QUASAR RESOURCES PTY LTD -v- APG AUS NO 3 PTY LTD [2023] WASCA 171 (1 December 2023)

(i) in the case of Refined Precious Metals, the number of troy ounces of Refined Precious Metals delivered or credited to the account of [the buyer] as evidenced by the metals return statements received from the refiner, subject in each case to final adjustments with the refiner, multiplied by the Deemed Sales Price, and reduced by the Allocable Charges; and

(ii) in the case of Mineral Products that are not Refined Precious Metals and which are sold and delivered by [the buyer] the gross amount actually received by [the buyer] from the purchaser for the Mineral Products so sold, and reduced by the Allocable Charges[.] (emphasis added)

1. It can be seen that, under each limb of the definition of Net Smelter Returns, the amount derived or deemed to be derived from sales is to be reduced by the Allocable Charges. Broadly summarised, Allocable Charges cover four species of costs incurred, namely (i) taxes; (ii) smelting, refining and marketing costs; (iii) costs of transport to places where smelting, refining or selling occurs; and (iv) royalties and other payments to the government or under native title agreements. Allocable Charges is defined, relevantly, in the following manner:

'Allocable Charges' means the following costs, but only to the extent actually incurred and borne by [the buyer]:

...

(ii) Charges, costs and penalties, if any, for smelting (which does not include crushing), refining and marketing. In the event smelting or refining are carried out in facilities owned or controlled, in whole or in part, by [the buyer] or its Affiliates, charges, costs and penalties with respect to such operations will mean reasonable charges, costs and penalties for such operations but not in excess of the amounts that [the buyer] would have incurred if such operations were carried out at facilities not owned or controlled by them offering comparable custom services;

(iii) Charges and costs, if any, for transportation to places where Ores and Minerals are smelted, refined and sold[.] (emphasis added)

1. At the trial, and on appeal, the parties advanced competing constructions of the word 'refining' in the definition of Allocable Charges. The narrow construction, advanced by APG and adopted by the trial judge, is that refining means the final processing of metal bearing products[1] by which impurities are physically separated from the metallic intermediate product, resulting in a pure or nearly pure metal final product. On this construction, purification processes that precede the final stage do not constitute refining. The broader construction, advanced by Quasar, is that refining is the purification and upgrading of a commodity from an impure state. Consequently, on Quasar's construction, refining embraces all processing operations directed to purifying or upgrading the relevant commodity, including those that precede the final purification stage.
2. Quasar contends that, on a proper construction, all of the following processes - which the primary judge declared were not Allocable Charges under the Agreement - amount to refining and so fall within Allocable Charges:

(a) the extraction of uranium ore from the Mineral Lease area using an in‑situ leaching process which involves (inter alia):

(i) the injection of sulphuric acid and oxygen solution (lixiviant) through injection wells into the orebody, by which process the uranium ore forms a uranyl sulphate in solution;

(ii) the extraction of the uranyl sulphate in solution via extractor wells;

(b) the transportation of the uranyl sulphate in solution in pipelines from the wells on the Mineral Lease to an adjacent tenement, the Beverley North Mineral Lease ML 6387 (Beverley North), held by Heathgate, or the Beverley Processing Plant located at Beverley;

(c) the removal or recovery of the uranyl sulphate from the solution at the Beverley Pannakin Plant located at Beverley North, alternatively, at the Beverley Processing Plant located at Beverley, by the use of resin contained within ion exchange columns, which resin attracts the uranium sulphate from the solution;

(d) where necessary, the transportation of the uranyl sulphate‑loaded resin by vehicle from the Pannakin Processing Plant at Beverley North to the Beverley Processing Plant, located at Beverley;

(e) the washing or 'elution' of the uranyl sulphate from the resin at the Beverley Processing Plant, using a strong acid solution, and which forms a uranium pregnant solution;

(f) the precipitation of that pregnant solution, leaving a form of uranium oxide;

(g) the further washing and drying of that uranium oxide, to form yellowcake; and

(h) the packaging of that yellowcake into drums.

1. The thrust of Quasar's approach on appeal is that the meaning it advances reflects the ordinary meaning of the word 'refining'. Quasar submits that its construction is supported by the meaning of the word refining in many dictionaries and by the 'common sense' meaning of refining.[2]
2. Quasar asserts that this meaning is consistent with the text, context and purpose of the Agreement, permitting the word to be construed consistently with the contracting parties' objective intention for 'refining' to have a broad operation going beyond the production of gold or common metals.[3] In relation to this, Quasar submits:

(1) At the time of entering into the Agreement, the parties knew that (i) the relevant tenements were prospective for uranium, which might be mined by the in situ method and processed by related techniques; and (ii) there were mining and processing facilities of that kind at the adjacent Beverley mine.[4]

(2) Mineral Products has a wide ambit, encompassing anything that can be classified as a mineral that is mined or removed from the tenement area.[5]

(3) The word 'refining' should not be given an ambit confined to what is appropriate for processes that are applied to base metals or gold bullion, particularly in circumstances where uranium was one of the Mineral Products contemplated by the parties at the time of entering the agreement.[6]

1. Any technical or uniform meaning of 'net smelter royalty' does not bear significantly on the construction of 'refining' because the meaning of 'net smelter royalty' in this case is governed by the definition or prescribed means of calculation of that term in the Agreement, not by the label 'net smelter royalty'.[7]
2. Quasar submits that having regard to the terms on which yellowcake is sold, and having regard to what happens after it is sold, yellowcake is a final product and thus a final Mineral Product for the purpose of the Net Smelter Royalty payable under the Agreement.[8]
3. Quasar submits that there is no justification in fact or in law for the judge's reliance on industry meanings of refining or of other terms used in the Agreement. It submits that it was not shown that the parties intended such meanings. The judge's approach 'ignored the ordinary (and ... unambiguous) meaning of the word'.[9] Further, Quasar submits that there is no consistent or universal technical meaning of a word such as 'refining'.[10] That is said to be illustrated by the variety of meanings set out in the examples in exhibit F of Professor Trench's report.[11] Moreover, Professor Trench himself recognised exceptions in certain 'value chains', namely alumina and uranium.[12]
4. Quasar submits that the primary judge's reliance on the language in the definition of Mineral Products was erroneous. First, Quasar submits, the words 'processed or otherwise upgraded' in that definition are synonymous with refining.[13] Secondly, in any event, those words have a different purpose, namely to identify the scope of what is a Mineral Product, whereas the word 'refining' is used in the definition of Allocable Charges as an element of the means of calculating the royalty to be paid.[14]
5. Quasar submits that, applying its preferred construction, all of the steps referred to in the primary judge's declaration are properly characterised as refining.[15]

1. Ground 1 is unhappily drafted. Within ground 1, with its 10 subgrounds, are the following three conceptually distinct species of error:

(1) Errors of fact in making various intermediate findings of fact, including as to how various terms were understood in the Australian mining industry at the time of entry into the Agreement (grounds 1(a) ‑ (f) and (i)).

(2) Errors of law in giving any weight, or alternatively giving excessive weight, to those findings in the process of construction (grounds 1(a) ‑ (f)).

(3) The error of law in adopting what Quasar asserts is the incorrect construction (grounds 1(g), (h) and (j)).

As can be seen, each of grounds 1(a) ‑ (f) asserts both error of law and error of fact.

1. Beyond the contentions in [18] above, it is not necessary nor useful to determine the merits of each of the criticisms of the judge's reasoning that are made in the appellant's submissions. That is because, as this court observed in Sino Iron v[16]ineralogy,16 there is only one true construction, and the task of this court in an appeal concerning the construction of an instrument is to determine for itself the proper construction of the instrument.
2. We will deal in turn with the three species of error identified in [18] above. We will begin by explaining why none of Quasar's challenges to the judge's intermediate factual findings succeeds. Next, we will explain why, in our opinion, industry understanding of various terms used in the Agreement was relevant to the constructional task that arose for determination. Finally, we will explain our preferred construction, which is the same as the primary judge's construction.

Grounds 1(a) - (f) and (i): error in fact‑finding? The challenged findings

1. The primary judge made a number of intermediate factual findings as to the manner in which various terms were understood in the Australian mining industry in 2002. They may be summarised as follows (with the relevant subground in brackets):

(1) Net smelter return is commonly understood to mean the revenue receipts received by a mining company after the charges for smelting and refining of ex‑mine metal bearing product have been deducted (ground 1(a)).[17]

(2) A net smelter royalty is a royalty based on revenue received for ex‑mine metal bearing product after deducting charges for smelting and refining and it is commonly set at a percentage of between .5% and 5% (ground 1(a)).[18]

(3) A net profit interest royalty commonly allows for a more extensive range of deductions from revenue than a net smelter royalty and is commonly set at a higher percentage of between 5% and 25% (ground 1(a)).[19]

(4) The terms 'beneficiation' and 'upgrading' were used interchangeably to describe operations undertaken at a mill to increase the concentration of a metal in ore (ground 1(b)).[20]

(5) The operations undertaken at mine sites to process ore into intermediate mineral products were referred to as milling, and the plant at which these operations were undertaken was referred to as a mill (ground 1(c)).[21]

(6) Operations of the nature employed at the Beverley plant to produce yellowcake were referred to and described as milling or concentrating (ground 1(c)).[22]

(7) The term refining was understood to be the final processing of metal bearing products, whereby impurities were physically separated from the metallic intermediate product, resulting in a pure or nearly pure metal final product. Refining was not understood to encompass any purification processes that proceeded the final stage (ground 1(c)).[23]

1. The judge found that the parties to the Agreement, as participants in the Australian mining industry, were familiar with the terms 'net smelter return', 'net smelter royalty', 'beneficiation', 'upgrading', 'concentration', 'mill', 'milling', and 'refining', and knew that the terms were understood in the industry as having the meanings found by the judge.[24] These findings are challenged by grounds 1(d), 1(e) and 1(f).

1. There was no controversy at trial as to the industry meaning of the terms 'net smelter return', 'net smelter royalty', and 'net profit interest royalty'.[25] The only witness who gave evidence on the topic was Professor Trench, whose evidence on the topic was not substantively challenged in cross‑examination. Insofar as ground 1(a) asserts an error of fact, it fails accordingly.

Grounds 1(b) and (c): the test for demonstrating appellable error

1. The meaning of 'refining' in the Australian mining industry was the subject of conflicting testimony of expert witnesses called by the parties. The judge resolved that conflict in favour of the witnesses called by the respondent. In our view, the appellant's challenge to the judge's finding engages the principles of appellate restraint concerning factual findings likely to have been affected by impressions about the reliability of witnesses.
2. In Child and Adolescent Health Service v Mabior,[26] this court summarised those principles as follows:

The general principles relevant to appellate restraint in this context were summarised most recently by this court in Smart v Power. The principles have also more recently been restated by the High Court in Lee v Lee:[27]

'A court of appeal is bound to conduct a "real review" of the evidence given at first instance and of the judge's reasons for judgment to determine whether the trial judge has erred in fact or law. Appellate restraint with respect to interference with a trial judge's findings unless they are "glaringly improbable" or "contrary to compelling inferences" is as to factual findings which are likely to have been affected by impressions about the credibility and reliability of witnesses formed by the trial judge as a result of seeing and hearing them give their evidence. It includes findings of secondary facts which are based on a combination of these impressions and other inferences from primary facts. Thereafter, "in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge".' (footnotes omitted)

These principles apply equally to the testimony of expert witnesses.[28]

In this context, due regard must be had to the advantages of the learned trial judge. In that regard, it would:

'be wrong to limit "the advantages which the primary decision‑maker has" to demeanour as a guide to credibility assessment and to ignore the "feeling of a case" that usually emerges from running a trial. The primary decision-maker is able to assess testimony against the entirety of the evidence and in a situation in which she or he has an appreciation of the way the trial was run. There may, for example, be subtleties in the way questions were asked (or avoided) that are apparent in the heat of battle but which are not quite as clear in a more clinical examination of a transcript. Similarly, the effect of evidentiary rulings or rulings about the pleadings made at one stage of a trial may have a greater impact at another point in the proceedings than will be apparent from the record. In carrying out its duty to decide for itself on the proper inference to be drawn from facts an appellate court must be alive to the entire context in which findings were made.'

1. The appellant submits that the principles of appellate restraint do not apply to this appeal because the findings which the appellant impugns are not credibility based.[29] It is true that the impugned findings are not based on the judge's assessment of the witnesses' credibility, but, as explained in Joyce v Anderson,[30] these principles are not confined to credibility‑based findings, and apply equally to findings likely to have been influenced by a judge's assessment of the reliability of witnesses. The judge's findings as to the industry understanding of refining are likely to have been so influenced.

Why no error is demonstrated by grounds 1(b) and (c)

1. The appellant's submissions were not put in the framework of these principles. Having due regard to these principles, we are not persuaded, on our review of the evidence, that the judge erred in finding that the terms 'refining', 'upgrading', and 'beneficiation' were commonly understood in the mining industry in the manner identified by Professor Trench and Mr Lawson. In any event, even if we were to decide for ourselves where the weight of the evidence lies on the basis of the record and without regard to these principles, we would not be satisfied of error in the primary judge's findings. Our reasons for these conclusions are as follows.
2. The judge gave detailed reasons for his findings as to the industry understanding of the term refining.[31]
3. Far from revealing error, the judge's reasons for preferring the opinion evidence of Professor Trench and Mr Lawson to that of Mr Dunn are cogent and accord with the views we have formed from our review of the record.
4. Both Professor Trench and Mr Lawson had substantial experience in the Australian mining industry. They supported their opinions by reference to that experience. Their opinions were directed to any commonly accepted meanings of relevant terms within the Australian mining industry.
5. By contrast, Mr Dunn is an experienced metallurgist who accepted that he does not have experience in the general mining industry.[32] His report identified the question for his opinion as being 'what is the commonly accepted meaning of "refining" within the Australian mining industry and, or alternatively, the field of hydrometallurgy'.[33] Asked if he spoke on behalf of only the metallurgy industry, or the mining industry as well, he said he spoke as a metallurgist.[34] In supporting and explaining his opinion as to the meaning of 'refining', Mr Dunn relied primarily upon his own 'purist' hydrometallurgy conception of the word refining, rather than upon industry experience or industry publications. When publications suggestive of a more confined conception of refining were put to him, Mr Dunn's responses referred to his purist conception as a metallurgist of the ambit of refining, rather than to how others - specifically how those in the mining industry - used or understood the term.[35] For example, Mr Dunn distinguished his hydrometallurgy view from the 'man‑given names' of the operations in question.[36] In another response, Mr Dunn said:[37]

I'm coming at this as a hydrometallurgist. ... To allocate names and titles to buildings or process steps ... is in the hands of others. But I'm talking about purifying, as a refining process, from a hydrometallurgical perspective - it takes place across multiple building blocks.

1. Bearing in mind that the critical question concerns how the term refining was used and understood in the mining industry, these differences in the approach of Professor Trench and Mr Lawson, on the one hand, and Mr Dunn, on the other, of themselves provide a compelling reason to prefer the evidence of Professor Trench and Mr Lawson to that of Mr Dunn.
2. Further, as the primary judge observed, in the course of cross‑examination, Mr Dunn qualified his opinion by saying that processing of ore to remove impurities amounts to refining only if it involves 'quantitative' or 'in toto' removal of the impurities.[38] For the reasons in the following paragraph, we share the primary judge's view that this qualification, expressed for the first time in cross‑examination, gave rise to doubt as to the logic and coherence of Mr Dunn's opinion, thereby diminishing its weight.
3. As Professor Trench said in his evidence, once mineral ore is removed from the ground, its processing ore involves various chemical and physical processes, all of which are directed to increasing the purity of the 'payable metal' in the ore.[39] The processing of many metals, including some precious metals (such as gold and silver) and base metals (such as copper, lead, nickel, zinc and tin) involves some initial processing to further concentrate the mined ore, then smelting to a significantly higher purity, followed by refining.[40] That being so, unqualified adoption of the definition of refining advanced by Mr Dunn in his report and in the joint expert statement results in what might be thought to be a plainly overinclusive notion of refining. In other words, it would capture some processes that Mr Dunn recognised could not sensibly be seen as refining. One such process is the processing of nickel to a concentrate before smelting, which Mr Dunn accepted no one in the industry would characterise as refining.[41] It might reasonably be inferred that recognition of that reality required Mr Dunn to qualify the definition he had asserted. This qualification was not expressed in his report nor in the joint expert statement. Moreover, the qualification tended to undermine the coherence of, and logic of, the opinion Mr Dunn advanced.
4. Contrary to the appellant's submissions,[42] the extracts set out in exhibit F of Professor Trench's report do not undermine, but rather support, Professor Trench's opinion as to the understanding of 'refining' in the Australian mining industry. As Professor Trench explained in his report,[43] exhibit F contained (i) examples suggestive or demonstrative of the usage of refining in the mining industry; (ii) examples of the use of the term refining within the oil and sugar industries; and (iii) the two exceptions identified by Professor Trench, namely alumina and the processing of yellowcake. Among the extracts in exhibit F is the definition of refining in the glossary of The Mining Valuation Handbook, published by Dr Victor Rudenno. Exhibit F referred to the 1998 edition of that book, the fourth edition of which was tendered as an exhibit. Both editions include the following definition of refining:

[T]he final stage of metal production in which impurities are removed from the molten metal by introducing air and fluxes. The impurities are removed as gases or slag.

1. As the judge also noted, The Mining Valuation Handbook distinguished between processing and refining in the following manner:

Processing. Most minerals will require some initial on-site processing. For bulk commodities, such as coal, some upgrade may be needed to meet the quality requirements of the purchaser. For low-grade ores, concentration will be undertaken to reduce the amount of waste material within the ore, which would otherwise be transported to another location for further recovery of the economic element. An increasing number of mines are introducing technology that allows for the recovery of the economic element, such as copper, at the mine site itself.

Refining. Concentrate sent from the mine site may undergo further processing, either by hydrometallurgical (liquid) or pyrometallurgical (heat) processes, or by a combination of both, to recover the saleable commodity. In the case of petroleum the oil will be refined to produce various products, such as diesel or petrol.

1. Further, beneficiation was defined as the upgrading of a mineral by concentration processes.
2. Also referred to in exhibit F of Professor Trench's report was the definition in the Industry Commission report of 1991.[44] The Industry Commission report defined refining as 'the final purification process of a metal or mineral' and defined beneficiate as 'to treat ore so that the resulting product is richer or more concentrated with mineral'.[45]
3. Having considered the various extracts in exhibit F, we are not persuaded that they reveal a variety of usages or connotations of the term refining such as to undermine Professor Trench's opinion.
4. Nor, in our view, does the single statement in the IAEA Safeguards Glossary reveal error in the judge's acceptance of Professor Trench's opinion. The relevant part of that publication was in the following terms:

[Uranium mining and processing plants are] installations, respectively, for mining uranium ore and for refining it to produce uranium ore concentrate, most commonly into concentrated crude oxide, U3O8 (often called yellow cake).

1. A single counterexample does not in itself preclude a finding as to a generally accepted understanding. That reflects Professor Trench's evidence that there was a generally accepted usage of words like refining, concentrating, and purification, but there was no 'word police' that would come and correct a particular choice of terminology that had departed from the usual usage.[46] Moreover, as the primary judge pointed out, several other IAEA publications referred to refining in relation to uranium only by reference to the conversion of yellowcake into uranium hexafluoride, with processing operations that produce yellowcake being referred to as milling or concentrating.[47] The same is true of other publications to which the experts and the parties referred - in the context of uranium, the only references to refining were to the conversion of yellowcake, not to the processes that produce yellowcake.
2. As the judge found, in the Australian mining industry in 2002, operations of the nature employed at the Beverley plant to produce yellowcake were referred to and described as milling or concentrating, and thus, by implication, were not referred to as refining. There was abundant evidence to support the finding. Although the appellant challenges this finding by ground 1(c), the appellant does not develop submissions in support of that challenge. No error has been demonstrated and none is apparent.

1. Grounds 1(d) ‑ (f) challenge the primary judge's findings that the parties to the Agreement were familiar with various words and phrases in the Agreement - net smelter return, net smelter royalty, beneficiation, upgrading, concentration, mill, milling, and refining - and knew that those terms were commonly understood to have the meanings found by his Honour. The primary judge evidently inferred that, as participants in the mining industry, the parties to the Agreement were aware of the common industry understanding of those words and phrases. In the absence of evidence pointing the other way, no error has been demonstrated in the inferences drawn by the judge.
2. Grounds 1(d) - (f) are not established.

1. Ground 1(i), as advanced at the hearing of the appeal, challenges the judge's finding that yellowcake is not a final product.[48] That finding is amply sustained by the evidence. Mr Lawson referred to yellowcake as an intermediate product,[49] explaining that the final product is nuclear pure uranium hexafluoride.[50] To the same effect, Mr Dunn referred to yellowcake as an interim product.[51]

1. For these reasons, none of the appellant's challenges to the judge's intermediate findings of fact has been made out.

Grounds 1(a) - (c): could regard be had to evidence of industry understanding of terms within the Agreement?

1. As explained below, in our view the judge did not err in having regard to the evidence of the common understanding in the Australian mining industry of various words and phrases in the Agreement.
2. At trial, both parties led expert evidence as to the understanding in the Australian (and international) mining industry of the term 'refining'. No party challenged the admissibility of this evidence.
3. Evidence may be led to prove the custom or usage in a particular locality, trade, market, business or class of persons. If proved, the custom or usage may sustain an implied term or it may inform the interpretation of an expression used in the agreement. In the latter respect, such evidence does not depend on ambiguity. The custom or usage must be so notorious, uniform and certain that any party can be presumed to have known of it and intended that meaning in using the expression in question. In Western Australia, these principles are usually associated with the decision of Ipp J in Homestake Australia Ltd v Metana Minerals NL.[52] The strictness of the requirements of custom and usage to sustain the implication of an implied term has been explained in a number of cases in the High Court.[53]
4. Custom and usage is not, however, the only basis for admitting expert evidence of the common understanding in an industry or other sphere to assist in the construction of a particular word or phrase. There are many cases in which evidence of that kind is admitted to assist in the process of construction of a contract, and many statements in text books to the same effect, without reference to the stringent requirements of establishing a meaning by custom and usage. That said, it must be acknowledged that it is not always easy to identify the principles being applied in a particular case by a court in having regard to evidence of this kind. For example, in some cases, it is not clear whether statements made as to evidence of this kind - such as a reference to 'technical meaning' - are references to evidence of custom and usage, with its requirements identified in [49] above, or to evidence admitted on a different and broader basis.
5. In Max Cooper & Sons Pty Ltd v Sydney City Council,[54] Lord Diplock, delivering the advice of the Privy Council, said of the phrase 'pay loadings' that:[55]

It is not an expression that is used in ordinary speech; without extrinsic evidence from a witness experienced in the building industry and familiar with the technical terms used in it, a judge could only speculate as to the meaning of 'pay loadings'. That the ordinary meaning in which a technical expression is used in a particular industry is not a question of construction but is a question of fact to be decided upon expert evidence, has been undoubted law since it was laid down by Parke B in Shore v Wilson (1842) 9 Cl and Fin 355; 8 ER 450. A question of construction (which is one of law) arises only when it becomes necessary to determine whether the particular context in which the expression is used shows that in that context it was intended to bear its ordinary technical meaning or some more extended or restricted meaning.

1. Australian law no longer maintains the distinction drawn in this passage between interpretation - determining the meaning of the words used - and construction - the legal effect to be given to them.[56] However, that does not detract from what is said as to the use of expert evidence.
2. This passage from Max Cooper & Sons v Sydney City Council was cited with approval by this court in Sino Iron v Mineralogy. It was also applied by Ipp J in Technomin Australia NL v Southern Resources Ltd,[57] a case with some parallels to the present case and which is discussed in detail in Lundberg J's reasons. Ipp J held, applying this passage, that evidence as to industry understanding of 'treatment costs' was admissible in aid of construing that phrase in a mining agreement. This approach was approved on appeal.[58]
3. In Lewison and Hughes, The Interpretation of Contracts in Australia [5.07], the authors observe that the court may hear evidence to assist its understanding of a scientific or technical word, referring to Shore v Wilson and to what was said by Jordan CJ in Australian Gas Light Co v Valuer‑General,[59] albeit in the context of the construction of a statute. The same point was made by Lord Wilberforce in Schuler v Wickman Tool Sales.[60] Similarly, in Heydon on Contract, it is said that if the meaning of technical or scientific terms is disputed, the meaning may be established by expert evidence.[61]
4. Further, at least where a term is ambiguous or susceptible of more than one meaning, extrinsic evidence is admissible to assist in determining the meaning of a particular descriptive word or term.[62]
5. In Technomin, Ipp J also applied this principle, in addition to relying on the principle expounded in Max Cooper & Sons v Sydney City Council, in admitting extrinsic evidence of the industry understanding of the terms 'net smelter return' and 'treatment costs' in aid of determining the proper construction of those terms in a mining agreement.[63] His Honour's approach in this regard was approved on appeal.[64]
6. In Metal Roofing and Cladding Pty Ltd v Amcor Trading Pty Ltd,[65] McPherson JA applied this principle to evidence as to what was meant in the relevant market by 'PVC resin', the parties having entered an agreement of sale and purchase of goods by that description. In so holding, McPherson JA distinguished (i) evidence as to what is commonly understood in an industry by descriptive words in the agreement from (ii) evidence of the custom of a trade, which must be notorious, uniform and certain.[66]
7. In Sino Iron v Mineralogy,[67] this court observed, by analogy with Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council,[68] that the fact that a word or expression has a technical meaning in an area of discourse relevant to the contract in question, in itself provides a basis for the reasonable reader to conclude that the term or expression is used in its technical sense, unless there are other factors present that show that it is not used in that special sense.
8. Professor Carter has observed that evidence of technical or other usages of words within a particular industry (or locality) may be led as contextual evidence, independently of the rules on custom and usage.[69] The same point was made by Einstein J in Enron Australia Finance Pty Ltd (in liq) v Integral Energy Australia,[70] in a passage quoted with evident approval in Sino Iron v Mineralogy.[71] Context may be sufficient to infer an intention to adopt the usage of a word or phrase applicable in the industry in which the contracting parties operate.[72]
9. In the present Agreement the parties provided for the payment of what they have chosen to describe, both in cl 2.2 and in cl 7.1, as a 'net smelter royalty'. Contrary to the appellant's submissions, some meaning should be given to those words. Specifically, the phrase 'net smelter royalty' should not be read as if it simply provided for a payment of a 'royalty'. It is true, as the appellant emphasises, that, by cl 7.1, the net smelter royalty to be paid by the buyer is to be calculated in accordance with what is there-stipulated, namely as 1% of the Net Smelter Returns. Nonetheless, in choosing between competing constructions of the term refining in the definition of Allocable Charges, which is in turn inserted into the definition of Net Smelter Returns as an element of calculating what is payable, it is relevant to take account of the parties' choice in describing the sum to be paid as a 'net smelter royalty'.
10. It is not easy to see how any meaning is to be ascribed to the phrase 'net smelter royalty' if regard is not had to expert evidence. To our minds, absent evidence as to how that term is understood in the mining industry, to refer to something as a net smelter royalty has no particular or ascertainable meaning. In that respect, the phrase may be thought to be like the phrase 'pay loadings' in Max Cooper & Sons v Sydney City Council.
11. Applying the principles in [51] ‑ [54] above, it is appropriate to attribute to the term 'net smelter royalty' the meaning applicable in the Australian mining industry in 2002, as fou[73] by the primary judge.73 That meaning is a royalty based on revenue received for ex‑mine metal bearing product after charges for smelting and refi[74]ng have been deducted.74 Consequently, reference to a net smelter royalty itself directs attention to the costs of 'refining'. In this framework, regard should consequently be had to any evidence of the industry understanding of the term refining.
12. For these reasons, the judge did not err in law in having regard to the evidence as to how the terms 'net smelter royalty' and 'refining' were understood in the mining industry.
13. Further, applying the principles summarised in [55] ‑ [59] above, and having regard to the findings referred to in [43], the judge was entitled to (i) have regard to this evidence as part of the background and context in which the Agreement was to be construed, and (ii) infer that the parties intended to use those terms in the sense in which they were commonly used in the industry in which the parties were participants.
14. The same is true of the evidence of the understanding in the mining industry in Australia of the words beneficiation, upgrading and milling. That evidence was relevant context for the construction of the Agreement.
15. Insofar as grounds 1(a) ‑ (c) assert errors of law in having regard to evidence of industry knowledge, the grounds are not established. It is unnecessary to consider whether error has been demonstrated in relation to the further basis on which the judge had regard to this evidence, namely that the terms had a meaning established by industry custom and usage.[75]

Grounds 1(g), (h) and (j): the proper construction of 'refining'

1. The general principles applicable to the construction of instruments are well established. They have been outlined in many cases - see, for example, Black Box Control Pty Ltd v TerraVision Pty Ltd[76] and AIG Insurance Australia v McMurray.[77] By way of summary:

(1) The construction of a contract involves a determination of the meaning of the words of the contract by reference to its text, context and purpose. The starting point for the proper construction of a clause is the language used in the clause. In particular, one starts by identifying the possible meanings that the words chosen by the parties can bear.

(2) Ascertaining the meaning of terms in an instrument requires a determination of what a reasonable person would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract, and the commercial purpose or objects to be secured by the contract. The instrument must be read as a whole.

(3) The general principle applicable to the construction of commercial contracts is that they should be given a businesslike interpretation. Absent a contrary intention, the court approaches such contracts on the basis that the parties intended to produce a result which makes commercial sense. This requires that the construction placed on the term or terms in question is consistent with the commercial object of the agreement. However, it must also be borne in mind that business common sense may be a topic on which minds may differ.

1. The ultimate question is the meaning of the word 'refining', where it appears in the definition of Allocable Charges. Neither individual words, nor definitions, are to be construed in isolation. A definition should be inserted in the substantive provision in which the defined term is found, and the provision then construed accordingly.[78]
2. Here, the relevant substantive provision is clause 7.1. By that clause, the seller covenants to pay a net smelter royalty equal to 1% of the Net Smelter Returns. The definition of Net Smelter Returns is thus to be inserted in clause 7.1. That in turn requires the insertion of the definition of Allocable Charges, a term used in the relevant limb, namely par (ii), of the definition of Net Smelter Returns.
3. The net smelter royalty stipulated by cl 7.1 is part of the consideration for the sale of the mining tenements the subject of the Agreement. The Agreement thus involves mining tenements and contemplates the exploitation of the tenements by or on behalf of the buyer.
4. In determining the meaning to be attributed to the term 'refining', it is essential that this contractual context be kept in mind.
5. The appellant's principal contention is that the meaning it seeks to attribute to refining is the ordinary meaning of that term, and there is no basis to depart from the ordinary meaning in construing the word in the definition of Allocable Charges. In our view, that contention fails at the first step because 'refining' cannot be said to have an ordinary meaning without knowing the context in which the word is used. Refining has markedly different connotations in different settings. The appellant accepts that this is so.[79] In addition to the variety of substances that can be refined - many of which involve refining in a context other than mining - an argument can be refined and a person's taste can be refined.
6. As the primary judge observed, the numerous dictionary definitions of refining denote a process of purification or enhancement, the attributes of which vary according to the context in which the term is used. Thus, it is meaningless to refer to the ordinary meaning of refining in the abstract - what is in question is the meaning of refining in the context of mining. For these reasons, meaning is not to be attributed to the word 'refining' in the Agreement by inserting a generalised dictionary definition of the word.
7. Recognition of the significance of the context in which a word is used is not novel or unusual. Albeit in the context of a constitutional case, Isaacs J remarked, more than 100 years ago, that the 'natural sense' of any word must depend on the subject matter in connection with which it is used and on its co‑location.[80]
8. That is why, as Drummond J said in CCOM Pty Ltd v Jiejing Pty Ltd,[81] the context in which words are used and the background circumstances against which the agreement was made, are of paramount significance in identifying the meaning to be attributed to the words used in the agreement. His Honour also observed, consistently with the principles stated in [55] ‑ [59] above, that the context and background to a contract may require a word used in it to be given a technical meaning in order to better reflect the objective i[82]ention of the parties.82 In our view, this is such a case.
9. The findings made by the primary judge as to the common understanding of refining in the mining industry, and as to what was known to the parties to the Agreement in that regard, inform the meaning to be given to the word refining in the Agreement. In our view, a reasonable business person would have understood the parties to have used the term 'refining' in the sense in which it was commonly understood in the Australian mining industry at the relevant time, namely as set out in [21](7) above.
10. Even if, contrary to our opinion, regard cannot be had to expert evidence, we would not adopt the appellant's construction. Putting aside any expert evidence, we do not accept that, as a matter of 'ordinary meaning' or of 'common sense', refining in the context of mining has the broad connotation advanced by the appellant's construction. Without the aid of expert evidence, our own sense of refining in the mining context does not enable a comprehensive definition, but to our minds the term connotes the final stage of the processing of mineral ore, rather than all steps taken to purify the ore once removed from the ground. In our sense of the term, when used in mining, it is only when the mined product is at a reasonably advanced stage of its processing that it can then be refined. To us, the enhancement of something in its crudest form cannot be said to be refining. Applying our own sense of the word, refining does not encompass the steps taken in processing the uranium ore as set out in the declaration made by the primary judge.
11. While not a matter that, of itself, carries substantial weight, the construction we prefer, set out in [76] above, is congruent with the parties' express statement that what was to be paid was a 'net smelter royalty', given what the parties knew as to the term net smelter royalty and its contradistinction to a net profit interest royalty. In this regard, we repeat what we have said at [60] above.
12. Further, the definition of Mineral Products refers to 'beneficiating, processing or otherwise upgrading', but does not use the word refining. On the appellant's construction, these words are synonymous with refining and therefore do not differentiate or narrow the meaning of refining. We do not agree. Rather, to our minds, as explained in [77] as a matter of ordinary language - and without regard for expert evidence - refining has a distinctly more specific and confined connotation than processing and upgrading.
13. We agree with the primary judge that the contrast in language in the definition of Mineral Products supports the conclusion that when the parties used the word 'refining' elsewhere in the Agreement, they intended it to mean something other than 'beneficiating, processing or otherwise upgrading'. While context or other considerations may suggest otherwise, the natural starting point in construing an instrument is that the use of different words is intended to convey different meanings.[83] Moreover, on the judge's findings, beneficiating and upgrading were understood in the Australian mining industry to have meanings markedly broader than the meaning of refining. Thus, the natural starting point - that different words have different meanings - is reinforced when regard is had to the context of an agreement between participants in the Australian mining industry. For these reasons, the contrast in language in the definition of Mineral Products - 'beneficiating, processing or otherwise upgrading' - with the word 'refining' supports the construction we have adopted, set out in [76] above, in preference to the appellant's construction.
14. It is common ground, and it is clear, that the Agreement contemplates a variety of minerals that may ultimately be mined. In our view, the breadth of the scope of the Agreement - with its reference to Mineral Products - and the parties' contemplation that uranium might be mined using the in situ method, does not sustain, or even support, the appellant's construction and application of the word 'refining'. The words 'if any' should be noticed in par (ii) of the definition of Allocable Charges. Many of the appellant's arguments appear to be premised on an assumption that there must be costs properly characterised as refining. That assumption is unsound. Just as it cannot be assumed that a given Mineral Product will involve smelting, so too it cannot be assumed that any given Mineral Product will involve some refining. We accept the respondent's submission that the fact that the Agreement is intended to apply to a broad range of minerals and Mineral Products says nothing about the ambit to be given to the phrase 'charges, costs and penalties, if any, for ... refining'. In particular, it does not provide a reason to attribute to the word 'refining' the wider meaning advanced by the appellant.
15. In short, for the reasons in [72] - [73] and [77] above, the appellant's construction is not supported by the adoption of the 'ordinary meaning' of refining. For the reasons in [81], neither the breadth of minerals encompassed by the Agreement nor the parties' contemplation of uranium being mined provides a reason to prefer the appellant's construction. The appellant does not advance any other reason to prefer the construction for which it contends.
16. For these reasons, in our opinion the primary judge's construction is the correct construction, to be preferred to the construction advanced by the appellant.

1. For the above reasons, ground 1 fails.
2. Ground 2 depends on acceptance of the appellant's construction as advanced by ground 1. The appellant makes no submissions in support of ground 2 separate from its submissions on ground 1. Ground 2 fails accordingly.

1. Ground 3 challenges the judge's findings that the certain of the charges imposed by Quasar were not reasonable. As the judge found, and as the appellant recognises, no question of reasonableness arises if, as we have found, the primary judge's construction and application of refining is correct. The judge described the issues the subject of challenge by ground 3 as factually dense, giving rise in a number of respects to complex and detailed sub‑issues. His Honour considered it appropriate to express his reasons on these issues relatively briefly.
2. Grounds 1 and 2 having failed, it is not necessary to decide ground 3. In the circumstances, having regard to considerations of judicial economy, we do not think it appropriate to embark upon the resolution of ground 3.

1. The appeal must be dismissed. We would hear from the parties as to the costs of the appeal.

1. The appellant (Quasar Resources) and the respondent (APG) are the assignees to an agreement for the sale and purchase of mining tenements entitled the 'Sale of South Australian Exploration Licences' dated 21 May 2002 (the Agreement).[84]
2. The Agreement includes a provision for the payment by the appellant to the respondent of a 1% royalty on 'Net Smelter Returns'. The royalty is described within the Agreement as a 'net smelter royalty'.
3. In April 2014, the appellant commenced mining and production of uranium from the tenement the subject of the Agreement, which is situated towards the north-east end of the Flinders Ranges in South Australia (referred to as the Four Mile tenement). All processing of that uranium has occurred at facilities located on neighbouring tenements. The registered holder of the neighbouring tenements, and the owner of the facilities thereon, is an affiliate of the appellant, namely Heathgate Resources Pty Ltd (Heathgate Resources).
4. In February 2016, the appellant commenced paying the net smelter royalty to the respondent in respect of the sale of uranium which had been extracted from the Four Mile tenement and thereafter processed by Heathgate Resources. The product sold was uranium peroxide concentrate, which is typically referred to as yellowcake.
5. The royalty which was payable was required to be calculated in accordance with cl 7 of the Agreement, applying several terms defined within the Agreement. The Agreement also allowed the appellant to deduct certain charges, costs and penalties before calculating the royalty. Specifically, the defined term 'Allocable Charges', which is employed within the defined term 'Net Smelter Returns', permitted the appellant to deduct, among other things:

(ii) Charges, costs and penalties, if any, for smelting (which does not include crushing), refining and marketing. In the event smelting or refining are carried out in facilities owned or controlled, in whole or in part, by [the appellant] or its Affiliates, charges, costs and penalties with respect to such operations will mean reasonable charges, costs and penalties for such operations but not in excess of the amounts that [the appellant] would have incurred if such operations were carried out at facilities not owned or controlled by them offering comparable custom services. (underlining added)

1. The appellant deducted certain charges and costs from the gross amounts it received from the sale of the yellowcake, before calculating the royalty payable to the respondent. The charges and costs were described as 'Uranium extraction and processing' costs. The appellant maintains that these deductions were permissible under the Agreement, falling within paragraph (ii) of the defined term 'Allocable Charges', as set out above.
2. In the proceedings below, the respondent sought a determination as to whether these charges and costs were permitted to be deducted from the gross amounts the appellant received. On the basis of the respondent's contention that the charges and costs were not authorised by the Agreement, the respondent contended the royalty had been underpaid over a period of approximately three years.
3. Having regard to the express language of the Agreement, and on the pleadings filed by the parties, whether the deductions were permitted required the learned primary judge (Tottle J) to address two issues. The first issue is fundamentally a construction issue. The second issue was strictly only required to be addressed if the appellant succeeded on the first issue of construction.

1. First, it was necessary to consider whether, on a proper construction of the Agreement, the deducted charges and costs were for 'refining', being the process or operation described in the first sentence of the definition of 'Allocable Charges' set out above, and being an activity in respect of which the charges and costs were permissible deductions.
2. The respondent's pleading included the following contention:[85]

9.1 On the proper construction of the [Agreement]:

9.3 where the Mineral Product sold is yellowcake, the Allocable Charges identified in cl 1.1(c)(ii) do not include:

9.3.1 any charges, costs or penalties for 'smelting' or 'refining', as neither of those processes occur prior to the sale of such Mineral Product by [the appellant] as yellowcake; or

9.3.2 any costs for or related to extraction or processing of uranium ore.

1. There are two activities identified in the pleading: 'smelting' and 'refining'.

1. Smelting typically involves the application of high temperature to melt the ore.[86] It was common ground that no smelting activities were undertaken by the appellant or by its affiliate, Heathgate Resources.[87]
2. Whether refining activities were undertaken by the appellant or by Heathgate Resources was a matter of contention between the parties at trial and is a central issue on this appeal. The respondent contended that the concept of 'refining', as that term is used in the Agreement, extended to the final processing stage of the uranium and did not include the extraction or processing of uranium ore. On this approach, no refining activities were undertaken by the appellant or Heathgate Resources in Australia, and no deductions for refining ought to have been made by the appellant. The appellant posited a broader meaning of the term in the proceedings below, and further developed that contention on appeal.
3. The primary judge was thus required to consider the meaning of the word 'refining' in the Agreement. The primary judge ultimately accepted the respondent's construction of the Agreement and the respondent's meaning of the term 'refining' (having regard to the expert and other evidence which was led), and found that no operations falling within that meaning were or are undertaken at the Australian operations. The respondent's meaning was generally referred to by the parties in the proceedings below as the narrow meaning of the term, in the sense that it allowed for a narrower scope of permissible deductions to be made by the appellant.

1. Second, if the charges and costs satisfied the above requirement, the respondent nonetheless challenged the reasonableness of two components of the 'Uranium extraction and processing' costs deducted by the appellant, being the utilisation fee and the management fee. Both fees were charged to the appellant by its affiliate, Heathgate Resources. The primary judge was required to determine whether these amounts were reasonable and did not exceed the amounts which would have been charged if the relevant operations had been carried out by independent third parties offering comparable services. This limiting language is found in the second sentence of the definition of 'Allocable Charges' set out at [93] above.
2. The contention as to the reasonableness of the fees was put as follows in the respondent's pleading:[88]

11A. In the alternative to paragraph 11, if any of the activities or operations set out in paragraphs 10.1 to 10.8 above are 'refining' or 'smelting' (which is denied), then since around October 2015, in calculating the amounts of the royalty payments pleaded in paragraph 13 below, [the appellant] has:

11A.1. paid amounts to Heathgate in respect of charges relating to such activities or operations which are not reasonable and which are in excess of the amounts which [the appellant] would have incurred had such operations been carried out at facilities not owned by its Affiliate, but by an entity offering comparable custom services;

11A.2. to that extent, wrongly purported to claim as 'Allocable Charges' all of the charges so paid by [the appellant] to Heathgate;

Particulars

Particulars of the amounts by which the Management Fee and the Utilisation Fee exceed that which is reasonable will be provided following expert evidence and prior to trial.

11A.3. accordingly, wrongly purported to reduce the 'Net Smelter Return', and thereby the royalty payable by [the appellant] to [the respondent], by subtracting the excessive charges, in full, which were not 'Allocable Charges' on the proper construction of the [Agreement].

1. The primary judge found in favour of the respondent on the second issue as well,[89] but was unable to make a finding on the limited evidence available as to the charges for the two fees which would have been reasonable.[90]

1. The primary judge granted declaratory relief in favour of the respondent consequential upon his determination as to the proper construction of the Agreement.[91] The appellant was also ordered to pay the respondent a sum to reflect those charges and costs which had been wrongly deducted by the appellant.[92]
2. The appellant now appeals on three grounds, each of which asserts errors in both fact and law.[93] The first two grounds challenge the construction issue considered by the primary judge, as to the meaning of the term 'refining' in the Agreement and whether the processes or operations undertaken constituted 'refining' for the purposes of the Agreement (grounds 1 and 2). The third ground of appeal challenges the primary judge's conclusion as to the unreasonableness of the utilisation fee and the management fee (ground 3). The parties were in agreement that in the event grounds 1 and 2 were upheld but ground 3 failed, the matter should be remitted to the primary judge for further consideration.[94]
3. For the reasons set out below, I have reached the same conclusion as the primary judge as to the proper construction of the Agreement and the meaning of the term 'refining', and I do not accept the primary judge erred in the manner contended. Accordingly, ground 1 fails, and so must ground 2, which is tied to ground 1. Although ground 3 does not therefore strictly arise in those circumstances, having considered the substance of this ground, I am of the view that no error has been demonstrated and the primary judge was correct in his conclusion that the fees were unreasonable. Accordingly, ground 3 also fails. The appeal should therefore be dismissed.
4. I will begin these reasons by setting out the relevant provisions of the Agreement, together with a summary of the background facts which are uncontroversial.[95] I will then address grounds 1 and 2, first by summarising the primary judge's conclusions, then the competing constructions of the Agreement, and will then explain my reasons for accepting the construction advanced by the respondent. Ground 3, and the evidence and arguments as to the reasonableness of the two fees, can and will be addressed quite separately. I will summarise the primary judge's conclusions on this aspect of the proceedings below and then explain why I consider no error has been demonstrated in this regard and, indeed, why the primary judge was correct.

1. The original parties to the Agreement were Goldstream Mining NL (Goldstream), Alliance Energy Ltd (Alliance) and Alliance Craton Explorer Pty Ltd (ACE), with Alliance being the parent company of ACE. The original parties to the Agreement were substituted over time, with the appellant assuming the obligations of ACE to pay the royalty and the respondent assuming the rights of Goldstream to receive the royalty.
2. By the terms of the Agreement, Goldstream sold three exploration licences located in South Australia to ACE. The consideration was the issue of shares in the capital of the parent company of ACE (being Alliance) and the payment of a net smelter royalty by ACE.[96] Clause 2 of the Agreement provides as follows (with references to ACE replaced by the appellant, reference to Alliance replaced by the appellant's parent company, and references to Goldstream replaced by the respondent):
   1. SALE

2.1 In consideration of the matters set out in clause 2.2, [the respondent] hereby sells and transfers the Tenements to [the appellant], and [the appellant] hereby agrees to accept and purchase the Tenements upon and subject to the terms and conditions hereinafter set forth.

2.2 In consideration of [the respondent] entering into this Agreement, at the request of [the appellant's parent company], [the appellant's parent company] covenants and agrees with [the respondent] to issue and allot the Shares to [the respondent] free of encumbrances pursuant to clause 5, and [the appellant] covenants and agrees with [the respondent] to pay the net smelter royalty set out in clause 7 of this Agreement.

1. The royalty payable was required to be calculated in accordance with cl 7 of the Agreement, applying several defined terms in cl 1.1 of the Agreement, namely 'Allocable Charges', 'Mineral Products', 'Net Smelter Returns', 'Refined Precious Metals'. Clause 7 is in the following terms (again, with references to ACE replaced by the appellant and references to Goldstream replaced by the respondent):
   1. NET SMELTER ROYALTY

7.1 [The appellant] covenants and agrees with [the respondent] to pay [the respondent] a net smelter royalty equal to one percent (1%) of the Net Smelter Returns in the manner and at the times hereinafter set out. The obligation to pay this royalty will endure for:

(a) the life of the Tenements and for the life of any replacement, renewal or substituted tenement or other form of authority that allows the recovery of Mineral Products from the Tenement Area; and

(b) so long as [the appellant] or any Affiliate of [the appellant] has an interest in the Tenements or in any replacement, renewal or substituted tenement or other form of authority that allows the recovery of Mineral Products from the Tenement Area.

7.2 All royalty payments to [the respondent] must be paid in cash. Royalties will be paid:

(a) for Refined Precious Metals on or before the 45th day after the last day of the quarter in which the final settlement date for such Refined Precious Metals fall; and

(b) for Mineral Products that are not Refined Precious Metals on or before the 45th day after the last day of the calendar quarter in which [the appellant] actually receives payment for such Mineral Products.

7.3 [The appellant] must provide [the respondent] at the time royalties are paid copies of all source documentation that verifies the amount of the royalty. [The respondent] will also be given access to any original documents, data, information and returns that form any part in the calculation of the royalty.

7.4 Within 90 days after the end of each financial year during which a royalty payment has been made, [the appellant] will deliver to [the respondent] an unaudited statement of royalties paid to [the respondent] during the year and the calculation thereof. [The respondent] will be entitled at [the respondent's] expense to an annual independent audit of the statement by a certified public or chartered accountant within 12 months after presentation of the unaudited year-end statement.

7.5 [The appellant] will have the right to commingle ores and minerals received from the Tenement Area with like resources from other properties. Before commingling, resources will be sampled, assayed, weighed and measured in accordance with sound industry practices. Before co-mingling [the appellant] will give notice to [the respondent] of its intention to co-mingle and [the respondent] shall be provided with the opportunity of attending any co-mingling or any sampling, assaying, weighing or measuring referred to in this clause. [The appellant] will maintain records of such measurements, which will be available for inspection by [the respondent] from time to time on reasonable notice.

7.6 [The respondent] may lodge a caveat over each of the Tenements to protect its interest in the Royalty and [the appellant] shall not take any steps to remove it.

7.7 [The appellant] and [the respondent] acknowledge that [the appellant] may from time to time undertake forward sale and/or purchase contracts, spot-deferred contracts, and option contracts and/or other price hedging and price protection arrangements and mechanisms and speculative purchases and sales of forward, futures and option contracts, both on and off commodity exchanges (Trading Activities) in connection with some or all of the Refined Precious Metals and other Mineral Products. Such Trading Activities, and any profits and losses generated thereby, will not, in any manner, be taken into account in the calculation of royalties due to [the respondent] whether in connection with the determination of price, the date of sale, or the date any royalty payment is due. [The respondent] acknowledges that [the appellant] engaging in Trading Activities may result in [the appellant] realising from time to time fewer or more dollars for Refined Precious Metals or other Mineral Products than is utilised in the royalty calculation and [the respondent] hereby waives any claim for additional royalty should [the appellant] at any time realise more dollars per troy ounce or other units of sale for Refined Precious Metals or Mineral Products than is utilised in the royalty calculation. Similarly, [the appellant] waives and [the respondent] will not be obligated to share in any losses generated by any such Trading Activities with respect to Refined Precious Metals or other Mineral Products.

1. The following definitions in cl 1.1 of the Agreement are important to the exercise of construction:

(c) 'Allocable Charges' means the following costs, but only to the extent actually incurred and borne by [the appellant]:

(i) Sales, use, gross receipts, severance, ad valorem, GST (but not if subject to an input tax credit, which is actually claimed and received) and other similar taxes, if any, however denominated, payable with respect to existence, severance, production, removal, sale or disposition of Mineral Products, but excluding any taxes on net income;

(ii) Charges, costs and penalties, if any, for smelting (which does not include crushing), refining and marketing. In the event smelting or refining are carried out in facilities owned or controlled, in whole or in part, by [the appellant] or its Affiliates, charges, costs and penalties with respect to such operations will mean reasonable charges, costs and penalties for such operations but not in excess of the amounts that [the appellant] would have incurred if such operations were carried out at facilities not owned or controlled by them offering comparable custom services;

(iii) Charges and costs, if any, for transportation to places where Ores and Minerals are smelted, refined and sold; and

(iv) Royalties, rentals, fees and charges payable to the Government of South Australia and under native title agreements with respect to the Mineral Products for which the royalty is being calculated;

(g) 'Mineral Products' means all ores, minerals, concentrates, dore bullion, and other products mined and removed from all or any part of the Tenement Area, whether or not subsequently beneficiated, processed or otherwise upgraded and includes Refined Precious Metals;

(h) 'Net Smelter Returns' means:

(i) in the case of Refined Precious Metals, the number of troy ounces of Refined Precious Metals delivered or credited to the account of [the appellant] as evidenced by the metals return statements received from the refiner, subject in each case to final adjustments with the refiner, multiplied by the Deemed Sales Price, and reduced by the Allocable Charges; and

(ii) in the case of Mineral Products that are not Refined Precious Metals and which are sold and delivered by [the appellant] the gross amount actually received by [the appellant] from the purchaser for the Mineral Products so sold, and reduced by the Allocable Charges;

(j) 'Refined Precious Metals' means all gold derived from Mineral Products and refined by or for the account of [the appellant] to a purity of at least .995[.]

1. At least initially, Alliance announced to the market that following acquisition of the tenements it would concentrate its search for iron oxide copper-gold-uranium mineralisation on the tenements.[97]
2. In about 2005, the appellant discovered uranium deposits on one of the tenements.[98] Subsequently, in 2012, a mineral lease was granted over the area on which those deposits were located, being mineral lease ML 6402.[99] This mineral lease is referred to by the parties as the Four Mile tenement. Relevantly, the only tenement over which the royalty was payable by the appellant under the Agreement was the Four Mile tenement.
3. The Four Mile tenement is adjacent to two other tenements. The adjacent tenements are the Beverley tenement (which is mineral lease ML 6321) and the Beverley North tenement (which is mineral lease ML 6387), on which the processing of product from the Four Mile tenement was undertaken. No uranium ore has been mined from either of the adjacent tenements since around 2016 or 2017.[100]
4. The processing plant located on the Beverley tenement is referred to as the Beverley Plant. Two satellite processing plants (described as the Pannikan and Pepegoona plants) are located on the Beverley North tenement. These satellite plants have since been decommissioned.[101] Collectively, I will refer to the Beverley tenement, the Beverley North tenement and the processing plants as the Beverley Mine.
5. Following a series of transactions which it is not necessary to traverse in any detail, the appellant assumed the obligations of ACE to pay the net smelter royalty, and the respondent assumed the right to receive the royalty.[102] Further, the appellant became the registered holder of the Four Mile tenement and Heathgate Resources became the registered holder of the Beverley tenement and the Beverley North tenement, as well as the owner and operator of the Beverley Mine itself.[103]
6. The appellant itself has no employees, and so Heathgate Resources has provided all the personnel and knowledge for the exploration and mining activities undertaken on the Four Mile tenement.[104] Heathgate Resources charged certain fees to the appellant for the services it provided, which I will explain further below.

1. Mining and production from the Four Mile tenement commenced in April 2014.[105] All of the solution extracted from the Four Mile tenement was and is processed at the Beverley Plant owned by Heathgate Resources.[106] The decision to process the uranium ore at the Beverley Plant was taken despite objection from Alliance and ACE, who had proposed that a stand-alone plant be constructed on the Four Mile tenement to reduce operating costs.[107] As will be seen, this aspect of the matter has relevance to the third ground of appeal.
2. The uranium product is extracted using a process described as in‑situ leaching or in-situ recovery, which is then transported in solution form through a pipeline to a facility on the neighbouring tenements for processing.[108]
3. The primary judge summarised the mining method employed at the Four Mile tenement and the processing of the uranium in the terms set out below, which I take to be uncontentious:[109]

[25] Uranium is a heavy, silver-grey metal that is weakly radioactive. It is mined by open pit and underground mining methods and by a process known as in-situ leaching sometimes referred to as 'in situ recovery' or 'solution mining'. In situ leaching is the mining method employed at Four Mile. The process is explained in more detail below but essentially it involves the recovery by chemical leaching of uranium from porous orebodies without physical excavation.

[26] Extraction of sub-surface uranium occurs at wellfields located on Four Mile. Each wellfield consists of injector wells and extractor wells.

[27] A solution comprising water, sulfuric acid, and one or more oxidants is injected into the injector wells. In hydrometallurgy this solution is referred to as a lixiviant. As injected through the injector wells it is referred to as the 'barren lixiviant'.

[28] The lixiviant goes through the geological formation containing uranium and dissolves it into a solution of predominantly uranyl sulfate. This 'pregnant lixiviant' (sometimes referred to as 'leachate') is pumped to the surface via the extraction wells and then transported through a pipeline from Four Mile to an ion exchange (IX) facility within the Beverley Plant (all the solution extracted from Four Mile is processed at the Beverley Plant).

[29] The IX Facility consists of tanks which contain resin beads approximately one millimetre in diameter. The pregnant lixiviant moves through the resin beads which capture the uranium. The remaining lixiviant (also referred to as barren lixiviant though it contains a relatively small amount of uranium) is pumped back to the wellfields to be re-used with fresh reagents added.

[30] The loaded resin beads are transferred to tanks. In those tanks the uranium is eluted (stripped) from the resin beads using a concentrated solution of sodium chloride and sulfuric acid. The solution is known as an 'eluant'. The uranium on the resin is replaced by a combination of chloride and sulphate ions from the eluant solution. Some of the iron which attached to the resin beads during the IX phase is also removed.

[31] The eluant is transferred into further tanks. Hydrogen peroxide followed by sodium hydroxide is added. These reagents are added at a speed and in amounts which allow large crystals of uranium oxide to precipitate out of the solution.

[32] The uranium precipitate is transported to various settling tanks, known as 'thickeners'. During that process, flocculants (various chemicals) are often added to the tank and the uranium precipitate settles to the bottom of the tank.

[33] The settled uranium solids are taken from the tanks and pumped to a dryer which evaporates water from the uranium precipitate.

[34] The final product from these processes is yellowcake.

1. The first yellowcake from the Four Mile tenement was sold on the appellant's behalf in the last quarter of 2015.[110] The term yellowcake often refers to uranium oxide or U3O8, although the primary judge noted that yellowcake produced at the Beverley Plant exists in the form of UO4.[111]
2. The primary judge found that the appellant delivered yellowcake produced from uranium extracted at the Four Mile tenement to two converter facilities in the United States.[112] The yellowcake delivered to those facilities was sampled for impurities. The primary judge found the process involved several steps including measuring the weight of the product, the uranium concentration and the amount of contaminants, with adjustments for price and the imposition of penalties if the contamination exceeded certain amounts.[113] The yellowcake delivered by the appellant is commingled at the converters with yellowcake from other sources, giving the appellant an entitlement in the books of the converter to a certain amount of yellowcake.[114]
3. At the converter facilities, the yellowcake is converted to uranium hexafluoride (or UF6), which is thereafter processed at an enrichment facility for use in the nuclear energy industry.[115] As succinctly explained by one of the experts at trial:

The UOC [uranium oxide concentrate] from the Four Mile mine and the Beverley processing plant is subsequently transported to a converter ... for refining and conversion to produce nuclear pure uranium hexafluoride (UF6), which is a fungible product that can be enriched and processed into fuel rods for use in nuclear power generation.[116]

1. Commencing in February 2016 and continuing until late 2018, the appellant paid a quarterly royalty to the respondent under the Agreement in respect of the sale of yellowcake. In February 2016, the appellant issued the first royalty statement. The royalty statement included details of the 'Allocable Charges' incurred for the relevant period of the royalty statement and expressly identified the sub‑clause of the definition upon which it relied to deduct the charges and costs.
2. For example, the royalty statements expressly refer to the statutory royalty amount which was deducted pursuant to cl 1.1(c)(iv) of the Agreement. This is the amount the appellant was obliged to pay by way of a royalty to the State of South Australia pursuant to the Mining Act 1971 (SA).[117]
3. Further, and most relevantly for this appeal, the royalty statements expressly stated that certain costs for 'Uranium extraction and processing' were deducted pursuant to cl 1.1(c)(ii) of the Agreement. The royalty statements described these costs as including 'Uranium Wellfield Extraction', 'Uranium Processing' and 'Services and Utilities'.[118]
4. The appellant contended at trial, and contends on appeal, that the amounts deducted for 'Uranium extraction and processing' are costs associated with 'refining' and thus deductible under the Agreement before the net smelter royalty is calculated. In contrast, the respondent asserts that no refining is undertaken in Australia and so the appellant has incurred no costs for refining within the meaning of the Agreement.[119]
5. As already noted, Heathgate Resources charged certain fees to the appellant for the services it provided. The three fees pleaded by the respondent were the utilisation fee, the management fee, and the capital fee.[120] The first two of these fees, the utilisation fee and the management fee, were passed on by the appellant to the respondent as 'Allocable Charges' (forming part of the 'Uranium extraction and processing' costs). The respondent's pleading described the utilisation and management fees as follows:[121]

(a) the utilisation fee was a fixed rate fee of A$7.50, which was charged on each pound of yellowcake packed at the Beverley Plant; and

(b) the management fee was charged at 15% on the value of 'Operating Costs', excluding the utilisation fee and shipping costs.[122]

1. As will be seen, the direct evidence as to the basis for calculation and the rationale for these fees was exiguous, as the primary judge explained.[123]

1. The primary judge granted a declaration in favour of the respondent, by reference to the eight activities pleaded by the respondent as being involved in the extraction of uranium ore from the Four Mile tenement and processing at the Beverley Plant.[124]
2. The declaration, which is set out below, identified the activities pleaded by the respondent which did not constitute refining.[125] The primary judge also ordered that the underpaid royalty amount be paid to the respondent:

1. There be a declaration that on the proper construction of the written agreement dated 21 May 2002 entitled 'Sale of South Australian Exploration Licences' between Goldstream Mining NL, Alliance Energy Limited and Alliance Craton Explorer Pty Ltd, the costs charges or penalties incurred in respect of the following activities are not 'Allocable Charges' under the agreement:

(a) the extraction of uranium ore from the Mineral Lease area using an in-situ leaching process, which involves (inter alia): > > > (i) the injection of sulphuric acid and oxygen solution (lixiviant) through injection wells into the orebody, by which process the uranium ore forms a uranyl sulphate in solution;
> >
> > (ii) the extraction of the uranyl sulphate in solution via extractor wells; > >
>
> (b) the transportation of the uranyl sulphate in solution in pipelines from the wells on the Mineral Lease to an adjacent tenement, the Beverley North Mineral Lease ML 6387 (Beverley North), held by Heathgate, or the Beverley Processing Plant located at Beverley;
>
> (c) the removal or recovery of the uranyl sulphate from the solution at the Beverley Pannakin Plant located at Beverley North, alternatively, at the Beverley Processing Plant located at Beverley, by the use of resin contained within ion exchange columns, which resin attracts the uranium sulphate from the solution;
>
> (d) where necessary, the transportation of the uranyl sulphate-loaded resin by vehicle from the Pannakin Processing Plant at Beverley North to the Beverley Processing Plant, located at Beverley;
>
> (e) the washing or 'elution' of the uranyl sulphate from the resin at the Beverley Processing Plant, using a strong acid solution, and which forms a uranium pregnant solution;
>
> (f) the precipitation of that pregnant solution, leaving a form of uranium oxide;
>
> (g) the further washing and drying of that uranium oxide, to form yellowcake; and
>
> (h) the packaging of that yellowcake into drums.

1. There be judgment in favour of the plaintiff in the sum of $2,693,222.48.

1. Grounds 1 and 2 challenge the primary judge's conclusion as to the meaning of the term 'refining' in the Agreement and his finding, having regard to the construction he preferred, that none of the processes or operations undertaken at the Beverley Plant constituted 'refining' for the purposes of the Agreement. Ground 3 challenges the primary judge's conclusions as to the reasonableness of the utilisation fee and the management fee.
2. The grounds of appeal are as follows:

1. The trial judge erred in law (J [194] ‑ [214]) in construing the word 'refining' in clause 1.1(c)(ii) of the Agreement, including in that:

(a) the trial judge erred in fact and law in finding (at J [134] ‑ [135]) that 'net smelter return', 'net smelter royalty', and 'net profit interest royalty' had any specialised or customary meanings in the Australian mining industry in 2002 and in treating that meaning as determinative or relevant (at J [196] ‑ [197]);
>
> (b) the trial judge erred in fact and law in finding (at J [137]) that 'beneficiation' and 'upgrading' had any specialised or customary meanings in the Australian mining industry in 2002 and in treating that meaning as determinative or relevant (at J [200]);
>
> (c) the trial judge erred in fact and law in finding (at J [139] ‑ [143]) that 'milling' and 'refining' had any specialised or customary meanings in the Australian mining industry in 2002 and in treating that meaning as determinative or relevant (J [194] ‑ [195], [198] ‑ [199]);
>
> (d) the trial judge erred in fact and law in finding (at J at [147]) that the parties to the Agreement knew that 'net smelter return', 'net smelter royalty', and 'net profit interest royalty' were commonly understood as having the meanings as found (at J [134] ‑ [135]) and further erred in giving any weight to those findings in construing the Agreement (at J [196] ‑ [197]);
>
> (e) the trial judge erred in fact and law in finding (at J at [148]) that the parties to the Agreement were familiar with the terms 'beneficiation', 'upgrading', 'concentration', 'mill', 'milling' and 'refining' and knew that those terms were commonly understood as having the meanings as found (at J [137] ‑ [143]) and further erred in giving any weight to those findings in construing the Agreement (at J [195], [200]);
>
> (f) the trial [judge] erred in fact and law in finding that the parties knew that 'refining' was commonly understood to have 'the narrow meaning' and in concluding that the parties should be taken to have used the term in the manner that it was used in the which it was commonly understood in the Australian mining industry (at J [195], [202]);
>
> (g) the trial judge erred in law in determining (at J [198] ‑ [199]) that the word 'refining' was not to be understood according to its ordinary meaning;
>
> (h) the trial judge erred in law in finding (at J [200]) that, read as a whole, the Agreement supported the narrow meaning of 'refining';
>
> (i) the trial judge erred in fact in concluding that the yellowcake produced at the Beverley Plant was not fungible (J [204] ‑ [213]), and should have found instead that the yellowcake was a fungible product; and
>
> (j) the trial judge ought to have found that, on a proper construction of the Agreement, 'refining' meant 'the purification and upgrading of a commodity from its impure state.'

J [134] ‑ [148], [165] ‑ [168], [194] ‑ [214].

1. The trial judge erred in fact and law in concluding that none of the processes or operations that were undertaken at the Beverley Plant constituted 'refining' for the purposes of the Agreement.

1. The trial judge erred [in] fact and law in finding that the Utilisation Fee and the Management Fee incurred by the appellant in favour of its affiliate were unreasonable and in excess of amounts that the appellant would have incurred if such operations were carried out at facilities not owned or controlled by an affiliate that offered comparable custom services.

J [225] ‑ [226], [231], [235], [269] ‑ [283].

Grounds 1 and 2: the construction of the Agreement Overview

1. The appellant's first ground of appeal identifies ten respects in which the primary judge is asserted to have fallen into error. The essential complaint is that the primary judge erred in law in determining that the word 'refining' was not to be understood according to its ordinary meaning (chapeau to ground 1 and ground 1(g)), and erred in law in concluding that the term was rather to be understood in its narrow sense (ground 1(h)). The appellant contends on appeal that the primary judge ought to have concluded that, on the proper construction of the Agreement, 'refining' had a broad meaning, namely the 'purification and upgrading of a commodity from its impure state' (ground 1(j)).
2. The remaining sub-grounds challenge the findings of the primary judge as to other terms, the analysis of which formed part of his Honour's reasoning process. Those terms are 'net smelter return', 'net smelter royalty', 'net profit interest royalty', 'beneficiation', 'upgrading', and 'milling'.
3. The appellant also challenges the court's factual findings as to the parties' knowledge of certain matters (grounds 1(d), 1(e), and 1(f)).
4. In broad terms, the issues which are raised by grounds 1 and 2 require this court to consider the relevant legal principles applicable to three broad questions; namely (1) what is the proper construction of the provisions of the Agreement which are determinative of the dispute; (2) whether the word 'refining' has a special or technical meaning when used in the context of this Agreement; and (3) to what extent is it open for this court to revisit the factual findings made by the primary judge.

1. The trial of the action involved only limited lay evidence but a considerable volume of expert evidence on the interpretation and construction issues. Additionally, amongst the documentary evidence tendered, several industry publications were relied upon which included the words 'refine' and 'refining' and were said by the parties to be supportive of their respective interpretations.
2. For the appellant, the lay evidence consisted of the statements of Mr Craig Bartels, the President of Heathgate Resources,[126] and Mr Joseph De Gennaro, a director of the appellant.[127] For the respondent, the lay evidence was confined to the statement of Mr Jason Gray, the Chief Financial Controller of Anglo Pacific Group PLC (the parent company of the respondent).[128] Mr Bartels and Mr De Gennaro were both cross-examined.
3. As to the expert evidence on the first issue before the primary judge, the appellant led evidence from Mr Grenvill Dunn, a chemical engineer and hydrometallurgist, as to the commonly accepted meaning of 'refining' in the mining industry and as to whether any of the operations and processes constituted 'refining'.
4. The respondent led expert evidence from Professor Allan Trench, a geophysicist and mineral economist, and from Mr Brett Lawson, a chemical engineer with uranium sector experience, as to the commonly accepted meaning of terms in the mining industry. Mr Lawson also gave evidence as to the operations and processes undertaken by the appellant.
5. Mr Dunn, Professor Trench and Mr Lawson gave their evidence at trial concurrently. On the first issue, three detailed reports were tendered by the parties containing opinion evidence as to the commonly accepted meaning of terms in the mining industry in Australia and globally, as well as to whether any of the operations and processes in question constituted 'refining'.[129]
6. It is convenient to address the substance of the expert evidence when analysing the reasoning of the primary judge.

1. The primary judge approached the construction issue by first analysing the terminology employed in the various publications referred to by both parties, including the legislation applicable in South Australia where the relevant operations were situated. In particular, his Honour referred to the applicable aspects of the Radiation Protection and Control Act 1982 (SA).[130] His Honour also identified the applicable dictionary definitions of the word 'refine'.[131] For example, his Honour referred to the following:

(a) refine: 'to free (something, such as metal, sugar, or oil) from impurities or unwanted material';[132]

(b) refining: 'the process of reducing the impurities in a substance';[133] and

(c) refine: 'to bring to a fine or a pure state; free from impurities: to refine metal; to refine sugar; to refine petroleum'.[134]

1. The primary judge then undertook a detailed assessment of the expert evidence led by the parties on the issue of construction. The experts in this regard were Professor Trench, Mr Lawson and Mr Dunn.
2. At the outset of that analysis, his Honour recognised there were points of commonality between the experts, recorded in the joint expert memorandum, which I have summarised below:[135]

(a) refining involves purification and therefore upgrading from an impure to a pure state;

(b) refining can be either hydrometallurgical and/or pyrometallurgical in nature;

(c) upgrading during the physical process of mining does not constitute refining;

(d) refining ends with the production of a high purity product and may include one or more unit of operations prior to the final product being produced;

(e) refining involves the transformation of an intermediate process product with the final refined product having a high degree of purity;

(f) a refined product is fungible; and

(g) multiple stages of processing are required to obtain a pure metal or metal product from the ore.

1. Further, Mr Dunn and Mr Lawson agreed that the 'refined product' need not be a metal but could be a compound of a metal. Professor Trench did not disagree with that proposition but his view was, in effect, that 'refining' is a term most commonly used to describe the production of pure metals.
2. It is unnecessary to traverse the entirety of his Honour's review of the expert evidence which was led. Indeed, some of the factual findings made by the court were based on the evidence of Professor Trench which was not seriously contested.[136] His Honour ultimately made a number of factual findings on the basis of this evidence which I will mention shortly.
3. It is sufficient to note that the primary judge generally preferred the evidence of Professor Trench and Mr Lawson on several key issues in dispute, describing their evidence as cogent and persuasive, and concluding that they both had extensive experience in the Australian mining industry.[137] Professor Trench based his opinions on his academic analysis as well as his commercial experience as an executive in the Australian mining industry, and his conclusions were supported by his comparative analysis of the 'metal value chains' for copper, gold, iron, lead, nickel, silver, tin and zinc derived from his professional experience.
4. In contrast, his Honour observed that Mr Dunn's experience of the Australian mining industry was not as long or as broad as that of Professor Trench and Mr Lawson. His Honour also identified particular aspects of Mr Dunn's evidence which gave rise to reservations as to the application of his opinion to the issues arising in these proceedings, but no questions as to his credit.[138]
5. Following his review of the expert evidence and industry publications, the primary judge made the following additional findings of fact:

(a) That in the Australian mining industry in 2002, the term 'net smelter return' was commonly understood to mean 'the revenue receipts, per unit of ex-mine metal-bearing product, that are received by a mining company after the relevant tolling charges for smelting and refining of ex-mine metal-bearing product have been deducted'.[139]

(b) That in the Australian mining industry in 2002, a net smelter royalty was a form of royalty that was commonly negotiated in the mining industry and was based on revenue received for ex‑mine metal bearing product after tolling charges for smelting and refining and that a net smelter royalty was commonly set at a percentage rate of between 0.5% and 5%.[140]

(c) That in the Australian mining industry in 2002, a net smelter royalty was distinguished from a net profit interest royalty because the latter commonly allowed for a more extensive range of deductions from revenue and was commonly set at a higher percentage of between 5% and 25%.[141]

(d) That in the Australian mining industry in 2002, the terms 'beneficiation' and 'upgrading' were used to describe operations undertaken at a mill (using the term 'mill' in the sense explained below) to increase the concentration of a metal in ore. The terms were used interchangeably with each other. There was an overlap in the ambit of the meanings of 'beneficiation', 'upgrading' and 'concentration'. 'Concentration' was used as a generic reference to beneficiation, upgrading and other processes including leaching and 'concentrate' was used to describe the product that was the outcome of those operations.[142]

(e) In the Australian mining industry in 2002, the operations undertaken at mine sites to process ore into intermediate mineral products were referred to generically as 'milling' and the plant at which these operations were undertaken was referred to as a 'mill' and, that was so, irrespective of whether the operations included the communition (or crushing and grinding) of hard rock ore.[143]

(f) In the Australian mining industry in 2002, operations of the nature employed at the Beverley plant to produce yellowcake were referred to and described as milling or concentrating.[144]

1. Most critically, at [142] and [143], the primary judge found that, in the Australian mining industry in 2002, the term 'refining' was understood to be the final processing of metal bearing products whereby impurities were physically separated from the metallic intermediate product resulting in a pure or nearly pure metal final product, and was not understood to include any purification processes that preceded the final stage.[145] This finding was supported by the evidence of Professor Trench and Mr Lawson, which his Honour preferred over that of Mr Dunn. His Honour detailed nine reasons in support of the finding, which are referred to below. One of those reasons was the existence of a tension, if not inconsistency, in Mr Dunn's conclusion that 'the process of refining involves purification and upgrading of a commodity from its impure state' and the opinion he expressed in cross-examination that processes that improve the concentration of a metal in ore (ie, upgrading) but do not remove impurities in toto are not refining. This tension gave rise to a reservation about Mr Dunn's evidence, according to his Honour.[146]
2. The opinion of Professor Trench on the meaning of the term 'refining' within the global mining industry and within the Australian mining industry, as recorded by his Honour, included the following clear statements:

[79] In Professor Trench's opinion, there is, and was in 2002, a commonly accepted meaning of the term refining within the global mining industry and within the Australian mining industry. The substance of Professor Trench's evidence was that refining is understood as the last physicochemical processing step in the process value-chain for a metal-bearing product, whereby remaining chemical impurities are physically separated from the metallic intermediate product, resulting in a pure metal final-product. Professor Trench gave an 'alternate definition' of refining which was that, '[r]efining refers to a final stage of metal processing that typically achieves a very high purity of metal as an output, such as for example, to a level of purity consistent with the chemical specifications of metals as they are traded on the London Metals Exchange (LME) and other metals exchanges'. Professor Trench said that typically but not always refining follows a pyrometallurgical (heat based) smelting treatment of metal concentrates to subsequently produce a near-pure refined metal, such as for gold or copper. Although expressed in (slightly) different language, I do not understand Professor Trench's 'alternate definition' to connote a process with attributes that are different from those connoted by his primary definition.

...

[81] Professor Trench supported his evidence by reference to a list of 50 references in published sources in which the term refining is applied to different metals and other commodities. He contended that the citations demonstrated that 'refining is a commonly-used, well-understood, industry term in the mining industry, specifically relating to the final processing step to achieve metal products of specified high purity'. The list of references included the definitions of refining in The Mining Valuation Handbook and the Industry Commission report and the description of refining quoted earlier from Minerals, Metals and Sustainability - Meeting Future Material Needs. (emphasis added) (footnotes omitted)

1. Before proceeding to undertake the construction exercise, the primary judge made several findings as to the objective background facts known to the original parties to the Agreement. The facts as found were as follows:

(a) That when the Agreement was made the original parties contemplated that a range of minerals might be extracted from the tenements. The original parties knew that the tenements were prospective for 'Olympic Dam style mineralisation', that is the tenements were prospective for iron, gold, copper and uranium.[147]

(b) The original parties to the Agreement, as participants in the Australian mining industry, were familiar with the terms 'net smelter return' and 'net smelter royalty' and knew those terms were commonly understood as having the meanings the primary judge found they had in 2002.[148]

(c) The original parties to the Agreement were familiar with the distinction between a net profit interest royalty and a net smelter royalty and knew that a net profit interest royalty commonly allowed for a more extensive range of deductions from revenue than a net smelter royalty and was commonly set at a higher percentage than a net smelter royalty.[149]

(d) The original parties to the Agreement were familiar with the terms beneficiation, upgrading, concentration, mill, milling and refining and knew that those terms were commonly understood in the Australian mining industry as having the meanings the primary judge found they had in 2002.[150]

(e) The original parties to the Agreement understood that in the Australian mining industry the operations undertaken to produce yellowcake were referred to generically as 'milling' and that the operations undertaken at converter facilities to produce uranium hexafluoride or pure uranium oxide were referred to as 'refining'.[151]

1. At trial, the appellant characterised the respondent's proposed meaning of 'refining' as 'a special and narrow technical meaning' and contended that the so-called ordinary meaning of the term should be preferred. The appellant submitted that the respondent's construction drew an artificial boundary between 'refining' and other processes by setting the boundary at 'the last physiochemical processing step in the process value-chain for a metal bearing product'. The appellant emphasised that the yellowcake produced at the Beverley Plant, once accepted at a converter, was a final, commercially saleable and fungible product despite the fact that further processing might occur. Indeed, the characterisation of yellowcake as fungible was an important aspect of the appellant's proposed construction.[152]
2. The appellant further highlighted the fact that, just as yellowcake was an intermediate product, the output of converter facilities (being uranium hexafluoride) was also an intermediate product as further operations were required to enrich it before it could be used as nuclear fuel. The appellant noted that the final stage in the nuclear fuel cycle was the creation of a uranium compound not the creation of a pure form of uranium.[153]
3. In further support of its construction, the appellant submitted that the definition of 'Mineral Products' was intended to capture all possible mining activities including products beyond common metals. On that basis, it was argued that the word 'refining' must be construed broadly to accommodate mining processes beyond the production of common metals (such as copper and nickel), and to extend to different mining and refining processes for other products such as coal, mineral sands and uranium. In support of this contention the appellant reiterated that the respondent's construction of refining 'unduly focusses on refining in mining processes applicable to the mining of gold and common metals'.[154]
4. Ultimately, the appellant submitted that its construction provided a workable and commercially sensible construction, which carved out from the royalty the costs and charges of purifying and upgrading the commodity from its impure state. The appellant contrasted this approach with what it contended was the arbitrariness of the respondent's attempt to confine the purification and upgrading costs to a last or final step in the process. The appellant argued that this construction gave rise to difficulty and uncertainty in working out when the 'last physiochemical processing step' begins and ends, and when the '(near) pure metal final-product' was produced. These were uncertainties the appellant contended commercial parties, acting reasonably, would wish to avoid. A construction that avoids such uncertainty is to be favoured, submitted the appellant.
5. The appellant also criticised the respondent's construction as giving no effect to the word 'refining' in the context of the production and sale of yellowcake. The appellant contended the respondent's construction narrowly construes the refining limb of Allocable Charges such that it only applies to certain minerals (namely common metals) but not others (such as uranium).[155]
6. The appellant argued for an expansive construction of the term 'refining' and identified three additional grounds in support thereof.[156] The appellant placed emphasis on the preposition 'for' in the phrase 'charges, costs and penalties, if any, for smelting ... refining and marketing' justified the inclusion as Allocable Charges of those expenses which in a practical and business sense are reasonably necessary to be done and are sufficiently closely and directly involved in the acts which are the direct acts of refining to be 'for' 'refining'. The appellant noted that the parties could be taken to know at least two things at the time the Agreement was made, namely that the only mineral for which the area was prospective was uranium and the Beverley Mine and Beverley Plant were in operation in 2001. On the basis of those matters, it would be unusual for the parties to have entered into a royalty agreement that refers to smelting and refining if it were supposed that they both had in mind a narrow definition of smelting and refining which meant there was no smelting or refining. Further, the words 'if any' were otiose because the effect of the provision was that the only charges, costs and penalties of the requisite kind for smelting, refining and marketing could ever be deducted.
7. At trial, the respondent contended that refining in the context of the Agreement (in particular, a provision for the payment of a net smelter royalty) was intended to mean the final purification process to take an intermediate crude product to a refined, almost pure product.[157] The respondent asserted three primary reasons for this approach. First, the respondent submitted that this was the commonly accepted understanding of refining in the mining industry. Second, the respondent submitted that this meaning is consistent with the commonly accepted understanding of what a net smelter royalty is, how it works, and how it is starkly different from a net profit interest royalty in terms of the range and extent of deductions to be made from gross revenue. Finally, the respondent submitted that, if refining bore the meaning for which the appellant contended, that would convert a net smelter royalty into a net profit interest royalty, and subvert the parties' bargain.
8. The respondent drew support for its approach to the construction of the Agreement from the decision of Ipp J in Technomin Australia NL v Southern Resources Ltd.[158] The respondent developed several further arguments in support of its construction, which are outlined by the primary judge at [171] - [183] of the primary reasons, which I will return to in due course.
9. The primary judge undertook a thorough analysis of the evidence and the competing arguments. His Honour ultimately concluded that the term 'refining' should be understood as meaning the final processing of metal bearing products whereby impurities were physically separated from the metallic intermediate product resulting in a pure or nearly pure metal final product. The primary judge concluded that the term did not include the purification processes that preceded the final stage.[159] His Honour described this as the narrow meaning, being the meaning for which the respondent had contended.[160]
10. His Honour concluded:

[194] In my view the parties to the Agreement intended that the term refining as it appears in the Agreement should be understood as meaning the final processing of metal bearing products whereby impurities were physically separated from the metallic intermediate product resulting in a pure or nearly pure metal final product and the parties did not intend the term to include the purification processes that preceded the final stage. I will refer to this meaning as 'the narrow meaning' and I will refer to the meaning for which the defendant contended - 'the purification and upgrading of a commodity from an impure state' - as 'the broad meaning'.

1. The primary judge delineated nine bases for reaching this conclusion. The salient reasons of his Honour in this regard are as follows:

[195] First, the parties were active participants in the Australian mining industry who, as I have found, knew that 'refining' when used by those involved in the Australian mining industry was commonly understood to have the narrow meaning. The parties should be taken to have used the term in the manner in which it was commonly understood in the Australian mining industry.

[196] Secondly, the term 'refining' appears in the definition of Allocable Charges that forms part of the definition of net smelter returns. The definitions do not have substantive effect and they must be construed in the context of the provision within which they are to operate, that is, within cl 7 of the Agreement which provides for the payment of the net smelter royalty. It is to be presumed that the parties' selection of the words 'net smelter royalty' to describe the royalty was a deliberate choice and, as I have found, relevantly the parties knew that:

(a) a net smelter royalty was a royalty commonly negotiated in the mining industry and was based on revenue received for ex-mine metal bearing product after tolling charges for smelting and refining;

(b) a net smelter royalty was commonly set at a percentage rate of between 0.5% and 5%; and

(c) a net smelter royalty was distinguished from a net profit interest royalty because the latter commonly both allowed for a more extensive range of deductions from revenue and was set at a higher percentage of between 5% and 25%.

[197] I accept the plaintiff's contention that construing 'refining' as having the broad meaning would allow the deduction of a wide range of costs and charges and this would have the effect that the royalty payable under cl 7 of the Agreement would not accord with the commonly accepted understanding of a net smelter royalty. Rather the royalty would operate as a net profit royalty. To put the matter in another way, ascribing the narrow meaning to 'refining' promotes a harmonious construction of the Agreement because limiting the Allocable Charges for refining to the charges, costs and penalties for the final purification stage conforms with what was commonly understood to be meant by the term 'net smelter royalty' when the Agreement was made.

[198] Thirdly, the meaning of the term 'refining' in the Agreement is not to be determined on the basis that it has one ordinary meaning which is 'to bring to a fine or pure state; free from impurities'. There are three reasons for this. First, the ordinary meaning of the word refining varies according to the field of discourse in which it is used and in the Australian mining industry it has the narrow meaning. Secondly, and alternatively, 'refining' has a technical meaning when used in the mining industry, that is, it has the narrow meaning. Thirdly, and again alternatively (and to the extent to which there is any difference between a technical meaning and a meaning established by industry or trade usage), the narrow meaning is established by industry usage.

1. Pausing here, it should be recognised that his Honour considered the term 'refining' should be given its narrow meaning on several alternative bases. The linguistic label which is attached to the meaning, whether it be ordinary meaning, technical meaning or trade meaning, was not critical, according to his Honour. The primary judge concluded that the dictionary definition varied according to the context in which the term was used. Further, his Honour found that the ordinary meaning of the term 'refining' when used in the Australian mining industry was the narrow meaning, and terms such as beneficiation, upgrading and concentration were used in the industry to refer to the operations which preceded the refining stage.[161] In the alternative, his Honour was also satisfied the narrow meaning of 'refining' is the technical meaning or, as a further alternative, a meaning which is established by industry or trade usage.[162] As to the requirements for industry or trade usage, the primary judge found that the conditions that must be satisfied before a term will be considered to have a trade usage were satisfied in the present case.[163]
2. His Honour continued:

[200] Fourthly, an instrument must be construed as a whole. Conformably with this requirement, a court must consider whether other provisions bear on the construction of the provision in question. In this respect, three points arise:

(a) First, the definition of Mineral Products in the Agreement assists in understanding the meaning of refining. For ease of reference, I set out the definition of Mineral Products again:

'"Mineral Products" means all ores, minerals, concentrates, dore bullion, and other products mined and removed from all or any part of the Tenement Area, whether or not subsequently beneficiated, processed or otherwise upgraded and includes Refined Precious Metals; (emphasis supplied)'

The inclusion in the definition of Mineral Products of the words 'beneficiated, processed or otherwise upgraded', as opposed to 'refined' supports the conclusion that when the parties used the word 'refining' in the definition of Allocable Charges they intended it to mean something other than 'beneficiating, processing or otherwise upgrading'. As I have found 'beneficiating' and 'upgrading' were understood in the Australian mining industry in 2002 as the operations undertaken to increase the concentration of a metal in ore and, as participants in the mining industry, that is how the parties should be taken to have intended those words to be understood when used in the Agreement.

(b) Secondly, the distinction between smelting and refining on the one hand and beneficiating, processing or otherwise upgrading on the other is reinforced by the recognition in cl 1.1(c)(ii) that smelting and refining are activities that might be undertaken either at facilities owned by third parties or by the defendant or its Affiliates and the inclusion of a provision governing the 'reasonableness' of costs charged by the defendant or an Affiliate. The absence of an equivalent provision for the costs of beneficiating, processing or otherwise upgrading suggests that the cost of these operations were not to constitute 'Allocable Charges'. That the parties have drawn a distinction in the Agreement itself between the processes of smelting and refining and other 'purification' processes provides an answer to the defendant's contention that the narrow meaning draws an artificial boundary between refining and other processing steps.

(c) Thirdly, the definition of 'Refined Precious Metals' as gold with a purity of .995 per cent provides an indication of the level of purity that the parties contemplated would be achieved following 'refining' and thus, the term 'refining' was to be understood as referring to the operations undertaken to produce a 'pure metal'.

[201] Fifthly, as I have found, when it was made the parties to the Agreement contemplated that a range of minerals might be extracted from the tenements and the royalty provision was agreed on that basis. The text of the definition of Allocable Charges recognised that costs for smelting or refining might not be incurred. This is apparent from the inclusion in the chapeau of the definition the qualification 'only to the extent actually incurred and borne by [the defendant]' on the costs that might constitute Allocable Charges and by the inclusion of the words 'if any' in the first sentence of sub-clause (ii) of the definition of Allocable Charges. The parties recognised the possibility that there might be no costs for smelting or refining. That a Mineral Product might be sold without any costs being incurred for smelting or refining does not weigh against accepting the narrow meaning. Relatedly, that the royalty provision might apply to a broad range of Mineral Products does not justify the adoption of the broad meaning.

[202] Sixthly, I do not accept that the narrow meaning has the scope to create uncertainty as the defendant contended. In my judgment the narrow meaning was established and understood in the Australian mining industry in 2002. It does not produce an 'unworkable' outcome. Moreover, in contrast to the broad meaning for which the defendant contends, the narrow meaning serves to identify the operations that constitute 'refining' whereas the broad meaning is unrestricted in its ambit and, as the defendant argues, embraces all post-extraction processes especially when coupled with the emphasis given by the defendant to 'for' in the phrase 'charges, costs and penalties if any, for smelting ... refining and marketing' - a matter which I address next.

[203] Seventhly, I do not accept that the preposition 'for' as used in cl 1.1(c)(ii) as set out in the preceding paragraph has the effect of expanding the meaning of the term 'refining' to include 'those expenses which in a practical and business sense are ... reasonably necessary to be done ... and are sufficiently closely and directly involved in the acts which are the direct acts of refining to be for refining'. With respect the serial qualifications inherent in the terms - 'practical and business sense' - 'reasonably necessary' - 'sufficiently closely and directly involved' - 'direct acts' - demonstrate why such an approach would itself be unworkable. The potential for disputation is manifest.

[204] Eighthly, I do not accept the defendant's contention that yellowcake produced at the Beverley Plant constituted 'a fungible and widely saleable commercial commodity', and was to be regarded as a final product.

...

[214] Ninthly, I do not accept that the narrow construction focusses unduly on any particular metal group or mineral product or fails to recognise that ore might be extracted by in situ leaching or otherwise fails to take into account that the parties contemplated that uranium ore might be extracted from the tenements. This contention was intertwined with the contention that the narrow construction should not be accepted because it would have the consequence that certain Mineral Products might be produced and sold without any costs for smelting or refining being incurred. For the reasons I have already given this is not a matter that weighs against the adoption of the narrow meaning

1. Having reached the foregoing construction of the Agreement, the primary judge next found that no operations falling with this meaning of the term 'refining' were undertaken at the sites in question (that is, at the processing plants on the Beverley Mine), and granted the declaratory relief sought by the respondent.[164]
2. His Honour specifically rejected the contention that the reagents used in the process of extraction and pumped back to the extraction wells as 'barren lixiviant' after going through the IX facility are used for the purpose of refining. The reagents are used for the purposes of extracting uranium ore from the ground and thereafter, in the form of pregnant lixiviant, they are the subject of ion exchange process.

1. On appeal, the parties largely reiterated the submissions which had been advanced before the primary judge. It is therefore only necessary to briefly mention some of the salient aspects of these submissions on appeal.
2. Counsel for the appellant emphasised the absence of any smelting in the operations at the Beverley Plant and the inapposite nature of the words 'net smelter' in the phrase 'net smelter royalty'. The submission did not go so far as to contend that the inclusion of the phrase 'net smelter royalty' was wholly irrelevant to the construction exercise, however.[165]
3. The appellant maintained the word 'refining' in the Agreement should be given its ordinary meaning, which involves the steps to increase the purity of a mineral product and, to the extent that definition requires the steps to lead to a final product, the appellant contends the yellowcake produced at the Beverley Plant is a final product.[166] The appellant submits that the ordinary meaning of the term ought be favoured given the broad nature of the Agreement, which was drafted to apply to all mineral products, not merely uranium.[167] That is, the definition of 'refining' must be sufficiently broad to enable one fairly to consider whether the treatment of any mineral products constitutes refining.
4. The appellant placed emphasis on the presence of the words 'beneficiated, processed and otherwise upgraded' which appear in the definition of 'Mineral Products' in the Agreement.[168] These words were said to be synonymous with the term 'refining'. The appellant submitted that an error emerged in the primary judge's treatment of the words 'beneficiated, processed and otherwise upgraded', which the appellant says were included to broaden the scope of the mineral products which might bear a royalty.[169] The error is said to emerge from the primary judge's reasons at [200(b)], in this regard.
5. Fundamentally, the parties on appeal differed as to whether the term 'refining' ought be given a technical or special meaning when used in the instant Agreement. The appellant maintained there was no evidence that the parties intended to use the word in a specialised or technical sense, and asserted that the approach of the primary judge involved little more than an assumption to this effect.[170]

1. As noted in the introductory section of these reasons, the first issue considered by the primary judge, which is the subject of grounds 1 and 2, is fundamentally a construction issue. The proper construction of a contract is a question of law and there is only one true construction of a written instrument. It is for this court to determine for itself the proper construction of the agreement in question.[171] Further, there was no dispute between the parties as to the applicable principles of construction, which are well-established. I respectfully adopt, without repeating, the principles as to contractual construction summarised in the recent decision of this court in AIG Insurance Australia Ltd v McMurray.[172]
2. Given the contentions advanced by the parties, the correct approach to be adopted to the construction exercise, and the process undertaken by the primary judge, is to first examine the evidence as to the meaning of the contractual terms to assess the relevance of that evidence to that exercise. As has been seen, the primary judge made a number of factual findings in this regard. Ground 1 includes several challenges to those factual findings. I will address this aspect of the appeal first.

1. An immediate difficulty with the formulation of ground 1 is the focus which is placed on challenging the findings of fact made by the primary judge. Those challenges appear in grounds 1(a), 1(b) and 1(c) as to the specialised or customary meanings of certain terms, in grounds 1(d), 1(e) and 1(f) as to the parties' knowledge of certain matters, and in ground 1(i) as to whether yellowcake produced at the Beverley Plant was a fungible.[173]
2. Very little attention was given in the appellant's written submissions to the bases upon which this court would be justified in overturning the factual findings of the primary judge. The lack of attention directed to these matters was surprising given the primary judge's findings were evidently based on his assessment of the competing expert evidence adduced by the parties (as well as on the findings based on the points of commonality between the experts) and bearing in mind the well-understood principles of appellate restraint which apply when considering an appeal against findings of fact, including findings made on the basis of expert evidence.
3. Counsel for the appellant made it plain in argument that the appellant mounted no challenge on this appeal against the credit of the expert witnesses who testified at trial, nor it would seem to the reliability of those witnesses.[174] That concession does not, in my view, alleviate the difficulty inherent in the appellant's challenge to the factual findings below. That is because the primary judge's reasons reveal that his findings were indeed informed by his Honour's assessment as to the reliability of the expert witnesses. I refer in particular to the several points identified by the primary judge at [143(b)] of his reasons. It is thus appropriate to recall the well‑accepted principles relevant to appellate restraint in this regard.
4. An authoritative statement of the general principle is found in the decision of Brennan, McHugh and Gaudron JJ in Devries v Australian National Railways Commission[175], in which the earlier statements of McHugh J in Abalos v Australian Postal Commission[176] were applied:

More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding of fact. If the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge 'has failed to use or has palpably misused his advantage' or has acted on evidence which was 'inconsistent with facts incontrovertibly established by the evidence' or which was 'glaringly improbable'. (footnotes omitted)

1. The general principle was recently restated by this court in Ledgerton v Ambrosini:[177]

Whilst an appellate court, in an appeal by way of rehearing, is obliged to conduct a real review of the trial and of the judge's reasons, in conducting the review the appellate court must observe the 'natural limitations' that exist in the case of any appellate court proceeding wholly or substantially on the record. In the case of findings based, at least to any substantial degree, on the assessment of the credibility or reliability of the witnesses, an appellate court will not interfere with the finding unless it is demonstrated to by wrong by reference to incontrovertible facts or uncontested testimony, or because the finding is glaringly improbable or contrary to compelling inferences, or because the trial judge failed to use, or has culpably misused, his advantage as a trial judge.

1. One of the authorities referred to by the court in Ledgerton v Ambrosini is Child and Adolescent Health Service v Mabior by next friend Kelei.[178] In that case, this court expressly recognised that this general principle was equally applicable to the testimony of expert witnesses.
2. Indeed, in Abalos v Australian Postal Commission, the High Court was concerned with an appeal arising from a trial in which the relevant evidence was given both by an expert witness as to the system of work and the design of a work station, and by a lay witness who demonstrated the manner in which the work was undertaken by the types of employees in question (being coders operating a keyboard). The trial judge relied on the evidence and demonstrations of the lay witness, apparently in preference to the opinions of the expert, in concluding that the employer breached its duty in not supervising the work of the employee so as to ensure that she adopted a correct, relaxed posture while performing her work.
3. In Abalos v Australian Postal Commission, the New South Wales Court of Appeal overturned the primary judge's decision. On appeal to the High Court, in reinstating the findings of the trial judge, McHugh J (with whom Mason CJ, Deane, Dawson & Gaudron JJ agreed) emphasised the advantage enjoyed by the trial judge in assessing the evidence on this issue:[179]

[31] As I pointed out in Jones v Hyde [1989] HCA 20; (1989) 63 ALJR 349, at p 351; [1989] HCA 20; 85 ALR 23, at p 27, when a trial judge resolves a conflict of evidence between witnesses, the subtle influence of demeanour on his or her determination cannot be overlooked. It does not follow that, because her Honour made no express reference to the demeanour or credibility of either Professor Ferguson or Mrs Archer, demeanour or credibility played no part in her findings on the supervision issue. But in any event, no matter how impressive Professor Ferguson's evidence may appear, it cannot claim the consideration of an appellate court to the extent necessary to overcome the advantage which her Honour enjoyed in seeing and hearing Mrs Archer give evidence. There is simply no basis for concluding that, in so far as her Honour preferred the evidence and demonstrations of Mrs Archer to the evidence of Professor Ferguson, she failed to use or palpably misused the advantage which she had of seeing and hearing the witnesses. In any event, her Honour may well have taken the view, not without justification, that Professor Ferguson's evidence on the issue of supervision was too limited and tenuous to outweigh the effect on her of the video cassette and in-court demonstrations given by Mrs Archer.

[32] Accordingly, I would hold that the Court of Appeal was in error in reversing the finding of Mathews J that proper supervision would have avoided the plaintiff's injury.

1. The principle of appellate restraint with respect to interference in a trial judge's findings of fact is engaged in the present case given the primary judge expressly preferred the evidence of Professor Trench and Mr Lawson on key issues and described their evidence as cogent and persuasive. His Honour's conclusions in this regard are likely to have been affected by his impressions as to the credibility and reliability of the witnesses which were formed by seeing and hearing them testify.
2. In any event, the primary judge gave a detailed and persuasive explanation for his reasons in preferring the opinions of Professor Trench and Mr Lawson.[180] Having reviewed their evidence, his Honour's conclusions in this regard are well-justified.
3. Accordingly, the factual findings which are challenged in grounds 1(a), 1(b) and 1(c) cannot be sustained to the extent they are direct challenges to the findings. In these grounds, the appellant challenges the primary judge's findings that various phrases had a specialised or customary meaning in the Australian mining industry in 2002. The phrases are: 'net smelter return', 'net smelter royalty', 'net profit interest royalty', 'beneficiation', 'upgrading', 'milling' and 'refining'.
4. As to the first three phrases, the primary judge found that a net smelter royalty was common in the Australian mining industry in 2002. Such a royalty was based on revenue received for ex-mine metal bearing product after tolling charges for smelting and refining, with a rate of between 0.5% and 5%.[181] This form of royalty was distinct from a 'net profit interest royalty', which allowed for a more extensive range of deductions from revenue, with a much higher rate.[182]
5. As to the overlapping terms 'beneficiation' and 'upgrading', his Honour found they were used (interchangeably) to describe operations undertaken at a mill to increase the concentration of a metal in ore.[183] The ambit of their meaning overlapped with the meaning of 'concentration'. 'Concentration' was used as a generic reference to beneficiation, upgrading and other processes including leaching, and 'concentrate' was used to describe the product that was the outcome of those operations.[184]
6. As to the term 'milling', the primary judge found that operations at mine sites to process ore into intermediate mineral products were referred to generically as 'milling' and the plant at which these operations were undertaken was referred to as a 'mill' (irrespective of whether the operations included crushing and grinding of hard rock ore).[185] A further significant factual finding was made by the primary judge in this regard. His Honour found that operations of the nature being undertaken at the Beverley Plant to produce yellowcake would have been referred to as milling or concentrating.[186]
7. Lastly, and importantly, the primary judge found the term 'refining' was understood to be the final processing of metal bearing products whereby impurities were physically separated from the metallic intermediate product resulting in a pure or nearly pure metal final product, and was not understood to include any purification processes that preceded the final stage.[187] His Honour relied upon the evidence of Professor Trench and Mr Lawson in this regard, as appears quite plainly at [143] of his reasons.
8. The appellant's challenges to the primary judge's factual findings that the foregoing terms had specialising or customary meanings in the Australian mining industry in 2002 are simply unpersuasive. Whether these meanings are determinative or relevant to the constructional exercise is a matter I will return to below.
9. Further, the challenge to the factual findings made by the primary judge as to the knowledge of the parties is unpersuasive. I refer here to grounds 1(d), 1(e) and 1(f). His Honour's findings are explained at [144] - [148]. These findings are not based on the primary judge's assessment of the credibility or reliability of any of the witnesses, but are supported by the matters outlined in the passages to which I have just referred, as well as at the matters detailed at [143].
10. The final factual challenge is contained in ground 1(i). The finding made by his Honour was that the yellowcake produced at the Beverley Plant did not constitute a fungible and a widely saleable commercial commodity. That is, it was not a 'final product'.[188] The challenge is similarly unpersuasive, given the authoritative documentary material on which the court placed reliance, and the evidence of both Mr Lawson and Mr Dunn to the effect that yellowcake is an intermediate product.[189]

1. The appellant's challenge to the primary judge's conclusion as to the meaning of the term 'refining' in the Agreement must necessarily be seen through the prism of the foregoing factual findings. As clarified during the appeal, the appellant's challenges to the factual findings are better described as errors of an analytical nature in the sense that the appellant maintains the primary judge's approach to the construction exercise was incorrect. That is, reliance on the technical meanings of the terms to which I have referred was inapposite, on the appellant's submissions.[190]
2. Allied to the point just made, the above findings as to the specialised meanings of the various terms considered by the primary judge, and the knowledge of the parties, will only have an impact on the construction of the Agreement and the word 'refining' if those findings are relevant to the constructional analysis having regard to accepted principles of construction.
3. The appellant asserts the primary judge erred in law in treating the meanings of the various terms as 'determinative or relevant' to the construction exercise (grounds 1(a), 1(b) and 1(c)), and in giving weight to the findings as to the knowledge of the parties (grounds 1(d), 1(e) and 1(f)).
4. Thus ground 1 challenges various aspects of the reasoning of the primary judge, ultimately contending that the primary judge erred in failing to conclude (and ought to have concluded) that the term 'refining' meant the 'purification and upgrading of a commodity from its ' "impure state" ' (ground 1(j)). This suggested broad meaning of the term 'refining' sits at odds with several features of the Agreement, as the primary judge noted, and also with the specialised or customary meanings of various terms in the Agreement as understood within the Australian mining industry at the time the royalty instrument was executed.
5. The broad meaning of the term had very limited support on the evidence which was adduced at trial, and would in effect have allowed for the deduction by the appellant of a wide range of costs and charges.
6. In contrast, the narrow meaning favoured by the primary judge - the final processing of metal bearing products whereby impurities are physically separated from the metallic intermediate product resulting in a pure or nearly pure metal final product, and not including the purification processes that preceded the final stage - would operate to limit the costs and charges which could permissibly be deducted by the appellant before calculating the royalty.
7. Where words in an agreement have a natural meaning, which is well understood, the process of interpreting the words may be a straightforward exercise. The task may be achieved through resort to dictionary definitions.
8. However, as Lord Hoffman observed in Charter Reinsurance Co Ltd v Fagan, 'in some cases the notion of words having a natural meaning is not a very helpful one'. His Lordship explained that, because 'the meaning of words is so sensitive to syntax and context, the natural meaning of words in one sentence may be quite unnatural in another'.[191]
9. The constructional choice between the competing meanings is not to be simplistically approached in an agreement such as this by resorting to dictionary definitions to identify a suitable meaning of the disputed phrase. The primacy afforded to the grammatical and ordinary meaning of words is tempered by the requirement that words are to be considered in the context in which they are used and by whom they are used.[192] Further, in resolving issues of ambiguity in the construction process, 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. An appreciation of the commercial purpose of a contract presupposes knowledge of the genesis of the transaction, the background, the context, and the market in which the parties are operating.[193]
10. The constructional issues generated by the fact that words may have more than one ordinary meaning or different shades of meaning or connotations that are imprecise in their factual ambit or application, are resolved by reference to the context and purpose in which the words are used. That is, the rights and liabilities of parties under a provision of a contract are determined objectively by reference to its text, context (the entire text of the contract) and purpose.[194] Further:[195]

Identification of the purposes or objects intended to be secured by a commercial contract will usually be inferred from the express or implied terms of the contractual instrument and any admissible evidence as to the surrounding circumstances. Often it will be apparent from a consideration of the contractual provisions read as a whole. In any case the purpose and object of a transaction is ascertained objectively by considering what a reasonable observer, in the situation of the parties, would conclude was the purpose and object. Thus the purpose or object of contractual provisions is revealed by their text and structure. It should be derived from what the contract says and not from any assumption about the desired or desirable reach of the operation of the relevant provisions. However, extrinsic evidence may assist where the task is facilitated by an understanding of the genesis of the transaction, its background, the context and the market in which the parties are operating. (footnotes omitted)

1. The primary judge accepted that reference may be made to dictionaries for guidance on the meaning of words. The process of construction, however, is concerned with the meaning of documents. In Investors Compensation Scheme Ltd v West Bromwich Building Society,[196] Lord Hoffman held as follows:[197]

The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean.

1. Where a word has an apparent natural meaning and an apparent technical meaning, some care is needed to ensure the construction exercise does not miscarry. The law allows, and has allowed for some time, evidence to be admitted of the technical meaning or usage of a term, where one party contends that the word carries that meaning, rather than an alternative natural or ordinary meaning.[198] Evidence of this nature will typically be given by way of expert evidence. The admission of the evidence does not alter the primary task of the court, which is to assess the objective intention of the parties and to consider the conclusion a reasonable reader of the instrument would adopt.
2. Of course, some words in an agreement may not have an ordinary meaning. For example, the term 'pay loadings' in the agreement under consideration by the Privy Council in Max Cooper & Sons Pty Ltd v Sydney City Council.[199] The Privy Council regarded the term as a composite expression which could not simply be given an ordinary meaning. The term was regarded as a technical phrase, and expert testimony explaining the term was considered to be permissible.
3. Lord Diplock delivered the advice of the Privy Council and held that:[200]

The crucial expression in this paragraph is 'pay loadings'. It is a technical term, or term of art, used in the building industry. It is not an expression that is used in ordinary speech; without extrinsic evidence from a witness experienced in the building industry and familiar with the technical terms used in it, a judge could only speculate as to the meaning of 'pay loadings'. That the ordinary meaning in which a technical expression is used in a particular industry is not a question of construction but is a question of fact to be decided upon expert evidence, has been undoubted law since it was laid down by Baron Parke in Shore v Wilson (1842) 9 Cl and Fin 355. A question of construction (which is one of law) arises only when it becomes necessary to determine whether the particular context in which the expression is used shows that in that context it was intended to bear its ordinary technical meaning or some more extended or restricted meaning.

In the instant case there was unchallenged expert evidence by Dr Cooper on affidavit to the following effect: 'I have been engaged in the building industry for the past 40 years. The terms "loadings" and "pay loadings" are commonly used in the industry generally and by builders, architects and quantity surveyors. In their common usage in the industry they include the payment of or provision for fares, annual leave and holidays, sick leave, long service leave, payroll tax, workers' compensation insurance, accident pay, statutory holiday pay and picnic day pay'. (emphasis added)

1. The admission of evidence to explain a technical or other usage of a term is distinct from the process by which a party seeks to establish a peculiar meaning of a term through custom and usage.[201] It is, however, sometimes difficult to distinguish between cases in which the court is construing a technical term and cases where the court is recognising custom and trade usage.[202]
2. In Sino Iron Pty Ltd v Mineralogy Pty Ltd, this court relatively recently recognised the process whereby a word or expression may be given a technical meaning, noting that:[203]

[T]he fact that a word or expression has a technical meaning in an area of discourse relevant to the contract in question, in itself provides a basis for the reasonable reader to conclude that the term or expression is used in its technical sense, unless there are other factors present that show that it is not used in that special sense.

1. To a similar effect are the statements of Murphy JA in Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd.[204] His Honour observed:

Extrinsic evidence was also always admitted to explain technical expressions in a written contract: F L Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2; [1974] AC 235, 261. Even where the word to be construed had a plain English meaning, extrinsic evidence of usage in a trade or business could always be admitted to show that it had a particular or technical signification in the trade or business in which the contract was made: Rosenhain v Commonwealth Bank of Australia [1922] HCA 41; (1922) 31 CLR 46, 53; Appleby v Pursell [1973] 2 NSWLR 879, 889; Homestake Australia Ltd v Metana Minerals NL (1991) 11 WAR 435, 446 - 447.

1. The earlier Australian authority cited by Murphy JA, Appleby v Pursell,[205] collected a number of cases on the issue. In that authority, the New South Wales Court of Appeal considered the meaning of the words 'push' and 'push and stack'. Reynolds JA stated as follows:[206]

No matter how plain to the ordinary reader is the apparent sense of a word, evidence is admissible to show that it bore a different meaning in the instrument. Well known cases illustrate this dramatically. One thousand rabbits could mean one hundred dozen rabbits: Smith v Wilson [1832] EngR 643; [1832] 3 B & Ad 728; 110 ER 266; white selvage could mean black selvage; Mitchell v Hendy [1880] 16 Ch D 181; in Myers v Sarl [1860] EngR 1163; [1860] 3 E & E 306 at pp 319, 320; [1860] EngR 1163; 121 ER 457, at p 462, Blackburn J said: 'It is a prima facie presumption that, if the parties to such a contract use expressions which bear a peculiar meaning in the trade, they use them in that peculiar meaning; which can be ascertained only by parol evidence. I do not think that it is necessary, in order to render such evidence admissible, that there should be any ambiguity on the fact of the phrase which has to be construed ... That I take to be the true rule of law upon the subject; that when it is shewn that a term or phrase in a written contract bears a peculiar meaning in the trade or business to which the contract relates, that meaning is prima facie, to be attributed to it ...'. In the same case Cockburn C J said [1860] EngR 1163; [1860] 3 E & E 306 at p 315; [1860] EngR 1163; 121 ER 457 at p 461 'Now, although parol evidence is not admissible to contradict a contract the terms of which have but one ordinary meaning and acceptation, yet if the parties have used terms which bear not only an ordinary meaning, but also one peculiar to the department of trade or business to which the contract relates, it is obvious that due effect would not be given to the intention, if the terms were interpreted according to their ordinary and not according to their peculiar signification'.

1. Further, the authors of Lewison and Hughes observe as follows:

This principle complements, and to some extent overlaps, the principle that the court will interpret non-legal technical terms in their technical sense, if it appears from the circumstances that the parties intended the words to be so construed. It is difficult to distinguish (if distinction is needed) between cases in which the court is construing a technical term, and cases where the court is recognising a trade usage.[207]

1. It is useful to refer to an example which illustrates the foregoing principles, and which involves an analysis of concepts with direct application to the present matter. I refer to the decision of Ipp J in Technomin Australia NL v Southern Resources Ltd. His Honour's decision was subsequently upheld by a unanimous Full Court on appeal.[208] The case is of relevance to the present matter in that the concept of a royalty based on a 'net smelter return' was there under consideration.
2. The Production Agreement in Technomin Australia NL v Southern Resources Ltd provided that the 'minerals interest' of each of the parties, as to ore produced from a particular development area, 'shall be subject at all times to the three (3) per centum Net Smelter Returns entitlement of [the plaintiff] as provided in the Deed Confirming and Clarifying Net Smelter Returns'.
3. The identified Deed provided (in cl 1(f) thereof) that:

3% NSR means the entitlement of [the plaintiff] to a 3% Net Smelter Return in respect of Minerals produced from the Blue Development Area payable by the Participants in proportion to their respective Participating Interests at the times and calculated in the manner specified in cls 3 and 4.

The 3% NSR is a sum which is equal to [3% of] the Value (as hereinafter defined) of all Minerals produced and subject to cl 3.2(b) sold from the Blue Development Area.

1. The term 'Value' was defined in cl 3.2. The definition described two means of determining value and provided (in cl 3.2(d)) for the deduction of:

(i) transportation costs on a CIF basis from the Blue Development Area to the place where the Minerals are smeltered;

(ii) penalties; and

(iii) treatment costs.

1. The dispute before Ipp J concerned, in part, the meaning to be attributed to 'treatment costs' in cl 3.2(d) of the Deed. The plaintiff argued that the terms 'penalties' and 'treatment costs' meant the costs payable by the Participants to the Mint for refining the mineral product delivered to it. The defendants contended that 'treatment costs' meant either all costs associated with producing gold from the time the mine is in production, being the costs of mining the ore, milling, processing and refining it, or alternatively all costs associated with the production of the gold from the point the ore containing the gold has been mined to the point of sale. The defendants did not dispute the plaintiff's suggested meaning of 'penalties'. On the plaintiff's approach, the deduction which would be made from the smelter return would be less than ½%. In contrast, the defendants' approach would involve a deduction of about 60%.
2. His Honour rejected the submission that evidence as to the meaning of the term 'treatment costs' was not admissible.[209] Ipp J concluded that the term 'treatment' as part of the phrase 'treatment costs' was being used in the instrument in a technical sense, namely the sense in which it is used in the mining industry.[210] His Honour recognised that the term, as an element of the concept of net smelter return, was an unfamiliar phrase to him, it did not have a plain meaning, and he noted that the process of the production of minerals was a highly specialised procedure.
3. Specifically, Ipp J observed that the phrase 'net smelter return' was a phrase obviously employed in the mining industry. Relying on Max Cooper & Sons Pty Ltd v Sydney City Council, his Honour concluded that the term 'treatment costs' was being used in a technical sense and extrinsic evidence was admissible to establish its meaning.[211]
4. His Honour then analysed the evidence which had been led as to the various processes involved in the production of gold mined from the Blue Development Area. On his assessment of that evidence, his Honour found that the term 'treatment costs' did not have a particular meaning that was commonly accepted in the mining industry generally. The meaning depended on the context.[212] That context required an analysis of the instrument as a whole, including the phrase 'net smelter return', the Production Agreement and the fact that at the time the Deed was entered into, production of gold, and only gold, was contemplated by the parties as being likely. This last fact complicated the construction of the Deed, according to his Honour, as the production of gold from this area did not involve any smelting.[213]
5. His Honour nonetheless considered that the most significant aspect of the context in which 'treatment costs' was to be considered was the meaning of 'net smelter return' in the mining industry.[214] This was so despite there being a definition of that term in the Deed itself. In this regard, Ipp J was satisfied that the term had a commonly accepted meaning in the mining industry generally (although not in the gold mining industry in particular). In essence, the term referred to, by way of example, 'the gross value of recovered metals less off-site treatment costs adjusted by bonuses for penalties'.[215] The term might also be used to refer to an overriding royalty with deductions only for smelter costs and penalties.[216] On any view, the term was to be distinguished from a 'net profit interest', which referred to a net profit after deduction of all costs of production (such as operating costs, administration costs, deprecation, and tax).[217]
6. Ipp J found as a fact that the term 'net smelter return' does have a commonly accepted meaning in the mining industry generally. It was regarded as the price received by the producing mine for the mineral less the smelting costs and associated costs such as transportation and penalties.[218] His Honour regarded this conclusion as highly relevant when construing the Deed.
7. His Honour concluded that the term 'refining costs', incurred after the production of dore bullion, in the context of this Deed, was broadly equivalent to smelting costs incurred in the production of base metals.[219] Further, it was significant that the royalty provided for the deduction of 'treatment costs' from the net smelter return rather than from a net profit interest. His Honour held:

It is significant, in my view, that the royalty provided by the Deed is a royalty based on net smelter return and not on net profit interests. Treatment costs have to be construed in the light of the fact that they are a deduction from the net smelter return, not from the net profit interest.

By the use of the expression 'net smelter return' it seems to me that the parties intended that the costs up to the stage of producing dore bullion would not be part of the treatment costs. The inclusion of such costs, in 'treatment costs', would be entirely contrary to the concept of net smelter return as it is accepted in the mining industry, generally. Had the parties intended that all such costs be included under treatment costs then, in my view, the royalty would not have been termed a net smelter return royalty but a net profit interest royalty.[220]

1. Another decision of Ipp J, namely Homestake Australia Ltd v Metana Minerals NL,[221] provides an example of the use of extrinsic evidence to interpret a term of art in a written agreement by resort to the alternative analysis of custom and usage. The term in that case was 'ore reserve'. His Honour approached the task on the basis that the usage was required to be so notorious, uniform and certain that any person, making a contract affected thereby must be taken to have intended that the usage should part of the contract.[222]
2. On the evidence in that case, his Honour was not satisfied the usage had been demonstrated to the requisite standard (which required the 'strongest evidence'), and so considered the words must be given the meaning they ordinarily bear.[223]
3. The foregoing authorities demonstrate that it is permissible, in the process of construction, for a court to receive evidence to show that a word or phrase bears a particular meaning in a particular trade or business. This enables the court to properly interpret the word or phrase, as part of the ultimate process of construction of the instrument in question. Given the antiquity of the authorities to which I have referred, this is not a controversial proposition. The word or phrase will, through this method, then prima facie bear that particular meaning.
4. In the present case, the court is concerned with the process of attributing meaning to the word 'refining', in the context of an instrument entered into by participants in the Australian mining industry which concerns the payment of a 'net smelter royalty'. These features strongly suggest that if there existed a commonly understood meaning of the technical term 'refining' in the industry, which was known to the parties, then that should be preferred as the meaning to be ascribed to the term. On the material adduced below, the apparent ordinary meaning of the term - to bring to a fine or pure state; to free from impurities - was far from the settled meaning of the term when used in a technical sense. As the primary judge noted, and I agree, the 'ordinary meaning of the word refining varies according the field of discourse in which it is used'.[224]
5. The primary judge concluded that the narrow meaning of the term 'refining' represented the ordinary meaning of the term when used in the Australian mining industry. That conclusion did not require his Honour to find that the term was used in a technical sense, or that the meaning was established by industry or trade usage. Nonetheless, his Honour recorded that he was satisfied these two alternative approaches were available to him and he was appropriately satisfied the respondent's construction was supportable on those bases.[225]
6. For my part, having regard to the context and background of the Agreement, being an instrument which conveyed mining tenements and, in part consideration, required the payment of a long term royalty on 'Refined Precious Metals' or 'Mineral Products', I consider it is highly likely that the parties intended to adopt the technical meaning of undefined terms within the instrument. This is an approach which a reasonable business person reading the instrument would also be highly likely to adopt, in my view. This is important, given the following well‑accepted proposition:

Where a constructional choice is available it is important to consider what a reasonable businessperson reading the relevant clause or agreement would understand it to mean. It is from that perspective that the court considers the circumstances surrounding the contract and the commercial purposes and objects to be achieved by it.[226]

1. When considering the scope and meaning of the term 'refining', where that term is used in relation to the activity of treating a particular metal or commodity, the commercial purpose of the agreement is more likely to be furthered by giving preference to the technical meaning of the term than the meaning a lay person might attribute.
2. It was therefore appropriate, in my view, for evidence to be admitted as to the meaning of the term to allow the court to understand the particular or technical meaning of the term in this industry. The primary judge's approach in this regard was undoubtedly correct. I have earlier set out the points of agreement between the experts, which demonstrate that the process of refining involves purification and upgrading from an impure state to a pure state, but upgrading during the physical process of mining does not equate to refining.[227] Importantly, the process of refining may involve more than one step, to transform an intermediate process product into a final refined product with a high degree of purity.[228]
3. It remains necessary to also have regard to the terms of the Agreement as a whole, and to consider the textual and other indicia in the instrument. In this regard, in my view, an important feature of this Agreement which is significant to the construction exercise which is required to be undertaken by the court is the choice by the parties to describe the royalty as a 'net smelter royalty'. The inclusion of this term in the Agreement cannot simply be overlooked. This term, which is undefined, is used in cl 2.2(b) and cl 7 of the Agreement. This phrase has no common meaning, but is an example of a word which comes from 'a specialist vocabulary and [has] no significance in ordinary speech'.[229]
4. There was unchallenged evidence below, from Professor Trench, which formed the basis of findings by the primary judge as to the meaning of the term 'net smelter royalty'. His Honour found that, in the Australian mining industry in 2002, the term 'net smelter return' was commonly understood to mean 'the revenue receipts, per unit of ex‑mine metal-bearing product, that are received by a mining company after the relevant tolling charges for smelting and refining of ex‑mine metal-bearing product have been deducted'.[230] Further, the primary judge found that, again in the context of the Australian mining industry in 2002, a net smelter royalty was a form of royalty that was commonly negotiated in the mining industry and was based on revenue received for ex-mine metal bearing product after tolling charges for smelting and refining and that a net smelter royalty was commonly set at a percentage rate of between 0.5% and 5%.[231] His Honour further found that such a royalty was distinguished from a 'net profit interest royalty'. The latter royalty commonly allowed for a more extensive range of deductions from revenue.[232]
5. The appellant's challenge to these findings as to the specialised or customary meaning of 'net smelter royalty', as distinct from a 'net profit interest royalty', cannot be sustained, as I have already noted. The evidence of Professor Trench on these matters was assessed by the primary judge as being cogent and well supported. In any event, it was evidence which was unchallenged.
6. As I have indicated, the essence of the error asserted by the appellant appears to be the manner in which the primary judge deployed these findings in his analysis of the meaning of the Agreement. In my view, that error is not apparent from a close review of the primary judge's reasons, which reflect an orthodox approach to the construction exercise. In my view, the significance of the inclusion within the Agreement of the term 'net smelter royalty' is as follows.
7. First, at the time the Agreement was executed, the term 'net smelter royalty' had a commonly understood meaning in the mining industry, being a distinctly different concept from a 'net profit interest royalty'. It may be inferred in these circumstances that the parties to the Agreement made a choice to include the former term in the Agreement, rather than the latter. Drawing an inference in this sense is a reasonable step for the court to take as part of the construction process. That is distinct from simply making an assumption.
8. Second, the significance of the phrase is not lessened by the fact that uranium is not smelted. The phrase (and each of the words within the phrase) cannot simply be ignored, as noted above - that would be an erroneous approach to the construction of this Agreement. In any event, the text within the Agreement recognises that costs may not be incurred for smelting. The definition of 'Allocable Charges' refers to 'Charges, costs and penalties, if any, for smelting ..., refining and marketing' (emphasis added). Further, the expert evidence of Professor Trench was to the effect that net smelter returns are in fact applied to metals that are not smelted.[233]
9. Third, as already noted, it is permissible, in the process of construction, for a court to receive evidence to show that a word or phrase bears a particular meaning in a particular trade or business. The word then prima facie bears that particular meaning. This is not a controversial proposition for the reasons I have explained above.
10. In the present, as both parties may be inferred to have a specialised knowledge based on their experience in the mining industry, the overall context suggests that certain words employed by the parties in their agreement are highly likely to be used in the technical sense in which they are understood in the industry.[234] In my view, the phrase 'net smelter royalty' is used in a technical sense and should properly bear the meaning that the unchallenged expert evidence supports. Once this position is reached, it is permissible to have regard to the meaning of this term as an aid to the construction of the Agreement more generally and, in particular, in the analysis of the competing contentions as to the meaning of the term 'refining'.
11. It follows from the foregoing that the correct approach to the construction of the Agreement, and of identifying the meaning of the term 'refining', is to have regard to the specialised meaning of that term, as distinct from the processes of 'beneficiation', 'upgrading' and 'milling', when used in an Agreement as part of the textual machinery which must be applied to calculate a 'net smelter royalty'. The clear and persuasive meaning of this latter term provides strong corroborative support for the meaning of the 'refining' as understood in the Australian mining industry when this Agreement was executed. Indeed, a conclusion that the term 'refining' should be taken to adopt a far broader meaning, not only exhibits high degree of tension with the specialised meaning of 'net smelter royalty' but would produce an obtuse and unintended result in the operation of this Agreement.
12. In these circumstances, it is unnecessary to reach a conclusion as to whether the same result would be obtained by the alternative reasoning process applied by the primary judge, adopting the meaning of the term 'refining' as established by industry or trade usage.[235]

Ground 3: the reasonableness of the charges Overview

1. The dispute below (and the primary judge's analysis) was focused on the reasonableness of the utilisation fee and the management fee,[236] having regard to the second sentence of cl 1.1(c)(ii) of the Agreement. Given the conclusion I have reached on grounds 1 and 2, it is not strictly necessary to address ground 3. As the matter was fully argued, however, both below and on appeal, it is appropriate to explain my reasons for rejecting this ground.
2. As a preliminary point, it is first necessary to clarify the operation and purpose of this provision.
3. This part of the definition of 'Allocable Charges' is engaged where smelting or refining are carried out in facilities which are owned or controlled, in whole or in part, by the appellant or an affiliate of the appellant. In that event, the Agreement provides that the charges, costs and penalties with respect to those operations are essentially limited to the 'reasonable charges, costs and penalties for such operations', which are not to exceed 'the amounts that [the appellant] would have incurred if such operations were carried out at facilities not owned or controlled by them offering comparable custom services'. The two aspects of the sentence are overlapping or cumulative in a sense.
4. The provision operates to control the ability of the appellant to pass on processing fees which may exceed commercially acceptable levels, by reason that the fees are set by the appellant itself or set by an affiliate of the appellant. The fees must be reasonable and will be regarded as not being reasonable if they exceed the amounts which hypothetically would have been incurred if the facilities were owned or controlled by a non-related party, speaking generally. The objective, commercial purpose of the provision is thus quite clear.
5. In essence, in my view, the Agreement requires a comparison to be undertaken of the fees charged by the appellant or its affiliate, as against the hypothetical bargain which would be reached between the appellant and a non-related owner. This is the manner in which the primary judge approached the provision.

1. The lay evidence which was adduced at trial on this issue was extremely limited.[237] The primary judge recognised the deficiency,[238] as did the experts called by both parties.[239]
2. There was no evidence of any express agreement (written or oral) between Heathgate Resources and the appellant in relation to the fees or charges. The appellant asserted that such an agreement should be inferred, but even if that inference was made, there was nonetheless something of a vacuum in the evidence before the primary judge as to the contractual basis on which the utilisation fee and the management fee were charged to the appellant, as to the cost or expense incurred by Heathgate Resources to which these fees related, and as to the rationale for their calculation.
3. The limited lay evidence concerning the charges which was relied upon by the appellant consisted of the evidence of Mr Bartels and Mr De Gennaro.[240] Mr De Gennaro did not give direct evidence regarding the utilisation fee except that Heathgate Resources charged it and recovered it as an 'Allocable Charge'.[241] His evidence on the management fee was similarly constrained, save as to a description of the management services that Heathgate Resources provided.[242]
4. Mr Bartels made no reference to the utilisation fee in his witness statements. In cross-examination at trial, however, he accepted that there was no reason the utilisation fee could not be adjusted to reflect a change in circumstances.[243] The basis for the calculation of the utilisation fee was surprisingly not the subject of any direct evidence, although the appellant did instruct its expert to assume this figure.[244]
5. Further evidence was adduced from Mr Bartels and Mr De Gennaro as to matters such as the design life of the Beverley Plant, the replacement cost of the plant, the historical volume of production from the Four Mile tenement, and the estimated life of mine. This evidence was relied on by the experts who prepared reports for the proceedings, and I now turn to their evidence.

1. The respondent relied on two detailed reports from Mr Tigran Ter‑Martirosyan, a financial consultant and chartered certified accountant.[245] Mr Ter-Martirosyan has expertise in financial consulting, focussing on the valuation of businesses, shares and damages in international arbitration and litigation.[246]
2. Mr Ter-Martirosyan employed a benchmarking approach in his analysis, that is, he compared Heathgate Resources' fees to 'available arm's length reference points' or comparators. As will be seen, the primary judge accepted this approach as a legitimate method of assessing the reasonableness of the fees, although the exercise was recognised as being a difficult one.[247]
3. The appellant relied upon a detailed report from Professor Stephen Gray, a financial economist and a Professor of Finance.[248] Professor Gray's teaching, research and consulting experience extends to issues relating to infrastructure access pricing. He has experience advising regulators, government agencies and regulated and unregulated businesses on issues relating to infrastructure access pricing.[249]
4. Professor Gray adopted a building block approach. In his report, he described this approach as '[t]he standard approach for computing charges for access to infrastructure assets'.[250]
5. Professor Gray and Mr Ter-Martirosyan prepared a joint expert memorandum delineating the areas of agreement and disagreement,[251] and gave their evidence at trial concurrently. There was no challenge to either of the experts' qualifications.[252]
6. Both experts were asked to answer the following question, which accords with the text of the Agreement:

whether any charges, costs and penalties that [the appellant] has paid to Heathgate Resources in relation to its operations at the Four Mile mine and/or the [appellant's] use of its infrastructure and facilities at the Beverley Mine are reasonable in all the circumstances, and not in excess of the amounts that [the appellant] would have been charged if the infrastructure and facilities had been owned by a party that was not an Affiliate of the [appellant].[253]

1. Their approaches to this question were so dissimilar that their reasoning did not materially overlap.[254]
2. Mr Ter-Martirosyan and Professor Gray agreed that they were unable to delineate which component of Heathgate Resources' fees compensated for which expense or charge. This aligned with the primary judge's observation that the evidence as to Heathgate Resources' charges was sparse.[255] It is appropriate to set out the following deficiencies in the direct evidence, as to which the experts were agreed, as set out in their joint expert memorandum:
   1. HGR [ie Heathgate Resources] appears to operate Four Mile on a cost-plus basis ... subject to the lack of clarity in relation to the Management Fee.
   2. It is not clear from the evidence available to the Experts what each of the HGR Fees components compensates (or was intended to compensate) HGR for. It is also not clear what HGR's approach to estimating those fees was. Prof Gray is instructed to make certain assumptions about the nature of the Utilisation and Management Fees and has prepared [his report] on that basis.
   3. It is not clear from the evidence available to the Experts what part of HGR's charges to Quasar represent cost elements (ie pass-through of costs actually incurred in operating Four Mile) and what part represents profit elements (eg mark-up on costs). For example, Mr Ter-Martirosyan assumes that the utilisation Fee is a profit mark-up ... whereas Prof Gray is instructed to assume that part of the Utilisation Fee reflects certain costs[.][256]
3. The joint expert memorandum continued, with the following matters also being agreed:

there is no evidence available as to the nature and composition of the Management Fee. Mr Ter-Martirosyan assumes the Management Fee to be a pure profit element (ie mark-up on costs ...) whereas Prof Gray is instructed to assume the Management Fee to comprise both indirect costs associated with HGR operating Four Mile and a mark‑up...[257]

... there is no detail available as to the nature and composition of the Utilisation Fee.[258]

1. Mr Ter-Martirosyan and Professor Gray disagreed as to which method was better suited for the issues in this case. Professor Gray considered that Mr Ter-Martirosyan's benchmarking approach was relevant, but that caution must be taken to ensure equal comparisons were being made.[259] Mr Ter-Martirosyan was adamant that while Professor Gray's building block approach was suited for use in setting prices in regulated industries, it had its shortcomings when it came to non‑regulated or competitive markets.[260]

1. For the purposes of his analysis, Mr Ter-Martirosyan split the costs into two categories.
2. The first category was 'Mining Costs', which were the costs of operating the Beverley Plant. Mr Ter-Martirosyan concluded that the 'Mining Costs' were reasonable and so further reference to those costs is not necessary.[261]
3. The second category was denoted as HGR Fees,[262] which consisted of the utilisation fee, the management fee, and the capital fee.[263] Mr Ter-Martirosyan concluded that since the 'capital fee' was denoted as such, it should be assumed that it was intended to compensate Heathgate Resources for its capital investment in the Beverley Mine infrastructure.[264] Mr Ter-Martirosyan benchmarked the HGR Fees against the following matters:[265]

(a) the estimates of costs included in the Final Scoping Study which was disclosed in Alliance's announcement to the ASX in July 2010 (Alliance Study);[266]

(b) fees for toll processing agreements of four in-situ uranium recovery mines in the United States (the Nichols Ranch project, the Lance mine, the Charlie project, and the Dewey-Burdock project);[267] and

(c) profit margins of Australian mining contractors.

1. Given the primary judge's views as to the lack of reliability of the benchmarking approach referred to in paragraph (b) above,[268] I will briefly explain the benchmarking approaches referred to in paragraphs (a) and (c) only.
2. As to the benchmarking approach referred to in paragraph (a) above, Mr Ter-Martirosyan compared the estimate of operating costs of a satellite plant referred to in the Alliance Study (with a production capacity of 3 million pounds per annum) and the appellant's estimate of the same operating costs as recorded in an earlier feasibility study (Quasar Feasibility Study).[269] The Quasar Feasibility Study had been commissioned by the appellant in 2008 as part of the proposed development of the Four Mile tenement and the calculation of an appropriate utilisation fee and a management fee (in the event Heathgate Resources' infrastructure was to be used to process ore from that tenement).[270]
3. At the time, Alliance did not accept the Quasar Feasibility Study findings and considered it was financially advantageous for the joint venture to build its own processing plant on the Four Mile tenement, rather than use Heathgate Resources' infrastructure.[271] For this reason, Alliance commissioned the Alliance Study to which I have referred above, which estimated significantly greater returns for the project on the Four Mile tenement if developed as a standalone project.[272] Of course, both the Alliance Study and the Quasar Feasibility Study were based on a range of assumptions with orders of inaccuracy which were quite high.
4. Mr Ter-Martirosyan opined in his report that one would expect two things from the foregoing comparison. First, that the difference between the appellant's estimate of costs in the Quasar Feasibility Study and the estimates of costs in the Alliance Study would reflect an excess of HGR Fees over an arm's length fee as estimated in the Alliance Study. Second, that the estimates in the Alliance Study of the mine's operating expenditure under satellite and standalone plant scenarios would reflect the Alliance Study's estimate of an arm's length fee to HGR.[273]
5. However, he found the inverse of this to be true. Mr Ter‑Martirosyan found that the HGR Fees were approximately two times an arm's length fee and that the utilisation fee on its own was approximately 29% to 38% higher than the fees estimated in the Alliance Study.[274]
6. As to the benchmarking approach referred to in paragraph (c) above, Mr Ter-Martirosyan analysed six mining contractors as comparables. In his first report, Mr Ter-Martirosyan observed that Heathgate Resources provided the appellant with a 'full cycle mine management service', and in turn the appellant paid the fees to Heathgate Resources and the 'Re-Charged Costs'.[275] Accordingly, in his analysis he equated Heathgate's role with the appellant as to that of a mine management service provider or mining contractor, and compared the profit margin derived by Heathgate from its management of the mine to that of publicly listed Australian mining contractors (denoted as 'comparables' in his report).[276] Further, he relied on the EBITDA margin of the comparables to analyse the profit margin.
7. Using this benchmarking approach, Mr Ter-Martirosyan found that the fee margin of Heathgate Resources was higher than the maximum EBITDA margin earned by all of the comparables. Accordingly, Mr Ter-Martirosyan concluded that Heathgate Resources' fees exceeded what the appellant would have been charged had the Beverley Plant been owned by a party that was not an affiliate. He therefore concluded that the fees charged by Heathgate Resources were unreasonably high.[277]
8. In his second report Mr Ter-Martirosyan expressed opinions on the following questions:[278]

(a) what charges, costs or penalties payable by the appellant to Heathgate Resources in relation to Heathgate Resources' operations at the Four Mile tenement and/or the defendant's use of Heathgate Resources' infrastructure and facilities at Beverley would have been reasonable in all the circumstances; and

(b) at what amount would those actual charges, costs or penalties have exceeded the amounts that the defendant would have been charged if the relevant infrastructure and facilities had been owned by a party that was not an Affiliate of the appellant.

1. In answering these two questions, his benchmarks were the Alliance Study, the EBITDA margins achieved by publicly listed mining contractors, and the Lance mine tolling agreement.[279] Mr Ter‑Martirosyan ultimately found that, on balance, it would have been reasonable for Heathgate Resources to charge fees between A$3.50/lb to A$6.00/lb (approximately) during the operating period. He found that the actual HGR Fees exceeded even the high end of the reasonable amount by approximately A$3.70/lb to A$4.90/lb.[280]

1. I will turn now to summarise Professor Gray's evidence and approach. First, it is appropriate to explain the building block approach which Professor Gray adopted:

[16] When setting charges for the use of infrastructure assets, it is common to use a 'building block' approach to determine the level of charges that would be fair and reasonable in the circumstances. This approach is designed to ensure that the revenues generated from the provision of an infrastructure service are just sufficient to cover the costs of providing that service, including the provision of a reasonable return on capital.

...

[18] That is, the infrastructure owner should be able to generate revenues that are sufficient to cover any operating costs and taxes that must be paid each year. The owner should also be able to recover any capital that was invested to buy or build the infrastructure. And the owner should be able to earn a reasonable rate of return on the capital they have invested.[281]

1. Professor Gray explained that a key element of the building block approach is the return on capital, which is computed each year by multiplying the amount of capital invested in the business at the beginning of the year by an estimate of the reasonable return on capital that would just fairly compensate investors for the risk of their investment.[282] The reasonable return on capital is usually estimated as the WACC or the weighted-average of the cost of debt and equity capital.
2. Professor Gray noted that the building block approach was commonly used when setting charges for access to regulated and unregulated infrastructure, as well as in setting prices in the commercial sector and as the basis for tolling charges levied by some processing facilities such as ore concentrators.[283]
3. On the basis of various assumptions,[284] Professor Gray's estimation of a reasonable capital charge was A$8.16/lb and his estimate of the actual capital charge levied by Heathgate Resources, after deduction of an allowance in respect of remediation costs and licence fees, was A$6.25/lb.[285] One of the assumptions which Professor Gray was asked to make (given the absence of direct evidence on this issue) was that the utilisation fee was an allowance for tenement fees and pastoral lease fees relating to the land on which the plant is situated, and that on an annual basis those fees were A$1.5 million.[286]
4. As to the charge which a party who was not an affiliate of the appellant would impose for use of the Beverley Plant, Professor Gray opined that the amount of A$8.16/lb was within the range of charges that would be economically rational for a non-affiliate of the appellant to pay. That is because, in his view, it is equivalent in economic value to the cost of the appellant building its own facility and involves less risk. Professor Gray also noted that the actual capital charge currently being paid amounted to $6.25/lb, which he considered to be materially below the economic cost of building a new facility.
5. During cross-examination, Professor Gray accepted that his analysis of the limit of a reasonable charge was established if it was cheaper for the appellant to build its own plant than pay the charge demanded by Heathgate Resources, and that it was fair to say that this analysis reflected a bargaining position where Heathgate Resources had the appellant over a barrel. He accepted this was how his charge of $8.16/lb should be interpreted.[287]
6. Professor Gray did not express an opinion on the quantum of the management fee.[288]
7. Several concessions were made by Professor Gray during cross‑examination. The primary judge detailed the concessions in his reasons.[289] For example, he accepted that the initial valuation of the asset-base was often contentious in developing a building block approach because different methodologies can lead to fundamentally different values. Further, he adopted $180 million as the replacement value of the asset in 2014 because that was the only figure he had been given. Further, he accepted that if the appellant did not have exclusive use of the Beverley Plant that would alter his analysis. He accepted that if the agreement as to fees could be renegotiated to take into account any change of circumstances then that would necessitate a revision to his calculations.

1. The primary judge found that both the utilisation fee and the management fee were unreasonable in that they exceeded the fees which would have been charged had the plant been owned by an entity that was not an affiliate.[290]
2. Ultimately, the primary judge had regard to the lay evidence of Mr Bartels[291] and the primary judge preferred the expert evidence of Mr Ter‑Martirosyan,[292] and found that the evidence established that these fees were unreasonable. The trial judge detailed several observations in explaining his conclusion in this regard.[293] I will briefly summarise these below.
3. The first point made by the primary judge was as to the burden of proof on the issue. His Honour observed that the burden of proof rested on the respondent to establish the negative proposition that the charges, costs and penalties were unreasonable or exceeded the amounts the appellant would have incurred if such operations were carried out at facilities not owned or controlled by Heathgate Resources. However, in the circumstances of this case, the primary judge considered the appellant carried an evidentiary onus. The reason for this was, according to his Honour, the facts relating to the reasonableness of the fees were peculiarly in the knowledge of the appellant.[294] His Honour referred in this regard to the maxim in Blatch v Archer,[295] to which I will return in due course.
4. Building on the foregoing point as to the deficiency in the evidence going to the reasonableness of the fees, the primary judge identified six specific points, as follows:

(a) The primary judge noted that the only direct evidence as to the purpose of the utilisation fee was given by Mr Bartels, the president of Heathgate Resources. His evidence was unequivocally that '[a] big part of the utilisation fee', 'by far and away the biggest use of that utilisation fee' was for 'the upkeep and the maintaining of the plant' - 'to maintain the plant, beyond its original plan of 10 to 15 years'.[296] The primary judge attached particular weight to this evidence as Mr Bartels was Heathgate Resources' most senior executive, his explanation of the purpose of the utilisation fee was volunteered by him, and it was the only direct evidence of the purpose of the utilisation fee given on the appellant's behalf.[297]

(b) Further, the primary judge observed that the appellant included repair and maintenance of the Beverley Plant and its infrastructure under various 'Cost Centres' as 'Allocable Charges'. His Honour inferred that there was (at least) some element of double recovery of the cost of repairing and maintaining the plant. His Honour commented that it was difficult to make a finding in more exact terms because there was no evidence of the costs of upkeep and maintenance to which Mr Bartels referred in his evidence. However, his Honour was able to conclude that double recovery of some or all of the cost of repairing and maintaining the plant supported the conclusion that the charges, costs and penalties were unreasonable.[298]

(c) The primary judge noted there was no evidence that the rationale for the utilisation fee was the recovery of capital invested in the construction of the Beverley Plant.[299] On the limited available evidence, his Honour was not prepared to accept that the utilisation fee was a capital charge. Indeed, not only was there no evidence to that effect, but such a conclusion would be inconsistent with, if not contradicted by, Mr Bartels' evidence.[300]

(d) Accordingly, the primary judge concluded that the reasonableness of the utilisation fee as an 'Allocable Charge' must be assessed by reference to the cost incurred in respect of which the charge was levied. On the basis of Mr Bartels' evidence the reasonableness of the utilisation fee must be assessed by reference to the costs of the upkeep and maintenance of the Beverley plant. That a utilisation fee based on the recovery of capital costs might (hypothetically) be reasonable does not establish the reasonableness of a charge levied in respect of costs falling within another category (that is, repairs and maintenance).[301]

(e) The primary judge commented that the appellant was able to instruct Professor Gray that $0.75 of the utilisation fee was a remediation charge and that the utilisation fee also covered licensing and lease costs amounting to $1.5 million per year. If the appellant was able to provide Professor Gray with such precise instructions in respect of the 'remediation charge', it is reasonable to infer (as the primary judge did) that it was able to provide Professor Gray with the details of the other components of the utilisation fee but chose not to do so.[302]

(f) Finally, the primary judge found there was no evidence of the quantum of management fees incurred by Heathgate Resources (which it sought to recover by charging the appellant a management fee of 15% of the Operating Costs). Factors relevant to the reasonableness of the management fee would include: the cost incurred in providing the management services; the degree of expertise required to provide those services; the market; and, if the fee is based on a percentage of the operating costs to what extent the management fees are fixed and to what extent they are variable. His Honour regarded Mr Ter-Martirosyan's evidence as being sufficient to raise an inference that the management fee was unreasonable and there was an evidentiary onus on the appellant to establish that the fee was reasonable, which it had not discharged.[303]

1. As to the relative assessment of Mr Ter-Martirosyan's approach and the approach adopted by Professor Gray, the primary judge concluded that the benchmarking approach adopted by Mr Ter‑Martirosyan was a legitimate method of assessing the reasonableness of the utilisation fee and the management fee. His Honour accepted that the particular circumstances of this case made the benchmarking exercise a difficult one. There was also a limited range of potential comparators and the reliability of the comparators identified by Mr Ter‑Martirosyan was reduced by the lack of detailed information.[304]
2. Making due allowance for the limitations in his analysis and the critique of his report by Professor Gray, the primary judge considered that Mr Ter-Martirosyan's evidence established that the utilisation fee and the management fee were unreasonable because they exceeded the fees that would have been charged had the Beverley Plant been owned by a party that was not an affiliate.[305] On balance, the primary judge found the views of Mr Ter-Martirosyan more persuasive than the building block approach proposed by Professor Gray.[306]
3. I should note that the primary judge accepted Professor Gray's evidence that the building block approach has applications in commerce outside the field of regulatory economics.[307] In the present case, however, the benchmarking approach was to be preferred. In reaching this conclusion the primary judge specifically accepted the observation made by Mr Ter-Martirosyan to the effect that the underlying building block assumptions as to the recovery of capital and return on capital do not apply in more competitive market situations. Further, in the hypothetical situation of an arms-length negotiation, the primary judge found that Heathgate Resources was not a price-maker, that is, it was not in a position to dictate the price at which it permitted the appellant to process uranium ore at the Beverley Plant. Underlying the primary judge's assessment in this regard was the fact that, in 2014, the Beverley Plant was at the end of its design life and Heathgate Resources' requirement to process uranium ore through the plant was reduced to approximately 10% of the plant's capacity.[308]
4. As to the process of applying or allocating costs to the Agreement, on the limited evidence which was available, the primary judge found that the appellant in effect categorised the cost of all operations at the Beverley Plant as 'Allocable Charges'.[309] In support thereof, the primary judge noted that:[310]

Mr Gennaro [a director of the appellant] was unable to say what process determined whether the costs were allocable. In cross-examination he said, 'all I know is the numbers that come through the model'. He believed however that the defendant treated everything it did after extracting uranium from the wellfield as giving rise to Allocable Charges. (original emphasis)

1. The primary judge concluded that the utilisation fee and the management fee components of the 'Allocable Charges' were unreasonable and, further, the limitations in the evidence precluded him from making a finding as to what would be a reasonable charge for each of those costs.[311]

1. A significant part of the appellant's challenge to the primary judge's conclusions on this issue was the correctness of his approach in applying Blatch v Archer. The appellant submitted that the principle in that case should not apply in circumstances where the respondent had not adduced sufficient evidence to invoke its operation and Professor Gray's evidence should have been preferred and, in all events, was evidence that contradicted the respondent's evidence. The appellant eschewed any suggestion that the primary judge's assessment of the experts was informed by his assessment or impressions of their reliability, and that a proper assessment of their evidence could be undertaken from the documents and the transcript of the proceedings below.[312]
2. The appellant contended that the respondent simply did not satisfy its onus or burden of proof.[313]
3. As to the management fee, the appellant submitted that the primary judge fell into error in being satisfied that Mr Ter‑Martirosyan's evidence was sufficient to raise the inference that the management fee was unreasonable.[314] Further, counsel for the appellant submitted that the primary judge misstated the effect of the evidentiary onus in this respect.[315] Counsel focused on the passage of the primary judge's reasons at [281], which is as follows:

I consider that Mr Ter-Martirosyan's evidence is sufficient to raise an inference that the management fee is unreasonable and that there was an evidentiary onus on the defendant to establish that the fee was reasonable, which it has not discharged.

1. Counsel submitted that the foregoing passage reflected an approach by which the onus shifted onto the appellant, requiring it to establish the fee was reasonable.[316]
2. Further, as to both the management and utilisation fees, the primary judge was said to have fallen into error by implicitly determining the relative bargaining power of a hypothetical asset-owner (not being Heathgate Resources) and the appellant, when the evidentiary basis of that conclusion was not clear.[317] This point was not further developed in oral submissions.
3. The appellant also points to what it describes as fundamental flaws in the benchmarking process adopted by Mr Ter-Martirosyan,[318] including the use of a particular study, the use of mining contractor profit margins, the analysis of fees estimated or charged at other times by other parties in different circumstances, and the comparison of an assumed profit margin for Heathgate Resources' fees to the EBITDA margin of selected mining contractors.[319]
4. The appellant submitted the primary judge was wrong to infer there was double recovery by the appellant merely because the utilisation fee was used for upkeep and maintenance and some charges levied by the appellant were attributed to repair and maintenance.[320]
5. The respondent advanced two primary submissions in seeking to resist ground 3 of the appeal.
6. First, in response to the Blatch v Archer point, the respondent submitted that the evidence it adduced raised at least an inference that the fees were unreasonable.[321] In support of this submission, the respondent noted that there was no evidence as to any express agreement between the appellant and Heathgate Resources upon which the fees in question were levied, that the respondent obtained such evidence as it could, and the respondent briefed a qualified expert to undertake a review of the historical fees. The respondent observed there were limits on what evidence could be adduced by a party in its position, referring by way of analogy to a party alleging an uncommercial transaction and the analysis in Crowe-Maxwell v Frost.[322]
7. Second, the respondent submitted there was no error apparent from the primary judge's treatment of the expert evidence, nor from his preference for the evidence of Mr Ter-Martirosyan.[323] Further, the criticisms raised by the appellant ignored the deficiencies in its own evidence, according to the respondent. Those deficiencies included the 'inapt assumptions given to its expert Professor Gray' and the 'unsuitability of his "building block" approach for the contractual objective of assessing reasonableness'.[324] The following further submissions were made by the respondent:

(a) that the Agreement positively required an assessment of the bargain that would be reached between a non-Heathgate Resources asset owner and the appellant, yet the appellant's approach assumed a completely one-sided bargain with the appellant in a position of desperation ready to pay up to $1 less than it would have cost the appellant to build its own facility to process its uranium;[325]

(b) that the primary judge did in fact address the limitations in the benchmarking exercise, but nonetheless considered the benchmarking approach was a legitimate method to adopt in order to assess the reasonableness of the fees, and was to be preferred over the inapt building block approach;[326]

(c) it did not matter that no comparable services existed in Australia or that there was no comparable service provider because the proper construction of the Agreement 'required a hypothetical assessment as the touchstone of reasonableness';[327]

(d) that the bald assertion by the appellant that the primary judge should have accepted Professor Gray's approach is of no assistance given the criticisms of his evidence and his conclusions which were accepted by the primary judge;[328] and

(e) the primary judge's finding that there was 'double counting' had ample support on the evidence.[329]

1. This ground draws attention to two particular aspects of the primary judge's reasoning process in concluding that the utilisation fee and the management fee were unreasonable.
2. The first issue is essentially one of onus in the context of proof of a negative proposition.
3. The second issue concerns the persuasiveness of the expert evidence and the primary judge's assessment that, having had the opportunity to consider and assess the manner in which Mr Ter‑Martirosyan and Professor Gray gave their evidence, the primary judge found the views of the former to be more persuasive and identified deficiencies in the application to the present issues of the building block approach favoured by Professor Gray. This aspect of the appellant's challenge brings into focus the approach of the primary judge in weighing the limited (direct) evidence which was adduced at trial.
4. I will address these matters below and explain why this ground must be dismissed.

1. In cases in which there is a dearth of evidence going directly to the primary matter in issue, it is particularly important for the court to undertake the analysis of the evidence which has been adduced, including any available inferences which may be drawn, paying close attention to the onus of proof. This includes the identification of the party bearing the ultimate onus of proof, and whether one party bears an evidential onus.
2. The proposition to which the primary judge had regard, Lord Mansfield's maxim in Blatch v Archer, bears upon the appropriateness of deciding whether a fact has been proved when only limited evidence is available. In general terms, the principle is similar to, but wider than, the principle in Jones v Dunkel.[330] The principle is that:

[i]t is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.[331]

1. The continuing currency of the maxim in Blatch v Archer was recently recognised by a plurality of the High Court in GLJ v The Trustees of the Roman Catholic Church for the Diocese of Lismore.[332] In considering an appeal against an order permanently staying proceedings on the ground that a trial would be unnecessarily unfair or constitute an abuse of process, Kiefel CJ, Gageler and Jagot JJ emphasised the principles which have been developed by the common law in response to 'the fact that, in the adversarial system, cases are always decided within the evidentiary framework the parties have chosen and are often decided on incomplete evidence'.[333] One of these principles is the maxim in Blatch v Archer. The plurality observed that the maxim acknowledges the problem that in deciding issues of fact on the civil standard of proof, the court is concerned not just with the question 'what are the probabilities on the limited material which the court has, but also whether that limited material is an appropriate basis on which to reach a reasonable decision'.[334]
2. The maxim was the subject of earlier analysis by the High Court in Australian Securities and Investments Commission v Hellicar.[335] In that case, the plurality (French CJ, Gummow, Hayne, Crennan, Kiefel & Bell JJ) noted that there remains a need, notwithstanding the maxim, to faithfully apply the principles governing the onus and standard of proof. The court held:

[165] Disputed questions of fact must be decided by a court according to the evidence that the parties adduce, not according to some speculation about what other evidence might possibly have been led. Principles governing the onus and standard of proof must faithfully be applied. And there are cases where demonstration that other evidence could have been, but was not, called may properly be taken to account in determining whether a party has proved its case to the requisite standard. But both the circumstances in which that may be done and the way in which the absence of evidence may be taken to account are confined by known and accepted principles which do not permit the course taken by the Court of Appeal of discounting the cogency of the evidence tendered by ASIC.

[166] Lord Mansfield's dictum in Blatch v Archer that '[i]t is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted' is not to be understood as countenancing any departure from any of these rules. Indeed, in Blatch v Archer itself, Lord Mansfield concluded that the maxim was not engaged for 'it would have been very improper to have called' the person whose account of events was not available to the court. (footnotes omitted)[336]

1. The principles governing the onus of proof recognise a clear distinction between a legal (or ultimate) onus of proof, and the onus of adducing evidence. As a general rule in civil cases, the party who has the legal burden also has the evidential burden, but that is not always the case. As the primary judge recognised, a particular circumstance in which courts have recognised that the general rule does not apply is where the party bearing the legal onus is required to prove a negative proposition and relevant facts are peculiarly in the knowledge of the opposing party who has the greater means to produce evidence relating to those facts. In this respect, the primary judge referred to, and relied upon, the decision of Campbell J in Hawksford v Hawksford, in which his Honour explained the distinction as follows:[337]

The distinction between an onus of proof and an onus of adducing evidence is of particular relevance in the present situation. Where party A has the legal onus of proving a negative proposition, and relevant facts are peculiarly in the knowledge of party B or where party B has the greater means to produce evidence relating to those facts, then provided party A establishes sufficient evidence from which the negative proposition may be inferred, party B then comes under an evidential burden, or an onus of adducing evidence. (citations omitted)

1. In Hawksford v Hawksford, a challenge was brought to a solicitor's retainer with two corporate entities. Campbell J held that the legal onus of proving the absence of a retainer fell upon the plaintiffs. Once the plaintiffs had raised an inference of the negative proposition, the defendants then carried the evidential burden 'to advance in evidence any particular matters with which (if relevant) the plaintiffs would have to deal in the discharge of their overall burden of proof'.[338] Campbell J's statement was described by the NSW Court of Appeal in Crowe‑Maxwell v Frost as representing an application of the Blatch v Archer principle, in the context of proof of a negative proposition.[339]
2. The primary judge in the matter under appeal concluded that the ultimate onus rested on the respondent. That onus was to establish a negative proposition, that the charges and costs were unreasonable or exceeded the amounts the appellant would have incurred if such operations had been carried out at facilities not owned or controlled by Heathgate Resources.
3. Further, the primary judge found that the appellant bore an evidential onus, having regard to the maxim in Blatch v Archer and the observations in Hawksford v Hawksford. The evidential or forensic burden was to adduce evidence as to the reasonableness of the fees (which would likely include evidence as to the basis for the calculation of the two fees and the rationale for those fees). That conclusion was undoubtedly open to his Honour given the relevant facts as to the calculation and rationale of the fees were peculiarly within the knowledge of the appellant, and the appellant plainly had greater means to produce evidence relating to those facts.
4. The primary judge's invocation of the principle in Blatch v Archer, as the first step in his reasoning and analysis,[340] was entirely consistent with the principles expressed above.
5. That said, the applicability of the principle in Blatch v Archer was not directly challenged by the appellant on appeal. Rather, the appellant criticises the primary judge, and asserts he fell into error, insofar as he concluded that the appellant failed to discharge the evidential onus 'to establish that the fee was reasonable'.[341] The appellant submits the language employed by the primary judge indicates he approached the issue on the basis the appellant was required to establish the positive proposition that the fees were reasonable (that is, that the legal onus was somehow on the appellant).
6. It would undoubtedly be an error to shift the ultimate, legal burden from the respondent to the appellant. However, that is not what occurred on a fair reading of the primary judge's reasons and the submission should be rejected.
7. His Honour's reference to the appellant's inability to discharge the evidential onus does not reflect a misapplication or misstatement of law. In my view, the particular language employed by the primary judge at [281] of the primary reasons must be seen in the context of the reasons as a whole, including the preceding paragraph of his reasons at [280] and the primary judge's reference to, and analysis of, Hawksford v Hawksford and Crowe-Maxwell v Frost.
8. The reference at [281] of the reasons reflects his Honour's assessment that the appellant had an evidential onus to adduce some evidence relevant to the reasonableness of the management fee (noting that the comments at [281] do not refer to the utilisation fee). The use of the phrase 'to establish that the fee was reasonable' is a reference to the onus of adducing evidence concerning the quantum of the management fee and the various factors identified at [280], noting that his Honour had referred to the nature of the evidential burden in his reasons at [269]. His Honour's statement at [281] represents a not uncommon phrasing employed by trial judges to explain that the party which carried the evidential burden (that is, the burden to advance in evidence any particular matters with which (if relevant) the other party would have to deal in the discharge of their overall burden of proof),[342] had failed to satisfy that burden. On a fair reading of the primary reasons, it is this sense in which the primary charge spoke of the appellant's failure to discharge the evidential onus.
9. Although only limited evidence was available, the respondent (as the plaintiff below) was not released from its obligation to discharge the legal onus, which was to establish the negative proposition that the charges and costs were, generally speaking, unreasonable. His Honour's reasons, properly understood, do not reveal any indication that he sought to shift the ultimate onus to the appellant, which his Honour expressly recognised at [269] of his reasons.
10. In my view, his Honour's approach in this regard represents a correct application of established principle. His Honour held the respondent to its legal onus, but properly took into account the failure by the appellant to adduce evidence which could have been, but was not called, in determining whether the respondent had demonstrated its case to the civil standard. A striking illustration of this was the fact that no evidence as to the quantum of the management fees incurred by Heathgate Resources was adduced (and yet this formed the apparent sole basis for the charging of the fee of 15% to the appellant which was then on-charged to the respondent through the 'Allocable Charges' concept in the Agreement).[343]

1. The respondent sought to discharge its ultimate onus through the opinion of Mr Ter-Martirosyan as to the unreasonableness of the management fee (an issue in respect of which Professor Gray did not express an opinion) and the opinion of Mr Ter-Martirosyan as to the unreasonableness of the utilisation fee.
2. Additionally, the respondent was able to point to the vague evidence of Mr De Gennaro as to the process of allocating costs, and the direct evidence of Mr Bartels that the utilisation fee was largely for upkeep and maintenance of the plant, which supported a conclusion, having regard to other evidence, there was an element of double recovery in this regard.
3. The respondent was assisted in discharging its onus of proof by the limited evidence adduced by the appellant on these matters. As counsel for the appellant properly recognised, 'there was not an abundance of evidence about the utilisation fee at trial',[344] although a submission was made that the same could not be said for the available evidence concerning the management fee. I will address this proposition at the conclusion of this section of the reasons.
4. At [275], the primary judge concluded that the utilisation and management fees were unreasonable having regard to the opinion of Mr Ter-Martirosyan. The appellant submits that this court is in the same position as the primary judge to assess the evidence and opinions of Mr Ter-Martirosyan and Professor Gray, to undertake the exercise which is apparent from the primary judge's reasons at [275] and [277], and that this court should reach a different conclusion. I am not satisfied the task is wholly capable of re-evaluation by this court by reference to the documents and the transcript. His Honour had the opportunity, which this court does not, to consider and assess all of the evidence of Mr Ter-Martirosyan and Professor Gray, and concluded that he found the views of the former to be more persuasive. In this regard, the principles of appellate restraint to which I have earlier referred must be borne in mind.[345]
5. In any event, a review of the primary judge's reasoning on this issue reveals that a careful scrutiny was undertaken of the detailed evidence adduced from Mr Ter-Martirosyan and Professor Gray, and the competing models or approaches they applied. As part of this analysis, his Honour identified the limitations in the benchmarking process favoured by Mr Ter-Martirosyan, but ultimately concluded the benchmarking approach was a legitimate method to adopt for the purposes of assessing the reasonableness of these fees.
6. The appellant's submission is in effect that the benchmarking exercise was 'fundamentally flawed'.[346] There were certainly difficulties inherent in the analysis, some of which emerged from the lack of direct evidence, but the submission cannot be sustained in its entirety. Two particular points were highlighted by the appellant in support of its submission.
7. The first is the criticism that Mr Ter-Martirosyan did not have access to the Alliance Study, and only had regard to a summary of that study. The issue was recognised by the primary judge at [256(a)] of his reasons. The challenge is far from compelling when it can reasonably be inferred that the appellant had access to the complete copy of the study and failed to adduce it in evidence or otherwise demonstrate how the summary was materially inaccurate. The Blatch v Archer maxim has direct application in this regard.
8. The second criticism, which is of greater substance, is that the benchmarking by Mr Ter-Martirosyan against the profit margins of Australian mining contractors involves a false comparison.[347] Counsel for the appellant submitted that the respondent's expert was unable to say whether the mining contractors which were the subject of the comparison provided facilities and associated infrastructure as part of their service (which was the case with the Beverley Plant and infrastructure provided by Heathgate Resources). The primary judge recognised the limitations in Mr Ter-Martirosyan's analysis (at [256(c)] and [275] of the primary reasons). The difficulty with the comparability of the margins does somewhat weaken the cogency of Mr Ter-Martirosyan's conclusion in this respect, and his reliance on this benchmark. It may also serve to explain, at least in part, why the fee margin attributed to Heathgate Resources so starkly exceeded the comparable profit margins.[348]
9. Nonetheless, the benchmark on which Mr Ter-Martirosyan placed the greatest reliance was the first comparison, that is the benchmarking against the Alliance Study. As explained above, I do not accept the appellant's criticisms in this regard are sufficient to disclose error in the approach of the primary judge in placing reliance on the opinion of Mr Ter-Martirosyan, bearing in mind the opportunity the primary judge had to consider and assess the reliability of his evidence.
10. Further, it is not appropriate to undertake a review of the evidence before the primary judge in an isolated or piecemeal fashion. The evidence as a whole must be considered. In this respect, there was available evidence before the primary judge to support a finding that the imposition of the utilisation fee by Heathgate Resources, which was largely imposed to address the upkeep and maintenance of the Beverley Plant, involved an element of double recovery.[349] This finding was open given the evidence that repair and maintenance of the Beverley Plant was included under various 'Cost Centres' as 'Allocable Charges'. These matters, in the absence of any evidence to the contrary adduced from the appellant, which it had the ability to call, supported the conclusion that the charges and costs were unreasonable.
11. Additionally, on the appellant's assumption that the rationale for a portion of the utilisation fee was for remediation costs, the available evidence provided the foundation for a conclusion that this component of the fee was passing on almost three times the estimated full cost of remediation associated with the Beverley Mine.[350] On any view, this analysis strongly pointed against the reasonableness of the utilisation fee, particularly as the contention was not contradicted or explained by the appellant.
12. Further, one of the assumptions upon which Professor Gray's analysis was based concerned the replacement value of the Beverley Plant as at 2014. He was instructed to assume a replacement value of $180 million. That is, although the facility was by then some 14 years old, the assumed value was based on the cost to build a new facility. This was one of the matters accepted by Professor Gray in principle during the course of cross-examination, as noted by the primary judge at [278].
13. This leads me to the third submission developed by the appellant, concerning the primary judge's analysis of the evidence of Professor Gray concerning the reasonableness of the utilisation fee.[351] The appellant submits the assessment of Professor Gray ought to have been given weight, and should not have been discounted, by the primary judge, such that it ought to have been concluded there was an evidentiary foundation for the reasonableness of the utilisation fee. This analysis rather oversimplifies the approach adopted by the primary judge, which was not to wholly disregard the evidence of Professor Gray, but rather was to assess the relative reliability and persuasiveness of the two approaches employed by the experts including by reference to their applicability to the issues before the court and their inherent limitations. The primary judge also accepted that Professor Gray's model had applications in commerce outside the field of regulatory economics.[352]
14. Further, the primary judge specifically noted that the conclusion as to the utilisation fee reached by Professor Gray fundamentally rested on an assumption that Heathgate Resources had the appellant 'over a barrel' in a negotiating sense, such that it would have been reasonable for Heathgate Resources to impose a charge unless it was cheaper for the appellant to build its own plant. The assumption that the appellant was in a position of desperation in this regard was not only an unreasonable one, but this approach did not assist to address the issue which fell for determination on the pleadings and the terms of the Agreement. That issue required an assessment of the hypothetical bargain that would be reached between the appellant and an owner of the plant which was not an affiliate of the appellant, in order to assess the reasonableness of the fees.[353]
15. A further argument was advanced by the appellant on appeal in relation to ground 3, concerning the reasonableness of the management fee.[354] Counsel for the appellant submitted that there was evidence before the primary judge as to the services to which the management fee related.[355] This submission was directed at the primary judge's conclusion that there was an absence of evidence led by the appellant in discharge of its evidential onus concerning the management fee (at [280] and [281]). The appellant directed attention to the second witness statement of Mr De Gennaro in this respect, which outlines the services provided by Heathgate Resources,[356] in the context that the appellant did not have any employees of its own.
16. The evidence to which the appellant points helps to explain the management services which were provided. The primary judge's finding, however, was that no evidence was led by the appellant as to the quantum of the management fees incurred by Heathgate Resources which it sought to recover by charging this fee (which equated to 15% of the operating costs). The primary judge identified a range of matters which would have been relevant to the reasonableness of this fee, but which were not addressed in the evidence.[357]
17. In the absence of such evidence and recognising that Professor Gray did not opine on the reasonableness of these fees, the benchmarking approach adopted by Mr Ter-Martirosyan provided a sound basis to conclude that the fees were unreasonable. The benchmarking of the fees charged by Heathgate Resources, which included the management fees, against the Alliance Study, represented an apparently sound and justifiable method of assessing the reasonableness of the fees. On that benchmark, the HGR Fees were higher, allowing for a conclusion that the fees, including the management fees, exceeded the amount the appellant would have charged had the Beverley Plant been owned by a party that was not an affiliate.
18. At the very least, the primary judge was entitled to draw the inference, on all of the available evidence, that the management fee was unreasonable and, in determining whether the respondent had discharged its legal onus in this regard, was entitled to have regard to the appellant's failure in the circumstances to call or give evidence of the quantum of the management fees incurred by Heathgate Resources (which could cast light on the reasonableness of the management fee). As I have explained, this is the approach the primary judge adopted at [280] and [281]. In my view, his approach was correct.
19. The primary judge's approach in relation to the evidential onus concerning the management fee, and the application of the Blatch v Archer principle, accords with the manner in which the maxim has been applied by intermediate appellate courts in Australia. In this respect, I am referring to the primary judge's approach to the weighing of the evidence, rather than the question of onus, which I have already addressed above. I refer to the decisions of the NSW Court of Appeal in Ho v Powell [358] and Crowe-Maxwell v Frost, and to the decision of the Full Federal Court in Coshott v Prentice.[359]
20. It is only necessary to refer to the authority of Crowe-Maxwell v Frost in some detail. That decision is relied upon by the respondent, and was referred to by the primary judge.[360] The case concerned a challenge brought by liquidators to various transactions between the company and its directors. The liquidators contended the transactions were unreasonable director-related transactions and therefore voidable transactions. The funds in question had been used by the directors to pay personal expenses, for repayments of their residential home loan, and for repayment of a loan made by the father of one of the directors.[361]
21. An aspect of the argument raised on appeal in Crowe-Maxwell v Frost was that there was no evidential basis for the trial judge's findings that the payments did not constitute unreasonable director-related transactions.[362] Additionally, the appeal raised an issue as to whether the appellants had discharged the onus of proving the relevant transactions were unreasonable director-related transactions, and the extent to which the directors bore an onus to adduce evidence in relation to the transactions under challenge.[363]
22. Beazley P (with whom Macfarlan & Gleeson JJA agreed) addressed the onus issues at [89] - [92]. Her Honour held as follows:

[89] A common thread in the uncommercial transaction cases is that, where there is limited evidence of the nature or purpose of a transaction, but the surrounding circumstances show it to be a departure from normal commercial practice and to raise inferences as to a lack of benefit to the company, detriment caused to the company, or benefit accruing to other parties, absent some commercial explanation, courts may infer the transaction was uncommercial, without requiring the liquidator to prove its precise uncommercial nature. The same may be said with respect to the identification of unreasonable director-related transactions.

[90] In those limited circumstances, for practical purposes, a defendant may be said to bear an 'onus', sometimes referred to as an evidentiary onus, of raising some commercial explanation for the transaction.[364]

1. The respondent's submission that the analysis in Crowe-Maxwell v Frost provides analogous support for the approach adopted by the primary judge should be accepted.
2. Accordingly, the appellant's challenges to the approach and reasoning adopted by the primary judge in concluding that the utilisation fee and the management fee were unreasonable must fail, both in terms of the application of the onus of proof principles and in relation to the assessment of the evidence on the issues.

1. For these reasons the appeal should be dismissed. I would order that the appeal be dismissed and I would hear from counsel for the parties as to the costs of the appeal.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] It was uncontroversial that uranium is a heavy silver-grey metal that is weakly radioactive: APG Aus No 3 Pty Ltd v Quasar Resources Pty Ltd [2022] WASC 123 [25] (primary reasons).

[2] Appellant's submissions [24], [26]; appeal ts 25, 79.

[6] Appellant's submissions [35]; appeal ts 10 - 11, 31 - 32.

[7] Appellant's submissions [35]; appeal ts 7 - 9.

[8] Appellant's submissions [27]; appeal ts 14 - 15, 20 - 21, 31, 38.

[10] Appellant's submissions [48] - [50], [75]; appeal ts 28.

[15] Appellant's submissions [27], [45] - [46]; appeal ts 37.

[16] Sino Iron v Mineralogy [2019] WASCA 80; (2019) 55 WAR 89 [172]; see also AIG Insurance Australia Ltd v McMurray [2023] WASCA 148 [145] ‑ [146].

[24] Primary reasons [147] - [148], [195].

[26] Child and Adolescent Health Service v Mabior [2019] WASCA 151; (2019) 55 WAR 208 [93] ‑ [95].

[27] Lee v Lee [2019] HCA 28; (2019) 266 CLR 129 [55].

[28] Abalos v Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167, 178 - 179; Kakavas v Crown Melbourne Ltd [2013] HCA 25; (2013) 250 CLR 392 [131]; DRA Industries Pty Ltd v Kuredale Pty Ltd [2018] WASCA 17 [52]; Christos v Curtin University of Technology [2017] WASCA 110; (2017) 267 IR 209 [104]; Western Australia v Watson [1990] WAR 248, 305; X and Y (by her tutor X) v Pal [1991] NSWCA 302; (1991) 23 NSWLR 26, 34, 49; Davids Holdings Pty Ltd v Attorney-General (Cth) (1994) 49 FCR 211, 243 ‑ 244.

[30] Joyce v Anderson [2020] WASCA 48; (2020) 91 MVR 334 [127] - [132], [205] ‑ [211].

[35] ts 205, 230 - 231, 235 - 236, 243 - 244.

[44] The Industry Commission's Mining and Minerals Processing in Australia, Report No 7, 25 February 1991.

[47] Primary reasons [65](b), [140] - [141], [143](b)(iii).

[48] While the ground is expressed as challenging the judge's finding that yellowcake is not fungible, the appellant's oral submissions focused its challenge on the finding that yellowcake is not a final product. When the appellant's shift in focus was pointed out by the bench, the appellant sought leave to amend the ground to the extent necessary. This shift in focus may reflect the apparent reality that a conclusion as to fungibility will not sustain, or materially advance, the appellant's case on appeal.

[52] Homestake Australia Ltd v Metana Minerals NL (1991) 11 WAR 435, 446 ‑ 448.

[53] See, for example, Con‑Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226, 236 ‑ 237 and cases there referred to.

[54] Max Cooper & Sons v Sydney City Council (1980) 54 ALJR 234.

[55] Max Cooper & Sons v Sydney City Council (239).

[56] See, for example, Collector of Customs v Agfa‑Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389, 396 ‑ 397.

[57] Technomin Australia NL v Southern Resources Ltd (Unreported, WASC, Library No 7940, 13 November 1989).

[58] Southern Resources Ltd v Technomin Australia NL (Unreported, WASCFC, Library No 8329, 18 June 1990).

[59] Australian Gas Light Co v Valuer‑General (1940) 40 SR (NSW) 126, 137.

[60] Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2; [1974] AC 235, 261.

[61] J D Heydon, Heydon on Contract (2019) [8.390].

[62] DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423, 429, citing Prenn v Simmonds [1971] 1 WLR 1381, 1384; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 351.

[64] Southern Resources (11 - 12) (Nicholson J, Rowland J agreeing).

[65] Metal Roofing and Cladding Pty Ltd v Amcor Trading Pty Ltd [1999] QCA 472.

[68] Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 [171] ‑ [174].

[69] J W Carter, The Construction of Commercial Contracts (2nd ed, 2013) [7‑13], [14‑08] ‑ [14‑09], [12‑14].

[70] Enron Australia Finance Pty Ltd (in liq) v Integral Energy Australia [2002] NSWSC 753 [23].

[76] Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219 [42].

[77] AIG Insurance Australia v McMurray [135] - [140].

[78] George 218 Pty Ltd v Bank of Queensland Ltd [No 2] [2016] WASCA 182; (2016) 313 FLR 287 [88] and the cases there cited.

[80] Australasian Temperance and General Mutual Life Assurance Society Ltd v Howe [1922] HCA 50; (1922) 31 CLR 290, 302.

[81] CCOM Pty Ltd v Jiejing Pty Ltd [1992] FCA 325; (1992) 36 FCR 524, 527. Although his Honour was construing an undertaking, in doing so he stated and applied the rules governing the construction of a contract.

[82] CCOM Pty Ltd v Jiejing Pty Ltd (528).

[83] See, for example, Eureka Funds Management Ltd v Freehills Services Pty Ltd [2008] VSCA 156; (2008) 19 VR 676 [52] ‑ [53].

[85] Further Amended Statement of Claim [9]; BAB 135.

[86] Report of Mr Lawson, exhibit 306; GAB 505, 507; report of Professor Trench, exhibit 305; GAB 406 ‑ 407.

[88] Further Amended Statement of Claim [11A]; BAB 139 - 140.

[89] Primary reasons [268] - [280], [281].

[95] These matters are drawn from the background facts identified by the primary judge and from the parties' submissions on appeal insofar as they concern non-contentious matters: appellant's submissions, WAB 9 ‑ 28; respondent's submissions, WAB 56 - 75.

[101] Primary reasons [23]; appellant's submissions [7].

[102] Primary reasons [17], [24]. The agreement are exhibits 1 - 4; GAB 826 - 874.

[104] Primary reasons [22]; appellant's submissions [8].

[108] Primary reasons [25]; appellant's submissions [11].

[109] Primary reasons [25] - [34] (footnotes omitted).

[115] Appeal ts 15 - 16; report of Mr Lawson, exhibit 306; GAB 513.

[116] Report of Mr Lawson, exhibit 306; GAB 514.

[117] Primary reasons [60]. The applicable royalty rate was 5% on the revenue the appellant received from selling yellowcake.

[120] Further Amended Statement of Claim [10B]; BAB 137.

[121] The capital fee was described by the respondent as being approximately 5% of the capital costs incurred by Heathgate Resources: primary reasons [53]; Further Amended Statement of Claim [10B.3]; BAB 137.

[122] Primary reasons [56], [53]; Further Amended Statement of Claim [10B.1], [10B.2]; BAB 137.

[125] Further Amended Statement of Claim [10]; BAB 136 - 137.

[129] Exhibit 305; GAB 381 (Professor Trench); exhibit 306; GAB 496 (Mr Lawson); confidential exhibit 308; GAB 1419 (Mr Dunn).

[132] Merriam-Webster Dictionary (online version).

[133] Vocabulary.com Dictionary (online version).

[134] Macquarie Dictionary (online version).

[135] Primary reasons [69] - [70].

[136] Primary reasons [135] as to the concepts of a net smelter return and a net smelter royalty.

[138] Primary reasons [122], [143(b)].

[147] Primary reasons [144], [145].

[152] Primary reasons [184] - [186].

[157] Primary reasons [170], [171].

[158] Technomin Australia NL v Southern Resources Ltd (Unreported, WASC, Library No 7940, 13 November 1989).

[159] Primary reasons [194] - [214].

[163] Primary reasons [164], [199], being the requirements identified by Professor Carter in Carter JW, The Construction of Commercial Contracts (2013) 417 - 418.

[164] Primary reasons [215] - [218].

[166] Appeal ts 11 - 12, 14, 15, noting that the yellowcake produced at the Beverley Plant was in the order of 70% uranium.

[171] Electricity Generation and Retail Corporation (trading as Synergy) v EIT Kwinana Partner Pty Ltd [2022] WASCA 3 [229].

[172] AIG Insurance Australia Ltd v McMurray [2023] WASCA 148 [135] - [140].

[173] Counsel for the appellant confirmed these were factual challenges during the course of argument, following exchanges with the court: appeal ts 9, 23 - 24.

[175] Devries v Australian National Railways Commission (1993) 177 CLR 472, 479.

[176] Abalos v Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167, 179.

[177] Ledgerton v Ambrosini [2023] WASCA 16 [60], citing Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 [23] ‑ [29]; Robinson Helicopter Co Inc v McDermott [2016] HCA 22; (2016) 90 ALJR 679 [43]; Lee v Lee [2019] HCA 28; (2019) 266 CLR 129 [55]; Child and Adolescent Health Service v Mabior [2019] WASCA 151; (2019) 55 WAR 208 [93].

[178] Child and Adolescent Health Service v Mabior [94], fn 167.

[179] Abalos v Australian Postal Commission (179).

[180] Primary reasons [135], [143(b)].

[183] Primary reasons [137], having particular regard to the definition of 'beneficiation' in The Mining Valuation Handbook, the definition of 'beneficiate' in the Industry Commission Report entitled Mining and Minerals Processing in Australia published in February 1991, Mr Lawson's explanation of the concepts, and Professor Trench's evidence.

[185] Primary reasons [138], having regard to the evidence of Mr Lawson and Mr Dunn, as well as the industry publications on which reliance was placed.

[186] Primary reasons [139], having regard to Mr Lawson's evidence and the industry publications.

[188] Primary reasons [204] - [213].

[189] GAB 513, 762 (item 2), 769 - 770 (item 1).

[191] Charter Reinsurance Co Ltd v Fagan [1997] AC 313, 391.

[192] As recognised by the primary judge at [153] of the primary reasons, citing Maunsell v Olins [1975] AC 373, 391, which itself was cited with approval in Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389, 398; Sino Iron Pty Ltd v Mineralogy Pty Ltd [2019] WASCA 80 [316] ‑ [317].

[193] As recognised by the primary judge at [151] of the primary reasons citing Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45 [9] - [10].

[194] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [46] ‑ [52].

[195] AIG Insurance Australia Ltd v McMurray [137].

[196] Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896.

[197] Investors Compensation Scheme Ltd v West Bromwich Building Society (913).

[198] Carter JW, The Construction of Commercial Contracts (2013) 215.

[199] Max Cooper & Sons Pty Ltd v Sydney City Council [1980] UKPC 6; (1980) 29 ALR 77.

[200] Max Cooper & Sons Pty Ltd v Sydney City Council (85).

[201] Carter JW, The Construction of Commercial Contracts (2013)¸ 400, 466 - 467.

[202] Lewison K and Hughes D, The Interpretation of Contracts in Australia (2012) [5.09].

[203] Sino Iron Pty Ltd v Mineralogy Pty Ltd [289].

[204] Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164; (2014) 48 WAR 261 [178].

[205] Appleby v Pursell [1973] 2 NSWLR 879.

[207] Lewison K and Hughes D, The Interpretation of Contracts in Australia (2012) [5.09].

[208] Southern Resources Ltd v Technomin Australia NL (Unreported, WASCFC, Library No 8329C, 18 June 1990).

[209] Technomin Australia NL v Southern Resources Ltd (8 - 12).

[210] Technomin Australia NL v Southern Resources Ltd (13).

[211] Technomin Australia NL v Southern Resources Ltd (13).

[212] Technomin Australia NL v Southern Resources Ltd (17).

[213] Technomin Australia NL v Southern Resources Ltd (17).

[214] Technomin Australia NL v Southern Resources Ltd (18).

[215] Technomin Australia NL v Southern Resources Ltd (19).

[216] Technomin Australia NL v Southern Resources Ltd (20).

[217] Technomin Australia NL v Southern Resources Ltd (19 - 20).

[218] Technomin Australia NL v Southern Resources Ltd (21).

[219] Technomin Australia NL v Southern Resources Ltd (21).

[220] Technomin Australia NL v Southern Resources Ltd (22).

[221] Homestake Australia Ltd v Metana Minerals NL (1991) 11 WAR 435.

[222] Homestake Australia Ltd v Metana Minerals NL (447).

[223] Homestake Australia Ltd v Metana Minerals NL (451).

[224] Primary reasons [198], [199].

[226] AIG Insurance Australia Ltd v McMurray [139], citing Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [47]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544 [16].

[227] See [148] above.

[228] See [148] above.

[229] Charter Reinsurance Co Ltd v Fagan (384).

[233] Report of Professor Trench, exhibit 305 [39.1]; GAB 394.

[234] Enron Australia Finance Pty Ltd (in liq) v Integral Energy Australia [2002] NSWSC 753 [22].

[236] The respondent did not contend that the capital fee of 5% (which was not passed onto the respondent) was unreasonable: primary reasons [222].

[237] Primary reasons [223], [238].

[239] Joint Expert Memorandum; GAB 775 ‑ 785 (items 2, 9 and 13, for example).

[245] Exhibits 307, 309; GAB 594, 674.

[262] This was the abbreviation used by Mr Ter-Martirosyan to refer to the fees charged by Heathgate Resources, which I will similarly adopt where appropriate.

[266] Being the scoping study from Como Engineers Pty Ltd and Adelaide Control Engineering Pty Ltd (referred to as the Como-ACE Study by the primary judge but for convenience I will refer to as the Alliance Study).

[267] The primary judge was not satisfied that the processing agreements for these mines were reliable comparators for the benchmarking approach which Mr Ter-Martirosyan used in preparing his report: primary reasons [244], [253]. Indeed, Mr Ter-Martirosyan recognised that there were 'caveats on comparability of the benchmarks to equivalent fees charged by Heathgate Resources', and in cross‑examination, he accepted, in effect, that there were other uncertainties associated with using the Lance mine as a comparator: primary reasons [244].

[270] Primary reasons [227] - [229].

[277] Primary reasons [245] - [248].

[279] Primary reasons [250]. Again, the primary judge noted that the use of another mine's tolling agreement was not a reliable comparator and he did not propose to consider the Lance mine tolling agreement analysis of Mr Ter-Martirosyan: primary reasons [253].

[281] Exhibit 311; GAB 706; primary reasons [257].

[284] Including that the replacement value of the Beverley Plant and associated infrastructure was $180 million, the Beverley Plant was expected to end its useful life at around 2029; and the Beverley Plant was expected to process 3 million pounds of packed yellowcake per annum.

[287] Primary reasons [265]; ts 286 - 287.

[288] Primary reasons [264]. However, Professor Gray noted that 'overheads' or 'corporate costs' are commonly included as a component of operating costs in building block models. The quantum of such costs depended on the characteristics of the infrastructure asset in question and he had no basis for determining the appropriate quantum of Heathgate Resources' costs and thus could not offer an opinion on the reasonableness of the quantum of the management fee charged by it: exhibit 311; GAB 733.

[290] Primary reasons [268] - [282].

[293] Primary reasons [268] - [282].

[294] Primary reasons [269] - [270], relying on Hawksford v Hawksford [2005] NSWSC 463 [54]; Crowe‑Maxwell v Frost [2016] NSWCA 46; (2016) 91 NSWLR 414 [90] - [91].

[295] Blatch v Archer [1774] 2 EngR 2; (1774) 98 ER 969, 970.

[303] Primary reasons [280] - [281].

[313] Appellant's submissions [97] - [98]; WAB 25.

[314] Appellant's submissions [99]; WAB 25; appeal ts 41 - 42.

[317] Appellant's submissions [108]; WAB 26.

[318] Appellant's submissions [110]; WAB 26; appeal ts 41 - 46.

[319] Appellant's submissions [111]; WAB 27.

[320] Appellant's submissions [113] - [114]; WAB 27.

[322] Crowe-Maxwell v Frost [89] - [91].

[323] Respondent's submissions [52]; WAB 73.

[324] Respondent's submissions [52]; WAB 73.

[325] Respondent's submissions [53]; WAB 73.

[326] Respondent's submissions [54]; WAB 74.

[327] Respondent's submissions [55]; WAB 74.

[328] Respondent's submissions [56]; WAB 74.

[329] Respondent's submissions [57]; WAB 75.

[330] Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298; Chong v CC Containers Pty Ltd [2015] VSCA 137; (2015) 49 VR 402 [207] - [208]; AIG Insurance Australia Ltd v McMurray [278].

[332] GLJ v The Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32.

[333] GLJ v The Trustees of the Roman Catholic Church for the Diocese of Lismore [58].

[334] GLJ v The Trustees of the Roman Catholic Church for the Diocese of Lismore [58], quoting from Cross on Evidence (13th ed, 2021) [1215], which itself includes a quote from Ho v Powell [14] ‑ [16],

[335] Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345.

[336] Australian Securities and Investments Commission v Hellicar [165] ‑ [166].

[340] Primary reasons [269] ‑ [270].

[343] Identified by the primary judge at [280] of the primary reasons.

[345] See [182] - [186] above.

[348] Primary reasons [247], noting that the fees charged by Heathgate Resources were approximately 80% to 155% higher than the median EBITDA margin for the comparable entities, and between 85% and 160% higher than the average EBITDA margin.

[349] Primary reasons [271] ‑ [272].

[358] Ho v Powell [2001] NSWCA 168; (2001) 51 NSWLR 572 [14] - [15] (Beazley & Hodgson JJA).

[359] Coshott v Prentice [2014] FCAFC 88; (2014) 221 FCR 450 [81] (Siopis, Katzmann & Perry JJ).

[364] Crowe-Maxwell v Frost [89] - [90], referring to Hawksford v Hawksford with approval.