Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited & Anor; Wright Prospecting Pty Limited v Mount Bruce Mining & Anor [2015] HCATrans 188 (12 August 2015)

Last Updated: 24 September 2015

[2015] HCATrans 188

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S99 of 2015

B e t w e e n -

MOUNT BRUCE MINING PTY LIMITED

Appellant

and

WRIGHT PROSPECTING PTY LIMITED

First Respondent

HANCOCK PROSPECTING PTY LTD

Second Respondent

Office of the Registry
Sydney No S102 of 2015

B e t w e e n -

WRIGHT PROSPECTING PTY LIMITED

Appellant

and

MOUNT BRUCE MINING PTY LIMITED

First Respondent

HANCOCK PROSPECTING PTY LTD

Second Respondent

FRENCH CJ
KIEFEL J
BELL J
GAGELER J
KEANE J
NETTLE J
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON WEDNESDAY, 12 AUGUST 2015, AT 10.17 AM

Copyright in the High Court of Australia

____________________

MR N.J. YOUNG, QC: May it please the Court, I appear with my learned friends, MR M.J. DARKE, SC and MR M.A. IZZO, for the appellant in S99 and for the first respondent in S102. (instructed by Allens)

MR A.J. MYERS, QC: May it please the Court, I appear with MS K.A. STERN, SC and MR R.J. HARDCASTLE, in each of the appeals for Wright Prospecting Pty Limited. (instructed by Clayton Utz Lawyers)

MR N.C. HUTLEY, SC: If your Honours please, I appear with my learned friend, MR J.C. GILES, for Hancock Prospecting in each of the appeals. (instructed by Horton Rhodes)

MR A.C. ARCHIBALD, QC: May it please the Court, I appear with MR M.P. COSTELLO on behalf of Perron Iron Ore Pty Limited, seeking leave to intervene in the appeals. (instructed by King & Wood Mallesons)

FRENCH CJ: Thank you, Mr Archibald. Perron will have leave to intervene in the appeals. There was a question also whether HPPL should have special leave to cross-appeal in S102. Special leave will be granted for that purpose. The third question was whether time should be enlarged to allow MBM to file its notice of contention in S102 and that time is enlarged.

MR ARCHIBALD: Thank you.

FRENCH CJ: Yes, Mr Young. I understand there is an agreed order of address.

MR YOUNG: There is, your Honours. We have distributed an oral outline of our submissions that covers the issues in both of the appeals and it is agreed that I will proceed by addressing issues in both of the appeals but first by addressing the issues in MBM’s appeal.

FRENCH CJ: Yes.

MR YOUNG: The appeals arise from claims by the Wright and Hanwright interests in respect of allegedly unpaid royalties under a 1970 agreement. The claim relates to two disputed areas. May I identify those geographically? If the Court goes to volume 1 of the appeal book, please – page 179 is a map of the Pilbara depicting the two areas in contest which are labelled “Eastern Range” and “Channar” and coloured so as to distinguish them.

In the same volume, at page 187, there is a map which one of our witnesses tendered at trial. It is the same map as page 2479 in volume 6 and it is the same map as page 31 of the annotated agreed facts which was filed subsequently. The map shows the location of the two contested areas and it is mapped in such a way as to show the location, vis-à-vis the expired temporary reserves that expired in October 1974.

The area of ML4SA, sections 236 and 237, is the area of Eastern Range. The Channar area is faintly enclosed with a yellow line. It is two parallelograms adjacent to each other and everything within that yellow line is the Channar lease, lease No ML265SA. The blue shaded rectangles which are labelled ML252SA, with various section numbers running from 11 to 19, are the areas of the lease which MBM obtained in 1974 when it applied for a lease under the MBM state agreement. On that occasion, by force of the State agreement, there was a required expiration of what had formerly been the temporary reserves which you see in the mauve colour – the violet colour depicted on this map.

So, if one looks at the sections of 252SA depicted in blue, one can see that they are based on areas depicted in mauve that were the former temporary reserve areas and they were required to expire by force of the State agreement as the condition of the grant of the lease, 252SA.

KIEFEL J: Is section 238 the Channar A area comprising what was TR4966H and 4965H?

MR YOUNG: It is part of it. It is the Channar A area.

KIEFEL J: Put it this way - - -

MR YOUNG: Section 238 - - -

KIEFEL J: - - - is section 238 that part of those temporary reserves which is later surrendered and becomes ML4SA?

MR YOUNG: Well, it is not that part of the temporary reserves because the temporary reserves ceased to exist and it became unalienated Crown land in 1974.

KIEFEL J: Formerly part of those - - -

MR YOUNG: Yes. ML4SA was surrendered by Hamersley on the occasion of the grant of the Channar lease. So, your Honour is right. Section 238SA – 238, part of ML4SA, is the Channar A area that derives from the Hamersley lease.

KIEFEL J: Thank you.

MR YOUNG: The 1970 agreement in its royalty provision throws up two elements. I am referring to clause 3.1 of the 1970 royalty agreement. The two elements necessary to trigger royalty are that the ore must be won from the MBM area and the second element is that it must be won by MBM. Those two elements are respectively the subject of the two different appeals. The MBM area issue is the focus of our appeal. The question whether the ore was won by MBM depends upon the incorporated provision concerned with deriving title through or under MBM. So, they are the two issues and they correspond with the two elements for royalty under clause 3.1 of the 1970 agreement.

Although, MBM failed in relation to the MBM area point, both in respect of Eastern Range, where it was decisive against us and in respect of Channar A, where it was not decisive, the reason why it was not decisive in respect of Channar A was that the ore was found by the Court of Appeal not to be ore that was being won by MBM. There was no scope on the facts of the application of the deriving title provision to produce the result but it was deemed to be won by MBM. So that is how the two issues arise.

The Court will have seen that the Court of Appeal construed the words “from the MBM area” as referring to ore won from the physical areas of land that had been the subject of the temporary reserves that expired in October 1974. Our contention, in our appeal, is that that fails to give effect to the plain language of the 1970 agreement in the way in which it defines MBM area. Our contention is that the words “ore won from the MBM area” mean ore won from the present and future rights that MBM acquired from Hancock, or Hanwright, under clause 2.2. That is the short issue in the MBM appeal.

Can I start by giving an overview of the 1970 agreement? The 1970 agreement is in volume 3, at 1274. I want to commence with an overview so that the Court understands the structure of the 1970 agreement. By that agreement Hanwright transferred all of its present and future rights in relation to temporary reserves, 4937H to 4946H and 4963H to 4967H to MBM. In many ways, that is the principal purpose of the agreement. That transfer is affected by clause 2.2. The coming into effect of the transfer is conditional on governmental approval and governmental implementation under clause 10. The implementation aspect comes from the handwritten addition but may be difficult to decipher.

Under the 1970 agreement, the parties contemplated that the transfer would require MBM to step into the shoes of Hanwright under the 1967 and 1968 Hanwright State agreement and to acquire all of the rights and assume all of the obligations of Hanwright under those two – or under the State agreement as enacted in 1967 and as amended in 1968.

That appears from a number of things but, inter alia, clause 2.3 where the anticipated lease under the State agreement is to be shared in certain proportions between the contracting parties and also from clause 4 where it is contemplated that the transfer will necessitate variations to the Hanwright State agreement, including a special agreement that MBM would take over all of the secondary processing obligations that arose under the State agreement. That is not confined to the secondary processing obligations relating to the rights that MBM acquired but embraces secondary processing obligations in respect of the rights that were restored to Hanwright under the first limb of clause 2.2.

Now, the consideration for the transfer of those rights in relation to the specified temporary reserves was at least threefold under this agreement. First, there was a relinquishment of an option – a contractual option – that was granted to Hamersley under the January 1968 agreement. That is the effect of clause 2.1 and that contractual option was identified in clause 1.2. I should add – and I will come to this – as well as the contractual option there was an option resting in MBM under the State agreement which is referred to in clause 1.1 and also in clause 12 which is the entire agreement clause and as well in clause 4.

So the first element of consideration was the relinquishment by Hamersley of its contractual option. The second element of consideration for the transfer of the rights was MBM’s agreement to pay a base royalty of two and a half per cent as specified in clause 3.1. The third element of the consideration was the payment of a further royalty by MBM – triggered by the same two elements in clause 3.2. That further royalty was a specified monetary sum of $5 million.

In addition, there are two other related features of the agreement that could also be characterised as consideration and I have mentioned them. MBM agreed to assume Hanwright’s secondary processing obligations going forward in respect of the reserves restored to Hanwright and in connection with that assumption of processing obligations, Hanwright was given an option to sell its iron ore – or any iron ore it produced from what was restored to it – to Hamersley on the terms and conditions set out in clause 6. That is an overview of the structure of the 1970 agreement.

There were a number of prior transactions between the parties that I will need to refer to. I will not go through them immediately. I will go to the text of the 1970 agreement first, in most respects. But the prior transactions and the background are these. First, there was a 1959 agreement – found at appeal book volume 2, page 668 – I will not go to it right now. By that agreement, the Hanwright interest granted an option to Rio Tinto to purchase specified mining titles in exchange for a royalty.

The 1959 agreement led to the 1962 agreement because the 1962 agreement exercised that option just before it expired. So the 1962 agreement provided that the Hanwright interest would transfer specified mining titles to the Hamersley interests in exchange, again, for a two and a half per cent royalty. The 1959 and 1962 agreements relate to different areas than we are concerned with and the royalties are expressed in different language. They are part of the remote background, as it were. There is also a short provision from the 1962 agreement that is relevantly incorporated into clause 3 as a condition of payment and I will need to come to and explain that. It is part of clause 24(iii) from the 1962 agreement.

FRENCH CJ: That is the through or under - - -

MR YOUNG: That is the deriving title through or under clause. The next stage in the history is that the Hanwright interests acquired a new set of rights in relation to occupancy for iron ore prospecting purposes that were the subject of the 1967 Hanwright state agreement. That new set of rights was then the subject of a transaction between these parties recorded in the 1968 agreement.

I should have given the appeal book references to these documents as I went. The 1962 agreement is in volume 2 at page 708. The Hanwright State agreement is in volume 2 at page 902. The 1968 agreement between the parties is in volume 2 at page 968. The 1968 agreement was replaced by the 1970 agreement. So it is the immediate context for the 1970 agreement. So I will need to go to its provisions.

It provided for the grant of an option to Hamersley that would result in the transfer of all of the relevant rights in respect of temporary reserves to MBM which was to be a newly formed joint venture company for the Hamersley and Hanwright interests. The provisions of that agreement also dealt separately with one particular block which led to the Paraburdoo mine. The 1968 agreement provided for royalties in consideration of the grant of that option that might result in transfers of rights.

Then, in the sequence, there is a 1968 supplementary agreement at volume 3, page 1019. It does not figure much in the parties’ submissions. The 1968 supplementary agreement separated out of the 1968 agreement and provided for the immediate transfer of that single Paraburdoo block – block 4053H. So that was transferred out and we are not concerned with that block. That was an implementation earlier than otherwise required of Part 1 of the 1968 agreement.

Then finally in this sequence, shortly before the 1970 agreement, there was a 1968 Hanwright State agreement. It amended the 1967 Hanwright State agreement to provide for the implementation of the joint venture option. Under the 1968 State agreement, MBM was given an option to take the place of Hanwright in respect of all areas – in respect of all rights under the Hanwright State agreement of 1967. That is the option referred to in clause 1.1 of the 1970 agreement.

Before I come to the text of the 1970 agreement, I need to explain the nature of the rights that were subject of the transactions in the 1970 agreement. It is our contention that it is necessary to fully understand the nature of the rights being transacted to appropriately construe the 1970 agreement. The 1970 agreement contains various references that provide indications as to the special nature of the rights that are being transacted.

Those references include the reference to holding temporary reserves in respect of areas and the various references to the rights under the Hanwright State agreements. It also includes clause 1.4 which gives a special and expanded meaning to all references to reserves wherever they appear in the 1970 agreement.

Essentially, the rights being transacted under the 1970 agreement were all of the rights conferred upon Hanwright – or the Hanwright interests – by the State agreement as expanded in meaning by the special definition in 1.4. What I want to do is pause and to take the Court to the Hanwright State agreement of 1967 and then 1968 to explain the nature of the bundle of the rights that were being transacted by the 1970 agreement. Can I just defer that for one moment, just to say something about the nature of temporary reserves? The opening words of clause 1.1 are that:

Hanwright hold Temporary Reserves in respect of areas –

Then clause 1.1 goes on to say that those temporary reserves, also called blocks –

are subject to the exercise of an option –

Now, the concept of holding temporary reserves in respect of areas and the notion that the temporary reserves are the subject of an option conveys quite clearly that they are a bundle of rights, not a purely physical or geographical area that has been spoken about.

What is temporary reserve? A temporary reserve has its origin in section 276 of the Mining Act 1904. That simply provided that the Minister may reserve any Crown land from occupation. So it is simply Crown land that is set aside as a reserve. But the section goes on to say that, subject to 277, the Minister may authorise any person to temporarily occupy the reserve on such conditions as the Minister thinks fit.

So the notion of a temporary reserve is that it is simply reserve Crown land and the Minister has authorised occupation by a person for a particular period but the effect of the provisions in the 1904 Act is that the reservation is of limited duration – 12 months – and so, too, is the right of occupation. Quite clearly, those rights are simply personal choses in action. So, if someone is granted a right of occupation, it is simply a personal right and we have referred in our authorities to various cases that establish that fact quite clearly.

FRENCH CJ: The term “temporary reserves” only appears, I think, in the marginal note, does it not?

MR YOUNG: In the section, yes.

FRENCH CJ: Yes.

MR YOUNG: Yes, your Honour.

FRENCH CJ: One then construes it as an authority to a person to temporarily occupy a reserve on terms and conditions.

MR YOUNG: That is not the reserve. The reserve is simply the land that is set aside. The grant of authority is the next step.

FRENCH CJ: Well, it is something that the Minister does. The reserve is used as a verb, I think.

MR YOUNG: Yes, but I think that - - -

FRENCH CJ: It was a mysterious document – the Mining Act 1904.

MR YOUNG: Yes. This is perhaps an aside, your Honour, but the State agreements in Western Australia across their range supplanted the Mining Act which was quite unsophisticated in its provisions – the 1904 Mining Act – with a special regime - - -

FRENCH CJ: Yes.

MR YOUNG: - - - of a much more sophisticated sort under which much more extensive obligations and rights were imposed on the counterparty to the State agreement. The temporary reserve has simply been used as one element in the State agreement to erect that set of rights - if I can call it that - set of rights and obligations. The temporary reserves that we are concerned with under the 1970 agreement are reserves that were special in the sense that they were granted under and for the purposes of the Hanwright State agreement of 1967. They were not freestanding. That is borne out by the grant documents for the Hanwright TRs.

If the Court looks – I will not go through them all – I will give the references – but if the Court looks at volume 2 and, I think the last page, page 980, this is the first in a sequence of documents relating to the occupancy rights granted to Hanwright in 1968 that became the subject of the 1970 agreements. This is simply a letter from the Under Secretary of Mines but it refers to the Minister having approved of the creation of the relevant temporary reserves – it is page 980, your Honours – with occupancy rights for the purposes of the agreement. As I said, that is the first in the sequence.

There are documents relating to the renewal of those rights. The documents in the sequence are in volume 3 – and I will just give the page numbers – 1125, 1129, 1257 and the register for one of the TRs is volume 3 at page 1162 to 1163. All those documents indicate, as the provisions of the State agreement make clear, that these were temporary reserves granted under and for the purposes of the State agreement.

Can I then turn to the Hanwright 1967 State agreement which is in volume 2 at page 894? Page 894 is the Act approving and giving effect to the agreement. The agreement itself is in the schedule commencing at 897. What I will do is draw attention to particular clauses without reading them at any length. Clause 2(a) deals with the obligation of the State to cause certain rights of occupancy to be granted. It is at page 902 of the appeal book.

The first step under the 1967 agreement was that the joint venturers were to surrender such existing rights of occupancy as they had, and the State shall then cause to be granted to the joint venturers the rights of occupancy for the purposes of the agreement under section 276. When one reads on, we see that special rights attach to these rights of occupancy an entitlement to successive renewals, each of 12 months, which is a right over and above that conferred by the ordinary provisions of section 276, the last of which shall expire (1) on the date of application for a mineral lease, (2) at the expiration of one month from the commencement date, and (3) on the determination of this agreement pursuant to its terms, whichever shall first happen.

The rights of occupancy had a limited life; they were defeasible. The commencement date was the date of approval of detailed mining proposals under clause 4 and following. The lease would follow approval of proposals, but the rights of occupancy would expire on the date of application for a mineral lease. Aside from the fact that the rights of occupation started a particular pathway under the State agreement, they were a very limited set of personal rights giving no right to extract ore. In fact, it would only arise under a mineral lease granted in pursuance of these provisions.

The detailed proposals that were required covered an extensive set of obligations relating to the development of the mine, a railway, a port and processing facilities – that is clause 5 and following. Those proposals had to be submitted within set timeframes and approved within a set period. The final date, unless extended, is specified in clause 7(2) at the top of page 910, at about point 2 on the page, 30 November 1968 or such extended date to which the joint venturers may become entitled. That was the specified “drop dead” date, if I could call it that, for the development.

The commencement date is identified in the next subclause. It is effectively the date of approval or determination. Determination refers to the fact that if the State refused to approve the detailed proposals after discussions, the joint venturers had a right to arbitrate that refusal of approval. That appears at page 909 in subclause (2) of clause 6, just before line 40.

Now, that pathway, if one got to approval, could lead to a mineral lease. Clause 8(1)(a) is the relevant provision, towards the bottom of 910. The State’s obligation related to an application for a mineral lease not exceeding in total area 300 square miles in a rectangular shape. That was a much lesser area than the subject of the rights of occupancy, and the State’s obligation was - - -

FRENCH CJ: That is a point that is relied upon?

MR YOUNG: Yes, we rely upon that. The State’s obligation was to cause that to be granted, and looking at the top of page 911, the grant was subject to certain conditions; subject to:

the performance and observance by the Joint Venturers of their obligations under the mineral lease or mineral leases and otherwise under this Agreement shall be for a period of twenty-one years –

The lease is granted subject to the performance of obligations both under the lease and under the State agreement for a term of 21 years with successive rights of renewal.

FRENCH CJ: Just so I understand the legal framework of the agreement, you spoke of the State Act as having approved and given effect to the agreement, but the way in which the agreement was given effect to was that the approval designated as ratification in the agreement was a condition of, effectively, its coming into operation.

MR YOUNG: More than that, your Honour. The arrangements in the 1970 agreement could not be given effect to without formal amendments to the State agreement, which would then have to be ratified. We will see that.

FRENCH CJ: But in terms of the rights which were being granted, they were being granted within the framework of the existing mining legislation?

MR YOUNG: No, primarily within the framework of the existing State agreement obligations, because most of the relevant obligations concerned with - - -

FRENCH CJ: I am talking about the statutory – to the extent that there were statutory rights, they came from the Mining Act as distinct from the agreement, because the agreement is not a statute. It is simply approved by the Act.

MR YOUNG: No, but, your Honour, the Act which approves the agreement has the consequence that certain contractual rights attach - - -

FRENCH CJ: Come into existence; yes, I understand.

MR YOUNG: More than come into existence - attach to the holding of the rights of occupancy. To take successive rights of renewal, your Honour, there was no successive right of renewal in respect of a right of occupancy under 276, but there was an associated contractual right of renewal under the State agreement in respect of those rights of occupancy.

FRENCH CJ: Well, that means the Minister on behalf of the State had an obligation in relation to the renewal of those temporary reserves.

MR YOUNG: Yes.

FRENCH CJ: In other words, he had to exercise his discretion under the Mining Act in accordance with contractual obligation?

MR YOUNG: Yes, and that process was approved and, moreover, the legislation said that the provisions of the State agreement shall take effect. It does not give them legislative force and I am not contending that - - -

FRENCH CJ: No, it certainly does not.

MR YOUNG: It is within the concepts explained by the Western Australia Court of Appeal in Re Michael dealing with various categories of State agreement. Our point is that the bundle of rights that were the subject of the 1970 agreement is not confined to the bare statutory right. It embraces all of the associated State agreement rights, and in many ways, they are the most important rights because they provided the pathway to a lease as of a right, in the sense there is a contingent right to a lease if you satisfy certain conditions, then the lease carries with it a whole set of rights and obligations that I am about to come to.

KEANE J: Was the opportunity to apply for the mining lease assured exclusively to Hanwright?

MR YOUNG: Yes, by force of these provisions under clause 8(1), and other provisions that I will come to.

KEANE J: That is to say, that the State obliged itself not to entertain an application from anyone else?

MR YOUNG: That is so.

KEANE J: In respect of that land.

MR YOUNG: Whilst these rights existed the State had a power to determine the State agreement if the counterparty to the State agreement was not performing its rights and obligations. Likewise, it had a right to bring the State agreement to an end if the detailed proposals were either not lodged as required, did not address what was required, or the Minister refused approval. That is why those rights of occupancy were determinable in the various circumstances described in clause 2(a)(i) to (iv). So they are a limited set of rights; they were all defeasible; they would expire necessarily within a relatively short timeframe, but they provided a pathway under which there were sole and contingent opportunities to acquire the lease as defined in the State agreement.

Going to your Honour’s question still, Justice Keane, the rights of occupancy are described in clause 2(a) as conferring the sole right to search and prospect for iron ore. They were granted under and for the purposes of this agreement. Then it was only the holder of those rights – only the Hanwright interests, whilst they held those rights – that could make the application and have the benefit of a promise to cause to be granted the mineral lease over the reduced area that clause 8(1)(a) refers to. But the price of all that was that the balance of the area, the subject of the rights of occupancy, all rights would expire and the balance would fall back into the category of unalienated Crown land, open to anyone. In further answer to your Honour Justice Keane, I was about to come to - - -

GORDON J: Clause 8(4)(a) might help.

MR YOUNG: That is what I was about to come to, your Honour, yes. Clause 8(4)(a) provides there is to be no interference with the joint venturers’ rights; at least, that is the caption. It is a covenant by the State not during the currency of the agreement to register any claim or grant any lease or other mining tenement by which another person will obtain any rights. There was a special position conferred on the counterparty.

The rights were not limited to a mineral lease. Under clause 8(1)(b) and (c), other leases were promised by the State to facilitate the performance of the later development obligations, we will see, leases of lands for railway, processing plants, for access to a port, and so forth. The power of the State to determine the agreement if the joint venturers did not perform is contained in clause 10(l), which appears at page 932 of the appeal book. The power of determination appears at about point 7 of the page:

the State may by notice to the Joint Venturers determine this Agreement and the rights of the Joint Venturers hereunder and under any lease license easement or right granted hereunder –

The secondary processing obligations appear in clause 11 and following. There is a right subject to approval to vary the State agreement in clause 15 – perhaps in sequence, before I get to that, there is an ability to assign or to dispose of any of these interests under clause 14(1)(a). The joint venturers may assign – and I abbreviate, dispose of:

the whole or any part of the rights of the Joint Venturers hereunder (including their rights to or as the holder of any lease license easement grant or other title) and of the obligations of the Joint Venturers hereunder –

The clause goes on to require a deed of covenant to be procured from the assignee, and the joint venturers remain liable under clause 14(2), the due performance of the obligations that are assigned. The Court will have seen some discussion to the effect that the bundle of rights was not transferable. Whatever mechanism was adopted administratively, the rights, in our submission, were transferable. There is a provision dealing with variation of the State agreement in clause 15, and the Minister has a general power to extend time periods in clause 18 at page 941.

That general scheme is evident in the 1963 Hamersley Range State agreement, which is in the appeal book at page 787 of volume 2. The same general scheme appears in all of the other State agreements on the Western Australian statute book immediately prior to the 1970 agreement, and there were eight of them relating to iron ore in the Pilbara. We have a list which I will make available at the break to your Honours’ associates – it is simply a list of the other State agreements concerning iron ore and the general scheme of those State agreements is similar to that which I have just been through.

Modifications were made to the Hanwright State agreement in 1968. Consequent upon the 1968 agreement between the parties, that is to say, the Hamersley interests, the Wright and the Hancock interests – that is at volume 3, page 1064. The approving Act commences at 1059. The agreement itself is in the schedule commencing at 1061.

There are relatively few provisions I need to identify for the assistance of the Court in this agreement. Clause 4 has the effect of excising what I call the “Paraburdoo block”, block 4053H, from the Hanwright State agreement. That was because under the 1968 agreement and the 1968 supplementary agreement, that was to be immediately transferred to Hamersley, and we are not thereafter concerned with that block.

Clause 5(1) is the central provision. It gives effect to the option that the 1968 contract between the parties gave whereby a joint venture company, MBM, would completely take the place of Hanwright in respect of all of the rights and obligations. Hence, it provides the company – that is, the contemplated joint venture company:

may by notice . . . inform the State and the Joint Venturers that the Company desires to take the place of the Joint Venturers under the Principal Agreement . . . covenants and agrees with the State to perform and observe all of the Joint Venturers’ covenants and obligations –

under the State agreement. Upon the giving of that notice, the joint venture company would succeed to the former rights of the joint venturers to move, subject to various conditions, to a lease. Clause 2 provides that the joint venturers shall surrender their rights of occupancy:

simultaneously therewith the State shall cause to be granted to the Company and to the Company alone rights of occupancy –

similarly expressed –

for the purposes of this Agreement (including the sole right to search and prospect for iron ore) –

with successive rights of renewal, and then an expiry date. The circumstances that would result in expiry were expressed differently in the 1968 agreement - (a) is on the “grant of a mineral lease under clause 8(1)”; (b) is “on the expiration of five (5) years”, so these rights fall away if there is no mineral lease granted within five years.

FRENCH CJ: So these are all characterised as contractual rights, having regard to what you said earlier in your response to my question - - -

MR YOUNG: Yes, but contractual rights that define - - -

FRENCH CJ: - - - as against the State, which are then being dealt with by the parties.

MR YOUNG: Yes, but nonetheless, your Honour, they are contractual rights that we say define what is meant in the agreement when the agreement refers to the parties holding temporary reserves, which are the subject of an option. These contractual rights are embraced within that which is held, and that which is being dealt with by the 1970 agreement. They are the most important component of what is held.

FRENCH CJ: Is there any difference between the parties as to the characterisation of the rights as contractual?

MR YOUNG: Yes, there seems to be, your Honour. At least, the Hancock interests, your Honour, say that the only rights in question under the 1970 agreement were the bare statutory rights of occupancy, as we understand it, of a very limited 12-month duration.

FRENCH CJ: But you are characterising the obligations of the State as correlative with rights conferred upon you pursuant to contract with the State, or conferred upon the parties with the State agreement.

MR YOUNG: What we are saying is that the subject matter of the rights, the subject of the various transactions in the 1970 agreement, are rights that are to be defined in the way I have been endeavouring to explain – that is, there is a statutory element, but much more importantly, there are a bundle of contractual rights under the State agreement associated with the contractual element that provide the pathway to a lease, and the pathway to development and extraction of iron ore. Other than that, the statutory right gives you virtually nothing.

FRENCH CJ: Some of these agreements – I do not think it is a matter which is raised – were made at a time when there may have been a particular understanding of the effect of approval and ratification which was perhaps altered by Sankey v Whitlam, and then we saw the sequelae of that in the Government Agreements Act 1979.

MR YOUNG: Well, that is possible, your Honour.

FRENCH CJ: Anyway, you are not worried about that territory.

MR YOUNG: No, I do not think I can ask the Court to construe the document by reference to misapprehensions that may have prevailed at that point in time. Beyond that, the 1970 agreement went on to make various changes to the secondary processing obligations, but I do not need to go through the detail of that. It is the combination of the 1967 and 1968 agreements that essentially define the valuable aspects of the rights that were the subject of the transactions in the 1970 agreement.

In our submission, a proper appreciation of the nature of the rights being transacted assists in the construction of the agreement, and we do submit that a misapprehension by the Court of Appeal contributed to its erroneous construction of the 1970 agreement. Why I say that is that in various places, Justices Macfarlan and Meagher described the rights in question under the 1970 agreement as being confined to rights of occupancy; for instance, Justice Macfarlan at paragraphs 42 and 46, and Justice Meagher at paragraph 88.

It is that narrow and mistaken identification of the rights that are being transacted which contributed to the conclusion that the parties were only describing physical areas rather than the complex set of rights that were the subject of the agreement with respect to those areas.

BELL J: Why does the fact that the bundle of rights may have been greater than members of the Court of Appeal apprehended, if that be the case, why does that affect the reasoning of Justice Macfarlan, who saw the expansion in clause 1.4 of the 1970 agreement to rights - an expansion of the expression to include rights – in a sense, it does not matter quite what rights his Honour had in mind. The point that he was making was that that did not dictate a conclusion that the earlier reference to area was not to a physical area. It is just the logic of his Honour’s reasoning at paragraphs 42 to 44 does not seem to turn on the question of the extent of the rights.

MR YOUNG: Your Honour’s question requires a very long answer, because that attracts most of the limbs of our argument. Can I give your Honour a very short answer, and I will develop it in an orderly fashion, if I may. Firstly, clause 1.4 is, in a sense, the starting point because it requires that all references to reserves be read in the specially expanded sense of present and future rights in relation to those reserves, including extensions of ore bodies, et cetera. That definition applies just as much to clause 1.1 as it does to clause 2.2 and other provisions.

His Honour’s starting point that 1.1 is referring only to areas involves a disregarding of the fact that clause 1.4 defines references to reserves. Secondly, in clause 1.1, you need to read the whole of the provision. When it refers to holding temporary reserves in respect of areas that is not saying that the temporary reserves are mere physical geographic areas. It is referring to a holding in respect of areas, which holding is then the subject of an exercise of an option. Such a holding can only consist of rights because the bare geographic area cannot be the subject of an option. It is the rights in respect of it which might be.

There are many other reasons, but when one takes into account the definition, the all-embracing definition in 1.4, it feeds into 2.2. It defines what is meant by “temporary reserves” that immediately precedes the parenthetical definition “MBM area”. You cannot ignore the rights aspect of the definition, as his Honour does, and pick and choose the area aspect of the definition. It is all present in future rights with respect to areas, and as Chief Justice Dixon once said, that is an error of logic to drop part of the defined expression, and to pick and choose will only make use of the area component of the definition.

Now, there is a very long answer I am going to have to give, your Honour, but the answer is found in the text of the agreement, read and understood in the proper context of the nature of the rights that are being transacted, is the short answer.

FRENCH CJ: If one goes back to 276 of the Mining Act, which gives you the bare statutory right designated as a temporary reserve in the marginal note, as we noted earlier, it is really understood in terms of an authority in relation to a reserved area.

MR YOUNG: Yes. “Temporary reserve” in the Mining Act is not an area. It is an authority to occupy an area for - - -

FRENCH CJ: It is not defined, but that would appear to be the usage, if you have reference to the marginal note.

MR YOUNG: Yes. But these parties’ usage is wider, because they use “temporary reserves” to include all of the associated contractual rights under the mining agreements.

FRENCH CJ: I understand.

MR YOUNG: I have dealt with context, so far as the nature of the rights is concerned. Can I deal with the immediate context provided by the 1968 agreement, which was being replaced by the 1970 agreement next?

FRENCH CJ: Now, is this under the rubric of a general approach to construction of the contract?

MR YOUNG: No, your Honour. I thought, in sequence, I can deal with the 1968 agreement after the text or after - - -

FRENCH CJ: No, I am just talking about the principle of construction that you are applying.

MR YOUNG: It is narrower than the principle that one can have regard to, surrounding circumstances. The reason I am going to the 1968 agreement is that it is specifically adjusted by the 1970 agreement and the 1970 agreement refers to the option under the 1968 agreement and it refers to the fact that those adjustments are going to necessitate amendments to the State agreement. One cannot really understand those references within the 1970 agreement without seeing the interconnection with the agreement that it is replacing. So it is a much narrower matter that I am addressing than the surrounding circumstances.

FRENCH CJ: Well, it is context, is it not?

MR YOUNG: It is context. It is, as I said, the immediate context for the 1970 agreement and in particular provisions of the 1970 agreement that need to be understood to construe it properly.

FRENCH CJ: Ultimately, when you are dealing with the term “MBM area” you may be dealing with a term which offers constructional choices. There is obviously a debate about the appropriate construction here.

MR YOUNG: Yes, I understand that is the way it is put by our opponents - - -

FRENCH CJ: I am avoiding the use of the term “ambiguity” because - - -

MR YOUNG: No, no, what I was going to say, your Honour, is we say that there is no ambiguity at all about the defined terms.

FRENCH CJ: Plain meaning, is it?

MR YOUNG: Well, it is a question of applying the text and - - -

KIEFEL J: There is no ambiguity but each of you had a totally different view of what it means.

MR YOUNG: We have a totally different take, but the differences are about the content of the definition and the content of the definition is specified by the text of the agreement is the point I am trying to make. At all events I will be brief about the 1968 agreement but I thought it makes no sense to go to it before I go the text but I am not in any way attempting to substitute its language for the text of the 1970 agreement.

The 1968 agreement is at volume 2 at page 968. The 1968 uses language that is very similar to some of the language of the 1970 agreement in parts. Under the heading “Preamble” it starts with a representation from Hanwright that it holds temporary reserves. They are set out. There is then a representation:

that they have the right to these reserves as provided by their Government Agreement.

So, apropos of the point I was making earlier, the parties make it very plain that they are transacting prospective rights to the reserves. At the top of the next page, there is a definitional provision, unnumbered, that corresponds in language to clause 1.4 of the 1970 agreement. There are two parts to the agreement. Part I deals with the Paraburdoo block. Part II deals with the remaining blocks. They are captioned there “Mount Bruce Reserves”.

In Part I, there is an agreement by Hanwright to transfer block 4053H to Hamersley after Hamersley gives a “notice of intention to proceed”. The next clause refers to aspects of the government agreement affecting the rights being transacted, referring to timing obligations under the government agreement, expressing the sentiment or the feeling that the:

Government would be unlikely to rights under the Mount Bruce Temporary Reserves because . . . the Timing conditions were not –

being met. Now, that is clearly a reference to the State agreement and so when it refers to the rights under the Mount Bruce temporary reserves, they are referring to the bundle of associated contractual rights relating to development and how you move to a lease and so on. Then, in paragraph 3, if there is a transfer of block 4053H, there is a royalty provision.

Now, that is not the blocks we are immediately concerned with but a similar structure relates in Part II to the remaining blocks, described as the Mount Bruce reserves. If I can go to Part D of Part II at page 6 of the document, 973 of the appeal book:

implementation . . . are conditional upon the necessary approvals being granted by the Western Australian Government.

2. Hamersley may give Hanwright written notice of its intention to proceed -
   

Under 4, there is a reference:

rights in relation to the Mount Bruce Reserves may be extended by the Western Australian Government.

We would say that is a reference again to the bundle of rights arising under the State agreement and then 5:

On the giving by Hamersley of the notice of its intention to proceed, the blocks mentioned in the Preamble above, with the exception of [the Paraburdoo block] will be transferred -

So the notable features of the 1968 agreement is that it has been replaced by the 1970 agreement in most respects - I say in most respects for a particular reason I will come to, but it has the same concept of holding temporary reserves, meaning quite clearly when you look at the whole context within the agreement the bundle of rights under the State agreement with respect to those reserves, and it provides for a definition of blocks - all references to blocks or reserves include all present and future rights.

So, if I look at D5, when the provision says that the blocks will be transferred, what of course is transferred is not a geographical area because there is no right to a geographical area as such. What is transferred is the bundle of rights with respect to the Mount Bruce reserves.

KIEFEL J: Are you referring to the 1968 agreement to show that the parties have historically spoken in terms of rights and that this colours the – or effects - one should approach the 1978 agreement by reference to - - -

MR YOUNG: No, primarily to show that parties’ conception of the rights was when they spoke of reserves being transferred and reserves being the subject of a royalty, their conception of rights was the bundle of rights under the State agreement.

KIEFEL J: Well, conception of rights is one thing, but you are also, as I apprehend it, relying upon the language of rights being the language in which the parties are speaking.

MR YOUNG: Yes, yes, your Honour. I will make it very clear. I am not substituting this language, which is different for the language of the 1970 agreement.

KIEFEL J: No, but if you are historically saying it is going to carrying us into the 1970 agreement - - -

MR YOUNG: Yes, yes, I am, your Honour.

KIEFEL J: - - - then you are really talking about the background to the 1970 agreement by reference to what the parties have previously agreed. That is almost to bring in a negotiation context to the 1970 agreement.

MR YOUNG: Yes, that is the context. Now, I have gone to the transfer provision, D5. There is a royalty provision expressed in a similar way, which is in A5, page 4 and that says:

Ore won by M.B.M. from the Mount Bruce Reserves -

Now, the same language is used in respect of both the transfer and the royalty provisions, the Mount Bruce reserves, but the dictionary of the parties and their understanding is plain from this agreement that they mean in both B5 and A5 the bundle of rights with respect to the Mount Bruce reserves. The same point can be made if you look at Part I, clauses 1 and 3. They speak of transferring this temporary reserve, block 4053H in clause 1 of Part I and then in the royalty provision, clause 3:

Ore won by Hamersley from Block 4053H -

So both as a matter of their usage and as a matter of the definitional provision they are conceiving of a reserve or the block or the bundle of reserves and blocks as being a bundle of rights that are the subject of both the transfer and the subject matter of the royalty. So that is the immediate context in the 1968 agreement.

KEANE J: Why would one read it in that way? Why would one not read the references, particularly in clause 1.4 of the 1970 agreement, to future rights, all existing or future rights, as indicating that the parties are utterly indifferent as to the source or content of the rights to exploit and win ore? The agreements are simply concerned to assure that as between them one party gets to exploit, by whatever rights it can obtain, the tenements and whatever tenements it can obtain. What else does one make of the reference to future rights?

It seems to be that it is trying to say, comprehensively, or it is trying to make a provision as comprehensively as possible, to ensure that as between the parties to the agreement, whatever rights each party can obtain from the government to explore and exploit the blocks, they are exclusively assured to that party and in return for that they agree to pay royalties.

MR YOUNG: But, your Honour, that overlooks the fact that the term “MBM area” is defined explicitly by reference to those rights. One needs to adhere to the text of what the parties agreed and I am about to go through the text of the 1970 agreement.

KEANE J: But why? What do you make then of the reference to future rights?

MR YOUNG: Well, future rights is readily explicable by reason of the fact that as at 5 May 1970, Hanwright had the benefit of a set of unfolding contingent rights to move to a lease of a lesser area on condition that they would lose all of their rights to the balance of the area and that lease then gave them certain rights to renewals, to associated land for ports, railways and processing plants. All of those rights fall within the description of “future rights” because they are not vested rights, they are not current rights. They are rights that may unfold contingently, if you satisfy the various conditions laid down by the State agreement.

So it is that very bundle of rights that led to the parties, and I am speaking objectively, choosing a specially defined expression, definition, to govern the concept of reserves. They wanted to ensure that what was transferred and what was restored was the full pathway of contingent future rights that may arise under the State agreements that would allow them to extract ore but recognising that they would only get the right to extract ore from limited areas. That was the price they paid for that bundle of rights and when rights expired, it was then thrown open to all comers. They had no priority or privilege in respect of areas that had become unalienated Crown land on the expiry of occupancy rights.

So it is the recognition of that circumstance that led the parties to adopt a specially expanded definition and then that definition feeds into two things: what was the subject of the transfer and restoration of rights and what was the definition of MBM area that would be the basis for the royalty. Now, I will explain that more slowly, if I may, your Honour, and try and put all the pieces together but that is the nub of our answer.

KIEFEL J: When one does get to the 1970 agreement and clause 3.1, regardless of the bundle of rights that is transferred under the agreement, is not the royalty provision - and this may be too simplistic - but is not the royalty provision directed only to the material which is physically extracted from the land and that is it?

MR YOUNG: No, your Honour. Royalties are only payable on the value of the ore that you extract and sell but the circumstance that triggers a royalty consists of the two elements of winning it from the MBM area and winning it by MBM but - - -

KIEFEL J: But winning from is a process of extraction, is it not?

MR YOUNG: Winning is - - -

KIEFEL J: It is a physical process - - -

MR YOUNG: - - - is a process of extraction

KIEFEL J: - - - by which material is derived.

MR YOUNG: Yes.

KIEFEL J: That is what it is concerned with. That gives certainty in terms of the royalties to what it is that the royalty attaches to.

MR YOUNG: But that is entirely neutral in terms of the matter of construction we are concerned with, which is whether “MBM area” is defined earlier by the combination of clauses 1.4 and 2.2 in terms of the present and future rights acquired in respect of the areas. If it is so defined, then “MBM area” becomes winning the ore from the present and future rights relating to a more confined area, being the area the subject of the lease, because the rest is gone and it is necessarily gone long before you get to extraction.

I am now about to go to the text of the 1970 agreement. I did want to refer to two matters of principle before I embark upon the text. The task, in our submission, is to construe the agreement as a whole so that all of its provisions are harmonious with each other and that includes ensuring that you give effect to each of the provisions, rather than reading them out, effectively, of the agreement and that is a well-known principle from the ABC v APRA Case and Wilkie v Gordian Runoff.

Now, here there is a particular aspect of that that is in question, and again I am about to mention a couple of cases very briefly. First, it is not likely to be supposed that the same word or term has a different meaning in one provision compared to another provision. That is the effect of the respondent’s construction. Our construction gives the same word the same meaning in every provision where it appears.

Now, that is necessarily so because that is the consequence of the express definitional provision in clause 1.4 which lays it down that all references, all references to particular word or words, in this case, “reserves” is the critical word, has a singular fixed meaning. When we are dealing with a definitional provision, a further matter of principle I wanted to refer to is this.

The proper course is to read the words of the definition into the substantive provision and that may involve modifying the language if necessary, if the definition is a lengthy one or cumbersome in the context of a particular clause. There are a lot of cases to that effect. But where the contracting parties have chosen to define a term with a special expanded meaning, in our submission that choice is to be respected and applied. The only exception to that might be if it led to absurdity or repugnancy to some other provision.

Now, there are a number of cases that make that point very clear. The two that we would identify as benchmark authorities, as it were, are decisions of this Court. One is Halford v Price, the other is Southern Cross Assurance. Could I take a moment just to point to the passages in those two cases? Halford v Price 105 CLR is tab 6 in the bundle that I think our side has provided to the Court. Halford v Price concerned an insurance contract, contained a definition of the word “firm”. It was a policy of insurance effected by solicitors.

The effect of the definition and its reference to any other person was that if you read it as the text said, a solicitor would have the benefit of the insurance before he joined the firm. The countervailing argument was that it must have been intended that it should only operate in respect of permutations in the membership of the firm from the date the firm commenced. The High Court rejected that assertion that should be read contrary to the text. Chief Justice Dixon adopted the established approach of reading the whole of the definition in to the policy. He did that at page 27, at about 27, point 7. His Honour stated the issue and his Honour said:

But it is not a question that is answered, as I see it, by any words which would exclude –

the language of the definition. At the top of page 28, his Honour read the whole of the definition in. Page 29 his Honour stated the proposition:

Is there then any sufficient reason for implying a restriction on the indemnity -

to which he gave the answer no, and he dealt with this kind of argument that we confront here about what the parties must be taken to have been trying to do by saying it is all speculation, in the middle of the page. That passage continues and his Honour identifies the proposition of logic that the Court of Appeal analysis falls foul of, that concerned with the undistributed middle.

Here, let me take, in answer to something Justice Bell asked me about the Court of Appeal, Justice Macfarlan’s approach. His Honour accepted that the effect of clause 1.4 was to include rights in the concept of “MBM area” but his Honour then eliminated that by saying that does not matter. I am only going to give effect to one component of the definition. It is rights in respect of area - his Honour said I will give effect to the area component of the definition.

That is the very error that his Honour, Chief Justice Dixon, criticised. You cannot refuse to apply part of the definition because you think the parties might have intended something else. That is not what the language says and you do not get to pick and choose between the components of the defined term. So his Honour’s approach, in our submission, in Halford is correct. Justice Windeyer was very clear that the text has primacy, at the bottom of page 40.

There is another earlier decision that is likewise very helpful in terms of principle. It is the Southern Cross Assurance decision that we added to our list of authorities – tab 22. The salient passage is at page 636, at about point 2 on the page. Again, the text has primacy unless you find counter-indications within the text. Their Honours go on to say:

Preconceptions as to what the transaction involves of its own nature, or what the parties are likely to have intended ought not to be allowed to deprive the language in which the reinsurance is expressed of its natural meaning and effect.

That is the principle we seek to apply when these passages are read in their context. Where the parties have agreed on a special expanded definition, it is not likely to be disregarded, in our submission. So let me turn to the text – clause of the 1970 agreement. The course I propose to take is to address the text and our construction and then turn to the Court of Appeal and make such criticisms as we do of the reasoning in those passages.

I have explained the structure of the 1970 agreement. The appropriate starting point, in our submission, is clause 1.4 because it is an all-embracing special definition of the critical word “reserves”. It provides that:

All references to blocks or reserves include all present and future rights of Hanwright in relation to the above blocks and reserves including any extensions of the ore bodies located therein or any adjustments of the present indicated boundaries –

I will address aspects of it a little bit later – that is the ore bodies extension passage, but that is, on any view of things, a special and expanded definition of what would be conveyed by the word “reserves” if read in isolation.

KIEFEL J: It finds expression in clause 2.2 when the parties are talking about what is divided by - - -

MR YOUNG: Yes.

KIEFEL J: When it refers to the entire rights.

MR YOUNG: Yes.

KIEFEL J: So one could at least discern that it governs the provisions made for the division of rights.

MR YOUNG: More than that, your Honour. Its purpose and function – its main purpose and function is to feed into the central operative provision which is clause 2.2. By feeding into clause 2.2, it does two things. It controls the definition of “MBM area” and, secondly, it defines – in the same breath, as it were – the rights that are being transferred to MBM and, for that matter, the rights that are being restored to Hanwright.

KIEFEL J: But it does not control just what “MBM area” means. It controls the rights which are the subject of both the MBM and the Hanwright area because it is talking about what is the subject of the division.

MR YOUNG: Well, it is talking about two things. Can I tackle it in this fashion, your Honour? Within 2.2, the first reference that would attract the special definition is the phrase “its Mount Bruce Temporary Reserves”. Notice the preposition. It is not referring to areas in the abstract. It is referring to something that is held – “its Mount Bruce Temporary Reserves”. That harmonises with the opening words “Hanwright hold Temporary Reserves in respect of areas”. Then it goes on to label them as “Mount Bruce Temporary Reserves”.

So the first reference is to a holding in respect of areas to which the specially defined meaning in 1.4 applies. So “its Mount Bruce Temporary Reserves” means all of its present and future rights in relation to Mount Bruce temporary reserves including extensions, et cetera.

GAGELER J: You are reading the word “include” as means.

MR YOUNG: No, I am not - - -

GAGELER J: Well, you did just then.

MR YOUNG: Yes, I may have just then, your Honour, but it is a point without a difference, if I may say so for this reason. We can read it quite comfortably within our argument as “reserves” means the areas set aside by the government under section 276 as being the subject of an authority to occupy. We can read it that way – and includes all present and future rights, et cetera. It makes no difference because whichever way you read it, rights – present and future rights – are an essential component of the composite definition.

If I simplify it, your Honour, and simply read it – we say this is not entirely accurate, but if I were to read it as land including rights, you would nonetheless have a composite definition where it is the combination of the land with the present and future rights as specially defined. That is what 1.4 is setting out. That then feeds into the concept of its Mount Bruce temporary reserves.

I was about to add to my answer to Justice Kiefel, if I may, by going on to say what then follows in clause 2.2 is that 2.2 addresses two subsets of its Mount Bruce temporary reserves, two subsets of the bundle of rights in respect of all of the reserves. The first subset is 4947H to 4962H and their reserves. So in respect of temporary reserves 4947H to 4962H the reference to temporary reserves attracts 1.4. So, one reads that as, in respect of the reserves, including all present and future rights of Hanwright in relation to them, including any extensions of ore, the entire rights thereto are restored to Hanwright.

Similarly, what follows then deals with a second and separate subset of that overall bundle of rights relating to land. In respect of temporary reserves 4937H, et cetera, the words “temporary reserves” attracts 1.4 because we follow the imperative command “all references are to be given the specially expanded meaning”. So, reading in the definition, as Chief Justice Dixon did, in respect of the temporary reserves of those numbers, including all present and future rights of Hanwright in relation to them, including any extensions - and it is that composite concept which is then labelled and defined as the MBM area.

KIEFEL J: But the references in clause 2.2 are both to the collection of rights with respect to the land and the land itself, are they not?

MR YOUNG: Yes.

KIEFEL J: When it is speaking of the rights it is talking of the division of the rights and when it is speaking of the land it is identifying the physical land by reference to the - - -

MR YOUNG: No, your Honour, because when it is identifying in respect of temporary reserves it is identifying – and let me accept the - - -

KIEFEL J: But it is becoming a bit circular if it is identifying the rights with respect to the rights. It is referring to the rights with respect to identifiable land.

MR YOUNG: We say it is not circular, your Honour. The effect of the definition is that in respect of the subset of its Mount Bruce temporary reserves, specially defined to consist of the temporary reserves including the category of rights that 1.4 refers to, that whole bundle, that composite, is defined as MBM area. That composite is also the subject of the transfer to MBM. MBM acquires the entire rights thereto.

In our submission, it is no reason to refuse to apply the definition to say that if you read the definition in, it involves saying “and in respect of the temporary reserves, including all present and future rights”, et cetera, “MBM acquires the entire rights thereto”. It may involve more words than you might need, but there is no lack of sense in reading it in that way. It is to ensure that the reference to “temporary reserves” serves two functions and purposes: one, it defines “MBM area” as specially defined in 1.4; and, two, it is that whole bundle of rights which are the subject of the transfer to MBM.

KIEFEL J: But you do not need to read “MBM area” as importing the definition so that you get the bundle of rights read into “MBM area” because the clause itself tells you that those rights are to be divided with respect to that area of land. The clause does the work in relation to the rights itself.

MR YOUNG: No, it does not, with respect, your Honour. May I explain why? If your Honour is reading “temporary reserves”, those words immediately preceding “4937H”, as simply a reference to land alone, as your Honour seems to be and as our opponents do, that involves several mistakes. The first is it declines to give effect to clause 1.4 in the definition which compels “reserves” to be read as something than bare physical land. Secondly, it would defeat the purpose of the second part of the definition in 1.4 where it goes on to refer to “extensions of the ore bodies”.

GORDON J: Can I challenge that characterisation, just for a moment, of 1.4? If you are a cynical person, it seems to me that it is at least open on an argument that it reinforces the importance of the MBM area and what the parties were doing was to say we are not going to be limited by the present rights that are attached to the MBM area. We are going to take the physical area, and if there is a change, which can happen as we have seen either by way of the rights under the Mining Act or agreement of the government or something, that is not going to detract from the obligation for you to pay the royalties”. So, rather than being a definitional section, it is there to reinforce the actual words of “MBM area”.

MR YOUNG: With respect, no, that does not follow either, for the reasons I was about to explain to Justice Kiefel. But can I add to my response to your Honour? If your Honour adopts that view, your Honour is not giving effect to the definition, because the definition quite plainly says all references to temporary reserves include present and future rights. So, if you are to apply that definition, you are required to read it into the appropriate places in clause 2.2 and if you follow that simple instruction, what I have said follows.

You do not get the option – the court does not get the option of saying, “Well, we think the parties may really have been trying to do something else, so we will resist the instruction and read ‘temporary reserves’ where it appears immediately before ‘4937H’ as simply a reference to land”. Why is that being done, one might ask rhetorically? Is it because the parties chose the label “MBM land”? That is no sufficient reason when you are dealing with a specially expanded definition and there is nothing inapposite in talking about a bundle of rights with respect to land by reference to a caption “MBM land”. “Land” is a component of the definition but it is not the entirety of the definition.

BELL J: Does that argument work with clause 6 in relation to the definition of “Hanwright area”?

MR YOUNG: In relation to the definition of “Hanwright area”?

BELL J: Yes.

MR YOUNG: Yes, it would work perfectly well because the Hanwright area is – you find the definition in 2.2. It is the temporary reserves, including all present and future rights with respect to 4947H. So if we read that into 6, the sale of iron ore from the temporary reserves including all Hanwright’s present and future rights, it works perfectly well. There is no difficulty in the other references - - -

BELL J: It might seem a clumsy reading of clause 6.

MR YOUNG: Well, that would only be so if your Honour has some preconception about what “Hanwright area” is attempting to signify that lies outside the four corners of the special definition.

NETTLE J: Mr Young, could I just come back to Justice Kiefel’s point about security and clause 2.2? If one reads in the definition from clause 1.4 into Mount Bruce temporary reserves, all this clause would need to say is, is it not, that Hanwright hereby agrees that its Mount Bruce temporary reserves should be divided between Hanwright and MBM so that temporary reserves 4947H to 4962H inclusive go, and temporary reserves go.

MR YOUNG: But your Honour would then confine the purpose and function of 2.2 to one objective, which is to divide the rights. There are two objectives in 2.2: to divide the rights, and to specify what is going to be subject of the royalty by defining the MBM area by reference to the rights. It serves both purposes and functions, and that is why you find the definition of “MBM area” adjacent to the reference to reserves in the specially expanded sense.

NETTLE J: But could it not do that just as well if it said Hanwright hereby agrees to transfer 4947H to Hanwright, the Hanwright area, and the other one to the MBM area?

MR YOUNG: Well, if its sole objective was to divide the rights, the parties could have written the clause in that fashion.

NETTLE J: But would not the royalty provision have worked just as well?

MR YOUNG: Well, then the royalty provision would be severed from the definition of “MBM area”, if I am following what your Honour says because, as it is at the moment, clause 2.2 does two things. It defines the rights being transferred or restored by reference to the temporary reserves, including the bundle of rights, and it uses that same concept of the temporary reserves including present and future rights to define the MBM area because, we say objectively, there was an intention that the subjective matter of the royalty should be identical to the rights that were transferred to MBM.

KIEFEL J: You are no doubt right to say that one of the purposes of clause 2.2 is to identify the MBM area as that with respect to which MBM will have rights.

MR YOUNG: Yes.

KIEFEL J: But for the purposes of clause 3.1, the MBM area is where the ore is taken from.

MR YOUNG: The lease that is the product of the MBM rights is the area where the ore is being taken from. When you get to 3.1 there is no option - - -

KIEFEL J: Which eventually we will, I hope.

MR YOUNG: There is no option to read “MBM area” as an undefined expression.

KIEFEL J: No, it seems perfectly clear – goes on.

MR YOUNG: But if you read it as a defined expression, it has the meaning we give it. Can I add to my answer to Justice Nettle? If there was an intention to make 3.1 freestanding, not affected by the defined bundle of rights that were transferred, you would find the definition of “MBM area” immediately after the reference to the map in 1.1. But you do not. You find that as a definition of the bundle of rights comprised of the reserves including those rights.

NETTLE J: So going back to 2.2 one is to read the words “in respect of” first and “in respect to” secondly as a deliberate device to make sure that the royalties apply to the rights rather than to the areas?

MR YOUNG: Well, that is the consequence of giving effect to the text and there is nothing insensible in doing that.

NETTLE J: I was not meaning to deprecate it; just simply to be sure that is the way it is put.

MR YOUNG: Yes, your Honour.

NETTLE J: It is an intended device to achieve that effect?

MR YOUNG: Yes, to make the MBM area a defined term in the sense that appears in 1.4 in respect of a subset of the full bundle of rights, so that the area is based on the same thing that MBM is acquiring.

NETTLE J: Thank you.

FRENCH CJ: A premise of your argument is that the term “temporary reserves” is being used in its statutory sense, which we discussed before, of a right or an authority.

MR YOUNG: No, more than that. I am not disagreeing that “temporary reserve” has the meaning of an authority in respect of a 276 reserve, but these parties are using the expression “temporary reserves” in a wider sense than that, to include the associated rights under the State agreement.

FRENCH CJ: Yes, I understand the basis upon which you put that view. Is another view open – you will definitely say it is not – that the use of “temporary reserve” is in its colloquial sense of a reference to an area over which rights exist?

MR YOUNG: No. I mean - - -

FRENCH CJ: I am just thinking of usage over many years.

MR YOUNG: Well, your Honour, of course I appreciate that is the other side’s argument and it is the view the Court of Appeal took.

FRENCH CJ: It is a term of colloquial - - -

MR YOUNG: But that view, in our submission, is not open when you look at all of the provisions I am going to emphasise within this agreement. To give it that meaning would conflict with very many provisions and that is not the meaning that the Court of Appeal gave to it. The Court of Appeal recognised that “reserves” includes rights under the State agreement. That is paragraph 42 of - - -

FRENCH CJ: I understand the legal basis for your argument. I am just looking at the possibility that another usage is simply to use it in terms of an area description, that is to say, the area covered by temporary reserve effectively.

MR YOUNG: Well, in our submission, that is not open within the text of this agreement - - -

FRENCH CJ: Okay.

MR YOUNG: - - - and, remaining faithful to the text, it must be rejected. I started on an answer to Justice Kiefel but was going to make a second point about the problems in reading “temporary reserve” in 2.2 as geographic area only. Let me draw attention to the additional words “including any extensions of the ore bodies” and use that to test the rival constructions of clause 2.2, if I may. On our construction, the reference to “its Mount Bruce Temporary Reserves” and, secondly, being the reference to the subset of in respect of part of that, “temporary reserves 4937H”, et cetera - - -

KIEFEL J: I am sorry, what does the term “extensions of the ore bodies” actually refer to?

MR YOUNG: What that means is this, in our submission. If at the point of transfer Hanwright had any rights to any ore lying beyond the geographical boundaries of what is mapped in clause 1.1, so they are extensions from the original TRs - - -

KIEFEL J: So these are statutory extensions, or would have to be - - -

MR YOUNG: No, no, this is all contractual. An ore body is simply iron ore that is commercial. So you do not have an ore deposit unless it is commercially extractable. So whether it qualifies as an ore body depends on the market at different points of time. But the argument here was that, beyond the mineral leases that the parties ended up with, there were some connected ore deposits lying in part of what was within the boundaries of the original temporary reserves indicated on the map in clause 1.1. So the argument was about those areas.

Our submission is this. Within 1.4, it is not concerned with extensions within the mapped area in 1.1. It is concerned with an ore deposit lying outside the temporary reserves extending from the temporary reserves but lying outside, to which Hanwright had rights at the point of transfer to MBM. So if Hanwright had any rights to ore deposits in an area beyond the mapped area, those rights would also be transferred across.

KIEFEL J: When you say “rights”, you mean the subject of some grant or approval by - - -

MR YOUNG: Yes, the subject of some grant or approval, it would have to be, but - - -

KIEFEL J: But it means – in context, it is not just what they presently have? It refers to future rights as well?

MR YOUNG: Yes, it refers to a future right.

KIEFEL J: So, any further approvals?

MR YOUNG: But the critical point I am – yes, future rights prior to completion. But the critical point I am coming to is that the very concept of extensions of ore bodies located therein is referring to an ore body that is not within what our opponents say is the physical geographical area that is the subject of 2.2.

GAGELER J: Do the State agreements of 1967 and 1968 have anything to say about extensions of the ore bodies?

MR YOUNG: No, your Honour, the State agreements have nothing to say about extensions. There were in fact no extensions. No rights to extensions were transferred across. So this - - -

GAGELER J: Did they say anything about adjustments of the present indicated boundaries?

MR YOUNG: No. So 1.4 is referring to possible future rights that might arise. That is why it says “any extensions” and “any adjustments” of boundaries.

KIEFEL J: But in relation to extension of the ore bodies and the adjustments of boundaries, 1.4 is simply allowing for changes to the basic temporary reserves – to the temporary reserves presently held, which are identified in 2.2 - - -

MR YOUNG: Yes, but I am using it - - -

KIEFEL J: - - - which kind of reinforces the reference to land.

MR YOUNG: I am using to test the rival constructions. Let me explain, your Honour; I have not made a very good fist of it. On our construction, if there were any rights to extensions beyond the original boundaries as at the time of completion, those rights would be transferred across. Why would they be transferred across? They would form part of the defined term that you apply to the words “temporary reserves 4937H”, et cetera, and MBM would then acquire the entire rights thereto.

The only way in which the second part of 1.4 can operate is our construction. On our construction, those rights would be transferred across because the definition applies to temporary reserves. Because the definition applies to temporary reserves, those extensions, if any, would form part of MBM area, therefore ore extracted from the extensions would attract royalty under 3.1. On our construction, there is perfect symmetry and full effect is given to the passage at the end of 1.4.

Let me compare the other side’s construction. On the other side’s construction, “temporary reserves 4937H”, et cetera, in 2.2 is the bare physical area that is mapped in 1.1. It does not include any extensions, and if there were any rights to any extensions, they would not fall within those words “temporary reserves 4937H”. Therefore it would follow that MBM would not acquire any rights thereto because its rights would be limited to rights within that physical area. It would not get these additional rights under 2.2.

Even if it did, on some construction of 2.2, the physical extensions would not feed into the definition of “MBM area”. So ore extracted from the physical extensions could not be the subject of the royalty in 3.1. The physical area construction of 2.2 and MBM area negates the second part of the definition of 1.4. It has the result that it has no possible application at all. It cannot apply to define the rights that have been transferred and it cannot apply to identify the subject matter of the royalty. So therefore the physical area interpretation that has been adopted by recourse to the fact that you have chosen a label “MBM area”, defeats the second part of the definition.

GAGELER J: I may be not quite understanding your argument, but the second part of the definition is concerned with the expansion of the physical area, is it not?

MR YOUNG: Yes.

GAGELER J: So why cannot - - -

MR YOUNG: Well, it is including – yes and no is the answer, your Honour, but if there are any rights to extensions of ore bodies, the question would be how do those rights get transferred across to MBM?

GAGELER J: Yes.

MR YOUNG: Now, that is why I accepted that – we say it will not get transferred, but that is why I added the leg, assuming it does get transferred because, in your Honour’s words, these are physical extensions of the area, that might then fall within the concluding words of 2.2, so the rights are transferred across. It cannot have the consequence that temporary reserves 4937H to 4946H result in an expansion of the words “MBM area” unless you read in the definition in the way we say you should. In other words, your Honour’s observation might be a solution to the problem that the rights to the extensions would not be acquired under 2.2, but it will not expand the meaning of “MBM area” which is defined by reference to “temporary reserves 4937H”, et cetera.

KIEFEL J: But would not clause 1.4 have the effect that, because the entire rights to the reserves are given across to MBM under clause 2.2 on the division, that the MBM area would expand according to any adjustments of boundaries or extensions?

MR YOUNG: No, because the definitional term “MBM area” relates to the subject matter of the rights held by Hanwright and if that is a physical area alone, being temporary reserve 4937H, there is nothing to make that pick up extensions beyond those boundaries. It is only if you adopt our interpretation that there is the symmetry that the extensions, if there are any rights, form part of the MBM area and attract royalty, and the extensions, if there are any rights, are the subject of MBM’s acquisition of the rights.

You have a complete asymmetry, lack of symmetry, and the clause does not work and the second part of it has nothing to attach to, whereas our interpretation, which is simply reading the definition as applicable to temporary reserves as instructed, has the consequence that full effect is given to every limb of the definition.

I have gone to the connection between 1.4 and 2.2 at your Honours’ invitation. After referring to 1.4 I had intended to go back and emphasise certain other provisions that bear upon the substance of the submissions I have just made. Contrary to the view of the Court of Appeal, you do not start this agreement with the apprehension that temporary reserves are a purely geographical area. If you read the whole of clause 1.1, that is not the effect of its language. It is:

hold Temporary Reserves in respect of areas –

So the temporary reserves are distinguished from the areas as being something over and above it. Then it goes on to say “these blocks” which are captioned “Mount Bruce Temporary Reserves”:

are subject to the exercise of an option –

and it can only be the rights that are subject to the exercise of the option because there was no ability to transfer the area as such. So immediately in clause 1.1 we are speaking about rights relating to area being the conception that the parties have when they use the expression “temporary reserves” and “blocks”. That is confirmed by 1.2, which refers to the contractual option over the temporary reserves. That is an option over the rights. The associated clause - - -

FRENCH CJ: By rights there, you include contractual rights with the State in respect of temporary reserves?

MR YOUNG: In respect of temporary reserves in the sense - - -

FRENCH CJ: Used in the statutory sense.

MR YOUNG: Used in the sense your Honour and I discussed - - -

FRENCH CJ: Yes.

MR YOUNG: - - - of a reservation of Crown land that is then the subject of an authority to occupy for 12 months. Clause 2.3 and clause 4 indicate that the parties were explicitly contracting on the basis that the rights, the subject of the transactions, would lead to a lease over a limited area. So, if I start with clause 4, what was envisaged by this agreement is that:

M.B.M.’s right to give notice under Clause 5(1) of –

the 1968 agreement would be now restricted. The Court will recall that that was a notice to completely take the place of Hanwright under the 1967/1968 agreement in respect of all rights and obligations. The parties are contemplating that because MBM is acquiring State agreement rights relating to a certain subset, it is going to step in to Hanwright’s shoes but only in respect of that subset. However, it will take over all secondary processing obligations.

So the parties are directly assuming that there is going to have to be an amendment to the State agreement to give effect to this transfer of rights. The rights they are transacting are basically the State agreement rights. MBM is going to have to give a notice to step into Hanwright’s shoes in respect of that subset where it is acquiring the rights under clause 2.2. Clause 2.3 also shows that parties contracted on the basis and mutually agreed footing that the lease that would unfold from the rights they were transacting would be for a lesser area than the area, the subject of the temporary - - -

FRENCH CJ: That is why the word “reduced” appears in the second line because the rights you get are, in fact, expanded under a mineral lease in terms of what you can do with the land.

MR YOUNG: Yes, but the area in respect of which the lease might be granted is limited to 300 square miles and the term and condition of the State agreement is that the balance expires and reverts to unalienated Crown land.

FRENCH CJ: So, when they are speaking of the Mount Bruce temporary reserves being reduced to a mineral lease or leases, they are using them as a shorthand for the area – those terms as a shorthand for the areas they cover because it is the lesser area that you get from the mineral lease.

MR YOUNG: Well, not entirely, your Honour. I accept that they have – they are recognising the fact that you have rights of occupancy in respect of a wider area than you will get a lease but that is not to gainsay the fact that they are conscious that you are moving from rights of occupancy with the associated contractual pathway that leads to this lease of a lesser area. So, the very fact that they are making the assumption, the mutually agreed assumption, that any lease we get is going to be the State agreement lease is going to be a lesser area, we are going to have to split that between us in the proportions of 75/25 is what they record here.

That demonstrates that they are conscious that the other areas that have been the subject of rights of occupancy, in respect of those other areas, those rights are going to disappear and they are going to end up with a lease over a lesser area. So, the parties are conscious that their rights are going to be more confined in area but greater in content and that the only way that they can extract ore pursuant to these rights that have been transacted is to move to this kind of lease.

KIEFEL J: Would the parties know – I am sorry, at the outset, I take it you read the words “are reduced to” to mean result in?

MR YOUNG: Yes, but I accept, as the Chief Justice said, that part of resulting in is – there are two parts to this - - -

KIEFEL J: A consciousness of the lesser area. Would the parties know at this point how the area would be constricted, in what respects? I mean, I know the area is identified - - -

MR YOUNG: Yes, because the – not exceeding 300 square miles.

KIEFEL J: But they would not know which parts of the existing temporary reserves would be moved – which boundaries would be moved to limited, or would they be able to define that themselves?

MR YOUNG: They define that themselves seems to be the contemplation of the State agreement, that is the applicant for the mineral lease chooses what areas it wants to apply for.

KIEFEL J: So may they be taken to understand that whatever is the effect of the reduction in the mineral lease, what is left of the MBM area and the Hanwright area - - -

MR YOUNG: Has gone.

KIEFEL J: Well, when they go on to say the royalties provision would only operate with respect to the reduced area following the mineral lease, is that right?

MR YOUNG: Well, we say that is the consequence of the way in which they define “MBM area” and they define it as they did because they were conscious of the matters in 2.3. They were conscious that whatever rights of occupancy they had they would be lost, save and except to the extent to which they are granted a lease which is limited to 300 square miles.

KIEFEL J: Would it not also be workable to read “MBM area” in 3.1, assuming that it has been the subject of some reduction in the process of the mineral lease resulting, to be whatever is left of the land and the MBM area from which ore is taken?

MR YOUNG: That is the consequence of our construction that applies to the definition in 1.4, that MBM area is the combination of the rights you acquired in respect of the reserves. That is the consequence that MBM area becomes the land so far as it is the subject of the rights that were acquired or the rights deriving therefrom. So the composite concept remains the governing concept both for the transfer of the rights and the subject matter of the royalty.

KIEFEL J: But if you read 3.1 to simply refer to where it is in the physical sense from which ore is taken, the MBM area is simply that area of land referred to in 2.2 which is still within the mineral lease, is it not?

MR YOUNG: No, no, the argument arises because Channar A is not within the mineral lease that MBM acquired pursuant to these rights. It is outside that. It is in the land where all rights expired in 1974 and it became unalienated Crown land. It remained – it was land which other people could apply for - a BHP subsidiary did apply and did get a tenement over part of that area which it later surrendered or at least that was unresolved by the courts but that possibility existed.

KIEFEL J: The Dampier overlap question.

MR YOUNG: Yes. But it was open to anyone else to apply for the land. In due course what occurred is that in Channar A the land was the subject of applications by another Rio subsidiary in 1978 and 1979 for bare 1904 Act rights of occupancy.

KIEFEL J: But if Channar A falls out of the area, the subject of the mineral lease, and, therefore, cannot be the subject of extraction of ore, it would follow that it cannot be part of the MBM area from which ore is won.

MR YOUNG: No, this case arises, your Honour, because of these facts. It fell out in the sense that all rights expired on 17 October 1974. There was then a gap from 1974 - - -

KIEFEL J: To 1978 and 1979.

MR YOUNG: - - - 1978/1979 and during that time it was available to others and there is a possibility that Dampier acquired rights over some of the area in that interregnum.

KIEFEL J: Quite so, but does that not simply mean that ore could not be won by MBM from that area in that period?

MR YOUNG: No, on our construction of the definition of “MBM area”, it is governed by 1.4 and so once the linkage with the rights that you acquired from Hanwright has ceased to exist in 1974 that area that became open to anyone is no longer part of the MBM area and it remains the position, notwithstanding that someone else comes along and independently gets rights in respect of that area some years later. The nexus is broken with the defined term “MBM area”.

Now, clause 3.1 uses the defined term “MBM area”. In our submission, there is no option but to give it defined meaning the parties gave to it in clause 2.2 and if you give it that meaning it means the reserves including the acquired rights. You do not have an option of picking the land aspect of the definition only and ignoring the rights aspect of the definition. They are coupled together and so when ore much later on is won by an exercise of rights that have no linkage to the rights that were acquired by MBM under clause 2.2 it is an irrelevant fact that those newly acquired rights that someone else acquired from the government fall within what was once part of the MBM area. It ceased to be anything other than unalienated Crown land in 1974. So, clause 3.1 really turns upon the proper construction of clause 2.2 and the words “MBM area”.

Now, there is one feature I should mention. Clause 1.4 refers to the “present and future rights of Hanwright”. They are the very same rights that MBM acquired, if you apply the definition as we do. It is a single set of rights that we are talking about on our definition of “MBM area” and that is a composite definition linking the land the subject of the rights with the rights.

Now, can I go to the Court of Appeal’s decision and step through their Honours reasons, if I may? It is in volume 5 commencing at page 2373. We would submit that the Court of Appeal erred in at least four respects. To list them, without elaboration now, they are these. The Court of Appeal failed to give effect to clause 1.4. It is a definitional provision applying to “All references” to reserves. Secondly, it misconstrued clause 1.1 by failing to take account of its full terms read in context. Those errors led to a misconstruction of clause 2.2, including a misconstruction of the term “MBM area”.

Then, fourthly, the Court used the label that was chosen and the natural meaning of the word “area” to negate and defeat the parties’ specially expanded definition of “MBM area”. Those errors are manifest in each of the two judgments with which Justice Barrett agreed but it is convenient to deal with each judgment separately, if I may?

FRENCH CJ: Just to make sure I have the factual setting right, we are talking here about what is called “Eastern Range” because it was previously within TR4967 – I am looking at paragraph 19 of your submissions.

MR YOUNG: No, we are talking about both, your Honour. Can I endeavour to just get the factual background clear by going to the tenement history in volume 6?

FRENCH CJ: Maybe the tenement illustrations attached to the agreed facts, I think, might be – I am looking at section C, initially, the period from January to June 1970.

MR YOUNG: I will go to the illustrations, your Honour, but it may be easier if I start simply with the tenement history.

FRENCH CJ: Yes, all right.

MR YOUNG: At 2450.

FRENCH CJ: Yes.

MR YOUNG: Then we can see how this unfolds on the tables.

FRENCH CJ: I am only concerned, of course, with that part of the tenement history which is relevant to the MBM area.

MR YOUNG: Yes, I understand, your Honour. I will try and be precise. In relation to Eastern Range, the only issue was the MBM area issue.

FRENCH CJ: Yes.

MR YOUNG: The salient facts are that there was a Hanwright TR – TR4967 which was the subject of the 1970 agreement. It expired by force of the State agreement on 17 October1974. The reason it expired was that MBM was granted a lease over a lesser area at that point in time.

FRENCH CJ: That explains the gap which appears in the period 5 map, which is 17 October 1974 onwards.

MR YOUNG: Yes.

FRENCH CJ: You have got ML246, you have ML252 and TR4967 has disappeared.

MR YOUNG: Yes, that is so. Then there is a gap, as I endeavoured to explain to Justice Kiefel.

FRENCH CJ: That is right.

MR YOUNG: There is no tenement except that it is possible that Dampier acquired some rights but that is really only illustrative - - -

FRENCH CJ: That then comes in in period 6, I think, Dampier’s involvement - that is in the period 6 map. It shows Dampier with some temporary reserves adjacent to the gap.

MR YOUNG: Yes, then in 1977, in respect of Eastern Range, MBM applied for a new right of occupancy, TR6603, and at trial we called it the house-shaped area or at least Justice Hammerschlag did.

FRENCH CJ: That is the map headed “Period 7”.

MR YOUNG: Yes, 2466. Can I interpose that that TR, the documents of grant are quite clear that it is simply a section 276 authority? It is not issued for the purposes of any State agreement and it has no associated contractual rights.

FRENCH CJ: It does not have any barnacles of contractual rights attaching to it.

MR YOUNG: Yes. What then occurred in respect of Eastern Range is that Hamersley acquired mineral lease No 4 and the parts of that mineral lease that are relevant to the Eastern Range area are sections 236 and 237, which are depicted on period 12.

FRENCH CJ: That is from 8 December 1982.

MR YOUNG: Yes. Indeed, 236, 237 and 238 are all parts of ML4SA which Hamersley acquired in 1982 as a fresh grant from the government.

FRENCH CJ: The roof of the house appears still to be in place.

MR YOUNG: Yes. I think it has disappeared. It is an expired set of occupancy rights. So that is Eastern Range. The picture is – there is an overlay that probably makes it clearer. I will defer that about Eastern Range, but if I can go back now to Channar - - -?

FRENCH CJ: I understand that is 4966 and 4965 on period 1? I was working off paragraph 19 of your submissions.

MR YOUNG: On the period 1 map, Eastern Range is located within 4967. Channar is located within 4965 and 4966. In the case of Channar a better appreciation is given by the map I went to which is at 2479 and also – sorry, in this – the Court is using the separate annotated bundle it is page 31.

FRENCH CJ: It might be helpful if we can stick with one set of maps. Is it possible to track it through the maps attached to the tenement illustrations?

MR YOUNG: It is, your Honour, but they are not entirely clear in various respects. That is why the other overlay, I thought, helped, but we can.

FRENCH CJ: Well, if you think that is more useful, take us to it.

MR YOUNG: At 2479 you can see in one page, rather than separate period documents, what unfolds. You have the underlying TRs that disappear.

FRENCH CJ: All right, they are the - - -

MR YOUNG: Yes, in 1974 those TRs expired. So looking at the Channar tenement history, what occurred in 1974 is that MBM, pursuant to its MBM 1972 State agreement, acquired a mineral lease that had the blue sections depicted at 2479, 11 through 19. The sections that are relevant to Channar are only 18 and 19. So, on 17 October1974, MBM acquired a lease to sections 18 and 19 of ML252SA.

KIEFEL J: That is Channar B?

MR YOUNG: That is Channar B, that is not in dispute. Everything else expired and disappeared and it became unalienated Crown land in the area of Channar. There was then a gap until 21 April 1978. That is when HamEx began making fresh applications to the government for the grant of bare rights of occupancy not supported by any State agreement. On the tenement history at 2540 it was granted 6663 and then 6982 and 6983 and they appear - - -

NETTLE J: Which had been within – they had been in 4965 and 4966? Those two areas had been within 4965 and 4966?

MR YOUNG: Yes, and 2470 is period 11 that shows – periods 10 and 11 show those TRs that Hamersley acquired. Period 10 is perhaps – and the next stage is that in 1988 Hamersley acquires – I am sorry, in 1988 Channar, under its State agreement, acquires ML265 and sections 238 and sections 18 and 19 are surrendered and the consequence of that tenement history is that the disputed area, Channar A, derives from rights that Hamersley exploration acquired afresh from the government in 1978 and 1979.

I said that I was going to deal with each judgment separately rather than jumping between them. Justice MacFarlan’s judgment I will take first. Can I make a few submissions by way of overview of what his Honour did? His Honour accepted that “MBM area” in clause 2.2 is by force of clause 1.4 defined to include a reference to rights. That appears very squarely at the end of paragraph 46 at page 2395 where his Honour says:

It does not matter that, by reason of Clause 1.4, “MBM area” included a reference to rights. What is important for this case is that it included a reference to the relevant areas of land.

The same acceptance that “MBM area” includes rights is apparent in clause 43, last sentence, 44 and 45. In 45 his Honour says in 2.2 it was:

referring to areas of land and not, or at least not exclusively, to rights in respect thereof.

So his Honour accepted that the effect of the definition was that you were dealing with a composite of land and rights. However, his Honour disregarded the rights aspect of that combined definition saying it does not matter. The reason why his Honour did that seems to be twofold. First, Chartbrook - his Honour started with a quotation from Chartbrook at paragraph 39 and his Honour finished his analysis at paragraph 47 by saying support for the reasoning that he was going to disregard part of the definition is found in Chartbrook.

The second reason why his Honour disregarded an aspect of the contractual definition seems to lie in what we would call an isolated reading of clause 1.1 that it provided a primary signification of reserves as areas of land – not a complete signification but a primary signification of those areas. Now, in both those – in that analysis, we submit, his Honour fell into a number of errors.

FRENCH CJ: That might be a convenient moment, Mr Young. The Court will adjourn until 2.15.

AT 12.44 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

FRENCH CJ: Yes, Mr Young.

MR YOUNG: Your Honours, I am about to go to the judgments in the Court of Appeal. There is one more general observation that relates to both judgments. Neither judgment coherently explains precisely what meaning is given to clause 1.4. Nor do the judgments explain why the definition in its full ambit does not apply to the words “reserves” in clause 2.2, and neither judgment satisfactorily explains how it is that one aspect of the definition, that concerned with rights, is put to one side on the basis that it either does not matter or does not affect the definition of “MBM area” that is expressed within clause 2.2. Our respondents in their arguments do not provide an explanation of any of those matters either.

Turning to Justice Macfarlan’s judgment, his Honour starts at paragraph 42 in this part of the judgment with an observation about the meaning of “temporary reserves” and his Honour observes that that it is a “loose” reference to rights of occupancy. His Honour is correct in perceiving that it is a reference to rights. He is incorrect in limiting it to rights of occupancy, for the reasons that I have been through, particularly given the immediate context that refers to the State agreement rights. His Honour then explains a view about clause 1.1. His Honour refers to the passage beginning “these blocks”. Looking at clause 1.1, the whole of that passage must be read plainly as encompassing rights, because it goes on to say:

subject to the exercise of an option by Mount Bruce Mining –

That is the option in clause 5(1) of the 1968 State agreement, which is an option over the rights conferred by the State agreement. So, immediately, “blocks” is seen contextually as not referring to areas of land alone. Yet, his Honour goes on effectively to say that these are areas of land. That is incompatible with the context in which the expressions are used in clause 1.1.

His Honour finishes by referring to a composite, areas of land and “being the subject of Temporary Reserves”. That seems to be a composite of areas and a limited and mistaken category of rights. But it is certainly not a solely geographic area. His Honour then turns to clause 1.4. His Honour quotes the words, including the encompassing, “All references”. His Honour, without explanation – or without satisfactory explanation – says it “does not detract”. Presumably, the conclusion is that “blocks” and “reserves” means solely areas. Well, 1.4 says exactly the opposite. It does not mean solely areas.

His Honour finishes by referring to the primary signification of the expression as being land, albeit including rights. There is nothing in clause 1.4 to give a primary signification to the geographic aspect of the definition. There is a combined definition that links the two inextricably. Yet, his Honour attributes greater weight to one aspect of the definition compared to the other, and there is no textual justification for that, in our submission.

His Honour then acknowledges, as I have pointed out, that the effect of 1.4 closed 2.2 so that references to “areas” include references to rights. That is 45 and the last passage in 46. Now, what his Honour does not explain is how the definition applies in accordance with its language to the reference to reserves where it appears in 2.2, immediately antecedent to the definition, the label.

If you follow the instruction in the text, you must apply the definition in both its aspects to the reference to reserves in 2.2. Hence, “MBM area” means a reference to the composite concept of rights in relation to land, and we say it is rights in the expanded sense of encompassing the State agreement rights. But there is no explanation about that. All his Honour says is at the end of 46, which is to accept that “MBM area” includes a reference to rights.

That can only follow if you apply 1.4 to the reference to “temporary reserves” in 2.2. If you apply 1.4, you must apply the entirety of it, so that the reference is to temporary reserves including all present and future rights. Nor is there any textual justification for limiting future rights to a certain category of future rights. It must include, in our submission, all of the contingent rights that will arise in future, if the conditions of the State agreement are satisfied.

That includes the fact that the rights of occupancy are defeasible – they will expire on the grant of a mineral lease. The mineral lease will be for a lesser area, and you can only extract ore if you have a lease. That is the legal structure. The lease will necessarily be over a lesser area. All of that is encompassed by present and future rights. You cannot read down future rights so that it applies to rights acquired between 5 May 1970 and the implementation of the 1970 agreement and say that it does not apply to the pathway of rights that Hanwright enjoyed contingently under the State agreement. It is all its future rights. So, his Honour does not explain any of those matters in dealing with 2.2. His Honour then turned, in paragraph 46, to clause 3, and he says this at the top of 2395:

When the parties came in Clause 3 to specify the royalty . . . by reference to . . . “the MBM area” rather than its winning by exercise of the rights –

Now, that seems to be something that is asserted outside the text as if “MBM area” refers only to a physical geographical area. But if you apply the definition it applies to the coupling of the area with the rights that will lead to, before you can extract, the area must be confined.

Now, what his Honour appears to do is to choose, when he gets to 3.1, to apply only part of what his Honour understands to be the definition of “reserves” and the definition of “MBM area”, only that part that is concerned with geography, not that part which is concerned with the rights that confine the geography progressively. There is no logical or textual justification for picking and choosing parts of a definition. The justification seems to be, the ordinary meaning of the label “MBM area” that his Honour goes on to in the next paragraph.

I will defer what I have to say about Chartbrook and deal with it comprehensively under both judgments, if I may, because Justice Meagher embraces the recourse to Chartbrook. But, effectively, his Honour is saying that whilst “MBM area” is defined to include rights, when I get to 3.1, I am going to ignore the rights aspect of the definition and read it as per the ordinary meaning of the phrase, as if it were not defined. In our submission, that is an error and contrary to authority.

Now, his Honour attributes no weight to the reference to royalty – that is paragraph 48. He notes that there is a reference to the rights of Hanwright in clause 1.4, but as I said early, the rights of Hanwright defined in 1.4 are one and the same thing as the rights acquired by MBM. That is the clear effect of 2.3, so there is no point of distinction.

I will defer the 1962 agreement, which is mentioned. It is a distraction in a way, because we are construing the language of the 1970 agreement. Both Justice Macfarlan and Justice Meagher refer to that. I will deal with it again comprehensively at a later point, referable to both judgments. So, for those reasons, in our submission, his Honour’s approach fails to give effect to the definition in 1.4, fails to carry it through into 2.2, and effectively negates a substantial part of the definition of “MBM area” by saying I can disregard the reference to rights that flows from 1.4.

Can I turn then to Justice Meagher. Justice Meagher agrees with the reasons of Justice Macfarlan, but goes on to add some matters. Firstly, by way of overview, what his Honour does is to recognise the hurdles to his conclusion that are presented by clause 1.4. His Honour does that in two places: firstly, in paragraph 95, page 2409. His Honour says:

There is a distinction between the rights to occupy and prospect granted in respect of a . . . reserved area –

His Honour is wrong to confine the concept of temporary reserves insofar as it concerns rights to occupy, whilst ignoring the associated State agreement rights. But, leaving that aside, his Honour says -

The opening words of cl 1.4, to some extent, blur that distinction –

between rights and land. He makes the similar point about the identical language in the 1968 agreement towards the end of paragraph 96. He quotes the 1968 interpretative provision, and then he says:

It may be accepted that this provision, similar in its terms to cl 1.4 –

It is in fact virtually identical –

creates some uncertainty as to whether the reference to Mount Bruce Temporary Reserves is to be understood as including the exploration rights to which the relevant land areas or reserves are subject. That uncertainty does not, however, affect the meaning to be given to “MBM area” -

That is effectively to decline to apply the definition, because on any view of things, 1.4 does more than create uncertainty. It is a specific instruction that all references to reserves include all present and future rights. It cannot be put to one side, and his Honour is wrong to confine it exploration rights. But again, there is no explanation of how 1.4 is to be construed – whether there is any limit to be imposed upon the concept of present and future rights, why it does not apply to 2.2 and the references within 2.2 to “reserves”, and why it does not have an effect on the definition of “MBM area”.

There is no coherent explanation of any of those things, simply an assertion that it does not affect the meaning to be given to “MBM area”. In this respect, Justice Meagher differs from Justice Macfarlan, who accepts that it does affect the definition of “MBM area”, but he is going to disregard it when he gets to clause 3.1 in the use of the defined term there. So, that is a general point about Justice Meagher.

The progression of the argument is similar in that his Honour seems to start out at 95 with a distinction between rights to occupy and geographic areas, the subject of a reservation. That is not a fair reading of clause 1.1 when its whole language, subject matter and context are appreciated. His Honour refers to the MBM “option” in the opening of 96, but attributes no weight to the fact that an option must be referable to rights, not geographic areas.

In 1.4, his Honour refers to two phrases within 1.4 – “blocks and reserves” and “ore bodies located therein”. Justice Macfarlan also noticed those words. That is in 97, I think I may have mistaken the paragraph number. When one looks at 1.4, it is, of course, the definition, and it is going to be applied to other clauses. But the opening words of 1.4 make it clear that you are speaking of reserves, including present and future rights in relation to the above blocks and reserves.

True it is that the reference to the above blocks and reserves has a geographic aspect, but it has a rights aspect as well. So, there is nothing to be drawn from the fact that it refers to the above blocks and reserves in their geographical aspect within the four corners of the definition. Likewise, the words, “ore bodies located therein” – that is referring to the geographical aspect of what is referred to in 1.1. But it is not limiting the effect of 1.4 so that it does not establish a composite definition of “reserves including rights”. It is just acknowledging that there is a geographic aspect to it, and when they are talking about ore body extensions, it is a geographic aspect where those ore bodies are going to lie beyond the original boundaries. So those words do not lead to a conclusion that 1.4 does not establish a composite definition relating to reserves including rights. So that has dealt with 97.

Now, the crux of his Honour’s reasoning is on the next page. His Honour notices that there is a period until the agreement takes effect – government approval and implementation in 99. So, quite plainly, future rights would include rights arising in that period. But there is no reason to limit future rights so that it excludes the contingent rights that Hanwright has and will enjoy if it satisfies various conditions under the State agreement. “Future rights” is not limited in that way.

Turning to clause 2.2, this is a paragraph that contains a number of areas. His Honour starts with a conclusionary proposition, but it maintains the distinction between rights and areas. Well, in fact, that is not the starting point. The starting point is that references to reserves combine areas with rights as a composite defined concept. Far from maintaining the distinction, what has gone before establishes a definition where reserves does not mean purely geographical areas. It includes present and future rights. Then, his Honour proceeds to go to matters of construction, rather than assertion. Clause 2.2:

provides that the Mount Bruce Temporary Reserves should be divided so that in respect of the reserves (meaning areas) -

Now, that cannot be right. “Reserves” does not mean purely physical areas. Clause 1.4 demands the exact opposite of that. It does not mean areas. It includes all present and future rights. His Honour is not applying the definition as he should to the reference to “reserves” and there does not seem to be any foundation for saying reserves means areas. His Honour then goes on to refer to the “reference to the ‘entire rights’”, and it is quite clear that what his Honour is doing is applying 1.4 effectively to the expression “entire rights”. His Honour is right that the subject of the division is the present and future rights as defined in 1.4, but textually, you only arrive at that – you can only arrive at that conclusion – by applying, as instructed, the definition in 1.4 to the word “reserves”.

If you apply it to the word “reserves”, then it controls the definition of “MBM area”. So “MBM area” means the combination of land and present and future rights, exactly that which is transferred to MBM. You have complete symmetry if you apply the definition. So, with respect to his Honour, he has not applied the definition to “reserves” as commanded. He has applied it to the reference to “entire rights”, wrongly.

That seems to be done to achieve the consequence that all present and future rights transferred are exactly in accordance with the language of 1.4, but the definition does not – but 1.4 and its definition does not bear upon the meaning of the word or the phrase “MBM area” as defined. His Honour refers to the usage of “Hanwright area” elsewhere, as I answered one of your Honours earlier – that is entirely neutral, because those other expressions can be read as “from the exercise of Hanwright’s rights, as per clause 1.4”.

BELL J: Would it make sense to read clause 6 in that way?

MR YOUNG: Yes, because you only win ore – you only extract ore – from the exercise of rights under a mining lease. You cannot do it otherwise. So, not only does it make sense, it matches the legal fabric that we are dealing with. So, when Hanwright obtains ore, of course extracting ore is a physical process, as Justice Kiefel pointed out to me. But legally, you can only extract ore by exercising rights under a mineral lease.

BELL J: Accepting that, the function of clause 6 is the matter I am directing your attention to.

MR YOUNG: Yes.

BELL J: The sense of it.

MR YOUNG: But the sense of clause 6 is that we are speaking of iron ore from the Hanwright area. That can easily and sensibly be read as iron ore from the exercise of all of Hanwright’s present and future rights in respect of the area. There is no difficulty in that. Indeed, as I will show, that was the parties’ accustomed usage. They spoke about ore from mineral titles in another agreement of theirs. So it is a natural usage of language. There is nothing exceptional about it. So those other references are neutral, so far as things are concerned.

Otherwise, Justice Meagher refers to two things: one, the royalty provision of the 1962 agreement, which I will deal with separately as I said once, for both judgments, and then Chartbrook. Chartbrook is used to support the proposition that you can use the label itself to control the definition of “MBM area”, which is contrary to authority in this Court in the case of this kind of definition. So for those reasons, we contend that the Court of Appeal’s analysis is erroneous.

There is one matter I should add to, that I think I responded to earlier. One of your Honours put to me a question about 2.2, which was that the effect of reading in the definition as per 1.4 to the words “temporary reserves” was that the last words resulted in an element of repetition. In other words, “temporary reserves” means all present – or includes all present and future rights, et cetera. So the last words of clause 2.2 state:

M.B.M. acquires the entire rights thereto.

Now, of course, if the definition was written out in full in lieu of the reference to “temporary reserves”, those last words could have been, “MBM acquires those rights entirely”. That would be perfect grammar. The fact that the use of the definition means that MBM acquires the entire rights thereto, referring to temporary reserves in its defined, composite sense of the temporary reserves including all present and future rights is no reason for declining to give effect to the definition.

There is a long list of cases saying that it is often the case that when you have a definition to incorporate into a provision or an insurance contract or the like, as in Halford, or when you have to incorporate words from another document there is often some element of awkwardness in the language. The cases repeatedly say that any of those difficulties are simply to be resolved. It does not mean that you do not apply the definition, or you do not use the incorporated term.

A case like that is Tovir Investments on our list, but there are numerous references to cases in the passages in Lewison that we have given the Court. We would say it makes perfect sense to say that temporary reserves means what was held by Hanwright as temporary reserves, including all present and future rights, et cetera. MBM acquires the entire rights thereto – there is no lack of meaning or sense in it. Now, can I turn to 3.1, and just make one other point before I deal with the aspects of the Court’s reasoning that I have deferred for the moment.

FRENCH CJ: Just on the question of the use of the definitional label itself – I think you referred to Shin Kobe because they concerned with statutory construction, are they not.

MR YOUNG: Yes, I was going to come to that right now - well, Chartbrook was not statutory construction. The Australian cases in the High Court are, yes. The New South Wales Court of Appeal cases are a mix of statute and contract. But we submit there is no reason to draw a difference in approach, for reasons I will come to.

FRENCH CJ: All right.

MR YOUNG: I just wanted to make one other point before I left matters of pure construction, your Honour – before I go to Chartbrook. Clause 3.1 says:

Ore won by M.B.M. from the M.B.M. area –

That language involves no difficulty. It is commonplace to speak of ore being won from the exercise of mining rights from the exercise of rights under a lease. The effect of our definition is “from the MBM area” means from the exercise of the rights acquired under 2.2 in their expanded 1.4 meaning. There is no difficulty in that language and, indeed, it is the language the parties used in their royalty provision in 1959. You can only extract the ore if you get the lease that is referred to by the parties in 2.3.

Now, let me turn to Chartbrook, your Honour the Chief Justice. The first thing to note is that the definition in 1.4 that governs the definition of “MBM area” is the same kind of special and expanded definition that was the subject of the decisions in the High Court. In other words, “reserves” is given a special meaning by 1.4, not its natural meaning. It is given an expanded meaning, so as to include present and future rights of Hanwright, including extensions, et cetera.

Now, where a term is given a special and expanded meaning, it is circular and quite illogical to read down the effect of the plain words of the definition by reference to the label. There is nothing inapposite about talking about rights relating to land by reference to a label, “X land”, because the definition will make it clear the respects in which you have expanded the ordinary meaning of the label. That is the kind of definition in Wacal, Shin Kobe Cases. Can I just make that good very quickly by referring to those two High Court authorities? Wacal, tab 12, firstly – these were statutory cases, as I said.

FRENCH CJ: Yes.

MR YOUNG: Tab 12, 140 CLR, Wacal Developments concerned a provision of the Property Law Act (Qld) that defined “instalment contract” and it defined it in a way that went beyond the ordinary meaning of “instalment contract”. It embraced not just instalments, but any payments to the vendor, including interest payments. The argument was that you should read down the plain words of the definition by reference to the label “instalment contract” so as to exclude interest payments and limit it to instalments.

The High Court rejected that. Justice Gibbs is the best discussion, page 506, about point 6 on the page. The definition and the argument are identified. His Honour rejects the attempt to read down the normal language of the definition. At 507 at about point 4 after the word “First”, instalment should “colour the meaning”, and his Honour rejected it out of hand:

it is impermissible to construe a definition by reference to the term defined. The expression is given by the statute a special meaning which must be applied whether or not it accords with the ordinary meaning.

FRENCH CJ: But if there are, again, constructional choices presented in a contractual setting, one of which accords with the ordinary meaning of the label and the other not, can the ordinary meaning of the label inform the constructional choice that you make in relation to the definition itself?

MR YOUNG: No.

FRENCH CJ: That is not circularity.

MR YOUNG: This is dealing with a case where the ordinary meaning of the definition leads to one result and the label in its ordinary meaning suggests a different concept. In that kind of case, our respectful answer, your Honour, is no, you cannot use the ordinary meaning of the label to defeat or confine the ordinary meaning of the body of the definition.

FRENCH CJ: But sometimes we have things which have two ordinary meanings, or two possible usages, both of which are open.

MR YOUNG: Well here, your Honour, that situation does not arise because - - -

FRENCH CJ: Well, you say because “temporary reserves” is confined by reference to its statutory origins and the contractual rights attaching to it.

MR YOUNG: No, not only that, your Honour. We say that the body of the definition found in 1.4 makes it plain beyond argument that the concept of “reserves” includes all present and future rights which embraces the things your Honour just mentioned. So the proposition is that that being made plain by the body of the definition - - -

FRENCH CJ: All right, but that is a plain meaning argument. In other words, there is no constructional choice which can be informed by the use of the label.

MR YOUNG: Yes.

FRENCH CJ: I put to you a different premise, that there is a constructional choice and the label may inform it.

MR YOUNG: Well, it would depend but let me explain why, your Honour, because if we are dealing with a special expanded meaning expressed in the body of the definition and there are words that have to be construed within the body of the definition, but nonetheless it is clear that it is a special expanded meaning, there would still be an element of circularity in trying to use the ordinary meaning of the label to confine or control what is, on any view of things, a special and expanded meaning even if within the body of that definition there are some constructional issues.

Can I go to the other case that I wanted to refer to which is Shin Kobe, your Honour, tab 9. This is another statutory case. It was a definition of a proprietary maritime claim. It was defined in the way set out at page 415. The argument was that that was a special wider definition but nonetheless you should read down the effect of the body of the definition according to long-established Admiralty law understandings about what a proprietary maritime claim was, and the High Court rejected that at 419, last complete paragraph at page 419. We say this case falls into that category.

The Tovir Case we gave the Court – Tovir is at tab 11. It is a New South Wales Court of Appeal decision. In paragraph 20 that case recognised the distinction that it might be one thing as in Chartbrook where you have a term that is simply a distillation of the ordinary meaning to use the label, but where there is a special expanded meaning going beyond the ordinary meaning of the words that is impermissible. We submit that this case falls squarely into the category of definition discussed in Wacal and Shin Kobe as a special expanded definition where the use of the label would be to defeat the intended expansion.

Chartbrook - a contract case, that was simply a definition of the ordinary meaning of the expression “total land value” and “minimum guaranteed value” in the context of the contract and all Lord Hoffmann said was that in such cases where you are distilling the ordinary meaning of a term it is permissible to use the label.

There are no cases, so far as we can see, where it has ever been suggested that a different approach should be adopted to the construction of the definition according to whether it comes from a contract or a statute. If the body of the definition contains words that have an ordinary meaning as a matter of construction and it is a special expanded definition, the proper construction of the body of the definition must govern and cannot be controlled by the label it has chosen.

Now, this is an issue that does crop up quite frequently. The judgments mentioned – and I will refer to a list of further matters in support of our construction – first, the outcome we contend for is the product of a textual reading of the agreement faithfully to the text, and that outcome provides a sensible commercial operation in this respect. Royalty was granted in consideration for the transfer of that bundle of rights, so it makes commercial sense for the royalty to be payable on the exploitation of the rights that were required. It makes perfect sense. Indeed, that is the ordinary conception of a royalty. To quote or paraphrase the High Court in Tape Manufacturers, it is of the essence of a royalty that the payments are made in respect of the exercise of a right granted on each occasion that the right is exercised.

The third matter is this. The parties made a conscious choice not to define “MBM area” by reference to a purely physical area. They could easily have done that by including the definition in clause 1.1. They did not. They made the definition of “MBM area” depend on the definition of what rights were held by Hanwright in the expanded sense and what rights were being acquired. That choice should be respected.

Fourthly, the agreement is plain on its face from 2.3 and 4 that the parties objectively contemplated and assumed and made it the footing of their bargain that the area would reduce, the rest of the rights would expire, they would be left with a mineral lease and that is the passage that immediately precedes 3.1. That mineral lease would be the source of their rights to extract ore, the agreements would be amended. They anticipated a single mineral lease and they agreed to share it 25/75. So the immediate context for 3.1 is that the extraction of ore would occur under a lease produced by the State agreement in respect of a more confined area and the balance of the rights would expire.

Now, I need very briefly to mention the background agreements. There are two agreements remotely in the background: the 1959 agreement and the 1962 agreement. The 1959 agreement was an option agreement to acquire mining titles. It is at volume 2, 668. This is the option agreement that led to the 1962 agreement. This is background, we accept, extrinsic background, but it shows the parties accustomed use of language in a way.

One of the criticisms of our construction is that the result is to speak about extracting ore from the exercise of mining rights, or from mining rights, and it is said that that is an awkward use of language that would not have been intended. Well, that was the natural and accustomed use of the parties in the 1959 agreement. As consideration for the grant of the option over the mining titles in question a royalty was granted by clause 11 at page 675, and a royalty was payable, and I quote at the bottom of 675:

in respect of all minerals produced by the Purchaser from that Mining Title –

So there is nothing unaccustomed or unnatural in speaking about ore won or produced from mining rights for a mining title. The other thing to notice about this agreement is clause 15 has phraseology that is similar to something our opponents rely upon from the incorporated 24(iii). Clause 15:

in respect of which an obligation to pay any amount has arisen or may arise –

That is similar to the language found in clause 24(iii) of the 1962 agreement. We say it is neutral because it begs the question. It does not define when an obligation to pay royalty arises. It simply draws attention to the circumstances in which it may arise. So that is the 1959 agreement, an option over certain mining titles the consideration being a royalty.

The 1962 agreement was the product of that option agreement. It is found at page 708 of the same volume. Both judges in the Court of Appeal referred to the royalty provision here. We made the point in our written submissions that the 1970 agreement is not to be construed by substituting the different language of the royalty provision of the 1962 agreement which is obvious enough.

If it is to be referred to it is only as extrinsic background, but we would say it is hard to see how it can be because there is no evidence of any shared interpretation of the royalty provisions in the 1962 agreement that the parties held and mutually agreed upon prior to the 1970 agreement. So arguing about what interpretation you place on these royalty provisions is probably beside the point. The 1962 agreement royalty provisions were raised and relied upon in the first instance by Hancock at trial.

We responded on making the two points we make now. It is not relevant, but if it is relevant there is a different construction of the royalty provisions than the one you contend for. Can I just identify what the royalty provision is and then I will move on. The royalty provision is in clause 9. It uses a defined term, royalties on:

iron ore produced by the Purchaser . . . from the Temporary Reserve land –

That is on page 713, if I am moving too quickly for the Court.

FRENCH CJ: We are up with you, I think.

MR YOUNG: That is a defined term. It is defined in recital (g), and there is an issue of construction under this agreement which uses very different language about different areas than we are concerned with, but recital (g) is at 109 at the foot. It says:

all the right title and interest of the Vendors and each of them in and to and in respect of the said Temporary Reserves and the land comprised therein (hereinafter called “the Temporary Reserve land”)

Then it goes on importantly –

and all rights to prospect or mine granted thereby or flowing therefrom.

The rights referred to at the end “granted thereby or flowing therefrom” cannot flow from pure geographic areas, plainly enough. They can only flow from rights. So the last phrase qualifies the last preceding noun “Temporary Reserve land”, but it only makes sense if “Temporary Reserve Land” is a definition of everything that precedes “all the right title and interest . . . in and to” (a) and (b), “Temporary Reserves and the land”. So what is being defined as “temporary reserves” is:

all the right title and interest . . . in and to –

the rights that were held under the temporary reserves and the land comprised therein. It is a composite concept. The royalty is on the composite concept of rights and land. There are two other royalty provisions that have similar effect. There is clause 10 at page 715:

“the Temporary Reserve land” shall be deemed to include in addition to the land . . . described in the Third Schedule –

shaded blue, but only if the purchaser obtains titles before a certain date. So the subject matter of the royalty is not land per se. It is land if the purchaser acquires titles by a certain date. If it was land alone, why did the titles have to be acquired by a certain date? It demonstrates that the subject matter of the royalty is the combination of the two. We would make the same observation about clause 14. Here it is perhaps even clearer that this is a royalty on deposits:

iron ore produced . . . from such of those deposits in respect of which rights to mine are obtained –

The words I am reading are at 718 at about point 4 on the page. So the short point is that if this remote background about different areas and different language is to be referred to, and we say it is not particularly helpful, but if it is it shows that the parties had a usage where they were speaking of composite concepts of land and rights.

I have explained the relevance of the 1968 royalty agreement. The way in which the definitions apply to the royalty and transfer provisions of the 1968 agreement which the 1970 agreement replaced is completely consistent with our submissions and inconsistent with our learned friend’s submissions.

The notice of contention is the next matter I will mention. It arises because Wright and Hancock contend that if both appeals are successful they would in those circumstances seek a variation of the Court of Appeal’s orders to provide for substituted and partial royalties on ore body extensions alone. That is how this arises. Now, we formalised the point with a notice of contention but at the same time we said they should have raised it as a ground of appeal because they are seeking varied orders, but it does not matter who raises it. We are not taking any technical point.

What we are talking about can I illustrate by reference to the trial judge’s judgment very quickly? His Honour has a diagram at page 2328 of volume 5, paragraph 138. The Court sees the two parallelograms that adjoin each other and the outer boundary of those two rectangular blocks is the Channar lease. The ore body extensions are the ochre coloured pits. They are not within sections 18 and 19 that came from MBM. They are beyond that, but they are within the original expired TRs.

So the argument is that even if we are successful on the MBM area point, there is a claim to royalties on those pits on the grounds that they are extensions within the meaning of 1.4 that somehow feeds its way unexplained into the definition of “MBM area”, and this is all on the assumption that MBM area is the land plus rights definition.

The simple point we make is that the only extensions referred to in 1.4 are extensions beyond the original boundaries of the TRs. These two pits in ochre are within the original area. There is no basis for a royalty on the basis found by the trial judge in these extension areas. The trial judge’s findings, which we say are illogical, are at 144 to 149, firstly, and then at 169. His Honour produced contradictory results - - -

FRENCH CJ: Sorry, do you have a page number in the appeal book?

MR YOUNG: I am sorry, 2328.

FRENCH CJ: Thank you.

MR YOUNG: It is the same page, your Honour, just below the diagram.

FRENCH CJ: I see, yes.

MR YOUNG: His Honour in 147 read 1.4 to say the physical area of the extensions is outside the area of the block or reserve first mentioned. That should follow that it is outside the original TRs and therefore cannot be the basis of any claim. His Honour says that works congruently with 3.1. But then his Honour says a different result or a question would remain open if “MBM area” has a meaning other than the rights meaning that we contend for.

In our submission, that does not follow. We are talking about the construction of 1.4. That is simply referring to extensions beyond the original area of the TRs and these are not qualifying extensions. Where his Honour has got confused is that he has substituted into 1.4 not a reference to the above blocks or reserves but a reference to the defined term “MBM area”. On our interpretation, if we are right about the interpretation of “MBM area”, there is no outstanding question. These extensions are irrelevant because they are not extensions within the meaning of 1.4.

What his Honour does is apparent in 145, I am reminded. His Honour substitutes into 1.4 itself the definition of “MBM area” and so his Honour says the “ore body extensions” language produces a different outcome. If we fail on “MBM area” there is no basis for a claim, but if we succeed on “MBM area” then there is a basis for saying they get royalty on ore body extensions, which is the conclusion of 169. So, in our submission, his Honour’s reasoning simply does not follow. I want to move then to the second appeal, if I may, unless your Honours have any questions remaining about the MBM area point.

FRENCH CJ: I think we have heard as much as we want to hear about it at the moment. That is no disrespect to your argument.

MR YOUNG: The substance or the subject matter of the second appeal is quite confined. It concerns a very short passage incorporated from clause 24(iii) of the 1962 agreement. The incorporation arises from clause 3.1 of the 1970 agreement. The 1970 agreement refers to – or first it stipulates the conditions for a royalty, and then it refers to payment on the same conditions as apply to the existing agreement and it was common ground that that was a reference to the 1962 agreement as the existing agreement.

The same conditions, relevantly, were only concerned with one of those conditions or words from clause 24(iii) of the 1962 agreement which your Honours will now have closed – it may be handy to have that open beside one. It is at page 726, the relevant passage, of volume 2. I ask the Court to open that because I will by reference to that indicate what we say is relevantly incorporated.

It is subclause (iii), the definitional clause under the 1962 agreement. It expands the meaning of the word “purchaser”. In our submission, the incorporated words do not include the parenthetical reference to clause 19. Clause 19 is an operative provision of the 1962 agreement. It finds no counterpart in the 1970 agreement and there is no basis to say it is incorporated. So we say what is incorporated is this. We read the purchaser as if it said MBM:

[MBM] shall . . . include its successors and assigns and all persons or corporations deriving title through or under [MBM] to any areas of land in respect of which an obligation to pay any amount has arisen or may arise pursuant to Clause –

3.1. So they are the relevant words that are incorporated and all of the cases say in dealing with incorporation you make minor adjustments to the language to make it fit the clause and the context into which it is being incorporated. That raises the deriving title through or under point in respect of Channar A. The question only relates to Channar A because we are paying royalties on Channar B. The question is whether the Channar joint venture derived title through or under MBM to any areas of land in respect of which an obligation to pay royalty has arisen.

In our submission, the issue turns on the ordinary and natural meaning of the phrase, “deriving title through or under MBM”, read in the context of these words as incorporated. The cases make it clear that when you are dealing with the incorporation of a passage, you read it into the contract that you are concerned with, and you interpret it as incorporated in the context of here it bears within the 1970 agreement. You do not go off and construe the 1962 agreement first of all. We have cited the authorities and given the references to the text, Lewison. On that issue, we are on the same ground as Mr Archibald, I believe.

Now, the issue arises because Channar A was an area in respect of which all rights expired in 1974. There was a gap, and then HamEx made a fresh application to the government for an ordinary right of occupancy under the 1904 Act, not associated with any State agreement. It acquired certain titles, certain rights of occupancy. Then those rights of occupancy led to the relevant rights of extraction over Channar A.

The context for construing the incorporated words is that that I have given earlier. It includes the range of associated contractual rights under the Mining Act, so when it refers to deriving title, that is not to be read as if we are talking about realty. In the context of the 1970 agreement, that is to be read as a reference to rights in relation to mining, rights of occupancy, rights under the State agreement to obtain a lease, et cetera. That is what the Court of Appeal concluded at paragraph 57, and it is the only sensible interpretation.

FRENCH CJ: Well, it is a relational term, “through or under”, though it can expand or contract according to context in terms of categories or situations - - -

MR YOUNG: Well, within limits, your Honour.

FRENCH CJ: Which it attaches – the limits are context, I suppose, and purpose.

MR YOUNG: No, more than that – the whole phrase is “deriving title through or under”. So the concept of derivation of title itself imposes limits on the meaning you give to the phrase “through or under”. You cannot interpret “through or under” without regard to the fact we are talking about derivation of title through or under.

FRENCH CJ: I was not suggesting that, I was talking about the character of the term.

MR YOUNG: No, I appreciate that, your Honour, but it is a point we want to make clear.

FRENCH CJ: Yes.

KEANE J: So, you would say.....if it just said acquired from?

MR YOUNG: No, no. We read it more widely than that. We read it as requiring a derivation of title, and it can be - - -

KEANE J: Well, acquired directly or indirectly from.

MR YOUNG: Yes, well – acquire is perhaps too tight, your Honour. We include the kind of situation where one party’s rights lead to another person’s rights without there being a contract of sale or transfer.

KEANE J: Well, if it acted as an agent to facilitate the derivation.

MR YOUNG: No, that would not be a derivation from the agent. That would be a derivation from the party who previously held the relevant title. There would be a derivation through or under that prior title, but not a derivation simply because somebody acted as agent. But that, in our submission, is the ordinary meaning of the word “derived”, or the words “derived title through or under” because as we have said, if you look at the concept of derivation of something, a natural and ordinary meaning is that you trace it to a source or origin.

So, if you derive title, that title is to be traced to a source or origin. You derive title through or under MBM if the title in question can be traced directly or indirectly to a title that MBM held at some stage in the past. It does not have to be direct in the sense of a sale or transfer transaction.

KIEFEL J: Does your argument depend, essentially, upon what might be referred to as the gap in chain of title in between 1974 and 1978?

MR YOUNG: Yes, but not entirely, in this added respect that the rights that HamEx acquired that were the rights that led to the relevant part of the lease, they were rights that HamEx acquired from the government, in competition with anyone else who wanted to put forward an application for governance, so - - -

KIEFEL J: But that – what I was really trying to ask you about was, once Hamersley – which has a corporate connection with MBM – once it acquires those rights, you do not challenge the chain of title that runs down then to the mineral lease 265SA.

MR YOUNG: No, no. But, we would say that for this part of the lease, the relevant title has derived from HamEx’s – or derived through or under HamEx – because it traces to a source being the rights that HamEx freshly acquired in 1978 and 1979 from the government. I mean, if it was somebody other than HamEx, remove the corporate group, if somebody else came in and acquired rights freshly from the government it would not be said that those rights derived from MBM’s rights, because MBM once held expired rights in respect of the same area.

KIEFEL J: When you say expired rights, in 1974, no rights – when mineral lease 252SA was granted, there were no rights granted with respect to that part of temporary reserves 49658 and 668, which we referred to as Channar A.

MR YOUNG: Correct.

KIEFEL J: Whose decision was that?

MR YOUNG: It was the effect of the State agreement that if you made an application for a mineral lease, the consequence was that - - -

KIEFEL J: My point is – the question is – MBM applied for a mineral lease which excluded those areas.

MR YOUNG: Yes.

KIEFEL J: That it had acquired from Hanwright.

MR YOUNG: Yes, but the rights it acquired originally – the rights of occupancy, with the associated State agreement rights – was always, from its inception, a limited right. It was a right to 12 months occupancy.

NETTLE J: If there had been no gap, and HamEx had acquired those new rights the day after the old ones expired, what then would you say?

MR YOUNG: Exactly the same thing.

NETTLE J: Exactly the same.

MR YOUNG: Just as we would say if Dampier acquired rights the next day, those rights would not track to MBM.

NETTLE J: So, you are in no stronger position by reason of the four-year gap than you would be if it was the next day?

MR YOUNG: Well, save for this, your Honour, that the four-year gap represents a period where this land was unalienated Crown land available for competition between all comers.

NETTLE J: Yes, I understand that.

MR YOUNG: As the facts indicate. So this land could have gone anywhere.

NETTLE J: Does that make it a stronger case for you than if it were the next day?

MR YOUNG: It may, your Honour, but we would give the same answer the next day. But it does perhaps bear on the construction, because the recognition of the fact that the land on expiry of the original limited defeasible rights was available to all comers produces, on our construction, not only something that accords with the natural meaning of the words, but it is a sensible interpretation. That land was open to all comers. Our rights had gone. In those circumstances, why should you give a meaning to “through or under” that captures an independent transaction that occurs some time later?

Now, I did – I will not go to the case, but can I mention – I will withdraw that, I will postpone any references to cases. I did want to refer to the concluding words of 24(iii) that I foreshadowed a while back. It goes on to say:

to any areas of land in respect of which an obligation to pay any amount –

of royalty has arisen. They do not assist in the interpretative issue we have, because as I have said, that simply begs the question about what are the circumstances in respect of which an obligation to pay royalty may arise, and what combination of rights and areas is necessary.

Can I go to the Court of Appeal’s reasons, if I may, on this point? The relevant passages are in the judgment of Justice Macfarlan, commencing at paragraph 55. His Honour considered Tanning – and I will mention something about Tanning shortly – the issue turns on “text and context”. Paragraph 56, his Honour concluded that the words emphasise the chain of title:

derivation of title “through or under” in my view invokes –

a chain of title. His Honour explains that title cannot mean realty, and you do not need a transfer transaction, you can have a relinquishment of rights, and a taking up of rights that are connected. As the State agreement indicates, most of these of rights of occupancy – effectively, a transfer was effected by a surrender, accompanied by a re-grant to the other party. That is evident on the face of all of the State agreements. His Honour goes on to say that there is no “unbroken chain of ‘title’” that can be traced back to any title of MBM in paragraph 60 - we say quite accurately, for reasons given. His Honour then points out that there was the gap that we have discussed in paragraph 63, and it was not suggested - - -

FRENCH CJ: Well, is this saying anything different from your propositions?

MR YOUNG: No, I do not think so, your Honour. He makes the points that I made in answer to Justice Nettle.

FRENCH CJ: All right.

MR YOUNG: Now, there is one aspect I want to deal with. In paragraph 63, Justice Macfarlan goes on to not only refer to the absence of any nexus, but to refer to the fact that the evidence does not indicate there was any transaction between MBM and Hamersley. Our opponents’ submissions proceed on the footing that Justice Macfarlan was insisting that in every case there must be a transaction to give rise to a derivation of title through or under. That is not what his Honour was saying. His Honour was saying there is no unbroken chain of title for other reasons. There was a gap, there was no causal nexus. Then, by way of additional observation, his Honour simply observed not only was there no evidence at all, there was no evidence of the transaction.

Now, the main piece of the trial judge’s finding that there was a derivation title through or under was attributed to the surrender by MBM of the Channar B land. That is dealt with in paragraph 66. What occurred was that the other part of the Channar lease occupies what were formerly sections 18 and 19, and royalty is paid on that. The proposition was that although those sections did not concern the disputed Channar A, there was a sufficient derivation of title through or under because MBM surrendered adjacent areas on which royalty is paid.

That is to point to nothing more than a “but for” connection. As Justice Macfarlan points out, there is no evidence to support the proposition that the lease would not have gone ahead in the absence of that “but for” surrender. The point his Honour makes is that to say that MBM surrendered other areas does not support a conclusion that there is a derivation of title to a different area through or under MBM and in our submission that is correct.

KIEFEL J: Mr Young, if one accepts that – for the sake of this argument – if one accepts that the Channar A land lay within the MBM area at the time of the 1970 agreement, is clause 3.1 saying no more than that if the entity which ultimately takes the ore can be traced to MBM, a royalty is payable?

MR YOUNG: No.

KIEFEL J: Because if that is a construction which is available, it would not matter if there was a gap in the chain of title, would it?

MR YOUNG: Well, it turns, your Honour, on the meaning of the words - - -

KIEFEL J: If that construction - - -

MR YOUNG: - - - “deriving title through or under”, but to take your Honour’s point, for the Channar A area, even assuming we have lost on the MBM area point, it still has to be ore won by MBM. It is not being won by MBM, it is being won by the Chinese Hamersley joint venture, the Channar joint venture. So it will only be won by MBM, and therefore the other condition will only be satisfied if it can be said that the Channar joint venture falls within the concept of a person who derived title to Channar B through or under MBM.

KIEFEL J: I think what I was trying to put to you was the possible construction that deriving or obtaining the rights to take the ore can be traced in a relational sense to MBM - the entity that takes the ore, that gains the rights to take the ore and does take the ore can be traced in a relational sense to MBM.

MR YOUNG: Well, with respect, your Honour, we do not accept that, and I am not sure I understand what your Honour means by a relational sense - - -

KIEFEL J: Well, I knew you would not, but I am just curious why.

MR YOUNG: - - - because the entity extracting the ore is a Hamersley/Chinese joint venture.

KIEFEL J: Yes.

MR YOUNG: The rights to Channar - - -

KIEFEL J: MBM and Hamersley Iron are two of the entities.

MR YOUNG: Yes, but his Honour at trial rejected the proposition there was any kind of group obligation, and that was not the subject of any appeal. So, Hamersley acquired a fresh set of occupancy rights, and no more in 1978 and 1979. So the rights that the joint venture has can trace to Hamersley’s rights, but there is no sense in which they can trace to MBM rights, because those rights were completely lost in respect of this area in 1974.

Now, the only way in which it is said that there is a derivation is because MBM facilitated the grant of the lease because it gave up a different area that found its way into the lease. That is the “but for” connection, but that is not a derivation of title. The only other basis is said to be that there is some kind of sweeping historical continuity in that MBM and Hamersley are part of the same group. But as we have said, there is no evidentiary basis for that proposition, and it is remote from the natural requirements the words “deriving title through or under”.

Everything does come down to construing the words “deriving title through or under” as a complete phrase, not just part of it, in the context in which it is read into the 1970 agreement. Our submission makes sure that the party deriving title can trace its title to the bundle of rights that we acquired under the 1970 agreement and if it cannot be - - -

FRENCH CJ: I suppose what you have going for you, in a sense, is the argument that one might have expected an expansive instruction of that obligation to be reflected in more expansive drafting.

MR YOUNG: Well, it is – the words used, your Honour, are quite technical words – “deriving title through or under”. Our learned friends rely upon arbitration cases, which speak about somebody claiming through or under. With respect, that is a very different context than deriving title through or under, but even there, the High Court in Tanning observed that the words “through or under” connote a derivation of and by themselves. I will not take the time to go to the case, but can I just read out the relevant part of Tanning. It is at page 342 of 169 CLR, and the passage is:

the prepositions “through” and “under” convey the notion of a derivative cause of action . . . that is to say, a cause of action . . . derived from the –

other party’s cause of action. The issue in the case was whether a liquidator, mounting a defence, I think it was, was claiming through or under the company for which he was appointed. The High Court said, well, if he is asserting a defence or a cause of action that was the company’s defence or cause of action, the liquidator is asserting the claim through or under because it derives from the company’s claim, it can be traced to it, but not otherwise, is what the High Court said. We have stronger and more technical words “deriving title through or under”. Unless I can assist the Court further, I think I have made all the points I need to.

FRENCH CJ: Thank you, Mr Young. Yes, Mr Myers.

MR MYERS: Thank you, your Honours. I note oral argument in both appeals. Would your Honours be good enough to go to volume 3 to the 5 May 1970 agreement? I wish to deal first with this question of MBM area. Would your Honours look on page 1275 at clause 2.2 - it is the starting point. Leave aside the consideration:

Hanwright hereby agrees that its Mount Bruce Temporary Reserves –

Your Honours will recall that “Mount Bruce Temporary Reserves” are defined in clause 1.1 –

should be divided between Hanwright and M.B.M. so that in respect of temporary reserves –

Some are numbered –

(hereinafter called “Hanwright area”) the entire rights thereto are restored to Hanwright –

So there is a distinction immediately made between the temporary reserves and the rights to them. The reference to temporary reserves is prima facie a reference to something other than rights and it is naturally, as your Honour the Chief Justice said in argument this morning if I may adopt it, the common understanding that temporary reserves is a reference to the land over which the right to occupy exists. Then other temporary reserves and in respect of temporary reserves some numbers are set out –

(together hereinafter called “M.B.M. area”), M.B.M. acquires the entire rights thereto.

So the natural meaning of that clause, which is the fulcrum of the question concerning the meaning of “MBM area” is that “MBM area” is a reference to the land designated by the temporary reserves. There is a distinction between the land and the rights and it is a distinction that is made all the time by lawyers and ordinary people - when you speak of Blackacre are you talking of a parcel of land or a bundle or rights? If you talk of a leasehold, are you talking of a bundle of rights, or the parcel of land to which the bundle of rights relate? Could I then go back to the preamble for 1.1:

Hanwright hold Temporary Reserves in respect of areas indicated on the attached map . . . as the following numbered blocks –

Then there is a reference to the numbered so-called temporary reserves –

these blocks (hereinafter referred to as “Mount Bruce Temporary Reserves”) -

So, again, it is very clear that the reference to the temporary reserves is a reference to an area of land. If one goes to the annexure, Appendix A, on page 1284, the blocks are designated and they are designated as areas of land, part of the earth surface in the Pilbara region of Western Australia. I will leave aside 1.4 for the moment, but I will certainly grapple with it very soon. So that what is occurring is a division of rights and it is occurring with reference to a physical area.

The division of rights is, to put it bluntly, I suppose, to get Hanwright off certain areas and to give the Hamersley companies a free run of those areas - putting it colloquially, but that is what it was doing. The cost of that, from the point of view of the Hamersley companies – there may be other considerations, my learned friend referred to a lot of considerations – but the cost of it is that in relation to ore won by MBM from the MBM area, a sum of money is payable calculated per time. That is aptly described as a royalty, as the heading of clause 3 indicates.

So that so far as one of the basic objects of this deal is concerned, the deal is conditioned on certain rights being surrendered by Hanwright and the Hamersley companies having the right to step into the area in relation to which the rights are surrendered. That is something to do with rights. But when one looks at ore won from an area, it is plainly in the territory of a physical activity. Winning ore consists of digging the ore up, and reducing it to possession. That is something that happens in ordinary language as a result of a physical activity undertaken in relation to a parcel of land.

Could I invite the Court now just to look at how this expression “MBM area”, and the similar expression “Hanwright area”, are dealt with through the agreement. First of all, in 3.2, the words of 3.1 are replicated:

Ore won by M.B.M. from the M.B.M. area –

Then, if one goes across on page 1277 to clause 6, there is a reference to:

the sale of iron ore from the Hanwright area –

That is not language about exercise of rights. Then, if one goes to 6.12 “Blending of Ore”:

This option is conditional upon the Japanese Steel Mills agreeing to accept ore from the Hanwright area blended with ore produced by Hamersley from its areas.

Then, clause 9, there is a reference to:

ore mined from the Hanwright area.

Then, clause 12, on page 1283, which my friend did not take the Court to, it says that:

Subject to clause 10 above this agreement is intended to be binding and enforceable . . . and contains the entire agreement between the parties in relation to Mount Bruce temporary reserves –

There is no capital “T” and capital “R” there, but this document bears many of the characteristics of a homemade agreement than one carefully crafted in a solicitor’s office - and so on:

providing however that the granting of approvals by the Minister will be deemed to be notice of intention to proceed as required by clause 2 of the January 1968 agreement but Hamersley agrees to continue the loan of $3.2 million to Hanwright until the commencement of mining of the M.B.M. area –

That usage of “MBM area”, in my respectful submission, is quite inconsistent with the case that has been advanced. The case that has been advanced today before your Honours by the appellants is that the parties to the 1970 agreement intended to provide that royalty payments would be made by reference to the amount of iron ore won by, I would suggest, not from, the exercise of certain rights. They must concede, apparently, that they did this by agreeing in writing that the royalty will be paid on/or won from the MBM area. It is a very bold construction, and we say, with respect, the four judges below who decided against it were correct for the various reasons that they advanced.

Could I now just turn to clause 1.4 for a moment. Admittedly, it is a difficult provision, and the whole of the agreement has to be construed having regard to the terms of the instrument, the object and purposes of the transaction, and matters known to both the parties:

All references to blocks or reserves include –

It does not say “mean”, it says “include” –

all present and future rights of Hanwright in relation to the above blocks and reserves –

That is clause 1.1, which is definitely a reference to area –

including any extensions of the ore bodies located therein or any adjustments of the present indicated boundaries of the above Temporary Reserves arranged with the Western Australian Government.

One thing that this clause is clearly doing is saying that the reference to the blocks and reserves – which we can say is to an area, the surface of the earth – includes extensions of ore bodies and adjustments of the present indicated boundaries.

Just to digress slightly, I will refer your Honours – if not today, then in the morning – to evidence that showed that the Hamersley and Hanwright partnership were very concerned, if they could, to get the Western Australian Government to extend any reserves to include extensions of ore bodies, and also to make sure that the boundaries were correctly delineated, because people went out and undertook surveys that they were only approximately accurate. They may have been accurate as to where the iron ore was, in the sense that they identified the deposit of iron ore, but when it came to drawing up the line on the map to express the boundaries of the temporary reserve, sometimes there were some mistakes.

FRENCH CJ: Do you accept that the concept of “temporary reserve” under the Mining Act refers to an authority?

MR MYERS: I do. I am going to take your Honours to the Mining Act in a moment. It is my next port of call after a couple of observations about this. First of all, in relation to the physical area, there is a provision which expresses the intention to extend it in relation to those two matters referred to - the extensions of the ore body, and the adjustments of the present indicated boundaries. Then, if one goes to the top of 1.4, it says:

All references to blocks or reserves include all present and future rights of Hanwright in relation to the above blocks and reserves –

What does that mean in the context? Does it mean any more than when one is making a division of rights under clause 2.1 one does so in respect of all present and future rights of Hanwright? In our respectful submission, it does no more than that. It indicates that the rights that have been divided are present and future rights of Hanwright. It is not the fancy definitional provision that the entire argument on behalf of the appellant is founded. It is making clear that the division of rights is in respect of all present and future rights of Hanwright.

Now, notice it is only rights of Hanwright. I will just make a point in passing in relation to one of the things that my learned friend, Mr Young, said this morning. He referred to the 1968 agreement and in particular to clause 5, and said that that is an example of the sorts of rights that this agreement was dealing with. To the contrary, it is not.

The reference that I am making is to page 1064 in volume 3, and it is clause 5(1) which my friend made something of which gives the company the entitlement by notice in writing to the State and the joint venturers to inform the State and the joint venturers that the company decides to take the place of the joint venturers under the principal agreement. That is a right that MBM already had. The company is MBM. It is not a Hanwright right.

So what are the present and future rights of Hanwright? We can acknowledge that the present rights of Hanwright include the rights to the temporary reserves – I am going to come to your Honour the Chief Justice’s question about what that means – and it includes the rights, if any, of Hanwright under the State agreements.

The rights of Hanwright under the State agreements are very modest indeed, and they certainly do not include the very powerful right to substitute MBM for Hanwright. The fact of it is, as the 1970 agreement recognises, that it will not be completed, effected, for some time. Indeed, it was August 1972 before there was a surrender of the TRs, and it was 17 October 1974, as your Honours have heard this morning, before there was a mining lease granted.

There are several clauses of the agreement which show that the parties expect that there is more to be done - clause 2.3, clause 4, and clause 10, which refers to the implementation by government and government approval. The ordinary and natural meaning of this reference to “future rights” of Hanwright is to any rights that Hanwright might get in the meantime, before the division is effected, and is provided for by clause 2.2 of the agreement.

The suggestion that somehow it refers to rights that are not then existing, either at the time of the agreement or at the time of the division, but arise afterwards, after the surrender of the TRs, is simply insupportable. The ordinary meaning of this is that it is a reference to the rights, if any, that Hanwright might acquire in between the date of the agreement, and the date of its implementation of the section.

NETTLE J: In respect of the areas?

MR MYERS: In respect of the areas, of course, your Honour; I meant to say that. Can I now go to first of all the Mining Act? It is in our book of authorities; it is tab 13. I am going to go first of all to 276 and 277, which your Honour the Chief Justice has referred to. Section 276 - “Temporary reserves” are referred to in the marginal note:

The Minister and, pending a recommendation to the Minister, a warden, may temporarily reserve any Crown land from occupation, and the Minister may at any time cancel such reservation: Provided that if such reservation is not confirmed by the Governor within twelve months, the land shall cease to be reserved.

The Minister may, with the approval of the Governor –

This is a Governor in Council decision; it requires the approval of the Governor in Council –

authorise any person to temporarily occupy any such reserve on such terms as he may think fit, but subject to the provisions of section two hundred and seventy-seven.

So, a “temporary reserve” is an authority given by the Minister with the approval of Governor in Council, and 277 deals with mining for gold and so forth. Can I then ask your Honours to be good enough to look at section 273; this is just to eliminate an issue. “Mining tenements to be deemed chattels” is the marginal note:

Every mining tenement, and every share and interest therein, shall be deemed and taken in law to be a chattel interest, and, subject to this Act and the regulations, the holder may transfer and encumber the same:

But no person shall acquire any interest under any transfer of a mining tenement held under a miner’s right, unless such person is the holder of a miner’s right.

FRENCH CJ: That has to be read with the definition of “mining tenement”, does it not, which talks about land.

MR MYERS: It does - the definition of “mining tenement” in 3 and it all gets down to this, mining tenement and claims, something that can be transferred and encumbered has to be something to which the person has possession and the whole point about this is that there is not possession; there is only occupation. If your Honours can look at “Mining Tenement” – it is in section 3, and it is on page 5 of my print:

Any land applied for, held, occupied, used, or enjoyed under a lease or application therefor –

So this is not under a lease –

or as a claim –

and then if one looks at “claim” back on the previous page –

The portion of land which any miner shall lawfully have taken possession of and be entitled to occupy for mining purposes –

So that does not include what is called a “temporary reserve” because there is no possession; there is only right to occupy. If I can then ask your Honours to look at section 48 – it is at the beginning of Division 2, dealing with mineral leases:

The Governor may, subject to this Act and the regulations, grant to any person, not being an Asiatic or African alien, a lease of any Crown land . . .

(1) for mining –

Section 82, I think is the last section to which I wish to take the Court. It is on page 33 of my print:

A lessee or an applicant for a lease may, with the approval in writing of the Minister . . . transfer, sub-let, mortgage, encumber, or otherwise deal with the lease or application -

May I now take your Honours to a few authorities that deal in a general way with these matters and, first of all, could I ask your Honours to look at Wright Prospecting which is in our volume – I am sorry, it is in the MBM volume - tab 7. This is a case which was a large contest between two parties who are friends at the Bar table today in the way these things happen. I want to go first to paragraph 51 of the Court of Appeal’s decision. It is on page 47:

The Temporary Reserves are not land or an estate or interest in land under the 1904 Mining Act or at common law. That conclusion is compelled by a long line of High Court authority –

Wade, Gander v Murray, Adamson v Hayes and TEC Desert Pty Ltd v Commissioner of State Revenue, a recent decision which we also refer to. Then, if your Honours would be good enough to look at paragraph 62:

Accordingly, the Temporary Reserves are not land under the “mines and minerals” extension of the definition of land in the PLA. A further consequence is that there is no provision in the 1904 Mining Act, or the regulations made thereunder, regulating the transfer or creation of any interest in a temporary reserve. The regulations relating to transfers, registration and forfeiture . . . are confined to “mining tenements”.

Then the next paragraph deals with section 273, to which I have already referred, including relevant definitions. Paragraph 73 on page 50 of the judgment of the President of the Court of Appeal says:

The Temporary Reserves and the Exploration Licences are property but are not land or an interest in land and not choses in possession. They are, in my view, legal choses in action.

Now, it follows, we say, from that that first temporary reserves or rights to occupy are not transferable. There is no provision of the Mining Act for their transfer. The Mining Act provides for registration and all sorts of things. The Mining Act is a code and that code does not provide for transfer. That is what Justice Hale decided in the Delhi Exploration Case, to which I will take the Court in a moment, a judgment of a single judge of the Supreme Court of Western Australia.

Not only is there no provision for transfer, it follows that once a temporary reserve, a right of occupancy expires or is surrendered any new right of occupancy, even in respect of the same ground to the same person, is a new interest, a fresh departure, a fresh interest. That is what the High Court decided in Gander v Murray which I will come to in a moment.

Also, it follows that there is no mechanism or entitlement to convert in some way a right of occupancy into a mineral lease. The mineral lease is a fresh grant and the grant of the mineral lease does not depend upon the existence of a pre-existing right of occupancy. It may affect the way in which the Minister’s power is exercised but it is not a condition, it is not a jurisdictional matter that to obtain a mineral lease there has to be a pre-existing right of occupancy.

Could I ask the Court now to go to Delhi v Olive, which is tab 4 of our authorities, the case in which leading counsel was J.L. Toohey, QC, in October 1972. I just want to refer to one passage at page 54. It is about point 7:

In Nicholas v State of W.A. (September 1971, and unreported) I held that ss 276 and 277 of the Mining Act constitute a code relating to the temporary reserves thereby dealt with, to the exclusion of any rights which might otherwise be acquired under other provisions of the Act. When that case reached the Full Court Jackson, C.J., expressly agreed with that view, and so far as I know the other members of the Court expressed no dissent: I therefore adhere to it.

Now, we say that that is a correct statement that follows from the nature of the provisions made in the Mining Act. Could I now ask the Court to go to Gander v Murray, which is tab 6 of our bundle? This is an early decision of the High Court in 1907 of the Chief Justice, Sir Samuel Griffith, and Justices Barton and Isaacs. It concerned mining legislation in New South Wales and the legislation is not set out but it deals with an authority to enter upon land and explore or search for minerals. That appears, for example, in the headnote and it appears elsewhere in the judgment. If I could ask your Honours then to look at page 579 in the reasons for the decision of the Chief Justice:

The nature of the title or interest conferred by the Acts I have mentioned depends upon a document called an authority to enter, which may be granted by the Warden to the holder of a miner’s right or business licence. The authority continues in force for one year, and authorizes the holder of it to enter upon the particular area of private land described in it, to prospect for the mineral or minerals specified, and to carry on mining operations subject to certain prescribed conditions. But it does not confer any title to the land itself; it is not transferable; it may be renewed; and it is regarded as being merely anticipatory to a title to be afterwards acquired by lease from the Crown of the minerals contained in the private land. So much for the nature of the property.

Then, at the top of page 582:

As I have already pointed out, the adventure was the joint venture of Zobel and Gander. Before further dealing with the facts of the case, it is important to consider what was the nature of their joint interest in the mining adventure. There was clearly no estate in the land itself.

Again, this is consistent with what has afterwards been decided. Justice Barton, in the second page of his reasons for decision at page 588 about 12 lines down:

Gander appears to have done his utmost to see that Murray obtained a fresh authority. These authorities are personal rights, and they do not seem to stand on anything like the same footing as ordinary estates the subject of contracts which may be ordered to be specifically performed . . . It appears to me, that when the authority to Gander ran out, there was, as Dr. Cullen contended, an entirely fresh departure in title (if title it can be called), and that there was nothing which could for a moment be successfully contended to be the identical subject matter upon which the application of Gander originally had been granted.

Then, in the reasons for the decision of Justice Isaacs on page 589:

The authority holder obtains no interest in the land itself. He has rights and obligations with respect to the land; rights of prospecting and, if he wishes, of applying for a lease, and obligations to observe statutory conditions on pain of losing all his rights. But the rights, like the obligations, are purely personal, and no provision exists to transfer any of them.

FRENCH CJ: When we are looking at the statutory – the character of these rights under the statute or the authority, we are looking at it in isolation from the contractual context of the State agreement, which I think Mr Young was at some pains to make. There is an accretion of things with renewal entitlements and so forth attached to - - -

MR MYERS: I will answer your Honour’s question. If your Honours just look at the rest of the page and over the page it is a repetition I know of what has been said by the other Justices. It does explain the way in which the court has approached these sorts of interests.

Before it goes 4.15 I want to just deal with two things that Mr Young said about these interests and the reference to State agreements this morning. First of all he referred to the temporary reserves as in – he said they are not within the framework of the Mining Act. Would your Honours look at page 1029 of the Court book - that is in volume 3. There is set out the minute paper for the Executive Council meeting for the grant of the very temporary reserves that my learned friend said were not within the framework of the Mining Act – 1129? I am sorry, did I say 1029? I beg your pardon.

Far from these temporary reserves not being within the framework of the Mining Act and in some way being creatures of the State agreement or the Act approving the State agreement, the implementation of the State agreement required the grant of temporary reserves exactly in the means provided for by section 276 and under section 276.

FRENCH CJ: I did not understand Mr Young to say that the temporary reserves were the creatures of contract. They are statutory authorities which were the subject of obligations and rights created by the State agreement over and above those which were derived from holding them purely under the Mining Act, in relation at least to renewal.

MR MYERS: With respect, we would say no, there may be a contractual right to renewal.

FRENCH CJ: Yes.

MR MYERS: The question is whether that could be enforced. One would expect you would not get specific performance of it and, indeed, you may not even get damages. These are the sort of issues that were examined in a Victorian Full Court decision especially called L’Hullier v State of Victoria - I do not have the reference to it at my fingertips, but there would be very difficult questions about how you could enforce this.

FRENCH CJ: As I said earlier, I think there might have been some different views about State agreements in those days and what you could achieve by them.

MR MYERS: Yes, clearly they did and clearly the parties here when they speak in their State agreements of the transfers of temporary reserves are

making a mistake about temporary reserves being able to be transferred. They cannot be transferred in the sense that the temporary reserve that is numbered such and such and relates to such and such block of land can be transferred to another person. There has to be the procedure under the Mining Act undertaken.

FRENCH CJ: Well, we might hold that interesting topic over to tomorrow morning, Mr Myers.

MR MYERS: If your Honours are not fascinated, I will let you escape.

FRENCH CJ: Thank you. The Court will adjourn until 9.30 tomorrow morning for pronouncement of orders and 10.15 for the continuance of this matter.

AT 4.16 PM THE MATTER WAS ADOURNED
UNTIL THURSDAY, 13 AUGUST 2015