Mineralogy Pty Ltd & Ors v The State of Western Australia & Anor [2004] WASC 275 (21 December 2004)

Last Updated: 11 January 2005

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : MINERALOGY PTY LTD & ORS -v- THE STATE OF WESTERN AUSTRALIA & ANOR [2004] WASC 275

CORAM : PULLIN J

HEARD : 13 DECEMBER 2004

DELIVERED : 21 DECEMBER 2004

FILE NO/S : CIV 2463 of 2004

BETWEEN : MINERALOGY PTY LTD (ACN 010 582 680)

AUSTEEL PTY LTD (ACN 058 430 032)

BALMORAL IRON PTY LTD (ACN 058 429 931)

BELLSWATER PTY LTD (ACN 058 429 708)

BRUNEI STEEL PTY LTD (ACN 058 429 977)

KOREAN STEEL PTY LTD (ACN 058 429 600)

First Plaintiffs

INTERNATIONAL MINERALS PTY LTD (ACN 058 341 638)

Second Plaintiff

AND

THE STATE OF WESTERN AUSTRALIA

THE HONOURABLE CLIVE MORRIS BROWN MLA

Defendants

Catchwords:
Government Agreement - Iron ore project - Provision authorising the Minister to approve proposals - Proper construction thereof

Contract - Proper construction - No new principles

Legislation:
Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act 2002 (WA)
Government Agreements Act 1979 (WA)

Result:
Application dismissed

Category: B

Representation:

Counsel:

First Plaintiffs : Mr L M Wilk & Ms S J Marsh

Second Plaintiff : Mr A J Ellis

Defendants : Mr G T W Tannin SC & Mr R M Mitchell

Solicitors:

First Plaintiffs : Blake Dawson Waldron

Second Plaintiff : International Minerals Pty Ltd

Defendants : State Solicitor

Case(s) referred to in judgment(s):

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99

Hancock Prospecting v BHP Minerals [2003] WASC 259

Pan Foods Co Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group Ltd [2000] HCA 20; (2000) 170 ALR 579

PMT Partners Pty Ltd v Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 CLR 301

Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429

Worrall v Commissioner for Housing for the Australian Capital Territory [2002] FCAFC 127

Case(s) also cited:

Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370

Douglass v Gillman (1990) 19 NSWLR 570

Nicholas v Western Australia [1972] WAR 168

O'Grady v The Northern Queensland Co Ltd [1990] HCA 16; (1990) 169 CLR 356

Re Michael; Ex parte WMC Resources Ltd [2003] WASCA 288; (2003) 27 WAR 574

1 PULLIN J: The plaintiffs are parties to the Iron Ore Processing (Mineralogy Pty Ltd) Agreement dated 5 December 2001. The other party was the State of Western Australia. This Agreement was ratified and the implementation authorised by the Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act 2002. The Agreement is a "Government Agreement" as defined in the Government Agreements Act 1979 which means that any purported modification of any other Act shall take effect to modify that other Act. See s 3 of the Government Agreements Act 1979.

2 An issue has arisen about whether the second named defendant (Minister) is obliged by cl 8, cl 6 and cl 7 of the Agreement to consider and then to exercise certain powers he has under the Agreement concerning a proposal the plaintiffs submitted in relation to a proposed sale and export of a large volume of iron ore concentrate to a steel mill owner in China ("Concentrates Proposal"). The Court has been asked to construe the Agreement and declare whether or not the Minister does have such obligation and powers in relation to the Concentrates Proposal.

The Agreement

3 In the Agreement, Mineralogy Pty Ltd is called the "Company" and the other plaintiffs are called the "Co-Proponents".

4 The recitals to the Agreement state:

"(a) The Company is the holder of mining tenements in the Pilbara region;

(b) The Company has granted various rights in relation to certain of the said mining tenements to the Co-Proponents as set out in the Subsidiary agreements (as hereinafter defined);

(c) The Company by itself or in conjunction with one or more of the Co-Proponents wishes to develop projects incorporating -

(i) the mining and concentration of iron ore in Area A (as hereinafter defined);

(ii) the processing of that iron ore predominantly as magnetite in Area A or elsewhere in the Pilbara region principally for the production and sale of high grade pellets, direct reduced iron and/or hot briquetted iron or steel;

(iii) the transport of magnetite concentrates and processed iron ore within the Pilbara region;

(iv) the establishment of new port facilities in the Pilbara region; and

(v) the shipping of processed iron ore through such port facilities;

(d) The State, for the purpose of promoting employment opportunity and industrial development in Western Australia, has agreed to assist the establishment of the proposed projects upon and subject to the terms of this Agreement."

5 Clause 6(1) of the Agreement reads:

"6. (1) The Company either alone or with a Co-Proponent shall subject to the EP Act and the provisions of this Agreement submit to the Minister on or before 30 June 2003 to the fullest extent reasonably practicable its detailed proposals (including plans where practicable and specifications where reasonably required by the Minister and any other details normally required by the local government in which area any of the works are to be situated) for a project or projects of the type of Project 1, Project 2 or Project 3 or a combination thereof as described in the definition of Project in Clause 1. Thereafter during the currency of this Agreement the Company either alone or with a Co-Proponent may subject as aforesaid make further such detailed proposals for new projects of the type of Project 1, Project 2 or Project 3 or a combination thereof as aforesaid. The detailed proposals made pursuant to this Clause in respect of a project are in this Agreement called a 'Project proposal'."

(2) Each Project proposal shall address the establishment and operation of the project concerned and make provision where appropriate for the Company's workforce required to enable the Project Proponents to mine, recover and process iron ore and shall include the location, area, lay-out, design, quantities, materials and time programme for the commencement and completion of construction or the provision (as the case may be) of each of the following matters, if and as they are applicable to the project namely –

(a) (i) the mining and recovery of iron ore and any other minerals necessary for use in the project, including mining crushing screening concentration handling transport and storage of iron ore and plant facilities; and

(ii) any portion of Area A that the Project Proponents wish to be included in a mining lease to be issued to the Company pursuant to Clause 10 in respect of the project and any existing mining lease or leases or further mining lease or leases or Ancillary Tenement, or part thereof, the subject of a sublease approved by the Minister under Clause 31 or a sublease or a right to mine under the Subsidiary agreements, which the Project Proponents propose to be dedicated to the project;

(b) the plant or plants comprising the project the subject of the Project proposal for processing of iron ore and the estimated capital cost of the project;

...

(g) transportation of iron ore concentrates and/or products of iron ore concentrates;

...

(l) production of final products from iron ore concentrates by pelletising and/or direct reduction and/or steel making and disposal of residues;

(m) port development works including wharf, jetty and causeway works, dredging and dredge spoil disposal and storage and ship loading of the final products;

..."

6 Clause 7(1) reads:

"7. (1) Subject to the EP Act in respect of each proposal submitted pursuant to Clause 6 the Minister shall -

(a) approve of the proposal without qualification or reservation; or

(b) defer consideration of or decision upon the same until such time as the Project Proponents submit a further proposal or proposals in respect of some other of the matters mentioned in subclause (2) of Clause 6 not covered by the said proposal; or

(c) require as a condition precedent to the giving of his approval to the said proposal that the Project Proponents make such alteration thereto or comply with such conditions in respect thereto as he thinks reasonable PROVIDED THAT -

(i) no such alteration or conditions shall require the Project Proponents to grant access to their mineral resources to any third party; and

(ii) the Minister shall disclose his reasons for such alteration or conditions,

PROVIDED ALWAYS that where implementation of any proposals hereunder have been approved pursuant to the EP Act subject to conditions or procedures, any approval or decision of the Minister under this Clause shall, if the case so requires, incorporate a requirement that the Project Proponents make such alterations to the proposals as may be necessary to make them accord with those conditions or procedures."

7 Clause 7(2) provides that the Minister shall within two months after receipt of the proposals, pursuant to cl 6, give notice to the Project Proponents of his decision in respect to the proposals. "Project Proponents" mean the Company and such Co-Proponents which submit a proposal.

8 Clause 8(1) and (2) read as follows:

"8. (1) If Project Proponents at any time during the continuance of this Agreement desire to significantly modify expand or otherwise vary their activities carried on pursuant to this Agreement in relation to a Project beyond those activities specified in the approved proposals relating to that Project they shall give notice of such desire to the Minister and within 2 months thereafter shall submit to the Minister detailed proposals in respect of all matters covered by such notice and such of the other matters mentioned in paragraphs (a) to (q) of subclause (2) of Clause 6 as are applicable to the Project and as the Minister may require.

(2) The provisions of Clause 6 and Clause 7 (other than subclauses (5)(a), (6) and (7)) shall mutatis mutandis apply to detailed proposals submitted pursuant to this Clause with the proviso that the Project Proponents may withdraw such proposals at any time before approval thereof or, where any decision of the Minister in respect thereof is referred to arbitration, within 3 months after the award by notice to the Minister that they shall not be proceeding with the same. The Project Proponents shall subject to and in accordance with the EP Act and any approvals and licences required under that Act implement approved proposals pursuant to this Clause in accordance with the terms thereof."

9 Projects 1, 2 and 3 are defined in the Agreement as follows:

"'Project 1' means a project or projects for the production of high grade iron ore pellets within Western Australia with subject to Clause 2(h) an initial minimum production capacity of six million tonnes per annum (or lesser amount approved by the Minister) from a mine or mines within Area A and a pellet production facility located within Area A (or other area in the Pilbara region agreed to between the Minister and the Project Proponents) including expansions of projects the subject of approved proposals from time to time and may include inter alia a mine, concentrator, port, desalination plan, pellet plant, power station, pipelines and any other necessary facilities to enable pellets to be produced transported and shipped and provision for the supply of a minor tonnage of iron ore concentrates for use as heavy media in the coal washing industry;

'Project 2' means a project or projects for the production of DRI within Western Australia with subject to Clause 2(h) an initial minimum production capacity of two million tonnes per annum (or lesser amount approved by the Minister) from a mine or mines within Area A and a DRI production facility located within Area A (or other area in the Pilbara region agreed to between the Minister and the Project Proponents) including expansions of projects the subject of approved proposals from time to time and may include inter alia a mine, concentrator, power station, desalination plant, pellet plant, DRI plant, port, pipelines and any other necessary facilities to enable DRI to be produced transported and shipped and provision for the supply of a minor tonnage of iron ore concentrates for use as heavy media in the coal washing industry;

'Project 3' means a project or projects for the production of steel within Western Australia with subject to Clause 2(h) an initial minimum production capacity of two million tonnes per annum (or lesser amount approved by the Minister) from a mine or mines within Area A and a DRI production facility located within Area A (or other area in the Pilbara region agreed to between the Minister and the Project Proponents) including expansions of projects the subject of approved proposals from time to time and may include inter alia a mine, concentrator, power station, desalination plant, pellet plant, DRI plant, steel making and rolling plant, port, pipelines and any other necessary facilities to enable steel to be produced transported and shipped and provision for the supply of a minor tonnage of iron ore concentrates for use as heavy media in the coal washing industry."

10 The word "Project" is defined as follows:

"'Project' means a project of the type of Project 1, Project 2 or Project 3 the subject of approved proposals or a project made up of a combination of projects of the type of Project 1, Project 2 and/or Project 3 which subject to Clause 2(h) includes an aggregate production capacity of a minimum of six million tonnes per annum (or lesser amount approved by the Minister) of iron ore concentrates for input into a plant or plants the subject of Project 1, Project 2 or Project 3."

Initial Proposal - Project 1

11 On 29 April 2004 the plaintiffs submitted to the Minister proposals under cl 6 of the Agreement for a project of the type described in the definition of Project 1 ("Initial Proposal").

12 Accompanying the 29 April 2004 letter was a document containing:

"... detailed proposals making up a Project Proposal for Project 1. ... The co-proponent has executed a take or pay contract for the purchase of 7 (seven) million tonnes of iron ore pellets each year for a 15 year period."

13 The Initial Proposal also disclosed the following information. The Project is based on the magnetite iron ore deposits in the George Palmer Deposit. This deposit is located near Balmoral homestead 80 kms south-west of Karratha, located inland from Cape Preston. The Project will involve the expenditure of around A$1,400 million to establish a mine, plant and export facilities. The iron ore can easily be processed into iron ore concentrate containing over 70 per cent iron, a much higher grade than current iron ore exports. Iron ore pellets can be produced from iron ore concentrate. Iron ore pellets are designed to be used in the newer steel making technologies using electric arc furnaces as well as traditional blast furnaces. The Project will provide employment for 2,000 people during the construction phase and provide 400 permanent jobs after construction.

14 The Initial Proposal proposed that magnetite ore will be produced from the mine site located within an area called Area A. It will be crushed on site to particle sizes of about 32 mm in size. It will then be transported some distance away to a processing complex. This complex is to be made up of an administration block, a power station, a concentrator and pellet plant.

15 The concentrator will reduce the ore size, first to 5 mm particle size and eventually after separating the magnetite from this reduced ore, a further grinding process will take place reducing the concentrate to a fine powder, the particle sizes being measured in microns.

16 The iron ore concentrate containing a high percentage of magnetite will then pass to the pellet plant where other activities will take place. They will result in the production of iron ore pellets from the iron ore concentrate. The pellets are made by combining the iron ore concentrate with an organic binder such as clay. By the processes in the pelletising plant, the pellets grow to a size of about 8 mm to 20 mm in diameter. The pellets are then heated to a very high temperature in a furnace. They will then be discharged from the pellet mill and fed by conveyor belt to Cape Preston for loading onto ships or stockpiled awaiting export.

17 On 29 September 2004 the Minister approved the Initial Proposal. In summary the approval was for Project 1 which was for the production in Western Australia of 7 million tonnes of iron ore pellets per annum for 15 years, to be made from iron ore concentrate produced from iron ore mined from a minesite in Area A.

Concentrates Proposal

18 The plaintiffs wish to sell and export an additional 3 million tonnes of iron ore concentrate per annum to a Chinese steel mill.

19 The day after the Minister approved the Initial Proposal for Project 1, the plaintiffs submitted the Concentrates Proposal. This was accompanied by a letter to the Minister dated 30 September 2004 which read:

"As discussed we have now had firm confirmation in respect of additional expansion of the Project by the purchaser of concentrate."

The letter stated that the plaintiff submitted the Concentrates Proposal to the Minister for his consideration "under section 8(1) and section 8(2) of the Act and the Act generally". The Concentrates Proposal sought the Minister's approval to produce an extra 3 million tonnes per annum of iron ore concentrate. The iron ore concentrate when produced would not be used for the purpose of the production of "iron ore pellets within Western Australia"; nor would it be used as "heavy media in the coal washing industry". See the definition of "Project 1". The iron ore concentrate was to be sold and exported to the Chinese steel mill owner for the production of steel in China.

20 The Minister responded by letter dated 27 October 2004 in which he said, after acknowledging receipt of the 30 September 2004 letter and the Concentrates Proposal:

"Preliminary advice from the State Solicitor's Office suggest that the export of iron ore concentrate as you propose is not allowed under the Agreement. At our meeting on 25 August I indicated that I wanted to consider this matter after I had taken legal advice from Mineralogy and final formal advice from the State Solicitor's Office. ... I must advise you however that until this issue is resolved I cannot consider the additional proposal you have submitted.

I understand that this issue could be resolved by a variation of the Agreement and I would urge you to consider this option to achieve the same objective."

21 The reference in the last sentence of the letter to a "variation of the Agreement", was a reference to the procedure permitted via cl 32 of the Agreement, which provided that the parties to the Agreement may from time to time vary the Agreement. An agreement made to vary the Agreement must be tabled in Parliament within 12 sitting days following its execution and by cl 32(3) either house has the power to pass a resolution disallowing the Agreement.

22 The plaintiffs wish to first ascertain by these proceedings whether the Minister is obliged to consider the proposal and to deal with it under cl 8. If not, they will proceed to negotiate an agreement under cl 32.

23 The Minister has since his letter of 27 October 2004, expressed the view that the Concentrates Proposal cannot be dealt with under cl 8. The Minister is not opposed to the plaintiffs' desire to export the concentrate but is now firmly of the view that this can be achieved only by a variation to the Agreement under cl 32.

Plaintiffs' submissions

24 The plaintiffs submit that the Agreement reveals an intention that they should receive benefits under the State Agreement provided they first committed to and implemented as a minimum a project that met the definition of "Project". The plaintiffs submit that it would be illogical and uncommercial to require further activities to be constrained within what they call the "original minimum obligation Project scope". They submit that any such limitation should have been clearly expressed in the Agreement as a prohibition given that the plaintiffs have rights to develop the resources under the Mining Act 1978. They submit that the State Agreement contemplates the sale of iron ore concentrates, all other iron ore and all other minerals obtained from the mining leases. They say this is apparent from cl 11(1) of the Agreement which is the provision relating to royalties. They submit that the Agreement does not expressly require or imply that only projects which meet the definition of "Project" may be approved or implemented under the State Agreement. The plaintiffs concede that a "Project" must initially be approved and implemented, but they submit that the Agreement does not prevent other activities from being implemented as well. They refer to other clauses in the Agreement which they say are triggered by the initial proposal and not by the existence of a Project. They refer to cl 10(7), cl 14, cl 15(2), cl 19(1) and cl 22(1).

25 The plaintiffs emphasise certain words and phrases in cl 8(1) as shown below:

"If Project Proponents at any time during the continuance of this Agreement desire to significantly modify expand or otherwise vary their activities carried on pursuant to this Agreement in relation to a Project beyond those activities specified in the approved Proposals relating to that Project they shall give notice of such desire to the Minister ..."

26 The Plaintiffs point to the words emphasised to submit that the parties intended that once the proponents "had surpassed the initial hurdle of submitting a proposal for a 'Project' and having it approved, clause 8 would be available to enable the Proponents to significantly change or add to those activities by submitting additional proposals."

27 The plaintiffs submit that the parties intended that the activities proposed under cl 8 could be something different in nature or scope to the activities already approved, provided a Project continued to exist and provided that the newly proposed activities related to the approved Project in some way. They submit that there is no limitation in cl 8 requiring proposals to comply with the definition of "Project".

28 The plaintiffs submit the proposals which comply with the definition of "Project", including expansions of those proposals, may be submitted under cl 6, and that cl 8 must therefore be given a different meaning and include different proposals which do not fall within the definition of "Project".

29 The plaintiffs submit that the compendious expression "modify expand or vary" contemplates activities which may be different in nature and scope from those within the scope of the initial proposal. They submit that the Concentrates Proposal represents an increase in the size of the concentrator proposed as part of the initial proposal, an increase in the volume of iron ore concentrates produced and a change to the scope of the initial proposal because it proposes the production and export of an additional final product. The production of high grade iron ore pellets as specified in the initial proposal will continue and will be augmented by the additional iron ore concentrate production.

30 The plaintiffs submit that the words "beyond those activities specified in the approved proposals" make it clear that proposals submitted under cl 8 may be different to the types of activities already approved or included in the definition of "Project". They submit the word "beyond" means "superior to, surpassing, above", or "more than, in excess of and over and above". The plaintiffs submit that this word "means that a clause 8 proposal may 'move forward' by adding to the Initial Proposal" and conducting activities different from those in the Initial Proposal and that the Minister has power to approve it. They submit that it does not permit the Initial Proposal to be reduced in scope but equally it does not restrict the types of activities that can be put forward for approval under cl 8. They point out that the word "significant" means "substantially or materially". See Worrall v Commissioner for Housing for the Australian Capital Territory [2002] FCAFC 127.

31 The plaintiffs submit that the production of additional iron ore concentrates as proposed in the Concentrates Proposal is an activity that goes beyond the activities referred to in the Initial Proposal. It involves an expansion of the concentrator to produce more iron ore concentrates. It involves a change to the scope of the Initial Proposal because the additional iron ore concentrates will be exported as a final product. They point out that the Concentrates Proposal will not reduce or otherwise change the amount of pellets produced under the Initial Proposal.

32 The plaintiffs refer to the phrase "in relation to a Project" in cl 8. They acknowledge that this phrase, as wide as it is, requires that the two relevant subject matters be connected to some extent. See PMT Partners Pty Ltd v Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 CLR 301. The plaintiffs accept that proposals submitted under cl 8 as a modification, expansion or variation must be connected in some way to the initial proposal. They submit that under the activities under the Concentrates Proposal the activities are connected with the Initial Proposal in the sense that concentrate was to be produced under the Initial Proposal and also under the Concentrates Proposal. They say the Concentrates Proposal is related to the Initial Proposal because under both, iron ore will still be mined from the same mine, both projects will use the same crushing and milling facilities, the iron ore concentrates will be produced in the same concentrator and, via the same processes, will be transported to the port on the same conveyor and will be stockpiled in the same area at the port and will use the same ship loading facilities.

33 The plaintiffs concede that the activities relating to the production of concentrate for the purpose of sale and export to a Chinese steel mill will not be part of Project 1 unless approval is granted by the Minister under cl 8.

Defendants' submissions

34 The defendants submit that it is not enough that the Concentrates Proposal can be described as a significant modification, expansion or variation of an approved proposal. They submit that the modified, expanded or otherwise varied activities must still be activities carried on "in relation to a Project" and that activities to produce iron ore concentrate for sale to the Chinese steel mill will not relate to the Project which has been approved. They submit that the production of iron ore concentrate will only be "in relation to" Project 1, or a project of that type, if the iron ore concentrate is used:

(a) as part of the process of producing iron ore pellets in Western Australia; or

(b) for the supply of a minor tonnage of iron ore concentrates for use as heavy media in the coal washing industry.

35 The defendant submits that the activities relating to the production of iron ore concentrates for the purpose of sale and export, not for the production of iron ore pellets in Western Australia and not for use in the coal washing industry will not be activities carried on "in relation to a Project" for the purposes of cl 8 of the Agreement.

The construction of clause 8(1)

36 The Agreement is not to be interpreted like a statute. So, for example, the Interpretation Act 1984 does not apply. See Hancock Prospecting v BHP Minerals [2003] WASC 259 at [65] to [67]. As a result the long title to the ratifying Act cannot be referred to - as the defendants wish to do - to assist in construing the Agreement.

37 The usual principles which govern the proper construction of a written contract apply. The primary duty of the Court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. The whole agreement has to be considered, since the meaning of any one part of it may be revealed by other parts. If the words used are unambiguous, the Court must give effect to them. The Court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. However, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust. See Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109.

38 A contract should be construed practically so as to give effect to its prescribed commercial purpose, because the law seeks to uphold commercial contractual obligations and the expectations that derive from them. Pan Foods Co Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group Ltd [2000] HCA 20; (2000) 170 ALR 579 [24]. The Court should not adopt a narrow or pedantic approach to construction, particularly in the case of commercial arrangements. Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429 at 437.

39 In my opinion the provisions of cl 8(1) construed in the context of the Agreement as a whole, are unambiguous.

40 The Agreement is an agreement which confers benefits on the plaintiffs as well as imposing obligations. The clear purpose of the Agreement is to provide the framework for iron ore projects which will see value added to iron ore extracted from the minesite. Once a proposal in relation to a project is approved, the proponents are obliged to dedicate the parts of the tenements involved to the Project (see cl 10 of the Agreement) and are obliged to implement the proposal to produce iron ore pellets or even more highly processed iron ore for use mainly in the steel industry. A minor tonnage of iron ore concentrate may also be produced for use as heavy media in the coal washing industry. In return for such dedication and implementation, the State offers various concessions, for example a reduction in usual royalties and a modification of expenditure requirements in relation to the mining tenements. The State Government also undertakes to assist in relation to the provision of infrastructure.

41 As the recitals of the Agreement indicate, the State has agreed to assist the establishment of the proposed Projects for the purpose of promoting employment opportunity and industrial development in Western Australia. Parliament has imposed on the Minister the duty to consider proposals. It has also conferred on him the authority to approve proposals relating to projects and to approve modifications, expansions or variations of the projects; but the authority may be exercised only in relation to projects which have been carefully defined in the Agreement. The projects defined all involve a process of adding value to the raw iron ore.

42 Clause 8 comes into operation if the Project Proponents "desire to significantly modify expand or otherwise vary their activities". The "activities" however, are not activities at large. The activities referred to are activities "carried on pursuant to the Agreement" and "in relation to a Project". So if the Concentrates Proposal is a proposal to modify, expand or vary activities, then the activities to be modified, expanded or varied must first be identified.

43 The activities to be carried out pursuant to this Agreement in relation to Project 1, as defined in the Initial Proposal, are the activities associated with the production of "high grade iron ore pellets within Western Australia". The Initial Proposal reveals that this will involve activities associated with the establishment of a mine, a crushing plant, a transport system, a power station, an administration block, a concentrator, an iron ore pellet plant, conveyor belts and port facility and activities associated with the production of iron ore concentrates for the purpose of the production of iron ore pellets.

44 If the Initial Proposal had proposed the production of concentrates for the purpose of use as heavy media in the coal washing industry, then activities in relation to that production could also have been approved.

45 The Concentrates Proposal does involve an expansion of the activities involved in producing iron ore concentrates because the quantity produced will be increased. It also involves a modification or variation of activities because the concentrate will be transported, not to the pellet plant, but to Cape Preston for export.

46 In my opinion, however, to expand the production of iron ore concentrates, not for the purpose of production of iron ore pellets in Western Australia (and not for use as heavy media in the coal washing industry), but rather for the purpose of the sale and export to China, is not an expansion, modification or variation of activities in relation to the approved Project.

47 If the proposal had been a proposal to expand, modify or vary the activities involved in the production of iron ore concentrates for the purpose of producing more iron ore pellets, then it would have been an expansion, modification or variation contemplated by cl 8. Even a significant expansion, modification or variation for that purpose would fall within cl 8.

48 As the plaintiffs submit, the expression "in relation to" carries a very wide meaning, but it does still require a connection between the expanded activities and the Project. The expanded activity of concentrate production for the purpose of sale, export and not for the purpose of the production of iron ore pellets has no connection at all with the Project.

49 As a result, it is my opinion that the Concentrates Proposal is not a proposal of the kind referred to in cl 8(1) and the Minister therefore has no duty to consider it and no power to approve it.

50 In my opinion, if there is a desire on the part of the plaintiffs to produce iron ore concentrates not for the production of iron ore pellets in Western Australia and not for use in the coal washing industry, but for sale and export to China, then the Agreement must be varied by agreement under cl 32.

51 In reaching these conclusions, I have rejected a number of submissions made by the plaintiffs.

52 In particular, I do not accept the submission that because iron ore concentrates are mentioned in the royalty clause - cl 11 - that this type of sale must have been contemplated by the parties. In relation to Project 1, iron ore concentrate may be sold for use as heavy media in the coal washing industry and so there had to be a provision for royalties if that happened. (As an aside, it is somewhat puzzling that provision is made for royalties on the sale of iron ore when the Agreement does not permit the sale of iron ore. The defendants contended that this provision was there to cover the sale of iron ore from parts of the tenements not "dedicated" (see cl 10(2)) to a Project. However, this explanation seems not to be correct because cl 11 strikes a royalty to apply to sale of iron ore from "Mining Leases" and that expression seems to be defined as referring only to the parts of tenements "dedicated" to a Project. I do not however have to grapple further with that apparent conundrum because the issue here relates not to the sale of iron ore but to the sale of iron ore concentrate).

53 Secondly, the fact that some clauses are "triggered by the initial proposals" does not support the plaintiffs' case. So, for example, the plaintiffs point to cl 10(7) which states that in accordance with approved proposals they may construct works for the purposes of the Agreement and obtain stone, sand, clay and gravel from the mining leases, and that by cl 14 they may install and operate electricity generators in accordance with approved proposals. The plaintiffs argue that these clauses show that a project must exist but do not prevent the implementation of other activities in addition to the project. I do not see how reference to these sort of clauses assists. They show that there has to be express authority for activities not forming part of a Project. There is no authorisation approving activities relating to the production of iron ore concentrate which do not relate to a Project.

54 The plaintiffs also submitted that cl 6 allows for expansion of the initial proposal and so cl 8 must be referring to something else. In fact, cl 6 does not anywhere use the word "expansion". It does provide for the plaintiffs to make further detailed proposals but only for "new projects of the type of Project 1, Project 2 or Project 3 or a combination thereof ..." It is true that the definition of "Project 1" refers to "expansions" of projects, but in my opinion that is an inept reference to approved proposals pursuant to cl 8 which provides the detail concerning the kind of proposals permitted. I say it is an inept reference because the reference in the definition of "Project 1" to "expansions" of projects should have been followed by a reference also to "modifications" or "variations" which are permitted under cl 8. As a result, I do not think that cl 6 authorises the Minister to approve expansions of projects already approved.

55 The plaintiffs' submission that the production of iron ore pellets will not be reduced by the Concentrates Proposal is, in my opinion, not something which assists the plaintiffs in their argument; and nor does the submission that Project 1 will continue to exist.

56 I also reject the plaintiffs' submission that once they had "surpassed the initial hurdle of submitting a proposal for a project and having it approved", that cl 8 would then allow the plaintiffs to change the activities as they now propose. I have already dealt with that submission when I concluded that the activities as expanded, modified and varied must still relate to Project 1 and that the proposed activities involved in the production of concentrate for sale into China will not relate to Project 1. If the plaintiffs' submission were correct, then after the approval of Project 1, the plaintiffs could for example, seek approval under cl 8 to expand activities in relation to the production of iron ore and to sell a significant amount of the remaining ore body as iron ore without any value adding. That is not what was contemplated by the Agreement.

57 The word "beyond" in cl 8(1) has the meanings referred to in the plaintiffs' submissions but although the Minister has the power to approve activities expanded, modified or varied "beyond" those specified in the Initial Proposal, such activities must still be activities in relation to a "Project"; in this case Project 1. Thus the plaintiffs' submission about the wide meaning of "beyond" does not assist them.

58 Similarly, the plaintiffs' submission about the meaning of the word "significantly" does not assist them. A significant expansion, modification or variation of activities still requires the expanded, modified or varied activities to be related to the Project.

59 As a result I dismiss the plaintiffs' application.