Four cases and one amendment to legislation impacting WA miners

3 minute read  10.11.2022 David Suttner, Edward Fearis

The outcome of four recent cases and one amendment to legislation will impact commercial decision makers in the mining sector in Western Australia. In our quarterly update, we summarise those cases and what they mean for the sector.

A five year plan for a programme of work and budget required when applying for an exploration licence

In True Fella Pty Ltd v Pantoro South Pty Ltd [2022] WAMW 19, the Warden held that an application for an exploration licence would not be accorded priority over later applications. This is because it was non-compliant with the Mining Act 1978 (WA). The application did not provide a programme of work for the full five year term of the licence and a proposed budget for the full term and area of the licence.

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The case concerned competing applications for exploration licences by True Fella and Pantoro South. True Fella's application was lodged first in time. However, Pantoro South objected to it on the basis that the application did not comply with the requirements of the Act.

An application for an exploration licence must be accompanied by a "section 58 statement", which details matters including the programme of work proposed to be carried out and the estimated expenditure. The Warden held that True Fella's section 58 statement was deficient, most contentiously, on the basis that the statement did not provide a programme of work for the full five year term of the exploration licence and did not provide a proposed budget for the full term and area of the licence.

The decision is controversial because industry practice has been to include this detail for the first year of exploration only. It has also created concern that the tenure of other tenement holders may be at risk if those applications did not contain the level of detail the Warden considered necessary in True Fella.

Following the decision, the Minister published a media statement indicating:

"Industry can be assured the McGowan Government is taking this matter very seriously, and will act to ensure certainty and security of tenure for proponents. This will include any steps necessary to ensure the validity of granted exploration licences."

Notice of meeting invalid due to substantial injustice to shareholders

In Metalicity Ltd v Nex Metals Explorations Ltd [2022] WASC 234, the Supreme Court of Western Australia determined that Metalcity's notice of meeting issued under the Corporations Act 2001 (Cth) was invalid because it would cause substantial injustice to shareholders regarding the lodgement of proxies.

Nex Metals was the subject of a hostile takeover bid by Metalicity. At Nex Metals' AGM, Metalicity unsuccessfully proposed resolutions seeking to replace Nex Metals' current directors with directors nominated by Metalicity. However, Metalicity claimed it had concerns regarding the voting on these resolutions and so issued a notice of meeting to again propose the resolutions seeking to replace Nex Metals' directors. In response, Nex Metals sought to issue its own notice of meeting.

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The Court held that Metalicity's notice was invalid and likely to cause substantial injustice to shareholders because:

  • the notice and proxy form did not contain contact details of Nex Metals as an alternative means by which the form could be received;
  • the proxy form stated that it must be lodged "no later than" 26 April 2022 so that Nex Metals could receive the forms by 48 hours prior to the meeting. The Court found that the use of "no later than" did not comply with the Corporations Act because it represented to shareholders that they had a shorter time to vote than required; and
  • the proxy form failed to include details of a fax number as required by Nex Metals' constitution.

The Court was not required to determine Nex Metals' notice and simply adjourned its proposed meeting because:

  • the resolutions that directors be removed were extremely important;
  • there was no urgency around the meeting date;
  • there was significant risk that shareholders would not have had time to consider the Court orders before proxy votes were due; and
  • there was a high likelihood of shareholder confusion regarding the circumstances of the two proposed meetings pursuant to the two notices.

Reminder of certain critical principles of interpreting commercial contracts

In QNI Resources Pty Ltd v North Queensland Pipeline No 1 Pty Ltd [2022] QCA 169, the Queensland Court of Appeal emphasised the principles that:

  • when interpreting a contract, it should be assumed that the "parties intend to produce a commercial approach";
  • a clause will not be unenforceable as a penalty unless it is "distinctively punitive"; and
  • a term of good faith should not be implied into all commercial contracts.

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Queensland Nickel was a party to an agreement with North Queensland Pipeline for the transportation of gas to a refinery run by a joint venture between QNI Resources (QNR) and QNI Metals (QNM) (Gas Transportation Agreement). Queensland Nickel subsequently went into administration. Invoices totalling $62 million were then issued by North Queensland Pipeline to QNR and QNM for use of the pipeline. QNR and QNM resisted paying the invoices and argued that approximately $22.8 million of the invoices were unenforceable as a penalty.

The Gas Transportation Agreement provided that Queensland Nickel entered into the agreement in its capacity as the manager of the joint venturer participants and as agent for them, with the contracting party defined as "QNI". QNR and QNM argued that they were not liable to pay the invoices and that references to "QNI" in the agreement were to Queensland Nickel only. However, the Court held that “QNI” was a reference to Queensland Nickel, QNR and QNM. The Court held that the commercial intent of the Gas Transportation Agreement was that Queensland Nickel, as manager, would not incur any financial obligation to North Queensland Pipeline in isolation from the participants it represented (QNR and QNM). This meant that all three of Queensland Nickel, QNR and QNM may be liable.

The Court stated that it would not invalidate a contractual provision for being a penalty unless it was "distinctly punitive". Here, the relevant clause required QNR and QNM to pay a tariff of 200% on top of standard usage if the amount of gas that Queensland Nickel placed in the pipeline exceeded or fell below certain levels. The Court held that this merely represented the parties to the Gas Transportation Agreement, having settled for themselves the contractual allocation of burdens and benefits in respect of imbalances in the amount of gas placed in the pipeline. Accordingly, the clause did not constitute a penalty and was therefore enforceable.

QNR and QNM also argued that the agreement included an obligation of good faith which required North Queensland Pipeline to undertake certain steps prior to imposing the tariff. However, the Court reiterated that an implied term of good faith is not automatically implied into all commercial contracts.


ASIC successful in having CEO fined and disqualified from being a director for causing his company to breach its continuous disclosure obligations

In Cruickshank v Australian Securities and Investments Commission [2022] FCAFC 128, the Full Federal Court upheld a decision that:

  • Antares Energy had breached its continuous disclosure obligations when announcing the sale of oil and gas interests,
  • Mr Cruickshank (the former CEO) had breached his duties as a director in causing or permitting this,
  • As a result, Mr Cruickshank should be disqualified from being a director for four years and pay a $40,000 fine.

The Full Court upheld the trial judge's findings that failure to disclose information regarding the identity of the purchaser, the absence of independent verification of the purchaser's capacity to complete and the purchaser's incomplete financing approval, constituted continuous disclose obligations failures. The Full Court also emphasised the "reasonable director" test in determining whether Cruickshank had breached his duties.

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ASIC brought proceedings against Antares Energy, alleging it had breached its continuous disclosure obligations when announcing the sale of certain oil and gas interests to Wade Energy. It was found that Antares Energy had failed to disclose information regarding the identity of the purchaser (Wade Energy), the absence of independent verification of Wade Energy's capacity to complete the purchase, and Wade Energy's incomplete financing approval. It was found that this was information that a reasonable person would expect to have a material effect on the company's share price. The trial judge found that Mr Cruickshank knew of, approved and authorised the ASX announcements, and therefore had breached his duties.

Antares Energy did not appeal, but Mr Cruickshank did, principally arguing that the trial judge should not have found that the omitted information was information that a reasonable person would expect to have a material effect on the company's share price. The trial judge had made the relevant findings on the basis of ASIC's expert's evidence. On appeal, Mr Cruickshank sought to attack the expert's qualifications and reasoning, and therefore the trial judge's findings. This argument was rejected by the Full Federal Court, which upheld findings that:

  • the identity of the purchaser would have been likely to influence investors in deciding whether to buy or sell Antares Energy's shares;
  • as the disclosure said nothing about steps taken to verify Wade Energy's capacity to complete, investors would have had an expectation that the company would have undertaken independent verification in relation to Wade Energy's capacity to complete the transactions; and
  • disclosure of the incomplete financing approval would have introduced doubt about Wade Energy's ability to complete the transactions.

The Full Court emphasised that the correct approach in determining whether there had been a breach of Mr Cruickshank's duties was to identify the degree of care and diligence that would have been exercised by a reasonable person in the same circumstances as Mr Cruickshank.

The Full Court also dismissed Mr Cruickshank's argument that a four year disqualification was inappropriate given that six years had elapsed since the non-disclosures, noting that nothing in the intervening period had prevented Mr Cruickshank from continuing to serve as a director.

Important amendments to the Mining Act 1978 (WA)

Parliament has passed significant amendments to the Mining Act 1978 (WA), which are intended to commence in mid-to-late 2023. The amendments aim to improve approval timeframes, reduce the administrative burden on industry and provide an automated authorisation pathway for eligible mining activities.

Specifically, the amendments:

  • Relocate the mining activity conditions and approvals provisions dealt with throughout the Act into a new Part 4AA.
  • Create a single approvals statement for approved mining operations which can cover multiple tenements, replacing the existing practice of adding conditions to each tenement when particular mining activities are approved.
  • Create an automated authorisation pathway for eligible mining activities. Eligible mining activities will be specific activities which can be carried out with minimal disturbance to the surface of the land. The particular activities will be prescribed in yet-to-be-published regulations on which the government will consult separately.

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The amendments include transitional provisions to minimise the impact on existing tenements and approvals.

Separate proposed amendments to the Act have passed the Lower House of Parliament and are currently before the Upper House. These amendments aim to streamline administrative processes, safeguard security of title, and provide greater certainty to industry. Specifically, the amendments intend to:

  • Modernise the geodetic datum through adoption of the Geocentric Datum of Australia 2020 (GDA2020) to maintain the accuracy of location information, remove practical and administrative issues and recognise that the continued movement of the Earth's surface will require updates to the datum to be applied in the future.
  • Allow lease conversion applications to be submitted without first marking out the land if the land cannot be accessed due to a significant event or circumstances outside of the applicant's control. However, marking out will still be required to occur before the conversion application is granted.

The amendments also allow for fees to be prescribed for objection applications and provide minor amendments to the designated tenement contact provisions to allow for electronic communication of information, documents and notices.


Contact us for more information or details about these cases, and how they may impact your organisation.

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