Arthur v Department of Natural Resources and Mines & Anor [2003] QLRT 100

LAND AND RESOURCES TRIBUNAL QUEENSLAND CITATION: Arthur v Department of Natural Resources and Mines & Anor [2003] QLRT 100 PARTIES: Edward William Arthur (Applicant) -and- Department of Natural Resources and Mines (First Respondent) -and- Western Metals Copper Limited (ABN 88 004 664 108) (Receivers and Managers Appointed) (Administrators Appointed) (Second Respondent) FILE NO/S: CAV00099/2003 PROCEEDING: Application to lodge second caveats DELIVERED ON: 8 October 2003 (Ex tempore) DELIVERED AT: Brisbane HEARING DATE: 8 October 2003 PRESIDING MEMBER: Smith DP ORDER/S: 1. Order 1 of 24 September 2003 and order 5 of 29 September 2003 are discharged. (at [25]) 2. The Application is dismissed. (at [25]) 3. The Applicant pay the Second Respondent’s costs fixed in the sum of $5,000.00. (at [26]) 4. The Second Respondent only recover one set of costs in respect of this application and application no CAV 00100/2003. (at [27]) CATCHWORDS: SECOND CAVEAT – MINING LEASE – SERIOUS QUESTION TO BE TRIED – BALANCE OF CONVENIENCE – UNDERTAKING AS TO DAMAGES – COSTS – SPECIAL CIRCUMSTANCES Mineral Resources Act 1989, s. 304 Land and Resources Tribunal Act 1999, s. 50 Arthur v Department of Natural Resources & Anor [2003] QLRT 94, referred to BBC World Limited v Special Broadcasting Services Corporation [2003] FCA 247, referred to KC Park Safe (Brisbane) Pty Ltd v Cairns City Council [1997] QdR 497, referred to -- 1 of 8 -- Startune Pty Ltd v Ultra-tune Systems (Aust) Pty Ltd [1991] 1 QdR 192, referred to Cambridge Credit Corporation Ltd v Surfers’ Paradise Forests Ltd [1977] QdR 261, referred to Re New Acland Coal No. 2 [2001] QLRT 14, applied COUNSEL: R.P. Doyle SC and D. Clothier for the Second Respondent SOLICITOR/S: Crown Solicitor, for the First Respondent Minter Ellison, Solicitors, for the Second Respondent AGENT/S: S. Baghdadi for the Applicant SMITH DP: (Ex Tempore) Background [1] I have before me an application pursuant to s. 304 of the Mineral Resources Act 1989 (“the MRA”) by Edward William Arthur (“the Applicant”) seeking orders for second caveats with respect to mining leases ML 4552, ML 5443, ML 5457 and ML 5459. What are in effect interim caveats were granted by me1 on 24 September 2003 with respect to each mining lease. The interim caveats expire at 6:00pm today. This matter has progressed today as if it is an application to in fact lodge the second caveats for an extended period of time. [2] I have decided, due to the urgency of the matter, the substantial sums of money involved, and the various rights claimed, to give extempore reasons for my decision this afternoon. In doing so I repeat what Justice Branson said in BBC World Limited v Special Broadcasting Services Corporation.2 The reasons that I give at this stage will of necessity be not complete and expanded reasons will be published as soon as possible.3 [3] Although not made today, Mr Baghdadi, an agent who represents the Applicant, had previously made the point before me in submissions that he has concerns regarding his representation in the matter and ‘the might of the second respondent that may be thrown against him’, to use his words. [4] I must say for the record that I found Mr Baghdadi to be eloquent in his presentation of his case and although not legally trained, to have a depth of background knowledge of the facts and circumstances surrounding the matter so as to well put all arguments with respect to Mr Arthur’s claim. [5] I therefore consider that Mr Baghdadi has had, together with the assistance given by Mr Doyle of counsel, good and proper opportunity to properly make his claims before this Tribunal. 1 See [2003] QLRT 94. 2 See [2003] FCA247. 3 These are the complete reasons. -- 2 of 8 -- The Hearing [6] This matter was heard on the afternoon of 8 October 2003. The Applicant was represented by an agent, Mr Baghdadi. The Crown Solicitor for the State of Queensland was the solicitor for the First Respondent, and Mr Doyle SC and Mr Clothier of Counsel appeared before the Second Respondent. The evidence received by the Tribunal was almost all in the form of affidavit evidence. The Applicant relied upon a statutory declaration of Mr Baghdadi of 7 September 2003, an affidavit of the Applicant of 23 September 2003, affidavit of Katie McConville of 23 September 2003 and statutory declaration of Ian Burnham Mitchell of 23 September 2003. Mr Baghdadi was also sworn during the process of the hearing and gave evidence relating to the issue of an undertaking as to damages and was cross- examined by Mr Doyle. The First Respondent did not rely upon any affidavit evidence at the hearing. The Second Respondent relied on two affidavits, that of Garry John Hamilton sworn 2 October 2003 and Edward James Goodwin sworn 8 October 2003. The Facts [7] In my decision of 24 September 2003, I set out certain facts as obtained from submissions provided by Mr Baghdadi. For completeness, as well as referring to those facts already in that previous judgment, I also refer to the convenient summary provided by Mr Doyle in his submissions at paragraphs 3 to 15 of the background facts from his client’s perspective as follows: Background Facts 3. The mining leases in question are known as the Esperanza leases. The original holders of the leases were Mr Arthur, Mrs Arthur, Mr Morrison and Ms Morrison. On 15 December 1968 they entered into a royalty agreement with Vam Ltd, pursuant to which Vam Ltd was granted an option to acquire the leases on certain terms. Vam Ltd’s nominee exercised the option and in consideration for it agreed to pay the Arthurs and the Morrisons royalties in certain proportions: Arthur, para A. 4. The leases were subsequently assigned to a mining joint venture, the participants of which entered into a deed with the Arthurs and the Morrisons dated 22 November 1971 to pay royalties to them on the terms contained in the deed: Arthur, para 3. The effect of the 1971 deed was that the joint venture participants agreed to pay the Arthurs and the Morrisons royalties equivalent to 5% of then et profits derived by the participants from mining activities at the leases: clause 3. Further, the participants agreed not to assign or transfer title to the leases without the prior written consent of the Arthurs and the Morrisons. That consent could not be withheld if the purchaser first agreed with the Arthurs and the Morrisons to undertake the obligations of the participants as set out in the 1971 deed and if the purchaser reasonably satisfied them that it could perform those obligations: clause 7. 5. The leases were later transferred to Western Metals pursuant to an Asset Sale Agreement dated 3 May 1996: Hamilton, para 4; ex GJH4. In accordance with that agreement Western Metals executed an undertaking (Mitchell, ex P) in favour of the Arthurs and the Morrisons by which it undertook to: (a) pay royalties to the Arthurs and the Morrisons in accordance with, and at the rate set out in, the 1968 deed and the 1973 deed (“the Esperanza Agreements”); (b) provide the Arthurs and the Morrisons with reasonable access to the leases, the calculations by Western Metals in so far as they relate to the operations of Western -- 3 of 8 -- Metals on the leases for the purposed of ascertaining the compliances by Western Metals with the obligation referred to in paragraph (a). 6. Pursuant to a series of assignments the Applicants allege that the right to royalty payments with respect to the leases are now held by the following people in the following proportions: Exoblend 36.5%; Sageinvest 14%; Mr Arthur 8.75%; Mrs Arthur 2.5% Mr Morrison 19.5% Mrs Morrison 18.75% (See Arthur, paras 7-9). 7. No royalties have been paid pursuant to the Esperanza Agreements. This is because (on Western Metals’ case) none is payable. 8. The Applicants dispute this and assert that they are owed “significant sums”: Arthur, para 10; McConville, para 5. However there was no attempt in the Applicants’ primary material to outline the basis upon which that was asserted and the amount the Applicants contend they are owed. Indeed the late material now sought to be relied on does not seek to calculate the net profits of the leases, but this is something to which we shall return later. Western Metals has received expert advice to the effect that applying the formula contained in the Esperanza Agreements no royalties are liable to be paid: Hamilton, para 28. This is so even on the construction of the formula urged by the Applicants. 9. On 17 July 1998 a caveat was lodged over the leases on behalf of Mr Arthur as a person entitled to royalties in respect of the leases: Arthur, ex c. This caveat lapsed. Why he allowed that to occur is not convincingly explained by him. 10. In July 2002 a first ranking charge was granted over the whole Western Metal’s assets and undertaking, being fixed over the leases: Hamilton, ex GJH2. 11. On 22 July 2003 Mr David McEvoy and Mr Stephen Longley were appointed receivers and managers of Western Metals by the secured creditor who holds that registered charge: Hamilton, para 2, ex GJH1. Pursuant to their appointment the receivers and managers took steps to sell the assets and undertaking of Western Metals and engaged consultants and conducted a marketing campaign for that purpose: Hamilton, para 6. 12. On 23 September 2003 the receivers and managers entered into an Asset Sale Agreement to sell the assets and undertaking of Western Metals to Birla Mount Gordon Pty Ltd (“the Birla Agreement”): Hamilton, para 7. That company is a member of a group of companies which has operated globally for approximately 30 years in 18 countries, employing 72,000 people and with an annual revenue in excess of US $6 billion: Hamilton, para 11. 13. The facts of the Birla Agreement and details of the purchaser were released publically on 23 September 2003: Hamilton, para 11; ex GJH6. The consideration payable under the Birla Agreement is approximately $21 million and the agreement is due to settle on 31 October 2003: Hamilton, paras 9-10. If that does not occur (that is if a caveat prevents completion): (a) That Mt Gordon mine site, which includes the leases, will close because it is loss making and the receivers and managers cannot continue to operate it at a loss: Hamilton, para 12; (b) The jobs of approximately 143 full time employees and 164 contracted employees will be lost. The vast majority of these employees will retained by the purchaser after completion of the Birla Agreement: Hamilton, para 13(a); -- 4 of 8 -- (c) The mining estates of Western Metals will have to be auctioned. According to a valuation which the receivers and managers have obtained the amount likely to be received for those assets in that event is approximately $5 million. Further, there will be additional costs associated with the forced closure of the mine and the sale of Western Metal’s assets: Hamilton, paras 13(b) & 13(c); (d) The secured creditors of Western Metals, which are owed substantially in excess of the purchase price under the Birla Agreement, will receive substantially less than they will otherwise receive. On the basis of the facts referred to above, the loss will be at least $16 million: Hamilton, para 13(d); (e) Costs and expenses of approximately $500,000 which are directly related to the sale of the assets and undertaking of Western Mining will be wasted: Hamilton, para 14. 14. Prior to commencing these proceedings the Applicants knew of the appointment of receivers and managers to Western Metals and that the receivers and managers would attempt to sell the assets and undertaking of Western Metals. They also became aware that a sale agreement had been entered into on 23 September 2003. They knew this because they and their solicitors had been in contact with the receivers and managers and their solicitors and because Mr Baghdadi, who apparently represents the Applicants, has informed the Tribunal that he is aware of the Birla Agreement: Hamilton, paras 16-25; ex GJH7 – 12; Affidavit of Mitchell. 15. There are on foot proceedings in the Supreme Court of NSW between Sageinvest and Western Metals relating to the Esperanza Agreements. In those proceedings a dispute arose as to how net profits from the leases were to be calculated in accordance with the Esperanza Agreements. Originally a declaration was sought that certain expenses were not to be taken into account in determining the relevant profits. However that relief was abandoned: Hamilton, paras 19-20; ex GHJ7. Yet it these abandoned contentions which are urged in correspondence as being bases of the dispute between the parties: Mitchell, exs C-D. The tests to be applied [8] This matter basically boils down to two questions: is there a serious question to be tried; and what is the balance of convenience.4 [9] On the issue of serious question to be tried, I have no doubt that Mr Baghdadi has a firm, if not unshaken, belief in the facts as he has pointed them out and in the wrong that he feels as a royalty holder that he, the Applicant, and others have suffered in this matter. I must, however, consider the matter in the cold hard light of the facts as they are before me. [10] In that regard, I cannot get past what I have referred to during the course of the hearing this afternoon as the break in the chain that occurred by an agreement for sale in 1996.5 [11] In effect, the royalty holders, of which the Applicant is one, claim interests in the relevant mining leases, known as the Esperanza leases, dating back to deeds from 1968 and 1971. [12] It would appear that up until 1996 there had been included in agreements by those who have been working the mining leases that in the event that those companies seek to transfer their rights in the mining leases, they would first obtain the consent of the 4 See Re Arthur [2003] QLRT 94 at paras 6-9. 5 See, for example, Transcript, 8 October 2003 at p. 5 line 38 to p. 6 line 10. -- 5 of 8 -- royalty holders under certain specified conditions. However, that position changed in 1996. Although the undertaking to pay the royalty holders as set out in the 1968 and 1971 deeds remained, the issue of the royalty holders’ consent to any future transfer of the mining leases was not part of the 1996 sale. [13] The receivers of the Second Respondent have entered into contracts for the sale of the relevant mining leases held by the Second Respondent to a third party.6 The proposed transfer, which is due for completion at the end of October 2003, includes an undertaking to pay the royalty holders, which for the greater part is in the same terms as the undertaking of 1996 save for the point in time of which royalties will be payable from. [14] These facts alone, let alone others set out in Mr Doyle’s submissions,7 give grave doubt as to whether or not the Applicant has met the first head of a serious question to be tried. [15] I now turn to the question of balance of convenience. A pivotal factor in matters such as this relate to the giving of undertakings as to damages. It was clear in the hearing before me that Mr Baghdadi for the applicant was not aware of the legal terminology of an undertaking as to damages or of the implications of same. [16] Once he became aware of the legal concept, an undertaking for damages was personally given by Mr Baghdadi, and he is to be commended for that. [17] But at it’s best, however, that undertaking has behind it assets of $1.5 million in circumstances in which, by the evidence of the second respondent, damages may amount to $60 million. [18] I stress at this point that it is completely unknown what damages may or may not ever flow in this matter. However, in exercising my discretion it is necessary to consider the possibilities that may flow and the likelihood of a person who gives an undertaking as to damages, there are other factors in the balance of convenience argument that weigh heavily on me in this matter. The Second Respondents have referred me to the following authorities: KC Park Safe (Brisbane) Pty Ltd v Cairns City Council [1997] 1 QdR 497 at 506; Startune Pty Ltd v Ultra-tune Systems (Aust) Pty Ltd [1991] Qdr 192 at 199-200; and Cambridge Credit Corporation Ltd v Surfers’ Paradise Forrests Ltd [1977] QdR 261. [19] As Mr Baghdadi himself stated, no-one wants to see the loss of 300 jobs. I accept the evidence of the Second Respondent that this is the likely consequence should the caveats be granted and the sale of the leases fail. I note there are “direct” jobs and that the overall employment consequences would be even more severe. To counter this, Mr Baghdadi has himself put forward what he referred to as an undertaking to purchase Western Metals Corporation Limited for the sum of $21 million. [20] Whilst, again, I understand Mr Baghdadi’s sentiments in this regard and his desire to do whatever it takes to protect the royalty holders’ interests, as he sees them, the submissions put by Mr Doyle SC are correct. The receivers and managers of Western Metals Copper Limited have entered into a legally binding agreement to sell 6 In the sum of $21M. 7 See Second Respondent’s Submissions paras. 24-30. -- 6 of 8 -- the company to a third party. It would be quite improper of those receivers and managers at this time to accept or enter into separate arrangements with Mr Baghdadi. [21] If Mr Baghdadi has any objections to the manner in which the receivers and managers have conducted themselves with respect to their obligations, then that is a matter that Mr Baghdadi should take up in another forum, but it is not appropriate to do so before myself. [22] I also take into account two other factors which weight heavily in considering the balance of convenience. Firstly, should the sale proceed then the mine will be relatively debt free compared to the current position of the substantial secured creditors that it is now encumbered by. One would expect that the prospect of royalties flowing to the royalty holders would be enhanced. This is a point forcibly made by Mr Doyle in his submissions, and in effect conceded by Mr Baghdadi. [23] Secondly, on the material before me, there has been an offer from the receivers and managers to the royalty holders of an amount of up to $4 million representing royalties that may be payable up until the present time to the royalty holders. Again, on the material before me, that offer appears to have been rejected by the royalty holders. Certainly, Mr Baghdadi gave nothing to me by way of evidence or submissions to indicate otherwise. The rejection of that offer must also certainly heavily play on the exercise of any discretion relating to the balance of convenience. [24] In the circumstances, then, I have little option but to conclude that on any ground the application cannot succeed and I therefore make the following orders. Orders [25] My orders are: (1) Order 1 of 24 September 2003 and order 5 of 29 September 2003 are discharged. (2) The application is dismissed. [26] As regards the issue of costs, Mr Doyle has sought costs with respect to the second respondent and, relying upon s. 50(3) of the Land and Resources Tribunal Act 1999, seeks those costs in the sum of $5,000.00. I agree with Mr Doyle that special circumstances exist in this matter. In doing so, I specifically do not find that the action has been brought by the Applicant frivolously or vexatiously. Nevertheless, on the legal basis of the material that is currently before me, it is appropriate, in my view, to award costs, given the special circumstances that exists. “Special circumstances” must be considered in light of the facts and circumstances of the particular case. Once the full facts of this matter were apparent, on any view, this application was doomed to failure. Not only did the application fail because of the lack of a serious question to be tried in light of the “break in the chain” as regards the royalty holders consenting to a transfer, 8 the Applicant had virtually no hope of meeting the balance of convenience. 8 Ss pp 10-14 hereof. -- 7 of 8 -- [27] Had the Applicant or Mr Baghdadi received proper legal advice prior to instituting these proceedings, it is difficult, if not impossible, to imagine how any proper advice could have justified instituting the proceedings. Why then were the proceedings commenced? In my view, the proceedings were designed to delay, and perhaps even obstruct, the actions of the Receivers and Managers and improve the Applicant’s bargaining position.9 My approach is consistent with the view taken by President Koppenol of this Tribunal in Re New Auckland Coal Pty Ltd [No. 2].10 Accordantly, I order the Applicant pay the Second Respondent’s costs fixed in the sum of $5,000.00. I further order that the Second Respondent only recover one set of costs in respect of this application and application no. CAV 00100/2003. I make no order as to costs with respect to the First Respondent, State of Queensland. 9 See, in particular the two examples given in s. 50(2) of the Land and Resources Tribunal Act 1999: (a) the proceeding was started merely to delay or obstruct, and (b) the proceeding, or a part of the proceedings, has been frivolous or vexatious. 10 [2001] QRLT 14. -- 8 of 8 --