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Mineralogy Pty Ltd v Adani Mining Pty Ltd[2022] QSC 154

Mineralogy Pty Ltd v Adani Mining Pty Ltd[2022] QSC 154

SUPREME COURT OF QUEENSLAND

CITATION:

Mineralogy Pty Ltd v Adani Mining Pty Ltd [2022] QSC 154

PARTIES:

MINERALOGY PTY LTD ACN 010 582 680

(applicant)

v

ADANI MINING PTY LTD ACN 145 455 205

(first respondent)

and

RUSSELL THIRGOOD

(second respondent)

FILE NO/S:

6211 of 2022

DIVISION:

Trial

PROCEEDING:

Application (heard in civil list)

ORIGINATING COURT:

Supreme Court

DELIVERED ON:

22 July 2022

DELIVERED AT:

Brisbane

HEARING DATE:

18 July 2022

JUDGE:

Freeburn J

ORDER:

The application filed on 27 May 2022 be dismissed.

The parties be heard on costs.

CATCHWORDS:

ROYALTY DEED – DISPUTE RESOLUTION CLAUSE – NOTICE – APPOINTMENT OF INDEPENDENT EXPERT – CONTRACTUAL INTERPRETATION – STAY OF EXPERT DETERMINATION – where the applicant and first respondent entered into a royalty deed – where the first respondent sought finance – where the financier sought for the applicant to execute a priority deed – where the applicant did not execute the priority deed – where the first respondent sent the applicant a notice of dispute – where the first respondent referred the dispute the chief executives – where an independent expert was appointed by the President of the Queensland Law Society – Whether the dispute is within the terms of the Royalty Deed – whether the first respondent gave the applicant proper notice – whether the dispute holds merits.

COUNSEL:

Mr P Dunning QC and Mr K Byrne (for the applicant)

Mr S Doyle QC & Mr A Messina (for the first respondent)

SOLICITORS:

Alexander Law (applicant)

Allen & Overy (first respondent)

REASONS

Introduction

  1. [1]
    The second respondent, Mr Thirgood, has embarked on an expert determination.  He is an expert appointed by the President of the Queensland Law Society.  He has been appointed to give an expert determination of a dispute between the applicant (Mineralogy) and the first respondent (Adani).
  2. [2]
    By this application Mineralogy seeks to enjoin the continuation of that expert determination.  Adani opposes the application: it wishes the expert determination to proceed.  Mr Thirgood, for his part, appeared at the outset of the hearing, agreed to abide the order of the court, and was excused.

Background to the Dispute

  1. [3]
    The dispute arises in this way.  By a deed entered into on 29 November 2011 Adani agreed to pay royalties to Mineralogy for mining a particular mining tenement (the Royalty Deed).
  2. [4]
    Clause 7.1 of the Royalty Deed provided:
  1. 7.Security
  2. 7.1As security for Mineralogy’s rights under this deed, including to receive payment of the Royalty, Adani agrees it will not create or permit the creation of any Encumbrance over any of part of the Royalty Tenement or its interest under this Deed unless the person taking the benefit of the Encumbrance (financier) executes a chargee’s priority deed, agreeing that:
  1. (a)
    the Encumbrance will rank in priority after unpaid Royalty;
  2. (b)
    any sale, assignment or foreclosure by the financier under the Encumbrance will be subject to compliance with the provisions of this Deed relating to assignment by Adani; and
  3. (c)
    the financier will release its Encumbrance if Adani withdraws from this Deed.
  1. [5]
    In 2021, Adani sought funding from certain financiers to assist it with the development of the tenement.  The financiers required security.  However, as can be seen, clause 7.1 requires that Adani not agree to encumber the tenement unless the financiers execute a priority deed which possesses the three necessary features specified in clause 7.1.  Of course, the most important of those was that Mineralogy’s unpaid royalties would have priority over the rights secured by the financier’s encumbrance.
  2. [6]
    There was some correspondence about the Priority Deed.[1]  Mineralogy suggested some changes, which were accepted.  Minerology did not sign the Priority Deed and so, on 14 December 2021, Adani’s solicitors called on Mineralogy to execute the Priority Deed, failing which there would be a notice of dispute.
  3. [7]
    In the same letter Adani’s solicitors said:

Dispute resolution procedure – notice

If [Mineralogy] does not sign and return the enclosed Priority Deeds within the time set out above, then this letter will be deemed to serve as a written notice given by [Adani] to [Mineralogy] under and for the purposes of clause 8 (in particular, clause 8.2) of the Royalty Deed.  The matters set out above are the particulars of the dispute the subject of this notice.

In accordance with clause 8.4 of the Royalty Deed, [Adani] refers the dispute the subject of this notice to the Australian chief executives (or their nominees) of the parties’ respective global corporate groups.

  1. [8]
    There was no response from Mineralogy.  And so, on 17 December 2021, Adani’s solicitors wrote to Mineralogy’s solicitors saying that under clause 8.4 of the deed the dispute was referred to the parties’ Australian chief executives and that, if that mechanism did not resolve the dispute within 20 business days, Adani would refer the dispute to expert determination under clause 8.5 of the deed.
  2. [9]
    Again, Mineralogy did not respond.
  3. [10]
    On 21 January 2022, Adani’s solicitors wrote to Mineralogy’s solicitors and referred their dispute to an independent expert for determination.  Adani nominated four potential experts and indicated an intention to ask the President of the Queensland Law Society to nominate an expert if there was no response.
  4. [11]
    No agreement was reached.
  5. [12]
    In accordance with its threat, Adani’s solicitors then wrote to the President of the Queensland Law Society (copied to Mineralogy’s solicitors) asking for the President to nominate an expert.
  6. [13]
    The President then sought the consent of the parties to a nomination.
  7. [14]
    Somewhat against the run of play, in March, both Adani’s solicitors and Mineralogy’s solicitors consented to a nomination of an expert by the President of the Queensland Law Society.  Mineralogy’s solicitors said, expressly: “Our client will agree to the independent expert as chosen by the QLS”.
  8. [15]
    Mr Thirgood was subsequently appointed by the President of the Queensland Law Society.
  9. [16]
    Since then, the expert determination has commenced with a procedural conference in May 2022.
  10. [17]
    As I have explained, Mineralogy now seeks to enjoin that expert determination.

Identifying the Dispute

  1. [18]
    Before analysing the arguments, it is relevant to identify the precise dispute between the parties.  Clause 7.1 of the Royalty Deed (quoted above) is directed to Adani.  Adani agrees that it will not encumber the mining tenement unless the financier who takes the benefit of the encumbrance executes a priority deed.  That priority deed must have the three features listed in paragraph 7.1.  Primarily, of course, Adani is not permitted to encumber the mining tenement unless Mineralogy’s right to royalties ranks higher in priority than the financier’s encumbrance.
  2. [19]
    It can be seen that, by its terms, clause 7.1 does not oblige Mineralogy to do anything.  It certainly does not oblige Mineralogy to sign a priority deed.  By its terms, it obliges Adani to refrain from encumbering the tenement unless the financier has executed a priority deed. However, Adani argues that clause 7.1 is supplemented by clause 12.5 which provides that each party to the Royalty Deed must promptly do all further acts and execute and deliver all further documents – in form and content satisfactory to that party – required by law or reasonably requested by another party to give effect to the Royalty Deed.
  3. [20]
    It is unnecessary to decide the merits of Adani’s contention that the combination of clauses 7.1 and 12.5 means that Mineralogy is obliged to execute the Priority Deed.  At present, it is sufficient to identify that as the issue before Mr Thirgood.[2]
  4. [21]
    Mineralogy makes three broad submissions in support of its application to stay the expert determination. The first is that the dispute is beyond the terms of the dispute resolution provisions in clause 8 of the Royalty Deed. The second is that no proper notice was given of the dispute so as to engage the dispute resolution process. The third is what Adani describes as merits issues, that is that clause 7.1 is clear that no obligation is imposed on Mineralogy and that Mineralogy’s execution of the Priority Deed cannot be compelled. Each is considered in turn.[3]

First Issue – Clause 8

  1. [22]
    The principal issue is whether the dispute is within the terms of clause 8 of the Royalty Deed.  Clause 8.1 is wide in its terms:
  1. 8.1The mechanisms set out in this clause 8 apply to all disputes or claims arising out of or relating to this Deed and the alleged breach, termination or claimed invalidity of this Deed (dispute).
  1. [23]
    It is difficult to see how the present dispute could possibly fall outside any reasonable commercial interpretation of clause 8.1.  The issue or dispute between the parties plainly involves a question as to whether or not Mineralogy is obliged to execute the priority deeds.  That is a dispute which “arises out of” or is a claim that ‘relates to’ the Royalty Deed.
  2. [24]
    Mineralogy argues that the dispute is not one that is contemplated by clause 8.1 because:
  1. (a)
    The operation of clause 8.1 is limited by the balance of clause 8 – and by clause 8.3 in particular;
  2. (b)
    The dispute involves the rights of third parties; and
  3. (c)
    The dispute involves questions of fact or mixed fact and law.

It is necessary to deal with each of those three arguments.

Proper Interpretation of Clause 8

  1. [25]
    The interpretation of the dispute resolution clause in the Royalty Deed needs to be approached in this way:
  1. (a)
    dispute resolution clauses, as with an ordinary contracts, are to be interpreted so as to ascertain the objective intention of the parties;
  2. (b)
    commercial contracts are to be construed so as to avoid them making commercial nonsense;
  3. (c)
    the context is important; and
  4. (d)
    the dispute resolution clause is not to be construed in isolation from the remainder of the contract.[4]  
  1. [26]
    As stated above, clause 8.1 is wide in its terms.  That was common ground.  To state the obvious, it applies to “all disputes or claims”.  Naturally enough, the dispute as to whether the Royalty Deed required Mineralogy to execute the Priority Deed is a dispute that either “arises out of (the Royalty Deed)” or ‘relates to’ the Royalty Deed. However, Mineralogy contends that clause 8.1 must be read with clause 8.3 which “delimits” and confines the otherwise wide embrace of clause 8.1. 
  2. [27]
    At this point, it is necessary to set out clauses 8.1 to 8.6:
  1. 8.1The mechanisms set out in this clause 8 apply to all disputes or claims arising out of or relating to this Deed and the alleged breach, termination or claimed invalidity of this Deed (dispute).
  2. 8.2Unless expressly provided to the contrary in this Deed, either party may give to the other party written notice setting out the particulars of a dispute and requiring that it be dealt with in the manner set out in this clause 8.
  3. 8.3For the purpose of this clause 8:
  1. (a)
    technical matter means a matter involving issues relating to the production of coal and the determination of coal Mined or the like which is capable of determination by reference to engineering or scientific knowledge and practice;
  2. (b)
    financial matter means a matter involving financial calculations which is capable of determination by audit or reference to accounting, taxation or normal financial practices; and
  3. (c)
    legal matter means a matter involving the meaning or interpretation of the provisions of this Deed on the rights, duties or liabilities of the parties under or in connection with this Deed which is capable of determination by reference to the law and any other matter that is not a technical matter or a financial matter.
  1. 8.4Either party may refer a dispute to the Australian chief executives (or their nominees) of the parties’ respective global corporate groups.[5]
  2. 8.5Failing resolution of the dispute by the chief executive officers (or their nominees) of the parties within 20 Business Days, either party may refer the dispute to an Independent Expert for determination.
  3. 8.6Where a dispute is referred to an Independent Expert in accordance with clause 8.5, an Independent Expert must be appointed by the parties.  If the parties fail to appoint or are unable to agree upon the appointment of an Independent Expert within 20 Business Days of the date of the referral under clause 8.5, either party may refer the matter:
  1. (a)
    if or to the extent it is a technical matter, to the President for the time              being of the Institute of Engineers, Australia;
  2. (b)
    if or to the extent it is a financial matter, to the Chairman for the time being of the Queensland Branch of the Australian Institute of Arbitrators and Mediators; or
  3. (c)
    if or to the extent it is a legal matter, to the President for the time being of the Queensland Law Society;

Who will nominate a suitably qualified person to act as the Independent Expert to determine the dispute.

  1. [28]
    Mineralogy draws attention to the restrictive nature of each of the three definitions in clause 8.3.  In particular, Mineralogy emphasises the words, in each case “(matter) which is capable of determination” by reference to a specialised field.
  2. [29]
    The first difficulty with Mineralogy’s argument is that the definitions in clause 8.3 do not expressly confine the width of clause 8.1.  The ordinary and literal meaning of clause 8.1 means that the dispute restriction process applies to all disputes or claims arising out of or relating to the Deed”.
  3. [30]
    The second difficulty is that a careful analysis of clause 8.3 and its function does not support the view that clause 8.3 is intended to confine the meaning of clause 8.1.
  4. [31]
    The purpose of the definitions in clause 8.3 is to give meaning to clause 8.6.  The evident purpose of clause 8.6 is to provide that:
    1. (a)
      in the event that a party refers a dispute to an Independent Expert under clause 8.5 (because a meeting of chief executives has failed) then the parties must appoint an Independent Expert; or
    2. (b)
      if the parties fail to appoint or are unable to agree on the identity of an Independent Expert within 20 days, then either party may refer the matter to the President of a peak body who will nominate a suitably qualified person to act as the Independent Expert.
  5. [32]
    Thus, clause 8.6 caters for two alternative scenarios that might occur (assuming the chief executives have failed to resolve the dispute).  Scenario one is that the parties may, in accordance with their obligations under the Royalty Deed, appoint an Independent Expert.  In that event, clause 8.6 does not restrict who they may appoint as the Independent Expert, although the definition of Independent Expert assumes that the person appointed will have expertise in one or other of the three categories in clause 8.3.[6]
  6. [33]
    Scenario two occurs if, within 20 days of the referral, the parties fail to appoint an Independent Expert, or fail to agree on who is to be appointed the Independent Expert.  In that event either party may refer the matter to the President of the Institute of Engineers, or to the Chairman of the Queensland branch of the Australian Institute of Arbitrators, or to the President of the Queensland Law Society. At this point the purpose of clause 8.3 and 8.6 becomes clear. That right of referral, possessed by either party, is not a right to refer the dispute to any of the heads of those three peak organisations. The relevant head of the peak organisation to whom the dispute is referred depends upon whether the matter is wholly, or in part,[7] a technical, financial or legal matter.  A party with a right of referral is obliged to refer disputes as to technical matters to the President of the Institute of Engineers, to refer financial matters to the Chairman of the Queensland branch of the Australian Institute of Arbitrators, and to refer legal issues (and any other matters[8]) to the President of the Queensland Law Society. The head of those peak bodies is then to appoint a suitably qualified person as the Independent Expert.
  7. [34]
    That requirement (that technical matters be referred to the President of the Institute of Engineers etc.) does not apply in the case of the first scenario. That is the parties are free to choose if they are agreed on the Independent Expert.
  8. [35]
    That interpretation is reinforced by the terms of clause 8.7(a):

An Independent Expert appointed (otherwise than by agreement of the parties) under this clause 8 must:

  1. (a)
    have reasonable qualifications and practical experience in the area of the matter of dispute;
  2. (b)
    …”
  1. [36]
    As can be seen, clause 8.7 envisages that the parties have more freedom as to the appointment of an Independent Expert where the expert is appointed by agreement.
  2. [37]
    And so, it is difficult to accept Mineralogy’s argument that the wide words of clause 8.1 (“all disputes”) are to be read as confined to only those disputes that can be characterised as a technical matter, or a financial matter, or a legal matter. Clauses 8.3 and 8.6 do not appear to confine clause 8.1 at all. A proper interpretation of clause 8 has these consequences:
  1. (a)
    Clause 8.1 expressly provides a dispute resolution mechanism for “all disputes or claims arising out of or relating to the Deed”;
  2. (b)
    Either party can refer any such dispute to the chief executives;
  3. (c)
    If the chief executives are unable to resolve such a dispute then either Scenario one or Scenario two occurs;
  4. (d)
    Under Scenario one the parties appoint an Independent Expert, agreed by them, to resolve the dispute;
  5. (e)
    Under Scenario two (the parties not having agreed to appoint an expert):
  1. either party can elect to refer the dispute to the head of a peak body – and the classification of the dispute as a technical, financial or legal matter dictates the particular peak body; and
  2. the head of that peak body will then appoint a suitably qualified person to act as the Independent Expert.   
  1. [38]
    From that analysis it can be seen that the definitions of technical, financial, or legal matters has limited work to do. Those classifications only matter in the event that the chief executives are unable to resolve the dispute, and the parties are unable to agree on an Independent Expert. Otherwise, the regime in clause 8 is perfectly consistent with the wide words of clause 8.1.
  2. [39]
    An illustration of the width of clause 8 is clause 8.4 which provides for a primary level of dispute resolution by the chief executives.  There is no reason for thinking that the reference to the chief executives is limited to any particular category of dispute. All disputes may be referred to the chief executives. Similarly, clauses 8.6 and 8.7 are consistent with the idea that all disputes can be referred to an Independent Expert who the parties agree should determine their dispute.
  3. [40]
    The whole scheme of clause 8 is expressly designed to provide two levels of dispute resolution.  That regime applies to “all disputes” in connection with or relating to the Royalty Deed.  In contrast, clauses 8.3 and 8.6 have a limited purpose.  If the parties reach the secondary level of the dispute resolution process, and are unable to agree on the Independent Expert, then there is a default mechanism which enables the Independent Expert to be appointed by one of three peak bodies – depending on the classification of the dispute.
  4. [41]
    In short, to read clause 8.1 as qualified by clause 8.3 and 8.6 is contrary to the ordinary and natural meaning of clause 8.1 itself. It ignores the fact that clauses 8.3 and 8.6 have a limited purpose, and instead elevates the significance of clauses 8.3 and 8.6 beyond their evident purpose in the overall regime of clause 8.
  5. [42]
    In my view, it is a mistake to ignore the plain and ordinary meaning of the words “all disputes” in favour of an interpretation that gives clauses 8.3 and 8.6 a prominence beyond their purpose.  No reasonable businessperson would adopt such a strained interpretation.[9]
  6. [43]
    The third difficulty with Mineralogy’s argument, as Adani points out, is the definition of “legal matter” in clause 8.3(c). That definition includes a “catch-all” at the end: and any other matter that is not a technical or a financial matter”.  Therefore, even if technical and financial matters were narrowly interpreted, the dispute would fall within the definition of “legal matter”. The words “any other matter” are words of wide import.
  7. [44]
    Mineralogy pointed to the use of the phrase “which is capable of determination” in each of sub-clauses 8.3(a), (b) and (c).  The argument was that that phrase had in mind a stand-alone, narrow and technical issue within one of the three disciplines.  Whilst the words do require the dispute to be capable of resolution, it is doubtful the words go so far as to limit the Independent Expert to a stand-alone technical disputes that are strictly within the borders of one discipline.  The words “as to the extent” in clause 8.6 suggest that the draftsperson had in mind that a dispute may not be a narrow, confined dispute which objectively remains within the boundaries of one technical area. That accords with logic. Even a narrow dispute, for example, involving the calculation of the royalty payable under clause 3.2 of the Royalty Deed would also involve, even incidentally, a proper interpretation of the Royalty Deed.
  8. [45]
    In any event, the ‘catch-all’ in clause 8.3(c) is sufficiently wide to encompass disputes that are not strictly ‘technical’ or ‘financial’ and intrude into different disciplines.

Third Party Rights

  1. [46]
    Mineralogy argues that the dispute resolution clause does not apply to disputes where third party rights may be affected. Mineralogy’s argument is put in this way:

The alleged dispute referred to expert determination involves the rights of third parties who are not parties to the Royalty Deed or the EPC Deed. Clause 8 does not apply to such a dispute. The third parties are Adani’s proposed financiers and the State of Queensland. It is plainly inappropriate for the expert determination process to purport to be convened where those parties are not bound by the Royalty Deed or the EPC Deed and would not be bound by any determination in the expert process, yet Mineralogy may be bound to enter agreements with them. Nor should a determination of legal rights pursuant to an expert process proceed in the absence of those parties; the proper forum is a legal proceeding before the Courts.[10]

  1. [47]
    As explained above,[11] by its express terms, clause 7.1 of the Royalty Deed does not oblige Mineralogy to do anything.[12] Clause 7.1 imposes an obligation on Adani. Adani agrees that it will not encumber the mining tenement unless the financier who takes the benefit of the encumbrance executes a priority deed. However, Adani argues that clause 7.1 is supplemented by clause 12.5 which provides that each party to the Royalty Deed must promptly do all further acts and execute and deliver all further documents – in form and content satisfactory to that party – required by law or reasonably requested by another party to give effect to the Royalty Deed. Presumably, Adani will contend that it has made a reasonable request that Mineralogy execute the Priority Deed, and that the Priority Deed does no more than give effect to clause 7.1 (i.e. by giving Mineralogy’s royalty payments priority),[13] and that in those circumstance clause 12.5 obliges Mineralogy to execute the Priority Deed.
  2. [48]
    On that basis, it is not the case that the dispute ‘involves’ the rights of third parties such as the financier and the State of Queensland. The dispute that the Independent Expert is to determine is whether clause 7.1 and clause 12.5 of the Royalty Deed obliges Mineralogy to execute the Priority Deed. That is a determination of the rights of Mineralogy and Adani. The expert’s determination cannot affect the rights of the financier or the State of Queensland. They are not parties to the deed or to the dispute. Thus, if the expert determines that Mineralogy is obliged to execute the Priority Deed that is a determination of the rights of Mineralogy and Adani inter se. Similarly, if the expert determines that Mineralogy is not obliged to execute the Priority Deed then that merely defines the parties’ rights under the Royalty Deed.
  3. [49]
    A determination by the expert will not be binding on any third party and cannot affect the rights of the financier. Indeed, whatever the determination of the expert, the financier’s rights are unaffected and the finacier is entitled to choose whether to enter into the Priority Deed or not. The financier’s decision may be affected by the expert’s determination, but that is some distance from a situation where a third party’s rights are affected by a determination.
  4. [50]
    Counsel for Adani have referred me to the recent decision of Brown J in Hutson v Nerang Subdivision Pty Ltd.[14] There, Her Honour kept the parties to their agreement to pursue expert determination even though the dispute concerned the form of the contract of sale to be entered into between the owner and third-party buyers. The dispute between the parties concerned their obligations to each other. The form of the contract offered to third-party buyers may have been of interest to them, but they were free to accept or reject the contract. As with this case, the third parties’ rights were not affected. That case is analogous to this.

Mixed Fact and Law

  1. [51]
    Adani argues that the dispute resolution clause, and the definition of ‘legal matter’ in clause 8.3(c) of the Royalty Deed, do not contemplate disputes of the kind sought to be agitated by Adani where the expert is required to make findings of fact or determine questions of mixed fact and law. The dispute in the present case, it is argued, involves complicated questions of fact and mixed fact and law.[15]
  2. [52]
    First, as explained above, the ordinary and natural meaning of the words “all disputes or claims arising out of or relating to the Deed” means that the dispute resolution procedure in clause 8 has a broad scope. There is no justification for reading those words down so that they do not comprehend questions of fact or disputes involving mixed questions of fact and law. That would give the dispute resolution procedure in clause 8 little or no work to do. Most disputes will involve some finding of fact. It would be commercial nonsense to neuter the dispute resolution process in that way.
  3. [53]
    Second, the ‘catch-all’ in clause 8.3(c), namely “and any other matter that is not a technical or a financial matter [emphasis added]” reinforces the view clause 8 has broad scope. The dispute resolution procedure, which has both a primary and secondary level,[16] is designed to apply to matters that are not within the definition of ‘technical’ or ‘financial’ matters. There is no evident intention to exclude questions of fact or even disputes involving mixed questions of fact and law.
  4. [54]
    Again, that accords with logic. Even a relatively simple dispute as to calculation of the royalty payable under clause 3.2 of the Royalty Deed may involve mixed questions of fact and law. Again, if the expert were not able to determine questions of fact, or mixed questions of fact and law, there would be little work for the dispute resolution procedure – whether at the chief executive level or at the expert determination level. The effect would be to sterilise clause 8.
  5. [55]
    Third, Mineralogy’s interpretation would involve, in effect, deleting or ignoring the words “or to the extent” in clauses 8.6(a), (b) and (c).
  6. [56]
    It is also worth mentioning that clause 8.9 of the Royalty Deed provides that either party may be legally represented at a hearing before the Independent Expert and will be entitled to produce written submissions, and any relevant materials or evidence. That right is consistent with the expert determining issues of fact, or law, or both. It is true that the parties are not expressly bestowed with a right of cross-examination. That is a matter of procedure for the expert to determine. The absence of such a right is hardly fatal to the idea that the expert can decide questions of fact.
  7. [57]
    In summary, there is no logical reason for reading into the dispute resolution clause, which has both a primary and a secondary operation, some sort of qualification excluding disputes that involve questions of fact or questions of fact and law. There is no commercial reason for excluding such claims. Clause 8.1 itself requires “all disputes or claims arising out of or relating to the deed” to be referred to the chief executives and then to expert determination.

Justice of the Case

  1. [58]
    Mineralogy argues that the justice of the case requires determination by the court rather than by the expert.  It is difficult to see why that is so.  The dispute resolution process has two levels: a reference to the chief executives and then, if that fails, a reference to an expert determination. That is the contractually agreed dispute resolution mechanism.  As Scrutton LJ said in Metropolitan Tunnel and Public Works Limited v London Electric Railway Co: “a guiding principle on one side and a very natural and proper one is that parties who have made a contract should keep it”.[17]
  2. [59]
    In any event, concealed behind this submission regarding the justice of the case is a claim by Mineralogy that it has some entitlement to enjoin the expert determination even if the dispute is within the scope of the dispute resolution procedure in clause 8. As Adani submits, for such an argument to succeed, Mineralogy would need to point to some actionable wrong[18] and to a balance of convenience that favours such an injunction. There can be no actionable wrong where Adani is merely adhering to the contractually agreed dispute resolution process. There is no basis for thinking that Mr Thirgood does not have relevant qualifications, or that the process has miscarried, or that the process cannot achieve a just result. On the basis of a prima facie case, or on the basis of the balance of convenience, it is difficult to see any proper basis for an interlocutory injunction.
  3. [60]
    The issue addressed immediately below provides an additional reason why the court would be reluctant to enjoin the expert determination.

Waiver of Right to Object 

  1. [61]
    As explained, Mineralogy failed to engage in the process, and then engaged in the process by consenting to the appointment by the President of the Queensland Law Society in March 2022.  Mr Thirgood has been appointed.  The process has started.  Thus, Mineralogy participated in March and May 2022.  That makes it appropriate for the parties to continue with their agreed process for resolving this dispute.  Or, put another way, Mineralogy did not object within a reasonable time.
  2. [62]
    Mr Palmer appeared for Mineralogy at the procedural conference on 5 May 2022. The procedural conference minutes do not record any objection made by Mr Palmer. There is a note that Mr Palmer reserved Mineralogy’s rights in relation to the letter sent by Adani’s solicitors to Mineralogy’s solicitors on 14 December 2021. A reservation of rights is not an objection. And the reservation is in relation to the letter only. It is impossible to construe that reservation of rights in relation to the letter as an objection to the expert determination process, especially in circumstances where Mr Palmer was willingly participating in the process. Only on 23 May 2022 did Mineralogy’s solicitors object to the continuation of the expert determination.
  3. [63]
    Thus, Mineralogy did not object to the process within a reasonable time. On that basis, even if there were a basis to enjoin the expert determination, the court would exercise its discretion to refuse to do so on the grounds of laches and delay.[19] Mineralogy does not explain why it refused to engage in the appointment of an Independent Expert in December 2021, and then consented to the Queensland Law Society’s appointment of an expert in March 2022, and then participated in a procedural conference with the expert in May 2022, and yet now in July 2022 seeks to enjoin the expert determination. And the injunction is sought on the basis that the original referral eight months ago in December 2021 was invalid and that the dispute, which also arose in December 2021, was not a dispute that was comprehended by the dispute resolution procedure in section 8 of the Royalty Deed.
  4. [64]
    Adani argued that rule 12(1) of the IAMA expert determination rules had the effect that, because Mineralogy had participated in the dispute resolution process without taking an objection, Mineralogy is deemed to have waived its right to object to any irregularity. The problem with that argument is that clause 8.16 of the Royalty Deed does not appear to incorporate those IAMA rules, at least in a direct way. Clause 8.16 is in these terms:

For the avoidance of doubt, the parties agree that to the extent that this clause 8 is not certain in its application, the Institute of Arbitrators and Mediators Australia Expert Determination Rules will apply. [emphasis added]

  1. [65]
    Adani submits that the uncertainty here concerns uncertainty about procedure; the parties intended that the IAMA rules would fill any gap in procedure. Of course, a gap in procedure is a different concept to an uncertainty in the application of clause 8. Here, Adani has not pointed to any particular uncertainty in the application of clause 8, let alone an uncertainty that is resolved by importing rule 12 dealing with waiver of a right to object.  For that reason, I do not accept that alternative argument.
  2. [66]
    In any event, the dispute is within clause 8 and the dispute resolution process has been engaged.    

Second Issue: Proper Notice

  1. [67]
    Mineralogy contends that no proper notice of dispute was given by Adani because:
    1. (a)
      The notice was not given in accordance with the formal notice requirements imported from another Deed executed by the same parties on the same day as the Royalty Deed;
    2. (b)
      The notice lacked proper particulars;
    3. (c)
      The notice provided an ultimatum;
    4. (d)
      The notice was equivocal because it was without prejudice.

Again, it is necessary to deal with each contention in turn.

Notice – Formal Requirements

  1. [68]
    Clause 8.2 provides:
  1. 8.2Unless expressly provided to the contrary in this Deed, either party may give to the other party written notice setting out the particulars of a dispute and requiring that it be dealt with in the manner set out in this clause 8.
  1. [69]
    That is a relatively modest notice requirement.  It is facilitative rather than mandatory. There is no formal notice provision in the deed that requires service to be given in a specific way.
  2. [70]
    In fact, notice was given to Mineralogy’s solicitors.  That was in accordance with Mineralogy’s own request.  On 7 September 2021, Mineralogy’s solicitors in addressing a letter from Adani to Mineralogy, expressly said: “Please forward all future correspondence to our firm.”  That is what happened.  The solicitors for each party wrote to each other on their clients’ behalf.
  3. [71]
    It is evident that Mineralogy’s solicitors had authority to act for their client.  There is no evidence to the contrary. There is no claim that, in fact, Mineralogy did not receive the letters from Adani’s solicitors of 13 September, 14 December, and 17 December 2021, and 21 January 2022. 
  4. [72]
    Mineralogy argues that the court should read the Royalty Deed and the EPC Deed together. The latter deed does contain a specific notice requirement. The submission is that the notice requirements under the EPC Deed were objectively intended to apply to notices under the Royalty Deed and so, to be effective, a written notice under the Royalty Deed was required to comply with the notice requirements of the EPC Deed.
  5. [73]
    It is a long bow. First, the notice provisions in clause 8 of the Royalty Deed expressly apply to notices of dispute under the Royalty Deed, and they apply “(u)nless expressly provided to the contrary in this Deed”. Nothing in the deed expressly provides to the contrary. Second, the notice provisions in the EPC Deed include an in-built limitation. They apply only to a “notice, consent or communication under this document” [emphasis added]. Plainly enough, as Adani contends, a notice under clause 8.2 of the Royalty Deed is not a notice under the EPC Deed. Third, the parties to the two deeds are different and so to import the notice provisions in the EPC Deed into the Royalty Deed would require notices to be given by or to Waratah Coal Pty Ltd – an entity which is not a party to the Royalty Deed. That result would be commercial nonsense. Fourth, in any event, Mineralogy expressly requested that correspondence in relation to the Royalty Deed be sent to their solicitors. That is what Adani did.  

An Absence of Particulars?

  1. [74]
    Mineralogy contends that the letter of 14 December 2021 did not provide particulars of the alleged dispute. One only has to read the letter of 14 December 2021 in order to see that the claim of a lack of particulars is baseless. The letter enclosed the Priority Deed and called on Mineralogy to execute the deed The letter expressly asserted that Mineralogy was obliged to execute the Priority Deed by reason of clauses 7.1, 12.5, and 12.6 of the Royalty Deed.
  2. [75]
    Somewhat tellingly, Mineralogy asserts an absence of particulars but does not say what particulars are missing.
  3. [76]
    Mineralogy’s outline of submissions suggests that, rather than an absence of particulars, there is a substantial volume of material which requires a search to identify the particulars.[20] In other words, the contention is that the particulars are buried beneath an avalanche of detail. Again, that contention does not survive a fair reading of the 14 December letter.
  4. [77]
    Mineralogy’s outline of submissions asserts that Adani failed to articulate Adani’s interpretation of the Royalty Deed.[21] That is wrong. At page 2 of the 14 December letter Adani explains its interpretation of clauses 7.1, 12.5 and 12.6 of the Royalty Deed.[22]

Ultimatum

  1. [78]
    Mineralogy contends that the letter of 14 December 2021 provided an ultimatum and a unilateral deeming which a reasonable recipient could not fairly construe as a notice under clause 8. The 14 December letter provided:

If your client does not sign and return the enclosed Priority Deeds within the time set out above, then this letter will be deemed to serve as a written notice given by our client to your client under and for the purposes of clause 8 (in particular, clause 8.2) of the Royalty Deed. The matters set out above are the particulars of the dispute the subject of this notice.

In accordance with clause 8.4 of the Royalty Deed, our client refers the dispute the subject of this notice to the Australian chief executives (or their nominees) of the parties’ respective global corporate groups.

  1. [79]
    In substance, the dispute comprised Adani’s insistence that, under the Royalty Deed, Mineralogy was obliged to execute the Priority Deed and its complaint about Mineralogy’s continuing failure to do so. The 14 December letter expressly gave written notice of that dispute under clauses 8.2 and 8.4. The letter also recited the history of the attempts to have Mineralogy execute the Priority Deed and gave Mineralogy “for the last time” a further two business days to execute the Priority Deed. A reasonable businessperson would take the view that the 14 December letter was, in substance, notice under clause 8 but also afforded Mineralogy a last opportunity to sign.
  2. [80]
    In any event, even if there were some doubt, on 17 December 2021, Adani’s solicitors wrote again, referring to the dispute set out in the 14 December letter and expressly engaging the primary level of the dispute resolution process under clause 8.4.    

Without Prejudice

  1. [81]
    Mineralogy makes a point that the letter of 14 December 2021 is marked ‘without prejudice’ and that therefore it cannot constitute a referral to the chief executives under clause 8.4 of the Royalty Deed. In fact, the letter does not attempt any compromise and is not in substance a ‘without prejudice’ letter. Indeed, the limit of the label ‘without prejudice’ is express in the letter itself:

This letter is without prejudice to, and does not limit, our client’s rights and remedies, including (without limitation) in relation to any other method which our client could use to satisfy the requirements of clause 7.1 of the Royalty Deed or otherwise.

  1. [82]
    That is a mere reservation of rights. It does not qualify the referral.
  2. [83]
    For those reasons, notice was effective under clause 8 of the Royalty Deed.

Third Issue: Merits Issues

  1. [84]
    The issue before Mr Thirgood has been explained above.[23]
  2. [85]
    That issue raises the extent of the obligation under clause 12.5 of the Royalty Deed. The issue will be whether the execution of the Priority Deed is:
    1. (a)
      reasonably requested by Adani; and
    2. (b)
      requested to give effect to the Deed.[24]
  3. [86]
    It is impossible for me to decide that issue. It was not fully argued and may require evidence as to what is reasonable in this context, as well as consideration of the context of the deed.
  4. [87]
    In any event, the parties have agreed that their disputes in relation to the Royalty Deed would be resolved by their chief executives and, if they were unable to resolve the dispute, determined by an Independent Expert. That is what the parties agreed and, to quote again from Scrutton LJ in Metropolitan Tunnel and Public Works Limited v London Electric Railway Co, “parties who have made a contract should keep it.”[25]
  5. [88]
    There are many reasons why the parties may have chosen an expert determination over traditional litigation. The expert will often have technical or specialist knowledge, which can achieve savings of time and expense. The expert may also have an investigative role.[26] The expert determination is conducted privately rather than publicly,[27] and frequently the expert determination is specified as final and binding.[28] And frequently the parties are obliged to pay their own costs, and to bear the expert’s costs equally.[29] Those are all features which mean that, in selecting a dispute resolution process that involves an expert determination, the parties can be taken to have consciously selected a substantively different mode of dispute resolution. The court ought not lightly disregard that substantive bargain.
  6. [89]
    In many cases, of course, a party who has ignored a dispute resolution clause and has brought proceedings in the court, will be met with an application to stay the court proceeding in order to force the plaintiff back to the agreed dispute resolution procedure.[30] In those cases, the plaintiff has what Chesterman J described as a heavy onus:

The discretion whether or not to grant the stay is obviously wide. The starting point for a consideration of its exercise is that the parties should be held to their bargain to resolve their dispute in the agreed manner … However, a stay will not be granted if it would be unjust to deprive the plaintiff of the right to have his claim determined judicially or, to put it slightly differently, if the justice of the case is against staying the proceeding. The party opposing the stay must persuade the court that there is good ground for the exercise of the discretion to allow the action to proceed and so preclude the contractual mode of dispute resolution. The onus is a heavy one. The court should not lightly conclude that the agreed mechanism is inappropriate.[31] [emphasis added]

  1. [90]
    Here, Mineralogy seeks a stay of the contractually agreed expert determination process. Having concluded that this dispute is comprehended by clause 8, a parity of reasoning suggests that, at the least, the court would ordinarily conclude that the agreed dispute resolution mechanism is the most appropriate forum for the parties to resolve their dispute.     
  2. [91]
    For those reasons the application will be dismissed.

Footnotes

[1] There were two priority deeds proposed. For convenience these reasons refer to them in the singular.

[2] The issue is discussed later at paragraph [83].

[3] Mineralogy also contended that Mr Thirgood was in a position of conflict and was not independent or impartial. However, that contention was withdrawn.

[4] Lepcanfin Pty Ltd v Lepfin Pty Ltd (2020) 102 NSWLR 627 at [79]-[94]. Adani’s submissions helpfully summarised the principles at [28].

[5]  For convenience, I will refer to the Australian chief executives (or their nominees) as the chief executives.

[6] And so, for example, a “legal” expert might be appointed as the Independent Expert for a dispute that involves technical or financial matters or a combination of different types of disciplines.

[7] The words “to the extent” in clause 8.6(a), (b), and (c) suggest that the matter need not be wholly a “technical” matter in order to be referred to the President of the Institute of Engineers.

[8] See discussion below at paragraph [43].

[9] Ecoss Property Holdings Pty Ltd v Gee Dee Nominees (2017) 91 ALJR 486 at [16].

[10] Mineralogy’s outline of submissions at [42]. Note that the reference to the EPC Deed is a reference to a deed signed between the same two parties on the same day.

[11] See paragraph [19] above.

[12] That is consistent with Mineralogy’s submissions at [69].

[13] Presumably also Adani will contend that the form and content of the Priority Deed appears to have been approved by Mineralogy because changes Mineralogy suggested were incorporated in the document.

[14] [2021] QSC 323. 

[15] Mineralogy’s outline of submissions at [46].

[16] See paragraph [40] above.

[17] [1926] Ch 371.

[18] See Adani’s submissions at [45]; ABC v Lehane Game Meats Pty Ltd (2001) 208 CLR 199. See also Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (4th ed) at [21-035] and [21-350] (“a prima facie case of the existence of an underlying cause of action”).

[19] Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (4th ed) at [21-375].

[20] Paragraph 89(d) of Mineralogy’s outline of submissions suggests, rather than an absence of particulars, there is a substantial volume of correspondence which requires a search to identify the particulars. In other words, the contention is that the particulars are buried beneath an avalanche of detail. Paragraph 89(e) asserts that Adani had failed to articulate Adani’s interpretation of the Royalty Deed. But that is wrong: see page 2 of the 14 December letter. The position is the same with paragraph 89(h).

[21] See paragraph 89(e) of Mineralogy’s outline of submissions

[22] The position is the same with paragraph 89(h).

[23] See paragraph [18] to [20] above.

[24] There is no doubt a live issue as to whether facilitating finance for Adani is giving effect to the deed or merely giving effect to what Adani seeks to achieve by reason of the deed. See the case illustrations in Lewison & Hughes, The Interpretation of Contracts in Australia at [6.13].  

[25] [1926] Ch 371.

[26] See Capricorn Inks Pty Ltd v Lawter International (Australasia) Pty Ltd [1989] 1 Qd R 8 at 19.

[27] That is the case here: see clause 8.11 which requires confidentiality.

[28] That is the case here: clause 8.13 provides that, in the absence of manifest error, the determination of the Independent Expert will be final and binding upon the parties.

[29] Clause 8.15 is to that effect here.

[30] See Straits Exploration (Australia) Pty Ltd v Murchison United NL (2005) 31 WAR 187 at 193.

[31] Zeke Services Pty Ltd v Traffic Technologies Ltd [2005] 2 Qd R 563, 568. This passage was quoted and approved by Daubney J in Hooks Enterprises Pty Ltd v Sonnenberg Pty Ltd [2018] 1 Qd R 116 at [30] and by Brown J in Hutson v Nerang Subdivision Pty Ltd [2021] QSC 323 at [27].

Close

Editorial Notes

  • Published Case Name:

    Mineralogy Pty Ltd v Adani Mining Pty Ltd

  • Shortened Case Name:

    Mineralogy Pty Ltd v Adani Mining Pty Ltd

  • MNC:

    [2022] QSC 154

  • Court:

    QSC

  • Judge(s):

    Freeburn J

  • Date:

    22 Jul 2022

  • White Star Case:

    Yes

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2022] QSC 15422 Jul 2022-
Notice of Appeal FiledFile Number: CA8971/2229 Jul 2022-

Appeal Status

Appeal Pending

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