Forrest & Forrest v Wilson – consequences for mining lease applicants

As we previously reported1, a consequence of the High Court of Australia’s decision in Forrest & Forrest Pty Ltd  v Wilson2 is unexpected and unhelpful uncertainty regarding the validity of the grant of certain mining leases in Western Australia.

The State Government and the Department of Mines and Petroleum (DMP) are continuing to assess an appropriate legislative fix for the issues arising out of the High Court’s decision. Although this assessment is ongoing, the DMP has publicly indicated that the legislative fix will not cover mining lease applications which (in DMP’s opinion) are affected by the High Court’s decision. Affected applicants will be required to re-submit new mining lease applications that comply with the relevant requirements of the Mining Act. The DMP has not indicated (at this stage) whether the same approach will be taken for other applications for mining tenure which have similar document lodgement requirements.

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Filed under Australia, Department of Mines and Petroleum, Herbert Smith Freehill Mining, Herbert Smith Freehills, Mining, Natural resources, Resources, State Government, Western Australia

Federal Government Announces Junior Mineral Exploration Tax Credit

On 2 September 2017, the Government announced a welcome new four-year $100 million Junior Mineral Exploration Tax Credit (JMETC) following the expiry of the existing Exploration Development Incentive (EDI) exploration credit regime.

The JMETC will commence this 2017-18 financial year. Companies still have until 30 September to report their estimated expenditure to access credits under the existing EDI for the 2016-17 income year.

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High Court applies strict compliance test under the Mining Act 1978 (WA) and raises doubts regarding tenement validity –remedial legislative response required

In its recent decision in Forrest & Forrest v Wilson [2017] HCA 30, the High Court held that a failure to strictly comply with the technical lodgements requirements of the Mining Act 1978 (WA) (Mining Act) invalidated a decision of the Mining Warden to recommend that a number of mining leases be granted. This overturned two decisions of the Western Australia Supreme Court (at hearing and on appeal) which reached an opposite conclusion.

It also departed from the generally understood position that a mining lease, once granted, conferred on the holder an ‘indefeasible’ mining title that cannot be the subject of subsequent legal challenge on the basis that the tenement was invalidly granted.

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Queensland’s mining sector set to experience significant changes to financial assurance and rehabilitation requirements with proposed reforms

Mining projects in Queensland typically require financial assurance (FA), a form of financial security/bonding provided to the Government to cover costs associated with environmental harm and rehabilitation, should the project not comply with environmental obligations.

In 2016, an independent review of Queensland’s FA framework was undertaken, which revealed that an increasingly small amount of land disturbed by mining is rehabilitated, causing over-reliance on the FA to remediate the environmental impacts of mining. Consequently, the Government committed to a number of reforms and on 4 May 2017, released the first 2 of 6 proposed discussion papers outlining proposed changes to Queensland’s FA and rehabilitation frameworks for the resources sector.

The reforms, if adopted, will have significant impacts for mining operational costs, decisions to place mines on care and maintenance and the structuring and timing of divestment of mines.

The proposed reforms

The Financial Assurance Framework Reform Discussion Paper (FA Paper)1 is based around a ‘tailored approach’ to FA. The reforms contemplate the majority of operators contributing to a pooled fund with annual contribution rates of between 0.5 and 2.75%, rather than providing bank guarantees. For a number of companies, this will result in a significant increase in surety costs.

The reforms also involve:

  • assigning FA arrangements to resource companies based on their size and level of credit/insolvency risk;
  • undertaking more realistic calculations of rehabilitation costs and phasing out discounts on FA and use of company approved calculators;
  • pooling FA into an interest-earning Rehabilitation Fund for certain resource companies;
  • introducing new options for the delivery of FA, such as insurance bonds;
  • clarifying the obligations of operators for sites in care and maintenance; and
  • strengthening the assessment of financial capability of incoming mine owners/investors, including the potential introduction of a change of control trigger.

The State intends to remove the ability of a resource company to be sold, distinct from the assets, without the State having the power to reassess the conditions of the tenure and approvals. This will involve guidelines for what are acceptable counterparties.

The Better Mine Rehabilitation for Queensland Discussion Paper (Rehabilitation Paper)2 currently applies only to site-specific mining operations and proposes a number of measures which complement those outlined in the FA Paper, to proactively mitigate rehabilitation risk. These measures include:

  • using life-of-mine plans to outline operational and rehabilitation matters at all stages of mine life;
  • improving assessment and reporting of rehabilitation performance with self-assessments, independent audits and checks by the regulator;
  • enforcing progressive rehabilitation requirements in life-of-mine plans;
  • setting clearer completion criteria for rehabilitation outcomes;
  • introducing performance-based incentives for the management of rehabilitation; and
  • enhancing data collection practices to improve analysis and reporting on rehabilitation performance.

Once legislative provisions are introduced to facilitate the Rehabilitation Paper, the framework is to be implemented in a staged approach. For existing site-specific mines, provision of a life of mine plan will be required on the first anniversary day following:

  • one year after commencement of the legislative provisions for ‘higher risk’ existing mines; and
  • two years after commencement of the legislative provisions for the remaining existing mines.

Next steps

The FA Paper and the Rehabilitation Paper were open for public consultation until 15 June 2017, with responses now being considered.

Additional discussion papers are expected to be released by late 2017, including papers on the:

  • expanded range of surety providers;
  • expansion of the Abandoned Mines Land Program; and
  • improved management of sites in care and maintenance.

The various reforms are expected to begin taking effect by mid-2018.


  1. Financial assurance framework reform.
  2. Better Mine Rehabilitation for Queensland.

This article was written by Madeline Simpson, Special Counsel, Brisbane.

Madeline Simpson
Madeline Simpson
Special Counsel, Brisbane
+61 7 3258 6662

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High Court reconfirms object commercial purpose test for construction of contracts

This is a summary of a High Court decision made in the case of Ecosse Property Holdings Pty Ltd v Dee Gee Nominees Pty Ltd [2017] HCA 12 in dispute of a contract that restricted the sale and purchase due to planning restrictions.


The parties had entered into a long-term lease (99 years) for land, in circumstances where they were unable to effect a sale and purchase due to planning restrictions. The following amendments were made to a clause governing the payment of rates, taxes and other outgoings in the relevant lease agreement (clause 4):

“AND [the Lessee] will pay all rates taxes assessments and outgoings whatsoever which during the said term shall be payable by the tenant in respect of the said premises.”

The appellant argued that the above clause required the lessee to pay all rates, taxes and outgoings in respect of the land, whilst the respondent argued that the modifications to the clause only obliged the lessee to pay for imposts that were levied on it in its capacity as a tenant.

Neither party disputed during proceedings before the Court of Appeal (Vic) that the amendments left clause 4 ambiguous, and neither party objected to reference being made to the deleted words for the sake of interpreting clause 4.


A majority (4-1) of the High Court conceded that, prima facie, the clause was ambiguous and either the appellant’s or the respondent’s interpretations were plausible.1 As such, their Honours favoured interpreting the clause by reference to what a reasonable person in the position of the parties would have interpreted clause 4 (including its deleted words) to mean in light of the circumstances known at the time that the agreement was executed (objective test).2

The majority ultimately accepted the appellant’s construction of clause 4, and overturned the decision of the Court of Appeal. As part of their interpretation of clause 4 through the objective test, their Honours placed great emphasis on understanding the apparent commercial purpose of the lease. Reference was made to clause 13, which set out the intention of the parties to the lease:

‘in circumstances in which the parties were unable to convey a freehold estate in the land, they had chosen instead to convey a leasehold estate for almost a century for a fixed sum.’3

As such, the commercial purpose of the lease was to ‘recreate’ conditions (including a fixed value consideration of $70000 for the 99-year lease with no future adjustment) that would have otherwise existed if the land had been sold. Their Honours concluded that, as the lease purported to place the lessor as close in position to that of a vendor of land, the liabilities in clause 4 would have otherwise been transferred to a (quasi-) purchaser upon transfer of title. Therefore, the lessee was required to pay all rates, charges and obligations for the period of the lease.4

Nettle J dissented, preferring a construction of clause 4 that only considered the language used by the parties in light of the circumstances in which the contract was made.5 With reference to the strikeout of “excepting land tax”, “Landlord or” and “but a proportionate part…”, his Honour agreed that the proper interpretation of clause 4 was to oblige the lessee to only pay for imposts that were levied on it in its capacity as a tenant. His Honour did not view the ‘commercial approach to construction’ as ‘a licence to alter the meaning of a term that is ‘clear and fairly susceptible of one meaning only.’6


A possible implication of this case is establishing a High Court precedent in interpreting ambiguous clauses; greater weight will be placed on the presumed commercial purpose of an agreement than the language used and adopted by parties to the agreement. Nettle J was particularly critical of the majority’s approach, citing that the court ‘is not authorised under the guise of construction to make a new contract for the parties at odds with contract to which they have agreed.’7

This post was written by Julien Rosendahl, Graduate, Brisbane.


  1. Ecosse Property Holdings Pty Ltd v Dee Gee Nominees Pty Ltd [2017] HCA 12, at [15].
  2. Ibid, at [16].
  3. per Kiefel, Bell, Gordon JJ at [18].
  4. Ibid, at [25-26].
  5. per Nettle J, at [98].
  6. Id.
  7. Ibid, at [98].

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Queensland explores mining rehabilitation and financial assurance reforms

At a glance

The Queensland Government has proposed broad policy and legislative reform in relation to financial assurance and mine rehabilitation with a view to improving rehabilitation performance, reducing reliance on the financial assurance system and clarifying mine rehabilitation requirements.

The first two of a series of discussion papers have recently been released, and are open for public comment until 15 June 2017.

What’s to come

Key aspects of the reform package include:

  • a new financial assurance framework that eschews a ‘one size fits all’ approach, and is tailored to the operator’s risk profile and potential rehabilitation liability;
  • a rehabilitation fund to pool contributions;
  • diversified methods for providing financial assurances;
  • a framework that requires, monitors and assesses progressive mine rehabilitation, rather than taking an ‘end of life’ approach;
  • mandatory reporting and clear signing off on progressive rehabilitation; and
  • more realistic estimates of rehabilitation costs.

If adopted, the reforms are likely to have significant impacts on operational costs, decisions to place mines on care and maintenance and the timing of divestment.

Key dates

Proponents in the resources sector should be aware of the following proposed timetable for stakeholder engagement:



Key dates


A redesigned financial assurance framework—the tailored solution

Discussion paper released

Open for comment until 15 June 2017


Better mine rehabilitation for Queensland

Discussion paper released

Open for comment until 15 June 2017


Expanding the range of surety providers

Mid to late 2017


Expanding the Abandoned Mine Lands Program

Late 2017


Improving management of sites in care
and maintenance

Late 2017



Mid 2018


Watch this space – asset transfers and share sales

As part of the ‘other reforms’ aimed at improving rehabilitation outcomes in Queensland, the Government has identified the need to investigate how the financial capacity (i.e. ability to meet rehabilitation costs) of incoming owners of resources assets is assessed.

It is possible that the risk of unfunded rehabilitation costs could be addressed by introducing a power to regulate resources transactions effected by way of share sale.  In addition, the Government may also look at developing guidelines to assist both industry and decision-makers when considering ‘acceptable counterparties’ for both share and asset sale transactions involving resources interests.

For further information, please contact William Oxby, Partner, or Madeline Simpson, Special Counsel.

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Argentina seeks to double investment in mining sector

The Argentina government is working on a bill to establish a federal mining agreement to harmonise all existing legislation across the different provinces and with the federal government.

After a year of intensive negotiations with the different provinces, the Argentine government is finalising details of a plan to relaunch mining nationwide. The government expects to begin the debate in congress on the 1st March, following the summer recess. However, it expects strong opposition to the agreement from environmental groups.

The goal of Macri’s government is to double investment in the mining sector to US$25bn in eight years, compared to the US$10bn invested in the 2007-15 period.

The move is aimed at providing tax stability to investors, avoiding conflicts with local governments and winning over the support of local communities for the mining industry, in the same fashion as the previous government did with the oil industry.

This post was written by Ignacio Paz, Partner, Madrid.

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Shareholder activism: Update on the status of ‘advisory’ environmental resolutions in Australia

In its recent decision in Australasian Centre for Corporate Responsibility v Commonwealth Bank of Australia [2016] FCAFC 80, the Full Court of the Federal Court (Full Court) dismissed an appeal by the Australasian Centre for Corporate Responsibility (ACCR). This decision has effectively ended the prospect of shareholder activists proposing ‘advisory’ resolutions relating to the management of a company.


The ACCR is a not-for-profit association promoting shareholder engagement and advocacy.

In this case, the ACCR sought for the directors of the Commonwealth Bank of Australia (CBA) to propose one of 3 alternative shareholder resolutions at CBA’s annual general meeting (AGM). CBA refused to allow two of the resolutions. These resolutions required the CBA board of directors to report annually to shareholders on the quantum of greenhouse gas emissions CBA ‘is responsible for financing’, the risks posed to CBA from climate change, and the strategies adopted by the bank to mitigate those risks.

CBA agreed to include the third alternative resolution for consideration at the AGM. This resolution sought the amendment of CBA’s constitution to require the directors to report to shareholders on the directors’ ‘assessment of the quantum of greenhouse gas emissions [CBA is] responsible for financing’.

The ACCR brought the case to the Federal Court. After the Federal Court ruled against it, the ACCR appealed to the Full Court.

Implications of the decision

The case was run as a test case by the ACCR to bring Australian law more in line with the law in the US. In the US, shareholders routinely pass non-binding resolutions to express opinions as to the management of companies. The Full Court rejected this approach and emphatically denied the existence of a general power under Australian law to allow shareholders to pass such ‘advisory’ resolutions regarding issues of management.

The decision comes soon after the repeal of the provisions under the Corporations Act 2001 (Cth) that entitled 100 or more shareholders to demand that a company call a general meeting. The combination of the repeal of these legislative provisions and the Full Court’s decision leaves boards of directors in a better position to refuse a requisition by shareholder activists of ‘advisory’ resolutions.

Despite these developments, the level of shareholder activism is unlikely to decline. For example, the ACCR has had some success in raising awareness of its campaigns by requisitioning special resolutions to amend the constitutions of large Australian banks, energy and mining companies. None of these resolutions have so far been successful in Australia, considering they require 75% of shareholders to vote in favour in order to pass. They do, however, bring attention to, and force boards to comment on, the issues raised.

In this context, another point reinforced by the Full Court was a board’s ability to comment on proposed resolutions by shareholders. The ACCR argued that the CBA board had acted beyond its power by recommending against the proposed amendment to the CBA constitution because the board did not consider the resolution to be in the best interests of the company. The Full Court rejected the ACCR’s argument in this regard.


The ACCR argued that it should not be liable for CBA’s costs on the basis that the case was in the public interest and may have far reaching implications on shareholder participation or corporate governance. The Full Court did not accept the ACCR’s argument, noting that an applicant which is established to pursue a particular public interest should not be exempted from the usual costs order where litigation brought in pursuit of that purpose fails.

For further information, please contact Mary Boittier, Executive Counsel or your usual Herbert Smith Freehills contact.

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English High Court allows group claim to proceed against UK-domiciled mining company in relation to acts of subsidiary company abroad

The English High Court has rejected jurisdiction challenges by UK-domiciled mining company Vedanta Resources PLC and its Zambian-domiciled subsidiary Konkola Copper Mines PLC, allowing a group claim brought by 1,826 Zambian villagers in respect of alleged environmental pollution from the copper mine in Zambia to proceed against both companies: Lungowe & others v Vedanta Resources PLC and Konkola Copper Mines PLC [2016] EWHC 975 (TCC)

This case will be of interest to companies which are headquartered in London but with operations run by subsidiary companies around the world. If a similar approach is adopted in other cases, it may be difficult for such companies to challenge English jurisdiction for claims against both parent and subsidiary based on acts of the subsidiary company abroad – though of course each case will depend on its precise circumstances including (importantly) the nature, scope and extent of the parent company's control.

Click here to read more.  For further information please contact John Ogilvie, Joanne Keillor or your usual Herbert Smith Freehills contact. 

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Extension of WA co-funding drilling exploration program

The Western Australian State Government (State) recently announced the thirteenth round of applications for the Co-Funded Exploration Drill Program (Program), with an additional $5 million in grants available for explorative drilling programs in the 2016 / 2017 year. To date, prior Program rounds have provided funding of approximately $23 million to explorers, miners and prospectors.

The Program is the flagship program of the State-funded Exploration Investment Scheme (EIS), which promotes and supports innovative exploration drilling projects throughout Western Australia. The Program offers up to a 50% refund for innovative explorative drilling programs, subject to caps determined by whether the project is for general multi-hole drilling, single deep-hole drilling or prospecting. The EIS has resulted in multiple significant discoveries since its inception in 2009, including the Nova nickel deposit.

The State’s move to extend funding is an important response to the current economic climate and the associated impact on mining activity in Western Australia, particularly exploration. Concerning trends such as a decline in exploration spending and a narrowed focus on brownfield funding are reflective of a lack of confidence in the resources sector during a period of volatility in commodity and currency markets. Limited private investment and capital raising opportunities for junior proponents compound the issue, making it particularly difficult for junior proponents to commit to and fund meaningful exploration programs. In announcing the Program funding extension, Mines and Petroleum Minister Bill Marmion stated “There has never been a more important time to support exploration. This innovative program favours under-explored and greenfield[s] areas, helping more than 590 projects and 450,000 metres of drilling since it began in 2009.” 

Sustained exploration is key to adopting a long-view of the commodities cycle. There is currently a strong focus on capital returns for projects in a low-growth environment, however given the finite nature of mining projects, a lack of exploration at this point in the commodities cycle may lead to a constrained future project pipeline.    

Applications for Program funding are open until 5 April 2016, and should be made via the Western Australia Department of Mines and Petroleum website.

For further information, please contact Jay Leary, Partner, or your usual Herbert Smith Freehills contact.

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