High Court decision creates uncertainty for WA mining leases

What you need to know

• In a recent decision, the High Court found the lodgement of a mineralisation report contemporaneously with a mining lease application was an essential pre-condition before the Warden could recommend the grant of the mining lease.
• The decision challenges the prevailing view in Western Australia that the Warden and Minister have a broad discretion to waive non-compliance with procedural requirements of an application under the Mining Act.
• The decision casts doubt on the validity of mining leases granted since 2006 where the application was supported by a mineralisation report that was lodged after the mining lease application.
• The decision may signal that the Courts will be duty bound to adopt a strict approach to non-compliance with the procedural and other requirements of the Mining Act, which could have implications for the validity of other tenements granted without strict compliance with Mining Act requirements.

What you need to do

• Review any existing mining leases, and current mining lease applications, to confirm if those applications were supported by a mineralisation report lodged at the same time at the application.  If the mineralisation report was lodged at a later time, the validity of the lease may be in doubt and advice ought  to be taken to address any potential invalidity.
• Ensure that, going forward, all tenement applications are lodged strictly in accordance with the requirements of the Mining Act.

Background

On 28 July 2011, Yarri Mining Pty Ltd and Onslow Resources Ltd lodged two mining lease applications.  The Mining Act 1978 (WA) (Mining Act) required that each application be accompanied by either a mining operations statement or a mineralisation report.  The applicants did not lodge either of those documents with its applications.  A mineralisation report was lodged several months later.

The applications overlapped the Minderoo pastoral lease, held by Forrest & Forrest Pty Ltd (Forrest).  Forrest lodged objections to the applications.

Following a hearing of Forrest's objections, the Warden recommended that the Minister grant the applications.  The Warden held that the lodgement of a mineralisation report was an essential precondition to the exercise of a power to make a recommendation, but it was not an essential precondition that the report be lodged at the same time as the application.

Forrest applied to the Supreme Court to quash the Warden's recommendation.  The Supreme Court concluded that the Warden did have the jurisdiction to make a recommendation to the Minister, despite the fact that the mineralisation report was lodged late.

Forrest appealed the Supreme Court's decision to the Western Australian Court of Appeal.  The Court of Appeal dismissed the appeal, and found that the Warden did not act outside his powers.  The Court of Appeal accepted that late lodgement of a mineralisation report was a failure to comply with the Mining Act, but held that late lodgement did not invalidate a subsequent recommendation that a mining lease be granted.

Forrest applied for, and was granted, special leave to appeal to the High Court.  The High Court allowed the appeal and found that lodging a mineralisation report contemporaneously with a mining lease application was an essential precondition to the exercise of the power to recommend the grant of a mining lease.  Hence, the failure to meet that essential condition invalidated the recommendation that the applications be granted.

High Court decision

The Court characterised the issue as one of statutory construction and referred to the principle established in Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355 – whether the exercise of a statutory power in breach of a condition regulating the exercise of that power is invalid depends upon whether there is a legislative purpose that such an exercise of power will be invalid.

The High Court held that, having regard to the statutory purpose of the Mining Act, a failure to lodge a mineralisation report contemporaneously with a mining lease application would invalidate any purported exercise of a power to recommend the grant of a mining lease.  There were several key reasons given by the Court for its conclusion:

• (Right to exploit minerals) The High Court placed particular emphasis on a legal principle that was not referred to in the courts below: where a statutory regime confers power on the executive government to grant rights to exploit the resources of the State, compliance with that regime is a necessary condition for a valid grant (absent a contrary intention expressed in the legislation).  This approach to statutory construction reflects the fact that, under the Western Australian Constitution, the power to manage and control lands and minerals is vested exclusively in the legislature, rather than in the executive.  Accordingly, any conditions set by the parliament on the grant of Crown land or rights to exploit resources must be complied with strictly.
• (Terms of the Mining Act) The High Court considered that the terms of the Mining Act are clear (as was acknowledged by all the courts below) that a mineralisation report was required to be lodged at the same time as the application itself, not at some later time.  The Court referred particularly to the fact that while the Mining Act made express provision for late lodgement of a mining proposal accompanying a mining lease application, no similar allowance was made for a mineralisation report.  The Court also referred to s 74A of the Mining Act, which requires the Director, Geological Survey to provide the Warden or Minister with a report based on the information contained in the applicant's mineralisation report about whether there is "significant mineralisation" in the area of the mining lease.
• (Requirement could not be waived) The High Court found further that the mineralisation report requirement was not one that could waived.  Section 75(6)(b) of the Mining Act permits the Minister to grant a mining lease despite non-compliance with the Mining Act.  The Court held that this discretion only applies to non-compliance by the applicant for a mining lease, not non-compliance by the Warden (i.e. the Warden's decision to proceed to make a recommendation despite late lodgement of the mineralisation report).
• (Indefeasibility provisions were not applicable) Similarly, the Court rejected arguments based on s 116(2) of the Mining Act.  That provision provides that a mining tenement may not be "impeached or defeasible by reason or on account of any informality or irregularity in the application or in the proceedings previous to the grant or renewal of that tenement".  The Court found that the "informality or irregularity" referred to a lack of regularity in the method or manner in which a power is exercised, and not to an act that was beyond power (i.e. a jurisdictional error by the Warden).
• (Objects of the Mining Act) The High Court was critical of the Court of Appeal's focus on the delay, cost and prejudice suffered by the applicants for the mining leases.  The Court noted that compliance with the mining lease application regime, including timely lodgement of a mineralisation report would promote administrative efficiencies.  Moreover, strict adherence to the regime would prevent the State and landholders from being troubled by "half-baked" mining lease application proposals, ensure that landholders and objectors could respond to applications with the necessary information, and would prevent "land-banking".

For those reasons, the High Court held that the timely lodgement of a mineralisation report was an essential precondition to the exercise of the Warden's power to hear an objection and subsequently make a recommendation that a mining lease be granted.  The Court made orders declaring the Warden did not make a valid recommendation that the mining lease applications be granted.

Implications of the High Court's decision

Validity of other WA mining leases

Following the High Court's decision, any mining leases that were granted pursuant to an application supported by a mineralisation report that was lodged after the application itself may be invalid.  We understand departmental practice at various times has been to permit late lodgement of a mineralisation report, so a number of mining leases may be affected.

It is important to note, however, several factors that will limit the impact of the Court's decision:

• (Does not apply to pre-2006 mining lease applications) The provisions requiring a mineralisation report to be lodged with a mining lease application commenced on 10 February 2006, so the decision will only affect leases granted pursuant to applications lodged after this date.
• (Does not apply to mining lease applications supported by a mining proposal) The decision only applies to applications supported by a mineralisation report.  Where an application was supported by a mining proposal, the Mining Act expressly allows for the proposal to be lodged within 14 days of the application.  Provided the proposal was lodged in the prescribed time, the High Court's decision will not impact the grant.
• (Does not seem to apply to transferee of invalid mining lease) The High Court concluded that while s 116(2) does not protect the holder of a mining lease from the consequences of invalidity arising from late lodgement of a mineralisation report, it made observations that suggest that s 116(2) will protect a person who receives a transfer of an otherwise invalid lease.
  
  This aspect of the Court's decision did not form part of the binding reasoning and may be the subject of further controversy if tested.  If no valid mining lease exists because the grant of it was an "act beyond power", it is difficult to see how the second limb of s 116(2), which provides that a transferee is not required to make any inquiries into the validity of the title, could cure that invalidity.  This is particularly so given the prevailing understanding that the Mining Act creates a system of registration of title, and not title by registration: Yarri Mining Pty Ltd v Eaglefield Holdings Pty Ltd [2010] WASCA 132 [20]. The High Court's discussion of this point was brief, and it remains to be seen whether it will withstand closer scrutiny.

Consequences of invalidity of existing mining lease

The two mining lease applications found to be invalid by the High Court had not proceeded to grant by the Minister, so the High Court was not required to consider the consequences of a finding that a granted mining lease was invalid.

The consequences of an existing mining lease being invalid are potentially significant.

Effect on current mining lease applications

A similar conclusion applies to any current mining lease applications supported by mineralisation reports that did not accompany the applications.  Those applications may not comply with the Mining Act, and may not be able to be progressed to grant.

The risk of a third party applying for a tenement over the area of the non-compliant application would also arise, although the possibility of the Minister exercising the power to terminate the third party application on public interest grounds would also exist.

How will the state respond?

The State has not yet indicated how it will respond to the High Court's decision.  Given the potentially significant consequences outlined above, a legislative response seems likely.

The government may seek to introduce legislation retrospectively validating any leases that might otherwise be invalid as a result of the High Court's decision.  A similar issue recently arose in a native title context, with the Federal Court decision in McGlade vs Registrar National Native Title Tribunal [2017] FCAFC 10 casting doubt on the validity of a number of indigenous land use agreements and the mining leases granted in reliance upon them.  See the recent Ashurst update on this here.  In that case, the Federal Government responded quickly with legislation curing the potential invalidity.

What does the decision mean going forward?

The immediate impact of the High Court's decision is limited to a specific class of applications – mining lease applications supported by a mineralisation report that was not provided contemporaneously with the application.

More broadly, the decision may also signal a stricter approach to interpretation of the procedural requirements of the Mining Act.  As noted above, the Court referred to a long-standing line of authority which establishes that where legislation confers power on the executive to grant exclusive rights to exploit the resources of the State, compliance with those requirements will be essential to making a valid grant of tenure: Cudgen Rutile (No 2) Pty Ltd v Chalk [1975] AC 520 at 533.

There is some tension between this principle and the text of the Mining Act, which expresses a less strict approach to compliance with statutory requirements, particularly s 75(6) (which permits the Minister to grant a mining lease application notwithstanding an applicant's non-compliance with the provisions of the Act) and s 116(2) (which provides that an informality or irregularity will not impeach the validity of a tenement once it is granted).

The general view in Western Australia has been that the Mining Act does permit the Warden and the Minister a fair degree of discretion in waiving non-compliance with the Mining Act.  In contrast, the principle in Cudgen Rutile seems to have influenced the High Court to apply a more narrow reading of the scope of Mining Act (particularly s 75(6) and s 116(2)).

Ultimately, the effect of non-compliance with Mining Act requirements will always depend upon the terms of the particular requirement in the Act, and the Court's findings as to the statutory purpose of those requirements.  The High Court's reliance on Cudgen Rutile and the conclusions in Forrest v Wilson may, however, indicate a stricter judicial approach to the consequences of non-compliance with the Mining Act regime, not just in the context of mineralisation reports for mining lease applications, but potentially more broadly under the Mining Act.