FEDERAL COURT OF AUSTRALIA

Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2013] FCAFC 29

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The Appellant pay the costs of the First and Second Respondents.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    On 30 August 2002 the appellant (“Alliance”) entered into a joint venture agreement (“JVA”) with the second respondent (“Heathgate”) to explore a mining lease in an area in the northeast of South Australia known to contain the Four Mile Uranium Deposits. Heathgate was appointed under the terms of the JVA to be the joint venture’s first manager during both its exploration and mining phases. On 17 December 2002 Heathgate assigned all its rights, title and interest in the venture to the first respondent (“Quasar”), but continued to act as manager. Heathgate and Quasar are related companies. They are both controlled by the same company, Baywood Holdings Inc, which is a subsidiary of the US company General Atomic Technologies Corporation.

2    On 16 November 2009 Alliance filed an application in this Court seeking orders that the respondent give preliminary discovery of documents described in detail in the schedules to the application. The application was made pursuant to O 15A r 6 of the Federal Court Rules 1979 (Cth) (now repealed). Alliance claimed that it had reasonable cause to believe that it had, or may have the right, to obtain relief from either or both respondents for breach of the JVA, breach of fiduciary duty and misleading or deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth) (“TPA”) in the conduct of the joint venture (“JV”). In addition, or in the alternative, Alliance sought a declaration that it had a proprietary right, arising from the JVA, to access and retain copies of certain documents. The documents were described in the application as:

[A]ll documents (including without limitation all books, financial and other records, working papers, studies, technical reports and correspondence, whether in electronic form or otherwise) of the Four Mile Joint Venture as constituted by the [JVA] dated 30 August 2002 (JV Records).

3    Alliance also applied for an order that the respondents (or either of them as the case may be) permit Alliance to inspect and take copies of the documents.

4    The primary judge refused the application for preliminary discovery, holding that Alliance had sufficient information to determine whether to start the proceeding it foreshadowed. His Honour also refused to grant the alternative claim for declaratory relief, finding that Alliance had no such proprietary right in the documents. In this appeal Alliance contests only the refusal to grant the alternative relief. We are of the opinion that the declaration should have been refused and that the appeal should therefore be dismissed.

FACTS

5    Exploration Licence 2874 (“Licence 2874”) was issued pursuant to the provisions of s 28 of the Mining Act 1971 (SA) (“Mining Act”) to Gold Stream Mining NL as to 51% and to Bonanza Gold Pty Limited as to 49% (together the “licensee”). The licensee was granted the right to explore for all minerals except extractive minerals or precious stones in the area prescribed in Schedule A of such licence (“the tenement”) for a period of one year commencing on 5 December 2001. Licence 2874 was superseded on 22 December 2006 by Exploration Licence 3666 (“the current licence”) which was issued to Quasar as to 75% and Alliance as to 25%.

6    On 17 June 2002 Alliance became the registered holder of Licence 2874. The lands referred to in Schedule A to the licence were located near Arkaroola, North Western Curmamona Craton, South Australia. The tenement covers an area known as the “Four Mile Uranium Deposits”.

7    On 30 August 2002 Alliance and Heathgate entered into the JVA in respect of the Four Mile uranium project. The JVA delineated the interests of the parties, namely a 75% interest to Heathgate, and a 25% interest to Alliance. Clause 4.1 of the JVA provides:

With effect on the Commencement Date the parties establish between themselves a contractual joint venture governed by the terms of this Agreement. Heathgate will farm-into and may earn a 75% beneficial interest in the tenement by expending the Minimum Expenditure during the Earn-In Period.

8    Clause 4.3 of the JVA provides:

The purpose of the joint venture is to explore the Tenement for Minerals and to determine whether a viable resource or resources exist therein for Minerals and, if so, developing and mining the relevant part or parts of the Tenement.

9    Pursuant to cl 6.1, Heathgate was appointed as the first manager of the JV.

10    The JVA allowed for an “Earn-In Period”, defined in cl 1. In substance, the provision required Heathgate to notify Alliance that it had expended the “Minimum Expenditure” ($300,000) within two years of the Commencement Date (as defined) of the JVA.

11    By a deed made on 17 December 2002, Heathgate assigned all its right, title and interest in the JVA to Quasar. Heathgate and Quasar have a close relationship, given that the shareholdings in both Heathgate and Quasar are controlled by Baywood Holdings Inc. Notwithstanding the assignment, Heathgate continues to act as manager of the JV and perform the exploration work on Quasar’s behalf as its delegate.

12    On 29 September 2004 Alliance and Quasar agreed to vary the JVA. Under the JVA, as varied, Quasar was required to spend $450,000 in exploration on the tenement before 30 October 2005. The condition was fulfilled and on 18 October 2005 Alliance transferred 75% of its interest in the tenement to Quasar as prescribed by cl 4.1. Thus, Quasar holds a beneficial ownership as tenant in common of an undivided share in 75% of all property of the JV and is required to contribute 75% of all JV costs, the remaining 25% being the responsibility of Alliance.

13    Clause 11.2 of the JVA made provision for the establishment of a management committee (“the Committee”). The Committee was established on 14 November 2008, comprising a representative from each of Quasar and Alliance with voting at meetings in proportion to their shares.

14    Difficulties in the relationship between Alliance and Quasar appear to have emerged on 12 November 2008 when Alliance indicated that it had not been provided with a program or budget as required by the JVA. The first management meeting was held on 14 November 2008 and was adjourned to 25 November 2008. Alliance refused to participate unless the meeting was recorded and when the meeting resumed on 21 April 2009, the Committee decided against making a recording.

15    On 15 April 2009 and 23 May 2009 Quasar provided Alliance with some documents. These were updated versions of a budget Quasar had given to Alliance in November 2008 (“the Quasar budget”). The updates (referred to as the 2009 updates) were not approved by the Committee, apparently because Alliance had refused to participate in Committee meetings.

16    Under the Quasar budget and the 2009 updates, cash calls were made upon the joint venturers (i.e. Quasar and Alliance) in respect of the JV costs paid or incurred by Heathgate on behalf of Quasar. Alliance contended that the costs had not been properly identified and claimed that it required records relating to the expenditure before it would approve the budget. Alliance also alleged that the budgeted exploration costs extended outside the Mine Development Area as delineated in the JVA. Further, Alliance claimed that costs incurred by the processing plant known as the Beverly Plant, which is owned and operated by Heathgate, required clarification.

17    As a result of the alleged nondisclosure of records, Alliance claimed that it had reasonable cause to believe that it had an entitlement to seek relief from the Court in respect of breaches of the JVA, breaches of fiduciary duty and for damages resulting from misleading and deceptive conduct, as provided by s 52 of the TPA as it was then in force. Consequently, it filed the application that came before the primary judge.

HEARING BEFORE PRIMARY JUDGE

18    The application was heard on 22 and 23 February 2010. Due to a misunderstanding (explained in the primary judge’s reasons), judgment was not delivered until 26 March 2012.

19    The greater part of the primary judge’s reasoning is directed to the claim for preliminary discovery. The reason for this is readily apparent from the transcript, which shows that almost the entire time at the hearing was taken up with argument on that question. In contrast, the proprietary claim for access to the JV records occupied little hearing time. Similarly, the submissions made by Alliance in writing to the primary judge primarily concerned the question of preliminary discovery.

20    Alliance submitted before the primary judge that it was entitled to access records maintained by Quasar in its capacity as manager of the JV and by Heathgate to the extent that it acted as Quasar’s delegate. In particular, Alliance submitted that it was entitled to “a right of access” to JV property, including the information contained in the records of the JV, on several alternative bases, namely:

(a)    Under the JVA Alliance beneficially owned (as tenant in common with Quasar) a 25% undivided share in all the property of the JV, which includes the books and records of the JV, and the general rule (which is not excluded by the agreement) is that documents brought into existence by an agent during the currency of the agency belong to the principal(s);

(b)    The JV property, which includes the documents sought, held by Quasar, as manager, and Heathgate acting as the manager’s delegate, is held on trust for the joint venturers;

(c)    The manager of the JV owes a fiduciary duty to the joint venturers to keep them informed and to permit them to inspect the records;

(d)    There is an express term of the JVA (the stipulation in the agreement that the exploration licence is held by the parties in proportion to their respective JV interests, which is defined to include their interests in all JV property) that gives Alliance that right. Alternatively, a term giving Alliance the right to access the records should be implied to give business efficacy to the JVA.

21    The primary judge rejected all of Alliance’s arguments. His Honour held that there was no implied term in the JVA which creates or provides for either the proprietary or contractual right Alliance asserts and that in any case, Heathgate was remote from any such arrangement and contracted with Quasar as an independent contractor. His Honour found that “property”, as used in the definition of Joint Venture Interest in the agreement, was not intended to refer to the documents the manager assembles or creates. His Honour held there was no trust created in relation to the records. Finally, his Honour rejected the contentions that Alliance could access all the documents Quasar brings into existence as the manager of the JV because it was the manager or because Quasar owes Alliance a fiduciary duty to permit it to inspect them. His Honour observed at [99]:

There is no assertion of agency in the relationship of Joint Venturer/Manager in the proposed Statement of Claim. Clause 13.6 of the JVA expressly says the relationship is not one of principal and agent. The terms of the relevant agreements define the nature of the relationship and, save as the law implies obligations, they also define the rights and obligations under them: see Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161 at [13] and [35]-[36]; Wentworth v De Montfort (1988) 15 NSWLR 348 at 353.

THE APPEAL

22    As we indicated earlier, the appellant does not challenge the primary judge’s finding relating to preliminary discovery. However, Alliance challenges the findings on the proprietary claim. The trust argument was not pressed and was only put by way of analogy. All the other findings were challenged. Alliance argues that:

1.    Quasar acts, in its capacity as manager of the JV, as agent of the joint venturers. For that reason Alliance has a proprietary interest (held as tenants in common with Quasar) in all documents and other records created or obtained by Quasar and Heathgate as its delegate in that capacity. This includes the JV records, but not documents or records created or obtained solely for the benefit of the respondents;

2.    As the agent for the joint venturers, Quasar, as manager, has a fiduciary duty to Alliance, giving Alliance an equitable interest in the JV documents; and

3.    The JVA conferred a right on Alliance to access the JV documents, either expressly or by implication.

23    The relief Alliance seeks differs from the relief sought below. Alliance seeks declarations that it is entitled to access, inspect and copy the JV records held by the first and second respondents arising from its proprietary interest in such records.

SUBMISSIONS OF ALLIANCE

24    Alliance essentially confined its oral submissions to its proprietary claim for access to the JV records. This was upon the ground that Quasar, in its capacity as manager, holds the JV records as agent for the JV partners, and that accordingly Alliance, as a joint venturer, is entitled to access to such records. Alliance does not contend that, as a partner in the JV, Quasar must disclose its own records created solely in its capacity as a partner. Alliance maintained its claim that an implied term is to be imported into the JVA to the effect that the parties would be entitled to access to records of the JV, but made no oral submissions in support of that claim.

25    Alliance submits that Heathgate has obligations to its principal, namely the joint venturers, given that Heathgate undertakes for the JV (as Quasar’s delegate) the duties of manager and the actual exploration work.

26    Alliance submits that Heathgate, because of its involvement in the expenditure of monies incurred in the mining operations on behalf of the JV, has become a sub-agent of Quasar, or alternatively is the agent of the JV partners. Regardless, Alliance submits that Heathgate holds such documents pursuant to a constructive trust resulting from the fiduciary duty owed by an agent to its principal.

27    Alliance relies upon the fact that Heathgate is performing services solely in the capacity of manager. It points to two clauses of the JVA which purportedly support the submission. Clause 6.3 absolved Heathgate, and by virtue of the assignment, Quasar, as manager, from liability to the joint venturers in certain circumstances and cl 6.2 deems the manager not to be in breach of its duties as manager if, as a result of force majeure, it is prevented from fulfilling those duties. Alliance submits that these clauses demonstrate that Quasar, as manager, is treated as a separate entity to Quasar as partner of the JV.

28    Alliance also points to other clauses contained in the JVA which it submits indicates the agency. For example, cl 11.2(c) requires the manager to submit a program and budget to the Committee for approval, thereby providing clear evidence that the manager is not operating on its own account but rather is undertaking such activities on behalf of the joint venturers.

29    Alliance also refers to the affidavit affirmed 19 February 2010 by David Ian Roberts, director of Quasar and Heathgate, in which Mr Roberts deposes to payment of a management fee charged by Heathgate for the provision of services to Quasar in its capacity as manager in relation to the JV.

30    Alliance submits that following the Mine Decision Date (22 October 2008), pursuant to the JVA, Quasar, as manager of the JV, engaged Heathgate to provide services in respect of the development phase of the JV. Accordingly Alliance submits that Quasar delegated to Heathgate such activities, making Heathgate the agent for the JV.

31    Other indicia are referred to by Alliance in support of its submission that Heathgate has acted in such capacity. In particular it refers to the modus operandi of Heathgate, namely, as demonstrated by invoices, Heathgate incurs expenditure on behalf of the JV, for example with drilling activities, and invoices the joint venturers for that expenditure, including any of its own disbursements plus its own management fee.

32    In these circumstances, Alliance submits that Heathgate is the agent of Quasar, as manager, and even though there is no contract making Heathgate a sub-agent, the agency exists between the joint venturers and Heathgate and engenders a fiduciary duty to provide the JV records to Alliance.

33    In further support of its claim that it has a proprietary interest in the records of Quasar, Alliance referred to the definition of “Joint Venture Interest” contained in cl 1 of the JVA, which includes in 1.3:

the beneficial ownership as a tenant in common of an undivided share in that percentage of all property of the joint venture

34    The reference to “Joint Venture Interest” is repeated in cll 5.1, 10.6, 10.10 and 11.1. Since the tenement is a joint venture interest, Alliance submits that it would be absurd if the records relating to the location of minerals, for example, could not be examined by Alliance as a joint venturer. Alliance also points to the provisions of cl 1G of the variation agreement dated 29 September 2004 which inserts a new cl 5.3 into the JVA. That clause provides that if Heathgate had not earned the beneficial interest in the tenement, its interest, as stated above, would cease and that “mining property” would be delivered to Alliance.

35    Alliance relies upon the decision in Yasuda Fire & Marine Insurance Co of Europe Ltd v Orion Marine Insurance Underwriting Agency Ltd [1995] QB 174 at 185 and 187, in which the court found that agents who brought documents into existence were required to produce those documents for inspection by the principal. Alliance referred to the statement of principle in Bowstead and Reynolds on Agency (19th ed, Ch 5) at 165 that acts done on a principal’s behalf by a sub-agent, whose appointment was authorised or ratified by the principal, bind the principal as if they had been performed by the agent himself. Alliance also relied upon Powell & Thomas v Evan Jones & Co [1905] 1 KB 11 at 22 in which Mathew LJ, speaking of a sub-agent, said:

I think that the ordinary course of business in such a case as this is that the last-mentioned person takes the position of agent to the principal. It would be difficult in such cases to suppose that the principal would assent to the conduct of the business in which he was interested being transferred to a person who did not in carrying it out undertake the obligations of an agent towards him.

36    Before considering these submissions, however, it is necessary to deal with a late application Alliance made to tender further evidence.

ADMISSION OF FURTHER EVIDENCE

37    During its closing submissions in reply and over the objections of the respondents, Alliance sought the leave of the Court to tender the original Licence 2874, which, as already referred to, was issued to Goldstream Mining NL as to 51% and to Bonanza Gold Pty Ltd as to 49% dated 7 January 2002, and later transferred to Alliance.

38    Licence 2874 was not in evidence before the primary judge, but a copy of the current licence (namely Licence 3666) was before his Honour.

39    Senior Counsel for Alliance referred the Court to various clauses within Licence 2874 which imposed obligations upon the licensee, amongst other things, to submit exploration reports, data and sampling, to the Director of Mines (“the Director”). He submitted that Licence 2874 and the terms of the Mining Act imposed substantial obligations on the licensee including an obligation to keep and make available significant records. He pointed to the fact that s 33 of the Mining Act enables a licence to be cancelled or suspended in the event of a failure to do so. He submitted that Alliance would be unable to comply with such conditions if a request was made to produce the records referred to in the Mining Act, placing it in breach of its licence conditions.

40    Quasar complained about the late timing of the submission, contended that the evidence was not fresh and that it was unprepared to meet it.

41    Heathgate submitted that, had the issue been raised below, the parties would have sought to adduce evidence as to whether the responsibilities referred to in the relevant paragraphs of the current licence were those of the manager, rather than those of the licensee.

42    The evidence is certainly not fresh. There is no apparent reason why, if it were relevant, it was not tendered below. Still, the Court has the power to receive the evidence. The power, conferred by s 27 of the Federal Court of Australia Act 1976 (Cth) (“FCA Act”), is not confined to fresh evidence. The discretion is a wide one, constrained only by the subject matter, scope and purpose of the legislation, and there are no invariable rules: Cf. CDJ v VAJ (1998) 197 CLR 172 at [116] (McHugh, Gummow and Callinan JJ), which concerned the operation of s 93A(2) of the Family Law Act 1975 (Cth), which is in similar terms. Yet, as the Court emphasised in Sobey v Nicol (2007) 245 ALR 389, where the relevant principles are discussed at [68]-[72], the discretion is to be exercised in the context of an appeal by way of rehearing. A rehearing is not a hearing de novo. Its purpose is to correct error. The rules of court lay down a procedure for making an application for the Court to receive further evidence on an appeal (Federal Court Rules 2011 (Cth) (“the Rules”), r 36.57), with which Alliance did not comply. Applications must be filed at least 21 days before the hearing of the appeal and be accompanied by an affidavit stating not only the evidence the applicant wishes the Court to receive but also the facts on which the application relies, the grounds of appeal to which it relates, and the reason why the evidence was not adduced in the court below. The Court has power to abridge the time (r 1.39), indeed to dispense altogether with compliance with the Rules (r 1.34). But no application was made for the Court to exercise either of these powers (at least not formally) and in the present circumstances we see no good reason to do so.

43    No reasons were advanced to explain the late tender of Licence 2874. The issue of responsibility for compliance with the licensing conditions was not raised before the primary judge, nor was it made the subject of any ground of appeal. If leave were granted to admit Licence 2874, the respondents would have to be given the right to call evidence of their own and to make further submissions. This would not further the overarching purpose of the civil practice and procedure provisions of the FCA Act and Rules: FCA Act s 37M. It seems to us, in any event, that, the argument resting on the former licence is of doubtful merit; if any call were made under the Mining Act for the production of documents, Quasar, as a co-holder of the current licence, could produce them to the Director without first submitting them to Alliance.

44    In all the circumstances we do not consider that it is in the interests of justice that leave be granted to receive Licence 2874 into evidence. We therefore refuse the application.

CONSIDERATION

45    There was no dispute that where an agent creates documents during his employment with a principal, the documents are the documents of the principal and must be provided to the principal on request: Breen v Williams (1996) 186 CLR 71 at 88 (per Dawson and Toohey JJ) and at 101 (Gaudron and McHugh JJ); Leicestershire County Council v Michael Faraday and Partners, Limited [1941] 2 KB 205 at 216 (Mackinnon LJ). The question here is whether the relationship between Heathgate and Quasar on the one hand, whilst acting as manager of the joint venture and Alliance on the other, was one of agent and principal.

46    The primary judge was wrong to state that there was no assertion of agency in the relationship of Joint Venturer/Manager in the proposed Statement of Claim. The draft document, entitled Points of Claim, was amended at the beginning of the hearing to expressly make such an allegation. Nevertheless, we consider that his Honour was not wrong to find that there was no relevant agency relationship.

47    The appeal ultimately turns on the nature of the parties’ agreement and, more particularly, on whether the relationship between the joint venturers and Heathgate (and after the assignment Quasar) is one of principal and agent. The answer to that question depends on the proper construction of the JVA.

What did the parties agree to?

48    The JVA was intended to comprehensively address the contractual relationship between Heathgate and Alliance for a discrete period: from the date the agreement was signed (30 August 2002), in the “Free Carry Period” as defined in the JVA, to the “Mine Decision Date” (22 October 2008) and beyond, but only until a new agreement (entitled the Mining Joint Venture Agreement) had been signed. Clause 10.2 in part provides:

If Heathgate decides to proceed to develop a commercial mining operation the development and operation of the mine shall be regulated under a separate joint venture agreement and the Mine Development Area will be made subject to that joint venture. The separate Mining Joint Venture Agreement incorporating the broad principles contained in clause 6, this clause 10 and in clause 12 will apply to the Mine Development Area and, pending the execution of such separate Mining Joint Venture Agreement, this Agreement, or any agreement superseding this Agreement, shall govern the parties.

49    Clause 12 of the JVA in part provides:

As soon as is practicable and desirable after the Mine Decision Date, the joint venturers shall proceed to document a comprehensive Mining Joint Venture Agreement, to be drafted by Heathgate, to incorporate such matters commonly found in agreements of like nature and, without limitation, such an agreement shall deal with the following matters.

50    The JVA, which imposed onerous obligations upon Heathgate (and later Quasar) to invest substantial sums of money at the exploration stage and before the Mine Decision Date, was directed essentially to regulate the interests of the parties during the initial period of the exploration of the tenement.

51    During the initial period (that is before the decision to mine was made) Heathgate was appointed manager for the JV (see cll 6.3, 6.4 and 10.5 of the JVA). By cl 10.1 Heathgate, as manager, was required to provide a budget if it made a decision to mine. However, in the initial period Heathgate (and after the assignment, Quasar) was to act in the capacity of manager and not as agent for the JV. Clause 11.1 of the JVA states:

Heathgate shall be the first Manager in relation to the Mine Development Area and shall remain the Manager while it holds the largest Joint Venture Interest or until it retires or is removed from office and prior to execution of the Mining Joint Venture Agreement in relation to the Mine Development Area under clause 10.2, the provisions of clause 6 of this Agreement shall apply to management of the Mine Development Area.

52    Importantly, cl 13.6 of the JVA expressly disclaims any agency relationship:

No Partnership: Except as otherwise specifically provided in this Agreement, nothing contained in or otherwise arising from this Agreement shall constitute the parties as partners or any party as the agent for or legal representative of another and no party shall pledge the credit of another party.

53    “Agency” in law connotes “an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties”: International Harvester Company of Australia Proprietary Limited v Carrigan’s Hazeldene Pastoral Company (1958) 100 CLR 644 at 652. Cf. Peterson v Maloney (1951) 84 CLR 91 at 94:

The legal conception of agency is expressed in the maxim "Qui facit per alium facit per se", and an "agent" is a person who is able, by virtue of authority conferred upon him, to create or affect legal rights and duties as between another person, who is called his principal, and third parties.

54    The mere existence of a joint venture does not justify the conclusion, for example, that one of the venturers is the agent of the other in relation to the former’s dealings with third parties: Consolo Ltd v Bennett [2012] FCAFC 120 at [88]. An agency relationship can only be established by the consent of both principal and agent (whether actual or implied): South Sydney District Rugby League Football Club v News Ltd (2000) 177 ALR 611 (Finn J) (“South Sydney DRLFC”) at [132]; Tonto Home Loans Australia Pty Ltd v Tavares (2011) 15 BPR 29,699 (“Tonto”). In the present case there was no such consent. The parties expressly agreed that they were not in any relationship of principal and agent.

55    It may be accepted that an express disclaimer cannot disguise what is in truth an agency relationship (South Sydney DRLFC at [133]-[134]; Technology Leasing Pty Ltd v Lennmar Pty Ltd [2012] FCA 709 at [159]). Whether such a provision is effective will depend on whether, given “the actual incidents and content of the relationship” (what Finn J referred to as “the factual relation”), the parties have nonetheless consented to an agency relationship. But unless the disclaimer is a sham, the Court must give appropriate weight to it as a manifestation of the parties’ intention: South Sydney DRLFC at [135].

56    Alliance sought to confine the operation of cl 13.6, submitting that it was directed to the relationship of the parties as joint venturers and was not intended to apply to Heathgate (or Quasar) when it was acting in its capacity as manager. We do not accept that the clause should be read in such a narrow way. In our opinion, cl 13.6 clearly shows that the parties intended that for the duration of the initial exploration period whilst the JVA was current, Alliance and Heathgate (and subsequently Quasar) would be neither partners nor agents for each other. This situation was to be in effect at least until the JVA was replaced by another agreement. There is no evidence to suggest that the express disclaimer is a sham. Accordingly, full weight must be given to the words of cl 13.6

57    In Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 97, Mason J said of those instances where a contract provides the foundation for a fiduciary relationship:

In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.

58    These remarks were cited with approval by five justices of the High Court in the joint judgment in John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at [91].

59    In Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, Lord Browne-Wilkinson said (at 206):

[I]n my judgment, the derivation of the general principle from fiduciary duties may be instructive as to the impact of any contractual relationship between the parties on the general duty of care which would otherwise apply. The phrase “fiduciary duties” is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances. That is not the case. Although, so far as I am aware, every fiduciary is under a duty not to make a profit from his position (unless such profit is authorised), the fiduciary duties owed, for example, by an express trustee are not the same as those owed by an agent. Moreover, and more relevantly, the extent and nature of the fiduciary duties owed in any particular case fall to be determined by reference to any underlying contractual relationship between the parties. Thus, in the case of an agent employed under a contract, the scope of his fiduciary duties is determined by the terms of the underlying contract. Although an agent is, in the absence of contractual provision, in breach of his fiduciary duties if he acts for another who is in competition with his principal, if the contract under which he is acting authorises him so to do, the normal fiduciary duties are modified accordingly: see Kelly v. Cooper [1993] A.C. 205, and the cases there cited. The existence of a contract does not exclude the co-existence of concurrent fiduciary duties (indeed, the contract may well be their source); but the contract can and does modify the extent and nature of the general duty that would otherwise arise.

60    Numerous authorities establish that where a contract exists, the relationship of the parties is delineated by the agreement contained in the contract. These authorities have been usefully collated by Beech J in Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 (see [365]-[380]). At [365] his Honour said:

The relationship will be fiduciary to the extent, and only to the extent, that the fiduciary has agreed or undertaken to exercise powers or discretions for the principal, or, in the case of a horizontal relationship, for the parties jointly: Hospital Products (96 – 97); Pilmer v The Duke Group Ltd [71] and Grimaldi v Chameleon [179].

61    At [375] his Honour emphasised that the relationship between a manager of a joint venture and the venturers “must always be subject to the terms of any relevant contract” and it will only be a fiduciary relationship to the extent “that the manager is entrusted with powers and authorities to be exercised for or on behalf of the venturers”. That, he explained, “invites attention to the scope of the powers and authorities of the manager to act on behalf of the venturers”.

62    Although the JVA authorises Heathgate (and later Quasar), in its capacity as manager of the JV, to “procure services” and to carry out similar functions, the nature of the relationship between the parties is governed by cl 13.6 of the JVA. There is no agreement that Heathgate or Quasar exercise its powers or discretions for the parties jointly.

63    We conclude that the relationship between Alliance and Quasar, as manager, is not a relationship of principal and agent. This is not merely because of the express disclaimer in cl 13.6. A number of other provisions of the JVA lead to this conclusion.

64    Clause 4.4(a) imposes on Heathgate (and later Quasar) an obligation to manage the exploration and development, if any, on the tenement and gives it sole responsibility for programs and budgets relating to such exploration and/or development.

65    Clause 6.3 imposes limits on the liability of the manager inconsistent with those that would ordinarily arise from a principal and agent relationship. Clause 6.3 provides:

Heathgate as Manager shall not have any liability to the joint venturers for losses sustained or liabilities incurred if, in the circumstances of the particular case, it has acted or refrained from acting in the course of an effort made in good faith to perform its obligations under this Agreement and has not committed any act of wilful misconduct and has not been grossly negligent. For the purposes of this clause “grossly negligent” means such conduct as constitutes a reckless or wilful disregard for harmful and foreseeable circumstances.

66    Clause 6.4 entitles Heathgate (and later Quasar), as manager, to enter into such agreements and or to make such other arrangements with Native Title claimants as it alone deems appropriate or necessary to comply with Pt 9B of the Mining Act.

67    Clause 10.1 gives Heathgate (and later Quasar) “sole discretion” to make a decision “in its sole judgement” to mine after it has received a feasibility study, the scope and content of which is satisfactory to it, not the joint venturers. At that time it must give notice to Alliance and provide it with a preliminary development, mining, processing and production program and budget.

68    Clause 10.5 provides that the manager is to estimate the amount of expenditure that will be incurred by the JV in the upcoming month.

69    Clause 11.2(c) gives the manager responsibility for the creation of a program and budget setting out the proposed work and expenditure for the relevant period. The program and budget are subject to the Committee’s approval. Given the majority control Quasar held though this would be a mere formality.

70    The JVA gives the manager a very wide discretion in conducting the affairs of the JV, particularly with respect to proposing the work and expenditure for the relevant period. This reflects the considerable financial investment made by Quasar in the venture (spending approximately $42 million on exploration before the decision to mine was made), which was vastly disproportionate to Alliance’s modest contribution of $50,000.

71    These clauses may be contrasted with the provision made in cl 10.11 for the appointment by Alliance of Heathgate to market and sell “on its behalf” its share of minerals other than gold produced by the mining operation. This provision envisages the creation of an agency relationship for a specific purpose. It is one of the specific provisions contemplated in the exceptional category for which cl 13.6 allowed. Another is cl 4.4(d) which expressly authorised Heathgate during the Free Carry Period to apply for any substitute or successor title to the Tenement.

72    Little evidence was available concerning the actual incidents and content of the parties’ relationship. In our view, the evidence, such as it was, does not establish that in fact the existence of a relationship of principal and agent between the joint venturers on the one hand and the party acting as manager on the other or, put simply, between Alliance and Heathgate or Quasar, existed contrary to the stated provision of cl 13.6 of the JVA. The mere fact that Heathgate (or Quasar) undertook work at the JV’s request and for its benefit is insufficient to establish agency: cf. Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41 at 48-49 (Dixon J). Not every independent contractor doing work for or for the benefit of someone else will be that person’s agent “and so identified as it, or as representing it, and its interests”: see Tonto at [177] (Allsop P, Bathurst CJ agreeing at [1] and Campbell JA at [303]). Neither is it enough that some invoices from Heathgate were addressed to the JV or included in monthly accounting packs provided to Alliance. Those invoices sought payment of the management fee only, or of expenses Heathgate (or Quasar) had incurred. That circumstance, in our opinion, is entirely neutral. It may signify no more than an understanding on Heathgate and Quasar’s part that the JV would ultimately bear certain costs. It says nothing about whether the parties intended that Heathgate (or Quasar) should be able to legally bind the joint venturers when contracting with third parties or whether Heathgate (or Quasar) ever represented to third parties that it was acting on behalf of the JV when it did so. Indeed, the fact that all the invoices in evidence from the third parties were directed to Heathgate (and in the odd case to Quasar), and made no mention of the JV or the joint venturers, suggests otherwise.

73    The “central notion” of agency is the agent acting or having actual or apparent authority to act as representative of, or for, or on behalf of, the principal (NMFM Property Pty Ltd v Citibank Ltd (No 10) (2000) 107 FCR 270 at [522] per Lindgren J) of which there is no evidence here save in the limited respects referred to in the contract. Nor is there any evidence that Heathgate or Quasar ever represented to the third parties with which they contracted that they were acting on behalf of the joint venturers.

74    The element of control is relevant, though not decisive, in determining whether agency exists: see South Sydney DRLFC at [137]; ACN 007 528 207 Pty Ltd (in liq) v Bird Cameron (Reg) (2005) 91 SASR 570 at [110] (Besanko J). The evidence, and the JVA, in particular, demonstrates that Heathgate and later Quasar, as manager, were virtually given carte blanche to decide how the mine was to be managed. This militates against a conclusion that Heathgate or Quasar were at any point acting as agent for the joint venturers.

Should a term that Alliance have access to the documents be implied?

75    Alliance submits that a term providing it access to the documents should be implied in the JVA in order to give it business efficacy. Specifically, it submits on appeal that a term should be implied “to the effect that the joint venturers have a right of access to the data, records and information relating to the Tenement created or received by the Manager for the purpose of the joint venture”. Before the primary judge the implied term was put differently. The amended points of claim described it much more broadly and vaguely as:

an implied term … that the joint venturers have a right to access information, records and data relating to the Joint Venture.

76    The principles which guide the Court in determining whether a term should be implied are well-known. They are set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-283; Attorney General of Belize v Belize Telecom [2009] UKPC 10 at [16]-[27] and elsewhere.

77    Among the various factors, it is necessary for the party which submits that a term should be implied to demonstrate that the term is necessary in order to give business efficacy to the agreement in a business sense: see Butts v O’Dwyer (1952) 87 CLR 267 at 280 and The Moorcock (1889) 14 PD 64 at 68. It is not enough that it might be reasonable to draw such an implication: see Reigate v Union Manufacturing Co (Ramsbottom) Ltd [1918] 1 KB 592 at 605 and John Holland Construction & Engineering Pty Ltd v World Services and Construction Pty Ltd (unreported, Byrne J, Victorian Supreme Court, 27 August 1993) at [11]. If the parties’ intentions can be given effect without the term being implied, then a Court will not imply it: see Breen v Williams at 79-80.

78    The implication of the term proposed by Alliance (either below or in this appeal) is not necessary to give business efficacy to the JVA. The JVA is comprehensive in its terms. It was likely the product of some negotiation between the parties. There is no need for Alliance to have access to the documents in order to comply with its obligations under the JVA. The requirement to meet cash calls and contribute to the costs of the JV is not expressed in the JVA as being subject to Alliance’s satisfaction with the documentation. Its rights and responsibilities under the agreement continue independent of whether it has access to documents.

79    In these circumstances it is unnecessary to deal with the submissions concerning the meaning of the term “property”.

80    For these reasons the appeal fails.

Associate:

Dated:    12 March 2013