Problems arising from the Forrest case and WA's partial "legislative fix"
In WA Parliament two days ago the Mines Minister announced that Cabinet gave approval last week to draft validating legislation. We wait with interest and concern to see the scope of the legislation when it is introduced into the WA Parliament.
However it is pleasing to note the Minister has recognised that the Native Title Act requires the Commonwealth to enact legislation to assist in the validation process – although the nature of the requested Commonwealth legislation has not been disclosed.
In our article of 18 August, we commented on the High Court decision in Forrest & Forrest v Wilson (Forrest). Subsequently we reported that the WA Government intends a “legislative fix”.
Forrest presents several problems for the mineral industry, only some of which have been publicised so far. Although a draft of the legislative remedy is yet to be published, it is already apparent that it will not fix all the problems faced by the industry.
In this article we shall summarise these problems, suggest what explorers and miners should do to minimise their risks and put forward our view as to what government should do about it.
As noted in our original article, the High Court decided that it is an essential condition of the Warden’s jurisdiction to consider a mining lease application that the application be accompanied by a mineralisation report. Because in Forrest a mineralisation report was not submitted with the application, the High Court quashed the report of the Warden made following the Warden’s hearing of the application and quashed his recommendation to the Minister. In effect, the failure to lodge a mineralisation report contemporaneously with the application rendered the mining lease application invalid.
Prior to Forrest it was commonly thought that section 75(6) of the Mining Act 1978 (WA) could overcome problems like this because the Minister has power to grant a lease “irrespective of whether the applicant has or has not complied in all respects with the provisions of this Act”. The High Court was able to distinguish this section because whilst it allows the Minister to overlook an applicant’s non-compliance, it does not allow the Minister to overlook the Warden’s failure to observe the Act’s requirements.
Prior to Forrest it was also commonly thought that section 116(2) would provide a remedy in such situations because it provides that a mining tenement is not impeachable or defeasible by reason of an informality or irregularity in the application. We did not share that view. In Hunt on Mining Law we expressed our opinion that section 116(2) of the Mining Act provides a remedy for procedural defects but it does not remedy substantive defects. The High Court confirmed our view by limiting section 116(2) to a deficiency in legal form or a lack of regularity and stating that it does not extend to an act which was beyond power, such as the warden considering the application when he had no jurisdiction (because a mineralisation report had not been lodged contemporaneously).
It is far from clear what the WA Government intends to do.
The Minister for Mines originally (14th September) said: “The McGowan Government is exploring legislative solutions to overcome the uncertainty created by the High Court's ruling, including the legislation operating retrospectively if it proves necessary”.
The WA Department of Mines, Industry Regulation and Safety subsequently (10th October) said that the promised legislative remedy will only apply to granted mining leases. The Department said it intends to declare void and strike out mining lease applications which were not accompanied by a mineralisation report on lodgment and will also strike out mining lease applications where a mineralisation report was lodged but it was not signed off by a qualified person. It is not clear to us what power the Department relies on to “declare void and strike out mining lease applications”. We doubt that such a power exists.
On 28 November in Parliament the Minister referred only to mining leases and didn’t mention applications, so it appears the government accepts the Department’s position that only granted mining leases will be validated.
We think the possible ramifications of Forrest are enormous and we also think that not all of them have been recognised in the debate so far.
(a) applications for leases are not included in the legislative “fix”
The first consequence has already been established by the Department and, judging from the Minister’s recent statement, accepted by government. Only holders of granted leases will be protected by the proposed legislative remedy. Applicants for mining leases whose applications were non-compliant will have to start again to get their tenure granted.
The Department has stated that it has examined granted leases and lease applications dating back to 2006 (when the requirement to lodge a mineralisation report commenced). It has identified 55 lease applications where a mineralisation report was not lodged contemporaneously or where it was not signed off by a qualified person. Some of these applications have remained in the pipeline for years whilst the applicants have been seeking environmental clearances or native title future act agreements/decisions. For these applicants, having to go back and start all over again will be a nightmare. The mining lease applicants in this category will have to mark out the land again, make a new application ensuring all accompanying documents are correctly prepared and lodged and then go through the process of Mining Act objections by persons claiming other interests in the land (including landholders and competing miners) and also go through the future act process of the Native Title Act. These applicants may also have to fight off an opportunistic third party who may take the opportunity to apply for a mining tenement over the same ground. Until those applicants lodge their new applications, they are at risk of losing priority to the ground if an opportunistic person sensing a problem lodges an application for a mining tenement over the same ground.
(b) granted leases could be at risk
We have not seen the wording of the validating legislation but there must always be a risk that it is not adequate.
Some companies have already decided not to run that risk and have reapplied for mining leases over their existing granted leases. Two major iron ore projects (Fortescue and Roy Hill) have gone public and announced that they have applied for new leases over their existing granted leases. Roy Hill stated it wants to “prevent opportunistic or vexatious parties attempting to exploit potential uncertainties created by the Forrest case”.
We are aware that other companies (including clients of ours) have adopted a similar course of action. Whilst such action is prudent (and is recommended by us) it must be noted that it will be an expensive and time consuming exercise for those companies. We think that in a country which prides itself on a high sovereign risk rating, companies should not be put to time and expense in preserving their titles granted by government. Government (Commonwealth and State) need to make a big effort here if they wish to minimise the sovereign risk arising from the Forrest decision.
(c) defects other than failure to lodge a mineralisation report could prove fatal
The potential invalidity of granted mining leases (and applications for them) could go beyond the failure to lodge a mineralisation report. One example has already been identified by the Department: the lodged report not having been signed off by a qualified person.
But when lodging a mining lease application, the requirement to lodge a mining proposal, mineralisation report or resource report is not only the requirement. A mining lease application must be made by reference to a written description; it must be accompanied by a map, the application fee and rent.
What if one of these documents or payments was not lodged contemporaneously with the application?
What if one of these documents is defective in some respect?
What if there was a miscalculation of the application fee or rent?
It is one thing to say the Department must be on the alert to check strictly all future lodgments. But people make mistakes, so lapses have occurred and will continue to occur.
Also what about all the many leases which have been granted to date? What if there was one of these defects in these applications? Does the Department have to minutely examine each granted mining lease to check each aspect of the application for such lease?
Many of our readers will know that Western Australia has always had many active opportunists who look for, and take financial advantage of, errors and omissions by tenement holders/applicants. We think it can be expected that Forrest will bring such opportunists out in force. Government must prevent this by enacting comprehensive validating legislation and, in appropriate circumstances, by protecting incumbent tenement holder from unmeritorious opportunists such as by using the power under section 111A to refuse an opportunistic application.
(d) other mining tenements could be at risk
We see no reason to confine the High Court’s rationale in Forrest to mining lease applications.
First, in our opinion (obviously shared by the Government and the Department) the Forrest rationale extends beyond lease applications to granted mining leases which originated with non-compliant applications.
Secondly, we think similar reasoning could apply to other mining tenements. For example, an application for an exploration licence must be accompanied by a statement specifying the proposed method of exploration, details of the proposed work programme, an estimate of the amount of money proposed to be expended and particulars of the technical and financial resources available to the applicant. The wording of the requirement that an application for an exploration licence “shall be accompanied by” in section 58(1) is identical with the words in section 74(1) that an application for a mining lease “shall be accompanied by” a mineralisation report.
In saying this we accept that the requirement to lodge a mineralisation report for a mining lease application may be a unique situation which should not be expanded beyond that particular requirement. The rationale behind Forrest seems to be that because section 75(4a) states the warden shall not hear an application unless the warden has received a mineralisation report. Absent that, the warden has no jurisdiction. However the High Court went beyond to require that the mineralisation report must be lodged contemporaneously with the application.
So we suggest the rationale can easily be extended to other failures to comply strictly with the Mining Act; particularly where there is a requirement for the application to be “accompanied” by documents and payments.
(e) more contested tenement applications
We predict an upturn in objections based on failure to comply strictly with the application procedures prescribed by the Mining Act and the Mining Regulations. There are lots of warden’s court decisions effectively overlooking “strict compliance” where an application was required to be “accompanied” by documents and payments which we suggest can no longer be relied upon as sound law.
(f) native title
The issue of compliance with the Native Title Act (NTA) must be considered. The Department’s stated reason for limiting the legislative “fix” to granted leases is a concern with the native title implications of any proposed legislative remedy which validate lease applications.
So the Department said it would limit the remedy to granted leases that may otherwise have been deemed to be invalid on the rationale of Forrest. The Department argued that granted leases no longer have native title issues because they have been through the future act process of the NTA itself before they were granted.
Whilst it is true that they have been through the future act process, that doesn't remove the fundamental problem: in our opinion, just because a mining lease application has gone through the NTA future act process does not mean there has been compliance with the NTA if the mining lease application is itself invalid (because it did not comply with the Mining Act).
The Minister’s statement in Parliament might mean that the Department has recognised this issue since its 10th October statement but the Minister’s statement was brief and it may not cover the issue which concerns us. There have been lots of public comments about the issues raised by Forrest but, as far as we are aware, none has yet raised what we at HopgoodGanim see as the most serious issue: whether there was compliance with the NTA when the lease was granted. We say it is the most serious issue because it is not an issue can simply be resolved by the WA Government. Commonwealth legislation will be required to fix the situation and we really wonder if there will be any Commonwealth resolve to enact any such legislation. However it certainly is reassuring that the Minister has asked his colleague (the Minister for Aboriginal Affairs) to approach the Commonwealth and ask for a legislative remedy.
To restate the problem: in our opinion if a mining lease was granted based on an application not accompanied by a mineralisation report and so is invalid under the rationale of Forrest, there cannot have been compliance with the NTA. A future act must be valid apart from its effect on native title. If a mining lease was granted following an application which was invalid because of the Forrest rationale, it is ineffective under the NTA. So, even though it went through the NTA future act process, in our opinion it is a nullity. Having not validly gone through the NTA future act process, that mining lease will remain invalid. Further, our opinion is that even if the State legislates to validate such grants despite the non-compliance with the Mining Act, that does not mean there is deemed compliance with the NTA. Only Commonwealth legislation can deem compliance with the NTA.
(g) other States and Territories
The Forrest case is not simply an issue of concern to the Western Australian mining industry. Advisers to the mining industry in other States and the Territories should examine their mining legislation to see if it contains similar provisions to the WA Mining Act.
What should holders of granted mining leases do? (and in our opinion this applies to all mining tenements)
To avoid falling foul of the Forrest rationale, it is necessary for a mining lease applicant to check that it lodged the mineralisation report at the same time as the application. Additionally we suggest it would be prudent to check that the mineralisation report was prepared by an authorised person and that all other requisite documents and payments were submitted on time. If not, they should consider making a new application.
But as we have said, we are concerned that the rationale of the Forrest decision has ramifications which extend way beyond the facts of that case.
We suggest that the holders of granted mining leases should undertake similar checks. If those checks disclose non-compliance and the mining lease is of sufficient value to justify the expense, it would be prudent to lodge an application for a new mining lease and then wait to review the promised “legislative remedy”. We suggest after lodging, the new application need not be progressed and should be allowed to “sit there” pending the new legislation. This is the course being recommended by the Department.
We think that holders of other tenements should undertake detailed due diligence of all their mining tenements which are of sufficient value to justify the expense. Such due diligence would examine the process of application for each such mining tenement. If any defects in the application process are discovered, an application for a new mining tenement should be made.
Our recommendations as above obviously impose a significant burden on the mining industry in both time and money. The problems presented by the Forrest case are capable of legislative remedy but it requires a commitment from both State and Commonwealth governments to fix the problem.
For more information or discussion, please contact HopgoodGanim Lawyers' Resources and Energy team.