High Court: Unambiguous about ambiguity?

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In the decision of Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37, the High Court considered the construction of an agreement under which royalties were payable in respect certain mining operations.

The two issues were (a) whether an area called "Channar A" was within the "MBM area"; and (b) if it was, whether the ore was being mined by entities "deriving title through or under" Mount Bruce Mining. As to (a), the High Court upheld the New South Wales Court of Appeal's finding that the MBM area was defined by reference to the area of land fixed by the then existing boundaries of temporary reserves (and not from the rights obtained in relation to those reserves). As to (b), the High Court overturned the Court of Appeal's construction of "through or under", finding Mount Bruce Mining liable to pay royalties in respect of ore production at Channar A.

Of interest, was whether the High Court would use the case to revisit the "true rule" stated in Codelfa Constructions Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; namely, if a contractual term is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (ie. events external to the contract itself) cannot be adduced to contradict the term's plain meaning. Since Codelfa, different views have been taken about whether ambiguity is essential before regard can be had to surrounding circumstances. The differing views can be seen, for example, in the New South Wales Court of Appeal's decisions in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 and Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 (which held ambiguity was not essential) and the High Court's reasons for refusing special leave in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 (which held Codelfa remained binding authority until the High Court says otherwise).

The High Court declined to resolve this issue, as it was not necessary to the determination of the case. In doing so, the High Court took the following position:

1. Until the High Court reconsiders this issue, the position remains as stated in Codelfa; however

2. Reasons for refusing special leave [as in Jireh] are not themselves binding authority.

This may have left the door open to the High Court taking a more contextual approach to the construction of contracts in the future. Until such time, the true rule in Codelfa must be followed.

For more information, please contact us on (02) 9232 5977.

This is for general information purposes only. It is not intended to be legal advice and should not be relied on for that purpose. Formal legal advice should be obtained that is specific to your circumstances. To the extent permitted, Garland Hawthorn Brahe excludes all liability arising from reliance on this information.

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