IN_THE HIGH COURT OF AUSTRALIA) PRINCIPAL REGISTRY ) - 130 of 1976 ON APPEAL FROM THE SUPREME COURT OF NEW SOUTH WALES - BETWEEN WESTERN MINING CORPORATION a LIMITED Appellant AND EDWARD LESLIE JOSEPH REARDON, BERNARD JAMES REARDON and WASCOE INVESTMENTS PTY, LIMITED Respondents BEFORE THEIR HONOURS MR, JUSTICE STEPHEN, MR. JUSTICE MASON AND MR, JUSTICE JACOBS FRIDAY THE 4th DAY OF MARCH 1977 THIS APPEAL from the whole of the judgment and order of the Supreme Court of New South Wales given and made on the 30th day of June y 976 coming on for hearing before this Court at £ November, 1976 UPON READING the transcript Mr. K.R. ees OREN Counsel for Sestt pellant and Mr. F.D.J. Officer of Queen's roceedings herein and UPON HEARING en's Counsel and Mr. B.W. Collins of Counsel and Mr. C.C. Branson of Counsel for the Respondent THIS COURT DID ORDER on the said 15th day of November, 1976 that this appeal should stand for judgment and the same standing fox judgment this day accordingly at Melbourne THIS COURT DOTH ORDER that this appeal be and the same is hereby allowed AND THIS COURT DOTH FURTHER ORDER that the judgment and order of the said Supreme Court of New South Wales be and the same is hereby set aside AND in lieu thereof THIS COURT DOTH FURTHER ORDER that | | | | | | i there be judgment for the defendant in the action with cests AND_THIS COURT DOTH FURTHER ORDER that it be referred to the proper officer of this Court to tax and certify the costs of the Appellant of this appeal and that such costs when so taxed and certified be paid by the Respondent to the Appellant or to its solicitors, Messrs. Allen Allen & Hemsley AND THIS COURT CONS: FURTHER ORDER that the sum of One hundred dollars ($100.00) paid into Court by way of security be paid out to the Appellant or to its solicitors, the said Messrs. Allen Allen & Hemsley. WESTERN MINING CORPORATION LIMITED Vv. REARDON AND OTHERS ORDER Appeal allowed with costs. Order of the Supreme Court of New South Wales set aside and in lieu thereof order that there be judgment for the defendant in the action with costs. JUDGEMENT WESTERN MINING CORPORATION LIMITED REARDON AND OTHERS STEPHEN J. WESTERN MINING CORPORATION LIMITED ve. REARDON AND OTHERS This appeal turns upon the meaning to be attributed to the term "accrued liaibilities" appearing in clause 15 of an agreement, described as a mineral tenements contract of sale and concerned with certain mining tenements in New South Wales. The relevant effect of this agreement, dated 26 August 1971 and made between Western Mining Corporation Limited (WMC) of the first part and certain other parties interested in the tenements and in the freehold land to which they relate, may, albeit at the expense of precise accuracy, be summarised quite shortly. The vendor parties agree to sell and assign toWMC their rights to mine in consideration of WMC agreeing to pay to them $94,000 together with a royalty on copper won by WMC from the land - clause 1. The sum of $94,000 is made payable as to $25,000 within seven days of execution and the balance within nine months of execution - clause 2. By clause 4 the vendors, in consideration of a further sum of $5,000, also grant to WMC an option to buy for $1 their title to relevant applications for Authorities to Enter, applied for under the applicable mining legislation, and also to any mining leases and the like issued in consequence thereof. The exclusive mode of exercise of this option is by giving a notice of commitment under clause 5, a step involving consequences more far-reaching than the mere exercise of the option; clause 4 also provides that exercise of the option is not to pass title to the mining leases etc., which instead are to pass under clause 1. Clause 5, after declaring the agreement to be expressly subject to WMC committing itself to proceed within three years, provides that, unless WMC within three years gives to the vendors written notice committing itself to proceed with exploitation and development of the mining project, the vendors may rescind on thirty days written notice, moneys already paid by WMC being thereupon forfeited to the vendors. If WMC does give notice of commitment under clause 5 the vendors are thereupon to transfer to WMC titles to leases and also tenements - clause 11. WMC is given an exclusive right to enter and prospect on the lands - clause 8. Clause 15, the critical clause, I set out in full, with emphasis added: "15. WMC may at any time by notice given in accordance with Clause 20 hereof indicate that it does not intend to commit itself to the Project and as from the date upon which such notice is received or deemed to be received by the Vendors the obligations of WMC hereunder shall cease without prejudice to accrued liabilities and any moneys already paid to the Vendors hereunder shall be forfeited as and for liquidated damages. WMC shall then be under no liability or obligation hereunder save as in this clause provided." Only two further clauses need be mentioned. By clause 16(a), should WMC give notice under clause 15 or should the agreement be rescinded, WMC must supply the vendors with the information gained by it from prospecting operations on the lands. By clause 24 WMC may cancel the agreement either for defect of vendors' title to leases or tenements or if certain leases or tenements be not granted, the vendors thereupon repaying to WMC all moneys paid under the agreement. By two later agreements the original agreement was altered in a variety of ways. By the first agreement, dated 23 December 1971, the times within which WMC was obliged to commit itself under clause 5 and to make payments under clauses 1, 2 and 4 were extended by such a period as might be required in order to dispose of a third party's competing application for Authorities to Enter which had come to the parties' notice. By the second, dated 21 December 1973, the time for payment of the balance of $94,000 under clause 2 was extended to 31 December 1974, clause 5 was amended by substituting for the three year period for notice of commitment a period ending on 31 December 1977 and certain other alterations, not presently material, were also made; the first amending agreement was expressed to terminate as from 31 December 1973. . On 6 December 1974, shortly before the last date for payment of the balance of the $94,000, WMC gave notice that it did not intend to commit itself to the project. This brought into operation clause 15 and the vendors accordingly forfeited the moneys which had already been paid to them by WMC. They also claimed to be entitled to a further $69,000, being the still unpaid balance of the sum of $94,000. They contended that that sum was an "accrued" liability of WMC under clause 15, the giving of the notice by WMC being "without prejudice" to such liability. It was WMC's denial of the vendors' entitlement to this sum which has given rise to the present dispute, WMC contending that that sum does not answer the description of "accrued liabilities" in clause 15. In the New South Wales Supreme Court Yeldham J. found for the plaintiff vendors, who had sued in that court for the sum of $69,000. WMC now appeals to this court. The pattern of the arrangement between the parties is plain enough; after paying $25,000 under clause 2 and $5,000 under clause 4, WMC is to be entitled to enter and prospect. It may thereafter either commit itself, under clause 5, to development of the project, thereby also exercising its option under clause 4, or it may announce its antention to the contrary under clause 15. If it does neither of these things within a stipulated time the vendors may force its hand by service of a notice of intention to rescind under clause 5: whereupon WMC, if it is to avoid rescission, must give notice of commitment within thirty days, failing which the agreement comes to an end, the vendors retaining all moneys already paid to them by WMC. The agreement involves a curious combination of immediately binding obligation and optional liability; it is the uneasy marriage of the two which has given rise to the present problem. Although the vendors agree to sell their rights to mine in return for WMC's promise to pay $94,000 and to make subsequent royalty payments, yet WMC retains the right, at a "price" and within a limited period, to elect not to commit itself to full development as a mining project. If it exercises that right the agreement to sell comes to naught, title to the rights to mine and mining leases etc. remaining with the vendors; the "price" which WMC must pay if it is to exercise this right, styled liquidated damages, is to suffer forfeiture of moneys already paid to the vendors, WMC also remaining liable for "accrued liabilities". The extent of departure from the concept of immediately binding obligation which this agreement involves is illustrated by the opening words of clause 5: "This contract is expressly subject to WMC committing itself to proceed ..." The learned primary judge was, in my view, correct in rejecting the view that these words rendered the entire contract in some way conditional only. What they do do, however, is emphasise that WMC's performance of the agreement in its entirety is to be conditioned by its willingness, after due: investigation, to proceed with development of a full- scale mining project. Thus, although the agreement is not, with the exception of clause 4, expressed in terms of an option but instead speaks in the language of a contract of sale, yet at the same time it confers upon WMC explicit power to elect to proceed no further after having investigated the proposed mining project; it also confers upon the vendors a necessary consequential power, the power to resolve uncertainty as to WMC's intentions by means of a rescission notice. All this might have been well enough had the agreement been explicit, in clause 15, as to the full consequences should WMC elect not to commit itself; instead the draftsman was content to refer to "accrued liabilities", leaving it unclear whether they were to include any component parts of the total sum of $94,000 remaining unpaid when WMC served its notice of non-intention to commit itself. The sum of $94,000 was at all times payable in two amounts, $25,000 within seven days of execution and the palance of $69,000 originally within nine months of execution, that is to say on or before 26 May 1972, but extended by the first amending agreement and then further extended, before the end of that first extension, by the second amending agreement. -7- If, as the vendors contend, "accrued liabilities" in clause 15 was intended to refer to the sum of $69,000 whether or not due for payment by WMC to the vendors, the only effect of providing for a nine month's postponement of its payment must have been merely for the convenience of WMC in arranging finance and the postponement would have been incapable in any circumstances of affecting anyone's rights. Thus, on this view, were WMC to elect not to commit itself under clause 15, it would nevertheless have had to pay over the $69,000, whether or not then due. If, instead, it exercised its power to cancel under clause 24 the vendors would not in any event have been entitled to the $69,000, whether or not already paid over by WMC. Again, any exercise of the vendors! right to rescind under clause 5, followed by forfeiture to them of moneys already paid, would necessarily only arise long after the due date for payment of the $69,000 and would thus in any event carry with it a right to this $69,000. However it scarcely appears to be a likely intention to impute to the parties that the postponement of payment of the $69,000 was merely for convenience of funding on the part of WMC. The original period of postponement, nine months, when read in the context of an agreement contemplating that after its execution WMC should engage in "testing, inquiries, negotiations and studies preparatory to a decision" to commit itself to the development of the lands as a mining project (see clause 3), suggests rather that those nine months represent an initial period during which WMC might assure itself to some degree of the merits of the project before hazarding a further substantial payment. This receives confirmation from the two subsequent amending agreements; the first of these was necessitated by a rival application for an Authority to Enter lodged by third parties and the partiest reaction to this was to extend the time for payment of the $69,000 by as long as might prove necessary to dispose of the risk to the entire project which this rival application represented. The second amending agreement, executed fully two years later and apparently at a time when the first period of extension of time for payment of the $69,000 was still running, was necessitated by the emergence of a further possible frustration of the entire project due to re-zoning of the land, It provided for a period of rather more than a year from its execution before the balance of $69,000 should become payable. These two extensions of time strongly suggest that the postponed date for payment of the $69,000 was regarded as of importance as significantly affecting the parties! rights, a view consistent only with the interpretation of "accrued liabilities" in clause 15 as not including the $69,000 if, at the date of WMC's notice of non-intention to commit itself, that sum was not yet due for payment. Once the view be adopted that the reason for deferring payment of the greater part of the sum of $94,000 was to afford to WMC time further to assess the feasibility of full-scale development as a mining project without hazarding the whole of that. sum at the very outset, the true nature of the agreement is exposed. Although expressed in terms of a contract of sale it in truth operates very much like an option agreement. $25,000 (plus $5,000 payable under clause 4) is to be paid initially. WMC may then enter and conduct exploratory work on the land for the purpose of assessing its potentiality as the site of a mining project. Within a limited time WMC must pay a further $69,000 unless in the meanwhile it determines not to commit itself to the development of the project. Thereafter WMC, having paid all these amounts, still remains free to determine not to commit itself but will thereby forfeit the amounts it has already paid unless there should arise some want of title on the vendors' part or some non-grant of mining leasesetc., in which case WMC may cancel and recover all moneys paid by it. I regard this to be the true view of the nature of this agreement and it is one fatal to the vendors' claim to the sum of $69,000; it must result in this appeal being allowed. I have not troubled to discuss the numerous authorities on the meaning of "accrued liabilities" which were cited in argument and a number of which are discussed in the judgement of Yeldham J. As his Honour was at some pains to point out, these words depend for their meaning very much upon context and the present context is a quite unique one, remote from the statutory contexts with which most of those authorities were concerned. On this aspect I can, I think, do no better than rely, as did Yeldham J. upon the succinct statement as to the - 10 - inherent ambiguity of the words, contained in the judgement of the Circuit Court of Appeals of the Sixth Circuit in Watkins v. Illinois Central Railroad Co. (1916) 232 Fed. Rep. 691 at 692 and set out in the reasons for judgment of Yeldham J. To give to the words "accrued liabilities" in clause 15 the meaning which I do gives rise to no consequences inconsistent with what might be thought to have been the intention of the parties. It was said by counsel for the vendors that it was inherently unlikely that, under the terms of the original agreement, the fate of the $69,000 should depend upon whether or not a notice of non-intention to commit were given within nine months; such a period might or might not be adequate for initial investigation by WMC of the prospects of any full-scale mining development on the land. I see no force in that observation, the period is a lengthy one and the parties may well have concluded that it was also an appropriate one. It was also said that if the period of nine months was significant in affecting the vendors! rights to the $69,000, so too must be the period of seven days within which the original sums of $25,000 and $5,000 were payable. It is, of course, conceivable that WMC might, within seven days of execution of the original agreement, have given notice of non-commitment, thus denying to the vendors any entitlement to the sums of $25,000 and $5,000 if not then already paid to them. But the parties can scarcely have envisaged this as an -l1- even remotely possible eventuality, and I regard it as no aid in understanding the true effect of the parties' stipulation that the balance of $94,000 should for the first time become payable nine months after execution. The period of seven days served, I think, a quite different purpose from that of the nine months and may well have been inserted merely as a machinery provision to meet the convenience of WMC. Again it was said that if "accrued liabilities" did not include the $69,000, whenever payable, there was little upon which it could operate. Not so; provisions of clauses 7A, 12, 16 and 17 would appear to offer subject-matter upon which clause 15 can work in appropriate circumstances, each of these clauses being capable of giving rise to liabilities which might aptly enough be described as "accrued liabilities". The learned trial judge regarded certain recitals contained in the first amending agreement as supporting the interpretation urged by vendors' counsel. I have read and agree with all that is said by my brother Mason in this regard. It is for the foregoing reasons that I would allow this appeal. JUDGMENT WESTERN MINING CORPORATION LIMITED REARDON AND OTHERS MASON J. WESTERN MINING CORPORATION LIMITED Vv. REARDON AND OTHERS In this case the question is whether the appellant is bound, as Yeldham J. in the Supreme Court of New South Wales held it is, to pay to the respondents the sum of $69,000 on the footing that the amount in question falls within the expression "accrued liabilities" in cl. 15 of an agreement made on 26th August 1971 between the appellant and the respondents and Anne Moira Reardon, the appellant being bound to pay accrued liabili- ties within the meaning of that clause to the respondents. It is necessary to set out in some detail the circumstances in which this question became a matter of con- troversy between the parties. The original agreement to which I have referred was headed "Mineral Tenements Contract of Sale". The parties to it were the appellant ("WMC") of the first part, Edward Leslie Joseph Reardon and Bernard James Reardon ("the Holders") of the second part, the aforesaid two Reardons and Wascoe Investments Pty. Ltd. ("the Beneficial Owners") of the third part, the Holders and Beneficial Owners being jointly referred to in the agreement as "the Vendors", and Edward Leslie Joseph Reardon, Anne Moira Reardon and Karalee Pty. Ltd. ("the Freeholders") of the fourth part. The agreement recited that the Holders had, on behalf of the Beneficial Owners, applied for three Authorities to Enter, Nos. 381, 382 and 383, and stated that such applications (referred to as "the Tenements") would include the areas the subject of the 2. Tenements, the applications themselves and also any Authorities to Enter or renewals which might be granted, that the Holders had on behalf of the Beneficial Owners applied for mining leases under applications Nos. 136, 137 and 138 and that the Holders and Freeholders had agreed to do all that was necessary to carry into effect the agreement and to execute any necessary consents or other documents and that the Freeholders were, with one immaterial exception, the registered proprietors of the freehold of the land covered by the Tenements and the mining leases. Clauses 1 and 2 of the agreement provided: "1. (a) The Vendors hereby agree to sell, transfer and assign to WMC their rights to mine in the areas covered by the Mining Leases for gold and for all metals and minerals specified in the Regu- lations made under the Income Tax Assessment Act as metals or minerals in respect of which paragraph (p) of Section 23 of the said Act applies in consideration of WMC agreeing to pay the sum of NINETY-FOUR THOUSAND DOLLARS ($94,000.00) and a royalty to be calculated and paid in accordance with the provisions of Clause 3 hereof; (b) Subject to WMC paying the sum of Ninety-four Thousand Dollars ($94,000.00) in accordance with the provisions of Clause 2 hereof the Vendors agree upon the request of WMC made within two years and three months thereafter to sell, transfer and assign to WMC all the residue of their right title and interest in the Mining Leases for the sum of ONE THOUSAND DOLLARS ($1,000.00). 2. THE said sum of Ninety-Four Thousand Dollars ($94,000.00) shall be payable as to TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) within seven (7) days next after the date of execution hereof and the Balance within nine (9) months next after the date of execution hereof." Clause 2 was amended by a later agreement to which I shall refer so that the amount of $69,000 was expressed to be payable on or before 31st December 1974. Clause 3 provided that the royalty to be paid as part of the consideration provided for in cl. 1 should be paid for every ton of contained copper mined and sold by WMC calcu- lated in accordance with a formula set out in the clause. The clause stated that it was contemplated that a sum of approxi- mately $900,000 would be spent by WMC in relation to the mining leases and Tenements for the purpose of deciding whether or not it would mount a project for the exploitation and development of them and that in the event that WMC committed itself to pro- ceed with the project there would be completed a final feasibility study. Clause 4 provided that in consideration of the sum of $5,000 to be paid within seven days of the execution of the agreement the Vendors thereby granted to WMC an option to buy for the sum of $1 all the right, title and interest of the Vendors in and to the Tenements, the option to be exercised by the giving of the notice referred to incl. 5. Clause 4 contained a pro- viso in the following terms: "PROVIDED THAT any mining lease or application for or a right thereto obtained by applied for or held by the Vendors or any of them as a result of or pursuant to or dependent upon them or any of them having the Tenements or any of them shall not upon the exercise of the option pass under this clause but shall pass under Clause 1 hereof and the property in and title, right and interest in and to the Tenements shall not pass upon the exercise of the option but shall remain in the Vendors until mining leases have been applied for over the lands comprised in the Authorities to Enter set out in the First Schedule, or over so much thereof as WMC may in its absolute discretion decide." Clause 5 then provided: "5. THIS contract is expressly subject to WMC com- mitting itself to proceed with the Project within 4, three years from the date hereof. Unless WMC shall give notice in writing to the Vendors within such three year period or such extended period as the Vendors shall permit or as may be required pursuant hereto or both that WMC has so committed then the Vendors may rescind this contract by giving not less than thirty (30) days' notice of their inten- tion to do so. Unless WMC shall give notice as aforesaid before the Vendors' notice shall have expired then this contract shall upon the expira- tion of the Vendors' notice be rescinded and all Moneys paid by WMC hereunder shall be forfeited as and for liquidated damages but WMC shall be under no other liability or obligation as a result of not having given such notice. WMC may give the notice required of it at any time hereafter up to the expiration of the notice (if any) given by the Vendors as aforesaid." This clause was subsequently amended by a later agreement to which I shall refer so as to require WMC to elect on or before 31st December 1977 whether it would commit itself to proceed with the project. Clause 8 provided that at all times during the currency of the agreement WMC should have the exclusive right to enter upon the land for the purpose of inspecting, testing, taking samples and carrying out prospecting and other work and that it should have the right to bring on to the land any plant, machinery and other chattels and to remove the same. Clause 11 provided: "WI. UPON WMC duly giving the notice to be given by it pursuant to Clause 5 hereof then but not before at the election of WMC and so far as the nature of the Mining Leases and the Tenements shall permit the Vendors shall thereupon (a) transfer the titles to the Mining Leases and the Tenements to WMC; or (b) execute a declaration of trust satisfactory to WMC in favour of WMC in respect of the Mining Leases and the Tenements; or (ec) do both of the above in such combination in respect of the different parts of the Mining Leases and the Tenements as WMC may require." 5. Clause 14 enabled WMC to assign the benefit of the agreement. Clause 15, which is critical, is in these terms. "15. WMC may at any time by notice given in accord- ance with Clause 20 hereof indicate that it does not intend to commit itself to the Project and as from the date upon which such notice is received or deemed to be received by the Vendors the obligations of WMC hereunder shall cease without prejudice to accrued liabilities and any moneys already paid to the Vendors hereunder shall be forfeited as and for liquidated damages. WMC shall then be under no liability or obligation hereunder save as in this clause provided." Clause 24 provides: way, IT is hereby further agreed and declared that should the Title of the Vendors to the Mining Leases and the Tenements be found to be defective or should the appropriate Mining Warden fail to recommend or the Minister for Mines of the State of New South Wales fail to grant the Mining Leases and the Tenements or any of them or any part of them except in relation to conflicting Exploration Licence 266 then WMC may, at its absolute discretion, cancel this Agreement where- upon the Vendors shall forthwith repay to WMC all and any moneys paid to them pursuant hereto." The second agreement was made on 23rd December 1971 but as its provisions were largely supplanted by a third agreement which was made on 21st December 1973 I need not stay to deal with it now. The third agreement, that made on 21st December 1973, made the changes to the initial agreement to which I have already referred. It recited that as a result of the re-zoning of the land it was uncertain that WMC would be permitted to mine and that to take account of the changed circumstances the parties agreed to amend the initial agreement as it had been varied by the second agreement. The relevant amendments were: (a) The deletion from cl. 2 of the words "nine (9) months next after the date of execution hereof" and the 6. insertion of "on or before the 31st day of December 1974"; (b) The deletion from cl. 5 of the first sentence and the insertion of "This contract is expressly subject to WMC committing itself to procééd on or before the 31st day of December 1977"; and (c) The deletion from the same clause of the words "within such three year period or such extended period" and the insertion of "on or before the 3lst day of December 1977 or such later date". By notice dated 6th December 1974 WMC gave notice that it did not intend to commit itself to the project. The issue is whether, because at that date the time for the balance of $69,000 to be paid under cl. 2 as amended had not arrived, such sum was within the. expression "accrued liabilities" in el. 15. The respondents' case was that the expression included all liabilities which, wholly by reason of something previously agreed or done, had become absolute rather than con- tingent and that it referred to liabilities which had arisen irrespective of whether the obligation to pay was immediately enforceable or not. Alternatively, the respondents submitted that even if the meaning of the expression "accrued liabilities" was not clear it was necessary to construe cl. 15 as imposing an obligation upon the appellant to pay the balance of the con- sideration set out in cl. 1 so as to produce harmony with other provisions of the agreement and to conform to the intention of the parties. It was urged that if any other view were taken 7. the agreement would operate capriciously and enable the appel- lant to avoid an obligation which the parties clearly envisaged would lie upon it. On the other hand, the appellant contended that the expression "accrued liabilities" comprehended liabilities which were at the relevant time enforceable and for which at that time the appellant could be sued. It was submitted that only in the event that a liability was due could it be said to be "accrued". The primary judge took the view that in considera- tion of the Vendors agreeing to sell, transfer and assign their rights to mine in the areasin question WMC gave an absolute and unconditional promise to make the payments mentioned in cl. l(a). He considered that the only effect of cl. 2 as amended was to defer the time for payment, without affecting WMC's obligation to make the payment. Nor did he think that cl. 5 could be regarded as making the payments in any way conditional. Conse- quently, there was a liability in WMC to pay which had "accrued". With respect to his Honour, this is not a view to which I can subscribe. True it is that cl. 1(a) contains promises by the Vendors and WMC which are not expressed to be conditional. But in an agreement for the sale of real and personal property, transfer of title and payment are generally concurrent obligations in the sense that the obligation to pay the price is not independent of the obligation to transfer title. Clause 2 as amended required WMC to pay $25,000 within seven days of the execution of the agreement and to pay the balance on or before 3lst December 1974. Except as to the $25,000 it contains no provision requiring WMC to pay independently of the 8. Vendors' performance of their. obligation to assign. It would, in my opinion, call for particularly clear and cogent words to compel the conclusion that the obligation of WMC to make the payment was independent of the Vendors' obligation to assign. Clause 5 certainly. affords no support to the respondents. The right which it gives WMC not to proceed with the agreement - which was in essence an agreement for the sale, transfer and assignment of rights to mine - is inconsistent with the propositi that WMC was unconditionally bound to pay for the rights to mine. Much of the respondents' argument seems to me to stem from a fundamental misconception as to the nature of the agreement. An examination of its basic provisions indicates that it was designed to give WMC an opportunity of investigating and testing the deposits and of making feasibility studies with a view to deciding whether the deposits could be commercially developed with success. But all this was for WMC to decide and that is why cl. 5 empowered it to elect not to proceed and why cl. 15 authorized it to give notice that it did not intend to commit itself to the project. It would be quite at variance with the existence of the right of election and the right to give notice under cl. 15 to say that WMC was bound to pay for the rights to mine, notwithstanding an election on its part not to proceed with the project communicated by a notice given by it before the due date for payment of the sum of $69,000. Despite the arguments of the respondents' counsel there is nothing unjust or irrational in this result. The respondents were the owners or the potential owners of the Tenements but it was not suggested that they were in a position or had the capacity to develop the deposits commercially 9. for themselves. The agreement gave them the benefit of access to the investigations and feasibility studies to be carried out by WMC, a large and experienced mining company, and it presented what to them was the valuable possibility that the results of the investigations and studies would be favourable in which event WMC would, in all probability, elect to proceed, thereby entitlin the Vendors to performance by WMC of its obligations under the agreement. In this setting it should occasion no surprise that if WMC decided not to proceed, the parties should stipulate that it was under no liability to make the payments provided for in cl. 1(a) except as to the initial sum of $25,000, provided that notice under cl. 15 was given by WMC before the due date for payment of the balance of $69,000, namely 31st December 1974. It is understandable and not unfair that WMC was to forfeit the $69,000 if it was unable to determine its position by 31st December 1974 thereby disabling the respondents from making other arrangements with respect to the Tenements and that WMC escaped liability to pay that amount if it gave notice of intention not to proceed before 3lst December 1974 leaving the respondents free to make other arrangements with respect to the Tenements. The question of construction is therefore to be determined by reference to the natural and ordinary language of cl. 15, viewed in the light of the general subject matter of the agreement. As a matter of language, the expression "accrued liabilities" is appropriate to designate liabilities which have accrued due. It is inappropriate to denote liabili- ties which are conditional or contingent in character. Understood 10. in the context of the agreement taken as a whole, in particular in the light of its character as I have explained it, the pro- visions of cl. 1 cannot be construed as imposing on WMC an absolute and unqualified obligation to pay the balance irres- pective of a notice not to proceed given before the due date for payment of the balance. It was suggested by the respondents that unless their view was accepted there were no liabilities upon which el. 15 could operate. This is not correct. Liabilities could arise under cll. 7(a) and 17. It matters not that these liabili- ties are of a minor character. It is enough that they can come into existence for then appropriate provision had to be made for them as it was made by cl. 15. The primary judge seems to have thought that some support for the respondents' case could be found in Recital A and cl. 1(b) in the second agreement made by the parties. It is convenient to set out Recital A and cl. 1 of the second agreement. Recital A is in these terms: "A. The Vendors, the Freeholders and WMC are parties to a Mineral Tenements Contract of Sale ("the Minerals Agreement") dated 26th August 1971 where- by the Vendors granted WMC an option to buy all the right title and interest of the Vendors in and to the Tenements ("the Tenements") as therein defined and agreed, inter alia, to sell to WMC the Mining Leases ("the Mining Leases") as therein defined for the consideration therein set out and upon the terms and conditions therein contained." Clause 1 provides as follows: "1. The Vendors in consideration of the sum of ONE DOLLAR ($1.00) (which sum shall be paid to them within seven (7) days of the date of execution hereof) hereby jointly and severally agree to :- (a) extend the time within which WMC is bound pursuant to Clause 5 of the Minerals 11. Agreement to commit itself to the Project as therein defined by a period of time ("the extension period") equivalent to the period commencing on the llth day of October 1971 and expiring on the day of final determination as hereinafter defined. (b) extend the time within which WMC is bound to make payments to the Vendors pursuant to each of Clauses 1, 4 and the latter part of 2 (relating to a balance payment) thereof by the duration of the extension period." His Honour thought that the words "is bound" in el. 1(b) acknowledged that WMC was absolutely liable to make the payments, but reference to cl. 1(a) demonstrates that the expression "is bound", which also appears in that subclause, is used in the sense of "may become bound". Clause 1(a) deals with the time in which WMC is required to elect whether it will commit itself to the project. WMC was of course at no stage bound to commit itself to the project although it was required to make up its mind by the date stipulated. Conse- quently cl. 1(b) provides no support for the respondents. Nor, to my mind, does Recital A in the second agreement assist them. It does state that under the initial agreement the Vendors agreed to sell to WMC the mining leases for the consideration therein set out but it goes on to say "upon the terms and conditions therein contained", thereby importing the other provisions in the initial agreement which, in my view, make it clear that WMC's obligation to pay was not unqualified and absolute. For these reasons I would allow the appeal. JUDGMENT WESTERN MINING CORPORATION LIMITED REARDON AND OTHERS JACOBS J. WESTERN MINING CORPORATION LIMITED REARDON AND OTHERS I agree that the appeal should be allowed. I do not feel that I can usefully add anything to the reasons which have been given by the other members of the Court. IN THE HIGH COURT OF AUSTRALIA) PRINCIPAL REGISTRY ) He. 130 of 1976 ON _ APPEAL FROM THE SUPREME COURT OF NEW SOUTH WALES BETWEEN WESTERN MINING CORPORATION LIMITED . Appellant AND EDWARD LESLIE JOSEPH REARDON, BERNARD JAMES REARDON and WASCOE INVESTMENTS PTY. LIMITED Respondents BEFORE THEIR HONOURS MR, JUSTICE STEPHEN, MR. JUSTICE MASON AND MR. JUSTICE JACOBS FRIDAY THE 4th DAY OF MARCH 1977 THIS APPEAL from the whole of the judgment and order of the Supreme Court of New South Wales given and made on the 30th day of June, 6 coming on for hearing before this Court at bx Sydney on 1976 UPON READING the Counsel for the ellant and Mr. F.D.J. Officer of Queen's Counsel and Mr. C.C. Branson of Counsel for the Respondent THIS COURT DID ORDER on the said 15th day of November, 1976 that this appeal should stand for judgment and the same standing for judgment this day accordingly at Melbourne THIS COURT DOTH ORDER that this appeal be and the same is hereby allowed AND THIS COURT DOTH FURTHER ORDER that the judgment and order of the said Supreme Court of New South Wales be and the same is hereby set aside AND in lieu thereof THIS COURT DOTH FURTHER ORDER that there be judgment for the defendant in the action with costs AND THIS COURT DOTH FURTHER ORDER that it be referred to the proper officer of this Court to tax and certify the costs of the Appellant of this appeal and that such costs when so taxed and certified be paid by the Respondent to the Appellant or to its solicitors, Messrs. Allen Allen & Hemsley AND THIS COURT DOTH BY CONSENT FURTHER ORDER that the sum of One hundred dollars ($100.00) paid into Court by way of security be paid out to the Appellant or to its solicitors, the said Messrs. Allen Allen & Hemsley. mee "13 @ e oa IN THE HIGH COURT OF Aus tALIA ~vnewolf ESTERN. MINING. SORRORATION..... REARDON |....&... OTHERS REASONS FOR JUDGMENT ORIGINAL Judgment delivered at .... MELBOURNE sssssssessessensee on LRLDAY.....A TH. MARCH scsesseeehQulalueesee RM74/30574 IN THE HIGH COURT OF AUSTRALIA PRINCIPAL REGISTRY Court Book No. 130 of 1976 BETWEEN WESTERN MINING CORPORATION LIMITED Appellant AND EDWARD LESLIE JOSEPH REARDON, BERNARD JAMES REARDON AND WASCOE INVESTMENTS PTY. LIMITED Respondents ALLEN ALLEN & HEMSLEY, SOLICITORS, " 2 CASTLEREAGH STREET, SYDNEY, N.S.W. 2000, 232 0315 (BPJ 411/6 AIT) DX 105 WESTERN MINING CORPORATION LIMITED Vv. REARDON AND OTHERS ORDER Appeal allowed with costs. Order of the Supreme Court of New South Wales set aside and in lieu thereof order that. there be judgment for the defendant in the action with costs. WESTERN MINING CORPORATION LIMITED REARDON AND OTHERS JUDGEMENT STEPHEN J. WESTERN MINING CORPORATION LIMITED v. REARDON AND OTHERS This appeal turns upon the meaning to be attributed to the term "accrued liaibilities" appearing in clause 15 of an agreement, described as a mineral tenements contract of sale and concerned with certain mining tenements in New South Wales. The relevant effect of this agreement, dated 26 August 1971 and made between Western Mining Corporation Limited (WMC) of the first part and certain other parties interested in the tenements and in the freehold land to which they relate, may, albeit at the expense of precise accuracy, be summarised quite shortly. The vendor parties agree to sell and assign toWMC their rights to mine in consideration of WMC agreeing to pay to them $94,000 together with a royalty on copper won by WMC from the land - clause 1. The sum of $94,000 is made payable as to $25,000 within seven days of execution and the balance within nine months of execution - clause 2. By clause 4 the vendors, in consideration of a further sum of $5,000, also grant to WMC an option to buy for $1 their title to relevant applications for Authorities to Enter, applied for under the applicable mining legislation, and also to any mining leases and the like issued in consequence thereof. The exclusive mode of exercise of this option is by giving a notice of commitment under clause 5, a step involving consequences more far-reaching than the mere exercise of the option; clause 4 also provides that exercise of the option is not to pass title to the mining leases etc., which instead are to pass under clause 1. Clause 5, after declaring the agreement to be expressly subject to WMC committing itself to proceed within three years, provides that, unless WMC within three years gives to the vendors written notice committing itself to proceed with exploitation and development of the mining project, the vendors may rescind on thirty days written notice, moneys already paid by WMC being thereupon forfeited to the vendors. If WMC does. give notice of commitment under clause 5 the vendors are thereupon to transfer to WMC titles to leases and also tenements - clause 11. WMC is given an exclusive right to enter and prospect on. the lands - clause 8. Clause 15, the critical clause, I set out in full, with emphasis added: "15. WMC may at any time by notice given in accordance with Clause 20 hereof indicate that it does not intend to commit itself to the Project and as from the date upon which such notice is received or deemed to be received by the Vendors the obligations of WMC hereunder shall cease without prejudice to accrued liabilities and any moneys already paid to the Vendors hereunder shall be forfeited as and for liquidated damages. WMC shall then be under no liability or obligation hereunder save as in this clause provided." Only two further clauses need be mentioned. By clause 16(a), should WMC give notice under clause 15 or should the agreement be rescinded, WMC must supply the vendors with the information gained by it from prospecting operations on the lands. By clause 24 WMC may cancel the agreement either for defect of vendors' title to leases or tenements or if certain leases or tenements be not granted, the vendors thereupon repaying to WMC all moneys paid under the agreement. By two later agreements the original agreement was altered in a variety of ways. By the first agreement, dated 23 December 1971, the times within which WMC was obliged to commit itself under clause 5 and to make payments under clauses 1, 2 and 4 were extended by such a period as might be required in order to dispose of a third party's competing application for Authorities to Enter which had come to the parties' notice. By the second, dated 21 December 1973, the time for payment of the balance of $94,000 under clause 2 was extended to 31 December 1974, clause 5 was amended by substituting for the three year period for notice of commitment a period ending on 31 December 1977 and certain other alterations, not presently material, were also made; the first amending agreement was expressed to terminate as from 31 December 1973. On 6 December 1974, shortly before the last date for payment of the balance of the $94,000, WMC gave notice that it did not intend to commit itself to the project. This brought into operation clause 15 and the vendors accordingly forfeited the moneys which had already been paid to them by WMC. They also claimed to be entitled to a further $69,000, being the still unpaid balance of the sum of $94,000.. They contended that that sum was an "accrued" liability of WMC under clause 15, the giving of the notice by WMC being "without prejudice" to such liability. It was WMC's denial of the vendors' entitlement to this sum which has given rise to the present dispute, WMC contending that that sum does not answer the description of "accrued liabilities" in clause 15. In the New South Wales Supreme Court Yeldham J. found for the plaintiff vendors, who had sued in that court for the sum of $69,000. WMC now appeals to this court. The pattern of the arrangement between the parties is plain enough; after paying $25,000 under clause 2 and $5,000 under clause 4, WMC is to be entitled to enter and prospect. It may thereafter either commit itself, under clause 5, to development of the project, thereby also exercising its option under clause 4, or it may announce its intention to the contrary under clause 15. If it does neither of these things within a stipulated time the vendors may force its hand by service of a notice of intention to rescind under clause 5: whereupon WMC, if it is to avoid rescission, must give notice of commitment within thirty days, failing which the agreement comes to an end, the vendors retaining all moneys already paid to them by WMC. The agreement involves a curious combination of immediately binding obligation and optional liability; it is the uneasy marriage of the two which has given rise to the present problem. Although the vendors agree to sell their rights to mine in return for WMC's promise to pay $94,000 and to make subsequent royalty payments, yet WMC retains the right, at a "price" and within a limited period, to elect not to commit itself to full development as a mining project. If it exercises that right the agreement to sell comes to naught, title to the rights to mine and mining leases etc. remaining with the vendors; the "price" which WMC must pay if it is to exercise this right, styled liquidated damages, is to suffer forfeiture of moneys already paid to the vendors, WMC also remaining liable for "accrued liabilities". The extent of departure from the concept of immediately binding obligation which this agreement involves is illustrated by the opening words of clause 5: "This contract is expressly subject to WMC committing itself to proceed ..." The learned primary judge was, in my view, correct in rejecting the view that these words rendered the entire contract in some way conditional only. What they do do, however, is emphasise that WMC's performance of the agreement in its entirety is to be conditioned by its willingness, after due investigation, to proceed with development of a full- scale mining project. Thus, although the agreement is not, with the exception of clause 4, expressed in terms of an option but instead speaks in the language of a contract of sale, yet at the same time it confers upon WMC explicit power to elect to proceed no further after having investigated the proposed mining project; it also confers upon the vendors a necessary consequential power, the power to resolve uncertainty as to WMC's intentions by means of a rescission not ice. All this might have been well enough had the agreement been explicit, in clause 15, as to the full consequences should WMC elect not to commit itself; instead the draftsman was content to refer to "accrued liabilities", leaving it unclear whether they were to include any component parts of the total sum of $94,000 remaining unpaid when WMC served its notice of non-intention to commit itself. The sum of $94,000 was at all times payable in two amounts, $25,000 within seven days of execution and the balance of $69,000 originally within nine months of execution, that is to say on or before 26 May 1972, but extended by the first amending agreement and then further extended, before the end of that first extension, by the second amending agreement. -7- If, as the vendors contend, "accrued liabilities" in clause 15 was intended to refer to the sum of $69,000 whether or not due for payment by WMC to the vendors, the only effect of providing for a nine month's postponement of its payment must have been merely for the convenience of. WMC in arranging finance and the postponement would have been incapable in any circumstances of affecting anyone's rights. Thus, on this view, were WMC to elect not to commit itself under clause 15, it would nevertheless have had to pay over the $69,000, whether or not then due. If, instead, it exercised its power to cancel under clause 24 the vendors would not in any event have been entitled to the $69,000, whether or not already paid over by WMC. Again, any exercise of the vendors! right to rescind under clause 5, followed by forfeiture to them of moneys already paid, would necessarily only arise long after the due date for payment of the $69,000 and would thus in any event carry with it a right to this $69,000. However it scarcely appears to be a likely intention to impute to the parties that the postponement of payment of the $69,000 was merely for convenience of funding on the part of WMC. The original period of postponement, nine months, when read in the context of an agreement contemplating that after its execution WMC should engage in "testing, inquiries, negotiations and studies preparatory to a decision" to commit itself to the development of the lands as a mining project (see clause 3), suggests rather that those nine months represent an initial period during which WMC might assure itself to some degree of the merits of the project before hazarding a further substantial payment. This receives confirmation from the two subsequent amending agreements; the first of these was necessitated by a rival application for an Authority to Enter lodged by third parties and the partiest reaction to this was to extend the time for payment of the $69,000 by as long as might prove necessary to dispose of the risk to the entire project which this rival application represented. The second amending agreement, executed fully two years later and apparently at a time when the first period of extension of time for payment of the $69,000 was still running, was necessitated by the emergence of a further possible frustration of the entire project due to re-zoning of the land. It provided for a period of rather more than a year from its execution before the balance of $69,000 should become payable. These two extensions of time strongly suggest that the postponed date for payment of the $69,000 was regarded as of importance as significantly affecting the parties rights, a view consistent only with the interpretation of "accrued liabilities" in clause 15 as not including the $69,000 if, at the date of WMC's notice of non-intention to commit itself, that sum was not yet due for payment. Once the view be adopted that the reason for deferring payment of the greater part of the sum of $94,000 was to afford to WMC time further to assess the feasibility of full-scale development as a mining project without hazarding the whole of that sum at the very outset, the true nature of the agreement is exposed. Although expressed in terms of a contract of sale it in truth operates very much like an option agreement. $25,000 (plus $5,000 payable under clause 4) is to be paid initially. WMC may then enter and conduct ; exploratory work on the land for the purpose of assessing its potentiality as the site of a mining project. Within a limited time WMC must pay a further $69,000 unless in the meanwhile it determines not to commit itself to the development of the project. Thereafter WMC, having paid all these amounts, still remains free to determine not to commit itself but will thereby forfeit the amounts it has already paid unless there should arise some want of title on the vendors' part or some non-grant of mining leasesetc., in which case WMC may cancel and recover all moneys paid by it. I regard this to be the true view of the nature of this agreement and it is one fatal to the vendors' claim to the sum of $69,000; it must result in this appeal being allowed. I have not troubled to discuss the numerous authorities on the meaning of "accrued liabilities" which were cited in argument and a number of which are discussed in the judgement of Yeldham J. As his Honour was at some pains to point out, these words depend for their meaning very much upon context and the present context is a quite unique one, remote from the statutory contexts with which most of those authorities were concerned. On this aspect I can, I think, do no better than rely, as did Yeldham J. upon the succinct statement as to the -10- inherent ambiguity of the words, contained in the judgement of the Circuit Court of Appeals of the Sixth Circuit in Watkins v.- Illinois Central Railroad Co. (1916) 232 Fed. Rep. 691 at 692 and set out in the reasons for judgment of Yeldham J. To give to the words "accrued liabilities" in clause 15 the meaning which I do gives rise to no consequences inconsistent with what might be thought to have been the intention of the parties. It was said by counsel for the vendors that it was inherently unlikely that, under the terms of the original agreement, the fate of the $69,000 should depend upon whether or not a notice of non-intention to commit were given within nine months; such a period might or might not be adequate for initial investigation by WMC of the prospects of any full-scale mining development on the land. I see no force in that observation, the period is a lengthy one and the parties may well have concluded that it was also an appropriate one. It was also said that if the period of nine months was significant in affecting the vendors' rights to the $69,000, so too must be the period of seven days within which the original sums of $25,000 and $5,000 were payable. It is, of course, conceivable that WMC might, within seven days of execution of the original agreement, have given notice of non-commitment, thus denying to the vendors any entitlement to the sums of $25,000 and $5,000 if not then already paid to them. But the parties can scarcely have envisaged this as an -ll- even remotely possible eventuality, and I regard it as no aid in understanding the true effect of the parties' stipulation that the balance of $94,000 should for the first time become payable nine months after execution. The period of seven days served, I think, a quite different purpose from that of the nine months and may well have been inserted merely as a machinery provision to meet the convenience of WMC. Again it was said that if "accrued liabilities" did not include the $69,000, whenever payable, there was little upon which it could operate. Not so; provisions of clauses 7A, 12, 16 and 17 would appear to offer subject-matter upon which clause 15 can work in appropriate circumstances, each of these clauses being capable of giving rise to liabilities which might aptly enough be described as "accrued liabilities". The learned trial judge regarded certain recitals contained in the first amending agreement as supporting the interpretation urged by vendors' counsel. I have read and agree with all that is said by my brother Mason in this regard. It is for the foregoing reasons that I would allow this appeal. WESTERN MINING CORPORATION LIMITED | REARDON AND OTHERS JUDGMENT MASON J. WESTERN MINING CORPORATION LIMITED v. REARDON AND OTHERS In this case the question is whether the appellant is bound, as Yeldham J. in the Supreme Court of New South Wales held it is, to pay to the respondents the sum of $69,000 on the footing that the amount in question falls within the expression "accrued liabilities" in cl. 15 of an agreement made on 26th August 1971 between the appellant and the respondents and Anne Moira Reardon, the appellant being bound to pay accrued liabili- ties within the meaning of that clause to the respondents. It is necessary to set out in some detail the circumstances in which this question became a matter of con- troversy between the parties. The original agreement to which I have referred was headed "Mineral Tenements Contract of Sale". The parties to it were the appellant ("WMC") of the first part, Edward Leslie Joseph Reardon and Bernard James Reardon ("the Holders") of the second part, the aforesaid two | Reardons and Wascoe Investments Pty. Ltd. ("the Beneficial | Owners") of the third part, the Holders and Beneficial Owners being jointly referred to in the agreement as "the Vendors", and Edward Leslie Joseph Reardon, Anne Moira Reardon and I Karalee Pty. Ltd. ("the Freeholders") of the fourth part. The agreement recited that the Holders had, on behalf of the Beneficial Owners, applied for three Authorities to Enter, Nos. 381, 382 and 383, and stated that such applications (referred to as "the Tenements") would include the areas the subject of the Tenements, the applications themselves and also any Authorities to Enter or renewals which might be granted, that the Holders had on behalf of the Beneficial Owners applied for mining leases under applications Nos. 136, 137 and 138 and that the Holders and Freeholders had agreed to do all that was necessary to earry into effect the agreement and to execute any necessary consents or other documents and that the Freeholders were, with one immaterial exception, the registered proprietors of the freehold of the land covered by the Tenements and the mining leases. "1, (a) The Vendors hereby agree to sell, transfer and 2. ~~Clauses 1 and 2 of the agreement provided: assign to WMC their rights to mine in the areas covered by the Mining Leases for gold and for all metals and minerals specified in the Regu- lations made under the Income Tax Assessment Act as metals or minerals in respect of which paragraph (p) of Section 23 of the said Act applies in consideration of WMC agreeing to pay the sum of NINETY-FOUR THOUSAND DOLLARS ($94,000.00) and a royalty to be calculated and paid in accordance with the provisions of Clause 3 hereof; (b) Subject to WMC paying the sum of Ninety-four Thousand Dollars ($94,000.00) in accordance with the provisions of Clause 2 hereof the Vendors agree upon the request of WMC made within two years and three months thereafter to sell, transfer and assign to WMC all the residue of their right title and interest in the Mining Leases for the sum of ONE THOUSAND DOLLARS ($1,000.00). THE said sum of Ninety-Four Thousand Dollars $94,000.00) shall be payable as to TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) within seven (7) days next after the date of execution hereof and the Balance within nine (9) months next after the date of execution hereof." Clause 2 was amended by a later agreement to which I shall refer so that the amount of $69,000 was expressed to be payable on or before 31st December 1974. Clause 3 provided that the royalty to be paid as part of the consideration provided for in cl. 1 should be paid for every ton of contained copper mined and sold by WMC calcu- lated in accordance with a formula set out in the clause. The clause stated that it was contemplated that a sum of approxi- mately $900,000 would be spent by WMC in relation to the mining leases and Tenements for the purpose of deciding whether or not it would mount a project for the exploitation and development of them and that in the event that WMC committed itself to pro- ceed with the project there would be completed a final feasibility study. Clause 4 provided that in consideration of the sum of $5,000 to be paid within seven days of the execution of the agreement the Vendors thereby granted to WMC an option to buy for the sum of $1 all the right, title and interest of the Vendors in and to the Tenements, the option to be exercised by the giving of the not-ice referred to incl. 5. Clause 4 contained a pro- viso in the following terms: "PROVIDED THAT any mining lease or application for or a right thereto obtained by applied for or held by the Vendors or any of them as a result of or pursuant to or dependent upon them or any of them having the Tenements or any of them shall not upon the exercise of the option pass under this clause but shall pass under Clause 1 hereof and the property in and title, right and interest in and to the Tenements shall not pass upon the exercise of the option but shall remain in the Vendors until mining leases have been applied for over the lands comprised in the Authorities to Enter set out in the First Schedule, or over so much thereof as WMC may in its absolute discretion decide." Clause 5 then provided: "5. THIS contract is expressly subject to WMC com- mitting itself to proceed with the Project within 4, three years from the date hereof. Unless WMC shall give. notice in writing to the Vendors within such three year period or such extended period as the Vendors shall permit or as may be required pursuant hereto or both that WMC has so committed then the Vendors may rescind this contract by giving not less than thirty (30) days' notice of their inten- tion to do so. Unless WMC shall give notice as aforesaid before the Vendors' notice shall have expired then this contract shall upon the expira- tion of the Vendors' notice be rescinded and all moneys paid by WMC hereunder shall be forfeited as and for liquidated damages but WMC shall be under no other liability or obligation as a result of not having given such notice. WMC may give the notice required of it at any time hereafter up to the expiration of the notice (if any) given by the Vendors as aforesaid." This clause was subsequently amended by a later agreement to which I shall refer so as to require WMC to elect on or before 31st December 1977 whether it would commit itself to proceed with the project. Clause 8 provided that at all times during the currency of the agreement WMC should have the exclusive right to enter upon the land for the purpose of inspecting, testing, taking samples and carrying out prospecting and other work and that it should have the right to bring on to the land any plant, machinery and other chattels and to remove the same. Clause 11 provided: "ll. UPON WMC duly giving the notice to be given by it pursuant to Clause 5 hereof then but not before at the election of WMC and so far as the nature of the Mining Leases and the Tenements shall permit the Vendors shall thereupon (a) transfer the titles to the Mining Leases and the Tenements to WMC; or (b) execute a declaration of trust satisfactory to WMC in favour of WMC in respect of the Mining Leases and the Tenements; or (¢c) do both of the above in such combination in respect of the different parts of the Mining Leases and the Tenements as WMC may require." 5. Clause 14 enabled WMC to assign the benefit of the agreement. Clause 15, which is critical, is in these terms. "15. WMC may at any time by notice given in accord- ance with Clause 20 hereof indicate that it does not intend to commit itself to the Project and as from the date upon which such notice is received or deemed to be received by the Vendors the obligations of WMC hereunder shall cease without prejudice to accrued liabilities and any moneys already paid to the Vendors hereunder shall be forfeited as and for liquidated damages. WMC shall then be under no liability or obligation hereunder save as in this clause provided." Clause 24 provides: wan, IT is hereby further agreed and declared that should the Title of the Vendors to the Mining Leases and the Tenements be found to be defective or should the appropriate Mining Warden fail to recommend or the Minister for Mines of the State of New South Wales fail to grant the Mining Leases and the Tenements or any of them or any part of them except in relation to conflicting Exploration Licence 266 then WMC may, at its absolute discretion, cancel this Agreement where- upon the Vendors shall forthwith repay to WMC all and any moneys paid to them pursuant hereto." The second agreement was made on 23rd December 1971 but as its provisions were largely supplanted by a third agreement which was made on 21st December 1973 I need not stay to deal with it now. The third agreement, that made on 21st December 1973, made the changes to the initial agreement to which I have already referred. It recited that as a result of the re-zoning of the land it was uncertain that WMC would be permitted to mine and that to take account of the changed circumstances the parties agreed to amend the initial agreement as it had been varied by the second agreement. The relevant amendments were: (a) The deletion from cl. 2 of the words "nine (9) months next after the date of execution hereof" and the 6. insertion of "on or before the 31st day of December L974"; (b) The deletion from cl. 5 of the first sentence and the insertion of "This contract is expressly subject to WMC committing itself to proceed on or before the 31st day of December 1977"; and (¢) The deletion from the same clause of the words "within such three year period or such extended period" and the insertion of "on or before the 3lst day of December 1977 or such later date". By notice dated 6th December 1974 WMC gave notice that it did not intend to commit itself to the project. The issue is whether, because at that date the time for the balance of $69,000 to be paid under cl. 2 as amended had not arrived, such sum was within the. expression "accrued liabilities" in el. 15. The respondents' case was that the expression included all liabilities which, wholly by reason of something previously agreed or done, had become absolute rather than con- tingent and that it referred to liabilities which had arisen irrespective of whether the obligation to pay was immediately enforceable or not. Alternatively, the respondents submitted that even if the meaning of the expression "accrued liabilities" was not clear it was necessary to construe cl. 15 as imposing an obligation upon the appellant to pay the balance of the con- sideration set out in cl. 1 so as to produce harmony with other provisions of the agreement and to conform to the intention of the parties. It was urged that if any other view were taken Ts the agreement would operate capriciously and enable the appel- lant to avoid an obligation which the parties clearly envisaged would lie upon it. On the other hand, the appellant contended that the expression "accrued liabilities" comprehended liabilities which were at the relevant time enforceable and for which at that time the appellant could be sued. It was submitted that only in the event that a liability was due could it be said to be "accrued". The primary judge took the view that in considera- tion of the Vendors agreeing to sell, transfer and assign their rights to mine in the areasin question WMC gave an absolute and unconditional promise to make the payments mentioned in cl. l(a). He considered that the only effect of cl. 2 as amended was to defer the time for payment, without affecting WMC's obligation to make the payment. Nor did he think that cl. 5 could be regarded as making the payments in any way conditional. Conse- quently, there was a liability in WMC to pay which had "accrued". With respect to his Honour, this is not a view to which I can subscribe. True it is that cl. 1{a) contains promises by the Vendors and WMC which are not expressed to be conditional. But in an agreement for the sale of real and personal property, transfer of title and payment are generally coneurrent obligations in the sense that the obligation to pay the price is not independent of the obligation to transfer title. Clause 2 as amended required WMC to pay $25,000 within seven days of the execution of the agreement and to pay the balance on or before 31st December 1974. Except as to the $25,000 it contains no provision requiring WMC to pay independently of the 8. Vendors performance of their obligation to assign. It would, in my opinion, call for particularly clear and cogent words to compel the conclusion that the obligation of wc to make the payment was independent of the Vendors' obligation to assign. Clause 5 certainly affords no support to the respondents. The right which it gives WMC not to proceed with the agreement - which was in essence an agreement for the sale, transfer and assignment of rights to mine - is inconsistent with the propositi that WMC was unconditionally bound to pay for the rights to mine. Much of the respondents' argument seems to me to stem from a fundamental misconception as to the nature of the agreement. An examination of its basic provisions indicates that it was designed to give WMC an opportunity of investigating and testing the deposits and of making feasibility studies with a view to deciding whether the deposits could be commercially developed with success. But all this was for WMC to decide and that is why cl. 5 empowered it to elect not to proceed and why cl. 15 authorized it to give notice that it did not intend to commit itself to the project. It would be quite at variance with the existence of the right of election and the right to give notice under cl. 15 to say that WMC was bound to pay for the rights to mine, notwithstanding an election on its part not to proceed with the project communicated by a notice given by it before the due date for payment of the sum of $69,000. Despite the arguments of the respondents' counsel there is nothing unjust or irrational in this result. The respondents were the owners or the potential owners of the Tenements but it was not suggested that they were in a position or had the capacity to develop the deposits commercially 9. for themselves. The agreement gave them the benefit of access to the investigations and feasibility studies to be carried out by WMC, a large and experienced mining company, and it presented what to them was the valuable possibility that the results of the investigations and studies would be favourable in which event WMC would, in all probability, elect to proceed, thereby entitlin the Vendors to performance by WMC of its obligations under the agreement. In this setting it should occasion no surprise that if WMC decided not to proceed, the parties should stipulate that it was under no liability to make the payments provided for in cl. 1(a) except as to the initial sum of $25,000, provided that notice under cl. 15 was given by WMC before the due date for payment of the balance of $69,000, namely 31st December 1974. It is understandable and not unfair that WMC was to forfeit the $69,000 if it was unable to determine its position by 31st December 1974 thereby disabling the respondents from making other arrangements with respect to the Tenements and that WMC escaped liability to pay that amount if it gave notice of intention not to proceed before 3lst December 1974 leaving the respondents free to make other arrangements with respect to the Tenements. The question of construction is therefore to be determined by reference to the natural and ordinary language of cl. 15, viewed in the light of the general subject matter of the agreement. As a matter of language, the expression "accrued liabilities" is appropriate to designate liabilities which have accrued due. It is inappropriate to denote liabili- ties which are conditional or contingent in character. Understood 10. | in the context of the agreement taken as a whole, in particular in the light of its character as I have explained it, the pro- visions of cl. 1 cannot be construed as imposing on WMC an absolute and unqualified obligation to pay the balance irres- pective of a notice not to proceed given before the due date for payment of the balance. It was suggested by the respondents that unless their view was accepted there were no liabilities upon which el. 15 could operate. This is not correct. Liabilities could arise under cll. 7(a) and 17. It matters not that these liabili- ties are of a minor character. It is enough that they can come into existence for then appropriate provision had to be made for them as it was made by cl. 15. The primary judge seems to have thought that some support for the respondents' case could be found in Recital A and cl. 1(b) in the second agreement made by the parties. It is convenient to set out Recital A and cl. 1 of the second agreement. Recital A is in these terms: "A, The Vendors, the Freeholders and WMC are parties to a Mineral Tenements Contract of Sale ("the Minerals Agreement") dated 26th August 1971 where- by the Vendors granted WMC an option to buy all the right title and interest of the Vendors in and to the Tenements ("the Tenements") as therein defined and agreed, inter alia, to sell to WMC the Mining Leases ("the Mining Leases") as therein defined for the consideration therein set out and upon the terms and conditions therein contained." Clause 1 provides as follows: "1. The Vendors in consideration of the sum of ONE DOLLAR ($1.00) (which sum shall be paid to them within seven (7) days of the date of execution hereof) hereby jointly and severally agree to :- (a) extend the time within which WMC is bound pursuant to Clause 5 of the Minerals st il. Agreement to commit itself to the Project as therein defined by a period of time ("the extension period") equivalent to the period commencing on the llth day of October 1971 and expiring on the day of final determination as hereinafter defined. (b) extend the time within which WMC is bound to make payments to the Vendors pursuant to each of Clauses 1, 4 and the latter part of 2 (relating to a balance payment) thereof by the duration of the extension period." His Honour thought that the words "is bound" in cl. 1(b) acknowledged that WMC was absolutely liable to make the payments, but reference to cl. 1(a) demonstrates that the expression "is bound", which also appears in that subclause, is used in the sense of "may become bound". Clause l(a) deals with the time in which WMC is required to elect whether it will commit itself to the project. WMC was of course at no stage bound to commit itself to the project although it was required to make up its mind by the date stipulated. Conse- quently cl. 1(b) provides no support for the respondents. Nor, to my mind, does Recital A in the second agreement assist them. It does state that under the initial agreement the Vendors agreed to sell to WMC the mining leases for the consideration therein set out but it goes on to say "upon the terms and conditions therein contained", thereby importing the other provisions in the initial agreement which, in my view, make it clear that WMC's obligation to pay was not unqualified and absolute. For these reasons I would allow the appeal. JUDGMENT WESTERN MINING CORPORATION LIMITED REARDON AND .OTHERS JACOBS J. WESTERN MINING CORPORATION LIMITED REARDON AND OTHERS I agree that the appeal should be allowed. I do not feel that I can usefully add anything to the reasons which have been given by the other members of the Court. IN THE HIGH COURT OF AUSTRALIA PRINCIPAL REGISTRY Court Book No. 130 of 1976 BETWEEN WESTERN MINING CORPORATION LIMITED Appellant AND EDWARD LESLIE JOSEPH REARDON, BERNARD JAMES REARDON AND WASCOE INVESTMENTS PTY, LIMITED Respondents 1leo ALLEN ALLEN & HEMSLEY, SOLICITORS, 2 CASTLEREAGH STREET, 232 0315 (BPJ 411/6 AIT) DX 105 in f HIGH C T_OF AUSTRALIA) PRINCIPAL REGISTRY ) - 130 of 1976 ON APPEAL FROM THE SUPREME COURT OF NEW SOUTH WALES BETWEEN WESTERN MINING CORPORATION LIMITED . Appellant AND EDWARD LESLIE JOSEPH REARDON, BERNARD JAMES REARDON and WASCOE INVESTMENTS PTY, LIMITED Respondents BEFORE THEIR HONOURS MR STICE STEPHEN, MR STICE MASON AND_MR, JUSTICE JACOBS FRIDAY THE 4th DAY OF MARCH 19 THIS APPEAL from the whole of the judgment and order of the Supreme Court of New South Wales given and made on the 30th day of June 976 coming on for hearing before this Court at £ November, 1976 UPON READING the Counsel for the 7 ellant and Mr. F.D.J. Officer of Queen's Counsel and Mr. C.C. Branson of Counsel for the Respondent 'S COURT DID ORDER on the said 15th day of November, 1976 that this appeal should stand for judgment and the same standing flor judgment this day accordingly at Melbourne THIS COURT DOTH ORDER that this appeal be and the same is hereby allowed AND THIS COURT DOTH FURTHER ORDER that the judgment and order of the said Supreme Court of New South Wales be and the same is hereby set aside AND in lieu thereof THIS COURT DOTH FURTHER ORDER that there be judgment for the defendant in the action with cests AND THIS COURT DOTH FURTHER ORDER that it be referred to the proper officer of this Court to tax and certify the costs of the Appellant of this appeal and that such costs when so taxed and certified be paid by the Respondent to the Appellant or to its solicitors, Messrs. Allen Allen & Hemsley AND THIS COURT DOTH BY CONSENT FURTHER ORDER that the sum of One hundred dollars ($100.00) paid into Court by way of security be paid out to the Appellant or to its solicitors, the said Messrs. Allen Allen & Hemsley. WESTERN MINING CORPORATION LIMITED REARDON AND OTHERS JUDGEMENT STEPHEN J. WESTERN MINING CORPORATION LIMITED Vv. REARDON AND OTHERS ORDER Appeal allowed with costs. Order of the Supreme Court of New South Wales set aside and in lieu thereof order that there be judgment for the defendant in the action with costs. WESTERN MINING CORPORATION LIMITED v. REARDON AND OTHERS This appeal turns upon the meaning to be attributed to the term "accrued liaibilities" appearing in clause 15 of an agreement, described as a mineral tenements contract of sale and concerned with certain mining tenements in New South Wales. The relevant effect of this agreement, dated 26 August 1971 and made between Western Mining Corporation Limited (WMC) of the first part and certain other parties interested in the tenements and in the freehold land to which they relate, may, albeit at the expense of precise accuracy, be summarised quite shortly. The vendor parties agree to sell and assign toWMC their rights to mine in consideration of WMC agreeing to pay to them $94,000 together with a royalty on copper won by WMC from the land - clause 1. The sum of $94,000 is made payable as to $25,000 within seven days of execution and the balance within nine months of execution - clause 2. By clause 4 the vendors, in consideration of a further sum of $5,000, also grant to WMC an option to buy for $1 their title to relevant applications for Authorities to Enter, applied for under the applicable mining legislation, and also to any mining leases and the like issued in consequence thereof. The exclusive mode of exercise of this option is by giving a notice of commitment under clause 5, a step involving consequences more far-reaching than the mere exercise of the option; clause also provides that exercise of the option is not to pass title to the mining leases etc., which instead are to pass under clause 1. Clause 5, after declaring the agreement to be expressly subject to WMC committing itself to proceed within three years, provides that, unless WMC within three years gives to the vendors written notice committing itself to proceed with exploitation and development of the mining project, the vendors may rescind on thirty days written notice, moneys already paid by WMC being thereupon forfeited to the vendors. If WMC does give notice of commitment under clause 5 the vendors are thereupon to transfer to WMC titles to leases and also tenements - clause 11. WMC is given an exclusive right to enter and prospect on the lands - clause 8. Clause 15, the critical clause, I set out in full, with emphasis added: "15. WMC may at any time by notice given in accordance with Clause 20 hereof indicate that it does not intend to commit itself to the Project and as from the date upon which such notice is received or deemed to be received by the Vendors the obligations of WMC hereunder shall cease without prejudice to accrued liabilities and any moneys already paid to the Vendors hereunder shall be forfeited as and for liquidated damages. WMC shall then be under no liability or obligation hereunder save as in this clause provided." Only two further clauses need be mentioned. By clause 16(a), should WMC give notice under clause 15 or should the agreement be rescinded, WMC must supply the vendors with the information gained by it from prospecting operations on the lands. By clause 24 WMC may cancel the agreement either for defect of vendors' title to leases or tenements or if certain leases or tenements be not granted, the vendors thereupon repaying to WMC all moneys paid under the agreement. By two later agreements the original agreement was alt ered in a variety of ways. By the first agreement, dated 23 December 1971, the times within which WMC was obliged to commit itself under clause 5 and to make payments under clauses 1, 2 and 4 were extended by such a period as might be required in order to dispose of a third party's competing application for Authorities to Enter which had come to the parties' notice. By the second, dated 21 December 1973, the time for payment of the balance of $94,000 under clause 2 was extended to 31 December 1974, clause 5 was amended by substituting for the three year period for notice of commitment a period ending on 31 December 1977 and certain other alterations, not presently material, were also made; the first amending agreement was expressed to terminate as from 31 December 1973. On 6 December 1974, shortly before the last date for payment of the balance of the $94,000, WMC gave notice that it did not intend to commit itself to the project. This brought into operation clause 15 and the vendors accordingly forfeited the moneys which had already been paid to them by WMC. They also claimed to be entitled to a further $69,000, being the still unpaid balance of the sum of $94,000. They contended that that sum was an "accrued" liability of WMC under clause 15, the giving of the notice by WMC being "without prejudice" to such liability. It was WMC's denial of the vendors' entitlement to this sum which has given rise to the present dispute, WMC contending that that sum does not answer the description of "accrued liabilities" in clause 15. In the New South Wales Supreme Court Yeldham J. found for the plaintiff vendors, who had sued in that court for the sum of $69,000. WMC mow appeals to this court. The pattern of the arrangement between the parties | is plain enough; after paying $25,000 under clause 2 and $5,000 under clause 4, WMC is to be entitled to enter and prospect. It may thereafter either commit itself, under clause 5, to development of the project, thereby also exercising its option under clause 4, or it may announce its intention to the contrary under clause 15. If it does neither of these things within a stipulated time the vendors may force its hand by service of a notice of intention to rescind under clause 5: whereupon WMC, if it is to avoid rescission, must give notice of commitment within thirty days, failing which the agreement comes to an end, the vendors retaining all moneys already paid to them by WMC. The agreement involves a curious combination of immediately binding obligation and optional liability; it is the uneasy marriage of the two which has given rise to the present problem. Although the vendors agree to sell their rights to mine in return for WMC's promise to pay $94,000 and to make subsequent royalty payments, yet WMC retains the right, at a "price" and within a limited period, to elect not to commit itself to full development as a mining project. If it exercises that right the agreement to sell comes to naught, title to the rights to mine and mining leases etc. remaining with the vendors; the "price" which WMC must pay if it is to exercise this right, styled liquidated damages, is to suffer forfeiture of moneys already paid to the vendors, WMC also remaining liable for "accrued liabilities". The extent of departure from the concept of immediately binding obligation which this agreement involves is illustrated by the opening words of clause 5: "This contract is expressly subject to WMC committing itself to proceed ..." The learned primary judge was, in my view, correct in rejecting the view that these words rendered the entire contract in some way conditional only. What they do do, however, is emphasise that WMC's performance of the agreement in its entirety is to be conditioned by its willingness, after due. investigation, to proceed with development of a full- scale mining project. Thus, although the agreement is not, with the exception of clause 4, expressed in terms of an option but instead speaks in the language of a contract of sale, yet at the same time it confers upon WMC explicit power to elect to proceed no further after having investigated the proposed mining project; it also confers upon the vendors a necessary consequential power, the power to resolve uncertainty as to WMC's intentions by means of a rescission notice. All this might have been well enough had the agreement been explicit, in clause 15, as to the full consequences should WMC elect not to commit itself; instead the draftsman was content to refer to "accrued liabilities", leaving it unclear whether they were to include any component parts of the total sum of $94,000 remaining unpaid when WMC served its notice of non-intention to commit itself. The sum of $94,000 was at all times payable in two amounts, $25,000 within seven days of execution and the balance of $69,000 originally within nine months of execution, that is to say on or before 26 May 1972, but extended by the first amending agreement and then further extended, before the end of that first extension, by the second amending agreement. -7- If, as the vendors contend, "accrued liabilities" in clause 15 was intended to refer to the sum of $69,000 whether or not due for payment by WMC to the vendors, the only effect of providing for a nine month's postponement of its payment must have been merely for the convenience of WMC in arranging finance and the postponement would have been incapable in any circumstances of affecting anyone's rights. Thus, on this view, were WMC to elect not to commit itself under clause 15, it would nevertheless have had to pay over the $69,000, whether or not then due. If, instead, it exercised its power to cancel under clause 24 the vendors would not in any event have been entitled to the $69,000, whether or not already paid over by WMC. Again, any exercise of the vendors! right to rescind under clause 5, followed by forfeiture to them of moneys already paid, would necessarily only arise long after the due date for payment of the $69,000 and would thus in any event carry with it a right to this $69,000. However it scarcely appears to be a likely intention to impute to the parties that the postponement of payment of the $69,000 was merely for convenience of funding on the part of WMC. The original period of postponement, nine months, when read in the context of an agreement contemplating that after its execution WMC should engage in "testing, inquiries, negotiations and studies preparatory to a decision" to commit itself to the development of the lands as a mining project (see clause 3), suggests rather that those nine months represent an initial period during which WMC might assure itself to some degree of the merits of the project before hazarding a further substantial payment. This receives confirmation from the two subsequent amending agreements; the first of these was necessitated by a rival application for an Authority to Enter lodged by third parties and the parties't reaction to this was to extend the time for payment of the $69,000 by as long as might prove necessary to dispose of the risk to the entire project which this rival application represented. The second amending agreement, executed fully two years later and apparently at a time when the first period of extension of time for payment of the $69,000 was still running, was necessitated by the emergence of a further possible frustration of the entire project due to re-zoning of the land. It provided for a period of rather more than a year from its execution before the balance of $69,000 should become payable. These two extensions of time strongly suggest that the postponed date for payment of the $69,000 was regarded as of importance as significantly affecting the partiest rights, a view consistent only with the interpretation of "accrued liabilities" in clause 15 as not including the $69,000 if, at the date of WMC's notice of non-intention to commit itself, that sum was not yet due for payment. Once the view be adopted that the reason for deferring payment of the greater part of the sum of $94,000 was to afford to WMC time further to assess the feasibility of full-scale development as a mining project without hazarding the whole of that sum at the very outset, the true nature of the agreement is exposed. Although expressed in terms of a contract of sale it in truth operates very much like an option agreement. $25,000 (plus $5,000 payable under clause 4) is to be paid initially. WMC may then enter and conduct exploratory work on the land for the purpose of assessing its potentiality as the site of a mining project. Within a limited time WMC must pay a further $69,000 unless in the meanwhile it determines not to commit itself to the development of the project. Thereafter WMC, having paid all these amounts, still remains free to determine not to commit itself but will thereby forfeit the amounts it has already paid unless there should arise some want of title on the vendors' part or some non-grant of mining leasesetc., in which case WMC may cancel and recover all moneys paid by it. I regard this to be the true view of the nature of this agreement and it is one fatal to the vendors' claim to the sum of $69,000; it must result in this appeal being allowed. I have not troubled to discuss the numerous authorities on the meaning of "accrued liabilities" which were cited in argument and a number of which are discussed in the judgement of Yeldham J. As his Honour was at some pains to point out, these words depend for their meaning very much upon context and the present context is a quite unique one, remote from the statutory contexts with which most of those authorities were concerned. On this aspect I can, I think, do no better than rely, as did Yeldham J. upon the succinct statement as to the -10- inherent ambiguity of the words, contained in the judgement of the Circuit Court of Appeals of the Sixth Circuit in Watkins v.-Illinois Central Railroad Co. (1916) 232 Fed. Rep. 691 at 692 and set out in the reasons for judgment of Yeldham J. To give to the words "accrued liabilities" in clause 15 the meaning which I do gives rise to no consequences inconsistent with what might be thought to have been the intention of the parties. It was said by counsel for the vendors that it was inherently unlikely that, under the terms of the original agreement, the fate of the $69,000 should depend upon whether or not a notice of non-intention to commit were given within nine months; such a period might or might not be adequate for initial investigation by WMC of the prospects of any full-scale mining development on the land. I see no force in that observation, the period is a lengthy one and the parties may well have concluded that it was also an appropriate one. It was also said that if the period of nine months was Significant in affecting the vendors' rights to the $69,000, so too must be the period of seven days within which the original sums of $25,000 and $5,000 were payable. It is, of course, conceivable that WMC might, within seven days of execution of the original agreement, have given notice of non-commitment, thus denying to the vendors any entitlement to the sums of $25,000 and $5,000 if not then already paid to them. But the parties can scarcely have envisaged this as an -ll- even remotely possible eventuality, and I regard it as no aid in understanding the true effect of the parties' stipulation that the balance of $94,000 should for the first time become payable nine months after execution. The period of seven days served, I think, a quite different purpose from that of the nine months and may well have been inserted merely as a machinery provision to meet the convenience of WMC. Again it was said that if "accrued liabilities" did not include the $69,000, whenever payable, there was little upon which it could operate. Not so; provisions of clauses 7A, 12, 16 and 17 would appear to offer subject-matter upon which clause 15 can work in appropriate circumstances, each of these clauses being capable of giving rise to liabilities which might aptly enough be described as "accrued liabilities". The learned trial judge regarded certain recitals contained in the first amending agreement as supporting the interpretation urged by vendors' counsel. I have read and agree with all that is said by my brother Mason in this regard. It is for the foregoing reasons that I would allow this appeal. JUDGMENT WESTERN MINING CORPORATION LIMITED REARDON AND OTHERS MASON J. WESTERN MINING CORPORATION LIMITED Vv. REARDON AND OTHERS In this case the question is whether the appellant is bound, as Yeldham J. in the Supreme Court of New South Wales held it is, to pay to the respondents the sum of $69,000 on the footing that the amount in question falls within the expression "accrued liabilities" in cl. 15 of an agreement made on 26th August 1971 between the appellant and the respondents and Anne Moira Reardon, the appellant being bound to pay accrued liabili- ties within the meaning of that clause to the respondents. It is necessary to set out in some detail the circumstances in which this question became a matter of con- troversy between the parties. The original agreement to which I have referred was headed "Mineral Tenements Contract of Sale". The parties to it were the appellant ("WMC") of the first part, Edward Leslie Joseph Reardon and Bernard James Reardon ("the Holders") of the second part, the aforesaid two Reardons and Wascoe Investments Pty. Ltd. ("the Beneficial Owners") of the third part, the Holders and Beneficial Owners being jointly referred to in the agreement as "the Vendors", and Edward Leslie Joseph Reardon, Anne Moira Reardon and Karalee Pty. Ltd. ("the Freeholders") of the fourth part. The agreement recited that the Holders had, on behalf of the Beneficial Owners, applied for three Authorities to Enter, Nos. 381, 382 and 383, and stated that such applications (referred to as "the Tenements") would include the areas the subject of the Tenements, the applications themselves and also any Authorities to Enter or renewals which might be granted, that the Holders had on behalf of the Beneficial Owners applied for mining leases under applications Nos. 136, 137 and 138 and that the Holders and Freeholders had agreed to do all that was necessary to carry into effect the agreement and to execute any necessary consents or other documents and that the Freeholders were, with one immaterial exception, the registered proprietors of the freehold of the land covered by the Tenements and the mining leases. Clauses 1 and 2 of the agreement provided: "1, (a) The Vendors hereby agree to sell, transfer and assign to WMC their rights to mine in the areas covered by the Mining Leases for gold and for all metals and minerals specified in the Regu- lations made under the Income Tax Assessment Act as metals or minerals in respect of which paragraph (p) of Section 23 of the said Act applies in consideration of WMC agreeing to pay the sum of NINETY-FOUR THOUSAND DOLLARS ($94,000.00) and a royalty to be calculated and paid in accordance with the provisions of Clause 3 hereof; (b) Subject to WMC paying the sum of Ninety-four Thousand Dollars ($94,000.00) in accordance with the provisions of Clause 2 hereof the Vendors agree upon the request of WMC made within two years and three months thereafter to sell, transfer and assign to WMC all the residue of their right title and interest in the Mining Leases for the sum of ONE THOUSAND DOLLARS ($1,000.00). 2. THE said sum of Ninety-Four Thousand Dollars ($94,000.00) shall be payable as to TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) within seven (7) days next after the date of execution hereof and the Balance within nine (9) months next after the date of execution hereof." Clause 2 was amended by a later agreement to which I shall refer so that the amount of $69,000 was expressed to be payable on or pefore 31st December 1974. Clause 3 provided that the royalty to be paid as part of the consideration provided for in cl. 1 should be paid for every ton of contained copper mined and sold by WMC calcu- lated in accordance with a formula set out in the clause. The clause stated that it was contemplated that a sum of approxi- mately $900,000 would be spent by WMC in relation to the mining leases and Tenements for the purpose of deciding whether or not it would mount a project for the exploitation and development of them and that in the event that WMC committed itself to pro- ceed with the project there would be completed a final feasibility study. Clause 4 provided that in consideration of the sum of $5,000 to be paid within seven days of the execution of the agreement the Vendors thereby granted to WMC an option to buy for the sum of $1 all the right, title and interest of the Vendors in and to the Tenements, the option to be exercised by the giving of the notice referred to incl. 5. Clause 4 contained a pro- viso in the following terms: "PROVIDED THAT any mining lease or application for or a right thereto obtained by applied for or held by the Vendors or any of them as a result of or pursuant to or dependent upon them or any of them having the Tenements or any of them shall not upon the exercise of the option pass under this clause but shall pass under Clause 1 hereof and the property in and title, right and interest in and to the Tenements shall not pass upon the exercise of the option but shall remain in the Vendors until mining leases have been applied for over the lands comprised in the Authorities to Enter set out in the First Schedule, or over so much thereof as WMC may in its absolute discretion decide." Clause 5 then provided: "5. THIS contract is expressly subject to WMC com- mitting itself to proceed with the Project within three years from the date hereof. Unless WMC shall give notice in writing to the Vendors within such three year period or such extended period as the Vendors shall permit or as may be required pursuant hereto or both that WMC has so committed then the Vendors may rescind this contract by giving not less than thirty (30) days' notice of their inten- tion to do so. Unless WMC shall give notice as aforesaid before the Vendors' notice shall have expired then this contract shall upon the expira- tion of the Vendors' notice be rescinded and all moneys paid by WMC hereunder shall be forfeited as and for liquidated damages but WMC shall be under no other liability or obligation as a result of not having given such notice. WMC may give the notice required of it at any time hereafter up to the expiration of the notice (if any) given by the Vendors as aforesaid." This clause was subsequently amended by a later agreement to which I shall refer so as to require WMC to elect on or before 31st December 1977 whether it would commit itself to proceed with the project. Clause 8 provided that at all times during the currency of the agreement WMC should have the exclusive right to enter upon the land for the purpose of inspecting, testing, taking samples and carrying out prospecting and other work and that it should have the right to bring on to the land any plant, machinery and other chattels and to remove the same. Clause 11 provided: "li. UPON WMC duly giving the notice to be given by it pursuant to Clause 5 hereof then but not before at the election of WMC and so far as the nature of the Mining Leases and the Tenements shall permit the Vendors shall thereupon (a) transfer the titles to the Mining Leases and the Tenements to WMC; or (b) execute a declaration of trust satisfactory to WMC in favour of WMC in respect of the Mining Leases and the Tenements; or (c) do both of the above in such combination in respect of the different parts of the Mining Leases and the Tenements as WMC may require." 5. Clause 14 enabled WMC to assign the benefit of the agreement. Clause 15, which is critical, is in these terms. "15. WMC may at any time by notice given in accord- ance with Clause 20 hereof indicate that it does not intend to commit itself to the Project and as from the date upon which such notice is received or deemed to be received by the Vendors the obligations of WMC hereunder shall cease without prejudice to accrued liabilities and any moneys already paid to the Vendors hereunder shall be forfeited as and for liquidated damages. WMC shall then be under no liability or obligation hereunder save as in this clause provided." Clause 24 provides: woh, IT is hereby further agreed and declared that should the Title of the Vendors to the Mining Leases and the Tenements be found to be defective or should the appropriate Mining Warden fail to recommend or the Minister for Mines of the State of New South Wales fail to grant the Mining Leases and the Tenements or any of them or any part of them except in relation to conflicting Exploration Licence 266 then WMC may, at its absolute discretion, cancel this Agreement where- upon the Vendors shall forthwith repay to WMC all and any moneys paid to them pursuant hereto." The second agreement was made on 23rd December 1971 but as its provisions were largely supplanted by a third agreement which was made on 21st December 1973 I need not stay [ to deal with it now. The third agreement, that made on 21st December 1973, made the changes to the initial agreement to which I have already referred. It recited that as a result + of the re-zoning of the land it was uncertain that WMC would be permitted to mine and that to take account of the changed circumstances the parties agreed to amend the initial agreement as At had been varied by the second agreement. The relevant amendments were: (a) The deletion from cl. 2 of the words "nine (9) months next after the date of execution hereof" and the 6. insertion of "on or before the 31st day of December 1974"; (b) The deletion from cl. 5 of the first sentence and the insertion of "This contract is expressly subject to WMC committing itself to proceed on or before the 31st day of December 1977"; and (c) The deletion from the same clause of the words "within such three year period or such extended period" and the insertion of "on or before the 3lst day of December 1977 or such later date". By notice dated 6th December 1974 WMC gave notice that it did not intend to commit itself to the project. The issue is whether, because at that date the time for the balance of $69,000 to be paid under cl. 2 as amended had not arrived, such sum was within the expression "accrued liabilities" in el. 15. The respondents' case was that the expression included all liabilities which, wholly by reason of something previously agreed or done, had become absolute rather than con- tingent and that it referred to liabilities which had arisen irrespective of whether the obligation to pay was immediately enforceable or not. Alternatively, the respondents submitted that even if the meaning of the expression "accrued liabilities" was not clear it was necessary to construe cl. 15 as imposing an obligation upon the appellant to pay the balance of the con- sideration set out in cl. 1 so as to produce harmony with other provisions of the agreement and to conform to the intention of the parties. It was urged that if any other view were taken T. the agreement would operate capriciously and enable the appel- lant to avoid an obligation which the parties clearly envisaged would lie upon it. On the other hand, the appellant contended that the expression "accrued liabilities" comprehended liabilities which were at the relevant time enforceable and for which at that time the appellant could be sued. It was submitted that only in the event that a liability was due could it be said to be "accrued". The primary judge took the view that in considera- tion of the Vendors agreeing to sell, transfer and assign their rights to mine in the areasin question WMC gave an absolute and unconditional promise to make the payments mentioned in cl. l(a). He considered that the only effect of cl. 2 as amended was to defer the time for payment, without affecting WMC's obligation to make the payment. Nor did he think that cl. 5 could be regarded as making the payments in any way conditional. Conse- quently, there was a liability in WMC to pay which had "accrued". With respect to his Honour, this is not a view to which I can subscribe. True it is that cl. 1(a) contains promises by the Vendors and WMC which are not expressed to be conditional. But in an agreement for the sale of real and personal property, transfer of title and payment are generally concurrent obligations in the sense that the obligation to pay the price is not independent of the obligation to transfer title. Clause 2 as amended required WMC to pay $25,000 within seven days of the execution of the agreement and to pay the balance on or before 31st December 1974. Except as to the $25,000 it contains no provision requiring WMC to pay independently of the 8. Vendors' performance of their obligation to assign. It would, in my opinion, call for particularly clear and cogent words to compel the conclusion that the obligation of WMC to make the payment was independent of the Vendors' obligation to assign. Clause 5 certainly affords no support to the respondents. The right which it gives WMC not to proceed with the agreement - which was in essence an agreement for the sale, transfer and assignment of rights to mine - is inconsistent with the propositic that WMC was unconditionally bound to pay for the rights to mine. Much of the respondents! argument seems to me to stem from a fundamental misconception as to the nature of the agreement. An examination of its basic provisions indicates that it was designed to give WMC an opportunity of investigating and testing the deposits and of making feasibility studies with a view to deciding whether the deposits could be commercially developed with success. But all this was for WMC to decide and that is why cl. 5 empowered it to elect not to proceed and why cl. 15 authorized it to give notice that it did not intend to commit itself to the project. It would be quite at variance with the existence of the right of election and the right to give notice under cl. 15 to say that WMC was bound to pay for the rights to mine, notwithstanding an election on its part not to proceed with the project communicated by a notice given by it before the due date for payment of the sum of $69,000. Despite the arguments of the respondents' counsel there is nothing unjust or irrational in this result. The respondents were the owners or the potential owners of the Tenements but it was not suggested that they were in a position or had the capacity to develop the deposits commercially 9. for themselves. The agreement gave them the benefit of access to the investigations and feasibility studies to be carried out by WMC, a large and experienced mining company, and it presented what to them was the valuable possibility that the results of the investigations and studies would be favourable in which event WMC would, in all probability, elect to proceed, thereby entitling the Vendors to performance by WMC of its obligations under the agreement. In this setting it should occasion no surprise that if WMC decided not to proceed, the parties should stipulate that it was under no liability to make the payments provided for in cl. 1(a) except as to the initial sum of $25,000, provided that notice under cl. 15 was given by WMC before the due date for payment of the balance of $69,000, namely 31st December 1974. It is understandable and not unfair that WMC was to forfeit the $69,000 if it was unable to determine its position by 31st December 1974 thereby disabling the respondents from making other arrangements with respect to the Tenements and that WMC escaped liability to pay that amount if it gave notice of intention not to proceed before 31st December 1974 leaving the respondents free to make other arrangements with respect to the Tenements. The question of construction is therefore to be determined by reference to the natural and ordinary language of cl. 15, viewed in the light of the general subject matter of the agreement. As a matter of language, the expression "accrued liabilities" is appropriate to designate liabilities which have accrued due. It is inappropriate to denote liabili- ties which are conditional or contingent in character. Understood 10. in the context of the agreement taken as a whole, in particular in the light of its character as I have explained it, the pro- visions of cl. 1 cannot be construed as imposing on WMC an absolute and unqualified obligation to pay the balance irres-— pective of a notice not to proceed given before the due date for payment of the balance. It was suggested by the respondents that unless their view was accepted there were no liabilities upon which el. 15 could operate. This is not correct. Liabilities could arise under cll. 7(a) and 17. It matters not that these liabili- ties are of a minor character. It is enough that they can come into existence for then appropriate provision had to be made for them as it was made by cl. 15. The primary judge seems to have thought that some support for the respondents' case could be found in Recital A and cl. 1(b) in the second agreement made by the parties. It is convenient to set out Recital A and cl. 1 of the second agreement. Recital A is in these terms: "A. The Vendors, the Freeholders and WMC are parties to a Mineral Tenements Contract of Sale ("the Minerals Agreement") dated 26th August 1971 where- by the Vendors granted WMC an option to buy all the right title and interest of the Vendors in and to the Tenements ("the Tenements") as therein defined and agreed, inter alia, to sell to WMC the Mining Leases ("the Mining Leases") as therein defined for the consideration therein set out and upon the terms and conditions therein contained." Clause 1 provides as follows: "1. The Vendors in consideration of the sum of ONE DOLLAR ($1.00) (which sum shall be paid to them within seven (7) days of the date of execution hereof) hereby jointly and severally agree to :- (a) extend the time within which WMC is bound pursuant to Clause 5 of the Minerals sh, . ll. Agreement to commit itself to the Project as therein defined by a period of time ("the extension period") equivalent to the period commencing on the llth day of October 1971 and expiring on the day of final determination as hereinafter defined. (b) extend the time within which WMC is bound to make payments to the Vendors pursuant to each of Clauses 1, 4 and the latter part of 2 (relating to a balance payment) thereof by the duration of the extension period." His Honour thought that the words "is bound" in cl. 1(b) acknowledged that WMC was absolutely liable to make the payments, but reference to cl. 1(a) demonstrates that the expression "is bound", which also appears in that subclause, is used in the sense of "may become bound". Clause 1(a) deals with the time in which WMC is required to elect whether it will commit itself to the project. WMC was of course at no stage bound to commit itself to the project although it was required to make up its mind by the date stipulated. Conse- quently cl. 1(b) provides no support for the respondents. Nor, to my mind, does Recital A in the second agreement assist them. It does state that under the initial agreement the Vendors agreed to sell to WMC the mining leases for the consideration therein set out but it goes on to say "upon the terms and conditions therein contained", thereby importing the other provisions in the initial agreement which, in my view, make it clear that WMC's obligation to pay was not unqualified and absolute. For these reasons I would allow the appeal. a a JUDGMENT WESTERN MINING CORPORATION LIMITED REARDON AND OTHERS JACOBS J. WESTERN MINING CORPORATION LIMITED REARDON AND OTHERS I agree that the appeal should be allowed. I do not feel that I can usefully add anything to the reasons which have been given by the other members of the Court. vers ar) 37", IN| THE HIGH COURT OF Aus ALIA sesso WESTERN. MINING CORPORATION... LTD. REARDON |... &,... OTHERS REASONS FOR JUDGMENT ORIGINAL RM74/30574