WA Supreme Court Interprets Intention of Term Sheet

A recent decision of the WA Supreme Court considered the terms of a heads of agreement for a joint venture in circumstances where one party attempted to effect a transfer of its interests to a wholly owned subsidiary.

In Platina Resources Ltd v Artemis Resources Ltd [2021] WASC 42, Platina Resources Ltd (Platina) entered into a Heads of Agreement in relation to a mining tenement in Western Australia with Artemis Resources Ltd and its wholly owned subsidiary Karratha Metals Pty Ltd (Artemis and Karratha).

The Agreement set out the terms on which Karratha could farm-in to tenements held by Platina in the Munni Munni mining project. Platina held four mining leases associated with this project.

The Agreement provided that following Karratha’s payment of the ‘Exploration Expenditure’ to Platina; Karratha and Platina will become co-owners of the tenements, a ‘JV’ will be formed between Karratha and Platina and the parties will prepare and execute a formal JV agreement.

Following execution of the Agreement, Artemis wrote to Platina indicating an intention to set up Munni Munni Pty Ltd (MMPL) for the sole purpose of acquiring Karratha’s interest in the tenements. Artemis prepared a Deed of Variation amending the definition of ‘Karratha’ in the Agreement to include reference to any ‘Related Body Corporate’.

Artemis, Karratha, and Platina executed the Deed of Variation in May 2019, following which Platina transferred interest in the tenements to MMPL. Separately, Karratha and MMPL entered into a deed that in essence assigned to MMPL, the interests of Karratha in Platina’s tenements. However, Platina never executed the deed.

The above events caused a dispute between the parties. Platina commenced Supreme Court proceedings and claimed, amongst other things, under the terms of the Agreement a Joint Venture (JV) had been formed between Platina and Karratha.

Artemis agreed that a JV had been validly created, but argued that only Platina and MMPL were parties to the JV because, amongst other things, Karratha had nominated MMPL as its ‘Related Body Corporate’ to receive its Interest.

Ultimately, Allanson J held that the parties to the JV were Platina and Karratha, not MMPL. In reaching his decision, Allanson J considered the deeds, term sheet and circumstances of the case, and made the following observations:

•    The terms of the Agreement are to be construed objectively and are to be read in the context of the agreement as a whole with consideration given to the intended commercial purpose.
•    Construction is more difficult in circumstances where a formal agreement is to follow. However, this does not allow the court to write the contract it believes the parties would have ultimately agreed. The court is bound by the language the parties used.
•    The deed of variation varied only the interpretation provisions of the Agreement.
•    Even if the Agreement was amended by the deed of variation so that reference to Karratha was to be read as ‘Karratha or its Related Body Corporate’, the court could not find that MMPL became a party to the JV. Without more, there would be nothing to identify which related body corporate of Karratha was to be party to the Agreement and therefore the JV. For example, there was nothing to suggest that MMPL was ‘nominated’ for anything other than the holding of the tenement interest.

A full version of the judgement can be found here.