Full Court confirms that a proposal approved under a state agreement has legal effect
On 30 March 2017 the Full Court found that Edelman J was right to conclude that there was no doubt that the CITIC parties were responsible under the relevant state agreement for operations at the Cape Preston port. The Full Court made some important observations in relation to the nature of State agreements and their interpretation, the nature of approved proposals and the requirement to identify in any proposal the person or persons who are to implement the proposal.
Nature of state agreements and their interpretation
In dismissing the appeal the Full Court confirmed at , as Edelman J had held:
… that the State Agreement fell within the definition of “Government Agreement” in s 2 of the Government (WA). Section 3(a) of the Government Agreements Act provides that each provision of a government agreement will take effect, notwithstanding any other Act or law. It follows, the primary judge held, that the various proposals made by Mineralogy, Sino Iron and Korean Steel, which became approved documents, took effect, according to their terms and notwithstanding any other Act or law (at ). State agreements take effect between the parties as a commercial contract with the usual principles of contractual construction being applicable (Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd  WASCA 216; (2012) 45 WAR 29). This includes the interpretation of terms of a commercial contract in accordance with what reasonable business persons would have understood those terms to mean, having regard to the language, surrounding circumstances and the commercial purpose or objects to be secured by the contract against a background “of the genesis of the transaction, the background, the context and the market in which the parties are operating” and so as to avoid the agreement making “commercial nonsense” (Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd  HCA 7; (2014) 251 CLR 640 (at 656-657)).
Nature of approved proposals under state agreements
The State contended that a proposal is not simply a document for informing the State of the proponent’s proposals. Rather, it is the basis for an approval under the State Agreement. The State also submitted that the benefits and obligations that arise because of the Minister’s approval of a proposal mean that the proposal is more than a “non-contractual document” but a document with legal effect.
The State submitted that departures from a proposal may have consequences as potential breaches of the State Agreement. Because of the requirement at law for both the approval from the State in relation to the various proposals and the ratification by Parliament, obligations are necessarily owed, not only by one party to the other, but also to the State.
These arguments were accepted.
State must know who is to implement proposal
The Full Court also accepted the State’s submission that because the State Agreement gives an approved proposal legal effect, the terms of the proposal should include the identification of the agents or subcontractors of the proponent who will be responsible for the conduct of operations.
The State submitted that it is central to the State’s interests and to the Minister’s functions under the State agreement to know who is implementing the operation and maintenance of any aspect of the Project. The Full Court accepted this submission because this is to enable the Minister to consider that a proponent’s readiness in all respects to commence, complete and thereafter operate the project.
The Full Court agreed with conclusion of Edelman J that the proposal included 29 references to the CITIC parties operating and maintaining the project and none by Mineralogy. Although Mineralogy and the CITIC parties were legally obliged to implement the approved proposal in accordance with its terms, those terms included that it was the CITIC parties and not Mineralogy that would be carrying out the operation and maintenance of the facilities at the port.
Accordingly, it was the CITIC parties that were responsible under the relevant state agreement for operations at the Cape Preston port.