Mineralogy Pty Ltd v Adani Mining Pty Ltd [2022] QDC 154

Andrew Orford  |  Matt Hammond  |  Eva Squire

Key takeout

This case demonstrates that a court will not readily allow parties to bypass a contractually agreed expert determination process in favour of litigating a dispute. 

Where a dispute appears to clearly fall within the contractually agreed alternative dispute resolution process, a party seeking to stay that process faces a heavy burden to persuade the court the agreed mechanism should not be followed.

Facts

In November 2011, Adani Mining Pty Ltd (Adani) entered into an agreement to pay royalties to Mineralogy Pty Lid (Mineralogy) for mining a tenement (Royalty Deed).  A condition of the Royalty Deed was that Adani would not create or permit the creation of any encumbrance over any part of the tenement, unless a priority deed possessing certain features to protect the royalties was entered into (Priority Deed).

In 2021, Adani sought funding from financers to assist it with the development of the tenement.  The financiers required security, which would encumber the tenement.  In pursuance of its obligations under the Royalty Deed, Adani requested Mineralogy sign the Priority Deed in relation to the financiers.  Despite Adani’s repeated requests, Mineralogy did not sign the Priority Deed.

The Royalty Deed contained a dispute resolution clause which provided that all disputes arising under it would be referred to expert determination, either by agreement of the parties or by referral to a nominating body.  Under this clause, Adani referred the dispute to expert determination and an expert was nominated by the Queensland Law Society.  Mineralogy then applied to the court seeking to stay the expert determination process.

Mineralogy argued that the dispute should not be determined by an expert but should instead be heard by the court because:

• the relevant dispute was not covered by the terms of the dispute resolution clause in the Royalty Deed;
• no proper notice of the dispute was given under the clause; and
• the Royalty Deed did not oblige Mineralogy to execute the Priority Deed.

Decision

Freeburn J rejected all arguments made by Mineralogy, dismissing the application and referring the dispute back to determination by the expert.  Freeburn J emphasised that a court will not lightly disregard an alternative dispute resolution process that was consciously agreed to by the parties as part of a substantive bargain.

Mineralogy’s first argument was that the dispute was not covered by the terms of the dispute resolution clause in the Royalty Deed as it involved the rights of third parties, as well as mixed questions of fact and law.  Freeburn J found that, while the decision of the financier as a third party may be influenced by the expert’s determination, the financier’s rights were unaffected.  Further, the relevant dispute clearly fell within the ordinary meaning of ‘a dispute or claim arising out of or relating to’ the deed, as contemplated by the dispute resolution clause.

Second, Freeburn J dismissed Mineralogy’s claim that Adani had not properly complied with the notice requirements under the dispute resolution clause.  The clause did not impose particularly onerous or formal notice requirements, and the communication from Adani sufficiently explained the circumstances giving rise to the disputeThe label of ‘without prejudice’ on the notice merely indicated a reservation of rights and did not otherwise qualify the referral of the dispute.

Finally, on the merits issues raised by Mineralogy, the court would not determine these issues without proper evidence and submissions.  Rather, the argument raised issues of merit that ought to be determined by an expert, as contemplated by the parties in the dispute resolution clause.