NSW Court of Appeal Confirms Valid Termination of Royalty Agreement

In Cromarty Resources Pty Ltd v Thalanga Copper Mines Pty Ltd [2021] NSWCA 284 the NSW Court of Appeal (Meagher JA with Bell P and Payne JA agreeing) confirmed the judgment below of Stevenson J in Thalanga Copper Mines Pty Ltd v Cromarty Resources Pty Ltd [2021] NSWSC 640 who concluded that Cromarty had repudiated an agreement to pay a mining royalty to Thalanga by performing ‘as and when’ it suited it rather than in accordance with the terms of the agreement.

The Court of Appeal agreed with Stevenson J’s construction of the relevant terms of the agreement that required the payment of the royalty within 15 business days of the actual sale of processed ore and that the payment to be made was 4% of the net sales realisation without the deduction of sales realisation expenses.  They also held that Stevenson J correctly found that Cromarty’s conduct leading up to and following a solicitor’s letter of demand conveyed to a reasonable person in Thalanga’s position that it was only prepared to pay royalties in a manner substantially inconsistent with its obligations under the agreement.

In dealing with the arguments on the appeal, the Court of Appeal confirmed a number of fundamental contractual principles, including that:

  • an essential term is one which is of such importance to the promisee that it would not have entered into the contract unless assured of strict performance;
  • unless the contract makes clear by express provision or by necessary implication, arising from the nature, purpose and circumstances, that a particular stipulation is a condition, it will be characterised as an intermediate term; and
  • the giving of a notice to pay within a reasonable time could not alter the time fixed by the contract for performance of the payment obligation or make performance of those obligations essential.

The outcome of the appeal judgment requires Cromarty and its parent company, Red River Resources Ltd, to pay unpaid royalty and loss of bargain damages totalling more than $19.9 million to Thalanga, as well as paying Thalanga’s costs of the trial and the appeal.

Anthony McGrath SC and Tamasin Jonker appeared for Thalanga, the successful plaintiff/respondent at the trial and the appeal, instructed by McCullough Robertson.

Click here to view the profile of Anthony McGrath SC.

Click here to view the profile of Tamasin Jonker.

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