Negligence of Process has Dire Outcomes

26 Sep 2019

This Warden Court decision is an example of why a company should have good processes and procedures in place to prevent mistakes, and when a mistake is made the Warden will take a more lenient view.

http://www.dmp.wa.gov.au/Documents/Wardens-Court/2019WAMW8.pdf

You may read this article and say, ‘we are not this bad’, but in our experience this verges on the norm rather than the unusual.  So it is worth examining your processes so you are unperturbed when next being cross examined by a barrister.

Background

Onslow Premium Sands Pty Ltd (Onslow) failed to pay the rent for E08/2333 due to a litany of errors and the tenement was forfeited. Onslow, made an application for restoration of E08/2333 that K Plus S Salt Australia Pty Ltd (K Plus) objected to as they had applied for a competing Exploration Licence. Warden Sullivan refused the application for restoration as Onslow had “not approached the obligations under the Mining Act in a diligent and prudent manner”. It is worth examining those mistakes so business processes can be adopted to avoid them.

Onslow’s Business Processes 

  1. Onslow’s degree of care for the non-payment of rent to result;
  2. The extent prejudice would be suffered by the tenement holder; and
  3. What steps have actively taken place to promote the objects of the Mining Act.

Gross Lack of Care 

The Warden stated there was a “gross lack of care” by Onslow demonstrated by:

  • The repeated failures to correct the registered address of E08/2333 at DMIRS so correspondence would be received;
  • There was repeated failures to prevent several cheques bouncing due to lack of funds in the account;
  • The “failure to pay the penalty by the due date”;
  • There was no system for tenement management as the responsibility was not positively assigned; and
  • The person managing the tenements by default was doing the work of 2 people and “hardly surprising she may have made an error”.

Reckless indifference to expenditure claimed

Onslow maintained that expenditure stated in the Form 5s was greater than the commitment and as such promoted the object of the Mining Act. The Warden said “those who are recklessly indifferent to whether an item of expenditure is claimable or otherwise deliberately misrepresent information in a Form 5 does not promote the objects of the Mining Act”.

The expenses that Onslow claimed that were not claimable, are:

  • Legal expenses;
  • The travel expenses of the property fund manager;
  • Geological expenses where no report was produced;
  • Books purchased relating to aquaculture as they didn’t relate to mining; and
  • Time spent on assessing aquaculture on E08/2333 are not claimable as it doesn’t relate to mining.

Reckless indifference

Other matters that failed to support Onslow having special circumstances for restoration:

  • The 5 month late lodgement of the Annual Report;
  • The associated companies bad reputation for compliance;
  • Mr Burrows, employed by Onslow as a geologist, “is not qualified in accordance with the JORC Code” and his “opinion rests on assumptions that are not the subject of evidence”
  • Limited ground work on the tenement

To have any chance restoring a tenement you need a good tenement management processes, accurate expenditure reporting, and undertaking adequate exploration field work. LandTrack Systems can assist by providing a training courses in Understanding Tenement Expenditure and Advanced Tenement Management and software for personnel to ensure tenement management processes are in place and tenement expenditure is accurately reported.