CITIC Ltd v Mineralogy Pty Ltd [No 7] - [2021] WASC 371

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   CITIC LTD -v- MINERALOGY PTY LTD [No 7] [2021] WASC 371
CORAM:   KENNETH MARTIN J
HEARD:   8 OCTOBER 2021
DELIVERED          :   29 OCTOBER 2021
FILE NO/S:   CIV 1514 of 2016
BETWEEN:   CITIC LTD
First Plaintiff
SINO IRON PTY LTD
Second Plaintiff
KOREAN STEEL PTY LTD
Third Plaintiff
CAPE PRESTON RESOURCE HOLDINGS PTY LTD
Fourth Plaintiff
AND
MINERALOGY PTY LTD
First Defendant
CLIVE FREDERICK PALMER
Second Defendant

Catchwords:

Costs - Disputed costs orders after trial - Indemnity costs order sought - Contended mixed result at trial - Contended apportionment by reference to issues - Special costs orders sought further or in the alternative to indemnity costs

Legislation:

Legal Profession Act 2008 (WA)
Rules of the Supreme Court 1971 (WA)
Supreme Court Act 1935 (WA)

Result:

Costs orders settled and issued

Category: B

Representation:

Counsel:

First Plaintiff	:	Mr S H Parmenter QC & Mr A Barraclough
Second Plaintiff	:	Mr S H Parmenter QC & Mr A Barraclough
Third Plaintiff	:	Mr S H Parmenter QC & Mr A Barraclough
Fourth Plaintiff	:	Mr S H Parmenter QC & Mr A Barraclough
First Defendant	:	Mr P Dunning QC & Mr K S Byrne
Second Defendant	:	Mr P Dunning QC & Mr K S Byrne

Solicitors:

First Plaintiff	:	Allens
Second Plaintiff	:	Allens
Third Plaintiff	:	Allens
Fourth Plaintiff	:	Allens
First Defendant	:	Kane Jones
Second Defendant	:	Alexander Law

Cases referred to in decision:

Amica Pty Ltd v Hannell [2007] WASCA 158 (S)
Brookvista Pty Ltd v Meloni [2009] WASCA 180
CITIC Ltd v Mineralogy Pty Ltd [2020] WASC 223
CITIC Ltd v Mineralogy Pty Ltd [No 3] [2020] WASC 398
CITIC Ltd v Mineralogy Pty Ltd [No 4] [2020] WASC 439
CITIC Ltd v Mineralogy Pty Ltd [No 5] [2021] WASC 89
CITIC Ltd v Mineralogy Pty Ltd [No 6] [2021] WASC 144
David Weiping Chen & Ors v Kim Man Chan & Ors (No 2) (2009) VSCA 233
Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S)
Frigger v Lean [2012] WASCA 66
Hamod v New South Wales [2002] FCA 424; (2002) 188 ALR 659
Huntingdale Village Pty Ltd (Recs and Mgrs Apptd) v Korda [2015] WASCA 101 (S)
KSG Investments Pty Ltd v Open Markets Group Ltd [No 2] [2021] VSC 359
Latoudis v Casey (1990) 170 CLR 534
Les Laboratoires Servier v Apotex Pty Ltd [2015] FCAFC 27; (2016) 247 FCR 61
May v Thomas [2014] WASCA 176 (S)
Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [No 2] [2017] FCAFC 116
Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 16] [2017] WASC 340
Northern Territory v Sangare [2019] HCA 25; (2019) 265 CLR 164
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
Pelech v Royle [2020] WASCA 168 (S)
Sandoz Pty Ltd v H Lundbeck A/S (No 2) [2021] FCAFC 47
Simmons v Love [No 2] 2016 WASC 167
Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S)
Souter v Condor Developments Pty Ltd [2012] WASCA 227
State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174
Strzlecki Holdings v Jorgensen [2019] WASCA 96
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)
Yara Australia Pty Ltd v Oswald [2012] WASCA 264

KENNETH MARTIN J:

Introduction

I am dealing with a dispute over costs of this action, which saw a four‑day trial in December 2020: see my post trial reasons for decision in CITIC Ltd v Mineralogy Pty Ltd [No 5] [2021] WASC 89. This action also had significant interlocutory history, prior to the trial. In my post trial reasons, at [480], I indicated that further orders, including as to costs or special costs orders, would be reserved.
After those post trial reasons were published, there arose a further dispute between the parties. This dispute was in relation to the terms of the specific performance orders that were to be issued in favour of the plaintiffs, as per my post trial reasons: see CITIC Ltd v Mineralogy Pty Ltd [No 6] [2021] WASC 144. I issued final judgment orders on 6 May 2021 (folio 200).
Pursuant to orders 9 to 12 of my orders made on 6 May 2021, I ordered that the parties file their written materials in relation to their rival costs orders sought and for the matter to be listed for a special appointment to determine the appropriate costs orders.
The divide between the parties' positions over costs orders emerges out of their rival proposed minutes of orders, exchanged respectively by the plaintiffs at 6 July 2021 (folio 202) and by the defendants under a draft minute of costs orders of 5 August 2021 (folio 205). The plaintiffs also filed an affidavit sworn by Tania Cini on 6 July 2021 (folio 204).
Essentially, the clash over costs orders between the parties distils to two key areas of dispute. First, the plaintiffs seek their costs 'thrown away' as a result of the late amendments to Mineralogy's and Mr Palmer's defences under the Court's orders of 10 November 2020 (folio 128). Further, the plaintiffs seek that the costs of, occasioned by and thrown away as a result of those pleading amendments, be taxed on an indemnity basis, if not agreed. This essentially reflects the suggested wasteful consequences of a significant change of position as had been articulated by letter sent on behalf of Mineralogy and Mr Palmer at 22 September 2020. A copy of this letter is found at attachment KCJ-1 to the affidavit of Kane Christopher Jones sworn 23 September 2020 (folio 110).
Mineralogy and Mr Palmer essentially accept that the plaintiffs should receive their costs of the action up to and including 22 September 2020 (including reserved costs) - but on a taxed, party and party basis, only. Thereafter, Mineralogy contends that there should be no further order as to costs for the action, post 22 September 2020.
Consequently, there also presents a sub-issue over the rival costs duration date of 22 September 2020 suggested by the defendants and the date that is advocated by the plaintiffs, namely, to 10 November 2020.
Second, the plaintiffs seek further orders that Mineralogy and Mr Palmer otherwise pay the plaintiffs' costs of the action (including any reserved costs to be taxed, if not agreed). In this realm, they also seek special costs orders pursuant to s 280(2) of the Legal Profession Act 2008 (WA) (LPA) to be entitled to a taxation of their costs without the limits imposed by any of the applicable costs scales. They also seek that any taxation be conducted on the basis of an allowance made for the costs of two senior counsel and one junior counsel. This includes for attendances at all pre-trial hearings and at the trial. Costs orders in those atypically broad terms and any adjusting or removal of the scale limits, are resolutely opposed by Mineralogy and Mr Palmer.

Core issues

The essential components of the plaintiffs' argument are first, that they were entirely successful at the trial. Second, they say they incurred considerable wasted costs in the lead-up to the trial by reason of a significant volte‑face communication of the defendants on 22 September 2020. As I record in a number of the interlocutory judgments written before the trial, Mineralogy at this time advised by letter that it abandoned its counterclaim (see in particular CITIC Ltd v Mineralogy Pty Ltd [No 3] [2020] WASC 398, particularly at [16] and [54]). Mineralogy also advised it would not persist to press a number of the defences which it had previously raised against the specific performance relief sought by the plaintiffs (see also CITIC Ltd v Mineralogy Pty Ltd [No 3] at [57]).
Thereafter, Mineralogy amended (ie, pruned) its defence and wholly abandoned its counterclaim - effectively to implement that change of position. That occurred formally under court orders of 10 November 2020 as to pleadings.
Nevertheless, there were still a few more controversial 'twists and turns' prior to the eventual commencement of the trial, which ran for four hearing days, from 7 December 2020. These events are described in CITIC v Mineralogy [No 3] and CITIC Ltd v Mineralogy Pty Ltd [No 4] [2020] WASC 439. My post-trial reasons also relate some of the last minute pre-trial events (see CITIC Ltd v Mineralogy Pty Ltd [No 5] at [15] - [19]).
The divide that now exists between the parties is over appropriate final post trial costs orders - as an exercise of the court's discretion. The court essentially holds a wide discretion concerning post trial costs orders, subject of course to there being a principled exercise of the discretion (Supreme Court Act 1935 (WA) s 37(1)). I proceed to briefly summarise some of the more relevant costs principles in a discrete component of these reasons.

Legal principles as regards post trial costs

As indicated, the parties did not dispute the legal principles underlying costs orders issuing in the aftermath of a trial. That is reflected in their exchanged written submissions towards costs orders which, for the record, I note were:
(a)Plaintiffs' written submissions regarding final costs orders filed 6 July 2020 (folio 203);
(b)Defendants' written submissions on costs of 5 August 2021 (folio 206);
(c)Plaintiffs' submissions in reply regarding costs of 23 August 2021 (folio 207).
For the purposes of undertaking the present exercise, and assisted by the parties' exchanged written submissions, the following seventeen (17) costs principles may be briefly stated:
First, costs awards are in the discretion of the court (see Supreme Court Act 1935 s 37(1)).
Second, the court's discretion is absolute and unfettered, save that it must be exercised judicially: see Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [21] - [22] and at [134], and Frigger v Lean [2012] WASCA 66 at [53], per Allanson J, Newnes and Murphy JJA agreeing.
Third, the court's discretion must be exercised so as to achieve what is fair and just as between the parties according to the circumstances of the particular case: see Latoudis v Casey (1990) 170 CLR 534 at 558.
Fourth, the general rule is that the successful party should recover its costs: see RSC O 66 r 1(1). In Northern Territory v Sangare [2019] HCA 25; (2019) 265 CLR 164 the High Court of Australia has recently observed at [25]:
A guiding principle by reference to which the discretion is to be exercised - indeed 'one of the most, if not the most important' principle[s] - is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party. (citations omitted)
Fifth, the court may order that a party be liable for the other side's costs on an indemnity basis, if the justice of the case requires such an order: see Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S) at [8] per Pullin J; Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) at [10]; and Huntingdale Village Pty Ltd (Recs and Mgrs Apptd) v Korda [2015] WASCA 101 (S) at [11] - [17]. The categories of case in which a court may issue an indemnity costs order are not closed: see Swansdale v Whitcrest at [10].
Sixth, an order for indemnity costs may be issued as a mark of disapproval by a court by reason of its assessment as to the existence of a level of improper or unreasonable conduct in the litigation: see Yara Australia Pty Ltd v Oswald [2012] WASCA 264 at [33] per Murphy JA and Flotilla Nominees v Western Australian Land Authority at [25]. I note that there is no suggestion of improper conduct here by the defendants - only of contended unreasonable conduct, which allegation the defendants refute.
Seventh, if a party persists in pleading or pressing an untenable cause of action, or pressing an untenable defence, under circumstances where it is plain that it ought not to have persisted, then a court may mark its disapproval of that unreasonable conduct by making an indemnity costs order: see Swansdale Pty Ltd v Whitcrest Pty Ltd at [4] and [6]; Pelech v Royle [2020] WASCA 168 (S) at [6] - [7]; Huntingdale Village Pty Ltd (Recs and Mgrs Apptd) v Korda at [11].
Eighth, a court's indemnity costs are not punitive. They are designed for:
... compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs.
See Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [No 2] [2017] FCAFC 116 at [5] and Hamod v New South Wales [2002] FCA 424; (2002) 188 ALR 659 at 665 (Gray J, with whom Carr and Goldberg JJ agreed).
Ninth, the discretion of a court concerning an award of costs allows it to evaluate the parties' respective successes or failures upon the issues in dispute at the trial: see RSC O 66 r 1(3). Nevertheless, a court will be slow to proceed to exercise that discretion by reference to the discrete issues resolved by a trial: see Les Laboratoires Servier v Apotex Pty Ltd [2015] FCAFC 27; (2016) 247 FCR 61 at [303] and Souter v Condor Developments Pty Ltd [2012] WASCA 227 at [28].
Tenth, even if a court does not accept all of a successful party's arguments at a trial, that does not of itself render it appropriate to deal with costs orders on an issue by issue basis: see State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [8] (Emmett, Kenny and Middleton JJ).
Eleventh, a court's discretion to render an award of costs by undertaking an assessment conducted by reference to trial issues won or lost, would only to be exercised in the clearest of cases: see KSG Investments Pty Ltd v Open Markets Group Ltd (No 2) [2021] VSC 359 at [8] (Nichols J).
Twelfth, a court may depart from the ordinary rule that costs follow the event - so as to modify a costs order to take into account matters such as a level of unreasonable conduct by an otherwise successful party, or say by the failure at trial of the otherwise successful party upon one or more specifically identifiable issues that had consumed trial resources: see Strzlecki Holdings v Jorgensen [2019] WASCA 96 at [50].
Thirteenth, what constitutes success in proceedings is to be determined by the reality of the circumstances involved in any particular case: see Strzelecki Holdings v Jorgenson at [50], referring to Oshlack v Richmond River Council at [70] per McHugh J.
Fourteenth, the extent to which a court's discretion is exercised to reduce costs for a successful party, ought be approached as a matter of overall impression, without requiring any higher degree of mathematical precision: Amica Pty Ltd v Hannell [2007] WASCA 158 (S) at [7]; May v Thomas [2014] WASCA 176 (S) at [5] (Martin CJ); David Weiping Chen & Ors v Kim Man Chan & Ors (No 2) (2009) VSCA 233 at [10] (Maxwell P, Redlich JA and Forrest AJA).
Fifteenth, a court does not go back to 'comb' through resolved proceedings to separate out issues on which the successful party has not been successful so as, in some way, to moderate a usual order as to costs: see KSG Investments Pty Ltd v Open Markets Group Ltd (No 2) at [8] (Nichols J).
Sixteenth, an exercise of the court's discretion as to costs by some evaluation conducted towards issues won or lost - may be more appropriate where discrete and severable issues can be readily identified and upon which the otherwise generally successful party can be seen to have failed especially where the determination of such issues is discerned to have added to the cost of the proceedings in a significant way: see Amica v Hannell at [7] (Martin CJ, Steytler P and McLure JA). Nevertheless, the court exercises 'particular caution before departing from the ordinary rule that costs follow the event': see Sandoz Pty Ltd v H Lundbeck A/S (No 2) [2021] FCAFC 47 at [57] (Nicholas, Yates and Beach JJ).
Seventeenth, an order for costs 'thrown away' signifies a reference to what are completely wasted costs: see Simmons v Love [No 2] [2016] WASC 167 at [62] and see Brookvista Pty Ltd v Meloni [2009] WASCA 180 at [28] (Newnes JA, Buss JA agreeing). Such orders are encountered frequently in the interlocutory context, before a trial outcome is known and where a changed pleading position may be readily ascertained to have occasioned wasted legal costs, irrespective of an eventual trial outcome.

Successful party

Insofar as the plaintiffs are to be awarded some level of post trial taxed costs against Mineralogy, I will say at the outset that in my view, there can be no sensible argument put against the position that the plaintiffs were the successful parties at the trial. Ultimately, they obtained orders for specific performance in their favour - which came to be issued on 6 May 2021, as explained by the post trial reasons, CITIC Ltd v Mineralogy Pty Ltd [No 6]. Moreover, in CITIC Ltd v Mineralogy Pty Ltd [No 5], I had observed as follows at [46] - [49]:
[46]The defendants' formal submission as to an absence of any CPOA breach by Mineralogy arising from CITIC's exercise of its First Option, should immediately be resolved and put to one side.
[47]Mineralogy has long been in breach of its First Option performance completion obligations under the CPOA. Until 22 September 2020 Mineralogy, by its pleadings in this action, had been articulating a gamut of reasons seeking to justify its non‑performance, including (non-exclusively) by asserting CITIC's alleged repudiation of the CPOA and, as well, the contended contractual frustration of the CPOA. See CITIC v Mineralogy, which explains the main issues of dispute as then presenting on the pleadings regarding breach of the CPOA by Mineralogy.
[48]Mineralogy had also pursued at one time a counterclaim for significant damages for breach. But that all changed under the dramatic volte-face communication made on behalf of Mineralogy and Mr Palmer on 22 September 2020 (as I explained in some detail in CITIC v Mineralogy [No 3]).
[49]Therefore, a First Option non-performance omission breach by Mineralogy against the CPOA, occurring from 2012 up until at least 22 September 2020, is well established. That feature of past breach by Mineralogy and its non-performance over time, delivers a solid contractual cause of action platform for the CITIC plaintiffs to support specific performance relief if that discretionary equitable remedy is otherwise appropriate in all the circumstances - and as I ultimately assess, it is.
Accordingly, the CITIC plaintiffs were unquestionably the successful parties at the trial. Prima facie, they would be entitled to receive at least their taxed party and party costs of the action (including the trial days) against the unsuccessful defendants under the colloquially known 'loser pays' principle (Rules of the Supreme Court 1971 (WA) (RSC) O 66 r 1). This is subject to my countervailing considerations advanced from the defendants.

Removal of scale limits

As now mentioned, the plaintiffs seek special orders for the removal of the cost scale limits otherwise imposed by reference to the applicable scales. I thus turn to mention the now well known criteria required to be established for a court to make special costs orders to remove scale limits under s 280(2) of the LPA. It is pellucidly clear that this criteria is readily met in the present litigation. The applicable principles underlying the making of such orders are (ironically) found set down at length in Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) at [11] - [16]. There is no need to repeat them again.
The present action was commenced in 2016. I became its case manager in the CMC List some two and a half years prior to the eventual trial (see the court orders made on 30 June 2017 (folio 17)). Under these orders, I essentially programmed the action for a directions hearing to be fixed after a determination of other pending litigation between the same parties. This other litigation, in which I was also the nominated trial judge, was CIV 1808 of 2013 - and concerned Royalty Component B: see my reasons in Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 16] [2017] WASC 340.

On 26 February 2020, I set down provisional trial dates for this action of 10 days to occur in December 2020. Thereafter, throughout 2020 and prior to the trial, a number of interlocutory hearings concerning pleadings, discovery and other flashpoint issues were progressed and resolved.
There had also been predecessor litigation over, in effect, the same underlying trial issues in this court in CIV 3012 of 2012. This action, where CITIC was the first plaintiff, also related to the contended exercise of the first option under the CPOA agreement and its validity. That action came to be resolved under, in effect, consensual final orders issued by Chaney J on 30 September 2015. But that peace accord was only short lived and the present action was soon on foot raising the disputation again.
The interlocutory antecedents to the eventual December 2020 trial were voluminous - as is commonly experienced between these two parties in other litigation. My first set of interlocutory reasons in this action addressed Mineralogy's application for leave to amend and to expand its defences and its counterclaim at 19 May 2020 (folio 79). Later, I revised what were those ex tempore reasons, which came to be published on 18 June 2020: see CITIC Ltd v Mineralogy Pty Ltd [2020] WASC 223. As I had observed at [24] at that time (ie, May 2020 when the application came to be heard), I was dealing with what was the seventh iteration of Mineralogy's defence and counterclaim pleading. As that May 2020 hearing progressed, more proposed defence and counterclaim pleading iterations emerged from Mineralogy: see CITIC Ltd v Mineralogy Pty Ltd [36].
Ms Cini's affidavit (to which I have already referred) addresses the undeniably burdensome amount of work necessarily done over time in relation to responding to the defendants' many pleaded resistance arguments of defences. At the time, the defences were linked to contractual breach, repudiation and a CPOA termination for breach and frustration.
Ms Cini also juxtaposes the local 2014, 2016, 2018 and 2020 cost scale rates to the actual rates charged to the plaintiffs. This exercise was undertaken to support the submission that the scale rates were likely to be inadequate to see the plaintiffs fairly recoup the actual fees as were rendered by the solicitors and barristers working upon the matter prior to and during the trial phases of the action.
I accept that to be the case. It aligns with my own judgment that the cost scale determination limits are likely to be significantly inadequate to produce and deliver in these circumstances a just allowance to the plaintiffs for their costs. It would be an understatement to say that the unusual complexity and difficulty of this litigation is significantly above and beyond that of what might, with no disrespect elsewhere intended, be considered more run of the mill civil litigation disputes brought to a trial before this court.
Bearing all this in mind, it is my assessment that the applicable scale limits be removed pursuant to s 280(2)(c) of the LPA for the purpose of any taxation exercise and in all the respects as sought by the plaintiffs - should there be a taxation exercise required for the plaintiffs' costs. From my perspective as long term case manager and then as trial judge in this matter, this contention has been readily established. The ultimate assessment, however, still resides with the taxing officer concerned. However, there presents a potentially greater looming further consideration - namely the requested rendering of an order in the plaintiffs' favour for indemnity costs orders concerning aspects of this action over time before the trial began.

Indemnity costs: The rationale underlying the appropriateness of such an order

Towards the proposed order for indemnity costs, I would accept the CITIC plaintiffs' basal submission that the defendants' conduct prior to 22 September 2020, by their strategically pleaded defences put up against the plaintiffs' action over time, was unreasonable. A costs order ought to issue to mark the court's disapproval of that conduct.
In their written submissions the CITIC plaintiffs say:
17.... indemnity costs may be ordered where a party has engaged in ... unreasonable conduct, or waste of the time of the court and the other parties. That is the case here.
18.Mineralogy was in breach of the CPOA for many years. There is a long history of the CITIC Parties seeking to enforce their rights under the CPOA, including in this proceeding, which is set out in Annexure A to the CITIC Parties' closing trial submissions dated 13 December 2020. As that history shows, Mineralogy and Mr Palmer's approach to the CPOA - for over eight years - was to change their position as to whether the CPOA was, or was not, on foot, whenever they considered that it suited them to do so.
19.That approach includes the defences (and counterclaim) that Mineralogy and Mr Palmer pleaded in this proceeding. They made various allegations of breach, frustration and repudiation. They pressed those defences (and their counterclaim) for years - without filing any evidence in support of them. And they then abandoned them - reversing their position almost entirely - near the eve of trial. As noted above, no explanation was provided for this sudden and near complete change of position - either for the fact of it, or its timing. None is apparent.
20.That approach is highly unsatisfactory. Years of the Court's and the CITIC Parties' time were spent conducting the proceeding on the basis of the defences that Mineralogy and Mr Palmer pleaded. That time, and the substantial costs that the CITIC Parties incurred, were wasted, unnecessarily. (references omitted
Those submissions must be accepted in present circumstances. The CITIC submissions continue at par 23:
It was not until the morning of the first day of the trial, when Mineralogy's Senior Counsel, Mr Dunning QC, confirmed that the Proffered Matters had not been withdrawn, that the issues in dispute at the trial were finally clarified (referring to consolidated trial transcript T339 of 7 December 2020). As such, over the years and even up until trial, the CITIC Parties had to prepare a constantly-changing case based on a variety of allegations which were ultimately not pursued by Mineralogy and Mr Palmer at trial. (references omitted)
The CITIC plaintiffs also contend that there were multiple opportunities for Mineralogy and Mr Palmer to sensibly resile and amend their defences to this end. prior to 22 September 2020. That submission must also be accepted. Moreover, the change of position as it was announced for Mineralogy and Mr Palmer at 22 September 2020, was not due to the stated awareness about any new facts, or by an arrival of some unknown intervening factor. As the CITIC plaintiffs correctly submit at par 24 of their costs submission:
Rather, Mineralogy and Mr Palmer simply decided to change their position from having asserted, for years, that the CPOA was terminated, to instead seek completion of the First Option under the CPOA.
It is also the case that the solicitors for the CITIC plaintiffs had communicated on several occasions with Mineralogy and Mr Palmer's solicitors - pointing out what they saw then as fundamental defects in Mineralogy's defence and in its counterclaim and suggesting that such defences be withdrawn on the basis they were 'hopeless'. The advice was not heeded.
I mention to that end, and without limitation, Allens' letter to Mineralogy of 19 February 2018 (see annexure TC-12 of the affidavit of Tania Cini sworn 20 February 2018 (folio 18)), Allens' letter to Mineralogy and Mr Palmer's solicitors of 4 July 2018 (see annexure TC-1 of Ms Cini's affidavit sworn 24 October 2018 (folio 44)) and Allens' letter of 27 May 2020 to Mineralogy and Mr Palmer's solicitors (see annexure JPR-6 of the affidavit of Jeremy Peter Rich affirmed 27 May 2020 (folio 82)). The contended untenability of Mineralogy's position was also articulated under the CITIC plaintiffs' reply and amended reply and defence to counterclaim of 26 July 2016 and 20 December 2018 respectively (see folios 9 and 50).
Against those contentions, the defendants, under their written submissions dated 5 August 2021 (folio 206) contend that there were reasonable bases for them to plead out the defences (see par 22). Some of these bases were altered by subsequent events, and that it was not until 14 February 2020 that trial dates were sought. Moreover, it is correctly pointed out that no strike out application was ever advanced against the defence and counterclaim of Mineralogy.
However on my overall assessment, the defence and counterclaim position as it had been adopted by Mineralogy and Mr Palmer over time, was unreasonable. Multiple defences were pleaded for years to resist the CITIC plaintiffs' basic contention that the CPOA ought be performed - as regards to CITIC's exercise of a first option.
This conclusion is particularly emphasised by a scrutiny of the events collected in Annexure B to the plaintiffs' closing outline of written submissions of 14 December 2020 (folio 194). This document reads in terms:
Procedural history of this proceeding
1.After this proceeding commenced, the defendants' changes of position and unwillingness to complete the First Option have continued.
2.By their Amended Defence dated 1 July 2016 the defendants, inter alia, denied that they had breached the CPOA, denied that CITIC was ready, willing and able to complete the exercise of the First Option, made various groundless allegations of breach by CITIC and gave notice of termination of the CPOA.
3.On 28 December 2016, Mineralogy then wrote to CITIC's lawyers and said that it had 'decided to withdraw all claims for Termination or Repudiation [sic] of the MRSLAs'.
4.On 11 January 2017, CITIC's lawyers responded to that letter, asked Mineralogy to confirm that it would be withdrawing the allegations that the CPOA had been terminated, and said that CITIC remained ready, willing and able to perform its obligations under the CPOA.
5.Almost three months later, on 4 April 2018, Mineralogy wrote to CITIC and stated that the defendants would agree to a declaration that the CPOA remains in full force and effect and that Austeel Pty Ltd (Austeel) would be the Further Company for the purpose of completion of the First Option.
6.On 18 April 2018, CITIC's lawyers responded and, inter alia: requested information about Austeel's trading, financial and tax history; encouraged Mineralogy to consider reinstating the 'NewCo' ACN 606 342 778 Pty Ltd so that it could be the Further Company; and confirmed that CITIC remained ready, willing and able to complete the exercise of the First Option in accordance with the CPOA.
7.On 20 April 2018, Mineralogy said it was 'seriously considering' reinstating' the 'NewCo' and that it would write to CITIC 'by no later than close of business, Thursday 26 April 2018 as to how matters can be resolved and how we can move forward, hopefully in accordance with your suggestion'.
8.That never occurred. Rather, almost four months later, on 13 August 2018, Mineralogy said that it withdrew the nomination of Austeel as the Further Company and again asserted that the CPOA had been either frustrated or terminated and that the JDA was in full force and effect.
9.The defendants maintained those allegations until, on 22 September 2020, with the trial on 7 December looming, they abandoned their baseless claims that the CPOA had been terminated and said that they were willing to complete the First Option - but that the Further Company must be Balmoral Iron. (references omitted)
Those criticisms must be accepted, factually. Under the circumstances, Mineralogy and Mr Palmer's conduct in their defence of this action, up until a relatively short time before the commencement of the trial, were overall unreasonable. It is appropriate the Court mark its disapproval of that conduct by an order for indemnity costs. The order will be applicable until 10 November 2020.
The following assessments are integral to a finding that indemnity orders are appropriate:
(a)The conduct of Mineralogy in terms of its persistence over time with various defences which were unilaterally abandoned, along with the counterclaim at 22 September 2020, warrants that the court express disapproval of that conduct by an issue of an indemnity costs order;
(b)The indemnity costs order ought to extend beyond 22 September 2020 and until 10 November 2020. That date was when I ordered that Mineralogy have leave to file a defence in accord with its minute of proposed second further amended defence dated 5 October 2020 (see order 2 of the court's orders made on 11 November 2020).
(c)The stance of the defendants as regards removing numerous defence issues as live considerations from a trial, was still not fully bedded down until the 10 November 2020 orders.
(d)On my assessment, there were even after 10 November 2020, some still lingering trial issue uncertainties of some magnitude pressed by the defendants even after that date, including a possible need to prove at the trial the precise level of CITIC's drilling costs (as a component of ascertaining the CPOA's purchase price). That proof issue presented right up until immediately before the weekend before the trial actually commenced during December 2020.
(e)Based on what I witnessed over time as case manager and then as the trial judge, I would have inclined towards awarding the plaintiffs' indemnity costs extending beyond 10 November 2020 until the weekend prior to the commencement of the trial. However, the CITIC parties do not seek an indemnity costs order of that duration. In the circumstances, their earlier nominated date of 10 November 2020, on my assessment, is just and appropriate.
(f)An order for the full indemnity costs of the action to be paid extending to 10 November 2020, will render redundant any need for any separate order concerning costs thrown away by reason of the 22 September 2020 volte-face of the defendants. On my assessment, an indemnity costs order up to 10 November 2020 is the preferable greater relief in the circumstances.
(g)The CITIC plaintiffs were plainly the successful parties at the trial, obtaining ultimately orders for specific performance. Consequently, as successful parties, they are entitled, prima facie, to their party and party costs, to be taxed post 10 November 2020, including for the days of the trial albeit subject to some adjustment, as I explain below.
(h)By my assessment, some adjustment is called for as regards the costs for the four days of the trial - to take a proper account of the fact that the issues to be resolved in the trial had essentially narrowed to see the trial evolve to essentially require an exercise over resolving transaction document drafting disputation. Some of the drafting issues the parties could not agree about were trivial. But the court was still called upon to resolve many drafting dispute issues that commercially sensible persons in the usual course would never think appropriate to burden a court with.

Costs in relation to the trial

Regarding an apportionment of the costs for the four days of the actual trial, I render the following observations.
As I observed in the trial reasons CITIC Ltd v Mineralogy Pty Ltd [No 5] at a number of places (particularly [22], [23] and [66]), the essential issues at trial became a fairly long but very atypical drafting dispute resolution exercise for the court to undertake. Some points of disputation were trivial. I also came to reject the CITIC plaintiffs' ad hoc implied term as contended for (see [138] and [139]). That term argument underlay a significant component of the drafting disagreements over the scope of the exercise.
I do accept however that a few drafting dispute issues were significant. They required resolution in the face of the impasse between the parties. In saying that, the exercise ought not reasonably to have been of the magnitude and ordeal that it became. My reasons in CITIC v Mineralogy [No 5] capture the many disputes of drafting put to the court for resolution. As mentioned, reasonable commercial parties would not have troubled a court over most of those issues.
Two days of the court's trial time should have been more than enough to resolve the key signalled difficulties. Some issues, such as a more expansive suggested scope towards the content of Project Agreements, were arguments eventually decided adversely by the court against the contended rival position of the CITIC plaintiffs.
By my broad assessment, the significant issues of disputation arising as between the parties, and that might reasonably and factually be put to the court for resolution, ought not to have exceeded two days of the court's time. Consequently, the CITIC plaintiffs, as the successful party, will receive an award of costs for trial days - but limited to two days of hearing time (ie, 50%) rather than for the full four days. That apportionment of days does not require any precise arithmetical, issue by issue evaluation.
As the trial judge ultimately undertaking the full drafting dispute resolution exercise at the end, the apportioned result reflects an appropriate but moderate derogation from the CITIC plaintiffs' otherwise trial successes towards ultimately obtaining orders for specific performance, as ultimately issued in their favour by the court.
Moreover, my view is that, given the mixed conclusions I have reached, there should be no orders as to the costs of this final costs orders appointment hearing.

Conclusion

Ultimately, for the reasons now articulated, I am of the view that the following orders should issue as regards the costs of this action:
1.The defendants are to pay the plaintiffs their costs of this action -
(a)until 10 November 2020 on a full indemnification basis; and
(b)for the period thereafter, on a party and party basis, to be taxed or agreed, save that:
(i)scale limits are to be removed for the purposes of any taxation and in the respects as identified in par 7(c) of the affidavit of Tania Cini sworn 6 July 2021, for the purposes of any taxation; and
(ii)the plaintiffs are entitled to their costs for only two (2) of the four (4) days of the trial.
2.There will be no order as to the costs of the costs argument appointment hearing on 8 October 2021.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DM
Research Associate to the Honourable Justice Martin
29 OCTOBER 2021