DFD Rhodes Pty Ltd v Hancock Prospecting Pty Ltd
[2015] WASC 105
•26 MARCH 2015
DFD RHODES PTY LTD -v- HANCOCK PROSPECTING PTY LTD [2015] WASC 105
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 105 | |
| Case No: | CIV:2737/2013 | 27 NOVEMBER 2014 | |
| Coram: | LE MIERE J | 26/03/15 | |
| 31 | Judgment Part: | 1 of 1 | |
| Result: | Portions of the plaintiffs' statement of claim are to be struck out Plaintiffs ordered to provide particulars of certain pleadings | ||
| B | |||
| PDF Version |
| Parties: | DFD RHODES PTY LTD MATTHEW JOHN KEADY AND DOROTHEA MARGARET CAMPBELL by chain of Executors, the Executors of the Estate of DONOVAN FRANCES DUNCAN RHODES HANCOCK PROSPECTING PTY LTD WRIGHT PROSPECTING PTY LTD HOPE DOWNS IRON ORE PTY LTD |
Catchwords: | Pleadings Strike out application Adequacy of pleadings Sufficiently descriptive statement of claim Directors' fiduciary duties Prescriptive versus proscriptive fiduciary duties Discovery before particulars |
Legislation: | Mining Act 1904 (WA) Mining Act 1978 (WA) Supreme Court Rules 1971 (WA) |
Case References: | Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281 Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] (2008) 39 WAR 1 Breen v Williams (1996) 186 CLR 71 Farah Constructions Pty Ltd v Say-dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Foamlite Australia Pty Ltd v Campbell and Skilled Engineering Pty Ltd (Unreported, WASCA, Library No 7686, 31 May 1989) Giumelli v Giumelli (1999) 196 CLR 101 Howard v Commissioner of Taxation [2014] HCA 21 Nicholas v Western Australia [1972] WAR 168 Sorna Pty Ltd v Flint [2000] WASCA 22; (2000) WAR 563 Streetscape Projects (Australia) Pty Ltd v City of Sydney [2013] NSWCA 2; (2013) 295 ALR 760 Westpac Banking Corporation v Bell Group Ltd (in liq) [No 3] (2012) 44 WAR 1 Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
MATTHEW JOHN KEADY AND DOROTHEA MARGARET CAMPBELL by chain of Executors, the Executors of the Estate of DONOVAN FRANCES DUNCAN RHODES
Second Plaintiff
AND
HANCOCK PROSPECTING PTY LTD
First Defendant
WRIGHT PROSPECTING PTY LTD
Second Defendant
HOPE DOWNS IRON ORE PTY LTD
Third Defendant
Catchwords:
Pleadings - Strike out application - Adequacy of pleadings - Sufficiently descriptive statement of claim - Directors' fiduciary duties - Prescriptive versus proscriptive fiduciary duties - Discovery before particulars
Legislation:
Mining Act 1904 (WA)
Mining Act 1978 (WA)
Supreme Court Rules 1971 (WA)
Result:
Portions of the plaintiffs' statement of claim are to be struck out
Plaintiffs ordered to provide particulars of certain pleadings
Category: B
Representation:
Counsel:
First Plaintiff : Mr N D C Dillon
Second Plaintiff : Mr N D C Dillon
First Defendant : Mr J C Giles & Mr D J Pratt
Second Defendant : Mr J Rowland
Third Defendant : Mr D J Pratt
Solicitors:
First Plaintiff : G E Taylor & Associates
Second Plaintiff : G E Taylor & Associates
First Defendant : Jackson McDonald
Second Defendant : Clayton Utz
Third Defendant : Jackson McDonald
Case(s) referred to in judgment(s):
Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281
Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] (2008) 39 WAR 1
Breen v Williams (1996) 186 CLR 71
Farah Constructions Pty Ltd v Say-dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Foamlite Australia Pty Ltd v Campbell and Skilled Engineering Pty Ltd (Unreported, WASCA, Library No 7686, 31 May 1989)
Giumelli v Giumelli (1999) 196 CLR 101
Howard v Commissioner of Taxation [2014] HCA 21
Nicholas v Western Australia [1972] WAR 168
Sorna Pty Ltd v Flint [2000] WASCA 22; (2000) WAR 563
Streetscape Projects (Australia) Pty Ltd v City of Sydney [2013] NSWCA 2; (2013) 295 ALR 760
Westpac Banking Corporation v Bell Group Ltd (in liq) [No 3] (2012) 44 WAR 1
Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161
1 LE MIERE J: The first and third defendants, Hancock Prospecting Pty Ltd (HPPL) and Hope Downs Iron Ore Pty Ltd (HDIO), have applied to strike out the whole of the statement of claim or alternatively certain parts of it. Primarily HPPL and HDIO submit that the statement of claim does not disclose an arguable cause of action. Alternatively, HPPL and HDIO submit that parts of the statement of claim should be struck out as tending to prejudice, embarrass or delay the proper conduct of the proceedings.
2 The second defendant, Wright Prospecting Pty Ltd (WPPL), applies to strike out parts of the statement of claim on the ground that they disclose no reasonable cause of action or alternatively may prejudice, embarrass or delay the fair trial of the action. Alternatively, WPPL says that the plaintiffs should be ordered to give particulars of allegations in the impugned paragraphs of the statement of claim.
The main characters
3 It is convenient to commence by identifying the parties. Mr Donovan Rhodes was a director and the principal shareholder of the first plaintiff which I will refer to as the Rhodes Company. The second plaintiffs are the executors of the estate of Donovan Rhodes. I will refer to 'Donovan Rhodes and/or the Rhodes Company' as Rhodes.
4 Section 276 of the Mining Act 1904 (WA) empowered the Minister for Mines to temporarily reserve any Crown land from occupation and to authorise any person to temporarily occupy any such reserve. In the 1960s the Minister had authorised Rhodes to temporarily occupy certain temporary reserves in the Pilbara region. James Nicholas and William Nicholas had also been authorised to temporarily occupy certain temporary reserves in the region. The parties use the words 'temporary reserve' sometimes to apply to the land reserved and sometimes to apply to the right to occupy any such reserve. William Nicholas is sometimes referred to as 'the brother'. I will refer to James and William together as the Nicholas Brothers. The Nicholas Brothers agreed that, except for certain claims, all their interests including temporary reserves would be held by James Nicholas for both of the Nicholas Brothers in equal shares. I will refer to 'James Nicholas and/or the Nicholas Brothers' as Nicholas.
5 By an agreement dated 2 June 1967, James Nicholas, on behalf of the Nicholas Brothers, and Rhodes made an agreement (Rhodes Nicholas Agreement) to pool temporary reserves or interests held by each of them and to hold them 55% as to Rhodes and 45% as to Nicholas. Rhodes and Nicholas held temporary reserves 4189, 4190, 4191, 4268, 4503, 4515, 4516, 4517, 4518, 4519 and 4886, which the plaintiffs describe as the East Angelas TRs, and temporary reserves 5072, 5073 and 5074, which the plaintiffs describe as the Hope Downs TRs.
6 WPPL operated in partnership with HPPL. The partnership is sometimes described as 'Hanwright'. HPPL held all of the shares in Hancock Minerals Pty Ltd (Hancock Minerals). Hancock Minerals held all of the shares in HDIO. HPPL, Hancock Minerals and HDIO had common directors. I will sometimes refer to HPPL and HDIO as the Hancock parties.
Overview of plaintiffs' claims
7 I will set out the plaintiffs' claims in outline. Rhodes, Nicholas, HPPL and WPPL entered into three agreements which they call the 1969 Agreement, the Hope Downs Agreement and the General Agreement. The agreements relate to mining reserves or interests, including the East Angelas TRs and the Hope Downs TRs, or the ground subject to those reserves or interests. The right of Nicholas and Rhodes to occupy the East Angelas TRs and the Hope Downs TRs expired and over time other temporary reserves, or the right to occupy them, were granted to HPPL over ground which the plaintiffs say was the subject of the agreements. Through a chain of applications for the grant of mining tenements ground comprised in the East Angelas TRs and the Hope Downs TRs is now comprised in mining lease 282SA (ML282SA). Through a chain of corporate ownership HDIO, of which HPPL is the ultimate holding company, became the registered holder of ML282SA. HDIO receives benefits under an agreement (RTIO Extraction Agreement) with Rio Tinto Iron Ore (RTIO) under which RTIO mines and sells iron ore from ML282SA.
8 The plaintiffs' case is based on the three agreements. The plaintiffs say that under the 1969 Agreement, alternatively the Hope Downs Agreement, alternatively the General Agreement they are entitled to be paid a royalty on sales of iron ore mined by RTIO from the ground within ML282SA which covers ground previously comprised in the East Angelas TRs and the Hope Downs TRs. Alternatively, the plaintiffs claim that HPPL and WPPL are under a duty to account to the plaintiffs for the benefits that they have received under the RTIO Extraction Agreement. The duty is said to arise from the fiduciary duties owed by HPPL and WPPL as a result of entering into the 1969 Agreement, alternatively the Hope Downs Agreement, alternatively the General Agreement. The plaintiffs also claim that as a result of the General Agreement, the 1969 Agreement and the Hope Downs Agreement, the collaboration, pooled knowledge, knowledge acquired and opportunities acquired as a result of the agreements and the relationships arising from them HPPL and WPPL hold their interests in ML282SA on trust for the plaintiffs and HPPL and WPPL. The plaintiffs' claim against HDIO is that it holds its interest in ML282SA and the RTIO Extraction Agreements on trust for the plaintiffs as a result of HDIO becoming registered as the holder of ML282SA with knowledge of the terms of the agreements as a result of which HPPL and WPPL owed the plaintiffs fiduciary duties.
The statement of claim
9 The statement of claim is a lengthy document. I will outline its principal parts. In July 1968 Rhodes, HPPL and WPPL made an agreement which the plaintiffs describe as the General Agreement. In particulars dated 11 August 2014 provided by the plaintiffs in response to a request from WPPL, the plaintiffs said that the General Agreement is partly in writing and partly oral. Insofar as the General Agreement is in writing it is said to be comprised by five letters between WPPL, HPPL and Rhodes. Insofar as it is oral it is said to have been made in conversations immediately prior to 24 July 1968 between Donovan Rhodes on behalf of Rhodes, Lang Hancock on behalf of HPPL and Earnest (Peter) Wright on behalf of WPPL. The terms of the agreement include the following. The subject of the agreement included the ground the subject of the interests held by Rhodes or Nicholas in temporary reserves or other mining tenements or rights the subject of any other applications for mining tenements or rights in an area in the Pilbara. HPPL and WPPL would act, for reward, as an agent for Rhodes in seeking to negotiate joint ventures or other agreements with mining companies or consortiums which would finance or facilitate the exploration and development of any mineral resources located in the ground the subject of the temporary reserves or other mining tenements or rights the subject of the agreement. In relation to any such agreements Rhodes, on the one part, and HPPL and WPPL, on the other, would share equally the benefits received or gained from the joint venture or other agreements. The parties would collaborate, including by the pooling of their respective knowledge of the ground and the collaboration of their respective geologists and other staff, to assess and prove up any mineral resources in the ground the subject of the temporary reserves or other mining tenements or rights the subject of the agreement. HPPL and WPPL would provide management and operational services and pay any rents, fees or other costs incurred in undertaking the activities referred to or otherwise maintaining any subject temporary reserves or other mining interests in good standing.
10 In accordance with the General Agreement Rhodes and HPPL and WPPL collaborated and pooled knowledge and their respective geologists worked together to assess and prove up resources in or prospective to the ground comprised in the temporary reserves or other interests the subject of the General Agreement.
11 The Nicholas Brothers, Donovan Rhodes and the Rhodes Company made an agreement dated 19 May 1969 with HPPL and WPPL (the 1969 Agreement). The terms of the agreement include the following. It was acknowledged that the Nicholas Brothers and Rhodes had been granted the temporary reserves listed in the schedule which included the East Angelas TRs. It was acknowledged that the Nicholas Brothers and Rhodes had agreed that they would hold their interests in the ground the subject of the temporary reserves as granted or to be granted which was the subject of the agreement in the proportions: Rhodes 55%, Nicholas 45%. The subject of the agreement was the ground the subject of the temporary reserves listed in the schedule or such mining leases, claims and further temporary reserves granted over the ground comprised in the temporary reserves specified in the schedule and the ground the subject of such other temporary reserves or any other right to mine in respect of iron ore in parts of the Pilbara held by the Nicholas Brothers or Rhodes including rights held any time after the agreement was entered into. The term of the agreement was until all ore was mined from the ground the subject of the temporary reserves listed in the schedule or from such mining leases, claims and further temporary reserves granted over the ground comprised in the temporary reserves specified in the schedule and the ground the subject of such other temporary reserves or any other right to mine iron in respect of ore in the parts of the Pilbara held by the Nicholas Brothers or Rhodes including rights held any time after the agreement was entered into. Rhodes was to be paid a royalty of 1.25% of the amount received on sale or other disposal of iron ore. Clause 16 contained covenants by HPPL and WPPL including a covenant in cl 16(g) to apply on behalf of Rhodes and the Nicholas Brothers for the grant of any mining lease or other tenement in relation to the ground comprised within the temporary reserves, mining tenements or other rights the subject of the agreement and to pay all fees and charges required for such grants.
12 The temporary reserves in the second schedule include the East Angelas TRs but not the Hope Downs TRs. The plaintiffs plead that by operation of the General Agreement, cl 4 of the 1969 Agreement, or alternatively a separate agreement (the Hope Downs Agreement), the ground the subject of the Hope Downs TRs was made subject to the 1969 Agreement.
13 In about 1969 Rhodes, HPPL and WPPL agreed (Hope Downs Agreement) they would enter into a specific joint venture or joint endeavour in respect of the ground the subject of the Hope Downs TRs. In particulars the plaintiffs say that they are unable to say whether the Hope Downs Agreement is oral or in writing and that further particulars will be provided after discovery. The plaintiffs say that the Hope Downs Agreement is to be inferred from the matters pleaded in [15.3]. Paragraph 15.3 pleads that Rhodes, HPPL and WPPL entered into an agreement with CSR Ltd (CSR Agreement).
14 In about 1969 the East Angelas TRs expired. HPPL and WPPL, on behalf of Rhodes and the Nicholas Brothers and HPPL and WPPL, applied for extensions of the grants of those temporary reserves or for the grant of corresponding temporary reserves. In August 1971 the Minister of Mines did not extend or re-grant the East Angelas TRs to HPPL and WPPL but granted them to another company. Meanwhile, by an agreement made on 23 April 1971 (Nicholas Assignment Agreement) between the Nicholas Brothers, HPPL and WPPL, the Nicholas Brothers agreed to assign to HPPL and WPPL their beneficial interest in, amongst other things, the temporary reserves listed in the schedule to the agreement which included the East Angelas TRs and the Hope Downs TRs. The Hope Downs TRs, or some of them, were granted to another company during 1969 and expired in 1973.
15 Between 1971 and 1989 HPPL and WPPL took steps for the East Angelas TRs to be re-granted to them. They did so in accordance with their obligations under the 1969 Agreement or alternatively the General Agreement for the East Angelas TRs to be re-granted to Rhodes, HPPL and WPPL.
16 In 1985 the Minister of Mines granted to HPPL and/or WPPL temporary reserves corresponding to the East Angelas TRs. In 1984 or 1985 the Minister granted to HPPL and/or WPPL temporary reserves or exploration licences over the ground comprising the Hope Downs TRs.
17 Through a chain of applications for the grant of mining tenements the ground comprised in the East Angelas TRs and the Hope Downs TRs is now, in whole or in part, included in the ground comprised in ML282SA. Through a chain of corporate ownership, HPPL and WPPL caused the registered interest in ML282SA to be held by HDIO. The holders of the registered interests in ML282SA are now HDIO as to 50% and RTIO as to 50%. Pursuant to the RTIO Extraction Agreements, RTIO was granted the right to mine and sell iron ore extracted from the ground located on ML282SA. In about February 2008 RTIO and/or HDIO commenced selling or disposing of iron ore and receiving benefits from the sale of iron ore mined from the ground within ML282SA which was previously comprised in the ground held under the Hope Downs TRs. In about June 2013 RTIO and/or HDIO commenced selling or disposing of iron ore and receiving benefits from the sale of iron ore extracted from the ground within ML282SA which was previously comprised in the ground held under the East Angelas TRs.
18 The plaintiffs put their claim on a number of bases. The first basis, which the plaintiffs describe as the 1969 Agreement Claim, is a claim that Rhodes' entitlement to royalties under the 1969 Agreement has accrued and royalties are now payable. Alternatively, the plaintiffs say that HPPL and WPPL have breached the 1969 Agreement by not paying the royalties. The plaintiffs say that if ore is won by HPPL or WPPL or their associated companies from the areas of land that had been the subject of the East Angelas TRs or the Hope Downs TRs then Rhodes are entitled to a royalty. The break in title is not important; it is sufficient that ore is won from ground that was comprised in the East Angelas TRs or the Hope Downs TRs when they were the subject of the 1969 Agreement.
19 The second basis of their claim is described by the plaintiffs as the breach of fiduciary duty claim - 1969 Agreement. The plaintiffs say that as a result of entering into the 1969 Agreement, a relationship of trust and confidence arose between Rhodes of the one part and HPPL and WPPL of the other part which gave rise to fiduciary duties owed by HPPL and WPPL to Rhodes. In making applications for temporary reserves or mining tenements, including ML282SA in respect of the ground comprised in the East Angelas TRs and the Hope Downs TRs HPPL and WPPL used knowledge and information pooled or acquired as a result of or in furtherance of the 1969 Agreement and pursued the opportunity connected with the 1969 Agreement relating to the East Angelas TRs and the Hope Downs TRs. HPPL and WPPL have received benefits from the RTIO Extraction Agreements. HPPL and WPPL are under a duty to account to Rhodes for any such benefits received relating to Rhodes' interests. In breach of that duty HPPL and/or WPPL have failed to account to and pay royalties or any other benefit to Rhodes. As a result, Rhodes are entitled to an account of benefits received by HPPL and/or WPPL and following the account being taken to the payment of the royalties payable under the 1969 Agreement together with interest. Alternatively, Rhodes is entitled to damages or compensation in equity.
20 The third basis of the plaintiffs' claim is described as the Hope Downs Agreement Claim. The plaintiffs' argument is similar to its 1969 Agreement Claim. The plaintiffs say that Rhodes is entitled to be paid the royalty due under the Hope Downs Agreement which has accrued and the royalty is now payable. Alternatively, HPPL and WPPL have breached the Hope Downs Agreement by not paying the royalty.
21 The plaintiffs' fourth claim is described as the breach of fiduciary duty claim - Hope Downs Agreement. The plaintiffs say that as a result of entering into the Hope Downs Agreement a relationship of trust and confidence arose between Rhodes of the one part and HPPL and WPPL of the other part, as a result of which HPPL and WPPL owed fiduciary duties to Rhodes. The plaintiffs' breach of fiduciary duty claim - Hope Downs Agreement is pleaded in similar terms to the breach of fiduciary duty claim - 1969 Agreement.
22 The plaintiffs describe the fifth basis of their claim as the General Agreement Claim. The argument is similar to the plaintiffs' 1969 Agreement Claim and the Hope Downs Agreement claim. The plaintiffs plead that it arises if the 1969 Agreement and the Hope Downs Agreement are unenforceable. The East Angelas TRs and Hope Downs TRs were subject to the General Agreement. ML282SA is subject to the General Agreement. The RTIO Extraction Agreements were negotiated and entered into in compliance with the terms of the General Agreement and were negotiated and entered into for the benefit of, in part, Rhodes. Accordingly, Rhodes is entitled to 50% of all royalties and other benefits received or gained by the defendants from the RTIO Extraction Agreements or, if the General Agreement has been varied by agreement so as to limit their entitlement, is entitled to a royalty payment of 1.25% of revenue received to date from the sale of iron ore. The entitlement to the payment of royalties has accrued and the payments are now due.
23 The sixth basis of their claim is described by the plaintiffs as the breach of fiduciary duty claim - General Agreement. The plaintiffs say that as a result of entering into the General Agreement, a relationship of trust and confidence arose as between Rhodes of the one part and HPPL and WPPL on the other part as a result of which HPPL and WPPL owed Rhodes fiduciary duties. The claim is pleaded in similar terms to the breach of fiduciary claim - 1969 Agreement and the breach of fiduciary claim - Hope Downs Agreement claim.
24 The seventh basis of the plaintiffs' claim is described as the General Trust Claim. The plaintiffs say that as a result of matters pleaded and as a result of the collaboration between the parties, the knowledge pooled and the knowledge acquired and the opportunities identified were held equally on trust by Rhodes, HPPL and WPPL for the benefit of those parties. The information pooled and the result of the collaboration by the plaintiffs included providing information and knowledge in relation to the East Angelas TRs and the Hope Downs TRs and the opportunities arising in relation to those TRs. As a result of the trust Rhodes on the one hand and HPPL and WPPL on the other were subject to certain fiduciary duties. HPPL and WPPL applied for and were granted temporary reserves or mining tenements including ML282SA in respect of the ground comprised in the East Angelas TRs and the Hope Downs TRs. In making the applications for those interests HPPL and WPPL used the information pooled or acquired and pursued opportunities arising from the knowledge pooled or acquired. Accordingly, HPPL and WPPL hold any interests in temporary reserves or mining tenements including ML282SA in respect of the ground comprised in the East Angelas TRs and the Hope Downs TRs on trust for Rhodes of the one part and HPPL and WPPL of the other. As a result Rhodes are entitled to a declaration that HPPL and WPPL hold any interests in any temporary reserves or mining tenements, including ML282SA, in respect of the ground comprised in the East Angelas TRs and the Hope Downs TRs on trust for Rhodes on the one part and HPPL and WPPL on the other. Further, Rhodes are entitled to an account of any benefits received by HPPL and WPPL relating to that interest and following the account to payment of a royalty of 1.25% of the amount received on the sale or other disposal of iron ore.
25 Finally, the plaintiffs claim against HDIO. The plaintiffs say that at the time of becoming registered as the holder of ML282SA and entering into the RTIO Extraction Agreements, HDIO knew or ought reasonably to have known of the terms of the 1969 Agreement, the fiduciary duties owed to Rhodes by HPPL and WPPL as a result of entering into the 1969 Agreement or alternatively the terms of the Hope Downs Agreement and the fiduciary duties owed as a result of entering into the Hope Downs Agreement or further alternatively the terms of the General Agreement and the fiduciary duties owed as a result of entering into that agreement. As a result of that knowledge, at the time of becoming registered as the holder of ML282SA and on entering into the RTIO Extraction Agreements HDIO knew that HPPL and WPPL held their interests in ML282SA, in part, on trust for Rhodes. Accordingly, HDIO holds, in part, its interests in ML282SA and the RTIO Extraction Agreements on trust for Rhodes.
The strike out applications
26 The Hancock parties apply to strike out the plaintiffs' pleading in relation to each of the plaintiffs' claims. The Hancock parties say that, as a matter of construction of the 1969 Agreement, the plaintiffs' claim arising from that agreement is unarguable. The Hancock parties say that the General Agreement pleaded is relevantly inconsistent with the 1969 Agreement and the claim arising from that agreement is unarguable. The Hancock parties say that there is no proper foundation for the Hope Downs Agreement, and it is inconsistent with the 1969 Agreement. The Hancock parties say that each of the fiduciary duty claims are unarguable because they are either inconsistent with the pleaded agreements or unnecessary because Rhodes has an adequate remedy of damages for breach of contract. Further, the Hancock parties say that the pleaded fiduciary duties are not the type of prescriptive fiduciary duties recognised by Australian law. The general trust claim is said to be inconsistent with the 1969 Agreement. Further, the information and opportunities pleaded cannot be the subject of a trust. Thirdly, the alleged trust is not recorded in writing and its creation is barred by Mining Act 1978 (WA) s 119(2). Fourthly, the claim is unarguable as a matter of logic or law. The Hancock parties say that the claim against HDIO should be struck out for four reasons. First, the claim is dependent on the fiduciary duties alleged which are not arguable. Secondly, the claim is dependent on HDIO using information but a knowing assistance case or a knowing receipt case cannot be based on the use of information. Thirdly, the claim appears to be a knowing receipt case but HDIO did not receive anything which was held on trust for Rhodes. Fourthly, the relief extends beyond Rhodes' rights under the alleged agreements.
27 WPPL says that the claims in their present form, with inadequate facts pleaded, are not arguable.
Striking out pleadings - Relevant principles
28 The court may strike out a pleading under the Supreme Court Rules1971 (WA) O 20 r 19(1)(a) if it discloses no reasonable cause of action or under r 19(1)(c) if the pleading may prejudice, embarrass or delay the fair trial of the action. Rule 19(2) provides that no evidence shall be admissible on an application under [(1)(a)].
29 The approach of the court to applications of this kind is now well settled. In Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161, Martin CJ heard an application to strike out parts of the plaintiff's substituted statement of claim. His Honour said:
Before dealing with this specific application, I would observe that both I and the other members of this Court are firmly of the view that interlocutory disputes of this kind must be actively discouraged. In many cases, interlocutory disputes, particularly disputes relating to pleading issues, consume very substantial amounts of time and expense on the part of both the parties and the Court. In many cases, the time and expense involved in the consideration and resolution of the interlocutory dispute is entirely disproportionate to its significance to the just and effective resolution of the case as a whole by mediation or trial. For this reason, this Court will use the existing powers available under the Rules of the Supreme Court ('the Rules') and if necessary amend the Rules to actively discourage disputes of this kind. In very general terms, interlocutory disputes of this kind will only be entertained by the Court if the time and expense involved in their resolution is proportionate to the significance of the dispute to the just and effective resolution of the case. This principle is, in my view, already inherent in the provisions of the Rules when read as a whole, including in particular O 1 r 4A and r 4B, O 29 and O 29A [2].
30 Consolidated Practice Direction No 4.1.2 at [20] echoes the Chief Justice's observations in Youlden Enterprises:
A fundamental objective of the CMC List, and indeed the general practices and procedures of the Court, is the discouragement of interlocutory disputes with all means at the Court's disposal, including costs orders in appropriate cases.
31 The practical application of these principles is demonstrated by the decision of Martin CJ in Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281. The decision was made in relation to an application by the plaintiff for an order that the defendant provide the plaintiff with written objections to its statement of claim 'setting out in a succinct form the primary reasons why the defendant says the statement of claim does not disclose a reasonable cause of action and/or why the statement of claim is not in a form which the defendant can plead to …' The Chief Justice noted that the list of objections already filed by the defendant was approximately 40 pages in length, whereas the substituted statement of claim was 56 pages in length. The Chief Justice said that the question raised by the application was how to determine 'the best way of enunciating and resolving a dispute between the parties as to the adequacy of the statement of claim'. His Honour continued:
It is, I think, important when approaching an issue of that kind to bring to mind the contemporary purposes of pleadings. The purposes of pleadings are, I think, well known and include the definition of the issues to be determined in the case and enabling assessment of whether they give rise to an arguable cause of action or defence as the case may be, and apprising the other parties to the proceedings of the case that they have to meet.
In my view, the contemporary role of pleadings has to be viewed in the context of contemporary case management techniques and pre-trial directions. In this Court, those pre-trial directions will almost invariably include; firstly, a direction for the preparation of a trial bundle identifying the documents that are to be adduced in evidence in the course of the trial; secondly, the exchange well prior to trial of non-expert witness statements so that non-expert witnesses will customarily give their evidence-in-chief only by the adoption of that written statement; thirdly, the exchange of expert reports well in advance of trial and a direction that those experts confer prior to trial; fourthly, the exchange of chronologies; and fifthly the exchange of written submissions.
Those processes leave very little opportunity for surprise or ambush at trial and, it is my view, that pleadings today can be approached in that context and therefore in a rather more robust manner, than was historically the case; confident in the knowledge that other systems of pre-trial case management will exist and be implemented to aid in defining the issues and apprising the parties to the proceedings of the case that has to be met.
In my view, it follows that provided a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action or defence, as the case may be, and apprising the parties of the case that has to be met, the Court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the Court to be spent extensively debating the application of technical pleadings rules that evolved in and derive from a very different case management environment.
Most pleadings in complex cases, and this is a complex case, can be criticised from the perspective of technical pleading rules that evolved in a very different case management environment. In my view, the advent of contemporary case management techniques and the pre-trial directions, to which I have referred, should result in the Court adopting an approach to pleading disputes to the effect that only where the criticisms of a pleading significantly impact upon the proper preparation of the case and its presentation at trial should those criticisms be seriously entertained.
32 The power to strike out a statement of claim is used sparingly by the court. It is a last resort. It is only for plain and obvious cases. The Hancock parties' oral submissions related principally to their contentions that, as a matter of construction of the 1969 Agreement the plaintiffs' claim arising from that agreement is unarguable, that the General Agreement is inconsistent with the 1969 Agreement and the claim arising from that agreement is unarguable, that there is no proper foundation for the Hope Downs Agreement and that each of the fiduciary duty claims are unarguable because they are either inconsistent with the pleaded agreements or unnecessary because Rhodes has an inadequate remedy of damages for breach of contract and in any event are based on proscriptive rather than prescriptive duties. Senior counsel for WPPL, Mr Rowland QC, adopted the submissions of the Hancock parties in relation to the 1969 Agreement and the General Agreement and submitted that those pleadings and pleadings in relation to breach of fiduciary duty make that adequate particulars. The Hancock parties maintained their attack upon the general trust claim and the claim against HDIO but did not advance those arguments beyond those set out in their outline of written submissions. These reasons will similarly focus on the 1969 Agreement, the General Agreement, the Hope Downs Agreement and the claimed fiduciary duties. I will deal with the general trust claim and the claim against HDIO in the same brief manner that the parties did.
The plaintiffs' contract claim under the 1969 Agreement
33 The plaintiffs claim they are entitled to be paid a royalty under the 1969 Agreement. Their claimed right to be paid a royalty arises from cl 5 of the agreement. Clause 5 provides relevantly that Hanwright shall pay to James Nicholas, William Nicholas and Rhodes a royalty in respect of ore produced by Hanwright from the reserves. The royalty to be paid to Rhodes is 1.25% of the amount received on sale or other disposal of that iron ore FOB the first port of shipment. The Hancock parties say that the obligation imposed on Hanwright to pay the royalty in respect of ore is subject to two conditions which appear in the chapeau, or introductory paragraph, of cl 5. First, the ore must be produced from 'the reserves'. Secondly, the ore must be 'produced by Hanwright'. The Hancock parties submit that the pleaded facts demonstrate that the first condition is not satisfied and cannot be satisfied and the pleading should be struck out for that reason. Further, the Hancock parties submit that the pleading fails to engage with the second condition and consequently does not plead a material fact and the pleading should be struck out for that reason as well.
34 The Hancock parties' first argument turns on the meaning of 'the reserves'. Reserves is defined in cl 1 of the 1969 Agreement as follows:
'Reserves or 'reserve' wherever appearing in these presents includes all or any mineral claims and/or mineral leases and/or other mining tenements which may issue from the reserves referred to in recitals (d) and (g) hereof in respect of ground included in such reserves and/or any of them which may be applied for and/or obtained in respect of any ground in the area of or contiguous to the said reserves or any of them.
- The Hancock parties say that the pleaded facts show that no iron ore has been or is being produced from the reserves enumerated in recitals d and g. Those reserves have long since expired or been cancelled.
35 The Hancock parties accept that the definition of 'reserves' extends beyond the reserves enumerated in recitals d and g. The definition of 'reserves' is long and its meaning or content is not easily grasped. The Hancock parties say that the definition should be understood as follows:
Reserves or reserve … includes:
all or any mineral claims and/or mineral leases and/or other mining tenements which may issue from the reserves referred to in recitals d and g hereof
in respect of ground included in such reserves and/or any of them
[or] which may be applied for and/or obtained in respect of any ground in the area of or contiguous to the said reserves or any of them. (word in square brackets added)
36 The Hancock parties say that there are two criteria which must be met before a tenement, other than the enumerated temporary reserves, is a 'reserve' for the purposes of the 1969 Agreement. A tenement is a reserve if, but only if, (a) it is a tenement which 'issues from' one of the enumerated temporary reserves or a tenement which is a 'reserve' and (b) it meets one of the two geographic conditions identified in the subparagraphs in the above formulation of the definition of 'reserves'. The Hancock parties submit that the readily apparent object of the geographical conditions is to allow for the succeeding tenements to have different boundaries, either for administrative reasons or due to discovery of an ore body which exists over the boundary of one of the enumerated reserves with a consequence that the succeeding tenement is applied for and granted in a location contiguous with the ore body. The Hancock parties submit that the point of construction which defeats the plaintiffs' contract claim under the 1969 Agreement is that the temporary reserves issued in the period between 1985 and 1989 and subsequent tenements did not 'issue from' the enumerated temporary reserves. There was a long period, from 1969 or 1973 to the second half of the 1980s when the areas were not subject of any temporary reserves or tenements at all, or not subject to temporary reserves held by any of the parties. Upon expiry of the temporary reserves, or the right of Nicholas or Rhodes to occupy them, all of Rhodes, HPPL and WPPL's right, title and interest in them was extinguished: Nicholas v Western Australia [1972] WAR 168.
37 The Hancock parties say that their construction of cl 5 and the definition of 'reserves' is supported by cl 4 of the 1969 Agreement and is consistent with a number of other provisions of the agreement. The agreement has a number of purposes. The relevant purposes appear from recitals p and s. The Nicholas Brothers and Rhodes agreed to grant to Hanwright an exclusive licence to mine ore from the areas specified in cl 4 in consideration of the payment of the royalties specified in cl 5. Clause 4 provides that the Nicholas Brothers and Rhodes grant to Hanwright an exclusive right to mine ore from all leases, claims and reserves in the specified area of the Pilbara and any leases, claims and reserves 'now or at any time hereafter' held by the Nicholas Brothers and Rhodes including the temporary reserves referred to in the second schedule and any tenement granted over the whole or any parts of the area comprised in such tenements. The Hancock parties say that the plaintiffs' claim involves a disconnection of the royalty claimed under cl 5 from the grant of the licence. That is because the tenements to which the licence attached have long since ceased to exist.
38 The plaintiffs' answer to the Hancock parties' argument is that the construction of 'reserves' advanced by the Hancock parties is wrong. The plaintiffs say that the definition of 'reserves' should be understood as follows:
Reserves or reserve … includes:
all or any mineral claims and/or mineral leases and/or other mining tenements which may issue from the reserves referred to in recitals D and G hereof in respect of ground included in such reserves
and/or any of them [ie a reserve of that type] which may be applied for and/or obtained in respect of any ground in the area of or contiguous to the said reserves or any of them. (words in square brackets added)
- The critical difference between the plaintiffs' construction and the Hancock parties' construction is this. Under the Hancock parties' construction all the reserves must 'issue from' the reserves referred to in the second schedule to the agreement, which are the reserves referred to in recitals d and g and which are the reserves which Nicholas and Rhodes had applied for or been granted at the time of the agreement. Under the plaintiffs' construction 'reserves' includes reserves which may be applied for and/or obtained in respect of any ground in the area of or contiguous to the reserves referred to in the second schedule but they do not have to 'issue from' those reserves.
39 As I have said the definition of 'reserves' is, with all due respect to the drafter, difficult to understand. The Hancock parties' definition involves, in effect, inserting the word 'or' as I have set out above. The plaintiffs' construction involves giving a meaning to the word 'them' which their counsel accepts is 'not brilliant' and on one view may be thought to be somewhat strained. Each side supported their construction by reference to other provisions of the agreement. In my view none of those arguments are conclusive. Each side submitted that their construction would produce a more commercial result, one more consistent with business common sense.
40 I am not persuaded that the plaintiffs' construction is so untenable that their claim based on it should be summarily struck out. I do not think it is useful or appropriate to further elaborate upon the respective contentions nor to engage in a detailed analysis of the strengths and weaknesses of each proposed construction.
41 The Hancock parties' second point in relation to the plaintiffs' contract claim under the 1969 Agreement is that the statement of claim does not engage with the condition that the royalty is payable on, but only on, ore 'produced by Hanwright'.
42 In response, the plaintiffs point out that the obligation to pay the royalty is one that arises where ore is produced by Hanwright from the reserves 'whether operating alone or in association with or by licence to others'. In their written submissions the plaintiffs submit that when at trial the facts are shown that HDIO is associated with HPPL and WPPL or is their agent and thus associated with RTIO in respect of the mining licenced to RTIO, then the obligation to pay the royalty has been triggered. Senior counsel for the plaintiffs, Mr Ryan SC, submitted that the plaintiffs are only obliged to plead the material facts in their statement of claim and do not have to set out the legal argument in support of their case.
43 The statement of claim must contain a statement in a summary form of the material facts on which the plaintiff relies for his claim: Rules of the Supreme Court O 20 r 8(1). A pleading must contain the necessary particulars of any claim. The court may order a party to serve on any party particulars of any claim: O 20 r 13(3).
44 The purpose of pleadings is to formulate the issues between the parties, to give notice of the case that will be put at trial, and to bind the parties to those issues. The plaintiff is obliged only to plead the material facts of its cause of action. In [29] of their statement of claim the plaintiffs plead that as a result of the matter pleaded in [27] and/or [28] the plaintiffs' entitlement to royalties due under the 1969 Agreement has accrued and royalties are now payable. Paragraphs 27 and 28 plead that RTIO and/or HDIO commenced selling or disposing iron ore extracted from the ground located on ML282SA and receiving benefits from the sale of the iron ore. It appears from the facts pleaded that the ore was not produced by Hanwright operating alone but the pleading does not identify whether it was produced by Hanwright in association with or by licence to others, whether the other or others is HDIO or RTIO, and the facts establishing that.
45 As I have said, in their written submissions the plaintiffs submit that when at trial the facts are shown that HDIO is associated with HPPL and WPPL or is their agent and thus associated with RTIO in respect of the mining licence to RTIO, then the obligation to pay the royalty has been triggered. It thus appears that the plaintiffs have not pleaded all of the facts necessary to establish that ore has been produced by Hanwright from the reserves whether operating alone or in association with or by licence to others. In any event, they have failed to put their claims in relation to the 'ore produced by Hanwright' requirement in a legal context which leaves their statement of claim uninformative on that issue. It is apparent from the statement of claim that the plaintiffs' case is not that the ore is produced by Hanwright operating alone. But it is not apparent whether the plaintiffs' case is that the ore is produced by Hanwright in association with others or by licence to others, whether the other or others is HDIO or RTIO or both and what are the facts which constitute the association or licence. The failure of the plaintiff to frame its claim in the relevant legal context means that the pleading does not fulfil the notice function and define the issues sufficiently for the parties to proceed to mediation or trial.
46 The statement of claim does not fail to disclose a cause of action. It is not necessary to strike out the statement of claim, or any parts of it, to avoid embarrassment arising from the plaintiffs' failure to plead that the royalty is payable on ore produced by Hanwright. However, the efficient determination of the action will be advanced by the plaintiffs stating their case that the ore is produced by Hanwright by giving particulars whether the ore is produced by Hanwright in association with others or by licence to others, whether the other or others is HDIO or RTIO or both and what are the facts which constitute the association or licence.
Breach of fiduciary duty claim - 1969 Agreement
47 The Hancock parties challenge the plaintiffs' breach of fiduciary duty claim based on the 1969 Agreement on two bases. The first basis is that a fiduciary duty cannot arise on the pleaded facts. The second basis is that the duties pleaded are not the type of prescriptive fiduciary duties recognised by Australian law.
48 The Hancock parties' contentions are as follows. Fiduciary obligations and contractual obligations can co-exist. However, the fiduciary duty case is based on the 1969 Agreement and whichever of the advanced constructions is correct a fiduciary duty cannot arise. If the Hancock parties' construction is correct, then the pleaded fiduciary duty attempts a radical rewriting of the parties' correlative rights and obligations. A fiduciary duty must conform to the terms of the contract. On the other hand, if the plaintiffs' construction is correct then the duty is unnecessary and will not be imposed as the plaintiffs have an adequate remedy of damages for breach of contract. Counsel for the Hancock parties, Mr Giles, relied upon the decision of the New South Wales Court of Appeal in Streetscape Projects (Australia) Pty Ltd v City of Sydney [2013] NSWCA 2; (2013) 295 ALR 760 in support of his argument. The City of Sydney and Streetscape Projects entered into a comprehensive written contract. The City of Sydney could have a complete remedy for breach of contract. There was no inequality of bargaining power between the parties and the parties did not seek to rely upon tacit assurances of good conduct. The Court of Appeal found therefore that the trial judge erred in finding that Streetscape Projects owed the City of Sydney a fiduciary duty which it had breached and in which Obeid was knowingly concerned. Barrett JA, with whom Meagher and Ward JJA agreed, said at [97] that a fiduciary duty may exist in a contractual setting and at [99] that the fiduciary relationship must accommodate itself to the terms of the contract so that it is consistent with and conforms to them. Barrett JA then stated at [100]:
The contractual terms are paramount. A fiduciary duty cannot detract from or contradict them. The two types of obligation - contractual and fiduciary - will, in general, coexist if and only to the extent that the sanctions available for breach of contract (including any implied terms) are insufficient to deal with some possibility of unconscionable conduct to which one party is exposed.
- After referring to authorities on the relationship between contractual and fiduciary duties Barrett JA said:
The adequacy of remedies for breach of contract is therefore, in general, the determinant of whether there is scope for equity to play a supplementing role by way of the imposition of a fiduciary duty upon a contracting party; and the mere fact that one party puts faith and trust in the other is not of itself sufficient to bring equity to centre stage in that way.
50 In my view, the contentions advanced by the plaintiffs are not so unarguable that they should be summarily disposed of on a strike out application.
51 The Hancock parties further say that there is no undertaking created by the 1969 Agreement by Hanwright to act solely in the interest of Rhodes and in that circumstance no fiduciary duty is imposed. In my view, that is a matter for trial and not summary disposal on a strike out application.
52 The second basis of the Hancock parties attack on the pleaded fiduciary duty is that the duties pleaded are not the type of prescriptive fiduciary duties recognised by Australian law. The Hancock parties submit that the pleaded fiduciary duty case involves an attempt to impose various positive duties in the sense of duties to do acts which are not imposed by the terms of the 1969 Agreement. In Australia fiduciary obligations are proscriptive and not prescriptive: Breen v Williams (1996) 186 CLR 71, 113 (Gaudron & McHugh JJ). In Howard v Commissioner of Taxation [2014] HCA 21 [31] at [56] Hayne and Crennan JJ said in relation to fiduciary obligations:
The obligations are proscriptive, not prescriptive. They are not quasi-tortious duties to act solely in the best interests of the principal. Nor are they obligations directed only to providing redress for loss or damage proved to have been suffered by the person to whom the duties are owed.
53 Whilst the High Court has repeatedly emphasised that fiduciary obligations in Australia are proscriptive and not prescriptive, the distinction is often difficult to draw - see Leon Firios 'Precluding prescriptive duties in fiduciary relationships: The problems with the proscriptive delimitation' (2012) 40 ABLR 166, 167 - 170. Senior counsel for the plaintiffs, Mr Ryan, denies that the duties pleaded in the statement of claim are prescriptive. The duty pleaded in [31.2.1] of the statement of claim - to act in good faith in the dealings between Mr D Rhodes and Rhodes on the one part and HPPL and WPPL on the other relating to the subject matter of the 1969 Agreement - appears to be prescriptive in form. However, it could be recast in proscriptive terms. In Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] (2008) 39 WAR 1 at [4546] and [4578] Owen J construed the directors' duties to act in the best interests of the company and for a proper purpose, ostensibly positive in form, as proscriptive duties requiring directors not to act otherwise than bona fide and in the company's best interests and for a proper purpose. Mr Ryan submitted that the pleaded duty merely encapsulates the two core fiduciary duties then pleaded and gives a practical effect to those duties.
54 Mr Ryan submitted that if the pleaded duty is truly prescriptive, the issue of whether the High Court has definitively stated that no such duty can ever exist as a fiduciary duty remains open in Western Australia following the decision of the Court of Appeal in Westpac Banking Corporation v Bell Group Ltd (in liq) [No 3] (2012) 44 WAR 1. In Bell, both Owen J at trial and the majority on appeal held that the duties to act bona fide in the best interests of the company and for proper purposes are fiduciary. On appeal, Lee AJA considered the best interests and proper purposes duties as part of a fiduciary's overall duty of loyalty and stated that prescriptive obligations could occur in fiduciary relationships: [897] - [899]. Drummond AJA held that as a general rule all powers vested in directors under a company's articles are fiduciary powers and that the fiduciary nature of these powers is given meaning and content by requiring them to be exercised bona fide for the benefit of the company and for proper purposes, meaning that these duties are necessarily fiduciary obligations: [1949] - [1956]. Drummond AJA further held that no binding decision existed limiting directors' fiduciary duties to their companies to the two proscriptive duties outlined in Breen and that directors may have to take positive action to fulfil their fiduciary obligations in certain circumstances: [1960] - [1962], [1969].
55 The plaintiffs' claim should not be summarily struck out on the basis advanced by the Hancock parties. The existence and scope of fiduciary duties, whether they are proscriptive or prescriptive and whether prescriptive duties may be recognised in particular contexts are matters which should be determined at trial when all of the evidence has been led, the relevant facts determined and full legal argument presented.
General Agreement claim
56 The Hancock parties submit that there are a number of reasons the General Agreement case cannot succeed and should be struck out. First, accepting for the purpose of the strike out application that there was an informal agreement in 1968, that agreement was replaced or superseded by the 1969 Agreement. The 1969 Agreement defines the parties' rights and correlative obligations in relation to ore temporary reserves or other mineral exploration and mining tenements in the areas identified in the 1969 Agreement which includes the Hope Downs TRs and the East Angelas TRs. The Hancock parties say that the 1969 Agreement, whether it varies or rescinds the General Agreement, fully states the parties' rights and obligations in respect of all of Rhodes and of the Nicholas Brothers temporary reserves and other tenements in the areas referred to and Hanwright's obligation to pay a royalty on ore won from those reserves and tenements.
57 Secondly, the Hancock parties say that the language of the letters is inconsistent with the plaintiffs' pleaded case. The letter of 30 July 1968 proposes an option to the temporary reserves and extensions of them. The letter from Rhodes of 8 August 1968 recording Rhodes agreement to those terms is to the same effect. The option is not alleged by Rhodes to have been exercised. The 1969 Agreement is inconsistent with the exercise of the option.
58 Thirdly, the letters alleged to comprise part of the General Agreement required continuity of title to engage the obligation to pay a royalty. The General Agreement did not impose an obligation on Hanwright, following cancellation of the reserves, to obtain tenements over the areas formerly covered by the East Angelas TRs or the Hope Downs TRs nor to pay a royalty on any ore won from those areas.
59 The plaintiffs say there is no inconsistency between the General Agreement and the 1969 Agreement. The General Agreement is not only an agreement for an option and it is not confined to the East Angelas TRs. The plaintiffs say that the General Agreement is 'an overarching agreement'. It is pleaded as a fall-back position. If the Hope Downs TRs are covered by the 1969 Agreement then the General Agreement has no work to do. However, if, as the Hancock parties maintain, the 1969 Agreement does not cover the Hope Downs TRs then they are covered by the General Agreement. In that sense the General Agreement is what Mr Ryan described as a carve out.
60 In my opinion the pleaded General Agreement is inconsistent with the 1969 Agreement and should be struck out. The General Agreement, insofar as it is in writing is, according to the plaintiffs' particulars of 11 August 2014, contained in five letters. The plaintiffs also rely upon a further letter of 25 July 1968 from Rhodes to Mr Hancock, a copy of which they have recently obtained. The letter of 24 July 1968 confirms an arrangement whereby Hanwright acquire a 50% interest in the temporary reserves held by Rhodes and Nicholas and any further applications in the Pilbara district. The letter says that ownership of the reserves is to be on a 50/50 basis. By letter of 25 July 1968 to Mr Hancock Rhodes said that the text of Mr Hancock's letter of 24 July 1968 is generally acceptable and appears to cover most aspects of the arrangement with one exception. The exception is the 50% interest in future applications for temporary reserves. Rhodes said that the agreement can only be made on those temporary reserves already held by Nicholas and Rhodes. Mr Wright wrote to Donovan Rhodes on 30 July 1968. Mr Wright confirmed the arrangement in the letters of 24 and 25 July 1968 that Hanwright is given an option to acquire the whole of Rhodes interest in the temporary reserves in exchange for a contract to pay a royalty of 1.25%. The option is to be for the life of the temporary reserves and any extension of them. Mr Rhodes wrote to Hanwright on 1 August 1968 agreeing that in regard to future applications their agreement is restricted to the Opthalmia Range and that portion of the Hamersley Range which lies east of the Main Turee Creek. Mr Wright wrote to Mr Rhodes on 2 August 1968 referring to Rhodes acceptance of Hanwright's description of the area to which their agreement applies but added that Rhodes did not comment on the rest of Hanwright's letter confirming the arrangement. Mr Rhodes responded by letter of 8 August 1968 in which he confirmed and accepted the arrangement. He then stated:
In consideration of Hancock and Wright paying all future fees and expenses connected therewith and carrying out a programme deemed necessary to hold the temporary reserves presently held by Nicholas and myself in accordance with our agreement dated June 2nd 1967 plus any other reservation acquired in accordance with that agreement, I agree to give Hancock and Wright an option to acquire the whole of my interest in such temporary reserves in exchange for a contract to pay me one and a quarter per cent of the FOB value of the ore obtained from any of the areas.
61 The recitals to the 1969 Agreement refer to Nicholas and Rhodes having applied for and been granted temporary reserves. It is further recited that Nicholas and Rhodes had agreed that all the temporary reserves held by them should be held in the following proportions: Rhodes 55%, Nicholas 45%, and that the reserves had been transferred into the names of Rhodes and Nicholas in the proportions referred to. The agreement recites that it has been agreed that Rhodes and Nicholas grant to Hanwright an exclusive licence to mine ore from all the areas referred to in cl 4 of the agreement in consideration of the payment of the royalties thereafter referred to. The 1969 Agreement provides for Nicholas and Rhodes to grant to Hanwright an exclusive right to mine iron ore from all leases, claims and reserves in the specified region held by Nicholas and Rhodes and for Hanwright, amongst other things, to pay a royalty. The 1969 Agreement is inconsistent with the General Agreement. That may be because the General Agreement was not concluded or it was abandoned, discharged or superseded by the 1969 Agreement. However, in my view, the two pleaded agreement cannot stand together.
62 The SOC pleads that the General Agreement is partly oral. The conversations said to constitute the oral part of the agreement might fill in the remaining parts of the agreement but they cannot turn an agreement to acquire an option in the temporary reserves to an agreement in the terms pleaded in SOC [11] because it would be inconsistent with the written terms of the pleaded agreement.
63 I also accept the Hancock parties' submission that the language of the letters is inconsistent with the pleading of the General Agreement. Mr Wright's letter of 30 July 1968 confirmed the arrangement that Hanwright is given an option to acquire Rhodes' interest in the temporary reserves in exchange for a royalty of 1.25%. In his letter of 8 August 1968 Mr Rhodes agreed to give Hancock and Wright an option to acquire his interest in the temporary reserves in exchange for a contract to pay a royalty of 1.25%. The General Agreement is said to be comprised of those letters and some conversations. The plaintiffs do not plead that Hancock and Wright exercised the option. The terms of the General Agreement pleaded in SOC [11] are inconsistent with the agreement outlined in the letters. The General Agreement claim should be struck out.
Breach of fiduciary duty claim - General Agreement
64 This claim depends upon the General Agreement and therefore must be struck out.
Hope Downs Agreement
65 The plaintiffs' case is that the Hope Downs TRs are covered by the 1969 Agreement. The plaintiffs' alternative case is that the Hope Downs TRs were covered by a separate agreement - the Hope Downs Agreement.
66 The Hancock parties say that the Hope Downs Agreement should be struck out for three reasons. First, there is no foundation for the pleaded claim. Rhodes concedes that it can give no particulars of the alleged oral agreement. There is therefore no basis for the two alleged terms of the agreement. Secondly, the Hope Downs Agreement is inconsistent with the 1969 Agreement. The 1969 Agreement conferred rights on Hanwright in relation to the Hope Downs TRs but the obligation to pay a royalty did not extend to ore produced from the Hope Downs TRs. Thirdly, the allegation should be struck out as liable to embarrass the fair trial of the proceedings or as an abuse of process in the sense that the plaintiffs can do no better than to assert an agreement, without providing particulars or evidence that supports an inference that the pleaded agreement was entered into. It is impermissible to allege an agreement of which particulars cannot be provided then to seek discovery to trawl for a case. WPPL's principal attack upon the Hope Downs Agreement is the lack of particulars of the agreement pleaded by the plaintiffs.
67 Senior counsel for the plaintiffs submitted that they should have discovery from the defendants before being required to give further particulars of the pleaded agreement. There is no hard and fast rule as to cases in which particulars should precede discovery, or discovery be ordered before particulars. The judge must exercise a reasonable discretion in every case after carefully looking at all the facts and taking into account any special circumstances. The court will generally not order discovery before particulars unless there is a substantial foundation for the plaintiffs' allegations.
68 The plaintiffs have pleaded the material facts - the agreement, the parties and the terms. They have not pleaded the usual particulars of a contract. A material fact may be struck out of a pleading if the proper particulars of it cannot be furnished: Foamlite Australia Pty Ltd v Campbell and Skilled Engineering Pty Ltd (Unreported, WASCA, Library No 7686, 31 May 1989).
69 The plaintiffs say that in furtherance of the Hope Downs Agreement, HPPL, WPPL and Rhodes entered into the CSR Agreement whereby CSR joint ventured into the Hope Downs TRs. Mr Keady's evidence shows that Rhodes have not, to date, been able to obtain access to relevant documents. It appears that HPPL has custody of the relevant records. The pleading of the Hope Downs Agreement is an inference from the CSR Agreement.
70 In the circumstances of this case the plaintiffs should not be required to give further particulars until after the defendants have given discovery. The principles of case management support deferring determination of the adequacy of particulars of the Hope Downs Agreement until after discovery. The defendants know the case they have to meet - that there was an agreement between Rhodes, HPPL and WPPL, and the terms of their agreement. The defendants can plead to that allegation. They may admit the agreement or deny it. The defendants do not know the particulars of the Hope Downs Agreement. They are entitled to those particulars sufficiently before the trial that they have a proper opportunity to meet the case against them. The action is going to proceed. The defendants will have to give discovery. I am not persuaded that the work required for the defendants to give discovery, and hence the costs to the defendants, will be significantly greater if the Hope Downs Agreement pleading remains in the statement of claim than if it does not. In those circumstances, case management principles may be advanced by the plaintiffs having the opportunity to give further particulars after discovery rather than determining the adequacy of particulars before discovery has been given. In this case, having regard to all of the circumstances, including the fact of the related litigation between HPPL and WPPL, justice is served by allowing the plaintiffs to obtain discovery before requiring them to give further particulars of the Hope Downs Agreement. It follows that the pleading of the Hope Downs Agreement should not be struck out.
Breach of fiduciary duty - Hope Downs Agreement
71 This claim should not be struck out for the same reasons that the breach of fiduciary duty - 1969 Agreement should not be struck out.
Fiduciary duties generally
72 The Hancock parties submit that there are two reasons why the fiduciary duties claims should be struck out in any event. First, the use of information case, and the use of opportunity case, cannot succeed if HPPL and HDIO's construction is correct. If it is not then the plaintiffs have the bargained for contractual remedy and there is no occasion for a fiduciary obligation to be imposed. That argument does not succeed for the reasons I have already given.
73 Secondly, the Hancock parties say that the statement of claim pleads the use of information at an impermissible level of generality. The Hancock parties say that the claim appears to be a confidential information case and the information is not properly identified.
74 WPPL submits that the plaintiffs' fiduciary duty claims are insufficiently particularised and in the absence of further particulars are not sustainable. The plaintiffs say that they have pleaded the material facts and provided sufficient particulars to enable HPPL to plead to the statement of claim. Their claim is not a confidential information case. The allegations of knowledge and use are the premise upon which the allegation of diversion or exploitation of a commercial opportunity that fell within the scope of the defendants' fiduciary duties is based. The information came to the defendants in the context of the agreements and fiduciary relationships alleged. As such if the defendants were to exploit that opportunity they could only do so with the informed consent of Rhodes. The plaintiffs say they have given the best particulars that they can without discovery. It is appropriate that they not be required to give further particulars before discovery.
General trust claim
75 HPPL says that the general trust claim is hopeless and should be struck out for four reasons. First, the alleged trust is inconsistent with the 1969 Agreement and with the alleged terms in the General Agreement and the Hope Downs Agreement. Each agreement, at its highest, conferred on Rhodes, on the happening of identified events, a right to a royalty of 1.25%. The general trust case is to the effect that HPPL's and WPPL's interest in ML282SA is held on trust in equal shares for Rhodes and Hanwright. The plaintiffs say that this argument depends upon the proper construction of the 1969 Agreement and hence is a matter for trial.
76 Secondly, the Hancock parties say property can be the subject of trust but information or an opportunity cannot: Farah Constructions Pty Ltd v Say-dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [118] - [120]. The plaintiffs say that the gravamen of their pleading is not that there was 'an express trust of the classical type' but rather that the fiduciary duties that applied rendered the exploitation of the information and opportunity a breach of those duties. They further submit that a similar case is made by WPPL in its pleading in CIV 3041 of 2010.
77 Thirdly, the Hancock parties submit the alleged trust is not recorded in writing and its creation is barred by Mining Act s 119(2). The plaintiffs say that the short answer is that the trust alleged relates to the knowledge and opportunities pleaded not to the tenements per se. The fiduciary duties flowing from that position are pleaded in SOC [38.3] and the consequences of breach in [38.5] and [38.6]. Section 119(2) of the Mining Act does not prevent a remedial trust of the kind considered in Giumelli v Giumelli (1999) 196 CLR 101 being imposed. Nothing said in Sorna Pty Ltd v Flint [2000] WASCA 22; (2000) WAR 563 relates to such a remedial trust. SOC [38.6] shows the inherently remedial nature of the pleaded trust. I am not satisfied that the plaintiffs' contentions in relation to Mining Act s 119(2) are so unarguable that the general trust claim should be summarily disposed.
78 Fourthly, the Hancock parties submit that assuming for the purpose of argument that [38.1] of the statement of claim is arguable in relation to identified information which is confidential, the balance of [38] does not follow as a matter of logic or law and the pleaded claim is not arguable.
79 I have already found that the pleading of the General Agreement is inconsistent with the letters which are pleaded to be the written part of the agreement. The general trust claim depends in part on the terms of the General Agreement. For that reason, the general trust claim should be struck out. It is not necessary to consider the Hancock parties' other submissions.
Claim against HDIO
80 The Hancock parties say that the claim that HDIO holds its interest in ML282SA and the RTIO extraction Agreement on trust for Rhodes should be struck out for four reasons. First, that claim is dependent on the fiduciary duties alleged and those claims are not arguable for the reasons already advanced. I have found that the fiduciary duty claims, other than the claim based on the General Agreement, are not unarguable.
81 Secondly, the Hancock parties say the claim is dependent on HDIO using information, or at least it appears to be. The judgment of the High Court in Farah Constructions establishes that a knowing assistance case or a knowing receipt case based on use of information must fail. The plaintiffs say that their case is not pleaded as a knowing assistance case.
82 Thirdly, the Hancock parties say the claim appears to be a knowing receipt case. However, HDIO did not receive anything which was held on trust for Rhodes. It applied for and obtained ML282SA. In response, the plaintiffs say that the pleading is that HDIO holds its interest in the identified matters on trust for the Rhodes parties. This matter was not elaborated upon in argument. It is not appropriate to try and resolve this matter on a strike out application. It should be resolved after full argument at trial.
83 Fourthly, the Hancock parties submit the relief extends beyond Rhodes' rights under the alleged agreements. Those rights, taking Rhodes' contract cases at the highest, are limited to the alleged royalty. Those rights do not translate into a beneficial interest in ML282SA or the RTIO Extraction Agreements. This matter was not the subject of oral argument. It is inappropriate to attempt to resolve the matter on the brief written submissions that were made. The issue should be resolved at trial after full argument.
Conclusion
84 The pleading of the General Agreement and the plaintiffs' case based on the General Agreement should be struck out. That will involve striking out SOC [11] and any consequential pleas which depend upon the pleading of the General Agreement, including the breach of fiduciary duty - General Agreement claim and the general trust claim.
85 The plaintiffs should give particulars of SOC [29] by giving particulars whether the ore is produced by Hanwright in association with others or by licence to others, whether the other or others is HDIO or RTIO or both and what other facts which constitute the association or licence.
86 The plaintiffs should give particulars of the Hope Downs Agreement. However, they should not be required to give particulars until after the defendants have given discovery. If after the defendants have given discovery, the plaintiffs do not give further particulars of the Hope Downs Agreement or the defendants consider that the further particulars given are inadequate and the defendants may renew their application to strike out those parts of the statement of claim which pleaded the Hope Downs Agreement.
87 The defendants' further attacks upon the SOC do not succeed.
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