Hughes v St Barbara Mines Ltd [No 4]

[2010] WASC 160

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   HUGHES -v- ST BARBARA MINES LTD [No 4] [2010] WASC 160

CORAM:   KENNETH MARTIN J

HEARD:   2-5 JUNE, 8-12 JUNE & 17-19 JUNE 2009

DELIVERED          :   30 JUNE 2010

FILE NO/S:   CIV 1913 of 2002

BETWEEN:   BRYAN KEVIN HUGHES (as Trustee of the KINGSTREAM STEEL CREDITORS TRUST)

Plaintiff

AND

ST BARBARA MINES LTD (ACN 009 165 066)
First Defendant

ZYGOT LTD (ACN 009 115 664)
Second Defendant

Catchwords:

Mining tenement - Exploration licence - Mandatory surrender of areas - Application for mining lease - Non transferability of mere expectancy

Deeds - Construction - Surrounding circumstances - Use of descriptive term

Deeds - Agreement - Rectification - Continuing common intention - Unilateral mistake

Contract - Inferred terms - Implied terms - Business efficacy - Criteria for implication

Equitable (promissory) estoppel - Conventional estoppel to establish contract in which terms contended to be breached - Need for reliance and detriment to be shown - Limitation issues arising

Duty of care - Negligence - Obligations sought to be imposed beyond contract

Application for leave to amend statement of claim during trial - Decision reserved - Forensic prejudice to defendants in allowing amendments

Prior amendments - Rules of the Supreme Court, O 21, r 5(1), r 5(2), r 5(5) - Dates for taking effect of causes of action introduced by amendments in October 2008 ascertained

Damages - Breach of contract - Admissibility or appropriateness of receipt of evidence as to events subsequent to a breach of contract in loss of opportunity claim for damages

Evidence - So-called rule in Jones v Dunkel invoked - Basis for invocation of rule where defendant does not call witnesses as to facts

Legislation:

Mining Act 1978 (WA)

Result:

Action dismissed

Category:    B

Representation:

Counsel:

Plaintiff:     Mr R M Smith SC & Mr T O Coyle

First Defendant             :     Mr C R C Newlinds SC & Mr I R Pike

Second Defendant         :     Mr C R C Newlinds SC & Mr I R Pike

Solicitors:

Plaintiff:     Lavan Legal

First Defendant             :     Tottle Partners

Second Defendant         :     Tottle Partners

Case(s) referred to in judgment(s):

Adelaide Petroleum NL v Poseidon Ltd (1990) 98 ALR 431

Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Company Ltd [2008] WASCA 119; (2008) 66 ACSR 594

AON Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175

Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1

Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10; [2009] 2 All ER 1127

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99

Bahr v Nicolay (No 2) (1988) 164 CLR 604

Bwllfa & Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Company [1903] AC 426

Byrne & Frew v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410

Codelfa Constructions Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337

Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329

Dodd Properties Ltd v Canterbury City Council [1980] 1 WLR 433

Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431

Equuscorp Pty Ltd v Wilmoth Field Warne (a firm) [2007] VSCA 280; (2007) 18 VR 250

Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420

GMA Garnet Pty Ltd v Barton International Inc [2010] FCAFC 38

Golden Strait Corp v Nippon Yusen Kubishika Kaisha [2007] UKHL 12; [2007] 2 AC 353

Government Employees Superannuation Board v Martin (1997) 19 WAR 224

Hadley v Baxendale (1854) 9 Exch 341; (1854) 156 ER 145

HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640

Hughes v St Barbara Mines Ltd [No 3] [2008] WASC 220

International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151

Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298

Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281

Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 5

Koufos v C Czarnikow Ltd [1969] 1 AC 350

Macaura v Northern Assurance Co Ltd [1925] AC 619

Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181

Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705

Malec v JC Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638

Mander Pty Ltd v Clements [2005] WASCA 67; (2005) 30 WAR 46

Miliangos v George Frank (Textiles) Ltd [1976] AC 443

Naxakis v Western General Hospital (1999) 197 CLR 269

Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451

Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180

Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165

Pollock v Wellington (1996) 15 WAR 1

Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370

Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183

Programme Holdings Pty Ltd v Van Gogh Holdings Pty Ltd [2009] WASC 79

Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204

Pukallus v Cameron [1982] HCA 63; (1982) 180 CLR 447

Rayney v The State of Western Australia [No 3] [2010] WASC 83

Robinson v Harman (1848) 1 Exch 850; (1848) 154 ER 363

Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603

Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332

Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254

Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 253 ALR 1

Tame v The State of New South Wales [2002] HCA 35; (2002) 211 CLR 317

The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 225 FLR 1

The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64

Tipperary Developments Pty Ltd v The State of Western Australia [2009] WASCA 126; (2009) 258 ALR 124

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

Walley v The State of Western Australia (1996) 137 ALR 561

Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387

Waterman v Gerling Australia Insurance Co Pty Ltd [2005] NSWSC 1066; (2005) 65 NSWLR 300

Watson v National Companies & Securities Commission [1988] WAR 332

Table of Contents

SECTION 1................................................................................................................................ 8

A)Overview as to liability claims................................................................................... 8

B)Overview of the trial in June 2009........................................................................... 15

C)Structure of these reasons......................................................................................... 19

D)Core issues................................................................................................................ 20

SECTION 2:  BACKGROUND............................................................................................... 22

A)Iron ore mining in Western Australia....................................................................... 22

B)Iron ore at Weld Range and Jack Hills..................................................................... 25

C)Surrounding statutory environment:  the Mining Act explained in the evidence of the plaintiff's mining law expert, Stuart House (exhibits 50(A) ‑ (F))..................................... 28

SECTION 3:  CHRONOLOGICAL FINDINGS UPON FACTS DERIVED FROM TENDERED DOCUMENTS......................................................................................................................... 39

A)The parties................................................................................................................ 40

B)Exploration licence 20/209 at Jack Hills.................................................................. 41

C)Exploration licence 20/176 at Weld Range.............................................................. 43

D)Discussions between St Barbara and Kingstream regarding St Barbara's tenements at Weld Range and Kingstream's interest in acquiring iron ore tenements as feedstock for its mooted secondary processing steel plant at Oakajee........................................................................ 44

E)1997 and events leading to the Option Deed of 26 March 1997.............................. 46

F)Option Deed of 26 March 1997................................................................................ 54

G)Events post Option Deed sign off on 26 March 1997.............................................. 57

H)The Supplemental Deed of 20 January 1998............................................................ 62

1. Events after the Supplemental Deed of 20 January 1998......................................... 65

J)Mr Solomon's efforts to secure a further Supplemental Deed for Kingstream addressing Zygot as a party and addressing the Zygot AMLs............................................................... 70

K)January 1999............................................................................................................. 73

L)Friday 29 January 1999............................................................................................ 74

M)Exercise of the option............................................................................................... 78

N)Settlement on sale and purchase document 22 February 1999................................ 80

O)Mr Manning's request of 22 April 1999 to St Barbara............................................. 81

P)Mr Manning's 3 May 1999 request regarding EL20/209 and AML20/343............. 85

Q)May 1999 to September 2001................................................................................... 86

R)The withdrawal of the Zygot AMLs by Zygot - 19 September 2001....................... 86

S)Issues rising from withdrawal of Zygot AMLs in September 2001......................... 87

T)November 2001: Kingstream insolvent and in voluntary administration................ 88

U)2003:  Kingstream advances efforts to emerge from administration....................... 89

1. The Midwest Prospectus of 6 June 2003.................................................................. 90

W)DOCA terminated..................................................................................................... 90

1. Assignment and notice of CIV 1913 of 2002 given to defendants........................... 91

Y)July 2004:  Ruane/Zeedam transfer exploration licence applications (including EL20/535) to Winterfall............................................................................................................ 91

SECTION 4:  ANALYSIS OF NON‑EXPERT WITNESSES AT TRIAL............................ 92

A)Plaintiff's witnesses concerning the Option Deed and the Supplemental Deed:  Mr Solomon, Mr Zuks, Mr Manning and Mr Roberts.............................................................. 92

B)The application for leave to further amend the Current Statement of Claim by the plaintiff's Closing Minute................................................................................................................. 93

C)Mr Gregory Solomon's evidence.............................................................................. 98

D)Mr Brett Manning's evidence................................................................................. 110

E)Mr Zuks' evidence‑in‑chief.................................................................................... 118

F)Mr Zuks' cross‑examination................................................................................... 129

G)Mr Neil Roberts' evidence...................................................................................... 139

Evidence as to events after September 2001.................................................................. 139

H)Stephen Ross de Belle's evidence........................................................................... 139

1. Mr Bryan Hughes................................................................................................... 143

J)Jones v Dunkel:  plaintiff's invocation................................................................... 146

SECTION 5:  THE PLAINTIFF'S CONTRACTUAL CAUSES OF ACTION................. 148

A)The first contractual basis: construction of the Option Deed and the Supplemental Deed        148

Principles of construction applicable to commercial contracts.............................. 149

Surrounding circumstances relied on by the plaintiff............................................ 154

The plaintiff's argument on construction................................................................ 155

Matters bearing upon the interpretation exercise................................................... 156

Facts surrounding 'EL20/209'................................................................................. 158

Analysis.................................................................................................................. 159

Date of leave to amend per October 2008 orders of Newnes J.............................. 161

The term contended for as breached....................................................................... 161

B)Asserted terms of the Option Deed (as varied by the Supplemental Deed of 20 January 1998); assuming the plaintiff can establish that the Zygot AMLs at Jack Hills were included in the Sale Interests to be acquired..................................................................................... 162

Paragraph 17D:  common terms said to have been breached................................. 166

The par 17D(b) terms............................................................................................. 170

The par 20 Current Statement of Claim implied terms.......................................... 172

C)The second contractual basis.................................................................................. 177

Paragraph 17F: Equitable estoppel and conventional estoppel as to the terminology 'EL20/209' used in cl 2(e) of the Supplemental Deed - extending to encompass the Zygot AMLs 177

D)The third and fourth contractual bases:  rectification............................................. 183

Mistake (common and unilateral) as a basis for the equitable remedy of  rectification     183

(i)Legal principles................................................................................................ 191

(ii)The arguments.................................................................................................. 194

(iii)Refusal of leave to amend under the Closing Minute................................ 197

(iv)Operative date for October 2008 amendments................................................. 198

E)The fifth basis in contract:  par 17B of the Current Statement of Claim (the Letter Agreement of 8 February 1999).............................................................................................. 198

The formulation of the 1999 Letter Agreement..................................................... 199

What is the consideration from Kingstream under a Letter Agreement with St Barbara of 8 February 1999?................................................................................................................ 204

Further observations:  Letter Agreement 1999....................................................... 207

F)The sixth contractual basis:  par 17C of the Current Statement of Claim (equitable or conventional estoppel arising from events tied to the Clayton Utz facsimile of 29 January 1999 and the Sale and Purchase Contract for the tenements and Sale Interests of 8 February 1999) 210

The law:relief by way of promissory and/or conventional estoppel.................... 211

Paragraph 17C:  as formulated............................................................................... 226

The elements of par 17C......................................................................................... 228

The applicable date for amendments made in October 2008 under par 17C of the Current Statement of Claim............................................................................................................ 234

SECTION 6:  TORT.............................................................................................................. 235

A)Claims in common law negligence against first and second defendants............... 235

SECTION 7: DAMAGES, CAUSATION AND REMOTENESS........................................ 243

A)Overview................................................................................................................ 243

B)Post‑September 2001 breach evidence................................................................... 249

(i)The divide....................................................................................................... 249

(ii)HTW................................................................................................................ 253

(iii)Analysis of HTW............................................................................................ 257

(iv)Analysis of par 209......................................................................................... 259

(v)Other case authorities relied on by the plaintiff............................................. 263

(vi)Bwllfa.............................................................................................................. 264

(vii)Smith New Court Securities............................................................................ 265

(viii)The Golden Victory................................................................................. 265

C)Evidence of three expert witnesses concerning damages....................................... 268

(i)Plaintiff's first expert:  Mr Philip Retter........................................................... 268

(ii)The plaintiff's second damages expert:  Mr Neil Cole..................................... 272

(iii)Mr Jeffrey Hall - defendants' damages expert (report of 14 April 2009, exhibit 56A)    278

(iv)Mr Hall's valuation and his criticisms of Mr Cole's reports............................. 279

(v)Mr Hall's other criticisms of the first three Cole reports.................................. 283

D)Causation of loss..................................................................................................... 286

E)Remoteness of damage........................................................................................... 293

F)Lost chances........................................................................................................... 301

SECTION 8: CONCLUSION AS TO DAMAGES, CAUSATION AND REMOTENESS 302

KENNETH MARTIN J: 

SECTION 1

A)     Overview as to liability claims

1. Bryan Kevin Hughes (Mr Hughes) seeks damages from the defendants of at least $350 million (par 224, plaintiff's substituted trial submissions), on causes of action assigned by Kingstream Steel Ltd (ACN 009 224 800) (Kingstream).  It is pleaded that the assignment occurred on 28 August 2003. 

2. Mr Hughes and Mr Vincent Smith were appointed as Kingstream's voluntary Administrators (the Administrators) on 27 November 2001.  At the time, Kingstream was unable to meet its debts to unsecured creditors, with its insolvency being to the extent of between $6.9 million and $12 million (exhibit 5, page 2048).  Kingstream may have been insolvent for some time prior to 27 November 2001, possibly from 31 December 2000 (exhibit 5, page 1893).  However, I am not called upon to resolve insolvency issues.

1. Broadly speaking, between late 2001 and September 2003, the Administrators were able to reorganise Kingstream's affairs, complete arrangements with creditors, see in a new board of directors, secure a relisting of Kingstream's shares on the Australian Stock Exchange (ASX) following the issue of a prospectus (exhibit 6, pages 2428 ‑ 2531) and withdraw - thereby avoiding a descent by Kingstream into liquidation. 

2. The reconstruction arrangements were complicated.  They took considerable time to perfect.  They involved a Reconstruction Deed, Deed of Company Arrangement (DOCA) and ultimately a recapitalisation of Kingstream, which emerged from administration under a new name, Midwest Corporation Ltd (Midwest).  Midwest was relisted on the ASX on 4 September 2003. 

3. The reconstruction arrangements for the insolvent Kingstream are uncontroversial.  They are summarised between pars 34 ‑ 50 of the Current Statement of Claim. 

4. The reconstruction arrangements (par 42(b) and par 50 of the Current Statement of Claim) resulted in the causes of action which are the subject of this litigation, commenced by writ on 2 July 2002, being assigned by Kingstream to the Administrators, in their capacity as joint and several trustees of a creditor's trust.

5. Clause 7.1 of a Reconstruction Deed dated 1 November 2002 between Kingstream, the Administrators (in their own capacities, and as the joint and several Deed Administrators of a DOCA dated 3 April 2002) identified as a component of Kingstream's available assets (par 42(b)):

   All Kingstream's rights, entitlements and claims in, or in respect of, any claim of whatsoever nature that Kingstream may have against the defendants relating to mining tenements ML20/343, ML20/344 and ML51/641 as currently asserted in these proceedings or otherwise.

6. A prefix 'ML' or 'MLA' might inadvertently suggest the grant of a completed and fully efficacious 21‑year mining lease by the Minister under s 71 of the Mining Act 1978 (WA) (Mining Act).  It is necessary to correct any possible misapprehension arising from the use of such a prefix.  The holdings at Jack Hills the subject of these proceedings were only ever applications for mining leases made by the second defendant (Zygot) under s 74 of the Mining Act.  The applications were never granted and so, never became mining leases.  Accordingly, I will use the terminology 'AML' throughout my reasons, in lieu of the acronym 'MLA' used by the parties in their submissions. 

7. From time to time, the Zygot AMLs are referred to as 'tenements' or 'mining tenements'.  That nomenclature is also technically inappropriate prior to a grant (as to the nature of an application for a prospecting licence, see Watson v National Companies & Securities Commission [1988] WAR 332, 338 ‑ 339 (Malcolm CJ)). There was no grant of a mining lease to Zygot or to Kingstream because Zygot withdrew its applications for the three mining leases at Jack Hills (the Zygot AMLs) in September 2001, approximately two months before Kingstream appointed the Administrators in November 2001.

8. The economic loss Kingstream claims to have suffered as a result of Zygot withdrawing its AMLs lies at the very heart of all of Kingstream's causes of action for loss and damage, now pursued on assignment by Mr Hughes as sole trustee (upon the retirement and withdrawal of Mr Smith) of the Kingstream Steel Creditors Trust, for the benefit of pre‑administration creditors of Kingstream.

9. Still speaking very broadly, the assigned causes of action of Kingstream which are now pursued by Mr Hughes, seek damages for asserted breaches of contract(s), or damages for breaches of duties of care which Mr Hughes' asserts were owed to Kingstream by both the first defendant (St Barbara) and Zygot.  The claims for damages all arise in circumstances where it is undisputed that Kingstream, on 8 February 1999, exercised the option rights it held against St Barbara in respect of a temporary reserve (TR3902H) and two exploration licences (EL20/176 and EL20/209) that St Barbara and Zygot also held over tenements located at Weld Range and Jack Hills in the mid‑west region of Western Australia.

10. How Kingstream came to hold these options rights is also complicated.  It is the subject of a long story that begins around 1996.  It involves two executed deeds, referred to as the Option Deed (of 26 March 1997), and a Supplemental Deed (of 20 January 1998), entered solely between Kingstream and St Barbara (ie, not with Zygot).

11. The Supplemental Deed was a 1998 instrument prepared to be read and to operate with the earlier 1997 Option Deed as a variation, rather than as a stand alone document.  Issues of contractual construction arise in respect of the subject matter dealt with by the two deeds, especially when read together at 20 January 1998. 

12. There were only ever the two parties to each deed - ie, Kingstream and St Barbara.  An absence of Zygot as a party to the formal contractual arrangements generates another central feature of the litigation. 

13. Zygot, at all relevant times, was a wholly owned subsidiary of St Barbara, with common directors.  It is uncontroversial that, at relevant times, Zygot was, in a corporate sense, controlled by St Barbara. 

14. Up to February 1999, St Barbara was registered holder of temporary reserve TR3902H, as well as exploration licence EL20/176 at Weld Range in Western Australia's mid‑west region.  Zygot, from April 1993, was the registered holder of exploration licence EL20/209 at Jack Hills, an area approximately 70 km north‑west of Weld Range. 

15. Privity complications arise from option arrangements entered into just between Kingstream and St Barbara and crystallise in respect of Zygot's holding of EL20/209 at Jack Hills.  Option rights granted to Kingstream by St Barbara under the two deeds were granted over EL20/209.  St Barbara may have controlled Zygot by a 100% shareholding, but St Barbara did not itself ever hold EL20/209 at Jack Hills.  Zygot did.

16. Zygot acquired a five‑year exploration licence, EL20/209, under s 57 of the Mining Act, as that Act then stood, on 27 April 1993. At that time, exploration licences in Western Australia were subject to s 65(1) of the Mining Act which imposed, in effect, mandatory partial area surrender obligations.  Those surrender obligations took effect at the third and fourth anniversaries of a five‑year exploration tenement (subject to more detailed provisions of the Act that I will examine in due course). 

17. The statutory surrender provisions, which applied to exploration licences by s 65(2) of the Mining Act required an exploration tenement holder to surrender, at the third anniversary of the exploration licence, 50% of the tenement area then held as the subject of the licence. A second 50% area surrender obligation over the remaining holding arose at the fourth anniversary. These obligations broadly reflected a 'use it or lose it' legislative regime, by which an exploration licence holder was encouraged, during the five‑year term, to explore, then apply for a mining lease (in which case it would apply to convert to a higher level of tenement holding for mining purposes and would enjoy priority over other rival claims to the area). Alternatively, if the exploration licence holder was not seriously interested in mining following its exploration opportunity, s 65 encouraged it to release the areas, so that others might have the opportunity to explore. The compulsory surrender regime of the Mining Act was obviously directed against tracts of land being 'tied up' or 'warehoused' for long periods as exploration tenements, thus holding out other potentially more interested or more viable miners or explorers. 

18. When Zygot obtained its five‑year exploration licence, EL20/209, in April 1993, the initial licence area covered 17 graticular blocks in the Jack Hills region.  By the looming third (as extended) anniversary date for EL20/209 in 1996, Zygot needed to surrender or, as is put more colloquially in the mining industry, to 'drop‑off' 50% of the area of that exploration tenement.  Zygot did surrender eight of the original 17 graticular blocks from EL20/209.  However, almost at the same time, as it was entitled under the Mining Act, Zygot applied for these surrendered areas to be granted to it as mining leases - the elevated species of mining tenement, in comparison to an exploration licence.  This conduct by Zygot in 1996 was an exercise of conversion rights enjoyed by exploration licence holders under the Mining Act at the time (see the provisions of s 65 and s 67). However, a finalised grant to Zygot of fully efficacious 21‑year mining leases by the Minister required that a number of threshold requirements would need to be met by Zygot.

19. First, areas which are the subject of applications for mining leases needed to be 'pegged', so that the boundaries would be delineated 'on the ground', by physical datum points of reference.  The pegging requirement for mining lease applications is in contradistinction to applications for exploration licences, the boundaries of which can be less precisely delineated, using graticular mapped blocks as reference points. 

20. Second, the fees that needed to be submitted with an application for a mining lease included a proportion of the first year's rent that would fall due under a granted mining lease.  The annual fees due to the State under mining leases were higher than the fees payable for exploration licences, reflecting the intense working of the ground expected with a mining operation. 

21. Third, in order for a 21‑year mining lease to be granted by the Minister under s 71 of the Mining Act, there was a usual requirement that a Mining Warden recommend the grant be approved. 

22. From about the mid‑1990s, certain provisions of the Native Title Act 1993 (Cth), intersected with State mining law procedures for the grant of a mining lease. Before the Minister could grant a mining lease, satisfactory arrangements needed to be reached with any relevant Indigenous native title claimants over areas the subject of the application for the mining lease. The Native Title Act thereby injected an extra step, in effect, into the overall process leading to a grant of a mining lease by the Minister. 

23. The mere fact that an application for a mining lease was lodged by the party who had previously held the same area under an exploration licence therefore carried no necessary assurance that a 21‑year mining lease would ultimately be granted.  There was much to be accomplished by an applicant before a mining lease was granted, particularly by the resolution of any outstanding native title claims.

24. Kingstream's causes of action, now pursued by Mr Hughes against the defendants, are all grounded upon a bedrock contention that the option arrangements between St Barbara and Kingstream extended in ambit not only to TR3902H and to EL20/176 (St Barbara's tenement areas at Weld Range), as well as to Zygot's EL20/209 at Jack Hills, but, also and most controversially in this litigation, to the Zygot AMLs. 

25. It is uncontroversial that at a settlement transaction on 22 February 1999, Kingstream received sealed transfers for TR3902H and EL20/176 at Weld Range (from St Barbara) and for EL20/209 at Jack Hills (from Zygot).  Kingstream subsequently became, on those transfers being processed, the registered holder of each of those three tenements at Weld Range and Jack Hills, as from about April 1999.  Kingstream also received in the settlement of February 1999, transfers to it executed under seal by Zygot over the Zygot AMLs at Jack Hills.  However, Kingstream did not and could not thereafter become the registered holder of the Zygot AMLs.  Kingstream's claim for damages is grounded upon that failed outcome.

26. The Zygot AMLs, pending between 1996 and September 2001 over areas originally the subject of EL20/209, were incapable in law (as mere pending applications for mining leases) of being transferred or assigned to anyone.  It was not possible in 1999 for Kingstream to progress transfers with the Western Australian Department of Industry and Resources (DIR) of the Zygot AMLs that Kingstream received at settlement with St Barbara in February 1999.  The temporary reserve and the two exploration licences were of a different character.  Transfers of those mining tenements to Kingstream were lodged and processed, resulting in Kingstream becoming the registered holder of those transferred tenements.  However, Kingstream could not, by transfer, become the registered holder of the Zygot AMLs.  No arguments raising any issue as to trusteeship (of any kind) by or in Zygot or St Barbara over the Zygot AMLs at Jack Hills in Kingstream's favour, were pleaded or raised in this litigation on behalf of Kingstream or Mr Hughes.  No trust related issues arise for determination. 

27. The Kingstream causes of action alleging breach and damage against the defendants are not directly grounded upon any asserted failure of Zygot to transfer, or of St Barbara to procure a transfer of, the Zygot AMLs to Kingstream, as part of the settlement of February 1999.  Such a case has also not been pursued on behalf of Kingstream.  It would be bound to fail anyway, since the Zygot AMLs were not in law transferable, as between Zygot and Kingstream.  These premises were uncontroversial at trial.

28. The Kingstream causes of action pursued at trial are instead grounded upon the distinct premise that Zygot, from February 1999, was bound to prosecute the three AMLs at Jack Hills (or that St Barbara was bound to cause Zygot to prosecute them) to the successful end point of ministerial grant.  After an hypothesised successful outcome of ministerial grant, it is then contended that Zygot was further obliged (or that St Barbara was then further obliged to cause Zygot) to transfer each of the three 21‑year mining leases over the AML areas at Jack Hills to Kingstream.  Ministerial consent would also be required for that hypothesised transfer.

29. In all likelihood it would have taken a considerable period (ie, years, at least) post‑February 1999, for the mining lease applications by Zygot in respect of its AMLs to be progressed to successful grant.  As a result, the hypothesised outcome of grant to Zygot is unlikely to have been accomplished much before mid‑2005.

30. The assigned causes of action are all framed to pursue damages based upon the loss of opportunity for Kingstream to obtain 21‑year mining leases over the Zygot AML areas at Jack Hills.  But it is argued further that Kingstream lost the allied future opportunity of then profitably exploiting those mining leases over time.  It is argued that this economic damage flows consequentially from breaches by St Barbara (or Zygot) of contractual obligations or common law duties of care owed to Kingstream, which occurred on 19 September 2001 when Zygot unilaterally withdrew its three AMLs at Jack Hills. 

31. As part of the case for damages for Kingstream's lost chances to obtain, then profitably exploit 21‑year mining leases over the Zygot AML areas at Jack Hills, Mr Hughes, at the trial, sought to adduce evidence of positive developments and events at Jack Hills, Weld Range and elsewhere that have occurred subsequent to September 2001.  It was sought, for instance, to prove the subsequent acquisition by third parties (Mr Michael Ruane and an associated corporation of his, Zeedam Enterprises Pty Ltd (Zeedam)) of substantially the same AML areas at Jack Hills in February 2002, under EL20/535, the subsequent conversion of part of the area of EL20/535 to mining lease ML20/506 (see exhibit 16, page 6810) in 2005 and the acquisition of ML20/506 in 2005 by Winterfall Pty Ltd (Winterfall) (subsequently known as Iron Jack Ltd, and now, Crosslands Resources Ltd (Crosslands)).  Mr Hughes led evidence to demonstrate that through the acquisition of shares in Crosslands, a listed corporation, Murchison Metals Ltd (Murchison Metals) gained control of the Jack Hills area the subject of ML20/506.  Mr Hughes seeks to show that Murchison Metals, in 2007, entered into joint venture arrangements with a subsidiary of an internationally known Japanese corporation, Mitsubishi.  As a result, it is suggested that ML20/506 has now become the cornerstone of a valuable iron ore mining and development project at Jack Hills (the Jack Hills Project).  All this, it is said, bears upon the scope of Kingstream's loss of opportunity damages.

32. To establish the extent of the damages claim, Mr Hughes also seeks to adduce contemporary evidence of the worth and prospects of the Jack Hills Project, including evidence as to many millions of dollars invested in the exploitation of the iron ore mining lease M20/506.  Mr Hughes argues that the September 2001 breaches have resulted in Kingstream losing a chance of very profitably exploiting the same Jack Hills mining lease areas that Murchison Metals is now successfully exploiting.  He argues that, as a matter of legal principle, Kingstream's economic damages can and should be assessed taking full account of contemporary events relating to the success of the Jack Hills Project post‑September 2001 until trial in mid‑2009.  Such events include millions of dollars in exploration expenditures, a staged future development planned for the further exploitation of ML20/506 under a Murchison Metals/Mitsubishi joint venture regime, and recent world events, including high world iron ore prices, a commodities boom and a seemingly unlimited appetite in China for Australian iron ore. 

33. Mr Hughes presses a case for Kingstream's loss of the opportunity to develop a profitable iron ore project at Jack Hills, but also argues that Kingstream lost a further chance of doing even better than Murchison Metals.  That claim is based on the asserted potential for a joint exploitation and development of the (lost) Jack Hills mining leases over time, in combination with a concurrent profitable exploitation of Kingstream's iron ore tenements at Weld Range.  Mr Hughes seeks to show that a revitalised Kingstream (now trading as Midwest) has subsequently achieved a profitable exploitation of Weld Range after Kingstream's emergence from voluntary administration, around August 2003, and that 'synergies' would likely have been obtained in an hypothesised joint exploitation and development of the Weld Range and Jack Hills iron ore holdings.

34. Evidence as to Midwest's promising development of its Weld Range tenements up to 2009 was put to the court to support the economic loss case grounded upon Kingstream's loss of these valuable opportunities, established by actual knowledge of events transpiring subsequent to September 2001.

B)     Overview of the trial in June 2009

1. The trial occupied 12 hearing days throughout June 2009.  But a substantial component of the evidence adduced consisted of documents, all uncontroversially tendered.  Exhibits 1 ‑ 27 encompass 27 lever arch files of assembled documents, more than 80% of which were tendered towards the issue of Kingstream's economic damage. 

2. Exhibits 23 ‑ 27 are four files of commercial documents obtained on subpoenas returnable before trial from various quarters, including from Murchison Metals, Mitsubishi, Midwest, and from agents of, or corporate advisors to, those entities.  Many of these documents are commercially sensitive, or were said to be.  They were treated as such by the parties during the course of the trial.  To the extent that it is be necessary for me to make reference to such documents in these reasons, I propose to do so in abbreviated fashion.

3. The 27 lever arch files of documents, exhibits 1 ‑ 27, are sub‑indexed further, in exhibit 28.  That index was agreed between the parties.

4. At trial, the plaintiff adduced evidence from 11 witnesses, nine of whom attended and gave their evidence in person.  The evidence‑in‑chief from witnesses who attended court took the form of prepared witness statement(s).  A report from one of the plaintiff's witnesses, Mr Brown, an expert on world iron ore prices and the predictability of iron ore prices in the world market, was tendered uncontroversially, without need for Mr Brown's attendance for cross‑examination (exhibit 49).

1. Another witness for the plaintiff, Mr Saburo Takeuchi, Vice President, Iron Ore Division of Mitsubishi Development Pty Ltd, had his evidence adduced as an amended witness statement.  The defendants, after raising numerous successful objections against portions of a proposed witness statement, did not ultimately require Mr Takeuchi to attend for cross‑examination upon the limited material ultimately introduced (exhibit 52). 

2. Of the plaintiff's nine witnesses who attended court, three were experts.  One of those, Mr Stuart House, was a solicitor.  Before his admission to legal practice, Mr House was a former employee of the DIR (originally the Department of Mines of Western Australia).  Mr House's expertise is in the area of mining law, including as to the surrender of areas from mining tenements granted under the Mining Act.  Mr House provided reliable evidence.  I will refer to Mr House's evidence at an early point in these reasons, since it provides a useful overview of the surrounding legislative environment applicable to mining tenements in Western Australia - the essential context for the subject matter of this litigation, particularly exploration licences, applications for mining leases and mining leases. 

3. Two further experts called by the plaintiff at trial were Mr Phillip Retter and Mr Neil Cole.  Both gave valuation evidence in written reports going to the issue of Kingstream's damages.  In all, Mr Cole provided some eight written reports (exhibits 53A ‑ 53H). 

4. Mr Retter, the plaintiff's other valuation expert, was previously a member of Snowdon Corporate Mining Industry Consultants (Snowdon), and was co‑author of two comprehensive Snowdon reports of 18 February 2003 (exhibit 51A) and 22 November 2005 (exhibit 51B).  Mr Retter personally provided further individual reports of 27 May 2009 (exhibit 51C) and 7 June 2009 (exhibit 51D) for the plaintiff.

5. The plaintiff's non‑expert witnesses at the trial, apart from Mr Takeuchi, included the former managing director of the Australian operations of Kingstream at relevant times, Mr Nikolais Zuks, and a Perth legal practitioner, Mr Gregory Solomon, who, for over ten years until August 1997, was also a non‑executive director of Kingstream. 

6. Mr Solomon and Mr Zuks were the only members of the Kingstream board called as witnesses at trial for Kingstream.  There had been numerous other members of Kingstream's board across relevant time periods (see exhibit 48, page 69). 

7. In the period 1996 to 2004, Kingstream underwent a number of changes to its name, as well as to its board.  At the commencement of 1996, Kingstream was an ASX listed no liability corporation.  As a result of an alliance it formed with Taiwanese interests, it changed name to An Feng Kingstream Steel Ltd, in or about mid‑1997.  After an Asian economic crisis of the late 1990s, Kingstream, in effect, was decoupled from the Taiwanese alliance and then known, from about 1999, as Kingstream Steel Ltd (exhibit 3, pages 1228 and 1230). 

8. For over ten years, from February 1992 to April 2003, Mr Zuks served as managing director of the Australian operations of Kingstream. 

9. Mr Solomon's non‑executive directorship on the Kingstream board ended on 7 August 1997 (exhibit 30, par 2).  Mr Solomon was a witness at trial, chiefly to provide evidence concerning his drafting work and his legal input towards the preparation and execution, on 26 March 1997, of the Option Deed entered into between Kingstream and St Barbara.  Later, Mr Solomon drafted cl 2(e) and cl 2(f) of the Supplemental Deed, executed on 20 January 1998.

10. I also received evidence at trial on behalf of the plaintiff from Mr Brett Manning.  He was Kingstream's tenement manager at certain times.  More generally, he was employed as the assistant to the managing director, Mr Zuks.  However, Mr Manning was never a member of Kingstream's board. 

11. The plaintiff also called Mr Neil Roberts, St Barbara's corporate secretary and general counsel between February 1988 and July 1997 (exhibit 40A).  Mr Roberts was never a member of the St Barbara board.

12. The remaining non‑expert witnesses called by the plaintiff at the trial were Mr Hughes himself, and Mr Stephen de Belle.  Their evidence concerned events post‑November 2001, while Kingstream was in voluntary administration and thereafter.  Kingstream eventually emerged from administration as Midwest, with the Administrators retiring on 28 August 2003 and Kingstream relisting on the ASX (as Midwest) on 4 September 2003. 

13. Mr de Belle became a member of the new Midwest board (with Mr Jesse Taylor and Mr Robert Duffin, exhibit 35) under reconstruction proposals which resulted in substantive changes to the board and in corporate strategy.  A new corporate strategy for Midwest saw the abandoning of Kingstream's dominant objective of seeking to establish a secondary processing steel facility at Oakajee, north of Geraldton, Western Australia.  Midwest pursued a new direction as an ASX listed junior iron ore miner and exporter of DSO (direct shipping iron ore) from some (retained) tenements originally acquired to provide feedstock for Kingstream's steel production objectives (see the Midwest Prospectus of 6 June 2003, exhibit 6, pages 2428 ‑ 2531). 

14. Midwest's new board was able to pursue the strategic change in corporate direction, freed from the unsustainable debt levels of 2001 that had ensnared Kingstream, leading to its appointment of voluntary Administrators, towards the end of November 2001. 

15. Mr de Belle and Mr Hughes played key roles in the reorientation and successful redirection of the 2001 failed Kingstream, as the 2003 revitalised Midwest.

16. The defendants called evidence from only one witness at the trial, its damages expert, Mr Jeffrey Hall of Sumner Hall Associates Pty Ltd.  Mr Hall's report became exhibit 56A. 

17. There are philosophical and numerical divergences of opinion between the three valuation experts at trial, Messrs Retter, Cole and Hall, in regard to assessment of damages issues.  These divergences must be finally resolved if the plaintiff can make good a successful case on liability against St Barbara, or Zygot, grounded upon the withdrawal of the Zygot AMLs on 19 September 2001.

18. That completes an unduly simplified overview of the litigation.

C)     Structure of these reasons

1. The approach I propose to follow in these reasons is to first resolve all issues surrounding liability. 

2. I will address issues on liability by first identifying from the pleadings broad issues in the case pertaining to liability. 

3. I then propose to assess and make factual findings chronologically upon what, in the main, are relatively uncontroversial areas or reliably documented underlying primary facts.  Mostly this will be based on contemporaneous documents uncontroversially tendered at trial.

4. I will then assess some more contentious evidence from various witnesses concerning liability, particularly evidence emanating from two members of Kingstream's board, Mr Zuks and Mr Solomon, as well as from Mr Zuks' assistant, Mr Manning. 

5. I will then address the evidence of the other non‑expert witnesses called at trial by the plaintiff, Mr Roberts, Mr Hughes and Mr de Belle.

6. It will be necessary to address the law in some critical areas.  These include:

   (a)principles applicable to the construction of commercial instruments;

   (b)the law applicable to the equitable remedy of rectification, particularly in respect of deeds; and

   (c)the law applicable to equitable (promissory) estoppel and conventional estoppel, which are both raised and relied upon by the plaintiff, as an adjunct to various of its alternate contractual cases against the defendants.

7. There are further legal issues which arise, such as the law concerning the implication of terms into commercial contracts and the so called rule in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298. The need to consider Jones v Dunkel arises by reason of a major submission by the plaintiff in closing concerning the defendants' asserted failures at trial to call any evidence from available and relevant witnesses, including, the plaintiff complains, from Messrs Ross Atkins, Bruce Tomich, Brian Gardiner, Kevin Dundo, Ms Jill McBain or Ms Gail Oates.

8. It will also be necessary to consider some statutory provisions of the Mining Act, as they applied at relevant times, particularly between 1996 and 2001, as a part of the examination of the surrounding legislative background to a contractual dispute involving mining tenements and AMLs.

9. An essentially uncontroversial statutory background can conveniently be gleaned from the evidence of the plaintiff's mining law expert, Mr House, most of whose evidence was not seriously challenged.  I will assess Mr House's evidence next, after summarising the core issues.

10. I approach the task of rendering findings of fact upon relevant events cautiously, given a heavy lapse of time as regards most relevant events, which usually exceeds a decade.  Generally, where there is doubt, I prefer to rely in this task, upon the contemporaneous documents found within the trial bundles, rather than the attempted recollections of witnesses concerning events long passed, or their attempts to reconstruct past events from fading memories. 

11. Whilst there is obviously an inseparable interrelationship I have kept firmly in mind, I will begin with a consideration of documents, before proceeding to consider the more controversial trial evidence from some witnesses. 

D)     Core issues

1. The issues in the litigation concerning Kingstream's causes of action pursued by Mr Hughes against St Barbara and Zygot can be summarised as follows:

   (1)the proper construction of the Supplemental Deed of 20 January 1998 over what is embraced by the use of the terminology 'EL20/209' (par 17A of the Current Statement of Claim);

   (2)alternatively, a claim by Kingstream for rectification of the Supplemental Deed, based upon either common continuing mistake (pars 16 and 17(b) of the Current Statement of Claim), or upon Kingstream's unilateral mistake to the knowledge of St Barbara (par 17E of the Current Statement of Claim);

   (3)the contractual consequences, if any, flowing from some Clayton Utz correspondence, as solicitors for St Barbara and passing between the parties' respective solicitors across Friday, 29 January 1999, a subsequent exercise of option rights by Kingstream on 8 February 1999, and in St Barbara, tendering to Kingstream at settlement on the option transaction on 22 February 1999 eight transfers, all executed under seal (par 17B of the Current Statement of Claim);

   (4)whether promissory (equitable) or common law (conventional) estoppels arise in Kingstream's favour, if it be found that no stand alone contractual obligations arose in Kingstream's favour applicable to the Zygot AMLs (pars 17C and 17F of the Current Statement of Claim);

   (5)what is to be assessed as the effective date for some 2008 pleading amendments by the plaintiff introducing pars 17A, 17C, 17E and 17F to the Current Statement of Claim, by orders of Justice Newnes of 10 October 2008 (see his Honour's reasons, Hughes v St Barbara Mines Ltd [No 3] [2008] WASC 220 [114], [129], [130], [143], [147], [155], [161] and [170]). This issue relates to limitation period expiry defences raised by the defendants against these 2008 amendments;

   (6)Kingstream's claim to relief, based on alleged breach of common law duties of care contended to be owed to Kingstream as at February 1999, by St Barbara and Zygot; and

   (7)in the event that Kingstream is found to be entitled to damages for breach of contract or for breach of duty, what is:

   (a)the principled approach to the assessment of those damages; and

   (b)the level of those damages.

   Again, that is a gross, but necessary, oversimplification upon many complex issues raised within the litigation. 

2. Under the Current Statement of Claim (filed pursuant to the orders of Justice Newnes on 10 October 2008), the longstanding primary relief claimed is the remedy of rectification to the Supplemental Deed (see par 16 and par 17(b)).  An alternative claim based upon contractual construction of the Supplemental Deed emerged as a (2008) secondary alternative to the original case seeking rectification (par 17A) ie, against an unhelpful outcome construction as set out in par 17(a) of the Current Statement of Claim. 

3. Notwithstanding the historical ordering in the different claims, it is more logical to evaluate the plaintiff's case initially from a perspective of contractual construction, then, depending upon the outcome of that analysis, to assess, if necessary, the claims invoking the remedy of rectification towards the Supplemental Deed.

4. As a further complication, the plaintiff submitted at the end of the trial a Minute of Proposed Amended Statement of Claim dated 17 June 2009 (the Closing Minute).  The plaintiff seeks leave to further amend in respect of the Closing Minute, notwithstanding that both sides, by then, had closed their respective evidentiary cases in the trial and were proceeding with their closing arguments. 

5. The defendants oppose the grant of leave to further amend in respect of most alterations sought under that Closing Minute.

6. At trial, I reserved my decision upon the issue of a grant of leave to the plaintiff to further amend under the Closing Minute, on a basis that I would deal with that issue in an overall context of these reasons for judgment. 

7. I should record that the parties also submitted at trial a Statement of Agreed Facts and Issues in a document dated 29 May 2009 (exhibit 29).  Part B of that document contains a recitation of agreed issues between the parties.  Perusal of Part B will confirm that I have oversimplified this summary of the core pleaded issues.

8. I propose in the following section of these reasons to make some more background observations about the history of iron ore mining in Western Australia, particularly at Weld Range and Jack Hills in Western Australia's mid‑west region.  I will then address the surrounding legislative regime under the Mining Act, in the context of a consideration of Mr House's expert evidence.

SECTION 2:  BACKGROUND

A)     Iron ore mining in Western Australia

1. These observations are derived from the Snowdon report to Phillips Fox of 18 February 2003 (Retter and Snowdon) (exhibit 51A), and from pars 57 ‑ 95 of the defendants' damages expert report of Mr Hall (exhibit 56A).  I find these facts to be reliably established, indeed essentially unchallenged at the trial. 

2. Insofar as I will refer to facts subsequent to September 2001, there is a residual legal question to be resolved as to the admissibility or utility of facts occurring subsequent to September 2001, particularly in regard to the assessment of Kingstream's damages for breach of contract or common law duty.

3. Although not as well known as Western Australia's Pilbara region, iron ore mining has been undertaken in the mid‑west region of Western Australia since the 1960s.  Mining operations commenced in 1966 at Koolanooka, approximately 160 km south‑east of Geraldton, near Morawa.  Mining at Koolanooka ceased around 1974, with larger and higher grade iron ore deposits in Western Australia's Pilbara region then assuming precedence. 

4. The mid‑west region of Western Australia was then largely inactive from an iron ore mining perspective for the following 30 years.

5. By contrast, Western Australia's Pilbara region has become one of the world's largest iron ore producing regions.  After the lifting of an embargo against iron ore exports to Japan, growth in demand for iron ore in the 1960s led to a mining boom in the Pilbara.  Large iron ore deposits were discovered and developed at Mount Goldsworthy (1969), Mount Tom Price (1969), Mount Newman (1969), Pannawonica (1972) and Paraburdoo (1973).  The iron ore produced was mainly exported.  These outback discoveries and developments required the construction of long‑distance railways to link remote iron ore mines to Western Australia's northern coastal export ports of Cape Lambert, Dampier and Port Hedland.

6. According to Mr Hall's report (par 60), Australia is the world's third‑largest iron ore producer, behind Brazil and China.  With India, those four countries produce approximately 75% of global iron ore supply.  China is also a major steel producer.  Whilst China consumes the majority of its iron ore for domestic purposes, Brazil and Australia are the world's principal iron ore exporting countries.

7. China and Japan accounted for 62% of Australia's seaborne iron ore export dollar trade in 2007.  Of that figure, China accounted for 46%.  Japan had been the largest importer of iron ore until 2003, when it was overtaken by China.  Japan's import demand for iron ore has remained steady over the past decade.  China has experienced more rapid growth, leading to its current position as the leading seaboard importer of iron ore.

8. Western Australia accounted for 97% of Australia's iron ore production in 2007, with the Pilbara region contributing 92% of that production.  Two corporations, BHP Billiton and Rio Tinto, dominate the Pilbara iron ore market.  Both have made substantial capital investments (over the past 30 to 40 years) in rail and port infrastructure to facilitate the success of their remote mining locations and export businesses.  The cost of replicating expensive infrastructure for remote operations has created a barrier to entry for other potential iron ore producers.  Fortescue Metals Ltd began production from its first major iron ore project in the Pilbara region in 2008.  Additionally, a number of small producers or 'junior' iron ore exporters are seeking to develop iron ore projects in the Pilbara region.

9. By contrast, the mid‑west region of Western Australia remained largely undeveloped until recent times.  The scale of planned iron ore mining operations is still relatively small in contrast to the Pilbara region. 

10. The Koolanooka mine, as I observed, closed around 1974, but reopened in 2004.  This followed the ultimately failed efforts by Kingstream to develop an integrated, locally based iron and steel operation (the Midwest Iron and Steel Project) utilising its mid‑west region iron ore deposits from Koolanooka and Tallering Peak.  Kingstream's goal was to transport iron ore by rail to a proposed steel slab plant and port facility to be built at Oakajee (north of Geraldton), from where it would pelletise the iron ore, then ship the partly processed ore to Taiwan for further processing at a rolled steel plant. 

11. The steel processing project at Oakajee was initially proposed in the mid‑1990s, then promoted by Kingstream. 

12. However, in November 2001, Kingstream entered voluntary administration.  Its Administrators sold off Kingstream's Tallering Peak iron ore holdings in April 2002.  The remaining principal assets of Kingstream were its Koolanooka mine, a nearby Bluehills mine and its iron ore tenements at Weld Range, Robinson Range and Jack Hills.  I have mentioned that Kingstream changed its name to Midwest and relisted on the ASX in September 2003, after its Administrators withdrew.  It subsequently pursued as Midwest, a large scale development of its iron ore tenements at Weld Range for the purposes of producing iron ore for export.

13. The iron ore deposits at Koolyanobbing, Mount Gibson, Tallering Peak, Koolanooka, Weld Range and Jack Hills occur in a late Archaen geological setting, taking the form of greenstone belt hosted deposits in the western (Southern Cross province) part of the Yilgarn Craton, in an area to the south‑east and north‑east of Geraldton. 

14. Common attributes of Yilgarn iron ore deposits include an occurrence in areas where banded iron formation sequences (BIF) stratographic units are severely disrupted by a folding (particularly where synclines are developed) and where rock brecciation has occurred during deformation.

15. DSO is high grade iron ore that meets acceptable commercial standards of quality, without requiring processing beyond crushing and screening.  In contrast, lower grade iron ore needs to be beneficiated to reach an acceptable shipping grade by concentrating the iron content and reducing contaminants (such as silica).  This requires the use of screening or heavy media separation. 

1. Haematite ore, with low levels of contaminants such as silica (SiO2), alumina (Al2O3), phosphorus (P) and sulphur (S), is the most common Australian iron ore.  Shipping grade haematite lump ore (6 mm to 30 mm) and fines (less than 6 mm) usually has an iron content greater than 60%.  Lump ore, which is produced by crushing and screening mined haematite ore, can be fed directly into blast furnaces with no additional handling or processing.  It is therefore attractive to steel makers. 

2. Haematite and magnetite fines require secondary processing to produce a coarser product prior to being fed into a blast furnace. 

B)     Iron ore at Weld Range and Jack Hills

1. The Weld Range is located some 700 km north‑north‑east of Perth, about 60 km north‑north‑west of Cue (see exhibit 51A, s 3.0).  The Jack Hills are located approximately 670 km north‑north‑east of Perth, approximately 100 km to the north‑west of the Weld Range, approximately 380 km north‑east of Geraldton and 100 km north‑west of Meekatharra, in the northern corridor of the mid‑west region of Western Australia.  Access is via a sealed road from Cue to the south‑east.  Until recently, that road was graded, but unsealed. 

2. With the exception of the West Wiluna project which has explored the alternative of shipping out of the port of Esperance, successful long term development of the iron ore projects in the mid‑west region of Western Australia is heavily dependent on the approval and development of new deep‑water port facilities at Oakajee to handle the large‑scale export of bulk iron ore shipments. 

3. Iron ore exporters from the mid‑west region presently ship relatively small quantities of iron ore through Berth No 4 and the refurbished Berth No 5 at the port of Geraldton.  Those Geraldton Port facilities are not capable of handling large increases in iron ore export shipments planned by the new iron ore producers from the mid‑west region. 

4. A map which shows the locations of Jack Hills, Weld Range, Tallering Peak, Koolanooka, Oakajee and Geraldton is found in Mr Hall's report [74], and reproduced below:

The map shows a proposed railway as a line between Weld Range, Jack Hills and the proposed new Oakajee port.  The existing road haulage route to the port of Geraldton is marked as a broken line.

1. Mr Hall records that the Jack Hills iron ore tenements were first explored by a Japanese company in the late 1960s.  A private corporation further explored the area in 1969 (par 75, footnote 31, Mr Hall's report).  It conducted a mapping and sampling program that included drilling three diamond holes and ten percussion holes.  That corporation, then known as Northern Mining Corporation, extended its drilling program in 1973, by a further 59 percussion holes. 

2. Subsequent to 1973, a number of corporations reviewed the geological data from these Jack Hills drilling programs.  However, none actively pursued the development of iron ore tenements at Jack Hills until control over the areas was eventually acquired by Murchison Metals in 2004.

3. The Jack Hills range of hills stretches for approximately 50 km and rise approximately 300 m above the Murchison Plain (par 76, Mr Hall's report). 

4. The Murchison Plain is largely a region of pastoral leases supporting sheep and cattle. 

5. Murchison Metals acquired its interest in its tenements at Jack Hills when it acquired shareholding control of a corporation then known as Winterfall, around October 2004.

6. Winterfall (subsequently renamed Iron Jack, then later renamed Crosslands in 2007) held rights to acquire a number of iron ore tenements in the vicinity of Jack Hills and Weld Range, including a pending exploration licence application EL20/535, which extended to eight graticular blocks, near Mount Hale. 

7. Winterfall also held seven other pending exploration licence applications at Balline, Weld Range West, Weld Range, Weld Range North, Stuart Bore, Big Well, as well as a further exploration licence at Jack Hills (EL20/559) which included a further 16 graticular blocks.

8. Mr Hall's report (par 79), provides details of two agreements, both of 28 July 2004, by which Winterfall acquired eight pending exploration licence tenements from vendors who had acquired interests in the tenement areas at Jack Hills, including areas previously associated with Kingstream.

9. Mr Hall observes (par 80), that what is now termed the Jack Hills Project, pursued by Murchison Metals, is centred around only one of the eight Winterfall exploration licence areas, namely the area which was part of EL20/535. 

10. The eight graticular blocks within EL20/535 embrace an area of 20.5 square km, representing a central portion of Jack Hills, including Mount Hale, and most of the iron ore bodies known from the historic drilling programs. 

11. Exploration licence EL20/535, then mining lease ML20/506, obtained from it, were granted over portions of territory that were formerly within areas first covered by EL20/209, when held by Zygot.  Upon surrendering eight of the original 17 graticular blocks from EL20/209 in 1996, Zygot then made its applications for mining leases over the surrendered areas, under its applications M20/343, M20/344 and M51/641.  One graticular block was surrendered out of EL20/209 on 18 May 1999. 

12. The location of the mining lease applications of Zygot at Jack Hills can be conveniently observed in a diagram in Mr Hall's report (par 86).  They are further identified by the plaintiff's mining tenement expert, Mr House, in his supplementary witness statement, exhibit 50C, as well as in exhibit 50F(4).

13. The diagram at par 86 in Mr Hall's report shows that most, but not all, of the iron ore tenements that now support the Jack Hills Project of Murchison Metals were within the areas the subject of the Zygot AMLs (ie, Zygot's mining lease applications 20/343, 20/344 and 51/641).  Some haematite deposits that are not within the area of the Zygot AMLs are the H7 lens, part of the H4 lens and part of the Brindle lens.  Those deposits fall within the subsisting area of EL20/209. 

14. Zygot withdrew its AMLs in September 2001.  An application for EL20/535 then covered substantially the same Zygot AML areas.  It was applied for in February 2002 by Mr Ruane and his associated corporation, Zeedam. 

15. The term 'inferred resource' uses terminology of the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves as published by the Joint Ore Reserves Committee (the JORC code).  The JORC Code uses the terms inferred, indicated and measured resources to rank mineral resources in order of increasing geological confidence (par 90, Mr Hall's report).

C)     Surrounding statutory environment:  the Mining Act explained in the evidence of the plaintiff's mining law expert, Stuart House (exhibits 50(A) ‑ (F))

1. Mr House was admitted as a legal practitioner of the Supreme Court of Western Australia in February 2004, after obtaining a mature age law degree from the University of Notre Dame, Western Australia, in 2002.  Since then he has practiced as a solicitor in the resources area, providing advice concerning the Mining Act, tenement related issues and in mining resource related transactions. 

2. Prior to obtaining his law degree, in the period between 1989 and February 1996, Mr House was employed with the DIR, originally known as the Department of Mines.  He performed various roles within the registration division of the DIR, including processing and examining mining tenements, and acting as a Warden's clerk.  The tasks he performed included assessment of applications for mining leases, monitoring compliance with provisions of the Mining Act, preparation of applications for mining leases recommended for grant by the Minister and providing advice to applicants for mining leases and members of the public concerning the making of applications for mining leases compliant with the provisions of the Mining Act.  In that role, Mr House obtained a strong familiarity with various forms required to be completed and lodged relating to the obtaining of prospecting licences, exploration licences, mining leases, miscellaneous licences and general purpose leases under the Mining Act. 

3. Part of Mr House's duties as a clerk with the DIR included providing his advice on a range of matters pertaining to the rights and obligations of mining tenement holders, including expenditure requirements, and the effect of statutory surrender provisions applicable to exploration licence areas by reason of s 65 of the Mining Act.  In particular, Mr House was familiar with the DIR's electronic register system, physical tenement registers and the files that were maintained by the DIR for mining tenements.  Mr House also became familiar with the tenement maps kept and produced by the DIR, then later with the DIR's computerised tenement mapping system, known as a Tengraph, or as a Tengraph Map (or sometimes, a Tengraph Search). 

4. I assess Mr House's expertise upon the workings and processes of Western Australian mining tenements to be demonstrable.  He is a person who, through his DIR career work experience and subsequently as a practicing solicitor in the area of mining law in Western Australia, is appropriately qualified to provide expert opinions as to the workings of the DIR and its practices from 1989 to the present, in relation to mining tenements, generally, and particularly upon matters pertaining to exploration licences, mining leases and the applications for processes concerning the grant of those tenements. 

5. Mr House has also worked in the private sector as a tenement manager for Plutonic Resources Ltd, an ASX listed exploration and mining corporation, operating out of Perth.  In that capacity he was exposed to issues associated with applications for mining leases made to the DIR, particularly in relation to the compliance requirements arising in such applications relating to issues associated with the Native Title Act, as well as the general interrelationship between native title applications and pragmatic workings of the Mining Act.

6. Mr House's evidence in chief was adduced through a series of witness statements.  His primary evidence was given in exhibit 50A.  He also prepared a series of seven large maps (exhibits 50F(1) ‑ 50F(7)) showing the boundaries of:

   •EL20/209;

   •Applications for mining leases M20/343, M20/344 and M51/641;

   •EL20/535 as applied for and granted;

   •EL20/535, as it remained, subsequent to the grant of ML20/506; and

   •ML20/506.

7. Mr House was not seriously challenged in cross‑examination in respect of the reliability of most topics addressed within his witness statements.  Except as I shall clarify below, I accept his evidence as relevant and admissible opinion.

8. In his witness statement, Mr House explains the concept of graticular blocks for an exploration licence, in these terms (par 6, exhibit 50C):

   6.The certified search of an exploration licence and a mining lease identifies the boundaries of the mining tenement.  The boundaries of an exploration licence are described by way of graticular blocks, and the boundaries of the mining lease are described by way of describing the location of a datum point, and then by describing the bearings and distances of each boundary of the tenement.

   7.Exploration licences are applied for by reference to graticular blocks, as described in s 56C of the Mining Act 1978. They are blocks of 1 minute of longitude by 1 minute of latitude. Each block is identified by firstly, by the 1: 1,000,000 map it is situated within, then by a 'primary' block number, and then by 'graticule'. There are 25 graticules within each primary block and they are identified by the letters 'A' to 'Z' (omitting the letter 'I').

   8.The certified search for E20/290, records historical details relating to the application, grant, surrender and partial expiry of E20/209.  Page 2 of that certified search, records the grant on 27 April 1993 of 17 graticular blocks.  It shows that the 17 graticular blocks were each located on the Meekatharra 1: 1,000,000 map and comprise primary block 1767, graticules K, O, P, S, T, U, X, Y and Z, primary block 1768 graticules A, B, F, G, L, M and Q and primary block 1839, graticule D were granted to E20/209.

9. Much of Mr House's evidence was directed towards establishing that areas embraced by EL20/535, as originally applied for in 2002, cover substantially the same areas applied for under the Zygot AMLs.  I assess that to be reliably established.  As a necessary corollary, the area of ML20/506, which is an area derived from EL20/535, must also substantially fall within areas which, until September 2001, had been the subject of the Zygot AMLs. 

10. Section 67 of the Mining Act affords the holder of an exploration licence a right to apply with priority for a mining lease over all or part of the area of the exploration licence while the exploration licence continues in force. Upon a grant of a mining lease applied for pursuant to s 67, the area of the underlying exploration licence affected by the granted mining lease is excised from the exploration licence.

11. Mr House explained (ts 881) that '[p]rospecting licences and mining leases generally need to be pegged'.  The pegging requirement did not extend to an exploration licence.  Hence the boundaries of EL20/535, applied for in February 2002 by Mr Ruane and Zeedam, are unlikely to have been pegged on the ground at the time.  Rather, in 2002, the application for an exploration licence would routinely be made by simply completing the appropriate forms and identifying the areas applied for by reference to graticular blocks, upon lodgment at a mining registrar's office. 

12. However, with an application for mining lease over part of an area covered by a subsisting exploration licence (ie, such as for ML20/506, which was applied for on 29 March 2005, and granted on 21 October 2005 (see exhibit 16, page 6810)), there needed to be a physical pegging out of the ground.  As to that, Mr House said (ts 881.3):

    Somebody went out there and with one-metre high pegs and trenches attached a notice of marking-out to the ground.

13. A tenement search for ML20/506 (exhibit 8, page 3195), shows that the mining lease was granted for a 21‑year term on 21 October 2005.  The applicants were Zeedam and Mr Ruane, with a 50% interest each (exhibit 8, page 3196). 

14. The same search reveals that on 16 June 2006, Zeedam and Mr Ruane transferred their shares in ML20/506 to Iron Jack.  Iron Jack was, as I have mentioned, previously known as Winterfall.  Subsequently, Iron Jack Ltd changed its name to Crosslands.  It became a joint venture company held by Murchison Metals and Mitsubishi Development. 

15. A sale agreement was entered into between Zeedam, Mr Ruane and Winterfall on 28 July 2004 (exhibit 26, tab 25).  A further tenement acquired by Winterfall under the sale agreement is located elsewhere at Weld Range (EL20/552). 

16. Less than half the area of EL20/535 ultimately became the subject of ML20/506 (ts 885). 

17. In cross‑examination, Mr House said that in 1997, it was possible to conduct searches at the DIR to ascertain whether, in respect of any mining tenement, there had been an application made for a mining lease or leases (ts 888). 

18. Mr House (ts 890) confirmed that iron ore, as a mineral, is excluded from tenements 'until the tenement holder applies to have rights to iron ore included'.  He also said, 'you can't have a separate iron ore tenement granted where there is an existing tenement'. 

19. Mr House said that the general rule for applications for mining leases was that the party which had pegged the area first, enjoyed priority (ts 890).

20. In response to a question I asked Mr House, following completion of his re‑examination, he explained the position concerning (non) transferability of applications for mining leases (in the period between 1999 and 2000).  His evidence was (ts 892):

    In 1999, 2000 it was different from the way it is now.  [In] 1999, 2000 the department would not register a transfer of a mining lease that was in application or any tenement that was in application. 

    KENNETH MARTIN J:  How was that dealt with?‑‑‑They would simply refuse them.  If you lodged a transfer and it would often happen as part of a bundle of transfers and an application slips in by accident, you would simply have it back in the post a few days later.

    Did you ever act for vendors or purchasers in that situation?---I acted for - at that time I would have been dealing with those situations.  I hope I didn't lodge one but I've certainly seen them lodged and it's merely the department will just go through them, send them back and say, 'Look, lodge it again when it's granted.'

    And you say that changed? When did it change?---Now an application can be deemed to continue in the name of the transferee. In the situation where it is part of a conversion under section 49 or section 67 of the Act, which are conversions from prospecting and exploration licences to mining leases, they still - it's a deemed transfer if you transfer the underlying title, but that changed from recollection in the early 2000s but possibly later.

21. Arising out of that series of questions, Mr House provided this evidence during further re‑examination by senior counsel for the plaintiff:

    In a situation where, prior to the change you have just given evidence of, a party purchases mining lease applications which are held by another party - let's call it the vendor - what would the purchaser have to do before any transfer of those mining lease applications were effective to convey title to the purchaser?‑‑‑The purchaser would ordinarily have commitments, warrantees [sic] to preserve title pending its transfer.  The purchaser may have taken on the role of prosecuting the applications through a native title process, a power of attorney to do so - not necessarily the case but they may have, and other than that the purchaser sits and waits for the grant and then lodges the transfer upon grant of the tenement.   

    To the vendor?‑‑‑To the vendor, yes.

22. Another important aspect of Mr House's evidence concerned the ramifications of Native Title claims, and their interrelationship with applications for mining leases. 

23. Mr House referred to what he described as 'Native Title Letters' in respect of the DIR files for ML20/343, ML20/344 and ML51/641 (ie, the Zygot AMLs), dated 14 February 1997 and 11 April 1997 (exhibit 9, pages 3485 ‑ 3486 and 3509). 

24. Mr House's review of the DIR files in respect of each Zygot AML, led him to express an opinion that (par 19, exhibit 50A) the Zygot AMLs had been recommended for grant in 1997 (ie, by the Mining Warden to the State Minister) on the basis that all Mining Act requirements had been satisfied.  In Mr House's experience, applications for mining leases would be referred to the State Minister for grant, subject to meeting the requirements under the Native Title Act, after all the DIR's internal Mining Act requirements had first been satisfied.  Therefore, Mr House's view was that the Zygot AMLs had been recommended for grant to the State Minister, subject to the various processes required under the Native Title Act being completed.

25. Mr House explained the process by which Zygot had applied for mining leases under a conversion of surrendered areas from EL20/209, in accordance with s 67 of the Mining Act.  Subject to meeting the terms of the Mining Act, there was, in his opinion, a right held in an exploration licence holder at the time, to proceed to obtain a grant of a mining lease from the State Minister. 

26. I accept Mr House's evidence (pars 38 ‑ 39, exhibit 50A), and which I do not perceive to be challenged, as follows:

    38Based on my reading of the Files and my experience set out above I am of the opinion that the Applications were recommended for grant. I am of the opinion that the processing of the applications was suspended due to the practices and procedures of the Department established to ensure all tenement grants would be made in accordance with the NTA. I am of the opinion that but for the provisions of the NTA and the procedures put in place for compliance with it, the Applications would have proceeded and, absent any detrimental action by the applicant (such as withdrawing the Applications) the Department would have forwarded the Applications to the Minister for determination based on the recommendation that they be granted.

    39For the reasons set out in paragraph 38 above, my opinion is that given that the Applications were recommended for grant, there was a high probability of the Applications being granted by the Minister if native title requirements were satisfied.

1. In my assessment, the defendant's conceptual criticisms as collected above, and bearing against causation being established on the par 33(i) and par 33(ii) cases, are correctly stated.  They raise insurmountable causation obstacles against any acceptance of the par 33(i) or par 33(ii) cases.

2. As I observed however, they do not constrain the narrower par 33(iii) case, which only seeks compensation for the loss of the value of the Zygot AMLs, at their date of unilateral withdrawals by Zygot, at 19 September 2001.  By recourse to a reliable market, the assessment of the value of Kingstream's loss of the Zygot AMLs, measured at that time, was $500,000 under the par 33(iii) claim, if liability can be established.  

E)     Remoteness of damage

1. The plaintiff also accepts that remoteness of damage is a further conceptual threshold it must surmount.  But it contends that par 33(i), par 33(ii) and par 33(iii), all meet the remoteness of damage threshold. 

2. Again, I need to briefly evaluate the plaintiff's loss of chances cases (as claimed) distinctly in the remoteness perspective, as against Kingstream's more confined case in relation to par 33(iii), limited to loss of the value of the Zygot AMLs, as at September 2001.  (Always assuming, of course, on the basal hypothesis underlying this analysis, that it is established that there was a breach of an identified term or terms in the 1999 Sale and Purchase Contract addressing the Zygot AMLs, thereby entitling Kingstream to pursue damages for breach, against St Barbara.)

3. On the assumed breach hypothesis, I do not consider that the nature of a damages claim seeking only the assessed value of the withdrawn Zygot AMLs, as at September 2001, under par 33(iii), is too remote. 

4. Nor, in my view, is the loss of chance damages case under par 33(i).  Claims to damage arising out of lost mining leases (assuming causation is established) can meet, in my view, the remoteness threshold.  Objectively speaking, such a loss would or should have been foreseeable to a reasonable corporation in the position of St Barbara as of 1997 or 1999, as a consequence of the hypothesised acts of withdrawal by Zygot of pending AMLs at Jack Hills (assuming again that liability and causation are otherwise established, and assuming the implied term as to notice of a withdrawal of the AMLs is also established). 

5. The par 33(i) damage formulation would, I find, surmount the remoteness threshold of Hadley v Baxendale (1854) 9 Exch 341; (1854) 156 ER 145, as a loss (of the AMLs, or the mining leases to be granted therefrom) to Kingstream which arises in the ordinary course. St Barbara's failure to give notice of the looming September 2001 acts of withdrawal of the Zygot AMLs, inhibited Kingstream's prospect of moving to obtain mining leases derived from those Zygot AML areas (subject to potential reacquisition opportunities earlier discussed under causation). Any mining leases granted to Zygot still ultimately needed to be transferred to Kingstream (with further ministerial consent needed).

6. However, the same rationale does not, in my assessment, hold good for the plaintiff's most preferred further loss of opportunity case under par 33(ii), for the lost chance of profitably exploiting over time, mining leases at Jack Hills.

7. The plaintiff's arguments as regards its remoteness of damage case under pars 165 ‑ 175 of Annexure A of its written Closing Submissions, were as follows:

   Remoteness

   165K accepts it must prove that loss of the chance or opportunity to acquire a mining lease over the AML caused by withdrawal of the Mining Lease Applications was not too remote:  Amann supra n 47 at 92 and 99.

   166The rule of remoteness was settled in 1854 by Hadley v Baxendale [1854] 9 Exch 341.

   167The application of this rule, in the common law of Australia, was explained by Mason CJ and Dawson J in Amann supra at 91 -92. What has often been described as the first and second limbs of the rule according to their Honours, is to be accepted as a single statement of principle. This observation relied upon Lord Reid's speech in Koufos v Czarnikow Limited [1969] 1 AC 350 at p 385. Lord Reid stated the principle in Hadley (supra) n 52, as:

   Whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realized that such loss was sufficiently liable to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that the kind of loss should have been within his contemplation.

   168The fundamental purpose of the contract which came into existence when K exercised the Option was for the defendants to convey the tenements involved in the contract to K. Those tenements included the Mining Lease Applications. On either limb of the rule in Hadley the defendants realized that if the Mining Lease Applications were withdrawn, K would lose the opportunity to obtain a mining licence over the MLA area; because this was the natural consequence of the breach.

   169The authors of Cheshire and Fifoot's Law of Contract (9th Aus. Ed) 2008 [23.39] point out that whilst the formulation of the rule in Hadley v Baxendale refers to the contemplation of both parties, the critical issue is whether the defendants should have realized that the loss in question was a probable result of the breach. This appears from Lord Reid's statement of the rule in Koufos supra n 54 .

   170The rule in Hadley supra n 52 is based on the premise that a contracting party impliedly accepts the risk of loss that, at the time when the contract was made, it knew, or should have known, would probably result from the breach in question: Castle Constructions Pty Limited v Fekala Pty Ltd [2006] NSWCA 133 at [39].

   171It is well settled that before a defendant is liable, it is not necessary to establish that the defendant need contemplate the degree, or extent of the loss suffered, nor the precise events giving rise to that loss. It is sufficient that the defendant contemplated only the kind, or type of, loss in question Alexander v Cambridge Credit Corporation Limited, supra n 49, at 365­6.

   172As Mason P held in Fekala supra n 60 at [35], whilst it is convenient to identify two separate grounds for the purpose of analysis, in some cases the grounds may overlap.

   173The first ground is that a reasonable person would have realized that such a loss was likely to occur as a usual consequence of such a breach.

   174The second ground is that the defendant should have realized that such a loss was likely to occur on the basis of the defendants' actual knowledge of the circumstances.

   175Loss of the chance of acquiring a mining lease over the MLA area satisfies each limb of the rule in Hadley supra n 52.

8. At the submission under par 168 above, the plaintiff describes the fundamental purpose of the contract that would come into existence, once Kingstream exercised its option, as a contract to 'convey' the tenements, including the AMLs.  That fundamental error requires immediate correction.  AMLs, as we have seen, were simply not capable of conveyance.  Mining leases first needed to be granted by the Minister.  That process could take years, or even fail completely, especially if the uncertainties surrounding unresolved native title claims that needed to be settled to complete the process remained unaddressed. 

9. From a remoteness of damage perspective, with regard to the par 33(ii) case over the claimed loss of the opportunity to engage in a profitable exploitation of these mining leases by Kingstream, over time, it is appropriate to revisit cl 6.5 of the Option Deed of 26 March 1997, and then to recall that this clause provided an express term that formed a part of the Sale and Purchase Contract applicable to the Sale Interests, by reason of cl 4 of the Option Deed.  It will be recalled that cl 6.5 provided:

   St Barbara Mines warrants that save as disclosed in cl 6.3 above, the Sale Interests are in good standing and free from encumbrances and that St Barbara Mines is empowered to transfer the same to Kingstream.

   (emphasis added)

10. What is embedded in cl 6.5, and also more generally from the terms of the Option Deed as a whole, is the notion that the parties, objectively assessed, as at March 1997 and February 1999, contemplated an immediacy, in terms of a fully perfected sale and purchase transaction - under transfers which would follow, once Kingstream exercised its option rights within 12 months under the Option Deed.  The general tenor of the express terms in the Option Deed, and in the variations incorporated by the Supplemental Deed of 20 January 1998, carry an objective hallmark of the parties immediately proceeding to the consequential transfer of whatever subject matter comprised the Sale Interests.  Hence, a wholly inconsistent scenario of a long‑term post settlement holding of the Zygot AMLs by Zygot on behalf of Kingstream, is not what the parties, objectively assessed ever intended under their 1999 Sale Contract.  Accordingly, a remoteness of damage assessment, by reference to breach in September 2001 of a term of the 1999 Sale and Purchase Contract between Kingstream and St Barbara, should begin from the point of an accepted notion that the Sale Interests would be transferred quickly to Kingstream, rather than  held for it over time by St Barbara.

11. The plaintiff relies on cl 9 of the Option Deed, a promise by St Barbara to assist Kingstream by doing all acts and things necessary to obtain consents and given effect, in the form of St Barbara's (mutual) promise in the Option Deed.  But cl 9 must be assessed in its surrounding context of the envisaged post settlement tenement transfers for all Sale Interests to Kingstream.  No case was put at trial raising an argument that the cl 6.5 empowerment to transfer warranty, had been breached by St Barbara.  That same warranty was in the Sale and Purchase Contract, created upon Kingstream's exercise of its option rights, on 8 February 1999.  Clause 9, read in proper context, cannot advance matters for the plaintiff.

12. Assessment of the parties' objective reasonable expectations as regards faithful performance of an 8 February 1999 Sale and Purchase Contract, applying Lord Reid's formulation of the remoteness test from Koufos v C Czarnikow Ltd [1969] 1 AC 350, leads me to conclude that here, St Barbara is to be assessed (objectively) as reasonably foreseeing that a withdrawal of the Zygot AMLs (in circumstances as are hypothesised) could generate an outcome of jeopardising Kingstream's ultimate holding of mining lease tenements over those areas, but no more than that.

13. To go beyond the horizon of (objective) foresight towards possibly jeopardising by breach the obtaining of possible future mining leases, so as to also foresee a loss of a veritable 'El Dorado' iron ore project at Jack Hills, strays, in my view, into the realm of fantasy.  I do not accept, on all the evidence that, assessed objectively in March 1997, January 1998, or February 1999, that St Barbara would, should or could have had it in its corporate contemplation as an ordinary or natural prospect or consequence, that vast horizons of potential profit to Kingstream at Jack Hills by its participation in large scale DSO iron ore projects there, could be closed off.  The Jack Hills developments associated with the effort and money of Murchison Metals was all simply too far off in the future (assessed as at 1997 ‑ 1999) to be in realistic contemplation, even as a remote possibility at that time.  Axiomatically, that is so for the even wider loss of opportunity surrounding losing a combined exploitation of Jack Hills in conjunction with the tenement interests at Weld Range.  In 1997, 1998 and 1999 the expensive and time consuming exploration work that would be needed to provide a platform of knowledge for the holding of reasonable expectations of that kind, had not yet happened.  Many millions of dollars in exploration expenditures at Jack Hills would need to be outlaid by others post‑2001, to secure that level of factual knowledge and insight about the optimistic DSO iron ore production prosects for Jack Hills.  The first limb of the Hadley v Baxendale text based upon objective foresight cannot be met. 

14. The defendants' closing written submissions upon remoteness, between pars 307 ‑ 318, were in these terms:

    Remoteness

    307.Kingstream fails to satisfy either limb of Hadley v Baxendale: the loss it seeks is simply too remote. As a basic matter of contract law, a plaintiff is only entitled to the loss reasonably within the contemplation of the parties at the time of contracting. Kingstream properly concedes it must prove that its claimed loss is not too remote (para 172).

    308.In Transfield Shipping Inc v Mercator Shipping Inc [2009] 1 AC 61 at 68 [12]-[13], Lord Hoffman said:

    12.It seems to me logical to found liability for damages upon the intention of the parties (objectively ascertained) because all contractual liability is voluntarily undertaken. It must be in principle wrong to hold someone liable for risks for which the people entering into such a contract in their particular market, would not reasonably be considered to have undertaken.

    13. The view which the parties take of the responsibilities and risks they are undertaking will determine the other terms of the contract and in particular the price paid. Anyone asked to assume a large and unpredictable risk will require some premium in exchange. A rule of law which imposes liability upon a party for a risk which he reasonably thought was excluded gives the other party something for nothing. And as Willes J said in British Columbia and Vancouver's Island Spar, Lumber and Saw-Mill Co Ltd v Nettleship (1868) LR 3 CP 499, 508: 'I am disposed to take the narrow view, that one of two contracting parties ought not to be allowed to obtain an advantage which he has not paid for.'

    309.In the present case, the evidence demonstrates beyond any doubt that the damages alleged to have flowed from the defendants' conduct are too remote.

    310.The value claimed by Kingstream is within the second limb of Hadley v Baxendale. The 'natural'(i.e. first limb) loss from a failure to deliver the 'applications' is not receiving them. To claim any amount reflecting the future use to which Kingstream says it might have put those applications is to claim something within the second limb.

    311.It is worth recalling that Baron Alderson's statement of the second limb was (354, ER 151) losses 'such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it'.  

    312.First, the analysis above shows that EL 20/209 (and perhaps EL 20/176) was added to the contract at a very late date. In exchange, the consideration went up from $3 million to $3.2 million, an increase of $200,000.

    313.If (contrary to the defendants' submissions) these interests included the Mining Lease Applications, then the parties certainly did not contemplate or include in their bargain the value of any of the potential earnings now sought by Kingstream.  To use Lord Hoffman's words, the defendants did not assume the 'large and unpredictable risk' for which Kingstream now seeks to recover, and to allow Kingstream to succeed would give it 'something for nothing'.

    314.Secondly, Kingstream has not (and indeed could not) lead evidence that, at the time of entering into the Option Deed, it was then intending to work the land in respect of the Mining Lease Applications. It was not a course of conduct the risk of the loss of which could, or would, have been reflected in the contract. It was a loss of the kind described by Alderson B in Hadley v Baxendale itself as one 'which the party in breach was unable to contemplate when considering the terms on which he could agree to enter into the contract', to use the words of Lord Hope of Craighead in Mercator Shipping.

    315.It was the kind of loss that, had Kingstream wished to bring within the risks assigned by the contract, such that the defendants would be liable for them were they to breach the contract, would have to be incorporated specially into the contract.

    316.A reasonable and objective bystander standing in the room at the time the Option Deed was being signed would have answered 'certainly not' had anyone then asked him whether a reasonable person would consider that the contract would place upon the defendants the risk of a possible loss of the kind asserted by Kingstream; or that the words and conduct would have led a reasonable person in the defendant's position to believe that: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 [40].

    317.Thirdly, the usual understanding of those involved in the market for mining lease applications was to treat them as simple expectancies, with any future value (of precisely the kind Kingstream claims) very heavily discounted. There was a market for 'applications', and they were effectively interchangeable. To the extent that the parties, and the market, considered that there might be any future profits or value from the working of leases, that profit or value was incorporated into the market price. The Applications were the kind of asset held only for these future dealings. Any compensation for their loss allocated by the contract is therefore met by awarding the market price at the time.  This would have been both parties expectation at the time.

    318.The evidence of each of Mr Hall and Mr Retter demonstrates that, at the time the contract was made, and indeed through to 2002, it was simply not in the contemplation of the market that factors would arise making it viable to work the land in the area, let alone in the value claimed by Kingstream. As both a subjective and objective fact, the parties to the Option Deed were trading in assets whose speculative value was captured by the market. There is no evidence to suggest that the parties considered or bargained upon any chances, likelihoods or contingencies other than those reflected in the market price. The market price is therefore the extent to which the parties bargained upon any risk in relation to this speculation, and therefore the most that Kingstream is entitled to recover.

15. I accept the force of those submissions towards the remoteness threshold as regards the most preferred par 33(ii) damages case pursued by the plaintiff.  The remoteness hurdles cannot be overcome by Kingstream, as regards a case premised around loss of the opportunity of profitably exploiting over some undetermined future period, mining leases - when finally obtained by Kingstream over the Zygot AML areas.

16. The plaintiff's submissions as to Kingstream's lost opportunities do not acknowledge any distinction between what I assess are two conceptually distinct loss of chance cases, by par 33(i) and par 33(ii).  The plaintiff's submissions elide across both, on the inferred premise that loss of the first chance (of obtaining mining leases) necessarily carries with it foreseeability of the loss of the second chance (subsequent profitable exploration over time of those mining leases).  I reject the premise. 

17. The preferred lost opportunity case upon par 33(ii), is dependent upon St Barbara foreseeing potentially billions of dollars being raised in the future to fund dedicated port, rail and mine infrastructure to support a DSO iron ore exporting operation out of Jack Hills and Weld Range.  But at the relevant times (1996 ‑ 1999) Kingstream was still primarily focussed on establishing a secondary steel operation at Oakajee, and St Barbara was pursuing its gold mining core business.  An implementation of a long term DSO iron ore production and export business plan at Jack Hills by Kingstream, akin to what has been subsequently pursued by Murchison Metals, was never discussed, as between Kingstream and St Barbara between 1996 ‑ 1999, on all the evidence.  So there is also no evidentiary prospect of the second limb of Hadley v Baxendale being met to assist the par 33(ii) damages case of the plaintiff. 

F)     Lost chances

1. The plaintiff's 'rolled up' approach to what I assess as conceptually distinct lost opportunity cases under par 33(i) and par (33)(ii), is exemplified baldly at par 179 of the plaintiff's written submissions:

   Loss of the opportunity to obtain a mining lease over the MLA areas had considerable value.  As events have shown, ML20/506 has proven to have had substantial value.

2. There may obviously present different factual scenarios around diverse contractual breaches, where the subject matter of what is lost, is only capable of being evaluated as the worth of a lost chance.  By illustration, I mention the facts of the leading authority in the area of lost opportunity, Sellars.  But here, where what is lost is something traded as a commodity in a reliable market at the time of the assumed breach in 2001, the conceptual need to engage in an exercise of valuing a less tangible subject matter (ie, a chance, or chances), usually will not arise.  This is this case.  Upon the reliable valuation evidence received at trial from Mr Retter and Mr Hall, the worth of the Zygot AMLs was well capable of being valued in a reliable market, as at September 2001, the time of the assumed breach.  On that foundation, it is neither necessary, nor appropriate in my view, to evaluate the worth of a lost chance of obtaining, let alone the chance of subsequently exploiting on a profitable basis, a fully operational Jack Hills DSO Project.

3. Were it necessary for me to evaluate Kingstream's profit exploitation lost chance case under par 33(ii), on the basis of weighing the prospects as at September 2001, of Kingstream profiting from a successful exploitation of Jack Hills mining leases coming to fruition in the future (either alone at Jack Hills, or in conjunction with Midwest's development of its iron ore tenements at Weld Range), I would assess that prospect in 2001, as so wholly speculative and fanciful as to be a lost opportunity of negligible value, applying observations in Sellars (355, 364).

SECTION 8: CONCLUSION AS TO DAMAGES, CAUSATION AND REMOTENESS

1. The plaintiff's concluding written submission as to damages was in these terms:

   224K's submission is that the value of what it lost is at least $350M.

2. From all of what I have now said concerning the trial issues as to liability and damages, it is apparent that I must reject that submission.

3. If the plaintiff had made good a cause of action on behalf of Kingstream against St Barbara for damages for breach of a contractual term concerning the Zygot AMLs, based upon St Barbara's inaction, as regards failing to give notice of Zygot's looming withdrawal of those AMLs in September 2001, then the loss would properly be measured at the time of breach, without using hindsight.  Kingstream's contractual damages are well capable of being assessed fairly, by reference to a prevailing market for the trading of AMLs, as at September 2001. 

4. On the evidence of the plaintiff's expert, Mr Retter, the assessed worth of the Zygot AMLs at that time, would be $500,000.  An award of damages at that level would render just and proper compensation to Kingstream for an immediately sustained loss as at September 2001, assuming breach is made out. 

5. There is no proper conceptual basis I find to award damages to Kingstream for loss of an opportunity to obtain the 21‑year mining leases over the Zygot AML areas.  Nor is there any basis to award compensation for loss by Kingstream of an even more speculative opportunity to profitably exploit the AML areas, in a fashion akin to the exploitation and development of the same areas by Murchison Metals under its Jack Hills Project over the period 2005 ‑ 2009.  To award compensation on those hypotheses is not, in my view, at all justified, in legal principle, fairness or in fact.

6. In the end, however, the plaintiff fails to establish liability against St Barbara or Zygot on any of its causes of action.  As a result, all the plaintiff's claims must be dismissed.