Koolan Iron Ore Pty Ltd v Rizhao Steel Holding Group Co Ltd [No 2]
[2010] WASC 386
•16 DECEMBER 2010
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: KOOLAN IRON ORE PTY LTD -v- RIZHAO STEEL HOLDING GROUP CO LTD [No 2] [2010] WASC 386
CORAM: KENNETH MARTIN J
HEARD: 17 NOVEMBER 2010
DELIVERED : 17 NOVEMBER 2010
PUBLISHED : 16 DECEMBER 2010
FILE NO/S: ARB 18 of 2010
BETWEEN: KOOLAN IRON ORE PTY LTD
Plaintiff
AND
RIZHAO STEEL HOLDING GROUP CO LTD
Defendant
FILE NO/S :ARB 19 of 2010
BETWEEN :MOUNT GIBSON MINING LTD
Plaintiff
AND
RIZHAO STEEL HOLDING GROUP LTD
Defendant
Catchwords:
Mareva - Freezing orders - Ancillary orders - Attachment - Cargo in ships - Third parties - Jurisdiction to order - Confidential information - Orders for disclosure of information as to iron ore purchase arrangements with a view to future freezing order relief
Legislation:
Rules of the Supreme Court 1971 (WA)
Result:
Application granted in part
Category: A
Representation:
ARB 18 of 2010
Counsel:
Plaintiff: Mr K J Mony de Kerloy & Ms TBA
Defendant: Mr F M Douglas QC & Mr S K Dharmananda
Solicitors:
Plaintiff: Freehills
Defendant: Holman Fenwick & Willan
ARB 19 of 2010
Counsel:
Plaintiff: Mr K J Mony de Kerloy & Ms TBA
Defendant: Mr F M Douglas QC & Mr S K Dharmananda
Solicitors:
Plaintiff: Freehills
Defendant: Holman Fenwick & Willan
Case(s) referred to in judgment(s):
Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380
Jackson v Sterling Industries Ltd (1987) 162 CLR 612
Koolan Iron Ore Pty Ltd v Rizhao Steel Holding Group Co Ltd [2010] WASC 384
Lister v Stubbs (1890) 45 Ch D 1
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30; (1998) 195 CLR 1
Perth Mint v Mickelberg (No 2) [1985] WAR 117
Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd [2010] WASC 385
KENNETH MARTIN J:
(This judgment was delivered extemporaneously on 17 November 2010 and has been edited from the transcript. For convenience, this decision, as part of a series of extempore reasons for decision, will be referred to as 'Rizhao 5'.)
Relief is sought in both ARB 18 and 19 of 2010 on the application of the respective plaintiffs; that is Koolan Iron Ore Pty Ltd (Koolan) in ARB 18 of 2010 and Mount Gibson Mining Ltd (Mount Gibson) in ARB 19 of 2010.
The characterisation of the relief sought, by reference to the terminology used by the High Court in Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 [42], is a Mareva order. In previous times the terminology used was that of a Mareva injunction.
Mareva injunctions or orders have been around for at least 30 years, and are partly a product of Lord Denning's work in the Court of Appeal in the United Kingdom: see Mareva Injunctions (1985) 59 ALJ 22.
The jurisdictional basis for this relief has been the subject of debate over the last 30 years. Mareva orders are the subject of three decisions in the High Court of Australia, commencing with Jackson v Sterling Industries Ltd (1987) 162 CLR 612; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30; (1998) 195 CLR 1 and then, Cardile.
There is also a statutory basis for like relief now enacted pursuant to the Civil Judgments Enforcement Act 2004 (WA), see s 86 under div 7 of the Civil Judgments Enforcement Act by reference to terminology used in s 85, 'available asset'.
The Rules of the Supreme Court 1971 (WA) also expressly provide now for a mechanism of 'freezing orders', under O 52A, introduced by amendments carried into effect on 21 February 2007. To some extent those provisions codify, indeed possibly advance, the case law, in terms of the available scope of potential Mareva relief.
In their earliest form, Mareva injunctions were usually sought in circumstances where a judgment had not yet been obtained, but where there was a perception on behalf of a putative judgment creditor that the whole process of proceeding to obtain judgment, might be rendered futile ‑ because there would be no attachable assets available in terms of satisfying an end judgment, were it ultimately obtained: see Perth Mint v Mickelberg (No 2) [1985] WAR 117.
Mareva relief was revolutionary, in that a long line of authority, going back to the 1890's, see Lister v Stubbs (1890) 45 Ch D 1, established that there could not be a pre‑judgment execution against a potential judgment debtor. Mareva remedies which were provided by courts of the United Kingdom from the 1970's and onwards, had to be rationalised with that position. However, the underlying jurisdictional basis for such orders has been controversial.
For Australia, the position was settled in Cardile in 1999. In particular, I would refer to Cardile, and observations at [41] therein made by reference to the earlier decision Patrick Stevedores, as to the power of the Federal Court under s 23 of the Federal Court of Australia Act 1976 (Cth) to make interlocutory orders. Here, it was said (quoting from observations of Brennan J in Jackson):
A judicial power to make an interlocutory order in the nature of a Mareva injunction may be exercised according to the exigencies of the case and, the schemes which a debtor may devise for divesting himself of assets being legion, novelty of form is no objection to the validity of such an order (621).
The Mareva injunction is the paradigm example of an order made to prevent the frustration of a court's processes.
In Cardile at [41] and [42], the plurality referred with approval to a cited passage from Patrick Stevedores, but then added:
Subject to two matters to which we shall come, this passage should be accepted as a correct statement of principle. The first matter is that, in that passage, the attention of the Court was directed to orders against parties to the proceedings and against whom final relief was sought. In that situation, the focus is the frustration of the court's process. If relief is available against non-parties, the focus must be the administration of justice. The second matter is that, to avoid confusion as to its doctrinal basis, it is preferable that references to 'Mareva orders' be substituted for 'injunctions' [42].
The plurality continued as to orders made after judgment is obtained:
In Australia, for many years, Mareva orders have been made in aid of the exercise of the specific remedies provided for execution against judgment debtors. Such orders are not interlocutory as they may operate after the recovery of final judgment, yet they are impermanent in the sense that they preserve assets and assist and protect the use of methods of execution and do not substitute for them. In respect of their operation after, as well as before, the making of orders for final relief, the Mareva order should, in general, be supported by an undertaking as to damages [43].
Presently, I am dealing with a situation in respect of which an arbitrator on 16 August 2010 has made two awards in favour of the respective applicant plaintiffs, that in aggregate, exceed US$114 million against the defendant in each of these actions, namely Rizhao Steel Holding Group Ltd (Rizhao). Those awards were made just on three months ago.
No payment on either award has yet been rendered.
On 3 November 2010, I made orders under s 33 of the Commercial Arbitration Act 1985 (WA), to the effect that those awards were capable of being enforced in this court, as if they were judgments of the court: see Koolan Iron Ore Pty Ltd v Rizhao Steel Holding Group Co Ltd [2010] WASC 384 (Rizhao 2).
So the position is that, unlike for many Mareva order cases, the underlying circumstances here are that final judgment has, in effect, been obtained against Rizhao, based upon the awards of the learned arbitrator in the middle of August 2010 and now, by my s 33 orders.
Moreover, no component of these awards has been paid in over three months.
Rizhao is a foreign corporation resident outside of Western Australia, based in the People's Republic of China, doing business worldwide. From the evidentiary materials relied upon, apart from one category of potentially seizable property - about which there is speculation as to details - namely, Western Australian iron ore which has been purchased by Rizhao and so, which constitutes cargo loaded, or to be loaded, into ships that receive the bulk iron ore at Western Australian ports, and then transport that iron ore by sea to China - there are no other identifiable tangible real or personal property assets of Rizhao known of, within the jurisdiction of Western Australia.
Enforcement on the unmet US$114 million awards has not been stayed, on any application made to this court.
Applications were brought by Rizhao before me, in this court seeking leave to appeal against only limited aspects of the two awards, to an extent in aggregate of about $US40 million, under leave applications that I determined yesterday: see Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd [2010] WASC 385 (Rizhao 4). My decision was to refuse Rizhao leave to appeal in respect of a US$40 million challenge to both arbitral awards.
So the position today, is that the two arbitral awards stand as fully enforceable under s 33 of the Commercial Arbitration Act, but wholly unpaid, and with no stay orders. It is also the case, uncontroversially put to me, that the arbitral awards - since the middle of August 2010, and now as judgments of this court, registered pursuant to s 33 of the Commercial Arbitration Act, are capable of being the subject of execution against Rizhao, under international treaty arrangements that are applicable in the People's Republic of China.
I have no information before me about any execution steps taken to date within the People's Republic of China. So I say nothing more, other than the fact that there is no information about that before me.
Failure to pursue the judgment or award by execution steps taken in the People's Republic of China since August 2010, is one consideration raised by Rizhao, in the context of the relief that I am asked to order today, in terms of the discretion I exercise.
For the purposes of recording the evidence relied upon in today's applications, I should say that the plaintiffs, as applicants for relief, rely upon two affidavits: first an affidavit of David Garth Berg, sworn 10 November 2010, and an affidavit affirmed today by Mr Shane Michael Murphy - with attachments that essentially contain correspondence passing between solicitors.
On behalf of Rizhao, in resisting the applications, there is put to me, a bundle of documents.
This application is brought on and argued in circumstances of some urgency. Thirteen documents were put in this bundle of material, comprising some 52 pages, as prepared by Rizhao's solicitors. There was no objection to me referring to any of that Rizhao material, and I have done so.
In respect of Mr Berg's affidavit, senior counsel for Rizhao raised an objection against essentially, some statements of belief found therein as to the likely availability or potentiality of iron ore cargoes purchased and owned by Rizhao, being found within the jurisdiction of Western Australia and so, being identified for the purposes of freezing and service relief, now sought by the plaintiffs against Rizhao.
Mr Douglas QC for Rizhao, made a submission that Mr Berg should be called to be cross‑examined on his affidavit sworn in each matter, so that these expressions of general belief - but without any underlying foundational facts - could be probed. I rejected that proposal for cross‑examination. The Berg affidavit is to be assessed on its merits.
The bound materials relied upon by Rizhao also incorporated a notice to produce, given by Rizhao's solicitors in respect of certain contracts, as are referred to in Freehills' correspondence passing between the solicitors. There has been no effective response to that notice to produce. This lack of response was also a consideration pressed upon me by Rizhao, as bearing against the application for freezing order relief being acceded to, on the inadequate strength of the material put before me, to found relief, assessed either under O 52A of the Rules of the Supreme Court, or under the Civil Judgments Enforcement Act, or at common law.
I will refer briefly to some of the information in Mr Berg's affidavit of 10 November 2010. At par 7 he recites some well‑known background to this dispute, particularly the arbitral awards and to orders which I earlier have made. None of that seems contentious. However, at pars 14 ‑ 27, Mr Berg expresses some beliefs. This all culminates at pars 19 ‑ 20, where Mr Berg says:
19.Accordingly, I believe that from time to time Rizhao has assets (iron ore loaded on to ships at West Australian ports) temporarily within Australia. Shortly after the ships are loaded they leave port to deliver the ore to China for use in Rizhao's steel mills.
20.Rizhao's interest in the sale contracts referred to, in paragraph 17, that any iron ore loaded in Australian ports, once it passes the ship's rail pursuant to those sale contracts, constitute assets or property of Rizhao situated in Australia.
The position in respect of those statements of belief by Mr Berg, in terms of an evidentiary foundation, does seem somewhat threadbare. Essentially, the position can be analysed as Mr Berg's hypothesis, based upon his broad knowledge of what Rizhao does, his knowledge of how the iron ore industry, particularly in Western Australia as an export industry by ship, operates ‑ and then his knowledge about a general use of FOB shipping contracts in the iron ore industry of Western Australia.
In the context of the relief sought today, on the application of the plaintiffs, seeking affirmative freezing orders, by reference to Rizhao's assets in the nature of iron ore cargoes, the information is inadequate, in my assessment in order to found affirmative freezing order relief.
Indeed, the paucity of the Rizhao iron ore cargo information is so self‑evident, that what I was essentially pressed to do today by counsel for the applicants was to only make orders for a limited component of the relief, as is sought on the plaintiffs' chamber summonses.
The applicants' submission today was that I just make orders to compel a provision of information from Rizhao about its Western Australian iron ore purchase contracts, so that information might then be assessed by the plaintiffs, in terms of their ascertaining whether or not there may be (within the jurisdiction of Western Australia, under shipping arrangements with local iron ore sellers and exporters such as OneSteel, FMQ, Robe River or BHP) consignments of iron ore cargo ‑ which are or will become the property of Rizhao, whilst a ship is berthed or within the jurisdictional waters of Western Australia, for a purpose of amenability to in personam freezing orders against a Rizhao cargo of iron ore, if that is the case.
Today then, counsel for the applicants sought relief no higher than information disclosure orders, from Rizhao, seeking to clarify the situation regarding what is a substantive lack of detailed information about such Rizhao cargo matters, and with a view to finding out, with some degree of assurance, what the precise position was. But counsel did not resile from pressing for these information disclosure orders today, as necessary and appropriate, on a basis that there had been a total lack of information volunteered to date by Rizhao in terms of its iron ore purchase contracts, so that it was said to be perfectly appropriate, in all the circumstances, for ancillary orders - ancillary that is to a future potential making of freezing orders against iron ore cargoes in the future - in order to address a fundamental concern about potential Rizhao assets capable of being seized or sold, in an environment of a lack of information emanating voluntarily from Rizhao, dealing with the precise situation as to its cargoes.
Even put at that limited level however, the responsive submission of senior counsel for Rizhao, was critical of the application for disclosure of information. This was on the basis, essentially, that the applicants were said to be taking a 'boot straps' approach. It was submitted that until there could first be identified an available Rizhao asset to seize or freeze - either for the purposes of s 86 of the Civil Judgments Enforcement Act or, for a potential freezing order, under the Rules of the Supreme Court O 52A - it was conceptually inappropriate for the court to even consider ancillary disclosure of information orders ‑ because it had not yet been shown at any level, particularly by reference to the paucity of evidence (as opposed to beliefs expressed in Mr Berg's materials) and the materials which surrounded it, that there was simply no proper basis for this ancillary relief to be considered today.
The divergence of approach as to the appropriateness of ancillary information disclosure orders seems today to be the focus of what is now in dispute. I did not assess counsel for the plaintiffs to be pressing for freezing orders in terms of pars 6 ‑ 7 of a minute of proposed orders that was submitted. Rather, he only sought to press for the provision of information in terms of pars 8 ‑ 9 of the minute.
Counsel for Rizhao also expressed concerns about the appropriateness of in personam orders for provision of information, on the basis that there may be, in a hypothetical scenario of those orders being made but not answered, some question as to their enforceability by this court. Rizhao has no directors resident in Western Australia against whom sequestration proceedings could be taken, were this court's orders not complied with, if they were made.
As to that submission, it seems to me that I ought not proceed on any basis that an order requiring the provision of information would be disobeyed by Rizhao. Rizhao was a party to the iron ore supply agreements of June 2007, which were assessed and dealt with by the learned arbitrator. Those were contracts expressly stipulated to be governed by West Australian law and they contain an exclusive submission to the jurisdiction of the Supreme Court of Western Australia by the parties for their disputes. Rizhao participated actively in the arbitration conducted in Perth during 2010, before the learned arbitrator. After the applicants commencement of proceedings in this court against Rizhao, it has now entered unconditional appearances, thereby submitting again to the jurisdiction of this court, in order for these proceedings to be properly pursued and determined.
I accept therefore counsel for the applicants' submission, that I ought not to proceed on any basis of an assumption that this court's in personam orders, if made for the provision of information by Rizhao, would not be obeyed to the fullest extent, were I to consider it appropriate, in the exercise of my discretion, to make those orders.
There are some further considerations. There is, as I have said, no information before me at all about steps taken, if any, to date in order to secure payment of the outstanding judgment through execution proceedings taken in the People's Republic of China. I have no information as to that, and so, I make no assumptions either way.
An absence of information about steps taken to enforce the awards or the judgments against Rizhao's overseas assets, would impact, as one discretion, were I asked today to make substantive freezing orders against Rizhao's iron ore cargoes in Western Australia. Failure to provide any information about the applicants' efforts after three months, as to execution and their success (or lack of success) in other jurisdictions, including in the People's Republic of China, would be a powerful consideration against a grant of freezing order relief.
But this consideration is not so significant today, in circumstances where the only relief I am asked to grant, essentially is as to the compulsory provision of information by Rizhao, as to its cargo assets in Western Australia.
A powerful discretionary consideration in favour of making the orders that are confined to the provision of information today, is, in my view, that there have been many earlier requests (seen in correspondence between solicitors) for this information to be provided, voluntarily. These requests have been met with less than fulsome responses ‑ in terms of the expressed lack of amenability by Rizhao to date, towards voluntarily disclosing that information, absent a compulsive order from this court.
Indeed, Rizhao's stance against volunteering asset information has even flowed through to requests made to third parties who deal with Rizhao, to requests by solicitors for Koolan and Mount Gibson Iron, seeking information concerning their iron ore supply contracts with Rizhao. At least in one case, the response received through solicitors for Robe River, was to indicate that the requested information could not be provided ‑ because Rizhao has refused to consent to the information being provided by Robe River.
I do not infer anything pejorative against Rizhao in terms of it wishing to keep its confidential business information to itself, or in it to date, not volunteering confidential information ‑ until it is required to do so under an order of a court.
I also do not infer anything pejorative against Rizhao by reason of it conducting its business ‑ whereby it purchases bulk iron ore from Western Australian based iron ore suppliers ‑ which ore is then loaded into ships and taken out of Western Australia to China, where it is processed and made into steel. These activities all seem to me to be in the ordinary course of Rizhao's business.
Again, I do not infer anything pejorative against Rizhao, based upon some references found in materials to a looming potential restructuring of that foreign corporation (its assets being the subject of a looming corporate restructure), on a basis that some new joint venture vehicle company in the People's Republic of China might acquire Rizhao's assets, with Rizhao then receiving and holding shares in the restructured joint venture vehicle.
In the materials put before me on today's application by both parties, there was reference to the pending restructure proposal for Rizhao in the People's Republic of China, being put back, at least to a time beyond 30 November 2010. That November date, at an earlier point, had loomed as a likely deadline for the restructure to occur. That looming November 2010 deadline date, had injected elements of great urgency into the earlier applications between these parties, determined in this court. A Rizhao restructure, if it proceeds, as of today, now looks less imminent.
Balancing all those matters, questions arise as to the appropriateness and, indeed, the basis in jurisdiction for me to make even limited ancillary orders today, requiring a disclosure of information by Rizhao.
I am satisfied, at a jurisdictional level, that I have the power to make the requested orders, first at common law. See observations made by the High Court in Cardile [41] ‑ [44]. There is the power to render orders to make the court processes efficacious, particularly in circumstances where there are unsatisfied awards and judgments of great magnitude (exceeding US$114 million since 16 August 2010, excluding interest), and a lack of readily identifiable real property or personal property of Rizhao within the jurisdiction of Western Australia, to meet the large and presently unsatisfied, judgment sum.
But it also seems to me that the relevant provisions within the Civil Judgements Enforcement Act are expressed in broad terms, to empower this court to make efficacious orders, when needed. In particular, I refer to s 86(1)(e), conferring power to make an order that facilitates the appropriation or realisation of the asset. I refer, as well, to the preface to s 86(1) of the Civil Judgements Enforcement Act, in terms of an available asset of a judgment debtor being conveniently appropriated or realised.
Even the valid criticisms made about the paucity of solid factual information found in Mr Berg's affidavit (as opposed to his beliefs) ironically, do demonstrate via a somewhat negative route, that there presently exists a lack of convenience for the applicants in their appropriating or realising against an available asset of Rizhao, in the jurisdiction of Western Australia.
I am also satisfied that O 52A r 5, particularly r 5(4), is unconstrained in its terms by any need to show an intent in a judgment debtor, to act in a way designed to frustrate the enforcement of a judgment. So it may be that even the normal day to day operations of a judgment debtor (actual or putative) under ordinary business practices could be assessed as conduct sufficient to produce the effect of frustrating a potential recoupment on a judgment debt or chose in action. This type of conduct could be assessed as sufficient to jurisdictionally empower the court to make orders envisaged under the broadly drawn O 52A, and indeed, to make ancillary orders as well, if they are appropriate.
I am satisfied then, that I have jurisdiction to make compulsory information disclosure orders, if appropriate.
The remaining question is to the appropriateness of disclosure orders sought by the applicants' minute in both matters.
I am satisfied provisionally, that this course, as a matter of discretion, is now appropriate, bearing in mind, especially, the effects of the stance taken by Rizhao to date, in terms of if not volunteering any information about its iron ore contracts and cargoes.
From my dialogue today with counsel for the applicants, concerning a hypothesis of potentially seeking to attach a Rizhao iron ore cargo in a loaded ship at a Western Australian port, it does seem to me that a party seeking the freezing or attachment of such cargo would need to be extremely precise in first assessing the relevant contractual documentation applicable to a carrier ship, and second as to the contracts of carriage or charterparties associated with any ore shipments which have been loaded, or are about to be loaded as cargo in a ship.
Precision in these respects, requires information. I do accept that in the circumstances this may be highly confidential information which to date, legitimately, has not been volunteered by Rizhao. But now, to assist the processes of execution on an unmet debt, that currently subsists in a significant amount and has been wholly unsatisfied for more than three months, it does seem to me to be appropriate that the precise information as to Rizhao's iron ore contracts and cargoes, the subject of those contracts, now be ordered to be compulsorily disclosed by Rizhao.
I have not heard precise submissions in terms of the formulation of the proposed information disclosure orders, which are the subject of pars 8 ‑ 9 in the applicants' minute. But it looks to me, at a glance, that in some respects pars 8 ‑ 9 are formulated at too high a level of disclosure generally. That is inappropriate.
However, in a general sense it does seem to me, that proper, targeted inquiries for the provision of information and documentation from Rizhao to the plaintiffs, concerning iron ore shipments and its cargoes, is now appropriate.
I indicate that I am prepared to make compulsory disclosure orders of that character on terms, albeit it seems to me that pars 8 ‑ 9 of the proposed minute are drawn in omnibus fashion, and do not have a sufficiently targeted quality, as proper demands for information. They should be more precisely drafted.
Accordingly, what I propose now is to afford the parties through their solicitors, the opportunity to confer about the precise terms of compulsory orders for provision of this information. In the absence of agreement as to the terms of these orders by way of conferral, I will call the matter back for determination by me as to the terms of the orders. But it seems that a process of intense conferral first needs to occur.
Those are my reasons, essentially, for upholding today, a component of the plaintiffs' application, as regards the compulsory provision of information concerning Rizhao's contracts with iron ore suppliers in Western Australia, and concerning Rizhao iron ore cargoes, for the purposes of potential freezing or attachment, in a context of carriage and shipping arrangements that are applicable to Rizhao iron ore purchase contracts with its iron ore suppliers from Western Australia.
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