Mineral Resources Ltd v Pilbara Minerals Ltd - [2016] WASC 338

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: MINERAL RESOURCES LTD -v- PILBARA MINERALS LTD [2016] WASC 338

CORAM: BANKS-SMITH J

HEARD: 14 OCTOBER 2016

DELIVERED : 17 OCTOBER 2016

FILE NO/S: CIV 2700 of 2016

BETWEEN: MINERAL RESOURCES LTD
First Plaintiff
ACN 611 488 932 PTY LTD
Second Plaintiff
AND
PILBARA MINERALS LTD
Defendant

Catchwords:

Contract - Dispute resolution - Where plaintiff sues for breach of contract which contains provision for expert determination - Where defendant seeks stay - Whether expert determination mandatory - Whether proceedings should be stayed - Exercise of discretion to grant stay - Right of first refusal - Where validity of notice disputed - Where issues of construction - Whether issues amenable to expert determination

Legislation:

Nil

Result:

Stay granted

Category: B

Representation:

Counsel:

First Plaintiff                  :     Mr M L Bennett & Mr M J M Nas
Second Plaintiff             :     Mr M L Bennett & Mr M J M Nas
Defendant:     Mr S K Dharmananda SC & Mr M T McKenna

Solicitors:

First Plaintiff                  :     Bennett + Co
Second Plaintiff             :     Bennett + Co
Defendant:     Gilbert + Tobin

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

Badgin Nominees Pty Ltd v Oneida Ltd [1998] VSC 188
Baulderstone Hornibrook Engineering Pty Ltd v Kayah Holdings Pty Ltd (1997) 14 BCL 277
Dance With Mr D Ltd v Dirty Dancing Investments Pty Ltd [2009] NSWSC 332
Fimiston Mining NL v Western Reefs Ltd (Unreported, WASC, Library No 950633, 22 November 1995)
Ipoh v TPS Property No 2 Pty Ltd [2004] NSWSC 289
ITC Ltd v Timbercorp Ltd (in liq) [2009] SASC 342
JTA Le Roux Pty Ltd as trustee for the FLR Family Trust v Lawson [2013] WASC 293
Moraitis Fresh Packaging (NSW) Pty Ltd v Fresh Express (Australia) Pty Ltd [2008] NSWCA 327
Sanrus Pty Ltd v Monto Coal 2 Pty Ltd [2005] QSC 284
Santos Offshore Pty Ltd v Apache Oil Australia Pty Ltd [2015] WASC 242
Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587
Shoalhaven City Council v Firedam Civil Engineering Pty Ltd [2011] HCA 38; (2011) 244 244 CLR 305
Simsmetal Ltd v Wanless Metal Industries Pty Ltd (Unreported, NSWSC, 19 March 1997)
Straits Exploration (Australia) Pty Ltd v Murchison United NL [2005] WASCA 241; (2005) 31 WAR 187
The Heart Research Institute Ltd v Psiron Ltd [2002] NSWSC 646
THL Robina Pty Ltd v The Glades Golf Club Pty Ltd [2004] QSC 461
Warren v Lawton [No 3] [2016] WASC 285
Zeke Services Pty Ltd v Traffic Technologies Ltd [2005] QSC 135; (2005) 2 Qd R 563
BANKS-SMITH J:

Summary

This application is for a stay of proceedings on the basis the parties contractually agreed to resolution of the dispute by expert determination.
The defendant (Pilbara Minerals) is a mining and exploration company listed on the Australian Securities Exchange (ASX), specialising in the exploration and development of specialty minerals including lithium. Lithium and its chemical compounds have a wide range of industrial…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] WASC 338
Decision Date: 17 OCTOBER 2016

CaseChat Overview and Summary

Mineral Resources Ltd and Associated Nickel Co Ltd (ACN) sued Pilbara Minerals Ltd for breach of contract. The dispute centred on a right of first refusal (ROFR) contained in a Sale Agreement and an Offtake Agreement. The case was heard in the Supreme Court of Western Australia. The court had to decide if the contractually agreed expert determination process was mandatory and whether proceedings should be stayed in light of this. Additionally, the court considered whether the validity of a notice issued under the ROFR was an issue fit for expert determination.

The court held that the parties' agreement to use expert determination was mandatory and should be adhered to. The court emphasised that parties who agree to such a process should be kept to it. It rejected arguments that the dispute was inappropriate for expert determination or that the expert determination clause was inadequate. The court also noted that the parties intended for the dispute to be resolved within the 45-day exercise period set out in the agreements, which should accommodate the expert determination process.

In conclusion, the court granted a stay of proceedings to allow for the expert determination process to proceed. It found that the issues in dispute, including the validity of a notice under the ROFR, were amenable to expert determination. The court dismissed ACN's claim for specific performance, noting that the court would not draft or supervise the content of any fresh notice. The court's decision was in line with the principle that parties who agree to expert determination should be kept to it, and the expert determination process should be allowed to proceed as intended by the parties.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

What is the relevance of securing a decision from the Court of Appeal? I do not consider the existence of a timing imperative weighs against the grant of a stay. The parties agreed that the exercise period is 45 days. That is the bargain they struck. Whilst it is possible that a dispute may be determined by a first instance judge and any appeal may be determined by a Court of Appeal within that time period, it would depend upon matters such as appropriate allocation of court resources and the questions involved in any trial and appeal. If parties intend that an exercise period should accommodate potential appellate court proceedings, a period considerably greater than 45 days ought to be allowed. Providing for a lengthy time period may well undermine the very purpose for which alternate dispute resolution processes are encouraged and recognised by the courts: speedy and efficient resolution of disputes. As senior counsel for Pilbara Minerals submitted, a time period that allows for a trial, appeal and potentially a special leave application may defeat the whole purpose of an expert determination clause. The dispute is to be finally determined by a contractually agreed process within the exercise period. That is the course the parties anticipated and agreed upon for the resolution of a cl 11 dispute. What is the relevance of ACN seeking specific performance? As already noted, in addition to seeking a declaration that the Proposed Sale Notice is invalid, ACN seeks an order that, '[Pilbara Minerals] specifically perform cl 11 of the Sale Agreement by providing to Mineral Resources and ACN a proposed sale notice that complies with the requirements of the clause'. The relief sought has to be viewed in context. The court would only consider the claim for specific performance if it first declares the Proposed Sale Notice invalid. It is not for the court to draft or supervise the content of any fresh notice (and ACN did not suggest otherwise). In any event, it does not follow that specific performance would be ordered. To date, Pilbara Minerals has issued two notices under cl 11.2 and the plaintiffs have asserted both are defective. If the Proposed Sale Notice were declared invalid by the court, there is no reason to expect that Pilbara Minerals would not issue a further notice, after having regard to the court's reasons and its obligations under the Offtake Agreement. Its conduct to date is consistent with that of a party seeking to proceed under cl 11.2. Mr McKenna confirmed in court during the various directions hearings in this matter that his instructions were indeed that if the Proposed Sale Notice were determined to be invalid, Pilbara Minerals intended to issue a new one. I note the approach of Pritchard J in Santos Offshore v Apache Oil, where her Honour, having declared invalid a notice issued to a joint venture party under a pre‑emption right regime, said:[43]Finally, I turn to the question of specific performance. In my view, this is not an appropriate case for an order for specific performance. Nothing in the facts before the Court suggests that the defendants do not intend to comply with their obligation to give a notice which complies with cl 12.3 of the Spar JOA. Once declarations are made that the Notices are invalid, the obligation on the defendants to issue a Notice will be re‑enlivened.[43] Santos Offshore Pty Ltd v Apache Oil Australia Pty Ltd [117].

Ratio Decidendi

Legal Principle Established

In Straits Exploration (Australia) Pty Ltd v Murchison United NL,[27] Wheeler JA said that where a contract provides for determination of disputes by an expert, the law has recognised that it is desirable that 'parties who make such a bargain should be kept to it', a passage cited by the High Court in Shoalhaven City Council v Firedam Civil Engineering Pty Ltd.[28][27] Straits Exploration (Australia) Pty Ltd v Murchison United NL [2005] WASCA 241; (2005) 31 WAR 187 [14] (Wheeler JA, McLure JA & Murray AJA agreeing). See also JTA Le Roux Pty Ltd as trustee for the FLR Family Trust v Lawson [2013] WASC 293 [140] (Edelman J).[28] Shoalhaven City Council v Firedam Civil Engineering Pty Ltd [2011] HCA 38; (2011) 244 244 CLR 305 [25] (French CJ, Crennan & Kiefel JJ). There are circumstances where it may be appropriate that a stay be refused. In Dance With Mr D Ltd v Dirty Dancing Investments Pty Ltd, Hammerschlag J said:[29]Examples of when a stay may be refused include where:a.it would result in a multiplicity of proceedings;b.the dispute is inapt for determination by an expert because it does not involve the application of his special knowledge to his own observations or the area of dispute is outside of the expert's field of expertise; orc.the agreed procedures are inadequate for determination of the dispute that has arisen.[29] Dance With Mr D Ltd v Dirty Dancing Investments Pty Ltd [2009] NSWSC 332 [54], citing Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587; Ipoh v TPS Property No 2 Pty Ltd [2004] NSWSC 289; Badgin Nominees Pty Ltd v Oneida Ltd; Zeke Services Pty Ltd v Traffic Technologies Ltd. Even where a dispute involves questions of fact and law, an expert may determine it.[30] A referral may encompass questions of law, including questions as to construction of an agreement.[31] As Gillard J acknowledged in Badgin, the position may be different if the intended expert is untrained and inexperienced.[32][30] The Heart Research Institute Ltd v Psiron Ltd [2002] NSWSC 646 [25], [30] (Einstein J).[31] Badgin Nominees Pty Ltd v Oneida Ltd [133].[32] Badgin Nominees Pty Ltd v Oneida Ltd [137]. The mere fact that there is a degree of complexity is involved does not mean a chosen procedure should be abandoned.[33][33] Badgin Nominees Pty Ltd v Oneida Ltd [120]. The expert determination process is meant to be expeditious and offer finality. It accords with modern case management principles which support the use of alternate dispute resolution.[34][34] The Heart Research Institute Ltd v Psiron Ltd [16], [24] ‑ [25], [83] ‑ [86]. The respective positions of ACN and Pilbara Minerals are to be considered in accordance with these principles. Unsurprisingly, Pilbara Minerals relies on the express terms of cl 11, and in particular cl 11.7. Clause 11.7 sits within the ROFR regime and expressly applies to it. Its language has broad application, encompassing 'any' dispute. The word 'any' is of broad import, as Edelman J observed in JTA Le Roux.[35][35] JTA Le Roux as trustee for the FLR Family Trust v Lawson [74].