Mineralogy Pty Ltd v Sino Iron Pty Ltd
[2013] WASC 194 (S)
•25 JUNE 2013
MINERALOGY PTY LTD -v- SINO IRON PTY LTD [2013] WASC 194 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 194 (S) | |
| Case No: | CIV:2338/2012 | 25 JUNE 2013 | |
| Coram: | EDELMAN J | 25/06/13 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Orders to be made | ||
| B | |||
| PDF Version |
| Parties: | MINERALOGY PTY LTD SINO IRON PTY LTD KOREAN STEEL PTY LTD |
Catchwords: | Declarations Whether declaration is in the nature of an advisory opinion Extent of declaration that should be made Practice and procedure Whether orders should be made for dismissal or discontinuance where part of an action is resolved other than on the merits |
Legislation: | Rules of the Supreme Court 1971 (WA) Supreme Court Act 1935 (WA) |
Case References: | AGC (Advances) Ltd v West (1984) 5 NSWLR 301 Bass v Permanent Trustee Company Ltd [1999] HCA 9; (1999) 198 CLR 334 Boman Irani v St George Bank Ltd [2005] VSC 456 Carlin v Hamersley Iron Pty Ltd [2003] WASCA 270 Chen v McNamara [2012] VSCA 229 Commonwealth v Sterling Nicholas Duty Free Pty Ltd [1972] HCA 19; (1972) 126 CLR 297 Hamersley Iron Pty Ltd v Hancock (Unreported, WASC, Library No 5195, 23 December 1983) 4 In re Freme's Contract [1895] 2 Ch 256 Kyabram Property Investments Pty Limited v Murray [2005] NSWCA 87 Re Adelphi Hotel (Brighton) Ltd [1953] 1 WLR 955 Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 Re Staples [1916] 1 Ch 322 Re Tooth & Co Ltd (1978) 31 FLR 314 Sankey v Whitlam (1978) 142 CLR 1 Tannous v Mercantile Mutual Insurance Co Ltd [1978] 2 NSWLR 331 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
SINO IRON PTY LTD
First Defendant
KOREAN STEEL PTY LTD
Second Defendant
Catchwords:
Declarations - Whether declaration is in the nature of an advisory opinion - Extent of declaration that should be made
Practice and procedure - Whether orders should be made for dismissal or discontinuance where part of an action is resolved other than on the merits
Legislation:
Rules of the Supreme Court 1971 (WA)
Supreme Court Act 1935 (WA)
Result:
Orders to be made
Category: B
Representation:
Counsel:
Plaintiff : Mr A N Odorisio
First Defendant : Mr S H Parmenter
Second Defendant : Mr S H Parmenter
Solicitors:
Plaintiff : Michael John Dunham, Mineralogy Pty Ltd
First Defendant : Allens
Second Defendant : Allens
Case(s) referred to in judgment(s): AGC (Advances) Ltd v West (1984) 5 NSWLR 301
Bass v Permanent Trustee Company Ltd [1999] HCA 9; (1999) 198 CLR 334
Boman Irani v St George Bank Ltd [2005] VSC 456
Carlin v Hamersley Iron Pty Ltd [2003] WASCA 270
Chen v McNamara [2012] VSCA 229
Commonwealth v Sterling Nicholas Duty Free Pty Ltd [1972] HCA 19; (1972) 126 CLR 297
Hamersley Iron Pty Ltd v Hancock (Unreported, WASC, Library No 5195, 23 December 1983) 4
In re Freme's Contract [1895] 2 Ch 256
Kyabram Property Investments Pty Limited v Murray [2005] NSWCA 87
Re Adelphi Hotel (Brighton) Ltd [1953] 1 WLR 955
Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622
Re Staples [1916] 1 Ch 322
Re Tooth & Co Ltd (1978) 31 FLR 314
Sankey v Whitlam (1978) 142 CLR 1
Tannous v Mercantile Mutual Insurance Co Ltd [1978] 2 NSWLR 331
- EDELMAN J:
1 Following delivery of my reasons for decision the parties conferred about the terms of appropriate orders. They agreed upon part of a declaration that should be made in terms which properly reflect my reasons and construction of cl 8 of the MRSLAs. The parties disagree about
(i) the extent of the declaration which should be made,
(ii) whether a part of the proceeding, which the parties agreed need not be determined, should be dismissed or discontinued, and
(iii) the appropriate costs orders.
I address each of those matters in turn below.
2 In summary, a declaration should be made which is limited to the rights arising directly from the construction issue in dispute between the parties. I do not accept Mineralogy's submission that it should extend further than that. I accept that any appropriate order would be for discontinuance rather than dismissal. But in circumstances in which there is dispute about the factual substratum for the terms of any discontinuance, as well as the contractual basis upon which discontinuance was thought to be appropriate, it is common ground that the appropriate course is to defer orders until a later date. This deferral will also provide the parties with the opportunity to resolve the remaining issues between them which they had thought to be resolved by a written agreement entered shortly after trial. In any event, the reasons which follow are an attempt to resolve those matters in dispute which can currently be resolved, and to indicate a provisional view on some matters upon which submissions have been made.
(i) The extent of the declaration to be made
3 In reliance upon the principal reasons, Mineralogy submitted that the following declaration should be made:
(a) the phrase 'Magnetite Ore taken' in cl 8 of the Mining Right and Site Lease Agreements between the plaintiff and the first defendant, and the plaintiff and the second defendant, both dated 21 March 2006, as amended 8 January 2008 in relation to the first defendant, and as amended on 22 October 2008 in relation to the second defendant (MRSLAs), upon its proper construction means Magnetite Ore when it comes into the possession or control of the first defendant or the second defendant or both jointly, by moving it from its natural place of occurrence and either stockpiling it for the purposes of possible future processing or use (as opposed to placing it on waste piles) or moving it directly to a primary crusher; and
(b) by reason thereof, and in the event of non-payment of Mineralogy Royalty, by the defendants, in respect of Magnetite Ore that they had taken, as above, then the plaintiff had a right to issue written notices of default pursuant to cl 30.4(d) of the MRSLAs holding each defendant in default for failure to pay the Mineralogy Royalty to the plaintiff pursuant to cl 8 of the MRSLAs.
4 The basis for the making of a declaration is s 25(6) of the Supreme Court Act 1935 (WA). That section, following s 50 of the Chancery Procedure Acts of 1850 and 1852, 13 16 Vict c35, c86, removed a perceived restriction in the Court of Chancery by conferring power to grant 'binding declarations of right' without consequential relief.1 The description of a right includes claim rights as well as privileges, powers and immunities.2
5 Order 58 r 10 of the Rules of the Supreme Court 1971 (WA) provides:
Any person claiming to be interested under a deed, will, or other written instrument, may apply by originating summons for the determination of any question of construction arising under the instrument, and for a declaration of the rights of the persons interested.
6 Mineralogy submitted that it is necessary for par (1)(b) of the declaration above to be made in order 'to fulfil the authority of the Court' under O 58 r 10. Mineralogy relied upon the decision of McLure J in Carlin v Hamersley Iron Pty Ltd,3 which was, in turn, quoting from an unreported decision of Olney J as follows:4
The procedure contemplated by the rule is one appropriate to cases where there is no disputed question of fact and where the Court has before it an instrument the construction of which is capable of determination by reference to the instrument itself. In my view, the authority of the Court is to make a declaration of right and not to declare the construction of the instrument. If it were otherwise, the Court's order would be in the nature of an advisory opinion. The rule contemplates that the Court will determine the construction of the instrument as a preliminary to it declaring the rights of the parties.
7 The point made in the quotation above is that declarations about contractual construction should not be made where the declaration does not concern the rights of a party. Where questions of construction affect the rights of parties then declarations are frequently given about those questions of construction.5 A declaration about the proper construction of cl 8 of the MRSLAs does not concern a purely hypothetical matter. The question of construction of cl 8 concerns a real and immediate dispute between the parties concerning whether the defendants, or either of them, was, and is, liable to pay royalties to Mineralogy for Magnetite Ore which had been stockpiled for the purposes of possible future processing or use. And, in circumstances in which it was common ground that further Magnetite Ore had been stockpiled for future processing and use, the declaration also extends to future rights to payment which are not hypothetical.6
8 In the language of Brennan J in Re Tooth & Co Ltd,7'the plaintiff is seeking to establish a right which is denied by the defendant, and the declaration (if made) settles the right in controversy between the parties'. In order that the terms of par (a) are sufficiently clear, and in order that the declaration is a self-contained statement of the rights of the parties, an additional paragraph can be inserted as follows:
Consequent upon the construction above, when Magnetite Ore comes into the possession or control of the first defendant or the second defendant or both jointly, by (i) moving it from its natural place of occurrence and (ii) either stockpiling it for the purposes of possible future processing or use (as opposed to placing it on waste piles) or moving it directly to a primary crusher, then Mineralogy has a right to be paid a royalty from the person taking the Magnetite Ore pursuant to the exercise of its Mining Right.
9 It is not appropriate for the Court to make the second part of the declaration sought by Mineralogy for two reasons.
10 First, the proposed wording of that part of the declaration is, at best, ambiguous. It is not clear to me how that ambiguity might be cured. A declaration of right must not be expressed in ambiguous terms. Otherwise, the declaration's utility in resolving controversy would be undermined. For this reason, it has been said that 'in the case of declaratory relief ... precision in its terms is essential, and the failure to give attention to this matter doubtless contributed to the making of a declaration which ought not to have been made'.8
11 Some of the ambiguities in the proposed declaration are as follows. Why is there a condition of non-payment by the defendants (plural) before the issue of written notices? Why is there no reference to the timing for payment of royalties under cl 8.1(c) before the notices of default should issue? Should the issue of a written notice of default to a particular defendant be conditional upon a statement by that defendant of an amount of royalty owing, and a failure to pay that royalty? If not, then does the declaration permit the issue of a notice of default where the amount of royalty is disputed? Is there any implied condition, such as reasonableness, which attaches to the issue of a notice of default? Why is the declaration expressed in the past tense, even though declarations can be expressed in relation to future matters?9 Why is the past tense used when it was common ground at the hearing that the Magnetite Ore stockpiled for the purposes of future processing or use had increased from the time that the proceedings were brought?
12 Secondly, it is not appropriate for a declaration to be made concerning issues of validity of the default notices, or any default notices, in circumstances in which
(i) this issue was not the subject of argument at the hearing; and
(ii) as explained below, the parties had agreed that the serious consequences which are inextricably related to this issue did not need to be determined by the Court.10
13 A declaration should be made in the terms sought in par (a) of the plaintiff's proposed minute as well as the additional paragraph set out above.
(ii) Dismissal or discontinuance?
14 The next issue is whether the remainder of the proceedings should be dismissed or whether Mineralogy should be given leave to discontinue the proceedings. There were important issues from the pleadings,11 and from the amended originating summons, which were not decided. These included issues concerning the validity of the default notices, and whether Mineralogy had power to terminate the MRSLAs.
15 The usual basis upon which proceedings are dismissed is the adjudicated merits. There has been no adjudication upon the merits of the issues described above.
16 Another common basis upon which orders can be made dismissing proceedings is where the parties consent to orders that the proceedings be dismissed. There was no consent by Mineralogy to dismissal of the proceedings in relation to the issues above. There was only consent by Mineralogy that these matters need not be decided in these proceedings, and hence submissions need not be made concerning consequential legal issues related to them. As explained below, there may now be some question about this consent and whether the proceedings should continue.
17 On 6 May 2013 the parties agreed that '[t]he Court's decision on the royalty issue will determine the efficacy of Mineralogy's default notices and demands for payment ... it is not necessary for this Honourable Court to determine the existence or extent of any obligation on the plaintiff to provide for an amount in the default notices'. The parties also agreed that 'it is not necessary for this Honourable Court to determine whether Mineralogy is entitled to suspend or terminate the MRSLAs pursuant to the notices of default dated 11 July 2012 or its notice of intention to terminate dated 2 November 2012'.12 This does not amount to consent to dismissal of the proceedings.
18 The Rules of the Supreme Court 1971 (WA)confer other powers to dismiss proceedings, in various circumstances. No submission was made by the defendants that any of those circumstances applied in this case.
19 In light of the agreement between the parties that the issues described need not be determined, the appropriate order would ordinarily be that, other than in respect of the declaration made, the claim be discontinued.
20 However, immediately before today's hearing I was provided with an affidavit which annexed the terms of the agreement between the parties which was the basis for why these issues need not be determined. There is now dispute between the parties concerning whether pre-conditions for Mineralogy withdrawing its claims have been met.
21 The agreement provides that upon compliance by the defendants with their obligations under that agreement, Mineralogy will be deemed to have
(i) withdrawn its default notices dated 11 July 2012 and its notices of intention to terminate dated 2 November 2012;
(ii) disclaimed any right to rely on those notices thereafter; and
(iii) released the defendants from all claims in respect of payments of Royalty Component A for all quarters ending before the date on which my reasons for decision were delivered.
22 These circumstances might, in the ordinary course, have been sufficient for an order to be made discontinuing the proceedings on terms that Mineralogy provide an undertaking in terms of (i), (ii) and (iii) above. However, since there remains dispute between the parties concerning whether the defendants have satisfied the pre-conditions to the deeming of those matters, there is real difficulty in making any order for discontinuance. It became common ground between the parties at this hearing that the appropriate order was that Mineralogy be given leave to apply to discontinue upon an undertaking which would preserve the rights of the defendants under the interlocutory injunction which provided that no termination would occur until 7 days after delivery of orders.
(iii) The appropriate costs orders
23 It was common ground that the appropriate costs orders should be dealt with at the time of making final orders. In circumstances in which I received substantial written submissions on the issue of costs, I can indicate to the parties my provisional view that the appropriate order for costs may be that there be no order as to costs. The reason for this is that although Mineralogy was successful on the point of construction, it is material to consider the manner in which that point of construction was framed and the terms of the declaration which were sought as well as the related interlocutory injunction which was granted. The matter was litigated by Mineralogy initially on the basis that a declaration should be made that Mineralogy had the power to suspend operations. The originating summons was later amended to seek declarations that
(i) Mineralogy had validly issued notices of default and a notice of intention to terminate and
(ii) that Mineralogy had the power to terminate the MRSLAs.
24 The consequences about which declarations were sought by Mineralogy are not trivial matters. Senior counsel for the defendants submitted at the hearing that $7 billion had been spent by the defendants on developing the project. In contrast, divorced from the consequences of termination or suspension of operations, the difference in construction between the parties concerns only the timing of royalty payments for stockpiled Magnetite Ore. As I explained in my principal reasons, the purpose of the stockpiling is to maintain a continuous feed for the processing plant at which point the defendants accepted that the Magnetite Ore would be 'taken' for the purposes of royalty payments. Although it appears that there is still dispute between the parties concerning the amount of royalty which is now payable, it appears that the amount is less than $2 million. In comparison with the potential consequences of termination of a $7 billion project, the debt of $2 million is far less significant, even taking into account the future payment of royalties based on a time of stockpiling rather than processing.
25 In view of these consequences it may be that if there is a discontinuance of these issues, then the appropriate order may be that there be no order as to costs. One reason militating in favour of an order that there be no order as to costs is that the consequences and terms of the declarations sought by Mineralogy are not issues which can be separated from the construction issue. They were part and parcel of the manner in which the construction issue was litigated. Decisions by the defendants about the conduct of the litigation might have been shaped by these issues and consequences. As McHugh J explained, in the context of discontinuance, it has been held in a large number of cases that if 'it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings'.13
26 Of course, if the proceedings were not discontinued in relation to these matters, and if Mineralogy were given leave to continue these proceedings (which is not a certain result) rather than required to commence fresh proceedings, then the ultimate costs order may be significantly affected by the determination of questions concerning the power to terminate the project that Mineralogy asserts, based on the notices of default which it issued.
The provision in the MRSLAs for payment of Mineralogy's costs of administering the Agreement
27 I also received substantial submissions concerning reliance placed by Mineralogy upon cl 27(a)(xiii) of the MRSLAs as the basis for its submission that it was entitled to an order for indemnity costs. At the hearing no further oral submissions were made about this clause. I do not preclude any further argument about this, but my provisional opinion is that this clause does not support any claim for indemnity costs and may not affect the exercise of a costs discretion otherwise.
28 Clause 27(a)(xiii), in each contract, provides that each defendant 'hereby covenants with Mineralogy at all times during the Term ... to pay all of Mineralogy's costs in administering this Agreement and Mineralogy's delegation hereunder'. There is no express reference in this clause to an order for indemnity costs.14 It does not use words such as 'indemnity costs', 'solicitor/client costs' or 'special costs'. The absence of those terms has been held to be material in a conclusion that indemnity costs were not contemplated by the phrase 'any costs and fees incurred by the Contractor in enforcing or further securing its rights'.15
29 It may also be material that the contractual clause was not pleaded in any version of Mineralogy's pleading, nor mentioned in Mineralogy's originating process. In Kyabram Property Investments Pty Limited v Murray,16 Beazley JA (Hodgson and Ipp JJA agreeing) referred to the failure of the plaintiffs to claim costs other than as a conventional incident of the litigation. Her Honour explained that there was considerable force in the submission that the defendants were prejudiced in any consideration they might give to making an offer of compromise in the proceedings, because the full extent of the claim now made for indemnity costs had not been pleaded. Her Honour confined the plaintiffs to party/party costs, explaining the requirement to plead:17
The requirement is of no small moment. Costs of litigation are a heavy burden in any event. A costs order, if made in the terms of the contractual provision in this case, would be substantially more and would attract interest at the mortgage default rate. The Murrays were entitled to know what claim they were facing so that they could make informed decisions in respect of any step they might take in the litigation, including, but not limited to, making an offer of compromise.
30 Another material matter may be that in Boman Irani v St George Bank Ltd,18 one of the reasons why Whelan J declined to order indemnity costs in the exercise of his Honour's discretion was because the provision was not 'as clear and unequivocal as some provisions can be'.19 Even assuming that cl 27(a)(xiii) encompasses a claim for legal costs, it is unclear whether it could extend to alter the manner of exercise of discretion in relation to a claim for legal costs when there are otherwise good reasons to make a different costs order.
Conclusion
31 In relation to whether the remainder of the proceedings should be dismissed or discontinued, I accept Mineralogy's submission that they should not be dismissed. I accept that the approach proposed by the parties is appropriate by which the parties will have several weeks to consider, and hopefully resolve, the terms of the letter agreement which are pre-conditions to Mineralogy's agreement not to pursue the further issues raised in these proceedings.
32 As to the declaration sought by Mineralogy, it goes beyond an adjudication of the matters before me and is ambiguous in key respects. Any declaration should only be in terms of the proposed paragraph (a), with additions as I have discussed for the sake only of clarification.
1 See the discussion in G Donaldson, 'Discretion in Declaratory Relief' in K Dharmananda and A Papamatheos (eds) Perspectives on Declaratory Relief (2009)122, 128 - 130.
2Sankey v Whitlam (1978) 142 CLR 1, 23 (Gibbs ACJ).
3Carlin v Hamersley Iron Pty Ltd [2003] WASCA 270 [46].
4Hamersley Iron Pty Ltd v Hancock (Unreported, WASC, Library No 5195, 23 December 1983) 4.
5In re Freme's Contract [1895] 2 Ch 256; Re Staples [1916] 1 Ch 322, 327 (Sargant J).
6 Lord Woolf and J Woolf, The Declaratory Judgment (4th ed, 2011) 186 [4-141], [4-153] - [4-155].
7Re Tooth & Co Ltd (1978) 31 FLR 314, 331.
8Tannous v Mercantile Mutual Insurance Co Ltd [1978] 2 NSWLR 331, 335 (Reynolds JA).
9Commonwealth v Sterling Nicholas Duty Free Pty Ltd [1972] HCA 19; (1972) 126 CLR 297, 305 (Barwick CJ); Bass v Permanent Trustee Company Ltd [1999] HCA 9; (1999) 198 CLR 334, 356 [47] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ).
10 Agreed Supplementary Statement of Issues, 6 May 2013 [1] - [3]. See also Further Amended Statement of Agreed Facts and Issues, 23 April 2013 [42] - [44].
11 See especially the Further Amended Statement of Claim, prayer for relief (1) and (2).
12 Agreed Supplementary Statement of Issues, 6 May 2013 [1] - [3].
13Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622, 624 - 625.
14 See eg Re Adelphi Hotel (Brighton) Ltd [1953] 1 WLR 955, 958 (Vaisey J); AGC (Advances) Ltd v West (1984) 5 NSWLR 301, 305 (Hodgson J).
15 See Chen v McNamara [2012] VSCA 229 [20] (Redlich JA).
16Kyabram Property Investments Pty Limited v Murray [2005] NSWCA 87 [15] - [16].
17Kyabram Property Investments Pty Limited v Murray [2005] NSWCA 87 [17].
18Boman Irani v St George Bank Ltd [2005] VSC 456.
19Boman Irani v St George Bank Ltd [2005] VSC 456 [21].
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