Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 13] - [2016] WASC 403

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 13] [2016] WASC 403

CORAM: KENNETH MARTIN J

HEARD: 27 & 28 OCTOBER 2016

DELIVERED : 13 DECEMBER 2016

FILE NO/S: CIV 1808 of 2013

BETWEEN: MINERALOGY PTY LTD
Plaintiff
AND
SINO IRON PTY LTD
First Defendant
KOREAN STEEL PTY LTD
Second Defendant
CITIC LTD (formerly CITIC PACIFIC LTD)
Third Defendant
ATTORNEY GENERAL (WA)
Intervenor on Counterclaim

Catchwords:

Contract - Mandatory interlocutory injunction seeking interim payments of money - Contract based claims - Exclusively common law causes of action - Equitable injunctive relief sought on interlocutory basis - Auxiliary jurisdiction of court of equity - Interlocutory injunction sought in affirmative conduct terms - Terms of interlocutory injunction seeking money payment as in effect final relief

Strength of applicant's prima facie case for injunction - Balance of convenience considerations - Adequacy of common law damages as factor within balance of convenience - Discretionary considerations - Equitable interlocutory relief by way of injunction - Plaintiff's action pending for 3 1/2 years - Injunctive relief seeking to compel defendants' performance of an executed contract - Plaintiff required to itself do equity to defendants

Plaintiff contending termination of underlying contractual obligations with defendants upon accepted breaches of contract and asserted repudiatory breaches by defendants - Defendants contending contract obligations not terminated and ongoing

Defendants continuing to perform activities on basis that contracts remain afoot - Defendants continuing to mine and ship iron ore from Western Australia

Assertion of contractual unenforceability by reason of royalty payment formula provision in contract being uncertain or unworkable through cessation post contract of input source for data needed to calculate royalty component - Defendants' argument that uncertainty or unworkability of royalty component formula capable of severance leaving residually functional and enforceable contractual bargain between parties

Legislation:

Nil

Result:

Interlocutory injunction granted

Category: A

Representation:

Counsel:

Plaintiff:     Mr P Zappia QC & Mr N Bender
First Defendant     :     Mr C M Scerri QC, Mr S H Parmenter & Ms T Spencer Bruce
Second Defendant     :     Mr C M Scerri QC, Mr S H Parmenter & Ms T Spencer Bruce
Third Defendant     :     Mr C M Scerri QC, Mr S H Parmenter & Ms T Spencer Bruce
Intervenor on Counterclaim   :     No appearance

Solicitors:

Plaintiff:     Kane Christopher Jones
First Defendant     :     Allens
Second Defendant     :     Allens
Third Defendant     :     Allens
Intervenor on Counterclaim   :     State Solicitor for Western Australia

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

AB v CD [2014] EWCA 229; (2015) 1 WLR 771
Action Cycles Pty Ltd (recs and mgrs apptd) v Ross [2011] VSCA 411
Aikman v The Owners of Strata Plan 48817 - 16 Dolphin Drive Mandurah [2016] WASC 380
Ailakis v Olivero [No 2] [2014] WASCA 127
American Cyanamid Co v Ethicon Ltd [1975] AC 396
Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101
Austman Pty Ltd v Mount Gibson Mining Ltd [2012] WASC 202
Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57
Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148
Cayne v Global Natural Resources plc [1984] 1 All ER 225
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 150 CLR 226
Evans Marshall & Co Ltd v Bertola SA [1973] 1 WLR 349
F & G Sykes (Wessex) Ltd v Fine Fare Ltd [1967] 1 Lloyd's Rep 53
FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340
JTA Le Roux Pty Ltd as trustee for the FLR Family Trust v Lawson [No 2] [2013] WASC 373
Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533
MacKinlay v Derry Dew Pty Ltd [2014] WASCA 24; (2014) 46 WAR 247
Marsh v Baxter [2013] WASC 209
Mineralogy Pty Ltd v Sino Iron Pty Ltd [2013] WASC 194
Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105
Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 10] [2016] WASC 90
Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375
Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 6] [2015] WASC 80
Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 8] [2015] WASC 473
Moran v Schwartz [2014] WASC 334
NWL Ltd v Woods [1979] 1 WLR 1294
Pavey v Matthews Pty Ltd v Paul (1987) 162 CLR 221
Photo Production Ltd v Securicor Transport Ltd [1980] AC 827
Samsung Electronics Co Ltd v Apple Inc [2011] FCAFC 156; (2011) 217 FCR 238
Secured Income Real Estate (Australia) v St Martins Investments Pty Ltd (1979) 144 CLR 596
SMS Rental (WA) Pty Ltd v Cahma Life Nominees Pty Ltd [2009] WASC 35
State Transport Authority v Apex Quarries Ltd [1988] VR 187
Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429
Wallis Nominees (Computing) Pty Ltd v Pickett [2013] VSCA 24; (2013) 45 VR 657
Yara Australia Pty Ltd v Burrup Holdings Ltd [2010] FCA 1273; (2010) 80 ACSR 641

TABLE OF CONTENTS

Introduction
Underlying materials relied upon
More background concerning prior interlocutory injunction applications and orders obtained by the CITIC parties
The CITIC parties' injunction application of March 2015
Observations on the positions of the parties
The position of the CITIC parties opposing any payment of RCB to Mineralogy
Common law damages
Contractual obligation debt/common law loss of bargain damages redux

Debt/damages distinction at the appeal
The successful ground of the appeal
Debt/common law damages: the distinction - present concerns
Observations on Royalty Component B within the MRSLAs
'PP' and 'CP' as concepts used within Royalty Component B in cl 8.2 of the MRSLAs
Other provisions in the MRSLAs showing some linkage to RCB
Court of Appeal: reasons of McLure P concerning cl 8.2 in the MRSLAs
Interlocutory mandatory injunctions before trial requiring affirmative steps by a defendant
Parties' submissions on the present application
Expert evidence assessed on interlocutory basis: RCB
Expert differences
Determinations upon interlocutory injunction orders sought by Mineralogy

Relief

KENNETH MARTIN J:

Introduction

I am dealing with the application of the plaintiff, Mineralogy Pty Ltd (Mineralogy), seeking a mandatory interlocutory injunction in terms requiring that the defendants (the CITIC parties, the third defendant being the parent company of the first defendant (Sino) and the second defendant (Korean)) be ordered to pay to Mineralogy, before trial, the amount of $US80,984,166 and, beyond that, for further interlocutory relief that will be exposed in due course.
To observe that the parties' underlying action involves a contract dispute is a significant understatement. Nevertheless, it is necessary to observe that the final relief being sought in the action by Mineralogy is grounded exclusively upon its common law contractual rights which, in essence, arise out of two agreements of March 2006, which are referred to as the Mining Right and Site Lease Agreements, or MRSLAs.
It is convenient to turn to the terms of Mineralogy's amended chamber summons which advances the present interlocutory application. The chamber summons is amended by the grant of my leave on 27 October 2016. At base, Mineralogy seeks the following interlocutory orders:
1.An order that the first, second and third defendants pay to the plaintiff the sum of $US80,894,166 (eighty million eight hundred and ninety four thousand one hundred and sixty six United States dollars) or such other sum as the court may determine.
…
3.An order that if the defendants comply with order 1, the first and second defendants are permitted to mine, process, ship or otherwise transport iron ore and iron ore products in respect of the project known as the Sino Iron Project provided that on 1 October 2016 and for each quarter thereafter until the final determination of these proceedings the first and second defendants pay to the plaintiff a sum calculated by multiplying $US6.00 by the number of dry metric tonnes of (iron ore) concentrate shipped in the preceding quarter.
The interlocutory application of Mineralogy under determination presents as something of a re-run of an earlier application, in consequence of the reasons and orders of the Court of Appeal delivered 27 June 2016 in Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105. That decision upheld Mineralogy's appeal against the decision of the primary judge delivered 7 December 2015, which had refused the earlier application of Mineralogy seeking interlocutory injunctive relief in terms much akin to what is presently sought under the mandatory interlocutory orders seen above. In December 2015, however, the amount of money sought to be paid was a mere $US48 million, claimed to be due by the defendants to Mineralogy in respect of unpaid royalties due to Mineralogy arising under the force of cl 8.1 (with the 'Mineralogy Royalty' to be calculated according to the formula in cl 8.2) in each of the MRSLAs as regards 'Royalty Component B' (RCB): see Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 8] [2015] WASC 473.
Mineralogy's December 2015 mandatory interlocutory injunction application was refused by the primary judge, essentially after an evaluation of discretionary balance of convenience considerations conducted at that time. That urgent interlocutory application had been argued, heard and determined upon the basis that Mineralogy had shown, as regards its claim to final relief, a serious question to be determined. Indeed, so much had, in effect, been conceded by the said parties for the purposes of that application. The application had been refused upon the evaluation of balance of convenience factors notwithstanding the serious question which was assumed in Mineralogy's favour.
Over seven months later, on 27 June 2016, the Court of Appeal unanimously upheld Mineralogy's challenge to the rejection of its application by the primary judge. The reversal on appeal was reached on the assessment that there had been a failure by the primary judge to evaluate the strength of the serious question that had been accepted as being raised by Mineralogy as regards RCB. Consequently, there had been a failure to incorporate a strength assessment of Mineralogy's serious question into the other phase of the interlocutory evaluation at that time, namely, the balance of convenience. However, procedural fairness considerations raised by the CITIC parties in relation to their heavily truncated opportunities as defendants to assemble and provide responsive expert evidence in order to engage against the counterpart expert evidence which had been adduced in support of Mineralogy's application for urgent interlocutory relief, led the Court of Appeal to ultimately remit Mineralogy's successful appeal for a redetermination by another judge.
The following reasons will, therefore, assume a commencing platform of the reader's full familiarity with the June 2016 reasons of the Court of Appeal in Mineralogy v Sino Iron and as well with the primary judge's reasons under appeal in that decision (Mineralogy v Sino Iron [No 8]). It will be necessary for me to touch briefly upon some of the underlying history canvassed under those earlier reasons, but I do so only to the extent necessary to conduct the present rehearing, in effect, of Mineralogy's December 2015 application.

Underlying materials relied upon

There are some new underlying materials which require evaluation for this renewed application by Mineralogy seeking interlocutory mandatory injunctive relief. These are chiefly:
(a)The parties' completed pleadings and, most particularly, a finalised statement of claim emanating from Mineralogy - which was not held by the primary judge in December 2015 or by the Court of Appeal in March 2016, when the appeal was argued. This is the fourth further amended statement of claim (which I refer to as '4 FASOC') filed under the leave of Chaney J (see his Honour's reasons in Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 10] [2016] WASC 90, delivered 23 March 2016 - essentially granting leave in respect of most of Mineralogy's proposed minute of pleading). The 4 FASOC was filed on 1 April 2016.
(b)I also hold a long defence and counterclaim pleading responding to the 4 FASOC by the CITIC parties. The defence and counterclaim was filed on 29 April 2016 and runs to some 136 pages. It adds the State of Western Australia as a party, making it a second defendant to the CITIC parties' counterclaim. There are as well six schedules (A through F) to the defence and counterclaim comprising an additional 146 pages of content.
(c)Last in the trilogy of new pleadings is an amended reply and defence to counterclaim by Mineralogy, filed 5 July 2016.
Those pleadings complete (for the present) the parties' pleadings in this action.
By way of other new material for this application, I also hold further affidavits - beyond those which were considered by the learned primary judge and the Court of Appeal, although I hold as well much of the original material that was relied upon in December 2015. For convenience sake, I should note the respective materials relied upon by the parties on this application. On the part of Mineralogy, it relies upon:
•the affidavits of Mr D B Wolfe of 17 November 2015, as well as his supplementary affidavit of 19 November 2015, his supplementary affidavit of 22 July 2016 and, finally, by leave, his further affidavit of 8 August 2016
•the three lever arch file volume affidavit of Ms T L Miley sworn 20 November 2015
•the affidavits of Mr K S Byrne of 24 November 2015, 7 August 2016 and 21 September 2016
•the affidavit of Mr K C Jones of 22 July 2016
•the affidavit of Ms S Morgan of 29 September 2016
On Mineralogy's behalf in terms of expert evidence I also hold the two affidavits from Mr R Brierley of 5 August 2016 and 21 September 2016.
I also hold accounting evidence by the affidavits of Mr S Sorbello of 5 August 2016 and a subsequent affidavit sworn by his colleague at BDL (Qld) Pty Ltd, Mr S Birkett, of 21 September 2016.
In terms of the evidentiary materials relied upon by the CITIC parties for this application, I hold the following materials, namely:
•the two-volume bound affidavit of Mr D M Mason affirmed 2 December 2015
•a supplementary affidavit sworn by Mr Mason of 2 September 2016
•the affidavit of Mr I P S O'Donahoo sworn 27 November 2015 and Mr O'Donahoo's second affidavit sworn 2 December 2015
For the purposes of the present application, I also hold Mr O'Donahoo's bound two-volume affidavit, sworn 2 September 2016.
By way of new expert evidence, I hold the two-volume bound affidavit of the CITIC parties' expert, Mr J P Barkas, sworn 2 September 2016.
That material can be contrasted to the evidence as was identified by the primary judge at [39] - [40] of his reasons in Mineralogy v Sino Iron [No 8].
I will turn to the content of that evidentiary material later in the course of these reasons, although I do not propose to canvass it at any great length. Of particular importance is the updated expert evidence from Messrs Brierley, Sorbello and Birkett and, for the first time, the response to that material by the CITIC parties from its expert, Mr Barkas. I deal with that expert material in a discrete section of these reasons.

More background concerning prior interlocutory injunction applications and orders obtained by the CITIC parties

These reasons also assume familiarity with the reasons for decision of Edelman J in Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375, delivered 14 October 2013. Equally important are the reasons of Chaney J in Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 6] [2015] WASC 80, delivered 5 March 2015. Both those prior interlocutory determinations are the subject of observations by the Court of Appeal in its June 2016 reasons.
The reasons of Edelman J and then Chaney J, delivered approximately 18 months apart, resolved interlocutory injunction applications which had been brought by the CITIC parties in order to restrain Mineralogy from carrying out threatened MRSLA termination conduct. This had been conduct in the way of the pending threats at that time of Mineralogy to act upon a number of contractual termination notices which it had issued under the termination for default by notice provisions found in cl 30.4 of the parties' MRSLAs.
Back in October 2013, as explained under [10] and [11] of his Honour's reasons, Edelman J had occasion to issue at the CITIC parties' behest interlocutory injunction orders preventing Mineralogy from acting any further upon a number of termination for default notices which Mineralogy had issued to Sino and Korean on 26 July 2013. Mineralogy was then contending under cl 30.4(d) of the MRSLAs that at that time there had been breaches and defaults by Sino and Korean. This was alleged to be by their failure to pay to Mineralogy a royalty amount asserted as then due (as a component of the 'Mineralogy Royalty') for RCB, under cl 8 of the MRSLAs.
In resolving that interlocutory injunction application in favour of the CITIC parties and against Mineralogy, Edelman J had then said at [12] and [13]:
In these proceedings, Mineralogy's evidence is that based on 19,000 tonnes of iron ore concentrate produced over the three quarters the subject of the default notice, the amount of Royalty Component B is $287,059.
In contrast with the quantum of Mineralogy's claim in these royalty dispute proceedings, which is said by Mineralogy to be worth $9.4 billion, the grant of this interlocutory injunction would, if Mineralogy were ultimately successful in the royalty dispute, affect Mineralogy in an amount of around $15,000 to $25,000. This amount of $15,000 to $25,000 would then be recoverable under the undertakings to damages given by Sino Iron and Korean Steel.
It can be seen that the claimed amount then said to be then due to Mineralogy in respect of RCB was a mere $287,059.
His Honour issued the interlocutory injunction against Mineralogy at the behest of the CITIC parties and thereby restrained Mineralogy from taking further steps towards a contractual termination of the MRSLAs under Mineralogy's default notice of 26 July 2013: [16].
The terms of the injunction were set out at [14]:
Until 21 days from the pronouncement of final orders, or earlier order in this matter, the Plaintiff, whether by itself, its officers, servants, agents or otherwise, be restrained, and an injunction is hereby granted restraining it, from:
(a)issuing or purporting to issue any notice to the First Defendant or the Second Defendant requiring them to suspend the operations carried out by, or on behalf of, either of them on the Project Area, as defined in the Sino Iron Mining Right and Site Lease Agreement (as amended) (Sino MRSLA) and the Korean Steel Mining Right and Site Lease Agreement (as amended) (Korean MRSLA); or
(b)issuing or purporting to issue any notice to terminate the Sino MRSLA or the Korean MRSLA; or
(c)terminating or purporting to terminate the Sino MRSLA or the Korean MRSLA,
in reliance on, or in respect of the defaults alleged in, the purported notice of default issued by the Plaintiff to the Defendants on 26 July 2013.
His Honour, however, at the time issued an important qualification concerning potential future developments as regards a future dispute over RCB debt. He added this important qualifying observation at [63]:
[T]his application only relates to the default notice concerning a $287,000 disputed debt. If a default notice were issued concerning an alleged debt of hundreds of millions of dollars as counsel asserted, and if Sino Iron and Korean Steel were to refuse to pay any of that alleged amount, on any terms, then it is possible that the balance of convenience might be different.

At the time, in 2013, his Honour also assessed an argument by Mineralogy which contended that interlocutory relief granted in favour of the CITIC parties should be tied to a condition that a royalty amount for RCB should be paid to Mineralogy on a regular quarterly basis, in terms that the CITIC parties 'pay royalties, including Royalty Component B, to Mineralogy, using the disputed formula which Mineralogy relies upon in the principal proceeding' [68].
His Honour rejected that condition then sought by Mineralogy as inappropriate: [69].

The CITIC parties' injunction application of March 2015

In his reasons for decision, Mineralogy v Sino Iron [No 6], delivered in March 2015, Chaney J evaluated a later application by the CITIC parties seeking injunctive relief to restrain Mineralogy from once again threatening to exercise contractual termination rights under cl 30.4 and cl 30.2 of the MRSLAs. Relevantly, Mineralogy had on this occasion, threatened termination of the MRLSAs by reference to termination and default notices issued in July and September 2014: see [3] and following. Some of the notices then issued by Mineralogy, which the CITIC parties were complaining about, asserted (inter alia) a breach of cl 8.4 of the MRSLAs in relation to a 'Mineralogy Royalty' payment by failing to provide a statement as to the calculation of RCB: [18].
His Honour's analysis of the practical effects of issuing interlocutory injunctions at that time restraining Mineralogy are set out at [38] in terms:
i.Mineralogy would be prevented from issuing a suspension notice or a termination notice on the basis of the defendants' refusal to join in requesting nomination of an expert to deal with the issue concerning Royalty Component B, that is on the basis of their failure to comply with the 10 July 2014 default notice (par 1 of the Amended Chamber Summons).
ii.Mineralogy would be prevented from entering the mine area for the purpose of rectifying Sino and Korean's alleged breaches of their obligations to provide a statement as to the calculation of Royalty Component B. In practical terms, that means being prevented from examining books and records relevant to calculation of Royalty Component B (par 2 of the amended summons).
iii.Mineralogy would be prevented from taking steps in reliance on their contention that the MRSLAs have been terminated on either 3 October 2014 or 9 October 2014 by reason of the 12 September 2014 termination or the 18 September 2014 termination notice. In a practical sense, that means being prevented from attempting to take possession of the site, although the plaintiff has disavowed any present intention to take any such step (par 2A).
iv.Mineralogy would be prevented from issuing any further default notices in relation to the alleged defaults the subject of the various default notices which it has withdrawn (par 1 and par 2A).
At the end, Chaney J insisted upon an unconditional undertaking from Mineralogy, in lieu of his granting an interlocutory injunction against it, in the terms as identified at [63] of those reasons, not to act further on those termination notices other than on a period of prior written notice (save that there was an adjustment to the stipulated notice period outward to 60 days). The court noted receipt of that undertaking on 6 March 2015.
Chaney J's March 2015 reasons clearly display that but for the proffering of the undertaking by Mineralogy to the court in unconditional terms not to take further steps in advancement of its then threatened termination of the MRSLAs, that he would have issued an interlocutory injunction restraining such threatened MRSLA conduct by Mineralogy.

Observations on the positions of the parties

It was the case then, and remains the case now, that Korean and Sino have since 2013 been continuing to mine magnetite ore and to process and ship 'Product' (as defined in the MRSLAs), on a basis that the mining lease occupancy and mining rights as are afforded to Korean and Sino under their MRSLAs remain fully alive and enforceable and wholly available to Korean and Sino for full exploitation.
That position has been, and remains, the stance of Korean and Sino, notwithstanding that it is also the case that some key input pricing data used in order to perfect what is the stipulated algebraic formula specified by cl 8.2 to indicate how RCB is to be calculated have, on the case of Korean and Sino, been incapable of being sourced since early 2010.
That obstacle and the lack of a data source, in order to complete an RCB calculation, on the case of Korean and Sino, renders the RCB formula seen specified under cl 8.2 of the MRSLAs as uncertain and unenforceable.
Consequently, the stated position of Korean and Sino, which has been constantly maintained by them since 2013 to date in 2016 is that RCB, as stipulated under cl 8.2 in the MRSLAs, is incapable of ascertainment. They submit that that has been the case essentially since early 2010, when a publicly accessible pricing data source, known as the annual benchmark pricing system (ABPS), ceased to operate.
Notwithstanding cessation of the ABPS, Korean and Sino correlatively also contend that all of those parts of cl 8.2 which relate to RCB in each MRSLA can be effectively severed from the MRSLAs, either by invoking common law severance principles or, alternatively, under the express work of MRSLA severance cl 38.5. That functional contractual severance outcome is possible, they contend, as regards RCB within cl 8.2, on a basis that such an excision does not affect the continuing operation and integrity of the MRSLAs on an ongoing basis.
In effect then, Korean and Sino have been contending since 2013 and contend now that the MRSLAs remain as fully functional and binding contractual agreements with Mineralogy, which continue in full force and effect - except for the RCB component as one of the two parts of a Mineralogy Royalty specified to be payable under cl 8.2(a). So it is put that the Mineralogy Royalty due to Mineralogy is calculable and payable by Korean and Sino only to the extent of the royalty amount that is payable as Royalty Component A - which amount Korean and Sino say has been and continues to be remitted to Mineralogy faithfully, on a quarterly basis in conformity under the MRSLAs as they now operate, post the severance of the RCB term.
However, Mineralogy has never accepted that RCB as defined in cl 8.2 is uncertain and incapable of being calculated as a monetary amount due to it in respect of a promised amount of royalty on 'Product' (derived from iron ore).
Specifically, Mineralogy does not accept that the necessary inputs for viably engaging against the RCB algebraic formula as specified by cl 8.2(a) of the MRSLAs are no longer ascertainable.
So it is that Mineralogy does not accept that the specified formula used under cl 8.2(a) towards deriving an amount of royalty payable to it as RCB is uncertain in a contractual sense that is sufficient to raise any true difficulty of contractual uncertainty over the utility and enforceability of that clause. Absent any contractual uncertainty with the clause, there is of course no need, on Mineralogy's case, to ever embark upon a consideration of contractual severance principles.
Nevertheless, Mineralogy contends, in any event, that the contractual severance arguments of Sino and Korean, to the effect that RCB can and has been, in effect, viably blue pencilled out of the MRSLAs, leaving an otherwise intact and fully functional subsisting MRSLA bargain continuing in full force as between the parties, is an untenable approach. Mineralogy says that severance argument is fundamentally at odds with the essence of the parties' bargain. It would effectively undermine the stipulated legal consideration to Mineralogy which is the foundation of the MRSLAs by an elimination of RCB.
Mineralogy rejects as misconceived any application of severance principles either at common law or under cl 38.5 on the basis that, objectively assessed, the underlying character of what would be left as the MRSLA parties' residual bargain, in effect, after an excision of RCB, would be fundamentally different. Given that case, severance is not applicable.
But Mineralogy's first position is that no issue as to severance ever arises, because the RCB calculation formula as found under cl 8.2 in the MRSLAs is not uncertain. It remains a workable formula with viable and accessible input pricing data for all elements of the formula, enabling RCB to be calculated at all times as a quarterly royalty payment amount due to Mineralogy as the other necessary part of the 'Mineralogy Royalty' as defined in the MRSLAs.
Mineralogy next contends that once the misconceived notion of contractual uncertainty as regards cl 8.2 and RCB and the allied misconceived notion of a potential severance are together assessed as weakish defence arguments (or, as Mineralogy would contend, arguments which should be afforded no weight whatsoever) then it contends now, as it did in March 2016 before the Court of Appeal, that what remain as the residual defence arguments raised by Korean and Sino by way of fallback positions, all proceed upon a basis that, in the end, some amount of fair or reasonable royalty payment, or a royalty amount on 'Product' worked out as between the parties after a good faith negotiation, will always have been payable to Mineralogy.
Hence, Mineralogy then says, it must be due something at least for RCB, once the Sino/Korean uncertainty/severance argument is put to one side as meritless or weightless. All asserted RCB pricing quantification obstacles, in terms of assembling the required input data, do not detract from Mineralogy's base case that at the end of the day it holds a strong entitlement to a payment from Korean and Sino of some funds as a royalty upon 'Product' produced by Korean and Sino, rather than the current position of receiving absolutely nothing for RCB whilst mining, processing and exporting proceed apace.
The current status quo, which sees Mineralogy receiving no moneys at all as regards a royalty in respect of substantial and valuable quantities of 'Product' being produced and shipped offshore by Sino and Korean, Mineralogy argues is manifestly unfair, artificially derived and wrongly reallocates the internally made risk assessment by the parties under the MRSLAs. Axiomatically, it is a status quo that is highly prejudicial fiscally to Mineralogy's interests by denying it the substantial royalty funds on 'Product' which it would otherwise have held and enjoyed to apply towards its various business interests as it saw fit.
Mineralogy argues that it is sustaining very considerable and ongoing financial prejudice, by reason of being denied on an ongoing basis what, on any reasonable view, must inevitably be its contractual entitlements under the MRSLAs to receive a sizable quarterly revenue stream due to it in respect of 'Product' since 2013. As an investment corporation with wide-ranging business interests through subsidiary corporations holding interests in Australian nickel and coal mining operations, Mineralogy argues that the ongoing fiscal deprivation of royalty on 'Product' which it is suffering (since 2013) is generating harmful negative impacts against it and against its business interests through its subsidiary corporations.
Mineralogy then points out as well that under the terms of the MRSLAs it is constrained and confined in ever seeking damages against Korean and Sino to recover consequential losses which it sustains by way of MRSLA breach damages: see cl 30.3(b). It argues, with force, that even a likely long-term breach of contract damages result success against Korean and Sino at a trial, in terms of proving an end entitlement to funds arguments as RCB moneys, is still not full compensation for its true losses, given the constraints against it recovering consequential and indirect losses. Compensation by damages and even the award of interest at a default interest rate (under cl 30(1)(a) and (b)) longer term against the CITIC parties would still be an inadequate end compensation outcome, so it contends - measured against the hypothetical position of it holding these substantial RCB funds now.
So it is that Mineralogy argues, in effect, that the previous injunction orders of October 2013 obtained by Sino and Korean and the undertaking which it was compelled to provide in March 2015 continue and have effectively forced Mineralogy to continue to perform all its relevant contractual obligations owed to Korean and Sino under the MRSLAs. Whereas, against that position, Mineralogy says it has not received the countervailing contractual performance in its favour from the CITIC Parties. That all being the case, Mineralogy contends, invoking asserted mutuality principles, that there ought to have been some preconditions tied to the interlocutory relief that has been obtained by Korean and Sino to date against it, requiring Sino and Korean to mutually perform as well their MRSLA obligations as owed to Mineralogy. Such conditions framed with an eye to mutual performance on each side would have at least required Korean and Sino, at minimum, in order to get and keep the interlocutory relief granted to them (impacting upon the parties' contractual allocations of risk under the MRSLAs), to remit to Mineralogy regular royalty payments of an amount of a royalty assessed by reference to 'Product' produced by Sino and Korean, aligning as closely as possible to the RCB calculation formula.
Mineralogy therefore contends that the current status quo fails to reflect a proper level of contractual performance obligation mutuality in its favour, as regards the MRSLAs. The undertakings and injunctions obtained by the CITIC parties to date, it contends, unduly and unfairly interfere with Mineralogy's enjoyment and enforcement of its contractual rights vis-à-vis Korean and Sino under the MRSLAs.
It is important to appreciate that, in advancing its lack of mutuality arguments based upon historical orders in this action that continue in force, in truth what Mineralogy is complaining about when it says that it is being forced to continue to perform its MRSLA obligations but Korean and Sino have not - is a grievance that Mineralogy has been prevented under the 2013 and 2015 interlocutory relief obtained by Korean and Sino from taking steps in further advancement of MRSLA termination notices which it has issued, as regards the MRSLAs. Mineralogy, in real terms, is complaining that negative restraints which have been imposed against it to date by orders or undertakings accepted by this court on an interlocutory basis, have prevented it from acting further on its termination notices, by reference to Mineralogy's asserted rights to give notice of termination under cl 30.4 of the MRSLAs. That is the pragmatic sense in which Mineralogy contends it has effectively been forced to 'perform its obligations' under the MRSLAs.
This position is also apparent from an examination of the terms of those MRSLA agreements, which were perfected in their execution as agreements in March 2006. Objectively assessed, the pragmatic day-to-day obligations resting upon Mineralogy under those agreements look to be few once production has commenced. Once Mineralogy makes available, as it has, site possession and mining rights to Korean and Sino over Mineralogy's mining leases, then from that point on, and after the project infrastructure has been built, the essential performance burdens of the MRSLAs on an ongoing long-term basis bear chiefly upon Korean and Sino. On a prima facie review then of the two MRSLA documents, provided the sublease and mining rights as granted to Korean and Sino to Mineralogy continue, from that point forward Mineralogy, essentially, should be a recipient of ongoing fiscal payments which continue on a long-term basis under those agreements tied to the exploitation of iron ore deposits (magnetite ore) out of Mineralogy's mining leases at Cape Preston.
So it is that as Korean and Sino continue to conduct their operations to mine magnetite ore and from that ore then produce 'Product' (as defined), Korean and Sino incur under the MRSLAs the allied obligation to pay and remit the Mineralogy Royalty to Mineralogy on a quarterly basis and calculated in arrears by reference to the levels of production achieved over time.

The position of the CITIC parties opposing any payment of RCB to Mineralogy

The CITIC parties contend that the present interlocutory mandatory relief sought by Mineralogy as regards an interlocutory payment in excess of $US80 million is unprincipled pre‑trial relief that is, in any event, unwarranted.
The CITIC parties in their extensive written submissions point to the plethora of termination notices which have previously been issued by Mineralogy over time. They point to multiple changes of position under Mineralogy's ever changing pleadings, including so many changes of position that Edelman J, when case manager, was compelled to order that there be no further amendments to Mineralogy's pleadings without leave - an exceptional position in a Commercial and Managed Case (CMC) List case managed commercial action.
The CITIC parties contend that the so-called interlocutory relief as the money presently sought by Mineralogy is unprecedented and that it is, in its effect if not its present characterisation, final in its implementation.
They also are concerned that Mineralogy's present and future financial position manifests as being precarious. This leads to the submission beyond the worth of Mineralogy's undertaking that any funds to be paid over to Mineralogy at the present time in respect of RCB are more than likely to be lost forever and incapable of being recouped should that be necessary as a consequence of a future trial outcome in their favour on this point. They contend that moneys paid over now to Mineralogy are as good as 'forever lost'. Any payment is inappropriate, they contend, in the absence of a final trial determination in relation to Mineralogy's entitlement to such moneys.
The CITIC parties also contend, with some force, in my view, that any interlocutory relief which they have been successful in obtaining to date has essentially been fully justified on its merits and has been directly responsive to what has been ongoing unacceptable, unsupportable and provocative conduct directed at them by Mineralogy. Such conduct has, in effect, left them no other alternative but to seek relief from a court of equity, to preserve their contractual positions, against what they contend to be the as-threatened multiple unlawful terminations of the MRSLAs by Mineralogy. They contend that the magnitude of the fiscal consequences of such threatened terminations under notice presents to be of such proportions, given the investment to date in this Pilbara ore production project of billions of dollars, as to be a violation of the express covenant of good faith in the MRSLAs found at cl 37.4 - where the MRSLA parties promised to afford good faith to each other, in relation to their performances of the MRSLAs as long term contractual relationships.
As regards their own financial positions, the CITIC parties point to the significant and substantial net capital reserves of the third defendant, CITIC Ltd (a corporation listed on the Hong Kong Stock Exchange) as essentially the parent company of Sino and Korean and to its obligations, in effect, as guarantor of those obligations of Sino and Korean under project documentation. Consequently, they submit there is absolutely no sensible prospect arising on the available evidence upon this application that there should be any concern that, in the event that Mineralogy proves successful at trial in obtaining a significant financial judgment award against them after a final hearing, that such judgment amounts as are finally ascertained and ordered to be due and payable to Mineralogy in respect of RCB would not be easily met.

The CITIC parties then contrast their own strong fiscal positions to that of Mineralogy, which they say is demonstrably uncertain, even precarious. Accordingly, they contend that the standard undertaking as to damages proffered by Mineralogy as a necessary component of the seeking of equitable relief as now sought by Mineralogy lacks a sufficiently secure financial foundation.
Furthermore, as they did in December 2015, the CITIC parties emphasise their overwhelming project investment of capital and infrastructure to date all now outlaid in establishing what is the substantial investment in a fully functional iron ore mining and processing project on Mineralogy's mining leases at Cape Preston (and associated transport infrastructure).
The extent of the investment is vast. At par 63 of his first affidavit of 2 December 2015, Mr Mason sets out CITIC's capital expenditure for 2009, 2010, 2011, 2012 and 2013 with respect to the Sino Iron Project in Cape Preston in Western Australia as those expenditures had been stated in that company's annual reports for 2010, 2011, 2012 and 2013. The overall amount of the expenditures across the five financial years as from FY 2009 to FY 2013 presents as being approximately $AUD8.4 billion. At par 11 of his second affidavit, of 2 September 2016, Mr Mason says that he is 'informed by Kim Liew, Financial Controller at CPM [CITIC Pacific Mining Management Pty Ltd], and believe it to be true that CITIC has spent more than USD$10 billion to date on the Project'.
The Sino/Korean iron ore project in the Pilbara is also a substantial employer and a significant contributor to the economy of Western Australia, by payment of mining royalties to the State. The CITIC parties particularly draw attention to their obligations to continue to operate this project as ongoing obligations they have undertaken directly to the State of Western Australia under a State agreement - see the Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act 2002 (WA), which essentially requires Sino and Korean to continue their mining and processing operations of magnetite ore, save for a very few limited intruding and exceptional circumstances as specified. They say that they have met all their obligations to the State by the ongoing payment of royalties (see cl 11(1)(a) of the State agreement following the establishment and implementation of the project (as defined)).
Through Mr Mason's most recent affidavit, the CITIC parties provide some further details concerning the underlying economic scale of the project and the undeniable benefits arising out of the continuance of the current mining operations at Cape Preston. There has been a request that much of what is commercially and economically sensitive material in Mr Mason's affidavit be kept and remain confidential. I have for the present acceded to that request. Consequently, I do not dwell upon the material in these reasons, save to observe that it is essentially uncontradicted. It points to what is a significant economic project venture in the Pilbara of Western Australia and a continuing significant workforce who benefit from a continuance of the project. Correlatively and necessarily it is then said, as is obvious, there would almost inevitably be a significant disruption and dislocation associated with any unjustifiable termination of those ongoing arrangements. This would deliver a significant harm not only to the CITIC parties but to their employees and, possibly, to the economy of Western Australia. These enumerated consequences align with factors which bore heavily upon Chaney J, in his March 2015 interlocutory injunction reasons, resulting in the unconditional undertaking which was necessarily provided from Mineralogy in lieu of injunctive orders at that time: see Mineralogy v Sino Iron [No 6] [42]. Chaney J observed that the CITIC parties then (as applicants) had:
identified what are undoubtedly very substantial costs, losses and expenses which would flow from the defendants suspending their operations in the project area. It is not necessary to recite the details of these costs, losses and expenses. Given the enormous capital investment by the defendants in the project so far, the impact of suspension of operations and the immobilisation of the project employing thousands of people is obvious. I have no hesitation in concluding that, if the consequence of a refusal to grant the injunctions was that mining operations were to cease, either temporarily or permanently, then the balance of convenience would be overwhelmingly in favour of the grant of the injunctions [42].
Chaney J's 'Armageddon' hypothesis observations rendered in March 2015 all firmly remain in place as relevant considerations bearing upon the balance of convenience on this application. They give rise to concerns in the event of an unsupportable termination of the MRSLAs by Mineralogy of waste, dislocation and general economic harm ramifications of very sizable and widespread negative proportions. These are undoubtedly powerful considerations still bearing upon any assessment of the balance of convenience. I acknowledge their continuing force. They particularly bear upon, in the context of the balance of convenience, the court's exercise of its power to issue a discretionary equitable remedy before trial - and are relevant to be weighed no matter how strong or weak the prima facie case of an applicant for interlocutory injunctive relief might present prior to a trial.

Common law damages

Also of powerful present significance, however, to ultimate interlocutory assessments is an awkward phenomenon that is pointed to by the CITIC parties as regards Mineralogy's currently articulated pleaded position against them (now clarified with the benefit of the 4 FASOC making this problem absolutely explicit). The difficulty of concept is that Mineralogy is contending it has lawfully brought to an end the future performance obligations of the MRSLAs by it acting upon breach conduct, resulting in the lawful termination by Mineralogy of the future performance of those MRSLA agreements in early October 2014. This is demonstrable at various places within Mineralogy's 4 FASOC, which explicitly state that the MRSLAs have been terminated for breach by Mineralogy at that time. See, for instance and non-exclusively, 4 FASOC par 84 and pars 103 - 106, contending of them for contractual repudiation and breach by Sino and Korean such that each of them repudiated their respective MRSLA. In way of illustration, I set out from the 4 FASOC pars 107 - 110 therein. They illustrate the as presently articulated stance of Mineralogy:
Termination of the MRSLAs
107.By notices of termination to each of Sino and Korean dated 12 September 2014 and 18 September 2014, Mineralogy terminated the Sino MRSLA and the Korean MRSLA effective from 3 October 2014 or alternatively 10 October 2014.
108.Alternatively, by service of the written summons in proceedings CIV 2368 of 2015, Mineralogy accepted the repudiation of the RMSLAs and terminated the MRSLAs.
109.By letter dated 29 October 2015 from Kilmurray Legal to the defendants' solicitors the plaintiff confirmed its acceptance of the repudiation of the Sino MRSLA and the Korean MRSLA. The letter was effective to terminate the Sino MRSLA and the Korean MRSLA by reason of the repudiation of those agreements by Sino and Korean.
110.Alternatively, for the avoidance of doubt by this Fourth Further Amended Statement of Claim, Mineralogy hereby accepts the repudiation and terminates the Sino MRSLA and the Korean MRSLA.
I will also set out par 119 of the 4 FASOC, by which Mineralogy currently pleads:
In the premises, by reason of the repudiation of the MRSLAs by Sino and Korean, Mineralogy has suffered loss and damage in the sum of approximately $6.4 billion, or alternatively a sum representing the lost opportunity to be paid royalties within their present value of approximately $6.4 billion (on the assumption pleaded in paragraph 117 by Mineralogy that it would have received royalty payments from Sino and Korean up to and including the year 2044).
Even on the present application, the expert accounting reports from Mineralogy's experts Messrs Sorbello and Birkett which Mineralogy has relied upon are seen to be prepared on a basis that they explicitly draw a temporal line at before and after what is called a 'Termination Date' of 3 October 2014. This position is demonstrable from the terms of those reports, which render an accounting assessment for Mineralogy's claims for moneys sought in respect of RCB, both before and after such a termination date, extending presently to a claim calculated up to the end of quarter two on 30 June 2016.
Lest there be any doubt, an examination of Mineralogy's prayers for relief found at page 51 of the 4 FASOC displays claims to relief in terms:
1.Payment of sums for Royalty Component B.
2.A declaration that the Sino MRSLA and the Korean MRSLA have been terminated.
3.Damages for the repudiation of the Sino MRSLA and the Korean MRSLA.
4.Damages for the unlawful taking of concentrate.
5.Damages for breach of the MRSLAs.
6.In the alternative, a declaration that the Sino MRSLA and the Korean MRSLA be rectified.
7.Payment by way of restitution.
8.…
As against the third defendant, CITIC, the parent corporation of Sino and Korean, relief is seen to be sought is by reference to another instrument, namely, a document referred to as the Fortescue Coordination Deed. That, in effect, sees the third defendant guarantee the performance obligations of its subsidiary corporations, Sino and Korean. Relief sought against CITIC is expressed as:
1.Payment of sums pursuant to clause 11.5 of the Fortescue Coordination Deed.
What emerges with clarity from this analysis of Mineralogy's completed statement of claim is that the final relief which it seeks after a trial displays what can only be assessed as a fundamental in principle inconsistency in Mineralogy's present position. On my assessment, there is a base assertion of inconsistent contractual rights. If a lawful termination for breach of the MRSLAs has been effected by Mineralogy for cause, then the ongoing performance of the MRSLAs has been brought to an end, as from early October 2014. That result came about by Mineralogy's legitimate acceptance, on its plea, of serious or repudiatory breaches of the MRSLAs by Korean and Sino. As a result, Mineralogy's rights subsequent to such a contractual termination from that point must be essentially limited to it seeking loss of bargain breach damages. In other words, it is not conceptually open to Mineralogy presently to claim royalty money payments accruing to it quarterly under the performance covenants of Korean and Sino under the MRSLAs if future contractual performance has been lawfully brought to an end in October 2014 by Mineralogy. There is nothing novel in that analysis. It is a purely orthodox contractual analysis, as regards parties' contractual rights under contractual arrangements that have been brought to an end under perfected termination for breach scenarios: see, for instance, Sir Owen Dixon's classic observations in McDonald v Denny Lascelles Ltd (1933) 48 CLR 457, 477. See as well the observations in the House of Lords by Lord Diplock in Photo Production Ltd v Securicor Transport Ltd [1980] AC 827, 849 as regards primary obligations which, post breach and a termination of future performance, are replaced by secondary damages entitlements for the innocent contracting party. See also FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340 [192] - [193] (Basten JA).
In other words, for Mineralogy to presently contend in one breath that it should receive interlocutory mandatory injunctive orders of a compulsive kind, forcing Korean and Sino to actively perform ongoing royalty payment contractual obligations arising under the MRSLAs, by paying to Mineralogy amounts of royalty money said to fall due in Mineralogy's favour on a quarterly basis as RCB up to 30 June 2016, is wholly irreconcilable and inconsistent with Mineralogy's termination stance as regards the MRSLA's future performance ending at October 2014.
Mineralogy is, therefore, as regards its contractual rights post October 2014, presently articulating an interlocutory position seeking payments on a basis inconsistent with its pleaded case seeking final relief upon a basis of contractual termination at October 2014. Its present interlocutory claim for money payments in respect of RCB subsequent to alleged termination of the MRSLAs at October 2014 sits wholly inconsistently with a contention in the next breath that contractual mutuality has been upset and performance obligations under those two MRSLA agreements should be enforced by this court at this time in Mineralogy's favour. This inconsistency of position is a problem for Mineralogy. It cannot be explained away or glossed by an argument that Mineralogy's case is run in the alternative. Analysis of the pleadings shows that the assertion of termination is not advanced in the alternative. Even if it was, the problem still manifests.

Contractual obligation debt/common law loss of bargain damages redux

An appreciation of an in principle contractual distinction between an innocent party claiming damages for a breach of what has become a contract terminated in respect of its future performance, as opposed to that party claiming to enforce the benefit of a contractual right falling due under contractual obligations which remain live and enforceable is a distinction that arose before and was fully appreciated in December 2015. The reasons of Tottle J drew a clear distinction between liquidated amounts falling due to Mineralogy under the MRSLAs, in contrast to what is a conceptually distinct claim for breach damages, also advanced by Mineralogy, on the basis of an acceptance of the innocent party of the repudiatory breach conduct of Korean and Sino in October 2014.
I highlight in this respect his Honour's December 2015 observations at [63], referring to Mineralogy's claims to be entitled to very substantial damages and, as well, to $US22 million, in respect of unpaid RCB up to the date of alleged MRSLAs termination in October 2014, observing that 'this is Mineralogy's primary position'. I also note his Honour's observations at [64] concerning that, in an absence of it being established that the MRSLAs had been terminated, Mineralogy's claim was for (then) the additional sum of $US26 million in respect of unpaid RCB from October 2014 to (then) December 2015.
At [65] of his reasons his Honour directed remarks exclusively at Mineralogy's then common law breach damages claim, but not against the claim to funds due under the MRSLAs by reference to RCB. His Honour said of the breach damages claim only:
[65]In my view, however, the strength of any claims for damages is irrelevant to the serious question to be tried which must be considered for the purposes of the application for an interlocutory injunction because there is simply no principled basis upon which a plaintiff may obtain an injunction compelling payment of damages in advance of a trial. For that reason, I have not attempted to make an assessment of Mineralogy's claims that it has validly terminated the MRSLAs and I make no assessment of its consequential claims for damages …
He continued:
[66]A mandatory interlocutory injunction may be granted to compel performance of a contractual obligation. Thus, the only basis upon which Mineralogy may succeed in its application is if the application can properly be characterised as an application for an order compelling the performance of a contractual obligation.
[67]Notwithstanding references in Mineralogy's submissions to the claims for unpaid royalties being claims for damages … the claims for the unpaid Royalty Component B (both the claim for royalties payable up to October 2014 and the claim for royalties payable thereafter, assuming no termination of the MRSLAs) are debt claims, rather than damages claims (albeit that there may be a concurrent claim for damages for loss of the use of the funds between the due dates for payment and the date on which payment is ultimately made).
His Honour returned to the basal legal distinction between a contractual debt obligation and a claim for common law breach damages, concluding, as he did then, on the balance of convenience, not to grant Mineralogy's application for mandatory interlocutory injunctive relief at that time. He observed:
[103]First, as I have observed in the earlier passage in these reasons, there is no basis in principle upon which a court can order that a payment be made to a plaintiff in respect of a claim for damages before the claim is determined. Mineralogy has not drawn any authority to my attention which supports the proposition that the court's discretion to grant injunctive relief could or should be exercised in that way. Thus, in my view, the application cannot be sustained by reference to a contention that Mineralogy is likely to receive an award of damages at trial.
[104]Secondly, in seeking an injunction to compel the payment of royalties Mineralogy is asking the court, in effect, to determine (on a provisional basis) the issue of the liability to pay Royalty Component B and the quantum of the royalty payments wholly in its favour.
I would respectfully adopt the observations by his Honour as regards the fundamental distinction between a claim to a contractual right such as a payment under a contract that remains fully effectual, in conceptual contradistinction to a claim for damages in respect of the breach of a contract, the future performance of which has been brought to an end by a lawfully implemented termination for breach.
On my assessment, his Honour in December 2015 drew, with respect, what was the entirely correct legal distinction as between a claim brought by Mineralogy for contractual breach damages - which could never support the interlocutory mandatory injunction requiring Sino and Korean to pay $US48 million (then sought), in contrast to the conceptually distinct claim for monetary sums falling due under a contract which remained afoot.
His Honour also observed, whilst proceeding to evaluate Mineralogy's application only upon the basis of a claim for a monetary sum (ie, the position most favourable to Mineralogy):
[108]In my opinion, it is not a complete answer to Mineralogy's application to say that because the claim is for monetary sums it must follow that the award of money at the conclusion of the trial will be adequate compensation. For that reason, I have endeavoured to make an assessment of the extent of the relevant risk of harm by reference to the categories of harm identified by Mineralogy.
I agree with that assessment and adopt it as applicable to this renewed application.
I would also mention, without citing further, his Honour's observations at [10].

Debt/damages distinction at the appeal

From the leading reasons of Newnes JA (with whose reasons Corboy J expressly agreed at [117]) the appeal was allowed essentially on one ground only. That was so notwithstanding that numerous further grounds had been raised by Mineralogy on that appeal: see [72].
Significantly to the present debt/damages conceptual distinction discussion, I note that in the course of his reasons Newnes JA considered and expressly rejected what was then Mineralogy's ground 2 of its appeal, identified under [72](2) of his Honour's reasons.
The failed ground 2 argument was to the effect that a claim for a payment in respect of damages was a sufficient basis to compel performance of a contractual obligation. Newnes JA expressly rejected ground 2. His Honour said at [74] - [75]:
This ground is entirely misconceived. Whilst the primary judge concluded (at [65]) that a court could not order that a payment be made to a plaintiff in respect of a claim for damages before the claim is determined, his Honour did not determine the application on that basis. His Honour expressly disregarded Mineralogy's claim for damages at [65] and [66]. Having found (at [66]) that Mineralogy could only obtain the injunctions it sought on the basis of an order compelling the performance of a contractual obligation - that is, on the basis of its claims for payment of royalty component B - the primary judge determined the application on that basis [17], [18], [67].
This ground must be dismissed.

Nevertheless, the observations rendered upon this issue would seem to have been either overlooked or ignored by Mineralogy whilst advancing the present application. The conceptual distinction, on my assessment, is vital to the end determination of this application. I will return to that issue later. For the present, I turn to Mineralogy's successful ground of appeal and its present ramifications.

The successful ground of the appeal

Whilst dealing with Newnes JA's reasons in the Court of Appeal, it is convenient to observe that his Honour then evaluated ground 1 of Mineralogy's appeal, which he identified under his reasons at [72](1). The ground was in terms:
in having found there was a serious question to be tried in respect of Mineralogy's claim to Royalty Component B, reasoned that he was not in a position to make 'any' assessment of the strength of Mineralogy's case.
Towards ground 1, I note his Honour's observations commencing at [76]. At [89] Newnes JA referred to [74] of the primary judge's reasons, where it had been said:
I am satisfied that Mineralogy has established as a serious question to be tried in respect of its entitlement to payments in respect of Royalty Component B. I am not in a position to make any assessment of the strength of Mineralogy's claims (including, and especially, any provisional assessment of quantum).
Ground 1 was the only successful ground was upheld at the appeal (see [100] - [103]) culminating in the observations by Newnes JA:
but, in my opinion, it did not relieve him of the task of assessing the strength of Mineralogy's case as best he could.
He continued at [104] - [105]:
As a consequence of declining to undertake that evaluative task, the primary judge was not in a position to determine whether Mineralogy had shown a sufficient likelihood of success to justify, in the circumstances, the grant of the injunction pending the trial. In my respectful view, by declining to undertake it, his Honour fell into error.
I would uphold this ground of appeal. In those circumstances it is unnecessary to determine the remaining grounds upon which Mineralogy relies and indeed they involve issues that could not properly be resolved until there is an assessment of the strength of Mineralogy's case in the action.

Debt/common law damages: the distinction - present concerns

With this action now having run almost 3 1/2 years, I hold the somewhat novel advantage of having (almost) completed pleadings but, more particularly, Mineralogy's 4 FASOC.
It would appear that the observations by Newnes JA (with whom Corboy J agreed) in rejecting ground 2 of Mineralogy's appeal, which I have set out above, have not effectively been heeded by Mineralogy upon the present application. By its 4 FASOC and, indeed, by its amended reply and defence to counterclaim, Mineralogy still contends repeatedly for a termination for breach by it of the MRSLAs in early October 2014: see par 176, par 183 and pars 191 - 198 of the amended reply and defence to counterclaim.
On my assessment of the pleadings, Mineralogy's contention towards an early October 2014 termination by it of future performance of the MRSLAs from that time onwards for breach is not advanced on an alternative basis under its pleadings. That is so, albeit that its appeal looks to have been argued upon a basis that Mineralogy submitted to the Court of Appeal that there was no effective repudiation and that Mineralogy was still claiming a debt: see ts 4.
By my assessment, the inconsistency of rights which is presently being articulated on this application as regards the MRSLAs being terminated in their future performances by it for breach as an innocent contracting party in October 2014, yet at the same time presently seeking on this application to, in effect, compel on mutuality grounds a performance by Sino and Korean of a significant aspect of the underlying MRSLA contractual relationship, by seeking that the court order Korean and Sino to render to Mineralogy lump sum and ongoing royalty money payments towards RCB, is untenable. Either the MRSLAs are fully alive and on foot post October 2014 up to now, or they are not. If their ongoing performance was terminated by Mineralogy in October 2014, then after that Mineralogy's claims at trial are for loss of bargain damages against Korean and Sino only, apart from any accrued contractual entitlements held on either side as at the time of the termination event. That being so, the contention of Korean and Sino on this interlocutory injunction application that common law damages at trial will be a fully adequate remedy for Mineralogy if it wins at trial is irresistible.
Mineralogy's inconsistency in position as regards its rights asserted as presently reflected, needs to be corrected before a court could contemplate interlocutory injunctive relief of the character as is currently sought from a court of equity in an exercise of its auxiliary jurisdiction to assist the common law in the final pursuit of what are exclusively common law causes of action based upon contractual rights.
This is a fundamental conceptual problem for Mineralogy that needs to be addressed, before relief beyond evaluating a claim for Mineralogy's accrued contractual entitlements around RCB up to October 2014 can be countenanced.
Having said all that, since the present position of the CITIC parties presents as that, from their perspective, they regard all the rights and obligations afforded to them under the MRSLAs as fully effectual and intact - with those agreements remaining fully on foot, it looks to me that Mineralogy's position of inconsistency can still be remedied. It presently remains open for Mineralogy to correct what I assess to be its fundamentally inconsistent assertion of conflicting contractual rights. Mineralogy, on my assessment, needs, in effect, in order to obtain the equitable assistance which it seeks, to do equity to Korean and Sino - by demonstrating now that Mineralogy is ready, willing and able to perform all its obligations under the MRSLAs now and into the future. That starting platform presents to me, in effect, as the 'price' payable presently by Mineralogy for seeking equitable relief, in order for it to enjoy a prospect of securing compulsive interlocutory injunctive remedies from this court - requiring Sino and Korean to perform their contractual obligations to Mineralogy, as regards a future rendering of RCB quarterly payments and all arrears of RCB after October 2014.
To date, I have not addressed observations by McLure P in the Court of Appeal, where the learned former President addressed a number of observations towards the meaning and effect of cl 8.2 and cl 8.6 within the MRSLAs and with which Corboy J explicitly agreed in his subsequent concurring reasons. I propose to canvass her Honour's observations, particularly upon cl 8.2, within the framework of my following evaluation of the place and significance of RCB in cl 8.2 within the two MRSLAs.
I will set about that task as a necessary component in leading to my following evaluation of the strength of the prima facie case now articulated by Mineralogy upon this application seeking mandatory injunctive relief. This comes about uniquely for an action remitted to the Supreme Court of Western Australia from the New South Wales Supreme Court under the cross-vesting legislation in April 2013 (having been commenced in the New South Wales Supreme Court in March that year). It comes about wholly exceptionally that the present interlocutory injunction application falls to be evaluated some 3 1/2 years into the running of an action (at this time) and when all parties have fully pleaded out their cases. Sino and Korean have, as a result, now fully articulated their defences under their defence and counterclaim, and contended against their rendering any payment whatsoever and whenever towards RCB under the MRSLAs.
So, as a component in the process of my presently evaluating the strength of Mineralogy's prima facie case (or serious question to be tried), it falls to evaluate the strength or weakness of the defences presently articulated by the CITIC parties against Mineralogy's claim to receive RCB. Their defences against rendering any payment are articulated at the same time as Korean and Sino continue to mine ore and then process and export Product under the MRSLAs as living contracts. That is so notwithstanding Korean and Sino's contention that the RCB calculation formula as set within cl 8.2 for RCB is uncertain and unworkable, leading to the consequent unenforceability of that clause for RCB, coupled to a concomitant rehabilitation exercise in contractual severance, otherwise finally leaving intact, fully functional and enforceable MRSLAs.
An evaluation of the strength of the CITIC parties' uncertainty and severance defence arguments, leaving otherwise fully functional MRSLAs, can only be undertaken as an exercise in objective contractual construction - once a proper contractual understanding is attained towards the place and function of RCB as a concept within the MRSLAs as a whole. That overview of the MRSLAs needs to be temporally focused at March 2006, when they were executed. Next then, I turn to some prima facie attempted objective insight of RCB assessed within the overall framework of the MRSLAs as a whole. The exercise is conducted, of course, only on a prima facie basis within the present interlocutory context.

Observations on Royalty Component B within the MRSLAs

The full text of cl 8 in the MRSLAs, including the key definition of 'Mineralogy Royalty' which is arrived at by reference to a summation of the defined terms 'Royalty Component A' and 'Royalty Component B' was set out in full at [34] in the reasons for decision of Newnes JA in the Court of Appeal. For convenience, I set out here that MRSLA text of cl 8 once again:
8.1Mineralogy Royalty
(a)Sino [Korean] will pay to Mineralogy a royalty ("Mineralogy Royalty") in respect of Magnetite Ore taken by Sino [Korean] pursuant to the exercise of its Mining Right.
(b)The Mineralogy Royalty is an enduring royalty, payable throughout the Term of the Mining Right.
(c)Sino [Korean] will pay the Mineralogy Royalty quarterly, based on the quantity of Magnetite Ore taken by Sino [Korean] and Products produced during the previous quarter. The Mineralogy Royalty will be payable not later than the 14th day of each quarter.
8.2Rate of Mineralogy Royalty
(a)The Mineralogy Royalty is calculated according to the following formula:
Mineralogy Royalty = Royalty Component A + Royalty Component B
where:
Royalty Component A at the date of this Agreement is as specified in Item 5 of the Schedule; and
Royalty Component B is calculated according to the following formula:
Royalty Component B = (PR x ((1/2 x Product)
x PP))
+
(CR x ((1/2 x Product) x
CP))
where:
Royalty Component B = The amount of the additional royalty payable for that quarter.
Product = The total aggregate tonnes of product (derived from iron ore) produced by the Sino [Korean] in that quarter for sale or supply, regardless of the type of that product.
PP = The prevailing published annual FOB price (expressed in US dollars per DMTU [the percentage by mass of iron in a tonne determined on a dry basis]) for pellets established by the largest supplier or seller of pellets in Brazil for export multiplied by 68.1.
CP = The prevailing published annual FOB price (expressed in US dollars per DMTU) for Mount Newman fines for export multiplied by 68.1 and then further multiplied by 1.05.
PR = Where the Pellet Price is:
(a)less than US$55 – 6% of the Pellet Price;
(b)greater than or equal to US$55 but less than US$65 – 8% of the Pellet Price;
(c)greater than or equal to US$65 but less than US$70 – 9% of the Pellet Price; or
(d)US$70 or greater – 10% of the Pellet Price.
CR = Where the Concentrate Price is:
(a)less than US$35 – 6% of the Concentrate Price;
(b)greater than or equal to US$35 but less than US$40 – 8% of the Concentrate Price;
(c)greater than or equal to US$40 but less than US$45 – 9% of the Concentrate Price; or
(d)US$45 or greater – 10% of the Concentrate Price.
(b)The rate of Royalty Component A will be reviewed on a quarterly basis from the date of this Agreement. On each review, the increase in the rate of the Royalty Component A will be a percentage equal to the CPI Movement between the date of review and the date of the previous review (or the date of this Agreement in the case of the first review).
8.3Variation in pricing
If there is a FOB price for either Brazil pellets or Mount Newman fines applying for different destinations, the applicable price for use in the formula in calculating Royalty Component B under clause 8.2(a) will be the price for shipments to China, or, if there is no price for shipments to China, for shipments to Asia.
8.4Statements
Each payment of Mineralogy Royalty will be accompanied by a statement, showing in detail the calculation of the Mineralogy Royalty for the month in question. The statement will include such information as Mineralogy may reasonably require for the purpose of confirming the correctness of the calculation.
8.5Inspection, copying and audit
(a)Mineralogy may at any time on reasonable written notice to Sino [Korean] inspect and copy Sino's [Korean's] books and records for the purpose of verifying the amount of Mineralogy Royalty payable by Sino [Korean].
(b)In exercising its right under clause 8.5(a), Mineralogy agrees to give to Sino [Korean] a minimum of 7 days written notice.
(c)Mineralogy may also, at its cost, have Sino's [Korean's] books and records audited. Sino [Korean] will make freely available its books and records for this purpose to Mineralogy or its auditors.
8.6Disputes
Any dispute as to the amount paid to Mineralogy shall be referred to an Expert, in accordance with clause 33, who shall make in the absence of agreement between the parties a final determination for any quarter of the amount to be paid to Mineralogy under this clause 8.
Item 5 of the Schedule to the MRSLAs, referred to in cl 8.2(a), states:
5.ROYALTY COMPONENT A
Rate of Royalty Component A as at date of this Agreement
A$30 per tonne of Magnetite Ore taken by Sino [Korean] during the term of this Agreement.
I can render the following preliminary observations about the royalty arrangements for Mineralogy from cl 8.
1.The term 'Mineralogy Royalty' is found defined in aggregate terms - by reference to it being an enduring royalty payable throughout the term of the 'Mining Right'. As seen, it is the arithmetic summation of two royalty amounts: see cl 8.1(a) and cl 8.1(b) read with cl 8.2(a) in the MRSLAs.
2.The 'Mineralogy Royalty' is payable to Mineralogy quarterly, based on the quantity of 'Magnetite Ore' 'taken' as regards the first component A. Component B is a royalty that is differently derived by reference to a different underlying quantum of subject matter, namely the quantity of 'Product' produced during the previous quarter (cl 8.1(c) of the MRSLAs).
3.Some potentially problematic issues in respect of Royalty Component A have been earlier resolved: see Mineralogy Pty Ltd v Sino Iron Pty Ltd [2013] WASC 194 (Edelman J), delivered 21 May 2013, and where his Honour concluded at [247]:
Although the word 'taken' in cl 8.1 is ambiguous, the best interpretation of that word, and the clause, is a construction similar to that proposed by Mineralogy. Clause 8.1 in the 2006 MRSLAs has the effect that a royalty becomes payable by either Sino Iron or Korean Steel or by them jointly when the relevant person takes possession or control of Magnetite Ore, either by stockpiling for the purposes of possible future processing or use (as opposed to placing it on waste piles) or by moving it directly to the primary crusher.
4.The underlying machinery for Royalty Component A can be seen via cl 8.2(a) to be tied to item 5 of the Schedule in both MRSLAs. There is also via cl 8.2(b) a regular review of the level of Royalty Component A. This is conducted on a quarterly basis, by reference to 'CPI Movement'.
5.Whilst item 5 of the Schedule shows that Royalty Component A is payable by reference to Magnetite Ore taken, the underlying referenced subject matter in respect of the other aspect of the royalty is differently constructed in terms of the underlying subject matter. Both the components A and B are necessary to in aggregate derive the 'Mineralogy Royalty'.
6.By cl 8.2(a) of the MRSLAs the Mineralogy Royalty is an amount of money which needs to be 'calculated'. An arithmetic formula is provided to complete this calculation. It is the summation of Royalty Component A and Royalty Component B.
7.The word 'calculated' is seen then to be used yet again later in cl 8.2(a), now in a context of defining the basis upon which the Royalty Component B is to be ascertained. A second mathematical formula is provided in order to perfect this calculation for RCB.
8.As seen, the formula provided for the calculation of the monetary quantum of what is referred to as Royalty Component B provides a more complex algebraic formula. As an objective assessment, the provision of that formulae and the calculations to be undertaken all suggest to me a laying down, at this point, of elaborate machinery - in order to derive with precision the royalty money amounts which are to fall due to Mineralogy, on a quarterly basis.
9.As now seen, certain pricing ingredients used within the Royalty Component B formula post 2006 have proven, or are said to be, problematic in terms of their ascertainment. That is the case particularly as regards the subject matter that is referred to by the acronym PP (which I assume for present purposes is meant to signify a reference to pellet price) and also a counterpart formulae acronym CP (which I assume for present purposes signifies concentrate price - although those conclusions concerning the meaning of the two acronyms are an inference I have drawn, rather than being matters that are explicitly stated).
10.It is apparent from the defined term 'Product' that it is the commencing point in the equation for both the PP and CP components in the formula specified to derive Royalty Component B. 'Products' is defined in the MRSLAs' early definition clause (cl 1.1) as:
Products means up to a combined aggregate total of 12,000,000 (twelve million) tonnes per year of a combination of Iron Ore Concentrate, and/or Pellets, and/or HBI for sale or export in such ratio as Sino [Korean] may decide from time to time and no more.
11.Other definitions in that definition clause at cl 1.1 in the MRSLAs also define the term 'Iron Ore Concentrates' to mean 'Magnetite Ore concentrated to at least 65% Fe'; 'Pellets' to mean 'high grade iron ore pellets produced from Magnetite Ore'; and 'HBI' to mean 'hot briquetted iron produced from Magnetite Ore'.
'Magnetite Ore' is defined in cl 1.1 to mean:
Ore mined from the Mine Area and containing a magnetite content of at least 17% magnetite Fe. Magnetite Ore also includes any Low-Grade Material used by Sino to produce Iron Ore Concentrates.
Clause 1.1 also defines 'Mineralogy Royalty' to mean 'the royalty payable by Sino [Korean] to Mineralogy under this Agreement, as set out in cl 8.1'.
12.Hence, it may be seen that whereas Royalty Component A is a royalty amount payable to Mineralogy in reference to the subject matter of 'Magnetite Ore' 'taken', that Royalty Component B is to be distinctly calculated by reference to the quarterly amounts of the different subject matter, being 'Product'.
13.Whilst 'Products' is first defined in the cl 1.1 MRSLA clause that I have mentioned, there is within cl 8.2 a further and independent definition for 'Product', as regards its meaning within Royalty Component B and which it is necessary to assimilate.
14.Within the definition of the Royalty Component B formula, 'Product' is defined in terms:
Product = The total aggregate tonnes of product (derived from iron ore) produced by Sino [Korean] in that quarter for sale or supply, regardless of the type of that product.
Hence, it is seen that although the defined term 'Product' is capable of embracing a number of different derived iron ore products such as concentrate, pellets or HBI, in the end this does not matter for the purposes of qualifying as product in terms of a subject matter delivering the obligation to pay a royalty exposure to Mineralogy. All 'Product' will do that and the royalty payable is the same.
15.Expansive as the definition of 'Product' is now seen to be under cl 1.1, it would not appear to extend to include iron ore 'fines'.
16.For present purposes, it is significant that all argument before me has proceeded upon the basis that, to date, the only derived subject matter from the iron ore 'taken' at Mineralogy's Cape Preston mining leases as worked by Korean and Sino (from the magnetite iron ore which has been taken since 2013) is iron ore 'concentrate'. No other subject matter potentially capable of fulfilling the nominated MRSLA definition of 'Product' looks to have been derived to date. It would appear to be that to date no pellets or HBI has been produced, just concentrate.
17.The last negative observation is significant, once the dual halved parts in the RCB formula are examined, noting again that the acronyms PP and CP in that formula both envisage use of FOB (shipping) prices for the two distinct underlying subject matters that are chosen. The chosen subject matters in the formula are the price of iron ore pellets originating from Brazil, but in the other half of the formula the other distinctly chosen subject matter is of Mount Newman iron ore fines for export.
18.The Royalty Component B formula on close examination is seen first to halve the overall quantum of produced Product (as defined). Relevantly, for present purposes, since 2013 this has been only iron ore concentrate which has been produced from the extracted magnetite ore. Having halved the quantum of the produced Product, the RCB formula then proceeds to multiply that halved amount of Product by an FOB shipping price for each of the two chosen underlying subject matters, across the distinct halves of the formula. Hence, taking half the tonnage of the iron ore concentrate product (as Product), that tonnage amount is then multiplied, in the case of PP, by a shipping price in US dollars per dry metric tonne for Brazilian sourced iron ore pellets. The same methodology is used in respect of the other half of the calculation taking the halved Product tonnage and applying the US dollars shipping price (FOB), this time for the subject matter of Mount Newman fines for export (noting as dual curiosities that, first, fines would not appear to fall within the definition of 'Product' and, second (and in passing) that Mount Newman fines are actually derived from hematite ore, not magnetite ore: see ts 1412).
19.For each of PP and CP the FOB price nominated for either subject matter (pellets or fines) is indicated to be the annual shipping price for the subject matter.
20.Further, that annual nominated shipping price is identified as having been 'published' - indicating prima facie that the price used is in the international public domain, rather than being pricing information that is kept confidential.
21.A further aspect in each of the PP and CP price definitions is that these annual prices to be used are specified to be 'prevailing' - indicating prima facie a specification of a market price which may change over time - and presumably here, annually.
22.Each half of the specified Royalty Component B formula is then to be multiplied by a percentage for PR and CR. This percentage proceeds to manifest on a sliding scale, depending upon the level of the price for pellets or, in the case of CR, Mount Newman fines (albeit referred to as Concentrate Price in CR).

It is apparent then that there is presently a strong clash of expert perspectives, as regards a legitimate use of anything other than an annual benchmark pricing system to source the pricing data required in a derivation of a royalty payment of money for Mineralogy as RCB under cl 8.2 of the MRSLAs, as an aspect of the 'Mineralogy Royalty'. Given that clash, it is convenient to recall the observations of the President at [24] of her reasons, where her Honour had observed:
Prima facie, the standard for the calculation of RCB is the published market price for the relevant products (PP and CP) during the relevant quarter. The fact that (unlike the ABPS) the market price changes during the relevant period does not make the standard legally uncertain. How best to achieve and quantify the market price for the relevant period is a matter for expert evidence on a subject involving a well understood process that is neither ambiguous nor uncertain.
Those highly persuasive observations, which I would respectfully apply on this application, were explicitly identified and agreed with concerning cl 8.2 by Corboy J in his reasons at [118] on that appeal.
At this point, I would simply observe once again that cl 8.2 in the MRSLAs does not, as regards the derivation of Royalty Component B over time, say expressly that the input data source for PP and CP must be data obtained by using the (no longer operative post early 2010) ABPS. References seen in cl 8.2 to a FOB (shipping) price pose no real difficulty. Nor is a conversion of a C&F price to a FOB price theoretically problematic.
The pragmatic obstacle to implementing an RCB calculation, if there is a problem, is tied to the absence post March 2010 of a published annual market price for PP and CP (which had once been the case under the ABPS). The Brierley methodology in lieu of using what became the now inoperative ABPS source takes an average of the published daily spot prices for Brazilian pellets and Mount Newman fines, gathered from other publicly available industry data sources.
This clash of expert perspectives is not an issue that I can or need to resolve on a final basis for this application. For present purposes, I now hold Mr Brierley's revised and reworked reports responding specifically to, and also adopting, a number of the criticisms raised by Mr Barkas, and then reworking his earlier calculations accordingly. Against that, I have the approach of Mr Barkas for the CITIC parties which basically opines that Mr Brierley's averaging approach by using spot price data to derive the annual prices for RCB is too far removed from the terms of cl 8.2 as regards meeting the proper input of the RCB calculation formula.

Determinations upon interlocutory injunction orders sought by Mineralogy

It is undeniably the case that at present Sino and Korean continue to intensively mine and process ore on their MRSLA mining leases to extract vast quantities of magnetite ore to produce 'Product', in the nature of iron ore concentrate. This intensive production activity proceeds on an ongoing and industrious basis on Mineralogy's mining leases at Cape Preston. Product is loaded aboard ships and exported offshore. Mr Birkett assesses the worth of the produced magnetite concentrate as Product shipped to June 2016 to be $US652,993,692: see table 13 (par 5.7) of his affidavit.
All this ongoing mining and export activity involving more than 10 million tonnes (DMT) of magnetite concentrate is being implemented on the necessary basis, as asserted by the CITIC parties, that their MRSLAs remain fully intact and enforceable, thereby affording them the contractual rights to fully exploit all their contractual mining entitlements under those agreements.
Yet since the commencement of the production of iron ore concentrate as Product began at these mining leases in 2013, the joint contention of Korean and Sino has been and remains that there presents what is for Mineralogy a most unfortunate inability for the parties to utilise the MRSLAs' Royalty Component B calculation formula, because it is uncertain and unenforceable, albeit severable, from the MRSLAs, with the correlative consequence that nothing at all as a royalty amount as RCB on Product can or needs to be paid to Mineralogy.
That overall status quo (2013 - 2016) of no royalty at all on Product, I would presently assess, prima facie, to be startlingly curious. There is for me a detectable undertone of ongoing unjust enrichment to Korean and Sino at Mineralogy's expense in that status quo which, generally speaking, is an unsatisfactory situation for courts of common law and equity when that unifying concept is present (see Pavey v Matthews Pty Ltd v Paul (1987) 162 CLR 221 (Deane J)).
For reasons now canvassed, I am of the view at this time that Mineralogy has made good what is a strong prima facie case that it holds an entitlement against Sino and Korean to be receiving quarterly payments of at least some reasonable amount of royalty funds in respect of RCB from Sino and Korean, or at least a reasonable amount of royalty that is assessed by reference to 'Product', in lieu of RCB and that is worked out on a principled basis that international iron ore industry experts would assess as being fair and reasonable to Mineralogy.
The only major caveat to that strength assessment is the problem of Mineralogy's conceptually irreconcilable contemporaneous assertion that the MRSLAs were legitimately and justifiably terminated by it in early October 2014 on the basis of serious or repudiatory breaches of terms in those agreements, by Korean and Sino. That is the inconsistent MRSLA termination stance which, I assess, inhibits Mineralogy's claims post October 2014 to anything but it seeking common law loss of bargain damages for breach. But I also assess this to be an inconsistent rights assertion stance of Mineralogy that is presently capable of being corrected by an unequivocal withdrawal of all assertions of MRSLA termination - in relation to the future ongoing performance of its own obligations under the MRSLAs by Mineralogy to thereby show that it is in a position to do equity to Sino and Korean and show that it is 'ready, willing and able to perform' itself.
Because of the way Mineralogy has advanced its case post 2014, including through its experts, a temporal distinction has been needlessly drawn between rights in two time periods. These are the periods pre and post Mineralogy's asserted termination, as regards the ongoing future performance of the MRSLAs, at early October 2014 (or, in other words, an initial assessment must be conducted towards the quarterly periods up to the end of the 30 September 2014 quarter, with subsequent quarterly periods thereafter to 30 June 2016 being assessed differently, on the basis that they must be post contractual performance (following the MRSLAs' termination evaluations).
For the pre-termination period to 30 September 2014, on my assessment, Mineralogy presently asserts what I assess to be a strong prima facie case that it should have received by now from Sino and Korean what can be reasonably assessed as an accrued pre-termination entitlement to moneys due in respect of Royalty Component B - as a vested contractual entitlement that was obtained prior to termination of the MRSLAs. That accrued right survives intact for Mineralogy, notwithstanding any termination of the ongoing performance of the MRSLAs, even if that had later occurred: see McDonald v Dennys Lascelles (477) (Dixon J). See also Austman Pty Ltd v Mount Gibson Mining Ltd [2012] WASC 202 [39] and [543] - [544], discussing FPM Constructions Pty Ltd v Council of the City of Blue Mountains, especially [192] - [193].
The strength of that case for Mineralogy, plus the weakness of the defences articulated against it by the CITIC parties, do not sit as isolated considerations apart from the further assessment of the overall balance of convenience. There is an interrelationship between the interlocutory strength of a prima facie case that is demonstrated for injunctive relief and the balance of convenience considerations: see Mason ACJ in Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148, 155. Here, taking that interrelationship into account, acknowledging the strength of the prima facie case (and, correlatively, the weakness of the defence arguments as to uncertainty of RCB and its severance), I render the following observations (recognising that Mineralogy is advancing an exceptional case seeking relief for what is a claim to receive now a sizable amount of money, in effect, as final relief).
First, I can detect no fiscal prejudice to the CITIC parties by presently requiring them to render a sizable payment of moneys now, on the basis that I will explain. The CITIC parties do not at all contend that they lack the capacity to render such a payment, or that they would be prejudiced in any way themselves raising those funds. Indeed, the essence of their articulated position has been that they would have made royalty payments on Product earlier had, in effect, RCB been capable of being calculated. Their position has been that, through problematic circumstances post March 2010 that were wholly unattributable to them, an RCB calculation simply cannot be made. So, therefore, no payment at all for RCB is due to Mineralogy.
Second, bearing upon balance of convenience considerations, there is merit, as I would assess matters presently, in the submission of Mineralogy that the MRSLAs debar it from later pursuing viable breach damages claims against the CITIC parties for consequential damages, in the event of Mineralogy successfully establishing at trial a breach of the MRSLAs as regards Sino and Korean's RCB obligations, because cl 30.3(b) excludes a claim for damages for indirect or consequential loss or damage or to claims of loss of profit, special loss or damages suffered by a MRSLA party or by any other person. There is persuasive authority (see AB v CD [2014] EWCA 229; (2015) 1 WLR 771 [18], [24], [27] - [30] (Underhill LJ), [33] (Laws LJ)) to the effect that the inability or limitation to pursue such indirect or consequential breach damages losses may be taken into account in assessing the balance of convenience as regards interlocutory relief by a court considering an intervention into the contractual relationship. That consideration is a circumstance favouring Mineralogy receiving some funds immediately assessed by reference to RCB - where it is now clear that Mineralogy (subject to resolving the termination problem) has articulated a strong case to receive some funds now, difficult as a precise computation might ultimately prove to implement at a later time. But that, essentially, is a matter of precision to be confronted later at a trial, with the assistance of expert evidence.
The unusual circumstances in this matter are such that an evaluation of the adequacy of common law damages as a remedy, in a context of an assessment of the balance of convenience, can also be framed as an inquiry as to whether it is just in all the circumstances that the plaintiff be confined to a remedy in common law damages awarded at trial: Evans Marshall & Co Ltd v Bertola SA [1973] 1 WLR 349, 379; State Transport Authority v Apex Quarries Ltd [1988] VR 187, 193; SMS Rental (WA) Pty Ltd v Cahma Life Nominees Pty Ltd [2009] WASC 35 [45]; Action Cycles Pty Ltd (recs and mgrs apptd) v Ross [2011] VSCA 411 [30].
I would note here the viewed expressed by the primary judge in the reasons in Mineralogy v Sino Iron [No 8] [108], where his Honour stated:
I accept that there is a risk that Mineralogy and its related entities may suffer prejudice for which the award of monetary sums at the conclusion of the trial may not be adequate compensation. In my opinion, it is not a complete answer to Mineralogy's application to say that because the claim is for monetary sums it must follow that the award of money at the conclusion of the trial will be adequate compensation. For that reason, I have endeavoured to make an assessment of the extent of the relevant risk of harm by reference to the categories of harm identified by Mineralogy. I have given anxious consideration to the serious consequences which Mineralogy urges me to accept will flow from a refusal to grant an injunction.
His Honour then went on to review the potential harm relied upon by Mineralogy, as presented based on the evidentiary materials then before him, at [110] - [126]. The findings in those paragraphs are then summarised at [66] - [70] in the reasons of Newnes JA in the Court of Appeal. In that context, I have examined the further materials provided by Mineralogy as to the potential harm that may be suffered if interlocutory relief is not granted, notably the two 2016 affidavits of Mr Wolfe.
Third, balanced against those considerations of convenience favouring Mineralogy are some persuasive concerns as are expressed in materials filed for this application by the CITIC parties towards Mineralogy's current precarious financial position and the CITIC parties' legitimately expressed concern that if substantial moneys are ordered to be paid over now before a trial outcome to Mineralogy (essentially as final relief to Mineralogy) vis-à-vis RCB, that the strong likelihood is that those funds will never be recovered again, were it to arise following a trial that they needed to be repaid.
Fourth, against the third consideration, Mineralogy counters by asserting that its uncontroversial entitlement to regular quarterly payments of royalty money as Royalty Component A, might be used in future as a set off to enable such a recoupment, in the unlikely event (it says) that ever were to be necessary. That set off contention, however, would I think conceptually founder, if there has been a termination of the performance of the MRSLAs - in which case, there would be no further ongoing accruing entitlement to Royalty Component A and, in lieu thereof, only a claim by Mineralogy to common law breach and loss of bargain damages.
Having reviewed the extensive affidavit materials as now filed by the parties, I am presently satisfied that there are indeed a few fiscal 'clouds' hovering over the financial future of Mineralogy. They might develop to put at risk a potential future recovery of funds paid over now, if required to be repaid. But then balanced against that, however, is the fact that Mineralogy has demonstrated (termination issue aside) a strong prima facie case which has to date only been answered weakly by the CITIC parties - under their cl 8.2 uncertainty and severance arguments. Fallback arguments which the CITIC parties raise essentially accept that some royalty amount, assessed on 'Product', that is fair or reasonable or arising out of a good faith negotiation would need to be paid in lieu of a precise calculation of RCB. At all events, on fallback scenarios Mineralogy must at the end receive 'Product' royalty money, as regards Product produced and with Product continuing to be produced on Mineralogy's mining leases at Cape Preston presently and for the foreseeable future.
I am also satisfied that the currently subsisting non‑payment of anything stance by Sino and Korean since 2013, in respect of RCB, in circumstances where Mineralogy might otherwise as at 2006 have contractually anticipated (objectively assessed) receiving a substantial quarterly inflow of funds by a royalty assessed against iron ore concentrate produced as Product - has contributed, although not exclusively so, to present fiscal strictures and 'clouds' which presently afflict Mineralogy. In other words, the non-payment of anything stance on 'Product' of Korean and Sino as a result of the asserted inability to compute RCB is a strong contributing factor to Mineralogy's current fiscal problems. That is not to exclude Mineralogy's own contributions to its own problems, including, as I would assess matters, by its voluntary payments towards the funding of a political party at the 2013 federal election.
But I would add on this prima facie assessment that the no RCB money at all stance to date of Sino and Korean (contending that RCB is incapable of calculation) does not seem to me to amount, at least by itself (if Korean and Sino are ultimately proven wrong about that at trial), to repudiatory conduct of the MRSLAs on their part, as regards their MRSLA obligations. In other words, I would not view Korean and Sino's breach conduct, if it is ultimately ever assessed as that, in making no RCB payments at all to date, as being sufficient to provide a platform to allow Mineralogy as the so-called innocent contracting party, to use that as sufficiently repudiatory conduct and thereupon to legitimately terminate all future performance of the contractual obligations under the MRSLAs. To the contrary, and of course only on a prima facie basis at this time, I would assess the conduct of Sino and Korean to date as regards non-payment of RCB as being whilst potentially mistaken as to the MRSLAs' correct interpretation vis-à-vis RCB, as not being inconsistent with them still acknowledging the ongoing contractual obligations under the MRSLAs: see Meagher, Gummow and Lehane (5th ed) at [20-120] and the cases referred to at footnote 252. More would be required, I think, to assess Sino and Korean as exhibiting enough to be assessed objectively as sufficiently repudiatory conduct, as regards the stance they have taken currently towards not paying anything towards RCB. Of course, that assessment may need to be revised on an ongoing basis after these reasons are published.

Relief

Given what has now been canvassed, I am of the view that there should presently issue some equitable relief by way of an interlocutory mandatory injunction to compel Korean and Sino to pay one-half of $US21,380,541 to Mineralogy within 30 days. The other half of that amount is to be paid into court - to abide there the outcome of a trial of all issues presently in dispute as between the MRSLA parties concerning RCB: see table 9 of Mr Birkett's report for derivation of this figure.
Such orders will - and, on my assessment, are necessary to - restore a proper balance under the MRSLA respective contractual interests and risk allocations as between the parties. That is appropriate in circumstances where the present prior interlocutory injunctions, issued by Edelman J as regards Mineralogy's termination notices, and then the unconditional undertaking of Mineralogy given to Chaney J in 2015 against taking steps in furtherance of more termination notices, still remain in place. Their ongoing effect was explained by McLure P at [22].
A payment into court of a half component of that amount is directed towards addressing legitimate concerns of the CITIC parties concerning possible later recoupment, were that necessary post trial from Mineralogy. It also caters, conservatively, to address quantum adjustment issues that could be required, once the parties' respective experts set about their further work for trial, in relation to issues concerning working out the level of a fair or reasonable royalty in respect of Product in lieu of RCB - should it be the case that the calculations and methodology adopted by Mineralogy's experts to date (Messrs Brierley, Sorbello and Birkett) prove to be excessive. It is unlikely, however, on my present assessment, that these calculations would prove to be excessive to an extent of more than half of the Birkett amounts. That half component would remain in court, until a final determination of these issues.
For the subsequent temporal period, after Mineralogy's asserted termination date of early October 2014, the conceptual position is presently different. If future performance obligations on both sides under the MRSLAs have come to an end by Mineralogy's early October 2014 election to bring about a termination of performance result, then Mineralogy's claims post October 2014 can only be for loss of bargain damages, not for RCB moneys due under the MRSLAs themselves as living contracts - assuming Mineralogy is proven right at trial in taking that October 2014 termination election step.

It is not presently open conceptually, on my assessment, for Mineralogy to presently seek ongoing liquidated payment amounts as RCB contractual royalty entitlements contractually due to it under the MRSLAs post October 2014 when, in the next breath, Mineralogy is asserting those MRSLA agreements came to an end as regards their performances in October 2014. This is a conceptual obstacle by a pursuit of mutually inconsistent rights which Mineralogy cannot skate around by asserting that its MRSLA October 2014 termination stance is a position taken in the alternative (which it actually does not, from an evaluation of the face of its pleadings and its prayers for final relief on its 4 FASOC) or even more weakly, that it is just not 'fair' that the CITIC parties continue to occupy, mine, produce and export ore and product from the mining leases without paying anything on Product to Mineralogy. That latter submission is only an unprincipled whinge.
As Mineralogy seeks the assistance of equity to compel Korean and Sino to meet their asserted obligations to pay royalty moneys said to be falling due to Mineralogy as royalty payments by reference to RCB in the MRSLAs, or reasonable amounts in lieu thereof, Mineralogy first needs to do equity itself towards the other parties to the MRSLAs. It will do that by showing itself to be fully ready, willing and able to perform its own obligations under the MRSLAs. But this, in practical terms, does not now require very much at all from Mineralogy to fix, as I explain below.
Put another way, to obtain discretionary equitable relief by the remedy of injunction on an interlocutory basis, Mineralogy must be seen to be conducting itself on an equitable basis. I can envisage no greater scenario of a party presenting themselves to a court as being thoroughly unready, unwilling, and unable to perform their contractual obligations under an agreement, than by that party pleading as its case, that all the future obligations of performance under the parties' agreements have come to a complete end over two years ago.
Mineralogy's fundamentally inconsistent rights position of contractual MRSLA terminations at October 2014 must first be corrected, before any equitable relief as sought post October 2014 can be countenanced.
Nevertheless, it is the case that Korean and Sino do still continue to conduct themselves at Cape Preston upon the basis that the MRSLAs continue on foot, thereby affording them full entitlement to occupy, mine and produce ore and product, as they do. That being so, Korean and Sino have not yet reacted as they might otherwise have to the termination stance as articulated to date by Mineralogy. Given that, it is, on my assessment, still open to Mineralogy for the present to correct its presently inconsistent assertion of rights problems and to fix the conceptual problem by removing all assertions of a MRSLA termination unilaterally and immediately, starting with its pleadings in this action.
Mineralogy needs to demonstrate to the court that it is ready, willing and able to perform its ongoing obligations to the CITIC parties under the MRSLAs to obtain any further equitable relief for the post October 2014 period. If it does that, sooner rather than later, then I can see no present reason, conceptually, why a similar 50/50 receipt/payment into court interlocutory regime would not be appropriate as regards a $US59,603,625 amount - assessed by table 10 in Mr Birkett's report.
But if Mineralogy does not swiftly correct its current inconsistent assertion of rights position, then its best claim for this post October 2014 period, essentially, would only be a claim for common law damages for breach and loss of bargain damages. On that best case, given the very nature of that common law damages claim, the answer to the necessary interlocutory question - where there is, as here, an exclusively common law contract derived cause of action (bearing upon the balance of convenience) - as regards the longer term adequacy of the post trial outcome of an award of common law damages, carries necessarily a self-evident affirmative answer.
Consequently, I would afford to Mineralogy a brief opportunity, if it wishes, to: (1) amend (by my leave) their pleadings in accord with what I have indicated above and (2) present (with leave) further affidavit material within a shortish period to demonstrate to my satisfaction that it is ready, willing and able to perform its future and ongoing obligations under the MRSLAs.
In the event those contingencies are met by Mineralogy, I see no reason why interlocutory injunctive orders of a similar kind should not issue, along the lines I have indicated for the period up to 30 September 2014, so as to also issue in respect of the period to 30 June 2016 (ie, for $US29,801,812.50 to be paid to Mineralogy and with the same amount to be paid into court to abide a trial of issues as regards RCB).
As regards future ongoing periods beyond 30 June 2016 (which Messrs Sorbello and Birkett have not attempted to address by their reports filed to support this application) I would merely observe that a substantial component of the proposed orders seen under par 3 of Mineralogy's amended chamber summons conceptually are not appropriate. In particular, orders premised upon the hypothesis of the defendants complying with order 1 then 'being permitted' to continue to conduct mining, processing, shipping and other activities subject to further provisos are conceptually unworkable, uncertain and, in any event, are conceptually misconceived and inappropriate as framed.
Having said that, the balance of proposed order 3, as regards a regular payment of a sum calculated by multiplying $US6 by the future quarterly number of dry metric tonnes of iron ore concentrate shipped in a preceding quarter, would, on the face of it, seem to be appropriate, subject to certain qualifications.
In the first place, my observations above and made frequently through these reasons concerning Mineralogy's MRSLA inconsistent termination stance, as regards the early October 2014 termination of the MRSLAs, is a problem that first needs to be wholly fixed. That must happen in order for any equitable interlocutory relief for future periods before trial to even be in contemplation.
Second, I expect the parties from this point on, with the action now under my case management, to co-operate towards each other with good faith towards the objective of a swift (from now on) determination by way of preliminary issue on a final basis of all contentious issues concerning Royalty Component B within the present action. I note from prior reasons that that same objective has been aspired towards by prior case managers, but as yet has proven so far unattainable. Nevertheless, my resolve to that end is undiminished. I expect the parties and their legal representatives to co-operate meaningfully to that end, by agreeing an isolation of most underlying facts (hopefully, fully agreed as between the parties) and all relevant documents (again hopefully, agreed) so that a final determination concerning all issues as regards RCB can be reached, sooner rather than later.
Aligned to that objective, and because Korean and Sino continue to intensively mine iron ore and produce Product from Mineralogy's mining leases on an ongoing basis, a payment of a quarterly amount calculated at $US6 per dry metric tonne of iron ore concentrate shipped in the preceding quarter, presents to me as appropriate to be paid into court, with liberty to apply to vary those arrangements. That figure would represent about a 40% discount on the pricing calculations of Mr Brierley to date and so is conservative in its conception as Mineralogy suggests. To be more specific, all such RCB-linked moneys claimed beyond the end of June 2016, rather than half, would be paid into court, to abide the outcome of a final determination upon RCB. That should provide incentive for the parties to more timeously work to that objective. The funds would thereby also be secured, but available to abide a final outcome.
Hence, once again, subject to the pre-conditional need for Mineralogy to address and correct the October 2014 termination stance by showing that it is ready, willing and able to perform its obligations under the MRSLAs, I see no reason why, as a matter of concept, further orders along those lines should not issue in future once the groundwork is met.
In consequence then, I would propose to issue orders in the above terms, subject to hearing the parties within a reasonable time frame, concerning the precise formulation of orders implementing these reasons.