Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 5]

[2014] WASC 471

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 5] [2014] WASC 471

CORAM:   EDELMAN J

HEARD:   10 DECEMBER 2014

DELIVERED          :   10 DECEMBER 2014

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 PACIFIC LTD
Third Defendant

Catchwords:

Practice and procedure - Defendants' application for adjournment of hearing of application for interlocutory injunctions - Importance of issues and short timeframe before hearing - Expert evidence and pleading provided by plaintiff two weeks late without satisfactory explanation -  Refusal by plaintiff to respond to defendants' enquiries about plaintiff's expert evidence - Need for parties to confer, after pleadings, about possibility of trial of a preliminary issue - Prejudice to plaintiff due to delay arising from adjournment - Background of changes of case by plaintiff

Legislation:

Nil

Result:

Defendants' application for adjournment allowed

Category:    B

Representation:

Counsel:

Plaintiff:     Mr S Couper QC

First Defendant             :     Mr C M Scerri QC

Second Defendant         :     Mr C M Scerri QC

Third Defendant           :     Mr C M Scerri QC

Solicitors:

Plaintiff:     HopgoodGanim

First Defendant             :     Allens

Second Defendant         :     Allens

Third Defendant           :     Allens

Cases referred to in judgment:

Mineralogy Pty Ltd v Sino Iron Pty Ltd [2013] WASC 194

Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375

Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 4] [2014] WASC 282

EDELMAN J: 

Introduction

1. On 26 September 2014, I made orders granting interim injunctions in favour of the first two defendants, Sino Iron and Korean Steel, who I will describe as the Citic parties.  The interim injunctions included orders restraining Mineralogy from terminating or suspending a project which, as I explained in earlier interlocutory proceedings,[1] is estimated by Mineralogy to be worth $9.4 billion.  The Citic parties have spent billions of dollars on the project.  The termination or suspension of the project could affect the employment of between 2,500 and 2,800 people.

   [1] Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375 [2].

2. At the time the interim injunctions were granted I listed a hearing of the Citic parties' application for four interlocutory injunctions on 18 December 2014.  Programming orders were made for the hearing of that application.  The orders included a requirement for Mineralogy to file the affidavit evidence upon which it proposed to rely.  Mineralogy's affidavit evidence was ordered to be filed by 14 November 2014.  Mineralogy was also ordered to file its reply and defence to counterclaim by 21 November 2014.  The parties were ordered to confer, on or after 5 December 2014, about the trial of a separate issue.

3. Mineralogy served affidavit expert evidence from an accountant, Mr Sorbello, two weeks late.  As senior counsel for Mineralogy properly conceded, there is no satisfactory explanation for the delay.  Mineralogy also served its reply and defence to counterclaim two weeks late.  Again, no satisfactory explanation has been given for the delay. 

4. Mineralogy's expert evidence from Mr Sorbello did not contain, as is usual, the letter of instructions to the expert.  The Citic parties requested those instructions.  Mineralogy refused to provide it.  Mineralogy's expert evidence was also unusual in another respect.  As senior counsel for Mineralogy accepted, it is essentially two expert reports contained in one (an expert report from BDO based in part on an expert report from AME).  The Citic parties requested underlying material from the AME report.  Mineralogy refused to provide it.

5. Mineralogy has now filed (prior to the filing of submissions by the Citic parties) 37 pages of concise, but wide ranging, submissions in opposition to the interlocutory injunction application.  The submissions include a focus upon the expert evidence for a condition of any interlocutory injunction that is granted.  The condition sought is that the Citic parties make a payment to Mineralogy of an amount which could range from between $13 million and $27 million or possibly more. 

6. The Citic parties say that any revised timetable to a hearing in 8 days' time will not now give them sufficient opportunity to consider and respond to the Sorbello affidavit.  They say that the delayed filing of Mineralogy's reply also means that it will not be possible for the parties to confer about a trial of a separate issue which could be a factor, potentially a significant factor, which affects the balance of convenience in relation to the issue of any interlocutory injunction.  They also say that the unexpected number of issues raised by Mineralogy in its submissions means that a one day hearing might now be inadequate.

7. In contrast with the asserted prejudice to the Citic parties' preparation, Mineralogy submits that the prejudice to it from an adjournment of the interlocutory injunction is that the interim injunctions would be extended without a detailed consideration being given to their merits.  Mineralogy says that the effect will be that the Citic parties will continue to mine and export iron ore without paying Royalty Component B, which Mr Sorbello estimates to be between approximately $13 million and $27 million over the last year. 

8. In the context of this application including (i) the background of Mineralogy's changes of case, (ii) the importance of the interlocutory injunctions to the Citic parties, (iii) the tight timetable for hearing of the application for interlocutory injunctions, (iv) the lack of satisfactory explanation for the delays by Mineralogy, and (v) the potential importance of Mr Sorbello's evidence, basic considerations of fairness require that the Citic parties' application for interlocutory injunctions be adjourned.  The applications should be relisted at the first reasonable opportunity in the new year. 

Mineralogy's failure to comply with the hearing timetable

1. On 26 September 2014, I made orders for interim injunctions.  I imposed a tight timetable for evidence and submissions in relation to the Citic parties' application for interlocutory injunctions.  The timetable was largely agreed by the parties. 

2. The timetable required the Citic parties to file and serve their evidence by 7 November 2014.  They did so on 7 November 2014.

3. The timetable then required Mineralogy to file and serve its evidence by 14 November 2014.  It did not do so.

4. The timetable then required the Citic parties to file responsive evidence and submissions by 28 November 2014.  They were unable to do so because at this date Mineralogy still had not filed its evidence.

5. On Friday, 28 November 2014, Mineralogy sent the evidence upon which it relied to the solicitors for the Citic parties.  The evidence is an affidavit from Mr Sorbello, a chartered accountant.  The affidavit includes an expert report from BDO (Qld) Pty Ltd (the BDO report) concerning the calculation of royalties, specifically Royalty Component B.  The BDO report, in turn, relies upon a report from AME which was not filed as a separate expert report.  No satisfactory explanation was provided for the delay.  The Sorbello affidavit was not filed at the court until 5 December 2014.

6. The timetabling orders also required the Citic parties to file and serve any amended defence and counterclaim by 24 October 2014.  They did so on 24 October 2014.

7. Mineralogy was required to file and serve its reply and defence to counterclaim, and any proposed questions for separate determination, by 21 November 2014.  It did not do so.  

8. On Saturday, 6 December 2014, Mineralogy served its reply and defence to counterclaim (dated the previous day).  No satisfactory explanation was provided for the two week delay.

9. Also on 6 December 2014, Mineralogy served its outline of submissions for the interlocutory injunction application.  Mineralogy's submissions were obviously not responsive because the Citic parties had not filed their own submissions prior to 6 December 2014. 

Prejudice to the Citic parties if no adjournment is granted

1. From a broad perspective, there is a clear prejudice to the Citic parties if no adjournment is granted.  That prejudice is that they will have had two weeks fewer than the orders had provided in order to consider and assess Mineralogy's evidence and responsive pleadings. 

2. The precise extent of this general prejudice to the Citic parties is difficult to assess.  It is pertinent that the timetable only allowed the Citic parties two weeks to respond to the Sorbello affidavit.  Despite Mineralogy's delay, the Citic parties would still have two weeks to respond if the date for their provision of evidence were extended to 12 December 2014.  But the general prejudice arises in the context of an interlocutory application with a tight timetable involving issues with the potential significantly to impact a multi-billion dollar project and thousands of jobs.  The prejudice must also be assessed in the context of the pressure of a compressed timetable in a notoriously busy period before Christmas.

3. The general prejudice to Mineralogy is exacerbated by the nature of the Sorbello affidavit and its significance in Mineralogy's submissions. 

4. Without descending into the question of whether the Sorbello affidavit is admissible, the nature of the Sorbello affidavit is unusual in two respects. 

5. First, it does not contain the letter of instructions that is almost always provided with, or annexed to, an expert report.  The Citic parties requested that letter of instructions but their request was refused by Mineralogy. 

6. Secondly, as I have mentioned, the Sorbello affidavit contains a report from BDO, a company of which Mr Sorbello is a Director.  But the BDO Report relies on another expert report, from AME.  The AME Report is an annexure to the BDO report.  In effect, the Sorbello affidavit is two expert reports contained in one.  The AME Report says that 'AME has used a combination of import prices and port prices in estimating the prevailing FOB price for Mt Newman fines'.[2]  But there is no letter of instructions to AME included with the Sorbello affidavit.  Nor is there information about precisely how AME made its calculation including the combination of prices used.  The Citic parties requested the instructions and this information but their request was refused by Mineralogy.        

   [2] Affidavit of Mr Quan-Sing, 8 December 2014, JQS 6, page 68.

7. The prejudice to the Citic parties also arises in circumstances involving a background of numerous changes of case by Mineralogy, including interlocutory applications that were brought and later abandoned.  I explained those many changes of case in Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 4].[3] 

   [3] Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 4] [2014] WASC 282 [7] - [18].

8. On this occasion, Mineralogy has provided no satisfactory explanation for its delay and failure to comply with court orders.  A week after Mineralogy's evidence was due, Mineralogy wrote to the Citic parties saying that the delay was caused by the 'unavailability of counsel'.[4]  No prior notice of this delay had been given to the Citic parties by Mineralogy.  No leave to extend time had been sought from the court.  Even more fundamentally, Mineralogy has used numerous different counsel in its many interlocutory applications in this proceeding.  Mineralogy did not suggest that all counsel had been unavailable.  Even if attention were focused only upon the interlocutory injunction application, the written submissions for the interlocutory injunction application are signed by two senior counsel and one junior counsel.  Mineralogy did not suggest that all three had been unavailable to settle the evidence upon which Mineralogy relied. 

   [4] Affidavit of Mr Quan-Sing, 8 December 2014, JQS 1, page 5.

Prejudice to Mineralogy and the administration of justice if the adjournment is granted

1. Weighing against the prejudice to the Citic parties are two matters. 

2. First, there is the general interest of timely resolution of disputes in the administration of justice.  Delay is often, in itself, an injustice.  It is productive of uncertainty.  It causes lingering pressure, even where the parties involved are corporations.   

3. Secondly, I accept that there is some specific prejudice to Mineralogy.  The interim injunctions were issued without any substantial consideration of the merits of the applications, and on the basis that there would not be a substantial period of time before the hearing of the Citic parties' application for interlocutory injunctions.  The restraints prevent Mineralogy from taking steps, which it claims an entitlement to take, towards suspension or termination of Mining Right and Site Lease Agreements underpinning the project.  Mineralogy claims that it is entitled to exercise those rights in circumstances in which it has not been paid millions of dollars said to be owing under the (disputed) terms of Royalty Component B.  

4. The extent of each of these matters of prejudice will be affected by the length of the delay in hearing the adjourned application.  The timetable proposed by the Citic parties envisages a hearing on or after 9 February 2015.  In circumstances in which the number of issues raised is such that I would have been very likely to reserve my decision on 18 December 2014 (to provide written reasons some time after the court recess) the delay until resolution of the interlocutory injunction is ultimately likely only to be a matter of weeks.  In the context of the importance of the issues involved, and Mineralogy's assertion that ultimate resolution of the matter might take 'years', this delay is relatively small. 

Assessment of the relative prejudice and the hearing timetable

1. In my assessment, the relative prejudice as discussed above favours an adjournment of the hearing.  In any event, however, there are two further matters relied upon by the Citic parties for an adjournment.  The first (conferral concerning a preliminary issue) is another significant factor in favour of an adjournment.  At this stage, I do not accept the second (the hearing might exceed one day).

Conferral concerning a preliminary issue

1. The Citic parties assert, but Mineralogy denies, that Mineralogy's delays leave no time for conferral concerning the trial of a preliminary issue, and the terms of any question for such a preliminary trial.  It is not clear why this conferral is impossible prior to 18 December 2014.  But I accept that it is very unlikely that proper consideration and conferral about a preliminary issue can now take place prior to 18 December 2014. 

2. The difficulty for conferral arises from Mineralogy's delay in filing its reply and defence to counterclaim.  Mineralogy says that it is now in a position to provide to the Citic parties a draft list of possible questions for trial by 11 December 2014.  I accept the submission of senior counsel for the Citic parties that it is seriously doubtful whether there would remain sufficient time for proper consideration by the Citic parties and conferral upon these questions if the interlocutory injunction application were not adjourned.  A decision to try a preliminary question is never taken lightly and, when it is taken, the question must be formulated carefully and with precision.

3. The importance of this matter to the interlocutory injunction application is that if there is a strong case for trial of a preliminary question which might expedite ultimate resolution of these proceedings then this might turn out to be a significant factor in an assessment of the balance of convenience.  This is because one factor relied upon by Mineralogy in the balance of convenience is the potential delay before final resolution of these proceedings.  

The scope of Mineralogy's written submissions for the interlocutory injunction application

1. A further reason relied upon by the Citic parties, apart from relative prejudice and the need to consider a properly formulated preliminary issue, is that a one day hearing of the application for interlocutory injunctions may no longer be adequate.  If a one day hearing proved to be inadequate then the application would, in any event, have to be adjourned until the new year.

2. Mineralogy has filed its written submissions before the written submissions of the Citic parties.  This was undoubtedly designed to ameliorate some of the prejudice caused by Mineralogy's delay.  Mineralogy's outline of submissions is 38 pages long.  Despite their length, the submissions deal with the numerous legal and factual issues very concisely.  The submissions are the reason that the Citic parties now question whether a single day will be adequate. 

3. Although I consider that a single day should remain adequate, and I accept the submission of senior counsel for Mineralogy in this respect, there will be numerous issues that will need to be covered.  They are as follows.

   (i)the court does not, in some respects, have the power to grant the interlocutory injunctions sought;

   (ii)the injunctions are unnecessary or would be inutile;

   (iii)the Citic parties have not shown a prima facie case in support of the relief sought; and

   (iv)the balance of convenience does not favour the grant of the interlocutory injunctions.

4. The submissions on these points are wide ranging.  Mineralogy canvasses the conduct of Sino Iron and Korean Steel in their alleged failure to pay any royalties.  Mineralogy raises the refusal by Sino Iron and Korean Steel to participate in a contractual dispute resolution process.  Mineralogy suggests a perception that Sino Iron and Korean Steel intend to delay for as long as possible the final determination of proceedings about Royalty Component B.  Mineralogy asserts that much of Sino Iron and Korean Steel's 226 page defence and counterclaim is not responsive.

5. Mineralogy also makes submissions concerning whether the Citic parties have shown a prima facie case in relation to some of the matters in dispute in the primary proceedings.  The issues concerning a prima facie case include the following.

6. One issue is that Mineralogy says that it was entitled to issue a notice of default on 10 July 2014 because Sino Iron and Korean Steel were in breach of contract by failing to join with Mineralogy in requesting an expert nomination to determine a dispute concerning the amount of Royalty Component B which is due to Mineralogy.  This raises questions of construction of the dispute resolution provision, including:

   (i)whether the provision permits the issue of a joint notice (and the meaning of such a concept);

   (ii)the specificity of the notice that is required;

   (iii)whether the dispute is capable of resolution by an expert; and

   (iv)whether Mineralogy has waived its power to have the dispute resolved by an expert.

7. Another issue is that Mineralogy says that it was entitled to issue notices of default on 18 July 2014 requiring Sino Iron and Korean Steel to pay Royalty Component B for the quarter ended 30 June 2014, and requiring a proper statement for calculation of the royalty for that period.  Mineralogy relies on the report of Mr Sorbello for quantification of the approximate royalty for that quarter.  The issue of the meaning of Royalty Component B is a matter that goes to the heart of the proceedings.

8. Finally, as I have mentioned, Mineralogy has also raised issues concerning appropriate conditions to be imposed on any interlocutory injunction if one were granted.  This may require consideration of the expert evidence, the objections to it, and any responsive evidence.

9. Overall, I am not satisfied that the hearing should extend beyond one day.  The detail of the submissions by Mineralogy should assist in confining oral argument.  But it may be wise for the parties to confer about division of time at the hearing to ensure that the application is not adjourned part-heard.

Conclusion

1. For basic reasons of fairness, the hearing of the interlocutory injunction application brought by the Citic parties should be adjourned.  I will list the matter for directions in my usual CMC list next Wednesday.

2. In light of Mineralogy's concerns about the prejudice to it from delay it is appropriate that I conclude with general remarks about the progression of these proceedings. 

3. This action has now been on foot for nearly two years since it was first brought in New South Wales.  Mineralogy has expressed concern that the final disposition of proceedings in relation to Royalty Component B 'could not occur in the foreseeable future, and may take years'.[5]  This echoes a concern that I have raised with the parties on many occasions when interlocutory applications were brought (sometimes subsequently abandoned) and when substantial changes were made to pleadings.  The trial would probably have occurred by now if it were not for the numerous changes to Mineralogy's case, and the numerous interlocutory proceedings. 

   [5] Submissions of Mineralogy, 5 December 2014, [36].

4. The delays involving this dispute concerning the meaning of Royalty Component B contrast with the dispute about Royalty Component A.  The parties were in dispute about Royalty Component A in 2012.  Mineralogy brought a claim in August 2012.  After only a few interlocutory issues, the matter was heard in April 2013.  It was decided in May 2013.[6]  That royalty dispute appears now to have been resolved.

   [6] Mineralogy Pty Ltd v Sino Iron Pty Ltd [2013] WASC 194.

5. It may be useful for the parties to consider whether the considerable energy and effort devoted to the continuing interlocutory disputes might be more usefully redirected towards moving these proceedings towards final resolution, including possibly by a determination of a preliminary issue which both senior counsel this morning considered to be a realistic possibility.