Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6)
[2015] FCA 825
•14 August 2015
FEDERAL COURT OF AUSTRALIA
Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825
Citation: Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825 Parties: MINERALOGY PTY LTD ACN 010 582 680 v SINO IRON PTY LTD ACN 058 429 708, KOREAN STEEL PTY LTD ACN 058 429 600, CITIC PACIFIC LTD and CITIC PACIFIC MINING MANAGEMENT PTY LTD ACN 119 578 371; SINO IRON PTY LTD ACN 058 429 708 and KOREAN STEEL PTY LTD ACN 058 429 600; MINERALOGY PTY LTD ACN 010 582 680; ATTORNEY GENERAL FOR WESTERN AUSTRALIA File number: WAD 110 of 2013 Judge: EDELMAN J Date of judgment: 14 August 2015 Catchwords: ADMINISTRATIVE LAW – power of private parties to create rights inconsistent with legislative and regulatory regimes: [397]-[410]
CONTRACTS – implied term of good faith – test for implication of terms – meaning and content of good faith – difference between normative guiding principles and contractual obligations – circumstances in which implication can be made – whether any scope for implication in this case: [993]-[1037]
CONTRACTS – admissibility of subsequent communications between the parties for interpretation of contracts – when subsequent communications are admissible for the purpose of determining whether parties intended to be bound by the contract – relevance of subsequent communications: [716]-[749]
CONTRACTS – alleged variation by subsequent contracts of contractual terms contained in formal deed – where subsequent contracts are not in the form of a deed – where subsequent contracts do not refer expressly to the term allegedly being varied – importance of context and nature of variation – where term being varied is, at best, ambiguous
EQUITY – declarations and injunctions – need for proper form – improperly formulated declarations and injunctions that are abstract and not referable to concrete facts: [1043]-[1056]
EQUITY – relief against forfeiture – whether relief against forfeiture is available for termination of contractual rights – whether a proprietary right is required before relief will be granted – relationship between relief against forfeiture and implied restrictions upon the exercise of a contractual discretion: [978]-[992]
EQUITY – penalties – whether obligation requiring vacation of possession following termination of agreement is a penalty – meaning of a primary stipulation – meaning of a failure of a primary stipulation – when clause operates as security for primary stipulation – need for clause to be susceptible to assessment in money terms – need for detriment to be inordinate, extravagant, or oppressive: [469]-[492]
ESTOPPEL – estoppel by convention – requirements for an estoppel by convention – whether estoppel by convention can apply to future rights and future conduct – test for causation and connecting links: [756]-[794]
PRACTICE AND PROCEDURE – joinder of necessary parties – failure by Mineralogy to join a directly interested party, the State of Western Australia, as a party to the proceedings: [941]-[970]
CONTRACTS – waiver of breaches of contract – conduct which amounts to a waiver – whether requiring breach to be remedied a month before the issue is scheduled to be determined by a court amounts to a waiver: [936]-[940]
Legislation: Conveyancing Act 1919 (NSW) s 129
Customs Act 1981 (Cth)
Environmental Protection Act 1986 (WA)
Evidence Act 1995 (Cth) ss 135, 135(a), 135(b), 136
Government Agreements Act 1979 (WA) ss 2, 3(a)
High Peak Mining Customs and Mineral Courts Act 1851 (UK) 14 & 15 Vict c 94
Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act 2002 (WA) s 4(3); cll 1, 6, 6(1), 6(2), 6(5), 6(6), 6(6)(b)(i), 7(6), 8, 8(1), 11(3), 11(6)(b), 21, 21(3), 21(4), 28(1), 29, 33
Iron Ore Processing (Mineralogy Pty Ltd) Agreement Amendment Act 2008 (WA) cl 25(d)(b)
Jetties Act 1926 (WA)
Marine and Harbours Act 1981 (WA)
Maritime Transport and Offshore Facilities Security Act 2003 (Cth) ss 10, 14, 14(1), 42(1), 42(1)(b); Pt 3, Div 3.2
Mines and Safety Inspection Act 1994 (WA)
Mining Act 1904 (WA)
Mining Act 1978 (WA) ss 85, 86, 87, 87(1), 109, 114
Occupational Safety and Health Act 1984 (WA)
Shipping and Pilotage Act 1967 (WA) ss 4, 5(1), 10, 10(1), 11(a), 12(1)
Western Australian Constitution Act 1890 (Imp)
Federal Court Rules 2011 (Cth) rr 1.40, 9.05(1)(b)(ii), 9.07, 16.03(1)(b), 16.08(a), 16.08(b), 16.08(c)
Iron Ore (Robe River) Cape Lambert Ore and Service Wharves By-laws 1995 (WA) regs 3, 4, 5, 6, 7, 12, 24, 41
Maritime Transport and Offshore Facilities Security Regulations 2003 (Cth) rr 6.33, 6.65, 6.95
Shipping and Pilotage (Ports and Harbours) Amendment Regulations 2010 (WA)
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Gowan v Christie (1873) LR 2 Sc & Div 273
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Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29
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In the Marriage of UI and DB Bowron (1982) 8 Fam LR 651
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Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 3) [2015] FCA 542
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Mineralogy Pty Ltd v The State of Western Australia [2005] WASCA 69
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Moratic Pty Ltd v Lawrence James Gordon [2007] NSWSC 5; (2007) 13 BPR 24,713
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Newbon v City Mutual Life Assurance Society Ltd [1935] HCA 33; (1935) 52 CLR 723
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Ryledar Pty Ltd t/as Volume Plus v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603
Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149
Saleh v Romanous [2010] NSWCA 274; (2010) 79 NSWLR 453
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Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634
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Sidhu v Van Dyke [2014] HCA 19; (2014) 251 CLR 505
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Sino Iron Pty Ltd v Mineralogy Pty Ltd (No 2) [2014] WASC 444
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Sino Iron Pty Ltd v Secretary of the Department of Infrastructure and Transport [2014] FCAFC 103
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Stapleton J, “Unnecessary Causes” (2013) 129 Law Quarterly Review 39Date of hearing: 2-10, 17-19 June 2015 Date of last submissions: 26 June 2015 Place: Brisbane (via Video Link to Perth) (Heard in Perth) Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 1088 Counsel for the Applicant and Cross-Respondent: Mr S Couper QC with Mr D Atkinson and Mr DL Cook Solicitor for the Applicant and Cross-Respondent: Kilmurray Legal Counsel for the Respondents and Cross Claimants: Dr A Bell SC with Mr S Free and Mr S Wong Solicitor for the Respondents and Cross Claimants: Allens Counsel for the Intervener: Mr P Evans with Ms R Young Solicitor for the Intervener: State Solicitor’s Office
Table of Corrections 27 August 2015 Minor amendments have been made in paragraphs 284, 430, 436, 441, 442, 456, 547, 725, 779, 934, 996, 1017 and 1031
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 110 of 2013
BETWEEN: MINERALOGY PTY LTD ACN 010 582 680
ApplicantSINO IRON PTY LTD ACN 058 429 708
First Cross-ClaimantKOREAN STEEL PTY LTD ACN 058 429 600
Second Cross-ClaimantAND: SINO IRON PTY LTD ACN 058 429 708
First RespondentKOREAN STEEL PTY LTD ACN 058 429 600
Second RespondentCITIC PACIFIC LTD
Third RespondentCITIC PACIFIC MINING MANAGEMENT PTY LTD
ACN 119 578 371
Fourth RespondentMINERALOGY PTY LTD ACN 010 582 680
Cross-RespondentATTORNEY GENERAL FOR WESTERN AUSTRALIA
Intervener
JUDGE:
EDELMAN J
DATE OF ORDER:
14 AUGUST 2015
WHERE MADE:
BRISBANE (VIA VIDEO LINK TO PERTH) (HEARD IN PERTH)
THE COURT ORDERS THAT:
1.The application is dismissed.
2.The applicant is permanently restrained from acting upon the termination notices issued to the first and second respondents on 25 November 2014.
3.Other than order 2 above, the cross-claim is dismissed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 110 of 2013
BETWEEN: MINERALOGY PTY LTD ACN 010 582 680
ApplicantSINO IRON PTY LTD ACN 058 429 708
First Cross-ClaimantKOREAN STEEL PTY LTD ACN 058 429 600
Second Cross-ClaimantAND: SINO IRON PTY LTD ACN 058 429 708
First RespondentKOREAN STEEL PTY LTD ACN 058 429 600
Second RespondentCITIC PACIFIC LTD
Third RespondentCITIC PACIFIC MINING MANAGEMENT PTY LTD
ACN 119 578 371
Fourth RespondentMINERALOGY PTY LTD ACN 010 582 680
Cross-RespondentATTORNEY GENERAL FOR WESTERN AUSTRALIA
Intervener
JUDGE:
EDELMAN J
DATE:
14 AUGUST 2015
PLACE:
BRISBANE (VIA VIDEO LINK TO PERTH) (HEARD IN PERTH)
REASONS FOR JUDGMENT
TABLE OF CONTENTS
1. INTRODUCTION AND SUMMARY
[1]
1.1 Introduction
[1]
1.2 Summary of the case and my decision
[8]
2. BACKGROUND, EVIDENCE AND CONCEPTS
[35]
2.1 Unpleaded matters attempted to be raised by Mineralogy
[35]
2.2 Objections to evidence in the trial bundle
[55]
2.2.1 The objections concerning evidence tendered before or during trial
[55]
2.2.2 Additional evidence that Mineralogy sought to tender after the trial
[69]
2.3 Background and relevant chronology
[82]
2.4 Witness statements and affidavit evidence
[191]
2.5 The oral evidence: particular findings and admissibility rulings
[193]
2.5.1 Mr Holtshausen
[196]
2.5.1.1 The extent of production by the Sino Iron Project
[199]
2.5.1.2 The commissioning phase of the Project
[207]
2.5.1.3 The scheduling of the arrival of vessels
[214]
2.5.2 Mr Cribbes
[218]
2.5.3 Mr van der Heyden
[225]
2.5.4 Mr Robinson
[250]
2.5.5 Mr Mason
[257]
2.5.6 Mr Rayson
[259]
2.5.7 Mr Northey
[267]
2.6 The interests of third parties in the port area
[270]
2.6.1 Mineralogy’s inaccurate use of various terminology
[270]
2.6.1.1 The meaning of “The Port”
[271]
2.6.1.2 The meaning and role of a Port Operator
[277]
2.6.1.3 The meaning and role of a Harbour Master
[281]
2.6.1.4 The meanings of Port Facility Operator and Port Terminal Operator
[287]
2.6.2 The area of Mineralogy’s General Purpose Lease was intended to accommodate third party use
[292]
2.6.3 There was, and there remains, scope for third party development of port facilities
[298]
2.7 The fully integrated nature of the Sino Iron Project
[312]
3. MINERALOGY’S RIGHTS AND OBLIGATIONS RELEVANT TO ITS RELIEF
[345]
3.1 Mineralogy’s rights under the general purpose leases
[346]
3.2 Mineralogy’s rights and obligations under the Facilities Deeds
[360]
3.2.1 Background to the Facilities Deeds
[360]
3.2.2 The nature of the Facilities in the Circled Area
[367]
3.2.3 The hierarchical definitions of Facility in the Facilities Deeds
[372]
3.2.4 The Shared Facilities provisions that appear before cl 24
[395]
3.2.5 Clause 24 of the Facilities Deeds
[396]
3.2.6 Clause 24(a1) of the Facilities Deeds
[397]
3.2.7 Clause 24(b) of the Facilities Deeds
[411]
3.2.8 Mineralogy’s construction of cl 24(b)
[416]
3.2.9 The best construction of cl 24(b)
[447]
3.2.10 Clause 33(h) of the Facilities Deeds is not a penalty
[469]
3.3 Mineralogy’s rights and obligations under the State Agreement and the Approved Proposals
[493]
3.3.1 The ratification of the State Agreement
[493]
3.3.2 The effect of the State Agreement and the Approved Proposals
[495]
3.3.3 The terms and operation of the State Agreement
[500]
3.3.4 Relevant terms of the Approved Proposals
[518]
3.3.5 The February 2008 Sino Iron Pellet Proposal
[524]
3.3.6 The April 2009 Korean Steel Concentrate Proposal
[541]
3.3.7 The April 2009 Sino Iron Concentrate Proposal
[553]
3.3.8 The January 2010 Second Sino Iron Concentrate Proposal
[561]
3.3.9 The January 2010 Second Korean Steel Concentrate Proposal
[567]
3.3.10 The State Agreement and Proposals varied the Facilities Deeds to the extent necessary
[574]
3.4 Mineralogy’s rights and obligations under the Mining Right and Site Lease Agreements
[597]
3.4.1 Background to the MRSLAs
[597]
3.4.2 The operation of the MRSLAs
[602]
3.4.3 Conclusion concerning the MRSLAs
[615]
3.5 Mineralogy’s rights and obligations under the Fortescue Coordination Deed
[618]
3.5.1 Background to the Fortescue Coordination Deed
[618]
3.5.2 The conferral of responsibility on the CITIC parties for Mining Operations
[622]
3.5.3 Mineralogy’s submission that the Fortescue Coordination Deed did not vary the Facilities Deeds
[653]
3.5.4 Conclusion in relation to the Fortescue Coordination Deed
[664]
3.6 Mineralogy’s rights and obligations under the Port Terminal Operator Agreement
[665]
3.6.1 The dispute about the Port Terminal Operator Agreement
[665]
3.6.2 Background to the Port Terminal Operator Agreement
[679]
3.6.3 The terms of the Port Terminal Operator Agreement
[698]
3.6.4 Reasons why the Port Terminal Operator Agreement was binding
[699]
3.6.5 The post-contractual conduct argument
[716]
3.6.6 Legal principles concerning post contractual conduct
[717]
3.6.7 The post-contractual communications do not support Mineralogy in any event
[732]
3.6.8 Mineralogy’s argument that the Port Terminal Operator Agreement could not have amended the formal Facilities Deeds
[750]
3.7 Restraints upon Mineralogy’s rights arising by estoppel by convention
[756]
3.7.1 The legal test for estoppel by convention
[758]
3.7.2 The requirements for estoppel by convention would have been established
[780]
4. MINERALOGY’S PRIMARY RELIEF: TERMINATION OF THE FACILITIES DEEDS
[795]
4.1 The Termination Notices
[800]
4.1.1 The first Termination Notice: alleged breaches by defending these proceedings
[800]
4.1.2 The second Termination Notice: alleged breaches by asserting in a defence in this proceeding that draft by-laws were not in force
[808]
4.1.3 The third Termination Notice: alleged breaches by failing to acknowledge a disputed approval
[811]
4.1.4 The fourth Termination Notice: alleged breaches by failing to advise of all proposed shipping schedules
[814]
4.2 Reason 1: the Termination Notices were all invalid as no breach occurred
[816]
4.2.1 The first Termination Notice
[817]
4.2.1.1 the first Termination Notice: cl 24(a1)
[817]
4.2.1.2 the first Termination Notice: cl 2.2 and cl 24(b)
[834]
4.2.2 The second Termination Notice
[841]
4.2.3 The third Termination Notice
[861]
4.2.4 The fourth Termination Notice
[869]
4.3 Reason 2: the Termination Notices were all invalid because any breach was not serious or persistent
[889]
4.3.1 The meaning of a serious or persistent breach
[889]
4.3.2 The first Termination Notice
[896]
4.3.3 The second Termination Notice
[901]
4.3.4 The third Termination Notice
[905]
4.3.5 The fourth Termination Notice
[909]
4.3.6 Mineralogy’s allegations of damage are unsustainable
[913]
4.4 Reason 3: the Termination Notices were all invalid as a reasonable time was not provided
[926]
4.5 Reason 4: no relief is available because of the failure to join the State of Western Australia as a party
[941]
4.5.1 The principles concerning the failure to join a necessary party
[942]
4.5.2 The State of Western Australia should have been joined
[949]
4.5.3 The failure by the CITIC parties to plead this issue does not mean that it can be ignored
[958]
4.6 Lack of readiness and ability by Mineralogy to operate the port terminal facilities
[971]
4.7 The CITIC parties’ submissions concerning relief against forfeiture
[978]
4.8 The CITIC parties’ submissions concerning lack of good faith
[993]
4.8.1 The test for implication of a term
[998]
4.8.2 The meaning of an implied term of “good faith”
[1003]
4.8.3 The context affects the content of any implication of a duty of good faith
[1016]
4.8.4 The difficulty in implying a term of reasonableness into cl 33(c)
[1020]
4.8.5 Any implied term would have been breached by Mineralogy
[1026]
5. MINERALOGY’S ALTERNATIVE RELIEF
[1038]
5.1 The reasons why Mineralogy’s alternative relief fails
[1041]
5.1.1 Reason 1: The absence of the State of Western Australia as a party
[1042]
5.1.2 Reason 2: The abstract nature of the alternative relief sought
[1043]
5.1.3 Reason 3: The lack of any legal right in the Facilities Deeds for ownership or operation of Company Facilities
[1057]
5.1.4 Reason 4: The variation by the State Agreement and Approved Proposals of any right to operate or maintain that existed
[1067]
5.1.5 Reason 5: The variation by the MRSLAs of any right to operate or maintain that existed
[1069]
5.1.6 Reason 6: The variation by the Fortescue Coordination Deed of any right to operate or maintain that existed
[1073]
5.1.7 Reason 7: The variation by the Port Terminal Operator Agreement of any right of operation that existed
[1078]
5.1.8 Reason 8: Estoppel by convention would prevent exercise of any right of operation that existed
[1080]
5.2 The relief sought by the CITIC parties in the cross-claim
[1082]
6. CONCLUSION
[1087]
ANNEXURE 1: MINING LEASES, EXPLORATION LICENCES, AND GENERAL PURPOSE LEASES
ANNEXURE 2: MRSLA SITE LEASE AREA AND PROJECT AREA
ANNEXURE 3: THE AREA OF EXPLORATION LICENCE 08/636
ANNEXURE 4: LOCATION OF VARIOUS PORT TERMINAL FACILITIES IN THE AREA OF GENERAL PURPOSE LEASE 08/52
1. INTRODUCTION AND SUMMARY
1.1 Introduction
The primary issue in this case concerns whether the applicant, Mineralogy, has terminated Facilities Deeds with two of the respondents, Sino Iron and Korean Steel.
Sino Iron and Korean Steel entered into the Facilities Deeds with Mineralogy while they were its subsidiaries. Subsequently, CITIC Pacific Ltd (now CITIC Ltd) acquired all of the shares in Sino Iron and Korean Steel. Together with CITIC Pacific Mining Management (CPMM), which is an Australian wholly owned subsidiary of CITIC Ltd, the respondents are collectively referred to as the CITIC parties.
If the Facilities Deeds have been terminated then the multi-billion dollar project established by the CITIC parties will come to an end.
When there are billions of dollars at stake there can sometimes be an unfortunate tendency to attempt to raise any and every issue that might be thought to be arguable. It is even more unfortunate when the case presented is constantly shifting. This case began in April 2013 with a heavy focus on Mineralogy’s rights as designated Port Operator (on 31 January 2013) under the Maritime Transport and Offshore Facilities Security Act 2003 (Cth) (the MTOFS Act). But the decision to appoint Mineralogy as Port Operator was quashed by the Full Court of the Federal Court in Sino Iron Pty Ltd v Secretary of the Department of Infrastructure and Transport [2014] FCAFC 103; (2014) 225 FCR 22. With several changes of counsel, there were a number of significant changes in Mineralogy’s focus.
In these reasons, particularly in the early sections, I describe a number of matters that were not part of Mineralogy’s pleaded case. This is because there were a number of attempts by Mineralogy to change its case during trial, often in major respects, and sometimes without any attempt to amend its pleadings. Even as late as the final day of trial, after millions of dollars had been spent on this litigation, Mineralogy sought to amend four of its five grounds of relief. Some of the amendments raised significant new points in an attempt to rectify deficiencies in Mineralogy’s case. The proposed amendments were subsequently abandoned (ts 638).
My ultimate conclusion is that Mineralogy’s claims fail for a litany of reasons. The section which follows describes an outline of my reasons. This outline is necessarily broad and abbreviated. It does not, and cannot, attempt to capture the detail of the vast volume of factual material and legal issues raised.
Although there were many factual issues explored, at the heart of this dispute are a series of legal issues. Most of the numerous legal issues were agitated by the respondent CITIC parties. The headline issues concern questions of contractual construction, implication of terms including a protean obligation of good faith, issues of estoppel by convention, relief against forfeiture, the penalties doctrine, and the effect of non-joinder of third parties on a power to grant injunctions or declarations. The CITIC parties have ultimately been successful on almost all of these issues.
1.2 Summary of the case and my decision
In 2001, a number of companies including Sino Iron and Korean Steel separately entered into Subleases and Facilities Deeds with their then parent company, Mineralogy. The transactions concerned areas of land, including areas within a future port in the West Pilbara region of Western Australia, approximately 100 km to the south-west of Karratha.
In a series of transaction documents between 2006 and 2008, the respondent CITIC parties took over Sino Iron and Korean Steel. The CITIC parties paid $415 million as part of the takeover process. Following government approvals in 2008, the CITIC parties began constructing facilities and preparing for mining and export of magnetite ore under the revised agreements with Mineralogy. Those revised agreements included Mining Right and Site Lease Agreements (MRSLAs) which had replaced the Subleases, and variations to the Facilities Deeds.
The CITIC parties built facilities, including port facilities. They constructed a fully integrated mining and export project which is described as the Sino Iron Project or the Project. It is hard to express in words the extent to which every aspect of the Project is dependent upon other aspects of the Project. A view of the Sino Iron Project taken by the Court on the third day of the trial made the extent of integration extremely clear. The cessation of operations in relation to any significant aspect of the Project will bring the entirety of the Project to a halt.
The CITIC parties spent billions of dollars constructing the facilities. The CITIC parties have always controlled and operated the facilities although there is some ambiguity in the Facilities Deeds concerning the party who is obliged to operate the facilities. Some of the facilities are contained in an area of the Port of Cape Preston described in the pleadings as the Circled Area. Construction work in the port area at Cape Preston began as early as August 2008.
From February 2008, before construction of the facilities, Mineralogy, together with Sino Iron or Korean Steel, submitted a series of project proposals to the State of Western Australia. The proposals were approved. On at least 29 occasions in those proposals, expressly or impliedly, Mineralogy represented that CPMM would be the operator of the port facilities. This was a matter of importance to the State of Western Australia.
On 23 March 2010, Mineralogy and the CITIC parties reached an agreement, in a letter signed by Mineralogy and also signed as “acknowledged and agreed” by the CITIC parties. The agreement was that whilst the Port was a single-user port CPMM would perform the role of Terminal Operator in respect of the facilities to be developed for on or behalf of the CITIC parties (which include the facilities in the Circled Area) and that Mineralogy would be responsible for the Harbour Master role. One of the obligations upon CPMM in this Port Terminal Operator Agreement was to pay $3 million to Mineralogy. CPMM made this payment.
In September 2010, after the CITIC parties had spent $6 billion on the Sino Iron Project, Mineralogy confirmed that, consistently with its obligations under the Port Terminal Operator Agreement under which it had been paid $3 million, it did “not plan to get involved in [CPMM’s] operations” [tb 4930].
In 2012, after the CITIC parties had spent billions more dollars on the Sino Iron Project, Mineralogy changed its mind. Mineralogy then brought proceedings in this Court for various forms of relief including a declaration that it has an entitlement to possession and control of the Port and the Facilities within the Circled Area “within the terms of the Project Agreements”. It brought these proceedings despite the project proposals, despite the Port Terminal Operator Agreement under which it had accepted $3 million, and despite its September 2010 acknowledgement.
After the litigation had been underway for considerable time, Mineralogy amended its application to bring a new claim. The new claim became the primary relief that Mineralogy sought. The new claim relied upon four termination notices that Mineralogy issued to the CITIC parties on 25 November 2014 while this litigation was ongoing. The primary relief sought by Mineralogy became a claim for a declaration that these termination notices were valid and a declaration that the Facilities Deeds had terminated.
It is surprising that Mineralogy sent the termination notices while the litigation was on foot. It is even more surprising that Mineralogy alleged in those notices that the Facilities Deeds would come to an end prior to the date set for the trial of the litigation concerning whether the CITIC parties had a right to control the port facilities over which they have spent billions of dollars.
When the terms of the termination notices are considered, the issue of those notices by Mineralogy is not merely surprising. It is astonishing. Many aspects of the termination notices are farcical.
One termination notice relied upon one of a number of contractual provisions concerned with requirements for Government Approvals. The contractual provision required the CITIC parties to comply with by-laws. It was an admitted fact that neither the draft “by-laws” attached to the Facilities Deeds, nor any others, had been enacted by government. Yet Mineralogy asserted that the CITIC parties had committed a serious and persistent breach of the Facilities Deeds simply by refusing to acknowledge the validity of draft “by-laws” which Mineralogy knew, and admitted in these proceedings, had not been promulgated. Even if they had been promulgated, there was no term of the Facilities Deeds that imposed an obligation upon the CITIC parties to acknowledge the validity of any by-laws.
Apart from the mere act of defending these proceedings, the only act which Mineralogy alleged to constitute the breach by the CITIC parties was one paragraph in a three page letter to Mineralogy’s solicitors. The allegedly offending paragraph asserted (as Mineralogy knew to be correct) that the “By-Laws attached to the Facilities Deeds were not approved by the relevant government agencies of the State of Western Australia and that this has been communicated to Mineralogy” [tb 9212].
In summary, Mineralogy effectively alleged in the first termination notice that the CITIC parties had committed a “serious breach” (i) of a non-existent obligation to acknowledge the validity of “by-laws”, (ii) where the “by laws” had not been promulgated, and (iii) where the “breach” consisted of statements made by solicitors for the CITIC parties, which Mineralogy accepted were true.
Another termination notice asserted that the CITIC parties had committed a serious and persistent breach by filing a defence in this proceeding. The termination notice demanded that the CITIC parties remedy this breach by a date which was one month before the date which was then scheduled for this trial. Unsurprisingly, Mineralogy could not point to any express or implied obligation in the Facilities Deeds which prohibited the CITIC parties from defending legal proceedings brought against them.
In other words, the CITIC parties were alleged to have breached a term that was neither express nor implied, yet which somehow required them to capitulate to proceedings involving potentially billions of dollars. In its written closing submissions, Mineralogy said that a reason why this so-called “breach” was “serious and persistent” was because the CITIC parties had, in these proceedings, “run arguments, relying on implied terms and contractual interpretation”: [4.1.71]. Not only was there no obligation, nor any breach, but many of these arguments run by the CITIC parties concerning implication and interpretation were correct.
A third termination notice asserted that the CITIC parties had committed a breach of the Facilities Deeds simply because they had disputed the legal validity of a notice issued by Mineralogy. The notice about which the validity was disputed was a notice that a company, Australasian Resources Limited (ARH), had been approved by Mineralogy to use facilities at the Cape Preston Port. ARH had no mine from which it was supposed to produce product for which it was supposed to use the facilities. ARH had not announced any decision to mine. ARH did not have the billions of dollars necessary to create a mining operation. It was effectively insolvent with less than $130,000 in the bank and kept afloat only by loans from Mr Palmer.
Once again, no clause of the Facilities Deeds obliged the CITIC parties to abstain from disputing the validity of a notice. And, in any event, the CITIC parties’ allegations about the validity of the notice were correct. Mineralogy omitted to mention in the termination notice any of the qualifications upon its power to approve use of the facilities. A central qualification was that there must be spare capacity in the facilities. That requires an estimate of the extent to which the facilities would be used. Mineralogy had (unsurprisingly) not provided any estimate of the extent to which the facilities would need to be used for the imaginary processing and export from a non-existent mine funded by a company which was practically insolvent.
A fourth termination notice concerned an alleged failure by the CITIC parties to provide Mineralogy with “shipping schedules”. In previous communications Mineralogy had described notices provided by the CITIC parties as shipping schedules. But in the termination notice, Mineralogy said that notices that had been provided by the CITIC parties were not “shipping schedules”. The fourth termination notice relied only on a letter sent in 2013 by Mineralogy to the CITIC parties. The CITIC parties had responded to that letter in a manner that one of Mineralogy’s main witnesses described as a “fair and reasonable” response (ts 436). Mineralogy never replied to that reasonable response. Indeed, Mineralogy did nothing in response for 19 months, other than receive many of the notices that it had described as shipping schedules without any complaint about their validity. Then Mineralogy sent a termination notice.
Mineralogy’s claim that it is entitled to terminate the Facilities Deeds for breaches of the Facilities Deeds is without any substance. The termination notices did not allege any genuine breach. They did not involve any serious or persistent breach. They did not provide for any reasonable time to rectify any breach. Although no obligation of good faith is implied into the Facilities Deeds, the termination notices were issued as a lever for future commercial negotiations and they were not issued in good faith.
That was Mineralogy’s primary case.
Mineralogy’s three other claims became Mineralogy’s alternative relief. For numerous reasons, each of the alternative claims fails. The claims were based upon a misunderstanding of ambiguous clauses in the Facilities Deeds. But even if Mineralogy’s understanding had been correct, the claims would have failed for a number of other reasons.
At the end of this trial, senior counsel for Mineralogy sought to make radical changes to Mineralogy’s alternative forms of relief to try to resuscitate Mineralogy’s case. Ultimately, he withdrew that application, but he did not abandon the relief sought.
In the alternative relief Mineralogy sought injunctions and declarations. In Mineralogy’s written closing submissions, but not in the grounds for relief, these alternative claims were succinctly described as “declarations that it is entitled to possession and control of the port”. Mineralogy said that the “essence” of its alternative case is that the regime created by the Facilities Deeds gave control of the operation of the port to Mineralogy so that a number of entities could use the port in a coordinated way. Mineralogy said in its written closing submissions that the CITIC parties had set out to “stymie the inception and operation of other projects by blocking access to the port and by asserting control over it”: [2.2.2].
The premise of Mineralogy’s alternative claims is misconceived. It was common ground that the facilities with which this litigation is concerned are not Shared Facilities (as defined by the Facilities Deeds). If some of them, or all of them, were ever to become Shared Facilities (with the associated financial obligations, and subject to the restrictions in the Facilities Deeds) then different issues might arise. One of those issues would be the extent to which later agreements had varied the operation of the Facilities Deeds in relation to Shared Facilities and would need to be considered separately. For instance, cl 3.3(c) of the Fortescue Coordination Deed provides that a number of the facilities with which this litigation is concerned “will not constitute ‘Shared Facilities’ or ‘Approved Shared Facilities’ for the purposes of the Facilities Deeds”. Other clauses in different agreements between the parties constrained the operation of Shared Facilities: eg cl 3.6.2 of the Direct Agreement in January 2008. But those issues are not the concern of this litigation.
The alternative claims fail for a multitude of reasons. Most fundamentally, not only does Mineralogy not have rights to possess, control, own, operate or manage the port terminal facilities, but the CITIC parties were under a duty to operate and maintain them by the operation of provisions in later agreements.
The reasons why Mineralogy’s alternative claims fail are:
(1)the alternative relief cannot be ordered in the absence of a directly interested party to these proceedings (the State of Western Australia). Despite being put on notice of this issue as early as 29 April 2013, Mineralogy failed to take any steps to join the State as a party and opposed even the last minute application by the State for limited intervention to make submissions concerning matters of law;
(2)Mineralogy’s alternative relief is precluded due to the abstract nature of Mineralogy’s alternative claims, including restating contractual relief in terms which do not resolve the factual controversy;
(3)significant parts of Mineralogy’s alternative relief are unavailable in light of the proper concession in closing oral submissions by Mineralogy that private parties cannot, by private agreement, vary or alter a regime of public law legislation and regulation;
(4)Mineralogy’s alternative relief depends upon a construction of the Facilities Deeds that I reject;
(5)even if Mineralogy’s construction of the Facilities Deeds were correct, those rights cannot be asserted, nor any alternative relief based upon them, due to each of the following, as independent and separate matters: (i) the State Agreement and Approved Proposals, (ii) the MRSLAs, (iii) the Fortescue Coordination Deed, and (iv) the Port Terminal Operator Agreement. In each case the “new contract must override the old contracts so far as their terms clash and the old contracts even if they are not rescinded rendered inoperative to this extent”: Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93, 128 (Williams J); and
(6)if Mineralogy had rights of “possession”, “control”, “ownership” or “operation and maintenance” over the port terminal facilities, which had not been varied by any of the above agreements, then it could not exercise those rights due to an estoppel by convention.
2. BACKGROUND, EVIDENCE AND CONCEPTS
2.1 Unpleaded matters attempted to be raised by Mineralogy
During the course of trial, a number of new, unpleaded matters were raised. Some of those were subsequently withdrawn, although at points during the trial some of those withdrawn points appeared to resurface.
First, Mineralogy applied to amend its Reply to make numerous allegations in relation to an alleged Port Terminal Operator Agreement. The CITIC parties had pleaded this agreement as a defence. Mineralogy had pleaded that it was not a legally binding agreement. Mineralogy’s only reason given for this denial was to assert that a “contingency” had not been fulfilled.
After opening submissions, and immediately before the weekend preceding the cross-examination of Mineralogy’s witnesses, Mineralogy sought to amend its Reply to raise a suite of other reasons why the alleged Port Terminal Operator Agreement was not binding. Evidence was filed in relation to this amendment application. Submissions were made. Then the amendment application was withdrawn: Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 4) [2015] FCA 570. The withdrawn amendment application had included proposed allegations concerning the Port Terminal Operator Agreement that:
(1)no agreement was formed because the 23 March 2010 letter was too uncertain;
(2)any agreement was abandoned;
(3)this was not an agreement to which Sino Iron and Korean Steel were parties;
(4)the Port Terminal Operator Agreement did not vary the Facilities Deeds;
(5)the Port Terminal Operator Agreement did not permit CPMM to subcontract the role of terminal operator to any other party; and
(6)the Port Terminal Operator Agreement was not performed.
Despite these proposed amendments having been withdrawn, Mineralogy made closing written submissions as if the proposed amendments (3), (5), and (6) had been maintained and allowed (see [6.3.192] – [6.3.194]). As I explain later in these reasons, these matters were raised in different contexts. It was too late, in closing submissions, to raise these new issues when millions of dollars had been spent on legal fees, and vast time and energy over two years, as well as cross-examination of witnesses, had been focused on the case as pleaded.
Secondly, in closing there were additional unpleaded allegations made by Mineralogy concerning the Port Terminal Operator Agreement which had not been the subject of the withdrawn amendment application. It was submitted that issues arose concerning when Mr Fitzgerald signed that agreement and why it was signed. It was submitted that the agreement might not have come to the attention of Mineralogy, or that it might not have been approved by senior management. All of these submissions are without foundation and were later withdrawn orally (ts 705, 773).
Thirdly, in closing written submissions, Mineralogy also treated its pleading that the Port Terminal Operator Agreement was “contingent” upon the parties “agreeing a set of port operating protocols” to mean that it was contingent upon the parties agreeing “the roles of Terminal Operator and Harbour master”. As I explain in more detail later in these reasons, the concepts of “port operating protocols” and a delineation of a “Terminal Operator’s role” or “Harbour Master’s role” involve potentially different cases. The CITIC parties’ objection to Mineralogy running its case in this way in closing is upheld.
Fourthly, another unpleaded case that Mineralogy attempted to run in closing written submissions, and to which the CITIC parties objected, was to attempt to justify the Termination Notices by reference to matters that were not pleaded and not contained in the Termination Notices. Those matters were:
(1)the CITIC parties failed to provide a Shared Facilities Register: [4.1.26];
(2)the CITIC parties refused to supply information needed by Mineralogy to administer the Shared Facilities: [4.1.28]; and
(3)the CITIC parties refused to provide information sought by Mineralogy in relation to the operation and maintenance necessary to operate the Port: [4.1.71(c)].
Senior counsel for Mineralogy submitted in closing oral submissions in reply that these unpleaded matters as bases for termination could be taken into account even though the CITIC parties had never been put on notice that termination was alleged for these reasons. He said that they could be taken into account because they had been pleaded in the different context of why Mineralogy was not ready and able to act as a port operator (ts 774). But that different context requires no consideration of numerous different issues which would be raised by the new plea that these matters could permit termination. These new issues would include considering these allegations in light of the terms or the context of the termination notices to see if they were somehow contained by implication (they were not expressed) within the termination notices. Evidence would potentially have been required of the context in which they were raised as matters that could entitle termination. In any event, in the context of litigation of this size, it was too late for Mineralogy to run this unpleaded case in closing submissions.
Fifthly, another unpleaded case that Mineralogy sought to run in closing written and oral submissions was that Sino Iron and Korean Steel had breached the Facilities Deeds by objecting to the designation of Mineralogy as the Port Operator under the MTOFS Act: [4.1.19]-[4.1.20], (ts 593-594). Again, this matter was not contained in any termination notice expressly. For the same reasons as the alleged implications concerning refusal to supply information, it is too late to raise this unpleaded allegation of implication.
Sixthly, another unpleaded case that Mineralogy attempted to run in its closing written submissions was that the timing and quality of information provided in emails was such that the emails could not constitute shipping schedules and therefore a breach alleged in the termination notices had been proved: [4.1.84]. This was another new case.
Until closing submissions, Mineralogy’s pleaded case, consistently with the terms of the termination notices, had been that the CITIC parties had breached the Facilities Deeds by failing or refusing to advise Mineralogy of their proposed shipping schedules. Mineralogy’s case was not that defective shipping schedules had been provided. Nor was its case that the information provided by the CITIC parties was incapable of being construed as a shipping schedule because its timing and quality was so deficient to deprive the information of being a “shipping schedule”. Either case would have invited a close examination of the content of the communications concerning ship arrivals. There may have been a need for expert evidence concerning the quality of information necessary to constitute a shipping schedule in the industry, and whether that quality would differ according to the nature of the recipient.
Although I consider that Mineralogy should be entitled to run a case that the shipping communications, on their face, simply did not constitute shipping schedules, Mineralogy’s detailed focus on timing and quality of information was beyond the scope of the pleadings and should not be allowed.
Seventhly, Mineralogy attempted to run a case in closing that the CITIC parties’ acts have stymied the operation of other projects and made it impossible for third parties to have access or be assured of access for the purpose of constructing additional facilities and exporting iron ore product: [2.2.2], [6.3.67]. This was another unpleaded case. The closest that Mineralogy’s pleadings came to a pleading of such a case was its particulars of the alleged “serious” nature of breaches by the CITIC parties. Those particulars alleged that Mineralogy was deprived of a “practical commercial advantage” by the CITIC parties’ breaches, which included an alleged effect on the preparedness of a purchaser to purchase Mineralogy’s rights or its shares. That is the extent to which Mineralogy should be permitted to run that case.
Eighthly, Mineralogy attempted to run a case in closing concerning failures by the CITIC parties to comply with the terms of State Proposals. This issue arose in the context of one of the CITIC parties’ defences to Mineralogy’s claims that the Facilities in the Circled Area had vested in it, that Mineralogy is the operator of the Port, and that Mineralogy has responsibility for scheduling operations at the Port and the Facilities. At [31] of the CITIC parties’ defence, they plead numerous matters, including that they have implemented State Agreement Proposals consistently with the State Agreement, which State Agreement (by incorporation of the Proposals) is inconsistent with Mineralogy’s claims. At [22A(a)] of Mineralogy’s Reply, Mineralogy denied all of the many and varied matters pleaded in the CITIC parties defence at [31].
Mineralogy submitted that this bare denial permitted it to raise very particular factual allegations concerning breaches by the CITIC parties of the Proposals approved under the State Agreement. They raised these arguments in closing written submissions for the purposes of alleging that the CITIC parties are not entitled to the “benefit of the effect of the proposals without being obliged to comply with them”: [6.1.97].
This submission, raising unpleaded matters, and made in closing submissions is contrary to a host of court rules: Federal Court Rules 2011 (Cth) r 16.03(1)(b), r 16.08(a), r 16.08(b), r 16.08(c). More fundamentally, the submission is contrary to basic fairness. Mineralogy’s allegations at [6.1.93]-[6.1.109] and [6.1.119]-[6.1.121] of its closing written submissions raise numerous particular matters of fact which should have been pleaded in any litigation before closing submissions but particularly in a proceeding involving billions of dollars, and where millions of dollars have been spent on legal fees and preparation of evidence. Those submissions included unpleaded allegations that:
(1)Cape Preston Port Company (CPPC) is an independent contractor and is not an agent of CPPM which is alleged to be the party authorised to implement the Sino Iron Project under the Project Proposals;
(2)there was a “blatant flouting” of the Approved Proposals because the CITIC parties had no intention of building a pellet plant or exporting pellets; and
(3)the CITIC parties have not, more than five years after the approvals, put in place equipment to permit the production or export of 21.6 mtpa of concentrate.
Mineralogy should not be permitted to raise any of these unpleaded matters. All can immediately be seen to be significant matters, but later in these reasons I explain the gaps in the evidence and submissions that would exist, in relation to (1), even if Mineralogy had applied in closing submissions to amend its pleading to raise these matters. The same point can be made in relation to (2) and (3). Apart from the need to make legal submissions about the relevance and effect of these matters to the pleaded relief, focused evidence would need to have been prepared by the CITIC parties based upon the intentions of the CITIC parties and the precise steps that they have taken in the last five years if these matters were relevant to a pleaded issue.
Ninthly, Mineralogy sought to run a new case in closing submissions in response to a matter pleaded in [31] of the CITIC parties’ defence. The matter specifically pleaded in [31] of the CITIC parties’ defence was that the alternative relief sought by Mineralogy was not available because the grant of that alternative relief would have the effect that the implementation or continuous operation of the Sino Iron Project would cease, in breach of various express and implied provisions of the State Agreement including implied terms which required Mineralogy to take steps to prevent it from occurring. This matter was just generally denied by Mineralogy in its reply pleading which contained a broad denial of the whole of [31] of the defence.
In closing submissions, Mineralogy sought to rely on cl 33 of the State Agreement in response to this submission. Mineralogy alleged that this clause had the effect that obligations of a party under the State Agreement would be suspended while that party was prevented or delayed from complying with those obligations by an event or circumstance beyond the power or control of the responsible party. Mineralogy then alleged that a serious breach of the Facilities Deed, and a failure to remedy a serious breach, are matters beyond the control of Mineralogy so that there could be no breach by Mineralogy of an obligation to ensure the continuous operation of the Sino Iron Project.
Again, this matter was not pleaded. The CITIC parties objected to it being raised. Once again, and particularly in the context of this litigation, this unpleaded allegation cannot be raised by Mineralogy. Evidence could have been led on this point from the parties. And the State had no opportunity to respond to it at all.
2.2 Objections to evidence in the trial bundle
2.2.1 The objections concerning evidence tendered before or during trial
The objections were not in an entirely satisfactory state.
At the start of this trial I made a number of remarks to counsel about the manner in which I considered it appropriate to deal with the many objections to relevance concerning many exhibits which comprised more than 12,000 pages in the trial bundle. The parties subsequently agreed a regime consistent with my remarks by which objections would be raised and documents would be admitted. One condition of the agreed regime concerning admissibility was that “unless a document is expressly referred to in oral or written submissions it shall be taken as rejected on the ground of relevance and will at the conclusion of the hearing be removed from the Court Book”. I endorsed that regime and the trial proceeded on that basis.
After trial, an index to the trial bundle was produced. The parties produced a long list with various different categories of objections in different colours. Some of these objections had been conceded expressly or impliedly. The basis for others was not wholly clear. Ultimately, by emails to the court on 22 July 2015, in response to a query from my associate on 13 July 2015, the parties confirmed that the only objections were by the CITIC parties and were in the following categories:
(1)the documents in categories 1 and 2 of the Addendum to Mineralogy’s closing submissions;
(2)the “Disputed Documents” listed in an email from the legal representatives of the CITIC parties to my associate on 26 June 2015;
(3)in relation to document 263 an objection that the signature of the CITIC representative was made without the CITIC parties’ authority; and
(4)documents 57, 66 and 352 being annexures AVH-2, AVH-3, and AVH-4 to Mr van der Heyden’s first affidavit on the basis that the whole of the affidavit is inadmissible.
As to (1), this is considered separately in section 2.2.2 below.
As to (2), at the conclusion of the trial, the parties were in dispute concerning whether reference had been made to 48 documents that Mineralogy asserted to be relevant and which Mineralogy asserted had been relied upon in its written submissions. Those 48 documents, described as the “Disputed Documents” are documents numbered 185, 187, 274, 277, 278, 279, 316, 322, 331, 332, 333, 335, 336, 350, 351, 358, 359, 362, 370, 377, 378, 383, 388, 392, 416, 419, 420, 423, 425, 443, 451, 452, 453, 456, 457, 508, 509, 513, 515, 516, 520, 522, 523, 537, 561, 563, 568, and 569.
Mineralogy submitted that all of these documents were referred to in its closing submissions in [2.7.4], [2.7.20], and [4.1.47]. These were three short paragraphs in 250 pages of submissions. It is helpful to set out those paragraphs in full:
2.7.4.Each of [International Minerals, Resourcehouse and its subsidiary China First Iron Ore] had an interest in the development of a port for the exporting of any product they produced. The documents at PER-31 to the First Robinson Affidavit make clear that they were closely involved in developing the Port Construction Proposal to accommodate other interests.
2.7.20.The correspondence between Mineralogy, the CITIC parties and ProMet consistently contemplated that the Port would be designed to permit of third party use. Much of the relevant correspondence is contained in Attachment PER-31 to Mr Robinson’s first affidavit. [Submissions are then made about a number of particular documents].
4.1.47.Mr Northey said that, given the prospective expansion of the operation to ten lines and about 40 million tonnes per annum, as he was designing, he was “leaving space” so as not to impede the future expansion by the construction of a trestle jetty. It is noted, also, that the construction of a trestle jetty features at many points in the correspondence in “PER-31” where Mineralogy and CITIC agreed upon arrangements being made for third party use.
Annexure PER-31 is 246 pages. In the index to Mr Robinson’s affidavit, the annexure is described as “a bundle of copies of correspondence, minutes and plans which includes some discussions about third party use of the Port, the facilities generally, and their context”.
The effect of Mineralogy’s submission, if accepted, would be that in the 24 hours following the receipt of Mineralogy’s 250 pages of written submissions and before closing oral submissions, the CITIC parties would be required to trawl through 246 pages of documents to determine what matters were relevant to the subsidiary issues raised in three short paragraphs of Mineralogy’s submissions. This approach would be inconsistent with the regime agreed by the parties for admissibility and endorsed by the Court. It would also create substantial unfairness to the CITIC parties.
Mineralogy was both capable of, and did, expressly refer to a number of the documents relevant to these issues. Those documents expressly referred to are relevant. In [2.7.20], Mineralogy gives detailed consideration to fourteen documents from PER-31. The thirteen of those documents that have document numbers are 168, 172, 206, 218, 241, 257, 258, 270, 271, 397, 420, 424, and 457. They are all relevant on the basis of the agreed regime. But only two of those (420, 457) are in the list of the 48 Disputed Documents.
There was a live issue concerning the matters raised in [2.7.20] of Mineralogy’s closing submissions in which Mineralogy referred to these fourteen documents. In [2.7.20], Mineralogy refers to matters concerning third party access to the facilities constructed by the CITIC parties in the Port area. But ultimately if there is any probative value, beyond the fourteen documents to which Mineralogy referred, and beyond Mr Northey’s evidence described below, then the probative value in unspecified statements contained in unspecified documents is exceeded by the prejudicial effect of admitting those statements contrary to the agreed regime.
All of the documents in the list of disputed documents, apart from 420 and 457, are inadmissible.
As to (3), namely document 263, the CITIC parties asserted that the signature of the CITIC representative was made without the CITIC parties’ authority. The letter was sent from Mineralogy and signed with a signature and handwritten words that appear to say “Milton Law” and “Received and accepted by CITIC 5 August 2010”. Almost no submissions were made about this disputed signature by either Mineralogy or the CITIC parties. The onus to prove authority was on Mineralogy: Lysaght Brothers v Falk (No 1) [1905] HCA 7; (1905) 2 CLR 421, 427 (Griffith CJ).
Mineralogy asserted that Mr Law signed the letter as a director (but did not say of which company he was a director). Document 940 (which Mineralogy tendered without reference to the relevance of it) establishes that Mr Law was a director of Sino Iron from 6 July 2006 to 1 April 2015 and a director of Korean Steel from 22 October 2008 to 1 April 2015. The parties were aware that Mr Law was a representative of the CITIC parties and had attended meetings in that capacity and been involved in high level negotiations. Document 263 is admissible and I am also satisfied that Mr Law had, at least, ostensible authority to sign the letter on behalf of Korean Steel or Sino Iron.
As to (4), Mr van der Heyden’s evidence, this is entirely inadmissible for reasons explained later.
2.2.2 Additional evidence that Mineralogy sought to tender after the trial
At the conclusion of both written and oral closing addresses, senior counsel for Mineralogy foreshadowed that he would provide an addendum to the Court which would set out a number of additional documents which he wished to have included in the trial bundle. These were not documents to which Mineralogy had referred in its written or oral closing submissions. This procedure was not consistent with the agreed regime for treatment of relevant documents.
Senior counsel for Mineralogy confirmed that the addendum that he would provide would set out the relevance of the additional documents by reference to the paragraphs of Mineralogy’s written submissions (ts 763). I expected that the addendum would contain a few documents which had inadvertently been omitted from written submissions, but which raised no new factual or legal issue. I expected that the addendum would refer to those few documents that had been omitted, with a reference to the paragraph in its submissions, or the footnote, where the documents should have been included. This was not what happened.
Mineralogy subsequently provided an addendum which referred to 65 additional documents. The 65 documents fell into four categories. Shortly after Mineralogy provided its Addendum, the legal representatives for the CITIC parties emailed to my associate the CITIC parties’ objection to categories 1 and 2.
Apart from a broad, generalised reference to the issues involved in each of the four categories, Mineralogy did not explain how any of the 65 documents related to the pleaded issues in dispute. Mineralogy did not explain with any precision how any of the 65 documents supported any of its oral or written submissions. The provision of these documents was contrary to the agreed regime for the admission of documents upon which the trial had been conducted. Further, the CITIC parties were deprived of the opportunity of responding to any of these submissions even if they could have discerned how each of the 65 documents was said to support Mineralogy’s case. Apart from a handful of documents about which there was no issue, I reject the admission of all the remaining documents in categories 1 and 2 for these general reasons. I also reject them for the specific reasons below.
Mineralogy said that the first category of documents were relevant “to show the full scope and frequency of ongoing negotiations between the applicant and the respondents about their respective roles in the operation of the Port” as described in Mineralogy’s supplementary submissions: [46]. As I explain later in these reasons, in the context of the Port Terminal Operator Agreement, during trial the parties had focused closely upon the timing and chronology of events and the terms of the communications. For instance, there was little attention given in submissions to any issue arising from other negotiations concerning amendments to the Facilities Deeds or other project documents. It is unfair on the CITIC parties for documents to be admitted against them without any particular submission in support of the relevance of those documents. The CITIC parties had no opportunity to consider whether they wished to make reference to (and hence tender) other documents which would have thrown different light on the documents that Mineralogy now seeks to rely upon generally.
There was no dispute about the admission of four documents in this category (203, 213, 226, and 237). Those are the only documents that are admitted.
The documents in the second category were said by Mineralogy to be relevant to “the issue of whether or not there were potential users [of the port] apart from the CITIC parties”: addendum [2]. Two of those documents (47 and 56) were referred to in submissions and no objection was taken to the tender of document 60. Apart from those three documents, Mineralogy said that the remainder of the documents were relevant to inferences that the Court might draw about the need for co-ordination at a multi-user port which, in turn, was relied upon to establish that alleged breaches of the Facilities Deeds were “serious”.
Mineralogy pointed to reports from a stock broker and merchant banks expressing views about the value of projects for mining iron ore from Mineralogy’s tenements. It was submitted that the availability of these reports is evidence that shows that the tenements were likely to be valuable to Mineralogy if it could satisfy investors that it could guarantee access to the port. The CITIC parties were not given the opportunity of considering whether any part of the reports was inconsistent with such a submission. They did not have the opportunity to tender any document which might have suggested a more limited operation or function of such reports.
There is again unfairness in inviting the Court to draw inferences and find facts on the basis of documents to which the CITIC parties, relying upon the agreed regime, have not had the opportunity to respond either by submission or by tender of additional documents. None of the documents in this category, other than the three I have mentioned, is admitted.
As the CITIC parties’ did not object to any of the documents in categories 3 and 4, those documents will be admitted. However, had an objection been raised in relation to these documents, I would not have allowed the admission of the documents for the following reasons.
The documents in category 3 concerned ten further emails between Mineralogy and the CITIC parties concerning the issue of ship scheduling. As I explain below, this was an issue upon which Mineralogy claimed to be entitled to terminate the Facilities Deeds in the context of the $15 billion Sino Iron Project. Mineralogy’s case in closing relied upon a table involving numerous emails. The CITIC parties made various forensic decisions about how to respond to those submissions. Mineralogy now seeks to tender an additional ten emails. If those emails do not add anything to Mineralogy’s submissions then they are not needed. Indeed, if they added nothing it is unlikely that senior counsel for Mineralogy, consistent with his obligations to the Court, would have sought to tender an additional ten documents in a manner contrary to the agreed regime. But if the documents added something to Mineralogy’s case, as would be expected, then this was never clearly explained. However, as the CITIC parties raised no objection to these documents they are admitted.
As to category 4, Mineralogy tendered the CITIC parties’ Further Amended Defence filed on 13 February 2014 to which reference was made in various Notices of Termination. Submissions were made about that Further Amended Defence. Its terms were a live issue. It should be admitted.
Mineralogy also sought to include document 940 (mis-described as document 941). This was approximately 80 pages of ASIC company search records. Mineralogy simply said in its supplementary submissions that these documents “should be uncontroversial”: [51]. Mineralogy did not explain what issue these documents were relevant to establish or why they needed to be tendered. Mineralogy did not suggest that there was any dispute arising from the pleadings concerning the dates when any company had commenced or its officers. Again, despite the lack of clarity regarding the relevance of the ASIC company search records, there was no objection to these documents and they are admitted.
2.3 Background and relevant chronology
This section of my reasons sets out, in chronological sequence, the key events relevant to this litigation. Later in these reasons, I make reference to some of these events and the evidence concerning them in more detail. This section merely establishes the background and sequence of the most significant events.
On 12 December 1990, Exploration Licences 08/117 and 08/118 were transferred to Mineralogy. These exploration licences are within a location described as Bilanoo. They can be seen in Annexure 1 to these reasons.
On 28 September 1992, Mining Leases 08/118 to 08/128 were issued to Mineralogy. Their commencement date was 23 June 1993. These mining leases can be seen in Annexures 1 and 2 to these reasons. They are described as the “Balmoral tenements”.
The Balmoral tenements run in a corridor which is approximately 5km wide and 30km long in a northerly direction. As can be seen in Annexure 1 to these reasons, the Balmoral tenements are divided into Balmoral North, Balmoral Central (including the George Palmer Deposit), and Balmoral South.
The Sino Iron Project Area, as it later became, includes the Balmoral Central tenements (08/123 to 08/125) from this corridor. Mineralogy holds a number of nearby tenements including other mining leases in this corridor. Mineralogy also holds General Purposes Leases 08/63 (from 27 August 2009) and 08/74 (from 24 September 2009) and Miscellaneous Licence 08/20 (from 5 March 2004). These leases and licences can be seen in Annexures 1 and 2 to these reasons.
23 June 1993 was the commencement date of Exploration Licence 08/636 granted to Mineralogy by the State of Western Australia. The area of Exploration Licence 08/636 can be seen in Annexure 3 to these reasons. The importance of this area of Exploration Licence 08/636 is that it includes the area of the port terminal facilities (which are part of the Sino Iron Project) which are at the heart of this dispute. In the Facilities Deeds, the area of Exploration Licence 08/636 is defined as the Preston Area. Clause 33(h) of the Facilities Deeds requires that on termination of the Facilities Deeds, Sino Iron and Korean Steel (in each case) “shall vacate the Preston Area”.
On 14 February 2001, Mineralogy obtained Mining Leases 08/264, 08/265, and 08/266. As can be seen from Annexure 2 to these reasons, these later formed part of the Sino Iron Project Area.
On 25 October 2001, Mineralogy entered into Sublease Agreements with (i) Sino Iron (by its former name, Bellswater), and (ii) Korean Steel. The Sublease Agreements recited that Mineralogy was the holder of Mining Leases 08/118 to 08/130 and Exploration Licence 08/636, and that each of Sino Iron and Korean Steel wished to acquire a right to mine in the Project Area, which is part of the mining leases, to enable the company to mine iron ore.
On 26 October 2001, Mineralogy entered into Facilities Deeds with six companies:
(1)Bellswater Pty Ltd (subsequently Sino Iron);
(2)Korean Steel Pty Ltd;
(3)Brunei Steel Pty Ltd;
(4)International Minerals Pty Ltd;
(5)Austeel Pty Ltd; and
(6)Balmoral Iron Pty Ltd.
The terms of the Facilities Deeds are considered at length later in these reasons. In very broad terms, and as amended, they relate to the construction, operation, maintenance, and use of facilities for the extraction, processing, transport, and export operations in a project for the export of magnetite ore.
On 26 October 2001, Mineralogy, Korean Steel, Sino Iron, and others entered into the Fortescue Projects Consolidation Agreement.
On 5 December 2001, Mineralogy entered into the Iron Ore Processing (Mineralogy Pty Ltd) Agreement (the State Agreement) with companies including Korean Steel, Sino Iron, and the State of Western Australia.
The recitals to the State Agreement, in broad terms, described how Mineralogy is the holder of mining tenements in the Pilbara region and has granted various rights in relation to certain of the mining tenements to the Co-Proponents (including Sino Iron and Korean Steel) and that Mineralogy (by itself or with a Co-Proponent) wishes to develop projects incorporating the mining, processing, transport and shipping of iron ore, including the establishment of new port facilities in the Pilbara region.
On 14 December 2007, the parties agreed on certain variations to the State Agreement.
On 24 September 2002, the Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act 2002 (WA) (Agreement Act) came into operation with Royal Assent. This had the effect of bringing the State Agreement into force.
On 20 October 2003, Ministerial Statement 635 issued to Mineralogy, under the Environment Protection Act 1986 (WA). In that Ministerial Statement, Mineralogy was the Proponent, with responsibility “for the implementation of the proposal” which was described in Schedule 1 as being “to establish and operate an iron ore mine, process plant (pelletising, direct reduced iron and hot-briquetted iron), accommodation and port facility in the Cape Preston area”. The Proposal was described as including “stockpiling, seawater desalination plant and port facilities at Cape Preston and off Preston Island”.
Senior counsel for Mineralogy submitted that all of these prayers for relief were in the alternative to the declarations of termination in 4A (ts 30). Although I have treated prayer for relief 4B together with the other alternative prayers for relief in some of the matters considered below, 4B is not an alternative to the declarations of termination in 4A. This is because the only basis upon which Mineralogy sought the 4B mandatory injunction requiring vacation of the Preston Area was based upon termination of the Facilities Deeds. The failure of Mineralogy’s claim in relation to 4A necessarily means that 4B must fail.
In closing submissions, senior counsel for Mineralogy properly conceded that there was a “cogent argument” that the declarations in grounds for relief 1 and 2 are too broad and extend beyond the issues raised in the proceedings (ts 638). This is just one of the many obstacles faced by the declarations sought by Mineralogy. Recognising these obstacles, Mineralogy applied to amend all of the alternative relief during its closing submissions. The amendments extended beyond the original relief sought. The application was subsequently withdrawn. But the unamended alternative relief was still sought.
5.1 The reasons why Mineralogy’s alternative relief fails
Mineralogy’s alternative claims for relief must fail for eight reasons, each of which would be independently sufficient. Each of those reasons is considered separately below.
5.1.1 Reason 1: The absence of the State of Western Australia as a party
As I have explained in section 4.5, all of Mineralogy’s alternative relief must fail because of the absence of the State of Western Australia as a party to the proceedings.
5.1.2 Reason 2: The abstract nature of the alternative relief sought
Another reason why the alternative relief should be refused is because neither the injunctions nor the declarations sought would resolve a controversy between the parties. In each case the injunctions and declarations are expressed in terms which are far abstracted from the facts, and which seek to make declarations or require conduct in language which reiterates the very matters in dispute. Each injunction and declaration would also be likely to cause significant confusion.
In Bass v Permanent Trustee Company Ltd [1999] HCA 9; (1999) 198 CLR 334, 357 [49], Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ explained that the efficient administration of the business of courts is incompatible with answering hypothetical questions “which frequently require considerable time and cause considerable expense to the parties, expense which may eventually be seen to be unnecessarily incurred”. Their Honours characterised a hypothetical or advisory opinion as involving the following at 356-357 [48]:
If ... the dispute is not attached to specific facts, and the question is only whether the plaintiff is generally entitled to act in a certain way, the issue will still be considered theoretical. The main reason for this is that there may be no certainty that such a general declaration will settle the dispute finally. Subsequent to that declaration a person (the defendant himself or someone else) may be adversely affected by a particular act of the plaintiff. It may then be doubtful whether this act is covered by the declaration. In such a case the affected person will probably be entitled to raise the issue again on its special facts. Indeed, such a declaration will in effect be a mere advisory opinion.
Their Honours then explained at 357 [49] the reasons why the Full Court had erred in that case:
As the answers given by the Full Court and the declaration it made were not based on facts, found or agreed, they were purely hypothetical. At best, the answers do no more than declare that the law dictates a particular result when certain facts in the material or pleadings are established. What those facts are is not stated, nor can they be identified with any precision. They may be all or some only of the facts. What facts are determinative of the legal issue involved in the question asked is left open. Such a result cannot assist the efficient administration of justice. It does not finally resolve the dispute or quell the controversy. Nor does it constitute a step that will in the course of the proceedings necessarily dictate the result of those proceedings. Since the relevant facts are not identified and the existence of some of them is apparently in dispute, the answers given by the Full Court may be of no use at all to the parties and may even mislead them as to their rights. Courts have traditionally declined to state - let alone answer - preliminary questions when the answers will neither determine the rights of the parties nor necessarily lead to the final determination of their rights. The efficient administration of the business of courts is incompatible with answering hypothetical questions which frequently require considerable time and cause considerable expense to the parties, expense which may eventually be seen to be unnecessarily incurred.
The first example of the abstract nature of the relief sought is in ground of relief 1, which seeks a declaration that “pursuant to the project agreements” (pleaded as the Facilities Deeds, Consolidation Agreement, and State Agreement) “the Facilities contained in the Circled Area have vested in the Applicant”. As I have explained at [411]-[468], the concept of “vesting”, referred to in cl 24(b) of the Facilities Deeds, is confusing and unclear in its meaning. The declaration sought relies upon a confusing and unclear term from the Facilities Deeds.
Even if the proposed declaration were intended to express Mineralogy’s construction of the concept of vesting in cl 24(b), there would still be the confusion of why the declaration is not confined to the Facilities Deeds. In what sense have the Facilities “vested” in Mineralogy under the Consolidation Agreement and the State Agreement? How have those agreements affected the rights that have “vested”? No answer to these questions is apparent from the terms of the declarations sought.
A further lack of clarity concerns the “Facilities” that are said by Mineralogy’s proposed declaration to have “vested” in it. As I have explained in section 3.2.3, the definition of Facilities in the Facilities Deeds includes all facilities that are constructed by all parties to a Facilities Deed. But, apart from Sino Iron and Korean Steel, the other four parties to Facilities Deeds were not parties to this litigation. A declaration concerning “Facilities” (as defined) would purport to affect their future rights if they constructed any Facilities.
As to Mineralogy’s proposed relief in grounds 2, 3(a), and 3(c), I have explained in section 3.2.6 that these grounds were based on a misunderstanding of cl 24(a1) of the Facilities Deeds. In closing oral submissions Mineralogy accepted that it had no power to compel Sino Iron or Korean Steel to recognise any “entitlement to possession and control of the Port” for Mineralogy or any right to “operate the Port” or “occupy the Port”. These were, and are, matters of public law governed by a host of legislation and regulations. These declarations cannot be made if “Port” is to have its defined meaning. But if “Port” in these proposed declarations and injunctions was intended by Mineralogy to mean something other than its definition in the Facilities Agreements then it is not clear what that meaning is intended to be. Mineralogy did not seek to amend its proposed declarations to clarify the content of “Port”.
If such amendment had been sought, it would have been necessary for Mineralogy to explain which parts of the “Port”, under this new definition, the CITIC parties were not entitled to occupy under the MRSLAs. As I have explained, Mineralogy conceded for the purposes of these proceedings that the MRSLAs were on foot and Mineralogy had therefore sought to carve out from prayer for relief 4B any obligation upon the CITIC parties to vacate areas governed by the MRSLAs. Nor could the “Port” be confined to the areas of Mineralogy’s General Purpose Leases 08/51 and 08/52 by an easy amendment. This would raise a very different case. For instance, senior counsel for the CITIC parties submitted in closing submissions that there was a pastoral lease over some of the area of General Purpose Lease 08/52 (see ts 648).
It would also have been necessary for Mineralogy to explain how any “entitlement” that it had to possession of the acilities in the Circled Area could practically have effect and how that possession could be effected. For instance, senior counsel for Mineralogy conceded that the desalination plant was not within the Circled Area (ts 35). The location of the desalination plant can be seen in Annexure 3 to these reasons. But how would Mineralogy’s asserted right to possession and control operate in relation to the Facilities in the Circled Area that are essential to, and connected with, the desalination plant such as the desalination plant outfall pipe and the desalination plant inlet pumps? These points are discussed above at [342] and must be understood in light of the integrated nature of the Sino Iron Project discussed at section 2.7.
As for ground of relief 3(b), this ground seeks an injunction by reference to Mineralogy’s “ownership of the Facilities”. It is unclear what “ownership” means in this proposed injunction. In opening submissions, senior counsel for Mineralogy accepted that Mineralogy had no “ownership” in the sense of a freehold or a leasehold title that would sometimes carry with it (ts 47). As I have explained above in section 3.1 of these reasons, Mineralogy also could not claim to have “ownership” in the sense of an entitlement to the Facilities as personalty.
If Mineralogy’s claim for injunctive relief in ground 3(b) was intended by Mineralogy to restrain the CITIC parties from interfering with Mineralogy’s rights to possession, then it is unclear why the word “ownership” was used. But if the injunction were intended to restrain interference with a right to possession then why was it expressed to be “subject to the Project Agreements”? How could the CITIC parties know whether they had infringed the injunction which is made subject to several contracts involving numerous provisions and about which there has been lengthy dispute?
Another example of a lack of clarity in the injunctions and declarations is the mandatory injunction sought in ground of relief 4B requiring the CITIC parties to vacate the Preston Area. Mineralogy amended that claimed relief to carve out from it those parts of the Preston Area which fell within the Site Leases granted under the MRSLAs.
There is ambiguity in the carve out in the MRSLAs of “those parts of the Preston Area which are the subject of the grant of Site Leases”. I have explained above in section 3.4 that the area of operation of the MRSLA Site Leases extends to all of the facilities operated by the CITIC parties in the Preston Area. This means that the proposed mandatory injunction in ground 4B is wholly inutile if the carve out is intended to encompass the whole area of operation of the MRSLAs. Mineralogy did not accept this construction of the MRSLAs. But it did not explain precisely which parts of the Preston Area would be exempted from the operation of ground for relief 4B due to the operation of the MRSLAs.
At the very least, the proposed mandatory injunction in ground 4B is unclear and productive of significant confusion.
5.1.3 Reason 3: The lack of any legal right in the Facilities Deeds for ownership or operation of Company Facilities
As I explained in the introduction to these reasons, Mineralogy’s alternative relief was expressed as a claim of entitlement to the possession and control of the “Port”. Even if this relief were understood to be concerned with possession and control of the port terminal facilities, it was common ground that each of Mineralogy’s grounds for relief 1, 2 and 3 depended on the CITIC parties not having any obligation to operate and maintain the port terminal facilities. Such an obligation would necessarily have required the CITIC parties, or any of them individually, to possess the facilities for this purpose rather than Mineralogy. Mineralogy therefore submitted that cl 23(b) of the Facilities Deeds imposed the obligation to operate and maintain the facilities upon it, not upon the CITIC parties.
For the reasons explained in section 3.2 of these reasons, Mineralogy had, and has, no legal right to ownership or operation of the facilities constructed by the CITIC parties under the Facilities Deed (which are currently Company Facilities). Nor did it have any obligation to operate and maintain those facilities as Company Facilities. I reiterate that Mineralogy did not establish, nor did it seek to establish, that the facilities were Shared Facilities.
In its pleaded case, Mineralogy relied upon a letter written by CITIC Pacific to its shareholders dated 8 May 2006 and provided to the Hong Kong Stock Exchange. Mineralogy alleged that this letter showed that “at all material times” an admission had been made by the CITIC parties that “the title to the Facilities within the Circled Area comprising the Port remains with Mineralogy”.
The letter to which Mineralogy referred to is 40 pages long (including appendices) and discusses in broad terms CITIC Pacific’s transactions with Mineralogy to acquire the mining rights [tb 2291]. The alleged “admission” is contained in one sentence in a paragraph in relation to “Capital Expenditure” [tb 2101] and another in an appendix to the letter [tb 2118]:
Some of the infrastructure for which Sino-Iron and Balmoral are required to fund construction is outside the project area of Sino-Iron and Balmoral. According to the preliminary plan which is subject to final feasibility study, infrastructure outside the project area of Sino-Iron and Balmoral may include conveyor belt to the port, port facilities (including jetties, loading and unloading facilities and related infrastructure) and water and power lines and desalination plant (the estimated cost expenditure for which is approximately US$735 million (approximately HK$5,733 million), being part of the US$2,470 million (US$1,370 million for Sino-Iron and US$1,100 million for Balmoral) payable by Sino-Iron and Balmoral for the estimated capital expenditure). Title to those facilities will remain with Mineralogy as it is the owner of the land. However, Sino-Iron and Balmoral will have the right to use the facilities, on paying the operation and maintenance cost and on terms which are fair and equal as compared to other users of the facilities, during the Project life. If there are other projects commenced in the area by participants seeking to use the port or other facilities, those new participants will be obliged to pay an amount to Sino-Iron and Balmoral, to effectively share the capital costs associated with construction of the facilities. The intended capacity of the port to be constructed by Sino-Iron is sufficient to cater for the needs of Balmoral and Sino-Iron in relation to export of the products. (my emphasis).
The second relevant paragraph is in Appendix II to the letter discussing risk factors:
Title to those facilities will remain with Mineralogy as it holds the necessary right to occupy the land on which those facilities will be constructed and the contractual arrangements between Mineralogy, Sino-Iron, Balmoral and any further company that may be acquired under the Options provide that Mineralogy will own those facilities. However, Sino-Iron and Balmoral will have the right to use the facilities, on paying the operation and maintenance cost and on terms which are fair and equal as compared to other users of those facilities, during the Project life.
Mineralogy made no substantive submissions on this point either orally or in writing. The only reference Mineralogy made to this argument was by reproducing the former paragraph in a background discussion in written submissions. Mineralogy did not explain how these two references, expressing an erroneous conclusion of law, were capable of amounting to an ongoing admission that the Facilities belong to Mineralogy.
If Mineralogy were correct that the statement by CITIC Pacific in the letter was suggesting that Mineralogy was the owner of all facilities then it would be based upon two misconceptions. The first misconception would be that Mineralogy is the owner of the land. It is not. As the Annexures to these reasons show, Mineralogy holds various rights in relation to the land. The second misconception would be that, as the owner of the land, Mineralogy becomes the owner of the Facilities. I have explained in section 3.1 above why this is also incorrect.
However, it may be that the passage in the letter was discussing the circumstance where there were multiple users of the facilities, so that the facilities were Shared Facilities. This would explain the reference to “other users of the facilities”. It would also explain the reference to sharing of the capital costs. As I have explained, those circumstances do not currently exist and are not the subject of this litigation.
In any event, even if this were not the proper construction of the sentence, an incorrect expression of a legal proposition does not amount to an “admission” that creates a transfer of title has has not transferred. Mineralogy, quite properly, did not submit that the statements in the letter could amount to a gift by the CITIC parties of their assets to Mineralogy.
Finally, if the statement in the letter could somehow have constituted an admission then any such admission would have been rescinded by cl 3.3(c) of the Fortescue Coordination Deed, which I have discussed earlier in these reasons but reiterate here. That clause provides that:
Mineralogy agrees that the desalination plant, power station, stockpiles, tailings dams and water reticulation facility, dewatering facility, pellet plants and slurry pipelines, constructed by Sino Iron or Korean will not constitute “Shared Facilities” or “Approved Shared Facilities” for the purposes of the Facilities Deeds. As between Mineralogy, Sino Iron and Korean, the title to those assets remains the sole property of whichever of Sino Iron or Korean constructed the asset. (Emphasis added).
5.1.4 Reason 4: The variation by the State Agreement and Approved Proposals of any right to operate or maintain that existed
For the reasons explained above in section 3.3, if Mineralogy had a “right” or an obligation to operate and maintain the port terminal facilities then any right and any obligation was varied by the operation of the State Agreement and the Approved Proposals. The State Agreement provided in cl 28(1) that its terms took effect notwithstanding subsidiary agreements including the Facilities Deeds.
The effect of cl 7(6) of the State Agreement and the Approved Proposals was that Mineralogy had agreed that the Project would be implemented in accordance with the Proposals. This required that the operation and maintenance of the port facilities was not by Mineralogy. The Approved Proposals required the operation and maintenance to be by CPMM.
5.1.5 Reason 5: The variation by the MRSLAs of any right to operate or maintain that existed
The terms of the MRSLAs are another reason why each of grounds for relief 1, 2 and 3 must fail.
The MRSLAs provide that they supersede all previous agreements (which includes the Facilities Deeds) on their subject matter: cl 38.7.
As I have explained in section 3.4, the operation of the MRSLAs is not limited to the Site Lease Area (which is the area of Mining Leases 08/123 to 08/125 shown in Annexure 2 to these reasons). The subject matter of the MRSLAs includes the Access Area which includes the area on which the terminal facilities came to be located and the “Project Area” which included the area of General Purpose Lease 08/52 which contained the port terminal facilities.
For the reasons explained above in section 3.4, even if Mineralogy had a right or an obligation to operate and maintain the port terminal facilities (which Mineralogy asserted to be a “composite right”), then the provision in the MRSLAs requiring maintenance to be undertaken by Sino Iron varied that “right” so that the “right” was held by Sino Iron and Korean Steel who, under each respective MRSLA, were required to undertake maintenance of the port terminal facilities. Further, under the MRSLAs, Sino Iron and Korean Steel both had obligations to operate and maintain the port terminal facilities, which necessarily required a right to possession of them.
5.1.6 Reason 6: The variation by the Fortescue Coordination Deed of any right to operate or maintain that existed
A further reason why Mineralogy’s grounds for relief 1, 2 and 3 must fail (again on the assumption that they could be redrafted to claim rights to exclude the CITIC parties from operating and maintaining the port terminal facilities) is the operation of the Fortescue Coordination Deed.
As I have explained in section 3.5, the Fortescue Coordination Deed “constitutes the entire agreement of the parties about its subject matter and supersedes all previous agreements, understandings and negotiations on that subject matter”: cl 17.7. The subject matter of the Fortescue Coordination Deed includes the operations of the port facilities.
If Mineralogy had been correct in its submission that it had the right to possess, operate or maintain the port terminal facilities while they were Company Facilities then the Fortescue Coordination Deed varied that right by providing that it was not Mineralogy but CITIC or its nominee who had this right. More accurately, the CITIC parties had the obligation of planning and conduct of activities including the use of the port terminal facilities. The CITIC parties were obliged to possess the port terminal facilities for the purpose of performing their obligations.
My reasons for this conclusion are set out in section 3.5. However, it is worth reiterating one surprising aspect of Mineralogy’s submissions. Mineralogy submitted that the Fortescue Coordination Deed did not have this effect because the operation of the port terminal facilities was not “Mining Operations” within the broad definition of the Fortescue Coordination Deed. If this were correct, then it is very likely that those operations would not be “mining operations” within the meaning of s 87(1) of the Mining Act.
Mineralogy never explained how the operation of the port terminal facilities by the CITIC parties was not Mining Operations within the Fortescue Coordination Deed, although Mineralogy’s asserted right to operate those facilities under the Facilities Deeds was “mining operations” within the statutory grant to it of the general purpose lease. That grant of a general purpose lease under s 87(1) of the Mining Act was, relevantly for purposes involving “erecting, placing and operating machinery thereon in connection with the mining operations...” and “for using the land for any other specified purpose directly connected with mining operations”.
5.1.7 Reason 7: The variation by the Port Terminal Operator Agreement of any right of operation that existed
A further reason still why Mineralogy’s grounds for relief 1, 2 and 3 must fail is the operation of the Port Terminal Operator Agreement.
As I have explained in section 3.6, the Port Terminal Operator Agreement was a binding agreement made on 23 March 2010 that included terms that CPMM will perform the role of Terminal Operator whilst the port is a single user port. This necessarily varied any asserted right that Mineralogy had to possession of the port terminal facilities. Any “right” to possession of the port terminal facilities would be held by CPMM as the party obliged to undertake the obligations of Terminal Operator under the Port Terminal Operator Agreement.
5.1.8 Reason 8: Estoppel by convention would prevent exercise of any right of operation that existed
If, contrary to my reasons above, (i) Mineralogy had a right to own, operate, and maintain Company Facilities under the Facilities Deeds, and if (also contrary to my reasons) (ii) those rights permitted Mineralogy to exclude the CITIC parties from operating and maintaining the Company Facilities under all the subsequent agreements, then (iii) an estoppel by convention would arise to preclude Mineralogy from exercising its rights at least while the port terminal facilities remained Company Facilities.
My reasons for the conclusion that an estoppel by convention would arise are set out above in section 3.7.
5.2 The relief sought by the CITIC parties in the cross-claim
In the CITIC parties cross-claim, the relief they sought was as follows:
1.An order permanently restraining Mineralogy from:
(a)terminating or purporting to terminate the Facilities Deeds;
(b)acting upon the Termination Notices; or
(c)issuing any further termination notices under clause 33(c) of the Facilities Deeds.
2.A declaration that, under the State Agreement, Mineralogy must:
(a)do all things necessary to implement the Sino Iron Project in accordance with the terms of the Approved State Agreement Proposals;
(b)ensure continuous operation of the Sino Iron Project in accordance with the terms of the Approved Statement Agreement Proposals; and
(c)not engage in any act which will interfere with the implementation or continuous operation by the CITIC Parties of the Sino Iron Project in accordance with the terms of the Approved State Agreement Proposals.
In closing submissions, as a consequence of matters raised during the trial, the CITIC parties reduced the scope of their relief substantially. The relief that they sought was only the relief contained in ground 1(b) (ts 691). This ground was the converse of Mineralogy’s claim that the Termination Notices were valid. In terms of the cross-claim, this had also been essentially the only matter in the cross-claim to which the parties focussed in any substantial submissions.
This concession was appropriately made. As to ground of relief 2, the terms of each of the declarations sought in ground 2 were too abstracted from any concrete facts to be of any utility: Bass v Permanent Trustee Company Ltd [1999] HCA 9; (1999) 198 CLR 334, 356-357 [48]-[49] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ). They were restatements of obligations contained in the State Agreement without focus upon what was required by those obligations in any factual circumstance.
As to the terms of 1(a) and 1(c), they were expressed too broadly. For instance, it would preclude Mineralogy from issuing a Termination Notice for any serious or persistent breach including even (as an extreme example) a renunciation by the CITIC parties of all their obligations under the Facilities Deeds. It would also preclude Mineralogy from issuing a termination notice for an Insolvency Event under cl 33(d) and cl 33(e).
An injunction in terms of 1(b) should be made. The Termination Notices are invalid for all the reasons I have given in relation to Mineralogy’s claim.
6. CONCLUSION
All of Mineralogy’s claims are dismissed. The cross-claim by the CITIC parties is allowed in the form of the order sought that Mineralogy be permanently restrained from acting upon the Termination Notices.
It is lamentable that despite many millions of dollars that have been spent on this litigation alone, there remain numerous issues in dispute between the parties arising from their long term contractual relationship. Most of those remaining disputes are being litigated in the Supreme Court of Western Australia. In some matters Mineralogy is the plaintiff. In others the CITIC parties are the plaintiffs. The litigation between the parties, and the associated uncertainty, might last for years. It could consume many more millions of dollars in legal fees. These consequences offer no advantage to anyone. They might be avoided if the parties are able to negotiate in a commercial manner, reasonably, and in good faith, towards terms that will clarify their rights and expectations for the long term. Such negotiation might have good prospects of success if it could take place without the shadow of existing or threatened litigation.
I certify that the preceding one thousand and eighty-eight (1088) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edelman. Associate:
Dated: 14 August 2015
ANNEXURE 1: MINING LEASES, EXPLORATION LICENCES, AND GENERAL PURPOSE LEASES
ANNEXURE 2: MRSLA SITE LEASE AREA AND PROJECT AREA
ANNEXURE 3: THE AREA OF EXPLORATION LICENCE 08/636
ANNEXURE 4: LOCATION OF VARIOUS PORT TERMINAL FACILITIES IN THE AREA OF GENERAL PURPOSE LEASE 08/52
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