Process Minerals International Pty Ltd v Consolidated Minerals Pty Ltd - [2012] WASC 254

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: PROCESS MINERALS INTERNATIONAL PTY LTD -v- CONSOLIDATED MINERALS PTY LTD [2012] WASC 254

CORAM: KENNETH MARTIN J

HEARD: 10 MAY 2012

DELIVERED : 31 JULY 2012

FILE NO/S: CIV 1034 of 2010

BETWEEN: PROCESS MINERALS INTERNATIONAL PTY LTD
Plaintiff
AND
CONSOLIDATED MINERALS PTY LTD
First Defendant
PILBARA MANGANESE PTY LTD
Second Defendant

Catchwords:

Practice and procedure - Discovery - Inspection of industrial plant - Sampling of defendants' ore product sought - Discretion

Legislation:

Rules of the Supreme Court 1971 (WA), O 28, O 52

Result:

Application refused

Category: B

Representation:

Counsel:

Plaintiff:     Mr M L Bennett
First Defendant            :     Mr S Standing
Second Defendant        :     Mr S Standing

Solicitors:

Plaintiff:     Bennett & Co
First Defendant            :     Freehills
Second Defendant        :     Freehills

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

Evans Deacon Pty Ltd v Orekinetics Pty Ltd [2002] QSC 42; [2002] 2 Qd R 345
Process Minerals International Pty Ltd v Consolidated Minerals Pty Ltd [2010] WASC 266
Process Minerals International Pty Ltd v Consolidated Minerals Pty Ltd [2011] WASCA 219
Unilever Plc v Pearce [1985] FSR 475
Wahl & Simon‑Solitec Ltd v Buhler‑Miag (England) Ltd [1979] FSR 183
West's Process Engineering Pty Ltd (Administrator Appointed) v Westralian Sands Ltd (Unreported, WASC, Library No 980060, 17 February 1998)

KENNETH MARTIN J: This opposed interlocutory application is brought pursuant to the Rules of the Supreme Court 1971 (WA) (RSC) O 28 r 2(1), alternatively RSC O 52 r 2 and r 3, seeking orders enabling the plaintiff (PMI) to inspect (accompanied by its experts and lawyers) the defendants' processing plant at Woodie Woodie.
Background to that processing plant and the close contractual relationship between PMI and the defendants may be found in my reasons for decision in Process Minerals International Pty Ltd v Consolidated Minerals Pty Ltd [2010] WASC 266. That decision was rendered in CIV 2272 of 2009. These are distinct proceedings although the parties are the same.
By its chamber summons of 15 February 2012, PMI also wishes to be permitted to conduct an extensive sampling of the defendants' lump and fine processed product at 19 distinct locations, the last of which is at the defendants' export loading facility at Port Hedland, prior to the defendants' materials being loaded aboard ship. The envisaged sampling exercise has potential to involve a removal of up to 1.2 tonnes of PMI's lump or fine manganese ore from the defendants' plant at Woodie Woodie or its loading facility at Port Hedland.
In support of the application, PMI filed 26 pages of written submissions, referred to as an outline, on 10 April 2012. The defendants responded by an outline of written submissions of 11 pages on 20 April 2012. PMI's responsive outline of written submissions of 8 May 2012 was 13 pages long. PMI's minute of proposed orders for inspection of the defendants' plant spans 5½ pages plus a second schedule (parts A and B) of proposed inspection items and proposed sampling items. The sampling locations are identified in part C of the second schedule by red numbers signifying the 18 locations at Woodie Woodie including within the crushing and screening plant, the cyclone plant and the drum plant. The 19th location as I mentioned is at the defendants' beneficiated fines product stockpiles in Port Hedland.
From an evidentiary perspective PMI's application is founded upon two affidavits of its technical director, Mr David Geraghty. Mr Geraghty is a metallurgist and became the general manager of PMI in 2003. His title was changed to technical director in 2007. Mr Geraghty's primary affidavit, sworn 15 February 2012, spans 68 pages.
Mr Geraghty's affidavit was responded to by the defendants' group metallurgist, Mr Roy Francis. Mr Francis' affidavit in opposition to PMI's application was filed on 23 April 2012. That affidavit, which includes six annexures, spans 172 pages. Mr Geraghty's 89 page responsive affidavit, including its six further annexures, was filed on 3 May 2012. There followed Mr Francis' four page supplementary affidavit of 9 May 2012.
Messrs Geraghty and Francis filed opposing affidavits on an earlier, unsuccessful application by PMI made in CIV 2272 of 2009: see my draft reasons for judgment of 6 November 2009 which are attached as annexure RF6 to Mr Francis' 23 April 2012 affidavit. At that time PMI was seeking to inspect the defendants' Woodie Woodie plant by reason of what it thought was a dramatic downturn in the amount of tailings materials reaching its secondary processing plant since September 2009. However, at that stage the trial of CIV 2272 of 2009 was only five working days off and that application which was brought under RSC O 52B, as well as under RSC O 28 and O 52, I assessed as inappropriate. I refused PMI's inspection application at that time (and a rather more constrained application to sample). However, I preserved the opportunity for PMI to apply again once the looming trial had been completed. PMI now applies again in these freshly commenced proceedings.
During the trial of CIV 2272 of 2009 which spanned days across November 2009 and April and May 2010, I received evidence from both Messrs Geraghty and Francis. The evidence of both men was important in that trial. Although very knowledgeable in their particular fields, both having expertise in metallurgy, neither man was presented as or held himself out as an independent expert witness. Notwithstanding that, much of their evidence was opinion based or technical in character. Both men assessed documents and rendered their respective analyses of underlying data. In order to comprehend that evidence and assess its reliability, the process of cross‑examination was indispensible.

This interlocutory application

The inspection and sampling exercise arises fundamentally out of a contractual dispute over the size of the apertures used in screens at the defendants' Woodie Woodie manganese ore processing plant. PMI's interlocutory application carries the potential to require the shutdown of the defendants' manganese processing plant at Woodie Woodie, possibly for up to four hours.
PMI accepts that its envisaged inspection and sampling exercise could cost the defendants in the range of $42,000 ‑ $52,000. PMI offers to pay that amount or, for that matter, any other reasonable amount the court assesses as appropriate, in order for PMI to be permitted to carry out the inspection and sampling exercise. PMI says that the inspection and sampling process which it proposes is necessary in order for it to advance the case which it seeks to make out against the defendants at trial. Basically it says that the defendants are the sole repository of information concerning how their manganese ore processing plant at Woodie Woodie operates. Accordingly, PMI says that in order for it to have proper insights as to its case, it needs the information it believes it will gain as a result of the inspection and sampling it proposes.
There is case authority in this court to support the legitimacy of an inspection of a large scale manufacturing plant including, if necessary, for the court to order a shutdown of a plant on the basis that it is a 'physical object for the purposes of RSC O 28': see West's Process Engineering Pty Ltd (Administrator Appointed) v Westralian Sands Ltd (Unreported, WASC, Library No 980060, 17 February 1998) (White J).
RSC O 28 r 2(1) provides:
Where one party alleges that another party to any cause or matter has in his possession or control some physical object, not in the nature of a document, the inspection of which is material for the proper presentation of his case such first‑mentioned party may by notice in writing require the other to permit inspection by the party requiring it with, or without, his solicitor or expert adviser.
The defendants say RSC O 28 is concerned with moveable physical objects and will not found a proper basis for PMI's application. I agree. However, PMI in the alternative relies upon O 52 r 2 and r 3 as to inspection and sampling. RSC O 52 r 2(1) appears to be drawn in wider terms as follows:
The Court may, on the application of any party to a cause or matter, make an order for the detention, custody, preservation or inspection of any property which is the subject matter of a cause or matter, or as to which any question may arise therein.
Under RSC O 52 r 3(1)(a) the court holds a broad power to order the taking of samples of any property for the purpose of 'enabling the proper determination of any cause or matter or any question arising therein'.
I did not understand the defendants to submit that RSC O 52 r 2 or r 3 would not provide the court with the power to make the inspection and sampling orders now sought by PMI as a matter of discretion provided that a proper basis in principle was first established. However, this would require an examination of the subject matter of the cause, or questions which may arise. The defendants say that O 52 r 2 is only applicable as regards an inspection of their plant and not to support an inspection of the defendants' processes, referring to Unilever Plc v Pearce [1985] FSR 475. That decision, of course, was a patent infringement order case. From it the defendants extract the proposition at (481) that an inspection (under O 52 r 2) or an order for sampling (under O 52 r 3) will not be made where the application is merely a fishing expedition (see also Wahl & Simon‑Solitec Ltd v Buhler‑Miag (England) Ltd [1979] FSR 183, 186). The defendants say there needs to be a substantial and genuine question to be tried which must be demonstrated by more than mere suspicion.
Whilst on the subject of O 52, the defendants point to r 5 insofar as it allows the court to order an early trial. Order 52 r 5 provides:
Where on the hearing of an application made before the trial of a cause or matter, for an injunction, or appointment of a receiver, or an order under Rule 2, 3 or 4, it appears to the Court that the matter in dispute can be better dealt with by an early trial than by considering the whole merits thereof for the purposes of the application, the Court may make an order accordingly, and may direct that such trial be held at such place and time as the Court thinks fit, and as respects the period before trial, may make such order as the justice of the case requires.
For present purposes, and predominantly by reference to RSC O 52 r 2 and r 3, I proceed on the basis that I hold the power, as a matter of discretion, to make the inspection and sampling orders which PMI seeks. I note the defendants' point concerning the limits of O 52 r 2 as regards it not extending to the inspection of their processes. However, as I understand the PMI application, its inspection is sought on the basis of the PMI plant being stopped, while the proposed inspection occurs across possibly a four hour time period. On that basis, the inspection of the defendants' plant at Woodie Woodie would be an inspection of property.
The defendants resist the interlocutory inspection and sampling orders, although they are prepared to permit an off‑site inspection of two screens, being screens that separate out the less than 1.2mm material from larger material (see Mr Francis' first affidavit, par 24). As regards the inspection of screen panels which are identified in part A of PMI's second schedule as inspection items (c) and (h), the defendants say that these screen panels are removable and that the defendants offer to make these panels (in new and used condition) available for inspection at Perth with inspection at Woodie Woodie being unnecessary.
By reference to part A of the second schedule, it will be seen that inspection item (c) is a wet screen located in the crushing and screening plant, and that inspection item (h) is a feed preparation screen located in the cyclone plant.
Irrespective of the wider scope of PMI's application which is to be determined, I am of the view that an inspection of screens at Perth on that basis pursuant to RSC O 52 r 2 is appropriate and should proceed. The parties should confer about the basis upon which that inspection takes place.
The defendants, in resisting the wider aspects of the inspection and sampling application, contend that because they direct tail their wet slurry from their processing plant by pipeline to PMI at its adjoining secondary processing plant at Woodie Woodie, that PMI through those arrangements obtains all the defendants' wet waste directly. For a further explanation of that process see my reasons in Process Minerals International Pty Ltd v Consolidated Minerals Pty Ltd [2010] WASC 266 as regards direct tailing at [292] ‑ [337]. See also Process Minerals International Pty Ltd v Consolidated Minerals Pty Ltd [2011] WASCA 219 [38] and [39]. The direct tailing aspect of [2010] WASC 266 was not the subject of challenge on the appeal or cross‑appeal.
Because of the direct tailing arrangement currently in place, the defendants say PMI already enjoys every opportunity to analyse, test and evaluate the emitted materials within its wet slurry and that this should be sufficient for PMI's verification purposes. PMI does not accept this proposition.
In order to assess the subject matter of the cause, questions which may arise therein (RSC O 52 r 2(1)) and then to evaluate what is necessary for the purpose of enabling the proper determination of a cause or matter or a question arising therein (RSC O 52 r 3(1)(a)), it is necessary for this action to gain a better appreciation of the parties' positions, framed by reference to the pleadings. Unfortunately the present state of the pleadings is quite complex. Their evaluation is better assisted if I revisit at the outset some express terms in two of the key written agreements between the parties which underlie the dispute. From there I will proceed to assess what PMI seeks to make of those express terms on the pleadings.

Contractual provisions

I assessed the agreements in my earlier reasons in [2010] WASC 266. The first agreement is the Super Fines Agreement of September 1996 (the SFA). The vague or vacuous non‑content of the SFA is the root cause of most of the ongoing disputes between PMI and the defendants. I have set out most terms of the SFA in those earlier reasons at [83]. Of particular relevance to the present dispute is the definition of 'Super Fines' in cl 1.1, cl 2.4, as regards the grant of rights to PMI (referred to in the SFA as 'Port', with the defendants referred to as 'Valiant' and 'Manganese'). As regards the defendants' screens, cl 4 and within it cl 4.1(b) (as regards best endeavours) and cl 4.1(d) (as regards not reducing the screening cover on the heavy media plant or other processing plants to under 1.2mm), present as relevant.
The second agreement relevant for present purposes between the parties is a Heads of Agreement so called (HOA), entered just before PMI managed to commence a secondary processing operation at Woodie Woodie regarding Super Fines, in 2004. Commencement was eight years after the concept of processing Super Fines material to extract valuable manganese had been addressed by the terms of the SFA. The HOA was the subject of my briefer consideration (in another context) in [2010] WASC 266 [117] ‑ [126]. At [123] I set out cl 2.1(a) of the HOA, which varies the SFA. For convenience I repeat [124] of the earlier reasons:
Notwithstanding cl 4.1(d) of the SFA, it would appear that for a period prior to August 2004, the defendants' screens at Woodie Woodie were screening material at an aperture smaller than 1.2 mm. This issue was obviously picked up in the negotiations leading to the 2004 Heads of Agreement and then expressly dealt with in that document, by the arrangements I have set out.
I will set out once again from the SFA only the key clauses to which I have referred, namely par (b) of the definition of 'Super Fines' in cl 1.1, cl 2.4 and cl 4.1(b) and (d):
1.1…
'Super Fines' means:
…
(b)in respect of the mining tenements set out in paragraph (b) of the definition of Tenement, all tailings that have left the wash plant or the beneficiation plant.
2.4In exercising its rights set out in this Agreement, Port shall not unduly interfere with the current operations of Valiant or Manganese and shall comply with all reasonable requests of Valiant or Manganese in respect of the location and conduct of the Operations.
4.1Valiant and Manganese covenant in favour of Port as follows:
…
(b)Valiant and Manganese shall use their best endeavours consistent with the operations of Valiant and Manganese to make available to Port all Super Fines capable of being processed and treated;
…
(d)they will not reduce the screening cover on the heavy media plant or other processing plants to under 1.2mm it being acknowledged by Valiant and Manganese that Port shall design the Plant to process Super Fines specific to this size and that Port shall suffer loss and damage if this covenant is breached.
Clause 4.1(d) of the SFA may be contrasted with cl 2.1(a) of the HOA. The HOA provision reads:
2.1Additional provisions for inclusion in the Super Fines Agreement
The parties have further agreed that the additional matters as set out below shall be included in the Super Fines Agreement for the purposes of clarification:
(a)1.2mm Screens Cover
Consolidated will change the screening cover on their heavy media plant or other processing plant to produce minus 1.2mm tailings in accordance with existing clause 4.1(d) of the Super Fines Agreement by the date of commencement of operations by PMI.
PMI will indemnify Consolidated against any future action, loss or damage which may arise as a result of smaller aperture screens (1.0mm) having been used at the Woodie Woodie Plant prior to the date of commencement of operations by PMI pursuant to the Super Fines Agreement.
(my emphasis in bold)
An issue of contractual construction as regards the SFA and HOA over the correct aperture sizes for the defendants' plant screen covers at Woodie Woodie lies at the heart of the present dispute. PMI contends that the aperture sizes in the screens used by the defendants after 2004 are still too small and breach those agreements.
PMI says that the defendants' screens do not facilitate the passing through of all the suspended waste manganese tailings of a size that otherwise ought to pass through the screen apertures and from there to PMI. PMI is particularly concerned over its perceived loss of wet tailings material (Super Fines) in a size range of 1.0mm ‑ 1.2mm. This concern is reinforced says PMI because the defendants' internal recording information only evaluates material passing through screens which is of a size measured at less than 1.0mm.
Hence, PMI says there is a lack of information about possible further Super Fines slurry‑derived material in the range of 1.0mm to 1.2mm, which PMI is concerned is not getting through the defendants' screen apertures (which PMI alleges are too small). Hence, PMI is concerned that it is not receiving within the wet slurry, which is directly tailed to its plant from the defendants' plant, all sub‑1.2mm Super Fines it is entitled to.
So, PMI's substantive cause of action is grounded essentially upon contractual rights under the SFA and/or the HOA. The key express terms, extracted above, form the basis of potentially relevant terms, as regards the aperture sizes of the defendants' screens and the screens' operation by the defendants as part of their overall processing operation.
I now move to assess the pleadings.

Pleadings assessment

PMI issued its writ in this action, CIV 1034 of 2010, on 11 January 2010. From a timing perspective that was just under two months after I had heard the first five days of argument and evidence in the trial of CIV 2272 of 2009. Subsequently, I received further evidence in that first action across April and May 2010. My reasons for decision in that action were delivered on 30 September 2010.

An indorsed statement of claim accompanied PMI's writ as filed in the present action. PMI sought breach damages. But it also sought as relief:
B.A permanent injunction restraining the defendants from configuring and operating the defendants' plant in a manner that prevents all Super Fines capable of being processed and treated, consistent with the operations of the plaintiffs, being made available to the plaintiff;
C.A permanent injunction requiring the size of the apertures in the defendants' wet screen within its processing plant at Woodie Woodie to be set at not less than 1.4mm.
All PMI's pleaded grievances concerning Super Fines and the defendants' wet screens are seen to be contractually based, either by reference to the SFA, or to the HOA.
PMI then filed an amended writ carrying an amended statement of claim on 22 November 2011. That was just over a month after the Court of Appeal delivered its decision on the parties' appeals and cross‑appeals in [2011] WASCA 219 (delivered 13 October 2011).
I refer to par 11 in the amended statement of claim which reads:
At all material times, to ensure that all tailings of -1.2mm produced in the processing plant of the defendants were and are made available to the plaintiff:
11.1the apertures in the defendants' screens or any other screens within its processing plant should be approximately 1.4mm in size so as to produce an underflow of material that is 1.2mm and less;
11.2the defendants' processing plant was and is required to be configured and operated so as to operate in accordance with the Design Specifications applicable to the type of screens utilised by the defendants in such plant;
11.3alternatively the defendants were and are obliged or required to operate the defendants' processing plant in accordance with the Design Specifications applicable to the type of screens utilised by the defendants in such plant.
Paragraph 12 provides:
At all material times from 25 August 2004 the defendants and each of them failed to ensure that its plant:
12.1contained screens with apertures approximately 1.4mm in size or greater by utilising screens with apertures less than 1.4mm in size;
12.2was configured alternatively operated in respect of the quantities of ore being passed across the Wedge Wire Screens and/or the SAF Screens from time to time in a manner that did not exceed the Design Specifications specified in respect of those screens;
and thereby failed to provide the plaintiff with all available Super Fines notwithstanding that to have acted to avoid such failure would have been consistent with the operation of the defendants' processing plant at Woodie Woodie.
The PMI averment as to an approximate wet screen aperture of 1.4mm has clearly been formulated by reference to PMI's contention that the operation of such a screen must allow an underflow of tailings to it of a minimum of 1.2mm. That contention appears to be arrived at as a result of a process of interpretation or implication applied by PMI to cl 4.1(d) of the SFA and cl 2.1(a) of the HOA. Clearly, neither clause specifies or mentions an aperture size of 1.4mm. They each refer to an aperture size of less than 1.2mm.
PMI's amendments sought even more elaborate permanent injunctive relief, by reference to what it identifies as 'Design Specifications' PMI says are applicable to the defendants' screens at its Woodie Woodie plant. The permanent injunction now sought in the prayer for relief is in the following terms:
B.A permanent injunction restraining the defendants from configuring and/or operating the defendants' processing plant (save for circumstances of mechanical breakdown or otherwise resulting from events beyond the control of the defendants) otherwise than in accordance with the Design Specifications in respect of the screens utilised from time to time by the defendants in their processing plant or otherwise than in a manner as specified for the efficient processing of ore consistent with making available to the Plaintiff all Super Fines.
PMI says the defendants are under a contractual obligation to operate their manganese processing plant at Woodie Woodie in accordance with these as formulated 'Design Specifications', which seek to prescribe operational parameters for the defendants' plant. This is pleaded to be on a three‑fold basis in relation to the defendants' Woodie Woodie plant's operations by:
(a)a specification as to the maximum quantity of ore per square metre of surface area being passed across the screens;
(b)a specification as to the maximum quantity of ore per hour being passed across the screens; and
(c)a specification as to the maximum quantity of ore per annum being passed across the screens.
(See also amendments introduced by new pars 6.9, 6.10 and 6A under PMI's amended statement of claim of 22 November 2011.)
Paragraph 6A in the amended statement of claim carries a contention that the defendants' use of wedge wire screens and 'SAF' screens at Woodie Woodie require 'operation in accordance with the particular Specified Tonnes Per Square Metre, Specified Tonnes Per Hour, and Specified Tonnes Per Annum relevant to those screens'.
The Design Specifications PMI asserts bind the defendants cannot be found as express terms within either the SFA or the HOA. Nor are they pleaded to be implied terms arising in either of those agreements. It would seem that on PMI's case the Design Specifications arise as matters of alleged inference, seemingly by reason of pragmatic ramifications delivered by reason of the defendants' best endeavours obligation towards PMI, as found in cl 4.1(b) of the SFA.
On the face of it, the breadth of operational constraints PMI contends for as the Woodie Woodie plant's Design Specifications, as regards plant operation by the defendants, ask a lot of cl 4.1(b) in the SFA. That is particularly so when the demonstrably qualified character of that best endeavours promise within cl 4.1(b) itself is recalled (see the phrase 'consistent with [the defendants'] own operations') as well as (by cl 2.4 of the SFA) PMI's earlier covenant against 'undue' interference with current operations of the defendants.
By an amended defence of 14 February 2012 the defendants admit that they used stainless steel wedge wire cross flow screens at Woodie Woodie between 1996 and 2005 and that they began using horizontal slots cross flow polyurethane wet screens from about 2005 (see amended defence par 6).
The defendants do not cavil over a premise from the SFA that they are required to use best endeavours, consistent with their operations, to make available to PMI all Super Fines capable of being processed and treated (see amended defence par 7(g)).
But at this point the defendants then fundamentally join issue against PMI's contentions over the true interpretation of the SFA and the HOA, particularly as regards required screen aperture sizes of 1.4mm for their screening covers and any required operation of their Woodie Woodie manganese ore processing plant by reference to PMI's 'Design Specifications'.
By par 11 in their amended defence, the defendants say, relevantly, that:
…
(c)the Plaintiff has no entitlement to an 'underflow of a minimum of 1.2mm and less';
(d)if apertures of 1.4mm were used, quantities of material of a size of 1.2mm and greater would pass through the screens (ie - as underflow) and into the wet slurry leaving the plant as tailings; and
(e) the alleged obligation to use screens with an aperture size of approximately 1.4mm would be contrary to, and inconsistent with, the express terms of clause 4.1(d) of the Super Fines Agreement.
As regards so‑called 'Design Specification' operational obligations binding the defendants as contended for by PMI, the defendants (at amended defence par 11(f)) say:
[S]ave for the obligation upon the Defendants under clause 4.1(d) of the [SFA] to not reduce the screening cover in their plant to under 1.2mm ‑
(1)the Defendants' processing plant is not required to be configured and operated in accordance with Design Specifications applicable to the type of screens used by the Defendants in their plant;
(2)the Defendants are entitled to configure and operate their plant in any safe manner as is required from time to time which the Defendants bona fide considers will optimise the production of lump and fines product from their plant.
Finally, at par 12 of the amended defence, the defendants contend:
[A]t all material times since 25 August 2004, the screens used in their processing plant have been horizontal slots cross flow wet screens with rectangular apertures that have a size of 1.2mm (in the direction at which material moves across the screens) by 12mm (perpendicular to the direction at which material moves across the screens), and that such screens satisfy the requirements of clause 4.1(d) of the Super Fines Agreement.

Summary as regards subject matter of dispute and approach to questions arising

From that review of the key express contractual provisions and amended pleadings, it may be seen:
(a)The commencement point of PMI's case is essentially its arguments of contractual construction over the required minimum size of the apertures in the defendants' screen covers at Woodie Woodie, arising by reason of disputed contractual interpretations and disputed pragmatic ramifications of express terms within the SFA and the HOA, namely, cl 4.1(b) of the SFA as regards best endeavours, cl 4.1(d) of the SFA and, lastly, cl 2.1(a) of the HOA, to the extent that it varies or interfaces with subcl 4.1(d) of the SFA.
(b)The SFA has already been construed by me in [2010] WASC 266 and then by the Court of Appeal in [2011] WASCA 219. To a lesser extent I also assessed the HOA in my reasons at [117] ‑ [126]. Although these are different proceedings, the parties are the same as in CIV 2272 of 2009 and CACV 107 of 2010. No party contends that the curial interpretations rendered towards the SFA and the HOA are not fully binding upon the same parties in this action.
(c)I have heard approximately three weeks of evidence and argument between these parties over the same manganese processing plants and the SFA and HOA agreements in CIV 2272 of 2009. In that context I have now also seen Messrs Geraghty and Francis provide evidence and be cross‑examined over the operation of the parties' respective manganese processing plants at Woodie Woodie.
(d)The Court of Appeal in [2011] WASCA 219 resolved appeals and cross‑appeals concerning aspects of my decision in [2010] WASC 266. In that process the correct interpretation of the term 'Super Fines' as used in the SFA, is now settled as encompassing the defendants' tailings leaving its wash or beneficiation plant at Woodie Woodie, irrespective of the dimensions of the tailings.

The defendants' further grounds of resistance to the inspection and sampling interlocutory application

The defendants raise many arguments against the interlocutory inspection and sampling orders sought by PMI. These include, in broad summary:
•the asserted weakness of PMI's construction case overall, as regards a minimum size aperture of 1.4mm or the operational 'Design Specifications' which the defendants say are unsustainable and renders this interlocutory application for inspection and sampling orders as a fishing expedition by PMI;
•the breadth and disproportionate character of the inspection and sampling orders, especially measured against the time and resources involved in their implementation and assessed against potential benefits for PMI;
•a contention that the inspection and sampling information PMI seeks would only be relevant (as was effectively accepted during oral argument by counsel for PMI) as regards issues relating to alleged breach by the defendants of the SFA or the HOA, or as to PMI's breach damages. In other words, it is only once PMI makes good its construction and inference arguments as regards a 1.4mm minimum aperture size of the screens, and its Design Specifications arising out of the SFA and the HOA, that any information potentially unearthed by the mooted inspection and sampling exercise will possibly be relevant;
•workplace occupational health and safety concerns associated with allowing a PMI inspection and sampling team access to the defendants' sophisticated manganese ore processing plant at its remote Woodie Woodie location;
•concerns about confidentiality of the defendants' proprietary processing operation being compromised, given that the defendants and PMI are now essentially high level competitors in the world market for the sale of processed manganese fines material.
Additionally, the defendants say by reference to an evaluation of the extensive and complex technical information provided to the court by each side (from the Geraghty and Francis affidavits to which I have referred), there is on any view no question of any 'skulduggery' or underhanded conduct on their part, as might otherwise arise within the parameters of an alleged patent breach type case. The defendants say the high water mark of the PMI case for inspection or sampling orders can be described as the supposed 'concerns' of PMI over matters as to which PMI seeks to pursue its personal verification. The defendants say that there must be more than just concerns or speculation by PMI. The defendants, in effect, say Mr Francis has now answered every possible point of arguable concern raised by Mr Geraghty, by his answering affidavits.
As a result, the defendants say there can be no basis beyond bare suspicion to sustain the 'concerns' of PMI. The defendants say that they have refuted all suggestions PMI was receiving a diminished quantity of manganese waste slurry tailings directly streamed to PMI's adjoining processing plant. In fact, the defendants say they have proved conclusively that the quantity of slurry based material reaching PMI has significantly increased over time.
Fundamentally, the defendants say that the mere fact PMI, through Mr Geraghty, had expressed 'concerns' that might be appeased by his inspection (with a team of others for PMI) of the defendants' plant at Woodie Woodie does not support what is in reality a proposed fishing expedition. The expedition proposed amounts essentially to PMI's personal audit of the defendants' Woodie Woodie processing plant. The audit exercise, say the defendants, cannot be supported within the proper scope of O 52.
To properly evaluate the rival positions of the parties it is necessary to descend more deeply into the Francis and Geraghty affidavits, to test some of the propositions advanced by each side. I embark upon the process bearing in mind the discretionary nature of the power to allow inspection and sampling and the comparative breadth of that discretion. At the start of the evaluation I would mention some helpful observations by Chesterman J in Evans Deacon Pty Ltd v Orekinetics Pty Ltd [2002] QSC 42; [2002] 2 Qd R 345 that are in point. His Honour observed, by reference to a similarly worded rule (Uniform Civil Procedure Rules 1999 (Qld), r 250), that the true principle was expressed by Whitford J in Wahl & Simon‑Solitec Ltd v Buhler‑Miag (England) Ltd. Orders for inspection will not be made, save where that would be 'appropriate' [19]. Chesterman J continued [19]:
The discretion conferred by the rule is a wide one. It should not be limited by the superimposition of conditions not found in the rule itself. The order should not be made unless, on the material before the court, it is proper to do so. It must be remembered that the rule exists to promote the efficient and economical conduct of litigation. If the result of an inspection would tend to bring about such a result the discretion should, I apprehend, ordinarily be exercised in favour of inspection subject to there being some counter vailing circumstance. To say that there must be formidable grounds for alleging an infringement before inspection will be ordered is to say only that there must be sufficient grounds for making the order. I do not think there is any benefit in using any more particular or pejorative adjective. It is no doubt true that an order for inspection of property will not be made unless there is some evidence that the plaintiff's rights are being infringed and that an inspection will facilitate proof of the claim. This, I expect, is all that is meant by saying there must be a substantial and genuine dispute. There are, of course, degrees of suspicion as well as of proof. It is pointless to resort to semantic differences and refuse inspection where there is 'mere suspicion' of an infringement, but allow it where there is 'strong suspicion' or 'proof' of it, even if the proof be weak. The discretion conferred … should be addressed by considering whether in all the circumstances of a particular case the plaintiff has shown sufficient grounds for intruding on the defendant's property.
I find Chesterman J's observations to be of directional assistance in the present evaluation. I also mention his Honour's observations at [20], upon whether an inspection is likely to save time and costs in the long run.
In the context of proceedings brought in the CMC List, the overall proportionality of the orders sought in context is, as well, always a relevant consideration to be weighed.

The Geraghty and Francis evidence: Further observations

Without attempting a comprehensive restatement of all contentious matters arising across the broad spectrum of Mr Geraghty's affidavits and Mr Francis' responsive affidavits, I will draw attention to what I assess to be five key issues.
First, a significant component of Mr Geraghty's first affidavit of 15 February 2012 seeks to build arguments grounded around what was exhibit VV (the swim lane diagram) in CIV 2272 of 2009. But that exhibit was prepared and tendered by Mr Francis in that trial for different purposes. More particularly it was there used to explain how course rejects, being the significant subject matter in that trial, were generated: see pars 32 ‑ 42 of Mr Geraghty's first affidavit.
Mr Francis' affidavit of 20 April 2012 takes this point up expressly at par 36. He says:
[T]he swim lane diagram addressed the issues in dispute in the other proceeding. It did not need to (and thus did not) provide for any tolerances or margins.
It is apparent that PMI has attempted on this application to use the swim lane diagram beyond the context for which it was prepared. Dangers in that approach are obvious.
Second, as a result of calculations he has made by reference to the documents mentioned at pars 43‑45, Mr Geraghty has generated a summary, referred to as a data sheet, which he produced as his attachment DMG7 (par 46, first Geraghty affidavit).
Mr Geraghty renders various observations concerning his data sheet at pars 47, 48 and 49. Paragraph 50 of Mr Geraghty's affidavit suggests differences between the data sheet and the swim lane diagram, as regards the amount of coarse rejects as a combined percentage since January 2011. On the basis of his analysis and what appears to be a 2006 report concerning Super Fines retention which he attaches as DMG8 (par 52), Mr Geraghty makes further observations concerning the swim lane diagram (par 57), the effects of additional spray bars installed in the defendants' plant around September 2006 (par 58) and the concept of excessive pegging, where large particles of ore clog the 1.2mm aperture screens preventing that material from falling through the screen and reaching PMI's plant (par 58). Mr Geraghty also makes observations concerning the defendants' historical data keeping practice of only recording the amount of material with a width less than 1.0mm retained in the defendants' lump and fines product between July and late October 2009 (par 60).

This all culminates in the expression of opinions by Mr Geraghty at par 61 based upon his expertise, analysis of the defendants' documents, familiarity with the processing plants of both the defendants and PMI at Woodie Woodie. He makes observations concerning 'the likely reasons for the reduction in the flow of tailings feed to the plaintiff'.
But there remains a fundamental dispute between the parties over Mr Geraghty's conclusion concerning an asserted reduction in the flow of tailings feed to PMI.
In response, Mr Francis' first affidavit revisits the defendants' documents used by Mr Geraghty in preparing his data sheet. Mr Francis generates his corrected version of that data sheet, which is his attachment RF1: see pars 37 ‑ 41 of Mr Francis' affidavit. At par 38 Mr Francis contrasts 2010 and 2011 as regards his corrected analysis of reject material. For tailings he contrasts a percentage figure of 31.7% in 2011 with the lower percentage figure in 2010 of 26.1%, 'tailings' being the Super Fines PMI receives by direct feed (par 39, Mr Francis' affidavit). Attachment RF1 to Mr Francis' affidavit shows that in 2010 the quantity of direct tailings fed to PMI was on average 55,554 dry tonnes per month, whereas in 2011 the average figure has now increased to 79,371 dry tonnes.
Therefore Mr Francis says that his amended data sheet, both in terms of percentages and average monthly tonnages, proves an overall significant quantitative increase, rather than a decrease in the amounts of tailings material actually received by PMI. At the interlocutory level there is a credible joinder of issue as between Mr Geraghty and Mr Francis over this quantitative dispute. I have not had the advantage of seeing either cross‑examined upon their calculations. As a prima facie assessment Mr Francis' work seems to be the more persuasive.
The tailings record for the period of August and September 2009 in this attachment can also now be seen in an overall context of subsequent tailings received. The decreases in those earlier months are not in accord with the longer term trend which is an increased amount of tailings over time for PMI. See the observations at the earlier time at p 9 in my draft reasons of 6 November 2009 in attachment RF6 at p 171 of the first Francis affidavit.
Third, in Mr Geraghty's responsive affidavit of 3 May 2012, it appears to me he seeks to make rather more than he should of the fact that the defendants' measurement of retained material is calibrated by reference to the threshold of less than 1.0mm (instead of less than 1.2mm tailings): see pars 12 ‑ 18 and particularly par 17. The chosen threshold presents as the historic recording calibration level, long used by the defendants. My assessment is Mr Geraghty strains to demonise this historic recording threshold. Mr Geraghty's position for PMI essentially is that he will not accept what Mr Francis says: see pars 9, 17 and 23 of the second Geraghty affidavit. At the end of the day I assess this as a back and forth seemingly unending squabble pursued only upon generalised 'concerns'. Fundamentally, Mr Geraghty does not accept what Mr Francis says and wants to personally verify matters for himself. For instance, see par 53 of his second affidavit where Mr Geraghty says:
As to paragraph 53 of the Francis Affidavit, although RF1 appears to show an increase in tailings volume, without further sampling and inspection of the defendants' plant I am unable to verify the information regarding my concern as to whether the plaintiff is receiving all ‑1.2mm material and I otherwise repeat paragraph 60 below regarding the plaintiff's assessment of the tailings stream.
At par 60 of his second affidavit Mr Geraghty says that PMI:
[L]ogically cannot assess what is not in the tailings stream. I identify in par 61 of my primary affidavit that the plaintiff's main concern is with the material in the +500 micron ‑1.2mm size fraction.
At this interlocutory level I am left essentially unmoved and unpersuaded by PMI.
Fourth, in Mr Geraghty's second affidavit he attaches a series of photographs of the screens (see DMG17 at pages 65 ‑ 73 of his second affidavit). At pars 19 ‑ 21 Mr Geraghty, by reference to the photographs (taken in May 2006 when Mr Geraghty was allowed to visit the defendants' plant at Woodie Woodie), seeks to advance what I assess to be more arguments over rock chips seen clogging the apertures of the screens to varying degrees and illustrating the process described as 'pegging'.
The suggestion is that pegging would inhibit or prevent much of the less than 1.2mm material from properly passing through the screen apertures. However, this suggestion, which arises out of May 2006 photographs, is again very comprehensively answered by Mr Francis, this time by his supplementary affidavit sworn 9 May 2012. At par 8 Mr Francis explains that the May 2006 photographs by Mr Geraghty show screens which were replaced in 2009. Hence they show a configuration of the defendants' plant which is far from contemporary. More importantly, at par 8(c) Mr Francis points out that the plant process looks to be stopped as the photographs were taken. That would mean that screen panels were not vibrating. Hence processed material would not have been moving over the screen panels and the spray bars would not have been operating: see pars 8(f) and (g). If the plant was stopped, the pegging which Mr Geraghty seeks to infer from the 2006 photographs as to the screen panels being clogged and thereby illustrative of the phenomenon occurring, is not reliable. With screens not operating the ore material is not subject to vibration and washing. On that basis the May 2006 photographs are unlikely to be a fair or accurate representation of the true operation and effectiveness of the plant's screens whilst in operation. Any concerns raised by Mr Geraghty's May 2006 photographs have therefore been answered at this point, says Mr Francis. At interlocutory level, I accept the explanation about evidence that is now some six years old and not reflective of the screens now used in any event.
Fifth, Mr Geraghty's first affidavit sought to place much emphasis upon a document attached as DMG8. This apparently is a reported prepared in 2006 and obtained on discovery, which Mr Geraghty addresses at pars 52 – 53 and 55 ‑ 59. In particular at par 55 Mr Geraghty draws attention to the retention of material mentioned in the report as being '5.72% of material less than 1.0mm in size that should have fallen through the screen and then reported to the plaintiff as its property'. The report says as well that the proportion of less than 1.0mm fraction 'entrained in the direct product from [the] screen' was 7.11%.
At par 56 Mr Geraghty seeks to extract conclusions from this report in reference to the percentage figures found within the swim lane diagram, particularly the figure of 7.11%. Mr Geraghty concludes the report records excessive pegging (par 59, Mr Geraghty's first affidavit).
Mr Francis' first affidavit of 20 April 2012 then addresses this 2006 report issue comprehensively at pars 43 ‑ 51. He explains that the report appears to be a draft (par 43). It also appears to have been prepared by a very junior employee at that time who has since left the defendants' employ.
At par 47(d) Mr Francis calculates from the defendants' records that the average proportion of less than 1.0mm material found in the defendants' unbeneficiated fines product has fallen from 0.97% in 2006 to 0.42% in 2011. There has been a similar decline in the percentages of less than 1.0mm material in unbeneficiated fines material across that same six year period. From this, Mr Francis says at par 47(e):
[T]he above data shows that only a very small proportion of material contained in fines product is of a size less than 1.00mm. This demonstrates that, in combination, the use of multiple screens in the entire process is as efficient as can in my experience be reasonably expected.
He says further at par 47(f):
[T]he defendants do not have any data regarding the amount of minus 1.2mm material retained in its product. However, the above data evidences that, as there is minimal material there is less than 1.00mm being retained, the 1.2mm screens are operating highly efficiently.
Unsurprisingly, Mr Geraghty does not accept Mr Francis' assertions, by his responsive affidavit of 3 May 2012: see par 48, particularly par 48.4 joining issue with par 47(e) of Mr Francis' affidavit; see also pars 9 and 10 of Mr Geraghty's second affidavit. At par 9 Mr Geraghty says he does not accept Mr Francis' evidence as to the defendants' plant currently either operating efficiently or not retaining significant amounts of less than 1.2mm material. But a joinder of issue by Mr Geraghty over what he does or does not claim to accept at this time does not assist me or advance PMI's case. There seems to me to be, once again, argument rather than empirical evidence. Furthermore, I observe that this 2006 report, attached as DMG8 to Mr Geraghty's first affidavit, ultimately concluded as regards the issue of Super Fines retention:
The retention of ‑1.0mm material on the lump and fines product screens is minimal. As additional washing is provided for Ferrosilicon recovery the proportion of super fines retained will be kept low or likely reduced.
(my emphasis in bold)
The retention is minimal and my impression at this interlocutory point is that Mr Geraghty has seized on one discovered document of the defendants and sought to make (a lot) more of it than is warranted. Mr Francis' observations better frame that draft report of 2006 (to the extent that it might carry any contemporary relevance bearing in mind the change in screens that occurred in 2009) in what I assess, overall, (at interlocutory level) to be a predominantly benign context as regards retained levels of materials (Super Fines) in the defendants' sale product (lump and fines).

Overall evaluation of evidence adduced by Messrs Geraghty and Francis

On 6 November 2009, just before the trial in [2010] WASC 266 was to begin, I heard a not dissimilar urgent inspection application pursued by PMI, based upon expressed concerns over the asserted diminished receipt at that time of Super Fines wet slurry material. For that application I also considered extensive affidavit materials by Messrs Geraghty and Francis, with them respectively advocating and opposing PMI's inspection application.
At that time PMI was concerned the defendants' recent introduction of a new scrubber or scrubbers into their plant, proximate to certain screens, had been responsible for diminishing, in breach of the SFA, alternatively the HOA, the quantity of wet manganese (Super Fines) it was receiving within the wet slurry being directly piped to its secondary processing plant. At the time I refused PMI's application, especially with the trial of that matter only five working days off (see attachment RF6 to Mr Francis' first affidavit).
The extensive subsequent tailing tonnage data now available to the end of 2011 within the present application shows that the quantitative reductions in Super Fines, between September and November 2009, being complained of by PMI, with the benefit of the subsequent data, was an aberration. And since then, up to the end of 2011, the quantity of wet material piped and pumped directly to PMI's plant looks to have increased significantly, based upon the figures provided in Mr Francis' affidavit.
This inspection application by PMI bears some similarities to the first application, but it is also somewhat different. PMI looks, on Mr Francis' figures, to be receiving in a quantitative sense a lot more material now from the defendants than in the last quarter of 2009. Nevertheless, PMI contends it is entitled to even more because it has rights over 'All' Super Fines. PMI believes it is missing out on the higher sized screened material, particularly in the spacial dimension of 1.0mm up to 1.2mm. PMI expresses concern that the defendants' screens now used have apertures too small to allow to pass through the screens all Super Fines wet slurry tailings material that should be passing to PMI as Super Fines - PMI also wants the 'Design Specifications' implemented by the defendants.
For all their diligence, Messrs Geraghty and Francis are hardly independent witnesses. They are heavily aligned to their respective sides. They have now been submitting and responding to each other's affidavits in multiple civil actions case managed by me in the CMC List for almost three years now. PMI and the defendants are competitors in the world manganese market. They continue to battle each other in a series of civil actions in this court with seemingly limitless resources.
In the present case, a good deal of energy and paper has been consumed by Mr Geraghty on behalf of PMI seeking to justify the inspection and sampling orders which are sought. In the end, however, the evidence he has been able to assemble for PMI only rises, on my present interlocutory assessment, to speculative 'concerns'.

Conclusion on PMI's interlocutory application seeking sampling and inspection orders

Weighing the diverse considerations which have been raised by this application together, I am not, in the end, persuaded that the breadth of the inspection and sampling orders as are now sought by PMI at this time are warranted. In essence, the subject matter of the present dispute and questions arising out of it, spring from the contractual provisions within the SFA (cl 4.1(d)) and the HOA (cl 2.1(a)) as regards the screen cover apertures of 1.2mm.
From that point PMI has used the best endeavours clause in its favour in the SFA (cl 4.1(b)) to construct a rather elaborate regime of obligations which it contends fall upon the defendants (the Design Specifications). These foundational parameters essentially will succeed or fail in being established, depending on PMI's success upon the underlying questions of construction or inference. It may well be that expert evidence is required to resolve some issues concerning PMI's mooted derivation of the so‑called Design Specifications.
My overall evaluation of the affidavits and submissions at this point leads me to conclude that the informational insights hoped to be obtained by PMI from the inspection and sampling exercise it seeks to have the court impose on the defendants are not a necessary aspect of the foundational parameters that ground PMI's contract case. To the contrary, the inspection and/or sampling information seems, in its potential utility for PMI, to be more relevant to issues concerning alleged breach of express or inferred obligations under the SFA or HOA, or to ascertaining and quantifying PMI's damages, if PMI could make good its contractual liability case against the defendants.
I am of the view that it would be a more efficient and proportionate utilisation of resources for these foundational parameters of PMI to be evaluated and established, before contemplating the worth of an exercise of the magnitude proposed. I of course allow the off‑site inspection at Perth of the new and used screens, to which the defendants have volunteered.
Additionally, I am of a provisional view, particularly as regards the Design Specifications, that PMI's inspection and sampling orders as sought could open the door, most undesirably, to possible reverse engineering risks, by illegitimate insights towards the proprietorial operations of the defendants' processing plant. In my view, PMI should first establish, if it can, its bedrock contract arguments as regards the screen aperture sizes and the Design Specifications, before an inspection and sampling exercise of the magnitude proposed is countenanced.
The parties are strong trade rivals. The processes of the defendants as a significant manganese ore exporter are proprietary. The proposed orders sought by PMI would, by their effect and moment, subjugate the defendants to some extent to PMI's interests for its secondary processing of Super Fines at Woodie Woodie. That was not the objective intent of the SFA, which identifies a key relationship premise at cl 2.4 that there must not be undue interference with the defendants' operations. Potential interruption to the defendants' operations delivered as a consequence of the orders proposed by PMI would, in my assessment, constitute undue interference with the defendants' operations. There are also legitimate occupational health and safety concerns to weigh.
In the absence of any suggestion of any suspicious or underhanded conduct by the defendants, let alone suggested patent infringement, this is not a case where some identified suspicious conduct warrants a closer investigation by a court sanctioned inspection. On my assessment, PMI's interlocutory application has proceeded on the basis of an attempt to raise its subjective 'concerns' warranting the court ordered exercise, which in character approaches the nature of an audit of the defendants' operations.
Given the poor state of the relationship between the parties, PMI's desire to conduct its own independent audit of the defendants' processing plant and operations at Woodie Woodie is perhaps understandable. But, in my overall assessment, PMI has not pointed to sufficient empirical evidence to persuade me that what is sought is justified or appropriate at this time or for that matter rises above a desire to conduct a fishing expedition in the neighbouring plant of the defendants.
Save for the off‑site inspection at Perth of the new and used screens, which the defendants have offered, PMI's inspection and sampling application must be refused.
PMI, as the unsuccessful party, should pay the costs of this application. The magnitude of the materials lodged on this application indicate that some special costs orders lifting the appropriate scales on a taxation are appropriate.
In terms of a future progression of the matter, the parties should now confer and submit a proposed minute of consent orders which progresses the determination of what I have referred to as PMI's foundational liability premises, as regards the construction position and Design Specifications it contends for. In that exercise, issues concerning breach and damages can be deferred for later consideration, if PMI makes good its foundational case. That is my prima facie view as to costs and the further progression of the matter.
Absent consensus I will hear the parties as to appropriate orders and directions at an appointment to be fixed administratively.