Sino Iron Pty Ltd v Mineralogy Pty Ltd
[2017] WASCA 24
•08/02/2017
SINO IRON PTY LTD -v- MINERALOGY PTY LTD [2017] WASCA 24
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2017] WASCA 24 | |
| THE COURT OF APPEAL (WA) | 08/02/2017 | ||
| Case No: | CACV:4/2017 | 27 JANUARY 2017 | |
| Coram: | BUSS P MURPHY JA | 27/01/17 | |
| 19 | Judgment Part: | 1 of 1 | |
| Result: | Application granted | ||
| B | |||
| PDF Version |
| Parties: | SINO IRON PTY LTD KOREAN STEEL PTY LTD CITIC LTD (formerly CITIC PACIFIC LTD) MINERALOGY PTY LTD |
Catchwords: | Practice and procedure Stay application Stay sought of interlocutory mandatory injunction ordering the payment of money to a party under a disputed term of a contract Turns on own facts |
Legislation: | Nil |
Case References: | Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308 Frigger v Professional Services of Australia Pty Ltd [2015] WASCA 3 Lewis v James (1886) 32 Ch D 326 Mineralogy Pty Ltd v Sino Iron Pty Ltd [2013] WASC 194 Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105 Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 13] [2016] WASC 403 Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375 Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 6] [2015] WASC 80 Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 8] [2015] WASC 473 Nigam Trading as SC Nigam & Co v Harm [2009] WASCA 209 Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2008] WASCA 222 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : SINO IRON PTY LTD -v- MINERALOGY PTY LTD [2017] WASCA 24 CORAM : BUSS P
- MURPHY JA
- First Appellant
KOREAN STEEL PTY LTD
Second Appellant
CITIC LTD (formerly CITIC PACIFIC LTD)
Third Appellant
AND
MINERALOGY PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : KENNETH MARTIN J
Citation : MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 13] [2016] WASC 403
File No : CIV 1808 of 2013
Catchwords:
Practice and procedure - Stay application - Stay sought of interlocutory mandatory injunction ordering the payment of money to a party under a disputed term of a contract - Turns on own facts
Legislation:
Nil
Result:
Application granted
Category: B
Representation:
Counsel:
First Appellant : Mr C M Scerri QC & Mr S C Wong
Second Appellant : Mr C M Scerri QC & Mr S C Wong
Third Appellant : Mr C M Scerri QC & Mr S C Wong
Respondent : Mr K S J Byrne
Solicitors:
First Appellant : Allens
Second Appellant : Allens
Third Appellant : Allens
Respondent : Kane Jones
Case(s) referred to in judgment(s):
Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308
Frigger v Professional Services of Australia Pty Ltd [2015] WASCA 3
Lewis v James (1886) 32 Ch D 326
Mineralogy Pty Ltd v Sino Iron Pty Ltd [2013] WASC 194
Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105
Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 13] [2016] WASC 403
Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375
Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 6] [2015] WASC 80
Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 8] [2015] WASC 473
Nigam Trading as SC Nigam & Co v Harm [2009] WASCA 209
Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2008] WASCA 222
- REASONS OF THE COURT:
Introduction
1 On 27 January 2017, the court heard an application for a stay of an interlocutory mandatory injunction ordered by Kenneth Martin J in Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 13]1 (primary decision). The stay was sought pending the determination of the appeal from the primary decision. The appeal has been listed for hearing on 8 March 2017.
2 At the conclusion of the hearing of the application, we granted a stay until 4.00 pm on 9 March 2017 and said that we would provide written reasons. These are our reasons.
Background2
3 The first respondent (Mineralogy) holds mining tenements and a general purpose lease over land in the Pilbara in Western Australia. On 21 March 2006, Mineralogy entered into certain agreements (Mining Agreements) with the first appellant (Sino) and the second appellant (Korean). The Mining Agreements are relevantly in identical terms. Sino and Korean are given, under their respective agreements, a right to mine for magnetite ore (up to an extraction limit), and a site lease for the construction and operation of their processing facilities. The third appellant (Citic) is the holding company of Sino and Korean, and Mineralogy contends that it is the guarantor of Sino and Korean. These three parties will be referred to as the 'Citic Parties'.
4 Sino and Korean now operate the Sino Iron Project, a large-scale magnetite mining ore project, on the land pursuant to the Mining Agreements. Sino and Korean have apparently expended $8.4 billion on the project.
5 The Mining Agreements, by cl 8, provide for the payment of a royalty to Mineralogy. The royalty has two components, 'Royalty Component A' (Royalty A) and 'Royalty Component B' (Royalty B). Royalty B (if enforceable) greatly exceeds Royalty A. A dispute in relation to Royalty A was determined in earlier proceedings.3 There remains a dispute about Royalty B.
6 Royalty B applies to magnetite ore that has been produced into 'Product'. Product, for this purpose, was first produced in 2013.
7 In general terms, the contractual formula for Royalty B has two parts. One relates to the price of Brazilian pellets and the other relates to the price of Mount Newman fines. Each component is expressed in terms of the 'prevailing published annual FOB price' for the material (ie, for Brazilian pellets and Mount Newman fines).
8 From about the late 1960s to 2010, there was a global iron ore pricing system involving certain published prices for iron ore referred to as the Annual Benchmark Pricing System (AB Pricing System). The Citic Parties contend that, on a proper construction of cl 8.2 of the Mining Agreements, the reference to 'prevailing published annual FOB price' is a reference to the AB Pricing System. It is not in issue that the AB Pricing System ceased operating in around early 2010. Accordingly, the Citic Parties' primary contention is that there is no obligation to pay Royalty B payments to Mineralogy. More particularly, the Citic Parties contend that:
(a) the Royalty B provision is void for uncertainty and may be severed whilst leaving the remainder of the Mining Agreements in operative effect; or
(b) alternatively, if severance is not available, there is an implied term to the effect that:
1. the parties must negotiate in good faith to seek to agree on a replacement formula or at least to negotiate in good faith before taking any steps to have any dispute as to the calculation of the royalty determined by a court; or
2. the royalty is one that is fair and reasonable; or
(c) in the further alternative, the Mining Agreements are frustrated because of an inability to calculate Royalty B.
9 Consequently, the Citic Parties have not paid Royalty B to Mineralogy. This led to Mineralogy issuing certain notices of default and to litigation concerning, amongst other things, an alleged repudiation by Sino and Korean of the Mining Agreements (discussed below). In July 2013, Mineralogy alleged that it was owed $287,000 by way of Royalty B. In September 2014, Mineralogy alleged that the amount it was owed was $22 million and, by September 2015, Mineralogy alleged that the debt had increased to $48 million.
The litigation between the parties
10 For present purposes, the following may be noted. Mineralogy originally commenced proceedings in New South Wales. They were transferred to the Supreme Court of Western Australia on 30 April 2013 and were given file number CIV 1808 of 2013 (proceedings).4
11 On 26 July 2013, Mineralogy issued a default notice under the Mining Agreements on the basis that Sino and Korean had failed to pay the sum of $287,000 by way of Royalty B. Sino and Korean applied in the proceedings for an interlocutory injunction restraining Mineralogy from suspending operations or terminating the Mining Agreements based on the default notice. Sino and Korean's contention, as noted above, was that no Royalty B payments were payable. An interlocutory injunction was granted: Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2].5 The judge in that case rejected Mineralogy's submission that any injunction should only be granted against it on terms that Sino and Korean pay, under protest, the claimed $287,000 Royalty B payment.
12 In July 2014, Mineralogy issued further default notices in relation to certain alleged breaches by Sino and Korean in connection with steps allegedly required to be taken in the calculation of Royalty B. Sino and Korean obtained an interlocutory injunction precluding Mineralogy from taking certain action with respect to those notices: Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 6].6 The judge said that it was an appropriate case for an injunction to restrain Mineralogy from taking steps to prevent Sino and Korean carrying on the project pending resolution of the proceedings.7 The judge rejected a submission by Mineralogy that the 'price' for the injunction obtained by Sino and Korean should be a payment to Mineralogy of the claimed debt of $22 million in respect of Royalty B. His Honour did so on the bases that the claimed figure of $22 million lacked proper evidentiary foundation, that Mineralogy had made no claim in the action for the payment of any amount by way of Royalty B, the current position was that Mineralogy was not receiving any Royalty B payments, and that the proceedings were proceeding to determination on the basis that Mineralogy would not receive any interim payment.8
13 On 27 November 2015, Mineralogy applied by chamber summons for interlocutory orders against the Citic Parties.9 In general terms, it sought:
(a) an order (payment order) to the effect that the Citic Parties pay $48 million for Royalty B or such other sum as the court may order;
(b) an order, in effect, that Sino and Korean be restrained from conducting operations unless and until the Citic Parties complied with the payment order; and
(c) certain other orders in relation to the rights of Sino and Korean to continue mining operations.
14 Mineralogy's application for interlocutory injunctive relief was dismissed: Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 8].10 Mineralogy appealed that decision. The appeal was upheld: Mineralogy Pty Ltd v Sino Iron Pty Ltd.11 As a consequence, Mineralogy's application for an interlocutory injunction was, in effect, remitted for a fresh hearing.
15 That matter ultimately came on for hearing before Kenneth Martin J. In the determination of that matter, Kenneth Martin J had before him further pleadings and evidence beyond that which were available in Mineralogy's earlier injunction application. On the evidence before the primary judge, Mineralogy's claim was for (approximately) $21.38 million in Royalty B payments up to 30 September 2014, and for (approximately) $59.6 million between 1 October 2014 and 30 June 2016, making a total claim of (approximately) $81million. It is the decision of Kenneth Martin J which is the subject of the appeal herein.
The primary decision
16 The judge observed12 that Mineralogy, in its pleadings, claimed in debt for the alleged Royalty B payments as well as alleging that it had terminated the Mining Agreements either by contractual termination with effect from early October 2014 or by accepting the repudiatory conduct of Sino and Korean in (around) October 2015. Mineralogy also claimed (in effect) loss of bargain damages in relation to the alleged repudiation, an order for rectification, and payment 'by way of restitution'.
17 In relation to the disputed contractual formula, the judge observed13 that cl 8.2(a) did not in terms refer to the AB Pricing System. He said that he had not overlooked the Citic Parties' plea that the expression 'prevailing published annual FOB price' is a descriptive term of industry custom and usage.
18 The judge also considered the expert evidence filed by the parties in relation to whether pricing mechanisms existed which reflected published annual FOB prices for Brazilian pellets and Mount Newman fines. Mineralogy's expert evidence was to the effect that such prices were calculable by reference to published spot prices.14 The Citic Parties' expert did not agree that 'the calculation of published iron ore spot market CFR indices and shipping prices can be used to derive "prevailing" FOB prices with any reasonable accuracy'.15 His Honour said:16
It is apparent then that there is presently a strong clash of expert perspectives, as regards a legitimate use of anything other than an annual benchmark pricing system to source the pricing data required in a derivation of a royalty payment of money for Mineralogy as [Royalty B] under cl 8.2 of the [Mining Agreements], as an aspect of the 'Mineralogy Royalty'. Given that clash, it is convenient to recall the observations of the President at [24] of her reasons, where her Honour had observed:
Prima facie, the standard for the calculation of [Royalty B] is the published market price for the relevant products … during the relevant quarter. The fact that (unlike the [AB Pricing System]) the market price changes during the relevant period does not make the standard legally uncertain. How best to achieve and quantify the market price for the relevant period is a matter for expert evidence on a subject involving a well understood process that is neither ambiguous nor uncertain.
Those highly persuasive observations, which I would respectfully apply on this application, were explicitly identified and agreed with concerning cl 8.2 by Corboy J in his reasons at [118] on that appeal.
At this point, I would simply observe once again that cl 8.2 in the [Mining Agreements] does not, as regards the derivation of [Royalty B] over time, say expressly that the input data source … must be data obtained by using the (no longer operative post early 2010) [AB Pricing System]. References seen in cl 8.2 to a FOB (shipping) price pose no real difficulty. Nor is a conversion of a C&F price to a FOB price theoretically problematic.
The pragmatic obstacle to implementing [a Royalty B] calculation, if there is a problem, is tied to the absence post March 2010 of a published annual market price for [Brazilian pellets and Mount Newman fines] (which had once been the case under the [AB Pricing System]). The Brierley methodology in lieu of using what became the now inoperative [AB Pricing System] source takes an average of the published daily spot prices for Brazilian pellets and Mount Newman fines, gathered from other publicly available industry data sources.
This clash of expert perspectives is not an issue that I can or need to resolve on a final basis for this application. For present purposes, I now hold Mr Brierley's revised and reworked reports responding specifically to, and also adopting, a number of the criticisms raised by Mr Barkas, and then reworking his earlier calculations accordingly. Against that, I have the approach of Mr Barkas for the CITIC parties which basically opines that Mr Brierley's averaging approach by using spot price data to derive the annual prices for [Royalty B] is too far removed from the terms of cl 8.2 as regards meeting the proper input of the [Royalty B] calculation formula.
19 As to the merits, his Honour considered17 that Mineralogy had a strong prima facie case that it has an entitlement to a reasonable amount of royalty funds in respect of Royalty B, or at least a reasonable amount of royalty 'worked out on a principled basis that international iron ore industry experts would assess as being fair and reasonable to Mineralogy'.18 He considered that Mineralogy's claims were only 'answered weakly' by the Citic Parties' argument concerning uncertainty and severance.19
20 His Honour was of the view, however, that Mineralogy could not claim relief in debt in relation to the period after October 2014 by reason of its allegation that the Mining Agreements were terminated in early October 2014, although the claim prior to then was unaffected.20 His Honour considered that the claim that the Mining Agreements were terminated in about October 2014 was inconsistent with the claim in debt for Royalty B payments after that time. He said, in effect, that Mineralogy would need to forego its claim of termination in order to obtain equitable relief. His Honour said:21
As Mineralogy seeks the assistance of equity to compel Korean and Sino to meet their asserted obligations to pay royalty moneys said to be falling due to Mineralogy as royalty payments by reference to [Royalty B] in the [Mining Agreements], or reasonable amounts in lieu thereof, Mineralogy first needs to do equity itself towards the other parties to the [Mining Agreements]. It will do that by showing itself to be fully ready, willing and able to perform its own obligations under the [Mining Agreements]. But this, in practical terms, does not now require very much at all from Mineralogy to fix, as I explain below.
Put another way, to obtain discretionary equitable relief by the remedy of injunction on an interlocutory basis, Mineralogy must be seen to be conducting itself on an equitable basis. I can envisage no greater scenario of a party presenting themselves to a court as being thoroughly unready, unwilling, and unable to perform their contractual obligations under an agreement, than by that party pleading as its case, that all the future obligations of performance under the parties' agreements have come to a complete end over two years ago.
Mineralogy's fundamentally inconsistent rights position of contractual [Mining Agreements] terminations at October 2014 must first be corrected, before any equitable relief as sought post October 2014 can be countenanced.
21 His Honour said in relation to the balance of convenience:
(a) there was no real 'fiscal prejudice' to the Citic Parties in the sense that there was no evidence that they could not afford to pay the money;22
(b) there were 'persuasive concerns' about Mineralogy's financial condition and that the Citic Parties had 'legitimately expressed concern' that there was a 'strong likelihood' that, if the moneys were paid to Mineralogy, they would not be recovered if the Citic Parties succeeded at trial;23
(c) any moneys for Royalty B payments which were ultimately ordered to be repaid by Mineralogy might however be recovered by Sino and Korean setting off Royalty A payments against such sums (subject, in effect, to the difficulties asserted with the termination claim);24
(d) the non-payment of moneys on account of Royalty B by Sino and Korean has been a 'strong contributing factor' to Mineralogy's 'current fiscal problems';25
(e) a factor weighing in favour of Mineralogy is that under the Mining Agreements it is precluded from claiming damages for indirect or consequential loss or damage, or to claims for loss of profit, special loss or damages;26 and
(f) prima facie, the non-payment by Sino and Korean of Royalty B payments was not repudiatory conduct.27
22 Although Mineralogy's application for orders that it be paid the relevant amounts was made by way of an application for an interlocutory mandatory injunction, rather than an application for the variation of the conditions of the injunctive orders granted to Sino and Korean in 2013 and 2015, his Honour had regard to the effect of the earlier injunctive orders. His Honour considered that an interlocutory mandatory injunction was necessary to 'restore a proper balance' to the contractual rights and obligations reflected in the parties' bargain, that balance having been interfered with by the earlier injunctions granted to the Citic Parties in 2013 and 2015.28
The orders of the primary judge and subsequent developments in the primary proceedings
23 His Honour's reasons were delivered on 13 December 2016. On 14 December 2016, the judge ordered relevantly, that:29
1. Upon the timeous filing and service of the usual sealed written undertaking as to damages by [Mineralogy] concerning the interlocutory injunctions, [Sino] and [Korean] are hereby ordered by 4pm on 30 January 2017 to pay:
(a) into Court the sum of US$10,690,270.50 (or the Australian dollar equivalent on the day that the funds are provided to the Court) to abide further orders of the Court; and
- (b) to [Mineralogy] the sum of US$10,690,270.50.
The appeal
25 The Citic Parties filed an appeal notice on 13 January 2017 and an appellant's case on 23 January 2017. In their grounds of appeal, the Citic Parties contend, in effect, that:
1. The judge erred in law in granting an interlocutory mandatory injunction to compel the payment of a debt which is disputed as to both liability and quantum.
2. The judge, having correctly held that:
(a) the causes of action advanced by Mineralogy were grounded exclusively in common law rights,
(b) therefore the adequacy of damages needed to be assessed before equity would intervene to assist, and
(c) damages would plainly be a sufficient and adequate remedy where Mineralogy's claimed final relief is for loss of bargain damages,
should also have held, and erred in not doing so, that payment of a pecuniary sum by way of final relief would likewise be an adequate remedy for Mineralogy's accrued debt claims and therefore there was no basis for equity to intervene on an interlocutory basis.
3. The judge erred in failing to have any, or any sufficient, regard to the inadequacy of Mineralogy's undertaking as to damages in that:
(a) the judge correctly found that Mineralogy's financial position was 'precarious' and under a 'cloud', and that there was a strong likelihood that substantial sums would never be recovered were they required to be repaid following trial; and
(b) his Honour should have held that Mineralogy's undertaking required security in order for it to be effective.
4. The judge erred in law in ordering payment into court of a debt which is disputed as to both liability and quantum in circumstances where his Honour ought to have found that there was no reason to believe that, if Mineralogy is successful at trial, the Citic Parties would not be able to pay all amounts ordered to be paid to Mineralogy in respect of Royalty B.
5. In addressing the balance of convenience, the judge erred in:
(a) holding that 'restoring balance' as between the parties to the Mining Agreements was a relevant consideration, and/or in the weight which his Honour gave to that consideration; and/or
(b) failing to have any, or any sufficient, regard to the contractual allocation of the risk of non-payment of the disputed debt which the parties to the Mining Agreements had adopted.
26 The Citic Parties' application for a stay was filed on 18 January 2017. The Citic Parties sought a stay of order 1(b) in relation to payment of (approximately) $US10.7 million to Mineralogy. There is no stay application in respect of order 1(a) requiring payment into court of the sum of (approximately) $US10.7 million.33
27 The evidence in the stay application indicated that a Mr Clive Frederick Palmer is the ultimate shareholder of Mineralogy and that Mineralogy is the ultimate holding company of Waratah Coal Pty Ltd (Waratah) and Fairway Coal Pty Ltd (Fairway).34 These companies, together with Queensland Nickel Pty Ltd (Queensland Nickel), Queensland Nickel Sales Pty Ltd and QNI Metals Pty Ltd, which are also ultimately owned by Mr Palmer,35 are referred to herein as the Palmer Group Companies. Queensland Nickel is in liquidation.
28 Mr Palmer, on behalf of Mineralogy, in an affidavit dated 23 January 2017, deposed36 that 'Mineralogy unequivocally has withdrawn any claim that the [Mining Agreements] have been terminated, and confirms Mineralogy is ready, willing and able to perform its future and ongoing obligations under the [Mining Agreements] …'
29 The Citic Parties contended, in effect, that:37
(a) Mineralogy would be unable to repay the money without difficulty or delay unless a stay were granted and that, in substance, the appeal would be rendered nugatory without a stay;
(b) they have reasonable prospects of success in the appeal; and
(c) the balance of convenience favours them in that:38
(i) Mineralogy has no legitimate need to receive payment immediately in circumstances where it does not conduct any operational business;
(ii) all project outgoings are met by the Citic Parties;
(iii) there are few, if any, obligations resting on Mineralogy under the Mining Agreements once production has commenced;
(iv) the judge found that the funding needs of Mineralogy's subsidiaries appeared 'to raise matters of convenience' to Mineralogy rather than matters of formal obligation to its subsidiaries;
(v) in any event, Mineralogy is receiving Royalty A payments which, to date, have exceeded $18 million; and
(vi) Mineralogy's interests can be adequately protected by the allocation of an early hearing date of the appeal.
(a) there are no special circumstances justifying departure from the ordinary rule that a successful party should not be denied the benefit of a judgment regularly obtained after a hearing;
(b) the Citic Parties have failed to establish any prejudice in making the payments;
(c) the appeal has poor prospects of success; and
(d) no difficulty or delay in repayment (if that should prove necessary) has been established in that the Citic Parties have the benefit of Mineralogy's undertaking as to damages, and there are offsetting payments that the Citic Parties are due to make to Mineralogy which provide a further means by which they could be compensated for the sums paid under the primary judge's orders.
31 In relation to the question of risk of non-payment, Mineralogy referred to certain evidence of Mr Palmer. It said that Mineralogy had offered (if it proved necessary) to repay the relevant amount not only by allowing offsets with respect to Royalty A payments, but also by allowing an offsetting sum of $US64.44 million which was payable in respect of an option under another agreement described as the China Project Option Agreement (Option Money). Mineralogy also said that the Citic Parties were effectively protected by the judge's orders that, in effect, half the moneys be paid into court and half be paid to Mineralogy.40
32 Mineralogy submitted that it and its related entities have suffered, and absent the injunction would continue to suffer, substantial prejudice in respect of Mineralogy's contractual rights under the Mining Agreements. It also observed that Sino and Korean would continue to exploit their rights to mine, process and export materials under the Mining Agreements, notwithstanding their failure to make the Royalty B payments. Mineralogy also emphasised that the judge found that it has a strong prima facie case, and that it was undeniable that some significant amount of money on account of the Royalty B payments would be paid to Mineralogy under the Citic Parties 'fall-back scenarios'.41
Disposition
33 There was no dispute about the relevant principles in relation to the grant of a stay.42 In general terms, a stay pending an appeal may be granted if the appellant appears to have reasonable prospects of success on the appeal and there is a real risk that, if a stay is not granted and the judgment sum is paid, the appellant will be unable to recover the money if the appeal is allowed.43
34 In relation to whether the appeal would be rendered nugatory if a stay were not granted, we were satisfied that there was a real risk that if a stay were not granted, and the money were paid, the Citic Parties would be unable to recover the money in the event of a successful appeal. That was so for essentially two reasons. First, the judge found, in effect, that there was a legitimate concern that there was a 'strong likelihood' that if the moneys were paid to Mineralogy, they would not be recovered if the Citic Parties succeeded at trial. Secondly, that conclusion is confirmed by evidence in this application to the effect that:
(a) Mineralogy has been informed by financial institutions that the company's assets, in the form of mineral deposits, could not be borrowed against.44
(b) the Palmer Group Companies,including Fairway, Waratah and Queensland Nickel, do not rely upon external funding from banks or financial institutions, and funding requirements within the group have historically been met by intercompany loans and transfers;45
(c) although Mineralogy, for the year ended 30 June 2015, had net assets of approximately $89.3 million, the majority of its assets comprised interests in subsidiary entities, and its cash, debtors and publicly traded shares totalled approximately $1.943 million;46
(d) each of Waratah and Fairway (ultimate subsidiaries of Mineralogy) is unable to fund itself, or at least fund itself sufficiently, from its own revenue without financial support from Mineralogy;47
(e) Mineralogy had incurred a loss in the sum of approximately $12.76 million for the year ended 30 June 2015 and a $5 million loss for the year ended 30 June 2016.48
35 The conclusion that there was a real risk that, if the stay were not granted, and the money were paid, the Citic Parties would be unable to recover the money following a successful appeal was confirmed by, but not dependent upon, the fact that Mineralogy had not undertaken not to dispose of or divest any money paid to it pending the determination of the appeal.49 To the contrary, it appeared that there was a strong likelihood that any money received by Mineralogy prior to the determination of the appeal would be transferred elsewhere within the Palmer Group Companies and expended.50
36 Having considered the appellant's case filed by the Citic Parties, we were also satisfied that, for present purposes and by way of a necessarily preliminary view of the matter, the Citic Parties have reasonable prospects of success, as that term is understood in this context. In reaching that view, we were mindful of the judge's finding that Mineralogy had a very strong case.
37 In relation to the particular submissions advanced by Mineralogy in opposition to the stay, the following observations may be made. For the reasons above, we were satisfied that there were special circumstances justifying departure from the ordinary rule that a successful party should not be denied the benefit for a judgment regularly obtained after a hearing. The prejudice to the Citic Parties in making the payments is that there is a real risk that they will not be repaid if they are successful in the appeal, in circumstances where it appears, on a necessarily preliminary view of the matter, that the appeal has reasonable prospects of success. We did not accept that Mineralogy's undertaking is, in itself or in combination with the proposed set-offs, sufficient to warrant the declining of a stay. The undertaking would ordinarily apply to any loss or damage suffered by the Citic Parties in consequence of the grant of the mandatory injunction. The Citic Parties' right to repayment of the sum of $US10.7 million itself would be likely the subject of express restorative orders in the event of a successful appeal. As it appears that Mineralogy provides funding for other companies' activities in the Palmer Group Companies, there appears to be a risk that there might be other third party demands (secured or otherwise) on Mineralogy's present and future assets which would preclude any effective set-off by the time any restorative orders made by this court came to be enforced in the event that the appeal were allowed. Also, Mineralogy's estimate is that it would take up to 12 months to satisfy out of Royalty A payments any required repayment.51 Further, in relation to the Option Money as a potential source of payment, Mineralogy's position in other proceedings appears to be that the money is not payable.52
38 Also, even though the judge sought to ameliorate the risk to the Citic Parties by only requiring them to pay half the relevant amount to Mineralogy (with the other half to be paid into court), it remains the case that if the Citic Parties succeeded in the appeal and were unable to recover the sum of approximately $US10.7 million, that would constitute real prejudice to the Citic Parties.
39 In relation to the prejudice said to be suffered by Mineralogy (and consequently its subsidiaries) by an interference with Mineralogy's rights under the Mining Agreements, it is to be noted that the judge, in effect, required Mineralogy to abandon its claims for termination of the Mining Agreements as the 'price' for the injunction. Indeed, his Honour was inclined to the view that the non-payment of the Royalty B payments was not repudiatory conduct by Sino and Korean. Mineralogy, for its part, has amended its pleading to withdraw such claims and Mr Palmer has deposed that the claims have been 'unequivocally' withdrawn. The Citic Parties contend that the result is that any interference with the balance of the contractual rights and obligations allegedly caused by the earlier injunctions obtained by Sino and Korean, has no substantive continuing effect. The question of whether there is any relevant imbalance, or continuing imbalance, of the parties' contractual rights will likely be an important issue at the hearing of the appeal. For present purposes, as we have said, we accept, on a necessarily preliminary view of the matter, that the Citic Parties' case on appeal (which is concerned only with the payment to Mineralogy and not the payment into court) has reasonable prospects of success, as that term is used in this context. The limited effect of the stay, discussed below, is also a relevant consideration here.
40 Finally, although the judge found that the non-payment of Royalty B money was a 'strong contributing factor' to Mineralogy's 'current fiscal problems',53 he also evidently accepted that Mineralogy made its 'own contributions to its own problems'.54 Moreover, any weight that might otherwise be attached to this consideration, and to the alleged interference with the balance of the parties' contractual rights, is significantly reduced by the limited period of the stay. The appeal itself will be heard on 8 March 2017 (approximately six weeks from the hearing of this application) and a stay has been ordered to 4.00 pm on 9 March 2017, with a view to the question of a stay being reviewed at the conclusion of the hearing of the appeal. A further six weeks' delay in payment (unless the stay is extended in the circumstances as they appear at the end of the hearing of the appeal), in the context of the lengthy history of this litigation between these parties, is, objectively, of little or no real weight in an assessment of what is just in all the circumstances of this particular stay application.
41 For these reasons, we ordered a stay of the primary judge's interlocutory order for payment to Mineralogy until 4.00 pm on 9 March 2017.
1Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 13] [2016] WASC 403.
2 The relevant background is taken from Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105, referred to by the primary judge at [7] of the primary decision.
3Mineralogy Pty Ltd v Sino Iron Pty Ltd [2013] WASC 194.
4Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105 [31].
5Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375 (Mineralogy No 2).
6Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 6] [2015] WASC 80 (Mineralogy No 6).
7 Mineralogy No 6 [50].
8 Mineralogy No 6 [52], [55] - [60].
9Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 8] [2015] WASC 473 [33], [35].
10Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 8] [2015] WASC 473.
11Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105.
12 Primary decision [66] - [73].
13 Primary decision [113] - [114].
14 Primary decision [177] - [178].
15 Primary decision [183.19].
16 Primary decision [194] - [198].
17 Primary decision [203], [206].
18 Primary decision [203].
19 Primary decision [215].
20 Primary decision [204] - [206].
21 Primary decision [223] - [225].
22 Primary decision [208].
23 Primary decision [213].
24 Primary decision [214].
25 Primary decision [216].
26 Primary decision [209].
27 Primary decision [217].
28 Primary decision [166], [219].
29 Affidavit of Ian Peter Scott O'Donahoo, sworn 17 January 2017 (O'Donahoo), Annexure 'POD-1', 15.
30 O'Donahoo, Annexure 'POD-3', 20. Reference to '2016' appears to be an error.
31 Affidavit of Kane Christopher Jones, sworn 25 January 2017 (Jones), Annexure 'KCJ-02', 12.
32 Jones, Annexure 'KCJ-03'.
33 As to payment into court, cf Lewis v James (1886) 32 Ch D 326.
34 Affidavit of Clive Theodore Mensink, sworn 29 March 2016, pars 3 and 21; fifth affidavit of Daren Bruce Wolfe (Wolfe 2016), sworn 5 August 2016, pars 3 and 5.
35 O'Donahoo, par 17; Wolfe, pars 3 and 5.
36 Affidavit of Clive Frederick Palmer, sworn 23 January 2017, par 23.
37 Appellants' written submissions dated 18 January 2017, pars 9 - 15.
38 Appellant's written submissions dated 18 January 2017, pars 16 - 18.
39 Mineralogy's written submissions dated 24 January 2017, pars 2 - 5.
40 Mineralogy's written submissions dated 24 January 2017, pars 15, 17 - 19.
41 Mineralogy's written submissions dated 24 January 2017, pars 22, 25, 27. Primary decision [146], [203].
42 See, for example, Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308 [9]; Frigger v Professional Services of Australia Pty Ltd [2015] WASCA 3 [33].
43Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [2008] WASCA 222 [22]; Nigam Trading as SC Nigam & Co v Harm [2009] WASCA 209 [8].
44 O'Donahoo, par 47.
45 O'Donahoo, par 19.
46 O'Donahoo, Annexure 'POD-05', 22, read with Annexure 'POD-04', 20, and affidavit of Daren Bruce Wolfe (Wolfe 2015) sworn 17 November 2015, pars 27 and 37.
47 O'Donahoo, pars 26 and 27.
48 O'Donahoo, par 14, read with Annexure 'POD-05', 24, 27, Annexure 'POD-04', 20, and Wolfe 2015, pars 27 and 37.
49 O'Donahoo, pars 28 - 29.
50 O'Donahoo, pars 20 - 25.
51 Mineralogy's written submissions dated 24 January 2017, par 19.
52 O'Donahoo, par 46, Annexure 'POD-18', 352.
53 Primary decision [216].
54 Primary decision [216].
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