Sino Iron Pty Ltd v Mineralogy Pty Ltd

Case •

[2015] WASC 429

•

10 NOVEMBER 2015

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   SINO IRON PTY LTD -v- MINERALOGY PTY LTD [2015] WASC 429

CORAM:   CHANEY J

HEARD:   30 JULY 2015

DELIVERED          :   10 NOVEMBER 2015

FILE NO/S:   CIV 1431 of 2015

BETWEEN:   SINO IRON PTY LTD

First Plaintiff

KOREAN STEEL PTY LTD
Second Plaintiff

SINO IRON HOLDINGS PTY LTD
Third Plaintiff

BALMORAL IRON HOLDINGS PTY LTD
Fourth Plaintiff

AND

MINERALOGY PTY LTD
First Defendant

CLIVE FREDERICK PALMER
Second Defendant

Catchwords:

Practice and procedure - Pleadings - Strike out - Whether arguable causes of action - Restitution - Unjust enrichment

Legislation:

Foreign Acquisitions and Takeovers Act 1975 (Cth)
Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act 2002 (WA), Sch 1
Rules of the Supreme Court 1971 (WA), O 20 r 19

Result:

Statement of claim partially struck out

Category:    B

Representation:

Counsel:

First Plaintiff                  :     Mr C M Scerri QC & Mr S H Parmenter

Second Plaintiff             :     Mr C M Scerri QC & Mr S H Parmenter

Third Plaintiff                :     Mr C M Scerri QC & Mr S H Parmenter

Fourth Plaintiff              :     Mr C M Scerri QC & Mr S H Parmenter

First Defendant              :     Mr S Couper QC & Mr J V Gooley

Second Defendant         :     Mr S Couper QC & Mr J V Gooley

Solicitors:

First Plaintiff                  :     Allens

Second Plaintiff             :     Allens

Third Plaintiff                :     Allens

Fourth Plaintiff              :     Allens

First Defendant              :     Kilmurray Legal

Second Defendant         :     Kilmurray Legal

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

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14; (2014) 307 ALR 512

Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344

Dalgety Australia Ltd v Rubin (Unreported, WASC, Library No 5485, 24 August 1984)

Day v William Hill (Park Lane Ltd) (1949) 1 KB 632; (1949) 1 All ER 219

Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Hyundai Heavy Industries v Papadopolous [1980] 2 All ER 29; 1 WLR 1129

Kimberley Downs Pty Ltd v State of Western Australia (Unreported, WASC, Library No 6414, 25 August 1986)

Mickelberg v 6PR Southern Cross Radio Pty Ltd [2002] WASCA 270

Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583

Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516

Stocznia Gdanska SA v Latvian Shipping [1998] 1 All ER 883

Wardley Australia Ltd v The State of Western Australia [1992] HCA 55; (1992) 175 CLR 514

  1. CHANEY J:  The first plaintiff, being Sino Iron Pty Ltd (Sino), the second plaintiff, being Korean Steel Pty Ltd (Korean), and the first defendant, being Mineralogy Pty Ltd (Mineralogy), are parties to other proceedings in this court, being action number CIV 1808 of 2013 (Proceeding 1808).  Proceeding 1808 involves a plethora of claims and counterclaims.

  2. An important issue in Proceeding 1808 is the question of the proper construction of cl 8.2 of two agreements, in materially identical terms, between Mineralogy and Sino and Korean respectively.  These agreements are entitled Mining Right and Site Lease Agreements (the 2006 MRSLAs).  Clause 8.2 deals with the payment of royalties by Sino and Korean to Minerology in relation to mining operations referred to in the 2006 MRSLAs.  An issue in Proceeding 1808 is whether or not a component of the royalties payable under cl 8.2, which is referred to as Royalty Component B, is capable of calculation.

  3. The parties' respective positions in relation to the proper construction of cl 8.2 have fluctuated during the course of the conduct of Proceeding 1808.  By reason of the most recent amendments to the defence in Proceeding 1808, Sino and Korean have pleaded, in the alternative to their primary contentions as to the proper construction of cl 8.2, that, if those primary contentions are not successful, the 2006 MRSLAs have been terminated by reason of frustration.

  4. A further issue in Proceeding 1808 is Mineralogy's contention that it has validly terminated the 2006 MRSLAs by reason of certain specified breaches by Sino and Korean.  Sino and Korean deny the breaches and Mineralogy's entitlement to rely upon the notices purporting to terminate the 2006 MRSLAs.  In the alternative, they seek relief against forfeiture.

  5. The claims in these proceedings are contingent upon the outcome of Proceeding 1808.  In these proceedings, the plaintiffs seek restitution for their very significant outlays in relation to the mining project, which forms the subject matter of the 2006 MRSLAs, and many agreements related to that project.  In essence, restitution is sought in the event that the 2006 MRSLAs are found to be frustrated, or alternatively in the event that they are found to have been validly terminated by Mineralogy and the court declines to grant relief against forfeiture.

  6. Mineralogy contends that the basis upon which restitution is sought in these proceedings is simply unarguable, and applies to strike out the statement of claim pursuant to O 20 r 19 of the Rules of the Supreme Court 1971 (WA).

The statement of claim

  1. As a result of conferral which has taken place since the application to strike out the statement of claim was first lodged, the statement of claim was amended on 24 July 2015, and then further amended on 31 July 2015, in the terms of a document attached to the plaintiffs' submissions of 29 July 2015, (the SOC).

  2. Paragraph 6A of the SOC pleads that Mineralogy is the registered holder of certain mining tenements in the vicinity of Cape Preston.  Paragraphs 6B to 6S and 10A plead a series of agreements between various parties.

  3. Paragraph 6B pleads two subleases dated around 25 October 2001 between Mineralogy and each of Sino and Korean.  Paragraphs 6C and 6D plead an agreement to vary the earlier subleases and restate their terms by entering into Mining Right and Site Lease Agreements between Mineralogy on the one hand and each of Sino and Korean on the other (2005 MSLRAs).

  4. Paragraph 6E pleads that on or about 26 October 2001, Mineralogy and each of Sino and Korean entered into facility deeds pursuant to which Sino and Korean were granted certain rights to construct facilities on land held by Mineralogy within the Preston area.  Paragraph 6F pleads that the facility deeds were varied on 21 March 2006.

  5. Paragraph 6G pleads entry on or about 26 October 2001 by Mineralogy, Sino, Korean and others into the agreement known as the Fortescue Projects Consolidation Agreement.

  6. Paragraph 6H pleads an amendment to the Fortescue Projects Consolidation Agreement on or about 7 February 2003.

  7. Paragraph 6I pleads the State Agreement which comprises sch 1 of the Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act 2002 (WA) entered into between the State of Western Australia, Mineralogy, Sino, Korean and others.

  8. Paragraph 6J pleads an amendment to the State Agreement on or about 14 November 2008.

  9. Paragraph 6K pleads that since about May 2008, Sino, Korean and Mineralogy have had various project proposals approved by the State under the State Agreement and particularises those proposals.

  10. Paragraph 6L pleads that on or about 12 March 2005, Mineralogy, Sino and others entered into a joint development agreement (2005 Joint Development Agreement) which set out the terms and conditions on which the mining right holders, including Sino Iron, may exercise their respective mining rights.

  11. Paragraph 6M pleads that on or about 31 March 2006, Mineralogy, the third plaintiff (Sino Iron Holdings) and CITIC Ltd (then called CITIC Pacific Ltd) (CITIC) entered into a takeover agreement (Sino Iron Takeover Agreement) pursuant to which Sino Iron Holdings agreed to acquire from Mineralogy all of the issued shares in the capital of Sino Iron for a total consideration of approximately US$215 million.

  12. Paragraph 6N pleads that pursuant to the Sino Iron Takeover Agreement, Sino Iron Holdings paid to Mineralogy the sum of $215 million and acquired all of the issued shares in the capital of Sino.

  13. Paragraph 6O pleads that on or about 1 November 2007, Mineralogy, the second defendant (Palmer) and certain other entities related to Palmer which together were the owners of the shares of Korean, the fourth defendant (Balmoral Iron Holdings), Korean, CITIC and Sino entered into a takeover agreement (the Korean Steel Takeover Agreement) pursuant to which Balmoral Iron Holdings agreed to acquire from the owners of Korean shares all of the issued shares in the capital of Korean for a total consideration of approximately US$200 million.

  14. Paragraph 6P pleads that the consideration of US$200 million was paid pursuant to the Korean Steel Takeover Agreement and Balmoral Iron Holdings acquired all of the issued shares of Korean.

  15. Paragraph 6Q pleads that, on or about 22 October 2008, Mineralogy, Sino, Korean and CITIC entered into an agreement referred to as the Fortescue Coordination Deed, which applied in place of the 2005 Joint Development Agreement to regulate the manner in which the mining right holders would carry out and coordinate their respective project activities.

  16. Paragraph 6R pleads that on or about 22 October 2008, Mineralogy, Palmer and CITIC entered into an agreement referred to as the China Project Agreement which grants CITIC options to acquire further allocations of resources or companies who have such allocations of resources subject to the Project Agreements as defined in the China Project Agreement (CPOA).

  17. Paragraph 6S pleads that in or about 2008, Mineralogy, Sino and the China Development Bank entered into an agreement known as the Direct Agreement.

  18. Paragraphs 7 and 8 plead that on or about 21 March 2006, Mineralogy and each of Sino and Korean entered into the 2006 MRSLAs pursuant to which:

    (a)the parties agreed to vary and restate the terms of the respective 2005 MRSLAs;

    (b)Mineralogy agreed to grant to Sino and Korean in each case a right to mine magnetite ore from a designated mine area within the mining leases up to a total extraction limit of 1 billion tonnes of magnetite ore; and

    (c)Mineralogy agreed to grant each of Sino and Korean a lease over a designated site lease area within the mining tenements for the construction and operation of Sino's and Korean's respective processing facilities.

  19. Paragraph 10A of the SOC pleads that on or about 22 October 2008, Mineralogy, Sino and Korean entered into a further agreement concerning, amongst other things, the site lease area for the 2006 MRSLAs.

  20. The various agreements referred to above are referred to in the SOC as the 'Suite of Agreements'.

  21. Critical to the cause of action propounded by the plaintiffs is a pleading in [10B] of the SOC which is in the following terms:

    On the proper construction of the 2006 MRSLAs in the context of, and/or together with, the suite of agreements referred to in paragraphs 6B to 6M, 6O, 6Q to 6S and 10A above (collectively, the Suite of Agreements), the consideration for and/or the basis or purpose of the 2006 MRSLAs and the Suite of Agreements was to entitle and enable each of Sino Iron and Korean Steel to mine 1 billion tonnes of Magnetite Ore over the Term of the 2006 MRSLAs and process that Magnetite Ore into Products for sale or export.

  22. Paragraphs 10B to 13 deal with the claims by Sino and Korean for restitution in the event that the court holds in Proceeding 1808 that performance by the parties of their obligation under the 2006 MRSLAs has been frustrated.

  23. Paragraph 11 of the SOC pleads that Mineralogy has been enriched by the receipt of benefits provided at the expense of Sino and Korean in accordance with the terms of the 2006 MRSLA and in accordance with the Suite of Agreements. The benefits are particularised in sch 1 to the SOC (Benefits) and essentially comprise all payments made by, or on behalf of, Sino and Korean under the various agreements comprising the Suite of Agreements. Those payments include such things as the payment of royalties to Mineralogy and to the State for ore mined by Korean and Sino pursuant to the agreements, payments of an 'occupation fee' in relation to the years in which Sino Iron and Korean Steel have been in occupation of the mining site, payments in relation to a 'port occupation fee', payments of rents, rates and taxes and other governmental charges and under the State Agreement, payment of State government royalties for ore taken from the mine area and various other monies paid pursuant to the various agreements. In addition sch 1 pleads as a benefit enjoyed by Mineralogy:

    All rights of ownership, possession, use, access or control and other rights whatsoever, if any, that Mineralogy has found by this honourable court or any other court of competent jurisdiction to have upon the frustration or termination of the MRSLAs in, over or in respect of all items of infrastructure … constructed or developed by or on behalf of Sino Iron and Korean Steel for the purposes of the Sino Iron Project.

  24. Paragraph 11A pleads that as at about early 2010, Sino and Korean had mined 'only about 1,014,750 tonnes of magnetite ore from the mine area, and had not processed any magnetite ore into products for sale or export.

  25. Paragraph 11B pleads that at about the time when royalty component B under the 2006 MRSLA would have first been payable if it could be calculated, Sino and Korean had mined only about 4,778,158 tonnes of magnetite ore and had processed magnetite ore into only about 509,886 tonnes of product for sale or export.

  26. Paragraph 12 pleads that by reason of the matters pleaded in paragraphs 10B, 11A and 11B, Sino and Korean 'have not received any material part of the consideration to which they were entitled under the 2006 MRSLAs and the Suite of Agreements, and/or the basis or purpose of the 2006 MRSLAs and the Suite of Agreements has not been fulfilled'.  Alternatively, it is pleaded that, by reason of Sino and Korean not having received any material part of the consideration, or by reason of the consideration being severable, there has been a failure of consideration.

  27. It is alternatively pleaded that the benefits provided to Mineralogy were provided as a result of a mistake by Sino Iron and Korean Steel, that mistake being the belief that, regardless of whether Royalty Component B was capable of calculation under cl 8.2 of the 2006 MRSLAs, the 2006 MRSLAs would remain on foot.

  28. Paragraph 13 pleads that by reason of the matters pleaded in [10B] to [12], if the court holds in Proceeding 1808 that the 2006 MRSLAs have been terminated by reason of frustration, then Mineralogy will have been unjustly enriched at the expense of Sino Iron and Korean Steel and is required to make restitution.  The amount of restitution is particularised as being 'equal to the value of the Benefits less the value of the consideration received by Sino Iron and Korean Steel'.

Claims by Sino Iron Holdings and Balmoral Iron Holdings

  1. These claims are set out in [14] to [17] of the SOC.

  2. Paragraph 14 of the SOC pleads that on a proper construction of the Sino Iron Takeover Agreement and the Korean Steel Takeover Agreement (together the Takeover Agreements) in the context of or as part of the Suite of Agreements, the consideration for, or the basis or purpose of, the Takeover Agreements was to entitle and enable each of Sino Iron Holdings and Balmoral Iron Holdings to acquire all of the shares in a company, namely Sino and Korean respectively, which would be entitled and enabled under the 2006 MRSLAs to mine 1 billion tonnes of magnetite ore over the term of the 2006 MRSLAs and process that magnetite ore into products for sale or export.

  3. Paragraph 15 pleads that Mineralogy and Palmer have been enriched by receipt of the amounts paid to them for the transfer of the shares in those companies.

  4. Paragraph 16 pleads that if, contrary to the case of Sino and Korean in Proceeding 1808, the court holds that the 2006 MRSLAs have been frustrated as at the time that royalty component B would first have been payable if it could be calculated, or alternatively in or about 2010, then Sino Iron Holdings and Balmoral Iron Holdings had not received any material part of the consideration to which they were entitled under the Takeover Agreements, or the basis or purpose of the Takeover Agreements had not been fulfilled, or alternatively the consideration is severable, and for those reasons there has been a failure of consideration in relation to the payments made for the shares.  Those matters are said to entitle Sino Iron Holdings and Balmoral Iron Holdings to restitution for the amounts paid for the shares, Mineralogy and Palmer having been unjustly enriched by those payments.

The claims for restitution if the court in Proceeding 1808 declines relief against forfeiture

  1. This claim is an alternative claim to that pleaded in [10B] to [13] of the SOC.  The claim is contingent upon the eventuality that the court holds in Proceeding 1808 that any of the termination notices relied upon by Mineralogy was valid and effectively terminated the 2006 MRSLAs, and that Sino and Korean are not entitled to relief against forfeiture (SOC [18]).  Paragraph 19 pleads that as at November 2014 (presumably being the date upon which the termination notices would have been effective), Sino and Korean had mined only 11,227,737 tonnes of magnetite ore and processed about 2,340,775 tonnes of products for sale or export.  Paragraph 20 pleads that in those circumstances Sino and Korean would not have received any material part of the consideration to which they were entitled under the 2006 MRSLAs, and/or the basis and purpose of the 2006 MRSLAs and the Suite of Agreements had not been fulfilled.  It is alternatively pleaded that the consideration was severable.  By reason of those matters, it is pleaded that there has been a failure of consideration, or alternatively the benefits provided to Mineralogy after October 2014 were provided as a result of a mistake by Sino and Korean, namely a mistaken belief that the termination notices were not valid.  Paragraph 21 pleads that by reason of those matters, Mineralogy has been unjustly enriched at the expense of Sino and Korean and is required to make restitution.

  2. Paragraph 22 of the SOC pleads that, by reason of the fact that only the amounts of ore pleaded in [19] had been extracted, if the events pleaded in [18] occur, there will have been a failure of consideration in respect to the payments made by Sino Iron Holdings and Balmoral Iron Holdings for the shares in Sino and Korean respectively (SOC [22]).  In those events, it is pleaded that Mineralogy and Palmer would have been unjustly enriched and are liable to make restitution to Sino Iron Holdings and Balmoral Iron Holdings for the amounts paid for the shares.

  3. Thus the claim of Sino and Korean can be summarised as being for restitution by reason of:

    (a)failure of consideration:  SOC [10B], [11A], and [11B];

    (i)because Sino and Korean have not received any material part of the consideration for the 2006 MRSLAs (namely the entitlement to mine 1 billion tonnes of ore):  SOC [12(aa)]; or

    (ii)the basis and purpose of the 2006 MRSLAs has not been fulfilled:  SOC [12(aa)]; or

    (iii)the consideration actually received (SOC [11A] and [11B]) is severable:  SOC [12(ab)];

    (b)payment of Benefits to Mineralogy as a result of mistake by Sino and Korean, namely a mistaken belief that Royalty Component B was capable of calculation:  SOC [12(b)]; or

    (c)failure of consideration for the 2006 MRSLAs in the event that Mineralogy has successfully terminated the 2006 MRSLAs for breach and the court declines to grant relief against forfeiture:  SOC [11], [18] ‑ [20] and [21]:

    (i)because Sino and Korean have not received any material part of the consideration to which they were entitled under the Takeover Agreements or the basis of the Takeover Agreements has not been fulfilled:  SOC [20(a)], [22(a)]; or

    (ii)the consideration actually received was severable:  SOC [20(b)], [22(b)]; and

    (iii)there has been a failure of consideration in respect to the Benefits provided to Mineralogy:  SOC [20(c)], [22(c)]; or

    (d)the payment of Benefits paid after the termination notices to Mineralogy occurred as a result of a mistaken belief that the termination notices served by Mineralogy were not valid.

  1. The claims of Sino Iron Holdings and Balmoral Iron Holdings are for restitution for unjust enrichment of Mineralogy and Palmer by reason of a failure of consideration in relation to the transfer of shares in Sino Iron and Korean Steel.

The defendants' contentions

  1. The defendants apply to strike out the statement of claim pursuant to O 20 r 19(1) of the Supreme Court Rules which provides:

    (1)The Court may at any stage of the proceedings, subject to subrule (3), order to be struck out or amended any pleading, or the indorsement of any writ in the action, or anything in any pleading or in the indorsement on the ground that ‑

    (a)it discloses no reasonable cause of action or defence, as the case may be; or

    (b)it is scandalous, frivolous or vexatious; or

    (c)it may prejudice, embarrass or delay the fair trial of the action; or

    (d)it is otherwise an abuse of the process of the Court,

    and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be.

  2. Order 20 r 19(2) specifies that no evidence is admissible on an application under r 19(1)(a). It is, however, open to the court to refer to documents mentioned in a pleading ‑ see Day v William Hill (Park Lane Ltd) (1949) 1 KB 632; (1949) 1 All ER 219, 221. To that end, the defendants tendered at the hearing copies of the documents referred to in the SOC comprising the Suite of Agreements.

  3. Although the defendants did not identify which particular subparagraph of O 20 r 19 they relied upon, I take their submissions to be directed to O 20 r 19(1)(a).

  4. The proposition advanced by the defendants is that however the facts might be found there is no basis for the legal conclusion contended for by the plaintiffs:  see Dalgety Australia Ltd v Rubin (Unreported, WASC, Library No 5485, 24 August 1984) and Kimberley Downs Pty Ltd v State of Western Australia (Unreported, WASC, Library No 6414, 25 August 1986) (Staples M), or it is plain and obvious that the plaintiffs' claim cannot succeed, General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, 130.

The principles applicable to summary judgment applications

  1. The principles to be applied on an application to strike out a pleading are well established.  They were conveniently summarised by Steytler J in Mickelberg v 6PR Southern Cross Radio Pty Ltd [2002] WASCA 270 [29] where his Honour said:

    Generally speaking, a statement of claim should not be struck out unless the propositions advanced are really not arguable (see Packhard v Transport Trading & Agency Co Ltd (1912) 14 WALR 191 at 195) and great care must be exercised to ensure that the plaintiff is not improperly deprived of her opportunity for the trial of her case by the appointed tribunal (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130), although argument, even extensive argument, may be necessary to demonstrate that the plaintiff's case is so clearly untenable that it cannot succeed (General Steel Industries, above, ibid).  On an application to strike out, the facts alleged in the statement of claim should be accepted as true (Niven v Grant (1903) 29 VLR 102 at 106) and, as a general rule, a plaintiff is entitled as of right to have her case heard, to have the facts found and then to argue the question of law as it arises before the trial Judge upon the facts as found. The pleading should only be struck out where it can be seen from the outset that, however the facts might be found, there is no basis for the legal conclusion contended for by the plaintiff (see Dalgety Australia Ltd v Rubin, unreported; FCt SCt of WA; Library No 5485; 24 August 1984).  The Court at first instance should be careful not to risk stifling the development of the law by the summary rejection of a claim which might raise the possibility that, as the law develops, a cause of action will be found to lie (Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365 at 373). See also, generally in respect of the aforegoing, Kimberley Downs Pty Ltd v Western Australia, unreported, SCt of WA (Staples M); Library No 6414; 25 August 1986 and Seaman:  Civil Procedure Western Australia par 20.19.6.

  2. This is a case of the type referred to in General Steel Industries where it is necessary to examine extensive argument to ascertain whether the plaintiffs' claims are arguable.  Reliance is placed by the plaintiff on the great care required before a claim is struck out, and on the requirement for care to avoid a risk of stifling the development of the law.

Sino and Korean's claims for failure of consideration for the 2006 MRSLAs

  1. As noted above, the pleading found at par 10B of the SOC is critical to Sino and Korean's claims. I have set out par 10B above at [27].

  2. The plaintiffs contend that that plea as to the consideration for the 2006 MRSLAs must, applying the principle that the facts alleged in the statement of claim should be accepted as true for the purposes of a strikeout application, be taken as true.  The consideration for, or the basis or purpose of the 2006 MRSLAs and the Suite of Agreements is pleaded as being 'to entitle and enable each of Sino Iron and Korean Steel to mine 1 billion tonnes of magnetite ore over the term of the 2006 MRSLAs and process that magnetite ore into products for sale or export'.  That consideration is said to arise on the proper construction of the 2006 MRSLAs 'in the context of, and/or together with, the Suite of Agreements'.  The proper construction of agreements is a question of law.  The construction contended for by the plaintiffs is said to arise 'in the context of, and/or together with, the Suite of Agreements'.

  3. Putting aside the 2006 MRSLAs, the SOC pleads approximately 18 agreements or amendments to agreements, and an unidentified number of approved State Agreement proposals, all of which are said to comprise the Suite of Agreements.  Those documents date from as early as 2001 up to 2008, and the State Agreement proposals date from 2008 to 2010.  Notwithstanding that a number of those documents post-date the 2006 MRSLAs, they are all said to inform the proper construction of the 2006 MRSLAs.  No particular provision of any of the agreements, other than the 2006 MRSLAs, is identified in the pleading as being material to the proper construction of the 2006 MRSLAs.  As noted above, at the hearing of this application I was provided with copies of the agreements comprising the Suite of Agreements, including the approved State Agreement proposals which were made to the State of Western Australia by Sino and Korean between May 2008 and January 2010.  I was not taken to the provisions of any of those documents, with the exception of the 2006 MRSLAs and the Takeover Agreements, in the course of argument.

  4. The approach of the defendants was to argue that, by reference to the terms of the 2006 MRSLAs taken alone, the construction as to consideration for which the plaintiffs contend, is not open.

  5. Recital C to each MRSLA provides:

    Mineralogy has agreed to grant to Sino (Korean) a right to mine Magnetite Ore from a designated Mine Area within the Mining Leases, up to the Total Extraction Limit.

  6. Recital D provides:

    Sino (Korean) proposes to construct Processing Facilities for processing Magnetite Ore mined from the Mine Area into Iron Ore Concentrates, Pellets and HBI.  Mineralogy has agreed to grant to Sino (Korean) a Site Lease over a designated Site Lease Area within the Mining Leases, for the construction and operation of Sino's (Korean's) Processing Facilities.

  7. Total Extraction Limit is defined as meaning 'the quantity of Magnetite Ore specified in the Schedule' (being 1 billion tonnes).  The definition specifies that the 'Total Extraction Limit is the maximum quantity of Magnetite Ore that Sino (Korean) is entitled to take pursuant to its Mining Right'.

  8. Clause 3.2 of each of the 2006 MRSLAs reads as follows:

    3.2Granting of Mining Right

    Subject to this Agreement, Mineralogy hereby grants to Sino (Korean), in relation to the Mine Area, the following rights (collectively 'Sino's (Korean's) Mining Right'), namely the right:

    (a)To exclusively use and occupy the Mine Area for 24 months from the date hereof subject to the use of any other party to which Sino (Korean) may consent, but only in accordance with the terms of this Agreement and for the purpose of exploring for and mining Magnetite Ore;

    (b)to carry out or participate in, establishing a Mine within the Mine Area for mining Magnetite Ore;

    (c)to carry out or participate in, Mining Operations for mining and extracting Magnetite Ore from the Mine Area;

    (d)to take a quantity of all Magnetite Ore mined from the Mine Area, up to the Annual Extraction Limit in any Operating Year, and up to the Total Extraction Limit over the Term of Sino's (Korean's) Mining Right, for processing through Sino's (Korean's) Processing Facilities into Products which shall never exceed a total of 12 million tonnes a year as provided in this Agreement.

  9. For the Korean MRSLA the words '[i]f discovered and if the decision to mine is made' appear at the beginning of cl 3.2(d).  By cl 3.4 of each MRSLA, Sino's and Korean's Mining Right is to continue in force until they have taken their Total Extraction Limits.

  10. Clause 3.8 of the 2006 MRSLAs provides:

    3.8Total Extract Limit

    Sino's (Korean's) Mining Right does not entitle Sino (Korean) to take any quantity of Magnetite Ore which exceeds the Total Extraction Limit specified in the Schedule which amount may be increased only with the express written consent of Mineralogy from time to time.  Once Sino (Korean) has taken a quantity of Magnetite Ore equal to its Total Extraction Limit, Sino (Korean) will cease to be entitled to take any further Magnetite Ore, and Sino's (Korean's) Mining Right will thereupon terminate.

  11. Paragraph 29.1 of the 2006 MRSLAs contains warranties by Mineralogy, for the benefit of Sino and Korean respectively, that the mining leases are valid and subsisting, and that the mine area contains resources sufficient to enable Sino and Korean respectively to obtain magnetite ore up to the Total Extraction Limit.

  12. Clause 4.2 of each 2006 MRSLA provides:

    4.2Grant of Site Lease

    Mineralogy grants to Sino (Korean subject to Mineralogy's agreement with Sino) a sublease over the Site Lease Area (Site Lease), for the following purposes:

    (a)to construct and commission Sino's (Korean's) Processing Facilities upon the Site Lease Area;

    (b)to process Magnetite Ore taken by Sino (Korean) from the Mine Area through Sino's (Korean's) Processing Facilities for the production of Iron Ore Concentrates, Pellets and HBI in accordance with the terms of this agreement;

    (c)to maintain, repair, replace, extend, modify, utilise and operate Sino's (Korean's) Processing Facilities;

    (d)for the above purposes, to enter upon the Site Lease Area and to exercise within the Site Lease Area all of the rights and interests of Mineralogy as the holder of the Mining Leases.

  13. Clause 6.1 concerns implementation of the project and provides that Sino (Korean) will establish the processing facilities within the site lease area and to exercise its mining right within the mine area.

  14. The defendants' contention is essentially that the provision as to the entitlement to mine up to 1 billion tonnes of ore represents simply an upper bound, and that the 2006 MRSLA cannot be construed as containing any covenant by Mineralogy to enable Sino or Korean to win that quantity of ore from the mining area or to ensure that they do so.  In other words, the defendants contend that it is no part of the consideration provided by Mineralogy that it would bring about the extraction of 1 billion tonnes of ore.

  15. Rather, Mineralogy contends that the consideration moving from it to each of Sino and Korean is the grant of the mining right contained in cl 3.2 set out above, and the grant of a site lease pursuant to cl 4.2, the grant of a right to construct processing facilities on the site lease area and the grant of the right to process ore taken from the mine area.

  16. Mineralogy points to the plaintiffs' pleading in the SOC that refers to the facts that, following the 2006 MRSLAs, Sino and Korean entered into the site lease area, constructed processing facilities, commenced and continued mining operations on the site lease area, mined magnetite ore to the extent, by the fourth quarter of 2013, of 4,778,158 tonnes (11,227,737 tonnes by November 2014), and processed, by the same time, about 509,886 tonnes of products (2,340,775 tonnes by November 2014).  Mineralogy contends that the schedule of payments and expenses said to amount to benefits to Mineralogy, such as payment of royalties to Mineralogy and the State government, payment of rents, taxes and other charges, construction of infrastructure for mining and production purposes, and payment of camp and port occupation fees, demonstrates that the consideration to be provided by Mineralogy under the MRSLAs, and indeed under the Takeover Agreements, is executed.  Mineralogy argues that, in those circumstances, restitution on the basis of total failure of consideration is not an available remedy in the event that the MRSLAs are ultimately terminated by reason of frustration or by reason of Sino or Korean's breaches.

  17. Underlying Mineralogy's contention is the proposition confirmed in Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498 [30] by French CJ, Crennan and Kiefel JJ, that restitution in cases of unjust enrichment must involve enrichment by the defendant by reason of one or more recognised classes of 'qualifying or vitiating' factors such as mistake, duress, illegality or failure of consideration. Mineralogy argues that the vitiating factor pleaded in this case, namely failure of consideration, is not available because of it cannot be said that the failure of consideration, if any, is total. Reliance is placed on the observations of Mason CJ in Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344, 350 ‑ 351 where his Honour said:

    When, however, an innocent party seeks to recover money paid in advance under a contract in expectation of the entire performance by the contract-breaker of its obligations under the contract and the contract-breaker renders an incomplete performance, in general, the innocent party cannot recover unless there has been a total failure of consideration.  If the incomplete performance results in the innocent party receiving and retaining any substantial part of the benefit expected under the contract, there will not be a total failure of consideration.

    In the context of the recovery of money paid on the footing that there has been a total failure of consideration, it is the performance of the defendant's promise, not the promise itself, which is the relevant consideration.  In that context, the receipt and retention by the plaintiff of any part of the bargained-for benefit will preclude recovery, unless the contract otherwise provides or the circumstances give rise to a fresh contract.

    See also McHugh J at 392 ‑ 393.

  18. Reliance is also placed on the decisions of the House of Lords in Hyundai Heavy Industries v Papadopolous [1980] 2 All ER 29; 1 WLR 1129 and Stocznia Gdanska SA v Latvian Shipping [1998] 1 All ER 883 as supporting that view. Those cases concerned contracts for the construction and sale of ships with staged payments at different points in the construction. In Stocznia Gdanska SA Lord Goff said at 896:

    I start from the position that failure of consideration does not depend upon the question whether the promisee has or has not received anything under the contract like, for example, the property in the ships being built under contracts 1 and 2 in the present case.  Indeed, if that were so, in cases in which the promisor undertakes to do work or render services which confer no direct benefit on the promisee, for example where he undertakes to paint the promisee's daughter's house, no consideration would ever be furnished for the promisee's payment.  In truth, the test is not whether the promisee has received a specific benefit, but rather whether the promisor has performed any part of the contractual duties in respect of which the payment is due.  The present case cannot, therefore, be approached by asking the simple question whether the property in the vessel or any part of it has passed to the buyers.  That test would be apposite if the contract in question was a contract for the sale of goods (or indeed a contract for the sale of land) simpliciter, under which the consideration for the price would be the passing of the property in the goods (or land).  However before that test can be regarded as appropriate, the anterior question has to be asked: is the contract in question simply a contract for the sale of a ship? or is it rather a contract under which the design and construction of the vessel formed part of the yard's contractual duties, as well as the duty to transfer the finished object to the buyers?  If it is the latter, the design and construction of the vessel form part of the consideration for which the price is to be paid, and the fact that the contract has been brought to an end before the property in the vessel or any part of it has passed to the buyers does not prevent the yard from asserting that there has been no total failure of consideration in respect of an instalment of the price which has been paid before the contract was terminated, or that an instalment which has then accrued due could not, if paid, be recoverable on that ground.

  19. I note in passing that that passage of his Lordship's decision is preceded by an observation that his Lordship was well aware of the continuing debate amongst scholars and law reformers as to the circumstances in which, and the basis on which, the party in breach of contract can recover a benefit conferred by him on the innocent party under the contract before it was terminated by reason of his breach.  He dealt with the case before him, however, on the premise, common to both parties, that the issue is one of total failure of consideration.

  20. Given that the plaintiffs in this case went into possession under the site lease and have carried out, and had the benefit of, mining operations and production pursuant to the 2006 MRSLA, the force of the defendants' contentions is readily apparent.

  21. The plaintiffs contend that Mineralogy's characterisation of their claim fails to recognise the way in which the plaintiffs put their claim.  Rather, they contend that the failure of consideration arises in that Sino and Korean have not received 'any part, alternatively any material part, of the benefits to which they are entitled under the 2006 MRSLAs and the related agreements, and/or the basis or purpose of the 2006 MRSLAs and the related agreements has not been fulfilled':  SOC [12(a)].

  22. The plaintiffs rely on the judgments in Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516 concerning failure of consideration. In that case, Gleeson CJ, Gaudron and Hayne JJ said at [16] that failure of consideration is not limited to non‑performance of a contractual obligation. They referred to the authorities referred to by Deane J in Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583, 619 ‑ 620 as showing that the concept of failure of consideration embraces payment for a purpose which has failed as, for example, where a condition has not been fulfilled or a contemplated state of affairs has disappeared. They referred to the example given by Deane J in Muschinski v Dodds of

    a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it.

  1. In Roxborough, Gummow J described 'failure of consideration', in the circumstances of that case, as identifying the 'failure to sustain itself of the state of affairs contemplated as a basis for the payments the appellants seek to recover', and noted that no question of repudiation by the appellants of any contractual obligation arose [104].

  2. Mineralogy also relies on the indorsement by French CJ, Crennan and Kiefel JJ in Equuscorp Pty Ltd v Haxton [31] of the description of failure of consideration by the late Professor Birks where he said:

    Failure of the consideration for a payment … means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself.

  3. French CJ, Crennan and Kiefel JJ continued at [32]:

    As Gummow J pointed out in Roxborough v Rothmans of Pall Mall Australia Ltd, failure of consideration for the purpose of a claim for money had and received is not confined by contractual principles.  In that case there had been no failure of performance by Rothmans of any promise it had made.  There was no question of repudiation by it of its contractual obligations.  The question was whether it was 'unconscionable' for Rothmans as the recipient of payments to retain them in circumstances in which it was not specifically intended or especially provided that it should so enjoy them.

  4. Their Honours had earlier said at [30]:

    Unjust enrichment therefore has a taxonomical function referring to categories of cases in which the law allows recovery by one person of a benefit retained by another.  In that aspect, it does not found or reflect any 'all‑embracing theory of restitutionary rights and remedies'.  It does not, however, exclude the emergence of novel occasions of unjust enrichment supporting claims for restitutionary relief.  It has been said of Lord Mansfield's judgment in Moses v Macferlan that it was his view that 'the grounds for obtaining relief in money had and received were not to be considered static and the remedy could be made available in any case in which money had been paid in circumstances where it was unjust for the defendant to retain it. (citations omitted)

  5. In relation to the concept of unjust enrichment, Gageler J said in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14; (2014) 307 ALR 512 [140]:

    No less than its traditional synonyms, 'unconscionable' and 'unconscientious', 'unjust' has the potential to 'mask rather than illuminate the underlying principles at stake'.  Having noted that '[t]he notion of unconscionability is better described than defined', Deane J pointed out in a related context that a question whether conduct is or is not unconscionable in the circumstances of a particular case 'involves a "real process of consideration and judgment" in which the ordinary processes of legal reasoning by induction and deduction from settled rules and decided cases are applicable but are likely to be inadequate to exclude an element of value judgment in a borderline case'.  The question is not to be resolved 'by reference to some preconceived formula framed to serve as a universal yardstick'.

  6. The essential point of departure between the parties in this application is a difference in focus.  The defendants' submissions, on the question of consideration, focus on performance of contractual promises by Mineralogy.  The plaintiffs focus on what they contend to be the basis or purpose of the 2006 MRSLAs and the Suite of Agreements.  Having regard to the passages which I have set out above from the judgments of Deane J in Muschinski v Dodds, French CJ, Crennan and Kiefel JJ in Equuscorp and the observations referred to above in Roxborough and Australian Financial Services and Leasing Pty Ltd, I am not satisfied that the propositions advanced by the plaintiffs are not arguable or that there is no basis for the legal conclusion contended for by the plaintiffs.  For that reason, and mindful of the potential for 'the emergence of novel occasions of unjust enrichment supporting claims for restitutionary relief' referred to by French CJ, Crennan and Kiefel JJ in Equuscorp, and the need for care not to risk stifling the development of the law referred to by Steytler J in Mickelberg, I do not consider this to be a case in which the statement of claim so far as it relates to restitution following termination of the 2006 MRSLAs should be struck out under O 20 r 19. In my view, it is inappropriate to endeavour to determine the matters raised on the pleadings in relation to the claims by Sino and Korean in a summary manner. That includes the pleading as to severability of consideration. Although that aspect of the claim would appear to face significant difficulties, my conclusion that Sino and Korean's pleading as to consideration is not unarguable makes it appropriate to leave to trial argument as to the consequences which follow.

  7. Mineralogy also argues that the pleadings as to Benefits (SOC pars 11 and 13) are untenable because the payments set out in sch 1 to the SOC, which comprise the Benefits, include payments not made under the 2006 MRSLAs, but made under the Facilities Deeds, the China Project Options Agreement, the Fortescue Coordination Deed and the Fortescue Projects Consolidation Agreement. None of those agreements are pleaded as having been frustrated or otherwise terminated.

  8. There may be considerable merit in that submission.  The contention is, however, a matter to be pleaded by way of defence rather than a basis to strike out the pleading.

Mistake

  1. Mineralogy's submissions on the plea of mistake were confined to a complaint as to adequate particularisation.  That is not a basis to strike out the pleading.  It can be dealt with by way of request for further and better particulars.

Claims by Sino Iron Holdings and Balmoral Iron Holdings

  1. The claim by Sino Iron Holdings and Balmoral Iron Holdings is for restitution in relation to the amounts paid for the purchase of shares in Sino and Korean by Sino Iron Holdings and Balmoral Iron Holdings respectively.  The substance of the plaintiffs' claim is that the consideration for the very substantial payments made by each of the Sino Iron Holdings and Balmoral Iron Holdings was the transfer of the issued shares in the capital of a company which would be entitled and enabled under the 2006 MRSLAs to mine 1 billion tonnes of magnetite ore and process that ore into products.

  2. The SOC pleads (SOC [6N], [6P]) that payment was made by Sino Iron Holdings and Balmoral Iron Holdings respectively and that in exchange, the shares in Sino and Korean were duly transferred to the purchaser.  Mineralogy contends that there is no basis upon which the construction as to the consideration for the Takeover Agreements is arguable.  Rather, it contends that the agreements in substance are for a transfer of shares, the transfer has taken place, payment has been made, nothing more is required to be done by either party, and the Takeover Agreements are not the subject of any proceedings which would impact upon their operation.

  3. The Sino Iron Takeover Agreement and the Korean Steel Takeover Agreement are in similar but not in identical terms.  Each agreement recites that the relevant seller has agreed to sell and the purchaser has agreed to purchase the relevant shares in consideration for a specified purchase price.  Clause 1.1 of each agreement stipulates the agreement on the part of the seller to sell, and on the part of the purchase to purchase, the relevant shares on the terms and conditions of the agreement.

  4. Clause 1.5 of each agreement provides that the purchasers only remedies 'under or in relation to the subject matter of this agreement are as expressly set out in this agreement'.

  5. Clause 1.6 of each agreement provides that no party is liable to any other party 'for any loss of use, loss of revenue, loss of production or product, loss of profits, loss or interruption to business, facilities down time or any other special, indirect, incidental or consequential damages suffered by the other party under or in relation to this agreement howsoever arising'.

  6. Clause 4.2 provides that the seller agrees to deliver various instruments to the purchaser on completion of the sales and to convene a meeting of the board of directors for the purpose of various resolutions designed to facilitate transfer of control to the purchaser.  The purchaser is required on completion, by cl 4.3, to deliver certain instruments, cause the deposit to be released to the seller, and pay the balance of the purchase price.

  7. Clause 4.4 provides that, in respect of completion, the obligations of the parties under the agreement are interdependent and that all actions required to be performed will be taken to have occurred simultaneously at the time of completion.

  8. The completion date for the Sino Iron Takeover Agreement was within five days after approval under the Foreign Acquisitions and Takeovers Act 1975 (Cth) but in any event no later than 30 June 2006. The completion date under the Korean Steel Takeover Agreement was within three business days after consent of the Treasurer under the Foreign Acquisitions and Takeovers Act, or either an amendment to the State Agreement being executed or Sino obtaining approval for a specified annual production level under the Mining Act 1978 (WA), or in any event no later than 14 calendar months after the date of the agreement which was executed on 1 November 2007.

  9. By cl 8.1 of each agreement, the sellers represented and warranted that each of the statements set out in sch 1 to the agreement is true and accurate and not misleading. Amongst the sellers warranties and representations contained in sch 1 was a reference to material contracts including a representation that '[t]he material contracts are legal, valid and subsisting, and no notice to cancel any such contract has been received by or on behalf of the company' and that '[t]he company has received no notice which might reasonably be expected to affect a right of the purchaser or the exercise of that right under a material contract' other than a letter which is not relevant for present purposes. The material contracts include the State Agreement, the Facilities Deed dated 26 October 2001, the 2006 MRSLAs, the Fortescue Projects Consolidated Agreement, the Joint Development Agreement, and another agreement referred to as the Tax Sharing Agreement.

  10. Under the heading 'Assets and Property' in the schedule, was a representation and warranty that:

    The company has a valid and enforceable right under the Mining Right and Site Lease Agreement between the company and the seller to extract from the mining area 1 billion tonnes of magnetite ore in accordance with the restriction that such ore can only be used in any one year to produce a combined maximum of 12 million tonnes of product.

  11. The Korean Steel Takeover Agreement contained a differently worded, but substantially identical, representation.

  12. By cl 8.3 of each agreement, the relevant purchaser acknowledged that it did not rely on any representation, warranty, condition or other conduct which may have been made by the seller, or on behalf of the seller, except the seller's warranties contained in the first schedule.

  13. Clause 14.7 of each agreement contained an 'entire agreement' clause, which provided that the agreement constituted 'the entire agreement of the parties about its subject matter and supersedes all previous agreements, understandings and negotiations on that subject matter'.

  14. Clause 18.3 of each of the Takeover Agreements is in identical terms.  It provides:

    Time Limits

    (a)The Purchaser cannot make any claims under or in connection with this document (including for breach of any provision, of any of the Seller Warranties or of any covenant, or for indemnity or for misrepresentation, negligent or not), and the liability of the Seller for such a claim is absolutely barred, unless within:

    (i)7 years after Completion in the case of any Tax Warranties or a claim under clause 6; or

    (ii)5 years after Completion in the case of any other claims,

    The Purchaser gives to the Seller prompt notice of the Purchaser's intention to make the claim specifying in detail a matter which gives rise to the claim, the nature of the claim, the amount claimed, and how the amount is calculated; and legal proceedings for the claim have been properly issued and validly served upon the Seller within 12 months from the date on which the Purchaser became aware of the matter giving rise to the claim.

    (b)This clause operates to the fullest extent permitted by law.

  15. The essence of the claims by Sino Iron Holdings and Balmoral Iron Holdings is the plea in SOC [14] that, on proper construction of the takeover agreements, the basis or purpose of the takeover agreements was to entitle or enable Sino Iron Holdings and Balmoral Iron Holdings to acquire the shares in companies 'which would be entitled and enabled, under the 2006 MRSLAs, to mine 1 billion tonnes of magnetite ore over the term of the 2006 MRSLAs and process that magnetite ore into products for sale or export'.  SOC [16] pleads that if the 2006 MRSLAs are found to have been frustrated as at the time when Royalty Component B would have been first payable, then the basis or purpose of the Takeover Agreements has not been fulfilled.  The basis upon which restitution is sought in respect of this aspect of the claim invokes the same principles as relied upon in relation to the claim by Sino and Korean in relation to failure of consideration of the 2006 MRSLAs.

  16. There is, however, a fundamentally different question which arises in relation to restitution for failure of consideration of the Takeover Agreements as against a failure of consideration of the 2006 MRSLAs.  That is that the Takeover Agreements are wholly unaffected by any possible outcomes of proceeding 1808.  Regardless of the outcome, Sino Iron Holdings and Balmoral Iron Holdings will retain the shareholding in Sino and Korean respectively.  Sino and Korean will continue to be parties to various agreements, including the State Agreement.  Pursuant to cl 4.7 of the 2006 MRSLAs, Sino and Korean will retain property of all processing facilities installed or constructed by Sino or Korean with the Site Lease Area.  It can be assumed, therefore, that the shares in Sino and Korean would retain some level of value in the event that the 2006 MRSLAs were terminated.  In addition, Sino and Korean have exercised rights under the various agreements to which they are party, including the 2006 MRSLAs.  Not only have they mined ore and processed products from mining operations as pleaded in the SOC, but it is apparent that they have continued mining operations since the dates referred to in the SOC.

  17. The prayer for relief in the SOC in relation to the claim by Sino Iron Holdings and Balmoral Iron Holdings is for restitution for the 'Acquisition Payments', being the amounts paid by each of Sino Iron Holdings and Balmoral Iron Holdings to acquire the shares.  Thus, on the face of the pleadings, the claim is for the full amount of the payment made, being $215 million by Sino Iron Holdings and $200 million by Balmoral Holdings.

  18. In the course of oral submissions, senior counsel for the plaintiffs disavowed the proposition that Sino Iron Holdings and Balmoral Iron Holdings wanted 'all of their money back' in the event of termination of the 2006 MRSLAs.  Rather, he submitted that if the events occur, which give rise to a claim for restitution, the court would decide what the amount should be, giving credit for the consideration received (ts 54). 

  19. Although inconsistent with the prayer for relief, senior counsel's submission reflects what is apparent on the face of the SOC.  That is that, regardless of the outcome of Proceeding 1808, Sino Iron Holdings and Balmoral Iron Holdings have received, and will continue to retain, the shares which they purchased under the Takeover Agreements.  What, in effect, they seek is the difference between the amount paid as the purchase price (assuming that represents the value of the shares on the further assumption that each company could mine 1 billion tonnes of ore) and the sum of the value of the shares if the 2006 MRSLAs are terminated plus the value of benefits derived from ownership of the shares by reason of the mining and processing operations of Sino and Korean from the date of  purchase of the shares up until the date of assessment of the amount of restitution.  It is likely that the pleading in [12(ab)] of the SOC that the consideration received by Sino and Korean by reason of their mining of ore is severable necessarily involves the same approach (assuming the proposition that the purchase price can be treated as somehow severable by reference to the progressive quantities of ore mined and product produced ‑ a proposition which is difficult to accept).

  20. In my view, the claim, considered in those terms, is not reasonably arguable.  The reasons for that are as follows.

  21. I do not consider that the pleading in SOC [14] as to the basis and purpose of the Takeover Agreements is open having regard to the express terms of those agreements, including cl 1.5, cl 1.6, cl 4.4 and cl 14.7.  There is no suggestion that the representation and warranty as to the existence of valid and subsisting material agreements was not correct at the time of the agreement, nor that Sino and Korean did not hold the valid and enforceable right referred to under the heading 'Assets and Property' in the schedule.  In my view, it is not open to construe the Takeover Agreements as containing a provision that the consideration paid for the share would be somehow apportioned and repayable to the purchasers in the event that at some unspecified time in the future the expectations of the parties as to the activities to be carried on by the companies did not reach some unspecified level.

  22. The claim by Sino Iron Holdings and Balmoral Holdings is for restitution arising by reason of termination of an agreement to which they are not parties.  The restitution claimed relates to consideration paid under an agreement the terms of which are fully executed and which will be entirely unaffected by any termination of the 2006 MRSLAs.  In my view the claim goes beyond anything that might fall within the range of arguable 'novel occasions of unjust enrichment supporting claims for restitutionary relief'.  The termination of a contract the parties to which are neither the parties seeking restitutionary relief nor one of the parties against whom relief is sought, is not capable of amounting to a 'qualifying or vitiating factor' causing unjust enrichment.  That is particularly so where the enrichment has occurred under a contract the terms of which are fully executed and which is wholly unaffected by termination of the first mentioned contract.

  23. Reliance is also placed by Mineralogy on the limitation provision of the Takeover Agreements found in cl 18.3.  The plaintiffs contend that that provision has no application because, properly construed, it relates only to claims of which the purchaser has knowledge within the relevant time.  Having regard to the observation of the plurality in Wardley Australia Ltd v The State of Western Australia [1992] HCA 55; (1992) 175 CLR 514, at 533, that it is undesirable that limitation questions be decided in interlocutory proceedings, I would be reluctant to strike out the claim by Balmoral Iron Holdings and Sino Iron Holdings on that basis alone. Clause 18.3 does, however, reinforce the conclusion which I have reached as to the arguability of the plaintiffs' construction of the consideration under the Takeover Agreements. In other words, the time limit provided is inconsistent with the proposition that fulfilment of the underlying basis of the agreement could only be ascertained at some time in the future when mining operations reached a point of being a material part of the entitlement to mine 1 billion tonnes of ore.

  1. It follows that, in my view, the claim for restitution by Sino Iron Holdings and Balmoral Iron Holdings is not reasonably arguable, and [14] ‑ [17] of the SOC should be struck out.

  2. I will hear the parties as to the orders that should now be made in light of these reasons.

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Cases Citing This Decision

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Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 10] [2016] WASC 90