HEARD : 16-20 NOVEMBER 2009, 8-16 APRIL 2010 & 19­20 MAY 2010

BETWEEN : PROCESS MINERALS INTERNATIONAL PTY LTD (ACN 063 988 894)

Contract - Contractual construction - Secondary processing of manganese fines - Tailings storage facilities - Best endeavours obligation - Direct tailing plant to plant - Declaration

Environmental Protection Act 1986 (WA)

Mines Safety and Inspection Act 1994 (WA)

Plaintiff's application dismissed in part, allowed in part

First Defendant : Mr R E Birmingham QC & Mr S Penglis

Second Defendant : Mr R E Birmingham QC & Mr S Penglis

BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] HCA 40; (1977) 180 CLR 266

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337

EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471

GMA Garnet Pty Ltd v Barton International Inc [2010] FCAFC 38

Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41

Mackay v Dick (1881) 6 App Cas 251

Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989

Secure Parking (WA) Pty Ltd v Wilson [2008] WASCA 268; (2008) 38 WAR 350

Terrell v Mabie Todd & Co Ltd (1952) 69 RPC 234

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

Transfield Pty Ltd v Arlo International Ltd [1980] HCA 15; (1980) 144 CLR 83, 101

1 The plaintiff, Process Minerals International Pty Ltd (PMI) advances claims against the defendants, related corporations Consolidated Minerals Pty Ltd (CML) and Pilbara Manganese Pty Ltd (PMPL) grounded exclusively in contract. The basis for the relief sought by PMI begins with a written agreement entered into between these parties on 10 September 1996 known as the Super Fines Agreement (the SFA). On PMI's case, there was an oral component associated with the SFA, but this is strongly challenged by the defendants.

2 In 1996, these corporate parties were operating under different names. PMI was known as Port Services (WA) Pty Ltd and is referred to in the SFA as 'Port'. CML was then known as Valiant Consolidated Limited and PMPL (its wholly owned subsidiary both then and now) was known as Valiant Manganese Pty Ltd. The defendants are respectively referred to as 'Valiant' and 'Manganese' in the written SFA.

3 The SFA essentially dealt with a scenario of anticipated future developments arising out of PMI's secondary manganese ore future processing plans. PMI planned to process and sell for profit, material known as 'Super Fines'.

4 Up to September 1996, CML and PMPL were engaged in the business of extracting manganese lump or manganese fines for export out of ore bodies in tenements in the north-west of Western Australia at a location approximately 400 km south-east of Port Hedland, known as Mike Mine. But in 1996 the manganese ore deposits at Mike Mine were almost exhausted. As a result, the defendants looked to acquire further manganese tenements. Some 20 km to the north of Mike Mine lay a long-standing (since 1949) manganese ore processing plant and tenements operated by Portman Mining Ltd (Portman). This location was known as Woodie Woodie.

5 The defendants' acquisition of the Portman processing operation and tenements at Woodie Woodie was completed in the period leading up to September 1996 and the entry of the SFA. In this period, two men by the name of Farrell, but who were not related, namely Dr Bradford Farrell (Dr Farrell) and Mr Simon Farrell (Simon Farrell), were directors of both defendants.

6 Over the course of operating the defendants' manganese ore extraction business at Mike Mine, the Farrells developed a close business working relationship with a Mr Christopher Ellison who was a director of the corporation, Crushing Services International Pty Ltd (CSI). Another director of CSI was Mr Michael Kiernan, but Mr Kiernan had less interaction with the Farrells than his fellow director, Mr Ellison.

7 CSI provided crushing services by way of assistance to the defendants at Mike Mine. In the process, Mr Ellison developed considerable insight into the defendants' manganese ore extraction operations at Mike Mine. Prior to the SFA, Mr Ellison conceived an idea of a separation plant which would extract from what would otherwise have been a liquid waste slurry produced by the defendants' operations, some smaller solids containing manganese which were not processable. These waste solids which were in the dimension of less than 1.2 mm, were designated as Super Fines and they were extracted from the defendants' liquid waste slurry by a prototype machine Mr Ellison designed and eventually constructed at Mike Mine, known as a 'dinosaur'. From reports, the dinosaur worked successfully in terms of separating the smaller manganese solids from the slurry. However, the extracted solids were not processed further notwithstanding their manganese content. They were simply stored, on site, at Mike Mine.

8 The benefit to the defendants of the work of the dinosaur at Mike Mine was to reduce the amount of overall storage capacity for waste generated by the defendants' ore processing operations. There is no empirical data as to the quantitative reduction storage volume as a benefit arising out of the separation process associated with deployment of the dinosaur at Mike Mine. But the uniform evidence of Mr Ellison and of the Farrells at trial, essentially was to the effect that the utilisation of the dinosaur at Mike Mine had been positive in terms of reducing the area needed by the defendants for waste (tailing) storage, and thereby reducing one of the significant expenses associated with running a mining operation.

9 The separated manganese Super Fines material became the focus of a negotiation between Mr Ellison and the Farrells regarding its potential future processing by Mr Ellison, to generate a saleable manganese product from these extracted solids. A new corporation PMI, was specifically obtained and utilised by Mr Ellison for the purpose of entering the SFA with the defendants, with a view to achieving the objective of processing the Super Fines at a future time to produce a saleable, but smaller manganese product. Mr Ellison wished this new venture to be kept separate from the crushing business still carried on by CSI. Accordingly, a new corporation, PMI (then known as Port) was used as the vehicle by which Mr Ellison would enter into a long-term agreement with the defendants arising out of the negotiations with the Farrells concerning the processing of this Super Fines material.

10 A written SFA was eventually consummated in September 1996. But for various reasons, it was not until eight years later, in 2004, that PMI was actually able to build a trial processing plant on the defendants' Woodie Woodie tenements, then commence the processing of Super Fines material at Woodie Woodie. By 2004, the defendants had emerged from a scenario of insolvency administration which had befallen them, shortly after the SFA had been entered into in 1996.

11 By 2004, the Farrells had long ceased to be directors of the defendants. They had been replaced by a new board which included Mr Kiernan from early April 1998. Mr Kiernan was a director of both PMI and the defendants, up until mid-April 2001, at which time he ceased all association with PMI. Mr Kiernan then remained a director of the defendants until the end of June 2006.

12 With the departure of Mr Kiernan as a director of PMI in April 2001, Mr Ellison was left as the controlling personality associated with the operations of PMI.

13 Subsequent to the parties entering the SFA in September 1996, they entered over time, a series of further written agreements. They are referred to in par 13 of PMI's further re-amended statement of claim. These written agreements in certain respects vary terms of the SFA. I will explain their content, to the extent that it is relevant, later in these reasons.

14 Various disputes have arisen between the parties over time associated with the parties' respective manganese ore processing businesses - which largely arise out of two manganese processing plants which are situated and have been operating proximate to each other on the defendants' Woodie Woodie tenements, since 2004. A convenient orientation in terms of the respective plant locations at Woodie Woodie and some other locations which feature in these reasons, is found in exhibit 1, which is also an attachment to the further re-amended statement of claim. I append exhibit 1 as a schedule at the end of these reasons, for ease of reference.

15 A level of interdependency is necessarily associated with two distinct manganese processing businesses operating from the same mining tenements. Essentially, the parties have now become competitors in the same world market for the sale of manganese fines. Some disputes appear to have their genesis in the long-term business nexus that was established in 1996 between the parties, as a result of the potential long duration of the SFA (see cl 10 thereof). Furthermore, the SFA was entered in 1996, at a time when PMI's proposed secondary manganese processing operation based upon Super Fines was a wholly conceptual notion. By the time PMI's trial processing plant actually began operating at Woodie Woodie in 2004, the parties had encountered and dealt with many day-to-day logistical practicalities associated with adjacently operating manganese ore processing businesses. The SFA contemplates a relationship both of proximity and interdependency as between the two manganese processing operations, in circumstances where only the primary operation (the defendants' operation at Mike Mine and their operation at the Portman plant at Woodie Woodie) existed at the time the SFA was entered in September 1996. A PMI secondary Super Fines processing operation would not actually commence at Woodie Woodie for another eight years.

16 In 2005, PMI replaced its trial processing plant at Woodie Woodie with a new permanent plant. PMI then processed stored Super Fines materials which it extracted out of a purpose built storage area, known as Tailings Storage Facility 2 (TSF 2) which can be seen (numbered 9 on exhibit 1). PMI's trial plant had initially processed Super Fines material extracted from another tailings storage facility (TSF) location, namely TSF 1, an area better known as Rhodes Pit (numbered 10 on exhibit 1).

17 As I have said, PMI's causes of action are grounded solely in contract. In the main, they arise out of the terms of the SFA. A discrete contractual issue however, arises out of a subsequent written agreement entered into between PMI and CML on 28 March 2008, and known in these proceedings as the Camp East Agreement (the CEA).

18 The CEA provides expressly for CML to send its tailings (in the form of a water-based slurry) directly to (pumped via a pipeline connecting) PMI's processing plant, which is constructed several hundred metres to the west of the defendants' plant (see exhibit 1 and areas numbered 1 and 2 in the rectangle areas).

19 The issue of contractual interpretation arising out of the CEA is whether the direct tailing arrangements expressly provided for in the CEA, (cl 2) continue beyond the life of Camp East as a useable TSF. It is uncontroversial on the trial evidence that Camp East reached its capacity as a TSF at the end of November 2009. That of course was after this trial first commenced and had run for five days between 16 - 20 November 2009.

20 From December 2009, the next TSF established by the defendants and used for deposition of waste material, was a replacement TSF located to the west of Camp East and referred to in this action as Area One (see exhibit 1 and the area numbered 4). The question is whether express arrangements under the CEA stipulating for direct tailing (in effect, plant-to-plant by pipeline), are to continue in their application past November 2009, upon the storage capacity of Camp East as a TSF being exhausted. In other words, are the defendants required to continue to direct their waste slurry out of their primary processing plant at Woodie Woodie via pipeline directly into the PMI plant?

21 That issue of construction of the CEA is distinct from the three other central issues which arise in the context of the construction of the 1996 SFA. These, in summary, can be identified as:

(a) Whether another by-product of the defendants' manganese ore processing operations, referred to in this litigation as 'coarse rejects', falls as a matter of the proper construction of the SFA, within the breadth of the SFA's definition of Super Fines. In other words, do the coarse reject materials which are found on site at Woodie Woodie, also constitute materials in respect of which ownership rights passed by assignment to PMI, under the SFA?;

(b) Whether expressly or as a matter of implication, the terms of the SFA oblige the defendants to provide PMI with access to, and use of a TSF on the defendants' mining leases at Woodie Woodie? If so, a correlative issue then arises as to the precise terms upon which the defendants are obliged to provide the benefit of such a facility to PMI? In other words, does PMI have a right to the free use of a TSF, a facility that is established by the defendants? Or is PMI entitled to use the defendants' TSF at cost, or on some other reasonable commercial basis?; and

(c) As a matter of the proper construction of the SFA, are the defendants obliged to continue with a practice which they have followed (as provided for expressly under the terms of the CEA) since September 2008, of pumping their wet tailings slurry by pipeline directly to PMI's geographically adjacent secondary processing plant?

22 As is apparent, direct tailing did not actually commence into the PMI plant at Woodie Woodie until 2008, some 12 years after the SFA was first entered. When direct tailing did commence, the terms of the CEA expressly provided for it to occur. However, if the CEA has now run its duration in terms of applicability (as the defendants contend has occurred - upon the exhaustion of Camp East as a TSF, at the end of November 2009), then PMI nevertheless seeks to establish a distinct contractual obligation that requires direct tailing to continue by the defendants. PMI's case in this respect reverts back to the terms of the 1996 SFA. If there is no blanket express or implied obligation that can be ascertained requiring the defendants by the SFA to pump their wet slurry tailings directly to PMI's plant, then nevertheless, is that result delivered by a defendant's 'best endeavours' covenant found in the SFA, requiring the defendants to 'make available' to PMI, all Super Fines capable of being processed and treated (that obligation, of course, being construed in the context of the SFA, as a whole)? Does the SFA in 2010 impose in a pragmatic sense an obligation on the defendants to continue the current practice of direct tailing? (That exercise would, of course, proceed on the basis that the CEA ceased at the end of November 2009, to impose further direct tailing obligations on the defendants.)

23 An assessment of the working content of the SFA's 'best endeavours' to 'make available' obligation, in a pragmatic sense, can only be made by reference to the existing state of the mining and processing operations of each of the parties for their plants and operations, as they currently subsist. The best endeavours obligation that is imposed by cl 4.1(b) of the SFA on the defendants, must also to be assessed in the context of the terms of the SFA as a whole, including particularly against an earlier covenant (cl 2.4 in the SFA) which expressly acknowledges that in the exercise of its rights under the SFA, that PMI shall not 'unduly interfere' with the' current operations' of the defendants.

24 That completes a truncated summary of what are essentially, four main contractual construction issues that arise, three by reference to the SFA and one by reference to the terms of the CEA. In addition, there is an allied controversy about whether or not there was a collateral oral component to the written SFA.

25 PMI adduced evidence at the trial from Mr Ellison (whose witness statements became exhibits E, F and G), Dr Farrell (witness statement exhibit K), Mr Peter Wade (exhibit L), Simon Farrell (exhibit O) and PMI's current technical director, Mr David Geraghty (exhibits Q, R and S). The defendants adduced evidence from their current group metallurgist, Mr Roy Stephen Francis (whose witness statements became exhibits YY and ZZ) and a former general manager, director of operations and technical director in the period between December 1998 and July 2006, Mr Allan Quadrio (exhibits DDD and EEE). Additionally, evidence was led on behalf of the defendants from Mr James Lane (exhibit Y), who prepared an expert report dealing mainly with the issue of TSFs, their establishment, regulation and properties. Mr Lane is a principal of Coffey Mining, which has provided mining consultancy services to the defendants for some time, and particularly towards the establishment of Camp East and its successor facility, Area One, as TSFs used by the defendants over time.

26 The main issues in the trial, as I have said, relate to matters concerning contractual construction. In my assessment, this is not a case where much, if anything, turns upon an assessment of the credibility of the various witnesses called at trial by the respective parties. Nevertheless, cross-examination at trial, in particular of Mr Ellison, Mr Geraghty, Mr Francis and Mr Lane at trial, was lengthy. In my assessment, each of those witnesses at the trial did their best to provide accurate and reliable evidence. Their evidence was primarily elicited towards showing relevant mutually known surrounding facts or circumstances concerning the SFA in operation and the subsequent written variation agreements to the SFA, including the CEA of March 2008.

27 Overall, I assessed the trial evidence of Mr Ellison, Mr Geraghty and Mr Francis as reliable, although both sides, in my view, may be seen to have constructed the respective written witness statements in a fashion which reveals them to be heavily 'spun' at places towards constructing a version of events perceived to be most advantageous to each side's case. Because of that, caution I think needs to be applied in some limited areas of the controversy, which I will mention later in these reasons.

28 Both Mr Geraghty and Mr Francis provided long witness statements, then longish responsive witness statements. Again, I think there was a considerable degree of advocacy (rather than fact) found at various points in the content of these documents, which in some contentious areas, cannot be accepted at face value, by reason of the spin factor. I thought Mr Francis provided some frank and revealing answers to questions, particularly during a searching cross-examination. Some of those frank answers, as we shall see, were not always helpful to the case of the defendants.

29 Mr Lane's expert opinion evidence concerning tailings storage facilities (TSF's) was elaborative, concerning numerous complexities associated with the establishment and maintenance of an approved TSF. Mr Lane's evidence clearly established that much work and planning goes into the establishment of a TSF and obtaining the various regulatory and statutory approvals required from different quarters in that process. The issue of the ultimate rehabilitation of areas once mined, is obviously taken seriously, as it should be. The extensive work involved in establishing, maintaining and then rehabilitating a TSF area inherently carries with it a significant element of associated expense, which is a cost of the mining operation. None of Mr Lane's evidence seemed particularly controversial.

30 From a documentary perspective, a trial bundle of materials adduced as exhibits during the trial (apart from witness statements) comprised seven volumes. This began with an initial three volumes, soon augmented on day one of the trial with a further four supplementary trial bundle volumes. These materials comprised of approximately 200 trial bundle documents, spread across seven trial bundle volumes. A further tranche of loose documents was tendered during the running of the trial (inclusive of witness statements), and which range between exhibit A to exhibit III).

31 Of the 167 indexed documents within the initial (three) lever arch trial bundle volumes, only a handful of documents were ultimately not tendered. Of 41 further documents within the four supplementary trial bundle volumes, only the documents at tabs STB 4, 5 and 6 were not tendered.

32 The analysis of all this evidence carries, of course, different degrees of relevance or admissibility, depending upon which contractual agreement is being construed at any particular point in time.

33 The written component of the SFA was entered on 10 September 1996. Accordingly, I will begin with an analysis of the evidence leading up to that time. I will then examine relevant evidence in the period leading up to two further written agreements entered by way of variation to the SFA, a Heads of Agreement (exhibit 79) and a Deed of Acknowledgement which both carry the date, 25 August 2004 (exhibit 80).

34 The next time period in the factual assessment is the lead up to 15 June 2007, before the parties entered what is known as the June 2007 Agreement. There are two versions of this agreement, first, a longhand version (exhibit 107), then a typed version (exhibit 108). The typed version carries some acknowledged inaccuracies. Where there is inconsistency the longhand document is accepted by the parties to be the more accurate repository of the written terms.

35 Next, I will assess the relevant evidence in the period leading up to the CEA of 28 March 2008. Finally, I will examine some limited evidence which bears upon breach issues and relief, in the period since the CEA, up to the trial.

36 I should mention that the written contractual instruments entered subsequent to the SFA, which either vary the SFA expressly or by implication, were only entered as between the two parties, PMI and CML. However, no party at the trial raised any privity issue concerning the absence of PMPL (CML's wholly owed subsidiary) as a party to these variations of the SFA. So no issues in that respect arise.

37 Before assessing facts in each time sequence, it is first necessary for me to briefly say something as to the law concerning applicable principles of contractual construction and about the content of a contractually imposed 'best endeavours' obligation.

Principles of contractual construction and some other matters of law

38 There was minimal contention between the parties over the applicable legal principles relevant to the process of construing a commercial contract. It is not necessary to then expand the ambit of these reasons by undue reference to well-known principles. In EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78, Buss JA, with the concurrence of Owen and Newnes JJA, explained these principles by reference to observations of the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40]; see reasons of Buss JA at [103] - [104]. I would respectfully acknowledge and apply his Honour's comprehensive recitation of the contractual construction principles. I would also adopt and apply his Honour's following observations regarding the implied duty as between contracting parties (as a matter of law) to cooperate in the performance of contractual obligations. This is the so-called the Mackay v Dick principle (see Mackay v Dick (1881) 6 App Cas 251, 263 (Lord Blackburn), also explained in the reasons of Buss JA at [106] and [109]).

39 In a context of assessing the potential ramifications of cl 4.1(b) of the SFA, it is necessary to observe that 'best endeavours' clause and to contrast its terminology of 'best', against a distinct clause which merely makes reference to the standard of 'reasonable endeavours'. The High Court of Australia, in Transfield Pty Ltd v Arlo International Ltd [1980] HCA 15; (1980) 144 CLR 83, 101, referred to a best endeavours clause, considered by Sellars J in Terrell v Mabie Todd & Co Ltd (1952) 69 RPC 234. Mason J observed (101):

A 'best endeavours' clause thus prescribes a standard of behaviour which is measured by what is reasonable in the circumstances, having regard to the nature, capacity, qualifications and responsibilities of the licensee viewed in the light of the particular contract.

40 So the evaluation required as to the operative effect of a particular best endeavours clause is essentially fact specific in every case. In Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 64, Gibbs CJ identified the contrast in Transfield as between the views of Stephen J, as against narrower views of Mason J, and of Wilson J at (101). In Transfield the licensee was obliged to do 'all that could reasonably be expected of it having regard to the circumstances of its business operations'. The fact specific nature of the evaluation required in each case, renders it difficult for generalisations to be applied. Likewise, particular surrounding clauses found in any contract that is under scrutiny, will bear upon the ultimate assessment of the contextual ambit of best endeavours obligations.

41 Here, cl 2.4 is first seen to stipulate expressly that PMI's exercise of its rights under the SFA, is not to 'unduly interfere with the current operations' of the defendants. Later in the SFA, cl 4.1(b) is seen to carry its own internal qualification, by a phrase which immediately follows the 'best endeavours' commitment, in the words, 'consistent with the operations of', the defendants.

42 Theoretical distinctions as between possibly differing standards of behaviour carried by a 'reasonable endeavours' clause, as opposed to a 'best endeavours' clause, raise , in my view, something of an arid terminology distinction. It is of more assistance, I think, to first assess the words of cl 4.1(b) of the SFA as to its (best endeavours) obligations within the parameters of the surrounding clauses in the SFA, and then, by reference to any relevant surrounding facts and circumstances mutually known to the parties as at September 1996, which may bear upon its construction.

43 The construction exercise is also to be conducted having regard to the commercial purpose and object of the SFA; see again Buss JA in Secure Parking (WA) Pty Ltd v Wilson [2008] WASCA 268; (2008) 38 WAR 350 [145], and Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337, 350, applying longstanding observations by Lord Wilberforce from Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989, 995 - 996, that:

In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating. (Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at 462 [22] and DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 429).

44 I also mention a helpful recent recitation principles of contractual construction, found in the observations of Buchanan J in GMA Garnet Pty Ltd v Barton International Inc [2010] FCAFC 38 [179] - [194].

45 I now proceed to render the following factual determinations from the trial evidence.

46 Simon Farrell was managing director of the first defendant from 1991. He was appointed a director of the second defendant on 17 June 1996. So also was his co-director, Dr Farrell. The corporation that is the first defendant became known as Consolidated Minerals Ltd, just prior to its entry into administration and its delisting from the Australian Stock Exchange (ASX) at the end of 1996. It subsequently became Consolidated Minerals Pty Ltd (CML).

47 The second defendant, a wholly owned subsidiary of the first defendant at all times, became known as Pilbara Manganese Pty Ltd, after it also emerged from administration.

48 Simon Farrell's background was in commerce. He held his position as director until late 1997 or early 1998 (see the agreed chronology between the parties of 13 November 2009).

49 Dr Farrell, a geologist by background, had worked in the mining industry in Western Australia and elsewhere since 1969. He was an executive director of CML and PMPL, responsible for technical aspects of the defendants' operations. Simon Farrell was more concerned with the administrative side of the businesses of both corporations. Dr Farrell ceased to be a director of CML in February 1997.

50 Dr Farrell said at the trial that in 1992, CML commenced exploration upon tenements which had surrounded Portman's Woodie Woodie manganese processing tenements. In February 1993, CML made a discovery of manganese ore at the location which became known as Mike Mine. The discovery was approximately 5 km south-east of Portman's southern most operation at Woodie Woodie. The precise mining locations are found within exhibit WW, a roll-out map, showing the respective manganese ore bodies and pits.

51 CML completed a positive feasibility study of the Mike Mine discovery. It secured a mining lease, then the necessary environmental approvals. An initial contract for a trial shipment of manganese to Japan at the end of 1994 followed. Camp and treatment plant construction at Mike Mine was then established.

52 The defendants' ore treatment plant at Mike Mine consisted of a heavy media drum beneficiation plant, to extract lump manganese product. A cyclone plant was also used for the extraction of manganese fines, in conjunction with a front-end crusher and wash plant. The front-end crusher and wash plant were owned and operated by CSI.

53 Dr Farrell said that Mr Ellison had been involved in the initial contracting at Mike Mine. This was how the defendants' corporations initially became involved in a commercial relationship with Mr Ellison and CSI. He then dealt with the Farrells on a regular basis. Mr Ellison attended site at Mike Mine on numerous occasions. Mr Ellison also had occasion to visit Portman's nearby manganese processing operation to the north, on the Woodie Woodie tenements.

54 Mr Ellison explained that the Mike Mine operation involved the extraction of manganese ore by blasting - to generate run of mine (ROM) ore. Blasted ore was then hauled to a pad for crushing and processing. The ROM ore would consist of rocks of up to 600 mm in diameter, for processing. That ore would then be subjected to primary and secondary crushing processes, to ultimately derive ore less than 75 mm in size. The crushed ore was then fed into a wash plant, where it was screened and separated into categories of manganese ore of three distinct sizes, namely:

(b) ore in the range of 8 mm down to a size of 1.2 mm; and

55 The larger ore (between 75 mm and 8 mm) was loaded into the lump drum beneficiation plant. The produced lump manganese ore product was later transported (by road) to Port Hedland, for export by ship. At the plant the manganese lump ore had been treated, using what was, in effect, a separation process using flotation in water, by which lower manganese content ore was separated off. Mr Ellison explained that the separated away larger material had a lesser specific gravity (and therefore less manganese content) was waste or tailings material, that he referred to as 'coarse rejects'. Whether this larger separated off material is properly to be characterised as tailings (and if so, then as Super Fines under the SFA), is highly contentious in this trial. Coarse rejects having been separated, were then dry stacked around the Mike Mine mine site.

56 The second category of (smaller) processed manganese ore material (in the size range of 8 mm to 1.2 mm), was fed into the defendants' fines beneficiation plant at Mike Mine. The beneficiation plant utilised a cyclone process to separate out saleable manganese fines. Low manganese-bearing solids that were separated out by this process, were also stored by dry stacking, at the same dry stack coarse reject locations, with the larger separated off material I described above.

57 The final category of ore, of a dimension less than 1.2 mm, was discharged after passing through the defendants' wet screens, suspended in a water-based liquid slurry emitting those solids. This slurry (unlike the coarse rejects) is uncontroversially accepted to be tailings. Water comprising the slurry was subsequently either removed by pumping off for use in subsequent reprocessing, or the water evaporated, leaving the residual small solid tailings as waste in situ - lying in whatever TSF the slurry had been directed into. A TSF location is sometimes referred to as a tailings dam or tailings pond. A TSF might be an old disused mining pit. Alternatively, a purpose built TSF may have been constructed involving earthworks.

58 A TSF must be approved by the Department of Mines. Safety and environmental considerations were always relevant factors in the process associated with obtaining permission to use a proposed area as a TSF. Rehabilitation considerations were significant.

59 As Mr Ellison explained (exhibit E, par 22 and following) the residual solid fines material that is suspended within a water-based slurry, eventually settles downward, allowing process water, at the top, to be recycled. This will involve the use of a dam, known as a process water dam. Water conservation and water recycling is particularly important at remote inland northern locations, where access to water is scarce, making processed water a precious commodity. Over time the settled waste solids (fines) will compact in situ. They become more dense. This process is known as consolidation. As a TSF approaches its storage capacity limit, it will need further time for final settlement and consolidation before it can finally be rehabilitated, from an environmental perspective. Self evidently, once the capacity limit of a TSF has been reached, the viable continuance of further mining operations will necessitate the establishment of a replacement TSF, carrying the inevitable cost of all work associated with establishing the next TSF.

60 Dr Farrell said that the emphasis of the defendants' beneficiation operation at Mike Mine had been the production of high grade lump product (exhibit K, par 21). However, the fine tailings disposal facility at Mike Mine was inadequate, as the lump to fines ratio was less than anticipated. The problem was addressed by a tailings/water management scheme directed towards removal of approximately 80% of the solids from the fine tailings using the prototype plant referred to as a 'dinosaur'. Mr Ellison had been the person primarily involved in the design, construction and implementation of a prototype dinosaur plant at Mike Mine. He was assisted by a consultant, Dr Wolf Martinick. Another term used to describe a dinosaur plant operation is a 'Harris Box' (another trial witness referred to such a plant as an 'elephant shower').

61 The dinosaur commenced operating at Mike Mine in the September quarter of 1995. The solids that were extracted as a consequence of the operation of the dinosaur were high grade fine manganese ore (of a dimension less than 1.2 mm).

62 The Mike Mine operation also experienced problems in terms of the low volume of ore produced. The end product at times did not measure up to specification in terms of the required manganese content. Meetings between Mr Ellison and the Farrells from time to time addressed the issue. Mr Ellison said that CSI had funded an upgrade to the processing plants at Mike Mine, on the basis that CSI would operate the processing plants, under contract for the defendants. According to Mr Ellison, volume and quality problems experienced in the production of lump and fines at Mike Mine, were eventually addressed. At that point, CSI was essentially running the defendants' operations at Mike Mine, under something akin to a joint venture agreement with the defendants.

63 Mr Ellison had conceived the idea of the trial dinosaur plant to separate away the less than 1.2 mm solids out of the wet fine tailings waste stream generated in the operation of the wet screens at the Mike Mine plant. The dinosaur's operation had reduced the volume of wet fine tailings that had then needed to be deposited into an approved TSF. This saved money in relation to the amount of TSF capacity being used up, But the extent of the saving was not quantified.

64 The prototype dinosaur at Mike Mine employed cyclone technology. This was not particularly new, but it had not, to Mr Ellison's knowledge, ever been used before in the way the dinosaur operated at Mike Mine. Mr Ellison said, and it appears to be uncontroversial, that at this time there was no market for (dinosaur extracted) manganese fines - they being of such a small dimension (ie of the size 1.2 mm and smaller).

65 Mr Ellison explained that the dinosaur at Mike Mine worked by the defendants' wet fine tailings slurry being emitted directly from the defendants' beneficiation plant into the dinosaur plant. Extracted small manganese fines were then dry stacked. Emitted waste water which still contained other solids, was then filtered, purified and discharged into streams.

66 Mr Ellison said that the dinosaur trialled at Mike Mine was 'successful', and that its use was continued for the remaining duration of the Mike Mine operation (which according to the statement of agreed facts was only until October/November 1996). There is no empirical data as to the effects of the dinosaur at Mike Mine in terms of a TSF volume storage saving, or in a dollar cost saving.

67 In 1995, Portman closed its Woodie Woodie operations in order to concentrate on its Koolyanobbing iron ore operation (exhibit K, par 14). In late 1995, the defendants' managing director, Simon Farrell, held discussions with Mr Jones of Portman about a possible acquisition of Portman's Woodie Woodie operation. Negotiations were successfully concluded in July 1996.

68 Simon Farrell said (exhibit O, par 11) that CML then commenced open pit mining operations from Woodie Woodie. The defendants did so by continuing to use CSI as the crushing services contractor at the newly acquired Woodie Woodie operation.

69 Mr Ellison assisted the Farrells in the Portman negotiations leading up to the successful acquisition of the Portman tenements at Woodie Woodie. Mr Ellison was involved in the due diligence exercise undertaken by the defendants. Accordingly, Mr Ellison and the Farrells both knew of the Woodie Woodie operation of Portman prior to September 1996, before the SFA was entered.

70 The trial dinosaur plant used at Mike Mine worked satisfactorily from the perspective of both the Farrells and Mr Ellison. However, the extracted manganese fines material generated, was not further processed. It was merely separated and dry stored. The Farrells discussed with Mr Ellison, arrangements by which a new corporation (PMI) would be formed by Mr Ellison, specifically for a purpose of acquiring ownership of the manganese Super Fines, either in stockpile or in situ, at both Mike Mine and Woodie Woodie. Simon Farrell principally dealt with Mr Ellison in the negotiations, although to a lesser extent he had some dealings with Mr Kiernan. Mr Ellison remembered these discussions as spanning a period of about 9 months across 1995 and 1996 and being held particularly with Simon Farrell. Mr Ellison was the more enthusiastic party over a prospect of potentially reprocessing the extracted manganese solids generated from the work of the dinosaur plant at Mike Mine as well as, prospectivity, at Woodie Woodie. His recollection was that Simon Farrell had expressed some scepticism about the commerciality of Mr Ellison's plans (exhibit E, par 36). Concerns over technical and marketing issues also underpinned the expressed scepticism.

71 During the nine months of negotiations, Mr Ellison became acquainted with the defendants' negotiations to purchase Portman's operations and tenements at Woodie Woodie. It was at Simon Farrell's request that Mr Ellison had assisted in CML's due diligence enquiries with Portman.

72 Mr Ellison and some other CSI staff had inspected the Woodie Woodie mining site including the mining and processing plants. During one of these inspections of the Woodie Woodie mine site, Mr Ellison noticed a stockpile of the material which he referred to as 'coarse rejects'. He estimated the amount of this material to be in the vicinity of three to four million tonnes, stockpiled in what he referred to as a 'coarse rejects stockpile'.

73 Mr Ellison even conducted some testing on coarse rejects materials from Woodie Woodie. The tests revealed a manganese content of about 20% - 25%, according to Mr Ellison. Mr Ellison also noticed a substantial quantity of what he called fine tailings lying in one of the TSFs at Woodie Woodie, designated as TSF 1. This is the TSF more commonly called Rhodes Pit.

74 Mr Ellison's negotiations with the Farrells extended in ambit to embrace Woodie Woodie (see exhibit E, par 49). Discussions with the Farrells raised the prospect of a more sophisticated version of the dinosaur plant (beyond that trialled at Mike Mine). The more sophisticated plant that Mr Ellison planned would now be built to process the small manganese solids that were extracted from the stream of fine tailings slurry. One consequence of the new plan would be to reduce even further the extent of wet fine tailings storage area needed. But from this new plan of Mr Ellison's also arose the prospect of the allied potential for refining the extracted smaller manganese fine material, that would potentially generate a saleable, albeit smaller refined manganese product.

75 Mr Ellison recalled some further general discussion with the Farrells over the prospect of processing coarse reject material which was to be found at both Mike Mine and Woodie Woodie. He said that at the time a difference of views emerged. Dr Farrell expressed to him a view that there was no prospect of coarse rejects ever being commercially reprocessed. This was on the basis of technical difficulties and the low manganese price which prevailed at the time. Mr Ellison says that he expressed greater optimism about coarse rejects. He told the Farrells that he thought there was a prospect that coarse reject material might in future be economically reprocessed and that there might be some dry stacking benefits associated with all that. In my view, this generalised coarse reject negotiation discussion evidence was of such a loose nature as to be wholly unhelpful towards establishing any mutually known surrounding fact or circumstance for a purpose of reliably bearing upon the construction of written terms in the SFA. Paragraph 54 (exhibit E) in Mr Ellison's statement appears to have been constructed to carry with it an intended consequence that the term 'tailings', if used in these discussions would extend to include both the wet fine tailings slurry, as well as the coarse rejects, on a basis that 'coarse rejects' would thereby fall within the umbrella of the general terminology, 'tailings'. But my assessment is that there is too significant an element of spin and self interest at this point in Mr Ellison's witness statement, as regards the said to be remembered content of these long past general negotiations with the Farrells on this topic. I am driven to assess this evidence, both in Mr Ellison's witness statement, as well as in the Farrells' witness statements about coarse reject discussion - with considerable scepticism. In any event, the admissibility of general negotiations, from a contractual construction perspective, as regarding a written instrument (the SFA), is, at this point, highly questionable.

76 I do accept, as Mr Ellison relates at par 55, that Dr Farrell was against any proposal for PMI to deal with coarse reject material in stockpile at Mike Mine - on the basis that this might interfere with rehabilitation obligations at Mike Mine which was then rapidly reaching its exhaustion as a mine. Once the Mike Mine ore body was exhausted in or around October/November 1996, the defendants' operations ceased at that location. The focus of the defendants' operations from that point, turned to Woodie Woodie and to its 'Big Mac' mine, acquired as part of the Portman tenements.

77 Mr Ellison recalls (par 57) that in the pre-SFA discussions with the Farrells during 1996 concerning what would occur with PMI's potential secondary processing plant at Woodie Woodie, that the Farrells both said words to him to the effect that they were anxious that once PMI's plant was up and running, that the PMI plant receive wet fine tailings directly from the defendants' plant, since this would minimise the extent of tailings storage needed by the defendants at Woodie Woodie. However, I find no support for the contention that it was the Farrells who were expressing interest in initiating direct tailing at Woodie Woodie. Rather, it is my assessment that it would have been Mr Ellison who was highlighting to the Farrells any desirability in direct tailing. I find that the conceptual prospect of future direct tailing to a plant to be established by PMI at Woodie Woodie, was not discussed in anything more than general conceptual terms, at the time. I can accept Mr Ellison's evidence to the effect that it was mentioned by him to the Farrells, that it was likely PMI's processing costs, once PMI was directly receiving the defendants' wet fine tailings discharge slurry via a direct feed, would likely be less than the cost for PMI itself to extract its required super fines material itself from a stockpile or tailings dam, using an excavator or excavation processor. As a result, PMI could afford to pay the defendants more for super fine material which was directly received. More money received from PMI for feedstock would be an economic incentive for the defendants to directly tail their waste materials to PMI's plant, once it was established. But there obviously is a very significant distinction between providing an economic incentive to do something and laying down an absolute commitment. I do not assess in all the evidence the latter concept to have been raised, particularly bearing in mind the merely conceptualised discussions and therefore what was uncertain as to what might or might not eventuate, under Mr Ellison's future plans.

78 Mr Ellison could not recall any specific discussion with the Farrells about deposition of the defendants' tailings, once the PMI plant at Woodie Woodie had begun to process that material. I accept that to be so.

79 The SFA of 10 September 1996 carries the signatures of both Farrells, as directors on behalf of the defendants - with the signatures of Mr Ellison and Mr Kiernan as directors of PMI (affixed adjacent to the common seal).

80 To the extent that it is PMI's case (see the further re-amended statement of claim par 7), that there was also an oral component that accompanied the written SFA of 10 September 1996 and which dealt with an issue of direct tailing, I would reject that contention. It lacks any evidentiary support. Furthermore, in the terms as formulated, it is problematic. The oral term contended for is:

1. Further the [SFA] contained an express oral term that when the plaintiff's Plant had been properly commissioned, and had demonstrated an ability to reliably accept a stream of wet tailings feed, the first and second defendants would commence tailing directly into the plaintiff's Plant when requested to do so by the Plaintiff.

Such a term would in my view be inherently uncertain, particularly by reference to the dual qualifications, first as to proper commissioning; second, as to demonstrating the ability to reliably accept a stream of wet tailings feed.

81 In my analysis, it is solely the written content of the SFA document which embodies the full content of the parties' agreement and bargain, consummated in September 1996.

82 It is now appropriate to assess the content of the SFA itself, a somewhat complicated long-term contractual arrangement. On the basis of the submissions of each of the parties, almost all of its written terms are of constructional importance in terms of carrying vital insight as to the parties' respective positions as regards the present issues of construction. Accordingly, it is necessary to set out a considerable amount of its content, before resuming my ascertainment of the relevant facts in the case.

83 It is convenient at this point to set out a number of the provisions of the SFA. Reference to 'Port' in the SFA, is to PMI:

1.1 In this Agreement the following words have the following meanings:

'Agreement' and 'this Agreement' means the Agreement between the Parties constituted by this document;

'Future Tenements' means any other mining tenement under the Mining Act owned (in whole or in part whether through a joint venture or otherwise) managed or controlled by Valiant or Manganese at a future date and on which is located Super Fines and as otherwise referred to in Clause 4.1(e);

'Mining Act' means the Mining Act 1978 (as amended) of Western Australia;

'Minister' means the Minister of Mines or any other Minister of the Crown in the right of Western Australia charged with the responsibility of administering the Mining Act from time to time;

'Net Profit' means the net profit amount calculated in accordance with Clause 5;

(a) all of the activities to be carried out by Port to build, operate and manage the Plant on the Tenements;

(b) the required treatment and processing of the Super Fines undertaken by Port through the Plant or Plants; and

(c) the sale of the Product as provided for under this Agreement;

'Party' means a party to this Agreement and 'Parties' has a corresponding meaning;

'Plant' means the processing plant or plants to be constructed by Port on the Tenements for the treatment and processing of Super Fines;

(a) $8.40 per tonne for all minus 1.2mm manganese concentrate product which has been derived from feed directly entering Port's processing plant from Valiant's or Manganese's beneficiation plant;

(b) $5.00 per tonne for all minus 1.2mm manganese concentrate product derived from feed from stockpiles and tailings ponds;

'Special Product' means the end product greater than 52% manganese following further treatment and processing in excess of that undertaken for the Standard Product;

'Standard Product' means the end product following treatment and processing of the Super Fines through the Plant by Port and less than 52% manganese.

(a) in respect of Mining Lease 46/150, all minus 1.2mm tailings that has left Valiant's manganese beneficiation plant in stockpile or in tailings ponds on the Tenements and Future Tenements; or

(b) in respect of the mining tenements set out in paragraph (b) of the definition of Tenement, all tailings that have left the wash plant or the beneficiation plant;

(a) Mining Lease 46/150 registered in the name of Valiant;

(b) the mining tenements comprised in the Woodie Woodie Mine, run of the mine stockpiles and all associated tenements purchased by Manganese from Portman Mining Limited or any of its related companies;

(c) any other mining tenement or mining tenements which may be granted in lieu of; or relate to the same ground as Mining Lease 46/150 or the tenements set out in paragraph (b) of this definition;

(d) subject to the rights of Valiant or Manganese as the holder of the Tenements includes the right to mine as set out in this Agreement and other privileges appurtenant to the Tenements; and

(e) to the extent that any of the Future Tenements are the subject of this Agreement, includes these Future Tenements; and

1.5 A reference to Valiant includes Manganese and any other related corporation of Valiant or Manganese.

2.1 Valiant (and to the extent the ownership rights in the Tenements are held by Manganese, Manganese):

(a) assigns to Port the ownership rights to the Super Fines in consideration Of the payment of the Royalty;

(b) grants to Port the exclusive right during the Term to remove, treat and exploit the Super Fines in accordance with its rights under this Agreement; and

(c) authorises Port to sell the Standard Product and the Special Product in accordance with Clause 6 of this Agreement.

2.2 During the Term, Port, its agents, licensees, contractors, employees, servants and invitees shall have the following rights in respect of the Tenements insofar as Valiant and Manganese respectively have the power to grant these rights:

(a) to have non-exclusive possession and use of the Tenements to carry out the Operations, in accordance with site rules and statutory regulations.

(b) to pass and repass over all parts of the Tenements upon the natural surface of the ground with or without vehicles or mechanical contrivances;

(c) to install, bring, erect and use on the Tenements the Plant including without limiting the generality of this clause all buildings, plant, equipment, machinery and appliances as it thinks fit in order to carry out the Operations and in a location mutually agreed;

(d) to remove the Plant and any buildings, plant, equipment, machinery and plants as referred to in Clause 2.2(c) (which rights shall also continue for a period of six months after the expiration or sooner determination of this Agreement) with the right in these assets to remain in the sole ownership of Port;

(e) to establish, maintain and operate facilities of all kinds as may be necessary for the benefit of its personnel; and

(f) to determine in its discretion the nature, extent and timing of the Operations subject to any matter set out in this Agreement.

2.3 Property in the Super Fines shall pass to Port on the signing of this Agreement.

2.4 In exercising its rights set out in this Agreement, Port shall not unduly interfere with the current operations of Valiant or Manganese and shall comply with all reasonable requests of Valiant or Manganese in respect of the location and conduct of the Operations.

2.5 Valiant covenants in favour of Port that it will procure the performance of any obligation of Manganese-under the terms of this Agreement.

3.1 In order to treat and process the Super Fines Valiant and Manganese acknowledge that Port intends to design, construction, operate and manage at its sole cost the Plant to process high quality manganese fines suitable for sale as product in industries including but not limited to chemical, battery manufacture, brick colouring and water purification industries and also as feed stock for the Chemix manganese sulphate project owned by Valiant or Manganese, as the case may be.

3.2 Port shall during the term of this Agreement continuously operate the Plant in a proper and efficient manner and according to the best and most approved methods practised in similar undertakings.

4.1 Valiant and Manganese covenant in favour of Port as follows:

(a) they are respectively entitled to grant the rights under this Agreement and as at the date of signing it is the legal and beneficial owners of the relevant Super Fines free of any encumbrance, charge or third party rights whatever and full title and right in the Super Fines shall vest in Port;

(b) Valiant and Manganese shall use their best endeavours consistent with the operations of Valiant and Manganese to make available to Port all Super Fines capable of being processed and treated;

(c) the Tenements are in good standing and all expenditure commitments under the Mining Act have been satisfied or necessary exemptions obtained;

(d) they will not reduce the screening cover on the heavy media plant or other processing plants to under 1 .2mm it being acknowledged by Valiant and Manganese that Port shall design the Plant to process Super Fines specific to this size and that Port shall suffer loss and damage if this covenant is breached;

(e) Port shall have the exclusive right to process and treat Super Fines located on the Tenements. In addition, Port shall have the first right to be granted the same rights under this Agreement in respect of the Future Tenements. These rights shall be first offered by Valiant or Manganese to Port by notice in writing setting out the terms of the offer and specifying it is open for acceptance within 30 days of receipt of the notice. On acceptance of this offer, a contract shall be deemed to arise between Valiant or Manganese and Port; and

(f) they will not assign their rights in the Tenements or their rights under this Agreement without the prior written consent of Port (which consent shall not be unreasonably withheld) and the third party signing a deed in favour of Port (prepared by Port) covenanting that it will be bound by the terms of this Agreement insofar as it applies to Valiant and Manganese (as the case may be).

4.2 Valiant covenants that it has obtained the consent of the chargees under Australian Securities Commission registered charge numbers 451248, 451249 and 476055 to this Agreement and the release of the Super Fines as security under the respective charges. Manganese covenants that there are no encumbrances affecting the Superfines insofar as the same are its property.

5.1 In consideration of the assignment of the Super Fines to Port under this Agreement and the grant by Valiant or Manganese to Port of the access and other rights under this Agreement, Port:

(a) agrees to pay to Valiant or Manganese (as the case may be) the Royalty; and

(b) agrees to pay to Valiant or Manganese (as the case may be) an amount of 50% of the Net Profit as determined in Clause 5.2.

5.2 The Net Profit shall be determined in accordance with the following formulae:

(a) in respect of the Standard Product, the following formula applies:

1. = net profit per tonne
2. = actual sale price of the Standard Product received by Port per tonne

1. = total FOB costs of exporting the Standard Product and for the purposes of this formula fixed at $90 per tonne (subject to increase/decrease under Clause 5.3) except that marketing costs and all taxes, duties, Western Australian government royalties under the Mining Act and assessments shall be added to this fixed price

(b) in respect of the Special Product, the following formula applies:

1. = net profit per tonne
2. = actual sale price of the Special Product received by Port per tonne

1. = total FOB costs of exporting the Product and for the purposes of this formula this amount shall be negotiated in good faith between Port and Valiant but at all times is not less than the costs substantiated by Port.

5.3 ...

5.4 ...

5.5 ...

5.6 ...

5.7 ...

Port shall determine the times and places of sales and/or delivery of Standard Product and Special Product processed under this Agreement without any restriction whatever except that Port shall not sell Standard Product or Special Product to any party who as at the date of this Agreement has purchased manganese from Valiant or Manganese without Valiant's or Manganese's prior written consent.

Valiant and Manganese (as the case may be) shall supply all power and water to Port at no charge to enable Port to conduct the Operations.

This Agreement shall continue for the life of the mine conducted by Valiant and Manganese (as the case may be) on the Tenements and for the avoidance of doubt, the life of any mine on the Future Tenements.

11.1 During the Term, Valiant and Manganese (as the case may be) shall meet all statutory obligations in respect of the maintenance for the Tenements and shall observe and perform all covenants, stipulation's and other matters relating to the Tenements including keeping the Tenements in good standing.

11.2 Port shall supply Valiant and Manganese (as the case may be) with plans and details of all work done on the Tenements in accordance with this Agreement to assist Valiant and Manganese (as the case may be) in complying with any obligations under the Mining Act.

Valiant and Manganese (as the case may be) shall have the right at all reasonable times to examine and inspect the Operations but shall not interfere with the conduct of the Operations by Port under this Agreement.

This Agreement is subject to the law of Western Australia and the jurisdiction of that State.

At the expiration of this Agreement or if the Plant is moved to another location within the Tenements, Port will remove the Plant and all buildings, plant, machinery and vehicles belonging to or brought upon the Tenement by Port and shall make good to the satisfaction of Valiant all damaged caused or occasioned by that removal and shall leave the Tenement in the condition and state required by any Act, the Department of Minerals & Energy, the Environmental Protection Authority, the Department of Urban Planning and Development and the local Authority.

84 In the context of the three core issues concerning construction of the SFA (identified at the commencement of these reasons), it is now convenient to make some broad observations upon the content of the SFA, or perhaps more accurately, its non-content.

85 On the issue of coarse reject material as a potential subject matter under the SFA, it may be observed that the terms 'coarse reject' or 'rejects', are not at all mentioned in the SFA. The material in respect of which ownership rights are assigned to PMI (cl 2.1(a) and cl 2.3), is addressed only as Super Fines.

86 Second, I notice that the definition of Super Fines under cl 1.1(a) as regards the mentioning of mining lease 46/150, is an express reference to the Mike Mine tenement as a location. This is not controversial. Component (a) of the definition of Super Fines, by its reference to Mike Mine, addresses 'all minus 1.2 mm tailings' that have left a manganese beneficiation plant. But component (b) in the definition of Super Fines does not display the same reference to minus 1.2 mm tailings. Component (b) simply picks up the 'mining tenements' under par (b) of the definition of 'Tenement' in the SFA. It thereby draws attention to the significance of a widely defined SFA term, 'Tenement' in reference to 'all tailings' that left not only a beneficiation plant, but also a 'wash plant'. Reference in the SFA to 'Tenements', with its five (a) - (e) subcomponents, sees that term in its first subcomponent (a) refer by number to the Mike Mine mining lease. But the term 'Tenements' is drawn far broader than Mike Mine, in order to also embrace another four subcomponents, including 'Future Tenements'. Injection of the defined terms 'Tenements' and 'Future Tenements' back into the latter part of subcomponent (a) of the definition of Super Fines, also creates some element of uncertainty about whether subcomponent (a) of the definition of 'Super Fine' in the SFA, as to subject matter, goes well beyond just Mike Mine.

87 Third, cl 10 designates the 'Term' of the SFA, as the life of mine as conducted by the defendants on the 'Tenements or Future Tenements'. As this matter came to trial in November 2009 and in May 2010, there was no suggestion that the Woodie Woodie operation conducted by the defendants was anywhere near approaching the end of its mine life. In other words, in 2010, some 14 years after the SFA was entered in September 1996, the duration of the SFA, at least as regards its 'Term", is seen to continue unabated.

88 Fourth, as regards the constructional issue of direct tailing, it may now be seen in the SFA that a 'royalty' as defined in the SFA, is payable by PMI in return for the assignment of ownership rights over Super Fines, and as constructed, is a two-tiered royalty. The higher level royalty of $8.40 per tonne, is payable for all minus 1.2 mm manganese concentrate product derived from feed 'directly entering [PMI's] processing plant from [the defendants] beneficiation plant'. This is in contrast to the lesser level of royalty at $5 per tonne, payable for all minus 1.2 mm manganese concentrate product derived 'from feed from stockpiles and tailing ponds'. Accordingly, there is an apparent economic incentive afforded under the SFA to the defendants from a higher level of per tonne royalty remuneration to the extent of $3.40 per tonne, for feed material which directly enters PMI's processing plant.

89 Fifth, the only materials in respect of which a 'royalty' is payable under the SFA is by reference to the two components in the definition 'royalty', and which in each instance is expressed to be for minus 1.2 mm manganese concentrate product. But the payment criterion is not imposed by reference to what PMI takes as feedstock from the defendants. Rather, the royalty payment is assessed by reference to PMI's 'end product', which under the SFA may be either 'Special Product' or 'Standard Product', and dependent upon the percentage of manganese in the 'end product'.

90 Sixth, cl 2.1(a) refers to an assignment of ownership rights in the Super Fines, in 'consideration' of the payment of the 'Royalty'. This may be contrasted to cl 5.1, a further provision dealing with consideration payable under the SFA to the defendants, which refers not only to the 'Royalty', but also to 50% of 'Net Profit'. 'Net Profit' is then defined by reference to either 'Standard Product' or 'Special Product', by cl 5.2. It will be observed that under the SFA, PMI and the defendants were to split net profit, equally: see cl 5.1(b). Accordingly, the SFA may be seen to carry something of the hallmarks of a joint venture arrangement when entered in September 1996, in terms of the envisaged success towards shared profits in a further market not then established for the smaller, refined Super Fines manganese product.

91 Seventh, the definition of 'Operations' can be seen to extend in broad ambit to all activities by PMI to build, operate and manage the 'Plant on the Tenements'. This broadly defined word, 'Operations', is then used frequently throughout the SFA, in particular see cl 3, in terms of an acknowledgement by the defendants that PMI intended to design construct, operate and manage its plant at its 'sole cost'. The expressed objective (cl 3.1) was to process high quality manganese fines suitable for sale as product in industries that are identified.

92 Eighth, cl 2.4 of the SFA is to be noticed concerning the covenant of PMI not to 'unduly interfere' with the 'current operations' of the defendants and to comply with all reasonable requests in respect of the location and conduct of the 'Operations'. The concept of proscribing not all, but rather only 'undue' interference with the defendants' 'current operations', is an important qualification, in the overall scheme of the SFA.

93 Ninth, the 'best endeavours' Super Fines promise by the defendants finds expression in cl 4.1(b) as a covenant by the defendants in favour of PMI, in the qualified terms there seen. There is an immediately following internal qualification applicable within cl 4.1(b) upon the defendants' best endeavours covenant, on a basis that the endeavours of the defendants are to be 'consistent with the operations of the defendants'. Also important within cl 4.1(b) is the phrase 'make available', as is the following word 'all', in reference to the subject matter of Super Fines, that are 'capable of being processed and treated'.

94 Tenth, cl 4.1(d) sees the promise of the defendants not to reduce the 'screening cover' on the heavy media plant or other processing plants to under 1.2 mm, which is of significance. So also is the accompanying component to that clause by way of an acknowledgement from the defendants that PMI will be designing its plant to process Super Fines, 'specific to this size'.

95 Eleventh, the promise of the defendants to supply all power and water to PMI at no charge under cl 7 to facilitate PMI conducting its 'Operations', is of structural significance. It is evident that power and water are the only items which are expressly specified in the SFA as being provided by the defendants to PMI, at 'no charge'. The following cl 8 identifies a charge to PMI of $50 per man per day, in respect of accommodation at the defendants' camp for the personnel of PMI.

96 Twelfth, as regards the constructional issue of TSFs being provided to PMI on an ongoing basis and their use by the parties, once again there is no express stipulation to be found in the SFA about that subject.

97 Thirteenth, in terms of the ultimate sale of a manganese fine end product by PMI and the net profit hopefully produced out of sales of PMI's 'Standard Product' or 'Special Product', it is to be observed that there are no restrictions in the SFA upon PMI's sales, save for the covenant that PMI is 'not to sell to any party who as at September 1996, has purchased manganese from the defendants', subject to the defendants' consent. The parties (objectively assessed by reference to the written content of the SFA) therefore appear to have had some eye, at the time the SFA was entered, to PMI's future potential to become a competitor of the defendants in the supply of processed manganese, albeit that PMI was only obtaining rights to Super Fines material under the SFA.

98 I will now proceed to consider the evidence and render further findings on relevant factual developments subsequent to the SFA following September 1996.

Events subsequent to the SFA leading up to August 2004

99 Mr Ellison said (exhibit E, par 64), and I accept, that the defendants took over the Woodie Woodie mine site in late 1996, and that for the first six or nine months they did not do much, as they were experiencing financial problems. Mr Ellison observed that in about October 1997, both the defendant corporations entered administration. Dr Farrell's evidence was to the same effect (exhibit K, par 52).

100 Mr Ellison was in liaison with the administrators to recapitalise the defendants. Eventually, the defendants emerged from administration in March 1998. Funds that were advanced by Mr Ellison to facilitate that objective, were repaid. Post administration, the defendants contracted with CSI to install a crusher circuit, as well as a wet screen to upgrade the Woodie Woodie beneficiation plant. Some of CSI's plant was utilised to commission and operate an upgraded plant at Woodie Woodie for a period of approximately 15 months to produce saleable lump and fines product. Over that period CSI carried out work which included the modification and reinstallation of the conical cyclone chamber in the Woodie Woodie fines beneficiation plant. CSI operated the plant at Woodie Woodie for some 15 months, until CML exercised its right to buy CSI out. The defendants then began re-operating the Woodie Woodie manganese extraction plants in their own right.

101 In the period after the SFA was entered, the personalities directing the respective parties altered. The defendants' directors now included Mr Michael Kiernan of PMI/CSI background. Mr Allan Quadrio became general manager of the defendants' operations. PMI, after losing Mr Kiernan as a director, engaged the services of Mr David Geraghty as a technical director, and Mr Peter Wade became PMI's managing director in 1999. Mr Geraghty became PMI's general manager on 4 August 2003. In 2007, his title changed to technical director.

102 But very little in terms of a realisation of PMI Super Fines processing plans at Woodie Woodie seems to have progressed between 2000 and 2004. Mr Ellison said that in 2003/2004 (exhibit E, par 68), PMI was preparing to commence a processing operation at Woodie Woodie pursuant to the SFA, using a pilot plant.

103 Mr Quadrio, a metallurgist, jointed CML in December 1998. He filled a number of roles, including acting as general manager of operations, director of operations and as technical director. His responsibilities involved the start-up and management of the Woodie Woodie manganese mine for the defendants. This included taking a leadership role in negotiations undertaken on behalf of CML with PMI, in the period between December 1998 to 1 July 2006. After that, Mr Quadrio left to take another position as managing director of Monarch Gold Mining Company Ltd (a corporation associated with Mr Kiernan). Mr Quadrio had been involved in successfully recommissioning the Woodie Woodie mining operations in June 1999, following suspension of those operations in 1997. This work included the development of a mine plan, the awarding of contracts and on-site management until January 2000.

104 Upon being appointed operations director in 2000, Mr Quadrio's role included overseeing the Woodie Woodie mining operations through the expansion of ore reserves and consolidating the mining and processing operations. He developed an operating plan for the Coobina chromite operation and managed the design and construction of a 250,000 tonnes per annum heavy media plant for chromite ore by upgrade in 2002. He developed a financial justification and technical parameters for the addition of a second heavy media drum plant for the Woodie Woodie operations, with potential to enable a doubling of drum plant capacity, managing design construction and commissioning of that plant in January 2005.

105 As technical director of CML during 2005, Mr Quadrio developed financial and technical parameters for the replacement of the Woodie Woodie crushing plant with a 2M tonnes per annum plant, and managed the design, construction and commissioning of that plant in December 2005.

106 After commencing employment as general manager of operations in December 1998, Mr Quadrio became familiar with the defendants' mining tenements at Mike Mine. Mike Mine only had a single ore source, whereas the Woodie Woodie mine had numerous pit ore sources (see exhibit WW) with the feed having widely varying characteristics in relation to manganese contaminants. A significant amount of low grade manganese ore, known as 'blue' grade ore, had been processed at Woodie Woodie. This led to variability in the range of contaminants increasing, compared to the levels of contaminants present in the feed obtained from the Mike Mine pit.

107 Mr Quadrio observed the (disused) Mike Mine processing facility and prototype dinosaur, earlier mentioned. He noticed what he called an 'appendage to the processing facility' at Mike Mine, which consisted of a simple cycloning operation attached to the tailings discharge of CML's Heavy Media Separation (HMS) plant. There was no processing plant as such, with the infrastructure comprising an 'Elephant Shower', a simplistic form of cyclone, utilised in conjunction with a tank, pipes and a tails pump. Mr Quadrio described the former Mike Mine operation as 'extremely basic' (see exhibit DDD, par 14).

108 Mr Quadrio said that, for an 11-month period during 1999 to about April 2000, the defendants had contracted with CSI to manage and operate the defendants' crushing and beneficiation plants. Exhibits 12 to 24A, contain some of Mr Quadrio's memorandums relating to safety, maintenance and operational concerns arising with CSI in the period leading up to the termination of CSI's contract and what Mr Quadrio described as the inadequate state of the plant at the time of CSI's departure. Because all this material relates to CSI and not to PMI, I have placed no reliance upon its irrelevant content, in the overall scheme of these reasons.

109 Mr Quadrio became acquainted with the SFA. Its content concerned him. It was the subject of Mr Quadrio's incomplete memorandum (exhibit 25) to his director, Mr Kiernan, on 18 February 2002. A face-to-face meeting was then convened between Mr Quadrio (with Mr Mike Cook, on behalf of the defendants), and Mr Peter Wade (and Mr Terry Stark) (on behalf of PMI). Mr Quadrio's memorandum of 5 April 2002, recording events at a meeting on Wednesday 27 March 2002, relates that 'a preliminary meeting was requested by [PMI], in order to commence the process regarding the production of Super Fines as per the contract'. Exhibit 26 is Mr Quadrio's report of the preliminary meeting, taking the form of a memorandum to Mr Kiernan.

110 From about March of 2003, Mr Kiernan and Mr Ellison, with the aid of respective solicitors, embarked upon a process of attempting to conclude a deed of variation, altering the original SFA's terms. Numerous drafts and communications were exchanged from March 2003 (exhibit 27A) to July 2003. As negotiations continued into August 2003, Mr Ellison engaged Mr Geraghty, with an eye to utilising him in the practicalities of PMI's commencing to process Super Fines, in accord with the 1996 SFA (see exhibit 29). Mr Geraghty's first visit to Woodie Woodie (accompanied by Mr Ellison) occurred at the end of August 2003 (exhibit 31 and exhibit 33).

111 Numerous discussions and meetings then followed in a lead-up to the eventual commencement of PMI's operations at Woodie Woodie in 2004. There is minor controversy over what was, or was not, said at these meetings, which generally comprised either Mr Quadrio, or Mr Kiernan on behalf of the defendants, and Mr Geraghty, Mr Wade or Mr Ellison, on behalf of PMI. An early meeting is noted in the minutes for 14 May 2004 as between Mr Ellison, Mr Geraghty, Mr Kiernan and other representatives of the defendants. Multiple issues needed to be addressed, including where PMI would commence processing, transporting and loading, environment compliance, power and fuel requirements and statutory approvals. The breadth and duration of these discussions shows that, in a practical sense, commencement of PMI's secondary processing operation (at Woodie Woodie) involved a very substantial amount of operative 'flesh' being added to the bare skeleton of a conceptual proposal expressed under the SFA of 1996.

112 Two issues, which in 2004 required early resolution, in a practical sense, concerned where PMI would obtain its Super Fines feedstock for its secondary processing operation, and then, where PMI would deposit its process waste. On 28 May 2004 (exhibit 58), Mr Kiernan, on behalf of CML, advised the Department of Industry and Resources (DOIR) of contractual arrangements between PMI and PMPL (ie, by the SFA). Mr Kiernan advised that 'PMI have the rights to the contents of the tailings dam and any future tailings generated at Woodie Woodie'. He continued, 'PMPL will retain the control over deposition of waste material into the tailings dam and PMPL will also retain the rehabilitation responsibility associated with the tailings dams at Woodie Woodie'. Liaison with DOIR continued in relation to various issues, including demarcation for responsibility for rehabilitation of areas affected by the PMI operation (exhibit 59).

113 The parties discussed PMI commencing operations by processing fine tailings materials previously deposited into Rhodes Pit (TSF 1), and with a view to emptying that disused mine area of Super Fines material. Mr Ellison was advised by Mr Quadrio and Mr Kiernan that the defendants would carry out a series of three wall 'lifts' at the adjacent purpose-built TSF 2, to progressively increase TSF 2's tailings storage capacity. Once PMI had extracted all fine tailings previously deposited into Rhodes Pit, the defendants would then divert their tailings back into Rhodes Pit, until it was full. There was a further plan by the defendants to ultimately build a wall around both Rhodes Pit and TSF 2, to create a 'super pit' for tailings storage. (The locations of these places, including Rhodes Pit, TSF 2, Camp East and Area One, may all be found on the attached exhibit 1, which also shows the location of the parties' respective processing plants.)

114 On 25 August 2004, two further agreements were entered as between PMI and CML, a Heads of Agreement and a Deed of Acknowledgment. An 'Area of Responsibility' allocated to PMI's anticipated operations, was settled upon.

The Woodie Woodie Super Fines Project - Deed of Acknowledgment of 25 August 2004

115 The Deed of Acknowledgment between PMI and CML identifies an area of responsibility of PMI, by reference to an annexure A. The deed is exhibit 80, and its annexure A is the second page. The deed appears to be crafted with a firm eye to having PMI accept responsibility as a 'principal employer', under the Mines Safety and Inspection Act 1994 (WA), reflecting (when objectively assessed) the understandable objective on the part of the defendants - not to be held responsible for safety issues associated with PMI's looming commencement of its discrete secondary processing operation located upon the defendants' tenements.

116 By recital B, the deed refers to a Heads of Agreement between the same parties of the same date, that I will now address.

Woodie Woodie Super Fines Project - Heads of Agreement 25 August 2004

117 Again, this Heads of Agreement is entered only as between the two parties: CML and PMI. The respective corporate seals of CML and PMI, applied to each instrument, carry the adjacent signatures of Mr Kiernan and Mr Ellison, as the respective directors for each corporation. The Heads of Agreement carries recital (B) in these terms, after acknowledging the SFA:

The parties have now agreed to vary the terms of the Super Fines Agreement and to enter into a new Super Fines agreement (on similar terms save for the agreed amendments) and Deed of Acknowledgment which will supersede and replace in its entirety the existing Super Fines Agreement, but the parties are entering into this Heads of Agreement in the interim to record their agreement on the variations which are to be made and on the additional Deed of Acknowledgment which the parties have agreed to enter into.

It is the intention of the parties that this Heads of Agreement shall bind the parties until such time as the replacement Super Fines agreement contemplated by this Heads of Agreement is executed.

119 I would observe that in fact no replacement Super Fines agreement was ever in fact entered between the parties, notwithstanding what was expressed as anticipated by the Heads of Agreement as at 25 August 2004. The Heads of Agreement therefore stands as a variation to the SFA, but only by augmentation, not replacement.

120 The Heads of Agreement (exhibit 79) by its terms, adjusts various aspects of the bargain under the SFA. Again, no point is made about the absence of PMPL as a party to these variations.

121 The variations made under the Heads of Agreement effected to the SFA, emerged in circumstances where Mr Quadrio had not been on the scene for the defendants when the 1996 SFA was consummated. However, he had, after taking up employment, become acquainted with its content. In his trial evidence, Mr Quadrio described the SFA as an 'atrocious' deal for the defendants (see ts 1207). That sentiment seems to have been broadly shared across the defendants' management team in 2004.

122 Variations under the Heads of Agreement altered the term 'Royalty', in cl 1.1 of the SFA, to 'Purchase Price'. In return for CML no longer being required to provide free power and water to PMI for its operations, CML relinquished the right to receive 50% of the net profit, originally agreed under the SFA. PMI now also assumed an obligation to meet what is referred to under cl 1(g) of the Heads of Agreement, as a Gayna Park royalty.

123 The Heads of Agreement also dealt with an issue over the size of the screen covers then being used by the defendants on their heavy media and other processing plants. Under a new cl 2.1(a), it was provided:

1.2 mm Screens Cover

Consolidated will change the screening cover on their heavy media plant or other processing plant to produce minus 1.2 mm tailings in accordance with existing clause 4.1(d) of the Super Fines Agreement by the date of commencement of operations by PMI.

PMI will indemnify Consolidated against any future action, loss or damage which may arise as a result of smaller aperture screens (1.0 mm) having been used at the Woodie Woodie plant prior to the commencement of operations by PMI pursuant to the Super Fines agreement.

124 Notwithstanding cl 4.1(d) of the SFA, it would appear that for a period prior to August 2004, the defendants' screens at Woodie Woodie were screening material at an aperture smaller than 1.2 mm. This issue was obviously picked up in the negotiations leading to the 2004 Heads of Agreement and then expressly dealt with in that document, by the arrangements I have set out.

125 The Heads of Agreement also dealt with road maintenance costs associated with haulage of PMI's Super Fines product from the PMI plant, and the issue of access to site by PMI.

126 Only after execution of the Heads of Agreement and Deed of Acknowledgment was PMI permitted to have access to the Woodie Woodie site, in order to commence its construction of the PMI Super Fines (trial) plant. Access was allowed on the strict basis that PMI's contractors and subcontractors needed to comply at all times with the safety directions of CML in respect of areas at the Woodie Woodie site which were outside PMI's designated Area of Responsibility (cl 2.2 of the Heads of Agreement).

Findings as to events subsequent to PMI's commencement of secondary processing operations at Woodie Woodie in 2004 using its trial plant

127 PMI eventually commenced operations at Woodie Woodie using the trial plant which it constructed to process fine tailings (previously deposited into Rhodes Pit by the defendants and, before the defendants by Portman) (exhibit E, par 84). As Mr Ellison related, 'The trial plant was not capable of accepting directly fed wet fine tailings' (exhibit E, par 84).

128 In June 2005, PMI decommissioned the trial plant at Woodie Woodie. It then installed and commenced operating its permanent processing plant located near Rhodes Pit. The location is numbered 2 on exhibit 1.

129 PMI's new plant continued to process the dry Super Fines feed which PMI took out of Rhodes Pit, using an excavator and articulated dump truck. However, Mr Ellison and Mr Geraghty had now designed the new PMI plant to be configured to have the potential to accept a wet fine tailings feed source by pipeline, direct from the defendants' plant.

130 PMI also commenced removing and processing fine tailings out of TSF 2, the purpose built TSF. Both PMI and the defendants were also depositing their respective tailings waste into TSF 2, at that stage.

131 Mr Ellison described the two streams of tailings emitted from PMI's plant. First were residual solids. Second, was a watery waste material discharged after processing the solids removed by PMI from the defendants' fine tailings - to recover the residual manganese ore. PMI was then depositing both these waste streams into TSF 2. In addition, the defendants' plant was also discharging its unprocessed fine tailings that passed through its 1.2 mm screening process. As observed by Mr Ellison, the discharge of all this waste by both PMI and the defendants commonly into TSF 2 was possible, because of the design of TSF 2. The design of this purpose built TSF allowed deposited waste to be managed in a way that would not render the defendants' unprocessed fine tailings irrecoverable to PMI at a later time. 'Sterilisation' is a term applied to a deposition of fine tailings in a manner which would render them subsequently inaccessible or irrecoverable for the purpose of PMI ultimately utilising that Super Fines material.

132 In September 2006, the defendants asked PMI to stop all further excavation of Super Fine material from Rhodes Pit. This was because the defendants now wished to conduct exploratory drilling under the floor of that pit. There was now thought to be potential for a previously unknown source of further manganese ore to be unearthed from deeper below Rhodes Pit.

133 This Rhodes Pit development in 2006 led the parties to enter what has been referred to as an 'Access Agreement', by which, in broad terms, PMI agreed to temporarily cease removing fine tailings out of Rhodes Pit and the defendants agreed to supply an alternate feed source to PMI for PMI's plant.

134 In terms of its processing, PMI continued to dispatch its waste tailings into TSF 2. PMI was now removing and processing unprocessed fine tailings which had previously been deposited into TSF 2 (exhibit E, par 95, Mr Ellison). Exhibit 101A, an email from Mr Ellison to Mr Yurisich of Wednesday, 24 January 2007, at 3.05 pm, raised the subject of 'Friday's discussion and exploration in Rhodes Pit', attaching a copy of Mr Ellison's letter on behalf of PMI to Mr Baxter, managing director of CML, of 24 January 2007.

135 Mr Ellison referred to minutes of a meeting between PMI and CML personnel of Thursday 22 March 2007 (exhibit 102). Tailing into TSF 2 was discussed. By then CML had resolved that Rhodes Pit should be mined again. A note of the meeting records:

1. Rhodes Pit will be mined by CML. CML are going to be tailing into Camp East as an alternative. PMI are to note this as they will be required to tail into Camp East also. DOIR will not allow simultaneous/joint mining of Rhodes and tailing operations into TSF 2.

The idea of tailing directly into a screw classifier was mooted by PMI and whilst CML does not have a principle objection to this, it is clear that CML can not be:

• held up from operation by a problem of any nature within any position of the PMI system.
• held accountable for no feed to PMI as a result of any operation or other stoppage with their own system.

A mutually agreeable arrangement may be reached by the appropriate people on site and signed accordingly.

1. PMI are to design a relevant system for tailing into Camp East or obtain their own premises to tail into their own dam. CML will mine Rhodes tailings estimated by PMI to I1.1 Mt as part of exploiting the iron ore located beneath the current tailings. This will be stockpiled where possible for PMI to deal with.

AY and RF are to liaise with PMI regarding the tailing arrangements to ensure CML are not compromised by having all sources tail via one system.

136 Mr Ellison said that at this meeting both he and Mr Wade proposed that the defendants should tail directly into the PMI plant (exhibit E, par 96). But the note does not support that recollection. I prefer the reliability of the note in this instance - which raises a somewhat different arrangement, by PMI tailing into a screw classifier. A screw classifier is essentially an auger that is capable of separating solids out of a liquid waste slurry. A by-product of a screw classifier's operation is an amount of ultrafine solid material, referred to here by the parties, as 'slimes'. Rehabilitation issues may arise associated with a stand alone deposition of slimes in a TSF, as contrasted to that material forming a component of deposited waste in the settled, unseparated solids in a slurry.

137 PMI was unable to recommence extracting unprocessed fine tailings out of Rhodes Pit until May/June 2007. That issue gave rise to other proceedings begun in this court in CIV 1117 of 2008 and CIV 1426 of 2008, which have since been consolidated, but currently remain unresolved.

138 In the middle of 2007, TSF 2 was reaching the end of its storage capacity for further tailings from either PMI, or the defendants. As exhibit 102 indicates, the defendants proposed to establish Camp East as the next TSF. Camp East lies (approx) 2 km south of the processing plants of the defendants and PMI. Camp East, like Rhodes Pit, was an old mining pit (numbered 5 on exhibit 1).

139 The mining of further ore by the defendants out of Rhodes Pit now necessitated that PMI's unprocessed (Super Fine) tailings in Rhodes Pit would need to be removed and stockpiled in order for them to be processed later. An extraction of further ore from Rhodes Pit by the defendants would also create a deepened void which, in due course, once mining was finally completed, would (with statutory approvals) be capable of being utilised once again as a TSF. Completion of mining in Rhodes Pit would enable the defendants to then proceed with their longer term plan of amalgamating TSF 1 (Rhodes Pit) and TSF 2, thereby creating a long-term tailings 'super pit' storage facility (Mr Ellison, exhibit E, par 101).

140 In June 2007, there was a breach in the south wall of TSF 2. This incident allowed some wet fine tailings which had been deposited into TSF 2 by the defendants, to overflow into a nearby water course - Brumby Creek. On 14 June 2007, DOIR issued a stop-work order requiring all tailing into TSF 2 to cease, effective from 16 June 2007 (exhibit 106).

141 The effect of the DOIR stop-work order was that neither PMI nor the defendants from 16 June 2007, could continue to dispatch tailings from their respective plants to TSF 2. They now needed to use Rhodes Pit again to deposit waste, for a period of between six to 10 weeks (Mr Ellison, exhibit E, par 104).

142 The DOIR stop-work order created a major problem for PMI. Its main Super Fines feed supply at the time was the unprocessed fine tailings that were stored in Rhodes Pit. But PMI could not access that material, if the parties were necessarily discharging streams of tailings out of their respective plants to Rhodes Pit. This less than optimal situation led to the entry of a further written agreement, referred to by the parties as the June 2007 Agreement. There are two versions of this document, an original longhand version, exhibit 107, bearing date 15 June 2007, signed on behalf of CML by Mr Alistair Croll, and on behalf of PMI by its managing director, Mr Peter Wade. There is also a typewritten version, exhibit 108, also carrying the signatures of the same persons. There are small discrepancies as between the longhand and the typed version, which appear to be mainly transcription errors. As mentioned above, to the extent of any relevant inconsistency, the longhand version prevails.

143 Again, this agreement omits PMPL as a party. However, no party made any point about the absence of PMPL, it, of course, remaining at all times, a wholly owned subsidiary of CML.

144 The June 2007 Agreement does not express itself to be by way of variation to the SFA. But in substance, it obviously was. It was conceived in the problem laden factual lead up, I have described.

145 The June 2007 Agreement addresses operational issues arising at the time between the parties. Of particular importance is cl 11, which deals with the issue of access to Rhodes Pit (which the defendants would now mine again, thereby preventing PMI whilst that happened, from extracting the stored Super Fines materials) and the issue of future tailing into a new TSF by both parties.

146 Clause 11 sets out principles by which issues of access to Rhodes Pit and tailing into Camp East would be resolved and implemented. One illustration of a transcribing error as between exhibits 107 and 108 is found at the first dot point to cl 11 (there being ten dot points of principle in all, in cl 11). The first dot point refers to a grade control and a stockpiling plan to be established and implemented to practically manage the removal and storage of PMI's feed material from Rhodes Pit. Exhibit 108, as typed, however, refers to a 'good control' rather than 'grade control', as obviously was agreed.

147 The June 2007 Agreement appears to have been conceived in circumstances of some urgency, since the tenth dot point to cl 11 shows that PMI was to grant access to CML to commence tailing in Rhodes Pit from 9.00 am Saturday 16 June 2007 (the next day).

148 Of particular importance are dot points 7 and 8 in cl 11 in the June 2007 Agreement. They were later adjusted yet again, in the period of (approximately) a further nine months. In the June 2007 Agreement, the seventh and eighth dot points read:

[7] CML will pump the water and slimes to Camp East. PMI will supply, install, maintain and operate a pair of screw classifiers to remove the solids from the CML tails and stack the solids adjacent to the CML plant for PMI; the screw classifiers (operating and standby) shall have 98% availability and be supported by PMI spare parts and maintenance. PMI shall remove the solids and manage the dust control of this.

[8] PMI will pump its tails from the PMI process plant to a collection point for CML to pump the solid free tails to Camp East. PMI shall install and operate a screw classifier to remove the solids from the tails; the solids shall be disposed of by CML. The collection point is to be agreed.

149 Establishment of a new TSF required the approval of the Department of Mines and Petroleum, in accordance with provisions of the Environmental Protection Act 1986 (WA). For Camp East, this necessitated a submission by the defendants of a detailed mining proposal for Camp East as regards its use as an in-pit TSF. The complexity in detail associated with the assembly of all materials involved in making the submission to obtain approval, is apparent from exhibit STB17. On 25 June 2007, Mr Croll, chief operating officer of CML, submitted to DOIR a lengthy mining proposal in respect of Camp East, which had been prepared for CML by Coffey Mining. Attachments to that proposal included a geotechnical assessment of the Camp East pit, a hydrogeological review, and a sterilisation report. The mining proposal was prepared by Messrs Gray and Payton, of Coffey Mining. It was reviewed by Mr Christopher Lane, who was called as an expert witness for the defendants at the trial (see exhibit Y). Table 2 in the proposal within the executive summary of exhibit STB17 indicated, at that point, the anticipated TSF life for Camp East of 28 months.

150 Section 2.2 of the Camp East proposal dealt with the issue of Rated Throughput. The proposal proceeded on the basis that the aggregate tonnes of tailings to be discharged into Camp East on an annual basis would be approximately 425,000 tonnes per annum, comprising tailings material discharged by both PMPL and by PMI. For more detail in the proposal concerning tailings storage operational matters, see s 4, particularly s (4)(i), (iv) and (v). Section 5 (tailing deposition method), s 13 (rehabilitation) and figure 3, a tailings storage data sheet containing, at s 5, information concerning the properties of tailings, in particular their deposited density of 1.7 t/m3. The geotechnical assessment deals with tailings deposition, in particular a principle of 'spigotting' into Camp East (s 6.3 at page 10). Attachment 5 embodies a storage facilities operation manual for Camp East pit tailings, see s 4 concerning the components of a tailings storage operation, dealing with the deposition of tailings through pipelines, before ultimate deposition into an open pit, allied with issue of control in the position of a supernatant pond.

151 Mr Wade (exhibit L) mentions a letter he received from Mr Croll of 13 September 2007 (exhibit 121). The subject matter of Mr Croll's letter raised the issue of PMI's preparation of a notice of intent (NOI) to be submitted to DOIR regarding the use by PMI of a screw classifier to remove solids from the tailings of the defendants. The tone of Mr Croll's letter suggested that PMI had been dilatory in providing details and specifications for PMI's proposed tailing into Camp East. But Mr Crolls' letter drew a swift response from Mr Wade on 17 September 2007, exhibit 122. Strong issue was taken over any suggestion of delay on PMI's part. Mr Wade continued:

PMI has, and is taking, reasonable steps to give effect to the Agreement [the June 2007 agreement]. PMI has commenced the preparation of an Addendum to existing NOIs for the management of the PMI tailings to the collection point and the extraction of the solids, at that point, from the CML tails. We understand that the NOI for the tailings into Camp East is a CML responsibility and the NOI will incorporate the feed information from the screw classifier arrangement. The exact location of this collection point (adjacent to the PMI and PMPL processing plant and the new process water dam) requires resolution and the following outstanding information (verbally requested by PMI) is now formally requested from CML for PML to finalise its layout configuration.

PMI rejects your attempt to transfer cost or loss responsibility for the provision of tailings to Camp East to PMI. The agreement, and other commitments between the parties, recognises the responsibility to provide tailings to Camp East is owned by CML.

152 Mr Wade's response concluded with an urgent request for outstanding information from CML, so that the NOI addendum could be completed in a timely fashion by PMI.

153 Further meetings ensued between the parties' representatives, whose contractual relationship was now experiencing some strain.

154 Mr Geraghty, Mr Ellison, Mr Wade and Mr Croll met on 1 November 2007. Minutes of their meeting as prepared by PMI, are exhibit 123. In particular, I refer to two dot points under the heading Camp East, concerning tailings storage at Camp East and the basis upon which PMI's tails would be pumped to Camp East. The second dot point mentions an alternate proposal put by PMI to CML, involving PMPL tails being pumped to the PMI process plant, directly. The minutes record this alternative proposal of PMI as being received on a basis that it would, in effect, be reviewed by CML. Mr Ellison refers to this meeting and an alternative PMI proposal concerning direct tailing in his witness statement (exhibit E, at par 114), on a basis that the PMI proposal was put to Mr Croll, with a view to reducing capital costs for the parties.

155 At par 115 of his witness statement, Mr Ellison suggests that such a direct tailing proposal had been put verbally on prior occasions by himself to Mr Quadrio and to Mr Kiernan in 2006 and 2007, albeit rejected on each occasion by Mr Kiernan, without any reason being given. However, this reminiscence by Mr Ellison at par 115 is vague and imprecise. I do not accept this aspect of his evidence as reliable. I would find, if it is at all relevant (which I doubt), that the first occasion (after the 1996 SFA) on which it is reliably established that a proposal for the direct tailing of PMPL's fine tailings into PMI's plant, occurred during the discussions between PMI and the defendants' personnel, at the meeting of 1 November 2007, as a PMI proposal.

156 In February 2008 (as Mr Ellison relates under par 117, exhibit E), the defendants unilaterally commenced pumping their wet fine tailings direct into Camp East. But this was prior to PMI's planned installation of screw classifiers at Camp East (being screw classifiers to extract solids from the defendants' emitted wet tailings slurry and thereby isolate solid Super Fines material from what would also be extracted as slime material). The extracted Super Fine solids (now separated from the slimes) were then to be transported back to PMI's plant from Camp East, for PMI's processing (see exhibit 1).

157 The defendants' unilateral commencement of deposition of their wet fine tailings straight into Camp East, and without allowing PMI to first install and use screw classifiers, was strongly objected to by PMI - on the basis that it was prejudicial to PMI's supply of Super Fines material, and was in breach of the June 2007 Agreement. PMI then applied in Supreme Court action CIV 1117 of 2008 for an interlocutory injunction, to prevent the continued deposition of tailings by the defendants into Camp East in this fashion. The injunction was sought on the basis that PMI was being denied the proper opportunity, through use of screw classifiers, to extract Super Fines solid material for its own processing operation, with that material being put in jeopardy of being permanently lost to PMI.

158 That dispute was resolved on an interim basis in CIV 1117 of 2008, on the basis of the defendants' undertakings of 7 February 2008 - not to further discharge their wet fine tailings into Camp East, without first giving PMI one business day's notice of that event (see exhibit 130).

159 The defendants' witness Mr Roy Francis dealt at trial with this incident in brief terms in his evidence-in-chief, see his witness statement (which became exhibit YY), at pars 52.1, 52.3 and 52.4. At par 52.6, Mr Francis said that in negotiations leading up to what became the March 2008 CEA, that nothing was said about what the position would be after Camp East, as a TSF, was filled to its capacity limits. Mr Francis said that at that time Camp East was expected to last for only about 12 - 15 months, depending upon the volume of tailings that were emitted into Camp East by PMI. The 12 - 15 month period is actually shorter than the period identified in the Coffey Mining proposal for Camp East. But a timing difference as between preparation of that mining proposal for Camp East and March 2008 explains that matters had moved on somewhat, concerning the volumes of anticipated tailings expected to be emitted into Camp East as the next TSF.

160 Under cross-examination, Mr Francis was closely questioned (ts 1110 - 1111) over the circumstances in which the defendants, for a time, had commenced to tail directly into Camp East, but without affording PMI any reasonable opportunity to earlier extract by screw classifiers the material which PMI would wish to process as its feedstock, out of the defendants' emitted wet slurry material. Mr Francis's answers to questions were frank. It is plain that the defendants' operative decisions on this issue taken at the time, were not the decisions of Mr Francis. Mr Francis was but a 'cog' in the defendants' overall management system. Nevertheless, the conduct of the defendants in unilaterally proceeding as they did, before the undertakings ultimately given to the court on 7 February 2008 (see exhibit 130), were high handed and provocative. It appears that the defendants still assessed the SFA to have been an 'atrocious' deal, which placed the defendants as regards PMI in an invidious commercial position. The unilateral conduct of the defendants at this time appears to have been designed to test the resolve of PMI. As events transpired, however, PMI was steadfast. The degree of discord between the parties at this time, ultimately culminating in CIV 1117 of 2008, then the undertakings given by the defendants of 7 February 2008, provides part of the background leading up to the CEA of 28 March 2008.

161 Negotiations leading to the CEA also included the engagement of external consultants to review the timing, location and cost of works required to commence the deposition of tailings into Camp East (see the minutes of a meeting between PMI and PMPL personnel on 22 January 2008, exhibit 128). The external consultants engaged Mintrex, a wholly owned subsidiary of the engineering firm, Holfreters Pty Ltd. In due course, a Mintrex report was provided. It dealt with four options for tailings disposition, including an option 2, which was plant to plant direct tailing. The four options were under consideration at the time of the court proceedings in CIV 1117 of 2008, culminating in the defendants' undertakings of 7 February 2008.

162 A meeting took place between the parties' representatives on 29 January 2008 (exhibit 129). An augmentation to option 2, known as option 2A, became, under the CEA, the parties' chosen basis for proceeding with Camp East TSF arrangement. The main difference between option 2 and option 2A was the augmentation to option 2's direct tailing proposal with further elements of planned redundancy (ie fallback), in the event of the PMI plant not being able to receive or process a direct stream of tailings pumped by pipeline from the PMPL plant. Option 2A envisaged that in that (non-optimal) situation, an ultimate default position (Plan C) would allow the defendants to utilise a constructed bypass pipeline facility to Camp East - which would allow the PMPL plants waste wet slurry fine tailings to be discharged down the bypass line to Camp East (see exhibit 1), at which location PMI's screw classifiers would there be available to extract the Super Fines material at that point. The incorporation of a fallback bypass pipeline to allow the defendants' processing plant to stay operating in circumstances of a reception obstacle at the PMI plant inhibiting the direct receipt of the defendants' emitted slurry, added an element of greater cost to the Mintrex option 2 proposal associated with the capitasl cost of constructing the bypass pipeline.

The Camp East Agreement (CEA) of 28 March 2008

163 This written agreement (exhibit 132) is expressed to be by way of variation to the principles which the parties record that they earlier settled upon for tailing into Camp East under the June 2007 Agreement (see recitals A and B). By its terms (once again in a agreement between only CML and PMI, as exclusive parties) it is recorded in the CEA that the seventh and eighth dot points at par 11 of the June 2007 Agreement cease to have any force and effect, but with provisions in the CEA, with respect to tailing into Camp East, to apply. Clause 2 of the CEA expressly provided for direct tailing in this way:

1. CML will, during the period when it wishes to use Camp East as the facility into which tailings are to be sent for storage, tail direct into PMI's plant at its location current as at the date of this agreement.

164 However, it is equally clear from cl 2 that the temporal duration of CML's promise of direct tailing was wholly confined to the period that Camp East is used (at CML's wish) as a TSF.

PMI will use a wet screen and/or screw classifier at its plant to extract solids from CML's tailings. The screw classifier shall have a 98% availability and be supported by PMI's spare parts and maintenance.

(I will refer to this further redundancy alternative, located at PMI's plant by the use of another screw classifier, as Plan B.)

166 Clause 4 of the CEA provided for PMI to despatch its tailings (as defined in cl 4) direct into Camp East.

167 Clause 5 then provided for PMI to install a screw classifier on the bypass line from CML's plant into Camp East (Plan C). And then:

In the event that CML is required to cease tailing direct into PMI's plant, CML may use the bypass line to tail direct into Camp East (via the screw classifier) and PMI shall use the screw classifier to separate the solids from CML's tailings. These solids shall be stockpiled and transported to PMI's plant. Notwithstanding the terms of this clause 5, if, as a result of PMI's inability to accept direct tailing into its plant from CML, CML is required to use the bypass line for a period in excess of 5 days in any 30 day period, the parties shall take all reasonable steps and action to ensure minimum disruption to CML's operations (including by allowing CML to tail directly into Camp East in the event that the screw classifier at Camp East is operational), and to eliminate any potential adverse environmental impacts.

168 By cl 6 of the CEA the parties allocated as between themselves, responsibility for the operating and capital costs as set out in an attached schedule. The schedule to the CEA is seen to be entitled, 'Camp East - Option 2A'. A table in the schedule deals with three categories of infrastructure, CML to PMI (referring to a pipeline connecting CML's plant to PMI's plant to carry CML's wet slurry fine tailings discharge to PMI's plant), from CML to Camp East and, finally, from PMI to Camp East. In respect of those three infrastructure categories, the schedule allocates responsibility as between the parties regarding areas of design and construct, capital costs, operating costs, operation and maintenance responsibility and statutory responsibility. The foot of the schedule to the CEA carries reference to four different rankings of preferred tailings preference for PMI Feedstock, ranging between the first preferred preference of a PMI screen at the PMI plant, through to preference 4, which is direct discharge into Camp East.

169 Importantly, cl 8 of the CEA contained a significant variation to the royalty payment scenario by PMI as had been established under the two-tiered definition of 'royalty' in the 1996 SFA (as either $8.40 per tonne or $5 per tonne). The royalty regime had been rebadged by the Heads of Agreement (in 2004) to be designated as a 'purchase price', rather than a royalty - see cl 1(a) of the Heads of Agreement of 25 August 2004. Now, by way of further variation, cl 8 of the CEA provided:

1. The parties agree that the Purchase Price payable by PMI for the tails delivered direct by CML to PMI's plant pursuant to and for the purposes of this Agreement shall be $5.00 for each tonne of -1.2 mm manganese concentrate product derived from the tailings.

170 This alteration reduced the purchase price due to the defendants for end product which was derived directly from received Super Fine feedstock by PMI, from $8.40 per tonne for end product (under the SFA) to $5 per tonne for end product - the same price that was payable for end product which had been sourced by PMI from stockpiles or tailings dams.

171 Finally, cl 9 of the CEA committed the parties to cooperation and best endeavours to expedite tailing into Camp East, securing regulatory approvals and sourcing required plant and equipment. At the time, the parties committed to a target timeframe for tailing into Camp East of, 'within 14 weeks'.

172 Plant-to-plant direct tailing of the defendants' wet fine tailings stream of materials into PMI's plant, commenced under the pipeline and pumping arrangements used to link the two processing plants (as seen on exhibit 1) in September 2008 (Mr Ellison's witness statement, exhibit E, par 126.1). This was also when PMI commenced (exhibit E, par 126.2) dispatching its waste tailings to Camp East via a pipeline from its plant, also seen on exhibit 1. In addition to PMI's pipeline arrangements despatching its waste to Camp East, there now was an established bypass pipeline, constructed from the CML plant to Camp East as a redundancy option should the plant to plant direct tailing arrangements not be available, thereby allowing the defendants' plant to continue in operation (Plan C).

173 Camp East was a short term TSF. By the middle of 2009 it was becoming apparent that its capacity to receive further waste tailings was nearing its limit. This generated another level of tension between the parties, not least by reason of more looming capital and approval costs - inevitably associated with establishing another TSF. The PMI processing plant was now processing Super Fines material (and thereby producing waste going towards filling Camp East more quickly), sourced not only from the directly received slurry from the PMPL plant, but also from what PMI was still excavating as the stored Super Fines materials which PMI was removing and then transporting to its plant for processing.

174 In February 2009 (exhibit E, par 128) CML lodged an application for a works approval pursuant to the Environmental Protection Act to utilise another former mining pit, designated as Area One, as the next proposed TSF, with the Departments of Environment and Conservation (DEC) and Mines and Petroleum (DMP). Notwithstanding that this application was lodged in February 2009, Mr Ellison says (par 130), and I accept, that it was not until about 25 June 2009 that PMI learned of the defendants' intention to use Area One as a TSF, and , for that matter, learned of the defendants' lodgement of an Area One mining plan. The knowledge about Area One as the next TSF was eventually acquired at a meeting on 25 June 2009, attended by Mr Ellison, Mr Wade and Mr Simon Rushton (PMI's legal and commercial manager) and held with Mr Francis, Mr John Abbott (the corporate secretary of CML) and Mr Michael Marriott, on behalf of CML.

175 Mr Ellison says, and I accept, that he only learned at this meeting that the defendants intended to tail into Area One, once it was approved and available as a TSF, but more significantly that CML proposed from that time to cease pumping its wet fine tailings from the PMPL plant direct to PMI's plant. Mr Ellison also learned at this meeting that the defendants proposed to disallow PMI to emit any of its future waste tailings into Area One (although subsequent developments show that the defendants did not object to PMI's use of a screw classifier, if located at Area One, to extract solid material at that location, on a basis that slimes emitted as a result of the PMI screw classifier's operation, could be discharged into Area One). A series of tense correspondence soon ensued.

176 In PMI's letter sent by Mr Wade as managing director, on the same day (exhibit 154), Mr Wade wrote (in part) under the heading, 'Future Tailings Facilities':

I confirm Mr Abbott's advice today that once the Camp East tailings facility reaches capacity, Consolidated Minerals will commence depositing its tails into Area 1.

I further understand that Mr Abbott's subsequent statement was to the effect that Consolidated Minerals will not provide PMI with access to any tailing facility, following the Camp East closure, on the basis that Consolidated Minerals does not consider it has any obligation to provide PMI with access to a facility in which to dispose of tails.

If I have understood Mr Abbott correctly, I entirely disagree with this position which can only be described as vexatious and simply untenable.

In addition to the numerous express acknowledgments of Consolidated Mineral's obligation to provide a facility in which PMI can deposit tailings, it is clearly an implied term of the 1996 Super Fines Agreement as well as the 2004 Agreements that Consolidated Minerals will provide PMI with access to a tailing storage facility with capacity for tails to be deposited otherwise the operations could not be conducted rendering the entire agreement futile.

That communication made PMI's position explicit as regards its required utilisation of a TSF upon the defendants' Woodie Woodie tenements.

177 In relation to the issue of direct tailing, Mr Wade wrote:

Consolidated Minerals has a contractual obligation to use its best endeavours to make all Super Fines capable of being treated and processed available to PMI. In this regard and entirely consistent with this obligation, the CML tails should be made available to PMI to extract the Super Fines prior to deposition into Area 1.

178 Mr Wade's communication contained an element of ambiguity on the direct tailing issue, in the sense that his assertion as to the defendant's best endeavours to 'make available' obligation, is capable of being rationalised by continued direct tailing from CML's processing plant by pipeline direct into PMI's processing plant. But meeting the best endeavours obligation under Mr Wade's letter is also compatible with an arrangement whereby PMPL might discharge its wet tailings slurry material via a pipeline to the TSF (such as to Camp East or Area One), but then at the TSF, afford PMI the opportunity to there extract its required solid materials from the emitted slurry via PMI's use at the TSF of screw classifiers - before ultimate deposition of what remained of the defendants' slurry into the TSF.

179 On PMI's case, it presses to establish the defendants' obligation to continue direct plant-to-plant tailing, either on the basis of an express (inferred) term or an implied term to that effect found within the 1996 SFA, or by reference to an allied oral component of that SFA (but which asserted oral SFA component, I have already considered and rejected, as untenable). Alternatively, PMI argues to maintain the plant-to-plant direct tailing arrangements, on a basis that the arrangements the subject of the CEA extend beyond the life of Camp East as a TSF, and so, remain applicable in any period whilst Area One is being utilised as the relevant TSF. How that latter position is reached once the life of Camp East as a TSF had expired, is not clear.

180 By CML's response through Mr Abbott of 6 July 2009 (exhibit 156), the defendants' position was made more explicit as regards future TSF access by PMI. Mr Abbott advised, at page 3 of the concluding page of his response, in these terms:

If PMI needs tailings facilities, it is up to PMI to install them, subject to CML's approval and subject also to not unduly interfering with CML's operations. CML, as the tenement holder, will assist PMI in obtaining statutory approval, and will monitor PMI's compliance with statutory approvals.

181 I will observe, at this point towards the unfolding dispute as to three matters. First, the approval of a TSF by all relevant statutory authorities, is an expensive and time-consuming business. PMI would require a considerable period of notice, measured in the order of several months, not weeks, in order to comply with the numerous issues involved in obtaining all required approvals for its own TSF. This would be well known to the defendants, as they had encountered these processes in the past, in earlier obtaining statutory approvals for use of TSF 2, Rhodes Pit, Camp East and Area One, as their TSFs.

182 Second, it would appear to be implicit in Mr Abbott's 6 July 2009, response that a discrete and dedicated TSF used only by PMI, would still need to be situated somewhere on the defendants' mining tenements at Woodie Woodie. The faint suggestion at the trial and in the defendants' pleadings, that a PMI dedicated TSF site might be established by PMI at a location somewhere other than on the defendants' mining tenements - presents to me as a wholly artificial and unreasonable concept, well outside the scope of the overall objective intent of the SFA arrangements.

183 None of that, however, is to deal with the allied question of the terms upon which (ie, free, at cost, or on a commercial basis) an approved TSF on the Woodie Woodie tenements might then be accessed and utilised, from a cost perspective, by PMI? The SFA is wholly silent about PMI's utilisation of a TSF, unlike the expressly addressed position as regards the provision of power and water to PMI under cl 7 of the SFA - on the basis of 'no charge' to PMI. But the SFA says nothing about what other costs, if any, PMI is to bear, associated with use of a constructed and approved TSF as an essential part of its operations. I will address the 'terms of TSF use' issue further, in due course.

184 Mr Abbott's 6 July 2009 letter also addressed the issue of the defendants' 'make available' 'best endeavour' obligation. He wrote:

PMI can, for example, through the use of a screw classifier, access CML's superfines prior to CML tailing into Area 1. Otherwise it can recover superfines from Area 1 in due course once tailing there by CML has finished. If PMI wishes to access the material prior to its being deposited into Area 1, then we suggest that PMI makes arrangements for the use of screw classifiers to enable such access to occur. However, the arrangements must not unduly interfere with CML's operations, and for that reason we require you to provide us with details of any proposal to use screw classifiers for our prior approval. Without limitation, one of the issues which must be addressed is the presence of a by-pass system so that tailing from CML's plant cannot be interrupted by PML's screw classifier operations.

185 Finally, the 6 July 2009 letter addressed the issue of stockpiling of screw classified material at Area One. Mr Abbott observed that there was limited room for stockpiling such material - to the extent of no more than about 50,000 tonnes. His letter concluded by asking PMI to submit a proposal to include arrangements to prevent any stockpiling of screw classified material at Area One exceeding that limit.

186 The parties continued to debate these issues in their passing communications. In Mr Wade's letter (exhibit 157) to Mr Abbott of 8 July 2009, he observed, under the heading 'PMI access to Area One', at page 6, that it had taken a nominal 15-month period for CML itself to obtain (statutory) approval(s) to tail into Camp East.

187 There soon followed Mr Abbott's response on behalf of CML, 13 July 2009 (exhibit 159). As regards the issues of direct tailing and best endeavours, Mr Abbott now wrote:

We also reject your contentions regarding cl 4.1(b) of the 1996 Agreement. The fact is that diverting CML's tailings to PMI's plant prior to their deposition in a storage facility is not 'consistent with the operations' of CML. Having to direct tailings to PMI's plant (rather than directly to a tailings pond) significantly and seriously interferes with CML's operations. It effectively means that CML is no longer in control of its own operations, because it has to take into account what is happening at the PMI plant.

[I note that Mr Francis, during cross-examination, explained the same grievance in his terms to the effect that such a direct tailing arrangement had rendered the defendants 'beholden' to PMI: see ts 1086.]

By way of example, there have been 2 to 3 occasions over the last 6 months where PMI's plant has been unable to accept CML's tailings, and CML has had to shut down its plant for significant periods of time whilst arranging for tailings to bypass PMI's plant. Your suggested arrangements do nothing to remedy this problem.

189 Mr Abbott again raised the prospect of PMI using screw classifiers at Area One to extract Super Fines from the CML tailings, prior to deposition in that TSF.

190 PMI says that its secondary processing of the defendants' slurry reduces by about half the volume of waste material that ultimately would need to be deposited by the defendants into a TSF, by its extraction of the Super Fines. On the other hand, the defendants point out that PMI's plant also processes, in addition to the defendants' directly fed wet slurry, the additional excavated Super Fines solids - amounting to some 60% of PMI's feed throughput - from dry stockpiled material.

191 Mr Francis illustrated his point about PMI's volulmes of waste filling the defendants' TSFs very quickly, through a table in his witness statement (see exhibit YY, par 117). Mr Francis was cross-examined about the table and its methodology by counsel for PMI, particularly on the grounds that the table did not render a proper allowance by the defendants for the tailings storage capacity that would eventually be available at locations from which PMI excavated its Super Fines solid feed.

192 When I asked Mr Francis about this issue (see ts 1012 and 1014) by reference to PMI's extraction of dry stockpiled fines material in Rhodes Pit and TSF 2, thereby generating a cavity or void which could later be used as a repository for future tailing waste, his response was that the defendants had not yet decided whether TSF 2 would be used for tailings storage. That response, however, does not meet the extra storage potentiality point being made by PMI - which, in my assessment, must be accepted as correctly made.

193 The position had been reached that PMI's dry Super Fines excavation work as of early 2010, had cleared Rhodes Pit of all Super Fines materials. Mr Geraghty said and I accept that the only other dry source of feed for PMI was what was left and was currently being processed by PMI under stage 2 of its dry mining operation concerning TSF 2. That source was estimated as likely to be exhausted at current rates in approximately six to nine months (under par 225.3 of Mr Geraghty amended witness statement, dated 7 April 2010, exhibit Q).

194 These proceedings were commenced by writ on 14 July 2009. A direct tailing (plant to plant) status quo was preserved by undertakings of the defendants and the matter was programmed towards an early trial, bearing in mind a looming exhaustion of the Camp East facility as a TSF. The first stage of the trial was completed over five days in November 2009. Regrettably, the parties' joint preliminary estimates of a short trial, occupying no more than a week, were not realised. The trial consumed five hearing days between 16 - 20 November 2009 without even reaching a completion of PMI's case. By that time exhaustion of Camp East as a TSF was imminent, but had not finally been realised. That event came to pass 10 days later, on 30 November 2009. Area One then commenced being used as the next TSF, from 1 December 2009. It has been used by PMI since, on a 'without prejudice' basis, by reference to a resolution in these pending proceedings.

195 Only a matter of days before the trial began on 16 November 2009, the defendants sent communications to PMI (exhibits STB 8 and 9) on 12 and 13 November 2009, which I will refer to in due course in considering the issue of PMI's right to access to a TSF, under the SFA.

Trial during November 2009 and April and May 2010

196 As I mentioned, the trial commenced on 16 November 2009, running then for a period of five hearing days. At that time, the capacity of Camp East as a TSF was almost exhausted. In that period, I received evidence from Mr Ellison, Mr Wade, Dr Farrell and Simon Farrell.

197 The matter was then adjourned for the trial to be completed, with the next available dates convenient to all counsel only being in April 2010.

198 The trial recommenced on 8 April 2010, and continued for a further seven hearing days. In this period, the court received the evidence of Mr Geraghty, at which point PMI closed its case.

199 The court then received, on behalf of the defendants, the evidence of Mr Roy Francis, the (expert) evidence of Mr Lane (whose report concerned matters relating to the cost, construction, approval and operation of a TSF) and Mr Alan Quadrio.

200 The trial evidence was completed on 16 April 2010, at which point the defendants closed their case.

201 The parties each then prepared extensive written closing submissions, which then were addressed respectively by their counsel on 19 and 20 May 2010.

202 As the trial was not concluded in 2009, and the capacity of Camp East was exhausted as a TSF at the end of November that year, the defendants' undertook again, on a without prejudice and interim basis, to continue to tail direct into the PMPL plant, as well as to allow PMI to deposit its tailings waste into Area One. Those interim undertakings by the defendants were continued after I reserved my decision on 20 May 2010.

(a) are coarse rejects Super Fines for the purposes of the 1996 SFA?

203 This issue raises a pure question of the construction of the SFA. PMI seeks declaratory relief to the effect that coarse rejects are Super Fines for the purposes of that definition in the SFA. No claim for damages for contractual breach is advanced by PMI.

204 For convenience, I will repeat the definition of Super Fines from the SFA, which is in these terms:

'Super Fines' means:

(a) in respect of Mining Lease 46/150 [ie, Mike Mine], all minus 1.2 mm tailings that has left Valiant's manganese beneficiation plant in stockpile or in tailing ponds on the Tenements and Future Tenements; or

(b) in respect of the mining tenements set out in paragraph (b) of the definition of Tenement, all tailings that have left the wash plant or the beneficiation plant;

205 PMI's construction argument relies exclusively upon subpar (b) of the definition. PMI makes no contention as to any entitlement to coarse rejects at Mike Mine - which location is within the subject matter of subpar (a) of the SFA's Super Fines definition.

206 PMI contends, on a proper construction of subpar (b), understood in the context of the SFA as a whole, that 'coarse rejects' are 'tailings', and thereby they are also Super Fines. Accordingly, coarse rejects are said to be the property of PMI, by reason of their assignment to PMI under SFA cl 2.1(a) of, 'ownership rights to the Super Fines, in consideration of the payment of the Royalty'. PMI contends that it is entitled under the SFA to exploit, process and sell all Super Fines materials, including, so it is put, all coarse rejects to be found on the Tenements (save for at Mike Mine).

207 There is no issue of factual contention raised by the defendants over coarse rejects at Woodie Woodie having not left a wash plant or beneficiation plant of the defendants. On that point, I would refer to the evidence of Mr Francis (witness statement exhibit YY, par 45) and a Woodie Woodie manganese processing plant 'swim lane' diagram, that was explained by Mr Francis (exhibit VV). The diagram identifies, in terms of the column headed 'Plant Discharge', item 21, a reject product stockpile comprising material in dimensions of less than 75 mm and at a minimum of 1.2 mm. Exhibit VV shows a 26% reject product figure, comprising the components of 18% lump reject and 8% fines reject product.

208 According to PMI, a crucial consideration supporting its advocated construction outcome concerning coarse rejects, arises out of the deliberate use in the SFA of the broad phrase 'all tailings', seen in subpar (b) of the Super Fines definition. PMI then advances both positive and negative arguments towards its meaning, by reference to the word 'tail'. First it points to dictionary definitions, particularly in the context of mining, as addressing waste or residue product, see The New Shorter Oxford English Dictionary (Thumb Index Edition) (4th ed, 1993) 3204 (Meaning 7) 'the inferior or waste part of something; sediment, dregs'. See also, the Macquarie Dictionary (4th ed, 2005) 1434, 'the residue of any product, as in mining; leavings'. PMI then says that the coarse reject materials found at Woodie Woodie precisely fit, given their nature, these dictionary meanings of 'tailing', in the present mining context.

209 The next limb of the PMI argument is to point to a distinction as between subpar (b) in the SFA's definition of Super Fines, in contrast to subpar (a). Subparagraph (a), by reference to the Mike Mine location, makes reference to 'all minus 1.2 mm tailings'. But subpar (b) carries no similar minimum size delineation for its reference to 'all tailings'. This drafting distinction, as between subpars (a) and (b), was intentional, PMI says. Coarse rejects almost inevitably (see exhibit VV) would be of a size greater than 1.2 mm, since they have passed over (not through) the screen or screens set at that size limit (see the drum plant feed preparation screen and the cyclone plant feed preparation screen, items 9 and 10, respectively by reference to the key and explanation to exhibit VV).

210 PMI thus contends that coarse rejects are waste components of a mining production process, thereby tailings and therefore Super Fines, to which PMI is entitled under the SFA. The defendants reject PMI's construction approach.

211 Each side, during the trial, attempted to adduce surrounding circumstance evidence to buttress their divergent interpretation positions as regards this construction issue over coarse rejects under the SFA - by adducing evidence as to words spoken by various persons before the SFA of September 1996, whilst at Mike Mine, or at Woodie Woodie - when referring to the stacked coarse reject material as subject matter. To the extent that this sort of verbal utterance evidence could be admissible or of assistance in the exercise, it would need to be shown as consistent and coherent, as to a commonly employed and accepted terminology, used prior to the SFA (ie, before September 1996). PMI contended, by reference to evidence given by Mr Ellison (see ts 369 - 374 (in cross-examination)), that coarse reject material had been referred to as coarse tailings (thereby presumably assisting its constructional position that coarse rejects were tailings, and therefore, were Super Fines). PMI also relied on some terminology utterance evidence in this regard, from Mr Geraghty (see ts 724 and 798). But Mr Geraghty was not engaged by PMI until well after the SFA had been entered. I am not assisted by his evidence on this point.

212 The defendants sought to fortify their non-acceptance of PMI's construction position over coarse reject material, by some nomenclature utterance evidence of their own. Thus, there was evidence sought to be adduced from Mr Francis (employed from July 2006) to the effect that he had never heard of coarse reject material (at Woodie Woodie) being referred to as tailings, (see Mr Francis' witness statement, exhibit YY, par 44). Like negative evidence was sought to be adduced from Mr Quadrio, who was employed between December 1998 to July 2006 by the defendants (see Mr Quadrio's witness statement, exhibit DDD, par 75). Again, this evidence is from witnesses who were only engaged by the defendants subsequent to the SFA in September 1996, and it could not assist me.

213 In the scheme of things, a resolution of the question of construction arising out of words used in the SFA (read as a whole), turns primarily upon the terminology deployed within that written agreement. What I assess as the rather loose and inconsistent vernacular employed by various representatives of PMI or the defendants, in the period prior to 10 September 1996, is of little assistance to me in this case. The written components of the SFA must be construed in the light of that instrument's commercial purpose and object (ie, its genesis) and by reference to any relevant mutually known surrounding facts and circumstances which could bear upon the construction exercise required.

214 I make the following further factual findings concerning coarse rejects.

215 At Mike Mine, the coarse reject material was stacked separately from the tails produced as a result of the use of the 'dinosaur'. I refer to the evidence of Mr Christopher Ellison (ts 324); and the evidence of Dr Farrell (ts 423 - 424, 437). (PMI contends that at Mike Mine the coarse rejects and other tailings were deposited together, reliant upon Dr Farrell's evidence in cross-examination (ts 423). But my assessment of that evidence is to the contrary, namely that Mike Mine coarse rejects were separately stacked from the wet tails produced by the dinosaur.)

216 A further contentious factual issue between the parties relates to PMI's joinder of issue over whether it was the defendants' expressed intention to further process these the coarse rejects, at some stage. PMI says that this assertion is a very recent innovation, pointing to Mr Francis' evidence at exhibit YY, par 47, to the effect that the coarse rejects are distinguishable from tailings, on a basis that they were stockpiled above ground for possible future processing. On the other hand, the defendants assert that in 1996 they had the technology available to extract manganese from coarse rejects (by adjusting the specific gravity of the processing plant) had they been so inclined. However, the defendants say that this would have been uneconomic, owing to the low price at the time for a unit of manganese, which was in the region of about $1.85 to $1.95 (whereas at trial the price was $6 a unit).

217 The defendants say and I accept that their generation of coarse rejects out of their process plant was capable of being significantly varied (down to zero, were that decision made) simply by altering the level of specific gravity that was set in the beneficiation plant: see Mr Francis' evidence ts 867 - 868, and compare the evidence of Simon Farrell ts 518, and Mr Geraghty, ts 734. The defendants also assert that merely because some coarse reject materials at Mike Mine have, as a matter of convenience and availability, been used in the past, for road building and pad construction (see Mr Ellison, ts 325), that this could not bear upon what future use might be decided to be made of them by the defendants, depending upon the economics of a future use. This must be correct, but once again in the context of the constructional exercise of the SFA that is required, I find myself not much assisted in the end, by a controversy over how coarse reject materials may have been utilised in the past by the defendants.

218 Whatever may have been the plans or state of mind of the defendants concerning the possible utilisation in the future of the coarse reject material, as at 10 September 1996, these plans or objectives of the defendants were not, I find, communicated to PMI. They remained wholly an internal matter within the defendants. In other words, I find no evidence of any particular discussion between a high level representative of PMI (such as Mr Ellison or Mr Kiernan) and a representative of the defendants (such as the Farrells) communicating the defendants' corporate position over the future use of coarse rejects, prior to the SFA being entered into in 1996, sufficient to constitute a mutually known fact that might relevantly bear upon the construction exercise over the term Super Fines, under the SFA. It is a matter of record that the terms 'coarse reject', or 'coarse rejects', or 'course tailings', are simply not found at all in the SFA.

219 From the standpoint of the SFA construction exercise required, I also do not find any assistance in the fact that the defendants, from time to time, used the coarse reject materials stacked in stockpile at Woodie Woodie. That use was made both in the operations of Portman Mining and then in the following operations of the defendants from 1996. The coarse reject material was used for many purposes, such as building roads, constructing crusher pads or hardstand areas, building up and coating of embankment walls and the weatherproofing of pit operations during wet season (see exhibit YY, par 47; exhibit DDD, pars 66 and 83; cross-examination of Mr Francis, ts 1065; and cross-examination of Mr Quadrio, ts 1212 - 1213). But it is equivocal, I think, and only to be expected that at a remote outback mining location that a party would be driven to use whatever limited materials were available to it for operational purposes at the time, without reading much more into those decisions.

220 I do find, however, some significance, from the perspective of assessing the commercial object and purpose (ie, genesis) of the SFA, in a file copy of a communication sent by Mr Michael Kiernan as a director of PMI (then known as Port Services) to Simon Farrell, the then managing director of the first defendant, on 13 February 1996 (exhibit 11). The communication was, of course, sent some seven months prior to the entry of the SFA. I also recognise that it was sent by Mr Kiernan rather than Mr Ellison for PMI, and that it would appear uncontroversial that Mr Kiernan played a lesser role than Mr Ellison in negotiations with the Farrells in the lead up to the SFA. I also recognise, of course, that evidence of negotiations per se as between parties, is not admissible in relation to the construction exercise, see Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; [1982] HCA 24; (1982) 149 CLR 337 (Mason J). Nevertheless, I am somewhat assisted here, from a perspective of insight towards the evolving object, and purpose of a proposed transaction which became the SFA, by the terms of the 13 February 1996 communication which was in the following terms:

Dear Simon,

Re Superfines recovery project

This will confirm our discussion regarding the above matter.

Port Services would like to acquire the rights to salvage Valiant's manganese minus 1.2 mm washed feed product. This would include all Valiant's stockpiles or tailings containing minus 1.2 mm manganese product, from the Mike Pit, future satellite pits and product from the Portman leases should Valiant acquire these.

Port Services would propose to:

1. Build, fund, operate and manage a small processing plant to process some 70,000 tonne per year.
2. Pay Valiant a royalty of $8.40 per tonne of washed feed product acquired and $5 per tonne for product recovered from dams and stockpiles of waste.
3. Establish a marketing Joint Venture with Valiant in which Valiant would determine sales destinations and pricing policies.
4. Share equally with Valiant in profits on product sales.

We project total FOB costs (including Valiant and Government Royalties, ship loading costs) to be $90 per tonne. Profit on sales equates to $20 per tonne at a sale price of $110 per tonne.

Valiant's annual income from this proposal would be estimated as:

1. Product royalty $588,000
2. Profit share $600,000

$1,188,000

We would plan to establish a similar process to recover waste from the Portman leases. Income for Valiant from that project would be of a similar nature.

We will await your reply to our proposal.

221 There was some controversy over this communication during the trial. The original communication was not tendered. The tendering of a file copy of the letter, attempted to be advanced during cross-examination of Mr Ellison on day three of the trial, was objected to. Eventually, however, by the end of the trial, the copy entered the evidence as exhibit 11, and the original file copy, as exhibit 11A.

222 The copy carries a longhand notation by Mr Kiernan which, in effect, forwards the file copy to Mr Quadrio, with Mr Kiernan's note, 'Found this in my files when moving. You keep in your files', (with a notation 8/3, and what appears to be Mr Kiernan's signature). Mr Kiernan was not called as a witness at the trial by the defendants. But the terms of this communication are clear and essentially speak for themselves.

223 It is important at this point to keep in mind the overall chronology in terms of where this communication sits. I find it was received by Simon Farrell in or around mid February 1996. The penultimate sentence indicates that the letter's proposal was essentially conceived for minus 1.2 mm manganese product from Mike Mine, with a similar plan envisaged with the soon to be acquired 'Portman leases', at Woodie Woodie.

224 In February 1996, the acquisition of the Portman tenements had not yet been completed by the defendants. However, exhibit P, a prospectus issued by the first defendant, includes a letter to shareholders of 24 October 1996. The signatories were Mr R H Carnegie, chairman, and Mr S J Farrell, managing director. The letter (first paragraph) indicates that the first defendant, through its wholly owned subsidiary (the second defendant) by then, had acquired all the assets and undertakings of the Pilbara manganese project owned by Portman Mining Ltd, consisting of the Woodie Woodie manganese mining plant and equipment, for a consideration of $10.75 million. The acquisition was announced to the ASX on 19 July 1996. Notes to the financial statements in that prospectus for the half year ended 30 June 1996 (page 10) confirm that settlement was completed on the transaction, on 19 July 1996. See also a note as to subsequent events, item 3(1), page 10, in the prospectus.

225 So, by the time of entry into the SFA on 10 September 1996, the acquisition of the Woodie Woodie manganese operation of Portman Mining Ltd, in terms of its tenements, plant and equipment, had by then been complete for just under two months.

226 I would reject Mr Ellison's trial evidence to the extent that it was faintly suggested that, at some point, an earlier draft of a proposed SFA had contained a definition in subpar (b) for the term Super Fines - which did refer to minus 1.2 mm tailings, and which reference was deliberately removed as a part of the negotiation process. The argued significance of the excision is that those words were then deliberately removed to circumvent there being any Super Fine size delineation so as, in that process, to capture coarse rejects under the revised and expanded ambit of (b). This approach to the construction of the SFA was presumably advanced on the basis of an exception to the receipt of parol evidence as to parties' negotiations, as was referred to by Mason J in Codelfa Construction (352 - 353), at the paragraph commencing, '[T]here may perhaps be one situation in which evidence of the actual intention ...'). But no earlier drafts were produced to support the contention. The excision evidence is simply not sufficiently targeted or reliable enough to sustain the PMI argument.

227 I now move to my final evaluation of this issue regarding the SFA's constructional coverage of coarse reject material, which, in my view, is primarily to be resolved by reference to the written content of the SFA, read in its overall context and assisted by some evidence as to the commercial purpose and object of the SFA that is provided by exhibit 11, Mr Kiernan's file copy of the letter sent on behalf of PMI to the defendants, of 13 February 1996.

(b) coarse rejects - conclusions as to construction of SFA

228 In the end, the following considerations lead me to a conclusion as a matter of the construction of the SFA as a whole, that the coarse reject materials to be found at the defendants' tenements at Woodie Woodie, are not within the scope of subpar (b) of the definition of the term 'Super Fines', in the SFA.

229 First, coarse rejects as subject matter, are not explicitly referred to within the four corners of the SFA. It becomes from there a matter \of winkling that conclusion out of subpar (b) of the definition of Super Fines and, in particular, out of the phrase 'all tailings found therein'. I accept that coarse rejects, as subject matter, are in the nature of a mining waste or residue component that is generated as a result of crushing, washing and the defendants' beneficiation plant's overall operation (see exhibit VV). As a consequence, they may well fit within the ambit of a dictionary meaning of the word 'tailings'. But that is insufficient for PMI. Rather, the true assessment required is by reference to whether coarse rejects, as a subject matter, fall within the meaning of the term 'Super Fines', as that expression is used within the overall context of the SFA.

230 Second, albeit not conclusive, exhibit 11, being Mr Kiernan's file copy of his letter to Simon Farrell of 13 February 1996, suggests that the genesis of the proposal by PMI to the defendants was 'Valiant's manganese minus 1.2 mm washed feed product', being the materials generated as a result of the work of Mr Ellison's dinosaur at Mike Mine. The proposal was extended to 'minus 1.2 mm manganese product' from the Portman leases, 'should Valiant acquire these'. Waste from the Portman leases as referred to in the penultimate paragraph of Mr Kiernan's letter, by reference to a 'similar process', is a reference back to Valiant stockpiles or tailings containing minus 1.2 mm manganese product.

231 Exhibit 11 was sent seven months before the SFA was finally consummated in September 1996. So there was obviously considerable scope for an evolution in the parties' positions, subsequent to this proposal of mid February 1996. Nevertheless, by reference to exhibit 11 the genesis of the deal was for a transaction concerning 'minus 1.2 mm manganese product', not for 'all tailings'. To the extent that PMI suggests that the ambit of the subject matter in the SFA then expanded to embrace coarse reject materials, by the time the SFA was consummated in September 1996, I would have expected, in such an event, that it would be more likely that coarse rejects, as an explicitly identified further subject matter, would have been specifically and carefully identified in the SFA. The fact that coarse rejects are not identified discretely in the SFA, tends against PMI's advocated construction of the SFA on this issue.

232 Third, another consideration that I find favours the defendants is that cl 4.1(d) of the SFA contains a covenant by the defendants in favour of Port (PMI) in terms that the defendants:

[W]ill not reduce the screening cover on the heavy media plant or other processing plants to under 1.2 mm, it being acknowledged by Valiant and Manganese that Port shall design the Plant to process Super Fines specific to this size and that Port shall suffer loss and damage if this covenant is breached.

The component of cl 4.1(d), dealing with the design of PMI's plant using the phrase 'to process Super Fines specific to this size', is a further pointer to the conclusion that (coarse reject) material, which is of a size uniformly greater than 1.2 mm, was never within the (objectively assessed) subject matter of the SFA as a matter of construction.

233 As I have already observed, particularly by reference to exhibit VV, coarse reject materials, in terms of their size, are invariably of a dimension greater than 1.2 mm. From exhibit VV, which I find of reliable assistance, the 18% of coarse rejects would be materials arising out of the process undertaken by the two heavy media drums (note 14 in the explanation). As reject lump material they would be in the size range of between 75 mm - 6 mm. The other 8% of coarse reject material is generated out of the heavy media cyclone as part of the processing of unbeneficiated fines, and thereby generating coarse reject material in the range of 6 mm to 1.2 mm. All this coarse reject material is of a dimension greater in size than 1.2 mm.

234 During argument before me, it appeared to be accepted that PMI would need to introduce a crusher at Woodie Woodie in order for PMI to have the capability of processing coarse reject material in conjunction with its existing plant. PMI contends that there would be no impediment to doing this, indeed that it had, in the past, specifically brought in a crusher to Woodie Woodie on occasions when required by reference to the exigencies of its need to process bigger feed material the subject of the June 2007 Agreement (see Mr Ellison ts 327; Mr Geraghty ts 800; and exhibit 107).

235 But the prospect PMI might choose to augment its existing plant's capability by an addition of a crusher in order for PMI to process coarse reject material, seems to be something of an irrelevant sidewind. The 1996 SFA at cl 4.1(d) says that PMI's plant would be designed to process Super Fines specific to cater for material of a size under 1.2 mm. This strongly points against the parties' intention (objectively assessed) to embrace coarse reject material within the subject matter of 'Super Fines', over and above the smaller (ie, under 1.2 mm) waste material that was expressly addressed. The words deployed in the SFA simply do not deliver the additional coverage to larger sized material that PMI submits for.

236 Fourth, cl 1.1 of the SFA, defines 'royalty', as:

'Royalty' means a royalty of:

(a) $8.40 per tonne for all minus 1.2 mm manganese concentrate product which has been derived from feed directly entering Port's processing plant from Valiant's or Manganese's beneficiation plant;

(b) $5.00 per tonne for all minus 1.2 mm manganese concentrate product derived from feed from stockpiles and tailings ponds.

Reference to 'minus 1.2 mm manganese concentrate product' is a reference to either the Special Product or Standard Product produced by PMI (see cl 1.1 definitions), being the end product, as a result of the processing operations of PMI's plant (remembering that cl 2.1(a) of the SFA assigns to PMI, ownership rights to 'the Super Fines', in consideration of PMI's payment of the royalty).

237 No-one suggests that if (hypothetically) coarse reject material formed a component of what is Super Fines under the SFA, that PMI would be entitled to the coarse reject material for free. Furthermore, the SFA, as drawn at cl 5, provided for PMI and the defendants to split the ultimate net profit arising out of the sale of end product on a 50/50 basis: see SFA, cl 5.1(b). (I earlier noted a degree of inconsistency over the designated consideration payable by PMI for the Super Fines in the SFA, as between cl 2.1(a) and cl 5.1. Clause 5.1 also refers to access and other rights being granted to PMI. However, nothing, for present purposes, seems to turn upon that issue.)

238 If coarse reject material was to be the subject of a royalty payment to the defendants under the SFA, there could be no suggestion of that material being directly fed to PMI's plant. The $8.40 per tonne rate could not apply. That would leave the level of payment at $5 per tonne, on a basis of payment for materials 'derived from stockpiles and tailing ponds'. Reference to tailing ponds would not be applicable to coarse reject materials, although the word 'stockpiles', could apply. Importantly, however, the defendants would only be entitled to the $5 per tonne payment in respect of end product produced by PMI, if the end product was derived from 'minus 1.2 mm manganese concentrate product'. If PMI accessed coarse reject material of a dimension in the size range of between 75 mm to 1.2 mm then, unless PMI's refinement processes culminate in that coarse reject material becoming an end product that is reduced in its dimensions to below 1.2 mm, there would seem to be no obligation upon PMI to render any payment for it to the defendants under the definition of 'royalty' in the SFA. So, the defendants assert, for instance, PMI might take larger coarse rejects, process them, and then generate an end product for sale at a dimension not going below 1.2 mm. On that scenario the defendants would not be entitled to payment for the coarse reject material processed as feedstock, albeit that under cl 5 of the (unvaried) SFA they would have been entitled to receive 50% of net profit (probably for Standard Product, on the basis of there being less than 52% manganese content).

239 The hypothesised scenario above resulting in the defendants potentially not receiving any royalty payment in respect of coarse reject material under the SFA, if processed by PMI to generate an end product size above 1.2 mm, is out of harmony with the overall commercial structure of the payment for feedstock arrangements as set down under the SFA as a whole. It is another pointer against a construction conclusion that coarse reject material forms a component with the defined term 'Super Fines', for the purposes of the SFA.

240 Fifth, I am also of the view that the terminology 'Super Fines' used under the SFA, as a matter of nomenclature, strongly grates conceptually against PMI's attempt to fit larger sized coarse reject material within the ambit of that term. When the SFA was entered in 1996, there appears to have been a fairly well understood distinction, as between 'lump' and 'fines' manganese product - with larger lump product the more valuable. The term 'Super Fines', in my assessment, seeks to classify an even smaller category of material than 'fines'. A deployment of terminology applicable to a smaller category of product than fines was perfectly appropriate in the circumstances where prior to the SFA, being entered all parties had experienced and been familiar with Mr Ellison's prototype dinosaur operating at Mike Mine - to extract smaller manganese fines material out of the defendants' slurry waste at Mike Mine. In other words, there is a logical and understandable symmetry found in the SFA describing three categories of ore from which a potentially saleable manganese end product is produced, by reference to the diminishing size of the material, beginning with lump, proceeding to the smaller fines, and then identifying the even smaller Super Fines material. Attempting to fit the larger coarse reject materials into that last tripartite classification of Super Fines is, by reason of that material's larger dimensions, the logical equivalent, in my view, of trying to squeeze the elephant into a telephone box.

241 Sixth and last, PMI points out the difference in terminology used as between subpar (a) and subpar (b) in the definition of 'Super Fines' in the SFA. PMI argues that the ultimate omission of any reference to minus 1.2 mm tailings in subpar (b) in the SFA must mean that bigger coarse reject material was intended to be captured under subpar (b) where 'all tailings' otherwise meets the criteria set under subpar (b). But bearing in mind the factors which I have already mentioned, it does not seem to me that what I would assess at the highest as a drafting curiosity as between the two subparagraphs comprising the definition of 'Super Fines' in the SFA, could outweigh the countervailing constructional considerations I have now discussed. It is not possible, of course, in every contract case to render perfect symmetry in relation to every subclause found in every contract. Subparagraph (a) in the SFA's definition of 'Super Fines' is itself hardly a model of clarity - nsofar as it commences with a direct reference to the mining lease (46/150) which was the Mike Mine tenement, and then goes further to conclude on a basis of a wider reference to 'Tenements' and 'Future Tenements'. Bearing in mind the SFA's definitions of 'Tenements' and 'Future Tenements' in cl 1.1, a draftsperson's (objective) intent expressed under subpar (a), by reference to the phrase 'on the Tenements and Future Tenements', poses a real difficulty over whether subpar (a) was also directed to areas geographically beyond Mike Mine. That is a conundrum that is unnecessary to finally resolve. However, it does point up the underlying difficulty in any search for an absolutely perfect outcome from within the wording of the SFA's Super Fines definition.

242 The defendants suggest by their written submissions that there is no reference to 'minus 1.2 mm' (tailings) in subpar (b) of the definition of Super Fines, because as at September 1996, the parties were not then certain as to the dimensions of the screens used at the plants at Woodie Woodie (I also note that although subpar (b) of the definition of Super Fines refers to both a wash plant and a beneficiation plant, subpar (a) mentions only a beneficiation plant - although undoubtedly there must also have been a wash plant used at Mike Mine, since the washing of the crushed ore is such an integral aspect of the overall process of extracting manganese lump and fines from ore). The defendants argue that at the time the SFA was entered, there remained some uncertainty about the screen sizes used at Woodie Woodie. They say that the evidence of Mr Ellison as to the screen sizes used at Woodie Woodie as being 1.2 mm, was merely an assumption based on his belief about an industry standard at the time, rather than the recounting of Mr Ellison's specific knowledge: see Mr Ellison's cross-examination ts 326 - 327. The defendants further suggest that by reference to exhibit P (pages 14 - 15), that in 1996 the screen size used at Woodie Woodie was not 1.2 mm. Rather, it was 1.0 mm - and that the plant was closed for maintenance and changeover during the June quarter of 1996.

243 However in my assessment, that general contention by the defendants as to screen size at Woodie Woodie cannot stand against the clear terminology used by cl 4.1(d) of the SFA, under which the defendants' covenant in favour of Port that 'they will not reduce the screening cover on the heavy media plant or other processing plants'. The covenant not to 'reduce' inherently presupposes, I find, the existing state of affairs. That existing state, as a matter of construction, must be the fact that the existing screening were at the level of 1.2 mm at Woodie Woodie. That also accords with Mr Ellison's understanding of the industry standard. Therefore, I conclude that the defendants' hypothesised explanation for a drafting discrepancy, as between subpar (a) and subpar (b) of the definition of 'Super Fines', is not made good.

244 In the end, this aspect will not be capable of a resolution by perfect symmetry. Bearing in mind the cumbersome construction of subpar (a) of the definition of Super Fines, that is hardly surprising. A more plausible drafting rationale, if there is one, for different terminology used as between the subparagraphs, may lie, in my view, in the draftsperson's assumption that use of the terminology 'minus 1.2 mm' in regard to the noun tailings, may have been tautologous on the basis that the only waste material leaving the defendants' wash plant or beneficiation plant and intended to be covered under subpar (b) of the definition, of necessity, must have been of a dimension below 1.2 mm, since the draftsperson only had in mind material that passed through the screens (rather than passing in the wash across and over those screens) in the washing and beneficiation process. Towards Mike Mine, under subpar (a) of the definition, the draftsperson did not allow in that definition for a wash plant, possibly reflecting different instructions in regard to processes at Mike Mine.

245 In any event, whatever might be said about the drafting curiosity arising out of the omission of words in subpar (b), as a matter of contrast between the different limbs of the definition of Super Fines in the SFA, this consideration in the end, is heavily outweighed by the other factors to which I have referred.

246 Accordingly, I am, in the end, against PMI's advocated construction of the SFA upon the issue of coarse reject coverage. Therefore, I will not make the declaration sought by PMI concerning coarse rejects being assessed to be Super Fines, as a matter of the proper construction of the SFA.

(c) obligation of the defendants to provide PMI with the use of an approved TSF

247 PMI pursues further declaratory relief which, under its formulation, submitted on the penultimate day of the trial, essentially seeks to have the court declare that under the terms of the SFA (as amended), that the defendants are obliged (see cl 2.5 of the proposed declaration in the amended minute of relief sought, dated May 2010, in part):

[T]o allow the Plaintiff to pump tailings discharged from the Plaintiff's Manganese Fines Treatment Plant to Area 1 Tailings Storage Facility or provide another tailings storage facility to receive the said tailings.

248 The declaration is prefaced in its proposed duration to last essentially for whatever period PMI and the defendants' plants are configured and are operated together (as marked on the aerial photograph which is exhibit 1).

249 The essential argument of PMI concerning the required provision to it by the defendants of a TSF is found at par 10 of the further re-amended stated of claim in these terms:

On a proper construction, the [SFA] contained an implied term that the first and second defendants would provide tailings storage facilities into which the plaintiff could discharge tailings from the plaintiff's Plant. (emphasis added)

In support of the implied term as is contended for, PMI relied upon some matters of asserted common knowledge as between PMI and the defendants, as at the date of the SFA, being part of alleged mutually known extrinsic facts and circumstances, and set out between pars 8.1 - 8.23 of the further re-amended statement of claim. PMI also relied upon so-called 'Subsequent Conduct' referred to in par 9 of the further re-amended statement of claim. Alternatively, it supported the implied term on the basis that it fulfilled all the criteria of BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] HCA 40; (1977) 180 CLR 266 as referred to in Codelfa Construction (Mason J). In other words, it was contended by PMI that its advocated implied term was reasonable and equitable, necessary to give business efficacy to the SFA, and that its implication was obvious, capable of clear expression and did not contradict any express term in the SFA.

250 As the trial proceeded, it became apparent that the real point of contention as between the parties was not so much over the defendants' obligation to allow or provide PMI with an area within the defendants' tenements at Woodie Woodie to discharge PMI's process waste. Rather, the real controversy was over whether PMI should bear any of the costs associated with it being allowed or provided with an approved TSF by the defendants.

251 Before I address the ultimate implied term issue, it is necessary to say a little more about framework underlying this aspect of the trial. First, and obviously, the implied term contended for under par 9 is strongly denied by the defendants (see re-amended defence par 7).

252 Second, it is apparent that the SFA by its terminology, does not stipulate that the defendants are to provide PMI with use of a TSF, or with access to the defendants' TSF at Woodie Woodie. The defendants contend that this omission is constructionally significant - since at other places the SFA is very specific as to what PMI gets for free, or in allocating costs as between the parties for various matters. For instance, cl 7 provides, in effect, that the defendants are to supply all power and water to PMI at no charge, to enable PMI 'to conduct the Operations'. At cl 8 of the SFA, the defendants are to make accommodation available to PMI at the defendants' camp at a specified cost of $50 per man per day. By cl 3.1 of the SFA, there is an acknowledgement by the defendants that in order for PMI to treat and process the Super Fines which are the subject of the SFA, that:

Port intends to design, construction, operate and manage at its sole cost the Plant to process high quality manganese fines. (emphasis added)

The 'sole cost' of PMI policy consideration (save for the specific situations as expressly provided for) is a discernible sentiment in the SFA (objectively assessed).

253 PMI now does not contend for any express term in the SFA requiring the defendants to provide it with access to, or the use of a TSF. PMI nevertheless contends (before it seeks to establish its implied term) that various express terms of the SFA would be infringed, if the defendants were not to provide it with use of a TSF. (See par 22, further re-amended statement of claim, which, by reference back to pars 6.3, 6.5, 6.9, 6.11 and 6.12 appears to contend for breaches of cl 3.1, cl 2.1(b), cl 2.2(a), cl 2.1(c), cl 2.2(f) and cl 4.1(b) of the SFA.) I have earlier set out the provisions of the SFA at [83] of these reasons.

254 Clause 4.1(b) is a provision highly relevant to an assessment of the obligations of the defendants, to PMI, in relation to PMI's arguments over the defendants' obligation to tail directly into PMI's (existing) plant (the distinct question I deal with next). But in my view, cl 4.1(b) of the SFA, is of no assistance to PMI in relation to arguments about the defendants' provision of a TSF.

255 The other express provisions of the SFA which PMI mentions, taken together, rest upon the definition of 'Operations', within the SFA (particularly the phrase 'all of the activities to be carried out by Port to build, operate and manage the Plant on the [defendants'] Tenements'). Part of operating and managing PMI's plant, inherently must involve a creation of some waste product which would then need to be properly and lawfully disposed of. Subparagraph (b) of the definition of 'Operations' in the SFA mentions treatment and processing of Super Fines through the PMI plant or plants. PMI contends that it could hardly enjoy an exclusive right to 'remove, treat and exploit' its Super Fines, if there is at the same time an absence of any allied right in PMI to use an approved TSF - into which it may discharge its own waste, a lack of which in practice, would prevent PMI from operating.

256 In order to evaluate PMI's arguments based upon breach of these express terms, as well as PMI's argument contending for its implied term based upon BP Refinery (Westernport) criteria, it is necessary to consider and assess some mutually known surrounding facts and circumstances, which PMI contends for under par 8 of its statement of claim, to the extent that they may bear upon these arguments. Essentially, these matters are found at between pars 8.1 - 8.17 of the further re-amended statement of claim. Between pars 5(a) - 5(m) of their re-amended defence, the defendants either admit, deny or seek to qualify the breadth of some of the facts PMI contends for.

257 Of significance to arguments concerning a provision to PMI of use of a TSF, I find there to be established (beyond what is already admitted by the defendants) the following, as mutually known surrounding facts and circumstances subsisting as at, and prior to, the entry into of the SFA. The parties knew that the processing of manganese at the defendants' plant:

(b) in certain circumstances, involved the addition of processed water;

(c) involved the production of tailings, comprising Super Fines and waste material which, if and when added to water, formed a slurry;

(d) involved the deposition by the defendants of tailings into an approved TSF (which at the time comprised a disused mine or pit);

258 PMI has also established what it contends at par 8.5, namely that '[t]he storage facility for wet waste slurry material is generally known as a tailings storage facility' (ie a TSF).

259 I note the defendants' pleaded denial to pars 8.8 - 8.9 of the statement of claim, concerning the assertion about a reduction in volume of tailings, as a result of PMI's proposed operations (I read that as the proposed PMI operations at both Mike Mine and at Woodie Woodie under the SFA, since both fall under the definition of Tenements, as defined). The defendants in denying pars 8.8 and 8.9, then say, at p 5(h):

(A) The Plaintiff's proposed operations would involve treatment of tailings already disposed of by the Defendants (at their cost) into an approved facility;

(b) If the Plaintiff and Defendants agreed at any future time on the terms by which the Plaintiff could take tailings feed directly from the Defendants' plant, the volume of such tailings would only be reduced if the Plaintiff confined its operations only to treating such direct feed tailings, and not tailings which the Defendants had already deposited into a storage facility.

260 This point raises an issue over waste storage saving benefits, which PMI submits the defendants would eventually obtain under the SFA, over and above a receipt of royalty payments (or 50% of the net profits arising from PMI's sale of its 'end product'). PMI says the storage benefit was that the defendants, with the implementation of the SFA, would, by reason of PMI's extraction of Super Fines, then need less TSF capacity. However, the defendants respond that there would not necessarily be any such storage benefits, depending upon the levels of PMI's processing of Super Fines materials extracted from tailings ponds and stockpiles.

261 There is something to be said in favour of the merits of both sides' positions over the issue of TSF storage saving benefits. However, the clash satisfies me that there could be no mutually known and uncontentious surrounding fact (as at the time of the SFA in 1996) in relation to a likely reduction in the defendants' level of required future tailings storage capacity.

262 At par 8.12 of its pleading, PMI comes close to formulating an alleged mutually known fact as to the defendants' required provision to PMI of a TSF. PMI contends at par 8.12:

It was a necessary and essential incident of carrying out of the plaintiff's operations that the plaintiff be able to discharge the Waste Tailings into an appropriate tailings storage facility consistent with the mining operations on the Tenements;

263 But it will not be forgotten that as at 10 September 1996, PMI's operations at Woodie Woodie were wholly conceptual. In fact, as events transpired, they were not to be realised until 2005. All that had occurred prior to September 1996, was an operation of a prototype dinosaur plant at Mike Mine, extracting Super Fines material that had then been stored, but not processed any further. The defendants' response to par 8.12, at par 5(k) of the defence, sees this alleged mutually known fact denied, save to assert:

(A) it would be necessary for [PMI] to discharge the waste tailings from its plant into an appropriate [TSF];

(B) such discharge wherever made, would (inter alia) need to be in accordance with such conditions as may be imposed under the EPA.

264 In my assessment, the defendants' response position is the more appropriate. In effect, it accepts that it would have been mutually known that PMI would need to discharge its waste tailings. This response of course, does not bear upon the allied issue of which party would or should bear the cost of the deposition of PMI's waste into a TSF.

265 At par 8.17, PMI contends for this mutually known fact:

[W]hether or not the Super Fines Agreement was entered into, the first and second defendants as part of their own operations required a tailings storage facility;

266 The defendants' response under par 5.0 is that:

[S]ave to say that the Defendants then had an approved tailings storage facility, admit subparagraph 8.17 thereof;

267 The defendants argued at the trial that they have to date, allowed PMI to use the defendants' approved TSFs at no cost: first TSF 1 (Rhodes Pit); then TSF 2 (the defendants' purpose constructed TSF); then Camp East (albeit in accordance with and under express terms of a June 2007 Agreement and; then later, under the CEA of March 2008). But the defendants now contend that they have no obligation to continue their largesse to PMI. This stance, in 2009, led to the defendants advising PMI, that once the Camp East facility had reached its capacity limits as a storage facility, that PMI would not be allowed to continue to discharge its waste into the next TSF which the defendants had caused to be approved, namely Area One. This stance drove the parties into furious disputation, eventually resulting in undertakings being provided to the court on the interim basis, pending the determination in this litigation of the correct contractual construction of the SFA and CEA. Those interim undertakings were a retreat from the defendants' earlier communicated position, namely that upon Camp East reaching its storage limits, the defendants would cease tailing their wet slurry emission directly from their plant into PMI's plant, and also cease allowing PMI to deposit any of its waste into Area One. Sensibly, the defendants have retreated from that stance by the without prejudice, interim undertakings given during this litigation. Nevertheless, they seek to press an ultimate position as fully justified as a matter of construction under the SFA.

268 Insofar as PMI contends for the likely breach of SFA terms as a matter of construction, absent being allowed a TSF, the defendants' join issue - contending that a denial of access to PMI to Area One on its part would not, on any view, amount to an interference with PMI's right to operate its plant or to process Super Fines. The defendants also contend that the implied term sought to be established, fails to meet the BP Refinery (Westernport) touchstones required for implication. The defendants' stance in the letters dispatched shortly before the commencement of the trial on 16 November 2009 in open correspondence is the defendants' formal position.

269 It is necessary then, to set out the terms of exhibits STB 8 and 9, which are open communications to PMI sent on the defendants' behalf from the defendants' solicitors on 12 and 13 November 2009 respectively - and as to which PMI has not responded (see cross-examination Mr Geraghty ts 739 - 740).

270 By exhibit STB 8, the first defendant's company secretary Mr Abbott, advised Mr Wade on 12 November 2009:

Tailings facilities

I refer to my letter of 6 July 2009, in which, amongst other things, CML confirmed that it had no ongoing obligation to provide a tailings facility to PMI for its operations at Woodie Woodie.

That remains CML's view, and CML will be pressing for a determination by the Court in its favour in relation to this issue.

Notwithstanding the above, to enable PMI to continue operations whilst it designs, obtains consent for and constructs, its own tailings deposition facility, I advise that CML is prepared to enter into a separate agreement to allow PMI to tail into Area 1, for up to the earlier of four years or when Area 1 is full, on the basis that PMI pays CML for that access on reasonable commercial terms.

In CML's view, reasonable commercial terms would comprise the following:

• a fee of $80,000 per month, payable in advance without deduction or setoff. The basis for the amount of the fee is primarily related to the cost incurred by CML in pumping, from the tailings storage facility to the process water dam, the additional proportion of return water generated by PMI's tailings activities;
• agreement by PMI to not tail a volume of more than an agreed number of tonnes of tailings per calendar month into Area 1 [we suggest 37,500 tonnes];
• confirmation by PMI that it will comply with CML's reasonable directions regarding tailing into Area 1 (which directions would be given from time to time pursuant to clause 2.4 of the Super Fines Agreement), including directions regarding the addition of flocculants, and other directions as required from time to time so as to ensure that the Operations Manual for Area 1 is in all respects complied with;
• the fee will be adjusted annually in line with any cost increases incurred by CML.

271 On 13 November 2009, Mr Abbott for CML clarified his earlier letter sent to Mr Wade the previous day. The second letter said:

I advise that, if PMI does not agree the fee of $80,000 per month as proposed by CML, then CML would agree to an independent expert determination of the costs that would be incurred by CML as a result of permitting PMI to tail into Area 1.

The balance of Mr Abbott's letter identified a process for selecting an expert in the absence of the parties' agreement.

272 If I do find that the SFA requires as a matter of inference, or if necessary by the implication of a term to the effect that PMI be entitled to enjoy the use of an area or areas located upon the 'Tenements' (as defined in the SFA) for the purpose of lawfully depositing PMI's process waste, then from that conclusion, two further points of contention seem to arise, namely:

(a) whether the defendants would be permitted to simply identify such an area on the tenements designated for PMI's use as an approved TSF, but then (having also given reasonable notice which would allow PMI a sufficient period of time to attend to all preparatory steps for a TSF including obtaining all the required regulatory approvals) relinquish further responsibility for the actual establishment and approval of a TSF to PMI, by PMI's own efforts and at PMI's sole cost; and

(b) if the defendants are not entitled to act as postulated under (a) above, and therefore must provide PMI with access to and use of an approved TSF which the defendants have established at their expense, whether PMI would then be entitled under the SFA to receive that benefit from the defendants at no cost to PMI (in other words, take the benefit at the expense of the defendants having established the TSF and maintaining it), and if not, what appropriate level of payment should PMI render to the defendants for a provision of such benefits from the TSF facility or facilities?

The SFA offers no explicit assistance in relation to these questions.

273 Inherent in the formulation of the declaratory relief sought by PMI, in terms to which I have referred, is its stance that the defendants must provide it with an approved TSF for as long as the term of the SFA runs and at no cost to PMI. PMI does not formulate its declaratory relief on this issue upon any basis of PMI rendering a payment to the defendants.

(a) provision of an approved TSF for use by PMI

274 The following matters bear upon my ultimate conclusions that whilst PMI is entitled to use of an approved TSF that is established by the defendants on the defendants' tenements at Woodie Woodie, that PMI's utilisation of such a facility should be at PMI's payment of a commercial fee for that benefit.

275 First, it is overwhelmingly manifest under the SFA that PMI must be allowed to operate a secondary manganese processing operation for Super Fines. So much would even appear to be uncontroversial as a matter of fact from an analysis of the pleadings, particularly concerning the mutually known surrounding facts and circumstances which were admitted by the defendants (see defence pars 5(d)(D), 5(k) and 5(l)). In order then for PMI to viably operate, it must enjoy the use of an approved TSF, in order to discharge its own waste. So much, I think, arises as a matter to be inferred from the word 'Operations' as defined in the SFA, and then subsequently in cl 2.1(b), cl 2.2(a), cl 2.2(c) (as regards use of the 'Plant') and in cl 3.1, as regards a proposition that PMI would operate its plant, with the accompanying qualification of, 'at its sole cost'.

276 To the extent that this conclusion is not all capable of being inferred in the construction process from the SFA as I prefer, and as a matter of the proper construction of the terms of the SFA read as whole, the same result will, in any event, easily be reached through the medium of an ad hoc implied term, that fulfils each of the criteria in BP Refinery (Westernport) Pty Ltd (282 - 283). But such a construction or implication outcome for the SFA, as regards PMI being provided with use of a TSF on the tenements of the defendants, does not then extend to me also concluding that such a significant benefit is to be provided by the defendants to PMI at no cost.

277 Second, the SFA is explicit at places in stipulating what particular benefits are to be provided to PMI at no cost: see cl 7 as regards provision of all power and water to PMI at no charge, and significantly, 'to enable Port to conduct the Operations'. Nothing in the SFA suggests that PMI's use of a TSF would be for free for the duration of the SFA, or enjoyed at the expense of the defendants as, in effect, a subsidy to PMI.

278 Third, in September 1996 when the parties signed off the SFA, the proposed processing of Super Fines under the SFA by PMI at Mike Mine or Woodie Woodie, was a wholly conceptual proposition by PMI. In fact, it was not until 2004, some eight years after the SFA, that the first trial plant of PMI at Woodie Woodie was able to commence operations processing Super Fines extracted by PMI from Rhodes Pit. It was not until 2005 that PMI's permanent plant commenced operation at Woodie Woodie. Then, it was not until September 2008, 12 years after the SFA, that PMI's permanent plant first began to receive the wet slurry tailings dispatched directly from the defendants' plant via pipeline arrangement linking the parties' respective plants (represented by the black line drawn between the two plants, seen on exhibit 1).

279 None of those subsequent matters, of course, bear upon the construction of the words of the SFA. But the reality is that the parties in 1996 would have had only a minimal idea as to how things would practically pan out in terms of PMI's mooted secondary processing operation for Super Fines. That is so, particularly in relation to correlative issues as to how much TSF storage capacity PMI would need, or how the scale of PMI's secondary processing operations and its waste might impact against the defendants' own TSF capacity, either in using disused mining pits, or more purpose built TSFs constructed upon the ground (ie, TSF 2). The SFA is silent as to any pragmatic operational regime by which PMI would use the defendants' approved TSF, once it began operations.

280 Fourth, the defendants acknowledge that at the time the SFA was entered, they held an approved TSF (defence par 5(o)). It is also accepted that the defendants required a TSF in their own manganese ore processing operation (defence par 5(o) admitting essentially par 8.17 of the statement of claim).

281 Fifth, the envisaged (objectively assessed) secondary processing operation of PMI as of September 1996, would surely never have been on a basis of PMI processing its Super Fines, but then jettisoning all its waste on the ground for someone to clean up later. PMI was to be operating on the defendants' tenements. Longer term, those tenements would need to be properly rehabilitated, in accordance with rigorous statutory environmental standards and for which the defendants would remain responsible. PMI, assessed objectively, must have appreciated all this in the lead up to the SFA in September 1996. PMI would also have appreciated that environmental regulations would regulate any approved TSF, which it would need to use, in order to operate. If a disused mining pit was to be utilised as an approved TSF, PMI objectively assessed, prior to September 1996, must surely have appreciated that there would be establishment, approval and regulatory costs, associated with a lawful use and operation of an approved TSF. PMI in 1996 was still, of course, a very long distance away from being able to construct a secondary processing plant in order to commence production.

282 Whilst a utilisation of the defendants' approved TSF by PMI is not explicitly dealt with under the terms of the SFA, nevertheless, a broad policy theme found in the SFA of PMI proceeding by the SFA to design, construct, then finally operate and manage its secondary processing plant, 'at its sole cost' (by reference to cl 3.1 of the SFA) is pervasive. That is particularly so when cl 3.1 is read against the following cl 7 and cl 8, where limited scenarios of no charge or a fixed charge allocated to PMI are explicitly addressed.

283 The fact that the defendants by their conduct subsequently allowed PMI since 2004 to use Rhodes Pit and TSF 2 to deposit PMI's own waste at no cost, does not bear upon the issue of construction, that is applicable to the SFA. That 1996 instrument cannot to be construed by reference to subsequent conduct. In my assessment, there is no suggestion within the SFA that PMI is to receive a 'free ride', in terms of its own commercial utilisation of the approved TSFs of the defendants.

284 On the basis that PMI was to independently operate its own plant as a secondary Super Fines processing operation on the defendants' tenements, I assess it is both reasonable and equitable that PMI would do so at its sole cost. That must mean that PMI would pay to the defendants a reasonable commercial fee, appropriate for PMI's utilisation of Area One, and for any TSF that PMI would use subsequent to Area One. Area One is the first approved TSF in respect of which the defendants have sought to render a charge against PMI for its use of a TSF. The Camp East TSF arrangements were the subject of discrete agreements reached by way of express variation to the SFA, having regard to the terms of the June 2007 Agreement and then, under the CEA itself.

285 There remains a question as to whether (with proper notice and sufficient time for PMI to pursue all required approval arrangements) the defendants might choose to simply identify an area on their tenements as potentially suitable for use by PMI as PMI's exclusive TSF, but then leave it to PMI to seek and obtain all necessary approvals and expend whatever capital is necessary to establish a workable TSF at that site. This is essentially a future position foreshadowed under exhibit STB 8 on 12 November 2009 by the first defendant through Mr Abbott - to apply once Area One reaches its capacity as a TSF some years hence. In my view, the answer to this question must be, 'no'.

286 The process of identifying a potentially suitable site for use as a TSF (whether a disused mining pit, or a suitable area of surface land upon which an earth walled facility for surface receipt of tailings would be constructed) would involve an issue concerning the defendants' prior need to 'sterilise' the site location, before it is put to use as a TSF. By sterilise, is meant essentially to carry out a regime of testing to ensure that no potentially minable deposit of manganese lies in the vicinity of the site identified, and which may later be sought to be worked for the purpose of mining ore (thereby disrupting a tailings storage operation at the site). That consideration is very much the scenario that unfolded for Rhodes Pit in 2008, upon the discovery by the defendants of further viable manganese ore deposit under the former pit - into which tailings had then been deposited by Portman, the defendants and PMI. Sterilising an area to ensure that it does not hold longer term utilisable deposits of mineable ore, involves drilling and testing (presumably to a significant depth). Such an assessment would, no doubt, involve some significant cost element. Who should bear that sterilisation cost, if the TSF site is proposed to be used exclusively for the purpose of deposition of waste material generated out of the operations of PMI? In my view, the defendants must bear the cost of sterilising an area for ultimate site use as a TSF by PMI, since it is the defendants who must reach the decision as to what areas across the considerable area of the Woodie Woodie tenement holdings that they plan to mine. But aside from the issue of area sterilisation cost, I see no valid reason why PMI ought not to ultimately reimburse the defendants for the capital costs of an actual establishment of any TSF, which PMI is to exclusively use. To the extent that PMI may share a TSF with the defendants, then the capital and operative costs involved would be apportioned between them, on a reasonable proportionate volume usage basis, that could be assessed by a third party in the absence of a consensus between the parties.

287 Where plant-to-plant direct tailing by the defendants is being utilised, resulting in the defendants' slurry being despatched by pipeline directly into PMI's plant, then the defendants in that situation, would seem to have only a minimal (if any) need for the use of a TSF in their own right. In circumstances where, for whatever reason, direct tailing became impossible and in lieu thereof, under the fallback option (Plan C), a PMI screw classifier implemented the extraction of Super Fines at the TSF, producing in that redundancy scenario, waste material (slimes) at the TSF, that situation would still see the TSF used for an ultimate deposit of PMI's waste.

288 Bearing in mind that the defendants remain holders of the mining tenements at Woodie Woodie, and are ultimately accountable as such for rehabilitation, it does not seem to me to be viable or appropriate for these defendants to seek to relinquish responsibility to PMI for establishing and maintaining a TSF - the defendants having designated, then sterilised a site suitable for use by PMI as a TSF. The defendants continue to conduct their large scale primary manganese ore processing operation, to generate saleable export manganese lump and fines. The 2004 Deed of Acknowledgement, with an eye to provisions of the Mines Safety & Inspection Act 1994 (WA), was able to carve out an area of responsibility to be the subject of PMI's operations, and therefore, PMI's responsibility. But a similar 'carve out' of responsibility would not be appropriate, in my assessment, for any site which is to become a TSF, even for a TSF site the exclusive use of PMI. Ultimately, the defendants carry the non-delegatable rehabilitation responsibility for these TSF areas on their tenements. Because of that responsibility, it is simply not feasible or appropriate in my assessment, for the defendants to relinquish hands-on control of a TSF site, to PMI.

289 It is one thing for the defendants to seek to recoup reasonable capital and operating costs of providing TSF benefits to PMI on a commercial basis, which I would assess as permissible under the philosophy of the SFA. It is quite another, however, to effectively require PMI to essentially establish itself an approved TSF on the defendants' tenements, once the defendants identify, then sterilise a potentially suitable TSF site for PMI's exclusive use. Greater responsibility and involvement, in my view, is required of the defendants regarding any TSF to be established on its tenements, irrespective of who the user(s) of that TSF happen to be.

290 Given these conclusions, I am not satisfied that the proposed declaration as regards the TSF usage, as currently framed by PMI, is appropriate. But nor am I satisfied that the defendants' current offer to PMI of the shared utilisation of only Area One, for a further period of four years (or until Area One is full) on the basis of the 'reasonable commercial terms', is satisfactory, as presently formulated. For instance, the second dot point in exhibit STB 8 seeks to impose a volume limit per calendar month on PMI in terms of its volume of tailings into Area One. The basis for a volume limit has not, in my assessment, been satisfactorily justified to date.

291 I would propose to hear the parties, by reference to these reasons, as to the revised form of an appropriate TSF usage and cost declaration, in terms revised beyond that presently contended for by PMI - in reference to PMI's future use of Area One and for any subsequently approved TSF thereafter, assuming the continuance of its SFA for its 'Term' (as 'term' is defined under cl 10 of the SFA.

(b) direct tailing from defendants' plant at Woodie Woodie into PMI's plant

292 Since September 2008, the defendants via a constructed pipeline linking plants, have pumped their waste slurry tailings directly into PMI's adjacently located plant, for a purpose of PMI processing the Super Fines material suspended within the water-based slurry emitted from the defendants' plant. This process of direct tailing actually commenced 12 years after the SFA was entered in September 1996. The process was first implemented under the regime of the CEA of 28 March 2008. The CEA expressly provides for plant to plant direct tailing, as follows:

CML will, during the period when it wishes to use Camp East as the facility into which tailings are to be sent for storage, tail direct into PMI's plant at its location current as at the date of this Agreement [cl 2].

293 On 14 July 2009 (exhibit 161), the defendants notified PMI that they proposed to cease direct tailing into PMI's plant, once Camp East reached its capacity limit as a TSF. As mentioned, the defendants also gave notice at the time that they would not allow PMI access to Area One, to deposit PMI's own waste (although after commencement of these proceedings and shortly prior to the commencement of the trial in November 2009, the defendants modified that position to PMI being permitted to tail into Area One in accordance with the terms of Mr Abbott's communications - being exhibits STB 8 and 9, dated 12 and 13 November 2009 respectively).

294 On 30 November 2009, Camp East reached its capacity limit as a TSF. The parties then commenced to use Area One as the next approved TSF. Utilisation of Area One and the defendants' continuance of direct tailing since, has been on a without prejudice basis as an interim measure, pending resolution of the matters in dispute between the parties in this litigation. Use of Area One and direct tailing having continued on the same (without prejudice) interim basis, since my reservation of judgment, following completion of evidence and submissions in the trial on 20 May 2010.

295 PMI's case seeking to require that direct tailing be continued, has altered somewhat, and away from the entire basis seen to be articulated by its further re-amended statement of claim. PMI no longer seeks to establish within the SFA the (or any) implied term (that the defendants would, when requested by PMI to do so, commence tailing into PMI's plant, see par 12 of the further re-amended statement of claim) (see par 165 of PMI's closing submissions).

296 Under closing written submission of 17 May 2010 (par 166), PMI confined its direct tailing argument against the defendants to this basis:

(a) that the SFA on a proper construction requires the defendants to tail directly to PMI (upon par 12 of the further re-amended statement of claim);

(b) alternatively, that the SFA included an oral term that, when requested by PMI to do so, the defendants would commence tailing into PMI's plan (referring to pars 5 and 7 of the further re-amended statement of claim); and

(c) alternatively, that the CEA contains an implied term requiring the defendants to tail directly to PMI during the term of the SFA (referring to par 17 of the further re-amended statement of claim).

The defendants join issue against these contentions. I have already rejected PMI's contention under (b) above, as to an oral component to the SFA.

297 With PMI's abandonment of reliance upon an ad hoc implied term in the SFA, by reference to BP Refinery (Westernport) criteria, the major remaining issue concerns PMI's construction argument as to a direct tailing obligation under the SFA. The SFA contains no provision akin to cl 2 of the CEA, that explicitly imposed a direct tailing obligation upon the defendants. This omission has driven PMI to seek to infer as a matter of overall construction, that the SFA carries the direct tailing obligation that arose once PMI's plant had been properly commissioned and had demonstrated the ability to reliably accept a stream of wet tailings feed. Furthermore, PMI's direct tailing construction case is that the obligation of the defendants to directly tail into PMI's plant, was at the request of PMI (see par 12 further re-amended statement of claim).

298 It will be remembered that the SFA, by its definitions and interpretation provision cl 1.1, defined 'Royalty' in a two-pronged fashion. Subparagraph (a) provided for the higher level of royalty at $8.40 per tonne, in respect of PMI's end product, 'derived from feed directly entering Port's processing plant from Valiant's or Manganese's beneficiation plant' (emphasis added). That higher level of royalty is in contrast to the other (lower) level of royalty at subparagraph (b), at $5 per tonne in respect of end product, 'derived from feed from stockpiles and tailing ponds'.

299 Out of the two-tiered structure of potential royalty payment (the term 'royalty' later being amended in August 2004 under the Heads of the Agreement (exhibit 79) to be renamed as, 'Purchase Price'), it may be seen that the SFA set down a 1996 regime of economic incentive for the direct feed to PMI's processing plant, albeit that that event was then wholly conceptual (indeed, as subsequent events proved, was some 12 years off). Nevertheless, the SFA remains operative as a long-term arrangement (cl 10) as a consequence of its duration being tied to the ('Term') life of mine, for the 'Tenements' (as defined), and of any future tenements.

300 Express provisions relied upon by PMI within the SFA by reference to which it contends the defendants are obliged under the SFA to continue with direct tailing, are essentially cl 2.1(a), cl 2.1(b) and cl 4.1(b) (see cl 6.4, cl 6.5 and cl 6.12 to be read with par 21.1 of the further re-amended statement of claim). PMI further contends that the defendants' correspondence of 6 July 2009 threatening the cessation of direct tailing upon Camp East reaching its storage limit, amounted to the anticipatory breach of those SFA provisions.

301 Accepting that the SFA must be read and construed as a whole in accordance with well established constructional principles which I have already addressed, I can only observe that I find very little in cl 2.1(a) and cl 2.1(b) of the SFA that, either read alone or in conjunction, supports a SFA direct tailing obligation construction argument by PMI. The assignment of ownership rights over Super Fines as materials to PMI, in consideration of payment of the royalty, does not advance matters (see also cl 2.3, as regards property in the Super Fines passing to Port (PMI) on the signing of the SFA).

302 Neither to my mind does cl 2.1(b) of the SFA assist PMI on this issue by it granting to PMI the exclusive right during the term to remove, treat and exploit the Super Fines, in accordance with PMI's rights under the SFA. Clause 2.1(b) simply frames a problematic question as to what precisely are PMI's rights under the SFA. Accordingly, I find no basis established for PMI's inferred constructional contention that the defendants fall under an absolute obligation under the SFA to tail direct to PMI's plant. There is a royalty payment differential found in the SFA that does economically encourage the defendants to tail directly, but no more than economic encouragement is found, in my view.

303 PMI's stronger argument, in a constructional sense, emerges factually out of cl 4.1(b) of the SFA, which given its importance I will repeat, but in truncated fashion, allowing for the alterations in the parties' corporate designations over time:

4.1 [The defendants] covenant in favour of [PMI] as follows:

(b) [the defendants] shall use their best endeavours consistent with the operations of [the defendants] to make available to [PMI] all Super Fines capable of being processed and treated;

304 As the arguments unfolded during the trial, this 'best endeavours' clause seemed to embody PMI's strongest case to establish that, if the SFA is a wholly written instrument (as I have concluded), and that the CEA of March 2008 ceased to have effect upon the event of the Camp East TSF reaching its capacity limit at the end of November 2009 (as I have also concluded), that the defendants still remain obliged to continue the direct tailing practice which has now been followed since September 2008, and even though the applicable TSF now being used by the parties, is Area One, not Camp East.

305 Obviously, a 'best endeavours' clause needs to be construed in the context of the SFA as a whole, alongside its surrounding clauses, applying the orthodox principles of contractual construction. Once a meaning is correctly ascertained, the clause then has to be applied to the prevailing relevant facts that present, from time to time, as between the parties.

306 As it closed its case, PMI through counsel indicated that any declaratory relief (not damages for breach) would be sought upon the direct tailing issue. The draft declaration sought is framed by PMI insofar as it concerns direct tailing and the asserted obligation of the defendants to continue that practice, in these terms:

2.1 the Plaintiff continues to operate its manganese fines treatment plant (subject to breakdown or planned shutdown for maintenance or short term purposes) in is current position at the Woodie Woodie mine site (marked on the attached aerial photograph (EX1));

2.2 the Defendants continue to operate their manganese ore plant (subject to breakdown or planned shutdown for maintenance or short term purposes) in is current position at the Woodie Woodie mine site (marked on the attached aerial photograph (EX1));

the Defendants will be in breach of their obligations under the Super Fines agreement dated 16 September 1996 (as amended) if:

2.3 they cease (otherwise than as a result of breakdown or planned shutdown for maintenance or short term purposes) tailing directly into the Plaintiff's plant at Woodie Woodie; or

2.4 in the event that tailing directly into the Plaintiff's plant is not possible (due to breakdown or other malfunction or plant shutdown for maintenance purposes) they cease tailing to a screw classifier at Area 1 Tailings Storage Facility;

2.5 they refuse to allow the Plaintiff to pump tailings discharged from the Plaintiff's Manganese Fines Treatment Plant to Area 1 Tailings Storage Facility or provide another tailings storage facility to receive the said tailings.

307 In concluding written submissions PMI effectively accepts that the declaratory relief sought on the basis of the best endeavours obligation to make available the Super Fines material, could only be granted in respect of the factual situation prevailing as between these parties as pertains on the evidence presently before the court. PMI submits (par 210 of its written closing submissions) that:

If for bona fide commercial or technical reasons the defendants seek to relocate their plant or otherwise alter their plant or process such that the existing direct feed arrangements become problematic, or more expensive - for instance because it is necessary to build a longer pipeline - then the parties will at that time have to consider how the defendants are to comply with their obligations under clause 4.1(b) to use their best endeavours to make the Super Fines available consistent with their own operations.

308 This court is in no position to resolve future hypothetical eventualities surrounding the processing operations at the respective plants of the parties at Woodie Woodie. It can only deal with the facts presented at the trial, as regards the defendants' direct tailing obligations (if any) arising out of the best endeavours clause in the SFA. Manifestly, the prevailing relevant facts may alter over time.

309 I repeat that I have already concluded that there is no oral component to the SFA containing an oral term as to direct tailing which PMI seeks to establish under par 7 of its further re-amended statement of claim. The evidence simply does not rise to that standard, particularly viewed against the parties' decision in September 1996 to reduce their bargain to writing. The prospect of an allied oral component, collateral to the written SFA is more than remote, in my view. See generally Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471 [35] - [36].

310 I will proceed then to a consideration of cl 4.1(b) of the SFA, construed in the context of the provisions of the SFA as a whole, by reference to the contractual principles I have already discussed.

(c) cl 4.1(b) of the SFA and the best endeavours obligation upon the defendants under the SFA to tail direct from the defendants' processing plant into PMI's secondary plant

311 The present configuration of the respective processing plants of PMI and the defendants may be identified in exhibit 1. Direct tailing, of course, did not commence until September 2008 and then, under the CEA, following the construction of various pipeline arrangements, both plant-to-plant and to Camp East.

312 The direct tailing arrangements under the CEA also manifest two fallback positions, which I have referred to as Plans B and C - by reference first to screw classifiers located at PMI's plant (Plan B - assuming the slurry tailings of the defendants reach PMI's plant, but encounter a processing problem at PMI's plant). The major fallback position (Plan C) was another screw classifier scenario, this time situate at Camp East, in the event that the slurry tailings of the defendants were not capable of being received at the PMI plant and so, needed to be pumped by the defendants south to the Camp East TSF, via the bypass pipeline, on the basis that PMI's screw classifiers at Camp East could there extract the Super Fines from the defendants' tailings slurry.

313 The Camp East TSF reached its capacity limit at the end of November 2009. The bypass pipeline arrangements, utilising PMI's screw classifiers (ie, under Plan C) have now been relocated to Area One, upon Area One being used as the next TSF by the parties (on the without prejudice interim basis by PMI pending a resolution in this litigation as to PMI's continuing right to discharge waste into Area One).

314 Clause 4.1(b) in the SFA is seen to use the expression 'best endeavours', not 'reasonable endeavours'. PMI makes something of that distinction, contending that 'best' carries with it the higher level of obligation. However, not much turns here on that nomenclature distinction in a pragmatic 'on the ground' assessment , in my view.

315 Clause 4.1(b), read in the context of the SFA as a whole, is hardly absolute in character, in terms of the 'endeavours' obligation imposed upon the defendants to 'make available' the Super Fines material which is assigned to PMI under the SFA. In the first place cl 4.1(b) manifests its own express qualification, on a basis that the obligation to use best endeavours is limited to being, 'consistent with the operations' of the defendants. I assess that qualifying phrase in the SFA to mean that the defendants making available obligation to PMI of 'all Super Fines', must not significantly prejudice the defendants' primary manganese ore processing operations. Second, an overall qualified character in the defendants' best endeavours commitment to 'make available', is strengthened, I think, under cl 2.4 of the SFA which provides:

In exercising its rights set out in this Agreement, [PMI] shall not unduly interfere with the current operations of [the defendants] and shall comply with all reasonable requests of [the defendants] in respect of the location and conduct of the Operations. (emphasis added)

316 From cl 2.4, I infer that the parties did, before September 1996, (objectively assessed), envisage some limited degree of inevitable interference to the operations of the defendants - arising out of PMI's secondary operation with its plant, once it commenced. The acceptable degree of interference to the defendants, however, was not to be 'undue', assessed in all the circumstances.

317 An assessment of undue interference regarding 'current' operations and the manifestation of 'best endeavours' which are 'consistent' with the operations of the defendants, raise reasonableness considerations about 'on the ground', day-to-day facts - which can only be assessed by reference to relevant circumstances as they subsist from time to time.

318 I proceed on the basis that the defendants, by the terms of the SFA, agreed to accept some degree of interference to their operations that is not undue, arising out of the conduct by PMI of its 'operations'.

319 I have also not overlooked the consideration that the obligation of the defendants is to make available 'all Super Fines' capable of being processed and treated, or that the defendants' obligation to 'make available' once again, seems to raise fact specific considerations - which may alter across time, depending upon an assessment of all the materials being considered. For instance, PMI's accessing of Super Fines material already deposited into Rhodes Pit, or in TSF 2, as a result of the prior mining operations by Portman or by the defendants, in the period prior to September 2008, will carry its own fact specific considerations. The assessment of the defendants' obligation to 'make available' Super Fines contained within the defendants' water-based slurry, which is emitted as a result of the defendants' processing operations from time to time, must carry its own unique evaluation considerations.

320 The defendants submitted, in effect, that PMI was inhibited by cl 4.1(b) from pressing for the continuation of direct tailing to the PMI plant because PMI was also going about extracting and processing other Super Fines, that PMI was taking from stockpiles and tailings ponds. The operational 'split' as between PMI's feed source of Super Fines presently appears to be about 40% from direct tailing, and with 60% from the other (dry) sources. But I see nothing in the SFA to support the defendants' contention as to PMI being constrained as regards it processing of Super Fines material on an either or basis, by reference to the feed source. I find nothing in the SFA to diminish the force of the best endeavours commitment pertaining to the defendants obligation to continue plant-to-plant direct tailing, simply because PMI's operations also happen to generate waste from the contemporaneous processing by PMI's plant of Super Fines derived from (dry) sources.

321 There is not, I conclude, any undue interference to the defendants' 'current operations', arising out of PMI's processing of feed material from stockpiles and tailing ponds concurrently with its receipt of direct feed material. And on the trial evidence, PMI has now processed all the stockpiles of dry Super Fines out of Rhodes Pit. PMI is now in the second of two stages in terms of removing the deposited dry Super Fine material found in TSF 2. This TSF 2 material is estimated by Mr Geraghty as likely to be fully processed, with TSF 2 at that being wholly cleared of Super Fine material within six to nine months of April 2010. After that, it is said by Mr Geraghty, and I accept, that PMI's only other source of Super Fines feed material at Woodie Woodie (coarse rejects aside) will be what is contained within the wet slurry emitted directly out of the defendants' plant to PMI's plant.

322 My assessment of the obligation of the defendants under cl 4.1(d) of the SFA to continue direct tailing is wholly grounded upon the facts as they currently subsist. I am also concerned with assessing at this time only, the defendants' stance in terms of asserted undue operational prejudice that is contended for, if the defendants are obliged to continue with the practice of direct tailing to PMI's plant. The defendants say that they would like, for the future, to implement as the norm, the (Plan C) scenario of despatching their waste slurry south via the bypass pipeline to Area One, at which place PMI would there operate their own screw classifiers, in order to extract Super Fines material - which could then be stored at Area One, before being eventually transported back 2 km back north to PMI's processing plant.

323 Three pieces of evidence emerging during the cross-examination of Mr Francis bear significantly, in my view, upon the veracity of the operational prejudice which the defendants contend for as driving the position that their 'best endeavours' under the SFA, do not oblige them to continue directly tailing into PMI's adjacent plant.

324 First, there is an issue of the defendants' overall attitude to the PMI operation on their tenements, in the defendants not philosophically wanting to be 'beholden' to PMI. This attitude is encapsulated from a passage in the cross-examination of Mr Francis in these terms (ts 1086):

Your real concern about the direct tailings doesn't lie in anything impinging on CML's operations. It's on what you call interdependency, or interdependence?---That's correct.

The independence is the freedom to decide to pick up your plant and take it elsewhere?---No, not really.

Not only that?---Not only, no.

What else does it encompass?---Well, we are tailing to another party to which we have no control over, we are tailing to a party whom we are having difficulties in a relationship with, and the whole company is basically beholden to that line going to PMI.

The whole company?---Absolutely.

It wasn't in March of 2010, was it?---But whatever happens in PMI's plant we are beholden to.

Whatever happens in PMI's plant you're beholden to. Do I understand that to mean that whatever happens in the plant will have an effect on you?---Absolutely.

The effect will be if the PMI plant can't receive, it goes on the bypass line?---That's right.

That's an acceptable solution for the operation of your client, isn't it?---At the moment it is yes.

And it has been for the three months of downtime that you have produced and shown to me today?---That's right.

325 Mr Francis for the defendants provided frank responses during this line of questioning. The word 'beholden' as used by Mr Francis is, I think, insightful. But his response does not assist the defendants. A philosophical objection by the defendants against the relationship with PMI, in terms of PMI's proximately located secondary processing obligation - simply cannot stand against the inconsistent framework of the bargain struck under the SFA in September 1996. It was at that time that a potentially long-term relationship of proximity in both parties' processing operations, was accepted (see cl 10) by the defendants. In 1996, the commitment was made on the basis of a conceptual idea. Much time has elapsed and PMI's 1996 concept has now become a successful reality. The parties are now in effect competitors for sales in the world manganese market. The warmth in the business relationship between the parties has cooled since 1996. Nevertheless, it is of no moment that the defendants presently perceive the operations of PMI to be too close, or too troublesome. Such objections are simply insufficient to sustain the contention that PMI's operations 'unduly interfere' with the defendants 'current operations'. Nor does the fact that Mr Quadrio, in his equally frank evidence, characterised the 1996 SFA deal as 'atrocious' for the defendants, bear against my evaluation (ts 1207). No operational prejudice to the defendants can be demonstrated out of philosophical grievances over the merits or demerits of the 1996 bargain struck under the SFA or the allied tenement proximity that the SFA carries for the parties' respective operations at Woodie Woodie.

326 Second, it was very well established during the cross-examination of Mr Francis that, in reality, there had been only minimal interruption to the defendants' processing operations (due to breakdowns, or the like) over the ensuing period after direct tailing commenced between the plants, from September 2008. This was convincingly demonstrated in two documents of the defendants, both produced during Mr Francis' cross-examination. Exhibit XX, a crusher downtime log sheet record for the months of January to March 2010, shows negligible downtime due to tailings line changes - in fact 0% in March 2010. Exhibit BBB is a table which covers all months between September 2008 and December 2009. It is equally revealing in terms of recording very minimal disruption to the defendants' plant, as a consequence of the proximate operation of PMI's plant, on the basis of direct tailing. Indeed, Mr Francis, under cross-examination (ts 1049), actually said this of direct tailing, 'provided everything is running fine, it works just fine'. He explained:

'Just fine' means CML has optimal conditions pertaining in its plant. There is no interference whatsoever to CML's plant. Is that right? That's what you mean by 'just fine'?---It runs better than expected, yes (1049).

327 Mr Francis also said that direct tailing had now essentially become his preferred option in terms of (the defendants) processing, based upon a (favourable) experience (to date) with how the plant-to-plant tailing arrangements had worked out, since September 2008 (ts 1062). This most candid evidence from Mr Francis once again supports my conclusion that, for the parties' respective plants, as they are currently configured and operating, there is no operational prejudice suffered by the defendants, arising out of direct tailing.

328 Third, in another frank exchange during Mr Francis' cross-examination, this emerged:

The decision to refuse to allow tailing into Area One was not brought about by a concern to try and prolong the life of a tailing storage facility?---In area one?

Yes?---No.

It was purely the animosity between the two companies?---Yes.

329 That admission followed a series of questions about the defendants' motivations in mid-2009, in informing PMI that at the exhaustion of Camp East as a TSF, PMI would not be allowed to tail into the replacement TSF, Area One, and that the defendants would no longer consider themselves obliged to continue the practice of direct tailing.

330 Whilst it is clear that the defendants genuinely thought, or were advised at the time, that their contractual position under the SFA was so strong that they were entitled to take that stance, the motivation for doing so, as admitted by Mr Frances above, is most revealing. Mr Francis also said (ts 1119):

There'd been a history of poor relationships between the two companies and we seemed to be always getting the raw end of the pineapple and this is the first opportunity we could to - - -

Reverse the pineapple?---Reverse the pineapple, yes.

Let me understand. The stance adopted by CML wasn't brought about by any dissatisfaction with the method of direct tailings that pertained during the life of Camp East?---No, because we had an agreement so we worked with that.

And the agreement had proved to be better than fine, in a technical sense?---Technically yes.

331 This evidence by Mr Francis is wholly against any finding as to operational prejudice in the defendants arising out of direct tailing to date, assessed on the basis of the current operations of PMI and the defendants.

332 Another consideration arises. The defendants submit that because PMI's operation currently processes both the direct tailings as well as dry stockpiled Super Fines, that the dual processing of distinctly sourced Super Fines material is exhausting TSF capacity too rapidly, thereby causing additional expense and to incur extra levels of capital expense associated with establishing of replacement TSF facilities, including obtaining necessary environmental and regulatory approvals, as a part of the expensive TSF establishment process. Be all that as it may, it does not qualify, in my view, as operational prejudice against the defendants - for the purposes of cl 4.1(b) of the SFA, or as 'undue interference', under cl 2.4 of the SFA. My earlier conclusion that PMI does not receive the use of a TSF on a free carried basis, overlaps with and supports that conclusion.

333 Whilst considering this direct tailing issue, it is opportune to deal with one of the defendants' many arguments about cl 3.2 of the SFA. This clause provides:

[PMI] shall during the term of this Agreement continuously operate the Plant in a proper and efficient manner and according to the best and most approved methods practised in similar undertakings.

334 The defendants' submission was that the clause imposed an obligation upon PMI to continuously operate its plant, irrespective of whether that course was viable for PMI or not (ts 1279). However, that, curiously uncommercial submission is not how I would construe cl 3.2 in the SFA. The phrase 'continuously operate', in my view, bears upon the following words in cl 3.2, going towards mandating efficiencies and best practice methods to be used by PMI in relation to the operation of its plant. Efficiencies and best practice methods must be implemented on a continuous basis as regards the PMI plant. But I would reject the defendants' broader and uncommercial construction as to a required blanket continuous operation of the PMI plant.

335 In summary, therefore, based upon the parties' present configurations for the respective plants at Woodie Woodie and bearing in mind the state of the current operations of each party, I am persuaded that cl 4.1(b), by the best endeavours obligation within it, in a practical sense, presently obliges the defendants to continue the practice of direct tailing into the PMI's adjacently located processing plant.

336 I will hear the parties as to the appropriate terms of any declaration to that end. I am not persuaded that it is appropriate to declare in terms of any prior breach conduct by the defendants, as was sought by PMI, especially since declaratory relief (not damages), in the end was all that PMI sought at this trial.

337 I will now proceed to briefly consider PMI's alternative argument to the effect that the defendants' obligation to continue direct tailing arises independently of the SFA, by reason of the terms of the CEA, and which PMI contends continue to have force and application, notwithstanding that the capacity limit of Camp East was reached capacity at the end of November 2009, and the subsequent utilisation of the next TSF since then, namely Area One.

Do its express direct tailing provisions continue to have application?

338 The CEA (exhibit 132) of 28 March 2008 is replete with language in both its recitals and in its substantive provisions, to the effect that the CEA is an agreement (in effect, by way of variation to the SFA and subsequent agreements which varied the SFA) setting down tailing arrangements applicable to Camp East as a TSF, to be used by both the defendants and PMI: see recitals A and B. Of the nine active clauses of the CEA, only cl 3, cl 7 and cl 8 do not make a direct reference to Camp East.

339 In my assessment, the temporal and finite link, as between the applicability of the provisions of the written CEA with the life of Camp East as a functioning TSF, is overwhelming. For instance, see cl 2:

CML will, during the period when it wishes to use Camp East as the facility into which tailings are to be sent for storage, tail direct into PMI's plant at its location current as at the date of this agreement.

340 An attached schedule to the CEA, makes reference to the operational responsibilities of each party and to operating and capital costs (cl 6). It identifies three categories of pipeline arrangements - all by reference to Camp East, as option 2A. The first category, CML to PMI, is represented by a black line seen on exhibit 1 linking the two plants. The following two categories of pipeline, namely CML (Plant) to Camp East and PMI (Plant) to Camp East, reinforce the strong location specific parameters of the CEA.

341 PMI's arguments to the contrary are based around the asserted high capital cost considerations associated with obtaining a return on this investment over time, in the wake of significant money outlaid establishing a Camp East TSF. These arguments of financial analysis are complex and clever, but ultimately, not persuasive. The explicit words of the written CEA cannot be circumvented by an economic analysis of the capital costs associated with the CEA infrastructure over time. Nor does Mr Ellison's evidence, providing personal views about his reasons for the March 2008 CEA (exhibit E, pars 117 - 122), override the clear words in what was subsequently written out and mutually agreed as the CEA.

342 I therefore reject the PMI contention found in par 17 of its further re-amended statement of claim, that the CEA contained an implied term to the effect that direct tailing would continue beyond the life of Camp East as a TSF. Camp East reached its capacity limit as a TSF (apart from minor topping up which will occur in the ordinary course, after the settling process in respect of deposited waste has taken place and before final rehabilitation) at the end of November 2009. From that time then PMI may only invoke the SFA to establish a subsisting obligation in the defendants to continue direct tailing.

343 For reasons which I have now explained, the best endeavours to 'make available' commitment of the defendants under the SFA, is a viable basis for presently holding the defendants to continue direct tailing. But, I repeat, that the best endeavours obligations of the defendants are inherently and temporally, fact specific. The assessment may require possible re-evaluation from time to time, depending upon the state of, or the exigencies surrounding each party's respective operations. I have only resolved the matter on that limited temporal fact basis.

344 Before leaving the CEA, I need to observe upon cl 8, which, in 2008, altered the two-tiered royalty arrangement originally set under the SFA for the higher level of a royalty per tonne, to the extent of a differential of $3.40 per tonne in respect of end product (if the source of PMI's ultimate end product was Super Fines fed directly from CML to PMI). The term 'royalty' was replaced by the term 'Purchase Price' under the Heads of Agreement of 25 August 2004 (exhibit 79, cl 1(a)). But the dual price payable scenario, depending on the source of PMI's feed, otherwise remained in place. Direct tailing into PMI's plant from the defendants' plant did not, of course, actually eventuate until 12 years after the SFA, in September 2008. At that time, the modified one-level payment regime carrying the uniform remuneration of $5 per tonne (irrespective of feed source) was agreed as a variation under the CEA, as from 28 March 2008.

345 However, following the expiry of the CEA at the end of November 2009, the $5 per tonne arrangement applicable under cl 8 of the CEA is also at an end. As a result, dual levels of 'purchase price' remuneration, once again to be ascertained by PMI's original source of Super Fines feed, have become re-applicable ie, either at $8.40 per tonne for direct tailed material, or at $5 per tonne, otherwise. One of the defendants' arguments raised in resisting the obligation to continue direct tailing under the SFA (by reference to the best endeavours commitment upon them, under cl 4.1(b)), was on a basis that PMI at present is effectively unable at its Plant, to differentiate and then quantify the distinct sources of Super Fines feed, as between that which PMI receives directly through the slurry from the defendants' plant by pipeline and the dry feed material which PMI extracts from stockpile (in TSF 2) at Woodie Woodie. The evidence at trial I accept is that the split in terms of PMI's sources of Super Fines feed, is 40% direct tailings from the defendants' plant, with 60% obtained from stockpiles. However, once PMI completes its processing of the (dry) Super Fines under stage 2 in TSF 2 (within six to nine months of April 2010), PMI will then have exhausted its (dry) stockpiled Super Fines material. PMI will then be wholly dependent upon the defendants' direct tailed slurry, as the sole source of its Super Fines feedstock at Woodie Woodie.

346 The defendants submit that the inability of the defendants to effectively differentiate at present as between the source of PMI's feed product, must carry a conclusion that there can be no obligation on the defendants to continue direct tailing. I do not agree. There are at least, I think, two related answers to this point of costing detail. First, PMI may be obliged, if it cannot differentiate (and this is a matter for proof beyond mere assertion), to pay the defendants at the higher rate of $8.40 per tonne, in terms of end product. Or, with arrangements under the CEA at an end (and so under cl 8 thereof), PMI may be obliged to take steps to install a recording mechanism into its processing arrangements, so that PMI can, in a practical sense, differentiate the source for its Super Fines feed material.

347 However, this issue of costing detail, in the end, cannot deflect my conclusion in respect of the obligation of the defendants, in the factual circumstances as they presently prevail, to continue with direct tailing by reason of the impact of the best endeavours obligation under the SFA, which subsists, and which requires direct tailing to continue for the present, on the basis I have explained.

348 In summary, each party has enjoyed a measure of success and failure in respect of their contentions in this litigation. I would summarise the position as follows:

(a) On the issue of the coarse rejects, PMI's arguments of construction based on the SFA, have not been accepted as regards the term 'Super Fines', construed within the context of the SFA as a whole, Thus, PMI's application for a declaration that the coarse rejects stockpile falls within the definition of Super Fines in cl 1 of the SFA, should be dismissed.

(b) On the issue of PMI having use of an approved TSF, PMI has succeeded in establishing an entitlement to the use of Area One as a TSF. But since November 2009, the essential question has been a usage cost issue as to the terms upon which PMI should be entitled to its use of an approved TSF at Woodie Woodie. I have concluded that PMI should be allowed to use an approved TSF to be established by the defendants, but essentially at PMI's cost, which should be assessed on a reasonable commercial basis by a third party, if not agreed. Neither party has been completely successful in persuading me as to their respective positions on this issue. I will hear the parties as to the precise terms of any declaratory relief in relation to this issue.

(c) As regards the issue of the defendants' obligations to continue direct tailing into PMI's plant, PMI has been presently successful, by reference to its SFA 'best endeavours' to 'make available', clause argument. However, PMI has not been successful upon three other arguments which I identify as: first, its abandoned claim grounded upon existence of an implied term in the SFA as to direct tailing; second, an oral term under a collateral oral agreement argued to exist alongside the SFA; and third, PMI's distinct arguments based upon the asserted continuing application of obligations as to direct tailing under CEA, after the exhaustion of the capacity limit of Camp East as a TSF in November 2009.

349 In all these circumstances, I am minded, prima facie, to conclude that there should be no order as to the costs of the trial. But I will hear the parties in that respect and as to the precise terms of declaratory relief flowing out of PMI's limited success in respect of its position concerning a continuance of the defendants' direct tailing obligation - based upon the current underlying operational circumstances of each of the parties' respective plant and operations at Woodie Woodie.