BP Refinery (Westernport) Pty Ltd v Shire of Hastings

BP Refinery (Westernport) Pty Ltd v Shire of Hastings - [2010] WASC 266 - WASC 2010 case summary — Zoe

[106]

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.

[108]

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.

[424]

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.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (512 paragraphs)

PROCESS MINERALS INTERNATIONAL PTY LTD -v- CONSOLIDATED MINERALS PTY LTD [2010] WASC 266 (30 September 2010)

PROCESS MINERALS INTERNATIONAL PTY LTD -v- CONSOLIDATED MINERALS PTY LTD [2010] WASC 266 (30 September 2010)

Principles of contractual construction and some other matters of law

Events subsequent to the SFA leading up to August 2004

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

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

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

The Camp East Agreement (CEA) of 28 March 2008

Trial during November 2009 and April and May 2010

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

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

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

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

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

(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

Do its express direct tailing provisions continue to have application?

Parties

Legislation Cited (3)

Cases Cited (9)