The approach to the evidence
182 By raising this question, Koolan is seeking to persuade the Court that a past hypothetical event would have occurred. It seeks to establish that if the seawall had not failed and the Main Pit had not been flooded, it would have changed the mine plan for the Main Pit, and mined according to that changed plan from 1 March 2015. So, put very broadly, its case is that it would have acted differently at a particular time, had certain events preceding that time not occurred. And it seeks to establish that, in part, by the evidence of several witnesses who say what they would have done if those preceding events had not occurred.
183 The cases are replete with cautions about evidence of that kind. None of them are directly on point, as they deal with different fact situations, often in a personal injuries context. So they do not represent binding authority as to how I must deal with the evidence. But with respect, they all illustrate and confirm the approach which common sense, and common experience of human fallibility, would dictate in any event.
184 In cases where a medical practitioner has failed to warn a person about the risks of a procedure, and the person has undergone the procedure, direct evidence of the subjective intentions of the person, on the hypothesis that he or she had been warned, is relevant to the issue of causation of loss: see Chappel v Hart (1998) 195 CLR 232 at [93(7)]. There, Kirby J said (footnotes removed):
The subjective criterion involves the danger of the 'malleability of the recollection' even of an upright witness. Once a disaster has occurred, it would be rare, at least where litigation has commenced, that a patient would not be persuaded, in his or her own mind, that a failure to warn had significant consequences for undertaking the medical procedure at all (where it was elective) or for postponing it and getting a more experienced surgeon (as in this case). Yet, these dangers should not be overstated. Tribunals of fact can be trusted to reject absurd, self-interested assertions.
185 And as his Honour explained in Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 at 560:
It is true that answering that question [what Mrs Ellis would have done had she been properly advised of the risks involved in the operation] involves an exercise in retrospective reasoning. The patient cannot, when the mishap leading to damage and litigation has occurred, determine the answer authoritatively by the response in court to the question of what he or she would have done had only full and proper advice been given. However honest the patient may try to be, self-interest and the knowledge of the misfortunes that have followed the treatment will necessarily colour the patient's response to that question. Nonetheless, the answer remains an important ingredient in the decision by the fact finding tribunal as to what it thinks the patient, subjectively and at the time before operation, would have done if properly and fully advised.
And as Samuels JA said in the same case at 582, 'the subjective test necessarily entails the risk of distortion by hindsight'.
186 In Chappel v Hart, in a footnote (64), McHugh J emphasised the importance of objective evidence in such situations, as follows:
In practice, there is likely to be little difference in the application of the subjective and objective tests in medical issue cases. Human nature being what it is, most plaintiffs will genuinely believe that, if he or she had been given an option that would or might have avoided the injury, the option would have been taken. In determining the reliability of the plaintiff's evidence in jurisdictions where the subjective test operates, therefore, demeanour can play little part in accepting the plaintiff's evidence. It may be a ground for rejecting the plaintiff's evidence. But given that most plaintiffs will genuinely believe that they would have taken another option, if presented to them, the reliability of their evidence can only be determined by reference to objective factors, particularly the attitude and conduct of the plaintiff at or about the time when the breach of duty occurred. For that reason, the restrictions on appellate review laid down in Abalos v Australian Postal Commission (1990) 171 CLR 167; 96 ALR 354 and other cases are likely to have little application.
See also Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 at [87]-[89] (Gummow J).
187 It would be a mistake to apply this reasoning directly and uncritically to the present case. For it depends in part on acknowledging the reality that if something catastrophically bad has happened to a person, and the person is asked hypothetically and with hindsight what he or she would have done, it is to be expected that the person will say that they would have acted in a way to avoid the catastrophe: see Rosenberg v Percival at [26] (McHugh J), [221] (Callinan J). The dynamic here is not precisely the same; Koolan's witnesses are not, for example, hypothetically avoiding the failure of the seawall. They are merely giving evidence as to a business decision that would have been made, as iron ore prices continued to fall.
188 Nevertheless, the malleability of the witnesses' recollection and the dangers of hindsight are present here. That is so even allowing that the witnesses are honest. Each of them is, unavoidably, giving evidence in circumstances where they know that iron ore prices continued to fall and remained low throughout 2015, not reaching their nadir in the period under consideration until 15 December 2015 (see the graph at [252]). And as in the personal injury cases, the evidence is self-serving, in the sense that it benefits the employer they have or had, or the company of which they are Chairman, and with whose interests they identify (which includes, in my assessment, the former CEO Mr Beyer).
189 The malleability of recollection sounds, in part, in the fact that hypothetical evidence of this kind can be given without the constraints imposed by a desire to recollect accurately the real course of events. In Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2018] FCA 1556 Jagot J referred at [280] to the artificiality of the task that had been given to witnesses who were asked what they would have done, and how it was 'fraught with the risk of hindsight being brought to bear even from the most scrupulous and cautious of witnesses'. Her Honour then said (at [281]):
Other aspects of ordinary human experience must be factored into the equation. There are many kinds of pressures to which a person may be subject in giving evidence, whether consciously or not. These pressures are likely to hold less sway if the person is being asked to recall what happened. When a person is being asked instead to conjecture what would have happened, the constraints imposed by the usual nature of a witness's task, to recall things, are removed. When this is combined with the magnitude of the claims in this case it does not take much to infer that a more reliable guide to what would or might have happened is inference from available contemporaneous material and objective contemporaneous circumstances assuming rational commercial decisions rather than the evidence of witnesses speaking many years later in the context of litigation.
190 Given the general applicability of such concerns, it is unsurprising that the opinions expressed by the High Court in the personal injury cases above have been applied in commercial contexts: see for example Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [185]-[187]. In Attard v James Legal Pty Ltd [2010] NSWCA 311, a solicitors' negligence case in a commercial context, Tobias JA (Beazley and Giles JJA agreeing) went so far as to say that hypothetical evidence that a person would have proceeded in a certain way if he had received certain advice is 'of little probative value unless the reliability of the statement is confirmed by reference to objective factors' (at [120]) and that 'unless other objective evidence confirms its reliability, such statements should be given little, if any, weight' (at [126]). In Hosmer Holdings Pty Ltd v CAJ Investments Pty Ltd (1995) ATPR 41-442, Moore J had no regard to an affidavit from a director of the respondent as to what he might have done, had the respondent not engaged in contravening conduct, the respondent having accepted that such an affidavit is of little or no weight.
191 In Wilson v Arwon Finance Pty Ltd [2020] WASCA 137, a case where the appellant said he would not have entered into a transaction if he had not been induced to hold a certain assumption, Quinlan CJ and Vaughan JA summarised the position as follows (at [227], footnotes removed):
Often a reliance finding will be established by inference from the objective facts. On occasions - as occurred in the present case - a witness will give direct evidence to the effect that he or she took particular steps (or refrained from taking particular steps) on the faith of or induced by an understanding or belief brought about by a representation or other conduct on the part of another. Any such evidence is inherently self-serving. It will usually be treated with caution and scrutinised carefully by a trial judge in much the same way, and for much the same reasons, as a trial judge will carefully consider the veracity and reliability of hypothetical evidence (where such evidence may be lead). Such hypothetical evidence is normally assessed in light of the surrounding objective facts and circumstances. Unless objective evidence confirms its reliability such evidence often has little probative value. Demeanour can play little part in accepting the evidence; it may, however, be ground for rejecting the evidence. The last observation demonstrates that rejection of a party witness' direct evidence of reliance may result in him or her failing to establish reliance.
192 Quinlan CJ and Vaughan JA cited Rosenberg v Percival and Chappel v Hart in the course of making these observations. Then, after referring to the hypothetical nature of some of the appellant's evidence, their Honours said (at [229], footnotes removed):
Factual conclusions are best reached, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. That admonition has its usual force when considering a question of reliance in light of a party witness' direct evidence that he or she relied in a particular way. The real question is the appropriate inference to be drawn from the whole of the evidence. Accordingly, if, on the whole of the evidence, the court is not satisfied on the balance of probabilities that the asserted assumption or expectation contributed to the claimant's actions (or inactions), he or she will fail to make out the required connection between the charged party's representation or other conduct - leading to the claimant's relevant assumption or expectation - and the asserted detriment.
193 All of those matters lead me to adopt the caution expressed in the above authorities. I will give greater weight to the objectively observable behaviour of the witnesses and operations of Koolan and Mount Gibson, in the real world, as disclosed by contemporaneous materials and objective facts, than I will give to the 'direct' evidence of what the witnesses would have done, even when that evidence is given with conviction. The task is to make an inference about what Koolan would have done, based on all the evidence. The direct evidence of the witnesses is relevant to that, but the inherent unreliability of that evidence, leads me to adopt the approach just stated. That is consistent with the approach taken in Prudential LMI (see [178] above).
194 This does not limit the Court to evidence of occurrences prior to the relevant 'break event', here, the failure of the seawall. Evidence of what happened in the real world after the event may still be relevant, and indeed preferable to hypothetical evidence. In Tyco Australia Pty Ltd v Optus Networks Pty Ltd [2004] NSWCA 333 there was an issue as to what computer equipment (if any) would have been acquired by Optus, if a disaster at one of its data centres had not occurred. In relation to facts that came into existence after the disaster, Handley JA observed (at [89]-[90], Giles and Hodgson JJA agreeing):
… The Court can consider the probabilities before the casualty, and any plans Optus had for the acquisition of additional computer equipment. However the inquiry is not restricted to facts in existence at the date of the casualty. The Court can also look at subsequent events such as the use of leftover equipment. Indeed as Latham CJ said in Willis v The Commonwealth (1946) 73 CLR 105, 109: 'where actual facts are known, speculation as to the probability of those facts occurring is surely an unnecessary second-best'. See also per Dixon J at 116. This question had been considered in In Re Bradberry [1943] Ch 35 where Uthwatt J said at 45:
A principle is to be drawn from these authorities … that where facts are available they are to be preferred to prophecies.
Thus evidence of the subsequent use of leftover equipment was capable of identifying the kinds of equipment Optus would have acquired in any event.
195 Similarly in this case, evidence of what Koolan did after the Incident is relevant.
196 It should also be appreciated that the application of the above principles must take place in a situation where, ultimately, it is not an individual that says he or she would have acted differently. The hypothetical conduct to be established is that of a corporate entity whose governing 'mind' was a board of directors comprised of a number of individuals. And it was not a simple question of whether the Board would have done 'X' if they had been told 'Y'. Koolan seeks to effectively construct the hypothetical decision making process, and the manner in which a number of variables would have contributed to a decision, through the production of the HBP. These matters further complicate the process of inference described above.
197 Hughes Aircraft Systems International v Airservices Australia (No 3) (1997) 80 FCR 276 is a case in which there was a similar attempt to construct the decision making process of the board of a corporate body. There the issue was the admissibility of the evidence, including whether it should be excluded as misleading and confusing under s 135(b) of the Evidence Act 1995 (Cth). The issue was not weight: see 279B. Nevertheless, the following comments of Finn J shed light on the correct approach to be taken to the evidence of Board deliberations in the present case (at 280-281):
How, given this hypothesis, the CAA would have acted is, for practical purposes, a question as to how the appropriate organ, the board, would have acted. That question would have to be answered in a setting where a multimember, deliberative body would in any event have been required to make some discretionary judgments consequent upon a recommendation made to it by the [Tender Evaluation Committee]. In all likelihood one would in this have to consider some number of possibilities and probabilities. But it would be important and relevant to know the state of mind that the individual board members would have brought to the question even if there be some level of uncertainty (possibly large) as to whether that state of mind would in the hypothetical situation have been likely to have been translated into the decision suggested by that state of mind. To the extent that by evidence presently given the board members are able to illuminate their then state of mind in the sense referred to by Hodgson J in Tanna's case [Tanna v Deutsche Bank (Asia) AG [1996] ANZ ConvR 598] (explained below), that evidence is clearly admissible. And it is admissible notwithstanding that the evidence may be said to embody the expression of a board member's opinion as to how he would have decided the hypothetical question. It is so admissible because an expression of such an opinion relates to the doing of an intentional act and such an act presupposes relevantly an 'actual past state of mind, which in turn bears on the probabilities of what that [board member] would have [decided]'. It is in this sense that Hodgson J referred to state of mind in Tanna's case at pp 26-28.
198 It will be helpful to return to these observations later in a context where, in this case, there is no direct evidence as to what any members of Koolan's Board other than Mr Lee would have done if the seawall had not failed.
199 The reference to Tanna v Deutsche Bank (Asia) AG [1997] ANZ ConvR 598 in the above quote comes from the following passage, in which Hodgson J explains the basis on which hypothetical evidence of what a person would have done if he had understood the effect of certain mortgages was admissible, even though it was, strictly speaking, not evidence of anything actually observed or of actual beliefs or intentions held at the relevant time:
In my opinion, evidence of that kind may often be the most direct and understandable way in which a person can express a relevant actual past state of mind, which in turn bears on the probabilities of what that person would have done. The state of mind in question may not have been active or explicit or even fully conscious, because no actual consideration was given to the particular question at the time; but nevertheless what the person would have done in certain circumstances is plainly related to his or her state of mind at the time, comprising a multitude of beliefs and attitudes. It would be impossible directly to describe this state of mind fully and accurately. Very often the best that can be done is for the person to say what he or she would have done, if the relevant events had occurred: that is, in this case, if the defendants had not breached their duty. Such evidence may be far from conclusive, even from a completely honest witness, because it may be the result of unconscious reconstruction affected by the wisdom of hindsight; but in my opinion, it is clearly admissible.
200 Partly on that basis, in Hughes Aircraft, Finn J ruled that the evidence of what the board members would have done was not inadmissible as opinion evidence (that being the primary basis of the objection to it). But his Honour did exclude the evidence under s 135(b) of the Evidence Act as potentially misleading or confusing. That was because the reconstruction of the decision process did not follow the decision making procedure that would have been followed, essentially because it did not make provision for a recommendation from the Tender Evaluation Committee, a step that would ordinarily have taken place.
201 With these principles in mind I will set out a chronological account of the events that did transpire in the real world that are relevant to the issues of whether Koolan would have worked to the RMP from 1 March 2015, and the extent to which Koolan would have achieved the forecasts and targets set in the applicable plans. Those events occurred both before and after the failure of the seawall. The basic facts are not contentious; the controversy concerns the inferences to be drawn from them. However, before presenting the relevant chronology of events, it is convenient to describe two subjects: Mount Gibson's mining operations and its mine planning process.