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[2022] WASCA 26
Court of Appeal (WA)
2022-03-03
Buss P
Original judgment source is linked above.
1 The appellants sought to appeal against an interlocutory decision[1] striking out various pleas within a third further amended defence dated 17 August 2021 (3FAD).
2 The primary judge made the strike-out orders on 12 November 2021. The appellants filed their appeal notice on 1 December 2021. At the time the appeal notice was lodged the primary proceedings had been set down for a 3 month trial which was to commence on 31 January 2022 - although the start date was later postponed to 14 February 2022.[2] If successful, the appeal had the potential to affect the course of the trial. In the circumstances the Court of Appeal made an urgent appeal order. The appeal was listed to be heard on 2 February 2022. Judgment was reserved after the appeal hearing on 2 February 2022. On 8 February 2022 the appeal was re-listed for pronouncement of orders with reasons to follow.
3 The court was unanimously of the view that there should be leave to appeal and the appeal should be allowed. The court made orders to that effect. Some, but not all, of the pleas that were struck-out by the primary judge were reinstated. The formal orders made by the court are reproduced at [151] below. In making the orders the court informed the parties that the reasons for the orders would follow.
4 These are our reasons for the orders of the court made 8 February 2022 granting leave to appeal and allowing the appeal.
5 The parties to the appeal, and the contractual relationship that gives rise to the present dispute, have been involved in considerable earlier litigation in the Supreme Court as well as other courts.[3] The utility of a full rendition of the factual background is to be doubted - even more so where this appeal, in substance, concerns a relatively confined pleading dispute. Instead it is convenient to identify the essential background by adopting where relevant the exposition provided by Quinlan CJ in Sino Iron Pty Ltd [No 2].[4]
6 The first, second and third respondents - sometimes referred to as the 'CITIC parties' - are the first, second and third plaintiffs in the litigation. The first respondent (Sino Iron) and the second respondent (Korean Steel) are subsidiaries of the third respondent (CITIC).
7 The first appellant (Mineralogy) and the second appellant (Mr Palmer) are the first and second defendants in the litigation. Mr Palmer is alleged to be the directing mind and will of Mineralogy. The other party to the appeal is the State of Western Australia. The State is the fourth respondent in the appeal and the third defendant in the litigation. No relief is sought against the State in either the litigation or the appeal. The State is joined to both as a necessary party. The State did not participate at the hearing which gave rise to the impugned interlocutory decision[5] and has not filed a notice of respondent's intention to take part in the appeal. Accordingly, in what follows it will be convenient to refer to the 'respondents' as meaning the CITIC parties to the exclusion of the State of Western Australia.
8 Mineralogy, Sino Iron and Korean Steel are parties to an agreement referred to as the 'Iron Ore Processing (Mineralogy Pty Ltd) Agreement' (State Agreement), a State agreement ratified by the Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act 2002 (WA). For present purposes it is enough to note that, among other things, the State Agreement is relevant to a mining project conducted by the CITIC parties at Cape Preston in the Pilbara region of Western Australia (Sino Iron Project). Importantly, the implementation of the Sino Iron Project requires the submission of proposals to the State for approval under the State Agreement. Any such proposal must be submitted by Mineralogy as proponent.
9 In Sino Iron Pty Ltd [No 2] Quinlan CJ explained:
[T]he State Agreement provides for the development and exploitation of mining tenements the subject of the Agreement, in accordance with proposals approved by the relevant Minister in the Government of Western Australia (Approved Proposals). The projects contemplated by the Agreement include mining activity in relation to 13 existing mining leases (08/118 to 08/130). Mineralogy is the registered holder of the mining leases and is 'the Company' within the meaning of the State Agreement. Under the Agreement, proposals to the relevant Minister must be submitted by the Company (ie Mineralogy), either alone or with co-proponents.
Three of those mining leases (08/123, 08/124 and 08/125) (Sino Iron leases) are the subject of the Sino Iron Project, for which there are a number of Approved Proposals under the Agreement. In accordance with the Sino Iron Project, broadly speaking, Sino Iron and Korean Steel hold mining rights authorising the extraction of iron ore from the Sino Iron leases.[6]
10 The CITIC parties summarise their rights in relation to the Sino Iron Project as including rights: (1) to mine up to 2 billion tonnes of magnetite ore; (2) to produce and export up to 27.6 million tonnes of magnetite product per annum; and (3) to occupy, use and access some of the land falling within the Mineralogy tenements.[7] Sino Iron and Korean Steel's rights are conferred and regulated by a number of agreements between them and Mineralogy. These include Mining Right and Site Lease Agreements (MRSLAs) and Facilities Deeds. The MRSLAs are described as follows:
The MRSLAs are, relevantly, two largely identical agreements entered into by Mineralogy with Sino Iron and Korean Steel respectively. The MRSLAs confer on Sino Iron and Korean Steel mining rights to the Sino Iron leases and grant a sublease over an area defined in the MRSLAs as the Site Lease Area ...
The Site Lease Area under the MRSLAs extends beyond the Sino Iron leases and includes areas for related activities, including tailings and waste storage, and port facilities.[8]
The Facilities Deeds are, again, largely identical agreements entered into by Mineralogy with Sino Iron and Korean Steel respectively.
The Facilities Deeds relate to the construction and use of facilities on land defined in the Facilities Deeds as the Preston Area. The Preston Area is an area originally covered by exploration licence 08/636, and includes port terminal facilities that are part of the Sino Iron Project. That area, at least in part, is the subject of general purpose leases under the Mining Act 1978 (WA), including G08/53, G08/54, G08/63 and G08/74. The CITIC parties spent billions of dollars constructing various facilities in the Preston Area, including port facilities, for the purposes of the Sino Iron Project.
It is a significant feature of the Facilities Deeds that they make provision for the potential use of the Preston Area for a number of different mining operations. Indeed, not only are the Facilities Deeds with Sino Iron and Korean Steel largely identical, those Deeds are two of six identical Deeds entered into by Mineralogy at the same time (in contemplation of other projects under the State Agreement).[9]
12 The litigation the subject of this appeal arises from the CITIC parties' wish to expand their operations as part of the Sino Iron Project. Broadly speaking, as described in an executive summary to their statement of claim dated 23 October 2018 (SOC), the CITIC parties sue Mineralogy and Mr Palmer in relation to Mineralogy's alleged failure and refusal to:
1. submit mine continuation proposals for the Sino Iron Project to the State under the State Agreement;
2. grant further necessary tenure for the Sino Iron Project;
3. take steps to secure the re-purposing of leases for the Sino Iron Project; and
4. submit a programme of works for the Sino Iron Project to the State.
13 On the CITIC parties' case, despite an absence of any further consideration on their part to be provided to Mineralogy, Mineralogy's alleged failures and refusals are actionable and give rise to an entitlement to relief.
14 In oral submissions senior counsel for the appellants asserted that the 'real issue' between the parties is the tenure issue.[10] By this we understood senior counsel to be referring to the material commercial issue dividing the parties as viewed by Mineralogy. There are, it must be said, numerous legal issues on which the parties are joined in the primary proceedings. We doubt that any one of those legal issues could be characterised as the 'real issue' in the litigation. But it is readily identifiable why the tenure issue is a significant commercial issue. Minerology contemplated that its tenements within the Preston locality might be used for a number of different mining operations. The 3FAD contains a number of pleas in an 'Introduction' section which seek to demonstrate the potential effect of the CITIC parties' requests through a series of maps depicting Mineralogy's tenements including the port - the depictions including areas not presently exploited, a shared services corridor, parts of the tenements that are required to be available for common use for there to be multiple mining operations and the alleged interference that the CITIC parties' requests would have so as to render unusable parts of those areas for a multiuser resource project.[11]
15 The SOC refers to the relevant mine continuation proposals (MCPs) by the defined term '2017 MCPs'.[12] The 2017 MCPs are pleaded to constitute further proposals foreshadowed by earlier approved proposals to enable full implementation of the Sino Iron Project after approximately the first five years.[13] As described, the 2017 MCPs proposed: (1) an extension of the mine pit; (2) an increase to tailing and waste storage capacity; (3) an increase to stockpiling capacity and associated infrastructure at a port terminal facility; (4) construction of new infrastructure corridors; (5) the use of a port construction village as a permanent accommodation village; and (6) relocation of a road.[14]
16 The pleaded position is then described as follows:
The CITIC parties plead that, on and from 18 December 2017, they requested that Mineralogy submit the 2017 MCPs to the Minister for approval under the State Agreement [SOC par 137]. They also plead that Mineralogy has failed, and refused to, submit the 2017 MCPs to the Minister for approval under the State Agreement [SOC par 140].
While Mineralogy denies that the relevant correspondence on behalf of the CITIC parties constituted valid 'requests' and says that the 2017 MCPs are not in a form capable of submission, it does not appear to be in dispute that the CITIC parties sent that correspondence to Mineralogy, or that Mineralogy has not submitted the 2017 MCPs to the State [see 3FAD pars 137, 140]. The CITIC parties also plead that the Director General of the relevant State government department requested that Mineralogy carefully consider submitting the 2017 MCPs to the Minister [SOC par 139].
In addition to the 2017 MCPs, the CITIC parties also plead that they made requests of Mineralogy that it:
(a) agree to the expansion of the Site Lease Area within the meaning of the MRSLAs to include certain areas falling within the footprint of the 2017 MCPs [SOC par 147];
(b) take steps to secure changes to the purposes of the areas covered by G08/53, G08/54 and G08/63 to include purposes consistent with the 2017 MCPs [SOC par 148]; and
(c) submit, or authorise the CITIC parties to submit, a program of works to the Department of Mines, Industry Regulation and Safety, which they plead are 'critical' to further define the works required for the 2017 MCPs [SOC pars 159 - 160].
Again, while it denies the how and the why, there does not appear to be any dispute that Mineralogy has not acceded to the CITIC parties' requests in relation to these matters [3FAD pars 147, 148, 150].[15]
17 The proceedings below were commenced by the CITIC parties in the Federal Court of Australia in 2018 and transferred to the Supreme Court in 2019. They have been case managed by the primary judge. Among other things, the CITIC parties seek relief in relation to the 2017 MCPs.
18 The CITIC parties bring claims alleging breach of contract, unconscionable conduct under the Australian Consumer Law and actionable estoppels. Mr Palmer is sued as an accessory to the unconscionable conduct claim.
19 While it is an over-simplification,[16] at present it suffices to describe the CITIC parties' pleaded case in the following terms:
1. The CITIC parties allege that Mineralogy was obliged contractually to submit the 2017 MCPs (and take the other steps identified in [12] above) by a series of express and implied terms in the MRSLAs and other agreements - and breached those terms by failing to do so (SOC pars 141 - 146, 151 - 158, 162 - 173).
2. The CITIC parties allege that Mineralogy's alleged failures and refusals amount to unconscionable conduct under the Australian Consumer Law (ACL) to which Mr Palmer has been an accessory. The CITIC parties rely on alleged conduct and behaviour going back to 2012. At the heart of the statutory unconscionability claim is an assertion that Mineralogy's alleged failures and refusals have been against commercial conscience (there being no reasonable basis for the failures and refusals) and have involved an unconscientious taking advantage by Mineralogy of its position as proponent under the State Agreement and holder of the relevant tenements (SOC pars 174 - 181, 200, 201 - 203).
3. The CITIC parties allege that Mineralogy is estopped from failing and refusing to take the steps requested of it. They rely on both estoppel by convention and estoppel by representation and conduct. It is said that Mineralogy made representations and engaged in conduct which led the CITIC parties to reasonably expect that Mineralogy would take such steps as were necessary to enable Sino Iron and Korean Steel to exercise their rights to mine and export - such steps including submitting proposals under the State Agreement, granting further tenure and taking steps to enable the use of the tenure, as was reasonably required for implementation of the Sino Iron Project (SOC pars 182 - 199).
20 In evaluating the grounds of appeal it will be necessary to revisit some of the causes of action relied on by the CITIC parties and to detail some of the individual pleas. This is required as the appellants contend that the pleas as struck out are arguably defensive to the CITIC parties' claims because they arguably answer or arguably undermine (at least in part) critical aspects of the CITIC parties' claims and the relief sought by the CITIC parties.
21 The CITIC parties seek a variety of relief. This includes orders requiring Mineralogy to lodge the 2017 MCPs and otherwise do that which Mineralogy is alleged to have failed and refused to do. For example, the CITIC parties seek that Mineralogy grant further tenure as is reasonably required and take steps to enable the establishment of the infrastructure and facilities provided for in the 2017 MCPs. The CITIC parties also seek damages or compensation orders.
22 One aspect of the appellants' argument on appeal relied on par A of the SOC's prayer for relief. Accordingly, it is appropriate to reproduce that in full:
Summary dismissal of the appellants' permanent stay application
23 Mention has already been made of Quinlan CJ's decision in Sino Iron Pty Ltd [No 2]. Apart from its value in explaining the relevant factual context, Sino Iron Pty Ltd [No 2] had some significance in the primary judge's evaluation of the respondents' strike-out application as is the subject of this appeal. Accordingly, something more must now be said about Sino Iron Pty Ltd [No 2].
24 Sino Iron Pty Ltd [No 2] concerned an application by the appellants to permanently stay the CITIC parties' claim in the proceedings before the primary judge - an application premised on the proposition that the CITIC parties had brought the proceedings for collateral and improper purposes. Those purposes were described as the 'Fulcrum Purposes'. In points of claim filed in support of the permanent stay application the appellants described these 'Fulcrum Purposes' as:
The purposes of the Fulcrum Group [a group alleged to have been formed consisting of senior executives of and advisers to the CITIC parties] included to achieve the Contract 'Normalisation' Objective by the:
(a) use legal proceedings [sic], including as moving party and resisting party, to apply commercial pressure to Mineralogy and Mr Palmer to agree to alter the contractual relationship between the parties under the CITIC Negotiated Agreements, rather than to vindicate any bona fide claim or defence;
(b) use legal proceedings [sic] by complaints to regulatory and law enforcement authorities to apply commercial pressure to Mineralogy and Mr Palmer to agree to alter the contractual relationship between the parties, rather than to have some bona fide wrong sanctioned or loss recovered;
(c) by the [sic] use of legal proceedings as alleged in (a) and (b) above, to enable CITIC to recoup the unexpected costs of developing the Sino Iron Project directly from Mineralogy or indirectly from Mineralogy by denying to it sums to which it was entitled, including royalties, and potentially thereby rendering it insolvent and leaving CITIC able to pursue the Sino Iron Project on terms more favourable to it;
(d) thereby to engage legal processes in the manner alleged in (a) to (c) above not for the purpose of vindicating any legal right or defence at law or complaint about a loss or injury bona fide held, but rather to achieve a collateral purpose being the Contract 'Normalisation' Objective ...[17]
25 The Contract 'Normalisation' Objective as defined was the CITIC parties' alleged determination (said to be made by no later than May 2010) that steps were required to be taken to alter the parameters in which the Sino Iron Project was operating (both as to the contractual regime and the area allocated to the Project) to parameters more favourable to the CITIC parties and less favourable to Mineralogy and Mr Palmer.[18]
26 The CITIC parties responded to the appellants' permanent stay application with their own application to strike-out or summarily dismiss the stay application. It was the CITIC parties' summary dismissal application that was before Quinlan CJ for determination. His Honour received into evidence the various matters relied on in support of the Fulcrum Purposes allegation. Quinlan CJ found that there was no substance in - and no reasonable basis for - the Fulcrum Purposes allegation. Accordingly, Quinlan CJ concluded that there was no reasonably arguable basis to contend that the CITIC parties' substantive proceedings should be stayed as an abuse of process. The CITIC parties' summary dismissal application was successful and the appellants' permanent stay application was dismissed on a summary basis.[19]
27 In reaching that conclusion Quinlan CJ gave close consideration to the ten matters on which the appellants relied in alleging that the Fulcrum Purposes may be found or inferred (these being particularised at APOC par 35(e)). Therein lies the significance of Sino Iron Pty Ltd [No 2] for the strike-out determination of the primary judge. As will be seen, many of the challenged pleas within the 3FAD reproduced in substance the allegations made in the APOC. While there was another formulation of the 'Fulcrum Purposes' (see [37] below), the matters that the appellants pleaded as being those in which the Fulcrum Purposes were recorded or may be inferred from were substantially identical to seven of the ten matters relied on in the APOC before Quinl[20] CJ.20
28 The primary judge referred to the 'close correlation' of common text and 'substantial textual identity' between the appellants' allegations in the APOC and the impugned portions of the 3FAD.[21]
29 Moreover, as will be seen, the primary judge referred to and apparently relied on Quinlan CJ's conclusions in Sino Iron Pty Ltd [No 2] in evaluating the Fulcrum Purposes pleas as made in the 3FAD.[22]
30 Sino Iron Pty Ltd [No 2] was delivered on 28 May 2021. On 23 June 2021 the primary judge made directions in anticipation of the proceedings being listed for a 3 month trial commencing on 31 January 2022. As at the appeal hearing it remained the case that the proceedings were to come on for trial. However, the trial was to commence on 14 February 2022 rather than 31 January 2022. (The trial was later re-scheduled to commence on 21 February 2022.)
31 As part of the pre-trial directions the appellants had until 17 August 2021 to file and serve any amended defence. This, as the primary judge observed, provided the appellants with a last opportunity to further amend their respective defences without leave.[23]
32 Mineralogy filed the 3FAD on 17 August 2021. Mr Palmer filed a separate defence which in effect adopted Mineralogy's 3FAD.
33 Much of the 3FAD is uncontroversial. The part of the 3FAD which was in issue before the primary judge, and which is the subject matter of the appeal, concerns what were described as the 'Fulcrum pleas'.[24] These are the pleas at 3FAD pars 8A, 10A, 15A - 15AJ, 131(d)(iii), 142(aB), 147(aB), 148(a), 159(a), 182AA(e), 183(bC), 192(aA)(ii) and 203(d). Of those the key pleas are at 3FAD pars 15A - 15AJ (which, despite not observing alphabetic convention, include pars 15B - 15Z). The primary judge reproduced those pleas in full in sch C to the primary reasons. It will, however, be necessary to reproduce some of the key pleas to give context to these reasons.
34 A number of the challenged pleas exclusively raised factual matters. The primary judge rejected the respondents' challenge to these pleas on the basis that they were arguably capable of providing relevant factual background context or extrinsic facts.[25] 3FAD pars 8A, 10A, 15B, 15C, 15D, 15E, 15G, 15H, 15I, 15J, 15K and 15L fell within this category. There were also some pleas that were struck out by consent: 3FAD pars 142(aB), 147(aB) and 148(a).[26] These, like the exclusively factual pleas, require no exposition.
35 The critical pleas (as struck-out by order of the primary judge) commence with 3FAD pars 15M and 15N:
15M By no later than May 2010, CITIC had determined that steps were required to be taken to alter the parameters in which the Sino Iron Project was operating, including the contractual regime and the area allocated to the Sino Iron Project under the CITIC Negotiated Agreements, to parameters more favourable to CITIC and any subsidiary company, and less favourable to Mineralogy and Mr Palmer, by reason of the matters alleged in paragraph 15B to 15L above (the Contract 'Normalisation' Objective), by reason of each of:
it having negotiated what it considered to be an unfavourable bargain to it and any subsidiary company, compared to the position of Mineralogy and Mr Palmer, under the CITIC Negotiated Agreements;
it and its subsidiary companies had suffered significant losses by reason of the foreign exchange hedging pleaded in paragraph 15F to 15L above, and as recorded in the CITIC FX Losses Announcement;
it and its subsidiary companies could not recover from MCC the cost overruns in developing the Sino Iron Project or as a result of the Sino Iron Project Construction Delay, as MCC was also an entity ultimately owned by the People's Republic of China;
consequently, the additional costs of developing the Sino Iron Project in 15M(b) and 15M(c) above were to be recouped from Mineralogy.
15N Consistent with the Contract 'Normalisation' Objective, in May 2010, at a meeting between representatives of CITIC and Mineralogy, CITIC stated that the Sino Iron Project was running into many costs objectives which made the whole venture unprofitable and CITIC required Mineralogy's assistance to vary the Mineralogy Royalty formula, as follows:
- the meeting was held at CPMM's offices in Perth, Western Australia.
- the attendees for CITIC were Milton Law, Chairman Mr Chang Zhenming, Fei Xu, Kelvin Wong and a number of unidentified employees.
- the attendees for Mineralogy were Mr Palmer and Mr Geoff Smith.
36 The 'Contract "Normalisation" Objective' as so pleaded in the 3FAD echoes that advanced by the appellants in their APOC in support of the ill-fated permanent stay application (see [25] above).
37 The 3FAD goes on to plead that, by no later than August 2010, CITIC formed the 'Fulcrum Group' (par 15O) of which a Helen Dillon was the 'lead' (par 15P). Details are provided of the members of the Fulcrum Group (par 15Q). Then, in an important plea for the purpose of the appeal, par 15R of the 3FAD provides:
38 Later in the pleading, although undefined, these purposes are described as the 'Fulcrum Purposes'.[27]
39 The Fulcrum Purpose in 3FAD par 15R(a) (ie to achieve the Contract 'Normalisation' Objective) is the same as that pleaded by the appellants in their APOC. So too there is commonality between the Fulcrum Purpose in 3FAD par 15R(b) (ie to recoup costs from Mineralogy) and the Fulcrum Purposes in APOC par 35(c) (see [24] above). However, the Fulcrum Purpose in 3FAD par 15R(c) is additional to the Fulcrum Purposes provided for in the APOC.
40 At 3FAD par 15S Mineralogy identifies the evidentiary basis relied on for the Fulcrum Purposes in terms that substantially reproduce seven of the ten matters referred to in the APOC. The plea reads:
The Fulcrum Purposes are recorded in, and/or may be inferred from, the following documents and testimony:
(i) $20 m to the Site Remediation Fund by June of 2011 (at rows 32 and 500);
>
> (ii) $14.8225 m for Royalty A by December 2011 (rows 40, 570-575 and 612); and
>
> (iii) $280.630515 m for Royalty B by December 2011(rows 41, 577-595 and 613);
(i) the reason for 'Project Fulcrum' was '[d]ue to the poor contracts that were entered into in 2006 and 2008 and on the Sino Iron and Korean Steel Projects, there is a requirement to normalise the contracts as far as possible towards industry standards' (at .0077);
>
> (ii) the forecast contractual obligations to pay royalties to Mineralogy under the CITIC Negotiated Agreements of $5.265 m for Royalty A, $72.734 m for Royalty B and $230.073 m for what it described as the Royalty Penalty for the calendar year 2013 (at .0051);
>
> (iii) '... there is a dispute related to royalties that is currently between the parties. It is expected that this dispute may affect the timing of payment in relation to the Royalty Penalty and Royalty Component B as such the following has been removed from the 2013 base budget forecast. A request has been made to ensure that the following [being the $230.073 m and $72.734 m] can be easily accessed if required to fulfill a short notice requirement.' (at .0051). Thus, the purpose for the defending of the proceedings was to delay a payment known to be payable, rather than attempt to vindicate a defence that was believed to be arguable;
>
> (iv) in relation to the Site Remediation Fund and the request for payment into the fund by Mineralogy, '[t]he request from Mineralogy was denied on the grounds it was unreasonable, however it should be noted that there is a contractual obligation for Sino Iron and Korean Steel to contribute towards a Site Remediation Fund. Negotiations are occurring with Mineralogy to explore other options such as a corporate guarantee to fulfil this obligation. If this negotiation is successful, then it will require changes to the project agreements to solidity [sic] fulfillment of this obligation. Either way, this is a risk that is currently being managed by the Special Projects team. Consequently, a request has been made to ensure that ~$75 million can be easily accessed if required to fulfill this requirement.' (at .0050): [CPM.518.004.0047]
(i) recording 'Attached is updated after conversation with Charles. He has asked me to move $75 million and the Royalty B + Royalty Penalty to 2014. The reason being that the Royalties will be in dispute, and we will be negotiating for guarantees instead of payment of the Site Remediation Fund';
>
> (ii) such correspondence recorded the belief in an existing contractual obligation to make the payments and the use of the defence of the proceedings to defer such payments: [CPM.523.003.1670]
41 There follows various pleas in which the CITIC parties are said to have prosecuted the Fulcrum Purposes including by applying commercial pressure to alter the terms of the various agreements (3FAD par 15T) and by actions taken by the CITIC parties in relation to royalties payable to Mineralogy (3FAD pars 15U - 15AJ). The latter includes the CITIC parties not paying the royalties, and defending proceedings as to the royalties, to effect the Fulcrum Purposes and apply commercial pressure to alter the parties' contractual relationship rather than because of having a genuine belief in the defence propounded (3FAD pars 15Z, 15AB, 15AF and 15AH).
42 Finally, in direct answer to many of the causes of action, the 3FAD went on to refer to and invoke the Fulcrum Purposes pleas. For example, as to alleged reasonable expectations pleaded in respect of the CITIC parties' estoppel case, Mineralogy denied the allegations because of, among other things, the matters pleaded in 3FAD pars 15A - 15AJ and said that the alleged reasonable expectations were part of the Fulcrum Purposes (3FAD par 131(a) and (d)(iii)). So too the Fulcrum Purposes are pleaded in answer to the CITIC parties' assertion that they relied on the alleged reasonable expectations (3FAD par 192(aA)(ii)). Requests to submit or authorise the submission of a programme of works are said to be made for the Fulcrum Purposes (3FAD par 159(a)) and the CITIC parties are pleaded to have conducted the relationship with Mineralogy, and to have prosecuted the Sino Iron Project, for the Fulcrum Purposes (3FAD pars 182AA(e), 183(bC), 192(aA)(ii)).
43 Mineralogy also pleaded, at 3FAD par 203(d), that the CITIC parties are not entitled to or should be denied relief because:
of the matters pleaded in paragraphs 8A, 15A to 15AJ and the circumstance of the plaintiffs having wrongfully deprived Mineralogy of sums payable under the MRSLAs and pursuing the Fulcrum Purposes.
The CITIC parties' application to strike-out parts of the 3FAD
44 The CITIC parties applied by chamber summons dated 13 September 2021 to strike-out or permanently stay parts of the 3FAD. The primary judge treated the application as a strike-out application. While the CITIC parties referred to the similarity between the APOC and the impugned aspects of the 3FAD, it was not contended that there was a res judicata or issue estoppel.[28] Rather, as the primary judge put it, the application sought to strike-out the amendments as failing to disclose any reasonably arguable defence or alternatively as an abuse of process.[29]
45 Accordingly, the application was advanced on twin bases. The CITIC parties asserted that:
1. The 3FAD Fulcrum Purposes pleas did not provide a reasonable defence.
2. The attempt to revive or reagitate, under the guise of the 3FAD Fulcrum Purposes pleas, summarily dismissed aspects of the former APOC Fulcrum Purposes pleas (or to seek to argue them again on some collateral basis via the 3FAD), was an abuse of process.
46 The appellants rejected the contention that they were seeking, by the 3FAD, to reagitate the abuse of process challenge which was summarily dismissed by Quinlan CJ in Sino Iron Pty Ltd [No 2]. Instead, the appellants contended that the new 3FAD Fulcrum Purposes pleas had a legitimate defensive relevance in answer to the CITIC parties' claims. The appellants said that: (1) the Fulcrum Purposes, if established, were inconsistent with the CITIC parties' contended statutory unconscionability case and undermined the CITIC parties' estoppel claims; and (2) the Fulcrum Purposes, if established, were relevant to and militated against the grant of the discretionary relief sought by the CITIC parties.[30]
47 The primary judge characterised the central issue as being whether there was any arguable 'defensive trial utility' for the challenged pleas.[31] As previously mentioned, his Honour accepted that any pleas which raised background factual matters could remain. After referring to the parties' respective pleadings and respective contentions the primary judge made some general observations before turning to 3FAD par 15R.
48 In terms of general observations, the primary judge stated that:
2. The CITIC parties' statutory unconscionability claim was grounded on conduct (either act or omission) of Mineralogy and could not be impacted, even arguably, by the Fulcrum Purposes - being matters contended to reside in the mind of the CITIC parties.[34] On appeal this is challenged by ground 2(b).
49 As to 3FAD par 15R, the primary judge identified that 3FAD par 15S provided the evidentiary platform for the 3FAD Fulcrum Purposes pleas (in particular for the critical plea as to the 'Fulcrum Purposes' in 3FAD par 15R). His Honour noted, as has already been seen, that 3FAD 'aligns almost precisely' with the evidentiary pleas used by Mineralogy to support the Fulcrum Purposes as pleaded in the APOC. The primary judge stated, correctly, that in Sino Iron Pty Ltd [No 2] Quinlan CJ had concluded that the nominated evidentiary matters did not sustain the Fulcrum Purposes as pleaded in the APOC. The primary judge found this was also the case with the Fulcrum Purposes as pleaded in the 3FAD.[35] The primary judge assessed 3FAD par 15R(c) as being 'heavy on rhetoric but vacuous on facts'.[36]
Just as [the appellants] failed before in the APOC setting (along with a further evidentiary matters raised in the APOC) to sustain anything sinister or improper, so here as well, they must also fail towards providing the required evidentiary foundation to even derive this Fulcrum Purpose, as contended for under 3FAD par 15Rc. As discussed earlier, similar missing evidentiary derivation platform arguments have, in effect, already been extensively traversed under the reasons of the Chief Justice in [Sino Pty Ltd [No 2]].
Consequently, the like evidentiary platform attempted under 3FAD par 15S, fails to provide any support towards deriving the Fulcrum Purpose 3FAD plea at par 15Rc.[37]
51 The finding that 3FAD par 15R(c) did not have a reasonably arguable basis is challenged by ground 1.
52 In evaluating 3FAD pars 15M and 15N the primary judge returned to his earlier finding that the Contract 'Normalisation' Objective was benign. In his Honour's view, as the pleaded purpose was benign, it could 'go nowhere' in terms of providing the appellants with an arguable defence.[38] This was because:
I do not assess the holding of an objective purpose towards one day obtaining a better contractual deal - as being of itself inconsistent with elements of the CITIC Plaintiffs' pleaded estoppel cases by the SOC. A normalisation object, if held, would not necessarily be irreconcilable with CITIC also being wholly willing to perform all of their lawful contractual obligations to Mineralogy until the legitimate opportunity to consensually negotiate a better deal presented itself. That happens in business. Corporations, large and small, can also legitimately hold multiple objectives and corporate strategies at any particular time. How they act on them is another question. Hence, I do not assess an assumed holding of some benign or non-sinister Fulcrum Purpose (under 3FAD par 15R at a. and b.), as being necessarily inconsistent with, or as being irreconcilable to, or as potentially detracting from the elements of the SOC pleaded estoppels, including as to the alleged common assumption, or as to the elements of reliance and detriment in any estoppel. In short, they could all, in theory, co-exist together legitimately in the corporate mind of an organisation at the same time.[39]
53 His Honour said that, if pars 15M and 15N were the only irrelevant distractions in the 3FAD, he would be inclined to work around them.[40] However, the primary judge was mindful of unnecessary discovery burdens that arose from the pleas. Having regard to the short time remaining before a long trial the primary judge assessed the pleas as carrying 'too much distracting forensic baggage'.[41] Moreover, his Honour viewed the pleas as reflecting an 'underlying recalcitrance' to accept and move on from the result in Sino Iron Pty Ltd [No 2].[42] In addition to finding that pars 15M and 15N did not reveal a reasonably arguable defence the primary judge assessed the pleas to be an abuse of process.[43]
54 The primary judge's findings as to the 3FAD pars 15R(a) and (b) Fulcrum Purposes are challenged by ground 2(a). The primary judge's findings as to 3FAD pars 15M and 15N are challenged by ground 4(a).
55 The primary judge held that the 'wholly benign and non-sinister' pleaded Fulcrum Purposes could not be relevant to the discretionary relief sought by the CITIC parties.[44] In that respect his Honour referred to a submission by the appellants that the 3FAD Fulcrum Purposes could go to establish unclean hands on the part of the CITIC parties. The primary judge rejected that submission on the further basis that a defence of unclean hands was not pleaded in the 3FAD and such a plea should have been made explicitly if that was the case to be advanced.[45] The primary judge's finding that the 3FAD par 15R Fulcrum Purposes are not relevant considerations to the relief sought in the SOC is challenged by ground 2(c).
56 In the primary judge's view, a number of the pleas in 3FAD pars 15T - 15AJ fell derivatively with the rejection of the core pleas as to the Fulcrum Purposes. This accounted for pars 15O and 15P (dealing with the Fulcrum Group) and also pars 15T, 15Z, 15AB, 15AF and 15AH (which his Honour assessed as carrying with them suggestions of abuse of process or sinister or improper purposes on the part of the CITIC parties).[46] The primary judge held that these pleas failed to disclose any arguable defence and were also an abuse of process.[47] These findings are challenged by ground 4(b).
57 So too the rejection of the core pleas as to the Fulcrum Purposes resulted in the failure of 3FAD pars 131(a) (in part), 131(d)(iii), 140(i), 140(a) (in part), 159(a), 182AA(e), 183(bC), 183(d) (in part), 192(aA)(ii) and 203(d) (in part).[48] These findings are challenged by ground 4(c).
58 Separately, and in any event, the primary judge disallowed pars 15F, 131(d)(iii) and 192(aA)(ii) of the 3FAD as legally embarrassing.[49] That aspect of his Honour's decision is not challenged in the appeal. Accordingly, whatever the result of the appeal, those paragraphs had to remain struck-out.
59 In concluding the primary judge said that two plenary considerations bore on his assessment:
1. First, the challenged 3FAD pleas would have 'wholly disproportionate and unnecessary' pre-trial workload consequences which would ultimately go nowhere. Moreover, in the primary judge's view, they carried an unacceptable potential to 'derail and divert' a long and complex trial by a pursuit of irrelevancies.[50] This finding is challenged by ground 4(d).
2. Second, the excision of the struck-out pleas would not prejudice Mineralogy forensically - the appellants remained free to deny and challenge the CITIC parties establishment of their causes of action.[51] The finding that the appellants were not prejudiced forensically by the striking out of the impugned paragraphs in the 3FAD is challenged by ground 4(e).
60 The appellants say that they appeal against the primary judge's orders on four grounds. In fact, when independent sub-grounds are taken into account, there are numerous challenges to the primary judge's reasoning.
61 The primary judge is alleged to have erred in law by:
1. finding that 3FAD par 15R(c) did not have an arguable basis (ground 1);
2. finding that the purposes pleaded in 3FAD par 15R were not arguably inconsistent with or did not arguably undermine the state of mind alleged in the SOC (ground 2(a));
3. finding that the purposes pleaded in 3FAD par 15R were immaterial to the statutory unconscionability conduct claims alleged in the SOC (ground 2(b));
4. finding that the purposes pleaded in 3FAD par 15R were not relevant considerations for the court when exercising its discretion to grant the relief sought in the SOC (ground 2(c));
5. failing to consider whether 3FAD pars 15A - 15AJ disclosed or contributed to a reasonable defence to the contractual claim alleged in the SOC (ground 3).
62 In support of ground 1 the appellants contend that an intention to sterilise Mineralogy's other tenements and confound the underlying arrangements can be discerned on the face of the relief sought by the CITIC parties and the subsequent conduct of their case. Grounds 2(a), (b) and (c) allege that the purposes pleaded in 3FAD par 15R are relevant in answering certain aspects of the CITIC parties' claim. By ground 3 the appellants contend that the primary judge failed to engage with a submission that 3FAD pars 15A - 15AJ - and in particular par 15R - amounted to or formed part of a viable defence to the CITIC parties' contractual claims.
63 In addition, by ground 4, the appellants allege that:
As a result of the errors identified in grounds [1] and [3], or one or more of them, the Primary Judge further erred in law by:
(a) finding that paragraphs 15M and 15N of the 3FAD were illegitimate and an abuse of process because they did not 'render any arguably relevant or legitimately helpful defence contributions';
(b) finding that paragraphs 15F, 15M, 15N, 15O, 15P, 15Q, 15R, 15S, 15T, 15Z, 15AB, 15AF, 15AH, of the 3FAD were abuses of process and 'defensively pointless in any event';
(c) finding that paragraphs 15A, 131a, 131d(iii), particular (i) of 140, 141a, 182AAe, 183bC, 183d, 192aA(ii) and 203d, or parts thereof, had to be consequentially struck out;
(d) taking into account an erroneous consideration, being that the struck out paragraphs of the 3FAD 'carried with them wholly disproportionate and unnecessary extra pre-trial preparatory workload repercussions'; and
(e) taking into account an erroneous consideration, being that the Appellants were 'not at all prejudiced forensically' by the striking out of the impugned paragraphs in the 3FAD. (original emphasis) (references omitted)
64 Ground 4 is, in terms, dependent upon the appellants succeeding on one or both of ground 1 or ground 3. It is apparent, however, that ground 4 was intended to refer to 'grounds [1] to [3]' rather than 'grounds [1] and [3].[52] Thus success on aspects of ground 2 has implications for aspects of ground 4.
65 The appellants' notice of appeal and orders wanted confirm that the appellants require an extension of time for the appeal. The appeal notice was five days late. The failure to file the appeal within time was due to an inadvertent procedural mistake by the appellants' solicitor in navigating the court's e-lodgement system.[53] No prejudice arises from the late filing. In the circumstances it is appropriate that there be an order for an extension of time for the filing of the appeal.
66 The appellants also require leave to appeal.[54] The appellants' case contained no submissions in support of the application for leave. That omission ought not to have occurred. The requirement for leave is no mere technicality or procedural nicety. It is true that the principles on which this court considers whether to grant leave to appeal are well-established. A recent summary appears in NRW Contracting Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd.[55] But it is to be expected that an applicant for leave to appeal will address in its appellants' case why it is said that the interests of justice favour leave to appeal in the particular case.
67 For their part the CITIC parties oppose leave to appeal.[56]
68 The merits of the appeal are a relevant factor to whether the appellants have made out a proper basis for leave to appeal. For that reason we will defer consideration of leave to appeal. We will first consider the grounds of appeal. However, it should not be thought that the merits are necessarily determinative of the question of leave. Even if, on consideration, the primary judge's decision was wrong or attended by sufficient doubt to warrant its reconsideration, the appellants must make out that leave to appeal is in the interests of justice (although the merits of the appeal are a material consideration in assessing the interests of justice).
69 By an application in an appeal dated 16 December 2021 the appellants sought to adduce additional evidence in the appeal, namely, an affidavit of Daniel Jacobson affirmed 15 December 2021.[57] Mr Jacobson is a solicitor employed by Mineralogy. The affidavit refers to various steps taken, and documents filed in the proceedings before the primary judge, after the 6 October 2021 hearing of the CITIC parties' application to strike-out parts of the 3FAD. The appellants intended to rely on the affidavit in support of ground 1. The appellants contended that the CITIC parties' subsequent conduct of their case after the hearing on 6 October 2021 reinforced that 3FAD par 15R(c) had an arguable basis.[58]
70 No evidence is admissible on an application to strike-out a pleading on the ground that it discloses no reasonable defence.[59] After this rule was raised by the court in the course of the appeal hearing the appellants, by senior counsel, determined not to press the application to adduce additional evidence in the appeal.[60] Accordingly, the appellants' application to adduce additional evidence was dismissed. The CITIC parties also applied to adduce additional evidence in the appeal - an affidavit of David John sworn 17 January 2022. Mr John is a partner of the firm of solicitors acting for the CITIC parties. His affidavit clarified and expanded upon some of the matters referred to in Mr Jacobson's affidavit. The CITIC parties sought to rely on Mr John's affidavit if Mr Jacobson's affidavit was received. As the appellants' application was abandoned the CITIC parties' application fell away. It too had to be dismissed.
A preliminary point: did the primary judge rely on case management considerations as an independent basis for disallowing the amendments?
71 At the forefront of the CITIC parties' answer to the appeal was a contention that the primary judge's decision was grounded in more than a finding that the pleas as struck-out did not disclose a reasonable defence.
72 The CITIC parties contended that the strike-out orders entailed the primary judge explicitly exercising his discretion having express regard to case management considerations.[61] In that respect, in the CITIC parties' submission, it was material that the application was to disallow the amendments under O 21 rr 3(3) and (5) RSC as amendments made without leave.[62] According to the CITIC parties, the decision under appeal involved a discretionary judgment and there was no House v The King type discretionary error which would justify appellate interference.[63]
73 It may be accepted that the CITIC parties' application invoked O 21 rr 3(3) and (5) RSC as well as O 20 r 19(1) RSC. The orders sought were in terms both that the impugned pleas be 'disallowed' and also that they be 'struck-out'.[64] Both provisions were mentioned in the written submissions filed by the CITIC parties in support of the application.[65] But it does not follow that the primary judge's decision rested, at bottom, on case management considerations.
74 At the appeal hearing the CITIC parties submitted that, on a fair reading of his reasons, the primary judge relied on case management considerations as an independent basis for disallowing the amendments.[66]
75 We are unable to accept that submission. Nowhere in the primary reasons is there any express statement to that effect. Senior counsel for the CITIC parties pointed to various aspects of the primary reasons. For example, at [123] and [124] the primary judge referred to abuse of process. That, however, is not to rely on case management considerations. In any case, as senior counsel for the CITIC parties conceded, quite properly, the findings of abuse of process were linked to the findings that the pleas disclosed no reasonable defence.[67] Further, these references were confined to 3FAD pars 15M and 15N. Senior counsel for the CITIC parties also relied on the primary reasons at [62] and [63]. Senior counsel argued that the references to 'long term defensive trial utility' and 'defensive utility' was not the language of whether the pleas disclosed a reasonable defence. Rather, it was a composite expression that incorporated matters of proportionality and other case management considerations. We reject that reading of the primary reasons. His Honour has simply substituted more colourful language for the test of whether the pleas disclosed a reasonable defence. That is tolerably clear from the primary reasons at [63], where the primary judge said that if there was 'some genuinely arguable defensive utility' in the new 3FAD pleas 'they must remain intact' and the matters must proceed to trial.
76 Importantly, the primary judge characterised the application as one seeking to strike out the amendments 'as failing to disclose any reasonably arguable defence, alternatively as an abuse of process'.[68] His Honour did not, in identifying the grounds of the application, refer to case management considerations. His Honour identified the central issue for determination as being whether the pleas provided an arguable defence.[69] And in various places the primary judge unambiguously employed the language of assessing whether the amendments failed to disclose an arguable defence.[70]
77 We accept that, at some places in his reasons, the primary judge mentions case management considerations.[71] But these, properly understood, are informed by and bound up with his Honours conclusions as to whether the pleas reveal a reasonable defence. For example, at [122] of the primary reasons 3FAD pars 15M and 15N are said to carry 'distracting forensic baggage' and to impose 'unnecessary case management discovery burdens' in circumstances where his Honour has assessed the intrinsic merit of the pleas as being 'only ... of nuisance value'. Similarly, at [134], the primary judge speaks of 'pleas ultimately going nowhere' that ought not increase pre-trial burdens. And again, at [163], having characterised the struck-out pleas as carrying disproportionate and unnecessary pre-trial work, his Honour says that they go 'nowhere' when assessed at a 'mere arguability threshold' and involve a 'pursuit of irrelevancies'. The circumstance that the primary judge assessed the struck-out pleas as revealing no reasonably arguable defence explains his Honour's view that Mineralogy is not prejudiced forensically by the excision of the pleas.[72]
78 Senior counsel for the CITIC parties ultimately accepted that there was a degree of inter-relation between the primary judge's determination that the pleas as struck-out did not provide a reasonable defence and his Honour's reference to case management considerations.[73] For the reasons given above that concession was properly made. It is, in our view, determinative of the suggestion that the primary judge relied on case management considerations as an independent basis for disallowing the amendments. The primary judge's reliance on case management considerations was a secondary matter informed by his Honour's conclusions that the relevant pleas did not reveal a reasonable defence. The decision under appeal cannot be seen as a discretionary judgment independently founded on case management considerations with the consequences that would then attach for the purposes of appellate consideration of the decision.
Disposition: the merits of the grounds of appeal
79 Senior counsel for the appellants addressed the grounds of appeal in the order ground 2, ground 3 and ground 1. In relation to ground 4 senior counsel largely relied on the written submissions. Despite senior counsel for the appellants having approached the grounds of appeal in this order it is convenient to consider the grounds in numerical order.
Ground 1: Is there a reasonably arguable basis for 3FAD par 15R(c)?
80 Ground 1 alleged error in the primary judge's finding that 3FAD par 15R(c) did not have a reasonably arguable basis. It will be recalled that 3FAD par 15R(c) is the plea that the purposes of the Fulcrum Group included to sterilise Mineralogy's other tenements, to confound the commercial intent of the parties' commercial arrangements and to render the CITIC parties the sole miner that Mineralogy must sell its other rights to - Mineralogy's tenements having been rendered unsaleable and unusable. The primary judge held that the evidentiary platform provided by 3FAD par 15S failed to provide any support towards deriving the Fulcrum Purpose plea at 3FAD par 15R(c).
81 The appellants argued that the plea had an arguable basis as:[74]
1. The primary judge apparently proceeded on the premise that 3FAD pars 15R(a) and (b) had an arguable basis. We would observe immediately that while this may be accepted, the circumstance that pars 15R(a) and (b) had a reasonably arguable basis - derived from 3FAD par 15S - does not mean that 3FAD par 15R(c) had a reasonably arguable basis.
2. The relief sought by the CITIC parties sought an expansion of the site lease area in the MRSLAs which was extravagant and would inhibit access to and use of facilities from other Mineralogy tenements - including rendering the port area largely unusable by third parties. It was said that this 'overreach' supplied an arguable basis for 3FAD par 15R(c).
3. The 'sterilisation objective' (senior counsel for the appellants' shorthand for the Fulcrum Purposes plea at 3FAD par 15R(c))[75] was derived from and deployed in 3FAD pars 1AH - 1AJ (depictions of the relevant area and the contended effect of the CITIC parties' request for additional tenure), 133(bA) (esp. 133(bA)(iii)), 138(bA) (esp. 138(bA)(iii)), 141(a) and (b) (which relies on the depictions and the Fulcrum Purposes pleas), 142 - 146 (which rely on par 141), 147(d) (which relies on par 141) and 203 (which relies on the Fulcrum Purposes pleas).
82 Importantly, the appellants did not rely on the evidentiary platform provided by 3FAD par 15S.
83 The argument presented on appeal on behalf of the appellants ignored Mineralogy's pleaded case. 3FAD par 15R identified the 'Fulcrum Purposes' as relied on elsewhere in the defence. The basis on which it is alleged that the Fulcrum Group held the Fulcrum Purposes is pleaded in 3FAD par 15S and par 15S alone. Paragraph 15S states unambiguously '[t]he Fulcrum purposes are recorded in, and/or may be inferred from, the following documents and testimony'. There is then a list of seven matters that are relied on in support of the plea at 3FAD par 15R.
84 In oral submissions senior counsel for the appellants contended that par 15S did not set out the universe of the matters relied on for the plea at par 15R. Senior counsel argued that, while par 15S said what is recorded at [83] above, par 15S did not say that was the only place in which matters that grounded the Fulcrum Purposes plea appeared in the pleading. Hence senior counsel for the appellants referred to the additional pleas recorded at [81.3] above in support of the proposition that the Fulcrum Purposes plea in par 15R(c) had a reasonably arguable basis. Senior counsel said that par 15R was not only derived from par 15S; it was also derived from the other parts of[76]he 3FAD as nominated76 and was revealed from the relief as sought by the CITIC parties.
85 That submission, if accepted, would require the court to disregard the plain and natural reading of 3FAD par 15S in a way that would deprive the pleading of any utility. The pleading cannot be put aside in the way suggested on behalf of the appellants. The importance of pleadings, and their role in defining with clarity and precision the issues in dispute and providing the opposing party with fair and proper notice of the case it has to meet, is well understood. While these functions of pleadings are important in every case, their importance is magnified in a case of the scale and complexity of the primary proceedings. Among other things, one of the purposes of a pleading is to enable an assessment of whether the pleaded case gives rise to an arguable cause of action or defence. Given the clear words of par 15S any reasonably arguable basis for par 15R(c) must appear from par 15S. It suffices to say that no such reasonably arguable basis appears - something confirmed by the absence of any real argument on the part of the appellants to the effect that par 15R(c) was sustained by par 15S. Indeed, ground 1 did not take issue with the primary judge's conclusion that par 15S failed to provide any support for deriving the Fulcrum Purpose plea at par 15R(c).
86 Ground 1 was without merit. The primary judge made no error as alleged. To the contrary, for the reasons that his Honour gave, the primary judge was patently correct to strike-out 3FAD par 15R(c) as not having a reasonably arguable basis as pleaded. Ground 1 had to be dismissed.
Ground 2(a): Alleged inconsistency between 3FAD pars 15R(a) and (b) purposes and the CITIC parties' alleged state of mind
87 Ground 2(a) alleged error in the primary judge's finding that the 3FAD par 15R Fulcrum Purposes pleas were not arguably inconsistent or irreconcilable with - and did not potentially detract from - the alleged state of mind pleaded as part of the CITIC parties' estoppel cases. The rejection of ground 1 means that there is no basis for the Fulcrum Purposes plea at par 15R(c). Accordingly, the ground falls to be addressed by reference to pars 15R(a) and (b). Paragraph 15R(a) is the purpose of achieving the Contract 'Normalisation' Objective; par 15R(b) is the purpose of recouping additional costs of developing the Sino Iron project from Mineralogy.
88 Ground 2(a) is primarily of significance to the striking-out of 3FAD pars 15R(a) and (b). However, so far as ground 4(a) picks up the alleged error in ground 2(a), it has a flow-on effect for the striking-out of 3FAD pars 15M and 15N.
89 The primary judge characterised the Fulcrum Purposes pleas at pars 15R(a) and (b) as being 'benign' and 'non-sinister'.[77] Standing alone no error is alleged in terms of that characterisation. However, the alleged error the subject of ground 2(a) is partially grounded in the primary judge later finding that a benign or non-sinister purpose could go nowhere in terms of providing the appellants with a reasonably arguable defence. The gravamen of the appellants' contention on appeal was that there was an evident tension between the CITIC parties' pleaded belief that Mineralogy would do something favourable for them and the purpose of seeking to change the governing arrangements because they were unfavourable.[78] So understood, whether the alleged purposes of normalisation and recoupment were benign or non-sinister was no more than a distraction. The defence being asserted was that these alleged purposes (advanced as part of the defence case) were inconsistent with and undermined the CITIC parties' alleged state of mind (advanced as part of the CITIC parties' case).
90 In this connection it is necessary to examine the state of mind alleged on the part of the CITIC parties. Based on various matters pleaded at length in the SOC, the CITIC parties pleaded that they:
reasonably expected that Mineralogy would take such steps as were necessary to enable the location of infrastructure, facilities and activities for the efficient and economic carrying out of the Sino Iron Project on the Mineralogy Tenements, and to enable the exercise by Sino Iron and Korean Steel of their rights to mine 1 billion tonnes each of magnetite ore and to produce and export up to 13.8 million tonnes each of magnetite product per annum, including by:
(a) approving and submitting to the SA Minister under the State Agreement proposals reasonably required to further progress and implement the Sino Iron Project;
(b) granting access to, and/or use of, further tenure reasonably required by Sino Iron and Korean Steel for the purposes of the Sino Iron Project, for no additional monetary consideration; and
(c) taking steps reasonably required by Sino Iron and Korean Steel to enable them to exercise rights to access, and/or use, tenure for the purposes of the Sino Iron Project.[79]
91 Senior counsel for the appellants emphasised the alleged expectation pleaded in SOC par 131(b): the CITIC parties alleged that they reasonably expected that Mineralogy would grant further tenure reasonably required for the purposes of the Sino Iron Project for no additional monetary consideration.
92 The 'Reasonable Expectations' were relied on for the estoppel causes of action. For the estoppel by convention case the CITIC parties pleaded an alleged common position or assumption which was broadly consistent with the alleged Reasonable Expectations (SOC par 182 - see esp. par 182(b)). Accordingly, as part of the CITIC parties' case, the CITIC parties must establish that they held the Reasonable Expectations as pleaded. As to the estoppel by representation and conduct case: (1) Mineralogy was alleged to have induced the CITIC parties to adopt the Reasonable Expectations (SOC par 191); and (2) the CITIC parties were alleged to have acted in reliance on the Reasonable Expectations (SOC par 192). Again, as part of the CITIC parties' case, the CITIC parties must establish that they held the Reasonable Expectations as pleaded.
93 Pleas introduced by Mineralogy's 'Fulcrum Purposes' amendments were struck-out derivatively by the primary judge as a consequence of his Honour deciding to strike-out par 15R (3FAD pars 131(a), 131(d)(iii), 140(b)(ii)(i), 182AA(e), 183(bC), 192(aA)(ii)). Those pleas in part relied on 3FAD pars 15R(a) and (b) to refute that the CITIC parties in fact held the Reasonable Expectations.
94 The appellants' argument on appeal was relatively simple. The appellants said that the CITIC parties had put their state of mind in issue by propounding the estoppel causes of action. The CITIC parties allegedly believed that Mineralogy would take steps that were significantly favourable to the CITIC parties. By 3FAD pars 15R(a) and (b) Mineralogy advanced the case that the CITIC parties had the Fulcrum Purposes of contract normalisation and costs recoupment - something that was consistent with a belief on the part of the CITIC parties that the contractual arrangements were unfavourable to them. Mineralogy said that the state of mind alleged by the CITIC parties could not be reconciled with the objectives of normalisation and recoupment. In other words the positive case advanced by Mineralogy by pars 15R(a) and (b) was inconsistent with and undermined the state of mind alleged by the CITIC parties as to their holding of the Reasonable Expectations.
95 Senior counsel for the appellants asked rhetorically:
If CITIC sincerely believe[d] that their legal relationship with Mineralogy was such that Mineralogy would go so far as to, amongst other things, give them free tenure in order for them to exercise their contractual mining rights to their fullest extent in an economic and efficient way, why were they dissatisfied with the underlying contractual regime?[80]
96 Senior counsel went on to suggest that if the CITIC parties held the Reasonable Expectations, as asserted, the occasion to change the contractual relationship simply would not arise.[81]
97 On one reading of the primary judge's reasons his Honour accepted the potential for inconsistency. The primary judge observed that a normalisation object 'would not necessarily be irreconcilable' and said that he did not assess the holding of some benign or non-sinister Fulcrum Purpose under 3FAD pars 15(a) or (b) as being 'necessarily inconsistent with' the elements of the estoppel causes of action as pleaded in the SOC. In the primary judge's view 'they could all, in theory, co-exist together'. Each of those conclusions admits of the contrary possibility, ie that the parties' competing allegations might be irreconcilable or inconsistent and might not be able to co-exist. However, earlier in the same paragraph the primary judge said that he did not assess the holding of an objective purpose of obtaining a better contractual deal as being 'of itself inconsistent with' the state of mind pleaded in support of the estoppel causes of action.[82]
98 For their part, the CITIC parties, by senior counsel, accepted the potential for inconsistency, but said any such potential was 'slight'.[83]
99 The Fulcrum Purposes pleas in 3FAD pars 15R(a) and (b) propound a reasonable defence if there is a reasonable argument that they might rebut or answer the CITIC parties' asserted state of mind, either wholly or in part, by establishing an object that is inconsistent with or that undermines the Reasonable Expectations that the CITIC parties allege as part of their case. To exclude such a reasonable defence the CITIC parties had to negate that possibility. It was not enough that there was not necessarily an inconsistency, irreconcilability or undermining or that the various states of mind could, in theory, all co-exist. To leave it at that level of abstraction is to admit of the possibility that the contract normalisation or costs recoupment object could be inconsistent with or detract from the state of mind that the CITIC parties allege to make good their estoppel causes of action. Rather, to exclude there being a reasonable defence it had to be shown that the positive case Mineralogy sought to advance by the Fulcrum Purposes pleas in pars 15R(a) and (b) was incapable of being inconsistent with or to otherwise have the effect of undermining the Reasonable Expectations state of mind alleged as part of the CITIC parties' estoppel claims.
100 For the reasons in [97] above, it is by no means clear that the primary judge so found. If and to the extent that his Honour did so find, in our respectful opinion his Honour thereby erred.
101 We are satisfied that the contract normalisation and costs recoupment objects pleaded in 3FAD pars 15(a) and (b) are not incapable of being inconsistent with or otherwise undermining the CITIC parties' alleged Reasonable Expectations - in particular the CITIC parties' assertion that they assumed that Mineralogy would grant them further tenure reasonably required for the purposes of the Sino Iron Project for no additional monetary consideration. Put positively, we are satisfied that the Fulcrum Purposes pleas in pars 15(a) and (b) are capable of rebutting or answering, at least in part, the CITIC parties' alleged state of mind as is said to ground the estoppel causes of action.
102 It might be that when all the competing evidence is adduced and evaluated, findings in terms of Mineralogy's pleas that the CITIC parties' 'Fulcrum Group' had the purpose of achieving contract normalisation and costs recoupment belie or tell against a finding that the CITIC parties expected or assumed that Mineralogy would grant them further tenure reasonably required for the purposes of the Sino Iron Project for no additional monetary consideration. The purposes of contract normalisation and costs recoupment are arguably inconsistent with and arguably undermine an asserted belief that Mineralogy would grant the CITIC parties further tenure reasonably required for the purposes of the Sino Iron Project for no additional monetary consideration. It is certainly not beyond argument that, having concluded they had negotiated an unfavourable bargain and sustained significant losses such that steps were required to alter the parameters in which the Sino Iron Project was operating,[84] the CITIC parties did not expect that Mineralogy would grant them further tenure for no additional monetary consideration.
103 Whether or not that is the case is a matter for trial. So too we readily accept, as the primary judge observed, that the parties' competing allegations are not necessarily inconsistent or irreconcilable and may in theory co-exist. But again, whether or not inconsistency or undermining is ultimately established is a matter for trial.
104 In our respectful view the primary judge erred in concluding that 3FAD pars 15R(a) and (b), together with the associated pleas, did not reveal a reasonable defence to the CITIC parties' estoppel claims. Having found, in substance, that the relevant alleged Fulcrum Purposes were not necessarily inconsistent or irreconcilable with the state of mind asserted to sustain the estoppel claims, the primary judge should have concluded - as was the case - that those objects could be inconsistent with or detract from, thereby undermining, the state of mind the CITIC parties must establish to make good their estoppel causes of action.
105 Ground 2(a) was made out. Subject to leave to appeal it followed that the orders of the primary judge should be set aside to the extent that they struck-out 3FAD pars 15R(a) and (b) and the various derivative pleas (except to the extent that the latter were found to be legally embarrassing). The derivative pleas thus liable to reinstatement were those at 3FAD pars 131(a), 182AA(e) and 183(bC) (pars 131(d)(iii) and 192(aA)(ii) remain struck-out given the unchallenged finding that they are legally embarrassing). The CITIC parties also accepted that pars 15M, 15N, 15O, 15P, 15Q and 15S should rise or fall with pars 15R(a) and (b) as they contained the definitional and contextual pleadings for pars 15R(a) and (b).[85] That concession was properly made and should be accepted.
Ground 2(b): Whether 3FAD pars 15R(a) and (b) arguably material to statutory unconscionability claim
106 Ground 2(b) is partly derivate on ground 2(a). Ground 2(b) is concerned with Mineralogy's defence to the CITIC parties' statutory unconscionability claim. The primary judge held that the possible impacts of the alleged Fulcrum Purposes - as matters residing in the corporate minds of the CITIC parties - did not arguably bear on the existence of the alleged conduct, by act or omission, of Mineralogy.[86] By ground 2(b) the appellants contended that this conclusion was in error as the alleged Fulcrum Purposes were arguably material to the statutory unconscionability conduct claim pleaded in SOC pars 175, 177, 179, 181, 200 and 203.
107 The CITIC parties' statutory unconscionability conduct claim is advanced in two discrete ways. First, at SOC pars 174 - 181 the CITIC parties allege that there was unconscionable conduct in contravention of s 21 of the ACL by Mineralogy's conduct in one or more of failing to submit MCPs, grant further necessary tenure, grant a re-purposing request or submit or authorise the submission of a programme of works. Second, at SOC par 200 the CITIC parties allege that there was unconscionable conduct in contravention of s 21 of the ACL by Mineralogy's conduct in resiling from the alleged assumption or expectation (ie the 'Reasonable Expectations') that the CITIC parties rely on for the estoppel claims. As to both claims the CITIC parties make an accessorial liability claim against Mr Palmer (SOC pars 201 - 203).
108 Ground 2(b) is derivate on ground 2(a) in the second respect in which the statutory unconscionability claim is advanced. The same issues arise as to the Fulcrum Purposes pleas so far as the CITIC parties' claim relies on them establishing the state of mind contended for by the Reasonable Expectations. Conformably with the disposition as to ground 2(a), because the 3FAD pars 15R(a) and (b) Fulcrum Purposes pleas are capable of being inconsistent with or underlining the CITIC parties' alleged Reasonable Exceptions, those pleas disclose a reasonably arguably defence to that aspect of the statutory unconscionability claim.
109 Mineralogy pleads to the second aspect of the statutory unconscionability claim at 3FAD par 200. This incorporates the pleas at 3FAD pars 182 - 199. Relevantly, by 3FAD par 182(a), this incorporates pars 15R(a) and (b) and, by par 191, incorporates par 131 (sub-par (a) of which was struck-out but is already liable to reinstatement with the success on ground 2(a)). Ignoring other paragraphs incorporated by 3FAD pars 182 - 199 the only paragraphs within pars 182 - 199 that were struck-out by the primary judge were pars 183(bC) and 192(aA)(ii).[87] The latter must remain struck-out in any event as the primary judge held them to be legally embarrassing and that conclusion is not challenged on appeal. The former is liable to reinstatement with the success on ground 2(a). Accordingly, upholding this aspect of ground 2(b) does not result in any further modifications to the orders made by the primary judge.
110 The appellants also contended, by ground 2(b), that the primary judge's finding was in error as to the other aspect of the statutory unconscionability claim. Senior counsel for the appellants submitted that, so far as an evaluation of whether there had been statutory unconscionable conduct required a normative assessment of Mineralogy's conduct, the behaviour and state of mind of the CITIC parties was highly relevant. The submission was that the establishment of the Fulcrum Group with objects of contract normalisation and costs recoupment undermined the proposition that the CITIC parties were susceptible to the kind of exploitation necessary for a finding of statutory unconscionability. It was said that 3FAD par 15R amounted to or formed part of a viable defence to the statutory unconscionability claims in SOC pars 175, 177, 179 and 181.[88]
111 It is, with respect to those responsible for the pleading, very difficult to pick-up how Mineralogy's 3FAD relies on the Fulcrum Purposes pleas to counter the first aspect of the statutory unconscionability claims. There is no express reference to those pleas in the parts of the 3FAD that are responsive to this aspect of the statutory unconscionability claims. However, Mineralogy does plead that it was reasonable for it not to submit the MCPs, grant further tenure, grant the re-purposing request or submit or authorise the submission of a programme of works in the circumstances pleaded in 3FAD pars 140 - 141 or pars 140 - 147 (see 3FAD pars 174(c), 176(b), 178(b), 180(b)). Among other things 3FAD par 141(a) repeats and relies on pars 15A - 15AJ, thereby apparently raising the Fulcrum Purposes pleas.
112 The commercial relationship between Mineralogy and the CITIC parties must be viewed in its totality in evaluating whether Mineralogy has engaged in conduct that is, in all the circumstances, unconscionable. It is reasonably arguable that the CITIC parties' objectives in their dealings with Mineralogy may rationally affect an assessment of whether Mineralogy's alleged conduct could properly be described as being against conscience. That is all the more so given the breadth of the permissible considerations to which the court may have regard when determining whether a person has contravened s 21 of the ACL.
113 For example, by s 22 of the ACL the court may have regard to:
114 Moreover, it is well-established that, like a court examining a claim of unconscionable conduct in equity, a court evaluating an allegation of statutory unconscionable conduct must have regard to all the circumstances of the case. Determining whether a party to a transaction has engaged in unconscionable conduct will entail 'a precise examination of the particular facts' and 'every connected circumstance' as well as 'a scrutiny of the exact relations established between the parties'.[89]
115 It is reasonably arguable that the formation of the Fulcrum Group, and its objectives of contract normalisation and costs recoupment, may bear on one or more of these matters to which the court may have regard in evaluating whether Mineralogy engaged in conduct that is, in all the circumstances, unconscionable. The statutory considerations go beyond the alleged conduct of Mineralogy. They, at least arguably, extend to permit consideration of the actions and purposes of the CITIC parties. To that extent, in our respectful view, the appellants have established appellable error in the primary judge's conclusion that the CITIC parties' statutory unconscionability claim could not be impacted, even arguably, by the Fulcrum Purposes pleas so far as those objects resided in the corporate minds of the CITIC parties. Accordingly, ground 2(b) was also made out in relation to the first aspect of the CITIC parties' statutory unconscionability claim.
116 Ground 2(b) was made out. However, assuming leave to appeal, the allowance of ground 2(b) did not result in any additional pleas being reinstated to the 3FAD over and above those to be reinstated as a result of the success of ground 2(a).
Ground 2(c): Whether 3FAD pars 15R(a) and (b) are arguably relevant considerations to the relief claimed by the CITIC parties
117 Senior counsel for the appellants said that it was unnecessary to consider ground 2(c) if grounds 2(a) and (b) were upheld.[90] The CITIC parties took a different view. In a memorandum dated 4 February 2022, filed with leave after the appeal hearing, the CITIC parties contended that if grounds 2(a) and (b) succeeded, but not ground 2(c), 3FAD par 203(d) should be amended by deleting the words 'to 15AJ' and 'pursuing the Fulcrum Purposes'.[91]
118 The difficulty with the CITIC parties' contention is that the primary judge's striking out of those words in 3FAD par 203(d) did not depend on the findings the subject of ground 2(c). The findings the subject of ground 2(c) were the primary judge's findings that the alleged Fulcrum Purposes were not relevant considerations for the court when exercising its discretion to grant the equitable and statutory relief sought in the SOC. However, the primary judge struck-out the identified words from 3FAD par 203(d) as a consequential strike-out (something that fell 'derivatively' according to the primary judge)[92] rather than as a result of the findings impugned by ground 2(c).
119 The striking-out of the relevant portions of 3FAD par 203(d) is the subject of ground 4(c) and should be considered in that context rather than under the rubric of ground 2(c).
120 Grounds 2(a) and (b) have succeeded. There is no utility in determining ground 2(c) given what was accepted by senior counsel for the appellants. In the circumstances we will not determine ground 2(c).
Ground 3: Alleged failure to consider whether Fulcrum Purposes pleas a reasonable defence to the CITIC parties' contractual claims
121 Ground 3 is not immediately attractive. It is undeniable that, although raised before the primary judge in argument,[93] his Honour's reasons did not deal with the appellants' submission that the Fulcrum Purposes pleas disclosed a reasonable defence to the CITIC parties' claim that Mineralogy was contractually obliged to submit the MCPs, grant the further tenure, grant the re-purposing requests and submit or authorise the submission of the programme of works. But establishing a failure to consider the argument is immaterial unless the Fulcrum Purposes pleas disclose or form part of a reasonable defence to the contractual claims. What is not immediately apparent is why the Fulcrum Purposes pleas provide a reasonable defence to the CITIC parties' contractual claims in circumstances where - at the time of the failures or refusals - Mineralogy did not know of the Fulcrum Purposes.
122 In this regard senior counsel for the appellants accepted that there was no plea to the effect that Mineralogy knew of and declined the CITIC parties' requests as a result of the Fulcrum purposes. However, senior counsel said that this was not essential to the defence.[94]
123 Senior counsel for the appellants developed the argument in these steps:
1. The CITIC parties' contractual case is that Mineralogy was bound by various obligations of reasonableness, good faith and co-operation rather than a strict liability to meet the CITIC parties' requests. This may be accepted. For example, as to the alleged obligation to submit MCPs under the State Agreement the CITIC parties contend that (SOC pars 141 - 146):
(a) the requests to submit the MCPs are and were reasonable requests;
(b) as such Mineralogy was obliged to approve and submit the MCPs for approval under the State Agreement.
2. Mineralogy denies those allegations relying, in part, on the Fulcrum Purposes allegations. In effect, among other things, Mineralogy denies that the matters requested of it were reasonable or that compliance with the requests was required of it, because the requests were made in furtherance of the Fulcrum Purposes. Again this broad summary of Mineralogy's pleaded position may be accepted. For example, in the responsive pleading to SOC par 141 Mineralogy repeated and relied on 3FAD pars 15A - 15AJ and said that the CITIC parties' requests were not reasonable and Mineralogy was not obliged to accede to them (3FAD pars 141(a) - (b)). A similar approach is taken to the other contractual claims in part by repeating and relying on 3FAD par 141 (see eg 3FAD pars 147, 151, 155, 162).
3. The existence of the Fulcrum Purposes pleaded in 3FAD pars 15R(a) and (b) could bear on the assessment of whether Mineralogy reasonably or unreasonably refused the CITIC parties' requests.
124 As to the last step, so far as the CITIC parties' case was that Mineralogy was contractually bound to approve the requests as they were reasonable, senior counsel for the appellants developed a parallel between the CITIC parties' case and the landlord and tenant cases where a tenant has an entitlement under a lease to ask for the landlord's consent and the landlord's consent is not to be unreasonably withheld. While not a landlord and tenant consent case, senior counsel relied in particular on the following passage from the reasons of Mason J (Gibbs, Stephen and Aickin JJ agreeing) in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd:
I conclude that the respondent was not entitled to refuse to grant a lease to the appellant so as to deprive the appellant of a benefit which would otherwise accrue to it under the contract. A refusal on that ground would be capricious and arbitrary. On the other hand, a refusal on the ground that there were doubts that the appellant could or would pay the rent promptly would, if the ground were made out, not be capricious or arbitrary. I say 'promptly' because the respondent as owner was entitled to look for a tenant who would not only pay the rent, but would pay it promptly and in accordance with the provisions of the lease. If the evidence established that the respondent entertained doubts, reasonably based, that the appellant would pay the rent promptly and without difficulty, then it was reasonable to refuse to grant the lease on that ground.[95]
125 Later Mason J dealt with whether the reasonableness question was subjective, not objective, in the sense that the court must confine itself to points raised by the landlord at or about the time of refusal. Mason J concluded:
I am inclined to the view that the landlord is entitled to rely on a ground not taken at or about the time of refusal. It would be most unjust if the landlord could not take advantage of an important ground justifying refusal merely because it was not known to him at the time, eg the impending bankruptcy of the proposed assignee. In the context of this case, the reasons for allowing the respondent to advance a ground not communicated at the time of refusal are rather stronger. There is here no question of informing a lessee so that he can decide whether he should assign or not. And the general rule in contract is that a party can justify his termination or rescission of a contract by reference to grounds not taken at the relevant time.[96] (emphasis added)
126 The passage is obiter dicta. The case was ultimately decided on the concurrent findings of the trial judge and the Full Court of the Supreme Court of Queensland that the owner of the land entertained doubts, reasonably based, as to the willingness or ability of the proposed tenant to pay rent promptly in accordance with the terms of the proposed lease.[97] It is, however, seriously considered dicta joined in by four members of the High Court. It is clear, in this respect, that Mason J considered that the trial judge had been wrong to exclude from consideration matters not known at the time of refusing the lease.[98] Accordingly, the case stands for the proposition that an available ground of refusal may be relied upon even if it was not known at the time by the contracting party who refuses the other party's request.
127 On appeal the CITIC parties did not engage with the argument as developed by senior counsel for the appellants beyond making an assertion that the Fulcrum Purposes pleas were irrelevant to the contractual claims.[99] The CITIC parties instead sought to suggest that the argument was not raised before the primary judge; and, in any event, pointed to a passage of the transcript of the argument before the primary judge where his Honour made observations which seemingly rejected the defence.[100] Two things should be said about that submission:
1. First, what was said by the primary judge in the course of hearing argument does not form part of his Honour's reasons. It is plain, and the CITIC parties accepted,[101] that the primary judge did not deal with the matter in his reasons.
2. Second, if proof beyond the references in footnote 93 above be required, the fact that the primary judge engaged with the issue in argument establishes that the matter was adequately raised before his Honour.
128 The analogy sought to be drawn by senior counsel for the appellants is not perfect. However, the present context is one in which the question is whether there is a reasonable defence - a context in which great care must be exercised to ensure that a litigant is not improperly deprived of its opportunity to have a trial of its case. In that context there is a sufficiently arguable parallel between the landlord and tenant consent cases and the nature of the alleged contractual obligations contended for by the CITIC parties to make it reasonably arguable that the considerations which inform the landlord and tenant consent cases may also apply to the present case. Whether, ultimately, that proves to be the position is a matter for trial and will depend on the nuances of the express and implied contractual obligations, if any, as found by the trial judge. Nevertheless, having accepted that there is an arguable parallel, it is reasonably arguable - based on Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd - that Mineralogy may seek to justify its refusal of the CITIC parties' requests based on something not known to Mineralogy at the time.
129 So too, in our view, it is reasonably arguable that the Fulcrum Purposes pleaded in 3FAD pars 15R(a) and (b) - either individually or in combination - provide a defence on the basis that it was reasonable to refuse the CITIC parties' requests on that ground.
130 It is reasonably arguable that Mineralogy was entitled to take its own legitimate commercial interests into account when considering the CITIC parties' requests. Mineralogy's legitimate commercial interests are, in our view, arguably informed by or at the least affected by the actions of the CITIC parties so far as the CITIC parties are making requests of Mineralogy. In terms of the Fulcrum Purposes pleas at 3FAD pars 15R(a) and (b) it is reasonably arguable that a person in Mineralogy's position may entertain doubts, reasonably based, about consenting to submitting MCPs, granting further tenure, granting re-purposing requests and submitting or authorising the submission of a programme of works where its counterparty has an object of altering the parameters of the contractual relationship between the parties as a means of recouping losses from Mineralogy. It is reasonably arguable that, in circumstances where the CITIC parties had and were furthering the Fulcrum Purposes pleaded at 3FAD pars 15R(a) and (b), a person in Mineralogy's position might reasonably refuse the CITIC parties' requests because it was not in Mineralogy's legitimate commercial interests to enlarge the commercial relationship with the CITIC parties.
131 Ground 3 was made out. Subject to leave to appeal, success on ground 3 provided an independent basis for the reinstatement of 3FAD pars 15R(a) and (b) and associated Fulcrum Purposes pleas. In particular, success on ground 3 provided a basis for the reinstatement of the plea at 3FAD par 141(a) relying on pars 15A - 15AJ.
Ground 4: The pleas struck-out consequentially and the primary judge's additional observations
132 The parties did not address ground 4 in any significant way in their oral submissions. Senior counsel for the appellants said that ground 4 followed from grounds 1 - 3.[102] Senior counsel for the respondents referred to ground 4 as the 'consequential errors' and said that he did not need to address them orally.[103] Nevertheless, it is apparent from the respondents' memorandum dated 4 February 2022 that the CITIC parties contend that success on some aspects of ground 4 was necessary for particular pleas within the 3FAD to be reinstated. Accordingly, it is necessary to deal briefly with ground 4.
133 Ground 4(a) dealt only with 3FAD pars 15M and 15N. These were to be reinstated in any event given the appellants' success in relation to ground 2(a) and the CITIC parties' concession as to the consequence of upholding ground 2(a) (see [105] above). In any event ground 4(a) was made out and must be upheld. The pleas at 3FAD pars 15M and 15N were neither illegitimate nor an abuse of process so far as they contributed to the reasonably arguable defence revealed by the Fulcrum Purposes pleas as has been the subject of grounds 2(a), 2(b) and 3.
134 Ground 4(b) concerned 3FAD pars 15F, 15M, 15N, 15O, 15P, 15Q, 15R, 15S, 15T, 15Z, 15AB, 15AF and 15AH. In terms of what remains live for determination having regard to the conclusions already stated:
1. Paragraph 15F was disallowed on the additional basis that it was legally embarrassing. Success on ground 4(b) could not affect that outcome.
2. Paragraphs 15R(a) and (b) ought to be reinstated consistently with the outcome on grounds 2(a), (b) and 3 (subject to leave to appeal). However, the failure of ground 1 means that par 15R(c) will not be affected by the appeal if there is leave to appeal.
3. The respondents accept that pars 15M, 15N, 15O, 15P, 15Q and 15S rise and fall with the outcome of par 15R on grounds 2 and 3.[104]
135 Accordingly, ground 4(b) was material so far as concerns 3FAD pars 15T, 15Z, 15AB, 15AF and 15AH.
136 In addition to failing to disclose any arguable defence the primary judge found that these pleas were an abuse of process.[105] The findings that the pleas fail to disclose a reasonable defence is erroneous for the same reasons as establish the errors the subject of grounds 2(a), 2(b) and 3. Once it is accepted that the pleas disclose a reasonable defence it cannot be said that they constitute an abuse of process. It is not to the point that the pleas outwardly replicate some of the allegations that failed in Sino Iron Pty Ltd [No 2]. As pleaded in the 3FAD the relevant pleas serve a distinctly different forensic purpose. They are no longer relied on in support of an assertion by the appellants that the proceedings are an abuse of process because the CITIC parties brought them for collateral and improper purposes. The pleas are advanced to defend the CITIC parties' claim. Once it is found, as we do, that the pleas reveal a reasonable defence, we are unable to accept in the circumstances of this case that there is any abuse of process which would justify the striking-out of the pleas. Ground 4(b) must be upheld.
137 The upholding of ground 4(b) means that, subject to leave to appeal, 3FAD pars 15T, 15Z, 15AB, 15AF and 15AH must be reinstated. We harbour some reservations about this outcome. Had there been a notice of contention raising the issue it may well have been that we would have been persuaded that some or all of these pleas ought to have been struck-out as embarrassing. However, there is no such contention and the primary judge did not rely on this ground in striking out these pleas. The possibility that these pleas ought to remain struck-out in any event on the ground that they are embarrassing does not arise for determination in the appeal.
138 Ground 4(c) concerned 3FAD pars 15A, 131(a), 131(d)(iii), 140 particular (i), 141(a), 182AA(e), 183(bC), 183(d), 192(aA)(ii) and 203(d). Again, a number of these have been resolved with earlier conclusions:
1. Paragraphs 131(d)(ii) and 192(aA)(ii) were disallowed on the additional basis that they were legally embarrassing. Success on ground 4(c) could not affect that outcome.
2. Paragraphs 182AA(e) and 183(bC) ought to be reinstated consistently with the outcome on grounds 2(a) and (b) (subject to leave to appeal). However, the observations at [137] apply equally to these paragraphs.
3. The words struck-out in par 141(a) ought to be reinstated consistently with the outcome on ground 3 (subject to leave to appeal).
139 The remaining paragraphs the subject of ground 4(c) concern the primary judge striking-out references incorporating the Fulcrum Purposes pleas at 3FAD pars 15A - 15AJ (3FAD pars 15A, 131(a), 140 particular (i), 183(d), 203(d)). That was a consequential strike-out so far as the primary judge struck-out much of 3FAD pars 15A to 15AJ. The primary judge found that those references to 3FAD pars 15A - 15AH fell derivatively. The success on earlier grounds necessarily means that the primary judge's derivative finding was in error. Ground 4(c) must be upheld to that extent. So too ground 4(c) must be upheld so that the words 'and pursuing the Fulcrum Purposes' in 3FAD par 203(d) are reinstated. This too was a consequential finding premised on the primary judge's conclusion that the Fulcrum Purposes pleas did not reveal a reasonable defence.
140 It is not necessary to decide grounds 4(d) or (e). No plea struck-out by the primary judge depends on ground 4(d) or (e) for its reinstatement. We would, however, allow grounds 4(d) and (e). The findings the subject of grounds 4(d) and (e) were grounded on the primary judge's erroneous view that the Fulcrum Purposes pleas did not disclose a reasonably arguable defence. In terms of ground 4(d) the primary judge's assessment that the pleas carried wholly disproportionate and unnecessary pre-trial work was premised on his Honour's conclusion that the pleas were irrelevancies going nowhere. In terms of ground 4(e), contrary to the primary judge's finding, the appellants were prejudiced because the strike-out of the Fulcrum Purposes pleas had the effect of depriving the appellants of pursuing a reasonable defence.
141 In oral submissions senior counsel for the appellants emphasised that, if the grounds of appeal were meritorious, the appellants would be deprived of an opportunity to avail themselves of a tenable defence in the absence of leave to appeal. That was said to amount to substantial injustice justifying leave to appeal in the interests of justice. Senior counsel also pointed out that, if the appeal had force but leave to appeal was refused, one unpalatable possibility was that - on an appeal after final orders which raised alleged error in the appellants not being able to deploy tenable defences based on the Fulcrum Purposes pleas as struck-out - there was a risk of re-trial. That would inevitably be the case since, at trial, the appellants would be circumscribed in their cross-examination of the CITIC parties' witnesses as a result of not being able to pursue lines of cross-examination based on the Fulcrum Purposes pleas.[106]
142 In opposing leave to appeal senior counsel for the CITIC parties raised the following matters:[107]
1. The CITIC parties alleged that the appellants had ample opportunity to plead their defences and that the Fulcrum Purposes allegations could have been pleaded much earlier. At the latest, evidence of the Fulcrum Purposes allegations was discovered in May 2020 and was the subject of cross-examination in other proceedings before the primary judge in November 2020. It was said that the interests of justice did not require the grant of yet another opportunity to plead the allegations.
2. The Fulcrum Purposes pleas were said to be a reagitation of old grievances. Senior counsel for the CITIC parties identified, in written submissions, a number of occasions in which similar or related allegations had been raised in other proceedings.[108]
3. By the time Mineralogy sought to introduce the Fulcrum Purposes allegations into the primary proceedings, in mid-August 2021, the proceedings had already been listed for a long trial commencing early in 2022. The trial was going to require much preparatory work on an intensive basis.
4. The appellants would still be able to run other matters by way of defence. There was, in this respect, a so-called 'sterilisation' defence[109] and certain matters concerning the failure to pay the royalty (including various Fulcrum Purposes pleas that had not been struck-out such as 3FAD pars 15U - 15Y, 15AC - 15AE, 15AG, 15AI - 15AJ).[110] Senior counsel for the CITIC parties likened these defence as being 'proxies' for the matters that the appellants sought to expand upon by the struck-out Fulcrum Purposes pleas the subject of the intended appeal.[111] According to the CITIC parties this was not an occasion where the strike-out of the pleas deprived the appellants of a clear new line of defence.
5. So far as the Fulcrum Purposes pleas added anything their relevance and importance to Mineralogy's overall defence was 'marginal' and in any case disproportionate given the pre-trial workload and distraction that they posed so close to trial.
143 In written submissions the CITIC parties also relied on the primary judge's role as case manager providing him with a familiarity with the primary proceedings that should not lightly be put aside.[112]
144 We acknowledge the relevance of the primary judge's role as case manager and its significance to whether there should be a grant of leave to appeal.[113] That is particularly so where, as here, this court is being asked to review an interlocutory decision on a matter of practice and procedure - a circumstance in which this court exercises special restraint before engaging in appellate intervention.[114] The other matters relied on by the CITIC parties are of a kind that might have been raised as case management considerations that militate against allowing leave to amend to plead the struck-out pleas. Those other matters might have force on such an application. They have less force in the present context, ie in determining whether it is in the interests of justice that the appellants have leave to appeal. That is all the more so when, as previously noted, the primary judge did not disallow the impugned pleas for case management reasons - of particular importance since the CITIC parties did raise matters of delay before the primary judge[115] and his Honour did not criticise Mineralogy as having unduly delayed. Moreover, as senior counsel for the CITIC parties accepted, there was nothing concrete in the materials before this court to suggest that the trial would necessarily be postponed were the appeal to be allowed and some or all of the Fulcrum Purposes pleas reinstated.[116]
145 As to the last matter, while conceding that there was nothing before the court to say that the trial would not proceed as planned, senior counsel for the CITIC parties had earlier submitted that a trial would not be able to be commenced on 14 February 2022 if the amendments were reinstated.[117] In support of that submission senior counsel relied on an affidavit of the CITIC parties' solicitor sworn 5 October 2021. The high point of that affidavit was to state that the burden of discovering documents responsive to the Fulcrum Purposes pleas will be significant and time consuming.[118]
146 That very general evidence as to the potential discovery obligation does not make good the submission that the trial would inevitably or even probably be postponed if the amendments were reinstated. There was no suggestion that the obligation could not be carried out given the substantial legal and other resources self-evidently available to the CITIC parties. If postponement of the trial was a real risk it would have been a simple matter for the CITIC parties to adduce up-to-date affidavit evidence in opposition to the application for leave that addressed the issue directly. That was not done. Any such affidavit would, of course, have had to deal with the extent to which additional discovery would in fact be burdensome and time consuming given that - as senior counsel for the CITIC parties submitted - pleas within the 3FAD left intact by the primary judge's decision allowed the appellants to run defences which were in substance proxies for the struck-out Fulcrum Purposes pleas in any event. That submission diminishes the cogency of the CITIC parties' protestation that leave to appeal should be refused due to case management considerations.
147 It is not necessary to rehearse the principles on which this court considers whether to grant leave to appeal. Leave may be granted whenever the interests of justice require it. In the present case, although the complaint is as to a matter of practice and procedure on the part of a case manager, there were a number of factors which outweighed these considerations and the other considerations pressed by senior counsel for the respondents. Those factors justified the grant of leave to appeal.
148 The material considerations justifying leave to appeal in the particular circumstances of this case were as follows:
1. First, as can be seen from the upholding of grounds 2(a), 2(b), 3 and 4(a) - (e), the primary decision was wrong in a number of material respects.
2. Second, depending on how the evidence falls out at trial, it may be that substantial injustice will ensue if the decision is left unreversed. At the very least the appellants will be deprived of their opportunity to have a trial of tenable defences.
3. Third, leave to appeal - and the re-introduction of the Fulcrum Purposes pleas - must be viewed in the context of litigation which already involves significant complexity and is set down for a long trial. The Fulcrum Purposes pleas will not, in our view, result in a substantial increase in the complexity of the trial or its length.
4. Fourth, it is almost inevitable that the unsuccessful party at trial will appeal. Let it be assumed that Mineralogy is the unsuccessful party. One of Mineralogy's grounds will be that it was deprived of tenable defences by reason of the interlocutory order striking out the Fulcrum Pleas and this affected the final result.[119] If successful, such an appeal would be likely to result in a re-trial. That possibility is contrary to the private interests of both parties and the public interest - all the more so given the obvious complexity of the litigation and the length of the trial that is currently listed before the primary judge.
149 There are a wide range of matters that may be taken into account in determining whether it is in the interests of justice to grant leave to appeal. Those matters include the goal and objects in O 1 rr 4A and 4B RSC. Material errors have been established in relation to grounds 2(a), 2(b), 3 and 4(a) - (e). Those errors may, if unreversed, see large and complex litigation proceed to a lengthy trial on a flawed basis in a manner which is inconsistent with the objects in O 1 rr 4B(1)(b), (c), (e) and (f) RSC. The interests of justice - viewed in the wider sense of the phrase - are such that this is one of those relatively rare cases where leave to appeal ought to be granted to allow appellate intervention in relation to an interlocutory decision on a pleading point.
150 It was for these reasons that on 8 February 2022 we made orders granting leave to appeal and allowing the appeal.
151 The formal orders of the court were as follows:
1. The time for the appellants to file and serve an appeal notice against the orders made on 12 November 2021 in Supreme Court action CIV 1915 of 2019 is extended to 1 December 2021.
2. The appellants' application in an appeal dated 16 December 2021 is dismissed.
3. The first to third respondents' application in an appeal dated 17 January 2022 is dismissed.
4. The appellants have leave to appeal against the orders made on 12 November 2021 in Supreme Court action CIV 1915 of 2019.
5. The appeal is allowed.
6. Paragraphs 1 and 3 of the orders made on 12 November 2021 in Supreme Court action CIV 1915 of 2019 are set aside.
7. The following orders are made in substitution of par 1 of the orders made on 12 November 2021 in Supreme Court action CIV 1915 of 2019:
1A. By consent, the following portions of the first defendant's third further amended defence dated 17 August 2021 are struck out, namely:
(a) particulars (a) and (b) to par 58(c);
(b) particulars (a) and (h) to par 140(b)(ii);
(c) pars 142(aB), 147(aB), 148(a) and 159(a);
1B. The following portions of the first defendant's third further amended defence dated 17 August 2021 are struck out, namely, pars 15F, 15R(c), 131(d)(iii) and 192(aA)(ii).
8. All questions as to the costs of the appeal and of the application the subject of the orders made on 12 November 2021 in Supreme Court action CIV 1915 of 2019 are reserved until reasons for decision for these orders are delivered.
152 The parties should now be heard on the outstanding questions as to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
[1] Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 3] [2021] WASC 384 (Primary reasons).
[2] After the appeal hearing the trial commencement was further deferred to commence on 21 February 2022: Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 8] [2022] WASC 46 [3].
[3] Quinlan CJ collects references to some of the earlier litigation in Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2021] WASC 170 (Sino Iron Pty Ltd [No 2]) [17] - [18], [24] - [26], [56], [223], [227], [231] - [234], [236], [239] - [246], [264] - [280], [284], [298], [307]. See also Sino Iron Pty Ltd v Mineralogy Pty Ltd [2020] WASC 311 (Sino Iron Pty Ltd [No 1]) [36] - [45].
[4] See generally Sino Iron Pty Ltd [No 2] [2], [7] - [40].
[6] Sino Iron Pty Ltd [No 2] [10] - [11].
[8] Sino Iron Pty Ltd [No 2] [14] - [15].
[9] Sino Iron Pty Ltd [No 2] [19] - [21].
[10] Appeal ts 23. See also appeal ts 24 where senior counsel for the appellants referred to 'tenure' as a 'big issue' in the case.
[11] 3FAD pars 1AA - 1AJ. See also the pleas in relation to this allegation at 3FAD pars 133(bA), 138(bA), 147(gA).
[15] Sino Iron Pty Ltd [No 2] [30] - [33].
[16] The primary judge provides a more comprehensive description of the SOC, with emphasis on the contractual claim, in Sino Iron Pty Ltd [No 1] [25] - [30], [57] - [132].
[17] Appellants' amended points of claim dated 12 April 2021 (APOC) par 35. A copy of the APOC is reproduced at sch B to the Primary reasons.
[19] Sino Iron Pty Ltd [No 2] [313] - [318].
[20] Something accepted by the appellants (although the appellants say that they rely on the allegations 'for distinctly different forensic purposes, namely as reasonable defences to the various causes of action'): Appellants' submissions par 2(d).
[21] Primary reasons [40], [43]. See also [48] - [50].
[22] Primary reasons [109], [111] - [112].
[25] Primary reasons [74] - [75], [80], [113], [115] - [117].
[29] Primary reasons [31], [37] - [38], [48] - [50].
[30] Primary reasons [55] - [58]. See also [81] - [83], [89], [103] - [106].
[32] Primary reasons [98]. See also [15].
[33] In particular Primary reasons [90] (although here, read fairly, there is no adverse finding; but rather merely the identification of an issue), [119] (where the primary judge again characterises the Contract 'Normalisation' Objective as 'benign'), [120], [129] (where the primary judge characterises the Fulcrum Purposes at 3FAD pars 15R(a) and (b) as 'benign').
[35] Primary reasons [107] - [109]. In doing so the primary judge referred to relevant passages in Sino Iron Pty Ltd [No 2] where Quinlan CJ evaluated the various matters relied on in the equivalent plea to 3FAD par 15S: Primary reasons [111] - [112].
[37] Primary reasons [132] - [133].
[46] Primary reasons [136] - [146], [149].
[48] Primary reasons [150] - [160].
[49] Primary reasons [114], [152], [159].
[52] Appeal ts 39. Note also the reference to 'one or more' of the grounds rather than 'one or both' of the grounds.
[53] Affidavit of D M Jones affirmed 29 November 2021 par 4.
[55] NRW Contracting Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2020] WASCA 107 [117] - [118].
[56] Respondents' submissions pars 4 - 6, 39 - 44.
[57] Mr Jacobson also swore an affidavit on 28 January 2022 to provide the court with a corrected attachment (the wrong attachment having been included in his affidavit sworn 15 December 2021).
[58] Appellants' submissions pars 6, 14 - 16, 19 - 21.
[59] Rules of the Supreme Court 1971 (WA) O 20 r 19(2).
[61] Appeal ts 48 - 62; Respondents' submissions par 36.
[62] Respondents' submissions pars 30 - 31.
[64] Respondents' chamber summons dated 13 September 2021 par 1 BAB 410.
[65] Respondents' submissions dated 13 September 2021 pars 9 - 11 BAB 415 - 416.
[70] Primary reasons [62], [63], [119], [131], [135].
[71] See eg Primary reasons [64], [122], [134], [162] - [164].
[74] Appeal ts 31 - 36, 39 - 41; Appellants' submissions pars 17 - 18, 21.
[77] Primary reasons [119], [120], [128], [129].
[78] Appellants' submissions pars 7, 25, 30.
[84] The substance of the plea in 3FAD par 15M.
[85] Respondents' memorandum dated 4 February 2022 pars 2(a)(ii), 3(a)(ii).
[87] The Primary reasons also foreshadow some modification to 3FAD par 183(d): Primary reasons [158]. However, that does not appear to have been carried into the orders made.
[88] Appeal ts 17 - 20; Appellants' submissions pars 36 - 37.
[89] See, for example, Australian Securities and Investments Commission v Kobelt [2019] HCA 18, (2019) 267 CLR 1 [120], [150]; Serventy v Commonwealth Bank of Australia [No 2] [2016] WASCA 223 [2016] WASCA 223; Unique International College Pty Ltd v Australian Competition and Consumer Commission [2018] FCAFC 155; 266 FCR 631 [104]; Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd [2021] FCAFC 40; (2021) 151 ACSR 98 [90] - all adopting Jenyns v Public Curator (Qld) [1953] HCA 2; (1953) 90 CLR 113, 119.
[91] Respondents' memorandum dated 4 February 2022 par 2(d).
[93] See: ts 33; Appellants' submissions dated 4 October 2021 par 34(b) BAB 448.
[95] Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 610.
[96] Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (611).
[97] Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (615).
[98] Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (614).
[99] Respondents' submissions par 70; Appeal ts 70 - 71.
[101] Respondent's submissions par 70.
[104] Respondents' memorandum dated 4 February 2022 pars 2(a)(ii), 3(a)(ii).
[105] Primary reasons [135] - [146], [149].
[107] Appeal ts 62 - 66. See also Respondents' submissions pars 39 - 43.
[108] Respondents' submissions pars 21 - 28 (referring to Sino Iron Pty Ltd v Palmer [2014] QSC 259; Sino Iron Pty Ltd v Palmer [No 2] [2014] QSC 287; Sino Iron Pty Ltd v Palmer [No 3] [2015] QSC 94; [2015] 2 Qd R 574; Mineralogy Pty Ltd v Sino Iron Pty Ltd [2021] WASCA 53; CITIC Ltd v Mineralogy Pty Ltd [No 4] [2020] WASC 439; Sino Iron Pty Ltd [No 2]).
[109] Senior counsel for the CITIC parties identified this by reference to 3FAD pars 1AA - 1AJ, 133(bA), 138(bA), 147(gA) - esp par 147(gA)(iii) where Mineralogy pleads that the CITIC parties' request for additional tenure is not sought to accommodate a genuine requirement but has a 'true purpose ... to prevent, impair or inhibit Mineralogy including from using its other tenements in the Mineralogy Tenements'.
[110] Senior counsel for the CITIC parties also referred to 3FAD pars 28(b), 140(b)(ii)(i), 203(d).
[112] Respondents' submissions par 44.
[113] NRW Contracting Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [117.3]. See also: Pearce v International Mining Technologies Ltd [2009] WASCA 239, [25] - [26]; Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2019] WASCA 141 [49].
[114] NRW Contracting Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [117.2].
[115] Respondents' submissions dated 13 September 2021 par 31 BAB 425.
[118] Affidavit of D W John sworn 5 October 2021 par 12 GAB 104.
[119] It being established that, in some circumstances, a party may challenge the correctness of a final judgment on the ground that an interlocutory judgment was wrong: Gerlach v Clifton Bricks Pty Ltd [2002] HCA 22; (2002) 209 CLR 478 [5].
(1979) 144 CLR 596
(2002) 209 CLR 478
(1953) 90 CLR 113
(2019) 267 CLR 1