MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 12] [2016] WASC 335 (14 October 2016)

3 The plaintiff contends that RCB is capable of calculation. The interim injunction sought is a requirement that the defendants pay the plaintiff slightly in excess of $80 million, being the amount of RCB which it says should have been paid on product produced to date. The plaintiff also seeks an order that, if they comply with the order for payment, the defendants are permitted to continue to mine, process, ship or otherwise transport iron and iron ore products obtained from the operations under the MRSLAs. In order to quantify the amounts claimed, the plaintiff relies on an expert report prepared by Mr Robert Brierley, a research analyst with considerable mining industry experience.

4 Mr Brierley's reports contain calculations, based on various assumptions he was instructed to make, including assumptions as to the meaning of the expression 'prevailing published annual FOB prices'. That expression is found in cl 8.2 of the MRSLAs, and its construction is central to the matters in dispute in these proceedings generally, and in this injunction application in particular.

5 My acquaintance with Mr Brierley arises in the following circumstances.

6 Some considerable time ago I played cricket at a social level. I played with the particular team for a number of years, but stopped playing at least 10 years ago, although I cannot remember precisely when. My recollection is that shortly before I ceased playing, Mr Brierley joined the team. I therefore came to know him in that context, and through the occasional social events which were associated with that team.

7 After I ceased playing cricket, for perhaps two or three years, although I cannot now recall how many times, an end of season weekend gathering was held at my holiday home away from the city. Those occasions were attended by probably somewhere between 10 and 15 current or former players. I am unable to recall specifically whether Mr Brierley attended those gatherings on each occasion, although I am sure that he did so at least once and probably more.

8 Since that time I have had little to do with Mr Brierley although I am aware that he has continued as a member of that team to the present time. From time to time over the years, as a spectator, I have attended matches which the team plays, and would have most likely spoken to Mr Brierley on at least some of those occasions. Although I now have little, if any, involvement with the cricket team, I, like a very large number of other former players, have remained on the group email which is used during the course of a cricket season to seek expressions of interest to play on a weekend, to announce weekly teams, to provide match reports and to announce occasional social gatherings (in which I generally do not participate, although occasionally have). There are roughly 50 members of the email group. Since I ceased any particular involvement in the cricket team, Mr Brierley has in recent years assumed a role in organising teams, and has therefore been a sender of emails to the email group. As I disclosed to the parties, I most recently received such an email on the weekend immediately before this matter was due to be heard. That email called for expressions of interest of players for an upcoming fixture. It was a communication that was wholly irrelevant to me (and no doubt a large number of the other recipients). The only reason that I received it was that, like many others who have played in the team in the distant past but who no longer have anything to do with the team, I remain on the large group email list.

9 I would broadly describe my relationship with Mr Brierley as one of friendly acquaintance.

10 The defendants expressly disavowed any suggestion of actual bias, but submitted that I should recuse myself by reason of an apprehension of bias. The test to be applied in determining whether a judge is disqualified by reason of the appearance of bias is whether a fairminded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question that the judge is required to determine: Johnson v Johnson [2000] HCA 48; (2000) 201 CLR 488 [11].

11 In Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337 [8], the court explained that the application of the test involves two steps. First, the test requires identification of what it is that might lead a judge to decide a case other than on its legal and factual merits. Secondly, there must be an articulation of the logical connection between the matter and the feared deviation from the course of deciding the case on its merits.

12 The test requires that it should be assumed that the lay observer would base his or her opinion on a fair assessment of the judge's conduct in the context of the hearing as a whole: De Alwis v The State of Western Australia [No 2] [2015] WASCA 42 [70].

13 The defendants assert that the evidence of Mr Brierley is critical to the application for an injunction, and their case is that no reliance should be placed on his evidence. In support of those contentions, the defendants rely on criticisms of Mr Brierley's reports by their own expert, Mr Barkas. In those circumstances, they contend that a fairminded observer would apprehend that, by reason of my longstanding social acquaintance with Mr Brierley and in particular the fact that he has spent time as a guest in my holiday house, and has been the author of ongoing communications with me by email, I might not bring an impartial and unprejudiced mind to the assessment of his evidence.

The approach to evidence in an interlocutory injunction application

14 In order to assess the defendants' contention, it is necessary to consider the nature of the task I am to undertake in assessing an application for an interlocutory injunction, and the nature and significance of the challenges to Mr Brierley's evidence.

15 The grant of an injunction involves balancing the injustice which might be suffered by the defendants if the injunction is granted and the plaintiff later fails at trial, against the injustice which might be suffered by the plaintiff if the injunction is not granted and the plaintiff later succeeds at trial.

16 While the court takes into account the apparent strength of the plaintiff's case, the court does not undertake a preliminary trial or attempt a forecast of the ultimate result. Moreover, an application for interlocutory injunction is not an occasion to determine contested questions of fact and conflicts in affidavit evidence. In a passage recently cited with approval by the Full Federal Court in Warner-Lambert Company LLC v Apotex Pty Ltd [2014] FCAFC 59 [72], Mahoney JA (with whom Glass & Samuels JJA agreed) made observations in Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729 about the use to which the defendant's evidence can be put in determining an application for an interlocutory injunction:

But there are limitations upon the extent to which a judge is to take into account such evidence as the defendant may tender upon an interlocutory application. It is not his function to conduct a preliminary trial of the action, nor is it, in general, to resolve the conflict between the parties' evidence, and grant or refuse the application upon the basis of such findings. Where there is conflict of evidence, the use which may be made of the defendant's evidence in determining whether the plaintiff has made out a prima facie case is a limited one. For example, the plaintiff's evidence, considered alone, may be such a prima facie case as would be acceptable if submitted to a jury in a trial. But, when considered in the light of the defendant's evidence, it may be explained away so as no longer to be such. Or the defendant's evidence, when juxtaposed to that of the plaintiff may show that there is in reality no such case, no real question between the parties, appropriate to warrant preserving the status quo until the hearing (734).

17 The question of the determination in the present application arises in the context of the juxtaposition of Mr Barkas' evidence against Mr Brierley's evidence to consider whether the plaintiff has demonstrated a prima facie case in the relevant sense, or, if it has, whether there is a reliable basis upon which the order that the plaintiff seeks can be made.

18 It is common ground that the first task of the court in resolving the dispute regarding RCB will be the construction of cl 8.2 of the MRSLAs. That is a question of law. The defendants contend that at the time the MRSLAs were entered into, the words 'prevailing published annual FOB price' meant the benchmark price established by the annual benchmark pricing system (DS [53]). They rely on evidence of their own expert, Mr Barkas, that the words have that meaning and also submit that it can be inferred that Mr Brierley understood the words to have that meaning. They say that evidence supports the case that the words bore a well understood and customary meaning in the iron ore industry, and that cl 8.2 should be construed having regard to that well understood meaning.

19 It is apparent that Mr Brierley accepted that an assessment as to what was the prevailing published annual FOB price as at 29 March 2006 and 11 March 2010 should be based on the benchmark price (Brierley affidavit 5 August 2016 RB10 page 239). The benchmark system was discontinued in 2010. Thereafter there existed a system of spot, monthly or quarterly prices or what have been referred to as index based systems.

20 The existence of the benchmark system up until 2010, and the appropriateness of relying on the benchmark for the purpose of assessing RCB up until 2010, does not appear to be a matter in issue between the experts. The central point of departure between the experts is whether there are fundamental differences between the benchmark and index based pricing systems that prevent calculation of analogues of prevailing FOB prices in the current market. Whether or not that is so turns first upon the question of construction of cl 8.2. Secondly, it turns on an understanding of the differences of application of the respective systems. In other words, whether the index based system, when properly understood, is capable of being an analogue of an annual FOB price. The defendants have indicated that they challenge Mr Brierley's conclusion that they are so capable.

21 A significant issue in respect of which the competing evidence of the two experts needs to be considered is the defendants' contention that, if the balance of convenience otherwise favours the grant of injunction, there is insufficient evidence upon which to quantify, with sufficient reliability, any payment to be made. That issue requires examination of the criticisms of Mr Brierley's methodologies by Mr Barkas and by the defendants.

22 When initially instructed, Mr Brierley was instructed to make the following assumptions:

(a) 'Annual' has the meaning given to it in Black's Law Dictionary, being, inter alia, 'continuing for a period of a year' and other matters that were set out later in the instructions.

(b) 'FOB' has the meaning given to it in the incoterms (International Commercial Terms).

(c) The words 'prevailing published annual FOB price' means the prevailing annual FOB price relevant to a quarterly payment period derived from published data:

(i) if an annual FOB price or prices is or are published and represents or represent the prevailing price, by using that price or those prices;

(ii) if an annual price or prices are published which is or are not FOB prices, by converting the price or prices to an FOB price by using published data as to components of price;

(iii) if a relevant annual price is not published, by using published data as to spot, monthly or quarterly prices which best represents the prevailing price to calculate annual FOB price.

(d) Alternatively, if there is no published annual price relevant to a payment quarter, the words 'prevailing annual published FOB price' are to be construed as the prevailing published price relevant to the payment quarter, determined by reference to published data as to spot, monthly or quarterly prices which best represents the prevailing price for the quarter.

23 In the course of submissions, counsel for the defendants foreshadowed an argument that the credibility of Mr Brierley's report would be challenged on the basis that he failed to question the assumptions which he was asked to make.

24 Criticisms are also made as to what is said to be a lack of clarity as to what assumptions Mr Brierley drew upon for the purposes of the calculations which he made. That criticism was made by Mr Barkas in his report, and Mr Brierley elaborated on the point in his supplementary report. The defendants submitted that his explanation in response (Brierley affidavit 21 September 2016 RB14 page 52) is not credible (DS [105]).

25 The defendants assert that the unreliability of Mr Brierley's evidence is demonstrated by admitted errors in calculations and flawed assumptions regarding moisture content. Mr Brierley acknowledged some errors in calculation, and corrected them, with little impact on the resultant figures. Whilst not accepting that his assumptions in relation to moisture content were flawed, Mr Brierley in his supplementary report recalculated his figures to accommodate the moisture content percentage as suggested by Mr Barkas. Those matters by themselves do not appear to provide a basis to conclude that Mr Brierley's calculations are unreliable. The defendants may nevertheless argue that the concessions made in Mr Brierley's supplementary report go to the credibility of his report generally.

26 Mr Barkas notes that the supplementary Brierley report gives four affirmative results for quarterly FOB prices for Brazil 65% Fe pellets which differ by up to 35% in the same quarter, and by 15% or more in eight of the fourteen relevant quarterly periods. The defendants note that two different sources in respect of the Brazilian component of the price were relied upon by Mr Brierley, but that he expressed no opinion as to which set of prices ought to be preferred. On the instructions of the plaintiff, the experts who applied Mr Brierley's figures to the formula for RCB, Messrs Sorbello and Birkett, utilised one of those sources. The defendants contend that they lack any expertise to choose which source is appropriate and that the choice of the source of prices lacks any evidentiary foundation. That is not a criticism of Mr Brierley's credibility, but rather goes to the adequacy of his report for the purposes to which it is put.

27 Against that background, it is clear that the criticisms made of Mr Brierley's evidence invite a conclusion that no weight should be given to it for the purpose of assessing any amount which the plaintiff should be ordered to pay by way of interim injunction.

28 A social connection between a judge and a witness is a matter which is recognised as giving rise to a potential apprehension that the judge may not bring an impartial and unprejudiced mind to the assessment of the witness's evidence. While the relationship which I have with the witness is far from being a close one, my acquaintance with him dates back many years, and has involved mutual engagement in sporting and social events.

29 Although the task in the context of an application for an interim injunction does not require the final resolution of conflict between the evidence of the competing expert witnesses, it is apparent that the credibility of Mr Brierley's report is put in issue by the defendants and that Mr Brierley's evidence is central to the ultimate outcome of the injunction application. Determination of the application will require at least a broad, and to some extent intuitive, evaluation of the reliability of Mr Brierley's report and opinions in the light of a number of specific criticisms made of it by the defendants.

30 Although, as I indicated to counsel when I disclosed my connection to the witness, I consider that I would be able to bring an impartial mind to the resolution of the matter notwithstanding that connection, I accept that a fairminded lay observer, apprised of the particulars of my connection with the witness, may reasonably apprehend that I may not bring an impartial or unprejudiced mind to the assessment of his evidence. Regrettably, in those circumstances, I have determined that I should recuse myself from the hearing of this application.