Supreme Court of WA|2013-10-14|Before: Mr P, Edelman J

MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 2] [2013] WASC 375 (14 October 2013)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 2] [2013] WASC 375

Interlocutory injunctions - Whether plaintiff should be restrained from purporting to suspend or terminate a multi-billion dollar project on the basis of an alleged default in payment of $287,000 which could cause loss to the plaintiff of around $15,000 to $25,000 - Whether first and second defendants have a prima facie case in the main action - Balance of convenience - Relevance of future conduct in relation to royalties which are alleged to fall due

Iron Ore Processing (Mineralogy Pty. Ltd.) Agreement Act 2002 (WA)

First Defendant : Mr C Scerri QC and Mr S Parmenter

Second Defendant : Mr C Scerri QC and Mr S Parmenter

1 The primary litigation in these proceedings involves a component of a royalty which the respondent to this application, Mineralogy, says is worth $9.4 billion over the next 30 years in relation to its joint venture with the defendants.[1] The alleged default relied upon by Mineralogy is the failure of the first defendant, Sino Iron, and the second defendant, Korean Steel, to pay a disputed debt of $287,000. On the evidence before the Court, if Mineralogy is ultimately successful in the larger litigation it will suffer a loss from the delayed payment of the alleged debt which can be estimated very broadly at around $15,000 to $25,000.

2 At its lowest, this application by Sino Iron and Korean Steel concerns the question of whether, based on the disputed default and potential loss of around $15,000 to $25,000, Mineralogy should be required to give 30 days' notice before attempting to suspend or terminate the joint venture:

(ii) which Mineralogy says is worth $9.4 billion; and

(iii) on which the parent company of Sino Iron and Korean Steel, CITIC Pacific, has spent approximately $7 billion.[2]

Mineralogy says that there is no requirement to give 30 days' notice, nor, indeed, any notice before suspending or terminating.

3 The manner in which the hearing of this application was conducted is a matter of concern. The legal fees on this application must have vastly exceeded the potential loss to Mineralogy of $15,000 to $25,000. Nearly 1,000 pages of affidavit evidence were filed. The hearing occupied almost one full day. At the hearing, almost every imaginable point was taken by Mineralogy including challenging whether the defendants had any prima facie case in their defence of the multi-billion dollar litigation.

4 On the issue of the balance of convenience, counsel for Mineralogy submitted at the hearing that the standard undertakings as to damages given by Sino Iron and Korean Steel were not adequate in relation to the potential $25,000 loss. Sino Iron is one of the joint venturers in the multibillion dollar project. It has a paid up share capital of more than $38 million.[3] It is unnecessary to deal with the issue, or the evidence filed on this point by Mineralogy, because Mineralogy ultimately did not rely on an assertion of inadequacy of the undertakings. But this concession was only made after the conclusion of the oral hearing.

5 An interlocutory injunction should be granted in the terms sought by Sino Iron and Korean Steel. Mineralogy should be restrained, until a period after judgment in the main action, from purporting to suspend or terminate the multi-billion dollar project based on its default notice issued in relation to the disputed $287,000 debt.

6 The parties to this action are engaged in a joint venture at Cape Lambert in Western Australia described as the Sino Iron Project.

7 Numerous disputes have erupted between Mineralogy and the defendants: Sino Iron, Korean Steel and their parent, CITIC Pacific.

8 The action in which this interlocutory injunction is brought concerns a royalty component, contained in identical provisions in two transaction documents, the Mining Right and Site Lease Agreements (MRSLAs). The MRSLAs are agreements between (1) Mineralogy and Sino Iron, and (2) Mineralogy and Korean Steel.

9 The royalty dispute in the proceedings in which this application is brought was transferred to my list from the Supreme Court of New South Wales on 30 April 2013. The royalty dispute is progressing towards trial. But interlocutory disputes are slowing that progression to trial.

10 This interlocutory action was precipitated by a default notice issued by Mineralogy to Sino Iron and Korean Steel on 26 July 2013. The relevant parts of that default notice are as follows:

By reason of the above matters, Sino Iron and Korean Steel are in default of their respective obligations to pay Mineralogy the Mineralogy Royalty (in respect of Royalty Component B) for Q4/12, Q1/13 and Q2/13. These defaults fall within clause 30.4(d) of the MRSLAs.
Mineralogy hereby gives notice to Sino Iron and Korean Steel pursuant to clause 30.4(d) to require them to remedy their breaches of clauses 8.1(c) and 8.4 of the MRSLAs forthwith by:

(a) providing Mineralogy with true and correct information regarding the quantities of Products produced during Q4/12 Q1/13 and Q2/13 so as to enable Mineralogy to calculate the Mineralogy Royalty payable by Sino Iron and Korean Steel; and

(b) paying to Mineralogy all outstanding amounts of Royalty Component B of the Mineralogy Royalty for the periods Q4/12, Q1/13 and Q2/13.

Pursuant to clause 30.4(d) of the MRSLAs, Sino Iron and Korean Steel are on notice that:

(a) should they fall within 21 days to satisfy paragraph 26(b) above then Mineralogy shall be entitled to require Sino Iron and Korean Steel to suspend all operations on the Project Area until payment is resumed; and

(b) further, should they fail within 90 days to satisfy paragraph 26(b) above then Mineralogy shall be entitled on 21 days' written notice to terminate the MRSLAs.

Mineralogy awaits Sino Iron and Korean Steel's compliance with paragraph 26 forthwith and reserves all of its rights against Sino Iron, Korean Steel and CITIC Pacific.

12 In these proceedings, Mineralogy's evidence is that based on 19,000 tonnes of iron ore concentrate produced over the three quarters the subject of the default notice, the amount of Royalty Component B is $287,059.[4]

13 In contrast with the quantum of Mineralogy's claim in these royalty dispute proceedings, which is said by Mineralogy to be worth $9.4 billion, the grant of this interlocutory application would, if Mineralogy were ultimately successful in the royalty dispute, affect Mineralogy in an amount of around $15,000 to $25,000. This amount of $15,000 to $25,000 would then be recoverable upon the undertakings as to damages given by Sino Iron and Korean Steel.

The terms of the interlocutory injunction sought

14 The terms of the interlocutory injunction sought by Sino Iron and Korean Steel were originally formulated as follows:

Until 21 days from the pronouncement of final orders, or earlier order in this matter, the Plaintiff, whether by itself, its officers, servants, agents or otherwise, be restrained, and an injunction is hereby granted restraining it, from:

(a) issuing or purporting to issue any notice to the First Defendant or the Second Defendant requiring them to suspend the operations carried out by, or on behalf of, either of them on the Project Area, as defined in the Sino Iron Mining Right and Site Lease Agreement (as amended) (Sino MRSLA) and the Korean Steel Mining Right and Site Lease Agreement (as amended) (Korean MRSLA); or

(b) issuing or purporting to issue any notice to terminate the Sino MRSLA or the Korean MRSLA; or

in reliance on, or in respect of the defaults alleged in, the purported notice of default issued by the Plaintiff to the Defendants on 26 July 2013.

15 Prior to the hearing of the injunction application, Sino Iron and Korean Steel indicated that their alternative position was that an injunction should issue to restrain the above actions from taking place unless Sino Iron and Korean Steel were given 30 days' notice. They indicated that they would be prepared to accept an undertaking from Mineralogy to this effect in place of an injunction, and that any costs of the hearing could be reserved. Mineralogy refused this course.

16 It is not necessary to consider this alternative position. I am satisfied that the injunction, limited as it is to the purported default notice issued on 26 July 2013, should issue in the terms proposed by Sino Iron and Korean Steel in their primary submission, above.

17 The test to be applied to determine whether an interlocutory injunction should issue is as enunciated by the High Court of Australia in Beecham Group Ltd v Bristol Laboratories Pty Ltd.[5]

18 As Gummow and Hayne JJ later explained in Australian Broadcasting Corporation v O'Neill,[6] the High Court in Beecham said that on interlocutory injunction applications a Court addresses itself to two main inquiries:[7]

The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief ... The second inquiry is ... whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.

19 In Australian Broadcasting Corporation v O'Neill Gleeson CJ and Crennan J agreed with the 'explanation of these organising principles in the reasons of Gummow and Hayne JJ', citing the paragraph above.[8] However, Gleeson CJ and Crennan J also described the organising principles as involving a Court asking the following:[9]

whether the plaintiff has shown that there is a serious question to be tried as to the plaintiff's entitlement to relief, has shown that the plaintiff is likely to suffer injury for which damages will not be an adequate remedy, and has shown that the balance of convenience favours the granting of an injunction.

20 The possibly different approaches taken in the two joint judgments in Australian Broadcasting Corporation v O'Neill have been reconciled in a number of decisions on the basis that a Court will ask whether damages are an adequate remedy, but that this question is not an essential precondition that an applicant must satisfy; instead, the adequacy of damages is treated as a matter relating to the balance of convenience.[10]

21 Senior counsel for Sino Iron and Korean Steel properly pointed to one case in this jurisdiction in which it appears that inadequacy of damages was treated as an independent criterion.[11] The issue of whether adequacy of damages was an independent criterion or merely a matter to be considered did not affect the decision in that case. In any event, in this application all parties proceeded on the basis that the two relevant issues were whether there was a prima facie case, and whether the balance of convenience favoured the grant of an injunction. It is appropriate to follow that course.

22 The existence of a serious question to be tried as to the applicant's entitlement to relief, and as to the balance of convenience favouring the granting of an injunction, are not wholly independent requirements:[12]

... an apparently strong claim may lead a court more readily to grant an injunction when the balance of convenience is fairly even. A more doubtful claim (which nevertheless raises 'a serious question to be tried') may still attract interlocutory relief if there is a marked balance of convenience in favour of it.

The strength of any prima facie case that Sino Iron and Korean Steel will be entitled to relief

23 Initially, in written submissions, Mineralogy maintained that there is no serious question to be tried as to the validity of its 26 July 2013 default notice. By the conclusion of the oral hearing, however, counsel for Mineralogy accepted that 'it might be said, that there's a prima facie case'. However, he maintained that 'when one weighs the balance of convenience into it, the injunction is resisted on that basis'.[13] The submission appeared to be that although Sino Iron and Korean Steel have a prima facie case, the strength of that case is too weak when assessed in light of the balance of convenience.

24 I accept the concession, if that is what it was, that Sino Iron and Korean Steel have a prima facie case. I explain my reasons for doing so in brief detail below. It is not necessary to consider the issues raised by Sino Iron and Korean Steel's case in any greater detail, especially where such issues may be affected by evidence of a surrounding factual matrix, and where submissions were necessarily, and properly abbreviated at this interlocutory hearing.

25 It is enough to say that, for the reasons below, and on the tentative and preliminary basis as is necessary in an interlocutory application such as this, there is sufficient strength to Sino Iron and Korean Steel's prima facie case that the default notice is invalid to justify the grant of an injunction.

26 In very broad summary, the position of Sino Iron and Korean Steel in the principal action, as relevant to this application, is set out below.

27 Clause 3.2 sets out the mining rights granted by Mineralogy under the MRSLAs, subject to the rest of those agreements. Clause 3.2 includes a right (in clause 3.2(d)) to take a quantity of magnetite ore and to produce products.

28 The central dispute in these proceedings concerns the royalty clause in the MRSLAs, namely, clause 8. Clause 8.1 to clause 8.3 (with definitions inserted) provide as follows:

(a) Korean will pay to Mineralogy a royalty ("Mineralogy Royalty") in respect of Magnetite Ore taken by Korean pursuant to the exercise of its Mining Right.

(b) The Mineralogy Royalty is an enduring royalty, payable throughout the Term of the Mining Right.

(c) Korean will pay the Mineralogy Royalty quarterly, based on the quantity of Magnetite Ore taken by Korean and Products produced during the previous quarter. The Mineralogy Royalty will be payable not later than the 14th day of each quarter.

(a) The Mineralogy Royalty is calculated according to the following formula:

Mineralogy Royalty = Royalty Component A + Royalty Component B

where:

Royalty Component A at the date of this Agreement is as specified in Item 5 of the Schedule; and

Royalty Component B is calculated according to the following formula:

Royalty Component B = (PR x ((1/2 x Product) x PP))

Royalty Component B = The amount of the additional royalty payable for that quarter.

Product = The total aggregate tonnes of product (derived from iron ore) produced by the Korean in that quarter for sale or supply or processing, regardless of the type of that product.

PP = The prevailing published annual FOB price (expressed in US dollars per DMTU [the percentage by mass of iron in a tonne determined on a dry basis]) for pellets established by the largest supplier or seller of pellets in Brazil for export multiplied by 68.1.

CP = The prevailing published annual FOB price (expressed in US dollars per DMTU) for Mount Newman fines for export multiplied by 68.1 and then further multiplied by 1.05.

(b) greater than or equal to US$55 but less than US$65 - 8% of the Pellet Price;

(b) greater than or equal to US$35 but less than US$40 - 8% of the Concentrate Price;

(d) US$45 or greater - 10% of the Concentrate Price.

(b) The rate of Royalty Component A will be reviewed on a quarterly basis from the date of this Agreement. On each review, the increase in the rate of the Royalty Component A will be a percentage equal to the CPI Movement between the date of review and the date of the previous review (or the date of this Agreement in the case of the first review).

If there is a FOB price for either Brazil pellets or Mount Newman fines applying for different destinations, the applicable price for use in the formula in calculating Royalty Component B under clause 8.2(a) will be the price for shipments to China, or, if there is no price for shipments to China, for shipments to Asia.

The pleading that Royalty Component B is uncertain, void, or unenforceable

29 It is common ground that integral parts of the royalty formula for Royalty Component B can be abbreviated as a prevailing published Brazilian price and a prevailing published Mount Newman price, respectively as follows:

the prevailing published annual FOB price (expressed in US dollars per DMTU [the percentage by mass of iron in a tonne determined on a dry basis]) for pellets established by the largest supplier or seller of pellets in Brazil for export

the prevailing published annual FOB price (expressed in US dollars per DMTU) for Mount Newman fines.

30 Sino Iron and Korean Steel say that the MRSLAs make no provision for calculation of Royalty Component B in the event that there is no prevailing published Brazilian price or prevailing published Mt Newman price. They say that, on the proper construction of clause 8.2, the reference to those prevailing published prices is a reference to the Annual Benchmark Pricing System.

31 Sino Iron and Korean Steel plead that the Annual Benchmark Pricing System was the global iron ore pricing system in place from about the late 1960s through to about early 2010. According to this system, annual benchmark prices for iron ore products were set through negotiations between the world's largest steelmakers and their largest suppliers, before being announced by the suppliers and published.[14]

32 It is an admitted fact that the Annual Benchmark Pricing System ceased to operate in around early 2010.[15] Sino Iron and Korean Steel provided evidence including news reports which described this change as 'the biggest shake-up in [the global iron ore pricing system's] 40-year history'.[16]

33 In broad terms, Sino Iron and Korean Steel plead that the effect of the cessation of the Annual Benchmark Pricing System means that Royalty Component B is not capable of calculation in accordance with clause 8.2 of the MRSLAs.[17] They say that the parts of clause 8.2 which relate to Royalty Component B are 'uncertain, void and/or unenforceable' and are to be severed from the MRSLAs without affecting the continued operation of the rest of the MRSLAs.[18]

34 Alternatively, Sino Iron and Korean Steel plead that if those parts of clause 8.2 cannot be severed then there is an implied term of the MRSLAs to the effect that in the event that there are no prevailing published annual FOB prices, the parties must negotiate in good faith to seek to agree on an appropriate replacement formula to calculate Royalty Component B.[19]

35 It may be that at a final hearing it will be necessary to consider substantial evidence of a factual matrix. That evidence might concern matters from which an assessment could be made about what a reasonable person in the position of the parties, at the time of entry into the MRSLAs, would have expected to be encompassed within the meaning of the words of clause 8.2 referring to a prevailing published Brazilian price and a prevailing published Mount Newman price.

36 On the one hand it might be argued that reasonable persons would intend significant certainty in the calculation of this component of the royalty. Mineralogy referred to evidence which was submitted to be evidence of prevailing published prices in 2013. That evidence involved a considerable variation between $1.85/DMTU and $264.7/DMTU.[20] This possible variation, if accepted, could be relevant, especially if the difference were to have a substantial effect on the formula. It might be argued, for example, that a reasonable person in the position of the parties would be unlikely to have intended the formula to have such a range of possible outcomes.

37 The MRSLAs provide in clause 8.6 for reference to an expert of disputes concerning the 'amount paid' but it is not clear if this clause, on its proper construction, would extend to disputes concerning the particular prevailing published Brazilian price or prevailing published Mount Newman price which should apply from time to time.

38 On the other hand, against these possible arguments about certainty, a reasonable person in the position of the parties might consider that clause 8.2 should have some degree of flexibility in the context of a long term contract.

39 Mineralogy submitted that any prevailing published Brazilian price or any prevailing published Mount Newman price might include prevailing published prices other than as calculated according to the Annual Benchmark Pricing System. In other words, the meaning of those phrases should not be construed as limited to the Annual Benchmark Pricing System at the time the MRSLAs were signed on 21 March 2006.

40 In this application, however, there was no evidence of any other prevailing published Brazilian or Mount Newman prices at the time of entry into the MRSLAs. Nor did Mineralogy provide evidence of any industry expectations concerning prevailing published Brazilian or Mount Newman prices at this time.

41 There was evidence which Mineralogy said supported the existence of prevailing published Brazilian and Mount Newman prices in 2013. This was a report prepared by AME Consulting Pty Ltd[21] and a business briefing prepared by Platts.[22]

42 In reply submissions, senior counsel for Sino Iron and Korean Steel submitted that there were a number of material areas where these published rates did not conform with the prevailing published annual FOB prices for Brazil and Newman as defined in clause 8.3 of the MRSLAs.[23]

43 First, it was submitted that the prevailing published Brazilian and Mount Newman prices as defined in clause 8.3 are not simply one of a number of possible prices.[24] They are the prevailing prices. [25]

44 Secondly, the prices published by AME and Platts consisted of a 'simple average' of the annual price.[26] An average of the total monthly prices (in the case of AME) and an average of the total daily prices (in the case of Platts) might not be the same as an 'annual price'.[27]

45 Thirdly, it was submitted that the prices used by AME were calculated on a cost and freight, not FOB basis and therefore did not come within the clause 8.3 definitions.[28]

46 Counsel for Mineralogy pointed to the Iron Ore Processing (Mineralogy Pty. Ltd.) Agreement dated 5 December 2001 (the State Agreement), which is Schedule 2 of the Iron Ore Processing (Mineralogy Pty. Ltd.) 2002 (WA). The State Agreement is interdependent with the MRSLAs. Reference to the State Agreement is made in a number of clauses, including clauses 1.1, 3.3, 4.3 and 9.2 of the MRSLAs.

47 Counsel for Mineralogy submitted that clause 11(1) of the State Agreement made reference to prevailing rates in terms more closely aligned with a meaning which might be identified exclusively with the Annual Benchmark Pricing System.[29]

48 This submission might cut both ways. On the one hand, the State Agreement might provide evidence of words more closely associated with the Annual Benchmark Pricing System. On the other, the interdependence of the State Agreement and the MRSLAs could support an argument that the same pricing system was intended to apply to both the State Agreement and the MRSLAs.

49 Although it was not entirely clear, it appeared to me that by the close of oral submissions counsel for Mineralogy conceded that there was a prima facie case to the extent that it was arguable that the prevailing published Brazilian price or any prevailing published Mount Newman price refers to the Annual Benchmark Pricing System only. Even if this concession were not made, however, I consider that there is such a prima facie case.

50 Mineralogy submitted that there was no prima facie case that the Royalty Component B could be severed from the remainder of the MRSLAs. Mineralogy argued that Royalty Component B comprised 93% of the consideration for the MRSLAs and was so interdependent with the remainder of the contract price that it could not be severed.

51 Whether or not this is correct, the argument about severance is not to the point in this application. This can be seen by considering what would be the situation in the event that:

(1) Mineralogy were correct that this formula were not capable of being severed; and

(2) Sino Iron and Korean Steel were ultimately successful in their prima facie case that the formula in the MRSLAs for Royalty Component B is not capable of calculation and that this means that those parts of cl 8.2 which relate to Royalty Component B are 'uncertain, void and/or unenforceable'.

52 If both of these pleaded matters were correct then there would be two possible outcomes. Both outcomes would have the effect that the default notice was invalid.

53 The first possible outcome is Sino Iron and Korean Steel's alternative position. This is that there is an implied term requiring the parties to engage in good faith negotiations to seek to agree on an appropriate replacement formula for the calculation of Royalty Component B. Such a position would have the effect that the default notice would be invalid. The amount due to Mineralogy would depend upon the result of any successful negotiations.

54 The second possible outcome is not one sought by Sino Iron and Korean Steel. Nor is it sought by Mineralogy. It was described by senior counsel for Sino Iron and Korean Steel as 'Armageddon'.[30] The outcome is that the entirety of the MRSLAs would not be enforceable. The result would be that the default notice would be invalid because no royalties would be due to Mineralogy.

55 For these reasons, I consider that Sino Iron and Korean Steel have a prima facie case for the purposes of this application.

56 The prima facie case which I have discussed above must be considered and the strength of it weighed in light of the balance of convenience.

57 It is not necessary to refer to the potential consequences to Sino Iron and Korean Steel of a purported suspension or termination of the MRSLAs by Mineralogy. Some of those consequences are part of confidential evidence. In the context of a multi-billion dollar project the extremely disruptive effect of a purported suspension or termination is self-evident.

58 Mineralogy ultimately relied on only one matter affecting the balance of convenience. Mineralogy said that the injunction is 'about who should bear the interim cost (ie inconvenience) of payment or non-payment of the amounts sought by Mineralogy'.[31] Mineralogy said that this was 'a small price to pay for the right to continue mining and producing Products'.[32]

59 In other words, Mineralogy's submission was that, in the context of a demanded payment which is miniscule in the overall context of this dispute, Sino Iron and Korean Steel should make a payment under protest on the precise terms sought by Mineralogy, and disputed by Sino Iron and Korean Steel, in the principal proceedings.

60 The status quo is that Sino Iron and Korean Steel have refused to make the payment of $287,000. They dispute the validity of the alleged obligation to pay that sum. But Sino Iron and Korean Steel have not refused to make any Royalty Component B payment at all.

61 In oral submissions, counsel for Mineralogy submitted that the motivation for this surprising application was that the arguments by Sino Iron and Korean Steel were of broader consequence.[33] He submitted that the effect of those arguments was that Sino Iron and Korean Steel could refuse to pay any royalty which Mineralogy asserts to be due under the MRSLAs until (and assuming) Mineralogy's claims in this action were vindicated at trial.[34] Counsel asserted that Sino Iron and Korean Steel might therefore refuse to pay hundreds of millions of dollars in royalties which Mineralogy believes to be due.[35]

62 The short answer to this submission is that the evidence on this application cannot justify an inference that Sino Iron or Korean Steel intends to, or will, refuse to pay any amount, on any terms, corresponding to Royalty Component B.

63 First, this application only relates to the default notice concerning a $287,000 disputed debt. If a default notice were issued concerning an alleged debt of hundreds of millions of dollars as counsel asserted, and if Sino Iron and Korean Steel were to refuse to pay any of that alleged amount, on any terms, then it is possible that the balance of convenience might be different.

64 Secondly, the evidence on this application included that, following resolution of an earlier dispute, $1.8 million has been paid to Mineralogy by Sino Iron and Korean Steel in relation to Royalty Component A.[36] Sino Iron and Korean Steel's solicitors have said in correspondence that they are 'ready, willing and able to meet any obligations to pay Royalty Component B which are found to be owing by the Court'.[37]

65 Thirdly, in relation to Royalty Component B, Sino Iron and Korean Steel do not plead that the only possible effect of the alleged invalidity of that part of clause 8.2 which relates to Royalty Component B is that the MRSLAs are no longer enforceable in that regard. Instead, the position of Sino Iron and Korean Steel is that either Royalty Component B should be severed or alternatively that the parties must negotiate in good faith to seek to agree a replacement formula for Royalty Component B. On the alternative case there might arise an obligation for Sino Iron and Korean Steel to pay an amount of Royalty Component B, even if that amount were not of the same quantum, or calculated in the same way, as Mineralogy seeks.

66 Fourthly, in the usual course of events it would be expected that in a matter of this nature the legal representatives of Sino Iron and Korean Steel would co-operate closely with Mineralogy in order to ensure that the final hearing of this matter moves rapidly to a trial at which the nature of any obligation of Sino Iron and Korean Steel to pay Royalty Component B can be determined. The progression towards final hearing has now been delayed by the considerable time, expense, and resources which have necessarily been devoted to this application relating to a dispute concerning only $287,000.

67 In the circumstances of this application, I have weighed my assessment of the strength of the prima facie case with the balance of convenience. My assessment of the strength of the prima facie case, which I have described above, is necessarily tentative. It is also an assessment which is preliminary and informed by evidence and submissions which are considerably more limited than those that would be expected at the final hearing of the matter. My overall assessment is that it is appropriate that an injunction should issue in the terms sought by Sino Iron and Korean Steel, as set out above at par [14]. The parties will have liberty to apply.

68 Mineralogy submitted that any injunction granted should be subject to a list of conditions. Some of those conditions were quite unique. But at the oral hearing only one condition was pressed. That was a condition that, in broad summary, would require Sino Iron and Korean Steel to (i) prepare and provide statements to Mineralogy for all previous quarters which provide accurate data on the volume of product produced for each of the quarters; and (ii) pay royalties, including Royalty Component B, to Mineralogy, using the disputed formula which Mineralogy relies upon in the principal proceeding.

69 The proposed payment which was included in the only condition ultimately pressed would effectively give Mineralogy a central part of the disputed relief it seeks in the final proceeding. It is enough to say that for all the reasons expressed above, I am not satisfied that in the current circumstances of this application such a condition would be appropriate.

70 The usual order for costs when an interlocutory injunction is granted is that costs be in the cause. Counsel for Sino Iron and Korean Steel made submissions at the hearing concerning why the applicants would, in the unusual circumstances of this application, seek costs. In correspondence prior to this application, the representatives of Sino Iron and Korean Steel indicated that they would seek indemnity costs. Counsel for Mineralogy said that he wanted to be heard on this issue in light of my reasons for decision.

71 My tentative view on costs, subject to submissions from the parties, is that the appropriate order may be for costs to be reserved. One consideration which might make it appropriate to reserve the costs of this application is that of the future conduct of Sino Iron and Korean Steel in relation to Royalty Component B.

72 I have explained above that, on the evidence before me, I am not prepared to draw an inference that Sino Iron and Korean Steel will, in future, refuse to make any payment, on any conditions, referable to the current or any future agreed Royalty Component B. But if this conclusion were later falsified then that might be a matter relevant to costs. A number of scenarios can be postulated which, even if unlikely to occur, might be matters which could arguably affect the discretion as to costs on this application. One such scenario might be if (i) good faith negotiations were to take place in relation to Sino Iron and Korean Steel's alternative defence; (ii) an amount, or range of amounts, were able to be agreed, on the alternative basis of liability on which Sino Iron and Korean Steel defend the claim; and (iii) Sino Iron and Korean Steel were to refuse to make any payments to Mineralogy of that amount or range of amounts.

73 In the absence of agreement, I will hear from the parties concerning any costs orders.

[1] Affidavit of Mr Byrne (affirmed 3 October 2013) KSB-5; Respondent's outline of submissions [22].

[2] Affidavit of Ms Dillon (affirmed 30 August 2013) [23] - [25], HTD-8; Affidavit of Ms Dillon (affirmed 19 November 2012) [61], HD-6, HD-7.

[3] Supplementary Affidavit of Mr Byrne (affirmed 9 October 2013) [5].

[4] Second Supplementary Affidavit of Mr Byrne (affirmed 9 October 2013) [7].

[5] Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618.

[6] Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 81 - 82 [65].

[7] Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618, 622 - 623 (Kitto, Taylor, Menzies & Owen JJ).

[8] Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 68 [19].

[9] Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, 68 [19].

[10] AB Hassle v Pharmacia (Australia) Pty Ltd (1995) 33 IPR 63, 76 - 77 (Ashley J); Marley New Zealand Ltd v Icon Plastics Pty Ltd [2007] FCA 851 [3] (Gordon J); Medrad Inc v Alpine Medical Pty Ltd [2009] FCA 949; (2009) 82 IPR 101, 109 [38] (Kenny J); Instyle Contract Textiles Pty Ltd v Good Environmental Choice Services Pty Ltd (No 2) [2010] FCA 38 [55], [64] (Yates J); Samsung Electronics Co Ltd v Apple Inc [2011] FCAFC 156; (2011) 286 ALR 257, 276 [61] (the Court); Boyd v Wild Hibiscus Flower Company Pty Ltd (No 2) [2012] FCA 74 [61] - [66] (Foster J); Donoghue v Commissioner of Taxation [2013] FCA 84 [18] (Reeves J); Complete Field Maintenance Pty Ltd v Coulson [2013] WASC 374 [3], [52] (Martin CJ).

[11] Bennett v Indoor Holdings [2006] WASCA 265 [13] (Buss JA, Pullin JA agreeing).

[12] Bullock v Federated Furnishing Trades Society of Australasia (No 1) [1985] FCA 19; (1985) 5 FCR 464, 472 (Woodward J, Smithers & Sweeney JJ agreeing); Bennett v Indoor Holdings [2006] WASCA 265 [14] (Buss JA, Pullin JA agreeing).

[14] Defence to the Further Amended Statement of Claim and Counterclaim [20] (Particulars).

[15] Defence to the Further Amended Statement of Claim and Counterclaim [21]; Amended Reply and Defence to Amended Counterclaim [9].

[16] Affidavit of Mr Kirk (affirmed 26 September 2013) AK3, page 11.

[17] Defence to the Further Amended Statement of Claim and Counterclaim [25].

[18] Defence to the Further Amended Statement of Claim and Counterclaim [26].

[19] Defence to the Further Amended Statement of Claim and Counterclaim [27].

[20] Affidavit of Mr Byrne (affirmed 3 October 2013) KSB 1, pages 7, 16.

[21] Affidavit of Mr Byrne (affirmed 3 October 2013) KSB 1, page 7.

[22] Affidavit of Mr Byrne (affirmed 3 October 2013) KSB 1, page 16.

[24] Applicants' submissions in reply [9(a)].

[27] ts 242; Applicants' submissions in reply [9(b)].

[28] ts 243; Applicants' submissions in reply [9(c)].

[31] Respondent's outline of submissions [30].

[32] Respondent's outline of submissions [30].

[36] Affidavit of Ms Dillon (affirmed 30 August 2013) [51].

[37] Affidavit of Ms Dillon (affirmed 30 August 2013) HTD-56, page 646.

Ore Processing (Mineralogy Pty. Ltd.) Agreement Act 2002

MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 2] [2013] WASC 375 (14 October 2013)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (150 paragraphs)

MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 2] [2013] WASC 375 (14 October 2013)

Legislation Cited (1)

Cases Cited (6)