Supreme Court of WA|2014-08-05|Before: Edelman J

MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 4] [2014] WASC 282 (5 August 2014)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 4] [2014] WASC 282

Practice and procedure - Withdrawal of major plea in proceedings - Background circumstances to the withdrawal - Indemnity costs appropriate - Costs of joinder application - Application to amend statement of claim - Costs of application to amend

Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (WA)

1 These reasons concern three related, interlocutory applications. Vast affidavit evidence, and several sets of submissions were filed between May and August 2014. The parties agreed that these applications could be dealt with on the papers.

2 The first two applications are brought by the defendants, whom I will describe as the Citic parties, against Mineralogy. They are costs applications that relate to interlocutory matters in this proceeding.

3 The first costs application concerns costs that the Citic parties incurred in relation to a frustration claim brought by Mineralogy. After a number of changes to its case, Mineralogy brought its frustration claim with enormous impact upon the proceedings and with Mineralogy professing a desire for urgent hearing. Several months later it abandoned the claim. The Citic parties say that Mineralogy should pay their costs of the frustration claim on an indemnity basis. Alternatively, they say that various limits on allowable costs should be raised, referring to the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (WA).[1] For the reasons below an order for indemnity costs in favour of the Citic parties should be made.

4 The second costs application concerns the costs incurred by the Citic parties in relation to their application to join various parties to a counterclaim. The counterclaim was brought in response to Mineralogy's frustration claim. For the reasons explained below, there should only be a limited order for special costs in relation to this application to allow the costs of counsel.

5 The third application is brought by Mineralogy. It seeks to amend its statement of claim. It has pleaded, amended, or provided proposed amendments to its pleading on eight occasions since March 2013 (18 March 2013, 5 June 2013, 14 August 2013, 11 December 2013, 15 April 2014, 6 June 2014, 7 July 2014, and 8 July 2014).

6 After the major amendments on 11 December 2013 concerning frustration, I ordered that Mineralogy be prohibited from amending its statement of claim without leave. This order was not opposed by Mineralogy. Mineralogy then filed a proposed amended statement of claim in April 2014. It filed another proposed amended statement of claim on 6 June 2014. It filed yet another proposed amendment on 7 July 2014. It filed still another proposed amendment to the statement of claim on 8 July 2014. The Citic parties neither consented to, nor opposed, the 8 July 2014 amendments. In the circumstances discussed in these reasons the amendments should be allowed on this occasion but, despite Mineralogy's submissions to the contrary, Mineralogy should pay the Citic parties' costs thrown away by the amendments.

7 The following chronology borrows from the affidavit evidence contained in affidavits of Mr McKenna,[2] Mr Woods, [3] and Mr QuanSing[4] as well as my broad summary in Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 3].[5] This action was brought by Mineralogy in New South Wales by a writ of summons filed on 18 March 2013 and subsequently transferred to this Court. It involved an allegation that Mining Right and Site Lease Agreements (MRSLAs) between (1) Mineralogy and Sino Iron, and (2) Mineralogy and Korean Steel, were valid and that the Royalty Component B under those agreements was to be calculated according to cl 8.2 of the MRSLAs. Mineralogy's statement of claim was amended twice (on 5 June 2013, 14 August 2013) but these central allegations were maintained, sometimes in very strong terms, until November 2013.

8 On 29 August 2013, an application for an interlocutory injunction was brought by Sino Iron and Korean Steel. The application was granted.

9 On 18 September 2013, Mineralogy sought urgent discovery. The application was adjourned in circumstances in which there was insufficient information concerning whether the discovery orders sought by Mineralogy could be made, and in which it appeared that the parties had not engaged in proper conferral. The application was not subsequently pressed by Mineralogy.

10 On 6 November 2013, Mineralogy brought another application. Counsel for Mineralogy said that Mineralogy needed to have an urgent hearing in order to decide whether it could have time extended in order to bring an application to strike out all or part of the Citic parties' defences. Counsel for Mineralogy foreshadowed the strike out of the defences as an abuse of process apparently on the basis that some or all of the Citic parties had provided in accounts filed in Hong Kong for a current liability to pay royalties.[6]

11 On 25 November 2013 Mineralogy abandoned its extension of time application and, consequently, abandoned its strike out application. In the meantime, around 17 November 2013, Mineralogy informed the Citic parties of its intent to make radical changes to its statement of claim. The radical changes were made in Mineralogy's amended reply and defence to counterclaim. They involved a claim that Royalty Component B was not capable of calculation and an allegation that the MRSLAs were frustrated.

12 On 2 December 2013, Mineralogy's counsel sought to have an urgent trial of this frustration issue. The frustration issue involved new, and potentially complex questions of law, fact, and expert evidence. It arose in the context of the multibillion dollar litigation. Mineralogy sought to have the matter listed for trial in nine working days. The Citic parties had not yet even amended their pleadings in response. That application was refused.

13 On 24 January 2014, the Citic parties amended their pleadings including the following:

(3) alleging that if performance of the 2006 MRSLAs was frustrated then the 2005 Sino Iron MRSLA and the Korean Steel Sub-lease remained on foot,

(4) bringing restitutionary counter-claims by two defendants (Sino Iron and Korean Steel) against Mineralogy, and

(5) proposing additional counter-claims seeking restitution if the MRSLAs were found to have been frustrated.

14 The proposed counterclaims involved joining Sino Iron Holdings Pty Ltd (SIH) and Balmoral Holdings Pty Ltd (BIH) as counterclaimants against Mineralogy and Mr Clive Palmer. The basis for these counterclaims was that if performance of the MRSLAs had been frustrated then Mineralogy and Mr Palmer would have been unjustly enriched by payments of US$215 million and US$200 million. Those payments were made by SIH and BIH to Mineralogy and Mr Palmer for the acquisition of the issued shares in the first and second defendant.

15 On 10 February 2014, the Citic parties brought an application for joinder of the additional counterclaimants and joinder of Mr Palmer as a defendant to their counterclaim.

16 On 12 February 2014, a lengthy directions hearing was held. The issues considered at that hearing included questions surrounding the joinder application by the Citic parties. I made orders including listing the joinder application for hearing on 2 April 2014. I also listed for hearing on the same date the foreshadowed 'dismissal' applications by Mineralogy (including any stay, injunction, or strike out application).

17 During March 2014, Mineralogy filed submissions opposing the joinder application. It also applied to strike out the proposed counterclaim or to stay the proceedings. But, shortly before 20 March 2014, Mineralogy indicated an intention to amend its statement of claim to remove its allegation that the performance of the MRSLAs had been frustrated.

18 On 16 April 2014, Mineralogy applied to make a fifth amendment to its statement of claim. Mineralogy effectively sought to withdraw its claim for frustration.

The first application: the costs of Mineralogy's abandoned frustration claim

19 The first question in relation to Mineralogy's abandoned frustration claim is whether Mineralogy should pay the costs of the Citic parties on an indemnity basis.

Legal principles concerning indemnity costs orders

20 Although indemnity costs are an unusual award, the categories in which an award of indemnity costs will be made are not fixed. One general situation in which indemnity costs are awarded is where litigation has been conducted unreasonably and a mark of disapproval is required. In Yara Australia Pty Ltd v Oswal,[7] Murphy JA said

There must be some special or unusual feature of the case to warrant an award of indemnity costs: ColgatePalmolive Co v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225, 233. The categories of cases in which an indemnity costs order may be made are not closed: ColgatePalmolive Co v Cussons (233). In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1988) 81 ALR 397, 401, Woodward J said that indemnity costs were appropriate where the action 'has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success'. As Pullin J observed in Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [25], an order for indemnity costs may be seen as a 'mark of disapproval on the part of the court about the improper or unreasonable conduct of litigation' ...

Reasons why indemnity costs should be ordered for the costs of the frustration claim

21 In broad summary, Mineralogy's frustration claim was brought against a backdrop of changes to its case, and interlocutory proceedings including abandoned applications for discovery, extension of time, and strike out. The frustration claim was not brought until eight months after Mineralogy commenced its claim, and two months after the issue had been ventilated at a strategic conference. Senior counsel for the Citic parties had emphasised on a number of occasions that no claim of frustration was made and the commercial difficulty that would be presented by such a claim.[8] Despite the radical nature of the change to its case, Mineralogy introduced its plea of frustration with submissions that the issue go to trial as a matter of great urgency. After the Citic parties spent thousands of hours of work on the issue, Mineralogy abandoned the issue only four months' later.

22 Mineralogy's Managing Director of Legal says that the reason why Mineralogy abandoned its frustration claim was Mineralogy's discovery that it had been mistaken in its belief that, by pleading frustration, the parties could achieve a resolution of the matter within a short period of time.[9] Mineralogy said that it abandoned the frustration allegation because it did not anticipate that in response to the plea of frustration:[10]

(i) the factual enquiry in the proceedings would be significantly expanded because of the Citic parties' restitution claim and proposed restitution claim based on the Takeover Agreements;

(ii) the time required to bring the matter to trial would be increased;

(iii) the Citic parties would plead an alternative construction of cl 8.2 for the first time; and

(iv) the Citic parties would expand their counterclaim by seeking to join new parties and run new claims under other project agreements.

23 Essentially, Mineralogy's Managing Director of Legal says that Mineralogy abandoned its frustration claim when it realised that there was 'no realistic means of achieving an early determination of the proceeding'[11] and the frustration claim would also disrupt AustraliaChina trade relations and could lead to a very bad commercial result for the Citic parties if it were successful.[12]

24 With respect to Mineralogy and its legal advisers (although senior counsel who signed Mineralogy's submissions in relation to each of these applications was not involved before the Court in any of the events discussed below), both Mineralogy's belief that a plea of frustration would lead to resolution of the matter within a short period of time, and the manner in which Mineralogy acted upon that belief were, to say the least, unreasonable. There are three reasons for this.

25 First, the time period in which Mineralogy claimed that the frustration issue could be heard was unreasonable. This is so even if it were assumed (a very large assumption) that trial of a preliminary issue was appropriate. In a separate judgment, I explained the absurdity of the submission by counsel for Mineralogy that the frustration issue could be tried within nine working days of it being pleaded by Mineralogy. There had been no pleading on this issue by the Citic parties, there had been no lay evidence on the issue, there had been no expert evidence, there was no trial bundle, and there were no legal submissions.[13]

26 Secondly, the possibility of restitutionary claims by the Citic parties could not have come as a surprise. That possibility was ventilated on a number of occasions. It was ventilated in a strategic conference on 24 July 2013 at which I asked about different intermediate issues arising from any failure of the royalty clause.[14] Mineralogy's in-house legal counsel and junior counsel were both present at that conference. I raised the question of restitutionary claims arising from any invalidity. Counsel for Mineralogy emphasised that Mineralogy did not want to allege frustration.[15] At a hearing on 10 October 2013, senior counsel for the Citic parties reiterated that no party to the proceedings sought to argue that the MRSLAs were unenforceable. He described such an outcome as 'Armageddon'.[16] During the same hearing the possibility was raised that questions of frustration might raise consequential restitutionary issues amounting to billions of dollars.[17]

27 Thirdly, the introduction of Mineralogy's frustration claim concerning the performance of the MRSLAs underlying a joint venture in relation to which the Citic parties have spent more than $7 billion was undoubtedly a matter of enormous significance to the Citic parties. It could not reasonably have been expected to be an issue with which they would deal by providing only minimal evidence or submission. The legal issues were also immensely difficult. From my perusal of all the matters arising from the frustration claims while they were on foot, my initial impression was that the issue of frustration as well as the consequences if the performance of the MRSLAs had been held to be frustrated would give rise to a number of very difficult issues, some of which may not yet have been resolved in Australian law.

28 Given the considerable difficulty, and the extreme importance of the frustration issues, coupled with the urgency professed by Mineralogy in moving this matter to a hearing, it is unsurprising that the Citic parties devoted vast time, energy and resources into investigating, researching, and responding to this claim over several months. Prior to Mineralogy abandoning its frustration claim in April 2014 the solicitors for the Citic parties spent 2,565 hours working on matters relating to the frustration claim. Although Mineralogy resists the alternative submission by the Citic parties that the Scale of costs in the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (WA) should be lifted in various respects, it is clear beyond peradventure that each of the amounts in the Scale items to which the Citic parties refer (pleadings and particulars, proceedings in chambers, preparation of case) is grossly inadequate in relation to the work done on the frustration claim, and that the inadequacy arises because of the unusual difficulty, or complexity, or importance of the matter (all three being applicable in this case).[18] If I had not awarded indemnity costs (the primary submission of the Citic parties) then I would have ordered uplift of all the Scale items sought, without imposing any ceiling to constrain the taxing officer.

29 The three matters above, in isolation, would have caused me to award indemnity costs. But these three matters must also be considered in the context of the background circumstances surrounding Mineralogy's abandonment of its frustration claim. In light of all the circumstances, I consider that the only appropriate order is that an award of indemnity costs should be made.

30 For completeness, I note that the Citic parties also submitted that Mineralogy's changes in tack in its pleadings have been 'to suit its commercial imperatives rather than to identify and have the court determine the real issues in dispute between the parties'.[19] It is not inappropriate for a party to amend its pleadings to suit its commercial imperatives. For instance, commercial imperatives might mean that a party chooses not to plead an arguable, perhaps even a strongly arguable, issue. But, in this case, despite its commercial imperatives, the conduct of Mineralogy leading to the withdrawal of its frustration claim was so unreasonable that an award of indemnity costs should be made.

The second application: the costs of Citic parties' joinder application

31 On 10 February 2014, the Citic parties filed their joinder application to join SIH and BIH as counterclaimants and to join Mr Palmer as a defendant to the counterclaim. They filed submissions in support of that application on 6 March 2014.

32 On 12 March 2014, Mineralogy informed the Citic parties that it was no longer pursuing its frustration claim. As Mr McKenna explains in affidavit evidence, the abandonment of Mineralogy's frustration claim meant that SIH and BIH's restitution claims no longer arose and the joinder application, and the steps taken in relation to it, had been unnecessary.[20]

33 On 14 March 2014, Mineralogy filed submissions in opposition to the joinder application which were due that day. Mineralogy submits that the Citic parties 'required' it and Mr Palmer to file submissions and affidavit material in relation to the joinder application even though the joinder application was no longer likely to be necessary.[21] This submission misunderstands both the terms of the correspondence from the Citic parties as well as the operation of court orders. Given the shifting position of Mineralogy in these proceedings, the reluctance of the Citic parties to suggest proposed orders to defer filing of submissions might be understandable. But it might also be said that the Citic parties did not encourage as much economy as they might have done, for instance by saying that they would consent to an application to adjourn the filing of submissions which were likely to be redundant once Mineralogy had applied to withdraw its frustration claim.

34 On 20 March 2014, following Mineralogy's foreshadowed abandonment of its frustration claim, I made orders by consent that Mineralogy pay the costs of the Citic parties incidental to the joinder application, to be taxed forthwith if not agreed.

35 On 22 April 2014, the Citic parties applied for special costs orders in relation to the joinder application. The orders sought were, in summary, as follows:

The 20 March 2014 order that Mineralogy pay the Citic parties' costs of the joinder application be vacated, and determination of costs of and incidental to the joinder application be reserved to be dealt with as part of the defendants' costs thrown away by reason of Mineralogy's amendment abandoning the frustration claim.
Alternatively, the Citic parties' costs of the joinder application be taxed on an indemnity basis.
Alternatively, under s 280 of the Legal Profession Act 2008 (WA), Item 17 of the Scale of costs be raised in relation to preparation for the hearing of the joinder application so that the number of hours is removed and there is allowance for the costs of counsel at the rate in Table A of the Scale.

36 Mineralogy apprehended that the effect of the proposed order 1 was for the issue concerning the costs of the joinder application to be determined together with the costs of the abandoned frustration claim. Submissions proceeded on this basis. It is difficult to see the basis upon which Mineralogy resisted the concurrent determination of these two costs applications. Submissions in relation to the costs applications overlapped. Many of the factual circumstances relevant to the applications were common. Orders sought in each application were similar. And, as the Citic parties accepted, the concurrent determination of the two applications does not mean that the outcome (eg indemnity costs) must be the same for both.[22] It would be a waste of time and court resources for the costs application concerning the joinder application to be determined at a different time from the application concerning the costs of Mineralogy's abandonment of its frustration claim.

37 The 22 April 2014 costs application by the Citic parties in relation to the joinder issue was within the 30 day period after a standard costs order provided in the Rules of the Supreme Court 1971 (WA) for a 'special certificate as to costs' in O 66 r 51(2). In other litigation I have concluded that this subrule applies to special costs orders involving the lifting of the Scale of costs.[23] The sub-rule permits a special costs application even if standard costs orders have already been made, whether or not by consent. But no submissions were made by either Mineralogy or the Citic parties concerning whether my reasons apply equally to orders for indemnity costs. I proceed, although for the reasons below without the need to decide, on the basis that O 66 r 51(2) also applies to a special costs order for indemnity costs.

38 Unlike the costs of Mineralogy's abandoned frustration claim, I do not consider that the costs of the joinder application should be taxed on an indemnity basis or that it should be taxed as part of the frustration claim (which would also be on an indemnity basis). One issue on the joinder application may have been whether it was necessary for the Citic parties to bring the application to join SIH and BIH rather than SIH and BIH prosecuting their own claims for restitution of $420 million. It is not appropriate to attempt to decide that issue in the context of this costs application. Further, at this stage, I consider it sufficient to mark the disapproval of the Court that the Citic parties' costs of the frustration issue (which vastly exceed the costs of the joinder application) be taxed on an indemnity basis.

39 The alternative submission by the Citic parties is that Item 17 of the Scale of costs is inadequate in relation to the joinder application and that this inadequacy arose because the issues raised by their joinder application, in order to agitate SIH's and BIH's proposed claims for $420 million, were unusually difficult, complex, or important.[24]

40 The circumstances in which this special costs order is sought are not common. This is because the parties agreed that Mineralogy should pay the costs of the Citic parties' joinder application without any adjudication of the propriety of the joinder application on the merits. Yet, Mineralogy asserted in the costs application that the joinder application was contrary to the Rules of the Supreme Court and also contrary to Australian and English authority.[25] It is not appropriate to attempt to assess the merit of these submissions concerning the principal application, which is strongly resisted, simply in order to assess the terms upon which a costs award should be taxed. The absence of adjudication on the merits also means that it is appropriate to treat the unusual issues arising in the application as ones which involved some difficulty.

41 There is limited evidence before me concerning the importance of the joinder issue to the Citic Parties (as opposed to SIH and BIH in relation to whom there would be little difficulty in identifying the importance of their proposed claim of $420 million). But the scope of the claim and its effect on the litigation as a whole is such that it can properly be described as 'important' bearing in mind that 'importance' in s 280(2) encompasses importance to the parties; it does not require broader importance to the public or a sector of the public.

42 The Citic parties relied on evidence from Mr McKenna which described, in broad terms, that 340 hours of work had been performed by the solicitors in relation to both the joinder application and the strike out application.[26] Although no evidence was given about the amount of time spent in relation to each application, or in relation to the different aspects of each application, in the context of the mounting volume of evidence in relation to these applications this was a proper and understandable economy.[27] The question to be determined in relation to raising the limit of the Scale is addressed as a matter of impression rather than detailed evaluation.[28] That question is whether there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that would be imposed by the relevant costs determination because of the unusual difficulty, or complexity, or importance of the matter.

43 Item 17 of the Scale allows for a maximum of 120 hours in preparation of a party's case for trial. Although I received no submissions on this issue, it may be that in litigation of this size there might be an application to lift the limit to this item after trial in any event. That application might be brought by either, or both, parties depending on the nature of the costs orders made after trial and the scope of matters covered by the costs orders. It may also be that (i) the appropriate item of the Scale for the joinder and strike out applications is not Item 17 but is Item 10 which is concerned with proceedings in chambers and which provide for costs of up to $10,560 (two days of preparation and one day of hearing), and (ii) the item would be considered separately (ie twice) for the strike out application and the joinder application since they were commenced by chamber summons separately and the issues involved were not wholly co-extensive. I did not receive submissions on either of these points and I do not need to express any conclusion upon them.

44 In any event, proceeding on the basis of the relief sought in relation to Item 17, and on the basis that the existing limit for the taxation of costs concerning the joinder and strike out applications is 120 hours, as a matter of impression I do consider that, even with the unusual and important nature of the joinder and strike out applications, there is not a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than that. Part of this impression takes into account the substantial work which would have been done in relation to the frustration claim and which will be taxed separately and on an indemnity basis. As a matter of impression, it seems to me that that work on the frustration claim is likely to have involved some of the underlying substantive legal issues which were the foundation of the joinder application.

45 The Citic parties also submitted that there should be an allowance for the costs of counsel at the rate in Table A of the Scale. That hourly rate is $363 for counsel and $638 for senior counsel. The provision in the Scale is only for a senior practitioner at $451. It is appropriate that this provision be made. Given the involvement of both junior and senior counsel, it may be that the involvement of counsel, rather than a senior practitioner, in preparation of some of this work will make no difference to the ultimate taxation but it was entirely appropriate that some of the preparation for the joinder application was done by counsel where it might otherwise have been done by a senior practitioner.

The third application: Mineralogy's 8 July 2014 proposed amendment

46 The final application is Mineralogy's 8 July 2014 application to amend its statement of claim. The Citic parties neither consent to nor oppose Mineralogy's application.

47 As I explained in the introduction to these reasons, Mineralogy has pleaded, amended, or provided proposed amendments, eight times since March 2013 (18 March 2013, 5 June 2013, 14 August 2013, 11 December 2013, 15 April 2014, 6 June 2014, 7 July 2014, and 8 July 2014).

48 Since my order on 11 December 2013 that Mineralogy be prohibited from amending its statement of claim without leave, Mineralogy filed proposed statements of claim on 15 April 2014, 6 June 2014, 7 July 2014, and 8 July 2014. Its application to amend has been a moveable feast. In broad summary, the changes have been as follows.

(1) 15 April 2014: Mineralogy proposed amendments (i) to withdraw its frustration claim, (ii) seeking a declaration that Royalty Component B (concerning the amount of royalty for Magnetite Ore that is processed into product) is capable of calculation and the construction of cl 8.2 of the MRSLAs, (iii) seeking payment of sums due under cl 6.3 of the MRSLAs, and (iv) bringing four new claims concerning various alleged breaches by the Citic parties of the MRSLAs (Site Remediation Fund; Accommodation Camp; inspection of books and records; geological information and technical plans).[29]

(2) 6 June 2014 (after submissions had been made in relation to the amendment application concerning the 15 April 2014 amendments): Mineralogy proposed amendments to withdraw its claims concerning (ii) and (iii) above, leaving only the four new claims of various alleged breaches.

(3) 7 July 2014: Mineralogy proposed amendments removing two of the four new claims under (iv), leaving only the claims concerning the inspection of books and records; geological information and technical plans.

(4) 8 July 2014: Mineralogy proposed changes to the remaining two claims under (iv).

49 Mineralogy says that the 8 July 2014 proposed amendments have the following effects. First, by removing the Minimum Royalty claim under cl 6.3 the amendments will significantly reduce the time and cost of the proceedings. Secondly, that the additional breaches (including alleged failures by the Citic parties to provide copies of books of account and access to plans and designs) have been the subject of attempts by the parties at resolution of the dispute and the claims arise out of the MRSLAs which are the factual substratum of Mineralogy's claims. Further, Mineralogy notes that discovery has not been completed and a trial date has not been set.

50 In seeking leave to amend, Mineralogy is seeking an indulgence from the Court. In Summit Chemicals Pty Ltd v Vetrotex Espana SA[30] E M Heenan J (with whom Miller J agreed) said that it is 'plainly the case that a party who seeks to obtain a procedural indulgence by an application of the court as, for example, in an application for an extension of time or for an amendment of a pleading, will usually be required to pay the costs of the application'. Even where leave is not required, Mineralogy would usually be expected to pay the costs of its amendment borne by the Citic parties (see O 66 r 3(1)). I reject the claim by Mineralogy that costs of its amendments should be in the cause.

51 There should be no overlap between the indemnity costs that Mineralogy must pay in relation to its withdrawal of its frustration claim (which are likely to be confined almost exclusively to costs incurred prior to 15 April 2014) and costs concerning these amendment applications (which will postdate 15 April 2014 and include such matters as review of Mr Smith's affidavits on 15 April 2014 and 8 July 2014, submissions by Mineralogy concerning amendment on 15 April 2014 and 7 July 2014, and review of all of the various proposed amendments). But these are all ultimately matters for the taxing officer.

52 The Citic parties have raised concerns arising from Mineralogy's withdrawal of its claims relating to Royalty Component B. The Citic parties point to an application brought by Mineralogy on 2 June 2014 for expert determination of matters relating to the calculation of the Mineralogy Royalty for the March 2014 quarter. This was very shortly before Mineralogy's amendment to withdraw its claims relating to the Royalty Component B. At this stage it is not necessary to consider any of these concerns.

53 Although I allow Mineralogy's application to amend, it should not be assumed that further applications will be granted. Mineralogy's numerous, and sometimes very significant, changes to its case have slowed these proceedings down dramatically. There will soon come a point, if it has not already been reached, when a line must be drawn so that the defendants can be clear on the detail of the case which they have to answer. I reiterate the remarks of Gummow, Hayne, Crennan, Kiefel and Bell JJ in Aon Risk Services Australia Ltd v Australian National University[31] where their Honours gave examples why corporations are not immune from the effect of delay and disruption to the orderly progress of litigation:[32]

A corporation in the position of a defendant may be required to carry a contingent liability in its books of account for some years, with consequent effects upon its ability to plan financially, depending upon the magnitude of the claim. Its resources may be diverted to deal with the litigation. And, whilst corporations have no feelings, their employees and officers who may be crucial witnesses, have to bear the strain of impending litigation and the disappointment when it is not brought to an end. The stated object in the Court Procedures Rules [2006 (ACT)], of minimising delay, may be taken to recognise the ill-effects of delay upon the parties to proceedings and that such effects will extend to other litigants who are also seeking a resolution in their proceedings.

54 These comments were made in the course of rejecting the view that in modern litigation an order for costs is a panacea that heals all.

55 First, the Citic parties' costs arising from the frustration claim should be paid by Mineralogy on an indemnity basis. Those costs are properly characterised as the costs arising from pars [18] to [44] of Mineralogy's Second Further Amended Statement of Claim dated 10 December 2013. Those costs should be taxed and payable forthwith.

56 Secondly, apart from providing for the costs of counsel in relation to Item 17 (if applicable), no special costs orders should be made in relation to the Citic parties' costs of the joinder application, and associated applications. The costs orders already made in favour of the Citic parties are adequate.

57 Thirdly, other than those costs concerning the frustration claim, Mineralogy should pay the costs of the Citic parties occasioned by its proposed amendments on 15 April 2014, 6 June 2014, 7 July 2014, and 8 July 2014, to be taxed and paid forthwith if not agreed.

58 I have not yet received any submissions concerning the costs of each of these costs applications, which are likely not to be insignificant. I would hear from the parties if necessary but my tentative views are as follows. The usual order as to costs would be that the successful party to each application should pay the costs of the unsuccessful party. The Citic parties have been successful in the first costs application and Mineralogy has been substantially successful in the second. The Citic parties have also been successful in the third costs application so far as it related to the issue of costs of the amendment which was the only issue which they opposed. These costs applications were independent and would usually be taxed independently. But there may be a considerable practical benefit if both parties agreed that there be no order as to costs of the first two costs applications. It is extremely difficult, if not impossible, for me to assess whether the significant costs of the first costs application are likely to approximate the significant costs of the second costs application. But there was certainly overlap between the two. An order that there be no order as to costs in relation to these two significant applications would avoid the time and expense of a taxation of the costs of these two costs applications. Such a taxation could generate considerable legal fees although potentially resulting ultimately in similar costs awards to each party. If that is so, it would be hard to see how either lay client would benefit from taxation of those costs in circumstances in which the difference in costs on the taxation might be overwhelmed by the amount of legal fees. But since I have had no submissions on this matter, I will hear from the parties as to the precise form of orders and as to the costs of these costs applications at the next directions hearing in this matter tomorrow, if draft orders cannot be agreed.

59 It is necessary to make one final concluding comment on the manner in which this litigation continues to be prosecuted and defended. My comment concerns the importance of civility in the conduct of litigation. Modern litigation is far removed from the procedure and practices that were subjects of daily discussion between those counsel and judges sitting on the Benches of the Inns of Court and at the bar messes in the 19th century. The need for civility, from all participants in the legal process, is often forgotten today. I have remarked more than once in the course of this litigation of the need for polite, respectful interchange. The reiteration in these reasons arises due to a comment in the course of correspondence which was included in the vast amount of affidavit material provided in these applications. In one letter between the solicitors, reference was made to an allegation of conduct by the opposing solicitors said to be 'incongruous with professional ethical obligations'.[33] I say nothing about the content of the allegation in this case, particularly in circumstances where neither the issue, nor the facts, nor all the correspondence, is before the Court. It suffices to say that as a general matter an allegation of breach of professional obligations should never be made without very careful consideration. One reason for this is that in some circumstances the making such an allegation could itself amount to a breach of ethical obligations. More commonly, though, such allegations can be destructive of the relationships of respect that should exist in litigation, including the respect between opposing solicitors, all of whom are officers of the court. Other legal representatives in the course of practice, whether opposed or not, should always be treated with respect, dignity, and occasionally admiration (even if the language of respect has today become merely a forensic label). This is never inconsistent with the vigorous, even forceful, prosecution of a client's interests.

[1] The Legal Profession (Supreme Court) (Contentious Business) Determination 2014 (WA) does not apply to the remuneration of law practices based on costs incurred before 1 July 2014: cl 3(c).

[2] Affidavit of Mr McKenna sworn 5 May 2014.

[3] Affidavit of Mr Woods sworn 19 May 2014.

[4] Affidavits of Mr Quan-Sing sworn 16 June 2014 and 27 June 2014.

[5] Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 3] [2013] WASC 434 [2].

[6] Affidavit of Mr Woods sworn 19 May 2014, annexure GW 2, page 112 (ts 255).

[7] Yara Australia Pty Ltd v Oswal [2012] WASCA 264 [33].

[8] Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375 [54].

[9] Affidavit of Mr Smith affirmed 15 April 2014 [43].

[10] Affidavit of Mr Smith affirmed 15 April 2014 [44].

[11] Affidavit of Mr Smith affirmed 15 April 2014 [52].

[12] Affidavit of Mr Smith affirmed 15 April 2014 [50] - [51].

[13] Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 3] [2013] WASC 434 [4].

[16] Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 2] [2013] WASC 375 [54].

[17] Affidavit of Mr Woods sworn 19 May 2014, annexure GW 1, pages 73 - 74.

[18] Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 (S) [5] - [8] (Beech J).

[19] Citic parties' submissions, 21 July 2014 [23]. See also Citic parties' submissions, 19 May 2014 [17].

[20] Affidavit of Mr McKenna sworn 22 April 2014 [31].

[21] Submissions of Mineralogy, 12 May 2014 [14].

[22] Citic parties' submissions, 19 May 2014 [4].

[23] Cockburn Cement Ltd v Minister for the Environment (WA) [2011] WASC 260 (S) [22] - [49].

[24] Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 (S) [5] - [8] (Beech J).

[25] Submissions of Mineralogy, 12 May 2014 [22].

[26] Affidavit of Mr McKenna sworn 22 April 2014 [32].

[27] See also Frigger v Lean [2012] WASCA 66 [81] (Allanson J, Newnes & Murphy JJA agreeing).

[28] EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2008] WASC 275 (S) [7] (Martin CJ).

[29] Affidavits of Mr Quan-Sing sworn 16 June 2014 [10] - [12] and 27 June 2014 [4] - [5].

[30] Summit Chemicals Pty Ltd v Vetrotex Espana SA [2004] WASCA 109 (S) [12].

[31] Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175.

[32] Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175, 214 [101].

[33] See the affidavit of Mr Prescott affirmed 12 May 2014, Attachment LTP-14, page 54.

MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 4] [2014] WASC 282 (5 August 2014)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (114 paragraphs)

MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 4] [2014] WASC 282 (5 August 2014)

Legislation Cited (1)

Cases Cited (4)