MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 8] [2015] WASC 473 (7 December 2015)

MINERALOGY PTY LTD -v- SINO IRON PTY LTD [No 8] [2015] WASC 473 (7 December 2015) - WASC 2015 case summary — Zoe

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[3] CIV 2303 is a claim against each of Sino Iron and Korean Steel for what is said to be a breach of cl 6.3(b) of the MRSLAs by each of Sino Iron and Korean Steel to pay a royalty arising from a failure to produce no less than 6 million tonnes of product no later than seven years from the date of each of the MRSLAs. The claim is for payment of a sum of US$98,298,000 by each of Sino Iron and Korean Steel. A claim is also made against the third defendant (CITIC) pursuant to a guarantee under cl 11.5 of an agreement known as the Fortescue Coordination Deed by which CITIC provided a guarantee for the performance of the obligations of Sino Iron and Korean Steel. The claim against CITIC is therefore for the total amount said to be due from Sino Iron and Korean Steel pursuant to cl 6.3(b) of the MRSLAs, being $196,596,000.

[4] The question of proper construction of cl 6.3(b) of the MRSLAs is raised by the defendants in the counterclaim in CIV 1808. Various alternative constructions of cl 6.3(b) are raised in [23], [24] and [25] of the counterclaim in support of a claim for declarations as to the proper construction of cl 6.3(b), which would affect the question of the amount, if any, payable pursuant to that clause. The defendants also plead that they have no liability to make a payment under cl 6.3(b) of the MRSLAs because the failure to produce 6 million tonnes within seven years of the date of the MRSLAs occurred by reason of matters or things outside of Sino Iron and Korean Steel's control and are thus excused by cl 6.3(a) from the requirement to make the payment under cl 6.3(b). Apart from an admission as to one aspect of one of the alternative pleaded constructions, Mineralogy's defence to counterclaim puts the defendants' pleas as to the construction of cl 6.3(b) in issue. Although the money claim made in CIV 2303 does not presently form part of Mineralogy's pleading in CIV 1808, it did form a component of five of the eight previous versions of Mineralogy's statement of claim. It is clearly a matter capable of being dealt with in CIV 1808. Similarly, CITIC's liability under the Fortescue Coordination Deed has previously formed part of the claim in earlier versions of Mineralogy's statement of claim in CIV 1808, and whilst not part of the present pleading, it clearly could form part of the claim in CIV 1808. It is clear that determination of the cl 6.3 construction issues in CIV 1808 directly affects the determination of the amount, if any, to which Mineralogy is entitled to be paid under cl 6.3(b).

[5] CIV 2368 involves a claim that Sino and Korean have each repudiated the MRSLA to which they are a party. The repudiation is said to comprise:

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all of which are said to manifest an intention by Sino Iron and Korean Steel not to perform their obligations under the MRSLAs.

[6] Mineralogy also claims that Sino Iron and Korean Steel failed to comply with what are described in the MRSLAs as 'legal requirements' and with the Iron Ore Processing (Mineralogy Pty Ltd) Agreement (State Agreement), as they were required to by the MRSLAs. In particular, Mineralogy's claim relates to the requirements to construct a pellet plant capable of producing 6 million tonnes of pellets per annum, and a requirement to produce 21.6 million tonnes of concentrate per annum. Mineralogy plead that Sino and Korean did not, and did not intend to, construct a pellet plant in compliance with the requirements, and intentionally constructed insufficient production lines necessary to produce the required amount of concentrate. These matters are said to evince an intention by Sino and Korean not to perform their obligations under their respective MRSLAs, and are therefore said to lead to the conclusion that Sino and Korean thereby repudiated the MRSLAs by no later than 30 September 2014.

[7] There is a further claim of repudiation said to arise by reason of a breach of what is referred to as a standard of work provision contained in cl 16.1 of the MRSLAs. It is pleaded that each of Sino Iron and Korean Steel was aware from February 2008 that their contractor was not carrying out work to the standard required by cl 16.1 of the MRSLAs and they took no steps to comply with that clause, thereby evincing an intention not to carry out obligations in accordance with the MRSLAs and consequently repudiating the MRSLAs.

[8] There is then a claim for unlawful removal of magnetite ore post termination of the MRSLAs and a claim for the value of the ore removed.

[9] Mineralogy claims damages for the repudiation of the MRSLAs.

[10] Further, a claim is made in relation to an agreement known as the China Project Option Agreement which is said to have come to an end by reason of the termination of the MRSLAs, resulting in loss and damage to Mineralogy. Finally there is a claim for a declaration as to the termination of the Fortescue Coordination Deed.

[11] Most of the matters raised in the statement of claim in CIV 2368 overlap with issues in CIV 1808. They include the failure to pay royalty component B, the failure to join in the appointment of an expert and issues surrounding cl 6.3 of the MRSLAs. There is, of course, overlap between CIV 2303 and CIV 2368 in relation to cl 6.3, although curiously, the amount of the royalty said to be payable by each of Sino Iron and Korean Steel in CIV 2368 is almost US$22 million less for each of Sino Iron and Korean Steel than is claimed in CIV 2303. Various other issues are either currently raised in the pleadings in CIV 1808, or were previously the subject of pleadings in that action which have since been superseded. Neither of the parties has submitted that any of the issues raised in CIV 2368 are not capable of being dealt with in CIV 1808.

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[17] I apply the principles I set out in Twinside Pty Ltd v Venetian Nominees Pty Ltd, and Bedshed Franchising Pty Ltd v Battersby.

[18] The principles were explained by Gummow and Hayne JJ in Australian Broadcasting Corporation v O'Neill. Their Honours stated that the relevant principles are those set out in Beecham Group Ltd v Bristol Laboratories Pty Ltd. In Beecham, the two main inquiries were said to be whether the plaintiff had made out a prima facie case and whether the balance of convenience favoured the grant of the injunction. The phrase 'prima facie case' does not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed. It is enough that the plaintiff show a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial. How strong the probability needs to be depends upon the nature of the rights the plaintiff asserts and the practical consequences likely to flow from the orders the plaintiff seeks.

[19] The strength of the plaintiff's case and the balance of convenience are to be considered together. As the apparent strength of the plaintiff's case diminishes, the balance of convenience moves against the making of an order. The grant of an injunction involves balancing the injustice which might be suffered by the defendant 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.

[20] 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 an interlocutory injunction is not an occasion to determine contested questions of fact and conflicts in affidavit evidence.

[21] The authorities favour the position that the question of adequacy of damages is not an independent requirement, but rather is best considered as part of the balance of convenience.

[22] The plaintiffs' application seeks interlocutory mandatory relief in that it seeks an order compelling the defendant to give up possession of Home Farmmain.

[23] The principles relating to interlocutory mandatory injunctions were explained in Cash Converters Pty Ltd v Hila Pty Ltd and Films Rover International. In some cases, it is said that an interlocutory mandatory injunction should be granted only if the court has a high degree of assurance that the plaintiff will succeed at trial. However, ultimately the question is as to the balance of the risk of injustice. In considering that balance, the court must take into account the nature and consequences of the particular injunction sought.

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