PALMER -v- CITIC LTD [2017] WASC 253 (30 August 2017)

2 Mineralogy has brought an action in this court (CIV 1808 of 2013) against Sino, Korean and CITIC in which Mineralogy claims against Sino and Korean specific performance of agreements described as the MRSLAs by payment of a royalty described as Royalty Component B (or Royalty B), or alternatively, damages for breach of the MRSLAs. Mineralogy claims against CITIC payment of sums pursuant to a guarantee or indemnity in cl 11.5 of an agreement described as the Fortescue Coordination Deed. The trial of that action concluded on 29 June 2017. Judgment is reserved.

3 In this action Mr Palmer claims against CITIC the sum of $2.324 billion said to be the loss in the value of his shareholding in the Queensland Nickel Group (Palmer Shareholding) caused by the failure of Sino and/or Korean to perform their obligations under the MRSLAs and the failure of CITIC to cause Sino and/or Korean to perform their obligations under the MRSLAs. Mr Palmer claims that CITIC is required to indemnify him for the loss of $2.324 billion in accordance with cl 11.5(c) of the Fortescue Coordination Deed.

4 CITIC now applies for this action to be stayed until 21 days after the delivery of reasons for judgment in CIV 1801 of 2013 or further order. This proceeding will be stayed, as sought by CITIC for the reasons which follow.

5 This action is founded on cl 11.5(c) of the Fortescue Coordination Deed which provides that CITIC indemnifies Mr Palmer and Mineralogy against any loss suffered, paid, or incurred by it in relation to the failure of Sino and/or Korean to perform its obligations under the Deed or the Project Agreements or the failure of CITIC to cause Sino and/or Korean to perform its obligations under the Deed or the Project Agreements. The MRSLAs are part of the Project Agreements. Mr Palmer's claim proceeds as follows. In the period to 30 September 2015 Sino and Korean exported concentrate and were required to pay US$48,082,947 to Mineralogy as Royalty B. Sino and Korean have denied any obligation to pay Royalty B to Mineralogy and have refused to make any payment of Royalty B. Sino and Korean have thereby breached the MRSLAs and as at 7 December 2015 were indebted to Mineralogy in the amount of US$48,082,947. Sino and Korean have thereby failed to perform their obligations under the Project Agreements in the terms of cl 11.5(c) of the Fortescue Coordination Deed. CITIC has failed to cause Sino and Korean to pay, and did not itself, pay the US$48,082,947. CITIC thereby failed to perform its obligation under cl 11.5(b) of the Fortescue Coordination Deed. In or about November 2015 Queensland Nickel Pty Ltd (QN), which is part of the Queensland Nickel Group and is now in liquidation, required funding of $28 million to enable it to have sufficient working capital to continue operating its nickel refinery business. Mineralogy agreed to provide $28 million to the Queensland Nickel Group for working capital funded from the payment of Royalty B that it expected to receive from Sino, Korean and CITIC. Mineralogy brought an application in CIV 1808 of 2013 for an interlocutory mandatory injunction requiring Sino, Korean and CITIC to pay the sum of approximately US$48 million being the amount of Royalty B claimed to be due and owing to Mineralogy for the period ended 30 September 2015. Sino, Korean and CITIC successfully opposed the application for an interlocutory mandatory injunction. As a result of Sino, Korean and CITIC's failure to pay Mineralogy the sum of approximately US$48 million Mineralogy was unable to make the loan to the Queensland Nickel Group. On 18 January 2016 QN was placed into administration and on 22 April 2016 went into liquidation. The failure of QN to obtain the necessary working capital, the appointment of administrators to QN and the placing of QN into liquidation was destructive of, and reduced the enterprise value of the Queensland Nickel Group by $2.324 billion. As a result of the reduction in the enterprise value of the Queensland Nickel Group the value of the Palmer Shareholding has correspondingly reduced by $2.324 billion and Mr Palmer has suffered a loss of $2.324 billion. The loss to Mr Palmer is 'in relation to' the failure of Sino and Korean and CITIC to perform their obligations under a Project Agreement. Therefore, CITIC is required to indemnify Mr Palmer for the loss of $2.324 billion in accordance with cl 11.5(c) of the Fortescue Coordination Deed.

6 CITIC says that there is a significant overlap between the issues in this action and the issues in CIV 1808 of 2013. Mineralogy makes a number of claims in CIV 1808 of 2013. In its statement of claim (fifth further amended statement of claim), Mineralogy advances claims in relation to Royalty B as follows. Since 30 September 2016 Sino and Korean have continued to produce and export concentrate in respect of which Royalty B is payable. Sino and Korean have asserted that Royalty B is not capable of calculation and Royalty B is not payable. Sino and Korean have denied any obligation to pay Royalty B to Mineralogy and have refused to make any payment of Royalty B. Sino and Korean are indebted to Mineralogy in the amount of the Royalty B payable. Alternatively, Sino and Korean have breached the respective MRSLAs under which the royalty is payable. Mineralogy claims against Sino and Korean, by way of specific performance of the MRSLAs, payment of sums for Royalty B and in the alternative damages for breach of the MRSLAs. Mineralogy claims against CITIC payment of sums pursuant to cl 11.5 of the Fortescue Coordination Deed.

7 There is a significant difference between an application for a permanent stay and an application for a temporary stay or adjournment pending the completion of other proceedings which are likely to affect the proceedings sought to be stayed or adjourned. In Sterling Pharmaceuticals Pty Ltd v The Boots Company (Australia) Pty Ltd [1992] FCA 72; (1992) 34 FCR 287, 294 Lockhart J said:

There is obviously a substantial difference between a motion for a permanent stay or dismissal of a proceeding and a motion for a temporary stay or lengthy adjournment of a case ... The court remains in full control of the proceeding before it when it is stayed only temporarily ...

Earlier, at pages 290 - 291, Lockhart J said that the Federal Court:

has a general power to control its own proceedings, and that power extends to enable it to order a temporary stay of proceedings in the circumstances, including the case where proceedings are pending in another court and it is desirable that those proceedings should proceed to their conclusion first.

His Honour went on, at page 391, to identify the source of the court's power to stay proceedings in the court:

The court is a superior court of record and obviously may control its own proceedings including, where appropriate, the exercise of a power to grant a stay.

8 Lockhart J then proceeded to list relevant considerations to be taken into account by a court in considering whether to grant a temporary stay pending the determination of proceedings in another court involving the same or substantially similar issues:

In my opinion relevant consideration is to be taken into account in the present case includes the following:

• Which proceeding was commenced first.
• Whether the termination of one proceeding is likely to have a material effect on the other.
• The public interest.
• The undesirability of two courts competing to see which of them determines common facts first.
• Consideration of circumstances relating to witnesses.
• Whether work done on pleadings, particulars, discovery, interrogatories and preparation might be wasted.
• The undesirability of substantial waste of time and effort if it becomes a common practice to bring actions in two courts involving substantially the same issues.
• How far advanced the proceedings are in each court.
• The law should strive against permitting multiplicity of proceedings in relation to similar issues.
• Generally balancing the advantages and disadvantages to each party.

9 Sterling Pharmaceuticals is referred to with apparent approval by the High Court in Henry v Henry [1996] HCA 51; (1996) 185 CLR 571, 590 (Dawson, Gaudron, McHugh & Gummow JJ) and in CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345, 390, footnote 98 (Dawson, Toohey, Gaudron, McHugh, Gummow & Kirby JJ) and by the Full Federal Court in Oswal v Burrup Fertilisers Pty Ltd (2011) 85 ACSR 532 [29] [31] (Mansfield & Foster JJ). Sterling Pharmaceuticals was applied in this court by Templeman J in Pilbara Iron Ore Pty Ltd v Ammon [2008] WASC 108. The Court of Appeal refused to grant leave to appeal with respect to the stay order: Pilbara Iron Ore Pty Ltd v Ammon [2008] WASCA 202.

10 In Sterling Pharmaceuticals the applicant was a subsidiary in Australia of a US company (Sterling US) and the respondent was a subsidiary in Australia of a UK company (Boots UK). The applicant brought proceedings against the respondent in Australia alleging breaches of the Trade Practices Act 1974 (Cth) arising out of a statement made on the packet of one of the respondent's products. The New Zealand subsidiary of Sterling US had already commenced proceedings against the New Zealand subsidiary of Boots UK in the High Court of New Zealand. That action was brought under the Fair Trading Act 1986 (NZ), relying on sections equivalent to the Trade Practices Act 1974 (Cth) and based on facts similar to the Australian case. Lockhart J observed that although the Australian and New Zealand subsidiaries of Sterling US were separate entities, they operated to a degree through common management and control and there are other links between the two corporations. Lockhart J in effect granted a temporary stay by standing the proceedings out of the list. His Honour said that the resolution of the issues in New Zealand or Australia would not give rise to an issue estoppel in the other country because the parties are different. However, his Honour said:

it would be quite unreal to regard companies from the same international group as if they were totally independent of each other such that the success or reversal of one of them in proceedings in one country would not materially, as a practical matter, affect the conduct of their associates in another country where the proceedings involve similar issues (291).

11 Lockhart J emphasised that a party who has properly invoked the jurisdiction of an Australian court is prima facie entitled to have his case heard and determined by that court notwithstanding that he institutes proceedings in a foreign court and approached the case on that prima facie assumption. However, his Honour concluded that in all the circumstances, having balanced the advantages and disadvantages to which party in the Australian proceeding, he is satisfied that the interests of justice were best served by temporarily staying the proceedings.

12 CITIC contends that this action should be stayed until 21 days after the delivery of reasons for judgment in CIV 1808 of 2013 or further order. CITIC's principal contention is that there is significant overlap between the issues in this action and the issues in CIV 1808 of 2013. The trial of CIV 1808 of 2013 concluded in June 2017 and judgment has been reserved. The overlapping issues are fundamental to the claims made by Mr Palmer in this proceeding. It is undesirable to require that the parties progress work in this proceeding on the overlapping issues when those issues are to be determined in CIV 1808 of 2013. Some or all of that work in this action may be wasted. The court should not permit multiple proceedings to proceed in relation to the same or similar issues.

13 The plaintiff's principal contentions are as follows. The issues in this action are not coterminous with the issues in dispute in CIV 1808 of 2013. The principal issue in this proceeding would be the construction of cl 11.5(c) of the Fortescue Coordination Deed. That issue is not in dispute in CIV 1808 of 2013. The findings of the court in CIV 1808 of 2013 will not bind Mr Palmer. Moreover, CITIC has refused to undertake to be bound in this action by the findings in CIV 1808 of 2013. Thus, it remains open to CITIC to proffer a different defence to that of its subsidiaries in CIV 1808 of 2013 or to assert that it is not precluded by issue estoppel or res judicata from advancing arguments inconsistent with determinations in CIV 1808 of 2013. In the absence of agreement regarding being bound by the findings in CIV 1808 of 2013 an appropriate course is for this proceeding to continue and, if necessary, in the future, for this court to give directions for the benefit of findings in CIV 1808 of 2013 to alter the scope of the issues in this proceeding.

14 The circumstances as a whole favour granting a temporary stay of this action. First, Mr Palmer waited until the last day of the trial in CIV 1808 of 2013 to commence this action, notwithstanding that the circumstances and matters on which it is founded occurred by 22 April 2016 when QN was placed into liquidation. Secondly, the delivery of reasons for judgment in CIV 1808 of 2013 is likely to have a material effect on this action. If in CIV 1808 of 2013 the court finds that Sino and/or Korean were obliged to make payments of Royalty B as contended by Mineralogy then CITIC will be bound by that finding and the scope of the matters in issue in this proceeding will be significantly reduced. On the other hand, if in CIV 1808 of 2013 the court finds that Mineralogy was not entitled to the Royalty B payment claimed by Mineralogy and Sino and/or Korean did not breach the MRSLAs by not paying the royalty as asserted by Mineralogy then it is likely that Mr Palmer will not proceed with this action or CITIC will apply to dismiss or permanently stay the action as an abuse of process. Thirdly, it is undesirable that this court should proceed with interlocutory steps towards the resolution of an issue or issues when the same or similar issues have been argued in another action in this court in which judgment is pending. Fourthly, work done on pleadings, discovery and preparation in relation to the Royalty B issue in this action is likely to be wasted. Fifthly, the court should strive against permitting multiplicity of proceedings in relation to similar issues. Sixthly, there is no evidence of prejudice to Mr Palmer from a temporary stay of these proceedings until judgment in CIV 1808 of 2013 beyond the prejudice to any litigant of any delay in the resolution of the litigation.

15 Having balanced all of the matters advanced by the parties I conclude that this action should be stayed until 21 days after the delivery of judgment in CIV 1808 of 2013, as sought by CITIC. There should be consequential orders in relation to an extension of time for service of CITIC's defence and making any application for summary judgment or to strike out any pleading.