Sempra Metals & Concentrates Corp v Tritton Resources Ltd

GE Capital Asset Services & Trading Asia Pacific Pty Ltd v Rocks Excavations & Plant Hire Pty Ltd [2003] NSWSC 99 CASES CITED : Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 Schering Pty Ltd v Forrest Pharmaceutical Co Pty Ltd [1982] 1 NSWLR 286 Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 4th ed [21-210], [21-375]

Sempra Metals & Concentrates Corp (P) PARTIES : Tritton Resources Limited (D1) Carrington Facilities Pty Ltd (D2) Straits Resources Limited (D3)

A J L Bannon SC & A S McGrath (P) COUNSEL : R M Smith SC & J C Giles (D1 & 3) N J Beaumont (D2)

Henry Davis York (P) SOLICITORS : Corrs Chambers Westgarth (D1 & 3) Gadens Lawyers (D2)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5482/06 Sempra Metals & Concentrates Corp v Tritton Resources Limited & anor JUDGMENT - On application for interlocutory injunction 1 HIS HONOUR: This is an application for an interlocutory injunction to restrain the first defendant from selling or disposing of copper concentrate and copper ore otherwise than to the plaintiff. 2 The plaintiff is an international metals dealer. The first defendant conducts a copper mine near Nyngan in the State of New South Wales. The second defendant conducts a warehouse at Newcastle. The third defendant is the holding company of the first defendant as the result of a takeover. 3 The contract that is central to this matter is in its present form called the Second Amended and Restated Copper Concentrate Offtake Agreement between the first defendant and the plaintiff entered into on 12 December 2005 ("the agreement"). However, the agreement replaced in substantially similar terms an earlier agreement or agreements that went back as far as 2002. 4 Under clause 4.1 of the agreement, the first defendant must deliver and the plaintiff must accept 100 per cent of the concentrate produced at the Nyngan mine. It is to be noted that there is under the agreement no obligation on the first defendant to produce copper concentrate and there is no mention of copper ore. 5 The following matters are important background to the present conflict between the parties. At the time the agreement was entered into in December 2005, the copper price in London was about 70 cents a pound. It is now in the vicinity of $3.40 a pound. There is and at all material times has been a concentrator at or near the mine and the produce of the mine has to date been delivered to the plaintiff in the form of concentrate rather than ore. The concentrate is railed from Nyngan to Newcastle and stored to await shipment in the warehouse conducted by the second defendant. 6 The plaintiff relies on two separate bases for the interlocutory injunctive relief which it claims. The first is the breach of an implied negative stipulation in the agreement not to deliver concentrate from the mine to anyone other than the plaintiff. It also alleges that there is an implied negative stipulation not to deliver copper ore from the mine to anybody else. 7 Secondly, in relation to about 5,600 tons of ore actually in the warehouse at Newcastle, the plaintiff also relies on an arrangement whereby, upon the making of substantial prepayments in respect of that concentrate, title in that concentrate has already passed to the plaintiff. The plaintiff claims in respect of that concentrate, as well as an injunction to restrain breach of the negative stipulation in the agreement, an injunction to restrain conversion of its property. 8 In relation to the first of those claims, the first defendant alleges that any negative stipulation in the agreement is no longer operative because the agreement has been frustrated. It has filed in these proceedings a cross claim for a declaration of frustration. It may be noted that it is a term of the agreement that it is governed by the law of England and Wales, so that it is according to that law that the question of frustration will fall to be determined. 9 In relation to the second basis of claim, the first defendant concedes that title in 5600 tons of concentrate did pass from the first defendant to the plaintiff, but says that this concentrate has already been shipped away from Newcastle in MV Predator and is not the concentrate which is currently in the warehouse, in which it says title has not passed to the plaintiff. 10 The process to be engaged in in determining applications for interlocutory injunctive relief is, as the parties concur, that set out by McClelland J in Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535 - 536. "As I see it, the position is as follows. Where a plaintiff's entitlement to ultimate relief is uncertain, the Court, in deciding to grant or refuse an interlocutory injunction, must consider what course is best calculated to achieve justice between the parties in the circumstances of the particular case, pending the resolution of the uncertainty, bearing in mind the consequences to the defendant of the grant of an injunction in support of relief to which the plaintiff may ultimately be held not to be entitled, and the consequences to the plaintiff of the refusal of an injunction in support of relief to which the plaintiff may ultimately be held to be entitled: see, eg, Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208 at 216; A v Hayden (No 1) (1984) 59 ALJR 1 at 4-5; 56 ALR 73 at 79. Where the uncertainty depends in whole or in part on a contested question of fact it is not appropriate for the Court to decide that question on the interlocutory application. Where the uncertainty depends in whole or in part on a contested question of law, it may or may not be appropriate for the Court to decide that question on the interlocutory application, depending on circumstances, eg, whether the question is novel or difficult, or is susceptible of resolution on the present state of the evidence, or whether the urgency of the matter renders it impracticable to give proper consideration to the question: see, eg, A v Hayden (No 1) (at 4; 78); Cohen v Peko-Wallsend (1986) 61 ALJR 57 at 59; 68 ALR 394 at 397. If the Court does decide the question of law the uncertainty is to that extent removed.

Unless the plaintiff shows that there is at least a serious question to be tried which if resolved in its favour would entitle it to final relief, then the requirements of justice as between the parties will dictate that an interlocutory injunction should be refused: Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 57 ALJR 425; 46 ALR 398; Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 58 ALJR 283; 52 ALR 651; A v Hayden (No 1) ; Castlemaine-Tooheys Ltd v South Australia (1986) 60 ALJR 679; 67 ALR 553 and Cohen v Peko-Wallsend Ltd .

Apart from this, although normally the Court 'does not undertake a preliminary trial, and give or withhold interlocutory relief upon a forecast as to the ultimate result of the case' ( Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622), there are some kinds of case in which for the purpose of seeing where lies the balance of convenience (or more specifically 'the balance of the risk of doing an injustice' - see per May LJ in Cayne v Global Natural Resources plc [1984] 1 All ER 225 at 237, cf per Brennan J in Brayson Motors Pty Ltd v Federal Commissioner of Taxation (1983) 57 ALJR 288 at 292; 46 ALR 279 at 285), it is desirable for the Court to evaluate the strength of the plaintiff's case for final relief: see, eg, Brayson Motors Pty Ltd v Federal Commissioner of Taxation (at 292; 285); Castlemaine-Tooheys Ltd v South Australia at 682; 559. One class of case to which this applies is where the decision to grant or refuse an interlocutory injunction will in a practical sense determine the substance of the matter in issue: see, eg, NWL Ltd v Woods [1979] 1 WLR 1294 at 1306-1307; [1979] 3 All ER 614 at 625-626 per Lord Diplock; Cayne v Global Natural Resources plc ." 11 One thing which is contended by the defendants in these proceedings is that the determination of this application for injunctive relief will foreclose the result of this litigation, so that the matter must be dealt with in the fashion set out in the latter part of the passage cited from Kolback. I do not accept this proposition for reasons that will become apparent when I discuss the balance of convenience. It is not established that the result of the litigation will be foreclosed by the grant of an interlocutory injunction. I do not accept that it is established that the granting of an injunction would lead to closure of the mine. 12 The defendants have argued that the plaintiff has raised no serious questions to be tried. This contention depends upon the propositions that the case of frustration is clear so that there is no contract; that there certainly could not be any implied negative stipulation in respect of ore as opposed to concentrate; and that the evidence already available clearly establishes that there is no realistic claim of ownership by the plaintiff to the concentrate at present warehoused in Newcastle. 13 I do not agree with those propositions. It seems to me that the plaintiff has established in the requisite way that there are serious questions to be tried: 1 That sales of concentrate otherwise than to the plaintiff would be in breach of an implied negative stipulation in the agreement. 2 Although the existence of the alleged negative stipulation is less certain in the case of ore, I am of the view there is a serious question to be tried as to whether there is a negative stipulation preventing the disposal of ore from the mine otherwise than to the plaintiff. 3 In my view, there is a serious question to be tried as to the ownership of the concentrate actually warehoused in Newcastle. On that basis, I pass to the other questions as to whether injunctive relief should be granted. 14 This is a case in which the question of the adequacy of damages is in the forefront. On the evidence, copper concentrate is a commodity readily available on the world market, especially in London. The plaintiff in effect conceded that if it did not obtain the 5,600 tonnes of ore in Newcastle, it would buy replacement concentrate to fulfil its obligations to smelters, but at a higher price. There was no suggestion it would have any difficulty in acquiring that quantity of concentrate. 15 The principles as to the adequacy of damages are stated as follows in the 4th ed of Meagher, Gummow and Lehane, Equity Doctrines and Remedies. At [21-375] the learned authors state: "If any infringement of the plaintiff's right between writ and hearing would be properly compensated in damages, that fact alone can (but not must) be a ground for declining an injunction."

The authors earlier stated at [21-210] that in the case of sales of chattels: "It is now clear that negative stipulations, express or implied, will not be enforced by injunction unless: (a) the chattels are rare antiques; (b) they have some unique value; (c) they have some sentimental value; (d) they constitute the entire stock-in-trade of the plaintiff; or (e) damages would for some other reason not be an adequate remedy." 16 It should be noted that the concept of the adequacy of damages includes not only whether damages are available and able to be assessed, but the question of whether the damages, if awarded, will be paid: see GE Capital Asset Services & Trading Asia Pacific Pty Ltd v Rocks Excavations & Plant Hire Pty Ltd [2003] NSWSC 99; Schering Pty Ltd v Forrest Pharmaceutical Co Pty Ltd [1982] 1 NSWLR 286. In the GE Capital case, Young CJ in Eq said at [61] and [62]: "[61] There is no doubt that in many cases the fact that the defendant is of doubtful solvency will operate so that the court will hold that an award of damages will not be an adequate remedy; see eg Schering Pty Ltd v Forrest Pharmaceutical Co Pty Ltd [1982] 1 NSWLR 286.

[62] As Gummow J, writing extrajudicially said in his article, The Injunction in Aid of Legal Rights - An Australian Perspective (1993) 56 Law & Contemporary Problems 83, 93: 'The legal remedy may be inadequate not for any intrinsic reason, but because of the financial circumstances of the defendant.'" 17 In this case, the plaintiff points to what it submits is the first defendant's perilous financial situation as casting grave doubt on whether damages, if awarded against the first defendant in respect of breaches not restrained, would in fact be paid, particularly considering the large amounts in which it is possible that damages may be awarded. 18 The first defendant has not condescended to give any overall picture, even in outline, of its financial situation. It owns the mine at Cobar, against which it has borrowed some $30 million from Macquarie Bank Ltd ("MBL"), so one infers that that mine is of considerable value. The evidence shows protracted negotiations between the first defendant and MBL (in which the third defendant has also participated), which show that the first defendant has had difficulty in meeting its obligations under the borrowing agreement and that there has been some threat of the loan being called up. 19 In my view, this does show that the first defendant is in a financial condition which could preclude payment of damages, especially in the large amount which could be involved. In those circumstances, it cannot be said that damages are an adequate remedy in the circumstances of the present injunction application. The case for an injunction is, therefore, to be determined according to the balance of convenience. 20 The plaintiff's case on the balance of convenience is that, if injunctive relief is not granted, it may be deprived of concentrate in breach of contract and of its right of ownership and that it may be unable to collect the damages which may be awarded for those breaches. If it makes out its title to the concentrate at present in the Newcastle warehouse, its damages, if this concentrate is disposed of elsewhere, would be in the order of $US9 million. The projected production of further concentrate from the mine over the next four months is about 10,000 tonnes per month. The plaintiff's damages, if this concentrate is produced and disposed of elsewhere, could be of the order of some $US6 million per month. 21 The inflicting of this loss and the calculation of the damages are reasonably certain. The first and third defendants predict dire consequences to the first defendant, the mine and the town of Nyngan if injunctive relief be granted. The trouble with this prediction is that the proofs of these consequences are inchoate and uncertain. It may be that in the short term continued production from the mine would be at a loss. On the evidence, whether or not this would justify or lead to the drastic step of closing down the mine and devaluing the obviously valuable asset is quite uncertain. Whether or not the financier would take drastic steps in the short term is equally uncertain. Most importantly, the holding company, the third defendant, is a company listed on the Australian Stock Exchange. It has not demonstrated with any certainty that it is unable or unwilling, if necessary in the short term, to support the valuable mine owned by its subsidiary and which is indirectly its asset. 22 The third defendant has in fact offered to give an undertaking to the Court "to pay to the plaintiff damages (up to but not exceeding $US10 million) in respect of any damages (including interest and cost [sic]) assessed by this Court ...". The plaintiff has rejected this offer as inadequate and, in light of what appears above, the Court does not see it as sufficient to deflect injunctive relief, if otherwise appropriate. 23 The comparison of the relative certainty of the detriment to the plaintiff if injunctive relief is refused with the uncertainty of the consequences which the defendant points to as a result of the grant of the injunctive relief lead me to the conclusion that the balance of convenience is in favour of the grant of the injunctive relief and I propose to grant appropriately framed injunctive relief accordingly. 24 That will be upon the basis that, as the plaintiff does not have assets in the jurisdiction, it will give appropriate surety for its undertaking as to damages. 25 I should note that these reasons for judgment are given in the context that the proceedings will be placed in the Expedition List this Friday, 17 November 2006. If the proceedings are expedited they should be able to be brought to trial early next year. In saying this, I do not seek to constrain the exercise of discretion of the Expedition Judge, but the existence of the injunctions and the urgency of the determination of the question of frustration of this ongoing contract do appear to me to make an early trial imperative. 26 I do not think it necessary or appropriate to grant any injunctive relief against the second defendant. The situation is now clear to it. Obviously any step by it to assist in the disposal of the concentrate in its warehouse otherwise than in accordance with the directions of the plaintiff would be an assistance by it of a contempt of court that would be committed by the first defendant acting in breach of the injunction. I have no reason to think that the second defendant is likely to do that and, as I have said, I do not think injunctive relief against it is necessary. 27 The plaintiff has asked for injunctive relief also against the third defendant, on the ground that the third defendant has entered into an offtake agreement in relation to the mine concentrate with the first defendant on the assumption that the contract with the plaintiff is at an end. However, again, as with the second defendant, it is fully aware of the restraint of the first defendant. The third defendant would also be involved in a contempt of court by the first defendant if it participated in or assisted a breach by the first defendant. For the reasons stated in relation to the second defendant, I do not think it necessary to grant injunctive relief against the third defendant. 28 So far as costs are concerned, subject to anything further that is said, the costs regime I propose is as follows, that the plaintiff's costs of the application as against the first defendant and the third defendant be the plaintiff's costs in the proceedings; that the plaintiff be ordered to pay the second defendant's costs of the application; and that any question of whether or not the plaintiff ought be able to recover the costs ordered to be paid to the second defendant against the other defendants be reserved. 29 The reason that I have proposed joining the third defendant with the first defendant in the costs order, rather than taking the same course as I have with the second defendant, is that, although I have not granted injunctive relief against the third defendant, the first defendant and third defendant through the same counsel argued the case against the plaintiff in essence in the same way, whereas the second defendant's stance was quite different. …oOo… 30 Upon short minutes being brought in, the first defendant contended for an order 2 to the effect that order 1 (the injunctive relief) should not apply to anything done or required to be done by the first defendant pursuant to its obligations under any charge. It has in mind the situation of what might occur if its financier, MBL, should either enter into possession of the mine itself as mortgagee or should appoint a receiver under the powers in the charge. 31 There is evidence that the first defendant fears this as a possibility, and, indeed I have adverted in my reasons for judgment to negotiations with MBL concerning latitude to be given to the first defendant under the charge. However, I do not see in the evidence any imminent threat either of entry into possession or the appointment of a receiver by MBL. Furthermore, the qualification to the order as propounded, rather than clarifying the situation, as submitted by the first defendant, in my view detracts from the clarity. I do not intend to include order 2, as contended for by the first defendant, in the orders that I make. 32 I have inserted in the orders a liberty to apply. If such a situation as the first defendant envisages arises, it may be attended to by application under that liberty to apply. The liberty to apply may also be useful if there is any disagreement between the parties as to the provision of security by the plaintiff in the sum of $20 million to support its undertaking as to damages. 33 There will be orders in accordance with the short minutes initialled by me and placed with the papers. I note the giving of the usual undertaking as to damages in the form appearing in the short minutes.

15/11/2006 - Change of date of judgment in body of judgment - Paragraph(s) Headnote

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