Sino Iron Pty Ltd v Mineralogy Pty Ltd

Federal Court of Australia|2019-05-17|Before: Mr J, Smith J

Counsel for the Applicants: Mr JH Karkar QC with Mr J Kirkwood

Solicitor for the Applicants: Herbert Smith Freehills

Counsel for the First Respondent: Dr C Ward SC with Mr K Byrne

Solicitor for the Second Respondent: Alexander Law

Solicitor for the Third Respondent: State Solicitors Office

BETWEEN: SINO IRON PTY LTD (ACN 058 429 708) First Applicant

KOREAN STEEL PTY LTD (ACN 058 429 600) Second Applicant

AND: MINERALOGY PTY LTD (ACN 010 582 680) First Respondent

STATE OF WESTERN AUSTRALIA Third Respondent

JUDGE: BANKS-SMITH J DATE OF ORDER: 17 MAY 2019

The proceeding be transferred to the Supreme Court of Western Australia pursuant to s 5(4) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) and s 138C of the Competition and Consumer Act 2010 (Cth).
The parties be heard as to consequential orders including costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BANKS-SMITH J: 1 This is an application by the first respondent (Mineralogy) under s 5(4) and s 5(5) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) or, alternatively, pursuant to s 138C of the Competition and Consumer Act 2010 (Cth) to transfer these proceedings to the Supreme Court of Western Australia. 2 The applicants (CITIC parties) instituted these proceedings in October 2018. 3 The State of Western Australia is joined as third respondent but no relief is sought against it, and my reference to 'the parties' in these reasons is not intended to include the State.

Background 4 The contractual marriage between Mineralogy and the CITIC parties is an unhappy one. Senior counsel for Mineralogy aptly described the abundance of litigation as a shemozzle. 5 To date, there have been approximately 42 published judgments arising out of proceedings involving all or some of the parties in the Supreme Court of Western Australia, and approximately 13 published judgments arising out of proceedings between them in this Court. 6 Perhaps the best description of the current relationship between the parties was provided by Kenneth Martin J in Palmer v CITIC Ltd [No 2] [2019] WASC 14 (S) as follows: [7] I have had the privilege of case managing all the litigation in this court between these parties since 2016. The nature of the parties' trenchant disputation extends well and truly beyond more typical commercial disputes which are routinely evaluated by commercial courts on a daily basis. [8] The disputation between these parties is unique in many respects. The sums of money at issue are mind boggling to the average person. And these parties take, in effect, an attritional approach to all their extensive litigation in that virtually every point becomes a matter of controversy. The more rational and sensible commercial approach to litigation by way of sensible compromises is completely absent from the present framework. In other words, this is no usual situation of litigation as between rational and sensible corporate parties. This is litigious warfare, on a grand scale with many fronts.

The Sino Iron project 7 The Sino Iron project (Project) is a magnetite ore project in the Pilbara carried on by the first applicant (Sino Iron) and the second applicant (Korean Steel) on various tenements held by Mineralogy pursuant to a State Agreement with the State of Western Australia titled the Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act 2002 (WA) and in accordance with a number of agreements entered into between the parties (or some of them or related entities). 8 These agreements include the following: (1) Mining Right and Site Lease Agreements under which Mineralogy granted mining rights and site leases to Sino Iron and Korean Steel, and which contain terms (relevantly) as to the payment of royalties to Mineralogy, including Royalty Component A and Royalty Component B; as to site remediation; and as to a minimum production obligation (MRSLAs); (2) Fortescue Coordination Deed which provides (relevantly) for an indemnity in favour of Mineralogy and Mr Palmer in relation to consequential loss as a result of non-payment of royalties (FCD); (3) Joint Development Agreement that was suspended by operation of the FCD (JDA); (4) Direct Agreement with step in rights between Mineralogy, Sino Iron as Project Company, and the China Development Bank as Agent (Direct Agreement); (5) China Project Option Agreement which provides an option to CITIC to acquire or create a new corporate entity with an entitlement to increase the tonnage to be extracted, and sets out the procedures that must be complied with by CITIC for a valid exercise of that option (CPOA); and (6) Facilities Deeds that provide for the establishment, maintenance and operation of facilities at the Port of Cape Preston (Facilities Deeds).

These proceedings 9 The CITIC parties included an executive summary by way of introduction in the statement of claim and I acknowledge that the following summary of their claim is based in part on that executive summary. I also record that Mineralogy states in its defence that it disputes entirely the content of the executive summary. 10 The CITIC parties sue Mineralogy and Clive Palmer (who they assert is Mineralogy's directing mind and will) in relation to what they contend is Mineralogy's failure and refusal to undertake the following four steps: (1) submit mine continuation proposals for the Project to the State under the State Agreement (Mine Continuation Proposals); (2) grant further necessary tenure for the Project; (3) take steps to secure the re-purposing of leases for the Project; and (4) submit a program of works for the Project to the State. 11 The CITIC parties bring claims based on breach of contract, unconscionable conduct under the Australian Consumer Law and estoppel. They sue Mr Palmer as an accessory to the unconscionable conduct claim. They seek orders requiring Mineralogy to take the four steps listed above and damages for its failure and refusal to do so. Damages are also sought from Mr Palmer. 12 Central to the CITIC parties' claims are rights that they contend are held by Sino Iron and Korean Steel under the various agreements with Mineralogy to mine up to 1 billion tonnes each of magnetite ore; produce and export up to 13.8 million tonnes each of magnetite product per annum; and occupy, use and access tenements held by Mineralogy. 13 The CITIC parties allege they have invested billions of dollars in constructing infrastructure and facilities to enable Sino Iron and Korean Steel to exercise mining, production, export and land use rights. The infrastructure and facilities that have been constructed include a mine, processing facilities, waste rock landforms, a tailings storage facility, a gas-fired power station, a desalination plant, an export terminal facility, workforce accommodation camps and transportation infrastructure. 14 The implementation of the Project requires the submission of proposals to the State for approval under the State Agreement. Any such proposal must be submitted by Mineralogy as proponent. 15 The last proposals approved by the State for the Project were in January 2010. Those proposals were based on a mine plan that would provide sufficient ore for approximately five years of a mine life of beyond 25 years. The CITIC parties allege that it was agreed that during the first period of five years, additional areas would be sought for the placement of tailings and waste rock and the extension of the pit area and volume, following which further proposals would be prepared to enable full implementation of the Project. 16 Further proposals have since been prepared. They are the Mine Continuation Proposals the subject of this proceeding. 17 The Mine Continuation Proposals advocate a range of works to enable the continued operation, and full implementation, of the Project including an extension of the mine pit to the west, an increase to tailings capacity, an increase to waste rock storage capacity, an increase to stockpile capacity at the export terminal, new infrastructure corridors, and a permanent accommodation village. 18 The CITIC parties allege that Mineralogy has been contractually obliged to approve and submit the Mine Continuation Proposals to the State and take the other identified steps under a range of express and implied terms in the Project agreements, and has breached those terms by failing to do so. They additionally say that implied terms exist under the various agreements (including the MRSLAs, the FCD, the State Agreement and the Direct Agreement) which require Mineralogy to act honestly, with fidelity, reasonably and with fair dealing having regard to the interests of the parties and to the provisions, aims and purposes of the various agreements. They allege that by refusing to submit the Mine Continuation Proposals, Mineralogy has breached these express and implied terms. 19 The CITIC parties further allege that Mineralogy's failure and refusal to take these steps amount to unconscionable conduct under the Australian Consumer Law, and that Mr Palmer has been an accessory to such conduct. They allege that Mineralogy's failure and refusal have been against commercial conscience; have involved an unconscientious taking advantage by Mineralogy of its positions as proponent under the State Agreement and as holder of the tenements; have been intended to obstruct and frustrate the Project; and have formed part of a pattern of behaviour with that intention and to that effect that has been occurring since 2012. 20 By its defence, Mineralogy contends that the implied terms in the Project agreements upon which the CITIC parties rely cannot be implied and in any event would be of no force or effect because relevant agreements have been frustrated or terminated. Alternatively, Mineralogy contends that the CITIC parties have committed various breaches of the Project agreements, in particular of an obligation to put aside funds into a site remediation fund, and so Mineralogy is no longer obliged to grant to the CITIC parties the further tenures which they seek. 21 The CITIC parties were entitled to commence the proceedings in this Court. The CITIC parties contend that resolution of the proceedings requires some expedition because, relevantly, it is imperative that they secure an increase in the size of the tailings dam for the Project. They chose to bring the proceedings in this Court because they were concerned that if they brought them in the Supreme Court, resolution would be hampered by being enmeshed in other litigation proceedings before that Court.

Other proceedings in this Court 22 The most recent proceedings in this Court involving the parties related to access to the Cape Preston Port under the Facilities Deeds: Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825. That judgment was upheld on appeal in Mineralogy Pty Ltd v Sino Iron Pty Ltd [2017] FCAFC 55. They were very substantial proceedings, as is apparent from the judgments. There are no other extant proceedings in this Court.

Proceedings in the Supreme Court of Western Australia 23 In its written outline Mineralogy refers to some 14 current actions in the Supreme Court. That number is apt to mislead as some of those matters are stayed, have been discontinued or consolidated with other proceedings or are in fact appeals from primary decisions. Practically speaking, there are six groups of extant actions. A short summary of each follows. It will be necessary to return to some of them in more detail below in the context of Mineralogy's argument that there is substantial overlap between proceedings.

Royalty Component B proceedings 24 The Royalty Component B proceedings comprise the central dispute between the parties in the Supreme Court. The main proceedings in this group of actions are CIV1808 of 2013 (the primary action) and CACV9 of 2018 (the appeal). On 24 November 2017 Martin J delivered judgment in favour of Mineralogy in the primary action: Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 16] [2017] WASC 340. An appeal brought by the CITIC parties was heard by the Court of Appeal on 4 and 5 December 2018 and judgment is reserved. 25 In essence, the proceedings concern the interpretation of cl 8 of the MRSLAs, which requires the CITIC parties to pay royalties to Mineralogy in two components. The parties dispute the amount to be paid under Royalty Component B, which is payable upon the volume of 'Product' produced by the CITIC parties and is calculated according to annual market reference prices. The CITIC parties contend that Royalty Component B cannot be calculated according to the given formula, with the effect that it is either not payable, or that Mineralogy is entitled to a 'fair and reasonable royalty' under an implied term. Mineralogy argue that Royalty Component B remains calculable and consequently payable.

Claim based on potential frustration of MRSLAs 26 In action CIV1431 of 2015, the CITIC parties claim relief by way of restitution against Mineralogy in the event that the MRSLAs have been terminated by frustration. 27 The proceeding is effectively on hold pending the outcome of the appeal in the Royalty Component B proceedings.

FCD indemnity proceedings 28 These actions, being CIV2072 of 2017 and CIV1267 of 2018, are brought under the indemnity provisions of the FCD (Indemnity proceedings). 29 CIV2072 of 2017 was commenced by Mr Palmer and concerns losses incurred by Queensland Nickel Pty Ltd. Mr Palmer claims that because of the CITIC parties' failure to pay Royalty Component B, sums derived from that royalty could not be paid to assist Queensland Nickel with its operations, and this led to the voluntary administration and liquidation of Queensland Nickel. As the ultimate shareholder of Queensland Nickel, Mr Palmer claims he suffered loss and seeks indemnification from the CITIC parties. 30 In CIV1267 of 2018, Mineralogy claims an indemnity for losses said to have been similarly incurred with respect to Palmer Petroleum Pty Ltd. 31 I was told that Martin J has observed that the trial of these Indemnity proceedings may together occupy some eight to nine months of court time.

CPOA proceeding 32 In CIV1514 of 2016, the parties dispute whether CITIC validly exercised an option under the CPOA to acquire a further company for further magnetite ore production (CPOA proceeding). The CITIC parties have sued for specific performance of that agreement. Mineralogy and Mr Palmer resist that claim on the bases, amongst other things, that they were entitled to terminate the agreement or that the agreement is frustrated (as summarised in Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 at [190]). Although the parties do not dispute that the option was exercised by delivery of a written notice, Mineralogy argues that the CITIC parties' conduct following the exercise of the option failed to comply with the requirements of the relevant clause and thus the option was deemed not to have been exercised by virtue of cl 3.6(e)(iv) of the CPOA. The CITIC parties admit the non-compliance, but argue that the non-compliance was the fault of Mineralogy and so the exercise of the option remains effective.

Site remediation fund claim 33 In CIV2840 of 2018, Mineralogy claims the CITIC parties are obliged to pay approximately A$530 million into a site remediation fund under cl 20.6 of the MRSLAs (SRF proceeding). The CITIC parties have counterclaimed, seeking orders replacing Mineralogy as trustee of the site remediation fund trust account; orders for the establishment of a properly constituted trust account; and orders as to the amount to be paid into that account. 34 The SRF proceeding was commenced after this proceeding was commenced in this Court.

Minimum production royalty claim 35 In CIV3129 of 2018, Mineralogy and Mr Palmer claim that the CITIC parties are obliged to pay them approximately US$188 million by way of 'minimum production royalty' under cl 6.3 of the MRSLAs (MPR proceeding). The CITIC parties have made an application that this proceeding be struck out, permanently stayed or dismissed on grounds including abuse of process. 36 As with the SRF proceeding, this action was commenced after the proceedings were commenced in this Court.

Jurisdiction 37 Mineralogy seeks a transfer of this action pursuant to s 5(4) of the Jurisdiction of Courts (Cross-vesting) Act and s 138C of the Competition and Consumer Act. These provisions have the same practical effect: York Civil Pty Ltd v BHP Billiton Mitsui Coal Pty Ltd [2014] FCA 1422 at [22]. 38 Section 5(4) of the Jurisdiction of Courts (Cross-vesting) Act provides: (4) Where: (a) a proceeding (in this subsection referred to as the relevant proceeding) is pending in the Federal Court or the Family Court (in this subsection referred to as the first court); and (b) it appears to the first court that: (i) the relevant proceeding arises out of, or is related to, another proceeding pending in the Supreme Court of a State or Territory and it is more appropriate that the relevant proceeding be determined by that Supreme Court; (ii) having regard to: (A) whether, in the opinion of the first court, the relevant proceeding or a substantial part of it would have been incapable of being instituted in that court, apart from this Act and any law of the Australian Capital Territory or the Northern Territory relating to cross-vesting of jurisdiction; and (B) whether, in the opinion of the first court, the relevant proceeding or a substantial part of it would have been capable of being instituted in the Supreme Court of a State or Territory, apart from this Act and any law of a State or Territory relating to cross-vesting of jurisdiction; and (C) the extent to which, in the opinion of the first court, the matters for determination in the relevant proceeding are matters arising under or involving questions as to the application, interpretation or validity of a law of the State or Territory referred to in sub-subparagraph (B) and not within the jurisdiction of the first court apart from this Act and any law of the Australian Capital Territory or the Northern Territory relating to cross-vesting of jurisdiction; and (D) the interests of justice; it is more appropriate that the relevant proceeding be determined by that Supreme Court; or (iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of a State or Territory; the first court shall transfer the relevant proceeding to that Supreme Court. 39 Section 138C of the Competition and Consumer Act provides: Transfer of matters by the Federal Court (1) Subject to subsection (2), if: (a) a civil proceeding instituted by a person (other than the Commonwealth Minister or the Commission) is pending in the Federal Court; and (b) a matter for determination in the proceeding arises under this Part or the Australian Consumer Law; the Federal Court may, on the application of a party to the proceeding or of its own motion, transfer the matter, and any other matter for determination in the proceeding, to a court of a State or a Territory. (2) The Federal Court must not transfer a matter to another court under subsection (1) unless: (a) the other court has power to grant the remedies sought before the Federal Court in the matter; and (b) it appears to the Federal Court that: (i) the matter arises out of, or is related to, a proceeding that is pending in the other court; or (ii) it is otherwise in the interests of justice that the matter be determined by the other court. (4) If the Federal Court transfers a matter to another court under subsection (1): (a) further proceedings in the matter must be as directed by the other court; and (b) the judgment of the other court in the matter is enforceable throughout Australia and the external Territories as if it were a judgment of the Federal Court.

Summary of respective positions 40 The respective position of the parties is examined further below, but it is useful to first summarise them so that the review of the principles to be applied can be read with some context. 41 Mineralogy submitted that these proceedings should be transferred to the Supreme Court of Western Australia for the following principal reasons: (a) there is particular judicial expertise and experience residing in the Supreme Court of Western Australia and in particular with Martin J; (b) these proceedings are but one of many strands of dispute and litigation between these parties and maintenance of proceedings in separate courts entails unnecessary fragmentation; (c) there is commonality of parties and issues between the Supreme Court proceedings and these proceedings; (d) many of the instruments between the parties contain non-exclusive jurisdiction clauses; and (e) these proceedings are at a very early stage. 42 A written submission to the effect that it should be inferred that CITIC chose to bring the proceedings in this Court because it had been unsuccessful in proceedings before Martin J in the Supreme Court was sensibly not endorsed or pursued by senior counsel for Mineralogy at the hearing. That submission should not have been made. 43 During the course of the hearing, it was apparent that Mineralogy relied mainly on two arguments. The first is that there are matters that fall for determination in these proceedings that are also addressed, directly or indirectly, in the Supreme Court proceedings and so there is an overlap of facts, law and evidence. The second (and not independent of the first argument) is that the litigation should be managed in the same court so that issues are dealt with in an appropriate order, thereby avoiding injustice in the sense that the parties' resources would otherwise be deployed to meet the same propositions in multiple courts at the same time. 44 The CITIC parties submitted that: (a) there is no substantial and genuine overlap in the matters for determination in the respective courts: the refusal by Mineralogy to submit the Mine Continuation Proposals has been no more than a collateral issue in the Supreme Court proceedings; (b) Mineralogy has sought to in effect manufacture overlap by instituting new proceedings; (c) whilst it is possible that Martin J may manage these proceedings if they are transferred to the Supreme Court, the matter should not be transferred unless it is likely that the proceedings will be heard by the same judge and there is no evidence that such an outcome is likely; (d) a transfer will work injustice to the CITIC parties in that these proceedings would become enmeshed and entwined with the proceedings in the Supreme Court and the resolution of these proceedings may be relegated 'to the end of the queue'; (e) the courts should share the load of the litigation between these parties; and (f) previously, matters between the parties have proceeded in the Federal Court and there is no reason this action cannot be managed by and run in this Court at the same time as other matters are proceeding in the Supreme Court.

Principles 45 There was no real dispute as to the relevant principles. 46 In Yara Pilbara Fertilisers Pty Ltd (formerly known as Burrup Fertilisers Pty Ltd) v Oswal (No 8) [2015] FCA 49, McKerracher J summarised the relevant principles as follows: [24] The leading authority which canvasses many of the issues to be taken into account is BHP Billiton Ltd v Schultz (2004) 221 CLR 400. As the case law reflects, it is necessary to conduct a balancing exercise between relevant factors that inform as to whether or not it is in the interests of justice to transfer a proceeding. The weighing of considerations, such as cost, expense and convenience, even when they conflict, is a familiar aspect of the kind of case management involved in many cross-vesting applications: BHP per Gleeson CJ, McHugh and Heydon JJ (at [19]). While BHP considered the cross-vesting regime, for practical purposes the criteria for determining whether a proceeding should be transferred are broadly consistent with the criteria for determining cross-vesting: see Dwyer v Hindal Corporate Pty Ltd (2005) 52 ACSR 335 per Debelle J (at [13]). The question is essentially practical, or in the words used in BHP, it is essentially a "nuts and bolts" management decision as to which court, in the pursuit of the interests of justice, is the more appropriate to hear and determine the substantive dispute: BHP per Gleeson CJ, McHugh and Heydon JJ (at [13]); Bankinvest AG v Seabrook (1988) 14 NSWLR 711 per Street CJ (at 713-714). The "interests of justice" is an expression to be interpreted broadly: BHP per Gleeson CJ, McHugh and Heydon JJ (at [15]). [25] The court should not approach the transfer question with any presumption as to where the interests of justice lie: BHP per Gleeson CJ, McHugh and Heydon JJ (at [25]). It is not a circumstance in which an applicant has an onus of persuasion analogous to an onus of proof: BHP per Gummow J (at [71]). The disposition of an application for transfer of a proceeding does not require weight to be given to the plaintiff's choice of forum, which is essentially a neutral factor: BHP per Kirby J (at [168]) and per Gummow J (at 77). [26] As I noted in Commissioner of Taxation v Residence Riverside Proprietary Ltd (as trustee for the D & J Discretionary Trust and as trustee for the D & J Investment Trust) [2013] FCA 720 (at [17]), this court has previously recognised many factors as being relevant to the decision, which will vary in weight from case to case, including: (1) the stage of the proceedings in the respective courts; (2) the commonality or diversity of the parties; (3) the nature of the proceedings; (4) the commonality or diversity of issues; (5) the risk of conflicting findings of fact or conflicting orders; (6) a costs benefit analysis; (7) the potential unnecessary drain on judicial and other public and private resources; and (8) whether there is any particular judicial expertise residing in one court of the other. 47 It is unacceptable to contemplate the concurrent prosecution of proceedings in two courts: Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 729. In Winpar Holdings Ltd v National Consolidated Ltd [2001] FCA 1663, Allsop J said: [16] Whether or not the matter should be transferred to the Victorian Supreme Court depends in significant part on whether there is a substantial overlap of issues to be decided in these proceedings and in the proceedings in Victoria. It is quite inappropriate for two courts to be deciding the same issues between the parties if that matter can be avoided. However, mere overlap of some issues will not, of itself, require transfer. Also, the general statement which I have just identified, that is the inappropriateness of two courts deciding the same issues, can be qualified if in one court two judges are to hear the same issues. If two judges in one court are to hear the same issues then it seems to me that it is not necessarily so inappropriate that two courts hear the same issues. Questions might arise, of course, as to appeals and the like and their ability to be consolidated in one court. 48 In Matyear v Prismex Technologies Pty Ltd [2006] NSWSC 1350; (2006) 60 ACSR 210, Barrett J stated: [24] … The aim must be, if not wholly then substantially, to avoid repetition of evidence and the risk of inconsistent findings. [25] It may follow, as an important practical consideration, that transfer will be appropriate only if the judge of the transferee court who is hearing or is to hear the proceedings already on foot in that court will also hear the transferred proceeding. That is a matter referred to by Allsop J in Winpar Holdings Ltd v National Consolidated Ltd [2001] FCA 1663. In both that case and Nationwide Produce Holdings Pty Ltd v Davies [2003] NSWSC 653 (Gzell J), final consideration of a transfer application was deferred pending an inquiry of the judge of the transferee court seised of the overlapping proceeding to see whether the proceeding potentially to be transferred could be heard with it. [26] The question on the present application is whether efficiencies and avoidance of duplication (together with avoidance of the possibility of conflicting findings) are likely to be realised if the present winding-up proceeding is transferred to the Federal Court, Victoria Registry where the proceedings involving the patent remain unconcluded. I am not persuaded that transfer would produce any such positive effect, even if the judge hearing the patent case were also to deal with the winding-up proceeding. [27] There was speculation in the course of submissions - it could be no more - whether listing arrangements within the Federal Court could result in the transferred winding-up proceeding being heard by Jessup J. I do not consider that matter relevant. As I view the current state of the patent proceedings, efficient determination of the winding-up proceeding would be in no way enhanced by its being somehow consolidated with the balance of the patent proceeding. And it is, of course, misguided to think that any form of "background knowledge" that his Honour had gained through the patent proceeding could somehow be deployed upon a hearing of the winding-up application. That application would be determined on the evidence adduced. 49 In Australian Securities and Investments Commission v Australian Property Custodian Holdings Limited (Receivers and Managers Appointed) (in liquidation) (Controllers Appointed) [2012] FCA 1051, Murphy J dismissed a transfer application although it was common ground that there was substantial overlap between the proceedings in the Federal Court and those before the Supreme Court of Victoria, to which transfer was sought. His Honour dismissed the application on the basis that the two proceedings were of a different nature and would be heard separately and sequentially, rather than concurrently; that it was highly likely that two judges would separately hear the two proceedings; and that there was potential prejudice in that ASIC could become entwined in another larger, more complex and slower-moving proceeding to which it was not a party. 50 In Bell Group NV v Bell Group Finance Pty Ltd, in the matter of Western Interstate Pty Ltd [2018] FCA 1440, the Court was asked to order the transfer of a particular application to the Supreme Court of Western Australia, where a large and somewhat notorious dispute had been managed and on numerous fronts for many years. Importantly, in that case the commonality of issues did not fall for significant consideration, but McKerracher J transferred the application primarily for reasons of case management. Useful aspects of the reasons include the following: (a) the overarching litigation between the parties litigation had its 'natural home' in the Supreme Court (at [4], [46]); (b) the particular application formed part of a larger practical and commercial context, which would almost certainly be impacted by the grant or otherwise of the transfer application (at [14]); (c) although the commonality of issues was not the basis of the application to any significant degree, there was a strong connection between the proceedings in the two courts (at [19], [48]); (d) his Honour did not assume that a single judge would hear all of the litigation, and proceeded on the basis that it may be managed by the judge at that time managing the other matters in the Supreme Court or by another judge or judges (at [21]); (e) it was desirable for one court to handle all the facets and related issues arising in the overall litigation (at [21]); (f) there was a real likelihood of delay arising from an inability to coordinate court events optimally while what is essentially part of one substantial dispute straddled two courts, and such delay was cause for concern (at [45]); (g) a factor in support of transfer was the prospect that if the proceeding was heard before or concurrently with the other Supreme Court issues, the decision would be subject to just one appeal, with consequential efficient use of public resources (at [52]; (h) case management was the relevant factor overwhelmingly in support of the transfer to the Supreme Court (at [53]); and (i) there was no real advantage in continuing the proceedings in the Federal Court, having regard to the quite substantive interlocutory matters which would still require resolution and would almost inevitably, on their own, have led to further applications for leave to appeal (at [46]).

Issues on the transfer application 51 The matters relied upon by the parties are best addressed by dealing with the two main points: that is, the alleged overlap as to issues to be determined and the effect on case management.

The claimed overlap 52 Mineralogy submits that this proceeding will call for consideration of the construction of at least eight of the interrelated contracts between the parties, and that six of those contracts are the subject of proceedings before the Supreme Court. It says that the outcomes of those proceedings and findings in this proceeding would directly affect each other. The parties dispute the extent of such overlap.

Claim that MRSLAs may be frustrated 53 Mineralogy contends that one potential outcome of the Royalty Component B appeal is that the MRSLAs are frustrated. This outcome is said to potentially arise depending upon the outcome of the appeal with respect to the calculability of Royalty Component B and the existence or otherwise of certain implied terms, and other matters such as potential severance of terms. I do not consider it appropriate or necessary to discuss in any detail matters that are the subject of the appeal. However, Mineralogy submits that if the MRSLAs are for whatever reason frustrated, then the implied terms relied upon by the CITIC parties in this proceeding cease to exist, and consequently this proceeding becomes otiose. 54 The CITIC parties admit that frustration is a possible but highly unlikely outcome of the appeal, but submit that it would be for the parties to address the consequences of such an outcome and there is no reason why the Supreme Court would be better placed than this Court to deal with any such consequences for this proceeding.

The CPOA proceeding and alleged effect on the FCD and JDA 55 Mineralogy submits that the outcome of the CPOA proceeding could lead to the termination of the FCD and the reinstatement of the JDA, which would substantially change the nature of the present proceeding. 56 As summarised above, Mineralogy claims in the CPOA proceeding that the CITIC parties have failed to comply with the requirements of the relevant clause and thus the option is taken not to have been exercised. They submit that the CPOA has accordingly terminated pursuant to cl 3.7 of the CPOA. 57 Clause 3.7 of the CPOA provides: Failure to Exercise the Option 3.7 CITIC agrees with the Seller that in the event that CITIC does not exercise all Options before the expiry or termination of the Option Period: (a) it will forfeit the payment described in clause 2.1 [a nominal payment of consideration], together with all interest and any other income which has accrued thereto; and (b) this Agreement shall automatically terminate and, subject to clause 2.1, neither party shall have any claim or right of action against the other. 58 Mineralogy then submits that it is a possible result of the CPOA proceeding that the FCD is terminated by operation of cl 28 of that deed. Clause 28 of the FCD provides: TERM 28.1 This Deed commences on the date that it is executed and continues until the first to occur of: (a) the CITIC Option lapsing; or (b) both of Sino Iron and Korean ceasing to be a Mining Right Holder. 59 'Lapsing' is not defined in the FCD. Mineralogy contends that its meaning is to be ascertained by reference to the totality of the conduct of the parties, and so will be determined by an assessment of the entirety of the parties' conduct and the whole suite of contractual documents. That may be a rather ambitious description of the task to be undertaken in construing the particular term, but regardless, the crux of Mineralogy's contention is that there is a prospect that the FCD may be terminated, with the consequences that any claims made by the CITIC parties that rely upon express or implied terms in the FCD would fall away, the JDA may be revived and these proceedings will be substantially affected. 60 The CITIC parties contend that nothing in the proceeding in this Court turns on whether any of the allegations in the CPOA proceeding are made out. They allege that the pleaded defence in the CPOA proceeding has been adopted in this proceeding 'to create an appearance of overlap where none exists'. They also contend that it is an abuse of process for Mineralogy to allege in these proceedings that the FCD has been terminated when they rely on the FCD in other proceedings. 61 Senior counsel for Mineralogy addressed the abuse of process allegation by noting that in the other proceedings Mineralogy relies upon the indemnity clauses in the FCD, and there is no reason why such indemnity clauses would not survive termination. 62 Whether or not the consequences foreshadowed by Mineralogy from purported non-compliance with the CPOA through to termination of the FCD and a concomitant effect on the MRSLAs properly follow cannot be resolved within the confines of this application. Whilst I acknowledge the CITIC parties' scepticism and do not doubt that there may be some overstating on Mineralogy's part of the level of claimed overlap, there is a line of reasoning behind Mineralogy's potential reliance on cl 28 of the FCD which I cannot dismiss.

The Indemnity proceedings and interpretation of the FCD 63 Mineralogy submits that the question of the proper construction of the FCD is common to the Royalty Component B proceedings, the Indemnity proceedings and these proceedings. It submits that if the FCD is not terminated, then the interpretation of the FCD will fall for determination in each proceeding. It submits that this interpretation will require the Court to pay attention to the whole of the agreement and the surrounding circumstances. 64 The CITIC parties submit that there is no overlap between these proceedings. The CITIC parties in these proceedings rely on cl 4.1 of the FCD, which expressly provides that Mineralogy is not to unreasonably withhold its approval to proposals for implementation of the Project. They say that cl 4.1 or the issues it raises are not relevant to the claims brought by Mineralogy and Mr Palmer for indemnity under the FCD. I note that the CITIC parties also plead that there are implied terms of the FCD and other agreements (referred to as the FCD Implied Good Faith Term) that Mineralogy would act honestly, reasonably and with fair dealing and not act to undermine the bargain embodied in the FCD and other agreements. The CITIC parties also plead an implied term of cooperation of the FCD.

Claimed breaches of MRSLAs also the subject of Supreme Court proceedings 65 As part of its defence in these proceedings (filed 28 February 2019), Mineralogy asserts that the CITIC parties have breached their obligations under cl 20.6 of their respective MRSLAs. Clause 20.6 of the Sino Iron MRSLA provides (as does cl 20.6 of the Korean Steel MRSLA, with corresponding references to Korean Steel): 20.6 Site Remediation Fund (a) In order to make provision and to provide security for payment of future Site Remediation Costs as they become payable, Mineralogy will establish a Site Remediation Fund, and Sino will make payments into the Site Remediation Fund in the manner set out in this clause. (b) The Site Remediation Fund is intended to provide security and certainty for the benefit of Sino, and for Mineralogy as the holder of the Mining Lease, that sufficient funds will be available at Mine Closure to meet Site Remediation Costs. (c) The Site Remediation Fund will be maintained in a separate interest-bearing trust account controlled by Mineralogy as trustee, and which will be designated as a trust account. The interest earned on funds in the Site Remediation Fund will be retained in the Site Remediation Fund. (d) The Site Remediation Fund may be used solely for the purpose of paying Site Remediation Costs as they become payable. The Site Remediation Fund may not be used or accessed for any other purpose. (e) For each Operating Year, Mineralogy will determine an annual charge on account of future Site Remediation Costs to be made by Sino in that Operating Year. The amount of the annual charge is to be determined by Mineralogy, having regard to: (i) Mineralogy's best prevailing estimate of the amount of future Site Remediation Costs, and the amount (if any) already contributed by Sino into the Site Remediation Fund; and (ii) the number of years remaining until Mine Closure. (f) At least 30 days prior to the commencement of each Operating Year, Mineralogy will notify Sino of its annual charge in respect of the forthcoming Operating Year. 66 Mineralogy submits that a breach of this 'significant and fundamental obligation' would completely preclude any suggestion that Mineralogy (or the appropriate entity) should grant further tenure to the CITIC parties. 67 Mineralogy refers to cl 3.4.2 of the Direct Agreement, in which Mineralogy agrees that: … it will not exercise any rights it has under the State Agreement and/or a Mining Lease which would, in Mineralogy's opinion (acting reasonably) prevent, hinder or delay the Project Company [Sino Iron] constructing, completing, implementing and/or operating its Project on the Mining Leases (including surrendering any tenement or agreeing to resumption of land without the prior written consent of the Project Company and the Agent) provided the Project Company is complying with applicable laws and the Project Documents; … 68 Mineralogy contends that this clause operates as an escape clause in circumstances where the CITIC parties are not performing their obligations under the other Project documents. It submits that if it is found that the CITIC parties are in breach of their obligations, then Mineralogy has no obligation to assist them in their commercial endeavours. 69 Additionally, in these proceedings Mineralogy claims that the CITIC parties are in breach of cl 6.3 of the MRSLAs, which obliges the CITIC parties to produce a minimum quantity of product. That clause additionally contains within it reference to an obligation upon Mineralogy to assist CITIC in obtaining certain government approvals, as follows: 6.3 Commencement of production (a) Unless prevented from doing so by an act, matter or thing outside of Sino's control, by the doing of, or failing to do, an act by Mineralogy under this Agreement or otherwise, or a failure to obtain all Government Approvals necessary for it do so (provided it has used its best endeavours to obtain such approvals in a timely manner) Sino must produce no less than 6,000,000 (six million) tonnes of Product no later than 7 years from the date of this Agreement. (b) If Sino fails to comply with paragraph (a) then it must, no later than one month following the date by which compliance was required, pay to Mineralogy an amount equivalent to the Mineralogy Royalty payable on the amount of Magnetite Ore required to produce 6,000,000 (six million) tonnes of Iron Ore Concentrate. 70 Mineralogy had already pleaded those matters in the SRF proceeding (commenced 22 October 2018) and the MPR proceeding (commenced 11 December 2018) and submits that there is an obvious immediate overlap with the Supreme Court proceedings. The CITIC parties submit in effect that those Supreme Court proceedings may have been brought to bolster this transfer application, a matter denied by Mineralogy. Regardless, the CITIC parties contend that because those particular Supreme Court proceedings were commenced after this proceeding, then any overlap should be considered a neutral factor. However, it is not entirely neutral, because one way or another the question of a stay or the sequence of hearings must be addressed.

Claim that construction and interpretation informs other agreements 71 Mineralogy submits that the various agreements between the parties are to be read together as they operate against a very substantial commercial background between the parties and each may inform the construction of the other. 72 Mineralogy raises by way of example the meaning of 'fair and reasonable' or similar terms when utilised in the contractual agreements between the parties (see [18] above). They say the meaning of such terms has been substantially dealt with by Martin J in the Royalty Component B proceedings, and is presently before the Court of Appeal. The CITIC parties note that Martin J found at first instance that there was no implied term as to a 'fair and reasonable' royalty. However, they also state that if their arguments are accepted on appeal, there will be an implied term for a 'fair and reasonable' royalty, but with its content to be determined on remitter. 73 The CITIC parties maintain that these proceedings are separate and can be dealt with separately, and to the extent there are findings made by other courts in other proceedings about the Project, this Court is perfectly able to consider the effect of such findings as this litigation proceeds. Martin J's reasons contain no reference to the Mine Continuation Proposals. The focus of these proceedings is those proposals. The proposals have not been the subject of any of the other proceedings between the parties except in a peripheral manner, and the only mention of them by Martin J is in a single paragraph of a 2017 interlocutory judgment, where they were describes as a 'collateral side issue' (Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 14] [2017] WASC 17 at [55]). The CITIC parties submit that whatever background knowledge his Honour might now retain about any Mine Continuation Proposals is of no value as the CITIC parties' present claims about the proposals will in any event fall to be determined on the evidence adduced in this proceeding.

Conclusion on alleged overlap 74 It is not possible in an application such as this to comprehensively analyse whether claims of overlap between a large number of actions are genuine, of substance or likely to fall away as matters proceed. I have received a little over 1,000 pages of pleadings and copy submissions that have been filed in the Supreme Court actions. In addition, the pleadings in this proceeding number almost 150 pages. It is not possible to anticipate all nuances, to predict the extent to which the Supreme Court may entertain abuse of process arguments or to predict the extent of inevitable amendments or refinements of arguments. To some extent, the task of ascertaining the likelihood of overlap of issues where there are such a number of actions is a matter of impression. 75 In my view there is clearly the potential for duplication of consideration of issues by different courts over the next year of litigation (at least). Whilst I accept that Mineralogy may well have exaggerated the scope of overlap, I do not accept that this proceeding sits in a discrete silo and can be run without potential interruption by way of applications (for example) for stays pending resolution of particular questions about, for example, the construction of the agreements, or pending particular interlocutory steps in the Supreme Court. There is sufficient notice by way of the defence that Mineralogy seeks to impugn the conduct of the CITIC parties in a number of ways in support of its contention that its obligations with respect to the Mine Continuation Proposals have been minimised or discharged. Whether or not such claims by Mineralogy may be responsibly pursued or will ultimately succeed does not minimise their impact from a case management perspective. Taking into account the history of contested litigation between these parties I must give some weight to the likelihood of such interlocutory applications and the impact they may have on the progression of a case, even if they are ultimately found to have little or no merit. The same applies to the potential for appeals. Even where it might seem that some claims brought in the Supreme Court might be stayed so that they can be determined as part of these proceedings in this Court (for example the SRF proceeding and the MPR proceeding), it is not appropriate that I speculate as to the course that the Supreme Court might take, guided as that Court must be by the matters that are raised before it on any stay application and the relevance of resolving particular questions to that Court's determination of other matters. 76 In contrast to one of the key factors in ASIC v APCH, these are not proceedings that fall neatly into sequential order for separate resolution. 77 In the end, I have come to the view that there is sufficient commonality of areas of dispute that there is a real risk of duplication of issues and ongoing disruption to proceedings. Once that point is reached, it is necessary to contemplate the ways in which case management processes might be deployed in the interests of efficiency. For a start, there would need to be careful consideration given to the various common factual and legal issues, whether there should be a common discovery/disclosure regime for any of the issues, the order in which issues should be resolved, whether there is value in considering (or revisiting) separate questions and how to best coordinate or consolidate appeals. These disputes call for a relatively high level of case management and appropriate engagement by the parties and those who represent them. For the reasons explained below, I am of the view that such case management is best undertaken within the confines of the one court.

Case management 78 It is artificial to compartmentalise the issues that are relevant to case management, and I have already addressed some of those matters above. However, to best address the many submissions made by the respective parties, I will collect them under various headings.

The question of the same judge 79 Mineralogy alleges that there is an 'extremely strong prospect' that if transferred, these proceedings will be brought under the case management of Martin J, who (I was told) holds case management reviews of all other extant proceedings between the parties. It submits that this confers obvious case management benefits and will facilitate the expeditious, efficient and cheap resolution of the dispute. Senior counsel abandoned an earlier submission that it was highly likely that Martin J would hear all disputes between the parties, having accepted that it was not possible to properly make such a prediction. 80 On 18 December 2018 Mineralogy's solicitors wrote to Martin J's Associate inquiring as to whether, if the present proceeding was transferred to the Supreme Court, his Honour would be prepared to admit the proceeding to his CMC List (the Commercial and Managed Cases List, which for larger commercial disputes operates in a similar but not identical manner to the docket system of this Court). 81 On 20 December 2018 the Principal Associate to the Chief Justice replied, relevantly as follows: …whether Justice [Martin] would be allocated as the case manager of any further action between these parties (including any transferred matter) would depend on all of the circumstances relating to the Court's lists at the time of the allocation and the interests of all parties. 82 Understandably, this reply letter provides no assurance that, if transferred, the case will be admitted to Martin J's CMC list or that it will be managed or heard by Martin J. I am prepared to accept there is some likelihood that the matter will be managed by Martin J in his CMC List. But even if that were not the case and other judges were allocated management or hearing roles, such allocation would not weigh heavily against a transfer in this case. I have had regard to the point addressed in Winpar that if two judges in one court are to hear the same issues, then it may not be inappropriate that two courts hear the same issues. As McKerracher J identified in Bell Group NV, there are benefits in related disputes being managed by the same Court, even if there is no assurance that all such matters will be determined by the one judge. It is safe to assume that there are benefits that would flow from the ease of communication between court officers, registrars and others involved in case management and listing of hearings and appeals that may not be available to the same extent across jurisdictions. 83 That is not to say that there cannot be a degree of cooperation across jurisdictions. For example, Mineralogy contended that mediation would be restrained across jurisdictions. In my view there is potential for cooperation as to protocols for concurrent mediation by registrars of the respective courts, or indeed potential for mediation of all disputes with a private mediator, as is common between parties of such significant financial means. As I was also told that Mineralogy's counsel were not aware of any court disputes having been successfully mediated between these parties, and as the CITIC parties contend that Mineralogy and Mr Palmer have previously declined to participate in a proposed mediation, Mineralogy's expressed concern about mediation may be somewhat hollow. 84 However, to my mind, as discussed in Bell Group NV, even allowing for the potential that the disputes might not all be managed by one judge within the one court, there remains in a complex commercial dispute such as this a significant benefit for case management of the whole to be brought within the one court.

Inefficiencies of tandem litigation 85 The CITIC parties suggest that if some of the cases in the Supreme Court are determined by the time this case proceeds to trial in this Court, the results in those determinations can be taken into account by this Court, and if any cases remain outstanding then the position can be reconsidered afresh. 86 Mineralogy submits that such tandem litigation would be untenable for two reasons. First, it asserts that there is a serious risk of inconsistent findings on identical factual problems. Second, it asserts that there is a serious risk of injustice in terms of the use of the parties' resources in that the parties will need to argue the same propositions in multiple courts at the same time. 87 I accept that the CITIC parties' position is attractive in theory. However, having regard to the history and manner in which litigation has been conducted between these parties, I am concerned that taking into account the matters set out in [75] and [77], the likely disruption to the conduct of these proceedings is such that the perceived ability for the sequence of findings to be managed without considerable inefficiency and fragmentation is unrealistic. Justice Martin's comments as to 'litigious warfare' that are included at [6] above lend support to this concern.

Claimed injustice to CITIC parties by delay 88 The CITIC parties submit that the present proceeding is of a different nature to those before the Supreme Court. They submit that whilst the proceedings before the Supreme Court concern past actions, the present proceeding concerns the continued operation of the Project and requires reasonable expedition. They say that a transfer will lead to significant delay in hearing this proceeding. They submit that if transferred, this case will be referred to the 'back of the queue' with the result that the continued development of the Project will be hampered. 89 There are various assumptions underlying the injustice submission. First, it assumes that this proceeding will not be subject to unusual delay or interruption: I have already foreshadowed that I anticipate that regardless of the efforts of this Court, there will be interruptions by way of stay applications and other interlocutory applications that impact on its orderly resolution. Second, it assumes that the Supreme Court may direct fewer resources or accord less priority to this proceeding. I do not accept this submission is well founded. It would be a matter entirely for the Supreme Court as to how this action is managed upon a transfer, but there is no basis for assuming that the Supreme Court will not direct resources to this proceeding as it considers appropriate and having regard to how the proceeding might best be managed in the context of the other extant litigation between the parties. 90 Therefore, the anticipated benefit of a streamlined and efficient trial by proceeding in a separate court may not be realised to the extent hoped for by the CITIC parties. I am not persuaded that the anticipated benefit outweighs the value I accord to the significant benefits that may accrue from cohesive case management of all disputes by the one court.

The public purse and 'sharing the load' 91 I should add that I have placed little weight on some of the other matters raised by the parties. For example, Mineralogy expressed concern for the public purse and the allocation of judicial resources to the various disputes. I accept that there may be some benefit to the community that flows from the various disputes being dealt with more efficiently in one court. But more to the point, one can only express the hope that Mineralogy's stated concern is indicative of a genuine renewed focus on proactive attempts to resolve and minimise the ongoing litigation. 92 The CITIC parties suggest that the 'judicial load' should be shared across the courts. How resources are allocated within a court is a matter for the respective heads of jurisdiction to address. There is no reason to assume that the Supreme Court will not make appropriate resources available as required.

Relevance of the State Agreement 93 Mineralogy supported its claim for a transfer by asserting that the State Agreement is an instrument peculiar to the State of Western Australia and enacted by legislation of that State, and so it is natural that it be interpreted by the Supreme Court. That argument is not convincing. The Federal Court regularly interprets state legislation. It was called upon to interpret the particular State Agreement in the port proceedings referred to above (Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825 and Mineralogy Pty Ltd v Sino Iron Pty Ltd [2017] FCAFC 55).

Non-exclusive jurisdiction clauses 94 The various agreements between the parties contain non-exclusive jurisdiction clauses providing that the agreements are governed by the law in force in Western Australia, and the parties submit to the non-exclusive jurisdiction of the courts exercising jurisdiction in Western Australia. Mineralogy submits that these provisions should be construed as conveying a preference for proceedings to be heard in the Supreme Court of Western Australia, not the Federal Court of Australia. It cites National Dairies WA Ltd v Wesfarmers Ltd [1996] FCA 603. 95 The CITIC parties submit that National Dairies should be distinguished, as the contracts do not refer to 'the courts of Western Australia', but rather 'the courts exercising jurisdiction in Western Australia'. In my view the Federal Court is such a court: see PEP Community Services Inc t/as PEP Community Services v Job Future Ltd [2008] FCA 1264 at [8], where McKerracher J held that a similar clause could include the relevant registry of the Federal Court. The broader intention reflected in the jurisdiction clauses is that the parties agreed to litigate any disputes arising out of the agreements in Western Australia, being the location in which the Project is based: see the construction as discussed in Neville's Bus Service Pty Ltd v Pitcher Partners Consulting Pty Ltd [2016] FCA 859 at [17], [19].

Determination 96 Having regard to the interests of justice, I am persuaded that taking into account primarily the case management issues attached to the litigation between these parties discussed above, it is more appropriate that this proceeding be transferred to the Supreme Court of Western Australia.

Orders 97 Although Mineralogy was initially keen to defer further interlocutory steps in this proceeding pending the outcome of this transfer application, I directed that common steps such as the provision of pleadings and conferral as to discovery (including with a Registrar of this Court) continue. Accordingly, there are extant case management orders in this Court to be vacated. Further, usually the costs of the proceedings in this court would be part of the overall costs determination at the conclusion of the proceedings in the Supreme Court. I will hear the parties as to these matters. I certify that the preceding ninety-seven (97) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Banks-Smith.

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

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Judgment (44 paragraphs)

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