SINO IRON PTY LTD -v- MINERALOGY PTY LTD [No 2] [2014] WASC 444 (27 November 2014)

(b) In addition to the obligations referred to in paragraph (a), Mineralogy shall:

(i) grant to Sino Iron and Korean a licence to use all of the intellectual property rights in all studies, reports, and plans and the like prepared by or on behalf of Mineralogy in order to obtain the Environmental Approval or to carry out the Project, where those rights reside in Mineralogy;

(ii) if required before the transfer referred to in (a) above is given effect to, sign any document and provide any consent as reasonably necessary for the implementation of the Project or any necessary variation of the Project or the Environmental Approval; and

(iii) do all things at Korean's and Sino Iron's cost reasonably necessary to assist Sino Iron and Korean, as the case may be, to facilitate the carrying out of the Project.

2 It was common ground during the trial that the 'Environmental Approval' was Ministerial Statement 635 (as amended). The parties referred interchangeably to (i) the transfer of the Environmental Approval and (ii) the transfer of the status of proponent of the Ministerial Statement. I will also refer to these concepts interchangeably.

3 The Citic parties (Sino Iron and Korean Steel) say that the clause above means what it says: Mineralogy must transfer the Environmental Approval to Sino Iron in accordance with the earlier agreements and as the benefits may apply to the Project. Their construction is consistent with the words of the clause. It is consistent with legislative requirements. It is consistent with other contractual instruments, particularly those which did not use the word 'transfer' where no transfer was intended. It is legally and commercially workable. Without it, there would be serious commercial inconvenience to the Citic parties.

4 The construction of the Citic parties should be accepted.

5 In contrast, Mineralogy effectively says that the words 'transfer to' create no obligation to transfer. It says that the Citic parties are not entitled to a transfer of the benefits of the Environmental Approval. It says that Korean Steel is not even entitled to any benefits of the Environmental Approval. These submissions are made despite the facts that

(i) the Citic parties paid hundreds of millions of dollars for rights in relation to the project over which they are 'solely responsible for the planning and conduct',

(ii) the Citic parties assumed 'full liability' and agreed to 'carry out all conditions in respect of the Environmental Approval',

(iii) there is doubt concerning the lawful authority of the Citic parties to carry out the multi-billion dollar project without the transfer, and

(iv) every other environmental approval was either to be obtained in the name of the Citic parties, or required to be transferred to them, for any part that is necessary or desirable for carrying out the project.

6 Mineralogy's construction also requires the words of the relevant clause to bear an impossible weight, four times over. It is a construction inconsistent with any meaning of 'transfer to' in cl 20.1(a). It is a construction inconsistent with the meaning of 'obligation' in cl 20.1(b) and cl 20.1(d). It is a construction inconsistent with the meaning of 'obtain the Environmental Approval' in cl 20.1(b)(i). And it is a construction inconsistent with the meaning of 'transfer referred to' in cl 20.1(b)(ii).

7 Mineralogy's construction is also inconsistent with other clauses of the same agreement. It is a construction that, as senior counsel for Mineralogy conceded, may mean that an important clause in the earlier Sino Iron Takeover Agreement was effectively redundant. It is a construction that a reasonable person in the position of the parties would have considered to have the potential to create extremely serious legal difficulties for the Citic parties. It is a construction that a reasonable person in the position of the parties would have considered to have the potential to create serious practical difficulties for the Citic parties.

8 In Mineralogy's submissions, matters of surrounding context concerning possible commercial inconvenience to Mineralogy, assumed great significance. Mineralogy made written submissions about the restrictive rule in this jurisdiction that applies to construction of contracts[1] but not to implication of terms in fact.[2] The rule to which Mineralogy referred prevents reliance upon surrounding circumstances unless an ambiguity, or another relevant interpretation, emerges from a consideration of the text of the document as a whole. Ultimately, no party objected to the admission of the evidence of surrounding circumstances. For that reason it is not necessary to consider (i) whether the words are relevantly ambiguous or susceptible of more than one interpretation or, if not, (ii) whether the 'implied term' exception extends to terms implied in law, such as the implied term of cooperation relied upon by the Citic parties.[3] The latter issue may also raise the question in this jurisdiction whether the implied term exception permits surrounding context to be considered where, as may invariably be the case,[4] the implication is itself an issue of contract construction.

9 The matters of surrounding context relied upon by Mineralogy do not establish any real, prospective commercial inconvenience to Mineralogy that could have been anticipated by any reasonable person at the time of the relevant agreement. Even if they did, all the concerns described above could not be sacrificed at the altar of commercial inconvenience, however substantial it might have appeared to a reasonable person in the position of the parties.

10 This trial concerned one of the many matters of ongoing dispute between Mineralogy and the Citic parties involving the Sino Iron Project. That project was authorised by an agreement with the State, enacted into legislation as sch 1 of the Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act 2002 (WA).

11 The plaintiff (Mineralogy) and the defendants (the Citic parties) are Project Proponents of the Sino Iron Project in Cape Preston in the Pilbara region. The project is a magnetite mining and export operation involving an iron ore mine, processing facilities, and a port.[5] The day to day operations of all aspects of the project are conducted by the Citic parties, through their appointed manager.[6]

12 The Sino Iron Project is currently the only project being undertaken at Cape Preston.[7]

13 Mineralogy obtained environmental approvals prior to the Citic parties having any involvement in the Sino Iron Project.

14 The Citic parties now operate the Sino Iron Project to ensure that the project complies with conditions of environmental approvals granted under the Environmental Protection Act 1986 (WA). The manager engaged by the Citic parties has a team of 14 people whose primary role is to ensure that the project complies with the conditions of environmental approval.[8] The conditions that they monitor include conditions in Ministerial Statements by which the Minister for the Environment granted approval, subject to conditions, for the proposal for the construction and operation of the project.[9]

15 The essential issue in dispute in this case concerns whether the contracts by which the Citic parties became involved with the project require Mineralogy to make a transfer to the Citic parties of Mineralogy's status as 'proponent' of Ministerial Statements. Mineralogy refuses to take any steps to transfer to the Citic parties the status of proponent.

16 The issues in this case are almost exclusively issues of construction and implication of contractual terms. Those issues of construction and implication do not take place in a vacuum. They are commercial documents and must be construed in a commercial way.

17 The affidavit evidence in this trial has marginal relevance to these questions of construction. Two affidavits were sworn on behalf of the Citic parties.[10] As I explain below, much of that evidence concerns matters that arose subsequent to the entry into the relevant contracts by the parties.

The role of a proponent and the operation of the Environmental Protection Act

18 Part IV of the Environmental Protection Act requires that a significant proposal must be approved by the Environmental Protection Authority before any work implementing the proposal (other than minor work done with consent) is undertaken.[11] A 'significant proposal' is 'a proposal likely, if implemented, to have a significant effect on the environment'.[12]

19 An implementation agreement or decision is defined in s 3 as being an agreement or decision under s 45.

20 Section 45(5) provides that an approval for implementation of a proposal under pt IV of the Environmental Protection Act is given by a Ministerial Statement. Ministerial Statements specify the conditions and procedures that will apply to the implementation of the proposal.

21 By s 74A of the Environmental Protection Act, it is a defence to proceedings under Part V (which includes offences arising from environmental harm) if the person charged proves that the environmental harm occurred in the implementation of a proposal in accordance with an implementation agreement or decision.

22 Following the issue of a Ministerial Statement, s 47 requires the proponent to

(i) ensure that any implementation of the proposal to which the Ministerial Statement relates is carried out in accordance with the implementation conditions;[13] and

(ii) give the CEO reports and information sought from the proponent by the CEO concerning the implementation of the proposal to which the statement relates and compliance with the implementation conditions.[14]

23 If the proponent fails to comply with either of these requirements then the proponent commits an offence.

24 The Minister has various powers, including, in various circumstances, to serve on the proponent an order requiring the proponent 'to stop the implementation of that proposal for a period not exceeding 24 hours'.[15]

25 The Minister also has powers to serve on the proponent an order requiring the proponent to take steps to comply with a condition or procedure.[16]

26 All these matters, in [22] - [25] above, suggest a regime which assumes that the proponent of a proposal will have control over the implementation of the proposal.

27 Section 38(6a) provides that if the person nominated as having responsibility for a proposal ceases to have that responsibility, then that person is to give the Environmental Protection Authority written notice advising the name of the person to whom or to which responsibility for the proposal will pass or has passed.

Chronological summary of key events and documents

28 Mineralogy holds Mining Leases 08/123 to 08/125, Mining Leases 08/264 to 08/266, General Purpose Leases 08/52 to 08/54, and Miscellaneous Licence 08/20.[17] The land covered by the Mining Leases is located near Cape Preston, approximately 100 km south west of Karratha.

29 In October and November 2001, Mineralogy entered into subleases with some of its subsidiaries, including Korean Steel, Sino Iron (then called Bellswater Pty Ltd), and Balmoral Iron Pty Ltd.

30 On 5 December 2001, a State Agreement was entered into between the Western Australian State Government and a number of parties including Mineralogy, Sino Iron (then Bellswater Pty Ltd), and Korean Steel. The State Agreement was given legislative effect as sch 1 to the Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act 2002 (WA).

31 The recitals to the State Agreement provide as follows:

(a) [Mineralogy] is the holder of mining tenements in the Pilbara region;

(b) [Mineralogy] has granted various rights in relation to certain of the said mining tenements to the CoProponents as set out in the Subsidiary agreements (as hereinafter defined);

(c) [Mineralogy] by itself or in conjunction with one or more of the CoProponents wishes to develop projects incorporating

(i) the mining and concentration of iron ore in Area A (as hereinafter defined);

(ii) the processing of that iron ore predominantly as magnetite in Area A or elsewhere in the Pilbara region principally for the production and sale of high grade pellets, direct reduced iron and/or hot briquetted iron or steel;

(iii) the transport of magnetite concentrates and processed iron ore within the Pilbara region;

(iv) the establishment of new port facilities in the Pilbara region; and

(v) the shipping of processed iron ore through such port facilities.

(d) The State, for the purpose of promoting employment opportunity and industrial development in Western Australia, has agreed to assist the establishment of the proposed projects upon and subject to the terms of this Agreement.

32 On 20 October 2003, Ministerial Statement 635 was published.[18] The Ministerial Statement was subsequently amended four times,[19] and its conditions were amended by Ministerial Statement 822 on 23 December 2009.[20]

33 The Ministerial Statement granted an approval to Mineralogy, as proponent, under the Environmental Protection Act. The approval was subject to conditions. It was an approval for a proposal as follows:

The construction and operation of a 44.8 million tonnes per annum iron ore mine, power station, desalination plant, processing plant and accommodation and port facilities in the Cape Preston area, as documented in schedule 1 of this statement. The processing plant will produce pelletised, direct-reduced iron and hotbriquetted iron.

34 Table 1 of Ministerial Statement 635 provided that the concentrator rate for the processing plant was approximately 13.4 million tonnes per annum (13.4 mtpa). The Ministerial Statement is considered in detail later in these reasons.

35 On 8 September 2004, following an application by Mineralogy, the Minister approved a change to Ministerial Statement 635. The change increased the concentrator rate limit from 13.4 mtpa to 19.6 mtpa.

36 On 12 March 2005, Mineralogy and other parties, including Sino Iron, entered a Joint Development Agreement.

37 In the Joint Development Agreement, Mineralogy and Sino Iron agreed that they would comply strictly with all legal requirements relating to protection of the environment including the terms and conditions of the Ministerial Statements.[21]

38 The Joint Development Agreement provided for all government approvals to be in Mineralogy's name (cl 9.1(b)) and for the project manager to be Mineralogy Mine Management (cl 27.1).

39 The Joint Development Agreement was suspended from the date of the Fortescue Coordination Deed (cl 2.1 of the Fortescue Coordination Deed) on 22 October 2008.

40 On 21 March 2006, Mineralogy entered into Mining Right and Site Lease Agreements (MRSLAs). The MRSLAs were with companies that were, at that time, subsidiaries of Mineralogy: Sino Iron,[22] Korean Steel,[23] and Balmoral Iron.[24] In the MRSLAs, Mineralogy granted the relevant parties a Site Lease and a right to mine Magnetite Ore from a designated mine area within the mining leases.[25]

41 In the Sino Iron MRSLA, Mineralogy agreed to grant to Sino Iron an exclusive right for a period to use and occupy the Mine Area within the Sino Iron Project (cl 3.2(a)). Mineralogy also granted Sino Iron a right (in cl 4.2(b)) 'to process Magnetite Ore taken by Sino from the Mine Area through Sino's Processing Facilities for the production of Iron Ore Concentrates, Pellets and HBI in accordance with the terms of this agreement'.

42 Clause 3.2(d) the Sino Iron MRSLA provides for Sino Iron:

to take a quantity of all Magnetite Ore mined from the Mine Area, up to the Annual Extraction Limit in any Operating Year, and up to the Total Extraction Limit over the Term of Sino's Mining Right, for processing through Sino's Processing Facilities into Products which shall never exceed a total of 12 million tonnes a year as provided in this Agreement.

43 Clause 1.1 defines 'Products' as 'up to a combined aggregate total of 12,000,000 (twelve million) tonnes per year [12 mtpa] of a combination of Iron Ore Concentrate, and/or Pellets and/or HBI for sale or export in such ratio as Sino may decide from time to time and no more'. The same restriction is contained in the schedule, cl 3.

44 Mineralogy entered MRSLAs on the same day with Korean Steel,[26] and Balmoral Iron.[27] The Korean Steel MRSLA and the Balmoral Iron MRSLA contained identical provisions in cl 1.1, cl 3.2(d) and schedule cl 3. Those provisions also restricted Korean Steel and Balmoral Iron to recovery of 12 mtpa of Products.

45 On 31 March 2006, a number of companies entered into the Sino Iron Takeover Agreement. This agreement effectively provided for Citic Pacific Ltd, through an Australian vehicle company, to takeover Sino Iron from Mineralogy.[28]

46 The companies which were parties to the Sino Iron Takeover Agreement were Citic Pacific Ltd, Mineralogy, Sino Iron, and the acquisition vehicle company. The purchase price was $215 million.

47 The Sino Iron Takeover Agreement contains a provision (cl 7.3(g)) which required Mineralogy, at the request of Sino Iron, with effect from Completion, to

assign or otherwise make available to [Sino Iron] (at the election of [Mineralogy]) any benefits available to [Mineralogy] under environmental approvals relating to production of 12,000,000 (twelve million) tonnes of concentrate per annum, 7,000,000 (seven million) tonnes of pellets per annum and 1.7 million tonnes of HBI per annum.

48 Also on 31 March 2006, a number of companies entered into the Balmoral Iron Takeover Agreement by which Citic Pacific would acquire Balmoral Iron from Mineralogy.[29]

49 The companies which were parties to the Balmoral Iron Takeover Agreement were Mineralogy, Mr Palmer, Balmoral Iron, Citic Pacific Ltd, and an acquisition vehicle company. The acquisition price was $200 million.

50 The parties later (on 26 October 2007) signed an agreement terminating the Balmoral Iron Takeover Agreement and agreed instead to enter an agreement to acquire Korean Steel.[30]

51 On 6 July 2006, Citic Pacific Ltd became the ultimate holding company of Sino Iron following an acquisition of shares under the Sino Iron Takeover Agreement.[31]

52 In February 2007, Sino Iron and Korean Steel appointed a manager, CPMM, to manage the day to day operations of the Sino Iron project.

53 On 1 November 2007, various parties entered the Korean Steel Takeover Agreement which provided for the takeover of Korean Steel by Citic Pacific Ltd through an Australian vehicle company.[32]

54 The purchase price under the Korean Steel Takeover Agreement was US $200 million. The parties that entered that agreement included Citic Pacific Ltd, Mineralogy, Korean Steel, and Sino Iron.

55 Schedule 8, cl 13.1(a) of the Korean Steel Takeover Agreement, provided that[33]

Mineralogy acknowledges that it will transfer to Sino Iron the Environmental Approval in accordance with the Sino Iron Takeover Agreement as those benefits may apply to the Project.

56 On 8 January 2008, Mineralogy and Sino Iron entered a deed of amendment which amended the MRSLA to which Sino Iron was a party.[34]

(i) Citic Pacific Ltd became the ultimate holding company of Korean Steel.[35] This had the effect that Citic Pacific could produce up to 24 mtpa of Product.

(ii) Mineralogy and Korean Steel entered a deed of amendment to amend the MRSLA to which Korean Steel was a party.[36]

(iii) Mineralogy, Mr Palmer, and Citic Pacific Ltd entered the China Project Option Agreement.[37]

(iv) Mineralogy entered an agreement called the Fortescue Coordination Deed, with Citic Pacific Ltd, Sino Iron and Korean Steel. The Fortescue Coordination Deed had the effect of increasing Citic Pacific Ltd's total production limit to 27.6 mtpa. Clause 20.1(a) of the Fortescue Coordination Deed is considered in detail below. It provides that Mineralogy acknowledges that it will transfer to Sino Iron and Korean Steel the Environmental Approval in accordance with the Sino Iron Takeover Agreement and the Korean Takeover Agreement, respectively, as those benefits may apply to the Project.

58 On 13 February 2009 and 18 March 2009, the Environmental Protection Authority, acting for the Minister for the Environment under s 45C of the Environmental Protection Act, wrote to Mineralogy and approved further changes to Ministerial Statement 635.[38]

59 On 3 July 2009, the Environmental Protection Authority, acting for the Minister for the Environment, wrote to Mineralogy and approved further changes to Ministerial Statement 635. The further changes allowed Mineralogy a concentrator rate of 27.6 mtpa.[39]

60 On 23 December 2009, the Minister for the Environment issued Ministerial Statement 822.[40] Ministerial Statement 822 amended various conditions with which Mineralogy (as proponent) was required to comply by Ministerial Statement 635.

61 From 23 October 2012 until 14 May 2013, on at least six occasions either the Citic parties, their representative, or their lawyers wrote to Mineralogy to request a transfer of the EPA approval.[41]

62 Mineralogy has not taken any steps to transfer to the Citic Parties the Environmental Approval (ie the status of proponent under the Ministerial Statements).

63 Ministerial Statement 635, as amended by Ministerial Statement 822, was made under the Environmental Protection Act 1986 (WA).[42] It was published on 20 October 2003.

64 The proponent of Ministerial Statement 635 was, and is, Mineralogy.

65 Clause 1.1 of Ministerial Statement 635 provides that

The proponent shall implement the proposal as documented in schedule 1 of this statement subject to the conditions of this statement.

66 In Schedule 1 to the Ministerial Statement, the proposal is described as follows.

The proposal is to establish and operate an iron ore mine, process plant (pelletising, direct reduced iron and hot-briquetted iron), accommodation and port facility in the Cape Preston area. (Figure 1 shows the project site).

The project has the following main components:

• conventional open pit mining of the George Palmer ore body (Figure 2);
• stockpiling, waste and tailings storage facilities at the mine site;
• process plant for pelletising, and the production of directreduced iron and hotbriquetted iron;
• gasfired power station;
• 25 kilometre long infrastructure corridor (conveyor or haul road) from the mine and process plant site to Cape Preston;
• bridging structures or rock causeway from Cape Preston to Preston Island; and
• stockpiling, seawater desalination plant and port facilities at Cape Preston and off Preston Island.

Dewatering will be required during mining as there will be mining below the water table.

67 Table 1 (prior to amendment) described the key proposal characteristics which included the following characteristics of the process plant.

Concentrator rate: approximately 13.4 million tonnes per annum

Pellet production: approximately 13.8 million tonnes per annum

Direct reduced/hot briquetted iron: approximately 4.7 million tonnes per annum

68 Ministerial Statement 635 contains a number of conditions upon the approval of the proposal. Those conditions include conditions relating to surface waters (cl 5), marine wastewater outfall (cl 8) and a port environmental management plan (cl 9). Further, sch 2 to Ministerial Statement 635 includes a number of environmental management obligations such as a plantation crop of 10,000 trees per annum to mitigate the effects of greenhouse gas emissions (cl 14).

69 Clauses 1-2 and 1-3 of the Ministerial Statement deal with changes to the proposal.

70 Clause 1-2 provides that if the proponent seeks to change any aspect of the proposal in a way that the Minister for the Environment determines, on advice of the Environmental Protection Authority, is substantial, the proponent shall refer the matter to the Environmental Protection Authority.

71 Clause 1-3 provides that if the proponent seeks to change any aspect of the proposal in any way that the Minister for the Environment determines, on advice of the Environmental Protection Authority, is not substantial, the proponent may implement those changes upon receipt of written advice.

72 Clause 3 of the Ministerial Statement provides as follows.

3-1 The proponent for the time being nominated by the Minister for the Environment under section 38(6) or (7) of the Environmental Protection Act 1986 is responsible for the implementation of the proposal until such time as the Minister for the Environment has exercised the Minister's power under section 38(7) of the Act to revoke the nomination of that proponent and nominate another person as the proponent for the proposal.

3-2 If the proponent wishes to relinquish the nomination, the proponent shall apply for the transfer of proponent and provide a letter with a copy of this statement endorsed by the proposed replacement proponent that the proposal will be carried out in accordance with this statement. Contact details and appropriate documentation on the capability of the proposed replacement proponent to carry out the proposal shall also be provided.

3-3 The nominated proponent shall notify the Department of Environmental Protection of any change of contact name and address within 60 days of such change.

73 The Citic parties' primary case is simple. They point to Mineralogy's status as proponent under Ministerial Statement 635 (2003). They say that Mineralogy is required to apply for the transfer of the status of proponent to them due to Mineralogy's obligations under three subsequent project agreements.

74 The Citic parties say that Mineralogy's obligation arises from any or all of:

(ii) the Korean Steel Takeover Agreement (2007); and

The Citic parties' first submission: The Sino Iron Takeover Agreement (2006)

75 As to the Sino Iron Takeover Agreement, the Citic parties focus on cl 7.3(g):

[Mineralogy] must (at CITIC's request), with effect from Completion (subject only to receipt of any necessary government approvals), assign or otherwise make available to [Sino Iron] (at the election of [Mineralogy]) any benefits available to [Mineralogy] under environmental approvals relating to production of 12,000,000 (twelve million) tonnes of concentrate per annum, 7,000,000 (seven million) tonnes of pellets per annum and 1.7 million tonnes of HBI per annum, on the conditions that [Sino Iron]:

(i) complies with any conditions of those approvals (including relating to Product types and volumes) and indemnifies [Mineralogy] for any loss, damage, cost or charge as a result of a failure to do so, such indemnity to survive termination of this agreement for so long as [Sino Iron] carries on activities under such environmental approvals;

(ii) will give [Mineralogy] copies of any studies and environmental reports undertaken by [Sino Iron]; and

(iii) will forthwith commence development of the Project.

76 There are a number of components to cl 7.3(g). They are as follows.

(i) A mandatory obligation, with effect from Completion (subject to government approvals).

(ii) The nature of the mandatory obligation being to assign or otherwise make available any benefits to Sino Iron available to [Mineralogy] under environmental approvals.

(iii) A condition on the obligation that the benefits relate to production of 12,000,000 (twelve million) tonnes of concentrate per annum, 7,000,000 (seven million) tonnes of pellets per annum and 1.7 million tonnes of HBI per annum.

(iv) Mineralogy has an election concerning how to assign or make available those benefits.

77 Each of these matters will be dealt with separately below.

78 The effect of cl 7.3(g) involves a mandatory obligation on Mineralogy (ie 'Mineralogy must'). That mandatory obligation is subject to Sino Iron's request and the receipt of necessary government approvals.

79 The mandatory obligation is to assign or otherwise make available to Sino Iron any (ie all) benefits available to Mineralogy under environmental approvals, relating to the specified amounts of production.

80 Senior counsel for Mineralogy submitted that the benefit of Ministerial Statement 635 was the ability for Sino Iron to carry out the project.[43] In other words, his submission was that the benefit was the ability of Sino Iron to 'establish and operate an iron ore mine, process plant (pelletising, direct reduced iron and hot-briquetted iron), accommodation and port facility in the Cape Preston area'.

81 This submission is not correct. The Ministerial Statement does not confer any rights to engage in any particular activity. In Hohfeldian terms, the primary effect of the Ministerial Statement is to confer an 'freedom' from liability upon the proponent in relation to activities that would have a significant effect on the environment and which would otherwise render the proponent guilty of an offence. The Ministerial Statement does not give the proponent or any other party a right to do these things.

82 An example can be given to illustrate this point. Suppose a proponent of a Ministerial Statement lost the right to be present on the land which was the subject of the activities described in the Ministerial Statement. The proponent would still have the freedom if it implemented the proposal but it would have no right to do so if the person with the right to exclusive possession over the land did not allow it.

83 Senior counsel for Mineralogy then submitted that the benefit of the Ministerial Statement was the ability to do acts lawfully which would otherwise have been unlawful.[44] This is effectively a submission that the core benefit of the Ministerial Statement is the freedom it confers on the proponent. Senior counsel submitted, however, that Sino Iron obtained all of the benefit of the Ministerial Statement as soon as Sino Iron began to engage in acts which involved the implementation of the proposal.

85 First, if this were the only benefit of the Ministerial Statement with which cl 7.3(g) were concerned then cl 7.3(g) would be redundant. Mineralogy would not need to act to make this benefit available. The benefit would be available simply by virtue of Sino Iron acting to implement the Sino Iron Project, in accordance with its rights under pre-existing project agreements.

86 Senior counsel for Mineralogy initially submitted that the Citic parties, including Sino Iron, were acting as Mineralogy's agent or contractor in performing the mining activities.[45] If this were correct, and if it were necessary to make the freedom available to the Sino Iron (which I consider below) then the subsequent creation of an agency relationship could be an act by Mineralogy which conferred the benefit of the freedom upon the Citic parties. But it would, at the very least, be a very strange form of agency or contracting which involved the agent or contractor assuming full responsibility for the work, indemnifying the 'principal' for any liability, and, rather than receiving a commission, paying a royalty to the principal.

87 The position ultimately adopted in oral submissions by all parties was to assume that the Citic parties were acting on their own behalf in relation to the Sino Iron Project[46] and that it was merely the implementation of a proposal by any party, whether independent or as agent, confers the freedom from liability for committing an offence.[47] I discuss this assumption later in these reasons. It suffices to say here that if this is correct then no act creating an agency relationship would be needed for Sino Iron to take this benefit, and nothing would need to be done by Mineralogy. This makes plain the first problem with Mineralogy's submission. At the very least, it would be remarkable for the detailed, mandatory, obligation in cl 7.3(g), expressly requiring Mineralogy to elect to do something, to be construed in a manner that could never involve anything being done under that clause.

88 Secondly, another problem with the submission that Sino Iron obtained all of the benefit of the Ministerial Statement as soon as Sino Iron began to engage in acts which involved the implementation of the proposal is that this ignores other benefits conferred on Mineralogy by the Ministerial Statement.

89 Other benefits which are available to Mineralogy under the Ministerial Statement, through the recognition in that Ministerial Statement of Mineralogy's status as proponent, include the following.

(i) A power to obtain the approval from the Minister to change the proposal (in a manner that does not cause additional or different significant detrimental effect on the environment)[48] without a revised proposal being referred to the Environmental Protection Authority under this Part.[49]

(ii) An entitlement to notice in writing of any interim conditions and procedures that take effect in place of implementation conditions during consideration of a change to implementation conditions.[50]

(iii) An entitlement to notice in writing of various different types of minor changes to implementation conditions.[51]

90 The Citic parties also relied on evidence from Mr Munro, the manager of the compliance branch of the Office of the Environmental Protection Authority, for a further alleged benefit. This was that a work practice of the Office, not recorded in any policy document, is to deal only with the proponent of an approval and only to accept the submission of documents from the proponent of an approval.[52] But there was no evidence that these matters were known, or could reasonably have been known, to the parties at the time of their entry into the Sino Iron Takeover Deed.[53] That evidence cannot assist the construction of the Citic parties.

91 In summary, the mandatory obligation was to make available to Sino Iron any (ie all) benefits available to Mineralogy under environmental approvals relating to the specified amounts of production. That mandatory obligation includes ensuring that Sino Iron obtain the freedom from liability for an offence that is created by the Ministerial Statement for the proponent (although, as I explain below possibly also other parties implementing the proposal). If the mandatory obligation were limited to this, and if Mineralogy needed to create an agency relationship to extend this freedom to Sino Iron, then there was no evidence that Mineralogy created that relationship of agency. Further, the mandatory obligation was not limited to the benefit of the freedom. It extended to all the benefits created by the Ministerial Statement including the recognition in the Ministerial Statement of Mineralogy as proponent.

(iii) The production to which the environmental approvals must relate

92 A further requirement in cl 7.3(g) of the Sino Iron Takeover Agreement is that the benefits under environmental approvals must relate to a particular amount of production from the Sino Iron Project.

93 The Ministerial Statement envisaged that the processing plant could operate to produce the following quantities:

(i) Concentrate: approx 19.6 mtpa (amended in Sept 2004),

94 It was common ground that concentrate is used to produce pellets and HBI.[54] It was also common ground that the weight of pellets produced from concentrate will increase slightly due to the addition of an agglomerating agent, that is a glue type material.[55] This explains why the approximate weight for pellets (13.8 mtpa) exceeded the weight of concentrate (13.4 mtpa) before the concentrate weight was amended to 19.6 mtpa in September 2004.

95 In contrast with these amounts, cl 7.3(g) provides that the benefits of production that must be made available to Sino Iron under the environmental approvals relate to the following quantities:

(i) Concentrate: approximately 12 mtpa (compared with 19.6 mtpa),

(ii) Pellets: approximately 7 mtpa (compared with 13.8 mtpa),

(iii) HBI: approximately 1.7 mtpa (compare with 4.7 mtpa).

96 These restricted quantities reflect Sino Iron's total extraction limit of 12 mtpa of Product. For instance, assuming that Ministerial Statement 635 gave Sino Iron the benefit of the freedom from liability for an offence that would otherwise be committed when implementing the proposal, the quantities above mean that Sino Iron could choose to extract 12 mtpa of concentrate, which it could sell or export as concentrate, or it could use part of the concentrate to produce up to 7 mtpa of pellets, and up to 1.7 mtpa of HBI. There was no evidence at trial concerning the maximum weight of pellets and HBI that could be produced from 12 mtpa of concentrate.

97 The reason for the 'related to' restriction imposed on Sino Iron which apparently confined the benefit of the environmental approvals to 'relate to' 12 mtpa of concentrate, is readily apparent from the associated contracts.

98 On the same date as the Sino Iron Takeover Agreement, Mineralogy entered the Balmoral Iron Takeover Agreement.[56] Like Sino Iron, Balmoral Iron was entitled under the Balmoral MRSLA to take up to 12 mtpa of concentrate.[57] However, the Balmoral Iron Takeover Agreement limited the benefits of the environmental approval to which Balmoral Iron was entitled to 'relate to' 7 mtpa of concentrate.[58] The reason for this is plain. The total concentrate to which the Ministerial Statement related was approximately 19.6 mtpa. Sino Iron was to have the benefit of the environmental approval in relation to 12 mtpa. This left approximately 7 mtpa for Balmoral Iron.

99 The combination of the MRSLA entitlements of Balmoral Iron and Sino Iron (12 mtpa and 7 mtpa) was almost the entire amount of concentrate (19.6 mtpa) permitted under the Ministerial Statement 635. Senior counsel for Mineralogy conceded that in light of the approximate qualification to the amounts in the Ministerial Statement, there was no remaining capacity for any third party to produce concentrate. Hence, as senior counsel for Mineralogy conceded,[59] the concentrate is really the bottom line, or fundamental concern, for the production of products.

100 This concession was properly made. In the language of senior counsel for the Citic parties, the conclusion that the amount of concentrate is the bottom line is further supported by both logic and mathematics.[60] The provision in the initial Ministerial Statement 635 (as amended in September 2004) for the rate of mining (67.4 mtpa),[61] less the permitted waste to be produced by the plant's processing (47.8 mtpa), left 19.6 mtpa, which was precisely the amount of concentrate permitted. The provided amounts for pellet production and HBI objectively must have been intended under the Ministerial Statement to be the amounts that were derived from the production of concentrate up to the limit permitted by the plant.

101 However, Mineralogy submitted that there could still be some remaining capacity under the Ministerial Statement if a third party brought in concentrate from a different part of Area A under Mineralogy's State Agreement (and presumably under a new Ministerial Statement). Mineralogy submitted that a third party might use that extra concentrate in the processing plant to take the benefit of the remaining permitted amount of pellets and HBI.

102 I consider later in these reasons the lack of any evidence supporting the possibility of this hypothetical scenario suggested by Mineralogy and the substantial obstacles, if not impossibility, of it. It suffices for current purposes to emphasise the speculative nature of this submission assessed against the objective construction of cl 7.3(g). Objectively construed, the reference in the Sino Iron Takeover Agreement to the benefits of the environmental approval being related to particular quantities of product does not disclose any intent for Mineralogy to retain any benefits of the Ministerial Statement, other than those benefits intended to be assigned or made available to Sino Iron and Balmoral Steel and which effectively exhaust the total amount of concentrate permitted by the Ministerial Statement.

103 The total amount of concentrate permitted by the Ministerial Statement was effectively exhausted by the entitlement of Sino Iron and Balmoral Steel to the benefit of the environmental approval of 19 mtpa of the approximate 19.6 mtpa of concentrate. from which the pellets and HBI would be produced. This exhausted any real prospect of a surplus benefit of production from the plant. It is a purely speculative suggestion that

(i) some surplus might have been intended to be reserved to Mineralogy,

(ii) for the benefit of some future third party mining for concentrate with the benefit of (presumably) a new Ministerial Statement,

(iii) in a different part of the mining area covered by Ministerial Statement 635 from that comprised in the Sino Iron and Balmoral Iron MRSLAs (assuming such an area exists), and

(iv) which concentrate that third party would then bring to the plant for processing.

104 My conclusion, therefore, is that the Sino Iron Takeover Agreement does not manifest an intention to reserve benefits of environmental approvals to Mineralogy for limited amounts of pellets and HBI. Rather, the assumption was that the product limits in the Sino Iron Takeover Agreement and Balmoral Iron Takeover Agreement would exhaust the capacity of the processing plant permitted in Ministerial Statement 635.

105 This conclusion is also supported by cl 5.4 of the Sino Iron Takeover Agreement which provides as follows:

At any time, subject to reasonable notice being given, if requested to do so by [Citic Pacific Ltd], the Purchaser or [Sino Iron], [Mineralogy] must, at [Citic Pacific Ltd's] cost, reasonably assist [Sino Iron] to:

(a) seek all necessary government Authorisations to increase the production limits which apply to [Sino Iron] to permit the production and export of 12,000,000 (twelve million) tonnes per annum of saleable Product being Pellets, HBI and Concentrate (in whatever proportions the Company may determine at any time and from time to time); and

(b) take such further steps as may be reasonably necessary to allow [Sino Iron] to seek such further Authorisations as may be required to fully implement the Project but on the basis that the Company meet all costs incurred by them in doing so,

and take such further reasonable action (before or after Completion) as is reasonably requested by [Citic Pacific Ltd] in writing, to assist and facilitate in [Sino Iron] obtaining any such Authorisations or amendments not obtained on or before Completion so that they may be obtained as soon as reasonably possible after Completion.

106 In other words, if Sino Iron wanted to use its production quota of 12 mtpa under the MRSLA in a manner not permitted by a government authorisation (including in the production of pellets or HBI) then Mineralogy would reasonably assist Sino Iron to obtain government authorisations to do so. As I explain below, a significant increase in the production quota of Sino Iron, and the Citic parties, was also later contemplated and a possible increase is a matter about which a reasonable person in the parties' position would have been aware at the time of the Sino Iron Takeover Agreement.

107 As I have explained, the obligation to make the relevant benefits available to Sino Iron is mandatory. But Mineralogy had an election concerning how it would assign or 'otherwise make available' the benefits under environmental approvals.

108 The simplest way to assign or otherwise make available the benefits to Mineralogy under the environmental approval (Ministerial Statement 635) might have been for Mineralogy to apply to the Minister for transfer of the status of proponent (ie subject to 'receipt of any necessary government approvals'). Of course, Mineralogy might also have then required Sino Iron also to make available the benefits of the approval to other companies such as Balmoral Iron to the extent that any production in the area of the Ministerial Statement went beyond the 12 mtpa entitlement of Sino Iron.

109 However, I accept the submission of senior counsel for Mineralogy that cl 7.3(g) of the Sino Iron Takeover Agreement did not require Mineralogy to apply for a transfer of the status of proponent under Ministerial Statement 635. [62] This was not a requirement for two reasons.

110 First, the language of cl 7.3(g) is not language of 'transfer'. As senior counsel for Mineralogy submitted, one clear reason why Mineralogy could not be required by cl 7.3(g) to apply for a transfer of the status of proponent is because the clause, in a document drafted by lawyers and bearing the footer 'Mineralogy Pty Ltd Legal Department', carefully avoided the word 'transfer'.[63]

111 The language of cl 7.3(g) contrasts with the use of 'transfer' in the Schedule to the Sino Iron Takeover Agreement. The Schedule refers back to the obligation on Mineralogy in cl 5.4 to seek all necessary government Authorisations (defined in cl 19.1 as including approvals) to increase the production limits which apply to Sino Iron to permit the production and export of 12 mtpa of product. The Schedule then provides that Mineralogy 'is not aware of anything which might adversely affect the continuation of the Authorisations or transfers of the Authorisations which are required under clause 5.4' (emphasis added).

112 Secondly, it is unlikely that the parties objectively intended that an application for transfer to Sino Iron of the status of proponent was the only way that the benefit of Ministerial Statement 635 could be made available to Sino Iron. This is because the same provision existed in cl 7.3(d) of the Balmoral Iron Takeover Agreement.

113 If the intention had been to transfer the status of proponent jointly to Sino Iron and Balmoral Iron (subject to the different restrictions concerning their respective production) then the provisions would have made reference to their status as joint proponents. Instead, the provisions concerned obligations owed by Mineralogy to each of them individually.

114 In Mineralogy's written submissions,[64] it was asserted that a transfer to each of Sino Iron and Balmoral Iron individually (rather than jointly) was nonsensical. This may be correct, but in any event the short point is that the manifest intention was not to require a transfer. In other words, the election (identically worded) in the simultaneous Sino Iron Takeover Agreement, and Balmoral Iron Takeover Agreement, could have been performed in a number of other ways apart from transferring the status of proponent to Sino Iron.

115 One way in which the benefit might have been made available could have been by an equitable assignment. By definition, an equitable assignment does not involve transfer of legal rights. It would mean that Mineralogy, as assignor, would hold the benefit of Ministerial Statement 635, including the status as proponent in that Ministerial Statement, for Sino Iron and Balmoral Iron respectively with the usual obligation as assignor to act in the best interests of the assignee.

116 Mr Munro explained another way in which the benefit of Ministerial Statement 635, including the benefit of the status as proponent in that Ministerial Statement, could be made available. Mr Munro said that the Citic parties could be endorsed by Mineralogy to deal with the Office of the Environmental Protection Authority (effectively to act as the proponent).[65]

117 Senior counsel for Mineralogy also accepted a third way in which, even on Mineralogy's case, the benefit might have been provided under Ministerial Statement 635. Mineralogy could have applied for an amendment to Ministerial Statement 635 so that the proposal characteristics were reduced to allow production of only 12 mtpa of concentrate, 7 mtpa of pellets, and 1.7 mtpa of HBI, and then applied for another Ministerial Statement for the balance.[66] Even on Mineralogy's construction there would then be no obstacles to the transfer of the status of proponent to Sino Iron, in relation to the reduced Ministerial Statement. Senior counsel suggested that this process might involve delay or expense. But there was no evidence of the delay or expense that would be incurred by such a purely formal amendment and reissue of two Ministerial Statements.

118 The effect of this construction is that there was no obligation upon Mineralogy to procure a transfer to the Citic parties of the Environmental Approval (ie the status of proponent under Ministerial Statement 635). But Mineralogy was obliged to make available to Sino Iron the benefit of the Ministerial Statement, including the status of proponent. The manner in which this benefit could be made available was at the election of Mineralogy.

119 In contrast with this construction, Mineralogy's construction of cl 7.3(g) should be rejected.

120 To reiterate, Mineralogy said that upon completion of the Sino Iron Takeover Agreement on 6 July 2006,[67] the only benefit of the Ministerial Statement with which the Sino Iron Takeover Agreement was concerned was the freedom conferred upon a person implementing the proposal. Mineralogy effectively said that it elected to make that benefit of the Environmental Approval available to Sino Iron by doing nothing more than allowing (as it was contractually required to do) Sino Iron to conduct mining activities.[68]

121 This construction by Mineralogy of cl 7.3(g) of the Sino Iron Takeover Agreement renders that clause redundant. It makes a nonsense of the concept of election. And it involves reading down the meaning of 'any benefits available to [Mineralogy] under environmental approvals' without any basis to do so. Mineralogy's submission should not be accepted.

The Citic parties' second submission: the Korean Steel Takeover Agreement (2007) and the Fortescue Coordination Deed (2008)

122 The Citic parties relied in the alternative upon the Korean Steel Takeover Agreement and the Fortescue Coordination Deed. Since I do not accept that the Sino Iron Takeover Agreement created an obligation to transfer the benefit of Ministerial Statement 635, it is necessary to consider these additional two agreements.

123 The Citic parties said that these two agreements created an obligation for Mineralogy to transfer to them the status of proponent under Ministerial Statement 635. Alternatively, the Citic parties said that these two agreements amounted to an election under the Sino Iron Takeover Agreement to make this transfer.

124 Clause 4A.1(a) of the Korean Steel Takeover Agreement provided that

From the date that the amount referred to in clause 1.3(a)(ii) is paid unless and until Completion occurs Mineralogy, Sino Iron and CITIC are subject to the obligations, and entitled to the benefit of the rights, imposed on, or granted to, them, as the case may be, as set out in Schedule 8.

125 Clause 4A.1(b) of the Korean Steel Takeover Agreement provided that from Completion the rights and obligations set out in Schedule 8 cease to have any further effect, although Sino Iron can enforce rights it has in respect of any past breach or claim that has arisen in respect of the performance of the sch 8 rights and obligations.

126 Mineralogy submitted, without demur, that Completion of the Korean Steel Takeover Agreement occurred on 22 October 2008.[69]

127 On the same day, 22 October 2008, Mineralogy entered the Fortescue Coordination Deed with Citic Pacific Ltd, Sino Iron and Korean Steel. The definition of Completion Date in the Fortescue Coordination Deed, cl 1.1, is the date of completion of the Korean Steel Takeover Agreement.

128 Clause 4.2(a)(xii) of the Korean Steel Takeover Agreement provided that upon Completion, the original counterparts of the Fortescue Coordination Deed were to be executed by Mineralogy and delivered to the purchaser.

129 The effect of the matters are [124] - [128] is that the obligations in the Fortescue Coordination Deed involved a transition, seamless in time, directly from the obligations in sch 8 of the Korean Steel Takeover Agreement. The obligations in sch 8 of the Korean Steel Takeover Agreement arose upon payment of the amount due under that agreement by the Citic parties. Those obligations concluded, subject to 4A.1(b), upon Completion of the Korean Steel Takeover Agreement, which is when the obligations in the Fortescue Coordination Deed took effect.

130 The operation of the two agreements can be readily appreciated by consideration of key provisions upon which the Citic parties relied. The key provisions in each agreement are as follows.

131 The Korean Steel Takeover Agreement was entered on 1 November 2007. The Citic parties rely on an obligation upon Mineralogy in sch 8, cl 13.1 of that agreement as follows.[70]

(a) Mineralogy acknowledges that it will transfer to Sino Iron the Environmental Approval in accordance with the Sino Iron Takeover Agreement as those benefits may apply to the Project.

(b) In addition to the obligations referred to in paragraph (a), Mineralogy shall:

(i) grant to Sino Iron a licence to use all of the intellectual property rights in all studies, reports, and plans and the like prepared by or on behalf of Mineralogy in order to obtain the Environmental Approval or to carry out the Project, where those rights reside in Mineralogy;

(ii) if required before the transfer referred to in (a) above is given effect to, sign any document and provide any consent as reasonably necessary for the implementation of the Project or any necessary variation of the Project or the Environmental Approval; and

(iii) do all things at Sino Iron's cost reasonably necessary to assist Sino Iron to facilitate the carrying out of the Project.

(c) Sino Iron at its sole cost must obtain all necessary works approvals or licences required under the Environmental Approval to carry out the Project and shall comply with all Environmental Management Plans, offsets or conditions in respect of the Environmental Approval and Project.

(d) Sino Iron must reimburse Mineralogy any reasonable costs incurred by it in complying with its obligations under paragraphs (a) (c) inclusive.

(e) Sino Iron accepts full liability and will carry out all conditions in respect of the Environmental Approval.

132 Clause 20.1 of the Fortescue Coordination Agreement was set out in the introduction to these reasons. For convenience it is set out again below.

(a) Mineralogy acknowledges that it will transfer to Sino Iron and Korean the Environmental Approval in accordance with the Sino Iron Takeover Agreement and the Korean Takeover Agreement, respectively, as those benefits may apply to the Project.

(b) In addition to the obligations referred to in paragraph (a), Mineralogy shall:

(i) grant to Sino Iron and Korean a licence to use all of the intellectual property rights in all studies, reports, and plans and the like prepared by or on behalf of Mineralogy in order to obtain the Environmental Approval or to carry out the Project, where those rights reside in Mineralogy;

(ii) if required before the transfer referred to in (a) above is given effect to, sign any document and provide any consent as reasonably necessary for the implementation of the Project or any necessary variation of the Project or the Environmental Approval; and

(iii) do all things at Korean's and Sino Iron's cost reasonably necessary to assist Sino Iron and Korean, as the case may be, to facilitate the carrying out of the Project.

(c) Sino Iron and Korean at their sole costs must obtain all necessary works approvals or licences required under the Environmental Approval to carry out the Project and shall comply with all Environmental Management Plans, offsets or conditions in respect of the Environmental Approval and Project.

(d) Sino Iron or Korean, as the case may be, must reimburse Mineralogy any reasonable costs incurred by it in complying with its obligations under paragraphs (a) - (c) inclusive.

(e) Sino Iron and Korean accept full liability and will carry out all conditions in respect of the Environmental Approval.

133 Since the Fortescue Coordination Deed contains the obligations that take effect from completion of the Korean Steel Takeover Deed it is convenient to focus primarily upon the provisions of the Fortescue Coordination Deed in assessing the submissions by the Citic parties. However, the references in the Fortescue Coordination Deed to the Korean Steel Takeover Agreement mean that it is necessary to consider the terms of the Korean Steel Takeover Agreement to understand the meaning of the Fortescue Coordination Deed.

134 In broad summary, the two competing constructions of cl 20.1 of the Fortescue Coordination Deed were as follows.

135 The Citic parties said that cl 20.1 of the Fortescue Coordination Deed requires Mineralogy to transfer to Sino Iron the status of proponent under Ministerial Statement 635. They said that this is what the plain words say, and that this is what the purpose and context of the provision requires.

136 Mineralogy says that cl 20.1 does not require it to do anything. It says that the words 'transfer to' do not require a transfer and that cl 20.1 is a mere reiteration of cl 7.3(g) in the (very differently worded) Sino Iron Takeover Agreement.

137 For the following nine reasons, the Citic parties' submission should be accepted. Any one of these nine reasons would have been sufficient on its own to reject the submissions of Mineralogy. In combination, the nine reasons mean that the Citic parties' construction is irresistible.

Nine reasons why the Citic parties' construction of the Fortescue Coordination Deed is correct (1) The plain language of cl 20.1

138 The plain language of cl 20.1 of the Fortescue Coordination Deed supports the construction of the Citic parties that the provision involves an obligation to transfer the status of proponent. The plain language strongly militates against the construction proposed by Mineralogy.

139 Although the clause specifically refers to the Sino Iron Takeover Agreement there is a distinct change in language and a very particular focus upon a requirement for transfer which could only be a transfer of the status of proponent. In particular, the plain words of all of the matters below are inconsistent with Mineralogy's construction:

(i) cl 20.1(a) uses the word 'transfer' which had been avoided in cl 7.3(g) of the Sino Iron Takeover Agreement;

(ii) cl 20.1(b)(ii) speaks of matters required before the 'transfer' is given effect to;

(iii) cl 20.1(a) refers to a transfer of 'the Environmental Approval' rather than, as the Sino Iron Takeover Agreement had provided, merely making available the 'benefits available to Mineralogy under environmental approvals';

(iv) unlike the general reference to environmental approvals in the Sino Iron Takeover Agreement, the term 'Environmental Approval' is defined in cl 1.1 of the Fortescue Coordination Deed as 'an approval of a Mineralogy proposal in respect of certain Project activities by the relevant Minister which has been assessed under section 40(1)(b) of the Environmental Protection Act 1986 (Western Australia)';

(v) cl 20.1(b) and cl 20.1(d) both describe the 'obligations' of Mineralogy under cl 20.1(a); and

(vi) cl 20.1(a) refers to the obligation to transfer the Environmental Approval being owed to both Sino Iron and Korean Steel. Contrary to Mineralogy's submission this obligation cannot merely be descriptive of the matters in the Sino Iron Takeover Agreement and Korean Steel Takeover Agreement since neither of those two agreements mention any obligation to Korean Steel.

140 As I have said above at [110], senior counsel for Mineralogy accepted that the Sino Iron Takeover Agreement, cl 7.3(g), carefully avoided the use of the word 'transfer'. 'Transfer' had been used elsewhere in that agreement to describe a transfer of authorisations under cl 5.4.[71] Senior counsel for Mineralogy submitted, and I accept, that one clear reason why Mineralogy could not be required by cl 7.3(g) to apply for a transfer of the status of proponent is because the clause avoided the word 'transfer'.

141 The effect of this submission is that it is very difficult, perhaps impossible, to see how the use of 'transfer' in cl 20.1 of the Fortescue Coordination Deed, which cross-refers to the Sino Iron Takeover Agreement, can objectively be understood in a sense that specifically does not mean 'transfer'.

142 The deliberate use of 'transfer' in cl 20.1 becomes even clearer in cl 20.1(b)(ii). It would be nonsense to speak of matters required 'before the transfer referred to in (a) above is given effect to ...' if, as Mineralogy contends, the 'transfer referred to in (a)' were not a transfer or if it were a reference to some matter that had already taken effect.

(3) The choice of the person to whom the performance of the obligation was required

143 The construction advanced by the Citic parties has the advantage of promoting a consistency of language and of purpose for all three interrelated agreements in relation to the person to whom the obligation was required to be performed. Each of the three project agreements is rendered harmonious with the others: the Sino Iron Takeover Agreement, the Korean Steel Takeover Agreement, and the Fortescue Coordination Deed.

144 Under the Sino Iron Takeover Deed, the obligation upon Mineralogy was, at Mineralogy's election, to assign or otherwise make available to Sino Iron the benefits under environmental approvals related to Sino Iron's production. As I have explained, this did not require a transfer of the status of proponent.

145 But, after the Balmoral Iron Takeover Agreement was terminated, and after the parties entered into the Korean Steel Takeover Agreement, the nature of this obligation changed. The obligation was no longer one that was owed to the contract counterparty which was the subject of the takeover (Sino Iron in the Sino Iron Takeover Agreement, and Balmoral Iron in the Balmoral Iron Takeover Agreement). Instead, in the Korean Steel Takeover Agreement, Mineralogy acknowledged that the transfer would be made to Sino Iron. There was no corresponding obligation upon Mineralogy to make available to Korean Steel the benefit of the Environmental Approval.

146 There is an obvious reason why the Korean Steel Takeover Agreement only created an obligation in relation to Sino Iron and contained no corresponding obligation upon Mineralogy to make available to Korean Steel the benefit of the Environmental Approval. The reason is that after payment by the Citic parties of the sums due under the Korean Steel Takeover Agreement completion would not yet have occurred. Prior to completion, therefore, the obligation to transfer would be limited to Sino Iron.

147 In contrast, after completion of the Korean Steel Takeover Agreement the Fortescue Coordination Deed took effect. From that time, Citic Pacific Ltd would become the ultimate owner of Korean Steel. And, from that time, the obligation was to transfer to both Sino Iron and Korean Steel. The Fortescue Coordination Deed, which took effect immediately upon completion of the Korean Steel Takeover Agreement, thus altered the person to whom the obligation was owed when cl 20.1 of the Fortescue Coordination Deed provided for the obligation to transfer the Environmental Approval to both Sino Iron and Korean Steel.

148 For these reasons, the construction of the Citic parties is consistent with the description of the person to whom the obligation by Mineralogy must be performed as well as the changing nature of the obligation. The person to whom the obligation was required to be performed was (i) Sino Iron in the Sino Iron Takeover Agreement (with an election for Mineralogy to choose how the benefits would be provided), (ii) Sino Iron in the Korean Steel Takeover Agreement (with a requirement of transfer), and (iii) Sino Iron and Korean Steel in the Fortescue Coordination Deed (again with a requirement of transfer).

149 In contrast, Mineralogy's construction would mean that the changing nature of the obligations was meaningless. Mineralogy's submission also would mean that the reference in cl 20.1 to the obligation being owed to Korean Steel was a nonsense. Mineralogy's construction also would make no sense of why obligations only owed to Sino Iron are undertaken in the Korean Steel Takeover Agreement: indeed, senior counsel for Mineralogy said that this was just because 'for some reason' Korean Steel wanted these undertakings,[72] and that he could not explain why the Korean Steel Takeover Agreement named Sino Iron as the party to whom the duties must be performed, but not Korean Steel.[73]

150 Mineralogy's construction also could not explain why the description of those obligations changes to use the word 'transfer'. Nor could Mineralogy's construction explain why the obligation to transfer is extended to Korean Steel in the Fortescue Coordination Deed. On Mineralogy's construction, the reference to Korean Steel would be a nonsense. Mineralogy said that 'there [was] no agreement for Korean Steel to become proponent or have the benefits made available to it'.[74]

151 The changing nature of the person to whom the Environmental Approval (as defined) must be transferred, and the interlocking regime created by the three agreements, can only be understood if the submission of the Citic parties is accepted and the obligation to 'transfer' is understood as requiring a 'transfer'.

(4) The requirement for relevant approvals to be in the name of the Citic parties

152 The Joint Development Agreement (2005), to which Sino Iron was a party, cl 9.1 provided as follows:

(a) The commencement and performance of Mining Operations will be subject to the obtaining of all necessary Government Approvals.

(b) Unless otherwise agreed, Government Approvals will be applied for and obtained by the Manager in the name of Mineralogy. The Manager will keep the Mine Participants informed as to the progress of obtaining the necessary Government Approvals.

153 The Joint Development Agreement was in force while Sino Iron was a subsidiary of Mineralogy.

154 The Fortescue Coordination Deed, cl 2.1, suspended the operation of the Joint Development Agreement and changed the position in relation to government approvals. In relation to prospective approvals, all approvals were to be obtained in the name of Sino Iron and Korean Steel. Clause 3.3(a) of the Fortescue Coordination Deed provides:

Save for the Environmental Approval, Sino Iron and Korean are required to obtain all other Government Approvals in their own names which are required to implement the Project. Mineralogy will provide Sino Iron and Korean with such assistance as they reasonably require to obtain such approvals (at the cost of Sino Iron and Korean).

155 As to existing approvals generally, the Fortescue Coordination Deed generally requires the assignment of each part of each Government Approval which is necessary or desirable for carrying out the Sino Iron Project and, in the meantime, for Mineralogy to hold the benefit of that approval for the Citic parties. These requirements are in cl 5 of the Fortescue Coordination Deed:

For each part of each Government Approval which is held by Mineralogy but which is necessary or desirable for carrying out the Project, the following provisions will apply:

(a) Mineralogy, Sino Iron and Korean (in this clause a Relevant Mining Right Holder) will cooperate in an endeavour to have that part of the Government Approval assigned by Mineralogy to the Relevant Mining Right Holder.

(b) Unless and until the relevant part of the Government Approval has been formally assigned to the Relevant Mining Right Holder, Mineralogy will continue to hold the relevant part of the Government Approval, but will do so for the benefit and at the sole cost of the Relevant Mining Right Holder and exercise its rights under it in accordance with reasonable directions given by the Relevant Mining Right Holder provided they are in accordance with the provisions of the Project Agreements.

(c) Prior to and after the formal assignment of the relevant part of the Government Approval from Mineralogy to the Relevant Mining Right Holder, the Relevant Mining Right Holder will comply with the terms and conditions to which that part of the Government Approval and any related approvals is subject and will use its best endeavours to ensure that it does not do any act or thing that could place Mineralogy in breach of that part of the Government Approval or that could result in that part of the Government Approval being withdrawn or revoked.

(d) The assignment of a part of a Government Approval by Mineralogy to a party nominated by CITIC shall be deemed to be a valid assignment for no consideration for the purposes of this Deed.

156 In summary, the effect of these provisions is that, apart from Ministerial Statement 635, the Citic parties:

(i) are to obtain, in their name, all government approvals required to implement the Sino Iron Project; and

(ii) are to have assigned to the party nominated by them each part of each Government Approval which is held by Mineralogy and which is necessary or desirable for carrying out the Project.

157 Clause 20.1 of the Fortescue Coordination Deed thus concerns a 'transfer' to Sino Iron and Korean Steel of the only remaining government approval. All other approvals are relevantly to be obtained by, or transferred to, Sino Iron and Korean Steel. Consistently with the treatment of other approvals, it is very difficult to construe cl 20.1 as involving anything other than a requirement of transfer.

(5) The uncertainty concerning the protection in implementing a proposal

158 The context of cl 20.1 of the Fortescue Coordination Deed also reveals a legal imperative for Ministerial Statement 635 to be transferred to Sino Iron and Korean Steel. That legal imperative is the need for those Citic parties to obtain the benefit of the defence under s 74A which confers freedom from liability for contravention of the Environmental Protection Act.

159 Despite the concerns that I raised in oral argument, all the parties assumed that Sino Iron and Korean Steel had the benefit of a s 74A defence to any prosecution. It is not necessary to express any concluded view on whether this assumption of the parties is correct. It may be correct. But no reasonable person, legally advised, in the position of the parties at the time of the Fortescue Coordination Deed would have suggested that this point was beyond doubt.

160 In the context of a multi-billion dollar project for which the Citic parties had undertaken sole responsibility, any doubt about this assumption would be a very powerful reason to construe the word 'transfer' as meaning 'transfer'. The greater the legal doubt that a reasonable person in the parties' position would have at the time of entry into the Fortescue Coordination Deed, the more likely that the word 'transfer' must be construed to mean what it says.

161 The doubt arises from the terms of the Ministerial Statement that 'the proposal referred to above may be implemented by the proponent subject to the following conditions and procedures' (emphasis added). As I explain below, it became common ground during oral argument that the Citic parties are not the agent or contractor for Mineralogy in implementing the proposal.

162 Section 74A of the Environmental Protection Act provides as follows:

It is a defence to proceedings under this Part for causing pollution, in respect of an emission, or for causing serious environmental harm or material environmental harm, or for discharging or abandoning waste in water to which the public has access if the person charged with that offence proves that the pollution, emission, environmental harm, discharge or abandonment occurred -

(a) in the implementation of a proposal in accordance with an implementation agreement or decision ...

163 'Implementation agreement or decision' is defined in s 3 in terms that would include Ministerial Statement 635. It is defined as an agreement or decision under s 45 (or under s 45 as applied by s 46(8)) as to whether or not a proposal to which a report published under s 44(3) relates may be implemented and, if that proposal may be implemented, as to what conditions and procedures, if any, that implementation is subject.

164 Senior counsel for Mineralogy submitted that s 74A does not refer to the person who can implement the proposal.[75] His submission was that s 74A provided a defence for the implementation of the proposal by the Citic parties as compared with, for example, a trespasser, whose actions would not involve implementation of the proposal.

165 The difficulty with this submission is that it does not address how the Citic parties would be acting 'in the implementation of a proposal' when Ministerial Statement 635 requires that the proposal 'may be implemented by the proponent subject to the following conditions and procedures'.

166 The possibility that the protection of s 74A might be confined to the proponent or its agents is consistent with s 38(6a) of the Environmental Protection Act. That sub-section requires a notice to be given to the Environmental Protection Authority by the person nominated by the Minister as responsible for a proposal (ie the proponent). The proponent must give a notice if the person nominated by the Minister ceases to have responsibility for a proposal. The proponent must provide the name to be given of the person to whom the responsibility will pass. In other words, if Mineralogy, which is formally nominated as responsible by the Minister, ceases to be responsible in fact then the Environmental Protection Authority must be notified.

167 In the course of oral argument, senior counsel for Mineralogy accepted that if the Citic parties were not acting as Mineralogy's agent then they might be in breach of the Environmental Protection Act.[76] His initial submission was that they were acting as Mineralogy's agent. This submission is consistent with Mineralogy's failure to have notified the Environmental Protection Authority that Sino Iron and Korean Steel are responsible for the proposal. One might otherwise have expected that the Environmental Protection Authority would have been notified after cl 2.4 of the Fortescue Coordination Deed provided that unless the Joint Development Agreement is reinstated, Citic or its nominee will be solely responsible for the planning and conduct of the Mining Operations (broadly defined) by each of the Mining Right Holders.

168 The submission that the Citic parties were (and are) acting as the agents for Mineralogy faces the obstacles that it was the Citic parties who had (and have) sole responsibility for the project. The agency submission also encounters the obstacle that the Citic parties have a duty to pay royalties to their principal rather than a right to be paid a commission as agents.[77] Senior counsel initially submitted that without the benefit of agency, the Citic parties 'may well have been' committing offences under the Environmental Protection Act by acting without the benefit of the approval.[78] At the conclusion of the first day of trial, I indicated that I would like to hear further submissions to support this argument of agency, including by reference to any document that established the alleged agency relationship.

169 On the second day of trial, senior counsel conceded that the relationship between the parties was not one of agency.[79] This therefore leaves open an extremely serious possibility. If Mineralogy were not required to transfer the status of proponent to the Citic parties then the Citic parties would be performing a multibillion dollar project without the benefit of the defence in s 74A of the Environmental Protection Act, and potentially liable for offences under that Act.

170 Even the slight possibility of this extraordinary consequence would require a close scrutiny of cl 20.1 before it could be concluded that the parties did not objectively intend that the status of proponent should be transferred to Sino Iron and Korean Steel.

(6) The anticipated increase in production rights of the Citic parties

171 Mineralogy's acknowledgement of the transfer in the Korean Steel Takeover Agreement and the Fortescue Coordination Deed was qualified by the statement that the transfer was (i) in accordance with the Sino Iron Takeover Agreement and the Korean Steel Takeover Agreement, and (ii) 'as those benefits may apply to the Project'.

172 I deal with point (i) below at [227] - [234] in relation to the Citic parties' submissions about election. The only sensible meaning of (i) is that it is a reference to an election by Mineralogy under cl 7.3(g) of the Sino Iron Takeover Agreement.

173 There is an important reason why the words in (ii) ('as those benefits may apply to the Project') support the construction of the Citic parties that cl 20.1 imposes an independent obligation to transfer, and why the words militate against Mineralogy's case that cl 20.1 merely reiterates the election in cl 7.3(g) of the Sino Iron Takeover Agreement that Mineralogy said had already taken place.

174 The plain meaning of the words ('as those benefits may apply to the Project') is that Sino Iron and Korean Steel are entitled only to the benefit of the Ministerial Statement as it may apply to the Sino Iron Project. In particular, any benefits of the Ministerial Statement that go beyond the rights of the Citic parties under the Sino Iron Project would not expand those rights. Rather than specify the limits in the respective project agreements to which the Citic parties were subject, this phrase in both the Korean Steel Takeover Agreement and the Fortescue Coordination Deed merely constrained the Citic parties to their rights under the Sino Iron Project.

175 In this respect, the words concerning the benefit contrast with the words of the Sino Iron Takeover Deed. It will be recalled that in the Sino Iron Takeover Deed the benefits ('under environmental approvals' generally) had been confined to those relating to production of 12 mtpa of concentrate, 7 mtpa of pellets and 1.7 mtpa of HBI. But, in the Fortescue Coordination Deed the restriction is only 'as those benefits may apply to the Project'. Linguistically and functionally, the benefits described must be the benefits of the transfer of the Environmental Approval to Sino Iron and Korean Steel under the Fortescue Coordination Deed; indeed the Sino Iron Takeover Deed and Korean Steel Takeover Deed conferred no benefits at all on Korean Steel in relation to the Environmental Approval.

176 There are two apparent reasons for the removal of the restriction contained in the Sino Iron Takeover Agreement limiting the benefits to production of 12 mtpa of concentrate etc.

177 The first reason is that the Balmoral Iron Takeover Agreement had been terminated. So there was no need to restrict Sino Iron to 12 mtpa of the 19.6 mtpa of concentrate permitted in Ministerial Statement 635 in order to allow the remaining 7 mtpa of concentrate to be allocated to Balmoral Iron. Instead, the Fortescue Coordination Deed permitted the entire 19.6 mtpa to be allocated between Sino Iron and Korean Steel as they chose.

178 The second reason is that the Fortescue Coordination Deed increased the combined total production limit for Sino Iron and Korean Steel to 27.6 mtpa.

179 Clause 26.1 of the Fortescue Coordination Deed provides that

If CITIC or one of its subsidiaries acquires Korean, and Sino Iron and Korean reach full capacity of 24 million tonnes per annum of Product (as defined in the Korean Mining Right Agreement and the Sino Mining Agreement), then Mineralogy will allow Sino Iron or Korean to increase production quantity by up to 15% above the yearly production limits each year set out in the Korean Mining Right Agreement and the Sino Iron Mining Right Agreement subject to complying with the Sino Iron Mining Right Agreement and the Korean Mining Right Agreement and all the requirements of the Western Australian Government.

180 Further, as senior counsel for Mineralogy conceded, it was in the contemplation of the parties at the time of the Fortescue Coordination Deed that Sino Iron and Korean Steel would exercise an option to increase their rights to production of concentrate to 72 mtpa.[80] That option was granted under the China Project Option Agreement which was entered on the same day as the Fortescue Coordination Deed.[81] A reasonable person in the position of the parties would have thought at the time of the Fortescue Coordination Deed that the exercise of the option was likely because the lapse of the option under the China Project Option Agreement would lead to the reinstatement of the Joint Development Agreement (with provisions for all government approvals to be in Mineralogy's name and for the project manager to be Mineralogy Mine Management).

181 These increases, and anticipated increases, can be put into context in relation to the increases in Ministerial Statement 635, by a chart provided by the Citic parties. That chart is set out in the Appendix to these reasons. As might reasonably have been anticipated, the increase in production quotas by amendments to Ministerial Statement 635 closely tracked the increased rights that Sino Iron and Korean Steel had under the project agreements.

182 In Electricity Generation Corporation v Woodside Energy Ltd,[82] four justices of the High Court reiterated that the 'meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean'. Their Honours explained that a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption that the parties intended to produce a commercial result.

183 The commercial context of the Fortescue Coordination Deed militates powerfully in favour of the construction of the Citic parties. In particular, all of the following matters point strongly towards the likelihood that a reasonable person would construe cl 20.1 of the Fortescue Coordination Deed as requiring a transfer to Sino Iron of the status as proponent of Ministerial Statement 635:

(i) the Citic parties paid $400 million for the project;

(ii) under the Fortescue Coordination Deed, cl 2.4(a), the Citic parties are 'solely responsible for the planning and conduct'; and

(iii) the Citic parties assumed 'full liability' and agreed to 'carry out all conditions in respect of the Environmental Approval'.

184 These same factors are strong commercial reasons why, after completion of the takeovers, every other environmental approval was to be obtained in the name of the Citic parties. They apply equally to Ministerial Statement 635, with the added legal factors described in point (5) above concerning the uncertainty faced by the Citic parties without being named as proponent of Ministerial Statement 635.

(8) The obligations under the Environmental Protection Act

185 As I explained above, pt IV of the Environmental Protection Act involves a regime which assumes that the proponent of a proposal will have control over the implementation of the proposal. Section 38(6a) provides that if the person nominated as having responsibility for a proposal ceases to have that responsibility, as a matter of fact, then that person is to give the Environmental Protection Authority written notice advising the name of the person to whom or which responsibility for the proposal will pass or has passed. Section 38(7) empowers the Minister to revoke a nomination and nominate another person.

186 Clause 2.4, amongst other clauses, in the Fortescue Coordination Deed provides for the responsibility for the proposal to be borne by Citic Pacific Ltd (or its nominee, such as Sino Iron and Korean Steel). It provides that, unless the JDA is reinstated as a result of the Citic Option lapsing, Citic Pacific Ltd or its nominee:

(i) will be solely responsible for the planning and conduct of Mining Operations [defined in very broad terms in cl 4.2] by each of the Mining Right Holders (Sino Iron and Korean Steel and a third party controlled by Citic Pacific Ltd if it exercises its option and completes the Takeover Agreement proposed under the China Project Option Agreement);

(ii) will be responsible for carrying out all of those functions and responsibilities that were, under the Joint Development Agreement, to have been carried out by the Manager thereunder, including without limitation the engagement of a mining contractor and the giving of directions and instructions to the mining contractor;

(iii) will be responsible for coordinating the activities of the Mining Right Holders; and

(iv) together with the Mining Right Holders, will be solely responsible for all Mine Costs incurred on the Mining Leases and will indemnify Mineralogy against any and all such Mine Costs.

187 The effect of cl 2.4 of the Fortescue Coordination Deed must be read in light of s 38(6a) and in light of the operation of pt IV of the Environmental Protection Act. In light of those matters, the effect of cl 2.4 was to create an obligation for Mineralogy to give the Environmental Protection Authority written notice advising that responsibility for the proposal (at least to the extent provided in the Fortescue Coordination Deed) will pass or has passed to Sino Iron and Korean Steel (which, in light of cl 20.1, was the nominee of Citic Pacific Ltd).

188 An important context of cl 20.1 of the Fortescue Coordination Deed is therefore that the Environmental Protection Authority were to be advised of the responsibility of Sino Iron and Korean Steel which, even in the absence of a request for transfer by Mineralogy, might lead the Minister to consider that Mineralogy's nomination should be revoked and Sino Iron and Korean Steel nominated as proponent.

189 This context is a further reason why cl 20.1 of the Fortescue Coordination Deed is concerned with a transfer of the status of proponent to Sino Iron and Korean Steel.

190 Mineralogy's position was effectively that the words in cl 13.1 of sch 8 of the Korean Steel Takeover Agreement, and the words in cl 20.1 of the Fortescue Coordination Deed, should not bear their natural or ordinary meaning essentially because of the commercial or legal inconvenience that this meaning would create for Mineralogy. Senior counsel for Mineralogy relied upon various matters of essentially legal or commercial inconvenience, each of which is considered below.

9.1 Assertions of commercial inconvenience if the Joint Development Agreement were reinstated

191 Mineralogy submitted that a transfer of the status of proponent to the Citic parties would cause commercial inconvenience to it if the Joint Development Agreement were reinstated. Senior counsel relied on cl 9.1 of the Joint Development Agreement which provides for government approvals to be obtained in Mineralogy's name.[83] He effectively submitted that if the Environmental Approval were transferred to the Citic parties then there was no mechanism to require re-transfer if the Joint Development Agreement were reinstated.

192 The difficulty with this submission is that it may depend upon the proper construction of cl 2.3 of the Fortescue Coordination Deed. But that clause is not entirely clear and it was not the subject of any detailed submissions. Mineralogy briefly asserted a particular construction of that clause and then asserted that commercial inconvenience arising from that construction should control the construction of cl 20.1.

193 Clause 2.3 of the Fortescue Coordination Deed provides as follows

Subject to clauses 7.3 (d), (e) and (f) of the Sino Iron Takeover Agreement if the CITIC Option lapses without being exercised, the Joint Development Agreement will be reinstated in full force and effect with effect on and from the date of lapse and Korean, Sino Iron and CITIC shall execute such documents required by Mineralogy to enable Mineralogy Mine Management Pty Ltd be reinstated as a party and restoring the Joint Development Agreement to its status prior to 31 March 2006.

194 Clause 7.3(d) of the Sino Iron Takeover Agreement provides

With effect from Completion, [Mineralogy] conditionally assigns all its right, title and interest under the [Joint Development Agreement] to CITIC on the basis that if CITIC does not exercise the First Option as provided by the China Project Option Agreement (other than because there are less than 3 billion tonnes of measured and indicated Magnetite Ore resources in Area A as determined by CITIC or in accordance with paragraphs (e) and (f)), such right title and interest will be reassigned to [Mineralogy] no later than one month after the lapse of the First Option or within one week of any determination confirming there is a minimum of 3 billion tonnes of Magnetite Ore as provided by paragraphs (e) and (f) and in such circumstances the [Joint Development Agreement] will be in the same terms and conditions as presently exist prior to any assignment.

195 There is a strong argument that a document which provided for retransfer of the Environmental Approval would be a document required by Mineralogy to restore 'the Joint Development Agreement to its status prior to 31 March 2006'. There is also a strong argument that if the Citic parties had the status of proponent under the Environmental Approval then this is a right, title or interest required to be 'reassigned to Mineralogy' under cl 7.3(d) of the Sino Iron Takeover Agreement if the Joint Development Agreement is reinstated.

196 But even putting aside these questions of construction, there is an inherent contradiction in this submission by Mineralogy. On the one hand, Mineralogy is asserting that cl 20.1 of the Fortescue Coordination Deed should be construed in its favour because it will suffer a possible, contingent, future commercial prejudice in managing the project because the Citic parties might not be legally obliged to retransfer the status of proponent and might not voluntarily agree to do so. But, on the other hand, that identical prejudice (managing the project without being named as the proponent) is currently being suffered by the Citic parties.

197 Finally, there was no evidence, and no argument, concerning whether a reasonable person would have anticipated as a reasonable possibility, as opposed to an unlikely contingency, that the China Project Option Agreement would lapse and the Joint Development Agreement would be reinstated.

9.2 Asserted prejudice from alleged breach by Mineralogy of the State Agreement

198 As I have explained, the State Agreement was entered into between the Western Australian State Government and a number of parties including Mineralogy, Sino Iron (as it became after its name was changed), and Korean Steel.

199 Section 1 (definitions) in the State Agreement defines different Projects within an Area A. Each of these three projects included matters as follows:

1. Project 1: A project for the production of high grade iron ore pellets with an initial minimum production capacity of 6 mtpa from a mine or mines within Area A;
2. Project 2: A project for the production of HBI with an initial minimum production capacity of 2 mtpa from a mine or mines within Area A;
3. Project 3: A project for the production of steel with an initial minimum production capacity of 2 mtpa from a mine or mines within Area A and a HBI production facility in that area.

200 Clause 2(h) provides that the provisions for minimum production capacities in relation to each project shall only apply to the first project falling within Project 1, Project 2 or Project 3, or a combination of those three types of projects.

201 Area A as described in the State Agreement is set out in a plan which is included in the State Agreement.

202 Senior counsel for Mineralogy asserted that Area A in the State Agreement includes all of the area in Ministerial Statement 635, but that Ministerial Statement 635 is larger than the area of the Sino Iron Project over which the Citic parties had rights. In other words, his submission was that Mineralogy was subject to obligations under the State Agreement in relation to areas contained within Ministerial Statement 635 over which the Citic parties had no rights.

203 Senior counsel for Mineralogy then asserted that the transfer of the status of proponent to the Citic parties would prejudice Mineralogy's ability to enforce and exercise Mineralogy's duties over an area where the Citic parties had no rights.

204 The State Agreement defines Common Use Land to be 'land the subject of or proposed to be the subject of any lease, licence, easement or other title granted under [the State Agreement] the use of which is shared by Projects or is proposed to be so shared in accordance with approved proposals'.

205 The definition of Projects Proponents is Mineralogy or, Mineralogy and other CoProponents. In other words, Mineralogy will always be a Proponent to any Project under the State Agreement.

206 Clause 6(5) effectively provides that if Mineralogy submits to the Minister a proposal for Plant areas in respect of any area within Area C and Area D, the proposal must make reasonable provision for future third party use of port facilities by providing for the development of the Plant areas so far as practicable in Area C and providing for access to Cape Preston.

207 Clause 7(6) provides that in respect of each proposal, the Project Proponents are required to implement the proposals in accordance with their terms and generally to ensure continuous operation of the Project.

208 Clause 11 provides for the payment of royalties by Mineralogy to the State on minerals obtained from the Mining Leases including iron ore concentrates, concentrates processed into pellets, and concentrates processed further into HBI.

209 Clause 21 provides that Mineralogy shall develop port facilities for the Projects in accordance with approved proposals and provides for various requirements for those port facilities.

210 Clause 21(3) provides that Mineralogy and the Project Proponents are required, subject to various exceptions, to allow the State and third parties various services, facilities, installations, and machinery at the wharf and port.

211 Clause 22(1) provides that if an approved proposal provides for a railway, the railway shall be constructed and operated by Mineralogy and that Mineralogy has the overall responsibility to ensure that various facilities in relation to the railway are, subject to conditions, made available to the State and, in some respects, third parties.

212 Clauses 28(1) and 28(2) provide that the provisions of the State Agreement take effect notwithstanding the provisions of various other agreements which include the subleases between Mineralogy and Sino Iron and Korean Steel, and the Facilities Deeds between Mineralogy and Sino Iron and Korean Steel.

213 The following conclusions can be drawn from these provisions of the State Agreement and the evidence before the Court.

(i) The obligations in cls 7(6) and 21(3) are owed to the State by Mineralogy as well as by Sino Iron and Korean Steel.

(ii) There was no evidence before this court concerning any likelihood of any possible infringements of any of the obligations placed exclusively upon Mineralogy under the State Agreement. For example, there was no evidence concerning whether the transfer of the status as proponent of Ministerial Statement 635 to Sino Iron could have any practical impact upon Mineralogy's duties to control and provide facilities in relation to the railway or the port. Even more fundamentally, there was no evidence before the Court from which any inference could be drawn that such a possibility was a matter that could have been reasonably anticipated by the parties as a reasonable possibility at the time of entry into the Sino Iron Takeover Agreement.

214 Even putting to one side these significant obstacles to Mineralogy's assertions of commercial inconvenience, there are additional obstacles to Mineralogy's assertions about the inconvenience that would arise in relation to its obligations under the State Agreement. The additional obstacles are as follows:

(i) there was no evidence before the Court concerning any likelihood perceived by a reasonable person in the position of the parties at the time of the Fortescue Coordination Deed that the Citic parties would not co-operate with Mineralogy to ensure compliance with Mineralogy's obligations in relation to parts of Ministerial Statement 635 that were not the subject of exclusive mining rights of the Citic parties; and

(ii) there was no evidence from which it is possible to determine (a) whether Ministerial Statement 635 covered an area beyond that to which the Citic parties had exclusive rights or which reasonable persons at the time of the Fortescue Coordination Agreement might expect that the Citic parties would obtain exclusive rights, (b) the extent of any such area, or (c) the duties owed by Mineralogy within that particular area that would be affected.

215 In an attempt to address the deficiency in evidence concerning (ii) above, Mineralogy provided written submissions after trial, with leave, to address whether 'the whole of the area in the location map in Ministerial Statement 635 is an area over which the Citic parties have rights, or evidence which shows anything to the contrary'.[84]

216 The supplementary submissions filed by Mineralogy do not remedy this deficiency for four reasons.

217 First, the supplementary submissions go beyond the evidence before the Court. At their heart was a map produced by Mineralogy's geologist. That map was not the subject of any affidavit evidence or witness statement. It was evidence led without leave and it is not admissible. Although it was described as a 'diagrammatical submission' of the areas in the various project documents, the diagram went beyond the written submissions in representing those areas and their extent. Further, as the Citic parties submitted in their responsive written submissions, the map was not a snap shot of rights at any particular point in time.[85] For instance, Table 1 to Ministerial Statement 635 provided an original area of disturbance of 'approximately 220 ha'.[86] But later amendment identified with precision the areas of disturbance.[87] It appears, although it is not wholly clear, that Mineralogy's map set out the later, more precise, disturbance areas rather than the original areas.

218 Secondly, Mineralogy's map and submissions do not address areas contained within Ministerial Statement 635 which were not the subject of rights then existing of the Citic parties but which reasonable persons at the time of the Fortescue Coordination Deed might expect that the Citic parties would obtain exclusive rights.

219 Thirdly, Mineralogy's map and submissions included areas which are the subject of current litigation in the Federal Court. For instance, Mineralogy asserted that it 'maintains' exclusive rights of ownership and operation in relation to areas of the port which are the subject of an existing legal dispute. It is also unclear whether the map was intended to suggest that Mineralogy currently maintains those rights and, if so, whether Mineralogy asserts that a reasonable person would consider it had those rights at the time of the Fortescue Coordination Deed.

220 Fourthly, it appears, although it is not entirely clear, that, as the Citic parties submitted,[88] the footprint of the project under Ministerial Statement 635 as revealed by Mineralogy's map, fits entirely within the tenements to which the Citic parties had exclusive mining rights.[89]

9.3 Asserted prejudice from possible future third party agreements

221 Senior counsel for Mineralogy said that Mineralogy's loss of status as proponent would mean that Mineralogy could no longer apply for any increase in the production limits under the Ministerial Statement for the benefit of itself rather than the Citic parties.[90]

222 The difficulty with this assertion is that Mineralogy led no evidence to suggest that an increase in production limits for Mineralogy to exploit was (i) a matter that had been contemplated by Mineralogy, and (ii) involved information reasonably available to both parties at the time of the Fortescue Coordination Deed.[91] As I have explained, the evidence supported the opposite: there was an expectation of an increase in production limits for the Citic parties to exploit

223 Even if there had been evidence on these matters, there was no evidence, or submissions, of any likelihood that an increase in production limits for Mineralogy would occur. In particular, and even putting aside the deficiency in evidence to establish an area within the Ministerial Statement to which the Citic parties were not exclusively entitled:

(i) there was no evidence that any third party might enter into agreements with Mineralogy for the third party to mine for concentrate within Area A of the State Agreement and the Ministerial Statement, but outside the area of the MRSLAs with the Citic parties;

(ii) there was no evidence or submissions concerning the viability of third parties mining in an area within Area A of the State Agreement and Ministerial Statement 635, but outside the area in the MRSLAs with the Citic parties; and

(iii) there was no evidence or submissions concerning the likelihood that third parties would enter agreements with Mineralogy which would permit them to produce pellets or HBI in limited quantities (at best, 6.8 mtpa of pellets and 3 mtpa of HBI) in a plant that is run by the Citic parties and that is used by the Citic parties to process their own product.

224 Senior counsel for Mineralogy also submitted that it was possible that Mineralogy could bring in concentrate from elsewhere within the area of the State Agreement[92] and use that additional concentrate to produce pellets or HBI from any excess capacity remaining after the Citic parties had used their entitlement.

225 I have already explained at [92] - [106] why the Sino Iron Takeover Agreement did not manifest an intention to reserve benefits of environmental approvals to Mineralogy for limited amounts of pellets and HBI. That conclusion applies with even greater force to the Fortescue Coordination Deed which does not contain the restrictions concerning pellets and HBI.

226 In any event, there is no evidence to support an assertion that a reasonable person in the position of the parties at the time of the Fortescue Coordination Deed would have contemplated even the possibility that new concentrate could, or might, be able to be brought into the Sino Iron Project plant from elsewhere in the area of the State Agreement. And even if that complete lack of evidence is put to one side, there would be no excess capacity if the Citic parties used their entire allowance of concentrate.

The Korean Steel Takeover Agreement (2007) and Fortescue Coordination Deed (2008) involved an election by Mineralogy

227 As I have explained above, both the Korean Steel Takeover Agreement and the Fortescue Coordination Deed created an obligation upon Mineralogy to transfer the status of proponent under the Ministerial Statement 635. The Korean Steel Takeover Agreement involved an obligation to transfer to Sino Iron. And upon completion of the Korean Steel Takeover Agreement, the Fortescue Coordination Deed created an obligation to transfer to both Sino Iron and Korean Steel.

228 Since I have concluded that cl 20.1 of the Fortescue Coordination Deed was an independently binding obligation, it is strictly unnecessary to deal with the issue concerning whether the Korean Steel Takeover Agreement or the Fortescue Coordination Deed amounted to an election by Mineralogy under the Sino Iron Takeover Agreement. But, for completeness, I express my conclusion that the acknowledgements in the Korean Steel Takeover Agreement or the Fortescue Coordination Deed also involved an election by Mineralogy in accordance with the Sino Iron Takeover Agreement.

229 In written submissions filed on 9 October 2014, the Citic parties argued that sch 8, cl 13.1 of the Korean Steel Takeover Agreement and cl 20.1 of the Fortescue Coordination Deed amounted to the election by Mineralogy under cl 7.3(g) of the Sino Iron Takeover Agreement. In oral submissions at trial, a month later, senior counsel for Mineralogy observed that this point had not been pleaded. However, senior counsel for Mineralogy conceded that there was no prejudice to Mineralogy if the Citic parties were allowed to run their case in this way, and he responded comprehensively to their submissions.[93] The case was run by all parties on this point without any prejudice and the Citic parties should not be prevented from running this alternative case.

230 The reason why the Korean Steel Takeover Agreement amounted to an election under the Sino Iron Takeover Agreement is both linguistic and purposive.

231 Linguistically, the language of the Korean Steel Takeover Agreement and Fortescue Coordination Deed is the language of an obligation created by election. Schedule 8, cl 13.1 described the 'acknowledgement' of Mineralogy (ie an act of election) but the acknowledgement was also described as an 'obligation' (sch 8, cl 13.1(b), cl 13.1(d)). The same language was repeated in the Fortescue Coordination Deed.

232 Linguistically, the language of 'in accordance with the Sino Iron Takeover Agreement' is also descriptive of actions which conform to the process of election in that agreement. The ordinary meaning of the words 'in accordance with' mean 'in conformity to',[94] or 'in line with'.[95] It suggests an obligation being created 'in accordance with' the Sino Iron Takeover Agreement. Considering the different nature and terms of the obligation, and the different persons to whom it is owed in the Fortescue Coordination Deed, the conformity, or accord with, must be, in the Korean Steel Takeover Agreement, a reference to the provision for an election my Mineralogy in cl 7.3(g) of the Sino Iron Takeover Agreement. In the Fortescue Coordination Deed it must also be a reference to that election as made in the Korean Steel Takeover Agreement.

233 As a purposive matter, the obvious purpose of the reference to the transfer being 'in accordance with' the Sino Iron Takeover Agreement in sch 8, cl 13.1 of the Korean Steel Takeover Agreement was for the transfer to be Mineralogy's election under the Sino Iron Takeover Agreement. No other purpose can be discerned from cl 13.1. In particular, on Mineralogy's construction, the requirement that the transfer be 'in accordance with the Sino Iron Takeover Agreement' would have no purpose at all other than to serve as a more specific reference to the limited benefits applicable to Sino Iron (but not, apparently, Korean Steel despite the express provision in cl 20.1 for the transfer to extend also to Korean Steel). Mineralogy's submission is also undermined by the contrast between the words 'in accordance with' in cl 20.1 with the use of 'in relation to' in cl 7.3(g) of the Sino Iron Takeover Agreement.

234 For these reasons, I conclude that the creation of the obligation to transfer, as I have described, in sch 8, cl 13.1 of the Korean Steel Takeover Agreement was the election by Mineralogy under cl 7.3(g) of the Sino Iron Takeover Agreement. Clause 20.1 of the Fortescue Coordination Deed then picked up the obligation, as elected, from the Korean Steel Takeover Agreement and extended it to Korean Steel.

The Citic parties' case concerning lack of good faith

235 The Citic parties had two alternative submissions to their arguments about construction. Both were essentially based upon the need for transfer of the status as proponent of Ministerial Statement 635 due to obligations of good faith. In summary, the pleading of these matters, as clarified in oral submissions, was essentially that:

(i) if Mineralogy is not obliged to transfer the status as proponent of the Ministerial Statement [as a matter of construction of the relevant agreements], then Mineralogy is required to, and has failed to, make available to Sino Iron the benefits of being a proponent of the Ministerial Statement;

(ii) alternatively, Mineralogy is required to nominate Sino Iron as the proponent of a proposal under cl 3-2 of the Ministerial Statement, in circumstances in which there is no prejudice to Mineralogy in nominating Sino Iron as proponent.

236 The most recent appellate decision concerning good faith in this jurisdiction is Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd.[96] The decision of Pullin JA (with whom Newnes JA agreed) in that case was that the natural and ordinary meaning of good faith required only that parties deal with each other honestly.[97] But, as Pullin JA explained, the issue in that case concerned an express term of good faith. His Honour's decision concerning the meaning of 'good faith' was limited to the meaning of that phrase in a particular Memorandum of Understanding. As Pullin JA explained, it was not necessary to consider the authorities concerning implication of a term of good faith.[98]

237 Had it been necessary in Strzelecki Holdings to consider the meaning of 'good faith' as an implication, then it might have been necessary to consider whether a meaning restricting the concept to honesty was superfluous, since 'honesty in the stricter sense is by our law a duty of universal obligation [existing] independently of contract or of special obligation'.[99]

238 In contrast with the express term of good faith in the particular context of the clause in Strzelecki Holdings Pty Ltd, it is a different question whether a term of good faith exists as a matter of implication into commercial contracts generally.

239 The question of implication of a term of good faith into commercial contracts remains a vexed issue. The implication of such a term was assumed for the purposes of argument, but not decided, in the Court of Appeal in this jurisdiction in Central Exchange Ltd v Anaconda Nickel Ltd.[100] A further step was recently taken, following the practice of most jurisdictions in the United States, by the Supreme Court of Canada. That court unanimously endorsed a general implication of a duty of good faith requiring 'that parties generally must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily'.[101]

240 In contrast, three justices in a joint judgment of the Victorian Court of Appeal recently said that they did 'not accept that an obligation of good faith should be implied indiscriminately into all commercial contracts'.[102]

241 Much may depend upon what is meant by the phrase 'good faith'. The phrase might not describe a positive duty at all but, instead, be an umbrella concept to describe various manifestations of particular duties. In that sense it could not be implied indiscriminately into commercial contracts. On the other hand, there is much to commend the view that a particular manifestation of good faith that might generally be implied is a duty that requires the exercise of powers that affect another contracting party to be undertaken in a manner that is both honest and reasonable in all the circumstances. Such implications concerning both honesty and reasonableness in the exercise of powers permeate many areas of law apart from contract law, including property law, administrative law, the law of trusts, and insolvency law.

242 Ultimately the content of the good faith duty upon which the Citic parties relied was a well-recognised example of the duty to exercise contractual powers honesty and reasonably. This is the obligation to cooperate to achieve contractual objectives.[103] That particular cooperation obligation is a well-established general implication in commercial contracts. As Mason J in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd,[104] explained (in a passage quoted by French CJ, Bell and Keane JJ in Commonwealth Bank of Australia v Barker)[105] the principle enunciated by Lord Blackburn in Mackay v Dick:[106]

where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. What is the part of each must depend on circumstances.

243 Although this general implication is well recognised, its application will depend upon the terms of the contract. In the High Court in Barker, that implication of mutual cooperation was held to have no application because, as French CJ, Bell and Keane JJ (with whom Gageler J agreed on this point)[107] explained,[108] there was no relevant contractual benefit (such as a benefit to redeployment) with which the implied term could engage. As Kiefel J also explained, the duty of cooperation 'is anchored upon the need for one party to take a positive step without which the other party is unable to enjoy a right or benefit conferred upon it by the contract.'[109]

244 A similar difficulty arises in this case. In oral submissions senior counsel for the Citic parties conceded that if none of the construction arguments advanced by the Citic parties was accepted then an implication of mutual cooperation could not otherwise create the particular obligation to transfer to Sino Iron the status of proponent under Ministerial Statement 635.[110]

245 Conversely, my acceptance of the Citic parties' construction of the Fortescue Coordination Deed means that there is an express contractual obligation to transfer to Sino Iron the status of proponent. An obligation of mutual cooperation adds nothing to the declaratory relief sought by the Citic parties in this regard. As I understand it, it was for these reasons that senior counsel for Mineralogy did not seek to make any substantive submissions about good faith. For the same reasons it is neither necessary nor appropriate to consider the point any further in these reasons.

246 The essential submissions by the Citic parties concerning the construction of the relevant contracts should be accepted. There was, and is, an obligation upon Mineralogy under cl 20.1 of the Fortescue Coordination Deed to take steps to transfer to Sino Iron and Korean Steel the status of proponent under Ministerial Statement 635 (as amended).

247 The relief sought by the Citic parties is as follows:[111]

A declaration that pursuant to clause 20.1 of the Fortescue Coordination Deed, clause 4A and schedule 8 clause 13.1 of the Korean Steel Takeover Deed and clause 7.3(g) of the Sino Iron Takeover Deed, Mineralogy is required to transfer the EPA Approval to Sino Iron and Korean Steel in accordance with condition 3-2 of the Ministerial Statements as outlined at [9] above by:

(i) signing a letter substantially in the form of that provided by CPM with its letter dated 23 November 2012 and lodging it with the Office of the Environmental Protection Authority; and

(ii) lodging with the Office of the Environmental Protection Authority documents substantially in the form of those provided by CPM with its letter dated 23 November 2012.

248 Several points can be made about this form of this proposed declaration.

249 First, the reference to a required transfer of the EPA Approval is imprecise. What is meant by this reference, and what is desired by the Citic parties, was explained in the cogent submissions of their senior counsel. It is the transfer of the status of proponent under the Ministerial Statements. A declaration should express the duty in this more precise way.

250 Secondly, whatever the meaning of the terms of the relevant agreements, it might be doubted whether Mineralogy has the unilateral power to conclude the transfer to the Citic parties of the status of proponent under the Ministerial Statements. It may be that the formal transfer will be a matter for the Minister for the Environment. If so, then the declaration should be expressed in a form that Mineralogy is required to apply to the Minister for a transfer of proponent under Ministerial Statement 635 (as amended by Ministerial Statement 822).

251 Thirdly, the particular agreement upon which the declaration is based will make a difference to the terms of the declaration for reasons I have explained. For instance, the provisions of the Korean Steel Takeover Agreement do not require any transfer to Korean Steel. The requirement for a transfer to both Korean Steel and Sino Iron is only present in the Fortescue Coordination Deed.

252 During the hearing, senior counsel for each party sought leave to make further submissions on the form of the order in light of my published reasons for decision. For at least the three reasons above it is appropriate that this leave be granted if the form of the declaration cannot be agreed between the parties.

Appendix 1: Approximate concentrate plant limits in Environmental Approvals and rights to extract concentrate

CITATION : SINO IRON PTY LTD -v- MINERALOGY PTY LTD [No 2] [2014] WASC 444 (S)

Declarations - Form of declaration to be made - Issues arising beyond the scope of matters litigated at trial - Extent to which declaration should extend to obligations to third parties

Supreme Court Act 1935(WA), s 25(6)

The issues concerning the form of the declaration

1 The trial in this matter was heard and decided in November 2014. In my reasons for decision I explained that cl 20.1(a) of the Fortescue Coordination Deed imposes an obligation upon Mineralogy to take steps to transfer to Sino Iron and Korean Steel the status of proponent under Ministerial Statements 635 (as amended) and 822. That clause provides:

Mineralogy acknowledges that it will transfer to Sino Iron and Korean the Environmental Approval in accordance with the Sino Iron Takeover Agreement and the Korean Takeover Agreement, respectively, as those benefits may apply to the Project.

2 Clause 3-2 of Ministerial Statement 635 (as amended) provides as follows:

If the proponent wishes to relinquish the nomination, the proponent shall apply for the transfer of proponent and provide a letter with a copy of this statement endorsed by the proposed replacement proponent that the proposal will be carried out in accordance with this statement. Contact details and appropriate documentation on the capability of the proposed replacement proponent to carry out the proposal shall also be provided.

3 At trial, the only substantive relief that was sought by the plaintiffs, the Citic parties, was a declaration. The form of the declaration sought at trial was as follows:

A declaration that pursuant to clause 20.1 of the Fortescue Coordination Deed, clause 4A and schedule 8 clause 13.1 of the Korean Steel Takeover Deed and clause 7.3(g) of the Sino Iron Takeover Deed, Mineralogy is required to transfer the EPA Approval to Sino Iron and Korean Steel in accordance with condition 3-2 of the Ministerial Statements as outlined at [9] above by:

(i) signing a letter substantially in the form of that provided by CPM with its letter dated 23 November 2012 and lodging it with the Office of the Environmental Protection Authority; and

(ii) lodging with the Office of the Environmental Protection Authority documents substantially in the form of those provided by CPM with its letter dated 23 November 2012.

4 In my reasons for decision I indicated some concerns with the form of the proposed declaration by the Citic parties. The parties were given the opportunity to make submissions about the appropriate form of any declaration. The submissions were made in writing. The final submission was made yesterday.

5 There are several matters of common ground concerning the form of a declaration that should be made in light of my reasons:

(i) the declaration should only be concerned with an application for the transfer of the status as proponent;

(ii) the declaration should concern the status as proponent under both Ministerial Statement 635 and Ministerial Statement 822 (which operates as both an amendment to Ministerial Statement 635 and as a Ministerial Statement);

(iii) the declaration can refer to cl 20.1(a) of the Fortescue Coordination Deed; and

(iv) the application should be made to the Minister for the Environment.

6 There are two essential issues in dispute concerning the form of the declaration. The first is the person to whom a transfer should be directed in the application for transfer. The second is whether the declaration should provide specific details about the documents to be lodged with the Office of Environmental Protection as part of the application for the transfer of the status of proponent and the timing for lodgement.

7 Both of these issues should be answered broadly in the manner that Mineralogy has proposed. The declaration should be that the application for transfer should be for a transfer of the status of proponent to Sino Iron and Korean Steel. And the declaration should not prescribe the nature and form of the documents to be contained with the application.

Issue 1: The person to whom the transfer should be directed

8 In my reasons for decision I concluded that cl 20.1(a) of the Fortescue Coordination Deed imposes an obligation upon Mineralogy to take steps to transfer to Sino Iron and Korean Steel the status of proponent under Ministerial Statement 635 (as amended).

9 The Citic parties submit that the 'most logical and practical way to achieve a transfer to those entities' is for the transfer to be effected to CPMM as the agent of Sino Iron and Korean Steel. As I explained in my reasons at [52], in February 2007 CPMM was appointed by Sino Iron and Korean Steel to manage the day to day operations of the Sino Iron Project.

10 Mineralogy disputes this proposed order. Mineralogy correctly points to the absence of any contractual obligation, and the absence of any determination in my reasons, that requires it to apply for the transfer of the status of proponent to a nominee or an agent of Sino Iron and Korean Steel. Mineralogy says that the application should be for a transfer to Sino Iron and Korean Steel jointly, and that there is 'no legal (nor any known practical) impediment to the plaintiffs becoming the joint proponents'.

11 It is possible that the order sought by Mineralogy will simply create an additional bureaucratic hurdle. If the Minister transfers the status of proponent to Sino Iron and Korean Steel, then they may then consider it 'logical' or 'practical' to apply for the transfer of the status of proponent to their agent, CPMM. But this result cannot be avoided for three reasons.

12 First, the relief sought at trial did not seek a transfer of the status of proponent to CPMM. Nor was any submission made at trial to this effect. Had this relief been sought, or the submission made, it is possible that evidence might have been led in response from Mineralogy. At the very least, I would have required submissions about the nature of the relief potentially beyond the strict contractual entitlement before exercising my discretion to make such an order. In contrast, the liberty that I gave the parties to make submissions on the form of declaration was concerned only with the appropriate form of declaration in light of my reasons for decision.

13 Secondly, there is, at least, a strong argument that Mineralogy is not obliged by cl 20.1(a) to apply for a transfer to any other party than Sino Iron or Korean Steel. If such an implication were to be sought then further questions could arise. Would the application for transfer be required to be directed to a transfer to any party that Mineralogy is directed by the Citic parties? What would be the extent of the agency of such a potential transferee before Mineralogy would be required to make the transfer? How should Mineralogy be satisfied about the existence of that agency relationship?

14 In submissions in reply, the Citic parties say that 'it is not contended that Mineralogy has an obligation to transfer to CPMM, but rather that a transfer to CPMM (as agent of Sino Iron and Korean Steel) would be a practical and simple way to effect the transfer to both the plaintiffs'. But a further problem arises if Mineralogy is not obliged by cl 20.1(a) to apply for a transfer to CPMM. In circumstances in which Mineralogy does not consent to apply for a transfer to CPMM, then what basis is there for the Court to declare that Mineralogy is obliged to do so? The method chosen by the Citic parties might be a practical and simple approach but there was no argument at trial concerning why, if more than one mechanism is available to effect the transfer, Mineralogy cannot choose that mechanism which it prefers.

15 Thirdly, if the declaration is to extend to determine the rights of CPMM as a potential recipient of a transfer then it is, at least, arguable that CPMM should have been a party to the litigation.

16 The appropriate form of the declaration is that the application for transfer should be concerned with a transfer to Sino Iron and Korean Steel.

Issue 2: Whether the declaration should prescribe the documents to be contained with the application and the timing

17 The Citic parties seek a second part of the declaration as follows:

By 2 February 2015, Mineralogy must sign and lodge with the Office of the Environmental Protection Authority the documents annexed and marked 'A', being an application to the Minister for a transfer of the status of proponent of Ministerial Statement 635 (as amended) and Ministerial Statement 822 from Mineralogy to CITIC Pacific Mining Management Pty Ltd [CPMM] (as agent for Sino Iron and Korean Steel).

18 The proposed Annexure A is hundreds of pages long and contains a number of documents. The Citic parties say that this declaration is appropriate because the documents proposed are simply an updated version of those documents that were contained in the November 2012 letter (as set out in the form of declaration initially sought by the Citic parties).

19 It is appropriate to exclude the opening words which provide for a date by which the obligation must be performed. The immediate difficulty with this proposed part of the declaration is that it converts a declaration (which was sought at trial) into a mandatory injunction (which was not). Another difficulty is that no submissions were made concerning the timing of any obligation. Such submissions would need to have considered an implication of an obligation to perform cl 20.1(a) within a reasonable time, and evidence may have been necessary concerning what time was reasonable.

20 To deal with this, the Citic parties submitted, in the alternative, that the order could be expressed as a declaration, with the omission of a date, saying that 'Mineralogy must sign and lodge ...'. The Citic parties say that there are important reasons why the declaration should include the detail about the manner in which Mineralogy must apply for the transfer of the status of proponent, and the content of that application. These reasons include the importance of the project and the prospect that the Citic parties may be implementing environmental proposals without the benefit of certain statutory defences. By referring to the precise documents to be lodged Citic seeks to avoid the possibility of later dispute.

21 The desire expressed by Citic, or indeed any litigant, to have a declaration expressed in terms which avoid the potential for further dispute is understandable. Such a course is desirable. But, other than to provide the parties with liberty to apply in relation to future disputes concerning the implementation of the declaration, I do not accept that this part of the declaration that the Citic parties seek is appropriate. This is for three reasons.

22 First, no argument was directed at trial by either party about the form by which any application for transfer should be made or the nature or content of the documents that were proposed to be included and annexed to the declaration. The obvious reason for this may have been that the form of any application and the nature and content of the documents required could be affected by my conclusions as to the nature of the underlying rights. The parties are even in dispute about the terms of the documents to be provided. Mineralogy provided a substantially differently worded letter to the Office of Environmental Protection. Although, in submissions in reply, the Citic parties said that they do not have any substantive objections to Mineralogy's proposed letter save for the issue concerning CPMM as agent (issue 1 above) the different terms of even the letter to be sent illustrates the difficulty in adjudicating this issue without reopening the trial.

23 Secondly, the foundation for the power to make a declaration is s 25(6) of the Supreme Court Act 1935 (WA). That section is based on s 50 of the Chancery Procedure Acts of 1850 and 1852, 13 16 Vict c35, c86 which focuses upon the quelling of controversies between persons concerning legal rights: claim rights, powers, privileges and immunities.[112] As six justices in the High Court said in Bass v Permanent Trustee Co Ltd[113]

A judgment of a court is an affirmation, by the authorized societal agent of the state ... of the legal consequences attending a proved or admitted state of facts. It is a conclusive adjudication that a legal relation does or does not exist. The power to render judgments ... is the power to adjudicate upon contested or adverse legal rights or claims, to interpret the law, and to declare what the law is or has been. It is the final determination of the rights of the parties in an action which distinguishes the judgment from all other public procedural devices to give effect to legal rights.

24 It is unclear the extent to which there is any substantive controversy about the nature or content of the documents that were proposed to be included and annexed to the declaration, or the practical or legal significance of any controversy. To the extent to which controversy exists, cl 3-2 of Ministerial Statement 635 (as amended) does not prescribe the manner in which the application for a transfer is to be made save that it requires (i) a letter with a copy of the Ministerial Statement 635 endorsed by the proposed replacement proponent that the proposal will be carried out in accordance with this statement, and (ii) contact details and appropriate documentation on the capability of the proposed replacement proponent to carry out the proposal.

25 These circumstances militate against the exercise of discretion to make this part of the declaration.

26 Thirdly, the Citic parties' documents which are attached as annexure A to the proposed declaration are premised upon the assumption that the transfer be to CPMM. They provide contact details and a capability statement concerning CPMM not Sino Iron and Korean Steel. For the reasons expressed in relation to issue 1 above, that is not consistent with my reasons for decision.

27 A declaration should be made, substantially in the terms proposed by Mineralogy to give effect to my reasons:

It is declared that, by reference to cl 20.1(a) of the Fortescue Coordination Deed dated 22 October 2008 between the plaintiffs, the defendant and Citic Pacific Ltd, the defendant is obliged to make an application to the Minister for the Environment for the transfer to the plaintiffs of the status of proponent under Ministerial Statement 635 (as amended) and Ministerial Statement 822.

28 I have omitted from this declaration a reference to the obligation of Mineralogy (which appears to be common ground) in clause 3-2 of Ministerial Statement 635. That obligation is to provide to the Minister for the Environment a letter with a copy of the Ministerial Statement 635 (as amended) and Ministerial Statement 822 endorsed by the plaintiffs that the proposal will be carried out in accordance with the Statements, and contact details and appropriate documentation on the capability of the plaintiffs to carry out the proposal.

29 The reason why this substantive obligation has not been included in the declaration is because (i) it does not appear to be in dispute and (ii) the Citic parties contend that the statement of that obligation may lead to confusion. In reply submissions the Citic parties referred to a part of Mineralogy's proposed declaration which, in effect, contained this obligation. The proposed declaration is that 'the defendant is obliged to make an application, pursuant to condition 3-2 of Ministerial Statement 635 published under section 45(5) of the Environmental Protection Act 1986 (WA)'. The Citic parties said that these words would not quell a controversy but may 'give a false impression that clause 20.1(a) only requires Mineralogy to make an application pursuant to condition 3-2 of the Ministerial Statement'. It is correct that no determination was made by the Court that the application was so limited. No submissions were made on this point at trial. And in the absence of any controversy on this issue, I would not exercise my discretion to extend the declaration to these matters.

[1] Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164 [45] (McLure P; Newnes JA agreeing) citing Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29, 36 37 [9], 50 51 [74] [81] (McLure P). Compare Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184; (2014) 310 ALR 113, 130 [71], 134 [86] (Leeming JA; Ward & Emmett JJA agreeing); Stratton Finance Pty Ltd v Webb [2014] FCAFC 110 [40] (the Court); Newey v Westpac Banking Corporation [2014] NSWCA 319 [86] [91] (Gleeson JA; Basten & Meagher JJA agreeing on this point).

[2] Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29, 50 [79] (McLure P).

[3] Breen v Williams [1996] HCA 57; (1996) 186 CLR 71, 103 (Gaudron & McHugh JJ) quoting G Williams 'Language and the Law IV', (1945) 61 Law Quarterly Review 384, 401. See Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 312 ALR 356, 265 266 [28] (French CJ, Bell & Keane JJ).

[4] See Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 312 ALR 356, 365 [25] (French CJ, Bell & Keane JJ) citing Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 607 (Mason J).

[5] Exhibit A (affidavit of Mr Watson sworn 7 November 2014) [20].

[6] Exhibit A (affidavit of Mr Watson sworn 7 November2014) [4].

[7] Exhibit A (affidavit of Mr Watson sworn 7 November 2014) [19].

[8] Exhibit A (affidavit of Mr Watson sworn 7 November 2014) [15], [27] [33].

[9] Further amended statement of claim [8].

[10] Exhibit A (affidavit of Mr Watson, sworn 7 November 2014); Exhibit B (affidavit of Mr Munro, sworn 27 June 2014).

[11] Environmental Protection Act 1986 (WA) s 38, s 41A.

[12] Environmental Protection Act 1986 (WA) s 37B(1).

[13] Environmental Protection Act 1986 (WA) s 47(1).

[14] Environmental Protection Act 1986 (WA) s 47(2).

[15] Environmental Protection Act 1986 (WA) s 48(4)(a).

[16] Environmental Protection Act 1986 (WA) s 48(4)(b).

[17] Further amended statement of claim [4]; Third further reamended defence [4].

[18] Further amended statement of claim [7] [8]; Third further re-amended defence [7] [8]. See Exhibit 1/1c.

[19] Exhibit B (affidavit of Mr Munro, sworn 27 June 2014) [8].

[21] Further amended statement of claim [10]; Third further re-amended defence [10]. Exhibit 1/3.

[25] Further amended statement of claim [11]; Third further re-amended defence [11].

[31] Further amended statement of claim [15] - [16]; Third further re-amended defence [15] - [16].

[33] Further amended statement of claim [21]; Third further re-amended defence [21].

[35] Further amended statement of claim [19] - [20]; Third further re-amended defence [19] - [20].

[41] Further amended statement of claim [26]; Third further re-amended defence [26]. Exhibits 1/29, 1/36, 1/39, 1/41, 1/42, 1/43.

[42] Further amended statement of claim [7].

[47] Environmental Protection Act 1986 (WA) s 74A(a).

[48] Environmental Protection Act 1986 (WA) s 45C(2).

[49] Environmental Protection Act 1986 (WA) s 46A(2).

[50] Environmental Protection Act 1986 (WA) s 44(3)(b)(iii).

[51] Environmental Protection Act 1986 (WA) s 46C(2)(a)(iii).

[52] Exhibit B (affidavit of Mr Munro, sworn 27 June 2014) [14].

[53] Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896; [1998] 1 All ER 98, 114 (Lord Hoffmann) approved in Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181, 188 [11] (Gleeson CJ, Gummow & Hayne JJ). See also Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, 179 [40] (the Court).

[54] ts 193 (12 November 2014); ts 246 (13 November 2014).

[55] ts 193 (12 November 2014); ts 246 (13 November 2014).

[57] Exhibit 1/6a, cl 3.8, cl 7.3, sch A cl 3.

[61] Exhibit 1/1(d), page 62; Exhibit 1/2.

[64] Mineralogy's written submissions, 27 October 2014, [28].

[65] Exhibit B (affidavit of Mr Munro, sworn 27 June 2014) [27].

[67] Mineralogy's written submissions, 27 October 2014, [29].

[69] Mineralogy's written submissions, 27 October 2014, [41].

[70] Further amended statement of claim [21]; Third further re-amended defence [21]; Exhibit 1/7.

[74] Written submissions of Mineralogy, 27 October 2014 [49].

[82] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 306 ALR 25, 31 [35] (French CJ, Hayne, Crennan & Kiefel JJ).

[84] Mineralogy's outline of submissions on area, 18 November 2014, [1].

[85] Citic parties' submissions in relation to Mining Area, 19 November 2014, [6].

[87] Exhibit 1/12, pages 657, 659; Exhibit 1/13, pages 662, 663; Exhibit 1/14, pages 666, 668.

[88] Citic parties' submissions in relation to Mining Area, 19 November 2014, [2].

[89] See the area marked red on Mineralogy's map and Mining Leases 08/123 - 08/125 and General Purposes Leases 08/264 - 08/266; Exhibit 1/4, page 171; Exhibit 1/5, page 230; Exhibit 1/8, page 560; Exhibit 1/9, page 576.

[90] ts 171, 176-177, 182 (12 November 2014).

[91] Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896; [1998] 1 All ER 98, 114 (Lord Hoffmann) approved in Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181, 188 [11] (Gleeson CJ, Gummow & Hayne JJ). See also Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, 179 [40] (the Court).

[94] Oxford English Dictionary, Online Edition, 'Accordance' Definition 2b.

[95] Macquarie English Dictionary, Online Edition, 'Accordance' Definition 3.

[96] Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2010] WASCA 222; (2010) 41 WAR 318.

[97] Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2010] WASCA 222; (2010) 41 WAR 318, 339 [61].

[98] Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [2010] WASCA 222; (2010) 41 WAR 318, 335 [45].

[99] Nocton v Lord Ashburton [1914] AC 932, 954 (Lord Haldane) quoted with approval in Magill v Magill [2006] HCA 51; (2006) 226 CLR 551, 561 [17] (Gleeson CJ), 615 [207] (Heydon J).

[100] Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33, 39 [21] (Malcolm CJ; Wallwork J agreeing), 50 [55] (Steytler J).

[101] Bhasin v Hrynew [2014] SCC 71 [63].

[102] Androvitsaneas v Members First Broker Network [2013] VSCA 212 [108].

[103] Written submissions of the Citic parties, 9 October 2014, [96].

[104] Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 607.

[105] Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 312 ALR 356, 365 [25].

[106] Mackay v Dick (1881) 6 App Cas 251, 263. See also Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410, 448 449 (McHugh & Gummow JJ).

[107] Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 312 ALR 356, 388 [119].

[108] Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 312 ALR 356, 365 [26].

[109] Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 312 ALR 356, 381 [88] quoting Commonwealth Bank of Australia v Barker [2013] FCAFC 83; (2013) 214 FCR 450, 467 [122] (Jacobsen & Lander JJ).

[110] ts 154 (12 November 2014); ts 242 243, 272 (13 November 2014).

[111] Further amended statement of claim [29].

[112] Gouriet v Union of Post Office Workers [1977] UKHL 5; [1978] AC 435, 501 (Lord Diplock).

[113] Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334, 355 [46] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne & Callinan JJ) quoting Professor Borchard.