BETWEEN : WESTRAINT RESOURCES PTY LTD (ACN 009 083 783)

Courts - Practice and procedure - Application to amend statement of claim - Statute of limitations - Equity - Equitable claims analogous to common law claims

AG Blake [2000] UKHL 45; [2000] 3 WLR 625

Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (1995) 57 FCR 360

Associated Leisure Ltd (Phonographic Equipment Co Ltd) v Associated Newspapers Ltd [1970] 2 QB 450

Atkinson v Fitzwalter [1987] 1 WLR 201

Attorney-General v Blake [2000] UKHL 45; [2000] 3 WLR 625

Baburin v Baburin [1990] 2 Qd R 101

Baburin v Baburin (No 2) [1991] 2 Qd R 240

Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344

Barclays Bank Ltd v W J Simms Ltd [1980] 1 QB 677

Bradford Third Equitable Benefit Building Society v Borders [1941] 2 All ER 205

Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61

Bride v The Australian Bank Ltd & Ors [2000] WASC 310

Clay v Clay [1999] WASCA 8; (1999) 20 WAR 427

Clay v Clay [2001] HCA 9

Commissioner of State Revenue (Victoria) v Royal Insurance Australia Ltd [1994] HCA 61; (1994-5) 182 CLR 51

Coulthard v Disco Mix Club Ltd [2000] 1 WLR 707

David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353

Dimskal Shipping Co SA v International Transport Workers Federaton [1992] 2 AC 153

Diversified Minerals Resources NL v CRA Exploration Pty Ltd [1995] FCA 1049; (1995) ATPR 41-381

Evans v Smallcombe (1868) LR 3 HL 249

Foran v Wight [1989] HCA 51; (1989) 168 CLR 385

General Steel Industries Incv Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Hamilton v Australian Telecommunications Commission [1989] 2 Qd R 18

Hamilton v Kaljo (1989) 17 NSWLR 381

Hodgkinson v Simms [1994] 3 SCR 377

Hooker Corp Ltd v Commonwealth (1986) 65 ACTR 32

Hughes Aircraft v Air Securities Aust (1997) 76 FCR 5

Hughes v Gales (1995) 14 WAR 434

Johnson v Buttress [1936] HCA 41; (1936) 56 CLR 113

Kelly v Cooper [1993] AC 205

KM v HM (1992) 96 DLR (4th) 289

Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221

McGregor v Fraser (1913) 32 NZLR 1325

Nelson v Rye [1996] 2 All ER 186

News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410

Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASCA 255

Orr v Ford [1989] HCA 4; (1989) 167 CLR 316

Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1986) 162 CLR 221

Pedashenko v Blacktown City Council (1996) 39 NSWLR 189

Prosser v Edmonds [1835] EngR 1073; [1835] 160 ER 196

Re Lands Allotment Co [1894] 1 Ch 616

Roumeliotis v Colonial Mutual General Insurance Co Ltd, 14 August 1995, unreported, Supreme Court of Victoria, per Mandie J, BC 9507228

Taylor v Davies [1920] AC 636

Tito v Waddell (No 2) [1977] 1 Ch 107

Triden General Insurance Co Ltd v McNiece Bros Pty Ltd (1988)165 CLR 107

United Dominions Corporation Ltd v Brian Pty Ltd [1985] HCA 49; (1984) 157 CLR 1

Williams v Minister, Aboriginal Land Rights Act 1983 (1994) 35 NSWLR 497

1 SCOTT J: By application dated 15 December 2000, the plaintiff sought to amend the statement of claim. There have been other earlier amendments to the statement of claim and it is not necessary to particularise those amendments in these reasons.

2 On 20 December 2000, programming orders were made which enabled the present application to be heard on 9 and 16 February this year. Following that hearing, senior counsel for the plaintiff sought to add further submissions in reply and was given leave to do so in writing. Those submissions are contained in a document dated 9 March 2001. The defendant was given leave to respond to those submissions and did so in a document dated 4 April 2001. The plaintiff filed further submissions in response on 26 April 2001. Those submissions have been taken into account in these reasons.

3 There are many amendments to the statement of claim proposed in this application and, because it is impossible to particularise all of them in these reasons, the minute of proposed re-amended statement of claim is appended to these reasons. The amendments being sought by the plaintiff are double-underlined in that proposed amendment.

4 In order to understand the way in which these amendments arise, it is necessary to refer in general terms to the history of the relationship between the plaintiff and the defendant that led to these proceedings being instituted. In embarking upon such a summary, it is important to note that all of the steps involved in the relationship between the parties in the history of the matter cannot be referred to in these reasons. Many matters will be omitted and they are not to be taken as being overlooked. As the application is to amend the statement of claim, it is unnecessary to set out the whole history of the events surrounding this action.

5 In August 1984, iron ore mining companies under the control of the late Lang Hancock ("the Hancock companies") embarked upon a programme of disposing of iron ore to Romanian foreign trade enterprises. The Romanian trading enterprises were unable to pay for the iron ore in cash, so that payment was to be effected by way of counter trade.

6 The iron ore was to be sold by the Hancock companies and payment was to be by way of delivery of rolling stock and other barter goods provided in exchange. The agreements relating to the proposal were negotiated at a government level, particularly so far as the Romanian enterprises were concerned.

7 In April of 1985, the Hancock companies agreed with a Romanian company, Mecano Export Import ("Mecano"), to receive iron ore wagons as counter trade, which were to be used by the Hancock companies in the development of an iron ore mine at Marandoo.

8 In September 1985, the Hancock companies decided to develop a mine known as McCamey's Monster ("McCamey's") and to ship the iron ore from that mine via the Mt Newman railway for supply to Romania as part of the counter trade arrangement with the Romanians.

9 As part of the arrangement, the Hancock companies purchased a shareholding in a Hong Kong company called the Burwill Group ("Burwill"), a trading corporation experienced in dealing with barter goods involved in trade between China and the eastern bloc countries.

10 At the time of these negotiations, the Hancock companies hoped to use the defendant's railway line, which was carrying the defendant's iron ore from the Mt Newman mine to Port Hedland. It was necessary for the rail cars provided by way of barter trade from Romania to comply with the existing requirements for the Mt Newman railway. As a consequence, the company involved in preparing the specifications for the ore cars, Clough Engineering, contacted the defendant concerning the specifications for those cars.

11 In September of 1986, a barter agency agreement was entered into involving the Hancock companies, Burwill and the Romanian Government.

12 In the meantime, the Hancock companies were involved in the negotiations for access to the railway between Mt Newman and Port Hedland so as to enable the iron ore from McCamey's to be shipped via that port.

13 In November 1986, a contract was entered into between the Hancock companies and the Romanian Government for the supply of iron ore to the Romanian interests. One of the terms of the contract was that the Romanians were only required to accept iron ore to the extent that they had the equivalent value of barter goods to exchange. An agreement to that effect, being an addendum to the earlier contract, was signed on 3 November 1986.

14 It is to be noted that the Romanian government had a difficulty in that there was no suitable port for ship unloaders in Romania to enable the iron ore unloading to be completed in Romania. As a consequence, the Hancock companies agreed to install the infrastructure and ship unloaders at the Romanian Black Sea port of Constanza at a cost of some $30,000,000. In addition, a canal was to be constructed connecting Constanza with the Danube River so as to create a potential market into the eastern bloc countries from the Black Sea using the Danube and Rhine Rivers.

15 Pursuant to the long term contract for the supply of iron ore, dated 3 November 1986, the Hancock companies were to supply 53,000,000 tonnes of fines iron ore to be paid for by way of barter goods.

16 On 25 May 1987, the Hancock companies and the defendant executed a memorandum of understanding ("MOA"). The MOA was entered into with a view to having the defendant supply the finely crushed iron ore ("fines") from its Mt Newman mine to enable the contract between the Hancock and Romanian companies to be fulfilled. In exchange for the iron ore fines, the defendant was to receive Romanian barter goods as payment and, in particular, the defendant would acquire from the Hancock companies ore wagons including those acquired by the Hancock companies in part payment for the construction of the ship unloaders.

17 It was also part of the MOA that the Hancock companies and the defendant would undertake studies into the feasibility of a long term mining project at McCamey's with a view to a joint venture operation at that site. The defendant was also to have the rights to use the ship unloaders at Constanza constructed by the Hancock companies.

18 It is important to note that, from the Hancock companies' viewpoint, the development of McCamey's was only viable if the Hancock companies could obtain access via the Mt Newman railway to the Port Hedland port facilities on satisfactory terms. It was not feasible for the Hancock companies to develop separate railway and port facilities.

19 Negotiations were commenced for toll charges which would enable the Hancock companies to access the Mt Newman railway to Port Hedland on an economically viable basis. That issue was never resolved.

20 The plaintiff seeks to plead in the statement of claim that the defendant was a larger and more powerful company than the plaintiff and that the plaintiff was in a position of commercial vulnerability by reason of its arrangements with the Romanians.

21 The Hancock companies outlaid in excess of $33,000,000 for the construction of the ship unloaders at Constanza and, in exchange, were to receive a total of 350 ore wagons.

22 The amendments being sought by the plaintiff seek to plead the MOA as part of the basis for alleging that a fiduciary relationship existed between the plaintiff and the defendant. That will be discussed further in these reasons.

23 The history of the matter indicates that, by June of 1988, the Hancock companies were suffering financial hardship and so, by an agreement of 6 June 1988, one of the Hancock companies and Pennant Pty Ltd ("Pennant") entered into an agreement with the defendant. The effect of the agreement is alleged to have been that Pennant would become a partner with the Hancock companies in the sales arrangement with the Romanians. Senior counsel for the defendant has indicated that these arrangements were entered into between the Hancock companies and Pennant without the defendant's knowledge and approval. It was, however, part of the arrangement of 6 June 1988 that the defendant would purchase from the Hancock companies 350 complete sets of ore wagons for a price of $26,000,000, with the ore wagons to pass to the defendant as iron ore was supplied progressively in satisfaction of the contract with Romania.

24 The plaintiff also seeks to plead that the defendant, in any event, agreed to purchase the 75 ore wagons for the sum of $5,570,000 by a number of equal instalments. The agreement of 6 June 1988 was pleaded in the statement of claim prior to the amendments presently under consideration, but the proposed amendments greatly increase the pleaded terms of that agreement by way of additional allegations made by the plaintiff against the defendant.

25 By its amendment, the plaintiff seeks to establish that the plaintiff relied upon the defendant to act in good faith in relation to these contractual arrangements particularly arising out of the agreement entered into on 6 June 1988. As part of that agreement, the parties were required to negotiate in good faith and used their best endeavours to implement, and give full effect to, the proposed arrangement. Other matters are pleaded arising out of that agreement, as can be seen from the statement of claim annexed hereto.

26 It was also part of the agreement of 6 June 1988 that the parties would establish a joint venture management company to be known as the East Pilbara Iron Ore Company ("EPIOC") to act as the negotiating company for the joint venture. It was also proposed that there would be a feasibility study done for the purpose of developing McCamey's as a joint venture between the Hancock companies and the defendant. Other terms of the 6 June 1988 agreement are pleaded in par 3 of the proposed amended statement of claim.

27 Again, the plaintiff, by the amendments, seeks to allege that a fiduciary relationship was established arising out of the agreement on 6 June 1988, and particulars of the basis of that fiduciary relationship are set out in the amendments. This allegation in the proposed statement of claim is supported by UDC v Brian [1985] HCA 49; (1984-1985) 157 CLR 1; Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984-1985) 156 CLR 41.

28 The plaintiff also proposes to plead that it was unable to meet its commitment under the contract between the Hancock companies and the Romanians without increasing its supply of iron ore.

29 The plaintiff seeks to plead that the defendant did not intend to increase the production of iron ore from Mt Newman so as to supply ore to the plaintiff so that in turn the plaintiff would be able to meet its commitments to the Romanians and obtain by barter the 350 ore wagons for supply to the defendant. The plaintiff seeks to plead particulars of the basis upon which it is said that the defendant did not intend to increase the production of iron ore so as to meet the commitment to Romania pursuant to the ore wagon contract.

30 The plaintiff seeks to plead that the defendant did not intend to purchase the 350 ore wagons during the relevant period between 6 June 1988 and 31 March 1992. It is alleged in the proposed amendments that the defendant was not prepared to supply the necessary quantity of iron ore to the Hancock companies without a letter of credit for the full sale price of the iron ore being opened in its favour.

31 It is also pleaded that the defendant was not prepared to assist the Hancock companies in the establishment and operation of EPIOC, the joint marketing company.

32 By the amendments to the statement of claim, the plaintiff seeks to establish that the defendant agreed to purchase a total of 350 ore wagons (being 75 ore wagons which, the plaintiffs claim, were to be sold to the defendant in any event) with the remaining 275 ore wagons to be purchased by way of offset under the Romanian ore sales contract.

33 The plaintiff, in the statement of claim prior to this proposed amendment, alleged that the defendant was in breach of the 6 June 1988 agreement in that it refused to supply any Mt Newman iron ore to the Hancock companies to fulfil the Romanian ore sales contract.

34 The plaintiff pleads that the defendant did not use its best endeavours to implement and give full effect to the arrangements agreed to in the 6 June 1988 agreement. Other breaches of that agreement are alleged and particularised.

35 It should also be mentioned as part of the history of this application, that on 30 August 1989 there was an accident at the defendant's ore mine at Mt Whaleback, so that the defendant in any event was unable to meet its obligations for supply of iron ore to Romania.

36 Eventually, it is alleged that the defendant bought out the Hancock companies' interests in McCamey's at a price which the plaintiff alleges was considerably less than its true value. The amended statement of claim seeks to allege that the Hancock companies had been placed into a position of financial difficulty by reason of the defendant's failure to supply iron ore, and as a result the defendant was able to purchase McCamey's at a price of at least $60,000,000 less than its true worth.

37 The plaintiff seeks to establish a right to equitable compensation; restitution arising out of unjust enrichment; a constructive trust to the extent of the benefits obtained by the defendant arising out of the defendant's access to the Romanian market and an inquiry into the benefits obtained by the defendant from having access to the Romanian markets.

38 It should also be mentioned as part of the history of this action that, prior to the acquisition of McCamey's by the defendant, Hancock Mining Ltd purported to assign its rights to bring legal action to the predecessor of the plaintiff, Hancock Resources Ltd, by a deed made on 1 April 1992 ("the deed of novation"). There is a dispute between the parties as to whether the terms of the assignment are valid in law, and as to whether the terms of the deed of novation are wide enough to encompass the plaintiff's proposed causes of action. That aspect of the matter will be discussed later in these reasons.

39 It should finally be mentioned in dealing with the history of this matter that, by a notice faxed to the court on 9 February this year, further amendments were sought to the statement of claim in a document headed "Lygren Amendments". By that proposed amendment, the plaintiff seeks to claim damages arising out of a contract between the plaintiff and a shipping company, IMR Transport ("Lygren") to transport the iron ore from Port Hedland to Romania. The plaintiff seeks to allege that the plaintiff, through its predecessor, was obliged to pay 50 cents per tonne in respect of 53,000,000 tonnes of iron ore to be shipped to Romania. It is sought to allege that this sum was payable irrespective of whether the iron ore was shipped or not, thus obliging the plaintiff or its predecessor to pay $26,500,000. The plaintiff seeks to plead that, as a result of proceedings brought against the Hamersley Group in London by Lygren in September 1994, it was obliged to, and did, settle the Lygren claim for US$19,500,000 plus costs. The plaintiff seeks to plead that the defendant is liable to reimburse the plaintiff for that amount, being within the assignment of the causes of action assigned to the plaintiff from Hancock Resources Ltd under the deed of novation.

40 That sufficiently sets out the history of this action and sufficiently deals with the proposed amendments to the pleadings.

41 It should also be mentioned that, whilst this action had not been set down for trial when this application came before the court on 20 December 2000, programming orders were made with a view to having the matter entered for hearing on or about 1 July this year. An order for entry for trial was not made as many interlocutory steps were required before the matter was ready for entry for trial. The matter is not to be entered for trial until all interlocutory steps have been concluded. It is contended by the defendant that the proposed amendments to the statement of claim considerably widen the scope of the action, so that corresponding amendments will need to be made to the defence and probably also the reply. The discovery process will have to be re-opened before these amendments (if allowed) could go to trial. I will later deal with the aspects of prejudice which the defendant says it will suffer if these amendments are allowed at this late stage. In addition, the defendant contends that the proposed amendments raise new causes of action which have not previously been pleaded and which are statute barred. Again, that aspect of the matter will be discussed later in these reasons.

42 At this stage, it is important to note that this action has not yet been entered for trial. At the most optimistic, the matter will not be entered for trial before 1 July this year and the list of matters awaiting trial in this Court, particularly long causes matters, are such that it is highly unlikely that the case will be heard this year. It might well be well into next year before hearing dates can be obtained.

43 It is also of some importance to note that this case has been case managed with a view to its orderly progress through to hearing. The amendments sought by the plaintiff, although substantial, are not being sought at the court door at the commencement of trial. They are amendments which the plaintiff seeks to make some months before the matter is due to be listed for trial and many months before it is likely to be heard. The amendments do not involve the withdrawal of admissions that have previously been made. In that respect, the application is to be distinguished from Tony Sadler Pty Ltd v McLeod Nominees (1995) 13 WAR 323, where the existence of a lease was admitted on the pleadings until after the matter had been entered for trial. By the proposed amendment, the defendants sought to withdraw the admission. In that case, Seaman J said at 333:

"The principles which guide the exercise of the discretion to grant or refuse leave to amend are not dissimilar to the discretion to grant or refuse adjournment and the High Court has held that the judge of a busy court is entitled to consider the effect of an adjournment on court resources and the competing claims by litigants in other cases awaiting hearing as well as the interests of the parties and that propositions formulated when the lists were not as congested as they are now and the concept of case management had not developed are no longer applicable: see Sali v SPC Limited [1993] HCA 47; (1993) 67 ALJR 841 at 843-844."

44 Seaman J went on to consider the effect of the amendment sought and said at 335:

"In my view the application to amend was antithetical to the efficient disposal of the business of the court and the maximisation of the efficient use of available judicial and administrative resources, nor would the grant of leave facilitate the timely disposal of a business at a cost affordable by the parties, bearing in mind that it is notorious that parties incur expenses in litigation which are not recoverable by way of party and party costs."

45 In Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146, the High Court had occasion to review the principles surrounding pleading amendments in the light of case management principles and the majority, Dawson, Gaudron and McHugh JJ, cited with approval Sali v SPC Limited (1993) 67 ALR 841, at 849:

"... 'The contemporary approach to court administration has introduced another element into the equation or, more accurately, has put another consideration onto the scales. The view that the conduct of litigation is not merely a matter for the parties but is also one for the court and indeed to avoid disruptions in the courts lists with consequent inconvenience to the court and prejudice to the interests of other litigants waiting to be heard are pressing concerns to which a court may have regard ... Unless we are to mouth the repeated cautions about discretionary judgments, case management, efficiency, practice and procedure, and the advantages of the managing judge, only to ignore them when it comes to the crunch, this appeal must be dismissed.'

It may be said at once that in the passage which we have cited from Sali v SPC Limited Toohey and Gaudron JJ are not to be taken as sanctioning any departure from the principles established in Cropper v Smith and accepted in Clough & Rogers v Frog. Sali v SPC Limited was a case concerning the refusal of an adjournment in relation to which the proper principles of case management may have a particular relevance. However, nothing in that case suggests that those principles might be employed, except perhaps in extreme circumstances, to shut a party out from litigating an issue which is fairly arguable. Case management is not an end in itself. It is an important and useful aid for ensuring the proper and efficient disposal of litigation. But it is always to be borne in mind, even in changing times, that the ultimate aim of a court is the attainment of justice and no principle of case management can be allowed to supplant that aim."

46 In the same case, Kirby J set out in detail general principles surrounding amendments, at 169:

"Amongst considerations which tend to favour the extension of an indulgence to a party applying for it are the following: that this is the only way in which the true issues and the real merits, factual and legal, can be litigated and artificiality avoided; that the oversight which occurred is adequately explained as, for example, that it arose out of sudden and unexpected events; but the proposed amendment is of considerable importance to the rights of a party, particularly where it provides a complete answer to a claim; that any fault is that of the party's legal representatives; that the oversight was wholly accidental; that it was simply the product of unavoidable human error or, possibly, the outcome of the application to the case of fresh legal minds who perceived an important new point; that costs orders or the imposition of other conditions could adequately rebalance the competing claims to justice; and that the hearing date is sufficiently in the future to permit a party to meet the amendment, taking into account any consequences for the gathering of fresh evidence, the conduct of discovery or the like pre-trial procedures and the loss of assigned hearing dates."

47 All of those principles, particularly those referred to by Kirby J in Queensland v J L Holdings Pty Ltd (Supra), fall for consideration in this case. The plaintiff has had a number of legal advisers throughout the years since this action commenced and the submissions of senior counsel are that the proposed amendments arise out of documents uncovered in the course of discovery and through witness statements provided by the defendant as ordered under the case management rules. It is contended that these materials have thrown a different light upon documents earlier discovered in the case, and put a different complexion on the matters to be pleaded. As a result, these amendments are sought so that the true matters in issue between the parties can be fully pleaded and the case presented on a proper factual and legal basis. In relation to the opposing parties' witness statements, such an approach, although novel, has been accepted in Cheers v El Davo Pty Ltd (In liq) [2000] FCA 361.

48 To be weighed against those considerations are the facts that the matters giving rise to the issues between the parties occurred many years ago, as revealed by the summary of facts. The plaintiff and its legal advisers have had a substantial period to evaluate the documents which are central to its claim and, as I have indicated, the pleadings in this case have been amended on several occasions. The chronology of the legal steps taken in this action indicates that the statement of claim was first served on 2 May 1996 and amended on 8 December 1998, prior to the present amendments being sought. The defence and reply have also been amended on a number of occasions. Counsel for the defendant points out that many of the documents which would become relevant by reason of the amendments have now been mislaid or destroyed and that crucial witnesses are no longer available to the defendant. In particular, reference is made to the fact that the principal witnesses in this action have both unfortunately passed away and the President of Romania, who was a potential witness, was assassinated. Other witnesses are now located in various parts of the world and difficult to contact for the purpose of obtaining proofs of evidence. In addition, these events occurred long ago so that the recollections of witnesses are now either non-existent or so lost in antiquity that it is difficult to obtain detailed and accurate evidence. That is compounded in this case where international agreements and transactions are involved. It is necessary for the court to weigh all of those competing considerations together with the interests of justice relating to each party in order to make a determination as to whether or not the amendments should be allowed.

49 In making that determination in a case such as this, all of the factors need to be taken into account; but, on balance, (putting aside for the moment Limitation Act questions), I have come to the conclusion that the amendments should be allowed. This will enable the differences between the parties to be fully litigated. In that respect, the proposed amendments do not substantially alter the framework of the action as originally pleaded, except that the period of time relevant to these causes of action is now significantly extended. In that respect, the original statement of claim in this action, dated 2 May 1996, pleaded the agreement of 6 June 1988, together with the ore wagon sale and purchase agreement of 17 May 1989, as the two documents fundamental to its causes of action. By the proposed amendments, the timeframe will be greatly widened and the issue substantially extended. On the other hand, however, the statement of claim, even with the amendments, pleads causes of action arising out of the relationship between the plaintiff and the defendant involving the Hancock companies' arrangements with Romania. In my view, the proposed amendments do not substantially alter the original framework of the allegations, but rather seek to characterise different legal obligations arising therefrom. In saying that, I accept that discovery questions will need to be substantially revisited because new agreements are sought to be pleaded. Other witnesses no doubt will have to be located and their evidence obtained. In that respect, it is a matter of balancing the respective injustice to the parties and evaluating whether a fair and just result can be achieved with the amendments being allowed.

50 I take into account that some of these amendments raise serious matters of a kind that should not be raised lightly - see Overmeire v National Commercial Banking Corporation of Australia, unreported; SCt of WA (Master Seaman QC); Library No 6316; 29 May 1986, at 6. Whilst matters of fraud are not alleged here, as I have indicated the matters arising out of the allegation of breach of fiduciary duty are serious matters and the amendments should only be allowed where the plaintiff has satisfied the court that it has a properly arguable case.

51 The original statement of claim in this matter, filed on 2 May 1996, pleads in par 2 the agreement of 6 June 1988 and the obligations of the parties pursuant to that agreement which have been discussed earlier in these reasons.

52 The original statement of claim also pleads the agreement of 17 May 1989 relating to the ore wagons' sale and purchase. That pleading alleges the breach of each of those agreements and the consequences which the plaintiff alleges followed from the defendant's breach of the agreements.

53 By par 12 of the original statement of claim, the plaintiff pleads a deed dated 1 April 1992, ("the deed of novation") by which the plaintiff acquired the rights formerly vested in Hamersley Mining Ltd. That statement of claim pleads the damage that it is said to flow from breach of those agreements.

54 Nowhere in the statement of claim, until the course of this application, has any mention been made of the Lygren agreement. In addition, until the proposed amendments, the plaintiff has never pleaded the agreement entered into on 25 May 1987. Nor has the plaintiff previously alleged that a fiduciary relationship existed between the plaintiff and the defendant, which it is now said arises in part from the agreement of 25 May 1987.

55 If the amendments are allowed, it is trite to say that the issues between the parties will be extended back to 25 May 1987 and the terms of the Lygren agreement will, for the first time, be put in issue. In addition, as can be seen from the proposed re-amended statement of claim annexed hereto, issues giving rise to the alleged fiduciary relationship will, for the first time, become relevant to these proceedings. That, in turn, will involve the discovery process being substantially revisited, as the relative financial strengths and weaknesses of the plaintiff and the defendant giving rise to the fiduciary relationship will need to be examined.

56 Counsel for the defendant maintains that these issues will cause a substantial injustice to the defendant in that many of the relevant documents have been destroyed and witnesses who would have been able to give evidence on these issues will no longer be available. In addition, and more centrally to the matter presently under discussion, it is said that these matters are barred by the statute of limitations.

57 It should also be mentioned in passing that the plaintiff, by the amendments in par 16, seeks to allege that the defendant has been unjustly enriched because of the use of the information obtained from the plaintiff's predecessor. Those matters are pleaded in detail in par 16 of the proposed amended statement of claim.

58 It is also pleaded that the defendant, by reason of the plaintiff's vulnerability and the financial straits in which the plaintiff (or more accurately the plaintiff's predecessor) was placed by reason of the defendant's alleged breaches of contract, the defendant was able to obtain control of McCamey's at a gross undervalue. Again, particulars are given of that plea.

59 In the submissions of counsel, there is some conflict in Western Australia as to the appropriate legal principles to apply in considering the effect of the Limitation Act 1935-1978 ('The Limitation Act") on these proceedings.

60 The Limitation Act 1935 - 1978 relevantly provides in s 38:

"38. (1) Subject to the preceding sections of this Act and as hereinafter provided, actions, suits, or other proceedings as herein set out shall and may be commenced within the time herein expressed after the cause of such actions, suits, or other proceedings respectively:-

(c)(v) All other actions founded on any simple contract, including a contract implied in law;

Six years."

61 Section 47 of the Limitation Act provides:

"47. (1) In any action or other proceeding against a trustee or any person claiming through him, or in reference to any trust, except where the claim is founded upon any fraud or fraudulent breach of trust to which the trustee was a party or privy, or is to recover trust property or the proceeds thereof still retained by the trustee or previously received by the trustee and converted to his own use, the following provisions shall apply:-

(a) All rights and privileges conferred by this Act or any statute of limitations shall be enjoyed in the like manner and to the like extent as would have been the case if the trustee or person claiming through him had not been a trustee or person claiming through him.

(b) If the action or other proceeding is brought to recover money or other property and is one to which no existing statute of limitations applies, the trustee or person claiming through him shall be entitled to the benefit and be at liberty to plead the lapse of time as a bar to such action or other proceeding in the like manner and to the like extent as if the claim had been against him (otherwise than as a trustee or person claiming through a trustee) in an action of debt for money had and received; ..."

62 As can be seen from the statement of claim, the plaintiff seeks to allege that the defendant was a constructive trustee of the sum of $60,000,000, being the sum which the plaintiff alleges was the undervalue at which the defendant obtained the equity in McCamey's.

63 Counsel for the plaintiff submitted that there are conflicting decisions in the State of Western Australia on the applicability of the Limitation Act in these circumstances. In Dye v Griffin Coal Mining Co Pty Ltd (1997-98) 19 WAR 431, Malcolm CJ, Kennedy and Owen JJ considered the applicability of the Limitation Act in a case where the plaintiff sought to amend the statement of claim to allege that injury sustained by him in the course of his employment had occurred at a time earlier than alleged in the writ in such a manner as to take the allegation outside the limitation period. Leave to amend the statement of claim was refused by a Deputy Registrar of the District Court and the appellant (plaintiff) appealed to the Full Court. The Full Court dismissed the appeal on the basis that the cause of action sought to be introduced by the amendments constituted a new cause of action and did not arise out of substantially the same facts as those alleged in the original statement of claim. The court held that the amendments raised a course of conduct over an extended period which involved different facts and expanded range of issues. At 439, Owen J, having reviewed the Western Australian and common law authorities, said:

"In the light of the authorities, and as a matter of construction, I think the effect of the rules is that the rule in Weldon v Neal (1887) 19 QBD 394 continues in force in truncated form, being qualified only to the extent that O 21 r 5 allows some amendments out of time for certain limited purposes. Relevantly, when confronted with a proposed amendment that seeks to add a cause of action that is otherwise statute barred, the court has a discretion to allow the amendment under O 21 r 5(5) if the conditions set out in that rule are satisfied. The general discretion in O 21 r 5(1) is limited to that extent.

It seems to me, therefore, that once the trial Judge had decided that the amendment did not come within O 21 r 5(5) that was the end of the matter. His Honour was correct in deciding that O 21 r 5(1) does not confer on the court a general and further discretion to permit amendment, despite the expiry of the relevant limitation period."

64 In the latter case of Morgan v Banning (1999) 20 WAR 475, Owen J said at 476 - 477:

"But the question remains whether the writ covers a "cause of action" which the plaintiff wishes to advance. This calls for a determination of the meaning of the phrase "cause of action". Problems arise when an amendment does, or may, introduce a new cause of action not encompassed within the writ as originally issued. I reiterate that this problem falls to be determined in the statutory context. Neither through the inherent jurisdiction or by rules of court could the court alter the operation of the Limitation Act. Order 21 r 5(2) - (5) is a case in point. These rules empower the court to limit an amendment, if it is just to do so, to correct the name of a party or to alter the capacity in which a party sues or to add or substitute a new cause of action even though the limitation period may have expired. It is not difficult to see how a correction of a name or the alteration of a capacity could be done without interfering with any rights that the defendant may have had to raise a limitation defence. Adding or substituting a new cause of action is more problematic.

The issue falls away if the phrase "cause of action" in O 21 r 5(5) is understood in a narrow sense as meaning the basket of facts which give rise to the right to approach the court for relief rather than as the description of the right to sue by reference to the old forms of action. This must be so or the rule would be in conflict with the statute and, thus, ultra vires. It is interesting to compare the position in England. The Limitation Act 1880 (UK), s 35(5)(a) contains words that are virtually identical to those in our O 21 r 5(5). The same words appear again in English O 20 [sic 21] r 5(5). Accordingly, the issue of construction with which we are confronted would not arise in England because there is a statutory recognition of the right to substitute a new cause of action so long as there is the requisite degree of coincidence in the facts.

That is not to say that O 21, r 5(5) is devoid of meaning or an area of operation. It avoids overly technical and rigid investigation as to the degree of coincidence which must be found to exist between the facts necessary to establish the cause of action as originally advanced and those contained in the proposed amendments before the power to permit the amendment can be exercised.

This is the issue that arose in Dye v Griffin Coal Mining Pty Ltd (1998) 19 WAR 431. In that case a truck driver commenced proceedings against his employer for damages for a back injury that he claimed he suffered while driving the vehicle. In its original form the statement of claim alleged negligence in one specific incident as a result of which the injury was said to have been suffered. The proposed amendment sought to allege a whole series of incidents which caused or accumulated to a cause of injury rather than an injury arising from a single incident. In other words, the amendment sought to add further acts of negligence over and above that said to have been committed in the single incident referred to in the original pleading. The court held that the range of facts and circumstances necessary to prove negligence as alleged in the proposed amendment was so far in excess of that envisaged in the original pleading that it could not be said to arise substantially out of the same facts. Accordingly, leave to amend was refused. It was in that context that the discussion of the rule in Weldon v Neal (1887) 90 QBD arose. This has been sufficiently canvassed by Wheeler J. I respectfully agree with her Honour's analysis of the authorities, including Dye."

65 In that passage Owen J referred to the judgment of Wheeler J in the same case and in particular her Honour's judgment at 483:

"It appears to me that two consequences follow from the proposition that the Limitation Act is concerned with the writ and not with 'good or bad endorsements', let alone with statements of claim. First, if the writ when issued, although defective, is not a nullity, and its terms are wide enough to encompass the amendments sought to be made to clarify or particularise or 'cure' it, then it seems that no question of limitation arises. Such an action is within time and subsequent steps (even those directed to defects in the original endorsement) are merely steps taken in a validly instituted action with respect to which it is not necessary to consider limitation questions. However, if it is so irregular that, subsequent to the expiry of the limitation period the defendant is successful in having it wholly set aside, it will then be too late for the plaintiff to bring a further action.

The second proposition which seemed to me to follow is that if the defective endorsement appearing on the writ when issued, is not of a type which is capable of encompassing amendments sought to be made after the expiry of the limitation period, so that the amendments truly 'add' an additional and time-barred cause of action (rather than particularising, clarifying, or expanding one already instituted) then, whether leave to amend is granted or not, the new action remains time barred. Whatever the Rules of Court may provide, an action which is in fact instituted out of time is able to be defeated by reliance upon the Limitation Act, which the court has no power to override, whether by a procedural rule of 'relation back' or otherwise.

The clearest observations on this point are those of Toohey J, with whom Deane J agreed, in Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 559 - 562, where his Honour rejected the view that Weldon v Neal was no more than a 'rule of practice', and expressed the opinion that where an amendment seeks to introduce an 'admittedly new cause of action' a court has no power to ignore any statutory limitation period governing the bringing of that cause of action. Although these remarks were strictly obiter, they appear to me to stem from well understood principles governing the relationship between statutes and Rules of Court, and I would respectfully adopt them. Those remarks also make sense of occasional references in the authority to the 'power' rather than the 'practice' of the court in permitting amendments after the expiry of limitation periods including those which appear in Weldon v Neal itself."

66 Wheeler J went on to discuss the matter further at page 486 and said:

"The position now as I understand it is that the rule in Weldon v Neal applies to a cause of action which is truly new, and which may not be abrogated without statutory authority. At least in a clear case, the court should refuse to allow the addition of a new cause of action in that sense. There may of course be circumstances where it is not clear how the amendments relate to the original cause of action and in such a case, it may be preferable that the issue be left for trial, just as the issue may be left for trial where it is not clear from the pleading whether an action is time barred. If there is no new cause of action in an existing cause of action raised in the endorsement, O 21 r 5(5) is applicable. When the discretion is exercised in that case, it is of course to be remembered that the effect of a refusal to permit amendment may be that the plaintiff will be unable to bring an issue before the court at all, and questions of justice to the plaintiff, delay, reasons for delay, prejudice to the defendant or other persons, possible abuse of process, among others, will be relevant."

67 Applying those principles to this case, it seems to me inevitable that the "Lygren" amendments should not be allowed as infringing those principles and being beyond, and well beyond, the limitation period. That is so even although it may be contended that the loss allegedly sustained by the plaintiff is said to be part of the damages claim arising out of the breach of fiduciary duty as alleged by the plaintiff. The application in relation to amendments referred to as the "Lygren" amendments will be refused.

68 The plaintiff contends that the proposed amendments insofar as they plead breach of fiduciary duty arising out of that contract and the contract of May 1987 is not statute barred. Because the claim is in equity it could only be statute barred if it was encompassed by an analogous claim at common law. In this respect counsel for the plaintiff relies upon passages in "The Principles of Equity" (Law Book Company 1996) and in particular paragraphs 1002, 2910 and 2911 and in particular 2910:

"A few claims to equitable relief are specifically barred by a statutory period of limitation. Undue influence, innocent misrepresentation rectification and equitable compensation claims are all free of a statutory period of limitation. So too are claims for breach of fiduciary duty. "

69 In this respect it is to be noted that the plaintiff's claim for breach of fiduciary duty does not rely entirely upon the agreement entered into in May 1987. That is only part of the plaintiff's claim in that regard. However, insofar as the plaintiff seeks to base its claim upon that agreement, whilst it is arguable, in my view, that the statute of limitations would apply, by analogy that is a matter for trial: cf Spry, "The Principles of Equitable Remedies" (5th edition (1997) par 419-420) and Cia de Seguros Imperio v Heath (REBX) Ltd [2000] EWCA Civ 219; [2001] 1 WLR 112 at 122 and Levi v Stirling Brass Founders Pty Ltd (1997) 36 ATR 290 at 295-296.

70 It is to be noted that the proposed amended statement of claim does not allege fraud against the defendant so that the fraud exception to the limitation rule does not apply: Kitchen v Royal Airforce Association & Ors [1958] 1 WLR 563 at 568-569; Paragon Finance plc v DB Thackerar & Co [1998] EWCA Civ 1249; [1999] 1 All ER 400 per Millett LJ at 418. These issues, however, in my opinion, can only be resolved after trial and when all the evidence has been considered. It is not a pleading issue.

71 The issue as to whether the plaintiff is seeking to establish only a remedial constructive trust as distinct from a true trust so that, in the latter case, s 47(1) of the Limitation Act would not apply is a matter for trial: Mayne v The Public Trustee [1945] HCA 38; (1945) 70 CLR 395. In that respect it is open to the defendant to plead the statute of limitations in its defence as a consequential amendment to the amended statement of claim.

72 The other amendments, including those which relate to the 6 June 1988 agreement do not of course come within the same category and, in my view, should be allowed because they reparticularise matters which were previously alleged in the pleadings. The amendments in relation to the ore wagon sales and purchase agreement of 17 May 1989 were already pleaded in the statement of claim and, in my view, the amendments concerning that agreement should be allowed together with the claims arising therefrom.

73 I conclude by indicating to counsel that this decision is limited to pleading points and does not purport to define or confine the admissibility of evidence at the trial. If the defendant pleads the statute of limitations, then the issue as to whether that statute applies to the equitable claims by analogy, can be fully explored.

(a)and was at all relevant times a company duly incorporated pursuant to the laws of the State of Western Australia and was formerly originally known as Pilbara Port & Railroad Resources Company Pty Ltd and then known as Hancock Resources Ltd: and

(b)entitled to bring this proceeding by virtue of the matters alleged in paragraphs 12-14 hereof.

2. The Defendant is and was at all relevant times a company duly incorporated pursuant to the laws of the State of Western Australia and was formerly known as Mt Newman Mining Co Pty Ltd.

2A.1On 25 May 1987 Hancock Mining Limited ("HML") (now known as BHP Iron Ore (Jimblebar) Pty Ltd) and the Defendant executed a Memorandum of Agreement ("MOA").

2A.2The circumstances in which the MOA was executed were as follows:

(a)Mr LG Hancock had established excellent relations with, inter alia, the Socialist Republic of Romania ("Romania") enabling him, on behalf of HML, to enter into contracts to supply Western Australian iron ore using major new unloading facilities, which Mr LG Hancock was having built at the Romanian Black Sea port of Constanza;

(b)a new canal connected Constanza with the Danube, creating a potential market greater than Japan for competitive iron ore supply into the Eastern Bloc from the Black Sea along the Danube and to the Rhine;

(c)HML had entered into a long term contract with the Romanian purchasing authority, Mineralimportexport (a body established by Romania) ("Mimex") dated 3 November 1986, to supply 53,000,000 tonnes of fines ore, payment for which was to be completely in barter goods ("Romanian Ore Sales Contract");

(d)HML did not have an operating iron ore mine but was the holder of Mining Lease no.s 266A which contained resources or iron ore and which was known as "McCamey's Monster" ("McCamey's Monster");

(e)Economic analysis performed by the Defendant in consultation with HML indicated that a full mining development of McCamey's Monster was not viable under then current economic conditions, but an initial mining operation of the McCamey's scree ore deposits could be viable with appropriate assistance from the Defendant;

(f)the Defendant was keen to supply iron ore to new markets in eastern Europe and in particular, keen to supply Mt Newman fines to such new markets; and,

(g)HML wanted to commence the development of the McCamey's Monster ore deposits and to sell ore wagons which it would receive from the Romania in part payment for ship unloaders.

The Plaintiff relies upon the joint press release drafted by the Defendant dated 28 May 1987.

(a)the Defendant would supply Mt Newman fines to Romania to enable the delivery obligations under the Romanian Ore Sales Contract to be met and in return for the Mt Newman fines sold to Romania, the Defendant was to receive Romanian barter goods which would be sold internationally;

(b)HML and the Defendant would set up a jointly owned company as sales representative initially for the sale of Mt Newman fines to Romania and during the initial stage of the McCamey's development, lump scree sales by HML to the Defendant, and in the longer term the sale of Mt Newman fine ore and McCamey's ore to Romania;

(c)the Defendant would acquire from HML the ore wagons that it was to receive from Romania in part payment for the ship unloaders;

(d)payment by the Defendant for the ore wagons would be satisfied by the sale of Mt Newman fines to HML for on-sale to Romania under the Romanian Ore Sales Contract;

(e)HML and the Defendant would undertake joint studies as to the viability of long term mining operations at McCamey's Monster and the Defendant might elect to participate in a joint venture with HML for the long term development of McCamey's Monster; and,

(f)the Defendant would acquire equivalent rights to HML to use the ship unloaders at Constanza commencing on the completion of contractual arrangements for the purchase by the Defendant of McCamey's lump scree ore.

The Plaintiff relies upon the said joint press release.

2A.4In May 1987 and until April 1992 the Defendant had substantial commercial advantages over HML as to the subject matters of the MOA, in that:

(a)it was not commercially viable to develop McCamey's Monster without access to the Mt Newman railway and Port Hedland port facilities on satisfactory terms;

(b)Mr LG Hancock and HML did not have access to the Mt Newman railway and the size of the McCamey's Monster project, when fully operational, did not warrant the development of a dedicated railway line and port facilities;

(c)the Defendant had majority ownership and control of the Mt Newman railway;

(d)the Defendant would not agree toll charges for use of the Mt Newman railway and port facilities with HML that would make development of McCamey's Monster, based on revenues from the Romanian Ore Sales Contract, economically viable;

The Plaintiff relies upon Sections 2.3 and 2.4 of the Defendant's document entitled "A Proposal to Enter into Contractual Arrangements with Hancock Mining Limited" dated 1 March 1988 (discovered document no. AQ1) ("Proposal to Enter Into Contractual Arrangements").

(e)BHP Limited (formerly known as The Broken Hill Proprietary Company Limited) ("BHP"), the parent of the Defendant, was a world leader in iron ore mining and minerals development and had established contacts with global markets. It also had (through, inter alia, the coal division of BHP-Utah) world wide experience in barter trade and, in particular, selling coal to Romania by way of barter trade for use by steel foundries;

(f)BHP was a very substantial Australian corporation with significant financial resources; and,

(g)HML had no expertise in the fields of mining development, ore sales or barter trade.

2A.5In May 1987 and until April 1992 to the Defendant's knowledge, HML was in a position of commercial vulnerability.

(a)Sections 2.1 - 2.4 of the Proposal to Enter into Contractual Arrangements;

(b)Section 5 of a memorandum from Mr G Wedlock to Mr G Freeman dated 22 April 1988 entitled "Notes for discussion with Brian Johnson" (discovered document no. CK25).

(c)HML had outlaid 260,000,000 Austrian schillings (approximately A$33,635,000) in payment for two (2) ship unloaders being constructed for the Romanian port of Constanza. HML agreed with an instrumentality of Romania, Ice Mecanoexportimport, to accept the supply of 340 ore wagons (later amended to 350) fabricated by it in Romania to the Defendant's specifications, in part payment for the ship unloaders. Those ore wagons were designed for use on the Mt Newman railway and in ore wagon unloaders owned and operated by the Mt Newman Joint Venture.

2A.6From about December 1986 and thereafter HML:

(a)disclosed to the Defendant and entrusted the Defendant with knowledge of the matters alleged in paragraph 2A.5 and the particulars given thereunder;

(b)introduced the Defendant to HML's Romanian (and other) contacts and disclosed to the Defendant the terms of its Romanian contracts; and.

(c)sought the Defendant's assistance to develop McCamey's Monster and purchase the ore wagons on a joint venture basis.

2A.7Therefore, by reason of the matters alleged in paragraphs 2A.4 to 2A.6, in May 1987 and until April 1992, to the Defendant's knowledge, HML was relying upon the Defendant to act in good faith and with due regard to HML's interests in its dealings with HML as to the subject matter of the MOA.

The knowledge is to be inferred from the terms of the MOA and from the matters alleged in paragraphs 2A.4 to 2A.6.

2A.8There were express terms of the MOA, inter alia, that the Defendant would:

(a)pursuant to clause 18, resolve in good faith the arrangements relating to the sale of the Romanian bartered goods received in exchange for Mt Newman ore and McCamey's ore; and,

(b)execute and do all such further acts and things necessary or desirable to implement and give full effect to the provisions and purposes of the MOA.

2A.9Further, there were implied terms of the MOA, inter alia, that the Defendant would:

(a)act in good faith and with due regard to HML's interests pursuant to the MOA; and,

(b)do all things reasonably within its power to give HML the full benefit of the MOA and do nothing to interfere with or prevent the full benefit thereof from accruing to HML.

Each term is implied by law. Alternatively, the duty alleged in paragraph (a) is to be implied in fact by virtue of the matters alleged in paragraph 2A.8.

2A.10Further, by the MOA, HML and the Defendant were contemplating the formation of an unincorporated joint venture for the development of McCamey's Monster and the exploitation of the Romanian Ore Sales Contract.

2A.11By virtue of the matters alleged in paragraphs 2A.2 to 2A.7 and 2A.10 the Defendant stood in a fiduciary relation to HML and owed duties to HML:

(a)to act in the joint interests of HML and the Defendant under the MOA;

(b)to act in the interests of HML thereunder;

(c)to avoid any conflict between the Defendant's own interests, and

(i)the joint interests of HML and the Defendant under the MOA; or

(ii)the interests of HML thereunder;

(d)to prefer the interests of HML or the joints interests of them both when and if such a conflict should arise;

(e)to act in the utmost good faith toward HML and make full disclosure of all matters within or coming to the knowledge of the Defendant that might affect the interests of HML or the joint interests of them both under the MOA; and,

(f)not to use its position to acquire benefits for itself or a third party at the expense of HML.

2BIn the period from execution of the MOA until January 1988 HML and the Defendant negotiated the terms of various agreements contemplated by the MOA.

3. As a result of the negotiations referred to in paragraph 2B and further negotiations which commenced in March 1988, on 6 June 1988, HML, the Defendant and Pennant Pty Ltd entered into an agreement in writing ("6 June 1988 Agreement") whereby the parties agreed: By an agreement in writing made between Hancock Mining Ltd ("HML") (now known as BHP (Jimblebar) Pty Ltd), Pennant Pty Ltd and the Defendant, made on or about 6 June 1988 ("Principal Agreement" "6 June 1988 Agreement") the Defendant agreed with HML, inter alia:

(a) to procure the sale of and delivery of 14,000,000 tonnes of Mt Newman iron ore in accordance with the Romanian Ore Sales Contract;

(b) to establish a joint management company to, inter alia, be responsible for all marketing activities associated with the sale facilitate the sale of Mt Newman iron ore under the Romanian Ore Sales Contract including, without limitation, price negotiations, freight arrangements and administration of sales and countertrade matters in satisfaction of the obligations of HML under the Romanian Ore Sales Contract;

(c)the Defendant would to purchase from HML 350 complete sets of Ore Wagons free into store Port Hedland Western Australia for a price of $26,000,000 $26 million on terms whereby property in such Ore Wagons was to pass progressively to the Defendant as and when payment was made, such payments to be by periodic instalments made progressively and evenly during the term of the 6 June 1988 Agreement as and when ore was delivered by the Defendant in satisfaction of HML's obligations under the Romanian Ore Sales Contract, at a fixed dollar rate per tonne of Mt Newman iron ore sold under the Romanian Ore Sales Contract equal to $26,000,000 $26 million divided by 14,000,000 14 million tonnes;

(ca)the Defendant would in any event purchase provided that 75 of such ore wagons during the term of the 6 June 1988 Agreement for were to be delivered and paid for (in the sum of $5,571,000 $5.571 million) irrespective of whether or not ore was delivered to Romania by the Defendant in satisfaction of HML's obligations under the Romanian Ore Sales Contract and pay such sum by four annual instalments of $1,392,750 on 31 March of each year during the term of the 6 June 1988 Agreement; and

(cb)the term of the 6 June 1988 Agreement was:

(i)from 1 June 1988 to 31 March 1992; or

(ii)the period during which 14,000,000 tonnes of Mt Newman iron ore would be sold under the Romanian Ore Sales Contract,

(d) that HML and the Defendant would more fully and formally record the terms of their agreement with respect to, inter alia, the terms of sale of the Ore Wagons in another document to be executed in due course.

The 6 June 1988 Agreement Principal Agreement is in writing and dated 6 June 1988. The Plaintiff will refer to the 6 June 1988 Agreement Principal Agreement at trial for its full terms and effect.

3AABy reason of the matters alleged in paragraph 2A.4 to 2A.6 during the negotiations alleged in paragraph 2B and until April 1992, to the Defendant's knowledge, HML was relying upon the Defendant to act in good faith and with due regard to HML's interests in its dealings with HML as to the subject matter of the 6 June 1988 Agreement

The particulars given under paragraph 2A.7 are repeated.

3ABThere were express terms of the 6 June 1988 Agreement, inter alia, as follows:

(a)each of, inter alia, HML and the Defendant would negotiate in good faith and use its best endeavours to implement and give full effect to the proposed arrangements contemplated thereby;

(b)each of, inter alia, HML and the Defendant would execute as soon as practicable but in any event by 31 August 1988, such formal documentation as may be appropriate and consistent with the 6 June 1988 Agreement;

(c)if formal documentation was not executed by 31 August 1988 each of, inter alia, HML and the Defendant would nevertheless implement and be bound by the arrangements contemplated thereby;

(d)the parties would undertake an immediate feasibility study in respect of the development of bedrock mining at McCamey's Monster;

(e)once the results of such feasibility study were to hand, HML and the Defendant would conduct negotiations in good faith to determine and reach "in principle" agreement for the development of McCamey's Monster;

(f)HML was not free to deal with and make other arrangements in respect of the development of bedrock mining at McCamey's Monster for as long as HML and the Defendant had rights and duties vis-à-vis one another with respect thereto under the 6 June 1988 Agreement; and,

(g)the Defendant would procure the chairman of the joint management company to act in good faith and not do anything to unduly prejudice or interfere with the continued maintenance of the Romanian Ore Sales Contract or compliance by HML of its obligations thereunder or the proposed development of McCamey's Monster (clause 2 of Part 4 of the 6 June 1988 Agreement).

3ACFurther, there were implied terms of the 6 June 1988 Agreement, inter alia, that the Defendant would:

(a)act in good faith and with due regard to HML's interests pursuant to the 6 June 1988 Agreement; and,

(b)do all things reasonably within its power to give HML the full benefit of the 6 June 1988 Agreement and do nothing to interfere with or prevent the full benefit thereof from accruing to HML.

PARTICULARSEach term is implied by law. Alternatively, the duty alleged in paragraph (a) is to be implied in fact by virtue of the matters alleged in paragraph 2A.7.

3ADFurther, by the 6 June 1988 Agreement HML and the Defendant were contemplating:

(a)the formation of an incorporated joint venture, in the form of the joint management company, to be responsible on their behalf for exploiting the Romanian Ore Sales Contract during the term of the 6 June 1988 Agreement; and,

(b)the formation of an unincorporated joint venture for the development of bedrock mining at McCamey's Monster.

3AEBy virtue of the matters alleged in paragraphs 2A.2 to 2A.7, 2A.10, 2B and 3AB to 3AD, the Defendant stood in a fiduciary relation to HML and owed duties to HML:

(a)to act in the joint interests of HML and the Defendant under the 6 June 1988 Agreement;

(b)to act in the interests of HML thereunder;

(c)to avoid any conflict between the Defendant's own interests, and

(i)the joint interests of HML and the Defendant under the 6 June 1988 Agreement; or

(ii)the interests of HML thereunder;

(d)to prefer the interests of HML or the joints interests of them both when and if such a conflict should arise;

(e)to act in the utmost good faith toward HML and make full disclosure of all matters within or coming to the knowledge of HML that might affect the interests of HML or the joint interests of them both under the 6 June 1988 Agreement; and,

(f)not to use its position to acquire benefits for itself or a third party at the expense of HML.

3A Addendum 4 to the Romanian Ore Sales Contract ("Addendum 4"), executed by Mr Kevin Dalby on behalf of HML and Mr C. Petrescu on behalf of MIMEX on 12 February 1988, expressly provided, inter alia, that in the event that agreement on price was not resolved by 15 March in any Contract Year, then during the period from 1 April until the date a price was agreed, deliveries of iron ore of the quantity being negotiated were to continue with provisional payment based on the same price used in the previous Contract Year. The Plaintiff will refer to Addendum 4 at trial for its full terms and effect.

3B The Defendant was aware, or alternatively ought to have been aware, of the contents of the Romanian Ore Sales Contract (including Addendum 4) prior to the execution of the 6 June 1988 Agreement.

(a) In a memorandum dated 2 February 1988 to Mr Gordon Freeman, the Chief Executive Officer of the Defendant, Mr Geoff Wedlock, the General Projects and Engineering Manager of Mt Newman Mining Co Pty Ltd, expressly addressed the issue of the Romanian Ore Sales Contract.

(b) During the period 10-12 February 1988 in Bucharest Mr D.A. Carroll on behalf of the Defendant, conducted a series of negotiations with MIMEX and HML, which negotiations included amendments to the Romanian Ore Sales Contract on the subjects of quality and pricing.

• Addendum 4 constituted Appendix B to "A Proposal to Enter Into Contractual Arrangements With Hancock Mining Ltd", a document created by the Defendant and dated 1 March 1988.
• In a letter dated 13 May 1988 to Mr Geoff Wedlock, the General Projects and Engineering Manager of Mt Newman Mining Co Pty Ltd, Messrs Robinson Cox, solicitors:

(i) referred to then existing business arrangements as being based upon, inter alia, the Romanian Ore Sales Contract;

(ii) expressed an understanding of arrangements then proposed to be formalised as involving, inter alia, an obligation that "Mt Newman will deliver Mt Newman fines to Romania for four years in accordance with the Romanian contract";

• proposed the formalisation of the then existing business arrangements and the obligations of relevant parties by the execution of written contracts.

The Plaintiff will refer to the letter of 13 May 1988 at trial for its full terms and effect.

3C The 6 June 1988 Agreement and the Romanian Ore Sales Contract provided for the sale of 14,000,000 tonnes of Mt Newman iron ore by the Defendant on behalf of HML to Mimex from 6 June 1988 until 31 March 1992 as follows:

(a) A US dollar price per Fe tonne unit of iron ore to be supplied by the Defendant to MIMEX was to be negotiated and agreed by a joint management company;

(b) The joint management company, in conjunction with Metalimportexport ("Metalex") an instrumentality of the Socialist Republic of Romania, would agree with HML the nature of the goods ("Goods") to be supplied by Metalex as payment for the iron ore purchased by Mimex;

(c) Burwill Ltd ("Burwill"), a Hong Kong based trading corporation, would sell the Goods on the market to third parties for cash;

(d) HML would establish letters of credit in favour of the Defendant so that the Defendant could be paid in cash for the iron ore sold to MIMEX;

(e) The cash realised from the sale of the barter goods would go to HML to discharge the obligations of HML in respect to the letters of credit posted in favour of the Defendant and any excess would be for the account of HML.

(f) The Defendant would then have to apply a portion of the proceeds received from the sale of the iron ore to MIMEX to acquire the Ore Wagons from HML under the Ore Wagons Sale and Purchase Agreement.

• The price for iron ore, once agreed, would continue to apply as provided by Addendum 4 to the Romanian Ore Sales Contract until such price was varied.

3DPrior to, and at the time of entering into the 6 June 1988 Agreement, the Defendant knew ("BHP's knowledge") that:

(a)without increasing production of iron ore from Mt Newman the Defendant could only supply up to 10,000,000 tonnes during the contract period, and not the 14,000,000 tonnes required to be sold so as to oblige the Defendant to pay for all 350 Ore Wagons.

(i)The Defendant's knowledge is referred to in paragraph 9 of the witness statement of Mr J Rouse who was in June 1988 a director of the Defendant and its General Manager for Marketing. It is also to be inferred from paragraphs 16 of the witness statement of Mr L Dean, 12 of Dr B Greene and 16 of Mr R Oldham which although referring to a later point in time than 6 June 1988 give rise to the implication that that was there and therefore the Defendant's belief in June 1988;

(ii)The Defendant's knowledge is to be inferred from the Proposal to Enter into Contractual Arrangements, and in particular paragraph 6.2.

(b)the Defendant had no intention to increase Mt Newman iron ore production so as to meet the demand from Romania.

The Defendant's lack of intention is to be inferred from the matters referred to in sub-paragraph (a) hereof. It is further to be inferred from the fact that despite an agreement between the Defendant and Mimex for the Defendant to supply to Mimex on behalf of HML Mt Newman iron ore at US$0.39 cents per Fe tonne unit CIF Constanza (constituted by conversations between Dr B Greene on behalf of the Defendant and Mr C Petresceu on behalf of Mimex on 5 July 1989; a written protocol signed by those persons on 5 July 1989; the telex from Mr C Petresceu to Dr B Greene of 20 July 1989 and Addendum Nine dated 26 July 1989 made to the Romanian Ore Sales Contract), the Defendant supplied no Mt Newman iron ore to Romania pursuant to the 6 June 1988 Agreement and from about 16 August 1990 refused to supply any Mt Newman iron ore on behalf of MHL to Romania pursuant to the Romanian Ore Sales Contract. It is also to be inferred from paragraph 6.2 in the document referred to in the particulars to sub-paragraph (a) above.

(c)the Romanian iron ore market was not capable of sustaining the level of sales necessary to oblige BHP to pay HML for the remaining 275 Ore Wagons;

(i)The Defendant's preparedness, or lack of preparedness, is to be inferred from its subsequent conduct as alleged in the particulars to paragraph 9 below, specifically sub-paragraphs (vii), (ix), (x), (xi), (xii), (xiii), (xiv), (xv), (xvi), (xviii), (xix), (xx), (xxi) and (xxii).

(ii)The particulars to subparagraphs (b) hereof are also relied upon.

(iii)The Defendant's knowledge is also to be inferred from the Proposal to Enter into Contractual Arrangements and in particular paragraph 6.2.

(d)the Defendant did not intend to purchase 350 Ore Wagons in the relevant period, namely 6 June 1988 to 31 March 1992;

(i)According to paragraph 9.1 of the Proposal to Enter into Contractual Arrangements, the Defendant's current business plans limited projected sales to eastern Europe to 1,000,000 tonnes per year to 1990 and 1,500,000 tonnes per year to after that date. One of the stated reasons for those limited projected sales was:

"...The need to ensure that our more traditional markets are satisfied..."

(ii)The Defendant's knowledge is to be inferred from paragraph 6.2 in the document referred to in the particulars to subparagraph (a) above.

(e)the Defendant was not prepared to supply Mt Newman iron ore by way of barter trade but was only prepared to do so if a letter of credit for the full sale price was opened in its favour prior to loading a vessel for shipment;

(i)The Defendant's lack of preparedness is to be inferred from the allegations made in paragraphs 9 and 4 - 4F (inclusive) below.

(ii)The particulars to sub-paragraphs (b) and (c) are also relied upon; and,

(f)the Defendant was not prepared to assist HML or the joint marketing company to effect sales of iron ore to Romania and suitable barter trades.

(i)The Defendant's lack of preparedness is to be inferred from the allegations made in paragraphs 9 and 4 - 4F (inclusive) below.

(ii)The particulars to subparagraphs (b) and (c) are also relied upon.

(iii)According to paragraph 9.1 of the Proposal to Enter into Contractual Arrangements, the Defendant's current business plans limited projected sales to eastern Europe to 1,000,000 tonnes per year to 1990 and 1,500,000 tonnes per year to after that date. One of the stated reasons for those limited projected sales was:

"...The need to ensure that our more traditional markets are satisfied..."

(iv)The Defendant's knowledge is also to be inferred from paragraph 6.2 in the document referred to in the particulars to subparagraph (a) above.

4. Pursuant to the 6 June 1988 Agreement Principal Agreement:

(a) HML and the Defendant caused Eastern Pilbara Iron Ore Company Pty Ltd ("EPIOC") to be incorporated on or about 15 June 1988 to perform the role of the joint management company under the terms of the 6 June 1988 Agreement Principal Agreement;

(b)50% of the shares in EPIOC were to be owned by HML and 50% by the Defendant; and

(c)each of HML and the Defendant was to appoint three (3) directors of EPIOC and the Defendant was to appoint the Chairman who was to have a casting vote on EPIOC's board of directors.

4AThe initial directors of EPIOC were Mr J Rouse, who was also appointed Chairman, Mr G Wedlock and Mr D Carroll all appointed by the Defendant and Mr KW Dalby, Mr G Alleyn and Mr G Schwab appointed by HML.

4BIn mid 1989 Mr L Dean, appointed by the Defendant, replaced Mr J Rouse as Chairman.

4CMr Oldham, appointed by the Defendant, was manager for EPIOC until mid-1989 when he was replaced by Dr Greene, appointed by the Defendant.

4DUntil January 1990 Mr O'Shannessy, a solicitor employed by the Defendant was secretary of EPIOC.

4EAt all relevant times EPIOC's iron ore sales team were appointed by the Defendant, and included Dr B Greene and Mr J Maith.

4FBy reason of the matters referred to in paragraphs 4B to 4F at all relevant times the Defendant in fact controlled EPIOC and controlled the extent to which it performed its responsibilities as alleged in paragraph 3(b).

(i)The control came from the Defendant appointing the Chairman of EPIOC, from personnel of the Defendant occupying the positions of manager, secretary and iron ore sales team and from the fact that the Defendant and its personnel appointed as directors, officers and employees of EPIOC had considerable specialised knowledge of the development and marketing of iron ore sales and countertrade whereas HML and its appointed directors did not.

(ii)The Plaintiff also relies upon a letter dated 18 August 1988 from the Defendant to C.I. Minerals Australia Pty Ltd. Control in fact of EPIOC by the Defendant is to be inferred from the answer the question 6(2) therein.

5. Pursuant to the terms of the Principal Agreement, EPIOC, with the knowledge and consent of the Defendant, negotiated and agreed with MIMEX a price for Mt Newman iron ore to be delivered by the Defendant on behalf of HML under the Romanian Ore Sales Contract.

5AIn the period from execution of the 6 June 1988 Agreement until mid-May 1989 HML and the Defendant negotiated the terms of various agreements contemplated by the 6 June 1988 Agreement.

ORE WAGONS SALE AND PURCHASE AGREEMENT

6. By a document dated 17 May 1989, HML and the Defendant more fully and formally recorded the terms of their agreement with respect to the sale and purchase of the Ore Wagons ("Ore Wagons Sale and Purchase Agreement").

The Ore Wagons Sale and Purchase Agreement is in writing and dated 17 May 1989. The Plaintiff will refer to the Ore Wagons Sale and Purchase Agreement at trial for its full terms and effect.

6AThere were express terms of the Ore Wagons Sale and Purchase Agreement, inter alia, as follows:

(a)HML sold to the Defendant and the Defendant purchased from HML 75 Ore Wagons, subject to delivery and acceptance in accordance with the terms of clause 5 thereof (clauses 2.1 and 3.4);

(b)HML sold to the Defendant and the Defendant purchased from HML 275 Ore Wagons, subject to:

(i)delivery and acceptance in accordance with the terms of clause 5 thereof, and

(ii)the sale of Mt Newman ore in sufficient quantities under the Romanian Ore Sales Contract;

(c)the purchase price payable by the Defendant to HML for the 350 Ore Wagons was the sum of $26,000,000 (each Ore Wagon having an equal value) to be paid by instalments at the rate of $1.857 per tonne of Mt Newman iron ore sold under the Romanian Ore Sales Contract within 35 days after the date of bills of lading for such ore (clause 3.1);

(d)if no Mt Newman iron ore was sold under the Romanian Sales Contract the Defendant was bound to purchase the 75 Ore Wagons for the sum of $5,571,000 by four (4) equal instalments of $1,392,750 on 31 March 1989, 31 March 1990, 31 March 1991 and 31 March 1992 together with interest on as much of the sum of $5,571,000 as was for the time being unpaid (clauses 3.2 and 3.3);

(e)if Mt Newman iron ore were sold under the Romanian Ore Sales Contract the payments due on 31 March 1989 to 31 March 1992 and interest thereon as aforesaid would be reduced by an amount equal to the aggregate of the amounts paid at the rate of $1.857 per tonne as aforesaid (clause 3.6); and,

(f)on the date when and if the aggregate amount of the payments at the rate of $1.857 per tonne as aforesaid exceeded $5,571,000 plus interest thereon to that date, the first 75 ore wagons were to be taken as having been paid for in full and all further instalments at the rate of $1.857 per tonne were to be credited towards the purchase price of the further 275 ore wagons (clause 3.7).

6BUpon the proper construction of the Ore Wagons Sale and Purchase Agreement:

(a)each instalment of $1,392,750 (together with interest on the reducing balance of $5,571,000) was payable on its due date in accordance with clause 3.2 even if Mt Newman iron ore had been sold under the Romanian Ore Sales Contract, but in that event the amount of the instalment (and interest) would be reduced by the aggregate amount of payments made under clause 3.1 prior the due date for that instalment;

(b)the Defendant was bound (subject to the terms of clause 5 as to delivery and acceptance) to purchase and pay for at least 75 of the ore wagons by 31 March 1992, or sooner should sales of Mt Newman iron ore under the Romanian Ore Sales Contract have resulted in payments at the rate of $1.857 per tonne that in the aggregate were in excess of $5,571,000 and interest payable thereon prior to that date;

(c)if the first 75 ore wagons were taken to have been fully paid for by application of payments under clause 3.1 or 3.2 before the due date of an instalment payable under clause 3.2, that instalment was no longer payable; and,

(d)if any Mt Newman iron ore was sold under the Romanian Ore Sales Contract after 31 March 1992 it would continue to be subject to the payment of an instalment of the purchase price at the rate of $1.857 per tonne until and unless all 350 ore wagons had been purchased and paid for in full.

6CThere was an implied term of the Ore Wagons Sale and Purchase Agreement that the Defendant would:

(a)act in good faith and with due regard to HML's interests pursuant to the Ore Wagons Sale and Purchase Agreement; and,

(b)do all things reasonably within its power to give HML the full benefit of the Ore Wagons Sale and Purchase Agreement and do nothing to interfere with or prevent the full benefit thereof from accruing to HML.

Each term is implied by law. Alternatively, the duty alleged in paragraph (a) is to be implied in fact by virtue of the matters alleged in paragraph 2A.7.

1. 7.Further, iwas an express term of the Ore Wagons Sale and Purchase Agreement that in the event of default by the Defendant in payment of the purchase price or any part thereof the Defendant was obliged to pay to HML interest on any amount outstanding from time to time at a rate equal to the prime rate charged by the Rural & Industries Bank of Western Australia plus 2% per annum.

8. The Defendant completed the purchase of 75 Ore Wagons pursuant to the terms of the Ore Wagons Sale and Purchase Agreement.

8A By an agreement between Dr Basil Greene on behalf of the Defendant and Mr C. Petrescu on behalf of MIMEX, the Defendant and MIMEX agreed that the Defendant would supply to MIMEX on behalf of HML Mt Newman iron ore at the price of US$0.39 per Fe tonne unit CIF Constanza.

(a) On 5 July 1989 Dr Basil Greene and Mr John Maith each on behalf of the Defendant, or alternatively each on behalf of EPIOC, in the presence of Mr Kevin Dalby on behalf of HML, or alternatively on behalf of EPIOC, made an oral offer to Mr C. Petrescu, Mrs V Stanza and Mrs D. Dragastan on behalf of MIMEX to supply to MIMEX on behalf of HML Mt Newman iron ore at the price of US$0.39 per Fe tonne unit CIF Constanza.

(b) On 5 July 1989 Dr Basil Greene and Mr John Maith each on behalf of the Defendant and Mr C. Petrescu on behalf of MIMEX each executed a written protocol to formally record, inter alia, the oral offer pleaded at subparagraph 8A(a) above.

(c) On 20 July 1989 Mr C. Petrescu on behalf of MIMEX sent a telex to Dr Basil Greene on behalf of the Defendant by which MIMEX accepted the offer pleaded at subparagraph 8A(a) above.

8B In the alternative, by an agreement between Dr Basil Greene on behalf of EPIOC and Mr C. Petrescu on behalf of MIMEX, EPIOC and MIMEX agreed that the Defendant would supply to MIMEX on behalf of HML Mt Newman iron ore at the price of US$0.39 per Fe tonne unit CIF Constanza, which agreement was made with the concurrence of each of HML and the Defendant.

(a) On 5 July 1989 Dr Basil Greene became a director of EPIOC;

(b) The Plaintiff repeats subparagraphs 8A(a), (b) and (c) above; and

(c) On or about 21 July 1989 Dr Basil Greene orally informed Mr Kevin Dalby of the written acceptance of Mr C. Petrescu pleaded at subparagraph 8A(c) above.

8C In the further alternative, by an agreement in writing made between Mr Kevin Dalby, a director of EPIOC, on behalf of EPIOC, and Mr C. Petrescu on behalf of MIMEX on 26 July 1989, EPIOC and MIMEX agreed that BHPIO would supply to MIMEX on behalf of HML Mt Newman iron ore at the price of US$0.39 per Fe tonne unit CIF Constanza, which agreement was made with the concurrence of each of HML and the Defendant.

(a) On 26 May 1989 Mr Paul Kelly an employee of the Defendant, met on behalf of EPIOC with MIMEX to negotiate, inter alia, a price for the supply of iron ore by BHPIO to MIMEX pursuant to the 6 June 1988 Agreement.

(b) On 29 May 1989 Mr D.A. Carroll, a director of EPIOC, wrote on behalf of the Defendant to Mr Gary Schwab on behalf of HML, informing the latter of, inter alia, the facts pleaded at subparagraph 8C(a) above.

(c) On 29 May 1989, Mr Kevin Dalby, a director of EPIOC, wrote on behalf of HML and EPIOC to Mr Jantea, Director General of ROMEXIM, in a letter copied to Mr D.A. Carroll on behalf of EPIOC, informing the addressees of that letter of, inter alia:

(i) the facts pleaded at subparagraph 8C(a) above; and

(ii) his intention that Mr John Maith would, on or about 2 June 1989, further negotiate on behalf of EPIOC with MIMEX a price for the supply of iron ore to MIMEX on behalf of HML.

(d) On 2 June 1989, Mr John Maith further negotiated on behalf of EPIOC with, inter alia, Mr C. Petrescu, Mrs V. Stanza and Mrs D. Dragastan, all on behalf of MIMEX, a price from the supply of iron ore to MIMEX on behalf of HML.

(e) On 21 June 1989, Mr D.A. Carroll on behalf of the Defendant or alternatively EPIOC, sent a telex to Mr C. Petrescu on behalf of MIMEX, copied to Mr Kevin Dalby on behalf of HML and to Mr John Maith which telex:

(i) referred to the negotiations conducted by Mr Paul Kelly and Mr John Maith pleaded in subparagraphs 8C(a) and (d) above respectively; and

(f) The Plaintiff repeats subparagraphs 8A (a), (b) and (c) and 8B(b) above.

(g) On 26 July 1989 Mr Kevin Dalby and Mr C. Petrescu executed a document expressed to be Addendum 9 to the Romanian Ore Sales Contract, by which EPIOC and MIMEX agreed that BHPIO would supply to MIMEX on behalf of HML Mt Newman iron ore at the price of US$0.39 per Fe tonne unit CIF Constanza.

(h) Addendum 9 to the Romanian Ore Sales Contract was tabled at the meeting of the directors of EPIOC of 7 August 1989.

8D By reason of the matters pleaded in paragraphs 3A, 3B, 3C(g) and 8A (or in the alternative 8B, or in the further alternative 8C), the Defendant was obliged, in the absence of any subsequent agreement as to price, to continue to supply iron ore to MIMEX on behalf of HML at the price of US$0.39 per Fe tonne unit CIF Constanza for each successive Contract Year 1989 - 1992 inclusive.

8E No discussions as to any new or substitute price were initiated by EPIOC from August 1989 for the reason that the Defendant maintained it had no iron ore to supply to MIMEX.

9. In breach of the 6 June 1988 Agreement, Principal Agreement, in or about September on 16 August 1990, the Defendant refused, and at all material times thereafter continued to refuse, to supply any Mt Newman ore on behalf of HML to MimexMIMEX in satisfaction of HML's obligations to supply iron ore to MimexMIMEX pursuant to the Romanian Ore Sales Contract.

The refusal was oral and was communicated by Mr G McDonald and Mr G Wedlock of the Defendant to Mr L Hancock and Mr K Dalby, and the substance of the refusal was that the Defendant would not supply any further iron ore to Mimex under the Romanian Ore Sales Contract. It is also to be implied from the fact that the Defendant did not supply any or any further iron ore to Mimex under the Romanian Ore Sales Contract.

9AIn further breach of 6 June 1988 Agreement:

(a)the Defendant did not use its best endeavours to implement and give full effect to the arrangements contemplated by the 6 June 1988 Agreement;

(b)the Defendant did not procure the chairman of EPIOC to act in good faith and not do anything to unduly prejudice or interfere with compliance by HML with its obligations under the Romanian Ore Sales Contract; and,

(c)the Defendant did not act in good faith to give HML the full benefit of each of the 6 June 1988 Agreement and the Ore Wagons Sale and Purchase Agreement.

(i)Mt Newman had the production capacity to supply Mt Newman iron ore to Romania in the quantities contemplated by the 6 June 1988 Agreement. According to a Tex Report Iron Ore Manual 1989-1990 the production capacity of Mt Newman was expanded to 40,000,000 tonnes in 1976;

(ii)according to the same Tex Report Iron Ore Manual the shipped tonnages of Mt Newman iron ore was 30,666,000 tonnes for the calender year 1988;

(iii)in addition to the 30,666,000 tonnes to meet the supply of iron ore to Romania contemplated by the 6 June 1988 Agreement, the Defendant needed further production of 3,000,000 and then 5,000,000 tonnes of iron ore per year in accordance with the terms of the Romanian Ore Sales Contract;

(iv)to meet the contemplated volume of iron ore supplies to Romanian under the Romanian Ore Sales Contract, the Defendant had to increase Mt Newman production of iron ore and/or utilise its stockpile;

(v)the Defendant had no intention of so increasing the Mt Newman iron ore production to meet Romanian demand, and therefore had no intention at any material time of supplying the quantities of iron ore to Romania contemplated under the Romanian Ore Sales Contract. (The Plaintiff relies upon paragraph 9.2 of the Proposal to Enter into Contractual Arrangements;

(vi)the Defendant at all times maintained a stockpile of Mt Newman iron ore which it failed and refused to make available to fulfil the supply of the quantities of iron ore contemplated under the Romanian Ore Sales Contract. The existence of the stockpile is to be inferred from paragraph 6.2 of the document referred to in the preceding sub paragraph hereof. The existence of the stockpile in 1990 appears from an internal BHP document entitled "Australian Iron Ore - February Results and Full Year Forecast Results" prepared by Mr G McDonald to Mr J Currie dated 8 March 1990;

(vii)the Defendant made it practically impossible for Burwill & Company Ltd ("Burwill") to effect countertrades for the sale of Mt Newman iron ore to Romania by imposing stringent credit terms for Burwill;

(viii)the Defendant made no, or no real, effort to assist HML or Burwill to arrange terms satisfactory to the Defendant for the supply of iron ore to Romania;

(ix)the Defendant or related companies (such as BHP-Utah Minerals Europe Ltd or BHP-Utah Coal Ltd, all of whom were "BHP" for the purposes of the 6 June 1988 Agreement), had extensive experience in selling coal by countertrade to Romania (and elsewhere);

(x)a subsidiary of BHP made sales of coal to steel foundries in Romania by way of countertrade, who were also potential customers under the Romanian Ore Sales Contract, in exchange for steel (or steel products) which was also the expected barter trade for iron ore;

(xi)in September 1988 Mr G Freeman, Mr G Wedlock, Mr J Rouse and Mr R Oldham of the Defendant went on a BHP business mission to Romania representing the coal and steel divisions of BHP. The mission reported that there were 9 or 10 active countertrade partners for Romanian business with other aspirants;

(xii)the Defendant explained to Mitsui-C Itoh Iron Pty Ltd, a participant in the Mt Newman Joint Venture, in a letter dated 14 September 1988, that sales of Mt Newman ore under the Romanian Ore Sales Contract would be made against letters of credit established by Burwill so the Defendant would not get involved in the countertrade arrangements, but if Burwill was unable to establish a letter of credit so as to allow a shipment of Mt Newman ore to Romania, other countertrade organisations having Romanian countertrade credits would be utilised;

(xiii)paragraph 77 of Ronald Maxwell Oldham's witness statement, states that Mr U Hoffmann (of Burwill) asked for open ended credit terms so that the Defendant would not be paid until Burwill had sold the counter trade goods, to which he replied that the joint venture partners of Mt Newman would not allow the Defendant to agree to such terms and it was not its practise to do so.

(xiv)according to paragraph 30 of the witness statement of Mr L Dean, the chairman of EPIOC "BHP did not have enough of a trading history with Burwill, HML or Mimex for me to feel comfortable authorising the loading of a ship without a new irrevocable letter of credit in favour of BHP being opened";

(xv)according to paragraph 52 of Mr L Dean's witness statement, in early September 1989 Burwill had US$1,100,000 credit in place against the first contracted shipment and Mr L Dean said he would not allow a shipment to be sent without first obtaining a letter of credit covering payment. One shipment would be for approximately 170,000 tonnes of iron ore (equivalent to US$4,190,000);

(xvi)the very nature of counter trade required a period of 60 or 90 days after shipment to permit the counter trade to take place. By insisting upon payment on shipping, the Defendant was necessarily precluding countertrade;

(xvii)subject to proper discovery from the Defendant, HML believes that it is the fact that the Defendant customarily permitted iron ore customers to pay or partly pay, some time after delivery;

(xviii)the Defendant's opposition to iron ore countertrade was inconsistent with the known factual background to the 6 June 1988 Agreement, namely that iron ore sales to Romania could only occur through means of countertrade;

(xix)notwithstanding that BHP Trading was approved by the Romanians as set out in paragraph 72B of the witness statement of Mr J Rouse (who was then the chairman of EPIOC), the Defendant never suggested that BHP replace Burwill for the purposes of the proposed countertrade;

(xx)notwithstanding the Defendant's substantial experience of international countertrade, it provided no assistance to HML to effect such a countertrade in respect of the supply of iron ore to Romania;

(xxi)there were other countertraders with Romania in existence at the time who were selling counter trade goods and who could have been utilised to effect the countertrade;

(xxii)after the Mt Whaleback slippage on 30 August 1989 the Defendant falsely maintained that it lacked iron ore to supply to Romania. This was the Defendant's stated position at an EPIOC board meeting held on 12 February 1990 in the marketing report which was prepared by BHP personnel. In a memorandum from Dr B Greene of 1 March 1990 stated that BHP would not be offering high grade ore for the next contract year (beginning 1 April 1990). On 25 May 1990 Mr L Dean at an EPIOC board meeting advised that the Defendant ability to supply iron ore had not changed. According to the February results and full year forecast results - Australian Iron Ore documents dated 12 March 1990, the Defendant had a stockpile of iron ore fines of 2,400,000 tonnes in February 1990 with a forecast stockpile for the full year to 31 December 1990 of 3,400,000 (there is a further document of the Defendant showing that in March of the next year the stockpile reached 4,200,000 tonnes). The Defendant sent a copy of a telex to Mimex dated 8 September 1989, which referred to uncertainty of supply. The document referred to the issue of a force majeure notice as a result of the slippage. There was no force majeure provision in the 6 June 1988 Agreement.

(xxiii)although the Defendant continued to supply iron ore to its other iron ore customers after the slippage, no iron ore was made available for supply to Romania;

(xxiv)very shortly after the acquisition of McCamey's Monster by an associate of BHP, the Defendant or its associates commenced to supply substantial quantities of iron ore to Romania (up to 1,500,000 tonnes per year);

(xxv)The Defendant decided in 1988 not to take the subject ore wagons until 1992 and then only at the rate of 100 per year. In the Proposal to Enter into Contractual Arrangements, clause 6.1 provided for a budget of approximately one half of the amount payable under the 6 June 1988 Agreement and the Ore Wagons Sale and Purchase Agreement; and,

(xxvi)according to Mr G Wedlock's witness statement supply of iron ore exports between 1989 and 1997 increased from in the order of 30,000,000 tonnes to more than 50,000,000 tonnes per year as a result the Defendant had a need for approximately 1360 Ore Wagons in that eight-year period, and yet according to the Defendant's witness statements herein took only 75 ore wagons from 1988. Subject to further and proper discovery from the Defendant HML believes that during this period the Defendant acquired ore wagons other than Romanian Ore Wagons.

9BIn breach of the fiduciary duties owed by the Defendant to HML, as alleged in paragraphs 2A.11 and 3AE, the Defendant:

(a)failed to disclose to HML prior to May 1987 or at all that the Defendant considered that the sale of 53,000,000 tonnes of iron ore to Romania under the Romanian Ore Sales Contract was unrealistic and unlikely to be achieved so that the purchase by the Defendant of the Ore Wagons pursuant to:

(ii)Part 5 of the 6 June 1988 Agreement; and

(iii)the Ore Wagons Sale and Purchase Agreement,

would be unlikely to be completed as to all or a substantial number of them (other than the 75 Ore Wagons which the Defendant agreed to purchase in any event);

(b)failed to disclose BHP's knowledge;

(c)preferred its own interests over those of HML or the joint interests of HML and the Defendant when:

(i)from about September 1988 the Defendant's ore production was affected by industrial action;

(ii)after August 1989, the Defendant's ore production was affected by the wall slippage at Mt Whaleback,

by supplying what ore it could supply to the Defendant's customers and no ore to Romania under the Romanian Ore Sales Contract, and making up arrears under 1988 year commitments to the Defendant's customers (other than Romania) out of 1989 year production;

(d)failed to disclose that ore production in 1989 was forecast to be less than production in 1988 and well below the Defendant's commitments under long term agreements other than the Romanian Ore Sales Contract;

(e)failed to disclose that in February 1989 the Defendant (or related BHP entities) declined to tender for the supply of Mt Newman iron ore fines between May 1989 and April 1990, even for the first quarter of 1990; and,

(f)acquired McCamey's Monster at an undervalue of at least $60,000,000 from HML which was obliged to sell because of the Defendant's failure to pay for the 275 Ore Wagons and the full benefit of the Romanian market opportunities, including the benefit of the ship unloaders without paying for the 275 Ore Wagons.

9CHML would not have entered into the Ore Wagons Sale and Purchase Agreement and would not have agreed to the terms of payment for the remaining 275 Ore Wagons if the Defendant informed it of BHP's knowledge and the matters alleged in paragraph 9A and 9B(a), (b)(i), (c), (d) and (e) above.

10. By reason of and in consequence of its breach of the 6 June 1988 Agreement Principal Agreement the Defendant also breached the Ore Wagons Sale and Purchase Agreement in that it has failed to purchase any of the remaining 275 Ore Wagons for the sum of $20,429,000 remaining to be paid pursuant to the terms of the 6 June 1988 Agreement Principal Agreement and the Ore Wagons Sale and Purchase Agreement

1. Despite demand the Defendant continues to refuse to complete the purchase of the remaining 275 Ore Wagons for the sum of $20,429,000.

12. By a Deed dated 1 April 1992 and executed by the Plaintiff, the Defendant and HML, HML assigned to the Plaintiff all of its rights title and interest in the Ore Wagons Sale and Purchase Agreement together with any and all accrued rights or claims to damages or any other interest of HML as against the Defendant arising from or in respect of any non-performance or breach of:

(a) the Ore Wagons Sale and Purchase Agreement; and,

(b) the 6 June 1988 Agreement Principal Agreement in so far as it obliged the Defendant to supply Mt Newman ore in satisfaction of the Romanian Ore Sales Contract to the extent that such non-performance or breach affected the Defendant's obligations under the Ore Wagons Sale and Purchase Agreement;

with the express consent and acknowledgment of the Defendant ("Deed of Novation").

13. By an express term of the Deed of Novation the Defendant covenanted and agreed with the Plaintiff that to the extent that the rights assigned to the Plaintiff by HML pursuant to the Deed of Novation constituted a right of recovery of loss or damage suffered by HML, the Plaintiff shall be deemed to have suffered the same loss or damage.

1. In order to enable the Plaintiff to perform the obligations it had assumed by taking the assignment of HML's interest in the Ore Wagons Sale and Purchase Agreement, on or about 1 April 1992 HML assigned to the Plaintiff its rights title and interest in the 275 Ore Wagons which remained to be purchased by the Defendant pursuant to the Ore Wagons Sale and Purchase Agreement.

15. By reason of the Defendant's breaches of:

(a) the 6 June 1988 Agreement Principal Agreement; and,

(b) the Ore Wagons Sale and Purchase Agreement;

(b)its fiduciary duties owed to HML as alleged in paragraphs 2A.11, 3AE and 9B,

(i) The market value of the 275 Ore Wagons remaining to be sold under the Ore Wagons Sale and Purchase Agreement is and was at all material times less than the sum of $20,429,000 to be paid by the Defendant for those Ore Wagons pursuant to that Agreement.

(ii) By reason of the Defendant's default, additional costs of storage and maintenance have been incurred in respect of the 275 Ore Wagons.

(iii)(A)As a result of the breach by the Defendant of the 6 June 1988 Agreement and of its fiduciary obligations, HML had no option but to sell its equity in McCamey's Monster to the Defendant on terms and conditions far less favourable to HML than would have been the case but for the Defendant's breaches.

(B)If HML was not forced to sell its equity in McCamey's Monster to the Defendant as aforesaid and the McCamey's Monster deposit was developed by Mr LG Hancock and HML as Mr LG Hancock had contemplated prior to entering into the MOA with the Defendant in May 1987, HML would have had the opportunity to sell its equity in McCamey's Monster when it was developed and on terms not dictated by a necessity to sell or HML would have demanded a premium from the Defendant for the sale of its equity in McCamey's Monster in entering into the 1 April 1992 Agreement. As a result HML lost the opportunity to be paid an additional $60,000,000 by the Defendant for McCamey's Monster. $60,000,000 is calculated on the basis that in 1981 Hamersley Iron Pty Ltd paid $17,400,000 for 50% of the Marandoo tenement. In 1990 it paid $60,000,000 for the remaining 50%. In 1990 Marandoo was in a national park and had no infrastructure. The Marandoo ore deposit is 345,000,000 tonnes. The McCamey's Monster deposit is 328,000,000 tonnes. On the basis that Hamersley Iron Pty Ltd paid $60,000,000 for 50% of the Marandoo deposit, this puts a value of $120,000,000 for 100% of the McCamey's Monster deposit.

(iv)By reason of the aforesaid breaches by the Defendant, the Defendant obtained the full benefit of the Romanian market opportunities opened up by HML without payment of the cost of the ship unloaders installed at Constanza at HML's cost, to the extent of the 275 Ore Wagons.

(v)(iii) By reason of the Defendant's default the Plaintiff has lost the opportunity to use the funds that would have been received had the Agreement been performed, so as to:

16.The Defendant has been unjustly enriched at the expense of HML because it has obtained the full benefit of the Romanian market opportunities and other market opportunities provided by HML without paying for the remaining 275 Ore Wagons as alleged in paragraph (iv) of the particulars to paragraph 15 hereof, and ownership of McCamey's Monster at a substantial undervalue (as alleged in paragraph (iii) of the particulars to paragraph 15 hereof).

(a)The Defendant through its breach of the 6 June 1988 Agreement, its obligations of disclosure and, its obligations of good faith put HML in a position where it had no economic option but to sell its equity in McCamey's Monster to the Defendant under the agreement of 1 April 1992;

(b)Because of these breaches by the Defendant it acquired HML's equity on terms that were disadvantageous to HML because it had no economic option but to sell on those terms;

(c)If HML was selling under an arms length sale as a willing but not overly anxious seller of its equity in McCamey's Monster, BHP would have paid a further $60,000,000 for the purchase of HML's equity;

(d)On the other hand HML has not been paid for the remaining 275 Ore Wagons which were constructed under the Defendant's supervision and to its specifications and were customer built for its use only;

(e)HML complied by using its best endeavours with all of its obligations under the agreements; and,

(f)The Defendant was aware of HML's financial predicament and of the opportunity which that financial predicament gave it for the acquisition of HML's equity in McCamey's Monster and its acts and defaults as alleged in this Statement of Claim were conducted with that knowledge and for that purpose.

17.As a result of the Defendant's conduct as alleged herein the Defendant is a constructive trustee of the sum of $60,000,000 by which it underpaid for HML's equity in McCamey's Monster, which trust is secured over McCamey's Monster.

(ii) further or alternatively, pursuant to contract at a rate equal to the Rural & Industries Bank of Western Australia (now known as the Bank of Western Australia) Ltd prime rate plus 2%;

(iii) alternatively, pursuant to section 32 of the Supreme Court Act;

(d)a restitutionary order to disgorge the value of the Defendant's unjust enrichment;

(e)a declaration that the Defendant stands as a constructive trustee to the extent of the benefit obtained by the Defendant from having access to the Romanian market for the sale of its iron ore in the sum of $60,000,000 referred to in paragraph 17 above, secured by a charge over McCamey's Monster; and,

(f)an order for an enquiry into the benefits obtained by the Defendant from having access to the Romanian market for the sale of its iron ore and the taking of all necessary accounts.

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