FEDERAL COURT OF AUSTRALIA

Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825

THE COURT ORDERS THAT:

1.    The application is dismissed.

2.    The applicant is permanently restrained from acting upon the termination notices issued to the first and second respondents on 25 November 2014.

3.    Other than order 2 above, the cross-claim is dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

TABLE OF CONTENTS

1. INTRODUCTION AND SUMMARY

1.1 Introduction

1    The primary issue in this case concerns whether the applicant, Mineralogy, has terminated Facilities Deeds with two of the respondents, Sino Iron and Korean Steel.

2    Sino Iron and Korean Steel entered into the Facilities Deeds with Mineralogy while they were its subsidiaries. Subsequently, CITIC Pacific Ltd (now CITIC Ltd) acquired all of the shares in Sino Iron and Korean Steel. Together with CITIC Pacific Mining Management (CPMM), which is an Australian wholly owned subsidiary of CITIC Ltd, the respondents are collectively referred to as the CITIC parties.

3    If the Facilities Deeds have been terminated then the multi-billion dollar project established by the CITIC parties will come to an end.

4    When there are billions of dollars at stake there can sometimes be an unfortunate tendency to attempt to raise any and every issue that might be thought to be arguable. It is even more unfortunate when the case presented is constantly shifting. This case began in April 2013 with a heavy focus on Mineralogy’s rights as designated Port Operator (on 31 January 2013) under the Maritime Transport and Offshore Facilities Security Act 2003 (Cth) (the MTOFS Act). But the decision to appoint Mineralogy as Port Operator was quashed by the Full Court of the Federal Court in Sino Iron Pty Ltd v Secretary of the Department of Infrastructure and Transport [2014] FCAFC 103; (2014) 225 FCR 22. With several changes of counsel, there were a number of significant changes in Mineralogy’s focus.

5    In these reasons, particularly in the early sections, I describe a number of matters that were not part of Mineralogy’s pleaded case. This is because there were a number of attempts by Mineralogy to change its case during trial, often in major respects, and sometimes without any attempt to amend its pleadings. Even as late as the final day of trial, after millions of dollars had been spent on this litigation, Mineralogy sought to amend four of its five grounds of relief. Some of the amendments raised significant new points in an attempt to rectify deficiencies in Mineralogy’s case. The proposed amendments were subsequently abandoned (ts 638).

6    My ultimate conclusion is that Mineralogy’s claims fail for a litany of reasons. The section which follows describes an outline of my reasons. This outline is necessarily broad and abbreviated. It does not, and cannot, attempt to capture the detail of the vast volume of factual material and legal issues raised.

7    Although there were many factual issues explored, at the heart of this dispute are a series of legal issues. Most of the numerous legal issues were agitated by the respondent CITIC parties. The headline issues concern questions of contractual construction, implication of terms including a protean obligation of good faith, issues of estoppel by convention, relief against forfeiture, the penalties doctrine, and the effect of non-joinder of third parties on a power to grant injunctions or declarations. The CITIC parties have ultimately been successful on almost all of these issues.

1.2 Summary of the case and my decision

8    In 2001, a number of companies including Sino Iron and Korean Steel separately entered into Subleases and Facilities Deeds with their then parent company, Mineralogy. The transactions concerned areas of land, including areas within a future port in the West Pilbara region of Western Australia, approximately 100 km to the south-west of Karratha.

9    In a series of transaction documents between 2006 and 2008, the respondent CITIC parties took over Sino Iron and Korean Steel. The CITIC parties paid $415 million as part of the takeover process. Following government approvals in 2008, the CITIC parties began constructing facilities and preparing for mining and export of magnetite ore under the revised agreements with Mineralogy. Those revised agreements included Mining Right and Site Lease Agreements (MRSLAs) which had replaced the Subleases, and variations to the Facilities Deeds.

10    The CITIC parties built facilities, including port facilities. They constructed a fully integrated mining and export project which is described as the Sino Iron Project or the Project. It is hard to express in words the extent to which every aspect of the Project is dependent upon other aspects of the Project. A view of the Sino Iron Project taken by the Court on the third day of the trial made the extent of integration extremely clear. The cessation of operations in relation to any significant aspect of the Project will bring the entirety of the Project to a halt.

11    The CITIC parties spent billions of dollars constructing the facilities. The CITIC parties have always controlled and operated the facilities although there is some ambiguity in the Facilities Deeds concerning the party who is obliged to operate the facilities. Some of the facilities are contained in an area of the Port of Cape Preston described in the pleadings as the Circled Area. Construction work in the port area at Cape Preston began as early as August 2008.

12    From February 2008, before construction of the facilities, Mineralogy, together with Sino Iron or Korean Steel, submitted a series of project proposals to the State of Western Australia. The proposals were approved. On at least 29 occasions in those proposals, expressly or impliedly, Mineralogy represented that CPMM would be the operator of the port facilities. This was a matter of importance to the State of Western Australia.

13    On 23 March 2010, Mineralogy and the CITIC parties reached an agreement, in a letter signed by Mineralogy and also signed as “acknowledged and agreed” by the CITIC parties. The agreement was that whilst the Port was a single-user port CPMM would perform the role of Terminal Operator in respect of the facilities to be developed for on or behalf of the CITIC parties (which include the facilities in the Circled Area) and that Mineralogy would be responsible for the Harbour Master role. One of the obligations upon CPMM in this Port Terminal Operator Agreement was to pay $3 million to Mineralogy. CPMM made this payment.

14    In September 2010, after the CITIC parties had spent $6 billion on the Sino Iron Project, Mineralogy confirmed that, consistently with its obligations under the Port Terminal Operator Agreement under which it had been paid $3 million, it did “not plan to get involved in [CPMM’s] operations” [tb 4930].

15    In 2012, after the CITIC parties had spent billions more dollars on the Sino Iron Project, Mineralogy changed its mind. Mineralogy then brought proceedings in this Court for various forms of relief including a declaration that it has an entitlement to possession and control of the Port and the Facilities within the Circled Area “within the terms of the Project Agreements”. It brought these proceedings despite the project proposals, despite the Port Terminal Operator Agreement under which it had accepted $3 million, and despite its September 2010 acknowledgement.

16    After the litigation had been underway for considerable time, Mineralogy amended its application to bring a new claim. The new claim became the primary relief that Mineralogy sought. The new claim relied upon four termination notices that Mineralogy issued to the CITIC parties on 25 November 2014 while this litigation was ongoing. The primary relief sought by Mineralogy became a claim for a declaration that these termination notices were valid and a declaration that the Facilities Deeds had terminated.

17    It is surprising that Mineralogy sent the termination notices while the litigation was on foot. It is even more surprising that Mineralogy alleged in those notices that the Facilities Deeds would come to an end prior to the date set for the trial of the litigation concerning whether the CITIC parties had a right to control the port facilities over which they have spent billions of dollars.

18    When the terms of the termination notices are considered, the issue of those notices by Mineralogy is not merely surprising. It is astonishing. Many aspects of the termination notices are farcical.

19    One termination notice relied upon one of a number of contractual provisions concerned with requirements for Government Approvals. The contractual provision required the CITIC parties to comply with by-laws. It was an admitted fact that neither the draft “by-laws” attached to the Facilities Deeds, nor any others, had been enacted by government. Yet Mineralogy asserted that the CITIC parties had committed a serious and persistent breach of the Facilities Deeds simply by refusing to acknowledge the validity of draft “by-laws” which Mineralogy knew, and admitted in these proceedings, had not been promulgated. Even if they had been promulgated, there was no term of the Facilities Deeds that imposed an obligation upon the CITIC parties to acknowledge the validity of any by-laws.

20    Apart from the mere act of defending these proceedings, the only act which Mineralogy alleged to constitute the breach by the CITIC parties was one paragraph in a three page letter to Mineralogy’s solicitors. The allegedly offending paragraph asserted (as Mineralogy knew to be correct) that the “By-Laws attached to the Facilities Deeds were not approved by the relevant government agencies of the State of Western Australia and that this has been communicated to Mineralogy” [tb 9212].

21    In summary, Mineralogy effectively alleged in the first termination notice that the CITIC parties had committed a “serious breach” (i) of a non-existent obligation to acknowledge the validity of “by-laws”, (ii) where the “by laws” had not been promulgated, and (iii) where the “breach” consisted of statements made by solicitors for the CITIC parties, which Mineralogy accepted were true.

22    Another termination notice asserted that the CITIC parties had committed a serious and persistent breach by filing a defence in this proceeding. The termination notice demanded that the CITIC parties remedy this breach by a date which was one month before the date which was then scheduled for this trial. Unsurprisingly, Mineralogy could not point to any express or implied obligation in the Facilities Deeds which prohibited the CITIC parties from defending legal proceedings brought against them.

23    In other words, the CITIC parties were alleged to have breached a term that was neither express nor implied, yet which somehow required them to capitulate to proceedings involving potentially billions of dollars. In its written closing submissions, Mineralogy said that a reason why this so-called “breach” was “serious and persistent” was because the CITIC parties had, in these proceedings, “run arguments, relying on implied terms and contractual interpretation”: [4.1.71]. Not only was there no obligation, nor any breach, but many of these arguments run by the CITIC parties concerning implication and interpretation were correct.

24    A third termination notice asserted that the CITIC parties had committed a breach of the Facilities Deeds simply because they had disputed the legal validity of a notice issued by Mineralogy. The notice about which the validity was disputed was a notice that a company, Australasian Resources Limited (ARH), had been approved by Mineralogy to use facilities at the Cape Preston Port. ARH had no mine from which it was supposed to produce product for which it was supposed to use the facilities. ARH had not announced any decision to mine. ARH did not have the billions of dollars necessary to create a mining operation. It was effectively insolvent with less than $130,000 in the bank and kept afloat only by loans from Mr Palmer.

25    Once again, no clause of the Facilities Deeds obliged the CITIC parties to abstain from disputing the validity of a notice. And, in any event, the CITIC parties’ allegations about the validity of the notice were correct. Mineralogy omitted to mention in the termination notice any of the qualifications upon its power to approve use of the facilities. A central qualification was that there must be spare capacity in the facilities. That requires an estimate of the extent to which the facilities would be used. Mineralogy had (unsurprisingly) not provided any estimate of the extent to which the facilities would need to be used for the imaginary processing and export from a non-existent mine funded by a company which was practically insolvent.

26    A fourth termination notice concerned an alleged failure by the CITIC parties to provide Mineralogy with “shipping schedules”. In previous communications Mineralogy had described notices provided by the CITIC parties as shipping schedules. But in the termination notice, Mineralogy said that notices that had been provided by the CITIC parties were not “shipping schedules”. The fourth termination notice relied only on a letter sent in 2013 by Mineralogy to the CITIC parties. The CITIC parties had responded to that letter in a manner that one of Mineralogy’s main witnesses described as a “fair and reasonable” response (ts 436). Mineralogy never replied to that reasonable response. Indeed, Mineralogy did nothing in response for 19 months, other than receive many of the notices that it had described as shipping schedules without any complaint about their validity. Then Mineralogy sent a termination notice.

27    Mineralogy’s claim that it is entitled to terminate the Facilities Deeds for breaches of the Facilities Deeds is without any substance. The termination notices did not allege any genuine breach. They did not involve any serious or persistent breach. They did not provide for any reasonable time to rectify any breach. Although no obligation of good faith is implied into the Facilities Deeds, the termination notices were issued as a lever for future commercial negotiations and they were not issued in good faith.

28    That was Mineralogy’s primary case.

29    Mineralogy’s three other claims became Mineralogy’s alternative relief. For numerous reasons, each of the alternative claims fails. The claims were based upon a misunderstanding of ambiguous clauses in the Facilities Deeds. But even if Mineralogy’s understanding had been correct, the claims would have failed for a number of other reasons.

30    At the end of this trial, senior counsel for Mineralogy sought to make radical changes to Mineralogy’s alternative forms of relief to try to resuscitate Mineralogy’s case. Ultimately, he withdrew that application, but he did not abandon the relief sought.

31    In the alternative relief Mineralogy sought injunctions and declarations. In Mineralogy’s written closing submissions, but not in the grounds for relief, these alternative claims were succinctly described as “declarations that it is entitled to possession and control of the port”. Mineralogy said that the “essence” of its alternative case is that the regime created by the Facilities Deeds gave control of the operation of the port to Mineralogy so that a number of entities could use the port in a coordinated way. Mineralogy said in its written closing submissions that the CITIC parties had set out to “stymie the inception and operation of other projects by blocking access to the port and by asserting control over it”: [2.2.2].

32    The premise of Mineralogy’s alternative claims is misconceived. It was common ground that the facilities with which this litigation is concerned are not Shared Facilities (as defined by the Facilities Deeds). If some of them, or all of them, were ever to become Shared Facilities (with the associated financial obligations, and subject to the restrictions in the Facilities Deeds) then different issues might arise. One of those issues would be the extent to which later agreements had varied the operation of the Facilities Deeds in relation to Shared Facilities and would need to be considered separately. For instance, cl 3.3(c) of the Fortescue Coordination Deed provides that a number of the facilities with which this litigation is concerned “will not constitute ‘Shared Facilities’ or ‘Approved Shared Facilities’ for the purposes of the Facilities Deeds”. Other clauses in different agreements between the parties constrained the operation of Shared Facilities: eg cl 3.6.2 of the Direct Agreement in January 2008. But those issues are not the concern of this litigation.

33    The alternative claims fail for a multitude of reasons. Most fundamentally, not only does Mineralogy not have rights to possess, control, own, operate or manage the port terminal facilities, but the CITIC parties were under a duty to operate and maintain them by the operation of provisions in later agreements.

34    The reasons why Mineralogy’s alternative claims fail are:

(1)    the alternative relief cannot be ordered in the absence of a directly interested party to these proceedings (the State of Western Australia). Despite being put on notice of this issue as early as 29 April 2013, Mineralogy failed to take any steps to join the State as a party and opposed even the last minute application by the State for limited intervention to make submissions concerning matters of law;

(2)    Mineralogy’s alternative relief is precluded due to the abstract nature of Mineralogy’s alternative claims, including restating contractual relief in terms which do not resolve the factual controversy;

(3)    significant parts of Mineralogy’s alternative relief are unavailable in light of the proper concession in closing oral submissions by Mineralogy that private parties cannot, by private agreement, vary or alter a regime of public law legislation and regulation;

(4)    Mineralogy’s alternative relief depends upon a construction of the Facilities Deeds that I reject;

(5)    even if Mineralogy’s construction of the Facilities Deeds were correct, those rights cannot be asserted, nor any alternative relief based upon them, due to each of the following, as independent and separate matters: (i) the State Agreement and Approved Proposals, (ii) the MRSLAs, (iii) the Fortescue Coordination Deed, and (iv) the Port Terminal Operator Agreement. In each case the “new contract must override the old contracts so far as their terms clash and the old contracts even if they are not rescinded rendered inoperative to this extent”: Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93, 128 (Williams J); and

(6)    if Mineralogy had rights of “possession”, “control”, “ownership” or “operation and maintenance” over the port terminal facilities, which had not been varied by any of the above agreements, then it could not exercise those rights due to an estoppel by convention.

2. BACKGROUND, EVIDENCE AND CONCEPTS

2.1 Unpleaded matters attempted to be raised by Mineralogy

35    During the course of trial, a number of new, unpleaded matters were raised. Some of those were subsequently withdrawn, although at points during the trial some of those withdrawn points appeared to resurface.

36    First, Mineralogy applied to amend its Reply to make numerous allegations in relation to an alleged Port Terminal Operator Agreement. The CITIC parties had pleaded this agreement as a defence. Mineralogy had pleaded that it was not a legally binding agreement. Mineralogy’s only reason given for this denial was to assert that a “contingency” had not been fulfilled.

37    After opening submissions, and immediately before the weekend preceding the cross-examination of Mineralogy’s witnesses, Mineralogy sought to amend its Reply to raise a suite of other reasons why the alleged Port Terminal Operator Agreement was not binding. Evidence was filed in relation to this amendment application. Submissions were made. Then the amendment application was withdrawn: Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 4) [2015] FCA 570. The withdrawn amendment application had included proposed allegations concerning the Port Terminal Operator Agreement that:

(1)    no agreement was formed because the 23 March 2010 letter was too uncertain;

(2)    any agreement was abandoned;

(3)    this was not an agreement to which Sino Iron and Korean Steel were parties;

(4)    the Port Terminal Operator Agreement did not vary the Facilities Deeds;

(5)    the Port Terminal Operator Agreement did not permit CPMM to subcontract the role of terminal operator to any other party; and

(6)    the Port Terminal Operator Agreement was not performed.

38    Despite these proposed amendments having been withdrawn, Mineralogy made closing written submissions as if the proposed amendments (3), (5), and (6) had been maintained and allowed (see [6.3.192] – [6.3.194]). As I explain later in these reasons, these matters were raised in different contexts. It was too late, in closing submissions, to raise these new issues when millions of dollars had been spent on legal fees, and vast time and energy over two years, as well as cross-examination of witnesses, had been focused on the case as pleaded.

39    Secondly, in closing there were additional unpleaded allegations made by Mineralogy concerning the Port Terminal Operator Agreement which had not been the subject of the withdrawn amendment application. It was submitted that issues arose concerning when Mr Fitzgerald signed that agreement and why it was signed. It was submitted that the agreement might not have come to the attention of Mineralogy, or that it might not have been approved by senior management. All of these submissions are without foundation and were later withdrawn orally (ts 705, 773).

40    Thirdly, in closing written submissions, Mineralogy also treated its pleading that the Port Terminal Operator Agreement was “contingent” upon the parties “agreeing a set of port operating protocols” to mean that it was contingent upon the parties agreeing “the roles of Terminal Operator and Harbour master”. As I explain in more detail later in these reasons, the concepts of “port operating protocols” and a delineation of a “Terminal Operator’s role” or “Harbour Master’s role” involve potentially different cases. The CITIC parties’ objection to Mineralogy running its case in this way in closing is upheld.

41    Fourthly, another unpleaded case that Mineralogy attempted to run in closing written submissions, and to which the CITIC parties objected, was to attempt to justify the Termination Notices by reference to matters that were not pleaded and not contained in the Termination Notices. Those matters were:

(1)    the CITIC parties failed to provide a Shared Facilities Register: [4.1.26];

(2)    the CITIC parties refused to supply information needed by Mineralogy to administer the Shared Facilities: [4.1.28]; and

(3)    the CITIC parties refused to provide information sought by Mineralogy in relation to the operation and maintenance necessary to operate the Port: [4.1.71(c)].

42    Senior counsel for Mineralogy submitted in closing oral submissions in reply that these unpleaded matters as bases for termination could be taken into account even though the CITIC parties had never been put on notice that termination was alleged for these reasons. He said that they could be taken into account because they had been pleaded in the different context of why Mineralogy was not ready and able to act as a port operator (ts 774). But that different context requires no consideration of numerous different issues which would be raised by the new plea that these matters could permit termination. These new issues would include considering these allegations in light of the terms or the context of the termination notices to see if they were somehow contained by implication (they were not expressed) within the termination notices. Evidence would potentially have been required of the context in which they were raised as matters that could entitle termination. In any event, in the context of litigation of this size, it was too late for Mineralogy to run this unpleaded case in closing submissions.

43    Fifthly, another unpleaded case that Mineralogy sought to run in closing written and oral submissions was that Sino Iron and Korean Steel had breached the Facilities Deeds by objecting to the designation of Mineralogy as the Port Operator under the MTOFS Act: [4.1.19]-[4.1.20], (ts 593-594). Again, this matter was not contained in any termination notice expressly. For the same reasons as the alleged implications concerning refusal to supply information, it is too late to raise this unpleaded allegation of implication.

44    Sixthly, another unpleaded case that Mineralogy attempted to run in its closing written submissions was that the timing and quality of information provided in emails was such that the emails could not constitute shipping schedules and therefore a breach alleged in the termination notices had been proved: [4.1.84]. This was another new case.

45    Until closing submissions, Mineralogy’s pleaded case, consistently with the terms of the termination notices, had been that the CITIC parties had breached the Facilities Deeds by failing or refusing to advise Mineralogy of their proposed shipping schedules. Mineralogy’s case was not that defective shipping schedules had been provided. Nor was its case that the information provided by the CITIC parties was incapable of being construed as a shipping schedule because its timing and quality was so deficient to deprive the information of being a “shipping schedule”. Either case would have invited a close examination of the content of the communications concerning ship arrivals. There may have been a need for expert evidence concerning the quality of information necessary to constitute a shipping schedule in the industry, and whether that quality would differ according to the nature of the recipient.

46    Although I consider that Mineralogy should be entitled to run a case that the shipping communications, on their face, simply did not constitute shipping schedules, Mineralogy’s detailed focus on timing and quality of information was beyond the scope of the pleadings and should not be allowed.

47    Seventhly, Mineralogy attempted to run a case in closing that the CITIC parties’ acts have stymied the operation of other projects and made it impossible for third parties to have access or be assured of access for the purpose of constructing additional facilities and exporting iron ore product: [2.2.2], [6.3.67]. This was another unpleaded case. The closest that Mineralogy’s pleadings came to a pleading of such a case was its particulars of the alleged “serious” nature of breaches by the CITIC parties. Those particulars alleged that Mineralogy was deprived of a “practical commercial advantage” by the CITIC parties’ breaches, which included an alleged effect on the preparedness of a purchaser to purchase Mineralogy’s rights or its shares. That is the extent to which Mineralogy should be permitted to run that case.

48    Eighthly, Mineralogy attempted to run a case in closing concerning failures by the CITIC parties to comply with the terms of State Proposals. This issue arose in the context of one of the CITIC parties’ defences to Mineralogy’s claims that the Facilities in the Circled Area had vested in it, that Mineralogy is the operator of the Port, and that Mineralogy has responsibility for scheduling operations at the Port and the Facilities. At [31] of the CITIC parties’ defence, they plead numerous matters, including that they have implemented State Agreement Proposals consistently with the State Agreement, which State Agreement (by incorporation of the Proposals) is inconsistent with Mineralogy’s claims. At [22A(a)] of Mineralogy’s Reply, Mineralogy denied all of the many and varied matters pleaded in the CITIC parties defence at [31].

49    Mineralogy submitted that this bare denial permitted it to raise very particular factual allegations concerning breaches by the CITIC parties of the Proposals approved under the State Agreement. They raised these arguments in closing written submissions for the purposes of alleging that the CITIC parties are not entitled to the “benefit of the effect of the proposals without being obliged to comply with them”: [6.1.97].

50    This submission, raising unpleaded matters, and made in closing submissions is contrary to a host of court rules: Federal Court Rules 2011 (Cth) r 16.03(1)(b), r 16.08(a), r 16.08(b), r 16.08(c). More fundamentally, the submission is contrary to basic fairness. Mineralogy’s allegations at [6.1.93]-[6.1.109] and [6.1.119]-[6.1.121] of its closing written submissions raise numerous particular matters of fact which should have been pleaded in any litigation before closing submissions but particularly in a proceeding involving billions of dollars, and where millions of dollars have been spent on legal fees and preparation of evidence. Those submissions included unpleaded allegations that:

(1)    Cape Preston Port Company (CPPC) is an independent contractor and is not an agent of CPPM which is alleged to be the party authorised to implement the Sino Iron Project under the Project Proposals;

(2)    there was a “blatant flouting” of the Approved Proposals because the CITIC parties had no intention of building a pellet plant or exporting pellets; and

(3)    the CITIC parties have not, more than five years after the approvals, put in place equipment to permit the production or export of 21.6 mtpa of concentrate.

51    Mineralogy should not be permitted to raise any of these unpleaded matters. All can immediately be seen to be significant matters, but later in these reasons I explain the gaps in the evidence and submissions that would exist, in relation to (1), even if Mineralogy had applied in closing submissions to amend its pleading to raise these matters. The same point can be made in relation to (2) and (3). Apart from the need to make legal submissions about the relevance and effect of these matters to the pleaded relief, focused evidence would need to have been prepared by the CITIC parties based upon the intentions of the CITIC parties and the precise steps that they have taken in the last five years if these matters were relevant to a pleaded issue.

52    Ninthly, Mineralogy sought to run a new case in closing submissions in response to a matter pleaded in [31] of the CITIC parties’ defence. The matter specifically pleaded in [31] of the CITIC parties’ defence was that the alternative relief sought by Mineralogy was not available because the grant of that alternative relief would have the effect that the implementation or continuous operation of the Sino Iron Project would cease, in breach of various express and implied provisions of the State Agreement including implied terms which required Mineralogy to take steps to prevent it from occurring. This matter was just generally denied by Mineralogy in its reply pleading which contained a broad denial of the whole of [31] of the defence.

53    In closing submissions, Mineralogy sought to rely on cl 33 of the State Agreement in response to this submission. Mineralogy alleged that this clause had the effect that obligations of a party under the State Agreement would be suspended while that party was prevented or delayed from complying with those obligations by an event or circumstance beyond the power or control of the responsible party. Mineralogy then alleged that a serious breach of the Facilities Deed, and a failure to remedy a serious breach, are matters beyond the control of Mineralogy so that there could be no breach by Mineralogy of an obligation to ensure the continuous operation of the Sino Iron Project.

54    Again, this matter was not pleaded. The CITIC parties objected to it being raised. Once again, and particularly in the context of this litigation, this unpleaded allegation cannot be raised by Mineralogy. Evidence could have been led on this point from the parties. And the State had no opportunity to respond to it at all.

2.2 Objections to evidence in the trial bundle

2.2.1 The objections concerning evidence tendered before or during trial

55    The objections were not in an entirely satisfactory state.

56    At the start of this trial I made a number of remarks to counsel about the manner in which I considered it appropriate to deal with the many objections to relevance concerning many exhibits which comprised more than 12,000 pages in the trial bundle. The parties subsequently agreed a regime consistent with my remarks by which objections would be raised and documents would be admitted. One condition of the agreed regime concerning admissibility was that “unless a document is expressly referred to in oral or written submissions it shall be taken as rejected on the ground of relevance and will at the conclusion of the hearing be removed from the Court Book”. I endorsed that regime and the trial proceeded on that basis.

57    After trial, an index to the trial bundle was produced. The parties produced a long list with various different categories of objections in different colours. Some of these objections had been conceded expressly or impliedly. The basis for others was not wholly clear. Ultimately, by emails to the court on 22 July 2015, in response to a query from my associate on 13 July 2015, the parties confirmed that the only objections were by the CITIC parties and were in the following categories:

(1)    the documents in categories 1 and 2 of the Addendum to Mineralogy’s closing submissions;

(2)    the “Disputed Documents” listed in an email from the legal representatives of the CITIC parties to my associate on 26 June 2015;

(3)    in relation to document 263 an objection that the signature of the CITIC representative was made without the CITIC parties’ authority; and

(4)    documents 57, 66 and 352 being annexures AVH-2, AVH-3, and AVH-4 to Mr van der Heyden’s first affidavit on the basis that the whole of the affidavit is inadmissible.

58    As to (1), this is considered separately in section 2.2.2 below.

59    As to (2), at the conclusion of the trial, the parties were in dispute concerning whether reference had been made to 48 documents that Mineralogy asserted to be relevant and which Mineralogy asserted had been relied upon in its written submissions. Those 48 documents, described as the “Disputed Documents” are documents numbered 185, 187, 274, 277, 278, 279, 316, 322, 331, 332, 333, 335, 336, 350, 351, 358, 359, 362, 370, 377, 378, 383, 388, 392, 416, 419, 420, 423, 425, 443, 451, 452, 453, 456, 457, 508, 509, 513, 515, 516, 520, 522, 523, 537, 561, 563, 568, and 569.

60    Mineralogy submitted that all of these documents were referred to in its closing submissions in [2.7.4], [2.7.20], and [4.1.47]. These were three short paragraphs in 250 pages of submissions. It is helpful to set out those paragraphs in full:

2.7.4.    Each of [International Minerals, Resourcehouse and its subsidiary China First Iron Ore] had an interest in the development of a port for the exporting of any product they produced. The documents at PER-31 to the First Robinson Affidavit make clear that they were closely involved in developing the Port Construction Proposal to accommodate other interests.

2.7.20.    The correspondence between Mineralogy, the CITIC parties and ProMet consistently contemplated that the Port would be designed to permit of third party use. Much of the relevant correspondence is contained in Attachment PER-31 to Mr Robinson’s first affidavit. [Submissions are then made about a number of particular documents].

4.1.47.    Mr Northey said that, given the prospective expansion of the operation to ten lines and about 40 million tonnes per annum, as he was designing, he was “leaving space” so as not to impede the future expansion by the construction of a trestle jetty. It is noted, also, that the construction of a trestle jetty features at many points in the correspondence in “PER-31” where Mineralogy and CITIC agreed upon arrangements being made for third party use.

61    Annexure PER-31 is 246 pages. In the index to Mr Robinson’s affidavit, the annexure is described as “a bundle of copies of correspondence, minutes and plans which includes some discussions about third party use of the Port, the facilities generally, and their context”.

62    The effect of Mineralogy’s submission, if accepted, would be that in the 24 hours following the receipt of Mineralogy’s 250 pages of written submissions and before closing oral submissions, the CITIC parties would be required to trawl through 246 pages of documents to determine what matters were relevant to the subsidiary issues raised in three short paragraphs of Mineralogy’s submissions. This approach would be inconsistent with the regime agreed by the parties for admissibility and endorsed by the Court. It would also create substantial unfairness to the CITIC parties.

63    Mineralogy was both capable of, and did, expressly refer to a number of the documents relevant to these issues. Those documents expressly referred to are relevant. In [2.7.20], Mineralogy gives detailed consideration to fourteen documents from PER-31. The thirteen of those documents that have document numbers are 168, 172, 206, 218, 241, 257, 258, 270, 271, 397, 420, 424, and 457. They are all relevant on the basis of the agreed regime. But only two of those (420, 457) are in the list of the 48 Disputed Documents.

64    There was a live issue concerning the matters raised in [2.7.20] of Mineralogy’s closing submissions in which Mineralogy referred to these fourteen documents. In [2.7.20], Mineralogy refers to matters concerning third party access to the facilities constructed by the CITIC parties in the Port area. But ultimately if there is any probative value, beyond the fourteen documents to which Mineralogy referred, and beyond Mr Northey’s evidence described below, then the probative value in unspecified statements contained in unspecified documents is exceeded by the prejudicial effect of admitting those statements contrary to the agreed regime.

65    All of the documents in the list of disputed documents, apart from 420 and 457, are inadmissible.

66    As to (3), namely document 263, the CITIC parties asserted that the signature of the CITIC representative was made without the CITIC parties’ authority. The letter was sent from Mineralogy and signed with a signature and handwritten words that appear to say “Milton Law” and “Received and accepted by CITIC 5 August 2010”. Almost no submissions were made about this disputed signature by either Mineralogy or the CITIC parties. The onus to prove authority was on Mineralogy: Lysaght Brothers v Falk (No 1) [1905] HCA 7; (1905) 2 CLR 421, 427 (Griffith CJ).

67    Mineralogy asserted that Mr Law signed the letter as a director (but did not say of which company he was a director). Document 940 (which Mineralogy tendered without reference to the relevance of it) establishes that Mr Law was a director of Sino Iron from 6 July 2006 to 1 April 2015 and a director of Korean Steel from 22 October 2008 to 1 April 2015. The parties were aware that Mr Law was a representative of the CITIC parties and had attended meetings in that capacity and been involved in high level negotiations. Document 263 is admissible and I am also satisfied that Mr Law had, at least, ostensible authority to sign the letter on behalf of Korean Steel or Sino Iron.

68    As to (4), Mr van der Heyden’s evidence, this is entirely inadmissible for reasons explained later.

2.2.2 Additional evidence that Mineralogy sought to tender after the trial

69    At the conclusion of both written and oral closing addresses, senior counsel for Mineralogy foreshadowed that he would provide an addendum to the Court which would set out a number of additional documents which he wished to have included in the trial bundle. These were not documents to which Mineralogy had referred in its written or oral closing submissions. This procedure was not consistent with the agreed regime for treatment of relevant documents.

70    Senior counsel for Mineralogy confirmed that the addendum that he would provide would set out the relevance of the additional documents by reference to the paragraphs of Mineralogy’s written submissions (ts 763). I expected that the addendum would contain a few documents which had inadvertently been omitted from written submissions, but which raised no new factual or legal issue. I expected that the addendum would refer to those few documents that had been omitted, with a reference to the paragraph in its submissions, or the footnote, where the documents should have been included. This was not what happened.

71    Mineralogy subsequently provided an addendum which referred to 65 additional documents. The 65 documents fell into four categories. Shortly after Mineralogy provided its Addendum, the legal representatives for the CITIC parties emailed to my associate the CITIC parties’ objection to categories 1 and 2.

72    Apart from a broad, generalised reference to the issues involved in each of the four categories, Mineralogy did not explain how any of the 65 documents related to the pleaded issues in dispute. Mineralogy did not explain with any precision how any of the 65 documents supported any of its oral or written submissions. The provision of these documents was contrary to the agreed regime for the admission of documents upon which the trial had been conducted. Further, the CITIC parties were deprived of the opportunity of responding to any of these submissions even if they could have discerned how each of the 65 documents was said to support Mineralogy’s case. Apart from a handful of documents about which there was no issue, I reject the admission of all the remaining documents in categories 1 and 2 for these general reasons. I also reject them for the specific reasons below.

73    Mineralogy said that the first category of documents were relevant “to show the full scope and frequency of ongoing negotiations between the applicant and the respondents about their respective roles in the operation of the Port” as described in Mineralogy’s supplementary submissions: [46]. As I explain later in these reasons, in the context of the Port Terminal Operator Agreement, during trial the parties had focused closely upon the timing and chronology of events and the terms of the communications. For instance, there was little attention given in submissions to any issue arising from other negotiations concerning amendments to the Facilities Deeds or other project documents. It is unfair on the CITIC parties for documents to be admitted against them without any particular submission in support of the relevance of those documents. The CITIC parties had no opportunity to consider whether they wished to make reference to (and hence tender) other documents which would have thrown different light on the documents that Mineralogy now seeks to rely upon generally.

74    There was no dispute about the admission of four documents in this category (203, 213, 226, and 237). Those are the only documents that are admitted.

75    The documents in the second category were said by Mineralogy to be relevant to “the issue of whether or not there were potential users [of the port] apart from the CITIC parties”: addendum [2]. Two of those documents (47 and 56) were referred to in submissions and no objection was taken to the tender of document 60. Apart from those three documents, Mineralogy said that the remainder of the documents were relevant to inferences that the Court might draw about the need for co-ordination at a multi-user port which, in turn, was relied upon to establish that alleged breaches of the Facilities Deeds were “serious”.

76    Mineralogy pointed to reports from a stock broker and merchant banks expressing views about the value of projects for mining iron ore from Mineralogy’s tenements. It was submitted that the availability of these reports is evidence that shows that the tenements were likely to be valuable to Mineralogy if it could satisfy investors that it could guarantee access to the port. The CITIC parties were not given the opportunity of considering whether any part of the reports was inconsistent with such a submission. They did not have the opportunity to tender any document which might have suggested a more limited operation or function of such reports.

77    There is again unfairness in inviting the Court to draw inferences and find facts on the basis of documents to which the CITIC parties, relying upon the agreed regime, have not had the opportunity to respond either by submission or by tender of additional documents. None of the documents in this category, other than the three I have mentioned, is admitted.

78    As the CITIC parties’ did not object to any of the documents in categories 3 and 4, those documents will be admitted. However, had an objection been raised in relation to these documents, I would not have allowed the admission of the documents for the following reasons.

79    The documents in category 3 concerned ten further emails between Mineralogy and the CITIC parties concerning the issue of ship scheduling. As I explain below, this was an issue upon which Mineralogy claimed to be entitled to terminate the Facilities Deeds in the context of the $15 billion Sino Iron Project. Mineralogy’s case in closing relied upon a table involving numerous emails. The CITIC parties made various forensic decisions about how to respond to those submissions. Mineralogy now seeks to tender an additional ten emails. If those emails do not add anything to Mineralogy’s submissions then they are not needed. Indeed, if they added nothing it is unlikely that senior counsel for Mineralogy, consistent with his obligations to the Court, would have sought to tender an additional ten documents in a manner contrary to the agreed regime. But if the documents added something to Mineralogy’s case, as would be expected, then this was never clearly explained. However, as the CITIC parties raised no objection to these documents they are admitted.

80    As to category 4, Mineralogy tendered the CITIC parties’ Further Amended Defence filed on 13 February 2014 to which reference was made in various Notices of Termination. Submissions were made about that Further Amended Defence. Its terms were a live issue. It should be admitted.

81    Mineralogy also sought to include document 940 (mis-described as document 941). This was approximately 80 pages of ASIC company search records. Mineralogy simply said in its supplementary submissions that these documents “should be uncontroversial”: [51]. Mineralogy did not explain what issue these documents were relevant to establish or why they needed to be tendered. Mineralogy did not suggest that there was any dispute arising from the pleadings concerning the dates when any company had commenced or its officers. Again, despite the lack of clarity regarding the relevance of the ASIC company search records, there was no objection to these documents and they are admitted.

2.3 Background and relevant chronology

82    This section of my reasons sets out, in chronological sequence, the key events relevant to this litigation. Later in these reasons, I make reference to some of these events and the evidence concerning them in more detail. This section merely establishes the background and sequence of the most significant events.

83    On 12 December 1990, Exploration Licences 08/117 and 08/118 were transferred to Mineralogy. These exploration licences are within a location described as Bilanoo. They can be seen in Annexure 1 to these reasons.

84    On 28 September 1992, Mining Leases 08/118 to 08/128 were issued to Mineralogy. Their commencement date was 23 June 1993. These mining leases can be seen in Annexures 1 and 2 to these reasons. They are described as the “Balmoral tenements”.

85    The Balmoral tenements run in a corridor which is approximately 5km wide and 30km long in a northerly direction. As can be seen in Annexure 1 to these reasons, the Balmoral tenements are divided into Balmoral North, Balmoral Central (including the George Palmer Deposit), and Balmoral South.

86    The Sino Iron Project Area, as it later became, includes the Balmoral Central tenements (08/123 to 08/125) from this corridor. Mineralogy holds a number of nearby tenements including other mining leases in this corridor. Mineralogy also holds General Purposes Leases 08/63 (from 27 August 2009) and 08/74 (from 24 September 2009) and Miscellaneous Licence 08/20 (from 5 March 2004). These leases and licences can be seen in Annexures 1 and 2 to these reasons.

87    23 June 1993 was the commencement date of Exploration Licence 08/636 granted to Mineralogy by the State of Western Australia. The area of Exploration Licence 08/636 can be seen in Annexure 3 to these reasons. The importance of this area of Exploration Licence 08/636 is that it includes the area of the port terminal facilities (which are part of the Sino Iron Project) which are at the heart of this dispute. In the Facilities Deeds, the area of Exploration Licence 08/636 is defined as the Preston Area. Clause 33(h) of the Facilities Deeds requires that on termination of the Facilities Deeds, Sino Iron and Korean Steel (in each case) “shall vacate the Preston Area”.

88    On 14 February 2001, Mineralogy obtained Mining Leases 08/264, 08/265, and 08/266. As can be seen from Annexure 2 to these reasons, these later formed part of the Sino Iron Project Area.

89    On 25 October 2001, Mineralogy entered into Sublease Agreements with (i) Sino Iron (by its former name, Bellswater), and (ii) Korean Steel. The Sublease Agreements recited that Mineralogy was the holder of Mining Leases 08/118 to 08/130 and Exploration Licence 08/636, and that each of Sino Iron and Korean Steel wished to acquire a right to mine in the Project Area, which is part of the mining leases, to enable the company to mine iron ore.

90    On 26 October 2001, Mineralogy entered into Facilities Deeds with six companies:

(1)    Bellswater Pty Ltd (subsequently Sino Iron);

(2)    Korean Steel Pty Ltd;

(3)    Brunei Steel Pty Ltd;

(4)    International Minerals Pty Ltd;

(5)    Austeel Pty Ltd; and

(6)    Balmoral Iron Pty Ltd.

91    The terms of the Facilities Deeds are considered at length later in these reasons. In very broad terms, and as amended, they relate to the construction, operation, maintenance, and use of facilities for the extraction, processing, transport, and export operations in a project for the export of magnetite ore.

92    On 26 October 2001, Mineralogy, Korean Steel, Sino Iron, and others entered into the Fortescue Projects Consolidation Agreement.

93    On 5 December 2001, Mineralogy entered into the Iron Ore Processing (Mineralogy Pty Ltd) Agreement (the State Agreement) with companies including Korean Steel, Sino Iron, and the State of Western Australia.

94    The recitals to the State Agreement, in broad terms, described how Mineralogy is the holder of mining tenements in the Pilbara region and has granted various rights in relation to certain of the mining tenements to the Co-Proponents (including Sino Iron and Korean Steel) and that Mineralogy (by itself or with a Co-Proponent) wishes to develop projects incorporating the mining, processing, transport and shipping of iron ore, including the establishment of new port facilities in the Pilbara region.

95    On 14 December 2007, the parties agreed on certain variations to the State Agreement.

96    On 24 September 2002, the Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act 2002 (WA) (Agreement Act) came into operation with Royal Assent. This had the effect of bringing the State Agreement into force.

97    On 20 October 2003, Ministerial Statement 635 issued to Mineralogy, under the Environment Protection Act 1986 (WA). In that Ministerial Statement, Mineralogy was the Proponent, with responsibility “for the implementation of the proposal” which was described in Schedule 1 as being “to establish and operate an iron ore mine, process plant (pelletising, direct reduced iron and hot-briquetted iron), accommodation and port facility in the Cape Preston area”. The Proposal was described as including “stockpiling, seawater desalination plant and port facilities at Cape Preston and off Preston Island”.

98    10 December 2003 was the commencement date for General Purpose Lease 08/52. As I have explained, this is the general purpose lease which covers the area of the port facilities which are in dispute.

99    Mineralogy pleads, and the CITIC parties admit, that the Facilities that Sino Iron and Korean Steel have constructed are located within General Purpose Lease 08/52 and are in the area comprising the Preston Area (as defined in the Facilities Deeds).

100    In April 2004, ARH submitted its first Project Proposal under the State Agreement.

101    30 April 2004 was the commencement date for General Purpose Lease 08/51. As can be seen in Annexure 2 to these reasons, this is the general purpose lease which covers the area of water seaward of the port facilities which are in dispute.

102    On 12 March 2005, Mineralogy and Mineralogy Mine Management Pty Ltd entered into a Joint Development Agreement with three Co-Proponents, including Sino Iron but not Korean Steel.

103    On 21 March 2006, Mineralogy and Sino Iron, and Mineralogy and Korean Steel, varied and re-stated the terms of their respective (amended) Subleases. The new agreements became the Sino Iron MRSLA and Korean Steel MRSLA. Mineralogy also entered into MRSLAs with Brunei Steel, Balmoral Iron, and International Minerals.

104    The Sino Iron MRSLA and the Korean Steel MRSLA were both concerned with matters arising from the Balmoral Central tenements (Mining Leases 08/123 to 08/125). They provided for a total extraction limit of 1 billion tonnes and an annual extraction limit sufficient to produce 12 mtpa.

105    On 8 January 2008, Mineralogy and Sino Iron entered into a deed amending the Sino Iron MRSLA.

106    On 21 March 2006, Mineralogy and Sino Iron, and Mineralogy and Korean Steel amended the terms of their Facilities Deeds.

107    On 31 March 2006, Mineralogy, Sino Iron, Sino Iron Holdings Pty Ltd, and CITIC Pacific Ltd entered into a Takeover Agreement by which Sino Iron Holdings Pty Ltd (a company controlled by CITIC Pacific Ltd) agreed to acquire all of the issued share capital of Sino Iron for US $215 million.

108    On 8 May 2006, CITIC Pacific Ltd became the ultimate holding company of Sino Iron.

109    On 6 July 2006, Sino Iron Holdings completed the acquisition of Sino Iron pursuant to the terms of the Sino Iron Takeover Agreement.

110    In November 2007, Mineralogy and Sino Iron prepared the February 2008 Sino Iron Pellet Project Proposal for the Balmoral Central tenements (Mining Leases 08/123, 08/124, and 08/125).

111    On 1 November 2007, Mr Palmer, Mineralogy, Balmoral Iron Holdings Pty Ltd, Korean Steel, CITIC Pacific Ltd, and Sino Iron entered into a Takeover Agreement pursuant to which Balmoral Iron Holdings agreed to acquire all of the issued share capital of Korean Steel for a consideration of US $200 million, subject to certain adjustments.

112    On 19 November 2007, Sino Iron and Mineralogy as Co-Proponents submitted a compliant Proposal to the State under cl 6(1) and cl 6(2) of the State Agreement.

113    On 29 February 2008, an amended version of this Proposal was submitted (the February 2008 Sino Iron Pellet Proposal).

114    On 2 May 2008, the February 2008 Sino Iron Pellet Proposal was approved. In a later publication by the CITIC parties, this was described as a “major milestone” [tb 10223].

115    In August 2008, CPMM mobilised its construction team to commence work at Cape Preston.

116    It is also admitted on the pleadings that the CITIC parties have constructed at least the following facilities in the Preston Area with the exception of the facilities at (q), (r), and (bb) which the CITIC parties deny having completely built at the time these proceedings were commenced and which I do not accept to have been proved to have been entirely completed at the time of these proceedings:

(a)    Causeway;

(b)    Breakwater;

(c)    Causeway Conveyor;

(d)    Barge Loader;

(e)    Iron Ore Wharves;

(f)    Materials Offloading Facility (MOF) Wharf;

(g)    Service Wharf;

(h)    Laydown Area (including any materials or stock piles to be used to construct further Facilities at the Port);

(i)    Boat Ramps;

(j)    Tug pens;

(k)    Navigational Aid;

(l)    Can buoys for vessel mooring;

(m)    Port Workshop and Site Offices;

(n)    Security Gate and Fencing;

(o)    Security Office located adjacent to the Security Gate;

(p)    Lighting System;

(q)    CCTV System;

(r)    Site Offices located next to the MOF used for Port Communications and Scheduling;

(s)    Communications Tower;

(t)    Fibre optic communications cable network (underground);

(u)    Power Distribution System (underground transmission lines and surface transmission lines running along the Causeway Conveyor);

(v)    Corrosion Protection System, made up of: Cathodic protection systems for the Service Wharf, MOF Wharf and Desalination Plant Outfall Pipe; andAnodic protection system for the stiff leg and to stop dolphins at the Iron Ore Wharves;

(w)    Potable Water System (underground);

(x)    Raw Water System (underground);

(y)    Fire Water System (underground pipes and above ground pipes running along length of the Breakwater and hydrants on the Causeway and the access ramps to the Service Wharf and MOF Wharf);

(z)    Waste Water/Sewage System (underground);

(aa)    Desalination Plant Inlet Pump and Outfall Pipe (and all associated underground pipelines within the Circled Area); and

(bb)    Roads within the Circled Area (being the roads running along the Causeway on either side of the Causeway Conveyor, the access road to the MOF Wharf, the access road to the Service Wharf and the road along the Breakwater).

117    On 6 March 2008, Exploration Licence 08/1414 commenced.

118    On 22 April 2008, Exploration Licence 08/1451 commenced.

119    On 22 July 2008, Mineralogy, Sino Iron, Korean Steel, and the State agreed to amendments to the State Agreement.

120    On 23 September 2008, the Minister declared the Port of Cape Preston was subject to the Occupational Safety and Health Act 1984 (WA).

121    On 22 October 2008, completion of the acquisition of Korean Steel by Balmoral Iron Holdings pursuant to the Korean Takeover Agreement. CITIC Pacific Ltd became the ultimate holding company of Korean Steel. On the same day Mineralogy and Korean Steel entered into a deed amending the Korean Steel MRSLA.

122    On 22 October 2008, Mineralogy, CITIC Pacific Ltd, Sino Iron, and Korean Steel entered into the Fortescue Coordination Deed.

123    The Fortescue Coordination Deed included provisions requiring the transfer of Mineralogy’s status as Proponent under Ministerial Statement 635. The Fortescue Coordination Deed also provided that unless the Joint Development Agreement is reinstated as a result of the CITIC Option lapsing, “CITIC or its nominee will be solely responsible for the planning and conduct of Mining Operations by each of the Mining Right Holders”: cl 2.4(c).

124    On 14 November 2008, Mineralogy, Korean Steel, Sino Iron, and the State executed an amendment to the State Agreement. That amendment took effect when legislated on 10 December 2008 in the Iron Ore Processing (Mineralogy Pty Ltd) Agreement Amendment Act 2008 (WA).

125    In February 2009, CPMM commenced construction of the causeway at Cape Preston.

126    On 30 March 2009, Mineralogy and Korean Steel submitted the Korean Steel Concentrate Project Proposal for Mining Leases M08/123, M08/124, and M08/125.

127    On 22 April 2009, the Sino Iron Concentrate Proposal submitted to the State under cl 8(1) of the State Agreement.

128    On 22 April 2009, Korean Steel Concentrate Proposal submitted to the State under cl 6 of the State Agreement.

129    On 20 May 2009, the Minister for State Development consented for the Korean Steel Project to use facilities constructed as part of the Sino Iron Project in the conduct of its proposed project.

130    In June 2009, CPMM commended construction of the breakwater at Cape Preston.

131    On 11 June 2009, the Korean Steel Concentrate Proposal was approved by the State (the April 2009 Korean Steel Concentrate Project Proposal). As explained, as part of the Korean Steel Concentrate Proposal, Korean Steel had obtained consent to use Sino Iron’s facilities.

132    On 22 June 2009, the Minister for State Development approved the Sino Iron Concentrate Project – Additional Project Proposal (the April 2009 Sino Iron Concentrate Proposal), regarding production and export overseas of iron ore concentrates.

133    On 3 July 2009, State environmental approval was granted permitting the production of iron ore concentrate to be increased from 19.6 mtpa to 27.6 mtpa.

134    This approval was significant to the CITIC parties. In the CITIC annual report for 2009 [tb 4403] it was said:

All major approvals for the construction and operation of the project have now been received. In 2009, we obtained approval under the Western Australian Government’s Environmental Protection Act and Iron Ore Processing (Mineralogy Pty Ltd) Agreement Act to build our port and expand the project to export 28 mtpa of concentrate product.

135    The 2009 CITIC annual report also explained that once “the project goes into operation, product ready for export will be moved from land to vessels berthed at sea via transshipment. Transshippers, barges and tugs are now under construction in China” [tb 4406].

136    In July 2009, Sino Iron submitted a development proposal to Mineralogy under the Sino Iron Facilities Deed. The proposal was for the “construction of a port” for the Sino Iron Pellet Project.

137    In October 2009, a further Amended Port Construction Proposal was submitted by Sino Iron and Korean Steel to Mineralogy.

138    In November 2009, construction of a barge loader for the Project commenced in China.

139    On 10 November 2009, the Second Sino Iron Concentrate Proposal submitted to the State under cl 8(1) of the State Agreement.

140    On 10 November 2009, the Second Korean Steel Concentrate Proposal submitted to the State under cl 8(1) of the State Agreement.

141    In December 2009, a Further Amended Port Construction Proposal was submitted by Sino Iron and Korean Steel to Mineralogy. The construction of the permanent causeway at Cape Preston was completed.

142    On 15 December 2009, ProMet Engineers advised Mineralogy on quality of amended Port Proposal.

143    On 17 December 2009, Commonwealth Environmental Approval EPBC 2008/4236 decision.

144    On 23 December 2009, Ministerial Statement 822 was published 23 December 2009 (varying Ministerial Statement 635). Ministerial Statement 823 was published in relation to the Balmoral South Project.

145    On 6 January 2010, the Second Sino Iron Concentrate Proposal (the November 2009 Second Sino Iron Concentrate Proposal) and the Second Korean Steel Concentrate Proposal (the November 2009 Second Korean Steel Concentrate Proposal) were approved by the State.

146    These additional Project Proposal approvals authorised the expansion of the Sino Iron Project and the Korean Steel Project to support production and export of 27.6 mtpa of iron ore concentrate in addition to the 6 mtpa of pellets for the Sino Iron project, with Sino Iron and Korean Steel each being permitted to produce and export 13.8 mtpa of iron ore concentrates.

147    On or about 1 March 2010, Mineralogy established an Administration Fund under the Facilities Deeds.

148    In March 2010, the first ball mill was installed at the processing plant.

149    On 9 March 2010, Ministerial Statement 827 was published (varying Ministerial Statement 823).

150    On 23 March 2010, Mineralogy and the CITIC parties entered into the Port Terminal Operator Agreement.

151    In May 2010, the first autogenous grinding mill was installed at the processing plant.

152    In June 2010, construction of the barge loader was completed in China and construction of the barge loading facility commenced at Cape Preston.

153    In August 2010, construction of the barge loading facility at Cape Preston was completed.

154    On 2 November 2010, the Minister declared the Port was subject to the Mining Act 1978 (WA).

155    In January 2011, the construction of the breakwater at Cape Preston was completed.

156    In March 2011, installation of the barge loader was completed and installation of conveyors along the breakwater commenced.

157    In September 2011, the barges and transshipper were delivered to the Port area.

158    On 22 November 2011, the Minister declared the Port was subject to the Mining Safety and Inspection Regulations 1995 (WA).

159    On 23 November 2011, the last version of Port Construction Proposal was submitted by Sino Iron and Korean Steel to Mineralogy.

160    On 22 March 2012, Mineralogy was granted a non-exclusive Jetty Licence by the Manager, Property Services Coastal Facilities of the Western Australian Department of Transport.

161    On 11 May 2012, Mr Sharma, the Managing Director for Mineralogy in Western Australia, wrote to the CITIC parties, asserting Mineralogy’s ownership of “our port facilities” and saying that Mineralogy needed time to recruit operating personnel for equipment including the dewatering plant, the stackers and reclaimers, all pumping equipment in the Port area, all conveyors in the Port area, the barge loader, the water intake and outlet for the desalination plant, and all other equipment installed in the Port area. Mr Sharma also urgently sought information for the operation of the port terminal facilities and stressed the urgency of obtaining that information “prior to taking over operation”.

162    In June 2012, dry commissioning of the barge loader, conveyor and transshipment fleet for the Project was in progress.

163    In November 2012, Sino Iron and Korean Steel commenced trial production.

164    On 31 January 2013, the Commonwealth Department of Infrastructure and Regional Development Office of Transport Security declared the Port of Cape Preston to be a security regulated port and designated Mineralogy as Port Operator under the MTOFS Act.

165    On 27 February 2013, the CITIC parties sent a three page letter to Mineralogy saying that the “by-laws” attached to the Facilities Deeds were not approved by the relevant government agencies of the State of Western Australia (as was correct).

166    Mineralogy later relied on this letter as the basis for termination notices which it purported to issue under the Facilities Deeds.

167    On 18 March 2013, Mineralogy commenced Federal Court of Australia Proceeding WAD 83 of 2013.

168    On 2 April 2013, HopgoodGanim, the solicitors for Mineralogy, sent a letter to Allens, solicitors for the CITIC parties, demanding handover of, and control of, the Port Facilities.

169    On 5 April 2013, Mineralogy served a notice of demand on CITIC Pacific Ltd, Sino Iron, and Korean Steel requesting that they hand over possession of the Port.

170    On 12 April 2013, the solicitors for the CITIC parties sent a five page letter to the solicitors for Mineralogy responding to various allegations made by Mineralogy including allegations concerning the Port.

171    Mineralogy later relied on this letter as a basis for Termination Notices which they purported to issue under the Facilities Deeds.

172    On 15 April 2013, Mineralogy withdrew Federal Court of Australia Proceeding WAD 83 of 2013.

173    On 16 April 2013, Mineralogy commenced this proceeding.

174    On 19 April 2013, CITIC Pacific announced that the first shipment of iron ore concentrate was expected to be in the second half of May 2013.

175    On 22 April 2013, Mineralogy wrote to Sino Iron and Korean Steel referring to CITIC Pacific Ltd’s recent announcement stating that the first shipment of iron ore concentrate is expected to be in the second half of May 2013, and alleging that cl 25 of the Facilities Deeds says that Mineralogy is responsible for all scheduling and that Sino and Korean shall advise Mineralogy of all proposed shipping schedules. Mineralogy said that it looked “forward to receiving your schedules without further delay” [tb 9653].

176    On 3 May 2013, CPMM responded to Mineralogy’s 22 April 2013 letter and said that “once our shipping schedule is firm and we have a vessel committed for first shipment we will provide you a copy of the shipping schedule” [tb 9799A]. CPMM also said that it did “not expect Mineralogy to make any amendments to the shipping schedule when it is issued” because cl 25(b) of the Facilities Deeds permits Mineralogy to amend CITIC’s shipping schedules only “for good cause” [tb 9799A]. CPMM asserted that CITIC has priority rights to access and use the Facilities it has constructed and that no scheduling conflicts should arise as CITIC is currently the only authorised user of the Port. CPMM asked Mineralogy to “please let us know if Mineralogy insists on a formal consultation process in relation to the shipping schedule” [tb 9799A].

177    This letter from CPMM later formed the basis for termination notices which Mineralogy purported to issue under the Facilities Deeds.

178    On 17 September 2013, CPMM wrote to the Department of Mines and Petroleum in respect of a notification under s 4(3) of the Mine Safety and Inspection Act 1994 (WA).

179    On 29 September 2013, the Department of Mines and Petroleum, together with the State Mining Engineer, notified CPMM pursuant to s 4(3) of the Mine Safety and Inspection Act.

180    On 11 November 2013, the Commonwealth Department of Infrastructure and Regional Development Office of Transport Security approved CPPC's Maritime Security Plan for a Port Facility Operator pursuant to the MTOFS Act.

181    On 29 November 2013, Mineralogy replied to CPMM’s letter of 28 November 2013 advising that as the port owner and operator, the purported proposed shipping schedule was not approved and that CPPC should not undertake any operations at the Port of Cape Preston.

182    On 2 December 2013, CPMM issued a press release announcing that the first shipment of magnetite ore was being loaded before it set sail for China. The press announcement explained that the first concentrator line was operational and that the second was in process. The critical components surrounding the concentrator line were also operational. These are the power plant, slurry pipeline, desalination plant, and Port Facilities [tb 10371].

183    On 13 February 2014, the CITIC parties’ Further Amended Defence was filed in these proceedings. Mineralogy later alleged that filing this defence was a serious breach of the Facilities Deeds in a Termination Notice that Mineralogy issued, purportedly under the Facilities Deeds.

184    On 3 June 2014, Mineralogy wrote to Sino Iron and Korean Steel giving notice that it approved the use of the Facilities by ARH. Mineralogy said that it would “determine pursuant to Clause 8.7(a) the amount that [ARH] will pay to your companies, based on tonnage of products to be shipped from time to time prior to [ARH] commencing such shipments” [tb 10859].

185    On 12 June 2014, CPMM wrote to Mineralogy denying the validity of the notice by Mineralogy that ARH had been given approval to use the facilities and saying that ARH “has made no announcement to the market that it has made a decision to mine. In the context of a listed company that has a market capitalisation of less than $10 million dollars, it is inconceivable that such a decision would not require disclosure in accordance with its continuous disclosure obligations” [tb 10920].

186    This response later formed the basis for Termination Notices issued by Mineralogy purportedly under the Facilities Deeds.

187    On 20 August 2014, the Full Court of the Federal Court set aside the decision to designate Mineralogy as Port Operator for Cape Preston.

188    On 26 September 2014, in the Supreme Court of Western Australia, I granted an interim injunction restraining Mineralogy from issuing default notices and termination notices under the MRSLAs.

189    On 25 November 2014, Mineralogy issued Termination Notices to Sino Iron and Korean Steel under the Facilities Deeds. These Termination Notices became the basis for Mineralogy’s primary relief in this action.

190    On 6 February 2015, in the Supreme Court of Western Australia, I made a declaration that Mineralogy was obliged by cl 20.1(a) of the Fortescue Coordination Deed to make an application to the Western Australian Minister for the Environment for the transfer to Sino Iron and Korean Steel of the status of proponent under Ministerial Statement 635 (as amended) and Ministerial Statement 822.

2.4 Witness statements and affidavit evidence

191    Witness statements and affidavit evidence, following amendments after conferral and rulings, were tendered as set out below. As I explain later, exhibits G and H are inadmissible.

(1)    Exhibit A: Witness statement of Mr Holtshausen (28 November 2014);

(2)    Exhibit B: Witness statement of Mr Holtshausen (8 May 2015);

(3)    Exhibit C: Witness statement of Mr Holtshausen (27 May 2015);

(4)    Exhibit D: Witness statement of Mr Cribbes (14 April 2015);

(5)    Exhibit E: Witness statement of Mr Cribbes (13 May 2015);

(6)    Exhibit F: Witness statement of Mr Cribbes (9 June 2015);

(7)    Exhibit G: Affidavit of Mr Van der Heyden (17 April 2015)

(8)    Exhibit H: Second affidavit of Mr Van der Heyden (9 June 2015)

(9)    Exhibit I: Affidavit of Mr Robinson (17 April 2015);

(10)    Exhibit I1: Corrections to Mr Robinson’s affidavit (17 April 2015);

(11)    Exhibit J: Affidavit of Mr Robinson (13 May 2015);

(12)    Exhibit K: Witness statement of Mr Mason (7 May 2015);

(13)    Exhibit L: Witness statement of Mr Rayson (30 October 2015);

(14)    Exhibit M: Witness statement of Mr Northey (7 May 2015);

(15)    Exhibit N: Witness statement of Mr Watson (30 October 2015);

(16)    Exhibit O: Witness statement of Mr Watson (8 May 2015);

(17)    Exhibit P: Affidavit of Mr Richardson (7 May 2015);

(18)    Exhibit Q: Affidavit of Mr Richardson (8 June 2015); and

(19)    Exhibit R: Affidavit of Mr Richardson (9 June 2015).

192    In the reasons which follow, there are numerous aspects of the witness statements and affidavit evidence to which I make no reference. The same approach was taken by the parties in written submissions. As I will explain, many of the central issues in this case were matters of law. Some issues of fact were so peripheral that they almost became a distraction.

2.5 The oral evidence: particular findings and admissibility rulings

193    Oral evidence was given by three witnesses for Mineralogy and four witnesses for the CITIC parties. I consider that all witnesses were honest. All witnesses genuinely attempted to assist the Court for most of their evidence. However, as I explain, the degree to which I find the evidence of the witnesses to be reliable varies greatly.

194    With one exception, all admissibility rulings to the evidence of witnesses were given during the course of the trial. The one exception was an objection to the whole of Mr van der Heyden’s evidence. That objection was made prior to Mr van der Heyden’s evidence and dismissed. But it was renewed when new information came to light immediately before Mr van der Heyden’s evidence. It was pressed immediately after Mr van der Heyden gave evidence. Both parties were content that this ruling should be made in the course of my reasons for decision. As I explain below, the entirety of Mr van der Heyden’s evidence is inadmissible.

195    The remainder of this section sets out my general findings on those aspects of the witnesses’ evidence which were the subject of oral submissions. Later in my reasons I return to some of this evidence in greater particularity.

2.5.1 Mr Holtshausen

196    Mr Holtshausen is the managing director of the CPPC. He has held that position since 28 February 2014. Mr Holtshausen said that CPPC is responsible for the maintenance, operation and control of the various marine assets, infrastructure, superstructure, and transshipment facilities which comprise the Port.

197    He was an extremely impressive witness, with a mastery of every detail of the subject matter on which he gave evidence. Some difficulty arose in his cross-examination because Mr Holtshausen was also, quite properly, extremely precise. For instance, during the course of a long cross-examination about the capacity of barge loaders he described how small barges took three hours to load and large barges took four hours to load. When asked whether it would take ten hours to load two small and one large barge he answered “no”. It later became apparent that the reason why 3 + 3 + 4 does not equal ten is because barges are not always available to be loaded (ts 292).

198    Although I accept Mr Holtshausen’s evidence, three of the key matters in his evidence are described below.

2.5.1.1 The extent of production by the Sino Iron Project

199    Mineralogy relied on evidence from Mr Holtshausen for its assertion that the Sino Iron Project is currently producing considerably less than the 27.6 mtpa envisaged by the Project Approvals. This is correct. Mr Holtshausen said that the CITIC parties were currently only loading 5 mtpa (ts 293). The reason why they are only loading 5 mtpa is partly due to the operation of only two of the six processing lines. In turn, this is due to delays by a contractor (ts 500: Mr Northey).

200    Mineralogy also asserted that on the evidence of Mr Holtshausen the CITIC parties had not, some five years and five months after the date of the last of the approvals on 6 January 2010, put in place equipment permits the production of 27.6 mtpa or the export of 27.6 mtpa of product.