This article considers Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105, a WA Court of Appeal reversal of a decision of Justice Tottle who dismissed an application by Mineralogy for a mandatory injunction requiring the respondents to pay Mineralogy US$48 million by way of royalty under agreements between the parties concerning the Sino Iron Project (while that dispute is ongoing). The Court of Appeal’s decision was delivered on 27 June 2016.

The appeal was allowed, requiring the issue of the injunction to be re-considered.

Background

The proceedings have a long and complex history.

Mineralogy, a company founded and owned by Clive Palmer MP, holds mining tenements and a general purpose lease over an area of land in the Pilbara region of Western Australia. In March 2006, it entered into Mine Right/Site Lease Agreements (MRSLAs) with the respondents (Sino Iron and Korean Steel) granting them a right to mine for magnetite ore and granting them a site lease for the construction and operation of their processing facilities. The third respondent (CITIC) is the ultimate holding company of Sino Iron and Korean Steel.

Sino Iron and Korean Steel now operate the Sino Iron Project, a large scale magnetite ore mining project on the land pursuant to the MRSLAs. The amount spent by those parties on it to date is estimated at $8.4 billion.

The proceedings were commenced by Mineralogy in March 2013. A central issue in the proceedings is whether a royalty is payable by Sino Iron and Korean Steel under the MRSLAs and the amount of that royalty. The relevant applications by Mineralogy were for:

  1. a mandatory interlocutory injunction compelling the respondents to make immediate payment to Mineralogy of US$48 million, alleged to be due to Mineralogy in respect of unpaid royalties; and
  2. an order that if Sino Iron and Korean Steel make that payment, they be permitted to operate the project provided they made ongoing quarterly payments to Mineralogy in respect of royalty payments.

The applications were heard and dismissed by Justice Tottle on 7 December 2015: Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 8] [2015] WASC 473. Mineralogy appealed this decision. Mineralogy had sought similar orders on two previous occasions; in each case the relief was refused.

Analysis

Reasons of the primary judge

The approach taken to Mineralogy’s application by Justice Tottle was largely consistent with that of Justices Edelman and Chaney on the other occasions. Although satisfied that Mineralogy had established a serious question to be tried, Justice Tottle said he was not in a position to make any assessment of the strength of the claim to the royalty in question, including and especially, any provisional assessment of its amount. Accordingly, he dismissed Mineralogy’s application.

The apparent effect of the decision at first instance is that Sino Iron and Korean Steel have been permitted to receive the contractual benefits to which they would be entitled under the MRSLAs whilst not having to pay any amount on account of the royalty and having the benefit of interlocutory injunctions preventing Mineralogy from exercising its claimed contractual rights under the MRSLAs.

Appeal decision

The Court revisited the principles to be applied on an interlocutory injunction application stating that the test to be applied is the same for mandatory interlocutory injunctions and prohibitory interlocutory injunctions, but noted mandatory interlocutory injunctions are rarely granted (for reasons including the Court’s inclination to maintain the ‘status quo’ in these situations). The two main enquiries that arise for interlocutory injunctions are:

  1. whether the plaintiff has made out a prima facie case of sufficient strength to justify the grant of an interlocutory injunction; and
  2. whether the balance of convenience and justice favours the grant of the injunction.

These are related questions.

The Court was of the opinion that Justice Tottle was placed in a difficult position by the urgency with which Mineralogy insisted the application be dealt with and by the circumstances in which it came on for hearing. However, it held that notwithstanding those difficulties, it was incumbent upon Justice Tottle to make an assessment of the strength of Mineralogy’s case, as there was material before him upon which such an assessment could be made and that he simply had to do the best he could in the circumstances in which he found himself. As a consequence of declining to undertake that evaluative task, it held that Justice Tottle was not in a position to determine whether Mineralogy had shown a sufficient likelihood of success to justify, in the circumstances, the grant of a mandatory interlocutory injunction pending the trial. The Court concluded that Justice Tottle was in error in not evaluating the strength of Mineralogy’s case, allowed the appeal, and remitted the matter for rehearing.

Concluding remarks

Mandatory interlocutory injunctions are rarely granted. This is particularly so where the relief sought is the payment of money which is the subject of the dispute in the proceedings.

However, this decision demonstrates that an application to have a royalty payment enforced on an interlocutory basis (pending trial) cannot be expected to be summarily dismissed, even where the evidence is complex and time is short. It will be interesting to see whether the judge that is to reconsider the matter, Justice Chaney, ultimately comes to a different decision to Justice Tottle.