The Bell tolls for self-represented law firms seeking to recover costs

20 February, 2020

The recent judgment of the Supreme Court of Western Australia (Tottle J) in Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 8] [2015] WASC 473, which was delivered on 7 December 2015, has gained media attention due to the plaintiff company’s association with Clive Palmer MP (the Honourable Member for Fairfax and Palmer United Party federal leader), as well as the impact of the decision upon the community of Townsville.

It also serves as a timely reminder of the principles relating to interlocutory injunctions.

Background

Mineralogy is a company founded and owned by Clive Palmer MP. It is engaged in the exploration and development of mineral resources and in particular iron ore. The application brought by Mineralogy in the present case was described as “a further episode of interlocutory disputation in protracted litigation between the participants in what is known as the Sino Iron Project (the Project) located in the Pilbara region of Western Australia”.

The primary relief sought by Mineralogy in the application was mandatory interlocutory injunction compelling the first to the third defendants (known as the “the CITIC parties”) to make immediate payment of US$48 million to Mineralogy or, in the alternative, an injunction which would have the effect of suspending operations on the Project.

The relevant clause in the agreements between Mineralogy and the various CITIC parties relied upon by Mineralogy to support the application for an injunction was:

“6.3 Commencement of production

(a) Unless prevented from doing so by an act, matter or thing outside of [the CITIC parties’] control, by the doing of, or failing to do, an act by Mineralogy under this Agreement or otherwise, or a failure to obtain all Government Approvals necessary for it to do so (provided it has used its best endeavours to obtain such approvals in a timely manner) [the CITIC parties] must produce no less than 6,000,000 (six million) tonnes of Product no later than 7 years from the date of this Agreement.

(b) If [the CITIC parties] fails to comply with paragraph (a) then it must … pay to Mineralogy an amount equivalent to the Mineralogy Royalty payable on the amount of Magnetite Ore required to produce 6,000,000 (six million) tonnes of iron ore concentrate.”

Mineralogy relied upon expert evidence from a qualified mining engineer and a chartered accountant to establish that it is owed an amount of US$48 million pursuant to clause 6.3(b).

Test for interlocutory injunctions

The principles governing the determination of interlocutory injunctions are well established. As re-stated by Tottle J, those principles include:

The two main inquiries are whether the plaintiff had made out a prima facie case [or ‘serious question to be tried’] and whether the balance of convenience [or ‘balancing of the risks of injustice’] favours the grant of the injunction.
The grant of an injunction involves balancing the injustice which might be suffered by the defendant if the injunction is granted and the plaintiff later fails at trial, against the injustice which might be suffered by the plaintiff if the injunction is not granted and the plaintiff later succeeds at trial.
The strength of the plaintiff’s case and the balance of convenience are to be considered together. As the apparent strength of the plaintiff’s case diminishes, the balance of convenience moves against the making of an order.

In addition, the court observed that when determining where the balance of convenience lies the court may take into account the rights or interests of third parties that may be affected and, where appropriate, ‘detriment that might be caused to third persons or to the public generally if an injunction were refused’.

Did Mineralogy meet the test?

As is not uncommon in interlocutory injunction cases, the CITIC parties conceded that there was a serious question to be tried as to their liability to make royalty payments under clause 6.3 (although no concession was made in relation to the quantum of such claim). Accordingly the issue in dispute on this application was whether the balance of convenience (or balancing of the risks of injustice) favoured the grant of injunctive relief.

Mineralogy claimed that damages were not an adequate remedy because of the harm that it and five other entities or groups would suffer if the injunction was refused.

Mineralogy contended that it would be harm in various ways including:

the failure to grant the mandatory injunction in the sum of US$48 million will detrimentally affect its ability to pay legal costs associated with this action and five other actions (which legal costs were estimated to be $10.75 million over the next 12 months). Accordingly, it said that its right to pursue those legal proceedings was prejudiced.
A refusal to grant the injunction sought will jeopardise the jobs of 14 of its staff.

In relation to the alleged detriment that will be caused to Mineralogy if the injunction was refused, the evidence was that Mineralogy had met with executives of ‘the big four Australian banks’ in September and October 2015 and was told that its assets in the form of mineral deposits (valued at A$78 million at 30 June 2015) would not be adequate security for borrowings. However, the court noted that there was no of evidence as to the possibility of Mineralogy raising funds or financing its obligations by alternate means such as “assets sales; equity finance; farm outs or joint venture arrangements”. In the circumstances, the court was “left with the impression that Mineralogy has overstated its inability to fund its activities”.

Amongst the third parties which Mineralogy claimed would suffer if the injunction was not granted was Queensland Nickel Pty Ltd (QN) together with the people of Townsville. QN operates a nickel refinery near Townsville, Queensland and was said to be the town’s largest private employer. QN has, in the past, relied on Mineralogy for loans when required. Mineralogy claimed that the price of nickel has dropped substantially in recent times, as a consequence of which QN is experiencing a liquidity crisis. Mineralogy further claimed that QN urgently requires a cash injection of $28 million to avoid the closure of its refinery, job losses for up to 767 employees and to avoid being placed into administration.

In relation to the alleged detriment that will be caused to QN and the community of Townsville generally if the injunction was refused, the court observed:

No evidence had been given about attempts to source finance other than from major retail banks or to rationalize QN’s operations otherwise than by closing the refinery and terminating the employment of its entire workforce.
No evidence had been given of QN discussing with an appropriately qualified insolvency practitioner the wisdom of taking the extraordinary step of terminating the employment of all employees of QN before putting the company into administration. The court expected that such a decision “would be made in conjunction with the prospective administrator”.
In the circumstances, the court was prepared to accept “that there is a risk that QN may be placed into administration, but … (not) that the dire consequences outlined … will flow from QN being placed into administration”.

Ultimately the court concluded that the injunction should not be granted for the main reason “there is no basis in principle upon which a court can order that a payment be made to a plaintiff in respect of a claim for damages before the claim is determined”. In addition, the court considered that the potential harm relied upon by Mineralogy did not tip the balance of convenience/injustice in its favour.

Take Away Points

Obtaining a mandatory injunction which in effect compels payment of damages in advance of a trial will be a very substantial, if not an impossible obstacle. Such was the nature of the relief sought by Mineralogy in the present case, which the court characterised as “highly unusual”.
Where an applicant for an injunction claims:

(a) that an award of damages at the conclusion of the trial will not be an adequate remedy because dire consequences may flow to the applicant and to third parties if injunctive relief is not granted; or
(b) that the applicant has pursued and exhausted all alternate means of raising funds or financing its obligations,

a court will consider very carefully the cogency of such claims and the evidence in support.

[Postscript: on 15 January 2016, QN confirmed that it will lay off 237 workers and on 18 January 2016, the company went into voluntary administration.]

published by

Foez Dewan

Principal

contributors

Guy Lewis

Senior Associate

Recent Insights

View all

Litigation and Dispute Resolution

Canadian Court elevates thumbs-up emoji to signature status

In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract. Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed. Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)." Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter. Judgment At paragraph [36], Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship. Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph [63]: "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the dictionary.com definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest. What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.

Published by Foez Dewan

29 August, 2023

Government

Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane [2023] NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty. The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.

Published by Leighton Hawkes

18 August, 2023