New South Wales Supreme Court CITATION : Precious Metals Australia Limited v Xstrata Windimurra Pty Limited & Anor; Precious Metals Australia Limited v Xstrata (Schweiz) AG [2005] NSWSC 220 HEARING DATE(S) : 17/03/05 JUDGMENT DATE : 17 March 2005 Equity Division JURISDICTION : Commercial List JUDGMENT OF : Einstein J DECISION : Orders made on separate question. Costs orders made. CATCHWORDS : Costs - Related proceedings appropriate to be heard together LEGISLATION CITED : Supreme Court Rules CASES CITED : Precious Metals Australia Limited v Xstrata Windimurra Pty Limited & Anor [2005] NSWSC 141 Precious Metals Australia Limited (Plaintiff in 50113/04; 50003/05) Xstrata Windimurra Pty Limited (First Defendant 50113/04) PARTIES : Xstrata (Schweiz) AG (Second Defendant 50113/04; Defendant 5003/05) FILE NUMBER(S) : SC 50113/04; 50003/05 Mr RJL McCormack (Plaintiff) COUNSEL : Mr MR Elliott (Defendants) Piper Alderman (Plaintiff) SOLICITORS : Mallesons Stephen Jaques (Defendants) LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST Einstein J Thursday 17 March 2005 ex tempore Revised 17 March 2005 50113/04 Precious Metals Australia Limited v Xstrata Windimurra Pty Limited & Anor 50003/05 Precious Metals Australia Limited v Xstrata (Schweiz) AG JUDGMENT The state of the proceedings 1 The two sets of related proceedings presently before the Court for the purpose of dealing with costs and further directions were explained in the judgment delivered in the contract proceedings on 9 March 2005: see [2005] NSWSC 141 at paragraphs [4]-[13]. The guarantee proceedings 2 The proper order to be made in the guarantee proceedings is as follows: A The Court answers the question separated out for initial hearing by order made under Part 31 of the Supreme Court Rules as follows: Upon the proper construction of clause 7.7(a) of the Royalty Agreement, such Royalty Agreement being considered as a whole, Xstrata is not liable to pay or reimburse the costs, charges and expenses as incurred, and [which] may hereafter be incurred by the plaintiff ("PMA") in prosecuting action 50113 of 2004 ("Main Action") against Xwin: (1) as and when incurred and on demand (that is, before resolution of action 50113 of 2004); (2) whether or not PMA succeeds or is entitled to succeed in that action. B It has been unnecessary bearing in mind the reasons given in the judgment delivered in the guarantee proceedings to answer sub- question (3). Order on separate question 3 An order is made in accordance with paragraph 2A above. Further directions 4 The parties to the guarantee proceedings have not been able to agree upon the further directions to be given in the proceedings. The defendant to those proceedings has submitted that the summons should be dismissed. The plaintiff has sought the following declaration: "A declaration that pursuant to clause 7 of the Royalty Agreement dated 16 October 2000, as referred to in the Summons in these proceedings, in the event that the plaintiff succeeds with its claim in the proceedings brought by it as plaintiff in the Supreme Court of New South Wales, Sydney Registry, Equity Division, Commercial List, and being Action No. 50113 of 2004 (Main Action), the defendant is obliged to pay or reimburse the plaintiff for all costs, charges and expenses incurred by the plaintiff, or in respect of which it is obliged to pay, in connection with the plaintiff's claim in the Main Action, including, but not limited to, legal costs and expenses on a full indemnity basis, save and except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that, subject to those exceptions, the plaintiff is completely indemnified for its said legal costs and expenses." 5 To my mind it is inappropriate for the Court presently to do more than to answer the material questions separated for determination in these proceedings. 6 The essence of the approach taken by PMA is to focus upon the reasoning in the guarantee judgment (at [55]) and to seek to have what it contends to be appropriate declaratory relief to reflect the first sentence of that paragraph. 7 Standing back from both sets of proceedings and taking into account the limited nature of the questions which were separated out under Part 31 it may be seen that PMA's approach is inappropriate. 8 The proper exercise of the Court's relevant discretion bearing in mind (1) the Overriding Purpose Rule as well as (2) Section 63 of the Supreme Court Act is: · to give directions for the further preparation of such issues as may be sought to be determined in the guarantee proceedings; · to stand over the guarantee proceedings to be heard together with the contract proceedings. 9 I cannot see any prejudice to either party which could be occasioned by this approach which certainly meets the section 63 requirement to have related litigation heard at the same time. If there are any issue estoppels between the parties arising by reference to any part of the guarantee judgement handed down on 9 March 2005 the trial judge will be in a position to so declare. Costs 10 It will be recalled that as explained in the judgment in the guarantee proceedings (at [10]-[11]) PMA initially pursued a motion for summary judgement in those proceedings. 11 The transcript of 26 February 2005 is self-explanatory as to the manner in which the decision was taken to transform the nature of the hearing of the guarantee proceedings into a final hearing of the questions separated out under Part 31. The question of costs of the parties' preparation for the hearing of the motion for summary judgment [which motion was plainly rendered otiose] was not dealt with. 12 Whilst certainly some part of the preparation by both parties for the hearing of the motion for summary judgment would have dealt with the analysis of the principles apt to be applied in that field of discourse, it is clear to me that the vast bulk of preparation for the hearing of that motion would have raised precisely the same issues as were litigated in depth in relation to the Part 31 separate questions. Hence it seems to me that fairness dictates that costs of both the summary judgment motion and the separate question determination be dealt with together, costs of the motion to be regarded as abiding the decision on the separate question determination. It would clearly be a matter of great difficulty for a costs assessor to work out the extent to which the defendants wasted costs in preparation for the summary judgment motion. Such wasted costs are likely to be de minimus. 13 The submissions advanced by Xstrata (Schweiz) AG to the effect that it is entitled to costs on an indemnity basis are rejected. 14 There is no reason to depart from the usual approach that the unsuccessful party to litigation is to pay the costs of the successful party. Presently what falls for consideration is the costs of the separate question determination [the decision with respect to which will govern costs of the summary judgment motion]. Clearly Xstrata (Schweiz) AG was successful in relation to the separate question determination. It would be misconceived to stay the costs orders which are to be made pending determination of PMA's claims in the contract proceedings for the reason that the separate question determination involved a question of construction which has been answered favourably to Xstrata (Schweiz) AG. 15 The appropriate order is as follows: "Order that PMA pay the costs of Xstrata (Schweiz) AG of the summary judgment motion and of the separate question determination on a party party basis." The security for costs motion 16 At the end of the day the parties are agreed on the appropriate orders to be made, there being only a minor disagreement with respect to the issue of the wording of the order by which the plaintiff is to pay the defendants' costs of the motion. 17 The proper exercise of the Court's discretion in the circumstances dictates, and the reasons for judgment given dictate, that the Court makes the following orders. (1) Order that the plaintiff provide security for the defendants' costs of these proceedings in the amount of $500,000 by the provision to the defendants of a bank guarantee or bank guarantees from a reputable Australian bank as follows: (a) on or before 15 May 2005 - a bank guarantee in an amount of not less than $250,000.00; and (b) on or before 15 June 2005 - a bank guarantee in an amount of not less than $250,000.00 (2) Order that in the event that the plaintiff has failed to comply with order (1) (a) by 15 May 2005, these proceedings be stayed until further order. (3) Order that in the event that the plaintiff having complied by 15 May 2005 with order (1) (a), thereafter fails to comply with order (1) (b), these proceedings are to be stayed pending compliance with order (1) (b). (4) Order that the plaintiff pay the defendants' costs of this motion. I certify that paragraphs 1 - 17 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 17 March 2005ex tempore revised 17 March 2005 ___________________ Susan Piggott Associate 17 March 2005 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.