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BlueScope loses bid to toss out $506M claim by unsuccessful Taharoa iron sands buyer

Wednesday 18th July 2018

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BlueScope Steel, the Glenbrook steel mill operator, has lost a bid to end or narrow a $506 million court action taken by the unsuccessful bidder for the Taharoa iron sands mine near Kawhia.

Toward Industries, owned by BlueScope, had asked the High Court to separately consider four matters related to the conditional sale agreement it entered into with New Zealand Iron Sands Holdings for the mining company,Taharoa Ironsands, in November 2016.

That deal never proceeded, and the following May Taharoa Ironsands was purchased by Taharoa Mining Investments, a firm owned by iwi landowners Taharoa Block C Inc and Melrose Private Capital.

NZ Iron Sands, which was set up by Australian advisory firm Gleneagle Securities for a syndicate of investors interested in buying Taharoa, has claimed $506 million from Toward and Taharoa Ironsands, arguing they wrongly terminated the original sale agreement and didn’t treat it fairly in the second sales process.

Glenbrook is the country’s only producer of steel which it makes by smelting local iron sands with local and imported coal. The Taharoa mine, further south, is an export operation and was sold by ASX-listed BlueScope as part of a string of initiatives announced in 2016 to keep the New Zealand business profitable.

Toward told Justice Edwin Wylie in May that dealing separately with four aspects of the first sale agreement could reduce NZ Iron Sands’ claim from $506 million to nominal damages only. It could potentially bring the action to an end, and at the very least would shorten a hearing that would otherwise consider 59 issues and could be expected to take about four weeks.

Taharoa sought a separate ruling on whether it met the definition of being a ‘party’ to the original sale agreement and whether it also benefited from the limitation on damages contained in that agreement. Both applications were opposed by NZ Iron Sands.

In a June 28 decision, Justice Wylie observed that courts will consider dealing with separate questions when they narrow the scope of a subsequent hearing or obviate the need for one altogether.

But he noted the general assumption that all matters in a case will be determined in one trial, and that separate questions can be “particularly inappropriate” in complex cases.

Whether separate questions should be considered would be depend, he said, on: how clearly demarcated the issues would be from those in the subsequent trial; whether they would bring proceedings to an end; the potential time savings offered; how any appeals would be dealt with; and whether there were any other practical advantages to be gained.

Justice Wylie said that if Toward was successful during what would be a one to two-day hearing, proceedings would come to an end or might be settled.

But he was not convinced the interpretation of the rest of the original sales agreement would not be considered again at any substantive trial.

And if NZ Iron Sands was successful at the initial hearing that could delay the final hearing until 2020. At the moment it could not be heard before mid-2019 at the earliest.

Justice Wylie observed that the sum involved means there is also a “very real prospect” that either party would appeal a decision on the separate questions, with those appeals unlikely to be heard before the second half of 2019, or even 2020 if they went to the Supreme Court. Neither party had offered to be bound by ‘no appeal’ conditions.

Given the substantial evidence that would be required and the demarcation issues involved, he rejected the application.

“I am not persuaded that Toward and Taharoa have established ‘good, preponderant reasons’ in favour of a separate questions hearing.”

Justice Wylie also rejected an application from NZ Iron Sands for non-party discovery against Taharoa Mining Investments, Taharoa C, Melrose and its owners Wayne and Rosemary Coffey.

While it may be warranted later, the judge said the current application is premature and is “wasteful and duplicative” when the material sought may be provided through the usual discovery process.

The inference is also open, he said, that the application is being made to glean information for a threatened damages claim against the non-parties. Were that the case, that would constitute “fishing” and would be an improper use of the court process, he said.


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