Citic’s Federal Court win on Pilbara port will cost Clive Palmer

Clive Palmer’s resounding defeat in the Federal Court yesterday is shaping as costly on two fronts.

‘Confident justic will prevail’: Clive Palmer. Picture: Ray Strange

Clive Palmer’s resounding defeat in the Federal Court yesterday is shaping as costly on two fronts, as the MP now faces a multi-million-dollar legal bill and possible complications in other ongoing legal battles with his estrange­d Chinese business partner.

The Federal Court yesterday dismissed the application from Mr Palmer’s private company Mineralogy to remove China’s Citic as operator of the Cape Preston port in Western Australia’s Pilbara, which is central to the operati­ons of Citic’s $12 billion Sino Iron mine.

The court also permanently restrained Mineralogy from acting on termination notices it had issued to Citic in relation to the matter. In his ruling, Federal Court judge James Edelman said Mineralogy’s claims against Citic had failed for a “litany of reasons”.

Justice Edelman also slammed the nature of the termination notice­s Mineralogy had issued to Citic, in which Mr Palmer’s company effectively tried to evict Citic from the project.

“When the terms of the termin­ation notices are considered, the issue of those notices by Mineralogy is not merely surprising. It is astonishing,” Justice Edelman wrote. “Many aspects of the … notices are farcical.”

A defiant Mineralogy vowed to appeal against the decision, and said in a statement it would continue to issue Citic with more termination notices “for continuing breaches’’. It said it was “confident … that justice will prevail”.

Citic is now set to pursue Mineralogy over the costs of the two-year-long legal action, which Justice Edelman noted had run into the millions of dollars.

A win by Mr Palmer would have effectively forced Citic to shut down the Sino Iron mine and walk away from the project.

Justice Edelman dismissed the argument from Mineralogy that Citic had breached an agreement over the port by failing to accept that Australasian Resources, an Australian Securities Exchange-listed company controlled by Mr Palmer, needed access to the port.

He noted that Australasian had made no decision to mine, did not have the billions of dollars needed to build a mine, and was only being kept afloat by loans from Mr Palmer. “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 that was practically insolvent,” Justice Edelman wrote.

The termination notices did not allege any genuine, serious or persistent breach by Citic, he said. Instead, they had been issued “as a lever for future commercial negot­iations”.

The case is one of several between Mineralogy and Citic, with their relationship having soured dramatically since Citic agreed to buy the mine project from Mr Palmer in 2006 for $415 million.

The strength of Citic’s win is likely to boost its confidence of succeeding in the other matters, given the judgment touched on aspects common to the disputes.

Importantly, Justice Edelman found Citic had a “duty” to continue running the operation. That finding could help Citic as it fights against other termination notices. A spokesman for Citic said the company was pleased with the court decision.

Justice Edelman noted that the tense relationship between the two parties meant litigation was likely to continue for years.