Litigation and strategy – testing the limits in the Mirabela liquidation

Litigation is often a series of strategic plays. The Full Federal Court decision in Madden (Receiver) v Mining Standards International Pty Ltd [2025] FCAFC 142 provides helpful guidance regarding the difference between impermissible tactical claim splitting and legitimate financial constraints influencing a party’s approach in litigation.

Madden v MSI affirms the High Court’s warnings in Aon and UBS AG v Tyne, that the administration of modern civil justice will not accommodate gamesmanship that burdens both courts and the parties. Ultimately, lawyers must ensure their clients’ tactical ambitions never eclipse their obligations to the court. (Clayton Utz acted for the Receivers in the WA, Federal Court and High Court proceedings.) The special leave application made by Mining Standards International Pty Ltd (MSI) was refused.

An asset sale agreement is terminated

This dispute started with the termination of an asset sale agreement dated 1 November 2017 (ASA), under which MSI was to purchase all shares that Mirabela Nickel Ltd (Receivers and Managers Appointed) and its subsidiary (the Sellers) held in a Brazilian mining company, Mirabela Mineracao Ltda (BrazilCo). The Sellers were under the control of the Receivers at the time.

The Receivers issued a notice to MSI to terminate the ASA, arising from a failure to meet a finance condition precedent. MSI disputed the validity of the notice on various grounds claiming the ASA remained on foot.

The assets that were the subject of the ASA were subsequently sold to a third party.

The Receivers sought directions in the Supreme Court of Western Australia regarding the distribution of the sale proceeds (which were obtained). The Receivers then sought declarations in the same court on the validity of the termination of the ASA.

In the WA Supreme Court proceeding, MSI initially pleaded a defence based on the Sellers’ and Receivers’ alleged failure to use reasonable endeavours, but later withdrew this part of its defence. Before the WA Supreme Court judgment was delivered, MSI brought similar claims in the Federal Court, by commencing proceedings against BrazilCo for breach of the ASA and unconscionable conduct. BrazilCo then commenced a crossclaim against the Receivers, effectively joining them to the Federal Court Proceeding.

The WA Supreme Court decision was then appealed and the Court of Appeal declared that the Receivers' termination was valid (see [2025] WASCA 82). The WA Court of Appeal's decision was not appealed by MSI.

In the Federal Court, MSI argued that its decision to withdraw the defence and to not pursue a counterclaim in the WA Supreme Court Proceeding was driven by a lack of litigation funding and a desire to avoid delay and costs, rather than for any tactical advantage.

Tactical claim splitting

BrazilCo and the Receivers applied to stay MSI’s Federal Court Proceeding as an abuse of process. At first instance, the judge refused to grant the stay, in part due to MSI's financial inability to pursue all claims in the WA Supreme Court Proceeding.

The Full Federal Court found that the overlap caused by the splitting of proceedings as between the Western Australian Supreme court and the Federal Court meant that there was a real risk of inconsistent findings and unjustifiable oppression to the Receivers. The Full Federal Court also agreed with the Receivers' submissions that the claim brought by MSI would be barred by an Anshun estoppel.

The Full Federal Court reversed the decision at first instance, finding that MSI's conduct went beyond what could be justified by financial constraints and amounted to tactical claim splitting.

The key factors contributing to this finding included:

• Withdrawal to expedite proceedings: A strategic decision to withdraw a claim to expedite the proceeding and avoid evidence issues. MSI's withdrawal of the defence claims was not solely due to lack of funding.

• Lack of transparency: MSI failed to clearly communicate to the Receivers and the Court that it intended to pursue the withdrawn claims in later proceedings and did not come clean about its intentions, which deprived the Court and the other parties of the opportunity to manage the litigation efficiently.

• Deferred, not abandoned, claims: MSI intended to merely defer the withdrawn claims for later litigation, which undermined the utility and finality of the WA Supreme Court proceedings.

The Full Federal Court was also critical of the notion that a party or its funder could unilaterally dictate the timing and scope of litigation based on funding availability, without regard to the interests of the other parties or the Court.

Public vs private considerations

The Full Federal Court's acceptance of MSI’s inability to secure funding for a counterclaim in the WA proceeding was a significant factor in its decision-making. Nonetheless, it found that the efficient administration of justice and use of court resources, the avoidance of duplicative litigation and the need for finality are paramount. The overriding consideration is whether, in all the circumstances, the party’s conduct constitutes a misuse or abuse of the court’s process, having regard to both private and public interests.

Ethical considerations and obligations of lawyers

The underlying theme appears throughout Madden v MSI – to the effect that lawyers must not allow clients to drive strategies that may undermine their obligations to the court and interfere with the finality and efficiency of the justice system.

The Full Federal Court summarised lawyers' obligations as follows:

• Candour and transparency: Disclose intended claims and litigation strategies (where it interferes with the conduct of the case); and put your cards on the table to avoid surprise at trial.

• Assist in case management: Lawyers are expected to assist the court in achieving the overarching purposes of litigation; help the court manage proceedings efficiently; disclose related claims.

• Avoid tactical manoeuvring: Do not split claims or withhold issues for private advantage; always have in mind the interests of justice.

• Duty to the court: Lawyers' duty to the court is paramount and should not be curtailed by client’s private interests.

• Avoid abuse of process: Do not use court processes oppressively or wastefully.

High Court shuts the door on MSI

Following the Full Federal Court's decision to permanently stay its claims, MSI applied for special leave to appeal to the High Court.

MSI advanced six proposed grounds of appeal. Its principal contention was that the Full Federal Court erred in finding an abuse of process by failing to give sufficient weight to three matters:

• MSI was a defendant (not a claimant) in the WA Supreme Court Proceeding;

• BrazilCo was not a party to the WA Proceeding; and

• MSI's impecuniosity precluded it from bringing a cross-claim in those earlier proceedings.

MSI further submitted that the Full Federal Court improperly elevated the concept of "tactical manoeuvring" from UBS AG v Tyne into a principle of case management.

The Receivers (and BrazilCo in a separate related proceeding) opposed special leave, contending that:

• The special leave questions do not raise any issue of general principle: The Full Federal Court applied settled principles as to what constitutes an abuse of process in UBS AG v Tyne, which involves the proper balancing of private and public interests, not merely what suits a litigant or its funder.

• The proposed appeal is not an appropriate vehicle to consider the special leave questions: The finding of an abuse was based on the totality of facts and circumstances. There are unique factual circumstances that informed the Full Federal Court’s finding of “tactical manoeuvring”. As the Full Court stated, this case is not about forcing people who cannot afford to litigate to bring claims. It is about a party making unilateral forensic decisions in its own interests, or that of its funder, without raising its intended staged approach with the other party or the Court.

• The prospects of the proposed appeal succeeding were insubstantial: there is insufficient reason to doubt the correctness of the Full Court’s decision.

In March 2026, the High Court refused MSI's special leave to appeal with costs. In its decision, the High Court agreed with all three of the Receivers' reasons when refusing leave.

The practical effect is that the Full Federal Court's permanent stay of the Federal Court Proceeding stands, and MSI is precluded from pursuing its claims against BrazilCo for breach of contract and unconscionable conduct in the Federal Court.