JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: AMMON -v- CONSOLIDATED MINERALS LTD [No 3] [2007] WASC 232
CORAM: MARTIN CJ
HEARD: 6, 7, 12 - 16 & 19 - 23 FEBRUARY 2007
DELIVERED : 4 OCTOBER 2007
FILE NO/S: CIV 1222 of 2004
BETWEEN: DEREK NOEL AMMON
Plaintiff
AND
CONSOLIDATED MINERALS LTD (ACN 000 727 926)
First DefendantPILBARA IRON ORE PTY LTD (ACN 100 410 295)
Second Defendant
Catchwords:
Breach of contract - Construction and interpretation of contract - Use of pre-contractual and post-contractual conduct in aid to construing terms of the contract - Implied terms - Breach of confidence - Whether information was confidential - Whether unconscientious use of information occurred - Breach of fiduciary duty - Misleading and deceptive conduct
Legislation:
Nil
Result:
Action dismissed
Category: B
Representation:
Counsel:
Plaintiff: Mr J J Garnsey QC & Mr R J L McCormack
First Defendant : Mr G R Donaldson SC & Mr S K Dharmananda
Second Defendant : Mr G R Donaldson SC & Mr S K Dharmananda
Solicitors:
Plaintiff: Taylor Linfoot & Holmes
First Defendant : Blakiston & Crabb
Second Defendant : Blakiston & Crabb
Case(s) referred to in judgment(s):
Attorney-General v Observer Ltd (1990) 1 AC 109
B.P. Refinery (Westernpoint) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266
Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187
Butt v M'Donald (1896) 7 QLJ 68
Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33
Coco v AN Clark (Engineers) Ltd (1969) RPC 41
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
C-Shirt Pty Ltd v Barnett Marketing & Managing Pty Ltd (1996) 37 IPR 315
FAI Traders Insurance Co Ltd v Savoy Plaza Ltd (1993) 2 VR 343
Fractionated Cane Technology Ltd v Ruiz-Avila [1988] 1 Qd R 51
Frame v Smith (1987) 42 DLR (4th) 81; [1987] 2 SCR 99
Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales [1975] 2 NSWLR 104; (1975) 5 ALR 527
Lac Minerals Ltd v International Corona Resources Ltd [1989] 2 SCR 574; (1989) 16 IPR 27
Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd & Others [2006] FCAFC 144
Mackay v Dick (1881) 6 App Cas 251
N P Generations Pty Ltd v Feneley [2001] SASC 185; (2001) 80 SASR 151
National Roads and Motorists' Association Ltd v Geeson [2001] NSWCA 343; (2001) 40 ACSR 1
O'Brien v Komesaroff (1982) 150 CLR 310
Peters (WA) v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126
Pethybridge v Stedikas Holding Pty Ltd [2007] NSWCA 154
Price v Powers [2005] WASC 154
Rapid Metal Developments (Australia) Pty Ltd v Anderson Formrite Pty Ltd [2005] WASC 255
Re Coomber [1911] 1 Ch 723
Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234
Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 186 ALR 289; (2002) 76 ALJR 436
Seager v Copydex Ltd [1967] RPC 349
Secured Income Real Estate (Australia ) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Smith, Kline and French Laboratories (Australia) Ltd v Secretary to the Department of Community Services and Health (1991) 28 FCR 291
Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290
United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1
MARTIN CJ:
The parties
In these proceedings, Derek Noel Ammon (Mr Ammon), a geologist, mining engineer and metallurgist, currently engaged in the generation of new mining projects, makes various claims against Consolidated Minerals Limited (ConsMin) and Pilbara Iron Ore Pty Ltd (PIO). ConsMin is a listed company engaged in the development and operation of projects for the mining of various metals including iron. PIO is an unlisted company which was, at the time of its incorporation, a wholly‑owned subsidiary of ConsMin. The issued shares in PIO are now held as to 50% by ConsMin and as to the other 50%, by Fortescue Metals Group Ltd (FMG), which is also a listed company engaged in the development of projects for the mining of iron ore.
The claims
It is not easy to identify or summarise the claims advanced by Mr Ammon with any precision. The document to which one would ordinarily look for that purpose, his statement of claim, is 137 pages long. It is prolix, repetitive and confusing. In one area, being the area dealing with the claims Mr Ammon advances for misleading and deceptive conduct, it is so vague and incomprehensible, that during the course of the opening on behalf of Mr Ammon, I was required to request his counsel to deliver a further document clearly enunciating the causes of action relied upon so that I and the defendants could know the case that was being advanced. The statement of claim is a paradigm example of the oft observed inverse relationship between the length of a pleading and its performance of the two basic functions required of it - namely, to define the issues to be determined at trial, and to apprise the other parties of the case to be met.
Because of the deficiencies of the statement of claim, the identification of the particular claims advanced by Mr Ammon has to be undertaken drawing upon composite sources including the pleading, the opening address of counsel, the written particularisation of the misleading and deceptive conduct claim delivered after the opening address, and the closing address of counsel. It will be necessary to refer in much greater detail to the precise manner in which Mr Ammon enunciates his claims later in these reasons, but for present purposes it is sufficient to identify the broad categories of claims which he advances. They are:
(a)claims for breach of contract said to arise from a written agreement entitled 'Heads of Agreement' (HoA) entered into between Mr Ammon and PIO and two agreements characterised as the 'First Agreement for Exclusive Access' and the 'Second Agreement for Exclusive Access' said to have been entered into by Mr Ammon and ConsMin;
(b)breach of a duty of confidence said to be owed to Mr Ammon by both ConsMin and PIO in respect of an array of information, including the information contained in a document characterized as the 'Ammon Report';
(c)breach of fiduciary duties said to be owed to Mr Ammon by each of ConsMin and PIO; and
(d)misleading and deceptive conduct on the part of each of ConsMin and PIO.
In addition, a claim for breach of copyright was pleaded and maintained, but ultimately abandoned in the course of closing submissions.
The facts
As I have mentioned, Mr Ammon is qualified in three scientific disciplines. He holds the degree of Bachelor of Science in Geology from the University of Western Australia and the degree of Bachelor of Engineering in Mining Engineering from the West Australian School of Mines. He also holds the degree of Bachelor of Science in Extractive Metallurgy from the West Australian School of Mines. His occupational experience includes periods of employment with Cliffs Robe River Iron Associates at Cape Lambert in their iron ore preparation plant, in the course of which he was exposed to iron ore in the form of pisolite. Pisolite iron ore is usually encountered in deposits which are near to the surface, and are often associated with paleo‑channels, which are water courses which ran in prehistoric times.
Mr Ammon also spent a period employed by Hamersley Iron, in which he was involved in the exploration and mining of iron ore. He then worked for a period at Teutonic Bore mine site, employed by Seltrust Mining, during which he was mainly involved in the operation of the ore treatment plant. He also worked for a period as a contract geologist on the Mount Whaleback open cut iron ore mine at Newman. In addition, he has worked in a variety of other mining environments, including mines extracting gold and base metals other than iron.
In addition to periods of time when he has been employed by others, Mr Ammon has undertaken activities on his own behalf relating to the research and assessment of possible mining projects. He describes that activity as 'project generation' geology. He has undertaken that type of endeavour in relation to a number of different types of minerals, including coal, manganese, nickel, mineral sands, iron ore, chromite and others, but has a particular interest in iron ore and coal.
Mr Ammon is a director of Iron Ore Holdings Ltd, a public company which listed in about May 2005. That company is involved in the development of pisolite iron ore prospects at Yandi, which is in the same mineral field as the land the subject of these proceedings.
For reasons which I will set out in detail, I am unable to accept Mr Ammon's evidence unless it is corroborated by another witness or a contemporaneous document. It was clear from an early stage of his cross‑examination that he saw the witness box as a place from which to argue his cause, rather than give evidence of fact. In the course of his evidence, he seized every opportunity to promote his cause and denigrate that of his opponents. An early example was provided when, in answering a question as to the period of time over which he had studied to achieve his degree in metallurgy, he offered a gratuitous denigration of the qualification obtained in that field by Mr Smith, who was a witness to be called on behalf of ConsMin. Even though Mr Ammon did not know Mr Smith at all, he ventured the opinion that he had an 'inferior type engineering degree', which was entirely unresponsive to the questions he was being asked.
Examples of Mr Ammon's enthusiasm for the promotion of his own cause at the expense of the truth emerged during the course of his evidence in respect of his qualifications. The detailed curriculum vitae which was tendered in evidence on his behalf referred to a period during which he was employed by Kalgoorlie Consolidated Gold Mines as a graduate underground mining engineer. In the document he described his work as:
Full‑time, hands on 'at the face' practical training program which mining engineers must [complete] under the Western Australian Mines Regulations Act, as part of the Western Australian First Class Metalliferous Mine Managers Certificate of Competency certification process. All appointees to the statutory positions of Underground Manager and Deputy Underground Manager in the State of Western Australia must hold a valid Western Australian First Class Metalliferous Mine Managers Certificate of Competency.
That terminology is apt to create the impression that Mr Ammon had obtained the relevant qualification, when in fact, as emerged in cross‑examination, he did not complete the programme or obtain the relevant qualification. Another example is provided by Mr Ammon's description of his work while in Hong Kong as mining engineering work. But in fact the project on which he was engaged in Hong Kong was the building of tunnels in which to install sewerage pipes. When it was put to him that that was not mining, he gave the evasive answer 'not in West Australian terms, no'. The reason I describe that answer as evasive is because, quite plainly, tunneling for the purpose of installing sewerage piping is not mining in anybody's terms.
Mr Ammon's description in evidence of the work undertaken by a project generation geologist provides a useful context for the evaluation of a number of propositions which lie at the heart of his claims. In the written curriculum vitae tendered in evidence, he provided a detailed description of the methodology which he had employed as a project generation geologist. After undertaking research in relation to the ground in question, he asserts that the next step is 'securing the ground' which he described in the following terms:
Once a prospect of interest has been identified, mineral rights to the ground have to be secured by application through the relevant procedures as outlined [in] the West Australian Mines Act.
The next step in the methodology employed by him is the preparation of a report for review by senior industry professionals, after which comes the phase of 'marketing', which he described in the following terms:
Once mineral rights have been legally secured and a geological report has been prepared, the project then has to be sold to potential investors.
In the course of his oral evidence, he confirmed that the methodology employed by him involved first securing all the ground in which he had an interest prior to soliciting investment in the project. In the course of that evidence, he agreed with the proposition that he had always understood that if an area of ground was not protected by a mining tenement, then there was no legal security over that ground or, as he put it:
Well, if you own the ground, you own the ground. If you don't, you don't.
The evidence given by Mr Ammon in relation to his role at Iron Ore Holdings was evasive. When asked if he was the managing director of that company, he replied, 'I wish. I think I'm the technical director, subject to board approval'. When asked if there was a managing director, he replied, 'I'm not too sure. I don't think we do have an actual managing director'. When asked if he was the principal executive of the company, he replied, 'I am the executive director'. When asked again if he was the principal executive of the company, he replied, 'So it would seem'.
The evidence he gave as to the engagement of an expert witness, Mr Piestrzeniewicz, who gave evidence in support of his case, was also evasive. Mr Piestrzeniewicz was engaged to provide an opinion in relation to certain issues in the month preceding the trial. Notwithstanding the recency of his engagement, when asked how Mr Ammon had come to identify him as a witness, the answer he gave was, 'I presume because he has got a pisolite background.' When asked who had decided to engage Mr Piestrzeniewicz, he replied:
I guess it must have been me.
… Well, that's my best recollection.
When asked if he had discussed the choice of expert witness with his legal advisers, Mr Ammon replied, 'I guess I must have'. However, when it was put to him that it was him who had chosen Mr Piestrzeniewicz, he denied that proposition and asserted that he and his legal advisers 'went through the whole telephone book'. However, after suggesting that he needed legal advice in relation to his evidence, he accepted that he had not gone through the telephone book to identify Mr Piestrzeniewicz, but asserted that he and his solicitor had gone through the telephone book to find a technical witness and could not find any. When asked why he was finding these questions so difficult, he replied to cross‑examining counsel that he was suspicious of his motives.
Mr Ammon asserted that he and his solicitor had made a number of telephone calls to persons whose names they found in the yellow pages telephone book. However, he could not recall when those calls were made, or how many had been made or to whom, even though they had been made very recently. The terms in which Mr Ammon gave evidence on this topic reinforced my general impression that his evidence was tailored to support his case, and that he was quite willing to depart from the truth if he thought that would support his cause. I will refer later in these reasons to other aspects of Mr Ammon's evidence which reinforce my conclusion as to its unreliability.
In September 2001, Mr Ammon visited the WA Department of Mineral and Petroleum Resources, as it was then called (Mines Department), for the purposes of his general research in respect of potential mining projects. There he inspected a map entitled 'Iron Ore Deposits of the Pilbara Region'. Upon examining the map, he saw that a number of identified iron ore deposits were not within the boundaries of current mining leases, and were therefore unclaimed at the time the map had been prepared. Part of that map, with some annotations added by Mr Ammon, was included in the document which he later prepared entitled 'Mindy Mindy Creek Iron Ore Project' and which was characterised throughout the trial as 'the Ammon Report'.
From his review of that map, Mr Ammon identified that there was a known deposit in the Mindy Mindy Creek area which was not then the subject of any existing mining tenement. He conducted further research into that deposit from the information publicly available at the Mines Department. That information revealed that the deposit had been investigated in the past by two companies prospecting for iron ore: firstly, by Australian Steel and Mining Corporation Pty Ltd, and later by the OREX Joint Venture. Later still, Hamersley Iron had conducted exploratory work in the area and the results of that work were available for public inspection at the Mines Department and were reviewed by Mr Ammon. BHP had also produced a report of its exploratory activity in the area between 1993 and 1996, which was publicly available and was reviewed by Mr Ammon.
Based on his review of those materials, he concluded that the previous exploratory work had identified two prospective resources in the area. One comprised hematite ore, which is commonly described as 'hard rock', being still in the place in which it was originally formed. The other prospective resource comprised pisolite ore, which is detrital in the sense that it is formed by pieces of hematite breaking off and rolling into stream beds where they can conglomerate and remain in the beds of the draining system. So, as he explained in evidence, pisolite ore is often referred to as a 'channel iron deposit' because it has been deposited in a water course and lies in the channel of that water course.
Mr Ammon's review of the public data available at the Mines Department enabled him to conclude that in the Mindy Mindy Creek area, the pisolite ore appeared as mesas elevated above the surrounding terrain, which had been lowered by weathering and erosion over time. Because the pisolite ore was harder and more resistant to erosion than the surrounding terrain, in a number of places it had been left exposed above the surface of the surrounding terrain, appearing as mesas or outcrops.
Mr Ammon was generally aware from his knowledge of the iron industry that, although pisolite ore had not been regarded as desirable in the past, it had become highly sought, with qualities that enabled it to be shipped directly to prospective purchasers overseas without prior beneficiation or refinement. Mr Ammon was also aware that Hamersley Iron was mining pisolite ore from its Yandicoogina Mine which was about 20 or 30 kilometres from the Mindy Mindy Creek area. Because of Mr Ammon's knowledge of the way in which pisolite ore was deposited, he formed the view that the ancient water courses might also contain deposits which had not been identified. He regarded those areas as prospective.
Mr Ammon also formed the view that the identified deposits were not of a grade or magnitude which would have been attractive to prospective miners in the past, but, because of recent changes in the market for iron ore, would now be potentially attractive. He also appreciated that, because of the proximity of this deposit to other mining operations and railways in the area, extraction of the ore could be economically viable because of his belief that costs could be reduced by utilising existing infrastructure.
From reading the report prepared by the OREX Joint Venture, Mr Ammon also understood that in tertiary geological times, the Mindy Mindy Creek flowed into Weeli Wolli Creek to the north‑west. However, as a result of geological movement, that flow was severed, or 'beheaded' with the result that Mindy Mindy Creek now flows in a north‑easterly direction into the Fortescue River. The Weeli Wolli Creek area is part of the area in which pisolite ore is now mined by BHP and Hamersley Iron.
In the course of his researches, Mr Ammon also identified an article by Hall and Kneeshaw entitled 'Yandicoogina - Marillana Pisolitic Iron Deposits' published in 1990 in a work entitled 'Geology of the Mineral Deposits of Australia and Papua New Guinea'. Figures from that article, slightly modified by Mr Ammon, were included by him in the Ammon Report. Although the article by Hall and Kneeshaw was directed to the deposits in the Yandicoogina - Marillana area, their general description of the features of those deposits was regarded by Mr Ammon as potentially applicable to the deposits in the Mindy Mindy Creek area. Amongst the phenomena reported by Hall and Kneeshaw, was what Mr Ammon described as the 'iceberg' effect, whereby the iron deposits superficially visible in the form of mesas or outcrops are the tip of a much larger deposit lying beneath the surface of the surrounding terrain. Mr Ammon observed the same phenomenon described in respect of the Yandicoogina deposit in the 'Register of Australian Mining 2001/2002'.
After conducting the research and forming the views to which I have referred, on 8 November 2001, Mr Ammon applied for exploration licence (EL) 47/1140. The exploration licence covered 19 graticular blocks (being an area one minute in latitude by one minute in longitude). The maximum number of graticular blocks which could have been applied for in that licence was 70. In the event that an EL is granted, annual rental fees and minimum expenditure commitments are assessed by reference to the area of the subject of the licence, and are approximately $1000 per graticular block. Mr Ammon gave evidence to the effect that he only applied for 19 blocks because of difficulties he would have faced in meeting those financial commitments if he had applied for a greater area.
Mr Ammon's evidence was that he applied for EL47/1140 in order to secure the ground and was aware at the time he did so that all the ground outside the area for which he had applied was not secured and open to anyone else.
Mr Ammon's evidence was that he chose the configuration of EL47/1140 and the 19 blocks which comprise it, after drawing all the potential graticular blocks on the published geological survey map of the Roy Hill area. A version of that map, with graticular blocks annotated upon it, was in evidence. That map shows a total of 25 graticular blocks which are shaded, six being double hatched, and 19 being single hatched. Mr Ammon's evidence was that he would have liked to have applied for all 25 blocks which he had marked, but after marking them, realised that he could only afford 19 blocks, and therefore restricted his application to those 19. However, because there is a minimum annual expenditure commitment of $20,000 for each EL, whatever its area, of which Mr Ammon was aware, the difference in cost between an EL covering the 19 blocks for which he applied and an EL covering the 25 blocks would have been in the vicinity of $5000 per year. That is a relatively small amount. Because of my general skepticism in respect of his evidence, I do not accept that he would have applied for an area covering 25 blocks but was discouraged from doing so because of expense. That conclusion is reinforced by the observation that some months after applying for EL47/1140, Mr Ammon moved to Hong Kong where he earned a substantial income. Notwithstanding that income, he took no step to apply for an EL covering the additional blocks which he says he marked on the map because he would have liked to claim them or, indeed, any area additional to the area of EL47/1140. Mr Ammon gave evidence to the effect that he was thinking of pegging additional ground. However, he never did so, and because of my reservations about Mr Ammon's evidence generally, I do not accept that evidence. I think it more likely, and I find, that Mr Ammon thought at all material times that he had identified and captured the only significant prospective ground within the 19 graticular blocks he applied for as EL47/1140.
The Ammon Report
After applying for EL47/1140 and before leaving for Hong Kong, Mr Ammon wrote and produced the Ammon Report. Differing versions of that document were produced in evidence, one being coloured and others not coloured. Mr Ammon is adamant that the versions which he produced for prospective investors in the project contained coloured maps, and that seems inherently likely, given that Mr Ammon engaged a contractor to assist him in the preparation and printing of the maps and diagrams in colour.
As I have mentioned, the document is entitled 'Mindy Mindy Creek Iron Ore Project'. The first page of text of the document is headed 'Acknowledgement', under which the following appears:
This document was prepared by Mr Derek Ammon. Mr Ammon holds a 100% interest in E47/1140 which covers the Mindy Mindy Resource described within this report. Mr Ammon freely acknowledges that most of this report consists of extracts of other peoples work and that it contains substantial verbatim extracts from documents previously published by other authors.
The next page of text is entitled 'Project Summary'. Because of the significance of the arguments which were said to turn upon the construction to be given to the Ammon Report, and in particular this section of it, I will set out the text of the summary in full:
The Mindy Mindy Creek iron‑pisolite deposits are located in the eastern Hamersley Ranges of the Pilbara Region, Western Australia, about 70km north‑west of the town of Newman on the Roy Hill (SF 50‑12) 1:250 000 scale map sheet. Most of the resource is found within the beheaded portion of Mindy Mindy Creek about 20 km to the east of Hamersley Iron's Yandicoogina iron‑pisolite mining operation and about 25km south‑west of BHP's Newman to Port Hedland iron ore railway line.
In 1972 OREX identified a possible resource of 79,000,000t of iron pisolite (>55% Fe) on TR 4515H covering the downstream half of Mindy Mindy Creek. In 1993 Hamersley Iron identified an additional possible resource of 8,000,000t of iron‑pisolite (>55% Fe) on E47/633 covering the upper half of the Creek. In 11‑2001, E47/1140 covering the entire length of Mindy Mindy Creek, including both the OREX and Hamersley Iron pisolite resources was lodged by Mr. Derek Ammon.
The pisolites outcrop as [sic] a series of mesas, 15m to 25m thick, which dominate the valley of Mindy Mindy Creek. The mesas represent the eroded remnants of a large palaeo‑drainage system which in tertiary geological time was part of the Yandicoogina‑Marillana‑Welli [sic] Wolli drainage system which now hosts the massive 4,700,000,000t 'Yandi' iron‑pisolite currently being mined by BHP and Hamersley Iron.
All of the 87,000,000t resource identified to date is found in the above ground mesa portion of the resource. This point is of major significance because 90% of the total tonnage and all of the high grade ore (>58% Fe) found within the adjacent Yandicoogina‑Marillana‑Weeli Wolli Creek iron‑pisolite orebody, of which Mindy Mindy Creek was once a part, is found below ground level i.e. immediately beneath the outcropping mesas and below the superficial gravel's of the surrounding creek bed. These resources can literally be likened to icebergs with 10% (= 87,000,000t ?) of the resource clearly visible above ground level in the form of mesas while the remaining 90% of the resource lies concealed below ground level.
While the subsurface potential of the Mindy Mindy Creek orebody has not yet been systematically drill tested limited reconnaissance exploration drilling by BHP in 1995 within part of the creek on the extreme northwest edge of the licence intersected 12m of high grade iron pisolite ore (57.5% Fe) from 10m depth clearly demonstrating the subsurface potential of this resource.
The key to this projects viability is presence of both BHP and Hamersley Iron's high quality, iron ore railway line infrastructure right on the projects doorstep. Under the terms of there [sic] lease agreements both BHP and Hamersley Iron are obliged to provide third party access to there [sic] iron ore rail and port facilities at commercial rates. The presence of this infrastructure will not only save years off start up time and reduce start up capital costs by hundreds of millions of dollars but will also ensure that even relatively small orebodies found within trucking distance of the railway lines can be mined very profitably. With a [sic] operating margin of around $A20‑25/t FOB even a relatively modest 2,000,000t per year operation could be expected to generate a pretax profit in order of $A50,000,000 per year. In short we don't need to find a large orebody in order to make this project financially attractive.
Pisolitic iron ores of export quality (>55% iron) are highly sort [sic] after by steel makers as sinter feed for conventional blast furnaces because of there [sic] excellent sintering characteristics, high iron content after calcine and there [sic] low silica & aluminium content hence there will be few problems in either sourcing project funding or finding buyers for the product.
That page is followed by a picture of an iron mesa.
The detailed report is preceded by a contents page and then commences with a page headed '1.0 Introduction'. The text on that page commences with the following paragraph:
The Mindy Mindy Creek iron‑pisolite deposits are located in the eastern Hamersley Ranges of the Pilbara Region, Western Australia, about 70km north‑west of the town of Newman on the Roy Hill (SF 50‑12) 1:250 000 scale map sheet. The resource is currently held under E47/1140 in the name of the Mr. Derek Ammon (Fig‑1, p2).
The figure to which reference is made is the version of the map 'Iron ore deposits of the Pilbara region' to which I have earlier referred, showing tenement boundaries in the area, including the boundaries of tenement EL47/1140.
The introduction repeats a number of the assertions made in the Project Summary, including the assertion that most of the resource is found within the beheaded portion of Mindy Mindy Creek which was, in tertiary geological time, part of the Yandicoogina‑Marillana‑Weeli Wolli drainage system.
Later sections of the report deal with the tenement and previous exploration history of the area. Reference is made to the tenements previously granted to various companies, and summaries are provided of the exploration work carried out by those companies and their results. That material is drawn from the data which is publicly available at the Mines Department and to which I have referred. Included in that material is a figure showing the location of the identified deposits within the palaeo channel, which is, on the diagram, shown as heading northwest 'to Weeli Wolli Ck'. At the conclusion of that section of the report, there is reference to the current tenement position, in the following terms:
In November 2001, E47/1140 covering the pisolite resources identified by OREX and Hamersley Iron on TR 4515H and E47/633 (formerly TR4518H) respectively was lodged in the name of Mr Derek Ammon.
The next section of the Ammon Report deals generally with the nature of Yandicoogina iron pisolite deposits and their geology. Included in that section is a map of the Yandicoogina deposit and a cross‑section showing the structure of that deposit, both of which were taken by Mr Ammon from the article by Hall and Kneeshaw.
The next section of the Ammon Report is headed 'Mindy Mindy Pisolite Resource Potential'. After referring again to the 'iceberg' theory, this section of the report concludes with the following paragraph:
Clearly the entire length of the Mindy Mindy Creek palaeochannel, and the beheaded section of the creek in particular, is highly prospective for subsurface, high grade, pisolite resources, and hence there is very good potential for a resource far greater than the 87,000,000t of possible ore identified above ground to date.
The next sections of the report deal with native title and environmental issues. The report concludes with the page headed 'Conclusions' in which the assertions made in the Project Summary in respect of economic viability, deriving from the 'iceberg' phenomenon and the availability of infrastructure provided by others are repeated.
Various documents are attached to the Ammon Report, including the article by Hall and Kneeshaw, and an extract from the publication 'Register of Australian Mining 2001/02'.
Mr Ammon's first contact with ConsMin
While Mr Ammon was working on the Ammon Report, he telephoned Mr Bob Vivian, the exploration geologist at ConsMin. Mr Ammon had heard that ConsMin was looking for a mine manager for their newly opened Coobina chromite mine. In the course of the telephone conversation, Mr Ammon referred in very general terms to the Mindy Mindy Creek project, and inquired whether ConsMin would be prepared to offer him the mine manager's job as part of the consideration for participation in the Mindy Mindy Creek project. Mr Vivian transferred the call to Mr Alan Quadrio, the Operations Manager at ConsMin, who was responsible for employing the Coobina mine manager. Mr Quadrio told Mr Ammon that he was not interested in linking the position of mine manager to any other project, and therefore rejected Mr Ammon's proposal.
Distribution of the Ammon Report
As I have mentioned, Mr Ammon engaged a contractor to assist him in the preparation and printing of the Ammon Report. That contractor was Mr Dean Francis. Mr Francis told Mr Ammon that he was interested in the economic potential of the project. Mr Ammon responded in terms to the effect that he was interested in identifying investors to take an interest in the project, either by way of assisting with a float or perhaps in a joint venture. Mr Francis told Mr Ammon that he would not himself be interested in participating, but that he knew a person who might be interested and who had made a lot of money out of a previous float of an Internet related business.
Mr Francis gave him an address for that person, but at trial Mr Ammon was unable to recall the address. On 15 February 2002, Mr Ammon delivered an envelope containing the Ammon Report and a letter to an address in the Spearwood/South Fremantle area. Mr Ammon's copy of the letter does not identify the name of the person or the address to which it was delivered. The first paragraph of the letter includes the sentence:
As a favour to Mr Francis in return for his excellent service under pressure, I have enclosed a copy of the MINDY MINDY IRON ORE PROJECT DESCRIPTION for your attention.
In the course of his oral evidence, Mr Ammon ultimately accepted that the assertion that he was doing Mr Francis a favour was not true. The letter went on to state that the prospective investor would need $2,000,000 in cash up front in order to be a serious contender for the project. The letter contained no assertion or claim of confidentiality.
In his oral evidence, Mr Ammon initially stated that he had rejected an offer from the person concerned because 'I didn't like the terms he was offering'. However, he was unable to recall any of the terms proposed, except that the person concerned wanted control of the project.
Mr Ammon also said in evidence that he never knew the name of the person concerned even though, on his evidence, they had negotiated terms. His evidence was that he had spoken to him face to face at the time of delivering the envelope, but that he was under the impression that the person wished to remain anonymous. Mr Ammon could not identify any reason for the prospective investor's desire for anonymity. Mr Ammon said he thought there were subsequent telephone calls, but he could not remember any of the topics discussed in the course of those calls. He accepted that he never recovered the envelope with the Ammon Report in it, or made any attempt to recover it.
So, on Mr Ammon's evidence, he delivered an envelope containing a copy of his report to a person whose name he never knew, but with whom he conducted negotiations which he could not recall, but whose proposal he rejected, after which he made no attempt to retrieve the report which he asserts was highly confidential. In my view, that evidence is inherently implausible. It does, however, reveal Mr Ammon's indifference as to the confidentiality or security of the information contained in the Ammon Report, which he had given to this unknown person and never retrieved.
In the course of cross‑examination on this subject, Mr Ammon asserted:
[B]ut for the last day and a half I have been intensely cross‑examined and after a while it tends to scramble the brain, as it is designed to do. Now, you're saying, 'Remember these precise dates' and what have you. I mean, there's only a certain length of time you can put up with this before you start forgetting things and saying silly things, because you're rattled.
In fact, at that point Mr Ammon had been cross‑examined for less than a day. I attribute Mr Ammon's assertions to a realisation that the evidence he was giving was implausible and incorrect.
Mr Ammon was then cross‑examined on the fact that there appear to be a number of different versions of the Ammon Report in existence. During the course of that evidence, Mr Ammon stated that he had made changes to the report even after he had entered into the HoA with ConsMin. When asked to explain that conduct, he said:
The bottom line is these things are a work in progress and you go through and you check the English, you try and modify it as you go through. This was - the numbers actually issued for commercial purposes I think were three and I may well have tinkered with this a couple of years down the track without any real intent of publishing it or sending it off to any future buyers because the project has gone. It just caught a …
Later in his evidence he sought to justify changing the document because of the possibility that, under the HoA, the project could revert to him after five years. Although nothing appears to turn on the changes, Mr Ammon's differing and implausible explanations for them give me another reason to doubt his evidence generally. I do not accept Mr Ammon's explanations for the changes he made to the document.
Contact with Portman Ltd
In early March 2002, Mr Ammon rang Mr Peter Beilby, who he understood to hold a senior position at Portman Ltd, a mining company. Mr Ammon had worked for Mr Beilby many years earlier. Mr Ammon asked Mr Beilby whether Portman might be interested in investing in an iron ore project. Mr Beilby responded affirmatively.
Mr Ammon sent a copy of the Ammon Report to Portman Ltd, under cover of a letter dated 11 March 2002 addressed to Mr Ian Burston, the managing director of Portman Ltd. The letter commenced:
I am the owner of EL47/1140 containing the Mindy Mindy Creek Iron Pisolite Resource. The licence is currently proceeding through the Native Title Act under 'expedited procedure' and I am now seeking expressions of interests from persons or companies who may have an interest investing in a potentially large iron ore mining operation.
The letter contained no claim to confidentiality. Mr Ammon did not receive any response from Portman Ltd. He never attempted to retrieve the Ammon Report from Portman Ltd.
ConsMin
On 11 March 2002, Mr Ammon delivered to ConsMin an envelope containing a copy of the Ammon Report under cover of a letter dated 11 March 2002 addressed to Mr Kiernan, the managing director of ConsMin. The letter was in exactly the same terms as the letter to Mr Burston of Portman Ltd.
Mr Kiernan cannot recall whether or not he read the Ammon Report at the time that it arrived. If he did so, he would have flicked through it for no more than a couple of minutes. He referred the letter and accompanying report to Mr Vivian. Mr Vivian said in evidence, and I accept, that he read the Ammon Report as referring only to deposits that lay within Mr Ammon's tenement. On 13 March 2002, Mr Vivian sent an email to Mr Kiernan advising that the deposit appeared to be of initial interest from two viewpoints. Firstly, it had a delineated resource of 87,000,000 tonnes at approximately 57% Fe and 11% LOI (loss on ignition) and secondly, that the document stated that typically substantially larger and richer tonnages underlie the mesa deposits. There is nothing in this email to suggest that Mr Vivian formed a view of the prospective project extending beyond Mr Ammon's tenement.
Mr Kiernan then instructed Mr Vivian to proceed and, on the afternoon of 14 March, Mr Vivian telephoned Mr Ammon and expressed interest in the project. They arranged to meet the following day.
On 15 March 2002, Mr Vivian and Mr Ammon met for about 30 minutes at ConsMin's offices. During the course of the meeting, Mr Ammon gave to Mr Vivian copies of some of the reports that he had obtained from the Mines Department, which were prepared by companies who had previously explored the ground; namely, OREX, Hamersley and BHP. Mr Ammon took the Roy Hill map to the meeting with him and pointed out a number of deposits shown on the map to Mr Vivian.
Mr Vivian's evidence, which I accept, was to the effect that so far as he was concerned, all discussion which took place at the meeting related to the area within Mr Ammon's tenement. Mr Ammon asserts, and Mr Vivian denies, that there was discussion about Mindy Mindy being part of the Yandicoogina‑Marillana‑Weeli Wolli palaeo drainage. I have many reasons to doubt Mr Ammon's evidence, but no reason to doubt Mr Vivian's evidence, which I accept in this regard. Mr Ammon's evidence of a lengthy conversation between himself and Mr Vivian in which he pointed out the connection between the Mindy Mindy Creek deposits and the palaeo drainage channels heading north‑west towards the Yandi mines of BHP and Hamersley Iron is, I think, an invention designed to support his claim. I think it much more likely that any conversation at this first meeting would have been focused on Mr Ammon's tenement, EL47/1140. He was well aware that he had no security over any other ground. It is improbable that he would have specifically drawn attention to the value of other ground over which he had no security at such an early stage of his dealings with ConsMin. If Mr Ammon considered the ground beyond EL47/1140 was prospectively valuable, in accordance with the methodology he described, he would have secured that ground for himself before commencing the marketing of the project. I find that he did not believe that any of the ground outside EL47/1140 was sufficiently prospective to justify claiming and that he did not say anything on that subject to Mr Vivian.
There was no discussion at this meeting about confidentiality, nor any request by Mr Ammon that ConsMin execute a confidentiality agreement.
On 16 March 2002, Mr Ammon travelled to Hong Kong to take up employment.
It seems that Mr Vivian referred Mr Ammon's report to Mr Colin Smith, the chairman of ConsMin. Mr Smith has extensive experience in the minerals industry, including five years in which he was the general manager of operations for Hamersley Iron Ltd in the Pilbara.
After reviewing the Ammon Report, Mr Smith sent a memorandum dated 27 March 2002 to Mr Kiernan. In the memorandum, he expressed the view that Mr Ammon's comments about gaining access to the Mount Newman or Hamersley rail systems, and blending lesser grade ore with Newman or Hamersley's higher grade ore were 'dreamland stuff'. He also expressed the view that the 87,000,000 tonnes of identified resource was 'probably fairly much worthless' but that the potential value in the project was associated with the presence or otherwise of an underlying higher grade pisolitic material similar to that discovered at Yandicoogina. However, he expressed doubts arising from the fact that BHP and Hamersley had both relinquished tenements covering Mindy Mindy and in that context, observed that Mr Ammon 'only acquired the ground in November 2001'.
The terms of the document are consistent with Mr Smith's evidence to the effect that he construed the Ammon Report as only applying to Mr Ammon's tenement. I accept that evidence.
Mr Smith recommended that ConsMin obtain an opinion from a geologist experienced in iron ore as to the possibility of deeper higher grade mineralisation and if that opinion was positive, to proceed to buy their way into the project by spending $200,000 on drilling and metallurgical analysis.
After Mr Kiernan read Mr Smith's views, he instructed Mr Vivian to ask Mr Ammon for permission to send a geologist to evaluate his tenement and for an option or first right of refusal.
In an email sent to Mr Ammon in Hong Kong on 17 April 2002, Mr Vivian asked Mr Ammon to telephone him to discuss the Mindy Mindy project. It seems that they may have had a short discussion by telephone, after which Mr Vivian sent a further email to Mr Ammon advising that ConsMin wished to send a geologist to 'look at the ground and review the literature on it'. However, before taking that step, the email advised that ConsMin wished to have an option or a first right of refusal. Mr Vivian proposed an option period of 60 days.
By email of the same day, Mr Ammon replied advising that he had no difficulty with ConsMin looking at the ground, with or without the 60‑day exclusive option, provided that the native title claimant was contacted before ConsMin went to the site. Mr Ammon offered ConsMin a 90‑day/three month exclusive option for $25,000.
On 22 April 2002, there was an exchange of emails between Mr Ammon and Mr Vivian in relation to native title issues. In the course of his email to Mr Vivian, Mr Ammon wrote:
You are welcome to carry out any work on the lease approved by the council, no deals will be done with any third party for 60 days as from today 22‑04‑2002 in order to ensure you you [sic] have a fair go (there is no charge for this), if however you want first right of refusal ie the right to match any other offer made, you will have to pay for it as outlined in last email for the simple reason that it gives you a huge commercial advantage at my expense, the other interested parties would soon lose interest once they found out some [sic] else had first right of refusal ie how long would you stay interested if I gave Portman Mining first right of refusal.
For your peace of mind the 5 project descriptions I sent out all went out at the same time and while all five parties contacted me quickly expressing interest (iron ore mines don't turn up every day) we both know it could take years for a deal to go through.
There are a number of aspects of those assertions which were quite untrue and must have been known by Mr Ammon to be untrue. At that stage, there were no interested parties other than ConsMin, and Portman had expressed no interest whatsoever. Mr Ammon had not sent out five project descriptions, only three. One of those was sent to a person whose name he never knew and in respect of whom he could remember nothing of substance in relation to any negotiations by the time of trial.
When confronted with these obvious lies in the course of cross‑examination, Mr Ammon steadfastly refused to acknowledge that they were deliberate falsehoods. The exchange was as follows:
'For your peace of mind the five project descriptions I sent out' - pausing there, that's a lie?---It's sales pressure, mate.
Yes, that's untrue. You didn't send out five?---No, that's not correct.
'Four went out at the same time.' That's not true either because two went out at the same time and one went out a month earlier, 'and while all five parties contacted me quickly' - pausing there, that's a lie?---It's not correct.
Yes, well, it's a lie?---That's your term.
Do you know what a lie is?---It's not correct.
You knew it to be incorrect?‑‑‑It's not correct. It's simply a sales pitch.
It's not correct and you knew it to be incorrect. Is that so?‑‑‑No, I'm not agreeing with you on it, sir.
You thought it was true?‑‑‑I thought it was a fair comment to make in the circumstances.
What, it's fair? It's fair to say things that are false and you know to be false?‑‑‑This sort of proposition is very common in business to gain competitive advantage.
Mr Ammon's prevarication when confronted with obvious lies is another reason why I do not accept his evidence generally, unless it is either inherently plausible or corroborated by other credible evidence.
At about this time (probably on 16 April 2002), Mr Vivian telephoned Mr Martin Reynolds of Mackay and Schnellmann Pty Ltd, geological and mining consultants. Mr Vivian advised Mr Reynolds that ConsMin wanted him to have a look at the ground on Mr Ammon's tenement. The two men met on 23 April 2002 to discuss the project. In the course of that meeting, Mr Vivian gave Mr Reynolds the Ammon Report and the other documents that he had been given by Mr Ammon.
By letter dated 24 April 2002, Mr Reynolds provided a quotation for the consultancy project, which was accepted two days later by Mr Vivian on behalf of ConsMin.
In the course of undertaking preparatory work for the site visit, Mr Reynolds apparently came to the view that Mr Ammon's tenement, EL47/1140, did not cover the entire area with potential for economic mineralised deposits and that there was ground adjacent to Mr Ammon's tenement which was open to claim. Accordingly, on 29 April 2002, prior to his site visit, he recommended to Mr Vivian that ground adjacent to Mr Ammon's tenement be claimed by ConsMin. Mr Vivian communicated that recommendation to each of Mr Smith and Mr Kiernan. Both men supported Mr Reynold's recommendation and Mr Vivian was instructed to implement it.
Each of Mr Vivian, Mr Smith and Mr Kiernan gave evidence to the effect that prior to the recommendation from Mr Reynolds, they had not appreciated from reading the Ammon Report that there was a prospect of economic mineralisation on ground not covered by Mr Ammon's tenement but adjacent to it. I have no reason to reject that evidence, which is consistent with the contemporaneous documents, and I accept that it was Mr Reynolds who first appreciated that the material provided by Mr Ammon, perhaps augmented by his own knowledge and reviews of geological mapping, raised the prospect that ground not covered by Mr Ammon's tenement might also contain economically viable deposits of iron ore.
There was considerable argument at trial directed to the findings that should be made with respect to the extent of the contribution made by Mr Reynolds to the conclusion that ground outside EL47/1140 was sufficiently prospective to justify claiming it. Each party submitted that I should draw an inference adverse to the other from the failure to call Mr Reynolds to give evidence. Mr Ammon put his submission on the basis that Mr Reynolds was ConsMin's consultant at the time of his report. ConsMin put its submission on the basis that Mr Reynolds has recently been a consultant to Iron Ore Holdings.
I do not consider it is necessary to attempt to suppose what Mr Reynolds might have said had he been called, as the relevant facts appear to me to be clear. They are:
(a)The Ammon Report did not expressly refer to the prospectivity of ground outside EL47/114, nor was an inference of such prospectivity obvious on the face of the report.
(b)The Ammon Report did contain information as to economic prospectivity of the ground within EL47/1140 which would put an astute and technically qualified reader of that report on to enquiry as to the prospectivity of the ground adjoining EL47/1140.
(c)Mr Reynolds was such an astute and qualified reader who, prompted by the Ammon Report, gave consideration to the prospectivity of ground adjoining EL47/1140, and based on the information contained within that report, perhaps augmented by his own views and limited personal research, concluded that the adjoining ground was sufficiently prospective to justify claiming it.
(d)But for the Ammon Report neither Mr Reynolds nor ConsMin or PIO would have concluded that the ground adjoining EL47/1140 was sufficiently prospective to justify claiming it.
(e)None of Mr Ammon, or any of the personnel within ConsMin, had formed the view that the ground outside EL47/1140 was sufficiently prospective to justify claiming it before Mr Reynolds expressed that view.
So, the view that the ground outside EL47/1140 was sufficiently prospective to justify claiming it was first formed by Mr Reynolds, but he would not have formed that view unless he had been provided with the Ammon Report. The precise extent of the independent thought or research brought to bear on the subject by Mr Reynolds does not seem to me to matter.
Consistently with the instructions he had been given by Mr Smith and Mr Kiernan, Mr Vivian instructed Mr Ian Faris, the tenements manager for ConsMin, to undertake the work necessary to apply for tenements on ground adjoining Mr Ammon's tenement EL47/1140. At Mr Kiernan's suggestion, Mr Vivian also asked Mr Faris to find out whether a company could be formed in the name 'Pilbara Iron Ore', which could then apply for those tenements. At that time, it was ConsMin's standard practice to utilise private company subsidiaries to handle discrete mining projects. Accordingly, PIO was incorporated in early May 2002.
Mr Faris and Mr Vivian worked together to determine the precise boundaries of the ground for which ConsMin would apply. They drew plans for one application for an exploration licence covering 26 graticular blocks to the north and west of Mr Ammon's tenement and another covering 9 graticular blocks to the east of Mr Ammon's tenement. In addition, applications were prepared for two prospecting licences covering a long narrow strip of land between the graticular blocks the subject of ConsMin's applications, and the ground the subject of tenements held by others. That land came to be free from mining claims because of a change in datum points adopted by the Mines Department in December 2000, which led to a slight misalignment between blocks which were the subject of previously granted tenements, and the blocks used for these applications.
ConsMin's applications for those tenements, which became EL47/1191, EL47/1192, PL47/1156 and PL47/1157 were lodged at the Mines Department on 9 May 2002. ConsMin did not tell Mr Ammon that they were making these applications, although the lodgment of an application for a mining tenement is of course a public process which could have been detected by Mr Ammon from Hong Kong had he chosen to use Tengraph, the Internet search facility offered by the Mines Department. In fact, Mr Ammon became aware of PIO's applications through this means not later than the end of May 2002.
Mr Reynolds made a visit to the site on 15 May 2002. After that visit, he advised Mr Vivian that he had seen iron outcrops outside Mr Ammon's tenement area beside the access route to the tenement held by Mr Ammon and expressed the view that the palaeo drainage responsible for the deposit of the mineral most likely extended to the north‑west of Mr Ammon's tenement.
Mr Reynolds produced a report of his investigations dated 17 May 2002. In that report, he confirmed his oral advice to Mr Vivian to the effect that, in his view, there was an area to be interpreted as a palaeo channel immediately to the north‑west of Mr Ammon's property, connecting the Yandicoogina‑Marillana drainage system with Mindy Mindy Creek, which, in his view, had potential for channel iron deposits. He further recorded that he had observed outcrops in that area during his site visit. In his view, by analogy with the Yandicoogina‑Marillana deposits, the conceptual potential size of the deposits within Mr Ammon's tenement and in the area to the north‑west was in the order of 1,800,000,000 tonnes, half of which was within Mr Ammon's tenement.
In the detailed section of his report, Mr Reynolds ventures two alternative opinions as to the ancient configuration of the palaeo drainage system in the area. The detailed geological hypotheses advanced by Mr Reynolds go well beyond any proposition contained in the Ammon Report and clearly represent his own thinking.
Mr Reynolds also reported upon the hard rock iron deposits located to the south of Mr Ammon's tenement. He expressed the view that only about half of that deposit was within Mr Ammon's tenement. However, in Mr Reynolds' view, the hard rock deposit was an unattractive exploration target because it was small with little or no potential for increment in size, was located in rugged terrain and had a high phosphorus content.
Mr Reynolds' report contains a detailed summary of the previous investigations carried out by tenement holders in the area.
Mr Reynolds also expressed views in relation to what Mr Ammon had characterised as the 'iceberg' theory and expressed the view that the ratio of concealed to visible ore in the Yandicoogina‑Marillana area is more likely 3:1 than the 10:1 ratio proposed by Mr Ammon. In Mr Reynolds' view, it was dubious to apply any multiplier to the quantified mesa material in the Mindy Mindy Creek area. In general, Mr Reynolds' view was that the area was prospective and in his report, he confirmed his earlier recommendation to the effect that areas adjacent to Mr Ammon's tenement should be claimed by ConsMin, and further recommended that negotiations should be undertaken with Mr Ammon to acquire an interest in EL47/1140. In Mr Reynolds' view, once such an interest had been obtained, further exploration of the area should be undertaken.
On 18 May 2002, Mr Ammon sent an email to Mr Vivian inquiring as to the progress in ConsMin's evaluation of the site. Mr Vivian replied by email dated 20 May 2002 in which he requested a 90‑day extension of time under an exclusive option commencing on the expiry of the previously agreed 60‑day period in return for a consideration of $10,000.
Mr Ammon responded to that email by an email dated 21 May 2002. In response to the proposed 90‑day extension, he wrote:
Before I can decide on an extension I would need to know what activities have you undertaken on the lease so far and what activities do you intend to carry out on the lease in the 90‑day period just requested, I would also like some feed back as to the land council's response to your activities.
Mr Ammon's reference to the 'lease' is plainly a reference to EL47/1140. It is clear from the terminology which he used in this email, that, so far as he understood, the land the subject of their negotiations, and in respect of which an extension of time was sought, was the land the subject of his tenement.
On 22 May 2002, Mr Faris sent an email to Mr Ammon dealing with native title issues. Mr Ammon responded by email the following day (23 May 2002), in which he advised that he was prepared to agree to extend his undertaking not to enter into any agreement with any other party in relation to EL47/1140 for a further 90 days at the rate of $5000 per 30 days.
In the course of advancing that proposal, he wrote:
Considering the size of the asset being offered and the fact that your main competitor for the project (at this stage) was less than pleased with the 60 day agreement I gave you last time and may well walk when he finds out about the 90 agreement offered (I certainly would) I don't think you have any grounds for complaints with the $A5000 per 30 days asking price.
This assertion was plainly a deliberate lie, which Mr Ammon accepted in the course of cross‑examination. ConsMin had no competitors for the project. Mr Ammon also accepted that if he owed ConsMin a duty to act honestly and in good faith (corresponding to the duty which he alleges ConsMin owed him), he was not fulfilling that duty when he wrote that email.
On 23 May 2002, Mr Faris replied to Mr Ammon's email, generally accepting his terms for the extension, but proposing that it be structured on the basis of a 60 day extension at $5,000 per 30 days, and 'an ongoing option for $A5,000 per 30 day period until the Native Title problems are resolved'. Mr Ammon accepted that revised proposal by receiving payments made in accordance with its terms.
Mr Ammon asserts that in the latter part of May 2002 he entered into telephone discussions and email correspondence with Mr Kiernan. He says that in the course of those communications, Mr Kiernan indicated to him that ConsMin was incorporating PIO in order to hold the iron ore assets for their joint venture. Mr Ammon said that he understood that as a result of this statement he was going to have an interest in PIO.
Mr Kiernan denies that any such communications took place. Mr Kiernan was a credible witness whose testimony was consistent with the contemporaneous documents. To the extent that his testimony conflicts with Mr Ammon's, I have no hesitation in accepting Mr Kiernan's evidence in preference to that given by Mr Ammon. In this particular instance, the evidence given by Mr Ammon is inherently implausible because at the time he says this conversation took place, there had been no discussion whatever as to the form in which ConsMin would invest in tenement EL47/1140 and, in particular, no discussion of a joint venture.
Mr Ammon also asserted in evidence that after he became aware that PIO had applied for EL47/1191 and EL47/1192, he contacted Mr Kiernan for an explanation - either by telephone or by email. He says that he complained that ConsMin's actions in applying for the tenements adjacent to his were a breach of commercial confidence. He says that he received a response, which he believes was by an email which he cannot now locate, to the effect that the applications had been made for and on behalf of the joint venture that was under negotiation between ConsMin and Mr Ammon. He says that he understood this response to mean that although ConsMin was pegging the ground (through PIO), there was no problem because it was all going to be part of the Mindy Mindy Joint Venture which they had commenced negotiating.
These assertions were emphatically denied by Mr Kiernan in his evidence. Mr Kiernan's denials are entirely plausible, and I have no hesitation in accepting them. The email traffic between Mr Ammon and ConsMin has apparently been preserved in full and is consistent and sequential. I do not accept Mr Ammon's assertion that emails covering such an important issue have 'gone missing'. Further, as I have already observed, there simply were no joint venture negotiations at this stage. If, as Mr Ammon asserts, he believed that ConsMin had acted improperly in applying for those tenements, it is highly improbable that he would simply have allowed the matter to rest on the basis that he would be given an interest in those tenements in the course of some future commercial negotiations, which had not yet commenced.
Mr Vivian said in cross‑examination that he became aware, at some point, that there was 'a problem' with Mr Ammon in relation to tenements EL47/1191 and EL47/1192. However, he was only aware of that as a result of something he was told by 'fellow employees' he did not identify. There was no complaint made to him and he was not a party to any discussions with Mr Ammon on the subject, and he was extremely vague as to when he might have become aware of 'the problem'. I think it is most likely that Mr Vivian was recalling the problem which arose with Mr Ammon during the latter part of 2003, rather than any issue during mid‑2002. The vagueness and hearsay nature of his evidence on this topic leads me to the conclusion that it does not provide any significant support for Mr Ammon's version of events.
On 10 December 2003, Mr Ammon made a statutory declaration in support of a caveat which he lodged against PIO's tenement EL47/1191. In that statutory declaration, Mr Ammon relates the course of events with respect to the negotiations between ConsMin and himself leading to the execution of the HoA. In that statutory declaration, he makes no reference whatever to the communications which he now says took place between himself and Mr Kiernan in the latter part of May and early June 2002, in which Mr Kiernan advised him that the two tenements, including EL47/1191, had been acquired partly on his behalf. If those conversations had taken place, it is extraordinary that they would have been omitted from a statutory declaration in which Mr Ammon claimed an interest in those tenements. In my view, it is clear that the assertions which Mr Ammon now makes as to the conversations and emails which passed between himself and Mr Kiernan are a recent invention, specifically designed to bolster his case.
The evidence establishes that the first commercial negotiations between Mr Ammon and ConsMin in relation to the acquisition by ConsMin of an interest in EL47/1140 commenced on 11 June 2002 when Mr Ammon sent an email to Mr Neil Greygoose, the company's secretary and chief financial officer of ConsMin, to which Mr Ammon attached two alternative proposals. The first proposal was advanced under the heading 'Fund New Float'. The first three terms of that proposal were as follows:
1.Provide $A500,000 to pay the cost of floating E47/1140 (currently in my name) and E47/1191 (currently in your name) into a new company listing on the ASX.
2.Consolidated Minerals would receive 20% of the new shares for providing the startup seed capital and E47/1191; I would receive 40% of the new shares in return for E47/1140, which contains all of the currently known resource; the remaining 40% would be issued to the general public.
3.Assuming an initial issue of 100,000,000 shares at $A 0.20 each, Consolidated Minerals would receive: 20,000,000 shares; I would get 40,000,000 shares and the general public would get the remaining 40,000,000 shares issued at $A0.20 (or better depending on the market) raising $A8,000,000 to evaluate the resource.
I digress to observe that the terms of this offer are not consistent with any understanding by Mr Ammon to the effect that he had a beneficial interest in EL47/1191, and are only consistent with an understanding that the tenements were fully owned by the respective parties in whose names they were registered.
The second proposal was advanced under the heading 'Five Year Option for ConsMinerals to Purchase'. The terms of that proposal were as follows:
1.0 Option Price:
1.$A250,000 for the first‑12‑months,
2.$A1,000,000 for the remaining 48 months if required.
Purchase Price:
1.$A25,000,000 in cash
2.10,000,000 shares in Consolidated Minerals
3.$A2.00 per tonne production royalty on all iron ore sold by Consolidated Minerals ie E47/1140, E47/1191 and other leases subsequently applied for by Consolidated Minerals for the purposes of iron ore mining.
It was submitted on behalf of Mr Ammon that the terms of this offer reflect his understanding that he had a present entitlement to the benefit of ore produced from EL47/1191. I do not accept that submission. Other terms of the offer included demands for $25,000,000 in cash. Plainly, Mr Ammon had no understanding of a present entitlement to that amount. The terms of the royalty are, in my view, simply a proposal which would provide a future revenue stream to Mr Ammon and cannot be construed as reflecting upon any understanding as to present entitlements. The reference to EL47/1191 is in an offer for the outright sale of EL47/1140 to ConsMin. So the royalty stream from that tenement would flow at a time when Mr Ammon had no ownership of it. It follows that Mr Ammon's reference to a royalty stream EL47/1191 in this context does not support any inference that he believed he had any entitlement to an interest in that tenement.
A third page attached to the email set out a number of general conditions. The first of those was as follows:
1.Both the offers described above consist of the right to explore and evaluate all pisolite resources found on E47/1140 only, both offers specifically excluded the Mindy Mindy bedded hematite deposit located to the south of the lease, or any other iron resource found on E47/1140, which remain the personal property of Derek Ammon.
I digress to observe that the terms of this condition are only consistent with an appreciation or understanding that the only rights which Mr Ammon had available to transfer were rights to mine on tenement EL47/1140. The terms are entirely inconsistent with any appreciation or understanding on his part to the effect that he had present rights in respect of any other tenements.
Term 3 of the general conditions gives rise to the same inference. It was as follows:
3.The current 60 day agreement is: that I will not enter into any legally binding arrangements with regard to E47/1140 with any third party for the duration of the agreed period.
Term 5 of the conditions said to apply to the second alternative offer; namely, the option to buy, was expressed in the following terms:
5.At the end of the five years you must buy or walk ie if you don't exercise the option to buy, all leases held or applied for in relation to this project, plus all accumulated technical data must be returned to me free of charge without encumbrance.
It was submitted on behalf of Mr Ammon that this term reflects an understanding on his part to the effect that he had a present interest or entitlement to all tenements held in relation to the project. I do not accept that submission. The term proposed was a term to the effect that, if ConsMin elected not to proceed with the project generally, Mr Ammon should receive the project in its entirety. Viewed in that way, the proposal tells one nothing about his understanding of the entitlements which he had at the time he advanced the proposal.
Mr Greygoose provided a hardcopy of the email and attached terms to Mr Kiernan. Mr Kiernan's view of Mr Ammon's proposal is succinctly revealed in the words which he endorsed on it by hand at the time he passed it on to Mr Smith when he wrote:
Colin, this bloke is away with the pixies!
Mr Kiernan also directed an email be sent to Mr Ammon advising that he was reconsidering ConsMin's position in relation to Mr Ammon's various proposals.
On 12 June 2002, Mr Ammon sent an email to Mr Faris dealing with native title issues. That email refers twice to EL47/1140, and makes no reference to the tenements for which ConsMin had applied, even though Mr Ammon was, by then, well aware of ConsMin's applications. Again, the terms of this email are entirely consistent with an understanding by Mr Ammon to the effect that his only interest was in EL47/1140 and that he had no interest or entitlement to the tenements for which ConsMin had applied.
Nor was there any different understanding within ConsMin. On 13 June 2002, Mr Smith provided a memorandum to Mr Kiernan, responding to Mr Kiernan's implicit request for advice in relation to Mr Ammon's proposals. Mr Smith's memorandum commences with the observation:
Ammon is not off with the pixies.
He is one.
The terms of the memorandum are only consistent with an understanding by Mr Smith to the effect that Mr Ammon had full ownership of EL47/1140, but ConsMin had full right, title and ownership to the tenements for which it had applied. For example, the memorandum contains the following paragraph:
But importantly we should through or with Ammon, get the process moving, ie the cultural clearance(s). Even if we start with only the Ammon property. (NB: Ammon's greed has put paid to that approach and we must therefore concentrate on our own property. If that proves successful we become well placed in negotiations opposite Ammon.)
On 18 June 2002, Mr Kiernan sent an email to Mr Ammon in which he advanced a counter‑offer to the offers advanced by Mr Ammon on 11 June 2002. One of Mr Kiernan's introductory observations was in the following terms:
3.Ownership is in fact an exploration licence application.
The use of the singular suggests that it was common ground that the negotiation was for an acquisition by ConsMin of Mr Ammon's interest in his tenement.
The counter‑offer advanced by ConsMin included the following terms:
1.$250,000 payment for 5 year option payable on execution of documentation.
2.Consolidated Minerals will fund all exploration and engineering activities up to full feasibility study with a minimum commitment of $1m within 30 months of documentation.
3.The respective ownerships of your ground at this point would be
D Ammon
and
Consolidated Minerals
$.25m
___________________
$1.0m
___________________
$.25m + 1.0m
$.25m + $1.0m
20%
or
80%
Again, the terms of the offer are only consistent with a negotiation directed toward the acquisition by ConsMin of an interest in Mr Ammon's tenement. Mr Ammon accepted that view of the negotiations in the course of his cross‑examination (although later in his evidence he equivocated in that regard).
Another term of ConsMin's counter‑offer was as follows:
5.Should Consolidated Minerals decide not to proceed then total ownership would revert to yourself along with copies of all data.
Mr Ammon suggested in the course of his evidence that 'total ownership' was taken by him to be a reference to the entire project, and therefore to incorporate ConsMin's tenements. However, I do not accept that he held that view then or that it is a reasonable construction of the email. That is because the term follows other terms in which joint ownership of Mr Ammon's tenement was proposed. In that context, the expression 'total ownership' is to be taken as a reference to the ownership of Mr Ammon's tenement.
Mr Ammon replied to ConsMin's counter‑offer in an email to Mr Kiernan of 24 June 2002. The email is headed:
Re: Mindy Mindy Exploration Licence.
The use of that heading, in the singular, is consistent with a negotiation which was limited to Mr Ammon's tenement.
The first paragraph of Mr Ammon's email contains proposals which link the payment of money from ConsMin to the grant of 'the licence'. Plainly the licence being referred to is EL47/1140 (which had not then been granted), which Mr Ammon accepted in his evidence. In that context, the following exchange occurred:
So it's got nothing to do with any other tenement. It's you get your money when 1140 is granted?‑‑‑1140 is the only tenement I had legal claim to. That's the only tenement I can sell and that's‑‑‑
Mr Ammon proposed two slightly modified terms in this email as follows:
1.$A5,000 per 30 days, paid in advance, starting from the end of the 60 day agreement, until the licence is granted.
2.$250,000 payment for 5 year option payable within 7 calendar days of the licence being granted.
It is clear from these terms that the only reference to any tenement in Mr Ammon's counter‑proposal is to his tenement EL47/1140.
Mr Ammon otherwise accepted the terms proposed by ConsMin, which he incorporated into his response.
Mr Greygoose responded to Mr Ammon's email, advising that in his view the amendments proposed were sensible and that ConsMin accepted them. The email enquired whether Mr Ammon would like ConsMin's tenement solicitors, Blakiston & Crabb, to draw up documents at ConsMin's cost. Mr Ammon accepted that offer by email of the same date (24 June 2002).
On the same day, Mr Ammon sent a further email to Mr Kiernan, attaching an electronic file which contained an email exchange relating to native title matters between Mr Doug Stewart and Mr Ammon. In the course of that email exchange, Mr Stewart had asked for Mr Ammon's contact details, in order that documents concerning an objection to the expedited procedure, relating to tenement EL47/1140, could be sent to him. Mr Ammon replied in these terms:
Consolidated Minerals and my self have entered into a legally binding agreement in regards to E47/1147, part of that agreement gives Consolidated Resources the right to negotiate a legally binding agreement on my behalf in regards to Native Title matters, hence effective immediately, could you please direct all native title enquiries in regards to E47/1147 to:
Consolidated Minerals
Clearly, the reference to EL47/1147 is a typographical error, which should be read as a reference to EL47/1140. However, read in that way, it confirms that Mr Ammon's understanding of the agreement into which he had just entered was that it related only to tenement EL47/1140.
The same inference can be drawn from Mr Ammon's letter to the Mines Department of 26 June 2002, in which he advised:
Consolidated Resources and myself have entered into a legally binding agreement in regards to E47/1140, part of that agreement gives Consolidated Minerals the right to manage the affairs of [the] lease on my behalf, hence, effective immediately, could you please direct all enquiries concerning the above application to:
Mr Ian Faris
Consolidated Minerals
Mr Ammon sent a copy of that letter to Mr Kiernan. The same inference should be drawn from the terms in which Mr Ammon communicated with Mr Greygoose in an email of 27 June 2002, in which he advised:
To save your solicitors time when drawing up the contracts, I take this opportunity to remind you, that you have been offered the Mindy Mindy pisolite resource to explore and mine, the Mindy Mindy bedded hematite resource in the southern portion of the lease is not part of the deal, the contracts will have to clearly reflect this.
The reference to 'the lease' is plainly a reference to Mr Ammon's EL47/1140. The terms of this correspondence therefore reinforce my conclusion that all parties were well aware that the transaction which they had negotiated was limited to the acquisition of an interest in Mr Ammon's tenement by ConsMin/PIO.
That conclusion is further reinforced by the terms of a letter from Mr Faris of ConsMin to the Mines Department of 2 July 2002. In that letter, Mr Faris enclosed a statement of the financial capabilities of PIO in support of its application for tenements EL47/1191, EL47/1192, P47/1156 and P47/1157. The letter dealt separately with EL47/1140 and advised the Mines Department that ConsMin was currently finalising an agreement with Mr Ammon in relation to that tenement. The letter went on to request that the financial and technical capability statements be treated as applying to EL47/1140 as well, as ConsMin proposed to treat the five tenements 'as a single project'. Mr Ammon submits this latter reference shows that ConsMin regarded him as having an interest in all tenements. However, when the letter is read as a whole, it seems to me to support exactly the opposite inference; namely, that ConsMin were requesting the Mines Department to regard the tenements as one group for regulatory compliance purposes, notwithstanding their different ownerships.
And the same inference is properly drawn from an email to Mr Ammon of 11 July 2002 from Ms Christine Lovitt, a partner in the law firm, Blakiston & Crabb, in which she advised Mr Ammon that she had been instructed by ConsMin:
[T]o prepare an Agreement documenting the terms recently agreed with you in respect of your Mindy Mindy tenement.
Plainly, that email can only be read as a reference to Mr Ammon's tenement EL47/1140. Mr Ammon never took any step to correct the assertion that the agreement related only to that tenement. Rather, he acknowledged receipt of the email and advised Ms Lovitt that he would make contact again after examining the document enclosed with the email. Negotiations then took place between Mr Ammon and Ms Lovitt with respect to the precise terms of the proposed agreement. In the course of those negotiations, there was correspondence relating to the identification of the hard rock deposit, the interest in which was to be retained entirely by Mr Ammon. In the course of that correspondence, Mr Ammon was sent a map prepared by Mr Reynolds, which clearly showed that the hard rock resource was not entirely within tenement EL47/1140. However, Mr Ammon made no attempt to claim any interest in any land beyond EL47/1140 at the time the agreement was under negotiation. To the contrary, Mr Ammon proposed that the area of his retained interest be designated by reference to five graticular blocks falling within his tenement, and not going beyond it. Again, this is only consistent with an appreciation that the agreement under negotiation was restricted to the ground the subject of tenement EL47/1140.
In the event, Mr Ammon reached agreement with Ms Lovitt as to the terms of the HoA on 21 August 2002. Arrangements were then made for Mr Ammon and Mr Kiernan to meet in Hong Kong on 3 September 2002, as Mr Kiernan would be in Hong Kong that day in order to attend a conference in Shanghai.
In Smith, Kline and French Laboratories (Australia) Ltd at 304 their Honours referred to the 'broad principle of equity that he who has received information in confidence shall not take unfair advantage of it' (Seager v Copydex Ltd [1967] RPC 349, at 368), and went on to observe:
To avoid taking unfair advantage of information does not necessarily mean that the confidee must not use it except for the confider's limited purpose. Whether one adopts the 'reasonable man' test suggested by Megarry J or some other, there can be no breach of the equitable obligation unless the court concludes that a confidence reposed has been abused, that unconscientious use has been made of the information.
Accordingly, the requirement that there be a finding of 'unfair advantage' or 'unconscientious use' seems to me to connote that the considerations to be applied may not be exclusively objective, but may also, where appropriate, take account of the subjective views and perspectives of the participants.
There have been various attempts, in texts and previous cases, to identify factors and circumstances that might be taken into account to determine whether the circumstances in which the information was imparted give rise to an obligation of confidence. Most of those attempts are qualified by the obvious observation that because of the breadth and variety of the circumstances in which such information might be imparted, an exhaustive list of relevant factors and circumstances is unachievable.
One such attempt was made by the Full Court in Smith, Kline and French Laboratories (Australia) Ltd at 302 ‑ 303, where their Honours observed:
To determine the existence of confidentiality and its scope, it may be relevant to consider whether the information was supplied gratuitously or for a consideration; whether there is any past practice of such a kind as to give rise to an understanding; how sensitive the information is; whether the confider has any interest in the purpose for which the information is to be used; whether the confider expressly warned the confidee against a particular disclosure or use of the information - and, no doubt, many other matters.
In support of the submission that the circumstances pertaining to the delivery of the Ammon Report to ConsMin were such as to give rise to an obligation of confidence, Mr Ammon points to the nature of the report itself, and the negotiations which occurred after its delivery, including the agreement that he would deal exclusively with ConsMin for a period. However, the force of that is diminished by the fact that the exclusive dealing agreement protected only ConsMin, not Mr Ammon, and was restricted to dealings in respect of EL47/1140 in relation to which Mr Ammon's position was secured.
Mr Ammon also relied upon the evidence given by some of ConsMin's officers to the effect that they would not have published the Ammon Report generally after receiving it. However, when that evidence is scrutinised, it is clear that the reason they would not have published the Ammon Report was to protect ConsMin from rival bids for Mr Ammon's interest, not to protect Mr Ammon.
The other factors and circumstances that appear to me to be relevant to the assessment of whether the circumstances in which Mr Ammon provided his Report to ConsMin gave rise to an obligation of confidence are as follows.
First, Mr Ammon's interest in, and rights over the ground to which the report related was protected by the application which he had made for EL47/1140. Second, as I have observed, Mr Ammon believed that he had all necessary security over the ground and that his interest in the ground was fully protected. Third, objectively any recipient of the information in the Ammon Report would hold a similar view - namely, that Mr Ammon's interest in the ground, the subject of the express provisions of that report, was fully secured and protected.
Fourth, the circumstances in which Mr Ammon delivered the report to ConsMin and other prospective investors are, in my view, inconsistent with the importation of an obligation of confidentiality. As I have observed, the reports were delivered unsolicited and without claim of confidentiality or any realistic means of protecting confidentiality - particularly in the case of delivery to an investor whose identity was never known to Mr Ammon. Fifth, at no point in his dealings with ConsMin did Mr Ammon ever make any reference to the confidentiality of the report, or advance a claim for confidence. Sixth, at no point did Mr Ammon ever request a confidentiality agreement, notwithstanding his understanding that entry into express agreements to protect confidentiality was standard practice in the mining industry in Western Australia. Seventh, the evidence of the witnesses called on behalf of ConsMin established that it is in fact usual practice in the mining industry in Western Australia to seek an express written agreement of confidentiality if confidentiality is sought to be protected. Evidence was given by each of Messrs Kiernan, Macoboy and Davies to that effect.
Eighth, all the factual data and information contained within the Ammon Report was within the public domain. The element of novelty which, in other circumstances, could perhaps be characterised as confidential was essentially the proposition that the resource could be economically viable - a proposition advanced essentially as part of a sales pitch and at a level of great generality.
Ninth, Mr Ammon knew that the material would be supplied to third parties such as consultants, for their advice. Tenth, Mr Ammon made no complaint whatsoever when he became aware that other tenements had been applied for in late May 2002, and again in early September 2002.
Eleventh, Mr Ammon continued negotiating for the joint venture relating only to EL47/1140 after becoming aware of PIO's applications for tenements EL47/1191 and EL47/1192.
Twelfth, all emails generated by Mr Ammon in the course of negotiations for the HoA are consistent with him having only an interest in EL47/1140. Thirteenth, the HoA was limited to EL47/1140 and other tenements acquired by the Joint Venture, as its terms clearly show. Fourteenth, Mr Ammon made no claim to any interest in any ground other than EL47/1140 until late 2003, when an issue arose in relation to the hematite resource which he apparently considered was always to have been his. Fifteenth, and finally, at no point did Mr Ammon apply for any tenements other than EL47/1140, despite having the opportunity and capacity to do so.
When viewed together, these various factors and circumstances seem to me to point inexorably to the conclusion that the Ammon Report was not supplied to ConsMin in circumstances which imparted an obligation of confidence.
Unconscientious use
The third element of the cause of action identified by Megarry J in Coco (at 47), was described by him as 'an unauthorised use of the information to the detriment of the party communicating it'. In Lac Minerals Ltd v International Corona Resources Ltd [1989] 2 SCR 574; (1989) 16 IPR 27, this third element was referred to by La Forest J as the element of misuse of the information. That terminology avoids specific reference to the element of detriment - an element which later cases strongly suggest is not an essential component of the equitable claim for breach of confidence - see for example Attorney-General v Observer Ltd (1990) 1 AC 109; National Roads and Motorists' Association Ltd v Geeson[2001] NSWCA 343; (2001) 40 ACSR 1 at [58]; N P Generations Pty Ltd v Feneley[2001] SASC 185; (2001) 80 SASR 151 at [21]. Although the matter is not entirely free from doubt, the better view seems to be that detriment is not an essential element of the cause of action. In case a different view is taken elsewhere, it will be apparent from my findings that had it been necessary to find detriment, I would not have concluded it had been established, given my finding that Mr Ammon would not himself have made any attempt to claim the ground adjoining EL47/1140, had PIO not pursued that ground.
However, a claim alleging breach of confidence must nevertheless establish that the defendant misused the information, or, in the words of the Full Court in Smith, Kline and French Laboratories (Australia) Ltd at 304, took "unfair advantage" or made "unconscientious use" of the confidential information. As I have already suggested, that notion seems to me to import the permissible consideration of aspects of the conduct of the parties which sheds light upon their subjective views at the time, such as, Mr Ammon's conspicuous failure to make any complaint whatsoever when he became aware, in late May 2002, that PIO had applied for tenements EL47/1191 and EL47/1192, at a time when he had not even commenced negotiations in earnest with ConsMin. And, as I have observed, the terms of the negotiations between Mr Ammon and ConsMin appear to me to be only consistent with a tacit understanding that Mr Ammon's rights and interests were limited to EL47/1140, and that ConsMin enjoyed all the rights and interests deriving from the other tenement applications. That in turn is inconsistent with any perception by Mr Ammon to the effect that ConsMin had made unconscientious use of confidential information which he had supplied to it, as is his email to Ms Lovitt of 8 August 2002 in which he referred to ConsMin having negotiated in good faith. Plainly Mr Ammon did not consider that ConsMin had taken unfair advantage or made unconscientious use of his report until late 2003, when a dispute arose in relation to the hematite resource. His belated assertions of breach of confidence were only made after the dispute arose and Mr Ammon had received legal advice. They did not emerge from a common understanding or the implicit basis of his dealings with ConsMin. If, as I find, Mr Ammon himself did not at the time himself think that ConsMin had taken unfair advantage or made unconscientious use of confidential information which he had imparted, I can see no reason why a court should conclude otherwise.
For these various reasons, apart from the fatal flaw in Mr Ammon's claim for breach of confidence to the effect that the information which was used by ConsMin to claim the adjoining ground was not in fact conveyed by Mr Ammon, Mr Ammon's claim also fails because he fails to establish any of the elements which must be made out before the claim could succeed.
Lac Minerals Ltd v International Corona Resources Ltd
Mr Ammon's counsel placed considerable reliance on the decision of the Supreme Court of Canada in Lac Minerals Ltd. It was said that case bears a striking similarity to this. However, any such similarity is, in my view, entirely superficial. When the facts of that case are considered in detail, it is readily seen that they are very different to this.
The superficial similarities between the two cases lie in the fact that in Lac Minerals Ltd, two mining companies were negotiating towards a joint venture when one acquired the right to mine on adjoining ground from the owner of that right. However, that is where the similarities between the two cases end. The differences include the following:
(a)The claimant (Corona) told the defendant (Lac), directly and expressly of the economic desirability of the adjoining ground;
(b)The parties expressly discussed the acquisition of the adjoining ground for the purposes of their joint venture;
(c)It was found that but for the actions of Lac, Corona would have acquired the adjoining ground;
(d)Senior officers of Lac acknowledged an obligation of good faith and an industry standard or practice to the effect that one party would not acquire a property which was being pursued by a party with which it was negotiating;
(e)A senior officer of Lac acknowledged that the information he received from Corona was confidential and was received in circumstances of confidence;
(f)Lac made an offer to the owner of the right to mine the adjoining ground, at a time when it was aware that Corona also had made an offer for the adjoining ground;
(g)When Corona became aware that there was another bidder for the right to mine the adjoining ground, Lac did not disclose to Corona that it was that bidder;
(h)As soon as Corona became aware that Lac had acquired the right to mine the adjoining ground, a complaint was made and proceedings were commenced;
(i)The evidence established an industry practice to the effect that parties negotiating with each other would not use any information obtained in the course of those negotiations to the detriment of the other;
(j)The evidence failed to establish any standard or common practice within the mining industry of Canada whereby confidentiality was protected by express agreements.
In all these respects, the relevant facts of Lac Minerals Ltd are quite different to the facts which I have found in this case. Those differences of fact are crucial to the outcome of Lac Minerals Ltd. Accordingly, when regard is had to those differences, the decision in Lac Minerals Ltd provides no support for Mr Ammon's case.
For these various reasons, in my opinion Mr Ammon's claim for breach of confidence fails.
Breach of fiduciary duty
Mr Ammon's claims for breach of fiduciary obligation are easier to comprehend than some of the other claims he has advanced. They are almost exactly coterminous with his claims for breach of confidence. Indeed, at some points in the course of argument, his counsel was inclined to concede that if Mr Ammon's claims for breach of confidence failed, it necessarily followed that his claims for breach of fiduciary obligation must also fail. However, in the end, counsel resiled from that concession (if indeed it was ever made). However, because of the overlap between the two claims, it will be possible to deal with the claims for breach of fiduciary obligation relatively briefly.
Essentially Mr Ammon asserts that ConsMin, and in due course PIO, owed him a variety of fiduciary obligations by reason of the fact that he had entrusted them with confidential information and that he was vulnerable to the exercise of the powers which flowed from that confidential information, including the powers with which he clothed ConsMin in relation to the administration of his application for tenement EL47/1140. He alleges that those obligations were breached by PIO's application for tenements in relation to the ground adjoining EL47/1140, and by the negotiations with FMG, and the transaction with FMG. So the overlap between these claims and the claims for breach of confidence is almost complete.
Legal principles
At points the argument advanced on behalf of Mr Ammon seemed to advance the not uncommon heresy that once any kind of fiduciary relationship has been established, all conventional fiduciary duties apply to that relationship. However, it is well established that fiduciary relations are almost infinitely variable in type and category, and the extent of the obligations which attend the relationship depends critically upon the particular characteristics of the relationship - see the oft cited observations of Fletcher‑Moulton LJ in Re Coomber [1911] 1 Ch 723, 728 ‑ 729; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41.
It is also recognised that an exhaustive definition of the circumstances in which a fiduciary relationship will be found has been elusive. Various attempts have been made to define the characteristics which will generally be present in such a relationship. Subject to one slight qualification, I am attracted to the enunciation provided by Wilson J in Frame v Smith (1987) 42 DLR (4th) 81; [1987] 2 SCR 99 at 136 where her Honour observed:
Relationships in which a fiduciary obligation have been imposed seem to possess three general characteristics:
(1)The fiduciary has scope for the exercise of some discretion or power.
(2)The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary's legal or practical interests.
(3)The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power.
So, on this view, the identification of a discretion or power held by the beneficiary is central to the identification of a fiduciary relationship.
The slight qualification I would add to those observations concerns the issue of vulnerability. In Lac Minerals Ltd, La Forest J expressed the view that vulnerability was not an essential characteristic of a fiduciary relationship, and a similar view has been expressed in Australia (see C-Shirt Pty Ltd v Barnett Marketing & Managing Pty Ltd (1996) 37 IPR 315, per Lehane J). I incline to the view expressed in the latter case to the effect that vulnerability should not be regarded as the touchstone of fiduciary obligation, rather, the fundamental question is for what purpose and for the promotion of whose interest the fiduciary power is held. However, pursuit of these interesting questions of principle is unnecessary in this case, as in my view the facts which I have found determine the outcome of Mr Ammon's claims without need for resolution of these finer points.
Mr Ammon's claims
The fundamental difficulty with Mr Ammon's claims for breach of fiduciary obligation is that they rest on two false premises. The first is that he provided confidential information to ConsMin with respect to the prospectivity of the ground surrounding tenement EL47/1140. For the reasons I have set out above in relation to Mr Ammon's claims for breach of confidential information, I have rejected that assertion. The second false premise is that ConsMin/PIO had a power which could be exercised to his detriment, by reason of their relationship. The power which he suggests could be exercised was the power to claim tenements in relation to the ground surrounding EL47/1140. However, ConsMin's capacity to make those applications was not derived in any sense from its relationship with Mr Ammon, although, as a matter of fact, its exercise was stimulated by the view expressed by Mr Reynolds after he had digested the information in the Ammon Report. However, that sequence of events is fundamentally different in character to a circumstance in which a fiduciary is clothed with a power which can be exercised to the detriment of the beneficiary.
Prior to the execution of the HoA, Mr Ammon and ConsMin were negotiating at arms length for a commercial venture. While that relationship does not necessarily exclude the possibility of a fiduciary relationship (see for example United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1), ordinarily it is a circumstance which is inconsistent with the existence of such a relationship. And of course in this case, Mr Ammon's assertion that he was owed fiduciary duties by ConsMin in the course of their negotiations sits rather at odds with his own conduct, given that he felt free to lie to ConsMin regularly during the course of those negotiations, as and when it suited his interests.
Turning now to the situation after the execution of the HoA, I have already expressed the view that, under the terms of that agreement there was a fiduciary relationship between the parties to the joint venture, both by implication from the terms of the agreement and by analogy between the joint venture and a partnership. However, I have also expressed the view that the relationship defined by the HoA was confined to a relationship for the development and exploitation of EL47/1140 and other tenements acquired by the Joint Venture. Accordingly, there is nothing in the HoA which would extend any fiduciary obligations beyond obligations pertaining to those tenements. As no tenements have been acquired by the Joint Venture, it is limited to EL47/1140. And Mr Ammon does not allege that ConsMin have breached any obligation in relation to that tenement, other than his assertions that the negotiations with FMG, and the FMG transaction, somehow, in a manner which I am unable to identify, constituted an infringement of his rights. And, of course, once parties have entered into a contractual relationship, the extent of their equitable obligations will ordinarily be defined by the scope of their contractual relationship (see Price v Powers [2005] WASC 154).
Accordingly, for these reasons, in my opinion the claims for breach of fiduciary obligation must be dismissed.
Misleading and deceptive conduct
As I have already mentioned, Mr Ammon's pleaded claim for misleading and deceptive conduct was so opaque that it was necessary for me to direct that a further document be provided during the course of the trial which specified his claims in that regard. Such a document was provided. However, as will be seen, the written closing submissions provided on Mr Ammon's behalf departed to a limited extent from the case which he particularised during the trial. That case identified six instances of conduct on the part of ConsMin/PIO which were said to be misleading and deceptive. The closing submissions also referred to six incidents of conduct that are said to be misleading and deceptive, but one of those instances is different to the case particularised during the trial. I will therefore deal with all seven aspects of the conduct by ConsMin/PIO which Mr Ammon asserts was misleading and deceptive.
The first is an assertion that on 14 March 2002 ConsMin represented to Mr Ammon that it would not disclose the Ammon Report, nor use the information in that Report or the further information provided by Mr Ammon in the course of his meeting with Mr Vivian on 14 March 2002 for any purpose other than considering whether or not to invest in 'the Mindy Mindy Deposit'. It is said that the representation was misleading and deceptive because ConsMin did not then intend, or consider itself obliged to limit its use of the Ammon Report and the further information provided by Mr Ammon in that way. It is further alleged that Mr Ammon relied upon ConsMin's misleading and deceptive conduct to his detriment by supplying further information to ConsMin.
As I have found that ConsMin did not make any representation, either express or implied to Mr Ammon to the effect that it would not disclose the information in the Ammon Report, or as to the use to which it would put that information, this claim must fail because Mr Ammon has failed to establish the representation upon which it is based. I would also observe that I have, in any event, found that Mr Ammon did not supply any further information of any value to ConsMin, or refrain from taking any action he would otherwise have taken, such as claiming the ground adjoining his tenement, so it is difficult to see how Mr Ammon could have suffered any loss or damage by reason of his reliance upon the alleged representation.
Secondly, Mr Ammon asserts that shortly after 18 March 2002, ConsMin represented to him that it would not disclose the further information which he had provided during his meeting with Mr Vivian on 14 March 2002, and would not use the Ammon Report or that further information for any purpose other than the limited purpose of considering whether or not to invest in 'the Mindy Mindy Deposit'. Mr Ammon alleges that this representation was misleading and deceptive, because ConsMin did not intend to limit its use of the Ammon Report and the further information he had provided, nor did it feel obliged to limit its use to the specific purpose he alleges. He further alleges that in reliance upon ConsMin's representation, he granted ConsMin and PIO exclusive access to his tenement, consented to a consultant being engaged to examine the area, and did not deal with any other party in respect of the tenement.
This claim must fail for essentially the same reasons as the first claim for misleading and deceptive conduct. I have found that no representation was made by ConsMin as to the uses to which it would put the Ammon Report. I have also found that no significant additional information was provided to ConsMin during the meeting between Mr Ammon and Mr Vivian. I have also held that Mr Ammon did not have the right to prevent ConsMin having access to the land the subject of EL47/1140 prior to its grant, and therefore Mr Ammon's purported grant of access did not provide ConsMin with anything of value, or cause him any detriment. Further, although Mr Ammon did undertake not to deal with any other party, on the evidence before me it is difficult to see how he has foregone anything of value, as at that time, there were no other parties interested in dealing with him in relation to the tenement.
Thirdly, Mr Ammon alleges that at the end of May 2002, ConsMin and PIO represented to him that if he extended the grant of exclusive access to his tenement, they would not disclose the information in the Ammon Report nor the additional information he had provided, nor would they use that information for any purpose other than the limited purpose of considering whether or not they would invest in 'the Mindy Mindy Deposit'. Mr Ammon alleges that this representation was misleading and deceptive because ConsMin and PIO did not intend to limit their use of that information, nor did they consider themselves obliged to limit the use to which they put it. Mr Ammon alleges that in reliance upon this misrepresentation he continued the grant of exclusive access to ConsMin and PIO and did not deal with any other party.
This claim must fail because of my finding that there was no representation of the kind alleged by Mr Ammon. Further, the purported grant of exclusive access to the tenement, and the undertaking not to deal with any other party, did not cause any significant loss or detriment to Mr Ammon.
Fourthly, Mr Ammon alleges that at or about the end of May, ConsMin and PIO represented to him that the applications for tenements EL47/1191 and EL47/1192 had been made for the purposes of, and on behalf of, the joint venture to be formed between them. He alleges that this representation was misleading and deceptive because, in fact, the applications had not been made on behalf of the joint venture. Mr Ammon alleges that in reliance upon that representation he continued negotiations with CSM and PIO and entered into the joint venture on 3 September 2002.
This claim must fail in light of my finding that there was no representation to the effect alleged by Mr Ammon and my further finding that during the course of his negotiations with ConsMin and at the time he executed the HoA on 3 September 2002, he did not believe that tenements EL47/1191 and EL47/1192 were to be included within the joint venture.
The fifth claim enunciated by Mr Ammon in the document which he lodged shortly after the commencement of the hearing was an allegation that on 3 September 2002, ConsMin represented to him that PIO's applications for EL47/1191 and EL47/1192 had been made for and on behalf of the joint venture. He alleges that representation was untrue, because those applications had not in fact been made on behalf of the joint venture. He further alleges that he relied upon the representation by executing the HoA on 3 September 2002.
This claim must fail because of the lack of any evidence that there was a representation to the effect alleged on 3 September 2002, and my consequential finding that there was no such representation. It must also fail because of my finding that, at the time Mr Ammon executed the HoA, he did not believe that tenements EL47/1191 and EL47/1192 were to be part of the agreement.
In Mr Ammon's written closing submissions, the fifth claim for misleading and deceptive conduct is put quite differently. In that document, the claim is advanced on the basis of a failure to inform Mr Ammon that ConsMin and PIO had decided, prior to 3 September 2002, to apply for tenements EL47/1224 and EL47/1225 for their own use and benefit and failed to inform Mr Ammon of that. The document does not identify how Mr Ammon is said to have relied upon that omission to his detriment, nor why the failure to inform is said to be misleading and deceptive.
There are many cases dealing with the principles pertaining to claims which lie within the area loosely described as misrepresentation by silence. However, it is, I think, unnecessary to review those cases for the purposes of dealing with this particular claim. That is because, on the facts which I have found, including, in particular, my finding that all negotiations between Mr Ammon and ConsMin/PIO and the HoA which they executed, were directed only to tenement EL47/1140, I cannot see any basis upon which a failure to inform Mr Ammon of an intention to apply for other tenements on adjoining ground could be characterised as misleading and deceptive conduct. Nor can I see any basis upon which Mr Ammon could successfully assert that he relied upon a mistaken belief induced by that conduct to his detriment.
The sixth claim for misleading and deceptive conduct enunciated by Mr Ammon is based upon an allegation that on or about 9 September 2002, ConsMin and PIO represented to him that the applications for EL47/1224 and EL47/1225 had been made for and on behalf of the joint venture. He alleges this misrepresentation was misleading and deceptive because, in fact, those applications had not been made for or on behalf of the joint venture. He further alleges that he relied upon this conduct to his detriment by continuing to comply with his obligations under the HoA.
This claim must fail by reason of my finding that there was no such representation made by ConsMin or PIO. Further, I do not see how Mr Ammon's performance of his legal obligations under the HoA could constitute detriment which would entitle him to a remedy.
For these various reasons, all of the claims enunciated by Mr Ammon for misleading and deceptive conduct must fail.
Relief
Because I have concluded that all the claims made by Mr Ammon must fail, no question of the form of relief to be granted arises. However, in case this matter is pursued on appeal, it is perhaps appropriate if I make some short observations which might be of assistance in case a different view is taken in relation to liability.
Dealing firstly with the claims in contract, if Mr Ammon's claim as to the proper construction of the HoA had been made out, the appropriate relief would have taken the form of a declaration as to the proper construction of that document. In relation to his other claims for breach of contract, the appropriate relief to be granted, in the event those claims had been made out, would of course have been to provide him with a remedy which would put him in the position in which he would have been had the contract been performed. However, I have found that Mr Ammon would not have acted any differently, and in particular, would not, himself, have applied for any tenements in respect of adjoining ground, whatever ConsMin/PIO had done.
Further, in relation to the alleged breaches of the exclusive access agreements, in light of my finding of fact that Mr Ammon believed, at the time he entered into the HoA, that it applied only to tenement EL47/1140 and any other tenements subsequently acquired by or on behalf of the joint venture, it follows that the remedy of any breaches of the terms alleged to be implied into the earlier agreements would not involve putting Mr Ammon into any different position to that in which he now finds himself.
Turning now to Mr Ammon's claims in equity, the precise form of relief to be granted in respect of those claims would, of course, depend critically upon the precise nature of the claim made out. However, given Mr Ammon's assertion that he erroneously believed, at the time he entered into the HoA, that it applied to what he has characterised as 'the entire project', it is difficult to see any basis upon which equity could sustain his claim to be awarded the entire project, given his willingness to enter into an agreement to take only 20%.
Turning finally to Mr Ammon's claims for misleading and deceptive conduct, for the reasons I have set out above, in my view, it is difficult to see how Mr Ammon could have suffered any significant loss or detriment in reliance upon any of the conduct alleged. It is therefore difficult to see any basis upon which he could be granted a significant remedy pursuant to the provisions of the Trade Practices Act 1974 (Cth).
Conclusion
For these various reasons, in my opinion Mr Ammon's claims should be dismissed in their entirety.
- AGLC
- Ammon v Consolidated Minerals Ltd [No 3] [2007] WASC 232
- Case
- [2007] WASC 232
- Decision Date
CaseChat Overview and Summary
The primary legal issues in this case revolved around the interpretation of specific terms within the contract between Mr Ammon and ConsMin. The court needed to ascertain the meaning and implications of terms 3 and 5 of the general conditions, particularly in relation to the rights and obligations of the parties concerning tenement E47/1140 and other tenements for which ConsMin had applied. Additionally, the court examined whether there was any breach of confidence, implied terms, or fiduciary duty by either party, including whether there was unconscientious use of information or misleading and deceptive conduct.
The court carefully considered the evidence and submissions from both parties. It found that term 3 did not imply that Mr Ammon had a present interest or entitlement to all tenements related to the project. Instead, it was interpreted as a condition under which ConsMin could return all leases and technical data if they chose not to proceed with the project. The court also highlighted that Mr Ammon's understanding and communications consistently indicated that he only had an interest in tenement E47/1140 and not in the other tenements. Furthermore, the court concluded that there was no breach of confidence, implied terms, or fiduciary duty by either party.
As a result of the court's reasoning, the action was dismissed. The court ruled that the terms of the contract were clear and that there was no breach of any contractual obligations by either party. Consequently, no further legal action was warranted in this matter.
Orders
Orders of the court
Action dismissed
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Term 3 of the general conditions gives rise to the same inference. It was as follows:3.The current 60 day agreement is: that I will not enter into any legally binding arrangements with regard to E47/1140 with any third party for the duration of the agreed period. Term 5 of the conditions said to apply to the second alternative offer; namely, the option to buy, was expressed in the following terms:5.At the end of the five years you must buy or walk ie if you don't exercise the option to buy, all leases held or applied for in relation to this project, plus all accumulated technical data must be returned to me free of charge without encumbrance. It was submitted on behalf of Mr Ammon that this term reflects an understanding on his part to the effect that he had a present interest or entitlement to all tenements held in relation to the project. I do not accept that submission. The term proposed was a term to the effect that, if ConsMin elected not to proceed with the project generally, Mr Ammon should receive the project in its entirety. Viewed in that way, the proposal tells one nothing about his understanding of the entitlements which he had at the time he advanced the proposal. Mr Greygoose provided a hardcopy of the email and attached terms to Mr Kiernan. Mr Kiernan's view of Mr Ammon's proposal is succinctly revealed in the words which he endorsed on it by hand at the time he passed it on to Mr Smith when he wrote:Colin, this bloke is away with the pixies! Mr Kiernan also directed an email be sent to Mr Ammon advising that he was reconsidering ConsMin's position in relation to Mr Ammon's various proposals. On 12 June 2002, Mr Ammon sent an email to Mr Faris dealing with native title issues. That email refers twice to EL47/1140, and makes no reference to the tenements for which ConsMin had applied, even though Mr Ammon was, by then, well aware of ConsMin's applications. Again, the terms of this email are entirely consistent with an understanding by Mr Ammon to the effect that his only interest was in EL47/1140 and that he had no interest or entitlement to the tenements for which ConsMin had applied. Nor was there any different understanding within ConsMin. On 13 June 2002, Mr Smith provided a memorandum to Mr Kiernan, responding to Mr Kiernan's implicit request for advice in relation to Mr Ammon's proposals. Mr Smith's memorandum commences with the observation:Ammon is not off with the pixies.He is one. The terms of the memorandum are only consistent with an understanding by Mr Smith to the effect that Mr Ammon had full ownership of EL47/1140, but ConsMin had full right, title and ownership to the tenements for which it had applied. For example, the memorandum contains the following paragraph:But importantly we should through or with Ammon, get the process moving, ie the cultural clearance(s). Even if we start with only the Ammon property. (NB: Ammon's greed has put paid to that approach and we must therefore concentrate on our own property. If that proves successful we become well placed in negotiations opposite Ammon.)