Australis Exploration Pty Ltd v Cst Minerals Lady Annie Pty Ltd; Cst Minerals Lady Annie Pty Ltd v Australis Exploration Pty Ltd
[2014] QLC 30
•11 September 2014
LAND COURT OF QUEENSLAND
CITATION: Australis Exploration Pty Ltd v CST Minerals Lady Annie Pty Ltd; CST Minerals Lady Annie Pty Ltd v Australis Exploration Pty Ltd & Anor [2014] QLC 30 PARTIES: Australis Exploration Pty Ltd ACN 125 939 291
(applicant)v CST Minerals Lady Annie Pty Ltd ACN 136 930 222
(respondent)
(MRA142-14)and CST Minerals Lady Annie Pty Ltd ABN 90 136 930 222
(appellant)v Australis Exploration Pty Ltd ABN 63 125 939 291
(first respondent)and Cape Lambert Resources Limited ABN 71 095 047 920
(second respondent)
(MRA163-14)FILE NOS: MRA142-14; MRA163-14 DIVISION: General Division PROCEEDINGS: General Application for continuation of caveats
Originating Application for removal of caveatDELIVERED ON: 11 September 2014 DELIVERED AT: Brisbane HEARD ON: 17 July 2014 HEARD AT: Brisbane PRESIDENT: CAC MacDonald CATCHWORDS: Mining – caveats – Mineral Resources Act 1989, s 318AAZJ – caveats lodged over exploration permits – application by caveator for continuation of caveats – application by caveatee for removal of caveat – interest claimed pursuant to alleged agreement to assign phosphate mining rights on the tenements – relevant test for maintaining caveats – whether prima facie case established – whether sufficient evidence of alleged agreement – balance of convenience
Mineral Resources Act 1989, s 318AAZG, s 318AAZJ(2)(a)
Land Title Act 1994Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57
Australian Broadcasting Corporation v XIVTH Commonwealth Games Ltd (1988) 18 NSWLR 540
Re Arthur v Department of Natural Resources and Mines & Anor [2003] QLRT 100
Re Burman’s Caveat [1994] 1 QdR 123
Chillagoe Gold v Weil and Stein [2008] QLC 0161
Re Jorss’ Caveat [1982] QdR 458
Nickmere Pty Ltd v Dianne Mining Corporation Pty Ltd [2012] QLC 0006
Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] NSWLR 729 at 754
Sinclair, Scott and Co Ltd v Naughton (1929) 43 CLR 310 at 316 to 317
Warner-Lambert Company UC v Apotex Pty Ltd [2014] FCAFC 59APPEARANCES: Mr D O’Brien QC with Mr E Goodwin for the applicant
Mr PL O’Shea QC with Mr PP McQuade for the respondentSOLICITORS: Hopgood Ganim Lawyers for the applicant
Herbert Smith Freehills for the respondent
This decision deals with a general application brought by Australis Exploration Pty Ltd (Australis) (the applicant) against CST Minerals Lady Annie Pty Ltd (Lady Annie) (the respondent) in proceeding MRA142-14, pursuant to s 318AAZJ(2)(a) of the Mineral Resources Act 1989 (the Act) for orders that Caveat No. 103861 lodged on 7 April 2014 and Caveat No. 105109 lodged on 13 June 2014 remain in force until:
(1) thirty days after the finalisation of the proceedings, including any appeals from any decisions in these proceedings; or
(2) earlier order of the Land Court.
The decision also deals with an originating application brought by CST Minerals Lady Annie Pty Ltd (Lady Annie) against Australis Exploration Pty Ltd and Cape Lambert Resources Limited (MRA163-14). In those proceedings Lady Annie has sought orders that:
(1) Caveat No. 105109 be removed immediately; and
(2) Australis Exploration Pty Ltd and Cape Lambert Resources Limited pay the costs of CST Minerals Lady Annie Pty Ltd.
Background
Australis is a wholly owned subsidiary of Cape Lambert Resources Limited (Cape Lambert), a publicly listed company. CST Minerals Lady Annie Pty Ltd (formerly Cape Lambert Lady Annie Exploration Pty Ltd) (Lady Annie), was originally a wholly owned subsidiary of Cape Lambert but is now a wholly owned subsidiary of CST Minerals Pty Ltd (CSTM) which is ultimately controlled by CST Mining Group Limited (CST).
Lady Annie owns a copper project located some 90 minutes from Mount Isa, and is the holder of a number of tenements associated with the project. The caveats in issue in these proceedings were lodged over a number of exploration permits.
In its originating application filed in this Court on 23 June 2014 (MRA142-14) Australis said that the exploration permits allow exploration for copper and phosphate. The known copper and phosphate deposits are located in different physical locations but within the same broad area. By a share sale agreement (SSA) dated 11 March 2010 between Cape Lambert, CSTM and CST, Cape Lambert agreed to sell 100% of the shares in Lady Annie to CSTM on certain terms and conditions. Relevantly, it was agreed that the consideration paid for the acquisition of 100% of the shares of Lady Annie was based on the exclusive right to explore for and mine phosphate on the tenements (phosphate rights) being granted back to Australis (the agreement). The agreement was an oral term of the SSA or, in the alternative a collateral contract to the SSA. Cape Lambert was acting as agent for or on behalf of Australis, in relation to the agreement. In the alternative, Australis (in its own capacity) was a party to the SSA or to the collateral contract to the SSA.
Australis also said that the agreement was immediately binding, although the parties intended to negotiate and enter into a formal deed between Australis and Lady Annie in respect of the phosphate rights (phosphate rights deed). A draft phosphate rights deed was annexed to the SSA as Schedule 17.
On 31 May 2010:
(1) The SSA was completed and all of the shares in Cape Lambert were transferred by Cape Lambert to CSTM (completion);
(2) The phosphate rights deed had not been entered into between Australis and Lady Annie; and
(3) Cape Lambert, CST and CSTM entered into a completion side letter (side letter) which relevantly provided:
[Cape Lambert] and [CSTM] agree that they will negotiate in good faith to agree a phosphate rights agreement within three months after completion. Once negotiated and agreed, the purchaser will procure [Lady Annie] executes the agreement. [Cape Lambert] holds the benefit of this clause on trust for [Australis].
Australis further said that between June 2010 and January 2014, Cape Lambert on behalf of Australis and CSTM (on behalf of Lady Annie) negotiated regarding the terms of the phosphate rights deed. However, Lady Annie has failed or refused to enter into the phosphate rights deed, does not acknowledge the agreement, and is accordingly preventing Australis from exercising phosphate rights.
Accordingly, Australis sought the following relief in the principal proceedings (MRA142-14):
(a) Declarations that:
(i)Australis and Lady Annie have entered into a binding agreement to grant the phosphate rights to Australis; and
(ii)Australis has the right to explore and mine phosphate on the tenements.
(b) Specific performance of the agreement.
(c) In the alternative to (b), an injunction preventing Lady Annie by itself, its servants or its agents, from taking any steps or allowing any steps to be taken that will or may have the effect of:
(i)preventing Australis from exercising the phosphate rights; or
(ii)hindering or otherwise adversely affecting Australis’ exercise of the phosphate rights.
(d) The first caveat and the second caveat continue until they are withdrawn or removed.
(e) Lady Annie pay Australis’ costs of these proceedings.
Statutory Provisions
Section 318AAZG(1) of the Act provides that:
"Lodging of caveat
(1) A caveat may be lodged by any of the following—
(a)a person claiming an interest in a mining tenement or application for a mining lease;
(b)the registered holder of a mining tenement or an applicant for a mining lease;
(c)a person to whom an Australian court has ordered that an interest in a mining tenement or application for a mining lease be transferred;
(d)a person who has the benefit of a subsisting order of an Australian court restraining—
(i) a registered holder of a mining tenement from dealing with the mining tenement; or
(ii) an applicant for a mining lease from dealing with the application."
Section 318AAZG is found within Part 3 of Chapter 7 of the Act. Section 318AAZE(1) provides that Part 3 applies to the following mining tenements – a mining claim, an exploration permit, a mineral development licence and a mining lease.
Pursuant to s 318AAZG(1) of the Act, Australis claims an interest in exploration permits (EPM) which, by virtue of s 318AAZE(1)(b) are within the description of mining tenements as used in Part 3 of Chapter 7 of the Act.
Section 318AAZI(1) provides that until a caveat lapses, or is removed or withdrawn, the caveat prevents registration of a dealing with a mining tenement over which the caveat is lodged from the date and time endorsed by the chief executive on the caveat as the caveat's date and time of lodgement[1].
[1]Subsection (1) is subject to certain exceptions set out in subs (2), none of which are relevant to these proceedings.
Section 318AAZJ(2) provides that:
"(2)A caveat that is not an agreed caveat lapses—
(a) if an order of the Land Court is in force in relation to the caveat—at the expiration of the order; or
(b) otherwise—at the expiration of 3 months after the date of lodgement of the caveat or a shorter term stated in the caveat. "
Legal Principles
It is accepted by both parties that the test to maintain a caveat is the same as the test for the grant of an interlocutory injunction[2]. That conclusion was reached in cases dealing with caveats lodged under the Land Title Act 1994 but the same principles have been applied by this Court in relation to caveats lodged under the Act in, for example, Nickmere Pty Ltd v Dianne Mining Corporation Pty Ltd[3].
[2]Re Jorss’ Caveat [1982] QdR 458 at 464-465; Re Burman’s Caveat [1994] 1 QdR 123.
[3][2012] QLC 6 at [103]. See also Chillagoe Gold v Weil and Stein [2008] QLC 161 and Re Arthur v Department of Natural Resources and Mines & Anor [2003] QLRT 100.
In Australian Broadcasting Corporation v O’Neill[4] the High Court identified the principles relating to the grant of an interlocutory injunction:
"The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the Court addresses itself to two main inquiries and continued:
"The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief … The second inquiry is … whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted."
By using the phrase "prima facie case", their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal:
"How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks." (citations omitted)
[4](2006) 227 CLR 57 at 81, 82 [65] per Gummow and Hayne JJ; Gleeson CJ and Crennan J agreeing on this point.
In Warner-Lambert Company UC v Apotex Pty Ltd[5], the Court said:
"Whether an applicant for an interlocutory injunction has made out a prima facie case or whether the balance of convenience favours the grant of such relief are related questions. It will often be necessary to give close attention to the strength of a party’s case when assessing the risk of doing an injustice to either party by the granting or withholding of interlocutory relief especially if the outcome of the interlocutory application is likely to have the practical effect of determining the substance of the matter in issue or if other remedies, including an award of damages, or an award of compensation pursuant to the usual undertaking, are likely to be inadequate. "
Whether Australis has established a prima facie case
The Caveat[5][2014] FCAFC 59 at [70].
Relevantly, the following information appears in the notification by the Department of Natural Resources and Mines of the caveat lodged on 7 April 2014[6]:
[6]Affidavit of JC Hamilton filed 25 June 2014, paragraphs 12 and 15, Exhibit JCH-01 p 351.
Caveator details
Full name: Jeff Hamilton
Company name: Cape Lambert Resources Ltd
Caveat details"Right or interest: The nature of the right or interest claimed by the caveator, Australis Exploration Pty Ltd ACN 125 939 291 (Australis) is the right to explore for and mine phosphate on the tenements. These rights were granted by the holder of the tenements CST Minerals Lady Annie Pty Ltd (CSTMLA) pursuant to: 1. a share sale agreement (SSA) dated 11 March 2010 between Cape Lambert Resources Ltd ACN 095 047 920 (Cape Lambert), CST Minerals Pty Ltd ACN 142 485 470 and its parent company, China Sci-Tech Holdings Limited, for the sale of 100% of the shares in CSTMLA (then known as Cape Lambert Lady Annie Mine Exploration Pty Ltd), see in particular the definition of ‘Phosphate Rights Agreement’; and 2. schedule 17 of the SSA which set out a Phosphate Rights Deed (the Deed) which the parties would enter into, being CSTMLA (as Transferor) and Australis (as Transferee) (Australis), which is a wholly owned subsidiary of Cape Lambert, see in particular clause 12 of the Deed which contains an acknowledgement"
The same information is recorded in respect of the caveat lodged on 13 June 2014[7], although it appears there was additional information in that caveat.
[7]Affidavit of JC Hamilton, filed 25 June 2014, paragraphs 14 and 15, Exhibit JCH-02 p 355.
The respondent submitted that the applicant had not established a prima facie case because Australis did not have an interest, within the meaning of s 318AAZG, as claimed by Cape Lambert as caveator. In each caveat, the entity claiming the interest was Cape Lambert and not the applicant in this proceeding, Australis. The mere fact that Australis is a wholly owned subsidiary of Cape Lambert did not assist Australis.
The applicant submitted that the caveat must be read as a whole. The details under the heading "Caveator" were ambiguous and, properly construed, the caveator was the applicant. The register established under the Act had been corrected to make it clear that the caveator was Australis, not Cape Lambert[8].
[8]See Affidavit of Aaron Alcock, filed 17 July 2014, Exhibit AMA-01, p 40.
I have accepted that the caveator is Australis, the applicant in these proceedings. It appears from the notification of the lodgement of the caveat generated by the Department of Natural Resources and Mines that when the caveat was lodged online in the Department of Natural Resources and Mines, the "Caveator Details" were stated to be "Jeff Hamilton, Cape Lambert Resources Ltd". However, in the "Caveat details", Australis Exploration Pty Ltd is said to be the caveator. The two sections of the caveat notification are, on their face, inconsistent but when the document is read as a whole, it appears to me that the caveator is Australis, that being the entity claiming a right or interest in the tenements. Further, the evidence is that the register has been corrected to show Australis as the caveator.
It may be observed from the details of the caveats set out above that the applicant’s interest in the mining tenements is said to arise from the SSA, including in particular the definition of "phosphate rights agreement", and schedule 17 of the SSA which was a phosphate rights deed which the parties would enter into. Consequently, the respondent submitted that all that is needed to determine the existence of the prima facie case is the SSA and the draft phosphate rights deed in schedule 17 to the SSA.
It appears to be the thrust of those submissions that the question of whether there is a prima facie case as to the existence of a contract for the grant by Lady Annie to Australis of the right to explore and mine phosphate should be limited to an examination of the documents referred to in the caveat (the SSA and Schedule 17), and not the wider grounds relied on by the applicant.
I consider that it is sufficient for the purposes of s 318AAZF(1)(e) that the caveats state the nature of the right or interest claimed by the caveator and that it is unnecessary to state the grounds on which those rights are claimed. There is no requirement in the subsection that the grounds of objection be stated in a caveat. The right or interest claimed by the caveator in each caveat is the right to explore for and mine phosphate on the tenements. In my opinion that is a sufficient description of the rights or interests claimed. While the caveats go on to state grounds on which those rights are claimed, that is unnecessary for the purposes of the validity of a caveat. Further, I do not consider that the effect of including those grounds in the caveats is to limit the applicant to those grounds in the case which it may subsequently make in support of its claim to the right or interest in the mining tenements. Thus I consider that the applicant may, in its originating application and subsequent submissions, rely on additional grounds in support of its claim.
My conclusion that the applicant’s interests are sufficiently described in the caveat means that it is unnecessary for me to deal with a further general application, filed with leave by the applicant at the hearing of these applications, for leave to file another caveat in the name of Australis.
The Applicant’s evidence and oral submissions
The applicant submitted that in February/March 2010 and as part of the entry into the SSA, an oral agreement (the agreement) was reached between Cape Lambert on its own behalf and on behalf of Australis and Lady Annie (then still owned and controlled by Cape Lambert) and CST and CSTM, the effect of which was that:
(a) the phosphate rights then owned by Lady Annie would be excluded from the sale of the copper project; and
(b) Lady Annie would transfer to Australis all of its phosphate rights after the sale of the copper project was completed.
The applicant said that the existence of the agreement is deposed to by Mr Jason Bontempo, Mr Anthony Sage, and Mr Jefferey Hamilton.
Mr Bentempo said, in an affidavit filed on 10 July 2014, that in early 2010 he was a consultant engaged by Cape Lambert and acted on behalf of Cape Lambert in negotiations between Cape Lambert and CST for the sale of the Lady Annie project, although he did not have authority to bind Cape Lambert or make decisions on its behalf. Any deal was ultimately subject to approval by the Cape Lambert board.
From his association with Cape Lambert, Mr Bontempo said that he was aware that the project was to be sold to Q Copper Australia Limited (Q Copper) via an initial public offering in 2009. That offering was withdrawn in early 2010. One of the conditions of the proposed sale of the project to Q Copper was that the sale would not include the right to explore for and mine phosphate on the tenements.
Between about 18 February 2010 and 22 February 2010 Mr Bontempo had numerous telephone conversations with Mr Joe Ariti from Cape Lambert, Mr Simon Price from Azure Capital, Mr Richard Hui from CST and Mr Owen Hegarty from CST regarding the terms on which CST would acquire the project. Mr Bontempo’s recollections are that:
(a) the negotiations proceeded largely on the same basis as the Q Copper initial public offering;
(b) on behalf of Cape Lambert, Mr Ariti and Mr Bontempo made it clear that the sale of the project would exclude the phosphate rights. Mr Ariti was the general manager of Cape Lambert at the time;
(c) CST agreed that the phosphate rights would be excluded from the sale of the project;
(d) it was agreed that the phosphate rights would be granted back to Cape Lambert by Lady Annie;
(e) there were no specific discussions about the parties entering into a deed regarding the phosphate rights but Mr Bontempo expected that the parties would subsequently agree the details by which the phosphate rights would be exercised;
(f) it was agreed that the phosphate rights would be dealt with separately from the rest of the sale rather than included in the relevant provisions in the SSA;
(g) it was agreed that the consideration paid by CST for the Lady Annie project would be $130,000,000 paid in cash and a further $5,000,000 to be paid on the satisfaction of certain milestones and that that purchase price did not include the phosphate rights;
(h) there was no further discussion about the phosphate rights; and
(i) at no stage did anyone from Cape Lambert or CST suggest that the granting of the phosphate rights would be subject to or conditional upon entry into a more formal agreement. To the contrary, at no stage did anyone from CST indicate that they expected to keep the phosphate rights – it was always agreed and the discussions always proceeded on the basis that the phosphate rights would be excluded from the sale.
Mr Sage's second affidavit was also filed on 10 July 2014. Mr Sage is a director and the chairman of Cape Lambert and Australis.
Mr Sage’s evidence is generally consistent with that of Mr Bontempo. In addition, Mr Sage said that he agreed to the exclusion of the phosphate rights from the deal and, on behalf of Cape Lambert, he decided to enter into the deal with CST on the basis that the phosphate rights would be granted back to Australis. The board approved the deal with CST on that basis, he said.
Mr Sage also said that he had attended a conference in Toronto in 2010 and, specifically, a dinner with Mr Hui[9], Mr Price and Mr Bontempo. Mr Sage said that he spoke to Mr Hui about the deal for the sale of the project to CST at that dinner. While Mr Sage cannot recall the exact words used, he recalled that Mr Hui said that CST was not comfortable with the fact that the phosphate rights were to be granted back to Cape Lambert but recognised that it was a condition of the deal for the sale of the project. It is Mr Sage’s recollection that the SSA was executed several days after that dinner.
[9]Mr Hui is an executive director of CST Mining Group Ltd.
Mr Hamilton is a manager of development projects employed by Cape Lambert. In his affidavit filed on 25 June 2014, Mr Hamilton deposed to the proposed initial public offering of Q Copper in 2009. He was involved in the Q Copper initial public offering which was withdrawn in 2010 due to adverse market conditions. Mr Hamilton said that he was also involved in the sale of the project to CST including in the negotiations with CST regarding the terms of the SSA.
Mr Hamilton said that it was initially planned that Q Copper would purchase the project from Cape Lambert Lady Annie. However in late 2009 Cape Lambert decided to change the structure of the transaction so that Q Copper would instead acquire the project by purchasing all of the shares in Cape Lambert Lady Annie. The proposed share sale specifically excluded the phosphate rights, which would be retained by Cape Lambert (through Australis). Paragraph (e) of the ASX announcement dated 11 November 2009 entitled "Update in relation to Lady Annie initial public offering – shareholder approval" provided that:
"(Excluded Assets): the right to mine phosphate on the tenements which comprise the Lady Annie project ("Tenements") (other than some excluded tenements) and all other assets of CLLAE other than the Lady Annie Project, shall be assigned from CLLAE to another entity prior to the Settlement Date ("Excluded Assets")".[10]
[10]Page 361, Exhibits to Affidavit of Mr JC Hamilton, filed 25 June 2014.
Mr Hamilton said that he had been informed by Mr Ariti that from the outset of the negotiations it was agreed that the phosphate rights would be retained by Cape Lambert with the phosphate rights being granted to Australis (consistent with the proposed share sale to Q Copper). As a result, the negotiations always proceeded on the basis that Cape Lambert was to retain the phosphate rights. No one indicated to Mr Hamilton that CST was interested in purchasing the phosphate rights. The agreed purchase price of $135,000,000 was negotiated on the basis that Cape Lambert (through Australis) was to retain the phosphate rights and the purchase price would be exclusive of the phosphate rights.
Mr Hamilton also said that the known phosphate deposit on the tenements is in a separate area from the known copper deposits so that it is possible for Lady Annie to exercise its right to explore for and mine copper and other minerals on the tenements, and for Cape Lambert, through Australis, to exercise the phosphate rights separately, with neither party disrupting or interfering with the other party’s rights. Mr Hamilton believed that, had there been any discussion that the phosphate rights may not be granted to Cape Lambert, Tony Sage would have considered the value of those rights to Cape Lambert and would have sought to renegotiate the price to be paid under the SSA, or other appropriate amendments to the SSA, to reflect the fact that the phosphate rights were not being granted. Mr Hamilton believed that CST had the same understanding.
The SSA was executed on 11 March 2010. Clause 1 contains the definitions and interpretation applicable to the SSA. "Phosphate rights agreement" is defined as:
"an agreement under which the Company will transfer all of its rights to explore for and mine phosphate on the Tenements to Australis Exploration Pty Ltd and the parties agree how to manage their competing interests on the Tenements, which must be in a form agreed between the Purchaser and the Vendor, a first draft of which is set out in Schedule 17 but which is at the Execution Date still subject to consideration by the parties, in particular as to representations and warranties, pre-emptive rights and co-existence rights. "
Clause 6.2(b) provides that “Nothing in this agreement restricts the Company or the Vendor from entering into the Phosphate Rights Agreement.”
Completion of the SSA was due to occur on 31 May 2010 (the completion date). On 25 May 2010, Mr Hamilton said that he received an email from Jason Bontempo to a CST executive, Owen Hegarty, noting:
"Phosphate rights agreement: While not a headline issue, our preference is to resolve the Phosphate Rights Deed before completion. We need comments from CST and then focus on this Deed over the next days to finalise it. "[11]
[11]Page 573 Exhibits to Affidavit of Mr JC Hamilton filed 25 June 2014.
On 26 May 2010 Mr Hamilton received a revised draft of the phosphate rights deed dated 25 May 2010 which had been amended by CST’s lawyers, Norton Rose Australia.
On the completion date, Mr Hamilton said, Cape Lambert entered into an agreement (side letter) with CST and CSTM in respect of certain matters to facilitate completion of the SSA. Clause 4 of the side letter stated:
"The Vendor and the Purchaser agree that they will negotiate in good faith to agree a Phosphate Rights Agreement within 3 months after Completion. Once negotiated and agreed, the Purchaser will procure the Company executes the agreement. The Vendor holds the benefit of this clause 4 on trust for Australis Exploration Pty Ltd."[12]
[12]Page 617 Exhibits to Affidavit of Mr JC Hamilton filed 25 June 2014.
Mr Hamilton deposed at some length to the course of negotiations concerning the proposed phosphate rights deed, following completion of the SSA. Those negotiations were in train from 30 June 2010 until September 2013 and included an exchange of drafts numbered 3 to 8 of the phosphate rights deed.
On 19 November 2013, Mr Hamilton said, he received a copy of a letter from Mr Hui to Ms Tolcon (legal counsel and company secretary of Cape Lambert) to the effect that under the side letter, CST was only required to negotiate in good faith for three months. The letter also said that Cape Lambert’s website contained misleading references to Australis holding the phosphate rights. Various further emails were exchanged between various representatives of both companies until 23 January 2014. Mr Hamilton said that he had received no further correspondence from CST regarding the agreement or the phosphate rights deed since 23 January 2014.
The caveats were lodged on 7 April and 13 June 2014. It appears that the trigger for their lodgement was an article which appeared on 7 April 2014 in the Australian Financial Review entitled "UBS to sell Lady Annie mine", although that article was subsequently retracted at the insistence of the respondent. Mr Hamilton said that, other than in the first and second caveats, Australis’ phosphate rights are not recorded on the register. If, therefore, CST were allowed to proceed with the sale of the project without first recognizing Australis’ phosphate rights, Australis is likely to suffer significant loss and damage.
The applicant submitted that there is a sufficient likelihood that Australis will establish the agreement at trial to warrant the status quo being preserved.
First, the existence of the agreement is commercially likely given the following factors:
(a) The phosphate rights were excluded from the earlier negotiations with Q Copper in 2009 and 2010.
(b) CST was focused on becoming a copper producer and had stated before executing the SSA that the acquisition of Cape Lambert’s copper assets suited their strategy. To date Lady Annie under its new ownership has still not explored for phosphate.
(c) The consideration payable under the SSA was calculated on the basis that the phosphate rights were excluded. Mr Hui had not denied that this was the case. Indeed the price offered by CST in the indicative term sheet dated 17 February 2010 was AUD $150,000,000 but the price offered in the 21 February 2010 term sheet was AUD $135,000,000.
Second, Mr Bontempo had sworn that the agreement was made. Mr Sage confirmed that he and the board of Cape Lambert accepted the agreement. Mr Hamilton also confirmed the agreement in general terms. There is no obvious reason to doubt the truthfulness of these witnesses especially at an interlocutory stage. Mr Hui did not deny the telephone conversations with Mr Bontempo but Mr Hui simply said he did not expressly recall the conference telephone calls.
Third, the agreement, if a collateral agreement, is not inconsistent with the SSA. The definition of phosphate rights agreement commences "an agreement under which the company will transfer all of its rights to explore for and mine phosphate on the tenements". The words "will transfer" are definite and reflect the earlier agreement. What remained to be done was for the parties to settle upon the minutiae of the phosphate rights deed rather than agree the transfer itself. Specific matters were left for further agreement – representations and warranties, pre-emptive rights and co-existence rights.
Fourth, the agreement is a simple one and a certain agreement. More practical details were to be subsequently agreed. There is no or little difficulty in identifying the permits that allow exploration for phosphate that are owned by Lady Annie. Price is not an issue on the facts of the case. As to timing, the law will imply, if needed, a term that the transfer was to happen within a reasonable time after the completion of the SSA.
Fifth, Mr Sage had sworn that Mr Hui acknowledged at a dinner in Canada that the granting back of the phosphate rights was a condition of the deal for the sale of the project. Mr Hui said only that he cannot recall discussing the phosphate rights proposal at the dinner.
Finally, there are factual matters that need to be investigated and then resolved at trial. The evidence of Mr Bontempo, Mr Sage and Mr Hamilton was not speculative or mere assertion.
The Respondent's Submissions
The respondent submitted that the crucial question of whether there was a contract made for the grant by Lady Annie to Australis of the right to explore for and mine phosphate on the tenements listed in the caveats must be answered on an objective view of the SSA. No such agreement was formed because –
1. Lady Annie, the holder of the tenements, is not a party to the SSA and could not have granted to Australis, pursuant to that agreement, a right to explore for and mine phosphate on the tenements;
2. Upon a proper construction of the SSA that agreement does not confer any right upon Australis to explore for and mine phosphate on the tenements. The transaction the subject of the SSA was the sale by Cape Lambert and the purchase by CSTM of the shares in Lady Annie. There is no operative provision for the grant of any phosphate rights. There is no term which obliges any party to the SSA to enter into an agreement to grant the phosphate rights to Australis or to execute the Schedule 17 draft deed. There is no basis upon which Australis may seek specific performance against Lady Annie and there is no interest in a contract with Lady Annie which Australis could seek to protect by injunction.
There could be no immediately binding oral agreement. There was no evidence from which it could be concluded that there was an oral agreement as alleged by the applicant. At its highest there was an understanding that the parties were to negotiate further as to the terms upon which any phosphate rights would be granted. While it was accepted that a phosphate rights agreement was discussed by the parties, fundamental matters such as the identification of the tenements the subject of the alleged agreement had not been agreed. Nor was there any agreement as to how the parties would manage their competing interests in the tenements. It is when those issues were determined between the parties that the bundle of phosphate “rights” to be granted is identified. The “right” is defined by not only the benefits being provided by the grantor (Lady Annie) but also by the obligations imposed on the grantee (Australis).
In Australian Broadcasting Corporation v XIVTH Commonwealth Games Ltd[13] the High Court considered the question of when the parties intended to enter into a binding agreement. Gleeson CJ said[14] -
"In a case where a court is required to make a judgment concerning the intention of the parties in relation to what might broadly be described as a Masters v Cameron ((1954) 91 CLR 353) dispute, it will normally be of importance that the court have an understanding of the commercial context in which the dispute arises, and a most significant feature of that context will relate to the subject which the parties regard, or would ordinarily be expected to regard, as matters to be covered by their contract. … In many cases, … there is a need for evidence in one form or another as to what subjects would be regarded as requiring agreement between the parties. In this case the best evidence on that subject is to be found in the actual communications between the parties and, in particular, in the issues which they in fact addressed when they set about drafting their detailed conduct."
[13](1988) 18 NSWLR 540.
[14]At 548.
Accordingly, the respondent submitted, the written documents and communications should be examined to determine what subjects the parties considered required agreement. The applicant had alleged that the oral agreement was reached sometime before 21 February, which was prior to the date of the confidentiality and exclusivity deed (22 February 2010), the SSA and the side letter. When those written documents are examined it is apparent that their terms are inconsistent with the existence of the alleged oral agreement and also inconsistent with the terms of such an agreement. Also, the respondent said, the written agreements superseded any oral agreement.
The definition of "phosphate rights agreement" in the SSA contemplated a future agreement between the parties in that the definition says that the phosphate rights agreement is an agreement under which the company “will transfer” all of its rights etc, and the parties agree how to manage their competing interests in the tenements. The words used do not speak of any existing agreement but one in the future, to be in the form of a deed which was to be agreed.
The agreement was to be in a form agreed between the parties, a first draft of which was set out in Schedule 17, but the agreement was still the subject of consideration by the parties, in particular as to representations and warranties, pre-emptive rights and co-existence rights. The parties contemplated that the rights would only be granted upon the formal execution of a deed which was then in the form of a first draft.
The draft deed is a formal and detailed document prepared by lawyers. The complexities of granting any phosphate rights and the competing interests of the respective parties to the draft deed support the absence of an agreement intended to have legal effect until the deed was executed. It is the terms of the deed when executed that would define the nature, extent and limitations of the phosphate rights. This was a case where the execution of the further contract was a condition or term of the bargain and not a mere expression of the desire of the parties as to the manner in which a transaction already agreed will in fact go through. There was not a final consent of the parties such that no new term could be introduced in the final document[15].
[15]Sinclair, Scott & Company Limited v Naughton (1929) 43 CLR 30 at 316, 317.
The fact that the parties to the deed were different from the parties to the SSA also supported an intention that the deed be executed before there was an intention to form a binding contract.
Clause 24.5 of the SSA was also inconsistent with the existence of a prior oral contract, the respondent submitted. Clause 24.5 provides that ―
"This agreement shall constitute the sole understanding of the parties with respect to the subject matter and replaces all other agreements with respect thereto."
The SSA was amended by the side letter or, alternatively, there was a further agreement entered into between CST, CSTM and Cape Lambert in terms of the side letter. Australis and Lady Annie were not parties to this agreement.
Clause 4 of the side letter provides that the terms upon which the phosphate rights are to be granted are still the subject of negotiations between CSTM and Cape Lambert. That provision is contrary to the existence of any binding agreement even at the time of completion of the SSA.
It is also clear from this provision that there would be no binding agreement until Lady Annie had executed a written document recording the terms. CSTM and Cape Lambert were to undertake the negotiations and not Lady Annie. It was CSTM that would procure Lady Annie to execute the agreement upon conclusion of these negotiations.
The contemporaneous evidence establishes that there was no objective intention of Cape Lambert, CSTM and CST (or for that matter Australis and Lady Annie) to form a binding agreement prior to the execution on 22 February 2010 of the confidentiality and exclusivity deed, or thereafter. That is plain from the terms of the confidentiality and exclusivity deed. Only non binding indicative terms had been discussed with respect to a proposed transaction. There is no reference in the term sheet to the granting of phosphate rights. The exclusivity period was to enable CST and CSTM to evaluate the potential transaction and for Cape Lambert, CST and CSTM to negotiate and prepare any agreements.
Prior to completion of the SSA, neither CSTM nor CST were in control of Lady Annie and therefore could not have reached any agreement which could bind that company. At the time of the alleged oral agreement (about 21 February 2010) both Australis and Lady Annie were controlled by Cape Lambert. It would have been very easy for Australis and Lady Annie to make an agreement.
The terms of the alleged oral agreement are not identified, the parties and the rights are not identified. The terms are not those of the draft phosphate deed. Mr Hui has given uncontradicted evidence that he was not informed of the existence of that draft until early March 2010. The SSA and the side letter state that the document is only a draft and still the subject of negotiations.
The conduct of the parties after completion of the SSA was relevant to determining whether there was a concluded agreement: an email from Mr Bontempo (dated 25 May 2010) acknowledged that there was no phosphate rights agreement finalised; Draft 2 of the proposed deed showed that the list of tenements was not finalised; Draft 2 and subsequent drafts contained a note saying "CST to confirm tenement listing"; new clauses such as a guarantee and indemnity clause and a pre-emptive rights clause were inserted. These provisions were quite inconsistent with the existence of a concluded agreement.
There is affidavit evidence from Mr Bontempo, Mr Sage and Mr Hamilton that such an agreement exists. The respondent submitted, however, that specified parts of that evidence should not be admitted or, alternatively, not given any weight, on the grounds that ―
· sections of Mr Bontempo's evidence are irrelevant/conclusionary;
· sections of Mr Sage’s evidence are irrelevant/conclusionary, or are statements of Mr Sage's understanding and irrelevant; and
· sections of Mr Hamilton’s evidence are irrelevant opinions/conclusionary or irrelevant belief.
On that basis, the respondent said, there was no evidence from which it could be concluded that there was an oral agreement. The applicant had plenty of time to prepare its material and this was the best it could do. The evidence amounted to opinions and assertions that there was an agreement.
Consideration of whether prima facie case established
As set out above, the applicant contended that the agreement, pursuant to which the phosphate rights then owned by Lady Annie would be excluded from the sale and Lady Annie would transfer to Australis all of its phosphate rights after the sale of the copper project, was an oral agreement which was either a separate agreement (whether collateral or not) or an oral term of the SSA. There was evidence that the agreement was entered into between 18 and 22 February 2010[16].
[16] Affidavit of JA Bontempo filed 10 July 2014, paragraphs 9 and 10.
The respondent submitted that no such agreement can be found in the written terms of the SSA. That does not deal with the question of whether there is prima facie evidence that the oral agreement contended for was formed.
There is affidavit evidence that such an agreement was entered into. Mr Bontempo has sworn that an oral agreement was made and that the consideration paid by CST for the Lady Annie project did not include the phosphate rights. Mr Sage said that he decided to enter into the deal with CST on the basis that the phosphate rights were excluded. He also confirmed that he and the board of Cape Lambert accepted the agreement. Mr Hamilton has also confirmed the agreement. The respondent submitted, however, that parts of that evidence should not be admitted or given any weight.
I am not prepared to rule on the admissibility of this evidence or the weight to be given to it, at this stage of the proceedings, as it is not appropriate, on an interlocutory application, to conduct a preliminary trial of the action[17]. I consider that the dispute as to whether the evidence is admissible or to be given weight cannot properly be resolved before a final hearing when full consideration may be given to all the relevant evidence and submissions.
[17]Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] NSWLR 729 at 734, per Mahoney JA.
The respondent has not adduced any evidence directly challenging the affidavits of Mr Bontempo, Mr Sage and Mr Hamilton. Mr Hui's evidence was that he did not expressly recall any telephone conversations with Mr Bontempo. Mr Hui understood from conversations with Mr Simon Price of Azure Capital Pty Ltd (a financial advisory firm based in Perth) that the key terms of the proposed transactions were to be recorded in the indicative terms sheet.
However the respondent submitted that other factors and evidence point to the conclusion that a final agreement as to the phosphate rights had not been reached. The terms of the SSA, the side letter and the confidentiality and exclusivity deed were inconsistent with the existence and terms of the alleged oral contract.
The definition of "phosphate rights agreement" in the SSA contemplated a future agreement under which the company "will transfer" its rights etc, the respondent said.
While that definition is capable of the construction put on it by the respondent, I also consider that the appellant has at least established an arguable case that, in the light of the evidence of Mr Bontempo, Mr Sage and Mr Hamilton, the definition may be construed in the way advocated by the applicant. That is, in referring to “an agreement under which the company will transfer all of its rights”, the definition is identifying an existing agreement pursuant to which the company will transfer all of its rights. On that basis the definition contemplates that there is an existing agreement to transfer the phosphate rights but that there are other terms to be negotiated to deal with the management of the competing interests on the tenements, representations and warranties, pre-emptive rights and co-existence rights.
It does not necessarily follow from the absence of an agreement as to the management of competing interests on the tenements, representations and warranties that there is no oral agreement such as that alleged by the applicant. While those are matters of importance to the parties, I am not persuaded that the lack of agreement is such that the applicant's case does not have a likelihood of success, so that the caveats should be removed/not extended.
I consider that the evidence as to the identity of the tenements that are said to be the subject of the oral agreement is equivocal. There is evidence that there were changes to the list of tenements in Draft 1 of the phosphate rights deed, effected by Draft 2. While those changes may point to uncertainty as to the tenements included in the deed, there is no evidence as to the reason for the changes.
On balance then I have come to the conclusion that the definition clause is not necessarily inconsistent with the terms of the alleged oral agreement.
I consider also that the terms of the side letter are not necessarily inconsistent with the terms of the alleged oral agreement. The side letter provides that Cape Lambert and CSTM agree that that they will negotiate in good faith to agree a phosphate rights agreement. The use of that term refers to a phosphate rights agreement as defined in the SSA. That being the case, the same conclusions may be drawn in respect of the effect of that clause in the side letter as I have drawn in respect of the effect of the definition clause in the SSA.
The respondent also submitted that it was clear from the terms of the confidentiality and exclusivity deed executed on 22 February 2010 that there was no objective intention to form a binding agreement prior to that date.
The confidentiality and exclusivity deed was entered into between Cape Lambert Resources Limited and China Sci-Tech Holdings Limited on 22 February 2010. It was preceded by an indicative term sheet dated 21 February 2010 entitled “Proposed Acquisition of Cape Lambert’s Interest in Lady Annie”. The proposed terms of the acquisition are identified briefly in the indicative term sheet. The confidentiality and exclusivity deed deals with the parties’ agreement on the terms of disclosure of confidential information to each other and acknowledges that Cape Lambert had agreed to negotiate exclusively with CST in connection with “the potential transaction” in the terms of this deed. The potential transaction is defined to mean “a potential transaction under which CST, or a wholly owned subsidiary of CST, would acquire all or part of Cape Lambert’s interest in the Lady Annie project or the related bodies corporate of Cape Lambert which own or have an interest in the Lady Annie project”.
I consider that it is arguable that the terms of the confidentiality and exclusivity deed do not exclude the existence of an oral agreement such as that alleged by the applicant. The confidentiality and exclusivity deed, by its own terms, is dealing with the acquisition of Cape Lambert’s interest in Lady Annie. It says nothing about any agreement between Lady Annie and Australis as to the transfer of phosphate rights to Australis. The terms of the confidentiality and exclusivity deed are not incompatible with the existence of such an oral agreement.
The respondent also submitted that, given the complexities associated with the grant of the phosphate rights and the management of the competing interests in the tenements, this was a case where there was to be no binding agreement until the phosphate rights deed was executed.
In my opinion, that is not the only possible construction that may be put upon the documentation and conduct of the parties. The evidence indicates that the parties did intend to enter into a formal agreement as set out in the side letter, and the evidence also is that the parties were in negotiations from the completion of the SSA in May 2010 until January 2014 with a view to executing such an agreement. However, I am not persuaded that the evidence, as it currently stands, shows that the parties intended that there was to be no binding agreement as to the transfer of the phosphate rights until outstanding terms were agreed and the formal document was executed.
Similarly, I consider that the question of when Cape Lambert and CSTM intended to be bound, in relation to the transfer of Cape Lambert’s interest in Lady Annie, is not necessarily evidence of the parties’ intentions as to whether they intended to or had entered into an oral agreement relating to the transfer of the phosphate rights to Australis.
The respondent also submitted that the conduct of the parties after completion of the SSA was relevant to determining whether there was a concluded agreement.
All of the evidence adduced at the hearing of these applications indicates that the parties had not entered into a concluded phosphate rights agreement as defined in the SSA. It is accepted that negotiations continued over a period of some three and a half years and final agreement was not reached on a number of issues. I have dealt with the equivocality of the evidence as to the tenement identification. As to the other matters, my conclusion is the same as that reached above. The lack of agreement on these items does not preclude the existence of an oral agreement such as that alleged by the applicant.
Accordingly, I am satisfied that the applicant has made out a prima facie case that Cape Lambert on its own behalf and on behalf of Australis and Lady Annie (then still owned and controlled by Cape Lambert) entered into an oral contract with CST and CSTM the effect of which was that the phosphate rights would be excluded from the sale of the copper project and Lady Annie would transfer to Australis all of its phosphate rights. That is, I am satisfied that, if the evidence remains as it is, the applicant has shown a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial.
Balance of convenience
The applicant submitted that the following factors strongly favour the preservation of the status quo.
First, CST does not depose to there being an extant contract or dealing threatened by the caveats or any particular prejudice caused by the caveats.
Second, Cape Lambert has given the usual undertaking as to damages.
Third, the phosphate rights are unique due to the quantity and quality of the phosphate. Accordingly, damages will not be an adequate remedy. The rights are undoubtedly valuable.
Fourth, if CST sells the phosphate rights it will leave Australis with a claim for damages against CST which will be very difficult if not impossible to quantify. Damages therefore will not be an adequate remedy.
Fifth, if CST sells its assets (and thereby loses its revenue stream) it is not clear that it would be able to satisfy any claim for damages made by Australis.
Sixth, the presence of the caveats does not interfere with the daily copper mining operations of CST.
Seventh, the parties are represented by lawyers and counsel. There is no reason to think that a trial cannot be heard expeditiously.
The respondent submitted that the balance of convenience does not favour the maintenance of the caveats. Although there is no sale imminent, the registered owner has a legitimate interest in holding unencumbered interests in the tenements, particularly where the alleged oral agreement was made over four years ago. Lady Annie has operational assets in connection with the mine in Australia and has annual revenue in excess of $100,000,000. No evidence has been adduced by Australis of the existence of any economically recoverable phosphate deposits. The case of Australis is weak. It is unlikely that a Court would grant the relief sought in the originating application against Lady Annie by way of specific performance or an injunction.
For the reasons put forward by the applicant, I accept that the balance of convenience favours the maintenance of the caveats. Australis has given the usual undertaking as to damages. While the effect of the caveat is to prevent CST from dealing with the tenements, CST has made no submission nor adduced any evidence to suggest that that bar is of any further disadvantage to the company. There is no sale imminent. The applicant, on the other hand, has no other method of protecting what it asserts are its valuable phosphate rights. On the face of it, damages would not be an adequate remedy if CST were to dispose of the tenements without acknowledgement or recognition of the rights claimed by Australis.
Conclusions
It follows from my reasons set out above that Caveat No. 103861 and 105109 should remain in force until after the finalisation of the proceedings.
It also follows that the respondent’s application to remove Caveat 105109 is refused.
I will hear the parties as to the form of the orders and as to costs.
CAC MacDONALD
PRESIDENT OF THE LAND COURT
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