Barfuss v Altmann
[2008] NTCA 1
•12 November 2007
Barfuss & Ors v Altmann [2008] NTCA 1
PARTIES: BARFUSS, Uwe
BARFUSS CORPORATION PTY LTD
QUEENSLAND OPAL MINES PTY
LTDv ALTMANN, John Charles Maxwell TITLE OF COURT: COURT OF APPEAL OF THE
NORTHERN TERRITORYJURISDICTION: CIVIL APPEAL FROM THE SUPREME
COURT EXERCISING TERRITORY
JURISDICTIONFILE NO: AP 12 of 2007 (20724408) PUBLISHED: 15 January 2008 DELIVERED: 12 November 2007 HEARING DATES: 12 November 2007 JUDGMENT OF: MARTIN (BR) CJ, RILEY AND
SOUTHWOOD JJAPPEAL FROM: ANGEL J (18 October 2007) CATCHWORDS: APPEAL - Against interlocutory injunction – joint venture agreement –
mining tenements - a serious question to be tried - balance of convenience -
adequacy of undertaking as to damages - whether equitable rights
sufficiently identified - whether sufficient likelihood of success - appealdismissed.
Mining Act 1980 (NT) s 26, s 28 and s 173
Semple v Williams (1990) 156 LSJS 40 applied.
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001)
208 CLR 199; Australian Broadcasting Corporation v O’Neill (2006) 227
CLR 57, followed.
Barclays Bank v Quistclose Investments [1970] AC 567; Barneys Blu-Crete
v AWA (1973) 43 FLR 463; Cohen v Cohen (1929) 42 CLR 91; Daly v
Sydney Stock Exchange (1986) 160 CLR 371; Henry v Hammond [1913] 2
KB 515; Jennings v Crown Prosecutor Service [2005] 4 All ER 391; In re
Kayford Ltd (in liq) [1975] WLR 279; Peach v Bird (2006) 17 NTLR 230;
Walker v Corboy (1990) 19 NSWLR 382; Thomas A Edison Ltd v Bullock
(1913) 15 CLR 679; Thomas A Edison v Bullock (1912) 15 CLR 697; Toovey
v Milne (1819) 2 B & Ald 683; 106 ER 514, referred to.REPRESENTATION:
Counsel:
Appellant: C Gunst QC and C Ford Respondent: J Kelly Solicitors:
Appellant: Cridlands Respondent: Minter Ellison Judgment category classification: B
Judgment ID Number: Sou0801 Number of pages: 47 IN THE COURT OF APPEAL
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWINBarfuss & Ors v Altmann [2008] NTCA 1
No AP 12 of 2007 (2074408)
BETWEEN:
UWE BARFUSS
First Appellant
BARFUSS CORPORATION PTY LTD
Second Appellant
QUEENSLAND OPAL MINES PTY LTD
Third Appellant
AND:
JOHN CHARLES MAXWELL
ALTMANN
Respondent
CORAM: MARTIN (BR) CJ, RILEY AND SOUTHWOOD JJ REASONS FOR JUDGMENT
(Delivered 12 November 2007)
(Published 15 January 2008)
MARTIN (BR) CJ:
The appellants appealed with leave against the decision of Angel J to grant an interlocutory injunction. At the conclusion of submissions the Court dismissed the appeal and indicated that reasons would be published on a subsequent occasion.
I agree with the reasons of Southwood J and add the following brief observations concerning the complaint that the learned Judge ignored evidence and submissions on a number of topics.
| [3] | In support of the submission that the Judge overlooked a number of relevant matters, counsel relied upon the absence from the reasons of the Judge of mention of particular topics. Counsel referred to the appellants’ submissions as to the likely damages should an injunction be granted and the “worthless and illusory” nature of the undertaking as to damages. Reference was also made to the greater relief sought in the injunction than any final relief sought in the substantive proceedings and to non-disclosure of material facts during the previous ex parte application for an interim injunction. These issues were the subject of separate headings in the appellants’ written outline of submissions which were provided to the Judge. |
It is correct that Angel J did not specifically mention these matters in his reasons. However, it does not necessarily follow that his Honour overlooked or ignored such issues.
Given the circumstances in which the application came before the Judge and the nature of the injunctive relief sought, in my view his Honour acted appropriately in dealing with the matter expeditiously and in giving extempore reasons. In these circumstances it is inappropriate to subject his Honour’s reasons to the same critical scrutiny that would be appropriate had his Honour reserved judgment and subsequently delivered written reasons.
| [6] | The adequacy of reasons for decision must be determined according to the particular circumstances of each case. As Heydon J observed in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at [185], “speed” in delivering a judgment can come at a “necessary and reasonable price”. His Honour noted that reasons delivered expeditiously and under pressure of time “ought to receive a more benevolent construction, if that is reasonably available,” than a reserve judgment produced after significant time for reflection. |
Speaking generally in my opinion the proper approach to extempore reasons was accurately stated by Olsson J in Semple v Williams (1990) 156 LSJS 40 at [40]:
“It is necessary to take a broad view of (extempore reasons) and ascertain the essential thrust of the reasoning processes applied, without being unduly critical of the precise modes of expression used
or according them a degree of definitiveness which was never
intended.”
| [8] | The observations of Olsson J were approved by the Court of Appeal in Peach v Bird (2006) 17 NTLR 230. Although those observations were made in the context of decisions by Magistrates sitting in busy courts in which the workload necessarily requires that Magistrates frequently give brief oral extempore reasons without significant opportunity for reflection or preparation, they are nevertheless equally applicable when extempore reasons are given in circumstances such as those presented to the Judge. |
In my view there is no basis for concluding that the Judge overlooked the issues raised by the appellants in their written and oral submissions. Read in their entirety, the reasons demonstrate that his Honour obviously had in mind the critical issues, including potential losses, when he noted that the trial could take place in February 2008.
As the reasons of Southwood J well demonstrate, the material before the Judge provided an ample basis for his Honour’s conclusion that there was a serious issue to be tried. Given that the trial will take place in February 2008, the evidence as to potential losses of many millions of dollars amounted to no more than mere self serving assertions which, on the material before the Judge, lacked any credible basis for a conclusion that such losses were a realistic possibility.
RILEY J:
[11] I agree with the reasons of Southwood J.
SOUTHWOOD J:
Introduction
On 12 November 2007 the Court of Appeal dismissed the appellants’ appeal against an interlocutory injunction granted by Angel J on 18 October 2007. When the appeal was dismissed the Court stated that the Reasons for Judgment of the members of the Court would be published at a later date. Following are my Reasons for Judgment.
| [13] | The interlocutory injunction, as extended on 2 November 2007, restrains the appellants until further order from withdrawing, disposing of or in any way dealing with money held in the third appellant’s AUD and USD accounts with the Westpac Banking Corporation (the Westpac Bank), and in a third bank account with the Bendigo Bank. The purpose of the interlocutory injunction is to preserve the balance of the sum of USD$850,000 (the $850,000), which is held in the above accounts, pending the determination of the respondent’s substantive claims against the appellants. |
The respondent transferred the $850,000 into one of the third appellant’s AUD account on or about 30 April 2007. The respondent says the $850,000 is held by the appellants on trust as a financial reserve for the respondent. It is common ground that the money remaining in the third appellant’s bank accounts is money that is part of the $850,000 that was paid into the third appellant’s AUD account by the respondent.
The pleadings
The interlocutory injunction was obtained by summons on an Originating Motion filed on 11 September 2007. Relevantly, the endorsement on the Originating Motion pleads as follows:
“The plaintiffs’ claims arise out of:
1. a joint venture agreement dated 1 December 2001 between the plaintiff and the first and second defendants (“the Joint Venture Agreement”);
2. approximately US $2.5 million paid by the plaintiff into the third defendant's bank account … with Westpac Banking Corporation at … (“the Account”) for the purposes of the joint venture, which money was held on trust for the plaintiff and was only to be used for the purposes expressly authorised by the Joint Venture Agreement (“the Trust Money”);
3. $850,000 (being part of the $2.5 million referred to in 2) paid by the plaintiff into the Account as a financial reserve, to demonstrate to the Department of Primary Industry, Fisheries and Mines that the joint venture had financial viability, for the purpose of the renewal of the exploration licences, and on condition that it not be expended;
…
AND the plaintiff claims:
(a)
a declaration that the Trust Money is held in trust by the third defendant for the plaintiff;
… (d)
an order that the first and third defendants account to the plaintiff for the Trust Money paid by the plaintiff into the Account; and
(e) costs.”
The issues
| [16] | There were three principal questions in the Appeal. First, was there a serious question to be tried as to whether the third appellant held the sum of $850,000 on trust for the respondent as a financial reserve? Secondly, did the judge at first instance err in finding that the balance of convenience was in favour of the respondent? Thirdly, did the judge at first instance err by failing to require the respondent to give an adequate undertaking as to damages? |
The law
| [17] | The principles applicable to the granting of an interlocutory injunction have been restated by the High Court in two recent cases. First, in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 the majority of the High Court, Gleeson CJ, Gaudron, Gummow and Hayne JJ, stated that where an interlocutory injunction is sought it is necessary to identify the legal or equitable rights which are to be determined at the trial and in respect of which final relief is sought. The final relief need not be injunctive in nature. |
[18] Secondly, in Australian Broadcasting Corporation v O’Neill (supra) Gummow and Hayne JJ, who gave the principal judgment of the Court, stated that:
“[65] The relevant principles in Australia [as to the obtaining of an
interlocutory injunction] 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 totwo 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 (emphasis added). 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.’
(Emphasis added)
..…
[67] Various views have been expressed and assumptions made
respecting the relationship between the judgment of this Court in
Beecham and the speech of Lord Diplock in the subsequent decision,
American Cyanamid Co v Ethicon Ltd. It should be noted that both
were cases of patent infringement and the outcome on each appeal
was the grant of an interlocutory injunction to restrain infringement.
Each of the judgments appealed from had placed too high the bar forthe obtaining of interlocutory injunctive relief.
[68] Lord Diplock was at pains to dispel the notion, which apparently
had persuaded the Court of Appeal to refuse interlocutory relief, that
to establish a prima face case of infringement it was necessary for
the plaintiff to demonstrate more than a 50 per cent chance ofultimate success. Thus Lord Diplock remarked:
‘The purpose sought to be achieved by giving to the court
discretion to grant such injunctions would be stultified if the
discretion were clogged by a technical rule forbidding its
exercise if upon that incomplete untested evidence the court
evaluated the chances of the plaintiff's ultimate success in the
action at 50 per cent or less, but permitting its exercise if thecourt evaluated his chances at more than 50 per cent.’
[69] In Beecham, the primary judge, McTiernan J, had refused
interlocutory relief on the footing that, while he could not dismiss
the possibility that the defendant might not fail at trial, the plaintiff
had not made out a strong enough case on the question of
infringement. Hence the statement by Kitto J in the course of
argument in the Full Court that it was not necessary for the plaintiff
to show that it was more probable than not that the plaintiff wouldsucceed at trial.
[70] When Beecham and American Cyanamid are read with an
understanding of the issues for determination and an appreciation of
the similarity in outcome, much of the assumed disparity in principle
between them loses its force. There is then no objection to the use of
the phrase "serious question" if it is understood as conveying the
notion that the seriousness of the question, like the strength of the
probability referred to in Beecham, depends upon the considerations
emphasised in Beecham.[71] However, a difference between this Court in Beecham and the
House of Lords in American Cyanamid lies in the apparent statement
by Lord Diplock that provided the court is satisfied that the
plaintiff's claim is not frivolous or vexatious, then there will be a
serious question to be tried and this will be sufficient. The critical
statement by his Lordship is "[t]he court no doubt must be satisfied
that the claim is not frivolous or vexatious; in other words, that there
is a serious question to be tried". That was followed by a proposition
which appears to reverse matters of onus:‘So unless the material available to the court at the hearing of the application for an interlocutory injunction fails to disclose that the plaintiff has any real prospect of succeeding in his
claim for a permanent injunction at the trial, the court should go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought.’ (Emphasis added.)
Those statements do not accord with the doctrine in this Court as established by Beecham and should not be followed. They obscure the governing consideration that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought. (Emphasis added.)
[72] The second of these matters, the reference to practical
consequences, is illustrated by the particular considerations which
arise where the grant or refusal of an interlocutory injunction in
effect would dispose of the action finally in favour of whichever
party succeeded on that application. …”
The relevant principles may be summarised as follows. The plaintiff must identify the legal or equitable rights which are to be determined at the trial and in respect of which final relief is sought and he must show that there is a sufficient likelihood of success to justify in the circumstances of the
particular case the preservation of the status quo pending trial. The requisite strength of the probability of ultimate success that must be demonstrated depends upon the nature of the rights asserted and the practical consequences likely to flow from the orders sought.
The background to the application for the interlocutory injunction
The first appellant and his wife are Australian citizens. They own all of the shares in the second and third appellants. The first appellant is a director of the second and third appellants. He controls and manages all of the business of the second and third appellants.
The respondent is a citizen of the United States of America.
In the mid 1990s the first appellant, on behalf of the second appellant, applied for a number of mining tenements in the Northern Territory of Australia including an exploration licence, and mineral claims over a ruby
mine at Harts Range. The area of land applied for by the first appellant is
located about 130 to 250 kilometres North East of Alice Springs. On
10 July 1996 the second appellant was granted exploration licence 9434 for
one year. The term of exploration licence 9434 was extended for a number
of years. The exploration licence expired on 9 July 2001. On 21 June 2001
the second appellant was granted mineral claims southern 235 to 244
inclusive. The ruby mine is located within the boundaries of these mineral
claims. The second appellant acquired the mineral claims and exploration
licence 9434 so that the first and third appellants could mine for rubies and
explore for gem stones and other mineral resources.
On 1 December 2001 the respondent, as trustee of the Altmann Living Trust and the first and second appellants, entered into the Australia Mining Agreement which is a joint venture agreement between the respondent and the first and second appellants (the joint venture agreement). The joint venture agreement was varied by a Deed of Variation made on 2 February 2002. The joint venture was formed so that the parties could conduct exploration and mining activities within the boundaries of exploration licence 9434. The parties were particularly interested in finding and, if commercial deposits were found, mining vermiculite and garnet sands. Under the terms of the joint venture agreement, the respondent was to provide the funds to finance the exploration and mining, and the first and second appellants were to provide the mining tenements and undertake the exploration work.
The purpose and structure of the joint venture is conveniently summarised in the “Introduction” to the joint venture agreement, as varied, which states as follows:
“1. Barfuss Corporation presently holds a mining exploration
licence for an area of 42 square kilometres located at Harts
Range Northern Territory Australia, Licence number 9434
(hereinafter the "Exploration Site"), which was due to expire
on July 9, 2001 (hereinafter the "Licence"). A copy of this
Licence and the Exploration Site are attached hereto as Exhibit
"A" and incorporated herein by reference.2.
Under the terms of the Licence, Barfuss Corporation must expend 50,000 Australian dollars per year in order to preserve the Licence. Altmann approached Barfuss Corporation with a request to peg the Exploration Site on the basis of there being no other interested parties in a position to exploit the Exploration Site.
3.
The Licence allows the parties to apply for leases to mine the Exploration Site by staking out claims to certain mineral resources within the Exploration Site.
4.
Historical data suggests that possible mineral resources within the Exploration Site may have commercial value. Barfuss and Altmann agree to join together with a view to considering the potential of the Exploration Site. These mineral resources may
include diamonds (if located), vermiculite, and garnet mineral
sand. Altmann’s investment is subject to Foreign Investment
Review Board approval and it is understood that under the
rules of the Foreign Investment Review Board Altmann cannot
be controlling a mining project of this type without Foreign
Investment Review Board approval.5. Altmann initially agreed to contribute the sum of
approximately $50,000 in United States dollars to carry out
exploration and to purchase certain equipment as described in
this Agreement and has in fact contributed the $160,000 in
good faith and to enable the project to continue and to obtain
additional geophysical data and testing necessary to determine
if the diamonds, vermiculite, garnet sands and other mineral
resources on the Exploration Site area have commercial value.
In consideration for the payment of the $160,000, the parties
have agreed that Altmann will be entitled to own all of the
equipment being purchased with the Altmann funds until a
decision to mine is made whereupon all plant will become the
property of the Australian Corporation but subject to the
repayment of Altmann's investment.6. Following completion of the additional work necessary to
determine if commercial deposits of vermiculite, diamonds and
garnet sands or other mineral resources exist on the
Exploration Site, Altmann will have the option but not the
obligation to contribute an additional $140,000 US if Altmann
determines at Altmann’s sole discretion that commercial
deposits of diamonds, vermiculite, garnet sands, or other
mineral resources exist on the Exploration Site.7. In consideration for Altmann's agreement to contribute cash of
$160,000 the parties have agreed that the Australian
Corporation will hold the Licence with 50% to Altmann and
50% to Barfuss and Altmann and Barfuss will each own 50% of
the rights to mine on the Exploration Site. It is agreed and
understood that Queensland Opal Mines Pty Ltd a company
associated with Barfuss shall have the right to be the mine
manager and to have responsibility for certain of the tasks to
be performed under this Agreement. It is intended by the
parties that the Australian Corporation and Queensland Opal
Mines Pty Ltd as Mine Manager shall upon the decision to
proceed with mining activities enter into an agreement with the
Australian Corporation to outline and define Queensland Opal
Mines Pty Ltd duties as Mine Manager.8.
Each of the parties have agreed to form an Australian Corporation and to transfer to the Australian Corporation all rights to the mineral resources, diamonds, vermiculite, garnets and any other minerals excluding all rubies and any gems and gem materials. Barfuss and Altmann will each own 50% of the stock of the Australian Corporation.
9.
If Altmann elects to contribute the additional $140,000 specified in this Agreement, the parties agree that Altmann's total contribution to the commercial development and mining of all mineral resources on the Exploration Site shall not exceed the total sum of $300,000 US.
10.
Altmann, Barfuss and Barfuss Corporation hereby agree that their relationship in this matter is one of a joint venture and not that of a partnership and where applicable in this agreement the words “Joint Venture” are used to describe the proposal accordingly.
As matters transpired, the second appellant did not hold exploration licence 9434 at the time that the joint venture agreement was executed. The exploration licence expired on 9 July 2001. The Australian Corporation was not formed or acquired by the parties to the joint venture agreement and no decision to mine has been made.
Despite the fact that exploration licence 9434 expired on 9 June 2001, the respondent deposited the following amounts of money (and possibly more) into the second appellant’s bank accounts:
Date Amount 1 May 2001 $ 2,000 16 May 2001 $10,000 7 June 2001 $20,000 20 June 2001 $30,000 4 September 2001 $30,000 12 September 2001 $40,000 11 October 2001 $30,000 20 December 2001 $10,990
12 April 2002 $50,000 9 October 2002 $20,000
24 December 2002 $20,000 29 April 2003 $25,000
10 June 2003 $30,000 9 September 2003 $25,000 5 November 2003 $24,000 20 January 2004 $10,000 25 March 2004 $20,000 11 May 2004 $95,000 9 November 2004 $50,000 16 March 2005 $150,000 25 May 2005 $130,000 22 November 2005 $350,000 21 April 2006 $365,000 22 November 2006 $250,000 2 May 2007 $850,000
USD$2,636,990
| [27] | After exploration licence 9434 expired, further mining tenements were applied for and obtained by the second appellant. On 6 January 2005 the second appellant applied for exploration licence 24552. On 6 June 2005 the second appellant applied for mineral claims 24748 to 24761 inclusive. On 26 August 2005 the second appellant was granted exploration licence 24522. On 21 November 2005 the second appellant applied for exploration licence 25063. On 13 April 2006 the second appellant applied for mineral claim 25308. On 20 June 2006 the second appellant applied for exploration licence 25430. On 23 October 2006 the second appellant applied for mineral claims 25309 and 25310. On 20 November 2006 the second appellant was granted exploration licence 25063. Exploration licence 25063 covers the same area of land that was covered by exploration licence 9434. On 7 December 2006 the second appellant applied for exploration licence 25764. On 14 March 2007 the second appellant was granted exploration licence 25430. The total area of the exploration site held by the second appellant is now approximately 772 square kilometres. |
| [28] | The respondent claims that each of the additional exploration licences now held by the second appellant, were secured with funds contributed by the respondent to the joint venture. However, because of the provisions of s 173 of the Mining Act and the fact that the joint venture agreement only provided that the respondent would own fifty percent of all of the right, title and interest granted by exploration licence 9434, the nature of the respondent’s interest in the mining tenements currently held by the second appellant, if any, is unclear. |
The above matters are set out merely by way of background. I have made no concluded findings about such matters.
The respondent’s evidence
The respondent’s evidence about how things progressed after the joint venture agreement was executed is contained in his affidavits sworn on 7 September 2007 and 17 October 2007. His evidence is as follows.
| [31] | The purpose of the joint venture was to undertake exploration and development work to determine whether there were commercial deposits of vermiculite, diamonds, garnet sands or other mineral resources within the area of exploration licence 9434 sufficient to warrant mining activities. For the purposes of the joint venture agreement a company to be known as “Harts Range Mining Corporation Pty Ltd” was to be formed by the parties and the shares in the corporation were to be held equally by the respondent and the first appellant. However, the corporation was never formed or acquired by the parties. |
| [32] | The respondent’s primary role in the joint venture has been to provide the funding that was required to undertake the exploration and development work on the exploration site. Since the joint venture agreement was executed, the respondent has provided all of the funding for the joint venture. The funds provided by the respondent have been used to purchase various pieces of mining plant and equipment, to retain and pay for work undertaken by geological consultants, to hire plant and equipment, to pay the costs associated with making applications for exploration licences and mineral claims, to pay for some of the costs of maintaining the tenements, to pay the fees that have been charged by the first appellant for undertaking the exploration and development work, and to pay for some of the first appellant’s personal costs and living expenses. |
| [33] | The following plant and equipment has been purchased with money provided by the respondent: a backhoe valued at approximately $30,000; a diamond rig valued at approximately USD$20,000; a Pleitz jig valued at approximately USD$4,000; a Drill Delta Base valued at $330,000; a new petrol Toyota Landcruiser valued at approximately $60,000; two stainless steel cargo storage containers valued at approximately $10,000 each; two explosive safes; a tandem utility trailer; two caravans valued at approximately $12,000 each; two portable generators; a trailer mounted drill rig with drill stems valued at approximately $85,000; a blockhouse; and, a laundry/storeroom valued at approximately $5,000. |
The role of the first appellant in the joint venture has been to undertake the exploration and development work that was necessary to determine whether commercial deposits of vermiculite, diamonds, garnet sands or other mineral
resources existed within the area of the exploration site. As matters stand at
present, it is unclear what exploration and development works have been
undertaken by the first appellant.
At first there was a good working relationship between the first appellant and the respondent. However, the working relationship between them has deteriorated because of the failure of the first and second appellants to
provide proper accounts in relation to the expenditure of the money
contributed to the joint venture by the respondent. The respondent claims
that numerous requests for accounts have been ignored by the first and
second appellants and their accountants.
During 2005 or 2006 the first appellant visited the respondent at his home in the United States of America and the first appellant told the respondent that he intended to go ahead with a plan for the exploration and development of a
| larger area than that originally contemplated by the joint venture agreement. The respondent was reluctant to entertain the first appellant’s proposal because he felt that the first appellant should be concentrating all exploration and development work on the original exploration site. The respondent felt that the first appellant was spreading himself too thinly. However, he agreed to pay for the pegging of the extended exploration area and to “see how it goes for one year.” | |
| [37] | In or about the first week of March 2007, there was a telephone conversation between the respondent and the first appellant. During the telephone conversation the first appellant told the respondent that, for the purposes of renewing the then current exploration licences at Harts Range, the first appellant wanted the respondent to provide further funds which were to be placed in the joint venture bank account to show the Department of Primary Industry, Fisheries and Mines of the Northern Territory (the Department) that the joint venture was financially viable and had financial reserves. It was necessary to apply to extend the term of a number of mining tenements as some mining tenements were due to have the area of the tenement reduced while others were due to expire in July 2007. The first appellant also told the respondent that he was required to submit an annual report in about July 2007. |
During the telephone conversation the first appellant said to the respondent words to the following effect:
“To have the licences renewed, we need to show the Department that
more than $1 million is available as reserves for the joint venture in
order to impress the Department, so we don't lose up to half the
licence area because reserves are not available.”Under s 26 of the Mining Act the area of an exploration licence, such as those applied for by the second appellant, is to be reduced by half at the conclusion of the first 24 months of the exploration licence and by half
thereafter for each succeeding period of 12 months. Under s 28 of the
Mining Act the Minister may, on the written request of a licensee, defer or
waive for a period of 12 months, or such shorter period as he thinks fit, the
reduction under s 26 of a licence area.
In response to the first appellant, the respondent said words to the following effect: “That is a lot of money.”
The respondent suggested to the first appellant that he should inform the Department that the respondent had significant financial reserves in the United States of America. The first appellant replied that the funds had to be in a bank account in Australia.
| [42] | The respondent was aware that at the time of the telephone conversation there was a balance of $400,000 of joint venture funds in the third appellant’s bank account. Of that amount approximately $250,000-$300,000 was held in United States dollars. In the respondent’s opinion that was more than adequate for the exploration and development work of the joint venture. |
The respondent said words to the first appellant to the following effect:
“You should show the Department the bank account balance of
$400,000.”The first appellant then said to the respondent words to the following effect: “No, we need to show reserves of at least $1 million. If we can show that $1 million is available, it would be better to show that $1.3 million is available. That will put us in a different league.”
The respondent understood the first appellant to mean that if the first appellant could demonstrate to the Department that the joint venture had financial reserves in excess of $1 million, it would lessen the likelihood of the Department requiring the second appellant to relinquish part of the licence area. The first appellant said to the respondent that, “half of it is yours.”
The respondent suggested that he should contact the Department because he wanted to make it clear to the Department that if $1.3 million was shown to be the financial reserves of the joint venture it was not intended that the
funds would be spent on exploration and mining activities. The respondent
wanted to ensure that the Department was not under any mistaken belief.
In response, the first appellant said words to the following effect:
“No, you should not do that. They do not know you. They will
wonder who you are. They know me. I can explain that to them.”
[48] The respondent then said words to the following effect:
“It is important that you do. We are never to mislead the Department
into thinking those funds are definitely going to be used, or used at
all.”
The first appellant replied he would, “take care of it”. The respondent said words to the following effect:
“I will think about it. I may decide to give $500,000 or more, but
any money that I provide is only to be for reserve purposes. It is notto be spent on operations.”
| [50] | The respondent was not willing to provide the funds if they were going to be spent on exploration or development operations. The funds were to be held solely as a financial reserve for the purpose of satisfying the Department that the joint venture was of financial substance. In essence, the respondent told the first appellant that he would prefer not to be involved in the larger venture. He would stay in the original venture as contemplated by the joint venture agreement. The first appellant should find another investor to replace the respondent in the larger venture. |
A few days later the respondent telephoned the first appellant and he said to the first appellant words to the following effect:
“I will send the money down, but I want it to be a very clear
understanding that it is to be used for reserve purposes only.”The respondent does not state whether, during the above telephone conversation, the first appellant acknowledged or agreed to receive the $850,000 on the terms stipulated by the respondent or whether the first appellant said anything at all in response to the respondent’s remarks.
On 30 April 2007, the respondent arranged for USD$850,000 to be transferred by wire transfer from the respondent’s bank account in the United States of America into the third appellant’s AUD account.
| [54] | The respondent’s intention, which he states he expressed to the first appellant, was to secure the large exploration licenses for another 12 months so as to allow the first appellant to find other investors to replace the respondent in the expanded project. The respondent intended to maintain his interest in the original exploration site which is now covered by exploration licence 25063. |
The first appellant’s evidence
The appellants dispute the basis on which the sum of $850,000 was transferred by the respondent to the third appellant’s AUD account. The evidence of the first appellant is contained in an affidavit of the first appellant sworn on 15 October 2007. Of relevance to the issue of whether the $850,000 was held on trust for the respondent as a financial reserve, the first appellant deposes as follows.
In January 2004 the first appellant met the respondent in the United States of America. They discussed the joint venture project and the first appellant told the respondent that he believed that there would be significant movement in the joint venture during 2004. As a result during January, March and May 2004 the respondent contributed another USD$125,000 towards the joint venture. The purpose of the funds was to investigate and prepare an application for a very large exploration licence. The details of the proposal were discussed between the first appellant and the respondent.
On 7 October 2004 Mr Ross Caughey, a geological consultant with Flagstaff GeoConsultants Pty Ltd, lodged the application for the large exploration licence with the Department. However, the application did not proceed.
On 17 January 2005 the second appellant lodged the application for exploration licence 24552 with the Department. In January 2005 the first appellant took a copy of the application for exploration licence 24552 with him to the United States of America so that he could discuss the application with the respondent.
On about 27 January 2005, the respondent met the first appellant at the airport. They had the following discussion:
“Uwe: Max, this new EL for the big area, it's going to be a big thing
you know.
Max: Yes
Uwe: When we spoke about this before, I think that you were having doubts about whether to be a part of the project.
Max: Yes, it is a large area and I am interested, but I'm not sure
whether or not I should continue to be involved.
Uwe: Well, you need to make a decision on this, because it's going to
mean committing substantial funds. If we get the EL, we have
to prove that we have substantial resources, bigger than we
have ever had before, because it is such a large area, and run it
all the away to the end. You can't back out halfway through.
Max: Yes
Uwe: There is virtually no money that has been spent on this EL so
far, therefore it is not a problem for you to pull out now. If you
are having any doubts, then you should pull out.
Max: Are you going to pull out of it too?
Uwe: No, why should I, I will try and continue on my own.
Max: I will think about it.”
Nothing was resolved prior to the first appellant leaving the United States of America and returning to Australia.
On 9 February 2005 the first appellant and the respondent had the following telephone conversation:
“Uwe: Max, you’ve got two options. You can remain under the old
agreement with the old leases, and we can continue to develop
those to a mining stage. That would require a lot less financial
involvement than the big picture. The other choice is that you
come into the new project. Max, you need to make a decision.
It doesn’t matter to me either way. It’s your choice. The new
project is not just the new EL. It is everything. The project is
going to grow dramatically. Are you in or out as an investor?
Max: I have thought about it, and I am in.
Uwe: This is a big change. I want you to know that it’s going to be different from now on. It’s going to go from exploration to a mining stage, so you need to fund it to that stage. We could
consider a float if we keep control and to enable us to do that
we have to do a considerable amount of work including
considerable drilling. There is no bitching about expenses
okay, or telling me what to buy or so on. I need someone who
is going to back the project all the way through on the
resources that we find.
Max: Uwe, thanks to Kingdom Planning, I have more money
available for the project than we will ever need. Yes, I am in
completely. But do not want people to know that I am
involved. I want to be a silent investor. I don’t even want
your accountant to know I am involved because if there is an
accident on site I don’t want to be sued.
Uwe: You have put in money to now and will put in more, and I have put in the time and mining knowledge. Whatever comes of the project, we split 50/50. OK?
Max: Yes.
Uwe: OK, if it looks like we are going to get the EL I will be in
touch to let you know what I think we will need fund wise OK? Max: Yes, I’m backing it.”
According to the first appellant, the effect of the above conversation was that the parties had reached a new agreement whereby the relationship between the parties ceased to be one of joint venture. Instead the respondent became a risk capital investor in a larger project involving the expanded exploration area in return for an equal share in the profits.
After the conversation on 9 February 2005, the first appellant told the respondent that they would need approximately $230,000 at the start of the new project in order to be able to prove to the Department that they had substantial financial resources. The first appellant told the respondent that he would open a US dollar account for the new funds because it may not be advantageous for the moneys to be received and immediately converted into Australian dollars. The respondent agreed and the first appellant opened a US dollar account in the name of the third appellant with the Westpac Bank. In March 2005 the respondent transferred the sum of USD$150,000 to the USD account and in May 2005 the respondent transferred the sum of US$130,000 to the USD account.
On 26 August 2005 the Department granted exploration licence 24552 to the second appellant. Shortly after 26 August 2005, the first appellant telephoned the respondent and told him that they had been granted exploration licence 24552. He also told the respondent that because there had been a change in government policy there was a real opportunity to explore for uranium.
On 22 November 2005 the second appellant lodged an application for exploration licence 25063. In paragraphs 99 and 100 of his affidavit sworn on 15 October 2007 the first appellant states:
“On 22 November 2005 an application for an exploration licence was
lodged by [the second appellant]. I had told [the respondent]
previously that I was going to lodge this as an adjunct area to
EL24552, and that I was going to tell the NT Mines Department
about the funds we held available for development. ...I refer to part 7 of the application for EL25063. [The second appellant] submitted a letter with EL25063 from Westpac indicating that there was US$230,032.25 in the nominated account as at 27 May 2005.”
Part 7 of the application for exploration licence 25063 stated:
“The applicant and its associated interest in respect of the
Exploration Licence Application, have adequate financial resources
to fund the proposed programmes and provide full reporting. …”
[67] The letter from the Westpac Bank stated:
“This letter is to confirm that the balance of the account … is
$230,032.25USD with all funds available. This account is held in the
name of ….”
Part 5 of the application for exploration licence 25063 proposes an exploration work program for the first year of the exploration licence that was to involve the expenditure of $50,000. The first appellant does not depose that he told the respondent that the application for exploration licence 25063 was to be over the same area of land as that was previously covered by exploration licence 9434.
On 7 December 2006 the second appellant lodged an application for exploration licence 25764 with the Department. The application for exploration licence 25764 proposed an exploration work program for the
first year of the exploration licence that was expected to cost $30,000.
Part 7 of the application for exploration licence 25764 stated:“The applicant and its associated interest in respect of the
Exploration Licence Application, have adequate financial resourcesto fund the proposed programmes and provide full reporting. …”
[70] The attached letter from the Westpac Bank stated:
“This is the indication to convert all the USD funds to AUD from
your foreign currency account as at 7/12/2005.
USD = $390988.19
Rate = 7568
AUD = $516633.45
Please note this rate is an indication only and may change at any
time.Please contact me if you require any further information.”
| [71] | On 19 April 2007 the first appellant spoke to the respondent. He told him that it would be necessary to undertake a helicopter survey of the project area. The first appellant also told the respondent that if they did not do the aerial survey, other work on the project area would be delayed by two to three years. He told the respondent that if they did not do the helicopter survey the Department would reduce the area of exploration licence 24552. Such a reduction would be the respondent’s fault. The first appellant told the respondent that they needed to go ahead with the survey and that the project needed further funds to demonstrate to the Department that there were funds available to undertake the work on the area. The respondent said that he would agree to pay the further funds. The respondent also said that he was now happy to hire a helicopter and a pilot. |
In May 2007 the respondent travelled to Australia. While he was in Australia he met with Mr Brendan Swift who is the first appellant’s lawyer. The respondent handed Mr Swift a number of documents including a draft agreement which was entitled “Australia Mining Agreement (Novation)”. The draft agreement purports to document the changes in the relationship between the respondent and the first and second appellants.
The recitals to the draft Australian Mining Agreement (Novation) state as follows:
“A.
In 2001, the Barfuss Corporation had an exploration licence (“the License”) for the advancement of mining in Australia (“the Project” as more specifically defined below).
B.
The licence required that Barfuss Corporation spend FIFTY THOUSAND AUSTRALIAN DOLLARS ($50,000 AUD) to fund the Licence by July 1, 2001.
C.
UB sought financial backing from JCMA, and others, to maintain the Licence.
D.
During the course of the year 2001, JCMA agreed to, and did, provide financing for the Project, after which JCMA and Barfuss entered into the Australia Mining Agreement on December 1, 2001 (“Previous Agreement”).
E.
As acknowledged in the Previous Agreement, JCMA first provided UB with FIFTY THOUSAND US DOLLARS ($50,000 USD) to carry out exploration for the Project, and later provided additional money totalling THREE HUNDRED THOUSAND US DOLLARS ($300,000 USD) to fund the continual advancement of the Project.
F.
Since the execution of the Previous Agreement six years ago, the Licence has evolved into several licenses, some of which have matured into Mining Leases (the “Leases”), all of which are summarised in Exhibit A, “Evolution of Licences to
Leases,” attached hereto and incorporated herein by this reference.
G.
During the evolutionary growth of the Licences and Leases, JCMA has continued to contribute funds to the Project, which now total approximately TWO MILLION US DOLLARS ($2,000,000 USD), the details of which contributions are further defined below. These contributions have substantially exceeded the contributions originally contemplated by the Previous Agreement.
H. The six years of activity producing the Licences and Leases
were the joint product of the hands-on management of the
Project by UB and the risk capital provided by JCMA making
the Project possible. As indicated by the terms of the Previous
Agreement, the relationship between the Parties has been in the
nature of a Joint Venture. As the prospects for success grew,
UB began to devote more of his time exclusively to the Project.
Recognizing the need to advance the Project, JCMA increased
his financial support of UB to the point where the Project
became UB’s principal livelihood. Risk capital contributions
by JCMA were increased to include compensation and housing
expenses for UB, as well as the operating expenses and
equipment purchases as originally contemplated, all of which
are summarised in Exhibit B, “JCMA Funding History,”
attached hereto and incorporated herein by this reference.I.
The JCMA Funding History was prepared based on withdrawals from JCMA's accounts, wire fund transfers and deposits and operating account(s) for UB.
J.
Although the Previous Agreement required the formation of an Australian Company, with shares to be held on an equal 50 percent basis by JCMA and UB, respectively, this requirement was never met.
K. It is the present intent of the parties to fully document the
working relationship of the past between JCMA and UB, and to
provide form and stability to the continuation of the
relationship between the parties through the formation of a
Company which will assume, as a loan, all Past and Future
Expenditures, as well as responsibility for advancing the
Project.L.
The essence of the relationship has been and continues to be that UB has the background and experience necessary to manage and advance the Project, and is willing to devote his skills to such a purpose, while JCMA has the financial wherewithal to support the Project, and is willing to devote his resources, as risk capital, to such purpose.
M. In the event that the Project is successful in any measure, it is
contemplated that JCMA would first recover all costs
expended, plus interest, after which the proceeds of the success
would be divided evenly. This concept of a preferred return of
risk capital to JCMA is supported by the fact that UB has
received, and will receive, adequate compensation as he
commits his reasonable best efforts toward the advancement of
the Project.N.
If the project is not successful, the funds invested by JCMA would be unrecoverable, except for the value of the Company’s assets, to which JCMA would acquire title.
O.
This Agreement shall put the affairs in order regarding the past, present and future obligations of the Parties, and shall constitute a full and complete novation of their rights, duties and obligations to one another.”
| [74] | According to the first appellant, recital L of the proposed Australian Mining Agreement (Novation) accurately reflects his understanding of the 9 February 2005 oral agreement that was made between the first appellant and the respondent. Recital N is correct insofar as it stipulates that the funds invested would be unrecoverable if the project was not successful. |
On 18 July 2007 Mr Caughey sent a letter to the Department. He wrote the letter on behalf of the second appellant. In the letter Mr Caughey requested that the statutory reduction of the area of exploration licence 24552 be
deferred until a detailed geophysical survey had been completed. The letter stated that the second appellant planned to fly a detailed geophysical survey (magnetic and radiometric) over much of the project area. Mr Caughey
enclosed in his letter to the Department a copy of a letter from the Westpac
Bank which was dated 16 May 2007. The letter from the Westpac Bank
stated as follows:“Dear Uwe Barfuss
Re: … US Account …
This is an indication that … US currency account (…) as of 16th May
2007 has a balance of USD $1,095,835.29. As at 16th May 2007 the
AUD exchange rate is 0.8360. Conversion, at said rate, as at
16th May 2007 is AUD $1,310,807.76.I hope this assists you with your enquiry. Please do not hesitate to contact me if you have any further questions.”
| [76] | After the Department received the letter from Mr Caughey, the Department requested the second appellant to inform the Department of the approximate amount that the second appellant had expended to date on exploration licence 24552 and the approximate proposed expenditure on the exploration licence for the following year. On 17 August 2007 Mr Caughey responded by letter. In the letter he stated that the expenditure for the year to date on the exploration licence 24552 was estimated at between $60,000 and $100,000. He said the expenditure for the next year (possibly extending into the following year, depending on the area retained) will be in the order of $400,000-$600,000 or more (depending on whether equivalent commercial contract rates are applied). |
In the letter dated 17 August 2007, Mr Caughey also stated that:
“For the coming year:
In addition to other field work, a detailed helicopter-born radiometric
and magnetic survey is planned. At commercial geophysical contract
company rates, Barfuss has been quoted in the order of $1,000,000
for the planned survey. For such a large expensive survey, Barfuss
considers the purchase of its own equipment to be an economic
alternative. Geophysical surveying equipment costing $250,000 has
been ordered from Radiation Solutions Inc., an Ontario - Canada
based company. Geoz Pty Ltd, in Western Australia, will install and
commission the equipment and Alice Springs Helicopters has quoted
approximately $200,000 to fly the survey. Processing and
interpretation of the results will be additional costs, in the order of
tens of thousand of dollars, and follow-up in the field will be more
again. It is planned to commence the surveying later this calendar
year, but its completion may not be until the following reportingyear.”
| [78] | On 7 September 2007 the Mining Registrar wrote to the second appellant and advised the second appellant that under s 28 of the Mining Act the reduction of the area of exploration licence 24552 had been waived for 12 months. In the letter, the Mining Registrar stated that it was expected that future expenditure should not be less than the amount specified in the second appellant’s annual report to the Department and that a failure to meet that condition or any other condition of the exploration licence may jeopardise the continuation of the licence. Notice was also given that a further waiver of the reduction in the size of exploration licence 24552 may not be approved. |
| [79] | The first appellant states that, if the appellants cannot have access to the funds that are the subject of the interlocutory injunction, it will be impossible to complete the aerial survey by helicopter of exploration licence 24552 in a timely fashion so as to obtain a second deferral of a reduction in the area of the exploration licence 24552. This in turn would prejudice the viability of the project which may be worth hundreds of millions of dollars. The first appellant stated that there is no other source of funds which either the first or second appellants could access within time to complete the necessary exploration on exploration licence 24552. |
Is there a serious question to be tried?
The appellants argued that no serious question arises as to whether the sum of $850,000 was held on trust for the respondent on the following grounds. First, a trust of the kind discussed in Barclays Bank v Quistclose
| Investments [1970] AC 567 will only be created where it is the mutual intention of the parties that the money, which is said to be held on trust, is paid for a specific purpose and is to be used exclusively for that purpose. On no reading of the evidence could it be said that there was a mutual intention that the $850,000 be held unspent in a bank account. All of the objective evidence from which inferences may be drawn points to there being no mutual intention for the creation of a trust. The language used by the parties when the transfer of the $850,000 was discussed is disputed. The allegation of a trust in relation to the $850,000 was contrary to the uncontradicted evidence about mining industry practice and requirements, which mandate steady progress on mining claims measured by the expenditure of money. A certain sum of money is required to be spent each year on each exploration licence. The first appellant’s evidence that substantial expenditure was required on the exploration licences held by the second appellant was not disputed by the respondent. The sum of $850,000 was paid into the same account as the other money contributed by the respondent for expenditure on exploration. The transaction was just another payment in a long line of payments. The original joint venture had come to an end and the respondent was simply a risk capital investor in the appellants’ expanded exploration project. | |
| [81] | Secondly, the assertion of a trust hangs solely upon the evidence of one alleged telephone conversation said to have taken place in March 2007. The date of the conversation is not given in the respondent’s affidavit and the words deposed to are themselves ambiguous. The conversation is denied by the first appellant and is contrary to the course of dealing between the parties over a period of years involving many previous payments totalling some USD$1.8 million. The respondent’s evidence was not corroborated by any contemporaneous note, letter or other document. Further, the respondent is a person who is eccentric and who has a demonstrated propensity to record his thoughts and intentions in great detail in letters. The first time that the alleged conversation about the trust seems to have been mentioned by the respondent is in the respondent’s affidavit sworn on 7 September 2007. Neither the conversation nor the alleged trust were mentioned in the funds transfer request by which the respondent sent the money to the third appellant’s USD account on 30 April 2007, nor are they mentioned in the respondent’s solicitors letter dated 27 August 2007. The respondent’s evidence was overall so implausible that it could not be said that there was a strong possibility of it being accepted at trial and accordingly there was no serious question to be tried. |
For the following reasons the appellants’ argument cannot be sustained. There is a sufficient likelihood of the respondent’s evidence being accepted at trial.
| [83] | Whether the relationship between the parties is one of trust or debt, or some other relationship is determined by the mutual intention of the parties: Henry v Hammond [1913] 2 KB 515; Cohen v Cohen (1929) 42 CLR 91; Barclays Bank v Quistclose Investments (supra); In re Kayford Ltd (in liq) [1975] WLR 279; Daly v Sydney Stock Exchange (1986) 160 CLR 371; and Walker v Corboy (1990) 19 NSWLR 382. An intention to create a trust is an essential element of a trust. When the parties have not expressly stated their intention that a sum of money is to be held on trust, it then becomes necessary to consider, in all of the circumstances of the case, what intention the law should impute to them: Walker v Corboy (supra) per Meagher JA at 395 to 396. The duty to hold moneys specifically for a person has the same effect as if they were trust moneys: Walker v Corboy (supra) per Priestley JA at 384. If money is lent for the mutually agreed sole purpose of being used for a specific purpose, then that money becomes the subject matter of a trust, the execution of which is the fulfilment of that purpose, although the trust will not be a mere purpose trust since the putative borrower is under a duty to pay the money to a particular person: Toovey v Milne (1819) 2 B & Ald 683; 106 ER 514; Barclays Bank Ltd v Quistclose Investments Ltd (supra). A trust may be constituted in circumstances where the trustee is not obliged to keep the trust money separate from his own money. If the recipient of money intends to receive it only in the capacity of trustee, such money will be received in trust for the payor notwithstanding that the money so received is not paid into a separate account: In re Kayford Ltd (in liq) (supra) per Megarry J at 282. |
In order to determine whether the sum of $850,000 was held on trust, it is necessary to look at the nature of the transaction that involved the transfer of the $850,000 into the third appellant’s AUD account, the particular
| provisions of the agreement to transfer the $850,000 into the third appellant’s Westpac Bank account, and the whole of the circumstances attending the relationship between the parties. | |
| [85] | If the respondent’s evidence which is set out in pars [37] to [54] above is accepted there is a sufficient likelihood that the evidence establishes that it was the mutual intention of the first appellant, the third appellant and the respondent that the $850,000 was transferred to the third appellant’s AUD account to be held exclusively for the specific purpose of showing the Department that the second appellant had financial reserves and was financially viable and that the $850,000 remained in the beneficial ownership of the respondent. The mutual intention of the parties can be objectively inferred or imputed from the following. The first appellant contacted the respondent. The first appellant asked the respondent to place funds into the joint venture bank account for the specific and exclusive purpose of showing the Department that the joint venture had financial reserves and was financially viable so that the Department would agree to extend the term of the exploration licences held by the second appellant and the reduction in the area of the licences required by s 26 of the Mining Act would be avoided. No other reason was given by the first appellant as to why the transfer of the $850,000 was necessary. Within the preceding 12 months the respondent had paid in excess of USD$600,000 into the third appellant’s bank account, as at 5 December 2006 there was a balance in the third appellant’s USD account of USD$431,172.22. This amount of money was arguably enough to meet the exploration commitments of the parties. The respondent agreed to the first appellant’s request on the conditions that the funds were to be kept as a reserve only and the Department was not under any mistaken belief as to the nature of the funds. The conditions stipulated by the respondent precluded the appellants from dealing with the funds as they pleased. The first and third appellants were only permitted to mix the $850,000 with other joint venture funds. The appellants were not permitted to mix the funds with their own moneys. Payment out of the joint venture account could be debited first against the joint venture funds that were not part of the $850,000. The first and third appellant’s accepted the conditions imposed by the respondent. They did so when the first appellant said that, “They know me. I can explain that to them” and that he would “take care of it” (see par [47] to [49] above). By these words the first appellant acknowledged that he would not mislead the Department by telling the Department that the funds would be spent on exploration. Such a position is consistent with the first and third appellants having an intention to keep the $850,000 specifically as a reserve. |
| [86] | The above construction of the telephone conversations between the respondent and the first appellant in early March 2007 is not inherently implausible and it is supported by the context in which the request for the funds was made by the first appellant. The respondent and the first appellant were parties to a joint venture agreement. The $850,000 was paid into the third appellant’s AUD account which had been used as the joint venture bank account. It was the practice of the first appellant to ask the respondent for money for a specific purpose. For a period of time the first appellant had provided accounts as to the use made of the funds placed in the joint venture account. The payment of $850,000 was a one off payment. Previously there had been no payment of such a large amount of money. The largest previous payment was a payment of USD$350,000 or thereabouts. The first appellant’s own evidence established a pattern whereby the first appellant would use the amount of funds in the USD account to show the Department that the second appellant had substantial financial resources and was financially viable. The first appellant’s evidence in paragraphs 85, 99, 100, 111 and 112 of his affidavit was that: after the telephone conversation on 9 February 2005, he told the respondent that they would need approximately $230,000 at the start of the new project in order to be able to prove to the Department that they had substantial financial resources; prior to 22 November 2006 the first appellant had requested the respondent to transfer the sum of $250,000 to the third appellant’s USD account to ensure that the second appellant could satisfy the Department that there were sufficient resources behind the second appellant to continue with the project, and to satisfy the Department that a new application for an exploration licence should proceed; and, in support of the second appellant’s applications for exploration licences 25063 and 25764 the second appellant annexed letters from the Westpac Bank stating the amount of reserves that were in the third appellant’s bank account. The first appellant also stated in his affidavit that on 19 April 2007 the first appellant not only told the respondent that the helicopter survey needed to go ahead but that further funds were necessary to show the Department that there were funds available to undertake the work on the exploration area. As at March 2007, the first 24 months of exploration licence 24552 had nearly expired and the exploration work undertaken by the appellants was insufficient in itself to justify a deferral of the reduction in the licence area. If a waiver or a deferral was not obtained under s 28 of the Mining Act, then s 26 of the Mining Act required the area of exploration licence 24552 to be reduced by 50 percent. |
| [87] | What occurred shortly after the sum of $850,000 was transferred into the third appellant’s Westpac Bank account is also consistent with what the respondent said was the specific purpose of the transfer of the sum of $850,000. After the $850,000 was transferred by the respondent there was a balance in the third appellant’s USD account of USD$1,095,835.29. This was equivalent to AUD$1,310,807.76 which is a similar amount of money to the amount of money the respondent says was mentioned by the first appellant in the March 2007 telephone conversations (see par [44] above). Further, the first appellant’s geological consultant used the amount of funds in the joint venture USD account to show the Department that the second appellant had substantial financial reserves and was financially viable so that a deferral in the reduction of the area of exploration licence 24552 would be granted by the Minister or his delegate. |
On 18 July 2007 Mr Caughey, of Flagstaff GeoConsultants Pty Ltd, wrote to the Department on behalf of the second appellant and requested a deferral of the reduction in the area of exploration licence 24552. In support of the
request Mr Caughey attached a letter from the third appellant’s bank that
stated the balance of funds in the third appellant’s USD account was
USD$1,095,835.29. Mr Caughey did not provide the Department with
details of the estimated expenditure to be incurred exploring exploration
licence 24552 in the coming year. Those details were not provided until the
Department asked the second appellant to provide such details.
While there is some force in the appellant’s submissions that the contents of the draft Australian Mining Agreement (Novation) and in particular recitals L and N of the agreement are inconsistent with the sum of $850,000 being
held on trust, the argument does not significantly reduce the respondent’s
prospects of success. The agreement is a draft agreement. The sum of
money referred to in the agreement as past expenditure is estimated
(emphasis added) to be USD$2,000,000 not USD$2,636,990. This is
broadly consistent with the sum of $850,000 being held on trust as a reserve.
The full implications of the Australian Mining Agreement (Novation) can
only be determined at trial after the respondent has been cross examined.
As against the evidence of the respondent, the first appellant’s evidence is, on the whole, dissembling. The affidavit contains a lot of statements about what the first appellant thought rather than what occurred. The applications for the mining tenements that are said to have been made by Yearly
Connection Pty Ltd are not annexed to the affidavit. Nor does the appellant state whether the applications were successful or not. The affidavit lacks detail about the exploration work which is said to have been undertaken on the exploration site over a period of six years or thereabouts and the appellant does not state how he spent the sum of USD$1,595,000 which is a substantial part of the money that was paid into the third appellant’s bank account between 16 March 2005 and 2 May 2007. The first appellant was not completely candid. His affidavit does not disclose the transfer of some of the $850,000 between the third appellant’s bank accounts nor does it disclose the withdrawals that were made from the third appellant's bank accounts after 11 September 2007. Nor was a reason given as to why such transfers were necessary.
The balance of convenience
| [91] | The appellants argued that Angel J erred in holding that the balance of convenience was “pretty evenly balanced”. The appellants relied on the following grounds. First, no evidence was led, and no argument was put, that the respondent will suffer terrible injury for which damages would not be an adequate compensation. Secondly, the evidence of the first appellant was that if the injunction was granted there would very likely be: an inability to comply with the conditions of exploration licence 24552; a compulsory reduction in the area of exploration licence 24552 after 25 August 2008; permanent loss of all of the reduced area of exploration licence 24552; a loss of many millions of dollars; and an inability to obtain material, personnel and equipment, or at the very least an increase in the costs of exploration. Further, the uranium boom would be missed along with the opportunity to establish a public company. |
The submissions of the appellants in this regard lack merit. The funds sought to be preserved are arguably trust funds. The funds are the subject matter of the litigation. Further, there is insufficient evidence before the Court to establish the destructive effect of the injunction as alleged by the appellants. I accept the submissions of the respondent in this regard.
All that is standing in the way of the appellants completing the proposed exploration program on exploration licence 24552 during the current year is the sum of $500,000. The appellants are not restrained from conducting exploration work.
| [94] | If the exploration licences are as prospective as the appellants allege then the appellants should have no difficulty borrowing the sum of $500,000 from their bank or some other financial institution. No evidence was led by the appellants to the effect that they had attempted and failed to raise the sum of $500,000 by borrowing it from their bank or some other financial institution. |
The appellants had decided to undertake an aerial survey of the area of the exploration licences prior to 19 April 2007. At the time the injunction was first sought by the respondent the appellants had not started on the aerial
survey. Realistically it is unlikely that, in any event, the exploration work
contemplated by the appellants would have started before April 2008 and
would have been completed before the 25 August 2008. The first
appellant’s evidence was that the aerial survey by helicopter will take about
six or seven months to complete and that the helicopter cannot fly between
December to February or March. In my opinion if the helicopter cannot fly
in December because of the heat it is unlikely that the helicopter would have
been able to fly in November. There is to be a trial of the substantive
proceeding in February 2008. If the appellants are successful at trial they
will be able to commence the aerial survey in March or April 2008.
The Department has not said that it would not be prepared to further waive the reduction in the area of the exploration licences. No evidence was led by the appellants to this effect. Further, according to the letter from the
Mining Registrar dated 7 September 2007, even if the aerial survey was completed by 25 August 2008, there is no guarantee that the reduction in the area of the exploration licences would be further waived by the Minister or his delegate and it was not said that the appellants were not already in a position to determine what part of the exploration area was likely to be the most prospective. The appellants’ evidence is insufficient to establish that any reduced area would be insufficient for the purposes of the appellants. The appellants would still hold an exploration area in excess of 350 square kilometres.
| [97] | The appellants have merely asserted that there is approximately 10 million tonnes of thorium, uranium and rare earth within the exploration licence areas held by the second appellant and that at present prices that would be worth more than $100 per tonne. Insufficient evidence was led in support of this assertion. Even if the appellants were to ultimately construct a uranium mine it would be years before such a mine could be established. In the circumstances, any statement about the fluctuation in uranium prices is meaningless. No evidence was led by the appellants that any other company had sought to purchase the exploration licences held by the second appellant. |
No evidence was led by the appellants that they had the capacity to operate a uranium mine. A capacity to mine opals and rubies or garnet sand does not demonstrate a capacity to mine uranium.
| [99] | In my opinion no serious injustice will result from the granting of the injunction. At worst the practical consequence of the injunction is likely to be that the appellants will incur increased financial costs as a result of having to borrow the sum of $500,000. On the evidence currently before the Court, the loss that the appellants assert that they will incur as a result of the injunction is grossly exaggerated. The appellants have failed to establish that the interlocutory injunction will have any destructive effect. |
The inadequacy of the undertaking as to damages
[100] The appellants’ submission about the inadequacy of the respondent’s undertaking as to damages is part of the appellants’ submission relating to the balance of convenience and the proposition that the appellants’ damages could run into hundreds of millions of dollars. For the reasons stated above this submission cannot be sustained. I accept the respondent’s submissions in this regard.
[101] The respondent arguably owns machinery and equipment within the jurisdiction that has a value greater than $300,000 and real estate in Queensland. The value of the respondent’s assets both within Australia and
within the jurisdiction is not insubstantial. The respondent’s assets within
the jurisdiction are adequate to cover any financial costs incurred by the
appellants in borrowing the sum of $500,000.Non-disclosure
| [102] | The appellants have submitted that the respondent failed to disclose relevant matters to the Court when the respondent applied ex parte for the interim injunction. The appellants say that the respondent failed to disclose the following relevant matters: the draft Australian Mining Agreement (Novation); the recitals of the draft agreement; the conversation between the first appellant and the respondent on 9 February 2005 and their discussions regarding uranium and jade; and the respondent’s letters which are annexed to the affidavit of the first appellant sworn on 15 October 2007. The appellants further submit that such a failure should have resulted in a refusal to grant the interlocutory injunction: Thomas A Edison Ltd v Bullock (1913) 15 CLR 679 per Isaacs J at 682; Jennings v Crown Prosecutor Service [2005] 4 All ER 391 at [56] to [64]. |
| [103] | I reject the submissions of the appellants in this regard. It is unnecessary to determine if there was a material non-disclosure. All of the material referred to by the appellant was before the Court when the interlocutory injunction was applied for by the respondent and while a material non- disclosure may result in the ex parte interim injunction being discharged, it is no bar to the obtaining of an interlocutory injunction on the same terms: Thomas A Edison v Bullock (supra) per Isaacs J at 683; Barneys Blu-Crete v AWA (1973) 43 FLR 463 per Northrop J at 475. |
Conclusion
[104] In my opinion it has not been established by the appellants that the learned Judge at first instance was in error in granting the interlocutory injunction. The respondent has identified the equitable rights which are to be
determined at the trial and in respect of which final relief is sought and
there is a sufficient likelihood of success to justify in the circumstances of
this case the preservation of the status quo pending trial.
____________________________
0
1