Billabong Gold Pty Ltd v Vango Mining Ltd [No 2]
[2021] WASC 459 (S)
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: BILLABONG GOLD PTY LTD -v- VANGO MINING LTD [No 2] [2021] WASC 459
CORAM: KENNETH MARTIN J
HEARD: 23 & 24 AUGUST 2021
DELIVERED : 14 DECEMBER 2021
FILE NO/S: CIV 2932 of 2018
BETWEEN: BILLABONG GOLD PTY LTD
Plaintiff
AND
VANGO MINING LTD
First Defendant
DAMPIER (PLUTONIC) PTY LTD
Second Defendant
Catchwords:
Contract - Alleged breaches - Right of first refusal (ROFR) promise in agreement- Questioned ROFR engagement by separate conduct of defendants in 2016 and 2017 - Final mandatory injunctive relief sought to compel compliance with ROFR obligation - Entitlement to common law damages for breach - Attempted assignment of underlying contract breach rights as chose in action to plaintiff - Validity of assignment of chose in action as bare right to litigate where corporate assignee did not exist at the time of the first tranche breaches - Maintenance by assignment of bare right to litigate for earlier ROFR promise breaches
Legislation:
Nil
Result:
Final mandatory injunctive relief orders to be settled relating to ROFR conduct of 2017 breaches of the defendants
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr S K Dharmananda SC & Mr T N Owen |
| First Defendant | : | Mr D R Chandler |
| Second Defendant | : | Mr D R Chandler |
Solicitors:
| Plaintiff | : | Grondal Bruining |
| First Defendant | : | Lawton Macmaster |
| Second Defendant | : | Lawton Macmaster |
Case(s) referred to in decision(s):
Coal Hub Pty Ltd v NSL Consolidated Ltd [No 4] [2018] WASC 41
County Hotel and Wine Co Ltd v London and North Western Railway Co [1918] 2 KB 251
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498
Leveraged Equities v Goodridge [2011] FCAFC 3; (2011) 274 ALR 655
Monk v Australia and New Zealand Banking Group (1994) 34 NSWLR 148
Ninelen Pty Ltd v Interim Advance Corporation Pty Ltd [2011] WASC 107
Pata Nominees Pty Ltd v Durnsford Pty Ltd [1988] WAR 365
Sanrus Pty Ltd v Monto Coal 2 Pty Ltd [2005] QSC 284
THL Robina Pty Ltd v The Glades Golf Club Pty Ltd [2004] QSC 461
Trend-Tex Trading Corporation v Credit Suisse [1982] AC 679
Tribune Resources Ltd v EKJV Management Pty Ltd [2020] WASC 47
Western Areas Exploration Pty Ltd v Streeter [2011] WASCA 17
WorkCover Queensland v AMACA Pty Ltd [2012] QCA 240
Table of Contents
Introduction
The OTA
The Asset Sale and Purchase Agreement and the General Deed of Assignment and Assumption
Timing of Acquisition of OTA Rights
Separate trial
The ROFR clause in the OTA
Trial book (TB) documents and Agreed Chronology
Sale and Purchase Agreement (the SPA)
The General Deed of Assignment and Assumption (the 'GDAA')
Aspects of the ROFR obligation in cl 12.6 of the OTA
Relevance objections by the defendants
The position of Billabong Gold as an assignee of Northern Star of OTA rights
Clauses 12.1 and 12.3 of the OTA
Issues in the trial and issues abandoned
The proper execution of the GDAA
ROFR obligations and breach
The 2016 transactions of the defendants
Some background to the ROFR infringing transactions of 2016 and 2017
First Resistance Argument: The Ore Treatment Agreement (OTA) of 23 September 2014 'Commencement Date', 'Term' and a suggested non‑activation of cl 12 ROFR obligations in the defendants
Conclusion on first resistance argument
Second Resistance Agreement: Was the assignment to the plaintiff of Northern Star's 2016 chose in action for breach of contract an assignment of a bare right of action?
Third line of resistance - did the 2016 and 2017 transactions trigger ROFR obligations?
ROFR engagement by the 2017 transactions
Conclusions on the 2017 transaction events and ROFR offer obligation engagement
Relief
Conclusion
KENNETH MARTIN J:
Introduction
The plaintiff, Billabong Gold, commenced this action by writ on 8 November 2018 against the two defendants. This action concerns the alleged breaches of an Ore Treatment Agreement dated 23 September 2014 ('OTA'). The heart of the dispute relates to a right of first refusal ('ROFR') clause found in the OTA, and whether or not it was ever engaged.
The first defendant, Vango Mining Ltd ('Vango'), has controlled and held 100% of the second defendant's, Dampier (Plutonic) Pty Ltd's ('DPPL') issued shares since 23 August 2016. Before then, Vango and DPPL had been in a Joint Venture Agreement of 18 November 2013. This Joint Venture was known as the Plutonic Dome JV.
The OTA
There were three original parties to the OTA, namely both of the defendants, Vango and DPPL, plus the corporation, Northern Star Resources Ltd (ABN 43 092 832 892) ('Northern Star'). I note that the plaintiff, Billabong Gold, was not a party to the original 2014 OTA as perfected. And clearly, Northern Star is not a party to this litigation.
Pursuant to the OTA, Northern Star could be called upon to crush and treat the gold ore produced by the Plutonic Dome JV, being ore derived from a gold deposit, known as the K2 Deposit.
When the OTA was first entered in 2014, DPPL was then controlled by a different corporate shareholding parent. That was Dampier Gold Ltd ('Dampier Gold'). At this time, Vango was then known as Ord River Resources Ltd. The first defendant changed its name to Vango Mining Ltd on 28 November 2014.
Clause 12.6 of the OTA is the key clause to be considered in these proceedings. Clause 12.6 had provided Northern Star with an ROFR in respect of a disposal of the mining tenements as then owned by Ord and DPPL. Essentially, this clause required the defendants to offer Northern Star the first opportunity to purchase the defendants' tenements upon like terms - should they ever intend to sell them, or if they ever received a seriously considered bona fide offer to purchase them. That is, by the OTA terms the defendants committed to ROFR contractual obligations benefitting Northern Star - towards any potential future disposal of the defendants' tenements.
The Asset Sale and Purchase Agreement and the General Deed of Assignment and Assumption
On 12 August 2016, Northern Star entered into an asset sale and purchase agreement ('SPA') with Billabong Gold. Pursuant to this agreement, Northern Star sold off a number of its own assets to Billabong Gold (see exhibit 1.37). The sale included Northern Star's interests in various contractual agreements in relation to Northern Star's specified mining tenements.
At this time, Billabong Gold was a 100% Australian owned subsidiary of a Canadian gold producer and TSX Venture Exchange of Toronto Canada member, namely Superior Gold Inc. Billabong Gold appears to have been incorporated in Australia by Superior Gold Inc specifically to be the vehicle to implement this 2016 asset acquisition transaction from Northern Star. Billabong Gold was incorporated on 27 July 2016. That was just shortly before the SPA had been entered, on 12 August 2016.
Subsequently, as a part of the sale acquisition, Northern Star and Billabong Gold seemingly (as I will explain) perfected a General Deed of Assignment and Assumption instrument dated 11 October 2016 ('GDAA') (see exhibit 1.8). The OTA is specifically referred to as an 'Assigned Agreement' to Billabong Gold in the GDAA's schedule, at item 3.
The SPA and the GDAA both specified a common 'Completion Date', being 12 October 2016. This was to be the day that followed the perfection of the GDAA.
In essence then, although Billabong Gold was not the original contracting party to the OTA in 2014, its case before this Court proceeds on a basis that it came to acquire Northern Star's rights under the OTA - by reason of the 2016 SPA and the GDAA. As I will elaborate, Billabong Gold now brings this action arguing that the defendants have failed to comply with cl 12.6. This is because they did not provide Billabong Gold with the ROFR offers as required by the OTA notwithstanding dealings with their tenements that it says triggered that ROFR offer obligation. This is disputed by the defendants for multiple reasons as will be seen.
Timing of Acquisition of OTA Rights
An important consideration in this action is the timing around Billabong Gold's acquisition of any ROFR offer contractual rights with the defendants under the OTA. This because some of the defendants' conduct, which Billabong Gold argues has breached the OTA and had engaged the ROFR offer clause, had occurred in early 2016. That, of course, was well before Billabong Gold was assigned Northern Star's OTA rights. Further, some events that Billabong Gold relies on for its case occurred even before Billabong Gold was incorporated in July 2016.
Billabong Gold further claims that Vango and DPPL engaged in a second tranche of conduct that engaged with and triggered the ROFR clause - in the first half of 2017, after Billabong Gold had been assigned Northern Star's rights under the OTA. In determining if Vango and DPPL breached the ROFR clause in the OTA, the 2016 events and the 2017 events need to be isolated and evaluated distinctly as regards any alleged breach.
The two tranches of potentially ROFR triggering disposal conduct, as will be seen, also concern different tenement groups as owned by the Plutonic Dome JV. That is, the 2017 conduct concerned fewer potential tenements than the 2016 conduct.
The case authorities addressing the scope of contractual ROFR highlight that it is the precise text, as found uniquely deployed within each ROFR clause, that is significant, and so, requires a discrete evaluation for each case. To that end, see Burt CJ in Pata Nominees Pty Ltd v Durnsford Pty Ltd [1988] WAR 365 at 372 and THL Robina Pty Ltd v The Glades Golf Club Pty Ltd [2004] QSC 461 [18], [34], [35], [38] and [39] (Chesterman J).
Separate trial
On 5 April 2019, I had ordered that a trial in relation to ascertaining the plaintiff's damages (if any) would be tried separately (if necessary) - and after the trial of the balance of the (liability) issues presenting in the action (see folio 25, being my orders of 5 April 2019, order 1). Consequently, no issues concerning Billabong Gold's potential damages (if any) were to be determined at this trial.
It is helpful at an early point to see the precise terms of the relevant ROFR subclause itself from the OTA. But I take that exposure step cautiously, bearing in mind that any exercise in interpreting contractual language must be based on an allied evaluation of the surrounding context and with the objective purpose of the written instrument in mind. Nevertheless, it is insightful at this early point to see the precise ROFR clause text itself. I will return to discuss the OTA and cl 12 therein in due course and to consider some other aspects of the OTA as underlying background.
The ROFR clause in the OTA
With that caution, I can turn to expose sub-cl 12.6 from within the 2014 OTA. It presents there under the heading 'Right of First Refusal in relation to Disposal of Tenements'. The OTA itself is exhibit 1.8 in the trial.
Relevantly, subclause 12.6 of the OTA reads:
12.6Right of First Refusal in relation to Disposal of Tenements
(a)Northern Star has the right of first refusal on the terms and conditions set out in this clause in respect of a Disposal of all or part of the Tenements by Ord or Dampier.
(b)Where Ord or Dampier receive a bona fide offer to purchase, or intend to make an offer to sell, for a consideration involving payment of:
(i)cash in whatever form and over any period (including immediate cash, deferred cash, royalty, net smelter return, net profit interest), and or
(ii)publicly traded securities, a fair market value of the consideration shall be calculated using the closing price of such publicly traded security for the immediately preceding trading day, and or
(iii)assets other than cash or publicly traded securities, the fair market value of the consideration shall be calculated by an independent expert valuer with the appropriate expertise in the class of assets in question appointed by Northern Star at the cost of Plutonic Dome [meaning Ord or Dampier as the case may be], such valuation to be conducted during the Offer Period (defined below) which shall be extended by up to 14 days to accommodate such valuation exercise,
the whole or part of its interest in the Tenements which it is willing to accept and Dispose of, Ord or Dampier (Offeror) must promptly send written notice to Northern Star of the offer to purchase or sell making the same offer to Northern Star (ROFR Offer) and giving a copy of the same to the other Plutonic Dome Party. (my emphasis in bold)
(c)The ROFR offer must:
(i)set out all the details of the offer to purchase or sell that the Offeror has received or wishes to make, including the identity of the proposed acquirer (if then known), to enable an assessment of the acquirer's financial standing including, where applicable, details of the financial standing of the acquirer's Ultimate Holding Company (as defined in the Corporations Act) and any proposed parent company guarantees; and
(ii)attach a copy of all the ROFR Offer and any valuation referred to in clause 12.6(b).
(d)Northern Star has the right for a period of 30 days following receipt of the ROFR Offer (Option Period) to accept the ROFR Offer in full.
(e)To accept the ROFR Offer Northern Star must give written notice of acceptance to the Offeror during the Option Period. Where written notice of acceptance is given by Northern Star during the Option Period the Offeror must sell the Tenements, the subject of the ROFR Offer, to Northern Star on the terms of the ROFR offer.
(f)If Northern Star does not accept the ROFR offer within the Option Period then, following the Option Period, the Offeror is free within 6 months from the date of the ROFR Offer, and subject to subsequent completion and delivery of the required assignment documentation specified in this clause 12 and all necessary regulatory approvals, to Dispose of the tenements the subject of the ROFR Offer (and subject to the pre-emptive rights of the other Plutonic Dome Party) to the prospective acquirer at a price and subject to the terms and conditions which are no less favourable to Northern Star than the price, terms and conditions set out in the ROFR offer.
That is merely OTA subclause 12.16. To avoid undue clutter, Schedule A to these reasons sets out all of OTA cl 12 - as well as some further terms I have selected from out of the OTA, including its recitals and some key definitions as provided therein.
Trial book (TB) documents and Agreed Chronology
The parties raised very few factual disagreements that need to be resolved at this trial. The trial itself came to be conducted exclusively by reference to documents - tendered on each side. Those documents are found in a largely agreed upon trial book (TB) - which became exhibit 1 at the trial. The TB comprised several lever arch volumes of documents, all separated, paginated and sub-indexed by reference to individual numbers (by TABs). Hence any individual document that came to be tendered from within the TB, is a sub‑exhibit, that is identifiable by reference to its TAB number in the TB. For example, the OTA is found at TAB 8 and formally, is exhibit 1.8 in the trial.
At the conclusion of what proved to be only a two day trial, some redundant or irrelevant documents were removed by the parties, consensually, from out of the submitted TB. The resultant TB (as so pruned) is navigatable by its post-trial revised index, as agreed between the parties - and which ultimately came to be tendered as exhibit 2.
The plaintiff had also submitted a chronology of facts that in the end was wholly agreed with by the defendants. This was for the purposes of the trial and highlights the large measure of underlying factual agreement reached as between the parties. On that basis, the agreed fact chronology of 12 August 2021 became exhibit 6 in the trial. As seen, the chronology of events as assembled are largely sourced by reference to the underlying tendered documents and they are largely cross-referenced back to the TAB numbers of the TB.
For convenience purposes, I have included the parties' agreed chronology of facts (exhibit 6 and folio 111) in full - at a Schedule B to these reasons. It may be taken then that all the facts as assembled there have been and are found by me as facts proven at this trial.
Next, in the reasons I wish to divert briefly away from the OTA and from the facts to mention two further agreements of related key importance in this trial.
Sale and Purchase Agreement (the SPA)
An SPA of 12 August 2016, as entered between Northern Star and Billabong Gold, is exhibit 1.83 in the Trial Book (TB). Relevantly, Northern Star is there identified as Seller and Billabong Gold is identified as the Buyer.
By the recitals, under the heading 'Background', the SPA provides some further useful facts which may also be seen and accepted:
A.The Seller carries on the Gold Operations and owns the Assets, which are all of the assets necessary to carry on the Gold Operations. The Employing Entity is a wholly owned subsidiary of the Seller.
B.The Seller wishes to sell and the Buyer, as the nominee buyer appointed by CBRI [defined in this agreement as meaning Chris Braddock Resources Inc of an address in Oakville, Ontario, Canada] (as permitted under the Preferred Bidder Letter), wishes to buy the Assets and assume the Assumed Liabilities on the terms and conditions of this agreement to enable the Buyer to carry on the Gold Operations as a going concern in succession to the Seller and the Employing Entity.
C.The Buyer is a wholly owned subsidiary of [the named Canadian parent] [which] guarantees the due and punctual performance by the Buyer of the Guaranteed Obligations in accordance with the terms of this agreement.
Definitions found in cl 1.1 of the SPA, include the definitions for 'Access Agreements', 'Assets', 'Contracts', 'Excluded Assets', 'Excluded Contracts', 'Gold Operations' and 'Transferring Contracts'. I note that 'Assets' was defined to include 'the Plant and Equipment' and 'the benefit of the Seller's interest in the Contracts' (See (b) and (j) of the definition).
One of the defendants' key defensive points raised in the trial is that the SPA does not explicitly reference the OTA - as one of the identified Contracts or Transferring Contracts. That looks to be so content wise.
Essentially, the defendants' submission is that Northern Star and Billabong Gold only specifically identified the OTA in the GDAA agreement - that they entered on 11 October 2016. The GDAA does specifically refer to the OTA in Part A of the Schedule, at item 3.
At this point, I mention cl 10 of the SPA, regarding the benefits of 'Transferring Contracts' as defined under cl 10.3 and cl 10.4. The obligations and liabilities under Transferring Contracts are promised there to be performed by Billabong Gold, as the Buyer, pursuant to cl 10.4. The definition of 'Transferring Contracts' in cl 1.1 of the SPA states that schedule 5 to the SPA refers to an assembled number of Transferring Contracts. Nevertheless, this schedule looks to refer to a number of creditors by name, and it displays a description of supply and spend amounts - all numerically tabulated across several pages for each 'creditor'.
The definition for 'Transferring Contracts' within the SPA, reads:
Transferring Contracts means the Contracts which are necessary for the Buyer to be able to conduct the Gold Operations in substantially the same manner as the Seller, the benefit of which is to be transferred to the Buyer with effect at Completion by execution of the General Deed of Assignment or individual deeds of assignment, including those listed in Schedule 5 and any other Contracts agreed by the parties to be Transferring Contracts with effect at Completion.
By the SPA, a key word used in this definition, namely 'Completion', is also found defined as:
the completion of the sale and purchase of the Assets in accordance with clause 7.
It did not appear to be in dispute at the trial that the Completion Date under both the SPA and the GDAA was at 12 October 2016.
By my assessment, the OTA is not expressly mentioned by Schedule 5 of the SPA.
If it matters (and it probably does not), I also do not assess the OTA to be a contract that falls under the definition of 'Contracts' in the SPA. That definition captures contracts 'necessary' for Billabong Gold to be able to conduct gold operations (on tenements acquired from Northern Star) - in substantially the same manner as they were conducted by Northern Star. In relation to the on site mill utilisation aspects of the OTA's terms, whereby the defendants' gold ore extracted from their K2 tenements might come to be treated by that mill - the fact is that OTA was never used by the defendants in that respect for the treatment of their gold ore. That non-utilisation of the mill by the defendants was the case factually at 2016, when the SPA was perfected. Therefore, the OTA itself does not meet, on my assessment, the definition of it being a 'necessary' contract, that is referred to by the SPA. Billabong Gold did not need to rely on the OTA for it to conduct gold operations on the tenements that it was acquiring from Northern Star.
The SPA definition of 'Transferring Contracts', however, also includes the notion of 'any other Contracts agreed by the parties to be Transferring Contracts with effect at Completion'. The OTA does, I find, meet this definition, because it is specifically mentioned in the GDAA, which was agreed to in October 2016.
Next, I turn to discuss something of the content of that GDAA (exhibit 1.11).
The General Deed of Assignment and Assumption (the 'GDAA')
The GDAA entered as between Northern Star and Billabong Gold, is of 11 October 2016. Recitals found within that instrument of deed, under a heading 'Background', say this:
A.The Assignor has agreed to sell, and the Assignee has agreed to purchase, the Assets (as defined in the Asset Sale Agreement) on the terms and conditions set out in the Asset Sale Agreement.
B.The Assignor has agreed that at Completion under the Asset Sale Agreement it will assign the benefit of each Assigned Agreement to the Assignee [Billabong Gold]. The Assignee has agreed that at Completion under the Asset Sale Agreement it will assume the obligations of each Assigned Agreement in favour of the third party with the continuing rights under the Assigned Agreement.
C.In accordance with the respective obligations of the Assignor and the Assignee under the Asset Sale Agreement, the parties wish to provide for the complete vesting in the Assignee of the Assignor's interests in each Assigned Agreement and for the assumption of all obligations thereunder by the Assignee.
Definitional components within the GDAA, at cl 1.2, identify the Asset Sale Agreement referred to as being the Sale and Purchase Agreement Plutonic Gold Operations of 12 August 2016 (ie, the SPA) I have earlier discussed.
By the GDAA, the term 'Assigned Agreement' is defined as:
... each of the agreements, deeds and other documents described in the Schedule to this Deed (as amended, supplemented, novated, assigned and assumed up to the date of this Deed), which the Assignor and Assignee have designated as a Transferring Contract (as defined in the Asset Sale Agreement) under the Asset Sale Agreement.
The word 'Completion' is also found defined by the GDAA, as:
... the completion of the sale and purchase under the Asset Sale Agreement, as defined in the Asset Sale Agreement[.]
The end consequence was that 'Completion' under both the SPA and under the GDAA became the same date. As mentioned, this common date proved to be 12 October 2016.
At the heading 'Assignment', cl 2 of the GDAA provided:
(a)On and from Completion, the Assignor assigns and transfers to the Assignee the Assignor's Interest under each Assigned Agreement.
(b)The assignment and transfer in clause 2(a) is subject to and takes effect on and from Completion.
(c)As soon as practicable after Completion, the Assignor will provide notice of the assignment to the counterparty of the Assigned Agreement.
By cl 3(b) of the GDAA, Billabong Gold's expressed assumption of liabilities under the OTA was applicable from 'Completion', ie, being at 12 October 2016.
There are a number of other clauses in the GDAA I would note. Pursuant to cl 7.2 of the GDAA, there was an option for the GDAA to be executed in any number of counterparts and exchanged by email. Also, at cl 7.1, I note that the parties expressly chose for that agreement for it to be governed by the law of Western Australia. I also mention cl 6, as to the expressed relationship as between the GDAA and the SPA. Clause 6 also states that the GDAA was made, 'subject to Completion'.
Significantly, the GDAA makes express reference to the OTA
- albeit by using what was an obviously erroneous date reference of 23 September 2013 [sic]. This can be located at the schedule to the GDAA at 'Part A: Contracts Effected By Formal Agreement' at item 3.At the trial, the defendants pursued an issue as to a disputed, alleged non-perfection of the GDAA - which I address and resolve later in these reasons.
At the end, however, I came to conclude that the GDAA instrument was validly entered and was executed as between Billabong Gold and Northern Star, at or about the date it displays on its face, namely, at 11 October 2016. Following what was a late pleading amendment made to the defence, it was no longer in dispute at the trial that the defendants were provided with effective notice of the GDAA
- so that Northern Star's rights and liabilities under the OTA were assigned to Billabong Gold. Notice was by a letter of 21 October 2016 that was sent by Northern Star (see exhibit 1.94). Consequently, subject to resolving the defence issue over an alleged non-perfection issue of the GDAA, there remained no other dispute over Northern Star's rights under the OTA being validly and legally assigned to Billabong Gold at the time of notice of Completion (as defined) being given.As the GDAA explicitly refers to the OTA, by its Schedule at pt A item 3, the OTA became then a 'Transferring Contract', for the purpose of the SPA of 12 August 2016.
As regards scheduled agreements to the GDAA vis-à-vis the SPA, I also consider the definition of 'Assigned Agreement', as being a Transferring Contract. That engaged at 11 October 2016 - when the GDAA was agreed to - as the definition of a Transferring Contract under the 12 August 2016 SPA referred to
... and any other contracts agreed to by the parties to be Transferring Contracts with effect at Completion.
Aspects of the ROFR obligation in cl 12.6 of the OTA
Next, I would highlight, non-exclusively, some of the features that surround cl 12.6 within the OTA - and within that subclause, to the contractual ROFR offer entitlement that is afforded to Northern Star, by its terms.
The first point is a negative feature. I raise it in light of one of the other defensive arguments contended for by the defendants, but which, in the end, I must also reject.
My early observation is in relation to what is not to be found in the text of cl 12.6 ROFR clause. As seen, its text displays no reference, on its face, to it being operative only for periods where the OTA has otherwise been activated in other respects by the defendants - for a purpose of them accessing of Northern Star's Mill by the defendants for the treating of the gold ore from their tenements. The mill itself was situated on the tenements held by Northern Star. See the definition of Plutonic Dome tenements (defined by reference to the further OTA defined terms of 'Term', 'Commencement Date' and 'End Date' found within the OTA).
My negative observation above applies to the entirety of cl 12 which, by my assessment, displays no relevant constraints towards any of the other specified mutual entitlements and obligations assembled under OTA cl 12.
A second OTA feature to highlight is found within cl 12.6(a), at its second line, by the word, 'Disposal'. The word 'Disposal' is not specifically defined by the OTA. Nevertheless, the word 'Dispose' is expressly defined by the OTA, as:
Dispose means to sell, assign, transfer, part with the benefit of, declare itself a trustee in respect thereof, grant an Encumbrance, grant an option in respect thereof or otherwise deal with.
As a matter of the proper interpretation of the OTA, the definition provided for the word 'Dispose' (seen as implemented in broad terms) is also, in my view, applicable for exposing the true meaning of the word 'Disposal', as it is found used in OTA at cl 12.6. The word 'Dispose' is used frequently throughout OTA cl 12. For instance, I notice its deployment in OTA cl 12.1, cl 12.2(a) (albeit the word 'Disposal' is used in cl 12.2(b) and (c)), in cl 12.3(a) and (b) and see cl 12.4(a) and the use of the word 'Disposal' in cl 12.4(b)(i). See also use of the word 'Dispose' in cl 12.5(a) and juxtaposed there to use of the word 'Disposal' in OTA cl 12.5(b) and (c).
There was no argument raised at the trial that suggested that meaning of the word 'Disposal', as it is found used in the context of cl 12.6 of the OTA, carried a different or more limited meaning to the (wide) OTA definition seen as provided for the word 'Dispose'.
Third, I would next highlight that if an ROFR offer right had matured, to be held by Northern Star under OTA cl 12.6 vis-à-vis the defendants' tenement conduct - then its temporal duration would be for only 30 days. This follows expressly, pursuant to cl 12.6(d). That is subject to a potential extension of a further 14 days, by reference to OTA cl 12.6(b)(iii). Fundamentally, however, if an ROFR offer right is not taken up within what is a limited timeframe as specified, then an ensuing six‑month window of permitted dealing follows for the defendants, with their tenements is then held by cl 12.6(f) (on the terms seen there).
Fourth, the preface to OTA cl 12.6(b) highlights what is seen there as a duality of possible disposal scenarios. In other words, ROFR offer rights as they were afforded to Northern Star (from, ie, the defendants, Ord or DPPL) as regards a future disposal of their interests in the (OTA) Tenements, could arise by two possible scenarios.
First, is where one or other of the defendants came to be the recipients of a bona fide offer to them to purchase their Tenement interest, or a part thereof (and which one or other defendant is willing to accept). Second, the preface to cl 12.6(b) would also be engaged where either of Ord or Dampier (referred to now as Vango, or DPPL) initiates an offer by them to sell the whole or part of their interests in those same Tenements under cl 12.6. And it is not merely the making of such an offer to sell that engages this prior ROFR offer obligation vis-à-vis Northern Star. The wider ROFR wording, as seen, is deployed, in reference to 'an offer to sell', is delineated but also by the key phrase 'or intend to make' (vis-à-vis the defendants) an offer, which must necessarily embrace events earlier to the offer itself being issued.
As now exposed, the OTA cl 12.6(b) terminology is obviously wide. It is unlike some other more confined scenarios of ROFR engagement criteria of proposed sale, as are commonly seen used under other ROFR clauses. Here, the ROFR engagement criteria 'bites' earlier temporally than the issuing of the offer itself. The ROFR offer obligation is not expressed to be triggered merely by a mooted sale, nor even by the making of an offer to sell. Widely drawn, cl 12.6(b) may be engaged with and triggered at an even earlier temporal point. That is, the stage where Vango or DPPL or both, have reached a point in their corporate decision making, where they 'intend' to make 'an offer to sell' their interest in some or all of the Tenements for a consideration.
The textual breadth of the cl 12.6(b) ROFR offer potential catchment criteria accordingly delivers a very wide scope of potential applicability and potential engagement. This is to be measured against a mooted offer under a disposal by a transaction in relation to the whole, or of a part of the defendants' interest (Vango or DPPL) in the OTA Tenements.
So appreciated, the defendant's cl 12.6(b) ROFR offer obligation, with such wide potential applicable breadth, stands to be measured against another of the defendants' resistance arguments at the trial. The argument was that the cl 12.6(b) ROFR obligation would only be triggered, in effect, by the perfection of a legally binding and unconditional contract of sale of an interest in, or part of the OTA Tenements. Clearly, that is simply not the case, even arguably so, arising from the grammatical wording of OTA cl 12.6(b). That defensive resistance argument is of an undue limitation to the scope of the ROFR clauses application. It should immediately be put aside and dismissed - as an unmeritorious distraction.
Relevance objections by the defendants
Aside from highlighting the textual breadth for a potential engagement in Northern Star's (now Billabong Gold's) favour of the terms of the ROFR offer clause, by OTA cl 12.6(b), the subclause is important for another reason at the trial. Its terms bears against a relevance objection which was raised late by the defendants and was put against the admissibility at trial of a number of TB documents
- otherwise sought to be tendered by Billabong Gold during the trial. These documents were largely public statements made and issued at the time by the defendants, or by their parent or related entities. Such ASX announcements were made at the time by publicly listed corporations
- as to proposed or forthcoming dealing or acquisition transactions concerning the OTA tenements.The defendants raised a late relevance objection at the trial against such announcement material being relevantly received. This was put on a basis that an ROFR offer potential allegation could arise only by a perfected transaction dealing document - concerning the OTA tenements themselves. Thus, it was put such anterior announcement documents could not possibly be used for a purpose of ascertaining whether or not a perfected transaction had triggered an OTA ROFR offer obligation, so it was put. I must disagree.
The difficulty with the relevance objection by the defendants is that OTA cl 12.6(b), as now seen, is clearly drawn on a basis of wide potential engagement criteria. This can be observed in the reference to the 'intent' of one or other defendant corporations to make an offer to sell. Or, on another scenario, from my ascertained willingness of either Vango or DPPL to dispose of the whole or part of an interest in their OTA tenements.
An existing corporate intent to offer to sell (objectively ascertained) from time to time during 2016 and 2017 could engage with cl 12.6(b)'s potential ROFR offer engagement obligation. This is to the benefit of Northern Star as being potentially relevant ROFR engagement conduct. Consequently, this genre of public announcement document might potentially prove relevant in an evidentiary sense. The relevance goes towards ascertaining the defendants' intent. And so, these documents should be admitted as relevant. Relevance was the only basis of the defendants' late objections. Plainly, such materials, however, still need to be weighed as to their overall evidentiary significance, in overall context. However, questions of weight towards such materials obviously present as a different forensic question.
During the course of the trial, I indicated I would receive the TB announcement documents - albeit objected to on the basis of a subsequent ruling upon the evidentiary relevance objection, to follow in due course. And so it is my ruling is that such materials are potentially relevant. Hence, the documents objected to by the defendants will be admitted and received into evidence.
Next, I turn to discuss the position of Billabong Gold in the action before evaluating the defendants' various tiers of resistance - seeking to thwart the plaintiff's primary claim for equitable relief by way of final mandatory injunctive enforcement orders. The plaintiff seeks, in effect, to compel the defendants to make good OTA cl 12.6(b) ROFR offer rights to it - which were said to be engaged by reference to a series of conduct events and transactions that occurred and involving the defendants and the OTA Tenements (or some of them) during either 2016 or 2017.
Of course, any questions of damages, if the plaintiff makes good its ROFR liability case, as mentioned, are deferred.
The position of Billabong Gold as an assignee of Northern Star of OTA rights
As earlier mentioned, Billabong Gold is an Australian corporation registered in Western Australia on 27 July 2016. According to an ASIC company details extract of 28 August 2020 (see exhibit 1, tab 163), Billabong Gold only has two issued shares, both of which are held by its ultimate parent holding company, Superior Gold Inc, of Ontario, Canada. Three of Billabong Gold's four identified directors (Messrs Bradbrook, Olmsted and Boyle) display residential addresses located as in Ontario, Canada. A fourth director, Mr Alfred Gillman, is identified at holding a local Perth address.
Under the pleadings as exchanged for this action, it is admitted that Billabong Gold's holding corporation parent, Superior Gold, is a 'Canadian based gold producer listed on the TSX Venture Exchange in Toronto' (see par 1(b) of the plaintiff's amended statement of claim dated 16 July 2020 (folio 75) (ASOC)).
At par 12, the ASOC pleads in relation to Billabong Gold's position vis‑à-vis the OTA and its acquisition of contractual OTA rights thereunder from Northern Star as against the defendants, that:
By a written deed titled 'General Deed of Assignment and Assumption' dated 11 October 2016 between Northern Star and Billabong, Northern Star assigned and transferred to Billabong all of Northern Star's rights, title and interest in, to and under, amongst other agreements, the Agreement [OTA].
In particular, I note the above reference to the GDAA.
By a pleaded response to that ASOC plea seen above, the defendants' defence of 20 August 2021 (folio 117) at par 12(d), denies that Northern Star and Billabong Gold 'validly executed the GDAA dated 11 October 2016'. This plea was amended again, shortly prior to the commencement of the trial. Particulars under the plea (at (B)) elaborate further on the point:
A copy of the document entitled 'General Deed of Assignment and Assumption' dated 11 October 2016:
(i)is nine pages in length;
(ii)includes pages one to four, along with a fifth page that is not numbered, which are referred to in the header as 'General Deed of Assignment';
(iii)includes two 'signing pages which:
(a)are referred to in the header as 'Access Deed';
(b)are referred to in the footer as '160822-9 General Deed of Assignment and Assumption.Docx'; and
(b) [sic]include the signatures of Christopher Bradbrook and Alfred Gillman for Billabong and John Fitzgerald and Liza Carpene for Northern Star on one signing page and the signatures of Christopher Bradbrook and Paul Olmsted for Billabong and no signature for Northern Star on the second signing page.
That is a small aspect of a greater plea seen under par 12 of the defence.
The defence plea is that Billabong Gold's receipt by an assignment of Northern Star's rights, including, relevantly, Northern Star's ROFR rights under the OTA, is denied by the defendants. This is raised around the challenged legal validity of the GDAA and, furthermore, as to the effectiveness of any attempted assignment of the rights (par 12(g) of the defence) to Billabong Gold.
Clauses 12.1 and 12.3 of the OTA
It is necessary to return to expose some further aspects of the OTA at cl 12, to note particularly OTA cl 12.1 and cl 12.3 - as regards Northern Star. I highlight what is said there about that corporation permissibly disposing of its OTA rights - by way of an assignment or otherwise to another entity - such as to Billabong Gold in 2016.
To that end, OTA cl 12.1, under the heading 'Generally', says:
A Party may not Dispose of its right, title or interest under or in respect of this Agreement except in accordance with this clause 12 or as may otherwise be permitted by this Agreement.
By OTA cl 12.3, under the heading 'Disposal', it is said further:
(a)...
(b)Northern Star may Dispose of its rights and obligations under this Agreement provided the assignee has executed a deed in favour of Ord and Dampier assuming all of Northern Star's obligations and liabilities under this Agreement to the extent of the interest assigned. (my emphasis in bold)
A central part of the defendants' resistance arguments at the trial concerned a contended ineffectiveness of the GDAA's expressed assignment of Northern Star's rights to Billabong Gold (including Northern Star's OTA rights). The argument of the defendants was focussed at a suggested non‑engagement of cl 12.3(b) of the OTA. But the defendants do not contend that the GDAA was not a deed - if it is found otherwise to have been perfected by its valid execution between Northern Star and Billabong Gold (see ts 189).
Nor do the defendants contend at the trial that the GDAA, if found to be properly executed, was not a deed made 'in favour Ord and Dampier (see ts 189). That is so even though the GDAA, as now exposed, is seen to address transfers of multiple as identified contracts. This extends to include contracts as between Northern Star as entered with parties other than the defendants. However, no challenge was raised at trial grounded on an argument that the GDAA was not favouring Ord or Dampier. Instead, the basis of the defendants' resistance was largely directed at a contended imperfect execution of the GDAA by Billabong Gold in 2016. Before resolving that defence issue, I need to divert to discuss some other features in the trial.
Issues in the trial and issues abandoned
As now seen, the essence of the underlying controversy is obviously contractual, in character. It arises over the contended engagement in the plaintiff's favour of the OTA's cl 12.6(b) ROFR obligations, binding and bearing upon both Vango and DPPL.
A contended enjoyment by Billabong Gold of ROFR offer rights and thereby, as to the the defendants' alleged breaches of the OTA, is essentially tied to two distinct series of transactions or dealings by the defendants arising as dealings around their OTA Tenements.
First arising, were some 2016 transactions and events - as described in par 9 of the plaintiff's ASOC.
Next, however, is a second tranche of 2017 transactions also contended to have engaged with and to have then triggered ROFR offer obligations - at between January and May 2017. These events are the subject of par 16 of the ASOC.
The two distinct series of 2016 and 2017 transactions need to be evaluated separately and discretely vis-à-vis any potential engagements or otherwise, as to the generating of an ROFR offer obligation at the relevant times.
Factually, these 2016 and 2017 transaction events themselves are not disputed by the defendant as having occurred as and when they did. It is also agreed on the trial evidence that no ROFR offer opportunity was ever extended by way of a making of an ROFR offer by the defendants and made with the required notice (by OTA cl 12.6(b) and cl 12.6(c)), favouring Northern Star or Billabong Gold - with a 30 day opportunity to evaluate any taking up or otherwise of an interest in the OTA Tenements on the same terms, before someone else did.
Instead, what was put heavily into dispute from the defendants' perspective at the trial, was whether the 2016 and 2017 event transactions themselves could relevantly trigger the ROFR offer obligations of the defendants under OTA cl 12.6(b), at relevant times.
It was once also disputed by the defendants' pleas that notice of assignment by Billabong Gold under the GDAA had been provided to each of the defendants on several occasions. The issue over notice departed however, by reason of the last iteration of amendments made to the defendants' pleaded defence (see the admission under par 15 of the defence). Notice of the assignment came then to be accepted, as having been given by way of:
(a)a letter from Northern Star dated 21 October 2016 (exhibit 1.94);
(b)a letter from the Canadian parent company of Billabong Gold to the first defendant of 12 June 2017 (exhibit 1.105); and
(c)by an email from a Ms McDonald (a lawyer for Northern Star) to Ms McMaster of All Mining Legal (persons acting for the defendants) of 15 July 2018 (see exhibits 1.115, 1.116, 1.117, 1.118 and 1.119).
The issue as to valid notice of the assignment to Billabong Gold by Northern Star under the GDAA being given to the defendants was therefore ultimately accepted by the defendants as having been given, at not later than at 21 October 2016 (ie, under the notice then given by the assignor, Northern Star).
Prior to commencement of the trial, there had been an attempted estoppel amendment plea sought then to be pleaded by the defendants. This was explained in the defendants' pre‑trial written submissions of 13 August 2021, at between pars 47 and 60 (folio 112). However, that foreshadowed estoppel argument also came to be abandoned by the defendants, shortly prior to the commencement of the trial.
Noting such issue excisions, I can return to discuss what remained at the trial as the live issues raised by the defendants, made against the proper execution and validity of the GDAA of 11 October 2016, as between Northern Star and Billabong. This was a discrete defensive argument. It is convenient to deal with it immediately.
The proper execution of the GDAA
Essentially, an effective execution of the October 2016 GDAA instrument made between Northern Star and Billabong Gold is questioned by the defendants - by reference to two features observed upon by the defendants and said to be curious.
First, was that the GDAA looks to have been a subject of dual execution by directors of Billabong Gold, in effect, as seen at different successive concluding pages in the GDAA document (both of which are seen below a page number of 8). Execution by the directors without the application of the corporate seal is, of course, open - by s 127(3) of the Corporations Act.
The second supposedly curious feature raised by the defendants points to a superfluous or erroneous header notation - seen on two of the concluding pages of the GDAA. They display at their top right‑hand corner the header notation of 'Access Deed'. That description would be an inappropriate description of the GDAA. I refer specifically to exhibit 1.11 and at the top of pages 0571 and 0572.
However there is, on my assessment, no substance in what I assessed were undeveloped and somewhat opportunistic attempted challenges as raised by the defendants against the perfection of the GDAA instrument - against it being validly entered as between Billabong Gold and Northern Star at 11 October 2016. This is so, for a number of reasons.
First, as already seen, the GDAA envisages and does permit by cl 7.2, that the deed may be executed by any number of counterparts and can be exchanged by email to the email addresses, at cl 21.1 of the SPA.
Second, a copy of the GDAA was produced upon a pre‑trial subpoena as issued by Billabong Gold in this action to Northern Star, as exhibit 1.12, and it presented to be in an identical form to the GDAA copy as it was discovered and tendered by the plaintiff (exhibit 1.11).
Third, in terms of the queried execution pages which display a header notation in the top right corner of 'Access Deed' (at pages 571 and 572) and on the Northern Star produced version (pages 589 and 590) - it is also the case that at the foot of each of those questioned pages is another footer notation. The notation is identical to the footer notation seen in the earlier components of the document, reading namely:
160822-9 General deed of assignment and assumption.Docx
That footer notation is perfectly appropriate to match with the rest of the GDAA instrument. The curious header notation is a curiosity but it is not a substantive aspect of this deed and goes nowhere to suggest the instrument was not validly perfected.
Fourth, the fact that the GDAA instrument copies display (on a common page 8) a further execution signing page at a concluding page by a different Billabong Gold director/company secretary (Mr Olmsted) rather than Mr Gillman - ultimately, is also neither here nor there. A redundancy feature of extra signatures by directors does not go to detract from the validity of the execution of the document pursuant to s 127 of the Corporations Act for Billabong Gold achieved via the signature of its director, Mr Bradbrook, and by another director, Mr Alfred Gillman (page 589).
Fifth, as is admitted, Northern Star (see exhibit 1.94) as the assignor, on 21 October 2016 had then advised the directors of Vango in terms:
Dear Sirs,
COMPLETION OF SALE OF PLUTONIC GOLD OPERATIONS
Northern Star Resources Ltd (Northern Star) completed the sale of the Plutonic gold operations to Billabong Gold (Billabong Gold) on 11 October 2016.
We enclose for your records a copy of a General Deed of Assignment executed by Northern Star and Billabong dated 11 October 2016 under which Northern Star assigns the rights, and Billabong assumes the obligations of Northern Star under, the Ore Treatment Agreement dated 23 September 2013 [sic - 23 September 2014].
The letter is signed by a Liza Carpene, described as the company secretary, Northern Star Resources Ltd. The attachment to that communication contained, essentially, the substance of the GDAA including, with some redactions, reference to Northern Star agreements as being the subject of assignment as an assigned agreement, and as referred to by the Schedule to the GDAA, as:
3.Ore Treatment Agreement between Northern Star Resources Ltd, Ord River Resources Pty Ltd [sic] and Dampier (Plutonic) Pty Ltd ...
albeit still with the erroneous date (but obvious otherwise) reference of September 2013 [sic, 2014] and referring, as continuing parties, to Ord River Resources Pty Ltd and to Dampier (Plutonic) Pty Ltd.
The suggested curious Access Deed header reference was seen on the last two pages of the notified copy of the instrument. This also is only an immaterial and irrelevant distraction.
Sixth, exhibits 1.11 and 1.12 are admissible in evidence, in any event, as business records tendered by the plaintiff.
So, at the end, I am left satisfied that despite the denial of the defendants the GDAA instrument between Billabong Gold and Northern Star Resources was validly perfected under the terms of exhibits 1.11 and 1.12 (which are identical) at 11 October 2016.
The instrument describes itself as a deed. It was, I also find, executed in conformity with the requirements of s 127(3) of the Corporations Act - albeit seals of the two corporate entities were not applied. Nevertheless, by s 127(3) of the Corporations Act, a company may validly execute a document as a deed if the document is expressed to be executed as a deed and is executed in accord with subs (1) or (2). That is the case here.
The GDAA was validly executed in accord with s 127(1) by Billabong Gold and by Northern Star.
Consequently, the GDAA instrument was a perfected agreement as between those two Australian corporations at the time. It is also an instrument executed as a deed in accord with the requirements of s 9 of the Property Law Act 1969 (WA) as to the required formalities for a valid deed.
Notice of the GDAA's assignment in respect of Northern Star's rights and obligations by the GDAA was then duly given to the defendants - under communications the subject of par 15 of the ASOC which came to be admitted by the defendants.
Consequently, the requirements of s 20(1) of the Property Law Act for a valid legal assignment at law under statute were, I find, met for the GDAA. Section 20(1) of the Property Law Act relevantly provides:
Any absolute assignment by writing under the hand of the assignor ... of any debt or other legal chose in action, of which express notice in writing has been given to the ... other person from whom the assignor would have been entitled to receive or claim that debt or chose in action, is effectual in law (subject to equities having priority over the right of the assignee), to pass and transfer from the date of the notice -
(a)the legal right to that debt or chose in action;
(b)all legal and other remedies for the debt or chose in action; and ...
ROFR obligations and breach
I have now concluded that the GDAA was validly executed and perfected as between Northern Star and Billabong Gold at 11 October 2016. It was validly executed then as a deed. Further, proper notice of the GDAA was then given to the defendants in respect of the OTA as to it being an agreement the subject of the GDAA. Notice was given of the OTA rights of Northern Star being thereby assigned and of the obligations of Northern Star being accepted by Billabong Gold.
From that platform, I can now proceed to address the question of whether the event transactions of 2016 and 2017 involving the defendants did trigger the contended ROFR offer obligation rights, or not under the OTA. The defendants, of course, contend to the contrary.
For this task, it is important to notice again that the 2016 event transactions of the defendants which are said to trigger ROFR offer rights, viewed in a chronological sense, all happened some months prior to the entry into and completion upon the GDAA's assignment of the OTA rights of Northern Star to Billabong Gold.
Hence, for the 2016 engagement dealing transactions, an ascertained breach of the OTA cl 12.2(b) contract ROFR rights that arose by reason of the 2016 dealing transaction events would be OTA breaches (if established). At the time of any such breach, they would be choses in action - for breach of (the OTA) contract and a chose at the time of Northern Star. At common law, of course, the orthodox breach of contract relief redress for the innocent party not in breach - is by common law compensatory damages, assessed on a basis sometimes referred to as expectation loss damages.
The 2016 transactions of the defendants
The March and May 2016 tenement dealing transactions of the defendants that are alleged by Billabong Gold to have engaged with and triggered the OTA's ROFR offer obligation falling upon the defendants raise another key question to be determined. This is by some contradistinction to later 2017 transactions relied upon as ROFR breaches, all of which transpired after the time of the 12 October 2016 'Completion' happening under the GDAA with Billabong Gold.
But for the earlier 2016 events, the question is whether Northern Star's bare rights of action (choses) for breach of contract relief upon the triggering of a non-observed ROFR offer obligation in the OTA, if held by Northern Star, are rights capable of being validly assigned later on - to Billabong Gold. The defendants by their defence pleas made under pars 12(f), (g) and (h) contend to the contrary concerning the alleged non‑assignability in such bare chose in action breach rights
- from Northern Star to Billabong Gold.By pars 12(g) and (h) of their defence, the defendants plead:
(g)Vango and DPPL deny that the Sale Agreement and/or the Assignment Deed were effective to assign to Billabong any rights under the Agreement, or any rights, title or interest in respect of any causes of action in respect of the Agreement that had, or may have, accrued to Northern Star prior to 11 October 2016;
(h)in any event, Billabong did not hold any genuine commercial interest in any rights, title or interest that may have accrued to Northern Star in respect of the Agreement prior to 11 October 2016 such that, at law, Northern Star could not assign to Billabong, and did not so assign, any such rights, title or interest;
...
So observed, what the defendants essentially contend by these denial pleas, and in particular by reference to an asserted absence of Billabong Gold holding any 'genuine commercial interest' in rights of Northern Star prior to 11 October 2016 - is to raise a problem of a suggested prohibition by law against dealings (such as attempted assignments) in bare choses in action (such as bare rights to litigate).
The defendants say that longstanding tort and public policy objections against so called 'maintenance', by any trafficking in the proceeds of litigation, would apply here - as regards Billabong Gold and to the 2016 transactions vis‑à-vis any pre‑1 October 2016 ROFR breaches. More simply, the defendants' argument is that any choses in action as once held by Northern Star for breach by the defendants' of their OTA ROFR obligations to Northern Star, and arising by reason of tenement dealing transactions occurring in the first half of 2016, and thus at times prior to the October 2016 GDAA - are prohibited by law from being validly assigned to Billabong Gold. That corporation, as will be remembered, was itself only incorporated on 27 July 2016. It is said by the defendants therefore that Billabong Gold manifestly could have held no genuine commercial interest in the OTA rights being assigned to it in any property (chose) related to those breach rights at relevant times. How could it, if Billabong Gold did not even exist at the time of the alleged breach events in 2016.
Before resolving that line of resistance, I need to factually expose more fully the 2016 and the 2017 conduct events by the defendants arising around their dealings with their tenements. These dealings are said by the plaintiff to have been conduct that triggered and so, led to the breaches of the cl 12.6 ROFR offer obligation under the OTA by the defendants. That is, of course, disputed.
Some background to the ROFR infringing transactions of 2016 and 2017
The allegedly infringing ROFR transactions engaged in by the defendants are found assembled at par 9 of the ASOC for the 2016 transactions, and then at ASOC par 16, for the 2017 transactions. Factually, such events and conduct are not in dispute as having happened at these times, as alleged.
The 2016 and 2017 transactions of the defendants with their OTA Tenements, themselves are well documented. The pleas under ASOC pars 9 and 16 are seen to be helpfully cross-referenced to documents which form trial sub-exhibits from the TB under exhibit 1 for dealings described - as having triggered ROFR offer rights at relevant times in 2016 and 2017.
Summarised in broad terms, the 2016 tenement dealing transactions had seen efforts made then as between Vango and DPPL
- to transfer over DPPL's then minority holding interest in each of the Plutonic Dome JV tenements to Vango. Vango would thereby acquire all of the legal interest in each of the tenements. But as will be seen, the 2016 plan never came to a full fruition, at least in that form.At the time the 2016 dealing transactions occurred, DPPL at then had been a 100% wholly owned subsidiary of another listed corporation, Dampier Gold Ltd (Dampier Gold). Together, Vango and DPPL were noted as being registered as the owners of proportionate interests in the various tenements as mentioned in the OTA.
The 2016 transactions, which are alleged to have triggered the ROFR offer obligations favouring Northern Star under cl 12.6(b) of the OTA, display efforts then by Vango to obtain a 100% registered ownership tenement interest (beyond its then 60% majority tenement interest holding) for most of the OTA tenements, generally speaking, by purchasing the minority tenement ownership interest of DPPL.
What was then being negotiated as between the two defendants in 2016 was the sale of DPPL's minority tenement interest holding in the OTA tenements themselves, by its then corporate parent. This was to be to the majority interest holder, namely to Vango - so Vango would then be the 100% registered owner for all the OTA tenements.
During 2016, to that end, various draft sale and purchase agreements came to be prepared by the parties' lawyers. Albeit much discussed, none were ever completed upon. Obstacles arose.
As the parties' proposed drafts evolved, the realisation of a difficulty seems to have dawned upon the lawyers for the defendants. That is, an ROFR exposure position to Northern Star, under the terms of the OTA looks to have realised as first needing to be addressed. Eventually, a condition came to be drafted which, in effect, would render any proposed sale and purchase of the minority interest in the tenements from DPPL to Vango, as being made a subject of the condition precedent. The condition precedent would be the prior receipt of a waiver from Northern Star. Such a waiver receipt condition came to be inserted into the exchanged drafts. The sale and purchase would not be completed upon, if the condition precedent from Northern Star was not received. It was not, as things turned out.
The requested waiver never came from Northern Star. Consequently, although there was otherwise agreed upon agreement, in respect of a sale of the minority interest held by DPPL in the tenements over to Vango - such a sale was never completed upon due to the failure of the condition precedent to performance of that sale. Later, that sale agreement was cancelled. Stamp duty as paid on the sale, was refunded.
However as matters eventuated in 2016, a similar in effect result over DPPL's minority tenement holding interest disposition to Vango, in effect, was achieved - but under a different series of 2016 transactions. By the substitute transactions, all shares in DPPL the corporation were instead sold to Vango by DPPL's corporate parent, Dampier Gold. Hence, all the shares in DPPL came at the end to be acquired by Vango. From then, DPPL became Vango's wholly owned subsidiary corporation.
Under those later 2016 arrangements as perfected, the legal minority ownership interest, as had been held by DPPL in the OTA (Plutonic Dome) tenements, did not change. What did change merely was that Vango effectively acquired the ownership of all the shares in the DPPL corporation, from its then parent, Dampier Gold. Consequently, Vango purchased from Dampier Gold a 100% shareholding control over DPPL and thereby at 2016 Vango obtained, indirectly, 100% control over all the Plutonic Dome tenements.
At trial, it was accepted that Vango's 2016 ultimate acquisition of all the shares in DPPL (rather than by it acquiring directly DPPL's ownership minority interest in the tenements themselves) was not a disposal, or a deemed disposal - for the purpose of triggering the ROFR offer obligations under cl 12 of the OTA (see cl 12.4(b)(iii)). That accepted result was in contradistinction to a capture - had there been a direct disposal of (the minority) interest in the OTA tenements themselves. This would have triggered an engagement of OTA ROFR cl 12.4(b)(i) and cl 12.6(b).
It was an agreed fact (see exhibit 6) for the trial that at 16 August 2016 Vango, DPPL, and the then parent of DPPL (Dampier Gold), had all entered an agreement for the purchase by Vango of all the shares in DPPL (see also exhibit 1.37). That share acquisition was completed by Vango.
From 24 August 2016, DPPL then became a wholly owned subsidiary of Vango. All those 2016 transactions had preceded 12 October 2016, before 'Completion' occurred upon the GDAA and the SPA as between Northern Star and Billabong Gold.
Any choses in action of Northern Star for breach against the defendants, arising out of the 2016 dealing transactions by way of the breaches by the defendants against their ROFR offer covenants, were at the time, the property of Northern Star.
The 2016 transactions, which are impugned by Billabong Gold as ROFR breach conduct in 2016, have been directed first at DPPL - by it either offering to sell to Vango or, second, at Vango by it receiving an offer from DPPL that Vango was willing to accept in relation to the OTA (Plutonic Dome) tenements (effectively, all of them). In a commercial sense, there had obviously been an intended 2016 direct disposition by Dampier Gold of its residual minority interest in those OTA tenements - over to the majority tenement interest holder, Vango.
The 2016 transaction events might generally be viewed as an exit then of Dampier Gold away from that Plutonic Dome joint venture, leaving those tenements as held 100% by Vango. Billabong Gold does not seek to rely on the eventual sale of the shares in DPPL to Vango as having triggered ROFR obligations. Instead, it argues that it was all of the earlier 2016 direct sale efforts, even though they never came to fruition at a sale settlement, that nevertheless, did trigger the ROFR offer obligation in 2016. It says the fact that a direct sale disposal transaction never came to be completed in direct fashion does not matter at all given the scope of the cl 12.6 ROFR clause in the OTA.
At this point, it is convenient to address three more of the defendants' central resistance arguments as put at the trial, as regards a contended non‑engagement from the 2016 and by further 2017 transactions against ROFR obligations under cl 12.6 of the OTA.
The first of these lines of defence asserts that the ROFR obligations under cl 12.6 simply never became operative. This is because the defendants say they had never taken up an opportunity as was afforded them by the OTA terms to have their gold ore as extracted from their K2 tenements (some 31 km away) to be transported to be processed and treated at Northern Star's Mill.
The second line of resistance argues that the 2016 bare cause of action rights of Northern Star just could not ever be validly assigned to Billabong Gold.
The third line of resistance is to assert that the 2016 and 2017 tenement disposition transactions of the defendants concerning their tenements - were (mostly) never perfected transactions and so did not ever trigger any cl 12.6 obligations upon them under the OTA.
I turn to resolve each of those three arguments in turn.
First Resistance Argument: The Ore Treatment Agreement (OTA) of 23 September 2014 'Commencement Date', 'Term' and a suggested non‑activation of cl 12 ROFR obligations in the defendants
The argument is that there was always an unmet condition precedent negating any activation of the defendants' ROFR offer obligations in cl 12.6 of the OTA - which condition was never fulfilled at any time. It follows, say the defendants, that no ROFR obligations arising from the OTA ever became live or became incumbent upon them - vis-à-vis the defendants' 2016 and 2017 tenement disposition transactions as complained of by the plaintiff from an alleged ROFR offer omission breach perspective.
This line of defence raises essentially, an argument of contractual construction towards the OTA, around key terms in the OTA
- principally, the as defined terms 'Commencement Date', 'End Date', 'Term' and 'Mill'. All those OTA terms can be located in full at Schedule A to these reasons.In essence, the defendants argue that because they had never under the OTA nominated to use Northern Star's Mill to process gold ore from their OTA tenements, by giving a required three months' written notice to Northern Star, the 'Term' of the OTA had never begun. In consequence, they argue that distinct OTA obligations bearing on them, found in OTA cl 12.6, in relation to the giving of an ROFR offer to Northern Star (or later, to Northern Star's assignee, Billabong Gold)
- did not at any stage ever become active OTA obligations that were required to be observed or performed by them.To evaluate such arguments of construction, the commercial context of the OTA is obviously important. To that end, I would mention two key features. First, I mention the OTA recitals, as stated background to the OTA, which I will set out below. Second, are some extra suggested relevant extrinsic facts for a construction exercise, as they are raised and relied upon by the defendants, and found pleaded under par 6 of their defence pleading. Such par 6 facts may all be taken to be established, albeit at the trial, their significance towards any OTA construction conclusions as is contended for by the defendants, is firmly in issue.
Four recitals in the OTA as entered between the defendants and Northern Star, under a heading 'Background', read in the following terms:
A.Northern Star owns and operates the Mill.
B.Ord [referring to the first defendant] is currently earning up to a 75% interest in the Plutonic Dome Gold Project Joint Venture from Dampier [referring to the second defendant].
C.Ord and Dampier in their capacity as the Plutonic Dome Gold Project Joint Venture parties have requested that Northern Star crushes and treats the Gold Ore produced from the K2 Deposit by the Plutonic Dome Gold Project Joint Venture, at the Mill which is located approximately 36 kilometres from the Plutonic Dome Gold Project and 216 kilometres north east of Meekatharra in Western Australia.
D.The Parties have agreed that the Gold Ore will be treated through the Mill on the terms detailed in this Agreement.
The defendants point out, correctly, that there is nothing mentioned in those recitals concerning Northern Star potentially obtaining ROFRs over any of the defendants' tenements worked as part of a joint mining venture - then in place as between the defendants. There is also no dispute that the K2 Deposit as seen referred to was a component then of a greater number of mining tenements as the subject of the Plutonic Dome Gold JV.
The defined term 'Term' by the OTA, reads:
means the period commencing on and from the Commencement Date and ending on the End Date.
'Commencement Date' is then found defined in the OTA as meaning
... the date which is nominated by [the first and second defendants together] by giving not less 3 month's [sic] written notice to Northern Star.
Between cl 2 through cl 11 of the OTA, a number of potential mill access arrangements for the benefit of the defendants are found assembled, in respect of the treatment of the defendants' gold ore derived from K2 - on a basis of that such ore could, on terms, possibly come to be treated at Northern Star's Mill. Access to the Mill of Northern Star by such arrangements would be applicable during the Term (as defined). But in order for the defendants' gold ore to be treated at that Mill during the Term, there first needed to be a notice given to Northern Star by the defendants - in accord with the definition of 'Commencement Date'. No such notice was ever given, as is accepted. Furthermore, it is accepted that no gold ore emanating from the defendants' K2 Deposit tenement was ever presented for processing at Northern Star's Mill. All that may be accepted, factually.
The word 'Term' is seen used in the OTA at a number of places, including at cl 2.1(a) of the OTA, cl 2.2(a), cl 6.2(a), cl 10.1 and at cl 10.3.
Significantly, however, there is no use of, or reference to the OTA defined word 'Term', or to 'Commencement Date' found anywhere within cl 12 of the OTA. Furthermore, cl 12 makes no reference at all to any of the as enumerated cl 12 obligations of the defendants as being tied to the temporal concept of the OTA's 'Term' - or to them only being activated by the giving of a notice about use of the Mill under the OTA description of 'Commencement Date'. I would again note that all these OTA terms can be viewed in Schedule A to these reasons.
In essence then, the key OTA construction question is whether the array of cl 12 FOFR related promises should be, as the defendants say, interpreted as subject to a condition precedent to their performance first being met - namely, as to there being in existence an operative OTA Term. As seen, OTA promises are made on each side as assembled under OTA cl 12, and particularly for the defendants' ROFR obligations as promised to Northern Star under cl 12.6.
The question is whether those OTA cl 12 ROFR obligations upon the defendants are tied to, or linked to a necessary prior activation of Northern Star's promised treatment of the defendants' gold ore at Northern Star's Mill, under the OTA. Or, are the cl 12 OTA promises several in character and thus, do they stand alone as commitments
- which are unconstrained in terms of their applicability and aside from any temporal limits arising from a Term of the OTA (as defined)? The defendants' construction submission is that they are to be so assessed. The plaintiff's position contends to the contrary.Under par 6 of their ultimate defence pleading of 16 July 2020 (folio 117), the defendants contend for five mutually known factual circumstances - that I infer they contend assist its constructional choice and are to be assimilated as a part of an applicable extrinsic context in the required exercise of contractual construction around OTA cl 12.
Under par 6(a) of the last defence pleading the defendants said:
(A)the Marymia Greenstone Belt (Belt) is an area between Newman and Meekatharra of individual corridors of mineralisation;
(B)the Belt contained two separate projects; the Plutonic Dome Gold Project now known as the Marymia Gold Project, owned by DPPL and Vango to the north-east of the Belt, and the Plutonic Gold Operations owned by Northern Star Resources Ltd (Northern Star) to the south-west of the Belt;
(C)the two projects operated independently of each other and did not share resources, infrastructure or administrative facilities and the operation of the Plutonic Gold Operations did not involve any matters concerning the Marymia Gold Project;
(D)the Plutonic Gold Operations included a mill which had spare capacity;
(E)the Marymia Gold Project did not have a mill;
The defendants advance by that defence of 16 July 2020 (folio 117) to say that, upon a proper construction of the OTA, 'the obligations therein commenced with the Term' (as stated at par 6(d)) which by reason of the definition of 'Term' in cl 1.1 of the (OTA) began on the date nominated by written notice by Vango and DPPL (I refer to par 6 from par 6(e));
e)no date for the commencement of the Term of the Agreement was nominated by Vango and DPPL and accordingly:
(A)no ore has ever been delivered by Vango and DPPL pursuant to the [OTA] or at all;
(B)no ore has ever been treated pursuant to the [OTA];
(C)no account with the Perth Mint was established for the purposes of the [OTA];
(D)the rights and obligations under cl 12.6 of the [OTA] did not become operative;
f)The [OTA] was terminated by Vango and DPPL by written notice on or about 24 July 2016 [exhibit 1.108]; and
g)as no ore has ever been treated pursuant to the [OTA], at no time did the operation of the Plutonic Gold Operations [ie, of Northern Star and later Billabong Gold post assignment] involve any matters concerning the Marymia Gold Project [of the defendants] and the two projects remain separate and independent.
The facts as contended for by the defendants under these pleas, seen above in their final defence, may be accepted. For the purposes of the exercise they can be found to be established at the trial.
The residual question, however, is whether they bear upon the legal conclusion as to the contractual construction as contended for, namely, that ROFR rights and obligations under cl 12.6 of the OTA did not ever relevantly, become operative? In my view, they do not.
Conclusion on first resistance argument
The advocated position of the defendants essentially starts as it ends, with a proposition that a non-engagement of OTA cl 12.6, as regards ROFR offer obligations, must surely be correct - because any other conclusion would be, they submit, uncommercial and unfair
- according to their counsel at trial (see ts 155).With respect, I do not agree. Instead, I would assess that argument as more in the nature of an emphatic declaration of a desired conclusion, rather than a reasoned or persuasive argument.
In Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at [35] the plurality observed how an exercise in contractual construction should proceed:
The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances know to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties ... intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'.
By the defendants' written outline of opening submissions submitted before trial (of 13 August 2021, (folio 112)) the contended reading down of cl 12.6, by reference to the absence of any operative Commencement Date and, therefore, to the absence of any 'Term' under the OTA, should follow because it is said:
16.A reasonable business person after reading cls 1 - 11 of the OTA would be shocked by the proposition that [Northern Star] would be entitled to the ROFR if no notice or ore had been delivered by the defendants; that is, if [Northern Star] had done nothing.
17.The operation of the substantive provisions of the OTA commences with the giving of three months notice by the defendants and may end with the giving of three months' notice by any party: cl 1.1, Commencement Date, End Date, Term; cl 13.
18.The terms of the OTA contemplate an ongoing, long term commercial relationship between the parties.
19.For example, by cl 2.1 the defendants are to advise NST 'on a Quarterly basis of the projected Gold Ore that is expected to be available to [the defendants] to be sent to the Mill for treatment'; the Mill Schedule is prepared on a quarterly basis. Each (monthly) Batch is to be a minimum of 18Kt. The OTA contemplates one gram of gold per tonne of Gold Ore: sch 1.
20.The commercial context of the transaction recorded in the OTA is that the defendants need to identify, and then continuously extract and transport a large quantity of ore in order to develop an economic/profitable mining operation at K2. This obviously requires a large investment of resources. These matters are generally contemplated in the OTA by the Commencement Date depending upon three months' notice from the defendants, plainly around a time they have identified and begun a process of extracting ore capable of meeting the monthly minimum 18Kt requirement, and the OTA continuing until terminated by a party on notice. The OTA specifically contemplates the need for the defendants to re-establish haul roads: cl 2.5.
21.Further, obviously by entering into the OTA, the defendants have elected to not gather and commit resources to themselves treating the ore identified and extracted from K2. The commercial purpose of the transaction is the promise by [Northern Star] of treating the defendants' ore when available (on three months' notice), and the defendants supplying [Northern Star] with ore to keep its Mill operating.
The resistance suggestion of the defendants, that after 30 days an ensuing affirmative acceptance on the part of Billabong, as the ROFR offer beneficiary, could only at best produce a legal outcome of a non‑binding contractual agreement is (a) inconsistent with my post trial reasons, and (b) lacking in commerciality.
The defendants' suggested result, as I observed to their counsel, would amount to a sterile and wholly academic exercise - of no commercial utility to anyone. There would be no commercial point at all in the making of an ROFR offer exercise, if that outcome were to be the end position.
So in the end, I cannot accept that resistance line argument of the defendants on the third point of disagreement concerning relief.
The fourth area of post trial disagreement as between the parties arising out of their post trial reasons exchanges of written submissions, although not elaborated upon today, looked to be an expressed concern of the defendants that the plaintiff would be getting too much from a possible $3 million outlay - in relation to its obtaining of extra farm-in rights in so‑called 'additional tenements' as the subject of the HOA (but not the tenement subject matter of the BTS). Again, vis‑à‑vis the (greater) subject tenement matter of the heads of agreement, which is different to the lesser subject treatment matter as the subject of the BTS of 7 May 2017, that as phrased in the annexure 1 to the plaintiff's minute.
As I read the submission of the defendants, their contention appears to be - as regards Billabong's possible rights to obtain an interest by farm‑in to additional tenements as mentioned in the HOA, being tenements beyond the K2 tenement - that Billabong's capital expenditure (CAPEX) in relation to the K2 tenement, be it $3 million, or be it 50% of whatever the CAPEX in a reality sense turns out to be for K2, is the identical CAPEX expenditure obligation by Billabong that would as well generate for it an entitlement in Billabong in the additional tenements. But that expressed concern seems to me, as a matter of the interpretation of the HOA and of Billabong's proposed annexure 1, to be misplaced. It is, as I read the plaintiff's responsive written submissions, even rejected by them.
I assess vis-à-vis the HOA, that the true CAPEX outlay(s) position will be as regards any priority rights for Billabong in so-called additional tenements, tied to a further farm-in contribution by Billabong to the expenses of their development. This is because the language used delivers a further farm‑in arrangement that may see, after 12 months, a further similarly structured 50% CAPEX contribution by Billabong. If made, this would go towards the expenses of the development of the additional tenements and that extra farm-in contribution by Billabong would then, if made, generate further farm-in rights for it towards an interest in the additional tenements.
Whether a further 50% CAPEX outlay by Billabong turns out to be the case or not, the concern as expressed by the defendants, over, effectively, a possible free ride for Billabong in relation to no future CAPEX expenditure being required of it, so as to gain a farm-in interest in the additional tenements - is misplaced. I reiterate that the expressed concern is rejected under the plaintiff's responsive submissions.
Costs
Some sundry disputed issues also emerged today, in relation to the trial costs orders.
The first of these costs concerns, as regards potential costs orders, emerged around a defence argument that was never actually run at the trial. This unpursued argument, I learned, was over the alleged lack of solvency, or financial wherewithal of the plaintiff - in order to perform once it ever did accept an ROFR offer if made to it.
Consequently, until I received and read a post trial affidavit of a Ms Cecilia Camarri of 20 January 2022 for the defendants and its annexures, in particular, a proposed joint expert memorandum at CC05 (at par 8 of that affidavit) and an email with a covering letter from Auramet International LLC (Auramet International) of an address in San Juan, Puerto Rico, at CC06 (at par 10 of that affidavit), I had received few trial insights that there had once been as between these parties, under their exchanges before the trial proper began - a defence issue raised over an argument as to a contended lack of performance solvency being suggested against Billabong. This defensive stance had been pursued by the defendants up to just before the commencement of the trial, at which point they then, as is evident, abandoned the issue.
Essentially, this live issue before trial had been directed by the defendants as against Billabong obtaining any relief, even if otherwise successful on other issues, on a basis of a suggestion as to its lack of financial wherewithal to perform - even if an ROFR offer ever came to be put, and was then accepted by Billabong. Of course, I never heard any substantive arguments at the trial over this ultimately abandoned issue. Hence, I am still unsure if this was a contended argument of true insolvency once put against the plaintiff by the defendants, or only an argument as to a contended inability to obtain finance to perform and so, to settle on any as accepted ROFR offer received by Billabong.
The abandoned issue was, presumably, once raised by the defendants to bear against the court's discretion to grant affirmative equitable relief or against the utility of injunctive relief, if it had ever been run.
A recent disclosure of this abandoned trial issue post trial and after the delivered reserved reasons, in terms of it holding some potential relevance as to adverse costs orders - sees the defendants say post trial, in effect, that to the extent an order for costs might otherwise be made against them, which they resist, then even if the adverse costs order is made, any award, should not extend to any of the costs upon the abandoned issue. This is because it is put it had once been reasonable for the defendants, at the period before the trial began, to raise the point. It was an argument said to be supported by the views of the defendants' engaged expert - albeit another expert engaged for the plaintiff took a different view.
The defendants say then, as to any costs orders over this abandoned issue, that their viable for trial resistance point was effectively 'snatched away' from them, in an evidentiary sense, only on the last working day before the trial was to start - by the arrival of a communication from Auramet International. This communication evidenced only at then, it is put, the accessibility, in effect, to sufficient funds by the plaintiff of AUD$15 million if needed. Billabong, of course, is an Australian corporate subsidiary of a Canadian entity. Only on this eleventh hour arrival of extra financial information was the resistance point jettisoned just before the trial began.
This aspect of the costs argument then, as it emerged, was that a solvency/wherewithal component of the trial preparation issues, should be quarantined off and so, to not be made a subject of any adverse costs order vis-à-vis the defendants' costs exposures as the otherwise substantively unsuccessful parties in the wake of the trial result.
At the end, I am against this part costs, non‑run issue and the abandoned issue compartmentalisation resistance line of costs argument. As observed, the argument itself was never run at the trial. That was the defendants' choice. But earlier they chose to raise it before the trial began - then to abandon it. The costs submission as made now would seek to have the court ex post facto, enter upon the merits and demerits of a non-ventilated issue - by asking it to assess the pre-trial temporal reasonableness of this abandoned issue - an issue that was deliberately not run at the trial. Apportionments over trial issues won or lost in the wash up of a trial, is unusual. As to that disinclination, see my recent costs reasons in CITIC Ltd v Mineralogy Pty Ltd [No 7] [2021] WASC 371. But it is a novel and wasteful thing to go even further to ask a court post trial to undertake, as an exercise, a reasonableness of an abandoned issue over the costs of that issue not run. That is simply asking too much (in the present case post trial). Evaluating the issues raised by the trial is burdensome enough without adding to that burden the once live but ultimately not run issues. That is simply a bridge too far! It seems to me the advocated task, in any event, would be fraught with danger - to reach a hindsight temporal reasonableness conclusion without a full ventilation of the underlying (abandoned) issue, which of course never happened at the trial - just for the purposes of a component issue in a costs liability exposure determination after trial.
It was, of course, not the plaintiff who first injected this argument into the arena. The defendants did that - seeking at then to raise it, defensively. The defendants consequently 'set the hounds running' on the issue, with all the legal preparation expenses associated. Later they chose to not run the issue as on the arrival of evidence that emerged, indicating they would likely lose on it.
The defendants must bear the sole responsibility for costs on an exposure issue they have chosen to sow.
There should, given the end outcome of the trial, which the defendants ultimately lost, be a measure of responsibility for them tied to the costs incurred over responding to an issue that ultimately, was not run at trial by the defendants. That is the essence of the risks encountered in defended litigation. If the feared costs exposure upon losing is too great, then settle and do not go to trial. Here, by 'rolling the dice' and going to the trial, and then losing there, the defendants must bear a costs exposure - including upon issues that they raised and later chose to abandon before trial.
The defendants' abandoned resistance argument over a possible inability of the plaintiff potentially to perform, on acceptance, vis-à-vis either the 2016 ROFR offer rights or the 2017 ROFR offer rights, always proceeded in any event on a false premise, in my view. Once ROFR offer rights were engaged for the benefit of Billabong, there must be an ROFR offer made ‑ which then was to be left on the table and open for acceptance for a period of 30 days, for the benefit of the plaintiff. That is the essence of the right that was denied here by the defendants' breaches. Whether the plaintiff later on takes up that ROFR offer and ultimately accepts the offer or not, only comes about later. The plaintiff may choose not to take up the ROFR offer at the end.
Performance solvency considerations would not seem to bear upon the contractual ROFR obligation to adhere to the contractual promise and to make, when obliged, the open ROFR offer - once the ROFR obligation is triggered. Any feared financial concerns over Billabong not performing ‑ which are the subject of rival expert reports - only relate to the later in time performance considerations as a purchaser ‑ following a further required decision of Billabong made to accept, and then to perform, and then (as in this trial) to compel performance. But the performance stage by Billabong may never be reached, depending upon what it decides to do after it receives the open ROFR offer and considers its position.
As mentioned, there was and is, no obligation on a plaintiff to accept the ROFR offer. But it has the entitlement to have it made, left open and to weigh it up over 30 days.
Solvency arguments as to performance, would only present relevantly at a later stage. Specifically, after there had been a ROFR offer acceptance and then, a default in terms of performance of the accepted ROFR offer, and its binding obligations by the purchaser.
Moreover, a 30-day open right afforded to potentially take up such a ROFR offer could well bear upon the capacity of an ROFR recipient offer party in the position of the plaintiff, to then seek out and obtain finance to facilitate performance obligations whilst deciding whether to take up such an open offer in the time it is open. An open offer capable of being identified from a lending perspective, may be relevant to the obtaining of finance.
There could also arise a host of potential financing unknowns down a track that are impossible to look into, at what is, a hypothetical stage.
But the first step was for the ROFR offer obligation to be honoured and performed, not ignored and breached. That looks to me to be a prime consideration in relation to costs on this issue - rather than an abandoned hypothetical issue raised, but never run at trial at the end.
I do not, in the end, accept the defendants' costs arguments over the abandoned solvency issue being quarantined from a costs exposure perspective against them.
Costs - Calderbank
A further and separate costs resistance line of argument also emerged from out of the affidavit of Ms Camarri - by a reference to a Calderbank like proposal found to be in a letter from All Mining Legal Pty Ltd of 7 May 2021 for the defendants, commencing at par 12 of that communication (see CC-02 at par 50 of that affidavit). The contention essentially from a 'without prejudice' as to costs perspective - is that a 'deal' that was earlier offered to Billabong at 7 May 2021 by the defendants, at then on a 'without prejudice' basis, was essentially the same 'deal' as is seen in the BTS and an ensuing ROFR offer along those lines. That protects the defendants from a costs order, if it is put. The earlier 'deal' as offered, was effectively, it is put, what has been obtained from the running of the trial.
On that basis, the defendants now argue, from a trial costs perspective, that it was unreasonable for the plaintiff not to have then taken up the 'deal' earlier offered and so, that this bears now upon costs orders. I disagree.
I am not persuaded the 7 May 2021 offer 'deal' made to Billabong helps the defendants alleviate their costs exposures ‑ now that the 'deal' has been disclosed at this stage for the court to know about. As senior counsel for the plaintiff pointed out, the upshot of the trial was that vis‑à‑vis 2017 arrangements with Dampier Gold, the trial position as ultimately reached, has turned out to be even better for Billabong than the 'deal'. I agree. That is clear enough to see. As things turned out post trial, Billabong is now to be offered an election as between at least two distinct baskets of 2017 ROFR rights as the ultimate upshot of its sources at the trial.
Moreover, Billabong has also now obtained, as a result of the trial and as the substantially successful trial party, an entitlement to some level of its taxed legal costs. But no costs allowance was ever offered under the 7 May 2021 proposal put at then. Hence, Billabong has done a lot better under the trial result outcome, than what was offered to it as the earlier 'deal'.
Insofar as the 7 May 2021 offer is advanced as an antidote against a post trial costs exposure - by reason of it being put when it was and by it not being accepted at then - I simply do not accept it was unreasonable for the plaintiff not to have accepted such a 7 May 2021 offer upon BTS framed ROFR terms immediately after 7 May 2021 or prior to the trial.
There are a raft of case authorities on Calderbank offers bearing upon costs orders. They were helpfully summarised in a recent supplementary reasons of Strk J delivered on 21 January this year in Middendorp v Lygina [No 2] [2021] WASC 431 (S). I have also dealt with Calderbank costs considerations in Shephard v Tuanie Paul Galea and Carmen Byrne as Executors and Trustees of the Estate of the late Joseph Galea [2019] WASC 164 (S) at [27] - [39], where I discuss the case authorities, including the leading decision of the Court of Appeal in Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96. So, the defendants' Calderbank costs submission must also fail.
In terms of post trial costs orders, the plaintiff seeks its costs essentially as the successful party and asks for applicable scale limits to be removed. The position in relation to taxations and scale limit lifting was discussed by the Court of Appeal in the leading decision concerning s 280(1) and (2) of the Legal Profession Act 2008 (WA). I refer to Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) - in particular, at [11] to [16] of those reasons. The threshold, essentially, to be satisfied, is that upon contemplating a taxation in accordance with the limits of the scale, that it is seen as likely that a successful party (plaintiff) would not achieve a costs recoupment outcome that is fair and just in all the circumstances. That I find is the position here - around this complex trial. As the Court of Appeal observed at [12] in those reasons:
First, the court must form the view that the maximum amount allowable under the relevant scale item is inadequate in the same sense that there is a fairly arguable case that the bill to be presented to the taxing officer may properly tax at an amount which is greater than the limit which would be imposed by the relevant cost determination.
The further conjoint threshold criteria to be surmounted to obtain such an order is that:
[T]he court must also form the opinion that the inadequacy of the costs allowable under a costs determination arises because of the 'unusual difficulty, complexity or importance of the matter'.
The court added:
Issues of the kind which arise are addressed as matters of impression, rather than as matters of detailed evaluation, precision or science.
In terms of possible apportionments by reference to determined issues won and lost in a trial (as opposed to the costs of issues not run at trial), the topic has been a subject, recently, of my reasons for decision in CITIC v Mineralogy [No 7]. By those reasons, which were published on 29 October 2021, I identified numerous considerations possibly bearing upon the court's discretion to apportion as regards issues won and lost at trial. Without descending too far to discuss those legal principles, which are well-known, here I would emphasise the 9th, 10th, 11th, 13th, 14th, 15th and 16th principles, as the subject of [23], [24], [25], [27], [28], [29] and [30] of those reasons.
Essentially, a court will be cautious over denying a successful party their full taxed costs in respect of the outcome of the trial. Particularly if it is asked to descend into an evaluation by proposed apportionment of relative successes inquiry, or to count up all the issues won and lost on each side. That is not appropriate. The task is to be approached as a matter of overall impression for the court, rather than an approach carrying levels of arithmetical precision as to apportionments on costs.
A court does not usually seek to comb back through the wasteland of a resolved proceeding, to separate out and discount the issues a successful party has not been successful upon, so as, in some way, to deviate from the usual post trial entitlement to costs. That is, of course, that a successful party will usually receive its taxed costs of the action.
Here, by reference to the criteria thresholds for an order adjusting the limits or removing the scale limits under s 280(2) of the Act, I am of the view that this was clearly a case of considerable difficulty and complexity. It was also a case of particular importance as regards ROFR rights in respect of this plaintiff and the unique gold ore tenements underlying the action. I say that having been case manager of this litigation in the Commercial and Managed Cases List for over three years, having watched it evolve, and then having been trial judge.
It is true that, ultimately, the trial was able to be completed wholly upon the documents without verbal witnesses, and in only two days hearing time, rather than the allocated three days, with a reserve day.
Notwithstanding all that, and of which I take full heed, this trial was, on my assessment, a difficult commercial case presenting quite a number of unique and difficult issues to be resolved. The gold ore tenement subject matter underlying the trial was both valuable and unique. This was by no means a run-of-the-mill one-issue, or two‑issue commercial trial. Voluminous amounts of documents needed to be considered. These were complex commercial documents spread across many lever arch volumes. The case law underlying many of the trial issues was complex, as well.
So first then, I am thoroughly satisfied here that the usually applicable scale limits taxation would not deliver a just result in terms of what this plaintiff could ultimately achieve for its outlaid legal expenses. And so I find there is a proved basis for the lifting, indeed the removing, of the scale limits.
Second, I conclude that here all of the three (only one is needed) s 280(2) touchstones in the Act - that is, difficulty, complexity and importance - are met. That supports not only that scale limits be adjusted, but beyond that, there should be an order in accord with what the plaintiff moves - that those scale limits be removed for the purposes of any taxation conducted.
I hasten to add - as so many of the cost case authorities point out ‑ that a removal of those scale limits simply frees up a taxing officer in terms of any scale ceiling constraint that otherwise might be encountered, in terms of an inappropriate limit or constraint against what the taxing officer will otherwise assess as a fair and just allowance for the work done.
That is by no means an order for indemnity costs. Such orders simply remove one potentially inhibiting obstacle that may otherwise intrude to deliver an unfair ceiling upon the amount of taxed costs that should be allowed and recovered.
In terms of my ultimate cost orders assessed by reference to the minute of orders sought by the plaintiff, I am of an end view there should, nevertheless, and broadly viewed, be a modest apportionment and reduction favouring the defendants, to take a just account of the trial outcomes concerning the 2016 tenement trial issues - which were a subject of a not inconsiderable component of time and argument in the trial (and my post trial reasons). The defendants were successful upon the non-assignability at law issue over that chose in action from Northern Star Resources Ltd (Northern Star) to Billabong. More particularly, the defendants also succeeded on a related 2016 question around the conduct of Northern Star in relation to whether it might ever have been capable of obtaining from this court - always hypothetically, of course - any ROFR breach relief result that extended beyond mere common law damages.
In the reasons for decision concerning the 2016 transactions, I came to a view that, even without the non‑assignability of the chose in action argument against Billabong, and even if it had been Northern Star itself that was pursuing equitable ROFR offer relief - such equitable relief would not, on the evidence put before me, have been obtained. The 2016 agreement issues were a discernible and identifiable documentary component of the trial. I assess that in all the circumstances, some modest reduction to the level of taxed costs that would otherwise be awarded to the plaintiff, should be made to take account of those considerations.
Consequently, my end view is that the plaintiff should reserve 80% of its taxed costs of the action.
A 20% costs award reduction would, effectively, take just account of the aspects of the trial that I can readily discern were issues raised upon which the plaintiff was not ultimately successful.
So then, by reference to the plaintiff's minute and its order 4 as proposed, the order will read essentially, in terms:
The defendants are to pay 80% of the plaintiff's taxed costs of the proceedings, including all reserved costs, on the basis that all applicable limits on cost, as fixed by the Legal Profession (Supreme and District Court) (Contentious Business Costs Determination 2020 and the Legal Profession (Supreme and District Court) (Contentious Business) Costs Determination 2018 are to be removed for the purposes of a taxation exercise pursuant to s 280(2) of the Legal Profession Act 2008 (WA).
I certify that the preceding paragraphs comprise the reasons for decision of the Supreme Court of Western Australia.
PP
Research Associate to the Honourable Justice K Martin
11 FEBRUARY 2022
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