Brimstone Resources Ltd v Empire Resources Ltd
[2018] WASC 185
•20 JUNE 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: BRIMSTONE RESOURCES LTD -v- EMPIRE RESOURCES LTD [2018] WASC 185
CORAM: SMITH AJ
HEARD: 12 JUNE 2018
DELIVERED : 20 JUNE 2018
FILE NO/S: CIV 1959 of 2018
BETWEEN: BRIMSTONE RESOURCES LTD
Plaintiff
AND
EMPIRE RESOURCES LTD
Defendant
Catchwords:
Interlocutory injunction - Plaintiff seeks an order restraining the defendant from exercising powers conferred by a mining mortgage and dealing with the secured property - Construction of joint venture contract documents - Whether claim of specific performance arguable - Turns on own facts
Legislation:
Nil
Result:
Application dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr J C Yeldon & Mr C P Stokes |
| Defendant | : | Mr W C J Zappia |
Solicitors:
| Plaintiff | : | Chris Stokes & Associates |
| Defendant | : | HWL Ebsworth Lawyers |
Case(s) referred to in decision(s):
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199
Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57
Burns Philp Hardware v Howard Chia Pty Ltd (1987) 8 NSWLR 642
Daniels v Daniels [2008] WASCA 230
Harvey v McWatters (1948) 49 SR (NSW) 173
Inglis v Commonwealth Trading Bank of Australia (1971) 126 CLR 161
Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76
Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110
Welldog Pty Ltd v Prox Pty Ltd [2017] WASCA 62
SMITH AJ:
Application for interim orders heard as an urgent matter
The plaintiff filed a chamber summons on 6 June 2018 seeking an interim injunction. After hearing the parties on 12 June 2018, upon the defendant undertaking that it would not take any steps to enforce its rights, under a security deed dated 16 August 2017 or a mining mortgage dated 16 August 2017 until after the delivery of reasons in respect of the application for interim orders, the matter was adjourned to 18 June 2018 for judgment.
On 18 June 2018, an order was made that the application be dismissed and the parties were provided with a brief oral summary of the main points of my reasons for concluding that the plaintiff had not made out a prima facie case for the orders sought in its amended chamber summons. I reserved the right to provide my reasons in full as to why I reached this conclusion. This judgment sets out those reasons.
Background - the joint venture
The plaintiff and defendant own tenements collectively known as Penny's Find as tenants in common in shares of 60% by the defendant and 40% by the plaintiff. Penny's Find contains deposits of gold and is located approximately 50 km from Kalgoorlie.
The plaintiff is a private company. The defendant is a publicly listed company.
By an agreement dated 13 November 2015, the plaintiff and defendant agreed to undertake the development and mining of ore deposits and the refining and treatment of the ore mined from Penny's Find by entering into an agreement titled 'Penny's Find Mining Joint Venture Agreement' (the joint venture agreement).
In March 2017, the defendant presented the plaintiff with a funding proposal from Blue Cap Mining Pty Ltd (Blue Cap) whereby Blue Cap was prepared to provide and fund mining services for a mining campaign open pit up to a limit of $7.5 million. The plaintiff and defendant would be required to fund the balance of funds to mine the open pit. The plaintiff informed the defendant it was unable to separately fund 40% of any additional mining costs from its own resources. The defendant agreed to fund the plaintiff's share of the additional mining costs and to be reimbursed at a later time.
Blue Cap commenced a mining campaign on about 1 May 2017. At that time, it was anticipated over time the mining activities in the open pit would be self‑funding.
On 16 August 2017, the plaintiff and defendant entered into agreements with Blue Cap to formalise their agreement with Blue Cap regarding the mining activities to be conducted in the open pit and repayment to Blue Cap of the cost of mining. These agreements comprised a funding agreement, a mining mortgage, and a security deed. Importantly, the funding agreement was an agreement made between the plaintiff, the defendant and Blue Cap. By the funding agreement, the plaintiff and the defendant agreed to pay Blue Cap for its mining services in the following manner:
(a)the plaintiff and the defendant were to arrange for the project doré to be delivered to the refiner (the Perth Mint) (cl 9.1(a)(i));[1]
(b)the defendant (as the manager of the joint venture) was to establish a project metals account with the Perth Mint (cl 9.1(a)(ii) and (b));
(c)the defendant (as manager) was to establish a bank account (proceeds account) from which all proceeds from the sale of refined metal was to be deposited and to instruct Perth Mint to pay all of the sale proceeds of the refined gold from the project metals account into the proceeds account (cl 9.1(b) and (c)); and
(d)subject to the other provisions of the funding agreement and until all advances and the facility fee were repaid (to Blue Cap) the project revenue in the proceeds account was to be distributed in accordance with the project revenue cash priority arrangements set out in cl 10. Clause 10.1 provided for payment of various expenses of the joint venture to mine the open pit including Blue Cap.
[1] Doré gold is ore treated by a milling company.
By operation of cl 9.3(b) and cl 10.1 of the funding agreement, the monies in the proceeds account were to be distributed in accordance with the descending order of priority set out in the table in cl 10.1(a), (subject to cl 10.1(b)) as follows:
1.
Payment of the Government Royalty against royalty returns prepared by the Manager;
2.
Payment of gold transport and insurance costs for transport of refined Gold from the Gold Processing Plant to the Refiner;
3.
Payment of amounts that are due for payment under the Toll Processing Agreement against invoices received from GMM;
4.
Payment to the Project Account of up to $157,000 per month for administration and operating expenses incurred by the Manager in that month, less any sums Blue Cap has advanced to cover these expenses;
5.
Payment to the Project Account of fuel costs incurred by the Manager for the Project in that month, less any sums Blue Cap has advanced to cover that expense;
6.
Payment to the Participants of a total of $350,000 per month for 3 months commencing in the first month after the first gold sale for reimbursement of previously‑incurred outstanding PFJV[2] expenses;
7.
Payment of amounts that are overdue for payment under the Ore Haulage Agreement against invoices received from the contractor;
8.
Payment of the Advances, then the Facility Fee and other sums payable under this Agreement;
9.
Payment to the Project Account of any essential operating expenses (including fuel) incurred by the Participants from month to month as provided for in the Approved Budget;
10.
To meet any other costs mutually approved by the Parties; and
11.
The remaining balance, to be paid to the Project Account for any cash calls issued that relate to costs incurred after 5 May 2017 in respect of the PFJV, and the remaining balance to be paid 60% to Empire and 40% to Brimstone.
[2] PFJV is defined in cl 1.1 of the funding agreement to mean 'Penny's Find Mining Joint Venture'.
Clause 10.1(b) of the funding agreement provides:
For the avoidance of doubt, payments to PFJV under items 9, 10 and 11 above will only be made to the extent that there is sufficient Project Revenue available after having met the payment obligations in items 1 to 7. Each of the Participants acknowledges and agrees that it is the intention of the Participants to repay the Advances and the amount of the Facility Fee as soon as reasonably possible in priority to distributions to the Participants.
On the same day the funding agreement was made between the plaintiff and the defendant and Blue Cap, the plaintiff and defendant entered into three agreements to record and document the terms and conditions for the repayment by the plaintiff to the defendant of an agreed expenditure amount. The agreed expenditure amount was for payment of additional mining costs to mine the open pit that the plaintiff had agreed to pay from its own resources and the defendant had agreed to fund.
Consequently, on 16 August 2017, the plaintiff and defendant entered into the following agreements:
(a)a written agreement titled 'Penny's Find Mining Joint Venture Amending Agreement', whereby the plaintiff and the defendant agreed to amend the joint venture agreement and to set out the terms of agreement concerning the repayment by the plaintiff to the defendant of the agreed expenditure amount and the operation of the project metals account and the proceeds account (the joint venture amending agreement);
(b)a general security deed made between the plaintiff (as grantor) and the defendant (as security party) whereby the plaintiff granted the defendant a security interest over all its rights, title and interest in personal property and a fixed charge over other property including the plaintiff's interest in the mining tenements (the Empire security deed); and
(c)a mining mortgage, whereby the plaintiff granted to the defendant a mortgage over its interests in the mining tenements until the agreed expenditure amount was repaid (the Empire mining mortgage).
The agreed expenditure amount is an amount defined in cl 3.1 of the mining joint venture amending agreement as follows:[3]
[3] Affidavit of Paul Williams, sworn 6 June 2018, pages 200 ‑ 201.
3.1 Expenditure incurred
Brimstone acknowledges and agrees that the Agreed Expenditure Amount is comprised of:
(a)expenditure that ERL[4] has expended or incurred on behalf of Brimstone being as at 30 June 2017 $828,000.00; and
(b)further costs and expenses ERL as Manager will incur on behalf of the Joint Venture including:
(i)Direct Costs as defined in schedule 3 of the Mining JVA;
(ii)Manager Costs as defined in the Mining JVA; and
(iii)legal fees in respect to the Project Agreements, the operation of the Joint Venture and other related matters;
(c)any other cost or expense payable by the Manager on behalf of Brimstone in accordance with the Project Agreements and other agreements relevant to development of the Mine; and
(d)interest under clause 3.3.
[4] Note the reference to ERL is a reference to the defendant.
Pursuant to cl 3.2 of the joint venture amending agreement, the plaintiff agreed to reimburse the defendant the agreed expenditure amount by making the prescribed payments.[5] Repayment in full was due by the open cut completion date.[6]
[5] Affidavit of Paul Williams, sworn 6 June 2018, page 201.
[6] The effect of cl 3.2 of the joint venture agreement is in dispute.
The open cut completion date is defined in cl 1.1 of the joint venture amending agreement to mean the 21 days after the last delivery of project doré is made to the refiner (the Perth Mint).
The mining of ore from the open pit was for a short period of time.
The plaintiff and defendant contracted with two toll milling operators, Golden Mile Milling Pty Ltd (Golden Mile) and Eastern Goldfields Milling Services Pty Ltd (Eastern Goldfields) to treat the ore from the mine and deliver treated project doré to the Perth Mint.
The last delivery of project doré occurred on 15 May 2018. As a consequence, the defendant gave notice to the plaintiff that the agreed expenditure amount became due and payable by the plaintiff to the defendant on 6 June 2018 (pursuant to cl 3.2 of the joint venture amending agreement).
The plaintiff caused the distribution of some monies (on 18 May 2018 and 6 June 2018) in part payment of the agreed distribution amount, being amounts totalling, $320,000. The defendant claims, however, that $1,012,253.08 remains due and payable by the plaintiff and has informed the plaintiff that if the full amount remains unpaid it will exercise its powers under the Empire mining mortgage and the Empire security deed.
From late 2017, the plaintiff has been in dispute with the defendant about deposits and payments from the proceeds account.
The plaintiff disputes the sum is due and payable on grounds that the defendant has departed from its performance of its payment obligations under the joint venture agreement and joint venture amending agreement. The plaintiff claims that until it obtains specific performance by the defendant under these agreements it should be entitled to a standstill of its obligation to pay the balance of the agreed expenditure amount.
The plaintiff pleads in the amended statement of claim that it has an entitlement from revenue from the open cut mining campaign (which is now completed) being a sum due to it by the defendant of no less than $2.28 million, which sum is available to meet in full the agreed expenditure amount.
Whilst it is not pleaded by the plaintiff in the amended statement of claim, the plaintiff puts an argument (which appears to be in the alternative) that there is a serious question to be tried whether the defendant is entitled to receive full reimbursement of the agreed expenditure amount pursuant to cl 3.2 of the joint venture amending agreement.
Interim orders sought by the plaintiff
By its chamber summons, the plaintiff seeks interim orders that:
(a)an order that an account be taken of all dealings and transactions of the open pit mining, pursuant to the joint venture agreement and the joint venture amending agreement;
(b)until further order, the defendant be restrained from;
(i)dealing with the secured property (as defined) in any way under cl 6 of the Empire security deed made between the plaintiff and the defendant dated 16 August 2017;
(ii)exercising any powers granted under cl 11 of the Empire security deed;
(iii)exercising any powers or conducting any dealings in any way under cl 8, 9 or 10 of the Empire mining mortgage made between the plaintiff and the defendant dated 16 August 2017.
Relevant principles - the grant of an interlocutory injunction
The principles in relation to interlocutory injunctions were set out by Beech J in Twinside Pty Ltd v Venetian Nominees Pty Ltd. [7] They are:
(a)whether there is a serious question to be tried or a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be entitled to relief;
(b)whether the plaintiff will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and
(c)whether the balance of convenience favours the granting of an injunction.
[7] Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 [7] ‑ [11].
Interlocutory relief will not lie where there is no right to final relief.[8] Whether there is a prima facie case turns on the governing consideration that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought.[9]
[8] Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 [17] (Gleeson CJ).
[9] Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 [65] ‑ [71] (Gummow & Hayne JJ, Gleeson CJ & Crennan J agreeing); applied in Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 [9] (Beech J).
In Sino Iron Pty Ltd v Mineralogy Pty Ltd, the Court of Appeal recently stated the following important principles of law that are squarely relevant to the disposition of this application:[10]
[10] Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 [130] ‑ [134], [141], [144].
… Where equity's jurisdiction is invoked in an application for an interlocutory injunction, it is necessary to identify the legal or equitable rights which are said to be determined at trial and in respect of which final relief is sought. The power to grant an interlocutory injunction is not to be exercised by reference to unconstrained notions of what appears to be just: it must be exercised by reference to the rights claimed by the applicant in the proceedings. The final relief itself need not be injunctive in nature in this connection: Lenah. An interlocutory injunction in the auxiliary jurisdiction can only lie in order to protect an equitable or legal right which the plaintiff might enforce by final judgment: Lenah. The usual form of the interlocutory injunction in this court is 'until after judgment in this action, or further order'. The usual form of the order, as well as the purpose of the order, indicates that there is no 'free-standing' right to an interlocutory injunction: Lenah. The first question to be answered by the plaintiff in seeking an interlocutory injunction is, 'what is your equity?'
The parties to this appeal did not take issue with the observations made in Mineralogy Pty Ltd v Sino Iron Pty Ltd as to the general principles to be applied in the exercise of the power to grant an interlocutory injunction. Those observations proceed, at least implicitly, on the basis that the question of adequacy of damages is an aspect of the balance of convenience, not a separate requirement. We will also proceed on that basis. Three further points should, however, be observed. First, in an interlocutory injunction application in equity's exclusive jurisdiction, the question of whether damages or other remedies at law are adequate does not arise: Heavener v Loomes. Secondly, in equity's auxiliary jurisdiction, the question of whether the plaintiff will suffer irreparable injury for which damages will not be adequate compensation involves no more than a consideration of whether the injury cannot properly be compensated in damages, or by an order for accounts or some other interim remedy. The question of whether the injury cannot properly be compensated in damages involves a consideration of whether it is just in all the circumstances that the plaintiff be confined to their remedy in damages. See R v MacFarlane; Ex parte O'Flanagan and O'Kelly; McCarty v The Council of the Municipality of North Sydney; Action Cycles Pty Ltd v Ross; Meagher, Gummow & Lehane. Thirdly, as the Full Court of the Federal Court observed in Samsung Electronics Company Ltd, in assessing the balance of convenience in an interlocutory injunction application, the interests of the public and third persons are relevant and have more or less weight according to other material circumstances; whether those interests tend to favour the grant or refusal of an injunction in any given case depends upon the circumstances of the case; and hardship visited upon third persons or the public generally by the grant of an interlocutory injunction will rarely be decisive.
Specific performance and analogous equitable relief
Specific performance is not a remedy of right, but a discretionary remedy for the enforcement of contracts, although the discretion is to be exercised on a principled basis and not arbitrarily or capriciously: Loan Investment Corporation of Australasia v Bonner.
In Pakenham Upper Fruit Company Limited v Crosby, Isaacs and Rich JJ drew attention to the distinction between, on the one hand, specific performance in its 'true' sense, and relief 'approximate to specific performance', on the other. The former presupposes an executory agreement and the order is made to ensure that something is done such as the execution of a deed or conveyance, in order to put the parties in the legal position relative to each other in which they had agreed to be placed: JC Williamson Limited v Lukey; Sydney Consumers' Milk and Ice Co Ltd v Hawkesbury Dairy and Ice Society Ltd; Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard; Burns Philp Trust Co Pty Ltd v Kwikasair Freightlines Ltd.
In the case of specific performance in the sense of relief analogous to specific performance, the plaintiff seeks an order that the defendant perform its obligations according to the terms of the contract, and the remedy is frequently sought by way of injunction, including mandatory injunction: Sydney Consumers' Milk; Burns Philp Trust. Equity will not, however, make such an order if it considers that the plaintiff's remedies at law are adequate: Dougan v Ley; Coulls v Bagot's Executors; Sydney Consumers' Milk; Burns Philp Trust; McIntosh v Dalwood (No 4).
…
Also, a plaintiff may itself be required to pay a disputed sum into court as a means of doing equity where it is the plaintiff who is applying for injunctive relief. Payments into court pending trial are not uncommon in the context of a suit to restrain the defendant from withdrawing services under an agreement which the defendant had purportedly terminated. In Businessworld Computers Pty Ltd v Australian Telecommunications Commission, the respondent (Telecom) had disconnected the applicant's telephone services for alleged non-payment of accounts. The applicant commenced proceedings challenging the lawfulness of the disconnection, and sought an interlocutory injunction, pending trial, under which Telecom was to be 'restrained … from continuing the disconnection' of the services. The order sought was, in substance, a mandatory injunction for restoration of the telephone services.
…
The Full Court observed, in effect, that, where a party (applicant) seeks a mandatory injunction to restrain the other party (respondent) from terminating their agreement in the (alleged) exercise of a contractual right, the applicant should itself show its readiness and willingness to perform the agreement to which it seeks to hold the respondent. In such a case where moneys were allegedly due under the agreement, that would ordinarily require the applicant, in addition to the usual undertaking as to damages, to pay any amounts not in dispute to the respondent, and to pay into court any disputed amounts, although in some circumstances (as in Businessworld) the court may require some amount less than the full disputed amounts to be paid into court. In determining what amount should be paid into court in that regard, consideration should be given to the solvency of the applicant. Where the applicant does not pay all the disputed amounts either to the respondent or into court, or does not give security for all the disputed amounts (in addition to an undertaking to pay all future amounts), then the respondent could 'be forced to continue to do business, and incur perhaps ever greater indebtedness, and ultimately be left lamenting for amounts unpaid'.
The alleged breaches of the joint venture agreement and the joint venture amending agreement
By letter from the plaintiff's solicitor to the defendant's solicitor dated 5 June 2018, notice of dispute was given by the plaintiff to the defendant pursuant to cl 16.2 of the joint venture agreement. In particular, the letter gave notice of the dispute of the following matters which can be summarised as follows:
(a)the defendant has failed to provide a proper account of all revenue receipts from the open cut mining;
(b)the defendant has failed to provide a proper account of all expenses incurred in respect of the open cut mining; and
(c)the defendant as manager has failed to distribute the cash proceeds of $1,174,583 that it is currently holding in respect of revenue realised from the gold sale proceeds from the open cut mining.
The plaintiff's solicitor also stated in the letter dated 5 June 2018 that the plaintiff:
(a)does not agree that this sum is the final sum available for distribution; and
(b)disputes that there must be withheld from immediate distribution the sums of $445,000 for drilling costs (which can only relate to drilling costs for underground mining) on which a decision to mine is yet to be made, or $137,000 for underground study costs.
The plaintiff in its amended statement of claim seeks performance of the joint venture agreement. It does not seek rescission or damages for breach of the joint venture agreement.
The plaintiff says it is confined in the relief it seeks to specific performance and is otherwise limited to injunctive relief until the conclusion of the dispute between the plaintiff and the defendant pursuant to cl 16 of the joint venture agreement.
The plaintiff also claims in the amended statement of claim an order that an account be taken of all dealings and transactions touching upon the revenue from the mine obtained by the defendant and expenses incurred by the joint venture in respect of the open cut mining. These orders are, in substance, the same as the orders sought in the chamber summons.
The plaintiff, in the amended statement of claim, also claims an order that the defendant pay to the plaintiff such amount as may be found to be due upon the taking of accounts.
In the amended statement of claim, the plaintiff alleges that, in breach of the joint venture agreement and the joint venture amending agreement, the defendant:[11]
(a)failed to cause all of the refined gold from the campaigns to be allocated by the Perth Mint to the Project Metals Account;
(b)allowed sale proceeds from the Golden Mile project metals account and/or Eastern Goldfields project metals account to be paid to accounts other than the proceeds account;
(c)failed to cause all of the sale proceeds of the refined gold from the project metals account to the proceeds account; and
(d)caused or allowed payments to be made from the proceeds account without the approval of a signatory to that account appointed by the plaintiff (between 25 September 2017 to 2 January 2018).
[11] Amended statement of claim, [19].
The plaintiff also pleads in the amended statement of claim that it gave notice to the defendant to halt any further expenditure in respect of underground mining on 11 May 2018 and that on 1 June 2018 the defendant proposed to expend $137,000 and $445,000 in respect of exploration of underground areas of the tenements from revenue from the open cut mining of $1,174,587.[12]
[12] Amended statement of claim, [23] and [24].
In its written submissions in support of the application for interlocutory orders, the plaintiff alleges:
(a)the defendant has breached cl 9.1(a)(ii), cl 9.3 and cl 10 of the funding agreement and cl 4.1 of the joint venture amending agreement, as not all of the project revenue (being from the sale of gold)[13] has been paid into the proceeds account;
(b)a project metals account was not established by the defendant with Perth Mint as required by cl 9.1(a)(ii) of the funding agreement and cl 4.1(a) of the joint venture amending agreement;
(c)that all withdrawals from the proceeds account prior to 11 January 2018 were made without the approval of the plaintiff as required by cl 4.1(c) of the joint venture amending agreement;
(d)contrary to the express terms of the joint venture agreement and the joint venture amending agreement, the defendant has, and continues to, incur costs on behalf of the plaintiff it is not authorised to incur, in respect of underground mining. In particular, an argument is put by counsel for the plaintiff that the joint venture agreement and the joint venture amending agreement do not authorise expenditure for development of underground mining until a decision is made to mine; and
(e)the defendant has breached cl 15 of the joint venture agreement, in that the defendant has failed to confer with the plaintiff for its approval and has failed to use reasonable endeavours to agree to the terms of the text of public releases to the stock market on 29 May 2018, 31 May 2018 and 7 June 2018.[14]
[13] Project revenue is defined in cl 1.1 of the funding agreement to mean revenue from the sale of gold.
[14] Whilst the plaintiff in its written submissions relies upon this allegation, this issue is not pleaded in the amended statement of claim.
In considering whether the plaintiff has made out a prima facie case in respect of the first, second, third and fourth allegations, it is necessary to have regard to relevant terms of the agreements.
Clause 4.1 of the joint venture amending agreement provides:[15]
[15] Affidavit of Paul Williams, sworn 6 June 2018, pages 202 ‑ 203.
4.1 Funding Agreement
(a)The Participants acknowledge that they have entered into the Funding Agreement under which:
(i)ERL receives the Dore Gold in its capacity as Manager on behalf of the Participants; and
(ii)ERL will establish the Project Metals Account and the Proceeds Account in its capacity as Manager on behalf of the Participants.
(b)The Parties each must appoint 2 persons to act as signatories to the Project Metals Account and the Proceeds Account for the purposes of the Funding Agreement who as at the date of this Document are:
ERL:David Sargeant and the Company Secretary;
Brimstone:Paul Williams and Peter McDonald,
and the parties may by notice to the other change those persons.
(c)The Parties acknowledge that transactions on each of the Project Metals Account and the Proceeds Account must be approved by 2 signatories:
(1)comprising one signatory appointed by ERL and one signatory appointed by Brimstone; or
(ii)from ERL, if signatories from Brimstone are not available to approve a transaction within 5 Business Days provided that ERL cannot exercise this power if Brimstone has given written notice to ERL that the proposed transaction is disputed and has provided to ERL details of that dispute. For the avoidance of doubt the only situation where this clause 4.1(c)(ii) will take effect is if there is no Brimstone signatory available within the 5 business days to approve a transaction and the payment for that transaction is not in dispute by Brimstone.
(d)The Parties must each give appropriate directions to the Refiner (as that term is defined in the Funding Agreement) to:
(i)allow online access to each Participant to the Project Metals Account and the Proceeds Account; and
(ii)give effect to the provisions of this clause 4.1.
(e)The participants acknowledge that the Project Account will operate with a monthly float of $50,000.00. ERL in its capacity as manager on behalf of the Participants must provide to Brimstone on a monthly basis, within 7 days of the end of each calendar month, a copy of the Project Account bank statement. Within 14 days following the end of each month any excess funds above the $50,000.00 float must be paid to the Participants, such that 60% of the excess funds is paid to Empire and 40% of the excess funds is paid to Brimstone.
In an affidavit sworn on 6 June 2018 by Paul Williams, the managing director of the plaintiff, he deposes that after project doré was delivered to the Perth Mint by Golden Mile (after two campaigns took place in approximately September and November 2017) the defendant did not comply with the funding agreement and the joint venture amending agreement, in that it did not direct the Perth Mint to pay all the sale proceeds of the refined ore into the proceeds account. He also states that the defendant made payments out of the account to Blue Cap and others without the approval of a signatory of the plaintiff.
Eastern Goldfields Milling Services also processed ore in one campaign that concluded in late December 2017. The project doré from each of the Eastern Goldfields Services campaign was delivered to the Perth Mint for refining.
From about February 2018, the plaintiff and defendant were in dispute, and continue to be in dispute with Eastern Goldfields about the amount of project doré delivered to the Perth Mint and the amount due and payable by Eastern Goldfields to the plaintiff and the defendant. It is pleaded in the amended statement of claim that the plaintiff and defendant are claiming approximately $1,000,000 as owing by Eastern Goldfields.
In the amended statement of claim, it is pleaded that:[16]
(a)a total of approximately 18,405 ounces of refined gold was produced from project doré delivered by Golden Mile and Eastern Goldfields to the Perth Mint;
(b)at an average sale price of $1,700 per ounce, the value of the gold refined from the project doré equates to $31,288,500; and the bank statements of the proceeds accounts for the period between 26 September 2017 and 31 May 2018 shows a total of deposits into the account of only $9,091,625.70.
[16] Amended statement of claim, [16(e)], [18] and [19(c)].
In the affidavit sworn by Mr Williams on 6 June 2018, he points out that the difference between $31,288,500 and the $9,091,625.70 is $22,196,875. He also points out that this sum was not deposited into the proceeds account. He states he is concerned as he is unable to say what amount has been paid to third parties and others, yet he has been informed by the defendant in a report to the joint venture parties dated 30 May 2018 that Blue Cap had been paid a total amount of $17,111,159.41.[17] It is common ground that no claim has been made by Blue Cap for any further amounts.
[17] Blue Cap invoices and interest fees paid annexed to management committee meeting of the plaintiff and defendant held on 24 April 2018, affidavit of Paul Williams, sworn 6 June 2018, page 283.
Mr Williams, on behalf of the plaintiff, claims that all third party payments should have been approved by the plaintiff before funds to make payment to them were withdrawn from the proceeds account.
In a supplementary affidavit sworn by Mr Williams on 8 June 2018, Mr Williams annexes a copy of a repayment deed made between Blue Cap, the plaintiff and the defendant dated 2 February 2018, and a revised repayment deed made between the same parties dated 27 April 2018.
By the repayment deed:
(a)the plaintiff and defendant acknowledged that Blue Cap was owed $8,448,689.25 as at 1 February 2018 (cl 1.1(c));
(b)the plaintiff and defendant agreed that the acknowledged amount must be paid by directing the miller (as defined) and refiner (the Perth Mint if the refiner is paying the milling proceeds direct to the plaintiff and defendant) to pay the milling proceeds of 75% to Blue Cap and 25% of the milling proceeds to the participants (cl 3.2).
By the revised repayment deed:
(a)the plaintiff and defendant admitted that Blue Cap was owed the sum of $4,805,182.41, as at 20 April 2018 (cl 1.1(a));
(b)the plaintiff and defendant were required to pay the debt by directing the miller and the refiner (if the refiner is paying them the milling proceeds directly to the plaintiff and defendant) to Blue Cap until all sums were paid to Blue Cap in full (cl 3.2); and
(c)once Blue Cap has been paid the amounts owing, Blue Cap is obliged to pay over any milling proceeds received in excess of the sums it is entitled to under the transaction documents (cl 3.3).
Clause 2.6 of the repayment deed and cl 2.6 of the revised repayment deed provide that the parties agree that the deeds are transaction documents for the purposes of the funding agreement, the security deeds and the mortgages.[18]
[18] The definitions of these agreements in the repayment deed and the revised repayment deed make it clear that these documents are documents entered into between the plaintiff, the defendant and Blue Cap.
In light of the express terms of the repayment deed and the revised repayment deed, the plaintiff's complaint about payment of money to Blue Cap other than through transactions from the proceeds account must necessarily fall away, in so far as such payments were made after the repayment deed was executed on 2 February 2018.
It is clear from the terms of the repayment deed and the revised payment deed that monies due to Blue Cap were to be paid directly to Blue Cap without first being deposited into the proceeds account.
The defendant does not dispute that it did not establish a project metals account with the Perth Mint.
In an affidavit of David Wesley Sargeant, a director of the defendant, sworn on 11 June 2018, Mr Sargeant deposes that:[19]
(a)the defendant was not able to open a project metals account with the Perth Mint for the Mint to pay the sale proceeds of the refined gold as the project doré was delivered to the Mint by the toll treaters (the millers of the ore); and
(b)the minutes of the management committee meeting on 11 October 2017 records that (in the presence of Mr Williams as representative of the plaintiff) he (Mr Sargeant) described the Mint accounting process and how the toll treater was responsible for the Mint account.
[19] Affidavit of David Wesley Sargeant, sworn 11 June 2018 [40] - [41].
By cl 5.1 of the joint venture agreement, a representative of the plaintiff and the defendant was appointed to the management committee to:
(a)direct the project manager (the defendant) to conduct a bankable feasibility study under cl 2.4 (to undertake development and mining);
(b)make a decision to mine under cl 3.3;
(c)supervise the manager in the management of the joint venture; and
(d)make all strategic decisions, relating to the conduct of joint venture activities.
One of the central contentions in the plaintiff's argument in support of its application for an interlocutory injunction is that the joint venture agreement and the joint venture amending agreement does not allow for expenses to be incurred and paid from revenue received from open cut mining for expenses in respect of underground mining or exploration of the underground area of the tenements. Further, it is contended that these agreements do not authorise any expenditure being incurred for underground mining until a decision is made by both the defendant and the plaintiff to mine the underground area of the tenements. It is argued that in any event, such expenses should not be deducted from the plaintiff's entitlement to its share of revenue from the sale of refined metals from the open cut mining.
The first difficulty with the plaintiff's argument is that the terms of the joint venture agreement expressly contemplate that exploration work will be undertaken to determine whether the underground area of the tenements should be mined.
The definition of 'development' in cl 1.1 of the joint venture agreement is confined to the development of open cut mining but the scope of the definition of 'mining' in cl 1.1 extends to open cut mining, treatment of products and any other mine the participants decide to develop.
'Joint venture activities' are defined in cl 1.1 of the joint venture agreement to mean:
(a)the preliminary works (necessary to enable the management committee to make a decision to mine from the open pit);[20]
(b)other preliminary obligations under cl 2 of the joint venture agreement;
(c)all exploration (searching for, discovery and delineation of commercial ore deposits in the designated mining area and the evaluation of such deposits including prospecting, exploration declines, test mining, conducting preliminary feasibility studies, preparing feasibility study reports, and planning, but does not include development, mining or treatment).[21]
[20] See the definition of preliminary works in cl 1.1 of the joint venture agreement.
[21] See definition exploration cl 1.1 of the agreement.
Copies of monthly minutes of management committee meetings signed by Mr Williams on behalf of the plaintiff and by Mr Sargeant on behalf of the defendant (which are annexed to the affidavit of Mr Sargeant) record that approvals have been authorised by the management committee to expend funds of the joint venture participants to explore the feasibility for underground mining in the tenements. It is also clear, from the following management committee minutes, that a decision to proceed with mining of the underground area has not yet been made. These minutes record as follows:
(a)at least from 9 May 2017, a budget for at least some items for exploration was approved as part of the requirements for starting the underground feasibility study in mid‑2017.[22]
[22] Affidavit of David Wesley Sargeant, Attachment DWS 6, page 36.
(b)on 25 May 2017, the mining budget was unanimously accepted (an item of which was to conduct an underground feasibility) and a proposed budget for exploration from April 2017 to March 2018 of $576,040;[23]
[23] Affidavit of David Wesley Sargeant, Attachment DWS 6, pages 44 ‑ 45, 49.
(c)by 13 September 2017, an underground mining proposal was to be compiled;[24]
[24] Affidavit of David Wesley Sargeant, Attachment DWS 6, page 82.
(d)by 15 October 2017, drill hole data was expected to be compiled before proceeding with the underground feasibility;[25]
[25] Affidavit of David Wesley Sargeant, Attachment DWS 6, page 89.
(e)on 6 November 2017, it was resolved to approve the engagement of Steve Rogers as manager of the underground feasibility to lodge a mine plan to obtain a permit to develop the underground resource;[26]
(f)by 22 November 2017, a new underground resource was to be calculated and finalised the following week,[27] work on the feasibility had commenced and drilling of the pit was suggested to confirm continuity of mineralisation in planned high grade stopes;[28]
(g)on 21 December 2017, a report was given on an underground mine design and mining method along with further geotechnical studies;[29]
(h)on 10 January 2017, a report was given about mine design work that had been carried out;[30]
(i)on 13 February 2018, a report was given that expenditure on underground planning was being kept to a minimum, and there was a discussion about the location of 8,000 ounces, and a plan for extraction;[31]
(j)on 27 February 2018, a design of the underground was discussed as was the cost of study commitments of underground mining;[32]
(k)on 14 March 2018, underground mining planning continued to be discussed. The management committee was informed that mine design work had commenced and a new stope mining model was being compiled;[33]
(l)on 28 March 2018 a further update on the underground mining and mine design and stope mining model was discussed;[34]
(m)on 11 April 2018, there was a discussion about how large the reserve needed to be to make the underground mining operation robust and it was reported that there would be meetings the following week with four underground mining contractors. It is recorded that Mr Sargeant suggested that three to four drills might be needed to increase the probable reserve at the southern end of the ore body. It was also recorded that this could possibly be done after received proceeds from the next milling campaign;[35]
(n)on 24 April 2018, Mr Rogers reported that the final report on the underground reserve was expected that week. An estimation was given of the underground reserve and the meeting was informed that the project management plan is 90% complete. It was also recorded that Mr Sargeant and Mr Rogers described a proposal to drill six holes at the southern end of the ore body to convert an area of inferred resources to indicated. These resources could then be added to the probable reserve and it was stated that the estimated cost of this drilling programme is approximately $200,000.[36] At the same meeting, it is recorded that two budgets were unanimously approved. One was a preliminary budget from April 2018 to August 2018 for the cost of suspending the underground project for an amount of $458,200, ex GST, and the other was for a drilling budget for drilling the south end for $194,000, ex GST.[37]
[26] Affidavit of David Wesley Sargeant, Attachment DWS 6, page 100.
[27] Affidavit of David Wesley Sargeant, Attachment DWS 6, page 105.
[28] Affidavit of David Wesley Sargeant, Attachment DWS 6, page 106.
[29] Affidavit of David Wesley Sargeant, Attachment DWS 6, pages 120 ‑ 121.
[30] Affidavit of David Wesley Sargeant, Attachment DWS 6, page 129.
[31] Affidavit of David Wesley Sargeant, Attachment DWS 6, page 136.
[32] Affidavit of David Wesley Sargeant, Attachment DWS 6, page 143.
[33] Affidavit of David Wesley Sargeant, Attachment DWS 6, pages 152, 155.
[34] Affidavit of David Wesley Sargeant, Attachment DWS 6, pages 164 ‑ 165.
[35] Affidavit of David Wesley Sargeant, Attachment DWS 6, page 172.
[36] Affidavit of David Wesley Sargeant, Attachment DWS 6, page 182.
[37] Affidavit of David Wesley Sargeant, Attachment DWS 6, pages 183 ‑ 184.
On 11 May 2018, Mr Williams sent an email to Mr Sargeant requesting an immediate halt to further expenditure for underground development. In his email, Mr Williams stated:[38]
Following receipt yesterday of the forecast final open pit numbers and given the numbers presented to date in relation to the potential underground development of the PFMJV, Brimstone cannot see how the underground development could proceed with ERL as the manager and with the current size of the resource, how would it be financed or even profitable?
The open pit has proved that it is not profitable to go mining without some sizeable capital already in the bank and the current project ownership structure between Empire and Brimstone inhibits either company raising the required capital to start.
Looking at this realistically and based on my comments above Brimstone requests there be an immediate halt to any further expenditure in relation to the underground development, pending further discussion.
[38] Affidavit of Paul Williams, sworn 6 June 2018, page 303.
On 1 June 2018, the accountant for the joint venture, Nick Longmire sent Mr Williams and Mr Sargeant a copy of a cash flow forecast for the joint venture which included projected expenditure between June 2018 and August 2018 of $445,000 for exploration, and $137,000 for the underground study.
Given that the management committee had approved a budget of $576,060 in May 2017 and $194,000 ex GST for drilling of the underground area of the tenements in April 2018, I am not satisfied that no expenditure on the exploration of the underground area and the design of an underground mine (which included consulting fees, drilling fees and other costs) had been approved by the plaintiff.
In any event, the plaintiff gave notice of dispute to the defendant about this issue and other matters pursuant to cl 16.2 of the joint venture agreement on 5 June 2018. Yet there is no evidence before the court whether the dispute resolution process has, or has not been progressed in the manner prescribed in cl 16 of the joint venture agreement.
Nor is there any evidence before the court whether the expenses complained about in the amended statement of claim, in respect of underground mining, have actually been incurred by the defendant at this point in time in the exploration of the underground area of the mining tenements, or that planning for an underground mine has exceeded the amounts authorised by the management committee.
It is notable that the amounts pleaded by the plaintiff in the amended statement of claim as expenditure in relation to underground mining as amounts not been authorised, are pleaded as a 'proposed budget' for such amounts.
No prima facie case made out for interim relief
I have found that the plaintiff has not demonstrated that there is a prima facie case for relief. I have reached this conclusion solely on the basis of the evidence put before me for the purpose of the interlocutory application.
Whilst the plaintiff seeks an interim order for an account to be taken of all dealings and transactions of the open pit mining pursuant to the joint venture agreement and the joint venture amending agreement, having regard to the evidence before me, I am not satisfied that such an order should be made at this point in time.
Perhaps most importantly in respect of the order sought to account, the plaintiff has a contractual right pursuant to cl 9.5 of the joint venture agreement to inspect all books and records maintained by the defendant (as manager of the joint venture). The plaintiff has not sought to inspect those books and records and the defendant's counsel has informed the court on behalf of the defendant that the defendant has no difficulty with providing access to the plaintiff on the books and records pursuant to a request made under cl 9.5 of the joint venture agreement. In such circumstances, and in the absence of a failed request to inspect, I am of the opinion that irrespective whether the plaintiff was able to make out a prima facie case for injunctive relief in respect of the standstill of the obligation to pay the balance of the agreed expenditure amount, no order to account should be made by the court.
It appears clear that only limited deposits of revenue from the sale of refined metals have been made to the proceeds account, and it appears from bank statements of the proceeds accounts (annexed to the affidavit of Mr Williams sworn on 6 June 2018) that the proceeds account was not operated as an account used for the disbursement of payments in the manner prescribed by the waterfall arrangements in cl 10.1 of the funding agreement. However, for the reasons set out above, in respect of payments made to Blue Cap after the repayment deed was made on 2 February 2018, I am not satisfied that all revenue from the sale of refined metal was required to be paid into the proceeds account.
Although the plaintiff has recently taken steps in an attempt to withdraw its consent to expending funds on the exploration and mine plan for the development to mine the underground area of the tenements, I am not satisfied that the plaintiff had not authorised 'any' expenditure for this purpose. It is clear from the minutes of the management committee that the plaintiff had, as a participant in the joint venture, authorised expenditure for consulting fees, drilling and other costs in relation to exploration and proposed development of the underground area of the tenements. In particular, it appears to have authorised $194,000 ex GST for drilling which is part of one of the sums of the proposed expenditure it now complains about.
Further, I am not satisfied that an interim order should be made to restrain the defendant from dealing with the secured property or exercising any powers granted to it under the Empire security deed or exercising any powers or conducting any dealings under the Empire mining mortgage.
The plaintiff's counsel was very clear in his submission to the court that the only final relief the plaintiff seeks is specific performance. However, the plaintiff's claim for final relief, on the evidence before me, appears to be weak.
Firstly, there is a strong argument that the time for compliance with cl 4.1 of the joint venture amending agreement and cl 9.1 and cl 10 of the funding agreement have passed as the open pit mining campaigns have been completed, the ore milled and refined and the proceeds of all refined metals from those campaigns (except from the campaign conducted by Eastern Goldfields) have been paid.
It is argued on behalf of the plaintiff that the time has not passed for compliance as there are proceeds from the refined metals that can be paid into the proceeds account as it is common ground that there are funds available for distribution to the participants of the joint venture and that these funds are proceeds from the refined metals from open cut mining. It is also argued that there are other proceeds from the sale of refined metals from open cut mining that are still yet to be paid. These are:
(a)GST refunds on the sale of the refined gold; and
(b)outstanding proceeds owed by Eastern Goldfields.
The difficulty with this argument is that it appears on the evidence before me that it is strongly arguable that the material terms of the funding agreement relied upon by the plaintiff have ceased to have effect. If this proposition is accepted, it follows that cl 9 of the funding agreement (which provides for the establishment of a project metals account and a proceeds account) and cl 10 (which provides for the project revenue cash priority payments) have ceased to have effect.
The defendant puts this proposition in a different way. It contends the funding agreement has been terminated, pursuant to cl 11 of the funding agreement.
Clause 11 of the funding agreement provides:[39]
This Agreement remains in effect until:
(a) the Facility and all amounts owing under the Facility are repaid;
(b)the Facility Fee is paid; and
(c)all other sums payable to Blue Cap in connection with this Agreement are paid,
to Blue Cap in full at which time this Agreement terminates, other than for any provisions which are expressed to survive termination (including clauses 1, 12, 13, 14, 17, 18, 19, 20, 21, 22 and 23) but without prejudice to any right of any party that may have arisen prior to the date of termination.
[39] Affidavit of Paul Williams, sworn 6 June 2018, page 120.
When the definition of 'Facility' and 'Facility Fee' in cl 1.1 of the funding agreement are read together with cl 4 and cl 6 of the funding agreement, it follows that the funding agreement terminates when the facility, the facility fee and all other sums are paid in full to Blue Cap.
Whilst cl 6(c) of the funding agreement provides that the facility and advances must be repaid within three months of the initial period (defined in cl 1.1 of the funding agreement as, subject to any variation, a period of 180 days commencing on 1 May 2017) the time for repayment was extended (by the repayment deed and revised repayment deed) to 15 May 2018.
In his affidavit, Mr Sargeant deposes that Blue Cap was paid in full on or about 25 May 2018.
If it is accepted that all amounts owing to Blue Cap have been paid, the plaintiff's claim for final relief of specific performance of the provisions which it relies upon in the funding agreement appears to have little substance.
The plaintiff also argues that there should be a standstill of its obligation to pay the balance of the agreed expenditure amount on grounds that it is arguable that the agreed expenditure amount in full is not due and owing to the defendant.
The plaintiff points out that pursuant to cl 3.1 of the joint venture amending agreement, the plaintiff in part agreed the amount of the agreed expenditure amount. That is, it agreed that the amount was, as at 30 June 2017, $828,000 and it agreed that further costs and expenses the defendant as manager would incur on behalf of the joint venture, as provided for in cl 3.1(b), would comprise the total amount of the agreed expenditure amount. Consequently, it is said to follow that the final amount that is owing is not agreed. This submission, with respect, does not go very far as the terms of cl 3.1(b) clearly provide for the parameters of the quantification of the agreed expenditure amount.
The plaintiff points out that under cl 3.2(a) of the joint venture amending agreement the plaintiff and defendant agreed that the plaintiff had paid $200,000 of the agreed expenditure amount. The plaintiff also points out that the balance of the agreed expenditure amount is payable by the plaintiff to the defendant from revenue from the mine in priority to payments to the plaintiff in accordance with cl 10.1(a)11 of the funding agreement (cl 3.2(b)).
Clause 3.2 of the joint venture amending agreement provides:
3.2 Reimbursement of Agreed Expenditure Amount
The Agreed Expenditure Amount is to be paid to ERL:
(a)by the payment of $200,000 by Brimstone to ERL receipt of which is acknowledged by ERL; and
(b)the balance from revenue from the Mine in priority to payments to Brimstone in accordance with paragraph 10.1(a)11 of the Funding Agreement provided that:
(i)no reimbursement of the Agreed Expenditure Amount is made from the monies payable to Brimstone pursuant to paragraph 10.1(a)6 of the Funding Agreement;
(ii)Brimstone shall receive $140,000 of the $350,000 payable to the Participants pursuant to paragraph 10.1(a)6 of the Funding Agreement; and
(iii)only fifty per cent (50%) of the monies payable to Brimstone pursuant to paragraph 10.1(a)11 of the Funding Agreement is payable in reimbursement of the Agreed Expenditure Amount,
provided that the Agreed Expenditure Amount must be repaid by Brimstone to ERL in full by the Open Cut Completion Date.
The plaintiff says that by reason of cl 3.1(a) and under cl 3.2(a) there is no doubt that the plaintiff agreed, as at 30 June 2017, in the future it would be liable to the defendant for a further $628,000 and more perhaps payable at some time. However, the plaintiff argues that because there are two provisos in cl 3.2(b) of the joint venture amending agreement, an ambiguity is raised as to what is the agreed expenditure amount, which is now said to be owing by the plaintiff.
The plaintiff argues that cl 3.2(b)(i) and (ii) put a 'hedgerow' around payments to the plaintiff and the defendant from mine revenue of a total of $350,000 per month for three months commencing in the first month after the first gold sale for reimbursements of previously incurred expenses. These payments were not to be used to pay the agreed expenditure amount. Consequently, the plaintiff was to receive $140,000 of the $350,000 worth of mine revenue from the open cut campaigns.
As cl 3.2(b)(iii) provides, by reference to cl 10.1(a)11 of the funding agreement, only 50% of the monies (paid to the plaintiff) is payable to the plaintiff in reimbursement of the agreed expenditure amount, this proviso is said to directly contradict the final proviso. It is said that the proper construction of the proviso in cl 3.2(b)(iii) is that it may be that the defendant is not to receive full reimbursement of the agreed expenditure amount from the plaintiff if its mine revenue distributions fall below the 50% figure.
In support of this argument, a contention is put that the word 'provided' in cl 3.2(b) (which begins in the second last line of cl 3.2(b)) puts a 'long stop date' by which the agreed expenditure amount was to be repaid in full by the plaintiff to the defendant. The parties are agreed that this date was 6 June 2018. Yet it is said this proviso contradicts the proviso in cl 3.2(b)(iii) and raises an ambiguity. The argument is that on the one hand, the balance of the agreed expenditure amount is revenue from the mine, but only 50% of the plaintiff's distributions are available for repayment of the agreed expenditure amount. Yet, on the other hand, the agreed expenditure amount must be repaid in full by a certain time.
It is said to follow, therefore, that before the defendant can rely upon cl 3.2(b) of the amending agreement to exercise rights and powers under the Empire security deed and the Empire mining mortgage, the court would need to determine the proper construction of the joint venture amending agreement and resolve this ambiguity upon evidence.
The plaintiff also says the proviso in cl 3.2(b) cannot be applied by the defendant strictly by reason that the defendant is in breach of the funding agreement and the joint venture amending agreement. However, for the reasons I have already set out, I am not persuaded that there is an arguable case that specific performance would finally lie for the breaches of these agreements as alleged by the plaintiff in the amended statement of claim.
Further, I am not satisfied that the plaintiff has made out a prima facie case that the proviso in cl 3.2(b) of the joint venture amending agreement is ambiguous, or that the proper construction of cl 3.2(b)(ii) and (iii) could result in an amount less than the entire agreed expenditure amount being due and payable on and from 6 June 2018.
As Priestly JA said in Burns Philp Hardware v Howard Chia Pty Ltd, words are ambiguous if they have two or more plausible meanings when the context of the document is taken into account in light of any knowledge any ordinary intelligent reader of the document would bring meaning to it.[40]
[40] Burns Philp Hardware v Howard Chia Pty Ltd (1987) 8 NSWLR 642, 657.
However, the mere existence of an arguable alternative construction does not, of itself, create ambiguity.[41]
[41] Daniels v Daniels [2008] WASCA 230 [38] (Buss JA).
It is apparent the text and structure of cl 3.2 is that:
(a)pursuant to cl 3.2(a) a credit is made for a past payment made to the defendant by the plaintiff to the agreed expenditure amount;
(b)cl 3.2(b)(i) to (iii) (when read together with the priorities in cl 10.1(a) of the funding agreement) is that these provisions provide for further payments to be made from the revenue received from the proceeds of the sale of the refined metals from the open cut mining campaigns. However, cl 3.2(b)(i) to (iii) is subject to the penultimate and overriding proviso that the agreed expenditure amount must be repaid by the plaintiff to the defendant in full by the open cut completion date. Consequently, it is immaterial whether only 50% of monies payable to the plaintiff pursuant to cl 10.1(a)11 of the funding agreement have been paid in reimbursement to the agreed expenditure amount as provided for in cl 3.2(b)(iii) by the time the date of the open cut completion date is made. Once the open cut completion date occurs, the balance of the agreed expenditure amount is to be paid in full. It does not follow that the balance of the agreed expenditure amount can only be payable from the proceeds of the sale of the refined metals from the open cut mining campaigns. If that were the case, the final proviso would have no work to do.
Thus, the meaning of the whole of cl 3.2(b) is not contradictory or intrinsically doubtful.
Balance of convenience
It is not necessary to consider the balance of convenience. However, if I had found that the plaintiff had made out a prima facie case that the defendant should be restrained from exercising rights and powers under the security deed and the mining mortgage, I would have made an order that the plaintiff pay the disputed amount of $1,012,238.08 into court, as required by the rule known as the Inglis rule.[42]
[42] Inglis v Commonwealth Trading Bank of Australia (1971) 126 CLR 161.
In Welldog Pty Ltd v Prox Pty Ltd, the Court of Appeal observed:[43]
In Inglis, the appellants executed a mortgage of a property to the respondent to secure an overdraft. The appellants became indebted to the respondent under the mortgage. The indebtedness had not been repaid and the mortgage had not been discharged. The appellants brought proceedings against the respondent claiming damages for breach of contract, defamation, fraud and conspiracy. The appellants denied the existence of any indebtedness under the mortgage on the basis that any debt that did exist was more than counterbalanced by the damages which the appellants claimed. The appellants sought an injunction to restrain the respondent from taking any action pursuant to a notice of demand given under the mortgage and an injunction restraining the respondent, until judgment in the pending proceeding, from dealing in any way with the mortgaged property.
Walsh J dismissed the application for interlocutory injunctive relief. His Honour held:
'A general rule has long been established, in relation to applications to restrain the exercise by a mortgagee of powers given by a mortgage and in particular the exercise of a power of sale, that such an injunction will not be granted unless the amount of the mortgage debt, if this be not in dispute, be paid or unless, if the amount be disputed, the amount claimed by the mortgagee be paid into court (164).'
His Honour also held that 'nothing short of actual payment is regarded as sufficient to extinguish a mortgage debt' and, if the debt has not been actually paid, 'the Court will not, at any rate as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet what is claimed by the mortgagee to be due' (164 - 165). His Honour elaborated:
'The benefit of having a security for a debt would be greatly diminished if the fact that a debtor has raised claims for damages against the mortgagee were allowed to prevent any enforcement of the security until after the litigation of those claims had been completed (165).'
The appellants' appeal against Walsh J's decision to the Full Court of the High Court was dismissed. Barwick CJ (Menzies and Gibbs JJ agreeing) said, in essence, that Walsh J's decision to refuse the interlocutory injunction, and the reasons he gave for that refusal, were correct (168). The case fell 'fairly … within the general rule applicable when it is sought to restrain the exercise by a mortgagee of his rights under the mortgage instrument', namely failing payment into court of the amount sworn by the mortgagee as due and owing under the mortgage, 'no restraint should be placed by order upon the exercise of the respondent mortgagee's rights under the mortgage' (169).
[43] Welldog Pty Ltd v Prox Pty Ltd [2017] WASCA 62 [31] ‑ [34].
The rule in Inglis is not inflexible. There are exceptions. The plaintiff, however, has not raised any exceptions. It says that this matter is distinguishable from the rule in Inglis as no claim for damages is made by the plaintiff. However, this contention does not raise an exception to the rule in Inglis. In Welldog, the Court of Appeal observed that the general rule in Inglis supplements the ordinary requirement that an applicant give an undertaking as to damages.[44]
[44] Welldog Pty Ltd v Prox Pty Ltd [2017] WASCA 62 [35]; applying Harvey v McWatters (1948) 49 SR (NSW) 173, 177 (Sugerman J).
For these reasons, I made an order that the application for interim orders be dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
VV
ASSOCIATE TO THE HONOURABLE JUSTICE SMITH20 JUNE 2018
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