Copper (Qld) Investment Pte Ltd v Hallion

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2025 0053

COPPER (QLD) INVESTMENT PTE. LTD. (FORMERLY EMR CAPITAL INVESTMENT (NO. 6B) PTE LTD)	Applicant
v
CARL HALLION (AS THE AGENT OF EACH SECURED PARTY UNDER THE DEED OF MORTGAGE DATED 17 SEPTEMBER 2018) (AND OTHERS ACCORDING TO THE ATTACHED SCHEDULE)	Respondents

---

JUDGES:	BEACH, WALKER AND KENNY JJA
WHERE HELD:	Melbourne
DATE OF HEARING:	8 August 2025
DATE OF JUDGMENT:	12 September 2025
MEDIUM NEUTRAL CITATION:	[2025] VSCA 221
JUDGMENT APPEALED FROM:	[2024] VSC 805 (Lyons JA)

---

CONTRACTS – Construction – Objective intention of parties – Reasonable businessperson – Uncommercial outcome – Where parties entered into share sale agreement – Applicant agreed to buy shares held by respondent owning copper mine – As a result applicant held all shares in entity owning copper mine – Where share sale agreement required applicant to make upfront and earnout payments – Earnout payment conditional on aggregate of all cash returns payable to investors in applicant – Parties entered into share mortgage to secure applicant’s obligations under share sale agreement – Applicant sold all shares to third respondent – Third respondent also held other mining assets – Third respondent sold shares in initial public offering and issued shares to applicant – Sellers purported to appoint receivers over applicant’s shares in third respondent – Whether earnout payment depended on cash returns relating to broader group of investors in applicant – Whether terms of share mortgage required earnout payment to be paid into escrow at the time of the initial public offering – Leave to appeal granted – Appeal allowed.

CONTRACTS – Construction – Extrinsic evidence – Where clause of share sale agreement providing for payment drafted in ambiguous terms – Where share mortgage provided for share sale agreement payments into escrow – Whether drafting history relevant to interpreting share sale agreement and share mortgage – Where definitions adopted in earlier drafts rejected in later drafts – Whether terms sheet setting out early in-principle agreement relevant to interpreting agreements.

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; Cherry v Steele-Park (2017) 96 NSWLR 548; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; Australian Broadcasting Commission v Australasian Performing Right Association Ltd(1973) 129 CLR 99; Wilkie v Gordian Runoff Ltd(2005) 221 CLR 522; SAS (Vic) Pty Ltd v Urban Ecological Systems Ltd [2021] VSCA 335, applied.

MCA International BV v Northern Star Holdings Ltd (Receivers and Managers Appointed) (1991) 4 ACSR 719; Esso Australia Ltd v Australian Petroleum Agents’ & Distributors’ Association [1999] 3 VR 642; Lodge Partners Pty Ltd v Pegum [2009] FCA 519, applied.

---

Counsel
Applicant:		Mr S J Maiden KC with Ms S Weinberg
Respondents:		Mr J L Evans KC with Ms B E Slocum and Ms M Mečević
Solicitors
Applicant:	King & Wood Mallesons
Respondents:	HFW Australia

---

BEACH JA:

I agree with Walker JA.

WALKER JA:

This application for leave to appeal relates to a share sale agreement (the ‘2018 SSA’) and a related Share Mortgage[1] entered into on 17 September 2018. These two agreements concerned the ownership of the Capricorn Copper mine located in Queensland. The parties to the 2018 SSA were the applicant, as ‘Buyer’, and the sellers of the shares in question as the ‘Sellers’. The parties to the Share Mortgage were the applicant as ‘Grantor’ and the Sellers as the ‘Secured Parties’.
[1]The capitalised terms in quotations in this introduction are terms defined or words used in the 2018 SSA. I will address the extended definitions in detail below.
The applicant, Copper (Qld) Investment Pte Ltd, was at the time of the trial named EMR Capital Investment (No. 6B) Pte Ltd, and it will be convenient to refer to it as EMR6B for the purposes of these reasons. The first respondent, Carl Hallion, is one of the Sellers and was the ‘Seller Representative’ under the 2018 SSA, and the Secured Parties’ ‘Agent’ under the Share Mortgage.
Before the 2018 SSA was entered into, EMR6B owned approximately 96 per cent of the shares in Capricorn Copper Holdings Pty Ltd (‘CCH’). CCH owned all of the shares in Capricorn Copper Pty Ltd (‘CCPL’) which, in turn, owned the Capricorn Copper mine. EMR6B was managed by EMR Capital Management Limited (‘EMR Capital’), a private equity firm. The remaining shares in CCH (approximately 4 per cent) were owned by a company called Lighthouse Minerals Pty Ltd (‘Lighthouse’), the shares of which were owned by the Sellers (the ‘Lighthouse shares’).
Under the 2018 SSA, EMR6B agreed to purchase the Lighthouse shares from the Sellers. The result of the transaction was that EMR6B owned all of the shares in CCH which, through CCPL, owned the Capricorn Copper mine.
The purchase price under the 2018 SSA was an ‘Upfront Payment’ of AUD$7,285,000 million, together with the possibility of an additional payment (called an ‘Earnout Payment’) of approximately AUD$12.5 million. Payment of the Earnout Payment depended upon satisfaction of one of two circumstances set out in cl 6.1 of the 2018 SSA.
Under the Share Mortgage, EMR6B mortgaged 10 per cent of its shares in CCH (the ‘Collateral’) to the Secured Parties to secure payment of the ‘Secured Money’. In broad terms, Secured Money means the balance of moneys owing from time to time under the 2018 SSA.
The 2018 SSA and the Share Mortgage were executed on 17 September 2018. The Lighthouse shares were transferred to EMR6B. By June 2021, EMR6B had paid to the Sellers all but the fourth (and final) tranche of the Upfront Payment. It had not, to that date, paid the Earnout Payment, as the circumstances that would trigger that payment had not then occurred.
The third respondent to the application for leave to appeal is 29Metals Ltd. It was incorporated in order to hold the Capricorn Copper mine and two additional, separate assets (the ‘non-CCH assets’) that were held by two other separate entities, and to then offer shares to the public through an initial public offering (‘IPO’).
On 7 June 2021, EMR6B transferred all of its shares in CCH and Lighthouse (including the Collateral shares) to 29Metals. In return EMR6B received 107,199,052 shares in 29Metals. A prospectus for the IPO was issued that day.
It was a term of the Share Mortgage that EMR6B would not transfer the Collateral without the Sellers’ Agent’s prior consent unless and until the Secured Money had been paid or EMR6B had paid an amount equal to the Secured Money (including any Secured Money that would reasonably foreseeably be owing in future) into an escrow account. Hallion did not consent to the transfer of the Collateral to 29Metals. EMR6B paid the fourth tranche of the Upfront Payment into escrow, but did not pay the Earnout Payment into escrow.
The IPO was successfully completed on 5 July 2021. On that date the non-CCH assets were transferred to 29Metals.
Following the IPO the Sellers alleged that EMR6B had breached the Share Mortgage, leading to an ‘Event of Default’, which permitted Hallion, as Agent, to accelerate the payment of the Earnout Payment and appoint receivers over the shares 29Metals had issued to EMR6B. On 21 June 2021 Hallion purported to appoint receivers to EMR6B’s shares in 29Metals.
EMR6B and 29Metals commenced the present proceeding on 21 June 2021, seeking declaratory relief. The issues in dispute between the parties were whether, as at 7 June 2021, the Earnout Payment:
(a)was payable under cl 6.1(a) of the 2018 SSA;
(b)formed part of the Secured Money under the Share Mortgage; and
(c)was reasonably foreseeably owing in the future, pursuant to cl 5.1(c)(ii) of the Share Mortgage.
Resolution of these questions turned on whether:
(a)the value of the non-CCH assets held by 29Metals should be taken into account in determining the Earnout Payment under cl 6.1(a) of the 2018 SSA; and
(b)at the time of the sale of the CCH shares to 29Metals, the Earnout Payment would ‘reasonably foreseeably be owing in future’, under cl 5.1(c)(ii) of the Share Mortgage.
The judge resolved both issues against EMR6B.[2]
[2]EMR Capital Investment (No. 6B) Pte Ltd v Carl Hallion (as the ‘Agent’ of each ‘Secured Party’ under the Deed of Mortgage dated 17 September 2018) [2024] VSC 805 (Lyons JA) (‘Reasons’).
EMR6B now seeks leave to appeal the judge’s decision in relation to both the 2018 SSA and the Share Mortgage.
The Sellers filed a Notice of Contention, by which they sought to support the judge’s orders on the basis of a different construction of cl 5.1(c)(ii) of the Share Mortgage.
For the reasons that follow, I would:
(a)grant leave to appeal and allow the appeal in relation to the proper construction of cl 6.1(a) of the 2018 SSA;
(b)dismiss the appeal in relation to the proper construction of cl 5.1(c)(ii) of the Share Mortgage; and
(c)dismiss the Notice of Contention.
Before providing those reasons, I should say that, as is apparent from the judge’s reasons, the issues of construction of the 2018 SSA, especially regarding cl 6.1(a), and of the related Share Mortgage, arising for this Court’s consideration were far from straightforward. In that context, this Court had the considerable benefit of the clear and comprehensive analysis of the trial judge. The advantage afforded an appellate court by reasons of this kind is significant, because they enable the appellate court to comprehend all the more fully the nature of the competing considerations that bear on the decision the appellate court must ultimately make.

Detailed factual background

It is necessary to set out in some greater detail the circumstances that led to the 2018 SSA and the 29Metals IPO.

The parties

EMR6B is a special purpose investment vehicle, incorporated pursuant to the law of the Republic of Singapore, that is managed by EMR Capital, a private equity firm specialising in managing and advising funds with investments in mining operations. EMR6B is ultimately owned by a limited partnership, EMR Capital Resources, Fund I, LP (‘Fund I’) of which EMR Capital is the investment manager. EMR6B was the plaintiff below and is the applicant on the application for leave to appeal.
29Metals is a publicly listed company, having listed on the ASX on 2 July 2021. It was the second plaintiff below, and is the third respondent on the application for leave to appeal.
Hallion was one of the Sellers and was appointed as the Seller Representative under the 2018 SSA, and Agent of the Secured Parties under the Share Mortgage. The Sellers were the Secured Parties under the Share Mortgage.
Jeremy Nipps, the second respondent, was purportedly appointed by Hallion, pursuant to the Share Mortgage, as one of the Receivers to certain shares in 29Metals which formed part of the Collateral under the Share Mortgage. Nipps was the second defendant below.

Ownership of the Capricorn Copper mine

Before 17 September 2018:
(a)CCPL owned the Capricorn Copper mine;
(b)Lighthouse was the manager and operator of the Capricorn Copper mine pursuant to a management agreement;
(c)CCH owned all the shares in CCPL;
(d)EMR6B owned approximately 96.5% of the ordinary class A shares in CCH, which it had previously acquired from the Sellers; and
(e)the remaining 3.5% of the ordinary class A shares and 100% of the class B shares in CCH were owned by Lighthouse, which was wholly-owned by the Sellers.

The genesis of the 2018 SSA and the Share Mortgage

In late August and early September 2018, EMR6B commenced negotiations with the Sellers to acquire the Shares. In early September 2018, Mr Hallion (acting for the Sellers) and Mr Herbert of EMR exchanged several versions of a terms sheet for the proposed acquisition.[3]
[3]Reasons, [47]. The judge observed that the draft and final versions of the terms sheet referred to ‘EMR’, but it is clear that the parties understood this to be a reference to ‘EMR6B’.
On 7 September 2018, following these negotiations, EMR6B, Lighthouse, Mr Hallion, and Mr Watson each signed a Terms Sheet setting out the commercial terms on which EMR6B would acquire the Shares.[4] The details of the Terms Sheet were, relevantly, as follows:
(a)EMR6B would acquire 100 per cent of the Lighthouse shares in exchange for a purchase price comprising an ‘upfront, certain, payment plus a contingent payment on realisation of a Liquidity Event’, subject to it ‘achieving a minimum return’;
(b)the Upfront Payment totalling AUD$7.5 million was to be paid in four tranches;
(c)the further contingent payment of AUD$12.5 million was to be payable as follows:
•If, on a Liquidity Event, EMR[6B] reports to its Fund I investors that it has achieved a net outcome (after payment of the Contingent Payment) of 2.0x or greater multiple on its invested capital (adjusted to reflect the terms of the July 2018 equity raising) in the CCH Group (after accounting for the percentage of the EMR interest that is divested), a further payment of A$12.5m
•The Shareholders [Sellers] will be provided with visibility and access to the multiple on invested capital disclosed by EMR[6B] to its investors for the purposes of reporting and claiming a payment under the terms EMR[6B]’s mandate
(d)A Liquidity Event described as ‘any cash distribution to the EMR Fund I investors in connection with CCH Group’.[5]
[4]Reasons, [48].
[5]Reasons, [49].
The Terms Sheet contained the following terms in relation to security:
•A security deed to be executed granting the sellers security over 10% of the total issued share capital of CCH and CCM to secure payment of the Upfront Payment and Contingent Payment
•LMH Shareholders [Sellers] must not use their rights under the security deed to obstruct any proposed Liquidity Event and must provide reasonable assistance to EMR[6B] in connection with releasing their security as required to facilitate the Liquidity Event[6]
[6]Reasons, [50].
The terms of the 2018 SSA and the Share Mortgage were negotiated between 12 September 2018 and 17 September 2018. The negotiations and drafting were conducted by Clayton Utz on behalf of EMR6B (instructed by Mr Herbert) and Allen & Overy on behalf of Mr Hallion and the Sellers/Secured Parties (instructed by Mr Hallion).[7] The Sellers provided the judge with a detailed chronology setting out the drafting history of the 2018 SSA and the Share Mortgage, which was not in dispute between the parties. What was in dispute was the extent to which the Court could rely upon that drafting history in the construction of the documents. The judge set out some of the key drafting matters in his decision;[8] I will refer to relevant aspects of the drafting history later in these reasons, where necessary for my analysis.
[7]Reasons, [52].
[8]Reasons, [55]–[60].
On 17 September 2018:
(a)EMR6B and the Sellers executed the 2018 SSA, under which the Sellers agreed to sell, and EMR6B agreed to buy, all of the issued shares in Lighthouse; and
(b)EMR6B and the Sellers executed the Share Mortgage, under which EMR6B mortgaged the Collateral (being, at that time, 10 per cent of its shares in CCH) (the ‘Mortgaged CCH Shares’) to the Secured Parties (ie the Sellers) to secure (among other things) payment of the purchase price under the 2018 SSA.
The Purchase Price under cl 3.1 of the 2018 SSA comprised:
(a)the Upfront Payment (paid in four tranches) of AUD$7,285,000; and
(b)the Earnout Payment of $12,500,000 (if payable pursuant to cl 6.1 of the 2018 SSA).

Relevant terms of the 2018 SSA

Clause 6.1 of the 2018 SSA relevantly provided as follows:
6.1 Payment of Earnout Payment
(a) If a Liquidity Event occurs and any EMR Shareholder or any Affiliate of an EMR Shareholder reports (or is in a position to report) to EMR Investors that the aggregate of all cash returns paid or available to be paid to EMR Investors as a result of that Liquidity Event and any previous Liquidity Events (prior to the application of any Taxes payable, or otherwise withheld as a consequence of that Liquidity Event, by the EMR Investors) (Reported Multiple) is equal to or more than 2 times the amount of its Invested Capital immediately prior to the Liquidity Event, then the Buyer must pay to the Seller Representative the Earnout Payment within 10 Business Days of the date on which the Buyer receives the proceeds that result in the Reported Multiple being realised.
(b) If a Liquidity Event occurs and:
(i) a Reported Multiple is less than 2 times; and
(ii) but for the Earnout Payment, that Reported Multiple would have been equal to or more than 2 times,
then the Earnout Payment will be reduced by such amount as will result in the Reported Multiple, after accounting for the payment of the reduced Earnout Payment, equalling 2 times.
(c) Subject to clause 6.1(f), if, on the fifth anniversary of the date of this agreement, the Earnout Payment (or part thereof) has not fallen due for payment to the Sellers under the foregoing provisions of this clause 6.1, the Buyer and the Seller Representative will commission an independent valuation of the then present value of the aggregate of the Buyer and its Affiliate’s interest in the CC Group as at that time in accordance with the procedure set out in Attachment 4.
(d) If the amount determined by the independent valuation under clause 6.1(c) less an estimate of reasonable costs in realising a Liquidity Event, plus any returns to the EMR Investors generated by Liquidity Events that have occurred prior to the fifth anniversary of the date of this agreement (End Date Value) is equal to or more than 2 times the Invested Capital, the Buyer must pay to the Seller Representative the amount of the Earnout Payment within 10 Business Days of the date on which the End Date Value has been determined. …[9]
[9]Emphasis in original.
Various terms used in cl 6.1 were defined terms, as follows:
Affiliate means in respect of a person (Primary Person), a person:
(a) Controlled directly or indirectly by the Primary Person;
(b) Controlling directly or indirectly the Primary Person;
(c) directly or indirectly Controlled by a person who Controls the Primary Person (whether alone or with any of its Associates); or
(d) directly or indirectly under the common Control of the Primary Person and any of the Primary Person’s Associates,
and Control as used in this definition with respect to any person (other than an individual) means the possession, directly or indirectly, of the power to direct or cause the direction of the financial and operating policies of such person, whether through the ownership of voting securities, by agreement or otherwise, and includes the following:
(a) direct or indirect ownership of more than 50% of the voting rights of such person; or
(b) the right (whether alone or with any of its Associates) to appoint the majority of the members of the board of directors of such person (or similar governing body) or to manage on a discretionary basis the assets of such person,
and, for the avoidance of doubt, a general partner is deemed to Control a limited partnership of which it is the general partner and, solely for the purposes of this agreement, a fund advised or managed directly or indirectly by a person will also be deemed to be Controlled by such person.
…
CC Group means, together, CCH, CCPL, any entity that is a subsidiary of CCPL from time to time by virtue of section 46 of the Corporations Act and any new holding company of CCH that may be established from time to time.
…
EMR Investors means any investors in:
(a) Fund I;
(b) any entity, collective investment vehicle or fund (including an annex fund) managed or advised by the Buyer or its Affiliates (or any of their successors, replacements, assigns or co-appointees as manager or adviser);
(c) each entity forming part of, or which is owned by, any of the above; and/or
(d) any Affiliate of any of the entities described in paragraphs (a) to (c) of this definition that acquires a direct or indirect interest in the CC Group from any of the above.
EMR Shareholders means the Buyer and any Affiliate of the Buyer that holds shares in any member of the CC Group from time to time.
…
Invested Capital means, at any time, the aggregate cash amount paid by the Buyer in acquiring ordinary shares in CCH that it holds at that time (including any portion of the Purchase Price already paid under this agreement), and, counting only the US$4.5 million invested July 2018 twice, and after accounting for any shares in CCH that the Buyer has divested prior to that date. For the avoidance of doubt, the Invested Capital immediately prior to execution of this agreement is US$81,818,766.
…
Liquidity Event means:
(a) an initial public offering of the securities in any member of the CC Group; a change of Control of any member of the CC Group;
(c) a winding up of any member of the CC Group;
(d) a dividend or other distribution, return of capital or share buy-back by any member of the CC Group;
(e) a Disposal of shares in any member of the CC Group; or
(f) a Disposal of:
(i) for the purposes of clause 3.2(d) and clause 3.3, all or substantially all of the assets of any member of the CC Group; and
(ii) for all other purposes, any assets of any member of the CC Group,
other than as a consequence of a bona fide reorganisation or restructure undertaken with the consent of the Seller Representative (not to be unreasonably withheld). …[10]

Relevant terms of the Share Mortgage

[10]Emphasis in original.

Under the Share Mortgage EMR6B was the Grantor and the Sellers were the Secured Parties. Collateral was defined (via various nested definitions) to mean all of EMR6B’s rights in 10 per cent of its shares in CCH.
Clause 1.3 provided as follows:
1.3 Share Sale Agreement
(a) Unless otherwise defined, expressions used in this mortgage have the meanings given to them in or for the purpose of the Share Sale Agreement.
(b) This mortgage is a ‘Transaction Document’ for the purposes of the Share Sale Agreement.
Clause 2.1 provided as follows:
By this mortgage, the Grantor as legal and beneficial owner mortgages the Collateral to each Secured Party to secure the satisfaction of the Obligations and the payment of the Secured Money.
Clause 5.1 relevantly provided as follows:
5.1 Restrictions in relation to the Collateral
The Grantor will not without the Agent's prior written consent or as expressly permitted in any other Transaction Document:
…
(c) (No sale etc) sell, convey, assign, transfer, lease, licence or otherwise dispose of, part with possession of, make any bailment, or grant any option over or create or permit to exist any other interest in any part of the Collateral (each a Relevant Transaction), unless:
(i) and until the Obligations are fully discharged and the Secured Money has been unconditionally and irrevocably paid and discharged in full and it is not reasonably foreseeable that any Secured Money could be owing in the future; or
(ii) the Relevant Transaction is reasonably required to facilitate a Liquidity Event, provided that, prior to completion of the Relevant Transaction:
A. the Grantor has paid an amount equal to the Secured Money (including any Secured Money that would reasonably foreseeably be owing in future) into an escrow account located in Australia with an escrow bank acceptable to the Agent (acting reasonably);
B. the Grantor, the Secured Parties and the relevant escrow bank have entered into escrow or similar arrangements providing for the release of the funds in the escrow account to the Secured Parties immediately upon completion of the Relevant Transaction, in form and substance satisfactory to the Agent (acting reasonably); and
C. the Secured Parties have the benefit of a duly perfected Security Interest over the escrow account pursuant to a security agreement in form and subject satisfactory to the Agent (acting reasonably);; [sic] …[11]
[11]Emphasis in original.
I will refer to cl 5.1(c)(ii) as ‘the escrow clause’, being the terminology the judge used.
Various terms used in cl 5.1 were defined terms, as follows:
Secured Money means all money the payment or repayment of which from time to time forms part of the Obligations.
Obligations means all the liabilities and obligations of the Grantor to a Secured Party (whether alone or not) under or by reason of any Transaction Documents to which it is a party and includes any liabilities or obligations which:
(a) are liquidated or unliquidated;
(b) are present, prospective or contingent;
(c) arise from the making of any advance on or before the date of this mortgage or from any future advances;
(d) are in existence before or come into existence on or after the date of this mortgage and whether or not currently contemplated;
(e) relate to the payment of money or the performance or omission of any act;
(f) sound in damages only;
(g) accrue as a result of any Event of Default; or
(h) would exist but for an Event of Insolvency affecting any person,
and irrespective of:
(i) whether the Grantor is liable or obligated solely, jointly or jointly and
severally with another person;
(j) the circumstances in which a Secured Party comes to be owed each liability or obligation and in which each liability or obligation comes to be secured by this mortgage, including any assignment of any liability or obligation or of this mortgage; or
(k) the capacity in which the Grantor and a Secured Party comes to owe or to be owed that liability or obligation.
Events of Default were set out in cl 6.1 and included the following:
(b) (Breach of undertaking) the Grantor breaches any written undertaking given at any time to any Secured Party or fails to comply with any condition imposed by the Agent in agreeing to any waiver and has not remedied such breach or failure within 5 Business Days after the earlier of the date on which the Grantor becomes aware of such breach or failure and the date on which the Grantor is given written notice of such breach or failure; …
Clause 6.2 set out the rights on an Event of Default, as follows:
The Encumbrance created by this mortgage will become immediately enforceable if an Event of Default occurs. If any Event of Default occurs then, during the period it subsists, at the option of the Agent and despite any delay or previous waiver of the right to exercise that option:
(a) the Secured Money becomes immediately due and payable on demand from any Secured Party;
(b) all Powers not previously exercisable become exercisable; and
(c) any rights of the Grantor to deal with the Collateral (other than through a Receiver appointed under this mortgage) immediately cease.
In addition, under cl 7.1 a secured party was entitled to appoint a receiver of the Collateral if an Event of Default occurred.

The 29Metals IPO

The 29Metals IPO involved transferring ownership of three separate assets, owned by three separate entities, to a single company (namely, 29Metals), the shares of which were then offered to the public. The three assets, and their three owners, were as follows:
(a)the Capricorn Copper mine which, immediately before 7 June 2021, was owned by EMR6B as part of Fund I;
(b)the Redhill exploration project in Chile owned by EMR Capital Investment (No.4B) Pte Ltd (‘EMR4B’, which was an entity ultimately wholly owned by Fund I) and the limited partners of EMR Capital Resources, LP (‘Fund 0’); and
(c)the Golden Grove base and precious metals mine in Western Australia ultimately owned by the limited partners of EMR Capital Fund II, LP (‘Fund II’).
The following diagram illustrates the three funds and their holdings:
On 7 June 2021, a prospectus was issued for the initial public offering of shares in 29Metals.
Also on 7 June 2021, in anticipation of the IPO, EMR6B entered into an agreement pursuant to which it transferred the CCH shares (including the Mortgaged CCH Shares) to 29Metals (the ‘CCH Share Sale and Purchase Agreement’) and EMR6B received 107,199,052 shares in 29Metals, 10 per cent of which constituted consideration for the transfer of the Mortgaged CCH Shares (the ‘Consideration Shares’). The entry into the CCH Share Sale and Purchase Agreement was a ‘Relevant Transaction’ for the purpose of the escrow clause of the Share Mortgage.
Pursuant to cl 5.1(c) of the Share Mortgage,[12] EMR6B was not to transfer the Collateral without Hallion’s prior written consent unless, relevantly:
(a)the Secured Money had been paid in full and it was not reasonably foreseeable that any Secured Money could be owing in the future; or
(b)prior to the completion of the transfer, EMR6B had paid an amount equal to the Secured Money (including any Secured Money that would reasonably foreseeably be owing in future) into an escrow account located in Australia.
[12]Clause 10.6(b) of the Share Mortgage, which governed EMR6B’s entitlement to a release from the Share Mortgage, was drafted in materially the same terms.
Hallion, in his capacity as Agent, did not consent to the transfer of the CCH shares to 29Metals.
Prior to entering into the CCH Share Sale and Purchase Agreement, on 7 June 2021:
(a)EMR6B paid $2.5 million (the fourth tranche of the Upfront Payment) into escrow; and
(b)EMR6B directed the release of that amount to the Sellers immediately following the transfer of the Mortgaged CCH Shares to 29Metals.
EMR6B did not pay an amount equal to the Earnout Payment into the escrow account.
Also on 7 June 2021, EMR6B entered into:
(a)an escrow deed with 29Metals relating to, amongst other things, the Consideration Shares (the ‘29Metals Escrow Deed’); and
(b)a ‘Deed of Indemnity – Cash Backed’, by which EMR6B directed 29Metals to retain AUD$13 million of the proceeds of the IPO otherwise payable to EMR6B (‘Cash-Backed Indemnity Cash Amount’).
Upon becoming the holding company of CCH, 29Metals became a ‘new holding company of CCH’ for the purposes of the definition of ‘CC Group’ in the 2018 SSA, and therefore part of the CC Group for the purposes of the 2018 SSA.

Events following the IPO

Pursuant to the definition of ‘EMR Investors’ in the 2018 SSA:
(a)Fund 0, the limited partners of Fund II and EMR4B were ‘Affiliates’ of EMR6B; and
(b)the investors in Fund 0 and the limited partners of Fund II were EMR Investors.
Immediately following the IPO of 29Metals on 5 July 2021:
(a)29Metals acquired the Redhill project and the Golden Grove mine;
(b)each of Fund 0, the limited partners of Fund II and EMR4B became EMR Shareholders (as defined in the 2018 SSA);[13]
(c)EMR6B sold 42,386,568 shares in 29Metals, continued to hold 64,812,484 shares in 29Metals (the ‘Retained Stake’), and pursuant to the Deed of Indemnity, directed 29Metals to retain the Cash-Backed Indemnity Cash Amount;
(d)EMR4B sold 2,325,531 shares in 29Metals and continued to hold 3,555,925 shares in 29Metals;
(e)Fund 0 sold 68,296 shares in 29Metals and continued to hold a beneficial interest in 104,432 shares in 29Metals; and
(f)the limited partners of Fund II sold down 96,614,855 shares in 29Metals and continued to hold a beneficial interest in 147,731,909 shares in 29Metals.

Appointment of Receivers

[13]See paragraph [33], above.

On 10, 17 and 18 June 2021, Hallion, as Agent:
(a)alleged that EMR6B had breached the Share Mortgage;
(b)alleged that an Event of Default under the Share Mortgage had occurred;
(c)refused to release the Mortgaged CCH Shares from the Share Mortgage; and
(d)threatened to appoint a receiver and manager to the Collateral.
On 18, 21 and 23 June 2021, and again on 28 July 2021, the Secured Parties requested delivery up of title documents with respect to the Collateral.
On 21 June 2021, Hallion purported to appoint the Receivers to the Consideration Shares.

Summary of proceedings and issues

EMR6B and 29Metals commenced the proceeding by writ on 21 June 2021. By a statement of claim dated 9 August 2021, EMR6B and 29Metals alleged that:
(a)on the proper construction of the 2018 SSA and the Share Mortgage, EMR6B was not required to pay an amount equivalent to the Earnout Payment into escrow pursuant to cl 5.1(c)(ii) of the Share Mortgage, because the aggregate of all cash returns paid or available to be paid to EMR6B as a result of the IPO was not equal to or more than 2 times the amount of EMR6B’s Invested Capital as required by cls 6.1(a) of the 2018 SSA;
(b)the steps and arrangements to facilitate the IPO, as required by cls 5.1(c)(ii) and 10.6(b) of the Share Mortgage had been complied with; and
(c)consequently, the Secured Parties must release the Collateral and the Share Mortgage.
In summary, EMR6B and 29Metals sought declarations that the Sellers were not entitled to the Earnout Payment or any other amounts falling within the definition of Secured Money, that EMR6B and 29Metals were entitled to a release of the Collateral and the Share Mortgage and that the purported appointment of the Receivers was invalid. EMR6B and 29Metals also sought a mandatory injunction compelling the Hallion and the Sellers (as Secured Parties) to take all steps necessary to provide a release of the Share Mortgage.
By a further amended defence and counterclaim dated 2 March 2022, the Sellers alleged (relevantly, and in summary) that:
(a)on the proper construction of the 2018 SSA, EMR6B was required to pay the Earnout Payment if the aggregate of all cash returns paid or available to be paid to EMR Investors (which included all of Fund 0, Fund I and the limited partners of Fund II) from the proceeds of all Liquidity Events was equal to or more than 2 times the amount of the Invested Capital;
(b)on the proper construction of the Share Mortgage, in addition to payment of the fourth tranche of the Upfront Payment, EMR6B was required to pay an amount equal to the Earnout Payment into escrow prior to the completion of the CCH Share Sale and Purchase Agreement; and
(c)EMR6B’s failure to pay an amount equal to the Earnout Payment into escrow prior to completion of the CCH Share Sale and Purchase Agreement was an ‘Event of Default’ pursuant to cl 6.1(b) of the Share Mortgage, which accelerated the payment of the Earnout Payment such that it was immediately due and payable.
The defendants sought, in summary:
(a)declarations that the appointment of the Receivers was valid, that the Earnout Payment was due and payable, and that EMR6B was liable to pay the Receivers’ remuneration and indemnify the Secured Parties and the receivers in respect of costs incurred in the attempted exercise of powers under the Share Mortgage;
(b)delivery up of documents of title in respect of the Consideration Shares;
(c)a mandatory injunction restraining EMR6B and 29Metals from interfering with the Receivers in the performance of their duties and the exercise of their powers; and
(d)damages and interest.
The principal issues at trial relevant to the appeal included:
(a)the construction of clause 6.1(a) of the 2018 SSA, and specifically the question of whether the returns paid or available to be paid to Fund 0 and Fund II from the IPO should be taken into account in calculating the Reported Multiple and, thereby, in determining whether the Earnout Payment was payable;[14] and
(b)the construction of clause 5.1(c)(ii) of the Share Mortgage, and specifically whether immediately before completion of the CCH Share Sale and Purchase Agreement on 7 June 2021, the Earnout Payment constituted Secured Money or ‘any Secured Money that would reasonably foreseeably be owing in future’ if the IPO proceeded such that an amount equal to the Earnout Payment was required to be paid into escrow.[15]

Summary of judge’s findings

[14]See Reasons, [9], [210]–[234].

[15]See Reasons, [9], [308], [316], [330].

The judge found that the effect of the definitions used in cl 6.1(a) of the 2018 SSA was to require the returns paid or available to be paid to Fund 0 and Fund II from the IPO to be taken into account in calculating the Reported Multiple.[16]
[16]Reasons, [216], [217], [231], [234], [236].
By reason of his finding in relation to cl 6.1(a) of the 2018 SSA, the judge was satisfied that, at 7 June 2021 the Earnout Payment would reasonably foreseeably be owing in future if the IPO proceeded.[17] His Honour adopted the following methodology:
(a)first, under the 2018 SSA, two times EMR6B’s Invested Capital (including the Earnout Payment) was USD$286.3 million (the ‘target return’);[18]
(b)second, upon completion of the IPO, the EMR Investors (ie EMR6B, EMR4B, Fund 0 and the investors in Fund II):
(i)received a realised return of USD$205,464,972.75 (net of deductions), on the sale of 141,395,250 shares in 29Metals (the ‘realised EMR6B return’); and
(ii)continued to hold 216,204,272 shares in 29Metals (the ‘retained EMR6B stake’) which at the IPO listing price were valued at USD$324,307,125;
(c)third, to achieve the target return by the End Date, the retained EMR6B stake would need to return USD$80,835,027.25 (calculated by taking the target return of USD$286.3 million and deducting the realised EMR6B return of USD$205,464,972.75);
(d)as a result, the retained EMR6B stake of 64,812,484 shares in 29Metals would only need to be sold for USD$1.25 per share by the End Date to meet the target return.[19]
[17]See Reasons, [376].
[18]Reasons, [357].
[19]Reasons, [372].
As a consequence, the judge found that:
(a)the escrow clause of the Share Mortgage required EMR6B to pay an amount equal to the Earnout Payment into escrow prior to completion of the CCH Share Sale and Purchase Agreement on 7 June 2021;[20]
(b)failure to pay an amount equal to the Earnout Payment into an escrow account constituted an Event of Default pursuant to cl 6.1(b) of the 2018 SSA;[21] and
(c)by reason of that default, cl 6.2(a) of the Share Mortgage had the effect that the Earnout Payment became immediately payable upon demand being made by the Agent on 18 June 2021.[22]
[20]Reasons, [334], [561].
[21]Reasons, [562].
[22]Reasons, [564], [565].

EMR6B’s grounds of appeal

EMR6B advanced three proposed grounds of appeal[23] which, in summary, were as follows:
[23]For convenience, I will refer to the proposed grounds of appeal simply as grounds of appeal.
(a)Ground 1 was that the judge erred in construing cl 6.1(a) of the 2018 SSA in a way that required the cash returns paid or available to be paid to Fund 0 and to the limited partners of Fund II from the 29Metals IPO to be included in the calculation of the Reported Multiple. Ultimately this ground was directed to the judge’s construction of the term ‘EMR Investors’. Various sub-paragraphs of ground 1 alleged various more specific errors said to have been made by the judge.[24]
(b)Ground 2 was that, by reason of the erroneous construction of cl 6.1(a) identified in ground 1, the judge erred in finding that:
(i)at 7 June 2021, it was reasonably foreseeable that the Earnout Payment would be owing in future;
(ii)clause 5.1(c)(ii)(A) of the Share Mortgage required EMR6B to pay an amount equal to the Earnout Payment into an escrow account prior to completion of the CCH Share Sale and Purchase Agreement on 7 June 2021;
(iii)failure to pay an amount equal to the Earnout Payment into the escrow account constituted an Event of Default pursuant to cl 6.1(b) of the 2018 SSA; and
(iv)by reason of that event of default, cl 6.2(a) of the Share Mortgage had the effect that the Earnout Payment became immediately payable upon demand being made by the Agent on 18 June 2021.[25]
(c)Ground 3 was that the trial judge erred in finding that the Earnout Payment had become due and payable under cl 6.2(a) of the Share Mortgage. Ultimately this ground was directed to the judge’s construction of the term ‘Secured Money’. Various sub-paragraphs of ground 3 alleged various more specific errors said to have been made by the judge.[26]
[24]Citing Reasons, [216]–[217], [226], [228], [234], [245].
[25]Citing Reasons, [376], [561](b), [562], [564]. [565].
[26]Citing Reasons, [564], [565].

The Sellers’ Notice of Contention

The Sellers filed a Notice of Contention concerning the Construction of cl 5.1(c)(ii) of the Share Mortgage, by which they contended that the judge erred in finding that the Earnout Payment did not fall within the general definition of ‘Secured Money’ under the Share Mortgage.[27]
[27]Citing Reasons, [318].
Under the Notice of Contention the Sellers accepted the judge’s construction of the term ‘Secured Money’ in cl 6.2(a) of the Share Mortgage, but challenged the judge’s (different) construction of that term in cl 5.1(c) of the Share Mortgage. They contended that, regardless of the calculation of the Reported Multiple in the 2018 SSA, and regardless of whether the Earnout Payment was reasonably foreseeably payable in the future, it was always part of the Secured Money as defined in the Share Mortgage. Thus an amount equal to the Earnout Payment had to be paid into an escrow account. That did not occur, thus there was an Event of Default and the payment of the Secured Money (including the Earnout Payment) was accelerated and was immediately due and payable.

From this it was said to follow that the judge erred in finding that, on the proper construction of cl 5.1(c)(ii)(A) of the Share Mortgage, EMR6B was not required to pay an amount equal to the Earnout Payment (ie $12,500,000) into an escrow account as described in that clause on or before 7 June 2021, unless it was reasonably foreseeable at that date that the Earnout Payment would be owing (or payable) to the Sellers in future.[28]
[28]Citing Reasons, [315]–[316].

The relationship between the issues, EMR6B’s grounds of appeal and the Notice of Contention

EMR6B explained the ‘chain of reasoning’ that led the judge to conclude that EMR6B was liable to pay the Earnout Payment to the Sellers was as follows:
First, you calculate the [Reported Multiple] by reference to all of the funds [Fund 0, Fund I and Fund II]. That’s proposition one. Proposition two, at the time of the sale the [Reported Multiple] hadn’t been reached, so the share sale agreement did not require the earnout payment to be paid. Proposition three, the mortgage required an amount to be paid into an escrow account that was equal to the earnout payment because the earnout payment was reasonably foreseeable to be owing in the future. Proposition four, because of the interpretation of cl 6.1(a) [of the 2018 SSA], the earnout payment was reasonably foreseeably owing in the future. Proposition five, an amount equal to the secured money wasn’t paid into escrow, and that was a default. Proposition six, the monies that were accelerated on default under 6.2(a) [of the Share Mortgage] included the earnout amount. Proposition seven, as a result of that, the earnout amount became immediately due and payable on demand. Proposition eight, the demand was made.
EMR6B then explained the way in which its grounds of appeal and the notice of contention intersected with these propositions as follows:
(a)Grounds 1 and 2 challenged proposition one, namely the conclusion about what returns are taken into account in determining the Reported Multiple. EMR6B contended that, if ground 1 is accepted, the first proposition falls away and every subsequent step falls away. In that case the appeal would succeed unless the Notice of Contention succeeded.
(b)If the Notice of Contention succeeded, then the Earnout Payment was always ‘Secured Money’ under cl 5.1(c) of the Share Mortgage and was required to be paid into escrow before the transaction could proceed. Thus the appeal would fail.
(c)Ground 3 concerned proposition six, above. Under this ground, EMR6B accepted the judge’s construction of the term ‘Secured Money’ in cl 5.1(c) of the Share Mortgage, but disputed the judge’s (different) construction of that term in cl 6.2(a) of the Share Mortgage. Ground 3 thus challenged the conclusion that the monies accelerated on default under cl 6.2(a) of the Share Mortgage included the Earnout Payment. EMR6B submitted that the Notice of Contention would not defeat Ground 3.

Ground 1: Construction of cl 6.1(a) of the 2018 SSA

The judge’s decision concerning cl 6.1(a) of the 2018 SSA

The issue in relation to cl 6.1(a) of the 2018 SSA concerned the meaning of ‘EMR Investors’ in that clause. Construction of that term informed the calculation of the Reported Multiple in cl 6.1(a), which in turn impacted on whether the Sellers were entitled to the Earnout Payment following the IPO.
EMR6B contended that ‘EMR Investors’ should be understood to mean only investors in EMR6B, not investors in Fund 0 and Fund II. In contrast, the Sellers contended that the definition of ‘EMR Investors’ in terms included investors in Fund 0 and Fund II, and the definition applied to the use of the defined term in cl 6.1.
The judge commenced his analysis of this issue by setting out the relevant principles concerning contractual construction, which were not in dispute.[29] He also noted that caution is required when applying the assumption that the parties intended to produce a commercial result.[30] He also noted that EMR6B eschewed any reliance upon the ‘rectification by construction’.[31] Next the judge set out the principles relevant to the admissibility and use of pre-contractual negotiations.[32] After considering the judgment of Leeming JA in Cherry v Steele-Park,[33] the judge said this:
I have formed the view that I am able to use the drafting history and prior negotiations in construing the Transaction Documents, for the limited purpose of ascertaining the genesis of the contract, the commercial purpose of the agreement, and the other objective surrounding circumstances (being facts known to both parties). However, I will only be permitted to have regard to such documents if they disclose such matters, and are relevant to the issues of contractual construction, including for the purpose of resolving any ambiguity. To the extent that they instead disclose subjective intentions of the parties from time to time, culminating in the execution of the Transaction Documents, I am not permitted to use those materials to construe the clauses.[34]
[29]Reasons, [185]. The judge summarised the principles to be drawn from Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 (‘Mount Bruce’).
[30]Reasons, [186]–[188]. The judge referred to SAS (VIC) Pty Ltd v Urban Ecological Systems Ltd [2021] VSCA 335 (Sifris and Kennedy JJA, and Macaulay AJA) and to J & P Marlow [No 2] Pty Ltd v Hayes (2023) 112 NSWLR 29, 45, [78] (Bell CJ, see also Meagher and Kirk JJA at 49, [98]–[99]); [2023] NSWCA 117.
[31]Reasons, [192].
[32]Reasons, [193]. The judge referred to Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 352 (Mason J); [1982] HCA 24; Mount Bruce (2015) 256 CLR 104, 117 [50] (French CJ, Nettle and Gordon JJ); [2015] HCA 37; Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295.
[33](2017) 96 NSWLR 548, 563, [64] (Leeming JA, Gleeson JA agreeing at 551, [1], White JA agreeing at 576, [119]); [2017] NSWCA 295. The judge noted, at Reasons, [196], that White JA had dissented on the issue of admissibility: at 581–2, [146]–[150].
[34]Reasons, [198], referring to Perpetual Ltd v Myer Pty Ltd [2019] VSCA 98, [137] (Whelan, Niall and Hargrave JJA).
The judge began his analysis of the EMR Investors construction issue by considering the Terms Sheet, signed on 7 September 2018 by EMR6B and the Sellers’ Agent (among others). He considered the Terms Sheet to be relevant as evidence of mutually known background facts and of the objective intention of the parties at the time it was signed.[35] He found that the Terms Sheet disclosed an objective intention (at that time) that whether the Earnout Payment was to be payable was dependent only upon the financial performance of the CCH Group (comprising CCH and CCPL).[36]
[35]Reasons, [209].
[36]Reasons, [209].
The judge found that the terms reflected in the Terms Sheet were varied and expanded in the 2018 SSA. He held that it was not clear from the words of the 2018 SSA as executed, that payment of the Earnout Payment depended solely upon the financial performance of the CCH Group (comprising CCH and CCPL).[37] That was because of the definitions used in the 2018 SSA. Those definitions had the effect of expanding the entities within the EMR Capital Group whose returns or assets might fall within the returns considered for the purpose of determining whether the Earnout Payment was payable beyond those in the Terms Sheet. The judge considered it was not appropriate to read down the defined term ‘EMR Investors’ to mean ‘EMR Investors invested in EMR6B’.[38]
[37]Reasons, [209]–[210].
[38]Reasons, [210], [216]–[217].
His Honour reached that conclusion ‘notwithstanding’ that:
(a)under the 2018 SSA, the Sellers sold the Shares (which held an interest only in the Capricorn Copper assets via CCH) to EMR6B; and
(b) in light of the particular transaction undertaken by EMR6B (ie the Restructure and IPO), where application of the definitions resulted in the Earnout Payment under cl 6.1(a) becoming payable by reference to the returns from non-CCH assets.[39]
[39]Reasons, [218].
The judge also accepted that there was ‘inconsistency and/or ambiguity between the plain meaning of the defined terms inserted into cl 6.1(a), other parts of cl 6.1(a) and cl 6.2(b)’.[40] However, he was not satisfied that those inconsistencies or ambiguities, either on their own or in combination, led to the construction advanced by EMR6B, ‘in light of the deliberate and expansive definitions adopted by the parties.’[41]
[40]Reasons, [220].
[41]Reasons, [226].
In relation to the proposition that the literal construction of the defined term ‘EMR Investors’ led to an uncommercial outcome, the judge referred back to the proposition that caution is required in relying on that form of reasoning.[42] He observed that, consistently with the authorities, ‘there are limits to the Court’s ability to alter the objective meaning of words used or text chosen to further an attributed commercial purpose (ie that the Earnout Payment was only referable to the Capricorn Copper assets), or to avoid an asserted uncommercial outcome by reason of those words’.[43] He said this:
Objectively viewed, from the perspective of a reasonable businessperson, I am unable to infer that the only intended purpose of the above definitions was to avoid EMR6B stymying the Sellers’ entitlement to the Earnout Payment by unforeseen changes in the ownership of CCH shares. This is based upon the nature and extent of the related definitions adopted in the 2018 SSA; relevantly, for the purposes of cl 6.1(a) — EMR Shareholder, Affiliate, EMR Investors, the CC Group, and Liquidity Event — in the context of cl 6.1(a) as a whole, as set out in [217] and [222]. This is in circumstances where I accept the Sellers’ submission that the parties adduced limited evidence regarding the commercial factors considered in reaching agreement on the terms of the 2018 SSA. Accepting that ‘a’ purpose of these definitions was to prevent unforeseen changes to the CCH share ownership, and the potential impact of such changes on the Sellers’ entitlement to the Earnout Payment, the words chosen by the parties in the 2018 SSA also had the objective consequence (unintended or otherwise) of expanding the returns from assets of other entities (beyond EMR6B) that could be considered in determining whether the Earnout Payment was payable.[44]
[42]Reasons, [227].
[43]Reasons, [229].
[44]Reasons, [228].
The judge said he had reached his conclusion without regard either to the various drafts of the 2018 SSA (to which the Sellers had referred) or to the documents evidencing the course of the negotiations between the parties.[45] However, he observed that, had he taken into account the various drafts of the 2018 SSA, they would have supported the conclusion he reached.[46]

EMR6B’s submissions on ground 1

[45]Reasons, [232]–[233].

[46]Reasons, [232].

In its application for leave to appeal, EMR6B identified 10 distinct errors it said the judge made when construing the term ‘EMR Investors’. In its written submissions EMR6B contended that the judge made nine distinct errors, having combined, it seems, the first and second errors.
First, EMR6B contended that the judge failed to give sufficient weight to the finding that the objective purpose of the parties at the genesis of the transaction, as reflected in the Terms Sheet (which they referred to as ‘the original purpose’), was that payment of the Earnout Payment ‘depended only upon the financial performance of the CCH Group’.[47] That purpose implicitly excluded consideration of the performance of the ‘non-CCH assets’ held in Fund 0 and Fund II. They contended that:
As the only ‘EMR Investors’ who had any interest in the 2018 SSA were those who were invested in EMR6B (the entity purchasing the Lighthouse shares), it would make sense to read cl 6.1(a) as if the words ‘EMR Investors’ were read as ‘EMR Investors (invested in EMR6B)’. Such a reading is consistent with the original purpose. But despite having accepted the original purpose, the judge declined to read the words that way.
[47]Emphasis added.
EMR6B contended that the judge declined to read the words that way because he found that it was not clear that the original purpose still existed by the time of the 2018 SSA. But that finding, it contended, ought not have been made in circumstances where the Sellers did not allege a change in purpose and there was no evidence of any change to that purpose in the intervening period, or of what any changed purpose might be. To the extent that it might be inferred from the judge’s Reasons that the inclusion of the extended defined terms in the 2018 SSA was evidence of a change to the original purpose, EMR6B contended that such a conclusion found no support in the surrounding evidence. EMR6B contended that, having found the original purpose, and in the absence of evidence of a change in purpose, the judge ought to have concluded that the original purpose still existed at the time of the 2018 SSA. Had the judge done so, he then ought to have given ‘great weight’ to that original purpose.[48]
[48]Referring to Mount Bruce (2015) 256 CLR 104, 116, [47] (French CJ, Nettle and Gordon JJ); [2015] HCA 37.
Secondly, EMR6B contended that the judge erred in finding that the adoption in cl 6.1(a) of the extended defined terms prevented that clause being construed in a way which gave effect to the original purpose, notwithstanding that:
(a)the parties agreed (and the judge found) that a reason for adopting the extended defined terms was to prevent the Sellers’ right to the Earnout Payment being ‘stymied by unforeseen changes in the ultimate ownership of CCH’ after the 2018 SSA was executed, which purpose was consistent with the ongoing operation of the original purpose;
(b)the defendants did not advance, nor prove, the existence of any other objectively ascertainable purpose for the inclusion of the extended defined terms in cl 6.1(a), which might have displaced or altered the original purpose; and
(c)clause 6.2(b) of the 2018 SSA provided — consistently with the ongoing application of the original purpose — that the payment of the Earnout Payment was contingent on, and the amount of the Earnout Payment reasonably related to, the economic performance of the ‘Shares’ (effectively, shares in CCH), and did not identify any other matter which the payment was contingent upon or related to.
Thirdly, EMR6B contended that the judge erred in reaching, or in giving weight to, the conclusion that he was unable to infer that the only intended purpose of the extended defined terms was to prevent the Sellers’ right to the Earnout Payment being ‘stymied by unforeseen changes in the ultimate ownership of CCH’ after the 2018 SSA was executed.
Fourthly, EMR6B contended that the judge erred by failing to give adequate weight to the parties’ acknowledgment in cl 6.2(b) of the 2018 SSA that the amount of the Earnout Payment reasonably related to the economic performance of the ‘Shares’ (and implicitly, not the economic performance of any of the assets in Fund 0 or Fund II).
Fifthly, EMR6B contended that the judge erred in dismissing as mere ‘machinery’ the requirement for the ‘Buyer’ (ie EMR6B) to pay the Earnout Payment within ten business days after receiving the proceeds that result in realisation of the Reported Multiple, in circumstances where EMR6B would never receive proceeds payable to Fund 0 or Fund II — so that the Earnout Payment would never be payable if the calculation of the Reported Multiple included proceeds payable to Fund 0 or Fund II.
Sixthly, EMR6B contended that the judge erred in:
(a)finding that words should be read in to cl 6.1(a) such that the phrase ‘the Buyer receives the proceeds that result in the Reported Multiple being realised’ should be read as ‘the Buyer receives the proceeds (or its part of the proceeds) that result in the Reported Multiple being realised’;[49]
(b)failing to give adequate reasons for the finding that those words should be read in to that clause; and
(c)failing to account for the fact that there was no reason why EMR6B would ever:
(i)report or be in a position to report to the investors in Fund 0 or Fund II; or
(ii)report or be in a position to report to the Fund I Investors about the returns on investments made by the investors in Fund 0 or Fund II.
[49]Emphasis in original.
Seventhly, EMR6B contended that the judge erred in finding that cl 6.1(c) appeared inconsistent with the plaintiffs’ construction of cl 6.1(a) because it required a valuation of ‘the Buyer and its Affiliate’s interest in the CC Group’, and that Attachment 4 to the 2018 SSA did not assist the appellants’ construction of cl 6.1(a), because Attachment 4 was inconsistent with that phrase in cl 6.1(c), notwithstanding that:
(a)cl 6.1(c) required the valuation to be conducted in accordance with Attachment 4; and
(b)Attachment 4 required the valuer ‘to be instructed to conduct the valuation of the present value of the Buyer’s interest in the CC Group as at that time’ – such that cl 6.1(c) was at worst neutral in its effect on the interpretation of cl 6.1(a).
Eighthly, EMR6B contended that the judge erred by filing to construe cl 6.1(a) as a whole and in the context of the 2018 SSA as a whole.
Ninthly, EMR6B contended that the judge erred by failing to give adequate weight to the uncommercial effect of the construction accepted by the trial judge, which:
(a)required the return in respect of which the entitlement to the Earnout Payment was to be measured (ie the Reported Multiple) to be calculated by reference to the returns payable to all of Fund 0, Fund I and the limited partners of Fund II, but in so doing took account only of amounts invested by Fund I and not the assets contributed by Fund 0 or Fund II;
(b)would thus determine the Sellers’ right to an ‘Earnout Payment’ for the sale of the Sellers’ assets to Fund I by reference to the returns generated from assets which belonged to Fund 0 and Fund II, to which assets the Sellers had never had any entitlement;
(c)thereby created a mismatch between the numerator and the denominator of the central equation in clause 6.1(a), which distorted that equation so that it did not reflect an assessment of return on investments of Fund I or the economic performance of the Shares;
(d)was inconsistent with the original purpose; and
(e)constituted commercial nonsense as it would operate so as to deliver a windfall gain to the Sellers which was not earned by the performance of the Shares.[50]
[50]Citing Reasons, [221]–[222].
In its written case, and before the trial judge, EMR6B contended that the proper approach to the construction of cl 6.1(a) was to read in the words ‘(invested in EMR6B)’ after the words ‘EMR Investors’.[51] However, in oral argument that submission was withdrawn. Instead, EMR6B contended as follows:
[51]See Reasons, [149].
Rather, in the circumstances of the transaction to hand, the effect of reading this clause as properly construed was that it would operate, in effect, so as to focus the EMR investors clause on EMR6B.
…
Now, EMR investors affiliate[s] all refer to a wide range of candidates. It's an open universe. And in the circumstances of this transaction, it includes the three funds that we are looking at, the term as defined. But focus not on that to begin with. Focus on the final criterion, or rather, the final operative part of this clause. The beginning of the third last line, ‘The buyer must pay to the seller representative’.
…
The only party who can ever receive proceeds that might result in the earnout payment being payable is EMR6B. And EMR6B will only receive the proceeds from sale of EMR6B's assets that result in the reported multiple being realised.
So it's only if EMR6B receives proceeds which satisfy that complicated criterion above that the earnout payment would be payable. And that's why, in reality, it's only the report to EMR investors [by] EMR6B that mattered in this situation because EMR6B will never receive any proceeds that were payable to any of the other EMR investors.

The Sellers’ submissions on ground 1

The Sellers contended that the judge’s approach to the construction of cl 6.1(a) of the 2018 SSA was correct. They submitted that EMR6B’s proposed interpretation of that clause would read the phrase ‘EMR Investors’ in a manner contrary to the definition of that term in cl 1.1. EMR6B’s construction would read that term as “the Buyer” or “only those EMR Investors who are investors in Fund 1”. It would do so on every occasion the term ‘EMR Investors’ is used in cl 6 — which is on every occasion it is used in the 2018 SSA, because that defined term is not used elsewhere. This interpretation, they submitted, ‘would practically exclude each of Fund 0 and the limited partners of Fund II from the defined term, despite EMR6B accepting that the defined term ‘EMR Investors’ includes each of those funds’.
The Sellers contended that EMR6B’s interpretation of cl 6.1(a) is contrary to the principles of objective contractual construction summarised by the High Court in Mount Bruce. They contended, in their written submissions, that ‘the use of the defined term “EMR Investors” in cl 6.1(a) is not ambiguous’. However, in the course of oral argument they accepted that there is an ambiguity in cl 6.1(a). The Sellers submitted that, given the ambiguity, the Court is permitted to consider the drafting history of the 2018 SSA and the Share Mortgage. They submitted that the drafting history revealed that EMR6B is seeking, in essence, to have the Court adopt, as an interpretation of the phrase ‘EMR Investors’, the words that had initially been in the first draft of the SSA, but which had been rejected in later drafts.[52]
[52]Referring to MCA International BV v Northern Star Holdings Ltd (Receivers and Managers Appointed) (1991) 4 ACSR 719, 723–727 (Rogers CJ); Esso Australia Ltd v Australian Petroleum Agents’ & Distributors’ Association [1999] 3 VR 642, 647–9, [19]–[20] (Hayne J); Lodge Partners Pty Ltd v Pegum (2009) 255 ALR 516, 520–1, [30]–[32] (Lindgren J); [2009] FCA 519.
In relation to the purpose of the 2018 SSA, the Sellers contended that the judge was correct to find that, notwithstanding the purpose revealed by the Terms Sheet, it was unclear what the purpose of the 2018 SSA was or whether it had changed since the drafting of the Terms Sheet.
In relation to cl 6.2(b) of the 2018 SSA, the Sellers contented that the reasons for its inclusion were not the subject of evidence; its drafting is vague; and there is, in fact, no direct relationship between the performance of the Lighthouse shares and the performance hurdle required to trigger the Earnout Payment.
In relation to the judge’s conclusion that the final phrase in cl 6.1(a) was ‘machinery’, they submitted that EMR6B had not submitted any evidence to the contrary. They accepted that words need to be read into that part of the clause in order for it to operate in the manner they identified, and accepted that this was an ambiguity in cl 6.1(a). They contended that the words were only read in to provide grammatical sense.
In relation to the discrepancy between cl 6.1(c) and Attachment 4 (upon which EMR6B relied), they contended that cl.6.1(c) is the operative term, while Attachment 4 is a process document incorporated by reference to that operative term. They contended that ‘the operative term should take precedence as regards the scope of the relevant assets to be valued, in the event of an inconsistency between the operative term and the attachment’. They further contended that cl 6.1(c) was merely neutral in its effect on the interpretation of cl 6.1(a).
In relation to EMR6B’s submissions concerning commerciality, they contended that these submissions sought ‘to entirely disregard the plain meaning of the Definitions in the 2018 SSA entirely in favour of EMR6B’s subjective perception of the commerciality of the relevant transaction’. They denied that commerciality was relevant, but contended that in any event, the entitlement to the Earnout Payment following the IPO is not a ‘windfall gain … untethered from the performance’ of the Lighthouse shares’. Rather it was part of the agreed price payable by EMR6B for the right to dispose of the CCH Shares arising from a transaction prior to the end of the 5-year period referred to in cl 6.1(c).

Consideration of ground 1

As set out above, EMR6B contended that the judge made 9 or 10 distinct errors when construing the term ‘EMR Investors’. I have not found it necessary to consider whether the judge made the asserted 9 or 10 errors. That is because the ultimate question for this Court is whether the judge was correct in his construction of the 2018 SSA. For the reasons that follow, I consider that the construction adopted by his Honour was not the correct construction. I take a different view of the appropriate construction of cl 6.1(a) of the 2018 SSA from that adopted by the judge.
The principles of contractual construction were not in dispute between the parties; rather, what was in dispute was the application of the principles to the 2018 SSA. In summary, the relevant principles are as follows:[53]
[53]See the summary in Mount Bruce (2015) 256 CLR 104, 116–17, [46]–[51] (French CJ, Nettle and Gordon JJ); [2015] HCA 37. See also Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544, 551, [16]–[17] (Kiefel, Bell and Gordon JJ); [2017] HCA 12; Australian Broadcasting Commission v Australasian Performing Right Association Ltd(1973) 129 CLR 99, 109 (Gibbs J); [1973] HCA 36; Wilkie v Gordian Runoff Ltd(2005) 221 CLR 522, 529, [15]–[16] (Gleeson CJ, McHugh, Gummow and Kirby JJ); [2005] HCA 17.
(a)The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to the text, context and purpose of the contract. The context includes the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract.
(b)The determination of the meaning of the terms of a commercial contract is an objective exercise. It is necessary to ask what a reasonable businessperson in the position of the parties would have understood the terms to mean. That will require consideration of the language of the contract, the circumstances addressed by the contract and the commercial purpose to be secured by the contract. Relatedly, a court will generally approach the task of construing a commercial contract on the assumption ‘that the parties ... intended to produce a commercial result’. A commercial contract should be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.
(c)Ordinarily, a contract is construed by reference to the terms of the contract alone. If an expression in a contract is unambiguous, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
(d)However, sometimes, recourse to events, circumstances and things external to the contract is necessary.
(i)First, such recourse may be necessary in determining the proper construction where a provision is ambiguous, such that there is a constructional choice to be made.
(ii)Secondly, such recourse may be necessary in order to identify the commercial purpose of the contract. In that context, an understanding of the genesis of the transaction, the background, the context and the market in which the parties are operating may assist in identifying the commercial purpose.
(e)Even if recourse is had to events, circumstances or things external to the contract, those matters are nonetheless objective. That is, what may be referred to are external events, circumstances or things that are known to the parties or which assist in identifying the purpose or object of the transaction. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.
I note that some caution is required in relation to the proposition that courts will construe a commercial contract so as to avoid it making commercial nonsense or working commercial inconvenience. In particular, as this Court has said, this is not a ‘licence to alter the meaning of a term to achieve a result’ the court might consider reasonable.[54] Furthermore, ‘business common sense’ is a topic upon which minds may reasonably differ.[55] And, as Lord Mustill said in Charter Reinsurance Co Ltd v Fagan, ‘there comes a point at which the court should remind itself that the task is to discover what the parties meant from what they have said’.[56]
[54]SAS (Vic) Pty Ltd v Urban Ecological Systems Ltd [2021] VSCA 335, [64] (Sifris and Kennedy JJA and Macaulay AJA).
[55]J & P Marlow [No 2] Pty Ltd v Hayes (2023) 112 NSWLR 29, 45–46, [76]–[78] (Bell CJ, see also Meagher and Kirk JJA at 49, [98]–[99]); [2023] NSWCA 117.
[56][1997] AC 313, 388.
Thus, as the judge below observed, courts are prepared, where appropriate, to construe a contract, or to add or blue pencil words into a clause, to accord with the objective commercial purpose of the agreement. But this ‘does not mean that a court is entitled to significantly depart from the words chosen by the parties to give effect to an attributed commercial purpose or to avoid a commercial inconvenience to one party’.[57]
[57]Reasons, [188].
However, where there is ambiguity in the text, the text itself will not provide the answer. In such cases the commercial (or uncommercial) consequences of a particular construction may have a greater role to play.
In the present case, both parties accepted that cl 6.1(a) of the SSA is ambiguous.[58] Thus both parties accepted that this Court could have regard to materials outside the contract both to shed light on the genesis of the transaction, its background and its context, and to assist in determining the proper construction of the clause. The relevant materials included the Terms Sheet, in draft and final form, drafts of the 2018 SSA and some commentary by, and correspondence between, the parties’ solicitors. The Sellers correctly emphasised that the Court cannot have regard to such materials in order to identify the parties’ subjective intentions or expectations.
[58]As noted earlier, in their written case the Sellers contended that cl 6.1(a) was not ambiguous. However, in the course of oral argument they accepted that the clause is ambiguous.
The parties urged the Court to draw different conclusions from those documents. The Sellers contended that the drafting history of the SSA revealed that the construction for which EMR6B contended had been present in an earlier daft, and then removed from the draft and ultimately rejected by the parties. They also referred to some commentary by the parties’ solicitors. In contrast, EMR6B contended that the Terms Sheet and, to some extent, the drafting history, supported its contentions concerning the purpose of cl 6.1, which then assisted in resolving the ambiguity the judge had identified.
As already noted, the judge had regard to the Terms Sheet in construing the 2018 SSA, but did not have regard to the drafts of the 2018 SSA, the drafts of the Terms Sheet or the email exchanges between the solicitors.[59] I consider that it is open to this Court to have regard to the extrinsic materials because, as I explain below, I consider cl 6.1(a) to be ambiguous. I also consider the extrinsic materials to be relevant to an understanding of the genesis of the transaction, the background and the context of the 2018 SSA. I am conscious, of course, that the material is not to be used to identify the subjective intentions of either party.

The text of cl 6.1(a)

[59]See Reasons, [232]–[233].

It is appropriate to start by considering the text of cl 6.1(a), read with the definitions. For convenience, I will set it out again:
If a Liquidity Event occurs and any EMR Shareholder or any Affiliate of an EMR Shareholder reports (or is in a position to report) to EMR Investors that the aggregate of all cash returns paid or available to be paid to EMR Investors as a result of that Liquidity Event and any previous Liquidity Events (prior to the application of any Taxes payable, or otherwise withheld as a consequence of that Liquidity Event, by the EMR Investors) (Reported Multiple) is equal to or more than 2 times the amount of its Invested Capital immediately prior to the Liquidity Event, then the Buyer must pay to the Seller Representative the Earnout Payment within 10 Business Days of the date on which the Buyer receives the proceeds that result in the Reported Multiple being realised.[60]
[60]Emphasis in original.
Broken down into its component parts, the Earnout Payment is payable in circumstances when:
(a)a Liquidity Event occurs; and
(b)the Reported Multiple is equal to two or more times a certain amount, namely ‘its Invested Capital’ immediately prior to the relevant Liquidity Event. This can be expressed as an equation, as follows:
Reported Multiple ≥ Invested Capital x 2
That equation can be further expressed as follows:
Reported Multiple / Invested Capital ≥ 2
In that formulation, Reported Multiple is the numerator of a fraction and Invested Capital is the denominator of the fraction. The judge, in his Reasons, referred to the numerator and denominator in this way, and I shall do so too.
If those circumstances occur, then the Buyer (EMR6B) must pay the Earnout Payment within 10 business days of ‘the date on which the Buyer receives the proceeds that result in the Reported Multiple being realised’.
There is no dispute about the meaning of Liquidity Event; it plainly includes an IPO, as occurred in this case. Rather, the dispute concerns the manner in which the Reported Multiple is determined. Again at the risk of repetition, the language of cl 6.1(a) expresses the Reported Multiple in lengthy (and somewhat opaque) terms, as follows:
any EMR Shareholder or any Affiliate of an EMR Shareholder reports (or is in a position to report) to EMR Investors that the aggregate of all cash returns paid or available to be paid to EMR Investors as a result of that Liquidity Event and any previous Liquidity Events (prior to the application of any Taxes payable, or otherwise withheld as a consequence of that Liquidity Event, by the EMR Investors)
As is apparent, this part of cl 6.1(a) uses various defined terms: EMR Shareholder, EMR Investors and Affiliate (which have been set out earlier in these reasons[61]). As the judge found, and the parties accepted, the effect of these defined terms in the present factual context is as follows:
(a)Fund 0, the limited partners of Fund II and EMR4B are Affiliates of EMR6B;
(b)from 5 July 2021 (ie at the IPO), Fund 0, the limited partners of Fund II, and EMR4B were each EMR Shareholders; and
(c)the investors in Fund 0 and the limited partners of Fund II are EMR Investors.[62]
[61]See above, [33].
[62]Reasons, [143].
Thus the effect of the defined terms is, on their face, to cause the calculation of the Reported Multiple to include the aggregate of all cash returns, as a result of the IPO, to the investors in Fund 0, Fund I and Fund II. I shall refer to these definitions as the ‘extended defined terms’.
That is the construction for which the Sellers contended. That is so even though this results in the Earnout Payment becoming payable not on the basis of the returns generated from the Capricorn Copper mine, in which they had sold their interest, but from the returns generated from that mine and the Golden Grove mine and the Redhill project taken together. The latter two projects were, however, projects in which the Sellers had never had any interest.
Accepting, for present purposes, that the extended defined terms operate in the manner identified above, there are several aspects of cl 6.1(a) that then cannot operate effectively if the clause is read literally. The Sellers described these aspects as creating ‘difficulty in terms of interpretation’ and both parties (and the judge) characterised them as ambiguities.[63]
[63]Reasons, [165], [169], [170], [182], [219], [220].
The first problem arises in relation to the phrase ‘its Invested Capital’ in the middle of cl 6.1(a). The word ‘its’, as a matter of ordinary grammatical meaning, ought to refer back to the earlier subject of the sentence. It is not entirely clear who the subject of the clause is; however the better view is that it is the ‘EMR Investors’. That is a plural expression, yet ‘its’ is a singular pronoun. Furthermore, Invested Capital is relevantly defined as follows:
Invested Capital means, at any time, the aggregate cash amount paid by the Buyer in acquiring ordinary shares in CCH that it holds at that time … For the avoidance of doubt, the Invested Capital immediately prior to execution of this agreement is US$81,818,766.
Thus the word ‘its’ in ‘its Invested Capital’ cannot refer back to the EMR Investors. In addition, on a broad meaning of EMR Investors, the term includes persons who did not invest any capital in acquiring the CCH Shares.
The judge held that ‘its Invested Capital’ must be read as ‘the Buyer’s Invested Capital’.[64] I agree. But the use of the word ‘its’ suggests that the clause was intended to embody a relationship between the persons earlier referred to in the clause — those persons to whom the aggregate cash returns were payable — and the person who had invested the capital. That is, both the recipients of the returns and the original investor were intended to relate to the Invested Capital (namely, the investment in the Capricorn Copper mine), rather than relating to that mine and to other, unrelated projects.
[64]Reasons, [239].
In that regard, the judge said that the most relevant aspect of the text of cl 6.1(a) is ‘the numerator and denominator in the central equation in cl 6.1(a)’. His Honour accepted the plaintiffs’ submission that, if the Sellers’ construction is adopted, there is a mismatch in the equation. He considered that this mismatch was ‘very much in favour of the plaintiffs’ construction’.[65] Again, I agree. The judge went on to downplay that mismatch because he considered it was a consequence of introducing the extended defined terms. However, I do not consider that to provide a basis for reducing the weight to be given to this issue. Rather, the mismatch between the numerator and the denominator provides support for resolving the ambiguities in the text of cl 6.1(a) in favour of the construction proposed by EMR6B.
[65]Reasons, [221].
That approach to the construction of the clause is also supported by the later reference in the clause to the time at which ‘the Buyer [EMR6B] receives the proceeds that result in the Reported Multiple being realised’. The proceeds that result in the Reported Multiple being realised are (in summary terms) the aggregate cash returns paid to EMR Investors (the numerator), which are then compared to the Buyer’s Invested Capital (the denominator). But the proceeds received by EMR6B will only ever be cash returns paid to investors in EMR6B. Thus again the text supports a connection between the numerator and the denominator, which is lost if the Sellers’ construction of cl 6.1(a) is adopted.
Indeed, as EMR6B submitted, it would never receive proceeds payable to Fund 0 or Fund II, so the Earnout Payment would never be payable if the calculation of the Reported Multiple included proceeds payable to Fund 0 or Fund II. That would be an entirely uncommercial construction, and plainly cannot be correct. It was that issue that required the Sellers to advance a construction that involved reading words into the final part of the clause: ‘the Buyer receives the proceeds (or its part of the proceeds) that result in the Reported Multiple being realised’.[66]
[66]Emphasis added.
The judge accepted the Sellers’ construction in that regard. In so doing, his Honour downplayed the significance of the reference to ‘the Buyer’ in the final part of cl 6.1(a) by describing that part of the clause as ‘a machinery provision for the timing of the Earnout Payment’.[67] The Sellers contended that EMR6B ‘did not point to any evidence to the contrary’. But this was not a matter for evidence; this submission appears to be straying into a subjective assessment of cl 6.1(a). Rather, the proper characterisation of the final part of cl 6.1(a) is an objective assessment of the clause understood by reference to its context and purpose.
[67]Reasons, [223].

The Sellers agreed with EMR6B that there was ‘some inconsistency’ in the way in which the trial judge construed the phrase ‘Secured Money’ in the Share Mortgage. They contended that the judge ought to have found that the phrase ‘Secured Money’ used in cl 6.2 — and both outside and inside the parenthesis in cl 5.1(c)(ii) — should carry the same meaning (being its defined meaning). So construed, it would include the Earnout Payment. This was the subject of their Notice of Contention.
Notwithstanding their acknowledgement of the inconsistency, the Sellers contended that the judge was correct to recognise that the Secured Money under the Share Mortgage could change over time, and that various clauses of the Share Mortgage (including the escrow clause) expressly clarified what Secured Money meant in relation to each particular clause, despite the use of a defined term. In that regard, they contended that ‘the parties expressly identified, or clarified, in the escrow clause that the money required to be paid into escrow to deal with the CCH Shares included an amount equal to money that would reasonably foreseeably be owing to the Sellers’. They contended that such an interpretation of the escrow clause was:
(a)consistent with the express words of the clause; and
(b)consistent with the purpose of the Share Mortgage: namely, to secure the performance by EMR6B of its present and future obligations under the 2018 SSA to pay consideration for the (Lighthouse) Shares – regardless of if, or when, the obligation to pay parts of that consideration crystallised.
The Sellers contended that, if the CCH Shares could be sold to facilitate a Liquidity Event without EMR6B first paying the Earnout Payment into escrow, then their ‘future right to receive the Earnout Payment upon the occurring of the performance milestones would (by reason of a transaction entirely outside of their control) have become completely unsecured — and incapable of fulfilment’.
The Sellers also contended that the judge was correct in concluding that the 2018 SSA was not the exclusive source from which to determine whether the Earnout Payment was payable, and that the judge was correct to conclude that the Secured Money which becomes immediately due and payable on demand pursuant to cl 6.2(a) of the Share Mortgage must necessarily correspond to the Secured Money that EMR6B failed to pay into escrow in accordance with cl.5.1(c)(ii) of the Share Mortgage.
Turning to the Notice of Contention, the Seller contended that the judge ought to have construed the term Secured Money in the escrow clause as including the Earnout Payment, regardless of the words in parentheses in that clause. That followed from the text of the definition of Obligations, which included ‘any liabilities which […] are present, prospective or contingent’.[97] That construction was, they said, supported by the purpose of the Share Mortgage and by the fact that the Earnout Payment was the largest component of the price payable by EMR6B under the 2018 SSA.
[97]Emphasis in original.
The Sellers contended that the phrase ‘from time to time’ in the definition of Secured Money ‘identifies that Obligations may be discharged, and fresh ones arise, from time to time, such that the amount of the Secured Money at any particular time might change’. But, they submitted, it ‘does not qualify the Obligations, and cannot be read so that it excludes contingent payment Obligations which were known to the parties’.
The Sellers pointed out that cl 1.2(k) of the Share Mortgage provide that ‘“includes” in any form is not a word of limitation’.[98] The words in parentheses in the escrow clause commence with the word ‘including’ — thus the words in parentheses cannot be used as a basis for limiting the meaning of the term Secured Money. They contended that the words in parentheses provide clarification, so as to ‘put beyond doubt that an amount equal to the Earnout Payment was part of the Secured Money required to be paid into escrow as the price of EMR6B being permitted to deal with the Collateral under the Share Mortgage, without having first obtained the consent of the Sellers’.
[98]Emphasis altered.
In response to the Notice of Contention, EMR6B contended that the Sellers’ approach to the construction of Secured Money in the escrow clause:
(a)is inconsistent with the text and context of the paragraph in question;
(b)would render the escrow clause of the Share Mortgage redundant;
(c)is inconsistent with the commercial purpose of the parties’ agreement, because it would render the Earnout Payment payable without regard to the performance of the Shares; and
(d)is inconsistent with the structure of the transaction and the relationship between the 2018 SSA and the Share Mortgage.
In relation to the text and context, EMR6B pointed to the words ‘from time to time’ in the definition of Secured Money and to the parenthesised words in the escrow clause.
(a)In relation to the words ‘from time to time’, it submitted that the use of a separate definition for Secured Money, as distinct from the Obligations, was deliberate, and these words provided one criterion that identifies particular Obligations as being Secured Money at any given time — namely, those monetary Obligations which are payable at that time.
(b)In relation to the parenthesised words, they submitted that those words ‘have real work to do’, and that they ‘refer to a third concept — something beyond Secured Money but not so wide as Obligations — namely, Secured Money plus any money that would reasonably foreseeably become owing in the future (and thus later become Secured Money)’. In contrast, they submitted, if the Sellers’ construction were adopted and ‘Secured Money’ encompassed all possible contingent obligations under the 2018 SSA including the Earnout Payment, there would be no work for the parenthesised words to do, which is contrary to principle.
(c)In so far as the meaning of the word ‘including’ is concerned, EMR6B contended that ‘the context supplied by the definitions and the nature of the obligation in the escrow clause supplied a “contrary intention” that answers the Sellers’ reliance on cl 1.2(k).
EMR6B further contended that the Sellers’ construction would result in an uncommercial outcome because either:
(a)the combined operation of cl 5.1(c)(ii)(A) and (B) would effectively convert the contingent Earnout Payment to an absolute entitlement to a release fee under the Share Mortgage; or
(b)EMR6B would have been placed in the absurd scenario under which:
(i)pursuant to the escrow clause, it would have to pay an amount equal to the Earnout Payment into escrow before a Relevant Transaction, in circumstances where the Earnout Payment was not reasonably foreseeable to become payable;
(ii)under cl 5.1(c)(ii)(B), the amount paid into escrow would be released to the Sellers immediately following the Relevant Transaction, regardless of whether the Reported Multiple was achieved at that time (ie regardless of whether the Earnout Payment was reasonably foreseeable to become payable); and
(iii)if, at the End Date, the Earnout Payment had in fact not become due and payable, EMR6B would have to bring claims for moneys had and received against each of the Sellers, by which time the Sellers might have had viable change of position defences.
In contrast, EMR6B submitted that its construction would not result in an uncommercial outcome:
EMR6B acknowledges that one possible outcome of the construction of cl 5.1(c)(ii)(A), which the trial judge accepted, is that EMR6B’s promise to pay any outstanding Obligations would be unsecured after the occurrence of a Relevant Transaction which enabled Collateral to be transferred under cl 5.1(c)(ii). But the fact that such an outcome might have been unattractive to the Sellers does not render the construction objectively uncommercial. There is nothing inherently uncommercial about that outcome; it is merely one incident of the complex machinery adopted by the parties to balance the Sellers’ desire for security against EMR6B’s desire for flexibility. … [T]he Sellers could have negotiated for the Collateral to be replaced with a cash security in an escrow account until the end date of the 2018 SSA (End Date) if they wished for it to remain entirely secured at all times. They did not do so.[99]
[99]Emphasis in original. Footnotes omitted.
Finally EMR6B submitted that the 2018 SSA ‘exclusively prescribed the circumstances in which the Earnout Payment was payable’. The Share Mortgage was ‘ancillary to the 2018 SSA: it did not, as the Sellers contend, operate to create an independent obligation on EMR6B to pay the Earnout Payment, in circumstances in which it was not otherwise payable under the 2018 SSA’. They said this:
the fact that the purpose of the Share Mortgage was merely to secure the performance of EMR6B’s obligations under the 2018 SSA (and not to prescribe further independent obligations to pay) explains why cl 5.1(c)(ii) of the Share Mortgage expressly created an obligation on EMR6B to pay into escrow not the Secured Money itself, but ‘an amount equal to the Secured Money’. The obligation to pay the Secured Money ‘from time to time’ remained governed by the 2018 SSA.

Consideration of the Notice of Contention and Ground 3

For the reasons that follow, I would dismiss the Notice of Contention. I consider that the judge was correct to conclude that the escrow clause only applied to the Earnout Payment if it fell within the parenthesised words. For completeness, I note that I also consider the judge was correct in relation to his construction of cl 6.2(a) of the Share Mortgage, although it is not strictly necessary to determine ground 3 in light of my acceptance of ground 1 and my rejection of the Notice of Contention.
It is convenient to start with the proper construction of the escrow clause, by reference to the principles set out earlier.
Commencing with the text, there are two textual matters, in particular, that support the proposition that in the escrow clause the term Secured Money does not include the Earnout Payment in circumstances where it has not become due and payable.
The first textual matter is the use of the words ‘from time to time’ in the definition of Secured Money. As the judge observed, the definition of Obligations is very broad, and expressly includes prospective and contingent liabilities. In contrast, the definition of Secured Money is more limited. It is a subset of the Obligations: ‘all money the payment of which from time to time forms part of the Obligations’.[100] That language reflects the fact that what constitutes the Secured Money may vary from time to time. In my view it also means that, subject to the particular context in which the term is used, what constitutes the Secured Money is money that the Obligations require to be paid at the time in question.
[100]Reasons, [310] (emphasis altered). Contrary to the Sellers’ submissions, the judge’s reference to the Secured Money constituting a subset of the Obligations is not confusing; it is simply accurate.
The second textual matter is the inclusion of the parenthesised words in the escrow clause. Those words are included to make clear that the escrow clause applies to prospective and contingent liabilities, but only those that are ‘reasonably foreseeably owing in the future’. Those words mean that, if there is the reasonable possibility that an amount will be owing in the future, which will, at that future time, be Secured Money, then that amount is the subject of the escrow requirement (together with the then owing Secured Money).
I accept EMR6B’s submission that the construction adopted by the judge gives the parenthesised words active work to do within the escrow clause. In contrast, the Sellers’ construction appears to leave those words with no work to do. I do not accept that the parenthesised words were used simply to ‘put beyond doubt that an amount equal to the Earnout Payment was part of the Secured Money required to be paid into escrow as the price of EMR6B being permitted to deal with the Collateral’ without the consent of the Sellers. In that regard, it is significant that there are two clauses in the Share Mortgage that expressly use the phrase ‘including for the avoidance of doubt’, namely cl 1.2(d) and the definition of ‘relevant security’ in cl 1.1. Thus it is apparent that, when the parties included words in the Share Mortgage in order to put something beyond doubt, they expressly said as much. In light of that, I would not adopt a construction that results in the parenthesised words having no independent work to do.
The Sellers also observed that the parenthesised words commence with the word ‘includes’. They contended that cl 1.2(k), which provides that ‘includes’ is not a word of limitation, stands as an obstacle to the construction adopted by the judge. I do not accept that submission. I agree with the judge that the above construction, which relies in part on the parenthesised words, is not a limitation of the term Secured Money. Rather, those words recognise that the definition of ‘Secured Money’ has a temporal aspect (being the first textual matter identified above). In light of that, the parenthesised words make clear that the clause extends to payments that are not temporally then owing. It is an explanation or clarification of how the term Secured Money operates within this particular clause.
In any event, cl 1.2(k) applies ‘unless the context indicates a contrary intention’. In my view the text and context of cl 5.1 provide the necessary contrary intention.
Turning to the broader contractual context in which the escrow clause is found, there are, as the judge pointed out, various other clauses in the Share Mortgage that use the defined term Secured Money.
(a)Clause 5.1(c)(i) (set out earlier) provides, as an alternative to cl 5.1(c)(ii), a limitation on the ability of EMR6B to deal with the Collateral ‘until the Obligations are fully discharged and the Secured Money has been unconditionally and irrevocably paid and discharged in full and it is not reasonably foreseeable that any Secured Money could be owing in the future’.
Like cl 5.1(c)(ii)(B), this clause contemplates that, at the time of a Relevant Transaction, there is Secured Money that was owing (and has been paid), and that further amounts of money could become owing as Secured Money in the future. Those further amounts need not have been paid in full, so long as it is not reasonably foreseeable that they will become owing in the future. That is, if it is reasonably foreseeable that some amounts will become owing as Secured Money in the future, then this sub-clause will not permit EMR6B to deal with the Collateral.
(b)Clause 9.1(d) provides that payments received by the Sellers will be applied ‘in payment of the balance of the Secured Money then owing or contingently or prospectively owing, whether or not due and payable’. These words have the effect that moneys received will extinguish contingent or prospective liabilities that form part of the Obligations, such as the Earnout Payment. They make clear that in this clause a reference to Secured Money encompasses contingent payments not then due and payable. In other words, the clause operates not on the bare definition of Secured Money, but on an extended operation of that term.
(c)Clause 10.2 provides that:
No grant of full or partial satisfaction of or discharge from this mortgage by any Secured Party will, unless it expressly provides otherwise, release the Grantor from personal liability under this mortgage or under the Share Sale Agreement until none of the Secured Money is owing (whether actually, contingently or prospectively) and it is not reasonably foreseeable that there could be any Secured Money owing in the future.
Again, the language makes clear that, in this clause, a reference to Secured Money encompasses contingent payments not then due and payable. Again, the clause operates not on the bare definition of Secured Money, but on an extended operation of that term.
(d)Clause 10.6, which provides for releases, is in similar terms to cl 5.1:
The Secured Parties must grant a release of the Collateral from this mortgage at the request of the Grantor:
(a) when the Obligations have been discharged in full and the Secured Money has been unconditionally and irrevocably paid and discharged in full and it is not reasonably foreseeable that any Secured Money could be owing in the future; or
(b) when reasonably required to facilitate a Liquidity Event, provided that, prior to the date of the release:
(i)the Grantor has paid an amount equal to the Secured Money (including any Secured Money that would reasonably foreseeably be owing in future) into an escrow account located in Australia with an escrow bank acceptable to the Agent (acting reasonably);
…
What can be seen is that each of these other clauses contains words that explain and extend the way in which the term Secured Money is used in the particular context, rather than simply using that term alone. This context is important in understanding and construing the defined term Secured Money and in understanding how it is used from time to time within the Share Mortgage.
In contrast, various clauses use the term Secured Money without any words of explanation or extension. Thus, for example:
(a)Clause 2.1 provides that by the mortgage, EMR6B ‘mortgages the Collateral to each Secured Party to secure the satisfaction of the Obligations and the payment of the Secured Money’. That bare reference to the payment of the Secured Money is sensibly understood as a reference to the payment of the Secured Money if and when it is due and payable, and not otherwise.
(b)Clause 4.1 provides that EMR6B will ‘pay the Secured Money in the manner provided in this mortgage or in the Share Sale Agreement’. Again the bare reference to the payment of the Secured Money is sensibly understood as a reference to the payment of the Secured Money if and when it is due and payable, and not otherwise.
Finally, reference should be made to cl 6.2(a), which also uses the term Secured Money, and provides that, if any Event of Default occurs then, during the period it subsists …:
the Secured Money becomes immediately due and payable on demand from any Secured Party.
This clause uses the term Secured Money without any of the words of extension or clarification discussed above. However, it provides that the Secured Money ‘becomes immediately due and payable on demand’, which suggests that it applies to such moneys that are not already due and payable — including contingent obligations. Otherwise the clause would have no operation.
I accept that cl 6.2(a) provides some contextual support for the Sellers’ Notice of Contention. However, the difficulty with cl 6.2(a) is that there are various ways in which it can be construed, which themselves turn on the issue identified in the Notice of Contention. Thus cl 6.2(a) is of limited assistance in resolving the meaning of Secured Money in the escrow clause. I will return below to the preferable construction of cl 6.2(a).
I turn now to the question of uncommerciality. Like the judge, I accept that each party’s approach to the escrow clause results in some degree of uncommerciality.
On the Sellers’ construction, EMR6B is required to pay a significant sum into escrow even though that sum would not reasonably foreseeably be owing in the future. Under cl 5.1(c)(ii)(B), the sum paid into escrow is paid out to the Sellers immediately after the Relevant Transaction is completed. EMR6B’s only recourse, should it transpire in future that the Earnout Payment was not payable, would be to bring proceedings against the various Sellers to recover the amount dispersed to them. The Sellers, for their part, accepted that, if it later transpired that the Earnout Payment was not payable, then there may be an obligation to repay the amount paid to them in relation to the Earnout Payment.[101]
[101]This may be contrasted with the Sellers’ submission below, where they contended that the ‘price’ for the ability to sell the Collateral was to convert the contingent liability to pay the Earnout Payment (under the SSA) into an actual liability to pay the Earnout Payment (under the Share Mortgage): Reasons, [78]. This submission did not appear to recognise any right to recover the amount paid under the Share Mortgage.

I first note that, if it had been intended that the escrow clause would require payment to the Sellers, but that such payment would later be recoverable if it transpired the Earnout Payment was not payable, it might be expected that the Share Mortgage would have made provision for recovery of such moneys. But there is no provision for recovery in the Share Mortgage.
Turning to the operation of the clause, I consider it unlikely that, in those circumstances, the Sellers would have any change of position defence. However, it is certainly possible that, in some years’ time, the Sellers may not have the capacity to repay the amounts in question. The Sellers include various corporate entities and individuals and their future circumstances are, of course, unknown and might vary significantly. Thus a payment by EMR6B under the escrow clause might never be recoverable if it later transpires that it was not required under the 2018 SSA to make the payment.
However, EMR6B’s construction of the escrow clause is also uncommercial. Under its construction, the Sellers will in effect lose their security for the Earnout Payment if the CCH shares are disposed of for the purposes of a Liquidity Event in circumstances where it is not reasonably foreseeable that the Earnout Payment will be owing in the future.
However, it is significant that, on EMR6B’s construction, the Sellers will not lose their security in relation to the Earnout Payment in all circumstances. If the Earnout Payment is reasonably foreseeable to be owing in the future, the escrow requirement will apply and the security is thus maintained. That is, on this approach the Sellers retain some security in relation to the Earnout Payment — but they do not retain complete security, in relation to amounts that are not reasonably foreseeably owing in the future.
In effect, the parties agreed that the obligation to pay an amount into escrow would turn on whether the particular amount was either owing at the time of the Relevant Transaction or, if not, would reasonably foreseeably be owing in the future. If the answer to the second question was ‘yes’, then the payment into escrow would be made (and the sum immediately paid out to the Sellers), even though it might transpire that the amount would never be owing. But if the answer to that second question was ‘no’, then no payment into escrow was required.
In my view, this reflects a compromise that is explicable in relation to the provision of security for a contingent payment (which, by its very nature, may never become payable), where it is also accepted that it is necessary for the holder of the security to be able to dispose of the security. The compromise position preserves the security where it is reasonably likely the Earnout Payment will become owing in the future and, in such circumstances, provides for the escrow amount to be paid out immediately to the Secured Parties (the Sellers). But it does not preserve the security where it is reasonably likely the Earnout Payment will become owing in the future.
For these reasons, I would reject the Notice of Contention.
Turning to ground 3, it is not strictly necessary to resolve this ground. However, I make the following observations.
There are three potential constructions of cl 6.2(a), as follows:
(a)The first construction is that the clause uses Secured Money to mean money then ‘owing’, whether or not it was due and payable at the time of the Event of Default; any money owing at the time of the default is then immediately due and payable upon demand. For example, one of the Upfront Payment tranches could have been owing, albeit not immediately due and payable, under the 2018 SSA at the time of an Event of Default. That tranche would then become immediately due and payable by reason of the Share Mortgage. But cl 6.2(a) would not capture the Earnout Payment because that payment was not, at the relevant time, owing. This was the construction advanced by EMR6B under ground 3.
(b)The second construction is that advanced by the Sellers pursuant to their Notice of Contention, namely that cl 6.2(a) uses Secured Money to mean all of the money that might from time to time be payable pursuant to the Obligations, including contingent obligations such as the Earnout Payment. Such obligations would then become immediately due and payable upon an Event of Default, even though they might never have otherwise become due and payable under the 2018 SSA.
(c)The third construction of cl 6.2(a) is that it relates back to the Event of Default, so that if an Event of Default concerned a requirement to pay some amount equivalent to the Secured Money, including in an extended sense, then that amount becomes immediately due and payable. Thus if a breach of the escrow clause was the Event of Default, because it was reasonably foreseeable that the Earnout Payment would become owing in the future and the Earnout Payment was not paid into escrow, then the Secured Money then owing plus the amount that was reasonably foreseeable to become owing, would become immediately due and payable. That was the approach adopted by the judge, as I understand his reasons. This was the subject of challenge by EMR6B under ground 3.
In light of my rejection of the Notice of Contention, I would reject the second construction identified above. The question then is whether the first construction or the third construction is to be preferred.
On a literal reading (bearing in mind my approach to the construction of the term Secured Money set out in the analysis of the Notice of Contention above), the first construction is to be preferred. However, the effect of this construction is that if EMR6B commits an event of default by failing to pay the Earnout Payment into escrow (in circumstances where the Earnout Payment fell within the parenthesised words and so was covered by the escrow clause), nonetheless there would be no consequence of that Event of Default. In such a case, the Sellers would lose their security in relation to the Earnout Payment in circumstances where it was reasonably foreseeable that the Earnout Payment would become payable in the future.
That is an uncommercial outcome in relation to a clause the purpose of which is to provide for consequences for such an Event of Default. It departs from the compromise position that I consider is reflected in the escrow clause (discussed above), which is to provide effective security in relation to the Earnout Payment in so far as it is reasonably foreseeable. In my view, having regard to the purpose of cl 6.2(a) and its relationship to a breach of the obligations in the Share Mortgage, I consider that the judge’s approach to cl 6.2(a) was correct. For that reason I would dismiss the appeal on Ground 3.

Ground 2

It is appropriate at this point to deal with ground 2, by which EMR6B contended that, if ground 1 succeeded (and if the Notice of Contention failed), then the trial judge erred in finding that:
(a)at 7 June 2021, it was reasonably foreseeable that the Earnout Payment would be owing in future;[102]
(b)clause 5.1(c)(ii)(A) of the Share Mortgage required EMR6B to pay an amount equal to the Earnout Payment into an escrow account prior to completion of the CCH Share Sale and Purchase Agreement on 7 June 2021;[103]
(c)failure to pay an amount equal to the Earnout Payment into the escrow account constituted an Event of Default pursuant to cl 6.1(b) of the 2018 SSA;[104] and
(d)by reason of that event of default, cl 6.2(a) of the Share Mortgage had the effect that the Earnout Payment became immediately payable upon demand being made by the Agent on 18 June 2021.[105]
[102]See Reasons, [376].
[103]See Reasons, [561(b)].
[104]See Reasons, [562].
[105]See Reasons, [564]–[565].
The Sellers accepted that, if ground 1 succeeded and the Notice of Contention failed, then these consequences would follow.
In light of my conclusions about ground 1 and the Notice of Contention, I would also uphold ground 2.

Conclusion

For the reasons set out above, I would:
(a)grant leave to appeal;
(b)allow the appeal on grounds 1 and 2;
(c)dismiss the appeal on ground 3; and
(d)dismiss the Notice of Contention.
The consequence of those conclusions is that the applicant is entitled to the relief sought in its notice of appeal, namely:
(a)the application for leave to appeal will be granted;
(b)the appeal will be allowed; and
(c)orders 1, 2–5, 7 and 8 made by the judge on 27 March 2025 will be set aside.
I would hear from the parties on the precise form of orders that ought to be made in in lieu of the judge’s orders.

KENNY JA:

I have had the advantage of reading in draft the reasons for judgment prepared by Walker JA. I agree with the orders that her Honour proposes for the disposition of this matter. I do so for the reasons her Honour has stated.

---

SCHEDULE OF PARTIES

COPPER (QLD) INVESTMENT PTE. LTD. (formerly EMR
Capital Investment (No. 6B) Pte Ltd) Applicant

and

CARL HALLION (as the agent of each secured party under the
Deed of Mortgage dated 17 September 2018) First respondent

JEREMY JOSEPH NIPPS Second respondent

29METALS LIMITED (ACN 650 096 094)
Third Respondent

[2025] VSCA 221

12 September 2025