Findlay and Co Stockbrokers (Underwriters) Pty Limited (ACN 078 379 683) v Carminco Gold and Resources Limited (formerly known as Trans Pacific Mining Ltd) (ACN 095 749 670)

[2005] FCA 884

FEDERAL COURT OF AUSTRALIA

Findlay & Co Stockbrokers (Underwriters) Pty Limited (ACN 078 379 683) v Carminco Gold & Resources Limited (formerly known as Trans Pacific Mining Ltd) (ACN 095 749 670) [2005] FCA 884

FINDLAY & CO STOCKBROKERS (UNDERWRITERS) PTY LIMITED (ACN 078 379 683) v CARMINCO GOLD & RESOURCES LIMITED (formerly known as TRANS PACIFIC MINING LTD) (ACN 095 749 670) & ORS

NSD 829 OF 2004

EMMETT J
7 JUNE 2005
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD829 OF 2004

BETWEEN:

FINDLAY & CO STOCKBROKERS (UNDERWRITERS) PTY LIMITED (ACN 078 379 683)
APPLICANT

AND:

CARMINCO GOLD & RESOURCES LIMITED (formerly known as TRANS PACIFIC MINING LTD) (ACN 095 749 670)
FIRST RESPONDENT

TRANS PACIFIC MINING LTD (ACN 107 393 948)
SECOND RESPONDENT

RODERICK NEIL SALFINGER
THIRD RESPONDENT

JUDGE:

EMMETT J

DATE OF ORDER:

7 JUNE 2005

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Notes the First, Second and Third Respondents’ undertakings given by their counsel to the Court in the form set out in Schedule A hereto.

2.Notes that nothing in the undertakings shall prevent any of the First, Second or Third Respondents from complying with the laws and obligations of the country or state in which assets are located or in which they do business.

3.Orders that the hearing of this proceeding set down for 6, 7, 8 and 9 June be vacated.

4.Orders that the costs of the Notice of Motion filed on 9 July 2004 be the parties’ costs in the proceeding.

5.Orders that the First, Second and Third Respondents pay the costs of the Applicant thrown away as a consequence of the vacation of the hearing dates as agreed or taxed.

6.Orders the Respondents, no later than 28 June 2005, to provide security for the costs referred to in Order 5 in the sum of $10,000 in a form acceptable to the District Registrar.

7.Orders that the Respondents file and serve, no later than 30 August 2005, an affidavit by a qualified lawyer having conduct of the Canadian Appeal (as referred to in undertaking 2(e)) as to progress with the hearing and disposition of the Canadian Appeal giving an estimate as to when it is expected that the Canadian Appeal will be finally disposed of.

8.Orders that the proceeding be listed for directions on 9 September 2005.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

SCHEDULE A

UNDERTAKINGS

1. The First Respondent undertakes to this Honourable Court that it will not from the date of this undertaking, until further order, dispose of, diminish the value of, or transfer any of its assets other than with the consent of the Applicant or pursuant to further Order of the Court.
2. The Second Respondent undertakes to this Honourable Court that neither it, nor any wholly owned subsidiary, will not from the date of this undertaking, until further order, dispose of, diminish the value of, or transfer any of its assets other than with the consent of the Applicant or pursuant to further Order of the Court, save for payments of the following amounts in the ordinary course of the business of the Second Respondent, or such subsidiary, liability for which may be incurred by the Second Respondent, or such subsidiary, during the period of this undertaking:
1. $A12,500 by way of rental fee, in relation to the mining tenements referred to in paragraph 7 of the Amended Statement of Claim (‘the Croydon Tenements’);
2. $A50,000 by way of work commitments in relation to the Croydon Tenements;
3. $A75,000 by way of drilling and work commitments in relation to application EL4853 in Victoria (‘the Bendigo North Tenements’);
4. $A25,000 by way of environmental security bond in relation to the Bendigo North Tenements;
5. $A40,000 in relation to legal fees to be incurred in this proceeding and in the proceeding in the Court of Appeal of British Columbia, File No CA032453 (‘the Canadian Appeal’).
6. $C9,000 per calendar month in relation to day to day management fees.
3. The Third Respondent undertakes to this Honourable Court that he will not, from the date of this undertaking until further order, other than for full consideration, dispose of or otherwise diminish the value of, any of his assets other than for the reasonable living expenses of the Third Respondent and his dependent family in a sum not to exceed $C12,500 per calendar month or with the consent of the Applicant or pursuant to further Order of the Court. 
4. The First and Second Respondents will prosecute the Canadian Appeal with all due diligence.
5. In the event that the Canadian Appeal is not upheld, the Respondents will not, thereafter, in this proceeding, dispute the allegation made by the Applicant that the neither the First Respondent nor the Second Respondent held an option over all the mining tenements at the mine known as ‘Summit Lake Mine’ in British Columbia.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD829 OF 2004

BETWEEN:

FINDLAY & CO STOCKBROKERS (UNDERWRITERS) PTY LIMITED (ACN 078 379 683)
APPLICANT

AND:

CARMINCO GOLD & RESOURCES LIMITED (formerly known as TRANS PACIFIC MINING LTD) (ACN 095 749 670)
FIRST RESPONDENT

TRANS PACIFIC MINING LTD (ACN 107 393 948)
SECOND RESPONDENT

RODERICK NEIL SALFINGER
THIRD RESPONDENT

JUDGE:	EMMETT J
DATE:	7 JUNE 2005
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. On 9 July 2004, the respondents filed a notice of motion seeking, inter alia, a stay of the proceedings pending the outcome of litigation in the Supreme Court of British Columbia.  The parties in those proceedings include the applicant and the first and second respondents, together with a company called Tenajon Resources Corporation (‘Tenajon’).  The notice of motion has been stood over from time to time because it includes other relief, including that the third respondent be granted leave to appear for the first and second respondents.  The proposed stay is opposed by the applicant.

2. I fixed the matter for hearing for five days, initially to begin on 3 June 2005, although I subsequently indicated that I would begin the trial on 6 June 2005.  That fixture was made provisionally, pending final determination of the application for a stay.  Due to the fact that the respondents were not represented by counsel, I declined to hear the motion and finally ordered that it be heard prior to the commencement of the trial.  I embarked on the hearing of the motion on 6 June 2005 and heard submissions by counsel for both the applicant and the respondents.

3. In the course of the detailed opening by counsel for the respondents, I inquired as to whether or not undertakings might be given to ensure that potential prejudice to the applicant, by a stay or vacation of the hearing, might be avoided.  As I understand it, undertakings are now to be proffered on behalf of the respondents in a form that will afford some considerable protection to the applicant against prejudice by reason of the hearing being vacated.  In the nature of things, however, there will always be some risk of prejudice to the applicant by reason of the delay in the hearing of its claim. 

4. I have not heard all of the evidence that the parties wish to adduce in relation to the motion.  However, I have been informed by counsel of the nature of the evidence that is likely to be adduced.  In the hope of avoiding further costs and delay I have concluded that it would be desirable in the interests of justice to vacate the hearing date upon appropriate undertakings being proffered on behalf of the respondents.  In order to explain the approach that I have taken, it is necessary to say something about the issues in the proceeding.

5. By its amended statement of claim, the applicant alleges that in the period September 2003 to February 2004, the first respondent and, from 15 September 2003, the second respondent each represented to the applicant that either one or other of the first or second respondents held an option over all of the mining tenements of the mine known as Summit Lake Mine, in British Columbia, Canada (‘the Representation’). 

6. The amended statement of claim also alleges, inter alia, that the Representation was false at the time that it was made and constituted misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) (‘the Trade Practices Act’). The applicant alleged that neither of the first or second respondents held such an option, or if it did, the right to exercise it had been challenged by Tenajon, the alleged grantor of the option.

7. The amended statement of claim then goes on to allege that, induced by and acting in reliance upon the Representation, the applicant paid a total of $175,000 to the second respondent by way of subscription for shares.  There is some question as to whether the shares were to be in the first respondent or the second respondent.  The applicant then alleges that there has been no issue of any shares and that the first or second respondent has been unjustly enriched at the expense of the applicant, which is entitled to restitution of the sum of $175,000.

8. Next, it is alleged by the applicant that, induced by and acting upon, amongst other things, the Representation, the applicant entered into an agreement with the first respondent in about early January 2004, under which the sum of $450,000 was to be advanced by the applicant to the first respondent by 15 January 2004.  It is alleged that it was to be a term of that loan that, in the event that either the first or second respondent made an initial offering of shares to the public, the moneys would be repayable within seven days after the offer closed and that if there was no such offering by mid May 2004, the money would become immediately due and payable.  The applicant alleges that on 20 January 2004, it advanced the sum of $340,000 to one or other of the first and second respondents.  It then alleges that there has been no initial public offering and that, notwithstanding demand for repayment, there has been no repayment. 

9. The applicant claims those two sums from the first and second respondents. It also claims that the third respondent, who is a director of the first and second respondents, was concerned in or was a party to, contraventions by the first and second respondents of the Trade Practices Act. It therefore claims damages from the third respondent as well.

10. This proceeding was commenced on 21 May 2004.  On 10 June 2004, the first and second respondents commenced a proceeding in the Supreme Court of British Columbia.  The defendants were Mr Ivor Findlay, a principal of the applicant, the applicant and Tenajon.  In its amended statement of claim (‘the Canadian Amended Statement of Claim’) filed on 24 June 2004, the plaintiffs in the Canadian proceeding made allegations concerning the alleged option and also concerning arrangements between the first and second respondents, on the one hand, and the applicant, on the other.

11. Some of the language of the Canadian Amended Statement of Claim is less than felicitous.  Clearly enough, however, it raised, for the determination by the Supreme Court of British Columbia the question of whether or not the alleged option had been brought into existence on 14 August 2003, and claimed specific performance of the option agreement that was alleged to have come into existence.

12. In addition, the Canadian Amended Statement of Claim made allegations against the applicant along the following lines:

    (1)The first and second respondents relied on the option agreement and began in about November 2003 to negotiate with the applicant to arrange for financing of a proposed initial public offering.

    (2)On 19 November 2003, the applicant made a written offer to underwrite a proposed initial public offering on Australian Stock Exchange Limited.  That offer was accepted by the first respondent, on that day.

    (3)The first and second respondents relied on the option agreement in making representations to the applicant in relation to the proposed initial public offering.

    (4)The second respondent was incorporated to facilitate the short time frame for the initial public offering.

    (5)On or about 17 December 2003, the first respondent assigned its rights and interests under the option agreement to the second respondent.

    (6)In late December 2003 or early January 2004, the applicant began to provide financing to the first and second respondents, as had been agreed on 19 November 2003.  In particular, the applicant advanced the sum of $175,000 to the second respondent.

    (7)On about 8 January 2004, the applicant stated that it would provide the second respondent with an extra $450,000 and, by the end of January 2004, the applicant had provided the second respondent with a total of $620,000, which included the sum of $450,000 just referred to.

    (8)The second respondent issued a share certificate to the applicant, dated 16 February 2004, in respect of 3,542,857 shares at 17.5 cents per share, as consideration for the sum of $620,000.

    (9)The applicant was in a particular position of trust and confidence with the first and second respondents, as their financier, such that a fiduciary relationship was established.

    (10)The applicant requested the second respondent to enter into a retrospective loan agreement dated 25 February 2004, and the second respondent agreed to that request, as it reflected the status of moneys advanced to it prior to the issue of shares in the second respondent to the applicant.

    (11)On 15 April 2004, the applicant wrote to the second respondent demanding repayment of moneys advanced due to alleged misrepresentations concerning the option.

    (12)The applicant wrongfully breached and repudiated the agreement of 19 November 2003 and refused to proceed with the initial public offering.

    (13)As a result of that wrongful breach and repudiation the second respondent has suffered and continues to suffer loss and damage.

13. In their claims for relief against the applicant, the first and second respondents seek specific performance of the agreement of 19 November 2003.  Alternatively, they seek damages in lieu of specific performance and damages for breach of contract.  In addition, the first and second respondents claim a declaration ‘that the plaintiffs have a valid claim against the subject property interest.’  That appears to be a reference to the claim of the respondents that they are entitled to the benefit of the alleged option. 

14. As against Tenajon, the first and second respondents seek specific performance of the alleged option agreement and a declaration that Tenajon has no right, title or claim in the mineral titles that are identified in the Canadian Amended Statement of Claim.

15. For reasons that I find somewhat puzzling, the applicant did not appear in the proceeding in the Supreme Court of British Columbia.  On 28 October 2004, that Court ordered that the applicant pay, to the first and second respondent, damages to be assessed and costs to be assessed.  I have been informed that, quite recently, the applicant has moved the Supreme Court of British Columbia for orders setting aside that default judgment.  That application is yet to be determined.

16. On 4 November 2004, R.D. Wilson J in the Supreme Court of British Columbia published reasons for his conclusion that there was not an enforceable option agreement concluded on 14 August 2003, or at any time, between the first and second respondents, on the one hand, and Tenajon, on the other.  Accordingly, his Honour acceded to an application made by Tenajon for summary dismissal of the proceeding as against Tenajon.  Those orders were made after full argument on a summary basis, that included the taking of evidence by affidavit.  In the reasons of R.D. Wilson J, the exchange of correspondence that occurred up to August 2003 between the first and second respondents, on the one hand, and Tenajon, on the other, was summarised and analysed. 

17. By notice of appeal to the Court of Appeal of British Columbia the first and second respondents have appealed from the orders made by R.D. Wilson J.  Their complaint is that his Honour erred in concluding that there was no valid option agreement and in proceeding to deal with the application by Tenajon for summary dismissal.  Thus, if the appeal were to succeed, there would not be any final determination in favour of the first and second respondents as to the existence of the alleged option agreement; rather, the matter would be remitted to the Court for a hearing on the merits.

18. The basis for the application for a stay is that it would be inappropriate for this Court to embark on the hearing, on a final basis, of the question of whether or not there was an option at the relevant time.  That question would fall to be determined according to the law of British Columbia and is a question that is at present already in issue in the proceeding in the Supreme Court of British Columbia.

19. In circumstances where there are competing proceedings in different courts, raising either the same or substantially overlapping issues, a balancing exercise is required in order to determine where the issue should first be decided.  Some of the considerations that might be borne in mind are as follows:

    (1)Which proceeding was commenced first;

    (2)Whether termination of one proceeding is likely to have a material effect on the other;

    (3)The public interest and the interests of justice;

    (4)The desirability of two courts competing to see which of them determines common facts first;

    (5)Consideration of the convenience of witnesses;

    (6)Whether work already done in the preparation of one proceeding might be thrown away if that proceeding were not to be continued;

    (7)The undesirability of wasting time and effort in two different jurisdictions to determine the same issue;

    (8)The state of preparation of the proceedings in each court.

20. As I have said, this proceeding was provisionally fixed for hearing to commence on 6 June 2005.  The applicant says that it is ready and able to embark on a final hearing of the proceeding, although there has been a suggestion on behalf of the respondents that they received, quite late, voluminous affidavit material intended to be relied upon by the applicant.  The respondents, on the other hand, are not in a position to proceed with a final hearing despite the fact that the matter has, for some time, been provisionally fixed for hearing. 

21. There is much to be said for the notion that the question as to the validity of the alleged option should be determined according to the law of British Columbia.  On the other hand, while the applicant was a party to the Candian proceeding, it chose not to participate in the proceeding, even though there were allegations against it totally inconsistent with the stance that it was taking in this proceeding.  I have no material before me that enables me to make a judgment as to what prospect there is of the applicant being allowed to defend the claims against it in the Canadian proceeding.  While the relief claimed against it is not entirely clear, there is clearly substantial overlap between the issues that will be thrown up as between the first and second respondents, on the one hand, and the applicant, on the other, in the Canadian proceeding, when compared with the issues that I have briefly summarised that arise in this proceeding.

22. While it is undesirable for this Court to embark on a hearing of matters that are still live, at least in the form of the appeal in the Canadian court, the interests of the applicant must be considered, even though it has not looked after its own interests in relation to the Canadian proceeding in the way that one might have expected.

23. The matters of possible prejudice to the applicant, apart from the delay in recovering its money, assuming it will ultimately be successful, are the possibility of costs being thrown away by the vacation of the hearing and the difficulties in maintaining contact with prospective witnesses.  At present, however, the witnesses intended to be called by the applicant are officers or employees of the applicant, apart from the principal of Tenajon, who appears to be on perfectly good terms with the applicant and those acting for it.

1. A further possible detriment is the possibility that assets of the respondents, which might be available to meet any judgment that might be given in favour of the applicant, might be dissipated between the time when a judgment might have been entered in the ordinary course and the time when a judgment might be entered after a delay.  One way of overcoming that possible detriment would be for steps to be taken to ensure that the status quo is preserved as far as possible. 

2. As I understand the position, the respondents are prepared to proffer undertakings designed to ensure that their financial status quo would be maintained pending a determination of the Canadian appeal.  They are also prepared to undertake to prosecute the Canadian appeal with all due diligence and to agree that, if the appeal is not upheld, they will not thereafter dispute, in this proceeding, the allegation by the applicant that neither the first nor the second respondent held an option over the mining tenements in question.  They will also, as I understand it, submit to an order that the costs thrown away by the vacation of the hearing date be paid by them and that, within 21 days, they provide security for those costs in the sum of $10,000.

3. Upon those undertakings being given and such orders being made, any detriment to the applicant by the vacation of the hearing date will be substantially obviated, although not entirely eliminated.  As I have said, the issue that is before me involves a balancing exercise.  I do not consider that it is appropriate to stay this proceeding; however, I have concluded that it is desirable, in the interests of justice, that the matter not proceed this week.  I propose to keep a tight rein on the further conduct of the proceeding.  So long as I am satisfied that the Canadian appeal is prosecuted diligently and that there will be no undue delay in its resolution, I propose to defer fixing the matter for hearing until the appeal has been resolved.

I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:             7 June 2005

Counsel for the Applicant:	Mr A. Cheshire
Solicitor for the Applicant:	Guy Associates
Counsel for the Respondent:	Mr C.W. Ward
Solicitor for the Respondent:	Mr Moshel
Date of Hearing:	7 June 2005
Date of Judgment:	7 June 2005