Golden Sands Pty Ltd v Excel Quarries Pty Ltd (No 2)
[2007] VSC 157
•7 May 2007
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| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
CIVIL JURISDICTION
No. 6875 of 05
| GOLDEN SANDS PTY LTD | Plaintiff |
| V | |
| EXCEL QUARRIES PTY LTD | Defendant |
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JUDGE: | WHELAN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4 May 2007 | |
DATE OF JUDGMENT: | 7 May 2007 | |
CASE MAY BE CITED AS: | Golden Sands Pty Ltd v Excel Quarries Pty Ltd (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 157 | |
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INTERLOCUTORY INJUNCTION – material change of circumstances – order varied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S. Wilson Q.C. with Mr D. Clough | Piper Alderman |
| For the Defendant | Mr P Bick S.C. with Mr M. Osborne | Cornwall Stodart |
HIS HONOUR:
This is an application by the plaintiff by a summons filed 22 March 2007 to vacate or vary an order I made on 24 November 2006.
In the reasons which I published that day I set out the relevant background circumstances. These reasons should be read together with those reasons and these reasons assume knowledge of those reasons. It is nevertheless necessary to refer in these reasons to some matters which occurred before 24 November and I will then outline what has occurred since.
The parties to this proceeding are parties to a royalty agreement. That agreement requires the plaintiff (“Golden Sands”), amongst other things, to make minimum royalty payments. It has not made any payment since April 2004. It claims that it is not obliged to do so because it has substantial off-setting claims which it is pursuing in this proceeding. For the reasons which I gave on 24 November 2004 I ordered then that Golden Sands resume royalty payments in amounts not less than the monthly sum of $41,800 commencing on 28 December 2006. That order was expressly made subject to further order.
The application for the order which I made on 24 November was heard at a time when the trial of the proceeding was about to be adjourned part-heard. The position as it was then anticipated to be, and as it has transpired to be, was that I would not be in a position to resume the trial for a considerable period. In those circumstances the defendants issued a summons seeking an order which was to the effect that Golden Sands be restrained from entering upon one of the two sites which are relevant, the Darra site, or from using specified facilities and equipment unless it resumed making minimum royalty payments. I set out the precise terms of the application in full in my reasons of 24 November.
Amongst other things, in the submissions in support of that application made last November the defendants referred to Golden Sands’ continuing exploitation of the Darra site by sand mining, yielding to it sand at the approximate level of 100,000 tonnes per annum and $1 million per annum in revenue. The defendants’ submissions asserted on behalf of the defendants an entitlement to terminate the royalty agreement, but the position at that time was that all parties contended the royalty agreement remained on foot.
In my reasons of 24 November 2006 I relied on four matters in determining that the minimum royalty payment should resume.
In summary, those matters were:
(a)A director of Golden Sands, Mr William Wilson, had given evidence that by December Golden Sands would be selling sand at a rate in excess of 300,000 tonnes per annum.
(b)Golden Sands’ forensic accountant, Mr Dicks, had made more conservative calculations of Golden Sands’ likely sales in 2006/2007. He projected an annual total of 234,000 tonnes, which on his calculations was almost sufficient to enable Golden Sands to pay the minimum royalties for a full year.
(c)If it should turn out to be “wrong” to have granted the injunction, Golden Sands would recover any amount paid.
(d)If it should turn out to be “wrong” to have failed to grant the injunction, the defendants had little prospect of recovering from Golden Sands the royalty payments which would have fallen due before judgment and they would also have lost the value of the sand which would have been mined and removed from the Darra site by Golden Sands over that period.
On 15 December 2006 I granted an application for a stay of my order on the basis that Golden Sands had appealed to the Court of Appeal and that there was an application for a stay pending before the Court of Appeal and then due to be heard on 16 February 2007. In granting the stay I recorded senior counsel for Golden Sands unequivocal statement that if the Court of Appeal did not grant a stay on 16 February 2007 the minimum payments for December and January would be made immediately.
As matters transpired the application for a stay in the Court of Appeal was not heard until 5 March 2007. The Court of Appeal dismissed the application.
In the Court of Appeal a matter which had not been relied upon before me was relied upon, namely that Golden Sands could not meet the minimum royalty payments and pay its legal costs of the proceeding as well. In the Court of Appeal Habersberger AJA, with whom Chernov JA agreed, rejected that submission. Habersberger AJA also observed that Golden Sands’ decision to continue full mining operations under the royalty agreement without paying the royalties was seeking to have “the best of both worlds”.
As well as dismissing the application the Court of Appeal reiterated the order I had made. No party before me on this application suggested that this reiteration prevented or inhibited a reconsideration of my original order if it was appropriate to do so.
On 20 March 2007 the parties appeared before me and senior counsel for Golden Sands foreshadowed an application to vary or vacate the order I had made. An affidavit of Mr William Wilson sworn 19 March 2007 was relied on. At that hearing senior counsel for Golden Sands announced that Golden Sands intended to vacate the Darra site and he gave an undertaking on behalf of Golden Sands not to remove any further sand from the Darra site from that day.
The affidavit of Mr Wilson sworn 19 March 2007 set out a summary of what was said to be sales tonnages for the period from July 2006 to the end of February 2007. The affidavit erroneously stated that my order of 24 November 2006 “contemplated” that 75,000 tonnes of sand would have been sold in that period. The 75,000 tonne figure is apparently calculated by reference to an annual total of 300,000 tonnes. As indicated previously, I did rely on Mr Wilson’s evidence as to projected sales, which did suggest the 300,000 tonne level would be exceeded. But I also relied on Golden Sands’ own forensic accountant’s more conservative estimate which projected annual tonnages of 234,000.
In the affidavit of 19 March 2007 Mr Wilson suggested that there was only a very small operating profit for the quarter ended 28 February 2007 and he resiled from the evidence he had previously given concerning the projected sales from the other relevant site, Davegale, which had been the basis for the conclusion that the 300,000 tonne figure would be exceeded.
Finally, Mr Wilson’s 19 March affidavit referred to the fact that notice of termination of the royalty agreement had been given by Golden Sands and stated that Golden Sands would cease selling sand from the Darra site, and would vacate that site before 1 May 2007. Mr Wilson also referred to the legal costs which had been incurred in the second half of 2006.
On 22 March 2007 Golden Sands issued this application. In a further affidavit sworn on 2 April 2007 Mr William Wilson produced Golden Sands’ financial statements for the year ended 30 June 2006 and its general ledger for the period from 30 June 2006 to 28 February 2007. He also set out the sales figures from July 2006 to February 2007 and produced some correspondence between the solicitors.
The defendants’ forensic accountant, Mr Graeme Lavelle, swore an affidavit in response to the material relied upon Golden Sands on 17 April 2007, producing a report he had prepared dated that same day. In that report Mr Lavelle analyses the various estimates of production and profitability which have been made and concludes that Golden Sands should generate sufficient funds from operations in 2006/2007 to meet the annual minimum royalty payments and have a surplus of $291,522. Mr Lavelle’s calculations assume payment of the full annual minimum royalty, whereas my order does not require that.
The most significant adjustment which Mr Lavelle makes to the figures variously referred to by Mr Wilson and Mr Dicks, is that he adds back the non-cash item depreciation. Mr Lavelle’s analysis also suggests that Mr Wilson’s most recent sales figures could be extrapolated to an annual amount of 206,525.94 tonnes.
Finally, in an affidavit sworn 3 May 2007, Mr Wilson, amongst other things, disputes the appropriateness of adding back depreciation in Mr Lavelle’s analysis.
In its written submissions, Golden Sands submitted that significant aspects of the material circumstances had changed since the order of 24 November. It was submitted that the material now reveals that Golden Sands’ capacity to pay the minimum royalties was significantly over-estimated. Further, Golden Sands has now ceased mining on the Darra site and has, from 4 May 2007, vacated the site. Golden Sands also relied upon an asserted failure to provide particulars, the service of a statutory demand, and the service of subpoenas as constituting some form of unconscientious exploitation of Golden Sands’ position by the defendants.
In oral submissions, Golden Sands’ counsel re-emphasised those matters and also referred back to the original application made by the defendants and submitted they had, upon Golden Sands leaving the Darra site, achieved what had been sought in that original application.
The written submissions filed on behalf of the defendants firstly submitted that the purported termination of the royalty agreement was not effective, but that even if it were, under the relevant terms of the royalty agreement, that agreement would not come to an end until one year after the notice was given. The submissions relied upon Mr Lavelle’s analysis to submit that Golden Sands does still have the capacity to pay the minimum royalties. It was submitted that the purported termination and the cessation of mining were “tactical responses” to the interlocutory order. The submission was that the order should not be varied. As a fall-back position, it was submitted that Golden Sands should be required to make the payments ordered until the date of the variation order.
In oral submissions, the defendants’ counsel emphasised what was said to be significant matters inadequately explained or left unexplained in Golden Sands’ material. In particular reference was made to the asserted failure to explain the reason for the apparent decline in sales from the Davegale site. Golden Sands’ material as to its financial capacity was criticised. As to the submission made to the effect that upon Golden Sands leaving the Darra site the defendants had achieved in substance the relief they had originally sought, it was submitted that things had now moved on and that the only relevant issue now is whether there had been a material change since 24 November 2006.
I am not persuaded that any of the relevant circumstances which led me to make the order which I did on 24 November 2006, have altered in a manner justifying a revisiting of that order, save for one. In particular I am not persuaded that the material before me adequately demonstrates that Golden Sands’ financial position is significantly different to how it appeared late last year.
The one circumstance which has changed is that Golden Sands has now vacated the Darra site and has ceased extracting sand from that site.
The fact that Golden Sands has now vacated the Darra site and has ceased extracting sand from that site is significant in two respects.
First, in my view it significantly alters the “lower risk of injustice”[1] analysis. The defendants are no longer at risk that they will succeed in the action but “lose” both the royalty payments falling due and the sand extracted and removed from the Darra site during the relevant period.
[1]Bradto Pty Ltd v State of Victoria [2006] VSCA 86 at [35].
Secondly, the application which the defendants originally filed, and upon which my order of 24 November 2006 was made, was an application which sought relief to the effect that Golden Sands must either resume paying the minimum royalties or stay out of the Darra site and not use the production facilities on that site and the other equipment referred to in the summons. Golden Sands has now ceased mining, ceased using the production facilities on the Darra site, and has left that site. If my order of 24 November were limited to the period commencing on 28 December and ceasing upon Golden Sands’ departure from the Darra site, or on some appropriate date proximate to that departure, the defendants in my view will have substantially obtained the relief which they sought in the original application.
Accordingly, I propose to vary the order which I made on 24 November 2004 so that the minimum royalty payments which I ordered to be paid commence on the 28th of December 2006 and conclude on a date as to which I will hear the parties.
After further submissions the orders made were:
1. Pursuant to the express reservation contained in the order made 24 November 2006, paragraph 1 of that orders is varied so that it now reads:
2. Pending the final determination of the proceeding, Golden Sands Pty Ltd is to resume payments pursuant to clause 4 of the Royalty Agreement dated 21 December 2001 in amounts not less than the monthly sum of $41,800 commencing on 28 December 2006 and concluding on 28 April 2007 (inclusive).
3. The costs of the application by summons filed 22 March 2007 and of the hearing on 20 March 2007 are costs in the cause.
4. The defendants are to provided further particulars of paragraph 75AB(2) of their amended defence and counterclaim by 4pm on 21 May 2007.
5. The proceeding is adjourned for further directions on 8 October 2007 at 10am.
The defendants and the other companies who had given undertakings on 24 November 2006 renewed the undertakings they had given.
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