Goldus Pty Ltd v Australian Mining Pty Ltd
[2015] SASCFC 193
•18 December 2015
SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
GOLDUS PTY LTD v AUSTRALIAN MINING PTY LTD
[2015] SASCFC 193
Judgment of The Full Court
(The Honourable Justice Gray, The Honourable Justice Blue and The Honourable Justice Nicholson)
18 December 2015
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - EXTENSION OF TIME FOR APPEAL
Application for an extension of time in which to bring an appeal. The appellant and the first respondent are joint venturers. The second respondent, which owned all of the shares in the first respondent, agreed to sell all of the shares in the first respondent to a third party in an arms-length transaction. The appellant commenced proceedings against the respondents for breach of and for inducing a breach of the joint venture agreement. The appellant was unsuccessful at trial. The appellant received legal advice and made an informed decision not to lodge an appeal within the required time on the basis that it lacked sufficient funds. Some attempts by the appellant were made to raise funds for the running of the company generally. Following the trial Judge’s decision, the respondents proceeded to conduct their business dealings on the understanding that the Judge’s decision would not be appealed against and entered into a new, unconditional share sale agreement. The appellant gave notice of its intention to appeal after entry into the new agreement and two days before settlement of the agreement. The notice of appeal was filed after settlement.
Whether the time for the appellant to bring an appeal should be extended.
Held per the Court (dismissing the application and the appeal):
1. The appellant has an arguable case that the Judge erred in his construction of the joint venture agreement; however, its argument is not likely to succeed.
2. The evidence does not establish that the appellant’s delay was caused by any exceptional circumstance.
3. The evidence does not establish that the appellant had or could have raised the funds to benefit from the relief sought either at the time of trial or on the hearing of the appeal, namely a contractual entitlement to purchase the first respondent’s interest in the joint venture.
4. In circumstances where the appellant gave no notice of its intention to appeal, the respondents were entitled to rely on the trial Judge’s decision. The respondents and third party purchaser of the shares would suffer material prejudice if the appeal were to be allowed – lawful conduct following the trial Judge’s decision would be retrospectively deemed a material breach of contract and an arms-length commercial transaction would be unwound, with potentially adverse financial consequences.
5. No miscarriage of justice would arise from refusing an extension of time to appeal.
Supreme Court Civil Rules 2006 (SA) r 295(1), referred to.
Jackamarra v Krakouer (1998) 195 CLR 516; Burke v Garsden (Unreported, Supreme Court of SA, Debelle J, 12 March 1993); Collins v South Australia [2000] SASC 62; Spurway v Police [2011] SASC 177; Police v Warren [2000] SASC 285; McPherson v Groenveld (Unreported, Supreme Court of SA, Debelle J, 21 February 1997); Levi v Unisure Pty Ltd [1999] SASC 432, considered.
GOLDUS PTY LTD v AUSTRALIAN MINING PTY LTD
[2015] SASCFC 193Full Court: Gray, Blue and Nicholson JJ
THE COURT
This is an application for an extension of time in which to appeal against orders made by a Judge of the Court on 6 February 2015.
The plaintiff and applicant, Goldus Pty Ltd, has been a party to an unincorporated joint venture with the first defendant and first respondent, Australian Mining Pty Ltd, since November 2012. The assets of the joint venture comprise eight mining tenements and plant and equipment held for the purposes of the joint venture. Since 13 March 2013, Goldus has been the owner of a 33.677 per cent interest as joint tenant in the assets comprising the joint venture. Australian Mining holds the remaining 66.323 per cent interest.
At relevant times, and until 19 August 2015, Australian Mining was a wholly owned subsidiary of the second defendant and second respondent, Australian Corporate Holdings Pty Ltd. During that period, Sydney Fischer was the sole shareholder of Australian Corporate Holdings and a director of that company and of Australian Mining. By a share sale agreement dated 18 November 2014, Australian Corporate Holdings contracted to sell the whole of its shareholding in Australian Mining to Teetulpa Minerals Pty Ltd. It is common ground that completion of such a sale would effect a change of control of Goldus’ joint venture partner, Australian Mining.
Goldus issued proceedings in this Court seeking the following relief:
(a)a declaration that no compliant notice has been made by Australian Mining to Goldus in accordance with clause 13.3 of the joint venture agreement; and that if the share sale transaction were to proceed it would be an “event of default” under clause 11.1;
(b)an order requiring specific performance of the obligation of Australian Mining to provide a compliant notice to Goldus in accordance with clause 13.3;
(c)orders restraining Australian Corporate Holdings from dealing with its shares in Australian Mining until Australian Mining has complied with its obligation in clause 13.3; and
(d)in the alternative to (b) above, declarations that:
o Australian Mining is in breach of the joint venture agreement; and
o Goldus is therefore entitled to purchase Australian Mining’s participating interest under clause 11.1.
The central issue at trial turned on clauses 13.3, 13.7 and 13.8 of the joint venture agreement. Those clauses provide:
13.3 Pre-emptive Right
(a) Subject to clauses 13.1 and 13.2 a Joint Venturer must not Dispose of all or any of the Participating Interest and rights and obligations under this Agreement unless the disposing Joint Venturer has complied with the procedure specified in this clause 13.3.
(b) If the disposing Joint Venturer wishes to Dispose of its Participating Interest and rights and obligations under this Agreement other than to a Related Company it may only do so if the disposing Joint Venturer gives notice to the other joint Venturer of the consideration (which must be cash or cash equivalent amount of any non cash consideration) for, and on terms and conditions upon which, it wishes to Dispose of the Participating Interest and rights and obligations under this Agreement.
(c) After receipt of notice under clause 1.3(b) the non-assigning Joint Venturer will have an exclusive option for a period of 30 days to purchase the Participating Interest in respect of which notice has been given for the consideration and on the terms and conditions specified in the notice.
(d) If the non-assigning Joint Venturer does not exercise that option, then the disposing Joint Venturer may Dispose of the Participating Interest and its rights and obligations under this Agreement in respect of which notice has been given, to a third party for a consideration not less than that specified in the notice under clause 13.3(b) and otherwise on terms and conditions which are no more favourable to the third party than those offered to the non-assigning Joint Venturer and specified in the notice under clause 13.3(b), provided that the Disposal is evidenced in writing and completed within 90 days of the expiry of the 30 day option period.
13.7 Change of Control
A Change of Control of a Joint Venturer (except as a result of a Change of Control of an entity that is listed on a recognised stock exchange) shall, for the purposes of clause 13, constitute a Disposal to a non-Related Company of the Participating Interest of that Joint Venturer, in which case the provisions of clause 13 shall apply.
13.8 Definitions
In clause 13.7:
(a) Change of Control means:
(i)Subject to clause 13.8(a)(ii), a Change of Control occurs in relation to a body corporate or entity (the “body”) where:
A. an entity that Controls the body ceases to Control the body; or
B.an entity that does not Control the body comes to Control the body.
(ii) No Change of Control occurs if:
C.the entity that ceases to Control the body under paragraph (a)(i) was, immediately beforehand, Controlled by a body corporate that Controls the body; or
D.the entity that comes to Control the body under paragraph (a)(ii) is, immediately afterward, a wholly-owned subsidiary of a body corporate that previously Controlled and continues to Control the body; or
E. it results from a Change in Control of a listed entity.
In this definition each of listed and wholly-owned subsidiary has the meaning given in section 9 of the Corporations Act and entity has the meaning given in section 64A of the Corporations Act.
(b) Control has the meaning given in section 50AA of the Corporations Act except that in addition an entity controls a second entity if:
(i)the first entity would be taken to control the second entity but for subsection 50AA(4); or
(ii)the first entity has voting power (as defined in section 610 of the Corporations Act) of at least 50% in the second entity.
The trial Judge summarised the other relevant provisions in the following terms:
Clause 13.1 prohibits a joint venturer from granting a charge or encumbrance over a participating interest without the prior written consent of the other joint venturer. Clause 13.2 permits any party to freely dispose of all its participating interests and rights and obligations under the JVA to a related company provided that the related company delivers a deed containing a covenant to re-transfer the participating interest if it ceases to be a related company of the transferor.
Clause 11 of the joint venture agreement makes provision in respect of a default by a joint venturer. In particular, clause 11.1 provides:
11.1 Defaulting Joint Venturer Liable to Forfeit Participating Interest
A Joint Venturer is a “Defaulter” is [sic] it defaults in the performance of any of its obligations under this Agreement (“Event of Default”), and such default continues for a period of thirty days after the Manager or (where the defaulting Joint Venturer is the Manager) another Joint Venturer shall have given written notice to the defaulting Joint Venturer specifying the default and (where such default is remediable) requiring its remedy, and requiring the payment of a reasonable sum to cover the costs of issuing the said notice, then the Defaulter shall be deemed to have withdrawn from the Joint Venturer and it shall transfer its Participating Interest in the Joint Venture to the non-defaulting Joint Venturer or Joint Venturers (as the case may be) (“Non-Defaulter”) in proportion (as between them to their Participating Interests inter se) in consideration for a price determined by an independent valuation to be conducted by a valuer agreed between the Joint Venturers or failing agreement, appointed by the President of AusIMM payable by Non-Defaulters and this Joint Venture shall be at an end as regards the Defaulter.
A primary submission before the Judge by the defendants was that clauses 13.7 and 13.8 were void for uncertainty. The Judge accepted this submission and concluded:
Clauses 13.7 and 13.8 of the JVA are void for uncertainty and must be severed from the contract. For that reason, AM was not required to give notice to Goldus under clause 13.3 of the proposed sale by ACH of its shares in AM to Teetulpa Metals. Terms cannot be implied into the JVA to the effect contended for in paragraph 9.1 of the statement of claim.
Because of my conclusion that clauses 13.7 and 13.8 of the JVA are invalid and must be severed, it is not necessary to consider the various claims for relief advanced by Goldus.
For these reasons I dismissed the plaintiff's application in all respects.
The Judge dealt with the matter as a matter of urgency and, although making his orders dismissing the action on 6 February 2015, his reasons for so concluding were not published until 27 February 2015.[1] It appears that the Judge made no special order in respect of the time from which rights to appeal should run and, accordingly, the time for lodging an appeal commenced from the date of the Judge’s orders.
[1] Goldus Pty Ltd v Australian Mining Pty Ltd & Anor [2015] SASC 32.
Goldus did not appeal against the judgment within time. Goldus, through its sole director and a principal shareholder, Ivan Peter Lewis, was aware of its appeal rights and of the time in which an appeal was required to be lodged. Goldus had been represented in the proceedings and received legal advice about its appeal rights. Notice of its intention to appeal was given to the defendants by letter on 17 August 2015 and the appeal was lodged on 20 August 2015. As a consequence, the appeal is more than 5 months out of time. However, on 31 July 2015, before it was on notice of Goldus’ intention to seek permission to appeal out of time, Australian Corporate Holdings and Teetulpa entered into a second share sale agreement. This second agreement had the effect of revoking and superseding the share sale agreement entered into on 18 November 2014. The second agreement was settled on 19 August 2015, thus effecting a change of control in Australian Mining.
The application for an extension of time came on for hearing before a Judge of the Court. The Judge was informed that the application was opposed. Having regard to the delay and the prejudice suffered by the defendants through conduct undertaken during the period of delay, the defendants were critical of the affidavit of Mr Lewis, in particular a number of assertions he made as to the seeking of monies to allow the appeal to be prosecuted. Leave was sought to cross-examine Mr Lewis. An order for the production of documents was also sought. The Judge made an order for the production of documents but otherwise directed that the extension of time be referred to the Full Court and, if that Court thought appropriate, to be heard instanter with the substantive appeal.
The application came on for hearing before this Court and it was determined that the Court would hear the application for an extension of time and would not embark on the full hearing of the appeal at the same time. However, the Court considered that it should have an understanding of the relevant contentions to be advanced on the substantive appeal so that it could make an assessment of whether the appeal was arguable. To that extent, the parties relied on their written outlines of argument, which addressed both the application for an extension of time and the substantive appeal.
In support of the application, Goldus relied on three affidavits of its solicitor, Thomas William Wellington Rice, and the affidavit of Mr Lewis. Subject to some discrete objections, the tender of the affidavits was not opposed. The material the subject of objection was received de bene esse. Counsel for Australian Mining sought and obtained leave to cross-examine Mr Lewis in regard to discrete aspects of his affidavit. Australian Mining tendered an affidavit of the solicitor for Australian Corporate Holdings, Nicholas Llewellyn-Jones. The tender of this affidavit was not objected to. Counsel for Australian Corporate Holdings tendered one document, being the counterpart to the second agreement for the sale of the shares in Australian Mining dated 31 July 2015. Following cross-examination of Mr Lewis, the basis of a number of objections to his affidavit evidence fell away. The material received de bene esse has been received as evidence on the hearing of the application.
The Court has an overriding discretion to grant an extension of the time within which a party has to appeal pursuant to rule 295(1).[2] When considering the exercise of its discretion, the court may have regard to the length of the delay, the reason for the delay, whether there is an arguable case on the substantive issue on the appeal and the extent of any prejudice on the part of the respondent.[3] In Spurway v Police, Blue J summarised the principles which apply to an application for an extension of time as follows:[4]
[2] See, e.g., Jackamarra v Krakouer (1998) 195 CLR 516; Police v Warren [2000] SASC 285.
[3] See Burke v Garsden (Unreported, Supreme Court of SA, Debelle J, 12 March 1993); McPherson v Groenveld (Unreported, Supreme Court of SA, Debelle J, 21 February 1997); Collins v South Australia [2000] SASC 62; Levi v Unisure Pty Ltd [1999] SASC 432.
[4] Spurway v Police [2011] SASC 177, [22].
The question whether or not an extension of time should be granted involves an exercise of discretion, which should not be circumscribed by fixed and binding rules.
An applicant for an extension must bring forward material to show why the appeal was not filed within time and why the application for an extension ought to be granted.
Prejudice suffered by the other party by reason of the delay is a factor tending against exercise of the discretion to extend time.
Where the delay is substantial, the applicant must give a detailed explanation for the delay.
Where the delay is substantial, the applicant must establish either:
(a) that the delay was caused through exceptional circumstances or some untoward vicissitude of life which prevented the applicant from applying his or her mind to the question of appeal; or
(b) otherwise, that on the merits the appeal would be likely to succeed.
The overriding question is whether, if an extension is not granted, there will be a miscarriage of justice.
[Footnotes omitted.]
Counsel for Goldus informed the Court that, if an extension of time were granted, Goldus would contend on appeal that the decision of the Judge on the construction of clauses 13.3, 13.7 and 13.8 was erroneous. In particular, it would be argued that the Judge construed the agreement without having regard to the commercial interests of the parties. The respondents supported the Judge’s analysis. Both sides presented full written submissions on the question of construction. The appeal raises complex issues. Nevertheless, for the purpose of considering the application for an extension of time, it is sufficient to indicate that Goldus has an arguable case that the Judge erred.
Counsel for Goldus acknowledged that his client was aware of its right to appeal and the applicable time limits. It was acknowledged that an informed decision not to appeal was made. It was said that the explanation lay in the lack of resources available to Goldus to prosecute an appeal. Apparently, the solicitors for Goldus, Minter Ellison, who had also acted for Goldus at trial, were not prepared to continue acting without funds being placed in their trust account, and Goldus was in no position to do so. Counsel said that Goldus was influenced by the fact that, on the lodging of an appeal, Goldus would be confronted with an application for security for costs. Counsel then submitted that the evidence before the Court established that Mr Lewis, on behalf of Goldus, attempted to raise funds to prosecute the appeal. When funds became available in August 2015, an appeal was lodged, together with an application for an extension of time. Counsel acknowledged that there had been a lengthy delay of more than five months.
Counsel submitted that Goldus had suffered severe prejudice to its position. In the absence of an enforceable pre-emptive right, there had been a transfer of control in Australian Mining. Its holding company, Australian Corporate Holdings, had transferred all of the shares in Australian Mining to Teetulpa. It was said that the controlling shareholder of Teetulpa was an “arch enemy” of Mr Lewis – the two of them had been engaged in litigation and commercial disputes.
Counsel acknowledged that the transaction for the sale of the shares to Teetulpa had been settled and said that there would be no application to have that transaction set aside. Goldus’ position was that, in the event that it succeeded on appeal and the Judge’s declaration that clauses 13.7 and 13.8 were void for uncertainty was set aside, it would follow that Australian Mining was in breach of the joint venture agreement and, pursuant to clause 11, Goldus would have an entitlement to purchase Australian Mining’s interest in the joint venture at a value fixed by an independent valuation.
The respondents submitted that no satisfactory explanation for the lengthy delay had been provided to the Court. It was said that the affidavit of Mr Lewis only spoke of the most general of attempts to raise funds to support the ongoing operations of Goldus. It was said that the extensive documentation produced by Goldus on the application for an extension of time disclosed no specific attempt to obtain funds to finance the appeal. Mr Lewis was cross-examined on these suggested attempts and maintained that his approach was to seek funds for the general purposes of Goldus rather than seeking to raise monies specifically for the prosecution of the appeal.
The respondents submitted that Goldus was in a parlous financial position. No proper accounts had been prepared since 2011. The accounts at that date confirmed a parlous financial position. When pressed, all that Mr Lewis could suggest was that some further accounts were in the process of being prepared. It was submitted by the respondents that Goldus had been in no position to exercise any pre-emptive rights that it might have had in respect of the share sale agreement in place at the time of the trial. It was further submitted that Goldus, at the present time, was in no financial position to exercise any purported right pursuant to clause 11 of the joint venture agreement to purchase Australian Mining’s participating interest in the joint venture. It was also submitted that there was insufficient evidence to support a conclusion that Goldus might become financially capable of doing so in the future.
In these respects, Goldus claimed that it had the benefit of convertible notes. However, the notes were in the name of Mintech Resources Pty Ltd, an entity in which Mr Lewis had an interest. Little or no evidence was adduced as to Mintech’s financial position and, in particular, whether it was in a position to make the notes available to Goldus. In any event, an examination of the terms of those notes does not support a conclusion that they could be a source of immediate funds. On their face and having regard to their terms, the convertible notes, which were issued only on 31 August 2015, are not capable of providing funds to Goldus until 31 August 2019 at the earliest. Goldus argued that it could factor the notes in the financial market for something less than face value. However, that this might be possible and the amount that might be raised was, on the evidence before the Court, little more than speculation.
The other submission of Goldus was that, if it had an entitlement pursuant to clause 11 to acquire the balance of the entire joint venture assets, it could raise moneys to purchase them in the market place. Again, this was mere speculation. There was no evidence before this Court as to what attitude a financier would take to this proposition. Goldus has not established any ability to provide the consideration necessary either at the time of trial or subsequently to purchase Australian Mining’s interest in the joint venture.
As a consequence of the delay, the respondents were entitled to proceed following the expiration of the time for the lodging of an appeal on the basis that the Judge’s judgment was final and binding and that, as a consequence, clauses 13.7 and 13.8 of the joint venture agreement were void. In these circumstances, Australian Corporate Holdings and Teetulpa were entitled to proceed with the sale of all of the shares in, and thereby the passing of control of, Australian Mining to Teetulpa in accordance with the terms of the second share sale agreement. At the time of entering into this transaction, they acted legally. There was no breach of the joint venture agreement by Australian Mining. The share sale agreement in place at the time of trial had been terminated and a new share sale agreement entered into between Australian Corporate Holdings and Teetulpa. As indicated, that agreement was entered into on 31 July 2015 and settlement occurred on 19 August 2015. The appeal by Goldus was not lodged until 20 August 2015. As earlier noted, Goldus’ solicitors advised only on 17 August 2015 that an appeal would be lodged.
In the above circumstances, the respondents would suffer material prejudice if an extension of time were granted. On the argument of Goldus, if an extension were granted and the appeal succeeded, Australian Mining would be found to have acted in breach of the joint venture agreement and Australian Corporate Holdings would have engaged in the tort of interference with contract when it transferred control in Australian Mining without complying with clause 13.
This, according to Goldus, would lead to Australian Mining being exposed to a compulsory sale to Goldus of its participating interest in the joint venture. In other words, it was Goldus’ submission that what was entirely legal conduct at the time would, retrospectively, be a material breach of the joint venture agreement. On any view, this is material prejudice.
There are other considerations relating to prejudice that would be caused to Australian Corporate Holdings and Teetulpa as non-parties to the joint venture agreement.
On Goldus’ case, the end result is that it would be entitled, in accordance with clause 11, to acquire compulsorily Australian Mining’s participating interest in the joint venture. Teetulpa has participated in an apparently arm’s length transaction with Australian Corporate Holdings pursuant to which it has acquired a particular asset, the shares in Australian Mining, for valuable consideration. Those shares provide it with control over and an indirect interest in the two thirds participating interest held by Australian Mining in the joint venture. On Goldus’ case, it would be entitled to acquire from Australian Mining the participating interest and Australian Mining would receive its value assessed in accordance with clause 11. This may or may not be as valuable to Teetulpa as was the shareholding it contractually acquired when it was entirely lawful to do so. At the very least, Teetulpa contracted for a particular asset, namely the shares, perceived by Teetulpa to have a value to be realised in the future. Were it to be left with shares in a company whose primary asset was a capital sum rather than the participating interest, there would be an element of prejudice to an innocent non-party which is to be taken into consideration.
A second area of potential prejudice at least with respect to Teetulpa arises from the circumstance that the initial share sale agreement contained a provision that, in effect, would release the parties from their contractual obligations in the event that the court interpreted the relevant joint venture provisions in favour of Goldus. In this respect, Teetulpa would retain its purchase moneys. The second agreement entered into on 31 July 2015 in reliance on the understanding that there was to be no appeal such that the matter had, in effect, been finalised in the respondents’ favour, did not contain this provision. It was no longer necessary. Should Goldus now succeed on an appeal, Teetulpa would remain bound by the contract which has settled. The contract requires the purchase price to be paid by instalments. Teetulpa would continue to be bound to Australian Corporate Holdings to meet that price. In other words, under the first contract, in the event Goldus were to succeed, Teetulpa was entitled to exit the contract and retain its purchase money. Under the second contract, if Goldus were to succeed, Teetulpa would acquire shares in Australian Mining which would hold, as its major asset, only the money value of the participating interest as at a particular time. Teetulpa would remain liable for the purchase price.[5] This is a material change of position effected in reliance on an understanding of the then correct legal position, bolstered by the conduct of Goldus.
[5] Indeed, on the view of the share sale agreement propounded by the respondents, on Goldus’ case, Australian Mining’s breach of the joint venture agreement would trigger provisions in the share sale agreement requiring Teetulpa to pay the purchase price in full rather than by instalments; a further element of potential prejudice.
As earlier noted, the court has a wide discretion to grant an extension of time. Although it is arguable that the Judge erred in his construction of the contract, we would go no further than that. In particular, we do not hold the view that such a submission would be likely to succeed. We do not consider that the delay was caused through any exceptional circumstance. The delay was caused by the parlous financial position of Goldus. That parlous financial position meant that Goldus would be unable to address the liability that it had incurred in regard to the costs of trial. Goldus did nothing to inform the respondents that it intended to lodge an appeal in advance of funds becoming available.
The judgment of the trial Judge was final and binding and the respondents were entitled to proceed on the basis that clauses 13.7 and 13.8 were void and formed no part of the joint venture agreement. Goldus’ conduct in providing no indication that it would lodge an appeal bolstered this understanding. The evidence about attempts to raise moneys was vague and cursory. It was not supported in any real way by documentary evidence. Goldus has not provided a sufficiently detailed explanation for the delay. As discussed above, the respondents and Teetulpa would be materially prejudiced if an extension of time were granted. No miscarriage of justice would result from refusing an extension of time to appeal.
We refuse to extend time for the lodging of an appeal in the within proceeding and, as a consequence, dismiss the appeal.
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