Hightime Investments Pty Ltd v Adamus Resources Ltd
[2012] WASC 295
•21/08/2012
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA IN CIVIL |
| CITATION | : | HIGHTIME INVESTMENTS PTY LTD -v- ADAMUS RESOURCES LTD [2012] WASC 295 |
| CORAM | : EDELMAN J | ||
| HEARD |
| ||
| DELIVERED |
| ||
| FILE NO/S |
| ||
| BETWEEN |
|
AND
ADAMUS RESOURCES LTD
Defendant
Catchwords:
Contract - Factual dispute concerning alleged promises made in oral conversation on 16 May 2003 - Absence of any written record of the oral conversation - Absence of any written demand consistent with the alleged oral promise - Inconsistency of alleged oral promises with written demand on 9 December 2009 - Inconsistency of alleged oral promises with writ filed on 26 March 2010 - Evidence led by the defendant that the conversation involved only an undertaking to procure negotiations with the defendant - Undertaking to procure negotiations consistent with approach taken by the defendant in other contemporary transactions
Agency - Authority - Whether executive director had actual authority to enter into a contract of the type alleged - Whether executive director had apparent authority to enter into a contract of the type alleged
[2012] WASC 295
Unjust enrichment - No pleading of a qualifying or vitiating factor - Claim for unjust enrichment properly abandoned
Legislation:
Nil
Result:
Claim dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr P G McGowan |
| Defendant | : | Mr M G Pendlebury & Mr G T Peterson |
Solicitors:
| Plaintiff | : | Hotchkin Hanly |
| Defendant | : | Middletons |
Case(s) referred to in judgment(s):
Australian National Industries Ltd v Greater Pacific Investments Pty Ltd (in liq)
(Unreported, NSWSC, 14 December 1990)
Australian Securities and Investments Commission v Hellicar [2012] HCA 17
Auxil Pty Ltd v Terranova [2009] WASCA 163; (2009) 260 ALR 164
Birjandi v Todaytech Distribution Pty Ltd [2005] WASCA 44
Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co (1989) 15 NSWLR 448
Byrd v Nunn (1877) 7 Ch D 284
Camelot Resources Ltd v MacDonald (1994) 14 ACSR 437
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance
(Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226
County Securities Pty Limited v Challenger Group Holdings Pty Limited [2008]
NSWCA 193
[2012] WASC 295
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48;
(1992) 175 CLR 353
Deputy Commissioner of Taxation v Pratt Holdings Pty Ltd [2002] FCA 215
Durban Roodepoort Deep, Ltd v Newshore Nominees Pty Ltd [2005] WASCA
231
Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50
Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 86 ALJR 296
Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd (Receivers and
Managers Appointed) [No 3] [2012] WASC 190
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230
CLR 89
Fazio v Fazio [2012] WASCA 72
Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251
Freeman & Lockyer [1964] 2 QB 480
Geissler v Accro Motors Pty Ltd (1956) 73 WN (NSW) 31
Junker v Hepburn [2010] NSWSC 88
Lemercier v Farrow Mortgage Services Pty Ltd (in liq) (Unreported, SASC,
29 March 1996)
Lysaght Brothers v Falk (No 1) [1905] HCA 7; (1905) 2 CLR 421
Mears v Safecar Security Ltd [1983] QB 54
Mildura Office Equipment & Supplies Pty Ltd v Canon Finance Australia Ltd
[2006] VSC 42
Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990)
170 CLR 146
Peddie v Stein (Unreported, NSWSC, 26 March 1987)
Reynell v Lewis (1846) 15 M & W 517; 153 ER 954
Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208
CLR 516
South Australian Cold Stores Ltd v Electricity Trust of South Australia [1957]
HCA 69; (1957) 98 CLR 65
Thanakharn Kasikorn Thai Chamkat v Akai Holdings Ltd (in liq) [2010]
HKCFA 64; (2010) 13 HKCFAR 479
The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008]
WASC 239
Tiao v Lai [No 2] [2010] WASCA 189
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR
165
[2012] WASC 295
EDELMAN J
Table of Contents
Introduction and summary of the trial ........................................................................................5
The protagonists .........................................................................................................................7
The Hightime Investments camp............................................................................................7
Mr Gardner, Hightime Investments, Mr Lungan, Mr Hopkins and Wildbush...................7
The Adamus Resources camp.................................................................................................8
Adamus Resources, Messrs Halliday, Bojanjac, Owen and Meadows-Smith ...................8 The transactions in the Salman Project tenure area....................................................................9
Ground is required to be 'shed' from the Salman Project tenure ............................................9
Hightime Investments acquires the shed ground....................................................................9
Adamus Resources re-consolidates the Salman Project tenure ............................................10
The negotiation and acquisition of the shares in African Gold Resources.......................10
The negotiation and acquisition of the shares in Hightime Enterprises ...........................11
The transactions in the area surrounding the Salman Project tenure........................................11
| The central factual dispute: the conversation between Messrs Gardner and Bojanjac ...........14 | Adamus starts fundraising ....................................................................................................11 area........................................................................................................................................12 |
| Mr Gardner's evidence..........................................................................................................17 Mr Bojanjac's evidence.........................................................................................................19 The subsequent negotiations, agreement and events ............................................................22 Other evidence relating to the conversation .........................................................................25 The alleged promise was not made in the 16 May conversation..........................................25 |
(1) Demeanour of Mr Bojanjac and Mr Gardner .......................................................28 (2) Inconsistencies in Mr Gardner's oral evidence.....................................................28 (3) Lack of any written document supporting Mr Gardner's account ........................30 (4) A contradictory account put on Mr Gardner's behalf on 9 December 2009.........31 (5) A contradictory account put on Mr Gardner's behalf on 26 March 2010.............33 (6) Adamus Resources agreements required board approval.....................................34 (7) An oral contract would mean that breaches of disclosure rules occurred ............36 (8) The unlikelihood of the disputed oral promises ...................................................36
The contract claim fails because no binding commitment was made ......................................39 The contract claim fails because of interdependency of the matters discussed on 16 May 2003 ..................................................................................................................................................39
The contract claim fails because Mr Bojanjac had no authority to bind Adamus Resources to the alleged agreement ...............................................................................................................41
The legal principles relevant to authority .............................................................................42
Onus of proof....................................................................................................................42
Actual authority ................................................................................................................42Apparent (ostensible) authority ........................................................................................49
The alternative claim for unjust enrichment.............................................................................51
Valuation of the Ground ...........................................................................................................53
The evidence of the valuers ..................................................................................................53
The valuation conclusions ....................................................................................................55
Conclusion................................................................................................................................55
[2012] WASC 295
EDELMAN J
EDELMAN J:
Introduction and summary of the trial
1 This trial required consideration of numerous transactions
concerning Ghanaian mining property. There were hundreds of exhibits and substantial expert evidence about the value of prospecting licences over land in Ghana. But one of the most fundamental issues concerned an oral conversation which took place nearly a decade ago on 16 May 2003.
2 The plaintiff's case eventually became an allegation that there were
two parties to the conversation: Mr Gardner and Mr Bojanjac. Mr Gardner said that in the conversation Mr Bojanjac made a binding commitment on behalf of Adamus Resources. The binding commitment was alleged to be that Adamus Resources would pay Mr Gardner's company, Hightime Investments Pty Ltd, the fair value of a prospecting licence over land in Ghana for which Hightime Investments had otherwise intended to apply. That land has been described in this trial as 'the Ground'. The alleged oral promise in relation to the Ground was not mentioned in a written heads of agreement reached between Mr Gardner and Adamus Resources on related matters fewer than three weeks later. That written heads of agreement was expressly subject to approval by the board of directors. After numerous further legal steps the written heads of agreement was replaced by a Share Sale and Purchase Agreement.
3 Although Mr Gardner said that he made hundreds of demands for
payment based on the alleged oral promise, for six years there was no written demand nor any allegation of any existing liability in relation to this alleged oral promise. The first, and only, written letter of demand in evidence was by Hightime Investments' lawyers on 9 December 2009. That letter did not mention any oral promise to pay fair market value for a prospecting licence over the Ground. The demand was based on the assertion that Hightime Investments provided Adamus Resources with the opportunity to explore and to acquire the Ground without obtaining the 'benefit it anticipated by a Share Sale and Purchase Agreement'. A writ of summons was filed by Hightime Investments on 26 March 2010. Still there was no mention of the alleged independently binding promise to pay the fair market value for a prospecting licence over the Ground.
4 On 11 April 2011, nearly eight years after the alleged oral
agreement, the plaintiff changed tack. The writ was amended and a statement of claim was filed which alleged for the first time a binding oral agreement to pay fair market value for a prospecting licence over the Ground.
[2012] WASC 295
EDELMAN J
5 Adamus Resources disputed this allegation of a binding oral
agreement. Mr Bojanjac, giving evidence for the defendant, said that the conversation related only to negotiations between the companies; he denied making the alleged promise that Adamus Resources would pay the fair market value of a prospecting licence over the Ground. Mr Bojanjac's evidence was convincing, and consistent with the written documentation.
6 I am satisfied that a conversation occurred between Mr Bojanjac and
Mr Gardner. Mr Bojanjac undertook to procure Adamus Resources to negotiate for an agreement concerning rights in relation to the Ground for which Hightime Investments intended to apply, as well as for rights which Hightime Investments already had in relation to land in the area. And I accept that the parties expected that a subsequent agreement was very likely. But I do not accept that Mr Bojanjac made any promise in that conversation that Adamus Resources would pay the fair market value of a prospecting licence over the Ground, nor that he made any separate independent agreement about this with Mr Gardner.
7 There was a strong likelihood of subsequent agreement being
reached between the parties after the 16 May 2003 conversation. Mr Gardner said that there had never been a transaction which did not go through the board and, unless there was something completely wrong, they would go through. An agreement was reached soon after 16 May 2003 with the heads of agreement subject to conditions including confirmation by the Adamus Resources board of directors. That agreement was signed by Mr Gardner and Adamus Resources on 5 June 2003.
8 It may be that the high probability of subsequent agreement was the
reason why, the day after the conversation, an employee of Adamus Resources was instructed to substitute the name of Adamus Resources for the name of Hightime Investments in an application which he had prepared for an exploration licence over the Ground. But, whatever the reason why this was done by Adamus Resources, this substitution does not require the conclusion that the oral conversation had contained an unequivocal promise to pay the fair market value of a prospecting licence over the Ground.
9 Even if the alleged oral promise had been made, the claim by
Hightime Investments would still have failed for two other reasons. First, the subject matter of the alleged oral promise in relation to the Ground was interdependent with the subject matter of the 5 June 2003 heads of agreement, as to which no earlier agreement had been reached. Secondly,
[2012] WASC 295
EDELMAN J
Mr Bojanjac had no authority to bind Adamus Resources to the contract which was alleged. Mr Gardner also knew this.
10 During the trial, and in submissions, witnesses and counsel referred
interchangeably to the value of 'the Ground', the value of 'a prospecting licence over the Ground', and the value of 'an exploration licence over the Ground'. These notions all described the same concern, which was the subject of expert evidence, namely the value of a hypothetical prospecting licence over the Ground.
The protagonists
The Hightime Investments camp
Mr Gardner, Hightime Investments, Mr Lungan, Mr Hopkins and Wildbush
11 Mr Gardner has been involved in the mining industry for more than
[2] Exhibit A (witness statement of Mr Gardner) [18]. [1] Exhibit A (witness statement of Mr Gardner) [1] - [22]. | |||
| 12 |
[3] Exhibit A (witness statement of Mr Gardner) [20]. | ||
| 13 |
[4] Exhibit A (witness statement of Mr Gardner) [34] - [37]. [5] Exhibit A (witness statement of Mr Gardner) [37]. |
14 Mr Lungan is a geologist who, in mid-September 2002, was engaged
by Mr Gardner to do work for Hightime Investments in Ghana.
Mr Lungan was generally remunerated through Wildbush.[6] Hightime
[6] Exhibit A (witness statement of Mr Gardner) [114] - [130].
Investments did not call Mr Lungan to give evidence.
15 In late 2002 and 2003, Adamus Resources also used Mr Lungan's
Adamus Resources for work done for it in Ghana.[8] services.[7] On at least one occasion Mr Lungan was remunerated by [8] Exhibit H (witness statement of Mr Bojanjac) [18]; Exhibits 344 - 345, 348.
[7] Exhibit H (witness statement of Mr Bojanjac) [15], [17].
[2012] WASC 295
EDELMAN J
The Adamus Resources camp
Adamus Resources, Messrs Halliday, Bojanjac, Owen and Meadows-Smith
In June 2001, Adamus Resources was listed on the Australian Stock
Exchange.[9]
[9] Exhibit A (witness statement of Mr Gardner) [45].
17 From 2001 until 2007, Mr Halliday was the managing director of
Adamus Resources. From August 2001, Mr Bojanjac was also a director
company secretary.[11] 2002.[10] Mr Daniels was then the chairman and Mr Hunter was then the of Adamus Resources. Mr Bojanjac became an executive director in [11] Exhibit 38.
[10] Exhibit H (witness statement of Mr Bojanjac) [2].
18 Mr Halliday and Mr Bojanjac managed Adamus Resources.[12] As a chartered accountant, Mr Bojanjac focused on the financial aspects of Adamus Resources[13] although Mr Bojanjac's role went beyond this and
[12] Exhibit J (witness statement of Mr Halliday) [9] - [10].
[13] Exhibit J (witness statement of Mr Halliday) [10]; Exhibit H (witness statement of Mr Bojanjac) [4].
included a role in assisting to negotiate significant agreements. Any significant expenditures or liabilities which were incurred by Adamus
transfers had co-signatures of Mr Halliday and Mr Bojanjac.[15] necessary, by the board of Adamus Resources.[14] All cheques and fund Resources were agreed by Mr Halliday and Mr Bojanjac and, where [15] Exhibit J (witness statement of Mr Halliday) [12].
[14] Exhibit J (witness statement of Mr Halliday) [11] - [12].
19 From mid-2002 until 2005, Adamus Resources employed Mr Owen
on a full-time basis as its exploration manager with duties including
management of Adamus Resources' prospecting activities in Ghana and
preparing applications for prospecting licences.[16]
[16] Exhibit I (witness statement of Mr Owen) [4] - [5].
20 In late April 2003 (formalised on 12 May 2003), Adamus Resources
engaged Mr Meadows-Smith to work for Adamus Resources as its in-country Consultant Geologist in relation to the Salman Gold Project in
Ghana, including preparing and extending applications for prospecting
licences.[17]
[17] Exhibit K (witness statement of Mr Meadows-Smith) [15], [25]-[26]; exhibit 449; Exhibit 277.
[2012] WASC 295
EDELMAN J
The transactions in the Salman Project tenure area
21 This section sets out my findings of the background facts, many of
which were uncontroversial. Again, where possible I have referenced the
source which I accept for each finding.
Ground is required to be 'shed' from the Salman Project tenure
| 22 | The Salman Project area is in the Southern Ashanti Gold Belt in the | Western Region of Ghana.[18] Its location is shown in Appendix B to these |
| reasons. In early 2001, the Salman Project tenure rights were held by During 2002, African Gold Properties was required by Ghanaian law | ||
| African Gold Properties Limited.[19] | ||
| 23 | ||
| to relinquish or 'shed' some of its tenements in the Salman Project area.[20] | ||
| African Gold Properties wanted the tenements which had been shed to be | ||
| held in friendly hands so that they might be reconsolidated later.[21] | ||
| Mr Bojanjac, who was an executive director of the parent company of African Gold Properties, devised the solution. |
[18] Exhibit H (witness statement of Mr Bojanjac) [6].
[19] Exhibit H (witness statement of Mr Bojanjac) [6].
[20] Exhibit H (witness statement of Mr Bojanjac) [7].
[21] Exhibit H (witness statement of Mr Bojanjac) [7].
Hightime Investments acquires the shed ground
24 Mr Bojanjac had known Mr Gardner since 1993.[22] Initially there was a high degree of trust between them.[23] Mr Bojanjac was also director of Wildbush, the service company for Hightime Investments.
[22] Exhibit A (witness statement of Mr Gardner) [30].
[23] Exhibit A (witness statement of Mr Gardner) [33].
25 After Mr Bojanjac discovered that African Gold Properties had to
'shed ground' (ie relinquish its prospecting licences), Mr Bojanjac suggested to Mr Gardner and to African Gold Properties that Hightime
Investments should apply to acquire the shed ground when it was
relinquished.[24]
[24] Exhibit H (witness statement of Mr Bojanjac) [7].
26 This idea appealed to Mr Gardner. In 1998, Mr Gardner had
travelled to Ghana to explore the potential for mining interests there. He
was interested in investing in Ghana and he considered that the Salman
Project area had good prospects for an operational gold mine.[25]
[25] Exhibit A (witness statement of Mr Gardner) [26], [39].
[2012] WASC 295
EDELMAN J
On 20 June 2001, Hightime Investments applied for the shed ground mining tenements in the Salman Project area.[26]
[26] Exhibit A (witness statement of Mr Gardner) [24] - [25]; Exhibit 7.
Adamus Resources re-consolidates the Salman Project tenure
28 At the same time as Hightime Investments had applied to acquire the
shed ground, Adamus Resources began investigating the possibility of
acquiring:
(1) the Salman Project tenure held by African Gold Resources (less
the shed ground), and(2) the shed ground from Hightime Investments.[27] [27] Exhibit H (witness statement of Mr Bojanjac) [8].
These two acquisitions would re-consolidate the Salman Project tenure as previously held by African Gold Resources.
29 The first set of negotiations was between Adamus Resources and the
parent company of African Gold Resources, Afrowest Gold Limited. On 28 May 2002, the board of Adamus Resources resolved to negotiate for the acquisition of the shares in African Gold Resources.[28] This
[28] Exhibit 38, pages 128 - 131; Exhibit H (witness statement of Mr Bojanjac) [9(a)].
acquisition would give Adamus Resources control, through African Gold Resources, of the Salman Project tenure then held by African Gold Resources, although without the shed ground.
30 The second set of negotiations was to acquire the shed ground.
Adamus Resources negotiated with Mr Gardner, the controlling mind of Hightime Investments. At Mr Bojanjac's suggestion, Mr Gardner incorporated a new company called Hightime Investment Enterprises Pty Ltd (Hightime Enterprises) into which the licences over the shed ground would be transferred. Hightime Enterprises was to become the vehicle, or
seller, from which the sale of the shed ground licences would be made to
Adamus Resources.[29]
[29] Exhibit A (witness statement of Mr Gardner) [49] - [50].
The negotiation and acquisition of the shares in African Gold Resources
31 On 18 June 2002, the Adamus Resources board of directors approved
a draft agreement with the parent company of African Gold Resources for the acquisition of the shares in African Gold Resources.[30] Following discussions and proposed amendments to the draft agreement, a final
[30] Exhibit 51.
[2012] WASC 295
EDELMAN J
agreement was approved by the board of Adamus Resources.[31] On
[31] Exhibit H (witness statement of Mr Bojanjac) [9(c) - (e)]; Exhibit 64.
13 August 2002, after an independent audit and valuation,[32] the shareholders of Adamus Resources approved the agreement.[33] [32] Exhibit H (witness statement of Mr Bojanjac) [10]; Exhibit 82.
[33] Exhibit H (witness statement of Mr Bojanjac) [11]; Exhibit 110.
The negotiation and acquisition of the shares in Hightime Enterprises
32 In order to reconsolidate the Salman Project tenure previously held
by African Gold Resources, Mr Bojanjac and Mr Halliday also discussed the acquisition or assignment of the shed ground which Hightime Investments was intending to acquire. They decided to recommend to Mr Gardner that the acquisition price be five million shares in Adamus Resources. With Mr Halliday's consent, Mr Bojanjac told Mr Gardner of the suggested price and Mr Bojanjac explained that the proposal was subject to board and shareholder approval.[34] If Mr Gardner agreed, and if
[34] Exhibit H (witness statement of Mr Bojanjac) [14].
the Adamus Resources board approved the proposal then Mr Gardner would hold a considerable shareholding in Adamus Resources.
Mr Gardner was already a large shareholder of Adamus Resources. Inlate 2001 he had acquired a sizeable shareholding in the company.[35]
[35] Exhibit A (witness statement of Mr Gardner) [43] - [44].
On 18 June 2002, the Adamus Resources board of directors approved a draft agreement with Hightime Enterprises.[36]
[36] Exhibit 51.
34 On 26 June 2002, the licences were transferred from Hightime
Investments to Hightime Enterprises. At the same time Mr Gardner sold his shares in Hightime Enterprises to Adamus Resources in exchange for five million shares in Adamus Resources.[37] That agreement was executed
[37] Exhibit 64.
by Mr Gardner on the one hand, and Mr Halliday and Mr Bojanjac on
behalf of Adamus Resources.
The transactions in the area surrounding the Salman Project tenure
35 The next stage of the background to this case concerns facts, which I
find below, which led up to the critical conversation in which a binding
oral agreement was alleged to have been made.
Adamus starts fundraising
36 Although Adamus Resources had control over the re-consolidated
Salman Project area tenure in mid-2002, it needed to raise funds for the
[2012] WASC 295
EDELMAN J
gold mining operation.[38] Mr Gardner, who was a major shareholder in Adamus Resources, together with board members of Adamus Resources began meeting with potential investors and began examining financing options for Adamus Resources to consider.
[38] Exhibit A (witness statement of Mr Gardner) [67].
One potential investor was Mr Nelson. On 11 September 2002, Mr Nelson met with Mr Gardner, Mr Halliday, Mr Bojanjac, Mr Daniels and Mr Lungan. At the meeting, Mr Nelson raised the possibility of Adamus Resources also acquiring further tenements in the area surrounding the Salman Project area. Mr Nelson also suggested that Adamus Resources could put these tenements into a company which could be floated on the Alternative Investment Market.[39] Mr Halliday
[39] In relation to all of this paragraph: Exhibit A (witness statement of Mr Gardner) [86] - [92]; ts 535 (Mr
said that he would not acquire further ground until it was able to show that
the tenure it currently had was of sufficient viability.[40] Mr Gardner said
that if Adamus Resources was not going to acquire any further ground in[40] ts 447 (Mr Bojanjac).
Ghana then Hightime Investments would do so.[41]
[41] ts 448 (Mr Bojanjac).
Hightime Investments acquires further rights in relation to land around the
Salman Project area
38 Shortly after the 11 September 2002 meeting, Mr Lungan met with
Mr Gardner and Mr Bojanjac. Mr Gardner had invited Mr Bojanjac to the meeting with Mr Lungan.
| 39 |
[43] Exhibit B (witness statement of Mr Hopkins) [12]-[15]. [42] Exhibit H (witness statement of Mr Bojanjac) [16]; Exhibit A (witness statement of Mr Gardner) [107] - [127]; Exhibit 120. |
Mr Gardner instructed Mr Lungan to communicate with either Mr Gardner or Mr Bojanjac.[44] Subsequently, on 29 October 2002,
[44] Exhibit A (witness statement of Mr Gardner) [127] - [129].
behalf of Hightime Investments.[45] Mr Gardner gave Mr Lungan a power of attorney to enter agreements on [45] Exhibit A (witness statement of Mr Gardner) [170]; Exhibit 145.
41 In October 2002, Mr Gardner travelled to Ghana. He met with local
chiefs of villages. He also met with a representative of a mining company
[2012] WASC 295
EDELMAN J
which was working a tenement near the Salman Project area, and he examined soil samples.[46] [46] Exhibit A (witness statement of Mr Gardner) [143] - [146], [152].
42 Mr Gardner decided to acquire rights in relation to tenements in
instructed Mr Lungan to make enquiries about holdings in the area.[48] areas including those close to the Salman Project area.[47] Mr Gardner [48] Exhibit A (witness statement of Mr Gardner) [155].
[47] Exhibit A (witness statement of Mr Gardner) [152].
These enquiries, and agreements arising from them, occurred between October 2002 and May 2003.[49] Much correspondence ensued during this
[49] Exhibit A (witness statement of Mr Gardner) [158].
period between Mr Gardner and Mr Lungan. It was often communicated through Mr Bojanjac.[50] [50] Exhibit A (witness statement of Mr Gardner) [162]; Exhibit H (witness statement of Mr Bojanjac) [20(a)].
43 By December 2002, Hightime Investments, through Mr Lungan, had
entered into four agreements with entities in Ghana.[51] One of these was with Satemkon Mining Ltd on 10 December 2002.[52] Another was with [51] Exhibit A (witness statement of Mr Gardner) [172].
[52] Exhibit 458.
Tropical Exploration and Mining Company Ltd (Temco) on 12 December 2002.[53] The Satemkon and Temco tenements are shown below.
[53] Exhibit 459.
44 Another potential acquisition for Hightime Investments was rights in
relation to the Dadwen tenure. The Dadwen tenure was two parcels of land in the Salman Project area.[54] On 4 April 2003, Hightime Investments Dadwen tenure.[55] But on 14 April 2003, the Minerals Commission in entered an agreement with Fidelity Resources Limited in relation to the
[54] Exhibit A (witness statement of Mr Gardner) [177] - [179].
[55] Exhibit 240.
licence had expired and was not valid.[56] Ghana wrote to Hightime Investments saying that Fidelity's prospecting [56] Exhibit 249.
45 Mr Lungan tried to devise a strategy to deal with the invalid Fidelity
licence over the Dadwen ground. Mr Lungan said to Mr Gardner that he thought that Hightime Investments should peg ground including the Dadwen ground.[57] On 17 April 2003, Mr Lungan sent an internal
[57] Exhibit A (witness statement of Mr Gardner) [207], [224] - [226].
memorandum to Mr Bojanjac raising a number of options and recommending that Hightime 'tie up all the ground to the south of Salman to establish an orthogonal tenement position'.[58] Mr Gardner discussed this
[58] Exhibit 254; ts 460 (Mr Bojanjac).
[2012] WASC 295
EDELMAN J
with Mr Bojanjac and they both considered that it was a priority that On 22 April 2003, Mr Bojanjac suggested to Mr Lungan that 'we'
Hightime Investments peg the Dadwen ground to protect it.[59]
[59] Exhibit A (witness statement of Mr Gardner) [212] - [216].
46
should 'peg everything surrounding the ground including Fidelity
ex-tenure and re-negotiate with the owners [of Dadwen]'.[60][60] Exhibit 260.
47 On 14 May 2003, Mr Meadows-Smith (of Adamus Resources)
emailed Mr Lungan, copying the email to Mr Bojanjac, with attachments including a search request and map in the name of Hightime Investments.[61] Mr Meadows-Smith said that unless he heard otherwise 'a
[61] Exhibit 280.
formal application will be lodged in the name of Hightime to cover any
vacant ground'.48 On the next day, 15 May 2003, Mr Meadows-Smith again emailed
Mr Lungan (copying the email to Mr Bojanjac) attaching the search
results for the Hightime request.[62] He also attached a recommended
[62] Exhibit 284.
application over the Ground in the name of Hightime Investments.
The central factual dispute: the conversation between Messrs Gardner and
Bojanjac
49 At the heart of this trial was a conversation between Mr Gardner and
Mr Bojanjac, the content of which was disputed. In his witness statement Mr Gardner said that the conversation occurred some time around late April or May 2003. In his oral evidence Mr Gardner said that the conversation occurred on 16 May 2003.[63] There was no evidence that
[63] ts 158 (Mr Gardner), ts 221 (Mr Gardner).
either Mr Gardner or Mr Bojanjac made any contemporary notes of the
conversation.50 Hightime Investments says that during this conversation
Mr Bojanjac, on behalf of Adamus Resources, entered a binding agreement with Hightime Investments. Hightime Investments alleges that it was a term of the agreement reached in that conversation that Hightime Investments would 'allow Adamus Resources to apply for, and obtain, a licence' in 'stead' of Hightime Investments over land in the Salman Project area which was described as 'the Ground'.[64] That area is shown in the
[64] Further re-amended statement of claim [4].
diagram below which also shows the location of the Satemkon, Temco
[2012] WASC 295
EDELMAN J
(Tropical Exploration Pty Ltd) and Dadwen (Sanu Resources Pty Ltd)
tenures.
[2012] WASC 295
EDELMAN J
KEY
The Ground
Resolute Mining
tenement
[2012] WASC 295
EDELMAN J
Hightime Investments pleads,[65] and Adamus Resources denies,[66] that
[65] Further re-amended statement of claim [9].
[66] Further re-amended defence [8].
material terms of the oral agreement were that:
(1)
Adamus Resources would pay Hightime Investments the fair market value of the licence if Adamus Resources was successful in obtaining a licence over the Ground;
(2)
Adamus Resources would pay Hightime Investments after Adamus Resources completed its bankable feasibility study for its mining project in the Salman Project Area; and
(3)
Hightime Investments would allow Adamus Resources to use Hightime Investments' intellectual property (ie allow Adamus Resources to use the application for a licence over the Ground prepared on behalf of Hightime Investments) in order for Adamus Resources to lodge its application for a licence with the Minerals Commission in Ghana.
Mr Gardner's evidence
In broad summary, the effect of Mr Gardner's evidence in his witness statement concerning the 16 May 2003 conversation was as follows:[67]
[67] Exhibit A (witness statement of Mr Gardner) [237] - [274].
(a)
Mr Bojanjac said that Adamus Resources did not want Hightime Investments acquiring ground around the Salman Project area. It was embarrassing for Adamus Resources to have its major shareholder, Hightime Investments, pegging ground around Adamus Resources' interests in the Salman Project area.
(b)
Mr Gardner pointed out that Adamus Resources had taken no action and was leaving ground which could be taken by competitors.
(c)
Mr Gardner also said that Mr Halliday had told him that Adamus Resources had looked at the other ground but could not handle the ground it already had.
(d)
Mr Bojanjac said that Adamus Resources wanted to acquire Hightime Investments' interests in relation to the Dadwen Tenure and the Satemkon and Temco Agreements. Mr Bojanjac also said that Adamus Resources would pay Hightime Investments for the ground for which Hightime Investments was going to apply.
[2012] WASC 295
EDELMAN J
(e)
Mr Bojanjac said that Adamus Resources could do a deal on the Satemkon, Temko, and Dadwen ground and that Adamus Resources would pay for the other ground when the licences had been granted.
(f)
Mr Bojanjac said that the application for the other ground could be made in the name of Adamus Resources instead of Hightime Investments. Mr Gardner said that if he was not paid then Hightime Investments would go ahead and peg the ground.
(g)
Mr Bojanjac said that he did not know what the ground was worth but Mr Gardner said that 'Adamus [Resources] could wait until it was granted ground until we go it valued. That way [Mr] Bojanjac did not have to worry about the value now'. Mr Bojanjac also said that because Adamus Resources did not have a lot of capital, Hightime Investments could be paid after a bankable feasibility study had been done by Adamus Resources.
(h)
Mr Bojanjac said that he controlled the Adamus Resources chequebook.
Mr Gardner also said that:
(i) At the time of the discussion he had reached an agreement on two matters:
(i) payment for Hightime's interests in relation to Satemkon, Temko and Dadwen; (ii) payment for allowing Adamus Resources to apply for a licence over the Ground in stead of Hightime Investments. Mr Gardner said that at the time the conversation had led to 'an
agreement - two agreements that were subject to some completion
in time'.[68]
[68] ts 156 (Mr Gardner).
(j)
The following day after the conversation Mr Gardner said he telephoned Mr Lungan and told him that a deal had been done so that the ground that was going to be applied for in Hightime Investments' name was instead to be applied for in the name of Adamus Resources and that Hightime Investments would not be pegging any more vacant ground.
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(k) Mr Gardner said that if he had not reached an agreement with Adamus Resources then he would have continued to acquire vacant land in the Salman Project area. (l) Mr Bojanjac subsequently told Mr Gardner that Mr Bojanjac would ask a geologist working for Adamus Resources, Mr Owen,
to provide a price for the sale of Hightime Investments' interests.[69]
[69] Exhibit A (witness statement of Mr Gardner) [268] - [270].
A offer made to Mr Gardner subsequent to the 16 May 2003 conversation was rejected by Mr Gardner, but on 5 June 2003 Mr Gardner entered a heads of agreement with Adamus Resources.
In cross-examination, Mr Gardner referred to his conduct subsequent to 16 May 2003 in abstaining from pegging any further ground:[70]
[70] ts 160 (Mr Gardner).
[O]n 16 May 2002 [sic: 2003] when I was active in pursuing every piece of ground that I could, the conversation was about - Adamus didn't want Hightime to peg any more ground. It was agreed at that point with Mr Bojanjac that I stop acquiring ground and don't peg any more ground and they would take it from there on and I was to withdraw from applying for any other ground which I did. I kept my word and I allowed Adamus to take over my person, being Mr Lungan, at that point completely. I never pegged another piece of ground in Ghana.
55 Mr Gardner may not have pegged any more ground but see below at [67] in relation to the application for a licence over the Dadwen ground by Hightime Investments on 10 June 2003.
Mr Bojanjac's evidence
56 Mr Bojanjac accepted that a conversation had occurred between him
and Mr Gardner. He described the conversation as concerned with the 'entire context' of all Mr Gardner's interests in the area. Although he was not sure of the date of the conversation, or the precise words used, Mr Bojanjac also accepted that he said something to Mr Gardner to the effect that it was embarrassing that Hightime Investments was in the
although he did not think he said that in the same conversation.[72] process of acquiring ground around Adamus Resources' interests,[71] [72] ts 498 (Mr Bojanjac).
[71] ts 494 (Mr Bojanjac).
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Mr Bojanjac accepted that he frequently said that 'he who controls the chequebook controls the company' but he did not think he said that on
the occasion of the 16 May 2003 conversation either.[73]
[73] ts 498 (Mr Bojanjac).
Mr Bojanjac specifically denied a number of matters:
(a) Mr Bojanjac denied that there was any agreement that payment would be made for vacant ground when licences were granted.[74] He said that at no stage did he ever say to Mr Gardner that [74] ts 504 (Mr Bojanjac).
Adamus Resources would pay him anything for any extra ground
that Mr Gardner might peg.[75]
[75] Exhibit H (witness statement of Mr Bojanjac) [24(e)]; ts 498 (Mr Bojanjac).
(b) Mr Bojanjac denied that he said that payment would occur after a bankable feasibility study had been completed.[76] (c) Mr Bojanjac denied that Mr Gardner had said during the 16 May 2003 conversation that Mr Halliday had said that Adamus [76] ts 504 (Mr Bojanjac).
Resources did not want any more ground and it couldn't handle the
ground it had.[77]
[77] ts 497 (Mr Bojanjac).
(d) Mr Bojanjac said that Mr Gardner did not tell him which ground Mr Gardner was proposing to peg.[78] However, Mr Bojanjac accepted that some time prior to 22 April 2003 he had a telephone conversation with Mr Gardner in which Mr Gardner had agreed that Hightime Investments should peg the Dadwen ground as well as the ground around it to protect it from being taken.[79] And [78] Exhibit H (witness statement of Mr Bojanjac) [24(b)].
[79] ts 464 (Mr Bojanjac).
Mr Bojanjac knew that Hightime Investments was going to make a formal application over any vacant ground in the area,[80] and he had received from Mr Meadows-Smith on 15 May 2003 a (draft)
[80] Exhibit 259; Exhibit H (witness statement of Mr Bojanjac) [25], [27], [29], [33].
recommended application by Hightime Investments for a licence
over the Ground.[81]
[81] Exhibit H (witness statement of Mr Bojanjac) [35]; Exhibit 284.
59 Mr Bojanjac was asked many times about the conversation. His
description of the effect of the conversation was firm, resolute and consistent. He described the effect of his conversation as 'the formative stages of trying to reach an agreement which would resolve all of that and
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by which Adamus could seek to negotiate'.[82] He said that he recalled having a discussion that 'since we are in the process of negotiating to buy the tenure we should negotiate a price which included sufficient consideration for everything'.[83] He said that he had suggested 'that we
[82] ts 499 (Mr Bojanjac).
[83] ts 493 (Mr Bojanjac). See also ts 496 (Mr Bojanjac).
three pieces of tenure'.[84] negotiate a sufficient consideration to cover all interests including those [84] ts 498 (Mr Bojanjac).
60 When asked about his statement in the conversation concerning the
embarrassment of having Hightime Investments pegging ground around that which was held by Adamus Resources, Mr Bojanjac replied that this acquired'.[85] 'was a matter which needed to be negotiated, brought to a head and
[85] ts 480 (Mr Bojanjac).
61 Mr Bojanjac also accepted that in the conversation Mr Gardner said
that if Adamus Resources was not going to 'buy' the Ground from Hightime Investments then Hightime Investments would proceed to peg it.[86] However, Mr Bojanjac explained that a payment would be on 'the
[86] ts 501 (Mr Bojanjac).
basis that we negotiated consideration that would include everything which is what I thought we had done and were doing'.[87] Again, when [87] ts 502 (Mr Bojanjac).
Mr Bojanjac was asked whether he told Mr Gardner that Adamus Resources would pay for the vacant ground that was the subject of the upcoming application, he replied that he had told Mr Gardner that 'we should negotiate a position … where the consideration was sufficient to
buy all of his interests'.[88] The consideration which would be negotiated would 'include any pegged ground subject to application'.[89] [88] ts 499 (Mr Bojanjac).
[89] ts 504 (Mr Bojanjac).
62 In other words, Mr Bojanjac described the conversation as an
undertaking to procure Adamus Resources to negotiate with Mr Gardner to acquire all of Hightime Investments' interests and prospective interests. It was not a binding agreement by Adamus Resources to acquire the licences held by Mr Gardner. Nor was it an agreement by Adamus Resources to pay for the vacant land which Hightime Investments was intending to peg or to apply for (see [52(d)] - [52(g)] above).
63 Counsel for the plaintiff pointed to other answers given by
Mr Bojanjac in cross-examination. Some of those answers, if read in isolation, might have supported a submission that the conversation
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involved Mr Bojanjac agreeing that Adamus Resources would pay Hightime Investments for the Ground. But, read in the context of all of Mr Bojanjac's evidence, he was referring only to an undertaking to procure Adamus Resources to negotiate with Hightime Investments. For instance, counsel asserted to Mr Bojanjac that the 'only way that you would get a change in Hightime's position would be by agreeing to pay him for this ground'. Mr Bojanjac replied that '[t]hat would be correct. I have given you the context by which I thought the solution to it had been reached'.[90] That context was the undertaking that he would procure
[90] ts 501 (Mr Bojanjac).
Adamus Resources to negotiate with Hightime Investments for a price to be paid for the licences held by Hightime Investments and its intention to apply for licences for further ground.
As Mr Bojanjac had undertaken, negotiation subsequently did occur between Hightime Investments and Adamus Resources.
The subsequent negotiations, agreement and events
I find the following facts in relation to the events subsequent to the 16 May 2003 conversation.
66 Consistently with Mr Bojanjac's evidence about the oral
conversation, subsequent negotiations took place between Hightime Investments and Adamus Resources. Mr Gardner said that subsequent to the conversation an offer was made to him by Adamus Resources[91] to
[91] I am not satisfied that it was Mr Bojanjac, rather than Mr Halliday, who conveyed this offer but I find that an
purchase Hightime Investments' interests in relation to the Satemkon,
Temco and Dadwen ground. Mr Gardner rejected it.[92] There were,
nevertheless, strong grounds to expect that an agreement would be negotiated and concluded. Mr Gardner said that there had never been a transaction that did not go through the board. He added that the 'transactions' (by which he must have meant his discussions with Mr Bojanjac since, as Mr Gardner knew, no contracts were concluded prior to board approval) were 'presented correctly by Mr Bojanjac and they wanted the ground and the deals to go through, so in those
circumstances, unless there is something completely wrong, they would[92] Exhibit A (witness statement of Mr Gardner) [272].
go through'.[93]
[93] ts 156 (Mr Gardner).
67 On 17 May 2003, the day after the conversation between Mr Gardner
and Mr Bojanjac, Mr Meadows-Smith emailed Mr Lungan saying 'I spoke
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with [Mr Halliday] yesterday and will proceed to make two Prospecting
Licence applications. A Hightime application over the [Dadwen] ground
and a larger one for Adamus filling in all the gaps'.[94] On 10 June 2003,
Mr Meadows-Smith applied for the licence on behalf of Hightime
Investments in relation to the Dadwen tenement.[95][94] Exhibit 287.
[95] Exhibit 315.
68 On 17 May 2003, Mr Meadows-Smith also emailed Mr Halliday. He
attached a draft application for a licence over the Ground. With one difference, it was the same draft application as that sent by Mr Meadows-Smith to Mr Lungan on 15 May 2003. The difference was that the draft application was in the name of Adamus Resources rather than Hightime Investments. Mr Meadows-Smith also emailed Mr Owen
about the prospective application by Adamus Resources for a prospecting
licence over the Ground.[96]
[96] Exhibit 290; Exhibit 299.
69 On 30 May 2003, Mr Gardner, Mr Bojanjac and Mr Halliday flew to
Toronto to meet with bankers concerning a capital raising.[97] During that trip, on 5 June 2003, a conditional heads of agreement was agreed between Mr Gardner and Adamus Resources. It was subject to a number of conditions precedent.
[97] Exhibit 296; ts 136 (Mr Gardner).
70 The 5 June 2003 heads of agreement was signed by Mr Gardner,
Mr Halliday and Mr Bojanjac. It provided for Adamus Resources to acquire all of the interests of Mr Gardner and/or Hightime Investments, including Hightime Investment's rights, in relation to the Satemkon agreement, the Temko agreement and Hightime Investments' application over the Dadwen/Fidelity tenement.
It was subject to a number of conditions precedent including:
(i) approval of the other board members of Adamus Resources;
(ii) obtaining the required approvals under the Corporations Act and ASX listing rules;
(iii) completion of independent due diligence on the relevant interests and joint ventures involved in the Satemkon, Temko and Dadwen tenures; and
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(iv) the successful completion of Adamus Resources' negotiations with Semafo Ltd to acquire the Anwia Project and obtaining all the necessary associated approvals.
72 It is likely that the price in the 5 June 2003 heads of agreement was
negotiated even earlier than 30 May 2003 which was the date when Messrs Halliday, Bojanjac and Gardner left for Toronto. Mr Bojanjac said that he remembered arriving at Adamus Resources' offices one morning and being told by Mr Halliday that Mr Halliday had met with Mr Gardner earlier that morning and had reached agreement to issue five million shares in Adamus Resources and pay US$350,000 to Hightime Investments. Mr Bojanjac asked Mr Halliday '[i]s this for all of it?'. Mr Halliday replied that it was, and Mr Bojanjac said that he was relieved and believed that the conflicts between Hightime Investments and Adamus Resources were over.[98]
[98] Exhibit H (witness statement of Mr Bojanjac) [23(c)].
The day after the heads of agreement were signed, on 6 June 2003, Mr Meadows-Smith lodged applications for prospecting licences over two areas known as 'Apa Tam' and 'Asanta'. The Ground is a subset of those areas. It can be seen in Appendix A to these reasons.
74 On 17 December 2003, a formal agreement between Hightime
Investments and Adamus Resources gave force to the 5 June 2003 heads
of agreement.[99] The formal agreement was between Adamus Resources
and Hightime Investments. Unlike the brief and heavily conditional 5 June 2003 heads of agreement, the 17 December formal agreement was 22 pages including schedules, and detailed. The formal agreement involved a purchase by Adamus Resources from Hightime Investments of the shares in Hightime Ghana Pty Ltd, an entity to which Hightime had sold its interests in relation to Satemkon, Temco and Dadwen. The formal
agreement was approved by shareholders of Adamus Resources on[99] Exhibit 398.
23 January 2004.[100]
[100] Exhibit 405.
The prospecting licence in relation to Apa Tam was granted on 24 November 2004[101] and in relation to Asanta on 10 January 2005.[102]
[101] Exhibit 430.
[102] Exhibit 428.
In June 2007, Adamus Resources published its bankable feasibility
study.103
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Other evidence relating to the conversation
77 Apart from the evidence and my conclusions described in the section
immediately above, there is little other evidence which casts any real light upon the nature of the 16 May 2003 conversation. Mr Halliday had little day to day contact with Mr Gardner.104 Only Mr Bojanjac and
Mr Gardner were parties to that conversation.
78 As I have explained, Mr Halliday was closely involved in events
surrounding the 16 May 2003 conversation even though he was not a party to that conversation. I accept Mr Bojanjac's evidence that it was not Mr Bojanjac who gave instructions to Mr Meadows-Smith on 16 May 2003 about changing the name of the draft application. The emails from Mr Meadows-Smith at the time suggest that the instructions came from Mr Halliday.
79 But Mr Halliday's evidence was not reliable. Mr Halliday generally,
and implausibly, denied knowledge of Hightime Investments' intention to acquire the Ground. In part, the unreliability of his evidence might be explained by the years which have passed since the events about which he was cross-examined. But his answers to a considerable number of other questions were implausible. For instance, in response to a long line of questions he consistently maintained that Hightime Investments were only going to acquire ground in the area they wanted by purchasing ground (at
that no weight can be put on the evidence of Mr Halliday.106 (for minimal cost).105 I accept the submission of counsel for the plaintiff potentially considerable expense) rather than by pegging vacant ground
The alleged promise was not made in the 16 May conversation
80 Apart from the matter at [82] below, I accept the evidence of
Mr Bojanjac as set out above at [56] - [61]. Mr Bojanjac impressed me as an honest and reliable witness doing his best to answer questions and to recall the events of around May 2003. The impression I formed from Mr Bojanjac's and Mr Gardner's oral evidence was that Mr Bojanjac's was considerably more reliable than Mr Gardner's.
81 On some matters, there was a consensus, or something close to it,
between Mr Gardner and Mr Bojanjac. I accept that the conversation occurred between Mr Gardner and Mr Bojanjac on 16 May 2003.
103 Exhibit 485.
104 ts 540 (Mr Halliday).
105 ts 555 (Mr Halliday).
106 Plaintiff's outline of closing submissions [104].
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Although there was some dispute about the date, the date of the conversation was not seriously doubted by Mr Bojanjac. Adamus Resources denied that Mr Bojanjac had promised that Adamus Resources would pay the fair market value of a prospecting licence over the Ground but Mr Gardner was not cross-examined in detail about his changing recollection of the date when the alleged conversation had occurred.
82 I also find that Mr Bojanjac said something to Mr Gardner to the
effect that it was embarrassing that Hightime Investments was in the process of acquiring ground around Adamus Resources' interests. Although Mr Bojanjac did not think this was said in the 16 May 2003 conversation, he was uncertain about this and I consider that it is likely that it was said then.
83 However, I find that the substance of the conversation was that
Mr Bojanjac would procure Adamus Resources to negotiate towards paying Hightime Investments for all of the interests which Hightime Investments had in the area including the substitution of Adamus Resources for Hightime Investments as the named applicant for the licence in relation to the Ground. The latter substitution occurred in a draft of the application the day after the 16 May 2003 conversation. And the application was made on 6 June 2003. The negotiations took place and ultimately were brought to fruition in the form of a heavily conditional agreement on 5 June 2003.
84 Counsel for Mr Gardner relied heavily upon evidence which he
described as a 'change of position'. The initial position was that immediately before 16 May 2003, Mr Meadows-Smith (of Adamus Resources) had prepared a draft application for the Ground in the name of Hightime Investments. That application was never lodged. The change of position occurred when, on 17 May 2003, an identical application was prepared by Mr Meadows-Smith in the name of Adamus Resources. The applications over an area which included the Ground were lodged on 6 June 2003.
As I have explained, there was some discussion on 16 May 2003 between Mr Bojanjac and Mr Gardner concerning (1) the potential acquisition by Adamus Resources of Hightime Investments' rights in relation to the Satemkon, Temco and Dadwen tenements; and (2) the substitution of Adamus Resources for Hightime Investments as the named applicant for the licence in relation to an area of land in Ghana.
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86 I accept Mr Bojanjac's evidence that the general content of the
conversation, and its general tenor, was that Mr Bojanjac would procure Adamus Resources to negotiate towards an agreement between Hightime Investments and Adamus Resources.
87 It may be that the undertaking by Mr Bojanjac to procure these
negotiations gave Mr Gardner and Adamus Resources a strong expectation that Adamus Resources would subsequently enter an agreement. As I have explained, Mr Gardner said that there had never been a transaction that did not go through the board: 'they wanted the ground and the deals to go through, so in those circumstances, unless there is something completely wrong, they would go through'.[107] And it
[107] ts 156 (Mr Gardner).
may be that it was this strong expectation which motivated the change of position where Mr Meadows-Smith prepared a new draft application in the name of Adamus Resources in place of the one which he had prepared in the name of Hightime Investments.
88 In any event, it suffices to say that I do not accept Mr Gardner's
evidence that the 16 May 2003 conversation involved Mr Bojanjac speaking any words which could reasonably have been construed as committing Adamus Resources to any acquisition or payment to Hightime Investments. Apart from the evidence at [52](a) and (b) and the first sentence of (d) above, I do not accept the remaining factual allegations in that paragraph. As I have explained, I also prefer Mr Bojanjac's evidence that he had effectively undertaken to ensure that Adamus Resources would negotiate with Hightime Investments.
89 To be fair to Mr Gardner, there were other parts of his oral evidence
which were more consistent with Mr Bojanjac's account. For instance,
immediately after being asked about the 16 May 2003 conversation,
Mr Gardner gave the following answers in cross-examination:[108]
[108] ts 156 (Mr Gardner).
COUNSEL: You might recall me asking you that no matter whether Mr Bojanjac thumped his fists or stamped his feet at a board meeting, he was only one member of the board and if the other members of the board or at least a majority of the board did not agree to proceed with the transaction, then the transaction would not proceed?
MR GARDNER: Technically, yes.
COUNSEL: I put to you that this was the understanding that you had in
April or May 2003?
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MR GARDNER: No, because there had never been a transaction that didn't go through the board because it was presented correctly by Mr Bojanjac and they wanted the ground and the deals to go through, so in those circumstances, unless there is something completely wrong, they would go through.
90 This is more consistent than other evidence from Mr Gardner with
Mr Bojanjac's account that Mr Bojanjac had not committed Adamus Resources to any payment but that he (and Adamus Resources) would negotiate for a deal. The parties might well have expected that unless 'there was something completely wrong' a contract should eventuate after further negotiations and approval by the board.
91 I do not accept Mr Gardner's evidence that words which could be
construed as words of binding commitment were spoken by Mr Bojanjac. This is for the following eight reasons. Individually many of these reasons would be sufficient to reject Hightime Investments' claim. Together, the result is irresistible.
(1) Demeanour of Mr Bojanjac and Mr Gardner
92 First, as I have explained above, Mr Bojanjac was a more compelling
and reliable witness. He accepted that he may have said, or did say, a number of the matters which Mr Gardner attributed to him. He was not emphatic on many matters, which given the length of time which had elapsed since the 16 May 2003 conversation, was understandable. And on the matters on which he was emphatic, such as that the only promise was to negotiate consideration for everything including the rights held by Hightime Investments, his evidence was clear and cogent. In contrast, Mr Gardner's evidence was unclear in parts, often evasive, and sometimes inconsistent.
(2) Inconsistencies in Mr Gardner's oral evidence
93 Counsel for Hightime Investments submitted that Mr Gardner was
not challenged about his evidence of the 16 May 2003 transaction.[109] It is true that it was not expressly put to Mr Gardner that Mr Bojanjac did not promise that Adamus Resources would pay the fair market value for the Ground. But Mr Gardner could have been in no doubt that his evidence on this point was disputed by Adamus Resources. Adamus Resources had denied that there was any term of the alleged agreement that it would pay Hightime Investments the fair value of any licence which was granted
[109] Plaintiff's outline of closing submissions [29].
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Adamus Resources before trial explained that a central issue was that:[111] over the Ground.[110] The written outline of opening submissions filed by [111] Defendant's amended outline of submissions for trial [4].
[110] Further re-amended statement of claim [9]; Further re-amended defence [8].
[Mr] Bojanjac denies the discussions pleaded, and in particular denies ever saying to Gardner (whether in late April/May 2003 or earlier) that Adamus would pay money for the Opportunity [for Hightime Investments to allow Adamus Resources to apply for and obtain a licence over the Ground].
94 Mr Gardner was exhaustively cross-examined about inconsistencies
between his allegation of an oral agreement and the letter of demand. He was cross-examined about inconsistencies between the writ filed on behalf of Hightime Investments and his allegations of oral agreement. He was cross-examined about the use of written agreements by Adamus Resources in other transactions. He was cross-examined in relation to the absence of any announcement of the alleged oral agreement to the market.
One inconsistency in Mr Gardner's case concerned the 5 June 2003 heads of agreement.[112] The pleaded case for Hightime Investments, and Mr Gardner's initial evidence, was that an agreement was reached during the 16 May 2003 conversation. The pleaded case was that this agreement included Adamus Resources acquiring the interests of Hightime Investments in relation to the Satemkon, Temco and Dadwen tenements.[113] But in cross-examination Mr Gardner conceded that this
[112] Exhibit 308.
[113] Further re-amended statement of claim [6.15]; Exhibit A (witness statement of Mr Gardner) [257].
alleged oral agreement on 16 May 2003 was only to do the things which
were set out in the written heads of agreement on 5 June 2003.[114]
[114] ts 150 (Mr Gardner).
Crucially, the 5 June 2003 heads of agreement:
(a)
was described in the introduction as involving Adamus agreeing (not having previously agreed) '[f]ollowing today's discussion'[115] with bankers;
(b)
was specifically subject to approval of the other board members of Adamus Resources;
(c)
was subject to due diligence in relation to each of the relevant three interests; and
[115] Emphasis added.
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(d) was subject to the condition precedent of complying with 'the ASX Listing Rules as are necessary for it to enter into a full agreement'. 96 The inconsistency is that this 5 June 2003 heads of agreement was
not an immediately binding agreement to pay as Mr Gardner alleged. On Mr Gardner's case the 5 June 2003 agreement (which did not include such an immediate obligation) embodied the earlier oral agreement which he said did include such an obligation. Finally, even if an oral agreement as to these matters had been reached earlier (which I reject) this alleged embodiment of such an oral 'agreement' was, in very broad summary, only a conditional agreement for the matter to be taken to the board of directors of Adamus Resources.
(3) Lack of any written document supporting Mr Gardner's account
97 Mr Gardner's evidence in his witness statement concerning the
content of the 16 May 2003 conversation was produced nearly nine years after the relevant conversation. The conversation was not supported by any document or contemporary note. Mr Gardner claimed (but I do not accept) that he had made hundreds of demands for payment from the chairman, company secretary, managing director, and chief operating officer of Adamus Resources. But there was no evidence of any such demand in writing; no email, no letters, no memorandum. There was nothing in writing which mentioned any undischarged liability to Hightime Investments in relation to the Ground between 16 May 2003 and 9 December 2009. The only demand made in writing was by his lawyers on 9 December 2009. And, as I explain below, it is significant that this demand was fundamentally different from the binding oral promise which Mr Gardner alleged was made on 16 May 2003.
98 This subsequent conduct is a relevant matter to consider in finding
Security Ltd,[116] Stephenson LJ (with whom O'Connor LJ and Sir Stanley whether, as a fact, the alleged oral promises were made. Mears v Safecar [116] Mears v Safecar Security Ltd [1983] QB 54, 77.
Rees agreed) said: I have already expressed my view that this agreement was oral, but even if it was partly in writing, we are concerned with the search for a term that was not written down, and there is nothing in those authorities which prevents the court from looking at the way the parties acted for the purpose of ascertaining what that term was. Common sense suggests that their subsequent conduct is the best evidence of what they had agreed orally but
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not reduced to writing, though it is not evidence of what any written terms
mean.
99 This passage was approved by Owen J in The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9][117] and the latter half was
[117] The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239 [2668]. Despite the
statements in a number of other cases.119 Spigelman CJ has also described Fazio v Fazio118. The statement by Stephenson LJ is consistent with quoted with approval by Murphy JA (Pullin & Newnes JJA agreeing) in post-contractual conduct as a matter of 'significant weight' in identifying the subject matter of an alleged oral contract.[120] This approach also [120] County Securities Pty Limited v Challenger Group Holdings Pty Limited [2008] NSWCA 193 [24].
accords with principle. It would be peculiar if courts were to be constrained in the exercise of finding facts from considering any relevant matter subsequent to the alleged occurrence of the fact in issue.
(4) A contradictory account put on Mr Gardner's behalf on 9 December
2009
100 Although Mr Gardner's witness statement of 13 April 2012 was very
specific about the detail of the 16 May 2003 conversation, there were significant contradictions between that account of the conversation and earlier contentions made on Mr Gardner's behalf.
101 A stark contrast is with the only written demand in evidence which
Mr Gardner made of Adamus Resources. This was a demand by his
lawyers on 9 December 2009.[121] Although Mr Gardner's answers to many
questions about this letter were evasive, I accept his early answer in cross-examination that this demand, by his lawyers, had been made after
extensive discussions between Mr Gardner and his solicitors about the[121] Exhibit 433.
nature of his grievances against Adamus Resources.[122]
[122] ts 163 (Mr Gardner).
102 First, in the letter of demand, the conversation is alleged to have
occurred at a meeting in late 2002 (which Mr Gardner corrected to 16 May 2003 in his oral evidence)[123] between Mr Gardner, Mr Bojanjac and Mr Halliday. Mr Halliday did not recall being present at that
[123] ts 170 (Mr Gardner).
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meeting.[124] In Hightime Investments' statement of claim and Mr Gardner's witness statement, the conversation relied upon by Mr Gardner was said to have occurred in late April or early May 2003 and was only with Mr Bojanjac.[125] In Mr Gardner's oral evidence, the
[124] ts 541 (Mr Halliday).
[125] Exhibit A (witness statement of Mr Gardner) [237].
conversation occurred on 16 May 2003, again only with Mr Bojanjac.
103 Secondly, and more fundamentally, the 9 December 2009 letter of
demand suggested that a single interdependent agreement had emerged
from the conversation. That agreement alleged was as follows:
(a)
Adamus Resources would acquire from Hightime Investments the Ground[126] already pegged by Hightime Investments as well as Hightime Investments' application for an exploration licence over a substantial part of the Ground [I interpolate that there was no evidence at trial that any part of the Ground had been pegged by
[126] Which is the same Ground as that pleaded in the statement of claim: ts 184 (Mr Gardner).
Hightime Investments and it appeared to be common cause at trial
that it did not do so].[127]
[127] See defendant's closing submissions, fn 15.
(b) Adamus Resources would peg the remaining unpegged portion of the Ground. (c) Adamus Resources' acquisition of the pegged part of the Ground was conditional upon completion of the oral agreement for transfer of the Temko, Satemkon and Dadwen tenures to Adamus Resources, which occurred when it was put into a formal Share Sale and Purchase agreement on 17 December 2003 (see my discussion above concerning this agreement at [74]). (d) Hightime Investments would allow Adamus Resources to control and direct Mr Lungan and to use Hightime Investments' infrastructure to lodge the application and peg the remainder of the Ground in Adamus Resources' name. 104 The letter of demand then alleged that because the Shan Corporation
had acquired the Dadwen tenure, the Share Sale and Purchase Agreement was unable to be completed and 'Hightime has provided Adamus with the opportunity to explore and acquire the Ground, without having obtained the benefit it anticipated by the Share Sale and Purchase Agreement'.
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105 A fundamental point is that the letter of demand described the
alleged oral agreement in terms of a single, interdependent agreement,
which became the Share Sale and Purchase Agreement.106 Thirdly, there was no mention in the letter of demand of the alleged
oral promise by Mr Bojanjac that Adamus Resources would pay the fair market value of the Ground, or that the Ground would be valued, or that Adamus Resources could pay once it had obtained a bankable feasibility study. Instead, a demand was made for $5,000,000 or transfer of the Ground.
107 In summary, it is entirely implausible that after providing his
solicitors with detailed instructions leading to the 9 December 2009 letter, Mr Gardner would subsequently recall that seven years earlier an entirely oral agreement had been struck in different and inconsistent terms.
(5) A contradictory account put on Mr Gardner's behalf on 26 March 2010
108 There is a further implausibility of Mr Gardner's allegations of the
commitment by Mr Bojanjac, on behalf of Adamus Resources, to pay the fair market value of a licence over the Ground. This further implausibility is that the alleged oral agreement was also not mentioned in the writ filed on Mr Gardner's behalf on 26 March 2010. Mr Gardner accepted that
prior to the filing of the writ he had had long and careful discussions with
his lawyers about the allegations contained in it.[128]
[128] ts 128 (Mr Gardner).
109 In his 26 March 2010 writ, the claim for breach of contract was for a
single interdependent contract made in December 2002 in which it was alleged that Hightime Investments agreed to 'transfer to [Adamus Resources] 3 mining tenements it controlled in Ghana, West Africa and allow [Adamus Resources] to register and apply for an exploration licence over [the Ground] in consideration of [Adamus Resources] transferring to [Hightime Investments] 5,000,000 ordinary shares in [Adamus Resources] and US$350,000'.
110 Once again, the alleged promises in relation to the transfer of the
mining tenements and the application for an exploration licence over the Ground are expressed as a single interdependent agreement. Further, there was no suggestion of the alleged oral promise by Mr Bojanjac that Adamus Resources would pay the fair market value of the Ground, or that the Ground would be valued, or that Adamus Resources could pay once it had obtained a bankable feasibility study.
[2012] WASC 295
EDELMAN J
| (6) | Adamus Resources agreements required board approval | |
| 111 | A sixth reason for rejecting Mr Gardner's account of the oral | |
| conversation on 16 May 2003, and preferring that of Mr Bojanjac, is the consistency of Mr Bojanjac's account, and inconsistency of Mr Gardner's, with the manner in which other transactions were entered between Adamus Resources and Hightime Investments. Contrary to the pleaded case for Hightime Investments, although those transactions were the subject of oral negotiations, nothing was binding until the proposals were put to the board and accepted. | ||
| 112 | In relation to specific transactions, Mr Gardner also conceded in | |
| cross-examination that no binding agreement was reached until the board of directors approved proposals which were made to it. One example is in relation to the transaction by which Adamus Resources acquired the shed ground from Hightime Investments. That transaction was initially negotiated between Mr Gardner and Mr Bojanjac. But, as Mr Gardner and Mr Bojanjac were aware, it went through a long and detailed process to become a binding agreement: | ||
[129] Exhibit 38. [130] Exhibit 38, page 130; Exhibit H (witness statement of Mr Bojanjac) [9(a)]. |
attendance as an official member but the handwritten minutes record that Mr Gardner was present for a substantial part of the
meeting by invitation and they record his departure during the
meeting.[131]
[131] Exhibit 39.
(b)
It was subject to due diligence by the independent directors, Messrs Halliday and Bojanjac.
(c)
It was converted into writing by the solicitors for Adamus Resources.[132]
[132] Exhibit 43.
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EDELMAN J
(d) It was considered on at least four subsequent occasions by the board of directors of Adamus Resources.[133] (e) It was recorded in a document which was executed by Adamus Resources and Mr Gardner and announced to the market.[134] (f) It was subjected to the reports of independent experts.[135] (g) It was approved by shareholders. (h) It was announced to the market. [136] [133] Exhibits 51, 56, 61, 66.
[134] Exhibit 70.
[135] Exhibit 82.
[136] Exhibit 110.
Contrary to Hightime Investments' pleaded case in relation to this transaction, Mr Gardner acknowledged in cross-examination that it was
up to the board of Adamus Resources to accept or reject the proposal.[137]
[137] ts 92 - 93 (Mr Gardner).
Adamus Resources board could 'kick out' the proposal.[139] Mr Gardner accepted that he knew this at the time.[138] He realised that the [139] ts 110 (Mr Gardner).
[138] ts 100, 106 (Mr Gardner).
114 Once again, any oral negotiations were not binding until any
proposal was approved by the board. Mr Gardner said that he knew that it was up to the directors to decide whether to accept or to reject any proposal. He understood at the time that the 'recommendation for the management to the board is what the board relies on to be able to do a deal' and that this 'would have been discussed and it was up to the board to make a decision'.[140] Even if he had extensive discussions with
[140] ts 116 (Mr Gardner).
Mr Bojanjac about the matter before the board meeting, or received a degree of assurance from Mr Bojanjac that the board would go ahead with
the proposed transactions, Mr Gardner knew that it was entirely up to theboard to make the decision.[141]
[141] ts 116 - 117 (Mr Gardner).
A final, and highly pertinent example, concerns the 5 June 2003 heads of agreement which Mr Gardner conceded was an agreement to do the things which were the subject of the 16 May 2003 conversation in relation to acquisition of Hightime Investments' rights.[142] Crucially, the
[142] ts 150 (Mr Gardner).
5 June 2003 written agreement was specifically subject to approval of the other board members of Adamus Resources. The process of putting the
[2012] WASC 295
EDELMAN J
5 June 2003 into a binding formal agreement involved directors' meetings. It also involved drafting a 22 page agreement. It required independent expert reports. It needed shareholder approval. It needed market disclosure.
116 What was true of these specific transactions was also true generally.
Even on Mr Gardner's account of the way that he considered that oral deals were generally struck with Adamus Resources, he conceded that 'all agreements that we [did were] only ever spoken and reached with Mr Bojanjac and then he [Mr Bojanjac] did what was necessary through conclusion of those deals'.[143] In light of Mr Gardner's concessions that the board and management to do what was required to give effect to the
[143] ts 110 (Mr Gardner).
specific transactions were not binding before board approval, his reference to 'deals' done by Mr Bojanjac could be no more than undertakings by Mr Bojanjac to take these matters to the board of directors.
(7) An oral contract would mean that breaches of disclosure rules occurred
117 If Adamus Resources had entered into the significant binding oral
agreement with Mr Gardner on 16 May 2003, as Mr Gardner claimed, then Adamus Resources, as a company listed on the Australian Stock Exchange, was required to announce this to the market. Mr Gardner was aware of this.[144] If Mr Gardner were correct that Mr Bojanjac had
[144] ts 104, 123 (Mr Gardner).
undertaken binding commitments on behalf of Adamus Resources on 16 May 2003, then both Mr Bojanjac and Mr Gardner would have failed for numerous months to make any disclosure to the market. The failure to comply with disclosure requirements is a relevant matter to consider in assessing whether the alleged oral promises were made.[145] It is yet
[145] See Australian Securities and Investments Commission v Hellicar [2012] HCA 17 [71] (French CJ,
another indication that they were not made.
(8) The unlikelihood of the disputed oral promises
118 An eighth reason, which would also, of itself, have been sufficient
154 This is sufficient to dispose of the submission of actual authority.
But, in any event, none of the matters pleaded by Hightime Resources suggests the contrary conclusion. Some of the pleaded matters support the opposite conclusion, namely an absence of authority. Below, I deal with each of the pleaded matters.
| 155 |
[177] Further re-amended statement of claim [6.1] - [6.23]. [178] Further re-amended statement of claim [6.1]. [179] Further re-amended statement of claim [6.2]. [180] Further re-amended statement of claim [6.3]. | ||||
| combination, suggests that Mr Bojanjac had authority to commit Adamus Resources to the alleged agreement. |
156 Other pleaded matters by Hightime Investments were even more
remote from, or irrelevant to, the suggested inference. For instance,
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EDELMAN J
although there was some evidence to support the pleading[181] that Mr Bojanjac travelled nationally and internationally to raise funds for Adamus Resources, there was no evidence that Mr Bojanjac was empowered unilaterally to commit Adamus Resources to any significant financing contracts. Nor was there any evidence that he did so. Indeed, even when he travelled to Canada for fund-raising negotiations he did so with Mr Halliday and Mr Gardner.
[181] Further re-amended statement of claim [6.22].
157 Another pleaded fact which was remote from any inference that
Mr Bojanjac had power unilaterally to bind Adamus Resources to the alleged oral contract was the allegation that Mr Bojanjac engaged
Mr Lungan to oversee the Adamus Resources offices in Ghana and the
Salman Gold project.[182]
[182] Further re-amended statement of claim [6.12].
158 The evidence did not support a conclusion that Mr Bojanjac was
solely responsible for the engagement of Mr Lungan for Adamus Resources, to the extent that Mr Lungan worked for Adamus Resources rather than Hightime Investments.[183] But, even if it was Mr Bojanjac who
[183] ts 508 (Mr Bojanjac).
had engaged Mr Lungan to consult to Adamus Resources as well as Hightime Investments, authority to bind Adamus Resources to that engagement is quite a different matter from binding Adamus Resources to the alleged oral contract.
159 A further pleaded fact which was remote from the inference of
authority to bind Adamus Resources to the alleged contract was the statements made by Mr Bojanjac to the effect that 'the person who controls the chequebook, controls the company'.[184] But these statements
[184] Further re-amended statement of claim [6.13].
must be understood in light of the requirement, of which Mr Gardner was
aware,[185] that Adamus Resources’ cheques needed to be countersigned. It
was not sufficient for Mr Bojanjac unilaterally to sign a cheque.[185] ts 254, 272 (Mr Gardner).
160 The facts underlying other pleaded matters by Hightime Investments
contradicted the suggested inference that Mr Bojanjac had authority to enter into the alleged oral contract. For instance, eight paragraphs were
concerned with Mr Bojanjac's role in relation to the acquisition of the
shed ground by Adamus Resources from Hightime Investments.[186]
[186] Further re-amended statement of claim [6.4] - [6.11].
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161 In relation to those eight paragraphs, as I have explained above, the
evidence showed that Mr Bojanjac's authority in relation to that transaction was confined to negotiations prior to any commitment by Adamus Resources. As Mr Gardner was aware, after Mr Bojanjac had negotiated with Mr Gardner there were numerous additional steps before Adamus Resources could make any binding commitment. The proposal for acquisition of the shed ground was taken to the Adamus Resources board of directors for consideration on 28 May 2002. It was subject to due diligence by Messrs Halliday and Bojanjac as independent directors. It was converted into writing by the solicitors for Adamus Resources. It was considered on at least four subsequent occasions by the board of directors of Adamus Resources. It was recorded in a document which was executed by Adamus Resources and Mr Gardner and announced to the market. It was then subjected to the reports of independent experts. It was approved by shareholders. Then it was announced to the market.
162 The facts underlying another four pleaded paragraphs in support of
Mr Bojanjac's alleged authority also contradict the conclusion that Mr Bojanjac had authority to bind Hightime Investments to the alleged oral contract.[187] The proper understanding of the facts underlying those
[187] Further re-amended statement of claim [6.14] - [6.17].
paragraphs is that Mr Bojanjac's authority was only to negotiate on behalf of Adamus Resources with Mr Gardner for Adamus Resources to acquire the rights of Hightime Investments in relation to Hightime Investments' agreements with Temco, Satemkon and Fidelity. Mr Bojanjac did not, and could not, unilaterally commit Adamus Resources to agreement on these matters.
163 In relation to those four paragraphs, Mr Gardner accepted that
following the negotiations with Mr Bojanjac 'more information needed to be obtained and analysed by Adamus before Adamus would commit to proceeding with the transaction'.[188] Mr Gardner knew that there had to be
[188] ts 142 (Mr Gardner).
the ground such as geological assessment on location.[189] And as I have further due diligence by Adamus Resources and perhaps even inquiries on
[189] ts 144 (Mr Gardner).
explained above, the oral negotiations pleaded in these four paragraphs led to the 5 June 2003 written agreement which was specifically subject to approval of the other board members of Adamus Resources. The process of putting the 5 June 2003 into a binding formal agreement, which was described as the ATA Agreement or Share Sale and Purchase Agreement, involved directors' meetings, drafting of a 22 page agreement, independent expert reports, shareholder approval and market disclosure.
[2012] WASC 295
EDELMAN J
164 Mr Gardner eventually conceded that he was aware that if a majority
of the board did not agree to proceed with the transaction which he
negotiated with Mr Bojanjac, then the transaction would not proceed,
although he said that he expected that it would go through the board.[190]
[190] ts 156 (Mr Gardner).
165 A final group of pleaded matters which also contradicted the asserted
inference that Mr Bojanjac had unilateral power to bind Adamus Resources to the alleged oral agreement was in relation to oral negotiations between Mr Bojanjac and Mr Gardner.
166 Those negotiations were for Adamus Resources to acquire the rights
of Hightime Investments in relation to an agreement between Hightime Investments and BD Goldfields Ltd.[191] Subsequent to those negotiations,
[191] Further re-amended statement of claim [6.18] - [6.21].
on 23 June 2003, Mr Halliday and Mr Bojanjac signed a cheque for $US120,000 for a deposit to the account of Mr Meadows-Smith in Ghana.[192] The purpose of this transfer was to enable money to be
available for a proposed agreement between BD Goldfields Ltd and Hightime Investments.[193] Plainly, if the agreement did not go ahead then
Mr Meadows-Smith, as an employee of Adamus Resources, would re-transfer the money to Adamus Resources. The agreement between Hightime Investments and BD Goldfields was executed on 26 June 2003.[194] And on 24 July 2003, the directors of Adamus Resources ratified
a deed of assignment of 80% of the interest of Hightime Investments
under that contract, subject to shareholder approval and a legal opinion.[195][192] Exhibit 473.
[193] Exhibit H (witness statement of Mr Bojanjac) [45(g)].
[194] Exhibit 331.
[195] Exhibit 343.
167 Even putting aside the possible obstacle for a plea of authority that
these negotiations post-dated the alleged 16 May 2003 oral agreement, there are two reasons why these facts contradict Hightime Investments' assertion of authority for Mr Bojanjac to enter the alleged oral agreement.
| 168 |
[196] Exhibit H (witness statement of Mr Bojanjac) [45(d)]. |
and the bank authorisation for payment of $US120,000 was signed by
both Mr Bojanjac and Mr Halliday.[197]
[197] Exhibit 473.
169 Secondly, I accept Mr Bojanjac's evidence that he told Mr Gardner
that 'getting this deal through the Adamus board would likely need some
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EDELMAN J
assurances from its lawyers given the sensitivities involved in the proposal'.[198] [198] Exhibit H (witness statement of Mr Bojanjac) [45(e)].
170 For all these reasons, there was no actual authority, express or
implied, for Mr Bojanjac to bind Adamus Resources to an agreement of
the nature of the oral agreement alleged by Hightime Investments.
Apparent (ostensible) authority
171 Apparent authority involves a legal relationship between the
principal and the third party created by representation, made by the principal to the third party, intended to be acted upon by the third party, that the agent has authority to enter on behalf of the principal into a
contract of the kind within the scope of the apparent authority, so as to
render the principal liable under the contract.[199]
[199] Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, 503
In Durban Roodepoort Deep, Ltd v Newshore Nominees Pty Ltd,[200]
[200] Durban Roodepoort Deep, Ltd v Newshore Nominees Pty Ltd [2005] WASCA 231 [58].
McLure JA (as the President was then) summarised four requirements of apparent authority:
(1) that a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced was made to the third party; (2) that such representation was made by a person or persons who had actual authority to manage the business of the company either generally or in respect of those matters to which the contract relates; (3) that the third party was induced by such representation to enter into
the contract; and(4) that under its constitution the company was not deprived of the capacity to enter into a contract of the kind sought to be enforced or to delegate authority to enter into such a contract.
The claim based on apparent authority fails for two reasons.
174 First, as to (1) and (2), the pleading of apparent authority relied upon
a subset of the same facts which were said to support a grant to express or
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representations which create apparent authority:[202] implied authority.[201] Newnes JA has explained the nature of [202] Auxil Pty Ltd v Terranova [2009] WASCA 163; (2009) 260 ALR 164 [176]. See also Freeman & Lockyer
[201] Further re-amended statement of claim [7] - [8].
A representation creating an apparent authority of an agent may be made in a number of ways but the most common form of representation by a principal is by conduct, that is, by permitting the agent to act in the management or conduct of the principal's business. By permitting the agent to act in the management or conduct of the business, the principal thereby represents to anyone dealing with the agent that he or she has authority to do those acts on behalf of the company which an agent authorised to do acts of the kind which he or she is in fact permitted to do normally does in the ordinary course of such business.
175 For the same reasons set out above at [148] - [169], none of the
pleaded facts is sufficient to establish any representation by Adamus Resources that Mr Bojanjac had authority unilaterally to enter an oral agreement of the type alleged on behalf of Adamus Resources.
176 Secondly, the plea of ostensible authority fails due to (3), ie whether
Mr Gardner was induced by any representation to enter the alleged contract. Although Mr Gardner gave evidence that he thought that he had a 'deal' with Adamus Resources as a result of the alleged conversation and alleged oral agreement, I am satisfied that Mr Gardner was aware that Mr Bojanjac could not bind Adamus Resources to an agreement of the nature alleged.
177 In other words, even if (which I reject) Mr Bojanjac had spoken the
words which Mr Gardner alleged and had purported to bind Adamus Resources to pay the fair market value for a licence over the Ground,
Mr Gardner conceded that he was aware that Adamus Resources required
board approval for a deal to go through. As Mr Gardner said:203
That's the management of the companies, to get their approvals from their boards if they want the deal to go through. If they don't want the deal to go through, they don't have to. It's entirely up to the board of the company. It's not my responsibility to go out and get the board's permission to do this. It's my commercial thing but if they don't want to do it, they don't have to.
178 Adamus Resources also relied on a third submission concerning the
absence of any apparent authority. This is the principle that the alleged
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EDELMAN J
agreement would have involved a breach of fiduciary duty by Mr Bojanjac, and that the facts giving rise to this breach of fiduciary duty were known to Mr Gardner. It is not necessary to determine whether knowledge of facts which would establish a breach of fiduciary duty by an agent to his principal is sufficient to negate any claim of apparent authority.
179 It suffices to say that the facts which establish a conflict of interest
were known to Mr Gardner and those facts provide further support for the conclusion that Mr Gardner was aware that Mr Bojanjac could not unilaterally have committed Adamus Resources to the alleged oral agreement. These facts were as follows:
(1)
Mr Gardner was aware that there was a substantial conflict between the interests of Hightime Investments and Adamus Resources in relation to the acquisition of the Ground. If both companies applied for the Ground only one would get it.
Mr Gardner eventually accepted that this 'probably' was a
conflict.204
(2) Mr Gardner was aware that Mr Bojanjac owed duties to Adamus Resources as an executive director and duties to Hightime Investments as a consultant, through Wildbush.205 (3) On 15 May 2003, the day before the alleged oral agreement, Mr Lungan wrote to Mr Bojanjac and Mr Gardner and said that '[t]he application should go ahead immediately and with the highest priority. We now need a cohesive focussed move to get this ground tied up without [A]damus/[H]ightime conflict'.206 180 In summary on this point, neither actual authority nor apparent
authority existed for Mr Bojanjac to enter into the alleged oral agreement.
The alternative claim for unjust enrichment
181 In closing submissions Hightime Investments said that its alternative
claim for unjust enrichment was only brought in circumstances in which Adamus Resources had asserted that the alleged agreement was uncertain.
Hightime Investments then said that since the uncertainty pleading was
abandoned, the claim for unjust enrichment was 'no longer pressed'.207
[2012] WASC 295
EDELMAN J
182 The claim for unjust enrichment, as pleaded, was properly
abandoned in any event. The pleaded claim for unjust enrichment sought restitution of the enrichment which was said to be (i) the use by Adamus Resources of Hightime Investments' intellectual property; (ii) Hightime Investments conferring on Adamus Resources the opportunity to acquire a licence over the Ground; (iii) Hightime Investments facilitating the acquisition of a licence over the Ground by Adamus Resources.
183 This was the extent of the pleading of unjust enrichment. No
qualifying or vitiating factor was pleaded. In a joint judgment of the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd,208 Gleeson CJ,
Gummow, Callinan, Heydon and Crennan JJ explained that recovery in unjust enrichment 'depends on the existence of a qualifying or vitiating factor falling into some particular category'. To the submission that it was not necessary to identify some separate 'unjust factor', the court said that
'[t]his creates a form of liability which is potentially extraordinarilywide'.209
184 The need for an 'unjust factor' was recently reiterated by French CJ,
Crennan and Kiefel JJ. Although not excluding the possibility of novel
unjust factors, their Honours said that a claim based on unjust
enrichment210
depends upon enrichment of the defendant by reason of one or more recognised classes of 'qualifying or vitiating' factors; the category of case must involve a qualifying or vitiating factor such as mistake, duress, illegality or failure of consideration, by reason of which the enrichment of the defendant is treated by the law as unjust.
185 This is not merely a semantic point. The presence of an unjust factor
is an indispensible requirement to demonstrate the facts upon which a plaintiff relies for a claim that a defendant had no 'right to retain' the benefit and was unjustly enriched.211 The unjust factor may also affect the
availability or scope of defences, such as change of position, which rely upon pleading facts which fall within established and developing rules concerning circumstances which reduce or extinguish a defendant's duty to make restitution by 'any matter or circumstance which shows that his or
[2012] WASC 295
EDELMAN J
her receipt (or retention) of the payment is not unjust'.[212] In the absence of a properly pleaded claim for unjust enrichment, counsel for the defendant understandably protested that his ability to cross-examine
[212] David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353, 379
effectively was impaired without an understanding of the basis of the
plaintiff's claim for unjust enrichment.213
The claim for unjust enrichment is also dismissed.
Valuation of the Ground
The evidence of the valuers
187 I have concluded that no obligations were imposed upon Adamus by
the alleged Agreement. Nevertheless, it is necessary to record briefly the conclusions which should be reached in relation to valuation and to say something about the valuation evidence.
188 The valuation conclusions are expressed in United States dollars.
This is the principal currency in which valuations of Ghanaian mineral interests are conducted. The information concerning the projects
considered in Ghana, including the crucial gold price, was also expressed
in United States dollars.214
189 Two experts were called to give evidence concerning the value of a
prospecting licence over the Ground at two dates: May 2003 and January 2005. Hightime called Mr Paul Mazzoni, the Chief Geologist at Coffey Mining. Adamus Resources called Ms Deborah Lord, the Principal Consultant (Geology) at SRK Consulting. Both experts provided several reports.215 However, the clearest statement of their positions was
contained in their combined joint memorandum of conferral which also
attached supplementary valuations from each expert.216
190 The quantification of a hypothetical licence over part of an area
subject to Ghanaian mining licences, such as the Ground, which is at an early stage of exploration is an exercise fraught with uncertainty. The
[2012] WASC 295
EDELMAN J
and that the range produced could be so wide as to be meaningless.218 experts said that the range of values could be in an order of magnitude,217 191 Another potential source for wide disparity in the valuations was that
in relation to the January 2005 valuation, the experts had also used different valuation methodologies. Ms Lord used a comparable transaction approach and conducted her valuation by drawing comparison with the value disclosed from market transactions in areas involving similar circumstances, particularly geological features.219 But there were
few truly comparable transactions for January 2005. In comparison, a multiples of exploration expenditure approach (MEE approach) was used by Mr Mazzoni which starts by the valuer establishing an expected expenditure base and then applying a 'prospectivity enhancement multiplier' which either inflates or deflates the expenditure amount depending upon the estimated value of the minerals in the ground.220 One
difficulty with the MEE approach is that the multiplier is extremely
influential but it is also very subjective.221 It relies heavily on the judgment of the valuer.222 192 The potential differences between the experts were further magnified
by the short timeframe (approximately four weeks) which the two experts
had for the provision of their reports.223 Further, neither expert visited the
site which was to be valued although Mr Mazzoni had visited a site in Ghana to the north.224 193 In all these circumstances of potentially vast uncertainty, it was quite
remarkable that the difference between each of the valuations was relatively small, particularly after adjustments were made to the valuations which, during oral evidence, each accepted might be appropriate. This was, in no small part, due to their impartial and professional approach and the clarity and cogency of the evidence of both experts. Their evidence was given concurrently, and each assisted the other and the court at all stages of the process.
194 Both experts valued three areas: (i) the area of the Apa Tam
prospecting licence; (ii) the area of the Asanta prospecting licence; and (iii) the Ground (which is a subset of the Apa Tam and Asanta licence
[2012] WASC 295
EDELMAN J
areas). Each of these can be seen in Appendix A to these reasons. The
Ground valued in Appendix A is the same as the Ground described in the
Statement of Claim.225195 Both experts considered the Ground and the surrounding areas to
have high exploration potential at the time of the valuations. They also both considered that the Ground had higher exploration potential than areas such as the eastern part of Apa Tam, because the Ground was closer to the area of 'highest prospectivity structural zone'. This structural zone is an area within the Ashanti Gold Belt marked on Appendix B with
yellow lines. Two points marked on it are the Salman Project sites which
first announced a finding of 500,000 ounces of gold in June 2004.226
Within the Ashanti Gold Belt in Appendix B is also the Anwia deposit, a
known gold mineralisation, which lies just to the west of the Asanta
licence and just outside the Ground which is shown in Appendix A.227
The valuation conclusions
196 Some time after the hearing of the expert evidence, but prior to the
conclusion of the evidence generally, the parties reached agreement upon the appropriate values to be ascribed to the Ground in May 2003 and January 2005. One reason for this agreement may have been a number of reasonable and proper concessions made by each of the experts. I do not need to express anything further about the expert evidence other than to say that the agreement reached bears a very close resemblance to the preliminary conclusions which I had drawn, and to the draft I had written after their evidence.
The agreed values were as follows:
Fair market value of the Ground at May 2003: US $467,500 Fair market value of the Ground at January 2005: US $654,500
Conclusion
Hightime Investments' claim must be dismissed. In the 16 May 2003 conversation alleged by Mr Gardner, no words were spoken by Mr Bojanjac which could reasonably have been construed as amounting to a promise that Adamus Resources would pay fair market value for the Ground. Mr Bojanjac undertook only to procure Adamus Resources to negotiate towards an agreement.
[2012] WASC 295
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199 The claim also fails because, in any event, even if the case for
Hightime Investments and the evidence of Mr Gardner is taken at its highest, it could only have established a promise which was interdependent with other non-binding promises later set out in a heads of agreement. But those interdependent promises were not binding at the time of the 16 May 2003 conversation and it also appears that a formalised agreement was never completed due to the Shan Corporation's acquisition of the Dadwen tenure.
200 Thirdly, the claim fails because Mr Bojanjac was not, in any event,
authorised (actually or apparently) unilaterally to bind Adamus Resources
to an agreement of the type alleged.For completeness I record that if, contrary to my conclusions there was a binding oral agreement struck on 16 May 2003 between Mr Bojanjac (on behalf of Adamus Resources) and Mr Gardner (on behalf of Hightime Investments) then the appropriate fair market value of the Ground is to be assessed at the date that the licence over the area was granted to Adamus Resources and to be assessed in United States dollars. That amount is $US654,500. It would have been appropriate to express the judgment in terms of United States dollars as that would best have reflected the terms
of the alleged agreement and the loss which was alleged to have been suffered.228
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EDELMAN J
Appendix A: The location of the Ground, Apa Tam and Asanta
[2012] WASC 295
EDELMAN J
Appendix B: The Ashanti Gold Belt, the Anwia Deposit, and the
Salman Project
Halliday); ts 447-448 (Mr Bojanjac).
offer was made.
| catchwords, it appears from my first reading of the decision that this legal issue was not considered in the appeal judgments in Westpac Banking Corporation v The Bell Group Ltd (in liq) [No 3] [2012] WASCA 157. | 118 | Fazio v Fazio [2012] WASCA 72 [192] - [195], citing further authorities. |
| 119 | Peddie v Stein (Unreported, NSWSC, 26 March 1987) (Young J); Film Bars Pty Ltd v Pacific Film |
Laboratories Pty Ltd (1979) 1 BPR 9251, 9255 (McLelland J). Cf Mildura Office Equipment & Supplies Pty
Ltd v Canon Finance Australia Ltd [2006] VSC 42 [185] (Dodds-Streeton J).
Gummow, Hayne, Crennan, Kiefel & Bell JJ).
(1986) 160 CLR 226, 237 - 238 (the Court). See also exhibits 308, 321, 398 and ts 138 (Mr Gardner).
better summary of his position.
215 [31] (Kenny J).
See also Geissler v Accro Motors Pty Ltd (1956) 73 WN (NSW) 31, 33 (Roper CJ in Eq, Heron & Clancy JJ) and G dal Pont The Law of Agency (2nd ed, 2008) 163 [7.4], 517 [20.7].
| Gummow, Hayne, Callinan & Heydon JJ). | 166 | Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, 179 [40]. |
| 167 | Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50, 132 (Clarke & Cripps JJA); | |
| See also Tiao v Lai [No 2] [2010] WASCA 189 [104] - [105] (Buss JA, Owen & Murphy JJA agreeing); Junker v Hepburn [2010] NSWSC 88 [41] - [45] (Hammerschlag J); Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [No 3] [2012] WASC 190 [11] (Allanson J). | 168 | Exhibit 437. |
| 169 | Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146, 205. | |
| 170 | Plaintiff's outline of opening submissions [13]; Plaintiff's outline of closing submissions [139]. | |
| 171 | Australian National Industries Ltd v Greater Pacific Investments Pty Ltd (in liq) (Unreported, NSWSC, |
14 December 1990) especially [55] (Cole J); Camelot Resources Ltd v MacDonald (1994) 14 ACSR 437, 443
(Santow J).
(Diplock LJ). See also Durban Roodepoort Deep, Ltd v Newshore Nominees Pty Ltd [2005] WASCA 231 [58]
(McLure JA).
| (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, 503, 505 (Diplock LJ). The summary of Newnes JA was also endorsed in Thanakharn Kasikorn Thai Chamkat v Akai Holdings Ltd (in liq) [2010] HKCFA 64; (2010) 13 HKCFAR 479 [45] (Lord Neuberger). | 203 | ts 88 (Mr Gardner). |
| 204 | ts 209 (Mr Gardner). | |
| 205 | ts 200, 212 (Mr Gardner). | |
| 206 | Exhibit 282. | |
| 207 | Plaintiff's outline of closing submissions [17]. | |
| 208 | Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, 156 [150]. | |
| 209 | Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, 159 [156]. | |
| 210 | Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 86 ALJR 296 [30] (French CJ, Crennan & Kiefel JJ). | |
| 211 | Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516, 529 [27] |
(Gleeson CJ, Gaudron & Hayne JJ); South Australian Cold Stores Ltd v Electricity Trust of South Australia
[1957] HCA 69; (1957) 98 CLR 65, 75 (the Court).
| (Mason CJ, Deane, Toohey, Gaudron & McHugh JJ). See, further, B Kremer 'The Action for Money Had and Received' (2001) 17 Journal of Contract Law 93, 117; W Keener A Treatise on the Law of Quasi-Contracts (1893) 183. | 213 | ts 130. |
| 214 | Exhibit G (Hightime - Adamus conferral note) page 7. | |
| 215 | Exhibit C (expert report, Mr Mazzoni); Exhibit D (supplementary expert report of Mr Mazzoni); Exhibit E | |
| (expert report, Ms Lord); Exhibit F (supplementary expert report, Ms Lord); Exhibit F1 (instruction letter to Ms Lord). | 216 | Exhibit G (Hightime - Adamus conferral note). |
| 217 | ts 312 (Mr Mazzoni). | |
| 218 | ts 312 (Ms Lord). | |
| 219 | Exhibit E (expert report, Ms Lord) page 16. | |
| 220 | ts 319 (Mr Mazzoni). | |
| 221 | ts 319 - 320 (Ms Lord). | |
| 222 | ts 327 (Mr Mazzoni). | |
| 223 | ts 313 (Ms Lord); ts 314 (Mr Mazzoni). | |
| 224 | ts 315 (Ms Lord); ts 315 (Mr Mazzoni). | |
| 225 | ts 297 (Ms Lord); ts 298 (Mr Mazzoni). | |
| 226 | ts 305 (Ms Lord). | |
| 227 | ts 304 - 305 (Mr Mazzoni). | |
| 228 | Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co (1989) 15 NSWLR 448, 464 (Kirby P), 471 - 472 |
(Hope JA).
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