JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: MIRABELA NICKEL LTD (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) -v- MINING STANDARDS INTERNATIONAL PTY LTD [No 5] [2023] WASC 62
CORAM: HILL J
HEARD: 10, 11, 14, 15 & 23 DECEMBER 2020
DELIVERED : 3 MARCH 2023
FILE NO/S: CIV 1806 of 2019
BETWEEN: MIRABELA NICKEL LTD (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)
First Plaintiff
MIRABELA INVESTMENTS PTY LTD (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)
Second Plaintiff
MARTIN MADDEN, SCOTT DAVID HARRY LANGDON AND RICHARD SCOTT TUCKER as joint and several receivers and managers of MIRABELA NICKEL LTD (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)
Third Plaintiff
MARTIN MADDEN, SCOTT DAVID HARRY LANGDON AND RICHARD SCOTT TUCKER as joint and several receivers and managers of MIRABELA INVESTMENTS PTY LTD (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)
Fourth Plaintiff
AND
MINING STANDARDS INTERNATIONAL PTY LTD
Defendant
Catchwords:
Contract - Terms of contract - Condition precedent for delivery of binding finance agreements - Date that condition precedent required to be satisfied before right of termination arose - Whether Receivers released from any claim made by defendant under terms of contract - Proper construction of contract
Estoppel - Conventional estoppel - Whether defendant estopped from denying the date the contract was exchanged - Turns on own facts
Contract - Whether parties agreed to 'extend' date for compliance with condition precedent - Whether exchanges of texts and emails constitutes binding agreement - Whether consideration for agreement
Contract - Termination of contract - Whether agreement to provide 24 hours' notice of termination - Whether Receivers estopped from issuing notice of termination - Validity of Notice
Representations - Whether representations made by Receivers regarding intention to terminate contract - Whether representations made by Receivers as to whether they were in discussions with other parties - Whether representations, if made, were false and misleading
Election - Whether defendant's email regarding return of deposit constitutes an election - Whether defendant elected to accept termination of contract
Legislation:
Competition and Consumer Act 2010 (Cth), Sch 2, s 18
Result:
Plaintiffs' claim dismissed
Category: B
Representation:
Counsel:
| First Plaintiff | : | SK Dharmananda SC and SC Wong |
| Second Plaintiff | : | SK Dharmananda SC and SC Wong |
| Third Plaintiff | : | SK Dharmananda SC and SC Wong |
| Fourth Plaintiff | : | SK Dharmananda SC and SC Wong |
| Defendant | : | MD Howard SC and LA Warnick |
Solicitors:
| First Plaintiff | : | Clayton Utz |
| Second Plaintiff | : | Clayton Utz |
| Third Plaintiff | : | Clayton Utz |
| Fourth Plaintiff | : | Clayton Utz |
| Defendant | : | Russells |
Case(s) referred to in decision(s):
Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd [2009] FCAFC 85; (2009) 178 FCR 57
Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345
Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334
Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 6] [2019] WASC 5
Bell Group Ltd (in liq) v Westpac [No 9] (2008) 39 WAR 1
Bell Group NV (in liq) v Insurance Commission of Western Australia [2018] WASCA 179
Birla Nifty Pty Ltd v International Mining Industry Underwriters Ltd [2014] WASCA 180
Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219
Blacket v Barnett [2017] NSWSC 1032
Buckinghamshire County Council v Moran [1989] 3 WLR 152
CGU Insurance v Blakeley [2016] HCA 2; (2016) 259 CLR 339
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226
Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 260
CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Elvidge Pty Ltd v BGC Construction Pty Ltd [2006] WASCA 264
Field v Commissioner of Railways (NSW) (1957) 99 CLR 285
Filmana Pty Ltd v Tynan [2013] QCA 256
Foran v Wight [1989] HCA 51; (1989) 168 CLR 385
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1
George 218 Pty Ltd v Bank of Queensland Ltd [2015] WASC 434
George 218 Pty Ltd v Bank of Queensland Ltd [No 2] [2016] WASCA 182; (2016) 313 FLR 287
GPI Leisure Corporation (in liq) v Yuill (1997) 42 NSWLR 225
Henderson v Curtis [2008] WASC 283
Hewlett Packard Australia Pty Ltd v Exeed Pty Ltd [2004] FCA 135; (2004) 48 ACSR 670
Inness v Waterson [2006] QCA 155
Insurance Commission of Western Australia v Woodings (as liquidator of Bell Group Ltd (in liq)) [No 2] [2017] WASC 372; (2017) 124 ACSR 45
John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451
Jones v Dunkel (1959) 101 CLR 298
Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361
Lyszkowicz v Colin Earnshaw Homes Pty Ltd [2002] WASCA 205
Mandurah Enterprises Pty Ltd v Western Australian Planning Commission [2008] WASCA 211; (2008) 38 WAR 276
Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825
Mirabela Nickel Ltd (In Liquidation) (Receivers and Managers Appointed) v Mining Standards International Pty Ltd [No 4] [2020] WASC 449
Mirzikinian v Tom & Bill Waterhouse Pty Ltd [2009] NSWCA 296
MPB v LGK [2020] EWHC 90
Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723
Ogle v Comboyuro Investments Pty Ltd [1976] HCA 21; (1976) 136 CLR 444
Oldfeld Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASCA 255
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Pilbara Iron Ore Pty Ltd v Ammon [2020] WASCA 92
Re Mirabela Nickel Ltd (Receivers and Managers appointed) (in liq); Ex parte Madden [2018] WASC 335
RPS v The Queen [2000] HCA 3; (2000) 199 CLR 620
Ryder v Aphrodite Gold Ltd [2017] WASC 377
Sargent v ASL Developments Limited (1974) 131 CLR 634
Shevill v Builders Licensing Board (1982) 149 CLR 620
Skymist Holdings Ltd v Grandlane Developments [2018] EWHC 3504
Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 69
Watson v Foxman (1995) 49 NSWLR 315
Westpac Banking Group v Bell Group Ltd (in liq) [No 3] (2012) 44 WAR 1
Wigan v Edwards (1973) 1 ALR 497
Will Trading WA Pty Ltd v Lumley General Insurance (2005) 30 WAR 290
Table of Contents
Introduction
Factual background
Delay in judgment
Nature of case and issues for determination
Pleadings
Issues for determination
Onus and approach to the evidence
Onus and standard of proof
Approach to the evidence
Walter Robertson Milbourne Jnr
Martin Francis Ford
Consequences of plaintiff not calling any evidence
Relevant procedural rulings
Admissibility of TB204
Application for leave to adduce case in reply
Appointment of Receivers
Entry into Agreement
Terms of the Agreement
Events after execution of the Agreement until 8 November 2017
Events between 8 November 2017 and 10 November 2017
Events between 10 November (after payment of the deposit) and 15 November 2017
Events of 15 and 16 November 2017
Events of 17 and 18 November 2017
Events between 19 and 22 November 2017
Termination of Agreement
Events post November 2017
When was the Finance Condition required to be satisfied?
Did the parties agree to extend the date for satisfaction of the Finance Condition until 22 November 2017?
Is the defendant estopped from denying the date the Agreement was exchanged was 1 November 2017?
Was the notice of termination issued on 22 November 2017 valid?
Did MSI elect to accept the termination of the Agreement?
Election
Doctrine of approbation and reprobation
Does cl 9.1 of the Agreement operate as a release of any claim MSI may have had?
Did the Receivers agree to provide the defendant with 24 hours' notice prior to terminating the Agreement? If so, are the Receivers estopped from issuing the notice of termination without notice?
Did Mr Tucker make false and misleading statements about his intention to terminate the Agreement and whether the Receivers were in discussions with other parties?
Was the termination of the Agreement founded on unconscionable or inequitable conduct by the Receivers?
Were the Receivers in breach of cl 2.6 of the Agreement? If so, did this disentitle them from exercising any right to terminate the Agreement?
Conclusion and orders
HILL J:
Introduction
The dispute between the parties in this case arises out of the circumstances in which an asset sale agreement between the plaintiffs and the defendant (MSI) was terminated. Following termination of the Agreement, the third and fourth plaintiffs (Receivers) sold the assets of the first and second plaintiffs to a third party.
Since that time, on various occasions, MSI has threatened, but not commenced, proceedings arising out of what it contends was the unlawful termination of the Agreement.
On 8 May 2019, the plaintiffs commenced these proceedings. They seek a declaration that the Agreement has been validly terminated, among other orders. The defendant denies the plaintiffs were entitled to issue a notice of termination of the Agreement on 22 November 2017 and that, as a result, no declaration should be made in the terms sought by the plaintiffs.
For the reasons that follow, it is my view that:
(a)on the proper construction of the Agreement, cl 2.5(a) required all parties, including MMB, to sign and exchange counterparts of the Agreement before the time period in that clause began to run. As a consequence, I consider that if MSI had not satisfied the Finance Condition by 24 November 2017, the plaintiffs were entitled to terminate the Agreement under cl 2.5(a) on 25 November 2017;
(b)the parties did not enter into an agreement to 'extend the date' for satisfaction of the Finance Condition until 22 November 2017 as the date for satisfaction of the Finance Condition had not yet expired. In any event, any agreement to vary the Agreement required the consent of MMB which had not been obtained;
(c)while I am satisfied that until the morning of 8 November 2017, both the plaintiffs and defendant were acting under the common assumption that the Agreement had been exchanged on 1 November 2017, the plaintiffs have not established that they would suffer either of the pleaded detriments if the defendant was entitled to resile from this common assumption;
(d)the defendant's request for the return of the deposit and subsequent acceptance of the deposit does not constitute an election to treat the Termination Notice as a valid notice. The question as to whether the Termination Notice was valid is a question of law;
(e)by requesting and accepting the return of the deposit, the defendant has not approbated and reprobated what the plaintiffs refer to as the 'Recording Deed'. This deed was never entered into by the parties and cannot be the foundation of any claim;
(f)as a consequence, the Termination Notice issued by the plaintiffs on 22 November 2017 was not valid, nor was its restatement on 24 November 2017;
(g)finally, while I accept that the defendant has made numerous threats to commence proceedings against the plaintiffs, I am not persuaded I should exercise my discretion to make the declaration sought by the plaintiffs.
Factual background
As part of their opening submissions, the plaintiffs included a statement of the facts that are broadly agreed between the parties.[1] The following summary is drawn from these agreed facts.
[1] Plaintiffs' opening submissions [7] – [23]; Annexure to Defendant's opening submissions (Agreed facts).
On 28 October 2015, the Receivers were appointed as receivers and managers of the first and second plaintiffs.
On 1 November 2017, MSI and the Receivers executed an asset sale agreement (Agreement) to acquire certain loans and quotas[2] in the capital of Mirabela Mineração do Brasil Ltda (MMB or the Company) (Mirabela Assets).[3]
[2] Quotas are the Brazilian equivalent of shares.
[3] Ex 1, TB107.
The Agreement included, as a condition precedent, a requirement that the defendant execute binding finance agreements for an amount equal to the consideration under the Agreement (Finance Condition), namely USD $50 million.[4] If this condition precedent was not satisfied 14 days after the date of the exchange of signed copies of the Agreement, any party was entitled to terminate the Agreement.[5]
[4] Agreement, cl 2.1(f).
[5] Agreement, cl 2.5(a).
The first and second plaintiffs contend they agreed with MSI to extend the date for the satisfaction of the Finance Condition to close of business on 22 November 2017. MSI denies there was an agreement to this effect or that the date for satisfaction of the Finance Condition was close of business on 22 November 2017.
It is not in dispute that MSI had not satisfied the Finance Condition by 15 November 2017 or 22 November 2017.
On 22 November 2017, the plaintiffs issued a notice terminating the Agreement,[6] which was restated on 24 November 2017.[7] On 27 November 2017, the plaintiffs and MMB entered into a sale agreement to sell the Mirabela Assets to Appian Capital Advisory LLP (Appian).[8]
[6] Ex 1, TB152.
[7] Ex 1, TB167.
[8] Ex 1, TB187.
Since that time, the parties have been in dispute as to whether the Agreement was validly terminated.
Delay in judgment
The hearing of this matter took place in December 2020. It has not been possible to complete the reasons for my decision as quickly as I would have liked.
I have taken the following steps to ensure my ability to properly assess the parties' cases and the evidence that was given at trial has not been impaired by the delay between the hearing and the publication of these reasons.
First, only two witnesses were called at trial: Mr Milbourne and Mr Ford. My general observations on Mr Milbourne's credibility were substantially completed shortly after trial. During the course of the trial, I made contemporaneous notes. I have also re‑listened to portions of Mr Milbourne's evidence. Each of these matters have assisted me in completing this section.
Second, I had the benefit of oral closing submissions from senior counsel for the plaintiffs and senior counsel for the defendant. Senior counsel for both parties made submissions on the evidence given by Mr Milbourne, including as to the findings each contends should be made in respect of his credibility.
Third, notwithstanding the delay, I continued to have a clear recollection of Mr Milbourne's evidence and the manner in which he gave his evidence.
Nature of case and issues for determination
Pleadings
Both parties amended their pleadings on a number of occasions prior to the trial. At trial, the current statement of claim was its pleading filed on 10 July 2020, the current defence was the defence filed on 8 October 2020, following leave being granted on 7 October 2020, the relevant reply was a reply dated 6 November 2020, and the current version of the rejoinder was the document filed on 26 November 2020.
The plaintiffs plead that on 1 November 2017, the plaintiffs and MSI entered into an asset sale agreement.[9] The relevant terms of the Agreement included a term that the plaintiffs were entitled to terminate the Agreement by notice to MSI in the event the Finance Condition was not satisfied by a date which was 14 days after the date of the exchange of signed copies of the Agreement.
[9] Further amended statement of claim filed 10 July 2020 (FASC) [8].
The plaintiffs say the Finance Condition was not satisfied by 15 November 2017 and that on this date, the plaintiffs issued a notice to MSI under the Agreement.[10] Following the issue of this notice, by an exchange of emails and text messages, the plaintiffs plead that the parties agreed to extend the date for satisfaction of the Finance Condition until 22 November 2017.[11]
[10] FASC [12] - [13].
[11] FASC [14].
The plaintiffs say that MSI did not satisfy the Finance Condition by 22 November 2017[12] and a notice of termination was issued on that date.[13]
[12] FASC [15].
[13] FASC [16].
In the alternative, the plaintiffs plead MSI cannot deny or renounce the existence of the Agreement to extend time for fulfilment of the Finance Condition.[14] This is pleaded to arise from an email exchange between Mr Tucker on behalf of the plaintiffs and Mr Milbourne on behalf of MSI. The plaintiffs plead that on 17 November 2017, they emailed MSI a draft deed which reflected the granting of the extension of time until 5.00 pm on 22 November 2017.[15] Following this, there was an exchange of text messages and emails between Mr Milbourne and Mr Tucker which the plaintiffs plead was an approbation by MSI that it was bound by the terms of the draft deed.[16]
[14] FASC [14H].
[15] FASC [14A] - [14B].
[16] FASC [14C] - [14E].
Following the issue of the notice of termination, MSI requested the return of the deposit,[17] which was returned on 27 November 2017.[18] MSI did not tender the consideration of USD $50 million payable under the Agreement on 25, 26 or 27 November 2017, or at all.[19] Subsequent to the termination of the Agreement, on 27 November 2017, the plaintiffs entered into a separate agreement for the sale of the assets to a third party,[20] which completed on 27 July 2018.[21]
[17] FASC [18].
[18] FASC [21].
[19] FASC [20A].
[20] FASC [23].
[21] FASC [24].
The plaintiffs seek a declaration that the plaintiffs have validly terminated the Agreement and that under cl 9.1(b)(ii) of the Agreement, MSI has released the Receivers from any cause of action pleaded against them. The Receivers also seek an injunction restraining MSI from bringing proceedings in a particular form against them.[22]
[22] FASC, relief [6].
In its defence, MSI denies the plaintiffs are entitled to any of the relief sought. MSI admits the parties entered into the Agreement, but say the Agreement was not exchanged and did not become operative until 10 November 2017. For this reason, MSI denies the plaintiffs were entitled to terminate the agreement prior to 25 November 2017.[23]
[23] Fourth further amended defence filed 8 October 2020 (FFAD) [8] ‑ [9].
In respect of the allegation that the parties agreed to extend the date for satisfaction of the Finance Condition until 22 November 2017, MSI denies the communications exchanged between the parties constitute an agreement,[24] or that it is valid or enforceable.[25] In the alternative, MSI pleads that any agreement is not valid or enforceable because of representations made by Mr Tucker which are pleaded to be 'false and/or misleading and known to be such'. These representations are contained in an email from Mr Tucker to Mr Milbourne of 9 November 2017, and a conversation between Mr Tucker and Mr Milbourne on 10 November 2017. The representations are said to be false because of emails and messages sent and received by Mr Tucker as well as a telephone conversation on 6 November 2017 between Mr Tucker, Mr Carruthers, Mr Rathborne and Mr Loftus‑Hills.[26] Further and better particulars of these matters were provided by the defendant on 18 November 2020.
[24] FFAD [14(e)], [14D].
[25] FFAD [14(e)] ‑ [14(f)], [14B].
[26] FFAD [14(g)].
MSI denies the plaintiffs were entitled to terminate the Agreement on a number of grounds. First, the time for satisfying the Finance Condition had not yet expired at the time the Termination Notice was issued.[27] Second, the plaintiffs had previously agreed that no right of termination would be exercised without giving Mr Milbourne adequate prior notice,[28] which did not occur.[29] Third, because the plaintiffs were estopped from issuing the Termination Notice either because of representations about when the Agreement would be effective,[30] or because of the representation that prior notice would be given.[31] Fourth, because the plaintiffs were in breach of cl 2.6(c) of the Agreement, as they provided information to, and solicited an offer from, the Appian Purchasers while the Agreement was still on foot.[32] Fifth, the Termination Notice was founded on 'unconscionable or inequitable conduct'.[33]
[27] FFAD [12].
[28] FFAD [14(b)].
[29] FFAD [22(c)].
[30] FFAD [8(h)].
[31] FFAD [22(d)].
[32] FFAD [22(e)].
[33] FFAD [22(f)].
MSI admits that it requested the return of the deposit on 23 November 2017, but denies this constitutes any admission the Agreement was no longer operative.[34]
[34] FFAD [19].
MSI also contends that at the time the Receivers executed the Agreement, they were acting as agent for the Australian Security Trustee (Trustee) and on instructions from holders of the convertible notes issued the first plaintiff (Noteholders) and that, as a consequence the Trustee and Noteholders were parties to the Agreement.[35]
[35] FFAD [8(b)], [8(c)]. In the pleadings, these parties are referred to as Noteholders. In emails, they are often referred to as bondholders. I have adopted the description 'Noteholders' throughout these reasons to refer to this group.
In their reply, the plaintiffs say that if the 14 day period to satisfy the Finance Condition commenced on the date all parties exchanged signed counterparts, the plaintiffs and MSI assumed and conducted their affairs on the basis the Agreement was signed and exchanged on 1 November 2017 and MSI is estopped from denying it was exchanged on 1 November 2017.[36] The plaintiffs plead what they contend to be the material parts of the conversations between Mr Tucker and Mr Milbourne and deny that any false or misleading representations were made in the course of them.
[36] Fourth further amended reply filed 6 November 2020 (FFAR) [3(h)] ‑ [3(j)].
In relation to the agreement to extend time for satisfaction of the Finance Condition to 22 November 2017, the plaintiffs deny they agreed to give MSI prior notice of the termination, alternatively that prior notice was given by the notice of 22 November 2017, which was restated on 24 November 2017.[37] The plaintiffs also say that the court, as a matter of discretion, should not hold the agreement to extend this date is invalid or unenforceable because it arose from false representations by Mr Milbourne that Trafigura required the executed contract.[38]
[37] FFAR [5(b)].
[38] FFAR [5B(c)].
The plaintiffs say that MSI's request for the return of the deposit, alternatively its request coupled with the receipt of the deposit and its failure to return the deposit, is an acceptance of the validity of the Termination Notice and an election to treat the Agreement at an end.[39]
[39] FFAR [8].
In relation to the Appian bid, the plaintiffs plead the bid from Appian was unsolicited. They also deny that, on a proper construction of the Agreement, the right to terminate was subject to compliance with cl 2.6(c) of the Agreement. In any event, the plaintiffs say that on a proper construction of cl 2.6(c)(ii) of the Agreement, they did not breach their obligations.[40] The plaintiffs also contend that Mr Milbourne of MSI represented to the Receivers that they could continue to deal with Appian and seek an injunction under the Australian Consumer Law preventing MSI from contravening or attempting to contravene s 18.[41]
[40] FFAR [10].
[41] FFAR [1] ‑ [16].
In its rejoinder, MSI responds to some of the factual matters pleaded in the reply. Relevantly, MSI denies the plaintiffs assumed or conducted their affairs on the basis that the date of exchange of the Agreement was 1 November 2017 and refer to a number of emails between Mr Tucker and representatives of KordaMentha between 1 and 10 November 2017.[42] MSI also denies that any of its conduct was misleading or deceptive or could be rendered as such by its defence.[43]
Issues for determination
[42] Second further amended rejoiner filed 26 November 2020 (SFAR) [1A].
[43] SFAR [3].
Senior counsel for each of the parties framed the issues for determination in slightly different terms. Taking into account the submissions of the parties, on the pleadings there are ten issues that require determination:
(a)On a proper construction of the Agreement, what was the date by which the Finance Condition was required to be satisfied? (Issue 1)
(b)Did the parties agree to extend the date for satisfaction of the Finance Condition until 22 November 2017? (Issue 2)
(c)Is MSI estopped from denying the date the Agreement was exchanged was 1 November 2017? (Issue 3)
(d)Did the Receivers agree to provide MSI with 24 hours' notice prior to terminating the Agreement? If so, are the receivers estopped from issuing the notice of termination? (Issue 4)
(e)Did Mr Tucker on behalf of the plaintiffs make false and misleading statements as to whether the plaintiffs intended to terminate the Agreement and whether they were in discussions with other parties? (Issue 5)
(f)Was the termination of the Agreement founded upon unconscionable or inequitable conduct by the Receivers by asserting a right to terminate under cl 2.5 of the Agreement which they knew or must have known to be false? (Issue 6)
(g)Were the Receivers in breach of cl 2.6 of the Agreement? If so, did this disentitle them from exercising any right to terminate the Agreement? (Issue 7)
(h)Was the notice of termination issued by the Receivers on 22 November 2017 valid? (Issue 8)
(i)Did MSI elect to accept the Receivers' termination of the Agreement? (Issue 9)
(j)Did MSI release the Receivers from any claim it might otherwise have by reason of cl 9.1 of the Agreement? (Issue 10)
Given the nature of the issues raised by the parties, it is necessary to set out in some detail the chronology of the events that occurred before turning to the legal analysis of the parties' claims.
Onus and approach to the evidence
Onus and standard of proof
The plaintiffs accept they bear the onus of proof in relation to the claims they make. The defendant accepts it bears the onus of proof in relation to its claims against the plaintiff (Issues 4, 5, 6, and 7).[44]
[44] ts 682.
At all times, the standard of proof is the balance of probabilities.
Approach to the evidence
In this case, the evidence concerned events that occurred over a three‑week period in 2017 including a number of oral conversations between the parties. Previous authorities have discussed the approach that should be taken by the court in these circumstances.[45] In considering the evidence in this case, I have applied the following principles.
[45] Blacket v Barnett [2017] NSWSC 1032 [243] - [257] (Hallen J). See also Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 6] [2019] WASC 5 [26] (Tottle J).
Human memory of what was said in a conversation is fallible for a variety of reasons. Ordinarily, this increases over time, particularly where disputes or litigation intervene. This is because the processes of memory are overlaid, often subconsciously, by perceptions or self‑interest as well as conscious consideration of what should have been said or could have been said. All too often, what is actually remembered is little more than an impression from which plausible details are then again, often subconsciously, constructed.[46]
[46] Watson v Foxman (1995) 49 NSWLR 315, 318 ‑ 319 (McLelland CJ in Eq).
The credibility of a witness and their veracity may be tested by reference to objective facts which can be proved independently, in particular by reference to the documents in the case. Documents will often provide more valuable information than the attempted recollection of the facts by witnesses with an interest in the outcome of the litigation. This is particularly the case when the documents are accepted as genuine and were prepared by a person who had no reason to misstate the facts in these documents.
In addition, contemporaneous statements and documents are likely to be a more accurate reflection of events than later statements. This is because false memories can intrude, especially when the person recalling events has tried to assemble recollections logically. In doing so, the person can attempt to have some rational explanation as to what has happened.
In considering the evidence of Mr Milbourne, I also recognise that:[47]
Memory is a constructive and reconstructive process. What is remembered about an event is shaped by how that event was experienced, by conditions prevailing during attempts to remember, and by events occurring between the experience and the attempted remembering. Memories can be altered, deleted and created by events that occur during and after the time of encoding, during the period of storage, and during any attempts at retrieval.
[47] McClellan P, 'Who Is Telling the Truth? Psychology, Common Sense and the Law' (2006) 80 Australian Law Journal 655, 665, quoting Australian Psychological Society, Guidelines Relating to Recovered Memories (2000).
The court must be alive to the reality that words that are spoken are capable of bearing different and potentially opposing meanings depending on the nuance and emphasis that is given to particular words. A person's appreciation of the significance of these matters must necessarily be considerably diminished if there is a significant delay between the date when a conversation took place and the hearing at which the evidence of the conversation is given.
As Hammerschlag J stated in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd:[48]
Where a party seeks to rely upon spoken words as a foundation for a cause of action, including a cause of action based on a contract, the conversation must be proved to the reasonable satisfaction of the court which means that the court must feel an actual persuasion of its occurrence or its existence. Moreover, in the case of contract, the court must be persuaded that any consensus reached was capable of forming a binding contract and was intended by the parties to be legally binding. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved.
[48] John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 [94].
In this case, I have carefully assessed the oral evidence of the witnesses in the context of the contemporaneous materials, the facts that are either not in dispute or can be objectively established, and by considering the apparent logic of the events in accordance with the observations summarised above.
The plaintiff did not call any evidence at trial. The defendant called two witnesses: Walter Robertson Milbourne Jnr and Martin Francis Ford.
Walter Robertson Milbourne Jnr
Mr Milbourne is the sole director and shareholder of MSI. Mr Milbourne is a lawyer by profession and has degrees from Dartmouth College and the School of Law at Duke University. He is admitted to practice in New York, in the United States of America, and Columbia.
From about 2004 until 2010, Mr Milbourne was an in‑house counsel with Vale, before he returned to private practice in about 2010. From 2010 until 2016, he was a partner (as a foreign or international practitioner) at Norton Rose Fulbright and subsequently at K&L Gates.[49]
[49] ts 488.
Since leaving private practice in 2016, Mr Milbourne had been working through MSI to develop a way of assessing aggregated performance and standards in the mining sector.[50] In about 2016 or 2017, Mr Mundim of MMB contacted him and asked if he wanted to work with him in relation to Mirabela, which Mr Milbourne agreed to do on a part‑time basis.[51]
[50] ts 489.
[51] ts 489.
Mr Milbourne gave evidence over almost two days at trial.
It was a common occurrence in both his examination in chief and cross‑examination, although it was more pronounced in cross‑examination, for Mr Milbourne not to answer the question that had been asked of him but to use the question he was asked to give a lengthy non‑responsive answer. In many cases, the answer he gave was a generalised comment on the matter he had been asked or, on occasions, a completely different matter, or a submission. In answering the questions asked of him in this manner, it appeared that Mr Milbourne was primarily concerned to establish his expertise as a mining lawyer (which was not an issue in the proceedings), to avoid answering the question, or to give an answer or make a submission in a manner that advanced the case that MSI contends in these proceedings rather than give a factual account of what occurred. I set out below five examples of this.
The first example of this was the lengthy answer that Mr Milbourne gave to a question by senior counsel for MSI as to what the issues were with the Santa Rita Nickel Mine, the primary asset of MMB. In answering this question, Mr Milbourne gave a general answer about challenges within the mining industry and did not respond to the initial question. When directed to the issues with the Mine in early 2017, he again did not answer the question but expressed the opinion that he thought the position MMB was in (presumably a reference to it being in external administration) 'seemed odd' given there had been no nickel exploration for about eight years.[52]
[52] ts 490.
Second, the series of questions Mr Milbourne was first asked in cross‑examination concerned MSI's defence filed in these proceedings. Mr Milbourne was asked whether it was his case that the delivery of documents on 1 November 2017 was a breach of the Agreement that on MSI's submission did not become operative until 10 November 2017. After initially deferring to his lawyers as to whether or not these matters could constitute a breach, Mr Milbourne responded that:[53]
Perhaps it's better phrased that on 1 November, we had exchanged amongst some principals an agreement that provided confidentiality, which I expected was enforceable among those parties, or was to be honoured commercially among those parties, and that that obligation continued up to the point when we actually exchanged the final agreement. So I believed, from the point of signing to the date in which it was actually exchanged, that it was relevant that these events occurred. In my view, they were breaches.
[53] ts 542 ‑ 543.
Mr Milbourne then had the following exchange with senior counsel for the plaintiffs:[54]
So in your view, they were breaches, even although in paragraph 10 of your defence, you plead that the MSI sale agreement was entered into and became binding and operative on 10 November 2017. Is that it?---My view was that I signed, and the principals, Mr Tucker and others, signed on the 1st, and we were working towards what I understood was completion of a transaction from that date. It became clear to me very shortly thereafter that that had not actually occurred, and I had not received binding agreements by all parties, and it only became effective as of the 10th.
Was the agreement operative from 1 November 2017 or not?---From my perspective, there were representations under the agreement by Mr Tucker and others, under the asset sale agreement that they signed with me, that included no talk, no sharing about my contract, and I believed that those obligations continued into the date in which it became binding among all parties.
Were you under an obligation from 1 November 2017 to satisfy the finance condition within 14 days?---No.
So your evidence is, you get to choose which parts are enforceable?---No.
[54] ts 543.
Mr Milbourne was then taken through the particulars MSI pleads of the breach of the Agreement, many of which concerned matters that occurred prior to 10 November 2017. When asked why these matters were pleaded as breaches of the Agreement, Mr Milbourne responded:[55]
My understanding was that the parties had signed an agreement with general undertakings. Those undertakings continued up to the date in which the parties exchanged the agreement. Those agreements were broad, with respect to confidentiality. It seemed quite odd that you would sign an asset sale agreement with confidentiality terms, but then be free to breach them. So from my perspective, it seemed – that would be the way I understood it.
So according to your understanding, which provisions became immediately binding on 1 November 2017, upon your signing and the signing of all parties but the Brazilian company? Which ones?---I would have to look at the asset sale agreement. We can go one by one.
[55] ts 544.
When he was then taken through the Agreement, Mr Milbourne's evidence was that it was only the confidentiality provision was in place from 1 November 2017 on the basis that 'from [his] perspective, the date this was signed exhibited an intent by the parties to be honouring this, and that continued up until the date of exchange.'[56] Given Mr Milbourne's background as a commercial lawyer with many years of experience, this evidence was surprising and did not reflect well on him. Neither in Mr Milbourne's evidence nor in the submissions of MSI was there any explanation of the basis on which Mr Milbourne formed a view that 'general undertakings' arose on the signing of the Agreement by certain parties but that other operative provisions did not.
[56] ts 544 ‑ 545.
Third, in cross-examination, Mr Milbourne was asked about his messages to Mr Economou and whether he was frustrated with the lack of progress with Trafigura. His response was:[57]
I would say that on this date, I had already received a call from Mr Mundim saying that he was going to contact Trafi and tell him that – tell Trafi that the management was no longer supportive of the transaction. I had received the next day a call from Mr Mundim that I considered to be extraordinarily hostile. I had no idea what he was saying to Trafi, and I was concerned, at this point, that Mr Mundim had been interfering in the transaction with Trafi and that Trafi might want to delay or might not want to do the deal. They had never told me that they did not want to do the deal, but I was concerned by delay. I was worried that we needed to move fast, and we were not moving as fast as I had thought.
[57] ts 592.
This answer primarily focussed on Mr Mundim rather than Mr Milbourne's feelings about what was occurring with Trafigura, which was the question he was asked.
Fourth, in cross-examination, Mr Milbourne was asked whether he had ever informed Mr Ngai of Maple Rock that the offtake terms with Trafigura had been substantially agreed.[58] Mr Milbourne initially explained what an off‑take agreement was,[59] then that the agreement was substantially agreed,[60] and then, by reference to his experience as a corporate mining lawyer, that there were broad customary terms that would not require significant negotiation.[61] Ultimately, he agreed that he never saw a financing agreement or offtake agreement that was in a substantially agreed form.[62]
[58] ts 593.
[59] ts 593.
[60] ts 593.
[61] ts 594.
[62] ts 594.
A final example is that, in his examination in chief, Mr Milbourne's evidence was that the Receivers had failed to inform Bradesco about MSI and they did not know who he was when he called.[63] When asked in cross‑examination whether this evidence was false, Mr Milbourne accepted 'it may have been not entirely clear' and asked whether he could make a clarification.[64] When he was shown an excerpt of the transcript, Mr Milbourne denied his evidence was false and then said 'I believe I know exactly where you're going and I can explain it easily right now',[65] without answering the question that had been asked of him.
[63] ts 504.
[64] ts 607.
[65] ts 608.
Mr Milbourne was also prone to using emotive language in giving his evidence. By way of example, when asked about his reaction when he received the Notice of Failure of Condition Precedent, his evidence was that he was 'flabbergasted', was 'simply shocked' and 'truly shocked' to receive this. As an experienced corporate lawyer, who, at that time, had repeatedly told others he needed to obtain finance by 15 November 2017, I do not accept that it would have been either surprising nor shocking that his counterparts would issue such a notice.
Similarly, Mr Milbourne's evidence concerning the events of 23 November 2017 that 'it was an unusually shocking, confused day' are not consistent with his conduct in continuing to contact potential financiers that day, nor his years of experience as a corporate lawyer.
The manner in which Mr Milbourne gave his evidence did not reflect a witness attempting to give a factual account of what had occurred but, instead, someone trying to give evidence in a manner consistent with their case theory. This did not reflect well on Mr Milbourne.
For these reasons, it is not possible to accept that Mr Milbourne's evidence was generally reliable. In my view, Mr Milbourne's evidence has been adversely affected by the dispute between the parties and the position that MSI takes in these proceedings. I do not place any weight on his evidence unless there is independent corroboration for it.
Martin Francis Ford
Mr Ford is a chartered accountant and registered liquidator. At the time of the hearing, Mr Ford was a partner of PwC (formerly PricewaterhouseCoopers) in Melbourne. In 2017, Mr Ford was a partner of PPB Advisory and was based in Brisbane.[66]
[66] ts 569.
PPB Advisory were retained by MMB in early 2017 to provide it with advice.[67] In providing this advice, he dealt with Mr Milbourne 'as an intermediary' as well as Mr Mundim.[68]
[67] ts 569.
[68] ts 571.
Mr Ford was called, essentially, to prove the handwritten notes he took of the conversation between Mr Milbourne and Mr Tucker on 10 November 2017. Mr Ford had very little independent recollection of the transaction, the telephone conversation, or the events in dispute. On a number of occasions, he refreshed his memory from reading excerpts of emails which, to use his words, prompted his recollection.[69] On other occasions, Mr Ford acknowledged that he could only 'go on' what the note said.[70]
[69] ts 573.
[70] ts 574.
In these circumstances, I have placed very little weight on Mr Ford's oral evidence and have placed primary emphasis on the contemporaneous documents.
Consequences of plaintiff not calling any evidence
The plaintiffs did not call any evidence at trial. Much was made by senior counsel for the defendant in closing submissions of the decision not to call Mr Tucker.
Where there is an unexplained failure of a party to give evidence, the rule in Jones v Dunkel[71] applies. The scope and operation of the principle in Jones v Dunkel was explained by Heydon, Crennan and Bell JJ in Kuhl v Zurich Financial Services Australia Ltd in the following terms:[72]
The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case. That is particularly so where it is the party which is the uncalled witness. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn.
[71] Jones v Dunkel (1959) 101 CLR 298.
[72] Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361 [63].
In Australian Securities and Investments Commission v Hellicar, the High Court summarised the application of this principle in the following terms:[73]
Disputed questions of fact must be decided by a court according to the evidence that the parties adduce, not according to some speculation about what other evidence might possibly have been led. Principles governing the onus and standard of proof must faithfully be applied. And there are cases where demonstration that other evidence could have been, but was not, called may properly be taken to account in determining whether a party has proved its case to the requisite standard. But both the circumstances in which that may be done and the way in which the absence of evidence may be taken to account are confined by known and accepted principles which do not permit the course taken by the Court of Appeal of discounting the cogency of the evidence tendered by ASIC.
Lord Mansfield's dictum in Blatch v Archer that "[i]t is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted" is not to be understood as countenancing any departure from any of these rules. Indeed, in Blatch v Archer itself, Lord Mansfield concluded that the maxim was not engaged for "it would have been very improper to have called" the person whose account of events was not available to the court.
This court's decision in Jones v Dunkel is a particular and vivid example of the principles that govern how the demonstration that other evidence could have been called, but was not, may be used. The essential facts of the case, though well known, should be restated. The personal representative of a driver who had died in a collision with another vehicle brought an action for damages on her own behalf and on behalf of the deceased driver's dependants. The plaintiff's case depended upon demonstration that the other driver's negligence was a cause of the accident. The plaintiff sought to demonstrate negligence by having the tribunal of fact (in that case a jury) infer from facts concerning the road and the two vehicles involved that the collision had occurred when the defendant's vehicle was on the wrong side of the road. One of the defendants, the surviving driver, did not give evidence at the trial. The court divided about whether the inference which the plaintiff sought to have the jury draw about where the collision occurred was an inference that was open on the evidence. But the court held "that any inference favourable to the plaintiff for which there was ground in the evidence might be more confidently drawn when a person presumably able to put the true complexion on the facts relied on as the ground for the inference has not been called as a witness by the defendant and the evidence provides no sufficient explanation of his absence". (citations omitted)
[73] Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345 [165] - [167].
In Fazio v Fazio,[74] Murphy JA referred with approval to the observations of the majority of the High Court in RPS v The Queen:[75]
It is necessary to keep at the forefront of consideration that the mode of reasoning which is described proceeds from the premise that the person who has not given evidence not only could shed light on the subject but also would ordinarily be expected to do so.
...
In a civil trial there will very often be a reasonable expectation that a party would give or call relevant evidence. It will, therefore, be open in such a case to conclude that the failure of a party (or someone in that party's camp) to give evidence leads rationally to an inference that the evidence of that party or witness would not help the party's case and that:
'where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the defendant disputing it might have proved the contrary had he chosen to give evidence is properly to be taken into account as a circumstance in favour of drawing the inference'. (emphasis in original) (footnotes omitted)
[74] Fazio v Fazio [2012] WASCA 72 [135].
[75] RPS v The Queen [2000] HCA 3; (2000) 199 CLR 620 [25] - [26].
Murphy JA concluded:[76]
The authorities point to the need for the trier of fact to evaluate the whole of the evidence, drawing such inferences of fact as are appropriate from the direct evidence. In the evaluation of the evidence and its sufficiency, the judge should consider whether a party could and would ordinarily be expected to give or call certain evidence on an issue. The failure to call such evidence may (not must) allow the judge to infer that the omitted evidence would not have assisted that party's case on the issue, and to:
• take that matter into account in deciding whether and to what extent to accept other evidence on the issue;
• more confidently or readily draw inferences of fact adverse to that party which might otherwise be open on the issue.
[76] Fazio v Fazio [138].
Relevant procedural rulings
Prior to the commencement of the trial, the plaintiffs sought orders for a split trial, arising out of the relatively late amendment by MSI of its defence. On 13 November 2020, I rejected the plaintiffs' application and ordered that, in order to address the matters raised by the plaintiffs, senior counsel for MSI would be required to open MSI's case at the conclusion of the plaintiffs' opening address.[77] At that time, I left open the possibility for the plaintiffs to renew their application or seek to call evidence in reply.
[77] Mirabela Nickel Ltd (In Liquidation) (Receivers and Managers Appointed) v Mining Standards International Pty Ltd[No 4] [2020] WASC 449.
At the conclusion of the opening address of senior counsel for MSI, the plaintiffs applied for leave to adduce a case in reply. On the same date (11 December 2020), I was asked to make rulings on a series of objections by the parties in relation to the documents that were sought to be admitted in evidence as part as the trial bundle. I reserved my decision on the application for leave and the admissibility of one of the documents. At the commencement of the hearing on 14 December 2020, I gave reasons for my decisions that:
(a)the document at TB204 was not admissible in evidence in these proceedings; and
(b)the plaintiffs should not be granted leave to adduce a case in reply.
A summary of the reasons I gave on each of these matters is set out below.
Admissibility of TB204
MSI objected to inclusion of the document which was TB204 in the trial bundle. This document is a letter from the solicitors for MSI to the solicitors to the plaintiffs and two other law firms dated 24 October 2019. I inferred from the contents of the letter that these firms act for Appian and the Noteholders. The letter is marked 'without prejudice save as to costs'. MSI contended the letter is a without prejudice communication involving two other parties besides the plaintiff and, for that reason, was not admissible as evidence in these proceedings.
The plaintiffs submitted the letter was not, in substance, a without prejudice communication as it was not an attempt by MSI to open negotiations. On this basis, the plaintiffs contended the letter was admissible in these proceedings.
The nature and purpose of without prejudice privilege was summarised by the High Court in Field v Commissioner of Railways (NSW).[78] In essence, it is to enable parties who are attempting to compromise litigation to be able to communicate with one another freely without the risk that the communications might subsequently be adduced in evidence. The extent of the protection of the privilege depends not on the subjective expectations of the parties but on the objective consideration of what formed part of the negotiations for the settlement or proposed settlement of the action. That is, in order to attract the protection of the privilege there must be a connection between any purpose of the communication and the settlement or proposed settlement of the action.
[78] Field v Commissioner of Railways (NSW) (1957) 99 CLR 285.
In support of their position, counsel for the plaintiffs referred me to two cases: the decision of Beaumont J in Trade Practices Commission v Arnotts Ltd,[79] and the decision on Young J in GPI Leisure Corporation (in liq) v Yuill.[80]
[79] Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 69.
[80] GPI Leisure Corporation (in liq) v Yuill (1997) 42 NSWLR 225.
In Trade Practices Commission v Arnotts Ltd, Beaumont J (at 73) quoted with approval the judgment of Slade LJ in Buckinghamshire County Council v Moran:[81]
If, is in my view, the letter … cannot fairly and properly be read as an 'opening shot' in negotiations, the attribution of the protection of 'without prejudice' privilege to it would in my opinion go beyond the bounds of that privilege established by existing authority and would not in my opinion be justifiable. The public policy in which the privilege rests does not in my judgement justified giving protection to a letter which does not unequivocally indicate the writer's willingness to negotiate.
[81] Buckinghamshire County Council v Moran [1989] 3 WLR 152, 161.
In GPI Leisure Corporation (in liq) v Yuill, Young J considered whether a communication was admissible under s 131(1) of the Evidence Act 1995 (NSW) which provided that evidence was not to be adduced of a communication made between persons in dispute in connection with an attempt to negotiate a settlement of the dispute. While this decision concerns the admissibility of without prejudice communications under this Act, his Honour discusses the scope of without prejudice privilege under the common law.
In determining whether a letter headed 'without prejudice' which does not contain an offer falls within the privilege, his Honour noted it was relevant to consider whether it could be categorised as an 'opening shot' in a negotiation for the compromise of the litigation. In that case, his Honour held the letter did not suggest a method of compromising the underlying dispute and was merely a communication indicating that if the litigation could be dealt with in a practical way, the writer was open to suggestions. In these circumstances, his Honour did not consider it was sufficiently close to an attempt to negotiate a settlement of the dispute to fall within the protection afforded by the privilege.
In this case, the letter in question was written well after the commencement of these proceedings and shortly prior to the strategic conference held in October 2019. At that time, the matter had been provisionally listed for trial between 11 and 13 December 2019. The letter referred to the issues in the proceedings and expressed MSI's view on these matters. The letter then, under a heading 'Alternative Resolutions', referred to two alternate bases on which MSI considered the dispute could be resolved, and expressed a preference for one of these options. The letter concluded by indicating MSI was willing to discuss a compromise and queried whether the plaintiffs, together with Appian and the Noteholders, were willing to do so.
It is clear that, on its face, the letter did not contain an offer of settlement. However, that does not, of itself, mean the letter is not subject to a claim for without privilege. In considering whether the letter is properly viewed as 'without prejudice', it is relevant to consider whether the letter 'unequivocally indicates a willingness to negotiate' or can be categorised as an opening shot in negotiations.
It was my view the letter went further than simply indicating the dispute could be resolved in a practical fashion and set out two alternate methods by which the dispute could be resolved expressing a preference for one of these options. I considered that, objectively viewed, the letter was an opening shot in negotiations for the resolution of this matter and was properly the subject of a claim for without prejudice privilege.
For these reasons, I did not consider the letter (TB204) was admissible in these proceedings and ruled that it could not be tendered in evidence.
Application for leave to adduce case in reply
At the conclusion of the opening address by senior counsel for MSI, senior counsel for the plaintiffs renewed the application for leave to adduce a case in reply. The basis for the application was that the manner in which the case was opened by MSI did not shed any greater light on MSI's case of fraud, misleading conduct or misrepresentation and that the plaintiffs should be entitled to adduce a case in reply.
Senior counsel for the plaintiffs emphasised that the 'their point is about the unfairness attendant upon requiring the Receivers to go into evidence on such a case before having the party with the onus with respect to it to run its case'. Specifically, it was contended that MSI's particulars rolled together two separate representations relating to the competing offers and discussion and, separately, the pleading with respect to falsity and knowledge.
The application was opposed by MSI who noted the plaintiffs had previously made an application to enable them to split their case which had been refused and that this decision had not been the subject of appeal. In my view, this was not an answer to the plaintiffs' application as I made clear in the conclusion of that decision that the plaintiffs could renew their application at this stage of the trial.
In Mirabela Nickel Ltd (In Liquidation) (Receivers and Managers Appointed) v Mining Standards International Pty Ltd [No 4], I summarised the principles that govern the application by the plaintiffs.
As was noted by Andersen J in Lyszkowicz v Colin Earnshaw Homes Pty Ltd,[82] the rule that a plaintiff should present the whole of its case at once is designed to ensure the trial process is completed fairly and expeditiously and the trials are not unduly long.
[82] Lyszkowicz v Colin Earnshaw Homes Pty Ltd [2002] WASCA 205 [68] ‑ [69].
In considering the renewed application, I had regard to the opening submissions filed by MSI on 25 September 2020 (prior to the amendments made on 7 October 2020), the particulars filed on 18 November 2020, the outlines of evidence of Mr Milbourne and Mr Ford filed on behalf of MSI, and the opening address of senior counsel for MSI.
The purpose of an opening address is to give a general notion about what that party says the case is about by outlining the facts of the case, the issues that arise for the court's determination, the substance of the evidence to be adduced by that party, its effect on proving the case, and remarks on any point of law. Counsel should not open on allegations of fact that they cannot prove. That is, the main function of an opening address is to assist the court in outlining the case that is to be determined.
In Oldfeld Knott Architects Pty Ltd v Ortiz Investments Pty Ltd,[83] Ipp J discussed the importance of opening addresses. His Honour stated:
A party should not be obliged to defend any legal proceedings, for any period, involving unspecified causes of action based on generalised allegations of dishonesty or impropriety.
Nothing I have said is intended to detract from the right of a party, in opening, to inform the tribunal that evidence of dishonest or improper conduct will be led in support of that party's case concerning particular pleaded issues, or credibility questions. In that event counsel should make plain the purpose of the evidence in question. Moreover, dishonesty or impropriety in general terms should not be asserted. Counsel should explain to the tribunal in appropriate detail the nature of the dishonesty or impropriety asserted and the particular grounds on which those allegations are based.
[83] Oldfeld Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASCA 255.
Senior counsel for MSI opened MSI's case carefully and at length. Senior counsel did not open on matters that MSI was unable to prove from its own witnesses or from documents. While the address did not explain in detail the legal basis for the claims in [14(g)] and [22(f)] of its defence, these matters were addressed in MSI's written opening submissions.[84] Senior counsel for MSI confirmed MSI relied on its pleadings and did not depart from its pleaded case.
[84] Defendant's trial submissions filed 25 September 2020 [54] ‑ [59].
In my view, the unfairness I had identified in my earlier reasons was addressed by the filing of additional particulars and the detailed opening address given by senior counsel for MSI. These matters specifically addressed the individual representations which MSI relied upon and what MSI contended was said by Mr Tucker said during the conversation on 10 November 2017. In the schedule to the particulars, MSI set out what it specifically relied on in each conversation, message and document as comprising the falsity of these representations and what Mr Tucker knew from his participation in conversations or as the author of the message, email or document.
I considered that the plaintiffs knew the case they had to meet and there was only limited evidence they would have to call to respond to these matters, namely that of Mr Tucker. In this case, the plaintiffs could call Mr Tucker as part of their case but have chosen not to do so in support of their claim. In that regard, the decision not to call Mr Tucker as part of the plaintiffs' case was, in my view, a strategic decision.
To allow the plaintiffs to call evidence in reply from Mr Tucker would depart from the primary rule that a party must ordinarily produce all of its evidence when presenting its case. I did not consider there was any good reason to depart from the general rule in this case. For these reasons, I dismissed the plaintiffs' application.
Appointment of Receivers
The first and second plaintiffs (MBN and MBI respectively) are companies which are incorporated in Australia. At all relevant times, between them they held 99.99% of the quotas (which I was told is the local equivalent of shares) in Mineracao Do Brasil Ltda. The key asset of MMB was the Santa Rita Nickel Mine (Mine), which is located in the Bahia state of Brazil. MMB was also indebted to MBN in respect of the loan agreements described in Schedule 3 of the Agreement. These loans, together with the quotas, were the principal assets of MBN and MBI.
On 28 October 2015, the Receivers were appointed as joint and several receivers and managers of MBN and MBI. The appointment of the Receivers followed a resolution of the directors of these companies to appoint voluntary administrators on 24 September 2015.[85]
[85] FFAD [3(b)], [3(e)]; FFAR, [2].
In early 2017, MSI entered into a consultancy agreement with MMB (Consultancy).[86] At that time, the Mine was not operating but was on care and maintenance.[87]
[86] Ex 1, TB243. Note this is an unsigned version but both parties proceeded on the basis this reflected the agreement.
[87] ts 490.
Under the terms of the Consultancy, MSI agreed to provide an employee for the role of Director of Strategy and Business Development of MMB as from 1 January 2017. It was envisaged this role would take approximately 60 hours per month. MSI was paid a fixed monthly gross sum of USD $15,000, and a sign-on bonus of USD $20,000. Under the express terms of the Consultancy, MSI was entitled to receive a lump sum cash payment of USD $100,000 if MSI met all individual performance goals set by Mr Mundim (cl 3.4) or if there was a sale or substantial sale of the assets of Mirabela in 2017 (cl 3.5). The Consultancy was able to be terminated on a minimum of 90 days' notice in writing (cl 10.1).
Mr Milbourne recalled that in or about August 2017, he had a discussion with Mr Mundim and agreed that the relevant performance goal under cl 3.4 was 'successful completion', 'recapitalisation', or 'resolution of the insolvency in a way that was satisfactory to Mr Mundim'.[88] Initially, his evidence was that the payment would occur on signing by the bidder, although he did not have a 'crystal clear memory' on this.[89] After being shown the transcript of his examination, in which he said the milestone was the execution and signing by all parties of the acquisition of MMB,[90] Mr Milbourne's evidence was that:[91]
I believe – what I see here is, to the best of my recollection, it was an agreement that the acquisition for MMB had been executed and signed by all parties, or signed by the sellers and MSI, and I think involving all parties, but I can't remember if it was required MMBs signature. It was to the best of my recollection at that time. Again, this is now going on perhaps almost four years or three years. I don't believe I've been inconsistent. I must say, when I said that in cross-examination, I was trying to use the best of my recollection.
DHARMANANDA, MR: So you stand by the answer you gave at page 35?---To the best of my recollection, the trigger was the acquisition of MMB, and that it needed to be signed.
By all parties?---No. Actually, I perhaps had misspoken here that it had to have been executed and signed by all parties. I do recall a writing with Mr Mundim and Mr Tucker that it was upon approval and signing of the ASA. I don't remember that there was specific language that it was executed by all parties. I don't remember that being discussed with Mr Mundim or in writing with Mr Tucker.
[88] ts 586.
[89] ts 586 ‑ 587.
[90] Ex 3.
[91] ts 587.
To the extent that it is relevant, I find that the performance goal under cl 3.4 was the successful recapitalisation, resolution of the insolvency of MMB, or the execution of an agreement that would achieve these matters. This evidence is more consistent with the terms of the Agreement which specifically provided for the lump sum payment to be paid to MSI if there was a sale or substantial sale of the assets of Mirabela in 2017. This is also consistent with the invoice issued by MSI as referred to in [160] below.
On 16 March 2017, Appian submitted a non-binding proposal to the Receivers to acquire the Mine on a '100% equity, debt free, basis' for USD $75 million.[92] Appian required a number of matters in order to complete due diligence and indicated they anticipated submitting a final offer within six to eight weeks.
[92] Ex 1, TB207.
In about April 2017, Mr Milbourne met with the Receivers and Mr Mundim in Perth. At that stage, there was a possibility of a management buyout and they discussed what might be required in order to achieve this.[93] Mr Milbourne was aware that Bradesco had outstanding loans of about USD $50 million from MMB which was secured by the offtake from the Mine.[94]
[93] ts 491.
[94] ts 492.
In about August 2017, Mr Milbourne and Mr Mundim met with Mr Economou, the head of nickel at Trafigura[95] and presented a proposal in respect of the Mine. The proposal included moving from 'very large caterpillar equipment to very smaller trucks that would allow for a more efficient operation and essentially less sterilisation of the mine, which meant that it could go longer.'[96] If this was adopted, the mining equipment owned by MMB could be sold and the Mine moved to a contract mining operation.
[95] ts 492.
[96] ts 491.
On 5 September 2017, Mr Milbourne was granted access to the data room by KordaMentha.[97]
[97] Ex 1, TB1.
By October 2017, the Receivers had narrowed the possible offers to two parties (Appian and MSI) and were negotiating asset sale agreements with each of them.[98]
[98] Ex 1, TB46, p 1142 ‑ 1143.
On 20 October 2017, the Receivers told Appian they believed they were going backwards in their negotiations and requested a telephone conference to discuss the issues that had been identified.[99]
[99] Ex 1, TB2, TB3.
On 23 October 2017, Mr Milbourne received a letter from Trafigura Pty Ltd marked 'subject to contract'.[100] Trafigura confirmed 'its ongoing strong interest' in supporting MSI to acquire the shares in MMB and stated that if MSI was selected as the exclusive bidder by the Receivers, Trafigura aimed to complete 'binding financial support documentation in accordance with the terms sheets we have already negotiated'. The letter went on to state:
Trafigura confirms its strong interest and intention to provide financing to MSI for up to USD50 million, subject to completion of the relevant transaction documentation, which shall include the avoidance of doubt an acceptable resolution of the Bradesco debt situation.
[100] Ex 1, TB4, TB5.
Trafigura confirmed the proposed amount of the financial support had been approved through their internal processes and that no further internal approvals were required to proceed with the financing. The letter noted that Trafigura would need to approve the final transaction documentation.
Shortly afterwards, Mr Milbourne forwarded the letter to Mr Tucker and Mr Ben Carruthers, an executive director at KordaMentha, by email. In response, Mr Tucker asked whether the USD $50 million was 'locked' and Mr Milbourne responded 'I believe so. I will have signed contracts binding it this week so I think you can take it to them'.[101] In cross‑examination, there was some discussion between senior counsel for the plaintiffs and Mr Milbourne as to whether the full stop after 'I believe so' should have been a comma.[102] I agree with senior counsel for the plaintiffs that even if this was the case, it would make no appreciable difference to the content of the email or what was being conveyed.
[101] Ex 1, TB250.
[102] ts 590.
On 26 October 2017, Mr Milbourne sent an email to Mr Tucker, which was copied to Mr Mundim, and headed 'MSI Consultancy/Deposit'.[103] The email confirmed Mr Mundim had retained Mr Milbourne (or MSI) as a part‑time consultant to advise MMB on restructuring in Australia and to support any change of control or recapitalisation strategy. The terms of the part-time consultancy included a monthly salary, an annual bonus of USD $100,000 if certain KPIs were met, a change of control payment, and the possibility of joining a management equity arrangement. Mr Milbourne advised that:
Upon signing the ASA the annual KPI will be satisfied and I intend to use the bonus payable as a source of the mandatory deposit.
[Mr Mundim] has agreed that signing the ASA constitutes satisfaction of this KPI and is accordingly due and payable. Therefore on signing the ASA it has been agreed that the bonus will be due and payable in the form of a deposit to meet the 7 day deposit period. If the deal does not close than the deposit will of course not be refunded to me.
[103] Ex 1, TB219.
Mr Tucker responded to the email that day with the response 'ok'.[104]
[104] Ex 1, TB219.
On 27 October 2017, Mr Carruthers sent an updated draft Agreement to Mr Milbourne. In the covering email, he set out a few things to note. Relevantly, these included 'Deposit in 7 days and unconditional financing subject only to Bradesco's consent in 14 days' and the amendment to the exclusivity clause to remove the 'no talk' provisions. Mr Carruthers noted that 'whilst we are clearly not going to shop the deal one (sic) we sign, we still need to be able to talk where required'.[105]
[105] Ex 1, TB13.
Mr Milbourne responded on 27 October 2017 to request, in relation to the 'no talk' provision, a 14 day 'no talk/no shop' from signing.[106] He then said:[107]
If at the end of 14 I have executed financing agreements, subject to your reasonable consent, I would ask that the no-talk continues until closure, and if you are not comfortable, you are free to continue to talk to other parties at the end of the 14 days. We know that I cant (sic) have Bradesco resolved in 14 days, and hence financing cant be unconditional in 2 weeks, but I would rely on you in good faith that if I achieve Financing and Bradesco's executives team approval, there would be no value or fiduciary requirement for KordaMentha to maintain warm any discussions once Bradesco and Financing have been approved subject to final board approvals.
[106] Ex 1, TB16.
[107] Ex 1, TB16.
After receiving an updated asset sale agreement from Mr Carruthers,[108] Mr Milbourne raised with the Receivers the payment of MSI's transaction costs prior to completion. After an exchange of emails, the Receivers offered to pay USD $20,000 on execution of the Agreement, USD $30,000 on confirmation of unconditional finance, and a maximum of an additional USD $50,000 until completion. Mr Milbourne agreed with this proposal.[109]
[108] Ex 1, TB13, TB14.
[109] Ex 1, TB15.
As at 27 October 2017, Mr Milbourne and Mr Mundim were still corresponding in relation to the proposed management buyout. Mr Milbourne did not believe he could discuss or negotiate the terms of any agreement with Mr Mundim and that they needed to keep him 'temporarily independent'. Mr Milbourne explained that this was because the Receivers wanted 'to continue to be able to talk with Appian or other bidders until Completion'. Mr Milbourne proposed that the Receivers acknowledge the potential conflict and agree to sign a waiver at completion.[110]
[110] Ex 1, TB17.
At 9.23 pm on 27 October 2017, Mr Milbourne confirmed his acceptance of the terms of the asset sale agreement sent to him at 9.07 pm.[111] This draft did not include the 'no talk provision' he had requested but only a 'no shop' provision in cl 2.6(c).[112]
[111] Ex 1, TB22. The time stamps on the emails reflect the time in the jurisdiction it was received. In order to reflect the order in which emails were sent and received, I have, for the purposes of this judgment, adopted the timezone in Perth (AWST). Where the timezone is not clear, I have reflected that in discussing the particular document.
[112] Ex 1, TB21.
On 28 October 2017, Mr Tucker provided an update to Noteholders on the status of the offers and sought their consent to enter into the Agreement with MSI. In the email, he listed the conditions precedent as including binding finance agreements (subject only to Bradesco consent) 'within 14 days of signing'. Mr Tucker described this in the email as providing them 'with a 14 day termination right'. He noted the risks associated with the offer and expressed the intention to stay close to Appian in case MSI was unable to complete.[113]
[113] Ex 1, TB46, p 1140 ‑ 1141.
On 31 October 2017, an updated draft of the asset sale agreement[114] was sent by KordaMentha to Mr Milbourne by email.[115] The email enclosed two side letters: one for Mr Mundim,[116] addressing the potential conflict identified by Mr Milbourne, and the other to Mr Milbourne which addressed his role as advisor to MMB and the agreement to pay certain transaction costs.[117] Later that evening, Mr Milbourne confirmed he accepted the revised terms of the documents and was ready to execute the Agreement.[118]
[114] Ex 1, TB25 (marked up), TB26 (clean).
[115] Ex 1, TB23.
[116] Ex 1, TB24.
[117] Ex 1, TB27.
[118] Ex 1, TB28.
On the evening of 31 October 2017, Mr Milbourne exchanged text messages with Mr Tucker about whether the Receivers had approvals from Noteholders to enter into the Agreement. Later that night, Mr Tucker confirmed that signing would not occur that night.[119]
[119] Ex 1, TB60, p 1206.
Entry into Agreement
On 1 November 2017, Mr Milbourne was in Melbourne for the purpose of giving a presentation at and attending a conference.[120]
[120] ts 496.
At 7.36 am on 1 November 2017, Mr Tucker asked Mr Carruthers to send Mr Milbourne a PDF copy of the Agreement for execution. At 9.12 am, Mr Milbourne asked where it was as he was waiting at his hotel to sign and send it back before going to give his presentation. In response, Mr Tucker told him he would receive it in about two hours' time.[121]
[121] Ex 1, TB60, p 1205 ‑ 1206.
Prior to the Agreement being signed, Mr Tucker and Mr Mundim exchanged a series of WhatsApp messages.[122] The messages commence at 5.28 am on 1 November 2017 with Mr Tucker asking how Trafigura 'was looking'. At 8.09 am, Mr Mundim told him they were only going to receive feedback tomorrow. Mr Tucker told him they were going to sign today and asked that he check in with them. At 8.13 am, Mr Mundim responded:
We can't sign today Richard unfortunately. There is a bigger chance that [Trafigura] does not get to USD than that they do. If Rob hasnt (sic) been transparent about this he has been misguiding you!
[122] Ex 1, TB175.
Mr Tucker asked why he believed this and Mr Mundim said that he didn't believe the deal was 'doable' in two weeks. His recommendation was to proceed with one of the other offers and he would work on Trafigura as a fallback position.[123] He then asked Mr Tucker to call him.
[123] Ex 1, TB175.
Before the Agreement was signed, Mr Milbourne received a series of WhatsApp messages from Mr Mundim.[124] The messages commenced at 10.10 am with Mr Mundim asking when Mr Milbourne was available to talk. Before receiving a response, Mr Mundim recommended Mr Milbourne speak to him before he signed the Agreement (10.13 am) and that he would not make the deposit payment if Mr Milbourne did not speak to him first (10.20 am). When Mr Milbourne indicated he was unable to speak because he was in a meeting (10.26 am), Mr Mundim reiterated that they needed to talk (10.27 am) and that Mr Milbourne should not sign the Agreement without talking to him (10.28 am). The exchange concluded with Mr Mundim asking Mr Milbourne to call him when he was ready (10.41 am).
[124] Ex 1, TB130, p 2287.
At 9.33 am on 1 November 2017, Appian submitted a final proposal to the Receivers.[125] The total cash consideration offered by Appian was, subject to the qualifications in the proposal, USD $73 million.
[125] Ex 1, TB57 (covering email), TB30 (proposal), TB31 (draft asset sale agreement).
At 11.00 am on 1 November 2017, Mr Carruthers emailed an execution version of the Agreement to Mr Milbourne. The parties to the Agreement were MBN and MBI (defined as Sellers), the Receivers, MSI (defined as Buyer) and Mirabel Mineracao do Brasil Ltda (defined as MMB or the Company).[126] The covering email from Mr Carruthers noted that 'none of the Sellers, Receivers and Managers and the Company will be bound by the Asset Sale Agreement unless and until each of them has signed and exchanged the document with you'.[127]
[126] Ex 1, TB34.
[127] Ex 1, TB33.
Mr Milbourne read this email and said he noted that no-one would be bound until all parties had signed and exchanged the Agreement.[128]
[128] ts 500.
At 11.31 am, Mr Milbourne emailed Mr Tucker and Mr Carruthers a photograph of the execution page he had signed.[129] Mr Milbourne's recollection was that a representative of KordaMentha brought six or seven copies to him and he signed it at the Melbourne Convention Centre.[130]
[129] Ex 1, TB36, TB37.
[130] ts 497.
At 3.13 pm on 1 November 2017, the WhatsApp message exchange between Mr Milbourne and Mr Mundim recommenced,[131] with Mr Milbourne first asking whether Mr Mundim was going to call him and whether he was still up. He then sent a series of messages to Mr Mundim between 3.13 pm and 4.31 pm prior to receiving any response from Mr Mundim. The messages commence with Mr Milbourne saying he was going to have to sign today to 'be able to deal with [Trafigura] and then get Bradesco aligned' (at 3.13 pm), before saying he was going to get on a plane that night to meet with Trafigura in London and offering to meet Mr Mundim in Brazil on Sunday. He then stated 'We simply can not discuss equity at the moment until you give me your Brazil/US legal opinions though. Why haven't they come through?' (at 3.14 pm). At 3.54 pm, Mr Milbourne indicated it was Mr Mundim's choice whether to pay the deposit and referred to the email where it was accepted the bonus 'would serve as the deposit' (at [116]).
[131] Ex 1, TB130, p 2287.
Mr Milbourne's evidence was that his reference to the 'Brazil/US legal opinion' referred to his repeated requests to Mr Mundim about whether he had obtained independent advice about whether he could be part of a management team buyout. Mr Mundim had told him he should not be part of a management buyout, given his role as chief executive officer of MMB, and Mr Milbourne had been asking for confirmation of this to resolve the matter.[132]
[132] ts 499.
Shortly after this, at 4.03 pm, Mr Milbourne messaged Mr Mundim to tell him the deal had been signed and they would have to work together to close the Agreement. If Mr Mundim did not want to do this 'it will only result in problems for both of us'. He referred to a draft termsheet for shareholders which he had not received comments on and said that he (Mr Milbourne) was the only one putting money and contractual liability at risk. Mr Milbourne expressed the view that the only alternative was Appian which would 'clearly not be a good outcome for you and the team'. He concluded the message by saying he hoped they could collaborate productively and reach a good outcome for Mr Mundim and the team post acquisition but that if Mr Mundim did not want to, that was his choice.[133]
[133] Ex 1, TB130, p 2287.
In Skymist Holdings Ltd v Grandlane Developments, Waksman J summarised the principles of approbation and reprobation in the following terms:[606]
(a)the approbating party act or conduct must be clear and unequivocal. This has the practical advantage of enabling a proper comparison to be made with the latter allegedly reprobating act, to see if the latter is truly inconsistent with the former;
(b) the party in question must have gained a benefit from the approbation. If there is no benefit, it is not clear why it would be unjust to the other party to allow the first party to reprobate;
(c) the reprobating act or conduct must be clearly inconsistent with the earlier approbating act or conduct.
[606] Skymist Holdings Ltd v Grandlane Developments [2018] EWHC 3504 [61].
In MPB v LGK, this second element was described differently as being that 'it is usual but not necessary' for the approbating party to have taken a benefit from the approbation.[607] For the purposes of this decision, it is not necessary for me to resolve this conflict.
[607] MPB v LGK [2020] EWHC 90 [58].
In their submissions, the plaintiffs contended that MSI's conduct in accepting the return of the deposit was inconsistent with the terms of the draft deed. The primary issue with the plaintiffs' contention is that the draft deed of 17 November 2017 was never executed by the parties and was never entered into.
The Termination Notice that was issued by the plaintiffs referred to and relied on cl 2.5(a) of the Agreement. The defendant's request for a return of the deposit is consistent with the terms of that Agreement and does not rely on or affirm the draft deed of 17 November 2017.
For this reason, I do not consider that in requesting the return of the deposit, MSI is approbating and reprobating the draft deed. Accordingly, I do not consider this aspect of the plaintiffs' claim can succeed.
Does cl 9.1 of the Agreement operate as a release of any claim MSI may have had?
The plaintiffs seek a declaration that pursuant to cl 9.1(b)(i) of the Agreement, MSI has released and forever discharged the Receivers in relation to any cause of action pleaded against them in the draft statement of claim, which was annexed to the affidavit of Stephen Charles Russell filed 23 October 2018 and marked 'SCR2'.
The plaintiffs say that since the termination of the Agreement, MSI has continued to threaten to commence proceedings against the Receivers and other parties but has refused to advance those claims in these proceedings or anywhere else. Given this, the Receivers want to bring an end to the disputes between them and seek a declaration that the proposed claims fall within cl 9 of the Agreement. The Receivers say that they have a real interest in obtaining this declaration as MSI has asserted losses exceeding USD $74 million up to USD $148 million.
It is not in dispute that while MSI sought leave to issue a writ to be served overseas in terms of this attachment, leave was subsequently revoked by consent. It is also not in dispute that since 1 December 2017, the defendant's solicitors have threated to commence various proceedings in relation to the alleged breach of the Agreement. These include:
(a)on 1 December 2017, in a letter addressed to MNL and the Receivers, a threat to institute proceedings for 'specific performance and the necessary injunctive relief'. I note the last paragraph of the letter asks whether the Receivers intend to instruct solicitors to accept service of proceedings 'on behalf of the Sellers' and not the Receivers;[608]
(b)on 1 February 2018, the defendant's solicitors 'put [the plaintiffs] on notice that the Sellers, the Company and the Receivers' had, as a result of alleged ongoing breaches of the Agreement, caused 'substantial loss and damage' to the defendant. The defendant recorded that at any time prior to judgment for specific performance, it was entitled to elect to terminate the Agreement and sue for damages for the loss of the bargain;[609]
(c)on 30 June 2018, the defendant's solicitors wrote to Appian and stated that the defendant would 'shortly be instituting proceedings in the Supreme Court of Western Australia' against the Receivers, MNL, MNI and MMB;[610]
(d)similar statements were made in a letter to AET Corporate Trust Pty Ltd on 3 July 2018;[611]
(e)on 30 July 2018, the solicitors for the plaintiffs wrote to the defendant's solicitors advising they had instructions to accept service of any proceedings commenced in this court on behalf of the Receivers and that if they did not receive a response within 72 hours, they had instructions to commence proceedings;[612]
(f)on 9 April 2019, the solicitors for the plaintiffs wrote to the defendant's solicitors in relation to the draft statement of claim that is the subject of the proposed declaration summarising the claims raised by this document. This included that the Receivers were not entitled to terminate the Agreement, including on the basis that the right to terminate did not arise until 25 November 2017; that the defendant waived the repudiation of the Agreement and elected to keep it on foot and was ready, willing and able to perform its obligations under the Agreement; and that other parties procured and induced the alleged breaches of the Agreement by entering into an agreement with Appian. The plaintiffs' solicitors informed them of their intention to commence proceedings in this court.[613]
[608] Ex 1, TB176.
[609] Ex 1, TB182.
[610] Ex 1, TB184.
[611] Ex 1, TB185.
[612] Ex 1, TB186.
[613] Ex 1, TB190.
On 17 December 2019, the defendant's solicitors wrote to the plaintiffs' solicitors confirming it did not intend to issue proceedings against the Receivers in the terms of the draft statement of claim annexed to the affidavit of Mr Russell.[614] It then went on to state that:
Further, absent any obligation to do so, MSI hereby irrevocably undertakes to the Receivers that it will not institute any proceedings in any court of competent jurisdiction in relation to any cause of action pleaded in the [draft statement of claim] without giving to the Receivers care of your firm not less than 21 days' notice in writing of their intention in that regard, any such notice to be accompanied by the draft proceedings which MSI may intend to issue.
[614] Ex 1, TB205.
It is not in dispute that the Court's power to grant declaratory relief is discretionary.
Difficult questions can arise in determining whether a question is 'purely hypothetical' or whether it constitutes a proper exercise of judicial power.[615] One characteristic of a purely hypothetical case is that it does not arise from an actual or genuine controversy or constitute a binding decision capable of founding a res judicata between the parties.[616] The court does not lack jurisdiction to make a declaration on a theoretical issue where 'the issue is productive of a real and pressing dispute, is of real practical importance or is one in which the claimant has a real commercial interest'.[617]
[615] Insurance Commission of Western Australia v Woodings (as liquidator of Bell Group Ltd (in liq)) [No 2] [2017] WASC 372; (2017) 124 ACSR 45 [101].
[616] Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334 [48] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne & Callinan JJ).
[617] CGU Insurance v Blakeley [2016] HCA 2; (2016) 259 CLR 339 [102] (Nettle J).
Pritchard J considered the question as to whether a claim that was made was hypothetical in Insurance Commission of Western Australia v Woodings as liquidator of the Bell Group Ltd (in liq) [No 2].[618] After reviewing the relevant authorities, her Honour stated that:[619]
These cases confirm that provided that a claim is based on facts which have occurred, and have given rise to a real dispute, the claim will not be hypothetical simply because its resolution depends on the outcome of other claims.
[618] Insurance Commission of Western Australia v Woodings as liquidator of the Bell Group Ltd (in liq) [No 2].
[619] Insurance Commission of Western Australia v Woodings as liquidator of the Bell Group Ltd (in liq) [No 2] [110].
The Court of Appeal agreed with both the reasoning and the conclusion of her Honour.[620]
[620] Bell Group NV (in liq) v Insurance Commission of Western Australia [2018] WASCA 179 [56].
The primary difficulty with this aspect of the plaintiffs' case is that there is no evidence before me as to what claim (if any) may be advanced by the defendant against the Receivers. Since the plaintiffs commenced these proceedings, the defendant has disavowed reliance on the draft statement of claim which was provided to me by the parties during the trial. While I accept the release contained in the Agreement is drafted in extremely broad terms, the question as to what claims may be excluded by its terms cannot, in my view, be determined in isolation.
In these circumstances, I do not consider I should exercise my discretion to make any declarations as to the proper construction of cl 9.1 of the Agreement, or whether the claims made in a document which the defendant says it will not file fall within the terms of this clause. In my view, if the defendant decides to commence proceedings against the Receivers, the Receivers will have the benefit of the irrevocable undertaking contained in the letter from Russells dated 17 December 2019 and can determine what, if any, action to take in relation to the foreshadowed proceedings.
I accept the defendant's submission that the determination of the issue at that stage is a more efficient and sensible use of judicial resources.
Did the Receivers agree to provide the defendant with 24 hours' notice prior to terminating the Agreement? If so, are the Receivers estopped from issuing the notice of termination without notice?
Given my conclusion as to the validity of the Termination Notice, it is strictly unnecessary for me to address this issue. However, given this matter was the subject of argument and submissions, I set out below my brief reasons in relation to this issue.
I accept that on 14 November 2017, Mr Tucker and Mr Milbourne exchanged emails in respect of the Agreement. Mr Milbourne contends that by this exchange Mr Tucker agreed to provide Mr Milbourne with adequate prior notice before terminating the Agreement. I do not accept this contention.
The relevant emails are set out at [364] – [366] above. I accept that in response to an email from Mr Tucker, Mr Milbourne said he required at least 24 hours' notice before any termination and that, if this was not accepted, they would need to find a 'fair middle ground'.[621] Mr Milbourne accepted that he did not receive any response to this email.
[621] Ex 1, TB170, p 2602.
There is no evidence before the court that Mr Tucker accepted Mr Milbourne's 'requirement'. In this regard, I accept the plaintiffs' submission that MSI has not established the requirements of a valid contract – namely an offer, acceptance, and consideration.
In any event, I consider this email exchange was overtaken by the events on 17 and 18 November 2017. As set out above, I have found that the emails and messages exchanged on these dates did not constitute an agreement to extend the date for satisfaction of the Finance Condition, and, as a result, the plaintiffs' pleaded case fails. However, if I am wrong in that regard, I do not consider it was a term of that agreement that adequate prior notice be given of any decision to terminate the Agreement. There is no evidence that this was discussed or sought by MSI as a term of this agreement.
In the alternative, the defendant contends the plaintiffs are estopped from issuing the notice of termination because of the 'notice agreement'. In its defence, none of the elements of estoppel are pleaded. At trial, it was contended that had notice been given to Mr Milbourne, the defendant could have considered whether to waive the Finance Condition prior to a notice of termination being issued.
Both parties in their submissions referred to the decision of the High Court in Perri v Coolangatta Investments Pty Ltd.[622] In that case, the court considered the terms of a contract for the sale and purchase of land which contained a special condition that the contract was subject to the purchasers completing the sale of another property. There was no express entitlement of either party to waive or terminate the contract for non-fulfilment of this condition. The primary issues before the court were first, whether the condition was a condition precedent or a condition subsequent, and second, whether this clause imposed an implied obligation on the purchasers to make all reasonable endeavours to sell the property.
[622] Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537.
Mason J noted that courts tend to favour a construction of an agreement that an obligation is a condition precedent to performance, rather than a condition precedent to the existence or formation of the contract.[623] Turning to the specific clause in question, his Honour held that:[624]
The conclusion to be drawn then is that the clause expresses a condition which is precedent to the appellants' duty to perform the contract, non‑fulfilment of which entitles them to terminate the contract, rather than as a condition precedent to the formation of the contract.
…
It seems that in the courts below the parties were united in the view that the vendor, as well as the purchasers, could terminate for non-fulfilment of the condition. On the other hand, as I have said, the clause was inserted for the protection of the appellants and it is probably unnecessary to concede to the respondent for its protection an equivalent right to terminate for non-fulfilment of the condition. It seems to be sufficiently protected by relying on its rights to insist on completion of the contract within a reasonable time and by taking such action as it may in that event. Even so, the fact that the clause draws no distinction between the parties and is not expressed to condition only the purchasers' obligation to complete, together with their implied obligation to make all reasonable efforts to sell the Lilli Pilli property, provide strong ground for thinking that the respondent, as well as the appellants, had a right to terminate on non-fulfilment of the condition. This does not necessarily deny a right in the appellants to waive the benefit of the clause, the respondent's right of termination for breach, like the appellants', subsisting so long as there is no waiver by the appellant.
[623] Perri v Coolangatta Investments Pty Ltd, 552.
[624] Perri v Coolangatta Investments Pty Ltd, 553.
Brennan J reached a similar conclusion in relation to the clause, holding that:[625]
The purpose of the stipulation is to ensure that the purchasers should have the proceeds of the sale of their Lilli Pilli property before their obligation to pay the balance of the purchase price for the Cronulla property becomes absolute. The substance of the stipulation is a condition for the benefit of the purchasers and they may waive it if they choose. But the limit of the time within which the stipulation is to be fulfilled enures for the benefit of the vendor as well as for the benefit of the purchasers, "the vendor being interested to know for how long his liability was to remain unresolved". When vendor and purchaser are each under a contingent obligation to complete a contract of sale, the fulfilment of the contingency or the entitlement to avoid the obligation is of equal interest to both parties. (citations omitted)
[625] Perri v Coolangatta Investments Pty Ltd, 565.
In this case, I accept that the Finance Condition is a condition which is a condition precedent to the parties' obligations to perform the contract rather than a condition precedent to the formation of the contract. It is clear that the purpose of the Finance Condition is for MSI to have binding finance agreements in place before its obligation to pay the Consideration under the Agreement becomes absolute.
The Agreement specifically provides that this is a condition which may 'only be waived by [MSI]' (cl 2.4). In specifying who may waive the benefit of the conditions precedent, I accept that the substance of the Finance Condition is a condition for the benefit of MSI, which it may waive if it chooses.
However, this construction does not affect the proper construction of the rights of all parties to the Agreement to terminate the Agreement under cl 2.5. Clause 2.5 of the Agreement specifically enables a party, including the plaintiffs, to terminate the Agreement where the Finance Condition is 'not satisfied' by the date which is 14 days after the exchange of signed copies of the Agreement. This right can be contrasted with the right of termination in respect of the other conditions precedent, which enable any party to terminate the Agreement if, prior to the End Date, a condition precedent has become incapable of being satisfied (cl 2.2(b)), or has not been satisfied or waived prior to the End Date (cl 2.2(c)). Both of these clauses specifically exclude the condition precedent which is the Finance Condition. In this regard, it is clear from the text of cl 2.2 that the parties distinguished between the conditions precedent as to whether their non-fulfilment gave rise to a right of termination. The text of cl 2.5(a) makes plain that it was necessary for the Finance Condition to be satisfied before the plaintiffs lost the right to terminate the Agreement.
This construction is consistent with the purpose and context of the clause, which is to ensure that the plaintiffs have certainty they will receive the Consideration at Completion and, if not, have the ability to terminate the Agreement within a relatively short period of time. This is a matter that was of interest to the plaintiffs.
On this basis, even if Mr Tucker had represented that he would give notice to Mr Milbourne prior to exercising any right of termination, I do not consider that resiling from this representation would cause MSI any detriment.
Did Mr Tucker make false and misleading statements about his intention to terminate the Agreement and whether the Receivers were in discussions with other parties?
Given my conclusion as to the validity of the Termination Notice, it is also unnecessary for me to address this issue. However, given this matter was the subject of argument and submissions, I set out below my brief reasons in relation to this issue.
As set out above at [339], I accept and find that during the telephone call on 10 November 2017, Mr Tucker said that he did not intend to terminate the Agreement. I also accept that Mr Tucker made this same representation in his email of 9 November 2017. I do not accept that he made any statement about whether the Receivers were in discussions with other parties, although I accept he said there were no other offers on the table.
For the following reasons, I do not consider the statement by Mr Tucker made on 10 November 2017, that he did not intend to terminate the Agreement, was at that time false and misleading.
First, the statement during the telephone conversation has to be viewed in light of the statement in Mr Tucker's email the previous day that he had no intention of terminating on 15 November 2017. I do not consider the representation made by Mr Tucker on 10 November 2017 was that he would never terminate the Agreement, but that he had no intention of terminating the Agreement on 15 November 2017. This conclusion is consistent with Mr Milbourne's subsequent request for notice to be provided to him. Notice would not be required if Mr Tucker represented that he never intended to terminate the Agreement.
Second, at the time of these statements, I infer and find that Mr Tucker had obtained legal advice on the Agreement to the effect that the relevant time period under cl 2.5(a) began to run from the date of the exchange of the documents, which at the time he made these representations had not yet occurred. I infer this from the following matters. On the morning of 7 November 2017, Mr Tucker asked Mr Carruthers to obtain legal advice which was going to be sent through in the next couple of days. Prior to the telephone call with Mr Milbourne on 10 November 2017, Mr Tucker received advice that he was unable to terminate the Agreement for the failure to pay the deposit because time had not yet begun to run. This is apparent from the language used by Mr Tucker in the email he sent which is referred to at [316].
Third, at the time of these statements, the Receivers had rejected the offer from Appian and Appian had not made any other offer or confirmed that it intended to. I do not consider that, in circumstances where this was a sale of Assets by Receivers, Mr Tucker would have decided to terminate the Agreement unless there was another offer which could be accepted in the immediate future.
I also do not consider Mr Tucker's statement that there were no other offers on the table was false and misleading for the following reasons.
First, as at 10 November 2017, there were, as a matter of fact, no other offers on the table. Second, at this time, while Mr Tucker had some contact with the representatives of Appian, he had not received any confirmation as to whether Appian intended to make another offer. Third, Appian did not make another offer until 17 November 2017.
These matters are apparent from detailed chronology set out in these reasons and in particular, the following facts that I have found.
Appian made an offer to purchase the Assets on the morning of 1 November 2017 and Mr Tucker spoke with representatives of Appian later that day. On 3 November 2017, Mr Tucker emailed Appian to advise they had executed the Agreement and Mr Tucker spoke with representatives of Appian later that day. I accept that this email indicated they would like to remain engaged with Appian, however it was not clear whether Appian would stay engaged. This is consistent with the email from Mr Rathborne referred to at [187]. On 7 November 2017, Mr Tucker spoke again to the representatives of Appian. At the conclusion of the discussion, Appian indicated they would come back to the Receivers to confirm if Appian remained engaged. There is no evidence of any further contact between Mr Tucker and Mr Rathborne until the evening of 13 November 2017, when Mr Rathborne asked whether the condition precedent had been satisfied. No further offer was received from Appian until 17 November 2017.
For these reasons, I do not accept that Mr Tucker made false and misleading statements as alleged by the defendant.
Was the termination of the Agreement founded on unconscionable or inequitable conduct by the Receivers?
Given my conclusion as to the validity of the Termination Notice, it is unnecessary for me to address this issue.
These allegations rely on the same matters as the claim that Mr Tucker engaged in false and misleading conduct. As set out above, I do not consider Mr Tucker's representations were false and misleading. For similar reasons, I also do not consider that his conduct was unconscionable or inequitable.
Were the Receivers in breach of cl 2.6 of the Agreement? If so, did this disentitle them from exercising any right to terminate the Agreement?
Given my conclusion as to the validity of the Termination Notice, it is unnecessary for me to address this issue. However, given this matter was the subject of argument and submissions, I set out below my brief reasons in relation to this issue.
The question as to whether the Receivers were entitled to terminate the Agreement if they were in breach of cl 2.6 of the Agreement depends on the proper construction of cl 2.5 of the Agreement.[626]
[626] Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd [2009] FCAFC 85; (2009) 178 FCR 57 [55] ‑ [76] (Perram J).
The terms of this clause are set out in full at [146]. It is clear from the text of the clause that in order to terminate the Agreement, three things were required: first, a notice in writing to the other parties to the Agreement; second, compliance with the obligations under cl 2.2 of the Agreement; and third, one of the matters in (a), (b) or (c) applying. The clause did not require compliance with any other clause of the Agreement, including cl 2.6.
For these reasons, even if the Receivers were in breach of cl 2.6(c), it did not prevent them from exercising any right to terminate the Agreement.
Turning briefly to the issue as to whether the plaintiffs breach their obligations under cl 2.6 of the Agreement, MSI pleads that prior to the termination of the Agreement, the plaintiffs provided information regarding the Mirabela Assets to Appian and solicited an offer from Appian.
Clause 2.6(c) provided that between the date the Agreement was entered into and the earlier of Completion or termination, the plaintiffs and the Company 'must not' and 'must procure' employees of the Company do not provide information regarding the Assets to any potential purchaser other than MSI or solicit any offers for the Assets from any other person. Assets is defined in the Agreement to mean the 'Quotas and the Loan'. The term 'solicit' is not defined in the Agreement and, accordingly, is taken to have its ordinary and natural meaning. 'Solicit' means 'to entreat or petition (a person) for, or to do something; to urge, importune; to ask earnestly or persistently'[627] or 'to seek for by entreaty, earnest or respectful request, formal application' or 'to endeavour to obtain'.[628]
[627] Oxford English Dictionary.
[628] Macquarie Dictionary.
Consistent with the views that I have expressed above, I consider that the Agreement was entered into on 10 November 2017, when the Company signed and exchanged the Agreement. For this reason, I have not addressed any of the matters that arose prior to this date.
The evidence before the court was that on 15 November 2017, Mr Tucker instructed Mr Mundim to provide Appian's representatives with a copy of the balance sheet, and that the balance sheet was subsequently provided by Mr Mundim. While I accept this occurred, it was not clear from the submissions of the defendant how the provision of the balance sheet was information regarding the 'Quotas and the Loan' or how this constituted a breach of cl 2.6.
Similarly, while I accept that Appian made an offer for the Assets prior to the termination of the Agreement, the Agreement did not prevent the plaintiffs from communicating or talking with Appian. Appian had previously made an offer for the Assets and was the unsuccessful underbidder. I do not accept that, on a fair reading of the communications between KordaMentha and Appian or its representatives, the plaintiffs entreated or urged Appian to make an offer.
Conclusion and orders
For the reasons set out above, I do not consider that any of the orders sought by the plaintiffs should be made. On this basis, I consider that the plaintiffs' claim should be dismissed in its entirety.
I will hear from the parties as to the appropriate orders as to the costs of the proceedings.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JN
Associate to the Honourable Justice Hill
3 MARCH 2023
- AGLC
- Mirabela Nickel Ltd (in Liquidation) (Receivers and Managers Appointed) v Mining Standards International Pty Ltd [No 5] [2023] WASC 62
- Case
- [2023] WASC 62
- Decision Date
CaseChat Overview and Summary
The court, in examining the 'without prejudice' letter, considered whether it fell within the scope of the privilege under the common law. The letter was written after the commencement of the proceedings, referred to the issues in the case, and suggested two alternate methods for resolving the dispute, expressing a preference for one. The court held that the letter was an opening shot in negotiations and was properly viewed as an attempt to negotiate a settlement, thereby falling within the protection of the without prejudice privilege. Consequently, the letter was deemed inadmissible. Regarding the plaintiffs' right to present a case in reply, the court considered the manner in which the defendant opened their case and found that it did not sufficiently elucidate their case of fraud, misleading conduct, or misrepresentation. The court granted the plaintiffs' application to adduce a case in reply.
The court ruled that the 'without prejudice' letter could not be tendered in evidence and allowed the plaintiffs to present a case in reply. This decision highlights the importance of understanding the scope of without prejudice privilege and the procedural rules regarding the presentation of cases in reply. The outcome ensures that the plaintiffs have the opportunity to adequately respond to the defendant's allegations, maintaining a fair and balanced judicial process.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
In GPI Leisure Corporation (in liq) v Yuill, Young J considered whether a communication was admissible under s 131(1) of the Evidence Act 1995 (NSW) which provided that evidence was not to be adduced of a communication made between persons in dispute in connection with an attempt to negotiate a settlement of the dispute. While this decision concerns the admissibility of without prejudice communications under this Act, his Honour discusses the scope of without prejudice privilege under the common law. In determining whether a letter headed 'without prejudice' which does not contain an offer falls within the privilege, his Honour noted it was relevant to consider whether it could be categorised as an 'opening shot' in a negotiation for the compromise of the litigation. In that case, his Honour held the letter did not suggest a method of compromising the underlying dispute and was merely a communication indicating that if the litigation could be dealt with in a practical way, the writer was open to suggestions. In these circumstances, his Honour did not consider it was sufficiently close to an attempt to negotiate a settlement of the dispute to fall within the protection afforded by the privilege. In this case, the letter in question was written well after the commencement of these proceedings and shortly prior to the strategic conference held in October 2019. At that time, the matter had been provisionally listed for trial between 11 and 13 December 2019. The letter referred to the issues in the proceedings and expressed MSI's view on these matters. The letter then, under a heading 'Alternative Resolutions', referred to two alternate bases on which MSI considered the dispute could be resolved, and expressed a preference for one of these options. The letter concluded by indicating MSI was willing to discuss a compromise and queried whether the plaintiffs, together with Appian and the Noteholders, were willing to do so. It is clear that, on its face, the letter did not contain an offer of settlement. However, that does not, of itself, mean the letter is not subject to a claim for without privilege. In considering whether the letter is properly viewed as 'without prejudice', it is relevant to consider whether the letter 'unequivocally indicates a willingness to negotiate' or can be categorised as an opening shot in negotiations. It was my view the letter went further than simply indicating the dispute could be resolved in a practical fashion and set out two alternate methods by which the dispute could be resolved expressing a preference for one of these options. I considered that, objectively viewed, the letter was an opening shot in negotiations for the resolution of this matter and was properly the subject of a claim for without prejudice privilege. For these reasons, I did not consider the letter (TB204) was admissible in these proceedings and ruled that it could not be tendered in evidence. At the conclusion of the opening address by senior counsel for MSI, senior counsel for the plaintiffs renewed the application for leave to adduce a case in reply. The basis for the application was that the manner in which the case was opened by MSI did not shed any greater light on MSI's case of fraud, misleading conduct or misrepresentation and that the plaintiffs should be entitled to adduce a case in reply.