Nauru Phosphate Royalties Trust (Receivers and Managers appointed) & Business Australia Capital Mortgage Pty Ltd (in liquidation) & Ors; Andrew Hugh Jenner Wily in his capacity as liquidator of Business Australia..

[2008] NSWSC 916

CITATION:	Nauru Phosphate Royalties Trust (Receivers and Managers appointed) & Business Australia Capital Mortgage Pty Ltd (in liquidation) & Ors; Andrew Hugh Jenner Wily in his capacity as liquidator of Business Australia Capital Finance Pty Ltd & Ors v Nauru Phosphate Royalties Trust (Receivers and Managers appointed) & Ors [2008] NSWSC 916
HEARING DATE(S):	28/08/08, 29/08/08, 1/09/08
JUDGMENT DATE :	5 September 2008
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Parties to bring in short minutes of order
CATCHWORDS:	Contract - Construction - Express obligation to take reasonable steps to give effect to agreement and to provide reasonable assistance - Obligation the same in substance as an obligation to use ‘best endeavours’ - Obligation to use 'best endeavours' does not require person who undertakes obligation to go beyond the bounds of reason but requires that he do all he reasonably can in the circumstances to achieve the contractual object, but no more - Content of obligation to provide 'reasonable assistance' - Interdependent contractual provisions - Derivation of duty to cooperate - What is reasonable will turn on the particular circumstances - Implied obligations of good faith - Causation
CATEGORY:	Principal judgment
CASES CITED:	Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 Burger King Corp v Hungry Jack's Pty Ltd [2001] NSWCA 187 Byrne v Australian Airlines Ltd (1995) 185 CLR 410 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 Mackay v Dick (1881) 6 App Cas 251 Overlook v Foxtel (Barrett J) Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 Sheffield District Railway Co v Great Central Railway Co (1911) 27 TLR 451 State of New South Wales v Banabelle Electrical Pty Ltd [2002] 54 NSWLR 503 Terrell v Mabie Todd & Co Ltd (1952) 69 RPC 234 Tymshare Inc v Covell (1984) 727 F2d 1145 Vodafone Pacific Limited v Mobile Innovations Limited [2004] NSWCA 15 Waters Lane Pty Ltd & Anor v Sweeney & Ors [2007] NSWCA 200 Wentworth v De Montfort (1988) 15 NSWLR 348
TEXTS CITED:	H Broom, R H Kersley, A Selection of Legal Maxims, 7th ed (1989) Pakistan Law House
PARTIES:	Nauru Phosphate Royalties Trust (Receivers and Managers appointed (First Plaintiff 50096/07; First Defendant 50135/07) Republic of Nauru Finance Corporation (Second Plaintiff 50096/07; Randwick Nominees Pty Ltd (Receivers and Managers appointed) (Third Plaintiff 50096/07) Central Pacific (Downtowner) Pty Ltd (Receivers and Managers appointed) (Fourth Plaintiff 50096/07) Spencer Investments Pty Ltd (Receivers and Managers appointed) (Fifth Plaintiff 50096/07) Ronsi Business Pty Ltd (Receivers and Managers appointed) (Sixth Plaintiff 50096/07) Ronsi Holdings Pty Ltd (Receivers and Managers appointed) (Seventh Plaintiff 50096/07) Business Australia Capital Mortgage Pty Ltd (in liquidation) (First Defendant 50096/07) Business Australia Capital Finance Pty Ltd (in liquidation) (Receivers and Managers appointed) (Second Defendant 50096/07) HLBC Pty Ltd (Third Defendant 50096/07; Third Defendant 50135/07) Bondedge Pty Ltd (in liquidation) (formerly Business Australia Corporate Finance Pty Ltd) (Fourth Defendant 50096/07) Andrew Hugh Jenner Wily (Fifth Defendant 50096/07; (in his capacity as liquidator of Business Australia Capital Finance Pty Ltd) First Plaintiff 50135/07; (in his capacity as liquidator of Business Australia Capital Mortgage Pty Ltd) Second Plaintiff 50135/07; (in his capacity as liquidator of Bondedge Pty Ltd ) Third Plaintiff 50135/07) Leon Nikolaidis (Sixth Defendant 50096/07) James Miller & Parties trading as Ernst & Young and Ernst & Young Transaction Advisory Services Ltd (Second Defendant 50135/07)
FILE NUMBER(S):	SC 50096/07; 50135/07
COUNSEL:	Mr NC Hutley SC, Mr MW Sneddon & Mr S Aspinall (Plaintiffs 50096/07; Defendants 50135/07) Mr TS Hale SC, Mr DJ Barnett (Defendants 50096/07; Plaintiffs 50135/07)
SOLICITORS:	Henry Davis York (Plaintiffs 50096/07; Defendants 50135/07) MD Nikolaidis & Co (Defendants 50135/07; Plaintiffs 50135/07)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Friday 5 September 2008

50096/07 Nauru Phosphate Royalties Trust (Receivers and Managers appointed) & Ors v Business Australia Capital Mortgage Pty Ltd (in liquidation) & Ors

50135/07 Andrew Hugh Jenner Wily in his capacity as liquidator of Business Australia Capital Finance Pty Ltd & Ors v Nauru Phosphate Royalties Trust (Receivers and Managers appointed) & Ors

JUDGMENT

Overview

1 The two sets of proceedings presently before the Court concern the rights and obligations of various parties who entered into a Deed of Settlement and Release dated 16 October 2006 ["the Deed"].

2 The Nauruan Entities are the plaintiffs in the NPRT Proceeding and the first defendants in the Wily Proceeding and comprise the following entities:

(a) Nauru Phosphate Royalties Trust (receivers and managers appointed);

(b) Republic of Nauru Finance Corporation;

(c) Randwick Nominees Pty Ltd (receivers and managers appointed);

(d) Central Pacific (Downtowner) Pty Ltd (receivers and managers appointed);

(e) Spencer Investments Pty Ltd (receivers and managers appointed);

(f) Ronsi Business Pty Ltd (receivers and managers appointed); and

(g) Ronsi Holdings Pty Ltd (receivers and managers appointed).

3 The Deed sought to resolve numerous issues between the parties including, among other matters, the amount alleged to be due by the Nauruan Entities to Business Australia Capital Finance Pty Limited (in liquidation) [“BACF”], Business Australia Capital Mortgage Pty Limited (in liquidation) [“BACM”] and Bondedge Pty Limited (in liquidation) (formerly Business Australia Corporate Finance Pty Limited) [“Bondedge”], [together “the BA Companies”].

4 A central issue concerns the proper construction of the Deed.

The events leading up to entry into of the deed

5 On 28 July 2004, the Nauruan Entities commenced Federal Court proceedings numbered 1159 of 2004 [“Federal Court Proceeding”] against each of the following parties seeking various forms of relief:

(a) the HLBC Pty Limited [“HLBC”];

(b) each of the BA Companies;

(c) Ian David Lazar [“Lazar”].

The Heads of Agreement

6 The various and complex disputes between the Nauruan Entities on the one hand and the BA Companies, HLBC and Lazar on the other were resolved by the entry into of a Heads of Agreement dated 10 September 2004.

7 During the period 10 September 2004 to approximately May 2005, the parties to the Heads of Agreement sought to perfect those terms in a formal deed of settlement and release. No such deed was formalised.

8 In June 2005, Mr Wily was appointed as liquidator to BACM and Bondedge. In November 2005, Mr Wily was appointed as liquidator to BACF.

The Deed

9 On 16 October 2006, the following parties entered into the Deed:

(a) the Nauruan Entities;

(b) HLBC;

(c) the BA Companies;

(d) Mr Wily; and

(e) other parties not joined to either the Wily of NPRT Proceedings.

10 The Deed was entered into for the purposes of settling the various disputes and proceedings between the parties to the Deed, including the Federal Court Proceeding, and the issues the subject of the Heads of Agreement which was otherwise subsumed by the Deed.

11 One of the matters that the parties sought to address by entering into the Deed was the resolution of claims against the Nauruan Entities, the BA Companies and HLBC by various alleged creditors defined in clause 1.1 of the Deed as "Priority Creditors". The term "Priority Creditors" was used as a descriptive term only and did not, nor does it, serve to recognise or concede the legitimacy of claims made by those entities or that their claims have priority ahead of any other creditor (Clause 1.1 definition of Priority Creditors).

12 Each of the parties to the Deed represented and warranted that prior to entry into the Deed, they had taken independent legal advice as to the nature, effect and extent of the Deed (Clause 8.1(a)).

13 The convenient course in orientating a reader into the essential present issues is to set out the recitals to the deed:

Background

A In January 1999 and September 2000, GE Capital Finance by its agent GE Capital Security lent AUD$136 million and AUD$75 million to Ronfin and Ronsi Business.

B the GE Loans were guaranteed by the Applicants and secured by way of charges and registered mortgages over the Properties.

[the Applicants were defined as NPRT, Ronfin, Randwick Nominees, Central Pacific, Spencer investments, Ronsi Business and Ronsi Holdings]


C The GE Loans were repayable on 5 January 2004.

D The GE Loans were not repaid on the due date and GE subsequently appointed the Receivers who proceeded to sell and realise Properties.

E The Applicants allege but the Respondents deny that from about July 2003 the Respondents made various representations to the Applicants that they were in a position to proceed with funding arrangements to enable the Applicants to discharge their obligations under the GE Loans.

[the Respondents were defined as all of BACM, BACF, HLBC, Lazar and Bondedge]


F The Applicants allege but the Respondents deny that in reliance upon the representations made by the Respondents, the Applicants and Respondents entered into the Documents.

G A dispute arose between the Applicants and Respondents as to the amount owing by the Applicants to the Respondents under the Documents.

H The Applicants commenced the Federal Proceeding.

I On 8 September 2004 the Applicants and Respondents attended mediation before Sir Laurence Street which resulted in the Heads of Agreement being signed.

J From 8 September 2004 to about May 2005 the Applicants and Respondents sought to more perfectly document the Heads of Agreement by way of a deed.

K The terms of the deed referred to in the preceding recital were never finalised.

L In June 2005, the Liquidator was appointed as liquidator to BACM and Bondedge and in November 2005 to BACF.

M By undated further amended cross claim filed 21 June 2006 in the Federal Proceedings, the Liquidator seeks to enforce the Heads of Agreement.

N By second cross claim dated 30 June 2006 and filed in the Federal Proceeding, HLBC and Lazar seek to enforce the Heads of Agreement.

O The Applicants have purported to rescind the Heads of Agreement and otherwise deny that it is enforceable.

P In July 2006 the Allegations were made, which Allegations are denied.

Q In August 2006, the BA Receivers were purportedly appointed to BACM and BACF.

R In September 2006, the BA Receivers were removed as receivers and managers of BACM pursuant to an order made in the Terra Cresta Proceeding.

S The BA Receivers are the receivers and managers of BACF.

T The Liquidator does not accept that there has been a proper, legitimate or bona fide appointment of the BA Receivers.

U The parties to this document have agreed to settle their differences in accordance with the terms and conditions set out below.

Payment of the Reserve Sum

14 The Deed provided for the sum of $2,000,000.00 (Reserve Sum) to be paid by the Nauruan Entities into an account to be held by Mr Nikolaidis, the solicitor for Mr Wily and the BA Companies, and Mr Atkins, the solicitor for the Nauruan Entities, as trustees for the Nauruan Entities, the BA Companies and HLBC (Account) (Clause 3.2).

15 The Nauruan Entities agreed to pay the Reserve Sum into the Account and to make those funds available to enable Mr Wily to procure the settlement of outstanding claims identified as Priority Creditors in the Deed.

16 The Reserve Sum was to discharge any obligations of the Nauruan Entities to the Priority Creditors. Since the sums claimed were sums claimed to be owed by Nauruan Entities and not the liquidator or the BA Companies, the Liquidator required the co-operation of the Nauruan Entities and their solicitors, Henry Davis York [“HDY”].

The terms of clause 4

17 The terms of clause 4 of the Deed were as follows:

“4 PRIORITY CREDITOR RELEASES

4.1 The Liquidator will take all reasonable steps and use his best endeavours to procure the Priority Creditor Releases.

4.2 The Liquidator will progressively upon concluding his negotiations to procure each of the Priority Creditor Releases:


(a) simultaneously inform HDY, MD Nikolaidis and the BA Receivers in writing that he has reached agreement with a particular Priority Creditors [sic] to procure a Priority Creditor Release in respect of that Priority Creditors [sic] and the amount agreed upon for that Priority Creditor to enter into a Priority Creditor Release;

(b) provide to HDY, MD Nikolaidis and the BA Receivers, at the time of making the notification provided for in clause 4.2(a) a copy of the proposed Priority Creditor Release;

(c) request Scott Andrew Atkins and Leon Nikolaidis to withdraw funds from the Account in an amount being the lesser of the amount referred to in clause 4.2(a) and the amount provided in respect of that Priority Creditors [sic] in the table of the Priority Creditor Sums contained in clause 1.1;

(d) attend a settlement at HDY whereupon executed counterparts of each Priority Creditor Release will be exchanged in consideration for Scott Andrew Atkins and Leon Nikolaidis paying from the Account by bank cheque the amount withdrawn from the Account in accordance with clause 4.2(c) together with an amount representing interest, if any, accrued on the amount necessary to discharge the obligation under clause 4.2(c);

(e) where the amount referred to in clause 4.2(a) exceeds the amount provided in respect of the Priority Creditors in the table of Priority Creditor Sums contained in clause 1.1, then such amount will be paid by BACM, BACF, HLBC and Bondedge equally;

(f) in the event that as a result of agreements having been reached with Priority Creditors in amounts less than the amounts respectively provided in respect of those Priority Creditors in the table of the Priority Creditor Sums contained in clause 1.1, that amount shall be added to the surplus in the Account. The surplus shall be retained in the Account until a Priority Creditor Release is obtained in respect of all Priority Creditors, and until such time, the surplus or part of it shall be applied, if the Applicants so require, towards satisfying any judgment that may be obtained by any Priority Creditors against the Applicants in an amount in excess of the amount provided in respect of that Priority Creditor in the table of the Priority Creditor Sums contained in clause 1.1; and

(g) provided that prior to complying with his obligations under clauses 4.2(a) - (c) the Liquidator will obtain written consent from HLBC to proceed as proposed by the Liquidator, which consent will not be unreasonably withheld.


4.3 HDY and MD Nikolaidis will take all reasonable steps to give effect to the agreement as out in this clause 4 including but not limited to signing all necessary documents to give effect to the Priority Creditor Releases and the payments to be made from the Account.

4.4 For more abundant caution and for the avoidance of any doubt, the parties agree that:


(a) any funds remaining in the Account after the provision of all Priority Creditor Releases to HDY are to be paid equally to BACM, BACF, HLBC and Bondedge;

(b) the entirety of the Priority Creditor Releases are to be furnished to HDY by no later than 30 June 2007 failing which the balance of the funds then standing to the credit of the Account are to be paid to NPRT;

(c) other than as is provided for in clause 3.2, the Applicants have no liability to pay any further amount for or on behalf of any Priority Creditor or to satisfy any request by the Liquidator for funds to be paid to any Priority Creditor.

4.5 The Applicants shall provide reasonable assistance to the Liquidator in dealing with the Priority Creditors at the Liquidator's expense and to be charged at the normal hourly rates charged by HDY.

18 There were 11 named Priority Creditors under the Deed. Pursuant to clause 4, if Mr Wily obtained from all Priority Creditors releases (in the form set out in the Deed) by 30 June 2007 for less than $2 million, then he was entitled to retain the balance of the $2 million. If however all the Priority Creditor Releases were not obtained by 30 June 2007, the balance of the funds - $2 million - would revert back to the Nauruan Entities.

19 Ultimately in the events which happened the liquidator was unable to negotiate a Priority Creditor Deed of Release with Ernst & Young prior to 30 June 2007. These proceedings are centrally concerned with the causes and consequences of that failure.

Proceedings 50135/07

20 The burden of the case pursued by the BA parties in proceedings 50135/07 is the contention that the liquidator was unable to procure Priority Creditor Releases in accordance with the terms of the Deed because the Nauruan Entities breached their obligations to him under the Deed, with the result that he is entitled to the balance of the $2 million despite not obtaining all the required releases.

Proceedings 50096/07

21 By the other set of proceedings 50096/07 the Nauruan Entities claim the balance of the $2 million on the basis that the liquidator failed to procure the requisite Priority Creditor Releases by 30 June 2007.

The issues

22 A number of issues fall for determination, some in cascading fashion and some by way of alternatives:

i. What is the proper construction of the contractual obligations (if any) of the parties under clauses 4.1, 4.3 and 4.5 of the deed?

ii. Whether the Nauruan Entities and HDY breached their obligations under clauses 4.3 and 4.5 of the Deed in respect of the Ernst & Young Priority Creditor claim.

[Did the Nauruan Entities provide “reasonable assistance” (properly interpreted) to Mr Wily in dealing with the Priority Creditors?

In particular, did:

(i) the refusal by the Nauruan Entities to provide the form of authority sought by Mr Wily to permit Mr Wily’s solicitors access to files in the possession of Levitt Robinson (the Nauruan Entities former solicitors); and/or

(ii) the actions and conduct of the legal representatives of the Nauruan Entities at or outside Court on 27 and 28 June 2007,

constitute a breach of the requirements of clause 4.5?]


iii. Even assuming some breach, was the breach causative of Mr Wily’s failure to settle with Ernst & Young?

iv. Whether, in light of the answers to the above issues, the Nauruan Entities are entitled to rely on or enforce clause 4.4(b) of the Deed.

v. Who, in the events as they happened, is entitled to claim the balance in the funds standing in the account?

Issue 1 - the proper construction of clause 4 of the Deed

23 As is apparent from the terms of the deed, the extent of the parties' obligations are variously defined using phrases such as “best endeavours”, “all reasonable steps” and “reasonable assistance”. The meaning of such phrases was considered in the Court of Appeal in Waters Lane Pty Ltd & Anor v Sweeney & Ors [2007] NSWCA 200. Tobias JA, [99]–[107], with whom Giles & Santow JJA agreed, discussed whether there was any meaningful difference in the obligations imposed variously by phrases such as “best endeavours”, “all reasonable endeavours” and “reasonable endeavours”. Albeit without expressing a final conclusion, Tobias JA concluded that the various formulations were all likely to fall within the ambit of the often-cited obligations described by Gibbs CJ in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 62:

“…. an obligation to use ‘best endeavours’ does not require the person who undertakes the obligation to go beyond the bounds of reason; he is required to do all he reasonably can in the circumstances to achieve the contractual object, but no more: Sheffield District Railway Co v Great Central Railway Co (1911) 27 TLR 451 at 452; Terrell v Mabie Todd & Co Ltd (1952) 69 RPC 234 at 237”.

24 The Nauruan Entities have contended that the obligation imposed by the Deed in requiring HDY [not a party to the Deed but described therein as acting in their capacity as solicitors for the Nauru Entities] to take all reasonable steps to give effect to the agreement set out in clause 4 was plainly never intended to require HDY to procure the actual releases. The proposition is that the terms of both clauses 4.3 as well as 4.5 relate not to assisting the liquidator in actually obtaining the Priority Creditor Releases, but to assist him to deal with the priority creditors, in matters such as facilitating a dialogue between the parties: examples given by the Nauruan Entities are the obligation to provide relevant contact details for priority creditors or providing a letter of introduction to a priority creditor or similar.

25 The burden of this submission is to make the point that there was no obligation on the Nauruan Entities to assist the liquidator to actually settle the claims which matter was his and only his obligation under the deed. The contention was put as follows:

i. If the parties had desired to include a clause that the Nauruan Entities had an obligation to assist Mr Wily to obtain the Priority Creditor Releases, or to settle the claims, then they could easily have done so. On any reading, there is no such obligation. Moreover, such an interpretation of clause 4.5 is contrary to the general scheme of clause 4, because the whole purpose of the clause was that the Nauruan Entities were outsourcing the task to Mr Wily of negotiating the settlement of each of alleged Priority Creditor Claims, with the incentive for Mr Wily that if he procured each of the releases by 30 June 2007, the balance standing in the account would pass to him.

ii. It is contrary to the clear objective intent of the parties that subclause 4.5 should be construed as requiring the Nauruan Entities to assist Mr Wily in actually negotiating and obtaining settlement with the Priority Creditors: cf subclause 4.1.

26 I accept this submission as of substance.

27 However the submission eschews the importance of ascertaining the reach in clause 4.5, of the obligation to provide assistance to the liquidator in dealing with the priority creditors. The words which the draftspersons selected, were an obligation to provide 'reasonable assistance' in this regard. Clause 4.3 albeit not in precisely the same terms as clause 4.5, appears to an extent to have overlapped with clause 4.5, there being no material distinction between use of the words 'reasonable assistance' used in clause 4.5 and use of the words "or take all reasonable steps" used in clause 4.3.

28 The central issues litigated presently concern:

i. whether or not the obligation to provide reasonable assistance extended to an obligation upon the Nauruan Entities to facilitate the obtaining by the liquidator of any and if so what form of documentation;

ii. in particular [and upon the assumption that the obligation extended to require the Nauruan Entities to provide assistance in connection with the liquidator's attempts through Mr Nikolaidis, to obtain general access to files of the Nauruan Entities former solicitors], whether upon a close analysis of the factual circumstances, the Nauruan Entities are seen to have failed to provide that form of reasonable assistance.

The claim pleaded by the BA parties

29 The BA parties not only pleaded the express terms of the Deed, but went on to contend for the following two groups of implied obligation under the Deed:

Group 1

i. Upon the Nauruan Entities, the BA Group and HLBC and the BA Liquidator of good faith and fair dealing in the performance of the Deed.

ii. Upon the Nauruan Entities, the BA Group and HLBC and the BA Liquidator to cooperate with each other to facilitate the performance of the Deed including to co-operate to enable the BA Liquidator to fulfil his obligations under Clause 4.

iii. Upon the Nauruan Entities and the BA Liquidator not to hinder each other from performing their obligations under the Deed.

iv. Upon the Nauruan Entities not to hinder the BA Liquidator from performing his obligations under Clause 4 of the Deed.

Group 2


i. If the BA Liquidator failed to furnish copies of all the Priority Creditor Releases by 30 June 2007 by reason of the Nauruan Entities’ breach of the terms of the Deed or by reason of their breach of their implied obligations under the Deed the Nauruan Entities would not under Clause 4.4(b) be entitled to the balance of the funds standing to the credit of the Account.

ii. That a party in breach of the Deed or the obligations thereunder could not take advantage of their/its breach.

Interdependent contractual provisions

30 It is trite that a person may not claim to have a contractual provision enforced in its favour if that person is itself in breach of some interdependent obligation. One finds that principle in more than one place:

i. The general principle as expressed by Lord Blackburn in Mackay v Dick (1881) 6 App Cas 251:

"… as a general rule, … where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect"

ii. To similar effect in another field of discourse is the principle which relies upon the maxim 'nullus commodum capere potest de injuria sua propria' - 'no man can take advantage of his own wrong': There is a long line of authority to this effect [Cf. Broom's Legal Maxims , 10th edition, Pakistan Law House, 1989 at 191 et seq., noting that this maxim, being “based on elementary principles, is fully recognised in Courts of law and equity, and indeed, admits of illustration from every branch of legal procedure”.

31 A detailed examination of the alternate approaches to the derivation of the so-called duty to cooperate is to be found in State of New South Wales v Banabelle Electrical Pty Ltd [2002] 54 NSWLR 503 [at 54-69]. As the authorities there examined make clear, the principle is not in doubt, although what is reasonable will turn on the particular circumstances. Reference is also made to Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at [27] where Mason J [with whom Barwick CJ, Gibbs J, Stephen J and Aickin J agreed] observed as follows:

"It is easy to imply a duty to cooperate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but not essential to the performance of that party's obligations and not fundamental to the contract. Then the question arises whether the contract imposes a duty to cooperate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself."

32 In terms of the Deed the subject of these proceedings one of course has the express terms binding the Nauruan Entities to take all reasonable steps to give effect to the agreement and to provide reasonable assistance to the liquidator in dealing with the priority creditors. And as indicated in these reasons, the case hinges upon the content/reach of the obligation to provide reasonable assistance to the liquidator in dealing with the priority creditors.

33 The Nauruan Parties whilst not taking exception with the foundational proposition that a person may not claim to have a contractual provision enforced in its favour if that person is itself in breach of some interdependent obligation contend that the principle does not apply to the present circumstances for the following reasons:

i. Mr Wily’s ability to obtain the Priority Creditor Releases was never “contingent upon” or “conditioned by” assistance from the Nauruan Entities. Indeed, the definition of “Priority Creditor Sums” was calculated based on estimates made by Mr Wily as to the total sum of the claims, and that sum had been set-aside in the Account (as defined) for him to use to settle with the Priority Creditors (Wily affidavit sworn 7 November 2007 at [21]-[23]).

ii. Mr Wily was free to settle the claims on whatever basis he wished. Mr Wily’s view that he was charged with an obligation to determine the proper amount due to specific Priority Creditors (Wily T163.30) is a view that is simply not supported by anything in Clause 4.1 or 4.2 of the Deed, upon which Mr Wily had based his view (Wily T163.43).

iii. Mr Wily’s view that he could not settle with Ernst & Young unless he was satisfied that the amount of settlement was a “proper” one (Wily T163.51) is simply not supported by anything in the Deed.

34 As to proposition (i), the Nauruan Entities seem to me to be dealing with semantics. Provided that one does not jettison the obvious proposition that clauses 4.3 and 4.5 imposed obligations upon the Nauruan Entities to take reasonable steps/provide reasonable assistance to the liquidator in dealing with the priority creditors, I can accept proposition (i).

35 Propositions (ii) and (iii) are plainly of substance.

The alleged implied obligations of good faith and fair dealing

36 Scant attention was paid by the parties in examining the provenance of the alleged implied obligation of good faith in the performance of the Deed [let alone the alleged implied obligation of fair dealing].

37 The New South Wales Court of Appeal has observed that the Australian authorities make no distinction of substance between the implied term of reasonableness and the implied term of good faith: Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187.

38 In Vodafone Pacific Limited v Mobile Innovations Limited [2004] NSWCA 15, Giles JA at paragraph [189] referred to Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 and Burger King as supporting the proposition that “an obligation of good faith and reasonableness in the performance of a contractual obligation or the exercise of a contractual power may be implied as a matter of law as a legal incident of a commercial contract.”

39 In Overlook v Foxtel [2002] NSWLR 17, Barrett J drew attention to a number of significant parameters underlying the arguable nature and extent of a duty of good faith. One is able to discern a careful search for what his Honour considered as arguably the more substantial and separate content of the duty of good faith itself: that is to say, an adherence to standards of conduct which are honest, as well as being reasonable having regard to the party's interests [at 64].

40 Barrett J [at 65] recognised that if adherence to particular standards of conduct was indeed the predominant component of a separate obligation of good faith in the performance of contract, it was necessary to enquire about the extent to which selflessness was required:

It must be accepted that the party subject to the obligation is not required to subordinate the party's own interests, so long as pursuit of those interests does not entail unreasonable interference with the enjoyment of a benefit conferred by the express contractual terms so that the enjoyment becomes (or could become), in words used by McHugh and Gummow JJ in Byrne & Anor v Australian Airlines Ltd (1995) 185 CLR 410, “nugatory, worthless or, perhaps, seriously undermined”. This seems to me to be the principle emerging from paragraph 172 to paragraph 177 of the joint judgment in Burger King where the various authorities are collected and discussed.

41 Barrett J went on [at 67] to observe that there had been academic support for the proposition that an enquiry as to what was not in breach of good faith permitted the conclusion that the implied obligation of good faith underwrote the spirit of the contract and supported the integrity of its character:

"A party is precluded from cynical resort to the black letter. But no party is fixed with the duty to subordinate self-interest entirely which is the lot of the fiduciary: Burger King at paragraph 187. The duty is not a duty to prefer the interests of the other contracting party. It is, rather, a duty to recognise and to have due regard to the legitimate interests of both the parties in the enjoyment of the fruits of the contract as delineated by its terms.

42 The notion that the implied obligation of good faith could best be regarded as an obligation to eschew bad faith had, as Justice Barrett observed, received strong backing from Scalia J in the United States Tymshare Inc v Covell (1984) 727 F2d 1145:

“The doctrine of good faith performance is a means of finding within a contract an implied obligation not to engage in the particular form of conduct which, in the case at hand, constitutes ‘bad faith’.”

Scalia J went on to say that the contract itself will indicate the content of the duty in the sense that it is imbued or infused with the obligation not to engage in particular conduct.

[Scalia J had gone on to say that the contract itself would indicate the content of the duty in the sense that it was imbued or infused with the obligation not to engage in particular conduct.]

43 The effect of the Court of Appeal having in Burger King collapsed any distinction between contractual obligations of good faith and obligations of reasonableness renders it presently unnecessary to treat further with the duty of good faith analysis. There was no suggestion to the Court by counsel that the implied duty of good faith should be found to impose obligations on the Nauruan Entities above and beyond those required by the express terms [cf: clauses 4.3 and 4.5].

Whether the Nauruan Entities and HDY breached their obligations under clauses 4.3 and 4.5 of the Deed or under an implied term of good faith

44 The alleged breaches of clause 4.5 were pleaded as follows:

In breach of the express terms in Clause 4.5 of the Deed and in breach of their implied obligations, the Nauruan Entities in relation to the Priority Creditor claims by Ernst & Young:


i. Did not cooperate or provide reasonable assistance to the BA Liquidator in dealing with the Ernst & Young claim or in obtaining a Priority Creditor Release at a settlement sum which represented the true amount of the sums owed to Ernst & Young.

ii. Sought to hinder and did hinder the BA Liquidator in his endeavours to obtain a Priority Creditor Release from Ernst & Young at a settlement sum which represented the true amount of the sums owed to it.

iii. Encouraged Ernst & Young not to provide a Priority Creditor Release to the BA Liquidator or alternatively not to provide a Priority Creditor Release to the BA Liquidator at a settlement sum which represented the true amount of the sums owed to it.

45 The particulars relied upon were as follows:

(i) The failure of the Nauruan Entities to provide to its former solicitors, Levitt Robinson, a signed authority to enable the BA Liquidator and his legal and accounting advisers to inspect at the offices of Levitt Robinson the files in its possession in relation to it acting for the Nauruan Entities in respect of the Priority Creditor claim by Ernst & Young identified in the Deed or to otherwise cause the contents of those files to be made available to the BA Liquidator, thereby denying the BA Liquidator the opportunity to properly evaluate the claim or in a properly informed way be in a position to be able to negotiate with Ernst & Young to settle the claim.

(ii) The failure of HDY to take all reasonable steps or provide reasonable assistance to assist the BA Liquidator to obtain access to the documents referred to in (i) which may be inferred was on the instructions of the Nauruan Entities.

(iii) The failure of the Nauruan Entities or their legal advisers, including HDY, to assist BA Liquidator to negotiate with Ernst & Young to obtain a Priority Creditor Release or a Release at a settlement sum which represented the true amount of the sums owed to it including the failure to provide the plaintiff with all documents and information in the possession custody and control of the first defendant in relation to the Priority Creditor Claim of Ernst & Young.

(iv) That to the knowledge of the Nauruan Entities and HDY the BA Liquidator had obtained or was likely to obtain Priority Creditor Releases from each of the other 11 creditors and by 26 June 2007 had obtained such releases.

(v) The encouragement given to Ernst & Young by the Nauruan Entities and their legal advisers, including HDY, not to enter into a Priority Creditor Release or enter into a Priority Creditor Release at a settlement sum that represented the true sum owed to Ernst & Young. This may be inferred, inter alia, from:


(a) The actions and conduct of the Nauruan Entities through HDY and its other legal advisers both in Court and outside Court on 27 and 28 June 2006 in these proceedings.

(b) The facts, matters and circumstances referred to in (i), (ii), (iii) and (iv).

(c) Such additional facts, matters and circumstances particulars of which will be provided after discovery and interrogatories.

(vi) The whole of the conduct of the Nauruan Entities and HDY in relation to the Priority Creditor claim by Ernst & Young from which it may be inferred that, in order that the Nauruan Entities might pursuant to Clause 4.4(b) of the Deed be entitled to the balance of the funds standing to the credit of the account and thereby obtain a windfall, the Nauruan Entities breached Clause 4.5 of the Deed and the implied obligations.

46 The breach of Clause 4.3 of the Deed was pleaded as follows:

I The Nauruan Entities did not instruct HDY to take reasonable steps to give effect to the Deed; and

2 HDY did not take such reasonable steps.

The controversy with respect to the so-called 'mandate'

47 As is apparent from the allegations set out above, the key area in which the Nauruan Entities are alleged to have failed in their obligation to provide reasonable assistance and/or take reasonable steps concerns the attempt by Mr Wily to settle the claim of Ernst & Young.

48 Ernst & Young was one of the Priority Creditors listed in the Deed. Mr Wily therefore needed to negotiate with Ernst and Young and secure a Priority Creditor Release from that firm before the key date of 30 June 2007 in order to take advantage of the terms of the Deed.

49 In early October 2005, following the liquidator’s enquiry of Ernst & Young concerning its claim for fees in relation to the Nauruan Entities, Ernst & Young responded setting out the relevant background said to support its claim to fees owing in the sum of $560,347.65.

50 That letter enclosed a number of annexures comprising:

i. a signed mandate between Ernst & Young and the Nauruan Entities dated April 2004 and unsigned mandates;

ii. copies of outstanding invoices dated 12 April 2004;

iii. mandates between HLBC and the Nauruan Entities.

51 The mandate received from Ernst & Young relevantly contained the following conditions:

This mandate is subject to EY [Ernst & Young] discharging the current Mortgage held by GE Capital by raising funds through the refinance, or development or equity joint venture relating to the following properties:

Nauru House, 90 Collins Street Melbourne
not less than $80,000,000.00 AUD

Raytheon Building, 2234 Bay Area Boulevard (Clear Lake), Houston, Texas not less than $6,700,000.00 USD

In regards to: 677 – 689 Bourke Street, Melbourne

Obtaining the appropriate DA and tenants for that property.

52 It also contained a handwritten ‘Special Condition’ which appeared at the end of the mandate, which read:

"Special Condition

This mandate is conditional upon HLBC obtaining an extension with GE Capital for the Mercure Hotel conditions as per the deed of extension. This mandate is null and void should GE Capital appoint a receiver/liquidator."

53 Mr Wily and Ms Evans, an insolvency manager working in the Armstrong Wily firm, were both closely examined with regards to their response to the Ernst & Young claim. Ms Evans gave evidence that she and Mr Wily formed the view, some time prior to June 2007, that Ernst & Young had not satisfied a number of the express conditions relating to the refinancing of the various properties. Because of the failure to satisfy the terms of the mandate, they formed the view that no money was owing to Ernst & Young [save for disbursements of approximately $38,000].

54 Similarly, Ms Evans and Mr Wily formed the view that the terms of the special condition had been triggered by the appointment of a receiver and manager, and that consequently Ernst & Young were not entitled to be paid the fees claimed.

55 Upon Ms Evans raising this concern with Ernst & Young, that firm contended that the handwritten special condition in the mandate did not bind them because it was written on the document after it was signed by Ernst & Young. They contended that they had never accepted the handwritten terms;

56 Ernst & Young acknowledged that it had not complied with the typed conditions of the mandate regarding refinancing of properties: however it claimed that the agreement had been subsequently varied, and that these conditions had been waived. Over an extended period Ernst & Young contended that there was further documentation to sustain their position but was never able to produce that documentation.

57 Ernst & Young also relied upon a number of alternative grounds in support of its claim for $560,000 including:

i. that there were other mandate letters which would show a later departure from the handwritten condition at the foot of the mandate letter;

ii. a quantum meruit claim;

iii. a claim that HLBC had committed the Nauruan Entities to liability in some way.

58 Mr Wily also had some concerns about quantum of fees claimed, and the accuracy of the invoices which had been supplied, due to the absence of supporting material. Mr Nikolaidis, acting on Mr Wily’s instructions, had even gone so far as to allege to Ernst & Young that the invoices were fraudulent.

59 Prior to June 2007, Ernst & Young had failed to produce any material which satisfied Mr Wily that they were entitled to the amount claimed. In consequence, Mr Wily provided Ernst & Young with a draft notice of rejection on 1 May 2007, and a final notice of rejection in early June.

Whether the alleged breaches of obligation were made out on the evidence?

60 Mr Wily’s evidence was that he was concerned, in the period leading up to June 2007, that there might be documents, not in his possession, which altered or varied the terms of the Ernst & Young mandate. He was concerned that, if such documents existed, they might entitle Ernst & Young to a substantial settlement.

61 Specifically, Mr Wily was concerned, for reasons which will be set out below, that relevant documents were being held by a firm of solicitors which had previously been retained by the Nauruan Entities: Levitt Robinson. This failure of the Nauruan Entities to provide access to these ‘Levitt documents’ forms one of the bases for Mr Wily’s assertion that there was a breach of the obligation to provide reasonable assistance.

62 In order to establish whether the Nauruan Entities failed to provide reasonable assistance, it is necessary to examine the conduct of the relevant parties in some detail. But even before giving that detail it is convenient to note that:

i. the ultimate finding is that the alleged breaches of obligation were simply not proved;

ii. to the contrary, the materials in evidence demonstrate that HDY acting for Nauruan Entities spent very considerable efforts in endeavouring to locate documents sought by Mr Wily, their attempts in this regard being stymied by what would appear to be a strange melange of interlocking agendas of others.

The failure to provide access to the Levitt documents

63 Without purporting to be exhaustive, it is appropriate to consider a deal of the correspondence with passed between the relevant actors.

64 Mr Wily gave evidence that in or about October 2006 he had a conversation with Mr Stuart Levitt, a solicitor who had previously advised the Nauruan Entities. Mr Wily recalls that Mr Levitt told him that “I have in my office all of the Nauruan files and there is material in those files that you need to see before you finalise your determination in relation to the Ernst & Young claim.” Mr Wily asked to see the documents, and was told by Mr Levitt that he would need to be authorised by the Nauruan Entities before he could have access.

65 Mr Wily then instructed M D Nikolaidis & Co [“Nikolaidis”] to write to Henry Davis York [“HDY”] seeking general authority to access the Nauruan Entities’ files held by Levitt Robinson. The terms of the authority sought were as follows:

I hereby authorise and direct you to forward to M.D. Nikolaidis & Co all papers, writing documents, file note, file and to provide any information or assistance requested of them in relation to all or any of the Deed Creditors identified in paragraph 9 of the Heads of Agreement dated 10 September 2004.

66 HDY responded in a letter of 26 October 2006, which relevantly stated:

Your clients are not entitled to access our clients’ legal files. Further, Mr Levitt has no legal basis upon which to require our clients to provide any of the documents sought. In this regard, it is apparent to us that Mr Levitt is in a conflict of interest vis-à-vis our clients, having been their former solicitor.

Our clients are, however, cognisant of their obligations pursuant to clause 4.5 of the Deed. Accordingly, we attach documents in our clients’ possession that relate to the alleged Ernst & Young debt.

67 HDY provided Mr Wily with a set of five tax invoices from Ernst & Young. In a letter of 8 December 2006 HDY confirmed that the above invoices represented “all documents in their [clients’] possession that relate to the alleged Ernst & Young debt”.

68 The Wily parties reiterated their request for the Nauruan Entities to execute the authority to grant access to the Levitt documents in letters of 6 November 2006, 9 November 2006 and 5 December 2006 and in further correspondence over the following months.

69 In the letter of 9 November 2006 Mr Nikolaidis noted that: “our client has at no time suggested that he is entitled to access your client’s file. Our client however, is suggesting that he is entitled to see all of your client’s files so far as they relate to works responsible to the accounts rendered by Ernest [sic] & Young so as he can properly understand the work undertaken and assessed [sic] the proper amount to be paid to Ernest [sic] & Young (if anything at all).”

70 On 8 January 2007, HDY wrote to Levitt Robinson as follows:

We understand… that you hold certain documents belonging to our clients concerning work allegedly undertaken by Ernst & Young on our clients’ behalf.

Would you please immediately deliver up those documents to our office in order that we may be able to advise our clients in relation to a request from Mr Nikolaidis for access to certain documents. To this end, we look forward to receiving same by no later than 5.00pm on Friday, 19 January 2007.

71 Mr Nikolaidis wrote to HDY on 10 January 2007 to protest at the delay involved in this approach. He stated that:

As you will appreciate our client is becoming increasingly concerned about the delay which he is experiencing in dealing with the Priority Creditors… as a result of the Nauruan Entity Facility [sic] to make the documents available to him in accordance with their obligations under the Deed.

Our client is not concerned about issues which may arise between your firm Levitt Robinson or your clients, the Nauruans. Levitt Robinson has the files available which our client wishes to inspect to enable him to conduct investigations and enquiries into the Ernst & Young debt.

It is a simple matter for your client to provide the relevant authority to enable Levitt Robinson to make the files available to our client.

72 HDY replied by asserting that:

We were of the understanding that Levitt Robinson had already provided to us all documents pertaining to our clients. It is only recently that we have been informed, by you, that this is not the case. In the circumstances, it is reasonable that we would want to review any documents still in the possession of Levitt Robinson to ascertain matters of relevance and privilege before granting access to third parties.

From the files currently in our possession, we have provided you with the relevant Ernst & Young invoices to assist you in determining the Ernst & Young priority claim. In this regard, we note our clients’ obligation under the Deed of Settlement and Release to provide reasonable assistance to the liquidator in dealing with the priority creditors. We believe that all necessary steps are being taken in order to provide such assistance.

In any event, there is an ongoing dispute between Ernst & Young and Australian Litigation Funders in relation to the debt due to Ernst & Young. Whilst this dispute is on foot, we fail to see how our request for, and intended review of, documents supposedly held by Levitt Robinson will cause your client any delay in dealing with priority creditors.

73 On 23 January 2007 Mr Nikolaidis wrote to HDY noting that they had not yet received access to the Levitt files, and seeking an extension of the time limit provided by the Deed to 30 September 2007. The letter stated that:

In the event that you do not agree to this extension within 14 days from the date hereof we have been instructed to make an application to the Supreme Court

(a) to enforce your client’s compliance with the Deed; and

(b) to extend the time limit in paragraph 4.4; and

(c) for an order for costs.

74 They also sent a further letter on 23 January 2007 stating that:

We repeat our demand to your client to authorise us to access documents held by Levitt Robinson. For your client to continue to fail to do so is clearly in breach of his obligations pursuant to clause 4.4 (b) of the Deed [sic]; and that [sic] he is actively preventing our client from conducting investigations and enquiries considering the Ernst & Young debt.

75 On 15 February 2007, HDY again wrote to Levitt Robinson, noting that they had received no response to their letter of 8 January, or to their numerous telephone messages. They further noted that:

You are… undoubtedly aware of the significance and importance attached to you providing our clients’ files to us immediately.

We are being threatened by MD Nikolaidis & Co, on a weekly basis, with the commencement of legal proceedings against our clients due to our inability to provide them with the documents which are apparently in your possession. If you do in fact possess such documents, then we point out that these belong to our client and, as a matter of professional responsibility, you are obliged to provide these to us. Given the seriousness of the matter, we consider your failure to respond to our request as tantamount to unprofessional conduct and our clients reserve their rights to report your conduct to the Law Society of New South Wales.

We request that you provide us with an immediate response to our letter of 8 January 2007.

76 At the same time, HDY informed Mr Nikolaidis that “Levitt Robinson have refused (and we can only presume deliberately) to respond to our repeated requests for access to the documents”.

77 Levitt Robinson replied on 15 February 2007 in the following terms:

Firstly, do you continue act [sic] for PPB as Receivers and Managers appointed by GE Capital to the assets of the Nauru Phosphate Royalties Trust?

As you know, we did not act for any party in the Federal Court proceedings of which we became apprised, between the Nauruan interests and the BA Group interests, represented by Mr Wily as Liquidator.

Given that our files were created when we acted for NPRT against PPB and GE Capital and when you represented them rather than the Nauruan interests, we would need to have NPRT, plus each separate company under Nauruan control, among our quondam clients, execute separate authorities and directions to release these papers, in compliance with their respective Articles/Constitutions, with supporting evidence of such compliance.

78 Correspondence then passed between HDY and Levitt Robinson [on or about 15 or 16 February] in which HDY requested Levitt Robinson to deliver up all documents and files to Jacobsons Lawyers, who took over carriage of the matter from Levitt Robinson in 2005. Levitt Robinson responded by seeking evidence that the matter was transferred to Jacobsons Lawyers, denying any recollection that this had occurred.

79 On 17 February 2007, Mr Jacobson of Jacobsons Lawyers wrote to Levitt Robinson in the following terms:

You will recall that immediately after Levitt Robinson determined in about September 2005 to cease acting for the Nauru Parties to the BACF Heads of Agreement (by reason that you were also acting for creditors of BACF) -

1. the Nauru parties directed that Levitt Robinson deliver to our offices all files and documents held on behalf of the Nauru Parties; and

2. Accordingly Levitt Robinson delivered to us numerous boxes of documents held on behalf of the Nauru Parties.

I am now informed by Henry Davis York, Sydney that it has been suggested that Levitt Robinson might have retained some documents belonging to some or all of the Nauru Parties. Whilst I would be surprised if this was the case, I have been instructed by the Nauru Parties as a priority to request that you immediately deliver to us all files and documents – if any – retained by Levitt Robinson. Of course we shall be pleased to pay all costs associated with delivering any such documents to our offices in Melbourne.

I would be grateful to received your prompt advice whether Levitt Robinson continue to hold any documents on behalf of the Nauru parties.

80 On 6 March 2007 HDY wrote to Levitt Robinson noting that:

Despite requests made by both Jacobsons Lawyers and us for your firm to deliver up the files in your possession, you have failed to do so.

In our view, there is no basis for your continued refusal to deliver up these files. We cannot see any foundation for you to assert that either Jacobsons Lawyers or our firm lacks the appropriate authority to take delivery of the files. Further, you do not appear to have any right to maintain possession of the files.

In this regard and without prejudice to our clients’ rights generally, we refer you to Practice Rule 8 of the Revised Professional Conduct Rules 1995 and the authority of Wentworth v De Montfort (1988) 15 NSWLR 348, which we believe support the validity of the requests made by both Jacobsons Lawyers and our firm for our clients’ files to be delivered up. Of course, consistent with that authority, you may retain those documents in the files created for your own professional purposes and not for out clients’ benefit or use.

In the circumstances, our clients reserve their rights to commence proceedings against your firm in the event that the files are not delivered up to either Jacobsons Lawyers or our firm by 12.00pm on Thursday, 8 March 2007. We confirm that we will rely on this letter in relation to the issue of indemnity costs, which we will seek from you.

81 In response to this letter, Levitt Robinson replied by letter presumably misdated 15 February 2007 [but received on 6 March 2007] that:

After further review, it now appears that we sent all of the files to Andrew Jacobson, pursuant to his authority and request, in September, 2005…

82 HDY replied to this letter on 12 March 2007 as follows:

We are not aware of any particular documents or records that you hold which have not already been delivered up as required. We can therefore only assume that Mr Nikolaidis’ suggestion that you hold documents belonging to our clients relevant to the alleged Ernst & Young debt was an enquiry, rather than an assertion of fact. We are satisfied that your letter addresses Mr Nikolaidis’ query.

83 Despite being forwarded the letter from Levitt Robinson, Mr Wily continued to maintain that HDY had an obligation to provide the relevant authority to enable him to access the Levitt documents. In a letter of 19 March 2007 Mr Nikolaidis noted that, while Levitt Robinson had affirmed that it had delivered up the original file to Jacobson Lawyers, Levitt Robinson continued to hold copies of those files, which could potentially be inspected.

84 HDY was then informed by Mr Nikolaidis that Mr Levitt claimed to have conducted a review of the Nauruan files to extract those documents considered by him to be relevant to the alleged Ernst & Young claim. HDY sought permission from Levitt on 20 March 2007, and again on 27 March 2007, 24 May 2007 and 13 June 2007 to attend the office of Levitt Robinson to inspect those documents. On 14 June 2007, in response to further demands from Mr Nikolaidis to make the documents available, HDY invited Mr Nikolaidis to contact Levitt Robinson directly to arrange a time for HDY to inspect the documents.

85 Mr Nikolaidis wrote to Levitt Robinson on 15 June 2007 and again on 21 June 2007 requesting an inspection be arranged.

86 On 26 June 2007 Mr Nikolaidis served HDY with a summons seeking a declaration that the Nauruan Entities “do all things reasonable and proper to produce to (the Wily parties) the Nauruan files presently held by Levitt Robinson solicitors”. The plaintiffs failed in their attempt to obtain this order as urgent interlocutory relief.

87 The Levitt documents were ultimately produced to the Wily parties under subpoena on 30 July 2008. The same documents were also subsequently discovered from the files of the Nauruan Entities.

Did this constitute ‘failure to provide reasonable assistance’?

88 It was submitted for the Wily parties that there was a strict obligation on the Nauruan Entities to provide access to the documents which the liquidator required. Mr Hale SC put the submission as follows [at T245.3]:

Our proposition is whether it is reasonable or not reasonable , an arrangement had to be made, they had to do what was necessary to give the liquidator access to the documents. That could have been done by agreeing amongst other things to a limited authority, like that which was originally proposed, but at the end of the day it was the obligation of the Nauruans to give the liquidator access to the documents so that he could make an assessment or make arrangements to give the liquidator access to the documents pertaining to the Ernst & Young claim upon Nauru so that the liquidator could make his assessment.

89 In fact, the obligation in clause 4.5 of the Deed was to provide ‘reasonable assistance’ to the Liquidator in dealing with the Priority Creditors. The central issue is therefore whether the Nauruan Entities failed in this obligation to give ‘reasonable assistance’ by failing to:

i. provide the authorisation in the broad terms requested by the Wily parties; or

ii. take steps over and above those outlined above to allow the Wily parties to access the Levitt documents.

90 On the issue of whether it was reasonable for the Nauruan Entities to refuse to provide authority for general access to the Levitt files, Mr Hutley’s submissions are as follows [at 40-42]:

113 As the transcript [at 130.29] makes clear the court reserved into the final judgment the question of whether or not these exhibits were admissible. In my view the documents were admissible: they are admitted into evidence as exhibits LN 1 and LN 2.

Short minutes

114 The parties are to bring in short minutes of order on which occasion costs may be argued.