Noble Mineral Resources Ltd v Rothschild Australia Ltd - [2013] WASC 324

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: NOBLE MINERAL RESOURCES LTD -v- ROTHSCHILD AUSTRALIA LTD [2013] WASC 324

CORAM: MASTER SANDERSON

HEARD: 12 AUGUST 2013

DELIVERED : 29 AUGUST 2013

FILE NO/S: COR 68 of 2013

BETWEEN: NOBLE MINERAL RESOURCES LTD (ACN 124 893 465)
Plaintiff
AND
ROTHSCHILD AUSTRALIA LTD (ACN 008 591 768)
Defendant

Catchwords:

Corporations law - Application to set aside statutory demand - Turns on own facts

Legislation:

Nil

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff: Mr D J Jackson
Defendant: Mr B Dharmananda SC

Solicitors:

Plaintiff: Tottle Partners
Defendant: Corrs Chambers Westgarth

Case(s) referred to in judgment(s):

BBX Holdings Ltd v American Home Assurance Company [2007] NSWSC 549
Infratel Networks Pty Ltd v Gundry's Telco & Rigging Pty Ltd [2012] NSWCA 365

MASTER SANDERSON: This is an application to set aside a statutory demand. It raises a matter of some importance - not so far as the law is concerned for it raises no new matter of principle. But in terms of day to day commercial activity it raises the question of how far relationships need to be documented to be effective.
The facts are not substantially in dispute. In or about late 2011 and early 2012 the plaintiff was in the process of raising capital to fund its activities. After several false starts it engaged the defendant to assist it in its efforts. The defendant commenced providing its services on 1 May 2012. However the arrangement between the parties was documented in what is termed an 'Engagement Letter' dated 4 June 2012. A copy of the Engagement Letter appears as annexure BDT12 to the affidavit of Brian David Thomas sworn 24 April 2013 and filed in support of this application. The Engagement Letter is central to the dispute between the parties. Before considering it in detail I will give an overview of what actually occurred.
After their appointment the defendant undertook some work on behalf of the plaintiff. However they did not succeed in raising funds for the plaintiff. In fact through its own endeavours and with the assistance of third parties unrelated to the defendant the plaintiff did raise $85 million.
The Engagement Letter contained a provision which entitled the defendant to a fee of 5% if capital was raised by the plaintiff during the course of the defendant's engagement. Based upon this provision the defendant sent the plaintiff an invoice for $4,675,000. The plaintiff did not pay and the defendant issued a statutory demand dated 8 April 2013.
It is the plaintiff's position there is a genuine dispute as to the defendant's entitlement to its fee. Accordingly it seeks to have the statutory demand set aside under s 459G of the Corporations Act 2001 (Cth).
While there was no real dispute between the parties as to the applicable principles in matters such as this the defendant did refer to two decisions which counsel submitted were particularly relevant. The first of these was the decision of White J in BBX Holdings Ltd v American Home Assurance Company [2007] NSWSC 549. The argument in the case was whether there was a question of construction of a contract such that there was a genuine dispute warranting a statutory demand being set aside. Counsel referred to this case to support a submission in clear cases the court, when dealing with a statutory demand, can consider the proper construction of a contract. Justice White put the position as follows:
14.The plaintiff submitted that it need only show that a dispute as to the proper construction of the clause exists and that the grounds for that dispute were real and were not merely spurious, hypothetical, illusory or misconceived (Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452). I was referred to the oft‑cited passage from the judgment of Barrett J in Solarite Air Conditioning Pty Ltd v York International Australia Pty Ltd [2002] NSWSC 411 at [23]:
'23The tests of "plausible contention requiring investigation", "real and not spurious, hypothetical, illusory or misconceived" and "perception of genuineness (or lack of it)", applied in the context of a summary procedure where "it is not expected that the court will embark on any extended inquiry", mean that the task faced by a company challenging a statutory demand on the "genuine dispute" ground is by no means at all a difficult or demanding one. The company will fail in that task only if it is found upon the hearing of its s 459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow. The court does not engage in any form of balancing exercise between the strengths of competing contentions. If it sees any factor that, on rational grounds, indicates an arguable case on the part of the company, it must find that a genuine dispute exists, even where any case apparently available to be advanced against the company seems stronger.'
15.It was submitted for the plaintiff that in order to show the dispute was genuine, it was sufficient to show that the dispute as to the meaning of the clause was one which was arguable.
16.In Delnorth Pty Ltd v State Bank of New South Wales (1995) 17 ACSR 379, Cohen J said (at 384‑385):
'Section 459H(1) refers to the court finding that there is a genuine dispute. The parties have argued this case on the issue of whether the proper construction of the agreement and the facts results in the plaintiff owing money to the defendant. The facts were not in dispute and there was thus no question of whose evidence would be accepted on a final hearing. Under the previous legislation, when there was a claim that there was a bona fide dispute on substantial grounds as to the debt claimed, the court could decide that dispute if it arose from a question of law or was of short compass. See, for example, Offshore Oil NL v Acron Pacific Ltd (1984) 2 ACLC 8.'
I consider that under the provisions of the Corporations Law, the same approach can be taken. Although questions of disputed fact will not be decided on an application to set aside a statutory demand, the issue of whether there is a genuine dispute can be resolved on that application where the question arises on a short point of law or the construction of documents or agreed facts. In Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785; 12 ACLC 669, McLelland CJ in Eq said that the expression 'genuine dispute' connotes a plausible contention requiring investigation. Where no further investigation is required, I consider that the court on an application under s 459 g may decide as a matter of law if there is a genuine dispute. The occasions when this is possible may be few, but in my view this is one of them.
17.These observations have been adopted on a number of occasions, most recently by Campbell J in Lifestyle Retirement Projects No 2 Pty Ltd v Parisi Homes Pty Ltd [2005] NSWSC 705 ; (2006) 22 BCL 31 at [16]-[17]. Where the question is essentially one of construction of a contract and the question does not depend on conflicting evidence requiring findings of fact, to use the words of Cohen J in Delnorth Pty Ltd v State Bank of New South Wales, the Court can then decide 'as a matter of law if there is a genuine dispute'. Having regard to what I have decided is the proper construction of the relevant clause in the insurance policy, there is no genuine dispute that the plaintiff is indebted for the amount claimed in the statutory demand.
The second case relied upon by counsel was the decision of the Court of Appeal in New South Wales in Infratel Networks Pty Ltd v Gundry's Telco & Rigging Pty Ltd [2012] NSWCA 365. Justice Young (with whom the other members of the court agreed) said:
45.The primary judge said at [24] that where the relevant dispute depends upon the construction of the relevant contract, the court will ordinarily determine that question on an application to set aside the statutory demand where the factual matrix for the determination is present and there has been sufficient time to make proper submissions as to the question. His Honour cited Delnorth Pty Ltd v State Bank of NSW (1995) 17 ACSR 379 at 384 (Cohen J) and Re Seduce Group Australia Pty Ltd [2011] NSWSC 290 at [27] and following per Ward J.
46.With respect, the primary judge has to a degree misstated the principle. The court may determine questions of construction of a contract in an appropriate case. However, this is not, as his Honour said, the 'ordinary' situation, it is what may occur on a few occasions: Seduce at [28] and see Trecomax Pty Ltd v Prentice (2004) 50 ACSR 314; [2004] FCA 1057 at [35] where Sackville J actually said it was not ordinarily the occasion for the court to construe the contract.
Counsel for the defendant acknowledged then that if this originating process was to be dismissed it was necessary to consider the proper interpretation of the Engagement Letter. It was counsel's submission the position was so clear and the proper interpretation so obvious that the plaintiff was not able to establish there was a genuine dispute and the originating process ought be dismissed.
Counsel for the plaintiff on the other hand maintained there were four areas which required investigation. At first it was said it was necessary to settle on the correct interpretation of the Engagement Letter. That would require evidence as to precisely what the parties had agreed. Second having determined the contractual framework it was necessary to look and see what had been done by the defendant by way of corporate advice in determining whether or not the defendant had satisfied its obligations under the contract. Third it was submitted the capital raising had not been achieved through the efforts of the defendant and therefore the fee claimed by the defendant was not payable. Fourthly it was said the Engagement Letter required the parties to negotiate in good faith when the situation changed, the situation had changed here and as no negotiation had taken place there was a genuine dispute as to the entitlement of the defendant to its fee.
The Engagement Letter, which was prepared by the defendant and sent to the plaintiff for signature, runs to 12 pages. While it is reasonably comprehensive it does not purport to be a contract drawn by lawyers. But it sets out a working arrangement entered into between two commercial organisations. The plaintiff is a listed public company; the defendant is a merchant bank with an international presence. This was not some ad hoc one‑off arrangement between two unsophisticated entities. This was a commercial arrangement entered into knowingly and for a specific purpose.
Clause 1 of the Engagement Letter is headed 'Rothschild's role, duties and responsibilities'. Appearing as subsection a) are 'Services'. There follows a number of bullet points which sets out Services to be provided to the plaintiff by the defendant. These Services are expressed in general terms. For instance bullet point 1 reads as follows:
Identifying potential Transactions for Noble to undertake, including relevant targets or merger partners;
Again, bullet point 7 reads:
Advising Noble on establishing and maintaining defence preparations and strategies;
From the way these Services are expressed some are to be provided and others will not be provided. In some areas the defendant might have to provide significant Services; in others none at all.
It was not a requirement the defendant must provide all of these Services. An interpretation of the Engagement Letter in that way does not make any real sense. But it is unnecessary to finally decide that question. That is because of the way in which the fee entitlement arises.
Clause 3 of the Engagement Letter is under the subheading 'Remuneration'. Appearing then under the heading 'A. Capital Raising' there is the following:
Monthly Retainer:
A retainer fee of A$50,000 per month will be payable to Rothschild for any month in which, at Noble's request, Rothschild is actively and materially involved in providing Services to Noble in relation to a potential Capital Raising Transaction. Monthly Retainers in relation to a Capital Raising shall be payable by Noble to Rothschild:
•upon earlier of Noble receiving the proceeds from any Capital Raising or the Capital Raising process being terminated; and
•up to a maximum value of A$300,000 (equivalent to six months of monthly retainers),
however, the amount of any CR Transaction Fee (as defined below) that becomes due to Rothschild in relation to a Capital Raising will be reduced by the amount of any Capital Raising Monthly Retainer previously paid by Noble to Rothschild.
CR Transaction Fee:
Where Noble undertakes a Capital Raising (including a capital restructuring) in relation to which Rothschild has been providing Services to Noble, then Noble will pay to Rothschild a fee ('CR Transaction Fee') equal to:
•5.0% of any Gross Proceeds (as defined below) received by Noble in respect of the Capital Raising; except that
•where Gross Proceeds are raised or restructured where the counterparty to the Capital Raising is Investec (or any associated company), Herschel Principal Finance (or any associated company) or JGB Management Inc. (or any associated company), the CR Transaction Fee payable to Rothschild is 2% of any Gross Proceeds received by Noble in respect of the Capital Raising.
provided that other than as reduced by the amount of any Capital Raising Monthly Retainer in no event shall the CR Transaction Fee payable to Rothschild hereunder for a Capital Raising be less than A$500,000.
The term 'Services' is defined in cl 1a) to be:
(the services outlined above in respect of Change of Control, Other Material Transaction and Capital Raising being together, the 'Services').
During the course of his submissions counsel for the plaintiff conceded at the time of the capital raising the defendant had been providing some of the Services to the plaintiff. Once that concession was made, and in my view it was properly made, then it is clear the defendant is entitled to its fee. There is nothing in the relevant clause which requires the fee to be paid only in cases where the defendant is directly responsible for raising capital. The clause is not properly described as a success fee. It is simply a fee payable when capital is raised during the period of the defendant's engagement. In my view the clause is crystal clear.
It was argued by the plaintiff that as the defendant had no significant role in raising the capital it would be unreasonable for such a large fee to be payable. For their part, and probably only for the purposes of this application, the defendant conceded it had not played a significant part in the capital raising. But that is of no consequence. The parties agreed if capital was raised during the currency of their agreement the defendant would be paid a fee. Capital was raised and that fee is now payable.
The final point related to cl F of the Engagement Letter which is in the following terms:
F.Spirit of this Engagement
The parties acknowledge that the terms of this Engagement (including fees) cannot cater for every situation and outcome which might arise and that the nature, size or timeframe of the Transaction and/or Rothschild's role and the nature of services required change from that set out in this Engagement. In those circumstances, the parties agree to act reasonably and as soon as practicable to negotiate in good faith any amendments to this Engagement Letter (including without limitation, variations to the basis of any future remuneration) that reflect the changed situation.
In my view this clause is of no relevance in the present circumstances. This was not a situation where there was an unexpected outcome. Rather, capital was raised as was always the plaintiff's intention. It may have hoped the defendant would facilitate the capital raising but that did not come to pass, but clearly there was never any certainty that capital would be raised. In the circumstances of this case the provisions of cl F cannot be tortured such as to require there to be some form of negotiation. The fee was agreed, the capital was raised and the fee is now payable. In my view there is no substance to the plaintiff's argument and there is no genuine dispute as to this debt being owing.
The originating process ought be dismissed. I will hear the parties as to the precise form of orders.