Oswal v Yara Australia Pty Ltd [No 3] - [2011] WASC 255

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: OSWAL -v- YARA AUSTRALIA PTY LTD [No 3] [2011] WASC 255

CORAM: KENNETH MARTIN J

HEARD: 20, 22, 23, 24 & 27 JUNE & ON THE PAPERS ON 28 JUNE & 1 JULY 2011

DELIVERED : 14 SEPTEMBER 2011

FILE NO/S: CIV 3078 of 2010

BETWEEN: RADHIKA OSWAL
Plaintiff
AND
YARA AUSTRALIA PTY LTD
First Defendant
PANKAJ OSWAL
Second Defendant
BURRUP HOLDINGS LIMITED
Third Defendant
TOR HOLBA
VINOJIT AMBALAVANER
Fourth Defendants
(BY ORIGINAL ACTION)
YARA AUSTRALIA PTY LTD
Plaintiff
AND
RADHIKA OSWAL
First Defendant
PANKAJ OSWAL
Second Defendant
BURRUP HOLDINGS LIMITED
Third Defendant
TOR HOLBA
VINOJIT AMBALAVANER
Fourth Defendants
BURRUP FERTILISERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED)
Fifth Defendant
RAMESH SODUM
Sixth Defendant
IAN CARSON, DAVID MCEVOY AND SIMON THEOBALD AS THE RECEIVERS AND MANAGERS
Seventh Defendants
(BY COUNTERCLAIM)

Catchwords:

Contract - Construction - Surrounding circumstances - Shareholders' Deed - Nominee directors - Vesting under Discretionary Trust - Carry over of nominee director voting rights on board of parent corporation - Assignability of rights to appoint nominee directors - Meaning of word 'comply' in phrase 'comply with'

Legislation:

Nil

Result:

Questions answered on preliminary issue

Category: A

Representation:

Original Action

Counsel:

Plaintiff:    Mr P Durack SC, Mr M N Solomon & Mr A Shearer
First Defendant  :    Mr J C Sheahan SC, Mr R W Douglas & Ms K Levy
Second Defendant  :    No appearance
Third Defendant  :    No appearance
First-named Fourth Defendant     :    No appearance
Second-named Fourth Defendant :    No appearance
Solicitors:
Plaintiff:    Norton Rose Australia
First Defendant  :    Clayton Utz
Second Defendant  :    Maxim Litigation Consultants
Third Defendant  :    Blake Dawson
First-named Fourth Defendant     :    Gadens Lawyers
Second-named Fourth Defendant :    Blakiston & Crabb

Counterclaim

Counsel:

Plaintiff:    Mr J C Sheahan SC, Mr R W Douglas & Ms K Levy
First Defendant  :    Mr P Durack SC, Mr M N Solomon & Mr A Shearer
Second Defendant  :    No appearance
Third Defendant  :    No appearance
First-named Fourth Defendant     :    No appearance
Second-named Fourth Defendant :    No appearance
Fifth Defendant  :    Mr J Karkar QC & Mr K de Kerloy
Sixth Defendant  :    No appearance
Seventh Defendants  :    Mr J Karkar QC & Mr K de Kerloy

Solicitors:

Plaintiff:    Clayton Utz
First Defendant  :    Norton Rose Australia
Second Defendant  :    Maxim Litigation Consultants
Third Defendant  :    Blake Dawson
First-named Fourth Defendant     :    Gadens Lawyers
Second-named Fourth Defendant :    Blakiston & Crabb
Fifth Defendant  :    Freehills
Sixth Defendant  :    In person
Seventh Defendants  :    Freehills

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

Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Australian Zircon NL v Austpac Resources NL [No 2] [2011] WASC 186
Claro v Minister for Immigration, Local Government and Ethnic Affairs (1993) 46 FCR 494
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981 ‑ 1982) 149 CLR 337
EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23
Elders Forestry Ltd v Bosi Security Services Ltd [2010] SASC 233; (2010) 242 FLR 360
Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603
GMA Garnet Pty Ltd v Barton International Inc [2010] FCAFC 38
Greer v Kettle [1938] AC 156
Hughes v St Barbara Mines Ltd [No 4] [2010] WASC 160
International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896
Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 5
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579
Oswal v Yara Australia Pty Ltd [No 2] [2011] WASC 146
Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Process Minerals International Pty Ltd v Consolidated Minerals Pty Ltd [2010] WASC 266
Reardon Smith Line v Hansen‑Tangen [1976] 1 WLR 989
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603
The Bell Group Ltd (In Liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008‑9) 39 WAR 1
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Zhu v Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530

Table of Contents

The Parties and their Preliminary Issue...................................................................................... 7
Overview of Preliminary Issue................................................................................................... 9
Some key parts of cl 4 of the SD.............................................................................................. 13
Preliminary observations concerning cl 4.1(c) of the SD........................................................ 15
Share Sale Agreement of 19 September 2008 (the SSA)......................................................... 22
Pankaj's personal interest in 35% of BHL's shares................................................................... 23
Overview of cl 5(b) of the SSA................................................................................................ 25
Summary of Issues................................................................................................................... 33
Commencement of action......................................................................................................... 33
Yara's defence and counterclaim.............................................................................................. 38
BFPL......................................................................................................................................... 40
Summary as to shareholding position for BHL after the completion of the sale under the SSA 41
Further pleadings...................................................................................................................... 41
Arguments not being resolved on the Preliminary Issue.......................................................... 43
Genesis, background and surrounding circumstances.............................................................. 44
Evidence relied upon................................................................................................................ 49
Found facts submitted as bearing upon the constructions of the SD and SSA........................ 51
18 September 2008: One day before the SSA......................................................................... 64
Some concluding factual observations: Assumption Deed by Pankaj.................................... 77
Limited rights of transfer, coupled with pre‑emption rights for BHL shares by SD, cl 9 and cl 10 81
Rival respective positions: Nominee Directors of BHL.......................................................... 83
Construction of cl 5(b) of the SSA........................................................................................... 87
Meaning of 'comply' in the context of the phrase 'comply with' in cl 5(b) of the SSA............ 90
Conclusions as to interpretation of cl 5(b) of the SSA............................................................. 93
Theoretical transferability of BHL Nominee Director rights under cl 4.1(c) of the SD: Rival arguments 95
Conceptual transferability concluding analysis: cl 4.1(c) SD Nominee Director rights....... 112
Did the cl 4.1(c) rights terminate before 19 September 2008?.............................................. 117
Yara's board control hypothesis............................................................................................. 118
Construction conclusions........................................................................................................ 121
Alternative argument: Vesting.............................................................................................. 122
Formal responses to the Preliminary Issue questions posed arising from these reasons....... 123
Schedule................................................................................................................................. 129
Extracts from SD and SSA..................................................................................................... 129

(A) The SD of 24 March 2008.......................................................................................... 129
(B) The SSA of 19 September 2008................................................................................... 156
(SSA) Schedule 1 - Seller's Warranties.............................................................................. 164

KENNETH MARTIN J:

The Parties and their Preliminary Issue

The parties in this action agreed to orders of 19 May 2011 that I determine a preliminary issue in these terms:
That there be a trial separately from, and before, any further trial of the proceedings, of the following issues of construction:
(a)the rights to appoint Nominee Directors (as that expression is defined in the Shareholders' Deed) or any other director to the board of BHL;
(b)voting entitlements of each Nominee Director or any other director at a board meeting of BHL;
(c)whether a written notice of appointment of a Nominee Director by a shareholder is required to be given to each party to the Shareholders' Deed; and
(d)in the context of issues (a), (b) and (c) above, the ownership of the shares in BHL,
on a proper construction of the following documents as referred to in the pleadings [although not stated in the orders, I will mention the dates of each of the respective documents alongside each document when mentioned]:
(1)The Shareholders' Deed; [of 24 March 2008, exhibit 1, tab 4]
(2)The Old Shareholders' Deed; [of 13 March 2005, exhibit 1, tab 2]
(3)The Share Sale Agreement; [of 19 September 2008, exhibit 1, tab 3]
(4)The Constitution; [of BHL of 22 January 2008, exhibit 1, tab 3, annexure B to the Shareholders' Deed a constitution applicable to a limited corporation rather than a proprietary limited corporation]
(5)The Old Constitution; [when Shorewatch Pty Ltd was first incorporated on 14 June 2001, exhibit 1, tab 1]
(6)The Deed of Assumption, [referring to a document that is found in exhibit 1 tab 6 and referred to there as an 'Assumption Deed Poll' of 13 October 2009 by Radhika Oswal - albeit I note that this document is objected to by Yara as to its authenticity, authorship and communication]
as at and from:
(A)13 March 2007;
(B)26 April 2007;
(C)the date of entry into the Shareholders' Deed [24 March 2008];
(D)the date of entry into the Share Sale Agreement [19 September 2008];
(E)the date of entry into the Deed of Assumption [13 October 2009]; and
(F)24 December 2010.
As the terms of the preliminary issue suggest, I am only concerned at this point of the proceedings with issues of contractual construction.
The focus of the construction exercise distils to two of the above written instruments. The first is a deed of 24 March 2008, made between four parties, known as the Shareholders' Deed (which I will refer as 'the SD' or 'SD'). The parties to the indenture were Mr Pankaj Oswal in the capacity of trustee of the Burrup Trust (the Burrup Trustee), Yara Australia Pty Ltd, first defendant in these proceedings (and plaintiff by counterclaim), Burrup Holdings Limited (BHL) (the third defendant to the action and counterclaim and the fifth defendant by counterclaim) and Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) (BFPL). The appointed receivers and managers of BFPL (Messrs Carson, McEvoy and Theobald) are the seventh defendants by counterclaim. They were added as parties to the proceedings under my orders of 17 May 2011, see Oswal v Yara Australia Pty Ltd [No 2] [2011] WASC 146.
Whilst Mr Pankaj Oswal is a party to that instrument in the capacity of trustee:
(a)The Burrup Trustee, as Pankaj Oswal is sometimes referred, is not presently a party to either the claim or counterclaim in the proceedings.
(b)Mr Pankaj Oswal personally is named as second defendant to the action by the plaintiff (his wife, Mrs Radhika Oswal). Mr Pankaj Oswal is also second defendant to the counterclaim brought by Yara Australia Pty Ltd (Yara) in the proceedings.
(c)Pankaj Oswal and his wife, Radhika Oswal, as the second defendant and plaintiff respectively in the proceedings, have been represented from the outset by separate firms of solicitors, no doubt because of differing commercial interests arising from the proceedings.
(d)Neither Pankaj Oswal nor Radhika Oswal personally was a party to the SD.
The second key instrument for examination is a written agreement of 19 September 2008, referred to as the Share Sale Agreement (the SSA). Two parties to the SD became parties to the SSA, namely Yara and the Burrup Trustee. However, the two corporations, BHL and BFPL (who were parties to the SD) were not parties to the SSA.
The remaining parties to the SSA were Mrs Radhika Oswal personally and her husband Pankaj Oswal personally (to whom I will on occasion refer for ease of reference and convenience simply as Radhika and Pankaj respectively).
The SD and the SSA are the key instruments. Their terms and content read as a whole and together are so important in the overall construction exercise that it will be necessary for me to set out large components of their contents. During submissions, almost every word in every line of every clause in these documents was referred to as carrying some significance, insight or nuance in the overall construction exercise. It should not be thought that any word, phrase, clause or punctuation has escaped my eye in the overall construction task at hand. For convenience I have decided to set out significant portions from these instruments in a Schedule at the end of these reasons. My selection of clauses found in the Schedule ought not be assessed as any sort of indication that I have not had regard to the full content of each of these instruments.

Overview of Preliminary Issue

By way of overview at this point, I will observe that recitals to the SD record it as an agreement between just two 'Shareholders' (Yara and the Burrup Trustee). It is a shareholders' agreement that is relevant not only to the board management of BHL (in which the two 'Shareholders', the Burrup Trustee and Yara, are recorded as having respectively, a 70% and 30% shareholding in BHL) by its directors, but also to the boards of all Group Member corporations related to BHL.
One of BHL's wholly owned subsidiaries, BFPL, owns an ammonia plant, operationally established on the Burrup Peninsula of Western Australia since around 2006. The plant was established as a greenfields startup operation commencing around 2000.
The Burrup Trust was established under a Deed of Trust executed in 2001. Originally it was called the Vashundra Trust. But it changed name to the Burrup Trust shortly after it had been established (see exhibit 2, tab 9).
Recitals within the SD stipulate that it is an agreement entered between the Burrup Trustee and Yara, in respect of their (at the time) respective 70% and 30% shareholding interests in BHL. Whilst BHL and BFPL are parties to the SD, they are not 'Shareholders' as that term is defined and used in the SD.
Many of the covenants in the SD concern only 'Shareholders'. The 2008 SD replaced an earlier shareholders' agreement of 2005 between the same two parties, but involving a further person, Mr Vikas Rambal (as trustee of the Vikas Rambal Family Trust (the Rimbal Family Trustee)), who, at the time, held a 15% shareholding interest in BHL.
The Rimbal Family Trustee sold the 15% shareholding interest in BHL to the Burrup Trustee in 2007, thereby raising the shareholding interest of the Burrup Trustee from 55% to 70%.
Departure from a formerly tripartite BHL shareholding arrangement between 'Shareholders' under the 2005 Old Shareholders' Deed (OSD) to just a two party 'Shareholders' agreement is reflected under the terms of the SD of 24 March 2008.
The 2008 SD contains some covenants applicable between its four parties. But of particular significance to this preliminary issue are the BHL board voting and management covenants, applicable just as between the two designated 'Shareholders' to the SD, who then held respectively, 70% and 30% shareholding interests in BHL.
Broadly speaking, the SD reflects a quasi‑incorporated co‑venture project between the two remaining Shareholders, and sets out how the Shareholders agree to manage their venture concerning the operation of the Burrup ammonia plant. That plant, by 2008, had been successfully established as an operational business. There was a planned share float (IPO) and public listing on the Australian Stock Exchange (ASX) for the last half of 2008.
The SD's regime of corporate board voting and governance arrangements altered the more typical directors' decision‑making and director voting procedures that would otherwise apply in a corporation. Rather than seeing directors elected at a Shareholders' general meeting forming the corporation's board of directors, within which there would be either executive or non‑executive directors holding one vote each, the SD (and the OSD before it) implemented a very different corporate board governance structure.
The OSD and the SD both set down regimes of corporate governance through a mechanism of what are identified as 'Nominee Directors'. The OSD and the SD both specify that there can be no more than five 'directors' of the BHL board (see cl 4.1(b)). Under the SD, Yara and the Burrup Trustee, as the only two 'Shareholders', are entitled to appoint 'Nominee Directors' to the BHL board. Yara is granted a right to appoint one Nominee Director (as had been the case under the OSD). The Burrup Trustee is granted the right to appoint up to three Nominee Directors (as had been the case under the OSD). Those appointment rights are conditional upon the appointing 'Shareholder' of a Nominee Director or Directors holding and continuing to hold a minimum level of BHL shares (5%).
At BHL board meetings, Nominee Directors vote by a process that would mirror the outcome of a vote taken by poll conducted on the floor of a BHL Shareholders' general meeting. Nominee Directors of BHL are entitled to vote a numerical level of votes that is calculated by reference to their appointor Shareholder's holding of ordinary shares in BHL at the time of the vote. So, in the case of Yara, as of 24 March 2008, its Nominee Director on BHL's board held a 30% voting interest on a poll taken at BHL board meetings. The Burrup Trustee at that time could appoint potentially up to three Nominee Directors, who together had the entitlement to vote at a directors poll at BHL board meetings at a weighting equating to the Burrup Trustee's 70% ordinary shareholding.
This 2008 power allocation clearly displays a recognised differentiation between the respective power of the majority and minority Shareholders. However, there was a very important check or qualification overlaying this weighted board poll vote regime.
By another clause in the SD (cl 4.5(b)(ii)), all four parties, but particularly the two 'Shareholders', covenanted that a 'Special Majority' for some board decisions concerning a (wide) range of identified key subject matters concerning the operations of BHL was needed in order for board resolutions upon these nominated subject areas to be carried. The breadth of potential subject matters specified for the BHL board decisions that would require a 'Special Majority' is set out in Schedule 1 to the SD.

A Special Majority under the 2008 SD was set (see SD definition cl 1.1 'Special Majority' and sub‑definition (a)) at 80% of the votes of the participating Shareholders. [Special Majority, defined under cl 1.1 of the OSD, had been set at 90%.]
In circumstances where the Burrup Trustee held a 70% majority voting interest, need for BHL board resolutions upon Schedule 1 subject matters to be passed at an 80% majority carries obvious ramifications. Yara, as the (30%) minority Shareholder, effectively held a right of veto against board resolutions taken for Schedule 1 subject matters through the votes of its Nominee Director.
Consistent with a good faith relationship between the two parties controlling BHL, as well as its group subsidiaries and related corporations, unanimity was essentially required between the two power blocks of 'Shareholders' upon important specified management decisions for BHL.
Recourse to Schedule 1 in the SD indicates that recurring board management issues such as the annual budget and business plan for BHL, deviations from that annual budget and business plan and any significant asset sales or acquisitions would all fall into the genre of BHL board resolutions requiring unanimous support from both BHL's two Shareholders in order to be validly carried as resolutions of BHL's board.
Thus for Yara, BHL board governance arrangements involving a right to appoint a Nominee Director, coupled with the SD requirement for Special Majorities set at 80% upon significant BHL management topics, reflected an elaborately balanced power sharing arrangement with the Burrup Trustee. Such an arrangement afforded Yara as the minority BHL Shareholder a measured, but not dominant governance participation. It is clear that this arrangement envisaged cooperation and consensus between the two power blocks upon important BHL management decisions.
This summary is of course an oversimplification of what presents under the SD's complex governance system that is expressed to be the entire agreement of all the four parties to the SD.
It is convenient, since it is at the heart of the ensuing construction exercise, to set out at an early point the precise Nominee Director voting governance provisions within the SD which deliver the unique BHL board governance power balance.

Some key parts of cl 4 of the SD

Clauses 4.1(c), (d), (e) and (f), 4.4(e) and (f) and cl 4.5 of the SD need to be assessed together within the SD as a whole. Relevantly, however, these parts of cl 4.1, 4.4 and 4.5 of the SD are seen to provide:
4.1Directors
(c)(Appointment): For as long as it holds 5% or more of the issued share capital of Holdings, Yara may appoint one non-executive director to the Board of each company in the Company Group. For as long as he holds 5% or more of the issued share capital of Holdings, Pankaj Oswal may appoint the remaining 3 directors to the Board of each company in the Company Group. Holdings will appoint to the Board of each other company in the Company Group the persons nominated by the Shareholders in accordance with this clause.
(d)(Removal): Provided that the Shareholder has complied with clauses 4.1(c) and 4.1(f), a Director may only be removed by the Shareholder who appointed him. To remove a Director, the Shareholder who appointed him must give notice to the relevant company in the Company Group. The removal notice takes effect on the date that the removal notice is deemed given under clause 21(e).
(e)(Manner of appointment and removal): Every appointment and removal of a Director takes effect when the written notice of appointment or removal is received at the Registered Office. However, in the case of an appointment, the appointment takes effect when the written consent to act as a director is received at the Registered Office if that is later than the receipt of the notice of appointment.
(f)(Resignation): If at any time a Shareholder holds less than the percentage of Shares in Holdings referred to in clause 4.1(c), the Shareholder must ensure that its appointee Director(s) resign from the Board with effect from the date on which the Shareholder first held less than that percentage.
4.4Board meetings
(e)(Quorum): A quorum for Board meetings is constituted by the attendance (in person, by telephone or by live audio-visual transmission) of a Director appointed by each Shareholder that is entitled to appoint a Director under clause 4.1(c).
(f)(Adjournment): If at least one Director appointed by each Shareholder entitled to appoint a Director in accordance with this deed is not present (either in person, by telephone or by live audio-visual transmission) at a Board meeting, the meeting must be adjourned and reconvened at such time and place as reasonably determined by the Directors present (provided that notice of the time, date and place of the reconvened meeting must be given to each Director not less than 72 hours before the meeting and the reconvened meeting must not be held sooner than 7 days after the date of the adjourned meeting).
4.5Voting at Board meetings
(a)(Voting rights):
(i)The Nominee Directors appointed by each Shareholder and present and entitled to vote at a Board meeting are collectively entitled to one vote at a Board meeting for each Share held by the Shareholder that appointed those Nominee Directors.
(ii)If a person is a Director and is also appointed as an alternate Director for one or more Directors, the person appointed as an alternate Director is entitled to as many votes as the Directors he or she is acting for would have been entitled had they been present, in addition to his or her own vote (provided that the Directors who appointed the person as an alternate Director are not present).
(iii)Where a Shareholder is not represented by a Nominee Director at a Board meeting reconvened in accordance with clause 4.4(f) then those Nominee Directors that are present at that reconvened Board meeting will have that number of votes as the number of Shares held by the Shareholder that appointed them bears to the total number of Shares held by all Shareholders who have Nominee Directors present and entitled to vote at that reconvened Board meeting.
(b)(Voting):
(i)(Simple majority): Subject to clause 4.5(b)(ii) decisions by the Board must be made by a simple majority vote.
(ii)(Special Majority): Decisions on any matter set out in Schedule 1 must be made with the approval of a Special Majority of Directors.

Preliminary observations concerning cl 4.1(c) of the SD

To set the scene for what follows, there are some relatively straightforward observations I can make at the outset about the regime of BHL board governance that is set by reference to cl 4.1(c) of the SD.
First, I note the definitions component of the SD under cl 1.1 where the terms 'Directors', 'Nominee Directors', 'Shareholders' and 'Shareholder' are defined. These four terms are respectively defined as:
'Directors' means the directors of Holdings (or where the context permits or requires the directors of each other company in the Company Group) for the time being and includes any alternate director duly appointed and acting as a director and 'Director' means one of them.
'Nominee Directors' in relation to a Shareholder means the Directors nominated to the Board by that Shareholder in accordance with clause 4.1(c) that are present at the Board meeting and 'Nominee Director' means anyone of them.
'Shareholders' means the people who hold Shares from time to time, and 'Shareholder' means one of them.
From this I discern that a Nominee Director is a special class of director appointed by a Shareholder to BHL's board under cl 4.1(c) of the SD. But there may be other (ordinary) BHL directors as well. A Nominee Director is a subset of the more generic and wider position of director that is also recognised in the SD.
Second, by reference to cl 4.1(c), Yara's Nominee Director is to be a 'non‑executive director'. The (potentially appointed) three Nominee Directors of the Burrup Trustee are not given the same limited, i.e. 'non‑executive', designation as Yara's Nominee Director. From this I infer that one of potentially up to three Nominee Directors appointed by the Burrup Trustee may also occupy the executive positions of Managing Director (see cl 4.3) and, or, Chairman (see cl 4.2). It is an uncontroversial fact that Pankaj has personally held the positions of Managing Director and Chairman of BHL for most of BHL's operational existence (there is to follow in these reasons a section setting out a chronology of the background and surrounding facts to the key instruments which I find proven and established on this preliminary issue).
Third, I note the significance of an appointment of Nominee Directors, not only for BHL, but also carrying downstream consequences for the composition of the boards of 'each company in the Company Group'. The term 'Company Group' is defined in cl 1.1 of the SD as 'Holdings and each other entity within the Group of which Holdings is a Group Member including without limitation BFPL'. The term 'Group Member' needs to be understood by reference to the definition of 'Group' in cl 1.1, which is in terms:
'Group' in respect of a body corporate means:
(a)a Holding Company of the body corporate;
(b)a Subsidiary of the body corporate; and
(c)a Subsidiary of a Holding Company of the body corporate,
and a 'Group Member' is a body corporate that is a member of the Group.
The terms 'Holding Company' and 'Subsidiary' are defined in the definition clause 1.1 in relatively orthodox terms (except that 'Subsidiary' also includes a trust, where the trust would have been a subsidiary of an entity that is controlled if the unit or other beneficial interest of the trust was a share).
Fourth, whilst the Nominee Directors of Yara or the Burrup Trustee are appointed to the board of BHL, there is also found within cl 4.1(c) the correlative covenant of BHL promising to appoint to the boards of each other company in the Company Group the same persons nominated by the Shareholders. In other words, Yara and the Burrup Trustee get their nominees appointed directly to the board of BHL, but it is BHL which thereafter appoints those same BHL Nominee Directors to the boards of other companies within the Company Group. It may be observed that there is no restriction imposed in the SD as regards the identity, character, qualifications or antecedents for the person who is the subject of a nomination of a Shareholder to fill the role of a BHL Nominee Director.
Fifth, the first two sentences of cl 4.1(c) address Yara (by the word 'it') and the Burrup Trustee (by the word 'he'). However, in contrast, the last sentence of cl 4.1(c) refers to persons who are the (director) nominees of (a more generically applicable word) 'Shareholders'. The SD's definition of Shareholders extends beyond Yara and the Burrup Trustee, in order to reach those who hold shares in BHL 'from time to time'. This suggests some potential application for cl 4.1(c) as a whole to persons holding shares in BHL beyond just Yara and the Burrup Trustee.
Sixth, I observe that the first and second sentences of cl 4.1(c) are prefaced by the phrase, 'For as long as'. Accordingly, the Burrup Trustee and Yara are entitled to appoint Nominee Directors 'For as long as' the Shareholder holds a minimum percentage shareholding (5%) of the issued share capital in BHL. A question then arises as to whether this minimum percentage holding requirement is exclusively tied to Yara and the Burrup Trustee, or whether it can apply more expansively to a 'Shareholder' who is a permitted successor, substitute or assignee of BHL shares from Yara or the Burrup Trustee. I return to that question later in these reasons.
Seventh, cl 16.2(c) of the SD provides for some circumstances of 'automatic termination' of the SD for a Shareholder party. One of these circumstances is the termination of the SD for any Shareholder 'when it ceases to hold, directly or indirectly, any Shares'. In addition, by cl 16.2(a)(ii), the SD automatically terminates upon a listing of BHL on a stock exchange, or when any of its shares are quoted or listed on a stock exchange. As regards initial public offerings (IPOs) and BHL, see cl 9.1(b) which deals with transfers of BHL shares without restriction in the face of an IPO concerning the shares of BHL on a stock exchange.
Eighth, in the second sentence of cl 4.1(c) of the SD there is a mathematical incongruity in terminology concerning the Burrup Trustee appointing 'the remaining three directors to the board'. Yara has the right to appoint one Nominee Director. Since the Burrup Trustee has the ability to appoint 'the remaining three directors to the board' that in aggregate allows only a maximum of four Nominee Directors. However, a minimum of five directors is required by BHL's Constitution (see cl 3.1(a) of BHL's Constitution, which is exhibit 1, tab 3), as a limited corporation.
The mathematical non sequitur is explained historically by reference to the origins of a like Nominee Director clause in the OSD (exhibit 1, tab 2). The OSD's cl 4.1(c) had provided for the Rimbal Family Trustee to hold a right to appoint one Nominee Director at the time when the Rimbal Family Trustee held a 15% shareholding in BHL, along with Yara (at 30%) and the Burrup Trustee (at 55%) (see the OSD, exhibit 1 tab 2 at cll 4.1(b) and (c)). The three relevant blocks under the OSD could potentially appoint between them the five required directors (Nominee Directors) to BHL's board.
Clause 4.1(b) of the SD provides that the board of each company in the corporate group must consist of no more than five directors. But there is, as I noted, clear recognition under the SD not only of Nominee Directors, but of directors generally. With BHL's Constitution requiring a minimum of five directors, and four being the maximum number of Nominee Directors capable of being appointed under cl 4.1(c) of the SD from the two Shareholder blocks, then either the board of BHL (Constitution cl 3.3), or a general Shareholders' meeting of BHL (Constitution cl 3.4) could appoint or elect the required number of extra directors, so as then to produce a BHL board of not less than five directors. However, ordinary director(s) simply have one vote to cast, rather than exercising the poll weighted voting power of a Nominee Director derived from cl 4.5(a)(i) of the SD.
Ninth, by reference to the workings of cl 4.5(a)(i), on the hypothesis that the Burrup Trustee had appointed all three of a potential three Nominee Directors that trustee might appoint, the three Nominee Directors collectively would only be entitled to vote at the level of the Burrup Trustee's shareholding interest (65%, after completion on the sale of a 5% BHL shareholding to Yara agreed under the SD in 2008). The pragmatic workings of an apportionment of this type of poll voting power, spread as between up to three Nominee Directors of the Burrup Trustee if appointed, is not dealt with expressly by the SD.
Tenth, cl 4.5(a)(iii) of the SD addresses a situation under which a Shareholder may not be represented by a Nominee Director at a BHL board meeting. In that scenario, votes cast by Nominee Directors attending and voting are assessed by reference to a different aggregate vote base. A majority is assessed by reference to 'the total number of Shares held by all Shareholders who have Nominee Directors present and entitled to vote'.
Eleventh, there must be recognised an overall relative strength in the Burrup Trustee's position under the SD by being able to appoint up to three Nominee Directors, measured against Yara's lesser entitlement to appoint only one non‑executive Nominee Director. This is demonstrable under cl 4.1(c) of the SD. It was also the case under the predecessor Nominee Director provisions of the OSD. The right to appoint (up to) three Nominee Directors enjoyed by the Burrup Trustee remains applicable, even were (hypothetically) the Burrup Trustee to dispose of up to 65% of a (then 70%) BHL shareholding. On such a 'sell off' scenario, the Burrup Trustee would still be entitled to appoint three Nominee Directors to BHL, as well as to expect BHL to then appoint those (up to three) nominated directors of the Burrup Trustee to the other companies in the Company Group. Yet, as regards voting on a poll by directors at BHL board meetings, in the wake of such a hypothetical (65%) share sell‑off by the Burrup Trustee, the three Nominee Directors of the Burrup Trustee would only be able to cast votes (by cl 4.5(a)(i)) on a board poll at a total weighting of 5%. On the 65% sell off hypothesis the Burrup Trustee would suffer a risk of being outvoted by another 'Shareholder' party under the SD that had appointed a Nominee Director whose poll voting rights carried a greater numerical weighting from its holding of BHL shares, such as Yara at 35% (subject always to the intrusion of Special Majority board subject matter scenarios, set under Schedule 1 of the SD).
Twelfth, the practical utility for the Burrup Trustee appointing more than one Nominee Director to BHL, when one Nominee Director can cast all weighted votes at whatever the numerical BHL shareholding then held was at the time of the vote, needs to be assessed from a perspective that extends beyond just considering BHL's board management. The potential downstream effects from the appointment of BHL Nominee Directors upon the composition of boards of other corporations within the Company Group (towards which an application of voting by poll at directors' board meetings under cl 4.5(a)(i) arrangements would not apply), must be kept in mind. Three appointments to a downstream corporate board (of five) may be enough to deliver numerical board control of a BHL Group Member, even from a limited 5% shareholding in BHL.
Thirteenth, although the first two sentences of cl 4.1(c) expressly identify Yara and the Burrup Trustee by name, the last sentence, as I have indicated, refers to Shareholders, a word defined by reference to people who hold shares 'from time to time'. Under cl 1.2(c) of the definition clause of the SD (seen to be prefaced by the words applicable to cll (b) through (n), 'and unless the context indicates a contrary intention'), 'a reference to any party includes that party's executors, administrators, successors, substitutes and permitted assigns, including any person taking by way of novation'.
This successor clause in the SD is of key significance in resolving the parties' starkly divergent construction positions concerning the potential transferability (or portability) of BHL Nominee Director appointment rights held under cl 4.1(c) of the SD, particularly where they are seen to be expressly conferred upon a party to the SD by the introductory phrase, 'For as long as'.
Fourteenth, the essential character of contractual rights held under a corporate board management arrangement, agreed between two parties who are effectively co‑participants under what presents as an incorporated quasi joint venture arrangement, needs to be appreciated and respected. Private, contractual rights, held between co‑venturer parties, under an agreement over corporate management rights, are discussed by Hollington, Shareholders' Rights (4th ed, 2004) [3‑30] and [3‑40]. The author observes, in terms I accept:
A shareholders' agreement is … a private matter between the parties to the contract, enforceable between them according to ordinary principles of the law of contract … If a transferee of shares belonging to a party to the agreement is to be bound by and take the benefit of it, the transferee must adhere to it by further agreement on its part … a court will enforce such an agreement as between the shareholders who were parties to that agreement by injunction or otherwise, unless it conflicted with a specific statutory provision. There may be difficulties in enforcing such an agreement against successors entitled to the shares, but this can be overcome by an appropriate drafting of the agreement.

I also agree with Kourakis J, who in Elders Forestry Ltd v Bosi Security Services Ltd [2010] SASC 233; (2010) 242 FLR 360, after summarising case authorities in this arena at [130] ‑ [135] concerning rights of a shareholder party, particularly in the context of evaluating the assignability of such rights, observed at [136]:
In my view, the above passages support my conclusion that the Shareholders' Deed as amended affected the very nature of the share and its inherent rights and obligations.
Fifteenth, within the SD there is, as will be seen, an elaborate set of provisions controlling and regulating any transfer of shares in BHL (see cl 9 stipulating various situations where share transfers are permissible or are controlled). There is also a close interrelationship between cl 9 and cl 10 of the SD. Clause 10 deals with pre‑emptive rights enjoyed by SD Shareholders, in case of a party seeking to transfer BHL shares. For a new or incoming Shareholder in BHL, there is to be found relevantly within cl 9 of the SD a discernible and elevated emphasis upon the scenario of 'agreement' between Shareholders, made otherwise against what is more usually provided for as between Shareholders. Such agreements otherwise are to be paramount; see in that respect cl 9.1(c) and the preface to cl 9.7 of the SD.
The situation of express (Shareholder) 'agreement' to the contrary may be thought (generally speaking) to always be an option open for Shareholder parties, i.e. to consensually act otherwise than in accordance with a boilerplate regime set down. Nevertheless, the SD expressly reiterates and emphasises the option of consensus upon a different, once agreed, course, thereby entrenching the overall structural importance of the parties' express agreement to a course of action contrary to what is otherwise provided for by the SD.
Sixteenth, also within the regime of regulated share transfer and pre‑emption under the SD, there presents a discernible importance in the requirement for what is found under cl 11 as an 'Assumption Deed'. Such an instrument becomes applicable either under cl 11.1 on an issue of BHL shares, or under cl 11.2 on a transfer of BHL shares. The term 'Assumption Deed' is defined by the definitions clause 1.1 of the SD, as:
'Assumption Deed' means a deed of assumption substantially in the form of Annexure A.
Clause 11.2 of the SD provides:
The Shareholders must procure the Board [of BHL] to refuse to register the Transfer of any Shares to a person who is not already a party to this deed unless that Transfer is made pursuant to or for the purposes of an IPO or that person has executed an Assumption Deed.
(my emphasis in bold)
The express requirement for an Assumption Deed to be entered by an incoming BHL Shareholder manifests at a number of places in the SD, including by cl 9.2(a) (by reference to cl 9.7) and cl 9.7(a).
Seventeenth, from cll 4.1(c) and 4.1(f) of the SD it will be noted that if the minimum percentage holding falls below the specified minimum percentage (i.e. below 5%) then the Shareholder in question must at that point ensure that its Nominee Director(s) resigns, with effect from the date on which the Shareholder first holds less than that specified percentage of BHL shares. Within this mandatory resignation procurement provision I note a use of more generic terminology (i.e. 'Shareholder') [rather than by directly identifying the actual parties to the SD, as is seen under the first two sentences of cl 4.1(c)]. This tends to support what I detect as some scope for persons who in due course take a permitted allotment or transfer of shares in BHL from a 'Shareholder' under the SD (thereby becoming a 'Shareholder' under the SD) being able to obtain and exercise cl 4.1(c) Nominee Director rights as 'Shareholders'. However, the circumstances in which an incoming BHL Shareholder might be able to obtain and exercise cl 4.1(c) Nominee Director rights will require a more detailed subsequent consideration in these reasons.
I note the obligation upon a 'Shareholder' to cause its Nominee Directors who are its 'appointee(s)' to resign from the 'Board' (see cl 4.1(f)). In context, I read this to apply to all boards to which a Nominee Director has been appointed either directly to BHL's board, or by BHL to the boards of Group Members. Resignation by the Nominee Director is to be effective from the date on which the Shareholder first holds less than the designated percentage of shares in BHL. However, the SD obligation under cl 4.1(f) to 'ensure' is a covenant by the Shareholder rather than by the appointee director. Failure by the 'Shareholder' to comply with the obligation to ensure that its appointee director resigns at the appropriate time, would look, potentially, to constitute a breach of the SD by the Shareholder, potentially sounding in damages or some other remedy against it.
Questions of the status or validity of such a Nominee Director's continuing participation as a director of BHL or its Corporate Group Members, or the correlative consequences for the validity of resolutions participated in by a director who does not resign in such circumstances, also present as open questions.
Eighteenth, I have already observed there is no constraint seen within the SD as to the identity or qualifications of the actual nominee who is to fill the position of a Nominee Director, for the purposes of cl 4.1(c). The appointing party holding that right may nominate whoever they see fit to fill the position on BHL's board. The unfettered nature of the appointment right as regards a chosen nominee is, in my view, of relevance in assessing subsequent arguments as to the asserted non‑transferability of the contractual right.

Share Sale Agreement of 19 September 2008 (the SSA)

How the SSA, signed just under six months after the SD, interrelates with and affects the operation of the SD, particularly as between its two Shareholders (Yara and the Burrup Trustee), in a context of the possible transportability of cl 4.1(c) Nominee Director rights, is at the heart of the disputes in focus under the preliminary issue.
Unlike the SD, the SSA was not entered as a deed, and, as I have observed, it was a four party agreement involving only two of the four parties to the SD (namely, Yara and the Burrup Trustee).
The SSA is foremost, as its name rather suggests, concerned with the agreed share sale arrangements by which Yara was to acquire a further 5% of ordinary shares in BHL. On completion, the sale acquisition would lift Yara's minority shareholding position in BHL from 30% to 35%. Yara was to acquire the additional 5% shareholding interest in BHL at a sale price, defined in the SSA as a 'Completion Payment', which was US$141 million.
What presents as of immediate significance towards the SSA is that under the SSA (signed off on 19 September 2008) Yara's acquisition of a further 5% shareholding interest in BHL was to be from Pankaj personally (i.e. not from the Burrup Trustee). The eventual 5% BHL share acquisition by Yara from Pankaj personally, settled in October 2008, is not at all factually controversial. Nor is the correlative fact that Yara's further 5% BHL shareholding interest was not acquired from the Burrup Trustee, but rather from Pankaj personally.
So then, what changed between 24 March and 19 September 2008 as regards the legal and beneficial ownership of the (5%) (55,002,071) ordinary BHL shares that Pankaj personally sold to Yara under the SSA for US$141 million?
How it came to pass, between the time of the SD (24 March 2008) and the time of the SSA (19 September 2008), that Pankaj personally obtained the full beneficial interest (he already held the legal interest by his capacity as the trustee of the Burrup Trust) to 35% of the 70% shareholding in BHL shares formerly held by the Burrup Trustee is something of an epic factual enquiry in its own right.

Pankaj's personal interest in 35% of BHL's shares

On one view of the facts, Pankaj may not have acquired his full legal and beneficial shareholding interest in 35% of the shares in BHL until some time on 18 September 2008. In other words, Pankaj's personal legal and beneficial holding of 35% of the shares in BHL may not have been perfected until just one day before entry of the SSA - under which Pankaj then sold 5% of his acquired 35% shareholding to Yara.
According to the evidence of a Mr Basil Lenzo, a two time former director of BHL and solicitor engaged to document corporate compliance arrangements by BHL, it was only on 18 September 2008 that Mr Lenzo personally made entries in BHL's manual share register recording the legal and beneficial holding of shares in BHL by Pankaj (and of his wife Radhika) as to 35% each.
On that day Mr Lenzo also sent copies of the BHL register now showing his most recent entries in the share register of BHL to Yara. However, as will be seen, the share register entries made that day were considerably backdated by Mr Lenzo. What Yara's representatives saw on 18 September 2008, courtesy of Mr Lenzo, showed Pankaj and Radhika acquiring their respective beneficial interests as BHL shares on 26 April 2007. As the register stood after that date, Radhika and Pankaj held 574 shares each and Yara held the remaining 492 BHL shares (30%).
Whatever view is reached about the precise timing of Pankaj's (and Radhika's) acquisitions of personal beneficial interests of these BHL shares, there is not and can be no dispute that Yara ultimately did acquire its 5% extra BHL shareholding (taking it to a 35% shareholding interest in BHL) from Pankaj, for which it paid US$141 million.
At no later than 18 September 2008, the date by which Pankaj must have acquired his full beneficial interest in 35% of the shares formerly held by the Burrup Trustee, Radhika also acquired her 35% legal and beneficial shareholding. Effectively then, by no later than 18 September 2008, the 70% (majority) shareholding interest in BHL, once held by the Burrup Trustee, had become vested and was now held equally (35% each) as between Pankaj and Radhika. That vesting of the BHL shares in Pankaj and Radhika arises in circumstances where there appears to have been no instrument signed by the Burrup Trustee transferring a 35% BHL shareholding to Pankaj or Radhika.
Radhika had never been a party to the SD, or for that matter, to the OSD which preceded it. However, Radhika and Pankaj were both personally named as express Primary Beneficiaries of the Burrup Trust Deed. Pankaj was the trustee of that essentially discretionary trust.
Recitals in the SSA stipulate clearly that Pankaj held 35% of the BHL shares formerly held by the Burrup Trustee, that he was selling 5% of those shares to Yara and that Radhika held the other 35% shares legally and beneficially. Above that, express warranties to Yara as to that precise prevailing ownership position of 70% of BHL's shares were given by Pankaj and Radhika by cl 5(a) of the SSA.
The resultant shareholding position in BHL now reverted to three distinct Shareholder parties again (akin to the BHL Shareholder position between March 2005 and April 2007, when the Rimbal Family Trustee was a 15% Shareholder in BHL under the OSD in conjunction with the Burrup Trustee and Yara) rather than just Yara and the Burrup Trustee as the only two Shareholders under the SD. Three parties now holding all shares in BHL, after the 5% sale under the SSA to Yara was completed, were:
(a)Yara at 35%;
(b)Pankaj personally, at 30%; and
(c)Radhika personally, at 35%.
Sale of 5% of the shares in BHL from Pankaj to Yara for US$141 million, was implemented, settled and paid for by 28 October 2008.
No party seeks rescission of the 5% BHL share sale to Yara. Nevertheless, heavy controversy arises around and from the asserted implications of this sale, particularly as regards consequences for post sale BHL board management rights tied to Nominee Directors under the SD, now evaluated with the SSA. These controversies arise in the aftermath of the acquisitions of legal and beneficial ownership in 70% (in aggregate) of the BHL shares by Pankaj and Radhika, and the following sale of 5% of Pankaj's acquired 35% legal and beneficial interest to Yara.
The SSA makes express reference to some key future BHL management issues (see the SSA at cll 5(b), 6, 8, 9 and 10). Nevertheless the interpretive controversy surrounding the argued implications of personal BHL share acquisitions by Pankaj and Radhika, the sale, and the SSA, assessed together, are intense.
Pankaj, Radhika and the Receivers all assert that Yara, effectively, has agreed, by the SSA, to accept Pankaj and Radhika as 'Shareholders' for the purposes of the SD. Beyond that, it is said that Yara has agreed under the SSA to accept Pankaj and Radhika, in replacement for the Burrup Trustee, with them now holding (together) the majority shareholding interest in BHL (albeit at 65% after the 5% sale to Yara, not 70%). There is said to be an agreed continuance (vis a vis Pankaj and Radhika) of the Nominee Director appointment and BHL board poll voting arrangements of the SD.
At the heart of this dispute is effectively a power struggle for the control of board management in BHL, emanating from Yara's denial of any right of Pankaj and Radhika, either alone or together, to appoint Nominee Directors to BHL.

Overview of cl 5(b) of the SSA

The present (interpretive) controversy between Pankaj, Radhika and the Receivers on the one side, effectively aligned on construction issues as against Yara on the other, is heavily centred upon and fought around cl 5(b) of the SSA.
Clause 5(a) and the critical two sentences in cl 5(b) of the SSA provide:
(a)The Oswal Parties represent and warrant that:
(i)Pankaj Oswal in his personal capacity is the legal and beneficial owner of ordinary fully paid shares in the capital representing 35% of the total issued ordinary shares in the capital of the Company; and
(ii)Radhika Oswal is the legal and beneficial owner of ordinary fully paid shares in the capital representing 35% of the total issued ordinary shares in the capital of the Company.
(b)Pankaj Oswal, the Burrup Trustee and Radhika Oswal undertake to execute all documents necessary to join Pankaj Oswal in his personal capacity and Radhika Oswal to the Burrup Shareholders Deed in place of the Burrup Trustee and with such other amendments as agreed by the Buyer and the Oswal Parties. Until such document has been executed, Pankaj Oswal in his personal capacity and Radhika Oswal agree to comply with the Burrup Shareholders Deed as if they were a party to the deed in place of the Burrup Trustee.
Pankaj, Radhika and the Receivers all assert, within their respective multiple interpretation arguments, that by reason of cl 5(b) of the SSA, Pankaj and Radhika have been since 2008, with the agreement of Yara, in effect, consensually substituted for and have 'stepped into the shoes' of the Burrup Trustee as the other 'Shareholder(s)' under the SD with Yara.
Pankaj and Radhika contend that, by reason of the agreement of Yara under the SSA, particularly cl 5(b), they may exercise contractual rights to appoint up to three Nominee Directors to the board of BHL. They assert that their appointed BHL Nominee Director(s) can cast votes of an aggregated poll weighting level of 65% of the BHL shareholding interest which they together now hold in BHL. On that basis, they say that together they remain as the majority voting bloc at BHL board level. That is by way of contrast to Yara's 35% BHL director poll vote weighting, via one Nominee Director (subject to scenarios requiring a BHL board's Special Majority, at 80%, under Schedule 1 of the SD).
Yara strongly asserts that it has never agreed under the SSA to any substitution as regards the holding or enjoyment by Pankaj and Radhika of cl 4.1(c) Nominee Director management rights. Yara points to what it relies upon as a personal delimitation of this contractual right from the words 'For so long as' in cl 4.1(c) of the SD, and to automatic Shareholder termination provisions applicable to a Shareholder, as seen under cl 16(c) of the SD.
Yara says that with the Burrup Trustee, on any view of the facts, having ceased to be a BHL Shareholder at least one day before the SSA, from that point Yara, as the remaining (35%) BHL Shareholder under the SD, was the only party holding Nominee Director appointment rights to BHL's board. That, Yara says, was and remains the position until it agrees otherwise by amendments it accepts to the SD, as it could do, but has not yet agreed to do, under cl 5(b) of the SSA (first sentence).
Within a framework of multiple and elaborate interpretation arguments, both sentences of cl 5(b) of the SSA - indeed almost every word within cl 5(b) - are said in some way or another, to carry heavy significance in the rivalling construction evaluations regarding the potential transferability of Nominee Director appointment rights to Pankaj and Radhika under cl 4.1(c) of the SD.
Such levels of differentiation have been attributed to each of the two sentences comprising cl 5(b) of the SSA that, for convenience, Yara in submissions even referred to those sentences as cl 5(b)(i) and cl 5(b)(ii) respectively. They are not so differentiated by the SSA. I will not perpetuate that artificial dichotomy. The two sentences making up cl 5(b) SSA as a matter of overall construction need to be construed together as one overall functional clause. Then they must be, as harmoniously as possible, assimilated within the framework of the content of other clauses within the SSA assessed as a whole.
The first sentence of cl 5(b) of the SSA expressly envisages the necessary 'documents' being executed by Pankaj and Radhika, by which they would become joined to the SD (in circumstances where they personally had not been parties to that deed prior to 19 September 2008).
Joinder of Radhika and Pankaj as parties to the SD, as a matter of legal concept, might be accomplished in any number of ways. A deed of variation by outgoing, remaining and incoming parties, for instance, could deliver the joinder result. But within the SSA's proximate framework to the SD, Annexure A contains within it another pro forma deed by which any incoming transferee or allottee of BHL shares could be made a party (in circumstances expressly contemplated by the SD) to the covenants of the SD. That joinder machinery is conveniently provided for by the SD in the form of a unilateral instrument called the Assumption Deed (as defined). Being unilateral, an Assumption Deed is in the nature of a deed poll, rather than an indenture (adopting the nomenclature dichotomy between deeds).
Radhika ultimately (see ts 483) approached the determination of the preliminary issue on the basis that to date, no relevant Assumption Deed had been executed or delivered by her (i.e. no submission is advanced at this time by Radhika regarding implications for this hearing of an existing Assumption Deed signed, sealed and delivered by her, substantially in the terms of the pro forma deed poll in the form of Annexure A to the SD).
Radhika's ultimate stance on this aspect of the preliminary issue as articulated through her senior counsel in closing, as I understood it, was effectively that she may in due course, if necessary, still execute and deliver an Assumption Deed substantially in the terms of the pro forma deed poll instrument seen as Annexure A to the SD. Fulfilling that requirement would be a matter of documentary detail. But her primary construction position on the preliminary issue is that it is not even necessary for her to go so far. This is because of the preferred construction she, Pankaj and the Receivers all advance essentially stemming from the result of what is said to be afforded to them under the work of the second sentence in cl 5(b) of the SSA.
In addition, Radhika and the Receivers raise alternative arguments. One of these concerns the possible workings of the SD alone, in the circumstance where Radhika and Pankaj as Primary Beneficiaries of the Burrup Trust have come to each hold fully vested legal and beneficial interest in one half of that Trust's former 70% shareholding interest in BHL by no later than 18 September 2008, based on a vesting in them of these shares under the Burrup Trust and followed by Mr Lenzo's registration that day (albeit backdated) of their personal holdings as Shareholders in BHL.

Pankaj's interpretation position on the preliminary issue is akin to that of Radhika's, namely, that there is no substantive need on his part for a Deed of Assumption to be executed and delivered by him. But Mr Theobald, one of the Receivers, claiming to hold Pankaj's power of attorney under certain mortgage and share security arrangements entered by Pankaj over his 30% shareholding interest in BHL, has very recently (as late as June 2011) executed and delivered, acting as Pankaj's attorney, what is asserted to be a Deed of Assumption on Pankaj's part for the purposes of the SD and the SSA, if necessary.
It seems undeniable as a fact that by not later than midnight on 18 September 2008, one day before the SSA was entered, the former 70% shareholding in BHL by the Burrup Trustee ended. This was necessarily so in order for Pankaj and Radhika to each become 35% legal and beneficial owners of shares in BHL, for Pankaj and Radhika to enter the SSA by which they expressly covenant to Yara under cl 5(a) of the SSA and ultimately for Pankaj to validly sell 5% of his 35% BHL shares to Yara. On those bare facts, Yara then points to cl 16.2(c) of the SD which provides (as regards its SD termination implications as a Shareholder for the Burrup Trustee on those facts):
(c)(For outgoing Shareholder): This deed will also be terminated for any one Shareholder when it ceases to hold, directly or indirectly, any Shares. In that case, the provisions of clause 16.2(b) still apply.
So Yara says that a total shareholding cessation by the Burrup Trustee, as outgoing BHL 'Shareholder' under the SD, at not later than midnight on 18 September 2008, left Yara as the sole remaining 'Shareholder' in the SD which continued in operative effect despite the departure of the Burrup Trustee. That was the case albeit BHL and BFPL remained parties to the SD as well (but importantly, never as Shareholders).
Yara then contends that as the sole BHL Shareholder that remained a party to the SD from 19 September 2008 (then at 30% but, on completion of the sale from Pankaj under the SSA on 24 October 2008, rising to 35%) its one validly continuing BHL Nominee Director (Mr Holba) was effectively left in control of BHL's board. This is the position asserted by Yara notwithstanding that Pankaj was then serving as (founding) Chairman and Managing Director of BHL and that there was no hint or suggestion from any quarter then that Pankaj would soon be relinquishing his hold on those key BHL management positions to anyone, let alone to Yara's Nominee Director.
Yara says that whilst Pankaj and Radhika might have each validly become 35% shareholders of their BHL shares, they were never parties to the SD. Termination (automatically) of the Burrup Trustee's rights under the SD, at not later than midnight on 18 September 2008, necessarily meant that from then on there were no existing Burrup Trustee contractual rights under the SD in existence and therefore no rights capable of passing from the Burrup Trustee on 19 September 2008 to Pankaj and Radhika under the SSA.
Consequently, Yara says that, until it agrees otherwise (and it does not), Pankaj and Radhika personally hold no rights to appoint Nominee Directors to BHL's board (and from there, flowing to BHL's Group Members).
Yara also says that whilst Pankaj and Radhika as shareholders in BHL might vote their aggregate 65% BHL shareholding at a general meeting of shareholders, and thereby elect an ordinary director or directors to BHL's board, that ordinary BHL directors do not enjoy the same weighted voting power that is afforded to Nominee Directors on a poll of directors at BHL board meetings.
Ordinary directors elected at a general meeting of BHL's Shareholders may only cast one vote each on a poll at the directors' meeting. That one vote would then be measured (potentially) against 385,014,497 other votes which, by the SD, Yara's Nominee Director would be able to cast. A voting split at a poll of directors' votes conducted on that basis, sees Yara (holding a 35% minority shareholding in BHL) with overwhelming BHL majority board voting power (assuming a BHL board meeting poll vote was Yara, 385,014,497 for, opposed by, potentially, four votes against). On that basis, a vote of directors would deliver a 99.999% majority favouring Yara's resolutions. That level of voting power is more than sufficient for Yara to carry all BHL board resolutions, even at a Special Majority (80%) threshold required for those board decision subject matters as are identified under Schedule 1 of the SD.
On this basis Yara, effectively, contends it obtained overwhelming board control of BHL as from 19 September 2008, albeit at a 30% (increasing to 35%) minority shareholding.
In response, Pankaj, Radhika and the Receivers all say that a construction outcome, whereby Yara as 35% Shareholder in BHL could effectively exercise 99.999% voting control at BHL board meetings is a bizarre outcome that is a manifestly uncommercial result in the circumstances. They submit that the end result Yara effectively pursues by way of construction is not one that reasonable parties, objectively assessed as being in the positions of parties to the SSA as of 19 September 2008, could ever have sensibly contemplated. They contend that the end result Yara seeks cannot be the ultimate proper interpretation of the two key written instruments operating together, assessed against their backgrounds and surrounding events.
The Receivers essentially support the construction position of the SD and SSA that is contended for by Radhika. The Receivers were appointed to BFPL in December 2010 by the ANZ Bank under an exercise of security rights by the Bank over all BFPL's assets, as well the Bank's security held over all of Pankaj's remaining (30%) shareholding in BHL and 7.5% of Radhika's 35% shareholding in BHL.
A key plank of Yara's construction arguments regarding cl 5(b) of the SSA, particularly by reference to the proper understanding of the second sentence of cl 5(b), centres around the correct meaning of the word 'comply', seen used in the phrase 'comply with' in the second sentence of cl 5(b) of the SSA.
Yara says the word 'comply' as used there, and correctly understood, means no more than that Pankaj and Radhika would 'obey' or, to be bound by the obligations of parties to the SD.
Yara argues that the second sentence of cl 5(b) of the SSA merely implements an interim 'deeming' arrangement (by the phrase 'as if'), whereby Pankaj and Radhika commit only to observing obligations as if they were parties under the SD. Yara says this delivers no more than a result of Pankaj and Radhika committing to Yara to accept SD obligations. Yara says cl 5(b) carries no further entitlements to enjoy rights or benefits under the SD as 'Shareholders' for Pankaj and Radhika.
Rights and benefits under the SD, Yara says, are governed by the work of the first sentence in cl 5(b) of the SSA, but the deeming effects of the second sentence of cl 5(b) do not envisage Pankaj and Radhika obtaining rights or benefits. Under the second sentence Pankaj and Radhika merely accept SD obligations on a deemed interim basis (see the word 'Until').
Yara goes further, pointing to the first sentence of cl 5(b). It hypothesises that even if all 'necessary documents' as envisaged under that sentence were executed by Pankaj, Radhika and the Burrup Trustee, whilst that may afford some (even most) rights and benefits to Pankaj and Radhika as 'Shareholders', Yara says it still would not be enough to deliver to Pankaj and Radhika Nominee Director appointment rights under cl 4.1(c) of the SD.
The inherent non‑transmissibility of rights argument is put at a conceptual level, above Yara's factual contention, that cl 4.1(c) rights were not in existence to be transferred to Pankaj and Radhika by the Burrup Trustee, as those rights automatically ceased by midnight on 18 September 2008, when the Burrup Trustee ceased to hold any shares in BHL.
Alternatively, again, at minimum, Yara would say that conceptually, even if a transmission of cl 4.1(c) rights was theoretically possible by a clear and express agreement to that end, the SSA would in any event fall significantly short of achieving that end.
Multiple rebutting arguments to the contrary by Radhika, Pankaj and the Receivers, particularly about the true meaning of the word 'comply', understood within the overall context of cl 5(b) in the SSA, are made in response. In particular, the force and effect of the key phrase 'in place of', which can be seen to be used in both lines of cl 5(b) of the SSA, is emphasised as regards advocating the permitted transmissibility of cl 4.1(c) Nominee Director rights both in concept, as well as in operative effect under the SSA (particularly by reference to the second sentence of cl 5(b)). Emphasis is also directed towards the use of the word 'all', as regards an assumption of all 'rights' by cl 2.1(a) of the pro forma Assumption Deed, seen annexed to the SD. The Receivers say that 'all' really does mean all rights, not just some rights.
Further sub‑issues emerge within the preliminary issue. One arises from Radhika's unilateral attempt in late 2010 to appoint her own Nominee Director to the board of BHL. That nominee was Mr Ramesh Sodum. He was joined as sixth defendant to the counterclaim by Yara. Mr Sodum has not participated at all in the litigation. He has not even entered a memorandum of appearance responding to Yara's counterclaim against him.
The attempted appointment of Mr Sodum by Radhika to BHL's board as her cl 4.1(c) Nominee Director was not an attempted Nominee Director appointment made by Pankaj and Radhika acting together. Rather, it was an effort entirely by Radhika qua her undoubted interest then as a 35% BHL shareholder. How cl 5(b) of the SSA, properly construed, can bear the interpretation that, as an incoming BHL shareholder replacing the Burrup Trustee, Radhika holds and enjoys several rights under the SD (in contrast to rights jointly held with Pankaj) is not immediately apparent.
Some clauses within the SD bear upon the several/joint rights issue, see cl 1.2(m) of the SD, referring to rights and liabilities that are several (not joint, or joint and several). See also cl 18.3 of the SD as regards several obligations. However, SD definition clauses apply 'unless the context indicates a contrary intention' in the SD. Definition cl 1.2(a) in the SSA refers to rights conferred on two or more persons benefiting them 'jointly and severally'. That definition provision in the SSA is also only applicable 'unless the contrary intention appears'. Moreover, the definition of 'Oswal Parties' in cl 1.1 of the SSA is 'means the Burrup Trustee, Pankaj Oswal, Radhika Oswal, jointly and severally'.

Summary of Issues

The core issues which broadly present for resolution in this construction exercise relate to express terms found within the SD and the SSA. Nevertheless, any exercise in construction must be implemented within a background context of relevant mutually known surrounding facts and circumstances around the two key instruments, even though both the SD and the SSA contain comprehensive entire agreement clauses. Prevailing facts at each relevant date for the SD and SSA need to be ascertained. There will be extra potential background facts relevantly applicable for the SSA as it is later in time than the SD in 2008 by almost six months.
So, in the present case, it is first necessary to assess relevant and surrounding background facts leading up to the SD of 24 March 2008. For the SSA, the background and surrounding facts comprise those facts plus facts in a further period up to 19 September 2008.
Before examining the factual backgrounds for these two instruments by reference to their commercial purposes (objectively assessed) and origins (genesis) of the commercial transactions, it is necessary to say something of the pleadings of the respective parties, particularly for the three parties who actively participated in the determination of the preliminary issue, namely Radhika, Yara and the Receivers. The other parties in the action and the counterclaim, for the moment, have elected to delimit their active participation and agreed to abide the court's decision on the preliminary issue. The non‑participating parties, including Pankaj, did not participate in the preliminary issue, other than by (earlier) providing discovery to the extent requested.

Commencement of action

Radhika commenced this litigation by issue of her writ on Christmas Eve, 2010 at a time when she and her husband Pankaj were still residents of Western Australia. That altered in early 2011. Indorsed to Radhika's writ was a statement of claim, rather than an indorsement. That was a permissible course, see the Rules of the Supreme Court 1971 (WA) (RSC), O 6 r 3.
Radhika's prayer for relief at that time sought only declarations that:
1.On the proper construction of the two key documents (the SD of 24 March 2008 and the SSA of 19 September 2008):
(a)Mr Sodum was validly appointed by the plaintiff as a director of the third defendant;
(b)at any directors' meeting of the third defendant, Mr Sodum is entitled to 385,014,497 votes on any resolution; and
2.the Purported Resolutions [as defined in what was then par 24 of the statement of claim referring to written resolutions at a directors' meeting of the third defendant, Burrup Holdings Limited, of 17 December 2010 seeking to suspend the employment of BHL's managing director, to appoint an interim replacement managing director and to appoint further directors to the board of the third defendant] are invalid and of no force and effect.
The plaintiff's statement of claim was amended twice, with the (final) re‑amended statement of claim being indorsed to the plaintiff's re‑amended writ of summons filed 27 May 2011.
The SD was referred to in pars 14 through 17 of the plaintiff's re‑amended statement of claim.
Paragraph 14 referred to Pankaj as being a party to the SD in his capacity as trustee for the Burrup Trust. This is the discretionary trust created by another deed entered on 22 June 2001 between Peter Moltoni (as settlor) and Pankaj (as trustee). This trust was formerly known as the Vasundhara Trust (see par 1(2) of the re‑amended statement of claim).
As a preliminary observation, it may be noted:
(a)Radhika is not a party to the SD of 24 March 2008;
(b)Pankaj was only party to the SD in his capacity as the trustee of the Burrup Trust (the Burrup Trustee); and
(c)Radhika was a named beneficiary of the Burrup Trust (par 1(2) of the re‑amended statement of claim), as was Pankaj.
None of those observations raise controversial facts.
Radhika's 2010 Christmas Eve writ named four defendants.
(a)As first defendant, Yara was referred to (par 2(2)) as being registered Shareholder of 385,014,497 shares, or 35% of the issued share capital in BHL.
(b)Pankaj was named as second defendant to the proceedings, in his own right. The statement of claim refers to Pankaj as the registered Shareholder of 30% of the issued share capital of BHL, and self‑appointed Nominee Director of BHL.
(c)Radhika named the unlisted corporation Burrup Holdings Limited (Receivers and Managers Appointed) [sic] as third defendant to her writ. The reference to BHL as receivers and managers appointed was an error - later corrected by an amended writ of summons issued on 4 March 2011. The statement of claim uncontroversially refers to BHL as owning and operating the anhydrous ammonia plant on the Burrup Peninsula in Western Australia through its subsidiary, BFPL.
(d)As first‑named fourth defendant, the writ named Mr Tor Holba. Paragraph 5 of the initial statement of claim contends Mr Holba is a Nominee Director of BHL appointed by Yara pursuant to the SD.
(e)As a second‑named fourth defendant, the writ named Mr Vinojit Ambalavaner. Paragraph 6 of Radhika's re‑amended statement of claim refers to Mr Ambalavaner as being a Nominee Director appointed to BHL by Pankaj in about July 2009, pursuant to cl 5(b) of the SSA.
It also pleaded that Mr Ambalavaner ceased to be a director of BHL from 3 February 2011. Mr Ambalavaner told the court of his resignation personally at a directions hearing on 17 February 2011 (ts 41).
Paragraph 19 of Radhika's re‑amended statement of claim refers to recitals in the SSA to the effect that Radhika and Pankaj in their personal capacities each held 35% in their own right of the shares in BHL, with Yara holding the remaining 30% of the issued share capital. It is not controversial that Pankaj personally sold 55,002,071 of his BHL shares to Yara under the SSA, constituting Yara's acquisition of a further 5% of the share capital.
Notwithstanding that the respective recitals in the SD and the SSA suggest that Pankaj and Radhika had only acquired their 35% legal and beneficial shareholdings in BHL in the period between March and September 2008 (upon the vesting of their entitlements as beneficiaries under the Burrup Trust), one plea in Radhika's statement of claim suggests to the contrary. Paragraph 9 of the re‑amended statement of claim contends that, by written resolution dated 13 March 2007, the Burrup Trustee exercised a power provided by cl 17 of the trust deed and thereby caused the Trust's shareholding in BHL to be vested in Radhika and Pankaj in equal shares. Paragraph 10 of the re‑amended statement of claim contends that vesting of the 35% interest in Radhika was not registered until 18 September 2008 (i.e. one day before the SSA). This is a murky aspect of the dispute to which I will return. But there is no doubt Yara validly acquired an extra 5% of BHL shares under the SSA from Pankaj personally, for US$141 million.
What emerged under the re‑amended statement of claim concerning the two key written instruments of 2008 was an interpretation dispute over the right of Pankaj (either alone, or in conjunction with Radhika), for as long as Pankaj holds more than 5% of the shares in BHL as he does, to appoint up to three Nominee Directors to the board of BHL who would vote with the weighting of 65% of the BHL shares at directors' meetings.
By her re‑amended statement of claim of 27 May 2011, Radhika contended at par 23 seven alternative constructions of the SSA on the basis of it being allegedly agreed in the SSA as between herself, the Burrup Trustee, Pankaj in his personal capacity and Yara, that various permutations of entitlement that would entitle her to appoint Nominee Directors to BHL's board and for those Nominee Directors to exercise Nominee Director voting rights in respect of her 35% shareholding interest in BHL.
The seven alternate constructions of cl 4.1(c) of the SD, by reason of cl 5(b) of the SSA, are (par 23):
(1A)for as long as Pankaj and Radhika between them held 5% or more of the issued share capital of BHL:
(A)Pankaj and Radhika were jointly and severally entitled to appoint three directors to BHL; and
(B)the nominee directors so appointed were collectively entitled to 1 vote at a board meeting for each share held by Pankaj and Radhika;
(1B)alternatively, for as long as Pankaj and Radhika between them held 5% or more of the issued share capital of BHL:
(A)Pankaj and Radhika were severally entitled to appoint in total three directors to BHL; and
(B)the nominee directors so appointed were collectively entitled to 1 vote at a board meeting for each share held by Pankaj and Radhika;
(1C)alternatively, for as long as Pankaj and Radhika between them held 5% or more of the issued share capital of BHL:
(A)Pankaj and Radhika were jointly entitled to appoint a total of three directors to BHL; and
(B)the nominee directors so appointed were collectively entitled to 1 vote at a board meeting for each share held by Pankaj and Radhika;
(1)alternatively, for as long as Pankaj and Radhika between them held 5% or more of the issued share capital of BHL:
(A)Pankaj and Radhika were each entitled to appoint at least 1 director to BHL and between them, no more than 3 directors of BHL; and
(B)the nominee directors appointed by each of Pankaj and Radhika were collectively entitled to 1 vote at a board meeting for each share held by Pankaj and Radhika as the case may be;
(2)alternatively, for as long as Pankaj and Radhika between them held 5% or more of the issued share capital of BHL:
(A)Pankaj was entitled to appoint 3 directors and Radhika was entitled to appoint 1 director to BHL; and
(B)the nominee directors appointed by Pankaj were collectively entitled to 1 vote at a board meeting for each share held by Pankaj;
(C)the nominee director appointed by Radhika was entitled to 1 vote at a board meeting for each share held by Radhika.
(3)alternatively, for as long as Pankaj and Radhika between them held 5% or more of the issued share capital of BHL:
(A)Pankaj was entitled to appoint 3 directors to BHL; and
(B)the nominee directors appointed by Pankaj were collectively entitled to 1 vote at a board meeting for each share held by each of Pankaj and Radhika;
(4)alternatively, for as long as Pankaj and Radhika between them held 5% or more of the issued share capital of BHL:
(A)Radhika was entitled to appoint at least 1 director to BHL and between Radhika and Pankaj, no more than 3 directors of BHL; and
(B)the nominee directors appointed by Radhika were collectively entitled to 1 vote at a board meeting for each share held by each of Pankaj and Radhika.

What follows is the pro forma draft Assumption Deed which is Annexure A to the SD:
1.Interpretation
For the purposes of this deed the terms which are defined in clause 1 of the Shareholders' Deed have the same meanings when used in this deed.
2.Operative part
2.1New Shareholder to become a party to Shareholders Deed
The New Shareholder agrees to become a party to the Shareholders' Deed and to:
(a)assume all the rights enjoyed by the [Transferor/other Shareholders] under the Shareholders' Deed; and
(b)be bound, with the necessary changes, by the terms, conditions, restrictions and obligations set out in the Shareholders' Deed in every way as if the New Shareholder were named as a party to the Shareholders' Deed [instead of the Transferor/in addition to the other Shareholders].
2.2Limits of liability of New Shareholder
However, the New Shareholder will not be liable for any:
(a)breach by the Transferor under the Shareholders' Deed that occurred; or
(b)liability of the Transferor under the Shareholders' Deed that was incurred,
before the Effective Date.
3.Notices
For the purposes of the Shareholders' Deed the address of the New Shareholder to which all notices, consents, requests and other documents required to be given or sent is as follows:
[insert details]
4.Governing Law
This deed is governed by and construed in accordance with the laws from time to time of the State of Western Australia and the New Shareholder agrees to submit itself to the jurisdiction of the Courts of that State.

(B) The SSA of 19 September 2008

Following are clauses from the SSA which are of importance to construction issues discussed in these reasons.
PartiesPankaj Oswal of care of Level 8, 225 St George's Terrace, Perth, Western Australia (Seller)
Yara Australia Pty Ltd 076 301 221 of 20l Mill Street, Mezzanine Level, North Sydney, New South Wales (Buyer)
Radhika Oswal of care of Level 8, 225 St George's Terrace, Perth, Western Australia (Radhika Oswal)
Pankaj Oswal in his capacity as trustee of the Burrup Trust of care of 'Level 8, 225 St George's Terrace, Perth, Western Australia (Burrup Trustee)
Background
A.The total issued share capital of the-Company is 1,100,041,421 ordinary fully paid shares,
B.The Seller owns 35% of the issued shares in the Company, the Buyer owns 30% of the issued shares of the Company and the remaining 35% of the issued shares in the Company are owned by Radhika Oswal.
C.The Seller wishes to sell the Shares and the Buyer wishes to buy the Shares on the terms and conditions of this agreement.
D.Following the purchase of the Shares, the Buyer will own 35% of the issued shares in the Company and the Seller will own 30% of the issued shares in the Company.
1.Definitions and Interpretation
1.1Definitions
Burrup Offtake Agreement means the agreement entitled 'Anhydrous Ammonia Offtake and Marketing Support Agreement' dated 13 December 2002 made between Burrup Fertilisers Pty Ltd and Yara Asia Trade Pte Ltd.
Burrup Shareholders Deed means the shareholders deed between the Buyer, the Burrup Trustee, the Company and. BFPL dated 24 March 2008.
Burrup Trust means the Burrup Trust ABN 89 065 613 395 established under the Burrup Trust Deed.
Burrup Trust Deed means the trust deed dated 22 June 2001 as amended by a deed of variation dated 17 January 2001.
Completion Date means the date on which Completion occurs.
Completion Payment means US$141 million.
IPO means the initial public offering contemplated in clause 6 under which the Company will be listed. on the ASX or another recognised international securities exchange agreed to by the parties.
MOU has the meaning given to that term in clause 9(a).
Oswal Parties means the Burrup Trustee, Pankaj Oswal and Radhika Oswal, jointly and severally.
Plant means the anhydrous ammonia plant on the Burrup Peninsula at Karratha, Western Australia which is operated by Burrup Fertilisers Pty Ltd as at the date of this agreement.
Purchase Price means the Completion Payment as adjusted in accordance with clause 7.
Seller's Warranties means the warranties set out in Schedule 1.
Shares means 55,002,071 ordinary fully paid shares in the: capital of the Company comprising 5%of the total issued ordinary .shares in the Company, being l,100,041 ,421 ordinary shares.
Shri Krishna Holdings means Shri Krishna Holdings Pty Ltd CAN 112 217 160.
Shri Krishna Shareholders Deed means the shareholders deed between the Buyer, Pankaj Oswal in his own capacity and as trustee for the Burrup Trust and Shri Krishna Holdings dated 31 March 2005.
1.2General rules of interpretation
In this agreement headings are for convenience only and do not affect interpretation and, unless the contrary intention appears:
(a)an obligation or a liability assumed by 2 or more persons binds them jointly and severally and a right conferred on 2 or more persons benefits them jointly and severally;
(c)the word 'including' or any other form of that word is not a word of limitation;
3.Purchase Price
3.1Purchase Price
The purchase price payable for the Shares is the Completion Payment subject to possible increase in accordance with clause 7.
3.2Payment of Purchase Price
The Purchase Price must be paid as follows -
(a)on Completion, the Buyer must pay the Completion Payment to the Seller in accordance with clause 7 and clause 15; and
(b)if the Purchase Price is adjusted under clause 7, on the date prescribed in clause7 the Buyer must pay to the Seller the amount determined in accordance with clause 7.
5.Burrup Shareholders Deed
(a)The Oswal Parties represent and warrant that:
(i)Pankaj Oswal in his personal capacity is the legal and beneficial owner of ordinary fully paid shares in the capital representing 35% of the total issued ordinary shares in the capital of the Company; and
(ii)Radhika Oswal is the legal and beneficial owner of ordinary fully paid shares in the capital representing 35% of the total issued ordinary shares in the capital of the Company.
(b)Pankaj Oswal, the Burrup Trustee and Radhika Oswal undertake to execute all documents necessary to join Pankaj Oswal in his personal capacity and Radhika Oswal to the Burrup Shareholders Deed in place of the Burrup Trustee and with such other amendments as agreed by the Buyer and the Oswal Parties. Until such document has been executed, Pankaj Oswal in his personal capacity and Radhika Oswal agree to comply with the Burrup Shareholders Deed as if they were a party to the deed in place of the Burrup Trustee.
6.Initial Public Offering
6.1IPO
(a)Each of the Oswal Parties and the Buyer acknowledge and agree that it is their intention to proceed with an IPO in relation to the Company and listing of the Company on ASX, or another recognised international securities exchange agreed to by the parties at an appropriate time in the future.
(b)Notwithstanding any provision in the Burrup Shareholders Deed, the decision on the exact timing of the proposed IPO in relation to the Company within the 15 months following 9 September 2008, will be made by the Oswal Parties and, if the Oswal Parties determine that the Company will proceed to IPO within that time, the Buyer must take all steps and execute all documents reasonably required by the Oswal Parties or the Company to facilitate the Buyer's participation in the IPO in accordance with clause 6.2.
6.2IPO participation levels
The Oswal Parties and Buyer agree that if they proceed with an IPO and listing of the Company on ASX or another recognised international securities exchange agreed to by the parties, then each of the Oswal Parties and the Buyer must participate in the IPO by offering for sale that percentage of their respective shares in the capital of the Company determined as follows:
(a)if the Market Capitalisation at IPO is greater than or equal, to US$2,820,000,000 then each of the Oswal Parties and the Buyer shall offer pursuant to the IPO Disclosure Document at least that number of shares in the capital of the Company as is proportional to the number of shares they each respectively hold in the total issued share capital of the Company at the date of issue of the IPO Disclosure Document. [For example if no new shares in the Company are issued pursuant to the IPO and the Oswal Parties and the Buyer together offer 20% of the total issued share capital of the Company pursuant to the IPO Disclosure Document and their respective shareholdings in the Company represent for the Oswal Parties 65% and Buyer 35% of the Company's total issued share capital then the Oswal Parties shall offer 13% and the Buyer shall offer7% of the Company's total issued share capital pursuant to the IPO Disclosure Document];
(b)if the Market Capitalisation at IPO is equal to or greater than US$2,500,000,000 but less thanUS$2,820,000,000 then as a minimum Yara shall offer pursuant to the IPO Disclosure Document that number of shares as equates to not less than 3% of the total issued share capital of the Company; and
(c)if the Market Capitalisation at IPO is less than US$2,500,000,000 then Yara is not obliged, to offer or sell any of its shares in the capital of the Company pursuant to the IPO Disclosure Document.
7.Increase to Purchase Price
7.1Calculation
If the Company lodges an IPO Disclosure Document within 15 months from 9 September 2008 and the Market Capitalisation at IPO is greater than US$2,820,000,000 then the Purchase Price shall be increased such that the Buyer must pay to the Seller the difference between:
(a)the Completion Payment; and
(b)the Completion Payment that would have been received by the Seller if the Seller had sold the Shares for a total price equal to the price at which shares representing 5% of the total issued share capital of the Company would have sold at the price offered pursuant to the IPO Disclosure Document (and if there is more than one offer price for different categories of investors then the weighted average of all offer prices for all shares offered pursuant to the IPO Disclosure Document).
7.2Payment
If any amount is payable under clause7.1 the Buyer must pay that amount to the Seller in immediately available funds within 10 Business .Days of the date of listing of the Company on ASX or another recognised International securities exchange agreed to by the parties.
7.3No adjustment
If the amount specified in clause 1.1(a) is more than the amount specified in clause7.1(b), then there shall be no adjustment to the Purchase Price, and no amount is payable by the Seller to the Buyer.
8.Offtake
The Oswal Parties and the Buyer confirm and agree, and the Oswal Parties must use all reasonable endeavours to procure that the Company and BFPL agree, that (subject-to and conditional on Completion occurring on or before the End Date), if the Company or BFPL proceed with:
(a)any expansion of the existing Plant; or
(b)any further downstream nitrogen project from, in association or connection with the existing Plant; or
(c)any further downstream nitrogen project which utilizes gas supplied under the gas supply agreements in existence at the date of this agreement relating to the Plant or to which BHL or BFPL are a party at the date of this agreement,
then the Company or BFPL, as appropriate agree to enter into with the Buyer and/or its nominated Related Body Corporate (and the Buyer and/or its nominated Related Body Corporate shall have-the option to enter into) an exclusive long term domestic and export marketing agreement in respect of all products produced from or as a result of such expansion, such long term agreement to be upon terms which are substantially the same as the terms of the Burrup Offtake Agreement with respect to ammonia and at prices to be agreed based upon appropriate reference prices and/or pricing mechanism for other products produced by the Plant.
9.TAN Project
The Buyer and the Oswal Parties agree and the Buyer and the Oswal Parties must use all reasonable endeavours to procure that the Company and BFPL confirm and agree, subject to and conditional on Completion occurring on or before the End Date:
(a)the terms of the memorandum of understanding between the Buyer and the Company entered into on 10 May 2008 in relation to the TAN Project(MOU);
(b)that the terms of the MOU will be finalised in a formal agreement and exclusive off-take agreement;
(c)the parties will negotiate in good faith the terms of the formal documents to give effect to the MOU and will use their best endeavours to agree to the-terms of such documentation as soon as possible after the date of this agreement;
(d)that at the option of the Oswal Parties, at Completion either -
(i)Shri Krishna Holdings will be wound-up, and the Shri Krishna Shareholders Deed will be terminated; or
(ii)the Oswal Parties will purchase all of the shares in Shri Krishna Holdings held by the Buyer for $1,00, release the Buyer from any and all claims in relation to Shri Krishna Holdings and the Shri Krishna Shareholder Deed shall be. terminated.
10.Burrup Deed
The Oswal Parties and the Buyer must procure that the Company and BFPL enter into a deed in the form set out in Schedule 3 to confirm their agreement to the provisions set out in clauses 8 and 9 of this agreement and deliver an original counterpart of that deed duly executed by the Oswal Parties, the Company and BFPL within 5 Business Days of executing this agreement. It is acknowledged that the obligations of the parties under the deed referred to in this clause 10 will only come into force if Completion occurs on or before the End Date.
12.Warranties
12.1Seller's Warranties
The Seller warrants to the Buyer that each of the Seller's Warranties is true and correct as at:
(a)the date of execution of this agreement; and
(b)the time immediately prior to Completion.
12.2Buyer's Warranties
The Buyer warrants to the. Seller that each of the Buyer's Warranties is true and correct as at:
(a)the date of execution of this agreement; and
(b)the time immediately prior to. Completion.
12.3Warranties separate
Each Warranty is to he treated as. a separate warranty and is not limited by reference to any other warranty or any other provision of this agreement.
12.4Survival
Each Warranty will remain in full force and effect after Completion and a Warranty Claim is not limited to breaches identified prior to Completion.
12.5Reliance
The parties acknowledge that the Buyer and Seller have entered into this agreement in reliance on the Warranties.
12.6Indemnity for breach of Warranty
Without limiting any other remedy available to the Buyer or Seller, the Seller or Buyer (as the case may be) must pay to the other party on demand:
(a)an amount equal to all Indemnified Losses suffered or incurred by the other party arising out of or in connection with the breach or any Warranty; and
(b)an amount equal to any additional Tax assessable on the other party arising out of or in connection with the receipt by the other party of a payment under this clause 12.6 or otherwise in respect of the breach of Warranty.
12.7Seller and Buyer to notify potential breaches
If before Completion the Seller or Buyer (as the case may be) becomes aware of any fact, matter or circumstance which results in or is reasonably likely to result in a breach of any Warranty given by it before Completion the Seller or Buyer must promptly provide to the other party notice describing that fact; matter or circumstance in reasonable detail.
12.8Trustee warranties
The Burrup Trustee warrants to the Buyer that:
(a)(sole trustee) it is the sole trustee of the Burrup Trust and that no action has been taken to remove or replace it;
(b)(power and authority) it has the power under the deed constituting the Burrup Trust to enter-into and complete this agreement and that all necessary consents and notices in relation to the exercise by the party as trustee of such power have been given; and
(c)(full indemnity) it has a right to be fully indemnified out of the Burrup Trust fund except in the case of dishonesty or wilful breach of trust and provide that the liability is incurred by the trustee as trustee of the Burrup Trust.
18.Entire agreement
This agreement constitutes the entire agreement between the parties in relation to its subject matter and supersedes all previous agreements and understandings between the parties in relation to its subject matter.
20.Governing law and jurisdiction
20.1Governing law
This agreement is governed by the law applying in Western Australia.

(SSA) Schedule 1 - Seller's Warranties

1.The Seller
1.1Capacity and authorisation
The Seller has the legal right and full power and capacity to execute, deliver and perform its obligations under this agreement and has obtained all necessary authorisations and consents and taken all other actions necessary to enable it to do so.
1.2Valid obligations
This agreement constitutes (or will when executed constitute) valid legal and binding obligations of the Seller in accordance with its terms.
1.3Breach or default
The execution, delivery and performance of this agreement by the Seller does not and will not result in a breach of or constitute a default under:
(a)any agreement to which the Seller is party;
(b)any law or regulation or any order or judgment of any court or Regulatory Authority to which the Seller is a party or by which the Seller is bound.

2.Shares and share capital
2.1Ownership of the Shares
The Seller is the sale legal owner of the Shares and has complete and unrestricted power and authority to sell the Shares to the Buyer.
2.2Share capital
The Shares constitute 5% of the issued share capital of the Company and have been validly issued and fully paid up.
2.3Third party rights
There is no Encumbrance, option, right of pre-emption, right of first or last refusal or other third party right over any of the Shares or any of the shares in the Subsidiaries, other than pursuant to the Burrup Shareholders Deed.
3.Group Companies
As at 9 September 2008, the total amount owing by all Group Companies:
(a)to any bank, financier or similar financial institution in respect of borrowings or other financial indebtedness was approximately US$360,000,000; and
(b)to all shareholders of the Company was approximately US$30,000,000.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: OSWAL -v- YARA AUSTRALIA PTY LTD [No 3] [2011] WASC 255 (S)

CORAM: KENNETH MARTIN J

HEARD: 14 AUGUST 2012

DELIVERED : 28 SEPTEMBER 2012

FILE NO/S: CIV 3078 of 2010

BETWEEN: RADHIKA OSWAL
Plaintiff
AND
YARA AUSTRALIA PTY LTD
First Defendant
PANKAJ OSWAL
Second Defendant
YARA PILBARA HOLDINGS PTY LTD (Formerly known as BURRUP HOLDINGS LTD)
Third Defendant
TOR HOLBA
VINOJIT AMBALAVANER
Fourth Defendants
(BY ORIGINAL ACTION)
YARA AUSTRALIA PTY LTD
Plaintiff
AND
RADHIKA OSWAL
First Defendant
PANKAJ OSWAL
Second Defendant
YARA PILBARA HOLDINGS PTY LTD (Formerly known as BURRUP HOLDINGS LTD)
Third Defendant
TOR HOLBA
VINOJIT AMBALAVANER
Fourth Defendants
YARA PILBARA FERTILISERS PTY LTD (Formerly known as BURRUP FERTILISERS PTY LTD)
Fifth Defendant
RAMESH SODUM
Sixth Defendant
IAN CARSON, DAVID MCEVOY AND SIMON THEOBALD AS THE RECEIVERS AND MANAGERS
Seventh Defendants
(BY COUNTERCLAIM)

Catchwords:

Costs orders - Preliminary issue - Answers on preliminary issue not determinative - No clear outcome for residual litigation - Unresolved issues - Turns on own facts

Legislation:

Nil

Result:

Costs reserved

Category: B

Representation:

Original Action

Counsel:

Plaintiff: Mr M N Solomon
First Defendant : Mr J C Sheahan SC &
Mr R W Douglas

Second Defendant  :        Mr J C Giles
Third Defendant  :        No appearance
First-named Fourth Defendant       :        No appearance
Second-named Fourth Defendant    :        No appearance

Solicitors:

Plaintiff:        Norton Rose Australia
First Defendant  :        Clayton Utz
Second Defendant  :        Hotchkin Hanly
Third Defendant  :        Ashurst Australia
First-named Fourth Defendant       :        Gadens Lawyers
Second-named Fourth Defendant    :        Gilbert + Tobin

Counterclaim

Counsel:

Plaintiff: Mr J C Sheahan SC &
Mr R W Douglas

First Defendant  :        Mr M N Solomon
Second Defendant  :        Mr J C Giles
Third Defendant  :        No appearance
First-named Fourth Defendant       :        No appearance
Second-named Fourth Defendant    :        No appearance
Fifth Defendant  :        No appearance
Sixth Defendant  :        No appearance
Seventh Defendants  :        Mr K J Mony De Kerloy

Solicitors:

Plaintiff:        Clayton Utz
First Defendant  :        Norton Rose Australia
Second Defendant  :        Hotchkin Hanly
Third Defendant  :        Ashurst Australia
First-named Fourth Defendant       :        Gadens Lawyers
Second-named Fourth Defendant    :        Gilbert + Tobin
Fifth Defendant  :        Freehills
Sixth Defendant  :        No appearance
Seventh Defendants  :        Freehills

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

Oswal v Yara Australia Pty Ltd [2011] WASC 355
Oswal v Yara Australia Pty Ltd [No 3] [2011] WASC 255

KENNETH MARTIN J: On 14 September 2011 I delivered reasons providing answers to a series of questions framed at six different time periods on agreed preliminary issues: see Oswal v Yara Australia Pty Ltd [No 3] [2011] WASC 255 (primary reasons). No substantive orders were made at that time, although I am advised that an appeal against my decision has been instituted by the first defendant (Yara) and that other parties have filed cross‑appeals to the Court of Appeal, which are all presently pending.
Further issues concerning the same parties subsequently arose in a related action I dealt with: see Oswal v Yara Australia Pty Ltd [2011] WASC 355, delivered 19 December 2011.
The question now arises as to dispositive orders following my reasons of 14 September 2011, including as to costs. Somewhat unusually, all parties have moved for costs orders in their favour in the aftermath of those reasons and the answers provided in respect of questions posed as preliminary issues: see primary reasons [451] and following.
There have also been some subsequent developments involving these parties and others which have arisen throughout 2012, suggesting the 'sting' may have subsided in what remains to be determined in the present action. In particular, a 49% shareholding in Yara Pilbara Holdings Pty Ltd (YPH), which is the company formerly known as Burrup Holdings Ltd, has been sold to Apache Fertilisers Pty Ltd (Apache). Yara has acquired a further 16% of shares in YPH, taking its shareholding to a majority 51% position.
All parties filed extensive written submissions and further affidavit materials for the purpose of having me evaluate arguments over entitlements to the costs of the trial of the preliminary issues.
In the end, in the somewhat unique circumstances of the present case, I am of the view that I must reserve all costs issues surrounding the hearing and determination of the preliminary issues, at least until the end outcomes in this litigation become clearer and can translate into substantive final orders or declarations, either on Mrs Oswal's claims, or on the relief Yara seeks by its counterclaim.
In brief summary, the following considerations have led me to the view that costs issues should be reserved:
A.The preliminary issues I agreed to resolve at the parties' requests dealt only with contractual construction, mainly in relation to the meaning of certain key clauses in a shareholders' deed and a share sale agreement (the SD and the SSA as defined in the primary reasons).
B.In the wake of answers provided on the construction issues, only the seventh defendants by counterclaim (the former receivers of Yara Pilbara Fertilisers Pty Ltd (YPF), which is the company formerly known as Burrup Fertilisers Pty Ltd) have moved for final consequential orders resolving the claim in this action.
C.The former receivers and managers moved for the complete dismissal of Mrs Oswal's claims. However, dismissal is not appropriate at this time. It is apparent from her pleading that Mrs Oswal raises other causes of action going well beyond issues of pure contractual construction, including statutory oppression, estoppel and rectification. Those arguments have not been considered, let alone resolved. Until then it would be premature to unilaterally terminate Mrs Oswal's action. For instance, it is possible she may still seek declaratory relief concerning her individual right to appoint a director or directors to the board of YPL at some future point, invoking considerations beyond mere contractual construction relating to the SD and the SSA.
D.The position, then, is that final orders cannot be made at this time on either Mrs Oswal's claim or on Yara's counterclaim.
E.The question is whether the outcome of the preliminary issues was such that a successful or substantially successful party or parties can be identified in whose favour costs orders should be made. My view as to that proposition is in the negative.
F.The outcome of the hearing of the preliminary issues, in my view, saw no party as entirely successful in having all propositions they had sought to establish before me accepted. There remain robust arguments from each side about who was substantially successful or tactically successful upon their construction arguments. The reality is that the determination of the preliminary issues involved a complex exercise in contractual construction. Each side ran numerous arguments. The primary reasons attempted to resolve the significant construction arguments raised. But it still remains to be seen how the answers provided to the questions posed will affect the ultimate outcome of this litigation.
G.Absent a clear winner, in my view it would be more prudent, not to mention just, to wait to resolve costs issues associated with the determination of preliminary issues until the end outcomes concerning Mrs Oswal's claim and Yara's counterclaims are known.
H.I am led to that position first because, as the primary reasons reflect, on the assessment of extremely complex arguments, no party fully succeeded in establishing everything it was seeking to show in terms of the construction positions advocated at the hearing.
I.Next, I am advised that Yara has commenced an appeal against the primary reasons and other parties have filed cross‑appeals. These appeals presently remain unresolved. So it is possible that my answers to the preliminary issues may be varied, and that the final outcome of this action and counterclaim then be guided by alternative construction outcomes framed elsewhere. Potential for the situation to change by reason of further inputs is a reason to wait before finalising costs orders associated with the preliminary issues.
J.As already mentioned, I am informed YPH shareholding control has altered and that Yara is now the 51% majority shareholder, with Apache holding a 49% share. But Mrs Oswal is pursuing proceedings in the Supreme Court of Victoria, challenging the validity of the ANZ Bank's realisation through sale of her 35% YPH shareholding. I am told that that challenge is framed in a context of issues which have been raised by Mrs Oswal over the validity of ANZ's securities and thereby its rights to realise Mrs Oswal's 35% shareholding in YPH. Outcomes in the unresolved Victorian litigation also have some potential to impact against this action. So does another action pursued by Mr Oswal in the Supreme Court of Victoria, where he challenges the reasonableness of the marketing and sale process concerning Mr Oswal's 30% shareholding in YPH.
K.Although my answers to some of the preliminary issues might be read as providing a basis for concluding that Mrs Oswal's attempted appointment of the sixth defendant by counterclaim (Mr Sodum) as director of YPH was inherently flawed, I have, as indicated, only considered to date issues of construction concerning the SD and the SSA. It remains to be seen whether further non‑contractual causes of action could possibly bear upon my final assessment of the validity of Mr Sodum's appointment as Mrs Oswal's exclusively appointed nominee director to YPH.
L.I have by no means finally resolved, and would need to hear more argument upon, questions regarding the status of Mr Pankaj Oswal as a continuing nominee director of YPH in the period after the execution of the SSA. Considerations applicable to the resolution of those questions extend well beyond issues of contractual construction.
M.Yara's counterclaim also raises a number of further issues, particularly concerning declarations it seeks as to the validity of resolutions carried by the board of YPH promoted by Yara's nominee director Mr Tor Holba in the last months of 2010. I have not as yet heard argument on, let alone resolved issues raised by, Yara's counterclaim concerning the validity of those resolutions. Those issues could raise factual disputes and require evaluations going beyond pure contractual construction.
N.I expect that the legal costs incurred in the hearing of the preliminary issues on behalf of the receivers and managers appointed to YPH will have been met out of realisations from the receivership process or, if not, by indemnification from the appointing secured creditor, ANZ. I see no question of real urgency in a resolution of these costs issues due to the receivers and managers being out of pocket, exposed to personal liabilities or to prejudice associated with their proper participation in the trial of the preliminary issues. Hence, some degree of deferment concerning these costs, until end outcomes in Mrs Oswal's claim and on Yara's counterclaim in this action are clearer, will not deliver any significant prejudice. Nor for that matter has Yara or Mr or Mrs Oswal sought to demonstrate any financial prejudice to their respective positions arising out of a deferment of a resolution of these costs issues.
Accordingly, my view is that the costs of the trial of preliminary issues should be reserved until further order.
As there is a pending appeal by Yara and cross‑appeals by other parties, the matter whilst case managed in my CMC List should now stand in abeyance until the appeal process concludes. There is, of course, liberty to apply for all parties concerning reserved costs of the hearing and determination of the preliminary issues in the action itself and in the counterclaim.