Padraig Reidy as Trustee for the PR Mining Superannuation Fund v Contained Gold Pty Ltd - [2019] WADC 61

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION:   PERTH
CITATION:   PADRAIG REIDY as Trustee for THE PR MINING SUPERANNUATION FUND -v- CONTAINED GOLD PTY LTD [2019] WADC 61
CORAM:   PRIOR DCJ
HEARD:   9-11 & 13 APRIL & 6-8 AUGUST 2018
DELIVERED          :   26 APRIL 2019
FILE NO/S:   CIV 4593 of 2016
BETWEEN:   PADRAIG REIDY as Trustee for THE PR MINING SUPERANNUATION FUND
Plaintiff
AND
CONTAINED GOLD PTY LTD
Defendant

Catchwords:

Contract - Whether initial loan agreement was varied by a subsequent contract - Whether subsequent contract varying initial loan agreement was subject to conditions - Turns on its own facts

Legislation:

Nil

Result:

Judgment for the plaintiff in the sum of $109,375 and interest

Representation:

Counsel:

Plaintiff	:	Mr P Lafferty
Defendant	:	Mr C S Gough

Solicitors:

Plaintiff	:	Armeli & Molony Lawyers
Defendant	:	Mills Oakley

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

Ailakis v Olivero [No 2] [2014] WASCA 127
Bell Group Ltd (In Liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1
Commissioner of Taxation v Sara Lee Household & Body Care [2000] HCA 35; (2000) 201 CLR 520
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2008) 128 FCR 1
Googe v Spoljaric [2017] WADC 99
GT Corporation Pty Ltd v Amare Safety Pty Ltd [2008] VSC 143
Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93

PRIOR DCJ:

A. Introduction

In October 2015 the defendant entered into a joint venture agreement with SR Mining Pty Ltd, a wholly owned subsidiary of Bligh Resources Ltd (Bligh), to develop a mining project called the Bundarra Gold Project.[1]
[1] Exhibit 1.
The plaintiff in his personal capacity was at the time an employee of the defendant. He was the project manager of the Bundarra Gold Project from November 2015 to July 2016. Angler Mining Pty Ltd (Angler) was the major shareholder of the defendant.
Pursuant to an agreement in writing made on or about 25 January 2016 (the loan agreement), the plaintiff advanced $87,500 to the defendant by way of a secured loan.[2] This amount was paid in three instalments to Bligh on the direction of Dean O'Keefe, a director of the defendant.
[2] Exhibit 2.
This action is for that amount and a loan fee of 25% ($21,875), together with interest at 12% per annum from the date of default, being 1 April 2016.[3] I will refer to the sum of the loan amount, the loan fee and the interest as the debt.
[3] Plaintiff's statement of claim.

B. The issues

The defendant admits the loan agreement but claims that on or about 5 May 2016 the plaintiff agreed to convert the defendant's obligation to pay the debt to 1,367,888 shares in the defendant.[4]
[4] Defence par 7(a).
The defendant claims the plaintiff confirmed the agreement by an email sent to the defendant dated 5 May 2016. The defendant further claims that at no time did the plaintiff state that the agreement was conditional upon any other events or matters.
In the alternative, the defendant claims by his email dated 5 May 2016 the plaintiff offered to convert the debt to shares in the defendant and that by its conduct (in issuing the shares) the defendant accepted the plaintiff's offer.
The defendant claims that it later issued 1,367,888 shares to the plaintiff in satisfaction of the debt.[5]
[5] Defence pars 7(b) and 8.
The plaintiff contends that on or about 5 May 2016 at a meeting held at the defendant's registered office in Claremont, in the course of discussions between representatives of the defendant and the plaintiff, the defendant proposed that in the event that Bligh acquired the defendant's interest in the Bundarra Gold Project shares in the defendant would be issued to the plaintiff in full and final satisfaction of the debt.[6]
[6] Plaintiff's amended reply to defence par 3.
The plaintiff says as Bligh did not acquire the Bundarra Gold Project, the proposal by the defendant was not accepted.[7]
[7] Plaintiff's amended reply to defence par 4.
The plaintiff pleads in the alternative that if there were an agreement between the parties as pleaded in the defence, the shares issued to the plaintiff were not validly issued, and further that the value of the shares was not sufficient to satisfy the debt.[8] Neither of these points was pursued with any vigour by the plaintiff at trial.
[8] Plaintiff's amended reply to defence pars 5 and 6.
The issue in this case is whether the plaintiff agreed, on or about 5 May 2016 to accept 1,367,888 shares in the defendant in satisfaction of the debt.

C. The parties and the witnesses

The plaintiff Padraig (Paddy) Reidy gave evidence. He is a geologist and was an employee of the defendant from November 2015 until he resigned on 28 July 2016. The plaintiff was also employed by Angler from 24 September 2015 to 28 July 2016, and was a shareholder of Angler.
Mark Rowbottom was called as a witness by the plaintiff. He was a director of the defendant from 1 November 2015 to 2 August 2016 and the company secretary from 28 May 2015 to 2 August 2016. Mr Rowbottom was in charge of the defendant's company register until he resigned. Mr Rowbottom was also the chairman and a director of Angler from 14 August 2015 to 11 August 2016.
When Mr Rowbottom resigned as a director and company secretary of the defendant on 2 August 2016, he was replaced by Cornelius Plug. Mr Plug was not called as a witness at the trial by either party.
Jerome Vitale was called as the final witness for the plaintiff. He is a chartered accountant and performed consulting services between February 2016 and July 2016 in relation to the defendant's funding obligations for the Bundarra Gold Project.
The defendant called one witness, Dean O'Keefe. Mr O'Keefe is a director of the defendant and also a director of Angler.
The defendant's registered office in 2016 was Unit 18, 40 St Quentin Avenue, Claremont. During 2016 the defendant shared the office with Angler.

D. The meeting at the defendant's office on 5 May 2016

It is common ground between the parties that a meeting occurred between the plaintiff and Mr O'Keefe at the registered office of the defendant in Claremont (the meeting). The plaintiff's evidence was the meeting was on 5 May 2016. Mr O'Keefe was unsure of the exact date of the meeting. Mr Rowbottom was also present at the meeting.
Prior to the meeting occuring, the debt had not been paid.
There is a dispute as to what was said and what was agreed (if anything) between the plaintiff and the representatives of the defendant at the meeting.
The plaintiff's evidence was that in March and April 2016 he, Mr Rowbottom and Mr Vitale, as a corporate advisor and broker, were looking at strategies whereby either the defendant could buy out Bligh's interest in the Bundarra Gold Project, or Bligh could buy out the defendant's interest in the Bundarra Gold Project.
In late April 2016 the plaintiff recalled attending a meeting by Skype with Richie Yang, the managing director of Bligh, at the residence of Mr Vitale. At that meeting there were discussions about the possibility of the defendant buying out Bligh's interest in the Bundarra Gold Project. The plaintiff's evidence was that Mr Yang appeared reluctant to explore that possibility.
On 3 May 2016 Mr O'Keefe received an email from Mr Yang stating that Bligh would be willing to explore a deal where Bligh would buy out the defendant's shares (exhibit 5A). Bligh would then have 100% of the Bundarra Gold Project. According to the plaintiff, Mr Yang proposed that shareholders of the defendant would receive shares in Bligh at a rate to be determined.
The plaintiff gave evidence that on the morning of 5 May 2016 there was a brief informal meeting between himself, Mr Rowbottom and Mr O'Keefe in Mr O'Keefe's office in Claremont. He and Mr Rowbottom were standing and Mr O'Keefe was sitting at his desk. Mr O'Keefe said 'okay guys, what do we do about the secured note?' After a brief discussion Mr O'Keefe enquired whether, if the defendant's share price were discounted by 20%, he would be amenable to converting his secured loan to shares. The plaintiff said he would be amenable to that proposal in the context of Bligh's proposal to buy out the defendant, which was a key issue at the time. The same offer was made to Mr Rowbottom by Mr O'Keefe in relation to Mr Rowbottom's secured loan with the company, but Mr Rowbottom was uncommitted. The plaintiff's evidence was that Mr O'Keefe then requested him to send an email to that effect. He said the meeting lasted no more than five minutes.
It is the plaintiff's position, based on his evidence, that an offer was made by Mr O'Keefe at the meeting on behalf of the defendant that in the event Bligh acquired the defendant's interest in the Bundarra Gold Project, shares in the defendant would be issued to the plaintiff in full and final settlement of the debt and that he accepted this offer during the meeting.
In cross-examination the plaintiff maintained his position that the offer put to him by Mr O'Keefe in the meeting was to satisfy the debt by a transfer of shares in the defendant was conditional upon Bligh acquiring the share capital of the defendant. The plaintiff denied that his discussion with Mr O'Keefe on 5 May 2016 resulted in him agreeing he would convert the debt to equity in the defendant unconditionally.
During the following week he was advised by Mr Vitale or Mr Rowbottom that if he took shares in the defendant and then received shares in Bligh, he would be taxed twice. He described the proposal made by Mr O'Keefe to him as being null and void within a period of days. Discussions then moved to a proposal where Bligh would assume the defendant's liabilities. The plaintiff said he then advised Mr O'Keefe that it was better for him to take shares directly in Bligh.
Mr Rowbottom in his evidence was unable to recall attending a specific meeting at the defendant's Claremont office where the plaintiff and Mr O'Keefe discussed converting the plaintiff's loan to shares in the defendant. Mr Rowbottom stated that he first became aware of this discussion in an email he received from Mr O'Keefe on 5 May 2016 (exhibit 6). Mr Rowbottom could not recall being present at any meeting where the discussions between Mr O'Keefe and the plaintiff referred to in that email occurred.
Mr Rowbottom believed that he had discussions independently with both the plaintiff and Mr O'Keefe about the plaintiff converting the debt into shares in the defendant.
Mr Rowbottom recalled a conversation he had with the plaintiff around 5 May 2016 as follows:
My best recollection of what was said that if a commercial corporate transaction was to be done with Bligh, it may be preferable or more financially beneficial for all loan holders to convert the debts to equity and receive equity in Contained Gold and then through into Bligh. Something along those lines.
Mr Rowbottom also recalled a conversation with Mr O'Keefe about converting the debt into shares based upon a transaction occurring with Bligh. That transaction did not occur. Mr O'Keefe never brought up the subject of issuing shares to the plaintiff again.
Mr Rowbottom said he was not instructed by Mr O'Keefe to issue shares to the plaintiff. No shares in the defendant were issued by him to the plaintiff as a result of the plaintiff's email of 5 May 2016. Mr Rowbottom resigned from the defendant on 2 August 2016. To his knowledge, no shares were issued to the plaintiff before he resigned.
Mr Vitale gave evidence that he had frequent discussions with the plaintiff and Mr Rowbottom. His advice was that they would be crazy to convert the debt to shares prior to a deal being done.
Mr O'Keefe in evidence-in-chief said he could not remember all the details of the meetings he had with the plaintiff about the conversion of the debt. He said there were informal meetings in about April 2016. The conversion of the debt was discussed on many occasions. He said the discussions were about the debt being converted to shares in the defendant at a 20% discount on the normal share price. He stated that Mr Rowbottom and Mr Plug would have been present at these meetings.
Mr O'Keefe gave no evidence of a specific meeting on 5 May 2016 in his office, but he could remember conversations on this topic in the defendant's office in Claremont at which Mr Plug and Mr Rowbottom could have been present.
In Mr O'Keefe's witness statement (exhibit 31) at par 33 he stated:
I recall sometime prior to 5 May 2016 having a discussion about a discounted share conversion with Paddy. I do not recall the specifics of this conversation. Such a conversation could have only occurred in the context of a discussion concerning a share conversion. Whilst I do not recall a specific agreement with Paddy on this subject I accept that the content of his 5 May 2016 email may accurately reflect such an agreement.
Mr O'Keefe could give no specific detail as to what was discussed, but maintained that exhibit 6 reflected the total discussion between him and the plaintiff. He was unable to confirm exactly when the discussion took place. Mr O'Keefe's position was that there was more than one discussion and that they occurred in the weeks prior to 5 May 2016, probably in the Claremont office of the defendant.
Mr O'Keefe believed Mr Rowbottom and Mr Plug were present when many of these discussions took place. There was no evidence from Mr Plug or Mr Rowbottom confirming the detail of what was discussed at the meetings. In cross-examination, Mr O'Keefe said the request by the defendant to convert the debt may have been made on the telephone.
During Mr O'Keefe's cross-examination, he was again asked about the agreement he had with the plaintiff. He described it as an oral agreement that the debt could be converted to equity at a 20% discount on the issue price of shares. He said this is what he said to the plaintiff and all the staff. He described it as a standard proposal for many agreements amongst the group.
Mr O'Keefe disputed that the offer to the plaintiff was subject to Bligh's proposal to buy out the defendant. He accepted that Bligh taking over the defendant's interest was one of the deals being considered in relation to the Bundarra Gold Project at the time. He also accepted that 'the Bligh deal' may have come up in conversation because it had been discussed on 3 May 2016. Mr O'Keefe accepted that at the time these conversations were occurring with the plaintiff the defendant was not in a financial position to pay the debt.
The evidence revealed that the other persons who had loaned money to the defendant, Mr Rowbottom and Mr O'Keefe, had their loans eventually paid out by the defendant.

E. The email of 5 May 2016 (exhibit 6)

Following the meeting that day the plaintiff sent an email to Mr O'Keefe on 5 May 2016 and a copy to Mr Rowbottom, as follows:
Hi Dean,
I made three separate deposits for a total of $87,500 as follows –
•25 January $50,000.
•18 February $12,500.
•8 March $25,000.
All deposits were paid directly to Bligh's nominated account – transfer receipts attached.
I can confirm that what I would like to convert this loan facility to equity in Contained Gold as per our agreement at a price of $0.08 per Contained Gold share. With respect to the interest component of the loan at 25% - this equates to $21,875. I would also like to roll this over and convert to shares in Contained Gold at $0.08.
Total loan principal and interest funds are $109,375. At a deemed conversion price of $0.08 per Contained Gold this equates to 1,367,188 shares in Contained Gold.
The terms and conditions of this conversion from the secured loan to equity in Contained Gold shall be as per the initial agreement.
Cheers
Paddy
The email did not state that the conversion of the debt to shares was conditional upon Bligh acquiring the Bundarra Gold Project, but it does refer to 'our agreement' and later states expressly that 'the terms and conditions … shall be as per the initial agreement'.
The defendant's submission is that this email reflects the full agreement between the plaintiff and the defendant to convert the debt to shares in the defendant. Pursuant to the agreement, in August 2016 a share transfer confirming the issuing of shares in the defendant to the plaintiff was filed at the Australian Securities and Investments Commission (ASIC).
The plaintiff's position is that the email was sent with reference to the discussion he had with Mr O'Keefe that day in the context of the proposal made by Mr Yang on 3 May 2016.
The plaintiff said that he never received a share certificate from the defendant. He did not request shares in the defendant be issued to him on 6 August 2016.
Mr O'Keefe contends that the email can be construed as a specific request for the transfer of shares in satisfaction of the debt with a correct calculation of the number of shares.
Mr O'Keefe gave evidence that after he received the email from the plaintiff and checked that the calculations were correct, he sent the email on to the company secretary Mr Rowbottom to action. Mr O'Keefe said he then sent another email to Mr Rowbottom to issue shares in the defendant to the plaintiff. Mr O'Keefe's email instructing Mr Rowbottom to issue the shares was not produced in evidence.
Mr O'Keefe said that he expected Mr Rowbottom to issue the shares to the plaintiff within weeks.
Mr O'Keefe also claimed that he sent an email to the plaintiff to advise that shares in the defendant had been issued to him. No such email was produced in evidence. Mr O'Keefe in cross-examination accepted that he never told the plaintiff that shares in the defendant had been issued to him.
When Mr O'Keefe was asked in evidence-in-chief as to whether the plaintiff's request (exhibit 6) was ever acted on, his answer was that he believed the shares were issued on 2 August 2016. By that date the plaintiff and Mr Rowbottom were no longer involved with the defendant.
Exhibit 29, an ASIC Change to Company Details Form 484 signed by Mr Rowbottom on 5 August 2016 indicates Mr Plug was appointed a director and secretary of the defendant on 2 August 2016.
Exhibit 30, an ASIC Change to Company Details Form 484 signed by Mr Plug on 5 August 2016 indicates that on 6 May 2016 1,367,188 shares were issued to Padraig Reidy at 0.08 cents per share. Mr O'Keefe denied that he provided the date 6 May 2016 to Mr Plug.
At no stage up to his resignation from the defendant in early August 2016 did Mr Rowbottom note an issue of shares to the plaintiff in the defendant's company register. Nor did he send any forms to ASIC indicating any shares had been issued to the plaintiff.
Exhibit 33 contains a resolution of the directors of the defendant dated 5 August 2016 which confirms the appointment of Mr Plug as a director and secretary of the defendant. A second resolution states that the defendant 'process a conversion request by loan/convertible note (LCNA) creditor Mr Padraig Reidy for shares'. At the time these two resolutions were made neither Mr Rowbottom nor the plaintiff were involved with the defendant.
Mr O'Keefe in his evidence claimed that Mr Plug advised him that after Mr Plug actioned the change to company details (exhibit 30) he sent by mail share certificates for shares in the defendant to the plaintiff. There is no other evidence that share certificates for shares in the defendant were ever sent to the plaintiff. No share certificates or copies of them were produced as evidence.

F. Subsequent conduct of the parties

There was a dispute between the witnesses called by the plaintiff and the defendant as to whether Mr Vitale was actually employed or engaged by the defendant. What is not in dispute is that sometime after the Skype meeting with Mr Yang in late April 2016, Mr Vitale made a presentation to the shareholders of the defendant in relation to a proposal of Bligh buying the defendant. Leading up to the presentation, Mr Vitale sent an email to the plaintiff on 6 May 2016 attaching a draft document called Heads of Agreement for Termination of the Bundarra Joint Venture Agreement (the draft heads of agreement).[9]
[9] Exhibit 7.

Later in May 2016, Mr Vitale amended the draft heads of agreement and prepared a Powerpoint presentation for directors and shareholders of the defendant. He sent an email to the plaintiff, Mr Rowbottom and Mr O'Keefe attaching the Powerpoint presentation.[10] Mr O'Keefe accepted that this Powerpoint presentation was given by Mr Vitale to the directors of the defendant (including Mr O'Keefe) around 16 May 2016.
[10] Exhibit 9A.
Mr Vitale's email of 13 May 2016 stated:
As requested by Dean on several occasions I have also prepared a presentation for the shareholders of Contained Gold which sets out the terms of the exchange and answers the 'what do I get' question. I have included a ready reckoner.[11]
[11] Exhibit 9.
Mr Vitale asked to be advised promptly if any changes were to be made to the draft.
An amended draft heads of agreement sent by Mr Vitale by email on 13 May 2016 to Mr O'Keefe, Mr Rowbotton and the plaintiff referred to the assumption of liabilities, including the debt.[12]
[12] Exhibit 9 – 'Termination Consideration' – item (c).
The Powerpoint presentation prepared by Mr Vitale dated 16 May 2016 did not refer to the plaintiff as a shareholder of the defendant and the footnotes in the presentation referred to the loans from Mr Rowbottom and the plaintiff to the defendant as still existing.
These notations of the plaintiff's loan to the defendant are inconsistent with Mr O'Keefe's evidence that shares were issued to the plaintiff in early May 2016 pursuant to an agreement between the plaintiff and defendant to convert the debt to shares in the defendant.
Mr Vitale in his evidence confirmed that what was proposed in the heads of agreement did not go anywhere. The defendant never accepted the proposal contained in the heads of agreement for Bligh to buy the shares of the defendant and thereby effectively terminate the Bundarra Gold Project.
Mr Vitale gave evidence that on 13 July 2016 he sent, by email, another document to Mr Rowbottom which was titled 'Binding Heads of Agreement'.[13] This document set out the terms upon which it was proposed that Bligh would acquire 100% of the shares and options in the defendant. In this document the defendant's debt to the plaintiff is again listed as a liability. The document included as a term of the agreement that upon the defendant becoming a wholly owned subsidiary, Bligh would fund the payment of the plaintiff's secured loan of $112,611 by the issue of 4,504,440 shares in Bligh.
[13] Exhibit 27.
On 11 July 2016 Mr Rowbottom sent Mr Vitale the 2016 draft Annual Report and concise notes for the defendant.[14] In this document the debt owed by the defendant to the plaintiff is listed as a 'contingent liability'. The plaintiff is not listed as a shareholder. Mr O'Keefe accepted in cross-examination that Mr Rowbottom was sending information on behalf of the defendant to assist Mr Vitale in preparing a proposal to Bligh.
[14] Exhibit 26.
In cross-examination Mr O'Keefe was shown the financial statements for the defendant for the year 30 June 2016.[15] This document was signed by Mr O'Keefe as a director of the defendant and Mr Plug as a director/secretary. Note 10 to this document states:
Note 10. Conversion of Convertible Note
On 5 August 2016, the company processed a conversion request by a secured Convertible Note Holder creditor for shares. The conversion was processed as at the date of the Convertible Note Holder creditor's original election request being 5 May 2016, incurring a late penalty fee for the processing delay. The conversion converted an outstanding amount of $109,375 comprising of principal and interest to 1,367,188 fully paid ordinary shares in the company.
[15] Exhibit 35.
Both Mr O'Keefe and the plaintiff in their evidence said the plaintiff was never issued with a 'convertible note'. They both gave evidence of their understanding of the meaning of a convertible note.
Mr O'Keefe in cross-examination said the expression 'convertible note' in Note 10 of exhibit 35 was incorrect terminology. Mr O'Keefe said the use of the word 'processed' was slightly wrong in reference to the date 5 August 2016 as this description meant registering the plaintiff's share conversion with ASIC. Mr O'Keefe denied the description in Note 10 was misleading, but described it as 'mis‑labelled'. He accepted that exhibit 35 must have been finalised after 6 December 2016.
In cross-examination Mr O'Keefe was shown the defendant's resolution number 2 dated 5 August 2016.[16] Mr O'Keefe gave evidence that resolution was made because Mr Plug wanted a record that he had registered with ASIC that the plaintiff's loan had been converted into shares. Mr O'Keefe said the use of the words 'loan/convertible note agreement' in the resolution was a mis‑label and the resolution should have referred to 'loan note and conversion'. Mr O'Keefe claimed that he and Mr Rowbottom previously had a meeting to pass a resolution that the plaintiff's loan be converted to shares in the defendant. There was no documentary evidence tendered to confirm that such meeting occurred. Nor did Mr Rowbottom give evidence of any such meeting occurring.
[16] Exhibit 33.
Exhibit 34 is the register of members for the defendant as of the 30 June 2017. The last notation on the register is as follows:
5/5/2016 P Reidy (Debt Conversion) 1,367,188 (number) 109,375.001($)
All other entries are in chronological order. This entry is out of chronological order with the other entries. The date 5/5/2016 is inconsistent with the date on exhibit 30 which indicates that the same number of shares at the same value was entered in the register in the name of Padraig Reidy on 6/5/2016. Mr O'Keefe in his evidence was unable to explain why the entry was out of sequence.
These inconsistencies in exhibit 34, when considered with the other documentary evidence, the evidence of the plaintiff and the evidence of Mr Rowbottom, cause me to give no weight to this evidence as corroborating the issues of shares in the defendant to the plaintiff.

G. Relevant law

Parties to an existing agreement may vary or extinguish some of its terms by a subsequent agreement: Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93, 112 (Dixon CJ & Fullagar J), 144 (Taylor J); Commissioner of Taxation v Sara Lee Household & Body Care [2000] HCA 35; (2000) 201 CLR 520, 534 [23] (Gleeson CJ, Gaudron, McHugh and Hayne JJ) (Sara Lee); GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2008) 128 FCR 1 [226] (Finn J). A variation by contract involves two contracts, the existing one (which may or may not continue to exist) and the new one (the contract of variation): N Seddon, R Bigwood and M Ellinghaus, Cheshire and Fifoot - Law of Contract, (LexisNexis Butterworths, 10^th ed, 2012), [22.3]; Sara Lee 533 [22]; GEC Marconi [226], [1424]; GT Corporation Pty Ltd v Amare Safety Pty Ltd [2008] VSC 143 [113] – [114] (Robson J).
As with any contract, the onus is on the party asserting the existence of the second contract to prove that the second contract was made: GT Corporation [162] – [163]; Ailakis v Olivero[No 2] [2014] WASCA 127 [76] ‑ [78] (Martin CJ, with whom Buss & Murphy JJA agreed). The ordinary rules governing the formation of a contract apply equally to the contract of variation: GEC Marconi [226]; GT Corporation [114].[17]
[17] Googe v Spoljaric [2017] WADC 99.
The parties by their pleadings accept that the loan agreement was varied by an agreement made by the parties on or about 5 May 2016. What is in dispute is whether the conversion of the debt to equity, or in other words the satisfaction of the debt by the issue of shares in the defendant to the plaintiff was conditional upon Bligh acquiring the share capital of the defendant as a means of acquiring the defendant's interest in the Bundarra Gold Project.
The evidence as to what was actually discussed in the meeting between the plaintiff and Mr O'Keefe on 5 May 2016 is their oral testimony. None of what was discussed was recorded contemporaneously. Mr Rowbottom's evidence was not of his recollection of the meeting but his discussions with Mr O'Keefe and the plaintiff after the meeting and what he did.
Both parties rely on post-contractual conduct to support their respective positions as to what was agreed.
It is legitimate to resort to evidence of subsequent conduct for the purpose of not only determining whether a contract is made but also what were the terms of the contract.[18]
[18] Bell Group Ltd (In Liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1 [2668] – [2670].

H. Analysis

Mr O'Keefe's evidence of his recollection of what was discussed with the plaintiff on or about 5 May 2016 in relation to converting the debt into shares in the defendant was vague and lacked detail.
In contrast, the plaintiff's evidence as to the discussion on 5 May 2016 was more specific. The plaintiff was consistent and adamant throughout his evidence that any agreement that he made to convert the debt to shares was conditional on the Bligh proposal being accepted.
For this and the following reasons I consider that the evidence of the plaintiff is much more reliable than the evidence of Mr O'Keefe as to what was discussed and agreed:
(i)The email the plaintiff sent to Mr O'Keefe (exhibit 6), does not reflect the full detail of what the parties discussed and agreed at the meeting in Claremont on 5 May 2016. The terms and conditions of the agreement made at the meeting in Claremont on 5 May 2016 were referred to but not expressed. This email was not an offer made by the plaintiff to the defendant.
(ii)Mr O'Keefe's position that shares in the defendant were issued to the plaintiff in early May 2016 is inconsistent with the various documents I have referred to in [58] - [74]. The conduct of the defendant's directors after 5 May 2016 is consistent with an agreement between the parties on the terms described by the plaintiff in his evidence.
(iii)Mr Rowbottom's evidence does not support the defendant's position in relation to Mr O'Keefe requesting Mr Rowbottom to issue shares in the defendant to the plaintiff. Mr Rowbottom was a director and the company secretary of the defendant in May, June and July 2016. No action was taken by Mr Rowbottom from early May 2016 until he left the defendant in early August 2016 to issue shares in the defendant to the plaintiff. Mr Rowbottom gave evidence that no such request was made of him by Mr O'Keefe.
(iv)I find Mr Rowbottom a credible and reliable witness. I do not accept that Mr Rowbottom would have deliberately or negligently not issued shares to the plaintiff if requested by Mr O'Keefe while he was the company secretary and a director of the defendant.
I can rely upon the evidence of Mr Rowbottom and Mr Vitale coupled with various documentary exhibits in considering what has been proved as the terms of the second contract.
I am satisfied on the balance of probabilities that at the time the plaintiff and Mr Rowbottom resigned from their respective positions, the debt owed by the defendant to the plaintiff was still outstanding and no shares had been issued to the plaintiff.
I find that at the meeting on 5 May 2016 in Claremont when Mr O'Keefe discussed with the plaintiff the proposal of converting the debt to shares in the defendant, the plaintiff advised he was only interested in such a conversion if the Bligh proposal to acquire the share capital of the defendant was successful. This proposal never eventuated and as a result the debt owed by the defendant to the plaintiff remained outstanding.
Issuing shares to the plaintiff at any stage would not satisfy the debt as the agreement was conditional upon Bligh acquiring the share capital of the defendant.

Conclusion

The plaintiff has proved on the balance of probabilities that the new agreement entered into by the parties on 5 May 2016 was subject to a condition that the debt would be converted to shares in the defendant only if the Bligh proposal to acquire the share capital of the defendant was successful. I have come to this conclusion as I prefer the evidence of the plaintiff and Mr Rowbottom to the evidence of Mr O'Keefe.
It is not in dispute between the parties that the Bligh proposal to acquire the share capital of the defendant was unsuccessful. This condition which was the subject of the agreement entered into on 5 May 2016 was not fulfilled. As a result the loan agreement between the parties remains. The debt is still owing by the defendant to the plaintiff. The conduct of the defendant and its officers after the 5 May 2016 is consistent with the debt still being in existence.
The plaintiff's claim is allowed. The plaintiff is entitled to judgment in the sum of $109,375 and interest on that sum at 12% from the 1 April 2016 pursuant to the terms of the loan agreement.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
RR
Associate to Judge Prior
24 APRIL 2019