QNI Metals Pty Ltd v Queensland Nickel Pty Ltd (in liquidation) & Anor; Mineralogy Pty Ltd v Queensland Nickel Pty Ltd (in liquidation) & Ors

[2022] HCATrans 33

[2022] HCATrans 033

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B44 of 2021

B e t w e e n -

QNI METALS PTY LTD ACN 066 656 175

First Applicant

QNI RESOURCES PTY LTD ACN 054 117 921

Second Applicant

and

QUEENSLAND NICKEL PTY LTD (IN LIQUIDATION) ACN 009 842 068

First Respondent

MINERALOGY PTY LTD ACN 010 582 680

Second Respondent

Office of the Registry
  Brisbane  No B45 of 2021

B e t w e e n -

MINERALOGY PTY LTD ACN 010 582 680

Applicant

and

QUEENSLAND NICKEL PTY LTD (IN LIQUIDATION) ACN 009 842 068

First Respondent

QNI METALS LTD ACN 066 656 175

Second Respondent

QNI RESOURCES PTY LTD ACN 054 117 921

Third Respondent

Applications for special leave to appeal

KIEFEL CJ
GAGELER J
STEWARD J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA BY VIDEO CONNECTION

ON THURSDAY, 17 MARCH 2022, AT 9.30 AM

Copyright in the High Court of Australia

____________________

KIEFEL CJ:   In accordance with the protocol for remote hearings, I will announce the appearances of the parties.

MR P.J. DUNNING, QC appears with MR M.A. KARAM, MR T.R. MARCH, MR H.C. COOPER and MR K.S. BYRNE for the applicants in each matter.  (instructed by Jonathan Shaw)

MR A.M. POMERENKE, QC appears with MR N.J. DERRINGTON for the first respondent in each matter.  (instructed by HWL Ebsworth Lawyers)

KIEFEL CJ:   Mr Dunning, you are standing in for Mr Jackson as well.  How do you propose to deal with each of the matters?  Will you deal with them separately or the two matters in one go?

MR DUNNING:   I am in the Court’s hands, but I was proposing, Chief Justice, the latter course to really deal with them in a composite fashion and then move…..

KIEFEL CJ:   Yes, I think that works because in Mineralogy it is really only a question of additional grounds, is it not?

MR DUNNING:   That is exactly correct, your Honour, yes.

KIEFEL CJ:   Yes.  Yes, Mr Dunning.

MR DUNNING:   Thank you, your Honour.  As your Honours appreciate, in B44 the applicants are QNI Resources and QNI Metals who I will simply refer to as “Resources” and “Metals”, who were both principals and beneficiaries of the respondent whilst it was agent in trust under the joint venture agreement that regulated their affairs in respect of the Nickel…..of Queensland.

KIEFEL CJ:   We are having difficulty with the audio, Mr Dunning.  I think we might have to stand down and see if it can be improved a bit.  We are having difficulty understanding what you are saying.  We will adjourn briefly.

AT 9.32 AM SHORT ADJOURNMENT

UPON RESUMING AT 9.38 AM:

KIEFEL CJ:   Well, Mr Dunning, hopefully we can at least hear you.

MR DUNNING:   Yes, thank you, Chief Justice.

KIEFEL CJ:   It is much clearer, thank you.

MR DUNNING:   Thank you.  Your Honours, I am not sure whether you heard this before we broke, but in B44 the applicants are QNI Resources and QNI Metals, who I will simply call “Resources” and “Metals”, and this application involves the principals and beneficiaries of the respondent whilst it was agent and trustee under the joint venture agreement.  In B45 the applicant is Mineralogy, Mineralogy was the borrower of the sums that were sought to be recovered by the respondent in the courts below.

Your Honours, the three issues that arise in the two applications are these.  First, arising in B44, where a party holds a dual agent trustee role, how does one determine which functions predominate for the purpose of particular transactions?  Critically here and below the consequence is whether the legal relationship created by the transaction the dual agent trustee entered into is one as between the counterparty and the principal, if agency, and obviously possibly agency, or simply the counterparty and the trustee in the event of trusteeship.

The second issue is, what is the role of subsequent conduct in identifying parties to a contract, which arises in B45 and would give the Court the occasion to deal with conflicts at the intermediate appellate level on this topic recently discussed by the Victorian Court of Appeal in Nurisvan Investment, and thirdly and relatedly in B45 the effect of section 1305 of the Corporations Act and its State analogues regarding the evidentiary value it confers on particular ordering of accounts.  Necessary for an understanding of the relationships at issue was the company’s common ownership and control by Mr Palmer.  Hence, as the primary judge observed at judgment paragraph [121]:

Even without Mr Palmer giving evidence in this proceeding, it is a reasonable inference to draw that Mineralogy knew that Metals and Resources were the owners of the joint venture property and that QNI was the operator of the joint venture business on their behalf.

In the Court of Appeal, a qualification was introduced to that which, with the very greatest of respect to the Court of Appeal, we submit was not just unwarranted but ultimately, respectfully, irrational.  Can I take your Honours please to the Court of Appeal’s reasons at paragraphs [170] and [171], which your Honours will find at page 140 of the application book.

Your Honour, at paragraph [170] on page 34, the Court of Appeal set out paragraph [121] of the primary judgment, to which I referred a moment ago, and could we particularly ask your Honours to notice the words the Court of Appeal emphasised in that quote from paragraph [121] of the primary judgment at [170] of the Court of Appeal’s reasons.

KIEFEL CJ:   Yes.

MR DUNNING:   Your Honours, if I could then take you to paragraph [171], which in our submission is the heart of the…..court below.  If I could first invite your Honours to read paragraph [171].

GAGELER J:   That really follows, does it not, from the analysis in paragraphs [97] and [98]?

MR DUNNING:   Well, Justice Gageler, in our submission, it does not to this extent.  If one takes the first sentence that:

Mineralogy may well have known that Resources and Metals were the owners of the “joint venture property” in a general sense.

That is, in effect, saying that Mineralogy knew Resources and Metals were the owners of the money standing and credit to the bank account in QN’s name, and from which Mineralogy had been paid.  Now, once one accepts, or if one were to accept that as a fair reading of the first sentence, the second sentence, in our respectful submission, cannot be reconciled:

that inference does not extend to Mineralogy’s knowledge concerning the legal relationship governing the basis on which the account funds were held.

Because the first sentence refers to knowledge of the very fact that the moneys – that is, the “joint venture property” – was held in this QN account and necessarily paid out of it, and then in the second sentence, gainsaying that as a proposition. 

GAGELER J:   But is not the point in the final sentence?  Is not that the real point?

MR DUNNING:   Well, in our respectful submission, no, because – and that is really the first matter raised in B44, that if the relationship of agency predominates then, in fact – the fact that moneys may have come in and out of that account for that, amongst other purposes, does not note the moneys – the payment moneys being paid as trustee but rather as agent. 

STEWARD J:   Mr Dunning, you talk about whether the issue being wherever the agency relationship predominated, and there is a lot of discussion in the decision below of whether there was an express trust or a bare trust, but is not the real issue – the real issue is, when QNI signed that loan agreement – the question is in what capacity did it do so?  Did it do so as agent, or as principal?

MR DUNNING:   Yes.

STEWARD J:   Is not that really the issue here?  In that respect, does the court below in any way deal meaningfully with clause 5.2(vii), which appears at paragraph [25] of the reasons, and that is that the manager when dealing with joint venture property, acts:

as agent for . . . the Joint Venturers. 

So, the question becomes, bearing in mind that, in what capacity was this loan made? 

MR DUNNING:   We would respectfully agree, your Honour, that that is the ultimate question as to in what capacity it was made.  And, in particular, when one goes to clause 5.2, as your Honour points out, it is at paragraph [25] of the Court of Appeal judgment, page 113 of the book, when in particular one goes to (vii) it tells us that:

The General Manager shall, subject to the directions of the JVOC, be in charge of and responsible for –

And then in (vii):

the management and control of the Joint Venture Property –

which obviously includes the bank account:

and all operations hereunder as agent for, and for the account of, the Joint Venturers.

So not only was the bank account one that it operated as agent, but any transaction it proposed to enter into of that kind, vis the loan agreement, would also have been as agent, in our submission.

STEWARD J:   Does it follow from that that if it was correct to conclude that the lender was acting as principal, that in the circumstances of this joint venture it was in breach of 5.2(vii), given that it was dealing with joint venture property?

MR DUNNING:   If that were the characterisation of it, yes, but if as agent it caused the transaction to be entered into, albeit in the agent’s name so as to create a contract for its principal, that, in our submission, would not be a breach.

STEWARD J:   Can I ask one further question.  The loan agreement was entered into in 2011.

MR DUNNING:   Yes. 

STEWARD J:   When was the debt forgiven?  Was it 2013 or 2015?

MR DUNNING:   2013.

STEWARD J:   Was that debt forgiveness committed in writing? 

MR DUNNING:   Yes, it was.  There may have been a later debt forgiveness as well, Justice Steward.  I will have that checked.  But certainly, the debt forgiveness is in writing, and I believe that is recorded in the judgment at first instance, which I will have the reference turned up for the Court.

STEWARD J:   Do I assume it is between the joint venturers and the borrower?

MR DUNNING:   Yes. 

STEWARD J:   What about the form required under section 245‑90 of Schedule 1 of the Income Tax Assessment Act?  Was that entered into between the joint venturers and Mineralogy, or between QNI and Mineralogy?

MR DUNNING:   Sorry, your Honour.  I am just having that checked, so I can give your Honours a precise answer.

STEWARD J:   All right, thank you.

MR DUNNING:   Justice Steward, there appear to have been for the financial years 2013, 2014 and 2015 – and the financial year 2015 ‑ signed on 30 June 2015 by Mr Palmer, which is the note I have been given, but I am still endeavouring to have that turned up in the record. 

STEWARD J:   Well, do not let me distract you for the moment. 

MR DUNNING:   Yes, very good, your Honour.  I will get the paragraph numbers and come back to your Honour. 

KIEFEL CJ:   Mr Dunning, the primary judge in the Court of Appeal took different views of the loan forgiveness transactions, did they not?

MR DUNNING:   They did, yes.  They did.  But central ultimately to that was the importance that the Court of Appeal placed on what their Honours considered to be this loan agreement in writing that bound the parties, which, for reasons we will come to develop in our submission, was not the basis on which the matter was agitated before their Honours.

In fact, at trial what had occurred was the accounting records of QN had been relied upon to make good the then plaintiff, now respondent’s, case, and it was only at the end of the trial that there was a move away from that.  But even at that point, including the Court of Appeal, it was not ultimately asserted that the loan agreement was that document signed in writing.  Rather, it was a much gentler version that was put up in that regard and, in particular, your Honours, we deal with that in the written submissions in B45, paragraph 19, page 181.

KIEFEL CJ:   Speaking of what was argued below, it is put against you that the point about whether the agency relationship predominates was not taken in the Court of Appeal.

MR DUNNING:   That is put against us.  I was going to come back to that but I might deal with that issue now, if that is convenient.  That submission is made against us, in our learned friend’s written submissions at paragraphs 5 and 6, page 159 of the application book.  In our respectful submission that is not borne out by the history of the litigation below.  Can I ask your Honours, please, to go to paragraph [11] of the primary judgment, page 12 of the book.  What your Honours will see in [11], at the…..of Justice Mullins’ judgment, her Honour says:

There are some critical issues to be decided that will affect whether the plaintiffs can establish their claims.  They include:

(a)the nature of the relationship between QNI and the joint venture companies –

And her Honour goes on in the third line:

were held by QNI on an express trust for the benefit of Metals and Resources, as contended by the plaintiffs, or as the agent only of Metals and Resources under the JVA, so that QNI held the funds as bare trustee, as contended by the corporate defendants –

who are the applicants on this application. 

Can I also give your Honours reference, please, to paragraph [42] of the primary judgment on page 21 of the book.  …..[42] starts on page 20, but the passage I am concerned with is on…...[42], and in particular what her Honour sets out is the pleading history in the first part of [42] – I do not need to trouble your Honours with that, I can summarise it by saying, this issue was originally raised by the special purpose liquidators and not by the general purpose liquidators.  But her Honour goes on to explain how the manner of the defence had raised the issue which the chief general purpose liquidators responded to.  Your Honours, in the last six lines from the bottom of [42], on page 21:

The corporate defendants plead in their defence that QNI managed and controlled the joint venture property and all operations under the JVA as agent for, and for the account of, the joint venturers and that the JVA did not create, and was not to be construed as creating, a trust.

Similarly, your Honours, in paragraph [43], fourth line:

and QNI received such funds as agents for and on behalf of Resources and Metals, and otherwise all the property of, and held, constructed or acquired in respect of or for the purposes of the joint venture was owned by Resources and Metals –

as agent.  Then if I can ask your Honours please to note in paragraph [58] on page 25 of the application book, third line:

On the basis of the terms of the JVA, QNI was the general manager of the joint venture and its relationship with Resources and Metals and the conduct of the business of the refinery was a contractual relationship of agency.

Her Honour then goes on in that paragraph to notice that it is not impossible and this was such a case where there may have been “fiduciary obligations” alongside that agency agreement.

In our respectful submission, there is no substance in the criticism; the issue was squarely joined at trial and argued.  It did not have the prominence in the Court of Appeal because the respondents in this Court, appellants in that court, were focused on the conclusion of a bare trust rather than an express trust and that framed the argument in that court, but there is nothing inconsistent, new or requiring matters that were not required to be agitated at trial that is raised by this point, in our respectful submission. 

KIEFEL CJ:   The other matter which of course goes to the heart of special leave is whether or not this is a matter which falls to be resolved by reference to the joint venture agreement and the loan agreements, the terms of documents rather than any question of principle. 

MR DUNNING:   Yes, Chief Justice, we accept that, and we accept that to simply point to an error in respect of bespoke documents would not be something that would typically attract a grant of leave, and we do not put our request for leave on that basis.  Rather, it is put on the basis that these documents provide the vehicle for addressing this question that remains an open question in Australian law as to whether, in circumstances of duality, the agency relationship should predominate, and how one comes to assess, ultimately, which does predominate in the circumstances.

So, in our submission, the fact that they are idiosyncratic documents between the one party does not matter for that analysis.  Indeed, whenever the Court comes to determine that question, whether it is in this case or in a later case, it will typically be by an analysis of the particular schema between the parties, typically contractual, we accept that, giving rise to agency and fiduciary obligations.

GAGELER J:   Mr Dunning, as I understand your argument, you say that QNI was agent.  It was nevertheless the legal owner of the chose in action against the bank, which you must say was held on this bare trust.  Agency and bare trust necessarily go together in your argument, do they not?

MR DUNNING:   Yes, your Honour, they do, because the chose in action is in the name of QN.

GAGELER J:   So what you really need to address, which is really the way the point was decided against you in the court below, was how you square a bare trust with the explicit language of clause 6.4(f) of the joint venture agreement.

MR DUNNING:   Certainly.  Well, if I can turn directly to that question.  Your Honours, it is perhaps convenient to look at 5.2(a) and 6.4(f) of the joint venture agreement together.  They appear in the same document.  Your Honours, they are set out in paragraph [23] of the primary judgment, page 15 of the book, and [33] of the primary judgment, page 17.  And, Justice Gageler, we would respectfully make these submissions as to why the findings at first instance were correct, and the one in the Court of Appeal incorrect.

Firstly, clause 5.2, in our respectful submission, in emphatic language, demonstrates that QNI’s general manager shall be subject to the direction of, effectively, the joint venturers, and it is in charge and responsible for, and then when we go to (vii), the:

control of the Joint Venture Property –

Which means the control of the chose in action, respectively, bank account:

as agent for, and for the account of, the Joint Venturers.

The language could not be more explicit.  In our respectful submission, nothing in 6.4(a) of the joint venture agreement countermanded that.  If I could take your Honours please to that clause, which is at paragraph [33] of the primary judgment.

Her Honours explains at the outset of that paragraph how clauses 6.4(a)…..had dealt with the circumstances in which calls might be made for money into that account by the general manager and how, using the nomenclature of the provision, the general manager was called the “Calling Manager”.  Then if we go to 6.4(f):

“The Calling Manager –

It records what the calling manager might do, but then in the second sentence:

Such account shall be in the name of the Calling Manager but the moneys standing to the credit of the account shall belong to the Joint Venturers in proportion to the amounts respectively paid to such account –

I will not trouble your Honours with the rest of it.  Now, in our respectful submission, when one reads 6.4(f), it is firmly against the sort of express trust that the Court of Appeal were persuaded by.  The document that regulated the party’s affairs specifically adverted to assets, including assets of this – sorry, specifically adverted to assets of this kind, and said of them, in respect of the chose in action in the bank account, that that belonged to the joint venturers, notwithstanding it was in the name of the calling manager. 

In our submission, there is nothing more that the parties who entered into this agreement, long before Mr Palmer was involved in it, could have done to have made clear and consistent with 5.2, in particular (a)(vii), that the moneys were at all times to be the joint venturer’s money and held for convenience in the name of the agent but to be paid out of the direction of the joint venturer, according ‑ ‑ ‑

STEWARD J:   Mr Dunning, is the proposition as simple as this?  That is, clause 6.4(f) regulates the receipt and distribution of moneys as between the manager and the joint venturers.  It does not really answer the question about what capacity QNI acts in when it makes an external investment from the joint venture, here a loan to Mineralogy.  Is that how it is put?

MR DUNNING:   I am sorry, your Honour, could I just ask you – I apologise for doing this – but could I ask you to repeat that?

STEWARD J:   Yes, of course, I am sorry.  Is it the way that it is put as simple as this, namely, that 6.4(f) regulates the receipt of and distribution of moneys as between the general manager and the joint venturers, but that relationship does not answer the question about the capacity in which QNI makes external investments from the bank account, namely, here, the loan to Mineralogy.

MR DUNNING:   Yes, Justice Steward we would agree with that, and without in any way qualifying that agreement, we would nonetheless submit that 6.4(f) buttresses the fact that any such agreement made externally, to adopt your Honour’s language, is made as agent rather than trustee, and really for the reasons I have just dealt with.

Your Honours, moving perhaps slightly out of order in the way in which I would have dealt with it, but so I am not repetitious, can I simply make this point.  Both the parties and the primary judge and the Court of Appeal all agreed that the money in this account was held on trust by QNI, and your Honours will see that in the judgment in the first instance at [11](a), page 12, I will not take your Honours back, and in paragraph [12] of the Court of Appeal’s judgment at page 110 of the court book.  Similarly, it is uncontroversial that QNI also had simultaneous functions as the joint venture agent and, again, I have taken you to [11](a) of the primary judgment, but your Honours will see that at paragraphs [111] and [112] of the Court of Appeal’s judgment, page 129 of the book.

The critical divergence we have already observed centred on the nature of the trust, and that is apparent from the language the Court of Appeal itself employed when, for example, at paragraph [73] of its judgment it talks of:

the trust for which the appellants contended –

and it was that divergence between bare and express trust which led the Court of Appeal to set aside the judgment below, which your Honours see from paragraph [110] of the Court of Appeal judgment, which I have taken your Honours to.

Now, your Honours, in our submission, the fact that these were all Palmer‑owned entities was an important matter, and we have dealt with this at paragraphs 8 and 9 of the written submissions in B44, which your Honours find at page 145 of the application book.  The importance of that to the primary judge one sees at paragraph [121] of her Honour’s reasons, which form the basis of the analysis in the Court of Appeal, paragraphs [170] to [171], which I have already taken your Honours to.

Now, if I can then drill into the bases…..the Court of Appeal acted; the first basis for the Court of Appeal’s view was the respondents had advanced the money on its own account.  But the fact was all of the parties knew the money being advanced was money which belonged to Metals and Resources, and so much is apparent from 6.4(f) of the joint venture agreement.  Likewise, so much would be apparent after the – at least at first the deeds of forgiveness.  Justice Steward, while I am on that, can I give an answer to a question your Honour asked me earlier in relation to deeds of forgiveness.  Can I give your Honour a reference please to page 30 of the application book, and paragraph [80] of the primary ‑ ‑ ‑ 

STEWARD J:   Sorry, what paragraph was that, Mr Dunning?

MR DUNNING:   Paragraph [80], your Honour.  Your Honour, about halfway down that paragraph, your Honour sees:

As Resources and Metals were generating profits –

which introduces, in the next sentence, the loan forgivenessess.  For completeness, may I give your Honours please a reference to paragraph [97] of the primary judgment, pages 34 to 35 of the record.

Now, in our respectful submission, once one knows that the moneys are being advanced in those circumstances, the second basis for the Court of Appeal’s holding, namely, the loan agreement being between the respondent and Mineralogy, also falls away because it is not ultimately to the point if, in those circumstances, QN is acting in that capacity as agent and this is a matter that is dealt with in paragraph 44 of the application for special leave in B44 at page 152. 

KIEFEL CJ:   Mr Dunning, in relation to B45, it is proposed that just the same ground that is raised in B54 be pursued. 

MR DUNNING:   Correct.

KIEFEL CJ:   It is just that you raised additional arguments that went to the grant of special leave, but you would not be expanding the grounds?

MR DUNNING:   That is correct, your Honour, yes.

KIEFEL CJ:   Yes, I see.

MR DUNNING:   Thank you.

KIEFEL CJ:   Yes, thank you, Mr Dunning.  I see the light, Mr Dunning.

MR DUNNING:   Sorry, your Honour, was that the light at 20 minutes?

KIEFEL CJ:   No, it was the final light.

MR DUNNING:   My apologies, your Honours.  May I have just two minutes just to briefly address the other – no, your Honour, I do not need to trouble you for it.  In respect of those matters in B45, unless your Honours have any questions, I am content to rely upon what we have said in writing.

KIEFEL CJ:   Yes, thank you.  Yes, Mr Pomerenke.

MR POMERENKE:   Thank you, your Honour.  In our respectful submission, the Court of Appeal’s decision involved an orthodox approach to the construction of a bespoke joint venture agreement, then an orthodox approach to the evaluation of the evidence in respect of the loan made to Mineralogy and the Court of Appeal addressed the issues in the way that it did because that is the way the parties framed their respective cases.  The Court of Appeal did not have to confront any contested questions of principle, that is because there was no dispute before the Court of Appeal as to the applicable principles.  This so‑called principle of duality, or predominance of function that is raised initially in B44 was not raised in the courts below, contrary to Mr Dunning’s submission, it was not raised at all, either before the trial judge or the Court of Appeal.

Originally in the written application for special leave in B44 the applicants sought to sideline the bare trust issue as raising largely a false issue.  But the argument has been presented slightly differently by Mr Dunning, and in answer to your Honour Justice Gageler’s question Mr Dunning accepted that agency and bare trust must go hand in hand, and therefore his argument in both cases must depend upon the correctness of the bare trust analysis.  I will come back to why my learned friend has not demonstrated a case warranting special leave to overturn the Court of Appeal on the bare trust analysis.

KIEFEL CJ:   Mr Pomerenke, are you saying that the arguments below just focused on the nature of the trust?

MR POMERENKE:   Yes.  Yes, indeed.  There was no acceptance either at trial or in the Court of Appeal of the proposition that if there is an express trust of an active kind, then the QNI parties and Metals and Resources would somehow get around that express trust and the express terms of 6.4(f) by reference to some duality principle.  There was no argument to that effect at all.

It would have raised not only legal questions, but also factual questions.  The legal questions are obvious.  The cases cited by our learned friends in their application in B44 were not cited to the primary judge – to the Court of Appeal – and were therefore not discussed by the primary judge or the Court of Appeal.  But the factual questions are equally as important. 

Suppose that they are dealing with the proposition that there is an abstract principle that is capable of trumping the express terms of clause 6.4(f).  Suppose that they accept that there is a trust in respect of the 6.4(f) moneys.  One immediately asks the question:  what happens to the joint venture expenses?  What happens to the trustee’s right of indemnity in respect of those joint venture expenses?  And the factual question that is raised there is, as at the date of Metals and Resources supposedly authorising these individual payments to Mineralogy, or for the purposes of Mineralogy, what was the state of the trustee’s right of indemnity, because surely this general principle could not trump the trustee’s right of indemnity and the quality of the proprietary interest that the trustee has.  This principle must accommodate the express terms of 6.4(f) and the right of indemnity and the proprietary interest of the trustee. 

Now, that raises factual questions as at the date of each of the individual payments said to have been authorised by Metals and Resources.  What were the state of the joint venture expenses, present and future, as at that date?  What was the state of the trustee’s right of indemnity, as at that date?  And to the extent that the trustee had a proprietary interest, does that defeat this argument based on this so‑called principle of duality?  Those issues were not explored at all below, at trial or in the Court of Appeal.  So, we have not had the opportunity before the trial judge or before the Court of Appeal to address this as a matter of principle, nor have we had a chance to develop our factual answers to the question, and that is very important, in my respectful submission. 

There is another problem, just while I am dealing with factual problems, the analysis on this duality principle depends upon the disbursements being made at the request of Metals and Resources.  That is the theory, that the joint venturers requested these sums be made, and to the extent that your Honours need to see it in the argument of the applicants, your Honours can see it in B44, paragraph 12 of their submissions in‑chief and it is the last sentence…..the passage:

“The loan of funds to Mineralogy by Metals and Resources was a means of disbursement by QNI to Metals and Resources of their entitlement to the funds in the bank accounts operated by QNI for them and were disbursed by being paid to Mineralogy at their request” –

So, it is the “at their request” that I am focusing on at the moment.  Your Honours will see a reference is given there to paragraph [121] of the primary judgment, but that then runs into an immediate problem when one goes to paragraph [122] of the primary judgment.  Your Honours will see that on pages 40 and 41 of the application book.  In that paragraph, her Honour expresses some important findings…..on for the moment is that the:

loan account . . . recorded the loan from the joint venture companies to Mineralogy that was managed by QNI and payments made by QNI from its bank accounts –

And here are the critical words:

to, for or at the request of Mineralogy ‑

That is to say, the factual finding was that the relevant requests were made by Mineralogy, not the joint venturers and there was a substantial body of evidence underpinning those things, written and oral.  The Court of Appeal ‑ ‑ ‑ 

STEWARD J:   Mr Pomerenke, can I ask a question, I am sorry to interrupt.  What I am just struggling to understand is – I understand how, for example, the trustee’s right of indemnity will affect the type of trust relationship between QNI and the joint venturers in a CPT custodian sense.  What I am trying to work out is how that then dictates a conclusion about the capacity in which the manager makes an external investment of joint venture funds.  What is the relevance of that to the capacity question?  Because at the end of the day, QNI either has lent the money as principle or has lent it as agent.  It is one of either of those two capacities. 

MR POMERENKE:   Well, the right of indemnity is not directly relevant, in answer to your Honour’s question, but there are other answers to your Honour’s question which I was going to develop in a little bit, but I will do it now if that is convenient.  Your Honour Justice Steward asked a question about how did the Court of Appeal deal with clause 5.2(a)(vii), and your Honour I think asked whether they dealt with it in any meaningful way.

In my respectful submission, they did.  If your Honours would go to the Court of Appeal’s judgment at page 124, and it is paragraphs [77] and [78].  In [77], your Honours see 5.2(a)(vii) set out.  Your Honours see the concluding phrase from the provision as quoted:

subject to and consistently with the provisions of this Deed –

Then in [78] their Honours make the important point that what is happening in 5.2(a)(vii) is that there is an explication of what is to be done, but subject to the provisions of the deed, including clause 6.4(f).

So, there is no inconsistency, as their Honours said, between 5.2(a)(vii) and 6.4(f), because 5.2(a)(vii) is expressly made subject to 6.4(f).  But even absent that express provision as to how you deal with the competition between the two clauses, there are canons of construction that would resolve it.  6.4(f) is plainly the more specific provision.  It would be the one that would be accorded priority over the general provision in 5.2(a)(vii).

So, one does not need an elaborate principle of duality or predominance of function in order to answer this basic question of construction; one just needs to read the express words of the agreement, or, if necessary, if we were to ignore the express words, just to apply well‑established canons of construction.  So, there is no real question of principle here.

But then more to the point, their Honours’ analysis of clause 6.4(f) really puts paid to our learned friend’s argument, for a couple of reasons.  Immediately after having dealt with 5.2(a)(vii) in [77] and [78], their Honours go on under the heading:

Construction of clause 6.4(f)

…..in some considerable detail with the way 6.4(f) works.  All of it is important, really right through to [97] that your Honour Justice Gageler referred to earlier, and indeed all the way up to ‑ well, [98] will do for present purposes.  But the points that we would particularly emphasise there are first in [88]:

the Manager (QNI) is obliged to use money in the account “to meet Joint Venture Expenses payable or accrued or to become payable or to be accrued”. 

So that is an express obligation under that clause to deal with those moneys in that fashion.  Then there are, over the page, obligations in respect of investment, and the proceeds of the investment are dealt with in paragraph [93], the proceeds of the investment of the clause 6.4(f) moneys are to be:

applied promptly to meet Joint Venture Expenses –

So, what is happening is we have trust moneys.   Like any trustee, the trustee can invest those funds.  Your Honour Justice Steward asks what is the capacity in which those funds are being invested by way of line to Mineralogy, in your capacity as trustee, trustee of the clause 6.4(f) trust.  What happens to the proceeds of investment?  Like all of the other clause 6.4(f) moneys, they must be applied to discharge joint venture expenses. 

GAGELER J:   That then gets reflected in paragraph 97(h) in their Honours’ summary. 

MR POMERENKE:   Yes, indeed.

GAGELER J:   The simple point that their Honours are making is, if that is right, then it just is not a bare trust.

MR POMERENKE:   Quite, and there is no credible argument against that, in my respectful submission.  The point is underscored – and this is a subtle point made earlier in the Court of Appeal’s reasons ‑ but it deserves some prominence, but it really does underscore the correctness of this.  If your Honours go back to page 116 and 117 of the book, your Honours will see reference to clause 8 of the joint venture agreement and I invite your Honours to read paragraphs [38] and [39]. 

What we see there is the call moneys, the moneys that are to become the subject of 6.4(f) – at least one set of the moneys that will become part of 6.4(f) – are moneys that the manager, that is Queensland Nickel, can sue the joint venturers for.  The unpaid call moneys accrue interest, and the unpaid call moneys, to the extent that they accrue interest, the interest belongs to the non‑defaulting joint venturer. 

Now, in my respectful submission, what that does, is it emphasises the importance of clause 6.4(f) and the clause 6.4(f) trust, and it also emphasises the independent role that Queensland Nickel, the trustee, plays in respect of it.  Now, that importance should be obvious, in any event, because it is not just dealing with matters inter se, it is dealing with a matter as central as the payment of joint venture expenses.  Joint venture expenses are absolutely critical to this.  This is the means by which a trustee of those funds can ensure that it has funds in order to pay the joint venture expenses which are necessary to produce anything from this operation. 

So in the end our position in relation to B44 can really be summarised by saying it was an orthodox application of uncontroversial principles to the terms of the bespoke joint venture agreement and to the facts concerning the dealings between QNI and Mineralogy.  The decision was correct.  Mr Dunning now puts it on the basis that it is necessary for him to overturn the bare trust finding and he has no prospect of doing that, in my respectful submission.  There were no disputed questions of principle in the Court of Appeal.  The argument the applicants now wish to raise was not raised at trial or before the Court of Appeal.  On proper analysis, it is not really a point of principle, in any event.  It comes down to a question of construction. 

The Canadian case that our learned friends cite came down to a question of construction where the relevant trustee was described as a bare nominee and trustee and was given no independent powers and discretions and was said by the court to have been there only to do the bidding of the other parties.  That is not the case here.  Clause 6.4(f) makes that abundantly plain.  There was no clause remotely resembling clause 6.4(f) involved in the Canadian decision.  In any event, it will not avoid the need to go into the detailed evidence about the requests for the funds and rationally it should involve us having the ability to establish the state of our right of indemnity which will involve extensive factual questions.

The argument should not make a difference at all to the outcome, in any event, because there is no credible basis for getting around 6.4(f).  It is not explained how the principle can allow one to simply put 6.4(f) to one side.  Ultimately, in our respectful submission, B44 presents no case at all suitable for a grant of special leave.

I will deal with B45 briefly, if I may.  Again, it does not raise any question of principle.  To the extent that we are dealing with the bare trust proposition, the Court of Appeal relied upon settled law, including the High Court’s statement of principle in CGU Insurance Limited v One.Tel Ltd (2010) 242 CLR 174 at 36. There is no suggestion that that principle needs to be revisited or restated. At most, Mineralogy asserts that there was some misapplication of settled principle, but they have not demonstrated any actual error. They have not demonstrated any prospect of overcoming the construction of clause 6.4(f) and they cannot explain how their trusteeship is consistent with the express terms of the joint venture agreement which plainly impose active duties in relation to the payment of present and future joint venture expenses.

As to the supposed question regarding identification of parties to an informal contract by reference to subsequent conduct, that simply does not arise.  All parties accepted at trial and in the Court of Appeal that it was permissible to have regard to subsequent conduct in respect of an informal contract.  Here our contract was partly written and partly oral.  All parties relied on such conduct.  The debate was as to what conclusions should be drawn from the whole of the evidence, and there was no contested issue of principle at all, nor would there be if the matter were to come to this Court.

So far as section 1305 of the Corporations Act and section 84 of the Evidence Act are concerned, again there was no dispute that the records were some evidence of the matters stated in them.  The questions were what did the financial records actually show.  We submitted below, and the Court of Appeal accepted, that ultimately they were neutral.  Mr Dunning referred to the loan forgiveness transactions which started considerably after the inception of this loan, the loan incepted in 2011, and the facts driven loan forgiveness transactions did not start until at least October 2013. 

But leaving that point to one side, the loan forgiveness transactions were themselves neutral and one can see that if we go to page 37 in the application book, paragraph [110], and the text of the agreement, one of an array of agreements haphazardly entered into between the parties well after the loan incepted, but it says in the last paragraph “It acknowledged that”, and then your Honours will see what is set out there, reference only to

the loan owing by Mineralogy Pty Ltd to Queensland Nickel Pty Ltd –

So the agreements themselves were not all one way.  It should not be thought for a second that there will not be a substantial dispute in this Court as to what the evidence actually showed there would be, but ultimately involves no question of principle.  It is just looking at all of the evidence and what conclusions should you draw from it as a whole.  So, in our respectful submission, in both B44 and B45 we would urge your Honours to refuse special leave with costs.

KIEFEL CJ:   Thank you, Mr Pomerenke.  Anything in reply, Mr Dunning?

MR DUNNING:   Your Honours, very briefly.  Firstly, in our submission, your Honours should reject the suggestion leave should be refused on the basis that it raises a factual issue not raised.  Our learned friends do not deal with the fact that, as I took your Honour to, the issue of agency was squarely raised on the pleadings and agitated in the court below, therefore, there would be no basis for saying that there were matters not litigated because they were raised on the pleading. 

In relation to the suggestion that the agency argument would have the consequence of the trustee’s right of indemnity being in some way impaired, that is dealt with in the submissions in reply in B44, paragraphs 9 to 10, pages 171 and 172 of the record.  As for the reasons set out there, the point is, with great respect, wrong.

Can I deal with the suggestion that 6.4(f) is, in effect, a complete answer, and justify the Court of Appeal in the position it took.  The language of 6.4(f), set out in paragraph [33] of the primary judgment, page 17…..:

but the moneys standing to the credit of the account shall belong to the Joint Venturers –

In particular in response to Justice Gageler’s questions, both to myself and Mr Pomerenke, if we go to paragraph [98] of the Court of Appeal’s reasons, page 127 of the book, once that is understood ‑ now the “that” is…..where in paragraph [97] above their Honours in the Court of Appeal said:

Under clause 6.4(f) the obligations on QNI as holder of the bank account were ‑

But one actually should read that:  the obligations of QNI as holder of the joint venturer’s money in the bank account were.  And when one understands that, because that was the arrangement, then, in our respectful submission, all of the force goes out of the analysis of the Court of Appeal.

Your Honours were referred to clause 8.1 of the joint venture agreement on paragraph [38] of the Court of Appeal’s reasons, page 116.  In our respectful submission, that did not take the matter anywhere.  Rather, that was the sort of clause you would expect between parties who were anxious to keep themselves at arm’s length from each other, so that if one became delinquent in its calls, the other did not have to do it for it, the special purpose vehicle, limited only for the purpose that holding money could do so.  That is consistent with clause 13, which your Honours see in paragraph [40] in the Court of Appeal’s judgment, in fact the last sentence where, unsurprisingly, these parties did not want to be partners, they were careful to keep their relations as separate as possible.  So, clause 8.1 rather…..the respondent’s argument and our submission is against it. 

GAGELER J:   Mr Dunning, can I just ask you a question about paragraph [97] of the judgment of the Court of Appeal.

MR DUNNING:   Yes, of course, your Honour.

GAGELER J:   I am looking at [97](e), the investment of:

funds in the bank account in a prudential manner –

Was the QNI loan to Mineralogy an investment of funds within the meaning of clause 6.4(f)?

MR DUNNING:   In our submission, no, because 6.4(f)(e) – well, that section I quote, but dealing with (e) as a description of the obligation to invest in “a prudential manner”, for example, while the moneys sit in the joint venturers respective shares in an account – to make sure they are not held in cash, they are put into a bank account ‑ that is what (e) is concerned with.  It is not concerned with circumstances where the joint venturers choose to apply their money out of the account to somebody else. 

GAGELER J:   Thank you. 

MR DUNNING:   If you like, your Honour, I can turn up the actual – no, I do not want to add to that, Justice Gageler.

GAGELER J:   Thank you.

MR DUNNING:   Thank you.  Finally, your Honours, one cannot lose sight of the fact that 6.4(f) not only does not refer to trust, but the mechanism that it there creates is the antithesis of a trust because it states in terms that it remains at all times – sorry, of an express trust – because it remains at all times the money of the joint venturers.  Unless we can assist your Honours with anything further, they are our submissions in reply.

KIEFEL CJ:   Yes, thank you.  The Court will adjourn to consider the course that it will take. 

AT 10.38 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.43 AM:

KIEFEL CJ:   It is our view that insofar as the proposed appeals raise questions as to the capacity in which a manager of a joint venture makes investments they are not suitable vehicles for the consideration of that issue.  In each matter, special leave is refused with costs.

The Court will now adjourn.

AT 10.44 AM THE MATTERS WERE CONCLUDED