Sev.en Global Investments Pty Ltd (ACN 661 272 233) v Global Loan Agency Services Australia Nominees Pty Limited (ACN 608 945 008)

[2024] WASC 424

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   SEV.EN GLOBAL INVESTMENTS PTY LTD (ACN 661 272 233) -v- GLOBAL LOAN AGENCY SERVICES AUSTRALIA NOMINEES PTY LIMITED (ACN 608 945 008) [2024] WASC 424

CORAM:   HILL J

HEARD:   7 - 9 OCTOBER 2024

DELIVERED          :   15 NOVEMBER 2024

PUBLISHED           :   15 NOVEMBER 2024

FILE NO/S:   CIV 1990 of 2024

BETWEEN:   SEV.EN GLOBAL INVESTMENTS PTY LTD (ACN 661 272 233)

First Plaintiff

PIPER PRESTON PTY LTD (ACN 142 962 409)

Second Plaintiff

AND

GLOBAL LOAN AGENCY SERVICES AUSTRALIA NOMINEES PTY LIMITED (ACN 608 945 008)

First Defendant

GLOBAL LOAN AGENCY SERVICES AUSTRALIA PTY LTD (ACN 608 829 303)

Second Defendant

SEQUOIA IDF ASSET HOLDINGS S.A.

Third Defendant

TAURUS MINING FINANCE FUND AIV L.P

Fourth Defendant

TAURUS MINING FINANCE ANNEX FUND AIV L.P

Fifth Defendant

TAURUS MINING FINANCE FUND NO.2, L.P.

Sixth Defendant

SALT LAKE POTASH LIMITED (ACN 117 085 748) (RECEIVERS AND MANAGERS APPOINTED)

Seventh Defendant

Catchwords:

Contract - Proper construction of facility agreement and security trust deed - Payment by first plaintiff of second plaintiff's debt owing under facility agreement - Whether payment unconditional - Whether defendants obliged to accept payment

Equity - Rights of subrogation - Payment by first plaintiff of second plaintiff's outstanding debt under facility agreement - Debt secured by security trust deed - Presumption of intention by first plaintiff to keep security alive - Whether presumption displaced - Whether equitable remedy of subrogation can arise where security trust deed secures other obligations which are continuing - Relevant factors - What (if any) relief ought be granted

Legislation:

Rules of the Supreme Court 1971 (WA) O 67B

Result:

Orders for application of payment
Limited declarations to be made

Category:    B

Representation:

Counsel:

First Plaintiff	:	J K Taylor SC, W C J Zappia, A L Mason
Second Plaintiff	:	J K Taylor SC, W C J Zappia, A L Mason
First Defendant	:	T J Porter
Second Defendant	:	T J Porter
Third Defendant	:	D L Cook SC, N L Pham
Fourth Defendant	:	D L Cook SC, N L Pham
Fifth Defendant	:	D L Cook SC, N L Pham
Sixth Defendant	:	D L Cook SC, N L Pham
Seventh Defendant	:	No appearance

Solicitors:

First Plaintiff	:	Baker McKenzie
Second Plaintiff	:	Baker McKenzie
First Defendant	:	Hamilton Locke
Second Defendant	:	Hamilton Locke
Third Defendant	:	King & Wood Mallesons
Fourth Defendant	:	King & Wood Mallesons
Fifth Defendant	:	King & Wood Mallesons
Sixth Defendant	:	King & Wood Mallesons
Seventh Defendant	:	King & Wood Mallesons

Cases referred to in decision:

Aged Care Services Pty Ltd v Kanning Services Pty Ltd [2013] NSWCA 393; (2013) 86 NSWLR 174

Amcor Ltd v Barnes [2016] VSC 707

ATCO Controls Pty Ltd (in liq) v Stewart [2013] VSCA 132; (2013) 31 ACLC 13-065

Austin v Royal (1999) 47 NSWLR 27; [1999] NSWCA 222

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14; (2014) 253 CLR 560

Australian Mid-Eastern Club Ltd v Yassim (1989) 1 ACSR 399

AW v Rayney [No 4] [2012] WASCA 117

Bank of New South Wales v O'Connor (1889) 14 App Cas 273

Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221

Bass v Permanent Trustee Company Ltd [1999] HCA 9; (1999) 198 CLR 334

Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219

Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269

Boscawen v Bajwa [1996] 1 WLR 328

Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291

Cochrane v Cochrane (1985) 3 NSWLR 403

Commonwealth Bank of Australia v Stephens [2017] VSC 385

CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121

D & J Fowler (Aust) Ltd v Bank of NSW [1982] 2 NSWLR 879

DiMella v Rudaks [2008] SASC 345; (2008) 102 SASR 582

Ellis v Ellis [1924] SASR 379

El-Saafin v Franek [2021] VSC 489

Federal Land Bank v Marvin 14 SW (2d) 762 (1929); 70 Am LR 1392

Gandel Metals Pty Ltd v Centennial Mining Ltd (No 2) [2020] FCA 633

George 218 Pty Ltd v Bank of Queensland Ltd [No 2] [2016] WASCA 182; (2016) 313 FLR 287

Ghana Commercial Bank v Chandiram [1960] AC 732

Graham v Seal (1918) 88 LJ Ch 31

GWH Pty Ltd v Commonwealth Bank of Australia (1994) 6 BPR 14,073

Highland v Exception Holdings Pty Ltd (in liq) [2006] NSWCA 318; (2006) 60 ACSR 223

Insurance Commission of Western Australia v Woodings as liquidator of Bell Group Ltd (in liq) [No 2] [2017] WASC 372

Liberty Mutual Insurance Co (UK) Ltd v HSBC Bank plc [2001] Lloyd's Rep Bank 224

McColl's Wholesale Pty Ltd v State Bank of New South Wales [1984] 3 NSWLR 365

Newcrest Mining Ltd v Santos WA Northwest Pty Ltd [No 2] [2022] WASC 410

Nguyen v Sage Consultant Group Pty Ltd [2021] NSWSC 753

O3 Capital Pty Ltd v WY Properties Pty Ltd [2016] WASCA 82

Padovan v MGG Group Pty Ltd (in liq) [2011] NSWSC 1080

PGA Group Pty Ltd v Idameneo (No 789) Ltd (formerly Symbion Health Ltd); Gunn v Idameneo (No 789) Ltd [2011] VSC 382

Pilbara Iron Ore Pty Ltd v Ammon [2020] WASCA 92

Re Dalma No 1 Pty Ltd (in liq) [2013] NSWSC 1335; (2013) 279 FLR 80

Re Fellmane Pty Ltd (in liq) [2020] NSWSC 595

Re Trivan Pty Ltd (1996) 134 FLR 368

Registrar General v Gill [1994] NSWCA 261

Rogers v Resi-Statewide Corporation (1991) 105 ALR 145

Saffron Sun Pty Ltd v Perma-Fit Finance Pty Ltd (in liq) [2005] NSWSC 1317

Saraceni v Mentha [No 2] [2012] WASC 336; (2012) 269 FLR 12

Smits v Cugola [2022] QCA 262

State Bank of New South Wales v Geeport Developments Pty Ltd (1991) 5 BPR 11,947

Titles Strata Management Pty Ltd v Nirta [2015] VSC 366

Table of Contents

Introduction

Evidence

Should confidentiality orders be made in the terms sought by the plaintiffs?

Issues for determination

Factual background

Was GLAS Agent obliged to accept the Payment by 7GI to repay the debt owed by Piper Preston to Sequoia under the Facility Agreement?

Did the Payment automatically extinguish Piper Preston's debt under the Facility Agreement?

Did the Facility Agreement require the Payment to made by Piper Preston?

Was the Payment unconditional?

Were the defendants entitled to refuse to accept the Payment?

Is Piper Preston required to pay interest from the date of the Payment by 7GI?

Is 7GI entitled to the equitable remedy of subrogation?

What was 7GI's intention in making the Payment?

Do all of the debts secured by the Security Trust Deed need to be repaid before 7GI is entitled to the remedy of subrogation?

What, if any relief ought be granted?

Is there an existing dispute?

Can and should the court require GLAS Agent and GLAS Nominees to execute documents?

Conclusion

HILL J:

Introduction

1. The dispute between the parties arises out of the transfer of $8.5 million by the first plaintiff, Sev.en Global Investments Pty Ltd (7GI), into the bank account of the first defendant, Global Loan Agency Services Australia Nominees Pty Ltd (GLAS Nominees) on 7 August 2024.

2. 7GI says that it made this payment at the request of the second plaintiff, Piper Preston Pty Ltd (Piper Preston), to discharge Piper Preston's liability to the third defendant, Sequoia IDF Asset Holdings S.A. (Sequoia) under a facility agreement which came into effect on 7 October 2022 (Facility Agreement) on condition that it would be entitled to be subrogated to the rights and position of Sequoia under various finance and security agreements.  7GI seeks a declaration that it is entitled to be subrogated to Sequoia's interests and position under the Facility Agreement, an amended security trust deed which came into effect on 7 October 2022 (Security Trust Deed) and various other documents, and seeks orders compelling the first to third defendants to execute documents to give effect to this.

3. The defendants deny the plaintiffs are entitled to the relief they seek or any relief at all.  The defendants say that the transfer made by 7GI was conditional and did not discharge Piper Preston's obligations under the Facility Agreement.  Even if the transfer was effective, the third to sixth defendants say that no orders should be made by the court as there is no relevant dispute between the parties as to 7GI's rights of subrogation.  In the alternative, they say it would be premature to make any orders at this stage.

4. On 21 August 2024, the plaintiffs commenced these proceedings and sought an urgent hearing of the matter.  While the defendants did not accept there was any urgency with the matter, no objection was taken to the matter being programmed through to trial, which occurred within seven weeks. This was possible largely because of the approach taken by counsel and their instructors and the fact that no interlocutory applications were filed.  As I observed at the conclusion of the hearing, all those involved are to be commended on their conduct of the matter.

5. The issues raised by this matter are complex and raise difficult questions of law.  In reaching my decision, I have been considerably assisted by the written and oral submissions of all counsel for which I am most grateful.

6. For the reasons set out below, it is my view that:

   (a)the transfer of $8.5 million by 7GI to the bank account of GLAS Nominees on 7 August 2024 was not an unconditional payment of the outstanding debt of Piper Preston under the Facility Agreement;

   (b)as a consequence, Global Loan Agency Services Australia Pty Ltd (GLAS Agent) was entitled to seek instructions on the payment and not to accept it;

   (c)on 23 September 2024, 7GI made plain that the payment was unconditional.  From this date, the payment satisfied Piper Preston's obligations under the Facility Agreement;

   (d)as from 23 September 2024, 7GI was entitled to be subrogated to the security of Sequoia under the Security Trust Deed to the extent of $7 million; and

   (e)7GI is not entitled as of right to a legal assignment of Sequoia's position under the Facility Agreement, Security Trust Deed or other documents.  In the circumstances of this case, I do not consider that any orders should be made requiring the execution of documents to legally assign Sequoia's interests under the Facility Agreement, the Security Trust Deed or any other documents.

7. The detailed bases for these conclusions are set out below.

Evidence

1. At trial, most of the facts were not in dispute between the parties.  For this reason, evidence was given by way of affidavit.  On 4 October 2024, orders were made by consent requiring the attendance of the plaintiffs' witnesses for cross-examination.  Ultimately, Mr Howarth was not required to attend for cross-examination and his affidavit was read without objection.

2. The plaintiffs read three affidavits: two affidavits of Mark Sykes, a director of 7GI, the Country Manager - Australia for Sev.en Global Investments A.S., and a former director of Piper Preston, filed 21 August 2024 and 23 September 2024; and an affidavit of Jon Brennan Howarth, the current sole director of Piper Preston, filed 21 August 2024.

3. Mr Sykes was cross-examined by senior counsel for the third to sixth defendants.  While the third to sixth defendants submitted that Mr Sykes' evidence should not be accepted in relation to the events of 7 August 2024, ultimately, very little in his oral evidence has affected the findings I have made.  These findings are primarily based on the documents tendered at trial.  For this reason, it is not necessary to make any specific findings as to the credit of Mr Sykes and I decline to do so.

4. The first and second defendants read the affidavit of Steven Furlong, a transaction manager employed by GLAS Agent, filed 24 September 2024.

5. The third to sixth defendants read two affidavits: an affidavit of Nathan John Collins, a partner of King & Wood Mallesons (KWM), the solicitors for these parties, filed 18 September 2024; and an affidavit of Zachary Sharp, a solicitor employed by KWM, filed 1 October 2024.

Should confidentiality orders be made in the terms sought by the plaintiffs?

1. At the first directions hearing, confidentiality orders were made in respect of some of the paragraphs of the affidavits of Mr Sykes and Mr Howarth, as well as a number of the annexures to these affidavits.  These orders restricted access to anyone other than the parties, their legal representatives and the court.

2. At the conclusion of the hearing, the plaintiffs sought to maintain confidentiality orders only in relation to the specific figures referred to in [39], [40] and [43] of the affidavit of Mr Sykes filed 21 August 2024, the inter-company loan agreements between the plaintiffs (Annexures CMS-3 to CMS-10 of this affidavit) and the financial statements of Piper Preston, which were annexed to the affidavit of Mr Howarth filed 21 August 2024.

3. Submissions were filed by the plaintiffs in support of their application.  In circumstances where there was no contradictor, senior counsel for the third to sixth defendants addressed the court on the matters the court should consider in determining the application, including the principles of open justice.

4. In recent times, much has been written and spoken about the principles of open justice, particularly in ex-curial settings, what 'open justice' means, and whether confidentiality or suppression orders are consistent with these principles.  In Western Australia, the statement of the principles of open justice are those set out by Buss JA in AW v Rayney [No 4] (McClure P and Newnes JA agreeing).[1]  His Honour's statement of principles was summarised by Tottle J in Newcrest Mining Ltd v Santos WA Northwest Pty Ltd [No 2] in the following terms:[2]

   (a)An essential feature of courts in the Australian judicial system is that they sit in public.

   (b)The rationale for this principle is the benefit that flows from subjecting court proceedings to public and professional scrutiny and the maintenance of public confidence in the courts, in particular, confidence in the independence and impartiality of the courts.

   (c)A corollary of the open-court or open justice principle is that at common law, absent any limitation or restriction imposed by an order of the court, anyone (including the media) may publish a fair and accurate report of proceedings in open court.

   (d)At common law, a superior court may, in the exercise of its inherent jurisdiction, and an inferior court may, in the exercise of its implied powers, make orders that limit or restrict the application of the open-court or open justice principle, and the correlative entitlement to publish a fair and accurate report, by, for example, making a suppression order.  But this jurisdiction or power may be exercised only where it is 'necessary' for the proper administration of justice.

   (e)This court's inherent jurisdiction to make suppression orders has not been circumscribed or excluded by any relevant express statutory provisions.

   (footnotes omitted)

   [1] AW v Rayney [No 4] [2012] WASCA 117 [29] - [35] (Buss JA).

   [2] Newcrest Mining Ltd v Santos WA Northwest Pty Ltd [No 2] [2022] WASC 410 [17].

5. The powers of the court to restrict access to documents is set out in O 67B r 5 of the Rules of the Supreme Court 1971 (WA) (Rules). Where the court makes an order under O 67B r 5(3) of the Rules, it is required (under O 67B r 5(4)) to give reasons and sufficient information to clearly identify:

   (a)the information, record or thing to which the order applies; and

   (b)the person, or class of persons, whose access to the information, record or thing is restricted by the order; and 

   (c)any conditions that will apply if access to the information, record or thing were to be given by the court; and

   (d)the period during which the order applies.

6. Before it can make an order, the court must consider that one of the following applies:

   (a)the information, record or thing is the subject of a pending claim that it is privileged or confidential; or

   (b)the information, record or thing is privileged or confidential; or

   (c)that in the interests of justice, access should be restricted.

7. It is important to emphasise that these are alternative grounds. 

8. Order 67B of the Rules also sets out what information a person who is not a party to proceedings can access as of right. These include, in the context of a trial, a transcript, and a list of exhibits. Where a party is not entitled to information, a party who wants access to any information must apply for access.

9. I turn first to the application in respect of the specific figures referred to in [39], [40] and [43] of Mr Sykes' affidavit.  For the following reasons, I am not satisfied that any confidentiality orders should continue in relation to these figures.

10. First, putting to one side the question as to whether these figures were confidential in the first place, I am not satisfied that these amounts remain confidential. These figures are specifically referred to in the plaintiff's opening submissions (at [141]). In addition, the total of these figures (being the amount owed by Piper Preston to 7GI) was referred to by senior counsel for the third to sixth defendants at trial, without objection. No order has been sought or made for suppression of this aspect of the transcript. Given the provisions of O 67B r 6(4) of the Rules, any person is entitled to access the transcript, and will be able to ascertain the total amount owing.

11. Second, I do not consider that it is necessary in the interests of justice for access to the specific figures in these paragraphs to be limited.  In reaching this decision, it is important to stress that these proceedings were commenced by the plaintiffs and that they made decisions as to what information would be presented to the court in support of their claim.  Mr Sykes' affidavit was read at trial and he was cross-examined by senior counsel for the third to sixth defendants.  As part of its claim, 7GI says that, based on the amounts it was owed by Piper Preston, it had a valid commercial reason to make the Payment.[3]  In my view, this submission can only be properly considered and addressed by reference to the actual amounts that were then outstanding as between the plaintiffs.

    [3] Plaintiffs' outline of submissions [139] - [144].

12. I have reached a different conclusion in respect of the inter-company loan agreements and financial statements.  For the following reasons, it is my view that it is appropriate to make the orders sought by the plaintiffs in relation to these documents.

13. First, I am satisfied that each of these documents is confidential.  The inter-company loan agreements specifically impose an obligation on the parties to keep the conditions of these agreements confidential.  The Facility Agreement similarly imposes obligations of confidentiality on any documents that are provided to the defendants.  This obligation extends to Piper Preston's financial statements.  In relation to Piper Preston's financial statements, I accept that these documents are not generally accessible by members of the public or readily disclosable.

14. Second, none of these documents were referred to in any detail at trial.  The annexures to the affidavits that were relied on by the parties at trial formed part of the court book and were tendered as an exhibit.  These documents did not form part of the court book.

15. Third, I do not consider that making these orders in this limited form is inconsistent with the principles of open justice as summarised above.  This trial was held in public, these documents do not form part of the court's reasons for its decision, and the ability for anyone to publish a fair and accurate report of this matter is not impacted by the making of these orders. 

Issues for determination

1. In their pleadings and submissions, the parties framed the issues for determination slightly differently.  In my view, there are four key issues that need to be determined, namely:

   (a)Was GLAS Agent obliged to accept the payment of $8.5 million by 7GI to repay the debt owed by Piper Preston to Sequoia?

   (b)Is Piper Preston required to pay interest on the debt from the date of the payment of $8.5 million by 7GI?

   (c)Is 7GI entitled to be subrogated to Sequoia's interests under the Facility Agreement and Security Trust Deed (and any other security documents)?

   (d)If 7GI is entitled to the remedy of subrogation, what, if any relief, ought be granted?

Factual background

1. Piper Preston holds various mining interests[4] and water licences[5] in what is known as the Lake Way Project, located in the Goldfields region of Western Australia.  For approximately seven years, Piper Preston has been developing a potash mine at the Lake Way Project, by extracting organic sulphate of potash from naturally occurring brines using solar evaporation.  The mine is still in the development phase and has not yet reached commercial production.[6]

   [4] Ex 1, Tab 7 (Combination Security Agreement), sch 1.

   [5] Combination Security Agreement (definition of 'Water Licence').

   [6] Affidavit of Mark Sykes filed 21 August 2024 [31].

2. Prior to 6 September 2022, Piper Preston was a wholly‑owned subsidiary of Australia Salt Lake Potash Ltd (Australia Salt Lake Potash),[7] which in turn was a wholly owned subsidiary of Salt Lake Potash Ltd (Salt Lake Potash).[8] 

   [7] Affidavit of Mark Sykes filed 21 August 2024, 'MS-3'.

   [8] Affidavit of Mark Sykes filed 21 August 2024, 'MS-2'.

3. In August 2019 and August 2020, Piper Preston entered into royalty deeds (Royalty Deeds) with the fourth to sixth defendants (Taurus Entities) granting these entities a royalty over any sulphate of potash or any other product (other than gold or nickel) mined from the tenements (Product).  Under the terms of these deeds, a royalty will be payable when Piper Preston receives revenue from the sale or disposal of Product.  If the Royalty Deeds are terminated (including on the grounds of insolvency), Piper Preston is required to pay the Taurus Entities a 'Termination Payment' which is, effectively, the net present value of the royalty, discounted at the rate of 6% per annum.[9]

   [9] Ex 1, Tab 1, sch 3; Ex 1, Tab 6, sch 3.

4. On 14 July 2020, Piper Preston entered into a gas transportation agreement with APA Operations Pty Ltd (APA).  This agreement required Piper Preston to arrange for a bank guarantee to be issued in favour of APA, initially in the amount of $18 million.[10]  The amount of the bank guarantee reduced over the period of the gas transportation agreement from $18 million to $15 million (on 14 July 2021) to $11 million (on 14 July 2022) to $7 million (on 14 July 2023) and finally to $2.6 million (from 14 July 2024 for the remainder of the agreement, which is 20 years).[11]

   [10] Ex 1, Tab 2, cl 3.

   [11] Ex 1, Tab 2, cl 3, Details (definition of 'Term').

5. On 4 August 2020, Piper Preston entered into a syndicated facility agreement with, among other parties, the sixth defendant (Taurus Fund No 2), Clean Energy Finance Corporation (CEFC), GLAS Agent, and GLAS Nominees.  Under this agreement, Taurus Fund No 2 and CEFC agreed to provide Piper Preston with a US $138 million facility to repay a previous facility and fund the design, construction, operation and maintenance of the Lake Way Project.[12]  Piper Preston's obligations under this agreement were secured by a security trust deed entered into on the same date (Original Security Trust Deed),[13] which also secured payment of Piper Preston's obligations under the Royalty Deeds.

   [12] Ex 1, Tab 4.

   [13] Ex 1, Tab 3.

6. The Original Security Trust Deed established the Lake Way Project Security Trust (Trust).  Under the Original Security Trust Deed:

   (a)GLAS Nominees was appointed as trustee of the Trust;[14]

   (b)the Trust comprised $10 as well as any other assets which GLAS Nominees acquired in its capacity as trustee of the Trust;[15]

   (c)unless terminated earlier, the Trust ended on the earlier of the 80^th anniversary of the Original Security Trust Deed or on GLAS Nominees declaring it was terminated.  This declaration could only occur after all 'Transaction Security Interests' and 'Support Obligations' had been discharged and all proceeds distributed;[16] and

   (d)the beneficiaries included the Taurus Entities.[17]

   [14] Original Security Trust Deed, sch 1.

   [15] Original Security Trust Deed, cl 2.1.

   [16] Original Security Trust Deed, cl 2.2.

   [17] Original Security Trust Deed, sch 1, pt II.

7. On 3 December 2020, Piper Preston and GLAS Nominees entered into a combination security agreement (Combination Security Agreement). On the same date, Salt Lake Potash, Australia Salt Lake Potash, a number of Salt Lake Potash's related entities,[18] and GLAS Nominees entered into a general security agreement. The effect of these agreements was to grant a security interest in all present and after-acquired property of Piper Preston, Salt Lake Potash and Australia Salt Lake Potash (including specified mining tenements and water licences) to GLAS Nominees as Trustee under the Security Trust Deed. Mortgages over these tenements and water licences were subsequently entered into between 7 December 2020 and 23 June 2021.[19]

   [18] Irve Holdings Pty Ltd, Irve Developments Pty Ltd, Two Lake Holdings Pty Ltd, Two Lake Developments Pty Ltd, SO4 Fertiliser Holdings Pty Ltd, SO4 Fertiliser Developments Pty Ltd.

   [19] Ex 1, Tabs 9 - 14, 17.

8. On 3 June 2021, the syndicated facility agreement was amended to add Sequoia and the Commonwealth Bank of Australia (CBA) as additional lenders.[20]  Each of them was also added as a beneficiary under the Original Security Trust Deed.[21]  CBA agreed to issue the bank guarantee required by the gas transportation agreement with APA on the condition that Piper Preston held the amount required by the bank guarantee in a cash collateral account with the CBA.[22]  Under the terms of the amended syndicated facility agreement, as the bank guarantee reduced over time, Piper Preston agreed to repay Sequoia the amount that was released from the bank guarantee within three business days of its release.[23]

   [20] Ex 1, Tab 15.

   [21] Ex 1, Tab 15, sch 2, item 1.

   [22] Ex 1, Tab 15.

   [23] Ex 1, Tab 15, Annexure A, cl 7.4(a).

9. On 9 June 2021, the CBA issued the bank guarantee to APA.[24]

   [24] Ex 1, Tab 16.

10. On 20 October 2021, voluntary administrators were appointed to each of Salt Lake Potash, Australia Salt Lake Potash, and Piper Preston.  On the same date, GLAS Nominees appointed receivers and managers to each of these entities.[25]

    [25] Affidavit of Mark Sykes filed 21 August 2024 [24] - [25].

11. Following a sale process run by the receivers and managers, on 6 September 2022, 7GI entered into a share sale and purchase agreement with Salt Lake Potash (administrators appointed) (receivers and managers appointed) (SPA).[26]  A condition precedent of the SPA was the approval by creditors of a deed of company arrangement (DOCA) proposed by 7GI.[27]

    [26] Ex 1, Tab 18.

    [27] Ex 1, Tab 18, cl 6.1, item (f).

12. On 6 October 2022, Piper Preston (as Borrower), Australia Salt Lake Potash, a number of Salt Lake Potash's related entities,[28] GLAS Agent (as Agent) and GLAS Nominees (as Security Trustee), entered into a deed to restructure Piper Preston's liabilities (Restructure Deed).[29]  At the time of entry into the Restructure Deed, intercompany loans were owing by each of Piper Preston and Australia Salt Lake Potash to Salt Lake Potash.  These inter-company loans were purchased by 7GI on the terms set out in the Restructure Deed.

    [28] Salt Lake Potash Pty Ltd, Irve Holdings Pty Ltd, Irve Developments Pty Ltd, Two Lake Holdings Pty Ltd, Two Lake Developments Pty Ltd, SO4 Fertiliser Holdings Pty Ltd, SO4 Fertiliser Developments Pty Ltd.

    [29] Ex 1, Tab 19.

13. Pursuant to the express terms of the Restructure Deed, the following amended agreements took effect as from 7 October 2022:[30]

    (a)the Facility Agreement between Piper Preston, Australia Salt Lake Potash, Sequoia, GLAS Nominees and GLAS Agent, which was Schedule 2 to the Restructure Deed;[31] and

    (b)the Security Trust Deed between Piper Preston, Australia Salt Lake Potash, Salt Lake Potash, GLAS Nominees, GLAS Agent and various beneficiaries, which was Schedule 3 to the Restructure Deed.[32]

    [30] Ex 1, Tab 19, cl 2(a)(iii), cl 4.2, cl 6.

    [31] Ex 1, Tab 19, p 1383 - 1513 (Facility Agreement).

    [32] Ex 1, Tab 19, p 1514 - 1617 (Security Trust Deed).

14. Under the Facility Agreement, Sequoia continued to make available to Piper Preston the facility used as cash collateral for the bank guarantee required for the gas transportation agreement (referred to at [32]).[33]  This facility reduced over time from $15 million (until 10 April 2023) to $7 million (from 11 April 2024 until 30 April 2024).[34]  By 30 April 2024, all amounts outstanding under the Facility Agreement were required to be repaid.[35]

    [33] Facility Agreement, cl 2.1(b).

    [34] Facility Agreement, cl 2.1(a), cl 1.1 (definitions of 'Commitment' and 'Termination Date').

    [35] Facility Agreement, cl 4.1, cl 1.1 (definitions of 'Loan' and 'Termination Date').

15. As at 6 October 2022, the beneficiaries of the Trust were, relevantly, GLAS Nominees, CEFC, the CBA, GLAS Agent, the Taurus Entities and Sequoia (Beneficiary or Beneficiaries).[36]

    [36] Security Trust Deed, cl 1.1.

16. On 6 October 2022, GLAS Nominees entered into a distribution deed with the Beneficiaries.  Under this deed, the Beneficiaries agreed how any funds received by GLAS Nominees would be distributed between them.[37]

    [37] Ex 1, Tab 20, cl 2.3.

17. On 20 December 2022, 7GI entered into a loan agreement with Piper Preston (7GI Loan Agreement).[38]  Under the 7GI Loan Agreement, 7GI made available an unsecured loan to Piper Preston.  Pursuant to cl 9 of the 7GI Loan Agreement, Piper Preston agreed to provide reasonable security to 7GI on request.  The 7GI Loan Agreement has been amended on five times between 16 January 2023 and 1 February 2024.[39]  The total amount advanced by 7GI to Piper Preston under the 7GI Loan Agreement is almost $260 million.[40]

    [38] Affidavit of Mark Sykes filed 21 August 2024 [40].

    [39] Affidavit of Mark Sykes filed 21 August 2024 [41].

    [40] Affidavit of Mark Sykes filed 21 August 2024 [43].

18. On or about 22 August 2023, 7GI entered into two deeds of acknowledgement in relation to the parent loans to Australia Salt Lake Potash (in the amount of approximately $80,000) and Piper Preston (in the amount of approximately $228 million).[41]

    [41] Affidavit of Mark Sykes filed 21 August 2024 [39].

19. On 17 April 2024, GLAS Agent wrote to Piper Preston giving notice of the final repayment under the Facility Agreement, which was due on 30 April 2024. The notice requested that Piper Preston pay the amount of $7,050,958.90 to a bank account of GLAS Nominees by no later than 10.00 am on 30 April 2024,[42] and enclosed a statement explaining how this sum had been calculated.[43]  This bank account was set up in the name of GLAS Nominees at the direction of GLAS Agent for the specific purpose of receiving payments from Piper Preston under the Facility Agreement.[44]  GLAS Agent requested confirmation that payment would be made by that date.  Confirmation was provided shortly afterwards by the then financial controller of Piper Preston.[45] 

    [42] Ex 1, Tab 25.

    [43] Ex 1, Tab 26.

    [44] Affidavit of Steven Furlong filed 24 September 2024 [6].

    [45] Ex 1, Tab 25, p 1665.

20. Notwithstanding this confirmation, Piper Preston did not pay this amount or any amount to GLAS Nominees on 30 April 2024.  Instead, on 30 April 2024, Piper Preston requested that Sequoia consent to a deferral of the repayment.[46]  When asked for some background to the request, Mr Fraser, then a director of Piper Preston, explained that there had been a miscommunication between him and the financial controller.  He explained that until then, the timing of repayments coincided with the release of the cash backed deposit, which had funded the repayments.  This was not the case for this repayment, which, Mr Fraser explained, had come as a surprise.[47]

    [46] Ex 1, Tab 27, p 1670.

    [47] Ex 1, Tab 27, p 1669.

21. At the time this email was sent, there were three directors of Piper Preston: Mr Fraser, Mr Sykes and Mr Stulc.  All three resigned between 30 April 2024 and 3 May 2024.  In their place, on 2 May 2024, Mr Howarth was appointed as a director.[48]

    [48] Affidavit of Mark Sykes filed 21 August 2024, 'MS-3'.

22. Mr Howarth, who is a director of Specialised Business Services (SBS), a turnaround advisory firm,[49] was introduced to Mr Sykes by Baker & McKenzie, the plaintiffs' lawyers.[50]  One of the services Mr Howarth provides through SBS is a preparedness to be appointed as a director of relevant companies.  At the time of the commencement of proceedings as well as at the hearing, Mr Howarth was the only director of Piper Preston. 

    [49] Affidavit of Jon Brennan Howarth filed 21 August 2024 [11].

    [50] ts 103.

23. Mr Sykes' evidence was that none of the former directors resigned because of any concerns as to the solvency of Piper Preston.[51]  His explanation for his resignation and the appointment of Mr Howarth was that Mr Howarth was appointed 'on the basis of what … work we required' and that Mr Howarth had a greater risk appetite than him.[52] 

    [51] ts 101.

    [52] ts 102.

24. On 9 May 2024, GLAS Agent wrote to Piper Preston setting out the basis on which an extension of time would be granted for the repayment of the amount under the Facility Agreement until 4 June 2024.  These terms included payment of a fee of $840,000 together with payment of its costs on a full indemnity basis.[53]

    [53] Ex 1, Tab 28.

25. On 10 May 2024, Piper Preston issued a notice to 7GI that it believed an event of serious breach had arisen under the 7GI Loan Agreement as a result of Piper Preston's default under the Facility Agreement.[54]

    [54] Affidavit of Mark Sykes filed 21 August 2024, 'CMS-11'.

26. On 13 May 2024, 7GI wrote to Piper Preston, under cl 9 of the 7GI Loan Agreement, requesting that Piper Preston provide security to secure its obligations under the 7GI Loan Agreement.[55]  Mr Sykes accepted that at the time of this request, he was aware that Piper Preston was unable to give any security over its assets without the consent of the existing lenders under the Facility Agreement (Lenders)[56] and Security Trust Deed.[57]

    [55] Affidavit of Mark Sykes filed 21 August 2024, 'CMS-12'.

    [56] Facility Agreement, cl 16.13(a).

    [57] ts 106.

27. On 14 May 2024, 7GI and Piper Preston entered into a forbearance deed (Forbearance Deed).[58]  Under the terms of the Forbearance Deed, 7GI agreed not to enforce or take any steps under the 7GI Loan Agreement for a period of four weeks.  The parties subsequently agreed to extend this period to 31 July 2024,[59] 15 August 2024 and then to 30 August 2024.[60]  While there have been discussions between the parties about a further extension, at the time of the hearing, no further extension of the Forbearance Deed had been agreed.[61]

    [58] Ex 1, Tab 21.

    [59] Ex 1, Tab 22.

    [60] Ex 1, Tab 23.

    [61] ts 107.

28. Between 14 May 2024 and 17 July 2024, representatives of Sev.en Global Investments A.S. (the parent company of 7GI), Taurus and Sequoia engaged in various discussions concerning repayment of the outstanding debt under the Facility Agreement and the basis on which 7GI could obtain security for its outstanding loans, including taking an assignment of Sequoia's interest as a Lender (under the Facility Agreement) and a Beneficiary (under the Security Trust Deed).[62]  Ultimately, these discussions did not result in any concluded agreement.

    [62] Ex 1, Tab 30.

29. On 16 July 2024, Piper Preston wrote to GLAS Nominees requesting information regarding the identity and details of each Beneficiary, the total amount of Secured Money (and breakdown for each Beneficiary), the exposure of each Beneficiary, and a statement showing any details of the Secured Money owing to each of the Beneficiaries under the Trust.  This request was made pursuant to cl 3.18(b) of the Security Trust Deed and sought a response by no later than 5.00 pm (AEST) on 18 July 2024.[63]

    [63] Ex 1, Tab 31.

30. At that time, 7GI was funding the operations of Piper Preston through the provision of loan funds.  The amount of the loan was based on 13-week cash flow forecasts provided by Piper Preston to 7GI.  Mr Sykes expected that once a response was received from GLAS Nominees, this amount would be factored into the cashflow request.[64]

    [64] ts 112.

31. Following receipt of this letter, on 25 July 2024, GLAS Agent emailed Taurus, Sequoia, CEFC and the CBA asking them to confirm all amounts which were then outstanding to them in their capacity as a Beneficiary of the Trust.[65]

    [65] Ex 1, Tabs 32 - 35.

32. Despite a number of emails to GLAS Agent requesting a response, prior to 6 August 2024, Piper Preston had not received the information it had requested.[66]  Nor had it repaid the Facility Amount of $7 million.  As a result, Piper Preston remained in default of the Facility Agreement, the Security Trust Deed and the Combination Security Agreement with interest accruing at a rate of approximately $2,700 per day.

    [66] Ex 1, Tab 36.

33. On 6 August 2024, Mr Furlong of GLAS Agent emailed Mr Howarth of Piper Preston (copied to Mr Goldsworthy) providing an indicative amount of the amount owing under the Facility Agreement of $7,344,699.47 (being principal and interest up until 30 April 2024 of $7,094,356.16 with default interest of $250,343.31 up to 31 July 2024).[67] 

    [67] Ex 1, Tab 36, p 1700.

34. On 7 August 2024, Mr Howarth, as the sole director of Piper Preston, resolved that Piper Preston request that 7GI pay $8.5 million to GLAS Nominees.  This was its estimate of the maximum amount of the 'Secured Money' outstanding as defined in the Security Trust Deed.[68]  At 10.37 am on 7 August 2024, Piper Preston wrote to 7GI referring to its request that GLAS Nominees provide it with a payout figure, noting this had not been received, and estimating the amount was a maximum of $8.5 million.  Piper Preston requested that 7GI pay $8.5 million to GLAS Nominees.[69]

    [68] Ex 1, Tab 37, p 1711 - 1712.

    [69] Ex 1, Tab 38.

35. At about 2.30 pm on 7 August 2024, the directors of 7GI resolved that 7GI would make the payment to GLAS Nominees on the basis that it received an acknowledgement by Piper Preston that 7GI had a right to be subrogated to the rights and position of Sequoia under the Facility Agreement, Security Trust Deed and other secured documents; Piper Preston agreed to take all necessary steps to give effect to this; and, pending completion of formal documentation, Piper Preston not act in a way contrary to this.[70]

    [70] Ex 1, Tab 39.

36. At 2.47 pm on 7 August 2024, Mr Sykes on behalf of 7GI emailed Mr Howarth on behalf of Piper Preston informing him that 7GI would make the payment requested on the conditions resolved by the directors set out at [63]. The letter requested that Piper Preston confirm its agreement to the proposal by counter-signing the letter and returning it.[71]

    [71] Ex 1, Tab 40.

37. On 7 August 2024 at 2.53 pm, Mr Furlong sent updated calculations to Mr Howarth.  On the updated calculations, an amount of $7,346,673.14 was due and payable under the Facility Agreement as at 31 July 2024.  In his email, Mr Furlong asked whether there was any update as to when the 'Lenders' might be repaid.[72]

    [72] Affidavit of Jon Brennan Howarth filed 21 August 2024, 'JH-8'.

38. After receipt of the letter from 7GI referred to at [64], Mr Howarth, as the sole director of Piper Preston, resolved to accept the conditions of 7GI.[73]  At 4.04 pm, Mr Howarth, returned the counter-signed letter to Mr Sykes.[74]

    [73] Ex 1, Tab 41.

    [74] Ex 1, Tab 42.

39. On 7 August 2024, after receipt of the signed counterpart from Piper Preston, 7GI paid $8.5 million to the bank account nominated in the letter dated 17 April 2024 by electronic transfer of funds (Payment).[75]  I accept and find that this payment occurred prior to 4.59 pm when Mr Sykes wrote the letter referred to at [68], which attached a copy of the remittance advice.

    [75] Ex 1, Tab 43, p 1750.

40. At 4.59 pm, Mr Sykes wrote to GLAS Nominees, GLAS Agent and Sequoia (by email) confirming that 'on 7 August 2024, it paid A$8,500,000 to the Security Trustee, being the estimated maximum quantum of the Secured Money'.  Mr Sykes stated that the Payment was made as a result of a written request from Piper Preston and on the conditions agreed between 7GI and Piper Preston, and that as a result, 7GI 'has a right to be subrogated … to the rights and position formerly enjoyed by Sequoia' under the Facility Agreement, the Security Trust Deed, and the other secured documents.  7GI requested written confirmation that each of these parties would take all necessary steps for 7GI to become a Beneficiary under the Security Trust Deed and Lender under the Facility Agreement.[76]  The letter attached copies of the request by Piper Preston for a payout figure, a copy of the request from Piper Preston to 7GI to pay the outstanding amount, the letter signed by both 7GI and Piper Preston agreeing to this request, and a remittance advice confirming the Payment had occurred.

    [76] Ex 1, Tab 43.

1. Following receipt of this email, Mr Furlong called Mr Sykes to confirm he had received these documents.[77]

   [77] Affidavit of Steven Furlong filed 24 September 2024 [21].

2. As at 7 August 2024, Piper Preston owed $7,366,166.67 to Sequoia under the Facility Agreement.[78]  Mr Furlong's evidence is that from this date, GLAS Agent and GLAS Nominees have received instructions from KWM on behalf of the 'Lenders'.[79] Mr Furlong did not explain in his affidavit who this is a reference to or give any details about the instructions that have been received.

   [78] Third to sixth defendants' amended defence [36(b)(iii)].

   [79] Affidavit of Steven Furlong filed 24 September 2024 [23].

3. Mr Sykes accepted that the events of 7 August 2024 occurred following discussions at the end of July after the breakdown of negotiations between 7GI and the defendants,[80] he was aware that 7GI was going to receive the various documents from Piper Preston, and that the documents were prepared ahead of time with the assistance of legal advisors.[81]

   [80] ts 110.

   [81] ts 114 - 115.

4. On 12 August 2024, KWM, the solicitors for GLAS Nominees, GLAS Agent and Sequoia, responded to the letter from 7GI at [68].[82]  The letter acknowledged receipt of the Payment but denied it was possible under the terms of the Security Trust Deed to permit 7GI to become a Beneficiary or that the terms of the Facility Agreement contemplated that a third party could accede as lender as a result of the Payment.  On this basis, the solicitors sought confirmation as to which of the following options should be taken in relation to the Payment:

   (a)retention of the Payment as payment of Secured Money under the security documents to be applied against the monies owing under these agreements; or

   (b)return of the Payment.

   [82] Ex 1, Tab 45.

5. In response, on 13 August 2024, Mr Sykes requested that the funds be applied to repay the Secured Money 'as per my 7 August letter' and requested confirmation when this had occurred.[83]

   [83] Ex 1, Tab 44, p 1753.

6. On 14 August 2024, KWM confirmed that GLAS Nominees would be instructed to use the Payment to repay the Secured Money on the basis set out in their earlier letter (see [72(a)]) and requested confirmation from 7GI of this position.[84]  Later that day, Mr Sykes informed KWM that 7GI's intention was to be subrogated following payment, and that they were 'content' for the funds to be applied.  Once again, Mr Sykes requested confirmation when this had occurred.[85]

   [84] Ex 1, Tab 44, p 1752 - 1753.

   [85] Ex 1, Tab 44, p 1752.

7. On 19 August 2024, KWM advised Mr Sykes that the Payment would be returned to 7GI and requested details of the relevant bank account to enable this to occur.[86]  Mr Howarth of Piper Preston responded to this email expressing concern at the refusal to accept the Payment, stating that, in his view, the amount had been paid and that it was a matter for them that GLAS Agent was refusing to apply these funds.[87]

   [86] Ex 1, Tab 44, p 1751 - 1752.

   [87] Ex 1, Tab 44, p 1751.

8. The plaintiffs commenced these proceedings on 21 August 2024 and the relevant documents were served on KWM that same day.[88]

   [88] Ex 1, Tab 46.

9. On 30 August 2024, KWM, in correspondence with Baker & McKenzie (the solicitors for the plaintiff), relevantly made plain that Sequoia did not dispute that if Piper Preston requested that 7GI advance money to pay the overdue debt on an unconditional basis on behalf of Piper Preston then, subject to a contrary intention being established, 7GI would be entitled as against Piper Preston to be treated as if it had the benefit of the security available to Sequoia to recover this payment.  However, KWM disputed that the payment was unconditional or that this was what the plaintiffs were seeking to achieve.  KWM contended that the plaintiffs were seeking to prevent the Taurus Entities from exercising any rights under the Security Trust Deed to ensure payment of the obligations under the Royalty Deeds.  Mr Sykes denied this was their intention, although he accepted that this could be an outcome of the orders sought by the plaintiffs.[89]

   [89] ts 117 - 119.

10. On 23 September 2024, Baker & McKenzie wrote to the solicitors for the defendants advising that if the plaintiffs were successful in the proceedings, 7GI would execute a deed poll, comply with any 'know your customer' checks required by GLAS Nominees and pay any stamp duty required for 7GI to become a Beneficiary under the Security Trust Deed.[90]  The letter attached a draft deed poll which included covenants by 7GI that it would not increase the principal amount of the loan above $7 million, as well as a draft amended Facility Agreement.  On the same date, Mr Sykes (in his affidavit sworn and filed that day) confirmed that 7GI did not intend that its payment on 7 August 2024 be conditional on the court granting the relief sought in these proceedings.[91]  Mr Sykes also confirmed that, in the event the plaintiffs were successful in the proceedings, he would cause 7GI to execute the deed poll and draft amended facility agreement.[92]

    [90] Ex 1, Tab 49.

    [91] Affidavit of Mark Sykes filed 23 September 2024 [6].

    [92] Affidavit of Mark Sykes filed 23 September 2024 [9].

11. On 27 September 2024, KWM sought clarification as to why it was necessary for new documents to be executed rather than simply seeking declarations from the court as to the 'alleged right of subrogation'.[93]  In response, on 1 October 2024, Baker & McKenzie expressed the view that their proposal for the execution of documents was consistent with previous authorities in aid of the remedy of subrogation.[94]

Was GLAS Agent obliged to accept the Payment by 7GI to repay the debt owed by Piper Preston to Sequoia under the Facility Agreement?

[93] Ex 1, Tab 50.

[94] Ex 1, Tab 51.

1. The plaintiffs say that on the making of the Payment, which constituted payment of the outstanding debt of Piper Preston, to the bank account nominated by GLAS Agent, Piper Preston's obligations under the Facility Agreement were immediately satisfied and no further steps were required to be taken by any party.  They contend that GLAS Agent and/or GLAS Nominees were or was obliged to apply the Payment in accordance with the terms of the Facility Agreement and Security Trust Deed and that there was no ability for Sequoia (or anyone else) to instruct GLAS Agent to refuse to accept the Payment or to return it.  In any event, the plaintiffs say there is no evidence that any such instruction was given by Sequoia or any other party.

2. The plaintiffs say the Payment was unconditional.  While they accept the letter sent to GLAS Agent and GLAS Nominees shortly after the Payment was made sought certain confirmations and the execution of documents, ultimately, the question as to whether the Payment gave 7GI any right of subrogation is a matter of law.  In their submission, these matters did not make the Payment conditional.  In any event, even if the Payment was conditional at the time it was made, the plaintiffs say this has not been the case since at least 23 September 2024.  On that date, Mr Sykes put the matter beyond doubt by confirming in his affidavit that the Payment was unconditional.

3. The defendants dispute each of these matters, albeit on slightly different grounds. 

4. The defendants deny the Payment was made in accordance with the terms of the Facility Agreement as it was made by 7GI and not Piper Preston, as required by the express terms of the Facility Agreement.  The first and second defendants also emphasise that, as set out in the cover letter from Mr Sykes, the Payment was made to GLAS Nominees and not, as required under the Facility Agreement, to GLAS Agent.

5. Given these matters, GLAS Agent and GLAS Nominees say that on receipt of the Payment, they were entitled to seek instructions on whether or not to accept it.  They say that, in accordance with instructions given by Sequoia (which are set out in the letter from KWM dated 12 August 2024 and the email dated 19 August 2024), they did not accept the Payment or provide the confirmations sought. 

6. Sequoia and the Taurus Entities also say that GLAS Agent and GLAS Nominees were entitled to seek instructions on the Payment.  Where instructions were received from Sequoia, GLAS Agent was required to refrain from exercising any right, power, authority or discretion vested in it in accordance with those instructions,[95] which overrode any instructions received from any other party, including Piper Preston.[96]

   [95] Facility Agreement, cl 20.2(a).

   [96] Facility Agreement, cl 20.2(c).

7. The defendants say the Payment was not an unconditional tender of the debt owed under the Facility Agreement as it was conditional on their confirmation of 7GI's asserted rights of subrogation.[97]  Sequoia and the Taurus Entities deny there were any steps they could take to enable 7GI to become a Beneficiary under the Security Trust Deed or a Lender under the Facility Agreement.  This was because, under the terms of the Security Trust Deed, on the Payment being accepted, all Secured Money owing to Sequoia would be repaid and Sequoia would cease to be a Beneficiary under the Security Trust Deed.  Given this, they contend it was not possible to provide the confirmations sought. 

   [97] First and second defendants' defence [38].

8. Finally, Sequoia and the Taurus Entities say that even if the Payment was unconditional, it has not been accepted by Sequoia and Piper Preston's debt under the Facility Agreement remains outstanding.[98] 

Did the Payment automatically extinguish Piper Preston's debt under the Facility Agreement?

[98] Third to sixth defendants' amended defence [36].

1. At trial, there was a dispute between the parties as to which clause of the Facility Agreement (or Security Trust Deed) governed the Payment.  The plaintiffs submitted the relevant clause was cl 23 of the Facility Agreement (or possibly cl 11.1 of the Security Trust Deed), whereas the first and second defendants contended it was cl 4 of the Facility Agreement. 

2. Counsel for the plaintiffs submitted that because of the express terms of cl 23.1 of the Facility Agreement, on receipt of the Payment, Piper Preston's debt under the Facility Agreement was 'deemed to have been discharged'.[99]  The defendants deny this is the proper construction of this clause.

   [99] ts 67.

3. The first question, therefore, is which clause of the Facility Agreement or Security Trust Deed governs the Payment.  This turns on the proper construction of these agreements.

4. The principles which govern the proper construction of an agreement are well‑known.  They were summarised by the Court of Appeal in Pilbara Iron Ore Pty Ltd v Ammon as follows:[100]

   The construction of a contract involves a determination of the meaning of the words of the contract by reference to its text, context and purpose.  Ascertaining the meaning of terms in an instrument requires a determination of what a reasonable person would have understood those terms to mean.  That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract, and the commercial purpose or objects to be secured by the contract.  The instrument must be read as a whole.

   The general principle applicable to the construction of commercial contracts is that they should be given a businesslike interpretation.  Absent a contrary intention, the court approaches such contracts on the basis that the parties intended to produce a result which makes commercial sense.  This requires that the construction placed on the term or terms in question is consistent with the commercial object of the agreement.  However, it must also be borne in mind that business commonsense may be a topic on which minds may differ. (citations omitted) 

   [100] Pilbara Iron Ore Pty Ltd v Ammon [2020] WASCA 92 [85] ‑ [86].

5. Where an agreement uses definitions, the words of the definition should be read into the operative text (unless the context requires otherwise).[101]

   [101] George 218 Pty Ltd v Bank of Queensland Ltd [No 2] [2016] WASCA 182; (2016) 313 FLR 287 [82] and the cases cited; Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219.

6. A contract can only have one correct meaning.  The single legal meaning of the contract is determined by identifying the objective intention of the parties by reference to the text of the contract, construed in light of its context and purpose.[102]

   [102] CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121 [158].

7. Under the express terms of the Facility Agreement, Piper Preston was required to repay the loan on the Termination Date,[103] which is defined to mean 30 April 2024.[104] 

   [103] Facility Agreement, cl 4.1.

   [104] Facility Agreement, cl 1.1.

8. Clause 4.2(a) of the Facility Agreement required Piper Preston to make repayments of the Loan in instalments by repaying GLAS Agent (for the account of Sequoia) from the Effective Date (which is defined to have the meaning in the Restructure Deed, namely the date on which SPA Completion occurred) until the first to occur of:

   (a)the Repayment Date, which is defined to mean the date on which the outstanding principal amount of the Facility Agreement is reduced to zero; and

   (b)the Termination Date, which is defined to mean 30 April 2024.

9. Clause 4.2(b) of the Facility Agreement then sets out how Piper Preston was to make the repayments to GLAS Agent, namely by transferring funds from the Cash Collateral Account and, where necessary, paying any additional amounts. 

10. The text of cl 4 of the Facility Agreement makes plain that this clause only applies to payments made up to and including 30 April 2024, unless the loan is repaid prior to that date.  

11. As set out above, it is not in dispute that payment did not occur on 30 April 2024.  Given this, I accept the plaintiffs' submission that cl 4 does not apply to the Payment.

12. I turn then to cl 23 of the Facility Agreement.  This clause is entitled 'Payment Mechanics'.  It sets out the parties' agreement as to various aspects of payments to GLAS Agent, how funds are to be distributed, and a number of other matters including currency (and change of currency), disruptions to payment systems, as well as compliance obligations (with anti-money laundering and 'know your customer' checks). 

13. Relevantly, cl 23.1 is in the following terms:

    Payments to the Agent

    (a)On each date on which an Obligor or the Lender is required to make a payment under a Finance Document, that Obligor or the Lender shall make the same available to the Agent (unless a contrary indication appears in a Finance Document) on or before 11:00am (Sydney time) for value on the due date at the time in immediately available funds or if agreed by the Agent in such funds specified by the Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

    (b)Payment shall be made to such account:

    (i)in the case of Australian dollars, at the city of the Agent; and

    (ii)in the case of any other currency, at the city of the Agent or such other place as the Agent specifies, in each case, with such bank as the Agent specifies.

    (c)Payment by an Obligor to the Agent for the account of a Finance Party satisfies the Obligor's obligations to make that payment.

14. Counsel for the plaintiffs submitted that, notwithstanding the fact that payment was not made on 30 April 2024 as required by the Facility Agreement, cl 23.1(a) applied to the Payment.  This was because, in their submission, even though the final instalment was not paid on 30 April 2024, it was due 'every day thereafter until it is paid'.[105]  On this basis, it was contended that 7 August 2024 was a date on which Piper Preston was obliged to make a payment under the Facility Agreement under cl 23.1(a).

    [105] ts 67.

15. For the following reasons, I do not accept this submission and find that cl 23.1(a) does not apply to the Payment.

16. First, cl 23.1(a) applies to payments that are required to be made under a Finance Document and addresses the time by which payments are to be made (namely 11.00 am 'Sydney time').  The context in which this clause is to be construed is that cl 4 of the Facility Agreement requires payment of the Loan by instalments on specific dates but does not address the mechanics of how this payment is to occur.  It is the mechanics of the payments required under cl 4 of the Facility Agreement to which cl 23.1(a), as well as cl 23.1(b), are directed.

17. Second, I do not accept that the Payment was 'a payment required to be made under a Finance Agreement'.  The Facility Agreement required the payment to be made on 30 April 2024.  After this date, Piper Preston was in default of its obligations under the Facility Agreement, although it remained liable to Sequoia for the amount outstanding under the Facility Agreement.  This is consistent with cl 17.1 which specifically defines the failure by Piper Preston to pay the instalment on 30 April 2024 as an Event of Default.  On the occurrence of an Event of Default, and at any time afterwards, GLAS Agent was entitled (and was required if directed by Sequoia) to exercise any or all of the rights set out in cl 17.25 of the Facility Agreement.  It is not in dispute that none of these rights were exercised in this case.

18. At trial, the plaintiffs' submissions proceeded on the basis that if a payment was made under cl 23.1(a), the provisions of cl 23.1(c) applied to that payment.  In my view, there is no textual foundation in either clause for this submission.  On its terms, cl 23.1(c) is a separate obligation and is not limited, on its face, to payments made under cl 23.1(a).  Clause 23.1(a) addresses 'payments' under a Finance Document whereas cl 23.1(c) addresses 'payments' made for the account of a Finance Party.  In my view, cl 23.1(c) has a significantly broader remit.

19. Clause 23.1(c) has to be construed in the context of the Facility Agreement as a whole.  This includes the definition in cl 1.1 of the Facility Agreement of the term 'Unpaid Sum' as meaning any sum due and payable but unpaid under the Finance Documents.  There are only two other provisions of the Facility Agreement which address an Unpaid Sum.  First, cl 23.8(b), which specifies the interest payable on an Unpaid Sum where there is an extension of the due date.  Second, cl 23.9 of the Facility Agreement, which requires any repayment of the Unpaid Sum by Piper Preston to be in the currency provided in the Facility Agreement.  While a failure to pay an amount on a due date is defined to be an Event of Default, in cl 17.1, this clause does not use the defined term 'Unpaid Sum'.  Under cl 17.25, on the occurrence of an Event of Default, GLAS Agent and Sequoia have the option, but are not required, to give notice to Piper Preston of their intention to exercise any of the rights set out in that clause. 

20. In this case, I accept and find that after 30 April 2024, the amount of $7 million that was payable under the Facility Agreement together with default interest, which was payable by Piper Preston to Sequoia under cl 7.3, was an Unpaid Sum. 

21. I consider that on the proper construction of the Facility Agreement, Piper Preston was entitled as of right to tender payment of the Unpaid Sum to GLAS Agent to discharge its obligations under the Facility Agreement. Where this occurred, pursuant to cl 23.1(c), the Payment by Piper Preston (subject to the matters set out below at [116] - [123]) of the Unpaid Sum for the account of Sequoia, satisfied Piper Preston's obligations to make this payment. 

22. However, in order for the Payment to be a 'payment' under the terms of cl 23.1(c) of the Facility Agreement, it was necessary, for the reasons set out below, for the payment to be an unconditional payment.

23. Given this conclusion, where a question arose as to whether the Payment was an unconditional payment within the terms of cl 23.1(c) of the Facility Agreement, GLAS Agent was entitled, pursuant to cl 20.2(b) of the Facility Agreement, to seek instructions from Sequoia as to whether to exercise its discretion to accept or reject the Payment.  These instructions, once given, overrode any other instructions given by any other parties, including Piper Preston.[106]

    [106] Facility Agreement, cl 20.2(c).

1. In relation to these instructions, cl 20.6(j) provides that:[107]

   The Parties need not enquire whether any instructions from the Lender have been given to the Agent or as to the terms of those instructions. As between the other Parties on the one hand and the Agent and Lender on the other, everything done by the Agent under or in relation to the Finance Documents will be taken to be authorised. 

   [107] Facility Agreement, cl 20.6(j).

2. Given this provision, it was not necessary for GLAS Agent or Sequoia to adduce evidence of the instructions.  I find that the actions of GLAS Agent in refusing to accept the Payment are taken to have been authorised.

3. In light of my conclusion as to the proper construction of cl 23 of the Facility Agreement, it is strictly unnecessary for me to address whether the Payment is governed by cl 11.1 of the Security Trust Deed.  However, for completeness, I will briefly address this.

4. Clause 11.1 of the Security Trust Deed provides that:

   (a) Despite anything in any Secured Document:

   (i) after the Enforcement Time [defined as 20 October 2021] each SL Obligor shall pay the Security Trustee all amounts which under the SL Secured Documents are owing to a Beneficiary and payable by that SL Obligor; and

   (ii) after the PP Enforcement Time, each PP Obligor shall pay the Security Trustee all amounts which under the PP Secured Documents are owing to a Beneficiary and payable by that PP Obligor.

   Those amounts will remain debts owing to the Beneficiary payable to the Security Trustee.

   (b) On each date on which an Obligor or a Beneficiary is required to make a payment under a Secured Document to the Security Trustee, that Obligor or Beneficiary shall make the same available to the Security Trustee (unless a contrary indication appears in a Secured Document) by 11am Sydney time for value on the due date at the time in immediately available funds or if agreed by the Security Trustee in such funds specified by the Security Trustee as being customary at the time for settlement of transactions, in each case, in the relevant currency in the place of payment.

   (c) Payment shall be made to such account with such bank as the Security Trustee, in each case, specifies.

   (d) Payment by an Obligor to the Security Trustee of an amount payable to or for the account of a Beneficiary satisfies the Obligor's obligation to make that payment.

5. On the text of this clause, it only applies to either a 'SL Obligor' or after the PP Enforcement Time.  SL Obligor is defined to mean Salt Lake Potash and the Original Guarantors.  Piper Preston is not an Original Guarantor.  Nor had any of the events referred to in the definition of 'PP Enforcement Time' occurred.  Accordingly, I find that cl 11.1 does not apply to the Payment.

Did the Facility Agreement require the Payment to made by Piper Preston?

1. It is not in dispute that the Payment was made by 7GI and not Piper Preston.

2. Counsel for the first and second defendants submitted that, on its proper construction, cl 4.2(b) of the Facility Agreement imposed the obligation of repayment of any debt due under the Facility Agreement solely on Piper Preston and did not enable any party other than Piper Preston to make the Payment.  On this basis, it was contended that because the Payment was made by 7GI and not Piper Preston, it was not a payment under the Facility Agreement. 

3. For the reasons set out above, I do not consider that cl 4.2(b) is relevant to the Payment.  However, a similar argument can be made in respect of cl 23.1(c) of the Facility Agreement which, on its face, requires the payment to be made by an Obligor.  7GI is not an Obligor within the terms of the Facility Agreement.

4. As a matter of law, where payment of a debt is made by a third party who is not liable for the debt, the payment will not discharge the debt unless it is made with the debtor's authority.  The debtor's authority can be given either before or after the date of payment.  Where the payment is made with the debtor's authority, the money is received by the creditor as the debtor's money.[108]

   [108] Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14; (2014) 253 CLR 560 [162] (Gageler J); O3 Capital Pty Ltd v WY Properties Pty Ltd [2016] WASCA 82 [96].

5. For the following reasons, I accept and find that the Payment by 7GI into the account of GLAS Nominees was a payment made with the authority of Piper Preston and was capable, if unconditional, of discharging Piper Preston's obligations under the Facility Agreement. 

6. First, the Payment of $8.5 million was made by 7GI at the request of Piper Preston and in accordance with the agreement reached between them as to the terms on which the Payment would be advanced.  That is, at the time the Payment was made to the bank account of GLAS Nominees, it was made with the prior authority of Piper Preston. 

7. Second, the email sent by Mr Sykes on 7 August 2024 at 4.59 pm to GLAS Agent was copied to Mr Howarth, the sole director of Piper Preston.[109]  Mr Howarth did not, either then or subsequently, contend the payment had been made without Piper Preston's authority. 

   [109] Ex 1, Tab 43.

8. Third, the Payment was made with the description 'Piper Preston Loan'.[110]  This description supports a finding and I find that the Payment was not a mistake but was paid by 7GI with the intention of discharging the liability of Piper Preston. 

Was the Payment unconditional?

[110] Ex 1, Tab 43, p 1750.

1. It was not in dispute between the parties that for the Payment to be an effective legal tender of Piper Preston's debt, it was necessary that the tender be unconditional.  As was explained by Poole J in Ellis v Ellis:[111]

   If the terms on which the money was offered were such as to preclude the defendant from proceeding for any balance she might think was due, it was not a good tender. Of course, every person making a tender desires that the money shall be accepted in full settlement of all demands, but if he uses such words when offering the money that the acceptance of the money without more would prove acceptable in full settlement, then it is a bad tender.

   [111] Ellis v Ellis [1924] SASR 379, 395.

2. In PGA Group Pty Ltd v Idameneo (No 789) Ltd (formerly Symbion Health Ltd); Gunn v Idameneo (No 789) Ltd, Davies J explained that 'a tender is invalidated and is of no effect if the tender is made on terms that would adversely affect the rights of the person to whom the tender is made'.[112]  Her Honour went on to explain that:

   The rationale for the legal principle is that the creditor would be required, as a condition of the tender, to give up the right to recover more than that which the debtor considers is in fact owed. The creditor must be left in a position after accepting the tender to be able to allege that more was due than the payment that was made.

   [112] PGA Group Pty Ltd v Idameneo (No 789) Ltd (formerly Symbion Health Ltd); Gunn v Idameneo (No 789) Ltd [2011] VSC 382 [35].

3. However, not every tender made on terms is considered an invalid tender.  In Graham v Seal, the Court found a tender by a mortgagor was valid notwithstanding the requirement of the mortgagor that the mortgagee re-convey and deliver up the deeds of the mortgaged premises.  Swinfen Eady MR held that:[113]

   The obligation of a mortgagee is, as against payment of what is due to him, to reconvey and deliver up the deeds of the mortgaged premises. It is like the obligation of a vendor to convey and hand over the title deeds and the conveyance as against payment of the purchase money. It contemplates that the handing over of the conveyance and payment of the purchase money shall be a simultaneous transaction, so that neither party is at risk for any time without either the money or the estate; so in paying off of a mortgage a mortgagee is not entitled to insist upon payment of the mortgage money with a view to re-conveying at some future time. The mortgagor is not required by law to be at any time at risk in the sense that he must pay off all the mortgage money to the mortgagee, and then at some future time obtain a reconveyance of the mortgaged property. The transactions must be simultaneous, he paying off the mortgage money and obtaining a re-conveyance and delivery up of the title deeds. Under these circumstances the tender made by the plaintiffs on December 14 was a valid tender. There was no condition imposed other than that which the law enables the mortgagor to require, that is, that as against payment of the proper amount – and it is now finally determined that the amount offered was the proper amount – the mortgagee must simultaneously give up the deeds and re-convey the mortgaged property. In my opinion the law to that effect is well settled.

   [113] Graham v Seal (1918) 88 LJ Ch 31, 35 - 36.

4. It is important to note that this finding was, in part, based on the specific terms of the contract which required the mortgagee, on payment of the outstanding amount, to execute a re-assignment of the mortgaged property and return the title documents.  Warrington LJ expressed the view that:[114]

   The mortgagor does not, in my opinion, make his tender a conditional tender, so as to prevent it being a sufficient tender, if he merely insists on that to which he is entitled by virtue of his contract.' … …the tender may be an effectual tender for the purpose, though it be made conditional upon the re-conveyance, provided only that the form is observed of offering to the mortgagee a reasonable opportunity for executing that conveyance.

   [114] Graham v Seal (38).

5. In this case, the letter from 7GI dated 7 August 2024 confirmed that it had paid $8.5 million to GLAS Nominees, the estimated maximum of the amount required to discharge the Facility Agreement.  The letter then stated:

   The Payment was made by 7GI pursuant to a written request from PP and on conditions agreed by PP and 7GI as per the attached correspondence.

6. The letter asserted a right to be subrogated to the position of Sequoia under the Facility Agreement, the Security Trust Deed and other Secured Documents and sought confirmation that GLAS Agent, GLAS Nominees and Sequoia would take all steps to give effect to this right 'including for 7GI to become and accede as a Beneficiary (as Lender) under the STD and Lender under the Facility Agreement'.[115]

   [115] Ex 1, Tab 43, p 1744 - 1745.

7. The conditions agreed between 7GI and Piper Preston were that payment was to be made on the basis that:[116]

   (a) PP acknowledges that by making the Payment, 7GI has a right to be subrogated, with effect from the time of the Payment, to the rights and position currently enjoyed by Sequoia under the Facility Agreement, STD and other Secured Documents (Subrogation Right);

   (b) PP agrees to take all necessary steps, including pursuant to the STD and the Facility Agreement, to give effect to the Subrogation Right, including for 7GI to become and accede as a Beneficiary (as Lender) under the STD and Lender under the Facility Agreement; and

   (c) pending completion of formal documentation, PP will not act in a way which is contrary to or may prejudice the Subrogation Right, including seeking release or discharge of the Transaction Security Interests.

   [116] Ex 1, Tab 43, p 1749.

8. The plaintiffs submitted the Payment was unconditional as it had already been made at the time this letter was sent and was made without Sequoia, GLAS Agent or GLAS Nominees being notified of any conditions attached to the Payment. 

9. While I accept the Payment was made prior to dispatch of this letter, I do not accept this means the Payment was made without conditions or that the Payment was tendered unconditionally.  This submission is not consistent with the language of the letter. 

10. The letter sent by 7GI to Sequoia, GLAS Agent and GLAS Nominees stated that the Payment had been made on the conditions agreed between Piper Preston and 7GI.  These conditions included the obligation for Piper Preston to take all necessary steps for 7GI to become a Beneficiary under the Security Trust Deed and a Lender under the Facility Agreement.  This condition was restated in the letter in which confirmation was sought from Sequoia, GLAS Agent and GLAS Nominees that they would give effect to what was described as a 'right'. 

11. While I accept that subrogation is a remedy that is granted by the court, I do not accept that the letter conveyed an intention on 7GI's part to seek relief from the court.  In my view, the letter conveyed to an objective reader that acceptance of the Payment was conditional on Sequoia, GLAS Agent and GLAS Nominees taking steps to ensure that 7GI became a Beneficiary under the Security Trust Deed and a Lender under the Facility Agreement.  There was no ability under either agreement for 7GI to require this to occur.  In seeking to impose these conditions on the Payment, I find that 7GI did not tender an unconditional payment. As a result, the Payment did not constitute valid legal tender of the Unpaid Sum or debt owed by Piper Preston under the Facility Agreement.

12. On 13 August 2024, 7GI requested that the funds be applied to repay the Secured Money 'as per my 7 August letter'. On an objective reading of this letter, by referring to 7GI's earlier '7 August letter', I find that 7GI incorporated the conditions contained in its '7 August letter' into this request.  On this basis, for the reasons set out above, I find that this letter also did not constitute an unconditional tender of the amount then due under the Facility Agreement.

13. On 14 August 2024, 7GI again emailed KWM acknowledging receipt of a response from KWM, which confirmed the Payment would be used to repay the amount due under the Facility Agreement on the basis that 7GI would not accede as a Beneficiary under the Security Trust or have the benefit of the existing security.  The email then stated that:[117]

    As per previous correspondence, 7GI's intention is to be subrogated following payment. We understand that your clients have a different view.

    Accepting there are differences of opinion, we are content for the funds to be applied. If your clients maintain their position, it is likely that a court will be required to determine the legal effect of the payment.

    Please confirm the funds have been applied and grateful if you could please come back in due course in relation to any overflow of funds.

    [117] Ex 1, Tab 44, p 1752.

14. The plaintiffs submit that, properly construed, this email was a request for the Payment to be applied, with the difference on views as to subrogation to be potentially determined by a court. 

15. I do not accept this submission for two reasons. 

16. First, it is not consistent with the plaintiffs' pleaded case.  In their statement of claim, the plaintiffs contend that by this email, 7GI confirmed its intention in making the Payment was in return for the 'Subrogation Rights'.[118]  As set out above, the assertion that the Payment was made in return for something that it was not entitled to under the terms of the agreements is not consistent with the Payment being unconditional.

    [118] Further amended statement of claim [32].

17. Second, I do not consider the email conveyed to an objective reader that the Payment was unconditional.  The email commences with the continued assertion that 7GI was entitled to subrogation 'following payment', and that this dispute may need to be resolved by a court.  On the basis there was a dispute between them, 7GI was 'content' for the funds to be applied.  In using the word 'content', which in its ordinary and natural meaning means 'willing or resigned',[119] 7GI did not convey that it agreed to the Payment being applied to the outstanding debt without condition. 

    [119] Macquarie online dictionary.

18. That said, it is my view that this position changed on 23 September 2024.  On this date, Mr Sykes confirmed in his affidavit that the Payment was not conditional on the court granting relief and that the Payment was unconditional.[120] 

    [120] Affidavit of Mark Sykes filed 23 September 2024 [6].

19. As at 23 September 2024, the Payment (which continued to be held by GLAS Agent in the account of GLAS Nominees) become unconditional.  On this date, the Payment became an unconditional tender of payment by 7GI on behalf of Piper Preston for the account of Sequoia.  As a consequence, pursuant to cl 23.1(c) of the Facility Agreement, Piper Preston's obligations to pay the Unpaid Sum under the Facility Agreement were satisfied. 

20. The final issue is whether the Payment was tendered to GLAS Nominees or to GLAS Agent as required under the Facility Agreement.  In my view, for the following reasons, on the proper construction of the letter from 7GI of 7 August 2024, the Payment was tendered to GLAS Agent.

21. First, the letter is addressed to each of GLAS Nominees, GLAS Agent and Sequoia.  It is not addressed solely to GLAS Nominees and then copied to the other parties, but sent to each of these parties. The terms of the letter refer to the Facility Agreement as well as the Security Trust Deed.  In my view, it is sufficiently clear from this that the letter is being sent to GLAS Agent in its capacity as Agent under the Facility Agreement to Sequoia as Lender and to GLAS Nominees in its capacity as Trustee under the Security Trust Deed.

22. Second, while the letter states that the Payment was made to 'the Security Trustee' and deposited into a bank account in the name of GLAS Nominees, this was the bank account that GLAS Agent had directed Piper Preston to make payments to discharge its obligations under the Facility Agreement.  On an objective construction of the letter, it is sufficiently clear that the Payment was made to discharge Piper Preston's obligations under the Facility Agreement and the reference to the Security Trustee reflects the party in whose name the bank account was opened. 

Were the defendants entitled to refuse to accept the Payment?

1. The third to sixth defendants say that even if there was a valid legal tender of payment, the tender was refused by Sequoia on 19 August 2024.[121]  As a consequence, Sequoia and the Taurus Entities say the debt owed by Piper Preston has not been discharged as there is no evidence of 7GI's continued readiness to pay the debt nor has there been any payment into court.  On this basis, they contend the Payment does not give rise to any right of subrogation.

   [121] Affidavit of Mark Sykes filed 21 August 2024, 'MS-22'.

2. For the reasons set out above, I do not accept this submission.  It is my view that Piper Preston's obligations have been satisfied by reason of cl 23.1(c) of the Facility Agreement. 

3. Even if I am wrong in my construction of the Facility Agreement, for the following reasons, I do not consider that from 23 September 2024, the defendants were entitled to refuse to accept the Payment and find that Sequoia was obliged in equity to accept the Payment.

4. In support of the position they contended, the third to sixth defendants relied on the decision of Australian Mid-Eastern Club Ltd v Yassim.  In this case, Meagher JA (with whom Samuels and Priestley JJA agreed), in the context of a payment by a debtor to a creditor who had commenced winding up proceedings, stated that:[122]

   If a valid tender be made, a refusal of that tender (whether for good or bad reason, or for no reason at all) does not eliminate the debt in question.  The relationship of creditor and debtor still subsists.  The tender is no answer to a claim for the debt unless (as did not happen here) there is a continued readiness to pay, coupled with an actual payment into court.

   [122] Australian Mid-Eastern Club Ltd v Yassim (1989) 1 ACSR 399, 403 (Meagher JA).

5. In that case, his Honour considered there was a good reason to refuse the money; namely, that a winding up summons had been filed and there were other creditors.  In the event of a winding up order being made, it was likely that the money would be required to be returned.[123]

   [123] Australian Mid-Eastern Club Ltd v Yassim (403).

6. In this case, on 19 August 2024, KWM informed 7GI that their clients had confirmed the Payment should be returned to 7GI.[124]  However, at this stage, the Payment has not been returned to 7GI and these funds remain in GLAS Nominees’ bank account.[125]  Given this, I do not accept that it was necessary for the tendered sum to be paid into court.  These funds have not been returned to 7GI and neither 7GI (nor Piper Preston) has earnt any interest on this money or received any benefit from these funds.

   [124] Ex 1, Tab 44, p 1751 ‑ 1752.

   [125] First and second defendants' defence [38(e)].

1. Senior counsel for the plaintiffs submitted that the relevant question was whether the debt had been discharged in its entirety rather than whether the security had been discharged.  Senior counsel for the third to sixth defendants contended the discharge of the security was the relevant factor.[154]  That said, some of the submissions that were made by these defendants in respect of the relief that could and ought be granted, were somewhat contradictory to this position.  For example, it was accepted that 7GI could seek relief from the court if Piper Preston denied that 7GI was entitled to any security for the Payment, or if the defendants denied 7GI was entitled to any distribution in the event that actions were taken under the Security Trust Deed.[155]  7GI would only be able to seek this relief if it had an existing entitlement to the remedy of subrogation.

   [154] ts 73 - 74.

   [155] ts 80 - 81.

2. A number of the decisions I was referred to support a conclusion that it is the discharge of the security (rather than the debt) that gives rise to the remedy.  For example, in Boscawen v Bajwa, Millett LJ stated:[156]

   The discharge of the creditor's security at law is certainly not a bar to subrogation in equity; it is rather a precondition.

   [156] Boscawen v Bajwa (340).

3. In other cases, no relevant distinction is drawn between the discharge of the debt and the discharge of the security because both have occurred.  For example, in Bofinger v Kingsway Group Ltd, after reference to the description of the right of subrogation, the plurality of the High Court stated that:[157]

   This statement [which is referred to at [168] above] is important for this case because the indebtedness to the first mortgagee has been paid in full and the securities held by the first mortgage discharged. The remedies equity provides must, as will appear, found upon the obligation of the first mortgagee to account.

   [157] Bofinger v Kingsway Group Ltd [4].

4. This was also the case in Austin v Royal.  In that case, the New South Wales Court of Appeal (Cole AJA, Meagher and Handley JJA agreeing), in considering the payment of a debt by guarantors, explained the theory underlying the equitable remedy of subrogation by reference to the use that can be made of the security in the following terms:[158]

   The theory underlying the equitable concept of subrogation is that a creditor, having no use for a security over his debtor's assets because the creditor's debts have been paid and obligations discharged by the guarantor, is obliged to transfer that security to the guarantor who may then enforce it to recover the moneys from the debtor which he, the guarantor, has paid to the creditor. …

   [158] Austin v Royal (1999) 47 NSWLR 27; [1999] NSWCA 222 [19].

5. In Aged Care Services Pty Ltd v Kanning Pty Ltd,[159] in summarising the principles of subrogation, Gleeson JA (with whom Meagher JA and Leeming JA agreed) referred to the remedy arising where 'a third party has paid off a mortgage', adopting the terminology used in Meagher, Gummow and Lehane's Equity Doctrines and Remedies.  While this statement may support a conclusion that the relevant factor is the discharge of the security, in that case, the distinction between the payment of the debt and the discharge of the security was also not material.

   [159] Aged Care Services Pty Ltd v Kanning Pty Ltd [51] - [52].

6. In a number of other decisions, there has been a greater focus on the payment of the debt and whether the right of subrogation arises where there has been only part payment of a debt.

7. In State Bank of New South Wales v Geeport Developments Pty Ltd, there was a contest between the plaintiff and Geeport as who was entitled to the title (and other) documents in relation to land owned by companies associated with Girvan Pty Ltd.  The plaintiff agreed to advance $20 million to Girvan Corporation Ltd in December 1989.  Deeds of escrow were executed by the relevant parties giving an irrevocable direction to deliver certain documents to the plaintiff.  Loc‑tex claimed that it was entitled to these documents as it had repaid the debts of the companies to the first mortgagee and that a right of subrogation arose.  In that context, Cohen J expressed the view that the right of subrogation arose from payment of the debt.  His Honour expressed the view that:[160]

   [I]t seems to me that there is authority which supports the claim of Loc‑tex that it has a right to subrogation which arises from its payment of part of the debt of Geeport and Rosechurch to the extent of that payment. This is contrary to the view expressed by the learned authors of Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 2nd Ed., 913 where it is stated that it appears clear that there can be no subrogation, in general, unless the whole of the secured debt has been paid off. Authority for that is said to be Wilkins v Gibson. On the other hand at 944 the learned authors, when dealing with a surety's right of subrogation, say that it appears that subrogation pro tanto in this sense will still be available where the balance of the debt has been paid by a third party with some real interest in doing so. Again, authority for this is said to be Wilkins v Gibson and two other American decisions. In my opinion the authorities I have referred to above, and in particular the most recent one of 1974, seem to make it clear that there will be a subrogation of a proportionate part of the security. It may well be that the right to exercise that subrogation may not come into existence until the whole of the debt has been paid, whether by the principal debtor or another person so that the right until then remains dormant. This however seems more a matter of enforcement rather than a question of the rights which exist. (citations omitted) 

   [160] State Bank of New South Wales v Geeport Developments Pty Ltd (1991) 5 BPR 11,947, 11,953 ‑ 11,954.

8. Cohen J went on to state that subrogation 'is based upon the principle that equity regards it as against conscience that a person such as a holder of securities should use those securities to the detriment of the person, such as a surety, who pays a secured debt'.[161]

   [161] State Bank of New South Wales v Geeport Developments Pty Ltd (11,954).

9. In Padovan v MGG Group Pty Ltd (in liq), Black J considered the rights of a purchaser (who had an equitable lien) when the property was sold by a secured creditor, and whether the purchaser was entitled to be subrogated to the rights of the secured creditor, a bank, where the debt owing to the bank had not been repaid in full.  Based on Cohen J's reasoning in State Bank of New South Wales v Geeport Developments Pty Ltd that a right of subrogation can arise from part payment of a debt, Black J expressed the view that a declaration that the purchaser was entitled to be subrogated to the rights of the bank under a guarantee would have no impact on the interests of the bank.  This was because, until the bank received full payment of the debt, it was entitled to exercise its rights under the guarantee.  After it received payment, it had no interest in what occurred to the guarantee.  However, as the bank had not been joined as a party to the proceedings, his Honour considered the bank should be given an opportunity to be heard before a declaration to this effect was made.[162]  There is no record in the reasons as to what orders were ultimately made and no supplementary or additional reasons have been published.

   [162] Padovan v MGG Group Pty Ltd (in liq) [2011] NSWSC 1080 [31].

10. In Re Fellmane Pty Ltd (in liq), the applicant, who was the liquidator of the company, sought directions in respect of a proposed sale of a property, where the proceeds of the proposed sale would not be sufficient to pay out the principal debt in full.  After reviewing the authorities, Gleeson J expressed the view that:[163]

    At face value, the statements in Geeport and Padovan are not consistent with principle. However, the statements were qualified by the acknowledgment that the right of subrogation remains dormant and is not enforceable until the whole of the principal debt is paid. In that sense, the statements might be read as intending to convey, consistent with authority, no more than that subrogation is “potentially” available to the guarantor who has paid part of the debt, and that the right crystallised when the debt is otherwise paid in full.

    [163] Re Fellmane Pty Ltd (in liq) [2020] NSWSC 595 [51].

11. His Honour expressed the view that in the circumstances of that case, the company would not have a right of subrogation to the other securities held by the bank because the debt would not be paid in full.[164]

    [164] Re Fellmane Pty Ltd (in liq) [52].

12. In Nguyen v Sage Consultant Group Pty Ltd, Robb J, after reviewing the authorities (including Black J's decision in Padovan v MGG Group Pty Ltd (in liq)), agreed with Gleeson J and stated that it is an 'established principle' that:[165]

    [N]o right of subrogation can be exercised by any party who pays some or all of the mortgage debt until the whole of the debt has been repaid. No such third party can exercise or interfere with the right of exercise of the original mortgagee's security rights until that mortgagee has entirely been repaid.

    [165] Nguyen v Sage Consultant Group Pty Ltd [2021] NSWSC 753 [266].

13. This position was confirmed by the Court of Appeal of the Supreme Court of Queensland in Smits v Cugola, who, in considering the partial discharge of a debt by a guarantor, held that it was necessary for the entirety of the debt to be repaid before there was any obligation to transfer the securities to the party who has paid the debts of another.  In their view, this was the position under both the Mercantile Act 1867 (Qld) as well as in equity.[166]

    [166] Smits v Cugola [2022] QCA 262 [58].

14. At trial, both parties referred in detail to Gandel Metals Pty Ltd v Centennial Mining Ltd (No 2).[167]  In that case, Squadron lent up to $2 million to the defendant (Centennial), which was documented as a convertible note agreement and secured by a general security deed.  Under the general security deed, Centennial granted Squadron a mortgage over its mining tenement (Squadron Mortgage).  In addition to securing this obligation, the general security deed also secured amounts payable to 15 noteholders, of which Squadron was one.  It was not in dispute that Gandel Metals did not pay out the total amount secured by the Squadron Mortgage.  Gandel Metals paid out the debt which was owed to Squadron and the defendant's wholly‑owned subsidiary paid out the debts of the other noteholders. 

    [167] Gandel Metals Pty Ltd v Centennial Mining Ltd (No 2) [2020] FCA 633.

15. Middleton J rejected the proposition that the remedy of subrogation was not available to the plaintiff because it had not personally paid out the entirety of the secured debt.  He noted that 'all that is required is that the whole of the debt must be paid for the remedy of subrogation to be available' (emphasis in original).[168]  Middleton J then referred, with approval, to the analysis of Cohen J in State Bank of New South Wales v Geeport Developments Pty Ltd, where his Honour expressed the view that:[169]

    In my opinion the authorities I have referred to above, and in particular the most recent one of 1974, seem to make it clear that there will be a subrogation of a proportionate part of the security. It may well be that the right to exercise that subrogation may not come into existence until the whole of the debt has been paid, whether by the principal debtor or another person so that the right until then remains dormant. This however seems more a matter of enforcement rather than a question of the rights which exist.

    [168] Gandel Metals Pty Ltd v Centennial Mining Ltd (No 2) [77].

    [169] State Bank of New South Wales v Geeport Developments Pty Ltd (11,953 - 11,954) cited with approval by Middleton J in Gandel Metals Pty Ltd v Centennial Mining Ltd (No 2) [80].

16. On this basis, Middleton J concluded, in accordance with authority and equitable principle, that there could be subrogation of a proportionate part of the security, and that Gandel Metals was entitled to subrogation of a proportionate part of the security in respect of the amount that it had paid.

17. At present, the weight of authority is that the entirety of a debt secured by a security instrument needs to be repaid before any right of subrogation can be exercised by the party who paid the debts of another or for any orders to be made for the 'transfer' of any securities to that party.

18. The issue as to whether the relevant factor is the payment of the debt or the discharge of the securities did not arise for specific consideration in Gandel Metals Pty Ltd v Centennial Mining Ltd (No 2) for two reasons.  First, because all of the amounts secured by the mortgage had been paid out.  Second, because the amounts owed to Squadron (which were paid out by Gandel Metals) arose under two separate instruments: a loan which was documented as a convertible note agreement; and an additional amount raised from noteholders, of which Squadron was one.  In that case, the focus was on whether Gandel Metals was entitled to subrogation of a proportionate part of the security. 

19. On balance, for the following reasons, I consider the better view is that the remedy of subrogation arises on the payment of the entirety of a debt owed to a creditor rather than on the discharge of the security, and that it is not necessary for the entirety of the debts secured by a particular instrument to be paid out for the equitable remedy of subrogation to arise.

20. First, the circumstance which gives rise to the equitable remedy of subrogation is the payment of the secured debt of another.  As was emphasised by Gleeson J in Re Fellmane Pty Ltd (in liq), the critical requirement is that the whole of the debt is repaid, whether in full or in part by the third party.  On the discharge of the debt, the presumption arises that the third party did so with the intention they would be entitled to the benefit of that party's security.

21. Second, on the payment of the debt in its entirety, the rights of the creditor to the benefit of the security are extinguished.  At that time, the creditor has no future use for the continuing security.  It is these extinguished rights which the third party payer is entitled to assert as though they have not been extinguished by the payment but are kept alive or revived by operation of the law.

22. Third, as was emphasised by the High Court in Bofinger v Kingsway Group Ltd, the foundation for the application of the remedy is the liability of the debtor to the third party who has paid the debt.  This liability arises on payment of the debt, not the discharge of the security.  On the payment of the debt, the 'conscience' of the debtor, who has benefited from the payment by the reduction in the amount secured by the continuing security, is affected so as to keep the security alive.  Put another way, where a third party has paid out the debt in its entirety with the intention of obtaining security, it would be unconscionable for the debtor to insist that this payment was unsecured.

23. Fourth, although many cases of subrogation involve a lender who expected to receive security and claims subrogation to another security, it has been recognised as applying to personal rights.[170]  This is more consistent with the remedy arising on payment of the debt rather than discharge of the security.

    [170] Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291 [36] (per Lord Neuberger) cited with approval by Santow JA in Highland v Exception Holdings Pty Ltd (in liq) [2006] NSWCA 318; (2006) 60 ACSR 223 [106].

24. I turn then to the relevant facts of this case.  On its terms, the Facility Agreement did not create any security interest.  Under its express terms, Piper Preston and Australia Salt Lake Potash represented and warranted that the security created by Transaction Security Documents 'constitutes legal, valid and enforceable security'.[171]  These parties were also obliged to ensure that, at all times, each had provided security over all of their assets in a form and substance satisfactory to GLAS Agent (as well as GLAS Nominees) in a form consistent with the existing 'Transaction Security Documents'.[172]

    [171] Facility Agreement, cl 14.23(a).

    [172] Facility Agreement, cl 16.9.

25. 'Transaction Security Documents' is relevantly defined in the Facility Agreement to include: [173]

    (a)the general security agreement dated 3 December 2020 between Australia Salt Lake Potash and GLAS Nominees;

    (b)the combination security agreement dated 3 December 2020 between Piper Preston and GLAS Nominees;

    (c)mining mortgages granted or to be granted by Piper Preston to GLAS Nominees in respect of each of the tenements; and

    (d)water licence mortgages entered into between Piper Preston and GLAS Nominees.

    [173] Facility Agreement, cl 1.1.

26. As set out above at [35], these agreements granted a security interest in all present and after-acquired property to GLAS Nominees in its capacity as Trustee under the Security Trust Deed.  These securities, which are held by GLAS Nominees as Trustee, will not be discharged upon receipt of the Payment, as they also secure the contingent debts under the Royalty Deeds.

27. The objective intention of Sequoia and Piper Preston in entering into the Facility Agreement was that the debt owing by Piper Preston to Sequoia under the Facility Agreement would be a secured debt, secured, ultimately, by the Security Trust Deed. 

28. Under the terms of the Security Trust Deed:

    (a)all securities over the assets of Piper Preston were held on Trust by GLAS Nominees.  These securities would not be discharged until the first to occur of: 80 years; or the date on which the entirety of all amounts secured by the Security Trust Deed (which included the debt under the Facility Agreement) were received by GLAS Nominees and distributed to the Beneficiaries of the Trust, including Sequoia;[174] 

    (b)the security interests held on trust by GLAS Nominees are indivisible.  That is, the same assets secure the debt owed to Sequoia and Piper Preston's other debts (including contingent debts). Put another way, the securities held by the Trustee are for the benefit of all Beneficiaries of the Trust and not any particular Beneficiary;[175]

    (c)GLAS Nominees could request (and was required to at the request of Salt Lake Potash or Piper Preston) a Beneficiary to confirm whether its exposure had been reduced to zero and had no unsatisfied obligations.  Where a Beneficiary received such a request, it was obliged to provide the confirmation sought;[176] and

    (d)on the receipt by GLAS Nominees of a confirmation that its exposure has been reduced to zero and that they have no unsatisfied obligations, that party ceases to be a Beneficiary.[177]

    [174] Security Trust Deed, cl 2.2.

    [175] Security Trust Deed, cl 2.1.

    [176] Security Trust Deed, cl 6.11(a).

    [177] Security Trust Deed, cl 6.11(b).

29. For the following reasons, I accept and find that, by making the Payment on behalf of Piper Preston, 7GI is entitled to be subrogated to the position of Sequoia to the extent of the payment of $7 million, which comprised the entirety of the debt that was outstanding to Sequoia.  I will separately address my findings and conclusions as to the extent of these rights from [238] below.

30. First, in making the Payment, 7GI paid a debt of Piper Preston which was then owed to Sequoia.  This debt was a secured debt, under the terms of the Facility Agreement and Security Trust Deed.  As set out above at [176], I accept that in making the Payment, 7GI intended to be subrogated to Sequoia's position under these agreements.

31. Second, under the express terms of the Security Trust Deed, once a party's 'exposure' (being, in the case of Sequoia, the total of Piper Preston's undrawn commitment at that time) was reduced to zero and it provided confirmation of this, it ceased to be a Beneficiary of the Trust.  That is, on payment in full of the outstanding balance of the Facility Agreement, the issue of a request under cl 6.11(a) and a response under cl 6.11(b), Sequoia will cease to be a Beneficiary of the Trust and its rights under both the Facility Agreement and the Security Trust Deed will be extinguished.  At this point, it will have no need for the security comprised by the Security Trust Deed and associated documents.

1. Third, by the Payment, the whole amount required to be paid to Sequoia to discharge the debt under the Facility Agreement has been paid. 

What, if any relief ought be granted?

1. Having found that, by reason of the Payment, 7GI is entitled in equity to be subrogated to Sequoia's position, the question remains as to what, if any, relief ought be granted.

2. As an equitable remedy, subrogation will not be granted as of right but only where it is appropriate to do so in the circumstances.[178]  In considering whether to order subrogation, the court will consider where there are other remedies available to the party at law or in equity which are sufficient to 'avoid the unconscionable result'.[179]  It is a remedy that is granted to prevent an 'unconscionable situation', where the circumstances make it appropriate to do so to avoid injustice.[180]

   [178] Re Trivan Pty Ltd (372).

   [179] Aged Care Services Pty Ltd v Kanning Services Pty Ltd [58].

   [180] ATCO Controls Pty Ltd (in liq) v Stewart [2013] VSCA 132; (2013) 31 ACLC 13-065 [234].

3. As Gleeson CJ and Priestley JA from the New South Wales Court of Appeal stated in Registrar General v Gill:[181]

   The equitable principles relating to subrogation aim to adjust the interests of three parties, such as a creditor, a debtor and an insurer or surety, in such a way as to avoid the unconscionable result of double recovery by the creditor or inequitable discharge of the liability of the debtor.

   [181] Registrar General v Gill [1994] NSWCA 261, 264 (Gleeson CJ and Priestley JA).

4. The court should do the minimum required to achieve equity between the parties. In some cases, this may mean giving relief to the effect that a subsequent payer ought to stand in the shoes of the creditor whose liability has been discharged.

5. Senior counsel for the plaintiffs submitted that as a consequence of the Payment by 7GI on behalf of Piper Preston of the amount then outstanding under the Facility Agreement, 7GI is entitled (through the remedy of subrogation) to all of the rights and benefits of Sequoia under the Facility Agreement, the Security Trust Deed and other Secured Documents and that orders should be made to require the execution of documents to give effect to this.  While it was accepted that any right of subrogation arises as a matter of law and is not the same as an assignment, it was contended that it was not uncommon for courts to require parties to execute documents to give effect to these rights.

6. The defendants denied that 7GI was entitled to orders effectively assigning Sequoia's rights to 7GI for a number of reasons, including that this would have the effect of imposing obligations and risks on the first and second defendants that they had not agreed to.

7. Senior counsel for the third to sixth defendants submitted that even if the court were satisfied that 7GI was subrogated to Sequoia's rights by making the Payment to discharge Piper Preston's liability under the Facility Agreement, the court should not exercise its discretion to grant the relief sought by the plaintiffs.  This was for three alternative reasons. 

8. First, in these defendants' submission, there was no existing dispute between the parties and accordingly, the court could not grant declaratory relief.  The defendants accepted that if 7GI paid out the Facility Agreement on the basis that it obtained the benefit of the security given by Piper Preston for this, 7GI will have the benefit of the remedy of subrogation and it was unnecessary for any order to be made by the court.[182]

   [182] Third to sixth defendants' outline of submissions [35].

9. Second, the relief sought by the plaintiffs was novel and went further than was necessary to do equity between the parties.  In particular, the defendants emphasised that the relief sought by the plaintiffs required parties (including parties who were not the mortgagor or the exiting mortgagee) to enter into new agreements and deeds.  In their submission, there was no principled basis for the court to make such orders.

10. Third, granting the relief sought by the plaintiffs would (or at least could) cause prejudice to the Taurus Entities in the event that 7GI sought to exercise certain rights under the Security Trust Deed against the interests of these defendants.  Specifically, these defendants submitted that if Sequoia were replaced by 7GI and Piper Preston defaulted in any payment of royalties, under the terms of the Security Trust Deed, 7GI would be able to block any instruction given by the Taurus Entities to enforce any securities.

Is there an existing dispute?

1. Senior counsel for the third to sixth defendants denied there was any existing dispute.  In their submission, until a dispute arose as to the enforcement of any right of subrogation or the distribution of any amounts received by the Security Trustee, no orders should be made by the court as any issue was hypothetical or was, in effect, an advisory opinion.

2. Senior counsel for the plaintiffs rejected the contention that the dispute between the parties was hypothetical.  The plaintiffs emphasised that in this case, the parties had filed pleadings and evidence had been adduced.  The court was being asked to make findings of fact and reach conclusions on the rights of the parties based on these findings.

3. In support of the position that each contended, the parties referred to the seminal decision of the High Court in Bass v Permanent Trustee Company Ltd that:[183]

   The purpose of a judicial determination has been described in varying ways. But central to those descriptions is the notion that such a determination includes a conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy.

   …

   It is true that some have seen the use of the declaratory judgment as little more than the giving of an advisory opinion. However, one crucial difference between an advisory opinion and a declaratory judgment is the fact that an advisory opinion is not based on a concrete situation and does not amount to a binding decision raising a res judicata between parties. Thus, the authors of one recent text on declaratory judgments emphasise that, where the dispute is divorced from the facts, it is considered hypothetical and not suitable for judicial resolution by way of declaration or otherwise. They say:

   "If ... the dispute is not attached to specific facts, and the question is only whether the plaintiff is generally entitled to act in a certain way, the issue will still be considered theoretical. The main reason for this is that there may be no certainty that such a general declaration will settle the dispute finally.

   (footnotes omitted)

   [183] Bass v Permanent Trustee Company Ltd [1999] HCA 9; (1999) 198 CLR 334 [45], [48].

4. In Insurance Commission of Western Australia v Woodings as liquidator of Bell Group Ltd (in liq) [No 2], Pritchard J observed that where declarations are sought in respect of future conduct, it can be difficult to ascertain the difference between a hypothetical question and one that 'constitutes a proper exercise of judicial power'.[184]  Her Honour expressed the view that the court was required to make an evaluative judgement based on the facts and circumstances of each case and concluded that:[185]

   These cases confirm that provided that a claim is based on facts which have occurred, and have given rise to a real dispute, the claim will not be hypothetical simply because its resolution depends on the outcome of other claims.

   [184] Insurance Commission of Western Australia v Woodings as liquidator of Bell Group Ltd (in liq) [No 2] [2017] WASC 372 [101].

   [185] Insurance Commission of Western Australia v Woodings as liquidator of Bell Group Ltd (in liq) [No 2] [110].

5. In this case, I am satisfied that there is presently a controversy between the parties in relation to a number of issues including the proper construction of the Facility Agreement and the effect of the Payment.  I do not accept this dispute is hypothetical.  It is based on facts that have occurred, namely the Payment on 7 August 2024 and the legal effect of this Payment.  In my view, it is appropriate for declarations to be made to give effect to the conclusions I have reached on the various issues raised by the parties.

Can and should the court require GLAS Agent and GLAS Nominees to execute documents?

1. Senior counsel for the plaintiff accepted that there was no clear guidance in the authorities as to whether a third party who has paid the debt of another is entitled to all of the contractual rights of the original lender,[186] and whether the court will require the execution of any documents in aid of subrogation.

   [186] ts 206.

2. The third to sixth defendants accepted that, on occasions, courts have made orders for the execution and registration of documents in aid of the remedy of subrogation.  However, in their submission, this has generally occurred where:

   (a)a mortgage has been discharged and an order has been made for the execution of a mortgage in registrable form in favour of the subrogated party; and

   (b)the mortgagor is in default and the subrogated lender has obtained an order from the court for the sale of the property to discharge the debt.

3. The third to sixth defendants submitted that where the court has made these orders, there has been no other way of giving effect to the right of subrogation. This can occur when the existing mortgage has been discharged and it is necessary for documents to be executed to enable registration of the mortgage.[187]  It may also occur where an order is sought for the sale of property to enable the secured debt to be discharged.  

   [187] See for example Rogers v Resi-Statewide Corporation (1991) 105 ALR 145, 154; Titles Strata Management Pty Ltd v Nirta [2015] VSC 366 [12]; Commonwealth Bank of Australia v Stephens [2017] VSC 385 [535].

4. However, in their submission, there was no basis in principle arising from the cases relied upon by 7GI that would require orders to be made in the terms sought by the plaintiffs.

5. Most of the submissions at trial by senior counsel for the third to sixth defendants in opposing the relief sought focussed on whether the request by Piper Preston to Sequoia was 'contrived'.[188]  The contrivance is said to arise from the actions of 7GI after failing to agree on terms on which it would obtain an assignment of Sequoia's interest, and subsequently reaching an agreement with Piper Preston on 7 August 2024 pursuant to which the Payment was made through the exchange of letters on that date. 

   [188] Third to sixth defendants' outline of submissions [21].

6. The third to sixth defendants say that the letters of 7 August 2024 were drafted to 'ensnare' GLAS Nominees into accepting that 7GI was entitled to become a Beneficiary under the Security Trust Deed.[189]  Senior counsel for these parties emphasised that there was no evidence that Piper Preston was unable to pay the debt nor that 7GI was unwilling to continue funding Piper Preston on an unsecured basis.  On this basis, it was contended that the plaintiffs contrived the exchange of letters on 7 August 2024, and asserted a right of subrogation to 'frustrate Taurus' rights' and ensure that 'Taurus will never be able to exercise its existing security rights'.[190]  If orders were to be made by the court, they said that appropriate safeguards would need to be built in to ensure there were no unintended consequences.[191]

   [189] Third to sixth defendants' outline of submissions [21].

   [190] ts 88.

   [191] ts 170.

7. Senior counsel for the plaintiffs denied that a relevant factor for the court to consider in determining the relief to grant was whether the actions of the plaintiffs were 'contrived'.  The plaintiffs submitted that their actions in seeking to ensure that they acquired subrogation rights in making the Payment was not a basis to refuse to grant the relief sought.

8. On the evidence before me, I accept that the events of 7 August 2024 occurred with the benefit of legal advice and, consistent with the evidence of Mr Sykes, that the resolutions of Piper Preston and 7GI, as well as the correspondence that passed between them, were drafted by Baker & McKenzie.  However, I do not accept that these matters disentitle the plaintiffs to appropriate relief.  In my view, the more relevant question is whether the relief sought by the plaintiffs in [2] and [3] of the Prayer for Relief is necessary to do equity between the parties. 

9. In my view, they are not. 

10. The principle of the remedy of equitable subrogation proceeds on the basis that once the entirety of secured debt is paid, the security discharged by the payment ceases to exist.  It is this security that equity treats as being 'kept alive' for the benefit of the party paying the debt.[192]

    [192] Aged Care Services Pty Ltd v Kanning Services Pty Ltd [52] - [53] (Gleeson JA).  See also Banque Financiere de la Cite v Parc (Battersea) Ltd (236) (per Lord Hoffman).

11. This, however, does not mean that 7GI must for all purposes be treated as an actual assignee.  As Powell J stated in McColl's Wholesale Pty Ltd v State Bank of New South Wales:[193]

    [A]lthough by virtue of the doctrine of subrogation, a surety may become entitled to the benefit of any security given by the principal debtor, he does not, so it seems to me, necessarily obtain the benefit of all the covenants on the part of the principal creditor which may be contained in the instrument conferring the security. That this should be so is due to the fact that the ultimate purpose of subrogation is not to put the surety in the identical position in which the creditor formerly stood, but to enable the surety to enforce his right to an indemnity by resort to the securities formerly held by the creditor.

    [193] McColl's Wholesale Pty Ltd v State Bank of New South Wales [1984] 3 NSWLR 365, 378.

12. In my view, the principle that underlies the doctrine of subrogation is that the party who pays out the debt of another should be placed in the same position as the original lender in so far as that extends to the capacity to obtain security for payment of their debt and, ultimately, recover their debt. This enables the legal relations between the third party and the debtor (and, where relevant, other parties) to be regulated as if the benefit of the security has been assigned to the third party. This is also consistent with the extension of these rights to certain personal rights, such as the right to take action against a guarantor, a director under s 197 of the Corporations Act 2001 (Cth) (Corporations Act), as well as priority payments under the Corporations Act.[194]  Each of these is directed to enabling the third party to recover payment of the debt.  It is also consistent with the orders that have been made by the courts previously, such as for the execution of mortgages.

    [194] Saffron Sun Pty Ltd v Perma-Fit Finance Pty Ltd (in liq) [2005] NSWSC 1317 [21] referring with approval to D & J Fowler (Aust) Ltd v Bank of NSW [1982] 2 NSWLR 879.

13. Consistent with this principle, I do not consider it is necessary in order for 7GI to obtain security for payment of their debt or to recover their debt, for 7GI to have all the rights under the Security Trust Deed or for there to be any requirement for documents to be executed which would create a legal assignment of Sequoia's interests.  I accept there is a possibility that, depending on how any rights might be exercised, the interests of the Taurus Entities may be impacted if this were to be ordered.  At this stage, I am not satisfied that the orders sought are either necessary or appropriate.

14. I consider that a declaration should be made as to the effect of the Payment and that 7GI is subrogated to the benefit of Sequoia's security under the Security Trust Deed, but that any further orders would be premature.  At this stage, there is no suggestion that Piper Preston considers the Payment to be an unsecured debt or that 7GI will not be entitled to distribution from the GLAS Nominees for any payments received by it from Piper Preston.  If any issue arises in respect of these matters in the future, 7GI can take appropriate action at that stage.

Conclusion

1. For these reasons, I have concluded that:

   (a)the transfer of $8.5 million by 7GI to the bank account of GLAS Nominees on 7 August 2024 was not an unconditional payment of the outstanding debt of Piper Preston under the Facility Agreement.  As a consequence, GLAS Agent was entitled to seek instructions on the payment and not to accept it;

   (b)on 23 September 2024, 7GI confirmed the payment was unconditional.  On this date, pursuant to cl 23.1(c) of the Facility Agreement, the payment was for the account of Sequoia and satisfied Piper Preston's obligations under the Facility Agreement to make that payment;

   (c)the Payment was made with the express intention that 7GI was entitled to be subrogated to the rights and position of Sequoia.  On this basis, from 23 September 2024, 7GI was entitled to be subrogated to the security of Sequoia under the Security Trust Deed to the extent of $7 million; and

   (d)7GI is not entitled as of right to a legal assignment of Sequoia's position under the Facility Agreement or Security Trust Deed.  In the circumstances of this case, I do not consider that any orders should be made requiring the execution of documents to legally assign Sequoia's interests under either of these documents.

2. I will hear from the parties as to the appropriate orders to be made to give effect to these reasons and as to costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

JN

Associate to the Honourable Justice Hill

15 NOVEMBER 2024