Van der Sluys v Anaconda Nickel NL - [2002] NSWSC 673

No judgment structure available for this case.

CITATION: Van der Sluys and anor v Anaconda Nickel NL and others [2002] NSWSC 673 revised - 7/08/2002

FILE NUMBER(S): SC 50040/00

HEARING DATE(S): 3-6 and 10-13 December 2001, 17 and 18 April 2002.

JUDGMENT DATE: 31 July 2002

PARTIES :

Stephen van der Sluys and Richard Maish (Plaintiffs)
Anaconda Nickel NL, CIBC World Markets Australia Corporate Pty Ltd, CIBC Wood Gundy Securities Inc and Canadian Imperial Bank of Commerce (Defendants)

JUDGMENT OF: Brownie AJ at 116

COUNSEL : Plaintiffs: R.J Webb
First Defendant: R. McColl SC and R.S. Angyal
Second, Third & Fourth Defendants: N.Perram

SOLICITORS: Plaintiffs: Kemp Strang
First Defendant: Andersen Legal
Second, Third and Fourth Defendants: Mallesons Stephen Jaques

CATCHWORDS: Contracts- construction- no question of principle. - Estoppel- construction of contract- not available

CASES CITED: Magill v National Australia Bank Ltd [2001] NSWCA 221;
Commonwealth v Verwayen (1990) 170 CLR 394;
Johnson Matthey Ltd v A C Rochester Overseas Corporation (1990) 23 NSWLR 190, 195;
State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170,177;
Australian Co-operative Foods Ltd v Norco Co-operative Ltd (1999)46 NSWLR 267 at [51-52].

DECISION: See [116]

- 50 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

BROWNIE AJ

31 July 2002

VAN DER SLUYS and another v ANACONDA NICKEL LIMITED and others

JUDGMENT

The issues

1 The first defendant wanted to procure some funding, in order to develop a new mine. It engaged the services of various people to assist it to procure the funding, including the services of the second, third and fourth defendants, three related companies. The terms of that engagement entitled the second, third and fourth defendants to various fees including, in certain circumstances, a “success fee”. Later, the second, third and fourth defendants assigned to the plaintiffs the right to that success fee, and the plaintiffs now sue the first defendant for that fee.

2 As between the plaintiffs and the first defendant, the issue litigated are: as a matter of the proper construction of the contract of engagement, in what circumstances the fee became payable; whether in the events that happened the fee did become payable; whether the first defendant is estopped from denying that in the events that happened the fee became payable; and whether there was a subsequent agreement made having the effect of extinguishing the entitlement to the fee.

3 The plaintiffs also sue the second, third and fourth defendants, in the alternative to their claim against the first defendant. They say that if they fail as against the first defendant, they are entitled to damages from the second, third and fourth defendants. This claim is put under various legal rubrics, but in very broad terms it is a claim that a representation was made, improperly, to the general effect that the second, third and fourth defendants had not agreed to the extinguishment of the right to that fee.

4 Finally, the first defendant brings a cross-claim against the second and third defendants. In summary, it says that certain fees were overpaid, by mistake, and it sues in restitution. The cross-defendants deny that the fees were paid by mistake; and they raise defences of estoppel and of change of position.

The parties

5 The first defendant (“Anaconda”) was formerly called Anaconda Nickel NL. In and after 1995 it possessed various rights, and wished to develop a new nickel and cobalt mine, at Murrin Murrin in Western Australia. Its officers included Mr Forrest, who was its Chief Executive Officer and Deputy Chairman, and Mr Masterman, its Chief Financial Officer and an Executive Director. It appears that Mr Forrest or his family owned, directly or indirectly, a significant number of shares in its capital.

6 Another substantial shareholder in Anaconda was a Swiss corporation, Glencore International AG (“Glencore”). Glencore lent some money to Anaconda, by way of short term advance, and then in 1997 Glencore and Anaconda entered into a joint venture agreement. More precisely, there was a joint venture between Murrin Murrin Holdings Pty Ltd (“MMH”) and Glenmurrin Pty Ltd (“Glenmurrin”), subsidiaries of Anaconda and of Glencore, respectively. In substance, Glencore agreed to provide a capital contribution of US$220 million, and through Glenmurrin took a 40 percent interest in the mining venture. The affairs of the joint venture were administered through a “joint venture committee”, with both Anaconda and Glencore having representatives on that committee.

7 The fourth defendant, Canadian Imperial Bank of Commerce (“CIBA”) has a number of subsidiary companies, including the second and third defendants. The second defendant, CIBC World Markets Australia Corporate Pty Ltd, was formerly called CIBC Wood Gundy Australia Corporate Pty Ltd, amongst other names. The third defendant, formerly called CIBC Wood Gundy Securities Inc and now called CIBC World Markets Inc, is a Canadian corporation. It is sometimes called “CIBC Wood Gundy, Toronto”, and it has to be distinguished from a New York corporation, CIBC Wood Gundy Securities Corp, another subsidiary of CIBC, which I will call “CIBC New York”.

8 The CIBC companies together conducted a business unit called either “the Mining Group” or “the Global Mining Group”, using the services of employees of various companies in the group. Whilst within the CIBC group of companies, there was presumably a known demarcation of functions, the position does not seem to have always been entirely clear to others. Officers of the Mining Group were located in various places, including Toronto and Sydney. For a period in 1996–98 the plaintiffs were officers of the Mining Group. The assignment to them of the supposed debt now sued upon was negotiated as part of the settlement of a dispute between the plaintiffs and the Mining Group. The detail of that dispute is presently irrelevant.

9 Anaconda entered into two agreements retaining, loosely speaking, the Mining Group. The first agreement was with the third defendant, alone. The second agreement, which amended the first agreement, was expressed to be between Anaconda on the one hand and the second and third defendants, on the other hand. It was in fact executed by the second and fourth defendants, and not by the third defendant. Notwithstanding this, the parties have proceeded on the convention, which I will adopt, that the retainer was that of the second, third and fourth defendants: those three defendants assigned the debt or supposed debt for the success fee to the plaintiffs, and no party has raised any question as to the identification of the appropriate companies within the CIBC group said to be entitled to be paid the success fee. When it is not necessary to be more precise, I will refer to the second, third and fourth defendants indiscriminately as “the Mining Group”. I will refer to the first and second agreements, read together, as the contract sued upon, that is, the contract upon which the plaintiffs sue Anaconda.

10 Before either of these agreements had been made, Anaconda had retained the services of two other corporations to help it procure the finance it wanted: Bankers Trust Corporate Finance Ltd (“Bankers Trust”), and Salomon Brothers Australia Ltd (“Salomon Brothers”).

11 A Mr Schonfeld of Bankers Trust, who had the confidence of Anaconda, left Bankers Trust, and Anaconda terminated the services of Bankers Trust. That led Anaconda, ultimately, to retain the services of the Mining Group, whilst it also retained the services of Salomon Brothers, and of Mr Schonfeld personally. The source of the principal problems in the case lies in the overlapping roles of the Mining Group and of Salomon Brothers. Whilst, broadly speaking, the Mining Group and Salomon Brothers were to seek funds from different sources, Anaconda wished to avoid the possibility of incurring a liability to pay both the Mining Group and also Salomon Brothers for any one funding obtained.

The various retainers

12 The plaintiffs submitted that regard should be had to the terms of the respective contracts of retainer by Anaconda of Bankers Trust and of Salomon Brothers, as showing the basis upon which Anaconda retained the Mining Group, that is, as showing what work these parties expected the Mining Group to do, and be paid for. Anaconda submitted that regard should not be had to the terms of the retainers of Bankers Trust and Salomon Brothers, because, on the evidence, the Mining Group did not know at the time of the making of the contract sued upon of the terms of these retainers (as distinct from the fact of the retainers). I agree, and I put aside the terms of the retainers, for the purpose of considering the arguments concerning the proper construction of the agreement sued upon; but I note that it is common ground that at the time of the making of the contract sued upon Anaconda and the Mining Group expected that a large part of the finance then sought to be raised would be raised by way of bank loan or loans.

13 It is also common ground that there is one contract to be construed, but it is convenient to refer to the two documents constituting or recording that contract as the first and second agreements. The “first agreement”, that is, the initial contract of retainer by Anaconda of the third defendant, was constituted by a one page document, dated in typing 29 March 1996, and by hand 1 April 1996. Each of the two agreements contains a number of expressions that are explained by the evidence. I will mark these (when first appearing) by underlining, and set out the meanings in paragraph [18].

14 The first agreements reads:

Anaconda Nickel NL and CIBC Wood Gundy, Toronto agree to the following terms for CIBC Wood Gundy to provide financial advisory and related services to Anaconda Nickel. The engagement will be directed, and executed, from Toronto with support from Sydney as required.

Offering Memorandum

2. $A200,000 payment to run the Equity Joint Venture tender plus a success fee of:

Information Memorandum

Project

Technical Agent

6. CIBC Wood Gundy will work exclusively for Anaconda Nickel NL in Cobalt and Nickel in Australia for a period of 12 months to 29 March 1997

7. Both parties agree to sign standard confidentiality and indemnity agreements

15 The “second agreement”, that is, the later agreement, amending the first agreement, is dated 17 July 1996. The document reads:

With the completion of the Bank Feasibility Study and the evolution of negotiations with potential equity participants and contractor participants, it is agreed that the terms set out under Section 4 in the Agreement of April 1st 1996 are amended by inclusion of additional services and a revised fees schedule.

infrastructure financing

Senior

• Preparing an Information Memorandum for Senior Lenders that incorporates both Senior Bank and Infrastructure Financing.

• Coordinating the completion of technical due diligence by Senior Bank Lenders, Infrastructure Financing Lenders and Subordinated Debt Lenders; including coordinating preparation of a Request for Proposal for potential Independent Engineers and assisting Anaconda and the Lenders in selecting, contracting with and managing the Independent Engineer and Insurance Consultant.

• Assisting Anaconda in determining the feasibility and design of a ‘hybrid’ financing structure.

Term Sheet

• Reviewing and commenting upon draft Material Project Agreements (including EPC Contract, Power Supply, Gas Supply, Technological Services, Joint Venture Party Agreements(s), etc)

• Assisting Anaconda in reviewing Infrastructure Financing proposals.

• Assisting Anaconda in reviewing other tax based financing alternatives i.e. standard equity leasing, leveraged leasing, operating leasing and cross border leasing.

• Reviewing and advising Anaconda in the completion and delivery of all financial modelling.

A) A payment of $450,000 representing project debt advisory services required to ensure all preparation is complete so as to determine the preferred financial structure for the Project and to enable CIBC and Anaconda to move to immediate discussions with potential lenders upon the selection of an equity partner (the timing of which is estimated in the attached timetable). This fee and accrued expenses will be payable, with interest accruing from completion of the below tasks which is expected on 31 July 1996 onwards (at an interest rate equating to the Bank Bill rate plus 1% pa) upon the earlier of:

(i) Loan Agreement closing; or

The date proposed has been nominated so as to allow consideration of the submissions received from joint venture equity participants on or about July 19th 1996. It is agreed that the selection of a joint venture participant(s) will impact upon the determination of the components of debt finance selected/sought.

In addition to general financial advisory services discussed above the fee structure is intended to compensate for the completion of the following:

1. An Information Memorandum will be delivered completed to the maximum extent possible, taking account of the point to which joint venture negotiations have progressed. This Information Memorandum will contain detailed Terms and Conditions for a Bank Financing (and an Infrastructure Financing, if deemed to be attractive) for the Project.

2. CIBC will have completed a detailed ‘first stage’ technical and financial review of the Project. This will include:

• Review of all major project contracts.

• Completion of a Technical report for use in support of discussions with Debt providers

3. CIBC, working with Salomon Brothers, will have:

• Prepared a Request for a Proposal by potential Independent Engineering candidates;

It is expected that the Independent Engineer will be appointed by 31 July 1996 or shortly thereafter.

4. CIBC will advise (subject to formal CIBC management approval and completion of financial, technical and legal due diligence) Anaconda of the terms and conditions upon which CIBC would be willing to underwrite a portion of senior bank debt for the Project. These terms and conditions are expected to mirror the terms and conditions described in the Information Memorandum.

BOOT

B) Following completion of the above tasks the following fee structure is agreed for the implementation phase.

$A75,000 per month thereafter commencing after completion of the above tasks which is expected by 1 August 1996, subject to:

US Bond Products

In the event that a decision is taken not to proceed with financing arrangements referred to herein, the receipt by CIBC Wood Gundy of the amount of $A450,000 and any subsequent fees billed on a monthly basis shall be deemed to be a termination fee for services.

As before, Anaconda will reimburse out of pocket expenses (except salary expenses) incurred by CIBC and CIBC Wood Gundy Australia Pty Limited upon presentation. Agreed expenses shall include travel, accommodation, documentation preparation, legal expenses and other pre-approved expenses.

Attached is an agreed timetable for completion of the services described and a list of the personnel comprising that CIBC Wood Gundy has selected for participation on the Team to deliver the services specified under this Agreement. It is agreed between the Parties to this Agreement that each will use best efforts to complete the duties outlined in accordance with the enclosed timetable.

16 There were three attachments to this document. The first listed the names, titles, and contact details of the officers of the Mining Group, expected to do the relevant work. The second and third were timetables for the doing of the work. One of these was described as the Standard Version, and the other was marked “(Version – Accelerated) (Club Senior Bank financing + Infrastructure Financing)”. Both provided for work to commence, or have commenced in the week commencing 24 June 1996. The standard version provided for completion of the tasks by 15 November 1996, and the accelerated version by 18 October 1996. Omitting the details of the dates for the completion of the tasks, and the details as to who was to do the work, and inserting paragraph numbers for ease of reference, the standard version timetable provided for the following tasks to be performed:

1 Commence Draft Term Sheet Component of Senior Debt Information Memorandum

2 Arrival of … to conduct due diligence exercise

3 Draft letter information update for potential senior Debt Participants

4 Expected receipt of JV Tenders

5 Finalization of Information Memorandum

6 Meetings with potential Senior Lenders (… dependent on progress of other critical path items)

7 Technical Visit (Site)

8 Proposals from potential Lead Senior Banks due

9 Review of Bank Proposals

10 Review/Negotiation of Final term Sheet

11 Review/Negotiation of Final Term Sheet

12 Execution of Final Term Sheet

13 Commencement of Loan Syndication

14 Lenders Meetings (Sydney/New York?)

15 Technical Visit (Site)

16 Lending Commitments Due/Allocation of Lending Commitments/
Appointment of Lenders

17 Loan Agreement Preparation/Finalization

18 Loan Agreement Preparation. Closing Nov 15

19 First Drawdown (Upon satisfaction of Conditions Precedent)

17 The Accelerated version mirrored items 1-12, and also items 17-19, but with changed dates. It omitted items 13-16.

18 The evidence shows that the following expressions have these meanings:

§ “BOOT” is an acronym for “build, own, operate and transfer”. This is a form of infrastructure financing, apt for a mine such as that in question. Instead of raising money to build something such as a power plant, the mine owner contracts with some other party to provide it, in effect paying for it out of future income. That other party agrees to build, own, operate and eventually transfer the plant to the mine owner. Similarly, the expression “BOO”, encountered in other documents, stands for “build, own and operate”.

§ “Draft term sheet”: this is a document prepared during the course of negotiations to raise finance, setting out the essential terms and conditions of the proposed transaction.

§ “Information memorandum”: a document calculated to enable potential lenders to form judgments as to the “bankability” of a project, and as to the terms and conditions upon which they will be prepared to lend, or to underwrite a loan. In the case of a mining project, it typically contains a great deal of detailed information about many aspects of the borrower and the project to be financed.

§ “Infrastructure financing”: a process by which lenders agree to finance the construction of an essential part of the infrastructure needed by a project, such as a power plant to provide electricity for an on-site processing plant.

§ “Loan syndication”: a process, specific to the bank loan market, whereby a loan is sold to banks.

§ “Offering Memorandum”: a summary document setting out the terms of a proposed bond issue, including the maturity date, interest rate and covenants; a description of the issuer, and information about it, such as the markets in which it operates; a summary of any restrictions which might exist relating to the sale of the bonds; and a disclaimer by those marketing and selling the bonds as to their having made no relevant representations.

§ “Senior”: Mr Levy (a witness for Anaconda) said in chief that “senior lenders” referred to ”lenders that are party to a loan agreement”, and that “senior lead banks” referred to banks that are arranging and possibly underwriting a loan that is to be syndicated. In cross-examination he said that “senior” referred to the ranking amongst creditors. This seems to be consistent with many of the documents in evidence, and to be the preferable view: in particular, the statement that “senior lenders” referred to ”lenders that are party to a loan agreement” does not seem to be correct.

§ “Technical Agent”: sometimes a lead bank, one of the lenders to the project, becomes primarily responsible for the review of technical reports which are required as a condition precedent to the drawdown of funds and/or to determine that satisfactory project completion has been achieved; and the technical agent will either warrant to the other banks that the technical reports are in acceptable form, or will obtain the consent of the other banks to the form of the reports prior to drawing, or to certification of project completion.

§ “Term Sheet”: the final version of a draft term sheet.

§ “US bond products”: a term that does not have a specific market meaning, but which Mr Levy thought included a broad array of bond offerings, including “144A issues” (sometimes called “rule 144A issues”, that is, securities issued only to institutional investors, under US federal law), private placements, senior bonds, subordinated bonds, and convertible notes, but not including loans from banks.

19 For ease of reference I will treat the second agreement as having numbered paragraphs and sub-paragraphs, as follows:

7 The paragraph commencing “In addition …”, and the succeeding five numbered paragraphs as paragraphs 7.1 to 7.5.

20 It is common ground that some words were inadvertently omitted from paragraph 9 of the second agreement and that it is appropriate to read it by inserting into the first sentence the words “part or all of”, so that, with these words underlined, that sentence now reads:

part of all of

Condition precedent

21 The first issue to be decided concerns the proper construction of paragraph 8 of the second agreement. Was it a condition precedent to the first defendant becoming liable to pay the success fee that the documents mentioned be executed, or does this part of the document deal only with the question of when the fee was to be payable?

22 Both the plaintiffs and Anaconda adduced some evidence concerning the negotiations leading up to the formation of these contracts, but it was agreed that this evidence was only admitted as going to the issue of estoppel, or to the issue whether the success fee was earned, and not otherwise.

23 Anaconda’s written submissions described the first and second agreements as commercial contracts, to be construed according to the following principles (omitting citations):

They should be construed “fairly and broadly, without being too astute or subtle in finding defects” … In construing commercial contracts “no narrow or pedantic approach is warranted” … Thus a practical construction that is consistent with achieving “commercial reality” or “business common sense” is to be preferred to one which leads to uncommercial or unreasonable consequences … If detailed semantic and syntactical analysis of words is going to lead to a conclusion that flouts business commonsense the First and Second Agreements must be made to yield to business commonsense … The exercise of construction is neither uncompromisingly literal nor unswervingly purposive: while the contract must speak for itself, it must do so in situ and not be transported to a laboratory for microscopic analysis … In construing the First and Second Agreements it is presumed that the parties did not intend its terms to operate unreasonably … Further, the Court should have regard to the following principles … the Court must endeavour to discover the intention of the parties from the words of both Agreements; the words of every clause must if possible be construed so as to render them harmonious with one another; if the words are unambiguous the court must give effect to them, notwithstanding that the results may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different; if the language is open to two constructions, the interpretation which will be preferred is that which will avoid capricious, unreasonable, inconvenient or unjust consequences “even though the construction adopted is not the most obvious, or the most grammatically accurate”; it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. As is apparent from the principles set out [above], the primary task in which the court engages in construing contracts revolves around interpreting the words of the instrument itself … Extrinsic evidence will, however, be admitted in the form of evidence of surrounding circumstances to assist in the interpretation of the contract where the language is ambiguous or susceptible of more than one meaning … Even where evidence of surrounding circumstances is admitted, the nature of what may be admitted is limited … In essence, the only evidence which may be considered is of mutually known facts which establish objectively the genesis, aim and purpose of the transaction. Prior negotiations are only admissible to the extent that they may establish the objective background, were known to both parties and which were the subject matter of the contract. They are not admissible to the extent that they “consist of statements and actions of the parties which are reflective of their actual intentions and expectations …”. The vice of such evidence was highlighted … as follows: “The very purpose of a formal contract is to put an end to the disputes which would inevitably arise if the matter were left upon verbal negotiations or upon mixed communings partly consisting of letters and partly of conversations. The written contract is that which is to be appealed to by both parties, however different it may be from their previous demands or stipulations, whether contained in letters or verbal conversations.

24 The plaintiffs accepted that these were the applicable principles. Notwithstanding that measure of agreement, each of the plaintiffs and Anaconda, at times, sought to rely upon extrinsic evidence as an aid to construction, whilst relying on the principles mentioned to exclude evidence tendered by the opposing party or parties. I think it is clear that it is impermissible to look at this evidence, and I put it aside, when considering the construction questions.

25 Anaconda linked its primary submission, that the provision in question constituted a condition precedent, with a further submission that, on the proper construction of the second agreement, the Mining Group was to perform services “solely directed towards financing the project by loans from banks”. It does not seem to me that the words of the contract (that is, the first and second agreements, read together) support this proposition. Rather, the underlying idea comes from the negotiations between the parties, and particularly those leading up to the execution of the second agreement; and it is impermissible to have regard to this evidence, for the purpose of construing the words of the written contract. Similarly, Anaconda submitted that there was a distinction apparent between the “success fee” of 0.5 percent mentioned in the first sentence of paragraph 9, and the “non-success fee” of 0.1 percent mentioned in the second sentence of that paragraph; but the latter expression does not appear in the written contract, and the idea comes from the pre-contractual negotiations, and not from the words of the contract. Nor do I think it is legitimate to accept that the contract draws a distinction, urged by Anaconda, between raising money by “traditional bank loans” and “non traditional bank loans” on the one hand, and raising money by a bond issue on the other hand. Again, the underlying idea comes from the pre-contractual negotiations, and not from the contract.

26 The words of the second agreement were the product of hard fought negotiations. I set out some of the detail of this negotiation below, when considering the other issues, but for present purposes it seems sufficient to say that, consistently with the principles accepted by the parties, set out above, one cannot properly have regard to this material now.

27 Looking at the written contract, I think that the submissions advanced by Anaconda fail. One sees in paragraph 3.2 of the second agreement an apparent distinction between “Senior Bank Loans” and “Subordinated Debt Loans”, and an apparently similar distinction in paragraph 9 between “the Senior Bank Loan Agreement” and a “Subordinated Debt Agreement”, as if the parties somehow distinguished “bank” from “debt”, as well as between “senior” and “subordinated”.

28 The first sentence of paragraph 9 provides for the payment of the “success fee”, calculated by reference to “the Project’s total debt requirements”, and then excludes from that category debt raised by US Bond Products as arranged by Salomon Brothers, whilst the second sentence provides for the payment of a fee at a reduced rate in respect of US Bond Products arranged by Salomon Brothers. The third, fourth and fifth sentences all use the expression “debt facilities” or “debt formation” in a way that does not support Anaconda’s contention, and may point (faintly) in the opposite direction, as may the reference to “Debt providers” in paragraph 7.2.

29 Further, I consider that the plaintiffs are on the stronger ground when they point to other expressions used in the second agreement: paragraph 2 required the Mining Group to provide “comprehensive financial advice and assistance” in relation to the project, including dealing with “alternative financial methods or types” of financing the Project, some of which were mentioned, but without any expressed limitation; paragraph 3 described some of the additional services to be provided, but again without expressed words of limitation, in contrast to the wide words of paragraph 2; and paragraph 5 spoke of a payment for “debt advisory services” apt to identify “the preferred financial structure for the Project”, again without expressed words otherwise limiting the operation of paragraph 2.

30 For its part Anaconda pointed particularly to the words of paragraph 12, to the details of the activities described in the time tables, and to the evidence showing that those activities related, if not wholly then almost wholly, to raising bank debt, rather than to the raising of any other kind of debt.

31 To the same general effect, Anaconda point to the opening words of paragraph 1 of the second agreement, to the extrinsic evidence about that, which I consider I should put aside at this stage, and to the words of paragraph 1 of the second agreement, read together with paragraph 4 of the first agreement. Anaconda contended that the obligation of the Mining Group related to “project finance”, which meant raising loans from banks to finance the project, but I do not accept that the contract should be read so narrowly.

32 Then, Anaconda made detailed submissions as to the deemed intention of the parties being gleaned from paragraphs 2 and 3 of the second agreement. I accept that there are multiple references here to raising money by way of bank loan, but not that one can therefore say that this was to be the only method of raising money, or the only reason why a success fee would become payable. The submissions made did not, in my respectful view, respond adequately to the contractual obligation stressed by the plaintiffs, for the Mining Group to provide “comprehensive financial advice and assistance in financing” the Project, without expressed limitation.

33 Another matter debated concerns the description in the contract of the work to be done by the Mining Group. The first agreement provided in some detail for the fees to be paid, and when they were to be paid, but dealt less specifically with the work to be done to earn those fees. However, the opening sentence referred to the provision of “financial advisory and related services”; paragraphs 1, 2 and 3 identified some of the work to be done, upon the completion of which fees to be payable; paragraph 4 referred more generally to the Mining Group providing “project finance assistance” including but not expressly limited to various matters mentioned; and paragraph 5 spoke of the Mining Group defending Anaconda in the event of a takeover bid, for an additional fee. In the second agreement, paragraph 1 referred to the provision of “additional services”; paragraph 2 to “comprehensive financial advice and assistance in financing” the project; paragraph 3 detailed some of the services to be provided, without expressed limitation; paragraph 4 used the expression “these services”, without explanation, but perhaps referring back to the first agreement and to paragraph 4 of the second agreement; paragraph 5 used the expression “project debt advisory services” in the context of “the preferred financial structure for the Project”; paragraph 6 referred to the selection of one or more joint venture participants, and to the agreement that the selection of such a participant might have upon the determination of “the components of debt finance selected/sought”; paragraph 7 used the expression “general financial advisory services discussed above”, but then went on in sub paragraphs 1–5 to identify certain of the work to be done, again without expressed limitation; paragraph 9 used the expression “the Project’s total debt requirements” in a way that contemplates money raised by the issue of bonds as prima facie within that general description, and later referred to the fees mentioned as being payable “for provision of advice on debt formation, as described in Section A) and B) above”, in the context of a fee rebate; paragraph 10 referred to “financing arrangements”, and paragraph 12 referred to “the services described” and “the services specified under this Agreement”.

34 I do not find all this particularly clear or helpful, but on the whole it seems to me to favour the construction contended for by the plaintiffs, and not that contended for by Anaconda.

35 Anaconda also emphasised the progressive nature of the fee structure provided for in the second agreement, and to the distinction, it contended, between “the preparation phase” in the work (an expression not found in the contract) and the expression “the implementation phase”, used in paragraph 8 of the second agreement. However, if one discards from consideration the extrinsic evidence, these submissions do not seem to me to have any real force. The progressive nature of the fee structure is consistent with the proposition that the parties contemplated raising debt from banks, and not otherwise, but one cannot put it any higher than that.

36 A separate debate concerned the language used in the first sentence of paragraph 9. Anaconda contended that this expression denoted a condition precedent; and the plaintiffs resisted that. I regard the plaintiffs’ contentions as preferable. As a matter of general impression, if one looks at the apparently careful language of the rest of the contract, providing when fees are to be paid (see particularly paragraphs 1 and 2 of the first agreement, and paragraphs 5, 8, 9 and 11 of the second agreement), the expression in question does not seem apt to convey the meaning that Anaconda contends for; and I consider that this view is to some extent reinforced by a consideration of a language used in paragraph 9 of the second agreement. The contention of the plaintiffs, that the sentence in question provides when the fee is to be payable, rather than that it is a condition precedent to the right to payment that the document or documents mentioned be executed, seems to me to be the more appropriate construction.

37 The first sentence of paragraph 9 provides that a fee will be “due and payable” on the happening of an event, or some events; the second sentence provides that a smaller fee will be “payable” in respect of another event; the third sentence also uses the expression “payable”; the fourth sentence uses the expression “will be paid”; and the fifth sentence provides for a rebate of fees. It is not clear what intention should be attributed to the parties by their using these various expressions in the one paragraph, but they do seem to me to point towards the conclusion that the expression “due and payable” when used in the first sentence should not be given its usual meaning; and, considering all this together, the words used in the contract do not seem to me to be entirely consistent with the notion that the execution of the documents mentioned in the first sentence of paragraph 9 of the second agreement should be taken to have recorded the intention of the parties that the execution of the document or documents mentioned constituted a condition precedent to the Mining Group becoming entitled to the success fee mentioned.

38 A further difficulty seems to me to arise when considering Anaconda’s contention, if the contention is taken at face value. If Anaconda reached an agreement with a bank for the making of a loan, otherwise within the terms of the contract, and actually drew down the money in question, but there was no agreement executed, no success fee would be payable. I find it difficult to attribute that meaning to the intention of the parties, at the time of the making of the second agreement, particularly given the hard fought negotiations leading up to the making of that agreement.

39 Next, Anaconda submitted that the effect of paragraph 10 of the second agreement was that the retainer of the Mining Group had been terminated by the payment of the sum of $450,000 plus certain monthly payments. However, it is clear that no decision was taken “not to proceed with the financing arrangements referred to herein”.

40 In summary, I consider that paragraph 9 of the second agreement does not make the execution of the documents mentioned a condition precedent to the Mining Group becoming entitled to the success fee.

Was a success fee earned?

41 After the making of the second agreement, work proceeded, attempting to procure finance. Anaconda sought an equity partner, and Glencore became that partner. These two companies executed a “letter of intent” dated 6 December 1996. It provided, in the events that happened, for Glenmurrin to take a 40% interest in the venture, for which it was to pay US$220 million. Glencore was to advance this sum to Glenmurrin. US$73.3 million was to be paid relatively promptly, but the balance of US$146.7 million was not payable until there was a drawdown under a project loan facility; and it was provided that if no drawdown took place by 31 July 1997, Anaconda would provide Glencore with “a guarantee and supporting security enforceable on not less than one month’s notice” for the amount by then advanced.

42 After this, generally speaking, the Mining Group worked towards raising money by way of bank loan, and Salomon Brothers worked towards raising funds for Anaconda in the US capital markets. The common expectation was that, since the project was a “green fields” one, the only way in which Anaconda was likely to be able to raise the sum it needed, would be to borrow some money from senior lenders, most likely a group of banks, who would want a first ranking security, and that the balance would be borrowed from institutional lenders in the US, who would be content with a subordinated form of security. The concept that some of the funds might be raised by Anaconda issuing “high yield bonds” on the US market was raised by the Mining Group and discussed with Anaconda as early as April 1996, but it seems clear that all concerned thought that in the circumstances anything truly useful was quite unlikely to be able to be achieved, and nobody seems to have done any significant work along these lines, until about the middle of 1997.

43 There is a good deal of detailed evidence about what work was done up until May 1997, pointing to the Mining Group and Salomon Brothers respectively working along the lines mentioned, but I do not think that the detail matters at this stage. Given my finding above about the construction of paragraph 9 of the second agreement, and that evidence of post-contract conduct may not be used as an aid to the construction of the contract: Magill v National Australia Bank Ltd [2001] NSWCA 221, it goes only to the estoppel question discussed below.

44 As well as the Mining Group and Salomon Brothers working towards the goals mentioned, each did other work for Anaconda, of a preparatory nature, that is, preparing generally for later approaches to banks and institutional lenders, and by way of providing advice. All concerned treated this as part of their respective retainers.

45 Those controlling Anaconda came to think that Glencore and its financial adviser J P Morgan (“Morgan”) were working against the interests of Anaconda, with a view to enabling Glencore to take advantage of Anaconda’s financial embarrassment, and as the price for rescuing Anaconda from this embarrassment, take an increased proportion of the beneficial interest in the project. Glencore and Morgan denied this, and I have not heard from either of them. I express no view as to the truth of the matter, but record Anaconda’s belief, which coloured its conduct in the period leading up to 31 August 1997. It considered that it was imperative that it obtain a project finance facility, and make a drawdown under that facility, by that date, or that it raise funds somehow, so that it could repay the US$73.3 million advanced by Glencore, by that date.

46 By May 1997 nothing definite had really been achieved by way of securing a project finance facility, and Anaconda’s position was becoming critical. Although various proposals had been made, none of them seemed likely to result in a drawdown by 31 August 1997, and Anaconda was also at risk of running out of working capital before that date. In Anaconda’s view, Glencore and Morgan were taking positive steps to inhibit the successful negotiation of a project finance facility. Glencore refused to be a party to a joint approach with Anaconda to the US capital markets, and protested about approaches made to banks by Anaconda; and there were other matters that attracted the ire of Anaconda.

47 At about this time, market conditions changed, it seems quite markedly, and both the Mining Group and Salomon Brothers suggested to Anaconda that it might be possible to raise the whole of the finance sought by way of high yield bonds issued in the US, notwithstanding that the project was a “green fields” mining venture. (I accept the evidence of Mr van der Sluys as to this.) Anaconda considered a range of possible courses of action, including it raising 60% of the funds necessary, by itself, leaving it to Glencore or Glenmurrin to raise the other 40%.

48 Meetings between representatives of Anaconda and Glencore were held in Switzerland between 10 and 12 June 1997. In short, nothing positive was achieved by way of agreement to jointly procure a project finance facility, and Anaconda remained suspicious of Glencore and Morgan.

49 On their way from Australia to Switzerland to attend these meetings, representatives of Anaconda and the Mining Group had other meetings with potential financiers in New York, and that series of meetings in New York continued after (and also concurrently with) the Switzerland meetings, and led on to other negotiations.

50 At and just after 10 June Anaconda’s hope was to raise about US$330 million by way of senior secured bank debt, and a further US$200 million secured by subordinated bonds; and Salomon Brothers was said to have been working in connection with the latter task. Again, I do not think the detail matters at this stage, for the position changed, and Anaconda came to seek to raise the whole sum it needed, by way of high yield bonds, and it succeeded in doing so, raising US$420 million in August 1997, and a further US$300 million in November 1997. The claim for the success fee relates to the work done in securing funding by this method, and the question to be decided is whether Salomon Brothers arranged this funding. I will deal first only with the raising of the US$420 million.

51 In June, three companies made offers to procure finance using US high yield bonds. The first was Gleacher NatWest Inc. Various companies in the NatWest group became involved in the affair. It is not necessary to distinguish between them, and I will refer to them indiscriminately as NatWest. The second was an affiliate of Salomon Brothers, and the third CIBC New York. Anaconda chose to accept the NatWest proposal; and the question for resolution now is whether the bonds that were in fact issued in accordance with this proposal were “arranged” by Salomon Brothers within the meaning of the first sentence of paragraph 9 of the second agreement. That is, assuming that this sentence did not contain a condition precedent to the Mining Group becoming entitled to a success fee, but that it made provision for the payment of a fee calculated as a percentage of the total project debt, and as to when that fee would be payable, and provided that the size of the fee depended on whether the relevant part of the total project debt (being US Bond Products) had been arranged by Salomon Brothers, did Salomon Brothers arrange for the issue of these bonds?

52 Anaconda submitted that “the most commercial construction” of the expression in question was that it referred to “bonds arranged by the entity or entities that at the time of issue held the mandate to raise funds for Anaconda in the US capital markets”; and it relied upon the terms of the retainer it gave to Salomon Brothers in 1995. I do not accept this submission. I doubt that anything useful is to be found by reference to the idea of “the most commercial construction”. Since the Mining Group did not know of the terms of the Salomon Brothers retainer, as distinct from the fact of the retainer, at the time of the making of the contract sued upon, I do not think that it is appropriate to construe that contract by reference to the terms of the Salomon Brothers retainer. Further, I see no justification for focusing of the notion that there would only be one retainer granted by Anaconda to issue bonds: the words of the contract give no support for this, and in fact, as it happened, Anaconda made no pretence of using Salomon Brothers, and only Salomon Brothers (and/or its affiliates) for this purpose. Nor does it seem right to focus on the question who held the retainer, or a retainer, at the time of the issue of the bonds or indeed at any other time, rather than the question who arranged for the issue of the bonds.

53 I conclude that the word “arranged” (including its use in the expression “as arranged”) bears its ordinary English meaning, and that the issue should be resolved by examining what work Salomon Brothers did, what role it played, and generally, what its connection was with the issue of the bonds.

54 Salomon Brothers undoubtedly did a good deal of work that might be described, for brevity, as useful background work, but by June 1997 the position had changed. Anaconda’s needs had become urgent, and it was uninhibitedly looking for funding from whatever sources might be able to help, including banks and potential equity partners, as well as from bond issues. Once the idea had been advanced of raising money by way of issuing high yield bonds, it was embraced, although not to the exclusion of continuing to investigate other possible sources of funding. Anaconda continued to work on the basis that it had to meet the 31 August deadline, and all possibilities of raising funds were assessed by reference to this (amongst other criteria).

55 Events then moved swiftly. By the end of June Mr Masterman was able to report to the Anaconda board on a series of options then available. Glencore had made an offer that Anaconda regarded as predatory, and rejected. NatWest had offered to provide a bridging loan facility of US$80 million, in substance on terms that it be the lead manager in respect of a high yield bond facility, possibly aggregating US$475 million. In addition, it offered to arrange for an equity issue, through an affiliate, and made an alternative offer to arrange finance for the joint venture, totaling US$650 million. Salomon Brothers offered to provide a bridging loan facility of US$100 million, on terms that it lead manage a high yield bond issue for US$400 million. CIBC New York offered to provide a high yield loan facility for US$400 million, and spoke of making a bridging loan, but did not actually offer this. A consortium of banks offered to provide a bridging loan, but this offer was linked to their also lending money on a long term basis.

56 It seems plain that at this stage, each of the NatWest, Salomon Brothers and CIBC groups regarded it as likely that a high yield bond issue could be arranged, and that they could do this profitably. In a practical sense, they were then competing with each other for Anaconda’s business. (At least so far as the Mining Group was concerned, efforts were made to avoid a conflict of interests between the different companies in the group and the different officers of the companies.)

57 Anaconda chose to accept the NatWest proposal. It not only provided for a bridging loan, sufficient to provide the funds to enable Anaconda to meet its operating needs, and to repay its loan debt to Anaconda, but it also met Anaconda’s longer term needs. There were actually two sets of bonds issued, in accordance with this proposal: bonds in the total sum of US$340 million, described as Fixed Rate Notes due 2007, and bonds in the further total sum of US$80 million, described as Floating Rate Notes due 2005. They were ranked equally in terms of security, and are aptly described as “senior”.

58 If one focuses on the position in June, in the period when Anaconda was considering the three competing proposals for the issue of high yield bonds, the work done by Salomon Brothers can hardly be described as working for Anaconda. It may be that, in fairness to Salomon Brothers, it is appropriate at this point to distinguish between Salomon Brothers Australia Ltd, which Anaconda had retained in 1995, and that company’s American affiliate, which made the proposal for the issue of the bonds. The 1995 mandate allowed Salomon Brothers Australia Ltd to act through affiliates, and to treat the work of affiliates as the work of Salomon Brothers Australia Ltd for fee-earning purposes, but that is not to the present point. What was being done in about June 1997 was not being done pursuant to the 1995 mandate, as Anaconda submitted, and it hardly seems accurate to say that it amounted to Salomon Brothers arranging the issue of the NatWest bonds - Salomon Brothers was trying to arrange for the issue of different bonds entirely.

59 Once Anaconda decided to accept the NatWest proposal, another complication enters the equation. I gather that the view was taken that a bond issue of US$420 million was so large as to require, in prudence, and given the need for haste, more than one lead manager. Negotiations then took place, with each of Salomon Brothers and CIBC New York soliciting a share in this work. Apparently, each of Salomon Brothers, CIBC New York, NatWest and Anaconda regarded the lead managing work as potentially profitable. In the event Anaconda chose to appoint NatWest, Salomon Brothers and CIBC New York as co-lead managers in the proportions of 62.5%, 20% and 17.5% respectively. I will return to this topic, when dealing with the supposed variation of the contract sued upon, but for the moment it seems sufficient to say after this decision to share the lead-managing, what Salomon Brothers did may be categorized in the same way as its work in the period immediately before Anaconda chose to accept the NatWest proposal: it was not work arranging the bonds within the meaning of the contract. Between 11 July and 21 August 1997, NatWest was Anaconda’s exclusive agent for the placement of the bonds: it was only from the latter date that either Salomon Brothers or the CIBC group was authorized to attempt to place them.

60 After this decision, work was carried out to implement it. I do not think I need say more about the evidence on this topic than that it shows that the three co-lead managers did a good deal of work in that capacity.

61 But the ultimate question here is whether Salomon Brothers arranged for this bond issue, within the meaning of the contract. The written submissions of Anaconda list a good deal of work done, but most of it relates to work of a preliminary nature, that is, work done as a preliminary to some bond issue in general, and not to the issue of these bonds. Considering the sum of money at stake, and the way in which the litigation was conducted generally, there is a surprising lack of evidence proffered by Anaconda in support of its proposition that Salomon Brothers arranged this bond issue. If one puts aside for a moment the work I have categorized as preliminary, the work done opposing the NatWest proposal and advocating the Salomon Brothers proposal that Anaconda rejected, the work done agitating for the position of co-lead manager once Anaconda decided to accept the NatWest proposal, and the work done as one of the three co-lead managers, there is practically nothing shown to have been done, capable of being described as arranging the bond issue.

62 I do not think it is significant, but for what it is worth, it cannot be said that what Salomon Brothers did in relation to these bonds can be said to have entitled it to a fee from Anaconda under the terms of the 1995 retainer, which provided for payment upon the submission to Anaconda of a proposal in the form of an indicative offer together with a timetable capable of acceptance by Anaconda “to lead-manage an International Capital Markets Issue” that is, a proposal answering this description made by Salomon Brothers.

63 Finally, on this topic, Anaconda submitted that it had accepted the NatWest proposal, which was substantially identical to the Salomon Brothers proposal, because the former had been made first, but the evidence does not support these contentions.

64 I therefore reject this line of defence, as to the sum of US$420 million.

65 There is one further aspect, which may be significant. Paragraph 9 of the second agreement drew a distinction between a result for Anaconda that attracted a higher rate of remuneration for the Mining Group, and a result that attracted a lower rate, depending on whether Salomon Brothers had arranged for certain funding, and in circumstances where Anaconda expected both the Mining Group and Salomon Brothers to do a lot of work that overlapped, at least in part. This seems to me to point towards the view that for the sentence to operate in favour of Anaconda, the work done by Salomon Brothers must be able to be seen to have been significantly connected with the result in question, and not merely incidentally connected with that result.

66 The plaintiffs submitted that the proper inference to draw from the evidence was that Anaconda had terminated the 1995 retainer of Salomon Brothers. Mr Masterman denied that this was so, and I accept his evidence to this effect, but it might be that the proper inference is that, although Anaconda did not terminate the retainer, it allowed the retainer to wither away on the vine: as already remarked there is a surprising lack of evidence of work actually done by Salomon Brothers, relating to the bonds in question.

67 Next, by its Reply the plaintiffs advanced a claim, not mentioned in the Summons, for a success fee in respect of 0.5% of the sum of US$80 million, being the sum NatWest agreed to advance to Anaconda by way of bridge loan. Anaconda paid a commitment fee to NatWest in relation to this loan, but did not make a drawdown on the agreement, because in the events that happened, the bond issue provided sufficient funds in sufficient time to make it unnecessary to draw down on the bridge loan facility.

68 I reject this claim. I do not think it can properly be said that, within the meaning of paragraph 9 of the second agreement, the US$80 million formed part of the Project’s total debt requirements. Further, the success fee was only payable upon the first drawdown on a facility, and there was no draw down. I regard the need for a drawdown as a condition precedent to payment of a success fee. (If leave had been sought to amend the Summons, I see no reason why I would not have granted it.)

69 Next, the plaintiffs make a claim for a success fee in respect of the issue of bonds for US$300 million, in effect issued by Glencore in November 1997 in respect of its 40% of the joint venture interest. I reject this claim also. It does not seem to me that this bond issue, for Glencore rather than for Anaconda, was within the contemplation of the second agreement. It is true that one can say that in a sense the US$300 million formed part of the Project’s total debt requirements, but that construction is a strained one.

70 If this view is wrong, it could not be said that Salomon Brothers arranged for this bond issue.

71 In summary, I hold that the Mining Group was entitled, subject to a consideration of the next line of defence, to a success fee, calculated as 0.5% of US$420 million, or US$2.1 million. The parties agreed that the appropriate exchange rate was US$0.687 to the Australian dollar, and that Anaconda was entitled to a credit in respect of $1,275,000, previously paid pursuant to sections A) and B) of the second agreement, so that the sum payable was $1,781,768 (and interest).

Variation of the contract

72 Anaconda pleaded that the contract sued upon had been varied in a telephone conversation between its Mr Forrest and Mr Spohler of CIBC New York, which took place on or about 7 August 1999. It said that in consideration of Anaconda agreeing to cause MMH to issue and sell to CIBC New York 17.5% of the bonds with a face value of US$340 million (part of the US$420 million bonds, mentioned above), the Mining Group agreed that no further amount would be payable by Anaconda to the Mining Group.

73 There was a substantial dispute between Messrs Forrest and Spohler about what was said during this conversation. It was common ground that there was a conversation in which the parties agreed that the share of CIBC New York in the then proposed bond issue would be 17.5%, CIBC New York having been seeking more, and Anaconda having been offering less. The issue between the two men is whether their agreement to fix on the figure of 17.5% was connected with any release by the Mining Group of its claim for a success fee. Mr Spohler denied that the topic was mentioned.

74 The Mining Group, supported by the plaintiffs, pointed to four objectively independent matters said to be inconsistent with Mr Forrest’s version of the conversation. First, there was no contemporaneous record of the alleged agreement. So far as the evidence goes, this is correct, and quite surprising if what Mr Forrest said was true, and the explanations given for the absence of any contemporaneous record are lame. Secondly, although Mr Forrest wrote letters to the Mining Group dated 15 December 1997 and 12 February 1998, debating the measure and later the existence of any debt claimed by the Mining Group against Anaconda, and going into some detail about these matters, he did not mention the existence of the supposed agreement. Again, his explanations in cross-examination were unconvincing. Thirdly, Messrs Lindsay and Gilman, officers of the Mining Group, gave evidence about a meeting they had with Mr Forrest on 25 November 1997 in which the Mining Group’s claim for a success fee was discussed and the existence of the supposed variation was not mentioned; and Mr Lindsay made a note about what had been discussed. According to Messrs Lindsay and Gilman, Mr Forrest debated Anaconda’s liability for the success fee, but did not assert the existence of the supposed variation. The response of Anaconda and of Mr Forrest to the statements of Messrs Lindsay and Gilman was delayed and unpersuasive. Fourthly, it seems perfectly clear that Mr Forrest did not tell Mr Masterman, the chief financial officer of Anaconda, of the supposed variation; and if the contract had been varied as Mr Forrest said it had been, it is quite improbable that he would have failed to tell Mr Masterman of this fact.

75 I have dealt with these four matters quite summarily, because they seem to me to be unanswerable, and because the details of the arguments advanced on these topics, together with cross references to the relevant evidence, are set out in paragraph 29 of the written submissions of the Mining Group of 5 February 2002.

76 There are two additional matters. First, Mr Spohler was an officer of CIBC New York, and had no direct or immediate connection with the Mining Group, nor any authority or apparent authority to negotiate with a stranger to the CIBC group, such as Anaconda, about fees supposedly due to the Mining Group. Moreover, it seems that he had no real interest in that subject matter. Secondly, neither Mr Forrest nor Anaconda asserted the existence of the alleged variation before 15 July 1999, and they provided no detail about it before August 2000.

77 Additionally, however, I prefer the evidence of Mr Spohler, who I regard as a truthful and reliable witness, to that of Mr Forrest, who I regard as quite untruthful. Indeed, I think it would be unsafe to rely on any account he has given, in or out of court, except to the extent that it is demonstrated by other evidence to be correct. His evidence was generally quite unimpressive, and his evidence about the telephone conversation of 7 August 1997 particularly so.

Estoppel

78 The plaintiffs contended that if, contrary to the case I have accepted as to the proper construction of the contract, it should be held that paragraph 9 of the second agreement operated so as to make it a condition precedent to payment of the success fee that the documents mentioned be executed, then Anaconda was estopped from relying upon this construction. They relied primarily upon a common law estoppel by convention, and alternatively upon an equitable estoppel, assuming that these remain as separate concepts: compare The Commonwealth v Verwayen (1990) 170 CLR 394. The history of the negotiation of the second agreement is as follows.

79 On 7 June 1996, Mr Richards of the Mining Group faxed a letter to Mr Masterman of the first defendant, enclosing a draft agreement. The first page of that draft read:

June 7, 1996
Agreement Between Anaconda Nickel NL and Canadian Imperial Bank of Commerce
Background
Anaconda has requested CIBC Wood Gundy (through Canadian Imperial Bank of Commerce (“CIBC”)) to assist, and act as Financial Advisor to, Anaconda in reviewing, structuring and advising on: (i) alternative Completion Support Packages for financing the development of the Murrin Murrin Project; and (ii) alternative financing structures, including possible “hybrid” financing structures involving combined mine project and infrastructure project financing(s). These Financial Advisory Services would be in addition to those contemplated in an Agreement dated March 29, 1996 between Anaconda Nickel and CIBC Wood Gundy Securities Inc.

Services to be Provided
Based upon a review of the Bank Feasibility Study and discussions with Anaconda management as to the key objectives/criteria in selecting a Completion Support Package:

Preparation of alternative Completion Support Packages which, in the opinion of CIBC, are theoretically achievable and worthy of detailed review/consideration.

Review and comment upon draft (and alternative) terms and conditions for key contracts which would underpin the Completion Support Packages including, but not limited to:
EPC(M) Contract(s)
Key Input Contracts (power supply, gas supply, technological services, etc.)
Third Party Funding Pool Support
Joint Venture Party Completion Support Guarantee(s)

Assist Anaconda in: (i) determining the feasibility and design of a “hybrid” financing structure; and (ii) structuring and negotiating a preferred Completion Support Package. Assist Anaconda in selecting and negotiating an alternative Completion Support Package should the preferred Package ultimately be determined to be non-achievable.

The foregoing services would be in addition to the following services which are already provided for in the existing Agreement, but which are repeated here for both ease of reference and in recognition of the linkage between the foregoing and following services in completing a Senior Debt Bank Financing.

80 The second page provided for the payment of a fee of $150,000 in respect of services provided up to and including 15 July 1996, and for the payment of fees thereafter calculated on a daily rate basis, varying with the identity of the person doing the relevant work. It also provided for the payment of out-of-pocket expenses.

81 On Monday, 10 June, Mr Richards faxed a further letter to Mr Masterman advising that he had just received the final Bank Feasibility Study. He dealt with this and other matters, spoke of a plan to go to Perth and to Murrin Murrin, and invited a reply to this fax and to his fax of June 7.

82 On 11 June, Mr Masterman replied, suggesting a face to face meeting in Perth as soon as possible.

83 On 25 June, Messrs van der Sluys and Richards faxed to Mr Forrest another draft agreement. This was in the following terms:

Agreement between Anaconda Nickel NL of Western Australia and Canadian Imperial Bank of Commerce of Toronto Canada (CIBC) in Association with CIBC Wood Gundy Australia Pty Limited

With the completion of the Bank Feasibility Study and the evolution of negotiations with potential equity participants and contractor participants, the terms set out under Section 4 in the Agreement of April 1st 1996 have been amended by inclusion of additional services and a revised fees schedule.

Anaconda has requested CIBC Wood Gundy Global Mining Group to provide additional assistance in reviewing, structuring and advising on alternative financing structures, including possible ”hybrid” financing structures involving combined mine project and infrastructure financing.

The following services are proposed in addition to all existing services provided to Anaconda on Senior Debt Project Finance:

Assisting Anaconda in determining the feasibility and design of a “hybrid” financing structure.
Assisting Anaconda in reviewing Infrastructure Financing proposals.
Assisting Anaconda in reviewing other tax based financing alternatives i.e. standard equity leasing, leveraged leasing, operating leasing and cross border leasing.
Reviewing and advising Anaconda in the completion and delivery of all financial modelling.
Coordinating the completion of technical due diligence by Senior Bank Lenders, Infrastructure Financing Lenders and Subordinated Debt Lenders; including coordinating preparation of a Request for Proposal for potential Independent Engineers and assisting Anaconda and the Lenders in selecting, contracting with and managing the Independent Engineer and Insurance Consultant.
Preparing an Information Memorandum for Senior Lenders that incorporates both Senior Bank and Infrastructure Financing.
Assisting Anaconda in negotiating a comprehensive Term Sheet and Loan Agreement with the Senior Bank and Infrastructure Lenders.
Reviewing and commenting upon draft Material Project Agreements (including EPC Contract, Power Supply, Gas Supply, Technological Services, Joint Venture Party Agreement(s), etc.)

The basis of payment for these services incorporate and replace the fee structure proposed in Section 4 of the Agreement of April 1st, 1996. The progressive fee structure is:

a payment of $A150,000 representing services up to July 19, 1996.
thereafter a “per diem” rate will apply. The “per diem” rate will be based on the following fee scale and payable monthly in arrears:

Managing Director $A2,500 per day
Director $A2,000 per day
Associate Director $A1,200 per day
Secretarial Support $A 400 per day

A fee of $A300,000 will be payable upon completion and delivery of the Senior Debt Information Memorandum and Anaconda’s acceptance of such Information Memorandum. Anticipated delivery at this stage will be within two weeks of the selection of the joint venture partner.
Upon execution of the Senior Bank Loan Agreement, Infrastructure Financing Loan Agreement (if applicable) and Subordinated Debt Agreement (if applicable), a fee of 9.5% of the Project’s total debt requirements.
Fees set out in (a), (b) and (c) above will be rebatable against any additional payment as defined by (d) above.

As before, Anaconda will reimburse all out of pocket expenses (except salary expenses) incurred by CIBC and CIBC Wood Gundy Australia Pty Limited, including (but not necessarily limited to); travel, accommodation, documentation preparation and pre-approved legal expenses.

84 There were then meetings in Perth on 25 and 26 June 1996 between Messrs Richards, van der Sluys and Maish on behalf of the Mining Group and Mr Masterman on behalf of Anaconda. During one of those meetings, Mr Masterman said that the Mining Group should be working on syndicating bank finance, and that if there was to be a success fee, it should be calculated by reference to the achievement of bank finance. Mr Richards replied, saying that he did not agree that the role of the Mining Group should be limited to banks only. He pointed out that financing the project was likely to be difficult, given that Anaconda had no assets other than the mining project, capable of being used as security, that the project was a huge one, using new mining technology, and that it was not located in North America. He said that no one knew what the shape of Anaconda’s financing package would be in the end. Mr Masterman responded, asking what would happen if Salomon Brothers provided debt financing for part of the debt, and Mr Richards replied, saying that if Salomon Brothers arranged a bond issue, that would be part of the total package, and that any success fee should be calculated on total debt.

85 On 27 June, Mr Masterman produced an entirely different draft contract, in these terms:

Agreement between Anaconda Nickel NL and CIBC Wood Gundy

With a target date of 31 July 1996, CIBC Wood Gundy agrees to deliver to Anaconda Nickel the following:

an Information Memorandum;
(ii) Terms and Conditions for Bank and Infrastructure Financing of the Murrin Murrin Project;
a First Stage Technical Assessment of the Murrin Murrin Project;
initial appointment of [an] Independent Technical Adviser to pave the way for Salomon Brothers to proceed with their bond analysis and as a starting point for the Banking Syndicate once it is formed;
an assessment of CIBC Wood Gundy’s willingness to lend around $75 million to the Murrin Murrin Joint Venture Project and a positive assessment from Ken Richards and Bernie Haystead that CIBC Wood Gundy would be willing to lend such a sum on the above terms and conditions.

On completion of the above, Anaconda Nickel will pay to CIBC Wood Gundy A$450,00.

CIBC Wood Gundy will continue to work on a basis of A$75,000 per month capped at A$200,000.

86 It is not clear just what happened in relation to this draft, but by 2 July it had apparently been abandoned. On that day Mr van der Sluys, in Sydney, faxed a new draft agreement to Mr Richards in Canada. It is not immediately apparent whether this was communicated to Anaconda. On 8 July, Mr van der Sluys sent by fax to Mr Masterman a draft agreement under cover of a note saying “as promised”, significantly different to the earlier drafts exchanged between the parties. It was in the following terms:

Agreement between Anaconda Nickel NL of Western Australia and Canadian Imperial Bank of Commerce of Toronto Canada (CIBC) In Association with CIBC Wood Gundy Australia Pty Limited

With the completion of the Bank Feasibility Study and the evolution of negotiations with potential equity participants and contractor participants, it is agreed that the terms set out under Section 4 in the Agreement of April 1st 1996 are amended by inclusion of additional services and a revised fees schedule.

Anaconda has requested CIBC Wood Gundy Global Mining Group to provide additional assistance in reviewing, structuring and advising on alternative financing structures, including possible “hybrid” financing structures involving combined mine project and infrastructure financing.

The following services are proposed in addition to all existing services provided to Anaconda on Senior Debt Project Finance:

Assisting Anaconda in determining the feasibility and design of a “hybrid” financing structure.
Assisting Anaconda in reviewing Infrastructure Financing proposals.
Assisting Anaconda in reviewing other tax based financing alternatives i.e. standard equity leasing, leveraged leasing, operating leasing and cross border leasing.
Reviewing and advising Anaconda in the completion and delivery of all financial modelling.
Coordinating the completion of technical due diligence by Senior Bank Lenders, Infrastructure Financing Lenders and Subordinated Debt Lenders; including coordinating preparation of a Request for Proposal for potential Independent Engineers and assisting Anaconda and the Lenders in selecting, contracting with and managing the Independent Engineer and Insurance Consultant.
Preparing an Information Memorandum for Senior Lenders that incorporates both Senior Bank and Infrastructure Financing.
Assisting Anaconda in negotiating a comprehensive Term Sheet and Loan Agreement with the Senior Bank and Infrastructure Lenders.
Reviewing and commenting upon draft Material Project Agreements (including EPC Contract, Power Supply, Gas Supply, Technological Services, Joint Venture Party Agreements(s), etc.)

The basis of payment for these services incorporate and replace the fee structure proposed in Section 4 of the Agreement of April 1st, 1996. The progressive fee structure is:

A) A payment of $A450,000 representing project debt advisory services up to July 31, 1996. This fee and accrued expenses beyond those already billed will be payable upon the earlier of:

(i) Loan Agreement closing; or
(ii) 30 November 1996; with interest accruing from 31 July 1996 onwards.

The date proposed has been nominated so as to allow consideration of the submissions received from joint venture equity participants on or about July 19th 1996. It is agreed that the selection of a joint venture participant(s) will impact upon the determination of the components of debt finance selected/sought.

The foregoing fee is intended to compensate for the completion of the following:

1. An Information Memorandum will be delivered completed to the maximum extent possible, taking account of the point to which joint venture negotiations have progressed. This Information Memorandum will contain detailed Terms and Conditions for a Bank Financing (and an Infrastructure Financing, if deemed to be attractive) for the Project.

2. CIBC will have completed a detailed “first stage” technical and financial review of the Project.

3. CIBC, working with Salomon Brothers, will have:

(i) prepared a Request for a Proposal by potential Independent Engineering candidates;
solicited proposals from the candidates; and
commenced a review of the proposals received.

It is expected that the Independent Engineer will be appointed by 31 July 1996 or shortly thereafter.

4. CIBC will advise (subject to formal CIBC management approval and completion of financial, technical and legal due diligence) Anaconda of the terms and conditions upon which CIBC would be:

(i) willing to underwrite a portion of senior bank debt for the Project; or
(ii) willing to invest monies in a structured equity investment in Anaconda and/or the Project.

B) Following completion of the above tasks the following fee structure is agreed for the implementation phase.

$A75,000 per month thereafter commencing on 1 August 1996, subject to:
a cap of $A200,000; and
an understanding that, should the workload and/or schedule protract/extend beyond that currently contemplated, these fees will be subject to renegotiation upwards.

Following execution of the Senior Bank Loan Agreement, Infrastructure Financing Loan Agreement (if applicable) and Subordinated Debt Agreement (if applicable), a fee of 0.5% of the Project’s total debt requirements will be due and payable to CIBC Wood Gundy. Half of the fee apportioned to each of those debt facilities will be payable at the time of the first drawdown of each facility on a pro-rated basis. The remaining half of the fee calculated after the drawdown of all debt facilities will be paid on the earlier of (i) Project Commissioning, or (ii) 31st March 1998. All payments received by CIBC Wood Gundy for provision of advice on debt formation, as described in Section (A) above, will be rebated against the final half payment of the success fee.

In the event that a decision is taken not to proceed with financing arrangements referred to herein, the receipt by CIBC Wood Gundy of the amount of $A450,000 and any subsequent fees billed on a monthly basis shall be deemed to be a termination fee for services. (I will omit – up to and including 31 July, 1996 as it becomes superfluous.)

As before, Anaconda will reimburse all out of pocket expenses (except salary expenses) incurred by CIBC and CIBC Wood Gundy Australia Pty Limited upon presentation, including (but not necessarily limited to); travel, accommodation, documentation preparation and pre-approved legal expenses.
Attached is an agreed timetable for completion of the services described and a list of the personnel comprising that CIBC Wood Gundy has selected for participation on the Team to deliver the services specified under this Agreement. It is agreed between the Parties to this Agreement that each will use best efforts to complete the duties outlined in accordance with the enclosed timetable…

87 Mr Masterman took a copy of that draft document, and made a series of manuscript alterations, which he proposed. The bulk of these relate to the description of the services to be provided by the CIBC companies to the first defendant and they are substantially reflected in the second agreement, as finally executed: see [15] above. More contentiously, he made alterations to the last four paragraphs. By his fax of about 10 July (the date is obscured by the photocopying process) he suggested four amendments. First, in the paragraph commencing “Following execution…” he changed the expression “Subordinated Debt Agreement”, so that it read “Subordinated Bank Debt Agreement”; secondly, he changed the expression “The Project’s Total Debt Requirements” so that it read “The Project’s Bank Debt Requirements”; thirdly, he changed the words at the end of that paragraph so that, instead of reading “… will be rebated against the final half payment of the success fee”, it read “… will be rebated on an equal pro-rated basis against each half payment of the success fee.”; and fourthly, the penultimate paragraph was changed so as to substitute a new definition of out-of-pocket expenses, more favourable to the first defendant. Nothing turns upon this change of definition.

88 Mr van der Sluys caused fresh copies to be typed up, incorporating the amendments suggested by Mr Masterman. On 10 July he sent one copy of that to Mr Masterman and another to Mr Richards by fax, under cover of a letter in these terms:

This is where I got to with Michael [Masterman] tonight. He has indicated that it is now in a form that he will present to Andrew [Forrest] for signature.

Subsequent to our discussion, I have left a voice mail for Michael to confirm to him that my recollection to your negotiating stance on the success fee issue was as I remembered it and contrary to his representation to me.

Accordingly I will be faxing Michael with a revision to the third last paragraph on the third page following, thereby omitting the words “bank” as underlined thus restoring the original proposals.
Please advise if you have any additional comments by telephone …

89 On 11 July Mr van der Sluys sent to Mr Masterman a fax in these terms:

Subsequent to our discussion last night I contacted Ken Richards to discuss the issue of the calculation of the success fee. I am aware that you also made contact with Ken.
Consistent with my indication to you last night, it was also Ken’s understanding that we did not agree to the success fee as being calculable on bank debt alone. Indeed it was out understanding that we agreed the point during discussions in Perth.
Accordingly I have reproduced page 3 of the Debt Services Agreement to reflect that understanding.
As indicated before we see our advisory role as encompassing all potential permutations of debt. In proposing the basis of success fee there were two key matters that we considered. They were:
An assessment of market rates for project financings of this type and complexity whereby we are expecting to receive a success fee in the order of $A2,000,000.
Advice given by us cannot be influenced in any way by the method of calculation of the success fee.
Should this require further discussion I will arrange a conference call to enjoin Ken Richards from his home.

90 This draft amended the preceding draft by deleting, in two places, the word “bank” that had been inserted by Mr Masterman. Messrs Forrest and Masterman then met, and jointly prepared a fax. They sent copies to each of Messrs Richards and van der Sluys. After opening pleasantries, the fax said:

91 Mr Masterman said in evidence that the date 7 June 1996, mentioned in the penultimate sentence, was an error, and that the reference should have been to the first agreement. Accompanying the fax, there was a copy of one page of the draft, altered in manuscript by Mr Masterman. In the paragraph commencing “B) Following Execution…” he changed the expression “On 1 August 1996” to “After completion of the above tasks which is expected to be 1 August 1996”; and he changed the expression the “Project’s total debt requirements” to “the Project’s total bank debt requirements and 0.1% of the US Bond requirements”.

92 There was then a conference telephone conversation involving Messrs Masterman, Forrest and Richards. Initially, each side adhered to its position. Then, on Anaconda’s case, Mr Richards said that he would accept 0.1% of the US Bonds, but that he required a slightly different wording, and he said that he would instruct Mr van der Sluys to attend to this. On Mr Richards’ evidence the concession was limited to 0.1% of Bond financing arranged by Salomon Brothers. It is common ground that, at this stage, no one expected to raise the whole of the project debt by the issue of bonds. Whilst I consider Mr Richards to be a reasonably impressive witness, the contemporaneous documents are more consistent with the Anaconda case, on this point.

93 On 11 July (Canadian time) Mr Richards faxed to Mr van der Sluys in Sydney a letter in these terms:

Further to our conversation last night, I called Michael Masterman and left a detailed “voice mail” for him, as per conversation (enclosed also is Michael/Andrew’s letter to me of yesterday – which we also discussed).

I’d suggest changing the Fee Letter as per enclosed. While the “July 31st” change requested by Michael is somewhat illogical, I don’t think it’s worth fighting over – and by agreeing with him, I think we’ll finally have the Agreement signed and end the saga.

94 The reference in the first paragraph of this letter to “Michael/Andrew’s letter” is a reference to the letter dated 11 July (Australian time) drafted by Messrs Masterman and Forrest, set out at [90]. In relation to the second paragraph, Mr Richards attached a copy of the draft agreement then under discussion, as it had been amended by Mr Masterman, noted at [91], with some further manuscript amendments of his own. In Section A)(ii) he changed the expression “31 July 1996” so that it read “completion of the below timetable which is expected on 31 July 1996”. In section B) he deleted the word ”bank” inserted by Mr Masterman, twice, and instead added to the expression “the Project’s total debt requirements” the words “(exclusive of US Bond requirements) and 0.1% of the US Bond requirements.”

95 Mr van der Sluys made a different change to the draft, and sent it on to Mr Masterman. (At this point, and at other points, the evidence is incomplete: objection was taken to the tender of some of the documents in “the bundle”. Some of these documents were admitted, by consent, on a limited basis; and in the case of other documents, the tender was not pressed. The written submissions contain references to documents in the last mentioned category, and I have put these submissions aside. None of the detail of these matters seems to me to be of real consequence.) The new draft prepared by Mr van der Sluys changed the expression used by Mr Richards:

…. A fee of 0.5% of the Project’s total debt requirements (exclusive of the US Bond requirements) and 0.1% of the US Bond requirements will be due and payable to CIBC Wood Gundy…

96 So that it now read:

…A fee of 0.5% of the Project’s total debt requirements (exclusive of any US Bond products forming the total project debt as arranged by Salomon Brothers) will be due and payable to CIBC Wood Gundy. A fee of 0.1% of any US Bond products arranged by Salomon Brothers will be payable to CIBC Wood Gundy.

97 Messrs Masterman and McDonald of Anaconda then telephoned Mr van der Sluys to challenge this change. Again, there is a conflict, and, again, the dispute does not seem significant, for Anaconda accepted the change, suggesting only some relatively minor clerical amendments of no present significance.

98 Thereafter, Mr Forrest travelled to Toronto. Whilst en route on 16 July, he sent a fax to Messrs McDonald (the Chairman of the first defendant) and Masterman, dealing with a letter to be sent to the Board of the first defendant. In his fax to Messrs McDonald and Masterman, Mr Forrest said, amongst other things, that the then proposed agreement (i.e. the agreement in the form in which it was later executed) needed to be changed in various respects, not presently relevant, except that Mr Forrest said:

Lastly, the Board needs to be informed of the 0.1% fee to CIBC Wood Gundy in the event that Anaconda elects to adopt US capital markets financing.

99 Notwithstanding the terms of that fax, Mr Forrest signed the Agreement on behalf of the First Defendant, obtaining from Mr Richards a “side letter” dated 18 July, which is in these terms:

Further to our meeting of July 17th and the executed Debt Advisory Services Agreement, as requested, we are pleased to provide the following clarifications, as per our discussions.

CIBC’s Role as a Potential Lender

With regard to CIBC advising Anaconda (subject to formal CIBC management approval and completion of financial, technical and legal due diligence) of the terms and conditions upon which CIBC would be willing to underwrite a portion of senior bank debt of the Project (refer point No. 4 on page 3 of the Agreement), as requested, it is understood that CIBC will be evaluating this underwriting opportunity as being in the US$75 to US $100 million range.

As discussed, a separate team within CIBC will be evaluating the lending opportunity, with this team being led by Gerry Straub. In our view, it is critical to separate the “debt advisory” and “lending” activities for the following reasons:

As your Debt Advisor, it is important that the “Debt Advisory Team” be working solely to the objective of assisting Anaconda in obtaining the most attractive senior debt facility available in the marketplace – without regard to the potential needs of CIBC as a direct lender. To the extent that CIBC’s requirements vary from the proposed Term Sheet, Anaconda can, with our assistance, weigh the advantages and disadvantages of modifying the Term Sheet to accommodate CIBC’s requirements. Indeed, CIBC’s response to the Term Sheet should be dealt with in exactly the same manner as the response from any other prospective lender.

The separation of the “debt advisory” and “lending” activities within CIBC will help alleviate concerns, if any, from other potential lenders (both Senior Bank and BOOT Lenders) as to CIBC’s “independence” as Anaconda’s Debt Advisor.

Fee Payment

As outlined in the Agreement, fees will accrue, and will be payable upon, the earlier of: (i) Loan Agreement closing; or (ii) November 3 1996. As discussed, the November 30th date was chosen as the “outside” date and in keeping with the Timetable which anticipates an “outside” date for Loan Agreement closing of November 15th. This being said, it is recognised that, despite the good intentions of everyone involved, the date for Loan Agreement closing could extend beyond November 30th. With this is mind, it is understood that, should loan agreement closing be delayed past November 30th, and on the assumption that a senior bank facility is still in syndication/documentation at that time, the fees otherwise payable on November 30th would continue to accrue interest, and would not be payable until the earlier of loan agreement closing or, say, January 31, 1997.
We trust you will find the foregoing to be in keeping with our discussion. Needless to say, we very much welcome the opportunity of working with you, Michael and your colleagues over the next few months in successfully completing our Debt Advisory mandate and in developing a relationship with Anaconda which will grow and strengthen in the years to come.

100 The first way in which the plaintiffs put their case was that, if the Mining Group had known that the second agreement contained the condition precedent in question, it would not have entered into the second agreement. In my view, this contention should be rejected for either of two reasons. First, as a matter of policy, courts should not entertain such an argument when the parties, having negotiated and bargained, have reduced their agreement to writing, as happened here: see the discussions in Johnson Matthey Ltd v A C Rochester Overseas Corporation (1990) 23 NSWLR 190, 195, State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170, 177 and Australian Co-operative Foods Ltd v Norco Co-operative Ltd (1999) 46 NSWLR 267 at [51]-[52].

101 In this case, the second agreement, read together with the side letter, if necessary, constituted the expression by the parties of their agreement, and it represented a compromise. It is not easy to construe, but it was a form of words each was content to sign, when each had refused to sign earlier drafts. It represents a far sounder basis for estimating what the parties agreed to than some estoppel, arising out of contentious materials.

102 Secondly, at a factual level, what ever else be said about the matter, I find it difficult to see how either party to these negotiations could ever say against the other that it relied upon something the other said or did during the negotiations as to the meaning of the words ultimately used. So far as I can tell, each party conducted the negotiations aggressively, seeking to achieve what kit wanted; rival drafts were sent back and forth, and amended and re-amended; and in the end each party rather grudgingly executed not what it wanted, but what it was prepared to live with.

103 The plaintiffs also advanced a second case in estoppel. They said that if they, or the Mining Group had been made aware that the assumption about the condition precedent was wrong, they and the Mining Group would have acted differently, in that the Mining Group would have worked exclusively towards the end of raising funds by way of bank loans, rather than assisting Anaconda in relation to the bond issues. Whilst this submission is more attractive than the earlier one, it seems to me that it must fail for either of two reasons, factually. First, I do not think there is any sound basis in the evidence for concluding that Anaconda would have been able to raise a sufficient amount of funds, by way of bank loans, within the period of time available (that is, sufficient to attract a success fee, having regard to the credit to be given in respect of other fees paid by Anaconda). The evidence of both Anaconda and the plaintiffs tended to show that that Glencore was not being co-operative, with the consequence that progress was likely to have been slow, and difficult to achieve; and it seems on the whole that, unless market conditions had changed when they did, so that raising the whole of the funds needed by way of issuing high yield bonds became possible, the efforts of the Mining Group would not have produced a success fee.

104 Secondly, the evidence does not permit the fashioning of a proper remedy, that is, an award of a sum of money that answers the claim; and I note that the plaintiffs suggested only an award that effectively construed the second agreement as they wished for. If one had to somehow assess the value of the extra work done, it would be necessary to disentangle the extra work done from the work done by way of providing general advice, and the work done by way of assisting CIBC New York as co-lead manager; and to put a value on this extra work, and the evidence does not permit this to be done.

The Plaintiffs’ Claim Against the Mining Group

105 This claim, summarised at [3], fails because of the findings made above under the heading “Variation of the Contract”: there was no variation to that contract, as Anaconda asserts. However, it seems desirable to make some additional findings in case the matter goes further.

106 I accept Messrs Lutes and Lindsay as truthful and reliable witnesses, and I accept that the inquiries made by the Mining Group were reasonable. I also accept each of the plaintiffs as truthful and generally reliable witnesses. If the plaintiffs otherwise succeeded against the Mining Group, it may be that there would be problems about the measure of the damages recoverable, but I express no view about these matters.

The Cross-claim

107 The Cross Claim concerns a success fee, payable under first agreement rather than the second agreement. The first agreement provided, in its paragraph 2, for the payment of a success fee of $300,000 in the event that the joint venture partner was Glencore, and $600,000 plus an additional sum calculated according to a formula if the joint venture partner was not Glencore. In the event, Anaconda paid the Mining Group a success fee of $600,000. It now says that it paid this sum, rather than $300,000, by mistake, and it sues to recover the difference between the sum paid and the sum it says it was liable to pay.

108 By early December 1996 both Anaconda and the Mining Group expected that Anaconda and Glencore would reach agreement to enter into a joint venture agreement, and the letter of intent was in fact executed on 6 December 1996. The Mining Group regarded the negotiated fee of $300,000 as inadequate and Mr van der Sluys asked Mr Maish to approach Mr Masterman, seeking payment of a higher sum. At that time, the Mining Group was also seeking prompt payment by Anaconda of three sums: $450,000 under paragraph 5 of the second agreement; $150,000 representing three months fees under paragraph 8 of the second agreement; and about $49,000 in disbursements incurred; and it was apparently common ground that Anaconda was in arrears, because of its shortage of funds. It badly needed the funds that came from Anaconda upon the execution of the letter of intent.

109 On 5 December 1996, there was a conversation between Messrs Maish and Masterman. According to Mr Maish, Mr Masterman was “elated” by the circumstances. Mr Maish raised the question of the outstanding invoices and Mr Masterman said that, “We will fix you up for the joint venture for the 600,000”. Mr Maish made a file note to that effect and I see no reason to doubt the general accuracy of his evidence about this conversation. In cross examination, he said that he thought at the time that Mr Masterman was mistaken as to the contractual sum due, but Mr Maish did and said nothing about it, except to report back to his superiors the apparent agreement to pay the higher sum.

110 On 12 December, there was a further meeting Messrs Maish and Masterman. Mr Maish said that he told Mr Masterman that the Mining Group did not think that the $300,000 agreed fee represented a proper sum, considering the amount of work which had been performed, and that the Mining Group sought the payment of $600,000; and he said that Mr Masterman agreed that $300,000 was inadequate. According to Mr Maish, Mr Masterman then said: “Send me an invoice for $600,000 and I will make sure it is paid.” Mr Masterman said that he did not recall the conversation, but could not deny that it might have occurred. Anaconda paid the Mining Group $600,000 in March 1997, and according to Mr Masterman, it was paid in error, and the error was only discovered when Anaconda was preparing to resist the plaintiffs’ claim in the present litigation.

111 Anaconda mounted a vigorous attack upon the credit of Mr Maish, but I regard him as an honest and generally reliable witness. I am wholly unready to accept the suggestion that the supposed conversation of 12 December did not occur. Anaconda also submitted that it had been unhappy with the performance of the Mining Group generally. Anaconda undoubtedly said words to that effect from time to time, but at other times it also praised the efforts of the Mining Group. Thus, on 17 December 1996, Mr Masterman wrote to the Mining Group in terms of praise, and, similarly, Mr Forrest wrote on 12 February 1998, disputing the plaintiffs’ claim the subject of the litigation, and saying in effect that he had agreed to CIBC New York being given a 17.5% share of the bond issue, “effectively a bonus”, because of the regard in which Anaconda held CIBC.

112 Just why and how Anaconda came to pay $600,000 rather than $300,000 is quite unclear to me. The debate came to investigate some of the details of the accounting practices of Anaconda, but this detail does not seem to me to do more than to cast some degree of doubt upon the credit of Mr Masterman. He made a written statement, tendered in his evidence in chief, in which he set out what authority he had, and did not have, to bind Anaconda. The Mining Group suggested that he breached the limits of his authority from time to time, and the evidence seems to tend to show that this is so. Then, the debate turned on some further details of Anacondas’ accounting practice, and the records as to this did not find their way into evidence. I doubt that it matters at all, but if it does, I would be content to infer that these records would not have assisted Anaconda.

113 Critically, however, I am left in doubt about Mr Masterman. So far as I can tell, he had and still has a (commendable) sense of loyalty to Anaconda and to Mr Forrest, but that sense of loyalty seems to have had a powerful influence upon his evidence. In the end, I say only that I am not satisfied that the money was paid by mistake. I do not feel able to make any finding as to why it was paid, but I accept the evidence of Mr Maish. It is unnecessary to go on to consider the other questions debated about the cross-claim, which fails.

114 The second, third and fourth defendants did not seek an order for costs against the plaintiffs. Instead, they sought an order that Anaconda pay their costs, on an indemnity basis, founding this submission upon the proposition that they had only been brought into the litigation because of the dishonesty of Mr Forrest. This submission has considerable force, but the second and third defendants are also parties to the cross-claim, and all three companies employed the one set of lawyers. In these circumstances, it does not seem appropriate to make an order for costs on an indemnity basis. However, it does seem appropriate to order that Anaconda pay the costs of the second, third and fourth defendants, both in relation to the plaintiffs’ claim, and in relation to the cross-claim.

115 I will give judgment for the plaintiffs against the first defendant for $1,781,768 together with interest. I invite submissions as to the amount of the interest. There will be judgment for the cross-defendants on the cross-claim. Subject to any submissions that might be made, I propose to order Anaconda to pay the costs of each of the plaintiffs and of the second, third and fourth defendants.

Last Modified: 08/08/2002

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Citations

Van der Sluys v Anaconda Nickel Nl [2002] NSWSC 673

Cases Citing This Decision

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6

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Magill v National Australia Bank Ltd [2001] NSWCA 221

Pipikos v Trayans [2018] HCA 39

CITATION:	Van der Sluys and anor v Anaconda Nickel NL and others [2002] NSWSC 673 revised - 7/08/2002
FILE NUMBER(S):	SC 50040/00
HEARING DATE(S):	3-6 and 10-13 December 2001, 17 and 18 April 2002.
JUDGMENT DATE:	31 July 2002
PARTIES :	Stephen van der Sluys and Richard Maish (Plaintiffs) Anaconda Nickel NL, CIBC World Markets Australia Corporate Pty Ltd, CIBC Wood Gundy Securities Inc and Canadian Imperial Bank of Commerce (Defendants)
JUDGMENT OF:	Brownie AJ at 116

COUNSEL :	Plaintiffs: R.J Webb First Defendant: R. McColl SC and R.S. Angyal Second, Third & Fourth Defendants: N.Perram
SOLICITORS:	Plaintiffs: Kemp Strang First Defendant: Andersen Legal Second, Third and Fourth Defendants: Mallesons Stephen Jaques
CATCHWORDS:	Contracts- construction- no question of principle. - Estoppel- construction of contract- not available
CASES CITED:	Magill v National Australia Bank Ltd [2001] NSWCA 221; Commonwealth v Verwayen (1990) 170 CLR 394; Johnson Matthey Ltd v A C Rochester Overseas Corporation (1990) 23 NSWLR 190, 195; State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170,177; Australian Co-operative Foods Ltd v Norco Co-operative Ltd (1999)46 NSWLR 267 at [51-52].
DECISION:	See [116]