Zuleika Gold Limited formerly known as Dampier Gold Ltd v Vango Mining Limited
[2022] WASC 357
•31 OCTOBER 2022
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: ZULEIKA GOLD LIMITED formerly known as DAMPIER GOLD LTD -v- VANGO MINING LIMITED [2022] WASC 357
CORAM: SMITH J
HEARD: 21-30 MARCH 2022
DELIVERED : 31 OCTOBER 2022
FILE NO/S: CIV 1609 of 2020
BETWEEN: ZULEIKA GOLD LIMITED formerly known as DAMPIER GOLD LTD
Plaintiff
AND
VANGO MINING LIMITED
First Defendant
DAMPIER (PLUTONIC) PTY LTD
Second Defendant
Catchwords:
Joint Venture Agreement - Contract - Alleged breaches and repudiation - Whether plaintiff earnt‑in an interest in a mining tenement - Construction of terms of joint venture agreement - Implied terms - Whether term to co‑operate implied - No new principle - Turns on own facts
Legislation:
Nil
Result:
Declaration that plaintiff has a beneficial interest of 4.1% in Mining Lease 52/183 and that the defendants hold 4.1% of their collective legal interest on trust for the plaintiff
Order for transfer 4.1% of legal interest to plaintiff
Category: B
Representation:
Counsel:
| Plaintiff | : | S Penglis SC & B Tariq |
| First Defendant | : | D Chandler |
| Second Defendant | : | D Chandler |
Solicitors:
| Plaintiff | : | Bennett |
| First Defendant | : | Lawton Macmaster Legal |
| Second Defendant | : | Lawton Macmaster Legal |
Cases referred to in decision:
Armada Balnaves PTE Ltd v Woodside Energy Julimar Pty Ltd [2022] WASCA 69
Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 6] [2019] WASC 5
Billabong Gold Pty Ltd v Vango Mining Ltd [No 2] [2021] WASC 459
Binningup Nominees Pty Ltd v Mirvac (WA) Pty Ltd [2021] WASCA 130
CPB Contractors Pty Ltd v JKC Australia LNG Pty Ltd [No 2] [2017] WASCA 123
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544
EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23
Electricity Generation and Retail Corporation trading as Synergy v EIT Kwinana Partner Pty Ltd [2022] WASCA 3
Girgis v Poliwka [No 6] [2019] WASC 230
James Point Pty Ltd v The Minister for Transport [No 3] [2018] WASC 277
McCourt v Cranston [2012] WASCA 60
Patman v Fletcher's Fotographics Pty Ltd (1984) 6 IR 471
Recce Pharmaceuticals Ltd v Brown [2022] WASCA 66
Table of Contents
1.0 Introduction
1.1 The parties and the action
1.2 The issues raised by the plaintiff
1.3 A summary of the defence
1.4 The result
2.0 The witnesses
2.1 Legal principles - lay witnesses
2.2 The plaintiff's witnesses
2.3 The defendants' witnesses
3.0 Background
3.1 Events that occurred prior to the parties entering into the BTS Agreement
3.2 The parties enter into the BTS Agreement on 12 May 2017
4.0 Issue 1 - Whether, on a proper construction of the BTS Agreement, the plaintiff earned any Joint Venture Interest and, if so, what percentage was earned‑in
4.1 The construction of the Binding Terms Sheet - General legal principles
4.2 First part of Issue 1 - During the Earn‑in Period, did the plaintiff earn any Joint Venture Interest in the Tenement?
4.3 Disposition – First part of Issue 1 – The plaintiff earned in a Joint Venture Interest
4.4 The second part of Issue 1 – Did the plaintiff earn‑in a Joint Venture Interest of 4.1% or 11.87%?
4.5 Disposition - The second part of Issue 1 – The plaintiff earnt‑in a Joint Venture Interest of 4.1%
5.0 Issue 2 - Whether the defendants breached the terms of, and wrongly repudiated, the BTS Agreement
5.1 Events that occurred after entering into the BTS Agreement
5.1.1 The formation of the Joint Venture Committee and the respective parties' responsibilities as exploration manager and development manager
5.1.2 The termination of the Ore Treatment Agreement by notice dated 24 July 2017
5.1.3 Vango begins to put in place steps to develop the Tenement without the involvement of Zuleika after the termination of the Ore Treatment Agreement
5.1.4 The defendants make repeated statements to the effect that they had not yet entered into a binding joint venture agreement with Zuleika
5.1.5 The defendants claim after the Ore Treatment Agreement was terminated 'other issues arose' which impacted on the parties' relationship and required that the parties renegotiate the CAPEX for Zuleika to earn‑in a 50% interest in the Tenement
5.1.6 Zuleika sends to the defendants a draft farm‑in and joint venture agreement in November 2017
5.1.7 Meetings of the Joint Venture Committee in 2018 and attempts made by Zuleika to agree a budget for Expenditure for approval of its contributions to Expenditure, and for it to engage in exploration work on the Tenement
5.1.8 Meetings of the Joint Venture Committee and the positions taken by the parties in 2019
5.1.9 Events leading to the termination of the BTS Agreement by the defendants
5.2 Principles - Repudiation and the implied terms
5.2.1 Repudiation
5.2.2 Terms implied by law in contracts
5.3 The defendants breached the terms of, and wrongly repudiated, the BTS Agreement by preventing Zuleika from contributing to Expenditure
5.4 The defendants breached the terms of the BTS Agreement by conducting exploration operations without prior approval of the Joint Venture Committee or the involvement of Zuleika, and funded Tenement costs, prepared budgets and engaged in project management without prior approval by the Joint Venture Committee
5.5 The defendants breached the BTS Agreement by denying that Zuleika had an equitable interest in the Tenement and wrongfully asserted that the BTS Agreement had lapsed on 14 November 2019
5.6 The defendants failed to negotiate in good faith and use their best endeavours to execute a formal detailed joint venture agreement and breached cl 13 of the BTS Agreement
6.0 The defendants refused to transfer a beneficial interest to Zuleika and Zuleika was ready, willing and able to perform its obligations pursuant to the terms of the BTS Agreement
7.0 Disposition
SMITH J:
1.0 Introduction
1.1 The parties and the action
The plaintiff, Zuleika Gold Ltd whose name was Dampier Gold Ltd,[1] (Zuleika) commenced this action by a writ on 25 May 2020 against the first defendant, Vango Mining Ltd (Vango), and the second defendant Dampier (Plutonic) Pty Ltd (Dampier Plutonic).
[1] The plaintiff filed an amended writ of summons dated 9 March 2021 on 12 March 2021 after it had changed its name to Zuleika Gold Ltd.
Since on or about 23 August 2016, Vango has been the holding company of Dampier Plutonic.
The defendants are the registered holders of Mining Lease 52/183. Mining Lease 52/183 is located north‑east of Meekatharra in the State of Western Australia and within the Marymia‑Plutonic Greenstone Belt on which an underground gold mine known as Keillor 2 (K2) is located.
Zuleika and the defendants entered into a binding terms sheet agreement on or about 12 May 2017 (BTS Agreement),[2] which entitled Zuleika to earn‑in an interest of up to 50% in Mining Lease 52/183, which is defined as 'the Tenement' in cl 26 of the BTS Agreement.[3] Mining Lease 52/183 comprised three deposits:
(a)the K2 deposit which comprised of an open pit and away from the open pit access to the underground deposit by a decline from a boxcut;
(b)the K1 deposit comprised of an open pit; and
(c)a deposit known as PHB‑1.[4]
[2] Exhibit 349; Although Zuleika defines the binding terms sheet in its Second Further Re-Amended Statement of Claim filed on 30 March 2022 (Statement of Claim) as the JVA, to avoid confusion with negotiations for a detailed formal joint venture agreement within the meaning of cl 13 of the binding terms sheet, the binding terms sheet entered into on or about 12 May 2017 is referred to in these reasons as the BTS Agreement.
[3] Exhibit 349; defined in cl 26 to include Mining Lease 52/183.
[4] Exhibits 868 and 869; ts 71, 224, 228, 271.
At all material times, from the time the BTS Agreement was entered into, Vango holds 62.5% and Dampier Plutonic holds 37.5% of 96 shares in Mining Lease 52/183.[5]
[5] Exhibit 776.
It is not in dispute that the parties agreed, pursuant to the terms of the BTS Agreement, Zuleika could acquire an interest in the Tenement and form an unincorporated joint venture in respect of the development of the Tenement.
It appears from the evidence that the main focus of work on the Tenement during the Earn‑in Period of the BTS Agreement[6] was that it was intended to dewater, refurbish the K2 mine, and bring into production the K2 deposit.
1.2 The issues raised by the plaintiff
[6] Definition in cl 2(c) of the BTS Agreement as two years from the Commencement Date.
Zuleika claims during the Earn‑in Period the defendants engaged in conduct that constituted a clear repudiation of the BTS Agreement in that their conduct demonstrated a clear unwillingness on their part to substantially perform the BTS Agreement in accordance with its terms; and the defendants acted substantially inconsistent with their obligations under the BTS Agreement.
Zuleika's main claims are that the defendants:
(a)during the Earn‑in Period, repeatedly breached express and implied terms of the BTS Agreement by engaging in conduct to prevent Zuleika from earning‑in a Joint Venture Interest[7] of up to 50%, and repeatedly sought to 'tear up the BTS Agreement' and negotiate a new joint venture agreement on terms significantly more favourable to the defendants;
(b)wrongfully asserted that:
(i)the BTS Agreement had elapsed at the expiration of the Earn‑in Period;[8] and
(ii)Zuleika had not earnt any interest in the Tenement in circumstances where immediately upon the parties executing the BTS Agreement, Zuleika was deemed to have contributed the sum of $245,239.78 during the Earn‑in Period. By this it had in fact earnt‑in and acquired at least a 4.1% Joint Venture Interest;
which Zuleika claims is conduct that constituted a clear repudiation of the BTS Agreement, entitling Zuleika to accept the defendants' wrongful repudiation, terminate the BTS Agreement on 12 February 2020, and seek relief.
[7] Exhibit 349; defined in cl 26 to mean a Party's undivided interest (expressed as a percentage) in: (a) the obligation, subject to the terms of the BTS Agreement, to contribute to all Expenditure; (b) the ownership of and the right and obligation to receive in kind and to dispose of products produced by the Joint Venture; (c) the beneficial ownership as a tenant in common of the Tenement, and if applicable, the K2 Area; and (d) all other rights, benefits, liabilities and obligations accruing to or incurred by or on behalf of the Parties in, under or arising out of the BTS Agreement.
[8] Exhibit 349; within two years from the Commencement Date, being the date the last of the parties executed the BTS Agreement.
The issues to be determined in the action are:
Issue 1
(1)whether on the proper construction of the BTS Agreement, Zuleika earned any Joint Venture Interest during the Earn‑in Period and, if so, did it earn‑in a Joint Venture Interest of 4.1% or 11.87%; and
Issue 2
(2)whether the defendants breached the terms of, and wrongfully repudiated, the BTS Agreement by:
(a)preventing Zuleika from contributing to Expenditure[9] by repeatedly refusing to agree to any resolution to this effect at Joint Venture Committee meetings, and refusing to approve any Expenditure schedules or development work programs until or unless Zuleika agreed to an alternative higher CAPEX[10] figure, in breach of:
[9] Exhibit 349; as defined in cl 2(a).
[10] Exhibit 349; is recorded in definition of CAPEX in cl 26 that the capital cost estimate for the development of the mine on the Tenement was $6 million as at the Commencement Date.
(i)three implied terms (the duty to co‑operate in progressing the Joint Venture, the duty not to prevent the fulfilment of the BTS Agreement, and to do all things necessary to enable each other party to have the benefit of the BTS Agreement);[11] and
[11] Statement of Claim, par 14.
(ii)the terms of the BTS Agreement, particularly cl 26 (definition of CAPEX), cl 2(a) and cl 2(c);
(b)by denying and continuing to deny that Zuleika had an equitable interest in the Tenement because pursuant to cl 3(a) of the BTS Agreement, immediately upon all parties executing the BTS Agreement, Zuleika was deemed to have contributed $245,239.78 as part of its contribution to Expenditure and by wrongfully asserting that the BTS Agreement had lapsed on 14 November 2019;
(c)conducted exploration operations without prior approval of the Joint Venture Committee[12] or Zuleika and without the involvement of Zuleika, during the extended Earn‑in Period,[13] in breach of:
[12] Exhibit 349; established by cl 4.
[13] It is common ground that by agreement the Earn‑in Period was extended from two years to 30 months.
(i)cl 5(a) and cl 5(c)(i); and
(ii)three implied terms (the duty to co‑operate in progressing the Joint Venture, the duty not to prevent the fulfilment of the BTS Agreement, and to do all things necessary to enable each other party to have the benefit of the BTS Agreement);[14]
[14] Statement of Claim, par 14.
(d)funding Tenement costs, prepared budgets and engaged in project management (including maintaining the Tenement in good standing) without prior approval by the Joint Venture Committee in breach of and as required by cl 4(c)(vi) and cl 9;
(e)failing to negotiate in good faith and use their best endeavours to execute a formal detailed joint venture agreement, to replace the BTS Agreement, on normal terms embodying the terms and conditions contained in the BTS Agreement, in breach of cl 13; and
(f)there was a repeated failure by Vango to acknowledge that the parties had entered into a binding joint venture agreement by entering into the BTS Agreement, including claiming the agreed terms were subject to a comprehensive agreement.
Issue 3
(3)whether the defendants presently hold any Joint Venture Interest on trust for Zuleika, and whether Zuleika was and is entitled to be provided with a duly executed transfer in respect of its Joint Venture Interest in the Tenement pursuant to cl 2(d), to enable Zuleika to be registered as a legal and beneficial holder of either 4.1% or 11.87% of the Tenement; and
Issue 4
(4)whether Zuleika has suffered loss and damage by reason of the defendants' breaches and wrongful repudiation of the BTS Agreement.
Orders were made by consent on 11 February 2022 to the effect that Zuleika's claim for damages (Issue 4) be deferred, and be tried separately from the liability issues (Issues 1 to 3).
Issue 1 has two parts. The first part of Issue 1 is whether, on the proper construction of the BTS Agreement, Zuleika earned any Joint Venture Interest during the Earn‑in Period. This part of Issue 1 involves a question of law, and turns solely upon the proper construction of cl 1(a), cl 1(b), cl 2(a), cl 2(c), cl 2(d) and cl 3(a) of the BTS Agreement.
The second part of Issue 1 is whether Zuleika earned a Joint Venture Interest of 4.1% or 11.87% during the Earn‑in Period. The question turns upon a mixed question of law and fact.
The resolution of the second part of Issue 1 turns first upon proper construction of cl 1(b), cl 2(a), 2(b), 2(c) and the second paragraph of cl 2(d), and whether the second paragraph of cl 2(d) requires Zuleika to give notice to the defendants within 12 months of the Commencement Date. If notice is not required to be given within 12 months of the Commencement Date, a question of fact arises as to what was the total amount of CAPEX actually expended on Expenditure by the end of the Earn‑in Period.
Issue 2 involves mixed questions of fact and law. The question of law involves the proper construction of the functions and duties of the Joint Venture Committee and the separate functions of the parties under the terms of the BTS Agreement. The issues of fact go to the conduct of the parties during the Earn‑in Period, and whether the defendants breached their obligations and repudiated the terms of the BTS Agreement.
Issue 3 only arises if Zuleika is successful in its argument in respect of either the first or the second part of Issue 1. The defendants concede that if it can be found that Zuleika earned a Joint Venture Interest, that interest is 4.1 % (not 11.87%) and they hold on trust for Zuleika a 4.1% Joint Venture Interest in the Tenement.[15]
[15] Defendants' Opening Outline of Submissions, par 5.
The defendants also contend that even if it can be found that Zuleika earned a Joint Venture Interest, it should be found that the defendants did not repudiate the BTS Agreement and the Joint Venture[16] continues, with the defendants holding on trust for Zuleika a 4.1% Joint Venture Interest.
1.3 A summary of the defence
[16] Exhibit 349; as defined in cl 1(a) of the BTS Agreement.
As to the proper construction of the BTS Agreement, the defendants contend the bargain between the parties recorded in the BTS Agreement was clear; Zuleika may earn a 50% Joint Venture Interest (no more or less) by expending $3 million (no less). However, because Zuleika did no work and expended no monies during the 30 month term of the BTS Agreement, Zuleika does not have any Joint Venture Interest. Put another way, the defendants argue that in the absence of any notice given in accordance with the second paragraph of cl 2(d) (during the first 12 months of Earn‑in Period) unless, and until, Zuleika had expended $3 million in the Earn‑in Period, it could not earn‑in any Joint Venture Interest in the Tenement.
The defendants also argue that even if the BTS Agreement is construed so that Zuleika did earn a Joint Venture Interest, in all of the circumstances the defendants' conduct during the extended Earn‑in Period of 30 months was not repudiatory. In particular, the defendants claim that:
(a)Zuleika did nothing to advance the interests of the parties during the term of the BTS Agreement;
(b)the defendants did not stop Zuleika expending money for the purposes of earning a Joint Venture Interest, and the defendants expected Zuleika to do the work for which it would earn a Joint Venture Interest;
(c)insofar as the defendants' insistence on a revised CAPEX is relied on as a repudiation of the BTS Agreement, this was not for the defendants' own self‑interest but for the mutual interest of the parties in potentially developing the K2 deposit;
(d)a revised CAPEX was necessary because, among other reasons, the parties had only one month into the term of the BTS Agreement agreed to terminate the Ore Treatment Agreement (which at that time both defendants were a party together with Billabong Gold Pty Ltd)[17] pursuant to which ore from K2 (once refurbished and operational) would be treated to produce gold;
(e)the Joint Venture Agreement negotiations for a formal agreement were immaterial because at no time during those negotiations did Zuleika have any Joint Venture Interest;
(f)the defendants acted in accordance with the law to keep the Tenement in good standing, preserving the opportunity for Zuleika to earn a Joint Venture Interest; and
(g)the defendants (acted in good faith) by agreeing to extend the term of the BTS Agreement to allow Zuleika a longer period to earn a Joint Venture Interest.
[17] Exhibit 309; the Ore Treatment Agreement was entered into by the defendants and Northern Star Resources Ltd and is dated 23 September 2014. Northern Star entered into an asset sale and purchase agreement with Billabong Gold Pty Ltd on 12 August 2016, and part of the sale acquisition Northern Star assigned its interests in the Ore Treatment Agreement to Billabong Gold.
If the defendants' construction of the BTS Agreement and the defendants' factual contentions are accepted, the defendants contend that no issue of breach or repudiation arises and Zuleika's claim must be dismissed.
1.4 The result
For the reasons that I give below, I am satisfied that Zuleika has proved that the defendants breached the express and implied terms of the BTS Agreement as follows:
(a)the defendants breached the three pleaded implied terms and cl 2(a) and cl 2(c) by preventing Zuleika from contributing to Expenditure during the Earn‑in Period;
(b)the defendants breached cl 5(a) and cl 5(c)(i) and the three pleaded implied terms by carrying out exploration activities without the prior approval of the Joint Venture Committee, or Zuleika and without the involvement of Zuleika as exploration manager of the Joint Venture who had responsibility for the conduct of all exploration operations;
(c)the defendants funded Tenement costs, prepared budgets and engaged in project management without prior approval by the Joint Venture Committee in breach of and as required by cl 4(c)(vi) and cl 9;
(d)the defendants failed to adhere to the obligations in cl 18 and the implied term that the parties co‑operate by failing to do all acts and things that may be reasonably required by Zuleika to effectively carry out and give effect to the terms and intentions of the BTS Agreement. In particular, the defendants breached cl 18 and failed to co‑operate by failing to make reasonable efforts to participate in the arrangement of and, by its representatives, attend Joint Venture Committee meetings and to reach determinations consistent with the terms of the BTS Agreement;
(e)the defendants breached the first paragraph of cl 2(d) by not providing Zuleika with a duly executed transfer in respect of its Joint Venture Interest it had earned at the expiry of the extended Earn‑in Period; and
(f)the defendants breached cl 13 by:
(i)failing to negotiate in good faith and by attempting to negotiate a formal joint venture agreement to replace the BTS Agreement that did not embody the terms and conditions contained in the BTS Agreement, which conduct also breached cl 18; and
(ii)failing to respond to Zuleika's revised draft farm‑in agreement.
As the facts of each of these breaches set out below demonstrate, each express and implied term breached by the defendants were significant and serious departures from the obligations imposed on the defendants by the BTS Agreement, which breaches constituted repudiation of the BTS Agreement by the defendants. In light of the fact that each breach was significant and constituted serious departures of the defendants' obligations, it is not necessary to find that in the case of each breach whether each was a breach of an essential or an intermediate term. However, I have decided that some terms were fundamental terms of contract.
I am also satisfied that Zuleika has proved the defendants repudiated the BTS Agreement by a combination of acts and omissions that occurred from at least June 2017 until the extended Earn‑in Period expired on 12 November 2019. The defendants' conduct would convey to a reasonable person that they were unwilling to be bound by the terms of the BTS Agreement. These acts and omissions can be summarised as follows:
(a)the defendants repeatedly stated through their representative, Mr Bruce McInnes, the executive chairman of Vango and a director of Dampier Plutonic, that they wanted to tear up the BTS Agreement and enter into a new arrangement;
(b)the defendants repeatedly stated through their representatives that the BTS Agreement was not binding;
(c)the defendants persistently failed to approve contributions by Zuleika to Expenditure by:
(i)not approving resolutions Zuleika put before the Joint Venture Committee; and
(ii)demanding that unless Zuleika agreed to a revised CAPEX, the defendants would not approve contributions by Zuleika to Expenditure and tranches of Expenditure; and
in circumstances where there was exploration and rehabilitation work required to be undertaken before the commencement of the development and production of ore from the Tenement;
(d)failing to acknowledge Zuleika's deemed contribution to Expenditure, and denying that Zuleika had any beneficial interest in the Tenement;
(e)failing to agree and implement exploration programs by approving resolutions before the Joint Venture Committee;
(f)undertaking exploration activities on the Tenement without the approval of the Joint Venture Committee, and without inviting Zuleika to participate;
(g)funding Tenement costs, prepared budgets and engaged in project management (including maintaining the Tenement in good standing) without prior approval by the Joint Venture Committee;
(h)failing to negotiate in good faith and use their best endeavours to execute a formal detailed joint venture agreement, to replace the BTS Agreement, which conduct included:
(i)claiming that the BTS Agreement was not binding on the defendants and was subject to a condition precedent of entering into a comprehensive agreement; and
(ii)attempting to negotiate a new joint venture agreement that was materially inconsistent with the terms of the BTS Agreement;
(i)failing to co‑operate with Zuleika to progress the Joint Venture after the termination of the Ore Treatment Agreement, and preventing the fulfilment of the terms of the BTS Agreement and not doing all things necessary to enable Zuleika to have the benefit of the BTS Agreement;
(j)not providing Zuleika with all relevant documents it requested in its agenda sent to the defendants on 9 July 2018 which related to work carried out on the Tenement by the defendants, and included exploration, planned drill programs, budgets, contracts timeline and reports, mythological and geotechnical test‑work, decline refurbishment, mind development, or treatment options, access agreements, contracts and approvals, Tenement status reports and access agreements; and
(k)wrongfully asserting on 14 November 2017 that the BTS Agreement had lapsed.
In addition, for the reasons I give in 5.3 of these reasons, I am satisfied that the conduct the defendants engaged in to prevent Zuleika from contributing to Expenditure during the Earn‑in Period, when considered alone, is conduct that was sufficient to prove that the defendants repudiated the BTS Agreement.
I am also satisfied that the defendants' wrongful conduct by these acts and omissions entitled Zuleika to accept the repudiation and terminate the BTS Agreement.
2.0 The witnesses
2.1 Legal principles - lay witnesses
The most reliable indication of a person's knowledge of transactions and events is not their recollection of what was said by them and others several years ago, it is what they did and how they conducted themselves at the relevant time.
Contemporaneous, or near contemporaneous, documents provide more valuable and revealing information than what may be flawed attempts at recollection of those facts by witnesses, in particular, those with an interest in the outcome of the litigation. Contemporaneous statements in the form of email communications and other records of contemporaneous communications, in light of the contemporaneous documentary record more generally, are likely to be a more accurate reflection of the underlying events than the later witness statements prepared for the purpose of the litigation at a time when false memories can intrude.[18]
[18] Girgis v Poliwka [No 6] [2019] WASC 230 [123]; citing Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 6] [2019] WASC 5 [26(f), (g)].
Consequently, in assessing evidence which relies upon the recollection of events which occurred sometime ago, I have placed significant weight upon contemporaneous documents and upon inferences that can be properly drawn from that evidence. Where it is possible to establish objective facts from their evidence, I have assessed the written and oral testimony of each witness in light of the inherent probabilities of particular versions of events, in the context of established facts.
2.2 The plaintiff's witnesses
Zuleika adduced evidence from three witnesses.
The first was Mr Malcolm Carson who was the former executive chairman of Zuleika.
Mr Carson held academic qualifications in geology, economics, and mineral and resource management. He had a lengthy career working as an exploration geologist and manager, and held directorships in a number of mining companies. He was appointed to the board of Zuleika and Dampier Plutonic in May 2014.[19]
[19] Exhibit A, pars 3, 8 ‑ 10, 17 ‑ 18.
Unfortunately, by early January 2022, Mr Carson was terminally ill. As a result, his evidence was given de bene esse in late January 2022. By consent, Mr Carson's non‑contentious evidence in chief was given by way of an edited witness statement, and marked for identification. He also gave some brief oral evidence by audio‑visual link in two short hearings, on Saturday 22 January 2022 and on Tuesday 25 January 2022.
When the trial commenced, Mr Carson's non‑contentious witness statement[20] was tendered into evidence, subject to a number of objections made by the defendants on grounds of relevance, which objections I have had regard to in making relevant findings of fact in these reasons. The transcript of Mr Carson's oral evidence was also tended into evidence.[21]
[20] Exhibit A.
[21] Exhibit B.
The second witness called by Zuleika is also a director of Zuleika, Ms Hui Guo (known as Annie Guo). Ms Guo holds qualifications in economics and finance, and has substantial work experience in mergers and acquisitions with a focus on mining and resource sectors. Ms Guo became an alternative director of Zuleika in November 2013 and was appointed a director in June 2015. In addition, she was director of Dampier Plutonic from May 2014 until August 2016. Ms Guo became the managing director of Zuleika in October 2020.
Because of Covid 19 restrictions that were in place at the time of trial, Ms Guo and all of the other witnesses who gave evidence in the proceedings, with the exception of one of the defendants' witnesses, gave evidence by audio‑visual link. By consent, Ms Guo's evidence in chief was given in writing in the form of an edited witness outline.[22]
[22] Exhibit C.
The third witness called by Zuleika was Zuleika's company secretary, Mr Michael Higginson. Mr Higginson was appointed a director of Zuleika, after the death of Mr Carson, in February 2022.[23] Mr Higginson is by occupation a professional company secretary for several companies including Dampier. He gave evidence by audio‑visual link from his office in Brisbane. By consent, he also gave his evidence in chief in writing in the form of an edited witness outline.[24]
[23] ts 210.
[24] Exhibit D.
Zuleika's case does not stand or fall on its witness evidence. Zuleika is able to make out its case of breach and repudiation on the undisputed contemporaneous documentary evidence, and on the oral evidence of Mr McInnes who gave evidence for the defendants.
However, I did find all of Zuleika's witnesses were credible and their evidence was reliable.
Turning first to Mr Carson and Mr Higginson, I am of the opinion that they each gave truthful and reliable evidence for the following reasons:
(a)Mr Carson's evidence is corroborated in almost all material respects by comprehensive contemporaneous records that were not only kept by Zuleika, but also by Vango (in particular Vango's minutes of Joint Venture Committee meetings). In any event, most of Mr Carson's evidence was not in contest and not the subject of cross‑examination. In addition, the defendants in their written closing submissions note that Mr Carson gave evidence in very difficult circumstances, and concede he was honest and credible;
(b)Mr Higginson's evidence was relatively short and his evidence was confined to the taking of minutes at Joint Venture Committee meetings. The defendants in their written closing submissions also concede that Mr Higginson was an honest and credible witness, but contend that occasionally his oral evidence tended toward submissions in support of Zuleika's case about what was said at particular meetings. I do not accept this to be the case. Mr Higginson is by occupation a professional minute taker. When he was cross‑examined he recognised limits of his respective recollections and, without contest, he conceded matters that he could not recall or were not within his knowledge. In any event, Zuleika submits that it is not necessary to prefer the minutes taken by Mr Higginson on behalf of Zuleika to the minutes prepared by the defendants to make out its case of breach and repudiation of the BTS Agreement. Zuleika says that when making findings about material statements made at Joint Venture Committee meetings by the parties' representatives, the court need not look any further than the defendants' minutes.
Ms Guo's evidence was also relatively short. I found Ms Guo to be a reliable witness in respect of the material and relevant issues between the parties. This is because when cross‑examined about what was said in some of the Joint Venture Committee meetings, her evidence about what she independently recollected, was not inconsistent with what is stated in the defendants' minutes of those meetings.
Although Ms Guo appeared to have a very high opinion of her experience in mining operations and geology when she does not have any formal qualifications in geology, mining or engineering, she was not asked, either in examination in chief or in cross‑examination, any relevant questions about her opinions about any technical aspects of mining operations. Consequently, I did not find her evidence about her experience in this work to be relevant, material, or affect the reliability of her evidence.
Although counsel for the defendants attempted to adduce evidence that Ms Guo had been found not to be a person of credit in proceedings before the Supreme Court in New South Wales, when the decision of Rees J in Guo v Xu is carefully read, it is clear that her Honour made no finding that Ms Guo was not a credible witness. After noting that cross‑examination of Ms Guo was extensive and was conducted over a video link which proved unstable, Rees J found that she was not in a position to form any views of Ms Guo's credit. However, Rees J then went on to say that Ms Guo's evidence did not raise any issues of concern in this regard and found that she answered questions simply and directly, was precise, had a good recall of detail, and made reasonable concessions.[25]
[25] Exhibit 879; Guo v Xu [2021] NSWSC 460 [5].
Despite counsel's approach to Ms Guo in cross‑examination in this matter, in their written closing submissions the defendants concede that there is no cause to suggest that Ms Guo was not an honest witness, but submit she was quick to say when she could not recall matters that could have potentially been against her and Zuleika's interests. In particular, it was raised that she did not recall if Zuleika and she 'personally agreed' to terminate the Ore Treatment Agreement (the agreement for the treatment of ore that the defendants were a party to together with Billabong). However, this point is not relevant. It was not up to Ms Guo personally or Zuleika to terminate the Ore Treatment Agreement. It was a matter for the defendants. Zuleika was not a party to the Ore Treatment Agreement.
In any event, it is not in dispute that Zuleika, through the actions of Mr Carson, agreed that the defendants should terminate the Ore Treatment Agreement. Ms Guo was clear in her evidence that she knew the agreement had been terminated.[26]
[26] ts 184 ‑ 185.
The defendants also submit that some of Ms Guo's evidence resembled submissions and specifically referred to her evidence stating that a number of formal requests had been made by herself and Mr Carson to visit the Tenement but were refused by the defendants. Plainly, her evidence on this point cannot be regarded in the nature of a submission. I note, however, no documents have been produced to the court which record that any request had been refused.[27] In any event, her evidence on this point is not material, nor relevant.
2.3 The defendants' witnesses
[27] The minutes of the first Joint Venture Committee meeting on 21 May 2017 record that it was suggested Mr Carson conduct a site visit after his return from China in early June; Exhibit 360, and minutes of a Joint Venture Committee meeting on 10 July 2018 record that in the presence of Ms Guo, Mr Carson requested a site visit and it was agreed that a visit be arranged in early August 2018; Exhibit 485. It is not in dispute, however, Mr Carson and Ms Guo did not at any material time visit the site of the Tenement. In addition, it was Mr Carson's evidence that they did discuss going to the site but they were unable to co‑ordinate people's availability; ts 53.
The defendants called five witnesses.
The first witness was Mr McInnes. Mr McInnes has qualifications in accountancy, is a member of the Institute of Public Accountants, and is a registered tax agent. His main expertise is management accounting and taxation.[28]
[28] ts 242.
Mr McInnes gave his evidence by audio‑visual link from his office in New South Wales. His evidence in chief was given orally. He was cross‑examined at length by senior counsel for Zuleika. Although the defendants contend that he ought to be found to be an honest witness who did his best to assist the court and who made concessions potentially against the interest of the defendants, I am of the opinion that his evidence must be treated with caution.
Although Mr McInnes candidly made a number of statements against the interest of the defendants when giving evidence, some of his evidence was directly inconsistent with material contemporaneous records, his recollection of many events was poor, and some statements recorded as statements made by him in the defendants' contemporaneous records are misleading or untruthful.
The other four witnesses were technical witnesses who each gave short oral evidence, and whose evidence I have accepted as credible and reliable. The substance of the evidence of each of these witnesses was not challenged in cross‑examination.[29] These four witnesses were:
(a)a director of Ripago Underground Mining Services Pty Ltd, Mr Richard Gorzkos, who is a mining engineer and who prepared a desktop analysis report in December 2018;[30]
(b)a mining engineer employed by Entech Pty Ltd, Mr Shane McLeay, who was the principal reviewer of the K2 Feasibility Study dated June 2014 (June 2014 K2 Feasibility Report), the Definitive Feasibility Study Update K2 Deposit dated October 2014 (October 2014 K2 Feasibility Update Report), and the K2 Definitive Feasibility Study February 2017 Update (February 2017 K2 Update Report);[31] and
(c)a geotechnical engineer and consultant in mining geomechanics, Mr Peter O'Bryan, who inspected the walls of the K2 pit in March 2005, February 2007 and April 2020;[32]
(d)a geotechnical engineer, Mr Thomas Parrott, employed by Entech Pty Ltd, who carried out an inspection of the K2 deposit in March 2017.[33]
[29] It is noted that Zuleika's concession that their evidence should be accepted is confined to the evidence of each of these witnesses given in these proceedings which goes only to liability and not to loss or damage; ts 411.
[30] Exhibit 638.
[31] Exhibits 014, 722 and 276.
[32] Exhibit 775.
[33] Exhibit 322.
3.0 Background
3.1 Events that occurred prior to the parties entering into the BTS Agreement
The BTS Agreement is not the first joint venture agreement entered into by the parties. As at November 2013, Dampier Plutonic was a wholly owned subsidiary of Zuleika, and Dampier Plutonic was the holder of the tenements in the Marymia‑Plutonic Greenstone Belt (which are now jointly held by Vango and Dampier Plutonic) (the Plutonic Tenements).[34]
[34] Exhibits 008, 0440 (In these reasons, only the last four numbers of the pinpoint numbers of each of the exhibits will be identified in the footnotes).
On or about 18 November 2013, Vango (whose name at that time was Ord River Resources Ltd),[35] and Zuleika, together with Dampier Plutonic, entered into a number of agreements to develop the tenements which comprised the following (Plutonic Dome Gold Project Agreements):[36]
(a)an initial Joint Venture Agreement to explore for minerals in the area of the tenements that included Mining Lease 52/183;
(b)an initial Farm‑In Agreement, pursuant to which Zuleika and Dampier Plutonic agreed to grant Vango the right to earn a 30% initial interest as defined in the agreement in the Joint Venture by, inter alia, incurring a minimum of $2 million in farm‑in expenditure, before the expiry of the Earn‑in Period;
(c)three separate sole funding agreements pursuant to which, inter alia, Zuleika and Dampier Plutonic agreed to grant Vango the right to earn a further 45% Joint Venture Interest in 15% increments by expending sole funding expenditure totalling $4 million.
[35] Vango changed its name on 28 November 2014.
[36] Exhibits 008, 004, 005, 006 and 007; Statement of Claim, par 4A; Second Further Re-Amended Defence filed on 15 March 2022 (Defence), par 3; the defendants admit entering into the agreements and agree that the agreements contained terms generally to the effect pleaded.
After Mr Carson became a director of Zuleika and Dampier Plutonic in May 2014, he reviewed and familiarised himself with the books and records of the companies, including each of the Plutonic Joint Venture Agreements. He also reviewed Vango's publicly available financial information and quarterly activity reports and formed the view that Zuleika had funds to explore the Plutonic Tenements, whereas, Vango did not when they entered into the agreements.[37]
[37] Exhibit A, par 24; the defendants object to this evidence on the grounds of relevance and that it is unqualified opinion evidence. However, this evidence is relevant and admissible, not on the basis of the truth of the opinion, but on the basis that having held that opinion, Mr Carson made enquiries and took steps to have discussions with then executive deputy chairman of Vango, Mr McInnes, based upon that opinion.
Mr Carson also started familiarising himself with the tenements and had discussions with a geologist, Mr Howard Dawson, about a report prepared by a mining consultant for a funder to assess whether to provide funding to Zuleika. The purpose of the report was to assess the potential for discovery, continuity of mineralisation, and the potential for mining to occur in the area of the tenements within the Plutonic Dome Gold Project.[38] Mr Carson also had discussions with the outgoing managing director of Zuleika, Mr Richard Hay, who was retained for a period to assist with the handover to the new board concerning the tenements. Mr Hay told Mr Carson it was his opinion that some tenements could be dropped, others could be reduced, and he thought that K2 could be developed for an initial CAPEX of $6 million and $12 million over the life (of the mine).[39]
[38] Exhibits 010 and 011.
[39] Exhibit 12; see also Exhibit A, pars 28 ‑ 29 and 35; Exhibit 10 (CAPEX for K2 based on third‑party mining feasibility study report 2014 stated as $5,571.50); This evidence is relevant and admissible not on the basis of the truth of the statement made by Mr Hay, but on the basis of the subsequent action taken by Mr Carson on behalf of Zuleika.
The K2 deposit had been last mined in 1997 by another company, Resolute, who mined the orebody from the boxcut and decline before the mine was prematurely closed in 1998 after only minor amounts of ore extraction.[40] After the mine was closed, the underground decline was flooded.
[40] Exhibit 14, 0574.
On 1 July 2014, Mr Dawson sent Mr Carson the June 2014 K2 Feasibility Report prepared by Entech Pty Ltd for Vango.[41] The stated objective of the report was to assess the economic viability of extracting ore from the K2 deposit using underground mining methods, and to assume the extracted ore would be treated at the nearby Plutonic Plant owned by Northern Star Resources Ltd, which was located 36 km away from the K2 deposit.[42]
[41] Exhibit A, par 36, Exhibits 17 and 14.
[42] Exhibit 14, 0574.
The authors stated in the June 2014 K2 Feasibility Report that the estimate of the agreed capital cost (CAPEX) forecasts for the first year of the project was $6,212,241 and $2,964,606 for the second year (being a total of $9,176,847).[43] Zuleika contends that the forecast for the first year in this report is important, because it is Zuleika's case that the CAPEX for the development of the K2 deposit agreed to in cl 2(a) of the BTS Agreement, and in the definition of CAPEX as at the Commencement Date of $6 million in cl 26, was based upon the cost estimation of capital expenditure for the K2 underground for the first year in this report.[44]
[43] Exhibit 14.
[44] Exhibit 14, 0674; ts 72 ‑ 73.
Mr Carson explained, when he gave oral evidence, that the figure of $6,212,241 in the report estimate was not start‑up capital; it was working capital to get the mine up and running. He pointed out that the figure of $6 million was not a firm number, and said it did not include any engineering costs, but was an estimate of what it would cost to dewater the existing tunnels and refurbish the K2 underground.[45] Zuleika also points out this figure did not include the cost of the treatment of any ore removed from the K2 deposit.
[45] Exhibit B, 26.
On 1 July 2014, Vango made an announcement to the market that contained a comprehensive summary of matters stated in the June 2014 K2 Feasibility Report. In its announcement, it stated:[46]
(a)there had been a positive completion of a Definitive Feasibility Study on the K2 underground deposit in the Plutonic Dome Gold Project Farm‑In/Joint Venture with Zuleika;
(b)Vango was currently earning up to a 75% interest in the Plutonic Dome Gold Project through spending a minimum of $6 million across the project prior to 2 January 2016; and
(c)one of the highlights of the study was a maximum capital drawdown of $6.4 million.
[46] Exhibit 723.
In or about September 2014, Vango and Dampier Plutonic entered into the Ore Treatment Agreement with Northern Star to facilitate the processing of ore from the K2 deposit. Pursuant to the terms of the agreement, Northern Star was to be paid for the processing services through the provision of gold at the point of refining the ore.[47]
[47] Exhibits 309 and 870; see also facts found in Billabong Gold Pty Ltd v Vango Mining Ltd [No 2] [2021] WASC 459 [3] ‑ [5].
On 11 September 2014, Zuleika announced to the market that Vango had earned in a 30% Joint Venture Interest in the Plutonic Dome Gold Project, and Vango had advised Zuleika that it intended to undertake the 'sole risk' of the next $1 million of Joint Venture expenditure to increase its equity in the project to 45%.[48]
[48] Exhibit 21.
In early October 2014, Entech provided to Vango the October 2014 K2 Feasibility Update Report which assumed that the extracted ore from the K2 deposit would be treated at the nearby Northern Star processing plant.[49] This report contained a revised cost estimation of the CAPEX of $6,954,666, with a project cash flow estimation, before tax, of $6,464,814.[50] The author of the updated report forecast that the project cash flow showed a payback period of 19 months, the cumulative cash flow of the project completion would be $18.2 million, and the maximum depth of the cash trough was $6.6 million to be reached in month 13.[51] The updated report also contained a revised estimated CAPEX of $6,954,666 for the first year of the project, $2,879,472 for the second year, and $200,000 for the third year (being a total of $10,034,138).[52]
[49] Exhibit 722.
[50] Exhibit 722, 0521 ‑ 0522.
[51] Exhibit 722, 0524.
[52] Exhibit 772, 0521.
On 8 August 2014, Vango announced to the market the results of the October 2014 K2 Feasibility Update Report. The announcement summarised the report in detail and stated one of the highlights of the report was that the maximum capital drawdown was up 4%, and the pre‑tax net present value was up by 78%.[53]
[53] Exhibit 721.
During 2015, Mr Carson had a number of discussions with Mr McInnes about either Zuleika repurchasing Vango's interest in the Plutonic Dome Project, or Vango buying the balance of Zuleika's interest. Mr Carson told Mr McInnes that Zuleika or Vango should acquire 100% interest in the Plutonic Dome Gold Project tenements because they would not be able to raise capital with a diluting asset.[54]
[54] Exhibit A, par 53; this evidence is relevant and admissible, not on the basis of the truth of this opinion but, on the basis of having held this opinion, Zuleika took steps to enter into the sale agreement.
On 19 January 2016, Zuleika announced to the market that it had entered into a binding heads of agreement for the sale of 100% of Dampier Plutonic to Vango.[55]
[55] Exhibit 122.
On 11 May 2016, Zuleika announced it had sold all of its shares in Dampier Plutonic to Vango. The sale disposed of Zuleika's remaining equity interest in the Plutonic Dome Gold Project.[56]
[56] Exhibit 146.
The Sale Agreement was formally executed by Zuleika, Dampier Plutonic and Vango in an agreement dated 16 August 2016 (Sale Agreement). At the time of sale, Dampier Plutonic was the registered holder of 57 live tenements in the Marymia‑Plutonic Greenstone Belt, which included Mining Lease 52/183.[57] Pursuant to the terms of the Sale Agreement, it was agreed that immediately prior to settlement Vango held a 60% interest and Dampier Plutonic held a 40% interest in the mining tenements and tenement applications listed in Schedule 1 of the Sale Agreement.[58]
[57] Exhibit 168, 0042 ‑ 0045.
[58] Exhibit 168, cl 1.1, cl 5.1 and Sch 1, 0026, 0031 and 0042.
The consideration for the Sale Agreement was:[59]
[59] Exhibit 168, cl 3.1(b), 0030.
(a)a non‑contingent component of $2,200,000 (excluding GST) to be paid by Vango on the settlement date; and
(b)a contingent component payable within 7 days after the occurrence of the following events (milestone payments):
(i)$1 million (excluding GST) on the production of a total of 45,000 ounces of gold from the project tenements;
(ii)$1 million (excluding GST) on the production of a total of 100,000 ounces of gold from the project tenements;
(iii)$1 million (excluding GST) on the production of a total of 200,000 ounces of gold from the project tenements; and
(iv)$1 million (excluding GST) on the production of a total of 300,000 ounces of gold from the project tenements; and
(c)the royalty under the Royalty Deed.[60]
[60] Exhibit 168, cl 1.1 and cl 3.1(c), 0026 and 0030, and Exhibit 169.
On the same day, Zuleika, Dampier Plutonic and Vango entered into the Royalty Deed contemplated and required by the terms of the Sale Agreement.[61] Although there is some dispute about the meaning and effect of some of the provisions of the Royalty Deed, which dispute is not relevant to the disposition of the issues in this trial, it is not in dispute that pursuant to the terms of the Royalty Deed, Vango is required to pay a royalty in respect of any gold mined or collected from the tenements. The royalty is to be calculated as a percentage on each ounce of gold according to the US price for gold, capped at $2,000,000.[62]
[61] Exhibit 168.
[62] Statement of Claim, par 8; Defence, par 8.
In performance of its obligations pursuant to the terms of the Sale Agreement, Zuleika transferred 100% of its shares in Dampier Plutonic to Vango. On or about 23 August 2016, Vango became the registered shareholder of 100% of Dampier Plutonic. Since that time Vango has been the holding company of Dampier Plutonic.[63]
[63] Statement of Claim, pars 9 and 10; admitted Defence, par 1.
Despite the sale of Dampier Plutonic, Mr Carson, Ms Guo and Mr McInnes continued to discuss how Zuleika and Vango would jointly develop the K2 deposit and also discussed how Zuleika could farm back in (an interest into the K2 mine).[64]
[64] Exhibit A, par 105; Exhibit C, par 83.
In October 2016, Northern Star assigned its interest in the Ore Treatment Agreement to Billabong.
On 1 November 2016, Mr McInnes (on behalf of Vango) and Mr Carson and Ms Guo (on behalf of Zuleika) signed a debt funding memorandum stating the joint intentions of the companies to develop the K2 mine under a Joint Venture which provided:[65]
Under the K2JV arrangements, Dampier is exclusively responsible for procuring a Gold Loan or Debt Finance up to an amount of circa A$10M to provide the funding required for the development of the K2 Gold Mine.
The joint venture parties will provide the Financier with the necessary technical, financial and corporate information required by the Financier to undertake its due diligence on the K2 Project and the Companies, as may be required to support any offer for the provision of a Gold Loan or Debt Finance
[65] Exhibit 188.
On 14 December 2016, Zuleika, Vango and Dampier Plutonic executed a heads of agreement in which Zuleika agreed to finance up to $3 million or 50% of the capital cost (whichever is the lesser) for the development of the K2 deposit in exchange for up to 50% net profits derived from production from K2 for the life of the mine.[66] Because Zuleika was required to have a project as an exploration company, it could not enter into a net profit sharing agreement and needed to farm back an interest in the K2 area.[67]
[66] Exhibits 230 and 241, 1193; Exhibit A, par 108; Exhibit C, par 88.
[67] Exhibit A, pars 113 and 114; Exhibit C, par 91.
Consequently, the agreement to jointly develop the K2 deposit was renegotiated. On 17 January 2017, Zuleika, Vango and Dampier Plutonic signed a new heads of agreement whereby it was agreed that Zuleika may contribute up to 50% of the CAPEX or $3 million for the development of the K2 mine in exchange for up to a 50% equity interest in the Tenement comprising the K2 mining project.[68]
[68] Exhibit 261.
After the heads of agreement was signed, Mr Carson continued to have discussions with a funder to raise funds to develop the K2 mine.[69]
[69] Exhibit A, par 125.1.
On 29 March 2017, Vango announced to the market that it had received all approvals to commence construction and commissioning for its dewatering program, plant and infrastructure was currently being mobilised on a site ahead of an eight day establishment and commissioning period, and dewatering would commence with a 65 day pumping program which would be completed in the June quarter of 2017.[70]
3.2 The parties enter into the BTS Agreement on 12 May 2017
[70] Exhibit 324.
On 12 May 2017, Zuleika, Vango and Dampier Plutonic signed the BTS Agreement.
4.0 Issue 1 - Whether, on a proper construction of the BTS Agreement, the plaintiff earned any Joint Venture Interest and, if so, what percentage was earned‑in
4.1 The construction of the Binding Terms Sheet - General legal principles
The general principles applying to the construction of contracts were summarised by the Court of Appeal in Electricity Generation and Retail Corporation trading as Synergy v EIT Kwinana Partner Pty Ltd as follows:[71]
[71] Electricity Generation and Retail Corporation trading as Synergy v EIT Kwinana Partner Pty Ltd [2022] WASCA 3 [230], [232] ‑ [234] (citations omitted).
The principles applicable to the construction of written contracts established by the High Court are well known. They were outlined in this Court in Black Box Control Pty Ltd v TerraVision Pty Ltd and in Sino Iron Pty Ltd v Mineralogy Pty Ltd. Those principles include the following:
(a)The construction of a contract involves a determination of the meaning of the words of the contract by reference to its text, context and purpose. The starting point for the proper construction of a clause is the language used in the clause. In particular, one starts by identifying the possible meanings that the words chosen by the parties can bear;
(b)The process of construction is objective. Ascertaining the meaning of terms in an instrument requires a determination of what a reasonable person would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract, and the commercial purpose or objects to be secured by the contract;
(c)The commercial purpose or objects sought to be secured by the contract will often be apparent from a consideration of the provisions of the contract read as a whole. Extrinsic evidence may nevertheless assist in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding of the genesis of the transaction, its background, the context and the market in which the parties are operating;
(d)The instrument must be read as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed to have some operation; and
(e)The general principle applicable to the construction of commercial contracts is that they should be given a businesslike interpretation. Absent a contrary intention, the court approaches such contracts on the basis that the parties intended to produce a result which makes commercial sense. This requires that the construction placed on the term or terms in question is consistent with the commercial object of the agreement. However, it must also be borne in mind that business commonsense may be a topic on which minds may differ.
…
As the above summary of the general principles makes clear, the objective meaning of the words of a contract must be determined by reference to its text, context and purpose.
The starting point is, of course, the language (or text) itself. That is why, if the words used are unambiguous (that is, one open to only one meaning) the Court must give effect to them.
The principles recognise, however, that where the language, as a whole, is capable of more than one meaning, text and purpose can, on occasion, pull in different directions. It may be that, depending upon the circumstances, 'the most obvious, or the most grammatically accurate' meaning of the words of a text will give way to the evident commercial purpose and object of the instrument as a whole.
In this matter, parties agree that the proper construction of the clauses of the BTS Agreement that are at the heart of the dispute require a consideration of the commercial purpose of, or objects to be secured by, the BTS Agreement.
Zuleika contends that if the construction put forward by the defendants, that for Zuleika to earn any interest in the Joint Venture at all it had to contribute a minimum of $3 million to Expenditure, is accepted, this would result in a commercial absurdity. For the reasons that follow, I agree Zuleika's submission is correct.
As set out above, commercial commonsense is a topic upon which reasonable minds may differ. To this principle, the Court of Appeal in Recce Pharmaceuticals Ltd v Brown recently added:[72]
As to the respondent's argument that Recce's construction was not 'commercial', it should be remembered that while a commercial instrument ought to be construed so as to avoid it making commercial nonsense or working commercial inconvenience, commercial common sense is a topic on which reasonable minds may differ and in respect of which an imputed consensus may be impossible. For that reason alone the court should be careful before departing from the natural meaning of a provision merely because it might be thought to conflict with notions of commercial common sense. The court must also be astute not to confuse commercial common sense with each party's differing commercial interests - the latter often informing the parties' respective contentions as to what is or is not a construction that produces a commercial result.
The limits of commercial common sense as a guide to construction were described by Gibbs J (as his Honour then was) in a well-known passage in Australian Broadcasting Commission v Australasian Performing Right Association Ltd:
If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate'…
Accordingly, commercial purpose - as perceived by the court - cannot override the words of the instrument where those words are clear. The court is not able to disregard clear words. Nor, under the guise of construction, may the court re-write an instrument.
[72] Recce Pharmaceuticals Ltd v Brown [2022] WASCA 66 [62] ‑ [64] (footnotes omitted).
It is well established that the terms of a commercial contract are to be understood objectively by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract. This requires that the reasonable businessperson be placed in the position of the parties and it is from that perspective that the court considers the circumstances surrounding the contract, and the commercial purpose and objects to be achieved by it.[73]
[73] Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544 [16] (Kiefel, Bell & Gordon JJ) (footnotes omitted); applied in Electricity Generation and Retail Corporation trading as Synergy v EIT Kwinana Partner Pty Ltd [2022] WASCA 3 [243].
As to the relevance of admissible evidence that goes to surrounding circumstances, in Recce Pharmaceuticals Ltd v Brownthe Court of Appeal relevantly pointed out:[74]
Identification of the purpose or object intended to be secured by a commercial instrument is to be inferred from the express or implied terms of the instrument and any admissible evidence as to the surrounding circumstances. It must be ascertained objectively, and is revealed by the text and structure of the instrument facilitated by an understanding of the genesis of the transaction, its background, the context and the market in which it operates, rather than being derived from any assumption about the desired or desirable reach of the operation of the relevant provisions.
4.2 First part of Issue 1 - During the Earn‑in Period, did the plaintiff earn any Joint Venture Interest in the Tenement?
[74] Recce Pharmaceuticals Ltd v Brown [2022] WASCA 66 [69].
Although the parties are in dispute about the proper construction of some of the material terms of the BTS Agreement, the following rights, entitlements and obligations conferred by the express terms of the BTS Agreement are not in dispute:
(a)the Joint Venture was formed on the date that the last of the parties executed the BTS Agreement (cl 1(a) and cl 26 definition of Commencement Date),[75] which was 12 May 2017;[76]
[75] Statement of Claim, par 12.2; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.
[76] Exhibit 349.
(b)Zuleika may acquire an interest in the Tenement (defined as Mining Lease 52/183 (and other mining interests which do not apply)) and form an unincorporated joint venture in respect of the development of the Tenement (Joint Venture);[77]
[77] Statement of Claim, par 11; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.
(c)Zuleika shall be the exploration manager of the Joint Venture and have the conduct of all of the exploration operations of the Joint Venture on behalf of the parties, subject at all times to the reasonable directions of the Joint Venture Committee (cl 5(a));[78]
[78] Statement of Claim, par 12.19; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.
(d)the defendants shall be the development manager of the Joint Venture and have the conduct of all the development operations of the Joint Venture on behalf of the parties, subject at all times to the reasonable directions of the Joint Venture Committee (cl 5(b));[79]
[79] Statement of Claim, par 12.20; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.
(e)the defendants shall conduct Joint Venture operations in accordance with programs, budgets and decisions made by the Joint Venture Committee (cl 5(c)(i));[80]
[80] Statement of Claim, par 12.21; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.
(f)by cl 2(a), Zuleika agreed to contribute up to the lesser of 50% of the CAPEX (defined in cl 26 as the capital cost estimate for the development of the mine of the Tenement being, as at the Commencement Date $6 million, or such other amount as agreed in writing by the parties) or $3 million to the costs of the:[81]
[81] Statement of Claim, pars 12.7 and 12.8; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.
(i)development of a mine on the Tenement;
(ii)exploration for the mining of gold ore and its processing for the extraction of gold; and
(iii)any other items, as agreed by the Joint Venture Committee;
(g)in consideration for Zuleika's Expenditure, Zuleika shall earn a Joint Venture Interest (as defined in cl 26) equal to the lesser of Zuleika's Expenditure as a percentage of the CAPEX or 50% within two years from the Commencement Date (Earn-in Period) (cl 2(c));[82]
(h)the sum of $245,239.78 that Zuleika had expended in relation to the Tenement prior to the Commencement Date shall be deemed to form part of Zuleika's Expenditure (cl 3(a));[83]
(i)save for Zuleika's pre‑Joint Venture Expenditure, Joint Venture Expenditure should be made in tranches approved by the Joint Venture Committee with funds provided within 5 business days of the Joint Venture Committee's approval (cl 2(b));[84]
(j)upon the proper construction of the BTS Agreement, Zuleika was not required to agree, and the defendants were not entitled to require Zuleika to agree, to vary the CAPEX from $6 million prior to the parties agreeing Expenditure, including Zuleika's expenditure;[85]
(k)upon the expiry of the Earn-in Period or the issue of the notice by Zuleika to the defendants under cl 2(d) of the BTS Agreement, whichever occurs first, each party must contribute to expenditure made or incurred in respect of the Joint Venture in proportion to their then Joint Venture Interest, which expenditure must be authorised by the Joint Venture Committee (cl 3(b)). If a party does not contribute to the total Joint Venture Expenditure in accordance with its Joint Venture Interest, their Joint Venture Interest will dilute with the non‑contributing Joint Venturer's interest decreasing and the Joint Venture Interest of the other Joint Venturer increasing (cl 3(c));[86] and
(l)on the Commencement Date, but immediately prior to the parties executing the BTS Agreement, the Joint Venture Interests of the parties were: Zuleika ‑ 0% and the defendants ‑ 100%.[87]
[82] Statement of Claim, par 12.9; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.
[83] Statement of Claim, par 12.10; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.
[84] Statement of Claim, par 12.16; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.
[85] Statement of Claim, par 13; admitted by the defendants; Defence, par 1.
[86] Statement of Claim, pars 12.13 and 12.14; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.
[87] Statement of Claim, par 16; admitted by the defendants; Defence, par 1.
Zuleika pleads that the BTS Agreement included the following terms, each of which was implied as a matter of law:[88]
(a)each party has a duty to co-operate in progressing the Joint Venture;
(b)each party has a duty not to prevent the fulfilment of the BTS Agreement; and
(c)each party has a duty to all things necessary to enable each other party to have the benefit of the BTS Agreement.
[88] Statement of Claim, par 14; the defendants deny that the term in subparagraph (a) is implied by law in the BTS Agreement but admit the terms in (b) and (c) are implied as a matter of law in the BTS Agreement; Defence, par 10.
It is common ground that Zuleika did not contribute to any costs incurred in connection with the activities of exploration, development and mining of the Tenement:
(a)within the meaning of Expenditure in cl 2(a) and cl 26 of the BTS Agreement, after the Commencement Date; and
(b)within the Earn-in Period of the BTS Agreement (which period was to expire on 12 May 2019 but was extended by agreement to 12 November 2019).[89]
[89] The Earn-in Period was extended by agreement between the parties (by monthly extensions) to 12 November 2019; Statement of Claim, par 15; Defence, par 1.
It is also common ground that the CAPEX (as defined in cl 26 and for the purposes of cl 2(a) of the BTS Agreement) was at all material times $6 million, and no other amount was agreed by the parties.
In light of these uncontradicted and established facts, and the forementioned pleaded matters which are not in dispute, the answer to the question posed in the first part of Issue 1 involves an issue of law only. This is whether Zuleika earned any Joint Venture Interest during the Earn‑in Period. The second part of Issue 1 only arises if Zuleika did earn an interest, and that is whether that interest was 4.1% or 11.87% of the Tenement.
The first part of Issue 1 concerns the proper construction of cl 1(a), cl 1(b), cl 2(a), cl 2(c), cl 2(d), cl 3(a) and cl 3(b) of the BTS Agreement.
At the heart of the competing constructions put forward on behalf of Zuleika and the defendants is the effect of the sum of $245,239.78 that is deemed Expenditure pursuant to cl 3(a).
The question is whether on the proper construction of these provisions, because Zuleika failed to contribute a total amount of $3 million to Expenditure in the Earn-in Period, it could not and did not earn any Joint Venture Interest in the Tenement.
Clause 1(a), cl 1(b), cl 2(a), cl 2(c), cl 2(d), cl 3(a) and cl 3(b) provide as follows:[90]
[90] Exhibit 349 (clause notes added in italics).
[Clause 1(a) and cl 1(b)]
(a)Dampier and the DPPL Parties agree to form an unincorporated joint venture on signing this Term Sheet (Commencement Date) for the purpose of exploration and production from the Tenement on the commercial terms set out in this Terms Sheet and otherwise on terms and conditions acceptable to both parties (Joint Venture).
(b)On the Commencement Date:
(i)the initial Joint Venture Interests of the Parties will be:
(A)Dampier - 0%; and
(B)DPPL Parties - 100%
[Clause 2(a) and cl 2(c)]
(a)Dampier agrees to contribute up to the lesser of 50% of the CAPEX or $3,000,000 to the:
(i)development of a mine on the Tenement;
(ii)the exploration for and mining of gold ore and its processing for the extraction of gold; and
(iii)any other item, as agreed by the Joint Venture Committee,
(Expenditure).
…
(c)In consideration for the Expenditure, Dampier will earn a Joint Venture Interest equal to the lesser of:
(i)the Expenditure as a percentage of the CAPEX; or
(ii)50%,
within the period that is two (2) years from the Commencement Date (Earn-in Period).
[Clause 2(d)]
Following Dampier satisfying the Expenditure during the Earn-in Period, Dampier will be deemed to have earned the Joint Venture Interest and the DPPL Parties agree to the transfer of the Joint Venture Interest to Dampier, free from encumbrances, other than any Disclosed Encumbrance. To this end, the DPPL Parties agrees that it will provide Dampier with a duly executed transfer in respect of the Joint Venture Interest in the Tenement and such other documents as may be reasonably required by Dampier to enable Dampier to be registered as the legal and beneficial holder of the Joint Venture Interest in the Tenement. Until such time as Dampier becomes the holder of the Joint Venture Interest, the DPPL Parties will hold the Joint Venture Interest on trust for Dampier.
Without limiting the rights of Dampier under this clause 2, and subject to clause 2(c) Dampier may give a notice to the DPPL Parties at any time during the period which is 12 months from the Commencement Date requiring that the DPPL Parties transfer to Dampier a Joint Venture Interest within 7 days after the receipt of that notice. The DPPL Parties must then transfer a Joint Venture Interest to Dampier equal to the amount determined by dividing the amount then contributed by Dampier as Expenditure by the total CAPEX, expressed as a percentage. As an example, if Dampier has contributed $3,000,000 to Expenditure to that date and the total CAPEX to that date is $4,000,000, Dampier will be entitled to a maximum initial 50% Joint Venture Interest, with such Joint Venture Interest increasing if the DPPL Parties dilute under clause 3(c).
[Clause 3(a)]
The Parties acknowledge and agree that the DPPL Parties owe Dampier the sum of $245,239.78 for monies expended in relation to the Tenements. The DPPL Parties agree that this amount is deemed to form part of Dampier's contribution of $3,000,000 to Expenditure and this deemed contribution is in satisfaction of amounts owing by the DPPL Parties to Dampier.
[Clause 3(b)]
Upon expiry of the Earn-in Period or the issue of the notice by Dampier to the DPPL Parties under clause 2(d), whichever occurs first, each party must contribute to expenditure made or incurred in respect of the Joint Venture in proportion to their then Joint Venture Interest, which expenditure must be authorised by the Joint Venture Committee.
The starting point of the construction of these provisions is to identify the possible meanings that the words chosen by the parties can bear.[91]
[91] Recce Pharmaceuticals Ltd v Brown [2022] WASCA 66 [65].
The parties put forward two possible meanings about the proper construction of these provisions.
Zuleika contends that:
(a)pursuant to cl 3(a) of the BTS Agreement, immediately upon all parties executing the BTS Agreement, Zuleika was deemed to have contributed the sum of $245,239.78 it had expended in relation to the Tenement prior to the Commencement Date as part of its contribution to Expenditure, and points out that Zuleika's plea in par 12.10 of the Statement of Claim to this effect is not in dispute;[92] and
(b)given that the deeming provision in cl 3(a) became operative immediately following the Commencement Date, being the date the last of the parties executed the BTS Agreement, Zuleika's deemed contribution to Expenditure was made during the Earn‑in Period. Put another way, the effect of cl 3(a) is that Zuleika had contributed the sum of $245,239.78 within two years from the Commencement Date which, pursuant to and read with cl 2(c), it had earned‑in a Joint Venture Interest.
[92] The defendants plead that the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.
Accordingly, on and from execution of the BTS Agreement, Zuleika argues the effect of these provisions is that it had an equitable interest in the Tenement, which it had earned during the Earn-in Period (which interest the defendants hold on trust for Zuleika, pursuant to the first paragraph of cl 2(d)).
The defendants claim that Zuleika's construction does not properly construe the bargain between the parties recorded in the BTS Agreement because Zuleika's construction ignores the express effect of cl 1(b) and relies upon a contention that, as at the Commencement Date, Zuleika had a deemed contribution to Expenditure and thus a Joint Venture Interest on the Commencement Date. This construction is claimed to be contrary to the operative effect of cl 1(b) which expressly provides that, as at the Commencement Date, Zuleika's Joint Venture Interest will be 0%.
The defendants argue that, although it agrees the sum of $245,239.78 formed part of Zuleika's contribution of $3 million to Expenditure pursuant to cl 3(a), that amount is not by itself Expenditure within the meaning of the BTS Agreement because no money was expended by Zuleika (during the extended Earn-in Period).
The defendants claim the operative effect of cl 1(a), when read with cl 3(a), is that the sum of $245,239.78 alone conferred no Joint Venture Interest on Dampier.[93] Consequently, the defendants argue that Zuleika earned no Joint Venture Interest within the meaning of cl 26.
[93] ts 237.
The second part to the defendants' argument as to why they contend Zuleika earned no Joint Venture Interest during the Earn-in Period is that, pursuant to cl 2(a), Zuleika was required to contribute 'up to' the lesser of 50% of the CAPEX or $3 million to Expenditure (being the development of a mine on the Tenement, the exploration for and the mining of gold ore and its processing for the extraction of gold, and any other item as agreed by the Joint Venture Committee) and argue that the words, 'up to' acknowledge:[94]
(a)that any Joint Venture Interest capable of being earned (by Dampier) is capped at 50%;
(b)the CAPEX can be decreased or increased by agreement by the parties. If the CAPEX is increased, Zuleika is still only obliged to contribute $3 million, but it will not earn‑in a 50% Joint Venture Interest; and
(c)to earn‑in any Joint Venture Interest, Zuleika was obliged to contribute $3 million to the CAPEX and, irrespective of whether it was agreed by the parties to increase or reduce the CAPEX, unless Zuleika contributed $3 million in the Earn‑in Period, it did not earn‑in any Joint Venture Interest.
[94] ts 238.
In essence, the defendants' argument must be that the words 'up to' qualifies the quantum of contribution to Expenditure by Zuleika by requiring Zuleika to contribute 50% of the CAPEX or $3 million, and if Zuleika contributes less than either 50% of CAPEX or $3 million it does not earn‑in any interest in the Joint Venture.
The defendants refer to cl 2(c) which relevantly reads: '[i]n consideration for the Expenditure, [Zuleika] will earn a Joint Venture Interest equal to the lesser of (i) the Expenditure as a percentage of the CAPEX; or (ii) 50%, within the [Earn-in Period]'. The defendants argue that cl 2(c), properly construed in the circumstances of this case, simply means if Zuleika contributes $3 million as Expenditure during the Earn‑in Period it will earn a 50% Joint Venture Interest but, cl 2(c)(i) only operates when the parties agree to increase the CAPEX from $6 million.
The defendants contend that their construction of the BTS Agreement is confirmed by the opening text of the first paragraph of cl 2(d) which reads '[f]ollowing [Zuleika] satisfying the Expenditure during the Earn‑in Period, [Zuleika] will be deemed to have earned the Joint Venture Interest ...'.
Thus, the defendants argue the Expenditure was always $3 million (no less). To 'satisfy' is to fulfil, and even on Zuleika's best case it does not suggest that it 'satisfied' the Expenditure amount of $3 million.
The third part of the defendants' construction argument is that, insofar as Zuleika relies on the second paragraph of cl 2(d) to allege it may by notice claim a proportionate (less than 50%) Joint Venture Interest, this part of cl 2(d) is expressly 'subject to clause 2(c)' and points to the fact that Zuleika gave no notice to the defendants requiring it be transferred a 4.1% or 11.87% Joint Venture Interest, and Zuleika purported to accept the defendants' alleged repudiation of the BTS Agreement without giving any such notice.[95]
[95] Exhibit 736, 0617.
Consequently, the defendants contend that the proper construction of the BTS Agreement was that the bargain between the parties and the consideration to be provided by the parties was clear and certain; $3 million for a 50% Joint Venture Interest. The defendants contend that Zuleika did not satisfy its share of the bargain so it receives nothing and, in these circumstances, Zuleika has lost the sum of $245,239.78.[96]
[96] ts 453.
The defendants say that it necessarily follows that if their construction of the BTS Agreement is accepted, Zuleika's action must be dismissed and no issue of repudiation arises. This is said to be so because the extended Earn‑in Period expired on 12 November 2019, which prohibits Zuleika from relying upon its letter of demand from its lawyers dated 12 February 2020 in which it alleged it accepted repudiation of the BTS Agreement by the defendants and purportedly terminated the BTS Agreement, when in fact the BTS Agreement had come to an end on the expiry of the extended Earn‑in Period.
4.3 Disposition – First part of Issue 1 – The plaintiff earned in a Joint Venture Interest
The defendants contend that cl 3(a) of the BTS Agreement cannot operate, as Zuleika alleges, because this construction is inconsistent with the express term in cl 1(b) which does not state on the Commencement Day Zuleika's interest was 4.1% (or 11.87%) It states that Zuleika's interest was 0%.
The defendants' construction ignores the unambiguous obvious meaning of the language used in cl 1(b) when read together with cl 3(a), in particular the words 'initial Joint Venture Interests of the Parties' on the Commencement Date and the use of capitalisation of the word Expenditure in cl 3(a).
The commercially sensible and coherent reading of these clauses, when considered by regard to establish principles of construction of commercial contracts, is as follows.
First, the use of the words 'initial Joint Venture Interests', when read together with the words 'On the Commencement Date' in cl 1(a), when also read with the definition of Commencement Date in cl 26, must necessarily be read as the interests of the parties on the date the last of the parties executing the agreement which were the interests of those parties on the date the last of the parties signed the agreement and before the commencement of the Earn‑in Period. On that date, and immediately before the Earn‑in Period commenced, Zuleika's interest in the Joint Venture was 0%.
2.3 The result
For the reasons that follow, I have found:
(a)in 4.0, it was not unreasonable for the plaintiff to reject the defendants' Calderbank offer. For this reason, the defendants' application that the costs of the action on and from 14 February 2022, should be reserved, fails;
(b)in 5.0, an indemnity costs order should not be made in favour of the plaintiff, and
(c)in 6.0, special costs orders in favour of the plaintiff should be made.
3.0 Applicable principles – costs orders
3.1 Calderbank offers
The relevant principles which govern the exercise of the court's discretion to make an award for indemnity costs in the context of a Calderbank offer are settled, and were set out in some length by Buss JA in Ford Motor Company of Australia Ltd v Lo Presti.[382] In Eccles v Koolan Iron Ore Pty Ltd, Le Miere J summarised the principles explained by Buss JA in the following way:[383]
[382] Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1 [16] ‑ [32] (Wheeler JA agreeing).
[383] Eccles v Koolan Iron Ore Pty Ltd [No 3] [2013] WASC 418 (S) [9].
(1)a Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable;
(2)all of the relevant facts and circumstances must be considered in determining whether a party's rejection of a Calderbank offer was unreasonable;
(3)the mere fact that the recipient of a Calderbank offer is ultimately worse off than he or she would have been had the offer been accepted, does not mean that its rejection was unreasonable;
(4)whether conduct is reasonable or unreasonable always involves matters of judgement and impression;
(5)it is not possible nor desirable to enumerate exhaustively all circumstances which must be taken into account, in a particular case, in deciding whether the rejection of a Calderbank offer was unreasonable, but, ordinarily, regard should be had to, at least, the following:
(a)the stage of the proceeding in which the offer was received;
(b)the time allowed to the offeree to consider the offer;
(c)the extent of the compromise offered;
(d)the offeree's prospects of success, assessed as at the date of the offer;
(e)the clarity with which the terms of the offer were expressed; and
(f)whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it;
(6)the party who makes a Calderbank offer that is rejected bears the onus of satisfying the court that it should make an award of indemnity costs in his or her favour; and
(7)the standard to be applied in awarding indemnity costs should not be allowed to diminish to the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis absent some blameworthy conduct on its part ‑ a test of unreasonableness should not be upheld on other than clear grounds.
Where an unsuccessful party submits that the rejection of the Calderbank offer was not unreasonable, the unsuccessful party is to point to a reason for not accepting the offer beyond the usual prospects of being successful in litigation.[384]
[384] Stewart v Atco Controls Pty Ltd (In liq) [No 2] [2014] HCA 31; (2014) 252 CLR 331 [4].
The Court of Appeal recently reiterated in Strzelecki Holdings Pty Ltd v Jorgensen that, Calderbank offers must be assessed without the benefit of hindsight, and having regard to the strength of the parties' cases as they then stood.[385] Their Honours also relevantly pointed out that it is well‑established that a party's erroneous prediction about the prospects of litigation, on the basis of which he, she, or it rejects a Calderbank offer, may not be regarded as unreasonable if that party was not, at the time, and for good reason, in possession of sufficient information to make a proper assessment of its prospects, or if the circumstances upon which the assessment was based later changed.[386]
[385] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [87].
[386] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [88].
It is also established that the terms of a Calderbank offer must be unambiguous, that is the terms must be certain. Consequently, it will not be unreasonable to reject a Calderbank offer if there is some reasonable doubt about the nature and extent of what was being offered, that is, its value.[387]
[387] Mount Lawley Pty Ltd v Western Australian Planning Commission [2006] WASC 82 (S); (2006) 157 LGERA 1 [92] (Templeman J); applying Duncan & Weller Pty Ltd v Mendelson [1989] VR 386, 401; Grbavac v Hart [1997] 1 VR 154, 155 (Winneke P); see also Rapuano (T/as RAPS Electrical) v Karydis‑Frisan [2013] SASCFC 93.
3.2 Indemnity costs orders
In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd, Woodward J observed that an award of indemnity costs is appropriate where the action 'has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success'.[388]
[388] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1988) 81 ALR 397, 401; applied in Yara Australia Pty Ltd v Oswal [2012] WASCA 264 [33] (Murphy JA); Huntingdale Village Pty Ltd v Korda [2015] WASCA 101 (S) [11] ‑ [17].
In Civil Properties Pty Ltd v Miluc Pty Ltd, Newnes JA summarised the principles for assessing whether an award of indemnity costs should be made on grounds that a party brought a hopeless case:[389]
[389] Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195 [82] ‑ [83].
It is well-established that a court has a wide discretion as to costs (albeit, a discretion to be exercised judicially) and that an appellate court will be slow to interfere with the exercise of that discretion. Whether or not an order for indemnity costs is appropriate must depend upon the facts of the particular case. There are not, and cannot be, any hard and fast rules. But an indemnity costs order is a departure from the usual order that costs are awarded on a party and party basis. Ordinarily an indemnity costs order is appropriate only where the unsuccessful party has been involved in some unreasonable conduct in relation to the proceedings, such as where the institution or continuation of the proceeding was plainly unreasonable or the proceeding was issued or maintained for an ulterior or collateral purpose: see Rosniak v Government Insurance Office (1997) 41 NSWLR 608, 616; PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24 [36]. An order for indemnity costs reflects the court's disapproval of the conduct of the unsuccessful party: Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [25].
If a party brings a case which is hopeless it can normally be inferred that the proceeding was commenced or continued 'for some ulterior motive or because of some wilful disregard of the known facts or the clearly established law': Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, 401. But it is not necessary that such an inference be drawn; it is sufficient that the court's resources and the successful party's costs have been wasted on entirely frivolous litigation: Re SCA Properties Pty Ltd (in liq) [1999] QSC 180; (1999) 17 ACLC 1611 [70].
In Ben‑Pelech v Royle, the court pointed out:[390]
[390] Ben‑Pelech v Royle [2020] WASCA 168 (S) [7] – [8].
Relevantly, while the categories of cases in which an indemnity costs order may be made are not closed, one category where indemnity costs are appropriate is where the action has been commenced or continued in circumstances where the applicant, properly advised, should have known that it had no chance of success. Whether that is so is determined objectively ‑ it does not direct attention to the actual legal advice given to the party. The court should not be too quick to characterise a case as hopeless ‑ parties should not be discouraged from persisting in an action merely because success is uncertain. Whether a case was hopeless must be judged without the benefit of hindsight.
Thus, it is sufficient to enliven the discretion to award indemnity costs that, for whatever reason, a party persists in what should, on a proper consideration, have been seen to be a hopeless case.
3.3 Special costs orders
The principles which govern when it is appropriate for the court to make a special costs order are not in dispute. Until recently special costs orders were made pursuant to s 280(1) of the Legal Profession Act2008 (WA). This Act was repealed and replaced by the Legal Profession Uniform Law Application Act 2022 (WA). Section 141(1) of the Legal Profession Uniform Law Application Act replaces, and in effect, replicates s 280(1) of the Legal Profession Act.
Section 141 of the Legal Profession Uniform Law Application Act provides:
141.Effect of costs determinations
(1)The following are regulated by an applicable costs determination —
(a)the taxation of bills of law practices;
(b)any other aspect of the costs charged by law practices.
(2)Subsection (1) is subject to —
(a)any costs agreement made in accordance with the Legal Profession Uniform Law (WA) Part 4.3 Division 4 or the corresponding provision of a corresponding law; and
(b)section 146; and (c) the Legal Aid Commission Act 1976 section 14.
Note for this subsection:
See the Civil Liability Act 2002 section 15L and the Motor Vehicle (Third Party Insurance) Act 1943 section 27A, which affect costs under particular agreements between a law practice and client.
(3)Despite subsection (1), if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do any or all of the following —
(a)order the payment of costs above those fixed by the determination;
(b)fix higher limits of costs than those fixed in the determination;
(c)remove limits on costs fixed in the determination;
(d) make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.
(4)Subsection (1) does not limit the power of a court, a judicial officer or a taxing officer of a court to determine in any particular case before that court, judicial officer or taxing officer the amount of costs allowed.
(5)If a costs determination is in force in respect of any business referred to in section 133(1), any subsidiary legislation fixing or purporting to regulate the remuneration of law practices in respect of that kind of business is of no force or effect.
By s 141(1) and (2) of the Legal Profession Uniform Law Application Act a party's recoverable costs are confined, in effect, by the scale limits in costs determinations. Section 141(3) like the former s 280(2) of the Legal Profession Act2008 operates as an exception to s 141(1) of the Legal Profession Uniform Law Application Act.[391]
[391] Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) [11] (Buss P, Murphy & Beech JJA).
Section 141(3) of the Legal Profession Uniform Law Application Act provides that a court may make a special costs order where it is of the opinion that 'the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter'.
Section 141 of the Legal Profession Uniform Law Application Act is protective of the successful party to the litigation and, on that account, also serves the administration of justice by facilitating, within the limits imposed by the statutory criteria, the operation of the general principle that a successful party is entitled to its costs of the litigation.[392]
[392] Sino Iron Pty Ltd v Mineralogy Pty Ltd[No 2] [2017] WASCA 76 (S) [11] (Buss P, Murphy & Beech JJA).
Even where orders are made pursuant to s 141(3), it nevertheless remains the task of the taxing officer pursuant to s 141(4) to consider the reasonableness of, and necessity for the work undertaken, and to make a judgment about the remuneration reasonably required.[393]
[393] Sino Iron Pty Ltd v Mineralogy Pty Ltd[No 2] [2017] WASCA 76 (S) [11] (Buss P, Murphy & Beech JJA) applying Frigger v Lean [2012] WASCA 66 [81].
The court must form an opinion about two matters before it can make an order pursuant to s 141(3). First, it must form an opinion that the maximum amount allowable under the relevant scale item is inadequate, in that, there is a fairly arguable case that on taxation the costs allowed by the applicable legal costs determination may properly be allowed in an amount that is greater than the limit imposed by the costs determination. Second, it must form an opinion that the amount allowed is inadequate because of the 'unusual difficulty, complexity or importance of the matter'.[394] This requires that there be a causal connection between the unusual difficulty, complexity or importance of the matter and the inadequacy of the costs allowable under the relevant costs determination.[395]
[394] Heartlink Ltd v Jones as liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) [11] (Martin CJ); Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) [12] (Buss P, Murphy & Beech JJA); Maio v City of Stirling [No 2] [2016] WASCA 45 (S) [25] (Martin CJ, Buss P & Murphy JA); Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S) [3] (Martin CJ, McLure P & Buss JA).
[395] Electricity Generation and Retail Corporation trading as Synergy v Woodside Energy Ltd [2014] WASC 469 (S) [12] (Martin CJ) applied in Blatchford v Laine [2018] WASC 207 (S) [40(2)] (Vaughan J).
An assessment of whether an amount of costs allowed in respect of a matter under a legal costs determination is inadequate, is not to be determined by the court in a precise way.
If the preconditions for making a special costs order are met, then the court may make all or any of the orders provided for in s 141(3).
In Blatchford v Laine, Vaughan J also pointed out the following propositions that are established by the authorities, which propositions now have application when the court is considering an application made pursuant to s 141 of the Legal Profession Uniform Law Application Act:[396]
[396] Blatchford v Laine [2018] WASC 207 (S) [43] ‑ [53] (footnotes omitted).
First, the court is in a position to form the opinions required under s 280(2) as matters of impression, rather than science or mathematics, when it has heard the matter and is familiar with the way in which the case was conducted and the issues were litigated. While the court may be assisted by evidence as to the time spent and fees charged, the questions are quintessentially matters of impression rather than of detailed evaluation, precision or science. In particular the assessment of whether there is 'unusual difficulty, complexity or importance' is essentially a value judgment taking into account the court's experience of the usual run of civil cases.
Second, as to the first question, a 'fairly arguable' case will not be established merely because a party has incurred greater costs than those allowable under the relevant costs determination.
However, depending on the case, it may be relevant that a party has applied significantly more resources for the various steps in the litigation than those contemplated under the relevant costs determination. Viewed in the context of the difficulty, complexity or importance of the matter, that circumstance may sustain the conclusion that there is a fairly arguable case that those items and the costs allowable in respect of the matter is inadequate.
This is because, as to importance, the significance of the issues at stake is relevant to the degree of work properly and reasonably done in preparing for and presenting the case at trial. The same consideration applies where a matter is unusually difficult or complex.
Third, the court's power to make an order under s 280(2) is enlivened by satisfaction of any of the factors of 'unusual difficulty', 'complexity' or 'importance'.
Fourth, the word 'unusual' in s 280(2) qualifies only the term 'difficulty' and not the terms 'complexity' or 'importance'.
Fifth, the question of whether there is 'unusual difficulty' involves an evaluative judgment by which the court compares its experience of the particular case and the usual run of civil cases determined in the court. Indeed, that is the approach to all three descriptors. In O'Rourke v P & B Corporation Pty Ltd Martin CJ stated:
'… the word "unusual" means unusual having regard to what one might describe as the usual run of civil cases. The question is not, for example, in this case, whether this was an unusually difficult, complex or important case for specific performance of a contract for the sale of land which at the time the contract was entered into was not sub‑divided. Rather the question is whether this was an unusually difficult, complex or important case, having regard to the usual run of civil cases determined in the Supreme Court and generally in the District Court, because, of course, the Determination is generally applicable to proceedings in both Courts.'
Sixth, the question of 'importance' allows the court to have regard to the significance of the issues that arose in the litigation. Importance can arise either because of the significance of the issues to the parties or because of the significance of the issue to other prospective parties or to the public or the community generally.
Seventh, the question of unusual difficulty, complexity or importance arises in respect of the proceedings as a whole and not in respect of each individual item in the costs determination. The adjectival characteristics of unusual difficulty, complexity or importance qualify the issue, dispute or controversy before the court rather than the work done or services provided in respect of each applicable item.
Eighth, where orders are made under s 280(2)(b) or (c) the taxing officer must still consider the reasonableness of and necessity for the work undertaken and make a judgment as to the costs that ought reasonably be allowed.
Significantly, an application under s 280(2) must fail unless the court characterises the matter - ie the issue, dispute or controversy before the court - as being one or more of: (1) unusual difficulty; (2) complexity; or (3) importance.
4.0 The defendants' application that costs of the action following the refusal of the Calderbank offer by the plaintiff, and all of the costs of the deferred issues be reserved
The Calderbank offer was dated 13 January 2022.
As the defendants point out in their submissions, at the time the Calderbank offer was made, the parties could be found to reasonably have a fulsome understanding of the case they had to meet at trial.
The offer was made at a time after the third version of the statement of claim was filed (29 November 2021), substantial discovery had been given, the plaintiff had filed its witness outlines and the defendants had filed five of its witness outlines, but before the plaintiff had filed the application for a de bene esse hearing to take the evidence of the plaintiff's principal witness Mr Carson who was by that time terminally ill, and before the plaintiff had prepared a detailed and lengthy witness statement containing the evidence in chief of Mr Carson.
The terms of the Calderbank offer were as follows:[397]
[397]Affidavit of Jacob David Loveland affirmed 12 December 2022, Attachment JDL01, 7 (footnote omitted).
(a)Vango[398] grants Zuleika a 5% interest in mining tenement 52/183 (Tenement);
[398] The Calderbank offer defined Vango as the first defendant and the second defendant to the action; Affidavit of Jacob David Loveland affirmed 12 December 2022, Attachment JDL01,4.
(b)the parties acknowledge that the CAPEX for the development of any mine on the Tenement, including, but not limited to, either the K1 and/or K2 and/or the PHB-1 orebody, will need to be agreed;
(c)if Zuleika is unable to contribute 5% to the CAPEX, its interest will be diluted in proportion to the amount contributed. For example, if the total CAPEX is $100M, and Zuleika contribute $3M, then its interest will be reduced to 3%;
(d)each party bears their own costs in relation to the proceedings to date; and
(e)the terms of the settlement will be recorded in a deed of settlement which will record the terms agreed between the parties. The deed of settlement will include a clause recording that the parties will agree on the wording of any ASX announcements issued by them in relation to the settlement and will have annexed to it a binding Heads of Agreement setting out the terms agreed between the parties.
36.This offer is made in accordance with the principles contained in Calderbank v Calderbank and will remain open for 21 days from the date of this letter.
The defendants point out that the offer to the plaintiff to settle the whole of the action for a 5% interest in the Tenement was made when the plaintiff was only claiming a 4.1% interest, and prior to the orders being made for the deferred issues to be heard and determined separately.
The defendants accept at this point in time the court cannot determine if the Calderbank offer was unreasonably rejected, because the court is yet to hear and determine the deferred damages issues. However, the defendants claim that they should be entitled to rely upon the Calderbank offer if they are successful in defending the deferred issues. They claim that if the plaintiff is awarded no damages the court should find after the hearing of the deferred issues that the offer was reasonable and should have been accepted by the plaintiff.
As senior counsel for the plaintiff pointed out, even if the plaintiff was to be only awarded nominal damages in a hearing on the deferred issues it could not be found that the defendants offer was reasonable and should have been accepted by the plaintiff.
First, when the offer was made the plaintiff's claim was declaratory relief with respect to a 4.1% interest in the Tenement, and any contiguous tenements which cover adjacent, on‑strike or dip‑down extensions of the K2 ore body or mineralised zones (Extensions), and damages for breach of contract and repudiation. Other than the assessment of damages which was deferred, the plaintiff was awarded the relief it sought.
However, the Calderbank offer to the plaintiff was for different relief it was to agree to a 5% interest in the Tenement but not any Extensions, and to enter into a new binding agreement, including the CAPEX for the development of any mine to be agreed, and did not provide for any payment to the plaintiff towards the plaintiff's costs of proceeding to that date.
Second, although the offer was to agree to a 5% interest in the Tenement, the plaintiff's interest could be diluted if it did not contribute in proportion to its interest to a CAPEX amount that was yet to be agreed.
It cannot be said to have been unreasonable for the plaintiff to have rejected the offer in circumstances where what was offered was of a completely different nature than that sought by the plaintiff. The plaintiff was entitled to insist upon the relief to which it was entitled, not something that was entirely different.
Third, the offer was uncertain in that it required further agreement as to the CAPEX for the development of any mine on the Tenement, and a new binding Heads of Agreement, the proposed terms of which were unknown.
Fourth, in circumstances where the relationship between the parties had totally broken down it could not be found to be unreasonable for the plaintiff not to agree to enter into a new joint venture by entering into a new binding Heads of Agreement, which proposed terms were unknown and would have to be the subject of further agreement.
For these reasons, the orders sought by the defendants should be refused.
5.0 The plaintiff's application for indemnity costs
The plaintiff claims that the court should order indemnity costs against the defendants because the defendants' defence to the plaintiff's claim was hopeless, was conducted by the defendants in wilful disregard of known facts, and that the defendants, properly advised, knew or should have known that, since the commencement of the action.
Having considered the matter carefully, although the defendants defence failed, I am not satisfied that this is one of those cases where the court should make an award for indemnity costs.
In respect of whether the plaintiff had earned in a joint venture interest on the proper construction of the BTS Agreement, although the defendants' construction was rejected, and in part the defendants' construction was found to be commercially absurd, this part of the dispute as to the proper construction of the BTS Agreement was not straightforward. Consideration of the plaintiff's and defendants' construction arguments occupied almost 14 pages of the primary reasons for decision.
If the only issue in the trial on the preliminary issue had been whether the defendants breached the terms of, and wrongly repudiated the terms of the BTS Agreement, I would make an indemnity costs order. This is because the undisputed documentary evidence before the court overwhelmingly established that the defendants had by their conduct engaged in multiple breaches of, and had repudiated, the terms of the BTS Agreement.
However, if I was to make an indemnity costs order, the order would only be for costs of the action incurred by the plaintiff prior to 28 January 2022, which was the date that the plaintiff amended its statement of claim to claim an 11.87% interest in the Tenement, with the claim for a 4.1% interest remaining as alternative relief. Although the defendants concede that the plaintiff's argument in respect of this issue played a very small part in the resources required to be engaged in the trial of the preliminary issue, given that the plaintiff's claim that it was entitled to 11.87% interest failed, it could not be found that the defendants' defence of the plaintiff's claim for relief after the plaintiff amended its claim on 28 January 2022 was hopeless.
For these reasons, I am not satisfied that an indemnity costs order should be made in favour of the plaintiff.
6.0 The plaintiff's application for special costs orders – Items 4, 7, 19, and 22(a)
The plaintiff does not seek to lift the hourly rates allowable in each of the Determination items, but does seek the removal of the hourly limits for Items 4 (reply), 7 (discovery), 19 (preparation of case), and 22(a) (trial).
In the affidavit of Chloe Alyssa Tolley affirmed 22 November 2022, Ms Tolley deposes that the time spent on work falling within each of these items exceeds the maximum hours and thus the amounts allowable under the 2018 Costs Determination and the 2020 Costs Determination.
Item 4 (reply to defence) in each of the determinations prescribes a maximum limit of 10 hours to be charged for the work of a senior practitioner.
In respect of Item 4, Ms Tolley states, the defendants filed five versions of the defence and the plaintiff filed five versions of its reply to defence, and the time spent on work falling within Item 4 was at least 101 hours of work, being 4.5 hours of work by senior counsel, 5 hours of work by junior counsel, 56.6 hours of work by senior practitioners, 15.5 hours of work by a junior practitioner and 19.4 hours of work by a restricted practitioner.[399]
[399] Affidavit of Chloe Alyssa Tolley affirmed 22 November 2022, pars 11 and 12.
Item 7 (discovery) of the 2020 Determination prescribes a maximum limit of 10 hours for work to be charged by a senior practitioner for a notice requiring discovery and giving discovery of documents.
In respect of Item 7, Ms Tolley states that the parties agreed to provide discovery electronically and following orders made on 21 July 2020 requiring the parties to give general discovery, a total of approximately 4,625 documents were discovered by the parties of which the plaintiff discovered a total of 3,510 documents. In addition, there were 16 tranches of supplementary informal discovery exchanged, and the time spent on work falling within Item 7 of the Determination was at least 638.4 hours, being 225.3 hours of work by senior practitioners, 126.2 hours of work by a junior practitioner, 239.5 hours of work by a restricted practitioner and 47.4 hours of work by a clerk/paralegal.[400]
[400] Affidavit of Chloe Alyssa Tolley affirmed 22 November 2022, pars 13 ‑ 18.
Item 19 (preparation of case) of 2020 Determination prescribes the maximum hours for the preparation of case for trial to be 120 hours of work carried out by a senior practitioner.
In her affidavit, Ms Tolley states that in respect of preparation of case, among other things, the plaintiff prepared the urgent de bene esse application, witness outlines for three witnesses and supplementary witness outlines for two witnesses, objections to the defendants' witness outlines, issued, and inspected the produced documents from, four subpoenas, prepared an electronic trial bundle containing over 950 documents, which over 500 documents became trial exhibits, trial materials including papers for the judge, subsequent amendments to the pleadings, and a chronology of events.[401]
[401] Affidavit of Chloe Alyssa Tolley affirmed 22 November 2022, par 19.
Ms Tolley also states that the time spent on work falling within Item 19 of the Determination is, at least 1,585.2 hours, being 54.8 hours of work by senior counsel, 110.2 hours of work by junior counsel, 512.2 hours of work by senior practitioners, 447.8 hours of work by a junior practitioner, 312 hours of work by a restricted practitioner and 148.2 hours of work by clerks/paralegals.[402]
[402] Affidavit of Chloe Alyssa Tolley affirmed 22 November 2022, par 20.
Item 22 (trial) of the 2020 Determination prescribes a maximum period of 3.5 days' work for a fee on brief for junior counsel, for first day of trial and preparation, including submissions.
Ms Tolley states in her affidavit that the time spent by junior counsel on work falling within Item 22(a) was at least 137 hours.
6.1 Are the maximum amounts allowable under each of the Determination items inadequate?
The plaintiff points out that the affidavit of Ms Tolley demonstrates that the costs actually incurred by the plaintiff well exceed the maximum amount allowable under the 2018 Costs Determination and the 2020 Costs Determination, and thus the relevant Determination item is inadequate in the sense that there is a real prospect that the bill of costs in this litigation may be taxed at an amount that exceeds the limits imposed.
Having regard to the matters deposed by Ms Tolley in her affidavit, I am satisfied that the limits imposed by the relevant items of the costs determinations would prevent the plaintiff from putting a reasonable arguable case to the taxing officer on the costs that ought to be awarded in a taxation of each of these items. For this reason, I am satisfied that the costs allowable under each of the items under the application of the 2018 Costs Determination and the 2020 Costs Determination are inadequate.
6.2 Overview of the proceedings ‑ were the proceedings factually and legally complex, unusually difficult or important?
The defendants point out that the issues in dispute were confined to a commercial agreement between the parties, and did not raise issues of significance for the public or the community generally. Although the defendants argue that the trial on the liability issues was not ultimately, factually complex, I do not agree.
It is common ground that the trial of the liability issues did not raise any difficult or complex questions of law. However, a voluminous number of documents required consideration by the parties and the court.
I accept the plaintiff's submission that the matter was factually complex in that there was a large amount of material to be marshalled in order to prove each of the breaches and repudiation of the BTS Agreement.
As senior counsel for the plaintiff points out, the conduct of the defendants through its officers of the company, in particular Mr McInnes, was critical to establishing the breaches of contract. For the plaintiff to make out its case not only was a large volume of documents necessary to be discovered but senior counsel and junior counsel and those instructing them were required to analyse and assemble those documents to enable the plaintiff to make out its case not only by a lengthy analysis of the contemporaneous documents but also through the lengthy cross‑examination of Mr McInnes. I accept that this work added significantly to the time required to adequately prepare a reply to the defendants' defence, discovery, preparation of case and preparation for trial by junior counsel.
This was not a simple case of only one breach and repudiation of an agreement. The summary of the findings of breach and repudiation in my reasons for decision delivered in the primary decision comprise five pages and the factual findings of breach and repudiation extend over 100 pages.
The matter is important to the parties. It involves two ASX publicly listed companies, the refurbishment and development of an existing underground gold mine, and the right of the plaintiff to earn in an interest of 50% of a tenement, that included the gold mine.
I am also satisfied that having regard to the nature and number of contested factual issues, the volume of evidence and the importance of the action, the services of more than one counsel were reasonably necessary for the adequate presentation of the case at trial. Thus, the trial of preliminary issues as to liability justified the involvement and attendance of both senior and junior counsel at trial and allowance should be made for the same.
6.3 Special costs orders as sought by the plaintiff should be made
For these reasons, I am satisfied that there is a fairly arguable case that each of these items in the relevant cost determinations are inadequate because of the complexity and importance of the action, and the special costs orders sought by the plaintiff should be made.
I am also of the opinion that the defendants should pay the plaintiff's costs of the costs application to be assessed, if not agreed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TS
Associate to the Honourable Justice Smith
11 JANUARY 2023
29
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