Formation of contract - Oral agreement - Whether final agreement made - Protracted or imprecise negotiations - Intention to make a concluded agreement - No concluded binding agreement made

Authority to contract - No actual authority - No apparent or ostensible authority

Relief - Election to terminate agreement - Entitlement to damages in substitution for specific performance - Measure of damages for failure to deliver options

Supreme Court Act 1935 (WA), s 25(10)

First Plaintiff : Mr C L Zelestis QC & Mr M J Feutrill

Second Plaintiff : Mr C L Zelestis QC & Mr M J Feutrill

1 The plaintiffs sue to enforce an oral agreement which they say was made in stages between them and the defendant during the first half of 2006. The second plaintiff, Porter, is a geologist. The first plaintiff, Absolute Analogue Inc (Absolute), is a company through which Porter agreed to provide his services to the defendant. The defendant, Sundance Resources Ltd (Sundance), is a mining company based in Perth whose main assets are iron ore leases in Cameroon near Mbalam. Sundance is listed on the Australian Securities Exchange. John Corr was its chairman of directors. Adam RankineWilson, through companies he controlled, was the largest shareholder in Sundance. Sundance acquired the iron ore leases by acquiring Cam Iron SA, a company incorporated in Cameroon in which Porter held the majority of shares.

2 The plaintiffs say that the agreement as finally made was to the effect that Absolute would provide the services of Porter to Sundance, as the manager of the project in Cameroon, for one year at $20,000 per month and reimbursement of reasonable expenses, and Sundance would issue to Porter 30 million options to acquire shares in Sundance, exercisable within three years from the issue of the options, 20 million options exercisable at 10 cents and 10 million options exercisable at 20 cents. The period of service was to commence upon the transaction by which Sundance acquired Cam Iron becoming unconditional, which occurred on 19 May 2006.

3 Sundance paid fees and reimbursement of expenses to Absolute from 21 May to 30 November 2006 but disputed the sums claimed from 1 December 2006 to 19 May 2007. However, shortly before trial Sundance agreed to make payment of the balance of the fees and expenses claimed for that later period. What remains in issue is Porter's claim relating to the options. Porter claims damages representing the value of the options which should have been issued to him and interest. Sundance denies that there was any agreement for it to issue options to Porter.

4 The plaintiffs' pleading is as follows. In or about February 2006 Porter made an agreement with Corr and RankineWilson on behalf of Sundance. The agreement was that Porter would be appointed managing director of Sundance and Sundance would pay Porter a fee of $20,000 per month and grant to him 50 million options to be exercised on specified terms. The agreement was varied in or about midMarch and again in or about midMay 2006 by an agreement between Porter and Corr and Rankine-Wilson on behalf of Sundance. The variations were that Porter would be appointed a project consultant rather than managing director and would receive 30 million options instead of 50 million. The agreement was further varied on 8 June 2006 by an agreement between Porter and Corr and RankineWilson on behalf of Sundance. The variations are that the consultancy or management services to be provided by Porter would be provided through Absolute and the monthly fee would be paid to Absolute. The options were to be paid to Porter. It was agreed that the varied agreement would be immediately binding, but that the parties would enter into a formal written agreement recording the terms of the agreement. From 21 May 2006 to 19 May 2007, Absolute, through Porter, provided the management services as agreed. Porter negotiated the terms of a written agreement with Corr and subsequently Alex Pismiris, on behalf of Sundance, but they did not reach agreement on the terms of a written agreement.

5 Porter's case in relation to the options is as follows. Sundance, in breach of contract, failed to issue to Porter 30 million options to acquire shares in Sundance. The options should have been issued, at the latest, at the end of Porter's period of service as project manager, that is, 19 May 2007. They would have been exercisable at any time within the next three years. When the plaintiff commenced these proceedings on 31 July 2007, Porter claimed specific performance of the promise to issue the options, alternatively damages. Prior to the commencement of the trial Porter elected to terminate the agreement and seek damages in substitution for specific performance pursuant to Supreme Court Act 1935 (WA) s 25(10). By reason of Sundance's repudiatory breach of contract, Porter has suffered the loss of the value of the options. The options should be valued as at May 2007.

6 Sundance denies that any agreement was made in February 2006. Sundance admits that Corr had authority to contract on behalf of Sundance but denies that RankineWilson had such authority. Sundance denies that any agreement was made or varied in March or May 2006 or on 8 June 2006. Sundance says that Porter provided services to Sundance by an agreement that was partly oral and partly by conduct. The agreement was that Porter would provide project consultancy services to Sundance and Sundance would pay Porter a fee of $20,000 per month but denies that there was any agreement to grant options to Porter.

7 In closing submissions Senior Counsel for Sundance, Mr Donaldson SC, submitted that the plaintiff's pleaded case was that the agreement was made in February 2006 and subsequently varied in March, May and June 2006. Mr Donaldson said that it was not open on the pleadings to find that there was no concluded agreement in February 2006 but there was an agreement made in June 2006.

8 In Fazio v Fazio [2012] WASCA 72 Murphy JA, with whom Pullin and Newnes JJA agreed, considered the appellant's claim that the trial Judge erred in law in deciding the case on a basis that had not been pleaded. The trial Judge had found that an agreement had been made in the terms alleged by the respondents in their pleading except in relation to some of the terms. Murphy JA said that the terms of the agreement, as found by the trial Judge, did not 'fall outside the scope of the respondent's pleaded case' and 'the finding was ... "available" on the pleadings' and 'it could not be said that it was not "founded" on the pleadings ... or that it was, in substance, an "independent ground ... never pleaded"' [123]. Murphy JA held that:

It cannot be said that, in substance, the judge transgressed in finding the contract beyond the litigated case merely because the judge characterised the agreement in a form somewhat differently from that in the defence filed by the first to third respondents ... These differences in characterisation do not point to any denial of natural justice to the appellant, or to any departure by the trial judge from the principles in the authorities relied on by the appellants [124].

9 Mr Donaldson properly conceded that if it was open to find on the evidence that an agreement was made on 8 June 2006, and not before, Sundance 'had an opportunity to deal with it on that basis'. Having regard to the way in which the case was conducted, it is open to the court to find that an agreement in substantially the terms alleged by the plaintiffs was made, or varied, in February, March, May or June of 2006 if the evidence so establishes.

10 Protracted or imprecise negotiations will often give rise to doubt whether a final agreement had been made. A court must ascertain from the dealings between the parties whether they intended to make a concluded agreement or not. That intention is tested objectively by reference to what a reasonable person would have concluded. A person will be held to have made a contractual offer if it was reasonable for the alleged offeree to believe that he could conclude a contract simply by indicating assent to the offeror's terms. Similarly, a response to an offer will amount to a binding acceptance, notwithstanding that the offeree did not intend it to be an acceptance, if the offeror reasonably so regarded it. In Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1998) 18 NSWLR 540 Gleeson CJ discussed the test to ascertain whether the parties intended to make a concluded bargain or not. The Chief Justice said:

It is to be noted that the question in a case such as the present is expressed in terms of the intention of the parties to make a concluded bargain: see, eg, Masters v Cameron (at 360). That is not the same as, although in a given case it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. To say that parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same thing as to say that a court will decide that they intended to make a concluded bargain. Nevertheless, in the ordinary case, as a matter of fact and commonsense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention.

Reference has earlier been made to 'intention'. Cases which typically give rise to problems of the kind presently under consideration are cases in which there is no doubt that the parties had a common intention that at some stage, and by some means, they would enter into contractual relations. They have entered into negotiations for that specific purpose. The problem which arises is that they have exchanged communications which, on the one hand, use the language of agreement but, on the other hand, disclose an expectation that at some future time a document embodying the terms of their contractual arrangement will be brought into existence. Where, as in the present case, the communications which the parties have exchanged are in writing, the question of their 'intention' is, prima facie, to be resolved objectively, and as a matter of construction of the relevant documents.

...

This is not a case in which the parties have signed a single document which, because it contains some such expression as 'subject to contract', gives rise to the problem in question. In such a case, the outcome of which will ordinarily turn upon the construction of the single document referred to, questions may arise as to the admissibility of extrinsic evidence in aid of the construction of the document: see Air Great Lakes Pty Ltd v K S Easter(Holdings) Pty Ltd (1985) 2 NSWLR 309 per Hope JA. The case involves the objective determination of the intention of the parties from a consideration of a series of communications exchanged by them in the context of their dealings over a period of time. In those circumstances it is both appropriate and necessary to have regard to the commercial circumstances surrounding the exchange of communications and, in particular to the subject matter of those communications: Allen v Carbone [1975] HCA 14; (1975) 132 CLR 528 at 531-532. Furthermore, as was noted earlier, it is proper to have regard to communications between the parties subsequent to the date of the alleged contract to the extent to which those communications throw light upon the meaning of the language which is being considered for the purpose of determining whether it expresses an intention one way or the other upon the critical matter. At the least, such subsequent communications will often form part of the context in which the particular exchanges in question are to be evaluated (548 550).

11 In determining the party's objective intentions the court may look to such factors as the customary method of concluding a contract of the sort alleged or whether an informal exchange that is alleged to lead to a contract would accord with the expectations of the parties in a contract of the kind that is in dispute. The subject matter of this dispute is the issue of options to acquire shares in Sundance. The issue of securities is regulated by the Corporations Act 2001 (Cth). It is inherently unlikely that a publicly listed company would commit to the issue of options by an informal exchange not evidenced by any writing. Nevertheless, the court will find a contract to have been made if the evidence establishes that the parties irrevocably committed themselves by their words or conduct.

12 Where the intention of the parties is equivocal, conduct or correspondence subsequent to the time when the alleged agreement was made can be used as evidence to show whether or not a contract was concluded. Where it is asserted that it can be inferred that a contract has arisen from conduct, it is not sufficient that the conduct is consistent with the alleged contract. There needs to be a positive indication that the conduct is evidence of the contract alleged: Industrial Rollformers Pty Ltd v IngersollRand Australia Ltd [2001] NSWCA 111 [142]; Kriketos v Livschitz [2009] NSWCA 96 [117] [120]; McColl JA, Macfarlan JA concurring.

13 The principal players in the negotiations between the plaintiffs and Sundance were Porter, Corr and RankineWilson. There were also relevant discussions between Porter and Alex Pismiris who was also a director of Sundance. Porter, Corr and Pismiris all gave evidence and were crossexamined. RankineWilson died before the trial but after signing a witness statement.

14 Mr Donaldson attacked Porter's credit. First, he submitted that Porter's evidence in relation to his taxation arrangements was evasive and untruthful. In essence, Mr Donaldson submitted that Porter arranged matters to avoid paying tax in South Africa and Australia and his evidence was evasive about it. Secondly, Porter agreed to $200,000 being paid to his associate, Mr Asso'o, when he had no entitlement to it. In crossexamination Porter described Asso'o's demand for the $200,000 as extortion and said that he went along with the extortion demand because it was either that or there would not have been a deal. Mr Donaldson characterised Porter as a person who would quietly pay monies to an associate who had no legal or other entitlement to them, that he succumbs to extortion. Thirdly, Mr Donaldson submitted that Porter was dishonest in his dealings with the other shareholders of Cam Iron who Mr Donaldson characterised as Porter's partners. Porter concealed from those associates, Bogne and Asso'o, the consultancy agreement he was making with Sundance. Porter said that at the time he was negotiating the effective sale of all of the shares in Cam Iron to Sundance it was not inappropriate for him to conceal from the other directors or shareholders of Cam Iron that he was negotiating with Sundance for an agreement to pay him $20,000 a month and grant him options in Sundance. Porter's evidence concerning his email to Bogne of 13 June 2006 shows that he lacks integrity.

15 I find that Porter's evidence in relation to his tax arrangements was at times evasive. He went to some trouble to minimise his tax obligations and thereby maximise his personal gain. Porter acquiesced in payments to associates he considered to be extortion because otherwise the deal would not have been done. Porter concealed from the other directors and shareholders of Cam Iron that he was negotiating an engagement and issue of options by Sundance at the time he was negotiating commercial arrangements between Sundance and Cam Iron. Those findings reflect poorly on Porter's honesty and integrity. In crossexamination Porter did not accept that that behaviour was inappropriate. Porter's behaviour, and his rejection that it was inappropriate, reflect a 'whatever it takes' attitude to getting the deal done. These matters reflect poorly on Porter's honesty and integrity. That is a reason for carefully scrutinising the evidence of Porter.

16 Mr Donaldson also submitted that aspects of Porter's evidence were not credible in light of particular events and contemporary documents, or lack of documents. For example, Mr Donaldson submitted that Porter went to some trouble to set up a company in Malaysia and prepare draft written agreements in relation to the management fee of $20,000 per month but did not prepare any document in relation to the options without which, according to Porter, he would not have worked for Sundance. Mr Donaldson submitted that it was not credible that Porter would go to the trouble he did to create an agreement with a company to receive the $20,000 a month 'yet not a piece of paper in relation to the options'.

17 Mr Donaldson submitted that the most important document in this case is Porter's email to Corr of 2 July 2006. The email attaches a draft service agreement with Sundance and says: 'I have taken the section with the options out of it as they are linked to the directorship'. In crossexamination Porter said that he took out the 50 million options which were going to be issued to him in February for being a director. He agreed that he put nothing in about getting options as a consultant, but denied that he had taken out the reference to options because he understood that because he was not going to be managing director he had no entitlement to the options. Mr Donaldson submitted that that evidence is incredible and unbelievable.

18 I find that it is inherently unlikely that Porter would not have drafted any document providing for the issue of options to him or an agreement to do so, made any email or other written request for the issue of options, or made any reference in an email or other document to an agreement to grant him options if such an agreement had been made. That is especially so in circumstances where Porter prepared draft written agreements in relation to a management fee and refers to the written agreement in a number of emails and documents.

19 Mr Donaldson characterised Mr Porter's evidence of the 8 June 2006 meeting as astonishing and not believable, fantastic and preposterous. It was astonishing and not believable that RankineWilson would say to Porter 'you're not getting any options because the options related to you being appointed managing director and you're not managing director', and then a couple of minutes later 'I've discussed it with [Corr] and everything is OK, you'll still get the options'. It was fantastic and preposterous that after RankineWilson and Corr discussed giving options to Porter in front of Bogne and Asso'o, from whom Porter had concealed the negotiation, Bogne's only response was concern for Mr Porter and that they should go off to another meeting without RankineWilson. Porter's evidence that at the meeting he gave Corr a draft consultancy agreement with markings about options which did not reflect Porter's understanding of the agreement was ridiculous. I do not agree that Mr Porter's evidence of the 8 June 2006 meeting was astonishing, fantastic or preposterous. However, the matters referred to by Mr Donaldson do give rise to doubt about the credibility and reliability of Porter's evidence.

20 The matters to which I have referred give rise to doubts about the credibility and reliability of Porter's evidence. I do not accept Porter's uncorroborated evidence where it is contradicted by other evidence, or is unlikely having regard to other evidence.

21 RankineWilson was a founding director and executive chairman of Capital Investment Partners Pty Ltd (CIP), a corporate advisory services company. Corr and Pismiris were also directors of CIP. Corr and Pismiris acknowledged that RankineWilson was the driving force of CIP. From around February 2006 CIP was appointed as the corporate advisor to Sundance in relation to the acquisition of Cam Iron. The terms of CIP's engagement are contained in its letter of engagement dated 15 February 2006. RankineWilson had been providing some advice to Sundance in anticipation of the engagement.

22 RankineWilson was also the sole director and shareholder of Bayonet Investments Pty Ltd and the sole director, and, with Bayonet Investments Pty Ltd, the only shareholder of Laser Holdings Pty Ltd, companies which together were substantial shareholders, option holders and convertible note holders in Sundance. RankineWilson had taken a leading role in identifying and progressing the opportunity for Sundance in relation to the acquisition of Cam Iron, including the negotiations with Cam Iron. RankineWilson says that as a consultant to Sundance, CIP did not have the authority to contract on behalf of Sundance.

23 RankineWilson died before the trial but after signing a witness statement. The evidence attributed to RankineWilson in these reasons is taken from his witness statement. I have taken the evidence in RankineWilson's statement into account in making my findings of fact in this case. However, the weight to be given to that evidence is necessarily diminished by the fact that it was not made on oath and was not subject to crossexamination.

24 Corr was a director of CIP and of Sundance. He was the executive chairman of Sundance from 10 February 2005 to 13 November 2006. Senior Counsel for the plaintiffs, Mr Zelestis QC, attacked the credit of Corr. Mr Zelestis submitted that when crossexamined about why references to Porter being managing director of Sundance were removed from the March 2006 ASX announcement, Corr's answers were evasive and he gave purported explanations that were not in his witness statement and which were inherently improbable. Further, Corr's explanation for his belief that Porter would accept, or had not refused, the position of managing director before 8 June 2006 were not credible. In relation to both those matters, I find Corr's answers to be more reconstruction than recollection.

25 Mr Zelestis submitted that Corr's explanation that at the 8 June meeting Porter accepted a reduction from 50 million to 30 million options for the role of managing director because the strike price of the 30 million options was more favourable to Porter was false and his evidence that he was shocked and surprised when Porter accepted the reduction was not credible. I do not accept Corr's explanation of why Porter accepted a reduction from 50 million to 30 million options. Corr was confused about these matters. His evidence was more reconstruction than recollection and was internally inconsistent.

26 Mr Zelestis submitted that Corr's evidence to the effect that he believed at the end of the 8 June 2006 meeting that Porter had accepted the role of managing director was inconsistent with his evidenceinchief and not credible. Again, I find Corr's evidence to be confused and to be based on reconstruction. Mr Zelestis submitted that Corr gave inconsistent evidence about whether Porter had shown him a draft agreement or mentioned Absolute during the meeting on 8 June 2006. I find that Corr does not have a detailed recollection of what occurred at the meeting and his answers were, in part, an attempt to reconstruct what had occurred.

27 I find that Corr did not have a recollection of some of the details about which he was questioned and he gave evidence based on his reconstruction and belief of what must have happened in light of his impression of the outcome of meetings and discussions. For that reason, Corr's evidence must be carefully scrutinised. I do not rely on Corr's evidence where it is contradicted by other evidence or objective circumstances.

28 Alex Pismiris was a director of CIP from 14 January 2005 to 31 December 2007 and a director of Sundance from 5 July 2006 to 28 November 2008. Pismiris assisted in preparing Sundance's ASX announcement that it had acquired Cam Iron. He became a director of Sundance on 5 July 2006 when Corr went into hospital for emergency heart surgery. At the time of the trial Pismiris was an executive director of another company which provides corporate advisory services. Pismiris signed a witness statement on 4 November 2011. In crossexamination Mr Pismiris was asked about a meeting or meetings he had with Porter in September 2006 and in particular about the circumstances under which certain handwritten notations were made on a draft agreement produced by Pismiris. Pismiris was unable to recall those details. That is not surprising seven years after the event. I found Pismiris to be an open and honest witness.

29 I do not accept the evidence of Porter or Corr concerning crucial conversations where their evidence is contradicted by another witness or is unlikely having regard to objective circumstances and documents, including subsequent conduct and documents. I have reached that conclusion in relation to Porter for four reasons. First, the conversations occurred some years ago and Porter's recollection of crucial conversations is not assisted by any contemporaneous document. Secondly, as Mr Donaldson submitted, Porter had reason to tailor his evidence as he has a huge stake in the outcome of this matter. Thirdly, Porter's arrangement of his business affairs and his dealings with business associates cast doubt on his frankness and integrity. Fourthly, some of Porter's responses in crossexamination were implausible or unconvincing.

30 I have reached the conclusion set out in the previous paragraph in relation to Corr for three reasons. First, the conversations occurred some years ago and Corr's recollection is not assisted by any contemporaneous document. Secondly, Corr's evidence that during the 8 June 2006 meeting Porter first agreed to accept options for being managing director and then said that he did not want to be managing director is implausible. Thirdly, Corr gave inconsistent evidence about Porter agreeing at the 8 June meeting to receive 30 million options rather than 50 million options for being managing director. Corr's evidence that he was surprised when Porter agreed during the meeting to accept 30 million rather than 50 million options is inconsistent with his earlier evidence that the 30 million options were more favourable than the 50 million options because of the lower exercise price.

31 The defendants adduced in evidence a statement made by RankineWilson in 2007. As I have said, the weight to be given to that evidence is necessarily diminished because it was not made on oath and he was not subject to crossexamination.

32 There are no contemporary notes of the critical conversations. Each of the participants in the conversations made a witness statement and all but RankineWilson were crossexamined. The original witness statements were signed in 2011. That is five years after the crucial conversations. For the reasons I have stated, the evidence of Porter and Corr about the crucial conversations is unreliable and RankineWilson's evidence must be treated cautiously because it was not sworn evidence and he was not crossexamined.

33 The circumstances make applicable the approach described by Tamberlin J in Lake Cumberline Pty Ltd v Effem Foods Pty Ltd t/as Uncle Bens of Australia (Unreported, Federal Court, 29 June 1995) in a passage cited with approval by the High Court in Effem Foods Pty Ltd v Lake Cumberline Pty Ltd [1999] HCA 15; (1999) 161 ALR 599, 603 [15] and with apparent approval by Murphy JA in Fazio v Fazio [2012] WASCA 72:

... [Given the lapse of time] between the events and conversations raised in evidence and the hearing of the evidence before me, the only safe course is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence. In circumstances where the events took place so long ago, it must be an exceptional witness whose undocumented testimony can be unreservedly relied on. The witnesses in this case unfortunately did not come within that exceptional class. The discussions referred to in evidence were capable of bearing quite opposed meanings depending on subtle differences of nuance and emphasis, and a proper appreciation of the significance of those matters must necessarily be considerably diminished over such a long period of time [43].

In Fifteenth Eestin Nominees Pty Ltd v Rosenberg [2009] VSCA 112 Maxwell P, Neave and Redlich JJA observed at [113]:

Recollections of what was said, or intended, are inevitably clouded by the overlay of emotion and by the intrusion of individual hopes and expectations and feelings of entitlement.

In this case Porter, Corr and RankineWilson each had a belief whether or not their communications during 2006 had given rise to a final binding agreement that Sundance would issue options to Porter. Those beliefs inevitably affect their recollection of the crucial conversations. That is particularly so where their recollection of the detail of what was said is to an extent reconstruction based on their understanding of the outcome of the meetings and conversations.

34 I will now consider the events and communications which the plaintiffs say gave rise to the agreement they sue on.

35 In 2004 Porter became aware of a hematite iron ore occurrence at Mbalam in south east Cameroon near the frontier with the Congo. Porter caused Cam Iron to be registered in Cameroon and, with the assistance of Roger Bogne acting as his local agent, applied for an exploration permit over Mbalam. Cam Iron was granted an exploration permit over the Mbalam iron ore occurrences. Porter and his wife held 102 of the 120 shares issued in Cam Iron.

36 In December 2005 Porter signed a mandate with a company controlled by Stephen Miller for the company to act as an agent to sell Cam Iron into an ASX listed company. In January 2006 Miller told Porter that he was meeting with a group in Australia regarding the sale of Cam Iron to Sundance. Miller told Porter that an agreement between Cam Iron and Sundance was negotiated between Miller, his associate, Wayne Loxton, RankineWilson, who Porter believed to be the largest shareholder of Sundance, and Corr who was then executive chairman of Sundance.

37 RankineWilson had known Porter for approximately 20 years although not well. RankineWilson says that in late January/early February 2006 he had some telephone discussions with Porter about the project and Sundance's acquisition of Cam Iron. RankineWilson spoke to Porter about his staying involved in the project and canvassed whether he would be prepared to join the Sundance board as managing director. Porter said he would consider joining the Sundance board.

38 Miller had asked Porter what his ongoing involvement with the ASX listed company would be and Porter had said that he would assist in the short term but did not want to take a managerial or director role. On 2 February 2006 Miller sent to Porter an email which attached a draft consultancy agreement between Sundance and Porter's personal company, DP Prospecting Services Pty Ltd. The draft consultancy agreement was in the form of a letter from Porter to Sundance stating that DP Prospecting was prepared to provide to Sundance technical services and also the executive services of Porter. The draft letter said that the DP Prospecting would charge a fee of $20,000 per month. The draft letter further said:

[T]he Consultant will be granted xxx million options on such terms and conditions as agreed by way of an Incentive Agreement. It is proposed that these options be structured according to technical milestones associated with the Mbalam project that the parties agree on.

Porter forwarded Miller's email to Gilbert Rogers, the company secretary of Cam Iron who was located in Perth. Porter asked Rogers to incorporate the main features of Miller's draft consultancy agreement into a draft consultancy agreement in accordance with a template he had used previously for other projects. On 3 February 2006 Porter received an email from Rodgers attaching a revised draft consultancy agreement between Sundance and DP Prospecting. The draft consultancy agreement incorporated the term in relation to options which was contained in Miller's draft consultancy agreement.

39 Commencing on 7 February 2006 there were email communications between Corr and Porter. Porter says that on 14 February he had a telephone conversation with Miller about a 12 month contract that RankineWilson and Corr were prepared to offer Porter on behalf of Sundance. Miller said that in a meeting between himself, Loxton and RankineWilson, Sundance was prepared to offer Porter $US25,000 per month plus 15 million options exercisable at 5 cents, 15 million exercisable at 7.5 cents and 20 million exercisable at 10 cents.

40 On 15 February Porter received telephone calls from RankineWilson and Corr informing him of their interest in the project. Corr said that he was arriving in Cape Town, where Porter lived, on 17 February and wanted to meet to discuss the project in detail. RankineWilson and Corr both said that they wanted Porter to run the project on Sundance's behalf. Porter expressed reservations about being managing director.

41 On 18 February 2006 Porter met with Corr in Cape Town. They spoke of the project potential. Corr explained the transactions by which Sundance would acquire Cam Iron. They discussed Porter's position in the project. Corr said that Sundance wanted Porter to be its managing director. Porter said he would do it in the short term to get them established in Cameroon and to get the resource part of the work started but he believed that long term they needed an engineer as managing director. Porter said he had other things to do and did not need to work for Sundance but if they wanted him to be managing director then he wanted 50 million options. Porter says he proposed to Corr that 15 million options be exercisable at 5 cents, 15 million at 7.5 cents and the balance of 20 million at 10 cents. Porter asked for a consultancy fee of $20,000 per month for a 12 month contract. Porter says Corr said that he agreed with those terms but would have to check with RankineWilson to see that the terms were acceptable, especially regarding the options.

42 Later that day Porter, Corr and a Bill Hope went to dinner. Porter says Corr told Porter that he had spoken to RankineWilson about his proposal for options. Corr said that Porter would receive 30 million options at an exercise price of 10 cents with a three year term and a further 20 million options and an exercised price of 50 cents with a three year term. Corr said that Porter would receive $20,000 per month as a consultancy fee. Corr said that they would both call RankineWilson the following day to confirm the arrangement.

43 The following day, 19 February, Porter collected Corr and drove to Porter's house in Newlands where they attempted to telephone RankineWilson. The reception was impossible so they changed locations. They managed to contact RankineWilson on Corr's mobile phone. There is broad agreement about the subjects discussed in a telephone conversation with RankineWilson but different recollections of the detail of what was said. Porter says that RankineWilson spoke about the project. He said he wanted Porter to be the managing director. Porter agreed to do it on an interim basis until the resource work was completed and until they could find an engineer to manage the bankable feasibility study. Porter said to RankineWilson that he and Corr had agreed on 30 million options for Porter at an exercise price of 10 cents with a three year term and a further 20 million options at an exercise price of 50 cents with a three year term plus a monthly consultancy fee of $20,000. RankineWilson said that was fine with him.

44 RankineWilson's account of the telephone conversation is somewhat different. Porter said that he and Corr had been discussing Porter's possible appointment as managing director and that he would have to be incentivised in order to consider the proposal. RankineWilson asked Porter what type of incentive he had in mind. Porter replied that he would require options to be issued to him. Porter said he had 50 million options in mind, split into two tranches. Porter also said he wanted a fee. The discussion ended with RankineWilson understanding that Porter was interested in taking the role of managing director and Corr saying that he would discuss the matter with the Sundance board.

45 Corr says that during the telephone conversation Porter said to RankineWilson that they had discussed the possibility of him becoming managing director of Sundance but that he wanted 50 million options as part of the package. Corr says that during the time he was in Cape Town he did not say anything to Porter to the effect of offering him a position with Sundance or that any share options would be issued to him.

46 Immediately after Corr's visit to Cape Town there was a broad consensus between Porter, Corr and RankineWilson that Porter would be appointed managing director of Sundance and would receive 50 million options on the conditions outlined by Porter. That is to be inferred from the draft ASX announcements drafted in February and March. But Porter had not committed to becoming managing director and there was no concluded agreement. In crossexamination Porter agreed that at the time of the ASX announcement on 3 March he was still negotiating with Corr and RankineWilson for him to be involved in the project; what was agreed on 18 and 19 February 'was only a proposed deal'.

47 In late February Sundance drafted an ASX announcement of its acquisition of Cam Iron. It was drafted by Sundance's lawyers, Steinepreis Paganin, with input from Corr, Pismiris, RankineWilson and others representing the Cam Iron vendors. The draft underwent a number of iterations. Various iterations of the draft are attached to emails which are in evidence. I am unable to identify the first iteration. The first draft in evidence states that Sundance was pleased to announce the proposed appointment of Porter as managing director.

48 Porter says that on 27 February he spoke to Loxton and Corr by telephone. He told each of them that he did not want the position of managing director and that he would work as a project manager for 12 months providing that he got at least 30 million options. Corr said that the options went with the position of managing director. Porter said that he wanted options as well or it was not worth his while. Porter says that no agreement was reached. It is unlikely that Porter informed Corr of those matters on 27 February. If he did then Corr continued to believe that Porter would agree to become managing director notwithstanding what Porter had said. That is to be inferred from a draft of the ASX announcement sent by Corr on 1 March to Penrose, a lawyer advising Miller, and Steinepreis, the lawyer acting for Sundance, which stated that Sundance was pleased to announce the proposed appointment of Porter as managing director to oversee exploration and further assessment of Mbalam.

49 On 1 March 2006 Corr sent a draft of the ASX announcement to Porter, Penrose and Pismiris. The draft is dated 2 March 2006, notwithstanding that Corr attached it to his email of 1 March 2006. The draft announcement said that Sundance proposed to appoint Porter as managing director and that Porter would be granted 30 million options exercisable at 10 cents each on or before 31 March 2009 and 20 million options exercisable at 50 cents each on or before 30 April 2009, subject to required approvals. It is common ground that Sundance could have issued options to Porter without shareholder approval. The words 'subject to required approvals' suggests that Corr then believed that shareholder approval was necessary or intended to seek such approval whether it was necessary or not. In any event, the words are a further indication that there was no unconditional agreement at that time.

50 Porter says he had a telephone conversation with Corr on 2 March. They discussed the draft ASX release. They also discussed the options that Porter had sought for agreeing to be the project manager. Porter said he wanted 30 million options but Corr did not agree. In his witness statement Corr makes no reference to such a telephone conversation with Porter. Corr says that he received a call from Loxton, who said that Porter required references to him being appointed as managing director to be removed from the ASX announcement. Porter's diary note of his conversation with Corr on 2 March says 'still arguing'.

51 On 3 March Sundance made an ASX announcement that it had entered into an agreement to acquire the shares in Cam Iron. The announcement made no reference to Porter. RankineWilson says that at that stage he and Corr had not been able to conclude a suitable agreement with Porter for consideration by the board. RankineWilson says that he recalls the discussion with Porter in which Porter said that he did not want to be the managing director of Sundance.

52 I find that at the time of the ASX announcement on 3 March, no agreement had been made between Sundance and Porter that Sundance would engage Porter in any agreed capacity and no agreement had been made that Sundance would issue any options to Porter. Porter was doing work to facilitate the Mbalam project. He was doing so because he was to acquire shares in Sundance as part of the transaction by which Sundance acquired the shares in Cam Iron and therefore had a continuing interest in the project after the acquisition of Cam Iron by Sundance and also because he expected that an agreement would be reached between him and Sundance to remunerate him for his work.

53 Porter says he had a telephone conversation with RankineWilson in midMarch to the following effect. RankineWilson said that he had been talking to Corr who was unhappy about the level of options Porter was seeking compared to the 10 million options that Corr was to receive as executive chairman. Porter said that he and Corr had discussed the options for a few weeks and he had put forward a compromise proposal that he would reduce the number of options from 50 million to 30 million. Porter said words to the effect that he would not work for Sundance for a salary alone. RankineWilson said words to the effect that it should be right and that he would ring Corr. RankineWilson says that he does not recall having a conversation with Porter to that effect. In crossexamination Porter said that he did not reach any agreement with RankineWilson in that conversation they were still negotiating.

54 Porter says he had a telephone conversation with Corr on 31 March in which Corr informed Porter that a general meeting of Sundance shareholders was to be held on 19 May. Porter says he had several telephone conversations with Corr between 31 March and 15 April. During one of them Corr said that he agreed to Porter's proposal that he get 30 million options for being project manager but he would run it past RankineWilson. Porter says that after that conversation but prior to midApril he had a joint telephone conversation with Corr and RankineWilson in which they said that they agreed that Porter would get the 30 million options for being project manager. They said that Porter would get 20 million options exercisable at 10 cents and 10 million options exercisable at 20 cents.

55 Corr did not recall a telephone conversation with Porter on 31 March or a telephone conversation with Porter and RankineWilson in April but agreed that he had a number of conversations with Porter about that time. Corr did not recall a conversation with Porter and RankineWilson in April in which Porter getting 30 million options for being project manager was discussed but did not deny that it had occurred. RankineWilson does not recall a conversation with Porter about his position as project manager and options that Porter would receive for acting as project manager. RankineWilson says that when Porter subsequently raised the question of getting options with him at the meeting on 8 June he was surprised that Porter had raised getting options again as the last time Porter had raised getting options with RankineWilson was when they were talking about Porter's possible appointment as managing director in about February.

56 I find that Corr and RankineWilson did not agree in March or April with Porter that he would receive options for working as project manager. Porter's diary notes of conversations with Corr on 31 March, 6 April and 20 April make no reference to options. There were a number of emails between Corr and Porter in March, April and May but they make no reference to options. The Sundance notice of general meeting dated 7 April 2006 gave notice of a meeting on 19 May 2006 to pass resolutions for the purpose of acquiring Cam Iron. The notice included notice of resolutions to issue options to CIP, Corr and Dobson, who was a Sundance director, but no options to Porter. On 15 May Porter wrote to Colin Seah who operated a business in Malaysia providing corporate services including acquiring and administering companies for his clients. Porter said that he would be entering into a service contract with Sundance after approval of the transaction by Sundance shareholders on 19 May 2006 and that the contract is for 12 months at $20,000 per month. Porter said that he would like to invoice the work through one of Seah's service companies in Labuan because he was not resident in Australia and did not want the money to come into South Africa. Porter made no reference to options. Porter expected that an agreement would be reached with Sundance for him to be paid as a consultant or project manager. That is consistent with Porter requesting Seah to obtain a company to be the vehicle through which Porter would provide his services as consultant.

57 I find that in April Porter discussed with Corr receiving 30 million options for being project manager but no concluded or binding agreement had been reached between Porter on the one hand and RankineWilson and Corr on the other hand by 7 April 2006. It is inherently unlikely that a listed public company, or its chairman, would make an oral agreement to grant 30 million options without the agreement being referred to in any note or email, let alone a more formal document. The notice of general meeting dated 7 April 2006 makes no mention of any agreement having been made with Porter for him to be appointed as project manager nor does it refer to the grant of any options to him although it refers to the grant of options to others. Corr, RankineWilson and Porter must all have known that if an agreement had been made to appoint Porter project manager and to issue 30 million options to him then it should have been disclosed. It was not. It was not disclosed in the notice of meeting or the explanatory materials to shareholders which included a detailed explanation of the transaction and of all shares and options to be issued. It was not disclosed to the ASX or the shareholders at any time prior to the Sundance shareholders meeting on 19 May.

58 On 19 May a general meeting of Sundance shareholders approved Sundance purchasing all the shares in Cam Iron. Porter says that soon after the meeting he had a telephone conversation with Corr in which Corr said that Porter should use 19 May as the start of the term of his consultancy with Sundance.

59 Porter, Corr and RankineWilson went to Cameroon in early June. They had a series of meetings in Yaounde, the capital of Cameroon, and onsite at Mbalam. The meetings included meetings with political figures including the Prime Minister.

60 On 8 June there was a board meeting of Cam Iron in Yaounde. Porter, Corr, RankineWilson, Bogne and Asso'o, a significant shareholder in Cam Iron, were present. It was resolved to appoint Corr as chairman of Cam Iron. There are differences in recollections of what was said at the meeting about Porter's engagement as project manager.

61 Porter's evidence of what happened at the board meeting is as follows. RankineWilson raised the subject of Porter's position as project manager and the 30 million options. RankineWilson said that Porter was no longer entitled to the options as he was not going to be a managing director of Sundance. Porter became angry because RankineWilson and Corr had agreed that the 30 million options would remain for his role for helping Sundance get established in Cameroon and for doing their resource work. He left the room. A few minutes later RankineWilson came to speak to Porter. RankineWilson said words to the effect that he had discussed it with Corr and Porter would get the options. They returned to the meeting and then had a break around the pool area. The board meeting resumed at 1.50 pm. Porter had a draft contract with him and gave it to Corr. Porter said he was going to use a company called Absolute Analogue Inc (Absolute) in Malaysia to invoice Sundance for the monthly fee that was payable for Porter's services. Porter said to Corr words to the effect that he wanted the options issued to him personally under the Corporations Act placement facility. Corr said words to the effect that he agreed with those things.

62 In his statement RankineWilson says that Porter raised the issue of getting options with him (RankineWilson). RankineWilson understood that Porter was not interested in being managing director since any reference to him being managing director had been removed from the ASX announcement. RankineWilson said to Porter that he (Porter) did not want to be managing director or executive director and asked Porter what he was going to do to earn the options. Porter said that he wished to discuss a possible consultancy arrangement with Sundance. Porter said he would not be spending his time in Cameroon and would appoint someone else to do this work. RankineWilson said that that would not be acceptable to Sundance and that he would be required to provide a full time commitment to the project if he was to be paid as a consultant and if he was not prepared to do the work and go to Cameroon then Sundance would appoint someone who was prepared to do this. In response Porter said that was fine and he was going to do the best he could, given that he had a major shareholding in the company and he wanted the company to succeed.

63 Corr's account of the meeting is as follows. Porter's role was discussed. RankineWilson said that the 50 million options proposed by Porter for the managing director role was too much and proposed 20 million options with an exercise price of 10 cents and 10 million options with an exercise price of 20 cents. Porter said he would be happy with that. Porter then said he was not keen on being the managing director but would stay involved to progress the exploration programme. They then discussed a consultancy arrangement with Porter under which he would be paid $20,000 per month. Either at the meeting or later Porter asked about getting options as a consultant. Corr said that he would only get options as managing director and not as a consultant. Porter said he would provide a draft consultancy agreement to Corr on Corr's return to Australia. Porter did not show Corr any draft agreement during those discussions.

64 I do not accept in its entirety the evidence of Porter, RankineWilson or Corr of what was said at the meeting. I do not accept the evidence of RankineWilson because it is unsworn and not subject to crossexamination. For the reasons I have stated earlier I do not accept Porter's evidence which is contradicted by both Corr and RankineWilson and is unsupported by any document or other evidence. Furthermore, there are aspects of Porter's evidence which are implausible or at least give rise to doubt about the reliability of Porter's account of the meeting. First, Porter says that in the presence of Corr, Bogne and Asso'o, RankineWilson said that Porter was not going to get any options because he was not going to be managing director. Porter then stormed out of the meeting. RankineWilson followed him out and said that he had discussed it with Corr and they had agreed to give Porter the options. Porter agreed that RankineWilson came out a couple of minutes after Porter had left the meeting. It would be surprising if in that short period of time, RankineWilson had had a discussion with Corr in the presence of Bogne and Asso'o and reversed the position which RankineWilson had firmly stated. Secondly, Porter's evidence about the draft consultancy agreement he says he discussed with Corr at the meeting raises doubts about its reliability. Porter says that the document he gave to Corr was a copy of the document sent to him on 3 February with handwritten alterations on it. The 3 February draft is the draft consultancy agreement sent to Porter by Gilbert Rogers on 3 February. That draft document contained the following clause in relation to options:

The Consultant will be granted XXX million options in the Company on such terms and conditions as agreed by way of an Incentive Arrangement. The options to be issued will be structured between the parties in accordance with technical milestones associated with the Mbalam Project as agreed.

65 Porter said that he did not show a copy with those conditions to anybody. He said that after he had met with Corr and RankineWilson on 18/19 February he wrote in handwriting on the document the number of options - 30 million at 10 cents and 20 million at 50 cents. He then agreed that by 8 June, even on his version of events, that was not the deal. When it was put to him that his evidence was that he handed over a draft document with markings on it that did not reflect his understanding of the agreement. He said:

No, I said to John Corr, I said, 'these options under clause 5 relate to the managing director's role. I'm going to cross them out', which I did in handwriting, and I said I wanted the 30 million issued directly to me.

66 It is hard to understand how Porter could have come to write in on a draft consultancy agreement between Sundance and a company that was to provide Porter's services for that consultancy company to receive 30 million or 50 million options because, on Porter's evidence, the options were always to go to him personally. Thirdly, and importantly, not a single document which came into existence after the 8 June meeting makes any reference to Sundance having agreed to give Porter 30 million options for working as a consultant or project manager.

67 Aspects of Corr's evidence are not plausible. It would not make sense for Porter to agree to receive 30 million options rather than 50 million options to be managing director and then in the same meeting say he did not want to be managing director but a consultant. Corr's evidence is confused. Corr's recollection of the discussions which occurred is unreliable. He may have elided discussions before and after the meeting into the meeting. He appeared to be trying to reconstruct the discussions to match his understanding of the outcome of the meeting and what occurred after the meeting.

68 I find that RankineWilson said words to the effect that Porter would not receive options because he was not going to be managing director. That is the evidence of Porter and RankineWilson and broadly consistent with the evidence of Corr. I find that RankineWilson did not agree that Sundance would issue 30 million options to Porter to act as project manager. That may have been discussed but no concluded or binding agreement was made. I make that finding because Porter's evidence to that effect is contradicted by Corr and RankineWilson, is unsupported by any other evidence and because of the aspects of Porter's evidence which give rise to doubt about the reliability of his account of the meeting to which I have referred. I find the most reliable guide to what, if anything, was agreed at the meeting to be the events and documents which followed it. Those matters, to which I will now turn, lead me to find that no concluded or binding agreement was made at the 8 June meeting.

Porter sends draft agreement to Corr on 2 July 2006

69 On 18 June Porter sent an email to Seah, who was a director of, and administered, Absolute, attaching a copy of a draft consultancy agreement between Sundance and Absolute. The draft consultancy agreement provided for Absolute to provide the services of Porter to carry out executive functions for Sundance and more specifically to oversee and direct the Mbalam project. Absolute was to be paid $20,000 per month. There is no reference in the draft agreement or the email to the issue of options.

70 On 2 July Porter sent an email to Corr attaching a copy of the draft consultancy agreement between Sundance and Absolute. The email said:

Attached is my service agreement with Sundance. Could you go through it and see if it is acceptable to you. I have taken the section with the options out of it as they are linked to the directorship.

71 The natural and ordinary meaning of the email in its context is that Porter had removed the section of the draft agreement dealing with options because the options went with the position of managing director and he was not going to be managing director and so he was not going to receive the options. The plaintiffs say that that is an erroneous conclusion. The plaintiffs say that the original draft agreement was drafted in February and related to Porter being appointed managing director and receiving 50 million options. Senior counsel for Porter, Mr Zelestis, says that the 2 July email confirms that Corr had seen a version of the draft agreement at the meeting on 8 June but that was not a version that was intended to relate to the position of project manager; it was a version which referred to 50 million options which was 'a hangover' from the original agreement back in February for managing director. Mr Zelestis says that the email referred to taking out the 50 million options because they were linked to the managing directorship. No further options were put in the draft because the draft was between Absolute and Sundance only and Porter was to receive the options personally for acting as project manager.

72 Senior counsel for the defendant, Mr Donaldson SC, crossexamined Porter about the email:

Now, can I put it to you that what you meant to convey there is because I was no longer going to be the managing director I had no entitlement to the options?No, that's the wrong interpretation. Basically it's saying that I took out the 50 million options which were going to be issued to me after 19 February for being a director.

But you haven't put anything about the options in there. About you being a consultant?No, unfortunately.

Well, can I put it to you, Mr Porter, that it's obvious that when you say you have taken out the section with options as they are linked to the directorship, you understood at that time that because you weren't going to be managing director or a director you had no entitlement to options and that's why the document reflected it?No, that's wrong.

It doesn't say anything about I have taken the options out because they're going to be issued to me personally and not to this company, Absolute. That's not there. That's not what you're thinking about?I didn't put it there, no.

And the consultancy document which is annexed, that's the document that we have looked at already. There's no reference there of course to options?-As I have mentioned before, the consultancy agreement was for the $20,000 a month only.

73 On Porter's evidence, the options were more important to him that the consultancy salary. If an agreement had been made on 8 June that Porter was to receive 30 million options for working as a consultant it is unlikely that he would have forwarded to Corr a draft service agreement and said that he had taken out the section with the options because they were linked to the directorship without saying anything about the options being issued to him personally and when and on what terms.

74 On 5 July Corr was found to have a number of blocked heart arteries and scheduled for emergency surgery. Corr underwent surgery on 7 July. Corr says that he was largely out of contact for the rest of July and August although he may have taken some telephone calls and signed some papers during that time. RankineWilson told Porter that Corr had serious heart problems, had undergone a major operation and would be sidelined as executive chairman for at least three months and he had appointed Ian Whiteley as operations manager of the project for Sundance.

Porter's communication with Sundance after 5 July 2006

75 In Corr's absence Pismiris undertook managerial activities on behalf of Sundance. Pismiris says that before taking up this role he said to Corr that he saw his role as a caretaker director and Corr said that was correct and that he (Pismiris) did not have authority to enter into any agreements regarding the project without board approval. The plaintiff does not claim that Pismiris had authority to make any agreement on behalf of Sundance.

76 On 13 July Porter sent Pismiris by email a copy of the draft consultancy agreement between Sundance and Absolute which he had sent to Corr on 2 July. On 17 July Porter sent another email to Pismiris. Porter asked about the work contracts for Bogne and Asso'o and how his work contract was going but made no reference to the issue of any options or any agreement for the issue of options. The email also attached draft minutes for the Cam Iron board meeting on 8 June 2006 (incorrectly dated 7 June 2006). It is significant that the minutes drafted by Porter refer to the approval of a success fee of options for Porter, Bogne and Asso'o subject to the satisfaction of the Sundance board in relation to a proposal to acquire new areas for iron ore in the Republic of Congo (Brazzaville) but make no reference to the issue of any options to Porter in relation to the Mbalam project. I find that is significant notwithstanding that the minutes are of the board meeting of Cam Iron and the options under discussion were options to be issued by Sundance. Porter subsequently added further comments to the draft minutes in an email he sent to Pismiris on 20 July where Porter asked how the directors of Cam Iron could approve an issue of options by Sundance. That is, in his draft of the minutes Porter referred to the issue of options in Sundance to Porter, Bogne and Asso'o in relation to the Brazzaville project but made no reference to any agreement for the issue of options in Sundance to himself in relation to the Mbalam project.

77 Between 20 and 24 July there was an exchange of emails between Porter and Pismiris. On 24 July Porter sent to Pismiris comments on a discussion paper. One item referred to 'Review terms of consultancy David Porter'. It says:

I have supplied the Consultancy Agreement based on discussions with John Corr and Adam. The Agreement is a Blakiston and Crabb one which I have used in the past with Alcaston Mining NL. It would be nice to resolve this by the end of July.

There was no reference to the issue of any options to Porter. On 25 July Pismiris sent an email to Porter saying that he was currently drafting a services agreement for Porter incorporating terms agreed by Corr. There was no reference to any options.

78 On 30 July Porter had a telephone conversation with Bogne. Bogne said that there was a problem with the local shareholders of Cam Iron who wanted an additional 5% free carried interest in Cam Iron and 100 million ordinary shares in Sundance. There was a possibility that the exploration licence could be cancelled. Porter says that on 31 July he telephoned RankineWilson and conveyed the substance of Bogne's telephone conversation. They discussed the local shareholder problem. Porter says he asked RankineWilson about his options and RankineWilson said that this had been delayed because of Corr's health problems but he would ask Pismiris to deal with it. RankineWilson says that he did not have any further discussions with Porter about the terms on which he would provide consultancy services or the issue of options until later in 2006.

79 Porter says he had a conference call with Corr and Pismiris on 31 July concerning the dispute with the local shareholders. Corr and Pismiris said that the number of options that Porter was to get should be reduced because he was not becoming managing director. Porter refused to accept any reduction and said that everything was already agreed and there had already been a reduction from 50 million to 30 million options and he was not prepared to reduce his options further. Corr and Pismiris replied with words to the effect that 'ok that is fine'. Porter says Corr did various things and had conversations to deal with the problem with the local Cameroon shareholders.

80 Corr has no recollection of any such telephone conversation with Porter and says he would not have spoken to Porter on 31 July as that was only a short time after his heart surgery and he was not doing any work at that time. Corr says he did not have any involvement in the problems with the Cameroonian shareholders until October 2006.

81 In his witness statement Pismiris says that he does not recall having a conference call with Porter around 31 July and he was not directly involved in dealing with the dispute with the local shareholders of Cam Iron. He does not recall having any discussions with Porter about it or asking him to go to Cameroon and deal with it. Pismiris says that he did not have any discussion with Porter about options on 31 July and as far as he was aware from his discussions with Corr, options had been discussed with Porter in relation to the managing director position but not for a consultancy role.

82 Porter's evidence appears to be based on a diary note of 31 July. The note contains words and figures which appear to relate to the dispute with the local Cameroon shareholders. It contains the names of Corr and Pismiris but does not say that Porter had any conversation with them. The note makes no reference to options. I am not persuaded that Porter had any conversation with Corr and Pismiris on 31 July. I do not accept that Corr and Pismiris said that the issue of 30 million options to Porter was agreed.

83 Porter travelled to Perth on 1 September at RankineWilson's request to attend meetings with the Cameroonian shareholders of Cam Iron. Porter says that on 4 September he met with Pismiris. Porter asked Pismiris about his consultancy agreement. Pismiris printed out a copy for Porter. Porter scanned the document and asked some questions of Pismiris. The remuneration clause included a provision for the consultant to be granted executive options. Porter noticed that the document had a definition of 'Executive Option' in the 'Definitions and Interpretation' clause but no numbers had been filled in. Porter said he would take the draft contract away, fill in some gaps and bring it back the following day.

84 Porter says that on 8 September he met with Pismiris in Pismiris' office at Sundance and handed back the draft consultancy agreement he had been given on 4 September with his suggested amendments. Porter says that they went through the amendments. Porter said words to the effect 'how do you want to treat the options?' Pismiris replied with words to the effect 'they are three year options?' and then Pismiris wrote '20 mill @ 10 c 3 years expiry; 10 mill @ 20 c 3 yr expiry'. Pismiris wrote those numbers without any prompting from Porter. At the end of the meeting Pismiris said words to the effect that everything was now agreed and Porter replied, 'yes'. Porter left his copy of the draft consultancy agreement with Pismiris. Pismiris said words to the effect that he would instruct Steinepreis Paganin to make the necessary amendments and send the final copy back to Porter for execution.

85 In his witness statement Pismiris says he does not believe he gave Porter a copy of the draft agreement on 4 September 2006 but he does recall meeting with Porter and discussing the agreement with him. Pismiris says that Steinepreis Paganin had prepared a draft consultancy agreement between Sundance and Whiteley who was to act as a project manager in Cameroon and that he used a copy of Whiteley's draft agreement as a template for Porter's draft agreement. Pismiris says that the 'Executive Option' definition at the foot of page 1 was 'a hangover' from Whiteley's draft which he had overlooked removing from the draft Porter agreement. Pismiris said that Porter said something to the effect that he wanted options if Whiteley was having them. Pismiris says he does not believe that he wrote the text '20 mill @ 10c 3yrs expiry' and '10 mill @ 20c 3yrs expiry' without any prompting from Porter. Pismiris says he did not know how many options Porter wanted and he believed he could only have written those matters at Porter's suggestion. Pismiris says he did not say anything to Porter to indicate to him that he (Pismiris) agreed he could have the options or that any of the terms of the draft agreement were agreed. Pismiris says he included the reference to the options in the draft agreement as a result of Porter saying he wanted options if Whiteley got them and on the basis that the terms of the draft agreement would be reviewed by the new board who would refuse or approve the terms included in relation to options and the other terms of the draft agreement. Pismiris says he did not say to Porter that everything was agreed.

86 I accept Pismiris' evidence that he did not say to Porter that everything was agreed. In September Pismiris knew that RankineWilson had approached George Jones to become chairman of Sundance, Jones was prepared to become chairman and Jones' specific instructions were that the directors were not to make any significant commitments or changes to the operation before he became chairman. Pismiris' role was not to negotiate or make any agreement with Porter but to prepare a consultancy agreement for the consideration of the board. After Pismiris had met with Porter he sent the draft consultancy agreement with handwritten additions to Steinepreis Paganin. Steinepreis Paganin sent a further draft to Pismiris incorporating the handwritten additions and comments. On 24 October Pismiris sent the draft to Porter 'For your review and comments'. That draft included a clause in relation to options which provided that 30 million options were to be granted to the Consultant, that is Absolute, or its nominee, 'subject to Shareholder approval'. The inclusion of the option clause in the agreement is contrary to Porter's explanation for saying to Corr in his email of 3 July that the options were to be removed from the consultancy agreement. The provision that the grant of the options be subject to shareholder approval is contrary to Porter's account of the agreement made in June. Those matters indicate that in September and October Porter was negotiating to make an agreement for the grant of options and had not made a concluded and binding oral agreement for the grant of options which was being incorporated into a written agreement.

87 In around May 2006 RankineWilson had commenced discussions with Jones about Jones joining the Sundance board. After Corr became ill in July 2006 RankineWilson's discussions with Jones focused on him becoming the nonexecutive chairman. Jones was appointed as the nonexecutive chairman in November 2006. RankineWilson says that he and Jones were instrumental in Donald Lewis joining the Sundance board in November 2006. On 14 November 2006 Sundance made an ASX release entitled 'Sundance accelerates iron ore strategy with key appointments and $20m placement'. The release announced the appointment of Jones, Lewis and John Saunders to the board. The release stated that the senior management team includes Whitley as project manager and Porter as exploration manager. The release referred to a proposal to issue options to the three incoming directors, Pismiris and other consultants and executives of Sundance. There is no reference to the identity of the consultants or executives. The options are stated to have a five year expiry and be subject to shareholder approval. Both of those terms are contrary to the agreement Porter claims to have made with RankineWilson and Corr.

88 Pismiris says that in about November he said to Porter that because Lewis had been appointed as the new managing director Porter should speak to Lewis about the consultancy agreement. On 29 November Porter had a meeting with Lewis in Perth. Porter says that Lewis said words to the effect that RankineWilson had advised him that Sundance would not be executing the consultancy agreement or issuing Porter with the options. Lewis said he would discuss the issue with Jones, the newly appointed chairman of Sundance.

89 On 5 December Porter met with RankineWilson. Porter says RankineWilson said words to the effect 'George Jones would not have joined the board if I had given you your options. He told me so'. There was further discussion. RankineWilson said he would talk to Jones.

90 RankineWilson says that he had a discussion with Porter after Jones had been appointed nonexecutive chairman and director of Sundance. Porter raised the issue of options. RankineWilson said something about it being a matter for Jones as to who was appointed to the board and any options being issued.

91 On 4 February 2007 Porter spoke to Lewis in Cape Town. Porter says he mentioned his 30 million options and Lewis said he had discussed the issue with RankineWilson and Jones and that RankineWilson had told him that Porter was not entitled to the options as a consultant. Porter said that was not true and he would consider his legal position.

92 Porter says that he had a telephone conversation with Lewis on 4 March 2007. Lewis said that the directors of Sundance had discussed Porter's options and after meetings with RankineWilson and Corr had decided that no options were due to Porter as he was not appointed managing director of Sundance.

93 On 7 March 2007 Porter had a telephone conversation with RankineWilson. Porter's diary note includes:

George Jones would not agree to the past agreements with the directors. Adam admitted that I was 99% right. My options were never ratified by the new incoming board. Recalls everything I said. Other options promised to John Corr and Ian Whiteley were not given also.

94 RankineWilson says that he had a telephone call with Porter in early March 2007. Porter recounted the detail of a number of discussions which he had had with Corr and RankineWilson and complained about being denied what he described as his entitlement to the Sundance options. RankineWilson says he said to Porter something like 'what you have said about the background is 99% true, but none of that is relevant. You are omitting the 1% that is the important bit'. RankineWilson says he said the following. The discussions regarding Porter's possible appointment as managing director and the grant of options had never been finalised - it was never anything more than a proposal. It was Porter who had decided to withdraw his involvement in the project by declining the appointment as managing director and the nonexecutive board position and a full time commitment to the project on a consultancy basis. The discussions in which options had been discussed related to Porter's engagement as managing director. As the most important member of the team in that role, he had been advised that he would be required to spend time in both Perth and Cameroon which he said he was not prepared to do. He had said he did not want to be and had declined to be managing director. RankineWilson said that due to the importance of the managing director position further discussion was required as to the remaining terms and the matter had never been put to the board as the discussions had never progressed to a stage where any agreement could be reached. Porter said in response something like 'he was aware of this, and did not disagree with my comments'. Porter however raised that Whiteley, who had been appointed as project manager in July 2006, had demanded options. RankineWilson said that options had been considered in relation to Whiteley but none were granted to him. Porter said that he was taking legal advice. RankineWilson said that was a waste of time because Porter knew he was not entitled to the options.

95 I find that no concluded binding agreement was made at the 8 June 2006 meeting, or at any time, that Sundance would issue 30 million options to Porter as part of his remuneration for acting as a consultant on the Mbalam project. There were discussions and negotiations over a protracted period but they never resulted in a concluded binding agreement.

96 The plaintiff's pleaded case is that RankineWilson had actual authority, or alternatively ostensible or apparent authority, to enter into the agreement on behalf of Sundance. It is not strictly necessary to determine that issue because I have found that no concluded binding agreement was made between Porter and RankineWilson on behalf of Sundance. However, I will set out my finding on the issue.

97 The first pleaded agreement is that Porter would become managing director and would receive remuneration including 50 million options. Porter's case is that the agreement was subsequently varied and the varied agreement was that instead of being appointed managing director Porter was to be appointed a consultant to provide services to Sundance as manager of the Mbalam project and instead of receiving 50 million options Sundance would grant to Porter 30 million options.

98 In particulars the plaintiffs say that RankineWilson had actual authority to make the agreement. The plaintiffs say that Porter's actual authority arose from the agreement of 15 February 2006 between Sundance and CIP by which Sundance engaged CIP to provide advice and represent Sundance in relation to the implementation of the transaction involving the acquisition of all of the shares in Cam Iron for matters necessarily or reasonably incidental thereto.

99 The agreement of 15 February 2006 is contained in a letter from CIP to Sundance agreed to and accepted on behalf of Sundance by Corr on 27 February 2006. The letter provides for the engagement of CIP by Sundance (the Company) as corporate advisor in relation to the proposed acquisition of Cam Iron (the Transaction). The terms and conditions of the agreement include:

During the term of this Agreement all inquiries, whether direct or indirect, in relation to this Agreement should be referred to Adam RankineWilson or Alec Pismiris.

It is our understanding that Sundance wishes to acquire a 100% interest in Cam with the consideration comprising of cash and an issue of Sundance shares. ...

In addition to the acquisition of Cam, the Board of Sundance wishes to undertake a capital raising comprising of an issue of 120 million shares at an issue price of 2.5 cents per share to raise up to $3 million to fund exploration activities in the Mbalam Iron Ore Province.

It is envisaged that shareholder approval will be sought for the issue of shares pursuant to the acquisition of Cam and the proposed capital raising.

In its role as corporate advisor, CIP will provide assistance to the Board of Sundance on the following matters:

- assist with negotiating and structuring the Transaction.

- assist the Company with its due diligence investigations;

- act as lead manager to the proposed share placement;

- introduce the Company to a wider broking audience;

- identify and evaluate new potential investment opportunities;

- provide advice on future capital management programs;

- assist with dissemination of information to existing Sundance shareholders and potential new investors.

CIP accepts the Agreement and agrees during the term of the Agreement to provide the Company, to the extent appropriate, with financial and corporate advice and assistance, including:

1. familiarising itself to the extent appropriate and feasible, with the activities, operations, assets, properties, financial condition and prospects of Sundance, it being understood that CIP shall, in the course of such familiarisation, rely entirely upon publicly available information and such other information as may be supplied by the Company without independent investigation;
2. Identification and analysis of the issues to be considered and addressed in undertaking the Transaction;

1. due diligence investigations to the satisfaction of CIP for the purposes of completing the Transaction;

1. developing a general strategy to achieve a successful conclusion to the Transaction;
2. assist in drafting any documentation to effect the Transaction;
3. acting as a member of the Due Diligence Committee to ensure any significant items of interest to CIP are identified and communicated effectively to the Board of Sundance;
4. liaising with and coordination of lawyers and independent experts to minimise costs and avoid duplication;
5. marketing Sundance to key capital market participants as required to complete the Transaction;
6. providing Sundance with continuing support and advice as is necessary; and
7. such other services as are mutually agreed to be appropriate in the circumstances.

If you request us to provide additional services not otherwise contemplated by this Agreement, the Company and CIP will enter into an additional letter agreement which will set forth the nature and scope of the services, appropriate compensation and other customary matters, as mutually agreed upon by the Company and CIP.

100 The plaintiff says that the scope of the engagement included providing advice and acting on behalf of Sundance in relation to the employment of a person to provide management services to Sundance with respect to the acquisition of Cam Iron and the advancement of the proposed project, such matters being necessarily and/or reasonably incidental to the defendant's acquisition of the shares in Cam Iron.

101 The scope of the engagement of CIP by Sundance does not extend to employing or engaging a person as managing director or as a consultant or acting or behalf of Sundance to employ or engage a person in such capacity. The scope of the agreement does not extend to agreeing to issue options or other securities on behalf of Sundance. In short, the agreement between CIP and Sundance of 15 February 2006 did not authorise RankineWilson to enter into an agreement on behalf of Sundance to employ or engage Porter or anyone else as managing director or consultant or project manager or for Sundance to grant options to that person.

102 The plaintiff pleads that RankineWilson had ostensible or apparent authority to enter into the alleged agreement with Porter.

103 The basis upon which a person may have ostensible or apparent authority to enter into an agreement on behalf of the principal was summarised by McLure JA, with whom Wheeler and Newnes JJA agreed, in Tipperary Developments Pty Ltd v The State of Western Australia [2009] WASCA 126:

A principal may be liable under a contract effected by a person without actual authority if the principal represented that the apparent agent was authorised to enter into the transaction in question. Common law estoppel by representation is the foundation for ostensible authority: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, 466.

The person making the representation must himself have actual authority to enter into the transaction in question.

...

A principal can only be made liable on the ground of ostensible authority where the third party reasonably relied upon the representation as to authority: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, 498. There is no reasonable reliance when the nature of a transaction or other circumstances put the third party on inquiry as to whether the purported agent has the requisite authority: Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146 [108] [110].

104 In their particulars the plaintiffs say that RankineWilson's apparent authority arose from representations by Corr as follows:

1. In or about February 2006 Corr represented to the second plaintiff, in substance, that RankineWilson was authorized to enter into the Agreement on the defendant's behalf. The representation was made as follows.

1. In a conversation between Corr and the second plaintiff, Corr indicated that, without obtaining RankineWilson's approval, he was not able to enter into an agreement with the second plaintiff, on behalf of the defendant, in respect of the provision of management services by the second plaintiff to the defendant on certain terms and conditions. 2. In a conversation between Corr and the second plaintiff, Corr indicated that RankineWilson had approved the defendant entering into the Agreement on the terms pleaded in paragraph 7.

1. In a conversation between Corr, RankineWilson and the second plaintiff, Corr acquiesced while RankineWilson expressed his agreement to the defendant entering into the Agreement on the terms pleaded in paragraph 7.
2. In or about March and/or April 2006 Corr represented to the second plaintiff, in substance, that RankineWilson was authorized by the defendant to enter into the Varied Agreement. The representation was made as follows.
   1. In a conversation between Corr and the second plaintiff, Corr indicated that, subject to RankineWilson's approval of those terms, he agreed to the Varied Agreement on the terms in paragraph 10;
   2. In a conversation between Corr, RankineWilson and the second plaintiff, Corr acquiesced while RankineWilson expressed his agreement to the defendant entering in to the Varied Agreement on the terms pleaded in paragraph 10.
3. In or about June 2006 Corr represented to the second plaintiff, in substance, that RankineWilson was authorized by the defendant to enter into an agreement to vary the Varied Agreement. The representation was made in a conversation between Corr, RankineWilson and the second plaintiff, during which Corr acquiesced while RankineWilson purported unilaterally to vary the terms of the Varied Agreement on the defendant's behalf.

105 Porter gave evidence that when Corr visited Cape Town on 18 and 19 February 2006 they telephoned RankineWilson, at the suggestion of Corr, to discuss Sundance granting options to Porter. I have referred to Porter's evidence about those conversations earlier in these reasons.

106 Porter said in evidence that between 31 March and 15 April 2006 he had several telephone conversations with Corr and during one of them Corr said that he agreed to Porter's proposal that he get 30 million options for being project manager but Corr said words to the effect that he would run it past RankineWilson. Porter says that he had a joint telephone conversation with Corr and RankineWilson in early to midApril in which they said that they agreed that Porter would get the 30 million options for being project manager. As I have set earlier in these reasons, I do not accept that RankineWilson and Corr said during any telephone conversation in that period that they agreed to Porter being granted 30 million options.

107 Corr acknowledged that RankineWilson was a major force in Sundance entering into the transaction to acquire Cam Iron and that the transaction would probably not have proceeded without RankineWilson's imprimatur. Corr accepted that he discussed with RankineWilson the engagement of Porter and the grant of options to Porter. Indeed, it was RankineWilson who first proposed the appointment of Porter as managing director. It is clear that RankineWilson had substantial influence over the decision made by Corr and the directors of Sundance in relation to the Cam Iron acquisition and the furtherance of the project, notwithstanding that RankineWilson was not a director. RankineWilson was, in effect, the major shareholder of Sundance and the driving force of CIP which was Sundance's corporate advisor. Corr's references to RankineWilson in the course of discussions with Porter, his telephone conversations with RankineWilson and Porter and RankineWilson's presence at the Cam Iron board meeting on 8 June 2006 may reasonably have led Porter to believe that Corr would not agree to Porter being employed as managing director or engaged as a consultant and being granted options in Sundance without RankineWilson's approval. However, that is not the same thing as a representation that RankineWilson had authority to make an agreement with Porter to appoint him as managing director or consultant and grant him options, without the approval of the Sundance directors.

108 I find that the plaintiffs have not established that Corr represented to Porter that RankineWilson was authorised to enter into the agreement alleged by Porter, without the approval or agreement of the Sundance directors. The plaintiffs have not established that RankineWilson had ostensible or apparent authority to enter into the agreement alleged by Porter.

109 I have found that there was no concluded binding agreement between Porter and Sundance that Sundance would grant 30 million options to Porter. Accordingly, Porter is not entitled to any relief. In case the matter goes on appeal I will set out briefly my provisional findings in relation to relief.

110 In their prayer for relief the plaintiffs claim an order that the defendant specifically perform the claimed agreement by granting Porter 20 million options exercisable within three years at an exercise price of 10 cents and 10 million options exercisable within three years at the exercise price of 20 cents together with damages in addition to specific performance. The plaintiffs claimed in the alternative 'damages in lieu of specific performance'. On 18 November, that is seven days before the commencement of the trial, the plaintiffs delivered an outline of opening submissions which stated:

Porter now elects to terminate the agreement and seek damages in substitution for specific performance, pursuant to s 25(10) of the Supreme Court Act (WA) 1935, as he is entitled to do: Johnson v Agnew (1980) AC 367 at 392; Ogle v Comboyuro Investments Pty Ltd [1976] HCA 21; (1976) 136 CLR 444.

111 In the plaintiffs' opening submissions Mr Zelestis stated that when the plaintiffs filed their written submission they 'effectively elected to terminate for the defendant's continuing repudiation'. Mr Zelestis said that Porter was entitled to equitable damages and damages at common law. In the defendants closing submissions Mr Donaldson submitted that Porter could not claim damages under Supreme Court Act 1935 s 25(10) because the court did not entertain an application for specific performance at trial and could not claim damages at common law because the plaintiffs do not claim common law damages in their statement of claim.

112 The Supreme Court Act s 25(10) provides that the court may award damages to the party injured, either in addition to or in substitution for specific performance in all cases in which 'the court entertains an application for ... the specific performance of any covenant, contract or agreement'. The authors of the 4th edition of Meagher, Gummow and Lehane's Equities, Doctrines and Remedies at [23050] say there is some confusion as to the time at which a plaintiff seeking damages under Lord Cairns' Act, on which Supreme Court Act s 25(10) is based, has to demonstrate that the court has the requisite jurisdiction. The authors say:

It would seem that the plaintiff is entitled to claim damages if at the time he instituted his suit for relief he could have obtained an injunction or specific performance but his right to that relief has been lost to him in between the institution of the suit and the hearing.

In Ferguson v Wilson (1866) LR 2 Ch App 77, 91 Cairns LJ stated that, in order for the relevant jurisdiction to exist, all those ingredients which would enable the court, if it thought fit, to exercise its power and decree specific performance had to be present at the time the bill was filed, that is the action was commenced.

113 At the time the plaintiffs commenced this action the contract was still on foot and the court could, in the exercise of its discretion, have ordered specific performance of the agreement. The jurisdiction to award damages under s 25(10) is not lost by the plaintiffs' election to terminate the agreement.

114 The plaintiffs submit that a party is entitled to have whatever relief is justified by the facts pleaded and proved including common law damages. In Crouch v Joseph (Unreported, WASC, Library No 9004.1, 22 August 1991) (Anderson J) the plaintiff sought to enforce an agreement for the sale of land. In his prayer for relief the plaintiff claimed an order for specific performance and in the alternative equitable damages. However, the plaintiff abandoned his claim for specific performance at trial. Anderson J held that the court had power to award common law damages if the facts established that the plaintiff was entitled to common law damages. Anderson J said:

The position in Western Australia is that a party will be entitled to have whatever relief is justified by the facts pleaded and proved, be it in virtue of common law principles or equitable doctrine [19].

Although it is clear from the pleading that this claim [in the prayer for relief] for damages is not a claim for common law damages, the plaintiff, in opening his case at trial, stated that common law damages was the relief sought and the plaintiff did at trial without objection from the defendants proceed by various means to attempt to prove such damages. In my opinion, on the authority of such cases as Summers v Cock (op cit) the Court, in these circumstances, is empowered to award common law damages if the plaintiff establishes that he is otherwise entitled to recover damages [21].

115 If the plaintiffs have made out facts which entitle them to common law damages then they should be awarded such damages provided that to do so causes no unfairness to the defendant. In this case Mr Zelestis said in opening that the plaintiff was entitled to damages at common law as well as in equity. The plaintiffs led evidence in support of their claim for damages. There is no unfairness to the defendant in awarding common law damages to Porter.

116 Mr Zelestis submitted that the House of Lords has held that there is no difference between the measure of damages at common law and in equity but that has not been authoritatively determined by the High Court. In Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, the High Court held that whilst as a general rule damages for breach of contract are assessed as at the date of breach, the court will depart from the general rule whenever it is necessary to do so in the interests of justice. However, Mr Zelestis said, the High Court did not address whether there is any relevant difference between damages at common law and in equity. Mr Zelestis said that Porter claims damages in equity because if there is any difference between common law damages and equitable damages then there is more flexibility in assessing damages in equity. Mr Donaldson for the defendants did not directly address those matters. Mr Donaldson submitted that the only difference between the parties in relation to assessment of damages is the date of assessment.

117 The purpose of an award of damages at common law for breach of contract is to compensate the innocent party for loss flowing from the breach of contract. Where an innocent party sustains a loss by reason of a breach of contract, that party is, so far as money can do it, to be placed in the same position, by an award of damages, as if the contract had been duly performed: Robinson v Harman [1848] EngR 135; (1848) 1 Exch 850; 154 ER 363, 365; Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 80, 98, 134, 148, 161.

118 Porter sold about 10 million Sundance shares in 2006. In May 2007 the Sundance share price rose from 17 cents to 25 cents. Between June and October 2007 the share price rose from 25 cents to 63 cents having reached a high of 78 cents on 12 October 2007. Between June and October 2007, Porter sold about 70% of the balance of his shares. His reasons for doing so related to his pessimistic assessment of the extent of the iron ore resource that had been identified at Mbalam. Porter's evidence is that if Sundance had issued the 30 million options to him by May 2007, he would have exercised all of the options and sold all of the shares in the period June to October 2007, when all of the options were in the money, that is, the exercise price was below the share price. Mr Donaldson accepted that Porter's evidence to that effect should be accepted.

119 Mr Zelestis submitted that had Sundance granted the 30 million options to Porter it is likely that he would have exercised at least about twothirds of them and sold the remaining resulting 20 million shares when the options where in the money, in the period June to October 2007, when he did sell a large number of shares. He would have realised an average price of about 50 cents per share, that is $10 million. It is likely that Porter would have exercised the 20 million 10cent options first, in order to maximise his profit. After deducting the cost of exercise of $2 million, the net profit would have been $8 million. It is likely that Porter would have exercised some or all of the remaining onethird of the 30 million options and sold the resulting shares when the options were next in the money, in June 2008. Mr Zelestis submitted that the options, unlike shares, had a threeyear expiry date and it is inherently unlikely that Porter would have kept them until the last minute. Nevertheless, Mr Zelestis submitted, even if some weight is given to the prospect that Porter could have held out hopes of realising a higher price than that prevailing in June 2008 for some of the shares available from the remaining options, it is nevertheless appropriate to infer that, in view of Porter's reasons for exercising options in selling shares earlier, he would have exercised at least half of the remaining 10 million 20cent options and sold the resulting 5 million shares in June 2008, realising an average price of about 40 cents per share, that is of $2 million. Allowing for the exercise price of $1 million, the remaining profit would have been $1 million. On that basis, Mr Zelestis submits that Porter's loss was about $9 million.

120 Mr Donaldson submitted that for contracts for the sale of shares or options and contracts for the issue or granting of shares or options, the normal measure of damages is the market price of the share or option at the time when delivery was contractually due less the price that the purchaser or grantee was required to pay: McGregor on Damages (18th ed) [24003]. The passage in McGregor to which Mr Donaldson refers is:

The normal measure of damages is the market price of the shares at the contractual time for delivery less the contract price. This represents the amount that the buyer must obtain to put himself in the position he would have been in had the contract been carried out, since to do so he must buy equivalent shares in the market. This measure was established as far back as Shaw v Holland, Parke B taking the analogy of sale of goods.

121 It is not at all clear that the normal measure of damages for the failure to deliver shares is appropriate in the case of a breach of contract by failing to deliver options. Equating damages for the failure to deliver options with damages for the failure to deliver shares overlooks the fact that the true value of an option is higher than its intrinsic value, that is the difference between an option's exercise price and the market price for a share. The intrinsic value fails to reflect the true value because an option holder can wait to exercise his option until the market price for the share exceeds the exercise price. The option holder is thereby able to decrease his risk of incurring a loss and increase his likelihood of obtaining a future profit. Equating the true value of an option with its intrinsic value fails to recognise that even when an option has an intrinsic value of zero, that is its exercise price is greater than the share price, its true market value will be positive so long as the shares value has the potential to increase. There was no market for Sundance options. Porter could not purchase options which Sundance had failed to deliver. It is not appropriate to treat an option as similar to goods or shares.

122 Mr Donaldson relied upon the decision of Santow J in Ronnoc Finance Ltd v Spectrum Network Systems Ltd (1997) 45 NSWLR 624. In that case the defendant granted the plaintiff an option to purchase from it 18 million shares in Digicall Group Ltd. The plaintiff tried to exercise the option but the defendant did not allow the shares to be transferred and thereby breached the contract. The plaintiff sued for specific performance, further and alternatively damages. In March 1996 when this contract was breached the shares were trading at $1.10. In August 1996 the shares fell below the exercise price of 32 cents and never recovered. It was not until December 1996 that the plaintiff accepted the defendant's breach and terminated the contract. As the contract was terminated the plaintiff sought only damages. The plaintiff contended that the damages should be assessed according to the value of the shares at the date of the breach by the defendant. The defendant argued that the damages were the loss of the bargain and that this could only be recovered when the contract had terminated. At the time of the termination the bargain which was lost had no value. The plaintiff had elected to keep the contract alive. The court found that the most rational interpretation of the plaintiff's conduct was that he wished to keep alive a right to specific performance and take advantage of a rise in the market, while having the security of an action for damages if the market fell. By failing to accept repudiation sooner, the plaintiff was attempting to speculate at the defendant's expense. Santow J held that damages were to be assessed at the date of acceptance by the buyer of the seller's repudiation rather than the earlier date of breach because there can be no action at common law for loss of bargain until the contract is terminated.

123 Ronnoc Finance is distinguishable from this case. First, the seller's breach in Ronnoc was a failure to deliver shares after the buyer had exercised its option. There was a ready market for Digicall shares. Hence, the prevailing stock market price could be reasonably representative of a fair market value of the shares in the Digicall. Secondly, there was no evidence as to what the plaintiff would have done with the shares in Digicall had it obtained them when it exercised its option; in particular there was no evidence that it would have sold the shares then or thereafter. Thirdly, the court found that Ronnoc had elected to keep the contract alive to take the benefit of an anticipated right in price and 'it must thereby take the risk of a fall as in fact occurred'.

124 The court will depart from assessing damages at the date of breach or termination of the contract whenever it is necessary to do so in the interest of justice: Johnson v Perez (356). In this case there was no market for options. Porter could not have purchased options to replace the options that Sundance failed to deliver to him. It is not relevant to say that Porter could have purchased shares in Sundance. The value of options is that the holder does not have to risk his capital by purchasing shares in the expectation that the share price will rise. The option holder may hold his options and wait to exercise them until the share price exceeds the option price. In this case that is what Porter would have done. Justice is done by assessing his loss as the difference between the cost of exercising the options and selling them at the time which Porter would have sold them if they had been delivered in accordance with the contract. As set out earlier, that loss is $9 million. I assess damages at $9 million.

125 The plaintiffs' claim for damages for failure to deliver the options must be dismissed.