African Minerals Limited v Pan Palladium Limited

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

50161/02 African Minerals Limited v Pan Palladium Limited JUDGMENT 1 These proceedings are brought for a declaration that on or about 17 May 2002 the plaintiff, African Minerals Ltd ["African Minerals"] entered into a legally binding agreement with Pan Palladium Ltd ["Pan Palladium"]. The agreement alleged is said to have consisted of the terms and conditions contained in a letter dated 15 May 2002 from African Minerals to Pan Palladium executed by both parties on 17 May 2002 ["the letter"]. 2 Determination of whether in the circumstances the Pan Palladium acceptance on 17 May 2002 of the offer contained in the letter constituted a legally binding agreement is very much bound up with the proper construction of the letter. That exercise covers many parameters of close analysis of the document. A central question which was litigated concerns whether a paragraph of the letter entitled "Conditions Precedent to the Proposal" and including a number of sub-paragraphs, on the one hand constituted in whole or in part, conditions precedent to the entry into of a binding agreement ["conditions precedent proper"], or on the other hand, constituted in whole or in part, conditions precedent to the performance of obligations ["conditions subsequent", sometimes also referred to as "performance conditions precedent"]. 3 Other issues concern: · whether the agreement is one which fails for incompleteness or uncertainty; · whether the making of the declaration in the form sought is a proper exercise of the court's discretion in the particular circumstances which here obtain. The Parties 4 African Minerals is a Canadian company with interests in mineral properties in South Africa. 5 Within the Northern Province of South Africa there is an area of geological significance referred to as Bushveld Igneous Complex, which is denoted by a particular geological structure containing some of the richest deposits of platinum group metals in the world. Within this area there is a sub-area referred to as the "Platreef Horizon" sometimes also referred to as the "Northern Bushveld". By 2002 African Minerals held interests in properties in this area. The properties had been prospected and the results of this disclosed extremely promising reserves of platinum group metals and base metals. The area known as Grass Valley had been in the area generally considered to be potentially rich in deposits of this type. 6 Pan Palladium is an Australian listed company whose business is expiration mining and whose operations are conducted out of a head office in South Africa. Its principal assets are also in the Northern Bushveld area. 7 Apparently the principal assets of Pan Palladium included interests under two joint ventures. In each case those interests were held by Pan Palladium South Africa Pty Ltd ["Pan Palladium South Africa"], a wholly owned subsidiary of Pan Palladium. In addition to having interests in those two joint ventures, Pan Palladium had some other smaller and less significant interests in the Northern Bushveld area. 8 The joint ventures in which Pan Palladium was a participant were: · A joint venture with Impala Pty Ltd pursuant to an agreement dated 19 October 2001; · A joint venture with Randgold and Exploration Company Ltd pursuant to an agreement dated March 2002. 9 Under each of those agreements Pan Palladium South Africa could acquire a 75 percent interest in certain mineral property is in that Northern Bushveld area. The letter 10 The letter was in the following terms:

"South African Northern Bushveld Project ('Northern Bushveld Project')

This letter sets out the terms and conditions on which African Minerals Ltd, or its wholly owned subsidiary nominee, ('AML'), will acquire a percentage of the interest that Pan Palladium Ltd ('PPD') has in the Northern Bushveld Projects ('Proposal') and including that interest it is currently earning under its joint venture agreement with Impala Platinum Limited ('Impala') (the 'Impala Joint Venture Agreement') and its joint venture agreement with Randgold Limited ('Randgold') (the 'Randgold Joint Venture Agreement').

1.1 Pursuant to the Impala Joint Venture Agreement, PPD may acquire an interest of 75% in the farms Nonnenwerth 421KS, Volspruit 326KS and Zoetveld 294 KR by completing a bankable feasibility study within a three year period (the 'Impala Joint Venture Project').

1.2 The period for completion of the bankable feasibility study for the Impala Joint Venture Project may be extended for a further three years if prevailing market conditions allow.

1.3 There are no obligatory exploration work or expenditure commitments pursuant to the Impala Joint Venture.

1.4 On 11 April 2002, PPD announced commencement of Phase 1 of the resource drilling programme for the bankable feasibility study on the Grass Valley platinum group metal project situated on the Northern Bushveld Complex in South Africa under the Impala Joint Venture Project. Phase 1 drilling is due to complete in August 2002.

1.5 Pursuant to the Randgold Joint Venture, PPD may acquire an interest of 70% in the farms Altona, La Purcella and Kransplats by expending R7.6 million (approximately AUD1.25million) in four tranches over a five year period and completing a bankable feasibility study within a five year period (the 'Randgold Joint Venture Project').

1.6 PPD may acquire a further 5% interest in the Randgold Joint Venture Project for a consideration based on the net present value of the Randgold Joint Venture Project.

1.7 PPD has a 100% interest in other projects within the South African Northern Bushveld.

2.1 AML proposes to: (a) take a placement of 6.5 million ordinary shares in PPD at an issue price of AUD0.30 ('Placement') to be issued as soon as possible but not later than 24 May 2002; and

(b) acquire 50% of all interests of PPD in the Northern Bushveld area (either existing or future) including 50% of the 75% interest to be earned by PPD under the completion of the Impala Joint Venture Agreement and the Randgold Joint Venture Agreement.

2.2 For the avoidance of doubt, AML is interested in developing the Northern Bushveld area only. This Proposal does not extend to the Eastern Bushveld area. 2.3 AML proposes the following expenditure commitments: Year Funding by AML Year 1 AUD 1.5 million Year 2 AUD 2.0 million Year 3 AUD 2.5 million

2.4 The Years set out in paragraph 2.3 are the anniversary dates from the date of approval by the board of PP as evidenced by its signature below.

2.5 AML has the right to withdraw from this Proposal at any time after spending AUD$500,000 in Year 1 (as referred to in paragraph 2.3 above).

2.6 Subsequent to Year 3 (as referred to in paragraph 2.3 above), funding will proceed on a pro rata basis between AML and PPD (ie 50%/50%) subject to paragraph 2.7.

2.7 If PPD cannot produce sufficient funds to meet it 50% share of ongoing expenditures to continue with the bankable feasibility study for the Impala Joint Venture Project or the Randgold Joint Venture Project during 2005, AML will undertake to fund the remainder of the bankable feasibility study and will earn 60% of PPD's interest in the Impala Joint Venture Project and the Randgold Joint Venture Project.

2.8 Irrespective of the outcomes of the bankable feasibility study for the Impala Joint Venture Project or the Randgold Joint Venture Project, AML intends to proceed to establish an unincorporated joint venture with PPD of which AML will be the Manage (60%/40% or 50%/50% depending on paragraph 2.7) pursuant to the terms of one or more joint venture agreements between them which, unless the parties otherwise agree, will be based on its Form 5A-Exploration, Development and Mine Operating Agreement published by the Rocky Mountain Mineral Law Foundation ('AML/PPD Joint Venture').

2.9 Effective as of the date that the AML/PPD Joint Venture is formed, each of AML and PPD will be deemed to have made contributions to the AML/PPD Joint Venture equal to AUD$6 million provided that, if paragraph 2.7 applies, PPD's deemed contribution will be adjusted to AUD$4.8 million and AML's deemed contribution will be adjusted to AUD$7.2 million. Thereafter, the participating interest of each party will be determined, from time to time, as being equal to the product obtained by multiplying 100% by a fraction of which: (a) the numerator is an amount equal to the sum of all contributions made or deemed to be made by such party; and (b) the denominator is an amount equal to the sum of all contributions made or deemed to be made by both parties. Participating interests in the AML/PPD Joint Venture will be re-calculated whenever a party fails to contribute its proportionate share of ongoing expenditure commitments provided that the other party commits to fund the resulting shortfall.

3.1 Acceptance of the Proposal as outlined in paragraph 2 above is subject to the following conditions being satisfied: (a) review by AML and Minter Ellison of the Impala Joint Venture Agreement and Randgold Joint Venture Agreement and any other agreements pertaining to the Northern Bushveld area in which PPD is earning an interest, has earned an interest or is proposed to be earning an interest;

(b) approval of the Proposal (see paragraph 2.1 and 2.2) by the boards of PPD and AML; (c) the board of PPD will agree to AML having a board appointee (to be appointed immediately);

(d) the AML/PPD Joint Venture Management Committee will comprise 3 members appointed by AML and 3 Members appointed by PPD with the Chairman being appointed from the AML members who will have a casting vote; (e) AML will be granted right of first refusal in the event that PPD wishes to dispose of its interest in the AML/PPD Joint Venture, the Impala Joint Venture Project, the Randgold Joint Venture Project or any other interest PPD has, or may have in the future, in the Northern Bushveld area;

(f) the approval of all of the resolutions that will be put to the board on or before 5pm Sydney time Friday 17 May 2002 including: (i) the approval of the Placement to AML of 6.5 million ordinary shares in PPD at an issue price of AUD0.30 to be issued as soon as possible after the board meeting but not later than 24 May 2002; (ii) the approval of the Proposal for the AML/PPD Joint Venture; and (iii) the appointment of an AML nominee to the board of PPD. For the avoidance of doubt, the resolutions are interdependent. If one resolution is not approved then the proposal will be withdrawn by AML.

4.1 All terms and conditions of this Proposal remain valid until 5.00pm Sydney time Friday 17 May 2002 by which time the PPD board must have approved the Proposal, signed this letter in acknowledgment of such approval and returned the signed letter to William Hayden, Director of AML, care of Leanne Brown at Minter Ellison Lawyers, 88 Phillip Street, Sydney NSW 2000 (Fax No. +612 9921 8238). Non-compliance with this time stipulation will result in AML withdrawing the Proposal as set out in this letter in its entirety.

4.2 Subject to the satisfaction of the conditions precedent in paragraph 3.1, this letter is intended to be legally binding on the parties once the resolutions set out in paragraph 3.1 (f) have been passed by the PPD board and this letter signed by the representatives of the PPD board in acknowledgment of that approval. The PPD board and PPD must then proceed to do all things necessary to put effect to the Placement and the Proposal.

5.1 the parties will use all reasonable endeavours to prepare a formal Earn-In Agreement to document the Proposal and, if considered necessary, attach a draft AML/PPD Joint Venture Agreement (or heads of agreement for such AML/PPD Joint Venture) which will be entered as such time as the joint venture is entered by AML.

5.2 PPD will use all reasonable endeavours to procure the amendment of the Impala Joint Venture Agreement and Randgold Joint Venture Agreement to the extent necessary to acknowledge the interest of AML under the Proposal if requested to do so by AML.

6.1 AML must approve any announcement to be made by PPD in regard to the Proposal." 11 Certain threshold evidentiary issues arose for determination. The convenient course would seem to be to: · initially set out the relevant principles, including those which underpin the proper approach to the admission of subsequent communications for the purpose of determining the existence or non-existence of a contract; · applying these principles, then turn to the evidence to which regard may here be had, as part of the determination of the issue which arises. The Principles Commercial contract/certainty 12 The court is dealing with a commercial document. In endeavouring to discern the parties intent and in construing the meaning of the words used, the Court will strive to give the document a commercial, reasonable and rational operation: Australian Broadcasting Commission v Australian Performing Right Association (1972) 129 CLR 99 at 109; Hide & Skin Trading v Oceanic Meat (1990) 20 NSWLR 310. 13 There is abundant authority that "the court should be astute to adopt a construction which will preserve the validity of the contract": per Mason J, Meehan v Jones (1982) 149 CLR 571 at 529; Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 132, per Kirby P. Further the court will strive in dealing with a commercial contract to discern the objective intent of the business relationship or other parameters of a contract in order to give effect to that which the parties may be seen to have bargained for. But always it is to the words of the document [here suggested as amounting to a binding contract] that the court must attend looking in that regard to the whole of the document to discern the parties' intent. 14 Where mechanical provisions intended to operate over an extended period of time are concerned the court endeavours to follow the mechanics and provisions expressed in the contract in the endeavour to follow, always by looking at the manner in which the matter is expressed, how the parties saw the contract as a working guide to the way forward. As pointed out in Biotechnology at 135, the court will however not be in a position to in effect spell out that which the parties have for themselves failed to agree upon. Nor will the court be in a position to clarify that which is irremediably obscure. Nor will the court accept for itself a discretion which the parties have, by their agreement, reserved to one or other of them. To do so would not be to give effect to the contract but to change it: Kofi-Sunkersette Obu v A Strauss & Co Ltd [1951] AC 243 at 250 (PC). 15 Generally the proper approach is summarised in Halsbury's Laws of Australia volume 6 as follows:

"Faced with a conflict between, on the one hand, the desire to avoid making such efforts to enforce an uncertain or incomplete agreement that what is enforced is something that the parties did not in fact agree to and, on the other hand, upholding the reasonable expectations of parties who believed they had a contract and to avoid the reproach of being the destroyer of bargains, the courts give primacy to the need to uphold agreements, particularly executed agreements and commercial arrangements, wherever possible. However, account must always be taken of the nature of the agreement contemplated and a court will be less inclined to ignore elements of uncertainty and incompleteness where the transaction is one of magnitude, particularly where terms which are usually found in an agreement of the type before the court are absent" [110-460] 16 An agreement may be uncertain where the language used by the parties is such that the court is unable to attribute to it a sufficiently precise and clear meaning in order to identify the scope of the rights and obligations agreed to. An agreement may be incomplete; although the language used in the agreement is perfectly clear in its meaning, part of the transaction may still remain to be agreed upon so that there is no completed agreement and the alleged agreement will fail. Of course elements both of suggested uncertainty and suggested incompleteness may, and certainly here, require to be dealt with. 17 No contract will result where there is reserved to one-party a discretion as to whether or not to perform, because the apparent consideration provided by that party is, as a matter of law, illusory: Thorby v Goldberg (1964) 112 CLR 597 at 605, 613; Placer Development Limited v Commonwealth (1969) 121 CLR 353 at 356; Meehan v Jones (1982) 149 CLR 571 at 581. 18 The fact that a party is however given a wide latitude of choice as to how to perform does not render the agreement void, if nothing is left for future agreement and as long as the area within which that latitude is to be had is clearly laid down. [Halsbury's Laws of Australia, volume 6 (110-500) and authorities cited in footnote 2] Masters v Cameron (1954) 91 CLR 353 19 It is useful to recall the three classes for which the decision of the High Court is authority. The passage in question at 360 is in the following terms:

"Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.

In the each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution…

Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own…" 20 The seeds of what has now been called the "fourth class" were sown in the earlier case of Sinclair Scott Co Ltd v Naughton (1929) 43 CLR 310:

"One in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon while expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms." (per the majority consisting of Knox CJ, Rich and Dixon JJ at 317) 21 In Love & Stewart Ltd v S Instone & Co Ltd (1917) 33 TLR 475, His Lordship Lord Loreburn stated at 476: "It was quite lawful to make a bargain containing certain terms with which one was content, dealing with what one regarded as essentials, and at the same time to say that one would have a formal document drawn up with the full expectation that one would by consent insert in it a number of further terms. If that were the intention of the parties, then a bargain had been made, nonetheless that both parties felt quite sure that the formal document could comprise more than was contained in the preliminary bargain."

22 In Baulkham Hills Private Hospital Pty Ltd v G R. Securities Pty Ltd (1986) 40 NSWLR 622 McClelland J. by reference to Sinclair Scott and Co Ltd v Naughton (1929) 43 CLR 310 referred to a fourth class in terms of Masters v Cameron, namely the situation where the parties were content to be bound immediately and exclusively by the terms which they had agreed upon, whilst expecting to make a further contract in substitution for the first contract containing, by consent, additional terms. 23 On the issue which arose in Baulkham Hills of whether or not there was a binding contract, McClelland J at 627 put the manner as follows:

"There was a binding contract, if and only if, by the exchange of letters the parties mutually communicated their respective assents to being legally bound by terms capable of having contractual effect: see the discussions in Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 at 9254ff and Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309. In the last mentioned case Mahoney J A (at 326) identified three questions which it is often useful to consider in such a context as the present, namely "….did the parties arrive at a consensus?; (if they did) was it such a consensus as was capable of forming a binding contract?; and (if it was) did the parties intend that the consensus at which they arrived should constitute a binding contract?" 24 On appeal to the Court of Appeal, McLelland J's decision was affirmed on the basis of the principle quoted above in Sinclair, Scott. In G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, the Court of Appeal held that, "…the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances: Godecke v Kirwan (1973) 129 CLR 629 at 63; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 332-4, 337. If the terms of a document indicate that the parties intended to be bound immediately , effect must be given to that intention, irrespective of the subject matter, magnitude or complexity of the transaction." (per McHugh JA as his Honour then was at 634E-F, with whom Kirby P and Glass JA agreed) [emphasis added] 25 The fourth class has now passed into common parlance insofar as the courts are concerned and is referred to regularly as an accepted classification: see Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486; Heysham Properties Pty Limited v Action Motor Group Pty Limited & Ors (1996) 14 BCL 145; Telstra Corporation Limited v Australis Media Holdings (1997) 24 ACSR 55; Brunninghausen v Galvanics (1999) 46 NSWLR 538. 26 Regardless of classification, the principle that is now recognised is that there can be an informal contract with the expectation that other terms will be negotiated and by consent included in the formal document. That is, to say that such further negotiations and activity regarding other terms is still to take place does not mean the existing informal contract is not binding: Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 (per Ipp J at 110-111). 27 Most recently, the fourth class was considered in Graham Evans Pty Ltd v Stencraft Pty Ltd 16 BCL 335 [Full Federal Court (French, Whitlam and Dowsett JJ) and see also transcript of special leave application which was refused]. Evans brought an action against Stencraft claiming damages for breach of contract. The claim was dismissed at first instance. Evans appealed to the Full Federal Court. The Full Federal Court, in reversing Spender J at first instance, considered Masters v Cameron and applied Baulkham Hills and in so doing upheld the appeal unanimously. The Full Court held that parties may be bound immediately by the terms, which they agree upon, whilst expecting to negotiate the terms of, and make a further contract in substitution for, the first contract. 28 In Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, Mason P, Heydon JA and Ipp AJA case, Heydon JA set out succinctly the conventional and accepted principles of the law of contract: "The first relevant principle of law is that pre-contractual conduct is only admissible on questions of construction if the contract is ambiguous and if the pre-contractual conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347-352. The second relevant principle is that post-contractual conduct is admissible on the question of whether a contract was formed: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 77; Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 668, 669 and 672; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR [97011] at 9149 and 9154-9156; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR [97023] at 9255. The third relevant principle is that post-contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed. As explained by Priestley JA (Meagher JA agreeing) in Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 326-330, the status of the relevant High Court authorities is unclear: hence unless it is demonstrated that the later decisions of the Victorian Full Court and Court of Appeal against admissibility, Ryan v Textile Clothing & Footwear Union of Australia [1996] 2 VR 235 and FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343, are clearly wrong or they are overruled, they should be followed in New South Wales. No attempt was made to demonstrate that they are clearly wrong. The fourth relevant principle is that the construction of a contract is an objective question for the court, and the subjective beliefs of the parties are generally irrelevant in the absence of any argument that a decree of rectification should be ordered or an estoppel by convention found." 29 Hence in determining the circumstances surrounding the formation of the agreement, the matrix of facts, it is the objective intent that is paramount. Whether any relevant individual representative thought that an agreement existed or that it did not exist, is irrelevant to the exercise unless there exists an argument concerning estoppel. As Lord Wilberforce has said:

"When one speaks of the intention of the parties to the contract one speaks objectively - the parties cannot themselves give direct evidence of what their intention was - and what must be ascertained is what is to be taken as the intention which reasonable people would have had if placed in the situation of the parties." [ Reardon -Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989] 30 Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1907) 5 CLR 647; Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-549; Geebung Investments (supra); Anaconda Nickel (supra) are also authorities supporting the proposition that in ascertaining the relevant intention, that is the intention to contract, relevant circumstances may include prior negotiation and subsequent conduct. 31 A fundamental question falling for consideration is whether the conduct of the parties viewed in the light of surrounding circumstances shows or is indicative of an agreement having come into existence.

"In an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at any particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal; rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed." [Per McHugh JA in Integrated Computer Services Pty Limited v Digital Equipment Corporation (Australia) Pty Limited (unreported, NSWCA, McHugh, Mahoney and Hope JJA, 23 December 1988); see also Raguz v Sullivan (2000) 50 NSWLR 236 at 251] 32 Questions of the relevance and probative value of evidence in circumstances in which the issue concerned whether or not an enforceable contract had been entered into were also before the court in Film Bars Pty Ltd v Pacific Film Laboratories (1979) BPR 97023. As McClelland J. put it, such questions cannot properly be considered independently of a consideration of the relevant issue namely what it is, in point of fact, that constitutes the making of a contract in circumstances such as here obtained. As his Honour points out, such a contract is made "by the mutual communication between the parties of their respective assents to being bound by identifiable terms otherwise capable of having contractual force, the mutual communication typically taking the form of offer and acceptance". As his Honour (citing Williston on Contract, 3rd ed, Vol 1 paragraph 21) points out, one is not concerned with the subjective thing known as meeting of the minds, but the objective thing, the manifestation of mutual assents which is essential to the making of a contract. [At page 9254] 33 Film Bars [at page 9255] is also authority for the proposition that:

"in determining whether the communications between the parties constitute a contract the court is not confined to a consideration of the terms or manner in which the communications were made: they must be interpreted by reference to the subject matter and the surrounding circumstances including, inter alia, the nature of, and the relationship between, the parties, and previous communications between them, as well as to standards of reasonable conduct in the known circumstances." 34 More recently the Court in Brambles Holdings (supra) adverted to the "difficulties" of pressing too far the classical theory of contract formation based upon offer and acceptance (see also Pobije Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105 per Mason P at paragraph 1). Heydon JA said in that case, whilst considering the principles of the law of contract that:

"Offer and acceptance analysis does not work well in various circumstances." [at paragraph 71] 35 I have approached evidentiary issues during the hearing and approach the relatively few evidentiary issues still reserved for decision in the final judgment, in precisely the way in which McClelland J approached the issues in Film Bars. In short subsequent communications may have probative value depending upon the light they throw on the proper interpretation of earlier communications alleged to constitute the contract. Post contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed. 36 Subsequent communications can also legitimately be used against a party as an admission by conduct, of the existence or non-existence, as the case may be, of a subsisting contract. 37 Considerable assistance in terms of following the relevant principles and seeking to apply them in the present case is to be obtained from the decision of the New South Wales Court of Appeal in Australian Broadcasting Corporation v X1VTH Commonwealth Games Ltd (1988) 18 NSWLR 540. Some consideration is also given to questions of evidence without any departure from the approach taken by McClelland J. in Film Bars. 38 The particularly complicating factor the subject of the present proceedings involves ascertaining the parties intent generally to be gleaned from the proper construction of the letter, but also to be assisted by post contractual and other materials admissible in terms of the above described principles. Understanding the nature of the transaction becomes important. The terms of the letter itself are of vital importance. Endeavouring to glean the parties' intent involves closely examining the so-called 'conditions precedent to the Proposal'. But what was the Proposal? Was the Proposal only a part of a two part exercise? Was there actually any contractual obligation to make or take the Placement? The matter is not as simple as, but certainly raises the issue of, whether when the parties negotiated about, and signed the letter, they should be held to have entered at that stage into any and if so what contract, albeit one that is known or would later be overtaken by a further more formal contract containing additional terms and conditions. 39 The matter was put in the following terms by the Chief Justice (at 550 and following) with whose reasons for judgment Hope and Mahoney JJA agreed:

"…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) 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.

The position is by no means so clear, however, in connection with internal memoranda… or statements as to subjective intention made by individuals in the course of giving evidence. As it happens, although the learned judge had a good deal of material of this kind put before him at the hearing, it was not particularly helpful even if admissible. In the first place, a great deal of it was equivocal and individual pieces of evidence were contradictory in effect. Some of the persons who participated in the negotiations in question were called to the witness box and vigorously examined as to what was going on inside their minds at particular times. This process in the end principally served to demonstrate what might have been expected to be the case, that is to say, that the witnesses, not being lawyers themselves, were in a state of considerable confusion about the issue that ultimately emerged as determinative of the rights of the parties ……..

In so far as acts or statements of the kind referred to, not involving communications between the parties, are claimed to be relevant in a case such as the present upon the ground that they constitute an admission, it seems to me that it will often be necessary to identify with some care the fact which is said to have been admitted. As was noted, there may be cases in which the issue is such that the fact of the subjective state of mind of one or other of the parties is relevant. Normally, however, what is in issue is not their subjective state of mind but their "intention as expressed" (cf Inland Revenue Commissioners v Raphael [1935] AC 96 at 142 per Lord Wright) and caution may need to be exercised in relating the fact which is said to be admitted to the fact which is legally relevant." [emphasis added] 40 In short on the authorities, the admissibility issues are covered by the following propositions: · evidence of prior negotiations is not admissible insofar as it consists of statements and actions of the parties which are a reflection of their actual intentions and expectations; · evidence of post contract conduct is not admissible on the question of what the contract means as distinct from whether it was formed; · whether the parties intended that the consensus undoubtedly recorded in the letter should constitute a binding contract is to be resolved objectively and as a matter of construction of the letter. Rulings on evidence reserved for judgment 41 Objection was taken to the admissibility of parts of pages 221 - 223 of the agreed bundle. The Courts rulings are as follows: · the section under the box in portion on page 221 commencing "The Company… board of the Company" is allowed as an admission by Pan Palladium of its intention to enter into a legally binding agreement with African Minerals; · the section in the last paragraph on page 221 is admitted as evidence of circumstances surrounding the acceptance of the letter; · the statement that Mr Hayden had joined the board is admitted as an admission that this had occurred; · the section on page 222 under the subheading "(i) The Northern Bushveld Properties" is allowed as evidence of background facts of which the parties were aware at the time of acceptance of the letter; · the balance to page 223 is allowed. 42 Clearly the weight of this material is altogether another matter. The Court is not bound by an admission or by any other particular item of evidence where the whole of the evidence requires to be taken into account in determining: · whether or not an immediately binding agreement was entered into upon the acceptance of the letter; · what the parties are shown on all of the admissible evidence to have intended in that regard. General approach to construction 43 Most recently, the High Court has observed in Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 at 292-293 that:

"In Codelfa , Mason J (with whose judgment Stephen J and Wilson J agreed) referred to authorities which indicated that, even in respect of agreements under seal, it is appropriate to have regard to more than internal linguistic considerations and to consider the circumstances with reference to which the words in question were used and, from those circumstances, to discern the objective which the parties had in view. In particular, an appreciation of the commercial purpose of a contract: "presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating".

Such statements exemplify the point made by Brennan J in his judgment in Codelfa : "The meaning of a written contract may be illuminated by evidence of facts to which the writing refers, for the symbols of language convey meaning according to the circumstances in which they are used."" 44 To similar effect is the observation of Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 76 ALJR 246 at 248 (para 11), quoting with approval Lord Hoffmann in Investors Compensation Scheme [1998] 1 WLR 896 at 912-913 to the effect that interpretation of a written contract involves the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of contracting.

45 In Investors Compensation Scheme at 912 - 913, it was said that:

"The background knowledge which a reasonable person in the position of the parties will be regarded as having, for the purposes of the construction of contracts, includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man with the proviso that it should have been reasonably available to the parties".

"There is of course no doubt but that the court is entitled to inquire beyond the language and to "see what the circumstances were with reference to which the words were used, and the object appearing from those circumstances, which the person using them had in view": Prenn v Simmonds [1971] WLR 1381 at 1384 per Lord Wilberforce : Lakatoi Universal & Walker [2000] NSWSC 113 at par [1039]." The questions of particular structural significance 46 Reference has already been made to the analysis by Mahoney JA in Air Great Lakes of three questions which it is often useful to consider in this context. African Minerals submitted that the vital issues presently before the court might, adopting but reordering this analysis, be viewed as follows:

Question 1 Did the parties arrive at a consensus?

[African Minerals submitted that the answer to this question was undoubtedly in the affirmative for the reason that the letter records and purports to record a consensus in terms of the content of the letter] Question 2 - put as a question of construction of the letter Did the parties intend that the consensus at which they had arrived should, upon the signing of the letter, constitute an immediately enforceable binding contract?

[African Minerals submitted that the answer to this question was in the affirmative with a qualification, because the issue at the bar table was as to whether the letter was seen to be binding immediately upon the passing of the resolutions and the signing of the letter, or whether the letter was to be binding only upon the satisfaction of the sub-paragraphs to paragraph 3 referred to as "conditions precedent to the proposal"] Question 3 - put as raising questions of completeness and certainty Was the consensus at which the parties had arrived one such as was capable of forming a binding contract? 47 Clearly senior counsel for African Minerals maintained that in the particular circumstances of the letter standing at the centre of this litigation, the question of construction was pervasive. Conditions precedent and subsequent 48 Where the occurrence of an event is a condition precedent, the existence of the contract, or the obligation of one party (or both parties) to perform is subject to the prior occurrence of a specified event. 49 Whether the failure of the event to occur means that there is no contract, or simply no obligation to perform, depends on the intention of the parties as expressed in the contract or agreement: "[i]t depends on the proper construction of the contract as to whether on the non-happening of the event the parties' obligations are suspended or whether the contract ceases to bind ": Total Gas v Arco British [1998] 2 Lloyds LR 209 at 215 per Lord Slynn of Hadley. Hence although an approval may, for example, be expressed in the form of a condition precedent, upon examination it may be seen to have been a condition precedent not to the formation of the contract but to the obligation to complete it: Sandra Investments Pty Ltd v Booth 1983 153 CLR 153 at 157 per Gibbs CJ; cf Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 543,551, 557 - 558, 565; Newmont Pty Ltd v Laverton Nickel NL [1983] 1 NSWLR 181 at 188-189. See also Gange v Sullivan (1966) 116 CLR 418; Meehan v Jones (1982) 149 CLR 571. 50 In Perri, Gibbs CJ explained that the crucial issue is always the effect of the "condition" because, 'provided the effect of a condition is clearly understood its classification may be merely a matter of words'. Hence as is pointed out by Carter and Harland, Contract Law in Australia, 4th ed Butterworth's, 2002 at [741]:

"It is important to distinguish events which must occur for the formation of a binding contract from events which merely condition a party's obligation to perform. Where there is no contract until the event in question occurs either party may resile prior to the occurrence of the event without being held liable in damages for breach of contract. And the courts generally say that it is not open to one party to overlook ('waive') the non- occurrence of the event and to claim a right to enforce the 'contract'. The 'condition' must be for that party's benefit alone and that is more likely to be the position where the event conditions the obligation of one party to perform. By contrast, where the event merely makes a party's obligation to perform contingent, neither party is entitled to withdraw from the contract until it is clear that the event will not occur, in the case of a condition precedent, or the event has actually occurred, in the case of a condition subsequent". 51 In Total Gas the Court dealt with the circumstance in which Arco was licensee of a part of the North Sea Trent oilfield. It had agreed with Total to enter into a "Fully-Termed Agreement for the sale by Arco to Total of 50 percent of the interest of Arco in the natural gas in Trent. The fully Termed Agreement was to be substantially in the form of the letter Agreement and the draft of the agreement attached to it. The draft provided that the Fully Termed Agreement, "shall include the conditions precedent detailed in clause 2.8 of the Draft Agreement". A further provision in clause 2.8.1 provided that "This Agreement is conditional on… (ii) the Seller becoming party to the Allocation Agreement". The speech of Lord Slynn further included the following: "It is clear that the word condition may be used in a number of different senses. As Lord Reid said in Wickman Machine Tool Sales Ltd. v L. Schuler A.G [1974] AC 235 at p 250H: In the ordinary use of the English language "condition" has many meanings, some of which have nothing to do with agreements. In connection with an agreement it may mean a pre-condition: something which must happen or be done before the agreement can take effect. Or it may mean some state of affairs which must continue to exist if the agreement is to remain in force. The legal meaning on which Schuler relies is, I think, one which would not occur to a layman; a condition in that sense is not something which has an automatic effect. It is a term the breach of which by one party gives to the other an option either to terminate the contract or to let the contract proceed and, if he so desires, sue for damages for the breach.

In this context your Lordships have been referred to the discussion in Chitty on Contracts, 27th ed., (1994) chapter 12, pp. 570-573 as to the difference between promissory conditions and contingent conditions. Mr Pollock, Q.C. relies in particular on the passage in par. 12-025 where breach of promissory condition by one party, which gives the other party the opportunity to treat himself as discharged from further performance of the contract: …must be carefully distinguished from that of a "contingent" condition, i.e. a provision that on the happening of some uncertain event an obligation shall come into force, or that an obligation shall not come into force until such an event happens. In this latter case, the non-fulfilment of the condition gives no right of action for breach; it simply suspends the obligations of one or both parties.

In par. 12-026 it is said, as an example of a condition precedent that: …the parties may enter into an immediate binding contract, but subject to a condition, which suspends all or some of the obligations of one or both parties pending fulfilment of the condition.

On the other hand at par. 12-028: The obligations of one or both of the parties may be made subject to a condition that it is to be immediately binding, but if certain facts are ascertained to exist or upon which the occurrence or non-occurrence of some further event, then either the contract is to cease to bind or one or both parties are to have the right to avoid the contract to bring it to an end.

I agree with Mr. Pollock that it is important to keep promissory and contingent conditions separate but in my opinion there is a common factor. If the provision in an agreement is of fundamental importance then the result either of a failure to perform it (if it is promissory) or of the event not happening or the act not being done (if it is a contingent condition or a condition precedent or a condition subsequent) may by that the contract either never comes into being or terminates. That may be so, whether the parties expressly say so or not. Wickman Machine Tool Sales Ltd. v. L. Schuler A.G ., [1974] A.C. 235 at p. 262G per Lord Wilberforce. To adapt the words of Mr. Justice Maugham in In re Sandwell Park Colliery Co. , [1929] 1 Ch. 277 at p. 282 "the very existence of the mutual obligations is dependent on the performance of the condition." For completeness I would substitute "performance or fulfilment of the condition" for "performance of the condition." 52 The judgment of Samuels JA in Tricontinental Corporation v HDFI Ltd (1990) 21 NSWLR 689 at 703 includes reference to use of the word "condition" having a variety of different meanings in Australian contract law. Samuels JA made clear that he used the term "promissory condition" to mean a promissory stipulation in a contract, a breach of which entitled the innocent party to treat himself as discharged from his obligations under the contract. His Honour further made the point that a condition precedent need not be promissory in nature but is a stipulation in an agreement upon the fulfilment of which the existence of a contract, or of a principal obligation under an existing contract, is made contingent. 53 The judgment at 704 - 705 includes the following:

"If the condition precedent is the performance of some act by one party, it is not necessary to inquire whether the failure to do the act was also a breach of contract unless the party promised to do the act which is the condition precedent: Carter, Breach of Contract (1984) par 432 at 96. The observations of Diplock LJ in United Dominions Trust (Commercial), Ltd v Eagle Aircraft Services, Ltd [1968] 1 WLR 74; [1968] 1 All ER 104, in relation to unilateral contracts are in point. His Lordship said (at 84; 109-110): "... [T]he initial inquiry is whether the event, which under the unilateral contract gives rise to obligations on the part of the promisor, has occurred. To that inquiry there can only be a simple 'Yes' or 'No'. The event must be identified by its description in the unilateral contract; but if what has occurred does not comply with that description, there is an end of the matter. It is not for the court to ascribe any different consequences to non-compliance with one part of the description of the event than to any other part if the parties by their contract have not done so ....

For the inquiry here is: 'What have the parties agreed to do?' - not 'What are the consequences of their having failed to do what they have agreed to do?' as it was in the Hongkong Fir case." (My emphasis.) His Lordship indicated that this analysis applied not only to unilateral contracts, but also to "unilateral obligations" in agreements that also contain what he termed "synallagmatic", or reciprocally binding, obligations. Similarly, it has been said that if a provision is expressed in terms of a condition precedent, this of itself gives it the character of essentiality : Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 554 per Mason J. Implicit in his Lordship's remarks is the proposition that a condition precedent is strictly construed . So where a provision lays down an act by one party as a condition precedent to the existence of an obligation on the part of the other party, the condition precedent matches that described in the contract . Lest it be thought that there is always a clear-cut distinction between promissory conditions and conditions precedent, it is necessary to advert to the discussion of general principle by the majority of the High Court in Ankar . That case, like the present case, concerned the construction of a contract of suretyship. In the course of their joint judgment, the majority (at 555-556) explained the application of general principles of contract law to suretyship contracts in these terms: Breach of an essential term or a breach going to the root of the contract will of course discharge the surety from future liability if the surety elects to rescind for breach. The expression 'essential term' perhaps needs some elaboration in the context of suretyship because it is said sometimes that a surety is discharged by non-fulfilment of a condition precedent and at other times that a surety is discharged by the creditor's breach of a condition. A condition precedent may be unfulfilled without any breach of contract, but when performance by the creditor of a contractual promise is a condition precedent to the liability of the surety under a contract of suretyship which otherwise involves no more than a guarantee of payment of the debt owing to that creditor, the creditor's promise is necessarily an essential term of the contract. The terms of the contract itself demonstrate that the surety would not have entered into the contract of suretyship unless he had been assured of a strict performance of the promise: Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632, at pp 641-642… Conversely, when a contractual promise is a condition, performance of the promise, if the promisee so elects, is treated as a condition precedent to the promisee's executory obligations. Acceptance that a promissory condition operated in this way was the very foundation of the illuminating judgment of Bowen LJ in Bentsen v Taylor, Sons & Co [1893] 2 QB 274 at p 281, where his Lordship, in deciding whether a provision was a condition or a warranty, spoke of the need to determine 'whether the intention of the parties, as gathered from the instrument itself, will best be carried out by treating the promise as a warranty sounding only in damages, or as a condition precedent by the failure to perform which the other party is relieved of his liability': Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, at pp 60, 69-70; Bunge Corporation v Tradax SA, Panama [1981] 1 WLR 711, at pp 717, 718, 721, 725. In the context of suretyship contracts there has been a natural tendency to refer to the creditor's promise as a condition precedent rather than as a condition. This is because many guarantees are unilateral instruments, containing no promises on the part of the creditor except in so far as the recital of the consideration may refer to such a promise: see, eg, United Dominions Trust (Commercial), Ltd v Eagle Aircraft Services Ltd [1968] 1 WLR 74; [1968] 1 All ER 104 which, though not involving a guarantee, concerned a unilateral undertaking. This tendency in no way affects the discussion in the preceding paragraph."

It seems to me to follow from Ankar that it is meaningless to speak of the substantial performance of a condition precedent. Either it has been performed, or it has not. If it has, performance enlivens the obligation to which the stipulation is a condition precedent. If it has not, the obligation does not arise .

Tricontinental's submission that a tripartite classification of conditions precedent analogous to that used in assessing the status of promissory terms should therefore be rejected. Where an act by one party is a condition precedent to the liability of the other, whether it has occurred or been fulfilled depends upon if the act proffered matches the description of the condition precedent in the contract, and not upon the seriousness of the divergence from that description." [emphasis added] The evidence 54 The following matters were not in issue: · the letter which followed negotiations was drafted by solicitors for both parties; · on 17 May 2002, the Pan Palladium board having resolved to do so and before the varied time required by paragraph 4.1 [which was 9.00pm on 17 May 2002], accepted the African Minerals proposal: · Pan Palladium's acceptance as signed by Mr Murphy was received in Sydney having been communicated to African Minerals' care of its solicitors in Sydney; · Pan Palladium's Board had passed the resolutions referred to in paragraph 3.1 (f) of the letter before the varied time for compliance with that requirement; · on 20 May 2002 Mr Hayden was appointed to the Pan Palladium board as African Minerals's nominee; · on 22 May 2002, 6.5 million ordinary fully paid shares were issued to African Minerals' nominated subsidiary, Cereus Holding Ltd; · as at the present date no African Minerals/Pan Palladium joint venture management committee has been constituted; · as at the present date African Minerals has not been granted a right of first refusal in the event that Pan Palladium wishes to dispose of its interest in the African Minerals/Pan Palladium joint venture, the Impala joint venture project, the Randgold joint venture project or any other interest which it either has, or may have, in the Northern Bushveld area. Background and context in which the letter is to be construed 55 The letter records in paragraph 1.1 that in relation to the Impala Joint Venture Agreement, Pan Palladium may acquire an interest by completing a bankable feasibility study within a three-year period. Paragraph 1.2 makes clear that this period may be extended for a further three years if prevailing market conditions would allow. In short in relation to this Joint Venture, provision is made for a potential period of six years for the completion of such a feasibility study. 56 Likewise the letter in paragraph 1.5 discloses in relation to the Randgold Joint Venture, the entitlement of African Minerals to acquire its relevant interest over a five year period by completing a bankable feasibility study within that period. 57 An examination of both these joint venture agreements makes clear that the notion of an interest is essentially an economic interest in the exploitation of the mineral right which has been the subject of the bankable feasibility study. Also made clear by such an examination, is the fact that there are three stages to the relevant arrangements. The first is the stage of exploration. The second is the stage of undertaking a feasibility study. It is only if the feasibility study proves to be bankable (in the sense that it indicates a profitable resource to be exploited), that one moves to the third stage which is exploitation. And it is at the exploitation stage that the interest is in effect acquired and enjoyed, it being the stage which involves in the case of the two nominate joint ventures, the entry into of each joint venture. 58 An examination of the Impala Joint Venture Agreement makes the point. Clause 4.1 provides that Pan Palladium is to conduct a feasibility study over the subject properties to be completed by no later than three years after the "feasibility commencement date" (which is defined). Clause 4.2 provides that Pan Palladium is to bear all costs of each feasibility study and in consideration therefor is to earn 75 percent equity participation in each property. Clause 4.3 provides that within one month of completion of the feasibility study, Pan Palladium will determine, at its sole discretion, whether it wishes to proceed to develop the properties or any of them, either alone, or in conjunction with each other. If it intends to proceed it is to give a particular notice provided for by clause 5.1 which commences:

"A Joint Venture will automatically with effect from the date of the notice from Pan Palladium… be formed between Pan Palladium and Impala with respect to the properties, jointly, or as the sense dictates, separately in respect of any of them, in accordance with the terms set out herein read together with the terms set out in schedule B". 59 Schedule B in this instance describes the joint venture interests by reference to percentages which reflect the 75 percent equity participation interest. 60 Generally the same type of scheme can be seen in the Randgold Joint Venture Agreement. 61 These were of course documents known to exist to both parties, and using terminology involving the same notions of exploration earn-in or farm-in participation interests in a joint venture as are found in the letter agreement. Dealing with the matter 62 There is no doubt but that the letter leaves a very great deal to be desired in terms of precision as to what was intended. Notwithstanding the assistance which both parties appear to have had in terms of the preparation of the letter, the letter discloses a general muddle-headed approach to, and tendency to elide, the concepts of: · conditions precedent proper; · conditions precedent to performance. 63 Standing back from the very close submissions put by both parties it is necessary to endeavour to discern, using the permissible evidentiary materials earlier referred to, but primarily the terms of the letter itself: · what precisely was the Proposal the subject of the letter; · did the parties intend any, and if so which, obligations thrown up by the terms of the letter to become immediately enforceable upon the happening of any, and if so, which particular events. 64 To my mind a close examination of the letter and of the matrix of fact matters and circumstance in which the parties were placed at the time of the execution of the letter, makes the following matters plain: · the letter dealt with one Proposal; · that Proposal comprised three inter-related aspects namely: (i) the issue and placement of 6.5 million shares in Pan Palladium [see generally paragraph 2.1 (a)]: ["the Placement transaction"]

(ii) the acquisition of a 50 percent interest of all interests of Pan Palladium in the Northern Bushveld area outlining the mode in which the expenditure was necessary to be made for the acquisition of the 50 or 60 percent participation interest [see generally paragraph 2.1 (b) seen together with paragraphs 2.2-2.7 inclusive]: ["the earn-in transaction"]

(iii) the notion of entry into of an unincorporated joint venture [see generally paragraph 2.8]: ["the joint venture transaction"]. 65 The parties clearly contemplated that the taking of the placement should occur as soon as possible but not later than 24 May 2002. 66 Paragraph 2 in describing the proposal as the taking of the relevant shares and the acquisition of 50 percent of all interests of Pan Palladium (either existing or future) contemplates interests which are to be earned under existing arrangements and treats also with future interests. The proper construction is either: · that what was intended was a reference to property which existed at the time of the agreement or which could be earned at the time of the agreement as a result of either of the joint venture arrangements; or · that what was intended was a reference to property which existed at the time of the agreement or which could be earned at the time of the agreement as a result of either of the joint venture arrangements as well as a reference to after acquired interests in property. 67 In my view the latter of the above two constructions is the correct construction. 68 It is possible to contract to assign what might answer the description of future property for consideration or to grant a right of first refusal in respect of such property. 69 A question arises as to Paragraph 2.8 which uses words of intention in terms of African Minerals' intending to proceed to establishing the unincorporated joint venture there referred to. Leaving aside for the time being the meaning of the first 11 words in paragraph 4.2 for later examination, the question is as to whether the agreement is to be construed as providing that, after the resolutions set out in paragraph 3.1 (f) have been passed and the letter has been signed by the representatives of Pan Palladium in acknowledgement of that approval: · there is to be a binding obligation upon African Minerals at some, and if so what time, to proceed to establishing an unincorporated joint venture as described in paragraph 2.8; or · there is simply to be a right of election in African Minerals as to whether or not during some, and if so what period, to exercise what would, in effect, be an option to proceed to establishing such an unincorporated joint venture. 70 It seems to me that this is an area where the Court is simply unable to resolve the uncertainty. It is simply not possible for the Court to attribute a sufficiently precise and clear meaning in order to identify the scope of the rights and obligations of the parties. The matter is irremediably obscure. 71 African Minerals' contention was that the former proposition represents the correct construction for the reason that the letter in a number of places uses words strongly suggestive of an assumption that the joint venture will be formed: · paragraph 2.8 uses the words "will" in terms of joint venture agreements which… will be based on the Form 5A"; · paragraph 2.9 assumes that the joint venture is formed because it provides for the participation interests beyond that point in time to be determined in particular ways and to be recalculated; · paragraph 3.1 (d) uses the words " the Joint venture Management committee will comprise"; · paragraph 3.1 (f) (ii) refers to "the approval of the Proposal for the … joint venture"; · paragraph 5.1 refers to "such time as the joint venture is entered…" 72 I cannot see that these references are in any sense determinative. Further this was, it seems to me, clearly an essential and fundamental part of the bargain. Nor is it severable. On anyone's terms, a critical parameter of what the parties were dealing with was whether or not, at a particular point in time, African Minerals was to be contractually obliged to proceed to establish the unincorporated joint venture. 73 It may be that the very purpose of the references in paragraph 5.1 to the possibility that the parties may consider it necessary to attach [no doubt meaning 'first prepare and then attach'] a draft of the joint venture agreement (or heads of agreement for the joint venture) was because they could see that there could be many difficulties in endeavouring years later to agree upon and work out what the terms of the joint venture agreement should be. This may reinforce the suggestion that the parties should be inferred as having intended that African Minerals have an option to proceed to establishing the joint venture following the outcomes of the feasibility studies. Again the matter is simply not clear 74 African Minerals faces a further difficulty in terms of whether or not the agreement is sufficiently certain because it fails to explicitly identify at what time or up to what date African Minerals is to be obliged to proceed to establishing the unincorporated joint venture. The question is whether

(i) without this identification of the relevant time period that clause is so uncertain that no sensible meaning can be given to it; and

(ii) whether the clause is essential to the agreement, such that it cannot be severed. 75 The matter is returned to below. The paragraph 3 conditions - the condition precedent proper versus performance conditions precedent issue 76 The approach taken by African Minerals was to submit that all of the paragraph 3 sub-paragraph conditions are properly described as conditions precedent to performance of obligations, but that a bright line separates sub-paragraphs (a), (b) and (c) from sub-paragraphs (d) and (e). The submission is that the first three sub-paragraphs were plainly for the benefit of African Minerals. The distinction is submitted to be that it was clearly contemplated that the first three sub-paragraphs would have to be satisfied very quickly, indeed the intention being by 24 May 2002 at the latest. 77 It seems to me that there is substance in the submission explaining the bright line differentiation. 78 However it seems to me that the first three sub paragraphs on examination are shown to be conditions precedent proper. 79 Sub-paragraph (a) is proven to have been satisfied and was expressed in unqualified terms. I do not see that the construction implicitly required a satisfactory review in terms of one informed by notions of reasonableness. The review was to be no more than that - it says as much. 80 Sub-paragraph (b) is proven to have been fulfilled. 81 Sub-paragraph (c) is shown to have been agreed to and clearly contemplated the appointees being appointed immediately. The effect of paragraph 3.1 read together with paragraph 4.2 was clearly to make the agreement contemplated by sub-paragraph 3.1 (c ), an event which had to have happened before a legally binding agreement would come into existence. 82 Sub-paragraphs (d) and (e) are the particular provisions which occasion substantial difficulty in terms of the proposition that these are seen to be conditions precedent proper, for very obvious reasons. 83 As to sub-paragraph (d), one asks rhetorically why the parties would have contemplated that there be no binding agreement between them until there was a joint venture committee comprising three members, which was clearly an event which, it seems to me, the parties are shown to have contemplated as something which was not to happen until some time in the future when the joint venture would be formed. The notion that this was a condition precedent proper does not sit at all well with the fact that the parties clearly contemplated the share issue as taking place no later than 24 May 2002 and as soon as possible after the board meeting and the virtually immediate appointment of a nominee. 84 Sub-paragraph (d) is in terms a mutual promise and does not describe any event. It was clearly not something that could happen nor a promise which could be fulfilled before a number of other things contemplated to happen, had happened. These included the share issue, the appointment to the board and the acquisition by African Minerals of its participation interest. Quite possibly what would also be likely to have first occurred, was the execution of a more formal Earn-In agreement. 85 It seems to me plain that notwithstanding the heading of paragraph 3, the parties are shown to have intended and contemplated sub-paragraph (d) as being a condition precedent to performance. 86 Sub-paragraph (e) was a promissory condition requiring Pan Palladium to grant this right of first refusal. It could be granted immediately. However it could be granted at any time up to the point in time when Pan Palladium wished to dispose of any of its interests as described. It is relevant in considering this sub-paragraph to also note the terms of sub-paragraph 5.2, insofar as this obliged Pan Palladium to use all reasonable endeavours to procure the amendment of the Impala and Randgold joint venture agreements "to the extent necessary to acknowledge the interest of African Minerals under the Proposal if requested to do so by African Minerals". It seems to me that the word "interest" and sub-paragraph 5.2 generally should be read as requiring Pan Palladium, if requested to do so by African Minerals, to seek to procure the amendment of the nominate joint venture agreements to permit the grant of the right of first refusal which is the subject of sub-paragraph (e). 87 In my view the parties, again notwithstanding the heading to paragraph 3, are shown to have intended sub-paragraph 3.1 (e) to operate as a condition precedent to performance. 88 Pan Palladium did submit that the proper construction of paragraph 3.1 (e) was as a right of first refusal to be granted in circumstances where it could be granted: that is to say, 'and not otherwise'. The submission is rejected. The sub-paragraph is not expressed in this way. And of course there is here evidence that immediately after 9 May 2002 a conversation took place in which Ms Brown pointed out that he had a copy of the Impala Joint Venture Agreement but not the Randgold Agreement and Mr Murphy said that he would arrange for a copy but pointed out that there was a first right of refusal in the Randgold Agreement as well. Also that Ms Brown made an inquiry as to what the odds were in terms of Impala and Randgold giving consent to African Minerals' first right of refusal, to be told by Mr Murphy that he would consider that there would be some prospect of obtaining the consent of Impala but was not so sure as to what the position would be with Randgold. [Affidavit of Mr Hayden 25 February 2003, portion of paragraph 11] The defendant's bifurcation submission 89 Pan Palladium advanced a sophisticated submission to the effect that a close examination of the letter and of the matrix of fact matter and circumstance in which the parties were placed at the time of the execution of the letter, made the following matters plain: · two matters which although closely inter-related also requiring to be differentiated for important reasons, were sought to be dealt with by the letter: - the proposal that African Minerals would take a placement of shares in Pan Palladium at the identified issue price ["the placement transaction "]

• The proposal that African Minerals would acquire a percentage of the interests that Pan Palladium had in the Northern Bushveld Projects including the interests Pan Palladium as at the date of the letter was earning under the two nominate joint venture agreements: essentially this proposal may be described as a proposal that the parties endeavour to agree to the earn-in and joint venture ["the earn-in/ joint venture interest transaction"] · the parties intended that:

(i) upon the approval of Pan Palladium to and the passing by it, of all of the resolutions described in paragraph 3.1 (f), and

(ii) upon the letter being signed by representatives of the Pan Palladium board in acknowledgement of that approval and

(iii) upon the signed letter having been returned to African Minerals as provided for in paragraph 4.1, the letter was to be immediately legally binding on the parties in that: In relation to the placement transaction - the only conditions precedent proper to the obligation to make the Placement having been satisfied, the Placement was to be effected [Pan Palladium was obliged " to do all things necessary to put effect to the Placement "], not later than 24 May 2002; In relation to the earn-in/joint venture interest transaction - the parties are to be seen to have intended that: · they would be immediately bound in the terms provided for by paragraphs 5.1 and 5.2, [both parties were obliged to use all reasonable endeavours to "prepare a formal Earn-In Agreement to document the Proposal and, if considered necessary, attach a draft of the… Joint Venture Agreement or heads of agreement (for such) Joint Venture…] ". And this notwithstanding that as a matter of ultimate legal analysis, the obligations to use all reasonable endeavours may prove to be difficult of enforcement [ as for example where the parties and the Court may have difficulty in identifying whether particular conduct which might be said to have breached such obligations, could be seen to have, in fact, comprised breaches of the obligations]. 90 In short the defendant's senior counsel submitted that the letter made a clear distinction between the respective rights and obligations of the parties concerning on the one hand, the placement transaction and on the other hand, the earn-in/joint venture interest transaction. 91 It was put that this analysis squared with the commercial purpose and interests of both parties submitted to be discernible principally from the letter, but also from the post-contract material in evidence. The submission was that African Minerals understandably would not have wanted to be in a position whereby it made any of the expenditure commitments provided for in paragraph 2.3 by way of investing in the joint venture arrangements, only to find that either Impala or Randgold had a right to take out of the venture, the interest of Pan Palladium of which African Minerals was acquiring part. The submission was that from the point of view of Pan Palladium, it understandably would not have sought to be in a position where by providing any interest to African Minerals, Pan Palladium would jeopardise its interest in the Impala or Randgold joint ventures as would put itself in breach of its obligations under those joint ventures. The submission emphasised the significance of paragraph 3.1 (a) entitling the subject review for the purpose of African Minerals making an informed assessment as to whether or not to go further and, subject to the relevant documentation, to enter into the proposed Joint Venture Agreement. Likewise this was said to provide an explanation of paragraph 3.1 (e); unless the right of first refusal provided for would be granted, there would be a risk to African Minerals of having been required to invest into a venture where it could lose the interest when Impala or Randgold might exercise contractual rights, as upon a breach by Pan Palladium of any extant obligations to grant the right of first refusal to its joint venture partners. 92 To my mind this sophisticated submission does not represent a proper approach to the intent of the parties discernible from the letter. Rather the parties are shown to have intended that the letter would be legally binding once the resolutions set out in paragraph 3.1 (f) had been passed carrying with them approval to the share issue and the letter had been signed by the representatives of the Pan Palladium board in acknowledgement of that approval. Paragraph 4.2 expressly provided for the Pan Palladium board and Pan Palladium to then proceed to do all things necessary to put effect to the Placement and the Proposal. The paragraph 3.1 (d) and (e) conditions were conditions precedent to performance and no more and on examination are shown to have been promissory in nature. 93 In truth the letter is shown to have been intended to and to have been one transaction only albeit comprised of the interdependent sub- agreements, each of which agreements was inseparable from each other and which agreements bound the parties, subject to what was provided for in paragraph 4.1 and 4.2 Further uncertainty as to crystallisation of paragraph 2.8 obligation to proceed in establishing the joint venture 94 Even if the finding earlier set out in these reasons, of endemic uncertainty concerning whether or not African Minerals was contractually obligated to proceed in establishing the joint venture or had a discretion as to whether or not to so proceed, a further uncertainty issue received very close attention during submissions and for obvious reasons. 95 Mr Meagher SC was faced with the question of whether the terms of the letter were simply such that, even if the Court were to construe paragraph 2.8 as imposing an obligation upon African Minerals to proceed to establishing an unincorporated joint venture, the letter simply omitted to define or to describe the period of time in which African Minerals would be obliged to so proceed. The submissions which came forward varied during the argument and are very complex to follow. In short the propositions which were put seem to be as follows:

Obligation to proceed with joint venture irrespective of outcome of bankable feasibility studies · The parties are seen [paragraph 2.8] to have contemplated that there would be a contractual obligation in African Minerals to proceed to establishing a joint venture or joint ventures formed at the outcome of the bankable feasibility studies if they were favourable or, irrespective of whether they were favourable, at the end of the three-year period.

The contemplated expenditure identified for the first three years · The letter contemplates expenditure in what are described as years 1,2 and 3: - year 1 running from 17 May 2002 up to 16 May 2003,

• year 2 running from 17 May 2003 up to 16 May 2004,

• year 3 running from 17 May 2004 up to 16 May 2005. The contemplated expenditure would not accommodate a five-year period · This would seem to accommodate a three-year period for Impala unless the period in that regard was extended but would not accommodate a five-year period for Randgold.

Funding following year 3 was to proceed on a pro-rata basis · Subsequent to year 3 funding was to proceed on a pro -rata basis so that what was contemplated was that if the completion of the feasibility study for Impala was extended for a further three years and the feasibility study for Randgold was still running for another two years, then the parties would cover that expenditure on an equal basis to the completion of each of those studies.

Pan Palladium unable to produce sufficient assets during balance of 2005 · Paragraph 2.7 addressed the problem if, during the balance of 2005 which follows the end of year 3 [17 May 2005-31 December 2005], Pan Palladium could not produce sufficient assets to meet its 50% share of ongoing expenditures to continue with the bankable feasibility studies for the nominate joint ventures. In that event African Minerals undertook to fund the remainder of each study which would involve expenditure for possibly up to another three years. In return African Minerals would acquire a 60 percent interest in those joint ventures. · Paragraph 2.9 states that irrespective of the outcome of the feasibility studies for the nominate projects, African Minerals intends to proceed to establishing the unincorporated joint venture. This is said to indicate that African Minerals was obliged to so proceed, notwithstanding the use of the word "intends".

The latest point in time for establishing the joint venture · The parties are said to have intended to identify the latest or terminal point of the period during which African Minerals is to be obliged to proceed to establish the joint venture, as the conclusion of the later of the outcomes of the bankable feasibility studies for the two nominate joint ventures.

The earliest point in time for the crystallisation of the obligation to form the joint venture

African Minerals' submissions-percentages fixed at 50:50 --feasibility studies are completed within the initial three years [earliest point in time for crystallisation of obligation to form joint venture-16 May 2005] · If the feasibility studies had finished within the initial three years then paragraph 2.7 would have no work to do because the parties would be able to determine the percentages of their interests in the joint venture at 50%:50 percent. This then would be the earliest point in time by way of the commencement of the period during which African Minerals is to be obliged to proceed to establish the joint venture.

African Minerals' submissions -- feasibility studies are not completed within the initial three years [earliest point in time for crystallization of obligation to form joint venture - 31 December 2005] · Paragraph 2.8 provides that African Minerals is to be the manager and that the division is to be 60:40% or 50:50 percent depending on paragraph 2.7 - hence the earliest time that any joint venture would be formed is a time when paragraph 2.7 can be seen to have operated. This is said to be the end of 2005 because paragraph 2.7 uses the words "during 2005". Emphasis is placed on use of the word "ongoing" within paragraph 2.7. 96 In my view this again exposes a grave uncertainty in a failure by the parties to stipulate a matter which the Court is unable to correct. It was clear enough that senior counsel for African Minerals had difficulty through the argument in treating with the range of possibilities. An initial submission was varied following further consideration. The simple fact is that one cannot spell out that which the parties have for themselves failed in agree upon in relation to the bracket of time when, even if there was a contractual obligation in African Minerals to proceed to the establishing of an unincorporated joint venture, the letter omitted to define or to describe that period of time. It cannot be read into the letter by some form of creative judicial invention. The matter was equally fundamental to the bargain. It cannot be corrected. No question of severability arises. 97 An entirely alternative approach might be to construe the letter as simply having obliged African Minerals to proceed with the establishing of the unincorporated joint venture within a reasonable time. This alternative put to counsel for African Minerals by the court during argument, whilst arguably avoiding the difficult problems in endeavouring to discern a specific bracket of time within which, if the agreement is to be construed as having imposed a positive obligation upon African Minerals to proceed with the establishing of the joint venture, it was to be obliged to so proceed, does not advance the resolution of the issue by way of giving an answer. There are many cases in which the words "within a reasonable time" may be properly inferred as having been the parties' intent, but I do not see that this is one. Presumably it is for that reason that the matter was not the subject of an initial submission by African Minerals. To endeavour to infer an intent to have used these words requires one to identify precisely what event would have to have taken place by reference to which the description "within a reasonable time" may then be applied. The matter is simply again one with which the parties failed to deal. 98 Very close attention was given during final address to whether paragraph 2.8 can also be said to be uncertain for the reason that the parties had expressly provided with respect to the establishment of an unincorporated joint venture, that the joint venture was to be established " pursuant to the terms of one or more joint venture agreements between the parties which, unless the parties otherwise agree, is to be based on the Form 5A Rocky Mountain Mineral Law Foundation". The defendants have sought to submit that a close examination of this Form 5A document makes clear that it would not be possible, in the absence of further negotiation and agreement, for the parties to be bound by the terms of that document. The submission is that an important provision in the agreement is uncertain, amounts to no more than an agreement to agree and, not being severable, means that the whole of the agreement is unenforceable. 99 In my view the number and type of incomplete and inappropriate parts of the Rocky Mountain form provides a further ground for a holding off lack of certainty or more particularly, incompleteness. The matters highlighted by Pan Palladium in this regard were as follows:

"The reference to the Rocky Mountain form does not assist. That for is replete with incomplete and inappropriate mattes: Recital B (p437) supposes a grant by one to the other Clause 2.2 (p437) - does not recognise that the parties will only have 70% of the South African JV's together. Clause 2.5 (p438) - leaves open the meaning of 'continuous basis' Clause 3.1(c) (p438) Clause 3.2(a) (p439) Clause 3.2(c) (p439) - inconsistent with Impala and Randgold joint ventures (pp 25; 75) Clauses 3.2(d) and (e) (pp439 - 40) - US specific - what is the position in South Africa? (See p595) Clause 3.3 (p441) - inconsistent with Impala and Randgold joint ventures. Clause 3.5 (p441) - US specific. Clause 3.7 (p442) - Event if appropriate has items left blank. Clauses 4.2, 4.3 and 4.4 - US specific. What is the South African position? (See p595) Clause 4.6 (p443) - Laws defined (p505) United States laws. Clause 4.7 (p444) - inconsistent with Impala and Randgold joint ventures. Clauses 5.1(b) and (c) (p444) - inconsistent or partly inconsistent with Proposal letters. Clause 6.2 (p446) Clause 6.3 (p447) - leaves percentages out even if the clause was appropriate. Clause7.3 (a), (b) and (c) - leaves periods out. Clause 8 (p451) - does not identify manager and leaves out $ figures; (8.5) payment to manager (Ex B) (p485 - all left over to be agreed) Clause 9 (p457 and following) - leaves out Budget and Program to be agreed. Leaves out periods. Clause 10 (p464) - requires insertion of figures even if it were appropriate. Clause 10.5 (p466) - Remedies (p465) conflicts with Impala and Randgold joint ventures. Clause 10.6 (p467) - Audits Clause 12 - Withdrawals and terminations. Leaves periods blank. Is in conflict at least in part with Proposal. Clause 12.6 (p470) - non-complete covenants. Clause 13 (p470) - Deals with 'water rights' and leaves periods open. Clause 17 (p475) - Disputes - Choice of law, Forum and Arbitration left over for agreement. Clause 19 (p477) - United States specific. Ex B (p482) - all US specific. Ex C (p491) - Tax matters. Ex G (p570) - left open. Ex H (p 511) - leaves period open" 100 African Minerals sought to overcome these difficulties by reference to the proposition that to the extent that the Rocky Mountain form provisions are inconsistent with what the parties are said to have agreed on in the letter or of clearly irrelevant or in applicable to the intended subject matter of the joint venture, those provisions are to be read out of the joint venture agreement, or are to be read down as necessary. The following authorities were cited: · Fitzgerald v Masters [1956] 95 CLR at 426 - 427 where the joint judgment of Dixon CJ and Fullagar J includes reference to the circumstance that the document then before the court appeared to pose a superficial difficulty in a particular clause because it purported to incorporate a set of conditions so far as they were inconsistent with what had been specifically agreed upon. The court found no real difficulty in this regard, the holding being that words may generally be supplied, omitted or corrected, in an instrument where it is clearly necessary in order to avoid uncertainty or inconsistency. The holding was that it would be absurd to suppose that the parties, having expressed their agreement on a number of special and essential matters, should intend to incorporate by reference terms inconsistent with what they had specially agreed upon. The holding was that the parties must clearly have intended to incorporate a set of general conditions except so far as they were inconsistent with what they had specially agreed upon and that the Clause had to be read as if it said "consistent" or "not inconsistent". · Godecke v Kirwan 129 CLR 629 at 637 where Walsh J held that the terms of a particular offer and acceptance document were not to uncertain to constitute a binding and enforceable agreement putting the matter as follows: "The offer is expressed as part of the printed form, to be subject to the conditions of the 26th schedule of the Transfer of Land Act 1893. Condition 1 of the schedule has provisions as to completion of the purchase and the entitlement of the purchaser to possession which are not consistent with the terms of the Offer and Acceptance. Conditions 3 and 4 in the schedule cannot be easily accommodated to those terms. But, in my opinion, these difficulties should not be regarded as rendering the alleged contract void for uncertainty. It has not been argued that they should be so provided. In my opinion, the document signed by the parties should be construed as making applicable the conditions in the schedule to the extent only that these could operate consistently with the specific provisions contained in the "terms of the purchase" and in the special conditions." · Trustees Executors & Agency Co Ltd v M (1959) 102 CLR at 547-548 per Kitto J. 101 Consistently with the approaches taken in the above authorities and consistently with the general principle that the court will strain to avoid holding a commercial agreement unenforceable by reason of lack of certainty unless this is absolutely necessary for obvious reasons, the submissions of the plaintiff covering some five pages treating with individual articles, inconsistencies and other problems were as follows:

(a) if the article requires the blank to be completed in order to operate then a failure to complete the blank results in the article being read out of the joint venture agreement; and

(b) otherwise, and in particular with time stipulations, the omission is supplied by the general principles of the law: [See Trustee Executors and Agency Company Limited v Peters (1959) 102 CLR 557 at 549.] Recital B Recital B states that PPD is willing to grant to AML rights to participate with PPD in the exploration, evaluation and if justified the development and mining of mineral resources within the Properties. This requires no further negotiation and is not inconsistent with anything in the letter agreement. Article 2.2 The definition of Assets depends on the definition of Properties. The relevant Properties are identified in the opening paragraph and numbered paragraphs 1.1, 1.5, 1.6 and 1.7 of the letter agreement. If an asset is one in which neither has a controlling or managing interest (ie it is a passive interest) then it will be "managed" accordingly. Article 2.5 If the number of days in article 2.5 remained blank, the deeming provision does not apply and the words "on a continuous basis" are construed without reference to it. Article 3.1(c) This article contains the terms of a warranty to be given by both AML and PPD under the joint venture agreement. There is no uncertainty about its content and requires no further negotiation. If the position was other than as warranted by either party at the time of formation of the joint venture then the relevant party would be in breach of paragraph 2.8 of the letter agreement. That introduces no uncertainty. Article 3.2(a) This article, like article 2.2, depends on identification of the Properties, and PPD's interests in them, described or referred to in the opening paragraph and numbered paragraphs 1.1, 1.5, 1.6 and 1.7 of the letter agreement. Article 3.2(c) This is a warranty which is said to be inconsistent with the Impala and Randgold joint venture agreements. There is no uncertainty about the content of the obligation. Its performance may or may not put a party in breach of its obligations to third parties depending, for example, upon whether their consent is obtained (see, eg., Impala at 1/25). Articles 3.2(d) & (e) These articles are not entirely US specific as asserted by the defendant. However, the references to the 'paramount title of the United States' are US specific and would be read out of the agreement as inapplicable: see paragraph 1 above. Provisions which can have no application would be ignored in the process of construction with no effect on the enforceability of the contract because they are severable and not essential. Article 3.3 The same reasoning applies to this article as applies to article 3.1(c). There is no uncertainty as to meaning or content. Article 3.5 This provision is not US specific. Its meaning is clear. Article 3.7 The fact that blanks are not completed means that there is no minimum amount of a Material Loss and no limit on the indemnity obligation. There is no uncertainty introduced because the items are blank. Articles 4.2, 4.3 and 4.4 These clauses are US specific and the reasoning which applies to articles 3.2(d) and (e) applies to them and to Exhibit C. The fact that these provisions are to be ignored introduces no uncertainty because the applicable tax laws (of Australia or South Africa or both) will govern this aspect of the relationship. Article 4.6 'Laws' is not defined to mean United States laws. The expression "applicable federal, state and local laws" would pick up applicable South African or Australian laws. Even if the position was otherwise the clause still operates because it addresses "all rights" including but not limited to those provided by "Law". Article 4.7 The fact that an obligation under this joint venture might put a party in breach of some other obligation does not introduce uncertainty and paragraph 5.2 of the letter agreement contemplates steps to avoid that result. Article 5.1(b) and (c) To the extent that article 5.1 is inconsistent with what the parties have expressly agreed in the letter agreement, it would not be incorporated: see paragraph 1 above. In respect of this article, it is replaced by paragraphs 2.6 and 2.7 of the letter agreement which provide for the parties' initial contributions, as recognised in paragraph 2.9. Article 6.2 Similarly to article 5.1, article 6.2 is replaced by paragraph 2.9 of the letter agreement which provides for adjustment of the parties' participating interests in their joint venture. Article 6.3 Because the parties have not agreed the minimum position percentages in article 6.3, that article has no operation. That is the position as a matter of construction and there is no uncertainty or incompleteness as a result and no need for further negotiation. Articles 7.3(a), (b) and (c) The blanks are in relation to periods for giving notice or distributing documents. In the absence of agreement about those periods the general law would provide the answer: see introductory paragraph 2 above. Article 8 The manager is identified as AML in paragraph 2.8 of the letter agreement. Its powers and duties are described in article 8.2. Because there is no agreement about the administrative charges in Exhibit B (1/485) (see also article 8.5) the manager is not entitled to those charges. There is no uncertainty as a result. Article 9 If the parties have not agreed an Initial Program and Budget under article 9.1 and attached it as exhibit G, then article 9.3 applies and the Manager is to submit a Program and Budget to the Management Committee. The budget is then to be prepared for a period of one year and the following budget has to be prepared a reasonable time before the expiration of that first year: see introductory paragraph 2 above. Article 10 If the parties do not agree the blanks in articles 10.2 and 10.3 there is no uncertainty. There would be no requirement to keep a cash balance under article 10.2 and the rate of interest under article 10.3 would be the "Prime Rate" which is defined. Article 10.5 Article 10.5(a) provides for a power of sale which is a right to sell an asset or interest. Any such sale must be subject to the rights and obligations which comprise the asset or interest (eg. A right of first refusal to a co-venturer). That does not result in any "conflict" as suggested and there is no uncertainty. If the amounts in article 10.5(b) are not agreed then article 10.5(b) and (c) would not be applicable Article 10.6 There is no difficulty with article 10.6. The number of days in article 10.6(a) would be determined by the general principles of the law: see paragraph 2 above. Article 12 The absence of agreement as to number of months has the consequence that the deadlock provision does not apply. Nor was it required in view of paragraph 3.1(d) of the letter agreement which eliminates the possibility of a deadlock. Article 12.6 The absence of agreement about a non-compete period means that the parties would not be subject to any non-compete obligations. Article 13 The absence of agreement about the periods for exercise of any option would have the consequence that the provision did not apply. Article 17 The governing law of the joint venture agreement would be determined by the general principles of the law: see introductory paragraph 2 above. Article 19.3 Article 19.3 refers to US dollars. This is inconsistent with the letter agreement which expressly provides for monetary obligations by reference to Australian dollars. The joint venture agreement would be amended accordingly. Exhibit B Exhibit B is not all United States specific. To the extent that it is, the same reasoning as applies to article 3.2 applies to the relevant part of exhibit B. Exhibit C See response to articles 4.2 to 4.4 above. Exhibit G See response to article 9 above. Exhibit H The same reasoning applies to exhibit H as applies to article 2.5 above. Exhibit H is consistent with paragraph 3.1(e) of the letter agreement.

102 Notwithstanding this very close analysis to my view this is a further problem of lack of completeness and uncertainty which simply cannot be resolved even utilising the principles set out in the above authorities. There are simply too many matters which would have to be negotiated and in respect of which the Rocky Mountain Form is relevantly incomplete. [Without being exhaustive, see in particular Articles 3.7, 6.3, 8, 9, 10, 12.6,13]. The Court could not infer that the parties would have intended any such radical surgery on these and other clauses where what was envisaged was some form of consensus being reached on matters of obvious structural significance to parties entering into a joint venture. The court cannot clarify that which is irremediably obscure. Utility 103 It is appropriate to observe that even if, contrary to the above reasons, the Court had reached a decision that an immediately binding and enforceable agreement had been entered into upon the acceptance of the letter, I am quite clear that the declaration in the only form sought by African Minerals would not have been made. 104 Notwithstanding the submission that it was a proper exercise of the Court's discretion to make the declaration and that the parties would have been bound in terms of a res judicata discernible from the reasons, cf International General Electric Co of New York Ltd v Customs and Excise Commissioners [1962] Ch 784 at 789 and Spencer Bower, Turner and Handley, The Doctrine of Res Judicata, Butterworths, 3rd Edn, 1996 at [159], I have a strong view that the instant circumstances render it inappropriate to make the declaration in the form sought. There would be any number of matters relating to the terms and conditions of the agreement and aspects of obligations to perform which would likely arise between the parties by way of the future working out of their ongoing contractual relationship in respect of which it would be likely quite impossible, or certainly of the highest order of difficulty, for the parties or a court to match the same against the particular reasons which would have underpinned a judgment that a binding agreement had been entered into. The declaration in the terms sought is a most unusual declaration for the obvious reason that it does not treat with the identification of the terms and conditions of the alleged agreement. The plaintiff for whatever reasons eschewed the course of seeking to have made either: · a number of positive declarations of this type made; or · a number of, as it were, negative declarations that particular terms and conditions did not impose obligations. 105 It is one thing for there to be a principle that parties will be bound by a res judicata discernible from the particular reasons for judgment in any given case. It is entirely another thing for the court now asked to make the declaration, to be satisfied that the reasons for judgment underpinning the making of the declaration of the type here sought, will be such that the parties will later be able to avoid an internecine and awkward series of disputes as to whether or not a close search for inferences in the reasons, discloses that a particular matter was or was not one which must now be seen to bind the parties in terms of a res judicata. Determination of what was and what was not fundamental to the decision becomes a matter of high question. Nor is there an issue estoppel as to evidentiary facts or legal questions which comprise no more than steps in reasoning to the determination of an issue. The matter may come before another court forced to engage in the very same exercise. Alternatively the parties may even seek to return to me as the trial judge now, to try to resolve this type of exercise. All of this steps well outside: · the well-established principle that the likelihood of further litigation should be taken into account in deciding whether or not a particular form of declaration should be made; · the well-established approaches to section 63 of The Supreme Court Act 1970 setting the objective, so far as possible, of completely and finally determining in the one proceeding, all matters in controversy between the parties; · the overriding purpose Rule to be found in Part 1 of the Supreme Court Rules, elucidating the overall objectives of practices and procedures as specified in the Rules: "The overriding purpose of the Rules is to facilitate the "just, quick and cheap resolution of the real issues" in civil proceedings". 106 The court assessment is that the likelihood of further litigation between the parties is extremely high. Indeed African Minerals has in a formal letter which became Exhibit D2, travelled the distance of expressly indicating that notwithstanding that at it seeks the subject sole declaration in these proceedings, it reserves its right to seek other declarations and other relief in future proceedings if necessary. An important consideration concerns the nature of the letter put forward as an agreement and the many and complex sub-agreements sought to be treated with by the letter. To name but one example this Court would now have to travel through each of the respects in which each of the provisions in the Rocky Mountain Form may be given content, notwithstanding the series of areas where the Form is challenged as having been incomplete or uncertain. On a later occasion each of those findings would be closely scrutinised by the parties and close questions may arise of detail in that regard. Whilst this may have been avoided had African Minerals sought to procure a number of positive and negative declarations as to particular terms and conditions and the like, no such course was adopted. Whatever may have been the forensic position at earlier directions hearings and in relation to the attempt to strike the proceedings out on the basis of a suggested forum non conveniens, as trial judge my obligation is simply to determine whether or not the proper exercise of the court's discretion is to make or to withhold making the declaration. 107 To make the declaration in the form sought would leave too high a possibility of too many unsettled issues between the parties consequent upon it. 108 The Court is scrupulous in terms of the formulation of declarations of right and in the exercise of its discretion the Court would, for the above reasons, have in any event, declined to make the sole declaration pursued by the plaintiff.

Short Minutes of Order 109 The summons will be dismissed when short minutes of order to this effect are propounded. Costs may be argued at the same time.

I certify that paragraphs 1 - 109 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on Wednesday 9 April 2003 Corrigendum: 1. To give the reference at the commencement of paragraph 28 - Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153 2. Paragraph 54, third bullet point page 29: substitute for the reference to Mr Pain a reference to Mr Hayden. 3. Paragraph 88 substitute in the place of the reference to Mr Brown a reference to Ms Brown. 4. Substitute into paragraph 38 in the third sentence in place of the reference to "the so-called 'conditions subsequent to the Proposal'" a reference to "the so-called ' conditions precedent to the Proposal'".

              Susan Piggott
              Associate
              15 April 2003

Last Modified: 07/22/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.