Armada Balnaves PTE Ltd v Woodside Energy Julimar Pty Ltd

2. As the facts of each of these breaches set out below demonstrate, each express and implied term breached by the defendants were significant and serious departures from the obligations imposed on the defendants by the BTS Agreement, which breaches constituted repudiation of the BTS Agreement by the defendants. In light of the fact that each breach was significant and constituted serious departures of the defendants' obligations, it is not necessary to find that in the case of each breach whether each was a breach of an essential or an intermediate term. However, I have decided that some terms were fundamental terms of contract.
3. I am also satisfied that Zuleika has proved the defendants repudiated the BTS Agreement by a combination of acts and omissions that occurred from at least June 2017 until the extended Earn‑in Period expired on 12 November 2019. The defendants' conduct would convey to a reasonable person that they were unwilling to be bound by the terms of the BTS Agreement. These acts and omissions can be summarised as follows:

(a) the defendants repeatedly stated through their representative, Mr Bruce McInnes, the executive chairman of Vango and a director of Dampier Plutonic, that they wanted to tear up the BTS Agreement and enter into a new arrangement;
>
> (b) the defendants repeatedly stated through their representatives that the BTS Agreement was not binding;
>
> (c) the defendants persistently failed to approve contributions by Zuleika to Expenditure by: > > > (i) not approving resolutions Zuleika put before the Joint Venture Committee; and
> >
> > (ii) demanding that unless Zuleika agreed to a revised CAPEX, the defendants would not approve contributions by Zuleika to Expenditure and tranches of Expenditure; and

in circumstances where there was exploration and rehabilitation work required to be undertaken before the commencement of the development and production of ore from the Tenement;

(d) failing to acknowledge Zuleika's deemed contribution to Expenditure, and denying that Zuleika had any beneficial interest in the Tenement;

(e) failing to agree and implement exploration programs by approving resolutions before the Joint Venture Committee;

(f) undertaking exploration activities on the Tenement without the approval of the Joint Venture Committee, and without inviting Zuleika to participate;

(g) funding Tenement costs, prepared budgets and engaged in project management (including maintaining the Tenement in good standing) without prior approval by the Joint Venture Committee;

(h) failing to negotiate in good faith and use their best endeavours to execute a formal detailed joint venture agreement, to replace the BTS Agreement, which conduct included:

(i) claiming that the BTS Agreement was not binding on the defendants and was subject to a condition precedent of entering into a comprehensive agreement; and

(ii) attempting to negotiate a new joint venture agreement that was materially inconsistent with the terms of the BTS Agreement;

(i) failing to co‑operate with Zuleika to progress the Joint Venture after the termination of the Ore Treatment Agreement, and preventing the fulfilment of the terms of the BTS Agreement and not doing all things necessary to enable Zuleika to have the benefit of the BTS Agreement;

(j) not providing Zuleika with all relevant documents it requested in its agenda sent to the defendants on 9 July 2018 which related to work carried out on the Tenement by the defendants, and included exploration, planned drill programs, budgets, contracts timeline and reports, mythological and geotechnical test‑work, decline refurbishment, mind development, or treatment options, access agreements, contracts and approvals, Tenement status reports and access agreements; and

(k) wrongfully asserting on 14 November 2017 that the BTS Agreement had lapsed.

1. In addition, for the reasons I give in 5.3 of these reasons, I am satisfied that the conduct the defendants engaged in to prevent Zuleika from contributing to Expenditure during the Earn‑in Period, when considered alone, is conduct that was sufficient to prove that the defendants repudiated the BTS Agreement.
2. I am also satisfied that the defendants' wrongful conduct by these acts and omissions entitled Zuleika to accept the repudiation and terminate the BTS Agreement.

1. The most reliable indication of a person's knowledge of transactions and events is not their recollection of what was said by them and others several years ago, it is what they did and how they conducted themselves at the relevant time.
2. Contemporaneous, or near contemporaneous, documents provide more valuable and revealing information than what may be flawed attempts at recollection of those facts by witnesses, in particular, those with an interest in the outcome of the litigation. Contemporaneous statements in the form of email communications and other records of contemporaneous communications, in light of the contemporaneous documentary record more generally, are likely to be a more accurate reflection of the underlying events than the later witness statements prepared for the purpose of the litigation at a time when false memories can intrude.[18]
3. Consequently, in assessing evidence which relies upon the recollection of events which occurred sometime ago, I have placed significant weight upon contemporaneous documents and upon inferences that can be properly drawn from that evidence. Where it is possible to establish objective facts from their evidence, I have assessed the written and oral testimony of each witness in light of the inherent probabilities of particular versions of events, in the context of established facts.

1. Zuleika adduced evidence from three witnesses.
2. The first was Mr Malcolm Carson who was the former executive chairman of Zuleika.
3. Mr Carson held academic qualifications in geology, economics, and mineral and resource management. He had a lengthy career working as an exploration geologist and manager, and held directorships in a number of mining companies. He was appointed to the board of Zuleika and Dampier Plutonic in May 2014.[19]
4. Unfortunately, by early January 2022, Mr Carson was terminally ill. As a result, his evidence was given de bene esse in late January 2022. By consent, Mr Carson's non‑contentious evidence in chief was given by way of an edited witness statement, and marked for identification. He also gave some brief oral evidence by audio‑visual link in two short hearings, on Saturday 22 January 2022 and on Tuesday 25 January 2022.
5. When the trial commenced, Mr Carson's non‑contentious witness statement[20] was tendered into evidence, subject to a number of objections made by the defendants on grounds of relevance, which objections I have had regard to in making relevant findings of fact in these reasons. The transcript of Mr Carson's oral evidence was also tended into evidence.[21]
6. The second witness called by Zuleika is also a director of Zuleika, Ms Hui Guo (known as Annie Guo). Ms Guo holds qualifications in economics and finance, and has substantial work experience in mergers and acquisitions with a focus on mining and resource sectors. Ms Guo became an alternative director of Zuleika in November 2013 and was appointed a director in June 2015. In addition, she was director of Dampier Plutonic from May 2014 until August 2016. Ms Guo became the managing director of Zuleika in October 2020.
7. Because of Covid 19 restrictions that were in place at the time of trial, Ms Guo and all of the other witnesses who gave evidence in the proceedings, with the exception of one of the defendants' witnesses, gave evidence by audio‑visual link. By consent, Ms Guo's evidence in chief was given in writing in the form of an edited witness outline.[22]
8. The third witness called by Zuleika was Zuleika's company secretary, Mr Michael Higginson. Mr Higginson was appointed a director of Zuleika, after the death of Mr Carson, in February 2022.[23] Mr Higginson is by occupation a professional company secretary for several companies including Dampier. He gave evidence by audio‑visual link from his office in Brisbane. By consent, he also gave his evidence in chief in writing in the form of an edited witness outline.[24]
9. Zuleika's case does not stand or fall on its witness evidence. Zuleika is able to make out its case of breach and repudiation on the undisputed contemporaneous documentary evidence, and on the oral evidence of Mr McInnes who gave evidence for the defendants.
10. However, I did find all of Zuleika's witnesses were credible and their evidence was reliable.
11. Turning first to Mr Carson and Mr Higginson, I am of the opinion that they each gave truthful and reliable evidence for the following reasons:

(a) Mr Carson's evidence is corroborated in almost all material respects by comprehensive contemporaneous records that were not only kept by Zuleika, but also by Vango (in particular Vango's minutes of Joint Venture Committee meetings). In any event, most of Mr Carson's evidence was not in contest and not the subject of cross‑examination. In addition, the defendants in their written closing submissions note that Mr Carson gave evidence in very difficult circumstances, and concede he was honest and credible;
>
> (b) Mr Higginson's evidence was relatively short and his evidence was confined to the taking of minutes at Joint Venture Committee meetings. The defendants in their written closing submissions also concede that Mr Higginson was an honest and credible witness, but contend that occasionally his oral evidence tended toward submissions in support of Zuleika's case about what was said at particular meetings. I do not accept this to be the case. Mr Higginson is by occupation a professional minute taker. When he was cross‑examined he recognised limits of his respective recollections and, without contest, he conceded matters that he could not recall or were not within his knowledge. In any event, Zuleika submits that it is not necessary to prefer the minutes taken by Mr Higginson on behalf of Zuleika to the minutes prepared by the defendants to make out its case of breach and repudiation of the BTS Agreement. Zuleika says that when making findings about material statements made at Joint Venture Committee meetings by the parties' representatives, the court need not look any further than the defendants' minutes.

12. Ms Guo's evidence was also relatively short. I found Ms Guo to be a reliable witness in respect of the material and relevant issues between the parties. This is because when cross‑examined about what was said in some of the Joint Venture Committee meetings, her evidence about what she independently recollected, was not inconsistent with what is stated in the defendants' minutes of those meetings.
13. Although Ms Guo appeared to have a very high opinion of her experience in mining operations and geology when she does not have any formal qualifications in geology, mining or engineering, she was not asked, either in examination in chief or in cross‑examination, any relevant questions about her opinions about any technical aspects of mining operations. Consequently, I did not find her evidence about her experience in this work to be relevant, material, or affect the reliability of her evidence.
14. Although counsel for the defendants attempted to adduce evidence that Ms Guo had been found not to be a person of credit in proceedings before the Supreme Court in New South Wales, when the decision of Rees J in Guo v Xu is carefully read, it is clear that her Honour made no finding that Ms Guo was not a credible witness. After noting that cross‑examination of Ms Guo was extensive and was conducted over a video link which proved unstable, Rees J found that she was not in a position to form any views of Ms Guo's credit. However, Rees J then went on to say that Ms Guo's evidence did not raise any issues of concern in this regard and found that she answered questions simply and directly, was precise, had a good recall of detail, and made reasonable concessions.[25]
15. Despite counsel's approach to Ms Guo in cross‑examination in this matter, in their written closing submissions the defendants concede that there is no cause to suggest that Ms Guo was not an honest witness, but submit she was quick to say when she could not recall matters that could have potentially been against her and Zuleika's interests. In particular, it was raised that she did not recall if Zuleika and she 'personally agreed' to terminate the Ore Treatment Agreement (the agreement for the treatment of ore that the defendants were a party to together with Billabong). However, this point is not relevant. It was not up to Ms Guo personally or Zuleika to terminate the Ore Treatment Agreement. It was a matter for the defendants. Zuleika was not a party to the Ore Treatment Agreement.
16. In any event, it is not in dispute that Zuleika, through the actions of Mr Carson, agreed that the defendants should terminate the Ore Treatment Agreement. Ms Guo was clear in her evidence that she knew the agreement had been terminated.[26]
17. The defendants also submit that some of Ms Guo's evidence resembled submissions and specifically referred to her evidence stating that a number of formal requests had been made by herself and Mr Carson to visit the Tenement but were refused by the defendants. Plainly, her evidence on this point cannot be regarded in the nature of a submission. I note, however, no documents have been produced to the court which record that any request had been refused.[27] In any event, her evidence on this point is not material, nor relevant.

1. The defendants called five witnesses.
2. The first witness was Mr McInnes. Mr McInnes has qualifications in accountancy, is a member of the Institute of Public Accountants, and is a registered tax agent. His main expertise is management accounting and taxation.[28]
3. Mr McInnes gave his evidence by audio‑visual link from his office in New South Wales. His evidence in chief was given orally. He was cross‑examined at length by senior counsel for Zuleika. Although the defendants contend that he ought to be found to be an honest witness who did his best to assist the court and who made concessions potentially against the interest of the defendants, I am of the opinion that his evidence must be treated with caution.
4. Although Mr McInnes candidly made a number of statements against the interest of the defendants when giving evidence, some of his evidence was directly inconsistent with material contemporaneous records, his recollection of many events was poor, and some statements recorded as statements made by him in the defendants' contemporaneous records are misleading or untruthful.
5. The other four witnesses were technical witnesses who each gave short oral evidence, and whose evidence I have accepted as credible and reliable. The substance of the evidence of each of these witnesses was not challenged in cross‑examination.[29] These four witnesses were:

(a) a director of Ripago Underground Mining Services Pty Ltd, Mr Richard Gorzkos, who is a mining engineer and who prepared a desktop analysis report in December 2018;[30]
>
> (b) a mining engineer employed by Entech Pty Ltd, Mr Shane McLeay, who was the principal reviewer of the K2 Feasibility Study dated June 2014 (June 2014 K2 Feasibility Report), the Definitive Feasibility Study Update K2 Deposit dated October 2014 (October 2014 K2 Feasibility Update Report), and the K2 Definitive Feasibility Study February 2017 Update (February 2017 K2 Update Report);[31] and
>
> (c) a geotechnical engineer and consultant in mining geomechanics, Mr Peter O'Bryan, who inspected the walls of the K2 pit in March 2005, February 2007 and April 2020;[32]
>
> (d) a geotechnical engineer, Mr Thomas Parrott, employed by Entech Pty Ltd, who carried out an inspection of the K2 deposit in March 2017.[33]

3.1 Events that occurred prior to the parties entering into the BTS Agreement

1. The BTS Agreement is not the first joint venture agreement entered into by the parties. As at November 2013, Dampier Plutonic was a wholly owned subsidiary of Zuleika, and Dampier Plutonic was the holder of the tenements in the Marymia‑Plutonic Greenstone Belt (which are now jointly held by Vango and Dampier Plutonic) (the Plutonic Tenements).[34]
2. On or about 18 November 2013, Vango (whose name at that time was Ord River Resources Ltd),[35] and Zuleika, together with Dampier Plutonic, entered into a number of agreements to develop the tenements which comprised the following (Plutonic Dome Gold Project Agreements):[36]

(a) an initial Joint Venture Agreement to explore for minerals in the area of the tenements that included Mining Lease 52/183;
>
> (b) an initial Farm‑In Agreement, pursuant to which Zuleika and Dampier Plutonic agreed to grant Vango the right to earn a 30% initial interest as defined in the agreement in the Joint Venture by, inter alia, incurring a minimum of $2 million in farm‑in expenditure, before the expiry of the Earn‑in Period;
>
> (c) three separate sole funding agreements pursuant to which, inter alia, Zuleika and Dampier Plutonic agreed to grant Vango the right to earn a further 45% Joint Venture Interest in 15% increments by expending sole funding expenditure totalling $4 million.

3. After Mr Carson became a director of Zuleika and Dampier Plutonic in May 2014, he reviewed and familiarised himself with the books and records of the companies, including each of the Plutonic Joint Venture Agreements. He also reviewed Vango's publicly available financial information and quarterly activity reports and formed the view that Zuleika had funds to explore the Plutonic Tenements, whereas, Vango did not when they entered into the agreements.[37]
4. Mr Carson also started familiarising himself with the tenements and had discussions with a geologist, Mr Howard Dawson, about a report prepared by a mining consultant for a funder to assess whether to provide funding to Zuleika. The purpose of the report was to assess the potential for discovery, continuity of mineralisation, and the potential for mining to occur in the area of the tenements within the Plutonic Dome Gold Project.[38] Mr Carson also had discussions with the outgoing managing director of Zuleika, Mr Richard Hay, who was retained for a period to assist with the handover to the new board concerning the tenements. Mr Hay told Mr Carson it was his opinion that some tenements could be dropped, others could be reduced, and he thought that K2 could be developed for an initial CAPEX of $6 million and $12 million over the life (of the mine).[39]
5. The K2 deposit had been last mined in 1997 by another company, Resolute, who mined the orebody from the boxcut and decline before the mine was prematurely closed in 1998 after only minor amounts of ore extraction.[40] After the mine was closed, the underground decline was flooded.
6. On 1 July 2014, Mr Dawson sent Mr Carson the June 2014 K2 Feasibility Report prepared by Entech Pty Ltd for Vango.[41] The stated objective of the report was to assess the economic viability of extracting ore from the K2 deposit using underground mining methods, and to assume the extracted ore would be treated at the nearby Plutonic Plant owned by Northern Star Resources Ltd, which was located 36 km away from the K2 deposit.[42]
7. The authors stated in the June 2014 K2 Feasibility Report that the estimate of the agreed capital cost (CAPEX) forecasts for the first year of the project was $6,212,241 and $2,964,606 for the second year (being a total of $9,176,847).[43] Zuleika contends that the forecast for the first year in this report is important, because it is Zuleika's case that the CAPEX for the development of the K2 deposit agreed to in cl 2(a) of the BTS Agreement, and in the definition of CAPEX as at the Commencement Date of $6 million in cl 26, was based upon the cost estimation of capital expenditure for the K2 underground for the first year in this report.[44]
8. Mr Carson explained, when he gave oral evidence, that the figure of $6,212,241 in the report estimate was not start‑up capital; it was working capital to get the mine up and running. He pointed out that the figure of $6 million was not a firm number, and said it did not include any engineering costs, but was an estimate of what it would cost to dewater the existing tunnels and refurbish the K2 underground.[45] Zuleika also points out this figure did not include the cost of the treatment of any ore removed from the K2 deposit.
9. On 1 July 2014, Vango made an announcement to the market that contained a comprehensive summary of matters stated in the June 2014 K2 Feasibility Report. In its announcement, it stated:[46]

(a) there had been a positive completion of a Definitive Feasibility Study on the K2 underground deposit in the Plutonic Dome Gold Project Farm‑In/Joint Venture with Zuleika;
>
> (b) Vango was currently earning up to a 75% interest in the Plutonic Dome Gold Project through spending a minimum of $6 million across the project prior to 2 January 2016; and
>
> (c) one of the highlights of the study was a maximum capital drawdown of $6.4 million.

10. In or about September 2014, Vango and Dampier Plutonic entered into the Ore Treatment Agreement with Northern Star to facilitate the processing of ore from the K2 deposit. Pursuant to the terms of the agreement, Northern Star was to be paid for the processing services through the provision of gold at the point of refining the ore.[47]
11. On 11 September 2014, Zuleika announced to the market that Vango had earned in a 30% Joint Venture Interest in the Plutonic Dome Gold Project, and Vango had advised Zuleika that it intended to undertake the 'sole risk' of the next $1 million of Joint Venture expenditure to increase its equity in the project to 45%.[48]
12. In early October 2014, Entech provided to Vango the October 2014 K2 Feasibility Update Report which assumed that the extracted ore from the K2 deposit would be treated at the nearby Northern Star processing plant.[49] This report contained a revised cost estimation of the CAPEX of $6,954,666, with a project cash flow estimation, before tax, of $6,464,814.[50] The author of the updated report forecast that the project cash flow showed a payback period of 19 months, the cumulative cash flow of the project completion would be $18.2 million, and the maximum depth of the cash trough was $6.6 million to be reached in month 13.[51] The updated report also contained a revised estimated CAPEX of $6,954,666 for the first year of the project, $2,879,472 for the second year, and $200,000 for the third year (being a total of $10,034,138).[52]
13. On 8 August 2014, Vango announced to the market the results of the October 2014 K2 Feasibility Update Report. The announcement summarised the report in detail and stated one of the highlights of the report was that the maximum capital drawdown was up 4%, and the pre‑tax net present value was up by 78%.[53]
14. During 2015, Mr Carson had a number of discussions with Mr McInnes about either Zuleika repurchasing Vango's interest in the Plutonic Dome Project, or Vango buying the balance of Zuleika's interest. Mr Carson told Mr McInnes that Zuleika or Vango should acquire 100% interest in the Plutonic Dome Gold Project tenements because they would not be able to raise capital with a diluting asset.[54]
15. On 19 January 2016, Zuleika announced to the market that it had entered into a binding heads of agreement for the sale of 100% of Dampier Plutonic to Vango.[55]
16. On 11 May 2016, Zuleika announced it had sold all of its shares in Dampier Plutonic to Vango. The sale disposed of Zuleika's remaining equity interest in the Plutonic Dome Gold Project.[56]
17. The Sale Agreement was formally executed by Zuleika, Dampier Plutonic and Vango in an agreement dated 16 August 2016 (Sale Agreement). At the time of sale, Dampier Plutonic was the registered holder of 57 live tenements in the Marymia‑Plutonic Greenstone Belt, which included Mining Lease 52/183.[57] Pursuant to the terms of the Sale Agreement, it was agreed that immediately prior to settlement Vango held a 60% interest and Dampier Plutonic held a 40% interest in the mining tenements and tenement applications listed in Schedule 1 of the Sale Agreement.[58]
18. The consideration for the Sale Agreement was:[59]

(a) a non‑contingent component of $2,200,000 (excluding GST) to be paid by Vango on the settlement date; and
>
> (b) a contingent component payable within 7 days after the occurrence of the following events (milestone payments): > > > (i) $1 million (excluding GST) on the production of a total of 45,000 ounces of gold from the project tenements;
> >
> > (ii) $1 million (excluding GST) on the production of a total of 100,000 ounces of gold from the project tenements;
> >
> > (iii) $1 million (excluding GST) on the production of a total of 200,000 ounces of gold from the project tenements; and
> >
> > (iv) $1 million (excluding GST) on the production of a total of 300,000 ounces of gold from the project tenements; and > >
>
> (c) the royalty under the Royalty Deed.[60]

19. On the same day, Zuleika, Dampier Plutonic and Vango entered into the Royalty Deed contemplated and required by the terms of the Sale Agreement.[61] Although there is some dispute about the meaning and effect of some of the provisions of the Royalty Deed, which dispute is not relevant to the disposition of the issues in this trial, it is not in dispute that pursuant to the terms of the Royalty Deed, Vango is required to pay a royalty in respect of any gold mined or collected from the tenements. The royalty is to be calculated as a percentage on each ounce of gold according to the US price for gold, capped at $2,000,000.[62]
20. In performance of its obligations pursuant to the terms of the Sale Agreement, Zuleika transferred 100% of its shares in Dampier Plutonic to Vango. On or about 23 August 2016, Vango became the registered shareholder of 100% of Dampier Plutonic. Since that time Vango has been the holding company of Dampier Plutonic.[63]
21. Despite the sale of Dampier Plutonic, Mr Carson, Ms Guo and Mr McInnes continued to discuss how Zuleika and Vango would jointly develop the K2 deposit and also discussed how Zuleika could farm back in (an interest into the K2 mine).[64]
22. In October 2016, Northern Star assigned its interest in the Ore Treatment Agreement to Billabong.
23. On 1 November 2016, Mr McInnes (on behalf of Vango) and Mr Carson and Ms Guo (on behalf of Zuleika) signed a debt funding memorandum stating the joint intentions of the companies to develop the K2 mine under a Joint Venture which provided:[65]

Under the K2JV arrangements, Dampier is exclusively responsible for procuring a Gold Loan or Debt Finance up to an amount of circa A$10M to provide the funding required for the development of the K2 Gold Mine.

The joint venture parties will provide the Financier with the necessary technical, financial and corporate information required by the Financier to undertake its due diligence on the K2 Project and the Companies, as may be required to support any offer for the provision of a Gold Loan or Debt Finance

1. On 14 December 2016, Zuleika, Vango and Dampier Plutonic executed a heads of agreement in which Zuleika agreed to finance up to $3 million or 50% of the capital cost (whichever is the lesser) for the development of the K2 deposit in exchange for up to 50% net profits derived from production from K2 for the life of the mine.[66] Because Zuleika was required to have a project as an exploration company, it could not enter into a net profit sharing agreement and needed to farm back an interest in the K2 area.[67]
2. Consequently, the agreement to jointly develop the K2 deposit was renegotiated. On 17 January 2017, Zuleika, Vango and Dampier Plutonic signed a new heads of agreement whereby it was agreed that Zuleika may contribute up to 50% of the CAPEX or $3 million for the development of the K2 mine in exchange for up to a 50% equity interest in the Tenement comprising the K2 mining project.[68]
3. After the heads of agreement was signed, Mr Carson continued to have discussions with a funder to raise funds to develop the K2 mine.[69]
4. On 29 March 2017, Vango announced to the market that it had received all approvals to commence construction and commissioning for its dewatering program, plant and infrastructure was currently being mobilised on a site ahead of an eight day establishment and commissioning period, and dewatering would commence with a 65 day pumping program which would be completed in the June quarter of 2017.[70]

3.2 The parties enter into the BTS Agreement on 12 May 2017

1. On 12 May 2017, Zuleika, Vango and Dampier Plutonic signed the BTS Agreement.

4.0 Issue 1 - Whether, on a proper construction of the BTS Agreement, the plaintiff earned any Joint Venture Interest and, if so, what percentage was earned‑in

4.1 The construction of the Binding Terms Sheet - General legal principles

1. The general principles applying to the construction of contracts were summarised by the Court of Appeal in Electricity Generation and Retail Corporation trading as Synergy v EIT Kwinana Partner Pty Ltd as follows:[71]

The principles applicable to the construction of written contracts established by the High Court are well known. They were outlined in this Court in Black Box Control Pty Ltd v TerraVision Pty Ltd and in Sino Iron Pty Ltd v Mineralogy Pty Ltd. Those principles include the following:

(a) The construction of a contract involves a determination of the meaning of the words of the contract by reference to its text, context and purpose. The starting point for the proper construction of a clause is the language used in the clause. In particular, one starts by identifying the possible meanings that the words chosen by the parties can bear;

(b) The process of construction is objective. Ascertaining the meaning of terms in an instrument requires a determination of what a reasonable person would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract, and the commercial purpose or objects to be secured by the contract;

(c) The commercial purpose or objects sought to be secured by the contract will often be apparent from a consideration of the provisions of the contract read as a whole. Extrinsic evidence may nevertheless assist in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding of the genesis of the transaction, its background, the context and the market in which the parties are operating;

(d) The instrument must be read as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed to have some operation; and

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

As the above summary of the general principles makes clear, the objective meaning of the words of a contract must be determined by reference to its text, context and purpose.

The starting point is, of course, the language (or text) itself. That is why, if the words used are unambiguous (that is, one open to only one meaning) the Court must give effect to them.

The principles recognise, however, that where the language, as a whole, is capable of more than one meaning, text and purpose can, on occasion, pull in different directions. It may be that, depending upon the circumstances, 'the most obvious, or the most grammatically accurate' meaning of the words of a text will give way to the evident commercial purpose and object of the instrument as a whole.

1. In this matter, parties agree that the proper construction of the clauses of the BTS Agreement that are at the heart of the dispute require a consideration of the commercial purpose of, or objects to be secured by, the BTS Agreement.
2. Zuleika contends that if the construction put forward by the defendants, that for Zuleika to earn any interest in the Joint Venture at all it had to contribute a minimum of $3 million to Expenditure, is accepted, this would result in a commercial absurdity. For the reasons that follow, I agree Zuleika's submission is correct.
3. As set out above, commercial commonsense is a topic upon which reasonable minds may differ. To this principle, the Court of Appeal in Recce Pharmaceuticals Ltd v Brown recently added:[72]

As to the respondent's argument that Recce's construction was not 'commercial', it should be remembered that while a commercial instrument ought to be construed so as to avoid it making commercial nonsense or working commercial inconvenience, commercial common sense is a topic on which reasonable minds may differ and in respect of which an imputed consensus may be impossible. For that reason alone the court should be careful before departing from the natural meaning of a provision merely because it might be thought to conflict with notions of commercial common sense. The court must also be astute not to confuse commercial common sense with each party's differing commercial interests - the latter often informing the parties' respective contentions as to what is or is not a construction that produces a commercial result.

The limits of commercial common sense as a guide to construction were described by Gibbs J (as his Honour then was) in a well-known passage in Australian Broadcasting Commission v Australasian Performing Right Association Ltd:

If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate'...

Accordingly, commercial purpose - as perceived by the court - cannot override the words of the instrument where those words are clear. The court is not able to disregard clear words. Nor, under the guise of construction, may the court re-write an instrument.

1. It is well established that the terms of a commercial contract are to be understood objectively by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract. This requires that the reasonable businessperson be placed in the position of the parties and it is from that perspective that the court considers the circumstances surrounding the contract, and the commercial purpose and objects to be achieved by it.[73]
2. As to the relevance of admissible evidence that goes to surrounding circumstances, in Recce Pharmaceuticals Ltd v Brown the Court of Appeal relevantly pointed out:[74]

Identification of the purpose or object intended to be secured by a commercial instrument is to be inferred from the express or implied terms of the instrument and any admissible evidence as to the surrounding circumstances. It must be ascertained objectively, and is revealed by the text and structure of the instrument facilitated by an understanding of the genesis of the transaction, its background, the context and the market in which it operates, rather than being derived from any assumption about the desired or desirable reach of the operation of the relevant provisions.

4.2 First part of Issue 1 - During the Earn‑in Period, did the plaintiff earn any Joint Venture Interest in the Tenement?

1. Although the parties are in dispute about the proper construction of some of the material terms of the BTS Agreement, the following rights, entitlements and obligations conferred by the express terms of the BTS Agreement are not in dispute:

(a) the Joint Venture was formed on the date that the last of the parties executed the BTS Agreement (cl 1(a) and cl 26 definition of Commencement Date),[75] which was 12 May 2017;[76]
>
> (b) Zuleika may acquire an interest in the Tenement (defined as Mining Lease 52/183 (and other mining interests which do not apply)) and form an unincorporated joint venture in respect of the development of the Tenement (Joint Venture);[77]
>
> (c) Zuleika shall be the exploration manager of the Joint Venture and have the conduct of all of the exploration operations of the Joint Venture on behalf of the parties, subject at all times to the reasonable directions of the Joint Venture Committee (cl 5(a));[78]
>
> (d) the defendants shall be the development manager of the Joint Venture and have the conduct of all the development operations of the Joint Venture on behalf of the parties, subject at all times to the reasonable directions of the Joint Venture Committee (cl 5(b));[79]
>
> (e) the defendants shall conduct Joint Venture operations in accordance with programs, budgets and decisions made by the Joint Venture Committee (cl 5(c)(i));[80]
>
> (f) by cl 2(a), Zuleika agreed to contribute up to the lesser of 50% of the CAPEX (defined in cl 26 as the capital cost estimate for the development of the mine of the Tenement being, as at the Commencement Date $6 million, or such other amount as agreed in writing by the parties) or $3 million to the costs of the:[81] > > > (i) development of a mine on the Tenement;
> >
> > (ii) exploration for the mining of gold ore and its processing for the extraction of gold; and
> >
> > (iii) any other items, as agreed by the Joint Venture Committee; > >
>
> (g) in consideration for Zuleika's Expenditure, Zuleika shall earn a Joint Venture Interest (as defined in cl 26) equal to the lesser of Zuleika's Expenditure as a percentage of the CAPEX or 50% within two years from the Commencement Date (Earn-in Period) (cl 2(c));[82]
>
> (h) the sum of $245,239.78 that Zuleika had expended in relation to the Tenement prior to the Commencement Date shall be deemed to form part of Zuleika's Expenditure (cl 3(a));[83]
>
> (i) save for Zuleika's pre‑Joint Venture Expenditure, Joint Venture Expenditure should be made in tranches approved by the Joint Venture Committee with funds provided within 5 business days of the Joint Venture Committee's approval (cl 2(b));[84]
>
> (j) upon the proper construction of the BTS Agreement, Zuleika was not required to agree, and the defendants were not entitled to require Zuleika to agree, to vary the CAPEX from $6 million prior to the parties agreeing Expenditure, including Zuleika's expenditure;[85]
>
> (k) upon the expiry of the Earn-in Period or the issue of the notice by Zuleika to the defendants under cl 2(d) of the BTS Agreement, whichever occurs first, each party must contribute to expenditure made or incurred in respect of the Joint Venture in proportion to their then Joint Venture Interest, which expenditure must be authorised by the Joint Venture Committee (cl 3(b)). If a party does not contribute to the total Joint Venture Expenditure in accordance with its Joint Venture Interest, their Joint Venture Interest will dilute with the non‑contributing Joint Venturer's interest decreasing and the Joint Venture Interest of the other Joint Venturer increasing (cl 3(c));[86] and
>
> (l) on the Commencement Date, but immediately prior to the parties executing the BTS Agreement, the Joint Venture Interests of the parties were: Zuleika ‑ 0% and the defendants ‑ 100%.[87]

2. Zuleika pleads that the BTS Agreement included the following terms, each of which was implied as a matter of law:[88]

(a) each party has a duty to co-operate in progressing the Joint Venture;
>
> (b) each party has a duty not to prevent the fulfilment of the BTS Agreement; and
>
> (c) each party has a duty to all things necessary to enable each other party to have the benefit of the BTS Agreement.

3. It is common ground that Zuleika did not contribute to any costs incurred in connection with the activities of exploration, development and mining of the Tenement:

(a) within the meaning of Expenditure in cl 2(a) and cl 26 of the BTS Agreement, after the Commencement Date; and
>
> (b) within the Earn-in Period of the BTS Agreement (which period was to expire on 12 May 2019 but was extended by agreement to 12 November 2019).[89]

4. It is also common ground that the CAPEX (as defined in cl 26 and for the purposes of cl 2(a) of the BTS Agreement) was at all material times $6 million, and no other amount was agreed by the parties.
5. In light of these uncontradicted and established facts, and the forementioned pleaded matters which are not in dispute, the answer to the question posed in the first part of Issue 1 involves an issue of law only. This is whether Zuleika earned any Joint Venture Interest during the Earn‑in Period. The second part of Issue 1 only arises if Zuleika did earn an interest, and that is whether that interest was 4.1% or 11.87% of the Tenement.
6. The first part of Issue 1 concerns the proper construction of cl 1(a), cl 1(b), cl 2(a), cl 2(c), cl 2(d), cl 3(a) and cl 3(b) of the BTS Agreement.
7. At the heart of the competing constructions put forward on behalf of Zuleika and the defendants is the effect of the sum of $245,239.78 that is deemed Expenditure pursuant to cl 3(a).
8. The question is whether on the proper construction of these provisions, because Zuleika failed to contribute a total amount of $3 million to Expenditure in the Earn-in Period, it could not and did not earn any Joint Venture Interest in the Tenement.
9. Clause 1(a), cl 1(b), cl 2(a), cl 2(c), cl 2(d), cl 3(a) and cl 3(b) provide as follows:[90]

(a) Dampier and the DPPL Parties agree to form an unincorporated joint venture on signing this Term Sheet (Commencement Date) for the purpose of exploration and production from the Tenement on the commercial terms set out in this Terms Sheet and otherwise on terms and conditions acceptable to both parties (Joint Venture).

(b) On the Commencement Date:

(i) the initial Joint Venture Interests of the Parties will be:

(a) Dampier agrees to contribute up to the lesser of 50% of the CAPEX or $3,000,000 to the:

(i) development of a mine on the Tenement;

(ii) the exploration for and mining of gold ore and its processing for the extraction of gold; and

(iii) any other item, as agreed by the Joint Venture Committee,

(c) In consideration for the Expenditure, Dampier will earn a Joint Venture Interest equal to the lesser of:

(i) the Expenditure as a percentage of the CAPEX; or

(ii) 50%,

within the period that is two (2) years from the Commencement Date (Earn-in Period).

Following Dampier satisfying the Expenditure during the Earn-in Period, Dampier will be deemed to have earned the Joint Venture Interest and the DPPL Parties agree to the transfer of the Joint Venture Interest to Dampier, free from encumbrances, other than any Disclosed Encumbrance. To this end, the DPPL Parties agrees that it will provide Dampier with a duly executed transfer in respect of the Joint Venture Interest in the Tenement and such other documents as may be reasonably required by Dampier to enable Dampier to be registered as the legal and beneficial holder of the Joint Venture Interest in the Tenement. Until such time as Dampier becomes the holder of the Joint Venture Interest, the DPPL Parties will hold the Joint Venture Interest on trust for Dampier.

Without limiting the rights of Dampier under this clause 2, and subject to clause 2(c) Dampier may give a notice to the DPPL Parties at any time during the period which is 12 months from the Commencement Date requiring that the DPPL Parties transfer to Dampier a Joint Venture Interest within 7 days after the receipt of that notice. The DPPL Parties must then transfer a Joint Venture Interest to Dampier equal to the amount determined by dividing the amount then contributed by Dampier as Expenditure by the total CAPEX, expressed as a percentage. As an example, if Dampier has contributed $3,000,000 to Expenditure to that date and the total CAPEX to that date is $4,000,000, Dampier will be entitled to a maximum initial 50% Joint Venture Interest, with such Joint Venture Interest increasing if the DPPL Parties dilute under clause 3(c).

The Parties acknowledge and agree that the DPPL Parties owe Dampier the sum of $245,239.78 for monies expended in relation to the Tenements. The DPPL Parties agree that this amount is deemed to form part of Dampier's contribution of $3,000,000 to Expenditure and this deemed contribution is in satisfaction of amounts owing by the DPPL Parties to Dampier.

Upon expiry of the Earn-in Period or the issue of the notice by Dampier to the DPPL Parties under clause 2(d), whichever occurs first, each party must contribute to expenditure made or incurred in respect of the Joint Venture in proportion to their then Joint Venture Interest, which expenditure must be authorised by the Joint Venture Committee.

1. The starting point of the construction of these provisions is to identify the possible meanings that the words chosen by the parties can bear.[91]
2. The parties put forward two possible meanings about the proper construction of these provisions.
3. Zuleika contends that:

(a) pursuant to cl 3(a) of the BTS Agreement, immediately upon all parties executing the BTS Agreement, Zuleika was deemed to have contributed the sum of $245,239.78 it had expended in relation to the Tenement prior to the Commencement Date as part of its contribution to Expenditure, and points out that Zuleika's plea in par 12.10 of the Statement of Claim to this effect is not in dispute;[92] and
>
> (b) given that the deeming provision in cl 3(a) became operative immediately following the Commencement Date, being the date the last of the parties executed the BTS Agreement, Zuleika's deemed contribution to Expenditure was made during the Earn‑in Period. Put another way, the effect of cl 3(a) is that Zuleika had contributed the sum of $245,239.78 within two years from the Commencement Date which, pursuant to and read with cl 2(c), it had earned‑in a Joint Venture Interest.

4. Accordingly, on and from execution of the BTS Agreement, Zuleika argues the effect of these provisions is that it had an equitable interest in the Tenement, which it had earned during the Earn-in Period (which interest the defendants hold on trust for Zuleika, pursuant to the first paragraph of cl 2(d)).
5. The defendants claim that Zuleika's construction does not properly construe the bargain between the parties recorded in the BTS Agreement because Zuleika's construction ignores the express effect of cl 1(b) and relies upon a contention that, as at the Commencement Date, Zuleika had a deemed contribution to Expenditure and thus a Joint Venture Interest on the Commencement Date. This construction is claimed to be contrary to the operative effect of cl 1(b) which expressly provides that, as at the Commencement Date, Zuleika's Joint Venture Interest will be 0%.
6. The defendants argue that, although it agrees the sum of $245,239.78 formed part of Zuleika's contribution of $3 million to Expenditure pursuant to cl 3(a), that amount is not by itself Expenditure within the meaning of the BTS Agreement because no money was expended by Zuleika (during the extended Earn-in Period).
7. The defendants claim the operative effect of cl 1(a), when read with cl 3(a), is that the sum of $245,239.78 alone conferred no Joint Venture Interest on Dampier.[93] Consequently, the defendants argue that Zuleika earned no Joint Venture Interest within the meaning of cl 26.
8. The second part to the defendants' argument as to why they contend Zuleika earned no Joint Venture Interest during the Earn-in Period is that, pursuant to cl 2(a), Zuleika was required to contribute 'up to' the lesser of 50% of the CAPEX or $3 million to Expenditure (being the development of a mine on the Tenement, the exploration for and the mining of gold ore and its processing for the extraction of gold, and any other item as agreed by the Joint Venture Committee) and argue that the words, 'up to' acknowledge:[94]

(a) that any Joint Venture Interest capable of being earned (by Dampier) is capped at 50%;
>
> (b) the CAPEX can be decreased or increased by agreement by the parties. If the CAPEX is increased, Zuleika is still only obliged to contribute $3 million, but it will not earn‑in a 50% Joint Venture Interest; and
>
> (c) to earn‑in any Joint Venture Interest, Zuleika was obliged to contribute $3 million to the CAPEX and, irrespective of whether it was agreed by the parties to increase or reduce the CAPEX, unless Zuleika contributed $3 million in the Earn‑in Period, it did not earn‑in any Joint Venture Interest.

9. In essence, the defendants' argument must be that the words 'up to' qualifies the quantum of contribution to Expenditure by Zuleika by requiring Zuleika to contribute 50% of the CAPEX or $3 million, and if Zuleika contributes less than either 50% of CAPEX or $3 million it does not earn‑in any interest in the Joint Venture.
10. The defendants refer to cl 2(c) which relevantly reads: '[i]n consideration for the Expenditure, [Zuleika] will earn a Joint Venture Interest equal to the lesser of (i) the Expenditure as a percentage of the CAPEX; or (ii) 50%, within the [Earn-in Period]'. The defendants argue that cl 2(c), properly construed in the circumstances of this case, simply means if Zuleika contributes $3 million as Expenditure during the Earn‑in Period it will earn a 50% Joint Venture Interest but, cl 2(c)(i) only operates when the parties agree to increase the CAPEX from $6 million.
11. The defendants contend that their construction of the BTS Agreement is confirmed by the opening text of the first paragraph of cl 2(d) which reads '[f]ollowing [Zuleika] satisfying the Expenditure during the Earn‑in Period, [Zuleika] will be deemed to have earned the Joint Venture Interest ...'.
12. Thus, the defendants argue the Expenditure was always $3 million (no less). To 'satisfy' is to fulfil, and even on Zuleika's best case it does not suggest that it 'satisfied' the Expenditure amount of $3 million.
13. The third part of the defendants' construction argument is that, insofar as Zuleika relies on the second paragraph of cl 2(d) to allege it may by notice claim a proportionate (less than 50%) Joint Venture Interest, this part of cl 2(d) is expressly 'subject to clause 2(c)' and points to the fact that Zuleika gave no notice to the defendants requiring it be transferred a 4.1% or 11.87% Joint Venture Interest, and Zuleika purported to accept the defendants' alleged repudiation of the BTS Agreement without giving any such notice.[95]
14. Consequently, the defendants contend that the proper construction of the BTS Agreement was that the bargain between the parties and the consideration to be provided by the parties was clear and certain; $3 million for a 50% Joint Venture Interest. The defendants contend that Zuleika did not satisfy its share of the bargain so it receives nothing and, in these circumstances, Zuleika has lost the sum of $245,239.78.[96]
15. The defendants say that it necessarily follows that if their construction of the BTS Agreement is accepted, Zuleika's action must be dismissed and no issue of repudiation arises. This is said to be so because the extended Earn‑in Period expired on 12 November 2019, which prohibits Zuleika from relying upon its letter of demand from its lawyers dated 12 February 2020 in which it alleged it accepted repudiation of the BTS Agreement by the defendants and purportedly terminated the BTS Agreement, when in fact the BTS Agreement had come to an end on the expiry of the extended Earn‑in Period.

4.3 Disposition - First part of Issue 1 - The plaintiff earned in a Joint Venture Interest

1. The defendants contend that cl 3(a) of the BTS Agreement cannot operate, as Zuleika alleges, because this construction is inconsistent with the express term in cl 1(b) which does not state on the Commencement Day Zuleika's interest was 4.1% (or 11.87%) It states that Zuleika's interest was 0%.
2. The defendants' construction ignores the unambiguous obvious meaning of the language used in cl 1(b) when read together with cl 3(a), in particular the words 'initial Joint Venture Interests of the Parties' on the Commencement Date and the use of capitalisation of the word Expenditure in cl 3(a).
3. The commercially sensible and coherent reading of these clauses, when considered by regard to establish principles of construction of commercial contracts, is as follows.
4. First, the use of the words 'initial Joint Venture Interests', when read together with the words 'On the Commencement Date' in cl 1(a), when also read with the definition of Commencement Date in cl 26, must necessarily be read as the interests of the parties on the date the last of the parties executing the agreement which were the interests of those parties on the date the last of the parties signed the agreement and before the commencement of the Earn‑in Period. On that date, and immediately before the Earn‑in Period commenced, Zuleika's interest in the Joint Venture was 0%.
5. Second, as the defendants point out in their opening outline of submissions, the BTS Agreement is to be read in the ordinary way, from the beginning onwards, in the sequence in which it is written.[97] Clause 1 of the BTS Agreement establishes the formation of the Joint Venture and the terms that follow in the remaining agreement set out the commercial terms which were agreed to by the parties.
6. The deeming provision in cl 3(a) is one of the following commercial terms in cl 3 which operates to establish what are the amounts to be contributed by Zuleika as Expenditure during the Earn-in Period and following the Earn-in Period. The Earn‑in Period commenced on the coming into operation of the BTS Agreement and ended on 12 November 2019.
7. The defendants importantly do not submit that to earn‑in an interest in the Earn-in Period, Zuleika was to contribute the sum of $3 million in addition to the deemed Expenditure amount. They agree that Zuleika only had to contribute an amount of $2,754,760.30 in the Earn‑in Period because the sum of $245,239.78 is by operation of cl 3(a) deemed to form part of Zuleika's contribution to the $3 million Expenditure.
8. Consequently, the sum of $245,239.78 cannot be regarded as expenditure in a different sense than Expenditure. It is Expenditure for the purpose of earning‑in a Joint Venture Interest pursuant to cl 2(a) and cl 2(c).
9. The second part of the defendants' argument is when the BTS Agreement is properly construed, the parties' bargain was that Zuleika was to spend $3 million for a 50% Joint Venture Interest and no less.
10. The defendants say it necessarily follows that if the parties agreed to reduce the CAPEX, then under cl 2(a), Zuleika would have been obliged to expend only 50% of that reduced CAPEX (less than $3 million) to earn a 50% Joint Venture Interest under cl 2(c). However, if the parties agreed to increase the CAPEX, Zuleika would have been obliged to only expend $3 million (less than 50% of the CAPEX) to earn a Joint Venture Interest proportionate to the new agreed CAPEX under cl 2(c). In such a case, Zuleika could elect to expend 50% of any agreed increased CAPEX (more than $3 million) and would still earn only a 50% Joint Venture Interest. However, if at the expiry of the Earn‑in Period Zuleika had expended more than 50%, the defendants would have to contribute in proportion otherwise their Joint Venture Interest would dilute.[98] I agree that this construction of cl 2(a) and cl 2(c) is clear from the text and is a commercially sensible and coherent reading of cl 2(a) and cl 2(c) when having regard to the context and purpose of the BTS Agreement. However, it is clear that the amount required to be expended by Zuleika included the amount of deemed Expenditure as an amount it had already contributed during the Earn‑in Period.
11. I agree that it is clear from the text and the purpose of the BTS Agreement that at the time of entering the agreement, Zuleika knew (and a reasonable business person standing in the shoes of Zuleika would know) it would need to spend $3 million to earn a 50% Joint Venture Interest (unless it was agreed in writing that the CAPEX of $6 million was reduced to an amount below $6 million), and the defendants knew (and a reasonable business person standing in the shoes of the defendants would know) during the Earn‑in Period $3 million was intended to be expended by Zuleika on their Tenement for which they would be transferred a 50% interest.
12. When the terms of the BTS Agreement are properly construed, it is clear from the text and purpose of the BTS Agreement that Zuleika could have earnt‑in less than a 50% Joint Venture Interest by spending less than $3 million as Expenditure.
13. However, the defendants submit that if less than $3 million was contributed to Expenditure by Zuleika during the Earn-in Period, then the defendants as the asset holders are no worse off because the operative effect of these provisions is that they will maintain their whole interest in the Tenement, unless the parties have agreed to a reduced price for a 50% Joint Venture Interest by agreeing to a reduced CAPEX.
14. I do not agree. Zuleika properly points out, on the proper construction of cl 2(a) and cl 2(c) of the BTS Agreement, Zuleika would have earned a Joint Venture Interest provided that it has contributed some funds towards Expenditure within the Earn-in Period. The BTS Agreement expressly recognises a deemed contribution to Expenditure by Zuleika in the amount of $245,239.78, which deemed contribution took immediate effect upon all parties executing the BTS Agreement. That contribution clearly occurred within the Earn-in Period.
15. As Zuleika contends, the defendants' construction requires a meaning to be attributed to the words 'up to' in cl 2(a) that is commercially absurd and ignores the clear meaning of those words when read in context of cl 2. The words 'up to' qualify the maximum Joint Venture Interest, but not the minimum Joint Venture Interest that could be earnt by Zuleika in the Earn-in Period. The express language recognises that Zuleika agreed to contribute up to the lesser of 50% of the CAPEX or $3 million, the clear meaning of which is that it could contribute less than either and still earn‑in a Joint Venture Interest. Thus, there is no minimum amount that the plaintiff was required to contribute in order to be become eligible to earn a Joint Venture Interest.
16. This is because cl 2(a) must be read with cl 2(c)(i) which contemplates that if the parties do not agree to increase or decrease the CAPEX, in consideration for Expenditure actually expended by Zuleika (which the parties agree includes the sum of $245,239.78, pursuant to cl 3(a)), Zuleika was to earn a Joint Venture Interest equal to Expenditure as a percentage of the CAPEX within the Earn-in Period.

4.4 The second part of Issue 1 - Did the plaintiff earn‑in a Joint Venture Interest of 4.1% or 11.87%?

1. The question raised in the second part of Issue 1 is whether, on the proper construction of the BTS Agreement at the end of the (extended) Earn‑in Period, Zuleika was deemed to earn‑in a Joint Venture Interest calculated not by dividing the deemed Expenditure amount of $245,239.78 by the agreed CAPEX amount of $6 million, but by the actual total amount expended on CAPEX. The actual total amount expended on CAPEX, Zuleika says, is the actual cost of amounts expended in connection with the activities of exploration, development and mining of the Tenement (by the defendants) including the K2 area (within the meaning of cl 26) during the extended Earn‑in Period.
2. The resolution of this part of Issue 1 turns first upon the proper construction of cl 1(b), cl 2(a), 2(b), 2(c) and the second paragraph of cl 2(d); and second whether the second paragraph of cl 2(d) requires Zuleika to give notice to the defendants within 12 months of the Commencement Date. Zuleika argues that in the absence of notice it would be commercially absurd not to account for amounts expended on work and activities that were properly costs for the purposes of the definition of Expenditure in cl 26 that Zuleika was responsible to contribute to during the Earn‑in Period. For the reasons given below, I do not agree.
3. However, if notice is not required to be given within 12 months of the Commencement Date, only then does a question of fact arise as to whether there is sufficient evidence before the court as to the actual cost of CAPEX expended in connection with the activities of exploration, development and mining of the Tenement by the end of the extended Earn‑in Period.
4. Zuleika pleads:

(a) upon the proper construction of the BTS Agreement, Zuleika will be deemed to have earned a Joint Venture Interest equal to the amount determined by dividing the amount contributed by Zuleika as Expenditure by the total CAPEX expenditure incurred as at the date the defendants are required to transfer a Joint Venture Interest to Zuleika;[99]
>
> (b) upon the expiration of the extended Earn-in Period, the total CAPEX expenditure incurred to that date was a sum no greater than $2,065,376. The Tenement Register records that $2,065,376 has been expended on the Tenement for the years 2017 to 2019;[100] and
>
> (c) in the premises, upon the expiration of the extended Earn‑in Period, Zuleika acquired an 11.87% Joint Venture Interest (rounded to the nearest decimal place) and was, and is, entitled to be provided with a duly executed transfer to enable it to be registered as the legal and beneficial holder of 11.87% of the Tenement.[101]

5. The Earn-in Period, as extended, expired on 12 November 2019.
6. Zuleika pleads that, as at 12 November 2019, the position as to Expenditure was as follows:

(a) Zuleika's contribution to Expenditure was $245,239.78; and
>
> (b) the total actual CAPEX expenditure was a sum no greater than $2,065,376.[102]

7. Zuleika argues that on the proper construction of the BTS Agreement, subject to the restrictions set out in cl 2(c), Zuleika's Joint Venture Interest is to be assessed by dividing the amount contributed by Zuleika as Expenditure by the total CAPEX expenditure actually incurred (by the defendants) in respect of the Tenement as at the relevant date of assessment of the plaintiff's interest. Accordingly, upon the expiration of the Earn-in Period, as extended, Zuleika acquired an 11.87% Joint Venture Interest in the Tenement.
8. The Mining Tenement Details Report relied upon by Zuleika[103] records the minimum expenditure required by the Tenement holders, (the defendants) for all of the defendants' tenements in the Marymia‑Plutonic Greenstone Belt area was, from 2017 to 2021, $90,300. Additionally, the amount expended on exploration activities and the total amount expended on all expenditure (being exploration activities, rent/rates and administration) in the calendar years for:[104]

(a) 2017 was $457,099 for exploration activities and the total amount of all expenditure was $505,259;[105]
>
> (b) 2018 was $943,887 for exploration activities and the total amount of all expenditure was $1,018,514; and
>
> (c) 2019 was $492,207 exploration activities and the total amount of all expenditure was $541,603;

being a total of $1,893,193 spent on exploration activities and a total of $2,065,376 expended on all expenditure.

1. The defendants plead in par 21B of their Defence that during the Earn‑in Period, if approved by the Joint Venture Committee, Zuleika, as exploration manager for the Joint Venture, would have been responsible for preparing and performing exploration activities pleaded in par 21A of the Defence (being exploration activities which would been required to be completed before the Tenement could be developed to be a commercial gold producing operation). Importantly, the defendants in the opening outline of submissions concede that on the face of it, the defendants breached cl 5(a) and cl 5(c)(i) of the BTS Agreement by carrying out these exploration activities by themselves, but argue that in all the factual circumstances these breaches did not constitute a repudiation of the BTS Agreement.
2. Leaving aside the issue of breach and repudiation, it is clear for the reasons given below, that during the Earn-in Period, the defendants carried out exploration activities which, pursuant to cl 5 of the BTS Agreement, were activities that Zuleika was to conduct.
3. Senior counsel for Zuleika, in oral submissions, pointed out that the period of the extended Earn-in Period was shorter than the three calendar years from January 2017 to December 2019 (being from 12 May 2017 until 12 November 2019).[106] Consequently, the actual CAPEX would have been less and, if less, then Zuleika would be entitled to a greater Joint Venture Interest than 11.87%. However, Zuleika accepts it cannot prove the actual figure, and the best evidence the court has of the Expenditure is the official mining reports created by the defendants. Senior counsel for Zuleika also pointed out that the figure of 11.87% claimed by Zuleika does not operate to the disadvantage of the defendants.[107]
4. Senior counsel for Zuleika put an argument that Zuleika earned‑in a 11.87% Joint Venture Interest on the basis that:[108]

(a) cl 2(d) allows Zuleika to, at any time during the 12 months from the Commencement Date, bring the Earn-in Period to an end and calculate Zuleika's Joint Venture Interest by the actual CAPEX expended as at the date the Earn-in Period was bought to an end, and move into the expenditure period of the Joint Venture provided for in cl 3, where the parties have to contribute to expenditure pro rata, and if not their respective interests will be diluted; and
>
> (b) if notice is given one day short of the one-year period, the total CAPEX was $2 million and Zuleika had expended $950,000, Zuleika would then earn‑in a Joint Venture Interest of 47.5%. But, if no notice is given and at the end of the two-year Earn-in Period the total CAPEX is $2.1 million and Zuleika had expended $1.050 million and if its Expenditure was to be divided by the $6 million agreed CAPEX figure (not $3 million provided for in cl 2(a)), Zuleika would only earn‑in a Joint Venture Interest of 17.5%.

4.5 Disposition - The second part of Issue 1 - The plaintiff earnt‑in a Joint Venture Interest of 4.1%

1. This construction of the BTS Agreement as put by Zuleika is not open. The second paragraph of cl 2(d) only has operative effect if notice is given within 12 months from the Commencement Date. The parties appear to agree on the construction of the second paragraph of cl 2(d).[109] However, no notice was required to be given by Zuleika at the end of the Earn-in Period for its contribution to Expenditure to vest as a Joint Venture Interest.
2. Clause 2(b) specifically contemplates that, upon the expiry of the Earn‑in Period or the issue of the notice by Zuleika to the defendants under (the second paragraph) cl 2(d), within 12 months from the Commencement Date, the defendants were to transfer a Joint Venture Interest to Zuleika equal to the amount Zuleika had contributed as Expenditure (by the date of the notice) in order to enable it to be registered as a legal and beneficial holder of the Tenement in the amount of the Joint Venture Interest.
3. The second paragraph of cl 2(d) created an option for Zuleika to bring the Earn-in Period to an end prior to the expiration of the period prescribed in cl 2(c) (2 years from the Commencement Date) and by that notice the defendants would be required to transfer to Zuleika the interest in the Tenement it had earned‑in.
4. It is not until either:

(a) notice is given within the 12 month period; or
>
> (b) until the expiry of the Earn-in Period;

that, pursuant to the first paragraph of cl 2(d), Zuleika is deemed to have earnt‑in a Joint Venture Interest. It is at that point in time that the Joint Venture Interest of Zuleika is to be calculated on the basis of the amount it contributed as Expenditure, which amount includes the deemed Expenditure sum of $245,239.78, and which deemed sum is to be divided by the CAPEX.

1. In the absence of any notice given to the defendants to earn‑in a Joint Venture Interest during the Earn-in Period, the contributions to Expenditure by Zuleika, being only the deemed Expenditure amount of the sum of $245,239.78, is to be calculated pursuant to cl 3(a) by the formula in cl 2(a) and cl 2(c).
2. Zuleika's Joint Venture Interest is pursuant to the terms of the BTS Agreement $245,239.78 divided by the CAPEX amount of $6 million.
3. Thus, upon the expiration of the Earn-in Period, Zuleika was deemed pursuant to the first paragraph of cl 2(d) to have earned in a Joint Venture Interest of 4.1%, and it was and is entitled to be provided with a duly executed transfer in respect of its 4.1% Joint Venture Interest in the Tenement in order for it to be registered as a legal and beneficial holder of the Tenement.

5.0 Issue 2 - Whether the defendants breached the terms of, and wrongly repudiated, the BTS Agreement

5.1 Events that occurred after entering into the BTS Agreement

5.1.1 The formation of the Joint Venture Committee and the respective parties' responsibilities as exploration manager and development manager

1. One of the express terms of the BTS Agreement was that on the Commencement Date, pursuant to cl 4(a), the parties would form a Joint Venture Committee which would comprise of two representatives from Zuleika and two representatives from the DPPL Parties (defined in cl 26 as Vango and Dampier Plutonic).[110]
2. Mr Carson informed Mr McInnes that he and Ms Guo would be the Joint Venture Committee representatives for Zuleika.[111]
3. The main functions of developing the Tenement were separately and individually divided between the parties (subject at all times to the reasonable directions of the Joint Venture Committee).
4. Pursuant to cl 5(a), Zuleika was to be the exploration manager of the Joint Venture,[112] and have the conduct of all of the exploration operations of the Joint Venture on behalf of the parties, subject at all times to the reasonable directions of the Joint Venture Committee.
5. Pursuant to the cl 5(b), the defendants were to be the development manager of the Joint Venture and have the conduct of all the development operations of the Joint Venture on behalf of the parties, subject at all times to the reasonable directions of the Joint Venture Committee.
6. Clause 4(d) provided that the Joint Venture Committee was to meet at least every three months and, pursuant to cl 4(c), be responsible for:

(i) determining and approving the CAPEX (defined in cl 26 to mean the capital cost estimate for the development of the mine on the Tenement being, at the Commencement Date, $6 million, or such other amount as agreed in writing by the parties);
>
> (ii) determining and approving the Expenditure tranches of the CAPEX (Expenditure is defined in cl 26 to mean all costs incurred in connection with the activities of exploration, development and mining of the Tenement (as applicable), including the K2 Area);
>
> (iii) the preparation of mine plans and exploration programs;
>
> (iv) procuring management and operating personnel and contractors;
>
> (v) obtaining government approvals; and
>
> (vi) preparing budgets and project management (including maintaining the tenements in good standing).

7. In addition, cl 5(c) required the parties to conduct Joint Venture operations in accordance with programs, budgets, and decisions made by the Joint Venture Committee, and in accordance with accepted mining and exploration methods and practices.

5.1.2 The termination of the Ore Treatment Agreement by notice dated 24 July 2017

1. During the extended Earn‑in Period (between 12 May 2017 and 12 November 2019), Zuleika claims there were 12,[113] if not 14,[114] meetings of the parties which were meetings of the Joint Venture Committee. When Mr McInnes gave evidence, he stated that he was prepared to accept that there were two representatives from Vango present and these meetings were Joint Venture Committee meetings (as defined in the BTS Agreement).[115]
2. Pursuant to cl 4(a) of the BTS Agreement, the Joint Venture Committee was to comprise two representatives of Zuleika and two representatives of the defendants. Although each party only had one vote, there was no requirement for a quorum to require the presence of two representatives from each party.
3. The first meeting occurred on 21 May 2017, and the last on 17 May 2019.
4. When the first meeting was held, the relationship between the parties was cordial. Only Mr Carson and Mr McInnes attended this meeting. Mr Carson prepared minutes of this meeting which Mr McInnes subsequently signed. These minutes were the only minutes of any meeting between the parties that Mr McInnes signed. It is clear from these minutes that both Mr Carson and Mr McInnes were keen to progress the Joint Venture arrangements.
5. It is also clear that they were both keen to make arrangements to immediately progress the planned drilling program, approve the budgets, obtain necessary mining approvals from the Department of Mines, Industry Regulation and Safety (Department), and progress funding for a $6 million loan for working capital with an additional $10 million for a plant.[116]
6. The minutes taken by Mr Carson record the following discussion took place at this meeting:

BMc - Set up a camp at old airstrip, just north of Kl and K2 - capacity 10/12. Camp is being used by drillers for Trident drilling and guys working at Kl and K2.

A site visit was suggested on my return from China, early June.

Drilling program and budgets, Kl, K2 and K2 Satellites Drilling

Kl pit has significant assets - by lunch time tomorrow, have to decide to bring a second drill rig in (currently a rig at Trident = diamond). Recommendation is RC rig, to test 3-4 assets immediately south of K2 on mining leases. Kl is open at depth, therefore RC drilling is to be 80 to 100m.

K2 drilling, not much required for shallower ore - do need to drill out the deeper ore.

BMc preference is to go for the shallower stuff, delay de-watering K2 and refurbishment of decline, from cash flow. Doesn't want to drown Kl with dewatering so de-watering not commenced yet.

Water has dried out so can get rig in to test Kl. Suggestion is 1200 to 1500m of drilling will shore up the assets. Estimate is circa 50,000 to 100,000oz open pittable. BMc wants to bring rig in to test these assets. Have mining leases applied for by Barrick in 2006. By 4th of June will know if they are still current.

What want to do is use the mining approval for K2 to enable mining in Kl. Therefore, the argument is that Kl is an extension of K2 (therefore falls under K2 Farm-in Agreement). BMc believes that we can get the approval because DMP wants mining.

BMc meetings with DMP assist in smoothing the process, they are supporting.

Want to get 3 to 4 satellites that are adjacent to K2, in Kl and K2 satelites. Relatively high grade, i.e. ~5gms.

BMc is talking to Doray. Doray running out of ore and have surplus ore. Distance to Doray mine, is approximately 180km (TBC near to Meekatharra). MC transport will be expensive, probably close to a gram.

BMc - spoke with Chris Bradbrook on Friday afternoon. He has a lot of problems and there is an issue with FIRB. Corey Doust the mine manager has been running through high grade ore to show performance and will run out soon. They approached Three Rivers Station, to Hermes. The proposal to the family was to build a road across a flood plain which is shut down due to rain for 6 or more months a year.

They have not been drilling ahead to prepare for the exploitation of ore in about 12 months. They claim that making $4M a month - but they are a talking about a $10M float ?

BMc - Talking to PE group who are talking $6M in working capital + $10M for a plant. (need $15M).

$16M would be a plain vanilla loan - interest rate (groups out of Malaysia and Geneva). Chasing 15% interest all they want.

Balance of funding CAPEX, plant and pits to be from cash flow.

We will have to approve Kl drilling, and the surface drilling of the satellites near K2.

Drilling Program - to be completed within the next two days with the budgets. On receipt of the program, MC to begin to liaise with Dave and Dugdale (Dave does modelling, Dugdale is the exploration geologist). MC to oversee the programs presented and refine for review by and for approval of the K2 JV Committee on the K2 tenement (which includes Kl and the satellite bodies near to K2). (BMc will confirm roles with John and Dave)

(following meeting, spoke to the funding group who were pleased to see the announcement of the completion of the HOA and will revisit our proposal. Advised that there may be revisions and they confirmed will stand by)

1. The matters discussed at this meeting are important.
2. First, they show that, as at 21 May 2017, the defendants were complying with the terms of the BTS Agreement, in that Mr McInnes, as a representative of the defendants, showed a clear intention to co‑operate and facilitate the proper engagement of Zuleika in its role as exploration manager.
3. It is evident from the statements recorded in these minutes that it was agreed Mr Carson was to liaise with one of Vango's employees, Mr Jon Dugdale, Vango's chief consulting geologist, to oversee the drilling program and refine the program for review and approval of the Joint Venture Committee (which included K2, K1 and the satellite bodies near K2). In particular, it is clear that Mr McInnes acknowledged that Zuleika's role was to have the conduct of all the exploration operations of the Joint Venture on behalf of the parties.[117]
4. However, this co‑operation was short lived.
5. By a letter dated 12 June 2017, Mr Chris Bradbrook, a director of Superior Gold (the Canadian parent company of Billabong), raised a claim that the entering into the BTS Agreement triggered a requirement for an offer to be made to Billabong from the defendants, pursuant to cl 12.6 of the Ore Treatment Agreement, which if accepted would in effect confer on Billabong the right to earn‑in an interest in the Tenement on the same terms as Zuleika.[118]
6. The letter of demand by Superior Gold was directed also to Zuleika, even though it was not a party to that agreement. After the letter was received, Zuleika called a meeting to discuss the claim.
7. A consequence of Billabong's claim was that the relationship between the defendants and Billabong soured.
8. In addition, after Billabong made its demand, Vango made its position clear to Zuleika that it did not want to proceed with the Joint Venture to develop the Tenement with Zuleika. From this time on, Vango actively stonewalled and put in place obstructions to stop Zuleika from contributing to Expenditure in an attempt to stop it from earning‑in any interest in the Tenement.
9. The defendants from then on ignored Zuleika's role as exploration manager and in effect removed its ability to carry out its appointed functions as exploration manager by conduct which could be colloquially described as 'ghosting'; generally doing what it could to prevent Zuleika from having the benefit of the terms of the BTS Agreement.
10. On 25 July 2017, the parties met to discuss the Billabong claim. The meeting was attended by Mr Carson, Ms Guo, Mr McInnes and John Griffin from Vango. It was agreed by all present that the best course of action was to terminate the Ore Treatment Agreement.[119]
11. It appears, however, that Zuleika's agreement to terminate the agreement would in any event have been irrelevant because Mr McInnes had already prepared a letter, dated 24 July 2017, attaching a notice of termination to the effect that the Ore Treatment Agreement was to terminate on 25 October 2017, giving 3 months and 1 days' notice of termination.[120] In the letter of termination, Mr McInnes, on behalf of Vango, stated that it was Vango's view that the obligations under the Ore Treatment Agreement had not commenced, including the right of first refusal in cl 12.6, denying that Vango was in breach of the agreement.[121]
12. At the meeting on 25 July 2017, Mr McInnes told those present that 'the pre‑emptive right' sought to be exercised by Billabong 'was a major issue for them and for the Joint Venture and that we should tear up the joint venture and put in place a new agreement'. Mr Carson and Ms Guo did not agree.[122]
13. By this time it appears that the defendants had commenced drilling on the Tenement.[123]
14. The termination of the Ore Treatment Agreement and the breakdown in the relationship between the defendants and Billabong created a problem for the progression of mining gold from the K2 deposit because, as Mr Carson stated, it was his view the project could get up and running without its own treatment plant.[124] This did not mean the BTS Agreement had to come to an end. The defendants do not plead a defence of frustration.
15. It does appear, however, that the parties may not have intended to rely upon Billabong in the long‑term to process ore from the Tenement. Prior to the termination of the Ore Treatment Agreement, Mr Carson made enquiries to try and find a second‑hand ore processing plant that could be used to process ore from the K2 deposit.[125]
16. Following the termination of the Ore Treatment Agreement, Mr Carson considered that Zuleika and the defendants had four options to process ore from the K2 deposit. These were:[126]

(a) enter into a new ore treatment agreement with Billabong;
>
> (b) try to locate a substitute second‑hand ore processing plant;
>
> (c) identify an alternative small-scale processing plant; or
>
> (d) build a small-scale processing plant.

17. It was Mr Carson's opinion that the most logical and commercial options to process ore from the K2 deposit was to enter into a new ore treatment agreement with Billabong on similar terms to the previous Ore Treatment Agreement.[127] Mr Carson had discussions with Mr Bradbrook after the termination of the Ore Treatment Agreement which Mr Carson regarded as very encouraging because Mr Bradbrook indicated enthusiasm about negotiating a new ore treatment agreement.[128]
18. However, Vango would not agree.
19. It is Mr Carson's evidence that Mr McInnes told him that they (the defendants) would not deal with Billabong under any circumstance.[129] Ms Guo was present during this discussion. She gave similar evidence, and added that Mr McInnes insisted that the K2 joint venture should set up a brand-new processing plant. She told him that option was not commercial or economical.[130]
20. After the termination of the Ore Treatment Agreement, Mr Carson, together with Ms Guo, continued to look for a second-hand processing plant to treat ore mined from the K2 deposit, including visiting a second‑hand processing plant in New South Wales.[131] However, Mr Carson was unable to locate a suitable plant.[132]
21. Mr McInnes gave evidence to the effect that Vango's relationship with Billabong had broken down prior to the termination of the Ore Treatment Agreement. He said a dispute had arisen the night after Northern Star had assigned its interests in the Ore Treatment Agreement to Billabong in October 2016, when Mr McInnes met with Mr Bradbrook in Perth after the completion of the assignment of the agreement. Mr McInnes testified that Mr Bradbrook told him that 'their plant was full' and they would not have any ability to process any ore (from K2); they did not intend to honour the terms of the Ore Treatment Agreement.
22. Mr McInnes' evidence on this point must be treated with caution because no uncertainty in the adherence to the Ore Treatment Agreement in 2017 or 2018 was reported to the market.
23. In an ASX announcement on 14 February 2017, Vango reported on the Entech February 2017 K2 Update Report and its agreement with Zuleika to bring the K2 deposit into production, stating that the ore processing schedule was based upon delivered ore being processed when made available to the Northern Star Resources Plutonic Processing Plant, and referred specifically to the binding Ore Treatment Agreement with Billabong in positive terms.[133]
24. However, it does appear from Mr Carson's evidence that the parties may have been considering whether to purchase second‑hand plant prior to the termination of the Ore Treatment Agreement.

5.1.3 Vango begins to put in place steps to develop the Tenement without the involvement of Zuleika after the termination of the Ore Treatment Agreement

1. As set out above in 5.1.2, it cannot be disputed that after the Ore Treatment Agreement with Billabong was terminated by Vango, the parties' relationship deteriorated because Vango made its position very clear to Zuleika that it did not wish to comply with the terms of the BTS Agreement.
2. From this time onwards, Mr McInnes was not only very slow in corresponding with Mr Carson, but Vango began to put in place its own steps to explore and develop the Tenement without any involvement of Zuleika.
3. On 31 July 2017, Mr Carson sent an email to Mr McInnes to ask if it was possible to meet on 2 August 2017, but did not receive any response.[134]
4. On or about 17 September 2017, Mr Carson read a Vango investor presentation released to the market.[135] The investor presentation made the following statements about the development of the K2 deposit but made no mention of Zuleika, or its role as the exploration manager:[136]

• K2 Deposit, in the north‐eastern part of the Plutonic Dome Project, is the most advanced target - and the first deposit targeted for gold production
• K2 was previously mined by Resolute Mining in 1997 - a boxcut and decline were established that accessed the resource and continued for 1.4km
• K2 resource estimate: Indicated and Inferred 847kt @ 4.0g/t Au for 108,300 oz*
• Highly positive DFS update for K2 released February 2017^;
  • Pre‐tax NPV of $19m and IRR of 382%;
  • Estimated pre‐production capital costs of $6.4m;
  • Indicative cash cost of $907/oz (~$750/oz margin at current gold price);
  • Payback period 13 months; and
  • Total free cashflows $22.7m for initial two year mine life
• DFS includes approximately 50% of total resources at K2, and additional resources and reserves may be delineated in Vango's proposed drilling programs to expand mine life
• Development stages, to be initiated ASAP:
  1. Dewatering: of the K2 open pit into the non‐core K1 pit from Q4, 2017;
  2. Refurbishment: of existing K2 decline to allow drilling then development;
  3. Drilling: of additional resources / reserves to incorporate into mining schedule;
  4. Development: initially of upper levels, for stoping production from Q2 2018.
• Targeting gold production from 2018, subject to additional drilling, upgraded mine schedule, processing arrangements and final financing

^ The K2 DFS assessed the economic viability of underground mining methods to extract ore from the K2 Deposit. Details of the upgraded DFS are provided in ASX announcement of 14 February 2017. The original DFS was released 1 July 2014.

* This information was prepared and first disclosed under the 2004 JORC Code. It has not been updated to comply with the 2012 JORC Code on the basis that the information has not materially changed since it was last reported.

OP = open pit, UG = underground. Underground resources are reported above a 3.0 g/t Au cut‐off. Due to rounding, tonnages and grades may not equate to exact contained ounces; 100% equity basis.

1. However, Vango did make mention of its Joint Venture Agreement with Zuleika when it released its annual report for the year ending 30 June 2017, on 29 September 2017.
2. On 20 October 2017 (four days before a Joint Venture meeting), Vango released a statement to the market stating it had secured convertible notes totalling $1.5 million to help fund the next phase of the exploration and development of its hundred percent owned Plutonic Dome Gold Project. In the announcement, it spoke of a drilling program planned for 'the high grade Trident Gold Project', stated that development work was also planned to commence at the K2 deposit in the current quarter (to initially involve decline refurbishment and a dewatering program in preparation for additional resource drilling), and the commencement of mine development activities.[137] Again, there was no mention in this announcement of Zuleika or its role as the exploration manager of the Tenement.
3. Vango made other statements in 2018 to the market about its exploration activities of the K2 deposit in which it made no mention of the BTS Agreement or its obligations pursuant to the terms of the agreement.[138]

5.1.4 The defendants make repeated statements to the effect that they had not yet entered into a binding joint venture agreement with Zuleika

1. In its annual report, Vango repeated what it had stated in respect of the Entech February 2017 K2 Update Report in the investor presentation released on 19 September 2017, and also relevantly stated:[139]

Following the positive results of the DFS, in March 2017, the Company announced the commencement of the K2 development plan through the initiation of the dewatering programme. Vango have received all approvals to commence construction and commissioning for its K2 development plan, including the dewatering program, including the requisite works approval from the Western Australian Department of Environment Regulation (DER) and Mining Proposal from the Department of Mines and Petroleum.

Assessment of the dewatering options resulted in a review of the priority dewatering site, the K1 open pit, and an assessment that resulted in further drilling being proposed to sterilise the K1 option.

Assessment of the K2 resource has also led to a proposal to conduct drilling to convert additional resources to ore reserves in the upper levels of the development plan at K2.

The following stages of development will be commenced as soon as possible, targeting Q3/4 2017:

1. Dewatering: of the K2 open pit into the non-core K1 pit from Q3/Q4, 2017;
2. Refurbishment: of existing K2 decline to allow drilling then development;
3. Drilling: of additional resources / reserves to incorporate into mining schedule;
4. Development: initially of upper levels, for stoping production from Q2 2018.

In May 2017 the Company entered into a Binding Terms Sheet with Dampier Gold Limited (ASX: DAU) (Dampier) for Vango and Dampier to enter into a Joint Venture for the exploration and development of Vango's K2 Gold Deposit. Under the Terms agreed, and subject to a comprehensive agreement, Dampier may provide up to $3 million to fund the exploration, development and mining of K2, for the purpose of achieving gold production at K2 and forming a 50%:50% contributing joint venture.

1. Importantly, it is not pleaded by the defendants in their defence that the BTS Agreement was not binding, or subject to a condition precedent.
2. The statement in the annual report, released to the market on 29 September 2017 for the year ending June 2017, that the right of Zuleika to earn‑in a 50% interest in the Tenement was subject to a comprehensive agreement was an incorrect statement of the effect of the terms of the BTS Agreement. By the end of June 2017, Zuleika had the right to earn‑in a Joint Venture Interest in the Earn-in Period from the Commencement Date.
3. Clause 13 of the BTS Agreement expressly provided that the agreement was legally binding on the parties but that either party could notify the other in writing of an intention for a formal venture agreement to replace the terms of the BTS Agreement. As at 30 June 2017, Zuleika had not given notice in writing of an intention for a formal joint venture agreement to replace the BTS Agreement.
4. In any event, even if notice had been given by 29 September 2017, the BTS Agreement was binding on the parties. Even if a formal agreement was being negotiated, cl 13 of the BTS Agreement required that the terms and conditions contained in the BTS Agreement were to be embodied in the formal agreement.
5. Mr McInnes also stated in a meeting of the board of Vango on 8 January 2018 that the BTS Agreement was subject to negotiation.[140]
6. The claim that the BTS Agreement was not binding on the defendants, as it was subject to certain conditions, was also subsequently stated by Mr McInnes in a letter dated 13 March 2018 to Mr Carson.[141] In the letter Mr McInnes stated:[142]

In response to your email dated 20th February 2018 and following a meeting between Gilbert & Tobin and myself, I can make the following comments. With reference to your comments in relation to DAMPIER ADVISED

1. With respect to Dampier's frustration regarding the delay in finalising any potential Joint venture, Vango wishes to state that both parties were signatures to the TTA and are aware of any obligation due to third parties which need to be dealt with first.
2. Dampier may well have a funding agreement in place, however Vango is unaware of any evidence nor terms of such agreement.
3. Point 3 is dealt with as follows;

Vango and Dampier entered into a Head's of agreement in May 2017 which was subject to certain conditions precedent. Those conditions precedent were not met and therefore no Disposal has occurred under that heads of agreement.

Amongst other things, such conditions precedent would have necessarily included complying with the right of refusal obligations under the TTA.

1. When Mr McInnes was cross‑examined about what were the conditions precedent that would have necessarily included complying with the right of refusal obligations under the Ore Treatment Agreement, Mr McInnes said he was unable to recall what was in his memory at the time. When pressed he flippantly appeared to concede the statement he made at the meeting was 'sheer nonsense'.[143]
2. Irrespective of his evidence on this point, it is clear that Mr McInnes could have no rational explanation to explain the contention that the BTS Agreement was subject to conditions precedent, when clearly there were no conditions precedent, and no ambiguity in the terms of the agreement which could lead to such an inference being drawn.
3. Sean Zhou, the managing director of Vango, made the same claim in an email he sent to Mr Carson on 23 July 2018.[144] He claimed that the meeting that took place on 10 July 2018 was not a Joint Venture meeting because there was not a formal joint venture agreement in place and the parties were still negotiating.
4. The minutes of the meeting on 10 July 2018 taken by Mr Higginson record that Mr Carson and Ms Guo were present on behalf of Zuleika, and Mr McInnes and Mr Hepburn‑Brown attended on behalf of Vango.[145] The minutes also record that prior to the commencement of the Joint Venture Committee meeting:[146]

(a) there was a discussion about the claim made by Billabong and Mr McInnes tabled a document which set out certain information about exploration, milling and mining costs of K2, and the cost of building a processing plant and 100 man camp; and
>
> (b) Mr McInnes said since the Billabong issue was unresolved, there was probably no need to have the Joint Venture meeting but Mr Carson and Ms Guo insisted it go ahead.

5. At the next Joint Venture Committee meeting on 31 October 2018, Mr McInnes stated that Vango did 'not believe the meeting was a joint venture meeting, and the parties only have a term sheet'. When cross‑examined, Mr McInnes conceded what he said at this meeting was not correct and was untrue.[147]
6. On 9 May 2019, in an email to Mr Carson, Mr McInnes again stated that there was doubt whether a Joint Venture existed.[148]
7. The claim by the defendants that the BTS Agreement was not binding and subject to conditions precedent was conduct that can only be properly characterised as conduct that constituted a failure to make reasonable efforts to participate in the Joint Venture arrangements contemplated by the express terms of the BTS Agreement.

5.1.5 The defendants claim after the Ore Treatment Agreement was terminated 'other issues arose' which impacted on the parties' relationship and required that the parties renegotiate the CAPEX for Zuleika to earn‑in a 50% interest in the Tenement

1. When Mr McInnes was asked about the relationship the defendants had with Zuleika after the termination of the Ore Treatment Agreement, Mr McInnes said he continued to have discussions with Mr Carson about how they might try to move the development of the K2 deposit forward but, 'by this stage', there were other issues that were impacting on the relationship. When asked what those other issues were, he said:[149]

... in mid-2017 we had a further collapse of the western wall. So this was the second collapse that had occurred on that western wall. It actually closed off the old escapeway coming out the decline down at the foot of the pit. So my discussions with him started to revolve around, 'We need to look at an alternate access into the base of the mineralise zone or the commencement of the mineralise zone.' These - these discussions also centred around changes in costs that would be incurred, because our simplistic view of how we were going to start mining K2 did not exist anymore. It wasn't going to be simple.

1. When cross‑examined, Mr McInnes claimed that by the middle of 2017 the collapse of the western wall resulted in a material change to the ($6 million CAPEX) figure in the three Entech reports because it changed the integrity of the rock and earth that they were going to be dealing with.[150]
2. The effect of Mr McInnes' evidence on this point is that, because a collapse of the western wall of the open pit occurred by mid-2017, by mid‑2017 the two 2014 Entech feasibility study reports of the estimates of CAPEX of developing the K2 underground mine in year one (that were relied upon as forming the basis of the agreed CAPEX of $6 million in the BTS Agreement) could not now be relied upon. This, he claims, and the defendants claim, is the reason why the defendants subsequently sought to renegotiate a new figure of CAPEX that was to form the basis of Zuleika's right to earn‑in an interest in the Joint Venture.
3. It is clear that Mr McInnes' evidence about this issue is not credible.
4. Although it is clear that there was a collapse of the western wall of the open pit to the K2 deposit, the fact that it happened was not relevant to any of the discussions Mr McInnes had with Mr Carson. This is because the first collapse referred to by Mr McInnes occurred in 1990, well prior to the Tenements being acquired by Dampier Plutonic and well before the preparation of any of the Entech reports.
5. I do not accept Mr McInnes' evidence that he discussed with Mr Carson that they needed to look at an alternative access into the base of the mineralised zone, and that 'their simplistic view' of how they were going to start mining K2 did not exist anymore because of a further collapse of the western wall of the open pit.
6. It is Mr Carson's evidence that he does not recall any mention being made to him of any significant wall collapses during the term of the BTS Agreement.[151] Mr McInnes' evidence, that from the middle of 2017 it emerged that the cost of the commencement of mining of K2 had changed and Mr McInnes told him this, was not put to Mr Carson when he gave evidence.
7. More importantly, there is no mention in any of the relevant contemporaneous documents that passed between the parties of a collapse of the western wall of the open pit in the middle of 2017, or any anticipated change in the cost of refurbishment and dewatering of the K2 underground because of this event.
8. Also of importance, this evidence is inconsistent with the statements Vango made to the market in 2017 and 2018.
9. Mr McInnes conceded that, despite his view, he did not put any information out to the market about this issue because his opinion had not been substantiated (in 2017 or 2018) by any geologist or engineer.[152]
10. When then asked what steps, if any, he took to ascertain whether or not his opinion had substance, he said that they engaged a geotechnical report from (a geotechnical engineer employed by Entech), Mr Parrott.
11. When he was asked about what the result of Mr Parrott's report was, Mr McInnes said:

(a) studies indicated that the wall conditions were not as bad as what he thought but there was a possibility of a further collapse of the western wall on the southern end; and
>
> (b) he had hoped that the decline could still be used and he wanted to discuss the matter with Mr Hepburn‑Brown (who was a mining engineer) to get his views before they dramatically changed anything that they did.

12. In 2017 and 2018, Mr Hepburn‑Brown was employed as Vango's project manager and had responsibility for the implementation of the development plan to take the K2 deposit into production, including implementing a dewatering program for the K2 open pit and underground workings in preparation for mining activities, and refurbishing the K2 decline and additional resource drilling.[153]
13. However, Mr McInnes said when giving evidence that he did not speak to Mr Hepburn-Brown until early in 2018 or the middle of 2018 (about this matter) which was not long before Mr Hepburn-Brown died.[154]
14. If this was such an issue of significance to the method and cost of exploration and refurbishing the K2 decline, it can be inferred the matter would have been raised in mid‑2017 with Mr Hepburn-Brown, and it would have been a matter discussed with Mr Carson at one of the Joint Venture Committee meetings in 2017.
15. To the contrary, Mr McInnes' evidence on this point is directly contradicted by Mr Carson's minutes of the Joint Venture Committee meeting on 24 October 2017, the accuracy of which Mr McInnes does not dispute.[155]
16. Mr McInnes, Mr Hepburn-Brown and Mr Dugdale attended the meeting on 24 October 2017, as did Mr Carson.[156] Mr Carson took notes. At the meeting Mr Hepburn‑Brown stated that dewatering could be accomplished without refurbishing the decline, and provided information as to the method that would be used to target the base of the decline. Mr Dugdale provided information about a review of a new drill program. Mr Carson suggested setting out a template for future meetings and it appeared to be agreed by Mr McInnes that monthly meetings would be set with extra meetings if required.
17. It was also agreed at the meeting on 24 October 2017 that Mr Hepburn‑Brown would come back with a dewatering rate and costing, and Mr Dugdale would present with a proposed drill program (at the next meeting).
18. Importantly, in the minutes of this meeting there is no mention of a recent collapse of the western wall of the K2 open pit, or that there was a need to look at an alternative entry into the base of the mineralised zone.
19. In addition, Mr McInnes' evidence that in mid‑2017 they needed to look at an alternative entry into the base of the mineralised zone is not supported by the observations and opinions of Mr Parrott.
20. An assessment was made in March 2017 by Mr Parrott as to whether the dewatering activities of the underground area of the K2 deposit could have been accessed from the K2 open pit.
21. Mr Parrott wrote a letter report addressed to Mr McInnes containing site visit notes and photographs of his inspection of the walls of the open pit to the K2 deposit on 23 March 2017.[157]
22. In his letter report, he states that he was requested to provide a summary of a geotechnical review undertaken for the K2 pit and underground workings to access K2, and part of the scope of the work was to review the K2 pit in terms of geotechnical stability and serviceability for the purposes of re‑entry for undertaking dewatering activities.
23. In the letter report, under the heading 'K2 Open Pit SITE VISIT NOTES ‑ 23rd MARCH 2017', Mr Parrott stated:[158]

Vango Mining Ltd wish to re-establish access into the K2 pit for the purpose of undertaking dewatering activities to remove water stored in the base of the pit. Connection between the open pit and K2 underground workings exists, and removal of the water is required in order to regain access to the underground areas and recommence underground mining activities.

The main purpose of the visit was to undertake a geotechnical assessment of pit slope conditions within the K2 pit, with a view to access the pit via the recently reinstated ramp at the northern end. The main areas inspected during the visit centred around the western and south-western walls of the K2 pit.

1. In the letter report, Mr Parrott set out detailed observations about:

(a) the significant degree of weathering and erosion in several areas of the western and south‑western walls of the open pit,[159] and formed the opinion that, because of the degree of cracking, degradation and weathering along some parts of the walls, it was inevitable that there was likely to be further failures of the walls; and
>
> (b) there were several areas of localised instability which presented issues for entry into the pit.

2. In his letter report, Mr Parrott then went on to state his opinion about difficulties that would arise in re‑entering the pit for dewatering purposes as follows:[160]

Comments regarding re-entry into the pit for dewatering purposes.

Vango Ltd wish to re-enter the pit for placement of an electric submersible pump for dewatering operations. Access would be via a steep, single lane ramp at the northern end of the K2 pit. The time required to access the pit and place the pump and required electric cabling is ~1d or less.

Several concerning local (loose rocks) and large scale instabilities were identified during a site visit conducted on the 23rd March 2017, which present immediate safety issues for re-entering the pit, and were discussed in the prior section. These stability issues can be overcome, but potentially at significant cost and time to the company. While many of these areas appear quite unstable, it is worth noting that there are no visible, recent signs of instability or failure.

Unstable areas either side of the large slip present immediate safety issues. Discussions were held while onsite regarding the potential to remove them, however removal would be difficult (requiring drilling and blasting) and can quite often result in a poorer wall conditions and a reduced state of stability.

1. Mr Parrott set out in his letter report the remedial work to the pit that would have to be undertaken but importantly then opined that it was not necessary to dewater the underground mine from the open pit and that it would be cheaper and more feasible to access the underground for the purposes of dewatering from the K2 box cut and portal. In particular, he stated:[161]

The steps described above could work, however simpler, more economic and lower-risk options have been previously proposed by Shane Mcleay of Entech (2014). Mcleay (2014) proposed dewatering from underground, which could be achieved in approximately 2 months, advancing pumping infrastructure with rehabilitation work in the K2 decline. Access could then be regained to the bottom of the pit via a portal which has been historically established (but sits below the current water line). The existence of the portal was not known to the team at the time of the visit on 23rd March 2017.

Access via the K2 box cut is a more feasible, cheaper and safer option than attempting to regain access via the K2 pit.

1. The evidence of Mr McInnes is not directly supported in any material way by the evidence given by Mr O'Bryan, who is also a geotechnical engineer, who inspected the K2 pit and surrounding areas in March 2005, February 2007 and on 17 April 2020.
2. Mr O'Bryan prepared a technical memorandum of the K2 open pit wall stability conditions dated 21 November 2021.[162] Mr O'Bryan made similar observations to Mr Parrott.
3. In his report, Mr O'Bryan noted that his observations on 23 March 2005 were that, on average, wall stability conditions in the K2 pit were poor and that localised wall collapse had occurred at several locations, including a large failure on the upper west wall (Failure 3). He also assessed that further wall deterioration was inevitable.[163]
4. When Mr O'Bryan inspected the K2 open pit on 15 February 2007, he observed and opined that:[164]

(a) overall wall stability conditions were largely unchanged from those observed in 2005, although local rockfall and/or fretting from around previously observed significant failure and minor settlement of debris had occurred;
>
> (b) no additional significant wall instability had developed but several instances of local rockfall from lower batters (in fresh rocks) were evident; and
>
> (c) continued progressive wall deterioration was inevitable.

5. When Mr O'Bryan inspected the K2 open pit on 17 April 2020, he observed:[165]

(a) overall wall stability conditions on the eastern wall of the K2 pit were largely unchanged from those observed in 2007;
>
> (b) some of the expected further failure (wall deterioration) adjacent to Failure 3 on the southern sector of the west wall had occurred and there were obvious signs that further collapse/rockfall would occur from the area (Plate 13). He also noted that tension cracking was observed on the surface above Failure 3;
>
> (c) no end wall instability had developed; however, ramp access on the southern end wall had experienced significant gullying and was no longer safe to use. The ventilation drive adit on the northern end wall had been completely obscured by debris from ongoing fretting of the overlying batters; and
>
> (d) continued progressive wall deterioration was assessed to be inevitable.

6. In respect of the failure wall deterioration on the western wall, Mr O'Bryan stated it was not possible to identify the timing of local falls of ground which occurred in this sector between 2007 and 2020, but that degradation of stability conditions was expected in the area. Additionally, Mr O'Bryan noted that tension cracking on the surface was significant, and its location and trace on the surface suggest that the slope immediately south of the re‑excavated sector of the wall had relaxed.[166]
7. Mr O'Bryan made recommendations about the future open pit access and the work that needed to be undertaken for safe access if open pit mining was to occur, indicating that rehabilitation of the decline could be performed in concert with the dewatering operation of the underground.[167]
8. Mr O'Bryan also inspected the boxcut and decline portal briefly. He did not enter the decline of the boxcut but observed the boxcut walls were fundamentally stable and opined that access to the portal could be re‑established with a moderate amount of earthwork on the ramp and drainage from the surface to the portal.[168] Mr O'Bryan inferred that a substantial proportion of the initial leg of the decline to the boxcut would have to be developed in weathered ground, and the use of sprayed concrete support (shotcrete, as used at and immediately inside the portal) would have been required. He noted that the condition of reinforcing elements (rockbolts) was also unknown and opined that re‑establishment of decline access for operation would be slow, requiring testing of shotcrete thickness and quality, shotcrete adhesion (to the weathered rock mass), and assessment of the condition of the steel reinforcing elements installed in the decline. He observed that the existing decline profile was smaller than those typically adopted in current operations which, in his opinion, restricts flexibility, equipment selection, and likely compromises achievable productivity.[169]
9. Mr O'Bryan did not indicate in his report that dewatering of the underground could only be undertaken from the open pit. It is clear from his report that there is a lot of work to be done to bring the K2 deposit into production, including work to be done to the decline from the K2 boxcut. However, there is nothing in his report that supports a material change in the information known to Vango in mid‑2017 which rendered the Entech feasibility study estimates for developing the K2 Underground mine in year one to be unreliable.
10. In any event, none of the announcements made by Vango to the market in 2017 or in 2018 mentioned an increased costs of mining and development because of the collapse of a part of the western wall of the open pit of K2, or for any other reason.
11. To the contrary, in an investor presentation to the market in July 2018, Vango reiterated the estimated pre‑production capital cost of $6.4 million in the February 2017 K2 Update Report and described the report as highly positive.[170] The investor announcement also stated there had been no material changes to the forecast financial information derived from the production targets in that report.[171]
12. Also of importance, the Entech reports assessed the feasibility of mining the underground from the boxcut decline, not from the K2 open pit.[172]
13. The only mention of any problem with the wall which affected the mine plan in contemporaneous documents that passed between the parties was in an agenda Vango sent to Mr Carson and Ms Guo on 7 December 2018. Item 1 of this agenda referred to a proposed discussion at the next Joint Venture Committee meeting about updating the underground mine plan for the escape ways and ventilation shafts required by the Department due to 'instability of west wall'.[173]
14. Importantly, the minutes of the Joint Venture Committee meeting on 11 January 2019 which was the meeting that followed the provision of the agenda, there is no mention of any discussion about issues arising out of the instability of the west wall.[174] Further, and of importance, no discussion is recorded in these minutes about ground conditions.
15. It was not until approximately four weeks prior to declaring the BTS Agreement to be at an end did Vango make any ASX announcement suggesting that the pre‑production capital cost estimate in its 14 February 2017 announcement may no longer be reliable.
16. In its announcement to the market on 10 October 2019, in a chairman's update to shareholders, Mr McInnes stated:[175]

K2 Update. ... By any reasonable commercial assessment, the capital expenditure required for development, exploration, mining and processing at the K2 underground mine will be in excess of $20 million.

1. One of the fundamental difficulties with Mr McInnes' evidence is that the express terms of the BTS Agreement do not contemplate that the cost of bringing the K2 deposit into production would be no more than $6 million.
2. This amount was simply the agreed CAPEX for the purposes of Zuleika earning in a 50% interest in the Tenement during the Earn‑in Period. The agreed CAPEX of $6 million was based on the Entech estimates of expenditure for the first year. The June 2014 K2 Feasibility Report estimated the CAPEX for the first year as being $6,212,241, and $2,964,606 in the second year being a total of $9,176,847.[176]
3. After the expiration of the Earn-in Period, pursuant to cl 3(b) of the BTS Agreement, Zuleika and the defendants were required to equally contribute to Expenditure (all costs incurred in connection with the activities of exploration, development and mining) in proportion to their Joint Venture Interest, and if not, pursuant to cl 3(c), their interest would dilute.
4. For example, after Zuleika had earned in its 50% interest in the Tenement by contributing $3 million to Expenditure (and the parties had not agreed to vary the CAPEX amount of $6 million), if by the expiry of the Earn‑in Period the defendants had also spent $3 million on Expenditure, but an additional $14 million was required to bring the Tenement into production, Zuleika and the defendants would have to each contribute an additional $7 million if they each did not wish to dilute their interest in the Tenement.

5.1.6 Zuleika sends to the defendants a draft farm‑in and joint venture agreement in November 2017

1. On 14 November 2017, Mr Carson sent to Mr McInnes a draft farm‑in and Joint Venture Agreement, which Mr McInnes acknowledged receiving.[177] Mr Carson received no response.
2. On 10 January 2018, Mr Carson forwarded Mr McInnes another copy of the draft formal agreement.[178] Again, there was no response from Mr McInnes until after Mr Carson sent two emails in April 2018 in which he requested a response.
3. On 27 April 2018, Mr McInnes replied and stated he should have a response (to the draft farm‑in and Joint Venture Agreement) late the following week. Mr McInnes did not provide a response by that time. On 1 June 2018, Mr Carson sent another email to Mr McInnes seeking his response to the draft agreement. On 4 June 2018, Mr McInnes replied and said a response would be provided on 6 June 2018.[179]
4. On 6 June 2018, Mr Carson received a document containing a table setting out the defendants' substantive response to Zuleika's draft agreement and their proposed amendments.[180]
5. For the reasons that I give in [5.6] below, the defendants' proposed amendments were fundamentally inconsistent with the express terms of the BTS Agreement.

5.1.7 Meetings of the Joint Venture Committee in 2018 and attempts made by Zuleika to agree a budget for Expenditure for approval of its contributions to Expenditure, and for it to engage in exploration work on the Tenement

1. Although the parties agreed to meet monthly at the Joint Venture Committee meeting on 24 October 2017, the next meeting of the Joint Venture Committee did not occur until 1 February 2018.
2. Prior to the meeting on 1 February 2018, the board of Vango met on 8 January 2018. Mr McInnes, as the executive chairman, was present together with directors Mr Zhou and Carol Zhang. Also present was Vango's company secretary, Mr Ian Morgan. One of the items on the agenda was 'DAU and K2 arrangement for financing'. It is recorded in the board minutes under this item that:[181]

Bruce McInnes reported that the K2 Binding Heads of Agreement is subject to negotiation. Dampier Gold Limited (ASX: DAU) fund up to A$23 million for up to 50% (maximum). If DAU fund A$3 million of $7 million, they would earn 42.9% (3/7) interest.

Positions of Ms Hui (Annie) Guo and Mr Malcolm Carson were discussed. DAU's cash at June 2017 totalled A$ 3.1 million (September 2017 - A$ 2.8 million). Cash burn A$300,000 per quarter. DAU is also investigating a food export business (Aurigin Foods Pty Ltd). DAU's ability to fully complete an investment in K2 is considered doubtful., VAN to renegotiate potentially to allow small percentage. may May be 10% to 15% interest.

The Company's concern is whether DAU would meet A$ 3 million committed commitment.

1. On 11 January 2018, Mr McInnes sent to Mr Zhou a copy of the draft farm‑in and Joint Venture Agreement that Mr Carson had sent to Mr McInnes on 14 November 2017. Approximately 20 minutes later Mr Zhou sent the following response to Mr McInnes:[182]

Thanks for the email. I had a brief look at this documentation and found it is way too complicated than necessary. K2 project is too small to have over complicated management structure and decision making layers, as so proposed by Dampier in this document and I would like to get our people to significantly simplify it.

1. This proposed JV is restricted to K2 underground mining and K2 underground mining only. Any mention on any other Vango tenements is just not acceptable and could only create delays and confusion amount shareholders. I don't see Dampier putting any of their their assets on the line here if things go wrong, why should we?

2. VAN is 100% owner, we have the absolute sole decision making ability on everything about the JV, prior to DAU achieves 50% interest. We decide who to contribute and when to contribute to JV. We approve the budget and make the decision to mine. That's the only way to get this small project developed. We will keep them informed and consult their opinions, but we Vango will hold the deciding vote.

I suggest we go back to DAU directors with our desired version and give them till 30 Jan to decide. I am fine with not having them as JV partner after all...

1. When Mr McInnes was cross‑examined about what was said at the meeting of the board of Vango on 8 January 2018, he agreed that what was recorded in the minutes of the board meeting would be accurate but he claimed not to recall why he said that the BTS Agreement was subject to negotiation.[183]
2. He was then asked whether he recalled receiving the email from Mr Zhou on 11 January 2018, and he said that he did not. When asked whether he shared the views expressed by Mr Zhou in this email he said he did share those views.[184]
3. On 1 February 2018, Mr Carson and Mr McInnes met. Zuleika claims that this meeting was a Joint Venture meeting. Mr Carson wanted to speak with Mr McInnes about trying to accelerate the development of the K2 mine, which he considered seemed to be stalling.[185]
4. The meeting on 1 February 2018 was called by Zuleika to discuss funding alternatives for the K2 joint venture. Mr Carson made notes.[186] Mr Carson's notes record that he informed Mr McInnes that:

(a) (as previously discussed) Zuleika had secured debt funding in July 2017 from a third party funder for a gold loan, and that the funder had indicated its view that Zuleika was fundable whereas Vango was not; and
>
> (b) the funder was prepared to consider funding 100% of the project provided first ranking security could be provided over the Tenement and project assets.

5. Mr Carson presented to Mr McInnes a spreadsheet in which he had summarised Zuleika's understanding of Vango's financial position. Mr Carson's notes also record that he made an offer on behalf of Zuleika to complete arrangements for debt finance for Zuleika to go ahead to fund 100% of the development of the K2 deposit and for Vango to receive a royalty on production, which would equate to Vango's net financial position. Mr Carson recorded in his notes that Mr McInnes declined the offer.[187]
6. Mr Carson and Mr McInnes met again on 15 February 2018, together with Ms Guo. Mr Carson recorded what was said in that meeting in an email he sent to Mr McInnes on 20 February 2018.[188] The contents of the email records that the topic of conversation was the termination of the Ore Treatment Agreement and the claim being made against the defendants by Superior Gold on behalf of Billabong. In the email, Mr Carson set out the matters stated on behalf of Vango and the matters stated on behalf of Zuleika. Mr Carson recorded in the email that Vango was of the view that the only solution (to the situation with Billabong) was 'to tear up the Term Sheet and enter into a new arrangement'. When Ms Guo gave evidence, she said she could recall Mr McInnes repeatedly making this statement at the meeting.[189]
7. Another meeting on a date unknown in February or March 2018 may also have taken place between Mr McInnes, Mr Carson and Ms Guo at which Mr Carson and Ms Guo attempted to get the defendants to affirm the BTS Agreement.[190]
8. By a memorandum dated 16 February 2018, Mr Dugdale provided a summary and recommendation for approval by the board of Vango of a program and budget for the Trident tenement, K2 drilling, as well as the dewatering holes.[191] This internal memorandum was not provided to Zuleika or produced by Vango for consideration by the Joint Venture Committee. The total drilling costs stated in this memorandum for K2 were $511,250 and dewatering costs of $286,000, being a total of $797,250.[192] The work programmed to be performed at K2 was described in this memorandum as follows:[193]
   1. K2 (see Figure 2):

- A total of 6 RC holes and 6 RC Pre-collared diamond drillholes (12 holes) for at least 2,100m RC and 500m of diamond drillcore (2,600m).

- The drilling will test the upper zone (Zone 2) in specific areas to further define the resource and convert to Indicated, allowing additional reserves of >10,000oz to be defined.

- In addition, four holes will test for deeper extensions to the K2 resources, potentially extending high grade mineralisation at depth and confirming potential for an additional l00koz of resources.

- In addition, selected holes into Zone 1, potentially the K2 north open pit resource, including one to two oxide resource holes for confirmation and metallurgical purposes.

- Drill two dewatering bores to intersect the K2 decline at the base of development and install pumps and piping to dewater to the K1 open pit (check tailings disposal potential).

The drilling programme is planned to mobilise, weather permitting, the week of the 18th of February but may be delayed until the week of the 25th February.

1. In March 2018, Mr Carson sent a number of emails to Mr McInnes about a draft announcement to the market confirming the parties' commitment to the Joint Venture, but received no substantial response.[194]
2. On 13 March 2018, Mr McInnes sent an email to Mr Carson in which he made various complaints including complaints about Billabong's claim and claimed that Billabong had taken note of a caveat lodged by Zuleika over the Tenement and stated that 'Dampier is claiming a right to protect its interest due to the 12 May 2017 Heads of Agreement notified to the market' which had 'reinforced in Billabong's mind that indeed a "disposal" had occurred and therefore resulting in the insistence [by Billabong] that they can "step into" the 12 May 2017 term sheet in order to exercise their [first right of refusal]'.[195] Mr McInnes made it clear to Zuleika in this email that it was Vango's position that the BTS Agreement was subject to certain conditions precedent, including any first right of refusal under the Ore Treatment Agreement.
3. On 27 March 2018, Zuleika released an announcement to the market stating it was confirming its and Vango's commitment to the Joint Venture. In the announcement, Mr Carson stated on behalf of Zuleika:[196]

Following delays, Vango announced on 9 March 2018 the establishment of a 120 man camp and the commencement of pre‑development drilling at K2. In addition, Vango has acknowledged that it is in receipt of a draft formal joint venture agreement, prepared by Dampier's solicitors, and that it is willing to work towards a formal agreement acceptable to all parties.

Dampier is confident of securing its share of project funding and looks forward to working closely with Vango under the K2 mine Farm-in Joint Venture, which includes construction of the K2 Mine and the production of gold.

1. On 27 April 2018, Mr Carson had a brief email exchange with Mr McInnes about arranging a Joint Venture meeting the following week. However, the meeting did not take place.
2. Vango, however, did release an announcement to the market on 9 April 2018, in which Mr McInnes made the same statements that Mr Carson had stated on behalf of Zuleika in the announcement made on 27 March 2018.
3. By June 2018, Zuleika had sought the assistance of its lawyers to make a demand of Vango that it comply with the terms of the BTS Agreement.
4. On 6 June 2018, Mr McInnes provided a document that responded to Zuleika's draft of a formal Joint Venture Agreement provided to the defendants on or about 14 November 2017.[197] The defendants' response is dealt with below in [5.6] of these reasons.
5. By letter dated 19 June 2018 to Vango, Zuleika's lawyers stated that Vango had repeatedly breached and not complied with the terms of the BTS Agreement, and made the following demands on behalf of Zuleika:[198]

(a) Confirmation from Vango of its nominees to the Joint Venture Committee. Dampier's nominees are Malcolm Carson and Annie Guo;
>
> (b) A meeting of the Joint Venture Committee. This meeting is to take place no later than Friday, 29 June 2018 at 12pm at Level 25, 27 Bligh Street. The agenda for this meeting will be sent by Malcolm Carson in the week prior and will include confirmation of Dampier's rights to earn 50% in the K2 Project and its extensions, appointment of Dampier as exploration manager, a budget for exploration on the Tenement and other matters for consideration. Any additions by you to the meeting agenda can be added by providing notice to Mr Carson; and
>
> (c) Confirmation that the commercial terms as set out in the Binding Terms Sheet remain and that the only issues to be resolved in respect of the formal joint venture agreement include normal terms for inclusion in this form of document. A draft Joint Venture Agreement was provided by Dampier in November 2017.

6. By letter dated 28 June 2018, lawyers for Vango sent a letter to Zuleika's lawyers stating that, 'as your client is aware', the first draft of the formal Joint Venture Agreement is not acceptable to our client in its current form. The letter also stated that Mr McInnes would be on leave from 28 June 2018 until 5 July 2018, so Vango proposed to hold a meeting on 10 July 2018 and requested that an agenda be sent as soon as possible.[199]
7. On 28 June 2018, Mr Carson sent an email to Mr McInnes providing the following agenda for the next Joint Venture Committee meeting which Zuleika said should take place on 6 July 2018:[200]
   1. Nomination of Vango representatives to the JV Committee
   2. Appointment of Dampier as Exploration Manager
   3. Confirmation of Dampier's rights to earn 50% in the K2 Project and its extensions
   4. Confirmation of the commercial Terms set out in the Binding Terms Sheet
   5. Status of the formal Joint Venture agreement, reference to the November 2017 Draft presented by Dampier
   6. Other business
8. By letter dated 30 June 2018, Zuleika's lawyers sent a further formal agenda for a Joint Venture Committee meeting to Vango's lawyers.[201]
9. On 4 July 2018, Vango made an announcement to the market that it had agreed terms with sophisticated and professional investors to raise $5.1 million by issuing 28.3 million fully paid ordinary shares at $0.18 per new share to use the funds for planned exploration and development of Vango's 100% owned Plutonic Dome Gold Project, and for working capital.[202]
10. Despite Mr McInnes' evidence that by mid‑2017 the Entech feasibility CAPEX figures could not be relied upon because of changed ground conditions, the investor presentation released to the market in July 2018 to attract those investors relied upon the Entech February 2017 K2 Update Report and specifically stated that the forecast financial information derived from the production targets (in that report) continue to apply and had not materially changed since the disclosure provided in the announcement to the market on 14 February 2017.[203] In addition, under the heading 'Indicative Timelines and Investment Catalysts' and under the subheading 'K2', the investor presentation indicated the following work had been planned:[204]
    • Dewatering program - 2H 2018
    • Additional resource / reserve drilling including open pits - Q3 2018
    • Refurbishment of decline and commencement of underground ore development - 2H 2018 and/or
    • Open pit mining (e.g. K2 North) and alternative underground access - 2H 2018
    • Potential gold production from K2 from 1H 2019 (assuming toll treating or alternative processing option)
11. On 9 July 2018, Mr Carson sent to Mr McInnes a detailed agenda for the Joint Venture Committee meeting which, by this time, had been scheduled for the following day, which stated:[205]

Agenda Items presented by JV Partner and Exploration Manager, Dampier Gold (Dampier).

- Resource enhancement drilling (budget, timeline)

- Conversion resources to reserves (budget, timeline)

Vango to provide by 13th July, in relation to ML52/183 the following documents:

- Exploration, planned drill programs, budgets, contracts, time line and reports

- Metallurgical and geotechnical testwork, budgets, contracts, time line and reports

- Dewatering, planned program, budgets, contracts, time line and reports

- Decline refurbishment, planned program, budgets, contracts, time line and reports

- Mine development, budgets, contracts, time line and reports

- Ore treatment options, budgets, contracts, time line and reports

- Tenement status reports, status of works programs and approvals

- Access agreements, native title agreements, licenses and approvals

1. Prior to the meeting, Mr Carson prepared, with the assistance of Ms Guo, Helen Tang and Mr Higginson, a document titled 'Infill and Resource Enhancement Drilling, Dewatering, Refurbishment & Development Proposal & Budget K2 Joint Venture' (Zuleika's K2 Development Proposal and Budget).[206]
2. Part of Zuleika's K2 Development Proposal and Budget document was an updated work program and expenditure schedule in the form of a Gantt chart for developing the K2 mine with Zuleika's contribution. At the request of Mr McInnes, Mr Dugdale sent an email and a Gantt planning chart to Mr Carson on 27 July 2017. The Gantt chart was of activities by week for K2 production, assessing other options including K1, and a monthly budget taking K2 to stoping, and cash flow. The Gantt chart allowed for work on the K2 underground from July 2017 to March 2018 and costed the work of refurbishment, dewatering and drilling of K2 to be $2,380,190 and K2 underground development as $5,394,462 being a total of $7,863,152.[207]
3. The work program in Zuleika's K2 Development Proposal and Budget document covered dewatering and development of the decline, drilling the underground, appointing an underground mine manager, mine development, and stope production. An amount of $424,000 was allocated to exploration, $100,000 for dewatering, and $4,985,500 for refurbishment and development; a total of $5,509,500 with a contribution of $2,754,750 from Zuleika.[208] On the basis that under the terms of the BTS Agreement Zuleika was deemed to have already contributed $245,239.78 to Expenditure, if Zuleika was to contribute a further $2,754,750, it would have almost contributed $3 million dollars to Expenditure.
4. Two days prior to the meeting on 8 July 2018, Mr Hepburn‑Brown sent Mr McInnes and Mr Zhou a document by email which set out a draft of costs of mining and milling for the K2 deposit.[209] The draft costs document contained the following estimates:[210]

Milling Costs - Jon asked Como to send me the costs but I have not received anything, so I have used the Sedgman Costs.

Operating Costs - $43/t vs Toll Treating at Plutonic - $43/t.

Power Station - to be built and operated by third party

Open Pit - K2 North - $6m. This will produce 5,700ozs of gold (this is the old resource, no new drilling). It loses $1.5m

Underground Costs - Develop decline from K2 pit to the ore zone that we are drilling, 15,000ozs. (This 15,000 ozs depends on the current drilling results). This decline will cost $lm and recover 80% of 15,000 = 12,000ozs.

Rehabilitation of old Decline - 500m @ $2,000 per m = $lm

Ventilation Shaft - $2.5m. This depends on the ground conditions

I am not sure on the Dampier JV conditions, but to date we have approximately spent $1.5m on K2.

We will need $10.5m to commence mining on Open Pit and U/G Mining but will return 17,700ozs.

At $1600/ozs = $28m in revenue less costs of $10.5m + $1.5m = $16m profit

1. From this document it can be seen that, excluding the open pit of K2, the costs of developing the underground decline and rehabilitation of the decline, together with a ventilation shaft, was estimated to be $4.5 million. The document in this form was not provided to Zuleika.
2. The Joint Venture Committee meeting on 10 July 2018 was attended by Mr Carson, Ms Guo and Mr Higginson (by telephone) on behalf of Zuleika, and Mr McInnes and Mr Peter Hepburn‑Brown on behalf of the defendants.
3. Prior to the commencement of the Joint Venture Committee meeting on 10 July 2018, during a general discussion about the Billabong claim Mr McInnes tabled an edited version of the document prepared by Mr Hepburn‑Brown.[211]
4. After the meeting, Mr Carson asked Mr Higginson to prepare draft minutes, to which Mr Carson made some amendments before sending a copy of the minutes to Mr McInnes on 12 July 2018.[212] The defendants did not produce their own minutes of this meeting.
5. The minutes record that prior to the commencement of the Joint Venture Committee, there was a discussion about the K2 costs memo produced by Mr McInnes and the milling costs which were raised due to the issues with Billabong. The minutes record that Mr Carson said the Sedgemen costing from several years ago of $42 million for a small processing plant was far too high. Mr Hepburn‑Brown agreed and stated that Vango had approached Como Engineering in Perth for an updated/sensible cost estimate. There was also discussion about the general costings being presented for the development of a possible K2 North pit which would eliminate 200m of decline ($6 million) and underground development and rehabilitation of the old decline.
6. The minutes record that Mr McInnes then said that since the Billabong issue was unresolved, there was no need to have the Joint Venture meeting. However, Mr Carson and Ms Guo insisted they go ahead with the Joint Venture meeting.
7. The minutes record the opening of the meeting at 11.10 am and closed at 12.15 pm. During that period of time the following discussion occurred in respect of each of the items on Zuleika's agenda.
8. The first item of business was the 'Project Status'. The minutes relevantly record the following discussion in respect of this item:

The rig was moved over from Trident and has drilled a 130m de‑watering bore which is to be cased and pumps installed to begin dewatering the K2 underground workings and the K2 pit. He was unable to confirm the cost of this bore.

Exploration drilling resulted air from an RC hole had forced a plug out of an old drill hole nearby which caused a 'reportable incident'. The drillers refused to continue to work in the area until all the old holes were properly mapped. Records of old holes are incomplete, so VAN has purchased high level satellite photography to identify the old grid lines. They then plan to walk those lines with a metal detector to locate the old holes and sealing plugs. It is safe to drill >5m from an old hole.

MC: Sought confirmation that the March 2018 Terrasearch program (initiated by MC) was the basis of the exploration program and that effectively no exploration work has been undertaken on K2 upto date and that the initial stage of this program was circa $200,000 and that no new met. test-work or geotechnical work had been undertaken.

PHB: Confirmed the above and informed the meeting that as per the K2 Cost sheet, it was estimated that a ~$1m was needed to be spent on exploration to complete test the K2 North pit area (shallow zone identified along the decline see figure), the two main zones' resource upgrade to reserves and to explore for extensions to the deeper zones. He also and agreed that metallurgical testing and geotechnical work was inadequate and needed updating and completing and that' therefore' it was not possible to complete a mine plan.

MC asked again in general, it appeared other than the de-watering bore, there hasn't been much work done on the K2 Project. BM and PHB confirmed this was the case and the drilling incident had stopped any drilling for the time being. PHB said this was the first time he came out of Victoria (where he resides) in 6 weeks, he couldn't do any work because he had skin cancer treatment on his left hand, where still was swollen and scarred.

MC: enquired about de-watering and the disposal of the water?

• the water can be disposed of in the K1 pit
• that a licence for water disposal has been obtained but that this will not be issued until a pilot test program on the new bore was completed and approved
• Dewatering will be managed internally and will include installing a gen. set and pumps which will be turned on and off to ensure de-watering rates are managed so as not to dry out the underground workings too quickly which could cause collapses
• de-watering expected to completein 3 months

MC: noted that the K2 Project is initially driven by exploration, met and geotech test-work, followed by rehabilitation and mine planning and that this was how DAU had considered its budget for the contribution of $3M to its development.

• a 12-man camp was available
• drilling required to ascertain whether the K2 North open pit would be a better alternative to refurbishing the first 200m of the decline
• estimated 5,000 ozs in the K2 North open pit
• VAN is looking to expeditiously resolve problem of mapping holes
• current resources of 50,000 ozs at K2 which includes ~15,000 to 20,000 accessible from the upper reaches of the decline and circa 35,000 in the Western and Main Lodes (see fig above)
• worst case rehabilitation costs of the decline, $2,000 per m (i.e $1M)

1. The second item of business on the agenda was 'Information'. The minutes record that Mr Carson said Vango must by now have a comprehensive database containing key documents, and that this should be shared with Zuleika so it can refine its expenditure schedule and timeline. Mr McInnes said in response the database was a mess and that it needed to be brought into order. Mr McInnes, together with Mr Hepburn‑Brown, then discussed various data sharing options including email and Dropbox.
2. When Mr McInnes was cross-examined about if the documents sought by Zuleika at this meeting were subsequently provided to Zuleika, Mr McInnes claimed that the exploration, plan drill programs, budgets, contracts timeline and report documents were documents that should have been supplied by Zuleika to assist Vango to develop the K2 deposit, but then said that some of these documents were provided to Zuleika prior to 31 October 2018. He then conceded that he did not know whether any of the documents were provided after 31 October 2018.[213] When he was re‑examined about documents that he said should have been supplied by Zuleika, he said that these were the documents that the geologist in charge of the proposed drilling program would promote to the Joint Venture Committee. He also said in re‑examination that Zuleika were provided with a pro forma budget, an ordering plan and program budgets.[214]
3. The third item on the agenda was 'Dampier Budget'. Both Mr Carson and Ms Guo referred to the Gantt spreadsheet which set out the proposed expenditure schedule for Zuleika's $3 million contribution to the project and stated that on receipt of the latest information (as requested), Zuleika could update the schedule. Mr McInnes and Mr Hepburn‑Brown did not make any comments in response.
4. The fourth item on the agenda was 'J V Administration'. Mr Carson enquired about agreeing a budget and Mr McInnes stated that a budget could not be finalised until all data was available.
5. It was Mr Carson's evidence that the minutes of the meeting (set out above) are an accurate record of what occurred and was discussed at the meeting.[215]
6. Mr Higginson also gave evidence that these minutes were accurate.[216]
7. Mr McInnes gave evidence that he had no independent recollection of what occurred but, after having his memory refreshed by reference to the minutes, when cross‑examined he recalled some matters.[217]
8. When Mr McInnes was cross‑examined, he was asked to explain what was wrong with Zuleika's budget of how it intended to expend $3 million (taking into account the initial deemed contribution of approximately $245,000). In response, Mr McInnes claimed that a budget for drilling has to have attached to it numerous supporting documents to support a geologist 'application for us to give approval to it'.[218]
9. This evidence of Mr McInnes makes no sense because:

(a) Zuleika's K2 Development Proposal and Budget document that Mr Carson presented to Mr McInnes and Mr Hepburn‑Brown at the meeting on 10 July 2018 was based on, and had attached to it, the executive summary of a drilling program report addressed to Vango dated 10 March 2017. This drilling program report had been prepared by Mr Jenkins (a senior consulting geologist from a mining exploration geology and computing firm, Terra Search) at the request of Mr Carson, which report was paid for by the defendants;[219] and
>
> (b) the minutes of the meeting of 10 July 2018 record that Mr Hepburn‑Brown confirmed at the meeting that the Terra Search program was the basis of the costed exploration program (he had prepared).

10. Mr McInnes conceded, when cross-examined, that the Terra Search report was created without the involvement of Mr Carson or Zuleika, other than Mr McInnes authorising Mr Carson to approach Mr Jenkins to prepare the report.[220] Mr McInnes, however, claimed that Zuleika's K2 Development Proposal and Budget was a rehash of the Terra Search report which was out of date because it did not take into account changed ground conditions at K2.[221]
11. It is clear that this contention is not true. If the ground conditions at K2 had changed by 10 July 2018, it would have been reflected in Mr Hepburn‑Brown's costing document that he presented to the Joint Venture Committee meeting on 10 July 2018 and would have been the subject of discussion at the Joint Venture Committee meeting.
12. After Mr Carson had sent a copy of the final minutes of this meeting to Mr McInnes on 12 July 2018, on 23 July 2018 Mr Zhou sent to Mr Carson an email in which he referred to the minutes and claimed that no Joint Venture Committee meeting had taken place. In the email, Mr Zhou stated:[222]

I refer to your email dated 12th July 2018 to Bruce, following a meeting at Vango office on 10th July.

I am perplexed by the minutes purporting to be minutes of a JV meeting as there is at the present time, no formal JV agreement is in place and the parties are still negotiating.

From Vango perspective, the meeting took place in order to achieve two things:

1. To attempt to point out changes that need to be agreed to by DAU, in the proposal for a JV agreement which has been presented to Vango by DAU.

2. To inform DAU out of courtesy what is taking place around the K2 mine area.

1. K2 is not a priority 'one' target for mining start up, as costing on other areas for start up mining are more attractive to VAN.

2. During your discussion with Bruce, you requested a copy of the assignment of the Ore Treatment Agreement from NST to Billabong. In order to follow up on this matter as DAU was a signatory to that agreement, it would assist time wise if DAU could request such assignment directly from NST or Billabongs lawyers as it is your right to do so.

3. Please remember, VAN is trying very hard to help DAU and its shareholders to retain a position in the Plutonic area, in a way of developing a mutually beneficiary relationship for both parties.

1. At the Joint Venture Committee meeting on 10 July 2018, it was agreed to convene a further meeting on 24 July 2018. On 24 July 2018, one hour prior to the agreed meeting time, Mr McInnes notified Mr Carson and Ms Guo that he was unable to attend the meeting and it should be cancelled because he was in Brisbane. A meeting did go ahead after Mr Zhou attended. No other officers or employees of the defendants attended the meeting. Mr Carson, Ms Guo and Ms Tang attended the meeting on behalf of Zuleika. Minutes of the meeting were prepared by Zuleika. It was Mr Carson's evidence that the minutes were an accurate record of what occurred and what was discussed at the meeting.[223] His evidence on this point was not challenged.
2. The minutes of this meeting record that:[224]

(a) Mr Zhou stated that he came to attend the meeting purely as an observer and what he said in the meeting did not represent 'the company or board's position on this matter'; and
>
> (b) Mr Carson and Ms Guo made a number of complaints about Vango failing to: > > > (i) recognise that the BTS Agreement was binding;
> >
> > (ii) recognise that Zuleika is; pursuant to the terms of the BTS Agreement, entitled to 4.1% of the Tenement; and
> >
> > (iii) provide data and information as discussed at the meeting on 10 July 2018 so that it could refine its $3 million expenditure programs/schedule over the next 9 months.

3. On 31 July 2018, Vango released to the market its quarterly activities report for the period ending 30 June 2018. It highlighted it had completed a highly successful $5.2 million placement to accelerate its exploration at Plutonic Dome, with its debts position significantly reduced with $5.4 million debt to be converted to equity. The announcement also referred to an update on the proposed farm‑in Joint Venture for K2 gold deposit as a highlight, referring to the BTS Agreement as a binding terms sheet, but then said:[225]

Vango has previously acknowledged that it has received a draft formal Joint Venture Agreement from Dampier pursuant to the process outlined above in the Terms Sheet.

Vango advises that, in its current form, the formal draft Joint Venture Agreement submitted to it by Dampier does not represent terms agreeable to Vango, and on this basis it is currently not in a position to enter into a Joint Venure with Dampier for the K2 Mine Project under the terms presented in Dampier's draft formal Joint Venture Agreement.

The Company reiterates that it remains willing to work towards a formal agreement agreeable to all parties, and will continue discussions with Dampier on this basis. It will update the market on any material progress as it comes to hand.

1. In early August 2018, Mr Carson tried to arrange another Joint Venture Committee meeting and provided Mr McInnes with an agenda for a meeting on 7 August 2018. The meeting was rescheduled and was proposed to be held on 16 August 2018. The agenda effectively contained two items. The first was the Joint Venture Committee's approval of an exploration program and budgets to enable Zuleika to define its expenditure schedule over exploration and predevelopment. The second item was to set a time for a next meeting.[226]
2. By a letter sent by email to Mr McInnes and Mr Zhou, Zuleika's lawyers gave notice to Vango of a dispute, pursuant to cl 20 of the BTS Agreement, claiming that Vango was acting in breach of the BTS Agreement. The notice stated the outcomes and actions sought by Zuleika to resolve the dispute.[227]
3. Six weeks after the service of the notice of dispute, Vango launched a takeover bid to acquire all of the issued capital in Zuleika. The takeover bid was unsuccessful. When cross‑examined about the takeover bid, Mr McInnes, in effect, conceded that one of the motivating factors of making the takeover bid was that it was a solution to avoid the dispute between Vango and Zuleika.[228]
4. On 28 September 2018, Mr Carson sent Mr McInnes an email proposing dates for a Joint Venture Committee meeting in early October 2018 and attached a proposed agenda for the meeting.[229]
5. Prior to preparing the agenda, a search of the Department register of the Tenement indicated that Vango had reported, as at 1 February 2018, that $505,259 had been spent on the Tenement and of this amount $457,099 had been spent on exploration activities.[230]
6. In light of this information, Zuleika proposed items on the agenda that the Joint Venture Committee approve; either Zuleika contribute as Expenditure the full amount of $505,259 or, alternatively, 50% of this amount.[231]
7. On 5 October 2018, Mr McInnes sent an email to Mr Carson indicating that they were happy to attend a meeting from 16 to 19 October 2018.[232]
8. On 8 October 2018, Mr Carson sent an email attaching another agenda to Mr McInnes, with a copy to Mr Zhou, and proposed a meeting on 16, 17 or 18 October 2018.[233] Mr Carson did not receive a response to this email.
9. On 22 October 2018, Mr Carson sent another email to Mr McInnes and Mr Zhou in which he repeated the content of his email on 8 October 2018 and then said:[234]

Further, I note that pursuant to clause 4(d) of the Binding Terms Sheet the JV Committee is to meet at least every 3 months. The last meeting was held on 9 July 2018 meaning that it is now past 3 months since the last meeting of the JV Committee. I further note the repeated requests made by Dampier to conduct JV Committee Meetings.

The repeated conduct of Vango has been to indicate a willingness to participate in a JV Committee Meeting but otherwise failing to commit to the holding a JV Committee Meeting. Further, at meetings that have been held, Vango has failed to enable the JV Committee to achieve its responsibilities pursuant to clause 4(c) of the Binding Terms Sheet.

Vango will attend a JV Committee Meeting to address the matters set out in clause 4 of the Binding Term Sheet and those agenda items raised by Dampier within the coming week and Vango will provide dates and times for that Joint Venture Committee to be convened; and

Vango will forthwith provide the information requested as to M52/183 (including by the agenda of 9 July 2018, at the Joint Venture Committee meeting on 10 July 2018, the agenda of 28 September 2018 and my email of 2 October 2018).

1. Three days later, on 25 October 2018, Mr McInnes sent an email to Mr Carson in reply stating that unfortunately, due to various other matters, his previous availability during the period 16 October to 25 October 2018 was reduced considerably, suggesting a meeting on the following Tuesday (30 October 2018).[235]
2. On Monday 29 October 2018, Mr Carson sent an email to Mr McInnes, with a copy to Mr Zhou, in which he stated that Zuleika agreed to meet on 30 October 2018 and made it very clear from the following statements in the email that Zuleika was of the opinion that Vango was engaging in consistent intentional conduct to frustrate the terms of the BTS Agreement:[236]

Your email confirms an ongoing course of conduct that you are finding excuses not to participate in JV Committee Meetings and otherwise engaging in conduct designed to frustrate Dampier's efforts to have the JV Committee operate consistently with the Binding Terms Sheet. Your response also suggests that Vango is not committed to the K2 Project given that you consistently avoid advancing the objectives of the JV Committee as set out in clause 4 of the Binding Terms Sheet.

Your response also fails to provide the confirmations sought in the draft JV Committee meeting agenda sent on 28 September 2018 and specifically sought in my emails of 4 and 8 October. Dampier has repeatedly sought written confirmation that:

Vango will attend a JV Committee Meeting to address the matters set out in clause 4 of the Binding Term Sheet and those agenda items raised by Dampier within the coming week and Vango will provide dates and times for that Joint Venture Committee to be convened; and

Vango will forthwith provide the information requested as to M52/183 (including by the agenda of 9 July 2018, at the Joint Venture Committee meeting on 10 July 2018, the agenda of 28 September 2018 and my email of 2 October 2018).

The first bullet point is important. Vango has previously met with Dampier but only discussed matters not relevant to the purposes of the JV Committee. Dampier requires confirmation from Vango that it will engage in a JV Committee meeting to address the matters set out in clause 4 of the Binding Term Sheet and those agenda items raised by Dampier.

The second bullet point is also important to ensure that Dampier is provided with information in order to ensure that the participants in the JV Committee meeting can advance the purposes of the JV Committee outlined in clause 4 of the Binding Terms Sheet.

Not only have you been avoiding attending a JV Committee meeting, you have been avoiding providing documents to your JV partner and refusing to commit to a meeting designed to achieve the purposes specified in the Binding Terms Sheet.

In my email of 4 October 2018, I said 'If Vango agrees with the proposed resolutions then please let us know. If so, we can agree to the parties formalising the resolutions by a circular resolutions document executed by each of Dampier and Vango and postpone a further Joint Venture Committee Meeting to another set date at which further agenda items can be advanced.'

You have failed to indicate whether Vango agrees or not with the proposed resolutions. We see no reason why Vango would not agree to the proposed resolutions as it is consistent with Dampier providing expenditure funding consistent with clause 2 of the Binding Terms Sheet.

Dampier will agree to meet on Tuesday 30 October 2018. However, it demands that Vango provide the confirmation and documents again requested above by Monday 29 October 2018.

For the reasons explained above, Dampier considers that Vango is intentionally frustrating the Joint Venture formed by the Binding Terms Sheet. Dampier reserves all of its rights.

1. On the same day, Mr McInnes asked Mr Zhou to prepare an email in response and, after approving the contents of the email, Mr Zhou sent the email to Mr Carson later that day.[237] In the email Mr McInnes refuted the matters stated by Mr Carson, claimed that the Billabong claim was impacting on the relationship between the parties and the existing Joint Venture and said:[238]

Vango is not engaging in any conduct designed to frustrate Dampier's efforts to have the JV Committee operate consistently with the Binding Terms Sheet. However, both parties should be able to put forward matters to be included in the agenda for JV Committee meetings.

Vango will be attending tomorrow's JV Committee meeting to address the matters set out in clause 4 of the Binding Terms Sheet and expects Dampier to do likewise. If Dampier has other matters that it wishes to put on the agenda, then Vango is happy to consider those matters. Similarly, Vango expects Dampier to consider other matters that Vango might wish to put on the agenda.

Amongst other things, the Joint Venture Committee is responsible for determining and approving the capital cost estimate and the expenditure tranches of the that estimate. In this regard, Vango notes that Billabong continues to assert a right to overturn the Binding Terms Sheet and instead force Vango to enter into a substitute arrangement with Billabong. The position adopted by Billabong on this point is obviously a relevant matter for the Joint Venture Committee to consider in relation to determining and approving expenditure ‑ especially where the benefit of such expenditure might be enjoyed by Billabong rather than Dampier. This is an outcome that would not be in the best interests of either Dampier or the Dampier/Vango Joint Venture.

Vango is happy to provide the information that it is required to provide under the Binding Terms Sheet. However, Vango has recently been the subject of a data breach in relation to confidential information held by the Department of Mines, Industry Regulation and Safety. At the upcoming JV Committee meeting, Vango also wishes to discuss data security with Dampier as the Department has indicated that the relevant data breach has arisen due to password information provided by Dampier. Given these concerns and the shortness of time before the JV Committee meeting, it would be best if issues relating to information to be provided by Vango were discussed in the context of data security. Vango undertakes to provide to Dampier any information still owing by it to Dampier under the Binding Terms Sheet as soon as the data security issues relating to such information are resolved.

I look forward to our JV Committee meeting at our office on Wednesday 31 Oct, at 11am if that suits you.

1. Mr McInnes, when cross‑examined about the content of this email, did not agree that if the claim by Billabong succeeded it was only a problem for Vango because it would have to offer Billabong the same terms as the BTS Agreement. However, of importance to the disposition of the action, Mr McInnes conceded that he raised the Billabong claim as an excuse to not agree to joint venture resolutions to progress the binding BTS Agreement and allow Zuleika to earn‑in a Joint Venture Interest.[239]
2. The parties met on 31 October 2018 at 11.00 am, and the meeting was declared closed at 11.40 am. Mr Carson and Ms Guo attended with Mr Higginson. Mr Higginson took minutes of the meeting.[240] Mr McInnes and Mr Zhou attended on behalf of Vango with Anthony Schildkraut.[241] At the opening of the meeting, Mr McInnes was appointed the chair.
3. Zuleika's agenda items for this meeting were as follows:[242]

A register search for M52/183 is attached and confirms expenditure reported on the tenement to the Department of Mines, Industry Regulation and Safety.

'The expenditure on M52/183 as set out by Vango in the relevant Form 5 operations report and lodged with the Department of Mines, Industry Regulation and Safety in February 2018 in the sum of $505,259.00:

(a) is approved by the JV Committee for the purposes of clauses 2, 4(c)(iii), 4(c)(vi), 5(a), 5(b), 5(c)(i) and 9 (as applicable) of the Binding Term Sheet;

(b) is to be contributed by Dampier in full (being $505,259.00) within 5 business days of this approval by payment by bank cheque to Vango or transfer to any JV bank account (if established by Vango); and

(c) upon such contribution being made, increases Dampier's Joint Venture Interest from 4.1% to 12.50%.'

'The expenditure on M52/183 as set out by Vango in the relevant Form 5 operations report and lodged with the Department of Mines, Industry Regulation and Safety in February 2018 in the sum of $505,259.00:

(a) is approved by the JV Committee for the purposes of clauses 2, 4(c)(iii), 4(c)(vi), 5(a), 5(b), 5(c)(i) and 9 (as applicable) of the Binding Term Sheet;

(b) is to be contributed by Dampier as to a half (50%) proportion (being $252,629.50) within 5 business days of this approval by payment by bank cheque to Vango or transfer to any JV bank account (if established by Vango); and

(c) upon such contribution being made, increases Dampier's Joint Venture Interest from 4.1% to 8.29%.'

'Vango is authorised to establish a JV bank account with any major Australian bank it chooses and is authorised, with Dampier, to arrange user and signatory access for representatives of both companies.'

ITEM 2 - ITEMS FOR JV COMMITTEE TO PREPARE PRIOR TO NEXT MEETING

1. By Monday 29 October 2018 at 5:00pm, Vango to provide JV bank account details by email to Dampier if then available, or otherwise as soon as available.
2. By Thursday 1 November 2018 at 5:00pm, Vango to provide documents for M52/183 set out in the list in the Agenda dated 9 July 2018 (at Item 2) (further copy attached), to allow update of earlier proposed budget and schedule.
3. By Thursday 8 November 2018 at 5:00pm, Vango to account to Dampier as to expenditure so far incurred on M52/183 for the 2018 expenditure year.

1. Zuleika's minutes of the meeting on 31 October 2018 record that Mr McInnes stated that Vango did not believe that the meeting was a Joint Venture meeting and the parties do not have a joint venture, they only have a term sheet.[243] Although this statement is not specifically recorded in the Vango minutes, when cross‑examined, Mr McInnes agreed he had said this.[244] In any event, it is clear from the matters recorded in Vango's minutes that Mr McInnes and Mr Zhou were clearly pressing a view that the Joint Venture between the defendants and Zuleika had not commenced, because Zuleika had proposed a formal agreement, the BTS Agreement had been superseded.[245]
2. Of importance, when cross‑examined, Mr McInnes maintained what he had said at the meeting; there was no joint venture as at the date of the meeting because Zuleika had served formal documentation for a formal joint venture agreement. However, when pressed on this point, Mr McInnes conceded there was a joint venture in place at the time and when he made that statement at the meeting on 31 October 2018, he knew that statement to be untrue.[246]
3. Mr McInnes also reluctantly conceded that by 31 October 2018, he had come to the conclusion that the agreement with Zuleika, which allowed them to earn‑in an interest of 50% of the Tenement by expending an amount of $3 million, was no longer a commercially favourable transaction for Vango.[247]
4. Although the meeting on 31 October 2018 took only 40 minutes, the parties did consider each of the items of Zuleika's agenda. The representatives of the defendants voted with the representatives of Zuleika to authorise Vango to proceed with establishing a Joint Venture bank account. All other resolutions put forward by Zuleika were defeated by the votes of Mr McInnes and Mr Zhou as representatives of the defendants.[248]
5. Proposed resolutions 1 and 2 were for the Joint Venture Committee to approve a contribution by Zuleika to Expenditure which, if either resolution was approved, would have had the effect that Zuleika would have earned in an additional Joint Venture Interest in the Tenement of either 8.29% or 12.50%.
6. There had been, however, funds expended on exploration work on the Tenement by the defendants. Zuleika's minutes of the meeting on 31 October 2018 record that Mr Carson asked Mr McInnes why resolution 1 and resolution 2 were defeated. Mr McInnes simply said that Vango had to proceed with exploration in order to meet its expenditure commitments on all of its tenements; it had already expended the amount of $505,295, and did not need any contribution from Zuleika.[249]
7. However, when cross‑examined about this evidence, Mr McInnes conceded that he knew by 31 October 2018 the defendants were carrying out more work than the required minimum expenditure (required by the Department) for all of Dampier Plutonic's tenements.[250]
8. On 9 November 2018, Zuleika made an announcement to the market that Billabong had filed a writ of summons against Vango.[251] At this time, shareholders of Zuleika had not yet voted to reject Vango's takeover bid.
9. On 16 November 2018, Mr Carson sent to Mr McInnes an agenda for the next Joint Venture meeting which he had prepared in conjunction with Zuleika's lawyers.[252] Proposed resolution 1 and proposed resolution 2 of Item 1 were the same as the resolutions Zuleika had put forward and were considered by the Joint Venture Committee on 31 October 2018.
10. Item 2 proposed that Vango provide Joint Venture bank account details to Zuleika so that Zuleika could arrange user and signatory access.
11. Item 3 proposed that Vango provide the documents for the Tenements set out in the list in the agenda dated 9 July 2018 and for Vango to account to Zuleika as to Expenditure so far incurred on the Tenement for the 2018 expenditure year.
12. Item 4 proposed that Vango table a contribution schedule (which was agreed to be provided at the Joint Venture Committee meeting on 31 October 2018) and for the committee to discuss the contribution schedule.
13. Item 5 proposed dates in December 2018 to be set for the next Joint Venture Committee meeting.
14. Item 6 proposed:[253]

By Monday 3 December 2018 at 5:00pm, Vango to provide a draft JV Committee Meeting agenda that includes resolutions for Dampier to contribute Expenditure to earn a Joint Venture Interest of 50% within the Earn-in Period.

Dampier notes that pursuant to the Binding Terms Sheet the Expenditure contribution is $2,754,760.22 ‑ see clause 2 and 3 of the Binding Terms Sheet, taking into account existing 4.1% earned interest from clause 3(a). This sum to be spent should be further reduced by the passing of proposed resolution 1 or proposed alternate resolution 1.

1. On the same day that Mr Carson sent this agenda to Mr McInnes, lawyers acting for Zuleika sent an amended formal draft farm‑in and Joint Venture Agreement to the lawyers acting for Vango.[254] The letter from Zuleika's lawyers made a request of Vango's lawyers that they explain to their clients' board that the BTS Agreement is an immediately binding agreement and that there is a Joint Venture, and relevantly stated:[255]

While our client is seeking to negotiate the terms of the draft JVA with your client, it is apparent from a range of your client's conduct that it is likely in breach of a number of terms of the Binding Term Sheet or otherwise behaving in a manner entirely inconsistent with its terms.

Providing this draft JVA or entering into any negotiations should not be taken as any waiver or derogation of our client's rights.

Our client is continuing to call upon your client to act in accordance with the Binding Terms Sheet, to participate properly in the joint venture and to perform its obligations.

1. The parties agreed to meet on 21 November 2018. On 20 November 2018, Mr Zhou sent an email to Mr Carson in which he made it clear that Vango wished to renegotiate the term of the BTS Agreement which conferred the right on Zuleika to earn‑in a 50% interest in the Tenement by contributing $3 million to Expenditure. Mr Zhou made this very clear in the following statements about proposed resolutions 1 and 2:[256]

Because the capital cost estimate for the development of the K2 underground mine will exceed the initial estimate of $6,000,000, a revised capital cost estimate should be prepared and agreed by the Joint Venture parties as soon as practicable. I will have a copy of the updated estimates from Brian Williams tomorrow and we can go through them.

Vango will acknowledge that under the Binding Terms Sheet, Dampier is deemed to have contributed $245,239.78 for the purposes of calculating its Joint Venture Interest on or about 12 May 2019 (ie on the expiry of the 2 year Earn-in Period under the Binding Terms Sheet) but that additional contributions should be made only once the revised capital cost and cash flow estimate is known and agreed by the JV committee.

1. When Mr McInnes gave evidence, he conceded that what was stated by Mr Zhou in this email was also his position.[257]
2. Mr Carson responded to this email on the same day and sent a copy to Mr McInnes.[258] Early the next day, and prior to the Joint Venture Committee meeting that morning, Mr McInnes sent an email in response to the email from Mr Carson in which he copied each paragraph of Mr Carson's email and directly responded to each of the matters stated in Mr Carson's email by highlighting his response in red. In this email, Mr McInnes' response to the matters stated by Mr Carson are as follows:[259]

Your below email shows a fundamental misunderstanding of Proposed resolution 1. Please refer to the Explanatory Note Agenda Item 1 - 2017 Expenditure. During the 2017 expenditure year, Vango breached the terms of the Binding Terms Sheet by expending funds without the approval of the Joint Venture Committee. This is explained fully in the Explanatory Note - see specifically paragraphs 2.1 to 2.10. Vango fully understands DAU's proposed resolution 1, but does not agree that Vango has breached the Binding Terms Sheet (BTS) by expending funds without the approval of the Joint Venture Committee. Clause 9 of the BTS provides that the parties are responsible for ensuring that the K2 tenement is maintained in good standing in accordance with any applicable laws and in proportion with their equitable interest in the tenement. DAU currently has a joint venture interest of 0% in the tenement and this will be the case until on or about 12 May 2019 when the Earn‑in Period ceases. Until such time, Vango is required to fund 100% of costs of maintaining the K2 tenement in good standing in accordance with any applicable laws.

The purpose of resolution 1 is to seek in part to address Vango's breach of the Binding Terms Sheet. If proposed resolution 1 is not ratified by Vango at the Joint Venture Committee Meeting then Vango will be exacerbating its breach of the Binding Terms Sheet and engaging in intentional conduct to deny its rights under the Binding Terms Sheet to contribute Expenditure and increase its Joint Venture Interest during the Earn‑in Period. Vango is not in breach. On the contrary, Dampier's refusal to consider Vango's proposed resolutions puts Dampier in breach.

Dampier calls on Vango to act in accordance with the Binding Terms Sheet and to remedy this particular breach by passing the resolution. Vango calls on DAU to act in accordance with the BTS and agree that the capital cost estimate for the development of the K2 underground mine is now well in excess of the $6,000,000 originally anticipated. Once a revised capital cost is agreed then the Joint Venture Committee can sensibly consider Dampier's proposed contribution to expenditure and approve tranches of that expenditure as contemplated by clause 2 of the BTS. For the Joint Venture Committee to approve expenditure and tranches of expenditure in advance of approving the increased capital cost is putting the cart before the horse and commits the parties to expenditure without knowing whether that expenditure will be sufficient for the project.

The Joint Venture Committee can discuss matters relating to CAPEX which is presently fixed at $6,000,000 as agreed. However, this doesn't prevent Dampier from contributing Expenditure up to 50% to earn a 50% Joint Venture Interest. The Binding Terms Sheet is clear at clause 2(a) that 'Dampier agrees to contribute up to the lesser of 50% of the CAPEX or $3,000,000'. Therefore, to earn a 50% Joint Venture Interest Dampier's maximum necessary contribution is capped at $3,000,000, and cannot increase under clause 2. You have selectively quoted from clause 2 of the BTS by focussing only on paragraph (a). Paragraph (b) makes it clear that the Expenditure is to be made in tranches approved by the Joint Venture Committee. It appears to Vango that DAU is insisting on such approval without first acknowledging that the capital cost estimate for the project needs to be adjusted.

Therefore, the first focus is on agreeing Expenditure contributions by Dampier up to $3,000,000 within the Earn-in Period and, particularly, as this resolution provides, dealing with Vango's breach by incurring expenditure already without Joint Venture Committee approval. Thereafter, any additional CAPEX, if agreed to the change, is determined pursuant to clause 3 of the Binding Terms Sheet. The first focus is to have a successful project and this means properly calculating the capital cost for the project. Both Vango and DAU are listed companies with obligations to shareholders and for the Joint Venture Committee to approve Expenditure before calculating the capital cost of the project would not be in the interests of the shareholders of either company.

Any attempt to delay approval of an Expenditure schedule that will allow Dampier to contribute $2,754,760.22 by 12 May 2019 will constitute a breach of the Binding Terms Sheet and constitute conduct designed to damage the commercial interests of Dampier and its rights and interests under the Binding Terms Sheet. The main delay at the moment is the reluctance by DAU to acknowledge that the capital cost of the project needs to be adjusted. Vango has raised this issue numerous times before but DAU simply ignores this point.

Dampier reserves all of its rights in respect of this matter. Vango also reserves all rights in respect of this matter.

This is not a resolution. Item 2 is about the JV bank account. Vango agreed to open a Joint Venture bank account at the last meeting and has provided no evidence that it has done so. This failure is further evidence that Vango is engaging in a course of conduct designed to frustrate Dampier from contributing the Expenditure during the Earn‑in Period. Vango disagrees with your statement. Vango has no objection to opening a bank account. However, this again puts the cart before the horse - the parties must first determine the project cost before moneys can be expended on the project.

Your comments are otherwise confused. Vango have already acknowledged the contribution already made by Dampier - see clause 3(a) of the Binding Terms Sheet. This confirmation has also been made by Vango in public announcements. Your lawyers have even admitted that we have a 4.1% interest (see the G+T letter of 11 October 2018). DAU is confused about the BTS. The Joint Venture Interest of DAU will be calculated at the expiry of the Earn‑in Period.

The making of contributions of Expenditure is not predicated on a revised CAPEX. It is predicated on the Joint Venture Committee determining and approving the Expenditure tranches of the CAPEX - see clauses 2(b) and 4(c) of the Binding Terms Sheet. Again, you seem to believe that the Joint Venture Committee should determine and approve Expenditure towards a total project cost which the parties have not determined. DAU is fully aware that the total project cost will be in excess of $6,000,000.

The CAPEX is presently agreed at $6,000,000. This figure can be amended by the Joint Venture Committee. However, as you have indicated that it needs to be amended upwards, it has no relevance to determining and approving the Expenditure tranches of the CAPEX up to the $3,000,000 for Dampier to earn a 50% interest, as clause 3 clearly provides. Thereafter, expenditure will be incurred pursuant to the Joint Venture Interests - see clause 3 of the Binding Terms Sheet. We disagree with this as can be seen from our responses above.

Dampier urges Vango to take legal advice on the terms and operation of the Binding Terms Sheet. Vango's actual or feigned ignorance of the Binding Terms Sheet is causing Vango to breach the Binding Terms Sheet and prevent the operation of the Joint Venture Committee. Vango appreciates your concern and similarly urges DAU to do likewise. In particular, Vango urges DAU to remember that the main purpose of the joint venture is not to facilitate DAU earning an interest in the tenements. The joint venture is for the express purpose of exploration and production. Vango does not understand how this can properly occur without a realistic capital cost estimate for the project.

If Vango prevents the Joint Venture Committee from determining and approving the Expenditure tranches of the CAPEX to allow Dampier to earn up to 50% during the Earn-in Period then Dampier will have no option but to sue for breaches of the Binding Terms Sheet. If Dampier does not agree to properly consider the current capital cost estimate of the project then Dampier is in breach of the BTS. DAU must act in a way which shows that it is serious about this project rather than in a way which simply indicates that it is more concerned about earning an interest in a tenement than being a joint venturer in a successful project.

Dampier reserves all of its rights. Vango also reserves its rights.

As explained above, item 2 (not item 3) is about the JV bank account which Vango has failed to establish after agreeing almost 3 weeks ago. As explained above, Vango has no objection to establishing a bank account. However, this is not the main problem at the moment. The main problem is the failure by DAU to accept that every successful project needs a proper project plan with a realistic capital cost estimate. Again, DAU and Vango have obligations in relation to their shareholders in relation to the prudent expenditure of funds.

Item 3 of the agenda is about the information and documents that Dampier has continued to demand of Vango and which Vango is frustrating the joint venture by not providing. We again call upon you to comply with the requests. Vango will discuss with you at the Joint Venture Committee meeting the provision of the information you seek. As you well know, there has been a major security breach in relation to this information which is still being investigated.

Further, you need to focus on the Agenda and the Explanatory Notes as to what expenditure has been undertaken on the Tenement in the 2018 expenditure year. You need to ensure that you tell us what has been spent, and explain why it was not put to a Joint Venture committee before hand, when it will be put for approval and to confirm how the Tenement is to be kept in good standing. Again, moneys spent to keep the tenement in good standing are at present an expense for Vango under clause 9 of the BTS.

You have otherwise ignored all of the other items. We expect substantive responses and compliance at the Joint Venture Committee meeting. Vango also expects responses to its questions.

Dampier reserves its rights. Vango also reserves its rights.

1. When cross‑examined, Mr McInnes conceded that the statements made by him in this email were another example of him saying that, unless Zuleika agreed to a revised CAPEX, Vango would not, as part of the Joint Venture Committee, approve contributions by Zuleika to Expenditure and tranches of Expenditure.[260]
2. Mr McInnes maintained this demand of Zuleika at the Joint Venture Committee meeting later that morning. The meeting was attended by Mr Carson and Ms Guo. Again, Mr Higginson took minutes on behalf of Zuleika and testified that the minutes were accurate. Mr McInnes attended with Mr Schildkraut who took Vango's minutes. After the meeting both parties produced their own minutes.[261] The minutes are not substantially different. When Mr McInnes gave evidence after reading Zuleika's minutes he positively recalled much of what was recorded in these minutes. He also gave evidence that the minutes prepared by Vango are an accurate record of what occurred and was discussed at the meeting.[262]
3. The crucial matters recorded in both minutes, include:

(a) Zuleika sought the approval of the Joint Venture Committee for contributions to be made by it towards Expenditure;
>
> (b) the defendants did not approve Zuleika's proposed contribution to Expenditure;
>
> (c) the defendants were prepared to acknowledge the amount of $252,629.50[263] as Zuleika's initial contribution towards Expenditure on the K2 project; and
>
> (d) the defendants would not agree a budget for Expenditure until total CAPEX was agreed.

4. On 2 December 2018, Mr Carson sent Mr McInnes and Mr Zhou an email in which he reiterated Zuleika's view that agreeing a CAPEX figure was not determinant of Zuleika's right to earn‑in an interest in the Tenement, and said that Zuleika remained willing to consider the CAPEX as an overall Joint Venture matter. He requested that Vango provide their proposed revised CAPEX figure for consideration by the Joint Venture Committee. Mr Carson also made a further demand that the defendants provide a proposed schedule for Expenditure that would allow Zuleika to meet Expenditure of $2,754,760.22 by 12 May 2019 to achieve a Joint Venture Interest of 50% pursuant to the BTS Agreement.[264]
5. On 7 December 2018, Vango provided Mr Carson and Ms Guo with a copy of an agenda for the next Joint Venture Committee meeting. This was the first of only two agendas provided by the defendants.[265] The items on the agenda were as follows:[266]
   1. Discuss the current mine plans in accordance with clause 4(c)(iii) of the Binding Terms Sheet.

The discussion will include reference to the underground mine plan constructed by Vango in 2014 as well as the updated plan for the escape ways and ventilation shafts required by the DMP which have had to be amended due to the instability of the west wall.

1. Following the discussion contemplated in Item 1, Vango will present to the meeting the currently estimated capital cost estimate for the development of the K2 underground mine (CAPEX) for discussion and approval by the JV committee in accordance with clause 4(c)(i) of the Binding Terms Sheet. The calculations for the CAPEX will be circulated prior to the meeting.
2. Following the determination and approval of the CAPEX (as contemplated in Item 2 above and clause 4(c)(i) of the Binding Terms Sheet), the JV Committee will determine and approve the expenditure tranches of the CAPEX.
3. On 11 December 2018, Mr Carson sent to Mr McInnes an email confirming that the next Joint Venture Committee meeting would be held on 13 December 2018 and included an agenda for additional items to be discussed at the meeting. Mr Carson also sent Mr McInnes copies of communications he had with the National Australia Bank in relation to the establishment of a Joint Venture bank account.[267] The additional items on the agenda related to the establishment of the joint bank account, a reiteration of the request to provide the documents Zuleika had requested in the agenda dated 9 July 2018, and for Vango to account to Zuleika for expenditure incurred on the Tenement for the 2018 expenditure year.[268]
4. The meeting scheduled for 13 December 2018, did not proceed. Despite objection from Mr Carson, Mr McInnes deferred the meeting after informing Mr Carson that Vango needed to receive legal advice about an injunction notice it had received.[269]
5. On 21 December 2018, Mr McInnes sent a letter to Mr Carson in which he made the following statements about the defendants' opinion of the effect of the parties obligations pursuant to the terms of the BTS Agreement:[270]

The purpose of this letter is to correct your understanding about certain key points of the Binding Terms Sheet.

On the expiry of the Earn-In Period (12 May 2019), Dampier will be granted an interest in the K2 tenement. Until that time, it does not have an equitable interest in the K2 tenement.

So to be clear, Dampier will be granted an interest in the K2 tenement in May 2019 (subject to the success of any Billabong legal action as discussed below). But at the moment, it has not been granted such an interest.

As previously mentioned to you, the first action item for the Joint Venture Committee is to revise the capital cost estimate (as contemplated in clause 4 of the Binding Terms Sheet). To summarise again, Vango's current estimation of the capital cost estimate is well in excess of $6 million.

Once the capital cost estimate has been revised, it is then sensible for the Joint Venture Committee to consider expenditure. Naturally, it does not make sense to approve expenditure in advance of the Joint Venture Committee agreeing on the revised capital cost estimate.

As of this morning, Vango received the Contractor's estimates for the revised capital cost estimate. Vango is reviewing these estimates and will forward to you today the proposed revised capital cost estimate for your review.

Following your review, the Joint Venture Committee can then arrange to meet to discuss the revised capital cost. As mentioned above, once the revised capital cost is agreed, the Joint Venture Committee can then determine the additional expenditure.

Happy to meet today to discuss general matters, but it seems best for the next Joint Venture committee meeting to occur once you receive and have had an opportunity to review the proposed revised capital estimate.

1. On 24 December 2018, Mr Carson sent an email to Mr McInnes in response refuting most of what Mr Innes stated in his letter and made it clear, amongst other matters, that Zuleika had not received Vango's revised capital cost estimates, and requested this information be provided immediately.[271]
2. On 28 December 2018, in an email to Mr Carson, Mr McInnes provided the following information about cost estimates for development of the K2 underground mine:[272]

Please find a list of costed items prepared to date for development of K2 underground mine which is not the total costing as it does not include the cost of capital equipment such as vehicles ,generators etc.

These are estimates only, however they will form a base for establishing a working CAPEX and more importantly will now allow a review of the DFS for K2 underground which was last updated in early 2017 (but only to the extent that the gold price and AUST $ was updated). Bearing in mind that the original DFS was prepared in 2014 when costs where substantially lower.

Please review the above costings. As a suggestion Sean and I would be available to meet to discuss these costs as well as review the DFS on the 2nd January 2019.

1. On 29 December 2018, Mr Carson responded positively by email to Mr McInnes about the provision of the estimates and pressed for approval for Zuleika to contribute to Expenditure for work that could be undertaken whilst a working CAPEX was properly assessed by a Bankable Feasibility Study. In this email, Mr Carson relevantly stated:[273]

Thank you for providing Vango's estimates for a working CAPEX. Dampier is prepared to work with these CAPEX estimates, noting that final CAPEX will be determined and approved after conclusion of a Bankable Feasibility Study.

To move beyond estimates, you know that there is exploration, metallurgical, geotechnical and mine planning works that could be undertaken now that will assist in resource/reserve delineation and provide better data for CAPEX assessment, mine planning and to conclude a BFS.

We again ask that you forward Vango's proposed Expenditure schedule. We repeat that the Expenditure schedule should allow Dampier to contribute Expenditure of $2,754,760.22 to achieve a Joint Venture Interest of 50% by 12 May 2019.

Dampier is of the view that there are numerous exploration activities that can be engaged in, and pre-development works and mine planning steps that can be taken, over the first quarter of 2019 for this outcome to be achieved.

1. Of importance, to the disposition of the action, when cross‑examined, Mr McInnes conceded that the last two sentences in this email were correct, that there was work that could be undertaken at this time, and that work would assist in resource reserve delineation and provide better data for a CAPEX assessment, mine planning and to conclude a Bankable Feasibility Study.[274]

5.1.8 Meetings of the Joint Venture Committee and the positions taken by the parties in 2019

1. On 9 January 2019, Mr McInnes provided to Mr Carson further estimates for the development of the K2 mine which were as follows:[275]

1. Mr Carson responded to the content of the estimates provided by Mr McInnes in December 2018 and January 2019 after he had received the second table of mine cost estimates.
2. On 9 January 2019, the same day Mr Carson received Mr McInnes' email with development estimates (being the day before the next Joint Venture Committee meeting), Mr Carson replied to Mr McInnes' email in which Mr Carson stated that the summaries of the estimates provided on 28 December 2018 were not presented with any 'credible supporting reports or analysis by reputable mine development contractors or consultants,' and pointed out that in the absence of such information, Zuleika was unable to do detailed review of the costings and the technical logic behind, and, in the estimates.[276] Mr Carson also said in this email that the figures attached to Mr McInnes' email sent earlier that day had no rational basis and made very little sense.
3. The next day, Mr McInnes sent an email to Mr Carson in response in which he asked for a time to meet on 11 January 2019 for the Joint Venture Committee meeting and stated about the source of the estimates:[277]

I'm not sure that I understand your point about not providing a schedule of costs leading up to the commencement of production? I accept that you have some questions about the costs provided and it would be good to talk through those concerns at the meeting. But it is not correct to say that a schedule of costs leading up to production has not been provided.

In relation to analysis by credible consultants, the schedule of costs provided has been developed by Ripago Mining Consultants who specialise in underground mining. It would be helpful if you could let me know why you don't regard this consultant as credible?

1. On 11 January 2019, before the Joint Venture Committee meeting, Vango's head of strategy and planning, Stephen Clynk (and Vango's company secretary), sent another agenda to Mr Carson and further CAPEX estimates on behalf of Vango. The items on this agenda and estimates were as follows:[278]

Joint Venture Committee Meeting Agenda - 11 Jan 2019 2.30pm AEDST

1. Endorse Minutes of previous meeting as circulated 21 Nov
2. Agree updated estimated CAPEX as presented by Vango
3. Vango preparation of updated DFS - Vango propose presentation to JV Committee members not later than 17 Jan 2019
4. Schedule next JV Committee meeting - Vango propose 2.30pm EDST on 18 Jan 2019

1. It appears that the estimates in this table were taken from the final Ripago report prepared by consultant mining engineer, Richard Gorzkos.[279]
2. The Joint Venture Committee meeting on 11 January 2019 was held by teleconference and was attended by Mr Carson and Ms Guo on behalf of Zuleika. Mr Higginson also attended on behalf of Zuleika and his role was again to take minutes for Zuleika. Mr Higginson again testified that the minutes he took on this occasion were accurate.[280] Mr McInnes attended with Mr Clynk and Mr Schildkraut. After the meeting, both parties produced their own minutes.[281] The minutes of each of the parties are not substantially different.
3. When Mr McInnes gave evidence after reading Zuleika's minutes, he positively recalled much of what was recorded in these minutes. He also gave evidence that the minutes prepared by Vango were an accurate record of what occurred and was discussed at the meeting.[282] It was also Mr Carson's evidence that Vango's minutes were generally accurate.[283]
4. The crucial matters recorded in both minutes, include:

(a) Mr Carson and Ms Guo sought to progress an Expenditure schedule to enable Zuleika to contribute toward Expenditure; and
>
> (b) Mr McInnes on behalf of the defendants would not agree to providing a schedule for Zuleika to contribute to Expenditure until Zuleika agreed to a proposed total CAPEX.

5. Three days after this meeting, Mr McInnes sent Mr Carson a copy of the draft Ripago report prepared by Richard Gorzkos.[284]
6. It emerged during the trial that the estimates Mr McInnes sent to Mr Carson prior to this meeting were not the result of any assessment of all of the figures that truly could be found to be independent and could be verified as reliable. This finding is not intended to be critical of the reliability or credibility of the evidence given by Mr Gorzkos, but of the task that he was given and of the defendants' reliance on the estimates created by the task.
7. First, Mr Gorzkos prepared the report by making a desktop analysis. Mr Gorzkos relied on a (2009) 'Barrick scoping study' for the purposes of making assumptions to determine existing excavation quantities to generate a physicals schedule.[285] Second, some of the estimates were not contained in any existing reports but were provided by employees of Vango. Third, some of the items that were included in the report were items that Mr Gorzkos would not include in a cost estimate for underground mining.
8. When Mr Gorzkos gave his evidence in chief he was asked about the dimensions of the ventilation shaft and escapeway. He said these dimensions had been given to him by an employee of Vango, Glenn Povey.[286] Mr Gorzkos stated:[287]

[W]hen we did the report after he reviewed it, he said we need to put in the - the ventilation shaft and the escapeway. And he said allow for 138 metres at six metres and 138 metres at three metres diameter.

1. Mr Gorzkos was then asked to explain why there was a difference between the figures stated in his draft report and his final report and why amounts had increased about by $6.4 million. He responded during the following exchange with counsel for the defendants:[288]

Yes---Without going through my calculations and seeing what was done, I'm not - no, I'm not too sure why that would have been.

Okay---Maybe a bit more - I might have, as I've gone through the second time, I might have revised the trucking hours or the loader hours or - which is, obviously, the cost per hour, more hours, more cost type stuff, so more extra people I might have put in. But without going through my calculations and doing line by line offhand, sorry, I can't tell you at that at the moment.

There's also a new item of Infrastructure, Plant and Equipment. Do you see At the bottom just above subtotal We will need to scroll down for Mr Gorzkos to see it. See that Why was this new item included in your draft - your final report---That was the difference between, basically, the draft and the final report. With the draft report, it didn't have those items in it. And then, when I sent it to Vango for review, they said, well we need to allow for other items, which I don't normally allow for in the work that I do. And those items are things like workshops, changerooms, IT towers, 5G communications - bits and pieces that, generally, as a mine owner, and it gets taken up in their costs - in their cost estimates what they do - their own stuff. I don't normally take - allow those in it. But in this case here, I was instructed to say that we need to allow A, B, C, X, Y, Z for these or previous items.

1. When cross‑examined, Mr Gorzkos confirmed he was provided information about the ventilation shaft and escapeway rise by Mr Povey. On reflection he now recalled this information had been provided to him prior to the compilation of his draft report, and he then said:[289]

I was told to allow for a ventilation shaft and then they're the ones that gave me those prices for it. And when I looked at them, I - which with all the stuff, I look at them and I thought, yes, well they're reasonable enough to be for the amount of the scoping study or the level of accuracy that we were doing. To get proper pricing for that - well, it will take a long time, plus contractors will just give you the back of the number envelope number anyway.

But my understanding that, initially, you weren't going to make provision for a ventilation shaft and escapeway rise until you had this discussion with Mr Povey or Mr Williams. Is that what you're saying---It's likely because the main part was - you can do the rehabilitation of the underground without the ventilation shaft or the escapeway rise.

1. Fourth, when Mr McInnes gave evidence he conceded that the Ripago report was prepared on his instructions because he wanted to have something to give to Zuleika by way of an independent report to substantiate the defendant's position that the $6 million CAPEX (for Zuleika to earn‑in a 50% interest in the Tenement) was no longer fair and reasonable.[290] Mr McInnes also conceded that when he received the report, Vango did not make an announcement to the market because the report was not of sufficient substance or sufficiently reliable to cause Vango to make a disclosure to the public.[291]
2. When Mr Carson gave oral evidence he was highly critical of the estimates made in the Ripago report. He was also critical of the estimates in contemporaneous correspondence he sent to Mr McInnes.
3. Zuleika also points out some of the items that the defendants claimed were necessary expenditure to develop the Tenement were items that would be of benefit to the Plutonic Dome tenements as a whole. Mr McInnes gave evidence that 'K2, as a standalone mine, with an ore treatment agreement in place and the provision of camp and other facilities, would have been a profitable mine'.[292]
4. However, Mr McInnes accepted that other tenements held by the defendants across the Marymia Gold Project required a milling arrangement and the development of those tenements would benefit from the capital infrastructure costs Vango would incur in developing the K2 mine.[293]
5. As Zuleika points out, some the items included in the revised CAPEX that the defendants sought the plaintiff to agree, as set out in exhibits 638, 625, 626 and 634, included capital infrastructure costs that Vango would have otherwise had to incur in relation to its other nearby tenements. On 24 April 2018, Vango made it clear in an announcement to the market that it intended to develop the Trident Gold Deposit and the K2 deposit to develop the Plutonic Dome into a significant, stand‑alone, gold mining and processing operation.[294] On 16 May 2018, it announced to the market the results of the Trident and K2 drilling programs and stated that the objective of both programs 'was to prove‑up sufficient high‑grade gold resources to support a stand‑alone, high‑margin, gold mining and processing operation on the Plutonic Dome Project'.[295] Vango made similar statements to the market in its investor presentation in support of its capital raising in July 2018.[296]
6. In a bidders statement filed with the Australian Securities and Investments Commission to acquire all of the shares in Zuleika on 17 September 2018, Vango relevantly stated:[297]

The K2 Mine has been subject to a feasibility study published in July 2014, which was subsequently updated in February 2017. Under these feasibility studies it was contemplated that the K2 Mine would be subject to a toll treating arrangement at the Plutonic Mill. However, Vango Mining has since evolved its strategy towards having a stand‑alone processing plant drawing ore from multiple deposits, including the K2 Mine.

In February 2017, Vango Mining released a Definitive Feasibility Study (DFS) update for the K2 Mine which assumed that material mined from the K2 Mine would be toll treated through the Plutonic Mill at a cost of $40/t. As noted in this Bidder's Statement, it is now Vango Mining's intent to assess the feasibility of a standalone processing plant and use ore mined from K2 Mine to feed this plant, rather than having it treated by a third party operated mill.

1. This evidence establishes that Vango intended to create its own stand‑alone gold mining and processing operation at Plutonic Dome and intended to include K2 into a broader feasibility study relating to Plutonic Dome as a whole.
2. After Mr Carson received a copy of the Ripago report he sent an email to Mr McInnes on 23 January 2019 in which he pointed out that there was some aspects of the report which supported the validity of position that Zuleika had been pressing for some time and that was there was work that could be undertaken that Zuleika could contribute to as Expenditure while the mine is developed in stages. In this email, he relevantly stated:[298]

On 14 January 2019, you presented a report by Ripago entitled 'Ripago Vango K2 Rehab Cost Estimate Report BW _Draft Purposes'. Ripago states that it was engaged [by Vango] to undertake a cost estimate of the underground rehabilitation and the additional preproduction capital works to enable the commencement of development and production activities. This is confirmation that there are stage 1 works required to be undertaken before commencement of development and production activities can be undertaken which is consistent with items set out in the Gant chart presented by Vango to the JV Committee in July 2017, as above and attached.

The underground rehabilitation works alone are estimated by Ripago at $8.6 million with 4 months to complete with another $10.4 million in pre‑production costs which is considerably at variance with no explanation, with the Entech 2014 and Vango July 17 estimates. Although Dampier considers that the estimate of costs for this work is excessive, it confirms what has been consistently stated by Dampier that the rehabilitation work could have been completed by 12 May 2019 if Vango had not persistently denied Dampier's rights to make this contribution pursuant to the Binding Terms Sheet. This work alone may require the Expenditure of $2,754,760.22 which in turn would enable Dampier to earn a 50% Joint Venture Interest.

It is unnecessary to agree an entire project capital expenditure at this stage. As the mine is developed in stages, a staged approach to such expenditure can be taken.

1. By letter dated 5 April 2019, lawyers acting for the defendants notified Zuleika's lawyers that the defendants had agreed to extend the term of the BTS Agreement by one month so as to extend the Earn‑in Period to 12 June 2019 so that discussions between the parties could continue with a view to reaching agreement about the way forward.[299]
2. On 9 May 2019, Mr Carson sent to Mr McInnes an agenda for the next Joint Venture Committee meeting.[300]
3. On the morning of the Joint Venture Committee meeting on 17 May 2019, Mr McInnes sent to Mr Carson a marked‑up copy of Zuleika's agenda with comments in respect of the first four items on the agenda as follows:[301]

ITEM 1 - PROPOSAL FROM VANGO FOR BUDGETS, PLANS & CONTRIBUTIONS

'Within 7 days after this Joint Venture Committee Meeting, Vango provide proposed documentation and draft resolutions for Dampier's consideration of a proposal for the immediate undertaking of necessary K2 exploration and proposed mining budgets, plans and programmes, with an associated contribution schedule for Dampier's expenditure contributions up to $2,754,760.22.'

Vango looks forward to discussing this at the meeting. It's initial comment is that it has no objection to the development of proposed mining budgets, plans and programs for the development of a K2 underground mine. However, Vango's preference remains to develop these together with Dampier rather than in isolation. Naturally, the development of such budgets, plans and programs will necessarily mean that a revised CAPEX is created for the project - something that will need to be agreed to by both Dampier and Vango. Vango agrees that as part of the process of developing these mining budgets, plans and programs, an associated contribution schedule for Dampier's expenditure contributions up to $2,754,760.22 can also be developed which will set out the amount and timing of those contributions together with the relevant items to which the expenditure contributions are to be applied. Once the CAPEX and associated contribution schedule are agreed, then it will be a simple matter for the relevant resolutions to be passed evidencing the agreement on those matters.

ITEM 2 - PROVISION OF INFORMATION ON EXPLORATION OUTCOMES

'Within 7 days following this Joint Venture Committee Meeting, Vango is to:

(a) provide a short-written statement of the type, timing and results of exploration conducted by Vango on M52/183 as claimed in Form 5 operations reports for 2017 and 2018;

(b)(a) provide any exploration results, data, orebody extensions data or reports from exploration of M52/183 as claimed in Form 5 operations reports for 2017 and 2018.'

While Vango has conducted limited exploration on M52/183, the results of such exploration have not yet been released. Vango is more than happy to provide an update at the meeting and following the meeting will check to see whether there is any further material information that can be provided.

Vango to provide status update as to what it has done to assist in establishing Joint Venture bank account with National Australia Bank

Again, this can be discussed further at the meeting but Vango's initial comment is that Vango remains ready, willing and able to establish a Joint Venture bank account with NAB. Vango understood that Malcom Carson and Anthony Schildkraut were to attend NAB in Sydney and sign any bank paperwork necessary (and produce identification etc) for the account to be opened. In this regard, Vango notes that NAB may ask for a copy of the relevant formal Joint Venture Agreement as part of its requirements to open the bank account. As you are aware, no such formal Joint Venture Agreement has ever been entered into (although there is no doubt as between the parties that a joint venture exists). In any event, Vango believes that it is best to deal with such a request from NAB if or when such request is made and that Malcolm and Anthony should attend NAB as soon as possible and do all things necessary to open the bank account. Vango typically uses CBA rather than NAB and therefore would also be open to the possibility of opening the account at CBA instead of NAB. However, the priority is to open the account as soon as possible and Vango therefore believes that Malcolm and Anthony should attend to the opening of the account (whether at NAB or CBA) as a priority.

(a) review issues related to the Ripago Report ("K2 Mine Underground Rehab Cost Estimate) (dated December 2018) set out in Malcolm Carson's email of 23 January 2019; and

(b) provide written response as to issues raised and reviewed proposal, if any is to be proposed, as to change of CAPEX."'

(c) Provide a hard copy of the "DFS Upgrade" report released to the ASX on 14 February 2017 and all subsequent variations and updates and confirm the authors of these report.

(d) explain why Vango independently of the K2 JV Committee appointed new consultants including Ripago to present revised CAPEX estimates, the process by which these consultants and Ripago were selected and its qualifying credentials to prepare such a report.

(e) explain why Entech which had prepared the initial Feasibility Studies in 2014 were not commissioned to provide updates based on their original reports.

Vango agrees that this it would be valuable for the parties to spend considerable time discussing the above matters at the meeting tomorrow. As an initial comment, Vango believes that it is important for the parties to understand the issues raised in the reports obtained by Vango (and indeed, in any report which Dampier decides to obtain). Vango has been more than willing to share both the Entech and Ripago Reports and invites Dampier to obtain its own report to confirm the matters which are dealt with in the Ripago Report.

Vango will provide a hard copy of the DFS Upgrade report shortly after the meeting and will confirm the authors of the report as requested.

In relation to Entech, Vango confirms that Entech no longer provides services to Vango. However, if Dampier would like to engage Entech to prepare any feasibility studies etc it should feel free to do so.

Understanding the feasibility of the project is not only of crucial importance from the perspective of the Joint Venture, but is also necessary to move the project forward. Naturally, it is also important for Dampier to understand project feasibility if Vango and Dampier progress Dampier's suggestion that Vango sell its interest in the K2 mine to Dampier.

1. The Joint Venture Committee meeting held on 17 May 2019 was held by teleconference. Mr Carson, Ms Guo and Mr Higginson attended on behalf of Zuleika. Mr Higginson gave evidence that the draft minutes that he prepared on behalf of Zuleika are an accurate record of what occurred at the meeting.[302] Mr McInnes, Mr Zhou and Mr Schildkraut attended on behalf of the defendants. Again both parties produced their own minutes of the meeting.[303] Again, the minutes are not substantially different. When Mr McInnes was cross-examined about the minutes produced by Zuleika he was able to recall that most of the matters were discussed as recorded in those minutes.[304] The crucial aspects of the matters discussed were:

(a) the parties remained in disagreement about the defendants' position that a revised CAPEX had to be agreed by Zuleika before the parties could approve a budget for Expenditure; and
>
> (b) the defendants maintained their position that once a revised CAPEX had been agreed and Expenditure schedules agreed, the project could then move forward.

5.1.9 Events leading to the termination of the BTS Agreement by the defendants

1. Although Mr Carson sent correspondence to Mr McInnes seeking a Joint Venture Committee meeting on 28 May 2019,[305] and the defendants agreed to extend the Earn‑in Period by monthly extensions until 12 November 2019, there were no further Joint Venture Committee meetings.
2. It appears that there were a number of reasons why no further meetings occurred, one of which was that Mr McInnes was engaging in a 'roadshow' for the defendants and another was that Mr Carson was ill, and in and out of hospital.[306]
3. On 10 October 2019, Vango released to the market a letter to shareholders written by Mr McInnes, which was about one month after the release of its 2019 annual report to the market. In the letter Mr McInnes made the following statement about the K2 deposit:[307]

K2 Update. Shareholders will be aware that we have a Binding Term Sheet agreement with Dampier Gold (ASX: DAU) in respect of our K2 Gold Deposit within the Marymia Project. Our agreement with Dampier sets out that Dampier can contribute the lesser of 50% of the capital expenditure or $3 million to the development of a mine at the K2 Deposit, and the exploration for and mining of gold at K2 and its processing for the extraction of gold. By any reasonable commercial assessment, the capital expenditure required for development, exploration, mining and processing at the K2 underground mine will be in excess of $20 million. Whilst moving forward to develop K2 in the mid to longer term will benefit all parties concerned, Vango remains focussed on the much larger projects being opened up at Trident, Triple P and other potentially larger high priority target areas.

1. It is notable that Vango made no mention in its 2019 annual report that the potential cost of the development, exploration, mining and processing at the K2 underground mine had substantially increased to an amount exceeding $20 million. It is also notable that Vango did not release to the market any updated feasibility reports to support this statement.
2. After Mr Carson read this letter to the market, he wrote a letter dated 31 October 2019 to Mr McInnes in which he pointed out that despite several requests, Zuleika had yet to receive any material or report from Vango to support the increase of the CAPEX in the BTS Agreement of $6 million. He also pointed out that even if further capital expenditure was required for processing and treatment, such expenditure could be met from cash flow, as contemplated by the Entech reports. Mr Carson also made requests for a copy of the material relied upon to support the representation made to shareholders, and a Joint Venture Committee meeting to discuss the matter and how the Joint Venture may be progressed.[308]
3. The day after Mr McInnes released the letter to the market, the board of Vango met. The directors of the board in attendance on 11 October 2019 were Mr McInnes, Mr Zhou, and Ms Zhang (a non‑executive director). Mr Morgan and Mr Clynk also attended. One of the items of the agenda was 'Progress with DAU JV and DAU AGM'. Under this item, the minutes of the board meeting recorded the following matters were discussed and a resolution was passed to extend the Earn‑in Period a further month:[309]

Bruce Mclnnes reported that he has exhausted every way to for Dampier to agree that their ownership is less than 50% of capex or $3M. Negotiations commenced with Amanda McMasters to preparing documents for mediation. Dampier appears to have repudiated their own document. DAU's AGM is next week and there appears to be no support to 'roll the board'.

The Company should proceed with mediation. Dampier is issuing shares to dilute opposing shareholders. It was proposed and agreed that there is no need for the Company to send in its DAU proxy.

Proposed to proceed with a well-prepared mediation. Need to build K2 into mining table. No need yet to flag any expected date to commence mining.

Doing work on Kl, with no work on K2. Confident that the Company can retain control of K2 (maximum possible outside interest is 15% X 2 = 30%: Dampier 15% and Billabong Gold 15%)

Bruce McInnes proposed that the Company agreed with another 30-day extension (current period expires 12/10/2019).

IT IS RESOLVED to agree to another 30-day extension after, and subject to, receipt of Amanda McMaster's legal opinion.

1. The reason why Vango agreed to extend the Earn‑in Period for a further month on 11 October 2019 was in the hope that it would be able to come to some sort of resolution with Zuleika.[310]
2. However, the defendants did not agree to any further extensions of the Earn‑in Period.
3. On 14 November 2019, Mr Clynk sent a letter to Mr Carson on behalf of the defendants in which he informed Mr Carson that Vango's board had rejected Zuleika's request for a further extension of one month of the Earn‑in Period under the BTS Agreement and stated:[311]

In considering Dampier's request, the Vango Board of Directors has taken into account the facts and circumstances of the conduct of the parties to date. In that regard, the Board is cognisant of the time and resources which have been invested in the operation of the Binding Terms Sheet. Further, the Board notes that Vango has already agreed to 6 previous x 1 month extensions to the Earn-in Period.

The Vango Board does not consider there is any benefit in continuing to delay the close of the Earn-in Period, nor is it required to provide any further extensions.

Accordingly, the Board has directed me to notify Dampier that Vango and DPPL:

(a) will not grant any further extensions to the Earn-in Period;

(b) considers that Dampier has failed to satisfy the required Expenditure during the Earn-in Period and, as such, Dampier has failed to earn any Joint Venture Interest; and

(c) the Term Sheet has now lapsed.

1. Vango, did not, however, inform the market of this decision until 5 February 2020.
2. In a letter Mr McInnes released to the market on 5 February 2020, it was stated:[312]

On the 14 November 2019, Vango Mining confirmed its decision that it would not consent to a further extension of the termination date for the BTS.

Having already provided DAU with six extensions of the termination date since May 2019, the Vango board formed the view that any further extensions of the termination date would not result in the productive commercial progress of the BTS.

The two companies ongoing difficulties in resolving complications arising from the ambiguous and, in some instances, nonsensical wording of the BTS, resulted in irreconcilable and incompatible differences in the interpretation and application of the BTS. As a result, Vango concluded that it would be in the best commercial interests of both companies and their shareholders to not extend the termination date any further.

Vango is a significant shareholder of DAU. As such it looks forward to DAU progressing its own project interests, and delivering value for all DAU shareholders.

1. Zuleika's lawyers responded to this announcement and to the letter dated 14 November 2019 in a letter dated 12 February 2020 addressed to the defendants' lawyers.[313] The letter claimed that Vango had failed to perform the terms of and repudiated the BTS Agreement, informed the defendants that Zuleika accepted Vango's repudiation, terminated the BTS Agreement, and made a demand of payment of $21,573,813 for loss and damage incurred to date.
2. The letter also sought written confirmation from Vango that:

(a) Zuleika owned at a minimum 4.1% interest in the Tenement as at 12 May 2017; and
>
> (b) Vango would honour each of the Milestone Payments and the royalty payments (pursuant to the terms of the Sale Agreement dated 16 August 2016).

3. On 26 May 2020, Vango released a statement to the market in which it referred to the fact that Zuleika had commenced these proceedings, described the proceedings as spurious, stated the BTS Agreement had lapsed, and that Zuleika had failed to earn‑in any interest in K2.[314]

1. The principles relating to repudiation of contract are well established. They were recently restated by Buss P and Murphy JA in Armada Balnaves PTE Ltd v Woodside Energy Julimar Pty Ltd as follows:[315]

The term 'repudiation' is used in different senses. In one sense, the term 'repudiation' may refer to any breach of contract which justifies termination by the other party. In this sense, 'repudiation' describes both (1) breach of an essential term (and whether a term is essential as a question of the proper construction of the contract), and (2) a sufficiently serious breach of an intermediate (non‑essential) term, where the breach deprives the party not in default of a substantial part of the benefit to which it was entitled under the contract. Breaches of the latter kind are sometimes described in a conclusory way as breaches 'going to the root of the contract'.

In another sense, 'repudiation' may refer to conduct of the repudiating party which evinces an unwillingness or inability to render substantial performance of a contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it in a manner substantially inconsistent with the party's obligations. When used in this sense, the test of repudiation is whether the conduct of that party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it. Repudiation in this sense may be referred to as 'renunciation'.

Renunciation in this sense may be established by the promisor's express language to that effect. Renunciation may also be established where the promisor's express language and conduct conveys to the promisee that the promisor intends to fulfil the contract only in a manner substantially inconsistent with that party's obligations, and not in any other way. A common form of repudiation is an invalid termination of the contract.

Generally speaking, a finding of repudiation depends upon objective acts and omissions, and not upon uncommunicated intentions. The bona fides of the allegedly repudiating party may however be of significance in cases in which it is alleged that repudiation is evinced by the party having taken a mistaken view of the interpretation of the contract.

Whilst it is possible that a party may repudiate (by renunciation) a contract by insisting on an incorrect interpretation of the contract, that is not always the case. There are other cases in which a party, though asserting a wrong view of a contract because it believes it to be correct, is nevertheless willing to perform the contract according to its tenor. In the latter case, the party 'may be willing to recognise his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him'.

Where the promisor declares its inability to perform (by words or conduct), its conduct is renunciatory, and the promisee, in establishing repudiation, need not prove that the promisor was actually unable to perform as a matter of fact. Where, however, there is no such renunciation by the promisor, and the promisee seeks to establish repudiation by reason of the promisor's inability in fact to perform, the promisee must show that the promisor has become 'wholly and finally disabled' from performing the essential terms of the contract.

Commonly, resort to factual inability to ground a right to terminate will occur where factual inability was unknown to the promisee at the time, but subsequently the promisee seeks to rely on it as a further or alternative ground for justifying its termination or purported termination of the contract.

Repudiation is a serious matter and is not to be 'lightly found or inferred'. The repudiation of a contract must appear clearly and without ambiguity. The onus is on the party alleging repudiation to prove it.

Repudiation by the promisor does not itself bring about a termination of the contract. If the innocent party does not accept the repudiation, the contract remains on foot.

A repudiation continues to operate until it has been retracted by the repudiating party. Generally, the repudiating party may retract the repudiation at any time before the innocent party has accepted the repudiation, although the repudiating party may be precluded from retracting a repudiation by, eg, the operation of an estoppel.

The general position is that the repudiating party must communicate his or her retraction to the innocent party. Retraction may sometimes occur by a performance of the obligations which were repudiated. In Union Eagle Ltd v Golden Achievement, Lord Hoffman observed:

[A] party whose conduct has amounted to an anticipatory breach may, before it has been accepted as such, repent and perform the contract according to its terms.

1. The terms that will be implied in law as obligations in commercial contracts were summarised by the Court of Appeal in Binningup Nominees Pty Ltd v Mirvac (WA) Pty Ltd as follows:[316]

The law implies obligations in contracts to the effect that:

1. each party will not hinder or prevent the fulfilment of the purpose of the express terms of the agreement;
2. each party will do all things necessary on its part to enable the other party to have the benefit of the agreement; and
3. each party will abstain from any act which would destroy or deprive the agreement of its efficacy or efficiency.

Obligations of that kind have been characterised as rules of construction, but also described as implied terms, although the taxonomy does not necessarily yield practical differences.

In Campbell v Backoffice Investments Pty Ltd, Gummow, Hayne, Heydon and Kiefel JJ observed that care must be exercised in identifying both the content and operation of an implied obligation to cooperate lest it be at odds with the terms upon which the parties have expressly agreed.

In Marmax Investments Pty Ltd v RPR Maintenance Pty Ltd, the court adopted the observations of Cooke J in James E McCabe Ltd v Scottish Courage Ltd, in which his Lordship said:

A duty to co‑operate in, or not to prevent, fulfilment of performance of a contract only has content by virtue of the express terms of the contract and the law can only enforce a duty of co‑operation to the extent that it is necessary to make the contract workable. The court cannot, by implication of such a duty, exact a higher degree of co‑operation than that which could be defined by reference to the necessities of the contract. The duty of co‑operation or prevention/inhibition of performance is required to be determined, not by what might appear reasonable, but by the obligations imposed upon each party by the agreement itself.

In the absence of a fiduciary relationship, there cannot be a duty to cooperate in bringing about something which the contract does not require to happen: Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 at 124D. In that case, the Court of Appeal said at 125: 'A contract may "contemplate" many benefits for the respective parties, but each can only call on the other to provide, or cooperate in the providing of, benefits promised by that party'. (original emphasis)

In Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd, Mason J said:

It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself.

The High Court's decision in Park v Brothers is an illustration of the importance of ascertaining first, in this context, the nature and scope of the express provisions of the contract, before considering the ambit of the implied duty to cooperate.

1. Pursuant to cl 18 of the BTS Agreement, it was an express term that each party shall do all acts and things as may be reasonably required by the other party to effectively carry out and give effect to the terms and intentions of the BTS Agreement. Thus, as Zuleika submits, it was incumbent upon each of the parties to make reasonable efforts to participate in the arrangement and attendance of Joint Venture Committee meetings and to reach determinations consistent with the terms of the BTS Agreement.
2. In this matter, the defendants admit that it was implied as a matter of law into the terms of the BTS Agreement that each party has a duty not to prevent the fulfilment of the BTS Agreement, and each party has a duty to do all things necessary to enable each other party to have the benefit of the BTS Agreement.
3. However, the defendants do not admit that; as a matter of law, it was implied as a term in the BTS Agreement that each party had a duty to co‑operate in progressing the Joint Venture.
4. As Vaughan J explained in James Point Pty Ltd v The Minister for Transport [No 3]:[317]

The implied term is not at large. It does not require that a party act generally to the benefit of the other party; the ambit of the duty to co‑operate is defined by what has been promised under the contract. The implication is that a party will do that which is reasonably necessary to secure to the other party the benefit of the particular contractual provisions. Thus the implied obligation does not extend beyond the subject matter and obligations of the contract; it supports the primary obligations under the contract.

1. It is clear, however, that the scope, nature and functions of the parties under the BTS Agreement required each of the parties to co‑operate. Without reasonable co‑operation, the terms of the BTS Agreement could not be performed.
2. The scope and nature of the BTS Agreement as a joint venture agreement required the parties to carry out specific functions under the agreement. These functions could only be properly carried out by the parties if they co‑operated and complied with cl 18 by doing all acts and things as may be reasonably required by the other party to effectively carry out and give effect to the terms and intentions of the BTS Agreement. This is because the work necessary to explore and bring into production ore from the Tenement was divided between the parties but both were required to conduct that work through decisions being made by the Joint Venture Committee, which committee was comprised of the parties. The work to be carried out pursuant to the terms of the BTS Agreement was divided between the parties as exploration operations and development operations. Pursuant to cl 5 of the BTS Agreement, by assigning to Zuleika the work of exploration manager and the defendants the work of the development manager, each were required to conduct these Joint Venture operations in accordance with the programs, budgets and decisions made by the Joint Venture Committee, and in accordance with accepted mining and exploration methods and practices. Put simply, it was necessary for the parties to work together through the Joint Venture Committee to explore and develop the Tenement.
3. The carrying out of acts by the parties in accordance with cl 4 (the obligations of the Joint Venture Committee) and cl 5 were necessary to the performance by the parties of the obligations of the contract. Unless the parties reasonably co‑operated with each other in the performance of the functions of exploration and development, the purpose of the contract would likely not be fulfilled. This work comprised fundamental obligations of the contract.
4. In addition, cl 18 was not on its own sufficient to require co‑operation, but if the term is implied then it necessarily follows that the doing of acts and things that were reasonably required to carry out and give effect to cl 4 and cl 5 of the BTS Agreement would require the parties to co‑operate in doing those acts and things. In addition, without the co‑operation of the defendants as a member of the Joint Venture Committee, Zuleika would be unable to contribute to Expenditure pursuant to cl 2(b) to earn‑in an interest in the Tenement.
5. For these reasons, implying a duty to co‑operate in the BTS Agreement does not rise above the promises made by the parties or extend beyond the obligations of the contract.[318]

5.3 The defendants breached the terms of, and wrongly repudiated, the BTS Agreement by preventing Zuleika from contributing to Expenditure

1. The evidence overwhelmingly establishes Zuleika has proved that the defendants breached each of the three pleaded implied terms, by preventing Zuleika from contributing to Expenditure during the Earn‑in Period.
2. The evidence also establishes that the defendants by their conduct repudiated the BTS Agreement by preventing Zuleika from contributing to Expenditure during the Earn‑in Period. The defendants clearly did not want Zuleika to earn‑in an interest in the Tenement after the Ore Treatment Agreement was terminated.
3. As senior counsel for Zuleika submitted in closing, when Billabong raised its head in June 2017 by its parent company Superior Gold writing to Vango and Zuleika and claiming, pursuant to the Ore Treatment Agreement, Billabong had first right of refusal to earn‑in an interest of 50% in the Tenement, all of a sudden, the defendants stood to lose everything. This was because if the Billabong claim was successful then the defendants' other 50% interest in the Tenement would become the subject of a separate binding terms sheet with Billabong potentially resulting in the defendants ending up with no interest in the Tenement.[319]
4. From this time onwards, the defendants wanted to tear up the BTS Agreement and renegotiate a new agreement to potentially allow Zuleika to only earn‑in a 10% to 15% interest in the Tenement. This strategy was revealed in the minutes of a meeting of the board of Vango on 8 January 2018,[320] and discussed again at Vango's board meeting on 11 October 2019.
5. The defendants' strategy was to renegotiate the terms of the BTS Agreement, and they were not going to allow Zuleika to contribute to Expenditure to earn‑in until Zuleika agreed to renegotiate.
6. Consistently throughout the term of the BTS Agreement, Zuleika sought to pass resolutions by the Joint Venture Committee so as to enable it to contribute to Expenditure. The defendants did not co‑operate.
7. At a Joint Venture Committee meeting on 25 July 2017, after the defendants had terminated the Ore Treatment Agreement, Mr McInnes expressed the view that the parties should 'tear up the joint venture' and put in place a new agreement.[321]
8. Mr McInnes maintained this view thereafter, and made the statement again at Joint Venture Committee meetings on 15 February 2018[322] and 7 May 2019.[323]
9. The defendants repeatedly prevented Zuleika from contributing to Expenditure by repeatedly refusing to agree to any resolution to allow Zuleika to contribute at a Joint Venture Committee meeting. Formal resolutions to this effect were voted against by the defendants on 31 October 2018,[324] 21 November 2018,[325] 11 January 2019,[326] and 17 May 2019.[327]
10. It is formally admitted by the defendants that, during the extended Earn‑in Period, the defendants proposed alternative figures for the CAPEX to Zuleika on multiple occasions and sought to agree an alternative figure for the CAPEX with Zuleika.[328]
11. Whilst the defendants formally deny that they sought to require Zuleika to agree an alternative figure for CAPEX prior to approving any Expenditure schedules or development work programmes,[329] the evidence set out in 5.1.7 to 5.1.9 clearly demonstrates otherwise.
12. However, the defendants admit that, since as early as 10 July 2018, the defendants insisted on 15 occasions that Zuleika agree to a revised CAPEX.[330] The last of these occasions was at a meeting of the Joint Venture Committee on 17 May 2019.[331]
13. Mr McInnes gave evidence that, based on what he understood to be the actual costs associated with the development of the K2 mine, he no longer wanted Zuleika to earn a 50% interest in the Tenement by expending $3 million and wanted Zuleika to agree to a lesser percentage Joint Venture Interest by agreeing to a revised (higher) CAPEX to achieve that result.[332]
14. Mr McInnes made it very clear to Zuleika, including in correspondence, that the defendants would not agree to approve any tranche of Expenditure unless Zuleika first agreed to a revised CAPEX.
15. Mr McInnes knew that the defendants could not compel Zuleika to agree a revised CAPEX figure under the BTS Agreement.[333] Notwithstanding, Mr McInnes (and Mr Zhou) sought to cause Zuleika to do exactly that, going so far as to allege that Zuleika was in breach of the BTS Agreement for not doing so.[334]
16. The position of the defendants not to approve any contributions by Zuleika to Expenditure and to demand that Zuleika first agree to an increased CAPEX for the development of the K2 underground mine was not only misconceived but had no legal basis.
17. What is fundamental is that the total amount for the exploration, development and production of ore of the Tenement pursuant to the terms of BTS Agreement is and was not contemplated to be a total of only $6 million. This can be clearly illustrated by the following example.
18. Clause 3 of the BTS Agreement expressly provided for an amount of total Joint Venture Expenditure incurred which was not limited to any maximum amount.
19. The CAPEX of $6 million was, as defined in cl 26, to be the capital cost estimate for the development of the mine on the Tenement being, as at the Commencement Date, $6 million, or such other amount as agreed in writing by the parties.
20. As the defendants point out in their submissions, the defendants had no obligation to contribute to Expenditure until the end of the Earn‑in Period, but if they had made no contributions during this period, and if Zuleika made contributions of $3 million pursuant to cl 3(b) of the BTS Agreement on the expiry of the Earn‑in Period, the defendants would have had to contribute to Expenditure incurred by that date in respect of the Joint Venture in proportion to their Joint Venture Interest, otherwise pursuant to cl 3(b) their interest would dilute.
21. The effect of these provisions were that if, by the end of the Earn‑in Period, only $3 million of 'Expenditure' had actually been incurred and the CAPEX remained at $6 million within the meaning of that term in cl 26, Zuleika had contributed that amount, and the defendants had made no contribution, unless the defendants then made a contribution of $3 million to Expenditure, their Joint Venture Interest would dilute.
22. This construction is clear from cl 3(a) and cl 3(b) when read with the second paragraph of cl 2(d), which provides as an example (if notice is given to bring the Earn‑in Period to an end early), that if Zuleika had contributed $3 million to Expenditure at the date of the shortened period of the Earn-in Period and the total CAPEX to that date was $4 million, Zuleika would be entitled to the maximum initial 50% Joint Venture Interest, with such Joint Venture Interest increasing by 25% to 75% if the defendants' interest diluted under cl 3(c) (by not contributing to Expenditure in accordance with their 50% Joint Venture Interest).
23. Clause 2(a) required Zuleika to contribute up to the lesser 50% of the CAPEX (being $6 million or such other amount agreed in writing by the parties) or $3 million to Expenditure to earn‑in a Joint Venture Interest of 50%. This was not the only contribution they were required to make. After the expiry of the Earn‑in Period, but for the termination of the BTS Agreement by Zuleika by letter dated 12 February 2020, they would have been required to equally contribute to the 'total Joint Venture Expenditure' (within the meaning of cl 3(c)), being the total of all costs incurred in connection with the activities of exploration, development and mining of the Tenement.
24. If, after Zuleika had earned‑in a 50% Joint Venture Interest by the end of the Earn‑in Period by expending an amount of $3 million on the basis that the agreed CAPEX was $6 million, but not all works had been carried out and to bring the Tenement into production ultimately required Expenditure of an amount of $14 million in addition to $6 million, pursuant to cl 3 of the BTS Agreement, Zuleika would have been required to contribute an additional $7 million as Expenditure to maintain their 50% interest in the Joint Venture.
25. At least by February 2018, there was clearly exploration and refurbishment work to be carried out on the Tenement. However, the defendants refused to allow Zuleika to contribute to the cost of this work.[335] Yet the defendants expended their own funds on exploration work. This was work pursuant to the terms of the BTS Agreement that, but for the non-cooperation of the defendants, Zuleika was entitled to contribute to Expenditure pursuant to cl 2 of the BTS Agreement.
26. Zuleika was prevented from contributing as Expenditure for the cost of this work by the defendants repeatedly refusing to agree to any resolution by the Joint Venture Committee to approve contributions by Zuleika until or unless Zuleika agreed to an alternative CAPEX higher than $6 million.
27. For these reasons, I am satisfied that Zuleika has proved that the defendants have breached:

(a) each of the three implied terms pleaded by Zuleika in its Statement of Claim (the duty to co‑operate in progressing the Joint Venture, the duty not to prevent the fulfilment of the BTS Agreement, and to do all things necessary to enable each other party to have the benefit of the BTS Agreement); and
>
> (b) cl 2(a) and cl 2(c) of the BTS Agreement being its right to contribute as Expenditure up to the lesser of 50% of the CAPEX or $3 million, and in consideration for that Expenditure to earn‑in a Joint Venture Interest of up to 50% within the Earn‑in Period.

28. This conduct of the defendants was a sufficiently serious breach of the terms pleaded as implied terms of the duties to co‑operate in progressing the Joint Venture, not to prevent the fulfilment of the BTS Agreement, and to do all things necessary to enable Zuleika to have the benefit of the BTS Agreement. This was conduct which deprived Zuleika of a substantial part of the benefit to which it was entitled under the contract, namely the right to earn‑in a 50% interest in the Tenement. It was also conduct that can properly be described as renunciation of the fundamental obligations of the BTS Agreement.
29. The defendants' conduct from at least July 2018 until the end of the extended Earn‑in Period can properly be described as renunciation in two senses.
30. First, the conduct of the defendants in this period of time evinced an intention to no longer be bound by the BTS Agreement. Second, during this period of time their conduct and express statements conveyed to Zuleika that they intended to fulfil the BTS Agreement only in a manner substantially inconsistent with their obligations, and not in any other way.
31. For these reasons, I am satisfied that Zuleika has proved that the defendants breached the terms of, and wrongfully repudiated, the BTS Agreement by preventing Zuleika from contributing to Expenditure.

5.4 The defendants breached the terms of the BTS Agreement by conducting exploration operations without prior approval of the Joint Venture Committee or the involvement of Zuleika, and funded Tenement costs, prepared budgets and engaged in project management without prior approval by the Joint Venture Committee

1. The defendants admit that, during the extended Earn‑in Period, they conducted exploration operations without the prior approval of the Joint Venture Committee or Zuleika, and without the involvement of Zuleika as exploration manager of the Joint Venture.[336]
2. As set out in [133] of these reasons the defendants concede that on the face of it, they breached cl 5(a) and cl 5(c)(i) of the BTS Agreement by carrying out exploration activities in circumstances where, if approved by the Joint Venture Committee, Zuleika would have been responsible for preparing and performing the exploration activities. However, they argue that the exploration activities carried out by them are not breaches of the BTS Agreement that constitute repudiation. This is because they claim that because they hold the Tenement subject to a condition of the grant they are required to incur a minimum amount of Expenditure on mining or in connection with mining, or obtain an exemption from any shortfall in Expenditure. The defendants point out that if the annual Expenditure condition was not met during the Earn‑in Period, the defendants were at risk of forfeiting the Tenement pursuant to the provisions of the Mining Act 1978 (WA) (Mining Act) and Mining Regulations 1981 (WA) (Mining Regulations).
3. The minimum yearly Expenditure required by the Department for the Tenement from 2007 until 2021 was $90,300.[337] Although an exemption can be obtained from the Department to spend the minimum expenditure amount for a number of tenements only on one tenement, pursuant to s 115 of the Mining Act, there is no evidence before the court at the material time that the defendants had received approval to do so.[338]
4. Pursuant to cl 9 of the BTS Agreement, the parties were responsible for ensuring that the Tenement was maintained in good standing in accordance with any applicable laws and in proportion with their equitable interest in the Tenement. In November 2018, in an email to Mr Carson, Mr McInnes claimed that Vango had expended money on the Tenement because it was obliged to keep the Tenement in good standing, pursuant to cl 9 of the BTS Agreement.[339] However, the defendants expended significantly more than the minimum expenditure required by the Department to keep the Tenement in good standing. Mr McInnes conceded when cross‑examined that every time he told Zuleika that the defendants had expended money on the Tenement because they had to keep it in good standing, he knew that the defendants had expended far more than the required minimum expenditure.[340]
5. It was obvious to Zuleika that the defendants had done so. The actual total Expenditure on the Tenement reported to the Department in the reporting years for 2017, 2018 and 2019 was $2,065,376.60 with $1,893,193 spent on exploration activities.[341]
6. Mr McInnes gave evidence purporting to justify the defendants' expenditure on the Tenements by reference to a threat by the Department to take 'the tenements off us for non‑expenditure'. After senior counsel for Zuleika called for the Department letters to this effect, Mr McInnes accepted that the documents produced in answer to the call related to applications for other tenements and were notices that came into existence prior to the execution of the BTS Agreement.[342]
7. When Mr McInnes was cross-examined he conceded that drilling on the Tenement was undertaken by the defendants without consultation with Zuleika, and Zuleika was not given an opportunity to fund exploration activities.[343] Mr McInnes also admitted that he caused exploration work to be carried out on the Tenement during the Earn‑in Period.[344] Indeed, Mr McInnes gave evidence that he did not tell Zuleika anything about the exploration activities until the middle of 2018 in response to Zuleika specifically asking about Vango's exploration activities.[345]
8. As set out in 5.1.7 to 5.1.9 of these reasons, despite many requests and items being placed on the agenda for several consecutive Joint Venture Committee meetings, the defendants provided Zuleika with limited information about the exploration activities they had undertaken, did not provide any information directly to Zuleika about exploration outcomes, and provided no account to Zuleika of the amounts it expended as Expenditure on the Tenement.
9. The exploration activities undertaken by the defendants were not insignificant. These activities included drilling on the Tenement and preparation of plans and budgets. On 16 February 2018, Vango approved a drilling programme and budget for K2.[346] Vango made the following relevant statements in announcements to the market about the work it had planned and carried out, and to Zuleika at Joint Venture meetings:

(a) on 30 November 2017, 31 January 2018 and 9 March 2018, Vango announced to the market that it intended to commence development work on the Tenement in preparation for commencement of mining operations, including a dewatering program in early 2018;[347]
>
> (b) on 24 April 2018 and 16 May 2018, Vango made an announcement to the market concerning drilling activities undertaken, or underway, on the Tenement;[348]
>
> (c) at a Joint Venture Committee meeting on 10 July 2018, Mr McInnes stated that exploration drilling of the K2 mine site had commenced two months prior;[349]
>
> (d) on 31 July 2018, Vango released to the market its quarterly report in which it informed the market that drilling on the Tenement had been completed successfully;[350]
>
> (e) at a Joint Venture meeting on 31 October 2018, Mr McInnes confirmed that Vango had expended funds on the Tenement and stated it did not require any contribution from Zuleika;[351]
>
> (f) on 21 November 2018, Mr McInnes sent an email to Mr Carson which provided specific comments on each of the agenda items proposed by Zuleika for the next Joint Venture Committee meeting and acknowledged that the defendants had expended funds on the Tenement without the approval of the Joint Venture Committee.[352]

10. Mr McInnes gave evidence that he considered Zuleika could have, if it chose to do so, undertaken Joint Venture work and after incurring the costs of the work sought approval from the Joint Venture Committee to authorise those costs as its contribution to Expenditure. Given that the defendants consistently refused to allow Zuleika to contribute to Expenditure to allow it to earn‑in an interest in the Tenement, Zuleika could have had no confidence that the cost of any work would be approved. In any event, as a matter of practicality, Zuleika did not have possession of, or day-to-day management of the Tenement. In addition, it was the defendants who had sufficient information to agree to resolutions of the Joint Venture Committee for programmes and budgets for Zuleika to contribute Expenditure during the extended Earn‑in Period.
11. In about March 2018, Mr Clynk prepared a memorandum of schedule of work to be undertaken prior to recommencing underground mining and estimates of cost for each step which was designed by Vango to inform and mitigate the risk associated with any decision to commit CAPEX to the K2 Underground project. In this memorandum, he outlined 15 steps. The last of the steps was to complete all required plans for sign off by the Joint Venture Committee. Each of the steps were costed which when added, totalled between $7,880,000 to $8,200,000.[353]
12. Mr Clynk sent a copy of this memorandum to Vango's mine manager Mr Povey by email on 28 March 2019. On the same day, Mr Povey made amendments to the document, by removing all of the cost information, and removing some of the details of the proposed scheduled work and added some additional notes, but did not delete any of the 15 steps.[354] Later that day Mr Clynk sent a copy of the memorandum as altered by Mr Povey to Mr McInnes. In the email attaching the altered memorandum he stated 'Attached steps required to support decision to commit CAPEX to the K2 Underground mining operation. Let us know when you are ready to chat.'[355]
13. The original memorandum and the amended memorandum set out a blueprint of the work required to be done to progress the Joint Venture and Expenditure for much of that work could have been approved by the Joint Venture Committee, as contributions by Zuleika to Expenditure.
14. It does not appear, however, that the original of the memorandum with the cost information prepared by Mr Clynk or the amended copy was provided to Zuleika. When Mr McInnes was cross‑examined about this document, he could not recall reading it but he did not claim he had not received the email.[356] He did however concede that all of the work listed in the 15 points could have been carried out or paid for by Zuleika.[357]
15. When regard is had to all of this evidence, it is clear that Zuleika has proved that the defendants breached cl 5(a) and cl 5(c)(i) of the BTS Agreement and wrongfully repudiated the BTS Agreement. Clause 5(a) and cl 5(c)(i) were fundamental terms. Zuleika has proved the defendants carried out exploration work during the extended Earn‑in Period and did more work that was necessary to keep the Tenement in good standing as required by the Mining Act, the Mining Regulations and cl 9 of the BTS Agreement.
16. In carrying out exploration work on the Tenement during the extended Earn‑in Period without the prior approval of the Joint Venture Committee or Zuleika, or without the involvement of Zuleika as exploration manager and who had responsibility for the conduct of all exploration operations, the defendants not only breached cl 5(a) and cl 5(c)(i), but this conduct can only be described as renunciation of the fundamental obligations under cl 5(a) and cl 5(c)(i) of the BTS Agreement and the three implied terms.
17. The fundamental obligations under cl 5(a) and cl 5(c)(i), together with cl 18 and the three implied terms, required the defendants:

(a) to co‑operate with Zuleika and not to prevent Zuleika from fulfilling its work of exploration manager in accordance with programs, budgets and decisions made by the Joint Venture Committee; and
>
> (b) to do all things necessary to enable Zuleika to carry out this work, subject only to the reasonable directions of the Joint Venture Committee.

18. I am also satisfied that Zuleika has proved that the defendants funded Tenement costs, prepared budgets, and engaged in project management without prior approval by the Joint Venture Committee in breach of and as required by cl 4(c)(vi) and cl 9 of the BTS Agreement.
19. Clause 4(c)(vi) provided that the Joint Venture Committee shall be responsible for preparing budgets and project management (including maintaining the tenements in good standing) and cl 9 provided that the parties are responsible for ensuring that the Tenement is maintained in good standing. Although the defendants as the legal owners of the Tenement are responsible under the Mining Act and the Mining Regulations for incurring a minimum amount of Expenditure on mining or connection with mining, or obtain an exemption from any shortfall Expenditure, cl 4(c)(vi) and cl 9 of the BTS Agreement required that all Expenditure on the Tenement be approved by the Joint Venture Committee. These provisions required the approval of Zuleika to approve budgets and project management for the Tenement for all work including work to keep the Tenement in good standing, as Zuleika was, during the extended Earn‑in Period, a member of the Joint Venture Committee.
20. The defendants' conduct in carrying out exploration work, funding Tenement costs, preparing budgets, and engaging in project management on the Tenement without the approval of the Joint Venture Committee and Zuleika's involvement as exploration manager in these circumstances can only be properly characterised to convey to a reasonable person, in the situation of Zuleika, as a renunciation of these fundamental obligations. Not only did the defendants not involve Zuleika in this work as exploration manager and as a member of the Joint Venture Committee, the defendants provided Zuleika with limited information about their activities. This conduct of the defendants, as Zuleika claims, was conduct from at least July 2018 to the end of the extended Earn‑in Period which evinced a clear intention that the defendants were unwilling to substantially perform the BTS Agreement in accordance with its terms. In addition, the defendants' conduct constituted acts that were substantially inconsistent with their obligations under the BTS Agreement.
21. For these reasons, I am satisfied that Zuleika has proved that the defendants repudiated these fundamental obligations under the BTS Agreement.

5.5 The defendants breached the BTS Agreement by denying that Zuleika had an equitable interest in the Tenement and wrongfully asserted that the BTS Agreement had lapsed on 14 November 2019

1. It is admitted that on 14 November 2019, Vango, on behalf of the defendants, wrote to Zuleika stating, among other matters, that the defendants:[358]

(a) will not grant any further extensions to the Earn‑in Period;
>
> (b) consider that Zuleika has failed to satisfy the required Expenditure during the Earn‑in Period and, as such, Zuleika has failed to earn any Joint Venture Interest; and
>
> (c) 'the Term Sheet has now lapsed'.

2. On 5 February 2020, Vango made an announcement to the market in which it described its action not to grant any further extensions as 'not [consenting] to a further extension of the termination date' of the BTS Agreement.[359] Clearly, it was wrong to describe or characterise extensions of the Earn-in Period as extensions of the termination date of the BTS Agreement.
3. Although nothing arises of consequence out of the fact that the defendants did not agree to further extend the Earn‑in Period, as set out in 4.3 and 4.5 of these reasons, at the expiry of the extended Earn‑in Period, pursuant to the first paragraph of cl 2(d) and cl 3(a) of the BTS Agreement, Zuleika had earned in a Joint Venture Interest of 4.1%.
4. Because Zuleika had an equitable interest in the Tenement of 4.1%, upon the expiration of the extended Earn-in Period, the BTS Agreement did not lapse and the parties rights and obligations with respect to the Joint Venture in respect of the Tenement continued to be governed by the BTS Agreement until Zuleika accepted the defendants' repudiation and terminated the agreement, by letter dated 12 February 2020.
5. The defendants intentionally refused to acknowledge that Zuleika had earned a Joint Venture Interest and, up until Zuleika accepted the defendants' repudiation, the defendants refused to acknowledge that the BTS Agreement continued to operate.
6. As at 14 November 2019, pursuant to the first paragraph of cl 2(d) of the BTS Agreement, Zuleika was and is entitled to be provided with a duly executed transfer in respect of its Joint Venture Interest in the Tenement in order to enable Zuleika to be registered as a legal and beneficial holder of the Tenement in the amount of the Joint Venture Interest of 4.1%.
7. Consequently, it is clear that Zuleika has proved that the defendants have breached cl 2(d) by failing to provide Zuleika with a duly executed transfer in respect of its 4.1% interest in the Tenement.
8. I am satisfied that by wrongly denying and continuing to deny that Zuleika had an equitable interest in the Tenement, and by wrongfully asserting that the BTS Agreement had lapsed on 14 November 2019, Zuleika has proved that the defendants wrongly repudiated the BTS Agreement by conduct that evinced an intention to no longer be bound by the contract in circumstances that constituted a renunciation of the contract as a whole.

5.6 The defendants failed to negotiate in good faith and use their best endeavours to execute a formal detailed joint venture agreement and breached cl 13 of the BTS Agreement

1. It is admitted by the defendants that the effect of cl 13 of the BTS Agreement, that if either Zuleika or the defendants notifies the other in writing expressing an intention for a formal joint agreement to replace the BTS Agreement, then the party shall negotiate in good faith and use their best endeavours to execute a detailed joint venture agreement on normal terms (which includes clauses that are usually contained in such joint venture agreements) embodying the terms and conditions contained in the BTS Agreement (a Formal Agreement).[360]
2. It is also admitted that cl 18 of the BTS Agreement required each party to sign and execute and do all deeds, acts, documents and things as may be reasonably required by the other party to effectively carry out and give effect to the terms and intentions of the BTS Agreement.[361]
3. As set out in 5.1.6 of these reasons, on 14 November 2017, Mr Carson sent to Mr McInnes a draft farm‑in agreement which Mr McInnes acknowledged receiving. Despite repeated requests from Mr Carson for a response, Mr McInnes did not send Mr Carson a substantive response until June 2018.
4. On 6 June 2018, Mr McInnes sent to Mr Carson, via Ray Galea (an employee of Vango), Vango's response to Zuleika's draft farm‑in agreement.[362]
5. The defendants point out that they did respond during the term of the BTS Agreement to Zuleika's first draft farm‑in agreement and contend that they at all times properly considered Zuleika had a 0% interest in the Joint Venture. In these circumstances, they claim there was no pressing need for a formal joint venture agreement. For the reasons already given above, this contention is fundamentally wrong.
6. Given that the term of the Earn‑in Period was two years from the Commencement Date, the failure of the defendants to respond in a timely manner to the draft provided by Zuleika could be said to be in breach of the obligation to negotiate in good faith.
7. However, leaving aside this issue which I do not find necessary to decide, it is clear that Vango's response was fundamentally inconsistent with the terms of the BTS Agreement which, pursuant to cl 13, a Formal Agreement was to incorporate. This is because the language of cl 13 is clear in that the terms of a Formal Agreement must embody the terms contained in the BTS Agreement and, accordingly, all substantive terms and conditions of the BTS agreement are required to be terms and conditions of the Formal Agreement.
8. The terms proposed by Vango in its response to Zuleika's draft farm‑in agreement that were fundamentally inconsistent with the terms of the BTS Agreement were as follows:[363]

(a) In cl 2.1 (definitions) of Zuleika's draft, Zuleika proposed the 'DPPL Parties Initial Expenditure' be defined to mean 'an amount which is equal to the lesser of 50% of the CAPEX and $3,000,000.'[364] Vango's response was that this definition should be replaced to read 'means an amount which is equal to the lesser of 10% and $450,000. Additionally, all references in the document to "50% and $3,000,000" should be replaced with "10% and $450,000".'
>
> (b) Zuleika proposed that cl 2.1 be titled 'Right to earn a 50% Joint Venture Interest'.[365] Vango's response was that this heading should be replaced with the heading 'Right to earn 15% Joint Venture Interest.'
>
> (c) Zuleika proposed that cl 2.4(b) provides that it have an option at its sole discretion to contribute Additional Farm-in Expenditure to fund all or part of the defendants' Initial Expenditure if the defendants failed to contribute to their Initial Expenditure within 12 months of the Commencement Date.[366] Vango's response proposed to this clause was that 'The Additional Farm‑in Interest that [Zuleika] may earn will be capped at an amount determined by Vango. Vango will advise what this amount is in due course.'
>
> (d) Zuleika proposed in cl 7.1 of its draft that the parties agree and acknowledge that a manager shall be appointed by the Joint Ventures to oversee and manage the Joint Venture Activities and that, for the purposes of the agreement, Zuleika will be the exploration manager and the defendants the development manager prior to a decision to mine being made under cl 3.3.[367] Vango's response stated, 'Dampier is proposed to be the exploration manager of the Joint Venture. This is not acceptable to Vango. Delete the words in clause 7.1(b) "provided that the DPPL Parties continue to hold more than a Minimum Interest, failing which Dampier shall take over as development manager".'

9. These amendments proposed by the defendants to Zuleika's draft farm‑in agreement were fundamentally inconsistent with the terms of the BTS Agreement in two respects.
10. First, the defendants proposed that by operation of the terms and conditions of a Formal Agreement, Zuleika would only be entitled to earn‑in a 10% or 15% Joint Venture Interest in the Tenement, in circumstances where it had an existing right to earn‑in a 50% Joint Venture Interest.
11. Second, Zuleika would be removed from its role as exploration manager of the Joint Venture.
12. When Mr McInnes gave evidence, he did not shy away from admitting that he knew the purpose of a Formal Agreement was to give effect to and, where appropriate, expand upon the basic terms of the BTS Agreement.[368]
13. Importantly, he also did not shy away from admitting when cross‑examined that the defendants' response to Zuleika's draft farm‑in agreement was an attempt to seek to renegotiate terms of the BTS Agreement.[369] When asked in cross examination whether he was seeking to renegotiate the subject matter of the BTS Agreement, Mr McInnes responded 'most emphatically correct at this point, yes.'[370] Mr McInnes also accepted in cross-examination that the variations proposed by the defendants represented substantial changes to the BTS Agreement.[371]
14. Mr McInnes sought to defend the defendants' response to Zuleika's draft farm‑in agreement by claiming that Zuleika's draft departed from the terms of the BTS Agreement, and that he proposed amendments with a view that the parties would have 'a meeting of the minds in the middle'.[372] However, there was no attempt by the defendants to negotiate in good faith the terms of a Formal Agreement that embodied the terms and conditions contained in the BTS Agreement.
15. In the defendants' written closing submissions it is submitted that Zuleika's contention that the defendants repudiated the BTS Agreement by the substance of their response to Zuleika's draft farm‑in agreement must fall away because the terms of Zuleika's draft farm‑in agreement were themselves materially inconsistent with the BTS Agreement. The provisions of the draft which the defendants claim are inconsistent with the terms and conditions of the BTS Agreement are:

(a) by cl 2(c) of the BTS Agreement, the Joint Venture Interest that Zuleika could earn‑in was capped at 50% whereas in Zuleika's draft it included two mechanisms whereby it could earn a greater than 50% interest in proposed cls 2.4 and 2.5;
>
> (b) separately by cl 2.3 of Zuleika's draft, it proposed a mechanism by which it could elect to use the deemed amount of Expenditure under the BTS Agreement as a contribution towards its 'Initial Farm‑in Expenditure' or convert that amount back to a debt owed by the defendants to Zuleika;
>
> (c) by cl 2.4 of Zuleika's draft it was proposed that the defendants be obliged to commit Expenditure prior to Zuleika earning‑in an interest, contrary to cl 3(b) of the BTS Agreement.

16. I do not accept these contentions.
17. First, I do not accept that cl 2.3 of the draft proposed by Zuleika was materially inconsistent with the terms and conditions of the BTS Agreement.
18. Pursuant to cl 3 of the BTS Agreement, upon the expiry of the Earn‑in Period, if one of the parties did not equally contribute to the 'total Joint Venture Expenditure; as at that date their interest would dilute. If at the end of the Earn‑in Period Zuleika had earned‑in a 50% Joint Venture Interest by contributing $3 million and the CAPEX still remained $6 million, the defendants would be required to contribute $3 million to Expenditure otherwise their interest in the Tenement would dilute and Zuleika would in effect earn‑in a greater interest than 50%.
19. The deemed amount of Expenditure had been converted by the terms of the BTS Agreement from a debt to deemed Expenditure. It was not materially inconsistent for Zuleika to propose that Zuleika be afforded an option to convert that sum back to a debt if a decision to mine was not made, or failed to proceed.
20. Second, none of these contentions were raised by the defendants in Vango's response it sent to Mr Carson on 6 June 2018.
21. Third, although the defendants did not have to contribute to Expenditure prior to the expiration of the Earn‑in Period under the terms of the BTS Agreement, clearly they could do so if their contributions were approved by the Joint Venture Committee and they were obligated to do so immediately on the expiration of the Earn‑in Period. Consequently, although Zuleika proposed in cl 2.4 that the defendants' contribution during the Earn‑in Period could be said to be inconsistent with the terms of the BTS Agreement, this draft provision by itself could not be found to be fundamentally inconsistent with the terms of the BTS Agreement, unlike the terms proposed by the defendants in their response in June 2018. Such terms sought to reduce the maximum that Zuleika could earn‑in to either 10% or 15%, and to reduce Zuleika's right under the BTS Agreement to be an equal partner in the development, mining and production of ore from the Tenement.
22. In any event, the evidence of Mr McInnes clearly establishes that the defendants did not wish to enter into a formal joint venture agreement that allowed Zuleika to retain its right to earn‑in a 50% interest in the Tenement.
23. Zuleika did not agree to the issues raised in the defendants' response and proposed amendments, and requested that the defendants comply with their obligations under the BTS Agreement.[373]
24. On or about 16 November 2018, Zuleika provided the defendants with a revised version of the draft Formal Joint Venture Agreement.[374]
25. The defendants did not respond to Zuleika's revised draft. Importantly, Mc McInnes gave evidence that he did not read the revised draft.[375]
26. During the trial, Zuleika made an application to amend its Statement of Claim by pleading as an additional particular to its plea that the defendants breached cl 13 of the BTS Agreement by not providing any response to Zuleika's revised draft farm‑in agreement. After allowing the defendants to take some instructions and hearing from the parties the amendment was allowed.
27. Although the defendants objected to the amendment, the defendants could not be said to be prejudiced by this amendment as the fact that a revised draft was provided to the defendants in November 2018 was not in dispute and it was not in dispute that the defendants did not respond to the revised draft.
28. In light of the fact that no real prejudice to the defendants was raised and the amendment sought to raise a minor issue of fact, did not require the discovery of any documents and did not result in any wasted costs, it was appropriate to allow the amendment.
29. Failing to respond at all to the revised draft constituted a clear breach of cl 13 of the BTS Agreement by the defendants. This breach was not as serious as the breach of cl 13 by the defendants in attempting to renegotiate a whole new agreement which would not embody the terms of the BTS Agreement which entitled Zuleika to earn‑in a 50% interest in the Tenement.
30. The defendants also failed to negotiate in good faith and breached cl 13 by the acts of Mr McInnes and Mr Zhou set out in 5.1.4 of these reasons by claiming that the BTS Agreement was not binding and was subject to conditions precedent including entering into a comprehensive agreement.
31. For these reasons, I am satisfied that Zuleika has proved that not only did the defendant's breach cl 13 of the BTS Agreement, but the defendants also repudiated the whole of the BTS Agreement by their conduct which can only properly be described as evincing an intention not to be bound by the contractual terms of the BTS Agreement; conduct substantially inconsistent with their obligations under the BTS Agreement.
32. For these reasons, by this conduct the defendants engaged in renunciation of the whole of the BTS Agreement. This is because it was a fundamental term of the BTS Agreement that Zuleika was conferred a right to earn‑in an interest of 50% in the Tenement by making contributions to Expenditure, by tranches approved by the Joint Venture Committee, which right was not contingent or subject to any condition precedent.

6.0 The defendants refused to transfer a beneficial interest to Zuleika and Zuleika was ready, willing and able to perform its obligations pursuant to the terms of the BTS Agreement

1. In par 34 of the Statement of Claim, Zuleika pleads that it was ready, willing and able to perform its obligations pursuant to the terms of the BTS Agreement for the benefit of the Joint Venture. Although the plea in par 34 is relevant to its claim for loss and damage, and irrelevant to liability, the plea in this paragraph does not form part of any Deferred Issue pursuant to the orders made by the court on 11 February 2022.
2. The defendants appear to question whether Zuleika would have had available to it sufficient funds in order for it to meet its Expenditure tranches. However, the issue of whether or not Zuleika was able to fund Expenditure is irrelevant in this trial as to liability. What is relevant is that Zuleika was never provided an opportunity to contribute funds to enable it to earn up to a 50% Joint Venture Interest.
3. In any event, Zuleika led uncontradicted evidence that:

(a) immediately following the Commencement Date, it had more than $3 million cash in the bank; and
>
> (b) it held cash in the bank throughout the extended Earn-in Period between $3,283,652 as at the 31 March 2017 to $1,489,763 as at 30 September 2019,[376] to enable it to contribute to Expenditure.[377]

4. In addition, Mr Carson gave uncontested evidence that Zuleika could have raised any additional capital that it required for Expenditure in order to earn‑in a full 50% Joint Venture interest by equity raising.[378]
5. In light of this evidence, I am satisfied that Zuleika has proved that at all material times it was ready, willing and able to perform its obligations pursuant to the terms of the BTS Agreement.

(a) a declaration should be made that Zuleika has a beneficial interest in the Tenement, and any contiguous tenements which cover adjacent, on‑strike or down‑dip extensions of the K2 ore‑body or mineralised zones, of 4.1% and that the defendants hold 4.1% of their collective legal interest in the Tenement on trust for Zuleika; and
>
> (b) an order should be made that the defendants do all things so as to transfer 4.1% of their legal interest to Zuleika.

2. I will hear the parties further as to the precise orders that should be made, and as to costs.

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

CITATION : ZULEIKA GOLD LTD formerly known as DAMPIER GOLD LTD -v- VANGO MINING LTD [2022] WASC 357 (S)

BETWEEN : ZULEIKA GOLD LTD formerly known as DAMPIER GOLD LTD

Practice and procedure - Defendants made a Calderbank offer - Whether unreasonable for plaintiff to refuse offer

Practice and procedure - Plaintiff's application for indemnity costs on grounds defendants' defence was hopeless and conducted in wilful disregard to known facts

Practice and procedure - Plaintiff's application for special costs order - Legal Profession Uniform Law Application Act 2022 (WA) - Whether hourly rate Determination limits should be lifted for specified items

Legal Profession Uniform Law Application Act 2002 (WA) s 141

Defendants' application for indemnity costs dismissed

Plaintiff's application for indemnity costs dismissed

Plaintiff's application for special costs orders granted

Ben‑Pelech v Royle [2020] WASCA 168 (S)

Blatchford v Laine [2018] WASC 207 (S)

Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S)

Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195

Duncan & Weller Pty Ltd v Mendelson [1989] VicRp 36; [1989] VR 386

Eccles v Koolan Iron Ore Pty Ltd [No 3] [2013] WASC 418 (S)

Electricity Generation and Retail Corporation trading as Synergy v Woodside Energy Ltd [2014] WASC 469 (S)

Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1988) 81 ALR 397

Frigger v Lean [2012] WASCA 66

Grbavac v Hart [1996] VSC 37; [1997] 1 VR 154

Heartlink Ltd v Jones as liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S)

Huntingdale Village Pty Ltd v Korda [2015] WASCA 101 (S)

Maio v City of Stirling [No 2] [2016] WASCA 45 (S)

Mount Lawley Pty Ltd v Western Australian Planning Commission [2006] WASC 82 (S); (2006) 157 LGERA 1

Rapuano (T/as RAPS Electrical) v Karydis‑Frisan [2013] SASCFC 93

Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S)

Stewart v Atco Controls Pty Ltd (In liq) [No 2] [2014] HCA 31; (2014) 252 CLR 331

Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388

Yara Australia Pty Ltd v Oswal [2012] WASCA 264

Zulieka Gold Ltd v Vango Mining [2022] WASC 357

1.0 The result of the trial 5

2.0 The costs applications 6

2.1 The costs orders sought by the defendants 6

2.2 The costs orders sought by the plaintiff 6

3.0 Applicable principles - costs orders 8

3.1 Calderbank offers 8

3.2 Indemnity costs orders 10

3.3 Special costs orders 11

4.0 The defendants' application that costs of the action following the refusal of the Calderbank offer by the plaintiff, and all of the costs of the deferred issues be reserved 15

5.0 The plaintiff's application for indemnity costs 18

6.0 The plaintiff's application for special costs orders - Items 4, 7, 19, and 22(a) 19

6.1 Are the maximum amounts allowable under each of the Determination items inadequate? 21

6.2 Overview of the proceedings ‑ were the proceedings factually and legally complex, unusually difficult or important? 21

6.3 Special costs orders as sought by the plaintiff should be made 22

1. The plaintiff was successful at the trial of a preliminary issue which went to liability only. Prior to the trial, pursuant to orders made by the court on 11 February 2022, the plaintiff's claim for damages were deferred to be tried separately from the liability issues.[379]
2. The trial of the preliminary issue concerned a claim in contract for breach of a binding terms sheet entered into on or about 12 May 2017 (BTS Agreement) which entitled the plaintiff to earn in an interest of up to 50% in Mining Lease 52/183. Mining Lease 52/183 comprises three deposits (the Tenement):[380]

(a) the K2 deposit which comprised of an open pit and away from the open pit access to the underground deposit by a decline from a boxcut;
>
> (b) the K1 deposit comprised of an open pit; and
>
> (c) a deposit known as PHB‑1.

3. The plaintiff was entirely successful in its claim that during the earn in period of the joint venture the defendants prevented the plaintiff from earning in an interest in the Tenement of 50% by:

(a) breaching express and implied terms of the BTS Agreement which breaches were significant and serious departures from the obligations imposed on the defendants; and
>
> (b) engaged in conduct that constituted a clear repudiation of the BTS Agreement in that the conduct of the defendants demonstrated a clear unwillingness on their part to substantially perform the BTS Agreement in accordance with its terms; and that they acted substantially inconsistent with their obligations under the BTS Agreement.

4. The plaintiff also claimed that on the proper construction of the BTS agreement it had earned a joint venture interest during the earn in period of 4.1% or 11.87%. The plaintiff's construction that it had earned in a joint venture interest of 11.87% was rejected but the plaintiff's alternative construction that it had earned in an interest in the Tenement of 4.1% was upheld.
5. In light of these findings, it was found that:[381]

(a) a declaration should be made that the plaintiff has a beneficial interest in the Tenement, and any contiguous tenements which cover adjacent, on‑strike or down‑dip extensions of the K2 ore‑body or mineralised zones, of 4.1% and that the defendants hold 4.1% of their collective legal interest in the Tenement on trust for Zuleika; and
>
> (b) an order should be made that the defendants do all things so as to transfer 4.1% of their legal interest to the plaintiff.

(a) the defendants pay the plaintiff's costs of the action, except in respect of the deferred issues (as defined in the orders made on 11 February 2022), up to and including 13 January 2022 (being the date that it made a Calderbank offer), to be taxed if not agreed;
>
> (b) the determination of the costs of the action:

(1) in respect of the deferred issues, up to and including 13 January 2022; and

to be reserved until a time after the deferred issues are heard and determined; and

(c) each party bear its own costs of the costs applications.

1. The plaintiff opposes the defendants' application that costs of the deferred issues and the costs of all other aspects of the action from 14 January 2022 on the basis of the Calderbank offer, and claims that it was not unreasonable for it to reject that offer. The plaintiff instead seeks orders in its favour that:

(a) the defendants pay the plaintiff's costs of the action up to and including 31 October 2022, alternatively, insofar as the plaintiff's costs relate to the preliminary issue (subject to the orders made on 11 February 2022) on an indemnity basis, so that the plaintiff is fully indemnified for its costs, except insofar as the costs are unreasonable in amount or have been unreasonably incurred;
>
> (b) in the alternative, the defendants pay the plaintiff's costs of the action up to and including 31 October 2022; and insofar as they relate to the preliminary issue the subject of the orders made on 11 February 2022, to be assessed if not agreed and in taxing the plaintiff's bill of costs:

(1) the taxing officer is to do so without regard to the Determination item limits imposed by:

(i) item 4 in the in the Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2018 (2018 Costs Determination) and Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2020 (2020 Costs Determination) (reply);

(ii) item 7 (2020 Costs Determination) (discovery);

(iii) item 19 in the 2020 Costs Determination (preparation of case); and

(iv) item 22(a) in the 2020 Costs Determination (trial ‑ fee on brief for counsel);

(2) the taxing officer is directed to make reasonable allowances for the involvement and attendance of both senior counsel and junior counsel at trial and at the de bene esse hearings on 22 and 25 January 2022;

(c) the defendants pay the plaintiff's costs of the costs applications to be assessed, if not agreed.

(a) in 4.0, it was not unreasonable for the plaintiff to reject the defendants' Calderbank offer. For this reason, the defendants' application that the costs of the action on and from 14 February 2022, should be reserved, fails;
>
> (b) in 5.0, an indemnity costs order should not be made in favour of the plaintiff, and
>
> (c) in 6.0, special costs orders in favour of the plaintiff should be made.

1. The relevant principles which govern the exercise of the court's discretion to make an award for indemnity costs in the context of a Calderbank offer are settled, and were set out in some length by Buss JA in Ford Motor Company of Australia Ltd v Lo Presti.[382] In Eccles v Koolan Iron Ore Pty Ltd, Le Miere J summarised the principles explained by Buss JA in the following way:[383]

(1) a Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable;

(2) all of the relevant facts and circumstances must be considered in determining whether a party's rejection of a Calderbank offer was unreasonable;

(3) the mere fact that the recipient of a Calderbank offer is ultimately worse off than he or she would have been had the offer been accepted, does not mean that its rejection was unreasonable;

(4) whether conduct is reasonable or unreasonable always involves matters of judgement and impression;

(5) it is not possible nor desirable to enumerate exhaustively all circumstances which must be taken into account, in a particular case, in deciding whether the rejection of a Calderbank offer was unreasonable, but, ordinarily, regard should be had to, at least, the following:

(a) the stage of the proceeding in which the offer was received;

(b) the time allowed to the offeree to consider the offer;

(c) the extent of the compromise offered;

(d) the offeree's prospects of success, assessed as at the date of the offer;

(e) the clarity with which the terms of the offer were expressed; and

(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it;

(6) the party who makes a Calderbank offer that is rejected bears the onus of satisfying the court that it should make an award of indemnity costs in his or her favour; and

(7) the standard to be applied in awarding indemnity costs should not be allowed to diminish to the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis absent some blameworthy conduct on its part ‑ a test of unreasonableness should not be upheld on other than clear grounds.

1. Where an unsuccessful party submits that the rejection of the Calderbank offer was not unreasonable, the unsuccessful party is to point to a reason for not accepting the offer beyond the usual prospects of being successful in litigation.[384]
2. The Court of Appeal recently reiterated in Strzelecki Holdings Pty Ltd v Jorgensen that, Calderbank offers must be assessed without the benefit of hindsight, and having regard to the strength of the parties' cases as they then stood.[385] Their Honours also relevantly pointed out that it is well‑established that a party's erroneous prediction about the prospects of litigation, on the basis of which he, she, or it rejects a Calderbank offer, may not be regarded as unreasonable if that party was not, at the time, and for good reason, in possession of sufficient information to make a proper assessment of its prospects, or if the circumstances upon which the assessment was based later changed.[386]
3. It is also established that the terms of a Calderbank offer must be unambiguous, that is the terms must be certain. Consequently, it will not be unreasonable to reject a Calderbank offer if there is some reasonable doubt about the nature and extent of what was being offered, that is, its value.[387]

1. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd, Woodward J observed that an award of indemnity costs is appropriate where the action 'has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success'.[388]
2. In Civil Properties Pty Ltd v Miluc Pty Ltd, Newnes JA summarised the principles for assessing whether an award of indemnity costs should be made on grounds that a party brought a hopeless case:[389]

It is well-established that a court has a wide discretion as to costs (albeit, a discretion to be exercised judicially) and that an appellate court will be slow to interfere with the exercise of that discretion. Whether or not an order for indemnity costs is appropriate must depend upon the facts of the particular case. There are not, and cannot be, any hard and fast rules. But an indemnity costs order is a departure from the usual order that costs are awarded on a party and party basis. Ordinarily an indemnity costs order is appropriate only where the unsuccessful party has been involved in some unreasonable conduct in relation to the proceedings, such as where the institution or continuation of the proceeding was plainly unreasonable or the proceeding was issued or maintained for an ulterior or collateral purpose: see Rosniak v Government Insurance Office (1997) 41 NSWLR 608, 616; PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24 [36]. An order for indemnity costs reflects the court's disapproval of the conduct of the unsuccessful party: Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [25].

If a party brings a case which is hopeless it can normally be inferred that the proceeding was commenced or continued 'for some ulterior motive or because of some wilful disregard of the known facts or the clearly established law': Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, 401. But it is not necessary that such an inference be drawn; it is sufficient that the court's resources and the successful party's costs have been wasted on entirely frivolous litigation: Re SCA Properties Pty Ltd (in liq) [1999] QSC 180; (1999) 17 ACLC 1611 [70].

1. In Ben‑Pelech v Royle, the court pointed out:[390]

Relevantly, while the categories of cases in which an indemnity costs order may be made are not closed, one category where indemnity costs are appropriate is where the action has been commenced or continued in circumstances where the applicant, properly advised, should have known that it had no chance of success. Whether that is so is determined objectively ‑ it does not direct attention to the actual legal advice given to the party. The court should not be too quick to characterise a case as hopeless ‑ parties should not be discouraged from persisting in an action merely because success is uncertain. Whether a case was hopeless must be judged without the benefit of hindsight.

Thus, it is sufficient to enliven the discretion to award indemnity costs that, for whatever reason, a party persists in what should, on a proper consideration, have been seen to be a hopeless case.

1. The principles which govern when it is appropriate for the court to make a special costs order are not in dispute. Until recently special costs orders were made pursuant to s 280(1) of the Legal Profession Act 2008 (WA). This Act was repealed and replaced by the Legal Profession Uniform Law Application Act 2022 (WA). Section 141(1) of the Legal Profession Uniform Law Application Act replaces, and in effect, replicates s 280(1) of the Legal Profession Act.
2. Section 141 of the Legal Profession Uniform Law Application Act provides:
   1. Effect of costs determinations

(1) The following are regulated by an applicable costs determination -

(a) the taxation of bills of law practices;

(b) any other aspect of the costs charged by law practices.

(2) Subsection (1) is subject to -

(a) any costs agreement made in accordance with the Legal Profession Uniform Law (WA) Part 4.3 Division 4 or the corresponding provision of a corresponding law; and

(b) section 146; and (c) the Legal Aid Commission Act 1976 section 14.

See the Civil Liability Act 2002 section 15L and the Motor Vehicle (Third Party Insurance) Act 1943 section 27A, which affect costs under particular agreements between a law practice and client.

(3) Despite subsection (1), if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do any or all of the following -

(a) order the payment of costs above those fixed by the determination;

(b) fix higher limits of costs than those fixed in the determination;

(c) remove limits on costs fixed in the determination;

(d) make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.

(4) Subsection (1) does not limit the power of a court, a judicial officer or a taxing officer of a court to determine in any particular case before that court, judicial officer or taxing officer the amount of costs allowed.

(5) If a costs determination is in force in respect of any business referred to in section 133(1), any subsidiary legislation fixing or purporting to regulate the remuneration of law practices in respect of that kind of business is of no force or effect.

1. By s 141(1) and (2) of the Legal Profession Uniform Law Application Act a party's recoverable costs are confined, in effect, by the scale limits in costs determinations. Section 141(3) like the former s 280(2) of the Legal Profession Act 2008 operates as an exception to s 141(1) of the Legal Profession Uniform Law Application Act.[391]
2. Section 141(3) of the Legal Profession Uniform Law Application Act provides that a court may make a special costs order where it is of the opinion that 'the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter'.
3. Section 141 of the Legal Profession Uniform Law Application Act is protective of the successful party to the litigation and, on that account, also serves the administration of justice by facilitating, within the limits imposed by the statutory criteria, the operation of the general principle that a successful party is entitled to its costs of the litigation.[392]
4. Even where orders are made pursuant to s 141(3), it nevertheless remains the task of the taxing officer pursuant to s 141(4) to consider the reasonableness of, and necessity for the work undertaken, and to make a judgment about the remuneration reasonably required.[393]
5. The court must form an opinion about two matters before it can make an order pursuant to s 141(3). First, it must form an opinion that the maximum amount allowable under the relevant scale item is inadequate, in that, there is a fairly arguable case that on taxation the costs allowed by the applicable legal costs determination may properly be allowed in an amount that is greater than the limit imposed by the costs determination. Second, it must form an opinion that the amount allowed is inadequate because of the 'unusual difficulty, complexity or importance of the matter'.[394] This requires that there be a causal connection between the unusual difficulty, complexity or importance of the matter and the inadequacy of the costs allowable under the relevant costs determination.[395]
6. An assessment of whether an amount of costs allowed in respect of a matter under a legal costs determination is inadequate, is not to be determined by the court in a precise way.
7. If the preconditions for making a special costs order are met, then the court may make all or any of the orders provided for in s 141(3).
8. In Blatchford v Laine, Vaughan J also pointed out the following propositions that are established by the authorities, which propositions now have application when the court is considering an application made pursuant to s 141 of the Legal Profession Uniform Law Application Act:[396]

First, the court is in a position to form the opinions required under s 280(2) as matters of impression, rather than science or mathematics, when it has heard the matter and is familiar with the way in which the case was conducted and the issues were litigated. While the court may be assisted by evidence as to the time spent and fees charged, the questions are quintessentially matters of impression rather than of detailed evaluation, precision or science. In particular the assessment of whether there is 'unusual difficulty, complexity or importance' is essentially a value judgment taking into account the court's experience of the usual run of civil cases.

Second, as to the first question, a 'fairly arguable' case will not be established merely because a party has incurred greater costs than those allowable under the relevant costs determination.

However, depending on the case, it may be relevant that a party has applied significantly more resources for the various steps in the litigation than those contemplated under the relevant costs determination. Viewed in the context of the difficulty, complexity or importance of the matter, that circumstance may sustain the conclusion that there is a fairly arguable case that those items and the costs allowable in respect of the matter is inadequate.

This is because, as to importance, the significance of the issues at stake is relevant to the degree of work properly and reasonably done in preparing for and presenting the case at trial. The same consideration applies where a matter is unusually difficult or complex.

Third, the court's power to make an order under s 280(2) is enlivened by satisfaction of any of the factors of 'unusual difficulty', 'complexity' or 'importance'.

Fourth, the word 'unusual' in s 280(2) qualifies only the term 'difficulty' and not the terms 'complexity' or 'importance'.

Fifth, the question of whether there is 'unusual difficulty' involves an evaluative judgment by which the court compares its experience of the particular case and the usual run of civil cases determined in the court. Indeed, that is the approach to all three descriptors. In O'Rourke v P & B Corporation Pty Ltd Martin CJ stated:

'... the word "unusual" means unusual having regard to what one might describe as the usual run of civil cases. The question is not, for example, in this case, whether this was an unusually difficult, complex or important case for specific performance of a contract for the sale of land which at the time the contract was entered into was not sub‑divided. Rather the question is whether this was an unusually difficult, complex or important case, having regard to the usual run of civil cases determined in the Supreme Court and generally in the District Court, because, of course, the Determination is generally applicable to proceedings in both Courts.'

Sixth, the question of 'importance' allows the court to have regard to the significance of the issues that arose in the litigation. Importance can arise either because of the significance of the issues to the parties or because of the significance of the issue to other prospective parties or to the public or the community generally.

Seventh, the question of unusual difficulty, complexity or importance arises in respect of the proceedings as a whole and not in respect of each individual item in the costs determination. The adjectival characteristics of unusual difficulty, complexity or importance qualify the issue, dispute or controversy before the court rather than the work done or services provided in respect of each applicable item.

Eighth, where orders are made under s 280(2)(b) or (c) the taxing officer must still consider the reasonableness of and necessity for the work undertaken and make a judgment as to the costs that ought reasonably be allowed.

Significantly, an application under s 280(2) must fail unless the court characterises the matter - ie the issue, dispute or controversy before the court - as being one or more of: (1) unusual difficulty; (2) complexity; or (3) importance.

4.0 The defendants' application that costs of the action following the refusal of the Calderbank offer by the plaintiff, and all of the costs of the deferred issues be reserved

1. The Calderbank offer was dated 13 January 2022.
2. As the defendants point out in their submissions, at the time the Calderbank offer was made, the parties could be found to reasonably have a fulsome understanding of the case they had to meet at trial.
3. The offer was made at a time after the third version of the statement of claim was filed (29 November 2021), substantial discovery had been given, the plaintiff had filed its witness outlines and the defendants had filed five of its witness outlines, but before the plaintiff had filed the application for a de bene esse hearing to take the evidence of the plaintiff's principal witness Mr Carson who was by that time terminally ill, and before the plaintiff had prepared a detailed and lengthy witness statement containing the evidence in chief of Mr Carson.
4. The terms of the Calderbank offer were as follows:[397]

(a) Vango[398] grants Zuleika a 5% interest in mining tenement 52/183 (Tenement);
>
> (b) the parties acknowledge that the CAPEX for the development of any mine on the Tenement, including, but not limited to, either the K1 and/or K2 and/or the PHB-1 orebody, will need to be agreed;
>
> (c) if Zuleika is unable to contribute 5% to the CAPEX, its interest will be diluted in proportion to the amount contributed. For example, if the total CAPEX is $100M, and Zuleika contribute $3M, then its interest will be reduced to 3%;
>
> (d) each party bears their own costs in relation to the proceedings to date; and
>
> (e) the terms of the settlement will be recorded in a deed of settlement which will record the terms agreed between the parties. The deed of settlement will include a clause recording that the parties will agree on the wording of any ASX announcements issued by them in relation to the settlement and will have annexed to it a binding Heads of Agreement setting out the terms agreed between the parties.

5. This offer is made in accordance with the principles contained in Calderbank v Calderbank and will remain open for 21 days from the date of this letter.
6. The defendants point out that the offer to the plaintiff to settle the whole of the action for a 5% interest in the Tenement was made when the plaintiff was only claiming a 4.1% interest, and prior to the orders being made for the deferred issues to be heard and determined separately.
7. The defendants accept at this point in time the court cannot determine if the Calderbank offer was unreasonably rejected, because the court is yet to hear and determine the deferred damages issues. However, the defendants claim that they should be entitled to rely upon the Calderbank offer if they are successful in defending the deferred issues. They claim that if the plaintiff is awarded no damages the court should find after the hearing of the deferred issues that the offer was reasonable and should have been accepted by the plaintiff.
8. As senior counsel for the plaintiff pointed out, even if the plaintiff was to be only awarded nominal damages in a hearing on the deferred issues it could not be found that the defendants offer was reasonable and should have been accepted by the plaintiff.
9. First, when the offer was made the plaintiff's claim was declaratory relief with respect to a 4.1% interest in the Tenement, and any contiguous tenements which cover adjacent, on‑strike or dip‑down extensions of the K2 ore body or mineralised zones (Extensions), and damages for breach of contract and repudiation. Other than the assessment of damages which was deferred, the plaintiff was awarded the relief it sought.
10. However, the Calderbank offer to the plaintiff was for different relief it was to agree to a 5% interest in the Tenement but not any Extensions, and to enter into a new binding agreement, including the CAPEX for the development of any mine to be agreed, and did not provide for any payment to the plaintiff towards the plaintiff's costs of proceeding to that date.
11. Second, although the offer was to agree to a 5% interest in the Tenement, the plaintiff's interest could be diluted if it did not contribute in proportion to its interest to a CAPEX amount that was yet to be agreed.
12. It cannot be said to have been unreasonable for the plaintiff to have rejected the offer in circumstances where what was offered was of a completely different nature than that sought by the plaintiff. The plaintiff was entitled to insist upon the relief to which it was entitled, not something that was entirely different.
13. Third, the offer was uncertain in that it required further agreement as to the CAPEX for the development of any mine on the Tenement, and a new binding Heads of Agreement, the proposed terms of which were unknown.
14. Fourth, in circumstances where the relationship between the parties had totally broken down it could not be found to be unreasonable for the plaintiff not to agree to enter into a new joint venture by entering into a new binding Heads of Agreement, which proposed terms were unknown and would have to be the subject of further agreement.
15. For these reasons, the orders sought by the defendants should be refused.

5.0 The plaintiff's application for indemnity costs

1. The plaintiff claims that the court should order indemnity costs against the defendants because the defendants' defence to the plaintiff's claim was hopeless, was conducted by the defendants in wilful disregard of known facts, and that the defendants, properly advised, knew or should have known that, since the commencement of the action.
2. Having considered the matter carefully, although the defendants defence failed, I am not satisfied that this is one of those cases where the court should make an award for indemnity costs.
3. In respect of whether the plaintiff had earned in a joint venture interest on the proper construction of the BTS Agreement, although the defendants' construction was rejected, and in part the defendants' construction was found to be commercially absurd, this part of the dispute as to the proper construction of the BTS Agreement was not straightforward. Consideration of the plaintiff's and defendants' construction arguments occupied almost 14 pages of the primary reasons for decision.
4. If the only issue in the trial on the preliminary issue had been whether the defendants breached the terms of, and wrongly repudiated the terms of the BTS Agreement, I would make an indemnity costs order. This is because the undisputed documentary evidence before the court overwhelmingly established that the defendants had by their conduct engaged in multiple breaches of, and had repudiated, the terms of the BTS Agreement.
5. However, if I was to make an indemnity costs order, the order would only be for costs of the action incurred by the plaintiff prior to 28 January 2022, which was the date that the plaintiff amended its statement of claim to claim an 11.87% interest in the Tenement, with the claim for a 4.1% interest remaining as alternative relief. Although the defendants concede that the plaintiff's argument in respect of this issue played a very small part in the resources required to be engaged in the trial of the preliminary issue, given that the plaintiff's claim that it was entitled to 11.87% interest failed, it could not be found that the defendants' defence of the plaintiff's claim for relief after the plaintiff amended its claim on 28 January 2022 was hopeless.
6. For these reasons, I am not satisfied that an indemnity costs order should be made in favour of the plaintiff.

6.0 The plaintiff's application for special costs orders - Items 4, 7, 19, and 22(a)

1. The plaintiff does not seek to lift the hourly rates allowable in each of the Determination items, but does seek the removal of the hourly limits for Items 4 (reply), 7 (discovery), 19 (preparation of case), and 22(a) (trial).
2. In the affidavit of Chloe Alyssa Tolley affirmed 22 November 2022, Ms Tolley deposes that the time spent on work falling within each of these items exceeds the maximum hours and thus the amounts allowable under the 2018 Costs Determination and the 2020 Costs Determination.
3. Item 4 (reply to defence) in each of the determinations prescribes a maximum limit of 10 hours to be charged for the work of a senior practitioner.
4. In respect of Item 4, Ms Tolley states, the defendants filed five versions of the defence and the plaintiff filed five versions of its reply to defence, and the time spent on work falling within Item 4 was at least 101 hours of work, being 4.5 hours of work by senior counsel, 5 hours of work by junior counsel, 56.6 hours of work by senior practitioners, 15.5 hours of work by a junior practitioner and 19.4 hours of work by a restricted practitioner.[399]
5. Item 7 (discovery) of the 2020 Determination prescribes a maximum limit of 10 hours for work to be charged by a senior practitioner for a notice requiring discovery and giving discovery of documents.
6. In respect of Item 7, Ms Tolley states that the parties agreed to provide discovery electronically and following orders made on 21 July 2020 requiring the parties to give general discovery, a total of approximately 4,625 documents were discovered by the parties of which the plaintiff discovered a total of 3,510 documents. In addition, there were 16 tranches of supplementary informal discovery exchanged, and the time spent on work falling within Item 7 of the Determination was at least 638.4 hours, being 225.3 hours of work by senior practitioners, 126.2 hours of work by a junior practitioner, 239.5 hours of work by a restricted practitioner and 47.4 hours of work by a clerk/paralegal.[400]
7. Item 19 (preparation of case) of 2020 Determination prescribes the maximum hours for the preparation of case for trial to be 120 hours of work carried out by a senior practitioner.
8. In her affidavit, Ms Tolley states that in respect of preparation of case, among other things, the plaintiff prepared the urgent de bene esse application, witness outlines for three witnesses and supplementary witness outlines for two witnesses, objections to the defendants' witness outlines, issued, and inspected the produced documents from, four subpoenas, prepared an electronic trial bundle containing over 950 documents, which over 500 documents became trial exhibits, trial materials including papers for the judge, subsequent amendments to the pleadings, and a chronology of events.[401]
9. Ms Tolley also states that the time spent on work falling within Item 19 of the Determination is, at least 1,585.2 hours, being 54.8 hours of work by senior counsel, 110.2 hours of work by junior counsel, 512.2 hours of work by senior practitioners, 447.8 hours of work by a junior practitioner, 312 hours of work by a restricted practitioner and 148.2 hours of work by clerks/paralegals.[402]
10. Item 22 (trial) of the 2020 Determination prescribes a maximum period of 3.5 days' work for a fee on brief for junior counsel, for first day of trial and preparation, including submissions.
11. Ms Tolley states in her affidavit that the time spent by junior counsel on work falling within Item 22(a) was at least 137 hours.

6.1 Are the maximum amounts allowable under each of the Determination items inadequate?

1. The plaintiff points out that the affidavit of Ms Tolley demonstrates that the costs actually incurred by the plaintiff well exceed the maximum amount allowable under the 2018 Costs Determination and the 2020 Costs Determination, and thus the relevant Determination item is inadequate in the sense that there is a real prospect that the bill of costs in this litigation may be taxed at an amount that exceeds the limits imposed.
2. Having regard to the matters deposed by Ms Tolley in her affidavit, I am satisfied that the limits imposed by the relevant items of the costs determinations would prevent the plaintiff from putting a reasonable arguable case to the taxing officer on the costs that ought to be awarded in a taxation of each of these items. For this reason, I am satisfied that the costs allowable under each of the items under the application of the 2018 Costs Determination and the 2020 Costs Determination are inadequate.

6.2 Overview of the proceedings ‑ were the proceedings factually and legally complex, unusually difficult or important?

1. The defendants point out that the issues in dispute were confined to a commercial agreement between the parties, and did not raise issues of significance for the public or the community generally. Although the defendants argue that the trial on the liability issues was not ultimately, factually complex, I do not agree.
2. It is common ground that the trial of the liability issues did not raise any difficult or complex questions of law. However, a voluminous number of documents required consideration by the parties and the court.
3. I accept the plaintiff's submission that the matter was factually complex in that there was a large amount of material to be marshalled in order to prove each of the breaches and repudiation of the BTS Agreement.
4. As senior counsel for the plaintiff points out, the conduct of the defendants through its officers of the company, in particular Mr McInnes, was critical to establishing the breaches of contract. For the plaintiff to make out its case not only was a large volume of documents necessary to be discovered but senior counsel and junior counsel and those instructing them were required to analyse and assemble those documents to enable the plaintiff to make out its case not only by a lengthy analysis of the contemporaneous documents but also through the lengthy cross‑examination of Mr McInnes. I accept that this work added significantly to the time required to adequately prepare a reply to the defendants' defence, discovery, preparation of case and preparation for trial by junior counsel.
5. This was not a simple case of only one breach and repudiation of an agreement. The summary of the findings of breach and repudiation in my reasons for decision delivered in the primary decision comprise five pages and the factual findings of breach and repudiation extend over 100 pages.
6. The matter is important to the parties. It involves two ASX publicly listed companies, the refurbishment and development of an existing underground gold mine, and the right of the plaintiff to earn in an interest of 50% of a tenement, that included the gold mine.
7. I am also satisfied that having regard to the nature and number of contested factual issues, the volume of evidence and the importance of the action, the services of more than one counsel were reasonably necessary for the adequate presentation of the case at trial. Thus, the trial of preliminary issues as to liability justified the involvement and attendance of both senior and junior counsel at trial and allowance should be made for the same.

6.3 Special costs orders as sought by the plaintiff should be made

1. For these reasons, I am satisfied that there is a fairly arguable case that each of these items in the relevant cost determinations are inadequate because of the complexity and importance of the action, and the special costs orders sought by the plaintiff should be made.
2. I am also of the opinion that the defendants should pay the plaintiff's costs of the costs application to be assessed, if not agreed.

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

[1] The plaintiff filed an amended writ of summons dated 9 March 2021 on 12 March 2021 after it had changed its name to Zuleika Gold Ltd.

[2] Exhibit 349; Although Zuleika defines the binding terms sheet in its Second Further Re-Amended Statement of Claim filed on 30 March 2022 (Statement of Claim) as the JVA, to avoid confusion with negotiations for a detailed formal joint venture agreement within the meaning of cl 13 of the binding terms sheet, the binding terms sheet entered into on or about 12 May 2017 is referred to in these reasons as the BTS Agreement.

[3] Exhibit 349; defined in cl 26 to include Mining Lease 52/183.

[4] Exhibits 868 and 869; ts 71, 224, 228, 271.

[6] Definition in cl 2(c) of the BTS Agreement as two years from the Commencement Date.

[7] Exhibit 349; defined in cl 26 to mean a Party's undivided interest (expressed as a percentage) in: (a) the obligation, subject to the terms of the BTS Agreement, to contribute to all Expenditure; (b) the ownership of and the right and obligation to receive in kind and to dispose of products produced by the Joint Venture; (c) the beneficial ownership as a tenant in common of the Tenement, and if applicable, the K2 Area; and (d) all other rights, benefits, liabilities and obligations accruing to or incurred by or on behalf of the Parties in, under or arising out of the BTS Agreement.

[8] Exhibit 349; within two years from the Commencement Date, being the date the last of the parties executed the BTS Agreement.

[10] Exhibit 349; is recorded in definition of CAPEX in cl 26 that the capital cost estimate for the development of the mine on the Tenement was $6 million as at the Commencement Date.

[13] It is common ground that by agreement the Earn‑in Period was extended from two years to 30 months.

[15] Defendants' Opening Outline of Submissions, par 5.

[16] Exhibit 349; as defined in cl 1(a) of the BTS Agreement.

[17] Exhibit 309; the Ore Treatment Agreement was entered into by the defendants and Northern Star Resources Ltd and is dated 23 September 2014. Northern Star entered into an asset sale and purchase agreement with Billabong Gold Pty Ltd on 12 August 2016, and part of the sale acquisition Northern Star assigned its interests in the Ore Treatment Agreement to Billabong Gold.

[18] Girgis v Poliwka [No 6] [2019] WASC 230 [123]; citing Belgravia Nominees Pty Ltd v Lowe Pty Ltd [No 6] [2019] WASC 5 [26(f), (g)].

[19] Exhibit A, pars 3, 8 ‑ 10, 17 ‑ 18.

[25] Exhibit 879; Guo v Xu [2021] NSWSC 460 [5].

[27] The minutes of the first Joint Venture Committee meeting on 21 May 2017 record that it was suggested Mr Carson conduct a site visit after his return from China in early June; Exhibit 360, and minutes of a Joint Venture Committee meeting on 10 July 2018 record that in the presence of Ms Guo, Mr Carson requested a site visit and it was agreed that a visit be arranged in early August 2018; Exhibit 485. It is not in dispute, however, Mr Carson and Ms Guo did not at any material time visit the site of the Tenement. In addition, it was Mr Carson's evidence that they did discuss going to the site but they were unable to co‑ordinate people's availability; ts 53.

[29] It is noted that Zuleika's concession that their evidence should be accepted is confined to the evidence of each of these witnesses given in these proceedings which goes only to liability and not to loss or damage; ts 411.

[34] Exhibits 008, 0440 (In these reasons, only the last four numbers of the pinpoint numbers of each of the exhibits will be identified in the footnotes).

[35] Vango changed its name on 28 November 2014.

[36] Exhibits 008, 004, 005, 006 and 007; Statement of Claim, par 4A; Second Further Re-Amended Defence filed on 15 March 2022 (Defence), par 3; the defendants admit entering into the agreements and agree that the agreements contained terms generally to the effect pleaded.

[37] Exhibit A, par 24; the defendants object to this evidence on the grounds of relevance and that it is unqualified opinion evidence. However, this evidence is relevant and admissible, not on the basis of the truth of the opinion, but on the basis that having held that opinion, Mr Carson made enquiries and took steps to have discussions with then executive deputy chairman of Vango, Mr McInnes, based upon that opinion.

[39] Exhibit 12; see also Exhibit A, pars 28 ‑ 29 and 35; Exhibit 10 (CAPEX for K2 based on third‑party mining feasibility study report 2014 stated as $5,571.50); This evidence is relevant and admissible not on the basis of the truth of the statement made by Mr Hay, but on the basis of the subsequent action taken by Mr Carson on behalf of Zuleika.

[41] Exhibit A, par 36, Exhibits 17 and 14.

[47] Exhibits 309 and 870; see also facts found in Billabong Gold Pty Ltd v Vango Mining Ltd [No 2] [2021] WASC 459 [3] ‑ [5].

[54] Exhibit A, par 53; this evidence is relevant and admissible, not on the basis of the truth of this opinion but, on the basis of having held this opinion, Zuleika took steps to enter into the sale agreement.

[58] Exhibit 168, cl 1.1, cl 5.1 and Sch 1, 0026, 0031 and 0042.

[60] Exhibit 168, cl 1.1 and cl 3.1(c), 0026 and 0030, and Exhibit 169.

[62] Statement of Claim, par 8; Defence, par 8.

[63] Statement of Claim, pars 9 and 10; admitted Defence, par 1.

[64] Exhibit A, par 105; Exhibit C, par 83.

[66] Exhibits 230 and 241, 1193; Exhibit A, par 108; Exhibit C, par 88.

[67] Exhibit A, pars 113 and 114; Exhibit C, par 91.

[71] Electricity Generation and Retail Corporation trading as Synergy v EIT Kwinana Partner Pty Ltd [2022] WASCA 3 [230], [232] ‑ [234] (citations omitted).

[72] Recce Pharmaceuticals Ltd v Brown [2022] WASCA 66 [62] ‑ [64] (footnotes omitted).

[73] Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544 [16] (Kiefel, Bell & Gordon JJ) (footnotes omitted); applied in Electricity Generation and Retail Corporation trading as Synergy v EIT Kwinana Partner Pty Ltd [2022] WASCA 3 [243].

[74] Recce Pharmaceuticals Ltd v Brown [2022] WASCA 66 [69].

[75] Statement of Claim, par 12.2; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.

[77] Statement of Claim, par 11; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.

[78] Statement of Claim, par 12.19; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.

[79] Statement of Claim, par 12.20; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.

[80] Statement of Claim, par 12.21; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.

[81] Statement of Claim, pars 12.7 and 12.8; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.

[82] Statement of Claim, par 12.9; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.

[83] Statement of Claim, par 12.10; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.

[84] Statement of Claim, par 12.16; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.

[85] Statement of Claim, par 13; admitted by the defendants; Defence, par 1.

[86] Statement of Claim, pars 12.13 and 12.14; the defendants say the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.

[87] Statement of Claim, par 16; admitted by the defendants; Defence, par 1.

[88] Statement of Claim, par 14; the defendants deny that the term in subparagraph (a) is implied by law in the BTS Agreement but admit the terms in (b) and (c) are implied as a matter of law in the BTS Agreement; Defence, par 10.

[89] The Earn-in Period was extended by agreement between the parties (by monthly extensions) to 12 November 2019; Statement of Claim, par 15; Defence, par 1.

[90] Exhibit 349 (clause notes added in italics).

[91] Recce Pharmaceuticals Ltd v Brown [2022] WASCA 66 [65].

[92] The defendants plead that the BTS Agreement contains terms generally to the effect pleaded; Defence, par 9.

[97] McCourt v Cranston [2012] WASCA 60 [71] (Murphy JA) citing the approach applied to a statutory instrument in Patman v Fletcher's Fotographics Pty Ltd (1984) 6 IR 471, 474 ‑ 475 (Priestley & Mahoney JJA agreeing).

[99] Statement of Claim, par 16B; denied by the defendants; Defence, par 10B.

[100] Exhibit 762; Statement of Claim, par 16C; denied by the defendants; Defence, par 10C.

[101] Statement of Claim, par 16D; denied by the defendants; Defence, par 10D.

[102] Statement of Claim, par 16C; denied by the defendants; Defence, par 10C.

[105] On 8 July 2018, Mr Hepburn‑Brown sent a memorandum to Mr McInnes and Mr Zhou in which he stated that Vango had spent to date $1.5 million on K2; Exhibit 468; In the Joint Venture Committee meeting on 31 October 2018, Mr McInnes stated that Vango had expended $505,295 on the Tenement; Exhibit 529, 1519.

[112] Defined in cl 1(a) as being for the purpose of exploration and production from the Tenement on the commercial terms set out in the BTS Agreement and otherwise on terms and conditions acceptable to the parties.

[113] Exhibits 360, 731, 406, 732, 433, 485, 488, 529, 574, 563, 642, 649, 688 and 843; Exhibit B, 40; Mr McInnes, ts 271.

[114] Exhibits 671 and 673; and Mr McInnes ts 256 ‑ 257, 261.

[118] Exhibit 751; See the facts found by Kenneth Martin J in Billabong Gold Pty Ltd v Vango Mining Ltd [No 2] [2021] WASC 459 [6], [13], [19], [235] ‑ [244].

[122] Minutes prepared by Mr Carson; Exhibit 731; Mr McInnes stated in evidence that these minutes were an accurate record of what was discussed at the meeting, ts 254.

[123] Mr McInnes gave evidence that he visited the Tenement in mid‑2017 after drilling had commenced, ts 245.

[129] Exhibit B, 39; see also Ms Guo's evidence, ts 171.

[131] Exhibit A, pars 156 ‑ 157; ts 170.

[139] Exhibit 403, 8886 (added emphasis).

[141] Exhibits 435 and 434; Mr McInnes was unable to explain when he was cross-examined as to why he made this statement, ts 272 ‑ 274.

[142] Exhibit 435; it is to be noted that the reference to the TTAs in this email is a reference to the Ore Treatment Agreement.

[144] The text of the email is [302] of these reasons; Exhibit 483.

[147] See [319] ‑ [323] of these reasons; Exhibit 843.

[148] Exhibits 674 and 675; see [375] of these reasons.

[155] Exhibit 406; Mr McInnes gave evidence that the minutes of this meeting were a fair summary of what occurred and what was discussed, ts 269.

[172] See for example the June 2014 K2 Feasibility Report; Exhibit 14, 0626.

[181] Exhibit 831 (citations removed).

[194] Exhibits 439, 440, 441, 442 and 443.

[195] Although the copy of the email that is Exhibit 435 does not contain a time or date that it was sent, it is agreed that the email was sent on 13 March 2018, ts 100 and 482.

[200] Exhibit 458; Exhibit A, par 226 ‑ 229.

[212] Exhibit A, pars 235 ‑ 241; Exhibit 485.

[219] Exhibit 475, 1080 ‑ 1083; the entire report is Exhibit 317.

[223] Exhibit A, pars 245 ‑ 247; Exhibit 488.

[229] Exhibit A, par 252; Exhibits 500 and 501.

[259] Exhibit 559; In this judgment, Mr McInnes' responses are not in red but are in bold.

[263] The amount of deemed contributions to Expenditure pursuant to cl 3(a) of the BTS Agreement was in fact $245,239.78.

[269] Exhibit 593; which notice did not appear to concern Zuleika.

[284] Exhibit A, par 299; Exhibits 637 and 638.

[285] Exhibit 638, 0042 and 0044; ts 415.

[297] Exhibit 499, 7201; see also 7224.

[301] Exhibit 683; Mr McInnes' comments are underlined under each item of the agenda.

[306] Exhibits 693, 695, 696, 697, 699, 701, 702, and 703.

[315] Armada Balnaves PTE Ltd v Woodside Energy Julimar Pty Ltd [2022] WASCA 69 [508] ‑ [518] (footnotes omitted).

[316] Binningup Nominees Pty Ltd v Mirvac (WA) Pty Ltd [2021] WASCA 130 [401] ‑ [407] (footnotes omitted).

[317] James Point Pty Ltd v The Minister for Transport [No 3] [2018] WASC 277 [33].

[318] James Point Pty Ltd v The Minister for Transport [No 3] [2018] WASC 277 [36] (Vaughan J); citing EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23 [109]; CPB Contractors Pty Ltd v JKC Australia LNG Pty Ltd [No 2] [2017] WASCA 123 [77].

[321] Exhibit 731; Mr McInnes' evidence ts 254.

[323] Exhibits 671 and 673; ts 256 - 257, 341 - 348.

[328] Statement of Claim, par 21; Defence par 16(a) and 16(b).

[329] Statement of Claim, par 21; Defence par 16(c).

[330] Further and Better Particulars of Defence filed 23 July 2020; Answer 3, 7(a).

[331] Further and Better Particulars of Defence filed 23 July 2020; Answer 3, 7(b) to (o).

[335] See for example Vango's internal memorandum written by Mr Dugdale providing a schedule and cost for planned drilling and dewatering of K2 that was due to commence in February 2018; Exhibit 883.

[336] Statement of Claim, par 26; Defence, par 19(a); Exhibit 762.

[341] See [132] of these reasons; Exhibit 762, 0016.

[349] Exhibit A, par 234.8 and Exhibit 485.

[358] Statement of Claim, par 28; Defence, par 1; Exhibit 713.

[360] Statement of Claim, par 12.23; the defendants say the BTS agreement contains terms generally to the effect pleaded; Defence par 9(c).

[361] Statement of Claim, par 12.24; the defendants say the BTS agreement contains terms generally to the effect pleaded; Defence par 9(c).

[377] See also Exhibits 744, 748, 738, 742, 745, 749, 739, 743 and 746.

[379] Zulieka Gold Ltd v Vango Mining [2022] WASC 357 [11].

[380] Zulieka Gold Ltd v Vango Mining [2022] WASC 357 [4].

[381] Zulieka Gold Ltd v Vango Mining [2022] WASC 357 [500].

[382] Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1 [16] ‑ [32] (Wheeler JA agreeing).

[383] Eccles v Koolan Iron Ore Pty Ltd [No 3] [2013] WASC 418 (S) [9].

[384] Stewart v Atco Controls Pty Ltd (In liq) [No 2] [2014] HCA 31; (2014) 252 CLR 331 [4].

[385] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [87].

[386] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [88].

[387] Mount Lawley Pty Ltd v Western Australian Planning Commission [2006] WASC 82 (S); (2006) 157 LGERA 1 [92] (Templeman J); applying Duncan & Weller Pty Ltd v Mendelson [1989] VicRp 36; [1989] VR 386, 401; Grbavac v Hart [1996] VSC 37; [1997] 1 VR 154, 155 (Winneke P); see also Rapuano (T/as RAPS Electrical) v Karydis‑Frisan [2013] SASCFC 93.

[388] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1988) 81 ALR 397, 401; applied in Yara Australia Pty Ltd v Oswal [2012] WASCA 264 [33] (Murphy JA); Huntingdale Village Pty Ltd v Korda [2015] WASCA 101 (S) [11] ‑ [17].

[389] Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195 [82] ‑ [83].

[390] Ben‑Pelech v Royle [2020] WASCA 168 (S) [7] - [8].

[391] Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) [11] (Buss P, Murphy & Beech JJA).

[392] Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) [11] (Buss P, Murphy & Beech JJA).

[393] Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) [11] (Buss P, Murphy & Beech JJA) applying Frigger v Lean [2012] WASCA 66 [81].

[394] Heartlink Ltd v Jones as liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) [11] (Martin CJ); Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) [12] (Buss P, Murphy & Beech JJA); Maio v City of Stirling [No 2] [2016] WASCA 45 (S) [25] (Martin CJ, Buss P & Murphy JA); Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S) [3] (Martin CJ, McLure P & Buss JA).

[395] Electricity Generation and Retail Corporation trading as Synergy v Woodside Energy Ltd [2014] WASC 469 (S) [12] (Martin CJ) applied in Blatchford v Laine [2018] WASC 207 (S) [40(2)] (Vaughan J).

[396] Blatchford v Laine [2018] WASC 207 (S) [43] ‑ [53] (footnotes omitted).

[397]Affidavit of Jacob David Loveland affirmed 12 December 2022, Attachment JDL01, 7 (footnote omitted).

[398] The Calderbank offer defined Vango as the first defendant and the second defendant to the action; Affidavit of Jacob David Loveland affirmed 12 December 2022, Attachment JDL01,4.

[399] Affidavit of Chloe Alyssa Tolley affirmed 22 November 2022, pars 11 and 12.

[400] Affidavit of Chloe Alyssa Tolley affirmed 22 November 2022, pars 13 ‑ 18.

[401] Affidavit of Chloe Alyssa Tolley affirmed 22 November 2022, par 19.

[402] Affidavit of Chloe Alyssa Tolley affirmed 22 November 2022, par 20.