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[2018] FCA 1019
Federal Court of Australia
2018-08-15
Mr P, Foster J
Original judgment source is linked above.
Visy Paper Pty Limited v Australian Competition and Consumer Commission (2003) 216 CLR 1
Date of hearing: 4-8, 11-14 and 26-28 April 2016
Date of last submissions: 25 April 2016
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Economic Regulator, Competition and Access
Category: Catchwords
Number of paragraphs: 569
Counsel for the Applicant: Mr CA Moore SC, Mr M O'Meara, Mr RA Yezerski and Mr P Gaffney
Solicitor for the Applicant: Australian Government Solicitor
Counsel for the First, Tenth and Eleventh Respondents: Mr RM Smith SC and Mr NJ Owen
Solicitor for the First, Tenth and Eleventh Respondents: TressCox Lawyers (HWL Ebsworth Lawyers filed a Notice of Change of Address for Service on 12 February 2018)
Solicitor for the Second Respondent: The Second Respondent did not appear (Deutsch Partners filed a Notice of Acting - Change of Lawyer on behalf of the Second, Fourth, Sixth, Seventh and Eighth Respondents on 29 March 2017)
Counsel for the Third Respondent: Dr RCA Higgins
Solicitor for the Third Respondent: Ashurst Australia
Counsel for the Fourth, Sixth, Seventh and Eighth Respondents: Mr CRC Newlinds SC and Ms FT Roughley
Solicitor for the Fourth, Sixth, Seventh and Eighth Respondents: Breene & Breene (Deutsch Partners filed a Notice of Acting - Change of Lawyer on behalf of the Second, Fourth, Sixth, Seventh and Eighth Respondents on 29 March 2017)
Counsel for the Fifth and Ninth Respondents: Mr LT Livingston
Solicitor for the Fifth and Ninth Respondents: Torq Murray Law
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND: CASCADE COAL PTY LTD (ACN 119 180 620) First Respondent
MINCORP INVESTMENTS PTY LIMITED (ACN 132 441 868) Second Respondent
LOYAL COAL PTY LTD (ACN 132 497 913) (and others named in the Schedule) Third Respondent
JUDGE: FOSTER J DATE OF ORDER: 6 July 2018
TABLE OF CONTENTS LOYAL COAL [23] A BRIEF OVERVIEW OF THE RELEVANT FACTS [26] THE ACCC'S CASE AND THE RESPONDENTS' DEFENCES [48] THE RELEVANT FACTS [83] The Witnesses [83] The Primary Facts [87] Introduction [87] The Obeids' Interest in Coal Ventures in the Bylong Valley - June and July 2008 [90] Brook and his Introduction to the Obeids [99] Arrangements between Brook, Monaro and the Obeids [105] Obeid Interests and Associates Acquire Coggan Creek and Donola [154] The EOI Process for Mt Penny Commences [166] MMNL's EOI for Mt Penny and Glendon Brook [178] The DPI Reopens the EOI Process [190] Negotiations between Cascade and the Obeids, Related Matters and Subsequent Events (20 May 2009 to May 2012) [242] The 31 May 2009 Meeting [252] The Meeting of 3 June 2009 [294] The Meeting of 5 June 2009 [312] The Yarrawa Deal Involving Coalworks [389] The 23 May 2009 Meeting [395] Additional Findings of Fact [417] THE RELEVANT STATUTORY PROVISIONS [434] CONSIDERATION [455] Attribution of the Main Actors' Conduct [455] The Alleged Contract, Arrangement or Understanding [464] The Competition Issue [492] The Purpose Issue [516] The "Giving Effect" Issue [527] The Accessorial Liability of John McGuigan, James McGuigan, Poole, Moses Obeid and Paul Obeid [529] The Credit of Individual Witnesses [531] The Joint Venture Defences [539] Evidentiary Rulings [568] CONCLUSIONS [569]
FOSTER J: 1 In the period from the late 1980s until about 2011, Edward Moses Obeid (Eddie Obeid) was a prominent politician in NSW. He was a member of the Legislative Council throughout the period from 1991 to 2011. He was a power broker in the Australian Labor Party who exercised significant influence in that Party at all times during those years. 2 Eddie Obeid has nine children - five sons and four daughters. Four of Eddie Obeid's sons feature in the events which are the subject of this proceeding. Two of those sons, Moses Edward Obeid and Paul Edward Obeid, played a significant part in those events. Two other sons, Damien Edward Obeid and Gerard Edward Obeid, were also involved. 3 Members of the Obeid family conducted numerous business transactions together. Frequently, they deployed the following structure: (a) A company would be used as the entity that would enter into the particular transaction. The directors and shareholders of that company would be associates of the Obeid family such as a family friend, an accountant, a lawyer or business adviser; (b) The shareholders of the transacting company would hold the shares in that company on trust for one or more members of the Obeid family or their relatives, or on trust for other companies or trusts, the ultimate controllers and beneficiaries of which were one or more members of the Obeid family, their spouses or their relatives; and (c) The directors of the transacting company would act on the instructions of one or more members of the Obeid family and for their benefit. 4 Business structures with the features which I have described at [3] above were used by the Obeid family in and in connection with the transactions which are under scrutiny in the present case. 5 An important object sought to be achieved by the Obeid family by the use of such structures was to conceal the involvement of the Obeid family in those transactions from all except those who necessarily needed to know of that involvement. 6 The conduct of Moses Obeid and Paul Obeid in 2008 and 2009 is at the heart of the present case. 7 In this proceeding, the applicant, the Australian Competition and Consumer Commission (ACCC), claims relief against eleven respondents. The first six named respondents are corporate entities and the remaining five respondents are individuals. The ACCC claims declarations against all respondents, civil penalties against all respondents, disqualification orders against the individual respondents and costs in respect of alleged contraventions of ss 45(2)(a)(i), 45(2)(b)(i) and 44ZZRK (in respect of cartel provisions where the purpose conditions in s 44ZZRD(3)(a)(iii) and in s 44ZZRD(3)(c) are satisfied) of the Competition and Consumer Act 2010 (Cth) (CCA) by the corporate respondents. The individual respondents are all alleged to be liable as accessories to the alleged contraventions by the corporate contraveners. 8 The alleged contravening conduct took place in early June 2009. For this reason, the Court must apply s 4D and s 45 of the CCA in the form in which those sections then stood. Since 2009, s 45 has been substantially amended and s 4D has been repealed (as to which, see Act No 114 of 2017). In addition, the Court must apply s 44ZZRD and s 44ZZRK in the form in which those sections stood in 2009. Those sections have been renumbered by Act No 114 of 2017. Finally, I note that the joint venture defence provided for in relation to certain contraventions of the CCA has been reformulated by Act No 114 of 2017. The applicable sections in 2009 were ss 4J, 76C and 44ZZRP. 9 The references to sections of the CCA in these Reasons for Judgment are to the applicable sections in the form in which they stood in June 2009. 10 These Reasons for Judgment address questions of liability only. That is, by these Reasons for Judgment, I determine whether any declaratory relief should be granted to the ACCC and, if so, the form of that relief. In the event that it is necessary to address the ACCC's claims for civil penalties and disqualification orders, those claims will be dealt with at a later date. 11 The corporate respondents are:
Loyal Coal 23 At the commencement of Day 2 of the hearing, Counsel for Loyal Coal informed the Court that, upon the basis of an agreed statement of facts and admissions, Loyal Coal would consent to a declaration that it contravened s 45(2)(a)(i) of the CCA (read with s 4D) by arriving at what is described at pars 108 and 180 of the Further Amended Statement of Claim filed on 24 March 2016 (FASOC) as "the EOI Withdrawal Understanding". Counsel also said that the ACCC and Loyal Coal intended to make a joint submission to the Court as to penalty and costs. Until the Court was informed of these matters, Loyal Coal had actively defended the proceeding. It had filed its Second Further Amended Defence as recently as 31 March 2016. 24 Loyal Coal requested to be excused from further attendance at the hearing and also requested that I defer further consideration of the ACCC's claims against Loyal Coal until after judgment has been delivered in the ACCC's cases against the other respondents. I acceded to both of these requests and Loyal Coal took no further part in the hearing. 25 At some future date, it will be necessary to conduct a hearing in order to determine whether the Court should approve and give effect to the settlement reached between the ACCC and Loyal Coal.
A Brief Overview of the Relevant Facts 26 In November 2007, Locaway, a company controlled by the Obeid family, completed the purchase of Cherrydale which is located at Bylong. Subsequently, over the next two years, the Obeid family, through companies and trusts controlled by the family, and, on occasion, in conjunction with associates of the family, also purchased two additional rural properties in the same area, Donola and Coggan Creek. These additional properties adjoined Cherrydale. The total sum outlaid on the three acquisitions was $7.75 million. 27 In early July 2008, Moses Obeid, who is the eldest son of Eddie Obeid, met with Paul Gardner Brook (Brook), who was, at that time, Senior Vice President, Asia Special Situations Group, of Lehman Brothers (Lehman) in Sydney, in order to gauge Lehman's interest in being involved in a coal mining venture in the Mt Penny coal exploration area. Bylong is a few kilometres from Mt Penny. Cherrydale, Donola and Coggan Creek are centrally located in the Mt Penny coal exploration area which was one of the areas released by the NSW Government in September 2008 for the purposes of allowing exploration for coal to be undertaken there. 28 When he met with Brook in early July 2008, Moses Obeid provided to Brook a list of those small to medium mining companies which he (Obeid) believed would be invited to lodge an Expression of Interest (EOI) for an Exploration Licence (EL). ELs are granted under the Mining Act 1992 (NSW) (Mining Act). One company on that list was Monaro Mining NL (MMNL), a company which, up to that time, had not been involved in mining coal. It had focussed on mining uranium. 29 In August 2008, the NSW Department of Primary Industries (DPI), which was responsible for allocating and regulating ELs under the Mining Act, prepared an EOI Information Package (initial EOI information package) in respect of the NSW Government's plan to release eleven areas of the State for the purpose of allowing exploration for coal in those areas and ultimately allowing mining for coal in those areas. After that package was prepared, the DPI sought and obtained the approval of the relevant Minister (at the time, Mr Ian Macdonald) to send the initial EOI information package to a number of specific mining companies together with an invitation to the recipients of that package to lodge EOIs in respect of ELs for one or more of the eleven coal release areas. This was the first external step taken in the process which, in substance, was a closed tender process. 30 On 19 September 2008, an invitation to lodge an EOI in respect of all eleven coal release areas was sent to MMNL. At the same time, invitations were also sent to other companies. An initial EOI information package was sent with each EOI invitation. Cascade did not receive an initial invitation to lodge an EOI for any of those coal release areas. 31 Soon after Brook's first meeting with Moses Obeid, Brook contacted Mr Warwick Grigor, who was then the Chairman of MMNL. Over the next few weeks, Brook negotiated an arrangement between Voope, a company beneficially owned and controlled by the Obeid family, and MMNL, whereby MMNL granted to Voope or its nominee an option to acquire 80% of the issued capital of a special purpose vehicle (SPV) which was initially to be a wholly-owned subsidiary of MMNL, Monaro Coal Pty Ltd. Ultimately, Monaro Coal was registered with the intention of being that SPV. The option granted to Voope by MMNL was designed to place Voope in control of any EOIs lodged by MMNL pursuant to the DPI invitations of 19 September 2008. This arrangement was ultimately recorded in an Option Deed over Shares dated 20 August 2008 between MMNL and Voope (Voope Option Deed). Monaro Coal Pty Ltd later changed its name to Loyal Coal Pty Ltd. 32 On 15 September 2008, Lehman collapsed. As a result, Brook began to act on his own and for himself in connection with his ongoing dealings with the Obeid family and MMNL. At the same time, his nominee company, Oregon Standard Pty Limited (Oregon), signed a consultancy agreement with MMNL. Subsequently, Brook also intruded himself into the dealings between the Obeid family and Cascade and its directors. 33 On 21 November 2008, MMNL lodged EOIs for nine of the eleven coal release areas referred to in the initial EOI information package. Included within those nine areas were the Mt Penny and Glendon Brook coal release areas. 34 In January 2009, the DPI re-opened the EOI process. As a result, additional companies were invited by the DPI to lodge EOIs. A revised EOI Information Package (revised EOI information package) was prepared and sent to all invitees. Cascade was included within the group of invitees to whom revised EOI information packages were sent in January 2009. 35 On 16 February 2009, Cascade lodged an EOI for the Mt Penny coal exploration area. On the same day, it also lodged an EOI for the Glendon Brook coal exploration area. Glendon Brook is located in the Hunter Valley, approximately 12 km east of Singleton and approximately 170 km east of Mt Penny. 36 In its EOI for Mt Penny, MMNL had promised to pay not only the requisite financial contributions spelt out in the initial EOI information package (a total of $1,071,000) but had also offered an additional voluntary financial contribution of $25 million. In similar vein, it also offered an additional voluntary financial contribution of $5 million in its EOI for Glendon Brook. 37 In the period between August 2008 and May 2009, Brook claims to have tried to find an investor or financial partner for MMNL in order to enable it to meet the financial commitments which it had made in its EOIs but had been unsuccessful in finding such a partner. In May 2009, Brook told the directors of MMNL that he did not expect to be able to secure the necessary investment funds to support the promises made by MMNL in its EOIs. 38 In light of Brook's communications at this time, and for reasons associated with its own financial position and business goals, on 22 May 2009, MMNL decided to withdraw all of its EOIs, subject to certain conditions being met. But, as a result of Brook's entreaties, it did not do so immediately after 22 May 2009. 39 On 23 May 2009, Brook, Moses Obeid, John McGuigan and James McGuigan met in order to discuss a potential deal with Cascade. 40 Between 23 May 2009 and 31 May 2009, Brook and Moses Obeid took steps by which they intended that Voope would gain complete ownership and control of Monaro Coal and control of the EOIs lodged by MMNL in respect of a number of coal exploration areas, including the Mt Penny and Glendon Brook coal exploration areas. 41 On 31 May 2009, a second meeting took place. Those in attendance were Brook, Moses Obeid, Paul Obeid, John McGuigan and James McGuigan. An in-principle agreement was struck at this meeting. The substance of that agreement was: For a consideration equivalent to four times the value of Cherrydale, Donola and Coggan Creek, the owners of those properties would transfer those properties to Cascade or its nominee. In addition, Cascade and a nominee entity of the Obeids would enter into a coal mining venture in order to exploit the coal reserves in the Mt Penny coal exploration area. The Obeid entity would have 25% equity in that venture subject to certain detailed terms. The Obeids and Brook would ensure that the EOIs lodged by MMNL for Mt Penny and Glendon Brook would be withdrawn. 42 Further negotiations took place between representatives of Cascade, Brook and the Obeids in the period between 1 June 2009 and 5 June 2009. 43 The two letter agreements documenting the final arrangements were signed on 5 June 2009. 44 On 9 June 2009, Loyal Coal sent letters to the DPI by which it purported to withdraw the EOIs lodged by MMNL in respect of the Mt Penny, Glendon Brook and Spur Hill coal exploration areas. Those letters were signed by Brook. 45 On 19 June 2009, the DPI informed Cascade that it had been selected as the successful EOI applicant in respect of both the Mt Penny and Glendon Brook coal exploration areas. 46 On or about 27 October 2009, the DPI granted ELs over both the Mt Penny and Glendon Brook coal exploration areas to Cascade. 47 In late 2010, CMG agreed to buy out the Obeid interests from the coal mining venture. By then, Cherrydale, Donola and Coggan Creek had come under the control of Mt Penny Properties Pty Limited (Mt Penny Properties), a wholly-owned subsidiary of Cascade.
The ACCC's Case and the Respondents' Defences 48 The ACCC's claims for relief are set out in detail in the Amended Originating Application filed by it on 24 March 2016 (Amended OA). Its pleaded case is found in the FASOC. 49 I shall now endeavour to explain the ACCC's case as pleaded in the FASOC. 50 At pars 1 to 61, the ACCC describes the respondents as well as a number of other corporate entities and individuals who featured in the events which are the subject of the present proceeding. These paragraphs of the FASOC collect in one place a useful dramatis personae for this case. With one or two exceptions, which I shall identify, the Obeid respondents and Loyal Coal admitted the matters pleaded in pars 1 to 61 of the FASOC. The Cascade respondents and the CMG respondents did not admit most of those matters but, at the trial, did not seriously dispute most of them. Subject to the matters in dispute which I shall shortly identify, I will proceed in these Reasons upon the basis that the facts and matters pleaded at pars 1 to 61 of the FASOC are true. I make findings to that effect. 51 Paragraphs 1 to 61 of the FASOC are in the following terms: Parties Applicant 1. The applicant is a body corporate established pursuant to section 6A of the Competition and Consumer Act 2010 (Cth), formerly the Trade Practices Act 1974 (Cth) (the CCA), and is entitled to sue in its corporate name. Corporate Respondents Cascade 2. The first respondent, Cascade Coal Pty Ltd (Cascade) is and at all material times was a corporation duly incorporated according to law and a trading corporation within the meaning of s 4 of the CCA. 3. At all material times from 21 August 2009, Cascade held 100% of the issued share capital in Mt Penny Coal Pty Ltd (Mt Penny Coal). 4. At all material times from 4 September 2009, Cascade held 100% of the issued share capital in Mt Penny Properties Pty Ltd (Mt Penny Properties). Voope 5. The second respondent, Mincorp Investments Pty Limited, previously known as Voope Pty Ltd (Voope), is and at all material times was a corporation duly incorporated according to law and a trading corporation within the meaning of s 4 of the CCA. 6. At all material times from on or about 28 July 2008 to 10 December 2009, Gregory Allen Skehan (Greg Skehan) held 100% of the issued share capital in Voope on bare trust for the Obeid Family Trust No. 2, or alternatively, for members of the Obeid Family (as defined below) including, at least, the sixth respondent, Moses Edward Obeid (Moses Obeid), and the seventh respondent, Paul Edward Obeid (Paul Obeid). 7. At all material times from 2 June 2009, Voope owned 100% of the issued share capital in the third respondent Loyal Coal Pty Ltd, formerly Monaro Coal Pty Ltd (Loyal), and was a related body corporate of Loyal for purposes of s 4A(5) of the CCA. Loyal 8. The third respondent, Loyal, is and at all material times was a corporation duly incorporated according to law and a trading corporation within the meaning of s 4 of the CCA. 9. At all material times prior to 2 June 2009, Loyal was a wholly owned subsidiary of Monaro Mining NL (Monaro Mining). 10. At all material times from 2 June 2009, Loyal was a wholly owned subsidiary of Voope and a related body corporate of Voope for purposes of s 4A(5) of the CCA. Locaway 11. The fourth respondent, Locaway Pty. Limited (Locaway), is and at all material times was a corporation duly incorporated according to law and a trading corporation within the meaning of s 4 of the CCA. 12. At all material times, the directors of Locaway included Moses Obeid and Paul Obeid. 13. At all material times, Locaway was trustee for the Moona Plains Family Trust. 14. At all material times, the beneficiaries of the Moona Plains Family Trust included Moses Obeid and Paul Obeid. 15. At all material times, Locaway held the property known as "Cherrydale Park" Bylong (being Lot 1 in Deposited Plan 421103 and Lot 31 in Deposited Plan 598162), on trust for the beneficiaries of the Moona Plains Family Trust. Coal & Minerals 16. The fifth respondent, Coal & Minerals Group Pty Ltd (Coal & Minerals): 16.1. is and at all material times from on or about 16 June 2010 was a corporation duly incorporated according to law and a trading corporation within the meaning of s 4 of the CCA; and 16.2. at all material times until 27 September 2010 had the ninth respondent, Richard Jonathan Poole (Richard Poole) as its sole director and shareholder; 16.3. at all material times after 27 September 2010 had Arthur Phillip Pty Ltd (Arthur Phillip) as its sole shareholder and Richard Poole as its sole director. Southeast Investments 17. The sixth respondent, Southeast Investment Group Pty Limited (Southeast Investments): 17.1. is and at all material times was a corporation duly incorporated according to law and a trading corporation within the meaning of s 4 of the CCA; and 17.2. at all material times had Sevag Chalabian as its sole director and shareholder. Individual Respondents Moses Obeid 18. The seventh respondent, Moses Obeid, was at all material times: 18.1. a director of Locaway; 18.2. a director of Obeid Corporation Pty Ltd (Obeid Corporation); 18.3. a beneficiary of the Obeid Family Trust No. 1; 18.4. a beneficiary of the Obeid Family Trust No. 2; and 18.5. a beneficiary of the Moona Plains Family Trust. Paul Obeid 19. The eighth respondent, Paul Obeid, was at all material times: 19.1. a director and secretary of Locaway; 19.2. a director of Obeid Corporation; 19.3. a beneficiary of the Obeid Family Trust No. 1; 19.4. a beneficiary of the Obeid Family Trust No. 2; and 19.5. a beneficiary of the Moona Plains Family Trust. Obeid Family 20. Moses Obeid and Paul Obeid are brothers, together with Gerard Edward Obeid, Damian Edward Obeid and Edward Joseph Obeid (the Obeid Family). 21. Members of the Obeid Family conducted numerous business transactions together. In conducting their business transactions, members of the Obeid Family often utilised the following structure: 21.1. a company would be used to enter into the transaction, the directors and shareholders of which would be associates of the Obeid Family such as a family friend or an accounting, business or legal adviser; 21.2. the shareholder or shareholders of the company would hold the shares on trust for one or more members of the Obeid Family or their relatives, or on trust for further companies or trusts the ultimate beneficiaries of which were one or more members of the Obeid Family, their spouses or their relatives; and 21.3. the director or directors of the company would act on the instructions of one or more members of the Obeid Family and for their benefit. 22. Each of Voope, Loyal (from 2 June 2009), Southeast Investments, Calvin Holdings Pty Ltd (Calvin Holdings), Equitexx Pty Limited (Equitexx), Buffalo Resources Pty Limited (Buffalo) and Rothshire Group Pty Limited, previously known as United Pastoral Group Pty Limited, (UPG) were entities that adopted, or operated in accordance with, the structure referred to in the previous paragraph. 23. By reason of the matters pleaded in paragraphs 20 to 22: 23.1. members of the Obeid Family, including Moses Obeid and Paul Obeid, had authority to negotiate transactions on behalf of each of Voope, Loyal (from 2 June 2009), Southeast Investments, Calvin Holdings, Equitexx, Buffalo and UPG; and 23.2. Moses Obeid and Paul Obeid were agents for each of Voope, Loyal (from 2 June 2009), Southeast Investments, Calvin Holdings, Equitexx, Buffalo and UPG, and their conduct was conduct within their actual or apparent authority, for the purposes of section 84 of the CCA. 23A. Further or in the alternative, the conduct of Moses Obeid and Paul Obeid alleged herein with respect to each of Voope, Loyal, Southeast Investments, Calvin Holdings, Equitexx, Buffalo and UPG was conduct engaged in with the express or implied consent or agreement of the directors of each of those companies for the purposes of s 84(2)(b) of the CCA, in circumstances where the giving of such consent or agreement was within the actual or apparent authority of those directors in each case. 24. Further or in the alternative to the allegation in paragraph 23.2 above: 24.1. Moses Obeid and Paul Obeid were at all material times directors of Voope and (from 2 June 2009) Loyal within the meaning of the CCA, and their conduct was conduct within their actual or apparent authority as directors of Voope and/or Loyal, for the purposes of section 84 of the CCA; 24.2. Moses Obeid, Paul Obeid and Paul Gardner Brook (Gardner Brook) were at all material times officers of Voope and (from 2 June 2009) Loyal; 24.3. Moses Obeid and Paul Obeid were (either together or individually) the directing mind and will of each of Voope and (from 2 June 2009) Loyal; and, or alternatively, 24.4. Moses Obeid, Paul Obeid and Gardner Brook were each persons able to make contracts or arrangements with third parties, or to reach understandings with third parties, on behalf of Voope and (from 2 June 2009) Loyal. Richard Poole 25. The ninth respondent, Richard Poole: 25.1. was a director of Cascade at all material times since its incorporation on or about 7 April 2006; 25.2. was a director of Mt Penny Coal since its incorporation on or about 21 August 2009; 25.3. was a director of Mt Penny Properties since its incorporation on or about 4 September 2009; 25.4. was a director of Coal & Minerals since its incorporation on or about 16 June 2010; and 25.5. held 100% of the issued share capital in Coal & Minerals from on or about 16 June 2010 to on or about 27 September 2010. 26. Richard Poole had actual or apparent authority for the purposes of section 84 of the CCA to act on behalf of Cascade in relation to the conduct pleaded in paragraphs 77 to 148 below. 27. Richard Poole had actual or apparent authority for the purposes of section 84 of the CCA to act on behalf of Coal & Minerals in relation to the conduct pleaded in paragraphs 142 to 163 below. John McGuigan 28. The tenth respondent, John Vern McGuigan (John McGuigan) was: 28.1. a director of Cascade from on or about 19 February 2009; 28.2. a director of Mt Penny Coal since its incorporation on or about 21 August 2009; and 28.3. a director of Mt Penny Properties since its incorporation on or about 4 September 2009. 29. John McGuigan had actual or apparent authority for the purposes of section 84 of the CCA to act on behalf of Cascade in relation to the conduct pleaded at paragraphs 77 to 148 below. James McGuigan 30. The eleventh respondent, James William McGuigan (James McGuigan) was at all material times an employee of Arthur Phillip. 31. James McGuigan: 31.1. had actual or apparent authority for the purposes of section 84 of the CCA to act on behalf of Cascade in relation to the conduct pleaded in in [sic] paragraphs 77 to 128 below; or, alternatively, 31.2. engaged in such conduct at the direction of, or with the express or implied consent or agreement of, one or more directors of Cascade for the purposes of s 84(2)(b) of the CCA, and in circumstances where the giving of such direction, consent or agreement was within the actual or apparent authority of those directors. Other Relevant Corporations Arthur Philip [sic] 32. Arthur Phillip is and at all material times was a corporation duly incorporated according to law. 33. At all material times Arthur Phillip: 33.1. employed Richard Poole and James McGuigan; and 33.2. provided advisory and investment banking services to Cascade. Buffalo 34. Buffalo was a corporation duly incorporated according to law at all material times from about 3 June 2009 until its deregistration on or about 9 September 2010. Calvin Holdings 35. Calvin Holdings is and at all material times from 28 April 2011 was a corporation duly incorporated according to law. 36. At all material times from about 29 April 2011, Calvin Holdings was trustee for the Obeid Family Trust No. 2. Equitexx 37. Equitexx is and at all material times was a corporation duly incorporated according to law. 38. At all material times until about 28 April 2011, Equitexx was trustee for the Obeid Family Trust No. 2. 39. At all material times from 3 June 2009 to 9 September 2010, Equitexx held 88% of the issued share capital in Buffalo. Geble 40. Geble Pty Ltd (Geble) is and at all material times was a corporation duly incorporated according to law. 41. At all material times, Geble held the property known as "Donola" at Bylong (as in 77/DP755419, 78/DP755419, 90/DP755419, 177/DP755419, 178/DP755419, 192/DP755419, 210/DP755419, 211/DP755419 and 212/DP755419), on trust for the beneficiaries of the Elbeg Unit Trust. 42. At all material times: 42.1. 50% of the units in the Elbeg Unit Trust were held by UPG on trust for the beneficiaries of the Moona Plains Family Trust; and 42.2. 50% of the units in the Elbeg Unit Trust were held by Challenge Property Investments Group Pty Limited as trustee for the Triulco Family Trust. JKL 43. Justin Kennedy Lewis Pty Ltd, formerly Coopers World Pty Ltd, (JKL) is and at all material times was a corporation duly incorporated according to law. 44. At all material times, Justin Kennedy Lewis (Justin Lewis) held 100% of the issued share capital in JKL. 45. At all material times, JKL held the property known as "Coggan Creek" at Bylong (as in 203/DP755419), on trust for the beneficiaries of the Justin Kennedy Lewis Family Trust. Monaro Mining 46. Monaro Mining is and was at all material times a corporation duly incorporated according to law. 47. At all material times prior to 2 June 2009, Monaro Mining owned 100% of the issued share capital in Loyal. Mt Penny Coal 48. Mt Penny Coal is and at all material times from on or about 21 August 2009 was: 48.1. a corporation duly incorporated according to law; and 48.2. a wholly owned subsidiary of Cascade. Mt Penny Properties 49. Mt Penny Properties is and at all material times from on or about 4 September 2009 was: 49.1. a corporation duly incorporated according to law; and 49.2. a wholly owned subsidiary of Cascade. Warbie 50. Warbie Pty Limited (Warbie) is and at all material times was a corporation duly incorporated according to law. 51. At all material times, 100% of the issued share capital in Warbie was held by Gardner Brook. 52. At all material times from 3 June 2009 to 9 September 2010, Warbie held 12% of the issued share capital in Buffalo. UPG 53. UPG is and at all material times was a corporation duly incorporated according to law. 54. At all material times, Andrew Ausama Kaidbay (Andrew Kaidbay) was the sole director and shareholder of UPG. Other relevant individuals Gardner Brook 55. Gardner Brook: 55.1. was a director of Buffalo from on or about 3 June 2009 to on or about 9 September 2010; 55.2. was a director of Warbie from on or about 3 June 2009 to on or about 18 December 2011; 55.3. held 100% of the capital issued shares in Warbie at all material times from on or about 3 June 2009; 55.4. was a director of Loyal from on or about 16 September 2009 to on or about 16 August 2011; 55.5. at all material times, in relation to the matters pleaded in this statement of claim, was acting as an adviser to the Obeid Family, or alternatively, to Moses Obeid and/or Paul Obeid, and entered into transactions on their behalf, or alternatively primarily on their behalf; and 55.6. at all material times, engaged in the conduct pleaded in this statement of claim, at the direction of, or with the express or implied consent or agreement of, Moses Obeid and/or Paul Obeid for the purposes of s 84(2)(b) of the CCA, and in circumstances where the giving of such direction, consent or agreement was within the actual or apparent authority of Moses Obeid and Paul Obeid as directors or agents of Voope; and, or alternatively, 55.7. at all material times from 2 June 2009, engaged in the conduct pleaded in this statement of claim, with the express or implied consent or agreement of Andrew Kaidbay for the purposes of s 84(2)(b) of the CCA, and in circumstances where the giving of such direction or consent was within the actual or apparent authority of Andrew Kaidbay as a director of Loyal; and, or alternatively, 55.8 at all material times from 2 June 2009, engaged in the conduct pleaded in this statement of claim, at the direction of, or with the express or implied consent or agreement of, Moses Obeid and/or Paul Obeid for the purposes of s 84(2)(b) of the CCA, and in circumstances where the giving of such direction, consent or agreement was within the actual or apparent authority of Moses Obeid and Paul Obeid as directors or agents of Loyal. Sevag Chalabian 56. At all material times from at least 9 November 2009 to at least 31 December 2010, Sevag Chalabian was a director of Lands Legal Pty Limited (Lands Legal). 57. At all material times from at least 7 May 2010 to at least 31 December 2010, Sevag Chalabian was sole director, secretary and shareholder of Southeast Investments. 58. At all material times from at least 9 November 2009, Sevag Chalabian acted as a solicitor for Locaway, Geble and JKL in connection with the transactions and agreements pleaded at paragraphs 128 to 132 below. Andrew Kaidbay 59. Andrew Kaidbay was: 59.1. a director of Loyal from on or about 4 June 2009 to on or about 15 September 2009; 59.2. the sole director and secretary of UPG from on or about 15 February 2008; and 59.3. a director of Buffalo between 3 June 2009 and 9 September 2010. 60. At all material times, in respect of the matters pleaded in this statement of claim, Andrew Kaidbay acted on the instructions, and for the benefit, of members of the Obeid Family, or alternatively, on the instructions, and for the benefit, of Moses Obeid and/or Paul Obeid. Greg Skehan 61. Greg Skehan: 61.1. was at all material times a partner in the firm Colin Biggers & Paisley (now known as CBP Lawyers); 61.2. was a director of Voope in the period 28 July 2008 to 10 December 2009, and as pleaded in paragraph 6 above, held 100% of the issued share capital in Voope on bare trust for the Obeid Family Trust No. 2, or alternatively, for members of the Obeid Family including, at least, Moses Obeid and Paul Obeid, at all material times from on or about 28 July 2008 to 10 December 2009; 61.3. was a Dubai resident during the period August 2008 to October 2009, and had no day-to-day involvement in the affairs of Voope during that period; 61.4. acted on, and followed, the requests, instructions and directions of members of the Obeid Family (including at least Moses Obeid and Paul Obeid) in conducting the affairs of Voope; 61.5. executed documents on behalf of Voope at the request, instruction or direction of members of the Obeid Family (including Moses at least [sic] Obeid and Paul Obeid); 61.6. was acting within the scope of his actual or apparent authority for the purposes of s 84 of the CCA when executing documents on behalf of Voope; and 61.7. resigned as a director of Voope on or about 10 December 2009 at the request, instruction or direction of members of the Obeid Family (including at least Moses Obeid and Paul Obeid). 52 The matters in pars 1 to 61 which were in dispute were whether: (a) Poole ceased to be the sole shareholder of CMG on 21 September 2010 or on 27 September 2010 (par 16.2 and par 16.3); (b) Each of Voope, Loyal Coal (from 2 June 2009) and Buffalo were entities that adopted, or operated in accordance with, the structure referred to in par 21 of the FASOC. The Obeid respondents admitted that Calvin Holdings, Equitexx Pty Limited (Equitexx) and UPG did so operate (par 21 and par 22); (c) Paul Obeid had the pleaded authority in respect of Voope, Loyal Coal and Buffalo or was relevantly an agent of any of those companies. The pleaded authority and agency were both admitted insofar as Moses Obeid was concerned and also admitted in respect of Southeast, Calvin Holdings, Equitexx and UPG insofar as Paul Obeid was concerned (pars 23 and 23A); (d) Paul Obeid was ever a director of Voope or Loyal Coal; Paul Obeid was ever an officer of Voope or Loyal Coal; Paul Obeid was, either individually or together with Moses Obeid, the directing mind and will of Voope or Loyal Coal; and Paul Obeid was ever a person who could make contracts or arrive at arrangements or understandings on behalf of Voope or Loyal Coal (par 24). These matters are all denied by the Obeid respondents. Paragraph 24 is admitted in respect of Moses Obeid and separately asserted by those respondents as also being correct in respect of Brook; (e) Poole had actual or apparent authority for the purposes of s 84 of the CCA to act on behalf of Cascade in relation to the conduct pleaded at pars 77 to 148 of the FASOC or on behalf of CMG in relation to the conduct pleaded at pars 142 to 163 of the FASOC (par 26 and par 27); (f) John McGuigan had actual or apparent authority for the purposes of s 84 of the CCA to act on behalf of Cascade in relation to the conduct pleaded at pars 77 to 148 of the FASOC (par 29); (g) James McGuigan had actual or apparent authority for the purposes of s 84 of the CCA to act on behalf of Cascade in relation to the conduct pleaded in pars 77 to 128 of the FASOC or engaged in conduct at the direction of, or with the express or implied consent or agreement of, one or more of the directors of Cascade for the purposes of s 84(2)(b) of the CCA, acting within their authority (par 31); (h) Brook acted as an adviser to the Obeid family or, alternatively, Moses Obeid and/or Paul Obeid (par 55.5); (i) Brook acted at the direction of Moses Obeid and/or Paul Obeid in their capacity as directors of Voope (par 55.6); (j) Brook acted at the direction of Andrew Kaidbay and/or Moses Obeid and/or Paul Obeid in their capacity as directors of Loyal Coal (par 55.7); and (k) Brook, acting in his own interests, also gave directions to Skehan in relation to the affairs of Voope. 53 At pars 62 to 93 of the FASOC, the ACCC pleads a number of contextual facts and matters concerning Voope's dealings with MMNL, the EOI process and MMNL's involvement in that process. Most of the matters pleaded in this section of the FASOC were either admitted or not seriously disputed. However, some matters were in contest. These were: (a) Whether, from on or around 28 July 2008, Moses Obeid and Paul Obeid engaged Brook to act for Voope in negotiating a possible transaction with MMNL (par 62). The Obeid respondents deny that allegation; (b) Whether Brook also gave instructions to Christopher Rumore, a solicitor and partner in the law firm, Colin Biggers & Paisley (CBP), who was, in 2008 and 2009, acting for members of the Obeid family, in relation to negotiations with MMNL and whether he did so acting on his own behalf or, for a time, acting on behalf of Lehman; (c) Whether, in the period from around 15 May 2009 until 1 June 2009, Brook was acting at the direction of Moses Obeid and on behalf of Voope when he negotiated with the directors of MMNL for the acquisition by Voope of all of the shares in Monaro Coal and the nomination of Monaro Coal as the entity to take up any ELs offered by the DPI (par 82). The Obeid respondents deny that Brook was acting at the direction of Moses Obeid in the respects alleged, deny that Brook was acting on behalf of Voope in the negotiations with MMNL and contend that he was acting on his own behalf and using his own authority as a director of Voope; and (d) Whether MMNL's decision to withdraw the EOIs which it had lodged with the DPI in respect of the Mt Penny and Glendon Brook coal exploration areas reflected in the resolution of the Board of Directors of MMNL passed on 22 May 2009 was contingent upon Voope agreeing new terms with MMNL which would include an outline of a satisfactory mechanism for transferring from MMNL to Voope or its nominee any ELs that may be initially awarded to MMNL, a promise to hold MMNL harmless in all respects and an agreement to reimburse MMNL all of the expenses incurred by it in relation to its EOI in respect of Mt Penny (par 83). 54 At pars 94 to 97 of the FASOC, the following is pleaded: Competition 94. At all material times, it was in the interests of Voope that Loyal was successful in obtaining Exploration Licences in respect of the Mount Penny and Glendon Brook Coal Release Areas. 95. The effect of the request by Monaro Mining pleaded in paragraph 88.1 above was that: 95.1. on and from 1 June 2009, or alternatively, 2 June 2009, Loyal was deemed to be the applicant for any Exploration Licence issued pursuant to the Monaro Mining EOI; and 95.2. the DPI was required to grant any Exploration Licence issued pursuant to the Monaro Mining EOI to Loyal. Particulars: Mining Act 1992 (NSW), s 133 96. Further, and in the alternative, at all material times, it was the practice of the DPI to: 96.1. assign an Exploration Licence or an application for an Exploration Licence to a company nominated by the successful applicant for an Exploration Licence, upon the request of that applicant; or 96.2. permit the holder of an Exploration Licence to transfer or assign the Exploration Licence to another corporation; 96.3. permit a party participating in an expressions of interest process to nominate another entity to be the person to whom ministerial consent to apply for an Exploration Licence is given in the event that the party's expression of interest was successful; or 96.4. issue an Exploration Licence to another entity nominated by an applicant for an Exploration Licence, where the applicant was the successful participant in an expressions of interest process and/or had received consent to apply for an Exploration Licence; provided in each case that the person to whom the Exploration Licence or application was to be issued, transferred or assigned complied with the formal requirements to hold an Exploration Licence, including under s 129 of the Mining Act 1992 (NSW) and provided that the decision maker was not satisfied that the application ought to be refused pursuant to s 22 of that Act. 97. By reason of the matters pleaded in paragraphs 64 to 89 and 94 to 96, at all material times from at least 1 June 2009, or alternatively, 2 June 2009: 97.1. Loyal was competitive with, or likely to be competitive with, Cascade within the meaning of s 4D and in competition with, or likely to be in competition with Cascade within the meaning of s 44ZZRD(4) of the CCA in relation to: 97.1.1. the acquisition of services from the Crown; and/or 97.1.2. the supply of services to the Crown; and 97.2. further or in the alternative, by reason of its ownership and control of Loyal, Voope was competitive with, or likely to be competitive with, Cascade within the meaning of s 4D and in competition with, or likely to be in competition with Cascade within the meaning of s 44ZZRD(4) of the CCA in relation to: 97.2.1. the acquisition of services from the Crown; and/or 97.2.2. the supply of services to the Crown. Particulars The September 2008 EOI process contemplated both the acquisition of services from the Crown and/or the supply of services to the Crown by the successful bidder The services which Cascade and Loyal, and/or Cascade and Voope, competed to acquire or were likely to compete to acquire, included: i. the right to participate in the EOI process; ii. the opportunity to apply for, or obtain, an Exploration Licence for coal in respect of mining activities in the Mount Penny and Glendon Brook Coal Release Areas; iii. the right to apply for, or obtain, the necessary approvals for mining activities in the Mount Penny and Glendon Brook Coal Release Areas; iv. the contractual right to the grant of an Exploration Licence; and v. the rights conferred by the grant of an Exploration Licence, including but not limited to the right to apply for a Mining Lease under s 51(4)(a) of the Mining Act 1992 and thereafter conduct mining activities pursuant to any Exploration Licence granted by the Minister. The services which Cascade and Loyal, and/or Cascade and Voope, competed to supply or were likely to compete to supply included: vi. giving the Crown the valuable opportunity to grant an Exploration Licence in respect of the Mount Penny and Glendon Brook Coal Release Areas under the Mining Act 1992 (NSW), with conditions, undertakings and requirements to be performed by the licensee; vii. the performance of the conditions, undertakings and requirements attached to an Exploration Licence in respect of the Mount Penny and Glendon Brook Coal Release Areas, including paying or negotiating for the payment of additional financial contributions referred to at p 10 of the document titled Expression of Interest Information for the Mount Penny and Glendon Brook Coal Release Areas published by the Crown, dated January 2009; viii. the exploration of each of the Mount Penny and Glendon Brook Coal Release Areas; ix. the development and operation of a mine and related infrastructure in each of the Mount Penny and Glendon Brook Coal Release Areas; and x. the payment of royalties to the Crown. 55 Thus, the parties alleged to be in competition from at least 1 June 2009 or, alternatively, 2 June 2009, were Loyal Coal and Cascade (par 97.1) and Voope and Cascade (par 97.2). The services which those companies competed to acquire or were likely to compete to acquire were the various rights set out at subpars i., iii., iv. and v. of the Particulars provided in par 97 and the opportunity described in subpar ii. of those Particulars. The services which those companies competed to supply or were likely to compete to supply were those described at subpars vi. to x. of those Particulars. 56 A critical element in the ACCC's case is the proposition pleaded at par 88.1 of the FASOC that, in accordance with the Deed of Release dated 2 June 2009 between MMNL and Voope, MMNL wrote to the DPI on 1 June 2009 and again on 2 June 2009 requesting that any EL issued pursuant to any EOI submitted by MMNL be issued to Loyal Coal. This request is said to have the consequences that Loyal Coal was deemed to be the EOI applicant in respect of such bids from that point on and that the DPI was obliged to grant any ELs that flowed from such bids to Loyal Coal (par 95). The fact that letters were sent to the DPI as alleged in par 88 was admitted by all parties. The alleged consequences were not admitted. 57 The allegations made at pars 94 to 97 of the FASOC are all either denied or not admitted. 58 At par 98 of the FASOC, the ACCC alleges that, between about 23 May 2009 and 5 June 2009, Brook, Moses Obeid and Paul Obeid negotiated with representatives of Cascade and sought to reach agreement on, the terms of a contract, arrangement or understanding in respect of the Mt Penny and Glendon Brook coal exploration areas. Those allegations are essentially admitted by the respondents although the Cascade respondents and the CMG respondents quibble about the capacity in which Poole and James McGuigan participated in the discussions referred to in that paragraph. 59 At par 99 of the FASOC, the ACCC makes the following allegations: 99. In the course of the negotiations referred to in the previous paragraph: 99.1. one or more of Gardner Brook, Moses Obeid and Paul Obeid indicated they had an ability to gain control of the Monaro Mining bid for the Mount Penny and Glendon Brook Coal Release Areas and could pursue that bid if necessary; 99.2. one or more of Gardner Brook, Moses Obeid and Paul Obeid indicated that members of the Obeid Family had formed an alliance of owners of land the subject of the Mount Penny Coal Release Area, being Cherrydale Park, Donola and Coggan Creek, and were in a position to negotiate for the sale of that land to Cascade; 99.3. there were negotiations for the withdrawal of the Monaro Mining bid for the Mount Penny and Glendon Brook Coal Release Areas; 99.4. there were negotiations as to the grant by Cascade to members of the Obeid Family or to Gardner Brook (or their nominees) of an interest in any resulting mining venture, and negotiations as to the size of that interest (ultimately agreed at 25%) and its terms; and 99.5. there were negotiations as to the purchase by Cascade of Cherrydale Park, Donola and Coggan Creek, including the purchase price (ultimately agreed at four times land value). 60 The respondents admit the matters pleaded at pars 99.2 to 99.5 but some of them dispute the matters pleaded at par 99.1. In particular, the Cascade respondents contend that one or more of Brook, Moses Obeid and Paul Obeid indicated during the relevant negotiations that MMNL had formally resolved to withdraw its bids for the Mt Penny and Glendon Brook coal exploration areas because MMNL was unable to meet the financial obligations assumed by it in its EOI and because there was a determination by MMNL to focus on uranium exploration following a Board dispute. The CMG respondents do not admit the matters alleged at par 99. 61 At pars 100 to 107 of the FASOC, the ACCC alleges that, at a meeting held on or about 5 June 2009 attended by Moses Obeid, Brook, Poole, John McGuigan and James McGuigan, the Buffalo Agreement and the Landowners Agreement were signed. 62 At par 102 of the FASOC, the ACCC alleges that the Buffalo Agreement was executed in circumstances where Moses Obeid, Paul Obeid and Brook had effective control over Loyal Coal and had actual or apparent authority to act on behalf of Loyal Coal as they saw fit and with the knowledge, consent and agreement of Voope, Loyal Coal, Moses Obeid, Paul Obeid and Brook. The Obeid respondents admitted these matters. The remaining respondents did not contest these matters at the trial. 63 At par 105 of the FASOC, the ACCC alleges that the Landowners Agreement was negotiated and finalised by Moses Obeid and Paul Obeid, who were directors of Locaway, and who had authority to enter into an agreement on behalf of Locaway for the sale of Cherrydale. Accordingly, as alleged at par 106 of the FASOC, the ACCC alleges that Locaway was a party to the Landowners Agreement. The Obeid respondents also admitted these matters. The other respondents did not contest these matters at the trial. 64 It is then alleged that the Landowners Agreement was executed in circumstances where Moses Obeid, Paul Obeid and Brook had effective control over Loyal Coal and had actual or apparent authority to act on behalf of Loyal Coal as they saw fit and with the knowledge, consent and agreement of Voope, Loyal Coal, Moses Obeid, Paul Obeid, Brook and Locaway. The Obeid respondents admitted these matters in respect of Moses Obeid and Brook but denied them in respect of Paul Obeid. The other respondents did not contest these matters at the trial. 65 At pars 108 to 111 of the FASOC, the ACCC pleads the following: The EOI Withdrawal Understanding 108. By reason of the matters pleaded in paragraphs 98 to 102 above, on or about 5 June 2009, Cascade made a contract or arrangement or arrived at an understanding (the EOI Withdrawal Understanding), with: 108.1. Loyal; 108.2. Gardner Brook; 108.3. Buffalo; and 108.4. further or alternatively, Voope containing a provision that Loyal, Gardner Brook and any other "associates or related parties" of Buffalo including any companies controlled by the Obeid Family or by Gardner Brook (including Voope) would: 108.5. withdraw any existing application for an Exploration Licence in relation to the Mount Penny and Glendon Brook Coal Release Areas (including the Monaro Mining EOI); and/or 108.6. not pursue the grant of any mining rights, including the grant of an Exploration Licence, in the Mount Penny Coal Release Area or any contiguous area or the Glendon Brook Coal Release Area and in consideration of these matters, Cascade would: 108.7. vest its interest in an Exploration Licence for the Mount Penny Coal Release Area in a separate company or unincorporated venture; and 108.8. grant Buffalo a 25% interest in the separate company or unincorporated venture (together the 25% Interest). Particulars In addition to the matters pleaded in paragraphs 98 to 102 above, the existence of the EOI Withdrawal Understanding is to be inferred from: i. Loyal's conduct in withdrawing the Monaro Mining EOI as pleaded at paragraphs 118 and 119, below; ii. the email from Gardner Brook to James McGuigan pleaded at paragraph 119 below; and iii. the conduct of Cascade, Coal & Minerals and Southeast Investments in relation to the finalisation of the 25% Interest pleaded at paragraphs 142 to 163 below. 108A In circumstances where Loyal was a party to a contract, arrangement or understanding as alleged in paragraphs 108, Voope is taken to be a party to that contract, arrangement or understanding pursuant to s 44ZZRC of the CCA. 109. The provision pleaded in paragraph 108 above constituted: 109.1. an exclusionary provision within the meaning of s 4D of the CCA; and, or alternatively, 109.2. a cartel provision for the purposes of s 44ZZRD(3)(c) of the CCA, as that section applied from 24 July 2009; and 109.3. a cartel provision for the purposes of s 44ZZRD(3)(a)(iii) of the CCA, as that section applied from 24 July 2009, in that it had a substantial purpose of preventing, restricting or limiting the supply, or likely supply, of services to the Crown by Loyal, Gardner Brook and any other "associates or related parties" of Buffalo, including Voope. Particulars The applicant refers to and repeats the particulars to paragraph 97.2 110. Alternatively, by reason of the matters pleaded in paragraphs 98 to 107 above, on or about 5 June 2009, Cascade made a contract or arrangement or arrived at an understanding (the EOI Withdrawal and Land Sale Understanding), with at least: 110.1. Loyal; 110.2. [Not used]; 110.3. Gardner Brook; 110.4. Locaway; 110.5. Buffalo; and 110.6 further or alternatively, Voope containing a provision that Loyal, Gardner Brook and any other "associates or related parties" of Buffalo including any companies controlled by the Obeid Family or by Gardner Brook (including Voope) would: 110.7 withdraw any existing application for an Exploration Licence in relation to the Mount Penny and Glendon Brook Coal Release Areas (including the Monaro Mining EOI); and/or 110.8 pursue the grant of any mining rights, including the grant of an Exploration Licence, in the Mount Penny Coal Release Area or any contiguous area or the Glendon Brook Coal Release Area and in consideration of these matters, Cascade would: 110.9 grant Buffalo the 25% Interest; 110.10. purchase the properties known as Cherrydale Park, Coggan Creek and Donola at a multiple of four times the unencumbered value of those properties; and 110.11. refinance the mortgages over those properties with a facility at a zero per cent (0%) coupon rate or alternatively pay all interest attached to the existing mortgages. Particulars In addition to the matters pleaded at paragraphs 98 to 107 above, the existence of the EOI Withdrawal and Land Sale Understanding is to be inferred from: i. Loyal's conduct in withdrawing the Monaro Mining EOI as pleaded at paragraphs 118 and 119, below; ii. the email from Gardner Brook to James McGuigan pleaded at paragraph 119 below; iii. the conduct of Cascade, Locaway, Geble and JKL pleaded at paragraphs 128 to 131 below; and iv. the conduct of Cascade, Coal & Minerals and Southeast Investments in relation to the 25% Interest pleaded at paragraphs 142 to 163 below. 110A. In circumstances where Loyal was a party to a contract, arrangement or understanding as alleged in paragraphs 110, Voope is taken to be a party to that contract, arrangement or understanding pursuant to s 44ZZRC of the CCA. 111. The provision pleaded in paragraph 110 above constituted: 111.1. an exclusionary provision within the meaning of s 4D of the CCA; and, or alternatively 111.2. a cartel provision for the purposes of s 44ZZRD(3)(c) of the CCA, as that section applied from 24 July 2009; and 111.3. a cartel provision for the purposes of s 44ZZRD(3)(a)(iii) of the CCA, as that section applied from 24 July 2009, in that it had a substantial purpose of preventing, restricting or limiting the supply, or likely supply, of services to the Crown by Loyal, Gardner Brook and any other "associates or related parties" of Buffalo, including Voope. Particulars The applicant refers to and repeats the particulars to paragraph 97.2 66 The matters pleaded in these paragraphs are essentially disputed by all respondents. 67 In light of the above matters, the two cases sought to be put against the primary contraveners may be summarised as follows: (a) On or about 5 June 2009, Cascade, Loyal Coal, Brook, Buffalo and Voope, made a contract or arrangement or arrived at an understanding (called the "EOI Withdrawal Understanding" in the FASOC) which understanding was not necessarily confined to the Buffalo Agreement and which understanding contained a provision whereby Loyal Coal, Brook and all associates or related parties of Buffalo (including any companies controlled by the Obeid family or by Brook including Voope), agreed to withdraw any existing EOIs in relation to the Mt Penny and Glendon Brook coal exploration areas lodged by them with the DPI or over which they had control (including the EOIs lodged in respect of those two areas by MMNL) and not pursue any exploration or mining rights over those areas in return for which Cascade would vest its interest in any EL granted to it in respect of the Mt Penny coal exploration area in a separate company or unincorporated joint venture and grant to Buffalo or its nominee a 25% equity interest in that separate company or unincorporated venture (pars 98 to 102, 108 and 108A of the FASOC); (b) Alternatively, on or about 5 June 2009, Cascade, Loyal Coal, Brook, Buffalo, Locaway and Voope made a contract or arrangement or arrived at an understanding (called the "EOI Withdrawal and Land Sale Understanding" in the FASOC) which understanding was not necessarily confined to the contents of the Buffalo Agreement and the Landowners Agreement and which understanding contained a provision whereby Loyal Coal, Brook and all associates or related parties of Buffalo (including any companies controlled by the Obeid family or by Brook including Voope) agreed to withdraw any existing EOIs in relation to the Mt Penny and Glendon Brook coal exploration areas lodged by them with the DPI or over which they had control (including the EOIs lodged in respect of those two areas by MMNL) and not pursue any exploration or mining rights over those areas in return for which Cascade would vest its interest in any EL granted to it in respect of the Mt Penny coal exploration area in a separate company or unincorporated joint venture, grant to Buffalo or its nominee a 25% equity interest in that separate company or unincorporated venture, purchase the properties known as Cherrydale, Donola and Coggan Creek at a multiple of four times the unencumbered value of those properties and refinance the mortgages over those properties with a facility at a zero percent (0%) coupon rate or alternatively pay all interest attached to the existing mortgages (pars 98 to 107, 110 and 110A of the FASOC); (c) Loyal Coal was competitive with, or likely to be competitive with, Cascade within the meaning of s 4D and in competition with, or likely to be in competition with, Cascade within the meaning of s 44ZZRD(4) of the CCA as alleged at par 97.1 of the FASOC; (d) By reason of its ownership and control of Loyal Coal, Voope was competitive with, or likely to be competitive with, Cascade within the meaning of s 4D and in competition with, or likely to be in competition with, Cascade within the meaning of s 44ZZRD(4) of the CCA as alleged in par 97.2 of the FASOC; (e) The impugned provisions contained in the EOI Withdrawal Understanding and in the EOI Withdrawal and Land Sale Understanding were made for purposes, or substantial purposes, which were proscribed purposes within the meaning of s 4D and s 44ZZRD(3)(a)(iii) and s 44ZZRD(3)(c) of the CCA; (f) The impugned provisions contained in the said Understandings constituted exclusionary provisions within the meaning of ss 4D, 45(2)(a)(i) and 45(2)(b)(i) of the CCA and cartel provisions within the meaning of s 44ZZRD(1) of the CCA; and (g) By making or arriving at the said Understandings containing such provisions, the parties to those Understandings contravened s 45(2)(a)(i) of the CCA and, by giving effect to those provisions, most of the parties to the said Understandings together with CMG and Southeast contravened s 45(2)(b)(i) and s 44ZZRK(1)(b) of the CCA. The case against Voope is confined to alleged contraventions of s 45(2)(a)(i) constituted by its conduct in making or arriving at the two Understandings in question and the case against Loyal Coal is confined to contraventions of s 45 by making or arriving at the two Understandings in question and also by giving effect to the impugned provisions contained in those Understandings. The case against Southeast and CMG is confined to their conduct in giving effect to the impugned provisions. 68 At pars 178 to 183 of the FASOC, the ACCC specifies the particular contraventions alleged against each of the primary contraveners (Cascade, Voope, Loyal Coal, Locaway, CMG and Southeast). Those paragraphs are in the following terms: Contraventions Cascade 178. The first respondent, Cascade: 178.1. contravened s 45(2)(a)(i) of the CCA by making or arriving at that the EOI Withdrawal Understanding as pleaded at paragraph 108 above; 178.2. alternatively, contravened s 45(2)(a)(i) of the CCA by making or arriving at the EOI Withdrawal and Land Sale Understanding as pleaded at paragraph 110 above; 178.3. contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by causing Mt Penny Properties to enter into the Deed of Put and Call Option with Locaway, Geble and JKL; 178.4. contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by causing Mt Penny Coal to enter into the Access Agreements with Locaway, Geble and JKL as pleaded at paragraphs 128 to 132 above; 178.5. contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by causing and funding Mt Penny Coal to make the payments to Locaway, Geble and JKL pleaded at paragraph 133 above; and 178.6. contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of the EOI Withdrawal Understanding pleaded at paragraph 108 above or alternatively the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by its conduct in relation to the finalisation of the 25% Interest pleaded at paragraphs 144.2, 147 to 150 above. Voope 179. The second respondent, Voope: 179.1. contravened s 45(2)(a)(i) of the CCA by making or arriving at the EOI Withdrawal Understanding as pleaded at paragraph 108 above; 179.2. alternatively, contravened s 45(2)(a)(i) of the CCA by making or arriving at the EOI Withdrawal and Land Sale Understanding as pleaded at paragraph 110 above. Loyal 180. The third respondent, Loyal: 180.1. contravened s 45(2)(a)(i) of the CCA by making or arriving at that the EOI Withdrawal Understanding as pleaded at paragraph 108 above; 180.2. alternatively, contravened s 45(2)(a)(i) of the CCA by making or arriving at the EOI Withdrawal and Land Sale Understanding as pleaded at paragraph 110 above; and 180.3. contravened s 45(2)(b)(i) of the CCA by giving effect to the provision of the EOI Withdrawal Understanding pleaded at paragraph 108 above or alternatively the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by withdrawing or purporting to withdraw the Monaro Mining EOI as pleaded at paragraph 118 above. Locaway 181. The fourth respondent, Locaway: 181.1. contravened s 45(2)(a)(i) of the CCA by making or arriving at the EOI Withdrawal and Land Sale Understanding as pleaded at paragraph 110 above; 181.2. contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by entering into the Deed of Put and Call Option with Mt Penny Properties; 181.3. contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by entering into the Locaway Access Agreement with Mt Penny Coal as pleaded at paragraphs 128 to 131 above; and 181.4. contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by requiring Mt Penny Coal to make the payments pleaded at paragraph 133 above. Coal & Minerals 182. The fifth respondent, Coal & Minerals contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of EOI Withdrawal Understanding pleaded at paragraph 108 above or alternatively the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by its conduct in relation to the finalisation of the 25% Interest pleaded at paragraphs 142 to 163 above. Southeast Investments 183. The sixth respondent, Southeast Investments contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of EOI Withdrawal Understanding pleaded at paragraph 108 above or alternatively the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by its conduct in relation to the finalisation of the 25% Interest pleaded at paragraphs 142 to 162 above. 69 At pars 113 to 116 of the FASOC, the ACCC refers to the 6 June 2009 Agreement which is alleged to have operated as a variation of the Buffalo Agreement. 70 At par 117 of the FASOC, the ACCC pleads the following: 117. In the balance of this pleading: 117.1. a reference to the EOI Withdrawal Understanding includes a reference to the varied EOI Withdrawal Understanding; 117.2. a reference to the EOI Withdrawal and Land Sale Understanding includes a reference to the varied EOI Withdrawal and Land Sale Understanding; and 117.3. a reference to the 25% Interest includes a reference to that interest modified as pleaded in paragraph 115.2 above. 71 At pars 118 to 122 of the FASOC, the ACCC pleads that, on or about 9 June 2009, Loyal Coal withdrew, or purported to withdraw, the EOI lodged by MMNL in respect of the Mt Penny coal exploration area, in accordance with the arrangements made between Loyal Coal and Cascade. These matters were not disputed by any of the respondents. 72 At pars 128 to 135 of the FASOC, the ACCC pleads the facts concerning the Deed of Put and Call Option entered into between the owners of Cherrydale, Donola and Coggan Creek and Cascade dated 24 November 2009 pursuant to which Cascade agreed to purchase those properties at four times their unencumbered value and to refinance the mortgages over those properties or, alternatively, pay the interest due on those mortgages. At around the same time, Cascade entered into access agreements with the owners of those properties pursuant to which Cascade was given access to those properties upon payment of certain access fees. These matters were also not disputed. 73 At pars 136 to 171 of the FASOC, the ACCC recounts the facts and matters concerning the replacement of Buffalo by Southeast and then ultimately the buyout of the Obeid family's interests in the proposed mining venture. The facts and matters pleaded in these paragraphs were not seriously in dispute. 74 At par 150 of the FASOC, the ACCC alleges that, between 20 October 2010 and 3 May 2012, CMG made five payments totalling $30 million to Southeast. At par 153, the ACCC alleges that, between 21 October 2010 and 4 May 2012, Southeast distributed $29,461,665 out of the $30 million received by it from CMG to entities owned and controlled by the Obeid family. Those allegations are admitted by the Obeid respondents and were not disputed by the other respondents. 75 At pars 172 to 178 of the FASOC, the ACCC pleads the facts, matters and circumstances which it contends demonstrate that each of CMG, Moses Obeid, Paul Obeid, Poole, John McGuigan and James McGuigan had knowledge which justifies each of those parties being made liable as accessories to the contraventions by Cascade, Voope, Loyal Coal, Locaway, CMG and Southeast. 76 At pars 184 to 205 of the FASOC, the ACCC pleads the particular contraventions relied upon against each of the individual respondents. I will discuss these allegations more fully later in these Reasons. 77 The respondents also rely upon several positive defences. 78 First, in answer to the contraventions of s 45(2)(a)(i) pleaded against Voope, Loyal Coal, Locaway and Southeast, the Obeid respondents plead that the EOI Withdrawal Understanding and the EOI Withdrawal and Land Sale Understanding were for the purposes of a joint venture within the meaning of s 4J of the CCA and did not have the purpose of substantially lessening competition, and did not have, and were not likely to have the effect of, substantially lessening competition and that, for those reasons, they have a defence to the ACCC's claims based upon s 45(2)(a)(i) by reason of the provisions of s 76C of the CCA. 79 Second, for similar reasons, those respondents argue that s 44ZZRK of the CCA did not apply to any conduct giving effect to the impugned contracts or arrangements made or understandings arrived at in the present case because the alleged cartel provisions were for the purposes of a joint venture and the other exculpatory conditions specified in s 44ZZRP were satisfied. 80 Third, the Obeid respondents also contend that the ACCC cannot rely upon s 44ZZRC of the CCA because that provision did not come into force until 24 July 2009 and does not apply to conduct engaged in prior to that date. 81 The Cascade respondents and the CMG respondents also rely upon joint venture defences. 82 In its Amended Replies filed on 23 March 2016, the ACCC joined issue with the respondents' Defences and pleaded that the respondents' joint venture defences were not maintainable because they had not been adequately pleaded. However, the ACCC did not make any application to strike out those defences.
The Witnesses 83 The ACCC called two witnesses, Brook and Bradley William Mullard. Brook swore two affidavits - the first on 5 November 2015 and the second on 24 March 2016. He was cross-examined at some length. Mullard affirmed three affidavits - the first on 21 August 2015, the second on 18 March 2016 and the third on 7 April 2016. He was also cross-examined. In 2009, Mullard was initially the Acting Executive Director of Mineral Resources at the DPI. He was subsequently appointed to that position. Mullard's position at the DPI was a senior position. 84 The Cascade respondents called three witnesses: John McGuigan, James McGuigan and David Agnew. John McGuigan affirmed one affidavit (on 11 February 2016). James McGuigan affirmed two affidavits - the first on 11 February 2016 and the second on 1 April 2016. Agnew affirmed two affidavits - the first on 12 February 2016 and the second on 22 March 2016. All of these witnesses were cross-examined. 85 The CMG respondents called Poole as their only witness. He swore one affidavit (on 25 February 2016). He was also cross-examined. 86 The Obeid respondents did not call any witnesses. In particular, they did not call any of Moses Obeid, Paul Obeid, Gerard Obeid, Damien Obeid, Christopher Rumore, Greg Skehan, Andrew Kaidbay, Sevag Chalabian, Sid Sassine or Mario Sindone.
Introduction 87 In this section, I set out the relevant primary facts. This account is taken mostly from documents tendered in evidence before me. From time to time, the material gleaned from the documents is supplemented or explained by evidence from the witnesses. 88 Most of the facts recorded in this section of these Reasons were either admitted or not seriously in dispute. Where there is some controversy about a particular fact or particular facts, I have endeavoured to explain the controversy and to make appropriate findings resolving the controversy. 89 There was a significant dispute in the evidence between Brook and John McGuigan as to the content of the discussions which took place at a meeting which was held on Saturday 23 May 2009. The persons who attended that meeting were Brook, John McGuigan, Moses Obeid and James McGuigan. I have dealt with that meeting in a separate section of these Reasons. That dispute led to other less significant disputes between Brook and Poole as to the substance of conversations which took place in later meetings, particularly those in early June 2009.
The Obeids' Interest in Coal Ventures in the Bylong Valley - June and July 2008 90 On 27 September 2007, Locaway, as trustee of the Moona Plains Family Trust, entered as purchaser into a contract for the sale of Cherrydale. The purchase price was $3,650,000. Part of that purchase price was to be financed by the vendors and a related superannuation fund. Completion of the purchase was to take place on 15 November 2007. Damian Obeid and Paul Obeid executed the Contract for Sale as directors of Locaway and those persons, together with Edward Joseph Obeid and Moses Obeid, were guarantors of Locaway's obligations under the Contract for Sale. The Moona Plains Family Trust was a trust of which Damian Obeid, Paul Obeid, Moses Obeid, Gerard Obeid and Edward Joseph Obeid were the primary beneficiaries. It was established on 25 October 1994 at the behest of Eddie Obeid. 91 There is some evidence in the materials tendered before me which supports the proposition that Locaway was replaced by UPG as the trustee of the Moona Plains Family Trust on or about 15 February 2008. There is a letter from the solicitor who had acted for the Obeid family in relation to Locaway's acquisition of Cherrydale (Anthony Cordato of Cordato Partners) dated 14 February 2008 under cover of which a draft Deed of Appointment of New Trustee replacing Locaway with UPG was forwarded to Eddie Obeid for execution by him. There is an unsigned Deed of Appointment of New Trustee dated 15 February 2008. There is an undated and unsigned Real Property Act 1900 (NSW) Form (Form 04RP) entitled "Application to Record New Registered Proprietor" by which Locaway and UPG sought to have Locaway replaced on the title to Cherrydale by UPG upon the basis that UPG had replaced Locaway as the trustee of the Moona Plains Family Trust. There is the circumstance that, when the Elbeg Unit Trust was apparently created on 6 August 2008, 150 units in that Trust were issued to UPG as the trustee of the Moona Plains Family Trust. There is an email dated 2 October 2008 from Sid Sassine, who was the Obeid family's accountant at that time, to Cordato informing him that UPG had been the trustee of the Moona Plains Family Trust since February 2008. Finally, there were two further letters dated 9 February 2009 and 16 February 2009 respectively from Cordato to the vendors/mortgagees of Cherrydale in which Cordato stated that UPG had been the trustee of the Moona Plains Family Trust since early 2008. In the second of these two letters, Cordato said that the reason for the change of trustee was "to protect the clients' privacy". 92 In light of the circumstances which I have recounted at [91] above, and given that no member of the Obeid family gave evidence at the trial, I think that it is more likely than not that UPG did, in fact, replace Locaway as the trustee of the Moona Plains Family Trust in February 2008 and I so find. 93 The purchase of Cherrydale was completed in mid-November 2007. 94 By 23 June 2008, Moses and Paul Obeid had begun negotiating with members of the Boyd family in connection with the creation of a proposed joint venture for the acquisition of two properties which adjoined Cherrydale, as well as a management agreement which would nominate Equitexx (an Obeid company) to act on behalf of the proposed joint venturers to achieve an "Improvement Event" (which was to be "broadly defined to cover anything that adds value to the properties"). The proposed arrangement contemplated that royalties would be generated in the future. A SPV was to be set up to act as the trustee of a unit trust which was intended to become the owner of the two additional properties to be acquired. By this time, Moses and Paul Obeid had briefed Mr Christopher Rumore, a partner with CBP, to act for them in the transaction. Rumore opened a file in Paul Obeid's name on that day (23 June 2008). 95 The interests in the proposed joint venture were to be divided two-thirds in favour of the Obeids and one-third in favour of the Boyds. Contemporaneous notes disclose that the joint venture was directed towards an anticipated issue by the NSW Government of EOIs for ELs which was expected to increase the land value of the properties many times. 96 By 30 June 2008, the negotiations between the Obeids and the Boyds had broken down and a new prospective joint venture partner had been introduced, being the Tianda Group, which was associated with Mr Alan Fang. The negotiations with Fang envisaged that the Obeid interests would obtain an option to acquire a 30% interest in a company, Great Western Coal Pty Limited (GWC), which would only be exercisable if GWC secured the right to mine coal on the site of Cherrydale and the two adjoining properties. 97 By 2 July 2008, draft options for the purchase of Coggan Creek at Bylong, one of the two properties of interest adjoining Cherrydale, had been provided to Moses Obeid. On 2 July 2008, Rumore received a proposed contract for the sale of the other property adjoining Cherrydale, known as Donola. 98 In the evening of 2 July 2008, Moses and Gerard Obeid met with Rumore and Fang to discuss the proposed transaction. By this time, it was envisaged that the transaction would involve the acquisition of the adjoining properties by a "Hong Kong BVI company" (in which the Obeids would have a 40% interest) and the sale of those adjoining properties, together with Cherrydale, to GWC once it had obtained the right to mine coal on the site of those properties. Rumore provided further comments on the transaction to Moses, Paul and Gerard Obeid in the morning of 3 July 2008.
Brook and his Introduction to the Obeids 99 From August 2007 until mid-September 2008, Brook was a Senior Vice President of Lehman based in Sydney. 100 In the afternoon of 3 July 2008, Brook met Moses Obeid at the Wentworth Hotel in the Sydney CBD. He was introduced to Moses Obeid by Arlo Selby at Selby's instigation. On this occasion, Moses Obeid informed Brook of the Obeid family's ownership of Cherrydale. He went on to tell Brook of his belief that there were substantial coal deposits under Cherrydale and that a tender for ELs would soon take place. Moses Obeid expressed the Obeid family's desire to participate in a coal mining venture and informed Brook that the Obeids had formed a landholders' alliance with the owners of adjoining properties. He said that timing was tight as tenders would soon be called for and that a bidder with an alliance with the landholders would stand a much better chance of getting an EL. Moses Obeid inquired as to Brook's experience and contacts in the resources sector and whether Lehman had any coal mining companies as clients. Moses Obeid was sounding out Lehman as to whether it would be interested in investing in the Obeids' hoped for coal mining venture or in being involved in procuring finance for that venture. 101 By 4 July 2008, the Obeids had not finalised the deal with Fang and there was no certainty that a deal with him would actually come to fruition. 102 On 4 July 2008, Brook made inquiries, both within and outside Lehman, by which he was attempting to identify a company that might be a possible partner in the coal mining venture which he had discussed with Moses Obeid. 103 On 7 July 2008, Brook met with Moses Obeid, Paul Obeid and Gerard Obeid at the Wentworth Hotel in Sydney. This meeting was also arranged by Selby. At that meeting, Brook was shown two or three maps which disclosed the location of Cherrydale and the adjoining properties in an area referred to as Mt Penny. The Obeids told Brook of their belief that there were potentially 100 million tonnes of thermal coal in the Mt Penny area and possibly as much as 700 million to 1 billion tonnes of thermal coal in that area and that they believed that a government tender process for an EL for the area was about to open. They also informed Brook that the Obeids' property would be critical to any proposed mine. They said that a miner would need access to Cherrydale in order to get water and in order to gain access to road and rail infrastructure. They also told him of their desire to participate commercially in a coal mining venture as silent, passive participants. One of the Obeids who attended this meeting said that the Obeid family's involvement in the deal must remain confidential because their father (referring to Eddie Obeid) was a prominent political figure. One of the Obeids said: With the government tenders coming up, they're likely to involve junior companies because the State government doesn't want larger mining companies to land bank mining assets. 104 Following that meeting, Brook made further inquiries within Lehman as to whether there were any Lehman clients interested in acquiring a small stake in a new coal mining venture in Australia for which a Government tender was coming up.
Arrangements between Brook, Monaro and the Obeids 105 On or about 10 July 2008, Moses Obeid provided Brook with a list of the names of 15 companies that were likely to be invited by the NSW Government to participate in a closed tender process for an EL for Mt Penny. Brook copied that list of those names and emailed it to himself. One of those companies was MMNL. Another was Tianda Resources (Australia) Pty Ltd. Cascade was not on that list. Moses Obeid told Brook that he had been asking around and had come up with the names on the list. 106 Brook's evidence was that MMNL was one of several leads he was following and that he was not particularly focussing on MMNL in priority to other companies on Moses Obeid's list, although he did give evidence to the effect that he thought that MMNL might be interested in securing the backing of Lehman as he thought that MMNL might be "financially weak". According to Brook, Moses Obeid did not steer him towards MMNL. Brook testified that he asked Moses Obeid to pay him a success fee if he could broker a deal with MMNL. Moses Obeid agreed to this at the level of principle although no particular terms were agreed at this time. 107 On 15 July 2008, Brook met with the Managing Director of MMNL, Mr Mart Rampe. Brook told Rampe that he was working with a landholders' alliance of owners of properties at Bylong who believed that a coal tender process was coming up and that those landholders wanted to do a joint venture deal with a mining company so that they could profit from the mining resource and not just make money from owning the land. Brook said that the landholders wanted to keep their identity confidential but that they were prominent Sydney business people. Rampe suggested that Brook meet with Mr Warwick Grigor who was, at that time, the Chairman of MMNL. 108 On 16 July 2008, Brook met with Grigor at Lehman's offices. At that meeting, Grigor informed Brook that not all of the directors of MMNL were in favour of pursuing coal mining projects in NSW. He said that it was his own view that MMNL should diversify its business into coal and that, for the last couple of years, he had caused the company to lobby the DPI in order to be invited to tender for coal projects in the Lithgow area. Brook informed Grigor that the proposed venture concerned the Mt Penny area. Grigor said that he was not familiar with that area. Brook then said that Lehman had the landowners in the area on board and that they were proposing a joint venture with a mining company which involved some equity for them. Grigor indicated that MMNL would be keen to explore a relationship with Lehman with respect to any coal licences that might come up. 109 Shortly after that meeting, Brook informed Moses Obeid of the substance of his discussions with Grigor and of the potential for Lehman to provide capital for a coal mine, either from its own balance sheet or from its clients. 110 On or about 17 July 2008, Brook again met with Moses Obeid and Paul Obeid. At this meeting, Brook reported on his discussions with Grigor and recommended that the Obeids and Lehman pursue a coal deal with MMNL. For some time thereafter, Brook had very regular contact with Moses Obeid, which at times rose to the level of daily contact. 111 On 18 July 2008, Moses and Gerard Obeid met with Rumore. Rumore's handwritten notes of that conference record that: (a) The "deal with Tianda" [Mr Fang] was "off"; (b) The Obeids provided to Rumore contact details for Brook in connection with a possible transaction involving MMNL and Lehman; (c) In respect of a "first bid", the structure of that transaction was that Lehman would have an option to acquire 60% of a new company, referred to as Monaro Coal, exercisable "once MC wins right to mine pursuant to EOI"; (d) Monaro Coal would "buy 3 Obeid properties @ multiple" of three or four times valuation; (e) At the time of exercising its option, Lehman would direct Monaro Coal to issue 15% of its shares to Lehman and 45% to the Obeids; (f) The "two [arrangements]" were to be "interdependent"; (g) Both Lehman and Monaro Coal would use Clayton Utz as their solicitors in connection with the proposed transactions; and (h) In respect of a "second bid", there was to be a similar agreement but this second bid would involve no land component and the lessor's share would go to the Obeids. 112 A typed note on CBP's Bylong file accords with Rumore's handwritten notes of the conference. That typed note included additional matters which addressed a proposed agreement between Lehman and the landholders and Monaro Coal's bids for rights to mine other properties. 113 Moses Obeid and Brook met again, on this occasion on 21 July 2008. There was no evidence as to what occurred at that meeting. 114 On 22 July 2008, Grigor sent Brook a letter on MMNL's letterhead seeking Lehman's support for MMNL to tender for certain coal tenements which were expected to be promoted through a closed tender process within 30 days. In his evidence, Brook said that it was Moses Obeid who had told him about the upcoming closed tender process. In return for that support, MMNL proposed in its letter to Brook to grant to Lehman an option for 60% of the issued shares in a special purpose vehicle which would bid in the tender process, such option to be exercisable upon the bid being successful. In the letter, Grigor also proposed that Lehman be granted the first right of refusal to provide or arrange capital for the development of a mine. That letter was submitted to Brook by Grigor as a draft. It was then discussed between them before they finalised the form of the letter on 22 July 2008. 115 On 23 July 2008, Brook attended a meeting at the offices of CBP at 42 Park Street, Sydney, with Rumore and Moses, Gerard and Paul Obeid. Rumore's handwritten note of this meeting records the following: According to the note, there was to be a SPV between Lehman and the landholders. 45% equity in that SPV was to be held by an independent corporation as a bare trustee for the Obeids. The letter from MMNL to Lehman dated 22 July 2008 was referred to. Clayton Utz were to be retained to act for MMNL. CBP was to vet the proposed option agreement between MMNL and Lehman to ensure that the Obeids' interests were protected. Clayton Utz were to act in respect of the option and Lehman was to retain Freehills or Mallesons to act in respect of its deal with the Obeids. It was expected that the MMNL option would be finalised by 29 July 2008 which was the date for the opening of the Government's EOI campaign. Lehman was likely to accept MMNL's offer contained in its letter of 22 July 2008. 116 It appears that Lehman entertained Messrs Costa, Macdonald, Tripodi and Eddie Obeid for lunch on the same day. With the exception of Eddie Obeid, all of the other men were Ministers in the NSW Government at the time. There was no evidence before me as to what was discussed at this lunch. 117 A typed note on CBP's file dated 23 July 2008 records the important integers of the arrangement then proposed involving Monaro Coal. There was to be an option between MMNL and Lehman whereby 60% of the shares in Monaro Coal would be allocated to Lehman upon certain conditions being satisfied. Those conditions were: The option could only be exercised once Monaro Coal had won the right to mine on the three Bylong Valley properties in question (Cherrydale, Donola and Coggan Creek); there had to be an agreement in place for Monaro Coal to purchase those three Bylong properties at a multiple of the valuation of those properties at the time of the grant of the mining lease to Monaro Coal which multiple was yet to be agreed; and, at the time of the exercise of the option, Lehman was to direct MMNL to issue 15% of the shares in Monaro Coal to Lehman or its nominee and 45% of the shares to a special purpose vehicle which was intended to hold the interest of the Obeids in the venture. The note records that there were separate put and call arrangements between Lehman and each of the landholders who owned the three Bylong Valley properties in question which allowed Lehman to acquire those properties if Monaro Coal was successful in obtaining a right to mine over those properties. It was contemplated that a separate special purpose Monaro entity would bid for other rights to mine in NSW. Lehman was to grant an option for 45% of the shares in Monaro Coal in favour of the SPV for $1. The SPV was to act as a bare trustee holding 40% of the shares in Monaro Coal on behalf of interests nominated by the landowners with the other 5% being held on behalf of a nominated third party. 118 On the same day, CBP prepared a list of issues to be discussed with Sid Sassine, the Obeids' accountant. The matters sought to be discussed included: (a) Details of the SPV to hold the shares in Monaro Coal as bare trustee; (b) The identity of the trust on behalf of whom the 40% of the shares in Monaro Coal were to be held; (c) The identity of the company to act as bare trustee to acquire the two farms (Donola and Coggan Creek); and (d) The identity of the trust which was to be the beneficiary with respect to those two farms. 119 At approximately 5.30 pm on 23 July 2008, Brook sent an email to Edwin Wong who was a Lehman employee located in Hong Kong and Brook's immediate superior. Included within that email was a brief description of the proposal which Brook wished to discuss with Wong at that time. The important elements of that proposal as explained to Wong were as follows: (a) MMNL had become aware of certain tenements that were expected to come up for closed government tender in the next few days and was seeking financial support from Lehman as per its letter dated 22 July 2008; (b) MMNL had also identified a party who was currently the holder of land parcels which were anticipated to be crucial to the successful development of the coal tenements; (c) The land related party was seeking to participate in the ownership of any mine that followed from the grant of mining licences; and (d) To this end, it was proposed that Lehman would receive a 20% option over the shares in a successful joint venture SPV bidder with MMNL and that a further option for 40% of the SPV's issued capital would be issued to the land related party. 120 The essence of the proposal was depicted diagrammatically as follows: 121 The explanation of the proposal continued: Brook said that in return for Lehman's participation with MMNL through the tender process, Lehman would be issued an option for 20% of the issued capital in the SPV bidder company. This option would be issued to Lehman for $1 and would only be exercisable upon a bid being successful. An option on similar terms would be issued to the land related entity. Brook also foreshadowed the possibility that Lehman would have the option to fund exploration and feasibility study expenditure in order to increase its ownership in Monaro Coal. 122 On 23 July 2008, Barry Irwin, a partner at Clayton Utz, sent a letter to Grigor in which he set out his understanding of the proposed transaction and Clayton Utz's willingness to act for MMNL in respect of the transaction. 123 On 25 July 2008, Clayton Utz forwarded a draft option agreement to Grigor. Grigor provided the draft to Brook who, in turn, forwarded it to Rumore. 124 At around this time, the proposed transaction the subject of Monaro's letter of 22 July 2008 was revised to increase Lehman's interest in the SPV, obtainable by exercise of the option, from 60% to 80%. This revision to the proposed transaction was reflected in Rumore's notes of a further conference he had with Moses and Gerard Obeid on 25 July 2008. 125 By 25 July 2008, Rumore had received a draft Contract for Sale from the solicitors acting for the vendors of Donola. On that day, Rumore sought instructions from Paul, Gerard and Moses Obeid in respect of a draft letter which he advised should be sent to those solicitors on behalf of the purchasing entity. On the same day, Rumore sought instructions in respect of the proposed purchase of Coggan Creek. The purchaser in that transaction was also to be an Obeid entity. 126 Rumore met with Moses and Gerard Obeid on 25 July 2008 in order to discuss the instructions to be provided in respect of the acquisition of Donola and Coggan Creek. At that conference, one or other of the Obeids informed Rumore that the option proposal in favour of Lehman in respect of shares in the SPV (Monaro Coal) had been increased to 80% of the shares to be issued in that company. The Obeids informed Rumore that the manner in which the SPV would deal with this 80% would be addressed later during the six weeks EOI period. The Obeids asked Rumore to review the draft option agreement with MMNL which had been prepared by Clayton Utz. They also instructed Rumore that the agreement between the Obeid entities and the other two landowners could be done later during the EOI period. They also instructed Rumore that Greg Skehan, a partner in CBP, was to be the sole director and shareholder of the SPV (which later became Voope) and that Rumore was to be the sole director and shareholder of the second (landowner) vehicle (which later became Geble). 127 On 25 July 2008, Rumore placed an order for a new (shelf) company with Patricia Holdings Pty Limited, a shelf company supplier. The company order form records Skehan as the sole director and shareholder of the company, with the one share in the company to be held by Skehan on trust for Equitexx as trustee for the Obeid Family Trust No 2. 128 In the morning of 28 July 2008, Rumore sent an email to Gerard and Moses Obeid. This email was copied to Paul Obeid and to Skehan. In that email, Rumore reported on the progress which had been made in respect of the matters discussed with the Obeids in conference on 25 July 2008. In that email, he noted that he had ordered the two companies and brought the Obeids up to date with progress in respect of the land transactions. In respect of the companies, he said: We have ordered the two companies, in respect of one of which companies Greg Skehan will be the sole director and shareholder (which company will enter into the option for the shares in Monaro Coal (Aust)), and the other in respect of which the writer will be the sole director and shareholder and which entity will acquire the properties as trustee for Equitexx Pty Ltd as trustee for the Obeid Family Trust No 2. 129 In the morning of 28 July 2008, Christine Gibara of CBP sent an email to Rumore with a message that Emily from Patricia Holdings had called to indicate that the company order form sent to Patricia Holdings on 25 July 2008 did not identify the company name to be used for the new shelf company or its intended principal place of business. Rumore's handwritten note on the email recorded the following: "we don't care [about] co[mpany] names. Whatever she has is fine. Principal place of business is our address. 2 companies will be done this afternoon". On the same day, (28 July 2008) Voope (ACN 132 441 868) was registered with ASIC with Skehan as its sole director and shareholder. Geble (ACN 132 441 877) was also registered with ASIC on 28 July 2008 with Rumore as its sole director and shareholder. 130 On or about 28 July 2008, Brook again met with Rumore, Moses Obeid and Gerard Obeid. Prior to that meeting, Moses Obeid had told Rumore, and also Brook, that he required the entity which was to enter into the option agreement with MMNL to be an entity owned and controlled by the Obeid family. Rumore's notes of this meeting appear to be addressing an email dated 28 July 2008 by reference to specific paragraphs in that email. The relevant email was not in evidence before me. Someone at the meeting informed Rumore that the option for 80% of the shares in Monaro Coal was to be in favour of the company in which Skehan was the sole director and shareholder (Voope) and that that company would then introduce a joint venture partner and give part of its shares to this joint venture partner. Rumore was also instructed that MMNL must bid only through Monaro Coal. Rumore's notes go on to record that a shareholder's agreement would be needed and that MMNL was to accept the Obeids' direction in respect of the lodgment of the mining tenement application. Notes made during that meeting by Brook demonstrate that the transaction then under discussion involved a wholly owned subsidiary of Monaro (referred to as "Monaro Coal" and "Bidco") tendering for the EL for Mt Penny and an "SPV" (Voope) having an "80% option" in relation to Monaro Coal meaning an option to secure 80% of the issued capital of Monaro Coal. Brook's evidence was that he understood that the "SPV" referred to in his notes was to be an Obeid entity in which Lehman would have an interest. 131 On 28 July 2008, Rumore sent a letter to Gerard and Moses Obeid titled "Purchase two farms (three vendors) at Bylong Valley". That letter enclosed a copy of the draft option deed prepared by Clayton Utz on 25 July 2008 which had been provided to Rumore by Brook who had obtained it from Grigor. 132 Rumore provided the following commentary on the structure of the transaction: In view of the changed arrangement as discussed with writer on Friday afternoon, we understand that Lehman Brothers is not taking an option but that an option in respect of 80% of the shares in Monaro Coal (Aust) is to vest in a new SPV (in respect of which Greg Skehan will be the sole director and shareholder). [This was a reference to Voope] Our principal concern is that you have now advised us that Monaro Coal (Aust) will not be able to bid for the coal leases on its own and would need to bring in a further party to support its application for the coal licence in Bylong Valley. Our concern is that Monaro Coal may become a minor participant in the mining lease operations and by having an option to acquire, for nominal consideration, a significant part of the share capital in Monaro Coal (Aust), you will not achieve a significant interest in the overall coal operations that you intended. You need to further think this through to see how your position will be protected as it may well be that even having an option over 80% of the shares in Monaro Coal (Aust) may not yield the end participants with an equity anything like the equity stake that they originally thought, as this company could very well become the "junior player" in the "consortium" which ultimately wins the coal mining lease concessions. 133 In the morning of 30 July 2008, Sally Parker of CBP sent an email to Rumore to advise that the certificates of registration for the "Obeid companies" were expected to be provided to CBP that morning. Later that morning, Emily Sheldon of Patricia Holdings sent an email to Rumore attaching the certificates of registration of the companies which he had ordered - being Voope and Geble. 134 Later that same day (30 July 2008), Rumore informed Moses, Gerard and Paul Obeid of (inter alia) the incorporation of Voope which he described as "[t]he company to take the option in respect of the shares". Skehan was described as the sole director and shareholder of Voope. Rumore informed the Obeids that, as instructed, Skehan held the one issued share in Voope as a bare trustee for Obeid entities (Equitexx as trustee for the Obeid Family Trust No 2). 135 In an email of 31 July 2008, Rumore passed on to the Obeids the invoice for the costs of the incorporation of (inter alia) Voope. Rumore also told Moses, Gerard and Paul Obeid at this time that the company which was to acquire the properties at Bylong (Geble) had also been incorporated. 136 On 31 July 2008, Monaro Coal was registered with ASIC. On the same day, Brook informed Rumore of the registration of Monaro Coal and, on 1 August 2008, Rumore passed on that fact by email to Gerard, Moses and Paul Obeid. In the same email, Rumore sought comments "in relation to the option deed which we note you collected from our office yesterday". 137 Upon registration, Grigor was appointed as the sole director of Monaro Coal. No secretary was appointed. All shares issued at that time were held by MMNL and the registered office of the company was the same address as the registered office of MMNL. 138 On 4 August 2008, Rumore sent a further email to Gerard, Moses and Paul Obeid reporting on progress in relation to the acquisition of Donola and Coggan Creek. It is apparent from that email that the acquisition transactions were expected to be consummated soon after 4 August 2008. 139 On 5 August 2008, Rumore sent to Clayton Utz, in their role as the solicitors for MMNL, a re-drafted "Option deed re shares" between MMNL and Voope. The draft option deed granted to Voope an option to acquire 80% of the issued shares in Monaro Coal in consideration for Voope's assisting it in relation to an application in respect of various mining tenements. The option was exercisable within two years from the date upon which MMNL was granted a tenement or an interest in a tenement. Rumore also sent a copy of this email and the attachment thereto to Brook. In his evidence, Brook denied having any significant input into the drafting of this deed. 140 Later in the day on 5 August 2008, Rumore sent an email to Gerard, Moses and Paul Obeid in which he reported on the progress being made with the acquisition of Donola and Coggan Creek. Rumore reminded the Obeids that they were to come back to him to sign whatever documents were necessary to set up the bank accounts for Geble. He then said: With respect to the option, we have prepared this with the changes referred to by Moses and have sent it through to Mr Irving at Clayton Utz. With regard to the queries which Moses had in respect of the various obligations under that option, we refer you to clause 8 and, in particular, clauses 8(a)-8(e). 141 On 6 August 2008, the two option agreements between the vendors of Coggan Creek and Geble were exchanged. Those agreements gave Geble the option to purchase Coggan Creek for the total sum of $3,500,000. On the same day, the Contract for Sale between the vendor of Donola and Geble was also exchanged. On the same day, Geble apparently established the Elbeg Unit Trust in which 300 units were then issued. The initial unitholders were Challenge Property Investments Group Pty Limited (ACN 113 359 505) (Challenge) as trustee for the Triulcio Family Trust as to 150 units and UPG as trustee for the Moona Plains Family Trust as to 150 units. The purchase price of Donola was $600,000. UPG was an Obeid entity as was the Moona Plains Trust. The evidence did not go so far as to establish that Challenge was a front for the Obeids. At the very least, members of the Triulcio family were associates of one or more of the Obeids. In addition, there was some evidence which suggested that the Elbeg Unit Trust was not established on 6 August 2008 but was, in fact, created in September 2008. Whether or not this is so is not important for present purposes. I do not intend to make any findings about that matter. 142 On 7 August 2008, in a further email to Gerard, Moses and Paul Obeid of that date, Rumore suggested that, as Skehan was regularly absent from the office on business, it would be a good idea if Voope provided a power of attorney to one of Rumore's partners in CBP's property group. Rumore had prepared a power of attorney and enclosed it with the email. Rumore sought specific instructions from the Obeids that Skehan should provide such a power of attorney. Skehan ultimately executed the Power of Attorney on 15 August 2008. Rumore also suggested that he and the Obeids meet in order to discuss all outstanding issues and to obtain instructions from the Obeids in relation to those issues. 143 Late in the evening of 7 August 2008, Clayton Utz sent a revised version of the option deed to CBP. 144 On 8 August 2008, Rumore sent an email to Gerard, Moses and Paul Obeid. After referring to some specific issues relating to the acquisition of the properties at Bylong, Rumore noted that there was a significant number of matters that needed to be dealt with at that time and that, in light of the fact that some of the Obeids would be going on leave shortly, he felt that they should come and meet with him … "to run through all of the issues relating to these three matters (and associated matters) so we can take instructions in relation to the outstanding issues". He added: Of course, one of the things that needs to be resolved is the issue of the further option document which we have prepared and have sent through to Clayton Utz. 145 Later on 8 August 2008, Rumore sought instructions from Paul, Gerard and Moses Obeid in respect of that document generally but, in particular, in respect of the changes to Rumore's re-drafted document which had been suggested by Clayton Utz. 146 Clayton Utz chased up Rumore about the MMNL option deed on Saturday 9 August 2008. The next day, Rumore told Ms Cuthbertson of Clayton Utz that he was awaiting instructions from his clients. 147 Rumore met with Moses and Gerard Obeid on Monday 11 August 2008. At that conference, Rumore discussed the changes to the draft of the MMNL option agreement which had been sent to Rumore on 7 August 2008. 148 On 12 August 2008, Rumore sent an email to Clayton Utz to which was attached a further draft of that agreement. In the covering email, Rumore highlighted a number of matters by way of explanation of the drafting changes. On the same day, he sent a copy to Moses and Gerard Obeid of his email to Clayton Utz with the attached redrafted option agreement. 149 On 16 August 2008, Clayton Utz advised Rumore that MMNL accepted the draft option deed in the form sent to Clayton Utz on 12 August 2008. Rumore then forwarded that email to Gerard, Moses and Paul Obeid and asked whether those gentlemen were content for the option deeds to be exchanged on 20 August 2008. On the same day, Moses Obeid replied that exchange on 20 August 2008 was great and that he would speak to Rumore on the following Monday, 18 August 2008. 150 In a further email sent on 18 August 2008 to Moses, Gerard and Paul Obeid, Rumore confirmed his instructions to the effect that the option deed was to be exchanged on 20 August 2008. 151 On 20 August 2008, as anticipated, the option deed between MMNL and Voope (Voope Option Deed) was exchanged. Skehan executed that document on behalf of Voope. The important provisions of the Voope Option Deed were as follows: (a) MMNL granted an option in favour of Voope or its nominee or assignee to acquire 80% of the issued shares in Monaro Coal (cl 2); (b) The consideration for the grant of that option was expressed to be "… the provision of consultancy, general assistance and advisory services by or on behalf of Voope or at the direction of Voope for the benefit of [MMNL] and [Monaro Coal]"; (c) The option was exercisable by Voope in the two years following the grant of a "Tenement" or an interest in a "Tenement" to Monaro Coal, but lapsed if that grant had not occurred within three years of the date of the document (cl 3 and cl 4); (d) "Tenement" was defined to mean "… the mining lease, exploration licence or any other mining interest applied for pursuant to the Invitation to Tender issued by the Department of Primary Industries (NSW) at any time after the date of the [Voope Option Deed] but prior to 1 January 2009 and granted pursuant to the Act in the State of NSW for the exploration or mining of coal"; (e) MMNL was obliged to ensure that all applications for Tenements (as defined in the Voope Option Deed) were made through Monaro Coal and not by MMNL itself or by any other related body corporate (cl 8(a)); (f) MMNL was obliged to cause Monaro Coal to lodge applications for Tenements within the applicable time frames, to diligently pursue them and to supply the necessary information, documentation and material to the DPI (cl 8(b)); (g) Prior to lodging any application for a Tenement or responding to any request for information from or correspondence from the DPI, MMNL was obliged to cause Monaro Coal to consult and confer with Voope and to act in accordance with the directions and suggestions of Voope (cl 8(e)); (h) MMNL was obliged to ensure that Monaro Coal did not withdraw any application for a Tenement without the prior written consent of Voope (cl 8(f)); (i) MMNL was obliged to ensure that Monaro Coal did all actions, matters and things as it was reasonably able to do in order to be successful in procuring a grant to it of any Tenement or Tenements (cl 8(g)); and (j) MMNL warranted that no party other than Monaro Coal had or would have any interest in any Tenement which might be granted to Monaro Coal without the written consent of Voope which should not be unreasonably withheld. The condition precedent to the exercise of the option was the granting of the Tenement or an interest in the Tenement to Monaro Coal. 152 In the afternoon of 20 August 2008, Rumore advised Moses, Gerard and Paul Obeid that the Voope Option Deed had been exchanged that day. 153 By Deed of Variation of Option over Shares dated 22 December 2008 between MMNL and Voope, the parties agreed to remove the words "but prior to 1 January 2009" from the definition of Tenement in the Voope Option Deed. The effect of this amendment was to remove the temporal restriction from that definition. It appears that this variation document was actually executed on or about 10 March 2009 and backdated.
Obeid Interests and Associates Acquire Coggan Creek and Donola 154 On 24 or 25 July 2008, the Obeid sons instructed Rumore that the Obeids wished to proceed with the purchase of Coggan Creek and Donola. The proposed transaction for the purchase of Coggan Creek took the form of two call options granted by the owners of the property, TE O'Brien and TE O'Brien (Merriwa) Pty Limited. In the case of Donola, the transaction took the form of a Contract for Sale with the owner, being the Estate of the Late KJ Stanmore. 155 As noted at [141] above, on 6 August 2008, Geble, as purchaser, entered into a Contract for the Sale of Donola for the price of $600,000 and the two call option agreements in respect of Coggan Creek were also exchanged. The purchase of Donola was completed on 22 October 2008. Geble acquired that property as trustee of the Elbeg Unit Trust. 156 Geble was obliged to exercise the options to purchase Coggan Creek by 6 October 2008. In early October 2008, Gerard Obeid instructed Rumore to ascertain whether the vendors of Coggan Creek would be prepared to grant an extension of the option period. The vendors did not grant the requested extension and the options lapsed on 7 October 2008. In an email dated 8 October 2008 from Rumore to Gerard Obeid (copied to Moses and Paul Obeid), Rumore recorded his instructions from the Obeids to the effect that Geble was not in a position to exercise the options by the due date (6 October 2008) and that they intended to let the options lapse. 157 Subsequently, on 24 October 2008, the vendors of Coggan Creek entered into two Deeds of Variation of Option in respect of the options previously granted in favour of Geble by which the option period was extended to 31 October 2008. These transactions were entered into notwithstanding the fact that the options had already lapsed on 7 October 2008. 158 On 6 November 2008, Geble nominated Coopers World Pty Limited (ACN 133 940 388) as trustee of the Justin Kennedy Lewis Family Trust as its nominee to exercise the call options in relation to Coggan Creek. Contracts for the Sale of Coggan Creek between TE O'Brien and TE O'Brien (Merriwa) Pty Limited, as vendors, and Coopers World Pty Limited, as purchaser, were entered into on 7 November 2008. As already mentioned, the total consideration paid under those contracts was $3,500,000. 159 On 10 November 2008, Coopers World Pty Limited changed its name to Justin Kennedy Lewis Pty Limited (JKL). 160 Completion of the purchase of Coggan Creek by JKL took place on 2 November 2009, almost a year later. 161 On 7 November 2008, Rumore met with Gerard Obeid and Justin Lewis, who is the principal of JKL. The following matters were recorded by Rumore in his note of that meeting: (a) The three landowners (UPG, Geble and JKL) would sell the three properties in one line to a mining company that "gets the coal lease". [This is probably a reference to Monaro Coal. The reference in the note is "MC"]; (b) The sale price would be at a multiple of not less than four times the valuation of the property as at the date of sale with all other terms to be agreed (acting reasonably); (c) One representative would negotiate the sale and the mining interests with full power to negotiate as per laid down criteria; (d) There was to be an option to Monaro Coal for an EOI and, in the event that Monaro Coal did not get the lease, the option would lapse; (e) If Monaro Coal got the mining interest, that interest was to be distributed pro rata to the land value paid for the owners' respective parcels; (f) There was to be a separate agreement between the Obeids and Lewis as per paragraph 1 of Rumore's memo of 7 November 2008. Interests associated with Lewis were to obtain 70% of the profit after all costs were deducted and the Obeids were to obtain 30% of that profit; (g) UPG was to be given the first right of refusal to acquire JKL's land before the sale to Monaro Coal. The price at which that first right of refusal was to be exercised was the purchase price paid by JKL plus all costs subsequently incurred in relation to that acquisition; (h) If JKL could not settle within three months, it was to give notice to the Obeid interests of at least one month and they would take over the contract for sale; and (i) If anything was to happen to Lewis personally, there was to be a Power of Attorney to the owners' representative to conclude negotiations as per agreed parameters. 162 By 11 November 2008, Rumore had drafted a Landowners' Deed, the parties to which were Locaway, Geble and JKL. He had also drafted a Profit Sharing Deed, the parties to which were UPG and JKL. However, at the time when these documents were prepared, Rumore had a number of questions concerning the identity of the parties who were to enter into these arrangements and the correct names of those parties. These draft documents were provided to Moses Obeid on 12 November 2008 but do not appear to have been finalised. Nonetheless, on the evidence, it is more likely than not that the Obeids had entered into a profit-sharing arrangement with Coopers World Pty Limited which required that company to sell Coggan Creek to Monaro Coal, after taking out its reasonable costs of acquisition, and then to split the profits 70% to Coopers World Pty Limited and 30% to the Obeid interests. 163 Other transactions apparently took place at this time concerning Geble and UPG. Those transactions are somewhat confusing and may have proceeded upon incorrect assumptions. As they are not presently relevant, I do not propose to refer to them here. 164 In late November 2008, John Campo, the solicitor for the Triulcio family, became the sole director of Geble. He also became the sole shareholder at that time. However, it appears that he held those shares as to 50% on behalf of the Triulcio family and as to 50% on behalf of the Obeid family. 165 Also, it appears that a Landowners Deed, the parties to which were UPG, Geble and JKL, was executed on or about 18 November 2008. Under that Deed, those three companies appointed a representative to negotiate the sale of Cherrydale, Donola and Coggan Creek at a multiple of at least four times the current value of those properties. They also agreed to act together and to appoint a single representative to represent the three of them in negotiations for the sale of those properties.
The EOI Process for Mt Penny Commences 166 In 2008, the whole of NSW was declared to be a "Minerals Allocation Area" in respect of coal for the purposes of the Mining Act with the consequence that applications for ELs for coal could only be made with the prior consent of the Minister. The DPI established guidelines for the future allocation of ELs for coal exploration areas in relation to major stand-alone areas (that is, areas containing sufficient coal to develop a large new mine) by a tender or EOI process involving minimum and/or open-ended financial contributions. 167 In 2008 and 2009, the practice of the DPI in relation to applications for ELs for coal exploration areas was that certain parties would be invited by the DPI to lodge EOIs, the EOIs would be evaluated by a departmental committee and a recommendation made to the Minister or the Minister's delegate as to who was considered to be the best candidate to be invited to apply for an EL. The members of the particular Evaluation Committee in the present case were: William Hughes, the Acting Director Development Coordination at the DPI, A Zanella, Project Manager, Project Management Coordination at the DPI; and J Moloney, Principal Adviser Minerals at the DPI. Usually, the recommendation of such an Evaluation Committee would be accepted and the successful party (or its nominee) would be invited to apply for an EL for the relevant coal exploration area. 168 Consistent with that practice, on 9 September 2008, the DPI sent to certain companies invitations for EOIs for coal ELs for eleven coal exploration areas in the Gunnedah, Hunter and Western Coalfields, including the Mt Penny, Glendon Brook and Yarrawa coal allocation areas. MMNL was one of the companies invited to lodge EOIs. Responses to the DPI letter of 9 September 2008 were required by 24 November 2008. Accompanying that invitation was a document entitled "Expression of Interest Information" dated August 2008. This was the initial EOI information package. 169 Shortly after 9 September 2008, Rampe informed Brook that MMNL had received invitations to submit EOIs for all eleven coal exploration areas being released at that time. 170 In section 1 of the initial EOI information package, after the identification of the relevant coal exploration areas, the following text appeared: A number of companies have approached the Department of Primary Industries, seeking access to potential coal resources in these areas. The eleven (11) coal exploration areas may contain open cut and/or underground coal resources of domestic and possible export quality thermal coal. In accordance with the Department's Guidelines for Allocation of Future Coal Exploration Areas, with respect to "small areas unrelated to existing mines", a limited form of expression of interest will be undertaken for these eleven (11) areas. Only companies invited to submit an Expression of Interest may apply. Expressions of Interest for more than one area may be submitted. An individual application must be made for each area of interest. The Department of Primary Industries will establish an evaluation team from experts on its staff and elsewhere in government. The team will evaluate the Expressions of Interest using a consistent process approved by an independent probity auditor. The successful applicant/s will be awarded a coal exploration licence over the area(s) for an initial period of up to 5 years, pursuant to the Mining Act 1992. Interested parties are required to submit an Expression of Interest/s to the Department of Primary Industries with details of an exploration and development program. Closing time and date for Expressions of Interest is 12 noon on Monday 24 November 2008. The Expressions of Interest (EOIs) are open to individual company or companies or a consortium by invitation only. Any proposed foreign investment in Australian resource projects is subject to the Australian Government's Foreign Investment Review Board guidelines and approval. Exploration rights over these areas will be awarded by part transfer of the existing titles held by the Crown where applicable or the grant of a new exploration title. The continued tenure of the Exploration Licence during the initial period and any subsequent renewal period will be subject to compliance with agreed commitments and title conditions. The Department of Primary Industries is not bound to accept any of the proposals. 171 The initial EOI information package went on to specify a timeframe for resource evaluation and development approvals and the prerequisites to future mine development (section 2 and section 3). 172 Section 6 of that package spelled out in some detail the evaluation process and evaluation criteria. 173 In section 6.2.1(e) (p 8 of the initial EOI information package), the following was said: (e) Financial Contributions The successful EOI applicant/s will be required to meet the financial obligations for an exploration licence listed in Section 7. Expression of Interest applicants may nominate additional financial contributions to those listed in Section 7 to be considered as part of the evaluation process. Financial contributions in Section 8 will be payable if the release area proceeds to, and is granted development approval under, the Environmental Planning and Assessment Act 1979 (NSW). 174 Section 7 of the initial EOI information package specified three types of financial contribution. First, there was an assessment fee of $10,000. The second type of fee was described in the following way: (b) A one off payment by the successful applicant/s for the allocation of each area listed below as a contribution towards the Department's Coal Development Fund for continued coal exploration as follows: … • Yarrawah $150,000 • Spur Hill $100,000 • Glendon Brook $300,000 • Mt Penny $1,000,000
175 The third element was expressed in the following terms: (c) Additional financial contributions may be included as part of an applicant's Expression of Interest. 176 The compulsory financial contributions and any voluntary contributions to which I have referred at [174] and [175] above were payable within 30 days of the Minister's granting consent to apply for an EL for the relevant coal exploration area. Successful applicants were also required to pay standard fees for applications for an EL and an environmental security deposit. The directors of MMNL and Brook all misunderstood the 30 day requirement referred to above. They appear to have formed the (erroneous) view that the voluntary contributions would be paid later - when the EL was issued. This misunderstanding, when revealed, was a terrible shock to Brook and the others and caused a major problem for MMNL in the third week of May 2009. 177 The procedure documented in the initial EOI information package was not governed by specific provisions in the Mining Act. However, the granting of consent by the Minister or his delegate to a person to apply for an EL and the subsequent steps leading to the grant of an EL were subject to the provisions of the Mining Act. In particular, relevantly for present purposes, under s 13(4) of the Mining Act, any person wishing to apply for the grant of a new EL for coal had first to obtain the consent of the Minister or his delegate to do so. In 2009, the Minister's power to grant such consent had been delegated to Richard Sheldrake, the Director-General of the DPI at that time, pursuant to s 363(1) of the Mining Act. The relevant instrument of delegation was signed by the Minister on 23 December 2008. Once consent had been granted, an application for a new EL for coal had to be made by lodging a Form 3.
MMNL's EOI for Mt Penny and Glendon Brook 178 On 19 September 2008, Rampe sent a memorandum to Grigor and to the other directors of MMNL seeking (inter alia) approval to participate in, and incur expenditures in connection with, certain of the EOIs the subject of the DPI's invitations made on 9 September 2008. He then explained the current position with Brook. He said that Brook had now revealed that he (Brook) represented a group of Chinese coal companies who wanted to establish a presence in the NSW coal industry. He said that Mt Penny was the "plum" area of interest. He said that Brook had also told him that some Indian parties were also interested. 179 On 15 September 2008, Lehman collapsed. 180 Notwithstanding the collapse of Lehman, Brook agreed with Moses Obeid and Paul Obeid that he would continue to pursue a possible deal with MMNL in relation to Mt Penny in return for a percentage of the Obeid family's share in the proposed coal mining venture. He saw an opportunity for himself to replace Lehman as the intermediary between MMNL and the Obeids. As at late September 2008, Brook had still not revealed to MMNL that it was the Obeids who controlled Voope and the landowners. 181 On 23 September 2008, Brook, through his company Oregon, entered into an agreement with MMNL to provide consultancy services to MMNL in connection with its proposed tender for coal tenements in NSW. Under this agreement, Brook's company was to receive approximately $25,000 per month by way of consultancy fees plus expenses. Oregon was to act exclusively for Monaro in relation to the NSW coal tenements covered by the agreement. It also undertook to make full and frank disclosure to MMNL in relation to such tenements and opportunities to acquire same. 182 In the period from September 2008 to December 2008, Brook endeavoured to generate interest amongst potential Chinese investors or financiers to finance MMNL's tender for ELs and, if successful, its exploration activities at Mt Penny. At this time, Brook travelled to China. He canvassed a number of prospects but, initially, none was prepared to put up funds until the necessary ELs had been acquired. Brook kept Moses Obeid apprised of his discussions in China and of his dealings with MMNL, including those which concerned the introduction of a Chinese partner into the venture. He also looked for potential investors in India. He regarded himself at the time as acting for MMNL, the Obeids and himself. He thought that all of the relevant interests were aligned and that there were no conflicts of interest about which he should be concerned. 183 Just before 21 November 2008, MMNL entered into a MOU with Shenyang Tianci Yutong Industrial Inc (Shenyang Tianci) which constituted a conditional non-binding commitment to fund the Mt Penny financial contributions in return for equity in the project. 184 On 21 November 2008, MMNL lodged EOIs for ELs for the Mt Penny and Glendon Brook coal allocation areas. At the same time, MMNL lodged EOIs for ELs for seven other coal allocation areas. Brook had earlier sent a draft of MMNL's Mt Penny EOI to Moses Obeid for his information. 185 In addition to the mandatory financial contributions specified in section 7 of the initial EOI information package, MMNL's EOI in respect of the Mt Penny coal allocation area contained an offer to make an additional financial contribution of $25 million. In its covering letter in respect of that EOI, MMNL mentioned its partnership with Shenyang Tianci pointing out that its arrangements with Shenyang Tianci involved an off-take agreement and financial assistance to MMNL. The fourth dot point in the letter was in the following terms: • Aside from the statutory costs associated with the EOI, the Company, supported by Tianci, believes that an extra contribution of $25 million to the [DPI] is warranted. It is considered that this contribution should be paid to the [DPI] after certain milestones are achieved with the final payment being made upon the Approval of Mine Development being declared by the State Government. 186 In its accompanying EOI, MMNL went on to note that, if successful, it would request that the EL to be awarded pursuant to its EOI be granted in favour of a wholly-owned subsidiary and, in connection with funding, a copy of the MOU with Shenyang Tianci was attached. 187 At a Board Meeting of MMNL held on 26 November 2008, Brook expressed confidence that MMNL would be invited to apply for an EL for the Mt Penny coal release area. 188 In relation to the Glendon Brook coal release area, MMNL's EOI offered an additional financial contribution of $5 million. As was the case with the EOI for the Mt Penny coal exploration area, MMNL sought to pay the additional financial contribution progressively. 189 The identity of those companies which had lodged an EOI in respect of each of the eleven coal areas the subject of the EOI process was made public on 24 November 2008. Rampe and Brook immediately ascertained which companies had lodged EOIs in respect of areas for which MMNL had lodged an EOI. Brook passed on that information to Moses Obeid. The EOI applicants for Mt Penny were MMNL and the Jain Group. The EOI applicants for Glendon Brook were MMNL and Hydromining Coal Australia Pty Limited.
The DPI Reopens the EOI Process 190 On 9 January 2009, the DPI announced that the EOI process for the eleven coal release areas in the Gunnedah, Hunter and Western Coalfields areas (including Mt Penny and Glendon Brook) was to be reopened to allow additional small to medium companies to lodge EOIs. Those parties who had already lodged EOIs could retain, revise and relodge or withdraw their EOIs. At the same time, the DPI issued a revised document entitled "Expressions of Interest Information" (revised package) which stated: The successful applicant/s will be awarded a coal exploration licence over the area(s) for an initial period of up to 5 years, pursuant to the Mining Act 1992 … Exploration rights over these areas will be awarded by part transfer of the existing titles held by the Crown where applicable or the grant of a new exploration title. The continued tenure of the exploration licence during the initial period and any subsequent renewal period will be subject to compliance with agreed commitments and title conditions. The [DPI] is not bound to accept any of the proposals. 191 New and revised EOIs were required to be submitted by 16 February 2009. 192 Section 6 of the revised package described the evaluation process. Section 6.1 was in the following terms: 6.1 Evaluation Process The Director-General of the Department of Primary Industries will make recommendations to the Minister in relation to the awarding of exploration licences following completion of the evaluation process for the eleven (11) release areas. The Department of Primary Industries will establish an evaluation team from experts on its staff and elsewhere in government. The team will evaluate the Expressions of Interest using a consistent process approved by an independent probity auditor. The auditor will review compliance of the evaluation process by the evaluation team prior to the submission of recommendations to the Director-General. This process will ensure the highest levels of consistency, fairness and probity are achieved. The evaluation team's assessment will be based on the Evaluation Criteria outlined in Section 6.2. 193 Section 6.2 of the revised package repeated the evaluation criteria in the same terms as the initial EOI information package. Similarly, section 7 identified the relevant financial contributions in substantially the same terms as the initial EOI information package. All financial contributions were required to be made "… within 30 days of the Minister granting consent to apply for a new exploration licence". 194 At the time when the DPI reopened the EOI process, Brook was in India meeting with the Jain Group, an Indian power generation company which had also lodged an EOI in relation to the Mt Penny coal release area, with a view to negotiating a joint venture between the Jain Group and MMNL in relation to Mt Penny. At around this time, Brook was told by Moses Obeid that the EOI process had been reopened "to allow the White Group to put in a bid". Brook passed on that information to Rampe. 195 The Jain Group informed Brook that they did not wish to do a deal with MMNL before the DPI had announced the results of the EOI process. 196 By 2 January 2009, Brook and the Obeids were looking to funnel any investment proposal for Mt Penny through an Obeid entity. On that day, Brook sent an email to Rampe in which he said that he expected to receive an investment proposal from Kaidbay "next week". That proposal appeared to relate only to the first payment of $1,000,000 in respect of Mt Penny. 197 On 5 January 2009, Locaway and UPG executed a Call Option Deed. That document was signed by Moses Obeid and Damian Obeid on behalf of Locaway and by Kaidbay on behalf of UPG. By clause 1.1 of that Deed, Locaway purported to grant to UPG or its nominee an option to purchase Cherrydale at the price of $5 million "… plus 50% of any amount over $5 million which UPG is able to sell [Cherrydale] for within a period of 10 years after the date it exercises the Call Option". Under that Deed, UPG had the power to appoint a nominee to exercise the option instead of UPG itself. The Call Option granted by that Deed had to be exercised within six months after 5 January 2009. 198 The transaction embodied in the Call Option Deed to which I have referred at [197] above is a curious transaction. Locaway had purchased Cherrydale in 2007 in its capacity as the trustee of the Moona Plains Family Trust. UPG appears to have replaced Locaway as the trustee of that Trust on 15 February 2008. In order to reflect that change of trustee on the title to Cherrydale, all that was required was for UPG to be substituted for Locaway on the relevant title document upon the basis that it was the new trustee of the Moona Plains Family Trust. Indeed, as I have noted at [91] above, an undated document purporting to do just that was tendered in evidence before me. The transaction reflected in the Call Option Deed dated 5 January 2009 presupposed an arm's length relationship between Locaway and UPG and a proposed transaction of sale and purchase in respect of Cherrydale. One may ask rhetorically: Why was this done? It seems to me that one plausible explanation for the transaction is that the Obeids were desirous of resetting the benchmark which was to be the subject of the four times multiple that they would ultimately seek when transferring the property (Cherrydale) into the anticipated coal mining venture. Kaidbay was an associate of Moses Obeid at the time. UPG was an Obeid company at the time. I think it unlikely that the Obeids had forgotten that they had replaced Locaway with UPG as the trustee of the Moona Plains Trust only a year before. In fact, in his letter to the solicitors for the vendors/mortgagees of Cherrydale dated 9 February 2009, Cordato made very clear that the Obeids were well aware of the fact that UPG had replaced Locaway as trustee of the Moona Plains Family Trust because, in that letter, Cordato said: Our client desires to proceed without delay to record the appointment of [UPG] as the new trustee of the Moona Plains Family Trust on the title to the property. 199 It seems to me that, by February 2009, the Obeids wished to establish a value for Cherrydale which was at least $5 million (and hopefully more) so that the return on their ownership of Cherrydale would be far greater than it would otherwise have been had the original purchase price of $3,650,000 been used as the relevant benchmark. 200 On 13 January 2009, Cascade received the revised package from the DPI. Several of the directors of Cascade were also directors of White Energy Company Limited and the evidence suggests that, in the last quarter of 2008, those persons had been in contact with the DPI with a view to advancing Cascade's coal mining ambitions in NSW. 201 James McGuigan sent the revised package by email to John McGuigan, Atkinson and Poole the next day (14 January 2009). In that email, James McGuigan said: Yesterday we received the Expression of Interest Information Pack from the NSW Department of Primary Industry. It is attached, but the key points are: - The 4 medium and 7 small allocations from our previous meeting are on the table. - This includes the Mt Penny and Spur Hill areas that we were previously of the view that there had been a deal done for them. - This does not include the other major coal allocation (Bennalbri) in the Gunnedah Coalfield - The expression of interests are to be submitted by 16 February As discussed before the Director General (Dr Richard Sheldrake) will make his recommendation to the Minister (Ian McDonald) in relation to rewarding the licence. The evaluation criteria is quite detailed, and we will most likely have to engage the services of a mine / exploration consultancy firm to assist us with the exploration program, mine development proposal, infrastructure plan etc... I have arranged a meeting with Behre Dolbear for early next week, however if you guys have other consultants that you think may assist please let me know. Each submission will cost approx $11,000 to submit, further if are awarded the licence a one off payment for the area is required to the DPI's Coal Development Fund: - Spur Hill $1.5 - Mt Penny $1m - Glendenbrook $300k Additional financial contributions may be included as part of an applicant's Expression of Interest. Moving forward, John M is arranging a meeting with Greg Jones for this Saturday to figure out if the Mt Penny and Spur Hill areas have effectively already been allocated. If this is the case, from our meeting in November we were thinking: - Glendenbrook for Redman Mining - Spur Hill for Cascade Coal Both of those are Hunter Coalfield areas. We may want to revisit the WEC / Cessnock leverage point here. Further, both areas are close to Coal and Allied mines. I have attached the Information package (Atko I sent one to North Sydney attention to John M). Below is also the article from December 30 referring to Ian McDonald's allegations of buying personnel items on ministerial credit cards. I propose we arrange a meeting on Monday, after Saturday's meeting to set a plan for the following 3 weeks. Please give me a call if there is anything else. James McGuigan Arthur Phillip Pty Ltd· Level 33 Colonial Centre 52 Martin Place Sydney NSW 2000 P: +612 92278914 E: jmcguigan@aphillip.com.au Accused minister Ian Macdonald likely to be cleared by inquiry NSW Primary Industry Minister Ian Macdonald is set to be cleared of an accusation that be bought a $1299 LCD television for himself using taxpayers' money. The Australian learned last night an internal inquiry by the Department of NSW Premier Nathan Rees had determined that key aspects of the allegations -- first aired in a Sunday newspaper earlier this month -- were unsubstantiated. The newspaper reported that Mr Macdonald used a departmental credit card in 2005 to pay for the TV with built-in DVD player, despite ministerial use of corporate cards having been banned in 1995. It said the TV had been in Mr Macdonald's home but was subsequently moved to his office. Mr Macdonald's name and private mobile number were included on a purchase order from Bing Lee, Burwood, that was leaked to The Sunday Telegraph. However, a spokeswoman for Mr Rees said that, while the inquiry was yet to be finalised, "so far it's found that the statement he bought the TV on a credit card is false". The spokeswoman also said the TV was never in Mr Macdonald's home. She said the inquiry would be concluded soon but that the findings so far were "pretty conclusive". The finding marks a reprieve for Mr Rees, who has had to sack two ministers for misbehaviour. Former police minister Matt Brown was dismissed in September after it was revealed he had danced at a party in Parliament House in his underpants. Former medical research minister Tony Stewart was sacked last month for verbally intimidating a female staff member at a public function. 202 Greg Jones was an associate of several of the directors of Cascade. He also had a close association with Ian Macdonald and connections in the NSW Government. 203 On 4 February 2009, James McGuigan sent an email to John McGuigan, Atkinson and Poole in which he informed those gentlemen that he was preparing two submissions: One for Glendon Brook and one for Vickery South. He then said: I won't begin work on Mt Penny, until after the discussion with Greg Jones. 204 The day before (3 February 2009), Michael Johnstone informed Travers Duncan that he had had a telephone conversation that afternoon with John McGuigan, James McGuigan and Poole in which he had discussed various of the coal release areas the subject of the revised EOI process. In that email, Johnstone outlined the likely extent of coal deposits in some of the areas of interest. 205 At 5.23 pm on 4 February 2009, James McGuigan sent to Johnstone a report on the Mt Penny coal release area prepared by MMNL. That report was dated 10 October 2008. There was no direct evidence as to how James McGuigan had obtained that report. 206 By mid-February 2009, one or two of the directors of MMNL were becoming concerned about MMNL's capacity to meet the financial promises which it had made in the EOIs which it had lodged with the DPI. 207 On 13 February 2009, MMNL confirmed to the DPI that it maintained its original EOI applications in respect of the Mt Penny, Spur Hill and Glendon Brook coal release areas. At the same time, it indicated to the DPI that, in due course, it would submit variations to the other EOIs which it had lodged. 208 On 16 February 2009, Cascade lodged its EOI with the DPI for the Mt Penny coal exploration area. In its covering letter, Cascade said: The shareholders of Cascade are committed to developing a coal project and have committed to inject sufficient capital to meet the upfront fees and initial Program of Works as required in the event that Cascade is successful with its application. In this regard the shareholders have secured an underwriting from the investment bank Arthur Phillip Pty Ltd to underpin their commitment. 209 Unlike MMNL, Cascade did not offer any additional financial commitment. It did undertake to meet the minimum financial obligations and also committed to negotiate with the DPI in relation to an additional contribution at a later date. 210 On the same day, Cascade also lodged an EOI for the Glendon Brook coal exploration area. 211 The identity of the companies bidding for the areas covered by the DPI's program became publicly available on 16 February 2009. The bidders for the Mt Penny coal exploration area were Cascade, MMNL, Jain Group and Breakspheare Coal Mines Pty Ltd. For Glendon Brook, the EOI applicants were Cascade, MMNL and Hydro Mining Coal Australia Pty Limited. 212 On 17 February 2009, James McGuigan informed the directors of Cascade of the identity of the various bidders for the Mt Penny, Glendon Brook and Spur Hill coal areas. On 18 February 2009, he also passed that information on to Jones. 213 In early March 2009, Brook was seeking a firm commitment from Moses Obeid that Brook would be given a percentage of the Obeids' equity in the proposed mining venture at Mt Penny in compensation for his efforts on behalf of the Obeid family. He was seeking 5% of the shares issued in Monaro Coal. Moses Obeid subsequently raised this matter with Rumore and seemed willing to accommodate Brook's request. However, nothing concrete was done at this time. 214 On 17 March 2009, MMNL sent a letter to Voope in the following terms: 17/3/2009 The Directors Voope Pty Limited c/- Colin Biggers & Paisley Level 42, 2 Park Street, Sydney NSW 2000 Dear Sir, Re: Mt Penny Coal Release Area This is to advise you that in its submission of an Expression of Interest to the NSW Department of Primary Industries for the Mt Penny Coal Release Area, Monaro has specifically requested that should it be successful in being awarded the Mt Penny area, that it be awarded to a wholly owned subsidiary of Monaro Mining NL. It is our intention that this subsidiary be Monaro Coal Pty Ltd. Yours Faithfully, Mart Rampe Executive Director 215 A few days before, Brook had requested that a letter in those terms be sent to Voope. He settled the text of the letter with Rampe. Brook sent a copy of this letter to Moses Obeid soon after it was received by him. 216 In late March 2009, Rampe asked Brook if it would be possible to meet any of the landowners at Mt Penny while he and others were visiting the area. Brook told him "No". 217 In April 2009, disputes arose amongst the directors of MMNL in respect of that company's bids for ELs as part of the revised coal EOI process and its financial position generally. As a result, the Chairman, Grigor, was removed as a director of MMNL at a directors' meeting of MMNL held on 29 April 2009. On the same day, Grigor also resigned as a director of Monaro Coal. After Grigor's resignation as a director of Monaro Coal, the directors of Monaro Coal were James Malone, Rampe and Anne Adaley. All of the shares in Monaro Coal were still owned by MMNL. 218 By 6 May 2009, the officers of the DPI who were responsible for evaluating the EOI applications had substantially completed their analysis and had also finalised their recommendations. Those officers prepared an evaluation report of that date in which they recorded the results of their analysis. In that report, MMNL was identified as the preferred applicant for five of the EOI coal exploration areas, including Mt Penny, Yarrawa and Glendon Brook. MMNL's stated financial contributions had a decisive effect in the deliberations of the evaluation committee. The report did not disclose the identity of the second placed applicant for any of the coal exploration areas under consideration. 219 In early May 2009, MMNL was advised by a lawyer retained by it that Voope had no obligation to finance any of MMNL's coal bids. 220 On 6 May 2009, Hughes prepared a Ministerial Submission containing recommendations with respect to the EOIs for the eleven coal release areas covered by the revised EOI information package. In that submission, the author recommended that the Minister award ELs to the successful EOIs (as determined by the Evaluation Committee) for the eleven coal release areas covered by the submission. He also recommended that the Minister write to each company which either lodged a successful or an unsuccessful EOI in the terms of certain draft letters which were attached to the brief. Included within the bundle of draft letters attached to that brief was a letter to MMNL informing it that it was the successful EOI applicant for the awarding of an EL over the Mt Penny, Glendon Brook, Spur Hill, Yarrawa, Long Mountain and Ben Bullen coal release areas. 221 On 14 May 2009, MMNL informed Hughes by email that its commitment to pay $25 million as an additional financial contribution would be paid over a negotiated timeframe. 222 On 15 May 2009, Hughes responded to MMNL's 14 May 2009 email in the following terms: Thank you for clarifying with me the words 'Upon Granting of Consent' in Monaro's various Expressions of Interest (EOI) for the Coal Release Areas. All EOI's will be assessed by an Evaluation Team in accordance with the Evaluation Criteria outlined in the EOI Information Package for the Coal Release Areas. Each EOI will be assessed based on submissions made at the date of closing at 12 pm noon on Monday 16 February 2009. 223 The revised package required payment of the $25 million financial contribution offered by MMNL within 30 days of the Minister's consent to the EL application being made. 224 On 15 May 2009, Rampe was contacted by an officer of the DPI who requested that he meet with officers of the DPI about MMNL's coal bids. A meeting was arranged for 21 May 2009. 225 On 16 May 2009, MMNL proposed amendments to the Voope Option Deed. By the amendments, MMNL sought to impose upon Voope the obligation to fund the $25 million financial contribution required in respect of MMNL's bid for the Mt Penny coal exploration area, whether required upfront, or paid over a negotiated period. Brook resisted any variation. In an email sent to Rampe on 16 May 2009, Brook said: Incremental earn in by Voope is not acceptable and at this late hour will seriously put the outcome at risk. It was never the intention that Voope would have performance criteria. You have had many months to address these issues. 226 On 17 May 2009, Rampe replied that the amendments which he had sought were "just a suggestion". Rampe then proposed other ways of dealing with the issue. 227 In a memorandum dated 18 May 2009 forwarded by Rampe to the directors of MMNL, Rampe set out a timeline of relevant events. It seems likely that this memorandum was prepared for the directors of MMNL in order to bring them up to date immediately before the proposed meeting with officers of the DPI on Thursday 21 May 2009. Sections 3 and 4 of Rampe's memorandum were in the following terms: 3 Agreements and Potential Investors The only agreement in place regarding this project (together with a subsequent amendment) is an option deed over 80% of shares in Monaro Coal Pty Ltd held by Voope Pty Ltd (see Section 1 above). Please note that the purpose of incorporating Monaro Coal was to "house" the Mt Penny exploration licence, should it be granted by the DPI. The basis for this agreement was established by Gardner Brook, who had previously established a connection with Voope. Voope represents a majority of the landowners located within the Mt Penny coal release area who have agreed to make the land available to Monaro Coal for exploration and mining. In addition, Voope has agreed to facilitate the raising of the bulk of the funds to finance the necessary payments to the Government (approximately $25M) as well as the exploration program (approximately $8.2M). Because of the large sums required to secure the Mt Penny area, a 20% "free carry" to a bankable feasibility study for Monaro was considered fair and reasonable to all parties. However, it was further agreed in general terms that Monaro would pay the 1st $1.0M of the DPI commitment. It was assumed that this commitment would be paid from a larger capital raising (ie perhaps $2-$3M) off the back of a successful announcement. It was always understood that Voope would reduce its own interest in Monaro Coal, upon a principle investor being identified. To that end, Gardner Brook has been engaged on a retainer basis to canvass potential investors for Monaro Coal. This has involved meetings and discussions with a number of interested parties in Beijing, India, UK, USA as well as with local based companies. Finalization of the candidates will depend upon the Government confirming that Monaro has indeed secured the exploration licence. The above agreement is being amended to incorporate practical commercial terms and it is anticipated that the amended version will be completed in the following days. 4 Next Directors will be meeting with Gardner Brook and Voope this week ahead of a meeting with the head of the tender selection panel as well as the acting Director General of the DPI. The purpose of the meeting is to discuss the details of the Company's submissions. It appears that the selection process is now coming to an end. However, the timing of any announcement regarding the success or otherwise for Monaro, is still unknown. The results of this meeting will be circulated as soon as possible. 228 On 19 May 2009, MMNL provided Brook with a draft deed varying the Voope Option Deed. Brook promptly provided a copy of that draft to Moses Obeid. At this time, a number of drafts seeking to vary that Deed were prepared. Some for the Obeids and several for MMNL. Most of those drafts were not passed on to the respective counter-party. 229 On 20 May 2009, Brook met with representatives of MMNL and Messrs Capo and Sindoni representing Voope. A note of the meeting records discussion about MMNL engaging a party to identify "funding partners" with MMNL having an opportunity to provide funds if the Voope arrangements did not proceed. Brook requested, and the MMNL representatives agreed, to bring Brook to the DPI meeting scheduled for the next day (21 May 2009). 230 On 20 May 2009, Rampe confirmed with Hughes the details of the meeting to be held on 21 May 2009 and also sought permission to "bring along our partner if that's OK". The reference to "our partner" in the relevant email was a reference to Brook. 231 On 20 May 2009, Moses Obeid sent an email to John McGuigan (copied to Jones) concerning Georadar. On 21 May 2009, John McGuigan sent that email and his response on to his son, James. Georadar was a piece of technology that enabled a miner to delineate an ore body of interest without having to drill. This email exchange suggests that Moses Obeid had talked to or met John McGuigan before 20 May 2009. 232 The meeting with Mullard and others took place at 10.30 am on 21 May 2009 at the Sydney offices of the DPI. Present at that meeting were Mullard, Hughes, Brook and Rampe. At that meeting, the DPI officers in attendance informed Brook and Rampe that all financial contributions were required to be paid in a lump sum, upfront. That is, within 30 days of the Minister giving consent to an applicant to apply for an EL. Those officers told Brook and Rampe that MMNL had to decide by the following Monday (25 May 2009) with which EOIs it wished to proceed. Brook passed on the substance of this discussion to Moses Obeid on the same day (21 May 2009). 233 In the afternoon of 21 May 2009, Rampe sent an email to Brook which was in the following terms: Gardner This is my understanding of the process that Brad outlined to us this morning: 1 We need to nominate which projects we want to run with on the basis that all fees are paid in one lump sum. 2 We need to advise him by Monday COB which projects we intend to run with. 3 We nominate the project(s) and if we are successful in our bid (or bids), the Department will advise us within the next 1-2 weeks - probably informally. At that point of time, they will want to be convinced that we are serious contenders. 4 If we say yes, we will get an official letter shortly thereafter inviting us to apply for a licence over the relevant area. The letter will advise us that we have 30 days to put up the cash. Can you confirm that this is correct. Mart Mullard denied that he indicated to Brook and to Rampe at the meeting held on 21 May 2009 that MMNL was the favoured applicant for any of the coal release areas covered by the EOI process. 234 Later that same day, Brook forwarded to Moses Obeid Rampe's email to him (Brook). 235 On 21 May 2009, Rampe provided Brook with a summary of MMNL's financial commitments in respect of each of its EOI bids. Those commitments totalled approximately $60 million. Rampe also provided Brook with a copy of MMNL's original EOI application for Mt Penny dated 21 November 2008. These documents were immediately passed on to Moses Obeid. 236 In early May 2009, Brook agreed with Moses Obeid to attempt to gain control of MMNL's EOI for the Mt Penny coal release area. Later in May, but shortly before 22 May 2009, Brook met with Rampe at the Swissotel in Sydney. Rampe informed Brook that MMNL wished to withdraw from the EOI process to which Brook responded that Voope wanted to take control of the EOIs, if it could, subject to DPI approval. Rampe indicated that MMNL wanted some compensation for its costs of the EOI process. 237 On 22 May 2009, Brook met with several of the directors of MMNL (Messrs Malone, Barns and Rampe). The only director who did not attend this meeting was Mr Michael Duncan. At this meeting, Brook was endeavouring to ensure that Voope did not lose its interest in the Mt Penny project. Brook told the MMNL representatives that Voope was keen to preserve its position, that those who stood behind Voope had deep pockets and that they would want to take their chances. Immediately after this meeting, the Board of Directors of MMNL met. 238 At the meeting of its directors held on 22 May 2009, MMNL decided to abandon its "NSW Coal Project". The meeting was attended by Messrs Malone, Rampe and Barns. The Minutes recorded the following matters: Opening address The Chairman referred to the discussion between the Directors and Gardner Brook held immediately prior to the Board Meeting in reference to the NSW Coal Project and the Expressions of Interest submitted by the Company. In summary, the Chairman indicated that the NSW Government's requirement to have all fees and contributions paid within 30 days of offer placed the Company at too great a risk, should the Company fail to source the funds required. It was considered that the possibility of raising the funds nominated in the Expressions of Interest within the time frame suggested would be extremely difficult if not impossible. Given this very significant change to the anticipated strategy, the Chairman suggested that the Coal project was no longer viable. The Chairman noted the request from Gardner Brook representing Voope Ltd, who had expressed the desire to attempt a salvage of the coal project (in particular Mt Penny), given their significant exposure to the project. A discussion was then held between the directors during which time, various views were expressed. Resolution Resolved: to abandon the project, contingent upon the following: Voope to provide a new agreement outling [sic] a satisfactory mechanism for transferring any licences that may be awarded away from Monaro Mining and holding Monaro Mining harmless in all aspects; Voope to reimburse Monaro expenses, should it be successful in securing a coal licence The Chairman advised that he would report the result of the meeting to Mr M Duncan. The Chairman felt that Mr Duncan would be sympathetic to the above resolution. A circular resolution would be distributed to all directors giving effect to the above resolution. Next meeting To be advised Closure There being no further business the Chairman declared the meeting closed at 10.45 am. 239 Notwithstanding the terms of this resolution, MMNL did not withdraw its EOIs for Yarrawa, Long Mountain and Ben Bullen. The EL for Yarrawa was ultimately issued to Loyal Coal after ownership of Loyal Coal had passed to Coalworks Limited and the EOIs for Long Mountain and Ben Bullen were allowed to lapse. 240 By late May 2009, MMNL had retained Mark Edwards, a solicitor based in Perth, to advise it in relation to a number of matters concerning its dealings with Voope. On 28 May 2009, Edwards sent an email to Rampe in which he provided advice on the liabilities of directors for insolvent trading. At par 4 of that email, Edwards said that the directors would have: … reasonable grounds to believe that they will be able to meet liabilities arising from the tender if, prior to the time the liabilities were incurred, Monaro Coal enters into an unconditional legally binding agreement with a financially capable reputable company under which that company committed to provide the necessary capital to Monaro Coal to perform its obligations arising from the tender. 241 At this time, MMNL had two main concerns about the EOI process: First, the directors did not wish to commit MMNL, being a public company, to transactions which involved the payment of significant sums of money unless they were satisfied that MMNL had the necessary financial resources and/or backing to make those payments. Second, the directors of MMNL were concerned to preserve the company's good name in its dealings with government and not to damage that good name by behaving erratically and inconsistently in relation to the EOI process which was then coming to a head.
Negotiations between Cascade and the Obeids, Related Matters and Subsequent Events (20 May 2009 to May 2012) 242 The evidence disclosed that there were four meetings of significance involving the McGuigans, the Obeids and Brook in late May and early June 2009. These meetings were held on 23 May, 31 May, 3 June and 5 June 2009. There is very little in dispute between the parties as to what occurred and what was said at the meetings held on 31 May 2009, 3 June 2009 and 5 June 2009. There is a difference between Brook and John McGuigan as to the substance of the discussions which took place on 23 May 2009. For this reason, I will address the meeting of 23 May 2009 in a separate section of these Reasons. There is also a difference between Brook and Poole as to the substance of what was discussed at meetings held on 1 (or 2) June 2009, on 3 June 2009 and on 5 June 2009. 243 On 25 May 2009, Rampe sent an email to Malone and Barns. It was copied to Brook. That email was in the following terms: From: Mart Rampe Sent: Monday, 25 May 2009 7:58 AM To: 'jim.malone@xxxxx; 'Greg Barns' Cc: 'gbrook@oregonstandard.com.au' Subject: NSW Coal Importance: High Gents Having though [sic] about events from last week, I believe that the following matters need to be addressed, viz: The NSW DPI has requested that we respond to their query regarding the payment of the Contribution by COB today. I believe that we should advise them that we agree with their understanding of the upfront payment and let the them [sic] process our applications accordingly. My understanding of the process is that should the DPI deem one or more of our applications to be successful, we will then be invited to apply for a licence for the relevant area(s). It is at this point that Monaro either takes up the invitation or rejects it. This "invitation" from the DPI would appear to be a week or so from being forwarded to us (on the assumption that one or more of our applications are in the running). I would of course put this to them in writing. I would also imagine that they would give us a few days in which to make a decision. In the meantime, commencing from today, we would (via Gardner) approach a number of parties who had previously expressed an interest, on the basis that a written commitment to come up with the funds needs to be lodged with the Company prior to the DPI's "drop-dead" day. This is no question a tall order, but nevertheless, I believe that we are honour bound to at least give these interested parties an opportunity to respond. If the responses are unsatisfactory, then we can advise the DPI of our withdrawal. Parties that should be approached include The Jain Group, various Chinese Groups and Minsarco (who did the mine planning for us). Should we proceed on the above course of action, another matter that needs clarification from the DPI is the "awarding" of a licence. Our submission indicated that we would wish to have any awarded licence be granted to a "wholly owned" subsidiary of Monaro. However, under the current agreement with Voope and based on advice from Grant Thornton, this is not a good idea because of stamp-duty implications for the purchaser of the shares in the subsidiary. Hence we need to ask the DPI, whether we can vary that to a "partly owned" Company (or even consider getting it issued directly into Monaro). Does anybody have an issue with the above? We need to discuss as soon as possible this morning. Regards Mart 244 By late May 2009, Johnstone began to wonder whether there were links or associations between Cascade and MMNL. At 5.04 pm on 25 May 2009, Johnstone sent an email to James McGuigan in which he said: I met with a few DPI geologists, from one corner I was told a possible positive outcome, on other, same mantra as previously conveyed - "We do not have a timetable for release of who gets what". This implies a decision has been taken, but some sensitive issues and background dealing is going on. At 5.06 pm on the same day, James McGuigan sent an email to Johnstone in which he said: My mail is that we should be fine for Glendon Brook, and that we are in a good position with Mt Penny. Monaro have put substantial payments on every EOI area, however their ability to pay is what they are looking at. Anyway - hopefully it will be resolved this week. At 6.45 pm on the same day, Johnstone replied in the following terms: I'm getting some form with Monaro on Mt Penny. Are there any links or associations between Cascade and Monaro? 245 At 6.49 pm, James McGuigan responded in the following terms: Not at all. There was the proposal of a deal to be brokered last week, where we would take 90% of Mt Penny and a Monaro associate would take 10%. What's going on behind the scenes is that we are trying to raise the question on Monaro's ability to raise finances, especially after they have committed on each EOI. That's just between you and me. I think our stance is that we're not going to negotiate any more. Let's see how it plays out. Johnstone replied by saying: This clarifies some of the mixed spiel I have been getting. 246 The email exchange to which I have referred at [244]-[245] above took place on a Monday (25 May 2009). It took place shortly after the first meeting between Moses Obeid, Brook, John McGuigan and James McGuigan which had taken place on the preceding Saturday (23 May 2009). 247 It is a reasonable inference that James McGuigan had learned of the "substantial payments on every EOI area" placed by MMNL at the meeting held on 23 May 2009. He accepted as much in cross-examination. 248 On 27 May 2009, Paul Maroon, an employee of Streetscape, a company controlled by Moses Obeid, sent to Moses Obeid a draft of Heads of Agreement between Cascade and the landowners and a further draft Heads of Agreement between Cascade and Voope. The landowners Heads of Agreement provided that Cascade would purchase Cherrydale, Donola and Coggan Creek for an amount equivalent to four times the improved value of those properties. Recital E in the Voope draft Heads of Agreement recorded that, on 22 May 2009, the DPI had informed Monaro Coal that it was the leading tenderer in relation to a number of the coal exploration areas listed in the EOIs lodged by MMNL, including Mt Penny. The document went on to record an agreement to the effect that, if Monaro Coal was successful in being awarded the EL for Mt Penny, Voope would cause Monaro Coal to transfer that EL to Cascade. In return, Cascade would transfer 32.5% of its shares to Voope and lend moneys to Voope to enable it to pay out the existing mortgages over Cherrydale. 249 The next day (28 May 2009), further drafts of those two Heads of Agreement were sent to Moses Obeid, on this occasion by Mario Sindoni. Sindoni was acting for the Obeids. 250 On 29 May 2009, Moses Obeid attempted to email to John McGuigan a draft Deed of Release between Voope and MMNL. In the covering email, Moses said: "draft deed as discussed". The email did not reach John McGuigan because the email address to which it was being sent was not the correct address for him. The draft Deed of Release was also sent to Rampe who then passed it on to Malone and Barns. 251 I think that it is likely that Moses Obeid attempted to send the draft Deed of Release between Voope and MMNL in order to satisfy him that Brook and the Obeids would, in due course, gain control over the MMNL EOIs. The draft Deed of Release did not mention the withdrawal of any EOIs. The substance of the transactions contemplated by that draft was the transfer from MMNL to Voope of ownership and control of Monaro Coal and the locking in of Monaro Coal as the official bidder for the eleven coal release areas for which MMNL had previously lodged EOIs. This tends to suggest that, at the meeting of 23 May 2009, the question of the Obeids gaining control of the MMNL EOIs was discussed and the fact that they would gain that control through Monaro Coal may also have been discussed.
The 31 May 2009 Meeting 252 Brook's evidence was that, shortly before the meeting held on 31 May 2009 with the McGuigans, he and Moses Obeid, Paul Obeid and Gerard Obeid had met at Moses Obeid's office at Birkenhead Point. He said that, at that meeting, Moses Obeid had said words to the following effect: We want to incorporate Buffalo Resources, Buffalo Coal and Buffalo Energy. We want to use Buffalo Resources for the Cascade deal. 253 On 31 May 2009, immediately before the meeting with the McGuigans, Brook met Moses Obeid, Paul Obeid and Gerard Obeid outside Cascade's office. A conversation then took place in which Moses Obeid said words to the following effect: I've been talking to Brian [Flannery] and he's been talking to Travers Duncan. Both the land and equity deals will have to be vetted by Duncan. 254 Brook and the Obeids were then shown into Cascade's offices. 255 Present at the 31 May 2009 meeting were Brook, Moses Obeid, Paul Obeid, Gerard Obeid, Greg Jones, John McGuigan and James McGuigan. 256 At par 168 of his first affidavit, Brook gave a summary of the discussions which took place at this meeting. That paragraph is in the following terms: During the course of the meeting, we worked through the points that would form the basis of the first draft of the agreements between the Obeids and Cascade. The multiple that would apply to the land purchases (which had not previously been finalised) was mentioned. I was not responsible for negotiating the multiple, and we did not agree on the precise amount at this meeting. We also discussed the fact that the proposed venture would extend to any contiguous areas over which Cascade later acquired mining rights and talked about how the Obeids' 25% interest would work, in particular whether the shares would be 'contributing shares' (which would require the Obeids to make capital contributions) and whether the Obeids would be represented on the Board. I was sensitive to Cascade diluting the Obeids' 25% interest by spending them out through high capital expenditure which the Obeids could not match, so we negotiated a clause relating to the exploration spend or the establishment of a 100 million tonne resource. 257 Brook said that this second meeting did not last long. According to him, the following conversation occurred at this meeting: Brook: "We have agreed with Monaro Mining that we will take control of their EOI submission. Monaro will contact the DPI and inform them that we now control the Monaro Mining bids. Also, the shares in the special purpose vehicle being used by Monaro Mining will be transferred to our control." John McGuigan: "I want to see evidence that you control the Monaro bid." Brook: "I will provide you with the letters to the DPI and proof of the share transfers when I have them." John McGuigan: "Alright, well I'll draft an agreement for you to review. Also during the second meeting, there was a conversation to the following effect: Moses Obeid: "The Obeids' interest will be held by a separate company." 258 According to Brook's evidence-in-chief, immediately after the meeting on 31 May 2009, he had a conversation with Moses Obeid in which Moses Obeid told him that the Obeids would use Buffalo as the company to hold the mining interests with Cascade and that he (Brook) could take his success fee in the form of 12% stake in Buffalo. Brook said that he agreed to this. Brook also testified that Moses Obeid requested on this occasion that he be a director of Buffalo and Loyal Coal with Kaidbay. 259 According to John McGuigan, the discussion on 31 May 2009 commenced with reference to the landowners' alliance. John McGuigan said that he asked to see evidence of the landowners' alliance. He then said that Cascade would agree to acquire the land from the landowners at a premium to its agricultural value. He said that Cascade would have to do some research before it would agree on any multiple. He then said that, if Cascade were the successful EOI applicant, then contracts to purchase the land would be entered into within 90 days of the award of an EL for Mt Penny. He said that those contracts would be completed within 90 days of the grant to Cascade of a mining lease. 260 John McGuigan then testified that the discussion moved to the proposed JV interest. At par 22 of his affidavit, John McGuigan said the following: There was then discussion about the JV interest: Brook said: 'As I said at our last meeting I am acquiring Monaro Coal from Monaro Mining. Part of the deal with Monaro Mining is that I will acquire or have access to work that has been done by Monaro Mining in relation to and in preparation of its Expression of Interest document. Quite a lot of work was done by Monaro Mining in relation to environmental matters, road access and the like. If we can do a deal I will provide that intellectual property to you. In consideration for us delivering the land and providing the intellectual property, we want a 30% interest in the joint venture'. I said: 'I think a lower percentage would be more appropriate, something like 20%. Brook said: 'Can we split the difference and make it 25%?' After some deliberation, I said: 'OK. I think we can work with that. So that means you will be contributing 25% of the costs associated with exploration?' Brook said: 'Look. If we're reducing the equity interest from 30% to 25% we don't want to be contributing to the exploration costs.' I said: 'Well, if a mining lease is granted UPG or its nominee will be required to make its proportionate contribution to all costs of the development of the Mt Penny mine or be diluted in accordance with provisions which we will insert into the agreement.' Brook said: 'What about contiguous areas?' I said: 'If Cascade receives an exploration licence and other rights over areas contiguous to Mt Penny become available, then to the extent that either Cascade or the joint venturer acquire rights over those contiguous areas UPG or its nominee will be entitled to a 25% interest.' Brook said: 'We would like Board representation on the joint venture company equal to our joint venture interest.' I said: 'That would be appropriate in the circumstances. We will have a go at documenting the deal. Because I am going to Indonesia I will leave this to Richard Poole and James.' 261 John McGuigan said that, after the meeting, he prepared the Key Principles document which he regarded as an accurate contemporaneous note of the main points discussed at that meeting. 262 I do not consider there to be any difference of substance between Brook's evidence of what occurred at the meeting of 31 May 2009 and the evidence given by John McGuigan on that topic. The latter's evidence is more detailed but the substance of that evidence is more or less the same as that given by Brook. Further, the Key Principles document dated 31 May 2009 which John McGuigan sent to his son on 31 May 2009, after the meeting, is a reliable record of the discussions which took place at the meeting earlier that day and of the agreements made as a result. In light of the material to which I have referred, I find that, subject to being satisfied of the matters set out in the Key Principles document, Cascade was willing to proceed to consummate a deal with Brook and the Obeids which incorporated the matters recorded in that document. 263 At 5.42 pm on 31 May 2009, John McGuigan sent an email to his son James McGuigan to which was attached a document headed "Key Principles - 31-05-2009". That document was in the following terms: Key Principles l. Acquire land from landowners at a consideration equal to the assessed value of the land for agricultural purpose together with a premium that reflects the marketplace assessment for a sale of agricultural land to the holder of Mining Rights. 2. The contract to purchase and the determination of the consideration to be formally entered into within 90 days of the award of the Exploration License for Mount Penny to Cascade Coal Pty Ltd ("Cascade"). 3. Title and ownership in the properties owned by the landowners will remain with the land owners until completion. 4. Completion will take place within 90 days of the grant to Cascade of its application for a mining lease over Mount Penny and any additional contiguous areas. 5. The landowners and in particular UPG Pty Ltd ("UPG") will fully cooperate with Cascade in its pursuit of the grant of a Mining Lease. 6. In recognition of UPG's position as the key land holder Cascade will grant UPG or its Nominee a 25% interest in the Joint Venture Company formed to hold the Exploration License over Mount Penny and to pursue the grant of a mining lease and subsequent mining operations. 7. UPG or its Nominee will not be required to make any contribution to the costs of the Joint Venture up to the time of the grant of a Mining Lease. For the avoidance of doubt the costs will include the exploration costs, the costs associated with the development application for the Mining Lease and the costs in purchasing the land. 8. Once the Mining Lease is granted, UPG or its Nominee will be required to make its proportionate contribution to all costs of the development of Mount Penny or be diluted in accordance with the provisions of the Joint Venture governing the development of Mount Penny. 9. Cascade agrees to seek the grant of an Exploration License or other rights over areas contiguous to Mount Penny should they become available. To the extent that either Cascade or the Joint Venture Company acquires the rights over the contiguous areas, UPG or its nominee will be entered to a 25% interest. 10. In the principles outlined in paragraphs 7 and 8 with respect to Mount Penny will apply equally to any contiguous areas. 11. UPG or its nominee will be entitled to participation on the board of the Joint Venture Company to an extent to commensurate with its equity interest. 264 That email was re-sent to James McGuigan at 10.18 am on 1 June 2009. 265 The essence of the deal embodied in this email was: (a) Cascade or its nominee would acquire all of the Bylong land owned by the Obeid nominee companies; (b) The Obeid interests would be awarded a 25% interest in a joint venture company to be formed in order to hold the EL over the Mt Penny coal exploration area and to pursue the grant of a mining lease and subsequent mining operations; and (c) The Obeid interests would not be required to contribute to the initial costs being the exploration costs, the costs associated with the development application for the mining lease and the costs of purchasing the land. Once the mining lease is granted, the Obeid interests would have to pay 25% of the costs of development incurred thereafter. 266 The reference to "UPG" in the email is a reference to United Pastoral Group Pty Limited. 267 After the meeting held on 31 May 2009, Brook, Moses Obeid and Paul Obeid agreed a split between the Obeid interests and Brook of the 25% equity interest in the venture. That split was 12% to Brook and 88% to the Obeids. 268 Poole met with Brook in the morning of 1 June 2009. Brook said that he did meet with Poole in a one-on-one meeting but that he thought that it was either on 2 June 2009 or on 3 June 2009. Poole's evidence was that the meeting took place at around 10.00 am on 1 June 2009. Poole testified that, at this meeting, Brook told him that he had been unable to raise funding for the EOI lodged by a public company in respect of the Mt Penny coal release area. He said that the public company with whom he had been working had "… got cold feet and has decided that it did not want to proceed with any of the EOIs". He said that he had been trying to raise funds for the deal everywhere but he had been unable to do so. He then mentioned recent discussions with John McGuigan and the fact that he had discussed a deal which involved the interests that he represented bringing over the land in return for a 25% interest in the coal mining joint venture. 269 In his second affidavit, Brook denied saying some of the things attributed to him by Poole in Poole's affidavit. He accepted that he may have told Poole that he had been working with a public company on an EOI and had tried to raise funding for that purpose. He said that it was likely he told Poole that he had spoken to Indian and Chinese investors. He also accepted that he may have said that some of the members of the Board of MMNL had "got cold feet". However, he denied telling Poole that MMNL's EOIs were not proceeding. He also said that he did not tell Poole that he had been unable to raise funds and that his fundraising efforts were at an end. He denied telling Poole that MMNL's EOI would be withdrawn in any event. The burden of Brook's song was that he was at great pains not to tell the Cascade directors that MMNL had decided to withdraw its EOIs in respect of the Mt Penny and Glendon Brook coal release areas because that would have been contrary to his instructions from Moses Obeid and contrary to his own and the Obeid family's interests in using the asserted capacity to control MMNL's EOIs for those coal release areas as a bargaining chip in the negotiations with Cascade. Brook said that it would have made no sense for him to suggest that those EOIs would be withdrawn until he had ultimately concluded a deal with Cascade. 270 In his affidavit, Poole said that, after he had met with Brook on 1 June 2009, he had the clear understanding that the public company with which Brook had been working was not proceeding any further with its EOIs. He also said that he thought that a deal in principle had been done with John McGuigan the day before and that his role was now to document the terms of that deal. 271 At 12.26 pm on 1 June 2009, Poole sent to James McGuigan a draft of the letter agreement concerning the sale of Cherrydale, Donola and Coggan Creek to Cascade. 272 At 4.35 pm on 1 June 2009, MMNL sent a letter to Hughes at the DPI under cover of an email. Omitting address details and the heading, that letter was in the following terms: I refer to my email sent to you on 14 May 2009 regarding Monaro mining NL's (Monaro) meaning of the term "Upon Granting of Consent" within its various Expressions of Interest (EOI) submitted for the Coal Release Areas as invited by your Department in writing on 9 September 2009. We wish to advise the following: 1. We withdraw our meaning of the term "Upon Granting of Consent" as advised on 14 May 2009 via email. 2. We will adhere to the Evaluation Criteria outlined in the EOI Information Package for the Coal Release Areas; 3. We understand that if we are successful with any or all of our Expressions of Interest, that the Assessment Fee, EL Application Fee, Security Bond, the DPI Development Fund contribution and nominated additional financial contributions would be payable within 30 days from the date of a registration of part transfer of the current exploration licence or within 30 days of the Minister granting consent to apply for a new exploration licence. 4. In order to adhere to and thereby comply with the Evaluation Criteria outlined in the EOI Information Package for the Coal Release Areas, Monaro requests that all Exploration Licences for which are granted pursuant to the Expressions of Interest currently lodged with your Department, that they be issued to our nominee company called Royal Coal Pty Ltd. 5. In order to adhere to and thereby comply with the Evaluation Criteria outlined in the EOI Information Package for the coal Release Ares, the ownership of Royal Coal Pty Ltd will be transferred to Voope Pty Ltd who is the financial partner of Monaro's consortium. 6. It is intended that Monaro will provide Royal Coal with consultancy services via a management agreement should Royal Coal be awarded any Exploration Licences. Should you have any questions regarding the above, please direct them to Mr Gardner Brook who represents both Royal coal and Voope, telephone 0488 080 101. Yours faithfully Mart Rampe Executive Director 273 A later version of that letter was tendered in evidence. That version is dated 2 June 2009. It appears to be in the same terms as the earlier letter dated 1 June 2009 with the exception that the references to "Royal Coal Pty Ltd" were altered to "Loyal Coal Pty Ltd" (Loyal Coal). 274 By an email sent from Brook to James McGuigan at 5.18 pm on 1 June 2009, Brook passed on to James McGuigan his email address for him to send "the first draft". He did not identify the subject matter of that draft. He then said: Monaro completed all that I indicated today, and the share transfer will occur tomorrow. I'll send the relevant letters and agreement showing that we now have control of the bids. 275 At 5.23 pm on 1 June 2009, Poole sent to James McGuigan a further draft of the proposed letter agreement between Cascade and the landowners. 276 At 5.55 pm on the same day, Poole sent to James McGuigan a draft of the "equity letter" in respect of the proposed mining venture. 277 At 5.58 pm on 1 June 2009, James McGuigan sent the following email to Brook: Gardner That's good news that it ran smoothly. I spoke with Moses before, and informed him, that we are completing the agreements with the intention of getting them close to completion tomorrow. They will have to be reviewed by John who is in Indonesia, but I think we should be fine. Well done again, Speak soon Cheers 278 In light of the contents of the emails sent on 1 June 2009 and the actions taken by MMNL, Brook and the Obeids during the course of the day on 1 June 2009, it is likely that, at the latest, on 31 May 2009, Brook informed the McGuigans that he and the Obeids would soon have control of the MMNL EOIs through Monaro Coal to whom the DPI would be asked to issue any ELs if its EOIs were successful and that MMNL would write to the DPI to both inform it of the transfer of ownership in Monaro Coal and request that any EL be issued in the name of Monaro Coal. 279 The "it" referred to in that email was a reference back to the email which Brook had sent to James McGuigan at 5.18 pm on 1 June 2009 to which I have made reference at [274] above. The "John" referred to in James McGuigan's email is his father, John McGuigan. 280 At 6.43 pm on 1 June 2009, James McGuigan sent an email to Jones, John McGuigan and Poole. Attached to that email were documents described in the following terms: "Cascade Coal Letter - Land Owners.docx (31.54 kB); Cascade Coal Letter - Equity.docx (32.48 kB)". The email was in the following terms: Greg, John and Richard Please find attached two Letters of agreement: 1) Letter of Agreement between Cascade Coal Pty Ltd ("Cascade") and United Pastoral Group Pty Ltd, Geble Pty Ltd, Coopers World Pty Ltd [collectively "the Landowners"]. 2) Letter of Agreement between Cascade Coal Pty Ltd ("Cascade") and the ("Nominee"), collectively ("the Parties). I have had a discussion with Mo, but am yet to receive what Nominee company they want to do it with, as well as any of the Land Agreements as promised from Paul. Key changes made to these agreements include: 1) We have agreed to form a Joint Venture instead of a Joint Venture Company with the Mount Penny asset to sit in Cascade 2) With regards to Gardner's comment about whether money in - will be treated as debt or equity, the following was inserted "The Nominee acknowledges it has received consideration for the relevant land and that any contributions up to the grant of the Mining Lease shall be treated as shareholder loans and repaid out of profits in due course." Of immediate importance is the issue regarding as to what the multiplier which will be applied to the agricultural land - let's discuss this. Greg, we will discuss this tomorrow @ 11:30 at Arthur Phillip's offices which are: Level 33, 52 Martin Place (Colonial Centre) John, although documents are attached here I will resend as emails so that you can read on Blackberry. Please call me when you can. In other news, Monaro completed all that they indicated yesterday - today, and the share transfer will occur tomorrow. It will be a 100% entity owned by Gardner known as Royal Coal. Cheers 281 One of the draft letter agreements attached to this email was an agreement whereby Cascade agreed to acquire the three properties referred to in the letters. These were the properties owned by UPG, Geble and Coopers World Pty Limited (Cherrydale, Donola and Coggan Creek). The other draft letter agreement attached to James McGuigan's email dealt with a proposed joint venture between Cascade and a corporation to be nominated by Moses and Paul Obeid. This joint venture letter was in the following terms: Dear Sir DRAFT Re: Letter of Agreement between Cascade Coal Pty Ltd ("Cascade") and the ["Nominee"], collectively ("the Parties") I refer to our recent discussions in relation to Cascade's intention to acquire a land interest in the Bylong region and to be granted an exploration licence ("the Exploration Licence") and mining lease ("the Mining Lease") over the Mount Penny area, and the letter of agreement between Cascade and the Landowners, dated 2 June 2009. Cascade has submitted an expression of interest requesting to be granted an Exploration Licence over the Mount Penny area. Subject to the grant of the Exploration Licence, the Parties have agreed to form a Joint Venture ("JV") to explore and develop the Exploration Licence and pursue the granting of the Mining Lease, in addition the JV will pursue the grant and issue of all relevant exploration licences and mining leases for any additional contiguous areas to Mount Penny. Obligations of the Party's In recognition of the Nominee's position as the key owner of land in the Mount Penny area and in consideration of the Nominee: • and its associates or related parties undertaking not to pursue the grant of any mining rights to the area or any contiguous area; • agreeing to assist Cascade to explore and develop the Exploration Licence and Mining Lease; • agreeing to make available and provide their expert knowledge of the area to assist with further exploration and review of the contiguous areas: Cascade will agree to grant to the Nominee a 25% interest in the JV on the basis that the Nominee does not have to make any contribution to costs up to the grant of the Mining Lease. Obligations of the Nominee For the avoidance of doubt, prior to the granting of the Mining Lease the Nominee will not be liable to contribute to the exploration costs, the costs associated with the development application for the Mining Lease and the costs in purchasing the relevant land situated at Mount Penny. The Nominee acknowledges it has received consideration for the relevant land and that any contributions up to the grant of the Mining Lease shall be treated as shareholder loans and repaid out of profits in due course. Once the Mining Lease is granted, the Nominee will be required to make a contribution to all costs of the development of the commercial mining operations in Mount Penny proportionate to the Nominee's equity interest in the JV. Failure to contribute costs proportionate to the Nominee's equity percentage will result in the Nominee's interest in the JV being diluted pro rata in accordance with the provisions of the JV agreement governing the development of commercial mining operations in Mount Penny. Contiguous Areas If from time to time, the NSW Department of Primary Industries seeks expressions of interest from parties for the granting of a [sic] exploration licence, mining lease or any other mining interest for land that is contiguous to or adjoining or relevant to the future development of Mount Penny ("Contiguous Area"), Cascade on behalf of JV must use its best endeavors to become the successful applicant in any such exploration licence, mining lease or mining interest. To the extent that Cascade acquires the rights to pursue a mining interest over the contiguous areas, such areas shall be added to the JV. The principles outlined above under the section "Obligations of the Nominee" with respect to contribution of costs relating to the development of a commercial mine at Mount Penny, will apply equally to the Contiguous Area. Management of the Joint Venture The Nominee will be entitled to participate on the board of JV to the extent to commensurate with the Nominee's equity interest in JV. The Nominee will be entitled to participate in the management of JV to an extent to [sic] commensurate with the Nominee's equity interest in JV Confidentiality Except as expressly permitted by this Letter of Agreement, Cascade and the Nominee undertake and agree to hold each of the terms in this Letter of Agreement in strict confidence and not to disclose or discuss any Confidential Information to or with any person except, in accordance with this Letter of Agreement or as otherwise permitted by Cascade or the Nominee. Cascade and the Nominee will ensure that no Confidential Information is photocopied, reproduced or recorded in any manner except to the extent that is necessary to provide such number of copies as are reasonably required by either Cascade or the Nominee. Cascade and the Nominee will not use or disclose the Confidential Information or any part of it to gain any commercial, financial or other advantage for itself or any other person or to the competitive disadvantage or otherwise to the detriment of either Cascade or the Nominee. Executed as an Agreement Signed for and on behalf of Cascade Coal Pty Ltd ACN 119 180 620 Director Director Name of Director Name of Director (BLOCK LETTERS) (BLOCK LETTERS) Signed for and on behalf of ["Landowners"] ACN [ ] Director Director Name of Director Name of Director (BLOCK LETTERS) (BLOCK LETTERS) 282 On 1 June 2009, the change of name of Monaro Coal Pty Ltd to "Loyal Coal Pty Ltd" was registered by ASIC. 283 At 9.34 am on 2 June 2009, James McGuigan sent an email to Brook and to Moses Obeid in which he said: Gardner, Moses Just to touch base, 1) Can you guys please send over or email the Land Owners Agreements, Paul was referring to on Sunday. 2) Are you guys any clearer on the Nominee company that the agreement regarding the equity split with Cascade will be? Just to keep you in the loop, I am meeting with Greg at 11:30 to discuss a few things, then I will get back in touch with you where we are and any changes to the agreements. Regards James 284 At 10.07 am on 2 June 2009, James McGuigan sent an email to his father which was in the following terms: Dad, I made the changes that we spoke about this morning. - Just to clarify the money in will be treated as shareholders loans (i.e equity) - With regards to the "subject to" with regards to the Landowners I have written: "Completion of the SPA will occur within 90 days of Cascade being granted a mining lease for the Mount Penny area and for any additional contiguous areas ("Mining Lease"). Completion is subject to Cascade . completing a Feasibility study that concludes in Cascades absolute discretion that it can develop a profitable mining operation including consideration of transport and all mine development factors and that Cascade should proceed to develop a coal mine; . concluding that the reserves are sufficient to justify the proposed Property Acquisition. In the event Cascade does not receive the Mining Lease or conclude that a mine should be developed, the Facility will be repaid within 30 days." - Should I insert a clause regarding the subject to directors approvals? On a coincidental matter, there was a small article in the CBD section saying that land in the Bylong Area is going for $3,000 per ha (albeit it had a polo field). Could be a pure coincidence, but then again our letter mentions Bylong…. Could Greg have passed on to the boys, who planted the article?? Greg's in at 11:30-I will write you an email to update after wards, and we will chat later in the arvo 285 At 10.41 am on 2 June 2009, John McGuigan replied to his son by email in the following terms: James Call me on mobile or blackbeery [sic] I can not get you. On points Shareholder loans are not equity. Basis of discussion on Sunday was that it would be equity namely npot [sic] repayable to Cascade. Will be hard to reopen. On time for repayment suggest 90 days. If pressure is to sign today will need 0to [sic] have subject to. I would prefer to agree terms and have greg talk to Kingy and I will talk to Trav and John. Less formal and reduces risk of ropening [sic] issues. Discuss with Greg. John 286 At 1.18 pm on 2 June 2009, an employee of Moses Obeid's business, Streetscape, sent to him a signed Landowners' Deed, the parties to which were UPG, Geble and Coopers World Pty Ltd. That document had already been executed by Giovanni Campo, on behalf of Geble, but had not, at that time, been executed by either of the other parties. 287 At 2.37 pm on 2 June 2009, Moses Obeid sent an email to James McGuigan which was in the following terms: James As discussed I have included a copy of the Landowners agreement. The multiple falls under 1.1 definitions clause 'Criteria'. The name of the entity being used by Gardner for the JV is BUFFALO RESOURCES PTY LTD. I await you [sic] draft agreement. Cheers 288 By an email sent at 3.09 pm on 2 June 2009 by James McGuigan to Moses Obeid and Brook (copied to John McGuigan and Poole), James McGuigan sent the final form of the two Cascade letters which had been the subject of consideration as drafts the day before. It would appear that Moses Obeid had received a revised draft of the landowners' letter earlier that day. 289 Later in the day on 2 June 2009, a meeting was arranged at the offices of Arthur Phillip for 10.00 am on 3 June 2009. It was expected that that meeting would be attended by Brook, Moses Obeid, Poole and James McGuigan. 290 On 2 June 2009, Voope entered into a deed with MMNL styled "Deed of Release". The recitals to that deed recorded the fact that Voope and MMNL had entered into an option deed in respect of certain shares in Monaro Coal (as controlled by MMNL) and that the parties agreed to release each other from their obligations under that option agreement. The deed recorded that Monaro Coal was to be renamed Loyal Coal Pty Ltd and that MMNL was to ensure that any ELs referable to EOIs lodged by it were granted in the name of Loyal Coal Pty Ltd. The commercial deal recorded in the document seemed to be that, in consideration for MMNL transferring all of its shares in Loyal Coal to Voope, Voope would pay MMNL the sum of $1 and keep MMNL indemnified against all claims, liabilities or causes of action arising from Loyal Coal becoming the successful bidder in respect of the relevant ELs. Voope also promised to pay $300,000 to MMNL within 60 days of Loyal Coal being awarded any EL for any of the eleven coal release areas. This deed formalised the transfer of control and ownership of Loyal Coal from MMNL and possibly others to Voope alone. On 1 June 2009, Monaro Coal had changed its name to "Loyal Coal Pty Ltd". On 2 June 2009, MMNL transferred all of the issued capital in Loyal Coal to Voope. On the same day, Loyal Coal issued a share certificate in the name of Voope in respect of the shares so transferred. Thereafter, on 4 June 2009, Rampe, Malone and Ms Adaley resigned as directors of Loyal Coal and Kaidbay was appointed the sole director of that company. 291 After the registration of the transfer of all of the shares issued in Monaro Coal from MMNL to Voope, Loyal Coal was no longer a subsidiary of MMNL, let alone a wholly owned subsidiary of MMNL. It was, from that point on, a wholly-owned subsidiary of Voope. Kaidbay was its only director. 292 By an email sent by John McGuigan to James McGuigan at a time when John McGuigan was overseas at a resort called Tabang in Indonesia which email was apparently sent at 8.46 pm on 2 June 2009 and headed "CC - update", John McGuigan said to his son: Call me after your meeting. I had a detailed discussion with Travers and we are on the same page. Once you have the land owners agreement we need to verify title etc. It is important we don't give up on clause we inserted today re trigger of land purchase. I am around now if you pick this up. Tabang unbelievable. The reference to "Travers" in this email was a reference to Travers Duncan, who was, at that time, a director of Cascade. 293 That email from John McGuigan was sent in response to an email from James McGuigan sent an hour or so earlier in which James McGuigan reported that there was to be a meeting at 10.00 am on 3 June 2009 in Sydney. James McGuigan made reference to "they" in his email to his father. It is perfectly plain that the "they" to which reference is made in that email are Moses and Paul Obeid. This much was made clear in an email sent by James McGuigan to Jones at 4.52 pm on 2 June 2009 where he said that he had sent the Letters of Agreement "to the boys". In that email, he said to Jones: Not sure if you want to come to the meeting - just letting you know so you are up to date with the events.
The Meeting of 3 June 2009 294 On 3 June 2009, Brook, Moses Obeid, James McGuigan and Poole met at the offices of Arthur Phillip at Level 33, 52 Martin Place, Sydney, in order to discuss the then current draft of the two letter agreements. 295 Poole testified that he went through each draft. He directed his discussion concerning the joint venture to Brook because he understood that he was representing Buffalo at the meeting. He directed a discussion concerning the Landowners Agreement to Moses Obeid because he understood that he was representing the landowners at the meeting. At pars 81 to 87 of his affidavit, Poole said the following in relation to the discussions which took place at this meeting: I recall that the main issues discussed at the meeting were: (a) the final multiples of the land value to be paid to the landowners for acquisition of the land in the event of the grant of a mining lease; (b) the treatment of exploration funds to be spent by Cascade Coal in the joint venture; and (c) in particular, if the funds were not to be treated as a loan(s), I insisted there needed to be some protection for Cascade Coal and suggested that a cap or maximum expenditure number should be set after which Buffalo Resources had to start contributing cash to the joint venture. In relation to the negotiation of the final multiples of the land value to be paid to the landowners, words to the following effect were said: Moses: "Look, there's been sales of 10 times and higher." Me: "That's ridiculous. It's got to be a reasonable amount or Cascade will never get any investors (when we need them), it should be two times." Moses: "Well, it's got to be four times, because that's been agreed with the other landholders, it's in the Landholders (Alliance) Agreement." Me: "Well, look, I've got to get instructions from John and Travers." In relation to the negotiation of how to treat the exploration funds to be met by Cascade Coal, Gardner said words to the effect: "It was agreed that the JV partner was not required to contribute any of the exploration funds. These contributions cannot be treated as a loan." I formed the view that Gardner was not going to agree with the amendment. Therefore, rather than abandon the position entirely, I fell back to the proposition of installing a cap or maximum limit on expenditure that Cascade Coal had to meet before the joint venture partner had to start contributing pro rata. My best recollection is that, during the meeting, I said words to the effect: "I suggest an $8m cap or mine approval for a 75 million tonne resource." While going through the draft joint venture agreement at the meeting I read the "won't pursue mining rights" clause and said words to the effect "Because this is a JV, the parties have to work together". I do not recall this being controversial at all. My understanding, based on our discussion at the meeting, was that the clause was accepted as obvious. As previously stated in paragraph 62 above, I considered at the time that, if Arthur Phillip had not added this clause in the joint venture agreement, Arthur Phillip would have been negligent as I regarded the clause as being fairly standard in any joint venture agreement. I had the view, which I maintain, that it is in the interests of the joint venture that the parties will work together and not against each other or the joint venture interests. During this meeting, in the context of working together, words to the effect were said: Someone at the meeting (I cannot recall who) asked: "What about Glendon Brook?" Gardner responded: "I am not interested in Glendon Brook." After the meeting, at around 12.29pm, I received an email from Gardner asking James to alter the revised joint venture agreement to reflect that the "non-dilution periods ends upon mine approval for 100m tonnes or $15m in capex". A copy of this email, document STR.001.007.0031, is exhibited at Tab 37 of Exhibit RJP1. In the final document it was agreed that: "mining approval for a 100 million tonne resource; or Minimum exploration expenditure of $A10m. Contributions up to this milestone by Cascade will be treated as equity." 296 Brook's account of this meeting given in-chief was very brief and did not give rise to any contest of substance between his version and that given by Poole. 297 Poole has a recollection of raising the question of consideration being provided by Buffalo in support of the commitments it had extracted from Cascade in the Buffalo Agreement. This led to the insertion of the reference to Buffalo bringing intellectual property into the transaction. 298 I have no reason to doubt Poole's version of what occurred at this meeting and I accept it. 299 After the meeting held on 3 June 2009, Brook met with Moses Obeid and, immediately after that meeting, requested an alteration to the joint venture letter agreement. The amendment was intended to protect the Obeid interests against early dilution of their interest. A copy of that email was sent to Moses Obeid. 300 By email sent at 2.04 pm on 3 June 2009 to Brook and Moses Obeid, James McGuigan asked whether they had received the ACN for Buffalo Resources. 301 At 3.17 pm on 3 June 2009, James McGuigan sent an email to John McGuigan. That email was in the following terms: Dad, This is the first email I will out line the changes in which we have made, the second two will be the agreements as they stand. Richard has still not returned, so·we haven't discussed - hence these may change. LANDOWNERS • We agreed on four times multiple for all their land. • Moses assured us this would be done in a way that would stand up if ever looked at. This still needs to be clarified, as 32m for a 100m resource may seem excessive • Changed timing of entering into contract to purchase properties to 30 days from 90 days • Changed timing from 90 days to 60 days with regards to organising the facility • Changed terminology from Mine Lease to Mine Approval • Inserted Cascade undertakes to complete any necessary rehabilitation works to reasonably restore the property to its 1 June 2009 condition. We have left in the following clause as per our discussion yesterday morning: Completion of the SPA will occur within 90 days of Cascade being granted a Mining Approval for the Mount Penny area and for any additional contiguous areas ("Mining Approval"). Completion is subject to Cascade • completing a Feasibility study that concludes in Cascade's absolute discretion that it can develop a profitable mining operation including consideration of transport and all mine development factors and that Cascade should proceed to develop a coal mine; • concluding that the reserves are sufficient to justify the proposed Property Acquisition. In the event Cascade does not receive the Mining Approval or conclude that a mine should be developed, the Facility will be repaid within 180 days. Cascade undertakes to complete any necessary rehabilitation works to reasonably restore the property to its 1 June 2009 condition. Equity • Cascade will agree to grant to Buffalo a 25% interest in the JV on the basis that Buffalo does not have to make any contribution to costs up to the grant of the Mining Approval. The 25% carried interest ends upon the earlier between: • Mine Approval for a 100 million tonne resource; or • Minimum exploration expenditure of A$12m. • Contributions up to this milestone by Cascade to the JV shall be treated as equity • Once the Mining Approval is granted, Buffalo will be required to contribute additional equity to fund costs should third party debt finance be unavailable or insufficient to fund such costs, including proportionate costs of any land acquisition • Inserted line that "To the extent that Cascade and its associates and related parties acquire the rights to pursue a mining interest over the contiguous areas, such areas shall be added to the JV." I will now send the 2 documents as is. Call me when you can James McGuigan … 302 A few minutes later, James McGuigan sent revised drafts of the letter agreements to his father. 303 At 5.57 pm on 3 June 2009, James McGuigan sent updated Letters of Agreement to Moses Obeid and to Brook with copies to his father, Jones and Poole. In that email, James McGuigan said: … Let's aim to sign at Kent St on Friday at 12:00. The "Friday" referred to in that email was Friday, 5 June 2009. 304 In the email, he continued as follows: Before that happens we are going to need to gain comfort on the following issues: - the formal definitions of the land parcels that are referred to in the opening paragraph of the Landowners Agreement (highlighted in the attachment) - the addresses of the land holdings of the three Landowners properties, so that I can conduct a Title Search; - to confirm the existing mortgage agreements; - John McGuigan and Travers Duncan want to understand why we changed from "Mining Lease" to "Mine Approval"; - And to approve the withdrawal letters regarding Mount Penny and Glendon Brook Coal Release Areas from Loyal Coal Pty Ltd (formerly Monaro) - And the Buffalo Resource ACN Also please note I added in the equity letter under Obligations of the Parties the following comment regarding Glendon Brook • "and its associates or related parties undertaking not to pursue the grant of any mining rights to the Mount Penny area or any contiguous area, or the Glendon Brook EOI Coal Release Area;" Please call or email me if there are any other matters to discuss. Cheers 305 As I have mentioned, attached to that email were updated drafts of the Letter Agreements which had been under discussion over the preceding few days. 306 The ACCC submitted that I should find that there had been a discussion at the meeting held on 3 June 2009 to the effect that, if an agreement could be reached with Cascade, Loyal Coal would send letters to the DPI withdrawing the MMNL EOIs for the Mt Penny and Glendon Brook coal release areas. It was submitted that this discussion was reflected in the email sent by James McGuigan at 5.57 pm on 3 June 2009. The ACCC also submitted that I should find that, at the meeting held on 3 June 2009, it was proposed that, as additional consideration to the rights to be granted by Cascade to Buffalo under the Buffalo Agreement, the mining rights to the Glendon Brook coal release area would not be pursued with the consequence that the MMNL EOI for that area would be withdrawn. 307 I am prepared to accept that, at some stage prior to the sending of James McGuigan's email at 5.57 pm on 3 June 2009, there had been discussion amongst the parties to the effect that withdrawal letters in respect of MMNL's EOIs for the Mt Penny and Glendon Brook coal release areas would need to be sent to the DPI and that Glendon Brook should be included in the areas covered by those letters. Whether this discussion took place on 3 June 2009, or beforehand, does not seem to matter. Poole did not include the topic of withdrawal letters in his account of the meeting which took place on 3 June 2009. 308 On 3 June 2009, the Obeids, through their accountant, Sassine, caused Buffalo to be incorporated. Kaidbay became a director of Buffalo. He was instructed to act upon the instructions of Moses Obeid, Paul Obeid and Brook. Also at that time, Brook caused Warbie Pty Limited (ACN 137 486 018) (Warbie) to be incorporated. Warbie was to hold his 12% interest in Buffalo as had been agreed with Moses and Paul Obeid. 309 On 4 June 2009, Brook sought legal advice from a solicitor in respect of the landowners' letter and the joint venture letter which had been under discussion and which were intended to be signed the next day (5 June 2009). In his covering email, Brook said that the land agreement was with a related party. 310 Later the same day, Moses Obeid provided the lot numbers for the relevant land to James McGuigan and to Brook. Brook passed on that information to the solicitor whom he was consulting at that time. 311 On 4 June 2009, MMNL submitted a share transfer in respect of all of its shares in Loyal Coal for stamping by the Chief Commissioner of State Revenue.
The Meeting of 5 June 2009 312 This meeting was attended by John McGuigan, James McGuigan, Poole, Brook and Moses Obeid. 313 The meeting began with Brook endeavouring to persuade the Cascade representatives that the deal which was to be documented that day should be documented by using the drafts prepared by the solicitor who Brook had retained only the day before. The Cascade representatives rejected this approach and said that it was too late to endeavour to implement the changes reflected in those drafts. 314 Brook's account of this meeting in his evidence-in-chief is very brief. Poole's version was slightly more detailed. 315 All witnesses agreed that, at the meeting, the current drafts of the two letter agreements were brought up on a computer and amendments made to those drafts then and there. At pars 97 to 103 of his affidavit, Poole gave the following evidence of what then transpired at the 5 June 2009 meeting: A number of amendments were made to the wording of the draft joint venture agreement during this meeting to ensure that the final terms of the agreement were more specific and satisfactory to all parties. While we were reviewing and finalising the clause: "...Buffalo: ....and its associates or related parties undertaking not to pursue the grant of any mining rights to the Area or any Contiguous Area, or the Glendon Brook EOI Coal Release Area .....". Gardner said words to the effect: "What do I do with the existing Monaro EOIs that I'm trying to get control of? They include Mt Penny and Glendon Brook. How do we deal with this under this clause?" Somebody at the meeting (I cannot now recall who) said words to the effect: "Ok, well let's just say that the applications for Mt Penny and Glendon Brook will be withdrawn?" As a result the final non-compete clause read: "...Buffalo: ....and its associates or related parties including Gardner Brook and Loyal Coal Pty Ltd withdrawing any existing applications in relation to Mount Penny and Glendon Brook and undertaking not to pursue the grant of any mining rights to the Area or any Contiguous Area, or the Glendon Brook EOI Coal Release Area .....". I recall that these amendments were not controversial. I understood Gardner had always been going to proceed with a joint venture with Cascade Coal since I met him on 1 June 2009. Accordingly, I never regarded him, or any company he represented, as a competitor of Cascade Coal. Upon finalising the agreements to each party's satisfaction, words to the following effect were said: Me (to John McGuigan): "Have you spoken to the other directors, are they ok with this?" John McGuigan: "Yes, they are all fine with the agreements. I just want to make one more call to Travers to confirm." My best recollection is that John McGuigan then stepped out of the room and made a phone call, which I presumed was a call to Travers. Following that, as I recall, the letter agreements were incorrectly dated as 4 June 2009, so James had to reprint them so that they were ready to be signed. The joint venture agreement and the landowners agreement were then both executed at the meeting. I refer to the final signed versions of those agreements, namely: (a) the agreement dated 5 June 2009 between Cascade Coal, United Pastoral Group Pty Ltd (UPG), Geble Ply Ltd (Geble) and Justin Kennedy Lewis Pty Ltd (JKL) entitled "Letter of Agreement between Cascade Coal Pty Ltd ("Cascade") and United Pastoral Group Pty Ltd, Geble Pty Ltd and Justin Kennedy Lewis Pty Ltd" (Landowners Agreement). A copy of the Landowners Agreement, document 52949.007.002.0294, is exhibited at Tab 42 of Exhibit RJP1; and (b) the agreement dated 5 June 2009 between Buffalo Resources and Cascade Coal entitled "Letter of Agreement between Cascade Coal Pty Ltd ("Cascade") and Buffalo Resources Pty Ltd ("Buffalo")" (Buffalo Agreement). A copy of the Buffalo Agreement, documents 52949.007.001.0003 and 52949.007.001.0008 are exhibited at Tabs 43 and 44 of Exhibit RJP1. The Landowners Agreement was signed, by John McGuigan on behalf of Cascade Coal, Kaidbay on behalf of UPG, Giovanni Campo on behalf of Geble and Justin Lewis on behalf of JKL. The Buffalo Agreement was signed, at the meeting by John McGuigan on behalf of Cascade Coal and by Gardner on behalf of Buffalo Resources. 316 At par 13 and par 14 of his second affidavit, Brook denied saying the words attributed to him by Poole at par 97 of his affidavit ("What do I do with the existing Monaro EOIs that I'm trying to get control of? They include Mt Penny and Glendon Brook. How do we deal with this under this clause?"). 317 Brook argued that it would have made no sense for him to say these words attributed to him since he already had control of the MMNL bids for the Mt Penny and Glendon Brook coal release areas. He also said that the withdrawal of those bids had already been discussed at the meeting held on 31 May 2009. 318 Brook also said that, although he agreed that the words "… Buffalo … and its associates or related parties including Gardner Brook and Loyal Coal Pty Ltd withdrawing any existing applications …" were added to the draft Buffalo Agreement at the meeting held on 5 June 2009, they were not added at his request but rather inserted at the behest of John McGuigan or Poole. 319 There was no evidence from Brook or any other witness suggesting that the evidence given by Poole which I have extracted at [315] above was incorrect in any respect. I see no reason not to accept it. 320 The Buffalo Agreement was in the following terms: 5 June 2009 Gardner Brook Buffalo Resources Pty Ltd GPO Box 1810, Sydney NSW 2001 Dear Sir, Re: Letter of Agreement between Cascade Coal Pty Ltd ("Cascade") and Buffalo Resources Pty Ltd ("Buffalo"), collectively ("the Parties"). Further to our recent discussions this agreement is intended to outline the commercial terms for which both Buffalo and Cascade intend to establish a joint venture with the specific purpose of exploring and developing the Mount Penny Coal Release Area ("The Area"). Subject to the grant of the Exploration Licence (for the purposes of this agreement ("Exploration Licence") means an exploration licence granted to Cascade (or an affiliate) as a result of the current tender process and includes any extension renewal or replacement of that licence), the Parties have agreed to form either a Joint Venture Company or an unincorporated Joint Venture ("JV") to explore and develop the Exploration Licence and pursue the grant of Mining Approval over the Area. For the purposes of this agreement ("Mining Approval") shall mean the obtaining of all necessary permits and approvals including without limitation the grant of an appropriate mining tenement or tenements and environmental and native title approvals necessary for the development of a 100 million tonne resource. In addition the JV will pursue the grant and issue of relevant Exploration Licences and Mining Approvals over the area contiguous to the Area and detailed on the attachment hereto currently known as EL 6676 or any portion thereof ("Contiguous Area"). Obligations of the Parties In recognition of Buffalo's intellectual property contribution and in consideration of Buffalo: • and its associates or related parties including Gardner Brook and Loyal Coal Pty Ltd withdrawing any existing applications in relation to the Mount Penny and Glendon Brook Coal Release Areas and undertaking not to pursue the grant of any mining rights to the Area or any Contiguous Area, or the Glendon Brook EOI Coal Release Area; • agreeing to assist Cascade to explore and develop the Exploration Licence and obtain the Mining Approvals; • agreeing to make available and provide their expert knowledge of the Area to assist with further exploration and review of the Contiguous Area. Cascade agrees to: • vest 100% of its interest in the Exploration Licence in the JV; and • grant to Buffalo a 25% interest in the JV. Buffalo does not have to make any contribution to costs of the JV until the earlier of either: • Mining Approval for a 100 million tonne resource; or • minimum exploration expenditure of A$10m. Contributions up to this milestone by Cascade to the JV shall be treated as equity. For the avoidance of doubt, prior to the earlier of the, granting of the Mining Approval or minimum exploration expenditure of A$10m, Buffalo will not be liable to contribute to the costs of the JV including exploration costs. Upon the earlier of the grant of the Mining Approval or minimum exploration expenditure of A$10m Buffalo will be required to contribute its proportionate share of equity to fund costs should third party debt finance be unavailable or insufficient to fund such costs, including proportionate costs of any land acquisition. Failure to meet required equity contributions proportionate to Buffalo's equity percentage will result in Buffalo's interest in the JV being diluted pro rata in accordance with the provisions of the JV agreement governing the development of the Area. Contiguous Area If from time to time, the NSW Department of Primary Industries seeks expressions of interest from parties for the granting of a Exploration Licence, Mining Approval or any other mining interest in relation to the Contiguous Area, Cascade on behalf of the JV must use its best endeavors to become the successful applicant in any such Exploration Licence, Mining Approval or mining interest. To the extent that Cascade and its associates and related parties acquire the rights to pursue a mining interest over the Contiguous Area, such areas and rights shall be assigned to the JV. Management of the Joint Venture Buffalo will be entitled to participate on the board and management of the JV to the extent commensurate with Buffalo's equity interest in the JV. Buffalo will be entitled to review the books and records of the JV to ensure Cascade has complied with its obligation under this agreement and to inspect and obtain copies of all exploration records and data. No transfer or encumbrance No party may transfer or encumber its interest in the EL, any underlying mining rights or the JV without obtaining the consent of the other party. Confidentiality Except as expressly permitted by this Letter of Agreement, Cascade and Buffalo undertake and agree to hold each of the terms in this Letter of Agreement in strict confidence and not to disclose or discuss any Confidential Information to or with any person except, in accordance with this Letter of Agreement or as otherwise permitted by Cascade or Buffalo. Cascade and Buffalo will ensure that no Confidential Information is photocopied, reproduced or recorded in any manner except to the extent that is necessary to provide such number of copies as are reasonably required by either Cascade or Buffalo. Cascade and Buffalo will not use or disclose the Confidential Information or any part of it to gain any commercial, financial or other advantage for itself or any other person or to the competitive disadvantage or otherwise to the detriment of either Cascade or Buffalo. 321 That Agreement was signed by John McGuigan on behalf of Cascade and by Brook on behalf of Buffalo. 322 The Landowners Agreement was in the following terms: 5 June 2009 Andrew Kaidbay United Pastoral Group Pty Ltd Level 5, 501 Henry Lawson Business Centre Roseby St. Drummoyne NSW 2147 Dear Sir, Re: Letter of Agreement between Cascade Coal Pty Ltd ("Cascade") and United Pastoral Group Pty Ltd, Geble Pty Ltd, Justin Kennedy Lewis Pty Ltd collectively ("the Landowners"). We refer to our recent discussions in relation to the acquisition of your rural interests in the Bylong region specifically Cherrydale Park, Donola and Coggon Creek ("the Properties") Cascade has submitted an expression of interest requesting that it be granted an Exploration Licence over the Mount Penny area ("the Exploration Licence"). This area encompasses the Properties. We confirm that to ensure Cascade can gain access to the Properties for exploration and potential mine development, Cascade wishes to acquire the Properties. We set out the terms of our offer below. In the event these terms are acceptable can you please sign and return a copy of this letter acknowledging your agreement at your earliest convenience. Subject to the successful grant of the Exploration Licence and confirmation of the Property locations, Cascade agrees to acquire the Properties free from all encumbrances from the Landowners on the terms set out below. Purchase of the Properties from the Landowners by Cascade Cascade will acquire a 100% interest in the unencumbered Properties and in all related water and other necessary licences to build a·mine, and in consideration will pay to the Landowners the Purchase Price. The Purchase Price shall be an amount equal to four times the total sum of; • 100% of the value of the Justin Kennedy Lewis Pty Ltd property (Coggan Creek), plus • 100% of the value of the Geble Pty Ltd property (Donola) plus • 100% of the value of the United Pastoral Group Pty Ltd's property (Cherrydale Park). The Purchase Price will be apportioned between the Landowners based upon the respective improved value of each property as at 1 June 2009. The value of each property shall be agreed as the improved value as at 1 June 2009 of each property and agreed between the parties or in the event of a failure to agree as determined by an independent valuer. Conditional upon Cascade's successful application for the Exploration Licence, and within 30 days of the award of the Exploration License, Cascade and the Landowners shall: • enter into a contract of Sale and Purchase for the Properties ("SPA") on the terms set out in this letter agreement; and • complete the determination of the Purchase Price for the Properties. Renegotiation of the Facility Within 60 days of entering into the SPA, Cascade will provide a facility enabling the Landowners to replace the existing mortgagee with Cascade, or its nominee, on standard commercial terms other than that the interest rate shall be replaced with a zero (0) % coupon rate ("the Facility") or at its option Cascade shall commence paying all interest attached to the existing mortgages. Completion of the SPA Completion of the SPA will occur within 90 days of Cascade being granted Mining Approval for the Mount Penny area. For the purposes of this agreement ("Mining Approval") shall mean the obtaining of all necessary permits and approvals including without limitation the grant of an appropriate mining tenement or tenements and environmental and native title approvals necessary for the development of a 100 million tonne resource. Completion is subject to Cascade • completing a feasibility study that concludes in Cascade's absolute discretion that it can develop a profitable mining operation including consideration of transport and all mine development factors and that Cascade should proceed to develop a coal mine; • concluding that the reserves are sufficient to justify the proposed Property Acquisition. In the event Cascade does not receive Mining Approval or conclude that a mine should not be developed, the Facility will be repaid within 180 days. Cascade undertakes to complete any necessary rehabilitation works to reasonably restore the property to its 1 June 2009 condition. Mutual Co-operation The Landowners agree to work with Cascade and commit to use their best endeavors to assist Cascade in its pursuit of the Exploration Licence and Mining Approval for Mount Penny and any related applications for Exploration Licences or Mining Approvals related to the Mount Penny area. Confidentiality Except as expressly permitted by this Letter of Agreement, Cascade and the Landowners undertake and agree to hold each of the terms in this Letter of Agreement in strict confidence and not to disclose or discuss any Confidential Information to or with any person except in accordance with this Letter of Agreement or as otherwise permitted by Cascade or the Landowners. Cascade and the Landowners will ensure that no Confidential Information is photocopied, reproduced or recorded in any manner except to the extent that is necessary to provide such number of copies as are reasonably required by either Cascade or the Landowners. Cascade and the landowners will not use or disclose the Confidential Information or any part of it to gain any commercial, financial or other advantage for itself or any other person or to the competitive disadvantage or otherwise to the detriment of either Cascade or the landowners. Executed as an Agreement Signed for and on behalf of Cascade Coal Pty Ltd ACN 119 180 620 Director Director Name of Director Name of Director Signed for and on behalf of United Pastoral Group Pty Ltd ACN 127 743 453 Director Director Name of Director Name of Director Signed for and on behalf of Geble Pty Ltd ACN 132 441 877 Director Director Name of Director Name of Director Signed for and on behalf of Justin Kennedy Lewis Pty Limited ACN 133 940 388 Director Director Name of Director Name of Director 323 The Landowners Agreement was signed by John McGuigan, on behalf of Cascade, by Kaidbay, on behalf of UPG, by John Campo, on behalf of Geble and by Justin Lewis, on behalf of JKL. 324 On the same day (5 June 2009), Buffalo executed a Deed Poll. That document was signed by Kaidbay and Sindone as directors of Buffalo. By that Deed Poll, Buffalo declared that it held all of its interest in the joint venture documented in the Buffalo Agreement on behalf of Warbie and Equitexx. The beneficial interest of Equitexx in those companies' share of the joint venture was stated as 88%. Warbie was Brook's nominee. It was a company owned and controlled by him. Equitexx was the trustee of the Obeid Family Trust No 2. 325 By a further letter agreement dated 6 June 2009, Cascade and Buffalo varied the Buffalo Agreement. This later letter agreement was in the following terms: Dear Sirs Letter of Agreement between Cascade Coal Pty Limited and Buffalo Resources Pty Limited We refer to the letter agreement between Cascade Coal Pty Limited and Buffalo Resources Pty Limited dated 5 June 2009 (JV Agreement). We would like to clarify a few points in the JV Agreement (by way of variation to the JV Agreement) by: 1. deleting the words "or an unincorporated Joint Venture" in line 5 of paragraph 2 on page 1 of the JV Agreement; and 2. deleting the first two (2) paragraphs on page 2 of the JV Agreement and replacing them with the following: "In recognition of Buffalo's Intellectual property and for Buffalo and its associates or related parties including Gardner Brook and Loyal Coal Pty Limited withdrawing any existing applications in relation to the Mount Penny and Glendon Brook Coal Release Areas and undertaking not to pursue the grant of any mining rights to the Area or any Contiguous Area, or the Glendon Brook EOI Coal Release Area, Cascade agrees to: • vest 100% of its interest in the Exploration Licence in the JV; and • on and from the date of this agreement grant to Buffalo the right to acquire at anytime a 25% interest in the JV for $1.00. Buffalo's contribution to the JV will be to: • Assist cascade to explore and develop the Exploration Licence and assist Cascade to obtain the Mining Approvals • Make available and provide its expert knowledge of the Area to assist with further exploration and review of the Contiguous Area." Could you please confirm your acceptance of this variation and clarification by signing a copy of this letter. Dated: 6/6/09 John McGuigan said that his best recollection was that this additional letter agreement was not signed until May 2010 and was backdated. 326 On 9 June 2009, by letter sent by Brook to Hughes at the DPI, Loyal Coal purported to formally withdraw its (Loyal Coal's) EOIs for the Mt Penny, Glendon Brook and Spur Hill coal release areas. In the letter, Brook said: We [referring to Loyal Coal] wish to remain considered for the Coal Release Areas of Yarrawa, Long Mountain, Ilford, Cameron Road, Melrose and Ben Bullen in accordance with Expressions of Interest lodged by Monaro Mining currently being considered by your department. 327 On the same day, Brook emailed to John McGuigan, James McGuigan and Poole, a copy of the withdrawal letter sent by Loyal Coal to the DPI. In that email, Brook said: Please see below and attached withdrawal in accordance with our agreement. 328 On 10 June 2009, James McGuigan sent an email to his father and to Poole. In that email, James McGuigan said: The property Cherrydale Park is owned by Locaway Pty Ltd Directors of Locaway Pty Ltd - Paul Obeid - Edward Obeid - Damien Obeid - Moses Obeid Shareholding of Locaway Pty Ltd Paul Obeid 50% Obeid Corporation 50% So, there are some issues here. 329 On 10 June 2009, there was an email exchange between Hughes, Rampe and Brook. That exchange was in the following terms: From: william.hughes@dpi.nsw.gov.au [mailto:william.hughes@dpi.nsw.gov.au] Sent: Wednesday, 10 June 2009 11:41 AM To: Mart Rampe Subject: Fw: Expressions of Interest Hi Mart I recieved the following email this morning from Loyal Coal. As Monaro Mining lodged Expressions of Interest in the Coal Release Areas, could you please clarify and confirm the position of the company with respect to the submissions made. Kind Regards William From: "Mart Rampe" Date: Wed, 10 Jun 2009 14:09:38 +1000 To: Subject: FW: Expressions of Interest Hi Gardner This from the DPI. Could you please call to discuss. Thanks Mart gbrook@oregonstandard.com.au 10/06/2009 05:20 PM Please respond to gbrook@oregonstandard.com.au To: william.hughes@dpi.nsw.gov.au Cc: "Mart Rampe"<Mart.Rampe@monaromining.com.au Subject: Re: Expressions of Interest Dear William I am replying to you directly as Mart Rampe is out of the office today. You will notice that I have cc'd Mart, and I am also out of the office, albeit I have a blackberry. I have also left a voice message for you this afternoon. I refer to correspondence sent to you by Mart Rampe on 1 June 2009 and then again the same letter dated 2 June 2009 rectifying a typo on the 1 June 2009 letter. The typo being reference to a Royal Coal Pty Ltd and not the correct name of Loyal Coal Pty Ltd. I confirm on Mart Rampe's behalf that Loyal Coal Pty Ltd is the new name for Monaro Coal Pty Ltd. The letter of 1 and 2 June advised the following: 1. As a means to remain in consideration for the nominated Coal Release Areas, Monaro Mining NL transferred its interest in Loyal Coal (formally Monaro Coal) to Voope Pty Ltd. This was a requirement to enable adequate financing. 2. That if successful for any of the Coal Release Areas applied via Expression of Interest (EOI) by Monaro Mining, that the invitation for the Exploration Licence be made to Loyal Coal Pty Ltd. 3. I confirm that as of yesterday 9 June 2009, Loyal Coal (formally Monaro Coal and thereby Monaro Mining), withdrew its EOI in Mt Penny, Spur Hill and Glendon Brook. The reason being that the consortium is unable to confirm the level of financing required to adhere to the EOI terms. 4. I confirm that Loyal Coal wishes to remain considered for the balance of EOIs' submitted by Monaro Mining in accordance with the terms stipulated in the EOIs'. Please return my call on 0488 080 101. Mart Rampe is also available to confirm the above to you tomorrow. Regards Gardner Brook On behalf of Loyal Coal Pty Ltd Sent via BlackBerry® from Telstra From: william.hughes@dpi.nsw.gov.au To: gbrook@oregonstandard.com.au Date: Wed, 10 Jun 2009 20:19:46 +1000 Hi Gardner Sorry ive been out of contact this afternoon. I did get your voice message thank you. I appreciate the email clarifying the position of Monaro Mining with respect to company interest and ownership and the position with respect to EOIs lodged. Kind Regards William William Hughes A/Director Development Coordination NSW Department of Primary Industries Level 6, 201 Elizabeth Street Sydney NSW 2000 Ph: +61 2 8289 3931 Fx: +61 2 9286 3208 Mob: E: William.hughes@dpi.nsw.gov.au Web: www.dpi.nsw.gov.au gbrook@oregonstandard.com.au 330 On 11 June 2009, in response to an inquiry from Poole, James McGuigan sent an email in which he said: I spoke to Dad last night and set that we thought the logical progression was for Locaway to transfer the Cherrydale Park Asset to UPG. He's having a meeting with Moses today. Will let you know as soon as there is news Cheers 331 Poole followed up James McGuigan at 1.50 pm. James McGuigan reported to him that there was no news as at that time and said: Hopefully we will sit down with Moses by end of today and then I guess find out then. 332 On a date in June 2009 which was before 19 June 2009, the Evaluation Committee delivered to the Minister an evaluation report in respect of the eleven coal release areas then under consideration. In that report, the Committee recorded the identity of those companies which had applied for each area. Relevantly, the identity of the EOI applicants for certain of the areas was noted as follows: Yarrawa 1. Coalworks Limited 2. Monaro Mining NL 3. Endocoal Limited Spur Hill 1. Spur Hill Joint Venture - JV Novannis Pty Ltd and Morgan Resources Pty Ltd 2. Tianda Resources (Australia) Pty Ltd 3. Coalworks Limited 4. Breakspheare Coal Mines Ltd 5. Redman Mining Ltd 6. Monaro Mining NL Glendon Brook 1. Hydromining Coal Australia Pty Ltd 2. Cascade Coal Pty Limited 3. Monaro Mining NL Mt Penny 1. Jain Group 2. Cascade Coal Pty Limited 3. Breakspheare Coal Mines Ltd 4. Monaro Mining NL Long Mountain 1. Jain Group 2. Monaro Mining NL Ben Bullen 1. Monaro Mining NL 2. Coalpac Pty Ltd 333 The Committee recommended that the Minister select Cascade as the successful EOI applicant for the awarding of new ELs over the Mt Penny and Glendon Brook coal release areas and MMNL as the successful EOI applicant in respect of the Yarrawa, Long Mountain and Ben Bullen coal release areas. In their evaluation report, immediately above their Conclusion and Recommendation, the Committee said the following: It should be noted however that in a letter dated 9 June 2009, Monaro Mining NL (through its partner Loyal Coal Pty Ltd) withdrew its Expressions of Interest over the Spur Hill, Glendon Brook and Mt Penny Coal Release Areas. An evaluation team from experts on the staff of the Department of Primary Industries and elsewhere in government has evaluated the EOIs according to the evaluation criteria specified in the Coal Release Areas EOI Information booklet, and using a consistent process approved by an independent probity auditor. The Evaluation Team has examined the EOIs in detail and has reached clear conclusions and recommendations in the presence of the independent probity auditor on 18 June 2009. 334 The only two areas in respect of which Cascade lodged an EOI were Mt Penny and Glendon Brook. MMNL had also lodged EOIs in respect of the Spur Hill, Ben Bullen, Long Mountain, Yarrawa, Ilford, Cameron Road and Melrose coal release areas. As noted above, MMNL withdrew its EOIs for Spur Hill, Mt Penny and Glendon Brook. It was not successful in respect of any of the Ilford, Cameron Road or Melrose coal release areas. 335 By letter dated 19 June 2009 and signed by the Director General of the DPI, the DPI informed Cascade that it had been selected as the successful EOI applicant for the EL over the Mt Penny coal exploration area. The author of the letter invited Cascade to apply for an EL over that area. The letter went on to specify certain financial terms and conditions. A letter in similar terms in respect of the Glendon Brook coal exploration area was also sent to Cascade on the same day. 336 At 11.30 am on 25 June 2009, James McGuigan sent an email to Moses Obeid. In that email, James McGuigan said: As discussed. Good work. Look forward to a beer tomorrow. Attached to this email was a copy of each of the DPI letters dated 19 June 2009 sent to Cascade in respect of the Mt Penny and Glendon Brook coal release areas. Earlier on 25 June 2009, James McGuigan had sent a copy of the same letters to Brook. 337 At 9.01 am on 30 June 2009, Moses Obeid sent an email to John McGuigan and to Poole (with a copy to Jones) in which Moses Obeid said: Gents Can we discuss the three small opportunities. We don't want to leave our run late. The reference to "the three small opportunities" in this email was a reference to the Yarrawa, Ben Bullen and Long Mountain coal exploration areas. 338 On 1 July 2009, Brook sent an email to John McGuigan with a copy to Moses Obeid and Poole. In that email, Brook said: I would like us to discuss as soon as possible the coal release areas named: Long Mountain, Yarrawa and Ben Bullen. I would prefer to consummate a deal between us regarding these areas, and time is limited. I have an alternate solution if you guys are not keen. Can we please organise a call tomorrow Sydney time? I am flying back to Nice from London in the morning and therefore a call around 2pm Sydney/5am London would work for me. Please let me know. 339 The next day, John McGuigan replied inviting Brook to give him a call. Brook then responded by informing John McGuigan that he was about to meet Poole in Nice. 340 On 6 July 2009, Brook sent an email to the DPI in the following terms: gbrook@oregonstandard.com.au 06/07/2009 01:52 AM To: david.agnew@dpi.nsw.gov.au Cc: Mart.Rampe@monaromining.com.au Subject: Monaro Mining / Loyal Coal Dear Mr Agnew I act for Loyal Coal, who is the financial partner to the Monaro Mining bid for coal release areas in NSW, and in particular Ben Bullen, Long Mountain and Yarrawa. I have attached correspondence supplied to your department on 2 June 2009. I understand that Mr Mart Rampe has been in contact with you. I will call you on Monday to discuss the attached letter and how we can move forward to securing the Exploration Licences for these 3 areas. I am based in Europe and contact numbers are + 44 755 4031 025 and + 61 488 080 101. Regards Gardner Brook 341 By 8 July 2009, Brook was actively endeavouring to offload Yarrawa to Endocoal Limited (Endocoal). He was keeping Moses Obeid informed of his discussions with representatives of Endocoal. 342 On 8 July 2009, the DPI sent a letter to Cascade. That letter was in the following terms: Dear Mr McGuigan I refer to the letter from the Director General dated 19 June 2009, informing you of your success in relation to the expression of interest you submitted for the Mt Penny coal release area. Currently the Department is assembling a set of standard licence conditions, applicable to any exploration licence granted over the Mt Penny area, along with a draft set of special conditions. These special conditions will reflect the various conditions and requirements specified in the Coal Release Areas EOI information document, plus the specific commitments made by your company in its successful EOI. These draft special conditions will be forwarded to you shortly. You will need to reply in writing confirming acceptance by your company of these proposed special conditions. In the interim, we will have arranged Ministerial consent under section 13 (4) of the Mining Act 1992 for you to apply for an exploration licence for Group 9 minerals (coal). On receipt of your acceptance of the special conditions, we will confirm Ministerial consent and you will be in a position to apply for an exploration licence. Directions regarding the lodgement of an application will be provided with the confirmation. Yours sincerely David Agnew Manager, Coal & Petroleum Titles and Systems 8 July 2009 A letter in substantially similar terms was also sent to Cascade on that day in respect of the Glendon Brook coal release area. 343 Similar letters were sent to MMNL in respect of the Yarrawa, Long Mountain and Ben Bullen coal release areas. 344 On 17 July 2009, the DPI responded to Brook's email of 6 July 2009 in the following terms: From: david.agnew@dpi.nsw.gov.au Sent: Friday, 17 July 2009 3:39 PM To: gbrook@oregonstandard.com.au Cc: Mart Rampe; William.hughes@dpi.nsw.gov.au; tracey.godwin@dpi.nsw.gov.au Subject: Re: Monaro Mining / Loyal Coal Attachments: Letter Monaro to DPI 2 June 2009.pdf Mr Brook I refer to your email below. As we have sought Ministerial approval for Monaro Mining to apply for exploration licences over the relevant areas, any application will have to be made in that name. Once the application is lodged, Monaro Mining can nominate Loyal Coal as the company to whom they would like the licences granted. All that is required to facilitate this is a letter from the Company Secretary of Monaro Mining making the nomination. Regards David Agnew Manager Coal & Petroleum Titles and Systems Department of Primary Industries - Mineral Resources PO Box 344 Hunter Region Mail Centre NSW 2310 Phone: (02) 4931 6442 Email: david.agnew@dpi.nsw.gov.au 345 In June and July 2009, the shareholders of Cascade actively considered how they would fund the ELs which they had been told would be granted to Cascade over the Mt Penny and Glendon Brook coal release areas. 346 By a number of letters all dated 10 August 2009, the DPI wrote to the successful EOI applicants informing them that consent had now been given pursuant to s 13(4) of the Mining Act for the recipient of each letter to apply for an EL for coal over the coal exploration area in respect of which that company had been adjudged the successful EOI applicant. The author of the letters reminded the successful applicants that each of them would be required to make all of the financial contributions which they were required to make or had committed to make in accordance with the EOIs which they had lodged with the DPI "within 30 days from the date of [each letter]", that is to say, by 9 September 2009. After setting out the particular contributions required in the case of each coal release area, the author of the letters went on to tell the successful applicants that, in order to apply for an EL, they were required to complete and submit an Application for an Exploration Licence Form - Form 3 - which could be obtained from the DPI's website. 347 Letters in this form were sent to MMNL and to Cascade. 348 The letters sent to MMNL in respect of the Yarrawa, Ben Bullen and Long Mountain coal release areas were not received by MMNL until 20 August 2009. For this reason, the DPI extended the deadline for making the EL applications over those areas to 20 September 2009. 349 The letters sent to MMNL contained an additional paragraph in the following terms: An exploration licence application must be made by the same company to whom the Minister gave consent to apply. An applicant may then nominate another party to be the holder of any title granted in satisfaction of the application. 350 In mid-August 2009, the Obeids and Kaidbay, in his capacity as a director of UPG, were putting together various transactions concerning Cherrydale. As previously mentioned, these transactions appeared to be proceeding upon a basis which did not accord with the relevant facts. The Obeids and Kaidbay were orchestrating a sale and purchase of Cherrydale from Locaway to UPG, rather than a simple transaction whereby UPG, as the replacement trustee of the Moona Plains Family Trust, became registered on the title of Cherrydale in that capacity. 351 In August 2009, James McGuigan and Poole began to compile Cascade shareholder updates with a view ultimately to securing external funding for the mining venture then contemplated in respect of the Mt Penny coal release area and the Glendon Brook coal release area. 352 Under cover of a letter dated 24 August 2009 from Cascade to the DPI, Cascade lodged its Form 3 (Application for an Exploration Licence) in respect of the Mt Penny coal release area. By letter dated the same day, it made a similar application in respect of the Glendon Brook coal release area. The covering letter (omitting address details) in respect of Mt Penny was in the following terms: Dear Sir, Re: Application for Exploration Licence for Group 9 Minerals Thank you for your letter reference confirming consent to apply for an exploration Licence over the Mt Penny area. In this connection please find attached our completed Form 3 application, together with required information and prescribed fees in support of this application. For your information, Cascade Coal Pty Ltd would like the exploration title to be issued in the name of the following entity Mt Penny Coal Pty Ltd ACN: 139 010 209 Mt Penny Coal Pty Ltd is a wholly owned subsidiary of Cascade Coal Ltd. Should you require any further information or clarifications concerning this application our nominated contact is James Mcguigan. Email: jmcguigan@aphillip.com.au Phone: 612 9227 8914 Yours Sincerely John McGuigan Director 353 The Form 3 which accompanied that letter showed Mt Penny Coal Pty Ltd (ACN 139 010 209) (Mt Penny Coal) as the EL applicant. On 25 August 2009, Cascade submitted an amended Form 3 in respect of the Mt Penny EL in its own name after the DPI refused to accept the Form 3 which had been lodged showing Mt Penny Coal as the EL applicant. 354 The covering letter in respect of the Glendon Brook coal release area was in the following terms (omitting address details): Dear Sir, Re: Application for Exploration Licence for Group 9 Minerals Thank you for your letter reference confirming consent to apply for an exploration Licence over the Glendon Brook area. In this connection please find attached our completed Form 3 application, together with required information and prescribed fees in support of this application. For your information, Cascade Coal Pty Ltd would like the exploration title to be issued in the name of the following entity Glendon Brook Coal Pty Ltd ACN: 139 009 000 Glendon Brook Coal Pty Ltd is a wholly owned subsidiary of Cascade Coal Ltd. Should you require any further information or clarifications concerning this application our nominated contact is James Mcguigan. Email: jmcguigan@aphillip.com.au Phone: 612 9227 8914 Yours Sincerely John McGuigan Director 355 The Form 3 (Application for an Exploration Licence) in respect of the Glendon Brook coal exploration area was originally made in the name of Glendon Brook Coal Pty Ltd (ACN 139 009 000). Subsequently, the name of the applicant was changed to "Cascade Pty Ltd". Ultimately, a similar alteration was made to the name of the applicant shown on the Form 3 in respect of the Mt Penny coal release area. 356 By letter agreement dated 14 September 2009 signed by Kaidbay, on behalf of Loyal Coal, and by Greg Barns on behalf of MMNL, MMNL agreed to direct the DPI to award the Ben Bullen coal release area to Buffalo Coal Pty Ltd and the Yarrawa coal release area to Loyal Coal. The letter was in the following terms (omitting address details): Dear Sirs I refer to the Deed of Release between Monaro Mining NL and Voope Pty Ltd dated 2 June 2009. Voope Pty Ltd hereby agrees that by countersigning this letter, you agree to direct the Department of Primary Industries in New South Wales to award the Ben Bullen Coal Release Area to Buffalo Coal Pty Ltd and the Yarrawa Coal Release Area to Loyal Coal Pty Ltd. These advice need to be properly communicated to Mr David Agnew from the DPI by close of business 15 September 2009 by a Monaro director. In consideration for nominating the above aforementioned areas, Voope Pty Ltd will pay Monaro Mining NL, $70,000 once a successful transaction is complete. A "Successful Transaction" shall mean the grant of an the Exploration Licence to the SPV (Loyal Coal Pty Ltd) in respect of the Project namely the Yarrawa Expression of Interest area more particularly set out as Figure 4 on page 17 of the document issued by NSW Dept of Primary Industries in January 2009 entitled "Coal Release Areas - Gunnedah Coalfield, Hunter Coalfield and Western Coalfield Expression of Interest Information). The payment will be made without delay (or within 30 days, whichever is sooner) once the EL is awarded. Please confirm your acceptance of the above by counter signing below and returning via scanned copy today. Yours faithfully Andrew Kaidbay Director Loyal Coal Pty Ltd 357 It would appear that, by 14 September 2009, Brook had negotiated a transfer of MMNL's interest in the Yarrawa and Ben Bullen coal release areas to Coalworks Limited (Coalworks) for a fee. 358 By letter dated 18 September 2009, MMNL gave to the DPI the direction it had agreed to give in the letter agreement between it and Loyal Coal signed on 14 September 2009. The 18 September 2009 letter was in the following terms (omitting address details): Dear Mr Agnew, RE: Yarrawa Expression of Interest Area - Exploration Licence. We refer to our letter dated 2 June 2009 and your letter dated 10 August 2009. We confirm that the Department agrees to Monaro Mining NL nominating Loyal Coal Pty Limited as its nominee, and in those circumstances, Monaro Mining NL, nominates Loyal Coal Pty Limited to be issued with the Yarrawa Exploration Licence, in the event of Monaro Mining NL's Application being granted. Yours sincerely, Greg Barns Director 359 It appears that MMNL allowed its EOIs in respect of the Long Mountain and (possibly) the Ben Bullen coal release areas to lapse. 360 By letter dated 8 October 2009 from the DPI to James McGuigan at Mt Penny Coal, the Director General of the DPI informed James McGuigan that the DPI had reached the stage where it intended to grant a title in satisfaction of the Mt Penny EL (Exploration Licence Application No 3771) subject to the receipt of the security of $20,000 as outlined in conditions attached to the letter. A similar letter was sent at the same time in respect of the Glendon Brook coal release area. 361 On 13 October 2009, James McGuigan sent an email to Johnstone by which he sought Johnstone's advice in relation to the draft conditions attached to the DPI letter of 8 October 2009. The next day (14 October 2009), Johnstone responded in some detail. James McGuigan then sent Johnstone's response received by him on to Travers Duncan and John McGuigan. 362 By email sent at 4.53 pm on 21 October 2009 to all relevant parties, James McGuigan informed the recipients that he had received verbal confirmation that afternoon from the DPI that Glendon Brook Coal Pty Ltd had been granted Exploration Licence No 7405 over the Glendon Brook coal release area and that Mt Penny Coal had been granted Exploration Licence No 7406 over the Mt Penny coal release area. He said that both licences were valid for five (5) years from 21 October 2009. He also said that he would receive the official letters either Friday or Monday and that he would circulate a copy of those letters along with an update for all shareholders. 363 On 22 October 2009, Brook made contact with James McGuigan seeking an update as to the progress of the acquisition of the relevant ELs. Brook's communication caused James McGuigan to send an email to John McGuigan and Poole which was in the following terms: Guys, Just had a conversation with Gardner and informed of being granted the EL's. He was keen to let me know that he feels left out of the process, and wants to be kept in the loop more. I made him aware of the fact that he is in London and it's a bit difficult. However he wanted me to relay the message. He also raised concerns that he would like to be the point of contact going between the "boys", as he is worried about them. I am of the view that it's easier to keep him happy and inform him of minimal information, than to shut him out. Cheers 364 The reference in the above email to "the boys" was a reference to the sons of Eddie Obeid, probably Moses Obeid and Paul Obeid, in particular. 365 Under cover of a letter dated 27 October 2009, the DPI forwarded to James McGuigan the licence document in respect of Exploration Licence No 7406 being the EL for the Mt Penny coal exploration area. Presumably, a similar letter was sent at that time under cover of which was forwarded the Exploration Licence No 7405 in respect of the Glendon Brook coal exploration area. 366 On 24 November 2009, Locaway, Geble and JKL, as vendors, entered into a Deed of Put and Call Option with Mt Penny Properties, as purchaser. By that document, the vendors agreed to grant and the purchaser agreed to accept a call option to purchase the properties which were located over the area covered by EL7406. In addition, Mt Penny Properties agreed to grant and the vendors agreed to accept a put option whereby the vendors had the entitlement to require the purchaser to purchase those properties. The options were only exercisable in respect of all three properties simultaneously. The options were exercisable within a period of three months after the completion of a feasibility study confirming that a profitable coal mining operation could be developed in the area covered by the EL and when certain other conditions precedent were met. The total purchase price agreed in respect of the properties the subject of the Deed of Put and Call Option was $33.4 million ($17 million for Cherrydale; $2.4 million for Donola; and $14 million for Coggan Creek). This was a little over four times the amount which the vendors had outlaid to acquire the properties. Mt Penny Properties had the right to terminate the Deed of Put and Call Option if it or Mt Penny Coal decided, acting reasonably, that it could not develop a profitable coal mining operation on the land or if it or Mt Penny Coal was not granted mining approval or if it or Mt Penny Coal concluded, acting reasonably, that the reserves of coal on the properties were not sufficient to justify the proposed property acquisition. In the Deed of Put and Call Option, the parties agreed to keep the terms thereof confidential and also to keep information furnished from one to the other confidential. 367 Under the Deed of Put and Call Option, the vendors agreed to allow Mt Penny Coal access to the properties. 368 John McGuigan signed the Deed of Put and Call Option on behalf of Mt Penny Properties. His signature was witnessed by Poole. Paul Obeid and Damien Obeid signed that document on behalf of Locaway. Campo signed on behalf of Geble and Lewis signed on behalf of JKL. 369 Also on 24 November 2009, Access Agreements were executed between Mt Penny Coal and Locaway, Geble and JKL giving Mt Penny Coal access to Cherrydale, Donola and Coggan Creek respectively for the purposes of carrying out prospecting activities. The same persons as those who signed the Deed of Put and Call Option referred to above also signed the Access Agreements. 370 In addition to granting Mt Penny Coal access, the Access Agreements (in Schedule 1) provided that, in return for the right to carry out prospecting on the properties, Mt Penny Coal was required to pay: (a) Locaway the sum of $14,875 per month; (b) JKL the sum of $13,825 per month; and (c) Geble the sum of $3,009 per month on and from 21 December 2009 until completion of the Contracts for Sale the subject of the Deed of Put and Call Option or until the termination of the options granted pursuant to that Deed. 371 The EL for the Yarrawa coal exploration area (EL No 7430) was granted to Loyal Coal on 18 December 2009. Upon the happening of that event, Voope was required to pay to MMNL $70,000. Subsequently, Loyal Coal nominated Coalworks to take up the EL and subsequent mining tenements in respect of the exploration area covered by EL No 7430. 372 On 10 December 2009, Kaidbay replaced Skehan as the sole director of Voope. 373 As already mentioned, on a date not presently made clear in the evidence, Kaidbay, as a director of Buffalo, executed a Bare Trust Deed dated 5 June 2009, by which Buffalo declared that it held the interest in the joint venture constituted by the Buffalo Agreement on trust for Warbie and Equitexx in the respective proportions of 12/100 and 88/100. I shall refer to this document as the "Buffalo Bare Trust Deed". It appears that the Buffalo Bare Trust Deed was not executed until May 2010, even though the document itself bears the date "5 June 2009". This much is made clear by file note tendered in evidence dated 28 April 2010. That file note revealed that the Deed had not yet been signed as at 28 April 2010. I infer that the Buffalo Bare Trust Deed was signed shortly before the Deed referred to at [374] below. 374 By a Deed between Buffalo Resources and Southeast entered into on 11 May 2010 which was executed by Kaidbay on behalf of Buffalo and by Sevag Chalabian, on behalf of Southeast, Buffalo retired as trustee "… of the trust recorded in the Bare Trust Deed made on 5 June 2009" and was replaced as trustee of that trust by Southeast. The particular Trust Deed was not annexed to the Deed dated 11 May 2010 tendered in evidence before me. I infer that this Deed had the effect of substituting Southeast as the joint venturer with Cascade in respect of Mt Penny as documented in the letters of 5 June 2009 and 6 June 2009. 375 Sevag Chalabian was the sole director and shareholder of Southeast. In this capacity, he acted on, and followed, the requests, instructions and directions of Moses Obeid and Paul Obeid in conducting the affairs of Southeast in its capacity as trustee under the Buffalo Bare Trust Deed. 376 On the same day (11 May 2010), Buffalo wrote to Cascade in the following terms (omitting address details): Dear Sirs Letter of Agreement between Cascade Coal Pty Limited ("Cascade") and Buffalo Resources Pty Limited ("Buffalo") We refer to the letter of agreement between Cascade and Buffalo dated 5 June 2009 ("The Agreement"). We understand that Exploration Licence 7406 is held by Mt Penny Coal Pty Limited (ACN 139 010 209) which is a wholly owned subsidiary of Cascade. By execution of the copy of the letter where indicated below please confirm this fact. We advise that in entering into the Agreement, Buffalo was acting in the capacity as a bare trustee. Pursuant to the terms of the relevant trust we advise that Buffalo will be replaced as the trustee of that trust and all its rights and obligations will be assumed by South East Investments Pty Ltd 143 535 620 ("the New Trustee"). By execution of the copy of this letter where indicated below please confirm your acknowledgement of this change and confirm that the key terms of the Agreement are now effective as between Cascade and the New Trustee. Yours sincerely The Directors Buffalo Resources Pty Limited 377 On 17 May 2010, John McGuigan and Poole signed and returned the Buffalo letter dated 11 May 2010, as requested. 378 On 20 May 2010, an article appeared in the online version of The Sydney Morning Herald under the name of the journalist, Anne Davies. As far as the evidence goes before me, this was the second newspaper article in which the author drew attention to the Obeid family's interests in the Bylong Valley. The article is important for the present case. For that reason, I extract it in full: In late 2007 the family of the upper house MP and former minerals minister Eddie Obeid bought a large property for $3.65 million in the Bylong Valley, a beautiful valley to the east of Mudgee renowned for its good cattle pastures. Less than a year after the purchase of Cherrydale Park, the NSW Department of Primary Industry - the department responsible for managing the state's mineral deposits - called for expressions of interest to bid for a highly prospective coal exploration licence over the Bylong Valley. A few months after the Obeid family trust company Locaway purchased Cherrydale Park, other Sydney investors noticed the beauty of Bylong. In July, one purchaser bought a property adjoining Cherrydale Park for $600,000 and made an offer on another much larger property, Coggan Creek, putting down $50,000 to secure an option to buy it. When his option over Coggan Creek lapsed because he was unable to find investors, another Sydney investor emerged - a wealthy young man, Justin Kennedy Lewis, who knows the Obeid sons from childhood. Mr Lewis told the Herald he was not aware of the coal in the valley when he bought Coggan Creek for $2.42 million. "I have always wanted a proper working farm and - especially now I'm a new dad - was looking forward to getting rough and ready with my son." Moses Obeid, Mr Obeid's eldest son, said he was surprised to find that Mr Lewis, whom he had known since his childhood in Hunters Hill, had bought 10 kilometres away. He had bumped into Mr Lewis in January and Mr Lewis had told him: "I've just bought a country property, and I hear you guys have a farm up there too," he recounted to the Herald. But the Obeid's country idyll and those others who fell in love with Bylong is about to be disrupted. After a few hiccups in the tender process, in July 2009 an exploration licence for the Mount Penny region, the area that includes the Obeid and Lewis farms, was awarded to Cascade Coal - a company whose directors were familiar with the coal riches in the region. Armed with the funds they received after selling Felix Resources's Moolarben mine 40 kilometres away, Cascade Coal is now in the throes of test-drilling the valley to decide where the richest seam of coal lies. For landholders, this is both good and bad news. They are now facing the prospect of an open cut mine in the valley, with work starting as early as 2011. But they are also likely to see their land values increase, judging by the experience of landholders in the Liverpool Plains, whose land was similarly affected by coalmining. Mining companies are able to force the acquisition of land for mines, but often have to pay handsome premiums. Contacted by the Herald, Mr Obeid said that his family had bought Cherrydale Park not for its proximity to coal but because he had fallen in love with "the magnificent property". "The minute I walked in there I thought, this is where I want to retire. Not right away," Mr Obeid added hastily, as there has been speculation he is under pressure to leave Parliament before the next election. The property, as Mr Obeid says, is "truly remarkable". Developed over 10 years by John Cherry, a tax adviser to the late Kerry Packer, it has several hectares of gardens with more than 2000 roses, an artificial lake and a compound of houses and cottages. Asked whether he knew if there was coal under Cherrydale, Mr Obeid said: "I don't know if there is coal or there isn't. The whole valley has mining leases over it. Anglo has had one for years. When we bought we certainly weren't told of the mining lease, so I wasn't aware of it. "I personally wish it would never happen," he said of the mine. However Mr Obeid said that as a former minerals minister, he realised there was little a landholder could do to prevent a mine owner compulsorily acquiring land. At the time Mr Obeid bought, there was no exploration licence over the valley, although the general existence of coal in the valley was no secret. A spokeswoman for the department confirmed that the plan to grant 11 new exploration licences was not made public until September 9, 2008. However, she said a geologist or any person who understood the test drilling data would have been able to look at information on the department's website and make an informed guess on where there was likely to be coal deposits before that date. Mr Lewis bought just after tenders were called, although he did not settle on his land until late 2009 - after tenders were awarded - due to delays in finalising the sale of another property. Meanwhile there have been other acquaintances of the Obeids who have taken an interest in the valley, although for other reasons. Monaro Mining was one of the 60 companies which was invited by the Department of Primary Industry to tender for 11 areas, including Mount Penny, the exploration area in the Bylong Valley. Monaro was approached by a consultant and former Lehman Bros investment banker, Gardner Brook, and another consultant, Andrew Kaidbay, who offered to help with its bid. Moses Obeid told the Herald he knew both men - Mr Kaidbay had approached the Obeid sons on an earlier occasion about financing one of their projects and had introduced Gardner Brook to Moses and one of his brothers. But the Obeids had no part in their mining transaction. Mr Brook had been a specialist in putting mining deals together at Lehman, and Mr Kaidbay was a finance consultant, who currently works for Mark Bouris's Yellow Brick Road Securities. Together with the Monaro directors, they worked on the submissions and attempted to arrange a more substantial financial partner for Monaro's bids. According to the Monaro directors, Mr Brook was confident that Monaro would be successful, and when documents were later tabled in the upper house they revealed that Monaro's bid was highly rated by the tender assessment team. "We felt like we had been touched on the shoulder by a fairy," one director told the Herald. But soon after tenders were lodged, the Monaro bid began to unravel. There was a split on the board over the direction of the company, and the global financial crisis made finding partners with deep pockets difficult. A company, Voope, was brought in as the finance partner, with a lawyer, Greg Skehan, from Colin Biggers and Paisley, as its sole director. In the end though, Monaro was unable to raise the funds that were required as upfront payments. In the case of Mount Penny, that was $1 million upfront and four yearly payments. Mr Brook wrote to the department relinquishing the licence for Mount Penny and two others on June 9 but kept three smaller ones. Monaro decided to walk away from its foray into coal, and Mr Brook and Mr Kaidbay ended up with the three smaller exploration licences, which they have since sold. Mr Obeid made a personal explanation to Parliament last night accusing the Herald of having a vendetta against him because he had successfully sued the paper several years ago. He said he was simply doing his job as an MP representing the people who had contacted him over a dangerous bridge which he said was 65 kilometres from his family farm. "I make no apologies, that is what my job has been for 18 years." Mr Obeid also said the Herald had published incorrect information about his pecuniary interest register. He said he had sold his house in Concord "ages ago". The 2009 register, tabled in September last year, lists the Concord property and the house and land in Matrit, Lebanon. A supplementary filing for the current financial year, not yet tabled in Parliament, reveals he has sold the Concord property. Mr Obeid said he would have difficulty listing the holdings of all his relatives because he had so many. 379 The newspaper article to which I have referred was not admitted into evidence in order to prove the truth of its contents. It was admitted only to prove the fact of publication and the date of publication. It was also admitted as evidence of assertions made at the time by the author of the article. 380 Through a series of transactions which took place in September and October 2010, CMG, which was an entity associated with Cascade and Poole and controlled by Poole, agreed to buy out the Obeid interests from the Mt Penny and Glendon Brook coal ventures for a total sum of $62 million, $30 million of which was, in fact, paid during the period from late October 2010 to May 2012. Under the arrangements then put in place, CMG agreed with Cascade and Mt Penny Coal to forego its rights so acquired from the Obeids for a cash consideration of $32 million and shares in Cascade to a value of $30 million. 381 In early September 2010, Poole and Brook entered into negotiations for the sale of Warbie's interest in the Mt Penny coal project to CMG. 382 On 22 September 2010, Warbie, Brook, CMG and Southeast entered into an agreement whereby Warbie's 12% interest in the Buffalo Bare Trust was sold to CMG for a purchase price of $1.75 million. As a result, Southeast thereafter held its interest in that venture to the extent of 12% on trust for CMG. 383 On 13 October 2010, the Board of Directors of Cascade met and, in anticipation of CMG's successfully acquiring Southeast's interests in the Mt Penny coal project, resolved to approve Cascade and Mt Penny Coal entering into a Rights Termination Agreement (RTA) with CMG. The RTA provided for the termination of the "Rights Interest" defined as "the right to be issued 25% of the shares in Mount Penny Coal for $1 and all other rights and obligations held by CMG in relation to the Mt Penny project" for a consideration comprising: (a) The issue to CMG of $30 million worth of shares in Cascade; and (b) A cash consideration of $32 million payable in instalments of $17 million on or before 20 February 2011 and $15 million on or before 20 June 2011. 384 The Board of Cascade also resolved to issue to CMG 717,748 additional shares in Cascade in satisfaction of the first element of the consideration provided for under the RTA. That transfer occurred on 20 October 2010. 385 On 20 October 2010, Southeast and CMG entered into a Transfer Deed (Transfer Deed), the key aspects of which were as follows: (a) In consideration of the obligation to pay the "Purchase Price" (defined as $60 million), Southeast agreed to transfer to CMG the "rights interest" (defined as "the right for Southeast to be issued 25% of the shares in Mount Penny Coal for $1") (cl 2); (b) $30 million of the "Purchase Price" was payable in instalments as follows: $5 million on the date of the Transfer Deed, $2.5 million on 25 October 2010, $7.5 million on 28 February 2011 and $15 million by 30 June 2011 (cl 3.4.1); and (c) The remaining $30 million of the "Purchase Price" was payable by one of three alternative methods: (i) By the issue or transfer by 30 April 2011 of shares in a public company to the value of $30 million (White Energy Limited being an acceptable public company for this purpose) based on the share price according to which a majority of Cascade, or Mt Penny Coal, or the Mt Penny Project (as defined) was sold to the public company; or (ii) In three instalments of $10 million payable at 30 June 2011, 31 August 2011 and 31 October 2011 with interest payable at 12% per annum (with a default interest rate of 15% per annum, escalating to 20% per annum, in the event of default); and (iii) In a lump sum of $40 million (being $30 million plus $10 million interest) by 15 December 2011. (cl 3.4.2). 386 In order to secure its obligations under the (inter alia) Transfer Deed, on 20 October 2010, CMG charged in favour of Southeast all its present and future assets. 387 On 20 October 2010, Cascade, Mt Penny Coal and CMG entered into the RTA in the form which the Board of Cascade had approved on 13 October 2010. Thus, the 25% interest in the Mt Penny Coal venture in favour of Buffalo created by the Buffalo Agreement on 5 June 2009 was brought to an end. 388 In the period from 20 October 2010 to 3 May 2012, CMG paid to Southeast a total amount of $30 million. The facts concerning these payments and the matching payments to various Obeid entities were pleaded at pars 150 to 155 of the FASOC and are admitted by the respondents.
The Yarrawa Deal Involving Coalworks 389 On 19 June 2009, the DPI advised MMNL that it had been selected as the successful EOI applicant for an EL over the Yarrawa coal release area as well as for the Long Mountain and Ben Bullen coal release areas. 390 After MMNL had received the DPI's letters dated 19 June 2009, Moses Obeid invited John McGuigan to discuss the potential acquisition of these three areas. Brook also offered Cascade a deal for the three areas on 1 July 2009. 391 During July and August 2009, Brook negotiated with Endocoal and Coalworks in respect of the acquisition of the Yarrawa EL. 392 Shortly before or on 26 August 2009, Brook negotiated an agreement with Coalworks in relation to MMNL's EOI in respect of the Yarrawa coal release area under which: (a) Coalworks lent $2 million to MMNL secured by a floating charge over a joint entity which would hold the EL; (b) MMNL applied for the Yarrawa EL and included a letter nominating a joint venture entity as the EL holder; (c) Voope held a 10% interest in the joint venture entity; (d) MMNL received a fee of $70,000; and (e) Brook received a consultancy fee. 393 On or about 18 September 2009, Coalworks drew cheques payable to the DPI in accordance with the financial contributions required under the MMNL Yarrawa EOI and MMNL sent a letter to the DPI confirming agreement for the nomination of Loyal Coal as the entity to be issued with the Yarrawa EL in the event that an EL were to be granted. 394 On 22 September 2009, MMNL submitted a Form 3 to the DPI in respect of the Yarrawa coal release area, together with cheques provided by Coalworks and the letter dated 2 June 2009 nominating Loyal Coal as the holder of the EL.
The 23 May 2009 Meeting 395 In early May 2009, Brook met Moses Obeid at the Latteria café in Darlinghurst. At that meeting, Moses Obeid and Brook had a conversation to the following effect: Shortly after I returned to Sydney, I met Moses at Latteria. We sat down and had a conversation to the following effect: Moses: "Oh fuck G, you won't believe who we've met. Have you heard of Travers Duncan and Felix resources? Me: "No." Moses: "Him and his partners include John McGuigan, John Atkinson and Brian Flannery. These guys have a lot of money and really understand coal. They have a history of building up coal mines. I am speaking directly with Brian Flannery and they are willing to do a deal. Brian and I have agreed a 75/25 split on the mining and we are pushing as hard as we can on the land. We need you to represent us in ironing out the finer details to make sure our position is secure." Me "Fuck, really? That is awesome." The conversation then continued to the following effect: Moses: "Do you think we can get control of the Monaro bid so we can do a deal with Cascade and pull out? We need to be able to demonstrate that we have influence over their bids." Me: "I am pretty sure Monaro want out. I will go speak to Mart." Moses: "When can you go see him?" 396 At pars 154 to 159 of his first affidavit, Brook gave the following evidence: On or around 23 May 2009, I met Moses at the Kent Street offices, I had a conversation with Moses to the effect: Moses: "Brian Flannery has set this up, and we're meeting with John McGuigan. He's a very experienced solicitor and will play hard ball. You have to get across that we have other options in terms of funding the bid. As I've already told you, we've already agreed 75/25 but what we need you to do is make sure the structure is water tight. You will need to be firm and show some back bone. These guys are tough. We want to do a deal, and then get out." I took that direction to be an instruction as to how to conduct myself at the meeting. We went into a meeting room, two people were there who introduced themselves as John McGuigan (John) and James McGuigan (James). The meeting began with a conversation to the following effect: Moses: "We've got control of the land at Mt Penny. Monaro has got a bid in. Gardner has been working on this for a year or so." Me: "We need a financial partner but we also need a strategic partner. I had an opportunity while working at Lehman Brothers to identify Monaro Mining as a potential partner. We have partnered with Monaro Mining to pursue an exploration licence for Mt Penny. I have been trying to raise capital for Monaro. We have secured funding from Chinese and Indian investors, but there is a risk on how a foreign company may behave, so we are uncertain about how easy they will be to work with. The Obeid family would be more comfortable working with you rather than those investors. I can get control of the bid and withdraw it. If you are interested and want to consummate the deal that you've discussed, I think I can make that happen." When I said "we need a financial partner but we also need a strategic partner" I meant that I saw value in Cascade as a partner because they could not only provide capital, but also the expertise to develop the mine. This was a stumbling block that I had encountered seeking funding in China and India. Potential funders were put off by the fact that Monaro was a uranium miner. I saw real value in a partner like Cascade with solid coal mining expertise. There was also some discussion of the proposal to sell the land. I do not recall the exact words used. [My impression was that John thought the Obeid family were asking too much for the land as well as 25% interest in the mining venture.] [The first sentence was objected to and struck out.] He [referring to John McGuigan] said words to the effect: John: "You want both a generous land multiple and a 25% stake. I'm not happy about the multiple on the land, or the proposed equity stake. You've got your nose in a trough but look, I have to get my head around it and speak to Travers." The meeting lasted about one hour. 397 In his affidavit, John McGuigan said that, shortly before 20 May 2009, he met Moses Obeid for the first time. He said that that meeting had been arranged at the request of Moses Obeid and the topic discussed at the meeting was the item of mining technology called "Georadar". 398 John McGuigan said that, on 22 May 2009, Moses Obeid had asked him (McGuigan) to meet with him in order to discuss a coal project in the Mt Penny area. 399 At pars 14 and 15 of his affidavit, John McGuigan said: On 23 May 2009, I met with M. Obeid, who came to the meeting with Mr. Gardner Brook ("Brook"). M. Obeid introduced Brook to me as a merchant banker, who had worked for Lehman Brothers. My son, James, was also present. There was a conversation to the following effect: Brook said: 'I have been working for some months with a company called Monaro Mining which has lodged expressions of interest for Mt Penny and a number of other areas. There have been internal disputes among the Monaro Mining board members as to the company's focus and funding difficulties in meeting its obligations under its expression of interest proposals. These have resulted in Monaro Mining resolving to withdraw from the expression of interest process for Mt Penny. I am negotiating with Monaro Mining to take control of Monaro Coal. I am pursuing opportunities with other investors, including Chinese and Indian companies. The Monaro Mining board dispute concerns the strategic direction for the company and its inability to obtain funding to pursue its coal interests. Monaro Mining's main focus is uranium exploration, but it had also been pursuing a diversification strategy into the New South Wales coal sector. Part of my role was to assist in obtaining funding. I had approached contacts in both China and India. Monaro Mining has been unable to raise the necessary funding to meet its obligation with respect to upfront commitments and ongoing exploration costs in pursuit of the exploration activities associated with its expression of interest. For these reasons the board of Monaro Mining has resolved to withdraw from the expression of interest process. I have been working with Mo to secure key land holding in the Mt Penny area. Mo's family owns one of the properties. We have put together a land alliance covering the 3 critical properties in the area.' Moses Obeid said: 'My family bought Cherrydale Park in 2007. It is a beautiful property and perfect as a family retreat. Initially, when we heard that the Mt Penny area would become subject to coal exploration, we were concerned as to how this would affect our property. However, if coal exploration is to proceed, we decided to form an alliance with other land holders over the strategic landholdings at Mt Penny. Cherrydale Park has acquired very substantial water rights. This will give us bargaining power if we have to sell to a coal miner.' I said: 'Well that is all very interesting but what's that got to do with us? Brook said: 'Well, look, we are in the middle of the GFC. Monaro Mining has been unable to raise funding. Would Cascade be interested in a proposal involving acquisition of the land and the formation of a joint venture?' I said: 'Well of course we would be interested in the land but I do not believe we would be interested in a joint venture Brook said: 'Well if you want the land, then there must be a joint venture. Otherwise we will look at other options.' I said: 'Well what sort of venture interest are you thinking about?' Brook said: 'I was thinking something like 30%' I said: 'Well that sounds too high to me. Maybe a small interest. I will have to talk to the Cascade shareholders. I doubt if they would be willing to part with more than 10%'. Brook said: 'Well, are you prepared to consider it? There is some urgency in the matter. I said: 'Well, look, I will give it some thought and I will raise it with the other shareholders but, there is a real and genuine interest in the land and the water'. 400 James McGuigan gave no evidence-in-chief about what transpired at the 23 May 2009 meeting. 401 According to Brook, he had twice been told by Moses Obeid that Moses Obeid had met with Brian Flannery, a director and shareholder of Cascade, and agreed on a 75/25 split in relation to the proposed mining venture for the Mt Penny coal release area. Brook said that Moses Obeid had told him this in early May 2009 shortly after he returned to Sydney from London and again immediately before the meeting of 23 May 2009. 402 Brook also testified that Moses Obeid had said to him that the 23 May 2009 meeting had been arranged so that Brook could iron out the finer details of the agreement reached between Moses Obeid and Flannery and in order to discuss the proposed structure with the McGuigans with a view to ensuring that that structure was watertight and that the position of the Obeids was secure. 403 Flannery did not give evidence before me. 404 Neither version of the discussion which took place at the meeting on 23 May 2009 included any specific reference to this alleged agreement made between Moses Obeid and Flannery nor did either version of the conversation proceed upon the basis that an agreement in principle had already been reached. Brook testified that he did make reference to "the deal that you've discussed" and that John McGuigan had referred to the Obeids' request for a 25% stake. 405 I think that, if Flannery had already agreed to a 75/25 split, as alleged by Brook, either Brook or Moses Obeid would have mentioned that fact early in the discussions which took place on 23 May 2009. No such mention was made. 406 There is very little evidence as to how John McGuigan came to meet with Moses Obeid on 23 May 2009. John McGuigan said that, shortly before 20 May 2009, he met with Moses Obeid at Moses Obeid's request but gave no evidence of any other discussion with Brook or Moses Obeid before 20 May 2009. The discussion at the 20 May meeting concerned, in part, at least, the mining technology known as Georadar. In his evidence-in-chief, John McGuigan did not mention any discussion with Flannery in May 2009. Yet, on John McGuigan's version of the 23 May discussion, Brook mentioned Monaro Coal in a way which suggested that Brook, at least, thought that John McGuigan already knew about Monaro Coal and its role in the matter. According to John McGuigan, neither Brook nor Moses Obeid mentioned any prior discussion with Flannery or an agreed in-principle equity split in the coal mining venture of 75/25. 407 In his version of the 23 May discussion, Brook attributed to John McGuigan a remark to the effect that the Obeids wanted a generous land multiple and a 25% stake in the mining venture. On Brook's version of the discussions, these important terms of the likely deal were not raised by him at the meeting but were assumed knowledge, as it were, among the participants in the meeting. 408 James McGuigan gave no evidence about the substance of the 23 May discussions. Neither Moses Obeid nor Flannery was called as a witness. 409 Both versions of the 23 May discussions suggest that the discussions did, in fact, proceed upon the basis of some assumed knowledge, principally concerning the two most important aspects of the Obeid's proposal - the purchase of Cherrydale, Donola and Coggan Creek by Cascade at a multiple of current value and the grant of a 25% stake to the Obeid interests in the proposed coal mining venture. In the circumstances, I think that it is very likely that Moses Obeid had spoken to a Cascade representative about his proposals before 20 May 2009. On the evidence before me, the person to whom he spoke was Flannery. However, I doubt that Flannery had agreed to any particular split. Rather, I think that it is much more likely that he listened to Moses Obeid's proposal and passed it on to John McGuigan for further consideration. 410 Although with slightly different emphases, both versions contain reference to the fact that MMNL had lodged an EOI in respect of the Mt Penny coal release area and that the interests which Brook represented had control of the land. Brook said that he and the Obeids had been partnering with MMNL to pursue an EL for Mt Penny. I note that John McGuigan already knew that MMNL had lodged an EOI in respect of a number of coal release areas, including the Mt Penny and Glendon Brook coal release areas. 411 John McGuigan gave evidence to the effect that, at the meeting of 23 May 2009, Brook said that there had been internal disputes among the directors of MMNL as to MMNL's focus and the funding difficulties which it was experiencing in meeting its obligations under the EOIs which it had lodged. John McGuigan went on to say that Brook told those present at this meeting that MMNL had decided to withdraw its EOI for the Mt Penny coal release area. Brook's version did not include this observation. In cross-examination, Brook denied that he said this. According to John McGuigan, it was in this context that Brook said that he was negotiating to take control of Monaro Coal. According to John McGuigan, Brook did not say (as Brook testified) that he (Brook) could get control of MMNL's EOI for the Mt Penny coal release area or that he was negotiating to take control of MMNL's EOI for the Mt Penny coal release area. 412 Brook testified that he told the McGuigans that he had secured funding from Chinese and Indian investors but that the Obeid family would be more comfortable working with Cascade than with foreign investors. John McGuigan's version was that he was told that Brook had not been able to secure the necessary funding although he had been dealing with Chinese and Indian investors. 413 John McGuigan said that Brook requested a 30% equity interest in the coal mining venture and that he had responded by saying that an interest at that level was too high and that he would discuss Brook's request with the other directors and shareholders of Cascade. He went on to say that he thought that a small interest of no more than 10% might be possible but that he would have to discuss it with the others. Brook did not mention these matters in his version. Rather, he said that John McGuigan was the one who raised the land purchase and the 25% equity in the coal mining venture. 414 It is apparent from the above analysis of the evidence in relation to the 23 May 2009 meeting that the critical differences between Brook's version and John McGuigan's version comprise the following: First, John McGuigan said that Brook told those present that there had been disputes among the directors of MMNL and that he had been unable to secure funding to support the EOIs which MMNL had lodged with the consequence that MMNL had resolved to withdraw its EOI for the Mt Penny coal release area. Brook denies that he said any of these things. Second, Brook testified that he could get control of MMNL's EOI bid for the Mt Penny coal release area and subsequently withdraw it. John McGuigan's version was that Brook had told him that he could get control of Monaro Coal. It must be said, however, that, on John McGuigan's version, no explanation was given at the meeting as to the role of Monaro Coal. Third, Brook's version has him telling the McGuigans that he had already secured funding for MMNL's EOI in respect of the Mt Penny coal release area whereas John McGuigan's version has Brook telling him that he had been unable to secure such funding even though he had approached contacts in both China and India. Finally, Brook said that McGuigan raised the land purchase and the 25% equity in the coal mining venture whereas John McGuigan gave no evidence about a 25% stake in that venture and said that the figure mentioned by Brook was 30%. 415 At par 17 of his affidavit, John McGuigan said: My understanding of the proposal, after the 23 May meeting, was that: (a) Monaro Mining had resolved to withdraw its bid because it lacked the necessary funds to meet its EOI obligations. Withdrawal would occur whether, or not, Cascade agreed to any proposal from Brook and M. Obeid; (b) It was proposed that Monaro Coal (later, Loyal Coal, and referred to as such in this affidavit), a subsidiary of Monaro Mining, would be acquired by Brook and, on some basis which I did not understand or consider, Brook indicated Monaro Coal, under his control and ownership, would step into the EOI. I questioned how Loyal Coal under Brook's ownership could simply step into Monaro Mining's bid position. Loyal Coal had none of the attributes which were in the detailed EOI which Monaro Mining had lodged; (c) If the land on which the Mt Penny Exploration Licence area was located was to be acquired then there had to be a joint venture ("JV"). 416 I shall return to the 23 May 2009 meeting in the next section of these Reasons.
Additional Findings of Fact 417 When Lehman collapsed on 15 September 2008, Brook became unemployed. Soon afterwards, Oregon entered into the consultancy agreement with MMNL to which I have referred at [32] above. Brook described his position after Lehman's collapse as "brokering a deal" and "trying to broker the best deal for myself at the time". Both he and the Obeids had a common interest of profit in endeavouring to secure an equity investment in any future coal mining venture at Mt Penny. In this respect, Brook was very dependent upon the Obeids. He began to act for them in relation to their dealings with MMNL and subsequently in relation to their dealings with Cascade. 418 From July 2008 to late May 2009, Brook acted for the Obeid family and for MMNL in relation to the Obeid family's desire to secure the above equity interests. I find that, notwithstanding Oregon's consultancy agreement with MMNL, Brook preferred the interests of the Obeid family and his own interests over those of MMNL, where the two groups of interests were in conflict. For much of the time, the interests of all parties aligned. From late May 2009, Brook was acting for the Obeids and for himself. MMNL was essentially out of the picture after that time. 419 The Cascade respondents submitted that I should find that Moses Obeid had access to confidential DPI information relating to the NSW Government's proposal to issue an EOI for the Mt Penny coal release area. I am prepared to make that finding notwithstanding that the evidence does not permit any findings to be made as to the identity of the person or persons who provided that information to Moses Obeid. It was submitted that it was no coincidence that Locaway had purchased Cherrydale in September 2007. Nor was it a happenstance that, in early July 2008, Moses Obeid knew the identity of the companies likely to be invited to participate in the upcoming EOI process for the Mt Penny coal release area. While it may have been the case in July 2008 that the fact that the NSW Government had plans to conduct an EOI tender process for the release of certain coal areas was not confidential, the date when the EOI process would commence and the areas involved were matters which the DPI regarded as confidential. That information was not released by the DPI until 9 September 2008. The list of companies likely to be invited to submit EOIs was certainly confidential. It is also a reasonable inference that the person or persons from whom Moses Obeid obtained this confidential information in 2007 and the first half of 2008 continued to supply confidential information to him throughout the period from mid-2008 to late 2009. It is very likely, and I infer, that when Brook and the Obeids came to negotiate with the directors of Cascade in the period from about 20 May 2009, Moses Obeid was in possession of information to the effect that MMNL was the favoured EOI applicant in respect of (inter alia) the coal release areas for Mt Penny and Glendon Brook. The Evaluation Committee had prepared a Ministerial Submission on 6 May 2009 which included recommendations that the EL for those two coal release areas should be awarded to MMNL. As submitted by the Cascade respondents, if Moses Obeid had the confidential information to which I have referred above, there is little doubt that he would also have tapped his source to find out which EOI applicant was the second ranked bidder for the Mt Penny and Glendon Brook coal release areas. I infer that he did just that and ascertained that the second-ranked EOI applicant for those areas was Cascade. 420 By 20 May 2009, Moses Obeid knew that MMNL was wavering. At that time, MMNL was the only party in the game with whom the Obeids had an arrangement. If MMNL immediately withdrew from the process, the Obeid family would have lost a key plank in their bargaining position vis-à-vis Cascade. Obtaining an equity interest in any coal mining venture to be undertaken at Mt Penny had been a fundamental goal sought to be achieved by all the actions which the Obeids had taken from mid-2007 onwards. The Cascade respondents submitted that Moses Obeid must have known that Cascade was the second ranked bidder otherwise why did he choose to deal with Cascade rather than with either of the other two bidders (Jain Group and Breakspheare Coal Mines Pty Ltd). I agree with the submissions which I have summarised in this paragraph and at [419] above and draw the inferences urged upon me by the Cascade respondents. 421 The Cascade respondents also submitted that I should infer that Moses Obeid had knowledge of the DPI rankings for the Yarrawa coal release area as at mid May 2009. That submission was based upon the proposition that Brook had chosen to prefer an approach to Coalworks, rather than Endocoal, the other bidder for Yarrawa, when he sought to exploit Loyal Coal's control of MMNL's EOI for the Yarrawa coal release area. As at 21 August 2009, Endocoal had offered a greater commission to Brook than had Coalworks but Brook pursued Coalworks. This state of affairs is only explicable upon the basis that Brook knew that Coalworks was the second ranked bidder. If that be true, and I think it is, the inference that Moses Obeid knew of the DPI rankings in respect of the Yarrawa coal release area is inescapable. I draw that inference. 422 Brook attempted to assert that all of the information about the EOI process and the EOI applicants which he was given by Moses Obeid from time to time was publicly available. While it may be accepted that rumours of an upcoming EOI process were circulating by July or August 2008, I do not accept that the particular information which the DPI regarded as confidential was, in fact, publicly available. I do not accept Brook's assertion in this regard. The information which I have described at [419]-[421] above was not publicly available. 423 The Cascade respondents made a number of submissions concerning the position of MMNL immediately after the meeting with the DPI officers on 21 May 2009. At the meeting held on 21 May 2009, the DPI officers had made very clear to both Brook and Rampe that the DPI's firm official position was that the $25 million voluntary contribution offered in respect of the Mt Penny coal release area, the $5 million voluntary contribution offered in respect of the Glendon Brook coal release area, the $2 million voluntary contribution offered in respect of the Yarrawa coal release area and the other voluntary contributions offered by MMNL in respect of other coal release areas would have to be paid within 30 days of the Minister giving consent to MMNL to apply for an EL over those areas. There is no doubt at all that MMNL did not have $60 million available to make the promised contributions. Nor, in particular, did it have $25 million to cover the voluntary contribution offered in respect of the Mt Penny coal release area. Not only did MMNL not have these funds available as at 21 May 2009 but it had no prospect of obtaining those funds within the timeframe laid down by the DPI. In addition to the problems caused by the global financial crisis, the main stumbling block was the fact that any investor could not have the relevant EL as security because the $25 million had to be paid before the EL was granted. Brook had been trying for eight months or so to secure finance for MMNL but had been unable to do so. In addition, I have no doubt that the Obeid family was not going to fund any of the MMNL bids, either directly or through Voope. By 21 May 2009, it was clearly in the Obeids' interests for MMNL to withdraw its EOI for the Mt Penny coal release area (and perhaps for others) and for the Cascade bid to succeed provided that terms could be agreed with Cascade. Of course, there was a timing issue here: The Obeids did not want MMNL itself to withdraw its EOIs for Mt Penny or Glendon Brook before they could strike a deal with Cascade. I think that these submissions are amply supported by the evidence and I accept them. 424 If Brook and the Obeids were to do a deal with Cascade, it was essential that they convince the Cascade directors with whom they dealt from around 20 May 2009 onwards that they were in control of MMNL's bids for the Mt Penny and Glendon Brook coal release areas so that, if a deal with Cascade was done, those bids could and would be withdrawn. While the directors of Cascade might have felt that their EOIs would have prevailed in any event and while they were interested in acquiring the land over which the ELs would be granted in any event, Brook and the Obeids reasoned that being able to procure the withdrawal of the MMNL EOIs for the Mt Penny and Glendon Brook coal release areas was a valuable bargaining chip in the negotiations with Cascade, as no doubt it was. 425 On 21 and 22 May 2009, Brook provided Moses Obeid with details of MMNL's promised financial contributions (both compulsory and voluntary) for each of its EOI bids and also provided him with a copy of MMNL's original EOI application for the Mt Penny coal release area. I infer that Moses Obeid had requested this information in preparation for his meeting with the McGuigans on 23 May 2009. 426 I find that the last thing that Moses Obeid wanted as at 20 May 2009 was for Voope or any other Obeid entity to take over and progress the MMNL EOI for either the Mt Penny or the Glendon Brook coal release area. Once he realised that MMNL was unable to support the commitments in respect of the voluntary financial contributions which it had given in its EOIs for those areas, he must have appreciated that it was highly likely that MMNL would withdraw those bids and abandon its interest in the project. This is why he sent Brook to the MMNL directors to negotiate MMNL's exit from the EOI process. 427 At the meeting held on 23 May 2009 between Brook, Obeid and the McGuigans, and at all times thereafter, at least until a deal was struck on 5 June 2009, Brook and Moses Obeid had every reason to conceal from the Cascade directors MMNL's true position in respect of its EOIs for the Mt Penny and Glendon Brook coal release areas. As already mentioned, one of the bargaining chips which Brook and Moses Obeid could throw into the ring in their negotiations with the directors of Cascade was their capacity to secure a withdrawal of MMNL's EOIs for those two coal release areas. Of course, they continued to have other significant bargaining chips arising from their control of the three properties, Cherrydale, Donola and Coggan Creek, but their ability to remove MMNL from the process was, to their way of thinking, significant. 428 In his evidence, Brook said that, at the meeting held on 23 May 2009, he told the McGuigans that he could get control of the MMNL bid for the Mt Penny coal release area. He denied that he said anything more about the position of MMNL in relation to that bid. In his evidence, by way of contrast, John McGuigan said that Brook had been a little more forthcoming. He said that Brook told him that MMNL had resolved to withdraw its EOI for the Mt Penny coal release area because there had been internal disputes among the directors of MMNL as to the company's focus and funding difficulties in meeting its obligations under its EOIs generally. On neither version did Brook ever say that MMNL did not have the financial resources to make the financial contributions which it had promised in respect of the Mt Penny and Glendon Brook coal release areas or, for that matter, in respect of any other coal release areas nor did he tell the McGuigans that MMNL wanted to abandon the coal project come what may. The one message that is common to both versions of the discussions which took place on 23 May 2009 is that Brook (in the presence of Moses Obeid) was asserting to John McGuigan that the Brook and Obeid interests were in a position to get control of the MMNL bid for the Mt Penny coal release area and withdraw it. That is, it was not MMNL who would be "calling the shots" on the withdrawal of MMNL's EOI for that coal release area, but rather it was Brook and the Obeids. That message was conveyed in circumstances where, on both versions of the conversation, neither Brook nor Moses Obeid revealed to John McGuigan that MMNL was in no position to follow through with its EOIs for the Mt Penny and Glendon Brook coal release areas. On this view of the evidence, it is not necessary to resolve the more stark conflict between the two versions of what was said on 23 May 2009. Nonetheless, I propose to do so. 429 In the circumstances, I favour Brook's version because he and the Obeids had every reason to conceal from Cascade the true position and intentions of MMNL as at 23 May 2009. The disclosure of MMNL's position in the terms John McGuigan says he was told on this occasion might well have aroused the McGuigans' suspicions that perhaps Brook and the Obeids were not in control of the MMNL EOIs and that perhaps MMNL had already abandoned the coal project. Brook and the Obeids were intending to present to the DPI a state of affairs whereby MMNL was continuing to maintain its bids even after 22 May 2009 when it had resolved to withdraw them. Brook and the Obeids wished to maintain the position, at least until a deal was struck with Cascade, that MMNL's bids remained on foot but that Brook and the Obeids controlled the disposition of those bids. This conclusion is probably supported by the terms of James McGuigan's email exchange with Johnstone on 25 May 2009 (as to which, see [244]-[245] above). It appears that, as at 25 May 2009, the McGuigans were using their contacts with the NSW Government to undermine MMNL by suggesting that MMNL could not meet the financial commitments which it had made in its EOIs, a position which appears to be inconsistent with accepting Brook's assertions at face value. But, this is hardly surprising as it is unlikely that, after one meeting held two days before, the McGuigans would have put all of their faith in Brook and the Obeids and in those persons' capacity to procure the withdrawal of the relevant MMNL EOIs. 430 I have no doubt that the end in view sought to be achieved by Brook and the Obeids at this time was not to gain control of the MMNL bids for the Mt Penny and Glendon Brook coal release areas in order to progress those bids themselves and ultimately to secure the EL for themselves but rather to gain control of those bids for the purpose of withdrawing them as part of a deal to be struck with Cascade. Throughout the events the subject of this proceeding, the Obeid family and Voope had steadfastly and persistently avoided actually making any EOI of their own in respect of any of the relevant coal release areas. They had their reasons for avoiding such an intimate connection to the process. By 20 May 2009, that position had not changed nor had the reasons for it. However, by that date, Brook and the Obeids were well aware that pursuing an EL through the MMNL bids for the Mt Penny and Glendon Brook coal release areas involved the payment of more than $30 million within 30 days after the Minister's consent was given to MMNL to make an EL application. They were not in a position to make those payments. They also must have known that, at that time, a decision as to who would be invited to apply for ELs for the Mt Penny and Glendon Brook coal release areas was imminent. There was considerable pressure to secure a deal with Cascade as soon as possible. Neither Brook nor the Obeid family had ever intended to capitalise any EL from their own funds or from borrowed funds for which they or entities associated with them would be liable. Nothing could have been further from their minds. 431 The reality was that, with MMNL determined to withdraw its EOIs for the Mt Penny and Glendon Brook coal release areas (and perhaps other coal release areas as well) and Cascade apparently being ranked second in the EOI process for those coal release areas, Brook and the Obeids needed to do a deal with Cascade post haste and before the true position became known. Had the true position been revealed to the Cascade directors on or about 20 May 2009, or soon thereafter, the bargaining position of the Obeids and Brook would have been detrimentally affected although not completely destroyed. They still had control of the land, the licences and other permissions that went with the land which gave them significant bargaining power with Cascade in any event. 432 I find that, by no later than 20 May 2009, MMNL was not in a position to progress its EOIs for any of the Mt Penny, Glendon Brook or Yarrawa coal release areas. It did not have the necessary funds to meet the voluntary contributions to which it had committed itself in the EOIs which it lodged for those three areas (a total of $32 million) and had not been able to secure finance to enable it to pay those contributions notwithstanding Brook's earnest efforts during the period from September 2008 to late May 2009. Of course, it must be remembered that the collapse of Lehman heralded the beginning of the global financial crisis. That crisis continued to exist throughout 2009 and its effects were felt for many years after that. In addition, during May 2009, the directors of MMNL took independent advice as to their position were they to progress those three EOIs knowing that they could not meet the financial contributions which they had promised in those EOIs. They were concerned about potential insolvent trading claims. They were also very concerned about MMNL's reputation with the NSW Government and other governmental authorities should they continue to present to the DPI a position which involved progressing their EOIs in circumstances where they had decided to abandon them. Finally, the disputes among the directors of MMNL which had been brewing in the months leading up to the end of April 2009 had culminated in the removal of Grigor as a director of MMNL on 29 April 2009. Grigor had been the principal agitator within MMNL for it to pursue coal mining. His removal signalled the end of MMNL's interest in coal and a reversion to uranium, with which it had hitherto been very familiar. All of these circumstances support the proposition that, by 20 May 2009, not only was MMNL unable to progress its EOIs for the Mt Penny, Glendon Brook and Yarrawa coal release areas, but it was unwilling to do so given its change of direction. There was no real prospect of these circumstances changing in the immediate or near future, certainly not in time for MMNL to follow through with its EOIs for the Mt Penny and Glendon Brook coal release areas. All of this came to a head at the MMNL Board Meeting held on 22 May 2009 when the Board resolved to abandon MMNL's coal project. That decision was a firm and substantially unqualified decision. The contingencies expressed in the resolution itself were mere window dressing. The MMNL directors were already in discussions with Brook with a view to having Voope take over MMNL's EOIs and a satisfactory deal with Voope was very likely, particularly as Voope, Brook and the Obeids were convinced that they needed to secure control of the MMNL EOIs for Mt Penny and Glendon Brook if they were to negotiate a favourable deal with Cascade in relation to mining in the Mt Penny coal exploration area. 433 As at 23 May 2009, Brook and the Obeids obviously thought that securing control and ownership of Monaro Coal (soon to be Loyal Coal), coupled with Voope's contractual rights under the Deed of Release with MMNL executed on 2 June 2009, would give Brook and the Obeids complete control of the MMNL bids for those areas. In substance, that belief may have been correct in fact, although, when Loyal Coal endeavoured to withdraw the MMNL bids for the Mt Penny and Glendon Brook coal release areas, it hit a snag. The Obeids would have needed to resort to the Deed of Release in order to procure the withdrawal of those bids by MMNL itself if MMNL had been difficult about withdrawing the EOIs in question. Be that as it may, it is clear beyond argument that gaining control of Monaro Coal and getting MMNL out of the picture were the twin objects of the actions which Brook and the Obeids took at this time. They saw these steps as integral to ultimately securing a satisfactory deal with Cascade.
The Relevant Statutory Provisions 434 At all relevant times in 2009, 2010, 2011 and 2012, s 45(2)(a)(i) and s 45(2)(b)(i) of the CCA (and its predecessor in name, the Trade Practices Act 1974 (Cth)), provided that: (2) A corporation shall not: (a) make a contract or arrangement, or arrive at an understanding, if: (i) the proposed contract, arrangement or understanding contains an exclusionary provision; or … (b) give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision: (i) is an exclusionary provision; or … 435 Section 4D of the CCA contained the definition of an exclusionary provision for the purposes of s 45(2)(a)(i) and s 45(2)(b)(i) of the CCA. That section was in the following terms: 4D Exclusionary provisions (1) A provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be taken to be an exclusionary provision for the purposes of this Act if: (a) the contract or arrangement was made, or the understanding was arrived at, or the proposed contract or arrangement is to be made, or the proposed understanding is to be arrived at, between persons any 2 or more of whom are competitive with each other; and (b) the provision has the purpose of preventing, restricting or limiting: (i) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or (ii) the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions; by all or any of the parties to the contract, arrangement or understanding or of the proposed parties to the proposed contract, arrangement or understanding or, if a party or proposed party is a body corporate, by a body corporate that is related to the body corporate. (2) A person shall be deemed to be competitive with another person for the purposes of subsection (1) if, and only if, the first‑mentioned person or a body corporate that is related to that person is, or is likely to be, or, but for the provision of any contract, arrangement or understanding or of any proposed contract, arrangement or understanding, would be, or would be likely to be, in competition with the other person, or with a body corporate that is related to the other person, in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract, arrangement or understanding or of the proposed contract, arrangement or understanding relates. 436 In the CCA, unless the contrary intention appears, "provision", in relation to an understanding, means any matter forming part of that understanding (s 4(1)). 437 From 24 July 2009, and otherwise throughout the same period, subsections (1), (3), (4), (7), (9) and (11) of s 44ZZRD of the CCA provided: 44ZZRD Cartel provisions (1) For the purposes of this Act, a provision of a contract, arrangement or understanding is a cartel provision if: (a) either of the following conditions is satisfied in relation to the provision: (i) the purpose/effect condition set out in subsection (2); (ii) the purpose condition set out in subsection (3); and (b) the competition condition set out in subsection (4) is satisfied in relation to the provision. … Purpose condition (3) The purpose condition is satisfied if the provision has the purpose of directly or indirectly: (a) preventing, restricting or limiting: (i) the production, or likely production, of goods by any or all of the parties to the contract, arrangement or understanding; or (ii) the capacity, or likely capacity, of any or all of the parties to the contract, arrangement or understanding to supply services; or (iii) the supply, or likely supply, of goods or services to persons or classes of persons by any or all of the parties to the contract, arrangement or understanding; or (b) allocating between any or all of the parties to the contract, arrangement or understanding: (i) the persons or classes of persons who have acquired, or who are likely to acquire, goods or services from any or all of the parties to the contract, arrangement or understanding; or (ii) the persons or classes of persons who have supplied, or who are likely to supply, goods or services to any or all of the parties to the contract, arrangement or understanding; or (iii) the geographical areas in which goods or services are supplied, or likely to be supplied, by any or all of the parties to the contract, arrangement or understanding; or (iv) the geographical areas in which goods or services are acquired, or likely to be acquired, by any or all of the parties to the contract, arrangement or understanding; or (c) ensuring that in the event of a request for bids in relation to the supply or acquisition of goods or services: (i) one or more parties to the contract, arrangement or understanding bid, but one or more other parties do not; or (ii) 2 or more parties to the contract, arrangement or understanding bid, but at least 2 of them do so on the basis that one of those bids is more likely to be successful than the others; or (iii) 2 or more parties to the contract, arrangement or understanding bid, but not all of those parties proceed with their bids until the suspension or finalisation of the request for bids process; or (iv) 2 or more parties to the contract, arrangement or understanding bid and proceed with their bids, but at least 2 of them proceed with their bids on the basis that one of those bids is more likely to be successful than the others; or (v) 2 or more parties to the contract, arrangement or understanding bid, but a material component of at least one of those bids is worked out in accordance with the contract, arrangement or understanding. Note 1: For example, subparagraph (3)(a)(iii) will not apply in relation to a roster for the supply of after‑hours medical services if the roster does not prevent, restrict or limit the supply of services. Note 2: The purpose condition can be satisfied when a provision is considered with related provisions - see subsection (9). Note 3: Party has an extended meaning - see section 44ZZRC. Competition condition (4) The competition condition is satisfied if at least 2 of the parties to the contract, arrangement or understanding: (a) are or are likely to be; or (b) but for any contract, arrangement or understanding, would be or would be likely to be; in competition with each other in relation to: (c) if paragraph (2)(c) or (3)(b) applies in relation to a supply, or likely supply, of goods or services - the supply of those goods or services; or (d) if paragraph (2)(d) or (3)(b) applies in relation to an acquisition, or likely acquisition, of goods or services - the acquisition of those goods or services; or (e) if paragraph (2)(e) or (f) applies in relation to a re‑supply, or likely re‑supply, of goods or services - the supply of those goods or services to that re‑supplier; or (f) if subparagraph (3)(a)(i) applies in relation to preventing, restricting or limiting the production, or likely production, of goods - the production of those goods; or (g) if subparagraph (3)(a)(ii) applies in relation to preventing, restricting or limiting the capacity, or likely capacity, to supply services - the supply of those services; or (h) if subparagraph (3)(a)(iii) applies in relation to preventing, restricting or limiting the supply, or likely supply, of goods or services - the supply of those goods or services; or (i) if paragraph (3)(c) applies in relation to a supply of goods or services - the supply of those goods or services; or (j) if paragraph (3)(c) applies in relation to an acquisition of goods or services - the acquisition of those goods or services. Note: Party has an extended meaning - see section 44ZZRC. … Immaterial whether particular circumstances or particular conditions (7) It is immaterial whether: (a) for the purposes of subsection (2), subparagraph (3)(a)(iii) and paragraphs (3)(b) and (c) - a supply or acquisition happens, or a likely supply or likely acquisition is to happen, in particular circumstances or on particular conditions; and (b) for the purposes of subparagraph (3)(a)(i) - the production happens, or the likely production is to happen, in particular circumstances or on particular conditions; and (c) for the purposes of subparagraph (3)(a)(ii) - the capacity exists, or the likely capacity is to exist, in particular circumstances or on particular conditions. … Considering related provisions - purpose condition (9) For the purposes of this Division, a provision of a contract, arrangement or understanding is taken to have the purpose mentioned in a paragraph of subsection (3) if the provision, when considered together with any or all of the following provisions: (a) the other provisions of the contract, arrangement or understanding; (b) the provisions of another contract, arrangement or understanding, if the parties to that other contract, arrangement or understanding consist of or include at least one of the parties to the first‑mentioned contract, arrangement or understanding; has that purpose. … Purpose of a provision (11) For the purposes of this Division, a provision of a contract, arrangement or understanding is not to be taken not to have the purpose mentioned in a paragraph of subsection (3) by reason only of: (a) the form of the provision; or (b) the form of the contract, arrangement or understanding; or (c) any description given to the provision, or to the contract, arrangement or understanding, by the parties. 438 Section 44ZZRB provided that, in Pt IV, Div 1 of the CCA, likely, in relation to any of the following: (a) a supply of goods or services; (b) an acquisition of goods or services; (c) the production of goods; (d) the capacity to supply services; includes a possibility that is not remote. 439 In the same section, and in relation to the same Division, bid is defined to include: (a) tender; (b) the taking, by a potential bidder or tenderer, of a preliminary step in a bidding or tendering process. 440 Section 44ZZRC was in the following terms: 44ZZRC Extended meaning of party For the purposes of this Division, if a body corporate is a party to a contract, arrangement or understanding (otherwise than because of this section), each body corporate related to that body corporate is taken to be a party to that contract, arrangement or understanding. 441 Section 44ZZRK provided: 44ZZRK Giving effect to a cartel provision (1) A corporation contravenes this section if: (a) a contract, arrangement or understanding contains a cartel provision; and (b) the corporation gives effect to the cartel provision. Note: For enforcement, see Part VI. (2) Paragraph (1)(a) applies to contracts or arrangements made, or understandings arrived at, before, at or after the commencement of this section. 442 Section 44ZZRP provided: 44ZZRP Joint ventures - civil penalty proceedings (1) Sections 44ZZRJ and 44ZZRK do not apply in relation to a contract containing a cartel provision if: (a) the cartel provision is for the purposes of a joint venture; and (b) the joint venture is for the production and/or supply of goods or services; and (c) in a case where subparagraph 4J(a)(i) applies to the joint venture - the joint venture is carried on jointly by the parties to the contract; and (d) in a case where subparagraph 4J(a)(ii) applies to the joint venture - the joint venture is carried on by a body corporate formed by the parties to the contract for the purpose of enabling those parties to carry on the activity mentioned in paragraph (b) jointly by means of: (i) their joint control; or (ii) their ownership of shares in the capital; of that body corporate. Note: For example, if a joint venture formed for the purpose of research and development provides the results of its research and development to participants in the joint venture, it may be a joint venture for the supply of services. (1A) Section 44ZZRJ does not apply in relation to an arrangement or understanding containing a cartel provision if: (a) the arrangement or understanding is not a contract; and (b) when the arrangement was made, or the understanding was arrived at, each party to the arrangement or understanding: (i) intended the arrangement or understanding to be a contract; and (ii) reasonably believed that the arrangement or understanding was a contract; and (c) the cartel provision is for the purposes of a joint venture; and (d) the joint venture is for the production and/or supply of goods or services; and (e) in a case where subparagraph 4J(a)(i) applies to the joint venture - the joint venture is carried on jointly by the parties to the arrangement or understanding; and (f) in a case where subparagraph 4J(a)(ii) applies to the joint venture - the joint venture is carried on by a body corporate formed by the parties to the arrangement or understanding for the purpose of enabling those parties to carry on the activity mentioned in paragraph (d) jointly by means of: (i) their joint control; or (ii) their ownership of shares in the capital; of that body corporate. Note: For example, if a joint venture formed for the purpose of research and development provides the results of its research and development to participants in the joint venture, it may be a joint venture for the supply of services. (1B) Section 44ZZRK does not apply in relation to giving effect to a cartel provision contained in an arrangement or understanding if: (a) the arrangement or understanding is not a contract; and (b) when the arrangement was made, or the understanding was arrived at, each party to the arrangement or understanding: (i) intended the arrangement or understanding to be a contract; and (ii) reasonably believed that the arrangement or understanding was a contract; and (c) when the cartel provision was given effect to, each party to the arrangement or understanding reasonably believed that the arrangement or understanding was a contract; and (d) the cartel provision is for the purposes of a joint venture; and (e) the joint venture is for the production and/or supply of goods or services; and (f) in a case where subparagraph 4J(a)(i) applies to the joint venture - the joint venture is carried on jointly by the parties to the arrangement or understanding; and (g) in a case where subparagraph 4J(a)(ii) applies to the joint venture - the joint venture is carried on by a body corporate formed by the parties to the arrangement or understanding for the purpose of enabling those parties to carry on the activity mentioned in paragraph (e) jointly by means of: (i) their joint control; or (ii) their ownership of shares in the capital; of that body corporate. Note: For example, if a joint venture formed for the purpose of research and development provides the results of its research and development to participants in the joint venture, it may be a joint venture for the supply of services. (2) A person who wishes to rely on subsection (1), (1A) or (1B) bears an evidential burden in relation to that matter. 443 I pause at this point to note that Div 1 of Pt IV of the CCA (s 44ZZRA to s 44ZZRV) was first introduced into the CCA by Act No 59 of 2009 (the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (Cth)) which came into effect on 24 July 2009. In respect of contraventions in respect of which a civil penalty is sought, s 44ZZRK(1)(a) applies to contracts or arrangements made, or undertakings arrived at, before, at or after 24 July 2009 (s 44ZZRK(2)). That is, if the alleged contravention is the making of the contract or arrangement or arriving at the understanding which contains a cartel provision, such a contract, arrangement or understanding must have been made or arrived at after 24 July 2009. If the alleged contravention is giving effect to a cartel provision, then the contract, arrangement or understanding which contains the cartel provision may have been made at any time. 444 In the present case, the cartel conduct on the part of those respondents against whom cartel contraventions are alleged is said to be their conduct in giving effect to cartel provisions contained in the 5 June 2009 contracts, arrangements or understandings, and not their conduct in making those contracts or arrangements or arriving at those understandings which contained such provisions. 445 The CCA also provided a joint venture defence to the alleged s 45 contraventions. The relevant provisions were s 4J and s 76C which were in the following terms: 4J Joint ventures In this Act: (a) a reference to a joint venture is a reference to an activity in trade or commerce: (i) carried on jointly by two or more persons, whether or not in partnership; or (ii) carried on by a body corporate formed by two or more persons for the purpose of enabling those persons to carry on that activity jointly by means of their joint control, or by means of their ownership of shares in the capital, of that body corporate; and (b) a reference to a contract or arrangement made or understanding arrived at, or to a proposed contract or arrangement to be made or proposed understanding to be arrived at, for the purposes of a joint venture shall, in relation to a joint venture by way of an activity carried on by a body corporate as mentioned in subparagraph (a)(ii), be read as including a reference to the memorandum and articles of association, rules or other document that constitute or constitutes, or are or is to constitute, that body corporate. 76C Defence to proceedings relating to exclusionary provisions Defence (1) In proceedings against a person in relation to a contravention of subparagraph 45(2)(a)(i) or (b)(i) in relation to an exclusionary provision, it is a defence if the person establishes that the provision: (a) is for the purposes of a joint venture; and (b) does not have the purpose, and does not have and is not likely to have the effect, of substantially lessening competition. Application of subsections 45(3) and (4) (2) Subsections 45(3) and (4) apply for the purposes of subsection (1) in the same way as they apply for the purposes of section 45. Definitions (3) In this section: contravention of subparagraph 45(2)(a)(i) or (b)(i) includes conduct referred to in paragraph 76(1)(b), (c), (d), (e) or (f) that relates to a contravention of subparagraph 45(2)(a)(i) or (b)(i). proceedings means proceedings instituted under: (a) this Part or section 163A; or (b) section 21 or 23 of the Federal Court of Australia Act 1976; or (c) section 39B of the Judiciary Act 1903. 446 Finally, the provisions of s 4A(5), (5A) and (6) govern the concept of related bodies corporate for the purposes of the CCA. Those subsections provided: (5) Where a body corporate: (a) is the holding company of another body corporate; (b) is a subsidiary of another body corporate; or (c) is a subsidiary of the holding company of another body corporate; that first‑mentioned body corporate and that other body corporate shall, for the purposes of this Act, be deemed to be related to each other. (5A) For the purposes of Parts IV, VI and VII: (a) a body corporate that is a party to a dual listed company arrangement is taken to be related to the other body corporate that is a party to the arrangement; and (b) a body corporate that is related to one of the parties to the arrangement is taken to be related to the other party to the arrangement; and (c) a body corporate that is related to one of the parties to the arrangement is taken to be related to each body corporate that is related to the other party to the arrangement. (6) In proceedings under this Act, whether in the Court or before the Tribunal or the Commission, it shall be presumed, unless the contrary is established, that bodies corporate are not, or were not at a particular time, related to each other. 447 As I have explained at [54]-[73] above, in this proceeding, the ACCC contends that, on or about 5 June 2009, Cascade made a contract or arrangement or arrived at an understanding with Loyal Coal, Brook, Buffalo and/or Voope containing provisions that Loyal Coal, Brook and any other associates or related parties of Buffalo including any companies controlled by the Obeid family or by Brook (including Voope) would withdraw any existing EOIs in respect of the Mt Penny and Glendon Brook coal release areas (including those EOIs in respect of those areas lodged by MMNL) and not pursue the grant of any mining rights in respect of either of those areas or areas contiguous to those areas (par 108 of the FASOC). In addition, or in the alternative, the ACCC contends that, on or about 5 June 2009, Cascade made a contract or arrangement or arrived at an understanding with at least Loyal Coal, Brook, Locaway, Buffalo and/or Voope containing the same provisions (par 110 of the FASOC). 448 The consideration being provided by Cascade in relation to each of the pleaded contracts, arrangements or understandings was different. 449 The ACCC then alleges that the provisions to which I have referred at [447] above are exclusionary provisions within the meaning of ss 4D, 45(2)(a)(i) and 45(2)(b)(i) of the CCA. Several of the respondents are accused of making the contract or arrangement or arriving at the understanding containing the alleged exclusionary provisions. Several are accused of giving effect to those provisions. 450 The ACCC also alleges that the provisions to which I have referred above are cartel provisions within s 44ZZRD of the CCA. Several of the respondents are accused of giving effect to the alleged cartel provisions and, by that conduct, contravening s 44ZZRK(1) of the CCA. 451 The individual respondents are said to be liable under the ancillary liability provisions of the CCA. 452 The elements of the s 45(2)(a)(i) and s 45(2)(b)(i) contraventions alleged against the primary contraveners in the present case may be summarised as follows: The Court must find that two or more corporations made the alleged contract or arrangement or arrived at the alleged understanding. The Court must specify with precision the identity of the parties to that contract, arrangement or understanding so found. The Court must identify with precision the provision or provisions contained in the said contract, arrangement or understanding which are said to be exclusionary within the definition of exclusionary provision set out in s 4D of the CCA. In the case of an understanding, such a provision will be a "matter" forming part of the understanding (see s 4(1)). The Court must then find that two or more of the persons who are parties to the contract, arrangement or understanding as alleged are competitive or likely to be competitive with each other as explained by subs (2) of s 4D. Finally, having found all of the above things, the Court will need to be satisfied that the alleged exclusionary provisions were included in the relevant contract, arrangement or understanding for the purpose of preventing, restricting or limiting the supply or acquisition of services by all or any of the parties to the contract, arrangement or understanding or by a body corporate that is related to that body corporate or those bodies corporate in the manner described in s 4D(b) of the CCA. 453 The alleged cartel contraventions in the present case require proof of the following matters: The existence of a contract, arrangement or understanding which contains a cartel provision as defined in s 44ZZRD(1) of the CCA. Proof that two or more of the parties to the contract, arrangement or understanding were relevantly in competition with each other or likely to be in competition with each other (s 44ZZRD(4)). Proof that the alleged cartel provision was included in the said contract, arrangement or understanding for the purpose of preventing, restricting or limiting the supply or acquisition of services to persons or classes of persons by any or all of the parties to the contract, arrangement or understanding (s 44ZZRD(3)(a)(iii)) or, alternatively, for the purpose of ensuring that bids are made and/or managed in one or more of the ways specified in s 44ZZRD(3)(c). 454 Here, the respondents contend that the ACCC has failed to establish that the alleged contract, arrangement or understanding made or arrived at on or about 5 June 2009 contained exclusionary provisions or cartel provisions. They contend that none of the parties to the alleged arrangement or understanding was relevantly in competition with Cascade. They also argue that the impugned provisions were not included in that arrangement or understanding for the requisite proscribed purpose. They all accept that, on or about 5 June 2009, a contract, arrangement or understanding was arrived at between Cascade and Buffalo concerning the Mt Penny and Glendon Brook coal release areas but deny that that contract, arrangement or understanding contained exclusionary provisions or cartel provisions. They also rely upon the statutory joint venture defence.
Attribution of the Main Actors' Conduct 455 By the end of the hearing before me, most of the disputes raised on the pleadings as to the capacity of Brook, Moses and Paul Obeid to bind Loyal Coal and Voope had disappeared. 456 In its Closing Written Submissions, the ACCC made a number of submissions directed to these matters which were not seriously disputed by the respondents and which I now accept. 457 I shall set out in this section of these Reasons the findings in relation to the question of attribution of the main actors' conduct to various corporate entities which I now make. 458 The Obeid family had effective control of Loyal Coal at all material times after 2 June 2009. That control was exercised by Moses Obeid and Paul Obeid. When Brook purported to represent Loyal Coal after that date, his conduct is also attributable to Loyal Coal. This is because Moses Obeid and Paul Obeid authorised him to represent Loyal Coal in respect of those dealings where he purported to do so. 459 The following matters were ultimately admitted by the Obeid respondents and not disputed by any of the other respondents: (a) Loyal Coal was a wholly-owned subsidiary of Voope from 2 June 2009; (b) Kaidbay was the sole formally-appointed director of Loyal Coal in the period from 4 June 2009 to 15 September 2009; (c) Kaidbay was effectively a nominee of the Obeid family. He acted on the instructions of Moses and Paul Obeid at all material times in relation to the pleaded conduct in that period. He did not exercise independent power in his role as the sole director of Loyal Coal; (d) Kaidbay acted on, and followed, the requests, instructions and directions of one or more of Moses Obeid, Paul Obeid and Brook in conducting the affairs of Loyal Coal; (e) The conduct of Brook, Moses Obeid and Paul Obeid was attributable to Loyal Coal in the period from 2 June 2009 by operation of s 84(2)(b) of the CCA because Kaidbay consented to those individuals conducting the affairs of Loyal Coal in that period; (f) Moses Obeid was a "director" of Loyal Coal within the meaning of s 84(2)(a) of the CCA from 2 June 2009 (see the definition of "director" in s 9 of the Corporations Act 2001 (Cth) (Corporations Act)); (g) At all material times after 2 June 2009, Moses Obeid was a director of Loyal Coal, the directing mind and will of Loyal Coal and able to make contracts or arrangements with, or reach understandings with, third parties, on behalf of Loyal Coal; (h) Moses Obeid and Brook had effective control of Loyal Coal from 2 June 2009 and actual or apparent authority to make contracts or arrangements, and to reach understandings, on behalf of Loyal Coal; (i) Moses Obeid and Brook acted on behalf of Loyal Coal and with the consent or agreement of Kaidbay as the sole director of Loyal Coal at all material times after 2 June 2009; and (j) The purported or attempted withdrawal by Loyal Coal of the MMNL EOI in respect of the Mt Penny and Glendon Brook coal release areas was done with the consent of Kaidbay as the sole formally-appointed director of Loyal Coal. 460 The Obeid family had effective control of Voope at all material times in the period from the date of its registration on 28 July 2008 until at least late December 2009. Moses Obeid and Paul Obeid generally exercised that effective control on behalf of the Obeid family. From time to time in the period referred to, Brook engaged in conduct on behalf of Voope upon the instructions or authority of Moses Obeid and/or Paul Obeid. 461 The Obeid respondents admit and the other respondents do not contest the following matters: (a) From 28 July 2008 until at least 10 December 2009, Voope was wholly-owned by Skehan on trust for the Obeid Family Trust No 2, whose beneficiaries included Moses Obeid and Paul Obeid; (b) Skehan conducted the affairs of Voope at the direction of the Obeid family which direction was generally conveyed to Skehan by Moses Obeid and/or Paul Obeid; (c) Skehan executed documents on behalf of Voope at the request, instruction or direction of members of the Obeid family. Generally, those instructions came from Moses Obeid and/or Paul Obeid; (d) At all material times, Moses Obeid was a "director" of Voope, the directing mind and will of Voope and able to make contracts or arrangements with, or reach understandings with, third parties, on behalf of Voope; and (e) Brook acted within authority on behalf of Voope in negotiating with MMNL in the period from 15 May 2009 to 1 June 2009 in connection with the acquisition by Voope of all of the shares in Loyal Coal with a view to taking control of MMNL's EOI submissions. 462 Both Moses Obeid and Paul Obeid were also "directors" of Voope at all material times from 28 July 2008 (as to which, see the definition of "director" in s 9 of the Corporations Act). 463 Both John McGuigan and Poole were directors of Cascade at all material times. They had the authority of the Board of Directors of Cascade to negotiate with Brook and Moses Obeid in respect of the Mt Penny and Glendon Brook coal release areas. There was no suggestion on the part of the Cascade respondents that either of those gentlemen lacked the requisite authority.
The Alleged Contract, Arrangement or Understanding 464 At [53]-[81] above, I have endeavoured to explain the case pleaded by the ACCC as to the terms of the contract, arrangement or understanding relied upon as containing the offending provisions and the persons and entities alleged to be party to that contract, arrangement or understanding. 465 The terms "contract", "arrangement" and "understanding" describe a "spectrum of consensual dealings" (Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (2007) 160 FCR 321 (Leahy) at 331 [24]). That spectrum includes formal contracts but may also be apt to encompass less explicit and less formal dealings (Leahy at 331-332 [24]-[27]). 466 In Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 (Air NZ) at 486-487 [463], Perram J summarised the relevant principles in the following terms: As to the first issue the following propositions are orthodox in the jurisprudence of this court (although not free from controversy in academic circles): (1) Section 45 uses the expression "contract, arrangement or understanding". Obviously enough a contract involves a degree of formality. Arrangements and understandings, on the other hand, are different concepts but at the heart of both is the need for there to be a meeting of the minds or, if you will, a consensus: Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (2007) 160 FCR 321; [2007] FCA 794 at [26]-[28] (Leahy). It seems that an arrangement will generally require some form of express negotiation or at the very least communication between the parties: Leahy at [26] and the authorities there collected. On the other hand, an understanding can be tacit and may arise without communication so long as there is a meeting of the minds: Leahy at [27] and [28]. Whatever else is involved it seems this means that at least one party assumes an obligation to another or gives an assurance or undertaking that it will act in a certain way: Apco Service Stations Pty Ltd v Australian Competition and Consumer Commission (2005) 159 FCR 452; [2005] FCAFC 161 at [45] (Apco Service) applying the remarks of Lindgren J in Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (No 8) (1999) 92 FCR 375; 165 ALR 468; [1999] FCA 954 at [141] (CC (NSW)). (2) Ordinarily, the concept of a meeting of the minds or a consensus will involve some element of reciprocity between the parties to the understanding. A number of obiter dicta suggest that reciprocity or mutuality is not inevitably a necessary element while conceding that, in practice, it will frequently be present. The debate was usefully summarised by Lockhart J in Trade Practices Commission v Service Station Association Ltd (1993) 44 FCR 206at 230-1; 116 ALR 643 at 667. Although many later authorities in this court have referred to this judgment as authority for the proposition that mutuality is not a necessary element, it is worth noting Lockhart J's own observation that it is difficult to imagine such a case in practice. This view was also shared by Spender and Lee JJ in their concurring judgment at FCR 238; ALR 674. In a similar vein, I am aware of no case in which an understanding has been established in which there was not mutuality between the alleged parties to the understanding. Nevertheless, the authorities in this court require one to proceed on the basis that it is possible, at least in theory, to establish an understanding without mutuality being present. (3) An understanding need not be overt. In most cases, there will be overt or express action of some kind or another because in practical terms it is quite difficult to reach a consensus without some form of communication. It is not, however, impossible. (4) On the other hand, there will be no understanding where one party decides unilaterally to act in a particular way in response to a pricing manoeuvre by a competitor. A deliberate decision to follow the pricing of a competitor does not give rise, by itself, to an arrangement or understanding to which s 45 applies. In a sense, this is a corollary of the need for a consensus. (5) Consequently, there can be no understanding because one party hopes or expects (in a non-normative sense) that another party will act in a particular way: Apco Service at [45]; CC (NSW) at [141]. 467 To the same effect were the remarks of Gordon J in Norcast S.ár.L v Bradken Ltd (No 2) (2013) 219 FCR 14 at 78-79 [263]. 468 The ACCC pleaded and argued that, in the present case, on or about 5 June 2009, there was a contract or arrangement made or an understanding arrived at the terms of which are found in the Buffalo Agreement or, alternatively, in the Buffalo Agreement and the Landowners Agreement read together. The ACCC contended that the parties to this understanding included not only Cascade and Buffalo but also Loyal Coal, Brook, Voope and, if the Landowners Agreement is part of the relevant contract, arrangement or understanding, the parties to that Agreement, or, at least, Locaway, one of the parties to that Agreement. 469 In the present case, there is much to be said for the proposition that both the Buffalo Agreement and the Landowners Agreement constituted binding legal contracts. Reflected in both Agreements were offers, acceptance of those offers, consideration, an intention to be bound and certainty of terms (although not all of the detailed terms had been worked out by 5 June 2009). Both Agreements were conditional upon the grant to Cascade or its nominee of an EL over the Mt Penny coal release area as a result of the current tender process. In this sense, the contracts were conditional subject to the satisfaction of a condition subsequent. 470 Given the way in which the ACCC put its case, strictly speaking it is not necessary for me to arrive at a final conclusion as to whether or not the Buffalo Agreement and the Landowners Agreement were binding legal contracts. However, I see no difficulty in the proposition that the pleaded arrangement or understanding comprised one or both of those binding legal contracts together with additional arrangements or understandings as to the identity of those persons or entities who would be bound to the terms of those contracts, or one of other of them. 471 When due regard is paid to the terms of the two letter agreements and the evidence given by three of the main actors (Brook, John McGuigan and Poole), I find that the Buffalo Agreement and the Landowners Agreement were interdependent in the sense that the parties to those Agreements intended that performance of one required performance of the other. 472 The ACCC pleaded and argued that the parties to the contract, arrangement or understanding reflected in the Buffalo Agreement were Cascade, Buffalo, Loyal Coal, Brook and Voope. It pleaded and argued that the parties to the contract, arrangement or understanding reflected in both the Buffalo Agreement and the Landowners Agreement, taken together, were Cascade, Buffalo, Loyal Coal, Brook, Voope and Locaway. In other words, it was no part of the ACCC's case that UPG, Geble or JKL were party to the alleged contract, arrangement or understanding reflected in the Buffalo Agreement and the Landowners Agreement, notwithstanding that they were parties to the Landowners Agreement. 473 Although I am prepared to accept that the Buffalo Agreement and the Landowners Agreement were interdependent contracts, I do not agree that they constituted one contract. There were different parties to each of the arrangements reflected in those documents and quite different responsibilities imposed upon the parties to the agreements reflected in those documents. This much seems to have been accepted by the ACCC since it did not seek to implicate UPG, Geble or JKL in the offending conduct. Indeed, the promise to procure the withdrawal of the MMNL EOIs for the Mt Penny and Glendon Brook coal release areas and the promise not to pursue the grant of any mining rights in those two areas and in contiguous areas are found only in the Buffalo Agreement. The Landowners Agreement is really nothing more than a conditional Contract for Sale of Land. While Locaway may have been a party to the Landowners Agreement, it had no capacity whatsoever to influence, control or withdraw the EOIs lodged by MMNL for the Mt Penny and Glendon Brook coal release areas. It was simply not one of the associates or related parties who joined in the Buffalo promises. It was, in no sense, a party to the impugned provisions. 474 On the facts as I have found them, there was an expectation amongst the parties who had conducted the negotiations between Brook and the Obeid interests, on the one hand, and Cascade, on the other hand, that both Buffalo and those with whom Cascade had been dealing would bring about a withdrawal of the MMNL EOIs in respect of both the Mt Penny and Glendon Brook coal release areas. It was understood and expected by the Cascade directors that it was those who stood behind Buffalo and those who had caused it to be their nominee in the Buffalo Agreement who would ultimately bring about the withdrawal of those EOIs. That is, it was Brook, the Obeids and the two corporate entities which they controlled, Loyal Coal and Voope, who would procure that outcome. That is why, in the Buffalo Agreement itself, there is specific mention of Buffalo's associates and related parties including Brook and Loyal Coal as being the parties responsible for bringing about the withdrawal of the MMNL EOIs in respect of the two areas in question. 475 I think that the better view of the relevant facts is that, on 5 June 2009, an arrangement was made or an understanding arrived at pursuant to which not only did Buffalo agree to taking the actions specified at the top of p 2 of the Buffalo Agreement but Loyal Coal, Voope and Brook also bound themselves to comply with the same obligations. There is no difficulty with the proposition that the two contracts, the Buffalo Agreement and the Landowners Agreement, formed part of the pleaded understanding (Australian Competition and Consumer Commission v IPM Operation and Maintenance Loy Yang Pty Ltd (2006) 157 FCR 162 at 201 [170]). 476 The essence of the Buffalo Agreement was that, in consideration of and in recognition of the three matters set out next to the dot points at the top of p 2 of the Agreement, Cascade agreed to establish a joint venture with the specific purpose of exploring, developing and mining the Mt Penny coal release area and contiguous areas and to grant to Buffalo a 25% equity interest in the joint venture vehicle which, at that time, was intended to be either an incorporated joint venture vehicle or an unincorporated joint venture. The commercial terms which would govern the way in which that 25% equity interest would be managed were set out on the second half of p 2 and in the first few lines on p 3 of the Buffalo Agreement. In particular, Buffalo had no obligation to make contributions to the cost of the joint venture until the happening of the earlier of two particular events, namely, Mine Approval being granted by the NSW Government for a 100 million m/tonne resource or exploration expenditure of $10 million. Thereafter, contributions to costs would be required to be made by the venturers according to their respective shares in the venture. Those costs were intended to include the costs of any land acquisition. Any failure on the part of Buffalo to meet its proportionate share of contributions would result in a dilution of its interest in the joint venture. 477 For there to be a contravention of s 45(2)(a)(i) or s 45(2)(b)(i) or s 44ZZRK(1) of the CCA, there must be a contract, arrangement or understanding which "contains an exclusionary provision" (in the case of the s 45 contraventions) or contains a "cartel provision" (in the case of the s 44ZZRK contraventions). 478 In the present case, the impugned provisions relied upon by the ACCC for the purposes of all alleged contraventions are the promises made by Buffalo (and by its associates and related parties) to withdraw any existing EOIs lodged in respect of the Mt Penny and Glendon Brook coal areas (par 108.5 and par 110.7 of the FASOC) and not to pursue the grant of any mining rights in respect of those two areas or any areas contiguous to them (par 108.6 and par 110.8 of the FASOC). 479 Construed literally, the first of those promises would be hollow because none of the alleged parties (Buffalo, Loyal Coal, Brook and Voope) had lodged a relevant EOI. At the times when the parties were negotiating the two letter agreements, all relevant parties knew the identity of the EOI applicants for both the Mt Penny and Glendon Brook coal release areas. For Mt Penny, the EOI applicants were MMNL, Cascade, Jain Group and Breakspheare Coal Mines Pty Ltd. For Glendon Brook, the EOI applicants were MMNL, Cascade and Hydromining Coal Australia Pty Limited. The Cascade directors also knew that Brook and the Obeids were claiming to have control of the MMNL bids for those two areas. 480 Taking a purposive approach to the interpretation of the Buffalo Agreement and the alleged arrangement or understanding, I think that the parties to that understanding (other than Cascade) promised to procure the withdrawal of the EOIs lodged by MMNL in respect of the Mt Penny and Glendon Brook coal release areas, they being the only EOIs over which those parties had any possible control. 481 A question has arisen as to whether the scope of the impugned provisions should be confined to one side of the commercial transaction reflected in the Buffalo Agreement (the Buffalo side) or whether, in the circumstances of this particular case, the impugned provisions for the purposes of assessing the alleged contraventions should include the quid pro quo offered by Cascade for the promises made by Buffalo and its associated and related parties, namely, the promise to establish the joint venture referred to in the Buffalo Agreement upon the terms set out in that Agreement. The ACCC argued that the scope of the impugned provisions should include that quid pro quo because, without an element of reciprocity moving from the Cascade side of things, the substance of the offending conduct would be misdescribed. 482 The Obeid respondents, on the other hand, argued that the "provision" contemplated by s 4D and s 45(2)(a)(i) and s 45(2)(b)(i) and s 44ZZRK of the CCA was necessarily something less than the entire contract, arrangement or understanding relied upon. This argument was based upon the language of the section which appears to require that the offending provision be "contained" within the alleged contract, arrangement or understanding and not constitute the entirety of that contract, arrangement or understanding. Also, the definition of "provision", in relation to an understanding, in s 4 of the CCA, would suggest that the impugned provision must be a matter forming part of the understanding. 483 In the present case, the essence of the Buffalo Agreement was that, in return for the promises made by Buffalo (and its associates and related parties), Cascade agreed to do that which is recorded in the Buffalo Agreement as its obligations thereunder. Notwithstanding the somewhat vague and amorphous promises in relation to the delivery up of its intellectual property and future assistance, the essence of that which Buffalo and its associates and related parties committed to do was to procure the withdrawal of the MMNL EOIs for the Mt Penny and Glendon Brook coal release areas and not to pursue mining rights in respect of those areas and contiguous areas. That was fairly much all that Buffalo and its associated and related parties had to do. It follows, I think, that the promises made by Cascade to establish a joint venture upon the terms set out in the Buffalo Agreement are entirely referable to the promises made by the Buffalo interests to procure the withdrawal of the MMNL EOIs for the Mt Penny and Glendon Brook coal release areas and not to pursue mining rights in respect of those areas and contiguous areas. 484 In circumstances such as those which I have recounted above, I think that it is inevitable that the impugned provisions must also include the obligations undertaken by Cascade in the Buffalo Agreement. 485 I do not think that the use of the word "contains" or the expression "forming part of" has the effect contended for by the Obeid respondents. Provisions which represent the entirety of exchanged promises nonetheless are contained within the understanding constituted by those promises and also nonetheless form part of the entire understanding constituted by those promises. 486 I accept, of course, that the authorities to which Perram J referred at subpar (2) of [463] in Air NZ make clear that reciprocity or mutuality is not a necessary element when the Court comes to assess the scope or content of the impugned provision or provisions. However, as his Honour pointed out (correctly), reciprocity is commonly a matter which determines the true content of the impugned provision. 487 In Visy Paper Pty Limited v Australian Competition and Consumer Commission (2003) 216 CLR 1, at 6 [7], the plurality (Gleeson CJ, McHugh, Gummow and Hayne JJ) said: The word "provision" is used here and elsewhere in Pt IV in a comprehensive rather than any technical sense reflecting its usage in contract law. It invites attention to the content of what has been, or is to be, agreed, arranged or understood, rather than any particular form of expression of that content adopted, or to be adopted, by the parties. This is emphasised by the statement in s 4(1) that "in relation to an understanding" provision means "any matter forming part of the understanding". 488 At 12 [32], the plurality continued: The answer to the inquiry just described is not dictated by the particular drafting adopted by parties. There may be no written record of an agreement, let alone of any arrangement made by, or understanding reached between, the parties. Where there is no written record, there could be no resort to drafting. Further, and no less importantly, it is necessary to recognise that "contract, arrangement or understanding" encompasses such a wide range of consensual arrangements that the word "provision" and cognate expressions cannot be understood as confined to what might appear as a single clause of a written agreement. "Provision", when it is used in s 45(6), directs attention to the content of the agreement, arrangement or understanding rather than the manner of its expression. 489 The Court must be concerned to identify the substance of that which is agreed. In the present case, the promises made by Cascade as recorded in the Buffalo Agreement are clearly the quid pro quo for the promises made by Buffalo, Loyal Coal, Voope and Brook in that agreement. That quid pro quo provided by Cascade was not referrable to anything else. It would be wrong of the Court to confine the scope of the impugned provision to the promises made by Buffalo, Loyal Coal, Voope and Brook and to ignore what was given in return by Cascade. 490 I am not persuaded that this way of viewing matters has not been pleaded by the ACCC. A fair reading of par 108 and par 110 of the FASOC (esp subpars 108.7, 108.8, 110.9, 110.10 and 110.11) makes this clear. 491 In summary then, I have reached the following conclusions so far: (a) Each of the Buffalo Agreement and the Landowners Agreement was a binding legal contract. Those contracts were interdependent. (b) Those two contracts were part of a wider understanding arrived at on 5 June 2009, the parties to which were Cascade, on one side, and Buffalo, Loyal Coal, Voope and Brook, on the other side. The terms of that understanding are set out in the Buffalo Agreement and in the Landowners Agreement. (c) The impugned provisions relied upon by the ACCC in the present case are the promises made by the two groups which are set out in the Buffalo Agreement. (d) That which must be "given effect to" for the purposes of s 45(2)(b)(i) and s 44ZZRK(1)(b) are the provisions so described. The two sections in question speak of "giving effect to the exclusionary provision" and "giving effect to the cartel provision".
The Competition Issue 492 It has never been any part of the ACCC's case that MMNL itself was party to the contract, arrangement or understanding upon which the ACCC sues or was party to the impugned provisions forming part of that understanding. 493 The question here is whether the ACCC has established that any one or more of Loyal Coal, Brook, Buffalo, Voope or Locaway was in competition with Cascade in some relevant sense. 494 It seems to me that, if those parties were competing for anything, they were competing for the opportunity to be invited by the Minister, or his delegate, to apply for and obtain an EL for coal in respect of mining activities in the Mt Penny and Glendon Brook coal release areas. The process into which MMNL, Cascade and the other EOI applicants had entered was a process which could only culminate in the grant of an EL. The process was not directed to the obtaining of any other mining tenements subsequent to the grant of an EL although, of course, having an EL would have been a good starting point for procuring other relevant mining tenements. The ACCC relied upon a number of formulations of the prize for which the alleged competitors were competing at par 97 of the FASOC. However, I think that the substance of the matter is as I have concluded above. So the question then arises: Was one or more of the alleged contraveners competing with Cascade for the opportunity and ultimate prize which I have described above or likely to compete for that opportunity and that prize as at 5 June 2009? 495 The EOI process at issue in this case was a closed tender process. That is, only companies which were invited to lodge an EOI could enter the process. Here, those invited companies which chose to enter that process had to comply with the EOI rules. The EOI process was not specifically authorised by any particular provision of the Mining Act. However, it was a perfectly legal way for the Minister and the DPI to set about awarding ELs for mining areas and was a process deployed by the DPI from time to time in the allocation of ELs. The process was not an invitation for tenders for an EL under s 14 of the Mining Act. A s 14 invitation could only occur after public notice had been given and no such notice was given in this case. 496 According to the rules of the EOI process in the present case, the EOIs actually lodged by those companies which had been invited to participate would be assessed by an Evaluation Committee. That Committee would then make recommendations to the Minister as to which company should be awarded the EL for each particular coal release area under consideration. 497 In light of the Committee's recommendations, it was incumbent upon the Minister then to select the successful EOI applicant for each of the coal release areas in question and to formally provide his consent to each successful EOI applicant then making an application for an EL (see s 13(4) of the Mining Act which provided that an application for an EL over the areas in question here might not be made, except with the consent of the Minister). It was intended that the Minister would communicate to the successful EOI applicants the fact that he had consented to those companies applying for an EL. 498 Under the process here, it was then envisaged that each of the successful EOI applicants to whom the Minister's consent had been provided would then lodge an EL application. Such an application had to be made using the approved form for that purpose. In 2009, the approved form was Form 3. 499 In 2009, s 133 of the Mining Act provided: 133 Nomination by applicant or tenderer (1) An applicant or tenderer for an authority may, by notice in writing lodged with the Director-General, nominate a person to whom the authority is to be granted. (2) The person nominated in an application or tender as the person to whom an authority is to be granted is, for the purposes of this Act, taken to be the applicant or tenderer for the authority. … 500 "Authority" in s 133 included an EL. It was defined as meaning "an exploration licence, an assessment lease or a mining lease". 501 In 2009, it seems that there was an approved form for making a s 133(1) nomination although the DPI at that time apparently also accepted such nominations by letter. 502 A nomination under s 133 must be made before the grant of the particular EL. This is because s 133 referred to "an applicant or tenderer for an authority" and not the holder of an issued EL. 503 After the grant of an EL, the EL might be transferred pursuant to s 120 of the Mining Act. The ACCC did not rely upon s 120 of the Mining Act. 504 The deeming provision in subs (2) of s 133 only operated where a nomination was made in accordance with subs (1). The only person who could make a nomination under subs (1) was an "applicant" or "tenderer" for an authority. 505 The EOIs lodged by MMNL in the EOI process here were not applications or tenders for an authority. The invitations sent out by the DPI in September 2008 and in January 2009 in the present case were not invitations to apply for an EL. They were invitations to submit an EOI to be considered as a company that might, after due evaluation, be invited, with the Minister's consent, to apply for an EL. 506 Therefore, as at 5 June 2009, when the process had not yet reached the stage where the Minister had consented to any company making an application for an EL, MMNL was not an "applicant" or a "tenderer" within s 133(1) of the Mining Act and could not, at that time, or at any earlier time, make a valid nomination of Loyal Coal under s 133(1). 507 It follows that s 133(1) could not, and did not, authorise the nomination by MMNL of Loyal Coal as the entity to which the ELs for Mt Penny and Glendon Brook should be issued and that, at no time on or before 5 June 2009, did anyone (including MMNL) have standing, under s 133(1), to nominate any other entity as the entity to whom the ELs for those coal release areas should be granted. 508 It may be a pure matter of speculation whether, had the impugned provisions not been entered into, Loyal Coal would have ultimately been nominated as the holder of the relevant ELs. However, I think that there was no real likelihood that such an outcome would have been achieved, given that MMNL had abandoned the project and given that the Obeids and their associates were never going to take over the EOIs themselves and had no realistic prospect of persuading anyone else of doing so other than Cascade. 509 The above construction of the relevant statutory provisions was confirmed by subsequent events and also by the practices of the DPI. Despite some apparent differences between the evidence-in-chief of Mullard as to the practice of the DPI and the evidence-in-chief of Agnew as to that practice, after cross-examination, those differences substantially evaporated. In the end, the evidence established that the practice of the DPI substantially accorded with the legislative scheme. 510 As a matter of fact in the present case, the award of the ELs for the Mt Penny and Glendon Brook coal release areas occurred only after the Minister had provided his s 13(4) consent to Cascade making an EL application, only after the Minister had informed Cascade that he had provided that consent and only after Cascade had lodged applications for ELs on Form 3s in each case. Once the Form 3s had been lodged, Cascade became an "applicant" for an "authority" within s 133(1) of the Mining Act and thereafter was permitted to nominate another entity as the party to whom the EL should be granted. 511 As submitted by the CMG respondents, as at 5 June 2009, there was no actual or likely competition between Loyal Coal or Voope, on the one hand, and Cascade, on the other hand. It was submitted that that is so for at least four reasons, namely: (a) None of MMNL, Loyal Coal and Voope had the financial resources or the willingness to satisfy the financial contributions to which MMNL had committed in its EOIs for the Mt Penny and Glendon Brook coal release areas ($25 million and $5 million respectively); (b) The power of nomination and the deeming effect of any properly authorised nomination pursuant to s 133 of the Mining Act did not apply in the circumstances of the present case; (c) In any event, as a matter of contract, the EOI process was open only to a closed class of invited applicants which complied with the terms of the invitation and satisfied the evaluation criteria. Neither Loyal Coal nor Voope ever satisfied those requirements; and (d) Even if s 133 of the Mining Act did apply, or if the practice of the DPI otherwise permitted MMNL to nominate Loyal Coal, it was still necessary for Loyal Coal, as nominee, to comply with the conditions for the EOI and Loyal Coal could never have done so. 512 The ACCC endeavoured to justify the proposition that, prior to 5 June 2009, both Loyal Coal and Cascade were competitors. In support of that proposition, the ACCC relied upon s 133 of the Mining Act. For the reasons which I have explained, s 133 was not engaged in the present case and was never likely to be engaged in the present case. The second pathway relied upon by the ACCC was an aspect of the so-called practice of which Mullard gave evidence. However, to a large extent, he recanted that evidence. In any event, if the practice which he described was inconsistent with the legislative scheme, it had no validity. The practice of the DPI initially described by Mullard was not applied, in fact, in the present case in respect of any of the Mt Penny, Glendon Brook or Yarrawa coal release areas. 513 The ACCC also submitted that there was no need for Loyal Coal to be a current applicant in the EOI process. As far as it goes, as a matter of generality, that submission is correct. However, the only way that Loyal Coal could ever enter into competition with Cascade for the opportunity to be invited by the Minister, or his delegate, to apply for and obtain an EL for coal in the Mt Penny and Glendon Brook coal release areas was to be nominated by MMNL once it (MMNL) had achieved the status of "applicant" or "tenderer" for the purposes of s 133(1) of the Mining Act. That was a status which it never actually achieved. Furthermore, for the reasons which I have already explained, there was no likelihood that Loyal Coal would ever be so nominated at the first legally available opportunity (ie after the Minister had granted his consent to MMNL under s 13(4) to apply for an EL in respect of the Mt Penny coal exploration area and after MMNL had lodged a completed Form 3 in respect of that proposed EL). It matters not that MMNL had, in fact, tried to nominate Loyal Coal at an earlier point in time. In any event, that attempted nomination was rebuffed by the DPI as being premature. 514 For all of the above reasons, at all relevant times, the only competitors or likely competitors which Cascade had in respect of the Mt Penny and Glendon Brook coal release areas were those companies which had been invited to lodge an EOI in the EOI process which had been devised by the DPI and the Minister. Loyal Coal was not such a competitor nor was Voope. Neither of those companies were ever likely to be such competitors. Further, given the structure of the EOI process, competition was very likely going to cease, in any event, once the stage was reached where the Form 3 was lodged by the successful applicant. 515 In order to establish a contravention of ss 45(2)(a)(i), 45(2)(b)(i) or 44ZZRK of the CCA, the ACCC must establish that the relevant understanding was arrived at between persons any two or more of whom were competitive with each other at the relevant time. It has failed to do so in the present case. For this reason alone, the proceeding must be dismissed against all respondents, including the individual respondents.
The Purpose Issue 516 Strictly speaking, it is not necessary for me to address this issue. However, I should briefly express my views in relation to it. 517 For the purposes of the alleged s 45 contraventions, the impugned provisions must have been entered into for the purpose of preventing, restricting or limiting the supply or acquisition of specified services by all or any of the parties to the understanding. 518 In order to make out the cartel contraventions, the ACCC must establish that the purpose of the provisions was to prevent, restrict or limit the supply or acquisition of services by all or any of the parties to the understanding or ensuring that, in the event of a request for bids in relation to the supply or acquisition of services, one or more of the parties to the understanding would manage their bid in one of the particular ways specified in subs (3)(c) of s 44ZZRD of the CCA. 519 In assessing the relevant purpose, it must be remembered that "the relevant purpose is the purpose of the parties to the contract, arrangement or understanding and it is their subjective purpose" (South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 486-487 [144]; ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460). 520 The respondent parties submitted that, in the present case, the purpose of the provision was to define the terms of the joint venture rather than to prevent, limit or restrict the supply or acquisition of services. 521 It is not necessary that all of the parties to the understanding should have a common purpose. 522 Poole gave evidence as to his purpose and that evidence is a reasonable basis for inferring Cascade's purpose. He said that all he intended to achieve by including the provision was to reflect in the Buffalo Agreement what was already a fact, that is, that MMNL had decided to abandon its EOIs for the Mt Penny and Glendon Brook coal release areas and would have done so in the immediate future come what may. Poole said that, because Brook remained interested in squeezing some profit out of other MMNL EOI bids, including the EOI lodged for Yarrawa, he included the specific obligation that Buffalo and its associates and related parties would procure the withdrawal of the EOIs in respect of the Mt Penny and Glendon Brook coal release areas. John McGuigan said that he did not believe that Cascade was in competition with Loyal Coal for the right to apply for an EL over the Mt Penny coal release area. He said he thought that Cascade was competing only with the parties who had lodged EOIs for that area, including MMNL, even though he had been told that MMNL had decided to withdraw its EOI for that area. These purposes are not proscribed purposes. James McGuigan was not a decision-maker or director of Cascade. He did not have any purpose other than to do as he was asked when he took the steps which he did in the present case. 523 As far as Buffalo and Brook were concerned, they too did not have the requisite proscribed purpose. They knew that the MMNL EOIs for the Mt Penny and Glendon Brook coal release areas were "dead in the water" (as submitted by the Obeid respondents) and that Brook had not been able to raise the necessary funds. Furthermore, they were well aware that Brook had no chance of raising the necessary funds within the requisite timeframe. One may ask rhetorically: How could the impugned provisions have the necessary anti-competitive effect if MMNL was going to abandon the two EOIs in question in any event and therefore how could the participants have acted for the requisite proscribed purpose? 524 Similar considerations apply in respect of Loyal Coal and Voope. For reasons already discussed, I have concluded that there was absolutely no prospect that either of those companies would pursue the MMNL EOIs. 525 The ACCC submitted that the requisite proscribed purpose was self-evident from the terms of the provisions themselves. It also relied upon various concessions made in the evidence by John McGuigan and Poole. But these submissions ignore the fact that neither Loyal Coal nor Voope was, as at 5 June 2009, a competitor of Cascade in the relevant sense nor was either of those companies likely to be such a competitor, assessed as at that date. As at that date, MMNL had ceased to be a competitor or likely competitor, in reality, because it did not have the resources to progress its EOIs nor was it willing to do so. It had, by then, decided to abandon its EOIs and would have given effect to that decision come what may. 526 Had it been necessary to do so, I would have accepted the evidence given as to the various parties' subjective purposes. Had I done so, the ACCC would have failed to establish that the parties to the understanding which I have found was arrived at entered into the impugned provisions for the requisite proscribed purpose.
The "Giving Effect" Issue 527 There is no doubt that, if the competition issue and the purpose issue had been decided in favour of the ACCC, the conduct of Buffalo, Loyal Coal and Voope in successfully procuring the withdrawal of the MMNL EOIs for the Mt Penny and Glendon Brook coal release areas would have been conduct which amounted to "giving effect to" the impugned provisions. 528 However, I do not think that the conduct engaged in by Cascade, Southeast and CMG in 2010 which led to a negotiated exit for the Obeid entities from the proposed venture could, on any view of matters, constitute a "giving effect to" the impugned provisions by Cascade, CMG or Southeast. The understanding reached on 5 June 2009 containing the impugned provisions required Cascade to establish a joint venture upon the commercial basis set out in the Buffalo Agreement. Cascade never actually established such a joint venture. In 2010, Cascade, Buffalo, Southeast, CMG and Brook came to a fresh arrangement. The essence of that arrangement was that, for a total consideration of $62 million, CMG would buy out all of the rights of the Obeid entities, of Brook and of Warbie that then subsisted in relation to any coal mining venture being or to be carried out in the Mt Penny coal exploration area, the Glendon Brook coal exploration area and areas contiguous to those areas. These transactions brought to an end any possibility that there would be a joint venture along the lines of that contemplated by the Buffalo Agreement. They did not give effect to the promises made by Cascade in the Buffalo Agreement. The concept of "giving effect to" the impugned provisions requires a rational connection between that which was promised in the impugned provisions and that which was actually done subsequently. It is stretching the point beyond acceptability to submit, as the ACCC did, that the 2010 transactions gave effect to the obligations of Cascade under the Buffalo Agreement.
The Accessorial Liability of John McGuigan, James McGuigan, Poole, Moses Obeid and Paul Obeid 529 Again, strictly speaking, in light of the conclusions to which I have come in relation to the liability of the primary contraveners, it is not necessary for me to address these issues and, in any event, it would be somewhat artificial for me to do so. The ACCC addressed detailed submissions both in writing and orally to the liability of the individual parties who are said to have contravened the CCA. The respondent parties also filed detailed submissions on these points. 530 In the circumstances, I do not propose to address these matters in any detail in these Reasons.
The Credit of Individual Witnesses 531 The principal actors in the material events who gave evidence at the hearing were cross-examined at some length. Their credit was attacked vigorously during the cross-examinations. 532 Brook, in particular, was criticised for telling lies during the course of some of the commercial negotiations which featured in the case and for over-zealously supporting the ACCC's case by reason of an immunity granted to him. In the end, however, the Cascade respondents made very limited submissions as to the credit of Brook. They submitted that his evidence should be accepted where consistent with the objective facts and not accepted to the extent that it was inconsistent with John McGuigan's evidence as to the discussions which took place at the meetings of 23 May 2009 and 31 May 2009 and when he claimed that he did not know that the Obeids had confidential information relevant to the EOI process throughout the relevant period. 533 The Obeid respondents made a general submission that the Court should not accept the evidence of Brook when it conflicted with that given by John McGuigan, James McGuigan or Poole. In addition, the Obeid respondents submitted that, throughout his evidence, Brook overstated the role of Moses Obeid and, to some extent, Paul Obeid and underplayed his own role in the relevant events. 534 The ACCC, for its part, suggested that some of the evidence given by John McGuigan was false and that, in his evidence, James McGuigan, deliberately understated the role which he played in the relevant events. 535 In order to prepare these Reasons, I have carefully considered all of the affidavit evidence provided by all of the witnesses and read the transcript of their oral evidence. I have also carefully considered the notes which I made at the hearing. I have a clear recollection of each of the main witnesses and have carefully considered the oral evidence given by each of them. 536 There is no doubt that each of the main witnesses well understood the issues in the case and had a sound appreciation of their own best interests when giving evidence. However, this does not mean that the witnesses gave knowingly false evidence or tailored their evidence to suit their own case. A large number of documents was tendered in evidence before me. Those documents provide a very detailed and relatively reliable record of what occurred throughout the relevant period. To a very large extent, I have based my findings of fact on the contents of those documents and the story which they revealed. The evidence of Brook, in particular, provided helpful assistance in getting an accurate picture of the sequence of events. For the most part, his evidence was entirely consistent with the documentary record. To my way of thinking, there is very little scope, in reality, for using some of the disquieting features of some of Brook's business dealings and personal habits as a basis for jettisoning large parts of his evidence. Overall, I consider that his evidence was essentially reliable. On occasion, he allowed his self-interest to influence the answers he gave but, as I have said, I think overall his evidence was reliable. 537 I do not consider that any of John McGuigan, James McGuigan or Poole gave knowingly false evidence to the Court. The fact that I preferred Brook's evidence over that of John McGuigan in relation to the meeting of 23 May 2009 does not mean that I had serious reservations about John McGuigan's evidence generally. 538 I do, however, think that James McGuigan inappropriately took refuge in a professed lack of recollection when perhaps he should have been more forthcoming in the answers which he gave. However, his role was essentially as an amanuensis for his father and Poole. He was not a director of Cascade nor was he a decision-maker in relation to the dealings undertaken by Cascade relevant to this proceeding. I do not think that James McGuigan's somewhat exaggerated lack of recollection had any impact on my capacity to have available to me all of the relevant evidence sought to be tendered by the parties or on my capacity to understand and assess that evidence.
The Joint Venture Defences 539 Again, strictly speaking, given the view to which I have come in relation to the competition and purpose issues, it is not necessary for me to consider these defences. 540 However, in deference to the parties' submissions, I will shortly address these defences. 541 Both the Cascade respondents and the CMG respondents made detailed submissions in support of these defences. The Obeid respondents adopted the submissions made by the Cascade respondents in respect of this issue. 542 The Cascade respondents submitted that there was a joint venture between Cascade and Buffalo or, alternatively, between Cascade, on the one hand, and Buffalo, Loyal Coal, Voope and Brook, on the other hand. They submitted that that joint venture was established for the purpose of exploring and mining coal at Mt Penny. The CMG respondents submitted that there was a joint venture between Cascade and Buffalo. They abandoned several alternative formulations raised in their Defence. 543 Section 4J(a) of the CCA provided that a joint venture for the purposes of the CCA must have the attributes set out in that subsection. 544 In United Dominions Corporation Limited v Brian Proprietary Limited (1985) 157 CLR 1 at 10, Mason, Brennan and Deane JJ observed that: The term "joint venture" is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. 545 In Gibson Motor Sport Merchandise Pty Ltd v Forbes [2005] FCA 749 at [80], Crennan J, when her Honour was a Judge of this Court, identified certain "recognisable common characteristics of a joint venture" including: 1. Participants hold proprietary interests in the assets of the joint undertaking, often, but not necessarily, as tenants-in-common: see the abovementioned article of Mr Merralls QC. 2. Participants exercise joint control of the undertaking. 3. Participants contribute to the joint undertaking, not necessarily equally; such contributions may be disparate: Canny Gabriel Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 at 327; Television Broadcasters Limited v Ashton's Nominees Pty Ltd (No.1) (1979) 22 SASR 552. 4. Participants in the joint undertaking enjoy rights and assume obligations, which are often several, and calculated by reference to ownership of shares and/or contributions made. 5. Participants have a joint (or community of) interest in the performance of the undertaking's purpose: Cummings v Lewis (1993) 41 FCR 559 at 314/315 (per Cooper J); 6. Participants associate in the undertaking for mutual commercial gain which can be mutual profits. 546 Her Honour's list of common characteristics of a joint venture was not meant to be prescriptive nor was it meant to suggest that every joint venture had all of those characteristics. 547 As submitted by the Cascade respondents, the general law definition is consistent with the statutory definition found in s 4J. 548 Notwithstanding that I have found that certain of the parties formed an understanding on or about 5 June 2009, of which the two letter agreements formed part, I do not think that all of the parties who were parties to that understanding were intended to be parties to the contemplated joint venture. In my view, the Buffalo Agreement makes clear that the parties to the proposed joint venture were Buffalo (or, perhaps, a nominee of Buffalo) and Cascade (or, perhaps, a nominee of Cascade). 549 In the Buffalo Agreement, the parties agreed to form either a joint venture company or an unincorporated joint venture to explore and develop the EL over the Mt Penny coal exploration area and a specified contiguous area and to pursue the grant of mining approval over the same area. The establishment of that joint venture was conditional upon Cascade being granted the relevant EL. The essential terms of the joint venture were set out in the Buffalo Agreement. The Landowners Agreement contained no provisions which addressed the terms of the joint venture. 550 The respondents' submissions proceeded upon the basis that, at all times from 5 June 2009 to late 2010, there was in existence a joint venture between Cascade and Buffalo or between Cascade and Buffalo and its associates. I do not think that the Buffalo Agreement immediately established the requisite joint venture. Rather, it recorded a promise to do so in the future when the necessary condition (the award of the EL to Cascade) was satisfied. However, I do not think that this matters. In my view, the fact that the joint venture had not actually been established as at 5 June 2009 would not be a reason for denying access to the joint venture defences provided for in the CCA. 551 Under the Buffalo Agreement, Buffalo had significant obligations regarding the funding of the venture (including contributing its proportionate share of equity once certain conditions were met), as well as obligations to provide what was described as its intellectual property and future assistance. 552 The Cascade respondents submitted that the ACCC's contention that Buffalo was not contributing anything of substance to the joint venture was wrong. They submitted that: (a) The fact that Buffalo had a "free carry" did not mean that it was not contributing money. All that that provision meant was that the occasion for it to do so was deferred until specifically defined circumstances eventuated. Furthermore, the fact that it could elect not to contribute, with the consequence that its interest would be diluted, did not change that analysis. The fact that a party may elect to withdraw from the joint venture in the future, or diminish its participation in it, does not mean that a joint venture is not already in existence. The Buffalo Agreement read with the Landowners Agreement specifically contemplated a "pooling of assets", which the ACCC accepted was one of the hallmarks of a joint venture. The role of Buffalo as a future funding partner needs to be assessed in conjunction with the expected role of Brook. (b) The fact that intellectual property contributed by Buffalo was ultimately not used, or, was actually useless, does not mean that the association of the parties loses its status as a joint venture. The fact that one party to a joint venture contributes ideas, assets or skills that are ultimately not used does not change the nature of the arrangement between the parties. These submissions are correct and I accept them. 553 The CMG respondents submitted that the parties themselves regarded the proposed association as a "joint venture". They submitted that the parties had always looked at matters in that way. They also submitted that, although not determinative of the issue, the parties' views on the matter are relevant. I agree. 554 Although the Buffalo Agreement contemplated that the Buffalo interests would not actively participate in the exploration and mining activities at Mt Penny, it did contemplate a pooling of assets which, amongst other things, involved Buffalo being obliged to contribute proportionately to the costs of any land acquisition. 555 The CMG respondents went on to submit that, even if the Court were to conclude that the contribution made by Buffalo was not equal or was minimal, that conclusion would not affect the Court's assessment of whether or not a joint venture existed. I also agree with that submission. 556 The ACCC submitted that it was critical to identify the parties to the joint venture with precision. I agree. However, I do not think that that presents any difficulty in this case. As I have already mentioned, I consider that the parties to the claimed joint venture in this case were Buffalo and Cascade. 557 The ACCC submitted that the respondents were unable to identify the joint activity which was to be carried on pursuant to the Buffalo Agreement. 558 I do not think that this submission is correct. The Buffalo Agreement itself identifies the joint activity to be carried out quite specifically. The fact that the searching and digging at Mt Penny is to be undertaken by Cascade or contractors employed by Cascade is not to the point. In my view, s 4J and the general law do not require that the physical activity to be undertaken at Mt Penny be carried on by the parties together. 559 The ACCC also submitted that the joint venture defences cannot provide an answer to the impugned provisions insofar as they relate to Glendon Brook. Given the physical separation of the two exploration areas, that submission is correct. But, this submission on the part of the ACCC takes the matter nowhere because the joint venture in the present case did not encompass the Glendon Brook coal exploration area. 560 I pause to note that the joint venture defence provided for by s 76C of the CCA applies only in respect of the alleged s 45 contraventions and does not apply in respect of the alleged cartel contraventions. 561 Once the Court is satisfied that there is a joint venture within the meaning of s 4J and s 76C of the CCA, for the defence to run, the Court must be satisfied that the impugned provision was "for the purposes of a joint venture". 562 The Cascade respondents submitted that the impugned provisions in the present case were clearly for the purposes of the joint venture which was agreed to be established pursuant to the Buffalo Agreement. The purpose of requiring Buffalo and its associates to provide the promises which they gave in the impugned provisions was to ensure that those parties did not engage in conduct which would contradict or undermine the activities of the joint venture. Given that co-venturers or prospective co-venturers owe fiduciary duties to each other, setting out the content of those duties explicitly is sufficiently connected to the proposed joint venture to be "for the purposes" of that joint venture. As Poole put it in his evidence, his view was that, if Buffalo wanted to be involved with Cascade in a joint venture, it needed to promise that it would not compete with the activities contemplated by that joint venture. I agree that the impugned provisions were entered into for the purposes of the joint venture. 563 The final element of the s 76C defence is a requirement that the impugned provisions not have the purpose, effect or likely effect of "substantially lessening competition". 564 The respondents submitted that they have satisfied this requirement in the present case for the following reasons: (a) The purpose of the impugned provisions was to contribute to the foundation, protection, subsistence, efficacy, viability and success of the proposed joint venture. As at 5 June 2009, the impugned provisions were in fact, and were seen to be, incidental or ancillary to the formation and development of the joint venture described in the Buffalo Agreement. In this regard, the Cascade representatives considered the inclusion of the impugned provisions as a matter of low priority since they could not see how Loyal Coal could inject itself into the process in any event; (b) The evidence demonstrates beyond argument that, if the impugned provisions had not been included in the Buffalo Agreement, MMNL would have withdrawn its EOIs for Mt Penny and Glendon Brook in any event. This is because MMNL did not have sufficient financial resources to progress its EOIs and also because it had changed direction and was no longer interested in pursuing coal mining; and (c) In any event, neither Loyal Coal, Voope, Buffalo, Brook nor Moses Obeid had expressed any interest in an EL over Glendon Brook. 565 I agree that the impugned provisions did not have the purpose, effect or likely effect of substantially affecting competition in the market for the allocation of an EL for Mt Penny. 566 For similar reasons, the respondents submitted that they have made out the defence provided for in s 44ZZRP of the CCA. 567 As I mentioned at the outset, strictly speaking, I do not need to decide whether or not the joint venture defences are available to the respondents. However, I have set out brief reasons as to why I think that the defences would have been available to the respondents had all other elements of primary liability been established by the ACCC.
Evidentiary Rulings 568 At Transcript pp 96-98 (on day 2 of the hearing), I made a number of evidentiary rulings and indicated to the parties that I would provide reasons for those rulings at a later time. I intend to provide reasons for those rulings in a separate judgment.
Conclusions 569 For all of the above reasons, the Application must be dismissed with costs. Only the first and fourth to eleventh respondents should have the benefit of that costs order at the present time. The second respondent did not participate at all in the proceeding. For that reason, the second respondent is not entitled to its costs. The third respondent (Loyal Coal) settled the ACCC's case against it upon terms yet to be disclosed. I will deal with the question of costs as between the ACCC and Loyal Coal in due course when I come to consider whether I should give effect to the terms of its settlement with the ACCC. There will be orders accordingly. I certify that the preceding five hundred and sixty-nine (569) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.
Associate: Dated: 6 July 2018 and 15 August 2018 (Revised Reasons)
SCHEDULE OF PARTIES NSD 584 of 2015 Respondents Fourth Respondent: LOCAWAY PTY. LIMITED (ACN 066 616 484) Fifth Respondent: COAL & MINERALS GROUP PTY LTD (ACN 144 641 092) Sixth Respondent: SOUTHEAST INVESTMENT GROUP PTY LIMITED (ACN 143 535 620) Seventh Respondent: MOSES EDWARD OBEID Eighth Respondent: PAUL EDWARD OBEID Ninth Respondent: RICHARD JONATHAN POOLE Tenth Respondent: JOHN VERN MCGUIGAN Eleventh Respondent: JAMES WILLIAM MCGUIGAN
Australian Competition and Consumer Commission
Cascade Coal Pty Ltd
(1990) 27 FCR 460
(2014) 319 ALR 388
(2006) 157 FCR 162
(2007) 160 FCR 321
(2013) 219 FCR 14
(2001) 111 FCR 456
(1985) 157 CLR 1
(2003) 216 CLR 1
(2005) 159 FCR 452
(1999) 92 FCR 375
(1993) 44 FCR 206
(1974) 131 CLR 321
(1979) 22 SASR 552
(1993) 41 FCR 559