Contract law - Alleged breach of contract - Whether oral agreement amounted to legally binding contract - Extent of agreement on essential terms - Whether parties intended to be legally bound - Whether agreement so uncertain or incomplete as to be void

Equity - Remedies - Specific performance - Lack of certainty

Mining Act 1978 (WA) - Section 119(2) - Whether alleged agreement enforceable

Mining Act 1978 (WA), s 119(2)

Plaintiff : Mr M L Bennett, Mr T O Coyle & Mr R Brierley

First Defendant : Mr D R Williams QC, Mr S Ellis & Mr S J Penrose

Second Defendant : Mr D R Williams QC, Mr S Ellis & Mr S J Penrose

Third Defendant : Mr D R Williams QC, Mr S Ellis & Mr S J Penrose

Fourth Defendant : Mr D R Williams QC, Mr S Ellis & Mr S J Penrose

First Plaintiff by Counterclaim : Mr D R Williams QC & Mr S Ellis

Second Plaintiff by Counterclaim : Mr D R Williams QC & Mr S Ellis

Third Plaintiff by Counterclaim : Mr D R Williams QC & Mr S Ellis

First Defendant by Counterclaim : Mr M L Bennett & Mr T O Coyle

Second Defendant by Counterclaim : Mr M L Bennett & Mr T O Coyle

Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101

Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540

Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) NSWLR 622

Commonwealth of Australia v Riley (1984) 5 FCR 8

Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1997] UKHL 17; [1998] AC 1

Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551

LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2001] NSWSC 688; (2001) 53 NSWLR 31

Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353

Sorna Pty Ltd v Flint [2000] WASCA 22; (1999) 21 WAR 563

Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489

Striker Resources NL v Australian Goldfields NL (in liq) [2006] WASC 153

Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144

1 LE MIERE J: In March 2005 the plaintiff started to negotiate with the first defendant, who I will refer to as Fewster, for the plaintiff to enter into a joint venture with the defendants, or some of them, to explore, evaluate and develop a uranium poly-metallic mining project on the Mulga Rock tenements. The project or projects on the Mulga Rock tenements and surrounding area were described by the parties as the Mulga Rock project or the Narnoo Project. The plaintiff contends, and the defendants deny, that, although it was contemplated that there would be a more formal contract brought into existence, a binding oral agreement was entered into between the plaintiff and the defendants on 6 August 2005 or, alternatively, on 8 August 2005. The plaintiff claims a declaration that the oral agreement constitutes a binding agreement and claims specific performance of the agreement.

2 The defendants counterclaim for declarations to the effect that there is no agreement between the plaintiff and any of the defendants concerning the project and for orders that the defendants by counterclaim withdraw caveats over tenements in relation to the project and forbidding the defendants by counterclaim from registering further caveats over those tenements.

3 Fewster counterclaims liquidated damages in the sum of $5,000 for breach of an agreement between the plaintiff and Fewster on or about 10 August 2005 for the plaintiff to pay to Fewster $5,000 on account of additional legal and accounting expenses Fewster would incur in continuing to negotiate with the plaintiff and in formulating an alternative proposal to be put to the plaintiff. The third defendant, Eaglefield Holdings Pty Ltd ("Eaglefield"), claims damages against the plaintiff for breach of a written confidentiality agreement made by the plaintiff and Eaglefield on 22 June 2005.

4 Fewster is a geologist. He has in the past acquired a number of tenements and formed a number of joint venture arrangements with mining companies.

5 Fewster is the managing director and holder of one share in Eaglefield. Fewster is the sole director of the fourth defendant, Narnoo Mining Pty Ltd ("Narnoo Mining"). Fewster holds the only share issued in Narnoo Mining on trust for the Busani Family Trust, of which his family are the sole beneficiaries.

6 The second defendant, Mrs Fewster, holds the other share in Eaglefield and is a director of Eaglefield.

7 The Narnoo Project is a multi-commodity resource project located in the eastern goldfields region of Western Australia. On 5 August 2005 the project consisted of two Exploration Licences, Nos 39/876 and 39/877 ("the ELs") and three applications for exploration licences, Nos 39/1091, 39/1092 and 30/1114 ("the EL Applications"). Eaglefield held each of the ELs on trust for Narnoo Mining. Subsequently Narnoo Mining lodged three applications for exploration licences covering the same areas as the EL Applications. Eaglefield withdrew each of its exploration licence applications.

8 The plaintiff is a public company whose securities are and were listed for quotation on the Australian Stock Exchange ("ASX"). It is a resource, exploration and development company. In 2005 it held tenements for exploration for gold, uranium, nickel and base metals in various parts of Australia and concentrated in the area of gold-based minerals, nickel, base metals and uranium exploration and development.

9 In May 2006 there was a reorganisation of the plaintiff. As a result of the reorganisation the plaintiff acquired all of the shares in a company called Uranium Equity Ltd for the consideration of shares in the plaintiff. The plaintiff changed its name to Uranium Equities Ltd. Mark Chalmers, David Brunt and Timothy Clifton, who previously controlled Uranium Equity Ltd, were appointed managing director, executive director and chairman of the plaintiff respectively. The plaintiff's 35 million shares in Chalice Gold Mines Ltd ("Chalice") were distributed in specie to shareholders. The company's shares in its base metal subsidiary, Base Resources Ltd ("Base Resources") were distributed in specie to shareholders. Notwithstanding that change of name I will sometimes refer to the plaintiff as Bullion.

10 Andrew Bantock is a chartered accountant. In October 2004 he was appointed managing director and chief executive officer of the plaintiff. On the re-organisation of the plaintiff in May 2006 Bantock stepped down from the position of managing director of the plaintiff but remained as an executive director. He is currently executive chairman of Chalice and a director of Base Resources.

11 In 2005 Timothy Goyder had over 30 years experience in the exploration and resources industry. He was then chairman of the plaintiff. On the re-organisation of the plaintiff in May 2006 Goyder stepped down as chairman of the plaintiff but continued as a non-executive director.

12 Anthony Kiernan is a solicitor who holds executive and non-executive positions on the boards of several private and public companies. At all relevant times he was a non-executive director of the plaintiff and continues to be so.

13 John McIntyre is a geologist. Prior to the re-organisation of the plaintiff he was the exploration manager of the plaintiff. On the re-organisation of the plaintiff in May 2006 McIntyre became an executive director of Chalice.

14 Douglas Stewart is a geologist. In 2005 he was a non-executive director of the plaintiff.

15 Some of the evidence led by the plaintiff of the discussions which it says gave rise to the agreement was contested. The principal conflict is between the evidence of Fewster and the evidence of the plaintiff's witnesses, Bantock, Goyder, McIntyre and Kiernan. It is convenient at this time to make some observations on the credit and reliability of the principal witnesses.

16 The principal witness for the plaintiff was Bantock. His evidence was assisted and supported by several detailed sets of notes of his dealings with Fewster. His evidence was in general consistent in itself and consistent with the evidence of the plaintiff's other witnesses and with relevant documents. In general I accept the substance of Bantock's evidence subject to the following matters.

17 There are parts of Bantock's evidence that are a statement of his impression, understanding or conclusion of the effect of what was said rather than of the words spoken. In general, I give little weight to the words used by Bantock to summarise his impression, understanding or conclusion.

18 The telephone conversations between Bantock and Fewster on 6 August 2005, to which I will refer, are important. Bantock gave his evidence-in-chief by way of witness statement. In his statement Bantock gives evidence of his first telephone conversation with Fewster on 6 August. He commences by saying that "Fewster said words to the effect that" and then sets out in indirect speech the substance of what Fewster said. Bantock then goes on to say:

"I did not propose the concept of reaching a verbal agreement that day. Fewster put the proposition of a verbal agreement to me."

That evidence goes beyond reporting the conversation in indirect speech. It is argumentative and the statement of a conclusion.

19 The rule that evidence of conversations shall be given in direct speech is, in Australia, a rule of practice rather than a rule of law, a practice that is probably now disregarded as often as it is followed: Commonwealth of Australia v Riley (1984) 5 FCR 8 at 34 per Smithers, Sheppard and Wilcox J. In LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2001] NSWSC 688; (2001) 53 NSWLR 31 at [8] Barrett J said:

"There is no rule of law, whether under the Evidence Act or otherwise, which makes inadmissible evidence of a conversation given in indirect speech, but there are obviously very good reasons why courts have, over the years, been astute to regard the direct speech form as the best form."

"... I accept that not all the cross-examination opportunities available in a case of direct speech report will arise in case of an indirect speech report, but the ability to engage in meaningful cross-examination will exist nevertheless. There is also the point that the probative value of the evidence may be diminished by its form."

20 Bantock was cross-examined about his statement that Fewster put the proposition of a verbal agreement to Bantock. Bantock agreed with counsel that Fewster "was putting in this conversation basic terms on the basis he stated that if those basic terms could be agreed, he would stop negotiating with other parties". Bantock said that Fewster had gone beyond saying that he would commit to working towards a deal with Bullion. Bantock said that he had said to Fewster: "So you're saying you want to do a deal today" and that Fewster had said: "Yes, he did, here was the deal and that if [Bullion] accepted the deal then the deal would be done". Bantock said that Fewster had put the proposition of a verbal agreement to him "pretty much as I described it then", that is as set out earlier in this paragraph. Bantock went on to say that he then checked that what he was hearing was right and "it was expressed in those terms, so that here was the deal and if we accepted the deal the deal would be done".

21 I accept that Fewster said words to the effect that he wanted to do a deal that day and that if Bullion accepted the terms Fewster put forward then the deal would be done. Bantock's evidence that Fewster "put the proposition of a verbal agreement to me" is an argumentative conclusion and I place no weight on it.

22 The discussions between Fewster, Bantock and Goyder on Monday 8 August are important. For the reasons I state later I do not accept Bantock's evidence of what happened that day.

23 In general, I accept the evidence of Goyder. However, like the evidence of Bantock, his evidence is at times a summary of his recollection of the effect of what was said or done and cannot be taken without reservation or qualification as an accurate reflection of the words spoken on each occasion of which he gave evidence. His evidence of what happened on 8 August is vague and inconsistent in that his witness statement says that he, Bantock and Fewster reviewed a handwritten document whereas in cross-examination he said it was a typed document. I place little weight on Goyder's evidence of the details of what was said and done that day.

24 I accept the evidence of Kiernan, although his witness statement also takes the form of impression, understanding and conclusion at times. Subject to the same qualification I accept in general the evidence of McIntyre and Stewart.

25 Counsel for the plaintiff submitted that in critical respects Fewster's evidence was wholly unsatisfactory. I will refer to some of the matters addressed by counsel.

26 I accept the submission of counsel for the plaintiff that Fewster gave incorrect evidence about the involvement of Linq Entities in Energies and Mineral Australia Ltd ("EMA"). In cross-examination, Fewster was asked whether Linq Corporate had been granted a financing mandate. He first said not to his knowledge and then said he was not familiar with it. Fewster agreed that he had presented a paper to the Australian Uranium Conference in July 2006. He said that in that presentation he outlined the creation of a company called Energy Minerals Australia Ltd. It appears from one of the slides prepared by Fewster for that presentation that EMA had granted a finance mandate to Linq. Counsel asked Fewster whether he had informed the people at the conference that he had created that structure to list on the ASX with the Narnoo Project as its project. Fewster said that was not correct. Counsel then informed Fewster that he had a CD recording of his speech and again asked whether Fewster had presented EMA as the company which would list on the ASX. Fewster then agreed that it was and that he had presented to the conference that it was the intention of EMA to develop the Narnoo Project but there had been no conclusion of any agreement between EMA and the owner of the Mulga Rock project.

27 I find that Fewster did not have a good recollection of much of the detail of his dealings and communications with Bantock and the other directors of the plaintiff. Fewster did not take notes of his dealings with the plaintiff and other parties he was negotiating with in relation to the Narnoo tenements.

28 An example of Fewster's lack of recall of the detail of his dealings with the plaintiff is his recollection of his communications with Bantock and the other directors of the plaintiff on Saturday, 6 August. That is a critical day. The evidence establishes that on that day Fewster had four telephone conversations with Bantock and others. The second telephone conversation was at about 1.30 pm. Bantock made the call in the presence of Goyder, McIntyre and Kiernan and in the course of a meeting of the plaintiff's board of directors. The fourth telephone call was made by Bantock in the presence of Goyder at about 7 pm to Fewster who was at the Perth Glory football match. Fewster purports to have an actual recollection of each telephone conversation. However, he has confused elements of the second and fourth conversations. Fewster says that the second telephone conversation was at about 1 pm and that Bantock said that he had spoken to the plaintiff's directors. Fewster says that during the telephone call he took at the Perth Glory game he heard Bantock say the names of each of the directors and he heard someone in the background say "hello" so he presumed that all of the directors were present in the room and that Bantock was introducing them to him. Furthermore, Fewster has forgotten the third telephone call made by Bantock at about 5 pm.

29 Bantock and Goyder gave evidence that Bantock gave Fewster a copy of the heads of agreement document on 29 July or 4 August. As I set out later in these reasons, I accept the evidence of Bantock and Goyder on this point in preference to that of Fewster.

30 Later statements by Fewster corrected errors in earlier statements and added significant detail to discussions referred to in earlier statements. It was submitted on behalf of Fewster that the amendments to his witness statements were largely in response to objections. Nevertheless, Fewster's witness statements were finalised after the plaintiff's witnesses had completed their evidence. That causes me to have less confidence in the reliability of parts of Fewster's witness statements than I might otherwise have had.

31 Counsel for the plaintiff drew attention to the fact that in his amended statement of evidence in response (Exhibit 228) Fewster corrected the date on which he alleges that he received a copy of p 9 of the Heads of Agreement document, Exhibit 79, from 8 August to 3 August. In cross-examination Fewster conceded that up until the previous night his recollection was that he had written on that page on 8 August. Fewster then said that when he wrote his initial statement that was his recollection but subsequently he recalled that it was more likely that it was on 3 August. Fewster denied that he changed his evidence after listening to Bantock give evidence. He said that he had mentioned the correction to his solicitors the previous week. He could not recall whether or not that was after Bantock had been cross-examined on the point. In cross-examination senior counsel for the defendants put to Bantock that Fewster had written on page 9 of the draft heads of agreement on 8 August. I find that Fewster did not inform his solicitors that he had received p 9 of the document on 3 August until after the completion of Bantock's cross-examination. I find that Fewster's evidence on this point is a reconstruction after considering and reviewing all of the evidence available to him.

32 There is another important matter on which Fewster concedes he was mistaken. In his amended statement of evidence in response (Exhibit 228) Fewster said that he did not meet with McIntyre and Stewart on 8 August 2005. Fewster said that he had met with Stewart on the morning of 9 August. Fewster subsequently conceded that he had met with Stewart on the morning of 8 August.

33 As I have said, Fewster has no notes to assist his recollection of events and conversations. I find that Fewster's evidence is a mixture of actual recollection together with reconstruction based upon relevant documents and the sequence of events. Some of Fewster's reconstructions were calculated to advance his case.

34 In general, I prefer the evidence of Bantock and the other witnesses for the plaintiff to that of Fewster. However, there are some matters on which I accept the evidence of Fewster as to what he said or did in preference to the evidence of Bantock and Goyder. I do not accept in its entirety Bantock's evidence of what happened on Monday 8 August. I accept the evidence of Fewster in so far as his evidence is that there were matters discussed on Monday 8 August without any final agreement being reached in relation to those matters.

35 In general, I accept the evidence of Paterson and Golding.

36 The most reliable evidence of what was said and done by the protagonists is the contemporaneous documents. This includes draft memoranda, letters, e-mails and the minutes of the meeting of the board of directors of Bullion on 6 August to which I will refer later in these reasons.

37 In March 2005 Goyder instructed a geologist to find out who owned the Mulga Rock project. At the time the plaintiff was pursuing new projects. Goyder was aware of the Mulga Rock project from when a Japanese company, Japanese Power and Nuclear Fuel Corporation, had held the rights to it.

38 The plaintiff found out that Eaglefield held the tenements the subject of the Mulga Rock project and that Fewster was the director of Eaglefield.

39 On about 2 March 2005 Bantock telephoned Fewster. Fewster said that he was not interested in vending his interests into a company but was considering whether to go into a joint venture with a party needing a secure supply of uranium. There was a further discussion about the tenements and Fewster's plans for them. Fewster said that he would provide Bantock with an outline of the project.

40 On the same day, 2 March, Fewster sent an e-mail to Bantock. The e-mail attached what Fewster described as an overview of the Narnoo Project and invited Bantock to give him a call after he had looked at the material and researched the state of the offshore market for uranium listings.

41 In the executive summary of his overview of the Narnoo Project Fewster stated the following. The Narnoo Project is a major multi-commodity resource project located in the eastern goldfields region, about 240 kilometres from the city of Kalgoorlie. Eaglefield privately owns the project. The project is contained within two granted exploration licences and three applications for exploration licences, which aggregate about 900 square kilometres. The tenements cover the entire prospective area of a small sedimentary basin named the Narnoo Basin. Only about 20 per cent of the project is subject to native title claim, which importantly excludes all known mineral resources. The tenure of resources can be converted to mining leases without reference to the native title procedure, a considerable saving in both cost and time. There are four resource types presently identified within the project, plus exploration prospects for a further two resource types. All known or predicted resource types host multiple deposits or prospects. One of the identified resource projects is the Mulga Rock lignite-sandstone-hosted uranium, scandium, nickel and cobalt deposits described as the Mulga Rock Deposit or "MRD". The MRD was the principal mineral resource within the Narnoo Project with the largest of deposits at feasibility study stage development. The MRD comprised three deposits named Ambassador, Emperor and Shogun. Another of the identified resource types was lignite, an oily young coal used mostly for electric power generation.

Negotiations begin - Bullion's initial proposal

42 On 22 March Fewster and Bantock met at the Bullion offices. They discussed Bullion's assets, capabilities and objectives and the Narnoo Project.

43 On the following day, 23 March, Bantock sent a letter of 23 March to Fewster by e-mail. The letter outlined a proposal to establish a company to develop the Narnoo deposit. The proposal contained four key points. First, Fewster/Eaglefield was to establish a new (unlisted) public company, say West Australian Resources and Energy ("WARE"). Secondly, WARE would acquire all the assets and undertakings, including tenements, of the Narnoo Project. Thirdly, Bullion would pay to Fewster/Eaglefield $2.5 million and subscribe $10 million to WARE in return for a 50 per cent interest in WARE. Fourthly, the Board of WARE would be Fewster, his nominee, Bantock and Goyder.

44 Bantock said that it would be necessary to check for any tax or regulatory issues that may arise. Bantock's proposal was essentially that Bullion acquire 50 per cent of the Narnoo Project. Bantock went on to set out how the joint venture would work. The $10 million invested in WARE by Bullion's subscription for shares would be used to complete the first phase of feasibility work on the project. Bullion would then fund the second phase at the conclusion of which the project would have progressed to bankable or near bankable standard. The proposal envisaged a shareholders' agreement which would include an optional exit of either party from the project.

45 Fewster responded to Bullion's proposal by a letter dated 29 March. Fewster said that the funding format proposed by Bullion was not one that he found attractive. Fewster said that there were four key parameters that he was pursuing. Firstly, if the project went into a public company, then it must be listed as soon as possible. Secondly, no third party would hold more than 20 per cent of the company at listing. By third party Fewster meant parties other than himself and his related entities. Thirdly, the $25 million value was too low. The vendor consideration would also include a major options component, exercisable at minimal cost, provided some performance parameters were met. The issue of ownership of the scandium component of the resource was also unresolved. Fourthly, there should be an initial focus on exploration to increase uranium resources rather than acquiring other deposits. Fewster said that he was meeting his colleagues to discuss progress on the project and would discuss the Bullion proposal and advise Bantock of progress later in the week.

46 On 13 April Fewster received some advice by e-mail from Russell Garvey of Horwath, chartered accountants. Garvey referred to having met Fewster the previous week and made a number of suggestions with respect to tax planning "for the proposed float process". The e-mail included the advice that under a scrip for scrip deal capital gains tax ("CGT") rollover relief is available subject to certain conditions. Garvey concluded by stating that the strategy outlined had been put together urgently and would require "a fuller consideration of all steps before being proceeded with" but would assist Fewster for the purposes of his meeting with the brokers the following day.

Bantock reactivates negotiations - Fewster puts forward some terms

47 On 9 May Bantock reactivated negotiations by telephoning Fewster. Later that day, Fewster sent an e-mail to Bantock in which he said that he was moving towards a decision on how to progress the Narnoo Project. Fewster said that his preferred option was an initially unlisted public company to complete work up to completion of a feasibility study on Ambassador as Bantock had proposed. Fewster set out some general terms that he said encompassed issues raised by various parties who had an interest in the project and said he was also looking at some other funding options.

48 The general terms referred to by Fewster were as follows. Bullion would acquire an initial 25 per cent equity in the unlisted public company (say Newco) that would hold all aspects of the project (that is uranium, nickel, cobalt, gold, oil etc) excluding scandium, which would remain with the vendor. Bullion was to provide the following consideration:

1. Payment of $250,000 cash non-refundable deposit for a two month due diligence period.

2. Payment of a further $1 million cash to the vendor and subscribe for $15 million shares in Newco.

3. Bullion have the option to subscribe for 50 per cent of subsequent issues up to a maximum of 35 per cent of Newco.

4. Bullion appoint one non-executive director to a board to consist of a non-executive chair, Bullion's appointed non-executive director and two executives.

5. Bullion to hold a first right of refusal over any farm-out of uranium exploration prospects.

In his e-mail Fewster said that those terms were without prejudice and subject to execution of a formal heads of agreement and payment of the deposit.

Fewster obtains some tax advice from Golding

49 On 10 May Phillip Golding, a chartered accountant, sent an e-mail to Fewster referring to a meeting on 2 May and setting out the scope of work Fewster had asked Golding to undertake. The e-mail said that Fewster was considering raising capital to conduct exploration and possibly development on mining tenements held by his entities through an initial public offering ("IPO"), the objective being to have the IPO vehicle listed on the ASX. Golding said that Fewster had asked his firm to provide advice on the tax consequences of alternative ways of structuring the IPO with the primary objective of ensuring that his group did not incur any significant tax liability until it eventually disposed of any shareholding in the IPO vehicle.

50 On 13 May Golding provided to Fewster a draft memorandum of advice for review by Fewster. The advice referred to Fewster receiving proceeds from the IPO in the form of both shares and cash but predominantly shares. The memorandum said that scrip for scrip rollover relief would be available to avoid capital gains where two conditions were satisfied. The conditions were that the existing shareholders receive shares only in the listed company in return for shares in Eaglefield and that the listed company must initially acquire 80 per cent or more of the voting shares in Eaglefield. Golding noted that this requirement conflicted with the objective to receive some cash proceeds.

51 Bantock's evidence is that on 16 May he telephoned Fewster to follow up previous discussions and Fewster's e-mail of 9 May. Fewster agrees he spoke to Bantock on 16 May but says the discussion took place at a meeting with Bantock and Goyder at Bullion's office where they discussed Fewster's proposal of 9 May.

52 On 17 May Bantock sent Fewster an e-mail referring to their discussion the previous day, attaching a letter of 17 May and setting out the structure of a potential agreement for Bullion and Eaglefield to develop the Narnoo poly-metallic deposit. The letter stated that there were seven key objectives. One stated objective was that Eaglefield was concerned to ensure that dilution is minimised prior to IPO, that is to ensure that it does not cede 50 per cent of the project only to find that the project stalls for lack of corporate commitment. Another objective was that Bullion receives a 50 per cent interest in the project to justify its investment pricing and the dedication of management efforts and a major change in corporate direction to the project. Bantock suggested two possibilities to meet these objectives. The first was to amend the deal as outlined in his letter of 23 March by swapping $1 million of initial cash consideration for Bullion shares issued to Eaglefield so that Eaglefield would retain a 55 per cent project interest, being a 50 per cent direct project interest plus 5 per cent indirect interest through its shareholding in Bullion. The second possibility was that in addition to that suggestion, Bullion's interest would dilute to 25 per cent should only Eaglefield (and not Bullion) wish to proceed to the second phase of work and proceed to fund the work, that is elevating the project from the initial feasibility study to a bankable position.

53 On 20 May Fewster e-mailed to Bantock a revised summary for the Narnoo Project.

54 Bantock responded to Fewster by e-mail of the same date stating that the revised summary for the Narnoo Project was a useful improvement on the previous document and adding that one other thought to add to those in Bantock's letter was that Fewster retain the oily lignite rights to the extent that those are clearly separable from the other poly-metallic resources.

55 Fewster responded by e-mail the same day. He said that he was still not happy with the revised deal proposed by Bantock but had been thinking about a structure where the different commodities that could be separated either by way of conversion to mining leases or other methods be placed in separate company structures with differing levels of ownership. Fewster said he was still working on the idea and would get back to Bantock once he had something firm.

56 On 8 June Fewster e-mailed Bantock stating that his delay in replying indicated that he was still not comfortable with Bullion's current proposal. Fewster stated that he was still interested and had been thinking about some other options. He said that also required seeking some advice from tax experts and that was not yet finalised. Fewster said he would get back to Bantock when his thinking was complete.

57 On 16 June Bantock e-mailed Fewster enquiring whether Fewster had seen the SBS Cutting Edge programme the previous night. Fewster replied the same day stating that he had seen the programme and would call Bantock the following day to advise where things were at.

58 On 20 June Fewster e-mailed Bantock what he described as the final version of the Narnoo Project summary. The executive summary is dated 17 June 2005. The report includes as figure 3 a plan entitled "Tenement Outline and Deposit and Prospect Locations" that showed the tenements covering the prospective area and the location of the resources and prospects within the project area.

21 June: Fewster advances new proposed transaction structure

59 On 21 June Bantock and McIntyre met with Fewster. John McIntyre was Bullion's exploration manager. Bantock's evidence is that the meeting lasted about four hours. There was discussion about technical aspects of the project until McIntyre left the meeting. Bantock then talked to Fewster about the commercial structure of the deal. Fewster produced a diagram and explained that he and his advisers were developing a model that would address the corporate and taxation parameters which he had set for the project. The document showed an arrangement by which Eaglefield would convey the tenements to Narnoo Mining. A subsidiary of Eaglefield would retain all scandium rights. A separate subsidiary of Eaglefield called Lignite Co would have the ability to take the interest in the lignite by payment of an amount equal to twice past exploration expenditure. A company called Newco would own 80 per cent of Narnoo Mining. Bullion would have a 50 per cent interest in Newco. Fewster would have a 50 per cent interest in Newco and also a 20 per cent interest in Narnoo Mining.

60 Bantock told Fewster that he would consider the structure of the proposed deal and come back to Fewster with his thoughts.

61 At their meeting on 21 June Bantock and Fewster agreed that Fewster would forward a confidentiality agreement so that Bullion could progress its technical due diligence on the project at the same time that commercial discussions progressed.

62 On the morning of 22 June Fewster forwarded a draft confidentiality agreement to Bantock. Bantock sent an e-mail to Fewster on 22 June raising some issues about the confidentiality agreement. Bantock also referred to their commercial discussions the previous day and said that he would work on the commercial terms and send a proposal to Fewster. Bullion executed the confidentiality agreement and returned it to Fewster on 22 June. On the following day, 23 June, Fewster acknowledged receipt of the confidentiality agreement and said that he would deliver the data package to Bullion's office the following morning.

22 June: Bullion puts forward further proposal

63 Later on 22 June Bantock had sent by e-mail a letter of 22 June, a memorandum entitled "Establishment of Energy and Minerals Australia Ltd (EMA) to develop the Narnoo Polymetallic Resource, a partnership between Bullion Minerals Ltd and Eaglefield Holdings Pty Ltd, Outline of Principal Terms of Co-investment" and a covering e-mail. The covering e-mail summarised Bullion's offer or proposal as follows:

• A progressive earn rather than 50 per cent up front;

• $100,000 cash to Fewster on signing heads of agreement;

• $400,000 cash plus 4,000,000 Bullion shares to Fewster on signing the shareholders/subscription agreements;

• $15 million for 50 per cent of the Narnoo deposit (ex lignite/scandium) including a further $1.5 million cash/shares;

• Eaglefield reverts to 60 per cent interest in Narnoo on plus 45,000 tons uranium JORC Measured/Indicated and

• Joint management and control within a complimentary team.

64 The outline of principal terms of co-investment said that Bullion would invest $100,000 in EMA (or Eaglefield/vendor, subject to discussion/tax advice). In the outline Bantock said that the final ownership structure was to be in accordance with the attached diagram subject to tax advice with a prime objective to achieve the best outcome for Eaglefield and with Bullion to fund the tax advice on an agreed reasonable basis. Bullion was to issue Eaglefield or its nominee(s) 4,000,000 fully paid ordinary Bullion shares on execution of the shareholders/subscription agreements.

65 Fewster responded to Bantock's proposal by e-mail on 23 June. Fewster said he expected that it would be early July before he would be able to get back to Bantock with his reply.

66 On 24 June Davis delivered two CD's of technical information regarding the project to Bullion.

67 On about 6 July Bantock telephoned Fewster. One of the things that Fewster said to Bantock was that the claw back provision that Bantock had proposed would possibly create a tax problem in the long term.

Fewster receives more tax advice from Golding

68 On 13 July Golding provided a memorandum of advice to Fewster. Golding stated that at a meeting on 22 June Fewster had presented a revised structuring plan to cater for different commercial outcomes than initially envisaged. Golding stated that they had discussed the tax consequences of the revised plan but that Fewster did not wish Golding to provide comprehensive advice on it. Golding said that there were two specific issues that Fewster had asked him to comment on. The first was whether the scrip for scrip capital gains tax rollover relief would allow two separate exchanges of shares in Narnoo Mining by Uranium Newco. The second concerned how the value shifting rules would operate if shares in Uranium Newco were later issued to a third party at the then negotiated value of the shares. Golding provided some advice in relation to each of those issues but stressed that his notes were in response to Fewster's specific questions and should not be relied upon to affirm the tax consequences of the overall structuring. Golding added his advice that once Fewster had the commercial parameters resolved, tax issues should be reviewed cohesively and comprehensively.

22 July: Fewster puts forward further proposal

69 On 18 July Fewster met with Davis, Bantock and Goyder at Bullion's offices and then they had lunch together.

70 On 22 July Fewster met with Bantock and Goyder at Bullion's offices. During the meeting Fewster outlined a further proposal. Fewster proposed that Bullion provide consideration of 4,000,000 fully paid ordinary Bullion shares plus $500,000 in cash and 4,000,000 Bullion options at 15 to 20 cents per share. Fewster proposed two further tranches of options. The first tranche of 5,000,000 options would only be capable of exercise at a price of 20 cents per option upon Bullion's market capitalisation exceeding $50 million. The second tranche of 10,000,000 options would be capable of exercise at a price of 20 cents per option upon a decision to mine where the resource at the Ambassador deposit exceeded an in ground value of $1 billion. Fewster said that there should be a new company in the structure which would have an optional right to earn 50 per cent of the interest in the project. He said that in that way the structure for Bullion's investment in the project would be tax effective from Fewster's perspective. There was discussion about tax. Goyder and Bantock suggested to Fewster that he may want to talk to Bullion's tax advisers to help him finalise the structure. Fewster declined the offer and said that his proposal had been looked over by his tax advisers. During the meeting Goyder and Bantock proposed to Fewster that they should prepare a heads of agreement that embodied the concepts discussed in the meeting. Fewster agreed that should be done.

71 On 25 July Bantock prepared an annotated diagram and bullet point description of the deal proposed by Fewster. Bantock did so in part so as to provide instructions for Kiernan to draft a heads of agreement.

72 In late July Kiernan drafted a heads of agreement. The first heads of agreement document is entitled "Draft 1 - 27 July 2005". The parties are Bullion, Fewster, Narnoo, Eaglefield and "Newco Pty Ltd". The recitals say that Newco and Narnoo Mining have agreed to enter into a joint venture for the exploration, development and mining of ELs and EL Applications ("the Tenements"). Clause 4.1 provides that Fewster agrees to sell and Bullion agrees to purchase all of the shares in Newco. The consideration is 10,000,000 fully paid ordinary Bullion shares and options to acquire Bullion shares with the right to exercise the options dependant on certain milestones in the project.

73 Clause 5 provides for the establishment of a joint venture between Newco and Narnoo Mining. Newco initially has no interest in the joint venture and in the event that Newco solely funds all exploration expenditure in relation to the Tenements prior to a Decision to Mine for Uranium then Newco has a 50 per cent interest. The joint venture excludes the Reserve Minerals, that is scandium, lignite and sedimentary exhalative gold (commonly referred to as sedex gold) in those areas marked by cross hatching in Annexure A and unless Newco and Narnoo Mining agree otherwise Newco shall acquire no rights in relation to the Reserve Minerals irrespective of any expenditure undertaken in relation to the Tenements by Newco. I pause to note there was no Annexure A at that stage.

74 Decision to Mine for Uranium was defined to mean a decision to conduct mining for uranium in accordance with cl 5.7. Clause 5.7 provided that during the Earn In Period a Decision to Mine for Uranium may be made by Newco provided it has prior to making such a decision consulted in good faith with Narnoo Mining, taken proper account of any matters raised by Narnoo Mining and has provided to Narnoo Mining information that Narnoo Mining may reasonably require.

75 Clause 5.8 provides that at any time prior to earning its joint venture interest Newco may withdraw from the joint venture by written notice to Narnoo Mining but subject to having met, on a pro rata basis, expenditure requirements to maintain the Tenements in good standing.

76 Clause 5.9 deals with other minerals, that is Minerals other than Uranium and Reserve Minerals. Newco is entitled to make a Decision to Mine for Other Minerals at any time prior to earning its joint venture interest and if doing so Newco shall meet all costs and expenses and after reimbursement to Newco of all expenses incurred by it in relation to the mining of the other minerals the net proceeds shall be divided equally between Newco and Narnoo Mining.

77 Clause 5.10 is entitled "Put and Call on Joint Venture Interest". It is the first draft of the clause that came to be known as "the gelignite clause".

78 I interrupt the narrative of events to refer to graticular gaps. Outlines on the surface of the earth with boundaries defined by lines of latitude and longitude in one minute increments are called graticular blocks. Graticular blocks are used to define exploration licences. In 2000 the Australian Government changed the way latitude and longitude was measured in Australia. This resulted in the latitudinal/longitudinal co-ordinates prior to this date being 150 metres different from the same co-ordinate after this. This resulted in some tenements either overlapping slightly or having a gap between them. The gaps between tenements are called graticular gaps. There were graticular gaps between the tenements the subject of Eaglefield's exploration licences and applications for exploration licences.

79 On 24 June Fewster's colleague, Davis, had delivered two CDs of technical data regarding the project to Bullion. Subsequently Fewster had provided more technical information to McIntyre, Bullion's chief geologist. On 21 July McIntyre sent an e-mail to Fewster in which he said there are graticular gaps between the tenements and said that Fewster should peg them just in case some speculative type sees some blackmail potential. Fewster responded by saying, incorrectly, that only the holder of the new exploration licence can peg the graticular gap within mining leases. On 22 July McIntyre informed Fewster that anyone can peg the graticular gaps and no priority was given to the holders of surrounding exploration licences. On 22 July Fewster thanked McIntyre for the information but said that he would deal with the pegging of the graticular gaps. McIntyre acknowledged Fewster's response and reminded Fewster that it was not necessary to physically peg the gaps but that they could be applied for as prospecting licences with the appropriate application.

80 On 29 July Fewster met with Bantock and Goyder at Bullion's offices. Bantock made notes of the meeting in his notebook and on the first draft of the heads of agreement document. Bantock says that he gave a copy of the draft heads of agreement document described as Draft 1 - 29 July 2005 to Fewster. That version of the heads of agreement stated the parties to be Bullion, GE Resources Pty Ltd ("GER"), a wholly owned subsidiary of Bullion, Narnoo Mining, Eaglefield, Fewster, Mrs Fewster and a company to be formed or acquired called Mulga Rock Mining Pty Ltd ("Mulga Rock Mining"). The heads of agreement envisaged that at the time of execution of the heads of agreement there would be in existence an agreement described as Option Agreement, being an agreement between Narnoo Mining as grantor and Mulga Rock Mining as grantee pursuant to which Mulga Rock Mining has the option to acquire a 50 per cent interest in the Tenements and that upon exercise of the option the Joint Venture be established in consideration of the Option Exercise Obligations. The Joint Venture was the joint venture to be established under the Option Agreement between Mulga Rock Mining and Narnoo Mining for the exploration, development and mining of minerals other than Reserve Minerals within the Tenements. Reserve Minerals was defined to mean scandium, lignite and sedex gold in those areas marked by cross-hatching in Annexure A to the extent that those Reserve Minerals are clearly separable in a geological exploration and development sense from the underlying uranium resource. Thus, the joint venture was to apply primarily but not exclusively to the exploration, development and mining of uranium.

81 Clause 4.1 provided that Fewster sells and GER purchases all the shares in Mulga Rock Mining for 10,000,000 ordinary Bullion shares (subject to a voluntary escrow for 24 months) and options to acquire shares in Bullion exercisable on the achievement of certain milestones.

82 Clause 5 provided for the establishment of a joint venture between Narnoo Mining and Mulga Rock Mining with each to have a 50 per cent interest. Clause 5.3 provided that Mulga Rock Mining shall fund all Joint Venture expenditure up to completion of a Definitive Feasibility Study. Clause 5.4 provided that the Joint Venture excludes the Reserve Minerals and unless Mulga Rock Mining and Narnoo Mining agree otherwise Mulga Rock Mining shall acquire no rights in relation to the Reserve Minerals irrespective of any expenditure undertaken in relation to the Tenements by Mulga Rock Mining. There were clauses relating to a Definitive Feasibility Study and to a Decision to Mine for Uranium. There was a clause dealing with Mulga Rock Mining's right to withdraw from the Joint Venture. The gelignite clause, that is cl 5.10 (Put and Call on Joint Venture Interest) had been substantially amended since the first draft of the Heads of Agreement.

Fewster was given a copy of the heads of agreement on 29 July

83 Bantock and Goyder say that Fewster was given a copy of the Draft 1 - 29 July 2005, heads of agreement. Bantock's copy contained a "thought cloud" on the top right hand corner which contained notes he made to prompt the raising of issues at the meeting, being related to matters which were not included in the draft agreement. Bantock says that they talked through the terms of the heads of agreement and the meeting concluded on the basis that Fewster would review the agreement in more detail over the weekend and come back to Bantock.

84 Fewster denies that he was given a copy of the heads of agreement on 29 July. He says he did not see the document until Monday 8 August 2005. He says, however, that on 3 August he was given a single page from the heads of agreement, containing cl 5.10, that is the gelignite clause.

85 I accept the evidence of Bantock and Goyder on this point. Their evidence was consistent and credible. I do not accept the evidence of Fewster. His evidence as to when he wrote on page 9 of the document was inconsistent. It is unlikely that Fewster would have written on a single page of a draft agreement without requesting a copy of the document or asking anything about it. Also, Fewster adopted the definition of Reserve Minerals, a label devised by Kiernan to describe the separate treatment of scandium, sedex and lignite within the joint venture, in his dealings with KTL on 3 August 2005. Furthermore, the first bullet points list prepared by Bantock on 8 August included a bullet point that referred to cl 5.10 of the first draft heads of agreement "previously circulated".

86 I find that Fewster's evidence was a reconstruction to explain how his writing could be on a page of a document he says he did not receive until a later time, that is 8 August.

87 On 29 July Bantock sent a draft employment agreement to Davis in respect of his future role as development manager for Bullion pursuant to the proposed deal with Fewster.

88 On 2 August Fewster met with Davis, Bowen and Grant Paterson at the office of Hardy Bowen. Paterson is a solicitor employed by Hardy Bowen who then worked under the supervision of Michael Bowen, a principal of that firm. Bowen and Paterson represented a company called KTL Technologies Ltd ("KTL"). Bowen outlined a proposal that KTL's promoter, Mr Fletcher, desired to put to Fewster for the acquisition of the Narnoo tenements. Bowen said to Fewster that convertible preference performance shares (CPPSs) may be a tax effective means of structuring a transaction between KTL and the Fewster entities.

Thursday 4 August: Fewster meets Bantock and Goyder and puts the CPPS Proposal

89 On 3 or 4 August there was a meeting between Fewster, Bantock and Goyder at Bullion's offices. Fewster says the meeting was on 3 August. Bantock says it was on 4 August. It does not matter on which day the meeting occurred but I accept the evidence of Bantock that it was on 4 August. Bantock has a contemporaneous note of the meeting with the date 4 August written on. I accept the evidence of Bantock, supported by that of Goyder, as to what happened at that meeting.

90 Fewster said that the previous proposal would not be effective for tax purposes and therefore he proposed an alternative structure in which he would be issued with CPPSs. Fewster said that he proposed that there be three tranches of the CPPSs. He wanted a number of entities to receive various elements of the consideration payable. The entities were likely to include the Busani Family Trust. Bantock and Goyder said that all Fewster needed to do was advise who he wished to be the recipients of the consideration. As long as Bullion acquired 50 per cent of the project then the nomination of recipients for the consideration was up to him. Fewster said that the appropriate structure was being driven by the need to manage his tax position. Fewster said that the third tranche of CPPSs would be subject to Bullion retaining the sedex and lignite rights and that this would eliminate conflicts of interest issues which would otherwise arise whenever the Bullion Board contemplated exploration in the sedex/lignite areas. Fewster said he proposed a rights and useage agreement be entered into by a subsidiary of Narnoo Mining. The subsidiary would hold the lignite and sedex assets. Fewster referred to a prospectus issued by Nova Energy Limited as being a good example of such an agreement.

91 At the meeting Bantock said that Bullion understood that under the deal it would fund all the expenditure on the project through to a decision to mine and that Bullion would agree to spend a minimum of $2 million each year on the project through to the completion of a preliminary feasibility study.

92 Fewster commented on the draft heads of agreement and there was a discussion on Fewster's comments.

93 Exhibit 79 is a copy of the heads of agreement bearing the description Draft 1 29 July 2005. Clause 5.10 is the put and call on joint venture interests clause described by the parties as the gelignite clause. The typed text of the clause has been altered by handwritten amendments. Bantock said that the handwriting is that of Fewster. Bantock explained that they discussed the document on 29 July and again on 4 August. Bantock said that when they got to discussion of cl 5.10, the gelignite clause, there was some discussion as to how it would work and in explaining how it should work, Fewster lent across and wrote on Bantock's copy.

94 Fewster agrees that the handwriting on cl 5.10 of Exhibit 79 is his handwriting but disputed how it came to be on that copy of the heads of agreement. Fewster says that he made the handwritten amendments at the meeting on 3 August. They were discussing the change of the proposed transaction from the Mulga Rock Mining proposal to the CPPS proposal and Bantock gave the page of the heads of agreement document containing cl 5.10 to Fewster and Fewster made the amendments changing the name of the party from Mulga Rock Mining to Bullion. I accept Bantock's evidence of what occurred. I do not accept Fewster's evidence on this point.

95 After the meeting on 4 August Bantock prepared a document entitled "Discussion with M Fewster: Changes to HOA" for the purpose of sending it to Kiernan so that Kiernan would have a clear picture of changes that needed to be made to the heads of agreement to reflect the discussion between the parties. The note includes the following. Mulga Rock Mining is no longer involved. Bullion will acquire a 50 per cent interest in the tenements. The lignite/sedex rights on the tenements might be 50 per cent held by another subsidiary of Narnoo Mining. If Bullion does not elect to keep those rights after December 2007 then those rights might pass across to Narnoo. Fewster favours the concept of a rights and useage agreement similar to the Nova Energy prospectus. The consideration now comprises $0.5 million cash, 1.5 million options, 1 million fully paid ordinary shares, three annual payments of $600,000 and CPPSs. The CPPSs are to comprise 9 million CPPSs, being securities which automatically convert to fully paid ordinary Bullion shares on a one to one basis upon Bullion's market capitalisation exceeding $20 million; 10 million CPPSs automatically converting to Bullion fully paid ordinary shares on a one to one basis upon the happening of any feasibility study establishing a JORC standard resource and 25 million CPPSs automatically converting on 31 December 2007 if Bullion elects to keep the 50 per cent interest in the lignite and sedex.

96 The note further says that Bullion is to fund the project through to the decision to mine. There are other notes concerning the decision to mine and a note that a minimum expenditure requirement of $2 million per annum will apply for the period until Bullion has satisfied the CPPS second tranche conditions. The note refers to the "death trigger" and a number of other matters.

97 During the time that Fewster was negotiating with Bullion he was also negotiating with other parties. He had been negotiating with Linq Resources Fund since at least June. Fewster's colleague, Davis, met with Gareth Lloyd of Linq on 4 August 2005.

98 Fewster conducted negotiations with a company called Maple Minerals Corporation ("Maple") that was associated with a Canadian based resource company called Laramide Resources Ltd. On Tuesday 2 August a representative of Maple put an offer to Fewster. On Wednesday, 3 August Fewster responded with a counterproposal in which he said that he would like to conclude a deal soon. Maple put forward a further proposal on the morning of 5 August. Fewster replied by saying that it would take him a few days to decide which way to go with the project. Maple seems to have detected Fewster's lack of enthusiasm for its proposal and by a further e-mail on Friday, 5 August its representative said that he "just want[s] to assure you that Maple is keen to negotiate a deal that is fair to both parties and is committed to advance the project in line with your expectations".

99 Fewster held discussions with a company called KTL. I have already referred to the meeting on 2 August between Fewster, and Bowen and Paterson, solicitors who were then acting for KTL, at which Bowen outlined a proposal that KTL desired to put to Fewster for the acquisition of the Narnoo Tenements and Bowen said to Fewster that CPPSs may be a tax effective means of structuring a transaction between KTL and Fewster entities. That appears to have been the first occasion on which Fewster considered receiving CPPSs as part of the consideration for transferring interests in the Narnoo Tenements.

100 On 3 August Fewster sent an e-mail to John Fletcher, a representative of KTL, in which he attached what he described as an outline of a heads of agreement. The document outlined a proposal for the "Trafalgar group" to acquire Narnoo Mining. Part of the consideration involved CPPSs. Fewster concluded his e-mail by saying that he would appreciate if Fletcher could give him a yes or no or maybe on the proposal by 2 pm the following day (Thursday) and added: "I am under a bit of pressure to wrap up a deal ASAP". On the morning of Friday, 5 August Fewster sent an amended draft heads of agreement document to Fletcher.

Friday 5 August - Fewster telephones Bantock

101 On Friday 5 August Fewster telephoned Bantock. Fewster said that he had been approached by other companies who had made offers to him. Bantock said to Fewster that he had a clear choice to sell out or to corporatise his interest in the project by a deal with Bullion. Later that day Bantock met with Goyder and travelled to the Bullion offices. Bantock telephoned Fewster. Bantock and Goyder both spoke to Fewster. They said, in effect, that the deal they had put to Fewster was based on the structure that Fewster had said he wanted and that they could vary the proposal according to Fewster's wishes. Fewster said that he was unsure what he wanted to do and he would sleep on it.

102 The following day, Saturday 6 August, Bantock drafted a letter to Fewster. The draft letter reflected the previous day's discussion. The draft letter includes the sentence: "all of the above is structured in a tax-effective way -subject to your further professional advice - which is outstanding". Bantock never sent the letter because it was overtaken by events. Before Bantock could post the letter he received a telephone call from Fewster which was followed by further telephone calls.

103 Fewster, Bantock, Goyder, Stewart and McIntyre all gave evidence of or relating to the telephone calls on Saturday 6 August. Fewster's evidence of the times and sequence of calls is inconsistent with that of Bantock, Goyder, Stewart and McIntyre. I accept the evidence of Bantock as to the sequence and time of the calls.

104 Bantock's evidence is that Fewster telephoned him at about 11.30 am. I accept that Fewster telephoned Bantock at about that time. Fewster and Bantock have different recollections of what was said in the first telephone call. The minutes of the meeting of directors of Bullion held on Saturday 6 August summarise Fewster's first call to Bantock that day. The minutes were prepared by Bantock after the meeting. Goyder subsequently signed the minutes and testified that they were an accurate minute of what occurred. Counsel for the plaintiff, Mr Bennett, submitted that the minutes of the meeting provide the best evidence of the later telephone call between Fewster and the Bullion directors. Senior counsel for the defendants, Mr Williams QC, did not dispute the accuracy of what was said in the minutes, although he submitted that Mr Fewster gave a more detailed account of the telephone conversations. I accept that the minutes contain an accurate, although truncated and incomplete account of the board meeting and of the first telephone conversation between Fewster and Bantock on 6 August and of the later telephone conversation between Fewster and the Bullion directors during the course of the meeting of the board of directors of Bullion.

105 The recollections of Bantock and Fewster differ as to when and in what conversation things were said. They differ as to whether some things were said or not. I am not satisfied that either of them has a recollection of the words that were spoken as distinct from their impression of the effect of what was said. The most reliable guide to the contents of the telephone conversations is the minutes of the meeting of the board of directors.

"Earlier this morning, Mr Fewster had telephoned Mr Bantock and advised of the deal structure which, if agreed to by Bullion, Mr Fewster would commit to, today.

Mr Bantock outlined the principal terms of that structure as follows:

• Cash payment of $1.1 million, up front (to be characterised as for purchase of intellectual property relating to the project, including Mr Fewster's masters thesis);

• 1 million Bullion [fully paid ordinary] shares, up front;

• 1.6 million $0.20 5-year Bullion options, up front;

• 25 million Convertible Preference Performance Shares (CPPSs), which convert to 25 million Bullion [fully paid ordinary] shares upon Bullion's market capitalisation exceeding A$30 million;

• 20 million CPPSs, which convert to 20 million [fully paid ordinary] Bullion shares upon Bullion electing to retain lignite/sedex minerals rights beyond 31 December 2007;

• each tranche of CPPS will be subject to a 2-year voluntary escrow period;

• Mr Mike Fewster and Mr Chris Davis are to join Bullion's Board;

• Bullion is to fund all project expenditure through to Decision to Mine;

• The minimum expenditure requirement of $2 million per annum would apply in the period prior to Bullion producing a [pre-feasibility study];

• two further cash payments are to be made to Mr Fewster or his nominee of $600,000 each on 1 July 2006 and 1 July 2007."

107 I have referred earlier in these reasons to the first telephone conversation between Bantock and Fewster on 6 August. For the reasons I have stated, I accept that Fewster said words to the effect that he wanted to do a deal that day and that if Bullion accepted the terms Fewster had put forward then Fewster would stop negotiating with other parties and would do the deal with Bullion. I place no weight on Bantock's statement in cross-examination that Fewster put the proposition of a verbal agreement to him.

108 After the telephone conversation Bantock called Goyder and Stewart to convey the telephone discussion and convene an urgent Board meeting to consider Fewster's proposal.

109 The Bullion Board meeting was held at Goyder's home in Mosman Park. The minutes disclose that the meeting commenced at 1.15 pm with Goyder, Bantock and Kiernan present and Stewart present by telephone. The minutes state that earlier that day Fewster had telephoned Bantock and advised of the deal structure which, if agreed by Bullion, Fewster would commit to that day. The minutes state that Bantock outlined the principal terms of the structure and set out those terms. The terms are those Fewster outlined in his telephone conversation with Bantock earlier that day that I have set out above.

"Mr Bantock outlined the reasons for development of the deal in the above principal structure, as explained to him by Mr Fewster, and concluded by reiterating that, whilst Bullion may seek a slightly different structure in a number of the elements, it was time to make a decision as to whether to commit or not, given Mr Fewster's undertaking that if Bullion agreed to deal today, then the deal would be done. Mr Bantock commented that Mr Fewster was waiting for his call."

111 The statement what whilst Bullion may seek a slightly different structure in a number of elements it was time to make a decision as to whether to commit or not is ambiguous. Senior counsel for the defendant submits that those words demonstrate the incomplete nature of the discussions between Fewster and Bullion on 6 August in that Bantock was suggesting that Bullion may seek to slightly change the structure and a number of elements in the course of further negotiations. On the other hand, counsel for the plaintiffs says that the words mean that whilst Bullion may have wanted some aspects of the structure to be slightly different it was now time to make a decision on the basis of the proposal put forward by Fewster, that is it was time to take it or leave it. In my view the words of the minutes are ambiguous and it is not possible to resolve that ambiguity.

112 The minutes state that there was some discussion and then Stewart left the meeting because he had a pressing commitment and it was agreed that he would be briefed on the outcome of the meeting prior to Bullion committing to the deal. McIntyre then joined the meeting by telephone. McIntyre outlined his endorsement of the decision to invest. McIntyre left the teleconference. There was further discussion. The board then resolved, subject to the final agreement of Stewart, that the company would commit to the proposal put by Fewster.

113 The minutes then state that Fewster joined the meeting by teleconference. That is confirmed by the evidence of Bantock, Goyder and Kiernan. Fewster's evidence is that he believed he spoke with members of the board at a later telephone conversation at about 7 pm. I accept the evidence of Bantock, Goyder and Kiernan on this point.

114 I accept the account of the teleconference that is set out in the minutes of the Bullion board meeting as follows:

"Mr Bantock outlined that, as he had explained to Mr Fewster in their previous telephone discussion earlier in the morning, the Board of Bullion had met to consider the deal put by Mr Fewster. He then summarised the deal put by Mr Fewster this morning, as outlined above.

Mr Bantock stated each principal point to the deal and sought and received for each point Mr Fewster's understanding and agreement of the point. He also confirmed that the above comprised the principal points of the deal. It was then clarified that the basis of future dealing was that if Mr Bantock telephoned Mr Fewster later in the day saying that Bullion accepted his deal, then the deal outlined above would be done.

The Board explained to Mr Fewster that it awaited a further conversation with Mr Stewart, before this confirmation would be made. Mr Fewster agreed and the Board assured Mr Fewster that Bullion looked forward to working as his partner to optimise the project and develop an outstanding uranium business.

Mr Bantock then summarised the process from here, being that subject to Mr Bantock confirming Bullion's acceptance of the deal, Bullion would request a trading halt on the ASX from Monday 8 August 2005, which under the Listing Rules could last for two days. It was expected that the agreed deal would be summarised in a bulletpoint list, which Messrs Bantock and Fewster would review by Monday lunchtime, after which the Heads of Agreement embodying the agreed deal would be prepared, concurrent with the relevant stock exchange announcement, over the course of Monday afternoon and Tuesday. On this basis, it was hoped that Bullion's ASX trading halt would cease on Tuesday, with the public announcement of the deal being released on the Wednesday morning. Mr Bantock stated that he would work on the bullet points over the weekend, and Mr Kiernan stated he would update the previous draft Heads of Agreement to incorporate today's changes pursuant to the agreed deal.

Each party wished the other well and Mr Fewster left the teleconference."

115 After the Board meeting concluded Bantock attempted to contact Stewart. Bantock was unable to contact Stewart for some time and at approximately 5 pm contacted Fewster and informed him that he (Bantock) expected to speak with Stewart shortly and to confirm with Fewster his agreement with Bullion. Fewster said that he was going to a Perth Glory game but that Bantock could contact him by mobile phone to confirm their agreement. Fewster also asked Bantock to confirm an aspect of the deal which he said had been raised previously but had not yet been effected in the draft heads of agreement and was not raised in their discussion that morning. Fewster asked that Bullion commit to a minimum expenditure requirement in relation to the lignite/sedex minerals area of the tenements of $750,000 by 31 December 2007. Bantock said that that matter had previously been discussed and therefore it should be included. Bantock asked Fewster to discuss details of the exploration further with McIntyre on Monday.

116 Bantock then telephoned McIntyre to discuss the $750,000 expenditure requirement. Bantock and McIntyre concluded that Bullion should agree to the $750,000 minimum expenditure.

117 Bantock then called Fewster to confirm the matter. However, Fewster was not at home and Bantock spoke to Mrs Fewster.

118 Goyder then joined Bantock at Bantock's home. Goyder and Bantock telephoned Stewart at around 6.30 - 7 pm. Bantock and Goyder outlined to Stewart the outcome of the Board meeting at which he was not present and then further discussed the merits of the proposed deal. Stewart said that he had spoken with McIntyre, who had considered the matter and he agreed the agreement should proceed.

119 Bantock then telephoned Fewster who was at the Perth Glory game. Bantock's phone was on speaker phone and Goyder was present. Bantock's evidence is that he said words to the effect that Bullion had accepted the deal that Fewster had proposed and that therefore the deal was done. Bantock said that he would notify the ASX to put the company into a trading halt on Monday. Bantock's evidence is that Fewster said words to the effect that Bantock and Goyder should be delighted, but he was also delighted and that they should crack open a bottle of champagne to celebrate the deal. Bantock concluded the call by arranging for Goyder, Fewster and himself to meet at Bullion's offices on Monday morning at 9.30 am. Goyder's evidence is that both he and Bantock said words to the effect that they had spoken to Stewart and that Bullion was happy to go ahead with the deal.

120 I am unable to make a finding as to the words used by Bantock and Goyder in their telephone conversation with Fewster. I am not able to find that Bantock said that the deal had been done rather than that the deal would be done or some similar words. I observe that the board resolution earlier in the day was that the company would commit to the proposal put by Fewster. I find that Bantock and Goyder conveyed to Fewster that Bullion accepted the deal that Fewster had proposed earlier in the day and that Bullion would proceed with that deal.

121 On the evening of Sunday 7 August Bantock prepared a handwritten bullet point list of the terms of what he described as the agreement that had been agreed the previous day. In the course of drafting the notes Bantock telephoned Fewster to clarify a point in the arrangement as to the decision to mine implications in the context of a $1 billion resource. Bantock closed the call by again confirming that on the basis of their agreement Bullion would be placed in a trading halt the following morning.

122 On the morning of Monday 8 August Bantock wrote to the ASX requesting a trading halt. A trading halt was then effected.

123 At 8.36 am Fewster sent an e-mail to Fletcher of KTL in which he said:

"Events have moved fast down here, and I regret to inform you that I have agreed to basic terms with a Perth based company, with the intention of executing a Heads in a few days. An announcement should be out on Wednesday.

However, if for some reason the deal is not concluded, I will contact you again, and we can pick up discussions again."

Fewster sent a copy of the e-mail to Bowen and Paterson.

124 At 8.30 am Bantock had arrived at the offices of Bullion. He spoke with McIntyre. Bantock says he instructed his secretary to type the first draft of the bullet point list from his handwritten bullet point list.

125 Fewster arrived at the Bullion office at about 9 am. Davis arrived at about the same time. Fewster commenced discussions with McIntyre and Stewart. Davis met with Bantock. Bantock advised Davis to the effect that Bullion had done a deal with Fewster and that consequently Bullion was now in a trading halt. Bantock discussed with Davis matters relating to the agreement and Davis' future employment with Bullion. Davis then left Bantock's office and joined the meeting of McIntyre, Stewart and Fewster. Bantock briefly joined that meeting. Stewart left the Bullion offices at around 10 to 10.30 am.

126 At about 10.30 am Bantock asked Fewster to come to the Board room to work through the bullet point list with himself and Goyder.

127 Bantock's evidence of what happened in his discussions with Fewster and Goyder is principally given by way of a statement of his impression, understanding or conclusion of the effect of what was said. Bantock said:

"I gave Fewster and Goyder each a copy of the bullet-point list. I asked Fewster in respect of each point words to the effect did the words used in the bullet-point reflect Fewster's understanding of our agreement? Where he felt that the point had not represented the agreement, he advised of this and amendments were made. Goyder also made comments which, when agreed with Fewster, were reflected within the bullet-points."

128 Bantock then says that he asked his secretary to effect the agreed changes and she brought back a clean copy of the bullet point list. Bantock then said:

"We then read through the amended list. Fewster then agreed that the final list of bullet points accurately reflected our agreement.

The specific changes can be identified by comparing the first draft of the bullet points ... to the final bullet points".

129 Bantock's evidence that Fewster "agreed that the final list of bullet points accurately reflected [their] agreement" is Bantock's summary of the effect of what was said rather than an account of the words actually spoken.

130 Goyder says that he, Bantock and Fewster worked through a bullet point list that Bantock had prepared over the weekend. The document identified by Goyder in his witness statement is Exhibit 24, the document entitled "Discussion with M Fewster: Changes to HOA" which is a handwritten document prepared by Bantock on 5 August after his meeting with Fewster on 4 August. However, in cross-examination Goyder referred to the discussion being in relation to a typewritten document.

131 In his witness statement Goyder says that he recalls that Bantock went through each point with Fewster to confirm whether he agreed with it. Goyder says he recalls that a number of amendments, described by him as minor, were made to certain of the bullet points including the cash component and changing the ongoing exploration requirement prior to feasibility. He said that they progressed through the bullet points list without much difficulty as most of the points were as previously discussed. He recalls that Kiernan joined the meeting at approximately 11 am and they went through the various points of the agreement with Kiernan.

132 Kiernan's evidence is that he joined the meeting around midday, or a little earlier. Kiernan's recollection is that he remained at Bullion's office for two to three hours. Kiernan and Bantock reviewed the first list of bullet points. Kiernan left the meeting on the basis that he was to draft a heads of agreement.

133 Fewster's evidence is that he, Bantock and Goyder began discussing the transaction. As each matter was discussed, Bantock took handwritten notes. From time to time his secretary entered the room and collected each completed page for typing. Fewster says that the first typewritten bullet points were given to him at about 1.30 pm. The first bullet points reflected the discussions up to that time.

134 In his witness statement Fewster said that he, Bantock and Goyder reviewed the first bullet points together when they were available. Fewster said that when they reached each of points 4 and 5 on page 1 and points 1 and 5 on page 2 he said words to the effect that: "that would do for now" but that he could not give Bullion a final answer as to who the recipient of the consideration would be until he had obtained advice from Golding. Fewster said that Bantock or Goyder said "OK" or words to that effect. Fewster went on to say that in relation to a number of points in the bullet points he said words to the effect that that would do for now and Bantock or Goyder said okay or words to that effect.

135 In his responsive witness statement Bantock disputed that Fewster commented "that will do for now" in relation to bullet point items. Bantock said that in substance, each point on the bullet point list was raised with Fewster and Fewster commented words to the effect of "I agree", "okay" or "that will do" indicating agreement of each point before moving on to the next point. Bantock says that where Fewster sought changes to a point, those were made and then agreed with Fewster.

136 Fewster says he does not recall being given a copy of the second bullet points prior to leaving the Bullion office but recalls being given a copy at Hardy Bowen's offices later that evening.

137 I do not accept Bantock's evidence of what happened on Monday 8 August. Bantock said that he wrote out his handwritten notes entitled "Agreement for the Development of the Mulga Rocks Uranium-Polymetallic Project" (Exhibit 95) on Sunday and gave it to his secretary to type on Monday morning and that she produced the first typed bullet points entitled "Agreement for the Development of the Mulga Rocks Uranium-Polymetallic Project" (Exhibit 105) from the handwritten notes before any discussion with Fewster that morning.

138 However, there are a number of differences between the handwritten notes and the first bullet points. Counsel for the defendants identified some 18 differences in their written submissions. One difference is that the consideration payable to Fewster in the handwritten notes involves three payments, the first of $0.15 million on signing the heads of agreement, the second $0.3 million within three days of the Bullion shareholder meeting approving the deal and a final payment "payable (?) 2005". In contrast, the cash component of the consideration in the first bullet points involves only two payments, the first of $0.15 million on signing the heads of agreement and a second payment of $0.95 million within "48 hours after [Bullion] shareholder meeting that approves the deal (and prior to the requirement to provide application monies pursuant to the placement)". Bantock did not satisfactorily explain the differences between the handwritten notes and the first bullet points.

139 Counsel for the defendants submitted a schedule that shows that there are a large number of differences between the first and second bullet points. Some of those changes are significant. For example, the first bullet points provide that the cash payment of $0.15 million on signing the heads of agreement is a refundable deposit whereas the second bullet points state that the payment is a non-refundable deposit. There are a number of items in the second bullet point list that add significant detail to corresponding items in the first bullet point list. Some of the points in the second list are different from the first bullet point list.

140 In his witness statement, Bantock says that after his secretary had effected the changes to the first bullet point list she brought back a clean copy of the bullet point list and he and Fewster then agreed that the second bullet point list accurately reflected their agreement. Bantock says that it was by that time around 11.30 am to 12 noon and Kiernan joined he, Goyder and Fewster in the boardroom. Bantock says that he reviewed each of the bullet points again for Kiernan's benefit. However, in his witness statement Kiernan said that he and Bantock reviewed the first bullet point list. The inference to be drawn is that the second bullet point list had not been drawn up at that time and was not available until Kiernan left the meeting some two or three hours later.

141 I accept the evidence of Fewster to the extent that on that Monday the parties discussed some items on the first bullet point list, some items were changed and others were left without Fewster saying that he was finally satisfied with the terms in which it was stated. I am not satisfied that Fewster said words to the effect that the second list of bullet points accurately reflected the agreement they had made.

142 I do not place any weight on the statement in Bantock's original witness statement (Exhibit 205) that he asked Fewster in respect of each point on the bullet point list words to the effect: "did the words used in that bullet point reflect Fewster's understanding of our agreement?" Nor do I accept Bantock's evidence that: "Where he [Fewster] felt that the point had not represented the agreement, he advised of this and amendments were made". Bantock's evidence in his responsive statement shows that Bantock asked whether Fewster agreed with the point on the bullet point list not whether Fewster agreed that the point represented the agreement.

143 The parties were engaged in a process of discussing terms to be incorporated into a heads of agreement. They were not engaged in a discussion about what had been agreed on 6 August or at an earlier time.

144 At one time on Monday 8 August, McIntyre joined Bantock, Goyder, Kiernan and Fewster in the Board room and asked in whose name should he arrange the graticular block tenements to be pegged. There was some discussion amongst McIntyre, Goyder, Kiernan and Fewster, the outcome of which was that it was agreed that the tenements should be pegged in the joint names of GER and Narnoo Mining. Before McIntyre left the boardroom he confirmed that he was issuing instructions to McMahon Mining Title Services for the blocks to be pegged in joint names. Fewster gave McIntyre his green manila folder entitled "Action Required" which contained background information as to the tenements and graticular block gaps for reference in executing that matter.

145 At the conclusion of the meeting Fewster said that he would meet with his solicitors, Hardy Bowen, so that they could be briefed on the transaction. Fewster made a telephone call and then left Bullion's offices at approximately 4.30 to 5 pm. Fewster then went to the offices of Hardy Bowen.

146 It is not clear when Fewster retained Hardy Bowen to act on his behalf. It was some time after 8.36 am on Monday, 8 August, that is the time at which Fewster sent his e-mail to Fletcher stating that he had agreed to basic terms with a Perth based company. Paterson said that after he received the e-mail he went and spoke with Bowen, Bowen went away and then came back and advised Paterson that they were capable of accepting instructions from Fewster. I infer that Fewster telephoned Paterson sometime after 8.36 am that morning and asked Paterson to act on his behalf in relation to his dealings with Bullion over the Mulga Rock Tenements.

147 At about 5.30 pm Paterson met Fewster at the offices of Hardy Bowen. Paterson had received from Bantock by e-mail a copy of the second bullet points. Paterson discussed the second bullet points with Fewster. Paterson discussed with Fewster two problems. The first was the fact that Bullion would need to satisfy a range of regulatory requirements and obtain shareholder approval, all of which would take substantially longer than the timeframes proposed in the second bullet points. The second related to the "death trigger" concept. The death trigger concept was to the effect that if Bullion became insolvent then Fewster, Eaglefield or Narnoo Mining got the right to buy back Bullion's 50 per cent interest for $1. The problem identified by Paterson was the fact that the death trigger clause recorded in the second bullet points was worthless since if a receiver was appointed to Bullion the contract between Bullion and Eaglefield/Narnoo could be avoided. Paterson advised Fewster that he would need to put in place a mechanism whereby Eaglefield/Narnoo would lodge a charge over all of Bullion's assets and would have a right to appoint a receiver to operate the property.

148 During Fewster's meeting with Paterson, Bantock telephoned Fewster and requested that Fewster attend Bullion's offices early the next day to discuss pit optimisation scenarios.

149 At 6.09 pm Paterson received an e-mail from Kiernan attaching a draft heads of agreement. The e-mail stated that the draft heads of agreement had not yet been reviewed by Bullion. Paterson and Fewster did not discuss the draft heads of agreement in any detail but agreed that they would do so the following day.

150 At about 9 pm that evening, whilst he was drafting Bullion's ASX announcement, Bantock telephoned Fewster. Fewster said that he had just arrived home from meeting with Paterson and that Paterson had raised three major points which were issues arising from the meeting that day. The first issue related to a requirement for Bullion to undertake an independent expert's report to accompany the notice of meeting for the Bullion shareholders to approve the deal. Bantock said that he did not see that as a major issue because the expert's report would be written by an accountant and may add two weeks to an overall timeframe, for which a period of 45 to 60 days had been allowed. The second point related to the need for a prospectus. Bantock said that Bullion had already done a prospectus that year and it was a straightforward compliance task and should not interfere with the deal. Fewster could not remember the third point. Fewster then said words to the effect that Bantock request McIntyre to "pull" the tenement application in respect of the graticular blocks. Bantock said he would call McIntyre but doubted that that could be achieved.

151 Bantock then called McIntyre and explained his discussion with Fewster. McIntyre said that there was no chance of pulling the tenement applications because McMahon Mining Title Services had already acted on his instructions and the applications would be lodged first thing in the morning in Leonora and McIntyre was not able to recall the application envelope.

152 On the morning of 9 August Fewster and Paterson met at the offices of Hardy Bowen. Fewster said to Paterson that the draft heads of agreement was very brief and did not properly reflect his understanding of the transaction in four respects. The first was that the transaction was to be a farm-in not a sale. The second was that the purchase price to be paid in the short term was for intellectual property. The third was that Bullion would have a right to farm-in to the exploration licences but would not acquire an interest unless and until it completed its funding obligations. The fourth was that the interest would be transferred by way of security with a charge back to Fewster so that the interest would be reconveyed if Bullion did not comply with its obligations.

153 Stewart, McIntyre, Davis and Fewster met at Bullion's offices and discussed matters concerning mining scandium. At the meeting Fewster asked McIntyre the status of the tenement applications prepared by Bullion. McIntyre said that they had been sent to the Department of Infrastructure and Resources the previous day with the applicants noted as GE and Narnoo. Fewster made no response at that time.

154 At approximately 10 am Paterson, Davis, Bantock, Kiernan and Goyder met at Bullion's offices. Fewster joined the meeting shortly after it began. Paterson said that he did not intend commenting on each clause of the draft heads of agreement, that he had met with Fewster to review the second bullet points and that there were several high level issues that had to be resolved before the parties could move forward.

155 There was a discussion about Fewster's position on the board of Bullion and the potential for a conflict of interest by reason of the placement of shares to Fewster. There was also a discussion about the time it would take to obtain shareholders' approval and the obtaining of an independent expert's report. Paterson said that Fewster was concerned that it was going to take 90 days to complete the independent expert's report. He queried what was going to happen between then and the granting of shareholder approval. Paterson said that Fewster had thought of a solution to this issue whereby Bullion would commence work on the project and spend $100,000 on the project between then and the Bullion annual general meeting. Bantock and Goyder said that they accepted that proposition.

156 On the afternoon of 9 August Kiernan e-mailed to Paterson a marked up draft two of the heads of agreement. Later that afternoon Fewster met with Paterson at Hardy Bowen's offices. Paterson e-mailed the second draft heads of agreement to Golding.

157 At about 6.15 pm that evening Golding telephoned Paterson whilst Fewster was still at Paterson's office. Paterson placed the call on speaker phone. Golding stated that he had serious concerns regarding the proposed structure of the transaction set out in the second draft heads of agreement. In particular Golding stated that, in his view, the proposed model would not result in the recipient of the CPPSs obtaining tax relief since the first tranche of CPPSs would most likely be triggered a very short period of time after issue and, on that basis, the Australian Taxation Office would assess the value of the CPPSs at issue as being the value at which they were then triggered. Golding, Paterson and Fewster discussed whether the first payment of $1.1 million would be assessed as a capital gain for Fewster. Golding advised that would not occur since the payment would be aggregated into the deal and deemed to be income. Fewster estimated that the tax liability resulting from the deal would be in the order of $3 million as opposed to an anticipated tax liability of $300,000.

158 Early on Wednesday morning, 10 August, Fewster telephoned Bantock and said that there was a fatal flaw in the transaction model set out in the second draft heads of agreement in that it would not entitle the recipient of the CPPSs to tax relief. Fewster said that Paterson, Golding and he were meeting that morning to consider other options.

159 Fewster met with Paterson and Golding at Golding's office. Golding said that there was not a mechanism that he could approve at that time that would allow the deal to proceed in a way which would secure tax relief.

160 Bantock telephoned Fewster. Fewster agreed that he and Paterson would attend at Bullion's offices at 12 noon.

161 Shortly after 12 noon Fewster and Paterson met with Bantock and Goyder at Bullion's offices. Paterson said that there were problems with the current proposal and that there were several ways that the parties may be able to resolve those problems. There are differences in the recollections of those present at the meeting. I find that Paterson suggested ways in which Fewster's tax difficulties might be overcome. One proposal was that Bullion would indemnify Fewster against any tax liability arising from the transaction, but Bantock and Goyder rejected that proposal. Paterson said that Fewster had always understood that the proposed transaction was subject to legal and tax advice and that the preliminary tax advice was that the proposed transaction could not be done due to adverse tax consequences. Goyder and Bantock said that they were willing to consider other proposed structures or variations to the agreement but there was already a binding agreement between Fewster and Bullion. At the end of the meeting Fewster was demonstrably distressed and suffered a temporary collapse.

162 That afternoon Kiernan prepared and e-mailed to Paterson an amended second draft heads of agreement.

163 On the morning of Thursday, 11 August Fewster and Paterson met with Bantock, Goyder and Kiernan at the Bullion office. Paterson went through some potential proposals by Fewster. Paterson put forward new proposals that were materially different from those previously agreed or discussed with Bullion. During the meeting Paterson said that the proposal in its current form could not go ahead but that Fewster remained interested in trying to do a deal. Kiernan said that there was already an agreement. Paterson said that that was not Fewster's position. Kiernan said that Bullion was prepared to entertain further discussions without prejudice to its position that there was already an agreement. Paterson agreed. The meeting concluded on the basis that Fewster would develop a further proposal in writing for the consideration of Bullion.

164 Paterson then met with Golding either in person or by telephone. They agreed that there was no way the deal could be done in its current form. Golding, Fewster and Paterson developed a new written proposal.

165 At 3.26 pm on Friday, 12 August Paterson e-mailed to Kiernan a new proposal. At approximately 4.30 pm Kiernan telephoned Paterson and informed Paterson that Bullion declined the proposal on the grounds that it was uncommercial.

166 On Saturday 13 August Bantock sent a without prejudice e-mail to Fewster. Bantock said:

"We have an agreed deal ... It is the deal you agreed in person in our board meeting and subsequent discussions with [Goyder] and myself last Saturday, and upon which you suggested we open a bottle of champagne on Saturday night and we mutually agreed to call a trading halt for Bullion last Monday. You will recall that we also spoke last Sunday afternoon and again confirmed the deal was in place and that we would proceed to the trading halt on that basis. ..."

167 Bantock went on to say that that Bullion was willing to look for a way to commercially resolve Fewster's issues but that Bullion must clarify its position to the ASX and take whatever legal recourse is recommended to protect Bullion's position.

168 Fewster replied by e-mail on Sunday 14 August. Fewster said:

"I entered into negotiations with you with the full intent of concluding a deal, but that deal was simply unobtainable.

Our discussions last weekend only set a starting point from which to commence negotiations (ie, the consideration and some other broad issues). To suggest that it represented a binding agreement is nonsense. We both knew that a deal was going to be subject to working through the maze of taxation and regulatory issues that would emerge as we proceeded. There was also a great deal of mechanical detail that had to be resolved for such a complex deal to work; recovery of the reserve minerals and scandium etc. I still don't fully understand how the mythical Newco was to fit into the deal!"

169 Fewster went on to suggest that Bullion make an announcement to the ASX including comments that the negotiations had failed.

170 On 15 August Bullion lodged caveats over exploration licences E39/876 and E39/877. The caveats were supported by a statutory declaration by Bantock in which Bantock stated that Bullion claims a 50 per cent interest in the tenements pursuant to an oral agreement between Bullion and Fewster on behalf of Eaglefield and Narnoo on 6 August and an oral agreement between Bullion and Fewster at a meeting on 8 August.

171 On 16 August Bullion was removed from voluntary suspension on the ASX. In its announcement Bullion stated that in the opinion of the company it had agreed to acquire a 50 per cent interest in the Mulga Rock Uranium-Polymetallic Project from interests associated with Fewster.

172 On or about 16 August Bullion and GER lodged further applications for prospecting licences in the name of GER which related to ground within the project area.

173 On 19 August Bantock, as managing director of Bullion, wrote to Fewster. Bantock said that there was an agreement for Bullion to acquire a 50 per cent interest in all mineral rights except scandium at the Mulga Rock project and that the terms of the agreement were reflected in the bullet point sheet agreed and retained by each of them in the Monday meeting. Bantock stated that Bullion did not accept Fewster's repudiation of the agreement and would continue to perform the agreement and was currently finalising the draft heads of agreement as a basis for final documentation and stamping.

174 On 29 August Bullion commenced these proceedings.

175 The plaintiff says that the plaintiff made a concluded binding and enforceable agreement with the defendants. The plaintiff's primary case is that the agreement was made upon the plaintiff's acceptance during the telephone conversation between Bantock (with Goyder on speaker phone) and Fewster between 7.14 pm and 7.47 pm on Saturday, 6 August 2005, of the offer made by Fewster on behalf of himself and the other defendants during his telephone conversation with Bantock at approximately 11.20 that morning and reported to the board at around 1 pm. The terms of the agreement, according to the plaintiff, are essentially those set out in the first bullet points.

176 Alternatively, the plaintiff says that the agreement was made at around 4 pm on Monday, 8 August 2005, upon Fewster on behalf of himself and the other defendants, and Bantock and Goyder on behalf of the plaintiff, agreeing all of the terms pleaded in subparagraphs 7.1 to 7.28.5 of the statement of claim, as recorded in the second bullet points.

177 The plaintiff says that the agreement was immediately binding as a contract within the first category described in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360 per Dixon CJ, McTiernan and Kitto JJ, namely that the parties reached finality on all the terms of their bargain and intended to be immediately bound but proposed that those terms would be restated in a fuller and more precise form but to the same effect. The plaintiff says alternatively, and to the extent that the agreement contemplates entry into further agreements, the agreement should be regarded as coming within the so-called fourth category, namely that the parties intended to be bound immediately by the terms which they agreed upon while expecting to make a further contract in substitution for the first contract containing, by consent, additional terms.

178 The plaintiff claims a declaration that the oral agreement between the plaintiff and the defendants constitutes a binding agreement in respect of the Mulga Rock tenements. The plaintiff seeks specific performance of the agreement. The plaintiff further seeks equitable damages for delay in the specific performance of the agreement and in the alternative damages. By consent it was ordered that the issues of damages should be tried separately and after the determination of the other issues in this case.

179 The defendants say that at no time was there a binding contract between the parties for four reasons. First, the parties were still in negotiations. The agreement was incomplete. Secondly, negotiations had been conducted on the basis that any binding contract was conditional upon the defendants obtaining favourable taxation advice. The taxation advice which the defendants received on 9 and 10 August 2005 was not favourable. Thirdly, the negotiations had been conducted on the basis that any binding contract was conditional upon the parties executing a heads of agreement. The parties did not execute a heads of agreement. Fourthly, essential terms of the arrangement between the parties had not been agreed as at 6 August or 8 August 2005 so that no binding agreement had been reached. The agreement was uncertain.

180 Alternatively, the defendants say that if there was a binding contract between the parties, performance of the contract was subject to Fewster, Eaglefield and Narnoo obtaining expert advice that the tax implications of the proposed arrangement were favourable. Advice was received that the tax implications were not favourable.

181 The defendants further argue that by virtue of s 119(2) of the Mining Act 1978 (WA), a legal or equitable interest in a mining tenement is not capable of being "created, assigned, affected or dealt with, whether directly or indirectly, except by an instrument in writing" signed by the person dealing with the interest. Where there is no instrument in writing sufficient to satisfy s 119(2) of the Mining Act, specific performance is not available, although a plaintiff may have a remedy in damages. The defendants say there is no instrument in writing within s 119(2) of the Mining Act and therefore the plaintiff does not have an interest in the tenements sufficient to support an order for specific performance.

182 The defendants further submit that specific performance of the agreement, if it is made out, should not be ordered because the defendants would suffer undue hardship amounting to injustice as a consequence. That is because of the capital reorganisation of the plaintiff in May 2006 and its consequences. The defendants say that the transactions entered into by the plaintiff since 8 August 2005 have substantially altered the nature of the entity with which the defendants were to have an ongoing relationship, the significance of the defendants' shareholding in the plaintiff and the consideration to be received by the defendants. In the circumstances the defendants say it would be unjust to order specific performance.

183 Further, the defendants submit that the Court should not grant specific performance because such an order would involve the Court in a process of superintendence of not only the performance, but also the preparation, of a series of complex agreements. Performance of those agreements would take place over a lengthy period of time, would involve, in part, an arrangement for personal services, and would necessitate a close degree of personal co-operation between the parties.

184 The defendants claim declarations to the effect that there is no agreement between the plaintiff and the defendants in relation to the project. Eaglefield claims orders compelling the plaintiff to withdraw the caveats lodged over the exploration licences and forbidding the plaintiff to lodge any further applications for exploration licences within the relevant area. Narnoo Mining also claims a declaration that Bullion had no caveatable interest in the exploration licences and orders that GER deliver to Eaglefield executed withdrawals of each of the GER applications and the joint applications for prospecting licences.

185 The defendants say that a binding confidentiality agreement was entered into by the plaintiff and Eaglefield dated 22 June 2005. The plaintiff, by Bantock, sent a signed copy of the confidentiality agreement to Fewster, on behalf of Eaglefield. Eaglefield then provided the confidential information to the plaintiff. GER was an associate of the plaintiff within the meaning of that expression in the confidentiality agreement. In making the applications for tenements to cover the graticular gaps GER and the plaintiff used the confidential information. Fewster claims that he did not consent to the making of applications for tenements in respect of the graticular gaps in the joint names of G E Resources and Narnoo or in the name of G E Resources alone. Alternatively, the defendants submit that any consent must be taken to have been withdrawn upon negotiations between the defendants and the plaintiff failing.

186 The plaintiff submits that the applications for prospecting licences were made from information within the public domain. Further, the plaintiff says that the first application was lodged with the agreement of the defendants and the second application was lodged pursuant to the agreement.

187 There is a further claim made by the defendants. The defendants say that there was an oral agreement made on 10 August 2005 that the plaintiff would pay Fewster $5,000 on account of further legal and accounting costs and the plaintiff has failed to pay this sum.

Legal principles relating to contract formation

188 The plaintiff's primary case is that a concluded agreement was made on 6 August 2005. The first issue is whether or not the parties intended to make a concluded agreement on 6 August. That intention is to be determined objectively by reference to what a reasonable observer would have concluded. Where the intention of the parties is equivocal, the conduct or communications subsequent to the alleged concluded agreement can be used for the purpose of showing that it was not in the contemplation of either party that they were to be bound until all the essential preliminaries had been agreed to, nor until a formal contract had been drawn up embodying all the matters incidental to a transaction of such a nature: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 per Gleeson CJ at 548. In this context, a formal contract embodying all the matters incidental to a transaction of such a nature includes a heads of agreement as well as a more comprehensive contract.

189 In Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (supra), the Court considered whether protracted negotiations had resulted in a binding agreement having been reached. At 548 Gleeson CJ said:

"In a case where a court is required to make a judgment concerning the intention of the parties in relation to what might broadly be described as a Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 dispute, it will normally be of importance that the court have an understanding of the commercial context in which the dispute arises, and a most significant feature of that context will relate to the subject which the parties regard, or would ordinarily be expected to regard, as matters to be covered by their contract. In some cases, such as transactions involving the sale and purchase of land, or leases, courts may properly feel well equipped to form a view on such matters without the need for much evidence. In many cases, however, of which the present is a good example, there is a need for evidence in one form or another as to what subjects would be regarded as requiring agreement between the parties. In this case the best evidence on that subject is to be found in the actual communications between the parties and, in particular, in the issues which they in fact addressed when they set about drafting their detailed contract.

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

190 This case raises two questions. The first is whether the parties to the putative contract intended to make a concluded agreement. The second is whether they succeeded in doing so. In this case the two questions are closely interrelated.

191 The first question involves the objective determination of the intention of the parties from a consideration of the discussions between Fewster and Bantock on 6 August in the context of their dealings over a period of time. It is both appropriate and necessary to have regard to the commercial circumstances surrounding their discussions and the subject matter of those discussions. Furthermore, it is proper to have regard to communications and dealings between the parties subsequent to 6 August to the extent to which those communications and dealings throw light upon their intention to make a binding contract.

192 I will first set out some of the principles relevant to the resolution of the present issues. This summary of principles is based largely upon the summary of Kirby P in Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551at 14,569.

193 Firstly, the mere fact that the parties contemplate the execution of a heads of agreement or a formal contract, subsequent to an oral or informal agreement, does not mean that the oral or informal agreement is not presently binding.

194 Secondly, the fact that the parties contemplated the drawing up and execution of a heads of agreement is a consideration which may point to the conclusion that no presently binding agreement was intended until that heads of agreement was executed.

195 Thirdly, the existence of matters in which the parties have not reached consensus in their informal agreement will render it the less likely that they intended immediately to be bound before the execution of a formal document. As Gleeson CJ said in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd at 548, in the ordinary case, as a matter of fact and commonsense, other things being equal, the more numerous and significant areas in respect of which parties have failed to reach agreement, the slower a court will be to conclude that they have the requisite contractual intention. Even where the parties have agreed on the major matters, their subsequent conduct may indicate that they did not intend to be bound until the other issues between them were resolved in a formal document.

196 Fourthly, in order to determine what areas the parties were, and were not, in agreement, and what matters they considered necessary in order for an agreement to exist, it is legitimate to examine their subsequent conduct. Where communications between the parties after an informal agreement refer to important terms and conditions not mentioned or resolved during that informal discussion, it may more readily be inferred that the earlier discussion was simply a preliminary negotiation and not a binding agreement.

197 Fifthly, depending upon the size, importance and complexity of the subject matter, the less formal the initial agreement, the less likely it will be that it was intended to be legally binding and enforceable. Thus, an oral discussion which contemplates a subsequent formal written agreement is less likely to have been intended to have been immediately binding.

198 Sixthly, it is necessary to consider the nature and importance of the transaction which the parties contemplate. Where the agreement concerns a large sum or a significant transaction, it is less likely to have been intended to be presently binding. Broadly, the bigger the deal, the less likely that a court would conclude that informal exchange amounts to a contract: Cheshire and Fifoot's Law of Contract 8th ed Australia, at [3.9] and cases cited at footnote 67.

199 A further important principle is that the court should strive to uphold the parties' agreement where it is proper to do so. In Geebung Kirby P said that courts should be the upholders of bargains and not their destroyers. His Honour went on to observe that this aphorism begs the question to be solved but considered it important that courts should avoid "an over-nice approach to the arrangements between the parties which results in a disharmony between the parties' reasonable expectations and what our law provides". On the other hand, the court must be responsive to the need to ensure that business people can carry on negotiations without precipitous consequences.

Terms concerning Reserve Minerals and scandium

200 The defendants say that there were a number of matters, particularly matters concerning the Reserve Minerals and scandium, that were not agreed on or before 6 August or on or before 8 August. The defendants say that all of these are matters on which further agreement between the parties would be essential for there to be an enforceable agreement for the transfer of interests in the tenements and a future relationship to develop the tenements so that in the absence of agreement on those matters, any agreement made on 6 August or 8 August was no more than an agreement to agree. I will consider each of the matters raised by the defendants, starting by considering matters relating to the Reserve Minerals.

A. Inclusion or exclusion of Reserve Minerals

201 The defendants submit that agreement on how the sedex gold prospects and lignite were to be defined and dealt with was a critical component of any concluded agreement between the parties. They submit that the terms for the division of the rights to the sedex and the lignite prospects within the tenements varied throughout the period of negotiations and were never settled.

202 In his evidence, Bantock said that he understood that the principal consideration components to the deal that were discussed in the telephone conversations on 6 August were to sit alongside the other more minor items of the deal previously articulated in progressive drafts of the heads of agreement and the subsequent discussion of them as summarised in his notes of 5 August headed "Discussion with M Fewster - Changes to HOA". It is necessary to briefly review the negotiations in relation to the sedex and lignite rights.

203 In his e-mail of 20 May to Fewster Bantock suggested that Fewster retain the oily lignite rights to the extent that they are clearly separable from the other poly-metallic resources.

204 On 22 June, the day after meeting with Fewster, Bantock sent Fewster a letter and memorandum summarising Bullion's proposal. The memorandum proposed that "whilst the scandium and lignite rights (clawed back on basis suggested in diagram and to the extent readily separable from the uranium rights) are held by Eaglefield, Eaglefield and EMA will share information arising from their respective exploration and development activities".

205 In his notes of the meeting on 22 July, Bantock recorded diagrammatically that Eaglefield would retain ownership of all scandium, lignite and sedex prospects.

206 The only heads of agreement that had been seen by Fewster before 8 August was Draft 1 - 29 July 2005. Clause 5.4 of that draft heads of agreement provided that the joint venture excludes the reserved minerals and unless Mulga Rock Mining and Narnoo Mining agree otherwise Mulga Rock mining shall acquire no rights in relation to the reserve minerals irrespective of any expenditure undertaken in relation to the tenements by Mulga Rock Mining. Reserved Minerals was defined to mean scandium, lignite and sedex gold in those areas marked by cross hatching in Annexure A to the extent that those Reserved Minerals are clearly separable in a geological, exploration and development sense, from the underlying uranium resource. The defendants submit, correctly, that under this definition of Reserve Minerals Bullion would have acquired an up front 50 per cent interest in all scandium and lignite that would be contained in a uranium pit contrary to the proposal advanced and discussed at that time, namely that Fewster retain ownership of all scandium and unmineralised lignite within the pit.

207 The lignite and sedex rights were discussed at the meeting on 4 August. After the meeting Bantock prepared notes entitled "Discussion with M Fewster: Changes to HOA" for the purpose of sending it to Kiernan to redraft the heads of agreement to reflect the discussion between the parties. Bantock noted that Mulga Rock Mining was no longer involved. Bullion would instead acquire a 50 per cent interest in the tenements. The lignite/sedex rights on the tenements "apparently might be 50 per cent held by another subsidiary of Narnoo Mining such that if Bullion does not elect to keep those rights after December 2007, those rights might pass across to Narnoo". Bantock noted that he was not sure how this works in practice and that Fewster was getting advice on this. He also noted that Fewster favoured the concept of a rights and useage agreement, similar to the Nova Energy Prospectus. Bantock wrote that:

"Fewster is going to deliver a map with the relevant areas marked in terms of the lignite/sedex rights. We will have U rights over the entire area."

208 In cross-examination Bantock agreed that at the meeting on 4 August they did not have a map with the relevant areas marked in terms of the lignite and sedex rights.

209 In the first telephone conversation between Bantock and Fewster on 6 August Fewster stated the consideration to be received by Fewster for his entities. The consideration included 20 million CPPSs which were to convert to 20 million fully paid ordinary Bullion shares upon Bullion electing to retain lignite/sedex mineral rights beyond 31 December 2007.

210 Fewster's evidence is that the proposal he put to Bantock on the morning of 6 August was different to that they had discussed on 5 August, or 4 August, in relation to the subdivision of the lignite and sedex rights. Fewster's evidence is that he said that he would agree to Bullion acquiring upfront a 50 per cent share of mineral rights in the sedex gold prospects located close to the Emperor and Shogun uranium deposits and that all sedex gold prospects west of the Ambassador uranium deposit were to remain excluded. Fewster says that Bantock did not respond at that point in the conversation. Fewster's evidence is that later in the conversation he or Bantock said that there needed to be a map delineating the subdivision of mineral rights within the tenements and tenement applications. Fewster said that they would have to prepare a map to define the boundaries of the sedex gold prospects west of the Ambassador uranium deposit, the iron oxide gold - copper prospects under and east of Ambassador and the sandstone gold deposit south of the Emperor uranium deposit. Fewster said that he would prepare the map at some stage in the future and discuss it with Bantock and Bullion's exploration manager. Fewster says that Bantock said yes or words to that effect.

211 Fewster says that in his later telephone conversation with the members of the board, which he incorrectly states was at approximately 6.30 pm, there was a further discussion between he and Bantock to the same effect.

212 When those matters were put to Bantock in cross-examination he said that he did not recall Fewster saying that. I understood Bantock to mean that he did not remember Fewster saying those things, not that he denied that Fewster said them.

213 The minutes of the Bullion directors' meeting of 6 August does not contain any mention of a term concerning the division of sedex rights. However, the minutes record only that Bantock outlined the principal terms of the structure and the terms listed, except for a term that Fewster and Davis are to join Bullion's board, refer to the consideration to be provided by or payments to be made by Bullion. Other matters were discussed. For example, on the back of an envelope Bantock made notes about gaps and surrounding exploration licences.

214 In the conversation between Bantock and Fewster at approximately 5 pm on 6 August Fewster asked Bantock for Bullion to commit to a minimum expenditure requirement in relation to the lignite/sedex minerals area of the tenements of $750,000 by 31 December 2007. Bantock said to Fewster that he recalled that that had been previously discussed and therefore it should be included but he asked Fewster to discuss details of the exploration further with McIntyre. Bantock then spoke to McIntyre about that matter.

215 On the evening of Sunday 7 August Bantock prepared a bullet point list of the terms of the agreement that he understood had been agreed the previous day. At some time on the morning of Monday 8 August Bantock instructed his secretary to type the first draft of the bullet point list. At some time that morning Bantock gave Fewster and Goyder a copy of the typed bullet point list. The first bullet point says:

"Bullion will acquire a 50% interest in all minerals rights except scandium ... from commencement. This will comprise a direct interest in the subject tenements other than the Lignite/Sedex rights that may be in a purpose specific company (see below)."

There was no reference below to the purpose-specific company but a further bullet point entitled "Sedex/Lignite" contained a sub-bullet point:

"Mike Fewster will provide a map showing the previously explained geographical position of the subject Sedex/Lignite rights. Whilst [Bullion] will have Uranium rights in all tenements, it must make a decision by 31 December 2007 on whether it wishes to keep to keep the Sedex/Lignite rights. Keeping them triggers the 20 [million] CPPS (see above)."

A further bullet point said that scandium rights always remain outside the deal.

216 The second bullet points were unchanged so far as scandium and lignite rights were concerned although there were changes to the contribution to costs from scandium revenue item.

217 After the meeting at Bullion's offices, Fewster met with his solicitor, Paterson. At 6.09 pm Paterson received an e-mail from Kiernan attaching a draft heads of agreement. The e-mail stated that the draft heads of agreement had not yet been reviewed by Bullion. Kiernan's covering letter said that his draft assumes that the company to hold the Reserve Minerals rights will be incorporated prior to signing the heads and the Reserve Minerals Agreement as between that company and Narnoo Mining will also be in place. The letter went on to say that:

"[O]n talking to Fewster that afternoon it appeared that would not be the case with the consequence that the heads of agreement would need to provide for Narnoo Mining or Fewster agreeing to cause the incorporation of the company and the entry into of the Reserve Minerals Agreement."

218 The proposed transaction contemplated that there would be a Reserve Minerals Agreement in addition to the Reserve Minerals Joint Venture Agreement. Bullion contemplated that agreement would be executed prior to the heads of agreement being executed. No steps were taken to prepare or agree the terms of that agreement. The defendant submits that it would have been necessary to identify and agree the substantive content of the obligations involved before a legally binding agreement was concluded.

219 The defendants submit that the parties had to agree a map depicting the division of mineral prospects to be acquired by Bullion upfront and then upon issue of the second tranche of CPPSs. At the meetings between Bantock, Goyder and Fewster on 4 and 5 August it was agreed that Fewster would need to produce a map showing the exclusion of certain sedex, gold and lignite prospects. It was again agreed on 6 August that Fewster would provide a map. Fewster's evidence is that his proposal about sedex rights changed on 6 August and the map was to be different.

220 On 9 August Fewster provided Bantock with a map which showed the area in which Bullion was to acquire a 50 per cent interest in all minerals except scandium and unmineralised lignite. The map in effect showed the area in which Bullion was to acquire a 50 per cent interest in sedex rights as well as uranium. The map did not show the subdivision of reserved minerals within the project areas which was to be the map at Annexure A to the draft heads of agreement. McIntyre reviewed the map provided by Fewster. He concluded that it did not fit the description of reserve minerals as defined in the 8 August draft heads of agreement and made alterations to the title and description of the map to comply with the definition in the draft heads of agreement.

221 The map prepared by Fewster on the morning of 9 August is consistent with his evidence that he proposed to Bantock that Bullion would acquire a 50 per cent interest in the sedex prospect located close to Emperor and Shogun and that all sedex rights west of the Ambassador uranium deposit were to be excluded from the agreement. I find that Fewster did make that proposal to Bantock. The division of sedex rights as depicted in the map prepared by Fewster, or otherwise, was not agreed by Bullion and Fewster.

222 I find that the parties did not agree on how the inclusion or exclusion of reserve minerals would be dealt with. They were still discussing that matter on and after 8 August. The fact that they negotiated those matters after 6 August but before signing a heads of agreement indicates they regarded these matters as requiring agreement before concluding a legally binding agreement.

223 The heads of agreement drafted by Kiernan on 8 August stated at cl 2.1 that the agreement contains only the essential commercial elements of the transaction contemplated and that more formal and comprehensive legal agreements will be prepared. That is, the matters dealt with in the heads of agreement were essential commercial elements of the transaction. That is consistent with the manner in which the parties had conducted their negotiations. Clause 4.1 of the draft heads of agreement provides, in substance, that Narnoo Mining is to sell to GER a 50 per cent interest in the tenements subject to the Reserve Minerals Agreement. The Reserve Minerals Agreement is defined to mean an agreement between Narnoo Mining and Newco pursuant to which Narnoo Mining granted to Newco the exclusive right to explore, mine and treat the Reserve Minerals. The Reserve Minerals means lignite and sedex gold designated by a map at Annexure A to the extent that those Reserve Minerals are clearly separable in a geological, exploration and development sense from the underlying uranium resource. The negotiation of the parties and the drafting of the heads of agreement indicates that how the sedex, lignite and scandium rights were to be included or excluded from the transaction was a necessary part of any agreement between them. The parties did not reach agreement how the sedex rights were to be dealt with.

224 The defendant says that a key term was where the boundaries with respect to the ownership of the Reserve Minerals would be located. It is said no agreement was reached on this matter. I have dealt with this issue in discussing how the sedex rights were to be dealt with.

225 The defendants say that a key term that was not agreed was how scandium would be dealt with in a mining and process operation.

226 It is common ground that Bullion was not to acquire an interest in the scandium deposits. The scandium was geologically mingled with the uranium, nickel and cobalt deposits in the tenements. It was necessary that some terms be agreed in relation to scandium. The defendants submit that the key issues required to be agreed before a binding agreement could be made include the following:

(a) The allocation between the parties of the exploration costs for scandium.

(b) The price per kilogram to be paid for scandium concentrate.

(c) The form in which scandium would be delivered (ie as a concentrate with a prescribed minimum percentage of scandium).

(d) The grade of scandium to be delivered by Bullion, that is, whether it would be assessed on a dry or wet basis.

227 The dealings between the parties in relation to scandium on 8 August and subsequently, show continuing negotiations. Prior to 6 August there had been discussions concerning scandium, which involved proposals for Fewster paying Bullion for the costs of the scandium recovery. During 6 August the Bullion board was made aware that the transaction excluded scandium. However, on the evening of 6 August Bantock called McIntyre and asked McIntyre to meet with Fewster on the morning of 8 August to discuss using the revenue from scandium to optimise open pit mining. Bantock added a paragraph to his existing drafting instructions to Kiernan dealing with pit optimisation.

228 The defendants submit that Bantock's conduct in renegotiating this point shows that there was no concluded agreement as at 6 August.

229 McIntyre subsequently met with Fewster, Davis and Stewart on 8 August. McIntyre states that he opened the meeting with a proposal. The proposal was to incorporate the monies recovered by Bullion for mining and treating scandium into the model which optimised the mine. Fewster says that he proposed that he nominate a figure for scandium every six months and that McIntyre and Stewart agreed with this proposal. McIntyre said that, while he could put forward proposals, he did not make any agreement. Stewart says that the meeting was a discussion. In re-examination Stewart said that Bullion was saying that in concept it looked alright but that Bullion would need to look at the spatial relationships to confirm it.

230 The first bullet point list includes an item "Contribution to costs from Scandium revenue". The point is brief. It says that Fewster will agree to pay recovery costs through the mill plus 10 per cent to a maximum of $10 per kilogram recovered and if additional mining is required to access scandium Fewster will pay additional mining costs plus 10 per cent.

231 The second draft of the heads of agreement of 9 August has a more expanded scandium clause. It includes a different clause, which includes that Fewster may nominate a value for scandium to be included in a mine optimisation.

232 Clause 7.3(a) of the final draft of the heads of agreement incorrectly provided for the ownership of the scandium rights to be retained by Narnoo Mining notwithstanding that if the gelignite clause was triggered, Bullion would acquire Narnoo Mining. That was not part of any concluded agreement.

233 I find that the allocation between the parties of the exploration costs for scandium was not agreed by 6 August. Negotiations regarding the price per kilogram to be paid for scandium concentrate were ongoing. Although Bullion was to fund the project costs through to a decision to mine, there was no agreement as to funding the costs of exploration for scandium. One would expect these matters to have been agreed between parties before reaching a legally binding agreement. The fact that the parties continued to negotiate these matters after 6 August and before the signing of the heads of agreement indicates that the parties regarded these matters as requiring agreement.

234 At 11.26 am on Monday 8 August, Kiernan sent an e-mail to Bantock enclosing a further draft heads of agreement. Kiernan stated that the draft heads was based on Bantock's notes they had discussed on Sunday evening. In his evidence Kiernan said that Bantock had faxed through notes to him that he had prepared during the day of his understanding of where the deal was. In his e-mail Kiernan said: "Also I need to understand the scandium position". When he was asked what he knew at that time of the scandium position Kiernan replied:

"I knew that scandium was to be excluded from the transaction to the Fewster group of companies and that there needed to be some understanding about - he had the right to get us to mine the scandium. There needed to be an understanding as to cost recovery; in other words, the cost that we bore on behalf of extracting the scandium for him."

235 I find that those matters were not agreed between Fewster and Bullion and the heads of agreement and Kiernan's evidence reflects that the parties considered that those matters required to be agreed before a concluded agreement was finalised.

236 The defendants say that the terms of Narnoo Joint Venture Mining Agreement contemplated in cl 2.1 and cl 5 of the final draft heads of agreement are terms that were required to be agreed before a final agreement was made.

237 The draft heads of agreement sent by Kiernan to Paterson at 6.09 pm on 8 August states that it contains only the essential commercial elements of the transaction contemplated. It is not a logical corollary of that statement that each of the terms of the heads of agreement constitute or relate to commercial elements that are essential to the transaction. However, that clause of the heads of agreement together with the content of the other terms of the heads of agreement and the parties' conduct in negotiating those terms, is evidence that the parties regarded the matters dealt with in the heads of agreement as required to be agreed before reaching a concluded agreement.

238 The Narnoo Joint Venture Mining Agreement was meant to be prepared at the same time as the heads of agreement. Draft terms of such an agreement were not prepared by Bullion or provided to Fewster.

239 The plaintiff says that the Mining Joint Venture Agreement was only to come into play on there being a unanimous decision to mine, and the parties being able to make the funding contributions. The plaintiff says that the agreement was a "Baulkham Hills agreement" as the previous arrangements, to decide to mine, were very different in substance. The reference to a Baulkham Hills agreement is a reference to the judgment of McLelland J in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) NSWLR 622 where McLelland J said at 628:

"There is in reality a fourth class of case additional to the three mentioned in Masters v Cameron, as recognised by Knox CJ, Rich J and Dixon J, in Sinclair, Scott & Co v Naughton [1929] HCA 34; (1929) 43 CLR 310 at 317, namely, '... one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms'."

240 The terms of a joint venture mining agreement are important to the joint venturers. In the ordinary course of business one would not expect parties to make an agreement that provides for the parties to jointly hold tenements and for a decision to be made whether or not to mine the tenements and the consequential formation of a joint venture relationship without having agreed the principal terms of the proposed joint venture agreement.

241 The draft heads of agreement emailed by Kiernan to Paterson on 8 August provides for Narnoo Mining and GER to establish the Narnoo Joint Venture immediately upon settlement and the principal terms are set out in cl 5 of the heads of agreement. Those principal terms had not been agreed by Fewster and Bullion. They were to be agreed.

242 The defendants say that the terms of the Reserve Minerals Joint Venture Mining Agreement contemplated in cl 2.1 and cl 6 of the final draft heads of agreement are critical. That agreement was meant to be prepared at the same time as the heads of agreement. Draft terms were not provided to Fewster.

243 The plaintiff says that the terms of a reserve mineral joint venture agreement were to be agreed as a Baulkham Hills agreement. The reserve minerals joint venture would only come into play upon Bullion making a decision to mine for other minerals (other than Ambassador, Emperor or resources valued at over $1 million in situ value of at least Joint Ore Reserves Committee ("JORC") standard-referred resource). The plaintiff says that it was contemplated that upon the relevant contingency any such agreement was to be negotiated at that time.

244 The draft heads of agreement drafted by Kiernan on 29 July and discussed by Bantock, Goyder and Fewster on 29 July and 4 August includes a clause that Bullion and Narnoo Mining have agreed to establish a joint venture immediately upon exercise by Mulga Rock Mining of the option granted to it pursuant to an agreement entitled the Option Agreement. The clause went on to set out the principal terms of that joint venture. That shows that the parties negotiated an agreement or agreements that would set out the principal terms of a joint venture between the parties before the joint venture was established and prior to the parties concluding an agreement in relation to the Mulga Rock tenements.

245 The draft heads of agreement prepared by Kiernan on 8 August contained terms providing for the establishment of a Reserve Minerals Joint Venture the principal terms of which were set out in the draft heads of agreement. Those terms had not been resolved between Fewster and Bullion. The terms of the draft heads of agreement reflects that the parties required the principal terms of the Reserve Minerals Joint Venture to be agreed before making a concluded agreement.

246 This term relates to the terms of a rights and useage agreement or agreements in relation to various minerals including unmineralised lignite. The defendants say that the brief summary of the rights and useage agreement included in the Nova Energy prospectus related to a different arrangement with different considerations and could only function as a guide.

247 The plaintiff says that Fewster proffered the rights and useage terms set out in the Nova Energy prospectus. The plaintiff says that certainty and completeness would be achieved by a process of making some basic adjustments to the Nova Energy prospectus wording to accommodate the particular circumstances. Counsel for the plaintiff submitted that the terms of these rights and useage agreements can properly be described as "matters of detail which are subsidiary to and derivative from the critical obligation": Striker Resources NL v Australian Goldfields NL (in liq) [2006] WASC 153 at [62]. There were matters still to be resolved in relation to a rights and useage agreement. However, the matter was not dealt with by the parties in the bullet point lists or in Kiernan's draft heads of agreement of 8 August. That suggests that the parties did not consider that to be a matter essential to their agreement.

G. Time and costs of negotiating joint venture agreements

248 The defendants say that a further essential term or terms is the deadline for, and the costs of, negotiating the terms of each of the Reserve Minerals Joint Venture and Narnoo Joint Venture agreements.

249 The plaintiff says that the deadline for the negotiating terms of each of the agreements is resolved by implication of a reasonable time for completion. That may be so but as I have set out above, in the circumstances of this case, the conduct of the parties shows that they regarded the principal terms of the proposed joint ventures to be matters requiring agreement before entering into an agreement to jointly hold the tenements, which agreement would, or might, lead to them entering into the joint ventures.

250 Clause 5.3 of the heads of agreement drafted by Kiernan on 8 August provided that until such time as GER has had prepared a pre-feasibility study it shall contribute no less than $2 million per annum to Narnoo Joint Venture expenditure with the 12 months commencing from the date of execution of the agreement. Bantock said in evidence that the definition of pre-feasibility study was discussed on 9 August. He said:

"My view was that everyone had a different description of a feasibility study and there are different stages of feasibility studies, so probably rather than having a big descriptive sort of annexure on that, to have the key parts of it signed off by experienced external people meant that it would be clear as to what was a feasibility study standard. On the Tuesday Chris Davis had come to the meeting with Mr Fewster and Mr Paterson. A concept had been put forward that there should in fact be, you know, a more prescriptive definition of 'feasibility study'. We thought that wasn't unreasonable and agreed to that happening, to that change, and really it sort of gave Chris Davis something to do."

251 The heads of agreement prepared by Kiernan on 9 August contained a clause that provided that "GER shall sole fund all Narnoo Joint Venture expenditure up to a Decision to Mine but in any event shall sole fund all Narnoo Joint Venture expenditure necessary to complete a Pre-Feasibility Study". Bantock made a note next to the clause stating that it was very important that Bullion was not trapped by an overly onerous definition of pre-feasibility study and made a further note: "Can we say that we can declare the PFS is done, but is subject to MF challenge by way of independent expert?"

252 I am not satisfied that the definition of a pre-feasibility study had been agreed by 6 August or 8 August. That was a significant matter that was referred to by the parties in their discussions and in the heads of agreement after 6 August. That is an indication that the parties intended to reach consensus on the matter before concluding a legally binding agreement.

253 The defendants say that a key term is the extent of the interest immediately acquired by Bullion (or GER). Fewster considered that the transaction involved a farm-in by Bullion. Paterson informed Bullion of Fewster's views during the meeting on 9 August.

254 Fewster and Bantock discussed an arrangement on 4 August. That arrangement or structure provided for Bullion to acquire 50 per cent of the project. The third tranche of CPPSs would be subject to Bullion retaining the sedex and lignite rights. A rights and useage agreement was to be entered into. Bantock and Fewster must have been discussing an arrangement or structure by which Bullion would acquire a 50 per cent interest in the tenements. Bantock's note prepared after the meeting said that Bullion was to acquire a 50 per cent interest in the tenements. There was no change to that arrangement on 5 or 6 August. There was consensus that Bullion was to acquire a 50 per cent interest in the tenements upon the agreement being made.

255 The defendants allege that a further key term is the terms and conditions of the Bullion options included at Annexure B to the final draft heads of agreement. Those terms and conditions were not the subject of consensus.

256 The plaintiff submits that the terms and conditions of the options were sufficiently agreed and the absence of agreement on the detailed terms and conditions does not necessarily mean that the agreement is unenforceable. The plaintiff says that the terms of the options can properly be described as "matters of detail which are subsidiary to and derivative from the principal obligation" of Bullion to issue the options: Striker Resources (supra) at [62].

257 The defendants say that the matter of who was to be the recipient of the ordinary shares and options issued by Bullion was not agreed. It is true that while the recipient of the shares and options was not expressly agreed, the nomination of a recipient of the shares and options was agreed to be a matter for Fewster. At their meeting with Fewster on 4 August Bantock and Goyder had said that all Fewster needed to do was advise who he wished to be the recipient or recipients of the consideration. On 6 August Fewster outlined the consideration that he proposed.

258 The minutes of the Bullion board meeting on 6 August record the consideration to be paid by Bullion but not to whom it was to be paid. Fewster's evidence is that on 8 August there was discussion about who was to receive the various payments, shares and options. Fewster's evidence is to the effect that in respect of some aspects of the consideration he specified that he would be the recipient but if he received tax advice that the tax consequences of payment to him would be unfavourable then the payment would go to Eaglefield. Fewster's evidence is that Bantock responded "yes" or words to that effect. Fewster's evidence is to the effect that on each occasion he referred to who the recipient of aspects of the consideration was to be Bantock said "yes" or "fine" or words to that effect. The inference to be drawn is that the discussions concerning the consideration on 8 August proceeded on the basis that it was for Fewster to nominate the recipient or recipients of the consideration, as Bantock had stated in their meeting on 4 August.

259 The defendants say that the parties did not agree who was to be the recipient of the payments by Bullion. The same considerations apply to the identification of the recipients of payments by Bullion as apply to the identification of the recipients of the ordinary shares and options issued by Bullion. The parties understood and agreed that the recipients of the payments were to be the person or persons or entities nominated by Fewster.

260 The defendants say that the matter of who was to be the recipient of the CPPSs was a key term and was not agreed. As with the recipients of the shares and options and payments by Bullion, the parties intended and agreed that the recipient of the CPPSs were to be the person or persons or entities nominated by Fewster.

261 The defendants say that Bantock's evidence was that the terms and conditions of the CPPSs had to be clearly spelt out in the heads of agreement, but the terms and conditions had not been agreed by 8 August.

262 The plaintiff says that the terms and conditions of the CPPSs were sufficiently agreed and the more detailed terms are matters of detail which are subsidiary to and derivative from Bullion's obligation to issue the CPPSs. I accept the plaintiff's submission.

263 The defendants say that another key term was which entity (Eaglefield or a new entity) would retain the rights to the mineral scandium, which was to be excluded from any agreement between the parties. Under cl 7.3(a) of the final draft heads of agreement prepared by Kiernan, ownership of the scandium rights was retained by Narnoo Mining notwithstanding that if the "gelignite clause" was triggered, Bullion would acquire Narnoo Mining. In other words, scandium was incorrectly included in the transaction contemplated in the draft heads of agreement. I have already made reference to that. Kiernan said in his e-mail that the draft heads of agreement had not yet been reviewed by Bullion. Nevertheless, the inclusion of an important clause in the draft heads of agreement that did not reflect the earlier consensus in relation to the ownership of the scandium rights is an indication that the parties were still negotiating the terms of their agreement.

264 The defendants say that a key term was the inclusion of Mrs Fewster as a party to the transaction, whether as a co-guarantor or co-representer. The fact that Mrs Fewster was a beneficiary of the Sumic and Busani Trusts is irrelevant to her inclusion as a party.

265 Fewster did not agree, or purport to agree on behalf of Mrs Fewster, that Mrs Fewster would be a party to the transaction. I will discuss the significance of this matter later in these reasons.

266 The defendants say that a key term that was not agreed related to the parties' respective pre-emptive rights in respect of the proposed sale of any party's interest in the joint venture.

267 The first set of bullet points included the sentence: "pre-emptive rights shall apply to sale by either party of their rights per the agreement". The second bullet points contained the same sentence with the word "throughout" added at the end. The heads of agreement drafted by Kiernan and sent to Paterson at 6.09 pm on 8 August included as part of cl 5.6 a term that a more formal Narnoo Joint Venture Agreement would be entered into containing the usual terms and conditions and to avoid any doubt the more formal agreement must contain the following, amongst others, further provision: "Pre-emptive rights and to avoid any doubt a change of control of any party to the joint venture shall be a deemed disposal" and dilution provisions. The draft heads of agreement sent by Kiernan to Paterson at 4.03 pm on 9 August qualified the pre-emptive rights provision by stating: "Pre-emptive rights and to avoid any doubt a change of control of any party to the joint venture shall be a deemed disposal other than a change of control of a party that has listed on a stock exchange".

268 No final agreement appears to have been reached on the issue of pre-emptive rights. However, that might be regarded as a matter of detail that is subsidiary to and derivative from the principal obligation of the parties and not a matter required to be agreed before a final agreement was concluded.

269 The defendants say that a key term that was not agreed was the extent or the method of determination of the approved mining lease area referred to in cl 7.27.2 of the statement of claim. I do not consider that that prevents a legally binding agreement from having been reached.

270 The defendants say that another key term that was not agreed related to the operation and timing of the process referred to in cl 7.28 of the statement of claim. Again, I do not consider that that prevents a legally binding agreement from having been reached.

271 There were a number of matters that the parties discussed but on which the parties had not reached agreement by 6 August. They had not reached agreement on the terms of the Narnoo Joint Venture Mining Agreement or the Reserve Minerals Joint Venture Mining Agreement. They had not reached agreement on how scandium would be dealt with in a mining and process operation. They had not reached agreement on how the inclusion or exclusion of reserve minerals would be dealt with. They had not reached agreement on the definition of a pre-feasibility study. The question is whether, in those circumstances, no binding agreement was intended unless and until agreement at least in relation to those matters was reached. I have discussed earlier in these reasons the manner in which the parties addressed these matters before 6 August and on 8 and 9 August. I find that the manner in which the parties negotiated those matters before 6 August and on 8 and 9 August shows that they regarded them as subjects requiring agreement before a binding agreement was concluded.

272 The parties did not expressly agree who was to be the recipient of the ordinary shares and options issued by Bullion, who was to be the recipient of the CPPSs nor who was to be the recipient of payments by Bullion. The failure to have reached express agreement on those matters does not preclude a legally binding agreement from having been made. Indeed, for the reasons I have expressed earlier I find that the parties intended, and should be taken to have intended, that the recipients of the shares, options, CPPSs and other considerations were to be Fewster or persons or entities nominated by him.

273 Kiernan included Mrs Fewster as a party to the transaction in the heads of agreement he drafted on 8 August. Fewster did not agree, or purport to agree on behalf of Mrs Fewster, that Mrs Fewster would be a party to the transaction. That does not prevent a legally binding agreement having been reached to which Mrs Fewster was not a party. However, the conduct of the parties in negotiating after 6 August and 8 August about who were to be the parties to the transaction is a relevant consideration. It tends against Fewster and Bullion having intended to make a concluded and legally binding agreement on 6 August or 8 August.

274 No agreement was reached in relation to pre-emptive rights. That does not, however, prevent a legally binding agreement having been reached that contained no pre-emptive rights.

275 The conduct of Kiernan, on behalf of Bullion, in preparing a draft heads of agreement which provided for the ownership of the scandium rights to be retained by Narnoo Mining notwithstanding that if the "gelignite clause" was triggered, Bullion would acquire Narnoo Mining, also tends against the parties having reached a concluded and legally binding agreement on 6 August or 8 August. The fact that Kiernan drafted that provision after spending a substantial time with Bantock and Fewster whilst they went through the second list of bullet points suggests the parties were still negotiating.

The form of the putative agreement, its subject matter and terms

276 The transaction negotiated between Fewster and Bantock was a complex one. It involved more than the sale or transfer of tenements for an agreed consideration. It also involved the formation of two joint ventures to explore, develop and, if it was subsequently decided to do so, mine the tenements. The negotiations involved treating some of the metals, ores or resources on the tenements differently. The negotiations involved discussions about exploration expenditure and the making of decisions to mine. The consideration to be received by Fewster or his entities included cash payments, shares in Bullion, options in Bullion and convertible preference performance shares in Bullion that would convert to fully paid ordinary shares upon the happening of various events. In short, the transaction or deal being negotiated was a complex one.

277 The consideration payable to Fewster outlined by Fewster on 6 August included a cash upfront payment of $1.1 million and two further cash payments of $600,000 each. The consideration further included shares, options and convertible preference performance shares in Bullion that would or might lead to Fewster being the major shareholder in Bullion. The first tranche of CPPSs would convert to Bullion fully paid ordinary shares upon Bullion's market capitalisation exceeding $25 million or $30 million. Fewster's proposal to Bantock on 6 August included a requirement for Bullion to make a minimum expenditure of $2 million per annum in the period prior to Bullion producing a pre-feasibility study. Those matters are an indication of the size and importance of the subject matter of the putative agreement. The magnitude and complexity of the proposed transaction makes it less likely that the parties intended to reach a binding oral agreement.

Some pointers for and against a concluded agreement

278 The plaintiff says that on 6 August Fewster agreed to and intended to be bound by terms agreed that day and during their previous negotiations. The question of Fewster's, and indeed Bullion's, intention is, in general, to be resolved objectively. What this means is that if Bullion can establish that Fewster led it reasonably to believe that he agreed to and intended to be bound by those terms, Fewster is so bound notwithstanding that he did not actually agree to or intend to be bound by those terms.

279 The plaintiff relies upon three matters in particular to establish that on 6 August Fewster agreed to and intended to be bound by the agreed terms or at least led Bantock and the other Bullion directors reasonably to believe that he agreed to and intended to be bound by the agreed terms. Those matters are that Fewster expressly agreed that the deal would be or had been done, agreed that Bullion would request a trading halt on the ASX from Monday 8 August and said to Bantock that they should crack open a bottle of champagne to celebrate the deal. The plaintiff also points to Fewster having agreed on 8 August that the graticular gaps should be pegged in the joint names of GER and Narnoo Mining.

280 The defendants say that the negotiations had been conducted on the basis that any binding contract was conditional upon Fewster receiving favourable tax advice and upon the parties executing a heads of agreement and nothing was said or done by Fewster on 6 August or 8 August to change that.

281 I will first consider the defendant's contention that any binding contract was conditional on Fewster receiving favourable tax advice and then what was said and done by the parties in the course of their negotiations concerning the execution of a heads of agreement before considering what was said on 6 August.

282 It is the defendants' case that it was a condition precedent to the formation of a concluded enforceable agreement that the defendants receive expert tax advice that the tax implications of the proposed deal were favourable to the defendants in that the outcome of the proposed arrangements would be such that the recipient of Bullion shares would be entitled to capital gains tax rollover relief in respect of those shares and further or alternatively, would not incur a significant tax liability in respect of the issue and/or conversion of those shares.

283 Throughout his negotiations with Bullion, Fewster was concerned to ensure that the tax consequences of any agreement for the development of the project were favourable to the defendants. In the course of negotiations from March through to July, Bantock and Fewster each referred to taking tax advice in relation to the proposed transaction or considering the tax consequences of the transaction. From time to time Fewster did take tax advice.

284 As I have said, on 6 August Bantock drafted a letter to Fewster which he did not send because it was overtaken by the events of that day. In his letter Bantock outlined the position which he understood the negotiations had reached. In the letter Bantock set out what he described as the key components of their "jointly crafted ... model for corporatisation". Those key components included the consideration to be received by Bantock and other matters such as project development funding by Bullion through to a decision to mine. Bantock then stated:

"All of the above is structured in a tax-effective way - subject to your further professional advice - which is outstanding. We have shown a flexibility to accommodate such advice."

Thus, prior to 6 August Fewster and Bullion, through Bantock, had an understanding that any agreement they negotiated was subject to obtaining tax advice in relation to the proposed arrangement.

285 Fewster said that during his first telephone conversation with Bantock on 6 August he said words to the effect that: "I need to get advice on the performance shares to confirm the rollover relief", to which Bantock replied "Yes", or words to that effect. When that was put to Bantock in cross-examination Bantock said: "I don't recall him saying that. I recall him saying that he would get some advice on, you know, the cosmetics of these things but it was accepted that CPPSs were the consideration". Bantock was then asked whether cosmetics was his word or Fewster's. He said: "It's my word. I think that's what I understood".

286 The first bullet point list drafted by Bantock on 7 August and typed on 8 August included the statement: "Professional advice may change the number, description or characterisation of these, but the end result will be 25m fpo BLN shares". The second bullet point list also contained statements that professional advice may change the number, description or characterisation of the CPPSs but the end result will be 25 million or 20 million fully paid ordinary Bullion shares, respectively.

287 I find that at the conclusion of the telephone conversations between Fewster and Bantock on 6 August, each of them intended that Fewster would obtain tax advice in relation to at least the number, description or characterisation of the CPPSs. Bantock says, in effect, that the structure of the agreement was a concluded agreement and that only incidental details relating to the number, description or characterisation of the CPPSs remained to be finalised after Bantock took tax advice. Whether that is so or the parties had not concluded their agreement and other matters, including tax advice, remained to be resolved, cannot be determined independently of the state of negotiations as a whole.

288 On 6 August Fewster and Bullion agreed to something. Bullion says that it was an agreement for Bullion to pay the agreed amounts, shares and options to Fewster in consideration for an agreed interest in the tenements and project. The defendants say that Fewster agreed to stop negotiating with other parties and work exclusively with Bullion to finalising the terms of an agreement in relation to the tenements and the project.

289 I am not satisfied that it was a condition precedent to the formation of a concluded enforceable agreement that the defendants receive expert tax advice that the tax implications of the proposed deal were favourable to the defendants. On 6 August Fewster proposed that the consideration payable to him or his entities would be the payments and shares including CPPSs he specified. The only qualification he made related to the number, description or characterisation of the CPPSs. That is reflected in the first and second bullet points. Nevertheless, the fact that the number, description and characterisation of the CPPSs were still to be resolved between Fewster and Bullion tends against the parties having intended to make a binding agreement on 6 or 8 August. That is because the existence of matters in which the parties have not reached agreement in their informal agreement renders it less likely that they intended immediately to be bound before the execution of a more formal agreement, in this case a heads of agreement. The number, description or characterisation of the CPPSs were not matters that could be unilaterally determined by Fewster.

Prior to 6 August the parties contemplated the execution of a heads of agreement

290 It is the defendant's case that throughout the negotiations the parties agreed that it was a condition precedent to the formation of a concluded agreement that the parties agree the terms of, and enter into, a formal written agreement or heads of agreement.

291 In his e-mail of 9 May 2005 to Bantock, Fewster put forward what he described as some general terms that encompass issues raised by the various parties who have expressed an interest in the project. It was the first time Fewster had put forward something in the nature of a proposal. His earlier communications had merely outlined the Narnoo Project and set out some "key parameters" that he was pursuing in relation to the project. In his e-mail of 9 May Fewster put forward his general terms and then concluded that those terms "are without prejudice and subject to the execution of a formal Heads of Agreement and payment of the deposit".

292 On 21 June Bantock met with Fewster and discussed what he described as a model for the project. On 22 June Bantock sent to Fewster a letter, a memorandum and a covering e-mail. The first arrow point in the memorandum said:

"A co-investment structure will be agreed up-front between the parties and documented in a Heads of Agreement or similar document that sets out the principal terms, subject to relevant due diligence and a jointly developed, professionally structured and compiled business plan."

The covering email proposed, amongst other things, that $100,000 cash be paid to Fewster on signing a heads of agreement.

293 On 22 July Fewster met with Bantock and Goyder at Bullion's offices. Fewster outlined a further proposal. During the meeting Goyder and Bantock proposed to Fewster that they should prepare a heads of agreement that embodied the concepts discussed in the meeting. Fewster agreed that should be done. In late July Kiernan drafted a heads of agreement. The first heads of agreement was entitled "Draft 1 - 27 July 2005". Kiernan subsequently drafted further versions of a heads of agreement.

294 On 29 July Bantock gave Fewster a copy of the draft heads of agreement of 29 July and Bantock and Goyder went through that document with Fewster. Section 2 of the draft provided for the preparation and execution of formal agreements including a sale and purchase of shares and a mining and exploration joint venture. The section provided that until such time as the more formal legal agreements were executed the heads of agreement is binding on the parties and supersedes and replaces all previous agreements, arrangements and understandings.

295 Fewster says that he met with Bantock and Goyder on 5 August. Bantock says that there was no such meeting but he spoke to Fewster by telephone on the afternoon of 5 August. Fewster says that at the meeting Bantock proposed that they negotiate and agree a heads of agreement over the weekend and announce the deal during the Diggers and Dealers Conference which would give the parties four days (the weekend and a two day trading halt) to finalise the terms of a heads of agreement. Fewster says that he replied that he could not do so since tax and legal advice would not be available to him over the weekend. In his responsive witness statement Bantock says he does not recall Fewster saying words to the effect that he could not negotiate over the weekend since tax and legal advice was not available. Bantock does not dispute that he proposed that they negotiate and agree a heads of agreement over the weekend and announce the deal during the Diggers and Dealers Conference.

296 Kiernan gave evidence that towards the end of the telephone conversation on 6 August between Fewster and the Bullion directors, Bantock said words to the effect that the further action required was to get confirmation from Stewart as to the agreement, Bullion would then seek a trading halt prior to commencement of trading on Monday, Bantock would generate a bullet point list of the agreed terms by Monday morning and Kiernan would prepare a revised heads of agreement reflecting that which had just been agreed. Kiernan recalled that during the conversation someone said words to the effect that they should aim to execute the heads of agreement by the following Tuesday evening to allow the trading halt to be lifted by Wednesday morning.

297 On the morning of Monday 8 August Kiernan prepared a heads of agreement. He had prepared a third draft of the heads of agreement by 11.26 am when it was e-mailed to Bantock. There were extensive changes to earlier drafts of the heads of agreement.

298 On Monday 8 August Bullion called a trading halt pending the execution of a heads of agreement. In re-examination Bantock said that they had put in place a process by which there would be a trading halt, and during the trading halt the deal that had been done would be concisely summarised in the bullet points and there would be a heads of agreement pulled together to document that and then upon the heads of agreement being signed the company would be in a position to make an announcement prior to the opening of trading on Wednesday.

299 At 8.36 am on 8 August Fewster sent an e-mail to Fletcher, to which I have already referred, in which he said:

"Events have moved fast down here, and I regret to inform you that I have agreed to basic terms with a Perth based company, with the intention of executing a Heads in a few days. An announcement should be out on Wednesday. However, if for some reason the deal is not concluded, I will contact you again, and we can pick up discussions again."

300 Mr Kiernan left the meeting at Bullion's office on 8 August to attend to preparing the next draft of the heads of agreement. He circulated the draft at 6.09 pm that day.

301 Throughout the negotiations the parties had contemplated that any agreement would be made by entering into a written heads of agreement. The plaintiff submits in effect that on 6 August the parties moved away from that position and intended to reach an immediately legally binding agreement or at least Fewster reasonably led Bullion to believe that was so. The plaintiff submits that the parties did not intend that their agreement would be made by entering into a heads of agreement notwithstanding that the parties agreed to, and did, continue to work towards settling and executing a heads of agreement.

On 6 August did the parties intend to conclude an agreement before executing a HOA?

302 In his witness statement Bantock says that in their first conversation on that day, Saturday 6 August, Fewster said that he would outline the principal aspects of the deal to Bantock and if Bullion agreed to the deal that day then the deal would be done and Fewster would cease discussions with all other parties in relation to any other deal for the project.

303 I accept that is the broad effect of the discussion between Bantock and Fewster. However, Bantock does not claim to give a verbatim account of the telephone call. His description of the conversation is in the form of stating the effect of what was said. In cross-examination Bantock was referred to the statement in his witness statement that Fewster said words to the effect that on the basis of the deal Fewster would advise the other parties that he was dealing with that he had done a deal with Bullion and that Bullion could go forward on the basis of the deal to issue a trading halt first thing on Monday morning and was asked whether he was sure that that was Fewster's suggestion. Bantock replied:

"Yes, when the penny was dropping and I was checking that this was the call, I said to him, 'so what you're proposing is that this is the deal and if we accept it, then the deal is done,' and he said, 'yes. I will stop talking to other parties. You can go ahead and get your trading halt. We're done."

304 I observe that in responding to the question whether, if Bullion accepted the proposal, the deal is done, Fewster affirmed the proposition by saying that he would stop talking to other parties and Bullion could go ahead and get its trading halt. That is consistent with Fewster making a commitment to cease discussions with the other parties with whom he had been negotiating and negotiate exclusively with Bullion to conclude an agreement in relation to the tenements and the project.

305 In that first telephone conversation on 6 August Bantock said that he could not make the decision without the approval of the Bullion board. Bantock called a meeting of the Bullion board. Fewster joined that meeting by telephone. Bantock stated the principal points of the proposed deal to Fewster. In his witness statement Bantock says that he said words to the effect that the agreement between Bullion and Fewster was that if Bantock, on behalf of Bullion, verbally confirmed that day that Bullion accepted the deal then the deal would be done. Later that day Bantock spoke to Fewster when he was at the Perth Glory game. Bantock said to Fewster that Bullion had accepted the deal that Fewster had proposed and that therefore the deal was done.

306 There is no doubt that the parties agreed to something on 6 August. Fewster's agreement that Bullion call a trading halt on the Monday and his invitation to Bantock and Goyder to crack open a bottle of champagne to celebrate the deal shows that they all thought something significant had happened. The question is: what had they agreed? Did the parties to the putative contract intend to make a legally binding agreement for Fewster to sell an interest in the tenements and enter into a joint venture for the exploration, development and mining of the tenements as Bullion contends, or did they intend that Fewster would negotiate exclusively with Bullion to complete such an agreement on the basis that Fewster would receive the consideration agreed that day.

307 In Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (supra), an oral agreement to settle pending litigation was alleged. The parties agreed on a sum in the absence of their lawyers and shook hands. The New South Wales Court of Appeal considered whether this was a binding agreement. The majority (Gleeson CJ and Kirby P) held that it was, even though the parties intended to embody the agreement in more formal form to be drawn up by solicitors. Gleeson CJ said:

"As the decision in the Australian Broadcasting Corporation case illustrates, the fact that parties to negotiations have agreed upon the major matter under discussion, confidently believing that the remaining matters to be decided will be sorted out later between them or their lawyers, without any difficulty, can sometimes create a misleading appearance of consensus. Such parties may well believe that they have a 'deal' or a 'bargain', and speak and act accordingly, whilst at the same time knowing and intending that further and more detailed agreement is necessary. For that reason, conduct such as shaking hands, or using the language of agreement, can be ambiguous. The resolution of the ambiguity may require more detailed factual and legal analysis."

308 Kirby P thought that the parties shaking hands was significant. He said:

"In business and in life symbols are important. So in the law. Here, as in Liquorland, there was a symbolic shaking of hands. In the marriage ceremony, there is symbolic 'giving and receiving of a ring and joining of hands'. With respect to those of a different view, I regard the shaking of hands between business people, in circumstances such as the present, as an important signal to each other and to observer(s) present that they were ad idem."

309 Powell JA said that in determining what was the party's intention the fact that they had shaken hands was a matter to which the court might refer but he was disposed to give very little weight to such a circumstance.

310 Fewster confirmed that if Bullion agreed to the terms proposed by Fewster then the deal would be done. Counsel for the plaintiff submitted that the deal referred to a legally binding agreement and must have been understood by the parties that way. I do not agree.

311 Fewster made a commitment to the proposal he had outlined. He agreed to cease negotiating with any other parties and to negotiate with Bullion on the basis that the consideration that he and his entities would receive would be that which he had outlined, subject only to some variation of the details of the CPPSs as a result of tax advice. The minutes of the meeting of directors of Bullion on 6 August record that the board resolved that, subject to the final agreement of Mr Stewart, the company would commit to the proposal put by Mr Fewster. The company did not resolve to accept Mr Fewster's offer or to execute an agreement containing the terms outlined by Mr Fewster. In effect, both parties made a commitment to the proposal that fell short of a legally binding agreement.

312 On 6 August nobody expressly addressed the question of whether or not the parties had reached an immediately legally binding agreement. Both parties intended that they would settle and execute a heads of agreement.

313 The proposed agreement and its subject matter, was large, important and complex. The principal matter discussed on 6 August was the consideration to be received by Fewster and his entities. What the parties agreed on 6 August was one of the most important matters that needed to be agreed, that is to say the consideration that was to be received by Fewster for entering into the transaction. Both parties expected that having reached agreement on the consideration to be received by Fewster they would reach common ground on the other matters which they contemplated would form part of their agreement. Those were principally, but not only, the matters that had been discussed prior to 6 August. Fewster committed himself to cease negotiations with other parties and to inform them that he had done a deal with Bullion. Bantock and Kiernan undertook to draw up a bullet point of the points of agreement and to draw a heads of agreement respectively. Fewster was to meet with them on Monday to go through those points.

314 In the context of the prior negotiations, the size and complexity of the proposed transaction and relationship and what was said by Fewster and Bantock on 6 August, the statements that the deal would be done or was done are equivocal. It was understood and intended by Fewster, and what he said would have led a person in the position of Bantock to reasonably believe that Fewster agreed the consideration, would cease negotiating with other parties and would negotiate the terms of a heads of agreement in the expectation that it would be agreed and signed by the parties no later than the following Wednesday.

315 The calling of the trading halt is equivocal. The plaintiff says that the trading halt was put in place pursuant to the agreement that had been reached with Fewster on 6 August. The defendants say that Fewster agreed to the trading halt to give the parties time to conclude the negotiations, finalise the terms of the heads of agreement and execute the heads of agreement. Fewster's conduct in agreeing to the trading halt was consistent with his position that any concluded agreement was conditional upon the execution of a heads of agreement.

316 The defendants say that if, as Bullion alleges, an agreement was concluded on 6 August then there is no reason why it should not have announced the terms of that agreement on 8 August rather than calling a trading halt. When that was put to Bantock in cross-examination he said that the arrangements that had been agreed with Fewster provided for the trading halt to precede the announcement of a deal.

317 That the parties agreed to a trading halt on the Monday rather than an announcement of their agreement is consistent with the parties having agreed the most contentious matter, the consideration to be received by Fewster, but still needing to resolve some other terms before they concluded a binding agreement.

318 I find that on 6 August the parties reached agreement on the consideration to be received by Fewster and agreed to negotiate an agreement by which Bullion would acquire an interest in the tenements and the project in the expectation that they would reach agreement on the other matters which required agreement. However, they did not intend, or should not be taken to have intended, that they were immediately legally bound on 6 August.

319 As I have said, the existence of matters of importance on which the parties have not reached consensus in their informal agreement will render it the less likely that they intended immediately to be bound before the execution of a formal document, in this case the heads of agreement. On 6 August there were still a number of matters of importance on which the parties had not reached agreement. They continued to negotiate those matters on 8 August, and indeed continued negotiations on 9 August. Their conduct in negotiating those matters indicates that they were matters which the parties regarded as requiring agreement before a binding agreement was concluded.

320 Fewster agreed on Monday 8 August that the graticular gaps be pegged in the joint names of GER and Narnoo Mining. I do not think that leads to the conclusion that the parties had reached a binding agreement and were implementing it. The issue was not the subject of discussion and considered deliberation. McIntyre raised the issue whilst Fewster was discussing the terms of the agreement, or intended agreement, with Bantock and others. At the time Fewster intended and expected that he would proceed with the joint venture with Bullion to develop the tenements. Fewster went along with McIntyre's proposal in that expectation not because there was a binding agreement to do so.

321 On the evening of Monday, 8 August Fewster asked Bantock to pull the applications. Bantock did not protest that Fewster had made a concluded agreement and that the lodging of the applications was part of, or made pursuant to, that agreement. To the contrary he undertook to see if it could be done.

322 The plaintiff says that Fewster's email to Fletcher at 8.36 am on Monday 8 August is evidence of, and an admission that, Fewster agreed to and intended to be bound by an oral agreement made on 6 August. I do not agree. The email is consistent with Fewster having agreed "basic terms" but there being other terms to be resolved before an agreement was concluded. Fewster's reference to an intention to execute a heads of agreement is consistent with Fewster intending that the agreement with Bullion should be made on the execution of a heads of agreement. Fewster's statement that, "if for some reason the deal is not concluded, I will contact you again, and we can pick up discussions again" is consistent with Fewster not having agreed to, or having intended to be bound by, an oral agreement made on 6 August. Indeed, his suggestion that if the deal is not concluded he would pick up negotiations with Fletcher is inconsistent with a legally binding agreement having been made with Bullion.

323 The plaintiff says that it should be found that Fewster told David Brunt in a telephone conversation on or around 8 - 10 August that he had concluded the deal with Bullion. I do not find Brunt's statement to be reliable. Brunt did not give a statement until 21 August 2006, a year after the alleged call, and could not remember when the call took place. The evidence of emails shows that the call could not have occurred until after the meeting on 10 August in which Paterson had confirmed that the transaction was "dead".

324 Fewster's email to Taylor Wall & Associates on 15 August 2005 and subsequent communications are consistent with Fewster not having agreed or intended to be bound by an oral agreement made on 6 August.

Conclusion - No binding agreement made on 6 August

325 On 6 August the parties had not reached agreement on important matters. The conduct of the parties in meeting on 8 August and further negotiating the terms of their proposed transaction and relationship is consistent with neither party having agreed or intended to be bound by terms agreed on or before 6 August.

326 The minutes of the meeting of directors of Bullion on 6 August record that the board discussed the investment opportunity and resolved that "subject to the final agreement of Mr Stewart, the company would commit to the proposal put by Mr Fewster". I find that on 6 August each of the parties agreed the consideration to be paid to Fewster and committed to negotiating the further matters that needed to be resolved in the expectation that an agreement would be concluded by the signing of a heads of agreement, but no concluded agreement was made on 6 August.

327 At about 10.30 am on Monday 8 August, Goyder, Bantock and Fewster met in the Bullion boardroom to go through the bullet point list that Bantock caused to be typed. At some time that morning Bantock gave Fewster and Goyder each a copy of the typed bullet point list. Bantock went through the list with Fewster. Bantock asked his secretary to affect changes to the bullet points that were discussed. A second list of bullet points was prepared.

328 However, nothing was done to conclude an immediately binding agreement. Neither Fewster nor Bantock signed the bullet points or stated words to the effect that the agreement was then made. To the contrary, the bullet points were to be provided to Kiernan for him to draw up a draft heads of agreement. The procedure that had been agreed on 6 August was that the heads of agreement would be completed during the trading halt and signed by Wednesday to enable the trading halt to be lifted. The parties intended that their agreement should be made by executing the heads of agreement. No binding agreement was made on 8 April.

329 I have found that the parties did not intend to make a legally binding agreement on 6 or 8 August. It is strictly not necessary to consider the second, although closely related, question of whether the parties reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (supra) per Gleeson CJ at 548.

330 The plaintiff says, in essence, that the parties had reached agreement on the matters required for a legally effective agreement and the other matters related to inessential or collateral matters. The plaintiff further says that some of the matters not agreed upon were not necessary for the formation of a legally binding agreement because they were to be decided at a later stage of the parties' relationship, in particular, after the making of a decision to mine.

331 The requirement of certainty or the sufficiency of agreement was considered by the Full Court in Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101. The respondent was a registered owner of a number of mining tenements in the goldfields of Western Australia. The appellant wished to explore the respondent's tenements for nickel with a view to mining. In September 1994 the parties began negotiating. In April 1996 the appellant wrote to the respondent proposing five terms as heads of agreement. The letter concluded:

"The above forms a heads of agreement which constitutes an agreement in itself intended to be replaced by a fuller agreement not different in substance or form."

The respondent signed the letter confirming its agreement to the terms and conditions set out in it. The parties then entered into negotiations for the fuller agreement but those negotiations were unsuccessful. The appellant sought a declaration that the heads of agreement was a valid and binding contract. The respondent submitted that the parties had omitted so many important matters, and described so many other matters in such uncertain terms that, objectively speaking, the appropriate inference was that the parties had not intended to bind themselves to a legally binding contract. The respondent also submitted that the agreement was unclear and unworkable, including in situations where concurrent exploration might occur.

332 The Full Court allowed the appeal and found that the terms of the heads of agreement, the pre-contractual negotiations and the parties' subsequent conduct indicated that the parties intended the heads of agreement to have binding contractual effect. The Full Court found that the agreement did not omit essential terms, and nor was it unworkable in the sense of it being objectively impossible to perform. Ipp J, with whom Pidgeon J agreed, said at [25]:

"It is well recognised that parties may enter into a valid contract containing a limited number of terms comprising those terms essential to the bargain that they wished to conclude, in the expectation that at a later date a further contract will be arrived at containing additional terms that would facilitate and clarify the initial contract. That is to say, a binding contract may be arrived at even though it leaves unresolved many matters which might arise in the future. As Kennedy J said in Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144 at 159:

'An agreement does not have to be worked out in meticulous detail. A bargain can be made containing certain terms, regarded as essentials, whilst the parties recognise that a formal document will eventually be drawn up in the full expectation that a number of additional terms will, by consent, be included in that document.'"

333 Once the court has determined that the requisite intention is present, it is then necessary to go on to consider whether the contract is so incomplete or uncertain as to be void. In Anaconda Nickel v Tarmoola (supra) Ipp J said at [29]"

"It does not follow that any omission will make a contract incomplete or uncertain in the sense of rendering it invalid. It is only the omission of an essential term that will have that effect. As to the meaning of 'essential' in this context, the following words of Lloyd LJ (with whom the other members of the Court of Appeal agreed) in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyds Rep 601 at 619 are helpful:

'It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word "essential" in that context is ambiguous. If by "essential" one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by "essential" one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by "essential" one means only a term which the court regards as important as opposed to the term which the court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether they are important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge, "the masters of their contractual fate". Of course, the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called "heads of agreement".' "

334 I find that some of the matters on which the parties had not reached agreement, which I have set out earlier in these reasons, were matters which were required to be agreed before a legally binding agreement could come into effect. Those matters included the principal terms of the Narnoo Joint Venture Mining Agreement, the principal terms of the Reserve Minerals Joint Venture Mining Agreement, how scandium would be dealt with in a mining and process operation, how the inclusion or exclusion of reserve minerals would be dealt with and the definition of a pre-feasibility study.

335 The parties' conduct on 8 August and subsequently, shows that they considered those matters required agreement. Those matters were essential to the relationship between the parties. Whether the parties reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract is not the same as, although in this case it is closely related to, the question of whether the parties intended to make a concluded agreement: see Australian Broadcasting Corporation v XIVth Commonwealth Games (supra) at 548 per Gleeson CJ.

336 The heads of agreement drafted by Kiernan, and considered by Bantock, on 8 and 9 August are a strong indication of the matters that were the terms necessary for an enforceable agreement to be made. Agreement was not reached on all of those terms. I find that the parties did not reach agreement on essential terms. Their transaction and future relationship would be unworkable without agreement having been reached on those terms.

337 The plaintiff seeks specific performance of the oral agreement made on 6 August or alternatively on 8 August. As I have found that no binding legal agreement was made, it is strictly not necessary to consider the plaintiff's case for entitlement to orders for specific performance. In case the matter goes on appeal I will make some brief observations on the plaintiff's claim for specific performance.

338 Equity will not enforce contracts which, though enforceable at law, are too uncertain to permit formulation of the decree for specific performance: see Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1997] UKHL 17; [1998] AC 1 at 14. Since non-compliance with the order is punishable as a contempt of court, there must be sufficient certainty to make the defendants' duty clear. I have found that the alleged agreement is not enforceable at law. It is not feasible to pronounce upon whether or not the alleged agreement, if enforceable at law, is sufficiently certain to be enforceable by an order for specific performance. That is because it would be necessary to consider different permutations of hypothetical findings, contrary to the findings I have made.

339 The defendants also argue that specific performance should be refused because it would require constant supervision by the court. In this context constant supervision does not mean that the court would literally have to supervise the execution of the order but rather, "the possibility of the court having to give an indefinite series of such rulings in order to ensure the execution of the order which has been regarded as undesirable": Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd (supra) per Lord Hoffman at 12. References to constant supervision of the court is sometimes regarded as a part of the more general concern about whether the terms of the contract are sufficiently definite to allow a clear and precise court order to be issued. While constant supervision of the court and definiteness in the contractual terms remain separate and independent factors, the overlap is quite significant: Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd (supra) per Lord Hoffman at 13 - 14.

340 It is not practicable for me to consider whether an order of specific performance should be refused on the grounds that it would require constant supervision for similar reasons that it is undesirable that I consider whether an order should be refused on the grounds that the terms of any agreement between the plaintiff and the defendants, or any of them, are not definite enough.

341 The defendant says that specific performance should not in any event be ordered because its enforcement would impose undue hardship on the defendant. That is because it is said that the transactions entered into by the plaintiff since 8 August 2005 which were part of the corporate reorganisation, to which I referred earlier in these reasons, have substantially altered:

(a) the nature of the entity with which the defendants were to have an ongoing relationship;

(b) the significance of the defendants' shareholding in the plaintiff; and

(c) the consideration to be received by the defendants.

The defendant says that in the circumstances it would be unjust to order specific performance.

342 Whether or not it would be unjust to order specific performance only falls for consideration if the court finds that there was a binding legal agreement sufficiently certain to be the subject of an order for specific performance. To consider that issue in this case would require the court to hypothesise about what might be the facts and circumstances, contrary to those which I have found, which would call for the court to consider whether or not to refuse an order for specific performance on the grounds of hardship. It is not appropriate to undertake such a hypothetical task.

Mining Act, s 119****

343 The defendants say that by virtue of the Mining Act 1978, s 119(2), a legal or equitable interest in a mining tenement is not capable of being "created, assigned, affected or dealt with, whether directly or indirectly, except by an instrument in writing" signed by the person dealing with the interest. Where there is no instrument in writing sufficient to satisfy the Mining Act, s 119(2), specific performance is not available, although a plaintiff may have a remedy in damages. The defendants refer to Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144 per Kennedy J at 162:

"The purpose of s 80 is to prevent legal or equitable interests in permits from being created, assigned, affected or dealt with, whether directly or indirectly, except by an instrument in writing. It does not provide that oral agreements shall be of no force: cf s 81(2). Accordingly, although an oral agreement may not, for example, assign an interest in a permit, this is not to say that it does not create a personal right in contract. I consider that it does - cf Adamson v Hayes [1973] HCA 6; (1973) 130 CLR 276 at 297, 304, 306, 319 - 320, the note by R P Austin, 'The Conveyancer: Moot Point' (1974) 48 ALJ 322 at 324 and N C Seddon, 'Contracts for the Sale of Land: is a Note or Memorandum Sufficient?' (1987) 61 ALJ 406."

344 In Sorna Pty Ltd v Flint [2000] WASCA 22; (1999) 21 WAR 563, the appellant was the legal holder of a number of prospecting licences, an exploration licence and a number of applications for exploration licences. The respondents contended that pursuant to an oral contract the appellant held the tenements on trust for them. The appellant conceded that it held an 80 per cent interest in the tenements as trustee for the respondents but maintained that it was the holder of the beneficial interest in the remaining 20 per cent. In relation to the 20 per cent interest in dispute the appellant relied on s 119(2) of the Mining Act 1978 (WA) and contended that a legal or equitable interest in a tenement is not capable of being created except by an instrument in writing signed by the person creating the interest. The respondents contended that s 119(2) of the Mining Act did not operate to prevent equity from enforcing a constructive trust in the same terms as an oral contract. Ipp J at [11] addressed the question whether s 119(2) precludes the creation of a constructive trust created by the oral contract as contended for by the respondents. His Honour said that s 119(2) prevents legal or equitable interests in permits from being created, assigned, affected or dealt with, whether directly or indirectly, except by an instrument in writing. Accordingly, the section prevents the creation of the express trust orally agreed upon by the parties. It also prevents the creation of any equitable interest being created by construing a trust. Ipp J added that s 119(2) does not apply to contracts and the party's personal rights in contract remain.

345 Murray J held that the appellant's claim could not succeed by reason of the operation of s 119(2). His Honour said:

"That is not to say that a differently formulated claim in contract might not have been put in such a way as to seek the relief of an order that the mining tenements be conveyed to the respondents. But no such claim was made or agreement ever pleaded ..."

346 Senior counsel for the defendant in this case, Mr Williams QC, characterised the plaintiff's claim as being tantamount to specific performance of an agreement to transfer 50 per cent interest in mining tenements less the scandium rights. Mr Williams said that the claim was not maintainable because:

"Now, if the plaintiff is entitled to remedies in the nature of an order for specific performance or mandatory or other injunctions that are designed to give it an interest, it is entitled to that interest under the agreement before the orders are made but the act says you can't get an interest except by an instrument in writing."

347 Counsel for the plaintiff, Mr Bennett, submitted that Mr Williams' argument is based on circularity. As Gaudron J pointed out in Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489 at 537 the interest of a purchaser under a contract to purchase land is commensurate with the availability of specific performance. That availability is the very question in issue where there has been a termination by the vendor for failure to complete as required by the essential stipulation. Reliance upon the "interest" therefore does not assist; it is bedevilled by circularity.

348 Mr Bennett submits that the primary relief sought by the plaintiff is that Fewster execute the heads of agreement. That is a contractual right. It does not depend upon the plaintiff having an interest in the tenements prior to the execution of the heads of agreement.

349 I accept the plaintiff's submissions. Section 119(2) of the Act does not preclude an order for specific performance requiring Fewster to execute the heads of agreement document.

350 I have found that there was no binding agreement made between the plaintiff and the defendants or any of them. The plaintiff's claim must be dismissed.

351 The defendants make a number of counterclaims. Firstly, the first, third and fourth defendants claim declarations to the effect that there was no agreement between the plaintiff and the defendants in relation to the project. Secondly, the defendants make various claims in relation to caveats lodged by the plaintiff. Thirdly, the third and fourth defendants claim damages for breach of a confidentiality agreement made on 22 June 2005. Fourthly, Fewster claims $5,000 for breach of an agreement to pay him $5,000 in account of legal and accounting expenses.

352 On or about 15 August 2005 Bullion lodged caveats over exploration licences 39/876 and 39/877. Bullion claimed an interest in each of the ELs by virtue of an oral agreement entered into on 6 August between Bullion on the one part and Fewster on behalf of Eaglefield and Narnoo Mining on the other part regarding development of the project and an oral agreement entered into on 8 August between Bullion and Fewster regarding the development of the project.

353 On or about 16 August 2005 Bullion published an announcement on the Australian Stock Exchange that, in the opinion of Bullion, it had entered into an agreement with Fewster to acquire a 50 per cent interest in the project.

354 Bullion maintains that there is a binding agreement between it and Fewster, Eaglefield and Narnoo Mining concerning the tenements and the project. It maintains the caveats and maintains its position publicly. It is appropriate that declarations be made to the effect that there is no enforceable agreement between the plaintiff and any of the defendants concerning the tenements or the project.

355 In its prayer for relief the third defendant claims an order that the plaintiff forthwith deliver to Eaglefield duly executed withdrawals of each of the caveats, an order that GER deliver to Eaglefield duly executed withdrawals of each of the caveats and an order that in default of compliance by Bullion the Principal Registrar be authorised to execute withdrawals of the caveats in the name of the plaintiff. The third defendant also seeks an order forbidding the registration of further caveats over the tenements or on behalf of the plaintiffs or either of them. The third defendant further seeks an order forbidding the lodgement of further applications for exploration licences within the relevant area by or on behalf of the plaintiffs.

356 The fourth defendant claims a declaration that the plaintiff has no caveatable interest in the ELs or either of them, an order that the plaintiff deliver to Eaglefield duly executed withdrawals of each of the caveats, an order that GER deliver to Eaglefield duly executed withdrawals of each of the GER applications and joint applications and orders that in default of compliance by the plaintiff the Principal Registrar be authorised to execute withdrawals of the caveats and the GER applications and joint applications. The fourth defendant also seeks an order forbidding the registration of further caveats over the tenements by or on behalf of the plaintiffs and an order forbidding the lodgement of further applications for ELs within the relevant area by or on behalf of the plaintiffs or either of them.

357 I have found that there is no binding agreement between the plaintiffs and the defendants. That means that the plaintiffs do not have the caveatable interest that was claimed in lodging the caveats. However, no argument was addressed to the caveats or the relief sought in relation to the caveats. In those circumstances I will hear from the parties as to orders that should be made.

358 The plaintiff and Eaglefield entered into a confidentiality agreement on 22 June 2005. The confidentiality agreement concerned "the Information" which was defined to mean all and any information, knowledge and know-how not in the public domain of any nature whatsoever and in any form of expression whatsoever in any way relating to the subject matter described in Schedule C and all parts and aspects thereof, and includes any reports, studies or other analysis prepared by any servant or agent of the plaintiff. Schedule C specified exploration licences 39/876 and 39/877, applications for exploration licences 39/1091, 39/1092 and 39/1114 (collectively described as the Tenements) and an area extending five kilometres beyond the boundaries of the Tenements. The agreement states that in consideration of the disclosure of the Information by Eaglefield to the plaintiff, the plaintiff made the covenants and agreements contained in the agreement. Clause 3 provides that the plaintiff shall at all times during the term of the agreement keep the Information and cause the Information to be kept strictly confidential and shall not cause or permit the disclosure of any of the Information to any person other than employees and consultants of the plaintiff or employees and consultants of Associates of the plaintiff. Associates is defined in a way which includes GER. Clause 6 provides that the plaintiff shall not at any time during the term of the agreement in a personal capacity or by or through an Associate make use of the Information in any manner whatsoever or derive any personal benefit from the Information from its use or application except as otherwise agreed by Eaglefield. The clause further provides that the plaintiff and any Associate agree not to obtain or seek to obtain any interest or right in ground contained within the area described in Schedule C during a two year period while Eaglefield is the holder or one of the holders of an exploration licence or exploration licence application in relation to that ground except with the written permission of Eaglefield.

359 On 24 June, two days after the plaintiff executed the confidentiality agreement, Davis delivered to the plaintiff technical information regarding the project. Fewster gave McIntyre a green manila folder which contained more information concerning the tenements and graticular block gaps for reference in pegging the graticular block tenements.

360 On or about 8 August Bullion caused to be lodged at the Department of Industry and Resources applications for prospecting licences in the joint names of Narnoo Mining and GER and on 16 August caused to be lodged further applications for prospecting licences in the name of GER only. The prospecting licence applications related to the graticular block tenements. They concern ground within the area described in the confidentiality agreement during the term there described. In lodging those applications Bullion and GER used confidential information supplied by Eaglefield to Bullion.

361 The plaintiff raises two substantial defences. The first is that the applications made used publicly available information. However, the existence of the graticular gaps was information which came to the attention of the plaintiff whilst analysing the data that Fewster had provided and was not a matter of public record. The plaintiff also became aware, as a result of its analysis of the confidential information given to it, that the land the subject of the graticular gaps was sufficiently valuable to warrant applications for tenements. It was the use of the confidential information, rather than ascertaining the details of the boundaries, that constituted the plaintiff's breach of its obligations under the confidentiality agreement.

362 The plaintiff's further answer to this claim is that it used the confidential information to make the prospecting licence applications with the agreement of Fewster on behalf of Eaglefield. As I have said earlier in these reasons, there was a discussion on 8 August amongst McIntyre, Goyder, Kiernan and Fewster, the outcome of which was that it was agreed that the tenements should be pegged in the joint names of GER and Narnoo Mining. There was no breach of the confidentiality agreement by the plaintiff causing the applications to be lodged on 8 August in the joint names of GER and Narnoo Mining.

363 The plaintiff admits that on or about 16 August the plaintiff and GER lodged applications for prospecting licences in the name of GER only but denies that it did so without the consent or knowledge of the defendants.

364 On the evening of Monday 8 August, in the course of a telephone conversation, Fewster asked Bantock to ask McIntyre to "pull" the tenement applications in respect of the graticular blocks. Bantock said he would call McIntyre but doubted that this could be achieved. It is implicit in Fewster's request that he did not consent to any subsequent prospecting licence applications being made by the plaintiff or GER, whether in joint names with Eaglefield or alone.

365 By Sunday 14 August, if not before, Fewster had made it clear that he and Eaglefield maintained that there was no binding agreement with the plaintiff. I have found that there was no binding agreement.

366 I find that Eaglefield did not consent to the plaintiff lodging the prospecting licence applications on 16 August 2005. In using the defendants' confidential information to prepare and lodge those applications the plaintiff breached the confidentiality agreement.

367 The parties have agreed that the assessment of damages should be assessed separately and at a later time. I will hear the parties as to the appropriate orders to give effect to this part of these reasons for decision.

368 Fewster says that there was an oral agreement made on 10 August 2005 that the plaintiff would pay Fewster $5,000 on account of further legal and accounting costs.

369 The parties devoted little attention to this matter at trial. That is understandable because the amount in issue is relatively small compared with the other matters in issue between the parties.

370 Fewster's case is that Bullion, through Bantock, agreed to make a contribution towards his legal and accounting costs of $5,000 and that it has failed to do so. Fewster gave evidence of the making of the agreement. That was not contested by Bantock or Goyder. I find that the plaintiff agreed to make a contribution of $5,000 towards Fewster's legal and accounting costs. There is evidence that Fewster incurred legal and accounting costs after 10 August. Paterson and Golding worked on developing a new written proposal for Fewster to put to the plaintiff.

371 I find that Fewster was entitled to the payment of $5,000 and the plaintiff has failed to pay it. Fewster is entitled to judgment for $5,000 on that account.