CENTRAL EXPLORATION PTY LTD -v- ZUKS [2020] WASC 46 (21 February 2020) - WASC 2020 case summary — Zoe

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CENTRAL EXPLORATION PTY LTD -v- ZUKS [2020] WASC 46 (21 February 2020)

[2020] WASC 46

Supreme Court of WA|2020-02-21|Before: Allanson J

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At a glance

Source facts

Court

Supreme Court of WA

Decision date

2020-02-21

Before

Allanson J

Source

Original judgment source is linked above.

Judgment (141 paragraphs)

[1]

The plaintiffs and the defendants are involved in pursuing commercial interests, particularly in mining, in the Autonomous Region of Bougainville of Papua New Guinea.
The plaintiffs commenced these proceedings in November 2017, seeking urgent interlocutory relief to protect their interests from what they perceived to be an immediate threat from the conduct of the defendants. By December 2019, when these applications were heard, the plaintiffs' expectations about their interests, in particular in respect of the Panguna Mine, had been frustrated by a combination of factors.
The plaintiffs have pleaded, the defendants have not. The action was referred to mediation at a relatively early stage, before defences were filed, but the limited availability of the parties prevented mediation before October 2018. The mediation was held over four days, the final day being 18 June 2019. The dispute remained unresolved.
On 31 October 2019, the parties attended a strategic conference to discuss how the matter should proceed. In short, the plaintiffs wanted the defendants to file their defences, and to avail themselves of the interlocutory processes of the court. The defendants challenged the claim pleaded against them.
Orders were made for the plaintiffs to file a further amended statement of claim, and to program foreshadowed applications by the defendants to strike out the statement of claim, and applications by two of the defendants to be released from undertakings they had given in November 2017.
These reasons deal with the applications that were brought by the first defendant (Nikolajs Zuks), fourth defendant (David Albert Lloyd Johnston) and sixth defendant (Adam Nikolais Zuks).[1]

[2]

[10]

The Separation Deed was made on 18 December 2016. On 21 April 2017, a second CEPL Joint Venture Agreement was made which, by cl 31, was expressed to be the entire agreement of the parties and to supersede all prior agreements.
Clauses 2 to 5 of the undertakings given by Mr Zuks and Mr Johnston reproduced cl 5 (a)(i) ‑ (iv) of the Separation Deed. Mr Zuks was a party to the Separation Deed, Mr Johnston was not, but had signed it as director/company secretary of Kalia Holdings, which was a party.
On 4 December 2017, Kalia Holdings and Kalia Limited also filed undertakings. Those undertakings were expressed to be for a limited time and have since expired.
On 5 December 2017, the case was adjourned to a strategic conference.
On 6 December 2017, the plaintiffs filed the amended writ adding Mr Larkan and Adam Zuks as defendants, and adding the further cause of action against all defendants for engaging in a tortious conspiracy to harm the plaintiffs' interests, 'namely the commercial development of the Panguna Mine or the plaintiffs' interest in Bougainville generally'.
On 15 January 2018, Mr Larkan also gave an undertaking. The substance of the undertaking, cls 1 to 5, was in the same terms as those given by Mr Zuks and Mr Johnston. The proviso, however, was broader. Mr Larkan's undertaking could be withdrawn on seven days written notice to the plaintiffs' solicitors.
On each occasion, the defendants' undertakings were accompanied by cross undertakings as to damages on behalf of the plaintiffs.
The statement of claim was filed on 7 February 2018. At that time, the plaintiffs alleged that the conduct of the defendants had either significantly delayed or frustrated the grant of an exploration license to a joint venture company formed in Bougainville pursuant to a joint venture agreement between CEPL and three entities representing the land owners in Bougainville. The plaintiffs pleaded that, at the time of the defendants contravening conduct, the plaintiffs 'enjoyed a realistic and probable likelihood of obtaining a lawful interest in respect of the Panguna Mine'.[9] The value of that interest was said to be in the billions of dollars.
The plaintiff sought relief by injunctions, including a mandatory injunction; damages for breach of contract; damages for tortious conspiracy; and a compensation order pursuant to s 1317H of the Corporations Act.[10]
The statement of claim was amended on 20 April 2018. The amendments were extensive.
Significantly, in [114], the plaintiffs now pleaded that CEPL and RTG Mining were taking steps for the purpose of 'mining or exploring for' gold, copper and other minerals. The plaintiffs further pleaded that at 16 January 2018, the Joint Venture Company they had formed with the land owners had a right to have its application for an exploration license covering specified areas in the Panguna Region determined in priority over subsequent applicants, and 'a reasonable legitimate expectation' that this application would be granted.[11]
The plea of loss and damage was, however, substantially reduced, with the deletion of the plea that the conduct of the defendants delayed or frustrated the grant of an exploration license.
A mediation on four days between October 2018 and June 2019 failed to resolve the dispute.
The action was then returned for a further strategic conference at which the current applications were foreshadowed.

[29]

Mr Zuks relied on affidavits of Jonelle Di Lena, legal practitioner, sworn 29 October 2019 and 1 December 2019. Ms Di Lena attached correspondence between the solicitors for Mr Zuks (and a letter from the solicitors for the Kalia parties) and the solicitors for the plaintiffs.
While the practice of attaching correspondence is widespread, attaching correspondence between solicitors is seldom an appropriate way to put evidence before the court unless the fact in issue is whether a matter has been raised in correspondence. Order 37 r 6 of the Supreme Court Rules 1971 (WA) permits a statement of information or belief (setting out the sources or grounds for that information or belief) in an affidavit in interlocutory proceedings. Letters passing between the legal representatives, arguing their clients' positions, do not come within that rule and are generally of little if any evidentiary value. If part of a genuine attempt to settle a dispute, the correspondence is privileged and should not filed.
From the affidavit of Ms Di Lena, I accept that the plaintiffs have been asked for but have not provided copies of the maps referred to in the definition of Exploration Area in the Joint Venture Agreement to which the plaintiffs have referred. I also accept that Mr Zuks wishes to pursue unspecified interests and commercial opportunities in Bougainville without the restraint of the undertaking.
A letter from the plaintiffs' solicitors, dated 10 October 2018 and attached to the first affidavit of Ms Di Lena, shows that the plaintiffs raised concerns with the defendants' solicitors about possible breaches of the undertakings by one or more of the defendants seeking to obtain an interest in a joint venture or partnership with landowners in the 'Seven Sisters' area, an area the plaintiffs allege lies within the Panguna Mine Area.
Other than that, very indirect, evidence there is no evidence that Mr Zuks has any interests or commercial opportunities in Bougainville which are affected by the undertaking.
Mr Johnston filed an affidavit, sworn 28 November 2019. His affidavit also attached correspondence between the solicitors for the plaintiffs and various defendants. His affidavit is frequently argumentative, and, in part, unsupported assertion. The evidence about prejudice, or potential prejudice, from the continuation of the undertaking is vague and general and often overstated. For example, the claim that the undertaking prevents his travel to Bougainville for fear of allegations of contempt is far removed from the terms of the restraints he voluntarily accepted.

[30]

Mr Zuks relied on submissions about the change in circumstances since the undertaking was given, and a fair sprinkling of rhetoric. He submitted that the undertakings are an 'additional weapon in the [plaintiffs'] commercial armoury'; exposure to allegations of contempt in relation to 'any conduct in connection with Bougainville' has had a 'sobering, if not chilling, effect'; and that the plaintiffs have exploited their position.
Mr Johnston submitted that the undertaking was given in circumstances where the plaintiffs were asserting that his conduct jeopardised the acquisition of a licence that, if acquired and developed, would be worth billions of dollars, and that there was a real and not fanciful prospect of the plaintiffs suffering incalculable damage. The plaintiffs were also asserting that there negotiations with the ABG were at a critical point.
Mr Johnston further submitted that the balance of convenience points to the discharge of the undertaking. At present, the plaintiffs' monetary claim, even if fully established, is modest. Mr Johnston submitted that the plaintiffs have been unable to plead a viable case. And, on the case now advanced, it cannot be said that damages would not be an adequate remedy. The commercial interests said to require protection no longer exist, following a rejection letter from ABG to RTG Mining in March 2019.
Mr Johnston also submitted that, since November 2017, the plaintiffs have not secured or materially advanced the acquisition of any exploration license.
Further, undertakings given by the Kalia parties have now expired and the plaintiff has not sought to renew them.
Mr Johnston submitted that the operation of the undertaking has occasioned prejudice and is likely to continue to adversely affect him. It has already been in force for more than two years and will, if it remains operative, be in force for a materially longer period than would reasonably have been anticipated at the time it was given.
Finally, Mr Johnston alleged misuse of the undertaking. I deal with that in more detail below.
The plaintiffs submitted that the undertaking of each defendant should only be discharged when there are good grounds for doing so, such as new facts that have come into existence which would render its enforcement unjust, the prejudice or impact on the party or third parties from the continuation of the undertaking, or the public interest in maintaining the undertaking.
The plaintiff submitted, and I accept, that the assertions of prejudice put forward by Mr Johnston and Mr Zuks are general and often exaggerated. Although the period of the undertaking has been extended now to two years, that has resulted from the slow progress of the claim, including the lengthy period of mediation.
The plaintiffs further submitted that there is evidence of breach of the undertaking by the conduct of Mr Zuks and the company Wyndale Holdings in or around late June 2019.
The plaintiffs submitted that the undertaking should be maintained to do justice between the parties.

[31]

In my opinion, the court's discretion should be exercised by discharging the undertaking in each case. The question can be determined on a quite narrow basis.
At the time the undertakings were given (resolving the plaintiffs' application for interim injunctions), the material before the court was incomplete and inaccurate. In his affidavit, sworn 11 November 2017, Mr Duncan stated that he attached the (first) Joint Venture Agreement dated 29 February 2016. The document attached, however, was the later agreement dated 21 April 2017, which superseded the earlier agreement. The error was patent: the attached copy included the dated execution page. But the effect of the error was that the Joint Venture Agreement referred to in the Separation Deed was not before the court until 4 December 2017 when Mr Duncan filed a supplementary affidavit. That is, the undertakings were given on an application relying on incomplete information.
The matter was before the court on 5 December 2017, and again on several occasions since then. The defendants did not earlier seek discharge of the undertakings on the basis of the, now admitted, error. That does not, however, affect the position that the undertaking was given when the material before the court was inaccurate.
The other important factor is that there has been a material change in the plaintiffs' position since November 2017. The circumstances which gave rise to an urgent application have now abated. While the plaintiffs can continue a claim for injunctive relief, based on contractual obligations, the monetary value of the claim in contract has significantly diminished. The present circumstances do not support the conclusion that the balance of convenience favours the continuation of the restraint.
The continued restraint of Mr Johnston, in particular, cannot be justified. He was not a party to the Separation Deed. Even if the court were to accept that he has obligations in tort not to interfere with the contractual relations between the plaintiffs and Mr Zuks, those obligations are not coextensive with the obligations in the undertaking which extend, for example, to obligations with regard to Connected Persons.
I am also concerned about the utility of an undertaking in such wide but ill-defined terms (and with a wide and similarly ill-defined proviso), relating to conduct in another jurisdiction.
Those factors, in my opinion, are sufficient to warrant the discharge.