Denjim Pty Ltd v National Gold Pty Ltd; Denjim Pty Ltd v AU Gold Pty Ltd

PROCEDURE - SECURITY FOR COSTS - PLAINTIFF OR APPLICANT SUBSTANTIALLY IN POSITION OF DEFENDANT - where the second and third defendants by counterclaim have brought applications for security for costs against the plaintiffs by counterclaim - where, inter alia, the plaintiff companies by counterclaim were registered on the same date the relevant mining agreements were entered into; do not own any real property in Queensland; and the paid up capital of each of the plaintiff companies by counterclaim is $100 - whether the plaintiffs by counterclaim will not be able to pay the costs of the defendants by counterclaim if ordered to pay - whether the discretion to make an order for security for costs is enlivened

TAXES AND DUTIES - STAMP DUTIES - EVIDENCE AND PROCEDURE - OTHER STATES AND TERRITORIES - where the second and third defendants by counterclaim seek the plaintiffs by counterclaim to lodge the agreements with the Queensland Revenue Office - where the plaintiffs by counterclaim submitted the court's role is to make a ruling under s 487 of the Duties Act 2001 (Qld) - whether orders for the lodgement of the agreements for the assessment of duty should be made

Corporations Act 2001 (Cth), s 1335

Duties Act 2001 (Qld), s 487

Uniform Civil Procedure Rules 1999 (Qld), r 395, r 430, r 670, r 671, r 672

Adeva Home Solutions Pty Ltd v Queensland Motorways Management Pty Ltd [2020] QSC 361, applied

Allen Dodd as Trustee for the Dodd Superannuation Fund v Shine Corporate Ltd [2018] QSC 40, cited

Anutech Pty Ltd v Latent Energy Systems Pty Ltd [1997] ACTSC 4, cited

Base 1 Projects Pty Ltd v Islamic College of Brisbane Ltd [2012] QCA 114, cited

Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd [1987] FCA 102; (1987) 16 FCR 497, cited

Buckley v Bennell Design and Constructions Pty Ltd (1974) 1 ACLR 301, cited

Denjim Pty Ltd v National Gold Pty Ltd; Denjim Pty Ltd v AU Gold Pty Ltd [2022] QSC 295, related

Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564, cited

Global Access Ltd v Educationdynamics, LLC [2010] 1 Qd R 525; [2009] QSC 373, cited

Interwest Ltd (Receivers and Managers Appointed) v Tricontinental Corporations Ltd (1991) 5 ACSR 621; (1991) 9 ACLC 1218, cited

KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; (1995) 56 FCR 189, cited

Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques [2016] QSC 2, cited

Le v Bui & Anor [2008] QSC 149, cited

Mio Art Pty Ltd v Mango Boulevard Pty Ltd [2018] QSC 31, cited

Monto Coal 2 Pty Ltd v Sanrus Pty Ltd [2019] 3 Qd R 143; [2018] QCA 309, cited

Premier Building & Consulting Pty Ltd v Spotless Group Ltd (No 7) [2005] VSC 275, cited

Project Leaders Pty Ltd v Mt Isa Irish Association Friendly Society Ltd [2003] QSC 64, cited

Robson v Robson [2008] QCA 36, cited

Stella Life Spa Pty Ltd v Elcorp Investments Pty Ltd [2017] QSC 333, cited

T Sloyan & Sons (Builders) Ltd v Brothers of Christian Instruction [1974] 3 All ER 715, cited

Willey v Synan [1935] HCA 76; (1935) 54 CLR 175, cited

B Kabel for the plaintiff/first defendant by counterclaim

D Piggott KC, with A O'Brien, for the first defendant/plaintiff by counterclaim

M Harris for the second and third defendants by counterclaim

Ashurst for the plaintiff/first defendant by counterclaim

Centurion Lawyers for the first defendant/plaintiff by counterclaim

Carbone Lawyers for the second and third defendants by counterclaim

[1] In each of proceeding BS No 4508 of 2021 and proceeding BS No 4509 of 2021, the second defendant by counterclaim (Ashby Mining) and the third defendant by counterclaim (AMDR Operations) (together, the Ashby parties) have applied for orders:

(a) that the plaintiff by counterclaim in each of those proceedings, National Gold Pty Ltd (National Gold) in proceeding BS No 4508 of 2021 and AU Gold Pty Ltd (AU Gold) in proceeding BS No 4509 of 2021 (together, the Gold parties), provide security for the Ashby parties' costs up to the date of mediation;

(b) that would require the Gold parties to lodge an agreement which is the subject of each proceeding with the Queensland Revenue Office for assessment of any duty payable in respect of those instruments, and to pay such duty as might be assessed, failing which the counterclaim against the Ashby parties would be dismissed.

[2] On the applications for security for costs the issues for determination are:

(a) whether the discretion to order the provision of security for costs is enlivened in the circumstances of this case;

(b) if so, whether that discretion should be exercised in favour of ordering the provision of security;

(c) the amount and form of any security which might be ordered.

[3] On the applications for relief concerning the lodgement of instruments for the assessment of duty the issue is whether it is appropriate to make the orders sought by the Ashby parties at this stage of the proceedings or whether assessment of the Gold parties' liability to pay duty on the agreements should be deferred until the proceedings have been determined.

[4] The Gold parties raised objections to parts of the affidavit material read by the Ashby parties in support of the security for costs applications. I heard argument on those objections at the commencement of the hearing of those applications but reserved my decision. It is appropriate that I address those objections before addressing the applications themselves.

[5] First, the Gold parties raised a hearsay objection to a letter dated 25 January 2023 from the Ashby parties' solicitors to the Gold parties' solicitors.[1] That letter set out the basis for the Ashby parties' applications for security for costs. In response to the objection, Ms Harris, who appeared as counsel for the Ashby parties, submitted that the letter was relied on solely for the purpose of establishing that there had been correspondence about the issue of security for costs, not to prove the truth of anything said in that correspondence. Mr Piggott KC, who appeared for the Gold parties with Mr O'Brien, accepted that the letter should be admitted on that limited basis.[2]

[6] Secondly, the Gold parties objected to the exhibiting to a solicitor's affidavit of two valuation reports relating to tenements which are the subject of the proceedings.[3] The objection was to the tendering of those valuations in a hearsay form and failing to comply with the requirements for adducing expert opinion evidence. In response to that objection, Ms Harris submitted that the Ashby parties did not seek to rely upon the valuations as expert evidence, but only as forming part of the material exchanged between the parties concerning the issue of security for costs.[4] I cannot see how, on that basis, the valuations are relevant to the issues which arise for determination on the applications. I allow the objection to the two valuation reports.

[7] Thirdly, the Gold parties objected on the basis of relevance and hearsay to the exhibiting to a solicitor's affidavit of two further documents: a media release issued by the Australian Securities and Investments Commission (ASIC) regarding the disqualification of Andrew Kavanagh from managing corporations for a period of three years from 22 June 2009;[5] and an article from the Sydney Morning Herald concerning Pnina Feldman.[6] Both Mr Kavanagh and Ms Feldman are directors of National Gold and directors of AU Gold. The solicitors' letter which identified the Ashby parties' bases for seeking security for costs (see [5] above) referred to those[7]documents.7 Notwithstanding that reference, I accept the Gold parties' submission that neither the media release nor the article is relevant to the issues which arise for determination on the applications, particularly in circumstances where Ms Harris submitted that the Ashby parties did not rely upon those two documents for the truth of what is stated in them. I allow the objection to the ASIC media release and the Sydney Morning Herald article.

[8] Finally, the Gold parties objected to evidence of the attempted service on them of court documents in proceedings between the parties in the Federal Court, including the exhibiting to a solicitor's affidavit of affidavits of service sworn by the process server and filed in that Federal Court proceeding.[8] The objection was that the evidence was hearsay and that leave had not been sought, and should not be granted, to rely on evidence from another proceeding.[9] In response to the objection, Ms Harris applied for leave to rely upon the affidavits of the process server.[10] As I pointed out during argument on the objections, the difficulty with that application is that it has been made in circumstances where the issues addressed in the process server's affidavits are the subject of factual controversy and the Ashby parties have not made the process server available to be cross-examined. Nevertheless, I am not persuaded to allow the hearsay objection to this evidence. The application for security for costs is an interlocutory application and, consequently, the Ashby parties may rely upon affidavit evidence based on information and belief.[11] Although not expressed in the usual form, I am satisfied that the Ashby parties seek to rely on evidence based on information and belief to the effect set out in the process server's affidavits. Of course, in the circumstances I have referred to where the evidence goes to a matter which is the subject of factual controversy, the hearsay nature of the evidence and the resulting inability of the Gold parties to test that evidence through cross-examination are matters which bear upon the weight to be given to the evidence.

[9] The proceedings concern disputes about the ownership of interests in a gold mining project which is referred to in the pleadings as the Burdekin Project. That project relevantly comprises the following mining tenements:

(a) Mining Lease number 10344 (ML 10344) which includes the Hadleigh Castle mine located 38 kilometres east of Charters Towers; and

(b) three exploration permits numbered 18414, 25663 and 26251[12] (together, the EPMs) covering areas proximate to the Hadleigh Castle mine.

[10] The plaintiff in both proceedings, Denjim Pty Ltd (Denjim), is the registered holder of ML 10344 and the EPMs.

[11] On 27 February 2019, Denjim entered into two agreements (together, Agreements). The first, with National Gold, concerned the recommencement of mining operations at the Hadleigh Castle mine (Mining Lease Agreement). The second, with AU Gold, concerned exploration on the EPMs (EPM Agreement).

[12] The Agreements provided, in broad terms, that Denjim would grant ownership interests in the mining tenements to the Gold parties[13] in return for the Gold parties providing funding for the Burdekin Project. There is a dispute between Denjim and the Gold parties as to whether, on the proper construction of each of the Agreements, the Gold parties acquired the relevant interest immediately upon execution (the Gold parties' position) or only after having complied with their funding obligations (Denjim's position). In this regard, the Gold parties submitted that the relevant provisions of the Agreements operated as: a declaration of trust by Denjim; or, alternatively, as an assignment of an equitable interest; or, as a further alternative, as a purported assignment of a legal interest which was ineffective at law but effective in equity.[14]

[13] On or about 29 September 2020, Denjim notified each of the Gold parties that it had terminated the Agreements.[15] The Gold parties submitted that this occurred in circumstances where:

(a) by at least June 2020 and without the Gold parties knowing, Denjim had begun taking steps to replace the Gold parties with Ashby Mining as the funder of the Burdekin Project;[16]

(b) by September 2020, the Gold parties had become aware that Ashby Mining had entered into an agreement to acquire 50% of the shares in Denjim and was seeking to raise capital on the basis that it would thereby acquire a 50% interest in the Burdekin Project,[17] impliedly assuming that Denjim owned 100% of the Burdekin Project;

(c) on 23 September 2020, the Gold parties wrote to Denjim and Ashby Mining, among others, putting them on notice of the interests they claimed to hold in the mining authorities;[18]

(d) it was in further correspondence exchanged between Denjim, Ashby Mining and the Gold parties that Denjim notified the Gold parties by letter dated 29 September 2020 that it had accepted the Gold parties' repudiation of the Agreements on or around 3 March 2020 or, alternatively, terminated the Agreements for the Gold parties' repudiation.

[14] Denjim commenced the proceedings in April 2021 but did not join the Ashby parties.

[15] On 30 July 2021, Denjim informed the Gold parties that it had entered into a Tribute Mining Agreement (TMA) with the Ashby parties. The TMA conferred various rights on the Ashby parties in relation to the Burdekin Project, including a right to 80% of the net profit earned in consideration for funding the project.[19] The Gold parties submitted that Ashby Mining also entered into an agreement to acquire 100% of the shares in Denjim.[20]

[16] The Gold parties subsequently applied to join the Ashby parties as defendants to their counterclaims. Those applications were opposed but, on 20 December 2022, Brown J ordered that the Ashby parties be joined as the second and third defendants to the counterclaims.[21]

[17] In its claim against each of the Gold parties, Denjim pleads that it validly terminated each of the Agreements on or about 29 September 2020, in circumstances where National Gold had breached the Mining Lease Agreement and AU Gold had breached the EPM Agreement, and that the Gold parties have no interest in the mining authorities. Denjim seeks declaratory relief accordingly.

[18] As against National Gold, Denjim further or alternatively seeks rectification of the Mining Lease Agreement or a declaration that the Mining Lease Agreement is void for uncertainty.

[19] In defending the proceedings, the Gold parties:

(a) dispute Denjim's construction of the Agreements (see [12] above);

(b) deny the allegations that they were in breach of their obligations under the Agreements and that Denjim was entitled to terminate the Agreements;

(c) plead Denjim's entry in mid-2020, prior to the purported termination of the Agreements, into an agreement with Ashby Mining under which Ashby Mining was to acquire 50% of the shares in Denjim and, thereby, a 50% interest in the Burdekin project.

[20] On their counterclaims, the Gold parties plead that Denjim's purported termination of the Agreements amounted to a repudiation which entitles the Gold parties to a decree of specific performance. They further plead that Denjim entered into the TMA in breach of the Agreements and in breach of the trust upon which they held the mining authorities for the benefit of the Gold parties.

[21] The Gold parties plead that the Ashby parties induced Denjim's breach of the Agreements and, further, that they knowingly and intentionally induced the breaches of trust; that they have knowingly received, and will continue to knowingly receive, property held on trust for the Gold parties; and that they had, and continue to have, constructive notice of the trusts which would render them liable to a proprietary claim in respect of trust property.

[22] As against Denjim the Gold parties claim, among other relief:

(a) declarations that the Agreements remain on foot;

(b) declarations as to the beneficial interest held by the Gold parties in the mining tenements;

(c) declarations that Denjim holds the mining tenements on trust for the Gold parties to the extent of their beneficial interests therein;

(d) orders for specific performance of the Agreements by Denjim;

(e) declarations that the TMA is void or orders setting aside the TMA;

(f) orders restraining Denjim from performing the TMA.

[23] As against the Ashby parties the Gold parties claim, among other relief:

(a) declarations as to their interest in the mining tenements in the same terms as sought against Denjim;

(b) declarations that the TMA is void or orders setting aside the TMA;

(c) orders restraining the Ashby parties from performing the TMA;

(d) declarations that the Ashby parties hold, or will hold, on trust for the Gold parties trust property received by them pursuant to the TMA and its traceable proceeds.

[24] It is in that context that I turn to consider the applications for security for costs.

The court's power to order the provision of security for costs

[25] The Ashby parties have brought their applications for security for costs pursuant to one or more of r 671 of the UCPR, s 1335 of the Corporations Act 2001 (Cth) (Corporations Act) or the inherent power of the court.

[26] Rule 670(1) of the UCPR confers a discretion in broad terms to order that a plaintiff give security the court considers appropriate for a defendant's costs. Pursuant to r 677, a party who files a counterclaim can also be ordered to provide security for costs.

[27] Rule 670(2) provides that the discretion must be exercised subject to the provisions of the UCPR, particularly rr 671 and 672.

[28] The determination of an application for security for costs ordinarily involves a two-stage process. At the first stage, the court considers whether any of a number of prerequisite circumstances set out in r 671 are satisfied. At the second stage, the court considers whether it should exercise the discretion to award security for costs, and if so, in what amount.[22]

[29] Rule 671 sets out eight circumstances which enliven the court's jurisdiction to order security for costs under the UCPR. The Ashby parties rely upon four of them:

(a) r 671(a), the plaintiffs by counterclaim are corporations and there is reason to believe that those parties will not be able to pay the costs of the defendants by counterclaim if ordered to pay them;

(b) r 671(c), the address of the plaintiffs by counterclaim is misstated in the originating process, unless there is reason to believe this was done without intention to deceive;

(c) r 671(f), the plaintiffs by counterclaim are, or are about to depart Australia to become, ordinarily resident outside Australia and there is reason to believe the plaintiff has insufficient property of a fixed and permanent nature available for enforcement to pay the costs of the defendants by counterclaim if ordered to pay them;

(d) r 671(h), the justice of the case requires the making of the order.

[30] It is clear that r 671(f) does not operate to enliven the jurisdiction in the circumstances of this case. Ms Harris submitted that it was relevant that the Gold parties are not resident in Queensland and appear to have no assets in this state.[23] Although that circumstance might be relevant to the exercise of the discretion once the jurisdiction is enlivened, it is not sufficient in itself to enliven that jurisdiction under r 671(f).

[31] I am also not satisfied that r 671(c) operates in the circumstances of this case. The Ashby parties bear the onus of establishing on the balance of probabilities that the requirements of the rule are satisfied: that is, the address of National Gold and AU Gold is misstated on the counterclaims and the misstatement was done with the intention to deceive. While the Gold parties bear an evidential onus to raise any innocent explanation they might seek to rely upon, the overall onus remains on the Ashby parties to establish the prerequisites for the order.[24]

[32] The address for the Gold parties is stated on the counterclaims as Suite 202, Level 2, 25 Falcon Street, Crows Nest, NSW 2065. That accords with the address of the registered office and principal place of business for the Gold parties listed in the register maintained by ASIC.[25]

[33] Notwithstanding what appears in the ASIC register, the Ashby parties maintain that the address on the counterclaims is misstated. The basis for that submission is the evidence of the process server who attempted, unsuccessfully, to serve court documents in the Federal Court proceeding at that address (see at [[8] (a) the paid up capital of each of the Gold parties is $100.00;

(b) each of the Gold parties was registered on 27 February 2019, the same date the Agreements with Denjim were signed;

(c) neither of the Gold parties owns any real property in Queensland;

(d) Denjim purported to terminate the Agreements because of the Gold parties' failure to meet their obligations to fund the Burdekin Project;

(e) the Gold parties' contention that they are not impecunious is based upon the entities standing behind those companies having sufficient means to meet an adverse costs order, implying that the ability of the Gold parties to meet any financial commitments is contingent upon the future financial support of those standing behind the companies;

(f) the Gold parties elected not to put on any material concerning their financial position, in circumstances where the Ashby parties are unable to search for any annual returns on the ASIC register.

[39] The Gold parties submitted that those matters are insufficient to discharge the onus, particularly when regard is had to the relatively modest quantum of recoverable costs the Ashby parties are likely to incur prior to mediation and the assets held by First State Pty Ltd (First State), the sole shareholder of each of the Gold parties.

[40] First State is the registered owner of real property at Baulkham Hills in New South Wales valued at approximately $900,000.[30] That property is subject to a mortgage in favour of LBT Corp Pty Ltd (LBT Corp), an entity which is associated with Andrew Kavanagh. Further, as at 27 February 2023, First State had in excess of $530,000 in its bank account.[31]

[41] As to whether the assets of First State would be made available to meet a costs order in favour of the Ashby parties, the Gold parties relied on the following evidence:

(a) Mr Draybi, the Gold parties' solicitor, deposed to his belief based on information from Andrew Kavanagh that, if the court requires, First State would be willing to provide an undertaking to the court or to the Ashby parties to pay the Ashby parties' costs of the proceedings;[32]

(b) the sole director of First State, Lorraine Young, who is Andrew Kavanagh's mother-in-law, deposed that she is willing to cause First State to provide an undertaking to the court or to the Ashby parties to pay the Ashby parties' costs of the proceedings or to guarantee the Gold parties' payment of such costs, in lieu of the Gold parties providing security for costs in the form of cash or a bank guarantee;[33]

(c) the sole director of LBT Corp, David Kavanagh, who is Andrew Kavanagh's brother, deposed that if it would assist the Gold parties in relation to the security for costs applications, LBT Corp would be willing to discharge the mortgage it holds over the real property owned by First State or to grant priority to the Ashby parties over LBT Corp's mortgage should the Ashby parties be given the right to charge that real property with amounts payable in respect of their costs of the proceedings.[34]

[42] I infer from that evidence, and from the absence of any evidence that either of the Gold parties hold assets which would enable those companies to pay an adverse costs order from their own assets, that the Gold parties would be unable to meet an order to pay the Ashby parties' costs without the financial support of First State and, perhaps, LBT Corp.

[43] Further, the evidence which the Gold parties relied upon to establish the existence of that support does not contain any statement which constitutes an unqualified acceptance of an obligation on the part of First State or LBT Corp to take steps to meet a costs order made against the Gold parties. Those companies' preparedness to take on such an obligation was expressly conditioned on the outcome of the security for costs applications.

[44] In those circumstances I am satisfied that, in the absence of an unqualified acceptance of an obligation on the part of First State or LBT Corp to take steps to meet a costs order made against the Gold parties, there is reason to believe that the Gold parties will not be able to pay the Ashby parties' costs if ordered to do so.

[45] That is sufficient to enliven the jurisdiction to order the provision of security for the Ashby parties' costs of defending the counterclaim.

[46] Rule 672 sets out 13 matters to which the court may have regard in deciding whether to exercise the discretion to make an order for security for costs. Where, as here, the discretion to order the provision of security for costs is engaged that discretion is unfettered and should be exercised, having regard to all the circumstances of the particular case, by assessing and weighing relevant factors, some of which may be interrelated.[35]

[47] The Ashby parties emphasised: the impecuniosity of the Gold parties;[36] that such impecuniosity is not attributable to the conduct of the Ashby parties in circumstances where the pleadings between Denjim and the Gold parties indicate that the Gold parties ceased funding the Burdekin Project prior to June 2020;[37] and the means of those standing behind the proceeding.[38] As to that last matter, the Ashby parties raised concerns as to the enforceability of an undertaking given by First State in circumstances where that company holds assets as trustee and bank statements showed significant transfers out of First State's account over a short period of time. They also relied on the fact that Andrew Kavanagh appears to be one of the persons who stands behind the Gold parties but has not offered a personal undertaking to meet any costs order made against those companies.

[48] In their written outline the Ashby parties submitted that, in the absence of any evidence that the Gold parties had lodged the Agreements for the assessment of duty, those Agreements would be unenforceable by reason of s 487 of the Duties Act 2001 (Qld) (Duties Act).[39] This was submitted as being relevant to the prospects of success or the merits of the claim.[40] I do not accept that the fact the Agreements have not yet been lodged for the assessment of duty displaces the general position that, where a claim is prima facie regular on its face and discloses a cause of action, the court should proceed on the basis that the claim is bona fide with a reasonable prospect of success.[41] In that case the merits of the claim should be regarded as a neutral factor.[42]

[49] The Ashby parties further submitted that there was no evidence that an order for security for costs would be oppressive,[43] or that such an order would stifle the counterclaims.[44] Again, it seems to me that those are neutral factors in the exercise of the discretion.

[50] The Gold parties relied on a submission that they are effectively in the position of a defendant.[45] They also relied on the evidence going to the means of First State,[46] being the sole shareholder of the Gold parties, and its willingness to provide financial support to those companies (see [40] and [41] above) as well as the relatively modest quantum of recoverable costs the Ashby parties are likely to inc[47] prior to mediation.47

[51] There is authority for the principle that a plaintiff should not ordinarily be required to give security for costs where that party is really defending himself against the defendant's previous actions.[48]

[52] The same principle applies to applications for security for costs against a plaintiff by counterclaim. Security will ordinarily only be ordered against a counterclaiming party who is in substance a plaintiff and will not be ordered against a party who brings a counterclaim as a defensive proceeding or who has been forced to litigate.[49] In many cases, the fact that the counterclaim arises out of the same transaction as the claim will support a conclusion that the counterclaim is a defensive proceeding, but it does not necessarily follow.[50]

[53] This means it is necessary to characterise the proceedings in respect of which security is sought. That the proceedings are defensive in character, in the sense of either resisting proceedings already brought or seeking to halt self-help procedures, would provide serious grounds for refusing to make an order.[51] The extent to which the time and resources required to litigate the issues raised in a counterclaim would also be required to establish a defence to the plaintiff's claim is relevant to whether the proceeding is properly characterised as defensive.[52]

[54] In this case, the Ashby parties submitted that the Gold parties are not defending themselves against claims by the Ashby parties and are, therefore, truly plaintiffs. While it is correct that the counterclaim was not brought in response to proceedings instituted by the Ashby parties, such that the Gold parties are nominally plaintiffs in the counterclaims, I consider that the counterclaims against the Ashby parties are defensive in character because it was necessary for the Gold parties to join the Ashby parties to the counterclaims in order to defend themselves against the conduct of the Ashby parties (together with Denjim) in entering into the TMA.

[55] By entering into the TMA, the Ashby parties have sought a commercial benefit from Denjim's purported termination of the Agreements and subsequent denial that the Gold parties hold any interest in the mining tenements. For that reason, the interests of the Ashby parties in the proceedings are closely aligned with the interests of Denjim.

[56] The Gold parties amended the counterclaims, and joined the Ashby parties as defendants to those counterclaims, in response to the actions of the Ashby parties and Denjim entering into the TMA, in circumstances where the Gold parties had given notice of the interests they claimed in the mining tenements by reason of the Agreements. The only course the Gold parties had once Denjim and the Ashby parties had entered into the TMA was to seek relief from the court to declare the continuing existence of the Agreements and the interests the Gold parties held in the mining tenements by reason of those Agreements, and to restrain Denjim and the Ashby parties from giving effect to the TMA.

[57] In this sense, I am satisfied that the counterclaims against the Ashby parties arise out of the same transaction as the claim made by Denjim against the Gold parties. So much is clear from the reasons given by Brown J for concluding that the Ashby parties are necessary parties and ordering their joinder as defendants to the counterclaims.[53] It also seems to me that, because of the matters identified by Brown J, the bulk of the time and resources required to litigate the issues raised by the counterclaims would also be devoted to establishing that there was a defence to Denjim's claim: that is, the Agreements remain in effect and the Gold parties hold a beneficial interest in the mining tenements such that the TMA is liable to be set aside.

[58] The defensive character of the counterclaims against the Ashby parties weighs heavily against exercising the discretion to order for security for costs. I am not satisfied that, in the circumstances of this case, any of the discretionary factors identified by the Ashby parties are sufficient to overcome that consideration. For those reasons, I consider that it is not appropriate to order security for costs in this case.

[59] Given my conclusion concerning the exercise of the discretion, I can deal briefly with the remaining arguments on security for costs.

[60] The Ashby parties sought security for their costs up to mediation for the two proceedings in the amount of $179,267.50.[54] The Gold parties submitted that figure is excessive for two reasons.

[61] First, it would provide security for the cost of an expert report addressing the work required to commence Stage 1 mining operations on ML 10344 and the costs of those works, both to date and projected into the future. The quantum of security sought is based upon that report costing $100,000, although a written estimate has yet to be obtained from an expert.

[62] I am not satisfied that the cost of this report should be accounted for in the calculation of the appropriate amount of security. The report does not seem relevant to the issues in the proceedings which, as already addressed, turn upon the construction of the Agreements and whether the Gold parties are able to establish that they hold a beneficial interest in the mining tenements.

[63] Ms Harris submitted that the need for such a report arose from: an allegation that the Gold parties are ready, willing and able to perform their obligations under the Agreements; the prospect that the Gold parties' claim against the Ashby parties might involve a claim for damages for lost opportunity; and by reason of relief sought by the Gold parties in the form of an account of profits.[55]

[64] The issue whether the Gold parties are ready, willing and able to perform the Agreements will fall to be determined having regard to the capacity of those parties to meet their financial obligations under the Agreements. Under the Mining Lease Agreement,[56] National Gold was required to reimburse Denjim for certain costs and to provide funding in specified amounts.[57] The EPM Agreement[58] also imposes an obligation to make payments in amounts that are either fixed by the terms of the agreement or are to be agreed between the parties.[59] I find it difficult to see how a report addressing the nature of work required to undertake Stage 1 mining operations, and the projected costs of that work, would be relevant in determining the issue whether the Gold parties have the capacity to meet their financial obligations under the Agreements.

[65] If the Gold parties succeed in their claim for relief in the form of an account of profits, then evidence would be required of the earnings from the Burdekin Project up to the date of the account and the costs incurred in achieving those earnings. That material would address the work in fact undertaken and the actual cost of that work. The opinion of an expert is unlikely to assist in that exercise. Further, it is unlikely such evidence would be required to determine whether the Gold parties are entitled to the account of profits they seek. That evidence would only become relevant at a later stage of the proceedings.

[66] As to the claim for damages for loss of a valuable commercial opportunity, the Gold parties presently allege that Denjim caused such loss by its breach of the Agreements and by its entry into the TMA.[60] Although the Gold parties claim damages in the prayer for relief in each of the counterclaims against the Ashby parties,[61] the pleaded case against the Ashby parties for inducing breaches of the Agreements, inducing breaches of trust and knowing receipt of trust property do not allege that the Ashby parties' conduct caused the Gold parties to suffer loss.[62]

[67] For these reasons, the suggestion that the matters identified by the Ashby parties mean that they will be required, prior to mediation, to obtain an expert report of the type they have foreshadowed seems too speculative to warrant including the estimated cost of such a report in the determination of the appropriate amount of security.

[68] Secondly, the Gold parties submitted that it would not be appropriate to order security in the full amount of the Ashby parties' estimated recoverable costs, but that the amount of security to be provided should be discounted by at least 30% to reflect the possibility that the Gold parties' counterclaims will succeed.

[69] The assessment of an appropriate amount of security for costs is not susceptible of great precision. Rather, a "broad brush" approach is to be taken. An order for security for costs does not provide a defendant with an indemnity for the expenses of defending a claim. It is intended to provide protection against the risk that an order for party and party costs in the defendant's favour might not be satisfied.[63]

[70] Applying that broad brush approach, having regard to the estimate of costs provided by the Ashby parties and the two matters raised by the Gold parties, if I had determined that this was an appropriate case in which to order security for costs I would have ordered that security be provided in a total amount of $90,000, with National Gold required to provide security in the amount of $65,000 in proceeding BS No 4508 of 2021 and AU Gold required to provide security in the amount of $25,000 in proceeding BS No 4509 of 2021.

[71] The Gold parties also resisted an order that any security be provided by way of payment into court or bank guarantee on the basis that the undertaking offered by First State would provide adequate security to the Ashby parties (see [41] above).

[72] The principles which govern the exercise of the discretion as to the form of security are set out in Adeva Home Solutions Pty Ltd v Queensland Motorways Management Pty Ltd.[64]

[73] Ultimately the question is whether a particular form of security is adequate in all the circumstances. The Gold parties bear a practical onus of establishing that the undertaking offered by First State is adequate and does not impose an unacceptable disadvantage on the Ashby parties. This requires consideration of whether the disadvantages to the Ashby parties in not being able to access security in a liquid form are unacceptable. If First State does not voluntarily comply with the undertaking, the Ashby parties would be required to commence proceedings to enforce it. It is for that reason that, in determining whether a form of security is adequate in all the circumstances to protect a defendant, there is ordinarily a preference for a liquid form of security that enables funds to be accessed quickly and inexpensively, without the risk that litigation may be required to enforce the security.

[74] The submissions of the Gold parties did not address the risk that the Ashby parties might be required to commence proceedings against First State to enforce the undertaking. Nor did they suggest that a requirement to provide security by payment into court or a bank guarantee would impose an unacceptable financial impediment to the Gold parties or to First State. In those circumstances, if I had determined that this was an appropriate case in which to order security for costs, I would not have been satisfied that the Gold parties discharged the practical onus of establishing that the undertaking offered by First State is adequate and does not impose an unacceptable disadvantage on the Ashby parties.

Assessment of duty payable in respect of the Agreements

[75] The Ashby parties submitted that they have sought orders which would require the Gold parties to lodge the Agreements with the Queensland Revenue Office in order to regularise the position as regards the assessment of any duty payable on those instruments.[65]

[76] The Gold parties resist this aspect of the applications. They submitted that the court's role in this context is to make a ruling under s 487 of the Duties Act, either prohibiting use of the Agreements or their receipt into evidence under s 487(1) or deciding to receive the Agreements into evidence on the basis that the instrument is given to the commissioner pursuant to arrangements approved by the court under s 487(2). An example of the latter course can be seen in Le v Bui & Anor.[66] The Gold parties submitted that the time for making such a ruling has not yet been reached.

[77] I accept the submission of the Gold parties. Although, as the Ashby parties submitted, the question whether duty is payable on the Agreements is one for the commissioner and not for the court, the commissioner is likely to be aided in that assessment by the court's decision on the proper construction of the Agreements. If the commissioner was to assess the Agreements for duty on the basis of a construction which was not ultimately found by the court to be the proper construction of the Agreements then the assessment would in all likelihood have to be revisited. That situation could be avoided if the requirement for the Gold parties to lodge the Agreements for the assessment of duty is deferred until after the construction question has been resolved.

[78] I am not prepared to make the orders sought by the Ashby parties concerning lodgement of the Agreements for the assessment of duty.

[79] For the reasons set out above the applications filed on 20 February 2023 in both proceeding BS No 4508 of 2021 and proceeding BS No 4509 of 2021 are dismissed.

[80] In proceeding BS No 4508 of 2021 and proceeding BS No 4509 of 2021 it is ordered that the Ashby parties pay the Gold parties costs of and incidental to the application to be assessed on the standard basis if not agreed.

[1] Affidavit of Emanuele Carbone filed 20 February 2023 (Court document 39 in BS No 4508 of 2021), pages 7-22 of exhibit EC-01.

[3] Affidavit of Emanuele Carbone filed 20 February 2023 (Court document 39 in BS No 4508 of 2021), [19] and pages 29-181 of exhibit EC-01.

[5] Affidavit of Emanuele Carbone filed 6 March 2023 (Court document 47 in BS No 4508 of 2021), pages 38-39 of exhibit EC-02.

[6] Affidavit of Emanuele Carbone filed 6 March 2023 (Court document 47 in BS No 4508 of 2021), page 109 of exhibit EC-02.

[7] Affidavit of Emanuele Carbone filed 20 February 2023 (Court document 39 in BS No 4508 of 2021), page 11 of exhibit EC-01.

[8] Affidavit of Emanuele Carbone filed 6 March 2023 (Court document 47 in BS No 4508 of 2021), [9] and pages 149-167 of exhibit EC-02.

[9] Uniform Civil Procedure Rules 1999 (Qld) (UCPR) r 395.

[12] In the further amended defence filed in each proceeding on 27 January 2023, the Gold parties plead that EPM 26251 expired on or about 7 February 2022.

[13] A 50% interest in ML 10344 to National Gold under the Mining Lease Agreement and a 75% interest in the EPMs to AU Gold under the EPM Agreement.

[14] Written submissions of the Gold parties filed 13 March 2023 (Court document 49 in BS No 4508 of 2021) at [14](a) and the authorities cited.

[15] Affidavit of Maroun Antoine Draybi filed 2 November 2022 (Court document 19 in BS No 4508 of 2021), pages 156-161 of exhibit MD-3.

[16] Affidavit of Maroun Antoine Draybi filed 2 March 2023 (Court document 43 in BS No 4508 of 2021), [14] and pages 6-11 of exhibit MD-4.

[17] Affidavit of Maroun Antoine Draybi filed 2 November 2022 (Court document 19 in BS No 4508 of 2021), pages 74-91, 99 and 129 of exhibit MD-3.

[18] Affidavit of Maroun Antoine Draybi filed 2 November 2022 (Court document 19 in BS No 4508 of 2021), pages 70-73 of exhibit MD-3.

[19] Affidavit of Maroun Antoine Draybi filed 26 October 2022 (Court document 16 in BS No 4508 of 2021), pages 57-58 of exhibit MD-2.

[20] Affidavit of Maroun Antoine Draybi filed 26 October 2022 (Court document 16 in BS No 4508 of 2021), page 161 of exhibit MD-2.

[21] Denjim Pty Ltd v National Gold Pty Ltd; Denjim Pty Ltd v AU Gold Pty Ltd [2022] QSC 295 (Court document 31 in BS No 4508 of 2021).

[22] Robson v Robson [2008] QCA 36, [19]; Monto Coal 2 Pty Ltd v Sanrus Pty Ltd [2018] QCA 309; [2019] 3 Qd R 143, 150 [22].

[24] Robson v Robson [2008] QCA 36, [52].

[25] Affidavit of Maroun Antoine Draybi filed 2 March 2023 (Court document 43 in BS No 4508 of 2021), pages 20 and 31 of exhibit MD-4.

[26] Affidavit of Emanuele Carbone filed 6 March 2023 (Court document 47 in BS No 4508 of 2021), [9] and pages 149-167 of exhibit EC-02.

[27] Affidavit of Andrew Bruce Kevin Kavanagh filed 13 March 2023 (Court document 48 in BS No 4508 of 2021), [5]-[7].

[28] Stella Life Spa Pty Ltd v Elcorp Investments Pty Ltd [2017] QSC 333, [11].

[29] Monto Coal 2 Pty Ltd v Sanrus Pty Ltd [2018] QCA 309; [2019] 3 Qd R 143, 154 [43] and 155-156 [48]-[52].

[30] Affidavit of Maroun Antoine Draybi filed 2 March 2023 (Court document 43 in BS No 4508 of 2021), [27]-[33] and pages 104 and 128-133 of exhibit MD-4.

[31] Affidavit of Maroun Antoine Draybi filed 2 March 2023 (Court document 43 in BS No 4508 of 2021), [32] and pages 121-127 of exhibit MD-4.

[32] Affidavit of Maroun Antoine Draybi filed 2 March 2023 (Court document 43 in BS No 4508 of 2021), [26].

[33] Affidavit of Lorraine Rae Young filed 2 March 2023 (Court document 41 in BS No 4508 of 2021), [6].

[34] Affidavit of David Charles Kavanagh filed 2 March 2023 (Court document 42 in BS No 4508 of 2021).

[35] Base 1 Projects Pty Ltd v Islamic College of Brisbane Ltd [2012] QCA 114, [18] and [23].

[39] Court document 46 in BS No 4508 of 2021, [32].

[41] KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; (1995) 56 FCR 189, 197.

[42] Mio Art Pty Ltd v Mango Boulevard Pty Ltd [2018] QSC 31, [60]-[61] citing Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564, [37]-[39].

[48] Willey v Synan [1935] HCA 76; (1935) 54 CLR 175, 184-185 and see also 180; cited in Global Access Ltd v Educationdynamics, LLC [2009] QSC 373; [2010] 1 Qd R 525, 528-529 [14]-[16].

[49] Project Leaders Pty Ltd v Mt Isa Irish Association Friendly Society Ltd [2003] QSC 64, [11] citing Buckley v Bennell Design and Constructions Pty Ltd (1974) 1 ACLR 301, 306-307, Interwest Ltd (Receivers and Managers Appointed) v Tricontinental Corporations Ltd (1991) 9 ACLC 1218, 1228-1229 and KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; (1995) 56 FCR 189, 198.

[50] Project Leaders Pty Ltd v Mt Isa Irish Association Friendly Society Ltd [2003] QSC 64, [12] citing T Sloyan & Sons (Builders) Ltd v Brothers of Christian Instruction [1974] 3 All ER 715, 721.

[51] Interwest Ltd (Receivers and Managers Appointed) v Tricontinental Corporations Ltd (1991) 5 ACSR 621, 627 cited in Global Access Ltd v Educationdynamics, LLC [2009] QSC 373; [2010] 1 Qd R 525, 531 [21].

[52] Anutech Pty Ltd v Latent Energy Systems Pty Ltd [1997] ACTSC 4 cited in Project Leaders Pty Ltd v Mt Isa Irish Association Friendly Society Ltd [2003] QSC 64, [13].

[53] Denjim Pty Ltd v National Gold Pty Ltd; Denjim Pty Ltd v AU Gold Pty Ltd [2022] QSC 295 (Court document 31 in BS No 4508 of 2021), [26]-[27] and [48]-[50].

[54] Affidavit of Emanuele Carbone filed 20 February 2023 (Court document 39 in BS No 4508 of 2021), pages 20 to 22 of exhibit EC-01. The amount of security sought against National Gold in BS No 4508 of 2021 was $146,467.50, while the amount of security sought against AU Gold in BS No 4509 of 2021 was $32,800.00.

[56] Affidavit of Maroun Antoine Draybi filed 26 October 2022 (Court document 16 in BS No 4508 of 2021), pages 189-196 of exhibit MD-2.

[57] By cl 1, National Gold agreed to reimburse Denjim for costs in the amount of $690,000 with $490,000 to be paid within two days of execution of the Mining Lease Agreement and the remaining $200,000 to be paid on completion of any testing and the decision by National Gold to proceed with development. By cl 2, National Gold agreed to provide a minimum of $300,000 to be spent in an agreed timetable on drilling to explore and confirm the initial resource to be developed. By cl 6 and Recital 4(c), National Gold agreed to provide an initial capital expenditure amount of $2 million.

[58] Affidavit of Maroun Antoine Draybi filed 26 October 2022 (Court document 16 in BS No 4508 of 2021), pages 183-188 of exhibit MD-2.

[59] By cl 6, AU Gold agreed, on a best endeavours basis, to provide a minimum amount of $500,000 per year for the first two years to fund exploration on the EPMs. By cl 7, AU Gold agreed to provide minimum funding thereafter in an annual amount sufficient to meet commitments under the EPMs to the Mines Department. By cl 25, annual commitments to the Mines Department under the EPMs are to be approved by a joint venture committee consisting of members appointed by AU Gold and by Denjim.

[60] Further amended counterclaim (Court document 35 in BS No 4508 of 2021), [12]-[12B] and [32]; Further amended counterclaim (Court document 28 in BS No 4509 of 2021), [12]-[12A] and [33].

[61] Further amended counterclaim (Court document 35 in BS No 4508 of 2021), paragraph 17 of the prayer for relief; Further amended counterclaim (Court document 28 in BS No 4509 of 2021), paragraph 17 of the prayer for relief.

[62] Further amended counterclaim (Court document 35 in BS No 4508 of 2021), [34]-[50]; Further amended counterclaim (Court document 28 in BS No 4509 of 2021), [35]-[51].

[63] Allen Dodd as Trustee for the Dodd Superannuation Fund v Shine Corporate Ltd [2018] QSC 40, [15]-[17], citing Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd [1987] FCA 102; (1987) 16 FCR 497, 515; Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques [2016] QSC 2, [52]-[54]; Premier Building & Consulting Pty Ltd v Spotless Group Ltd (No 7) [2005] VSC 275, [5].

[64] [2020] QSC 361, [16]-[32].

[66] [2008] QSC 149, [23].