First Plaintiff v First Defendant

Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104; J & P Marlow (No 2) Pty Ltd v Hayes [2023] NSWCA 117; (2023) 112 NSWLR 29; Apple and Pear Australia Ltd v Pink Lady America LLC [2016] VSCA 280; (2016) 343 ALR 112.

TORTS - Inducing breach of contract - Breach of share mortgage by entering into various agreements - Whether knowledge of existence of agreements sufficient to ground knowledge or intention to induce where complex contractual arrangements - Where relevant breach not in contemplation of the parties at time of breach - Nature of inducement required - No liability established.

State Street Global Advisors Trust Company v Maurice Blackburn Pt Ltd (t/as Maurice Blackburn Lawyers) (No 2) [2021] FCA 137; (2021) 164 IPR 420; Daebo Shipping Company Ltd v The Ship Go Star [2012] FCAFC 156; (2012) 207 FCR 220; Short v City Bank of Sydney [1912] NSWStRp 21; (1912) 12 SR (NSW) 186; Allstate Life Insurance v Australia and New Zealand Banking Group Ltd [1995] FCA 1368; (1995) 58 FCR 26.

EVIDENCE - Evidence Act 2008, s 135 - Evidence excluded as defendant not aware of its relevance to claim - Prejudice as defendant was denied opportunity to call evidence or cross‑examine.

1 This proceeding relates to a share sale agreement (2018 SSA) and a related share mortgage (Share Mortgage) entered into on 17 September 2018, concerning ownership of the Capricorn Copper mine located in North West Queensland, approximately 125km north of Mt Isa (Capricorn Copper mine). The parties to the 2018 SSA were the first plaintiff (EMR6B) as purchaser and the sellers listed in Schedule 1 to the statement of claim (the Sellers).

2 Before the 2018 SSA was entered into, EMR6B owned approximately 96.5 per cent of the shares in Capricorn Copper Holdings Pty Ltd (CCH). CCH owned all of the shares in Capricorn Copper Pty Ltd (CCPL) which, in turn, owned the Capricorn Copper mine. EMR6B was a special purpose holding vehicle managed by 'EMR Capital', a private equity firm specialising in managing and advising funds with investments in mining operations. The Sellers owned the remaining shares in CCH (approximately 3.5 per cent) via a company called Lighthouse Minerals Pty Ltd (Lighthouse). I will refer to the shares owned by the Sellers in Lighthouse (which in turn held the shares in CCH), as the Shares.

3 Under the 2018 SSA, EMR6B agreed to purchase the Shares from the Sellers, with the result that EMR6B owned all of the shares in CCH which, through CCPL, owned the Capricorn Copper mine.

4 The purchase price under the 2018 SSA was an Upfront Payment (paid in four tranches) of AUD$7,285,000 million with the possibility of an additional payment (called an 'Earnout Payment') of approximately AUD$12.5 million. Payment of the Earnout Payment depended upon satisfaction of one of two circumstances or conditions in cll 6.1(a) and 6.1(c) and (d) respectively. In summary:[1]

(a) the first condition, in cl 6.1(a) of the 2018 SSA, concerns the happening of a 'Liquidity Event' (relevantly, including an initial public offering), where the aggregate of all cash returns paid or available to be paid to the 'EMR Investors', as a result of the Liquidity Event (and any previous Liquidity Events), is at least twice 'its Invested Capital' immediately before the Liquidity Event; and

(b) the second condition or circumstance, in cll 6.1(c) and (d), concerns the fifth anniversary and 'End Date' of the 2018 SSA where the Earnout Payment has not fallen due for payment, and an independent valuer is commissioned to determine the then present value of the aggregate in the 'CC Group', and whether it is at least equal to twice 'the Invested Capital'.

5 Further, under the Share Mortgage, EMR6B mortgaged 10 per cent of its shares in CCH (the Collateral) to the Sellers (who were referred to as the 'Secured Parties' in the Share Mortgage) to secure payment of the 'Secured Money'. In very broad terms, Secured Money means the balance of moneys owing from time to time under the 2018 SSA. Under cl 5.1(c)(ii) of the Share Mortgage, EMR6B was not allowed to transfer the Collateral without the consent of the Secured Parties' nominated Agent, unless EMR6B had paid 'an amount equal to the Secured Money (including any Secured Money that would reasonably foreseeably be owing in future)' into an escrow account with arrangements to release the funds to the Secured Parties immediately upon completion of a 'Relevant Transaction'. For convenience, I will refer to the Secured Parties as the Sellers unless indicated to the contrary.

6 Mr Carl Hallion (first defendant), who is one of the Sellers, is the nominated 'Seller Representative' under the 2018 SSA, and the nominated 'Agent' of the Secured Parties under the Share Mortgage. The first defendant is sued as the Seller Representative and/or Agent of the Secured Parties. Given that the Sellers participated in this proceeding through the first defendant, unless indicated to the contrary, I will also refer to the first defendant as (one of) the Sellers.

7 This proceeding primarily relates to whether the Sellers are entitled to the Earnout Payment from EMR6B, at the time of an agreed Relevant Transaction on 7 June 2021. This is in circumstances where:

(a) on 7 June 2021, EMR6B transferred all of its shares in CCH and Lighthouse (including the Collateral) to a new entity, 29Metals Ltd (29Metals) (the second plaintiff), without the consent of the Agent so that the Capricorn Copper mine could participate in an IPO of shares in 29Metals (the IPO);

(b) the IPO successfully completed on 5 July 2021; and

(c) as the intended consequence of the IPO, on 5 July 2021, other assets unrelated to the Capricorn Copper mine owned by entities within EMR Capital were transferred to 29Metals (the non-CCH assets); namely, the Redhill exploration project (Redhill or the Redhill project) and the Golden Grove mine (Golden Grove or the Golden Grove mine).

8 For convenience, I will refer to the EMR6B and the 29Metals collectively as the plaintiffs unless indicated to the contrary.

9 The Sellers' entitlement to the Earnout Payment depends upon the construction of relevant clauses in the SSA and Share Mortgage, in particular:

(a) clause 6.1(a) of the 2018 SSA, and whether the value of the non-CCH assets in 29Metals should be taken into account in determining the Earnout Payment; and

(b) clause 5.1(c)(ii) of the Share Mortgage, and the meaning of the phrase 'an amount equal to the Secured Money (including any Secured Money that would reasonably foreseeably be owing in future)'.

(a) the plaintiffs submit that, for the purposes of the Earnout Payment under cl 6.1 of the 2018 SSA, the value of the non-CCH assets in 29Metals (acquired as part of the IPO) should not be taken into account at the relevant time (namely, 7 June 2021) with the result that the Earnout Payment was not payable at that time. By contrast, the Sellers submit that the non-CCH assets of 29Metals should be taken into account with the result that the Earnout Payment was payable; and

(b) the Sellers contend that the Earnout Payment was payable under cl 5.1(c)(ii) of the Share Mortgage, because 'Secured Money' under the Share Mortgage included the Earnout Payment; or alternatively, because the Earnout Payment was reasonably foreseeably owing in the future, as at 7 June 2021. The plaintiffs dispute this position and contend that the Earnout Payment did not fall within the definition of Secured Money; and further, that the Earnout Payment was reasonably foreseeably owing in the future at that time.

11 Based on its construction of these provisions, EMR6B formed the view as at 7 June 2021 that the Earnout Payment:

(a) was not payable under cl 6.1(a) of the 2018 SSA;

(b) did not form part of the Secured Money; and

(c) was not reasonably foreseeably owing in the future, pursuant to cl 5.1(c)(ii) of the Share Mortgage.

12 As a result, EMR6B did not pay the Earnout Payment into an escrow account in accordance with cl 5.1(c)(ii) of the Share Mortgage. Further, without the consent of the Agent, EMR6B transferred the Collateral to 29Metals on 7 June 2021, in the lead up to the IPO. In addition, without the agreement of the Agent, EMR6B entered into a voluntary escrow arrangement to hold its shares in 29Metals following the IPO, until about February 2022 (the Consideration shares). Based on their construction of these provisions, the Sellers contend that the failure to pay the amount of the Earnout Payment into escrow, and the transfer of the Collateral to 29Metals without the consent of the Agent, each constituted an Event of Default under the Share Mortgage rendering the Earnout Payment immediately payable.

13 Relying upon these alleged Events of Default, the Agent (ie the first defendant) appointed the second and third defendants as receivers over the Consideration shares, pursuant to the Share Mortgage. The plaintiffs have denied any breach of the Share Mortgage (based upon the matters set out in [11] above), and allege in this proceeding that the appointment of receivers was invalid. The receivers did not play an active part in these proceedings. The third defendant is no longer a party. The Sellers, however, dispute that the appointment of receivers was invalid and seek the costs of receivership from EMR6B in this proceeding.

14 Finally, the Sellers allege that 29Metals induced EMR6B to breach the terms of the 2018 SSA and the Share Mortgage, because it had knowledge of the terms of those agreements.

15 For the reasons that follow, I have concluded that:

(a) on the proper construction of cl 6.1(a) of the 2018 SSA, the value of the non-CCH assets in 29Metals should be taken into account in determining the Earnout Payment;

(b) on the evidence before me, at the time of the sale of CCH shares to 29Metals, the Earnout Payment would 'reasonably foreseeably be owing in future', under cl 5.1(c)(ii) of the Share Mortgage.

16 As a result, by transferring the Collateral to 29Metals on 7 June 2021 without paying the Earnout Payment into an escrow account in accordance with the Share Mortgage, EMR6B breached cl 5.1(c) of the Share Mortgage which constituted an Event of Default. This rendered the Earnout Payment payable to the Sellers and also entitled the Sellers to appoint receivers under the Share Mortgage. As a result, subject to hearing further from the parties, the Sellers are entitled to the substance of the relief sought in this proceeding against EMR6B. However, I have concluded that the claim against 29Metals has not been established.

17 The parties agreed a list of issues to be determined in this proceeding.

1. Upon a proper construction of clause 6.1(a) of the 2018 SSA, did EMR6B have to pay the Earnout Payment to the Agent upon the completion of the IPO on 5 July 2021?

2. In considering Question 1:

(1) did clause 6.1(a) of the 2018 SSA include, in calculating the Reported Multiple, the returns paid or available to be paid to Fund 0 and the limited partners of Fund II; and

(2) did clause 6.1(a) of the 2018 SSA require, in calculating the Reported Multiple, account to be taken of both the cash and the shares in 29Metals following the IPO?

(3) was the effect of clause 6.1(a) of the 2018 SSA such that the Earnout Payment was not payable until the date on which EMR6B received the proceeds that resulted in the Reported Multiple being realised?

3. Properly construed, did clause 5.1(c)(ii)(A) of the Share Mortgage require EMR6B to pay an amount equal to the Earnout Payment into an escrow account prior to completion of the CCH Share Sale and Purchase Agreement on 7 June 2021?

4. In considering Question 3:

(1) Was the Earnout Payment part of the Secured Money regardless of whether the Earnout Payment was 'any Secured Money that would reasonably foreseeably be owing in future' as at 7 June 2021?

(2) If not, then:

(a) what is the proper meaning of the words 'any Secured Money that would reasonably foreseeably be owing in future'; and

(b) as a matter of fact, immediately before completion of the CCH Share Sale and Purchase Agreement on 7 June 2021, was the Earnout Payment 'any Secured Money that would reasonably foreseeably be owing in future':

(i) if the IPO did not proceed? or

(ii) if the IPO did proceed?

5. In considering Question 4(2)(b)(i), what were the reasonably foreseeable circumstances regarding:

(1) the occurrence of one or more Liquidity Events between 7 June 2021 and 17 September 2023 in respect of EMR6B's holding of 107,199,052 ordinary shares in 29Metals or in respect of 29Metals' 100% shareholding in CCH;

(2) the cash returns paid or available to be paid to EMR6B as a result of those Liquidity Events; and

(3) the value of EMR6B's shareholding in 29Metals (if any) at 17 September 2023?

6. In considering Question 4(2)(b)(ii), what were the reasonably foreseeable circumstances regarding:

(1) the future sale by EMR6B of its 64,812,484 ordinary shares in 29Metals on or before 17 September 2023, and the price which would be realised on any sale;

(2) the value of EMR6B's shareholding in 29Metals (if any) at 17 September 2023?

7. If the answer to Question 3 is yes, did the fact that EMR6B did not pay an amount equal to the Earnout Payment into an escrow account prior to completion of the CCH Share Sale and Purchase Agreement on 7 June 2021 constitute an Event of Default under clause 6.1(b) of the Share Mortgage?

8. If the answer to Question 7 is yes, then upon demand being made by the Agent on 18 June 2021, did the Earnout Payment become immediately due and payable?

9. If the answer to Question 3 is yes, but the answer to question 7 is no, did EMR6B's failure to comply with clause 5.1(c)(ii)(A) of the Share Mortgage give rise to a right in damages against EMR6B for an amount equal to the Earnout Payment, upon the proper construction of clause 5.1(c)(ii)(B) of the Share Mortgage?

10. Did the Consideration [s]hares[2] form part of the Collateral under the Share Mortgage, from 7 June 2021?

11. Did the failure by EMR6B to deliver up title to the Consideration [s]hares immediately after 7 June 2021 constitute an Event of Default under clause 6.2(b) of the Share Mortgage by reason of a breach by EMR6B of clause 5.2(g) or 5.2(h) of the Share Mortgage?

12. In entering and completing the CCH Share Sale and Purchase Agreement on 7 June 2021, did 29Metals intentionally induce the breach of clause 5.1(c)(ii)(A) of the Share Mortgage by EMR6B?

13. Does the Agent have an entitlement to be indemnified for his costs of enforcement of the Share Mortgage under clause 11.6 of the Share Mortgage, and if so on what basis?

14. What relief, if any, sought in the proceeding is each of the parties entitled to?

19 The agreed list of issues poses a number of complex questions, many involved mixed question of law and fact. I address these issues to the extent the evidence and submissions of the parties allow.

20 First, while issues 1 and 2 involve questions of construction arising from cl 6.1(a) of the 2018 SSA, issue 1 is a mixed question of fact and law.

21 Second, while issues 3, 4(1), and 4(2)(a) raise the question of construction arising from cl 5.1(c) of the Share Mortgage, issue 3 is also a mixed question of fact and law.

22 Third, issues 4(2)(b), 5, and 6 relate to matters of fact regarding whether any Secured Money 'would reasonably foreseeably be owing in future' if the IPO did or did not proceed. In deciding these issues, in addition to considering the meaning of that phrase, it is also necessary to consider - as at 7 June 2021 - the events which occurred in mid-2021, and the events which might have occurred after that time and prior to the End Date; and whether the Earnout Payment could 'reasonably foreseeably be owing in future' as a result of those events. This was the subject of much expert evidence to which I will refer below.

23 Fourth, issues 7 to 13 are only relevant in the event that I determine cl 5.1(c) required EMR6B to pay an amount equal to the Earnout Payment into escrow on 7 June 2021. However, whilst some of those issues are distinct, others are related:

(a) Issues 7 to 9 concern whether the failure to pay an amount equal to the Earnout Payment into escrow meant that that amount became immediately due and payable (because it was an Event of Default under the Share Mortgage) or gave rise to a right to damages;

(b) Issues 10 and 11 concern the fact that the Collateral under the Share Mortgage was, in fact, transferred by EMR6B to 29Metals as part of the plan to transfer the Capricorn Copper assets (the CCH assets) to 29Metals in June 2021 (the Restructure), without the consent of the Agent. The issues relate to whether this constituted an Event of Default under the Share Mortgage, and whether the 10 per cent of 29Metals shares issued to EMR6B on the Restructure formed part of the Collateral under the Share Mortgage from 7 June 2021;

(c) Issue 12 concerns whether 29Metals intentionally induced EMR6B to breach cl 5.1(c) of the Share Mortgage; and

(d) Issue 13 relates to the Agent's entitlement to costs for enforcing EMR6B's breach of the Share Mortgage, including by appointing receivers.

24 Finally, issue 14 deals with the issue of the relief to be granted.

25 EMR6B and the Sellers each relied upon the evidence of two lay witnesses. EMR6B relied upon the evidence of Peter Herbert and John Chomley. The Sellers relied upon the evidence of Carl Hallion and Jeremy Nipps.

26 EMR6B tendered the witness statement of Mr Peter Herbert by consent. Mr Herbert has a Bachelor of Commerce degree, and a Graduate Diploma of Applied Finance and Investment. He is also a chartered accountant. Relevantly, from 1 July 2018 until 2 July 2021, Mr Herbert was an investment director employed by EMR Capital Pty Ltd (EMR Capital), with responsibility for corporate financing and strategic initiatives. Since 2 July 2021, Mr Herbert has been the Chief Financial Officer of 29Metals. Mr Herbert's evidence concerned: the corporate structure of the Capricorn Copper mine prior to September 2018; EMR6B's acquisition of the Shares; and preparation of the IPO and prospectus for 29Metals. Mr Herbert has been a director of CCPL since 4 February 2019, and a director of CCH since 3 August 2021. Mr Herbert was not cross-examined.

27 EMR6B also called John Chomley, an investment director employed by EMR Capital, since 2015. Mr Chomley has a Bachelor of Chemical Engineering from the University of Melbourne. He has been working in the resources industry since 1991: until 2017, he worked in operational, technical business improvement, and management roles in base metal processing operations; after that time, in an investment and merger and acquisitions role.

28 As an investment director at EMR Capital, Mr Chomley is responsible for technical and commercial oversight of part of the investment opportunities and portfolio companies for the private equity funds managed or advised by EMR Capital. From September 2015 to 7 June 2021, when EMR6B transferred its shareholding in CCH to 29Metals, Mr Chomley's responsibilities included oversight of the investment in CCH. Mr Chomley was a director of CCH from 15 September 2015 to 3 August 2021; and of Golden Grove Holdings No 2 Pty Ltd, from 19 December 2016 to 3 August 2021.

29 Mr Chomley gave evidence in relation to: (1) the structure of EMR Capital, EMR6B, and the Capricorn Copper mine; (2) the Restructure; (3) the subsequent IPO of 29Metals in early July 2021 and the transfer of non-CCH assets (ie the Redhill project and Golden Grove mine) to 29Metals; and (4) the allegations of breach, and the release of funds. Further, he gave evidence of his opinion, as at 7 June 2021, that no Earnout Payment was reasonably foreseeably owing in the future.

30 Mr Chomley was cross-examined. He was a cautious witness, who gave each question careful consideration, often providing qualified answers. However, I considered him to be a credible and reliable witness.

31 The Sellers relied upon two affidavits of the first defendant, Mr Carl Hallion, affirmed 20 May 2022 and 26 October 2022. As noted above, Mr Hallion is the Sellers Representative under the 2018 SSA, and the Agent of the Secured Parties under the Share Mortgage. Until December 2018, Mr Hallion was the Chief Executive Officer and Managing Director of Lighthouse. He gave evidence in relation to: (1) the 2018 transaction; (2) his dealings with EMR6B in relation to the Restructure and IPO; (3) and the appointment of Jeremy Nipps and Clifford Rocke (the second and third defendants), on 21 June 2021, as receivers and managers of the Collateral, based upon an 11 June 2021 notice of default. Mr Hallion was not cross-examined.

32 The Sellers also relied upon the affidavit of Mr Nipps affirmed 20 May 2022. Mr Nipps deposed to the background of his appointment, and its validity. He produced the correspondence exchanged since his appointment as one of the receivers and managers. Mr Nipps was not cross-examined.

33 Much of the time at trial was spent on expert evidence. This was called to address the issue of whether the Earnout Payment was payable ie whether it formed part of the Secured Money, as at 7 June 2021, which would reasonably foreseeably be owing in the future. The evidence related to three scenarios or hypotheticals: the first two of which were based on successful completion of the IPO (with 29Metals comprising the Capricorn Copper, Golden Grove, and Redhill assets); and the last of which was based on the IPO not being successful (ie with 29Metals solely comprised of the Capricorn Copper assets).

34 In summary, the scenarios concerned whether, as at 7 June 2021, the Earnout Payment was reasonably foreseeably owing within the meaning of the Share Mortgage:

(a) assuming successful completion of the IPO, by the actual returns under cl 6.1(a) of the 2018 SSA, reaching, or exceeding twice the 'Invested Capital' (the 'target return') on successful completion of the IPO, being a Liquidity Event (the 1st scenario);

(b) assuming successful completion of the IPO, by the actual returns (including any valuation in accordance with cl 6.1(c)) reaching or exceeding the target return at or before the 'End Date' of the 2018 SSA, being 17 September 2023 (the 2nd scenario);

(c) if the planned IPO did not successfully complete, by the actual returns (including any valuation in accordance with cl 6.1(c)) reaching or exceeding the target return at or before the End Date (the 3rd scenario).

35 Given that consideration of this evidence depends upon the view that I form as to construction of cl 6.1 of the 2018 SSA and cl 5.1(c)(ii) of the Share Mortgage, I will address this evidence in detail below. However, in summary, Mr Chomley gave evidence that as at 7 June 2021 no Earnout Payment would reasonably foreseeably be owing in the future based on each scenario. Further, different kinds of expert evidence was called. It is appropriate that I address briefly the nature of that evidence as this stage.

36 First, there was the expert evidence as to whether CCH would have been able to obtain refinance of the liabilities in existence immediately before the Restructure and IPO. This was directly relevant to 3rd scenario. EMR6B called Geoff Green who holds a Bachelor of Economics majoring in Accounting and is a Chartered Accountant. Mr Green had extensive experience working for large banks between 1997 and 2018, including NAB and ANZ. In that time, he acquired extensive credit risk experience including eight years managing a portfolio of large corporate and institutional loans in NAB's Strategic Business Services department. Mr Green left NAB in 2018 and became a partner of Harbourside Advisory Pty Ltd, acquiring significant experience in post-approval review of lending decisions. That role has involved Mr Green undertaking debt advisory work for listed and private companies involving bilateral and multi-bank structures (including dealing with bank and non-bank lenders in Australia and internationally). Mr Green gave evidence to the effect that CCH would not have been able to refinance senior debt by 31 December 2021, the deadline set by CCH's financiers, because prospective lenders would conclude that the entity posed an unacceptable credit risk regardless of security structure.

37 Second, there was expert evidence as to the fair market value of CCH on 7 June 2021. That was directly relevant to the 3rd scenario. The Sellers called John Dawson of KordaMentha who filed reports dated 8 December 2022, 18 May 2023 and 25 May 2023. Mr Dawson is an executive director of KordaMentha and has over 38 years' experience in providing financial and valuation advice, having undertaken numerous valuations of mining project and companies. EMR6B called Dawna Wright of FTI Consulting who filed a report dated 31 March 2023. Ms Wright is a chartered accountant and holds a Bachelor of Commerce from the University of Manitoba in Canada. She is the head of the Forensic and Litigation practice at FTI Consulting. She has 30 years' experience in accounting with significant experience in providing accounting and valuation evidence, including in relation to mining projects. Mr Dawson and Ms Wright filed a joint report dated 9 June 2023. Mr Dawson valued CCH as at 7 June 2021 on a controlling and fully marketable basis at between AUD$325 million and AUD$375 million. By contrast, Ms Wright valued it at between AUD$137 million and AUD$174.2 million as at that date.

38 Third, there was evidence as to the discount that should be applied to the fair market value of CCH given the financial circumstances of the business as at 7 June 2021. This was also directly relevant to the 3rd scenario. The Sellers called Mr Justin Audcent who filed a report dated 7 June 2021. Mr Audcent has over 30 years' experience in corporate finance. He is a qualified chartered accountant and since 2003 has been a partner with large and multi-tiered accounting firms in Australia. He joined RSM Australia in 2017 and is currently an equity partner. He has had experience in accounting, valuations, financial due diligence, investigations, mergers and acquisitions, and capital market transactions. EMR6B called Liam Twigger who filed an expert report dated 31 March 2023 and a supplementary report dated 20 October 2023. Mr Twigger holds a Bachelor of Economics from the University of Western Australia and is a certified practising accountant. Mr Twigger is the deputy chairman and executive director of Argonaut Limited, a financial advisory and investment banking firm which specialises in the metals and mining, oil and gas, and agribusiness sectors. Mr Twigger has over 30 years' experience in investment banking and corporate finance. He was previously head of Macquarie Bank in Western Australia (1994-7) and head of Bankers Trust in Western Australia (1997-9). Mr Audcent and Mr Twigger filed a joint report dated 6 June 2023. Mr Twigger's expert opinion was that the discount that should be applied to the fair market value of CCH was in the order of 50 to70 per cent percent. Mr Audcent's expert opinion was that little or no discount should be applied.

39 The full nature of the EMR Capital Group structure was not made plain in this proceeding. Nevertheless, it is clear that a private equity firm known as 'EMR Capital' specialises in managing and advising funds with investments in mining operations, mining development, and mining exploration projects with a focus on copper, gold, hard coking coal, and potash. EMR Capital advises and manages a number of different funds and, relevantly for this proceeding, Fund 1, Fund 0, and Fund II (as defined in [40] - [42] below).

40 As noted earlier, EMR6B directly and via its shareholding in Lighthouse effectively owned all of the shares in CCH, the holding company that owned all of the shares in CCPL, which in turn owned the Capricorn Copper mine. EMR6B was incorporated in Singapore. It is a special purpose holding vehicle which is ultimately owned by a fund called the EMR Capital Resources Fund 1, LP (Fund 1). It had a 10-year term which expired in December 2023. At all relevant times:

(a) Fund 1 was an exempt limited liability partnership constituted under the laws of the Cayman Islands which operates as an investment vehicle;

(b) the general partner of Fund 1 was EMR Capital GP 1 Ltd; and

(c) EMR Capital Management Limited and EMR Capital Advisors Pty Ltd advised and/or managed Fund 1.

41 Other EMR Capital funds owned two of the assets relevant to this proceeding; ie the non-CCH assets. First, there is the Redhill project which, prior to the IPO, was owned by:

(a) EMR Capital Investments (No. 4B) Pte Ltd (EMR4B) (an EMR Capital entity that, like EMR6B, is ultimately owned by Fund 1); and

(b) EMR Capital Resources, LP (Fund 0).

42 Second, there is the Golden Grove mine which, prior to the IPO was ultimately owned by the limited partners of EMR Capital II, LP in their individual capacities (Fund II and the limited partners of Fund II).

43 On the evidence before me, the Redhill project was an exploration project in Chile: there had been no recent development studies on the project and, from about 2020, EMR Capital was considering its options to exit this project. Further, the Golden Grove mine was a profitable copper, gold, silver, zinc and lead mine in Western Australia which commenced commercial production in 1990 and had a life of mine in 2021 of at least 10 years.

44 As for the Capricorn Copper mine, from 2013, mining activities at the Capricorn Copper mine ceased, and the mine was placed into 'care and maintenance' (ie the mine was not operational or producing copper but was maintained to enable a return to production on short notice). In 2015, EMR6B acquired a majority interest in the Capricorn Copper mine, with the result that:

(a) the Capricorn Copper mine was owned by CCPL, with all shares in CCPL owned by CCH; and

(b) the shares in CCH were owned by EMR6B (approximately 96.5 per cent) and Lighthouse (approximately 3.5 per cent).

45 Lighthouse operated the Capricorn Copper mine under a management agreement dated 19 September 2015. Mr Hallion (the first defendant) and Mr Greg Watson were shareholders in Lighthouse, and were employed by Lighthouse to operate the Capricorn Copper mine. However, it was not until 2017 that commercial mining operations recommenced at the Capricorn Copper mine. Following a dispute or series of disputes between Lighthouse and EMR6B regarding operation of the mine, EMR6B entered into the 2018 SSA and the Share Mortgage on 17 September 2018.

46 As set out below, it was agreed that certain EMR Capital Funds and/or investors in those funds fell within relevant definitions, for the purposes of cl 6.1(a) of the 2018 SSA. I will address this further below.

47 In late August and early September 2018, EMR6B commenced negotiations with the Sellers to acquire the Shares. In early September 2018, Mr Hallion (acting for the Sellers) and Mr Herbert of EMR exchanged several versions of a terms sheet for the proposed acquisition. In the draft and final versions of the terms sheet, reference is made to 'EMR'; however, it is clear that the parties understood this to be a reference to 'EMR6B' (the entity that owned approximately 96.5 per cent of the CCH shares).

48 On 7 September 2018, following these negotiations, EMR6B, Lighthouse, Mr Hallion, and Mr Watson each signed a terms sheet setting out the commercial terms on which EMR6B would acquire the Shares (the Terms Sheet).

49 The Terms Sheet contained the following terms in relation to the purchase price:

(a) 'EMR' (EMR6B) would acquire 100 per cent of the Lighthouse Shares in exchange for a purchase price comprising an 'upfront, certain, payment plus a contingent payment on realisation of a Liquidity Event, subject to EMR[6B] achieving a minimum return';

(b) An upfront payment totalling AUD$7.5 million to be paid in four tranches;

(c) A further conditional payment of AUD$12.5 million payable as follows:

• If, on a Liquidity Event, EMR[6B] reports to its Fund 1 investors that it has achieved a net outcome (after payment of the Contingent Payment) of 2.0x or greater multiple on its invested capital (adjusted to reflect the terms of the July 2018 equity raising) in the CCH Group (after accounting for the percentage of the EMR interest that is divested), a further payment of A$12.5m[.]

• The Shareholders [Sellers] will be provided with visibility and access to the multiple on invested capital disclosed by EMR[6B] to its investors for the purposes of reporting and claiming a payment under the terms EMR[6B]'s mandate[.]

(d) A Liquidity Event described as 'any cash distribution to the EMR Fund I investors in connection with CCH Group'.

50 The Terms Sheet contained the following terms in relation to security:

• A security deed to be executed granting the sellers security over 10% of the total issued share capital of CCH and CCM to secure payment of the Upfront Payment and Contingent Payment[.]
• LMH Shareholders [Sellers] must not use their rights under the security deed to obstruct any proposed Liquidity Event and must provide reasonable assistance to EMR[6B] in connection with releasing their security as required to facilitate the Liquidity Event[.]

51 From the Terms Sheet, I have inferred that the parties knew Fund 1 owned EMR6B. The parties made submissions on this basis.

52 The terms of the 2018 SSA and Share Mortgage (the contract documents), and other documents, including an agreement ending management of the mine by Lighthouse (collectively defined in the 2018 SSA as the Transaction Documents), were negotiated between 12 September 2018 and their execution on 17 September 2018. The negotiations and drafting were conducted by Clayton Utz on behalf of EMR6B (instructed by Mr Herbert), and Allen & Overy on behalf of Mr Hallion and the Sellers/Secured Parties (instructed by Mr Hallion).

53 During arguments, in support of their differing construction of cl 6.1 of the 2018 SSA and cl 5.1(c) of the Share Mortgage, the parties sought to rely upon a number of emails and/or drafts of the term sheet and of the contract documents. This is because the parties maintained that these documents were relevant to the negotiation and evolution of the clauses in the contract documents. In summary, the plaintiffs submit that comments in a number of emails on the meaning or purpose of various clauses in the 2018 SSA and, in particular, the Share Mortgage were admissible and relevant; but submit that reference to the different drafts and changes in them (which did no more than demonstrate steps in the negotiation ultimately overtaken by the agreed terms of the contract documents) were not admissible. In contrast, the Sellers objected to the use of comments in emails on the meaning or purpose of various clauses in the contract documents, but submit that reference to different drafts of contract documents and changes made in the course of those drafts were admissible and relevant.

54 I will address the principles to be applied in relation to the admissibility and use of these documents, and the application of those principles to this case later in these reasons. To the extent that it might later become relevant, I accept as accurate the chronology of the drafting of the relevant clauses in the contract documents as set out in Attachment A to the written closing submissions of the Sellers. The plaintiffs did not contend to the contrary: rather they submit that the drafts recorded subjective motivation and were irrelevant. Given that the Sellers relied, in particular, upon amendments to the early drafts of cl 6.1 of the 2018 SSA, it is appropriate that I set out those changes briefly now.

55 The first draft of the 2018 SSA dated 11 September 2018 was prepared by Clayton Utz (first draft SSA). I pause to note that it was generally in accordance with the Terms Sheet. Clause 6 related to the Conditional Payment (or Earnout Payment), as follows:

(a) If a Liquidity Event has occurred and the Buyer [defined to mean EMR6B] has reported to the Fund 1 Investors that the cash return available to be paid to the Fund 1 investors after deducting all Taxes, costs and expenses reasonably incurred in connection with the Liquidity Event (including the Contingent Payment) is equal to or more than 2 times its Invested Capital, then the Buyer [defined as EMR6B] must pay to the Seller Representative the Contingent Payment within 10 Business Days of the date on which the Buyer [EMR6B] receives all proceeds of the relevant Liquidity Event.

(b) The Buyer [EMR6B] must provide to the Seller Representative such documentation as is reasonably requested by the Seller Representative in relation to the calculation of cash return available to the Fund 1 Investors.

56 In the 2018 SSA and the all drafts of it, the Buyer was defined as EMR6B. As a result, in these reasons any reference to the Buyer should be read as a reference to EMR6B. Further, Liquidity Event was defined to mean:

[A]ny cash distribution to the Fund 1 Investors in connection with CCH or CCPL as a result of:

(a) an initial public offering of the securities in CCH or CCPL, or any special purpose vehicle which becomes the holding company of either of them;

(c) a return of capital or share buy-back by CCH or CCPL;

(d) a sale of all or substantially all of the shares in CCH or CCPL; or

(e) the sale of all or substantially all of the assets of CCH or CCPL.

57 On 13 September 2018, Allen & Overy sent proposed amendments to the first draft 2018 SSA (second draft SSA). Clause 6 was substantially amended, and additional cll 6.1(b)-(c), 6.2, and 6.3 were inserted. Clause 6.1 provided:[3]

(a) If a Liquidity Event occurs and any EMR Shareholder or any Affiliate of an EMR Shareholder reports (or is in a position to report) to EMR Investors that the aggregate of all returns paid or available to be paid to EMR Investors as a result of that Liquidity Event and any previous Liquidity Events (after deducting the Earnout Payment) (Reported Multiple) is equal to or more than 2 times its Invested Capital, then the Buyer must pay to the Seller Representative the Earnout Payment within 10 Business Days of the date on which the Buyer [EMR6B] receives the proceeds that result in the Reported Multiple being realised.

(b) If a Liquidity Event occurs and:

(i) a Reported Multiple is less than 2 times; and

(ii) but for the Earnout Payment, that Reported Multiple would have been equal to or more than 2 times,

then the Buyer must pay to the Seller Representative such amount as will result in the Reported Multiple, after accounting for such payment, equalling 2 times.

(c) If, on the fifth anniversary of the date of this agreement, the Earnout Payment (or part thereof) has not fallen due for payment to the Sellers under the foregoing provisions of this clause 6.1:

(i) the Buyer and the Seller Representative will commission an independent valuation of the then present value of the Company [defined to mean Lighthouse] (including its future cash flows) and any returns generated by Liquidity Events (End Date Value) in accordance with the foregoeing [sic] provisions of this clause 6.1 in accordance with the procedure set out in Attachment [X];

(ii) within 10 Business Days of the date on which the End Date Value is determined in accordance with sub-clause (i) above and Attachment [X], provided the End Date Value is equal to or more than 2 times the Invested Capital, the Buyer must pay to the Seller Representative the amount of the Earnout Payment; and

(iii) upon payment by the Buyer of the amount of the Earnout Payment in accordance with sub-clause (ii) about, the Buyer shall have no further obligation to pay the Sellers the Earnout Payment.

58 Definitions of the EMR Investors, EMR Shareholders, and Affiliate were added at this time. Further, the definition of 'CC Group' was expanded to include 'any new holding company of CCH that may be established from time to time'; and of 'Liquidity Event' to include 'an initial public offering of the securities in any member of the CC Group'. As is evident, these aspects were different from the terms of the Terms Sheet.

59 On 15 September 2018, Clayton Utz sent amendments made to the second draft SSA (third draft SSA) to Allen & Overy (subject to instructions) and EMR Capital respectively. Relevantly, Clayton Utz accepted the definitions added to the second draft SSA of Earnout Payment, EMR Shareholders, Affiliate, and EMR Investors (save for the replacement of 'EMR Capital Resources 1, LLP' with 'Fund 1'). Clayton Utz made changes to the revised cl 6.1(a) as follows:[4]

6.1 Payment of Earnout Payment

(a) If a Liquidity Event occurs and any EMR Shareholder or any Affiliate of an EMR Shareholder reports (or is in a position obliged to report) to EMR Investors that the aggregate of all cash returns paid or available to be paid to EMR Investors as a result of that Liquidity Event and any previous Liquidity Events (after deducting all Taxes, costs and expenses reasonably incurred in connection with the Liquidity Event and the Earnout Payment) (Reported Multiple) is equal to or more than 2 times the amount of its Invested Capital immediately prior to the Liquidity Event, then the Buyer must pay to the Seller Representative the Earnout Payment within 10 Business Days of the date on which the Buyer receives the proceeds that result in the Reported Multiple being realised.

60 Clauses 6.1(b) and (c) were retained but amended. As to cl 6.1(c):

(a) the relevant valuation from 'the then present value of the Company [defined to mean Lighthouse] (including its future cash flows)', in accordance with cl 6.1, to 'the then present value of the Buyer's [defined to mean EMR6B's] interest in CCH as at that time in accordance with the procedure set out in Attachment 4';

(b) changing the numerator of the return calculation from the relevant valuation, to the relevant valuation plus any returns to EMR Investors generated by Liquidity Events prior to the End Date (see amendments to cl 6.1(d)).

61 I have not found it necessary to set out the various drafts of the Share Mortgage. It suffices to say that, whilst the terms of cl 5.1(c)(ii) were altered in the various drafts, the definitions of 'Secured Money' and 'Obligations' contained in the first draft did not change.

62 As stated above, pursuant to the 2018 SSA, EMR6B (referred to in the 2018 SSA as the 'Buyer') bought the Shares, with the effect that EMR6B wholly owned CCH. Clause 2.1 provided that, upon 'Completion', the Sellers must sell and EMR6B must buy the Shares for the 'Purchase Price', free from all Encumbrances. The Purchase Price was defined in cl 3.1 to mean '[t]he aggregate purchase price payable for the Shares is the sum of: (a) the Upfront Payment; and (b) the amount of the Earnout Payment (if payable)'.

63 The 'Upfront Payment' (totalling AUD$7,285,000) was defined in cl 1.1 to mean the sum of:

(a) the Tranche 1 Payment [AUD$285,000];

(b) the Tranche 2 Payment [AUD$2,000,000];

(c) the Tranche 3 Payment [AUD$2,500,000]; and

(d) the Tranche 4 Payment [AUD$2,500,000].

64 The time for payment of the Tranches is set out in cl 3.2 of the 2018 SSA. The date for payment of Tranches 1-3 outlined in cll 3.2(a)-(c). The time for payment of the Tranche 4 (cl 3.2(d)) was dependent upon EMR6B having received 'the first proceeds of the first Liquidity Event ... after the date of this agreement'.

65 Relatedly, cl 3.3 provides that if a Liquidity Event occurs (other than as a consequence of an Insolvency Event), prior to the date on which any portion of the Upfront Payment is payable, EMR6B must pay the outstanding portion or portions of the Upfront Payment, 10 business days after that Liquidity Event. As set out below, the occurrence of a Liquidity Event was also relevant to whether an Earnout Payment was payable, and the amount of any such payment.

66 The 'Earnout Payment' is defined in cl 1.1 to mean 'the sum of [AUD]$12,500,000'. Clause 3.2(e) of the 2018 SSA provides that the 'Buyer must pay the Earnout Payment (if applicable) to the Seller Representative in accordance with clauses 6 and 15'.

67 As noted above, the Earnout Payment was payable if either of the two contingencies were satisfied, pursuant to cl 6.1 of the 2018 SSA. Before considering these contingencies, it is first necessary to outline the definitions relevant to determining their satisfaction.

1. The relevant definitions for the purposes of cl 6.1(a), and cl 6 more generally, contained in cl 1.1 of the 2018 SSA are as follows:

(a) an initial public offering of the securities in any member of the CC Group;

(b) a change of Control of any member of the CC Group;

(c) a winding up of any member of the CC Group;

(d) a dividend or other distribution, return of capital or share buy-back by any member of the CC Group;

(e) a Disposal of shares in any member of the CC Group; or

(f) a Disposal of:

(i) for the purposes of clause 3.2(d) and clause 3.3, all or substantially all of the assets of any member of the CC Group; and

(ii) for all other purposes, any assets of any member of the CC Group,

other than as a consequence of a bona fide reorganisation or restructure undertaken with the consent of the Seller Representative (not to be unreasonably withheld).

CC Group means, together, CCH, CCPL, any entity that is a subsidiary of CCPL from time to time by virtue of section 46 of the Corporations Act and any new holding company of CCH that may be established from time to time.

EMR Shareholders means the Buyer [defined to mean EMR6B] and any Affiliate of the Buyer that holds shares in any member of the CC Group from time to time.

Affiliate means in respect of a person (Primary Person), a person:

(a) Controlled directly or indirectly by the Primary Person;

(b) Controlling directly or indirectly the Primary Person;

(c) directly or indirectly Controlled by a person who Controls the Primary Person (whether alone or with any of its Associates); or

(d) directly or indirectly under the common Control of the Primary Person and any of the Primary Person's Associates,

and Control as used in this definition with respect to any person (other than an individual) means the possession, directly or indirectly, of the power to direct or cause the direction of the financial and operating policies of such person, whether through the ownership of voting securities, by agreement or otherwise, and includes the following:

(a) direct or indirect ownership of more than 50% of the voting rights of such person; or

(b) the right (whether alone or with any of its Associates) to appoint the majority of the members of the board of directors of such person (or similar governing body) or to manage on a discretionary basis the assets of such person,

and, for the avoidance of doubt, a general partner is deemed to Control a limited partnership of which it is the general partner and, solely for the purposes of this agreement, a fund advised or managed directly or indirectly by a person will also be deemed to be Controlled by such person.

EMR Investors means any investors in:

(a) Fund 1;

(b) any entity, collective investment vehicle or fund (including an annex fund) managed or advised by the Buyer or its Affiliates (or any of their successors, replacements, assigns or co-appointees as manager or adviser);

(c) each entity forming part of, or which is owned by, any of the above; and/or

(d) any Affiliate of any of the entities described in paragraphs (a) to (c) of this definition that acquires a direct or indirect interest in the CC Group from any of the above.

Invested Capital means, at any time, the aggregate cash amount paid by the Buyer in acquiring ordinary shares in CCH that it holds at that time (including any portion of the Purchase Price already paid under this agreement), and, counting only the US$4.5 million invested July 2018 twice, and after accounting for any shares in CCH that the Buyer has divested prior to that date. For the avoidance of doubt, the Invested Capital immediately prior to execution of this agreement is US$81,818,766.

69 I note the interrelationship between the terms, particularly in respect of the definitions for CC Group and Liquidity Event, and EMR Shareholder and Affiliate.

70 Returning to cl 6.1, and the two contingencies relevant to whether the Earnout Payment was payable.

71 The first circumstance or condition upon which the Earnout Payment would become payable is outlined in cl 6.1(a) as follows:

(a) If a Liquidity Event occurs and any EMR Shareholder or any Affiliate of an EMR Shareholder reports (or is in a position to report) to EMR Investors that the aggregate of all cash returns paid or available to be paid to EMR Investors as a result of that Liquidity Event and any previous Liquidity Events (prior to the application of any Taxes payable, or otherwise withheld as a consequence of that Liquidity Event, by the EMR Investors) (Reported Multiple) is equal to or more than 2 times the amount of its Invested Capital immediately prior to the Liquidity Event, then the Buyer [ie EMR6B] must pay to the Seller Representative the Earnout Payment within 10 Business Days of the date on which the Buyer receives the proceeds that result in the Reported Multiple being realised.

72 As noted above at [34], I will refer to the target of '2 times the amount of its Invested Capital immediately prior to the Liquidity Event' as the target return. Thus, in substance, the parties agreed that if the Reported Multiple was equal to or more than the target return, the Earnout Payment would be payable.

73 Further, the parties agreed in cl 6.1(b) that an Earnout Payment would still be payable if, but for the Earnout Payment, the 'Reported Multiple' would have been equal to or more than the target return (as required by the cl 6.1(a) contingency). Clause 6.1(b) provides that:

(i) a Reported Multiple is less than 2 times; and

(ii) but for the Earnout Payment, that Reported Multiple would have been equal to or more than 2 times,

then the Earnout Payment will be reduced by such amount as will result in the Reported Multiple, after accounting for the payment of the reduced Earnout Payment, equalling 2 times.

74 Thus in these circumstances, the Earnout Payment would be reduced by such amount as would cause the Reported Multiple to reach the target return.

75 The second circumstance or condition upon which the Earnout Payment will be become payable is set out in cll 6.1(c)-(d):

(c) Subject to clause 6.1(f), if, on the fifth anniversary of the date of this agreement, the Earnout Payment (or part thereof) has not fallen due for payment to the Sellers under the foregoing provisions of this clause 6.1, the Buyer and the Seller Representative will commission an independent valuation of the then present value of the aggregate of the Buyer and its Affiliate's interest in the CC Group as at that time in accordance with the procedure set out in Attachment 4.

(d) If the amount determined by the independent valuation under clause 6.1(c) less an estimate of reasonable costs in realising a Liquidity Event, plus any returns to the EMR Investors generated by Liquidity Events that have occurred prior to the fifth anniversary of the date of this agreement (End Date Value) is equal to or more than 2 times the Invested Capital, the Buyer must pay to the Seller Representative the amount of the Earnout Payment within 10 Business Days of the date on which the End Date Value has been determined.

76 The valuation procedure is set out in Attachment 4 of the 2018 SSA. Clause 2 of Attachment 4 obliges the valuer to conduct, as at that time, a 'valuation of the present value of the Buyer's [EMR6B's] interest in the CC Group', 'assuming a willing but not anxious buyer and a willing but not anxious seller', 'on the basis of an ongoing, fully funded business'. Further, cl 7 requires EMR6B and the Seller's Representative to 'provide the Valuer with any information and assistance reasonably required by the Valuer to make its determination'.

77 For completeness, cl 6.1(f) of the 2018 SSA enables EMR6B to extend the five-year deadline in cl 6.1(c), in circumstances where the termination date of Fund 1 has been similarly extended. It provides:

(f) If the Buyer provides the Seller Representative with evidence satisfactory to the Seller Representative (acting reasonably) that the termination date of Fund 1 has been extended to a date that is after the date of the fifth anniversary of this agreement (Extended Termination Date), the Buyer's obligations to make the Earnout Payment in accordance with clauses [sic] 6.1(c) shall be taken to be deferred until the Business Day prior to Extended Termination Date, and such that each reference in this clause 6.1 to 'the fifth anniversary of the date of this agreement' shall be taken to be a reference to 'the Business Day prior to the Extended Termination Date'. ...

78 I pause to note that, under the regime of the 2018 SSA, there can be multiple Liquidity Events. If one (or multiple) Liquidity Events fails to satisfy the target return in cl 6.1(a), the Sellers can still become entitled to the Earnout Payment based on other Liquidity Events under cl 6.1(a) and/or under cll 6.1(c)-(d).

79 It is convenient at this point to set out several other relevant clauses from the 2018 SSA.

80 Under cl 6.2, the parties 'agree[d] and acknowledge[d]' that:

(a) it is not reasonably ascertainable at the date of this agreement whether the Earnout Payment will be payable; and

(b) the payment of the Earnout Payment is contingent on, and the amount of the Earnout Payment reasonably relates to, the economic performance of the Shares.

81 Under cl 6.4, EMR6B made several undertakings to the Sellers, including that it would:

(a) procure that no non-cash distributions in respect of EMR Investors' direct or indirect interests in the CC Group are made to EMR Investors (directly or indirectly) without the prior written consent of the Seller Representative;

(d) not to act in bad faith towards and without regard for the interests of the Sellers in relation to the Earnout Payment.

82 Thus, the plaintiffs submit, and I accept, that the first three tranches of the Upfront Payment were to be paid in fixed amounts at fixed times, subject to an acceleration if a Liquidity Event occurred before those times. The Tranche 4 Payment was for a fixed amount, but was not payable at any certain time, and would fall due at the time of the first Liquidity Event. By contrast, the Earnout Payment was only to be paid under cl 6.1(a) or cl 6.1(d), if - and to the extent that - the target return had been reached. The target return was to be measured at the time of each Liquidity Event, and again at the fifth anniversary of the 2018 SSA, being 17 September 2023 (ie the End Date).

83 Completion of the 2018 SSA was conditional upon the Sellers and EMR6B entering into the Share Mortgage. Pursuant to cll 2.1 and 2.2 of the Share Mortgage, the Sellers were provided with a first ranking security over the Collateral to secure performance of EMR6B's Obligations under the 2018 SSA, including payment of the 'Secured Money'.

84 Collateral was defined in cl 1.1 to mean all of EMR6B's 'rights and interests and all entitlements (including damages), dividends, proceeds, rights and other benefits payable, accruing or at any time to or in favour of [EMR6B], in each case in respect of':

(a) Relevant Security - defined in cl 1.1 to mean, in summary, 10 per cent of all shares held by EMR6B or its Affiliate in CCH from time to time; and

(b) each Additional Right - defined in cl 1.1 to mean, in summary, EMR6B's title, right, or interest (whether present or future) to take up shares in another corporation, trust, or entity (sub-cl (a)), or resulting from any consolidation (sub-cl (b)), in connection with the Collateral.

85 Further, cl 2.3(b) entitled the Sellers to the proceeds of any dealings with the Collateral.

86 The Share Mortgage contains restrictions on EMR6B's ability to deal with the Collateral. Clause 5.1 provides:

5. Additional undertakings concerning the Collateral

5.1 Restrictions in relation to the Collateral

[EMR6B] will not without the Agent's prior written consent or as expressly permitted in any other Transaction Document [being the 2018 SSA and the deed of release in respect of the management agreement]:

...

(c) (No sale etc) sell, convey, assign, transfer, lease, licence or otherwise dispose of, part with possession of, make any bailment, or grant any option over or create or permit to exist any other interest in any part of the Collateral (each a Relevant Transaction), unless:

(i) and until the Obligations are fully discharged and the Secured Money has been unconditionally and irrevocably paid and discharged in full and it is not reasonably foreseeable that any Secured Money could be owing in the future; or

(ii) the Relevant Transaction is reasonably required to facilitate a Liquidity Event, provided that, prior to completion of the Relevant Transaction:

1. [EMR6B] has paid an amount equal to the Secured Money (including any Secured Money that would reasonably foreseeably be owing in future) into an escrow account located in Australia with an escrow bank acceptable to the Agent (acting reasonably);
2. [EMR6B], the Secured Parties and the relevant escrow bank have entered into escrow or similar arrangements providing for the release of the funds in the escrow account to the Secured Parties immediately upon completion of the Relevant Transaction, in form and substance satisfactory to the Agent (acting reasonably); and
   1. the Secured Parties have the benefit of a duly perfected Security Interest over the escrow account pursuant to a security agreement in form and subject satisfactory to the Agent (acting reasonably)[.]

87 Clause 10.6 requires the Sellers to grant release of the Collateral, if EMR6B has complied with the requirements of either cl 5.1(c)(i) or cl 5.1(c)(ii). It provides that:

10.6 Release of Collateral

The Secured Parties must grant a release of the Collateral from this mortgage at the request of [EMR6B]:

(a) when the Obligations have been discharged in full and the Secured Money has been unconditionally and irrevocably paid and discharged in full and it is not reasonably foreseeable that any Secured Money could be owing in the future; or

(b) when reasonably required to facilitate a Liquidity Event, provided that, prior to the date of the release:

(i) [EMR6B] has paid an amount equal to the Secured Money (including any Secured Money that would reasonably foreseeably be owing in future) into an escrow account located in Australia with an escrow bank acceptable to the Agent (acting reasonably);

(ii) [EMR6B], the Secured Parties and the relevant escrow bank have entered into escrow or similar arrangements providing for the release of the funds in the escrow account to the Secured Parties immediately upon completion of the Relevant Transaction, in form and substance satisfactory to the Agent (acting reasonably); and

(iii) the Secured Parties have the benefit of a duly perfected Security Interest over the escrow account pursuant to a security agreement in form and subject satisfactory to the Agent (acting reasonably).

1. The relevant definitions from cl 1.1 of the Share Mortgage are set out below:

Obligations means all the liabilities and obligations of [EMR6B] to a Secured Party (whether alone or not) under or by reason of any Transaction Documents to which it is a party and includes any liabilities or obligations which:

(a) are liquidated or unliquidated;

(b) are present, prospective or contingent;

(c) arise from the making of any advance on or before the date of this mortgage or from any future advances;

(d) are in existence before or come into existence on or after the date of this mortgage and whether or not currently contemplated;

(e) relate to the payment of money or the performance or omission of any act;

(f) sound in damages only;

(g) accrue as a result of any Event of Default; or

(h) would exist but for an Event of Insolvency affecting any person,

and irrespective of:

(i) whether [EMR6B] is liable or obligated solely, jointly or jointly and severally with another person;

(j) the circumstances in which a Secured Party comes to be owed each liability or obligation and in which each liability or obligation comes to be secured by this mortgage, including any assignment of any liability or obligation or of this mortgage; or

(k) the capacity in which [EMR6B] and a Secured Party comes to owe or to be owed that liability or obligation.

Secured Money means all money the payment or repayment of which from time to time forms part of the Obligations.

89 It is significant that the definition of Obligations includes 'all the liabilities' of EMR6B payable under the 2018 SSA, including not only present liabilities, but also 'prospective or contingent' liabilities.

90 Clause 6 of the Share Mortgage provides for Events of Default, and relevantly states:

6. Events of Default

6.1 Events of Default

Each of the events set out in this clause 6.1 is an Event of Default (whether or not the cause is beyond the control of [EMR6B] or any other person):

(a) (Failure to pay) [EMR6B] does not pay any amount payable by it at or before the due time on the due date and in accordance with the [2018 SSA] (unless that default is caused by a technical or administrative error by a bank or financial institution in the transmission of funds and is remedied within 2 Business Days of its occurrence);

(b) (Breach of undertaking) [EMR6B] breaches any written undertaking given at any time to any Secured Party or fails to comply with any condition imposed by the Agent in agreeing to any waiver and has not remedied such breach or failure within 5 Business Days after the earlier of the date on which [EMR6B] becomes aware of such breach or failure and the date on which [EMR6B] is given written notice of such breach or failure;

...

6.2 Rights on an Event of Default

The Encumbrance created by this mortgage will become immediately enforceable if an Event of Default occurs. If any Event of Default occurs then, during the period it subsists, at the option of the Agent and despite any delay or previous waiver of the right to exercise that option:

(a) the Secured Money becomes immediately due and payable on demand from any Secured Party;

(b) all Powers not previously exercisable become exercisable; and

(c) any rights of [EMR6B] to deal with the Collateral (other than through a Receiver appointed under this mortgage) immediately cease.

91 Thus, an Event of Default includes a breach of cl 5.1 of the Share Mortgage (which is the breach of an undertaking under cl 6.1(b)). If an Event of Default is not remedied, amongst other things, the Secured Money becomes immediately due and payable.

92 Further, cl 7.1 provides that, if an Event of Default occurs, a Secured Party may appoint a person or persons to be a receiver, or a receiver and manager, of the Collateral. Clause 7.4 provides that each Receiver (as defined in cl 1.1) will be the agent of EMR6B, and EMR6B 'will be solely responsible for all acts and omissions by, and the remuneration of, each Receiver'.

93 There are three other relevant clauses of the Share Mortgage relating to the Collateral relied upon by the Sellers, namely:

(a) clauses 3.1(a) and 3.3, which together provide a continuing warranty by EMR6B that it has good title to the Collateral, and that 'the Collateral is free of all Encumbrances other than in favour of the Secured Parties or as otherwise expressly permitted by a Transaction Document';

(b) clause 5.2(g), which provides that EMR6B undertakes to deliver to the Agent, on the date of the Share Mortgage (or in respect of any Collateral which becomes subject to the Share Mortgage), 'all share certificates and other documents of title in respect of any Collateral'; and

(c) clause 5.2(h), which provides that EMR6B undertakes to provide the Secured Parties with Control 'over the Collateral in the manner requested by the Agent, including by providing a transfer of any certified Marketable Securities, executed by [EMR6B] in blank and otherwise in a form satisfactory to the Agent'.

94 At this stage, it is appropriate to record that, on 19 September 2018, following execution of the 2018 SSA and the Share Mortgage, a security interest was entered on the Personal Property Securities Register (PPSR) in favour of the Sellers as secured parties. Further, on 18 September 2018, EMR6B made the Tranche 1 payment to the Sellers. Subsequently, on 28 June 2019 and 28 February 2020 respectively, the Tranche 2 and Tranche 3 payments were made to the Sellers.

6.1 Financial position of Capricorn Copper and the proposed IPO

95 As noted above, Mr Herbert and Mr Chomley gave evidence in relation to the genesis for, decision to proceed with, and implementation of the Restructure and IPO. For the most part, their evidence was not contentious and was supported by contemporaneous documents.

96 In summary, from late 2018, EMR Capital commenced detailed consideration of a proposed IPO involving the consolidation of Capricorn Copper assets with those of two other EMR Capital assets; ie the non-CCH assets, namely, the Golden Grove mine (ultimately owned by Fund II) and the Redhill project (ultimately owned by Fund 1 and Fund 0). Work streams for the IPO (to consolidate these assets for a listing on the ASX) commenced in or around October 2019, but were interrupted by the COVID-19 pandemic and did not resume until early 2021.

97 In addition, from 2018, CCH, CCPL, and the Capricorn Copper mine faced a number of financial difficulties. The extent of these difficulties is evidenced by the fact that the CCH group financial statements (including CCH and CCPL) posted losses (before income tax expenses) for FY2017 to FY2020 of: AUD$9.127 million for FY17; AUD$68.567 million for FY18; AUD$27.67 million for FY19; and AUD$37.530 million for FY20.

98 The financial difficulties had an effect on the finance facilities. CCPL entered a syndicated facility agreement with BNP Paribas (BNP), originally dated 4 July 2017, and varied on 30 September 2019. CCH was the guarantor of CCPL's obligations. However, from 9 March 2020, CCPL and CCH were parties to an amended syndicated facility agreement with BNP and Natixis (amended syndicated facility agreement). The effect of the amendment was a transition from BNP as a sole lender to a new syndicate structure with an additional lender, being Natixis.

99 Pursuant to the amended syndicated facility agreement:

(a) 50 per cent of the outstanding term loan (at that time approximately AUD$31.052 million)[5] and 50 per cent of CCH's hedging facilities were transferred to Natixis;

(b) CCPL received an additional USD$7.2 million, by way of a 'revolving credit facility' (a line of credit); and

(c) the term loan, the hedging facilities, and the revolving credit facility were each ranked equally.

100 CCPL was subject to the following financial covenants:

(a) to repay its revolving credit facility in full and leave it undrawn for five days (clean down obligation); and

(b) that its 'debt service cover ratio' was not to exceed 1:2, where the first number represents net change in cash at bank over the period; and the second represents the amount of principal and interest for the same period (DSCR covenant).

101 In early 2021, it appears that CCPL was or was likely to be in breach of these covenants. As a result, in mid-March 2021, CCPL obtained a waiver of compliance with the clean down obligation until 31 December 2021. On 26 April 2021, CCPL also obtained a waiver of the DSCR covenant, on the condition that it successfully complete an IPO by 30 June 2021; failing which, it was required to deliver an alternative plan (within 30 days) to its lenders for refinancing, and demonstrate that the 'Secured Money' would be refinanced in full by 31 December 2021 (waiver letter). The waiver letter recorded CCPL's advice that it was unlikely to comply with the DSCR covenant.

102 Further, and in summary, CCH and CCPL faced the following existing and prospective liabilities in early 2021:

(a) pursuant to an offtake agreement known as the Advance Payment Agreement, CCPL had a loan of USD$15 million (entered into between CCPL and Trafigura Pte Ltd), which was restructured in 2018, and would mature on 31 March 2023;

(b) a liability to pay AUD$10 million to Metals X Limited (Metals X Payment), which related to a transaction in 2015. Terms for repayment were agreed on 24 December 2020: AUD$5 million plus interest on 31 March 2021, and the balance of AUD$5 million plus interest on or before 24 June 2021. It was necessary to extend the time for the first payment on 1 April 2021. An extension fee of AUD$250,000 was added to the first payment amount, which increased the amount owing to AUD$5.25 million. It also led to an increase in Metals X Limited's security over CCH; and

(c) derivative financial liability relating to hedging contracts of between AUD$59.5 million and AUD$66.7 million due to the hedging position for 2021 and 2022.[6]

103 Mr Chomley also gave evidence that, by 7 June 2021, CCH had a 'significant overdue trade creditor position', which totalled AUD$23.5 million; being trade creditors that had not been paid on time. The Sellers submit that little weight should be given to this evidence, given that no primary documents were produced to support these factual assertions. I do not agree for a number of reasons. First, as I have said above, I found Mr Chomley to be a credible and reliable witness. Second, the June 2021 Quarterly Report of 29Metals recorded that, on the completion of the IPO, AUD$21.5 million was paid from IPO proceeds in respect of Capricorn Copper's working capital normalisation. Further, Mr Twigger agreed in cross-examination that this line item was the equivalent of 'payment to surplus trade creditors to normalise the trade capital - the working capital'.[7] Mr Twigger's evidence supports a finding that the trade creditors' position was at least AUD$21.5 million in June 2021. In these circumstances, contrary to the Sellers' submissions, I am satisfied that there were significant overdue payments owed to trade creditors, which totalled at least AUD$21.5 million as at 7 June 2021.

104 In addition, Mr Chomley gave evidence, which I accept, that in early to mid-2021: the Capricorn Copper mine faced key technical and operational issues, including poor grade performance at several mines, environmental risks, and regulatory risks regarding tailings storage and ground conditions in mining areas. While I am conscious that this evidence of Mr Chomley was challenged and that the effect of some of the factors were not long-term, I accept that these factors affected Capricorn Copper mine's financial performance in early to mid-2021. Further, Mr Chomley gave evidence, which I also accept, that no further equity was available to be contributed to Capricorn Copper from Fund 1.

105 Finally, as to CCH's financial position, in the CCH Group financial statement for FY20 (which was dated 30 April 2021), the auditors described several factors contributing to CCH's consolidated net liability position of AUD$85.2 million by 31 December 2020, and concluded that matters relating to the CC Group '[gave] rise to material uncertainty that may cast significant doubt about [that] Group's ability to continue as a going concern' (going concern disclosure). Mr Audcent gave evidence as to the significance of the going concern disclosure; namely that, in order for an auditor to sign off on audited accounts, the auditor needed 'to be satisfied that the company will continue as a going concern for a period of at least 12 months from the date the audit report is signed' (in this case, 30 April 2021). As noted above, after CCPL received the waiver letter, it was obliged to complete an IPO, or refinance by 31 December 2021. Mr Audcent stated that, as there was no guarantee that this contingency would be satisfied, and in the absence of certainty, the auditor could not sign off without including the going concern disclosure.[8]

6.2 Deciding upon the proposed Restructure and IPO

106 Based on the evidence summarised in the previous section, I have formed the clear view that CCH and the Capricorn Copper mine were in serious financial difficulties in late 2020 and the first half of 2021. From early 2021, EMR Capital explored multiple liquidity options for the refinancing or exit of Capricorn Copper, in the event that the IPO option did not proceed. These options included:

(a) a potential trade sale of Capricorn Copper as a standalone asset (Option 1);

(b) a merger or reverse takeover of Capricorn Copper by an ASX-listed precious or base metals player (Option 2); or

(c) the refinancing of Capricorn Copper's senior debt via credit funds, mezzanine lenders, and royalty providers (Option 3).

107 Options 1 and 2 were held back, whilst EMR Capital explored a potential trade-sale of the Golden Grove mine. As to Option 3, refinancing solutions for Capricorn Copper were going to be expensive, due to the technical and operational challenges faced by the business, as summarised above. I will address these issues further below.

108 EMR Capital took steps to investigate whether the IPO option was in the interests of each of the different funds and limited partners that would be affected by a consolidation of assets. This resulted in the general partners and fund managers of Fund 1 and Fund II retaining a number of experts, including Deloitte, Credit Suisse, and others, to provide advice including as to the financial effects of any proposed restructure and IPO. For the purposes of this proceeding, the relevant reports were:

(a) a Deloitte valuation of CCH and CCPL dated 10 March 2021 (first Deloitte report), which contained both an enterprise and an equity value;

(b) a further Deloitte valuation dated 5 May 2021, of the relative contribution of each asset to the combined enterprise value of 29Metals, upon completion of the proposed IPO (Deloitte Relative Valuation report); and

(c) a Credit Suisse report dated 24 May 2021, which contained an enterprise valuation of 29Metals, including the Capricorn Copper mine, the Golden Grove mine, and the Redhill project (Credit Suisse report).

109 It would appear that these documents, and other documents relating to the potential Restructure and IPO, were considered at a meeting of EMR Capital's Investment Committee for Fund 1 (Investment Committee) on 27 May 2021 (May Investment Committee meeting). Mr Chomley gave evidence that the Investment Committee made recommendations to Fund 1 (which owned EMR6B and EMR4B). Mr Chomley (who attended the May Investment Committee meeting) said that the Investment Committee was made up of senior executives, including Mr Jason Chang, Mr Owen Hegarty, Mr David Jones, Mr Tony Manini, and Mr Robert Burns.

110 An 'Exit Process Update', dated 26 May 2021, was prepared for the May Investment Committee meeting (May Investment Committee paper). The May Investment Committee paper set out:

(a) the purpose of the report was to update the Investment Committee on work being conducted on the potential monetisation of Fund 1's investment in Capricorn Copper and Redhill, by way of an IPO with Fund II's Golden Grove;

(b) a summary of Fund 1's investment in Capricorn Copper and Redhill, with a book value of USD$180 million and USD$10 million respectively;

(c) a summary of the potential IPO, noting that analyst valuations received on 24 May 2021 had indicated an equity value range of between AUD$1,081 million to AUD$3,170 million;

(d) the value of all 'Rump' shares (namely, the shares that Fund 1 would retain in 29Metals after the IPO); and

(e) the risks and opportunities of the proposed IPO, and noted that EMR Capital would sell 50 per cent of its equity in Capricorn Copper and Redhill at the IPO.

111 The Investment Committee met again on 4 June 2021 (June Investment Committee meeting), at which it unanimously approved the recommendation that it was in the best interests of Fund 1, and its limited partners, to proceed with the IPO and transfer 100 per cent of Fund 1's indirect interests in Capricorn Copper and Redhill to 29Metals. Mr Chomley also attended this meeting. An 'Exit Proposal Report' dated 4 June 2021 was prepared for the meeting (June Investment Committee paper). The June Investment Committee paper:

(a) provided updated information relating to valuation and returns;

(b) summarised some key elements of the Restructure and IPO; and

(c) based on the final IPO pricing, recommended that Fund 1 proceed with the sale of Capricorn Copper and Redhill, by way of the IPO.

112 For the purpose of the IPO bookbuild, the June Investment Committee paper recorded an enterprise value for 29Metals of AUD$1,050 million or USD$811 million; and an equity value of AUD$961 million or USD$742 million, resulting in an AUD price per share of AUD$2.00. The Investment Committee approved a valuation allocation range of 29.1 per cent to 33 per cent for Capricorn Copper, choosing a midpoint of 31 per cent. This resulted in an enterprise value of CCH at AUD$325.5 million or USD$251.41 million and an equity value of AUD$297.91 million or USD$230.02 million.

6.3 Negotiations between EMR Capital and the Agent

113 Mr Chomley and Mr Hallion gave evidence in respect of discussions and correspondence between the Agent and EMR Capital, during March and June 2021, in relation to the Restructure (with 29Metals acquiring all of the issued shares in CCH) and subsequent IPO. For the most part, their evidence was not contentious and was supported by contemporaneous documents.

114 Mr Hallion's evidence was that, in March and April 2021, there was a series of emails (and one meeting) between Mr Hallion and Mr Chomley, in relation to the potential Restructure and IPO, in which Mr Hallion reminded him of EMR6B's obligations under the Share Mortgage. In or about April 2021, EMR Capital settled on what it considered would be the optimal structure for implementing an IPO (should one proceed). In summary, there were two stages:

(a) at the first stage, 29Metals was to acquire all of the issued share capital in CCH (ie the proposed Restructure and CCH share sale). This was successfully completed on 7 June 2021; and

(b) the second stage comprised the IPO and the contemporaneous acquisition of both Golden Grove and Redhill. This was successfully completed on 5 July 2021.

115 In early May 2021, EMR Capital gave the Agent informal notice of the proposed Restructure and IPO, including both Golden Grove and Redhill. EMR6B gave formal notice by letter dated 13 May 2021 (13 May letter). That letter was prepared by Mr Chomley and advised that:

(a) the proposed Restructure (which would be permanent, regardless of whether the IPO proceeded) constituted a 'Liquidity Event', to which the consent of the Agent was sought (which could not be unreasonably withheld under the Share Mortgage);

(b) the proposed Restructure (and CCH share sale) would not otherwise trigger the various Liquidity Event consequences under the Transaction Documents;

(c) as a result, EMR Capital proposed substituting the existing Collateral with corresponding collateral in the new holding company (ie 29Metals); or alternatively, substituting the existing Grantor (EMR6B) under the Share Mortgage with the new holding company. The letter noted that EMR Capital preferred the first option, as the new collateral would be 'superior to the existing Collateral'.

116 The 13 May letter also advised that the sale of shares in the new holding company, via an IPO, would constitute a 'Liquidity Event'; as a result of which, EMR Capital considered that the Tranche 4 Payment should be paid into escrow, 'together with an amount that is reasonably foreseeably owing in the future'. EMR Capital expressed the view that there were no other amounts 'reasonably foreseeably owing in the future' which would exceed the Reported Multiple. The relevant calculations were summarised in the 13 May letter, with more detail contained in Annexure A. Relatedly, EMR Capital proposed amendments to the Transaction Documents, in respect of payment of the amounts into escrow, with Perpetual Corporation Trust Ltd (Perpetual) appointed as the escrow agent, pursuant to the terms of a new escrow deed, the security of which would preserve the rights of the Sellers/Secured Parties.

117 On 19 May 2021, Mr Hallion wrote to EMR Capital (19 May letter), and asserted that the proposed CCH share sale was a 'Relevant Transaction' for the purposes of cl 5.1(c) of the Share Mortgage and, as a result, the Obligations under either of cll 5.1(c)(i) or 5.1(c)(ii) of the Share Mortgage were triggered. The 19 May letter also expressed the opinion of the Sellers that it was reasonably foreseeable that the Earnout Payment would become payable in the future. It stated that the valuation information set out in the 13 May letter, which formed the basis of the conclusion that the Earnout Payment was not reasonably foreseeably owing in the future, was 'flawed in several respects', including by failing to consider the performance of Oz Minerals and Australian and North American mining companies, and by failing to attribute value to a 'highly attractive exploration package at the CC Group'.

118 On 20 May 2021, EMR Capital replied to the 19 May letter, disputing that the proposed Restructure was a Relevant Transaction (instead categorising it as a necessary first step in the proposed IPO to avoid stamp duty implications), and disputing that any part of the Earnout Payment should be paid into escrow.

119 Nonetheless, after further communications between the parties, on 25 May 2021, EMR Capital sent an email to Mr Hallion, advising that it was prepared to agree to a total of AUD$15 million being placed into escrow from the IPO proceeds, on the basis that:

(a) the Sellers consented to the proposed Restructure, on the basis that EMR6B would grant replacement security over 10 per cent of its shares in the new holding company, effective upon transfer of the CCH shares to that company;

(b) if the potential IPO did not proceed, the replacement security would remain in place; and

(c) if the potential IPO did succeed, the Sellers would release the replacement security to EMR Capital, and AUD$15 million would be placed into escrow. AUD$2.5 million (being Tranche 4 payment) would be released within 10 business days of the IPO completion date; the balance would remain in escrow, to be paid in the event that an Earnout Payment became payable, including upon reaching the End Date.

120 The Sellers did not accept these terms, and did not consent to the CCH share sale. Nevertheless, EMR6B proceeded with the Restructure and IPO. I will deal with the steps taken for the Restructure and the IPO in the next section.

121 Before doing so, I pause to note that Mr Chomley gave evidence on behalf of EMR6B that he formed the view, as at 7 June 2021, that the Earnout Payment would not reasonably foreseeably be owing in the future. He was the person within EMR6B tasked to undertake this assessment. He said that he informed the EMR6B directors of his opinion at the time. Mr Chomley was extensively cross-examined about this conclusion, including by reference to details of the information provided to the May Investment Committee meeting and the June Investment Committee meeting, as well as the matters raised in the 19 May letter. I will address these issues in detail below, in the context of my conclusion as to the proper construction of the contract documents.

123 On 7 June 2021, a prospectus was issued for the IPO of shares in 29Metals (June Prospectus). A replacement prospectus was lodged with ASIC on 21 June 2021. I will refer to this replacement prospectus as the 'Prospectus', unless indicated to the contrary.

124 On 7 June 2021, in order to prepare for the sale of shares in CCH and Lighthouse to 29Metals (ie the Restructure), EMR6B took a number of steps and entered into a number of agreements. I will set them out in detail below.

125 In summary, the steps taken on 7 June 2021 were:

(a) EMR6B entered into an escrow deed with Perpetual (Perpetual Escrow Deed), pursuant to which it paid AUD$2.5 million into an escrow account, held by Perpetual as escrow agent, to be released to the Secured Parties after a successful IPO. EMR6B directed Perpetual to provide for the release of this amount to the Secured Parties and the Agent.[9]

(b) 29Metals entered into a share sale and purchase agreement with EMR6B (CCH SSPA), pursuant to which 29Metals purchased all of the shares of CCH and Lighthouse held by EMR6B (including the Relevant Securities constituting part of the Collateral, as defined in the Share Mortgage), in return for 29Metals issuing EMR6B with 10,719,906 shares in 29Metals;

(c) EMR Capital entered into an escrow deed with 29Metals (29Metals Escrow Deed), under which EMR6B agreed to enter into a voluntary escrow arrangement in relation to, amongst other things, the shares held by EMR6B in 29Metals immediately following completion of the IPO (which included the Consideration shares). Under the deed, the Escrow Period refers to 'the period commencing on the date on which Completion of the Offer occurs and ending at 4.15pm on the second Trading Day following the day on which [29Metals'] full year results for the financial year ending 31 December 2021 are released to [the] ASX'; and

(d) EMR6B entered into a deed of indemnity with 29Metals (Indemnity Deed), pursuant to which, amongst other things, EMR6B undertook to direct 29Metals to retain AUD$13 million of the IPO proceeds otherwise payable to EMR6B (retention amount).

126 As to the Perpetual Escrow Deed, EMR6B gave notice to Perpetual on 7 June 2021 that it had granted a security interest via a Specific Security Deed, in favour of the Secured Parties over its 'present and future right, title and interest at any time in connection with the Escrow Deed'. EMR6B sent a letter to the Agent requesting release of the Collateral, which was refused. From around 16 to 22 June 2021, the AUD$2.5 million was held in escrow before being drawn down and released to the Secured Parties, following the Restructure.

(a) the retention amount was to be retained until the earlier of:

(i) the date upon which the Share Mortgage was completely, unconditionally and irrevocably released; or

(ii) 17 March 2024 or (if EMR6B notified the Sellers of an extension to the termination date of Fund 1) six months after notification of the extension; and

(b) 29Metals could use the retention amount, amongst other things, to settle any claims against EMR6B or any of its Representatives by any Secured Party or the Agent.

(a) the sale of the shares under the CCH SSPA constituted a 'Relevant Transaction' for the purposes of cl 5.1(c)(ii) of the Share Mortgage; and

(b) upon becoming CCH's holding company, 29Metals became a 'new holding company of CCH' for the purposes of the definition of 'CC Group' in the 2018 SSA, and therefore became part of the 'CC Group' under the 2018 SSA.

129 Further, it is an agreed fact that, as at 7 June 2021, when 29Metals acquired the shares from EMR6B, 29Metals had knowledge of the existence and terms of the contract documents.

130 On 19 June 2021, EMR6B informed the Agent that EMR6B's 'Invested Capital', as defined in the 2018 SSA, had increased and was now USD$138,788,741.

6.5 The IPO and transfer of non-CCH assets to 29Metals

131 On 2 July 2021, 29Metals was admitted to the official list of the ASX and, on 5 July 2021, the IPO was completed.

132 On 5 July 2021, immediately following the IPO, 29Metals acquired the Redhill project and Golden Grove mine from the holding companies that owned those assets. As noted above, the Redhill project was owned by holding companies that were ultimately owned by EMR4B (an entity ultimately owned by Fund 1) and Fund 0; and the Golden Grove mine was owned by holding companies ultimately owned by the limited partners of Fund II.

133 Immediately following the IPO, the EMR Capital entities with investments in 29Metals each sold down a portion (approximately 40 per cent) of their shares. This is represented in the table below.

134 Pursuant to the Indemnity Deed, EMR6B directed 29Metals to retain the retention amount (later increased to AUD$13.5 million) from the sale of its shares in 29Metals, following the IPO. This amount would otherwise have formed part of the proceeds of sale for EMR6B's 42,386,568 shares in 29Metals.

135 It is agreed that Mr Hallion did not consent to the CCH SSPA, nor did he confirm that the alternative escrow arrangements (ie the Indemnity Deed) were satisfactory. Indeed, by letter from the Agent dated 10 June 2021, the Agent:

(a) alleged that EMR6B had breached several clauses of the Share Mortgage, including cll 5.1(c), 5.1(d), 5.1(e), 5.2(h), and 5.3;

(b) as a result, alleged that an Event of Default, within the meaning of cl 6.1 of the Share Mortgage had occurred, would occur by 15 June 2021 unless the breaches were remedied by that date; and

(c) threatened to appoint a receiver and manager to the Collateral, being the EMR6B's shares in 29Metals.

136 Similar assertions were made by the Agent's lawyers by letters dated 17 and 18 June 2021. Further, by the letter dated 17 June 2021, demand was made for Earnout Payment forming part of the Secured Monies due and payable. Further, by the 18 June 2021 letter, the Secured Parties/Sellers made a request for delivery of the title documents with respect to the Consideration shares. That request was repeated on 21 June 2021, 23 June 2021 and 28 July 2021.

137 On 21 June 2021, the Agent issued the notice of appointment of receivers.

138 On 2 August 2021, the Secured Parties/Sellers made a demand for payment of their own and the receivers' costs incurred as at 20 July 2021. EMR6B refused to pay.

(a) a declaration that the Sellers are not presently entitled to the Earnout Payment;

(b) a declaration that the plaintiffs are entitled to release of the Collateral;

(c) a mandatory injunction compelling the Sellers to take all steps necessary to provide a release that the Share Mortgage is in a form that can be registered on the PPS register;

(d) a declaration under s 418A of the Corporations Act 2001 that the purported appointment of receivers was invalid; and

(e) costs.

140 In summary, the Sellers seek by way of defence and counterclaim:

(a) a declaration that the Earnout Payment is presently due and payable;

(b) by dealing with the Collateral as part of the Restructure and IPO, otherwise than in accordance with cl 5.1(c)(ii):

(a) declarations that the appointment of receivers was valid;

(b) an order against EMR6B for remuneration of the receivers; and

(c) an indemnity in respect of the associated costs of the Sellers and receivers, in respect of all reasonable costs incurred in the attempted exercise of their respective powers under cl 11.6 of the Share Mortgage;

(c) in accordance with cll 5.2(g)-(h), an order for delivery up to the Sellers of all share certificates in respect of the Consideration shares, and a blank transfer form (presumably executed by EMR6B) in respect of them; or in the alternative, all share certificates in respect of 10 per cent of all Entity Marketable Securities (as defined in the 2018 SSA), and a blank transfer form in respect of them;

(d) damages by reason of the breaches of cl 5.1(c)(ii) and cll 5.2(g), 5.2(h) and 15.1 of the Share Mortgage and/or damages for breach of the continuing warranty in cl 3.1(a);

(e) damages against 29Metals for inducing the breaches of cl 5.1(c)(ii) and of the warranty in cl 3.1(a) of the Share Mortgage; and

(f) interest and costs.

141 As set out above, the full nature of the structure of the EMR Capital Group was not made plain in this proceeding. Although the parties agree that the identified entities most relevant to this proceeding fall within the definitions of 'Affiliates', 'EMR Shareholders', or 'EMR Investors' as defined in the 2018 SSA, it is worth noting that there are likely to be numerous other EMR Capital entities that fall within these definitions. This is due to the structure of the Funds and projects managed and advised by EMR Capital.

142 I note that in the pleadings, the Sellers allege and the plaintiffs admit that:

(a) EMR Capital Management Limited:

(a) indirectly controls EMR6B and EMR4B;[10] and

(b) is the manager of Fund II;[11] and

(b) EMR Capital Advisors Pty Ltd:

(a) directly controls the limited partners of Fund II, in relation to each of their investments in the 29Metals shares;[12] and

(b) manages the investment by Fund 0 of the shares in 29Metals. For this reason, the plaintiffs admit that Fund 0 is indirectly controlled by EMR Capital Advisors Pty Ltd.[13]

143 Having regard to the entities in the agreed statement of facts, and the definitions of Affiliates, EMR Shareholders, and EMR Investors, for the purpose of cl 6.1:

(a) Fund 0, the limited partners of Fund II and EMR4B are Affiliates of EMR6B;

(b) from 5 July 2021 (ie at the IPO), Fund 0, the limited partners of Fund II, and EMR4B were each EMR Shareholders; and

(c) the investors in Fund 0 and the limited partners of Fund II are EMR Investors.

144 I set out these matters because the entities in the agreed statement of facts which fall within the definitions of Affiliates, EMR Shareholders, and EMR Investors are particularly relevant to the construction of cl 6.1(a) 2018 SSA, which I will now address.

7. ISSUES 1 & 2: CONSTRUCTION OF CL 6.1 OF THE 2018 SSA

145 The issues discussed in this section are as follows:

1. Upon a proper construction of clause 6.1(a) of the 2018 SSA, did EMR6B have to pay the Earnout Payment to the Agent upon the completion of the IPO on 5 July 2021?
2. In considering Question 1:

(1) did clause 6.1(a) of the 2018 SSA include, in calculating the Reported Multiple, the returns paid or available to be paid to Fund 0 and the limited partners of Fund II; and

(2) did clause 6.1(a) of the 2018 SSA require, in calculating the Reported Multiple, account to be taken of both the cash and the shares in 29Metals following the IPO?

(3) was the effect of clause 6.1(a) of the 2018 SSA such that the Earnout Payment was not payable until the date on which EMR6B received the proceeds that resulted in the Reported Multiple being realised?

146 As noted earlier the determination of these issues is based primarily upon principles of contractual construction I will now turn to the parties' contentions as to the proper construction of cl 6.1(a). Before doing so, it is appropriate to set out again that clause:

6. Earnout Payment

6.1 Payment of Earnout Payment

(a) If a Liquidity Event occurs and any EMR Shareholder or any Affiliate of an EMR Shareholder reports (or is in a position to report) to EMR Investors that the aggregate of all cash returns paid or available to be paid to EMR Investors as a result of that Liquidity Event and any previous Liquidity Events (prior to the application of any Taxes payable, or otherwise withheld as a consequence of that Liquidity Event, by the EMR Investors) (Reported Multiple) is equal to or more than 2 times the amount of its Invested Capital immediately prior to the Liquidity Event, then the Buyer must pay to the Seller Representative the Earnout Payment within 10 Business Days of the date on which the Buyer receives the proceeds that result in the Reported Multiple being realised.

147 The parties agree that a Liquidity Event occurred at completion of the IPO on 5 July 2021. Issues 1 and 2 are directed to whether the Earnout Payment was triggered by that Liquidity Event, pursuant to the proper construction of cl 6.1(a) of the 2018 SSA.

148 The plaintiffs submit that the answer to that question is 'no' because, on the proper construction of cl 6 in its context:

(1) 'EMR Investors' should be limited to EMR Investors who were investors in EMR6B (EMR Investors construction issue); and

(2) the words 'cash returns ... available to be paid' (in the phrase 'all cash returns paid or available to be paid') does not include the value of shares received (the cash returns construction issue).

149 As a result, the plaintiffs submit that cl 6.1(a) should be construed as follows:

If a Liquidity Event occurs and any EMR Shareholder or any Affiliate of an EMR Shareholder reports (or is in a position to report) to EMR Investors [invested in EMR6B] that the aggregate of all cash returns paid or available to be paid [not including the value of any shares in 29Metals received] to EMR Investors [invested in EMR6B] as a result of that Liquidity Event and any previous Liquidity Events (prior to the application of any Taxes payable, or otherwise withheld as a consequence of that Liquidity Event, by the EMR Investors) (Reported Multiple) is equal to or more than 2 times the amount of its Invested Capital immediately prior to the Liquidity Event, then the Buyer must pay to the Seller Representative the Earnout Payment within 10 Business Days of the date on which the Buyer receives the proceeds that result in the Reported Multiple being realised.

150 As to the relevant background facts, the plaintiffs submit that the following matters are the objective and mutually known facts relating to the 2018 SSA:

(a) the Sellers knew that the relevant investors in EMR6B were the Fund 1 investors (based on the Terms Sheet);

(b) EMR6B was a special purpose vehicle which was an investment entity for a single fund with a limited time horizon, with the result that it required the ability to exit its investment;

(c) the Terms Sheet was to form the basis of the final agreement (based on the Terms Sheet); and

(d) the Sellers knew that EMR6B could not make non-cash distributions to investors (based on the fourth draft SSA).

151 For completeness, I note at this stage, the plaintiffs' submissions that the following matters were the objective and mutually known facts relating to the Share Mortgage:

(a) the parties accepted that the purpose of the Share Mortgage was to secure payment of the purchase price to avoid any obstruction of a Liquidity Event (based on the Terms Sheet);

(b) the reason as to why the parties included the escrow arrangement in cl 5.1(c)(ii)(A) of the Share Mortgage; namely, to provide a mechanism or circuit breaker by which the Collateral could be released to facilitate a Liquidity Event, and not a independent right to payment in circumstances where the conditions for payment were not otherwise triggered (based upon the email response from Allen & Overy to Clayton Utz dated 15 September 2018 at 11.17 pm) (the 15 September 2018 email exchange); and

(c) further, and relatedly, EMR6B had a commercial imperative to enter the Share Mortgage; namely, to enable it to exit its investment at some point.

152 As to context, the plaintiffs submit that the Earnout Payment was part of the compensation contingently payable to the Sellers for the Shares relating to the Capricorn Copper mine. In light of the IPO, pursuant to which the Capricorn Copper mine, the Redhill project, and the Golden Grove mine were transferred to 29Metals, applying the definition of EMR Investors in the 2018 SSA would result in aggregating the returns not only of those who invested in the Capricorn Copper mine (through Fund 1), but also those who invested in the Redhill project (through Fund 0, EMR4B, and Fund 1) and the Golden Grove mine (through the limited partners of Fund II). The plaintiffs submit that it was well known to the Sellers that regard was only to be had to the CCH assets. They rely upon the revisions made to the initial terms sheet on 4 September 2018, which expressly referred to an additional payment (the precursor to the Earnout Payment ) which would be paid '[i]f on a Liquidity Event, EMR[6B] reports to its Fund 1 investors that it has achieved a 2.0x or greater multiple on its invested capital in the Capricorn Group'. I have set out the equivalent provision of Terms Sheet at [49(c)] above.

153 The plaintiffs submit the Court should conclude that the definitions of Affiliate and EMR Investors were included in the 2018 SSA to ensure that the Sellers' entitlement to realise any value earned from their indirect investment in CCH was 'not stymied by unforeseen changes in the ultimate ownership of CCH once that investment left the Sellers' control'. However, those terms should not be construed to provide the Sellers with a windfall, due to other EMR Capital vehicles having rolled separate assets into an IPO with CCH.

154 This is in circumstances where, based on the text of cl 6 of the 2018 SSA:

(a) whilst aggregating the returns of EMR Investors is the numerator in the equation to ascertain the Earnout Payment under cl 6.1(a), the denominator is 'its' Invested Capital, which was clearly a reference to the Invested Capital 'paid by the Buyer' (ie EMR6B) in acquiring the ordinary shares in CCH;

(b) the last three lines of cl 6.1(a) provide that, if the Reported Multiple is achieved, then the 'Buyer' (ie EMR6B) must pay the Earnout Payment 'within 10 Business Days of the date on which the Buyer [EMR6B] receives the proceeds that result in the Reported Multiple being realised'; and

(c) the acknowledgement in cl 6.2(b) that 'payment of the Earnout Payment is contingent on, and the amount of the Earnout Payment reasonably relates to, the economic performance of the Shares'; ie the Shares owned by the Sellers in Lighthouse (who owned approximately 3.5 per cent of the shares in CCH) sold to EMR6B under the 2018 SSA.

155 The plaintiffs submit that it would make no commercial sense if, when the Sellers' entitlement to the Earnout Payment came to be calculated, the Sellers were to benefit from the value contributed by other people's assets.

156 As to the cash returns construction issue, which arose in the context of CCH receiving shares in 29Metals following the IPO, the plaintiffs submit that:

(a) shares are not cash, and the owner of those shares does not have cash 'available' to be paid to the market value of those shares, as those shares have not been realised;

(b) the cash return available upon realisation of a parcel of shares in issue (being the remaining CCH shares in 29Metals after the IPO) would not necessarily have been the price at which the shares were trading on the ASX multiplied by the number of shares held by EMR6B. Sale of such a large parcel of shares could depress the price of shares on the open market;

(c) in any event, EMR6B's shares in 29Metals were held in a voluntary escrow arrangement until February 2022; and

(d) any subsequent sale of the shares in 29Metals would be a separate and further Liquidity Event, and any construction which included the value of those shares in cl 6.1(a) would lead to double counting in respect of those shares.

157 The plaintiffs refer to comments in the fourth draft 2018 SSA circulated by email on 16 September 2018 at 3:23 pm, to the effect that it was not intended for non-cash distributions to be taken into account, on the basis that EMR6B undertook not to make non-cash distributions.

158 The Sellers submit that, properly construed, cl 6.1(a) of the SSA required:

(a) EMR6B to pay the Earnout Payment upon completion of the IPO on 5 July 2021; and

(b) in calculating the Reported Multiple, inclusion of the cash and shares received upon completion of the IPO by the limited partners of Fund II as an EMR Investor.

159 Effectively, the Sellers contend for the following construction of cl 6.1(a):

If a Liquidity Event occurs and any EMR Shareholder or any Affiliate of an EMR Shareholder [including EMR6B, Fund 0, the limited partners of Fund II and EMR4B] reports (or is in a position to report) to EMR Investors [including the investors in any of Fund 0, Fund 1, and the limited partners of Fund II] that the aggregate of all cash returns paid or available to be paid [including those amounts available to be realised by the sale of 29Metals shares] to EMR Investors as a result of that Liquidity Event and any previous Liquidity Events (prior to the application of any Taxes payable, or otherwise withheld as a consequence of that Liquidity Event, by the EMR Investors) (Reported Multiple) is equal to or more than 2 times the amount of [its the Buyer's] Invested Capital immediately prior to the Liquidity Event, then the Buyer must pay to the Seller Representative the Earnout Payment within 10 Business Days of the date on which the Buyer receives [its part of] the proceeds that result in the Reported Multiple being realised.

160 The Sellers, for the most part, accept the relevant background facts relating to the 2018 SSA, but question what those objective facts establish.

161 In addition, the Sellers rely upon communications in the course of negotiations between the parties, and their solicitors, leading up to execution of the 2018 SSA and the Share Mortgage, as representing mutually known background circumstances that the Court may use to resolve contractual ambiguity. In doing so, they rely upon the judgment of Leeming JA (with whom Gleeson JA agreed) in Cherry v Steele-Park ('Cherry')[14] to submit that, amongst other things, the drafting history and pre-contractual negotiations (including emails and comments on drafts) represent mutually known background circumstances for the purposes of construction.

(a) the decision to delete from the first draft SSA, the references to 'Buyer' and 'Fund 1 Investors' in the introductory part of cl 6.1(a), and to substitute them in the second draft SSA with the defined terms, 'EMR Shareholder or any Affiliate of an EMR Shareholder' and 'EMR Investors', respectively; and

(b) an alternative draft terms sheet (alternative terms sheet) sent by Mr Herbert to Mr Hallion on 3 September 2018, which the Sellers contend supports the mutually known fact that a Liquidity Event might include an IPO of CCH, in conjunction with other copper assets managed by or within the control of the EMR Capital Group.

163 The Sellers address the words that the plaintiffs seek to read into cl 6.1(a) as follows. First, the Sellers assert that the plaintiffs are seeking to do more than achieve a contextual construction of cl 6.1(a); rather, the plaintiffs are seeking rectification by construction, when the fundamental requirements to obtain rectification by construction (ie absurdity) are not present, relying upon Perpetual Ltd v Myer Pty Ltd ('Perpetual').[15] The Sellers submit that the plaintiffs' construction ignores the express definitions inserted with the agreement of the parties and their lawyers, because they are inconvenient to the circumstances that ultimately transpired.

164 Further, the Sellers submit that there was no evidence before the Court as to who the investors of Fund 1 are, or of the relationship between those investors and the investors in EMR4B, Fund 0, and the limited partners of Fund II.

165 As to the EMR Investors construction issue, whilst the Sellers appeared to concede some ambiguity in cl 6 of the 2018 SSA, they submit that the plaintiffs' construction is inconsistent with the words, and in particular, the express definitions adopted in that clause.

166 First, the Sellers refer to the definition of 'Liquidity Event' in the 2018 SSA, which includes 'a Disposal of shares in any member of the CC Group'. The definition of CC Group included CCH and, after the CCH sale on 7 June 2021, included 29Metals. As a result, the Sellers submit there were two Liquidity Events that occurred in June and July 2021: the CCH sale on 7 June 2021; and completion of the IPO on 5 July 2021.

167 Second, the Sellers emphasise that it is necessary for the Court to give effect to each of the defined terms in cl 6.1 (namely, 'EMR Investors', 'Affiliate', and 'EMR Shareholders'), noting that these terms were deliberately introduced for the purposes of cl 6.1. In particular, the Sellers rely upon:

(a) the term 'EMR Shareholders', which is defined to mean EMR and 'any Affiliate of [EMR] that holds shares in any member of the CC Group from time to time'; and

(b) the term 'EMR Investors' which is broader than 'EMR Shareholders'. This term is only found in cl 6 of the 2018 SSA, and was incorporated into the draft at the same time as the current cl 6.

168 The Sellers rely upon the agreement between the parties as to the EMR entities that fall within those definitions, as set out in section 4.2 above.

169 Third, the Sellers appear to concede two instances of ambiguity in cl 6.1(a), namely:

(a) the word 'its' before 'Invested Capital', with Invested Capital defined to mean the cash paid only by the Buyer [EMR6B] in acquiring the ordinary shares in CCH; and

(b) clause 6.1(a) requires the Earnout Payment to be paid 10 business days after the date upon which the Buyer [EMR6B], not the EMR Investors, receives the proceeds that resulted in the Reported Multiple being realised.

170 The Sellers submit that it is easy to identify where in the drafting process these two instances of ambiguity arose; namely, overlooking changes to the second half of cl 6.1(a), in light of the expanded scope of the definitions in the first half of that clause. The Sellers submit that the issues of construction should be resolved by construing:

(a) the word 'its' before Invested Capital to mean 'the Buyer's'; and

(b) the word 'proceeds' to mean 'its part of' the proceeds.

171 Fourth, as to context and commercial purpose, the Sellers contend that:

(a) the 2018 SSA was made against a background where EMR6B was a special purpose vehicle, which formed part of a private equity fund managed by EMR Capital, all operating within the sphere of mining operations, mining development, and mining exploration projects; and

(b) the existence of related party investments by other funds, made under the management and control of EMR Capital, is captured by the definitions of Affiliate and EMR Investors in the 2018 SSA.

(a) there was the prospect of an Earnout Payment by reason of meeting the target return under cl 6.1(a) before the End Date and/or on the End Date under cl 6.1(c) and (d);

(b) clause 6.1(a) contemplated that EMR6B might dispose of some or all of the shares in CCH before the End Date of the 2018 SSA (17 September 2023), by reason of one or more Liquidity Events, which included an IPO;

(c) an IPO could involve a consolidation of multiple assets, including assets owned by different EMR Investors. This was known to the parties by reason of the alternative terms sheet, which referred to the definition of Liquidity Event as including an IPO of CCH, or an 'IPO of the business undertaken as part of an IPO of EMR Capital Group's copper portfolio'; and

(d) clause 6.1(a) was drafted to allow for that possibility.

173 As a result, the Sellers submit that the Court should be slow to accept the plaintiffs' contention that the possibility of the Earnout Payment being derived from the benefits obtained by entities other than EMR6B was uncommercial or absurd.

174 Relatedly, the Sellers submit that, given the limited evidence adduced, the Court is not in a position to assess all factors which might have been considered by the parties in reaching the terms of the 2018 SSA. However, introduction of the defined terms supports the proposition that commercial considerations of the EMR Capital Group, rather than EMR6B, would have a part to play in considering whether the target return would or might be achieved.

175 Fifth, to the extent that the plaintiffs assert the Court should have regard to the parties' negotiations, the Sellers contend that:

(a) the Terms Sheet does not assist the plaintiffs, because it was expressly subject to 'long form binding agreements'; ie further negotiation between the lawyers for the parties of which Mr Herbert (on behalf of EMR6B) and Mr Hallion (on behalf of the Sellers) were aware;

(b) clause 6.1 of the second draft SSA extended beyond the reach of the Terms Sheet, which was accepted by the plaintiffs and/or their lawyers (on their behalf), and there were no further relevant changes to cl 6.1; and

(c) there is an entire agreement clause in cl 19 of the 2018 SSA.

176 As to the cash returns construction issue, the Sellers submit that the phrase, 'cash returns paid or available to be paid', includes both the cash returns to, and the shares retained by, the EMR Investors which were available to be realised after the IPO, upon its completion on 5 July 2021. The Sellers submit that this construction is both logical and commercial, given the shares were in a listed public company - otherwise EMR6B might avoid its obligation to make an Earnout Payment, by choosing not to convert all shares to cash.

177 The Sellers note that the plaintiffs adopted the defendants' construction in both written and oral openings. Finally, the Sellers dispute the plaintiffs' argument that, because some shares were held in escrow until after publication of the 31 December 2021 full year results for 29Metals, those shares are now available to be converted into cash, even if they were not before.

178 The Sellers submit that the Court was not presented with any evidence to support the plaintiffs' assertion that 'the sale of such a large parcel [of shares] may have depressed the price'. As for the double counting argument, the Sellers submit that 'cl 6.1(a) can be construed commercially (without the need to change any express words), such that the "aggregate" of returns means the aggregate, and not a duplication or multiplication of the returns from one or more Liquidity Events'.[16]

179 As to the EMR Investors construction issue, the plaintiffs submit in reply that the Sellers' construction reveals two fundamental problems.

180 First, the Sellers' construction is at odds with the fact that they accept that the 2018 SSA concerned the sale of their 3.5 per cent ultimate interest in CCH.

181 Second, the plaintiffs emphasise that, consistent with orthodox contractual construction principles, every provision in a contract must be read together and construed with the others, so as to render, as far as possible, the provisions harmonious with each other, relying upon the High Court decision in Fitzgerald v Masters.[17] They submit that the Sellers' construction fails to do this, because it reads the definitions of 'EMR Investors' and 'Affiliate' in isolation from the remainder of the 2018 SSA (particularly cl 6.2(b)) and the relevant background circumstances at the time of entry into the Transaction Documents.

182 Relatedly, the plaintiffs submit that the defendants' approach to establishing ambiguity contains a fundamental error. They contend that, once the Sellers acknowledged some ambiguity in some parts of cl 6.1(a), such ambiguity flows through to the entire clause. The plaintiffs did not address, in detail, the submission of the Sellers relating to rectification by construction and did not rely upon the rectification by construction.

183 In addition, the plaintiffs submit that, whilst it can be accepted that the IPO could involve various permutations, it does not follow that the term 'EMR Investors' was included to address the prospect of a 'consolidating' IPO.

184 Thus, the plaintiffs submit that the Sellers' construction does not lead to an 'explicable commercial result', as required by Apple and Pear Australia Ltd v Pink Lady America LLC ('Apple and Pear')[18] and Perpetual.[19] This is because, on the Sellers' construction, they would be entitled to an Earnout Payment notwithstanding that the majority of the return was earned by non-CCH assets, contrary to cl 6.2(b) of the 2018 SSA.

185 The legal principles expressed in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd ('Mount Bruce')[20] succinctly summarise how courts are to construe commercial contracts. In short:

(a) the 'rights and liabilities of parties under a provision of a contract are determined objectively' by reference to text, context, and purpose;[21]

(b) the court must consider 'what a reasonable businessperson would have understood those terms to mean', having regard to the 'language used', the 'circumstances addressed by the contract and the commercial purpose or objects to be secured';[22]

(c) whilst ordinarily the process of construction is to be undertaken by reference to the contract alone, if an expression or phrase is 'unambiguous or susceptible of only one meaning', evidence of surrounding circumstances 'cannot be adduced to contradict its plain meaning';[23]

(d) recourse to 'events, circumstances and things external to the contract' may be necessary; for example, to '[identify] the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context"', and the applicable market, or to determine 'the proper construction where there is a constructional choice';[24]

(e) in each case, such external matters must be 'objective' and known to both parties;[25]

(f) evidence of the 'parties' statements and actions reflecting their actual intentions and expectations' is inadmissible; [26] and

(g) unless the contract indicates a contrary intention, a court may assume that the parties 'intended to produce a commercial result',[27] and can construe the contract to avoid making 'commercial nonsense' or 'commercial inconvenience'.[28]

186 Recently, in SAS (VIC) Pty Ltd v Urban Ecological Systems Ltd ('Urban'),[29] the Victorian Court of Appeal commented on the principle referred to at sub-para (g) directly above, as follows:[30]

There are limitations to this concept. As this Court recently stated in Great Union Pty Ltd v Sportsgirl Pty Ltd:

[W]hile a court may approach the task of construction on the basis that the parties intended to produce a commercial result, this does not constitute a licence to alter the meaning of a term to achieve a result the court may think to be reasonable.[31]

187 The limited role of courts in this regard was recently addressed by the New South Wales Court of Appeal in J & P Marlow (No 2) Pty Ltd v Hayes.[32] In that case, Bell CJ said noted the caution is required when resort is had to assertions of 'commercially unlikely consequence' noting that ''business common sense' is a topic upon which minds may differ'.[33] His Honour endorses the comments of Lord Mustill in Charter Reinsurance v Fagan[34] that 'there comes a point at which the court should remind itself that the task is to discover what the parties meant from what they have said'.[35] Bell CJ concluded that the appellants' construction 'cannot be reconciled with the language employed by the parties, understood in the context of the [agreement] as a whole'.[36] In the same case, Meagher and Kirk JJA concluded that, while a court should seek to construe a contract so as to achieve its commercial purpose, there are limits to the courts ability to do so, relevantly including that such a construction must be reasonably open on the text.[37]

188 These passages emphasise that, whilst courts are prepared, when appropriate, to construe, add or blue pencil words to accord with the objective commercial purpose of the agreement,[38] this does not mean that a court is entitled to significantly depart from the words chosen by the parties to give effect to an attributed commercial purpose or to avoid a commercial inconvenience to one party.

189 The Sellers contend that the plaintiffs are seeking 'rectification by construction', and that the legal requirements for rectification by construction are not made out in this case.

190 In summary, it has been held that where the literal words in a contract contain a clear absurdity, a court can, through a process of contractual construction, alter the words to give the contract commercial meaning.[39] This has been referred to as 'rectification by construction'. However, in the New South Wales Court of Appeal, Bell P (with whom Macfarlan JA agreed) recently stated that this terminology is 'apt to [be] confuse[d]' with the equitable doctrine of rectification.[40] With respect, I agree.

191 In Perpetual,[41] the Victorian Court of Appeal adopted the requirements for 'rectification by construction' identified by Lemming JA in Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq),[42] namely, that:

(1) the literal meaning of [the clause or term] contains a clear mistake, which produces an absurd result;

(2) the absurdity is such that it is self-evident what the objective intention is to be taken to have been; and

(3) it is clear what correction ought to be made.[43]

192 As is evident, 'rectification by construction' is premised upon an absurdity not an ambiguity. As a result, courts approach rectification by construction with caution and require a strong level of conviction for each of the three elements.[44] As noted above, the plaintiffs eschewed any reliance upon the 'rectification by construction'.

7.5.3 Admissibility and use of contractual negotiations

193 As to the admissibility and use of pre-contractual negotiations, in addition to the principles referred to in the Mount Bruce summary at [185(c)-(f)] above, the following legal principles are clear:

(a) in order to resolve ambiguity, the drafting history and negotiations are admissible for the limited purpose of 'establish[ing] objective background facts which were known to both parties and the subject matter of the contract';[45] however

(b) to the extent that prior negotiations consist of 'the parties' statements and actions reflecting their actual intentions and expectations', they are inadmissible.[46] This is because they 'reveal the terms of the contract which the parties intended or hoped to make' and are 'superseded by, and merged in, the contract itself'.[47]

194 The Sellers rely upon the judgment of Leeming JA (with whom Gleeson JA agreed) in Cherry[48] to submit that, amongst other things, this Court could use the drafting history and pre-contractual negotiations (including emails and comments on drafts) for the purpose of construing the 2018 SSA and the Share Mortgage. The Sellers submit that more weight ought to be placed on the drafting history (ie the changes in the drafts to the contract documents representing mutually known circumstances), and less weight on pre-contractual negotiations, including emails and comments on drafts (which tend to be more subjective).

195 In Cherry, Leeming JA (with whom Gleeson JA agreed) concluded that email correspondence between the parties' solicitors in the course of negotiating the concluded agreement was admissible, and could be of use in construing the agreement on the basis that such correspondence relayed a party's 'communicated desire':

In the present case, I regard the initial proposal in the email of 19 May 2014 as analogous with the evidence of the party's communicated desire contained in an undisputed conversation in Boreland, with the evidence of the conversation explaining the reasons for the audit mechanism in Lahoud v Lahoud, and with the letter of offer in Angas Securities Ltd. I am also conscious that the subsequent emails, especially insofar as they reflect the negotiating positions of the parties, are less clearly within this area of admissible evidence of objective surrounding circumstances. However, neither party submitted, either at trial or on appeal, that the correspondence between the solicitors should be treated differentially. Because ultimately nothing turns on this point for the purposes of this appeal, I take the matter no further.[49]

196 White JA dissented on this issue of admissibility concluding that:

(a) the current contractual construction principles established by the High Court do not allow for the use of 'communicated or uncommunicated, actual, that is subjective, intentions or expectations of the parties for the purposes of construing the contract';[50]

(b) to the extent that the email correspondence showed the genesis of the contract, and the other objective surrounding circumstances (being facts known to both parties), they could have been used;[51]

(c) the email correspondence went further, and was evidence of the actual intent of the parties. To the extent that the correspondence addressed 'what it was proposed the Guarantee should secure, it was inadmissible for the purpose of construing the Guarantee';[52] and

(d) the authorities relied upon by Leeming JA are 'distinguishable, and are analogous to the legitimate purpose to which the correspondence and drafts in this case could be put'.[53]

197 Whilst the comments of Leeming JA have been adopted by some judges in New South Wales, to the best of my research, they do not appear to have been specifically endorsed outside that jurisdiction. In any event, the weight of authority in this State, consistent with the High Court decision of Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales ('Codelfa'),[54] is that for the purpose of construing a written agreement, a court will not have regard to negotiations which establish only the subjective intentions of parties from time to time, culminating in the execution of a final agreement.[55]

198 As a result, I have formed the view that I am able to use the drafting history and prior negotiations in construing the Transaction Documents, for the limited purpose of ascertaining the genesis of the contract, the commercial purpose of the agreement, and the other objective surrounding circumstances (being facts known to both parties). However, I will only be permitted to have regard to such documents if disclose such matters, and are relevant to the issues of contractual construction, including for the purpose of resolving any ambiguity. To the extent that they instead disclose subjective intentions of the parties from time to time, culminating in the execution of the Transaction Documents, I am not permitted to use those materials to construe the clauses.[56]

199 I would only add that, in my view, if the drafting history or prior negotiations are to be used to resolve ambiguity, those documents will need to be sufficiently clear to disclose the relevant genesis of the contract, the commercial purpose or other objective surrounding circumstances.

200 As noted above, there are two main issues of construction: the EMR Investors construction issue; and the cash returns construction issue. I will deal with each in turn. There are two subsidiary issues of construction raised by the Sellers relating to 'its Invested Capital' and the proceeds the Buyer receives in relation to the second half of cl 6.1(a). I will deal with them in the course of dealing with the main issues of construction.

201 Before doing so, it is important to set out the genesis of the transaction, the background, the context, and the market in which the parties were operating, to use language common to the authorities.

202 First, the Sellers held a small interest in the Capricorn Copper mine. This is because they owned shares in Lighthouse which owned 3.5 per cent of the shares in CCH. CCH owned CCPL, which in turn owned the Capricorn Copper mine. EMR6B held the other 96.5 per cent of the shares in CCH. Lighthouse was the manager of the Capricorn Copper mine from 2015.

203 Second, given that there were serious disputes between EMR6B and Lighthouse in relation to management of the Capricorn Copper mine, in late August 2018, the Sellers agreed to sell their shares in Lighthouse to EMR6B and terminate the Lighthouse Management Agreement. The result was that EMR6B would effectively own 100 per cent of CCH, CCPL, and the Capricorn Copper mine. This is evident from the Terms Sheet and the 2018 SSA.

204 Third, the purchase price for the Shares was to be an Upfront Payment of approximately AUD$7.5 million, and a contingent payment of AUD$12.5 million, which was payable dependent upon specified events and financial hurdles (ie the Earnout Payment). This is evident from the Terms Sheet and the 2018 SSA.

205 Fourth, the parties always agreed, and were aware, that one of the contingencies upon which the Earnout Payment might become payable was a Liquidity Event. This is evident from the Terms Sheet and the 2018 SSA. Further, the plaintiffs appeared to accept that, consistent with the terms of the 2018 SSA, there were different kinds of Liquidity Events, including the possibility of an IPO.

206 Fifth, the Sellers through their Agent were aware that:

(a) EMR6B is a special purpose holding vehicle established in Singapore and owned by Fund 1, whose investors were the Fund 1 Investors;

(b) EMR6B and Fund 1 formed part of a group of 'private equity funds' managed by EMR Capital, which operated with other funds within the sphere of mining operations, mining development, and mining exploration projects; and

(c) Fund 1 had a limited time horizon, which required it to be able to exit its investment in CCH. This is evident from the End Date in the 2018 SSA.

207 Sixth, the terms of the 2018 SSA were negotiated between the parties and their lawyers in the week before its execution on 17 September 2018.

208 It is clear from the words of the Terms Sheet that, whether the Earnout Payment was payable, depended upon the financial performance of the Capricorn Copper mine owned by 'CCH Group' (referred to in the Terms Sheet), which at that time comprised CCH and CCPL. The Sellers were objectively aware of the limited nature of the CCH Group at this time, by reason of their ownership of the Lighthouse shares in CCH.

209 I am conscious that, as set out in its heading, the Terms Sheet outlined the 'Proposed Terms - Subject to a Long Form Binding Agreement'. As these reasons evidence, the terms in the Terms Sheet were varied and expanded in the 2018 SSA. Nevertheless, I consider that the Terms Sheet may be taken into account, not only as evidence of mutually known background facts, but also as evidence of the objective intention of the parties at the time it was signed. Relevantly, the Terms Sheet discloses that the objective intention of the parties at that time was that, whether the Earnout Payment was payable, was dependent only upon the financial performance of the 'CCH Group' (ie CCH, CCPL, and the Capricorn Copper mine).

210 However, it is not clear from the words of the 2018 SSA, as executed, that payment of the Earnout Payment depended solely upon the financial performance of the 'CCH Group' (comprising CCH and CCPL). This is due to the use of defined terms in cl 6.1, which had the effect of expanding the entities within the EMR Capital Group, beyond those in the Terms Sheet, whose returns or assets might fall within the returns considered for the purpose of determining whether the Earnout Payment was payable. I refer, in particular, to the following terms:

(a) EMR Shareholder;

(b) Affiliate;

(c) EMR Investors;

(d) the CC Group; and

(e) Liquidity Event.

211 Each of these definitions is important, with many inter-related definitions. 'EMR Shareholder', 'EMR Investors' and 'Affiliate' are only used in or for the purpose of cl 6. 'Affiliate' is also used in the definitions of EMR Shareholders and EMR Investors. 'CC Group' and 'Liquidity Event' are used primarily in or for the purpose of cl 6. However 'CC Group' appears in several definitions (including 'EMR Shareholders' and 'Liquidity Event'). 'CC Group' is also used in cl 9 (Third Party Claims) and Attachment 4 (Valuation Principles). 'Liquidity Event' is also used in cll 3.2 and 3.3 relating to the Tranche 4 payment and the acceleration of the payment of the Purchase Price, respectively.

212 Most relevantly, for the purposes of determining the Earnout Payment under cl 6.1(a), the effect of including these definitions was to substantially change the nature and extent of:

(a) the entities who were obliged to report under cl 6.1(a) (the EMR Shareholders and its Affiliates, in lieu of EMR6B in the Terms Sheet);

(b) the investors whose returns might be considered for the purposes of determining the Reported Multiple in cl 6.1(a) (ie EMR Investors, in lieu of the Fund 1 Investors in the Terms Sheet);

(c) the CC Group (which included CCH, CCPL, a subsidiary of CCH, and a holding company of CCH); and

(d) a Liquidity Event which included, relevantly, an IPO in any member of the CC Group.

213 Further, the 2018 SSA contained provisions, additional to those in the Terms Sheet, for the Earnout Payment to be payable in the event that it had not been paid by the End Date (cll 6.1(c) and (d)). These clauses use some of the defined terms referred to above; namely, Affiliate and the CC Group in cl 6.1(c), and Liquidity Event and EMR Investors in cl 6.1(d). Once again, the effect of using these definitions was to expand the entities within the EMR Capital Group (beyond those in the Terms Sheet), whose returns or assets might fall within the returns considered for the purpose of determining whether the Earnout Payment was payable.

214 In addition, these defined terms are used in other parts of cl 6: for example 'EMR Investors' is used in cll 6.1(d) 6.3(a) and (d)and 6.4(a); 'Affiliate' is used in cl 6.1(c), 'EMR Shareholder' is used in cl 6.3(e) and 'CC Group' is used in cll 6.3(e) and 6.4(a)-(b).

215 The plaintiffs, in substance, contend that the application of these definitions in cl 6.1(a) creates an uncommercial outcome in the facts of this case; namely, in light of the Restructure and the IPO. This is because the effect of these definitions would mean that payment of the Earnout Payment depended upon the financial performance of 29Metals (which owned the Redhill project, the Golden Grove mine, and the Capricorn Copper mine through its subsidiaries), as opposed to that of the Capricorn Copper mine owned by CCH and CCPL, or any related entity. The plaintiffs contend it was very unlikely that the commercial parties in the shoes of EMR6B and the Sellers would have objectively intended that calculation of the Earnout Payment be based upon the non-Capricorn Copper assets (ie the non-CCH assets), when no such assets were transferred to EMR6B under the 2018 SSA.

216 The plaintiffs do not seek rectification of cl 6.1, nor do they rely upon the principles of rectification by construction. Rather, the plaintiffs contend that, in light of this uncommercial outcome in the current factual situation, the Court should read the word 'EMR Investors' 'differently' in cl 6.1(a); namely, as 'EMR Investors (invested in EMR6B)'.

217 I am not satisfied that I should do so in the circumstances of this case. In summary this is because, while I accept the objective intention of the parties at the time of the Terms Sheet is clear, that objective intention is not clear at the time of the 2018 SSA in light of the definitions (which in their terms are clear) agreed to by the parties, with the assistance of their lawyers.

(a) under the 2018 SSA, the Sellers sold the Shares (which held an interest only in the Capricorn Copper assets via CCH) to EMR6B; and

(b) in light of the particular transaction undertaken by EMR6B (ie the Restructure and IPO), where application of the definitions resulted in the Earnout Payment under cl 6.1(a) becoming payable by reference to the returns from non-CCH assets.

219 The plaintiffs contend that the plain meaning of the defined terms inserted into cl 6.1(a) is ambiguous and/or inconsistent with the following:

(a) whilst aggregating the returns to EMR Investors forms the numerator in the equation, to ascertain the Earnout Payment under cl 6.1(a), the denominator is 'its' Invested Capital, where Invested Capital means 'the aggregate cash amount paid by the Buyer [EMR6B] in acquiring ordinary shares in CCH';

(b) the last three lines of cl 6.1(a) provide that, if the Reported Multiple is achieved, then the 'Buyer' [EMR6B] must pay the Earnout Payment within 10 business days of the date on which the Buyer [EMR6B] receives the proceeds that resulted in the Reported Multiple being realised; and

(c) the acknowledgement in cl 6.2(b) that 'payment of the Earnout Payment is contingent on, and the amount of the Earnout Payment reasonably relates to, the economic performance of the Shares'.

220 I accept that there is inconsistency and/or ambiguity between the plain meaning of the defined terms inserted into cl 6.1(a), other parts of cl 6.1(a), and cl 6.2(b), as identified by the plaintiffs. However, the question is whether that inconsistency and/or ambiguity should be resolved in the way contended for by the plaintiffs.

221 The most relevant aspect of the text of cl 6.1(a), relied upon by the plaintiffs, is the numerator and denominator in the central equation in cl 6.1(a). I accept the plaintiffs' submission that there is a mismatch in this equation, if the defined terms are construed according to their defined meaning. This mismatch is very much in favour of the plaintiffs' construction. However, in my view, this mismatch appears to be a consequence of the introduction of definitions adopted for the purpose of determining the Earnout Payment in cl 6.1.

222 Whilst the Invested Capital (ie the denominator) remained substantively the same in the Terms Sheet and the 2018 SSA, as noted in [210] above, the returns to which the Invested Capital were to be compared varied greatly from the Terms Sheet and the 2018 SSA. The Terms Sheet referred to the returns reported by EMR6B to its Fund 1 investors. The 2018 SSA refers to the returns reported by the EMR Shareholder and its Affiliates (which go well beyond EMR6B ) to the EMR Investors (which went well beyond the Fund 1 Investors). As a result, the language and definitions of the 2018 SSA had the effect of changing the relevant entities and returns to be considered for the purpose of the numerator. In these circumstances, whilst the mismatch is a relevant matter in resolving the ambiguity or inconsistency, I do not consider it a determinative factor in favour of the plaintiffs' construction.

223 The plaintiffs also contend that the last three lines of cl 6.1(a) favour the plaintiffs' construction. In my view, they are consistent with the plaintiffs' construction, but far from determinative of it. This is because, in essence, that part of the clause provides a machinery provision for the timing of the Earnout Payment by reference to when the 'Buyer' [EMR6B] receives the proceeds (or its part of the proceeds) resulting in the Reported Multiple being realised. In this regard, I agree with and accept the contentions of the Sellers.

224 The plaintiffs also submit that any uncertainty or inconsistency regarding the basis upon which the Earnout Payment was payable is assisted by cl 6.2(b). As set out above, that clause relevantly provides an acknowledgement that 'payment of the Earnout Payment is contingent on, and the amount of the Earnout Payment reasonably relates to, the economic performance of the Shares'. I note that cl 6.2(b) is not entirely clear, referring only to the 'Shares' (ie the Lighthouse shares with a 3.5 per cent interest in CCH), and not all of the shares in CCH or the shares in the CC Group (which included CCH and CCPL).

225 Counsel for the Sellers contended that the sale of 50 per cent of EMR6B's shares in CCH might not include the Lighthouse shares, with the result that an Earnout Payment may be payable because of the definition of a Liquidity Event. However, those proceeds of sale would have nothing to do with the performance of the Shares themselves. While this submission may be technically correct, nevertheless I accept that there was a relationship between the performance of the Shares, and the performance of the Capricorn Copper mine and/or CCH/CCPL generally, with the result that cl 6.2(b) supports, to a limited degree, the plaintiffs' construction.

226 However, I am not satisfied that any of the three aspects to cl 6.1(a), on their own or in conjunction with the other aspects of cl 6.1 relied upon by the plaintiffs, lead to the construction of cl 6.1(a) contended for by the plaintiffs, in light of the deliberate and expansive definitions adopted by the parties. Further, as I set out below, the plaintiffs did not address how their construction of cl 6.1(a) works with other aspects of cl 6.1.

227 As noted above, the plaintiffs contend that application of these definitions created an uncommercial outcome in the facts of this case, which cannot have been the commercial intention of the parties. I refer to the caution with which the court ought approach such submissions referred to in [187] above. In this context, the plaintiffs submit that the Court ought not have regard to the various drafts of the 2018 SSA. Nevertheless, the plaintiffs submit that the Court should infer from the changes made in relation to the Earnout Payment - as altered from the Terms Sheet to the 2018 SSA - that the terms 'Affiliate' and 'EMR Investors' were included to ensure that the Sellers' entitlement to realise any value earned from their indirect investment in CCH was not stymied by unforeseen changes in the ultimate ownership of CCH, once that investment left the Sellers' control. Whilst the Sellers appeared to agree that this was so, they also submit, in substance, that the Court should not infer that it was the only intended purpose of those changes. The Sellers submit that the parties adduced only very limited evidence on the commercial factors which may have been considered by the parties in reaching agreement on the terms of the 2018 SSA.

228 Objectively viewed, from the perspective of a reasonable businessperson, I am unable to infer that the only intended purpose of the above definitions was to avoid EMR6B stymying the Sellers' entitlement to the Earnout Payment by unforeseen changes in the ownership of CCH shares. This is based upon the nature and extent of the related definitions adopted in the 2018 SSA; relevantly, for the purposes of cl 6.1(a) - EMR Shareholder, Affiliate, EMR Investors, the CC Group, and Liquidity Event - in the context of cl 6.1(a) as a whole, as set out in [217] and [222]. This is in circumstances where I accept the Sellers' submission that the parties adduced limited evidence regarding the commercial factors considered in reaching agreement on the terms of the 2018 SSA. Accepting that 'a' purpose of these definitions was to prevent unforeseen changes to the CCH share ownership, and the potential impact of such changes on the Sellers' entitlement to the Earnout Payment, the words chosen by the parties in the 2018 SSA also had the objective consequence (unintended or otherwise) of expanding the returns from assets of other entities (beyond EMR6B) that could be considered in determining whether the Earnout Payment was payable.

229 Consistent with the authorities set out in section 7.5.1 above, there are limits to the Court's ability to alter the objective meaning of words used or text chosen to further an attributed commercial purpose (ie that the Earnout Payment was only referable to the Capricorn Copper assets), or to avoid an asserted uncommercial outcome by reason of those words.

230 I reiterate that whatever the objective intention of the parties at the time of the Terms Sheet, it is not clear that the same objective intention existed at the time of the 2018 SSA in light of the definitions agreed to by the parties, with the assistance of their lawyers, for the purposes of cl 6 of the 2018 SSA.

231 In this context, it was not suggested by the plaintiffs that the definitions chosen by the parties in the 2018 SSA could not apply in other circumstances or that in those circumstances the result would be uncommercial. Indeed, it seems that the need to read down 'EMR Investors' only arises because of the IPO, which merged the assets of the Golden Grove mine and the Redhill project with those of 29Metals, to which the Capricorn Copper mine had been transferred by reason of the Restructure.

232 In reaching this view, I have not had regard to the various drafts of the 2018 SSA set out above, and referred to in the attachment to the Sellers' written closing submissions. Nevertheless, I wish to record that if I had taken them into account, they would have confirmed the view that I have reached. In substance, this is because I consider of the changes between the terms of cl 6 in the first draft SSA and the second draft SSA set out in [55] to [58] above, and which were accepted by the plaintiffs, disclose a change to the definitions in cl 6.1(a) by deleting the substance of the relevant Terms Sheet relating to the contingency payment, and replacing it with a series of definitions that expanded the relevant interests and returns to be taken into account. In my view that amounts to an objective background fact that a relevant change was made to include definitions not previously included. I would only that add that these drafts of the 2018 SSA may fall within the exception referred t[57]by Mason J in Codelfa.57 However, as I have said, in reaching my view as to the proper construction of cl 6.1(a) I have not taken the various drafts of the 2018 SSA into account.

233 Further, I have not had any regard to the course of negotiations relied upon by the parties, namely the alternative terms sheet, the draft terms sheet referred to in [162(b)] or the 15 September 2018 email exchange referred to in [151(b)]. In my view, these documents provide no assistance in the determination of the EMR Investors construction issue. In my view, these documents are not sufficiently clear to disclose the relevant genesis of the contract, its commercial purpose or other objective surrounding circumstances.

234 In all these circumstances, I am not satisfied that the plaintiffs' construction of the EMR Investors construction issue ought be adopted. The plaintiffs' construction is inconsistent with the defined terms deliberately chosen by the parties for the purposes of cl 6.1, and used particularly in cll 6.1(a), (c) and (d). I reiterate that these inconsistencies have arisen because of the breadth of defined terms adopted by the parties throughout cl 6.1, in the course of negotiating the terms of the 2018 SSA which go well beyond those used in the Terms Sheet.

235 Finally, I have considered whether I should apply the principles of rectification by construction in these circumstances, notwithstanding that these principles were not relied upon by the plaintiff. In short, I am not satisfied that a court would do so in circumstances where the plaintiffs did not contend that the court should, including where the plaintiffs did not contend for any relevant 'mistake'. In any event, as is clear from these reasons, I am not satisfied it is 'self-evident' what the objective intention of the parties is to be taken to have been.

236 For completeness, I have also considered whether other parts of cl 6.1 might support the plaintiffs' construction of cl 6.1(a). There is a clear connection between cll 6.1(a), (c) and (d). Most relevantly, cl 6.1(d) provides that the Buyer [EMR6B] must pay the Earnout Payment if the cl 6.1(c) valuation, less certain costs, plus 'any returns to the EMR Investors generated by Liquidity Events that have occurred prior to the [End Date] is equal to or more than 2 times the Invested Capital'. In this respect, cl 6.1(d) mirrors the language and terms in cl 6.1(a). In [18] of their reply submissions, the plaintiffs submit that the words 'plus any returns to EMR Investors', in cl 6.1(d), should be read consistently with cll 6.1(a) and 6.2(b), so as to require only 'those returns generated by the economic performance of the Shares, being the returns to EMR6B'. I understood the plaintiffs to interpret EMR Investors in cl 6.1(d) in the same way as they seek it to be construed in cl 6.1(a).

237 Clause 6.1(c) provides that an independent valuation will be commissioned of the 'then present value of the aggregate of the Buyer [EMR6B] and its Affiliate's interest in the CC Group as at that time in accordance with the procedure set out in Attachment 4'.[58] These definitions are also used in and/or are relevant to cl 6.1(a). As noted above, the parties accept that the Affiliates of EMR6B include Fund 0, the limited partners of Fund II, and EMR4B. On its face, cl 6.1(c) appears inconsistent with the plaintiffs' construction of cl 6.1(a) as it refers to the value of the aggregate of the interests of EMR6B and its Affiliates in the CC Group (which in this case would include the non-CCH assets, being all assets held by 29Metals).

238 I am conscious that Attachment 4, which contains the valuation procedure, provides for the valuer to conduct a 'valuation of the present value of the Buyer's interest in the CC Group'. However, this aspect of Attachment 4 is itself inconsistent with the words used in cl 6.1(c), which refers to 'the Buyer and its Affiliate's interest in the CC Group' which in this case would include the non-CCH assets, being all assets held by 29Metals.[59] In all these circumstances, I do not consider that Attachment 4 is of assistance to the plaintiffs' construction of cl 6.1(a).

239 Turning then to another issue of construction under cl 6.1(a), consistent with my comments above in [226], I consider that on the proper construction of cl 6.1(a), the Earnout Payment was not payable until the date upon which EMR6B, as the Buyer, received the proceeds or its part of the proceeds that resulted in the target return being met. Further, in my view, it is clear that 'its Invested Capital' in cl 6.1(a) means the Buyer's Invested Capital; that is, based on the definition of Invested Capital which refers only to amounts paid by the Buyer.

240 As noted above, there is uncertainty or ambiguity in relation to this aspect of cl 6.1(a). However, I consider that the plaintiffs' construction of the cash returns construction issue is correct. This is because the clause refers to the aggregate of all 'cash returns paid or available to be paid'. The focus of this clause is the cash returns, 'paid or available to be paid'. Shares are not cash, and the owner of those shares does not have cash returns 'available to be paid', as the market value given to those shares has not yet been realised.

241 I do not accept the Sellers' submissions that it is both logical and commercial to have regard to the 'value' of these shares for the purpose of this part of the clause, given that they were in a listed public company. If the parties had intended that the value of shares held, but not sold as part of the IPO, were intended to be included, then they could have expressly provided for this in cl 6.1(a), and also provided for how the value of those shares was to be ascertained. They did not do so. Rather, the parties provided for the 'aggregate of all cash returns paid or available to be paid'.

242 In any event, the Sellers failed to identify how the 'value' of those held shares was to be ascertained; ie whether it was a notional 'theoretical value' or a market value. This is relevant because, depending upon the number of shares available for purchase, the market price of those shares may vary in circumstances where the true value of shares is based upon the price at which they trade in the marketplace. This issue was not addressed in evidence or submissions.

243 As discussed above, in undertaking this analysis, I have not had any regard to the course of the negotiations and draft agreements between the parties for the reasons set out above. Most relevantly, I have not had regard to the comments included in the fourth draft 2018 SSA referred to in [157] above. However, recourse to the relevant negotiations, in particular the drafts of the 2018 SSA, would not have led me to a different result. As set out above:

(a) clause 6.1(a) of the first draft SSA prepared by Clayton Utz referred to 'the cash returns available to be paid to Fund 1 investors';

(b) in the second draft SSA, Allen & Overy deleted those words and replaced them with 'the aggregate of all returns paid or available to be paid to EMR Investors'; and

(c) in the third draft SSA, Clayton Utz reinserted the reference to cash by referring to 'the aggregate of all cash returns paid or available to be paid to EMR Investors ...'.

244 Thus it appears that, on the face of it, there was a deliberate and objective decision to include the 'cash returns paid or available to be paid', which I have interpreted according to its natural and ordinary meaning in cl 6.1(a), in its context.

245 As a result of my conclusion set out in section 7.6, the answers to the questions raised in issue 2 are as follows:

(a) Issue 2(1) - In light of the Restructure and IPO, yes.

(b) Issue 2(2) - No, only cash returns.

(c) Issue 2(3) - Yes, only EMR6B's share of the proceeds.

246 As noted in section 2, issue 1 raises questions of law and of fact. It is also related to issue 3. As a result, I will address the answer to issue 1 later in these reasons.

247 The issues discussed in this section are as follows:

1. Properly construed, did clause 5.1(c)(ii)(A) of the Share Mortgage require EMR6B to pay an amount equal to the Earnout Payment into an escrow account prior to completion of the CCH Share Sale and Purchase Agreement on 7 June 2021?
2. In considering Question 3:

(1) Was the Earnout Payment part of the Secured Money regardless of whether the Earnout Payment was 'any Secured Money that would reasonably foreseeably be owing in future' as at 7 June 2021?

(2) If not, then

(a) what is the proper meaning of the words 'any Secured Money that would reasonably foreseeably be owing in future';

248 Before addressing the parties' submission, it is appropriate to set out cl 5.1(c)(ii) of the Share Mortgage:

(c) (No sale etc) sell, convey, assign, transfer, lease, licence or otherwise dispose of, part with possession of, make any bailment, or grant any option over or create or permit to exist any other interest in any part of the Collateral (each a Relevant Transaction), unless:

...

(ii) the Relevant Transaction is reasonably required to facilitate a Liquidity Event, provided that, prior to completion of the Relevant Transaction:

1. the Grantor has paid an amount equal to the Secured Money (including any Secured Money that would reasonably foreseeably be owing in future) into an escrow account located in Australia with an escrow bank acceptable to the Agent (acting reasonably); [which I will refer to as the escrow clause]
2. the Grantor, the Secured Parties and the relevant escrow bank have entered into escrow or similar arrangements providing for the release of the funds in the escrow account to the Secured Parties immediately upon completion of the Relevant Transaction, in form and substance satisfactory to the Agent (acting reasonably); [which I will refer to as the release clause] and
   1. The Secured Parties have the benefit of a duly perfected Security Interest over the escrow account pursuant to a security agreement in form and subject satisfactory to the Agent (acting reasonably).

249 For convenience, I will refer to the words '(including any Secured Money that would reasonably foreseeably be owing in future)' in the escrow clause as the 'parenthesised words'.

250 In summary, the plaintiffs submit that the escrow clause did not require EMR6B to pay into escrow an amount equal to the Earnout Amount because:

(a) the Share Mortgage does not operate to displace the 2018 SSA's exclusive role in determining the circumstances in which the Earnout Payment was payable; alternatively, if the 2018 SSA does not play an exclusive role in determining when the Earnout Payment is payable, the Share Mortgage must be read in conjunction with and subject to the 2018 SSA;

(b) as at 7 June 2021, the Earnout Payment was not 'Secured Money (including any Secured Money that would reasonably foreseeably be owing in future)':

(a) because, as defined, 'Secured Money' is limited to money that was owing at the relevant time, as confirmed by the parenthesised words in the escrow clause;

(b) because:

(i) the parenthesised words are a reference to the Secured Money that would be payable as an immediate result of the Liquidity Event for which the Relevant Transaction was required;

(ii) if (i) is incorrect, the Earnout Payment was not 'reasonably foreseeably' owing up to the End Date.

251 The relevant background facts relied upon by the plaintiffs in relation to the Share Mortgage are set out in [151].

252 The plaintiffs contend that the 2018 SSA had an exclusive role in determining when the Earnout Payment was payable, with the result that the Share Mortgage did not create payment obligations itself; or at least, not obligations significant enough, if they were not met, to constitute an Event of Default. The plaintiffs rely upon the following provisions of the 2018 SSA, most relevantly:

(a) the definition of the Purchase Price in cll 3.1, 3.2(e), and 3.7, which clarifies when the Earnout Payment would not be payable;

(b) clauses 3.2(d) and 3.3, which provide for acceleration of the upfront payment, upon the occurrence of a Liquidity Event, but not the Earnout Payment;

(c) clause 6.1(c), which recognises that the only means the Earnout Payment could otherwise become payable are those prescribed by cl 6.1; and

(d) clauses 6.2(a) and 6.2(b), which emphasise the contingent nature of the Earnout Payment. It is contingent upon the economic performance of the Shares, demonstrating the true nature of the Earnout Payment, and that it is governed by the regime contained in cl 6.

253 The plaintiffs also rely upon cl 6.1(a) of the Share Mortgage, which acknowledges the exclusive jurisdiction of the 2018 SSA, by providing for an Event of Default if a party does not 'pay any amount payable by it at or before the time and the due date and in accordance with the [2018 SSA]'. Whilst cll 4.1 and 12.1 of the Share Mortgage create payment obligations, they are procedural rather than substantive in nature, forming part of the boilerplate provisions for a security document.

254 Alternatively, if the 2018 SSA was not the sole source of the obligation to pay the Earnout Payment, the plaintiffs submit that it is necessary to read cll 5 and 10 of the Share Mortgage consistently with the 2018 SSA.

(a) the escrow clause and cl 10.6(B) of the Share Mortgage expressly create an obligation to pay into escrow 'an amount equal to the Secured Money', but not the Secured Money itself;

(b) because the obligation to pay the Secured Money from time to time remained governed by the 2018 SSA, the release clause and cl 10.6(B) provided a mechanism for release of the Collateral to facilitate a Liquidity Event. The plaintiffs contend that, without a Liquidity Event or Events, the shares (which I understand to include the Collateral) could not have generated the returns necessary to enliven the Earnout Payment under the 2018 SSA;

(c) to read these clauses in a manner that created independent obligations to pay the Secured Money, or to pay it in a manner inconsistent with the 2018 SSA, was to ignore the express words and context of both agreements, and the roles they played in the central single transaction facilitated by them.

(a) the 15 September 2018 email exchange, which was generated in the course of negotiating the terms of the 2018 SSA and the Share Mortgage, evidences that the parties considered or intended the escrow clause in cl 5.1(c)(ii)(A) as a 'circuit breaker', and not an independent right to payment in circumstances where the conditions for the Earnout Payment would not otherwise be triggered;

(b) the final form of the escrow provisions in cl 5.1(c)(ii) was a last-minute addition, introduced by Allen & Overy in the draft circulated at 1:40am on 17 September 2018, the date that the Share Mortgage was signed; and

(c) if the parties had intended by inclusion of this clause to change the economics of the 2018 SSA, as set out in the Terms Sheet, in the manner alleged by the defendants, such a significant change would have been the subject of commercial negotiations between the parties.

257 I pause to note, as set out above, that the Sellers objected to use of the correspondence referred to in sub-para (a) of the previous paragraph, on the basis that it was neither admissible nor of relevance to the construction of cl 5.1(c). The Sellers contend that there is insufficient evidence before the Court to infer or conclude that the parties did not engage in further negotiations, beyond the written exchanges that were in evidence for the purposes of this proceeding.

8.1.2 Plaintiffs' primary construction: Secured Money and the parenthesised words

258 I will consider the plaintiffs' submissions on the release clause before those on the escrow clause. For the purposes of this discussion, it is helpful to reproduce the definitions of 'Secured Money' and 'Obligations' from cl 1.1 of the Share Mortgage below:

Secured Money means all money the payment or repayment of which from time to time forms part of the Obligations.

Obligations means all the liabilities and obligations of the Grantor [EMR6B] to a Secured Party (whether alone or not) under or by reason of any Transaction Documents to which it is a party and includes any liabilities or obligations which:

(a) are liquidated or unliquidated;

(b) are present, prospective or contingent;

(c) arise from the making of any advance on or before the date of this mortgage or from any future advances;

(d) are in existence before or come into existence on or after the date of this mortgage and whether or not currently contemplated;

(e) relate to the payment of money or the performance or omission of any act;

(f) sound in damages only;

(g) accrue as a result of any Event of Default; or

(h) would exist but for an Event of Insolvency affecting any person;

(i) whether the Grantor [EMR6B] is liable or obligated solely, jointly or jointly and severally with another person;

(j) the circumstances in which a Secured Party comes to be owed each liability or obligation and in which each liability or obligation comes to be secured by this mortgage, including any assignment of any liability or obligation or of this mortgage; or

(k) the capacity in which the Grantor [EMR6B] and a Secured Party comes to owe or to be owed that liability or obligation.

259 At the outset, I note that the plaintiffs' preferred construction of the release clause is that it did not provide for payment of any funds from escrow to the Sellers on completion of the Relevant Transaction. This is notwithstanding use of the words - 'the release of the funds in the escrow account to the Secured Parties immediately upon completion of the Relevant Transaction' - in that clause. The plaintiffs submit that the ordinary word 'release' is different from the ordinary word 'payment'. They submit that the parties contemplated a separate payment obligation to which the funds 'released' from escrow would be applied by the Sellers.

260 The plaintiffs submit that the Earnout Payment did not constitute Secured Money as at 7 June 2021. This is because of the temporal limit in the definition of Secured Money in the Shared Mortgage ('all money the payment or repayment of which from time to time forms part of the Obligations'), which limits the definition of Obligations, including contingent liabilities. In oral closing submissions, counsel for the plaintiffs' agreed that the Earnout Payment fell within the Obligations as a liability that was contingent, but that it fell 'outside the scope of the [S]ecured [M]oney because of the reference to the words "from time to time"'. Counsel then submitted that the Earnout Payment '[fell] within Secured Moneys for so long as it [was] not contingent'; ie when the contingency was satisfied.[61]

261 The plaintiffs submit that the term 'Secured Money' is the operative definition that defines what money is secured by the Share Mortgage. As a result, the words 'from time to time' are in the definition of Secured Money, but not that of Obligations. The plaintiffs submit that the temporal limit is confirmed by, and makes sense of, the parenthesised words. This is because the words 'from time to time' give the parenthesised words work to do. In oral closing submissions, counsel for the plaintiffs explained that this meant 'if we want to engage in a relevant transaction, and it is not Secured Money, we may still have to pay money into escrow if it is reasonably foreseeably owing at that point'.[62]

262 In support of this construction, the plaintiffs rely upon cl 2.1 of the Share Mortgage, as the primary 'securing' clause. Clause 2.1 establishes that EMR6B provided the Collateral 'to secure the satisfaction of the Obligations and the payment of the Secured Money'. The plaintiffs submit that the separate references to Obligations and the Secured Money in this clause, both highlights the difference between these concepts, and reflects that Secured Money is a concept which changes from time to time; ie it does not include the Earnout Payment at all times.

263 Accordingly, the plaintiffs submit that, when determining the amount to be paid, it is necessary to include, at the relevant time, the Secured Money (ie that part of the Obligations owing at that time), and 'any Secured Money that would reasonably foreseeably be owing in future' (ie money that might become Secured Money).

264 Consequently, the plaintiffs dismiss the Sellers' contention that EMR6B's obligation to pay an amount equal to the Secured Money included an obligation to pay the contingent Earnout Payment because the definition of Obligations included 'contingent' liabilities. They submit that the Sellers' construction strains credulity. This is because it imposes an obligation to pay all money which might possibly have become due and payable under the 2018 SSA into escrow, notwithstanding that the Earnout Payment was not - and may never have become - payable under the 2018 SSA. They also submit that it had the effect of changing the character of the Earnout Payment from a contingent to an absolute payment obligation.

265 Relatedly, the plaintiffs submit that, if the Seller's construction is correct, it would result in a commercially nonsensical situation, where:

(a) EMR6B would have to pay an amount equal to the Earnout Payment into the escrow account for the Relevant Transaction, before receiving any realised cash proceeds, and in circumstances where the Earnout Payment was not reasonably foreseeable payable;

(b) the amount paid into escrow would be released or paid to the Sellers immediately following the IPO, despite the Reported Multiple not having been achieved at that time; and

(c) if at the End Date, the Earnout Payment had not in fact become due and payable, EMR6B would have to a bring claim for monies had and received: such a claim after the End Date was liable to be defeated by a 'change of position' defence with the result the amount paid could not be recovered.

266 As a result of these matters, the plaintiffs' principal construction of the escrow clause is that the words 'Secured Money (including any Secured Money that would reasonably foreseeably be owing in future)' refer to the Secured Money that would be payable as an immediate result, or 'direct consequence', of the Liquidity Event for which the Relevant Transaction is required; ie 'the horizon for reasonable foreseeability is the Liquidity Event in question'.[63]

267 Understood in this way, the plaintiffs submit that the release from escrow required by the release clause is uncontroversial: if the Relevant Transaction was to lead to a Liquidity Event, which resulted in EMR6B obtaining the target return, then the Earnout Payment would be paid into an escrow account to be released immediately upon completion of the Relevant Transaction. However, if it was not reasonably foreseeable that the Liquidity Event would generate the target return, then no funds needed to be paid into the escrow account save relevantly for the Tranche 4 payment.

268 The plaintiffs acknowledge that, as a consequence of their construction, the obligation to pay any outstanding Secured Money would be unsecured after the Relevant Transaction occurred and by reason of which Collateral was released. However, the plaintiffs submit that there was nothing inherently uncommercial about this consequence for three reasons, namely:

(a) such a release would only be required to facilitate a Liquidity Event that involved either the disposal of 90 per cent or more of EMR6B's entire shareholding of CCH shares, or in the case of a progressive sell down, the disposal of the final 10 per cent of EMR6B's interest in the CCH shares. The plaintiffs submit that, if the Sellers wished to remain secured at all times until the End Date, they could have negotiated for the Collateral to be replaced with a cash security in an escrow account until the End Date;

(b) EMR6B would not be able to sell the CCH Shares to a third party (other than to a subsidiary, such as 29Metals), whilst the Sellers held the Collateral as security. It was necessary that the security was capable of being released, in order for EMR6B to be able to participate in a Liquidity Event and generate cash returns; and

(c) EMR6B entered into the Share Mortgage (including cl 5.1(c)(ii)(A)), which was designed in part to enable it to exit its investment, and it needed to have a means of releasing the Collateral, without necessarily having to pay an Earnout Payment which had not and might never become payable.

269 Alternatively, if the escrow clause requires consideration of all Secured Money that would reasonably foreseeably be payable beyond the Liquidity Event for which the Collateral is required, the plaintiffs agree that the parenthesised words require an objective standard by reference to what was relevantly known by EMR6B at the time (ie 7 June 2021). But they contend that this requirement would need to be markedly higher than the standard applied in negligence cases (ie real and not far-fetched) as submit by the Seller. This was for three reasons:

(a) to ensure consistency with the exclusive/paramount role of the 2018 SSA;

(b) given that reasonable foreseeability is inherently less certain for events in the more distant future, it would be difficult to ascertain, at the relevant time, the cash proceeds of any such events, and whether the target return would be realised; and

(c) the Earnout Payment might be released, even though the target return had not, and might never, in fact, be realised; ie there was no provision for repayment or discount.

270 As a result, the plaintiffs submit that the requirement imposed by the parenthesised words meant, in the context of the escrow clause, a 'serious possibility' or 'real danger' of the amount being owing in the future, thus drawing an analogy from the law of contract relating to expectation damages. Further, the plaintiffs contend that the longer it was necessary to look into the future, the higher the degree of satisfaction required to attain the reasonable foreseeably standard; ie 'something significantly more likely than a possibility'.

271 By way of introduction, the Sellers submit that the purpose of the Share Mortgage extended to 'secure ... payment of the Secured Money', relying on cl 2.1 of the Share Mortgage, with the result that its purpose was not limited to 'secur[ing] the performance of EMR6B's obligations under the 2018 SSA'.[64]

272 As to their construction of the escrow clause, the Sellers submit, as at 7 June 2021:

(a) the Earnout Payment fell within the definition of Obligations, and thus Secured Money, for the purposes of the escrow clause;

(b) alternatively, if the parenthesised words apply in some way, the Earnout Payment was Secured Money that 'would reasonably foreseeably be owing in future', as it was a liability that was 'owing'.

8.2.1 Response to the plaintiffs' construction

273 At the outset, the Sellers dispute that the 2018 SSA was intended to be the exclusive repository of the Sellers' rights in relation to the Earnout Payment. This is because cl 6.1(a) of the Share Mortgage (being failure to pay an amount payable under the 2018 SSA) is not the only Event of Default under the Share Mortgage. Further under cl 6.1(b) an Event of Default includes a breach of any written undertaking given at any time to the Secured Parties which would include the undertakings in cl 5 of the Share Mortgage, regarding additional undertakings concerning the Collateral.

274 The Sellers submit that, bearing in mind the purpose of the Share Mortgage, the reference to 'contingent' liability in the definition of Obligations must include the existing contingent obligation of EMR6B to pay the Earnout Payment which, as at 7 June 2021, might arise as a liability to pay the sum of AUD$12.5 million, depending upon the occurrence of a triggering event, as envisaged by cl 6.1 of the 2018 SSA.

275 As to the words 'from time to time' in the definition of Secured Money (cl 1.1), the Sellers agree that they import a temporal limitation into the definition of Obligations. But they submit that the Earnout Payment was (obviously) owing as a contingent liability between the date of executing the 2018 SSA and the date of the fifth anniversary valuation of that execution, pursuant to cll 6.1(c) and (d) of the 2018 SSA, and subject to the fulfilment of the contingency. The Sellers emphasise that, contrary to the plaintiffs' assertion, their position is not 'that all possible contingent payments under the 2018 SSA fell within the definition of 'Secured Money' (and particularly not Secured Money "owing")'.[65]

276 The Sellers submit that, if that is not correct, the parenthesised words do not qualify EMR6B's primary obligation to pay the Secured Money into an escrow account. This is because, under cl 1.2(k) of the Share Mortgage, '"includes" in any form is not a word of limitation'. The Sellers also rely upon use of the word, 'including', in various clauses of the 2018 SSA and the Share Mortgage; eg the definition of Collateral in cll 1.1 and 15.1(b)(i) of the Share Mortgage, and in cll 4.1, 8.7, and sch 3 of the 2018 SSA.

277 The Sellers contend that their construction makes commercial sense and is consistent with the purpose of the Share Mortgage. This is because the requirement to provide alternative security for the amount of the Earnout Payment, which might become payable in future, and which was, until the outcome was known, secured by Collateral as a precondition to dealing with the Collateral, is entirely consistent with the usual commercial practice of secured creditors. By way of contrast, the Sellers contend that the plaintiffs' construction destroys the benefit of the Sellers' existing security in the Collateral. The Sellers submit that Mr Chomley accepted this in his evidence.

278 First, the Sellers note that, on their construction, the escrow clause required the plaintiffs to pay the Earnout Payment into an escrow account, before completing the Restructure, and before any IPO. In this context, the Sellers note that it was not uncommercial for the parties to agree that the price payable by EMR6B for obtaining the benefit of the release of Collateral, in order to facilitate a Relevant Transaction without the Agent's consent, would include crystallisation of EMR6B's contingent liability to pay the Earnout Payment to the Sellers into an actual liability to pay the equivalent of the Earnout Payment. The Sellers acknowledge that their construction has the effect of converting the contingent liability (which was secured) into a present liability (now payable, upon release of the security). They reiterate that this is the 'price' for the Relevant Transaction to occur without the Sellers' consent.

279 Second, the Sellers note the plaintiffs' submission that the IPO was a near certainty. On this basis, they submit that payment of an amount equal to the Earnout Payment into escrow, prior to the Relevant Transaction, was not impractical or uncertain. This is in circumstances where the Relevant Transaction (ie the Restructure) was a consequence of EMR6B's commercial objectives. Further, they submit that, if the Restructure (which in substance involved transfer of the Capricorn Copper assets to 29Metals) had occurred immediately after the IPO (as with the Golden Grove and Redhill assets), EMR6B would not have been confronted with the allegedly nonsensical position of being exposed to pay the Earnout Payment before the Liquidity Event.

280 Third, the Sellers submit that, if the parenthesised words limit operation of the defined term 'Secured Money', they would not, in any case, operate to exclude the Earnout Payment from the amount required to be paid into escrow. This is due to use of the word 'owing', rather than 'payable' or 'due' in the parenthesised words ie 'including any Secured Money that would reasonably foreseeably be owing in future'. The Sellers submit that, from the time of the 2018 SSA, the Earnout Payment was an 'existing contingent liability, which was already owing due to the operation of cll 3 (Purchase Price) and 6 (Earnout Payment) of the 2018 SSA, 'albeit that the obligation to pay was imperfect until a contingency "within its purview" was satisfied'.[66] Thus, the question of whether the Earnout Payment would reasonably foreseeably be owing in future does not arise.

281 In support of the distinction between 'owing', and 'payable' or 'due', the Sellers refer to use of these words (or derivatives of them) in the Transaction Documents (see, eg cll 6.2(a), 9.1(d), 10.2, and 11.7(a)(ii) of the Share Mortgage, and cl 6.2 of the 2018 SSA). The Sellers submit that choosing to use 'owing' in the parenthesised words was significant. They rely upon the decision of M Osborne J in Pacreef Investments Pty Ltd v GTW Investments (Aust) Pty Ltd and Another ('Pacreef'),[67] to the effect that, 'owe' and 'owing' do not indicate whether or not the time for payment has arisen; rather, they merely indicate the existence of a debt. By contrast, the word 'payable' means that the time for payment has arrived.

282 I note, in passing, the Sellers' submit that their construction does not deprive the parenthesised words from having any work to do as those words might apply to other situations; for example, an award of damages based on an unliquidated claim will only become 'owing' upon judgment of a court of competent jurisdiction, or at the earliest, accrual of the relevant cause of action.

283 Fourth, as to the assessment required by the use of the words 'reasonably foreseeably' in the parenthesised words (the assessment requirement), the Sellers contend that these words raise issues concerning the prescribed standard, and from whose perspective that requirement is to be assessed. As to the standard, the Sellers submit that the words do not mean 'more likely than not', but rather carry the familiar meaning when used by lawyers in a negligence context in the sense of a 'real and not far-fetched possibility'. They note that the plaintiffs' submissions on the assessment requirement are premised on whether the Earnout Payment was within the reasonable contemplation of the parties, and not whether the Earnout Payment was 'reasonably foreseeably owing in future' in accordance with the escrow clause.

284 Further and relatedly, the Sellers submit that the inherent difficulty in assessing future events strengthens their construction that the Earnout Payment falls within the definition of Secured Money for the purpose of the escrow clause. In any event, the Sellers submit that, given these difficulties, the assessment requirement would be satisfied if reaching the target return was not reasonably unforeseeable.

285 As to perspective, the Sellers submit that it would be peculiar if the assessment requirement only involved consideration from the perspective of one of the contracting parties, namely EMR6B. They note that the first prospectus was issued on the same day as the Restructure. As such, in this case, the assessment requirement must be assessed by having regard to the prospect that there were two alternative future hypotheticals commencing on 7 June 2021. The first, if the IPO succeeded; the second, if the IPO did not. The Sellers submit that, for them to succeed, the Court need only be satisfied that it was reasonably foreseeable that one of those hypotheticals might result in the Earnout Payment being payable in future. In contrast, the Sellers submit that, for the plaintiffs to succeed, they had to establish that it was not reasonably foreseeable, either in the event that the IPO was successful, or in the event that it was not.

286 As to the plaintiffs' submission that the Sellers' construction would lead to the prospect of double recovery in respect of the Earnout Payment or its equivalent, the Sellers submit that the plaintiffs would not be entitled to a 'clawback' or 'double recovery' in circumstances where an amount equal to the Earnout Payment had been released to the Sellers under the release clause. They submit that the release clause was intended to discharge the plaintiffs' obligation to pay the Purchase Price (including the Earnout Payment).

287 Finally, while submitting it is unnecessary to decide for the purpose of the questions before the Court, the Sellers dispute the plaintiffs' submission that the release clause does not include a provision for payment out of the money in the escrow account. They submit that, under the escrow clause, EMR6B had an obligation to pay the Secured Money into escrow; and under the release clause, the escrow agent was obliged to release the funds in that account to the Sellers at the time of the Relevant Transaction. The Sellers submit that no proper distinction can be made between EMR6B's obligation to 'pay' and the 'release' of funds paid to the Sellers by the escrow agent.

288 As to the Sellers' submission relating to the word 'owing' in the parenthesised words, while the plaintiffs accept that the word 'owing' means 'under an obligation to (re)pay', the plaintiffs contend that any distinction between 'owing' and 'payable' is unnecessary in the context of this clause. Rather, the plaintiffs contend that the meaning of the word 'owing' is consistent with their construction of Secured Money, which imports a temporal limitation into the nature of Obligations, and affects what might form part of the Secured Money. In any event, the plaintiffs submit that, because the target return required by cl 6.1(a) was never satisfied, the Earnout Payment could never have been said to be 'owing', and therefore did not form part of the Secured Money_._

289 As to the Sellers' submission that the escrow clause provided a mechanism for alternative security to be given, while the plaintiffs agree that alternative security is the usual practice when one form of security is surrendered, the escrow clause is not expressed in such terms. Further, in response to the Sellers' contention that the escrow clause was the 'price' payable to deal with the Collateral, the plaintiffs contend that this is unsupported by the text of the clause, is inconsistent with the role of the Share Mortgage in the transaction, and leads 'inexorably' to the prospect of double recovery.

290 Finally, the plaintiffs submit that the Sellers' interpretation is inconsistent with the commercial intention of the parties, as evidenced in the Terms Sheet, which refers to contingent payment of the Earnout Payment and the realisation of a Liquidity Event. The reference to security in the Terms Sheet did not affect this obligation_._

291 First, the Share Mortgage must be considered in the context of the 2018 SSA, given that:

(a) the Share Mortgage forms part of the Transaction Documents, as defined in cl 1.1 of the 2018 SSA; and

(b) under cl 1.3 of the Share Mortgage, unless otherwise defined, the expressions in the Share Mortgage have the meaning given to them in the 2018 SSA.

292 As a result, the background facts and context relevant to the 2018 SSA are also relevant to the Share Mortgage and its construction. I will address the submission that the 2018 SSA played an exclusive role in determining whether the Earnout Payment was payable below.

293 Second, as to the objective commercial purpose of the Share Mortgage, at a high level, its purpose was to secure the obligations of EMR6B, including payment of the Purchase Price. This is consistent with cl 2.1 of the Share Mortgage, which provides that the Collateral is 'to secure the satisfaction of the Obligations [defined by reference to liabilities and obligations under the Transaction Documents] and the payment of the Secured Money'.

294 Third, and relatedly, at a high level, there was an objective commercial need to restrain EMR6B from dealing with the security (ie the Collateral) until satisfaction of EMR6B's obligations and payment of the Purchase Price. This is generally consistent with cl 5.1, headed 'Restrictions in relation to Collateral', the opening words of which provide a general restriction on EMR6B's ability to deal with the Collateral 'without the Agent's prior written consent or as expressly permitted in any other Transaction Document'. Further:

(a) clauses 5.1(a) and (b), respectively, restrict the creation of any encumbrance on the Collateral, and the exercise of any right or entitlement to the Collateral which prejudices the interest of the Sellers;

(b) clause 5.1(c) restricts the sale or disposal of any interest in the Collateral, subject to the exceptions which lie at the heart of the construction issues in this aspect of the proceeding; and

(c) clause 5.1(d) restricts EMR6B from engaging in any act or omission which might prejudice the Collateral in any way to the detriment of the Sellers.

295 Fourth, it was an objective background fact that the Capricorn Copper assets (or the shares in CCH or CCPL) owned by EMR6B and Fund 1 (and thus, the Fund 1 investors) might be sold or merged with the assets of other funds managed or 'Controlled' by EMR Capital in order to further the commercial objectives of EMR6B. This is inherent, in part, from the fact that the entitlement to an Earnout Payment during the term of the 2018 SSA was dependent upon the happening of a Liquidity Event (including an IPO) of the securities, or a disposal of the shares, in any member of the CC Group (which, as noted above, was widely defined but included at the time of the 2018 SSA, CCH or CCPL).

296 Fifth, and as a result, there was an objective need for an exception to the restrictions on EMR6B dealing with the Collateral, to allow the Collateral to be sold or merged for the purposes of a Liquidity Event. This is reflected in the terms of cl 5.1(c)(ii).

297 The plaintiffs submit that, it was an objective background fact known to both parties, that the plaintiffs' commercial purpose for entering the Share Mortgage in general, and cl 5.1(c) in particular, was to enable an exit to its investment at any time prior to the End Date. They contend that this could be inferred from the nature of the plaintiffs' business (being a private equity company), and also from language in the Terms Sheet to the effect that the Sellers should not be able to unreasonably prevent EMR6B from proceeding with a Liquidity Event. I am unable to accept this submission in such broad terms because I do not consider that the plaintiffs have established this as an objective background fact known to the Sellers. However, it was an objective background fact known to both parties that the End Date under the 2018 SSA generally corresponded with the termination of Fund 1. Indeed, the Sellers accepted that everyone knew in September 2018 that over the five-year life of the 2018 SSA, EMR6B might seek to sell some or all of its investment in Capricorn Copper, including by way of an IPO.

298 I will now turn to the language of cl 5.1(c), the relevant provisions of which are set out below. Before doing so, I wish to note that, given the subject matter of this clause of the Share Mortgage and cl 6.1 of the 2018 SSA, I consider it necessary to read the escrow clause in conjunction with the 2018 SSA, noting that the 2018 SSA is the primary document giving rise to the need for the Share Mortgage. As a result, I will construe the escrow clause having regard to the provision in the 2018 SSA relating to when the Earnout Payment becomes owing, namely, cl 6.1.

299 It is appropriate that I set out cll 5.1(c)(i) and (ii) to assist with the issues of construction raised by the parties:

5. Additional undertakings concerning the Collateral

5.1 Restrictions in relation to the Collateral

The Grantor [EMR6B] will not without the Agent's prior written consent or as expressly permitted in any other Transaction Document [being the 2018 SSA and the deed of release in respect of the management agreement]:

...

(c) (No sale etc) sell, convey, assign, transfer, lease, licence or otherwise dispose of, part with possession of, make any bailment, or grant any option over or create or permit to exist any other interest in any part of the Collateral (each a Relevant Transaction), unless:

(i) and until the Obligations are fully discharged and the Secured Money has been unconditionally and irrevocably paid and discharged in full and it is not reasonably foreseeable that any Secured Money could be owing in the future; or

(ii) the Relevant Transaction is reasonably required to facilitate a Liquidity Event, provided that, prior to completion of the Relevant Transaction:

1. [EMR6B] has paid an amount equal to the Secured Money (including any Secured Money that would reasonably foreseeably be owing in future) into an escrow account located in Australia with an escrow bank acceptable to the Agent (acting reasonably);
2. [EMR6B], the Secured Parties and the relevant escrow bank have entered into escrow or similar arrangements providing for the release of the funds in the escrow account to the Secured Parties immediately upon completion of the Relevant Transaction, in form and substance satisfactory to the Agent (acting reasonably); and
   1. the Secured Parties have the benefit of a duly perfected Security Interest over the escrow account pursuant to a security agreement in form and subject satisfactory to the Agent (acting reasonably);

300 Clause 5.1(c)(i) provides for an exception when the 'Obligations are fully discharged and the Secured Money has been unconditionally and irrevocably paid and discharged in full and it is not reasonably foreseeable that any Secured Money could be owing in the future'. I will return to the significance of this clause below.

301 If cl 5.1(c)(i) does not apply, cl 5.1(c)(ii) provides another exception in the event that dealing with the Collateral 'is reasonably required [by EMR6B] to facilitate a Liquidity Event'. I note that, prior to the End Date specified in the 2018 SSA, it is the occurrence of a Liquidity Event that triggers any entitlement to the Earnout Amount.

302 Further, cl 5.1(c)(ii) provides for what must be done by EMR6B to allow deployment of the Collateral to facilitate a Liquidity Event. Clause 5.1(c)(ii)(A) first provides for determination of the amount (if any) to be paid into an escrow account acceptable to the Agent, by way of security (ie the escrow clause). Clause 5.1(c)(ii)(B) then provides for 'release' of the funds held in the escrow account, 'immediately upon completion of the Relevant Transaction' (ie the release clause).

303 I will first address the meaning and significance of the release clause. In my view, on its proper construction, this clause is an exception to the continuation of security under the Share Mortgage, because it provides for 'release' of any funds paid into escrow pursuant to the escrow clause, in the event that the Collateral is required by EMR6B for a Liquidity Event.

304 In my view, and contrary to the submissions of the plaintiffs, the word 'release' is the equivalent of pay or pay over in this clause. I note that the word 'release' is both common and appropriate for the payment over of funds in the context of escrow agreements. In any event, the plaintiffs did not make clear what release means in this context, if not pay over. In their opening submissions, they submitted that it ought to be implied that the cash received is replacement security to be held by the Sellers and/or the Agent until, in effect, the Earnout Payment becomes payable. With respect, how or why such a significant yet unexpressed term arises, based upon the words used in the escrow clause, is far from clear. As a result, I also do not accept this submission.

305 Accordingly, by reason of the release clause, any funds paid into the escrow account pursuant to the escrow clause are not, in fact, provided as substitute security for the Collateral held to secure performance of the obligations under the primary agreement, as one would normally expect under such a security agreement. Rather, any funds in escrow are to be released or paid over to the Sellers 'immediately upon completion of the Relevant Transaction' to facilitate the Liquidity Event; ie at the time the Collateral is released to EMR6B to facilitate the Liquidity Event. Thus, cl 5.2(c)(ii) is not a clause that operates as a substitution of one kind of security for another in respect of the obligations under the 2018 SSA. In my view, this peculiar aspect is very relevant to the overall construction of that clause.

306 If the Earnout Payment forms part of the Secured Money, pursuant to the escrow clause, that sum will be released under the release clause for the purposes of the Relevant Transaction, whether or not the contingency required for the Earnout Payment under cl 6.1(a) of the 2018 SSA has been met. The plaintiffs submit that this uncommercial result could not be the objective commercial intention of the parties. By contrast, the Sellers submit that this was the commercial price for EMR6B being allowed to deal with the Collateral. Further, the Sellers submit that the consequence of the plaintiffs' construction, in this context, is that they will lose the benefit of their security, pursuant to a transaction entirely within EMR6B's control. In my view, both of these outcomes appear to create an uncommercial result when viewed from the perspective of the other party. It is in this context that the escrow clause must be construed.

'Secured Money (including any Secured Money that would reasonable foreseeably be owing in future)'

307 The escrow clause addresses the issue of whether any amount is to be paid into an escrow account for release of the Collateral to facilitate a Liquidity Event. As noted above, the escrow clause provides that EMR6B must pay into an escrow account 'an amount equal to the Secured Money (including any Secured Money that would reasonably foreseeably be owing in future)'; ie the parenthesised words.

308 In summary, whether or not the Earnout Payment falls within the definition of Secured Money in cl 1.1 of the Share Mortgage, the parenthesised words clarify the kind of Secured Money that is to be paid into the escrow account for the purposes of the escrow clause. That is, even if the definition of Secured Money includes contingent liabilities so as to include the Earnout Payment, the parenthesised words operate to clarify that only Secured Money that would be reasonably foreseeably owing must be paid into escrow, pursuant to the escrow clause. In reaching this view, I have taken the following matters into account.

309 First, only part of the Purchase Price was payable on completion or settlement of the sale under the 2018 SSA. At that time, three tranches of the Upfront Payment were prospective, and the Earnout Payment of AUD$12,500,00 was conditional (being payable on satisfaction of the target return under cll 6.1(a) or 6.1(d)). The amount of the contingent Earnout Payment was more than the combined total of the Upfront Payment of AUD$7,285,000. In my view, this was the most significant amount for the purposes of cl 5.1(c)(ii).

310 Second, the definition of Obligations under cl 1.1 of the Share Mortgage is very broad, referring to a range of obligations and liabilities, including but not limited to prospective and contingent liabilities. The definition of Secured Money is a subset of the Obligations, limited to 'all money the payment or repayment of which from time to time forms part of the Obligations'. In my view, the words 'from time to time' in the definition of Secured Money indicate a degree of fluidity as to time and when certain liabilities fell within that definition. Its precise meaning may vary, depending on the context in which it is used.

311 Third, particular clauses of the Share Mortgage impose clarification on the nature of the Secured Money, for the purposes of that clause: see cll 9.1(d), 10.2, and 5.1(c)(i). By way of example, cl 9.1 provides for the priority of payments received by the Sellers or any Receiver appointed by the Sellers. Clause 9.1(d) provides that such moneys will be applied 'in payment of the balance of the Secured Money then owing or contingently or prospectively owing, whether or not due and payable'. These words provide that moneys received are to be paid to extinguish contingent or prospective liabilities that form part of the Secured Money, such as the Earnout Payment. Clauses 10.2 and 5.1(c)(i) also seek to clarify or qualify the nature of the Secured Money for the purposes of each clause, with the added proviso that 'it is not reasonably foreseeable there could be any Secured Money owing in the future'.

312 These clauses emphasise that, under the Share Mortgage, depending upon the nature of the clause, the parties have sought to clarify and/or qualify the nature of the Secured Money for the purposes of a particular clause. In my view, the fact that the parties have adopted language to clarify or qualify the nature of Secured Money for the purposes of different clauses must be borne in mind when construing the escrow clause. Further, the escrow clause does not require the payment of the Secured Money into an escrow account, but 'an amount equal to the Secured Money (...)'.

313 Turning now to the escrow clause, it only makes reference to 'an amount equal to the Secured Money' followed by words '(including any Secured Money that would reasonable foreseeably be owing in future)' ie the parenthesised words. First, it does not make reference to the Obligations, as cl 5.1(c)(i) does. Second, the words 'an amount equal to the Secured Money', followed by the parenthesised words, highlight to an objective reader the kind of 'Secured Money' sought to be identified for the purposes of the escrow clause.

314 Viewed objectively, I consider that the parties have adopted language of clarification, or qualification, to identify the kind of Secured Money to be paid into escrow for the purposes of cl 5.1(c)(ii), where the need to deal with the Collateral is to facilitate a Liquidity Event.

315 I reject the Sellers' contention that any construction of the parenthesised words which clarifies the nature of the Secured Money in a manner that ultimately reduces the scope of the amount to be paid into escrow, is impermissible in light of the definition of 'includes' in cl 1.2(k) of the Share Mortgage (which states that it 'includes ... is not a word of limitation'. I reject this contention because I have concluded that the word 'including' in this context, in the words in parenthesis, is not a word of limitation but of clarification regarding the amount of money to be paid. This is in light of the definition of Secured Money and the nature of the obligation in cl 5.1(c)(ii), in the context of the payments (present, prospective, and contingent) under the 2018 SSA. As to cl 1.2(k), the chapeau of this clause provides that the specified interpretative principles apply 'unless the context indicates a contrary intention'. To the extent that it is relevant, I consider that there is a contrary intention in the escrow clause.

316 As a result, and read as a whole, the parenthesised words in the escrow clause qualify the kind of Secured Money that is to be paid into the escrow account. In my view, this qualification applies whether or not Secured Money includes contingent liabilities. That is to say, in my view, the parenthesised words reinforce that it was not the objective intention that any contingent liability (such as the Earnout Payment) was always to form part of the Secured Money for the purposes of the escrow clause, with the result that the amount paid into escrow had to include the Earnout Amount and was then released absolutely under the release clause. Rather, it was necessary to undertake an assessment as to whether the contingent liability 'would reasonably foreseeably be owing in future'. In my view, this construction accords with the context of cl 5.1, and the words used by the parties in that clause. It also accords with commercial common sense.

317 For completeness, I do not accept the Sellers' submission that the Earnout Payment was 'owing' at 7 June 2021, having regard to the distinction between 'owing' and 'payable'. In my view, the decision of M Osborne J in Pacreef is of little assistance in determining the meaning of the parenthesised words. On my reading of that judgment, the distinction drawn between 'owing' and 'payable' did not concern contingent liabilities. Further, as M Osborne J recognises in that case, the particular meaning of words used depends on the context in which they appear: it is not helpful to adopt the construction of the same or similar phrases in other contracts or statutory provisions, and to then apply them generally.[68]

318 Finally, to the extent that it is relevant, I am not convinced that a contingent payment such as the Earnout Payment falls within the general definition of Secured Money under the Share Mortgage. This view is based upon the distinction between the defined terms 'Obligations' and 'Secured Money' in the securing clause of cl 2.1 of the Share Mortgage. In my view, as noted above, Secured Money is a subset of Obligations, namely 'all money the payment or repayment of which from time to time forms part of the Obligations'. As I have set out above, reference to the words 'payment' and 'from time to time' in the definition of Secured Money creates a degree of fluidity which limits the scope of the kinds of Obligations intended to be included, notwithstanding the more expansive definition of Obligations which includes contingent liabilities. In the event that I am wrong, as set out above, I have concluded it is necessary to construe Secured Money in the context of the escrow clause and the parenthesised words, which have the effect of clarifying the amount to be paid into the escrow account, when the liability or obligations are relevantly prospective or contingent.

The nature of the assessment required by the parenthesised words

319 I do not accept the plaintiffs' submission that it is only necessary to have regard to the immediate result of the Liquidity Event to which the Relevant Transaction relates. There is no mandate for such a temporal limitation in the language used by the parties in the Share Mortgage. The clause is not drafted in that way, rather, it is directed to what would 'reasonably foreseeably be owing in future'. In my view, the use of the words 'in future' is significant. It was open to the parties to choose words limiting consideration to the relevant Liquidity Event facilitated by the Relevant Transaction: they did not do so. Rather, the language adopted by parties suggests a broader enquiry, beyond the immediate result of the Liquidity Event, which was facilitated by the Relevant Transaction, and regarding which the Collateral is required to be released. This is in a context where the End Date was 17 September 2023 and there was a possibility of further Liquidity Events before that time which could be aggregated for the purposes of cl 6.1(a), quite apart from any consideration of cll 6.1(c) and (d).

320 In this context, the breadth of the definition of Liquidity Event is significant: it reveals that a variety of different happenings can constitute a Liquidity Event, including a dividend or other distribution to any member of the CC Group, and a disposal of shares or assets in the CC Group.

321 In all these circumstances, the language used by the parties does not support a temporal limitation in the escrow clause, as suggested by the plaintiffs. I will deal with the consequences of this for the purposes of the escrow clause later in this section.

322 I will now address the nature of the assessment requirement, in particular the requirement imposed by the words ' reasonably foreseeably'.

323 For my part, I have not been assisted by analogy on the use of similar terminology in other areas of the law such as in the law of negligence or contractual damages. With respect, that is not the task of contractual construction. There is no suggestion that an ordinary business person, or these parties, were aware of the meaning attributed to this terminology in tort or contract law, let alone that they chose to adopt those meanings in the Share Mortgage. Rather, in order to interpret the words 'reasonably foreseeably owing in future' in this context of this clause, in my view, it is first of assistance to refer to the ordinary meaning of the words.

324 There are many definitions of the adjective 'foreseeable' but they relevantly include 'able to be foreseen or predicted'.[69] So too, the definitions of the adjective 'reasonable' include 'fair and sensible' and 'as much as is appropriate or fair'.[70] However, that is not the end of the matter. The task of contractual construction is to determine the meaning of the words in the context in which they are used. In that case, it is the context of cl 5.1(c) where, if the assessment is that no Earnout Payment is reasonably foreseeably owing in future, the result is that the Secured Party must release its security and be left without security for the other Obligations under the Share Mortgage, including if the Earnout Payment becomes payable.

325 I consider that use of the word 'reasonably' is relevant for two reasons. First, it goes to an objective test; ie an objective assessment is required to be undertaken by EMR6B (as the Grantor), but that assessment is not to be skewed by the interests of EMR6B. Rather, there is to be an objective assessment by a person with the same information as EMR6B. This is particularly so, given the consequences of an assessment that the Earnout Amount would not reasonably foreseeably be owing in future, by reason of the release clause.

326 Second, it goes to the quality of objectively assessing the predictability or foreseeability of the relevant payment - in this case, the Earnout Payment - becoming owing. That is to say, in my view, the notion of 'reasonably' foreseeable imposes a constraint on the nature of such predictions. Most relevantly, this affects the time with which such predictions can take place.

327 Common sense dictates that, in undertaking the assessment under the escrow clause, the more distant in time from the Relevant Transaction to the occurrence of the event that might give rise to cash return, the less confident an objective person will be about the occurrence of events or that the relevant targets will be reached. This is particularly so if the relevant event includes the End Date so that the relevant returns might be based cash returns form a Liquidity Event up to that time and/or the valuation at the End Date.

328 Nevertheless, I remain of the view that an objective person in the shoes of EMR6B, undertaking this exercise, could more readily form a view (and be more confident in that view) regarding the degree of predictability of a Liquidity Event and the cash returns in six to nine months, as opposed to forming a view about the degree of predictability of a Liquidity Event and the cash returns for a later period. However, it would be more difficult to form a view (or be as confident in any view formed) regarding the degree of predictability of any return closer to, or the amount of any valuation at, the End Date.

329 In this context, it is significant that the parties did not provide expert determination of whether the Secured Money would reasonably foreseeably be owing in future, as they could easily have done. In my view, this evinces an objective intention of the parties that a practical and business-like approach, rather than a precise or overly technical approach, was to be applied to the nature of the assessment requirement in the escrow clause. This is because of the number of variables that can make up such an assessment, in relation to copper and other mineral-related assets.

330 In all these circumstances, I consider that properly construed, the words 'reasonably foreseeably owing in future', in the escrow clause, mean more than possibly owing in future, but less than probably owing in future, for example, a fair or sensible possibility. Given the language used by the parties, in my view, it is difficult to be more precise as to the nature and scope of the reasonable foreseeability enquiry. It is an assessment undertaken at about the time of the Relevant Transaction, informed by the factual situation that exists at that time, and by predictions as to commodity prices, the AUD exchange rate, share prices, and a number of other variables. However, if the reasonably foreseeable return was close to but did not meet the target return, it may still be open to conclude that an Earnout Payment would reasonably foreseeably be owing in future given the number of variables.

331 It follows that I do not consider that the 2018 SSA had an exclusive role in determining whether the Earnout Payment or its equivalent was payable. Rather, as noted above, the escrow clause must be read in conjunction with and in light of the 2018 SSA. However, a Liquidity Event following on from a Relevant Transaction under cl 5.1(c) of the Share Mortgage may result in the target return being reached even if that was not reasonably foreseeable at the time of the Relevant Transaction. That would result in the Earnout Payment becoming payable under c 6.1(a) of the 2018 SSA.

332 As set out above, I am conscious that the effect of the construction of cl 5.1(c)(ii) adopted by me would mean that, if it was not determined at the relevant time that the Earnout Payment would reasonably foreseeably be owing in future, then there would be no security for that contingent payment for the rest of the Share Mortgage. The Sellers contend that this outcome is uncommercial. By contrast, the plaintiffs contend that any other outcome would be uncommercial, if it required payment of the contingent Earnout Payment before it actually became due and payable. With respect, resort to claims that the outcome is uncommercial, where cl 5.1(c)(ii) provides for release of that amount immediately upon the Relevant Transaction, are of little assistance. By reason of the release clause, either party is in a position to decry that the outcome is uncommercial. It is significant that neither party sought rectification of this clause to better accord with any subjective intention of the parties. This is where there was limited evidence as to the objective commercial purpose of this clause.

333 Consistent with my approach to the construction of cl 6.1(a) of the 2018 SSA, I have sought to construe the meaning of cl 5.1(c) primarily having regard to the words used in light of the objective background facts and the commercial purpose set out above in 8.6.1. As noted above, the release clause operates in a way which is unusual in the context of a security document. However, the amount of money to be released was to be decided in accordance with the escrow clause in the context of the release clause.

334 As a result, I would relevantly construe the escrow clause so that it provides, in substance, that there can be no dealing with the Collateral by means of a Relevant Transaction, unless that transaction is reasonably required to facilitate a Liquidity Event, if prior to completion of the Relevant Transaction:

[EMR6B] has paid an amount equal to the Secured Money (including any Earnout Payment that, objectively assessed by a person with the knowledge of EMR6B, would reasonably foreseeably be owing in future (ie a fair or sensible possibility to be owing in future, and not owing solely by reason of the relevant Liquidity Event) into an escrow account located in Australia with an escrow bank acceptable to the Agent (acting reasonably).

335 There is one final issue to address. A concern has been expressed that, if the escrow clause provides that EMR6B is required to pay the amount of the Earnout Payment (on the basis that it is a contingent payment which would reasonably foreseeably be owing in future), then the Sellers might claim another Earnout Payment if the conditions for liability are in fact met under cl 6.1(a) or cl 6.1(d) of the 2018 SSA. The plaintiffs submit that this fact should result in a more onerous standard, before it is concluded that any such contingent payment would be reasonably foreseeably owing. In short, I do not agree. This is because, in my view, it is very likely that a court would imply a term of the 2018 SSA to prevent double recovery of the Earnout Amount, given that the substance of it will have been paid under cl 5.1(c)(ii).

336 In reaching my view on the construction of cl 5.1(c)(ii), I have not had regard to the 15 September 2018 email exchange. In my view, this email exchange relates more to the subjective intention of the parties, reflecting their negotiating position from time to time. In any event, I am not satisfied that this exchange is sufficiently clear to disclose any such reason or purpose. As a result, I have not had regard to this email exchange in construing cl 5.1(c)(ii).

337 As a result of my conclusions set out in section 8.6, the answers to the questions raised in to issues 4(1), and 4(2)(a) are as follows:

(a) issue 4(1): Unnecessary to decide because whether the Earnout Payment forms part of the Secured Money, the parenthesised words clarify the amount to be paid under the escrow clause.

(c) issue 4(2)(a): Properly construed, the escrow clause requires the payment of the sum determined in accordance with [334] above.

338 Given that issue 3 raises questions of law and of fact, I will address the answer to issue 3 later in these reasons.

339 The issues discussed in this section, and as agreed between the parties, are as follows:

...

(b) as a matter of fact, immediately before completion of the CCH Share Sale and Purchase Agreement on 7 June 2021, was the Earnout Payment 'any Secured Money that would reasonably foreseeably be owing in future':

(i) if the IPO did not proceed?

(ii) if the IPO did proceed?

1. In considering Question 4(2)(b)(i), what were the reasonably foreseeable circumstances regarding:

(1) the occurrence of one or more Liquidity Events between 7 June 2021 and 17 September 2023 in respect of EMR6B's holding of 107,199,052 ordinary shares in 29Metals or in respect of 29Metals' 100% shareholding in CCH;

(2) the cash returns paid or available to be paid to EMR6B as a result of those Liquidity Events;

(3) the value of EMR6B's shareholding in 29Metals (if any) at 17 September 2023?

1. In considering Question 4(2)(b)(ii), what were the reasonably foreseeable circumstances regarding:

(1) the future sale by EMR6B of its 64,812,484 ordinary shares in 29Metals on or before 17 September 2023, and the price which would be realised on any sale;

(2) the value of EMR6B's shareholding in 29Metals (if any) at 17 September 2023?

9.1 Construction of cl 6.1(b): Calculation of the target return

340 Central to the determination of each of these issues is whether the 'aggregate of all cash returns paid or available to be paid as a result of the Liquidity Event' (and any relevant previous Liquidity Events) is equal to or more than 2 times the amount of EMR6B's Invested Capital immediately prior to the Liquidity Event (ie the target return).

341 For the purposes of this proceeding, the parties have agreed that EMR6B's Invested Capital was USD$138,475,236. EMR6B rounded this up to USD$138.5 million, and I will adopt this figure in these reasons. Under cl 6.1(a) of the 2018 SSA, it is necessary to double that sum to produce the target return, totalling USD$277 million. However, there was an issue between the parties as to whether, by reason of cl 6.1(b), it was necessary to add the Earnout Payment (AUD$12.5 million, which equates to approximately USD$9.37 million) to this sum, in order to determine the true target return.

342 While cl 6.1(b) of the 2018 SSA is set out above, it is useful to reproduce it here for the purposes of this discussion:

(b) If a Liquidity Event occurs and:

(i) a Reported Multiple is less than 2 times; and

(ii) but for the Earnout Payment, that Reported Multiple would have been equal to or more than 2 times,

then the Earnout Payment will be reduced by such amount as will result in the Reported Multiple, after accounting for the payment of the reduced Earnout Payment, equalling 2 times.

343 Based upon their construction of cl 6.1(b), the plaintiffs submit that the target return comprised '2 times' the amount of Invested Capital plus the Earnout Payment (USD$286.37 million) which, for convenience, I will round down to USD$286.3 million or AUD$381,830,000 based on a conversion rate of AUD$1:USD$0.75. For the reasons set out in [397] below, I will adopt this exchange rate as the appropriate rate as at the date of the relevant assessment in these reasons unless indicated to the contrary.

344 Based upon their construction of cl 6.1(b), the Sellers submit that part of the Earnout Payment would be payable, if the target amount was '2 times' the Invested Capital excluding the Earnout Payment. This is because the Sellers submit that they were entitled to a pro rata portion of the Earnout Payment, commencing once the Reported Multiple was USD$276,950,472 (which for convenience, I will round up to USD$277 million); and the 'full Earnout Payment' was payable, if the Reported Multiple was above USD$286.3 million, based upon cl 6.1(b) of the 2018 SSA.

345 In my view, cll 6.1(a) and 6.1(b) are far from clear as to whether the target amount ought include the Earnout Payment. Clause 6.1(a) suggests that no such addition is required, referring only to '2 times the amount of its Invested Capital'. Clause 6.1(b) suggests that this may not be correct, providing in substance that if, but for the Payment of the Earnout Amount, the Reported Multiple would have been at least equal to the target return.

346 Thus, both the plaintiffs and the Sellers are correct. That is to say, if the full Earnout Payment is to be paid, the relevant returns must reach a target return of at least USD$286.3 million. However, a proportion of the Earnout Payment is payable, once the relevant returns exceeds the target return of USD$277 million. It follows that the relevant returns needs to exceed USD$277 million for any part of the Earnout Amount to become owing under cl 6.1(a).

347 I note that cl 6.1(b) is expressed to apply 'if a Liquidity Event occurs'. It was not explained to me whether cl 6.1(b) also applies to the process under cll 6.1(c) and (d). For the purpose of these reasons, I will assume that it does.

348 In the context of cl 6.1(a) and cll 6.1(b) and (d), the calculation takes place in light of actual returns. It was not explained to me whether and how cl 6.1(b) applied in the context of the escrow clause. In the context of that clause, the issue is not whether a target return has been reached but whether, at the relevant time, that target return would reasonably foreseeably be reached in the future resulting an entitlement to the Earnout Payment. That assessment involves a degree of latitude and judgement and it is difficult to be precise. I refer to my comments above at [330]. Further, it is unclear whether the assessment requirement under the escrow clause would then require only part of the Earnout Payment to be paid into escrow. I acknowledge that this problem might be more theoretical then real.

349 In the absence of argument on these issues, I have determined that for the purpose of this proceeding I should adopt the target return of USD$286.3 million. This is primarily because the only claim made by the Sellers is for the full Earnout Amount, not some part of it.[71] Nevertheless, I will have regard to the Sellers' alternative target return of USD$277 million.

350 As noted above, there were three scenarios relevant to whether the Earnout Payment was payable. The outcome of the first and second scenarios depends upon the proper construction of the EMR Investors construction issue and the cash returns construction issue, as discussed at [185]-[199] above. For convenience I will refer to the construction I have adopted in relation to these issues as 'the proper construction'.

351 The 1st scenario is whether, as at 7 June 2021, the Earnout Payment was reasonably foreseeably owing within the meaning of the Share Mortgage, by reaching the target return on successful completion of the IPO, being a Liquidity Event: cl 6.1(a) of the 2018 SSA. Based upon proper construction of the EMR Investors construction issue and the cash returns construction issue, this only involves consideration of the returns from the sale of shares in 29Metals as a result of the IPO.

352 The 2nd scenario builds on the 1st scenario; ie whether, as at 7 June 2021, the Earnout Payment was reasonably foreseeably owing within the meaning of the Share Mortgage, assuming successful completion of the IPO, by reaching the target return at or before the 'End Date' of the 2018 SSA (17 September 2023): cl 6.1(c)-(d) of the 2018 SSA. This is relevant to issues 4(2)(b)(ii) and 6. In the 2nd scenario, it is necessary to have regard not only to the actual returns of the sale of shares in 29Metals in the IPO, as well as any returns from other Liquidity Events by the End Date, but also the 'valuation of the then present value of the aggregate of the Buyer and its Affiliate's interest in the CC Group', in accordance with cll 6.1(c) and (d).

353 The 3rd scenario is whether, as at 7 June 2021, the Earnout Payment was reasonably foreseeably owing within the meaning of the Share Mortgage, by reaching the target return at or before the End Date, in the event that the planned IPO did not successfully complete: cl 6.1(c)-(d) of the 2018 SSA. This is relevant to issues 4(2)(b)(i) and 5. The 3rd scenario involves consideration of any actual returns from Liquidity Events by the End Date (from 29Metals, whose only assets were the CCH assets), and also 'valuation of the then present value of the aggregate of the Buyer and its Affiliate's interest in the CC Group', in accordance with cll 6.1(c) and (d).

354 Before addressing each scenario, there are three matters to note. First, it was not in dispute that if it was reasonable foreseeable that the Earnout Payment would be owing in the future under any scenario, the obligation to pay that sum into the escrow account arose under the escrow clause. Second, as set out in section 2 above, Mr Chomley gave evidence in relation to each of the three scenarios, and expert evidence was led on the 3rd scenario.

355 Third, Mr Chomley's calculation in respect of the 1st and 2nd scenarios was premised on the plaintiffs' construction of the EMR Investors construction issue. This is because at the time Mr Chomley undertook his assessment, it appears that no party had suggested the proper construction of the EMR Investors construction issue which I have found. As a result, it has been necessary for me to analyse, based on the proper construction of the EMR Investors construction issue, the objective evidence to determine whether the Earnout Payment was reasonably foreseeably owing in future in accordance with cl 5.1(c)(ii) of the Share Mortgage, in respect of the 1st and 2nd scenarios. Nevertheless, and for completeness, I will also analyse the objective evidence based on the plaintiffs' construction of this issue. However, I will not analyse the objective evidence based on the plaintiffs' construction of the cash returns construction issue.

9.3 The 1****st scenario: Issue 4(2)(b)(ii)

9.3.1 Based on the proper construction of the EMR Investors construction issue

356 Based on the plaintiffs' construction of the EMR Investors construction issue, Mr Chomley expressed the view that it was not reasonably foreseeable, as at 7 June 2021, that an Earnout Payment would be payable as a result of the IPO and subsequent sell-down of the 29Metals shares by EMR6B on 5 July 2021. This is because the sell-down would only achieve a Reported Multiple return of x0.37 of the target return of USD$286.3 million. I wish to record that I accept Mr Chomley's general methodology in undertaking his assessment for the purpose of the 1st scenario. Mr Chomley identified the likely share price upon the IPO and applied that share price to assess the likely returns for the shares of EMR6B sold in 29Metals at the time of the IPO as against the target return.

357 Based on the proper construction of cl 6.1(a) of the 2018 SSA, I am satisfied that the cash returns received by the EMR entities from the IPO did not exceed the target return of USD$286.3 million or, alternatively, the Seller's target return of USD$277 million. Further, and more relevantly, based upon a proper construction of cl6.1(a) of the 2018 SSA, I am not satisfied that as at 7 June 2021 the Earnout Payment would be reasonably foreseeably owing in future as a consequence of the IPO ie that there was a fair or sensible possibility that the cash returns would exceed the target return of USD$286.3 million or, alternatively, the Sellers' target return of USD$277 million as a consequence of the IPO. This is for the following reasons.

358 First, the aggregate of cash returns paid or available to be paid to EMR Investors, as a consequence of the IPO, was USD$212,092,874.50. The calculation for each entity and/or fund is set out in the table below.

Value of 29Metals shares sold at IPO, based on listed share price[72]

Value of remaining 29Metals shares, based on listed share price[73]

359 Second, the parties appear to agree that, for the purposes of the cl 6.1(a) calculation, the aggregate of cash returns paid or available to be paid to EMR Investors must be less transaction costs. The total transaction costs payable to the joint lead managers was AUD$8,837,203 (USD$6,627,902.25). I note that Mr Chomley states that EMR6B's share of the transaction costs was AUD$2,649,161/USD$1,986,870.75, representing 29.98 per cent of the total transaction costs. However, given my construction of cl 6.1(a), the entire transaction costs must be taken from the aggregate. This was the approach taken by the Sellers in their written case.

360 On this basis, deducting transaction costs of USD$6,627,902.25 from the aggregate of cash returns at USD$212,092,874.50, results in a total of USD$205,464,972.25.

361 As a result, it is evident that the Earnout Payment would not have become payable as a consequence of the IPO, given that cash returns paid or available to be paid were USD$205,464,972.25, which is far below the target return of USD$286.3 million or, alternatively, the Seller's target return of USD$277 million.

362 As noted above, it was necessary for EMR6B to objectively consider whether the Earnout Payment would reasonably foreseeably (with a reasonable degree of predictability) be owing in the future. In the case of the 1st scenario, the relevant 'future' was the successful completion of the IPO on 5 July 2021. At the relevant date, it had been determined that the share price for 29Metals at the IPO would be AUD$2.00 per share, based on the IPO bookbuild process. Based on these calculations, it was not reasonably foreseeable, as at 7 June 2021, that the Earnout Payment would be owing at 5 July 2021 on occurrence of the IPO.

363 As is evident in making this assessment, I have adopted the general methodology of Mr Chomley in relation to the 1st scenario.

9.3.2 Based on the plaintiffs' construction of the EMR Investors construction issue

364 If I am wrong about the EMR Investors construction issue, I am not satisfied that as at 7 June 2021 the Earnout Payment would be reasonably foreseeably owing in future as a consequence of the IPO ie I am not satisfied that there was a fair or sensible possibility that the cash returns would exceed the target return of USD$286.3 million or, alternatively, the Sellers' target return of USD$277 million, as a consequence of the IPO.

365 Once again, at the relevant date, it had been determined that the share price for 29Metals at the IPO would be AUD$2.00 per share, based on the bookbuild process. Based on that likely share price, the cash returns paid or available to be paid to EMR Investors invested in EMR6B was USD$63,579,852 (less EMR6B's share of total transaction costs), which is far below the target return of USD$286.3 million or, alternatively, the Seller's target return of USD$277 million.

366 In addition to Mr Chomley's methodology relating to the 1st scenario, I accept his calculations based on the plaintiffs' construction of the EMR Investors construction issue. However, I note that his calculations, which are recorded in his witness statement, subtract AUD$13.5 million (representing the amount held pursuant to an Indemnity Deed) from the aggregate figure. It is not entirely clear to me why this deduction was made. This is in light of the fact that the only part of cl 6.1(a) of the 2018 SSA which may be relevant to any deduction is the words 'prior to the application of any Taxes payable, or otherwise withheld as a consequence of that Liquidity Event, by the EMR Investors' in that clause.

9.4 The 2****nd scenario: Issues 4(2)(b)(ii) and 6

9.4.1 Based on the proper construction of the EMR Investors construction issue

367 As noted above, the 2nd scenario is whether the target return, if not reached at the time of the IPO, would have been reached due to the occurrence of subsequent Liquidity Events on or before the End Date of 17 September 2023. This involves consideration of whether the Earnout Payment was reasonably foreseeably on or before the End Date.

368 Once again, Mr Chomley's calculations were premised on his view of the EMR Investors construction issue. I will comment on this further below. Nevertheless, it is appropriate to set out Mr Chomley's methodology, as I generally accept the methodology of Mr Chomley in relation to the 2nd scenario, albeit it is not based on the proper construction of the EMR Investors construction issue.

369 Mr Chomley formed the view, as at 7 June 2021, that no Earnout Payment (or any part of it) would be reasonably foreseeably 'owing in future'; ie in the period up to the End Date. He undertook the following analysis to reach this view:

(a) first, under the 2018 SSA, two times EMR6B's Invested Capital (including the Earnout Payment) was USD$286.3 million (ie the target return);

(b) second, upon completion of the IPO, EMR6B:

(i) received a realised return of USD$51,493,992[75] which represents the sell-down value of 42,386,568 of 29Metals shares, less EMR6B'S share of the transaction costs and the amount held back at settlement in the sum of AUD$13.5 million) (the realised EMR6B return);

(ii) continued to hold 64,812,484 shares in 29Metals (retained EMR6B stake, sometimes referred to as the Rump Shares) which, at the IPO listing price of AUD$2.00 per share, was valued at AUD$129.6 million (USD$97.3 million);

(c) third, for EMR6B to achieve the target return, the retained EMR6B stake would need to return USD$224.7 million at or prior to the End Date (the retained EMR6B stake return). That amount was calculated by taking the target return of USD$286.3 million and deducting USD$61.6 million (being the sum of the realised EMR6B return of USD$51,493,992 and the 'Held Amount' of AUD$13.5 million). This calculation was made on the assumption that there was no further investment by EMR6B;

(d) fourth, the retained EMR6B stake return of USD$224.7 million corresponds with an increase in value of the EMR6B retained stake, as at 7 June 2021, by at least 131 per cent, or a share price uplift to AUD$4.62 per share on certain assumptions; and

(e) fifth, the relevant benchmark performance over the two and a half years to early June 2021 (being the S&P/ASX 200, the S&P/ASX 300, and the S&P/ASX 200 Resources, from 1 November 2018 to 11 May 2021) was an increase in value of the shares between 33.1 per cent and 52.3 per cent.

370 In these circumstances, Mr Chomley considered it was not reasonably foreseeable that a 131 per cent uplift in the 29Metals' share price, which was required on his calculation to produce the retained EMR6B stake return of USD$224.7 million, would be achieved. I pause to note that the Sellers challenged many of the integers used by Mr Chomley in this analysis, including the appropriateness of his reliance on the relevant benchmark performance and on the high-end multiples in the May and June Investment Committee papers (Investment Committee papers), and his failure to factor in fluctuations in the copper price and/or the AUD to USD exchange rate. I will deal with these criticisms further below.

371 Notwithstanding these criticisms and my comments in fn 75, I consider that Mr Chomley's general approach to determining whether an Earnout Payment would be reasonably foreseeably owing in future, pursuant to cl 5.1(c)(ii) of the Share Mortgage, is a reasonable and appropriate methodology in the context of that clause, and of cl 6.1 of the 2018 SSA.

372 As a result, adopting Mr Chomley's general approach, and based on the proper construction of the EMR Investors construction issue, I find the following:

(a) first, the target return is calculated in the same way as [369(a)] above, resulting in a target return of USD$286.3 million;

(b) second, based on the calculations in the table at [358] above, upon completion of the IPO, the EMR Investors:

(i) received a realised return of USD$212,092,875, on the sale of 141,395,250 of 29Metals' shares at the IPO, from which transaction costs of USD$6,627,902.25 had to be deducted, totalling USD$205,464,972.75 (the realised EMR6B return);

(ii) continued to hold 216,204,742 shares in 29Metals (the retained EMR6B stake) which, at the IPO listing price of AUD$2.00 per share, were valued at AUD$432,409,500 (USD$324,307,125); and

(c) third, to achieve the target return by the End Date, the retained EMR6B stake would need to return USD$80,835,027.25 (calculated by taking the target return of USD$286.3 million and deducting the realised EMR6B return of USD$205,464,972.75).[76]

373 As a result, the sale of the retained EMR6B stake of EMR6B in 29Metals (64,812,484 shares being the retained EMR6B stake) would only need to be sold for USD$1.25 per share, at or before the End Date, to meet the target return (ie 64,812,484 x USD$1.25 = USD$81,015,605).

374 Adopting an exchange rate of AUD$1:USD$0.75 (chosen by Mr Chomley), a 29Metals share price of USD$1.25 per share would result in a share price of AUD$1.66 per share. By contrast, adopting the Sellers' exchange rate of AUD$1:USD$0.7763, a 29Metals share price of USD$1.25 per share would result in a share price of AUD$1.61 per share. Using either of the two exchange rate assumptions, it is evident that 29Metals could fall below the bookbuild share price of AUD$2.00 per 29Metals share and still meet the target return.

375 It is significant that , at the relevant time, the benchmarks referred to by Mr Chomley (being the S&P/ASX200, the S&P/ASX 300, and the S&P/ASX 200 Resources, from 1 November 2018 to 11 May 2021) indicated an increase in share price, in the previous two years of between 33.1 per cent and 52.3 per cent. I am conscious that there was some evidence, as at mid-2021, that the copper price was forecast to soften or decrease in 2025. However, at the relevant time, EMR6B had access to the Investment Committee papers, and other reports, which I will refer to below. The thrust of Investment Committee papers was that there may be an increase in the share price of 29Metals following the IPO.

376 In these circumstances, based upon a proper construction of cl 6.1(a) of the 2018 SSA, I am satisfied that, as at 7 June 2021, the Earnout Payment would reasonably foreseeably be owing in future. That is to say, I am satisfied that there was a fair or sensible possibility that the realised EMR6B return and the value of the retained EMR6B stake would exceed the target return of USD$286.3 million, or alternatively the Sellers' target return of USD$277 million, before or on the End Date. This is notwithstanding the limitations in predicting events and circumstances beyond six to nine months for any assessment under the escrow clause as set out above. It is important to note that in undertaking this analysis, I have considered the Earnout Payment would reasonably foreseeably be owing in future only having regard to the value of the retained EMR6B stake ie without taking into account any other returns to EMR6B or the EMR Investors from other Liquidity Events.

377 Further, I have not had regard the value of the interests of EMR6B (or its Affiliates)[77] in the CC Group, which are to be aggregated pursuant to express words of cl 6.1(c). Nor have I has regard to any returns to the EMR Investors from any Liquidity Event up to the End Date, consistent with cl 6.1(d). Taking any such returns into account, I am satisfied to a higher degree of satisfaction that, as at 7 June 2021, an Earnout Payment would reasonably foreseeably be owing in future.

9.4.2 Based on the plaintiffs' construction of the EMR Investors construction issue

378 As noted earlier, the Sellers challenge Mr Chomley's opinion, set out at [370] above, that it was not reasonably foreseeable that the Earnout Payment would be owing in the period up to and including the End Date.

379 In summary, the Sellers contend that, in addition to the cash returns to EMR6B from the IPO (of USD$63,755,880),[78] it was reasonably foreseeable as at 7 June 2021 that the value of the retained EMR6B stake (64,812,484 in 29Metals) might increase to USD$213,194,591 (based on a target return of USD$277 million at any time during the period between 5 July 2021 and 17 September 2023), such that the Earnout Payment would become payable. For the reasons that follow in this section, I am not so satisfied.

380 There are two contentions that I wish to address at the outset.

381 First, the Sellers submit that the actual share price at which 29Metals traded, after the IPO, was wholly irrelevant as the proper enquiry related to assessing share price movement up until the End Date. I accept that this is so. This is because the assessment under the escrow clause was to consider the reasonable foreseeability of share price movements between the IPO and the End Date.

382 Second, the Sellers submit that Mr Chomley's view was irrelevant, because the test under cl 5.1(c)(ii) was objective; and to the extent that EMR6B's knowledge is relevant to that assessment, the knowledge should be that of the Investment Committee. This is in circumstances where there is no evidence that Mr Chomley received a formal delegation or request from the board of EMR6B or the Investment Committee to make the relevant assessment on behalf of EMR6B. Nor was he a director of EMR6B, a member of the Investment Committee at the time, or someone who executed the CCH SSPA.

383 I do not accept that the relevant knowledge should be that of the Investment Committee, and that Mr Chomley was not the authorised person to undertake the relevant assessment. This is for a number of reasons.

(a) First, the Share Mortgage is relevantly between the Secured Parties and EMR6B, and cl 5.1(c)(ii) relates to the obligations imposed on EMR6B as Grantor;

(b) Second, there is no express or implied reference to the Investment Committee in that clause; and

(c) Third, as set out above, I consider that there must be an objective assessment by someone with the knowledge of EMR6B to assess whether the Earnout Payment was reasonably foreseeably owing in the future. This would include, amongst other things, reference to the Investment Committee papers. Other documents available to EMR6B could also be relevant, notwithstanding that they were not available to the Investment Committee.

384 Further, in my view, it is not relevant that Mr Chomley did not receive any formal delegation to make the assessment on its behalf. He was tasked to undertake this assessment by EMR6B. The question is whether his assessment was in accordance with the escrow clause.

385 I will now deal with the Sellers' contentions that Mr Chomley's analysis was flawed for a number of reasons.

386 The Sellers made broad ranging assertions in their submissions to the effect that it was reasonably foreseeable as at 7 June 2021 that the price per share of the retained EMR6B stake would reach the target return on or before the End Date. This was in light of:

(a) the 'blue sky' valuation in the Credit Suisse report provided to the Investment Committee;

(b) the significant fluctuations in the share prices of companies comparable to 29Metals, namely Aeris Resources Ltd ('Aeris') and Sandfire Resources Ltd ('Sandfire');

(c) fluctuations in AUD/USD exchange rates in the two years prior to 7 June 2021;

(d) likely copper price fluctuations; and

(e) the range of possible movements in other operating costs (the Sellers referred to oil prices, gas prices, labour costs, and inflation generally).

387 In short, I am not satisfied that the Sellers have established that it was reasonably foreseeable as at 7 June 2021 that these factors, individually or in combination, would have the effect that the target return at or before the End Date would be achieved; namely, that it was reasonably foreseeable that a further sum of USD$213,194,591 or thereabouts would be obtained by EMR6B from dividends and/or for its interest in 29Metals, with the consequence that the Earnout Payment would become payable. I will now deal with these matters in turn.

388 Whilst it is true that there are fluctuations in share prices, copper prices, exchange rates, and operating costs, the Sellers failed to explain why it was reasonably foreseeable as at 7 June 2021 that the effect of any or all of these factors would be that the price per share of the retained EMR6B stake would reach the amount necessary for the target return to be achieved. This is in the absence of expert evidence to explain why this is so. With respect, it appeared that the Sellers' submission was based upon 'possible' outcomes. But as I have explained, that is not the test under the escrow clause.

389 In this context, as noted in [327] above, in undertaking the assessment under the escrow clause, the more distant in time from the Relevant Transaction to the occurrence of the event that might give rise to cash return, the less confidence an objective person will have about the occurrence of events or that the relevant targets will be reached. Relevantly, for these purposes, the assessment is on 7 June 2021 having regard to relevant returns on a Liquidity Event and/or any valuation at or before the End Date.

390 Further, regarding the particular challenges to Mr Chomley's analysis, the Sellers contend that Mr Chomley:

(a) erroneously sought to compare the reasonably foreseeable future price movements of shares in 29Metals with ASX indices (rather than comparable companies like Aeris and Sandfire);

(b) applied an AUD:USD exchange rate of $0.75, which was lower than the rate of $0.7763, which was the actual exchange rate that applied on 7 June 2021 (and of $0.7724 which the Investment Committee had before them on 4 June 2021 which was also before the Investment Committee as a long-term forecast), and that he failed to take into account the possibility of fluctuations;

(c) failed to take into account information before EMR6B and/or the Investment Committee; and

(d) erroneously considered that the lowest figure required to be triggered for any portion of the Earnout Payment to become payable was USD$286.3 million (when it would be triggered by USD$277 million).

391 On this basis, the Sellers say that Mr Chomley's belief that the 'Rump Shares' (ie the retained EMR6B stake) needed to trade at AUD$4.62 per share was incorrect. Applying a fixed exchange rate of $0.776, and reducing the target return by AUD$12.5 million, the retained EMR6B stake/Rump Shares need only have traded at $4.24 for a portion of the Earnout Payment to become payable.

392 As to the assertion that Mr Chomley erroneously had regard to the ASX indices, the Sellers submit that he erroneously sought to compare the reasonably foreseeable future price movement of shares in 29Metals with indices on the ASX, rather than the price movement of shares in comparable companies like:

(a) Aeris whose share price had improved by 139 per cent over the two years ending 7 June 2021; or

(b) Sandfire, whose share price had fluctuated by more than 100 per cent in the two years to 7 June 2021.

393 These submissions were made in a context where Mr Chomley gave evidence that, whilst he was 'not sure' whether there was comparable trading company to 29Metals was, he thought that it might include Sandfire and Aeris. However, he went on to give evidence to the effect that, it was not simply a matter of taking one such company's share price, and that the Sellers could 'throw ... share prices at [him] all day', but that one needed to look at the reasons behind the share price.[79] This was consistent with the evidence of Mr Audcent who, in a slightly different context, gave evidence that it is difficult to draw meaningful conclusions from reasonably comparable companies in the absence of detailed analysis to determine the circumstances which impacted the share price.

394 Further, the plaintiffs highlight that the share price increases for Aeris and Sandfire occurred during a period when the copper price rallied 72 per cent, from USD$2.64/lb (in July 2019) to a near all-time high of USD$4.54/lb (in mid-2021). The copper price was forecast by AME (as recorded in the Prospectus) to gradually soften to USD$3.49/lb in 2025. The point-in-time selected by the defendants for comparison of Aeris and Sandfire coincided with this dramatic copper price increase. In a slightly earlier 2.5 year window (12 June 2018 to 20 December 2020), those stocks declined by 45.4 per cent and 43.6 per cent respectively. The plaintiffs submit that a peer set of only two companies is simply too small to draw a meaningful comparison. Finally, the mere fact that there are two or more individual companies with comparator data does not invalidate any reasonable foreseeability assessment made without reference to them.

395 I agree with these submissions of the plaintiffs. In my view, in undertaking the assessment under the escrow clause, it was not erroneous, unreasonable, or inappropriate not to have regard to the share price fluctuations of Aeris and Sandfire, as submit by the Sellers. I am far from satisfied that the past performance of these two companies was a basis upon which to draw a meaningful comparison with 29Metals. In this regard, I accept the evidence of Mr Chomley and Mr Audcent referred to in [393] above. Further, in my view, in undertaking that assessment, it was reasonable and appropriate to have regard to the S&P/ASX indices, in particular the S&P/ASX 200 Resources index, to forecast the future share prices of 29Metals. I refer to my comments above as to the nature of the assessment under the escrow clause.

396 I pause to note that, in the 19 May 2021 letter, the Sellers also contend that Mr Chomley should have had regard to Oz Minerals, which had a market capitalisation of AUD$8.2 billion, and a reported EBITDA of AUD$606 million for 2020. Mr Chomley gave evidence, which I accept, that Oz Minerals was not a comparable trading company to 29Metals.

397 As to choice of exchange rate, the plaintiffs concede that while Mr Chomley's assessment proceeded on a AUD$1:USD$0.75 exchange rate which was expressed to be the rate used in the EMR price deck, the rate in the EMR price deck was in fact AUD$1:USD$0.76. However, the plaintiffs note that Credit Suisse report used the rate that Mr Chomley used (AUD$1:USD$0.75) and this was in range adopted by the Deloitte Relative Valuation report. Further, although Mr Chomley agreed in his evidence that the exchange rate can fluctuate, in my view, it was reasonable and appropriate for him to adopt the future assumption of a rate of AUD$1:USD$0.75. It reflects the higher end AUD:USD price forecasts or assumptions of Deloitte to the end of 2023, and the long-term assumption of the AUD:USD price forecast in the Credit Suisse report. As a result, I am not satisfied that, in selecting this assumption, Mr Chomley acted erroneously or unreasonably. Rather, I consider that the rate Mr Chomley chose was reasonable in all these circumstances.

398 As to the information available to EMR6B and/or the Investment Committee, the Sellers rely upon four documents referred to in section 6.2 above which they submit are relevant to determining what EMR6B knew as at 7 June 2021; namely, the Deloitte Relative Valuation report, the Credit Suisse report, the May Investment Committee paper, and the June Investment Committee paper.

399 The Sellers submit that share trading at the higher end of the ranges referred to in these documents , at any point between July 2021 and September 2023, would have rendered the Earnout Payment payable. In response, the plaintiffs submit that the Sellers were cherry picking the highest end of the ranges in some of the expert reports, and of the ranges in the Investment Committee papers, which would not meet the test under the escrow clause (ie was it reasonably foreseeable that the Earnout Payment would be owing in future?).

Deloitte Relative Valuation report and Credit Suisse report

400 I shall first address the Deloitte Relative Valuation report and the Credit Suisse report.

401 The Deloitte Relative Valuation report provided an enterprise value for the assets of 29Metals (the Capricorn Copper Mine, the Golden Grove mine, and the Redhill project), on various difference copper prices as follows:

(a) AUD$1,043 million (USD$811 million) based on Consensus Economics' April 2021 copper price forecast, with an enterprise value in May 2021 of the Capricorn Copper mine at USD$251.7million representing 31.1 per cent of the total enterprise value;

(b) AUD$1,298 million (USD$1,009 million) based on EMR Capital's own April 2021 copper forecast, with an enterprise value of the Capricorn Copper mine at USD$333.2 million representing 33.0 per cent of the total enterprise value;

(c) AUD$1,681 million (USD$1,306 million) based on AME's April 2021 copper price forecast, with an enterprise value of the Capricorn Copper mine at USD$373.7 million 28.6 per cent of the total enterprise value; and

(d) AUD$2,637 million (USD$2,049 million) based on the April 2021 spot copper price, with an enterprise value of the Capricorn Copper mine at USD$674.8 million representing 32.9 per cent of the total enterprise value.

402 The Credit Suisse report also provided an enterprise value range for all of 29Metals' assets (the Capricorn Copper mine, the Golden Grove mine, and the Redhill project) of between AUD$1,081 million to AUD$1,461 million. This was based on Capricorn Copper and Golden Grove's respective Life of Mine models, and Credit Suisse's commodity price forecasts. On the basis that Capricorn Copper constituted approximately 31-32 per cent of 29Metals, Credit Suisse provided a base case valuation of Capricorn Copper between AUD$328 million and AUD$444 million. The Credit Suisse report also contained a 'blue sky' enterprise value of 29Metals (ie a 'plausible, not extreme, upside scenario') at between AUD$1,582 million and AUD$2,104 million.

403 Mr Chomley was not taken to the Deloitte Relative Valuation report or the Credit Suisse report, although he acknowledged having read the Deloitte Evaluation Report. The plaintiffs submit that these two valuations were enterprise valuations, and not equity valuations (which would take into account relevant debt), with the result that the enterprise valuations were not the appropriate valuation methodology to consider. I generally agree. The Sellers did not explain the effect of debt on these enterprise valuations or how the target return would be achieved if the debts were taken into account.

404 Further, as to the Deloitte Relative Valuation report, it expressly states that 'the focus of this analysis has been on the ratio of enterprise values or relative value of Capricorn Copper, Redhill mine and Golden Grove, rather than the outcome in terms of absolute values of the investments'. This emphasises the limitations of relying upon the Deloitte Relative Valuation report in considering the value of the individual assets, relevantly the Capricorn Copper mine.

405 As to the Credit Suisse report, the base case valuation appears to be premised on an assumed mined inventory of '1.85 x Reserve and ~0.4 x Total Reserve'. I am unsure of the basis for this assumption. Further, I generally agree with the plaintiffs that the 'blue sky' valuation (which builds on the base case valuation) is not of real assistance to the Sellers. This is primarily due to the assumptions adopted in the 'blue sky' valuation, namely a commodity price increase of 15 per cent from 2022 onwards, a '2 year mine life extension' for the Capricorn Copper mine, and a '5 year mine life extension' for the Golden Grove mine. I am not satisfied that there was a proper basis for these assumptions in light of the assessment requirement in the escrow clause.

406 I will now deal with the Investment Committee papers.

407 As noted above, the May Investment Committee paper indicated an equity value range for 29Metals (based upon the reports of several expert brokers) of AUD$1,081 million to AUD$3,170 million. The Investment Committee adopted the low and high of the lower end of the expert brokers' valuation range, being AUD$1,081 million to AUD$1,529 million.

408 The May Investment Committee paper also noted a potential future share price range for the 29Metals shares (assuming no exchange rate fluctuation). Most relevantly, based upon the equity value of AUD$1,081 million, there was a potential future share price fluctuation of between -26 per cent and 238 per cent, and -34 per cent and 309 per cent. In addition, based upon the equity value of AUD$1,529 million, there was a potential future share fluctuation of between -48 per cent and 136 per cent, and -54 per cent and 186 per cent. This was based on a wide range of potential EV/EBITDA[80] and P/NAV[81] multiples applied to the EMR Capital consensus price deck for copper, and the spot price for copper, with the spot price of copper producing the highest end of the range.

409 Further, the June Investment Committee paper informed the Investment Committee that the enterprise value at listing for 29Metals was AUD$1,050 million (USD$811 million), with an equity value of AUD$961 million (USD$742 million), resulting in an AUD price per share of $2.00. The June Investment Committee paper noted that the Investment Committee was to approve a valuation allocation range as between the assets of 29Metals, of between 29.1 per cent and 33 per cent for Capricorn Copper; the report recommended choosing a midpoint in the range of 31 per cent, resulting in an enterprise value for the Capricorn Copper mine of USD$251.41 million (31 per cent of USD$811 million).

410 Based upon the enterprise value of AUD$1,050 million, the June Investment Committee paper noted a potential future share price range of the Rump Shares, which were forecast to trade at the End Date in late 2023, of between -24 per cent and 248 per cent or -32 per cent and 322 per cent of their listing value. Once again, this was based on the wide range of potential EV/EBITDA and P/NAV multiples applied, relevantly, to the EMR consensus price and the spot price for copper, as set out in [408] above.

411 It is necessary at this stage to say something further about the valuation methodology employed in the Investment Committee papers. As indicated above, the trading forecast for the 29Metals shares was based upon the application of 'peer group multiples' (being EV/EBITDA and P/NAV multiples) to the price of copper. The Investment Committee papers use a range of 0.6-1.2x for P/NAV and 3.0-9.0x for EV/EBITDA. The papers explain that the 'wide range in EV/EBITDA and P/NAV ranges are shown as a proxy for the many possible commodity price and operational scenarios'.

412 It is the lower end of the forecast share price in the Investment Committee papers which is based upon the peer group multiples applied to the EMR price deck consensus price for copper. In the papers, the higher end of the range for the forecast share price of 29Metals shares was produced by applying the same peer group multiples to the spot price of copper. Once again, the Sellers submit that share trading at the higher end of the ranges outlined in the Investment Committee papers, at any point between July 2021 and September 2023, would have rendered the Earnout Payment payable.

413 The Sellers challenged Mr Chomley on why he did not have regard to the higher end of the forecast share price range in the Investment Committee papers, submitting that these ranges were relevant to the reasonable foreseeability of possible increases in 29Metals shares.

414 In his witness statement, Mr Chomley gave evidence that, in undertaking his analysis of whether the Earnout Payment would reasonably foreseeably be owing in future, he did not have regard to the ranges in the Investment Committee papers. He noted that the ranges were based on returns to EMR6B that were theoretically possible, rather than the ranges that were reasonably foreseeable. In particular, Mr Chomley stated that the high end of the ranges in the Investment Committee papers was based on a combination of high-end EBITDA multiples and the application of spot pricing (as set out in the Spot Price Deck in Appendix B of the May Investment Committee paper, and Appendix A of the June Investment Committee paper). Mr Chomley said that, in his experience, consensus pricing - and not spot pricing - is used to value mining investments. This is because, as spot pricing fluctuates daily, the market values a business based upon expected returns in the future, which is based on the consensus view of forecast commodity prices. In addition, he notes that the Investment Committee papers considered the possible returns to Fund 1 based on the investments of both EMR6B and EMR4B. As a result, he did not consider these ranges to be aligned to the task that he was performing under the escrow clause.

415 In his witness statement, Mr Chomley also gave evidence that the use of consensus pricing to value 29Metals, rather than spot pricing, was well illustrated by the fact that the market valued 29Metals at an enterprise value of AUD$1,050 million at the IPO date. This was below, but far closer, to the low end of the 'Broker Enterprise Values' of AUD$1,081 million in the May Investment Committee paper, which was based on consensus pricing, compared to the enterprise value of AUD$3,170 million in the May Investment Committee paper, which was based on spot pricing.[82]

416 Further, in his oral evidence, Mr Chomley gave evidence to the effect that he considered the returns (or 'multiple on money') produced when 'peer group multiples' (P/NAV and EV/EBITDA) were applied against the spot pricing as 'misleading'. When pressed on why this was so, he gave evidence that the chosen multiples for the P/NAV case (being 0.6x to 1.2x) were based on brokers or analysts using consensus pricing, rather than spot pricing. However, as noted above, both the Investment Committee papers applied this multiple to the spot price, as of 14 May, which was USD$4.73/lb. He said the returns based on spot pricing were too high. For example, in the May Investment Committee paper, Mr Chomley suggested that the maximum return range for the P/NAV should have been 1.5x. This was the maximum return range when the EMR consensus price deck was applied to the chosen P/NAV multiples.

417 Mr Chomley gave evidence that, if you were attempting to value the business based on the spot price, you would use different figures for the P/NAV and EV/EBITDA multiples in the Investment Committee papers. He was not asked what the different multiples might be.

418 He conceded that he did not point this out at the May and June Investment Committee meetings, notwithstanding that he would expect to inform the Investment Committee of any relevant inaccuracies in the material before the Committee. Rather, he gave evidence, in substance, that the members of the Investment Committee had significant mining and investment experience, with the result that they would not need any such explanation. Mr Chomley gave further evidence that he had never seen EMR6B make an investment decision based on spot pricing; rather, such decisions were based on consensus pricing (like the EMR price deck).

419 Further, Mr Chomley gave evidence that CCH was in such financial trouble heading into the IPO that the Investment Committee prioritised getting out of financial difficulty, and protecting EMR Capital's investment in CCH (including by paying out its lenders), rather than being concerned with the multiples to be achieved and expecting significant returns. As a result, he did not think that informing the Investment Committee of his views would 'influence their decision on that day'.[83]

420 I accept Mr Chomley's evidence in relation to the appropriateness of considering the high-end ranges in the Investment Committee papers, resulting from the application of spot pricing to the selected peer group multiples. Mr Chomley's evidence that consensus pricing, and not spot pricing, is used to value mining investments was generally consistent with the evidence of Mr Dawson and Ms Wright. Further, I do not think that his failure to express concerns regarding the reliability of the high-end ranges to the Investment Committee undermines his credibility in light of the reasons given by him.

421 In this context, I am conscious that these higher ranges were contained in the Investment Committee papers. However, on the evidence before me, Mr Chomley's evidence as to the nature of ranges produced on multiples of money, based on spot pricing, seems plausible and consistent with the other expert evidence. The Sellers also explicitly rejected the proposition that any decision be made using spot price multiples. In these circumstances, I am not satisfied that it was erroneous, unreasonable, or inappropriate for Mr Chomley to disregard these higher ranges, in undertaking the assessment under the escrow clause. To the extent that the Sellers submit the higher ranges in the Investment Committee papers contain 'possible' future increases in 29Metals' shares, that is not the task prescribed by the escrow clause.

422 Further, the Investment Committee papers considered the possible returns to Fund 1, based on the investments of both EMR6B and EMR4B (the latter being the Redhill owner) and, accordingly, the analysis in those papers was not fully aligned with the analysis that Mr Chomley was undertaking, being solely related to EMR6B.

423 In all these circumstances, I generally accept the evidence of Mr Chomley in his assessment of the 2nd scenario, and I reject the Sellers' contentions that Mr Chomley's analysis based on the plaintiffs' construction of the EMR Investors construction issue was flawed. I also reject that the Deloitte Relative Valuation report, the Credit Suisse report and the high end of the ranges in the Investment Committee papers were proper bases upon which to conclude that it was reasonably foreseeable, as at 7 June 2021, that the target return would be achieved at or before the End Date.

424 To the extent that it is relevant, I do not accept that Mr Chomley erroneously considered that the target amount for any portion of the Earnout Payment to become payable was USD$286.3 million (when it would be triggered by USD$277 million). This is because his calculations were on the basis that the Earnout Payment was paid in its entirety.

425 In all these circumstances, I am not satisfied that as at 7 June 2021 it was reasonably foreseeable (ie that there was a fair and sensible possibility) that a further sum of USD$213,194,591 or thereabouts would be obtained by EMR6B from returns and/or for its interest in 29Metals by the End Date, with the consequence that the Earnout Payment would become payable.

426 Relatedly, issue 6 required consideration of reasonably foreseeable circumstances regarding the occurrence of other Liquidity Events between 7 June 2021 and 17 September 2023. Once again, there were little or no submissions addressed to the reasonable foreseeability of the occurrence of other Liquidity Events until the End Date based on the plaintiffs' construction of the EMR Investors construction issue. This is no doubt due to the difficulty in assessing the reasonable foreseeability of such Liquidity Events, let alone the returns from any such events. As a result, I am not in a position to form any view in respect of this aspect of issue 6, other than my comments in [377] above.

9.5 The 3****rd scenario: Issues 4(2)(b)(i) and 5

427 As noted above, the 3rd scenario is whether, as at 7 June 2021, it was reasonably foreseeable that the Earnout Payment would be owing up to the End Date of 17 September 2023, if the IPO was not successful.[84] This scenario is premised on the Restructure occurring (ie the sale of EMR6B's shares in CCH and Lighthouse to 29Metals) but without the merger of the Golden Grove and Redhill assets (which was conditional upon success of the IPO), with the result that the only asset of 29Metals would be the Capricorn Copper mine. It follows that the EMR Investors construction issue has no bearing upon the outcome, for the purposes of the 3rd scenario.

428 Notwithstanding that the 3rd scenario proceeds on the assumption that the IPO did not successfully complete, the relevant question under the escrow clause is, in summary, an assessment of what was reasonably foreseeable on 7 June 2021. The plaintiffs submit that, as at 7 June 2021, the IPO was a 'near certainty', with the result that it was not reasonably foreseeable that it would not proceed. This is in light of the fact that, as at 7 June 2021, the Prospectus had been finalised for approval and the Underwriting Agreement with the Joint Lead Managers had been entered into, based on a bookbuild price of AUD$2.00 per share for 29Metals.

429 In his third witness statement, Mr Chomley referred to a number of customary termination events and concluded that, absent any of those termination events occurring, the IPO would likely complete by early July 2021. However, I note that there are other termination events in the Underwriting Agreement set out in the Prospectus, including those at the discretion of the Joint Lead Managers. Having reviewed those termination events, and in light of the limited evidence called on this issue, I am unable to conclude that, as at 7 June 2021, it was only reasonably foreseeable that the IPO would proceed.

430 In this section, given that 29Metals owned all the shares in CCH (and thus CCPL), I will refer to either 29Metals or CCH.

431 Mr Chomley also formed the view, as at 7 June 2021, that no Earnout Payment would ever reasonably foreseeably be owing during the relevant period (ie at any time up to 17 September 2023), if the IPO did not successfully complete. In summary, this was due to the number of financial difficulties faced by CCH and the Capricorn Copper mine in the period leading up to the IPO and Restructure (noting that the Restructure would continue if the IPO did not proceed). Mr Chomley relied upon the following relevant factors, some of which have been referred to above:

(a) CCH had been financially underperforming for at least three years (I refer to my comments in [106] above);

(b) the impact of the waiver letter, which required CCH to raise new debt or equity by 31 December 2021;

(c) no further equity was available to be contributed by Fund 1 (I refer to my comments at [104] above);

(d) the overdue trade creditor position of AUD$23.5 million (I refer to my comments at [103] above);

(e) the Metals X Payment, being a contingent payment totalling AUD$10 million plus interest (I refer to my comments at [102(b)] above);

(f) the fact that, based on the options explored by EMR6B for the Capricorn Copper mine, in the event that the IPO did not proceed, financiers and potential counterparts would require a risk premium to be applied to a sale of the mine, due to a higher perceived risk associated with the mine's financial and technical performance; and

(g) as to the Capricorn Copper mine's key technical and operational issues, these included poor grade performance at several mines; environmental risks; the Life of Mine model (LOM model) included 'Inferred Resources';[85] and regulatory risks regarding tailings storage and ground conditions in mining areas.

432 As a result, Mr Chomley gave evidence that, any alternative to the IPO would have delivered a lower value to EMR6B, than the value delivered by the IPO, and therefore the Earnout Payment was not reasonably owing. He considered three possible options if the IPO did not proceed: (a) a trade sale, (b) a merger or reverse takeover, or (c) the refinancing of debt. As to a potential trade sale, Mr Chomley gave evidence that a higher valuation discount would have applied, due to the higher perceived risk of Capricorn Copper mine as a standalone asset. As to a merger or reverse takeover, Mr Chomley gave evidence that the only parties with whom EMR Capital had negotiated were either early stage 'development assets' or lower quality mining operations (cf Golden Grove), the combined entity of which would have traded at a valuation discount to 29Metals. As to the refinancing of senior debt, Mr Chomley gave evidence that, because of the risks associated with the Capricorn Copper mine as a standalone entity, funding was going to be expensive, which would reduce the residual equity value of CCH to EMR6B, and thus result in a 'sub optimal outcome' when compared to pursuing a IPO.

433 There was much evidence at trial, including general evidence from Mr Chomley, as to whether financing the debt was reasonably foreseeable within the timeframe imposed by the waiver letter. EMR6B called Mr Green to give expert evidence on this subject. I will deal with his evidence below.

434 Mr Chomley gave evidence that EMR6B had approached or had discussions with over 30 parties in relation to refinancing (including the amended syndicated facility agreement, the Advance Payment Agreement, and the Metals X Payment) resulting in in a non-binding term sheet being executed and submitted by Nebari for USD$75 million. He recalled that the risk premium in respect of Nebari involved an interest rate of about 12 per cent (which was approximately double the interest rate of the amended facility agreement).[86] Mr Chomley said that two or three other terms sheets were submitted, none of which were called for or produced.

435 It is appropriate to repeat that I considered Mr Chomley to be a credible and reliable witness.

436 I have set out Mr Green's qualification and experience in section 2.2 above. He gave evidence to the effect that CCH would not have been able to refinance its senior debt by the 31 December 2021 deadline, referred to in the waiver letter, because prospective lenders would conclude that the entity posed an unacceptable credit risk, regardless of the security structure.

437 In summary, I consider that Mr Green was an honest and reliable expert witness, and I accept his evidence. The Sellers submit that this Court should give little weight to his ultimate conclusion in [436] for a number of reasons, including because his experience does not qualify him to opine on the attitude of non-banking lenders to refinance CCH. I do not accept this submission. Rather, I consider that the breadth of his experience, summarised in section 2.2, enabled him to give expert evidence in relation to the willingness of non-bank lenders to advance funds to CCH, if the IPO did not proceed.

438 In summary, the facts that led to Mr Green's ultimate conclusion, as set out in are:

(a) the going concern disclosure and the reason for it; namely, CCH's growing working capital deficiencies, and its inability to meet financial commitments as scheduled;

(b) the information disclosed in CCH's financial statements between FY17 and FY20 (set out at [97] above), including CCH's annual trading loss since mining recommenced in 2017, the significant net working capital deficiency, and current and non-current liabilities;

(c) the fact that CCH had breached loan covenants or was not able to meet some of them in 2018 and 2020, which suggested poor forecasting or underperformance (as demonstrated by the DSCR covenant, and the clean-down obligation, which resulted in deferral or variations, including the waiver letter);

(d) the fact that, pursuant to the waiver letter, CCH was required by its lenders (and most notably, a new lender of only 12 months) to refinance;

(e) the projected FY21 EBITDA for CCH (of AUD$44.69 million) would be wholly absorbed by CCH's capital expenditure (of AUD$33.4 million) and the 2020 interest expense (AUD$11.165 million); and

(f) an incoming prospective lender's options would be limited if CCH's underperformance continued, because Fund 1 was unable to provide further funding to CCH. Absent substantive changes to CCH's cost base or commodity prices, further refinance would be difficult because additional lenders would regard two problematic loan histories as warranting caution. Further, following a failed IPO, lenders would be concerned about whether an IPO would ever be achievable for this asset.

439 Mr Green gave evidence that the nature and extent of CCH's existing secured liabilities and security arrangements would be relevant to a prospective lenders' credit assessment of whether, and on what terms, to provide finance. Mr Green noted that CCH's term loan, revolving credit facility, and hedging facilities were equally ranked. He considered that all of these would need to be refinanced.

440 As to the inability to meet financial commitments as scheduled, referred to in [438], in addition to the breaches of loan covenants, Mr Green referred to the deferral or restructure of the Advance Payment Agreement (which he estimated to be AUD$19.43 million) and the Metals X Payment of AUD$10.25 million. He also referred to overdue trade creditors of AUD$23.5 million, the out of money hedging arrangements of approximately AUD$32.761 million for 2021, and the revolving credit facility balance of AUD$9.32 million. Mr Green concluded that all of these amounts would need to be refinanced by CCH/CCPL at a total of AUD$95,196 million.

441 As to the ongoing concern disclosure, Mr Green gave evidence that this disclosure, together with the information disclosed in the FY2020 statement in relation to CCH's net liability position, would have alerted prospective lenders to the following potential credit issues:

(a) the risk that CCH was not a going concern, was insolvent, or otherwise experiencing liquidity pressure;

(b) persistent solvency issues, despite CCH having arranged additional funding in March of 2020, which indicated that the entity had underperformed to budget, or that its forecasting was inadequate (or both);

(c) the inability to satisfy the DSCR covenant and the clean-down obligation (notwithstanding receipt of additional funding) indicated an inadequate forecasting process; and

(d) CCH's existing lenders, including a new lender (Natixis), were not prepared to continue the relationship. Further, CCH (or a related entity) had planned an IPO, which was unsuccessful.

Challenges to Mr Green's assumptions and whether he was provided with adequate information

442 The Sellers challenged many aspects of Mr Green's opinion, most relevantly, the accuracy of his assumptions and/or that he was not provided with adequate or correct information. In the course of his cross examination, Mr Green made sensible concessions. For example, he conceded that the correct amount payable to Metals X Limited in the period up to 31 December 2021 was AUD$5.25 million, rather than the AUD$10.25 million he had used, with the result that the credit limit for which approval would be sought ought to be AUD$90.196 million as opposed to AUD$95.196 million. He also conceded that, in calculating the hedging position, a different spot price would result in liabilities for the 'out of the money' hedging position going up or down. This could result in the out of the money hedging position falling below the figure that he had calculated (at approximately AUD$32.761 million for FY2021 and AUD$30.878 million for FY2022, based on the spot price of copper in the Prospectus), and would therefore cause the additional funding requirements to drop as well.

443 However, he gave evidence that, even if the out of the money hedging position was reduced to AUD$23.1 million, and the Metals X Payment was reduced to AUD$5.25 million, these changes would not alter his overall conclusion that CCH would have been unlikely to achieve refinance before 31 December 2021.

444 As to the assertion that Mr Green was provided with inadequate information, the Sellers contend that, by reason of the failure to produce or provide the Nebari non-binding terms sheet to Mr Green, the Court should infer that it may have altered Mr Green's view. I do not accept that submission. This is because, Mr Chomley's evidence was that the Nebari terms sheet (which was prepared before the IPO) proposed interest at least double the rate that CCH was paying under its existing amended syndicated facility agreement; ie to the effect that the Nebari terms sheet was commercially unacceptable to CCH/CCPL. The Sellers did not challenge this evidence or call for the production of the Nebari terms sheet.

445 Further, the Sellers submit that Mr Green accepted that a proposed financier would have been interested in the actual performance of CCH up to 31 October 2021, but that he was not provided with and did not conduct any analysis based on the actual trading figures of CCH between May to October 2021. The Sellers submit that, given the trading figures for January to May 2021 disclosed that CCH had generated EBITDA of AUD$36 million, it was reasonable to infer that, for the period January to September 2021, CCH would generate EBITDA of at least AUD$70 million. Based on this inference, the Sellers submit that CCH would have been able to pay all of its historic debts, and might only need to refinance approximately AUD$50 million. Further, the Sellers submit that long-term cashflow forecasts in the LOM model were not reviewed by Mr Green, in relation to understanding serviceability of the hypothetical refinance loan; instead, he relied upon the statutory EBITDA forecast in the Prospectus.

446 I reject the Sellers' primary submission that Mr Green had accepted that a proposed financer, as at October 2021, would have been interested in the actual financial performance of CCH up to that time. When presented with this proposition by counsel in cross-examination, Mr Green disagreed, and said that he did not think it would have been of assistance. Rather, the substance of his evidence was that, in general terms, a proposed financier would been interested in such information; ie EBITDA and serviceability. Mr Green considered that the proposed loan transaction involving CCH would have been 'discarded well before' consideration of the financial performance during this period.[87] To similar effect, Mr Green also gave evidence that three significant adverse factors - being, material uncertainty as to CCH's going concern status, the concern that CCH was 'consistently' in breach of lending covenants, and the apparent inability of the owner to provide any further support - would 'kill the deal [and thus, CCH's ability to obtain refinance] before anybody look[ed] at the projections'.[88]

447 Further, I consider that it was appropriate for Mr Green to place reliance upon the cash flow information in the Prospectus, rather than the LOM model, for the purposes of forming his view as at 7 June 2021. Mr Green gave evidence that 'the due diligence process that goes into creating figures for a prospectus and how carefully they are worked and done and used' was such that there is a 'greater level of scrutiny'.[89] This evidence was supported by Mr Audcent, who said that any prospectus 'goes through a very strict vetting process and verification process'.[90]

Challenges to Mr Green's 'significant adverse factors'

448 There are three primary bases upon which the Sellers challenged Mr Green's evidence of 'significant adverse factors' that a lender would identify.

449 First, the Sellers submit that the only basis for the material uncertainty as to CCH's going concern status, as identified by Mr Green, was the waiver of the DSCR covenant for the period ending 31 March 2021, which led to the waiver letter. The Sellers refer to the 2020 audited accounts for CCH, in which directors expressed their view that CCH would continue operating as a going concern, including having the support of EMR6B, forecast operating cashflows, ongoing support from the secured lenders, and the possibility of further equity funding. As set out in [105] above, Mr Audcent gave evidence about the significance of the going concern disclosure, and the fact that this was due to the waiver letter. Mr Green gave evidence to the same effect. As a result, and contrary to the Sellers' submissions, I consider that such a disclosure would be a significant adverse factor for a potential lender to consider.

450 Second, whilst Mr Green's report refers to CCH having 'consistently' breached lending covenants, he could only identify two such breaches: an unspecified breach in the 2018 audited accounts for CCH, and the DSCR covenant on 31 March 2021 (leading to the waiver letter). Even accepting that these two breaches might not satisfy the characterisation of 'consistent' breaches, I nevertheless accept the thrust of Mr Green's evidence on this topic; ie that a prospective lender would have identified these breaches as an adverse factor when assessing CCH's credit risk.

451 Third, the Sellers take issue with Mr Green's sole reliance on Mr Chomley's evidence as to CCH's inability to repay trade creditors, in circumstances where there was no evidence of the alleged overdue or surplus creditors as at 7 June 2021. However, for the reasons set out in [103] above, I have accepted that CCH's trade creditor position was AUD$21.5 million in mid-2021.

9.5.3 Only a sale was reasonably foreseeable as at 7 June 2021

452 If the IPO had failed, in light of Mr Green's evidence, I am satisfied that the only available option would have been a standalone sale of CCH by 31 December 2021, or thereabouts, to repay the funds owing under the amended syndicated facility agreement. As set out above, Mr Chomley considered that such a sale had no reasonable prospect of meeting the target return.

453 Before, and in the lead up to the trial, the Sellers maintained that the determination of whether an Earnout Payment was reasonably foreseeably owing in future, as at 7 June 2021, would 'necessarily' require expert evidence to be adduced in relation to the underlying value of the CCH Group.[91] As a result, the Sellers retained as experts, Mr Dawson and Mr Audcent. In response, the plaintiffs filed expert evidence from Ms Wright and Mr Twigger.

454 Mr Dawson (called by the Sellers) and Ms Wright (called by the plaintiffs) gave expert evidence as to the fair market value of CCH on 7 June 2021. Mr Dawson estimated the equity value of CCH, as at 7 June 2021, on a controlling and fully marketable basis at between AUD$325 million and AUD$375 million. By contrast, Ms Wright estimated the equity value at between AUD$137 million and AUD$174.2 million as at that date.

455 Mr Audcent (called by the Sellers) and Mr Twigger (called by the plaintiffs) gave evidence as to what discount (if any) should be applied to the fair market value, given the circumstances of the CCH business, as at 7 June 2021. In summary, Mr Twigger gave evidence that the discount which should be applied to the fair market value of CCH was in the order of 50 to 70 per cent. By contrast, Mr Audcent gave evidence that there was a 10 to 20 per cent probability that the transaction would complete at discount, with the discount being 10 to 15 per cent discount.

456 The experts witnesses were cross-examined extensively at trial.

457 However, in final submissions, the Sellers submitted that, because information (including the expert opinions of Mr Dawson and Ms Wright on the fair market value of CCH) was not available as at 7 June 2021, it was 'irrelevant' to the Court's task. Rather, the Sellers submit that, based on the information available as at 7 June 2021, the Court must determine whether it was reasonably foreseeable between 7 June 2021 and 17 September 2023 that there could be a Liquidity Event or Events which generated the target return and/or that, upon a valuation being conducted on 17 September 2023, pursuant to cll 6.1(c) and (d) of the 2018 SSA, EMR6B's interest in 29Metals would be worth at least the target return.

458 Rather, in closing submissions the Sellers rely upon four documents to establish that either of the above scenarios were reasonably foreseeable. However, as set out below, the Sellers submit that the Court could take comfort from Mr Dawson's valuation, given their submission that his valuation was generally consistent with the four documents upon which they rely.

459 Before dealing with the contemporaneous evidence relied upon by the Sellers, I note that I do not accept that it was necessary, in undertaking the assessment under the escrow clause, to consider the value of EMR6B's shares in 29Metals as at 17 September 2023. This is because I have concluded that the only available option, if the IPO had failed, was a standalone sale of CCH by 31 December 2021 or thereabouts. This is in light of the position taken by the financiers and the fact that no further equity was available from Fund 1. Consistent with my views on the escrow clause, the proper and commercial construction of the nature of the assessment under that clause does not require detailed consideration of every possible outcome or basis.

9.5.4 Submissions on whether Earnout Payment reasonably foreseeably owing

460 The Sellers relied upon four documents to establish that an Earnout Payment was reasonably foreseeably owing in future, namely:

(a) the first Deloitte report;

(b) the Deloitte Relative Valuation report;

(c) the Credit Suisse report; and

(d) the June Investment Committee paper.

461 The first Deloitte report identified a 'selected enterprise value' for CCPL at between USD$225 million and USD$250 million, based upon a discounted cash flow method. However, the equity value was between USD$174 million and USD$199 million. These valuations were based upon the LOM model for the year ending 31 December 2020.

462 The relevant parts of the Deloitte Relative Valuation report, the Credit Suisse report, and the June Investment Committee paper are set out in the section dealing with the 2nd scenario (see 9.5.2). Nevertheless, I will set out the relevant aspects relied upon by the Sellers, in the context of the 3rd scenario.

463 The Deloitte Relative Valuation report contained an enterprise valuation of CCH, in 2021, at USD$251.7 million, based on consensus pricing; at USD$333.2 million based on EMR's price deck; at USD$373.7 million based on the AME forecast pricing; and at USD$674.8 million based on spot pricing.

464 As to the Credit Suisse report, it contained a base case valuation of CCH at AUD$328 million to AUD$444 million (being 31-32 per cent of the base case enterprise value of 29Metals at AUD$1,062 million to AUD$1,381 million); or the blue sky valuation of between AUD$490 million and AUD$652.2 million (being 31 per cent of the blue sky value of 29Metals at AUD$1,582 million to AUD$2,102 million).

465 As to the June Investment Committee paper, it contained an enterprise valuation of USD$251.41 million, being 31 per cent of the value of 29Metals, for the purposes of the bookbuild of USD$811 million. The Sellers submit that, consistent with the evidence of Mr Dawson, it would be appropriate to apply a control premium of approximately 25 per cent. Using that control premium of 25 per cent, the Sellers submit that the enterprise value of CCH in the June Investment Committee paper, based on the IPO price of AUD$2.00 per share, might be as high as USD$316 million.

466 As a result, the Sellers submit that having regard to these figures it was reasonably foreseeable that, if the IPO did not succeed, the value of CCH assets would be more than the target return on 7 June 2021, given the significant fluctuation of share prices for comparable companies (Aeris and Sandfire), copper prices, exchange rates in the years up to 7 June 2021, the range of possible movements, and other operating costs.

467 Further, the Sellers submit that, whilst not strictly necessary, the Court can take comfort from the expert valuation of Mr Dawson in the range of AUD$325 million to AUD$375 million. The Sellers submit that this valuation was consistent with the Deloitte Relative Valuation report and the Credit Suisse report and with the proposed listing price in the June Investment Committee paper, once a control premium was added.

468 In their written closing submissions (and before the Sellers substantially abandoned their reliance on the expert evidence), the plaintiffs submit that Ms Wright's valuation evidence ought to be accepted over that of Mr Dawson; and that, even if the Court were to accept Mr Dawson's evidence in its entirety, it would be necessary to discount his valuation by a significant degree, in light of Mr Twigger's evidence regarding the 3rd scenario.

469 Further, in the plaintiffs' written reply submissions, they address the particular documents relied upon by the Sellers. The plaintiffs submit, in substance, that the June Investment Committee paper, the Credit Suisse report, and the Deloitte Relative Valuation report do not value CCH on an appropriate basis for the purpose of the 3rd scenario. To the extent that the Sellers rely upon the enterprise valuations contained in each of these documents (which do not include net debt), the enterprise valuations should be disregarded. Further, these reports were premised on CCH being part of a hypothetical listed entity, and were prepared for the purpose of ascertaining the value to be attributed to CCH in that context. The plaintiffs submit that, because they did not value CCH as a standalone asset, consistent with the 3rd scenario, the valuations in these reports should therefore be disregarded. I refer also to the plaintiffs' submissions on these documents in the 2nd scenario.

470 The plaintiffs acknowledge that the first Deloitte report contained an equity value on a standalone basis which accounted for the net debt of USD$51 million at the time of valuation. However, the plaintiffs submit that the first Deloitte report is of limited utility given it was based on an LOM model which by 7 June 2021 was out-of-date. They rely upon the terms of the first Deloitte report which records that their modelling was based on the latest LOM plan completed in November 2019 which had remained largely unchanged, though 'certain operating assumptions' in the near-term have been updated based on the actual performance during the financial year ended 31 December 2020. As I set out below, this appears to be correct, although it is difficult to ascertain the extent to which the LOM model was out-of-date.

471 In summary, the plaintiffs submit that any valuation of CCH in the failed IPO scenario must value the Capricorn Copper mine as a standalone entity and using an equity valuation, not an enterprise valuation, accounting for CCH's net debt. As a result, the Deloitte Relative Valuation report, the Credit Suisse report and the Investment Committee papers must be disregarded.

472 As noted above, the first Deloitte report expressed both an enterprise and an equity value of CCH on a standalone basis. The Sellers rely upon the enterprise value of USD$225 million and USD$250 million. However, the relevant valuation in the first Deloitte report is the equity valuation of USD$174 million to USD$199 million which takes into account CCH's debt. This was far below the target return. Further, for the reasons set out in [549] below, I am satisfied that the LOM model, on which the first Deloitte report was based, was out-of-date by 7 June 2021 at least for the period to December 2021. As a result, the Sellers have not satisfied me that it was reasonably foreseeable that the Earnout Payment would be owing in future, based on this document.

473 As to the valuations in the Deloitte Relative Valuation report, the Credit Suisse report and the June Investment Committee paper, in my view they are not of real assistance in determining whether an Earnout Payment was reasonable foreseeable under the escrow clause. In substance, this is because each of these documents fails to express an equity value of CCH (ie an enterprise value does not take in to account the net debt of CCH/CCPL); nor was CCH valued as a standalone asset in these reports.

474 In addition, as submit by the plaintiffs, the purpose for which these documents were prepared was to ascertain the value of CCH, in the context of a successful IPO of 29Metals (including Golden Grove and Redhill). That purpose or premise is very different from the 3rd scenario which proceeds on the basis that the IPO was unsuccessful. As a result, I do not consider that those documents provide a proper basis for the assessment requirement under the escrow clause in respect of the 3rd scenario. Rather, I accept the submission of the plaintiffs that those documents are of little relevance to the valuation to the Capricorn Copper mine or CCH as a standalone entity in the event that the IPO was not successful.

475 Further, I have reservations about relying upon the blue sky valuation in the Credit Suisse report. This is in circumstances where no-one from Credit Suisse was called and Mr Chomley was not cross-examined on the basis of the blue sky valuation in the Credit Suisse report. I refer to my observations concerning the Credit Suisse report in the previous paragraph and in my analysis of the 2nd scenario in [402] and [403] above.

476 As noted above, the Sellers relied in particular upon the June Investment Committee paper. Consistent with my views above, I am not satisfied that the enterprise value of CCH as recorded in the June Investment Committee paper is a proper basis to assess an enterprise valuation of CCH in the event that an IPO did not proceed. This is because the June Investment Committee paper was based upon an enterprise value of each of the Redhill, Golden Grove and Capricorn Copper mines. In my view, consistent with the conclusions I have reached relating to the financial position of the Capricorn Copper mine in early- to mid-2021, the relative value of the Golden Grove mine very much increased the enterprise value of the Capricorn Copper mine (which was in a difficult financial position in early to mid-2021) in the June Investment Committee paper. This is generally consistent with the evidence of Mr Twigger, which I accept, as to the advantages of an IPO involving the very profitable Golden Grove mine. As a result, in the event the IPO did not proceed, the enterprise value of CCH in the June Investment Committee paper is not a relevant comparator.

477 As noted above, the Sellers submit that a 'control premium' ought be applied to the enterprise value of CCH in the June Investment Committee paper reflected in a share price of AUD$2.00 per share. I am unable to accept this submission for two reasons. First, as is evident from these reasons, the price of AUD$2.00 represented the share price reflecting the value of Capricorn Copper, the Golden Grove mine and the Redhill project. Consistent with my comments in the previous paragraph, I have concluded that one of the advantages of the IPO was to merge CCH (and the Redhill project) with the more profitable Golden Grove mine to produce an enterprise value which would have the effect of raising this share price of CCH. Thus I do not consider it appropriate to apply a control premium to the IPO share price of AUD$2.00 in the June Investment Committee paper.

478 Second, the Sellers relied upon Mr Dawson's evidence as to the control premium. That arose in the context of Mr Dawson's cross check of his valuation in relation to the 3rd scenario. Mr Dawson gave evidence (which was not challenged by Ms Wright) to the effect that the a control premium is applied to the market capitalisation rate to reflect the control that purchasers will gain from acquiring all the shares, such as a takeover premium. I am not satisfied on this evidence how a control premium would apply to a particular share price in the context of the 3rd scenario when where the IPO had failed and the need for the sale arose due the financial difficulties of CCH and, most relevantly, in circumstances where existing lenders were unwilling to refinance CCH.

479 Further, and in addition, I have formed the view that for the purpose of the 3rd scenario, it would be necessary to apply a significant discount to the value of CCH, given the circumstances of a sale consequent upon the failure of the IPO. I will address this more fully below. However, I have reached the view that the discount was in the order of at least 25 per cent. Even if I am wrong and all or some part of the control premium ought to be applied to the share price of AUD$2.00, as was recorded in the June Investment Committee paper, the application of the discount factor of the kind that I have concluded would apply would reduce the return on the sale of CCH significantly below the target return of USD$286.3 million or, alternatively, the target return of USD$277 million as suggested by the Sellers.

480 Thus, I am not satisfied that as at 7 June 2021 and based on the four documents relied upon by the Sellers for the purpose of the 3rd scenario that the Earnout Payment would be reasonably foreseeably owing in future if the IPO was not successful.

481 As noted above at [455], Mr Twigger and Mr Audcent gave evidence as to whether it was appropriate to apply any discount to the valuation of CCH, in light of the circumstances of the company at the likely time of sale; ie in the six months prior to 31 December 2021, in the event that the IPO did not proceed. Mr Twigger and Mr Audcent gave their evidence in relation to the valuation of CCH/29Metals using the traditional valuation methodology of a discounted cash flow, which is consistent with the valuation reports prepared by Mr Dawson and Ms Wright. In light of the financial situation of CCH/29Metals in the context of the 3rd scenario, there is no reason as a matter of logic or principle why their comments cannot be applied to any valuation of CCH/29Metals at the relevant time.

482 As is evident from section 2.2 above, there was a great divergence between the expert opinions of Mr Twigger and Mr Audcent as to the discount to be applied. Mr Twigger's expert opinion was that a discount in the order of 50 to 70 per cent should be applied. Mr Audcent's expert opinion was that little or no discount should be applied.

483 I am satisfied that each of Mr Twigger and Mr Audcent were appropriately qualified to give their evidence. However, in my view, Mr Twigger had significantly more experience of a practical nature in the mining and metals sector. In 1999, he became a founding principal of PCF Capital Gorup a corporate advisory and investment banking group focused on the mining sector and mining sales. PCF Capital merged with Argonaut Limited in 2021 which, as noted in section 2.2, is a financial advisory and investment banking firm which specialises in the metal and mining, oils and gas, and agribusiness sectors. Mr Twigger gave evidence that he had been involved in the sale of distressed mining assets for over 30 years - both for sellers and potential purchasers - and that his company was probably the biggest broker of mines in Australia. I accept this evidence, which was not challenged. In making this finding, I am conscious that Mr Audcent gave evidence of being involved in a number of transactions involving the sale or acquisitions of mines, generally by providing an independent expert report. Nevertheless, Mr Twigger's greater experience and practice in the mining sector, compared to that of Mr Audcent, is of significance when considering his evidence.

484 The Sellers submit that Mr Twigger's expert evidence of a 50 to 70 per cent discount relied upon the premise that the Capricorn Copper mine would have been transitioned to care and maintenance, or would be perceived as moving toward that end between June and December 2021. By contrast, the plaintiffs submit that the Sellers' criticisms are misconceived as, on a proper reading of Mr Twigger's evidence, his discount does not rest upon the premise that the mine would have entered care and maintenance, but rather on the factors that he found would have led to that transition; namely, the doubt as to 'CCH's going concern status', and the fact that Fund 1 did not have access to further capital to support CCH's ongoing trading as a going concern or its 'orderly' transition to care and maintenance.

485 Mr Audcent and Mr Twigger filed a joint report on 29 June 2023. In the report, they agreed on, amongst other things:[92]

(a) that the definition of 'market value' was 'the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing, and where the parties had each acted knowledgeably, prudently and without compulsion';

(b) that an assessment of the 'fair market value' took into account 'all relevant circumstances relating to the business or asset being valued, as at the valuation date';

(c) in the case of a mining asset, this includes 'factors such as its ore reserves and mining resource, current and projected operating and financial performance, and market outlook for the relevant commodity';

(d) if an asset was underperforming, this fact would be reflected in the assessment of market value; for example, where the discounted cash flow methodology is adopted for valuation purposes, this will be taken into account in projected cashflows and the discount rate adopted, assuming the business or assets continue to operate as a going concern; and

(e) an asset may realise a value below its market value, 'in circumstances where the seller is under compulsion to complete a sale within an accelerated timeframe which does not allow time for "proper marketing" of the asset'; for example, where the vendor is 'under pressure from financiers and third party creditors to complete a sale within a defined period of time'.

486 A relevant disagreement between the experts relating to whether the financial position of CCH was such that the fair market value test referred to in [485(a)] was not fully satisfied ie because EMR6B was not a 'willing seller' and not acting 'without compulsion'. This was related to whether CCH (or more relevantly its owner EMR6B) could be described as a 'distressed seller'.

487 Mr Twigger was of the opinion that CCH's financial position was such that EMR6B was not a willing seller acting without compulsion, with the result that a sale would occur at a significant discount to market value.

488 Mr Audcent was of the view that concept of 'willing seller' needs to be considered separately from the concept of 'without compulsion'. Mr Audcent considered that EMR6B was a willing seller in spite of CCH's financial position because it was under an obligation to complete a sale in the absence of a successful IPO. He agreed that EMR6B would have been acting under compulsion, but the effect of compulsion upon EMR6B would not have limited its ability to achieve a sale at a fair market price ie without discount, as six months was a reasonable time frame for proper marketing.

489 Notwithstanding that the experts agreed the six-month period was a reasonable time frame for proper marketing and to achieve a sale, I have formed the clear view that this was far from a usual sale. This is because CHH was in a very serious financial position in mid-2021. I refer to be findings in section 6.1 above. Most relevantly, I refer to the:

(a) terms of the waiver letter set out in [101] above including that the new lender was unwilling to provide ongoing finance for the debts those facilities secured;

(b) going concern disclosure in the 2020 audited accounts for CCH, as a result of the waiver letter, referred to in [105] above;

(c) financial performance of CCH as captured in the financial reports for the three years prior to the IPO (ie since FY17), which indicated that it had traded at a loss in each year, had a significant net working capital deficiency, and current and non-current liabilities, as set out in [97]-[105] above;

(d) other indebtedness of CCH as set out in [102] above;

(e) technical and operational issues faced by the Capricorn Copper mine in early to mid-2021, as set out in [104] above; and

(f) fact that no further equity was available to be contributed to Capricorn Copper from Fund 1, as set out in [104] above.

490 In this context, Mr Twigger gave evidence that the timeframe imposed by the financiers made EMR6B a 'anxious seller. You've got a seller under control of its financiers'. While Mr Audcent agreed that CCH and/or CCPL were subject to 'financial distress' as at 7 June 2021, this acknowledgement underestimates the financial difficulty faced by CCH at the relevant time.

491 Further, I consider it relevant that the 3rd scenario is premised on the basis that the IPO did not proceed ie there was a failed attempt to sell IPO assets, including the Capricorn Copper mine. In my view, this is a significant factor in determining whether the assets would sell for fair market value. Mr Twigger gave evidence that the failed IPO would have added an 'additional drape' on the experts' analysis, which was not factored into their report and conclusions.[93]

492 When asked what the impact of the failed IPO would have on the trade sale, Mr Twigger responded that, based on his experience in dealing with boards, the impact would be 'terrible ... it's a very, very difficult position to be in and any potential buyers looking at it, they can smell that a mile away'.[94] Thus, any prospective buyers would realise that the company was in financial difficulty upon looking at the balance sheet, financials, and the mine's performance, notwithstanding the more positive outlook in the LOM model. I accept that evidence.

493 The experts also had regard to the financial performance of CCH in 2021, in particular between 7 June and 31 December 2021, in forming their opinion on these matters. Mr Audcent in particular relied upon these financials in support of his view that EMR6B was not a distressed seller. However, in my view, the performance of Capricorn Copper during this later period was very much dependent on the successful IPO. This is in circumstances where the joint expert report records that the proceeds of the IPO were used in part to repay external borrowings of AUD$56 million, settle hedge positions of AUD$33 million (Mr Twigger subsequently agreed this figure was AUD$28.7 million) and reduce other outstanding trade debts and payables of AUD$32 million.

494 I accept the evidence of Mr Twigger that the effect of this equity injection from the IPO was to 'reset' CCH and that, if not for this equity injection, 'the company was heading towards care and maintenance. It was in the hands of the bankers'.[95] In these circumstances, it is difficult to rely upon actual events after the IPO to form any concluded views as to the financial position of CCH as at 31 December 2021 for the purpose of the 3rd scenario. However, I am conscious that the Prospectus indicates that the Capricorn Copper mine was forecast to achieve EBITDA of AUD$70.384 million in FY21.

495 As noted above, another related issue in dispute was whether Mr Twigger's discount range was based upon the Capricorn Copper mine being placed into care and maintenance, or the more general financial position of CCH at the relevant time. I note that two of the three methodologies used by Mr Twigger appeared to be based on comparable companies in, or heading towards, care and maintenance or voluntary administration. However, viewing Mr Twigger's evidence as whole, I have concluded that Mr Twigger's opinion was prepared on the basis that, due to its serious financial position, there was significant doubt that CCH was trading as a going concern such that either the Capricorn Copper mine would be placed into care and maintenance, or that there was a real risk it would do so, based upon CCH's financial position at the relevant time.

496 By contrast, Mr Audcent was of the opinion that as of 7 June 2021 the Capricorn Copper mine was operating as a going concern generating positive cash flow and was expected to do so for the foreseeable future. As a result, he was of the opinion it was highly unlikely that the Capricorn Copper mine would transition to care and maintenance during the period to 31 December 2021. He considered that to the extent that Capricorn Copper was distressed at that time, 'this was a consequence of the financial position of CCH/CCPL, in other words it was the companies that were distressed rather than the mine itself'.[96] He gave evidence that the fact that CCH was distressed related to its balance sheet more than its profitability.

497 In cross-examination, Mr Audcent conceded that CCH relied on the Capricorn Copper mine to service and retire CCH's debts, whether from cashflows or sale proceeds. Significantly, Mr Audcent also agreed that, while the distinction between distressed asset and distressed company may be relevant in a formal valuation scenario, from the practical perspective of a seller, their motivation comes from the financial distress caused by the waiver letter ie 'the ultimatum that was put in place by the senior lending group'.[97]

498 Mr Twigger accepted the distinction between a distressed asset and a distressed company but considered that each of these descriptions applied to the Capricorn Copper mine and also EMR6B as the seller of CCH. In my view, the distinction drawn by Mr Audcent between a distressed asset and a distressed company has less force in the circumstances of this case when CCH/CCPL only had one asset, namely the Capricorn Copper mine. I accept the evidence of Mr Twigger that 'all the debts and problems were the result of the one mine so I don't know how you could really separate the two'.[98]

499 In all these circumstances, having regard to CCH's difficult financial circumstances at the time of any sale process and the evidence referred to above as to the financial position of CCH and the Capricorn Copper mine, I have concluded that a discount should and would have been applied to the purchase of CCH (or the Capricorn Copper mine owned by it). In a real sense, I have concluded that EMR6B was not a willing seller and/or acting without compulsion.

500 Before addressing the kind of discount that would apply, I wish to note that there was much evidence relating the correct amount of capital expenditure or the exposure under the hedging contracts for the purpose of ascertaining the likely financial position as at 31 December 2021. This was in the context of a forecast EBITDA AUD$70.384 million in FY21. To the extent it is relevant, I wish to record my views about these issues shortly.

501 Mr Twigger considered much of this EBITDA would applied to meet capital expenditures and to close out the hedging contracts. Mr Audcent disputed this.

502 As to capital expenditure, Mr Audcent relied upon the fact that of the AUD$40 million capital expenditure forecast for FY20 (with AUD$9 million of sustaining capital and the balance being development capital), only the sustaining capital needed to be spent. However, he acknowledged that if the development capital expenses were not met, it would ultimately affect earnings. As to the hedging liabilities, Mr Audcent considered that the liability under each contract depended on the price of copper when the hedging contract is closed (at a time when copper prices were rising) and that each was a 'contingent' liability until that time.[99] In this context, he expressed the view that hedging contracts were self-funding in the sense that they were funded out of income. He also gave evidence to the effect that all hedging contracts would only have to be settled if the mine was placed into care and maintenance.

503 As to hedging liabilities, I accept that they depend on the price of copper when the hedging contract is closed. Nevertheless, Mr Twigger gave evidence in substance that it was the potential exposure that would concern buyers or financiers. I accept this evidence.

504 As to capital expenditure, Mr Twigger maintained that much of the forecast EBITDA would be applied meeting capital expenditures of approximately AUD$40 million to ensure future earnings were not affected. In this context, Mr Twigger also maintained that CCH had been in a serious financial position for some time, as evidenced by its accounts - including the disclosed loss of AUD$37.5 million for FY 2020 and the net current asset liability of AUD 85.2 million for FY 2020. As to the significance of the net current asset liability, Mr Twigger gave evidence that 'as a financier you want a company to have $1 of current assets for every $1 of current liabilities as a minimum'.[100] Mr Twigger said he had never encountered such a net current asset liability in his 30-year working life. He said this demonstrates that the company and the organisation are under significant stress for a long period of time. I accept also that evidence.

505 I will now consider the appropriate discount. Mr Twigger's discount range of 50 to 70 per cent was premised on the basis that there was no IPO. However, as set out above, in oral evidence he was asked about the impact of a failed IPO which is the basis of the 3rd scenario. I refer to the evidence of Mr Twigger set out in [491] and [492] above. Based on his evidence and his greater practical experience in the mining and metal sectors, I am satisfied that in the event of a failed IPO, a higher discount range would have been adopted by Mr Twigger than the range in his expert report.

506 Mr Audcent considered that there is a 10 to 20 per cent possibility that the sale transaction would complete at a discount to market value, with the discount being 10 to 15 per cent discount. That was also on the basis there was no IPO rather than was a failed IPO. He did not express a view as the possible discount based on a failed IPO.

507 In cross-examination, Mr Audcent was challenged as to how he had reached that figure, and conceded that the percentage was not calculated or reached pursuant to any specific documents or information. He did not set out any particular sales (or a range of sales) upon which to base the opinion: he conceded it was a 'judgmental opinion of [his]'.[101] In these circumstances, and in light of the financial position of CCH in the event the IPO did fail, I attribute little weight to the quantification of discount propounded by Mr Audcent.

508 It is difficult to quantify the precise extent of any discount to be applied. In my view, any applicable discount is less than Mr Twigger's estimated range, but significantly greater than Mr Audcent's estimate. Based on the facts related to the financial position of CCH as at 7 June 2021 as I have found them and the expert evidence of Mr Audcent and Mr Twigger, I have concluded that a material discount would be applied, in the order of at least 25 per cent.

509 In reaching this conclusion, I have taken into account the basis of 3rd scenario, namely the effect of the failed IPO on potential buyers.

510 I have also taken into account Mr Twigger's evidence in cross examination that placing the Capricorn Copper mine into care and maintenance would have caused a 50 per cent reduction in the value of the Capricorn Copper mine. On the evidence before me, I am unable to conclude that the Capricorn Copper mine would be placed into care and maintenance. However, given CCH's serious financial situation, I consider that there was a real risk that this might occur prior to 31 December 2021. This is notwithstanding that it seems more likely that the CCH lenders would not allow the mine to cease operations and transition into care and maintenance during the period of any sale process. However, there was no evidence of any further funds available from the financiers. Further, as set out in [104], I have accepted the evidence of Mr Chomley that the there was no further equity was available from Fund 1.

511 As a result, based on the facts related to the financial position of CCH as at 7 June 2021 as I have found them and the expert evidence of Mr Audcent and Mr Twigger, I have concluded that a significant discount would be applied, in the order of at least 25 per cent.

512 Issue 5 required consideration of other reasonably foreseeable circumstances regarding the occurrence of other Liquidity Events between 7 June 2021 and 17 September 2023. There were little or no submissions relating to the reasonable foreseeability of the occurrence of other Liquidity Events until the End Date. This is no doubt due to the difficulty in assessing the reasonable foreseeability of such Liquidity Events, let alone the returns from any such events. Further, as set out in [452], I have formed the view that the only available option was a standalone sale of CCH by 31 December 2023 or thereabouts. As a result, I do not consider it appropriate to form any view in respect of this aspect of issue 5.

513 In light of the Sellers' submissions in closing, I do not think it necessary to consider in detail the valuation evidence of Mr Dawson and Ms Wright. Nevertheless, it is appropriate that I record my rejection of the submission that the Court should take 'comfort' in the expert valuation of Mr Dawson, in the range of AUD$325 million to AUD$375 million. In substance, this is because I have concluded that, even if I were to accept the higher end of Mr Dawson's range, it is necessary to deduct the value of surplus trade creditors in the order of AUD$21.5 million and apply the discount of at least 25 per cent. When this sum is converted to USD, the amount is in the order of USD$200 million, significantly less than the target return of USD$286.3 million, or alternatively, the target return of USD$277 million as submitted by the Sellers. Further, as set out above, I accept that the LOM model, which formed the basis of the valuations of Mr Dawson and Ms Wright, was out of date by 7 June 2021 at least until December 2021, although it is difficult to make any concluded assessment as to the extent to which it was inaccurate. I will comment on this further in below.

514 First, as noted in [328]-[330] above, the assessment required under the escrow clause was not in the nature of an expert valuation. That is to say, there was no obligation on EMR6B to obtain an expert view for the purpose of undertaking the assessment requirement. In this context, I pause to note that, to the extent that the Sellers submit that Mr Dawson's valuation satisfied the criteria of the 2018 SSA (presumably in cll 6.1(c) and (d)), I reject this contention. Most relevantly, this is because Mr Dawson's valuation was done as at 7 June 2021 and, assuming no extensions occurred, the End Date valuation was to be undertaken at 17 September 2023.

515 Second, the Sellers' submissions proceed on the basis that I should accept the entirety of Mr Dawson's valuation as accurate and appropriate. For the reasons that follow, I do not.

516 Before addressing my reasons for doing so, it is important to note that the experts adopted the same broad approach for valuing CCH as at 7 June 2021. Both Mr Dawson and Ms Wright assessed the value of CCH in terms of its 'fair market value' which they agreed in substance means the estimated amount for which an asset or liability should exchange on the valuation between a willing buyer and willing seller at an arm's length transaction and where the parties had acted knowledgeably, prudently and without compulsion. Both experts adopted the same methodology in assessing CCH's fair market value, namely:

(a) determining the enterprise value of the Capricorn Copper mine on the discounted cash flow methodology;

(b) subtracting the value of CCH's interest-bearing debt, agreed at AUD$58.8 million; and

(c) adding the value of CCH's surplus assets, and subtracting the value of its surplus liabilities.

517 There are a number of differences between the expert opinions of Mr Dawson and Ms Wright, most relevantly:

(a) whether the surplus trade creditors ought to be taken into account;

(b) whether a specific risk discount should be applied, given the uncertainties as to the forecast cashflow attributable to 9.7 million tonnes (Mt), and the forecast production of inferred or unclassified material in the LOM model (specific discount rate issue); and

(c) the treatment of carried forward tax losses (tax loss issue).

518 To the extent it is relevant in light of the nature of the disagreement between Mr Dawson and Ms Wright, I wish to record the following observation about Mr Dawson and Ms Wright. While Ms Wright has had substantial experience in valuing business, Mr Dawson has had more experience in valuation mining projects and businesses. Mr Dawson expressed his expert opinion dogmatically. By contrast, Ms Wright expressed her views in a more balanced, dispassionate manner. I have taken these matters into account in reviewing their evidence.

519 As to trade creditors, the issue is whether the surplus trade creditors should be deducted from the value of the Capricorn Copper mine, less interest-bearing debt, to obtain the market value. As noted above, I have formed the view that CCH had surplus trade creditors of AUD$21.5 million as at 7 June 2021. Mr Dawson did not take these creditors into account in reaching his valuation. If the surplus trade creditors of AUD$21.5 million had been taken into account, this would have reduced Mr Dawson's valuation range to between AUD$303.5 million and AUD$353.5 million.

520 In summary, accepting that Mr Dawson's highest valuation (AUD$375 million) must be reduced by, at a minimum, the surplus trade creditors found to have existed as at 7 June 2021 (ie around AUD$21.5 million), his highest valuation comes down to AUD$353.5 million. Assuming an exchange rate of AUD$1:USD$0.77 (which reflects the Prospectus), this higher valuation is USD$272,195 million, which is less than the target return, even without applying any discount (which I have found should be applied), and otherwise assuming Mr Dawson is correct in every other aspect of the valuation.

521 Further, applying the exchange rate of AUD$1:USD$0.75 (which, as noted above, was used by Credit Suisse report and in the range adopted by the Deloitte Relative Valuation report), Mr Dawson's highest valuation reaches USD$265,125,000. Applying a discount would have reduced this sum well below the target return of USD$286.3 million, or the target return asserted by the Sellers of USD$227 million.

522 As a result, even accepting the highest end of Mr Dawson's range, as adjusted by surplus trade credits and an appropriate discount rate, I am not satisfied that it was reasonably foreseeable that the target return would be reached with the result that the Earnout Payment would reasonably foreseeably be owing in future.

523 Although it is not necessary to do so, I will now briefly address the specific discount rate issue, and the tax loss issue.

524 The discounted cash flow methodology employed by both experts involved taking the projected future cash flows of the Capricorn Copper mining project, and applying a discount rate from which a present-date value could be derived. In valuing the Capricorn Copper mine, each expert prepared their reports on the basis of the forecast copper production levels contained in the LOM model, although they disagreed on the appropriate discount rate to be applied to part of the production forecast.

525 Before considering which approach is preferable, it is necessary to briefly explain the nature of the production forecasts in the LOM model.

526 According to the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves 2012 (JORC Code),[102] which was adopted by both experts and the Prospectus, there are two classifications of mineral ore bodies: 'Mineral Resources' and 'Ore Reserves'.

527 Mineral Resources are a concentration of solid material in such form, grade, quality and quantity that there are reasonable prospects for eventual economic extraction. To be classified as Mineral Resources under the JORC Code, the location, quantity, grade and continuity of the mineralisation must be known, estimated, or interpreted from specific geological evidence and knowledge.

528 Under the JORC Code, there are three sub-categories of Mineral Resources. These are set out below, in descending order of confidence, based upon the nature, quality, amount and distribution of copper mineralisation data, as follows:

(a) Measured Resources: when the tonnage and grade of the mineralisation can be estimated (in the opinion of a 'competent person')[103] to within close limits, and where any variation from the estimate would be unlikely to significantly affect potential economic viability;

(b) Indicated Resources: when a confident interpretation of the geological framework can be made to assume continuity of mineralisation; and

(c) Inferred Resources: quantity and grade (or quality) are estimated on the basis of limited geological evidence and sampling; ie the quantity and quality of mineralisation can be implied but not verified.

529 Ore Reserves are the economically mineable part of Mineral Resources in the Measured or Indicated categories. Whilst the JORC Code does not require that a full feasibility study be undertaken to convert Measured Resources and/or Indicated Resources to Ore Reserves, it does require that a pre-feasibility study be carried out to confirm a mine plan and production schedule that are technically achievable and economically viable, and that material 'modifying factors' have been considered. Modifying factors include mining, metallurgical, processing, infrastructure, economic, marketing, legal, environmental, social and governmental factors.

(a) Proved Reserves are the economically mineable part of a Measured Resource, in the highest confidence category of an Ore Reserves estimate, implying a high degree of confidence in geological and grade continuity, after consideration of modifying factors; and

(b) Probable Reserves are the economically mineable part of Indicated Resources, with a lower level of confidence, but sufficient to serve as the basis for a decision on the development of a deposit.

531 Under the JORC Code, Inferred Resources are deemed to be insufficiently delineated to be transferred into a category of Ore Reserves. Nevertheless, the JORC Code provides that it is reasonably expected that the majority of Inferred Resources could be upgraded to Indicated status with continued exploration.

532 Finally, the LOM model includes material that is unclassified for JORC reporting purposes (unclassified material).[104] The independent technical review prepared by Behre Dolbear Australia Pty Limited (BDA report), for the purposes of the IPO and the Prospectus, provides that unclassified material could be considered an 'Exploration Target' for the purposes of the JORC Code. The BDA report which was prepared for the Prospectus explains that the potential quantity and grade of Exploration Targets are 'conceptual in nature', as 'there has been insufficient exploration to determine a Mineral Resource'.[105]

533 The Prospectus provides that the Capricorn Copper mine has total Mineral Resources of 62.5 Mt, consisting of 5.4 Mt of Measured Resources, 33.8 Mt of Indicated Resources, and 23.3 Mt of Inferred Resources. The LOM model forecasts production of 14.5 Mt of Ore Reserves (ie derived from Measured and Indicated Resources). It also forecasts 9.7 Mt of non-Ore Reserve Mineral Resources (which consists of Inferred Resources and unclassified material) (the non-Ore Mineral Resources; of which, 1.4 Mt is derived from unclassified material, and 8.3 Mt is derived from Inferred Resources. As a result, the LOM model forecasts a total production of 24.2 Mt over the life of the Capricorn Copper mine. As shown below, the experts do not agree on how cashflows attributable to the 9.7 Mt of non-Ore Reserve Mineral Resources should be treated for valuation purposes.

534 Mr Dawson derived the cash flow of Capricorn Copper by adopting the production forecasts or 'technical assumptions' in the LOM model (including the forecasted recovery rates and concentration grades). In summary, he assessed the appropriate discount rate to be between 8-9 per cent. By contrast, although adopting this discount range for most of the forecast cashflows, Ms Wright applied a specific or extra risk premium of 14.8 per cent to forecast cashflows resulting from the 9.7 Mt of Inferred Resources or unclassified material, so as to reflect the risk that the forecast copper recovery rate in the LOM model (and the Prospectus) would not be reached for this material. She relied on the fact that historic concentration rates from December 2018 to March 2021, and recovery rates from November 2018 to May 2020, were below that estimated in the Prospectus.

535 In reaching her view that a specific risk premium ought to be applied, Ms Wright relied upon:

(a) extracts of the BDA report, to the effect that there was an increased risk, because Inferred Resources and unclassified material had been included in the LOM model;

(b) several paragraphs of the International Valuation Standards (IVS), most relevantly, general standard [50.38]. This provides that, if a valuer determines that certain risks included in the forecast cash flow for an asset have not been captured, the valuer must adjust the forecast or adjust the discount rate; and

(c) paragraph [8.5] of the 'Australasian Code for Public Reporting of Technical Assessments and Valuations of Mineral Assets' (commonly known as the VALMIN Code). This provides that Mineral Resources beyond Proved and Probable Ore Reserves may be included in the valuation but only if, amongst other things, they are consistent with the JORC Code, and 'discounted in a manner that is commensurate with the increased uncertainty'.

536 I pause to note that the VALMIN Code purports to provide a set of fundamental principles, minimum standards and supporting recommendations to assist in the preparation of relevant 'Public Reports of Mineral Assets', namely reports filed within the Australian regulatory framework comprising the Corporations Act 2001, ASIC Regulatory Guidelines and the various ASX Listing Rules.

537 As a result, Ms Wright considered that it was necessary for her to make an evaluation of the reasonableness of the forecast information relating to the non-Ore Mineral Resources. Ms Wright said that there were a number of ways in which she could have considered the impact of forecast cash flows resulting from the non-Ore Mineral Resources. She gave evidence that given the limited information available to her relating to the LOM model (the experts were not given the ability to seek further information relating to the LOM model or able to amend the specific cash flows provided within the LOM model), she considered the application of a specific discount rate was the most appropriate to reflect the different risk profile that attached to the cashflows from the non-Ore Mineral Resources.

538 In response, Mr Dawson gave evidence that this evaluation was unnecessary, in light of the information provided to the experts. He gave evidence that:

(a) the LOM model had already been 'risked' because it provides that, of the total Mineral Resources of 62.5 Mt, only 24.2 Mt was assessed to be economically viable over the life of the mine, with the result that Ms Wright's approach 'double count[ed]' the risk in the cashflows;[106]

(b) the LOM model had been prepared and/or reviewed by mining experts and geologists, namely SRK Consulting (SRK) and BDA;

(c) historic recovery rates and concentrate grades are not relevant, as concentrate grades and recoveries vary over the life of the mine; and

(d) based on his experience in valuing mines, it was not unusual for mine plans to incorporate some amount of unclassified or other lower confidence material.

539 The plaintiffs challenged Mr Dawson on this evidence. Mr Dawson considered that neither he nor Ms Wright was bound by the VALMIN Code, as they are accountants who do business valuations and not mining consultants and, in any event, he did not agree with parts of the VALMIN Code. Having said that, he maintained that the discount referred to in paragraph 8.5(e) of the VALMIN Code had been applied in the LOM model which, as noted above, was prepared by EMR Capital and SRK, and reviewed by SRK and BDA. In these circumstances, he considered that the discount rate he adopted took into account the risks associated with production consistent with the BDA report. As to standard [50.38] of the IVS, Mr Dawson gave evidence, in substance, that he did not have regard to this in preparing his valuation, and that he considered it to be ambiguous.

540 As to the BDA report, Mr Dawson stated that, whilst the report considered many different factors, it ultimately concluded that forecast production in the LOM model was 'realistic and achievable'.[107] Mr Dawson was taken to other passages of the BDA report that referred to the significant amount of inferred resources and unclassified material in the LOM model. He gave evidence, however, that the BDA report provided that, as further geological testing was undertaken, confidence in production and cash flows would be advanced, and the forecast in the LOM model would be achieved. Further, Mr Dawson gave evidence that if there are specific risks for a mining project, best valuation practice is to reflect those risks in cash flows, not in a discount rate. He relied upon the independent expert report of Grant Samuel in relation to the proposed acquisition of Oz Minerals. Mr Dawson maintained that all of the risks had been addressed in the BDA report.

541 Based on this evidence and Mr Dawson's report, the plaintiffs contend that Mr Dawson's valuation was fundamentally flawed, by reason of his failure to make any adjustment for the risks associated with the inclusion of inferred resources and unclassified material in the LOM model. They submit that, as a result, his valuation was inconsistent with valuation standards (including the IVS and the VALMIN Code), because he assumed that all inferred resources and unclassified material would be realised and become economically viable.

542 The Sellers submit, in substance, that Mr Dawson was entitled to rely upon the mining experts and geologists who prepared and reviewed the LOM model, being SRK and BDA. They contend that the LOM model was already 'fully risked', because 38.3 Mt of the total mineral resource had already been excluded from the production forecast, therefore Mr Dawson's valuation was compliant with industry best practice and the relevant codes.

543 I am not satisfied that a specific risk premium of the kind asserted by Ms Wright ought to be adopted in respect of the projected cashflows relating to the 9.7 Mt of non-Ore Mineral Resources.

544 First and significantly, Mr Dawson has vastly more experience in valuing mining assets over many years while Ms Wright's valuation experience includes only one valuation of a mining project. In my view, given his greater experience, I ought give more weight to Mr Dawson's opinion as to whether a specific risk premium ought to be adopted in respect of the projected cashflows relating to the 9.7 Mt of Inferred Resources and unclassified material.

545 In this context, I note that there was disagreement between the parties as to whether or not other Independent Expert Reports identified by Mr Dawson applied a specific risk premium in the discount rate in respect of Inferred Resources and unclassified material. Mr Dawson, who referred to 16 Independent Expert Reports (IERs), concluded that none of the IERs applied it. Ms Wright gave evidence to the contrary, concluding that nine of the 16 IERs included a specific risk premium. As I was not taken to the relevant IERs, I have not been able to form any concluded opinion on this issue.

546 Second, Ms Wright did not provide a substantive response to Mr Dawson's evidence that her approach effectively amounted to 'double risking'.

547 Third, the plaintiffs submit that Mr Dawson has assumed 'all inferred resources and unclassified material [in the LOM model] will be realised'.[108] That submission is inaccurate. This is because the Prospectus records a total of 23.3 Mt of Inferred Resources for the Capricorn Copper mine, and the LOM model assumes that only 9.7 Mt of Inferred Resources and unclassified material will be recovered over the life of the mine.

548 Fourth, I acknowledge that there are some contradictory statements in the BDA report. In substance, whilst the report acknowledges that there is 'low level of geological confidence associated with Inferred Mineral Resources and ... unclassified material', BDA considered that, overall, the 'forecast mine production is realistic and achievable'.[109] As a result, in the absence of additional technical or other expert evidence, I am unable to draw the conclusions from the BDA report of the kind submit by the plaintiffs.

549 Fifth, and relatedly, to the extent that the plaintiffs rely upon the evidence of Mr Chomley to contend that the LOM model was out-of-date as at 7 June 2021,[110] due to issues with the tailings dam (leading to downgrades in production estimates) and fallen ground at the Mammoth pillar,[111] I accept that these issues effected the accuracy of the LOM model. However, Mr Chomley appeared to concede in cross-examination that any downgrades in production would be temporary. It is difficult to make any concluded assessment as to the extent of any downgrades in production estimates. Based on the evidence of Mr Chomley, there would be a reduction in production by approximately 25,000 tonnes per month (a 16 or 17 per cent reduction) until at least December 2021.

550 Further, even if I were satisfied that a risk premium ought to be applied to a portion of the 9.7 Mt of non-Ore Reserve Mineral Resources in the LOM model, I am not satisfied, based on Ms Wright's evidence alone, as to why a specific risk premium of 10 per cent should be adopted. Whilst I accept that the application of a specific risk premium is subjective, given that Ms Wright has limited experience in valuing mining projects, it is difficult to ascertain how she determined, even on a broadbrush basis, the level of risk associated with the production of copper from Inferred Resources and unclassified material in a copper mine generally, or in this LOM model, specifically.

551 As to the tax loss issue, the real dispute between the experts concerns whether it was appropriate for any person undertaking the assessment, for the purposes of the escrow clause, to take into account the carried forward tax losses as an asset of CCH.

552 In the joint report, Mr Dawson considered that they ought to be taken into account, and attributed a value in the range of AUD$49.1 million to AUD$51 million for the available tax losses of CCH, when assessing the equity value of CCH. By contrast, Ms Wright did not take them into account at all. In the alternative, if they were to be taken into account, Ms Wright attributed a value of AUD$36.9 million to those tax losses, based on the discount rate applied by her, and referred to above.

553 Mr Dawson gave evidence that these losses had value to a hypothetical purchaser, because they could be used to offset an equivalent amount of profit generated by CCH in the future. This was on the basis of provisions in sub-div 165-a of Income Tax Assessment Act 1997 ('ITAA'). These provisions provide that, in summary, for the purchaser of a company to claim some of the carried forward tax losses of that company, the company must relevantly satisfy the 'business continuity test' by carrying on the same business, or a similar business, through the relevant period contained in ss 165.210 and 165.211 of the ITAA. I will not set them out in these reasons. For convenience, I accept as accurate the difference between the two tests as summarised in the Australian Tax Office's Law Companion Ruling 2019/1, noting in respect of the business continuity test that:[112]

(a) while the similar business test is comparable to the same business test, the similar business test allows a company to 'engage in new business activities and transactions that evolve from their pre-existing business'; and

(b) the similar business test focuses on 'the identity of a business, as well as continuity of business activities and use of assets to generate assessable income'.

554 Mr Dawson gave evidence that a natural buyer of CCH 'could quite reasonably be expected to be' an entity with tax attributes that would allow full utilisation of these losses. This was based on his experience as a chartered accountant and his consequent familiarity with tax issues in that role, including in valuations of companies which have tax losses. By contrast, Ms Wright considered that it was not within her expertise to opine on whether the carried forward tax losses could be transferred; and that it was not reasonable to assume that a hypothetical purchaser of CCH could utilise those losses. She relied upon statements in the Prospectus, to the effect that 'the acquired net assets exclude deferred tax assets in respect of historical tax losses to the extent those tax losses are not considered probable of recovery, in accordance with accounting standards...'.[113] In response, Mr Dawson considered that the statement in the Prospectus was only relevant to the IPO , and not relevant to the 3rd scenario.

555 The plaintiffs also relied upon paragraphs [30.7] and [180.1] of the IVS, to the effect that factors specific to a particular buyer and not available to participants generally are excluded inputs in market valuation. Paragraph 180.1(d) provides that entity specific factors that may not be available to participants include tax benefits or burdens unique to the entity. Mr Dawson gave evidence that those paragraphs are directed towards excluding limited factors unique to a particular purchaser (for example, synergies arising from geographical proximity between a buyer's existing assets and the assets being valued), and not factors that relate to the market of potential buyers of the assets.

556 I am conscious that I did not have detailed argument on this issue. Nevertheless, I generally accept and prefer the evidence of Mr Dawson. This is for a number of reasons. First, Ms Wright conceded that she did not have the relevant expertise: by contrast, Mr Dawson was not challenged on his experience in considering such issues. Second, I generally agree with Mr Dawson's approach to particular standards in the IVS which appear to relate to particular purchasers and not to the market of potential buyers of the assets. Ms Wright gave evidence that she did not seek to define the market of potential buyers.

557 Third and most relevantly, I consider that the carried forward tax losses would be available to likely purchasers of CCH, being market participants. That is to say, on the basis of the 'similar business' test contained in s 165-210 of the ITAA, the likely purchaser of the CCH business in the market generally would be able to make use of CCH's carried forward tax losses. Such a purchaser would have, at least, the option of continuing to operate the Capricorn Copper mine to comply with the 'same or similar' business test. In addition, in my view, it is significant that Ms Wright was not able to identify any potential purchaser not able to make use of the tax losses, and that the Deloitte Relative Valuation report attributed value to these losses.

558 Finally and relatedly, I am not satisfied that the statement in the Prospectus which related to an initial public offering has application in a non-IPO scenario, such as the 3rd scenario.

559 As noted above, Ms Wright's position is that, if the Court accepts that the carried forward tax losses ought to be considered as an asset of CCH, they should be valued at AUD$36.9 million. This is lower than the range of AUD$49.1 million to AUD$51 million provided by Mr Dawson. The difference between the experts is due to their adoption of different discount rates. As noted above, I have generally accepted that Mr Dawson's discount rate ought to be applied to the forecast cashflows of the Capricorn Copper mine in the LOM model, and that no specific risk premium should be applied to the 9.7 Mt of non-Ore Reserve Mineral Resources in the LOM model. As a result, I accept Mr Dawson's assessment that the value of the carried forward tax losses ought to be in the range of AUD$49.1 million to AUD$51 million.

560 As a result, the answers to issues 4(2)(b), 5, and 6 are as follows:

(a) issue 4(2)(b)(i): No, as at 7 June 2021 the Earnout Payment was not reasonably foreseeably owing in future if the IPO did not proceed;

(b) issue 4(2)(b)(ii): Yes, as at 7 June 2021 the Earnout Payment was reasonably foreseeably owing in future if the IPO did proceed based on the 2nd scenario only;

(c) issue 5: Unnecessary to decide; and

(d) issue 6: Unable to form any concluded view.

561 In light of my conclusions in respect of issues 1-6, the answers to issues 1 and 3 are as follows:

(a) issue 1: No; and

(b) issue 3: Yes, based on the answer to issue 4(2)(b)(ii) on the 2nd scenario only.

562 Issue 7 is in substance whether, if the answer to issue 3 is yes, the fact that EMR6B did not pay an amount equal to the Earnout Payment into an escrow account on 7 June 2021 constituted an Event of Default under cl 6.1(b). It is unnecessary to consider this issue in detail as the plaintiffs concede that if the answer to issue 3 is yes, any such failure would constitute an Event of Default under cl 6.1 of the Share Mortgage. This concession is consistent with the definition of an 'Event of Default' set out in [90] above which includes a breach of 'any written undertaking given at any time to the Secured Parties'. In my view, it is clear that a breach of cl 5.1(c)(ii) is a breach of an undertaking given cl 5.1 sits under the heading 'Additional undertakings concerning Collateral'. As a result, the answer to issue 7 is yes.

563 Issue 8 is in substance whether, if the answer to issue 7 is yes, then upon demand being made by the Agent on 18 June 2021, the Earnout Payment became immediately due and payable. Clause 6.2 of the Share Mortgage is the relevant clause which provides:

The Encumbrance created by this mortgage will become immediately enforceable if an Event of Default occurs. If any Event of Default occurs then, during the period it subsists, at the option of the Agent and despite any delay or previous waiver of the right to exercise that option:

(a) the Secured Money becomes immediately due and payable on demand from any Secured Party;

(b) all Powers not previously exercisable become exercisable; and

(c) any rights of the Grantor to deal with the Collateral (other than through a Receiver appointed under this mortgage) immediately cease.

564 Whether or not the Earnout Payment falls within the definition of Secured Money in cl 1.1 of the Share Mortgage, given my finding of a breach of cl 5.1(c) (ii)[114] which constituted an Event of Default, I am satisfied that the reference to 'Secured Money' in cl 6.2(a) ought properly include a reference to the Earnout Payment which was not paid under cl 5.1(c)(ii). In my view, any other reading of those words Secured Money in cl 6.2(a) of the Share Mortgage, in light of a breach of the undertaking in cl 5.1(c), does not accord with the objective intention of the parties in light of the obligation under cl 5.1(c).

565 However, as set out in section 6.6 above, in the 10 June 2021 letter, the Sellers required any such breach to be remedied by 15 June 2021. The Sellers made a clear demand for payment of the Earnout Payment payable under the escrow clause by letters dated 17 and 18 June 2021. In my view, the Earnout Payment became due and payable at that time.

566 Issue 9 is premised on the basis that the answer to issue 3 is yes and the answer to issue 7 is no. Given that I have concluded that the answer to each of issue 3 and 7 is yes, it is unnecessary to decide issue 9.

567 Issue 10 is in substance whether the Consideration shares form part of the Collateral from 7 June 2021. The basis of the Sellers claim is far from clear. Paragraph [50] of the FADCC pleads breaches of cll 5.2(g) and (h) and cl 15.1 of the Share Mortgage by failing to deliver up the Consideration shares. While no loss is alleged to have suffered, a declaration for delivery up is sought. In their written closing submissions, the Sellers submit that this was an 'alternative' claim for the Earnout Payment under cll 5.2(g) and (h) of the Share Mortgage if they are wrong on their interpretation of cl 6.1(a) of the Share Mortgage and cl 5.1(c)(ii) of the Share Mortgage. As set out in relation to issue 8, I have formed the view that the Earnout Payment became due and payable under the Share Mortgage.

568 By contrast, the Sellers in their aide memoire on the issues for determination submit that the answer to issue 10 is yes. So too, the plaintiffs in their written closing submissions submit that if the answers to issues 1 and 3 are yes, such that EMR6B was not entitled to a release of the Collateral, the plaintiffs conceded the Consideration shares form part of the Collateral.

569 In these circumstances, I am unsure if it is necessary for me to consider issue 10. For completeness, in my view, on the proper construction of the Share Mortgage, the Consideration shares form part of the Collateral. This is because, as noted in section 5.1 above:

(a) Collateral was defined in the Share Mortgage to mean 'all of [EMR6B's] rights and interests and all entitlements (including damages), dividends proceeds and other benefits accruing or at any time to or in favour of [EMR6B] in each case in respect of the Relevant Security and each Additional Right';

(b) Relevant Security was defined in substance to mean any securities created in or issue by CCH 'representing ten per cent (10%) of all the [securities] created in or issued by [CCH] held by EMR6B or an Affiliate of [EMR6B] as at or any time after the date of this mortgage including for the avoidance of doubt the 6,303,386 issued ordinary shares held by [EMR6B] in [CCH] represented by share certificate 13'; and

(c) Additional Right was defined in substance to mean EMR6B's title, rights or interest (whether present or future) to take up shares in another corporation or entity or resulting from any consolidation in connection with the Collateral.

570 As a result, in my view the Consideration shares were the proceeds of or other benefits accruing from the original Collateral, being 10 per cent of EMR6B's shares in CCH at the time of the CCH SSPA, with the result that 10 per cent of the Consideration shares now fall within the definition of Collateral. However, in light of the uncertainty regarding the Sellers' claim, I will not answer issue 10 until hearing further from the parties.

571 Issue 11 in substance is whether the failure of EMR6B to deliver up the Consideration shares immediately after 7 June 2021 constituted an Event of Default. In my view each of cll 5.2(g) and (h) was an written undertaking given by EMR6B. Clause 5.2 is headed 'Undertakings regarding the Collateral'. As a result, for the same reasons as set out in relation to issue 7, I am satisfied that this falls within cl 6.1(b) of the definition of Event of Default. As noted in section 6.6, by letter dated 18 June 2021, the Sellers made a request for the delivery up of the title documents with respect to the Consideration shares. EMR6B failed to do so.

572 I note that the plaintiffs concede that if the answer to issues 1 and 3 are yes, such that EMR6B was not entitled to release of the Collateral, the failure of EMR6B to deliver up the Consideration shares constituted an Event of Default. However, in light of the uncertainty regarding the issue 11, which in my view is related to issue 10, I will not answer issue 11 until hearing further from the parties.

(a) As a result, the answers to issues 7-11 are as follows: issue 7: Yes;

(b) issue 8: The Earnout Payment became due and payable on about 17 June 2021;

(c) issue 9: Unnecessary to decide; and

(d) issues 10 and 11: I will not answer until hearing further from the parties.

11. ISSUE 12: TORT OF INDUCING BREACH OF CONTRACT

573 Issue 12 for determination concerns whether, by entering into the CCH SSPA and the 29Metals Escrow Deed on 7 June 2021, 29Metals intentionally induced EMR6B to the breach of the Share Mortgage. As set out in section 6.4:

(a) under the CCH SSPA, EMR6B transferred its shares in CCH (owned in its own name or via Lighthouse) to 29Metals; and

(b) under the 29Metal Escrow Deed, 29Metals agreed to hold the shares on 29Metals owned by EMR6B immediately following the IPO until early February 2022.

As a result, the Sellers contend that 29Metals is liable to pay damages (being the equivalent of the Earnout Payment, interest and costs) arising from its conduct in inducing and procuring EMR6B to enter into the CCH SSPA in breach of the Share Mortgage.

574 At the outset, it is appropriate to record that the alleged liability which forms the basis of issue 12 received little attention at trial.

575 I have concluded that EMR6B breached cl 5.1(c) of the Share Mortgage by dealing with the Collateral in circumstances where it failed to pay an amount equivalent to the Earnout Payment into an escrow account in accordance with that clause. As these reasons disclose, that breach was based upon the proper construction of EMR Investors in cl 6.1(a) of the 2018 SSA which affected the matters to be taken into account under the escrow clause. As a result, I will consider issue 12 in this context.

11.1 The nature of the tort and the pleaded case

576 Before addressing the submission of the parties, I wish to record that the parties do not dispute the general principles to be applied in claims for knowingly inducing a breach of contract, as set out in Daebo Shipping Co Ltd v The Ship Go Star ('Daebo'):[115]

(1) there must be a contract between the plaintiff (or applicant) and a third party;

(2) the defendant (or respondent) must know that such a contract exists;

(3) the defendant must know that if the third party does, or fails to do, a particular act, that conduct of the third party would be a breach of the contract;

(4) the defendant must intend to induce or procure the third party to breach the contract by doing or failing to do that particular act;

(5) the breach must cause loss or damage to the plaintiff.

577 It is the application of these principles to facts of this case that was in dispute between the parties. It is to the facts of this case that I now turn.

578 The Sellers alleged in their FADCC that, as at 7 June 2021:

(a) 29Metals had knowledge of the existence and the terms of the contract documents;[116]

(b) 29Metals knew that entry into and completion of the sale under the CCH SSPA would result in a breach of the Share Mortgage and that entry into the 29Metals Escrow Deed was in breach of the Share Mortgage;[117]

(c) 29Metals intended to induce and procure EMR6B to commit these breaches;[118] and

(d) as a consequence of the above breaches, the Sellers suffered loss and damage.[119]

579 The particulars in support of the allegation in (a), (b) and (c) above were the same, focusing on knowledge held by individuals within 29Metals, namely:

Particulars

29Metals' knowledge is to be inferred from the following matters:

1. Mr Owen Hegarty was an EMR Capital nominee non-executive director and Chair of 29Metals;
2. Mr Hegarty had knowledge of the existence and the terms of the [contract documents] because he was, at all material times, the Executive Chairman of EMR Capital Management Limited;
3. Mr Peter Albert was the Managing Director and Chief Executive Officer of 29Metals;
4. Mr Albert had knowledge of the existence and the terms of the [contract documents] because he was, at all material times, the Operations Director of CCH;
5. Mr Peter Herbert was the Chief Financial Officer of 29Metals;
6. Mr Herbert had knowledge of the existence and the terms of the [contract documents] because he was, at all material times, an Investment Director at EMR Capital and was directly involved in the negotiation of the 2018 SSA and the Share Mortgage.[120]

(a) admit that 29Metals had knowledge of the existence and the terms of the contract documents;[121]

(b) deny that 29Metals knew that entry into and completion of the CCH SSPA and/or the entry into the 29Metals Escrow Deed resulted or would have resulted in a breach of the Share Mortgage, and further they:

(i) deny that entry into either of these agreements was or would have resulted in a breach of the Share Mortgage;

(ii) allege that no proper particulars had been provided of these allegations;[122]

(c) deny that 29Metals intended to induce and procure EMR6B to commit these breaches and allege that no proper particulars had been provided of the alleged inducement;[123] and

(d) deny that as a consequence of the above breaches, the Sellers suffered loss and damage.[124]

581 The Sellers contend that they adequately pleaded the elements of the tort of intentionally inducing breach of contract. In short, they submit that entering into the CCH SSPA constituted a breach of the Share Mortgage as the transfer to 29Metals was a dealing with the Collateral in contravention of cl 5.1(c) of the Share Mortgage. The Sellers submit that, for liability to attach, all that was required was that 29Metals know there was a breach of the Share Mortgage (including being wilfully blind or recklessly indifferent as to whether there was a breach) and that 29Metals had an intention to cause that breach.

582 The Sellers contend that knowledge of the Share Mortgage is sufficient to ground an intention to interfere with the Sellers' contractual rights. They relied upon the comments of the Court outlined in Daebo to the effect that:

(a) the 'gravamen of the tort is the defendant's intention to induce or procure the breach in the knowledge that such a breach will interfere with the plaintiff's contractual rights'; and

(b) 'knowledge of the contract may be sufficient for the purpose of grounding the necessary intention to interfere with contractual rights ... Reckless indifference or wilful blindness can amount to knowledge for this purpose'.[125]

583 The Sellers submitted that, in this case, having regard to the Share Mortgage, including the definition of Secured Money, the Court should be satisfied that there was a 'sufficient likelihood' of breach evident to 29Metals, from which the Court could infer requisite knowledge and intention. That is to say, 29Metals' knowledge of the Share Mortgage is 'sufficient to ground an intention to interfere with the Sellers' contractual rights'.

584 In closing oral argument they also relied upon entry into the Indemnity Deed to establish intention. As set out in section 6.4 above, under that Deed, EMR6B undertook to retain AUD$13 million of proceeds of the IPO owing to EMR6B. This was to be held pending the resolution of the dispute between EMR6B and the Sellers as to whether an amount equal to the Earnout Payment should have been paid by EMR6B into an escrow account in accordance with cl 5.1(c) of the Share Mortgage. Under the Indemnity Deed, EMR6B also agreed to indemnify 29Metals in respect of any claims by or liability incurred by 29Metals in relation to that dispute.

585 To the extent necessary, the Sellers submit the Court may a draw an inference with respect to such an intention where 29Metals failed to lead evidence-in-chief to the contrary from: (a) Mr Herbert or Mr Chomley who gave evidence on behalf of EMR6B and 29Metals; and/or (b) 'any other person who may have provided such evidence', for example Mr Hegarty was, as at 7 June 2021, a member of the Investment Committee and chair of 29Metals.

586 Further, for the first time in closing submissions, the Sellers relied upon the comments of Mr Tuck (who they assert was the legal counsel for EMR Capital) referred to in the affidavit of Mr Hallion which was tendered by consent. Mr Hallion deposed to a Zoom conference on 6 May 2021 between Mr Chomley, Mr Herbert and Mr Tuck on the one hand, and Mr Hallion and Mr Watson on the other. Mr Hallion deposed that in that Zoom conference Mr Tuck said words to the effect that Mr Tuck had read the Share Mortgage from 'cover to cover ... and he was a smart lawyer and he could make an agreement read the way he wanted it to read but that the proposed IPO could not proceed or fit under the terms of the existing agreements' (the Tuck statement). The Sellers submit that this statement was made in the context of a discussion as to why the sale of the shares in CCH to 29Metals and the obligation to pay funds into escrow must occur before the completion of the IPO.

587 The plaintiffs dispute any liability for this tort on a number of bases.

588 First, the plaintiffs contend that the Sellers have not pleaded, or provided necessary particulars of, the essential elements of the tort of intentionally inducing breach of contract, most relevantly that 29Metals in fact 'induced' the breach of the Share Mortgage by EMR6B. The plaintiffs submit that cases prior to and following Daebo have demonstrated a need to prove a causal link between the act of the defendant and the breach of contract in question. They rely upon the comments of Street J in Short v City Bank of Sydney ('Short v City Bank'),[126] that:

The words 'induce' and 'procure' in their ordinary significance, I think, convey the idea of persuasion or contrivance, and I think that a person complaining of a breach of contractual relations brought about by these means must show that the person whose actions are complained of did something in the nature of effectually persuading or prevailing upon the other party to the contract to violate [their] obligations under it. The persuasion may take the form of advice or friendly solicitation, or it may take the form of intimidation or molestation, but in every case I think that it must be shown that the defendant deliberately intervened between the contracting parties, either with the express design of depriving the plaintiff of the benefit of [their] contract, or under such circumstances that [they] must have known that the effect of [their] intervention would be to deprive the plaintiff of that benefit.[127]

589 They also rely upon the comments of Beach J in the more recent decision of State Street Global Advisors Trust Company v Maurice Blackburn Pt Ltd (t/as Maurice Blackburn Lawyers) (No 2) ('State Street'),[128] that:

[421] Merely facilitating a breach, or entering into a transaction that is inconsistent with the contracting party's obligations, is insufficient. It must be established that the relevant impugned conduct operated on the will of the contracting party. If the contracting party has already decided to commit a breach, no liability attaches to the mere acceptance of the benefit of that breach.

[422] The element of inducement or procurement represents a high bar. It is not enough for the alleged wrongdoer to know that a breach may well happen or is the natural and probable consequence of the alleged wrongdoer's activities; he must take some step which manifests an intention to induce the breach. What must be shown is some persuasion, encouragement, assistance or pressure that is aimed at the contract such that there is a clear causal link between the respondent's conduct and the breach.[129]

590 As a result, the plaintiffs submit that the Sellers are prevented from asking the Court to draw a Jones v Dunkel inference from the plaintiffs' failure to 'call evidence in response to an incompletely pleaded cause of action'.[130]

591 Second, as to the Sellers submission that intention could be inferred, the plaintiffs contend that nothing beyond knowledge was particularised as intention. In any event, the plaintiffs reject the notion that intention could be inferred from knowledge in the facts of this case for the following reasons:

(a) the ambiguity in the documents;

(b) the warranties in the transaction documents that were given by the parties to one another;

(c) the fact that it has never been put that those warranties were false, not to any of the witnesses or any of the people who signed those documents; and

(d) the extent to which EMR6B, through Mr Chomley, went to analyse the operation of the agreements, determine the facts and apply those facts to the circumstances, first in their correspondence with Mr Hallion leading up to June 2021, and secondly in Mr Chomley's analysis.

592 Further, the plaintiffs refer to the agreed fact that 29Metals was incorporated for the purpose of acting as the new holding company, submitting that the Sellers' argument 'puts the cart before the horse in saying that 29Metals induced EMR6B to do that which 29Metals had been incorporated by EMR6B for the purpose of doing'.[131]

593 Third, the plaintiffs contend that the material relied upon in the Sellers' written closing submissions went far beyond their opening submissions - which were based only on the agreed fact that 29Metals knew the terms of the 2018 SSA and the Share Mortgage. By contrast, in closing submissions, the Sellers relied upon the Tuck statement and the failure to call relevant witnesses in response to the Tuck statement.

594 As to the Sellers' reliance on the Tuck statement, the plaintiffs seek an order that this evidence be excluded or its use limited under ss 135 or 136 of the Evidence Act 2008, respectively. In summary, this is because the Sellers did not indicate they would rely on the Tuck statement prior to written closing submissions. The plaintiffs refer to a number of matters. First, Mr Hallion's affidavit was tendered by consent and without being cross-examined in circumstance where the plaintiffs were unaware that the Tuck statement formed any part of the Sellers case. If the Sellers intended to rely upon the Tuck statement as evidence of 29Metals knowledge or intent, the Sellers were under an obligation to put the plaintiffs on notice of this under r 13.10(3)(b) of the Supreme Court (General Civil Procedure) Rules 2015: they did not do so. Senior counsel submitted in substance that, if he was on notice of the significance of the Tuck statement, he would have called Mr Tuck and other witnesses and also cross-examined Mr Hallion. I accept this submission. Thus, the plaintiffs' failure to cross-examine Mr Hallion or call other evidence to contradict the Tuck statement ought not be used against them: rather the Tuck statement must be excluded.

595 Fourth, if the Seller's submissions in closing address were to be considered by the Court, the following objective facts demonstrate that 29Metals lacked the requisite intention to induce EMR6B to breach the Share Mortgage:

(a) clause 2.3(a) of the CCH SSPA includes an express acknowledgement that the CCH shares were sold to 29Metals subject to the Share Mortgage;

(b) clause 2.3(b) of the CCH SSPA includes an express undertaking by 29Metals to comply with the Share Mortgage; and

(c) clause 5.1(c)(i) of the CCH SSPA includes a warranty by EMR6B that the execution, delivery and performance of that agreement did not constitute a breach of any agreement to which it is a party, namely the Share Mortgage.

596 Finally, if the Tuck statement is not excluded, the plaintiffs submit that the Tuck statement is inadequate to support an inference of intention on the part of 29Metals to induce EMR6B to breach the Share Mortgage. This is because the Tuck statement was made at a time when Mr Tuck was a consultant at EMR6B (not legal counsel as asserted by the Sellers) and before he had a role with 29Metals, which was incorporated on 27 May 2021. Further, the plaintiffs note that Mr Tuck was never a director of 29Metals so his intention is not relevant. In any event, the Tuck statement was overridden by cl 5.1(c)(i) of the CCH SSPA as set out above.

597 The Sellers opposed any application to exclude the Tuck statement contending that the plaintiffs had not demonstrated any prejudice as they had the opportunity to file evidence for Mr Herbert to agree or disagree with the Tuck statement in Mr Hallion's affidavit. Ultimately, the Sellers did not seek to rely on what Mr Tuck said but on the fact that Mr Herbert was present when the Tuck statement was made and failed to give evidence about it. Senior counsel for the plaintiffs responded that this was first time they became aware that the Sellers put their case on this basis.

598 In my view, the Sellers have not established their claim against 29Metals.

599 First, I acknowledge that knowledge of the contract alone may be sufficient for the purpose of grounding the necessary intention to interfere with contractual rights. This is because knowledge and intention are often inter-related. I also acknowledge that wilful blindness or reckless indifference may contribute to a finding of knowledge. But whether such knowledge may ground the necessary intention to induce another to breach its contract very much depends on the facts of each case. That is to say, while knowledge of the precise term which is breached is not always necessary because knowledge of the effect of the term will suffice, it will depend on the facts of each case.[132]

600 I am not satisfied that 29Metals had requisite knowledge that, by entering into the CCH SSPA and the 29Metals Escrow Deed, EMR6B was in breach of the Share Mortgage. This is because, as these reasons disclose, the contractual provisions of the 2018 SSA and the Share Mortgage are complex and far from clear. With respect, I would adopt the following observations of Beach J in State Street on the question of knowledge of the contract:

Further, let me say something more on the question of knowledge of the contract, if it be said that that is the foundation from which intention can be established by inference. In some cases, where the contract is of a standard type or a standard class of contract, it may not be necessary for the tortfeasor to have precise knowledge of its terms for intention to be inferred. But where one is not dealing with such standard scenarios, in order for the claimant to establish intention by inference from knowledge, it may be necessary to establish knowledge of more precise aspects or terms of the contract. This will all depend on the nature of the case being advanced and the type of breach being asserted.[133]

601 The Sellers did not address the content of the nature of the 'breach' for the purpose of its claim against 29Metals. In my view, it is significant that, pursuant to my earlier conclusions, the breach that I have found is based upon the construction of the term 'EMR Investors' used in cl 6.1(a) of the 2018 SSA. As these reasons demonstrate, that term is relevant to the determination of whether money ought be paid in accordance with the escrow clause. But for the construction of EMR Investors I have adopted, I would have concluded that EMR6B was not in a breach of the escrow clause by failing to pay the equivalent of the Earnout Amount into escrow in accordance with that clause on the basis that the Earnout Amount 'was reasonably foreseeably owing in future'. Indeed, I have accepted the evidence of Mr Chomley, based on what I have called the plaintiffs' construction of the escrow clause in the context of cl 6.1(a) of the 2018 SSA contended for at the time, that there was no requirement to pay an amount equivalent to the Earnout Payment into escrow in accordance with the Share Mortgage.

602 It is true that the parties were in dispute before 7 June 2021 as to whether the Earnout Payment fell within the escrow clause. However, on my reading of the relevant correspondence between the parties up to 7 June 2021 (ie prior to entering into the CCH SSPA), that construction of EMR Investors was not raised at any time by the Sellers. Certainly, the Sellers did not suggest during this proceeding that it was raised in correspondence. Rather, the issues related to the likely returns to EM6RB arise from its interest in the Capricorn Copper mine alone, from the Relevant Transaction or from the IPO.

603 Thus, on the evidence before me, it appears that the construction of EMR Investors which I have adopted was not raised and was not a basis upon which the Sellers asserted the Earnout Payment fell within the escrow clause. Given the complexity of these contract documents and their definitions, in order for knowledge supporting an intention to induce to be established, it would be necessary to establish that 29Metals knew, turned a blind eye or was recklessly indifferent to the nature of the breach that occurred.

604 In my view this approach is also consistent with observations of Isaacs J in Short v City Bank, in its appeal to the High Court, who stated that:

[If the defendant] reasonably believed [the contract] did not require a certain act to be performed, [the defendant's] inducing a party to the contract to do something inconsistent with it could not be regarded as an inducement or procurement knowingly to break the contract ... the terms of an agreement and its true construction, for it may be very complicated, and the acts of the parties in relation to it are circumstances without knowledge of which reasonably brought home to the mind no [person] can be said to intend consequences regarding the breach of the agreement.[134]

605 In reaching this view, I am conscious of the contents of the CCH SSPA and the 29Metals Escrow Agreement. I have also had regard to the terms of the Indemnity Deed although it was only relied upon on oral argument. These agreements informed 29Metals of a dispute as to whether the Earnout Payment was payable under the escrow clause based upon likely returns to EMR6B.

606 I accept that if 29Metals as at 7 June 2021 knew, turned a blind eye or was recklessly indifferent to the substance or gist of the proper construction I have found, that might be a basis to infer intention to induce a breach of contract. But the Sellers have not put forward evidence that any relevant person within 29Metals was aware of the possibility of the construction of EMR Investors.

607 In these circumstances, I do not consider that I am able to form any adverse inference against 29Metals based on the rule in Jones v Dunkel.[135] The rule in Jones v Dunkel entitles the trier of fact to take the failure to call a witness into account in deciding whether to accept any particular evidence which relates to a matter on which the absent witness could have spoken.[136] In my view, the failure of the plaintiffs to call relevant witness cannot support an inference that the uncalled evidence would not have assisted the plaintiffs in circumstances where the Sellers have not put forward any evidence that 29Metals was aware of the possibility of the construction of EMR Investors which formed the basis of the relevant breach. As Dixon J said in a slightly different context in Insurance Commissioner v Joyce,[137] the failure to call a witness 'does not authorize [sic] the court to substitute suspicion for inference'.

608 I would only add that the acknowledgements and warranties in the Share Mortgage relied upon by the plaintiffs in cl 2.3(a), 2.3(b) and 5.1(c)(i) suggest that there was no such knowledge on the part of 29Metals. Further the plaintiffs were correct to submit that it was not put to the any of the plaintiffs' witnesses that these were false in any way.

609 In these circumstances, I am unable to conclude that 29Metals had requisite knowledge that there was a breach - or even a sufficient likelihood of a breach, as submitted by the Sellers - of the Share Mortgage, by EMR6B entering into the CCH SSPA or the 29Metals Escrow Deed.

610 In this context, I note that Sellers relied upon the common personnel of EMR6B/EMR Capital and 29Metals to establish knowledge. But there was only limited evidence of common personnel. On the evidence before me, Mr Herbert was not such a person: he was from 1 July 2018 until 2 July 2021 the Investment Director employed by EMR Capital. Mr Herbert commenced as Chief Financial Officer of 29Metals on 2 July 2021, after the CCH SSPA and 29Metals Escrow Deed had been entered into, under an employment contract dated 7 June 2021. In any event, I note that the Sellers did not seek to challenge Mr Herbert about these matters. Each of Mr Albert and Mr Hegarty became a director of 29Metals on its incorporation on 27 May 2021. However, the Sellers did not rely upon any evidence as to any previous role of Mr Albert. Mr Chomley gave evidence that Mr Hegarty was on the Investment Committee. The Sellers did not rely upon any evidence as to any other role of Mr Hegarty within EMR6B or EMR Capital from which he might have been aware of a breach of the terms of the 2018 SSA and the Share Mortgage by the sale of the shares in CCH to 29Metals on 7 June 2021.

611 Second, it follows from my conclusions on knowledge that I am unable to conclude that 29Metals 'intended' to induce or procure EMR6B to breach of the Share Mortgage by entering into the CCH SSPA or the 29Metals Escrow Deed.

612 Third, I am not satisfied that 29Metals 'induced' or 'procured' EMR6B to enter into the CCH SSPA and the 29Metals Escrow Deed. The Sellers made a bald allegation of inducement in the FADCC. But turning to the merits, I agree with the views expressed by Beach J in State Street that some persuasion, encouragement, assistance or pressure is required before any inducement can be found. There was no evidence of such conduct in this case. Rather, I agree with submissions of the plaintiffs that in this transaction it was EMR6B that arranged or procured for 29Metals to be incorporated for the purpose of acting as the new holding company under these agreements, not the other way around.

613 As to the Tuck statement, as noted above, the plaintiffs submit that the Tuck statement should be excluded pursuant to s 135 of the Evidence Act 2008, or otherwise its use should be limited pursuant to s 136. Under s 135, the Court has a general discretion relevantly to admit evidence if its probative value is substantially outweighed by the danger that the evidence might be unfairly prejudicial to a party or be misleading or confusing. Under s 136, the Court has a general discretion to limit the use of evidence may if there is a danger that a particular use of the evidence might be unfairly prejudicial to a party be misleading or confusing.

614 It is not entirely clear how the Sellers rely upon the Tuck statement. In their written closing submissions, the Tuck statement was put on the basis that in the absence of evidence to the contrary, Mr Tuck (presumably as a representative of 29Metals) remained of the view recorded in the Tuck statement. That was sensibly abandoned in oral argument where the Sellers appeared to rely upon the Tuck statement to found a Jones v Dunkel inference against Mr Hegarty.

615 However, I am satisfied that the plaintiffs were not put on notice that the Sellers intended to rely upon Tuck statement in support of the claim against 29Metals until the Sellers' written closing submissions. In my view, this meant that the plaintiffs were denied the opportunity to appropriately defend the claim by cross examining Mr Hallion about the Tuck statement and by having the opportunity to call further evidence relating to the Tuck statement including from the existing witnesses: Mr Herbert and Mr Chomley. I reject any suggestion that it was incumbent upon the plaintiffs to ensure that those two existing witnesses responded to or addressed the Tuck statement when the plaintiffs and their advisors were not aware of the relevance, let alone the significance, of the Tuck statement to the claim against 29Metals. This was unfairly prejudicial to them.

616 In these circumstances, I consider that the probative value of the Tuck statement is substantially outweighed by this unfair prejudice, with the result that I would exclude the Tuck statement under s 135(a).

617 Even if I had not determined to exclude the Tuck statement, I would place little or no weight on it. I repeat that, but for the construction of EMR Investors which I have adopted (which was not raised before 7 June 2021), I would have concluded EMR6B was in breach of the Share Mortgage. The Tuck statement is insufficiently probative to establish sufficient knowledge to ground an intention to interfere with contractual rights, and in my view is not of assistance in my determination of the inducement claim.

1. INDEMNIFICATION OF AGENT'S COSTS TO ENFORCE SHARE MORTGAGE

619 In substance, issue 13 concerns whether the Sellers are entitled to be indemnified under cl 11.6 of the Share Mortgage for the costs of enforcing EMR6B's breach, including by appointing receivers.

620 Relevantly, cl 11.6 of the Share Mortgage provides:

The Grantor will on demand indemnify and keep the Secured Parties indemnified in respect of all Taxes and reasonable Costs incurred by any Secured Party or any Receiver:

(a) in the exercise or attempted exercise of any Power;

(b) as a consequence of the occurrence or subsistence of any Event of Default;

[...]

and the Grantor will be entitled to defend all actions, proceedings, claims or demands brought by any person in relation to any matter the subject of this indemnity.

621 The Sellers submit that the costs of enforcement, including the costs of this proceeding are payable and form part of the Secured Money. As a result, the Sellers contend that the correct construction of cl 11.6 of the Share Mortgage is that EMR6B indemnified the Sellers for their reasonable costs, including for their legal costs, on the standard basis. While conceding that the award of costs is ultimately at the discretion of the Court, the Sellers contend that it is appropriate to make orders consistent with the 'plain and unambiguous' meaning of the contractual provisions in this regard, relying on Vickery J in Taree Pty Ltd v Bob Jane Corporation Pty Ltd.[138]

622 The plaintiffs submit that the question of Costs ought to be reserved until after delivery of the Court's reasons. Nonetheless, if Costs were to be determined, the plaintiffs submit that it is well-established that the Court is not restrained in its discretion to award Costs by an agreement of the parties.[139]

623 Further, the plaintiffs submit that the appointment of receivers was not reasonable, such that any costs incurred by appointing receivers do not fall within the purview of 'reasonable Costs' for the purposes of cl 11.6 of the Share Mortgage. The plaintiffs otherwise submit that determination of what is or is not reasonable should properly be the subject of further submissions after the judgment is handed down.

624 In my view, it is appropriate to reserve this issue until the parties have had the opportunity to consider my findings in this case. As concluded above at [562], I find that the relevant Event of Default under cl 6.1(b) is EMR6B's failure to pay an amount equal to the Earnout Payment into an escrow account on 7 June 2021. It was as a consequence of this Event of Default and in view of enforcing their rights under the Share Mortgage that the Sellers appointed receivers.

625 Issues 13 and 14 relate to the form of relief and orders. In my view, it is appropriate that this issue be reserved until the parties have had the opportunity to consider my findings in this case.

626 As a result, I will give the parties an opportunity to consider my reasons in this case before resolving issues 10-11, and 13-14, and the costs of the proceeding.

CARL HALLION (AS THE 'AGENT' OF EACH 'SECURED PARTY' UNDER THE DEED OF MORTGAGE DATED 17 SEPTEMBER 2018)

[1] The terms in quotations in this introduction are terms defined or words used in the 2018 SSA: I will address the relevant definitions further below.

[2] The term 'Consideration shares' is not defined in the 2018 SSA or the Share Mortgage, but is used by the parties to this proceeding to describe the 10 per cent of shares in 29Metals (ie 10,719,906 shares), which were issued to EMR6B on the Restructure. I will adopt that term in these reasons.

[3] Without the drafting notes included by Allen & Overy for the Sellers.

[4] Without the drafting notes included by Clayton Utz for EMR6B.

[5] The total liability of the syndicated loan facility agreement was AUD$31.052 million, comprising AUD$3.491 million (current liability) plus AUD$27.561 million (non-current liability) according to the audited accounts for CCH (year ended 31 December 2019).

[6] Mr Green, Mr Chomley and the Prospectus provided three different estimates for this figure. Mr Chomley estimated AUD$59.5 million in his third witness statement, however he refers to the Prospectus as the basis for his estimate, which places the figure at AUD$64.097 million. Mr Chomley's figure was based on the market price for copper as at 7 June 2021. However, he goes on to rely on the derivative financial liability set out in the Prospectus which calculates the liability at AUD$64.097 million based on a different copper spot price date. Mr Green estimated AUD$66.7 million in his expert report. I will comment further on the nature of this liability when dealing with the evidence of Mr Twigger and Mr Audcent.

[7] Transcript of Proceedings, 31 October 2023, 726.30-727.02.

[8] Transcript of Proceedings, 30 October 2023, 687.16-688.05.

[9] EMR6B also granted, as a deed poll, a security interest in favour of the Secured Parties over its right title and interest in the Perpetual Escrow Deed, including its interest in the AUD$2.5 million (the Specific Security Deed).

[10] Further Amended Defence and Counterclaim (FADCC) [8A.3.6], [8A.6.3]; Amended Reply and Defence & Defence to Counterclaim (ARD&DC) [2C(e)(i)], [2F].

[11] FADCC, [8A.5.5]; ARD&DC, [2E(e)].

[12] Ibid [8A.5.4], [8A.5.7(c)]; ARD&DC, [2E(d)], [2E(g)].

[13] Ibid [8A.4.2]; ARD&DC, [2D(b)], [2D(c)].

[14] [2017] NSWCA 295; (2017) 96 NSWLR 548, [57]-[59] (Leeming JA, Gleeson JA agreeing at [1]); [2017] NSWCA 295 ('Cherry').

[15] [2019] VSCA 98, [124] (Whelan, Niall and Hargrave JJA) ('Perpetual').

[16] Defendants' outline of reply submissions, [17] (emphasis in original).

[17] [1956] HCA 53; (1956) 95 CLR 420, 437 (McTiernan, Webb and Taylor JJ); (1956) HCA 53.

[18] [2016] VSCA 280; (2016) 343 ALR 112, 158 [152] (Tate JA, Ferguson and McLeish JJA agreeing); [2016] VSCA 280 ('Apple and Pear').

[19] [2019] VSCA 98, [126]-[127] (Whelan, Niall and Hargrave JJA), citing Apple and Pear [2016] VSCA 280; (2016) 343 ALR 112, 158 [152] (Tate JA, Ferguson and McLeish JJA agreeing); [2016] VSCA 280.

[20] (2015) 256 CLR 104; [2015] HCA 37 ('Mount Bruce Mining').

[21] Ibid 116 [46] (French CJ, Nettle and Gordon JJ) (citations omitted).

[22] Ibid 116 [47] (French CJ, Nettle and Gordon JJ) (citations omitted).

[23] Ibid 116 [48] (French CJ, Nettle and Gordon JJ) (citation omitted).

[24] Ibid 117 [49] (French CJ, Nettle and Gordon JJ) (citation omitted).

[25] Ibid 117 [50] (French CJ, Nettle and Gordon JJ). See also Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201, [70] (Whelan JA and Riordan AJA) ('Adaz Nominees'); Lopes v Taranto [2018] VSCA 288, [66] (Kyrou, McLeish and Hargrave JJA).

[26] Mount Bruce Mining [2015] HCA 37; (2015) 256 CLR 104, 117 [50] (French CJ, Nettle and Gordon JJ); [2015] HCA 37 (citations omitted).

[27] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640, 657 [35], citing Re Golden Key Ltd [2009] EWCA Civ 636, [28] (Arden LJ), quoted in Mount Bruce Mining [2015] HCA 37; (2015) 256 CLR 104, 117 [51] (French CJ, Nettle and Gordon JJ); [2015] HCA 37.

[28] Mount Bruce Mining [2015] HCA 37; (2015) 256 CLR 104, 117 [51] (French CJ, Nettle and Gordon JJ); [2015] HCA 37 (citations omitted).

[29] [2021] VSCA 335 (Sifris, Kennedy JJA and Macaulay AJA) ('Urban').

[31] [2021] VSCA 299, [32] (McLeish and Kennedy JJA, Macaulay AJA), citing Amcor Ltd v Barnes [2021] VSCA 6, [648] (Ferguson CJ, Beach and Whelan JJA). See also Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; 261 CLR 544, 579-81 [98] (Nettle J); [2017] HCA 12 ('Ecosse').

[32] [2023] NSWCA 117; (2023) 112 NSWLR 29, 45 [78] (Bell CJ, see also Meagher and Kirk JJA at 49 [98]-[99]); [2023] NSWCA 117.

[33] Ibid 44 [76] (Bell CJ); See also XL Insurance Co SE v BNY Trust Company of Australia Ltd (2019) NSWCA 215, [78]-[80] (Gleeson JA, Bell P agreeing at [1] and Emmett AJA at [133]); Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181, 198 [43] (Gleeson CJ, Gummow and Hayne JJ); [2001] HCA 70.

[34] [1997] AC 313, 388.

[35] J & P Marlow (No 2) Pty Ltd v Hayes [2023] NSWCA 117; (2023) 112 NSWLR 29, 45 [79] (Bell CJ, see also Meagher and Kirk JJA at 49 [98]-[99]); [2023] NSWCA 117.

[37] Ibid 49-51, [100]-[111] (Meagher and Kirkwood JJA).

[38] See, eg, Amcor Ltd v Barnes [2021] VSCA 6, [648] (Ferguson CJ, Beach and Whelan JJA).

[39] Newey v Westpac Banking Corporation [2014] NSWCA 319, [91] (Gleeson JA, Basten JA agreeing at [22] and Meagher JA agreeing at [23]).

[40] James Adam Pty Ltd v Fobeza Pty Ltd [2020] NSWCA 311; (2020) 103 NSWLR 850, 852 [2] (Bell P, Macfarlan JA agreeing at 852, [3]); [2020] NSWCA 311.

[41] [2019] VSCA 98 (Whelan, Niall and Hargrave JJA).

[42] [2019] NSWCA 11; (2019) 99 NSWLR 317; (Leeming, Payne and White JJA, Sackville and Emmett AJJA); [2019] NSWCA 11.

[43] Perpetual [2019] VSCA 98, [124] (Niall, Whelan and Hargrave JJA).

[44] Ibid [124]-[125] (Niall, Whelan and Hargrave JJA).

[45] Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 352 (Mason J); [1982] HCA 24 ('Codelfa').

[46] Mount Bruce [2015] HCA 37; (2015) 256 CLR 104, 117 [50] (French CJ, Nettle and Gordon JJ); Codelfa (1982) 149 CLR 337, 352 (Mason J). See also Adaz Nominees [2020] VSCA 201, [70] (Whelan JA and Riordan AJA).

[47] Codelfa (1982) 149 CLR 337, 352 (Mason J); [1982] HCA 24.

[48] Cherry [2017] NSWCA 295; (2017) 96 NSWLR 548; (Gleeson, Leeming and White JJA); [2017] NSWCA 295.

[49] Ibid 563 [64]; (Leeming JA, Gleeson JA agreeing at [1], White JJA agreeing at [119]); [2017] NSWCA 295.

[51] Ibid 582 [147]-[148] (White JA).

[53] Ibid 582 [150] (White JA). See further, 582-583, [151]-[161].

[54] (1982) 149 CLR 337; [1982] HCA 24 ('Codelfa').

[55] Perpetual [2019] VSCA 98, at [137] (Whelan, Niall and Hargrave JJA). See also Schreuders v Grandiflora Nominees Pty Ltd [2016] VSCA 93, [22] (Kyrou, Ferguson and McLeish JJA).

[56] See, eg, Perpetual [2019] VSCA 98, [137].

[57] (1982) 149 CLR 337, 352-3 (Mason J) (citations omitted); [1982] HCA 24. The Codelfa exception has been applied in various contexts, including in Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544, 549 [9] (Kiefel, Bell and Gordon JJ); [2017] HCA 12; Schreuders v Grandiflora Nominees Pty Ltd [2016] VSCA 93, [20] (Kyrou, Ferguson and McLeish JJA); Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27; (2017) 94 NSWLR 108, 139 [117]-[118] (Bathurst CJ, Beazley P and Gleeson JA agreeing); [2017] NSWCA 27.

[59] In [59] of their written closing submissions, the Sellers note that the plaintiffs' construction of cl 6.1(a) would also require the words 'and its Affiliate's' and/or 'CC Group' in cl 6.1(c) of the 2018 SSA to be addressed in some way - either by reading them down, or ignoring them. The plaintiffs did not address how this apparent inconsistency might be resolved. Rather, in [12] and [13] to the plaintiffs' written outline of reply submissions, the plaintiffs focused on the mismatch between the numerator and the denominator in cl 6.1(a) and the significance of an IPO being included in the definition of a Liquidity Event.

[60] The agreed list of issues for determination also notes that if the answer to Question 3 is no, then EMR6B is entitled to a release of the Collateral from the Share Mortgage, pursuant to cl 10.6 of the Share Mortgage. If the answer to Question 3 is yes, then the Share Mortgage remains.

[61] Transcript of Proceedings, 6 December 2023, 983.23-24.

[64] Defendants' outline of reply submissions, [21] (emphasis omitted).

[66] Defendants' written outline of closing submissions, [96], citing National Bank of Australasia Ltd v Mason [1975] HCA 56; (1975) 133 CLR 191, 200; (Barwick CJ); [1975] HCA 56. Barwick CJ stated: 'The stress is upon the word "owing", which imports some existing obligation though it may be imperfect until an event within its purview occurs'.

[67] [2022] VSC 56; (2022) 65 VR 405, 519-29 [437]-[471]; (Osborne J); [2022] VSC 56 ('Pacreef'). This decision was reversed in GTW Investments (Aust) Pty Ltd and Another v Pacreef Investments Pty Ltd [2023] VSCA 291 (Ferguson CJ, Niall and Macaulay JJA). I note that the appeal grounds relevant to this analysis were unsuccessful.

[68] See, eg, Pacreef [2022] VSC 56; (2022) 65 VR 405, 527 [467] (Osborne J); [2022] VSC 56.

[69] Angus Stevenson (ed), Oxford Dictionary of English (Oxford University Press, 3rd ed, online, 2015).

[71] FADCC, see eg [21]-[32], and [B] of the prayer for relief.

[72] Listed share price at the IPO was AUD$2.00 per share.

[74] This assumes a conversion rate of AUD$1:USD$0.75, as noted above.