Fubilan Catering Services Limited (Incorporated in PNG) v Compass Group

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

WESTERN AUSTRALIA DISTRICT REGISTRY WAD 169 OF 2007

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN: FUBILAN CATERING SERVICES LIMITED (INCORPORATED IN PAPUA NEW GUINEA)

THE APPEAL 1 This appeal concerns a dispute arising out of the provision of catering services to the operator of OK Tedi copper and gold mine in the Highlands of the Western Province of Papua New Guinea. The mine is situated at Mt Fubilan, roughly in the geographical centre of the island of New Guinea, near the Indonesian border. 2 The appellants are companies incorporated in Papua New Guinea ('PNG'). The second appellant ('MRSM') is the trustee of the Star Mountain Trust. It holds an interest in OK Tedi Mines Ltd ('OTML'), the operator of the OK Tedi mine, in trust for indigenous residents of ten villages in the Western Province of PNG. The first appellant ('Fubilan') is a wholly owned subsidiary of MRSM. Fubilan was acquired by MRSM as a shelf company on 4 November 1999, shortly before the execution of the contracts which gave rise to the present litigation. 3 Towards the end of 1999, MRSM tendered to provide catering services for OTML at the OK Tedi mine. OTML required a successful landowner tenderer to secure the management services of a company with an international reputation in catering of the relevant kind. In the event, MRSM succeeded in its tender. It duly acquired Fubilan as the vehicle to enter into the contract with OTML. 4 In early January 2000, Fubilan entered into a 'Contract for Catering Services' with OTML ('Catering Contract'). At about the same time, Fubilan and MRSM also entered into a 'Management Agreement' with two companies within the Compass Group, namely the first respondent ('Eurest Australia') and the second respondent ('Eurest'). In addition, a corporation wholly owned by the Independent State of New Guinea, Mineral Resources Development Company Ltd ('MRDC'), was a party to the Management Agreement (although it was not a party to the litigation). MRDC managed MRSM. 5 As the primary Judge found, the relationship between Fubilan and Eurest was difficult from the outset. Fubilan alleged wrongdoing of various kinds by Eurest in relation to its responsibilities under the Management Agreement. At the end of 2001, Fubilan attempted to terminate its relationship with Eurest and to substitute another manager. However, OTML withheld its approval for the termination, such approval being required by the terms of the Management Agreement. The troubled relationship between Fubilan and Eurest was ongoing at the date of the trial. 6 Despite the ongoing relationship, Fubilan and MRSM commenced proceedings in 2003 against Eurest, Eurest Australia and the parent company of the Compass Group, Compass Group PLC ('Compass'). According to his Honour, the appellants relied on 17 separate causes of action, including misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) ('TP Act'), breaches of fiduciary duty, negligence and breach of contract. The trial occupied 22 hearing days. No issue was raised concerning the jurisdiction of the Court to hear and determine the proceedings and none appears to arise. 7 The primary Judge held that the appellants failed on all causes of action pleaded by them. He considered that the proceedings were 'ill-conceived and made little commercial sense'. 8 The appellants' Amended Notice of Appeal identifies nine grounds of appeal. The respondents to the appeal are the three respondents joined in the proceedings at first instance, although it is not clear how any of the grounds of appeal, if upheld, would justify orders against Compass. 9 This judgment addresses each ground of appeal, in the order adopted by the Amended Notice of Appeal. However, we first refer to the agreement between OTML and the Government of Papua New Guinea ('Ok Tedi Agreement') and then summarise the provisions of the Catering Contract and the Management Agreement that are of greatest significance for the appeal. We do not think it necessary to recount the background to the relationship between Fubilan and Eurest which is explained in detail in the primary Judgment.

THE CROSS APPEAL 10 The respondents to the appeal filed a cross-claim in the proceedings at first instance, seeking contribution from the two cross-respondents (Morocco Holdings Pty Ltd and Mr Fenwick, an adviser to the appellants), in the event that the appellants succeeded in their claims for relief. Since the appellants failed, there was no occasion for his Honour to consider the cross-claim. His Honour ordered that the cross-claim be dismissed. 11 The respondents to the appeal filed an amended notice of cross-appeal seeking an order that the cross-claim be determined on the merits, should the appeal be allowed and the matter remitted for further hearing. There is no need to address the cross-appeal unless the appellants succeed on the appeal.

Ok Tedi Agreement 12 At the heart of the dispute that gave rise to this litigation is the concept of 'localisation', whereby Papua New Guineans would be trained to replace expatriates in managerial positions. The concept owes its origins, for present purposes, to the Ok Tedi Agreement, which was approved and implemented by the Mining (Ok Tedi) Agreement Act 1976 (PNG). 13 Clause 30.1 of the Ok Tedi Agreement required OTML to employ Papua New Guineans in all of its activities under the Agreement, except where the employment of non-Papua New Guineans was in accordance with the approved localisation and training program, or was otherwise approved by the State of Papua New Guinea. Clause 30.2 required OTML to replace progressively specified categories of foreign staff in accordance with the approved training and localisation program, subject to the right of OTML for good cause to request the State to revise the plan.

Catering Contract 14 The Catering Contract was signed on 11 January 2000, but 'made and entered as of 5th … January 2000'. The parties were OTML and Fubilan (referred to in the Catering Contract as 'the Contractor'). 15 The documentation comprising the Catering Contract consisted of 'The Agreement' and six sections, as follows: 'Section 1 : General Conditions Section 2 : Special Conditions Section 3 : Compensation Section 4 : Scope of Work Section 5 : Specification Section 6 : OTML Standard Supplementary Conditions.' Some of the sections, including sections 2, 3 and 6, contained Schedules. Other Schedules were apparently intended to be more or less free-standing. In all, the provisions of the Catering Contract took up five volumes. The various provisions are extremely difficult to follow. 16 The Agreement recited that OTML operated the copper mine at Mt Fubilan in the Western Province of Papua New Guinea; that it wished to engage Fubilan to provide catering services for the OTML mining operation; and that Fubilan had represented that it had the necessary skill and expertise for the purpose. Fubilan was to provide the catering services (referred to as 'the Services') in accordance with the provisions of the Catering Contract (Agreement, cl 1). OTML was to pay to Fubilan the amounts specified in the Catering Contract (cl 2). 17 Section 2, cl 6.1, of the Catering Contract addressed 'Management of the Services', as follows: 'The Contractor shall employ, and subject to Clause 6.2 below keep employed, [Eurest] … unless otherwise approved in writing by OTML, to manage, control, and supervise the whole of the Services on behalf of the Contractor. The Contractor and [Eurest] shall enter into a contract for the provision of such services by [Eurest] (the "Management Contract"), and the terms of the Management Contract shall be those of the pro forma at Schedule 2-11.' Clause 6.2 stated that Fubilan was not permitted to terminate the Management Contract (referred to in this judgment as the 'Management Agreement) without the consent of OTML. 18 Section 3 of the Catering Contract dealt with 'Compensation'. Clause 1.1 of section 3 stipulated that compensation for the 'Services': 'shall consist of a lump sum payment for mobilisation and site establishment; monthly lump sum payments for the Contractor's fixed and variable operating and overhead costs (which shall exclude cost of foodstuffs and the Contractor's profit); … and unit rates on a per plate basis which shall be Contractor's full compensation for cost of foodstuffs and for all the Contractor's profit for all of the work. All unit rates and prices entered in the Schedules hereto for meals, catering services and warehouse food issues shall exclude the Contractor's operating and overhead costs.' (Emphasis added.) The term 'Services' was defined in section 1 of the Catering Contract (cl 1.1) to mean: 'the whole of the Services to be provided by the Contractor under the Contract and shall include all extra work, additions, substitutions and variations ordered by or on behalf of OTML or agreed upon between OTML and the Contractor and all obligations imposed upon the Contractor by the Contract.' 19 Clause 1.4.1 of section 3 of the Catering Contract dealt with the monthly lump sum payment to Fubilan: 'Item 2.1, Schedule 3-1 specifies the lump sum payable each calendar month as full compensation for Contractor's operating and fixed costs for the work which shall be deemed to include, but not be limited to management, supervision and all staff costs, burden, overheads and training; motor vehicle procurement, operating and maintenance costs; office furniture, equipment, communication and consumables cost, insurance, and all other costs whatsoever incurred in operation of the contract; but shall specifically exclude landed cost of foodstuffs (including condiments and the like) and all Contractor profit for all of the Services. OTML shall pay to the Contractor the monthly lump sum entered at Item 2.1 corresponding to the monthly average camp occupancy advised to the Contractor by OTML.' (Emphasis added.) 20 Clause 1.5 of section 3 provided as follows: 'Item 3, Schedule 3-1 specifies the unit rates payable to the Contractor for landed cost of all foodstuff consumables … and for Contractor's profit for all of the Services. Compensation shall be on a per plate basis for each service actually provided in accordance with the Scope of Work at Section 4.' (Emphasis added.) 21 Schedule 3-1 set out in Item 2 the monthly lump sums payable by OTML to Fubilan in accordance with cl 1.4.1. The sums, comprising amounts expressed in PGK and AUD, varied according to the levels of average monthly camp occupancy. Item 3 of Schedule 3-1 set out unit rates in terms of prices per meal or per category of food or drink supplied by Fubilan. 22 Schedule 3-4 provided for adjustments to the monthly lump sum payments payable under Item 2.1 of Schedule 3-1 as a result of localisation of expatriate positions. Schedule 3-4 described six positions and set out the adjustments to the monthly lump sums payable by OTML to Fubilan: 'as a result of localisation of Expatriate positions within the Contractor's on-Site organisation'. This language appears to reflect the terms of the Ok Tedi Agreement, as well as provisions in the Catering Contract requiring Eurest to establish a 'Training and Localisation Plan'. 23 Clause 6.0 of section 3 of the Catering Contract provided for a 'Localisation Adjustment' as follows: 'The monthly lump sum prices entered at Item 2.1, Schedule 3-1, shall be adjusted in accordance with Schedule 3-4 upon each occasion that an Expatriate employee engaged on the on-Site services is replaced by a PNG National pursuant to the Contractor's obligations under Clause 13 of Schedule 6-1 - Labour Practices.' 24 Sections 1 to 5 of the Catering Contract were contained in volume 1. Volumes 2, 3 and 4 contained a total of 11 Schedules. Schedule 2-10 was headed 'Training and Localisation Plan' and provided as follows: 'The Tenderer shall attach hereto the methodology it proposes to implement to provide training of its PNG National staff in the provision and management of industrial catering services relevant to the Contract. The Tenderer shall also attach a listing of the positions in its Site organisation which are to be filled initially by Expatriates, and an outline localization plan for such positions. The localization plan shall identify PNG Nationals to succeed to the positions, and the time frame in which the succession will take place. The above attachments will form the basis of the detailed training and localization plan to be submitted by the Contractor pursuant to Clause 13 of Schedule 6-1, Labour Practices.' 25 Section 6 of the Catering Contract, located in volume 5, contained a number of Schedules recording the 'OTML Standard Supplementary Conditions'. Schedule 6-1 dealt with 'Labour Practices'. Clause 9 of Schedule 6-1 dealt with the 'Recruitment of Labour', while cl 13 dealt with 'Training and Localization'. Those provisions were as follows: '9. RECRUITMENT OF LABOUR (a) [OTML] is bound by the Ok Tedi Agreement which requires that all employers on the Site shall give preference to people from the "Preferred Area", being Telefomin Sub-Province of the West Sepik Province, and the Kiunga Sub-Province of the Western Province (including Lake Murray). (b) Accordingly, the Contractor and Sub-Contractors shall employ in grades G1 to G6 only those people from the "Preferred Area", and preference shall be given to people from the "Preferred Area", for all other employment. (c) In order to comply with the provisions of this Section, the Contractor shall complete the attached form "Clearance for Local hire" and obtain a signature from either the OTML Preferred Area Development Coordinator or the Preferred Area Recruitment Officer based in Tabubil. … 13. TRAINING AND LOCALIZATION The Ok Tedi Mining Limited Agreement requires that OTML be responsible for all training and localization matters at site. In order to comply with the above requirement the following shall apply: The Contractor shall submit to OTML, a detailed Training and Localisation Plan (TLP) for approval, prior to submission to the Department of Labour. Assistance in formulating the TLP will be made available on request, from OTML Human Resources and Public Affairs. The Contractor shall attend scheduled meetings, to discuss training and localization policy, planning and implementation, as requested.' (Emphasis in original.)

Management Agreement 26 The Management Agreement was executed on 6 January 2000, apparently in the form set out in Schedule 2-11 to the Catering Contract. As already noted, the parties to the Management Agreement were MRSD, MRSM and Fubilan (on the one side) and Eurest Australia and Eurest (the latter being referred to as the 'Manager') (on the other). 27 The Management Agreement recited that: · MRDC was wholly owned by the State of Papua New Guinea and managed MRDS under a management agreement; · MRSM held an interest in the OK Tedi Mining Project for and on behalf of the landowners within the project area, which interest MRSM held through its shareholding in OTML; · MRSM wholly owned Fubilan, which had entered into the Catering Contract and which was required to perform the Services under the Contract; · the Catering Contract required Fubilan to employ Eurest to manage, control and supervise the Services; and · in engaging Eurest, Fubilan would have available to it the qualification and high level of experience and skill that would enable it to perform the Services in satisfaction of the Catering Contract. 28 The key definitions in cl 1.1 of the Management Agreement, for present purposes, were the following: 'Company Expenses means those direct and indirect costs and expenses which Fubilan … is permitted or required to incur (including but not limited to the Manager's fees) under this Agreement, the Contractor is required to incur under the Act or any other applicable law or statute. Management Fee means an annual management fee in the initial flat amount of AUD225,000 that covers all of the expenses that the Manager incurs in the performance or discharge of its obligations under this Agreement and is payable in accordance with clause 11. … Operations means all the undertakings, activities and operations engaged in by Fubilan Catering Services in carrying out, performing or providing the Services under the Contract, which shall be the principal business of Fubilan… Program and Budget means a program and budget of the Operations or activities to be undertaken, and of the Company Expenses to be expended in the applicable Budget Period, prepared in accordance with clauses 8.1 and 8.2 and approved or deemed to have been approved under clause 8.3, and includes any alteration thereto approved by the Board of Fubilan … pursuant to clause 8.4. 'Services' has the meaning ascribed to it in the Contract.' (Emphasis added.) 29 Clause 2.2 of the Management Agreement appointed Eurest as manager in the following terms: 'On and from the[date of commencement of the Catering Contract] and for the term of the Contract, but subject to earlier termination as provided for in clause 18.1 and subject to and in accordance with the terms of this Agreement, the Manager [Eurest] is appointed and engaged by Fubilan … to manage, supervise and conduct the Operations.' (Emphasis added.) 30 Clause 2.4(a)(i) of the Management Agreement required Eurest to promote and extend Fubilan's business in terms of the Catering Contract. Clause 2.4(a)(ii) permitted Eurest to engage in a business competitive with that carried out by Fubilan: 'but only to the extent that such … engagement … relates to an activity … or business that is carried out or undertaken outside of the Contract Area'. The 'Contract Area' was defined (cl 1.1) to mean 'Kiunga, Tabubil and any other such area or location in the Western Province at which Fubilan … is or would be required to carry out or perform the Services under the Contract'. 31 Clause 4.1 of the Management Agreement required Eurest to perform its duties and responsibilities set out in the Agreement competently and diligently. Clause 4.2 provided as follows: '(a) Without restricting the generality of clause 2 but subject always to the requirements of the Contract, the Manager shall, in connection with carrying out the Operations, be responsible for and supervise the following activities of Fubilan … (ii) the employment, training and localisation of executive, management, technical, operational and other staff at the discretion of the Manager and OTML and agreed between them, which discretion shall be exercised in accordance with the Contract; … (vii) the proper disbursing of all funds provided by Fubilan … to including … the paying of all sums payable by Fubilan … with respect to its acquisition of all services and supplies, goods, materials, equipment and other property necessary or appropriate in connection with carrying out the Operations; …' 32 Clause 5.1 of the Management Agreement obliged Eurest to prepare proposed Programs and Budgets and to carry out the Operations in accordance with the Programs and Budgets in the manner provided for in the Management Agreement. Clause 5.2 imposed limits on Eurest's authority to incur expenditure, as follows: '(a) The Manager shall not make or incur any expenditure unless: (i) that expenditure is included in a Program and Budget or is otherwise approved by the Board of Fubilan … (ii) …' 33 Clause 5.11 of the Management Agreement provided for an account to be established and maintained in Fubilan's name: '(a) The Manager, shall open and maintain on behalf of and in the name of Fubilan … a separate credit current account with a bank licensed to carry on banking business in PNG … and shall pay into that account all moneys received by it pursuant to this Agreement and the Contract and the Manager is hereby authorised to operate that account. (b) The Manager, in the course of a Budget Period, shall subject to clause 5.2, make all disbursements of Company Expenses in connection with the Operations, carried out in accordance with the Program and Budget applying for that Budget Period, from such bank account. In relation to the payment of Management Fees, disbursements from the bank account shall be made by the Manager in accordance with clause 11.1.' 34 Clause 5.13 of the Management Agreement dealt with 'Contractors and Suppliers', as follows: '(a) The Manager: (i) may (subject to sub-paragraph (iii) of this clause 5.13) engage Sub-Contractors (on an arms length basis and on the best commercial terms then obtainable) on behalf of Fubilan … to carry out or perform any but not all of the Services in terms of a written Sub-Contract the terms of which, and any modifications or variations to which, are to be given notice of to the Board of Fubilan … within 30 days after execution of the Sub-Contract or agreement on modification or variation; (ii) [shall deliver a copy of the sub-Contract or any modification to the board of Fubilan within 40 days]; (iii) shall obtain the consent of the Board of Fubilan … before entering into a Sub-Contract or agreeing to any modification or variation to the Sub-Contract, but only in relation to a Sub-Contract that will not be or has not been entered into on an arms length basis. (b) The provisions of paragraph (a) of this clause 5.13 shall apply also to Sub-Contracts exceeding K20,000 in value with suppliers of foodstuffs, consumables, or other goods or services required for carrying out the Operations.' ('K' being an abbreviation for Kina, the currency of Papua New Guinea) 35 Clause 8.1(a) of the Management Agreement required Eurest to consult with the board of Fubilan in arranging each proposed Program and Budget. Eurest was also to consult with MRSM to determine the preferred method of funding Fubilan's working capital. Each proposed Program and Budget was to specify the Operations that Eurest recommended be carried out and to provide an estimate of Company Expenses to be incurred in subsequent periods (cl 8.2(a)). Eurest was to call a meeting of Fubilan's board to consider the proposed Program and Budget (cl 8.3(a)). Approval of the proposed Program and Budget by Fubilan's board authorised and obliged Eurest to carry out Operations and to incur Company Expenses in accordance with the Program and Budget (cl 8.3(b)). 36 Eurest was also required to submit to the boards of Fubilan, MRSM and MRDC, on a monthly basis, a 'current cash estimate of Company Expenses expected to be incurred' during the next period (cl 8.5(a)). This 'Call Notice' (as it was described) was to set forth the proportion of the Company Expenses to be contributed by MRSM (by way of contributions to Fubilan's share capital) or by MRDC (by way of loans to Fubilan), or by third party borrowings or from cash on hand (cl 8.5(b)). Upon receipt of the Call Notice, MRSM and MRDC were bound to pay Fubilan, in the appropriate manner, their respective proportions of Company Expenses (cl 8.5(c)). 37 The role, powers and functions of Fubilan's board were dealt with in cl 10 of the Management Agreement: '10.1 Role (a) Subject to the Act [Fubilan's] Constitution and the Contract, the Board of Fubilan … shall provide (in conjunction with the Manager) for the management and control of the business and affairs of Fubilan … and for the proper supervision and control of the Operations carried out by or on behalf of Fubilan … 10.2 Powers and functions of Board of Fubilan Catering Services (a) The Board of Fubilan … shall, without limitation, have the following powers and functions in providing for the management and control of the business and affairs of Fubilan … (i) to consider and, subject to clauses 8.1 and 8.2, if thought fit, to approve as provided in clause 8.3, proposed Programs and Budgets recommended by the Manager or determined by the Board of Fubilan … and all alterations and additions thereto; (ii) to establish policies on behalf of Fubilan … and give directions to the Manager in relation to the performance of its duties in relation to the Contract, but such directions must not be inconsistent with or impose any greater obligations on the Manager than the obligations of the Manager under this Agreement; (iii) to approve appointments recommended by the Manager of such technical, financial, accounting, legal and other employees and consultants as the Board of Fubilan … may deem appropriate for matters pertaining to actual or proposed aspects of the Operations; …' 38 Clause 11 of the Management Agreement dealt with the Management Fee as follows: '11.1 Management Fee (a) Subject to clause 11.4, Fubilan … will pay the Manager Management Fee from the bank account referred to in clause 5.11 and in accordance with that clause. Payment of Management Fee will be made in equal monthly instalments … (b) Subject to clause 11.3, the Management Fee will be reviewed by the Manager, MRSM and the Board of Fubilan … and adjusted annually (by agreement of those Parties) during the term of the Contract, which review shall take place at a date that is determined by the Manager to be convenient. In the event that no agreement as to adjustment is reached within one month of the commencement of each anniversary of this Agreement, an upward adjustment will apply based on the same percentage adjustment applicable to the fees payable by OTML to Fubilan … under the contract. … 11.3 Renegotiation of fees (a) The Management Fees and Incentive Fees were calculated and based on an assumed occupancy of 1,400 mandays. The Manager and the Board of Fubilan … or MRSM will proceed to further negotiate the level of those fees in accordance with paragraph (b) of this clause 11.3.'

Ground of Appeal 39 Ground 1 in the Amended Notice of Appeal is that the Court erred: 'in finding that [Eurest Australia] was entitled to charge the Appellants for expenses incurred by [Eurest Australia] including salaries, accommodation and travel expenses of [Eurest's] employees, in that clauses 1 and 11 of the Management Agreement read together show that all expenses [Eurest] incurs in catering work are included in the Management Fee.'

Appellants' Case at Trial 40 Ground 1 challenges the primary Judge's rejection of the appellants' contention at trial that Eurest had overcharged Fubilan by reimbursing itself for certain expenses that, pursuant to the Management Agreement, should have been borne by Eurest. Specifically, the appellants claimed at trial that Eurest charged Fubilan for salaries, accommodation and travel expenses relating to six positions, each of which was filled by an expatriate at the commencement of the Management Agreement. 41 The six positions were identified in Schedule 3 to the Catering Contract. Each position was said to be an 'Expatriate Position' and to have an 'Anticipated Localisation Date' (that is, a date on which the position would be occupied by an indigenous person in place of an expatriate). The six positions were described as follows: · Chef Supervisor (1); · Chef Supervisor (2); · Catering Manager; · Chef Supervisor (3); · Assistant Project Manager; and · Chef Supervisor/Training. (The numbers in parenthesis apparently referred to the relative seniority of the chef supervisor positions.) 42 It is not entirely clear why the Amended Notice of Appeal refers to overcharging by Eurest Australia since, on the appellants' case at trial, it was Eurest that charged Fubilan the relevant amounts without lawful authority. Nor is it clear why the Amended Notice of Appeal identifies the expenses as relating to Eurest's employees. It appears to have been common ground that the persons occupying the six positions at all material times after the Management Agreement commenced were employed by Fubilan, albeit pursuant to arrangements made by Eurest under the Management Agreement. Nothing, however, turns on these oddities. 43 The appellants pleaded in their statement of claim that: · cl 11 of the Management Agreement entitled Eurest to charge Fubilan a fee of $225,000 per annum; · the fee included all expenses incurred by Eurest in the performance or discharge of its obligations under the Management Agreement; · Eurest charged Fubilan for expenses incurred in performing and discharging its functions, including salaries, accommodation and travel expenses of Eurest employees; · these amounts were recouped by Eurest out of the Fubilan bank account (which was operated by Eurest); · the amounts so recouped amount to K5.9 million in respect of the salaries of expatriates occupying the six positions during the period from 11 February 2000 until (presumably) the institution of proceedings on 19 December 2003, and an unspecified amount in respect of travel and accommodation costs; and · Eurest's recoupment of these amounts contravened cll 4.2(a) and 11 of the Management Agreement. 44 Fubilan sought: · an order for payment of K5.9 million in respect of 'expatriate salary expenses'; · a taking of accounts to ascertain the travel and accommodation expenses wrongly recouped by Eurest. The manner in which the sum of K5.9 million was calculated was not explained in detail either in the pleadings or in the primary judgment. However, the sum claimed by the appellants apparently reflected the salaries actually paid to the various expatriates occupying the six positions from January 2000 until 19 December 2003, when the proceedings were commenced. 45 At trial, as on appeal, the appellants relied on the terms of the Management Agreement. As has been seen, under the Management Agreement Eurest was obliged to 'manage, supervise and conduct the Operations' (cl 2.2). The 'Operations' included all the activities engaged in by Fubilan in providing the 'Services' under the Catering Contract (cl 1.1). Eurest was to receive from Fubilan the 'Management Fee', being a flat amount that: 'covers all of the expenses that the Manager incurs in the performance or discharge of its obligations under the [Management Agreement]' (cl 1.1). 46 The appellants argued at the trial that the definition of 'Management Fee', on its ordinary construction, required Eurest to meet all expenses incurred by it discharging its extensive obligations under the Management Agreement. These obligations included the supervision and training services provided by the occupants of each of the six positions. Indeed, it was precisely because the positions involved supervisory and training functions that they were staffed by expatriates and were intended to be 'localised' in due course.

The Primary Judge's Reasoning 47 The primary Judge rejected Fubilan's argument. His Honour considered (at [619]) that the definition of 'Management Fee' referred to expenses which: '[Eurest] itself must bear and which were not included in the calculation of moneys recoverable by Fubilan from OTML'. In his Honour's view (at [619]), the parties could not have intended that: 'expenses which were built into the lump sum payments recoverable from OTML by Fubilan were not able to be charged to Fubilan by the manager'. In other words, the Management Fee was not intended to cover expenses effectively reimbursed to Fubilan through the lump sum payments which it was entitled to receive from OTML under the Catering Contract. 48 The primary Judge referred to a letter dated 7 July 1999 which recorded the 'legally binding intention' of Eurest to enter into a management agreement with MRSM in relation to a proposed tender by MRSM to carry out catering services for OTML (Fubilan not having been acquired as a shelf company at this point). The letter stated that if the tender was successful, the management fee would include 'offshore support costs not identified as direct project related expenses'. His Honour considered that, although the agreement constituted by this letter was superseded by the Management Agreement, it formed part of the background to the Management Agreement and could be taken into account in construing the Agreement. The letter suggested that the parties' intention was that the management fee was not intended to cover expenses recoverable by Fubilan from OTML. 49 His Honour pointed out (at [620]) that pursuant to cl 1.4.1 of section 3 (the Compensation section) of the Catering Contract, Fubilan was to receive payments compensating it for all staff costs. It followed that Fubilan had suffered no loss by reason of payments made to the expatriates or in respect of the positions they occupied at the commencement of the Catering Contract. His Honour cited (at [620]) the evidence in re-examination of Mr Kroeger, the manager of the Catering Contract (but apparently responsible to Eurest), to confirm that all salaries and expenses of expatriates were covered by the monthly lump sum payments made by OK Tedi to Fubilan. The primary Judge also noted (at [621]) that the renegotiation provisions in the Management Agreement did not allow for amendments based on movements in expatriate salaries and expenses. 50 His Honour concluded (at [622]) as follows: 'In my opinion the construction of the Management Agreement for which Fubilan contends would effectively confer upon it a windfall. It would recover from OTML the monthly compensation calculated by reference, inter alia, to the salaries and expenses incurred by Eurest onshore. In my opinion this cannot have been intended. This aspect of the claim also fails.' (Emphasis added.)

Reasoning 51 The parties are in dispute as to whether the evidence adduced at trial is sufficient to support the sums claimed by the appellants in respect of the salaries attributable to the six positions, should the appellants succeed on Ground 1. They are also in dispute as to whether there is any evidence supporting the quantum of travel and accommodation expenses claimed by the appellants. However, the parties seem to agree that if the appellants succeed on Ground 1, the matter should be remitted to the primary Judge to determine: (a) the quantum of damages; and (b) whether accounts should be ordered and, if so, what other orders should be made. 52 His Honour's reasoning on the question of the Management Fee is not entirely free from difficulty. First, it is doubtful whether the letter of 7 July 1999 is of significant assistance in construing the Management Agreement. The terms of the interim arrangement were different from those ultimately incorporated into the Management Agreement. The latter, for example, drew no distinction between 'offshore support costs' and 'direct project related costs'. In any event, these were not expressions defined in the letter of 7 July 1999. Moreover, the definition of 'Management Fee' in the Management Agreement had no counterpart in the letter. Further, the letter was framed on the assumption that the project would become self-financing within sixty to ninety days, an assumption that was not incorporated into the Management Agreement. 53 Secondly, the answers given by Mr Kroeger in re-examination are of little or no assistance in determining the intended operation of the compensation provisions of the Catering Contract. Mr Kroeger was engaged by Eurest and his responses in re-examination doubtless reflected Eurest's view of the operation of contractual provisions. 54 Thirdly, even if Fubilan was to be reimbursed by OTML for the salaries and expenses relating to the six positions occupied by expatriates, that would not necessarily rule out the possibility that the Management Agreement contemplated that Eurest would ultimately bear the cost of those salaries and expenses. While the Catering Contract and the Management Agreement were closely related, it was open to the parties to negotiate arrangements that would result in Fubilan, on one view, being reimbursed twice for the same expenses. The lump sum payment by Fubilan to Eurest, for example, might have been negotiated having regard to what otherwise might have been regarded as a 'windfall' gain to Fubilan. 55 The issue presented by Ground 1 of the Notice of Appeal must be resolved by reference to the language used in the Management Agreement although, as his Honour noted, the construction of the Management Agreement is to be informed by the surrounding circumstances, including the terms of the Catering Contract. Indeed, the Catering Contract (section 2, cl 6.1) specifically obliged Fubilan to employ and keep employed Eurest: 'to manage, control and supervise the whole of the Services on behalf of [Fubilan]'. Moreover, Fubilan was obliged to enter into a Management Contract with Eurest on the terms specified in Schedule 2-11 to the Catering Contract. 56 The starting point under the Management Agreement, as the appellants contend, is that Eurest was appointed by Fubilan to manage, 'supervise and conduct the Operations' (cl 2.2). Since the term 'Operations' was defined very broadly to include all activities and operations engaged in by Fubilan in providing the Services under the Catering Contract, the language of cl 2.2, if read in isolation, suggests that Eurest was actually to provide all the Services on Fubilan's behalf. Further, given that the 'Management Fee' was to: '[cover] all of the expenses that [Eurest] incurs in the performance or discharge of its obligations under [the] Agreement', a literal reading of the two provisions might suggest that Eurest was to meet all the expenses incurred in providing catering services to OTML pursuant to the Catering Contract. 57 This would be a very surprising result. Indeed, there was no dispute that this could not be the proper construction of the Management Agreement. It could hardly have been intended that Eurest, which was to receive an annual fee initially in a flat amount of $225,000, was to bear all the very substantial costs of conducting the Operations. It is true that the Management Agreement provided for Eurest to receive an 'Incentive Fee' equivalent to 50 per cent of net profit in excess of K1.2 million per annum (cll 1.1 (definition of 'Incentive Fee'), 11.2), but this hardly warrants giving cl 2.2 a literal construction that would require Eurest to meet the entire expenses of the Operations. 58 This view is reinforced by other provisions of the Management Agreement. The specific duties of Eurest were set out in cl 4.2, the relevant parts of which have been reproduced earlier ([31] above). Clause 4.2 was expressed not to restrict 'the generality of clause 2', but was also said to be 'subject always to the requirements of the [Catering] Contract'. Clause 4.2(a)(ii), in particular, suggests that Eurest's duties in relation to staff providing the Services to OTML, leaving aside issues such as occupational health and safety, were limited to employing and training staff and localisation of positions. 59 Furthermore, although Eurest was to conduct the Operations, it was to do so in accordance with a Program and Budget (cl 5.1). Eurest was not to incur any expenditure unless the expenditure was included in a Program and Budget or was otherwise approved by Fubilan (cl 5.2(a)). Eurest was to operate a bank account and pay into accounts all moneys received by it pursuant to the Management Agreement and was to make all disbursements of Company Expenses in connection with the Operation from the account (cl 5.11(a), (b)). 60 Eurest was to co-operate with the board of Fubilan in arranging each proposed Program and Budget and with MRSM to determine the preferred method of funding Fubilan's working capital (cl 8.1(a)). Each proposed Program and Budget was to specify in reasonable detail the Operations to be carried out and provide an estimate of the Company Expenses required (cl 8.2(c)). Fubilan's requirements for working capital were to be as provided for in the Programs and Budgets and were to be funded principally by MRSM providing debt and equity finance to Fubilan up to K3 million. Additional funding was to be provided by loans from MRSM or MRDC, third party borrowings or profits from Operations (cl 7.1). Within the framework of an approved Program and Budget, Eurest was to submit periodically to the boards of Fubilan, MRSM and MRDC an estimate of Company Expenses for the ensuing period (cl 8.5(a)). Eurest was to give notice to MRSM and MRDC of the contributions to Company Expenses each was to make to Fubilan by way of contributions to share capital in loans (cl 8.5(b)). MRSM and MRDC were bound to pay to Fubilan the amounts so specified (cl 8.5(c)-(e)). 61 This elaborate structure makes it clear that Eurest was not to conduct all Operations at its own expense. The finance required for the Operations was to be provided by Fubilan which, in turn, was to receive funds from MRSM and MRDC. Eurest was to meet the expenses incurred in the performance of its obligations under the Management Agreement, specifically those set out in cl 4.2. 62 It may not be an easy task in any given instance to determine precisely which expenses are to be borne by Eurest and which by Fubilan. It is possible, for example, that one person, whether formally employed by Eurest or by Fubilan, could discharge Eurest's obligations under the Management Agreement and also perform functions that are not Eurest's contractual responsibility. Nonetheless, whatever difficulties there may be in drawing a line in particular cases, the present claim relates to expenses which, clearly enough, were not intended to be borne by Eurest. 63 Under the Catering Contract, Fubilan was to receive lump sum payments in accordance with Schedule 3-1 as 'full compensation' for its operating and fixed costs including 'management, supervision and all staff costs' (section 3, cl 1.4.1). The full compensation was to exclude 'all Contractor profit for all of the Services'. Fubilan was to derive all of its profit for the Services from the unit rates payable to it on a per plate basis, as set out in Item 3 of Schedule 3-1. 64 Any doubt as to whether the costs associated with the six positions were to be the subject of the lump sum compensatory payments is dispelled by Schedule 3-4 to the Catering Contract. This provided that, upon the localisation of each of the six positions, specified adjustments were to be made to Item 2.1 of Schedule 3-1 which provided for the lump sum compensatory payments pursuant to cl 1.4 of Section 3 of the Catering Contract. It is quite clear that Schedule 3-4 assumed that the costs incurred by Fubilan by way of salaries and related expenses for the six positions would be fully compensated by OTML's monthly lump sum payment. 65 The Catering Contract was structured on the basis that Fubilan would provide all the Services to OTML. The role of Eurest was to manage, control and supervise the Services (section 2, cl 6.1). OTML was to compensate Fubilan for its operating costs, including staff, but on a basis that excluded a profit component. The six positions occupied by expatriates at the date the Catering Contract and Management Agreement came into force, were included in 'the staff' for which Fubilan was to be fully compensated by OTML. The structure of the Catering Contract strongly suggests that the occupants of the six positions from time to time (whether expatriate or local) were to be regarded as staff delivering the Services Fubilan was obliged to provide to OTML. Eurest's role was to manage, control and supervise the staff, including the occupants of those six positions. 66 Clause 2.2 and the definition of 'Management Fee' in the Management Agreement must be construed within this framework. The Management Fee was not intended to cover the salary and associated costs of the occupants of the six positions. They were part of the staff Eurest was to manage, control and supervise. Eurest was to bear the expenses of managing, controlling and supervising the staff, but the Management Agreement did not require Eurest to meet the salaries and associated costs of the holders of the six positions. In short, the expenses incurred in performing or discharging the duties of these positions were not: 'expenses that the Manager incurs in the performance or discharge of its obligations under [the Management Agreement]', within the meaning of the definition of Management Fee. 67 We do not rule out the possibility that the holders of one or more of the six positions might have performed additional duties from time to time, over and above those contemplated by the Catering Contract. If the additional duties were the responsibility of Eurest under the Management Agreement, it might have been liable to bear the proportion of expenses associated with the performance of the additional duties. However, the appellants did not and do not seek to make out a case of this nature. 68 Ground 1 of the Amended Notice of Appeal therefore fails.

Ground of Appeal 69 Ground 2 of the Amended Notice of Appeal raises an issue concerning the obligation of Eurest to provide training to achieve localisation. Ground 2 is in the following terms: '… the Court erred in: 2.1 finding the documents contained in volumes 2 to 5 of the OTML Catering Contract did not form part of that contract or the Management Agreement… 2.2 failing to find that Schedule 6.1 to the OTML Catering Contract, Labour Practices (contained in volume 5 of that contract), specifically clauses 9 and 13 and the training and localisation extract, specifically clause 30 applied; and 2.3 failing to find that the First and Second Respondents [Eurest Australia and Eurest] were in breach of the Management Agreement in failing to comply with the clauses referred to in 2.2 above, read with clause 6 in part 3 of the OTML Catering Contract read with Schedule 2.10 of the OTML Catering Contract and the localisation dates set out in Schedule 3.4 to the OTML Catering Contract.' 70 Ground 2.1 refers to statements made by the primary Judge that only the documents in volume 1 of the Catering Contract (containing the Agreement and sections 1-5) formed part of the contractual arrangements between OTML and Fubilan. Ground 2.2, although obliquely expressed, appears to be consequential on Ground 1, in that it contends that his Honour should have found that the provisions identified formed part of the Catering Contract and thus were relevant to Eurest's contractual obligations to Fubilan. Clauses 9 and 13 of Schedule 6-1 to the Catering Contract have been set out earlier ([25] above). The reference to 'clause 30' in Ground 2.2 is to cl 30 of the Ok Tedi Agreement, approved and implemented by the Mining (Ok Tedi) Agreement Act 1976 (PNG) ([12]-[13] above). 71 Ground 2.3 contends that the primary Judge should have found that the respondents breached the Management Agreement by failing to comply with the specified provisions, all of which have been reproduced earlier. It will be noted that Ground 2.3 does not identify the precise respect in which the respondents are said to have contravened the contractual provisions relied on by the appellants.

Primary Judgment 72 The appellants' pleaded case was that the intention of the parties to the Catering Contract and the Management Agreement was for Fubilan to take the opportunity afforded by the four years Catering Contract to be able to bid in its own right for the renewal of the Contract. The appellants pleaded that there was an implied term of the Management Agreement that Eurest would do whatever was reasonably necessary to give Fubilan the benefit of the Management Agreement and to refrain from doing anything that would interfere with, frustrate or deprive it of the benefit of the Management Agreement. It was alleged that Eurest in breach of this implied term, did not make available or provide sufficient training to the employees of Fubilan to the level necessary for Fubilan to gain the benefit of the Management Agreement. 73 The appellants' alternative pleaded case was that, by failing to provide Fubilan with the level of management necessary for it to gain the benefit of the Management Agreement, Eurest breached cl 4.2(a) of the Management Agreement. (Clause 4.2(a) is set out at [31] above.) In consequence of the alleged breaches, Fubilan claimed that it had lost the opportunity to make profits in providing industrial catering services in its own right in the national market of Papua New Guinea. 74 The primary Judge rejected the appellants' claims and gave concise reasons for doing so: 'It is not open, in my opinion, to imply the term which the applicants sought to imply. It amounted to a guarantee that Eurest would put Fubilan in a position to undertake the renewed management agreement in its own right. Moreover Eurest had no obligation to train a cohort of executive managers who would put Fubilan in that position. There was no evidence that any personnel with the relevant education and aptitude were available for such training. The evidence of Ms Broadbent, which was unchallenged, indicates that Eurest took its training responsibilities seriously and did what was reasonably within its power to discharge them. Nor in my opinion have the applicants shown any breach of cl 4.2(a) of the Management Agreement which could be said to be causative of the loss and damage claimed.'

Reasoning 75 In their written and oral submissions on the appeal, the appellants placed particular reliance on what was said to be a clear error by the primary Judge. At one point his Honour stated (at [152]) that the further four volumes of documents which accompanied volume 1 of the Catering Contract did not form part of the Contract. This may be contrasted with his Honour's earlier observation (at [147]) that those volumes did indeed form part of the Catering Contract. Unless his Honour was merely referring to the volumes not being physically part of the Catering Contract, the former statement appears to be an error. But, in our view, nothing turns on the apparent error. It is clear that his Honour reviewed the content of those four volumes at some length in the course of his extensive reasons and did so on the basis that they were part of the Catering Contract. This is reflected in his earlier, correct observation (at [147]) as to the status of volumes 2 to 5. There is no doubt that the Catering Contract comprised all five volumes of material. Equally, there can be no doubt, in our view, that his Honour approached the contractual issues on that basis. 76 It is not easy to follow the appellants' substantive argument on the contractual question. In particular, it is not clear whether they seek to rely on the implied term pleaded by them, some variation of that implied term or an express obligation derived from the various provisions identified in Ground 2 of the Amended Notice of Appeal. The thrust of the argument appears to be that those provisions and others referred to in argument by Mr Clifford amount to what might be described as a localisation promise, whereby Eurest undertook to train local people to a standard sufficient to enable Fubilan to bid for and carry out successfully industrial catering contracts in its own right. 77 One answer to this argument may be that this is not the case pleaded by the appellants, although his Honour characterised their argument as asserting that Eurest had guaranteed that it would put Fubilan in a position to undertake the renewed Management Agreement in its own right. Be that as it may, Mr Clifford did not direct our attention to any provisions that, individually or collectively, support the proposition that Eurest promised, expressly or implicitly, to set up a training program that would ensure that Fubilan could bid for and carry out catering contracts in its own right. 78 It was undoubtedly an important feature of the dealings between Fubilan and Eurest that Eurest would take steps to train local personnel to occupy positions of responsibility with a view to Fubilan being able eventually to perform all of the tasks, including those at a managerial and supervisory level. This element of the arrangement is reflected in the 'Training and Localisation Plan' in Schedule 2-10 of the Catering Contract. Schedule 2-10 attached Eurest's own plan which explained in detail the steps it proposed to take. Eurest's plan included a paragraph stating that: '[i]n summary, Eurest believes that the implementation and commitment to training is a critical element within the Localisation Plan. It will deliver employees the necessary skills for future economic sufficiency.' 79 This language, however, assuming it to be incorporated into the Management Agreement, falls short of an undertaking to achieve the specific results identified by the appellants. The obligation under the Management Agreement did not go beyond a requirement to carry out training in accordance with approved programs in an attempt to meet the localisation objective. No doubt if all went well, by the time the Management Agreement had run its course it might have been expected that Eurest would step aside and Fubilan would take over its role. But Eurest never promised contractually to ensure that this aspiration was actually realised. 80 As events transpired, the training and localisation plan did not produce the hoped for result, that enough suitably trained local people would emerge from the program to achieve full localisation. On his Honour's findings, the inability to achieve the goal of localisation came about because there were insufficient local personnel available with the education and aptitude required to acquire the appropriate skills. In any event, the failure to achieve the objective of the localisation program did not constitute a breach by Eurest of its contractual obligations under the Management Agreement. 81 Notwithstanding his conclusion on the contractual issue, his Honour dealt at length with the evidence concerning Eurest's training program, including the uncontested evidence given by Ms Broadbent. She was a qualified teacher of adult students and had been involved in writing and delivering training programs since 1982. She was in charge of the training program for Eurest. Her duties were to develop and deliver training programs for the Fubilan employees involved in the performance of the Catering Contract. She was to organise the training development and analyse training needs and develop and deliver programs to those requiring the training. She prepared a training needs analysis audit which was comprehensive and detailed and was annexed to her statement. She also prepared and began the implementation of the training program. 82 The training program itself was also in evidence. There was a first level training program of a basic type and a more sophisticated program for supervisory positions. The trainees were to be PNG nationals. Ms Broadbent was assisted by two other PNG nationals in the catering department who provided her with assistance in delivery of the programs. She was also assisted by an expatriate from the catering section. She delivered many of the training programs herself and supervised others. She provided senior management with reports on the training which had been conducted. These were intermittent at the outset, but in 2001 she provided them monthly. The reports which she provided were in evidence. There was also evidence that an audit conducted by the PNG Ministry of Labour and Industrial Relations in 2003 had passed the program. 83 It is not entirely clear whether the appellants challenge his Honour's findings in relation to Eurest's training program. In any event, his Honour was justified on the evidence in concluding that Eurest had met its training obligations under the Management Agreement. The appellants have not demonstrated any basis for disturbing his Honour's findings. 84 In view of these conclusions, it is not necessary to consider whether Fubilan suffered any loss or damage in consequence of any breach by Eurest of the localisation provisions of the Management Agreement. Nonetheless, it is appropriate to refer briefly to the difficulties the appellants would have faced on the appeal in establishing loss or damage, assuming they had been able to make out a case of breach of contract. 85 On the appellants' argument, Fubilan sustained loss or damage because it lost the opportunity to renew the Catering Contract in its own right and also lost the opportunity to obtain other catering contracts that in fact were awarded to Eurest. The appellants say that if Eurest had properly complied with its contractual obligations, Fubilan would have earned additional profits over a four year period of K7.9 million. This amount is equivalent (so the appellants contend) to the profits earned by Eurest over that period from catering operations in the relevant areas of PNG. 86 We were not taken in argument to any evidence that supported the proposition that Fubilan had a realistic chance of being awarded the catering contracts on which its claim was based, let alone evidence that it would have succeeded in obtaining the contracts. The primary Judge found (at [432]) that the difficulties experienced by Fubilan in renewing the Catering Contract in its own right were unrelated to its incapacity to deploy management staff. Rather, the difficulties related to the conduct of Mr Fenwick and the board, the ways in which they dealt with OTML and Eurest and: 'their ill-fated attempt to set up a supply channel for Fubilan and the hamfisted attempt to terminate the Management Agreement.' His Honour considered that Fubilan had shown a lack of commercial maturity and good corporate governance: 'which would give pause to any third party considering a relationship unmediated by an operator experienced in the industry and in the conduct of civil business relationships.' 87 Later in the judgment (at [551]), his Honour reiterated that: 'the operative obstacle to Fubilan's capacity to secure the renewal of the [Catering] Contract in its own right was not any deficiency on the part of Eurest but its own lack of capacity at the level of its board and senior management to conduct reasonably workable commercial relationships with Eurest and OTML.' Given the composition of the board and its choice of Mr Fenwick as adviser, so his Honour found, Fubilan would have faced the same difficulties whoever its manager might have been. 88 These findings are inconsistent with the appellants' case that a breach of the localisation provisions of the Management Agreement caused a measurable loss to Fubilan in the form of the loss of its opportunity to secure catering contracts in its own right. We were not taken to any material that demonstrates that his Honour made any appellable error in making these findings. 89 For the reasons we have given, the contractual claims founded on Eurest's alleged failure to comply with its obligations in relation to localisation must be rejected. Ground 2 of the Amended Notice of Appeal therefore fails.

GROUND 2A: ALLEGED MISREPRESENTATIONS 90 Ground 2A in the Amended Notice of Appeal raises the localisation issue in the context of alleged misleading or deceptive conduct by the respondents in contravention of s 52 of the TP Act. Ground 2A is as follows: '2A. In the alternative to ground 2 the Court erred in finding the evidence adduced by the Respondents was sufficient to establish [reasonable grounds for making] each of the statements alleged by the Appellants, where: 2A.1 the Respondents represented that they would localise expatriate positions in the operations and provided dates on which the localisation of six expatriate positions was anticipated to occur, between April 2000 and October 2003; and 2A.2 at the time the representation was made and the anticipated localisation dates were included in the OTML Contract, [Eurest's] training officer (Mrs Broadbent) held the view there were no PNG nationals from the preferred area with appropriate education(s) to be trained.' (Appeal Book references omitted). 91 It is clear that to make a promise which is not performed or a prediction which is not fulfilled is not, without more, misleading or deceptive: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82, at 88, per curiam; Bill Acceptance Corporation Pty Ltd v GWA Ltd (1983) 50 ALR 242. It is only where the making of a promise or prediction contains an implied representation of present fact, such as a representation that the promisor is capable of performing the promise, that the promise or prediction can be misleading or deceptive. Alternatively, if the promise can be construed as a representation with respect to a future matter, and the promisor does not have reasonable grounds for making the representation, it is taken to be misleading: TP Act, s 51A(1). In this case, the promisor, unless it adduces evidence to the contrary, is deemed not to have had reasonable grounds for making the representation: s 51A(2). 92 The misrepresentation case at first instance was based on 21 representations allegedly made by the respondents concerning the outcomes of the training or localisation programs. The claim was put on the basis that continuing representations had been made and had 'proven to be false', in that various outcomes had not occurred. The argument was that because the representations had not been fulfilled, Fubilan had been prevented from acquiring the reputation and skills necessary to achieve renewal of the Catering Contract with OTML in its own right and to secure other catering contracts. It was not pleaded, nor was his Honour satisfied, that the respondents lacked reasonable grounds for making representations relating to the establishment and implementation of an effective training and localisation plan. The falsity of the representations was said to be made out because the represented outcomes did not eventuate. 93 His Honour expressly found that, putting aside mere puffery, Eurest had the organisational capacity to do all the things it had allegedly represented that it would do. His Honour also found that the statements made to the appellants on this topic by Mr Hayes on behalf of Eurest were made honestly and that the respondents had reasonable grounds for making the representations. In addition, his Honour made factual findings, to which we have referred, inconsistent with the appellants' claim that Fubilan had suffered loss or damage by reason of any misleading or deceptive conduct on the part of Eurest. 94 Mr Clifford's oral submissions on the appeal were put on a different basis to those made on the appellants' behalf at trial. He accepted that the representations had been made innocently and reasonably at the outset, but submitted that they became misleading or deceptive once Eurest realised the magnitude of the challenges and difficulties it faced in achieving localisation. It was implicit in this argument that Eurest was under a duty to correct the false impression created by the continuing representation in order to avoid a contravention of s 52 of the TP Act. 95 The case put by Mr Clifford on the appeal was neither pleaded nor identified in the Amended Notice of Appeal. Indeed, it was not adverted to in the appellants' written submissions. To permit this new argument to be raised for the first time during oral argument on the appeal would be unfair to the respondents. As Mr Bennett submitted, they may well have wished to adduce further evidence on this question at trial had the appellants raised it in a timely fashion. 96 For these reasons, Ground 2A must be rejected.

GROUND 3: REBATES 97 The appellants claimed that Eurest failed to pass on the benefit of rebates which it obtained for bulk purchases and early payments in respect of foodstuffs purchased in Australia and PNG for use by Fubilan in its performance of the Catering Contract. There was no dispute that Eurest obtained such rebates. The quantum, however, was not agreed and would need to be the subject of a remitter to the primary Judge should the appellants succeed on this issue. 98 Between 1 February 2000 and 24 November 2001 Eurest placed food orders with Eurest (Australia), which ordered the goods from Australia or within PNG. Eurest retained the invoices, although it said that copies were provided to Fubilan from time to time on request. Eurest (Australia) arranged for the goods to be delivered to OTML's freight forwarder's depot at Townsville for transportation by OTML to PNG for use by Fubilan. Eurest (Australia) issued Fubilan with its own invoices for the cost of the goods so provided. 99 The appellants relied on cl 5.13(a)(i) of the Management Agreement, the terms of which have been set out earlier ([34] above). That provision empowered Eurest to engage Sub-Contractors on an arms length basis and on the best commercial terms available on behalf of Fubilan. Clause 5.13(b) applied the provision to 'Sub-Contracts' exceeding K20,000 in value with suppliers of foodstuffs or other goods and services required for carrying out the Operations. The appellants argue that Eurest's failure to pass on the benefit of the rebates breached its obligations under cl 5.13(a)(i). 100 The short answer, as his Honour held, is that the purchasing of foodstuffs by the respondents did not come about as a result of any 'Sub-Contract' within the meaning of cl 5.13(a) of the Management Agreement. Relevantly, the Services Fubilan was to provide to OTML involved the provision of meals, not foodstuffs. Obtaining foodstuffs for those meals would be no more a case of Fubilan sub-contracting its obligations under the Catering Contract than would be the purchase by Fubilan of fuel for its vehicles. As his Honour pointed out (at [574]), and as seems to have been accepted by the parties, the purchase of foodstuffs by Eurest was, strictly speaking, outside the framework of the Management Agreement. Fubilan needed to acquire foodstuffs and it was presumably convenient to utilise the capacity of Eurest and Eurest Australia in that regard. The relationship between Fubilan and Eurest was not that of principal and agent. Nor, as we explain later ([106]-[118] below) did Eurest owe any fiduciary duty to Fubilan. 101 It is necessary to bear in mind that the Management Agreement defined 'Sub-Contract' to mean a 'sub-contract referred to in section 1 of the [Catering] Contract'. Section 1 of the Catering Contract did not contain a definition of sub-contract, but defined 'Subcontractor' in cl 1.1 to mean: 'any person engaged by [Fubilan] to execute a part of the work under the contract on behalf of [Fubilan]'. Other provisions of the Catering Contract required its terms and conditions, so far as applicable, to be included as terms and conditions of any subcontract (section 1, cl 5.5). These provisions do not suggest that each purchase of supplies by the respondents constituted a 'Sub-Contract' for the purposes of the Management Agreement. Clause 5.13(b) of the Management Agreement does not advance matters for the appellants, since it merely applied cl 5.13(a) to 'Sub-Contracts' of a particular character. 102 We should note that Schedule 2-7 to the Catering Contract contained a list of 'Subcontractors and Suppliers whom the contractor proposes to use in the performance of the Services'. At one point, the primary Judge incorrectly stated that Schedule 2-7 was not part of the Catering Contract. However, there was no suggestion that the rebates that the appellants say should have been passed on to Fubilan arose out of dealings with the nominated subcontractors. Fubilan nominated the subcontractors in Schedule 2-7 in conformity with cl 5.2 of Section 1 of the Catering Contract, which required it to notify OTML of all proposed 'Subcontractors'. 103 His Honour was therefore correct in concluding (at [628]) that the failure of Eurest or Eurest Australia to pass on the benefit of rebates did not constitute the breach of any contract between Eurest and Fubilan.

GROUNDS 4 AND 5: SETTLEMENT OF THE REBATE ISSUE 104 A related issue concerning rebates is whether the parties agreed at some stage to settle the rebates issue. Along with other issues in dispute between them, Fubilan's claim to the benefit of rebates was the subject of extensive discussions between the parties. His Honour held (at [246]) that at a meeting on 13 February 2001 the parties reached a compromises of all outstanding matters in relation to the financial aspects of the Management Agreement. This compromise, in His Honour's opinion, was effective to preclude Fubilan from thereafter raising the question of its entitlement to the benefit of rebates that had been obtained until that point. His Honour noted, however, that the question of rebates became an ongoing issue and was not treated as having been resolved by the settlement agreement. On the Fubilan side, the driving force was Mr Fenwick, who hoped that companies in which he had an interest could become part of the food purchasing system. 105 On the appeal, the appellants challenge the finding that a binding compromise had been reached in February 2001. However, even if the challenge is well-founded, the fact remains that, for the reasons already explained, Fubilan did not have at that stage, or thereafter, any contractual or other legal entitlements to the rebates. There is therefore no need to address further these grounds of appeal.

GROUND 6: BREACH OF FIDUCIARY DUTY 106 The appellants contend that the primary Judge erred in failing to recognise the existence of a fiduciary relationship between the parties to the proceedings. The ground of appeal is expressed in the following terms: 'The Court erred in finding that the Respondents were not in a fiduciary relationship with the Appellants in that the Appellants were not in an equal bargaining position with the Respondents and were dependant on the Respondents training the Appellants and otherwise managing the Appellants' commercial interests under the Management Agreement.' 107 It is not entirely clear what would follow if the Court was to find that a fiduciary relationship existed between Eurest and Fubilan. In particular, it is not clear precisely what additional obligations would be imposed on Eurest as a fiduciary, over and above those imposed by the Management Agreement. Be that as it may, the primary Judge addressed the question and the appellants pursued it on the appeal. 108 The primary Judge observed (at [565]) that the pleaded basis for the existence of fiduciary duties owed by Eurest and Eurest Australia to Fubilan was the nature of the relationship between MRSM and Eurest prior to the commencement of the Catering Contract and the Management Agreement. He pointed out that the relationship thereafter was defined by the Management Agreement. His Honour noted that the way in which the contractual relationship could give rise to fiduciary obligations was not explained in the pleadings or in the closing submissions. 109 The appellants, in their written submissions in reply on the appeal, contend that the pleading pertained to: 'all of its dealings with the Respondents … referring specifically to the Respondent's [sic] conduct in acting as the catering contract manager if the tender proposal was successful'. They also assert that: 'Fubilan reposed its trust and confidence in the Respondents as they alone had the knowledge of the extent of the "benefits" it [sic-they] could obtain and ought to have passed on'. Although there was no contractual obligation to do so, the respondents should have passed on: 'the benefit of its large PNG, Australian and global purchasing power which allowed the Respondents to purchase at the best possible price'. 110 The appellants also rely on what they say was the extremely limited basis upon which Fubilan could dispense with the services of Eurest. This, it is said, demonstrates significant inequality between Fubilan and Eurest. The inequality, taken with the alleged dependence of Fubilan on Eurest, are the two key factors on which the appellants rely to establish a fiduciary relationship. 111 The appellants contend that the fiduciary relationship existed throughout the dealings between the appellants and the respondents - that is, both during negotiations leading up to execution of the Management Agreement and after it was executed. This argument is advanced even though the appellants were professionally represented throughout and even though a complex commercial agreement was reached between the parties after negotiations at arms' length. 112 It is clear that Eurest recognised that it was to train PNG nationals so that ultimately Fubilan would be in a position to take over Eurest's role under the Management Agreement or a similar role under a new management agreement. It is also true that his Honour observed (at [432]), in respect of the board of Fubilan, that: 'There was a lack of commercial maturity and good corporate governance which would give pause to any third party considering a relationship unmediated by an operator experienced in the industry and in the conduct of civil business relationships.' His Honour further observed (at [552]) that: 'Even with appropriate levels of employee competency, Fubilan fell well short of the commercial maturity at board level necessary to maintain ongoing commercial relationships in a complex service delivery exercise conducted in its own right.' 113 While Fubilan was inexperienced in the provision of catering services, it did have assistance. The initial negotiations which gave rise to the Management Agreement were undertaken with the backing of MRDC and the assistance of the advisor of its choice, Mr Fenwick. Despite the shortcomings of Mr Fenwick, which later became evident, he had extensive experience. 114 His Honour analysed in some detail the leading authorities on fiduciary relationships, including Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 and Breen v Williams (1995) 186 CLR 71. He cited the observation by the learned authors of Meagher, Gummow and Lehane's Equity Doctrines and Remedies (4th ed, 2002), at [5-010], supported by authority, that '[f]iduciary duties are less likely to be identified in commercial transactions between parties at arms' length effected in written form'. His Honour also referred to The Paul Dainty Corporation Pty Ltd v The National Tennis Centre Trust (1990) 22 FCR 495, where the Full Court said (at 515) that: '[t]he authorities make it clear that equity will not impose fiduciary obligations on parties who have entered into ordinary and arm's length commercial relationships, which fully prescribe the respective powers and duties of the parties. This is particularly so when the parties involved are substantial corporations, having equal bargaining power.' The primary Judge held that these authorities and others to which he referred were all of importance on the question of whether a fiduciary relationship existed in the present case. We respectfully agree. 115 The primary Judge concluded (at [595]) that the fiduciary duty claim had not been established either in respect of alleged breaches concerning rebates and discounts or in relation to the operation of the bank account in Fubilan's name. His Honour said (at [589] that: '[a]lthough the Management Agreement in the present case was entered into to meet a condition imposed by OTML for an experienced provider of catering services to manage the contract for the successful tenderer it was not thereby anything less than an arms' length contract …. The terms of the Management Agreement which required competence and diligence on the part of the Manager, responsibility for and supervision of the activities of Fubilan, preparation of programs, budgets and a Corporate Manual and of accounts and records, as well as reports, do not convey the sense of a relationship of a fiduciary character.' 116 There may have been greater commercial maturity and sophistication on the part of Eurest than Fubilan but, with proper advice, the parties committed their commercial dealings to a set of detailed rules formulated with some precision. Absent some unconscionable conduct, such detailed contractual arrangements would be pointless if they could be swept aside on the basis that there was an inequality of commercial experience between the parties. In any event, the terms and nature of the commercial relationships do not suggest an inequality in any relevant sense between Fubilan and Eurest. 117 In our view, the terms of the Management Agreement preclude the existence of a fiduciary relationship in the more general sense contended for by Fubilan. The sophistication of the commercial contractual relationship, the contractual protection afforded to Fubilan and the professional representation available to the appellants during negotiations for the Management Agreement and after its execution, would rarely, and then only for very limited purposes, leave room for a fiduciary relationship. It follows that the appellants have not established the existence of a fiduciary relationship in the sense for which they contend and that they cannot succeed in a claim founded on breaches of any such duty. 118 The appellants contend that the compensation which should be awarded for breaches of fiduciary duty comprise the expatriates' expenses, rebates not passed on and overpayment claims, totalling in all K20,810,487.17. Mr Clifford accepted in argument that the breach of fiduciary duty claim added nothing to the contractual claim relating to expatriate expenses. Moreover, as the primary Judge pointed out, there were significant deficiencies in the evidence adduced to support the quantum of compensation claimed by the appellants. However, since the appellants have failed to show that the primary Judge erred in holding that there was no fiduciary relationship between Fubilan and Eurest, these deficiencies need not be addressed. Ground 6 also fails.

GROUND 7: COMPETITION WITH FUBILAN 119 The appellants alleged in their statement of claim that the respondents breached cl 2.4(a) of the Management Agreement by engaging in activities competitive with Fubilan at Bige dredging site on the Fly River, at the Tabubil Golf Club and at the Tabubil bakery. The relevant terms of cl 2.4(a) and the definition of 'Contract Area' have been reproduced ([30] above). 120 Eurest's defence at the trial was that the Bige dredging site was not within the 'Contract Area' as defined. In relation to the Tabubil Golf Club and bakery operations, Eurest pleaded that both activities were in place and known to Fubilan at the time the Management Agreement commenced. Further, Eurest said that both activities were permitted by Fubilan at the time and had been subsequently terminated by Eurest when it was requested to do so. 121 His Honour (at [627]) found that Bige was not shown to be within the Contract Area. In any event, his Honour held (at [628]) that the evidence was: 'simply insufficient to establish that Fubilan was displaced by Eurest in relation to its activities in the areas pleaded or that it would have, on a stand alone basis, been able to provide the relevant services and make the profit alleged.' 122 The evidence as to loss or damage allegedly suffered by Fubilan was limited to some documents tendered in cross-examination showing turnover and profit of Eurest's operations. In our view, his Honour was correct in concluding that this was quite insufficient to establish that Fubilan would have made a like profit, or indeed any profit at all. There was no attempt, so far as we were informed, to adduce evidence as to whether, and if so how, Fubilan would have set up and operated the businesses in question and whether it would have made a profit, and if so, how much. 123 Nor was it shown that his Honour was incorrect in holding that Bige was not within the Contract Area. The onus was on the appellants. As to the Tabubil Golf Club and bakery operations, it is arguable that the restrictions of cl 2.4 only applied prospectively and not to Eurest's existing operations. Alternatively, Fubilan may have waived its right to insist on strict performance. But in any event, no damage was proved and his Honour was correct in so holding.

GROUND 8: LEAVE TO AMEND 124 Ground 8 of the Amended Notice of appeal alleges that the primary Judge erred in refusing the appellants' application to amend their pleadings to include a claim for overpayment by Fubilan to Eurest amounting to K3.98 million. The primary Judge refused to allow the amendment. His Honour pointed out that the issue was raised only after the cross-examination of the last witness at the trial had been completed. He held that, if the amendment was allowed the respondents would have been denied any real opportunity to make enquiries about the documentation relied on by the appellants. Such enquiries would have involved an adjournment at the end of a 22 day trial and required the respondents to gain access to records in Papua New Guinea. 125 The application to amend was not only made near the very end of the trial, but the appellants had particularised their damages in a schedule handed up at the outset of the trial. That set out the case that the respondents had come to meet. Moreover, the documents relied on by the appellants in their amendment application had been provided to them by the respondents before the trial commenced. 126 The foundation of Mr Clifford's argument in support of Ground 8 of the Amended Notice of Appeal was that the proposed amendment involved no injustice to the respondents because Mr Armstrong, the National Commercial Manager of the Compass Group, had conceded in cross-examination that there had been an overpayment to Eurest from the Fubilan account of some K2.65 million. In fact, Mr Armstrong made no such concession. He merely said when shown certain documents in the witness box, that he could not at that time explain an apparent anomaly in the figures. This was hardly surprising and indicated only that he would have had to make further enquiries in order to provide an explanation of the apparent anomaly. 127 In our view, there was no error in the exercise of his Honour's discretion to refuse the application to amend the particulars of loss and damage. Ground 8 therefore must be rejected.

GROUND 9: ADEQUACY OF REASONS 128 Ground 9 of the Amended Notice of Appeal contends that the primary Judge failed to provide adequate findings and reasons to enable the appellants to gain a proper understanding of the basis upon which his Honour decided the issues. The language used in Ground 9 is derived from a ground of appeal relied on in Mount Lawley Pty Ltd v Western Australian Planning Commission (2004) 29 WAR 273, at [26]. There the Full Court of the Supreme Court of Western Australia accepted a submission that the trial Judge had given inadequate reasons, although their Honours did not ultimately need to decide whether the failure was determinative of the appeal. 129 Ground 9 is entirely without merit. In the current proceedings, his Honour dealt with 17 pleaded causes of actions after a trial which lasted 22 days. He delivered a judgment which runs to 236 pages. None of his Honour's substantive conclusions has been disturbed by this Court. Mount Lawley v WA Planning Commission was a very different case from the present.

CREDIT OF MR FENWICK 130 None of the grounds of appeal identified his Honour's adverse credit findings in relation to Mr Fenwick as matters of complaint. Nonetheless, at the hearing of the appeal Mr Clifford made submissions that those findings were erroneous and unsafe and should be overturned. According to Mr Clifford, Mr Fenwick's credit had a bearing on the rebate issue and possibly others. 131 Mr Clifford identified two particular aspects of his Honour's reasoning that he submitted were unsound. Even assuming that those two findings were doubtful, his argument did not address the fact that the primary Judge made many express or inferential credit findings adverse to Mr Fenwick. Fubilan's case depended in significant measure on Mr Fenwick's evidence being accepted. It was not. There was ample justification for his Honour's conclusion as to the credit of Mr Fenwick. Even if we saw merit in either of the particular matters raised by Mr Clifford, that conclusion would be insufficient to cast doubt over the balance of the many adverse findings made by the primary Judge. 132 We mention, by way of example, that Mr Fenwick was not only a consultant to Fubilan in preparation of its case (at a rate of $10,000 per month (at [35])), but also a key witness for Fubilan. In addition, as his Honour observed (at [70]), Mr Fenwick's role as an advocate rather than as a witness of truth on issues of importance in the case emerged early in his evidence. Further, it is clear from his Honour's findings that he regarded Mr Fenwick as looking after his own personal interests ahead of those of Fubilan's at the time the Catering Contract was being performed (at [210], [214] and [253]). On numerous other issues his evidence was rejected. 133 The attack on his Honour's adverse credit findings relating to Mr Fenwick cannot be sustained.

CONCLUSION 134 The appeal must be dismissed. The appellants must pay the respondents' costs of the appeal. The cross-appeal should be dismissed, with no order as to costs. I certify that the preceding one hundred and thirty-four (134) numbered Paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Heerey, Sackville and McKerracher.

Counsel for the Appellants: Mr P G Clifford with Mr A P Rumsley

Date of Hearing: 11, 12 February 2008 Date of Judgment: 4 April 2008