Gibbins Investments Pty Ltd v Savage

Date of hearing: 28-31 March 2011

Date of last submissions: 7 April 2011

Place: Melbourne

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 146

Counsel for the Applicant: AJ Kelly SC with DG Guidolin

Solicitor for the Applicant: Wisewould Mahoneys

Counsel for the First, Second and Third Respondents: AP Rodbard-Bean with T Wodak

Solicitor for the Respondents: Thomsons Lawyers

Counsel for the Fourth Respondent: EN Magee QC with TP Mitchell

Solicitor for the Respondents: Gadens Lawyers

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 1071 of 2010

BETWEEN: GIBBINS INVESTMENTS PTY LTD (ACN 122 828 369)

AND: SAMUEL SAVAGE (AS EXECUTOR OF THE ESTATE OF JOHN THOMAS SAVAGE (DEC'D))

TERESA CLEGG (AS EXECUTOR OF THE ESTATE OF JOHN THOMAS SAVAGE (DEC'D))

MARYELLEN QUIGLEY (AS EXECUTOR OF THE ESTATE OF JOHN THOMAS SAVAGE (DEC'D))

JUDGE: GORDON J DATE OF ORDER: 19 MAY 2011 WHERE MADE: MELBOURNE

1. The parties to confer and bring in orders to give effect to these reasons for decision by 4:00 pm on 26 May 2011. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 1071 of 2010

BETWEEN: GIBBINS INVESTMENTS PTY LTD (ACN 122 828 369)

AND: SAMUEL SAVAGE (AS EXECUTOR OF THE ESTATE OF JOHN THOMAS SAVAGE (DEC'D))

TERESA CLEGG (AS EXECUTOR OF THE ESTATE OF JOHN THOMAS SAVAGE (DEC'D))

MARYELLEN QUIGLEY (AS EXECUTOR OF THE ESTATE OF JOHN THOMAS SAVAGE (DEC'D))

JUDGE: GORDON J DATE: 19 MAY 2011 PLACE: MELBOURNE

A. INTRODUCTION 1 The Applicant, Gibbins Investments, holds 55% of the issued shares in Sitzler Savage Pty Ltd (ACN 089 842 875) (Sitzler Savage). Gibbins Investments sought to restrain the First to Third Respondents (the Executors) from selling, transferring, disposing of, pledging, encumbering or otherwise dealing with the balance of the shares in Sitzler Savage which were owned by Jack Savage (dec'd) (the Estate), other than in accordance with Sitzler Savage's Constitution (and in particular, the pre-emptive rights provisions in Art 37). 2 The Executors and the Fourth Respondent, Vermillion, both oppose the application. Vermillion contends that it is entitled to complete its purchase of the shares in Sitzler Savage held by the Estate. The basis of Vermillion's opposition to Gibbins Investments' application changed during the course of the matter. It ultimately contended, during closing submissions, that Gibbins Investments had agreed to displace its rights under the Constitution by a special resolution of 100% of the shareholders of Gibbins Investments, or by each shareholder in Sitzler Savage agreeing to give up their rights under Art 37. The Executors relied upon the contentions of Vermillion in relation to these issues. 3 The Executors however also adopted a different position. They contended that Gibbins Investments failed to perform its obligations under a Heads of Agreement executed in 2007 (the 2007 Heads of Agreement), whereby it became the registered shareholder of 50% of the issued capital of Sitzler Savage and became beneficially entitled to 50% of the units in the Sitzler Savage Discretionary Unit Trust (the SSUT), of which Sitzler Savage was the trustee. As a result of the alleged failure by Gibbins Investments to perform its obligations under the Heads of Agreement, the Executors contend that Gibbins Investments repudiated the 2007 Heads of Agreement, and that they were entitled to accept that repudiation. They claim that they accepted the repudiation by terminating the 2007 Heads of Agreement by way of service of their Cross Claim on 2 March 2011. The Executors seek an order pursuant to s 175 of the Corporations Act 2001 (Cth) (the Corporations Act) for rectification of Sitzler Savage's share register to record the Estate as the registered holder of 95% of the issued shares in Sitzler Savage or the cancellation of 50 of the 55 shares Gibbins Investments holds in Sitzler Savage. 4 These reasons for decision address the facts that are the subject of this dispute chronologically, and then consider Vermillion's contention that Gibbins Investments agreed to displace its rights under the Constitution, either by a special resolution of 100% of the shareholders of Gibbins Investments, or by each shareholder in Sitzler Savage agreeing to give up their rights under Art 37. Finally, these reasons address the Executor's contention that Gibbins Investments failed to perform its obligations under the 2007 Heads of Agreement.

B. BACKGROUND FACTS 5 Sitzler Savage was involved in a project to extract, sell and distribute minerals (including magnetite) from tailings on certain mining tenements located about 15 kilometres east of Tennant Creek, in the Northern Territory (the Project). The persons originally involved in the Project were John Thomas Savage (dec'd) (Mr Jack Savage) and Michael Sitzler. The companies originally involved in the Project were Sitzler Savage, Peko Rehabilitation Project Pty Ltd (Peko), Australian Magnetite Pty Ltd (Australian Magnetite) and Bactron Pty Ltd (Bactron). Although the Project has run into significant financial difficulties with Peko now in receivership and administration, the parties consider that the shares in Sitzler Savage remain extremely valuable.

(A) 2006 - 2007 6 In March 2006, Mr Jack Savage invited Mr William John Gibbins (Mr Gibbins) to invest in the Project. Mr Gibbins inspected the Project and accepted an offer to advance funds to that part of the Project which concerned the extraction, sale and distribution of the magnetite. Mr Gibbins advanced $1.1 million to the Project. 7 Over the next two years, Mr Jack Savage sought further funds and Mr Gibbins agreed to advance further sums to the Project on the basis that: 1. existing advances, being debts owed to Gibbins Investments or associated companies, would be converted to equity in the Project including in Sitzler Savage; and 2. for proposed future advances, Gibbins Investments would obtain further equity in the Project including in Sitzler Savage. 8 In August or September 2007, the 2007 Heads of Agreement was executed. The recitals recorded that: 1. Mr Jack Savage was the sole director and shareholder of both Peko and Sitzler Savage (Recital A); 2. Peko had erected a magnetite plant for extracting magnetite from tailings on tenements in the Northern Territory held by Sitzler Savage (Recital B); 3. Peko had obtained a research and development concessional loan from the Commonwealth Government, and that in July 2006, the terms of that loan were altered by a Deed of Variation (Recital C); 4. the treatment of the tailings by Peko was carried out pursuant to a patented procedure with the patent being held by Bactron, a company of which Mr Jack Savage was the sole director and shareholder (Recital E); and 5. in addition to extracting magnetite from the tailings, Peko also proposed to extract gold, copper and cobalt (Recital F). 9 Recitals G and H recorded that Mr Gibbins was a director and effective controller of Biga Nominees Pty Ltd (Biga) and Gibbins Investments and that through his efforts, the following amounts had been advanced by Biga: 1. To PEKO, the sum of $2,000,000 (the Peko / Biga Debt); 2. To AUSTRALIAN MAGNETITE, the sum of $380,000 for advanced purchases of magnetite (the Australian Magnetite / Biga Debt). 10 The recitals recorded that these monies remained outstanding to Biga by Peko and Australian Magnetite respectively. Australian Magnetite had been established jointly by Mr Jack Savage and Mr Gibbins to market the magnetite produced by Peko from the tailings (Recital I). In any event, Peko required further capital to enable it to advance the Project (Recital K). Recital L provided that: Biga and Gibbins Investments … agreed to provide such capital for the Project as follows: (i) by GIBBINS INVESTMENTS paying PEKO the sum of three million dollars to acquire one half of the capital [of] Peko; (ii) by GIBBINS INVESTMENTS providing to AUSTRALIAN MAGNETITE trucking equipment and containers to the value of $2.62 million net of GST (the Trucks). (iii) by BIGA forgiving the Australian Magnetite / Biga Debt; and (iv) by BIGA forgiving the Peko / Biga Debt. 11 Finally, Recital M recorded that the parties further agreed that the shareholders of both Sitzler Savage and Australian Magnetite would be changed so that Mr Jack Savage or his nominee held 50% of the issued capital of each company, and Gibbins Investments held the other 50%. 12 The matters set out in the recitals formed part of the 2007 Heads of Agreement: cl 1. Settlement was to occur in September 2007 or on such other date as the parties agreed: cl 2. Clause 3 provided that at settlement, the following matters were to take place: (i) PEKO shall issue two ordinary shares in the capital of PEKO to GIBBINS INVESTMENTS so that JACK SAVAGE and GIBBINS INVESTMENTS have equal shares in the capital of PEKO; (ii) GIBBINS INVESTMENTS shall pay PEKO the sum of $3 million for the issue of the said shares; (iii) JACK SAVAGE shall procure that GIBBINS INVESTMENTS holds 50% of the issued capital of SITZLER SAVAGE; (iv) JACK SAVAGE shall procure that BILL GIBBINS is appointed as a director of both PEKO and SITZLER SAVAGE; (v) … (vi) BIGA shall execute all documents reasonably required by PEKO to secure the forgiveness and discharge in full of the Peko / Biga Debt; (vii) BIGA shall execute all documents reasonably required by AUSTRALIAN MAGNETITE to secure the forgiveness in full of the Biga / Australian Magnetite Debt; (viii) JACK SAVAGE, BILL GIBBINS and BIGA shall procure that JACK SAVAGE and GIBBINS INVESTMENTS hold the capital of AUSTRALIAN MAGNETITE equally between them; Clause 4 provided that as soon as practical after settlement, Gibbins Investments was to cause ownership of "the Trucks" to vest in Australian Magnetite. The 2007 Heads of Agreement also expressly stated that Mr Jack Savage and Peko acknowledged that neither Mr Gibbins nor any of his companies would provide any further funding for the Project other than the funding referred to in the Deed: cl 10. 13 There was to be equal control of Peko, Australian Magnetite and Sitzler Savage (the Companies) between Mr Jack Savage and Gibbins Investments (cl 5). Mr Jack Savage was to be the manager of the Project responsible for marketing, Mr Vincent Savage was to be responsible for the Project's management and finance, and Mr Gibbins was to be responsible for the Project's transport logistics. Finally, although the parties agreed to enter into formal agreements embodying the terms of the 2007 Heads of Agreement, the 2007 Heads of Agreement was binding upon the parties until the formal agreements were entered into: cl 16. None were executed. 14 In total, Gibbins Investments paid, or procured companies or trusts associated with it to pay, $10.42 million to the Project. It is common ground that since the 2007 Heads of Agreement was executed, Gibbins Investments or associated companies paid $6.47 million to the Project. Notwithstanding these amounts paid to the Project by Gibbins Investments or associated companies, the Executors contend that Gibbins Investments failed to perform its obligations under the 2007 Heads of Agreement. It will be necessary to return to consider these allegations later in these reasons for decision.

(B) 2008 15 On 21 February 2008, Mr Vincent Savage emailed Mr Jack Savage's solicitor, Mr Granac, confirming that he had received the balance of the sum of $3 million from Gibbins Investments in accordance with the 2007 Heads of Agreement, and that settlement had occurred pursuant to the terms of that agreement "with the relevant shares and directorships having been changed in accordance with the terms of that agreement". The email also stated that Mr Gibbins had confirmed in writing that Biga was willing to forgive the debts in accordance with cll 3(vi) and (vii) of the 2007 Heads of Agreement (see [12] above), and asked Mr Granac to prepare the appropriate documentation for Mr Gibbins' approval. At this time, Mr Vincent Savage was the director responsible for the Project's management and finance. A copy of the email was sent to Mr Gibbins, Mr Jack Savage and to Dean McVeigh. 16 The inaugural concurrent Board meeting of the Companies was held on 22 April 2008. It lasted four and a half hours. Mr Jack Savage, Mr Vincent Savage, Mr Gibbins and Martin Crow attended. The first substantive issue discussed concerned the financial state of the Companies. The minutes record that in relation to a number of issues raised by Jack Savage, Vincent Savage disagreed. For example, in response to a suggestion by Mr Jack Savage that Mr Gibbins had not paid the money under the 2007 Heads of Agreement, the minutes record that Mr Vincent Savage "strongly disagreed" and "advised that all of the BG money had been paid despite non co-operation from [Savage's solicitors] in the provision of signed documentation and acknowledgement of settlement". The minutes further record that Mr Vincent Savage told the meeting that Mr Gibbins effected settlement when the last truck was delivered. Funding of the Project was also addressed. Mr Gibbins is recorded as reiterating that no further funding would be forthcoming from him and that there were only two ways to fund the business - float or sell a share percentage. 17 Consistent with the discussion at that Board meeting, in late April and May, Mr Gibbins and Mr Vincent Savage were seeking offers for all Companies and tenements associated with the Project. So, for example, on 29 April 2008, Mr Gibbins emailed Mr Jack Savage and sought confirmation that (i) Mr Jack Savage would accept $50 million for all Companies and tenements associated with the Project, and (ii) Mr Jack Savage had requested him to conclude negotiations with "whichever party [came] up with the $50 million first". 18 Mr Gibbins' evidence was that by mid June he was concerned about his involvement and offered to undertake the work necessary to look for buyers. On 16 June 2008, Gibbins Investments and Mr Jack Savage (the members of Sitzler Savage) executed a Deed providing for the resignation of Mr Jack Savage as a director of the Companies (the 16 June 2008 Deed), and the appointment of Mr Gibbins as his attorney to enable a sale of all or part of the assets of the Project or their shares in the Companies. The net proceeds of sale for all of the shares in the Companies was to be divided between Gibbins Investments and Mr Jack Savage in accordance with their respective shareholdings if the net proceeds were equal to or greater than $16 million. Other distribution provisions applied in the event that the net proceeds of sale were less than $16 million. The 16 June 2008 Deed did not confer exclusive power to act as attorney. Mr Gibbins' evidence was that the parties remained free to find purchasers and that his intention was to sell the shares in the Companies as a means by which all the assets of the Companies would be sold and transferred to a purchaser. Mr Gibbins' evidence was that although he was authorised to sell, he took the view that he should have Mr Jack Savage's agreement before completing any sale. 19 The second Board meeting of the Companies was held by conference call on 8 July 2008. Mr Vincent Savage, Mr Jack Savage and Mr Gibbins attended. The minutes record that a further agreement was struck in the following terms: Bill Gibbins advised that he would continue to fund the entities until Christmas … and that he would place a further $1 million into the entities to continue to fund and that the resignations executed by Jack, three or four weeks prior to this meeting would stay held and Jack agreed to their lodgment, then the funding would go ahead. He also stated that this would therefore mean that the shareholdings in all three entities would now reflect 45% Jack Savage and 55% Bill Gibbins. Mr Vincent Savage's unchallenged evidence was that injection of working capital by Mr Gibbins enabled the Companies to be sold as a going concern. 20 On 28 August 2008, Gibbins emailed Mr Dale Clayson, a director and 50% shareholder of Minquip Pty Ltd (Minquip), and Mr Vincent Savage. The email included an offer that either could buy him out for $10 million. At the time, Clayson did not have the available funds. 21 On 28 October 2008, Mr Vincent Savage signed the ASIC Form 484 recording that with effect from 1 October 2008, Gibbins Investments now held 55 shares in Sitzler Savage and Mr Jack Savage held 45 shares in Sitzler Savage. This change in shareholding reflected the position reached after settlement of the 2007 Heads of Agreement and the further agreement of 8 July 2008 (see [19] above).

(C) 2009 22 Attempts to find purchasers for the assets or shares continued throughout late 2008 and 2009. 23 On Thursday, 9 July and Friday, 10 July 2009, a series of emails were exchanged between Messrs Clayson, Vincent Savage and Gibbins about a proposed purchase of shares in Peko and Sitzler Savage. In the first email, at 6:15pm, Mr Clayson sent Mr Vincent Savage a draft offer to peruse. The draft stated that Clayson was meeting certain unnamed investors in Hong Kong on 12 and 13 July and that "in principle and subject to conditions that will be stated in the contract they are intending to submit an offer through MQS … for acquisition of Peko along the following lines." The offer included Mr Gibbins' shares in Sitzler Savage. At 6:23pm, Mr Vincent Savage replied to Mr Clayson stating that the offer was good but that his father needed the same payments as Mr Gibbins. Mr Clayson replied asking "Will Gibbins not complain that Jack gets more than him per %?" 24 At 6:41pm on 9 July, Mr Clayson emailed an amended offer to Mr Vincent Savage. The draft still contained the statement that he was meeting certain unnamed investors in Hong Kong on 12 and 13 July and that "in principle and subject to conditions that will be stated in the contract they are intending to submit an offer through MQS … for acquisition of Peko along the following lines." The offer still included Mr Gibbins' shares in Sitzler Savage. However, Mr Jack Savage was now to receive the same payments as Mr Gibbins, despite the disparity in their respective shareholdings. Mr Vincent Savage sent the email to Mr Gibbins, and then told him that he was travelling to Hong Kong to discuss the offer. 25 At 12:47pm on 10 July, Mr Gibbins emailed Mr Clayson stating: You have never had, nor ever will have, authority to act on my behalf in the sale of my share in Peko or anything else for that matter. 26 He also replied in similar terms to Mr Vincent Savage at 1:01pm, stating: Happy for you to sell Jack's share to whoever you like and I'll sell my share to whoever I like, if and when I decide to. You have no authority to act on my behalf in any shape or form. … This email is important. It is the email relied upon by the Executors in support of their contention that Art 37 of the Sitzler Savage Constitution no longer applies to the Executors' disposal of Mr Jack Savage's shares in Sitzler Savage. 27 Mr Clayson and Mr Vincent Savage responded. Mr Clayson apologised, stating that he was not acting on behalf of either Mr Gibbins or the Savages, but on behalf of a consortium intending to make an offer for Peko and Sitzler Savage. Mr Vincent Savage's response at 4:52pm on 10 July 2009 was to agree that he had no authority to sell Mr Gibbins' shares, and he clarified that this was not his intention. He then invited Mr Gibbins to call him to discuss the offer. Mr Vincent Savage subsequently forwarded the chain of emails to Mr Clayson. 28 On 7 September 2009, receivers and managers were appointed to Peko. 29 From late 2009, a series of offers were received for the assets of the Project or the shares in the Companies.

(D) 2010 30 Despite the appointment of the receivers and managers to Peko, Clayson was still seeking to acquire the Project. On 20 April 2010, Clayson emailed Mr Gibbins and told him that a conditional contract was being signed by the Savages to sell their shares in Sitzler Savage for $3.5 million. Clayson asked Mr Gibbins if he would agree to sell his 55% interest in Sitzler Savage for $4 million. The evidence did not disclose if Mr Gibbins responded to this offer. 31 By 29 April 2010, the Executors had agreed to sell the Estate's 45 shares in Sitzler Savage to Minquip Pty Ltd (the Minquip Share Sale Agreement). The agreement was executed by Mr Sam Savage under a power of attorney on behalf of Mr Jack Savage. On execution of the agreement, Minquip paid a $40,000 deposit. The Minquip Share Sale Agreement contained a condition that enabled Minquip to terminate the agreement in the event that Minquip could not secure an agreement to purchase Gibbins Investments' shares in Sitzler Savage. Mr Jack Savage also gave a warranty that he had the full right and power to sell and transfer his shares in Sitzler Savage to Minquip. 32 On the same day, 29 April 2010, Clayson told the receiver of Peko that he had finalised his agreement with the Savages and had sent a draft offer to Mr Gibbins to purchase his shares in Sitzler Savage. The draft offer to Mr Gibbins was contained in an email dated 29 April 2010 from Clayson to Mr Gibbins which attached a draft proposed sale agreement between Minquip and Gibbins Investments and advised that Minquip had reached agreement with the Savages for their 45%. The email did not attach a copy of the executed Share Sale Agreement between the Savages and Minquip or between the Savages and the Bongiorno Group. 33 Two days later, on 1 May, Mr Jack Savage died. 34 On 5 May 2010, the receiver responded to Clayson's offer of 29 April stating that he had been in constant contact with Mr Gibbin's solicitors and that until there was a deal to satisfy outstanding creditors, Clayson would not be able to acquire Gibbins Investments' shares in Sitzler Savage. 35 On 17 May 2010, the receivers of Peko received a further offer from Mr Clayson on behalf of Minquip. The offer was $3.5 million for Mr Jack Savage's shares and $4 million to acquire the Gibbins' shares in Sitzler Savage. A copy of the offer was forwarded to Mr Gibbins' solicitors. At around the same time, the receivers had an offer of $13.8 million, as well as smaller offers of $2 million and an indicative offer of between $3.5 and $7.5 million. 36 On 18 May 2010, the receivers replied to Clayson stating that Mr Gibbins wanted at least a "proportional payment to the Savages" representing the proportion of shares in Sitzler Savage held by Mr Gibbins, as well as a "total solution" which included dealing with the Savages' shares in Australian Magnetite. The receivers told Clayson that they had a number of significant offers to hand and that if Minquip was able to match these offers, then he would be happy to deal with Minquip. The receiver noted that Minquip's offer was not quantified as a total deal to allow comparison with other offers he held, and that it was imperative that Minquip quantified the amounts that it intended to pay to other creditors and liquidators. 37 On 9 June 2010, Minquip's solicitors sent an offer to Mr Gibbins' solicitors to purchase Gibbins' shares in Sitzler Savage for $4 million. Minquip sought exclusivity. The letter stated that Minquip had reached agreement with Mr Jack Savage before his death to acquire his shares in Sitzler Savage and his units in the SSUT. 38 Mr Gibbins' solicitors responded on 11 June refusing to grant exclusivity and stating that Gibbins would only consider unconditional offers. The letter stated that Mr Gibbins had serious doubts about Minquip's ability. 39 In June, Clayson was introduced to Mr Gerard Bongiorno who agreed to invest in Minquip's acquisition of the Project. Mr Bongiorno met with Mr Gibbins to discuss the latest Minquip offer. 40 On 22 June 2010, Minquip's solicitors wrote to Mr Gibbins' solicitors confirming that the parties had reached an agreement for Minquip to acquire Gibbins' shares in the Companies and the Trust for $4 million. Gibbins had agreed to provide Minquip with exclusivity to deal with Mr Gibbins until 31 August 2010. The agreement was conditional and was to occur simultaneously with: 1. the completion of the purchase of all shares owned or controlled by Jack Savage in the Companies; 2. the completion of the purchase of all units owned or controlled by Jack Savage in the Trust; and 3. the settlement of all creditors (sic) claims made against Peko … including the debt to the Commonwealth of Australia. Minquip did not reach any agreement with Mr Gibbins prior to 31 August. 41 On 24 September 2010, the receivers received an offer from Hardy Bros Mining & Construction Pty Ltd (Hardy Brothers) of $24.8 million for the purchase of the magnetite operations of Peko, of which $16.9 million was to be paid to the shareholders of Sitzler Savage for their shares ($9 million to Gibbins Investments and $7 million to the estate of Jack Savage). Mr Gibbins and Mr Vincent Savage were provided with a copy of the offer on 27 September 2010. As the receivers stated, the offer was a far superior offer to any received up until that time. Mr Gibbins' evidence was that he was in favour of the Hardy Brothers offer because it included a sum of $3.7 million to settle the secured creditors debt, costs and expenses of the Peko receivership and $4.2 million was to be paid to the liquidator of Peko in respect of unsecured creditors and liquidators' fees. 42 On about the same day, 27 September 2010, Gibbins' solicitors received an offer from Vermillion to acquire Sitzler Savage's interests in the tenements, the tailings and "information" for $7.5 million. On 4 October, Mr Bongiorno for Vermillion sent Gibbins' solicitors a copy of a proposal he had put to the receiver and liquidator of Peko. 43 On 5 October 2010, Gibbins Investments received an email from Mr Vincent Savage stating he had reached a binding agreement with the "Bongiorno Group" to sell the Estate's 45 shares in Sitzler Savage, "which will settle on Friday". 44 Despite Mr Gibbins having met with Mr Clayson and Mr Bongiorno, Mr Gibbins' unchallenged evidence was that he was not informed of the existence of the agreement until 5 October 2010. Further, despite repeated requests for a copy of the executed agreement, he apparently did not become aware of its terms until 8 November 2010, which was shortly after Vermillion commenced a proceeding seeking specific performance of this agreement. In answer to these contentions, Vermillion produced the email dated 29 April 2010 from Clayson to Mr Gibbins entitled "Draft Offer" which attached a draft proposed sale agreement between Minquip and Gibbins Investments and advised that Minquip had reached agreement with the Savages for their 45%. The email did not attach a copy of the executed Share Sale Agreement between the Savages and Minquip or between the Savages and the Bongiorno Group: see [32] above. As is apparent, the contents of that email are no answer to Mr Gibbins' unchallenged evidence. 45 On 6 October, Mr Gibbins met with the receiver of Peko, the liquidator of Peko and Mr Sam Savage. Mr Gibbins told Mr Sam Savage that he was not prepared to accept the offer and that he wanted to explore other offers including the proposal by Hardy Brothers. 46 The original settlement date under the Minquip Share Sale Agreement was on or before 29 June 2010. On 16 June, the settlement date was extended to 12 July. Then it was further extended until the end of August, until 30 September, until 5 October and then 8 October 2010. Probate of Mr Jack Savage's estate was granted on 5 October 2010. 47 According to Mr Vincent Savage's unchallenged evidence he was not made aware of the offer from Hardy Brothers until on or about 7 October 2010. 48 On 8 October 2010, Minquip assigned its rights under the Minquip Share Sale Agreement to Vermillion. Significantly, Vermillion had waived various clauses of the Minquip Share Sale Agreement including the precondition that completion was subject to execution by Minquip of a sale and purchase agreement for the 55% shareholding in Sitzler Savage held by Gibbins Investments. On 12 October, the Executors accepted Vermillion's proposed alterations to the Minquip Share Sale Agreement. 49 The position was further muddied on 19 October 2010 when it emerged that Chris Savage had been retained by Vermillion to provide technical advice, and Mr Vincent Savage had been engaged by Vermillion to advise it in connection with its bid to acquire the shares in Sitzler Savage, and was to resign as a director of Sitzler Savage. 50 Gibbins Investments contends that the execution of the Minquip Share Sale Agreement and its assignment to Vermillion occurred without the Executors informing Gibbins Investments of their intention to effect such a sale or giving notice in accordance with Art 37 of the Constitution. Gibbins Investments therefore seeks to restrain the Executors from selling, transferring, disposing of, pledging, encumbering or otherwise dealing with the balance of the shares in Sitzler Savage owned by the Estate other than in accordance with the Sitzler Savage's Constitution and, in particular, the pre-emptive rights provisions in Art 37. The practical effect of this claim is that Gibbins Investments seeks to retain the right of first refusal in respect of the shares that are the subject of the Minquip Share Sale Agreement, the benefit of which has been assigned to Vermillion. 51 Before turning to consider the issues raised in this proceeding, it is important to understand the other disputes that arose in relation to these matters. An internecine dispute arose between the Executors about whether the shares in Sitzler Savage were being sold by the Executors at an undervalue. Proceedings were commenced in the Supreme Court of Western Australia. Vermillion also sought to protect its position by commencing proceedings in this Court seeking specific performance of the Share Sale Agreement. 52 Gibbins Investments commenced these proceedings on 9 December 2010 after the Executors refused to undertake that they would not transfer any shares in Sitzler Savage before the shares had been offered to Gibbins Investments. Vermillion cross-claimed against the Executors again seeking specific performance of the Minquip Share Sale Agreement. The WA Executors' proceeding, the Vermillion proceeding and the Vermillion cross-claim were all settled. The terms on which each of those proceedings was resolved has not been disclosed. 53 On 22 December 2010, the Executors and Vermillion executed a deed of variation whereby the Minquip Share Sale Agreement was further varied on certain terms including that the Executors purported to sell all 20 units in the SSUT. On the same day, the parties appeared at a directions hearing in this proceeding, at which the matter was set down for hearing.

(E) 2011 54 Upon learning of the further deed of variation, in February 2011 Gibbins Investments sought interim relief seeking to restrain the Executors from disposing of all of the issued units in the SSUT after the Executors refused to undertake that they would not transfer any units in the SSUT. On 17 February 2011, the Executors gave undertakings to the Court: that they, whether by their servants, agents, employees or otherwise, until further Order or hearing and determination of this proceeding that they shall not in any way deal with, transfer, encumber, sell or dispose of the 11 units held by them on trust for [Gibbins Investments] in the [SSUT]. This undertaking was given in this proceeding and continues until the hearing and determination of this proceeding. 55 In late 2010, Peko's receivers invited Gibbins Investments to participate in negotiations to grant North Mines Pty Ltd (North Mines), a company within the Hardy Brothers group, an option over its shares in Sitzler Savage. By a Heads of Agreement dated 21 January 2010, to which Gibbins Investments is a party, Peko's receivers agreed that Peko's licence granted by the Commonwealth for the exclusive use to the rights and benefits of the tenements should be sublicensed to North Mines on the terms set out in the Heads of Agreement. Under the terms of that agreement, Gibbins Investments granted an option to North Mines over its shares in Sitzler Savage, which option is expressly made subject to the pre-emptive procedures in the Constitution and the deed establishing the SSUT: Recital E, cll 1, 5.4(b)(iii). Vermillion participated in these discussions. 56 On 2 March 2011, the Executors filed an Amended Fast Track Response and Cross-Claim which, for the first time, alleged that Gibbins Investments had not performed its part of the 2007 Heads of Agreement. The Executors relied upon the service of the amended claim as their acceptance of the allegedly repudiatory conduct of Gibbins Investments.

(A) The Sitzler Savage Constitution 57 It is common ground that the Sitzler Savage Constitution operates as a contract between Sitzler Savage and each member, between Sitzler Savage and each director and between the members of Sitzler Savage: s 140 of the Corporations Act. 58 As Kenny J said in Lion Nathan Australia Pty Ltd v Coopers Brewery (2006) 156 FCR 1 at [97]: A company's constitution has effect as a contract between the company and each member, the company and each director, and between a member and each other member: see s 140(1). A corporate constitution is in the nature of a commercial contract, which, as Jenkins LJ said in Holmes v Keyes; [1959] Ch 199 at 215 … "should be construed so as to give [it] reasonable business efficacy, where a construction tending to that result is admissible on [its] language ... in preference to a result which would or might prove unworkable": see also National Roads and Motorists' Assn Ltd v Parkin … (2004) NSWCA 153 at [68] (Parkin) at 235-6 per Ipp JA; Stillwell Trucks Pty Ltd v Nectar Brook Investments Pty Ltd; (1993) 115 ALR 294 at 300-1; … per O'Loughlin J; Tosich v Tosich Construction Pty Ltd (1993) 10 ACSR 590 at 596 per Lockhart J; Norths Ltd v McCaughan Dyson Capel Cure Ltd (1988) 12 ACLR 739 at 746 (Norths) per Young J; The Mutual Home Loans Fund of Australia (Qld) Ltd v Cmr for Corporate Affairs [1978] Qd R 487 at 502; … per W B Campbell J; and Buche at NSWLR 374; … per Brownie J. Articles of association, like other commercial documents, must be read as a whole and, where appropriate, having regard to the purpose that, from an objective perspective, they were intended to serve. See also Lion Nathan at [45], [56], [83], [122], [238], [244], [251] and [254]. 59 For present purposes, three Articles of the Sitzler Savage Constitution should be noted. Article 34 provides that a transfer of shares is permitted subject to the Constitution and the Law. Article 37, entitled "Pre-emptive Procedure", relevantly provides: 1.1 No member shall transfer any share except in accordance with the procedures set out in the following sub-clauses of this clause 37. 1.2 A member proposing to transfer a share ("proposing transferor") must give written notice to the Company ("transfer notice") that he desires to transfer the share specified in the transfer notice and must specify the price of the share which he fixes as the fair value. … 1.3 … 1.4 The delivery of a transfer notice shall be taken to constitute the Company the agent of the proposing transferor for the sale of the shares specified in the transfer notice to a purchaser to be nominated by the Company as provided in this clause at a price equal to the fair value of the shares as specified by the proposing transferor or as fixed by valuation in the manner provided in subclause 37.10, as the case may be. 1.5 Shares comprised in a transfer notice must in the first instance be offered by the Company by written notice to all the members (except the proposing transferor) as nearly as may be in proportion to their respective holdings of shares of the same class. … 1.6 The offer to members must state that if the same is not accepted in whole or in part within 21 days from its receipt it shall be taken to be declined and such offer must also require any member who desires to purchase shares in excess of his proportion to state how may additional shares he desires to purchase at the fair value specified or fixed by valuation. The offer must also request the members to state whether they desire the fair price of the shares to be fixed by valuation as provided in subclause 37.10. 1.7 … 1.8 Any share comprised in the transfer notice which has not been accepted for sale in accordance with the preceding provisions of this clause 37 may be offered by the Company to any member or other person selected by the Directors as one whom it is desirable in the interests of the Company to admit as a member and who is willing to purchase the share at the fair value specified or fixed by valuation in the manner provided by clause 37.10. 1.9 … 1.10 The Directors must if so required by the purchasers of a majority of the shares to be purchased by the same notice as referred to in subclause 37.9 require the fair value of the shares to be fixed by an accountant of not less than 10 years standing appointed by a State Director for the time being of the Institute of Chartered Accountants in Australia or the Australian Society of Certified Public Accountants (or their respective successor bodies) instead of the fair value specified in the transfer notice. However, if the fair value so fixed by such accountant exceeds the fair value fixed in the transfer notice, the Company must immediately give written notice of that fact to the purchasers and all or any such purchasers may by written notice to the proposing transferor not later than 7 days after the determination elect not to continue with the purchase. 1.11 If the proposing transferor has become bound to transfer any shares and defaults in so doing the Company may receive the purchase money and shall cause the names of the purchasers to be entered in the Register as the holders of the relevant shares and must hold the purchase money in trust for the proposing transferor. The receipt of the Company for the purchase money shall be a good discharge to the purchasers and the entry of their names in the Register in purported exercise of this power will be conclusive evidence of the validity of transfer. 1.12 If at the expiration of 42 days after receipt of the transfer notice the Company has not found a member or person selected in accordance with the requirements of the preceding provisions of this clause 37 willing to purchase immediately for cash any shares mentioned in the transfer notice, the proposing transferor shall be entitled at any time within one month after the expiration of that period of 42 days to sell and transfer those shares to any person at a price not less than the price specified in the transfer notice. 1.13 All the members may by written agreement waive compliance with the provisions of subclause 37.2 to 37.12 inclusive in respect of a proposed transfer of shares by a member. (Emphasis added.) 60 Finally, subject to the Law and the Constitution, the management and control of the business and affairs of the Company was vested in the directors, who were entitled to exercise all powers of the company which are not by Law or the Constitution required to be exercised by the company in general meeting: Art 84. 61 On its face, Art 37 prescribes that a member proposing to transfer a share must give written notice to the company, which notice must specify the share to be transferred and the price at which transfer is to be effected. As noted, Gibbins Investments contends that the Executors' entry into and execution of the Minquip Share Sale Agreement was in breach of Art 37 because the Executors failed to give any notice to Sitzler Savage in accordance with Art 37.2. It is common ground that the Executors did not comply with Art 37. 62 Vermillion contends that Gibbins Investments is not entitled to rely upon Art 37 because the facts set out at [23] to [27] above constitute: 1. waiver by subsequent agreement of all members to vary Art 37; 2. an election by both members not to insist on their rights under Art 37; 3. an unambiguous representation by Gibbins about future rights giving rise to a promissory estoppel; and / or 4. estoppel by convention. The Executors relied upon the contentions of Vermillion in relation to these issues. 63 I will deal with each argument in turn.

(B) Was Art 37 Capable of Being Varied and, In Fact, Varied? 64 Section 136 of the Corporations Act relevantly provides that a company "may modify or repeal its constitution, or a provision of its constitution, by special resolution". "Special resolution" is defined in s 9 of the Corporations Act to mean a resolution of which notice has been given under s 249L(1)(c) of the Corporations Act, and that has been passed by at least 75% of the votes cast by members entitled to vote on the resolution. In the present case, no notice of a special resolution was given under s 249L(1)(c) of the Corporations Act and, therefore, no special resolution to modify the Constitution was passed by at least 75% of the votes cast by members entitled to vote on the resolution. 65 In addition to the statutory power to modify the Constitution, Art 37.13 itself provided a mechanism for variation of Art 37 in particular and defined circumstances. All members could, by written agreement, waive compliance with the provisions of subclause 37.2 to 37.12 (inclusive) in respect of a proposed transfer of shares by a member: Art 37.13. Neither of these mechanisms was adopted in the circumstances. 66 Instead, Vermillion submitted that there was an agreement between the Savage interests and the Gibbins interests to displace the pre-emptive rights under Art 37 of the Constitution. First, it contended that by a special resolution of Sitzler Savage, 100 per cent of the shareholders had agreed to displace the rights under Art 37. Vermillion submitted that this variation to Art 37 was able to be effected "orally or implicitly by conduct". Secondly, it contended that the variation was able to be effected by each side giving up the right to rely on Art 37. During the course of final submissions and in a supplementary note filed after the hearing, Vermillion labelled this as a "waiver" argument. In the "supplementary note" filed after hearing, Vermillion also identified two other kinds of "waiver" relied upon - election and estoppel. 67 Before turning to consider Vermillion's contentions, it is necessary to recall what the High Court said in Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at [50] - [55] (see also [100]) about "waiver": … "[W]aiver" is a word applied in a variety of senses. Leading scholars have long cautioned against, even condemned, its use. Roscoe Pound, in his Foreword to Ewart's work Waiver Distributed, described waiver as one of a number of "solving words" which are "but substitutes for thought" and as one of a number of "pseudo-conceptions" or "soft spots in what appears a hard legal crust". … And Corbin spoke of waiver as a word of "indefinite connotation" which "like a cloak ... covers a multitude of sins". Waiver has often been used in senses synonymous with election or estoppel. It has been suggested that waiver is indistinguishable from one or other of those doctrines. Sometimes, although expressed in terms of waiver, the reasoning adopted in cases reveals the elements for applying a more specific principle, typically election or estoppel. And it may be that in cases of the several kinds last mentioned, the term is used as no more than a conclusionary word stating the consequences of the operation of that more specific principle, rather than as indicating the application of any distinct and independent principle. Nonetheless, it is clear that there are cases in which the word has been used in senses other than those embraced by principles of election, estoppel or variation of contract. So, for example, waiver has been used in the sense of rescission where what has occurred is "an entire abandonment and dissolution of the contract". It has been used in connection with a party not insisting upon a term of a contract which is identified as a term for that party's sole benefit. And from time to time "waiver" has been used to describe some modification of the terms of a contract without the formalities, or consideration, necessary for an effective contractual variation. The uncertainties and difficulties which attach to the use of the term "waiver" have been recognised in judgments of this Court. Yet "waiver" remains firmly embedded in the lawyer's lexicon. … The uncertainties and difficulties which attach to the use of the term have prompted attempts to construct a taxonomy of waiver in which distinctions are drawn between "waiver by election" and "pure waiver" or between "waiver by election" and "unilateral waiver". It is not necessary to consider whether such classifications are useful. Rather, it is important to identify the principles that are said to be engaged in the particular case. (Footnotes omitted.) 68 Against that stark warning, what is the principle Vermillion says is engaged in this particular case? 69 Ultimately, in support of the contention that there was an agreement to displace the pre-emptive rights under Art 37 of the Constitution, Vermillion referred to Cain v Aero Marine Consulting Pty Ltd (2003) 133 FCR 1 at [46] - [48] where the Full Court stated: A company can dispense with the formalities set out in its constitution in relation to the resignation of a director by agreement. In Latchford Premier Cinema Limited v Ennion [1931] 2 Ch 409 the company's articles provided that the office of director would become vacant if a director resigned in writing. The defendants orally tendered their resignations as directors at the company's annual general meeting and the meeting accepted their resignations. The court held that the resignations were valid. Bennett J said at 410: I see no reason in law why the contract of service between the company and its directors should not be terminated by the same means as that by which the contract of service between two individuals may be terminated, and I see no ground in law for saying that where a written contract has been made for service which requires a written notice on either side before it can be terminated, it cannot be terminated by word of mouth by mutual agreement between the parties. Latchford was implicitly approved by Windeyer J in Marks v Commonwealth (1964) 111 CLR 549. There the High Court considered the purported resignation of an officer whereby the officer had tendered his written resignation but no assent had been given by the Governor-General as was required by the Defence Act 1903-1956 (Cth). Windeyer J said at 571: Turning from municipal corporations to trading corporations: A director of a company incorporated under the Companies Acts holds a public office: McMillan v Guest, yet he may resign without his resignation having to be accepted by the company, unless the articles require it: Transport Limited v. Schonberg; Glossop v Glossop; Re The Neokratine Safety Explosive Company of New South Wales Ltd; Latchford Premier Cinema Ltd v Ennion. This has been put on the ground that a director is an agent of the company, and that an agent can renounce his agency: Palmer, Company Precedents, 16th ed., vol. I, p. 580. (Footnotes omitted.) In Knight v Bulic (1994) 13 ACSR 553 Hayne J gave tacit approval to the reasoning in Latchford. His Honour said at 561: Both sides accepted that although the articles provide for a director to resign his office by notice in writing, a binding agreement of resignation could be reached by the director tendering his resignation orally and the company accepting that resignation. Latchford Premier Cinema Ltd v Ennion [1931] 2 Ch 409. This is so because the constitution of a company is a contract between the directors of the company and the company itself (s 140(1)(b) of the [Corporations] Act) which can be varied orally or implicitly by conduct. Hence a director can orally resign despite a requirement of written notice in the company's constitution, provided that such form of resignation is accepted by the company. 70 Vermillion submitted that each of the authorities cited in the above passage supports the proposition that when members of a company agree to act in a way other than in accordance with the Constitution, Courts will not stand in their way even if the acts are informal, with the result that members cannot later resort to a technical, formal reading of the Constitution to undo their acts. That contention requires closer analysis. 71 Each of the authorities cited dealt with a different subject matter to the one presently in issue - i.e. the ability of directors to resign without giving written notice (as required by the company's constitution) where the company and the director informally agree to vary these constitutional requirements. Each of the cases is factually specific. None of them considers the principles that might apply where a company's constitution, as a contract between members, is to be varied. None of the parties referred the Court to any authority that specifically dealt with the variation of constitutional pre-emptive rights clauses by informal agreement of members. 72 In a sense that is not surprising because the authorities address the question by reference to the doctrine of unanimous assent, often otherwise known as the Duomatic principle or rule (from Re Duomatic Ltd [1969] 2 Ch 365). In Herrman v Simon (1990) 4 ACSR 81 at 83 the principle was summarised as follows: … where it can be shown that all shareholders having a right to attend and vote at a general meeting of the company assent with full knowledge and consent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be. In other words, it is a doctrine dispensing with the consumptive effect of formalities. It is a doctrine that formalities may be disregarded if they have been waived by all shareholders acting in concert who want the same substantial result. See also Angas Law Services Pty Ltd (in liq) v Carabelas (2005) 226 CLR 507 at 519, Bodikian v Sproule (2009) 72 ACSR 598 at 606 and Re New World Alliance Pty Ltd (rec and mgr apptd); Sycotex Pty Ltd v Baseler (1994) 51 FCR 425 at 439-440, where Gummow J described the doctrine as "a function of the contractual relationship between the company and its members". 73 There is still some uncertainty about the precise scope of this doctrine in Australia: see Ford HAJ, Austin RP and Ramsay IM, Ford's Principles of Corporations Law, (Butterworths, 2000) at [7.590] and following. For example, there is uncertainty about whether the doctrine permits members to effectively override an express statutory requirement that a decision be made in meeting. Generally, under this doctrine shareholders are not required to physically meet in order to make a decision by unanimous assent: see Bodikian at 606. However, where the Corporations Act expressly requires a decision to be made in meeting, the case may be different: see Ford's at [7.595]. In Bodikian, Austin J did not ultimately have to decide this question, but thought it was relevant that the rules requiring a meeting in that case were replaceable rules (and therefore could be overridden if the company adopted a constitution). In Brick & Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1990) 3 ACSR 649 at 686-7, Ormiston J ultimately rejected a contention that members must express their agreement in general meeting for the Duomatic principle to apply. 74 Whatever the uncertainties, the Duomatic doctrine does appear to have limits. For example: 1. it does not give members a power that they do not constitutionally possess (e.g. powers vested in the Board): see Bodikian at [32]; 2. it has been suggested that it only permits shareholders to vary procedural rights (e.g. notice requirements), not substantive rights (Herrman v Simon (1990) 4 ACSR 81). However, note the discussion of this requirement in Ford's at [7.595]; and 3. it requires actual, not merely potential assent, and the assent must be informed assent. Meagher JA spoke of the need for "full knowledge and consent" in Herrman v Simon at 83, and noted that "it would be a very odd result if one could waive the destruction of rights of whose destruction one was ignorant". 75 In the present case, two competing principles are in play. On the one hand, there are the statutory requirements of the Corporations Act arising from the combination of the s 9 definition of "special resolution" and s 249L ("Contents of Notice of Meetings of Members") which would suggest that an actual meeting is in fact required for a special resolution to be passed by shareholders to amend the Constitution. On the other hand, Art 37.13 of the Constitution contained its own process for variation or "waiver" of the relevant requirements of Art 37 in particular and defined circumstances, a process which itself was limited - if all the members by written agreement waive[d] compliance with the provisions of subclause 37.2 to 37.12 inclusive in respect of a proposed transfer of shares by a member, then the pre-emptive provisions of the Article would not apply to that proposed transfer of shares by a member. 76 Of course, there was no written agreement of the kind envisaged by Art 37.13. There was in fact a failure by the members to comply with Art 37.13 in a number of important respects - first, a failure by written agreement to waive compliance with the provisions of subclauses 37.2 to 37.12 and, secondly, and no less importantly, a failure by written agreement to waive compliance with the provisions of subclauses 37.2 to 37.12 in respect of a proposed transfer of shares by a member. 77 Even if I was of the view that these failures were merely procedural and therefore (presumably) clearly within the ambit of the Duomatic doctrine, (about which I have formed no concluded view), I do not consider that by their actions on 10 July 2009 (see [23] to [27] above), it can be said that Messrs Jack Savage and Gibbins agreed to waive compliance with the provisions of subclauses 37.2 to 37.12 in respect of a proposed transfer of shares by a member. Article 37 was not referred to. A specific proposed transfer of shares was not identified. Further, the evidence disclosed that there was neither actual consent nor informed consent by the members to waive these formalities, and therefore, no unanimous informed consent, which is a necessary element for the operation of the unanimous assent doctrine. Moreover, what was it that the members were said to have unanimously agreed on that a general meeting of the company could carry into effect? Put another way, it cannot be said that "all shareholders having a right to attend and vote at a general meeting of the company assent[ed] with full knowledge and consent to some matter which a general meeting of the company could carry into effect" so that the assent was as binding as a resolution in general meeting. 78 For the same reasons, I reject Vermillion's alternative theory that on 10 July 2009, each party agreed to give up or displace the right to rely upon Art 37.

(C) Election 79 Vermillion's alternative theory, raised for the first time in final submissions and expanded in a supplementary note filed after the hearing, is that by the parties' exchange of emails on 10 July 2009 (see [23] to [27] above), Mr Gibbins and Mr Jack Savage both elected not to insist on their rights that the other serve a transfer notice in accordance with Art 37, and further, by Mr Gibbins' subsequent entry into an agreement to sell his shares to North Mines without having given notice to Sitzler Savage of an intention to sell, Mr Gibbins had elected between inconsistent rights. 80 First, it is necessary to identify the inconsistent rights. Vermillion did not identify the rights. Gibbins Investments identified them as an election between (1) receiving notice under Art 37 and (2) offering shares to third parties. 81 Secondly, it is necessary to identify the conduct which is said to give rise to the election between those inconsistent rights. In July 2009, Gibbins and Savage were both attempting to exit the venture by selling their shares in Sitzler Savage. Gibbins was told that Messrs Clayson and Vincent Savage were going to see potential investors in Hong Kong who might make some offer in principle for the entire project. Gibbins responded stating that "You have never had, nor ever will have, authority to act on my behalf in the sale of my share in Peko or anything else for that matter" (see [25] above). Messrs Clayson and Savage both accepted that they could not deal with Gibbins' shares and told Gibbins that: see [27] above. In order to put the issue beyond doubt, Mr Gibbins responded to Mr Savage, stating: Happy for you to sell Jack's share to whoever you like and I'll sell my share to whoever I like, if and when I decide to. You have no authority to act on my behalf in any shape or form. … 82 The question is whether Mr Gibbins was confronted with a choice between inconsistent rights. Put another way, was there a choice between (1) receiving notice under Art 37 in respect of the disposal of any of Savages' shares in Sitzler Savage, and (2) permitting a sale of those interests, unhindered by the requirements of Art 37, to third parties? Finally, if so, was that a choice between inconsistent rights? The answer is no. 83 In Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 641, Stephen J explained the doctrine of election between two inconsistent rights, a doctrine well established but not without its obscurities, as follows: … The doctrine only applies if the rights are inconsistent the one with the other and it is this concurrent existence of inconsistent sets of rights which explains the doctrine; because they are inconsistent neither one may be enjoyed without the extinction of the other and that extinction confers upon the elector the benefit of enjoying the other, a benefit denied to him so long as both remained in existence. 84 The issue of election between inconsistent rights was revisited by the majority of the High Court in Agricultural and Rural Finance at [56] - [67]. Two principles identified by the High Court are worth restating: circumstances in which there is an election between inconsistent rights are radically different from those where there is a waiver of rights (at [60]), and secondly, in many cases, the central issue is whether an election has been made or only foreshadowed: at [59]. The last principle is important. It is important because it focuses attention on the event which is said to give rise to the existence of two alternative rights. In the present case, the event was the email exchange of 9 and 10 July. The initial email on 9 July (see [24] above) provided that a "group of investors and the China Commercial Bank … [were] intending to submit an offer through MQS or another entity for acquisition of Peko along the following lines …" (Emphasis added). The offer was described in the email as "in principle". The payments to be received by Mr Gibbins were "over the next 2 to 4 years". It was, as Gibbins Investments submitted, a vague proposal. 85 Vermillion submitted that Gibbins' final response set out at [81] above was an election between inconsistent rights by Gibbins. As I have said, the rights were never identified by Vermillion. The event which generated this set of circumstances was the vague proposal propounded the previous day. At that time, no rights under Art 37 had accrued in respect of a proposed transfer. They had not accrued because no member had proposed to transfer a share in Sitzler Savage at a specified price: Art 37.2. Further, what was the inconsistent right open or available to Gibbins Investment? The power to "waive" under Art 37.13? For the reasons given earlier, it was not the right to amend the Constitution by agreement. 86 In addition to the email exchange of 10 July 2009, Vermillion relied upon Mr Gibbins' subsequent conduct in continuing to solicit offers for the sale of his shares to third parties "without serving notice of proposed transfer" in accordance with Art 37, including Gibbins Investment's entry into the North Mines option. This submission proceeds on fundamental misconceptions. First, that it was necessary to comply with Art 37 at some time prior to concluding an agreement with a potential purchaser, albeit an agreement conditional on the exercise of the pre-emption rights in Art 37. As noted earlier, any transfer notice under Art 37 must specify the shares and the price. That requirement is difficult, if not impossible, to comply with until a deal has advanced to the stage that the number of shares, the price and the terms of the sale have been agreed. Until the North Mines option, that position had not been reached. Moreover, the North Mines option was expressly subject to the pre-emptive procedures in the Constitution and the deed establishing the SSUT: see Recital E, cll 1, 5.4(b)(iii). 87 In my view, there was no election by Gibbins Investments between inconsistent rights, whether as alleged by Vermillion or at all.

Estoppel by conduct or promissory estoppel 88 The Executors pleaded estoppel by conduct but did not address it in their written or oral submissions. Vermillion also pleaded estoppel by conduct but did not address the argument in its written or oral submissions. 89 In the supplementary note filed by Vermillion after the hearing, it alleged that the facts gave rise to a promissory estoppel. The argument was put as follows: The email of 10 July 2009 was a representation about future rights. It was unambiguous. No consideration of context can strip the email of its unequivocal meaning. After receiving the email, Clayson thought he could buy and did proceed to buy Savage's shares. He negotiated with Gibbins on the basis that Gibbins was entitled to sell his own shares free of pre-emptive rights. An entity associated with Clayson, Vermillion, has taken an assignment of the burden and benefit of Minqip's (sic) contract with Savage on the basis of the representation. It was communicated contemporaneously to Clayson by Vin Savage [see [27] above] and also formed the basis of the warranty in the share sale agreement that the Savages were entitled to sell. Despite knowledge before the sale to Minqip (sic) and knowledge on the day that it occurred, at no stage did Gibbins ever say anything to restrain Minqip (sic) or Vermillion from acting, to their detriment, on the faith of the representation that Savage could sell his shares to whoever he liked. … (Emphasis added.) 90 In Commonwealth v Verwayen (1990) 170 CLR 394 at 413, Mason CJ analysed the historical distinction between estoppel by conduct and equitable estoppel (including promissory estoppel) and concluded as follows: … The result is that it should be accepted that there is but one doctrine of estoppel, which provides that a court of common law or equity may do what is required, but not more, to prevent a person who has relied upon an assumption as to a present, past or future state of affairs (including a legal state of affairs), which assumption the party estopped has induced him to hold, from suffering detriment in reliance upon the assumption as a result of the denial of its correctness. A central element of that doctrine is that there must be a proportionality between the remedy and the detriment which is its purpose to avoid. It would be wholly inequitable and unjust to insist upon a disproportionate making good of the relevant assumption. (See also the conclusion of Lord Denning M.R. in Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank [1982] QB at p 122.) 91 In my view, Vermillion's contentions that the facts gave rise to a promissory estoppel should be rejected. First, Art 37.13 provides a mechanism for the parties, by written agreement, to waive the pre-emptive provisions in sub-cll 37.2 - 37.12. As noted above, that did not occur. 92 Secondly, Vermillion was a purchaser, by assignment, under the Minquip Share Sale Agreement. It has no rights against Sitzler Savage. Rather, its remedies lie against the vendor of the shares - in this case, the Executors (see, by way of example, Rathner v Lindholm (2005) 194 FLR 291 at [101]). In accordance with relevant property law principles, as purchaser Vermillion does not obtain better title to the shares than the Executors were capable of giving in the circumstances. At all relevant times, the Minquip Share Sale Agreement was conditional upon Minquip executing an agreement to acquire Gibbins Investments' shares: cl 5.1(b) of the Minquip Share Sale Agreement. The only entity that decided to waive that requirement was Vermillion - not Sitzler Savage or its shareholders. 93 Thirdly, Vermillion (as a third party) was fixed with notice of the terms of the Constitution, including Art 37. When Vermillion took an assignment of the Minquip Share Sale Agreement on 8 October 2010, the agreement was still conditional. It was only when Vermillion executed a variation to the Minquip Share Sale Agreement on 8 October (waiving the condition to acquire Gibbins Investments' shares), that a joint sale fell away. At no stage did Vermillion seek to ascertain the true position whether by recourse to the Constitution or by direct enquiry of Gibbins Investments. 94 Fourthly, Vermillion's submission inaccurately describes the facts and circumstances identified. For example, there was no evidence to suggest that Clayson negotiated with Gibbins on the basis that Gibbins was entitled to sell his own shares free of pre-emptive rights or that the 10 July 2009 email formed the basis of the warranty in the Minquip Share Sale Agreement that the Savages were entitled to sell. Clayson's evidence was that the 10 July 2009 email and the subsequent assignment of the Minquip Share Sale Agreement to Vermillion were totally separate deals. Further, as noted earlier (see [44] above) I do not accept that Gibbins had knowledge of the Minquip Share Sale Agreement either before the sale to Minquip took place, or on 29 April 2009, the date of the sale. 95 It is useful to revisit the decision of the High Court in Legione v Hateley (1983) 152 CLR 406. Mason and Deane JJ recognised that promissory estoppel was applicable to preclude the enforcement of legal rights at least between parties to an existing contract: at 434-435. Mason and Deane JJ recognised, however, that if a representation is to found an estoppel, it must be clear and unambiguous (at 435-436). Of course, the representation does not need to be express or clear in its entirety: Legione at 438-439. It is sufficient if so much of the representation necessary to found an estoppel is clear: at 439. Secondly, Mason and Deane JJ recognised that a person will not be estopped unless, as a result of adopting the representation as the basis for action or inaction, the other party has placed themselves in a position that will be one of material disadvantage if departure from the assumption is permitted: at 437. 96 In the present case, Vermillion's final submissions referred to the 10 July email. Vermillion submitted that the email was a representation about future rights which was unambiguous and that "after receiving the email, Clayson thought he could buy and did proceed to buy Savage's shares". I do not accept that the 10 July 2009 email contained a representation that was clear and unambiguous: see [76] and [77] above. However, even if the 10 July email did contain a representation that was clear and unambiguous, it cannot be said that either Vermillion or the Executors adopted the representation as the basis for action or inaction and therefore placed themselves in a position of material disadvantage if departure from the assumption was permitted. At all relevant times, the Minquip Share Sale Agreement was conditional on Minquip acquiring Gibbins Investments' shares in Sitzler Savage - a position at least not inconsistent with the terms of the Constitution. 97 In the case of Vermillion, not only can its position be no better than the vendor of the shares, the Executors (see [92] above), it is in fact worse. Worse, because as a third party, it was fixed with notice of the terms of the Constitution including Art 37 and when Vermillion took the assignment from Minquip, the agreement was still conditional. It was only when Vermillion executed a variation to the Minquip Share Sale Agreement on 8 October (waiving the condition to acquire Gibbins Investments' shares), that a joint sale fell away. And that was a decision made by Vermillion. It was not made by Sitzler Savage or the shareholders in Sitzler Savage.

Estoppel by convention 98 In Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244, the High Court said: Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying. (Emphasis added.) See also Bofinger v Kingsway Group Limited (2009) 239 CLR 269 at 296. 99 In the present case, the doctrine has no application. As stated in Con-Stan, there is no estoppel unless it can be shown that the alleged assumption has in fact been adopted by the parties as the conventional basis of their relationship: see p 244. Evidence of custom is required. In the absence of proof of custom in the circumstances, there is no evidence that the parties adopted the alleged assumption. Given the paucity of argument on this issue, it is by no means clear what facts and matters are relied upon by Vermillion. 100 In any event, I do not consider that those facts referred to by Vermillion in its supplementary note (see [96] above) establish an assumption of fact - namely, that the conventional basis of the relationship between the Savages and the Gibbins was that each was free to sell their shares to whom ever they liked.

(E) Misleading and Deceptive Conduct 101 In paragraph 4 of the Executors' Amended Response and Cross-Claim, they alleged that if Gibbins Investments is entitled to rely on the pre-emptive rights of the Constitution (and the SSUT), it has engaged in misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) (as it then was) and s 1041H of the Corporations Act. No written or oral submissions addressed these arguments. They are dismissed.

(F) Heads of Agreement 102 The next issue to be determined is whether Gibbins Investments has performed its part of the 2007 Heads of Agreement. The Executors contend that Gibbins Investments repudiated its obligations under the 2007 Heads of Agreement. Of course, if Gibbins Investments performed its part of the 2007 Heads of Agreement it remains entitled to 50% of the shareholding in Sitzler Savage. If not, then it will be necessary to determine whether the Executors validly accepted Gibbins Investments' repudiation of the 2007 Heads of Agreement in February or March 2011 and, if so, what relief ought be granted. 103 Before turning to consider the parties' respective contentions, a number of facts and matters not in dispute should be noted. First, the 2007 Heads of Agreement set out the essential terms of the agreement between the parties. Secondly, the 2007 Heads of Agreement was legally enforceable until replaced by a formal agreement. No such agreement was ever executed. Thirdly, there were express terms of the 2007 Heads of Agreement: see [8] to [13] above. Fourthly, Biga and Gibbins Investments had agreed to provide capital for the Project as follows: 1. by Gibbins Investments paying Peko $3 million to acquire one half of the capital of Peko; 2. by Gibbins Investments providing to Australian Magnetite trucking equipment and containers to the value of $2.62 million net of GST (the Trucks); 3. by Biga forgiving a debt of $380,000 owed to it by Australian Magnetite; and 4. by Biga forgiving a debt of $2 million owed to it by Peko (the Peko / Biga debt). The total "capital" to be contributed to the Project was $8 million. 104 Fifthly, the contribution of $8 million was agreed on the basis that Mr Jack Savage had put a value on his contribution at $8 million, and that if Mr Gibbins agreed to bring his contributions (including previous advances) to $8 million, Mr Gibbins would get half of the equity in the Project and be appointed a director of Sitzler Savage and Peko. 105 Sixthly, at settlement the matters to take place included the following: 1. Peko was to issue two ordinary shares in Peko to Gibbins Investments so that Jack Savage and Gibbins Investments held equal shares in Peko; 2. Gibbins Investments was to pay Peko $3 million for the issue of these shares; 3. Mr Jack Savage was to procure that Gibbins Investments held 50% of the issued capital of Sitzler Savage, and procure Mr Gibbins' appointment as a director of Peko and Sitzler Savage; 4. Biga was to execute all documents reasonably required by Peko to secure the forgiveness and discharge in full of the Peko / Biga debt: cl 3(vi); 5. Biga was to execute all documents reasonably required by Australian Magnetite to secure the forgiveness and discharge in full of the Biga / Australian Magnetite debt: cl 3(vii); and 6. Mr Jack Savage, Bill Gibbins and Biga were to procure that Mr Jack Savage and Gibbins Investments held the capital of Australian Magnetite equally. 106 Seventhly, as soon as practicable after Settlement, Gibbins Investments was to cause ownership of the Trucks to vest in Australian Magnetite: cl 4 of the 2007 Heads of Agreement. 107 Eighthly, on 21 February 2008, Mr Vincent Savage transmitted an email confirming that he had received the balance of the sum of $3 million from Gibbins Investments in accordance with the 2007 Heads of Agreement, and that settlement had occurred pursuant to the terms of that agreement "with the relevant shares and directorships having been changed in accordance with the terms of that agreement". The email also stated that Mr Gibbins had confirmed in writing that Biga was willing to forgive the debts in accordance with cll 3(vi) and (vii) of the 2007 Heads of Agreement. Mr Vincent Savage also requested that the solicitors prepare the appropriate documentation for Mr Gibbins's approval. 108 Ninthly, the minutes of the inaugural Board meeting on 22 April 2008 (see [16] above) record that in response to a suggestion by Mr Jack Savage that Mr Gibbins had not paid the money under the 2007 Heads of Agreement, Mr Vincent Savage, the director responsible for finance, strongly disagreed and "advised that all of the BG money had been paid despite non co-operation from [Savage's solicitors] in the provision of signed documentation and acknowledgement of settlement". Further, the minutes recorded that Mr Vincent Savage told the meeting that Mr Gibbins effected settlement when the last truck was delivered. 109 The Executors contend that contrary to Mr Vincent Savage's email of 21 February 2008 and his statements at the Board meeting on 22 April 2008, Gibbins Investments and Biga did not perform their part of the 2007 Heads of Agreement. I reject that contention for the following reasons.

Contemporaneous records 110 Whether Gibbins Investments in fact performed its obligations under that agreement may be tested by reference to the matters listed in Recital L to the 2007 Heads of Agreement: see [10] above. 111 That Recital provided that: Biga and Gibbins Investments has agreed to provide such capital for the Project as follows: (i) by GIBBINS INVESTMENTS paying PEKO the sum of three million dollars to acquire one half of the capital [of] Peko; (ii) by GIBBINS INVESTMENTS providing to AUSTRALIAN MAGNETITE trucking equipment and containers to the value of $2.62 million net of GST (the Trucks). (iii) by BIGA forgiving the Australian Magnetite / Biga Debt; and (iv) by BIGA forgiving the Peko / Biga Debt.

Recital L(i) - provision of capital 112 Recital L(i) required the provision of capital of $3 million to Peko. 113 The Executors submitted that Gibbins Investments did not, subsequent to entry into the 2007 Heads of Agreement, pay $3 million to Peko. It is necessary to understand that the Executors' contentions were not that substantial sums were not paid (or forgiven), but that the monies were paid to Australian Magnetite and not Peko. 114 There are, however, difficulties with that complaint. First, the bank statement of Peko was in evidence and recorded the receipt of $1.2679 million on 21 February 2008 with funds sourced from a Gibbins-related entity. In the general ledger of Australian Magnetite for the 2008 financial year, the loan account of Biga recorded the receipt of $1.2679 million on 21 February 2008 and the subsequent allocation of these funds to a share premium account. These receipts were consistent with Mr Vincent Savage's email of the same date (see [15] above) that he had received the balance of the sum of $3 million from Gibbins Investments in accordance with the 2007 Heads of Agreement. These monies could only have come from Gibbins Investments as the evidence disclosed that Mr Jack Savage paid nothing towards the Project at this time. 115 Secondly, from 30 August 2007 until 11 February 2008, the general ledger account recorded additional receipts of $4.252 million. Again, these monies could only have come from Gibbins Investments as the evidence disclosed that Mr Jack Savage paid nothing towards the Project at this time. 116 Thirdly, on 30 June 2008, the balance of the Biga loan account in the Australian Magnetite general ledger ($6.47 million) was debited to record the premium paid for shares issued to Mr Gibbins. Significantly, Mr Hawker, who was retained in 2009 by Mr Vincent Savage to prepare financial statements for the Companies, gave evidence that he reviewed the bookkeeping entries and carried out a full bank reconciliation using the Companies' bank statements, and then checked the entries against the source documents. He had also been provided with a copy of the 2007 Heads of Agreement. After making all necessary adjustments to the accounts he prepared financial statements that "were consistent with the obligations of Gibbins and Biga under the [2007 Heads of Agreement]". Mr Hawker then exhibited the financial statements that he prepared. The accounts recorded that, as at 30 June 2008, a loan of $1.2 million from a Gibbins-related entity had been cancelled and transferred into the share premium account. 117 Fourthly, the financial accounts (the general ledger and the general journals) tendered in evidence support an inference that Australian Magnetite was the "clearing house". Peko appears to have been able to draw funds directly from Australian Magnetite as and whenever it chose to do so.

Recital L(ii) - provision of trucks and equipment 118 Recital L(ii) required Gibbins Investments to provide to Australian Magnetite trucking and other equipment to a value of $2.62 million. The Executors conceded that substantial amounts were made. In particular, the Executors conceded that equipment to the value of $2,369,802 (inclusive of GST) was purchased by Australian Magnetite in the financial year ended 30 June 2008 using funds supplied by the Gibbins. 119 Further, the evidence of Ms Kostadinoska, a self-employed accountant and bookkeeper, who provides accounting and bookkeeping services to Gibbins-related entities was that the equipment was provided. She was not cross examined about this evidence. Instead, the Executors objected to the receipt of her evidence on the basis that it was inadmissible. I reject that contention. First, Mr Gibbins gave direct evidence that he paid money pursuant to the 2007 Heads of Agreement and supplied the necessary equipment and that he instructed his accountant, Ms Kostadinoska, to provide evidence as to the books and records of Gibbins Investments and Biga. Her evidence produced the bank records of the Companies with some supporting telegraphic transfers produced by the bank to record payments made by Biga to Peko, invoices to Australian Magnetite for the supply of equipment and summaries of payments made. Contrary to the Executors' submissions, the records are admissible: s 69 of the Evidence Act 1995 (Cth). 120 Finally, on 22 April 2008, Mr Vincent Savage reported at the second Board meeting that settlement of this item was effected when "the last truck was delivered".

Recitals L(iii) and (iv) 121 Recital L(iii) and (iv) required forgiveness of debts. To forgive a debt, the underlying liability must be extinguished by an agreement supported by consideration or by deed: Ashton Mining Ltd v Commissioner of Taxation (2000) 44 ATR 249 at [34]. The 2007 Heads of Agreement was executed by all parties as a deed. The deed operated in and of itself to forgive the debts: 1. the Recitals formed part of the Deed: cl 1. They take effect as operative clauses of the deed; 2. by force of Recital L(iii) and (iv) and cll 1, 14 and 16 of the 2007 Heads of Agreement (being an agreement under seal), the debts referred to in Recital L(iii) and (iv) were forgiven; and 3. notwithstanding cll 3(vi) and (vii) of the 2007 Heads of Agreement, cl 16 of the 2007 Heads of Agreement provides that the agreement is binding on the parties. 122 Finally, the evidence disclosed that although cll 3(vi) and (vii) of the 2007 Heads of Agreement provided that at settlement Biga would execute all documents reasonably required by Peko and Australian Magnetite to secure the forgiveness of those debts, the failure of those entities to do so was not the fault of Gibbins Investments but the solicitors acting for Jack Savage. The debts were forgiven.

Cross examination about the 2007 Heads of Agreement 123 A substantial part of the trial, and the cross examination of the witnesses, addressed whether or not Gibbins Investments had in fact performed the 2007 Heads of Agreement. The oral evidence given was incomplete, inconsistent and, in some respects, implausible. To take just one example, in cross examination Mr Vincent Savage gave the following evidence about the email of 28 February 2008: You transmitted that email on or about the date it bears?Yes, I would say so. And Mr Granich, he was your father's solicitor in Perth?Correct. And the things that you stated in that were true, to the best of your belief, the date you sent that email, weren't they?That the group had received 3 million, yes. Sorry?That the group had received 3 million, yes. So will agree with that: I confirm that I have received the balance of the sum of 3 million from Gibbins Investments. ?Correct. You agree with that? That part is true?That the group had. Yes?Yes. And when you say "the group" what you actually say in your email: I confirm that I have received ­ ­ ­ ?Well, I'm ­ ­ ­ It's "I will agree", is it?Yes. "I"?Well, it's - it's the companies that had received it. Thank you?I never received any funds. And you've also said that: I received it in accordance with the heads of agreement - and that's true too, isn't it?Yes. You say further: ...and that settlement has occurred pursuant to the terms of that agreement - and that was true too, wasn't it?It probably - as it has been explained to me later, that - that may be incorrect. I see?Mm. So that is an email which you wrote, perhaps the closest email we get to the heads of agreement executed in 2007, and you now say on your oath you think that's wrong?Well, I think it's - it could be in error with what I've been provided with recently, as far as documents go and how the money was treated. (Emphasis added.) 124 Given the lapse in time and the fact that no witness was truly independent, I have relied upon the contemporaneous documentation in finding that, consistent with that contemporaneous documentation, Gibbins Investments performed the 2007 Heads of Agreement. That conclusion is further supported by the subsequent conduct of the parties to which I now turn.

Subsequent conduct 125 By the 16 June 2008 Deed (see [18] above), Jack Savage resigned as a director of the Companies and Mr Gibbins was appointed as his attorney to enable a sale of all or part of the assets of the Project or their shares in the Companies. At the second Board meeting of the Companies on 8 July 2008, a further agreement was struck in the following terms: Bill Gibbins advised that he would continue to fund the entities until Christmas … and that he would place a further $1 million into the entities to continue to fund and that the resignations executed by Jack, three or four weeks prior to this meeting would stay held and Jack agreed to their lodgment, then the funding would go ahead. He also stated that this would therefore mean that the shareholdings in all three entities would now reflect 45% Jack Savage and 55% Bill Gibbins. 126 That agreement and the resulting further issue of shares proceeded on the basis that the 2007 Heads of Agreement had been performed by Gibbins Investments. Under this agreement, Gibbins Investments was required to, and in fact did, provide further capital. That is not in dispute. The further issue of shares in Sitzler Savage was confirmed on 28 October 2008, when Mr Vincent Savage signed the ASIC Form 484 recording that with effect from 1 October 2008, Gibbins Investments held 55 shares in Sitzler Savage and Mr Jack Savage held 45 shares in Sitzler Savage. Other than the complaint of Mr Jack Savage recorded in the minutes of the first Board meeting of the Companies on 22 April 2008 (a complaint dismissed by his son Mr Vincent Savage), each of these subsequent events occurred without any query or any word of complaint about Gibbins Investments' performance of its obligations under the 2007 Heads of Agreement until February 2011, when the Executors amended their Fast Track Response to raise the allegations for the first time. 127 The Executors' principal complaint rests on events in and after 2009 and, in particular, the preparation of draft accounts by Gibbins Investments' accountants in and after May 2009. These matters were not raised as issues in these proceedings until 2 March 2011, when the Executors filed an Amended Response and Cross-Claim. The complaints fall into two general categories - draft accounts and income tax returns. I will deal with each category in turn. 128 Ms McNamara, one of Gibbins Investments' external accountants, gave evidence that the preparation of the accounts was a difficult matter. She prepared an internal note of her problems. That note was then converted by her into a letter that she sent to both directors - Mr Savage and Mr Gibbins. The letter referred to directors' meetings, subsequent discussions between the parties' accountants and correspondence received from Mr Vincent Savage. The letter dated 27 May 2009 relevantly stated: 1 Heads of Agreement effective 23 October 2007 In accordance with this agreement the following sums have been contributed to the group by interests associated with Bill Gibbins. $'000 50% of Peko share capital 3,000 Loan contribution for trucking, equipment and containers 2,620 Historical advances totalling 2,380 $8,000

… 2 50% of Peko Share Capital We understand that the financial accounts currently reflect $3 million of share premium in accordance with the Heads of Agreement. 3. Equipment Loans In relation to the advance of funds for the trucking equipment and containers to the value of $2.62m we believe the form of this advance is as a loan and documentation to securitize the position has been drafted. … The letter records, as I have found, that $3 million was contributed for 50% of the share capital in Peko. In relation to the trucks, there was never any suggestion that the trucks were not received. Ms McNamara's evidence centred around the accounting treatment of the receipt. That issue remains unresolved. 129 Ms McNamara's evidence was that she attempted to make recommendations that she considered would best reflect the 2007 Heads of Agreement in the draft accounts. She gave uncontradicted evidence that Mr Hawker met with her and agreed with her recommendations. As just noted, ultimately, the accounts were never agreed and the various loan and security documents referred to in her note were never prepared. 130 Moreover, on 29 May 2009 when Mr Gibbins presented draft accounts and draft income tax returns at a Board meeting of Peko and Australian Magnetite and sought to secure the debt claimed to be owing to Gibbins Investments, no resolutions were passed. Mr Vincent Savage refused to execute the documents and told Mr Gibbins that "if he wanted to adjust the financial accounts to his advantage and take security as he was proposing, [he] would need to seek Jack Savage's approval to amend the [2007 Heads of Agreement] such that it reflected the proposal". The 2007 Heads of Agreement were not amended. I do not consider that this evidence provides any support for the contention that Gibbins Investments did not perform its part of the 2007 Heads of Agreement. On the contrary, it tends to support the contention that the 2007 Heads of Agreement were performed. 131 In any event, I do not consider that the events surrounding the draft accounts or the filing of the tax return are relevant to whether or not Gibbins Investments satisfied its obligations under the 2007 Heads of Agreement. The characterisation of payments by third parties, removed from the transactions, years after the events, says nothing about whether the contracting parties complied with their contractual obligations under the 2007 Heads of Agreement, a contract entered into years earlier. If one or more of the transactions has been accounted for incorrectly, then the relevant authorities may take whatever action they consider necessary. 132 Despite the Board passing no resolution in relation to the draft income tax returns, Mr Gibbins signed and lodged the 2007/2008 income tax return for Australian Magnetite in which the investments were recorded as loans and which recorded a distribution of income of $2.38 million from a trust associated with Mr Gibbins. Mr Gibbins' evidence was that he accepted advice that the return should be lodged. Mr Gibbins signed and lodged the income tax returns by appointing himself the public officer of Australian Magnetite and appointing his own accountants as the tax agents despite objection from Mr Vincent Savage. Moreover, he did not provide access to the tax returns or other books and records of Australian Magnetite until compelled to do so by order of the Supreme Court of Victoria of 25 February 2011. His conduct was unacceptable. That conduct may constitute a breach of his duties as a director of Sitzler Savage. But that conduct, even if unlawful, does not alter the existing state of facts, an existing state of facts that the Savage interests effectively sought to enforce at the Board meeting on 29 May 2009 - that Gibbins Investments had performed its part of the 2007 Heads of Agreement. 133 For those reasons, I consider that Gibbins Investments has complied with its part of the 2007 Heads of Agreement.

(G) Repudiation? 134 Given the views that I have formed, it is strictly unnecessary to go on and consider the question of repudiation and whether the Executors were entitled to accept the allegedly repudiatory conduct. However, in the circumstances, it is appropriate I say something further about each of these issues. 135 Even if the conduct relied upon by the Executors was repudiatory in nature (a view I do not hold), it is by no means clear that the relief that the Executors seek is available to them. 136 The Executors submitted that they accepted the allegedly repudiatory conduct by filing and serving their Amended Response and Cross-Claim on 2 March 2011, some 28 days before the trial of the proceedings. No other step was relied upon by the Executors as constituting any acceptance of the fact that Gibbins Investments had repudiated the 2007 Heads of Agreement. That date of the purported acceptance, on 2 March 2011, is significant. 137 The acceptance operated, and can only operate, from 2 March 2011 to discharge the parties from any obligations in the future. The parties' accrued rights continue unaffected: see McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-477 and Striker Resources NL v Australian Goldfields NL (in liq) [2006] WASC 153 at [171] and the authorities cited. As at 2 March 2011, Gibbins Investments had already accrued rights unconditionally as shareholder to 55 of the issued shares in Sitzler Savage. Those rights remain unaffected. 138 Secondly, 2 March 2011 is late. Delay is a factor to be considered. In the present case, it is an important factor because in discharging the onus they bear of establishing the facts necessary to establish the right to accept the alleged repudiation, the Executors were unable to explain (and did not seek to explain) the inconsistency between the contemporaneous positions adopted by them (or parties associated with them): 1. on 21 February 2008 (see [15] above); 2. on 22 April 2008 (see [16] above); 3. in late April and May 2008 (see [17] above); 4. on 16 June 2008 (see [18] above)' 5. on 8 July 2008 (see [19] above); 6. on 28 October 2008 (see [21] above); 7. throughout 2009 and 2010 when offers for Gibbins Investments' shares in Sitzler Savage were pursued by or with the knowledge of the Savage interests (see [22] - [45] above); 8. when these proceedings were commenced on 9 December 2010 (see [52] above), and the position ultimately adopted by them on 2 March 2011 - service of an Amended Response and Cross-Claim alleging for the first time repudiatory conduct by Gibbins Investments, purportedly arising from its alleged failure to perform the 2007 Heads of Agreement.

(H) Relief? 139 Gibbins Investments sought, and for the reasons set out above, is entitled to an order restraining the Executors from selling, transferring, disposing of, pledging, encumbering or otherwise dealing with the balance of the shares in Sitzler Savage owned by Mr Jack Savage other than in accordance with Sitzler Savage's Constitution and, in particular, the pre-emptive rights provisions in Art 37. Given the form and content of the injunction, an order for specific performance sought by Gibbins Investments would appear to be unnecessary. 140 The claims made by the Executors and Vermillion against Gibbins Investments should be dismissed. As noted above, the Executors and Vermillion settled their claims against each other. Orders will need to be made to address those claims.

(I) Sitzler Savage Discretionary Unit Trust 141 The SSUT has 20 units. The Trust Deed was in tendered in evidence. It contains its own pre-emptive rights clause. Sitzler Savage is the trustee of the SSUT. 142 The Minquip Share Sale Agreement was varied on 22 December 2010 to amend the definition of shares to be sold by the Executors to Minquip (and therefore Vermillion) to include both shares in Sitzler Savage and all units in the SSUT. On 22 December 2010, Vermillion sought specific performance of the Minquip Share Sale Agreement including a claim that the Executors transfer 10 units in the SSUT. On 21 January 2011, the Executors' pleadings accepted that they held 11 of the 20 units on trust for Gibbins Investments. 143 Upon learning of the further deed of variation, in February 2011 Gibbins Investments sought interim relief seeking to restrain the Executors from disposing of all of the issued units in the SSUT after the Executors refused to undertake that they would not transfer any units in the SSUT. On 17 February 2011, the Executors gave undertakings to the Court: … that they, whether by their servants, agents, employees or otherwise, until further Order or hearing and determination of this proceeding that they shall not in any way deal with, transfer, encumber, sell or dispose of the 11 units held by them on trust for [Gibbins Investments] in the [SSUT]. This undertaking was given in this proceeding and continues until the hearing and determination of this proceeding. 144 On 4 March 2011, the Executors' position changed. They filed an Amended Response and alleged that they only held 1 unit on trust for Gibbins Investments. 145 Other than the trust deed, the Executors adduced no evidence about the SSUT, or its role in the Project. As Gibbins Investments submitted, there was no evidence to establish that the assets of the Project were settled on the SSUT. As is self evident, neither the 2007 Heads of Agreement nor the further agreement struck on 8 July 2008 refers to the SSUT. Both investments in the Project by Gibbins Investments proceeded on the basis that the assets of the Project were held by the Companies, not the SSUT. The Executors' submission that all of the assets of Sitzler Savage were held in the SSUT is rejected.

(J) Orders 146 Given the complexity of the issues raised in these reasons for decision, I will direct the parties to confer and bring in orders to give effect to these reasons for decision by 4:00pm on 26 May 2011. I certify that the preceding one hundred and forty-six (146) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.