Glencore International AG v Selwyn Mines Limited

GENERAL NATURE OF GLENCORE'S APPLICATION 8 Order 15A r 6 provides: '6. Where - (a) there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the court from a person whose description has been ascertained; (b) after making all reasonable inquiries, the applicant has not sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief; and (c) there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had possession of any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist in making the decision - the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c).' 9 It is convenient to make the following observations about this provision at the outset. 10 First, para (a) clearly poses an objective test (Hooper v Kirella Pty Ltd (1999) 96 FCR 1 at [39]): the opening words have the meaning 'there exists reasonable cause to believe'. 11 Secondly, the person against whom the concluding words empower the Court to make an order, is the person referred to in paras (a) and (c), and, by the expression 'that relief', implicitly, in para (b) as well. That is to say, the provision does not allow for third party discovery: discovery may be ordered only against the person from whom there is reasonable cause to believe that the applicant is or may be entitled to obtain relief (cf Hooper v Kirella Pty Ltd, above, at [36]). 12 Third, a document relating only to the question whether a judgment against a person is likely to be enforceable, is not: 'a document relating to the question whether the applicant [for preliminary discovery] has the right to obtain ... relief.' within par (c) of O 15A r 6, and such a document is therefore not discoverable. If the only reason why an applicant has not sufficient information to enable a decision to be made whether to commence a proceeding is that the applicant lacks sufficient information as to the respondent's capacity to satisfy a judgment, preliminary discovery will not be available. 13 Fourth, the measure of any preliminary discovery to be ordered is the extent of information that is necessary, but no more than that which is necessary, to overcome the insufficiency of information already possessed by the applicant after the making of all reasonable inquiries, to enable a decision to be made whether to commence a proceeding: Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 391 at 26-27. 14 Fifth, there is a tension between paras (a) and (c) of O 15A r 6. The stronger the relevant evidence already available to an applicant of its right to obtain relief, the stronger its position under para (a), but the weaker its position under para (c). On the other hand, the weaker that evidence, the weaker the applicant's position under para (a) and the stronger its position under para (c). 15 Sixth, and partly as a result of the tension just mentioned, while a respondent to an application for preliminary discovery is entitled to remain passive, the applicant must place before the Court all of the evidence already available to it relevant to the sufficiency of the information it possesses to enable a decision to be made whether to commence a proceeding. The applicant must not hold back information in aid of satisfying para (b). This obligation on the applicant to be forthcoming arises from the special and intrusive nature of preliminary discovery; the fact that ordinarily the respondent will not know, or be in a position to expose, the full extent of the information already available to the applicant; and the tension between paras (a) and (c) of O 28 r 6 referred to above. 16 Seventh, while the notion of 'reasonable cause to believe that the applicant … may have the right to obtain relief …' (my emphasis) may be seen to set the threshold 'at quite a low level' (cf Gulf Petroleum (WA) Ltd v Tah Land Pty Ltd [2001] FCA 1531 at [59] per Carr J), there must be some tangible support that takes the existence of the alleged right beyond mere 'belief' or 'assertion' by the applicant (Minister for Health and Aged Care v Harrington Associates Ltd [1999] FCA 549 at [29]; Hooper v Kirella Pty Ltd, above, at [39]; C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864 at [12]). 17 Glencore asserts that there is reasonable cause to believe that it has or may have a right to recover from the respondents the amount of its loss or damage in respect of its having advanced US$8 million to Selwyn, in particular, to Selwyn Operations, pursuant to a Pre-Export Finance Agreement dated 25 September 2002 ('Glencore Finance Agreement'). 18 Glencore's primary claim against Selwyn would be based on s 82 of the Trade Practices Act 1974 (Cth) ('TP Act') (invoking s 52 of that Act), or, alternatively, on s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth) ('ASIC Act') (invoking s 12DA of that Act). It is sufficient to think of the legislative foundation of the potential claim as one that a corporation has, in trade or commerce, engaged in misleading or deceptive conduct (or misleading or deceptive conduct in relation to financial services) in contravention of the TP Act s 52 (or ASIC Act s 12DA). 19 The claim against BankWest would be that it was knowingly involved in the contravention by Selwyn Operations, or, more generally, by the Selwyn companies: see TP Act s 75B (or Corporations Act s 79, which is applied for the purposes of s 12GF of the ASIC Act, by the operation of s 5(3) of the ASIC Act). 20 A second potential cause of action against Selwyn would be for breach of a 'Quistclose trust' (cf Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567). The related claim against BankWest would be founded on the two limbs of Barnes v Addy (1874) LR 9 Ch App 244. The claim would be that when Selwyn, in particular, Selwyn Operations, received the advance from Glencore, the monies were impressed with a trust arising out of the common intention of Glencore and Selwyn that they be used for working capital and not for debt reduction; that the payment of the trust money into an escrow account at BankWest and/or to BankWest in reduction of debt was a breach of trust by Selwyn; and that BankWest knowingly received trust property (money) or, alternatively, was knowingly involved in, the breach of trust. 21 The third and last of Glencore's potential claims against Selwyn Operations would be for breach of contract in the form of breach of the Glencore Finance Agreement. Glencore's associated claim against BankWest would be for inducing that breach of contract.

General 22 The chief officer of Glencore who was involved in the negotiations and transaction to which the present application relates, was Mr Mueller, the deponent of the affidavit referred to earlier. Mr Mueller resides in Switzerland. Michael O'Keeffe, a Sydney resident, the managing director of Glencore Australia Pty Ltd ('Glencore Australia'), and Matthew Cleary, a manager employed by Glencore Australia, also played roles on the Glencore side. The officers of Selwyn most involved were Selwyn's managing director, Mr Howe, and its chief financial officer, Mr Hogan. 23 Glencore, based in Baar, Switzerland, is one of the world's largest suppliers of a wide range of commodities and raw materials to industrial consumers. It had been purchasing copper concentrate from Selwyn on an ad hoc basis since 1996. 24 The critical events with which the proceeding is concerned occurred in 2002, against the background of Selwyn's relationships with BankWest and with Glencore. 25 There are certain important general matters against which those events fall to be assessed. As Glencore concedes it knew, Selwyn was not in a strong financial position when seeking a loan of US$8 million from Glencore in 2002. Glencore also knew that Selwyn was obliged to pay to BankWest between $6 million and $7 million in December 2002, $2 million in March 2003, and after that, $1 million every quarter commencing in June 2002. Glencore knew that BankWest was secured. But apparently it was important for Glencore to secure for itself Selwyn's copper concentrates output. It is impossible for me to know how important, or to know all the considerations which led Glencore to enter into what it understood to be a risky financing arrangement. The importance to Glencore of securing three years' supply may explain the apparently imprudent aspects of Glencore's decision to lend US$8 million unsecured to Selwyn.

The pre-2002 position 26 BankWest had provided financial accommodation to Selwyn Queensland as borrower under a facility agreement dated 7 June 2000 (which had been amended) ('BankWest Facility Agreement'). Selwyn Mines and Selwyn Operations were parties to that agreement as guarantors. Clause 13.1 of the BankWest Facility Agreement defined 'Default', and cl 13.2 provided that upon or after Default, BankWest was entitled to require immediate repayment of the 'Secured Monies'. The expression 'Secured Monies' was defined to mean all debts and monetary liabilities of Selwyn Queensland and each other 'Transaction Party' to BankWest. The expression 'Transaction Party' meant Selwyn Queensland and each guarantor, that is, each of Selwyn Mines and Selwyn Operations. 27 Selwyn Mines executed a deed of charge, also dated 7 June 2000 in favour of BankWest. Selwyn Queensland, Selwyn Mines and Selwyn Operations also executed a deed of charge dated 3 July 2000 in favour of BankWest. 28 Under an 'Offtake Agreement', Selwyn Operations agreed to sell and deliver copper concentrates to Glencore for a period of three years expiring on 31 December 2002. 29 Under an Offtake Agreement - Side Deed dated 3 July 2000 between Selwyn Operations, Selwyn Queensland, Glencore and BankWest, Glencore consented to the creation of security in favour of BankWest over the right, title and interest of Selwyn Operations under the Offtake Agreement.

A chronological account of the events of 2002 30 On 30 April 2002, BankWest wrote to Selwyn proposing certain amendments not presently relevant to the BankWest Facility Agreement, to which Selwyn agreed on 2 May 2002. 31 On 14 June 2002, Mr Howe, Selwyn's managing director, wrote to Michael O'Keeffe of Glencore Australia proposing renewal of the Offtake Agreement for a further period of three years, on the basis that Glencore would prepay for the copper concentrates in July 2002, the amount of the prepayment to be applied evenly as payment for the shipments, which were to commence in January 2003. The letter stated: 'The proceeds will be used for working capital requirements to complete the commissioning of the underground mines and plant and principal debt reduction.' A copy of this email was sent to Mr Mueller, who says that he understood at all times that any finance to be provided by Glencore would be used for working capital. 32 On 7 August 2002 Mr Mueller advised other officers of Glencore:

• that his investigations suggested that Selwyn was 'going to face some severe liquidity issues';
• that it must be assumed that Selwyn had 'a high risk of going into default';
• that any lender would want security over Selwyn's assets on the basis that the project value exceeded debt; and
• that, since security had already been given to BankWest, he saw three possibilities for Glencore, the third of which was: 'We could perhaps enter into short-term prepayments, purely for covering the cash shortfall, but not allowing them to make debt repayments. Depending on the security given to BankWest, there is perhaps a chance to get security over inventory. However, we need to be aware that in case the company falls over, a receiver would likely disregard the contract, and the security would probably not hold up in court.' Mr O'Keeffe wrote to Mr Mueller on 13 August 2002 supporting this third option. 33 Meanwhile, BankWest was insisting that Selwyn raise equity capital. On 27 August 2002, BankWest wrote to Selwyn proposing a further variation to the BankWest Facility Agreement. The variation would insert a new cl 10.6 into that Agreement obliging Selwyn to raise equity capital of not less than A$10 million by 31 December 2002, to be applied as to A$6,900,000 in respect of certain specified liabilities to BankWest. 34 By the same letter, BankWest proposed a further and related variation which would insert a new cl 13.6 to the effect that it was an 'Event of Review' if Selwyn Queensland did not raise equity capital in an amount of not less than $A10 million on or before 31 December 2002, and that on or after the occurrence of the 'Event of Review', BankWest would be entitled either to require a restructuring of facilities acceptable to it, or to give Selwyn Queensland written notice nominating a date, not within 60 days, by which the Secured Monies were to be paid in full. 35 On 5 September 2002, Selwyn signed an acceptance of BankWest's variation letter. 36 Mr Mueller did not learn of the 'Event of Review' provisions until a conversation he had with Mr Hogan on 16 October 2002. He states that if he had known of them, he would have recommended that Glencore not make the advance to Selwyn. 37 Meanwhile, on 3 September 2002, Mr Howe wrote to Mr O'Keeffe setting out the proposed terms for the renewal of the Offtake Agreement for three years from 1 January 2003. 38 On 4 September 2002 Mr Mueller emailed Mr O Keeffe asking what the proposed use of the funds (to be provided by Glencore) was, to which Mr O Keeffe's personal assistant, Phoebe Alexopoulos, replied: 'working capital'. Ms Alexopoulos informed Mr Mueller that she had obtained that answer from Mr Hogan. 39 On 5 September 2002, several things happened. Mr Howe told Mr Mueller that Selwyn was still proceeding with the raising of equity capital, and that the funds requested of Glencore were distinct from equity, and were needed to provide 'a working capital facility to cover the funding requirements in between shipments'. Mr Howe also told Mr Mueller that Selwyn needed 'some upfront payout to be provided by Glencore but … not … the whole amount of $8 million'. 40 Later on 5 September 2002, Mr Hogan told Mr Mueller that Selwyn had drawn down $15 million from BankWest and $3.4 million from a BankWest standby facility, a total of $18.4 million; and that $4.9 million was to be repaid to BankWest by 31 December 2002, and a further $2 million was to be paid into a debt service reserve account in March 2003. In response to a question by Mr Mueller, Mr Hogan told him that there were no relevant 'defaults' in the BankWest Facility Agreement, such as production levels, and that 'the [the] only default [was] related to reserve life'. As noted at [34] above, in fact, on the same day, Selwyn was agreeing to what was in substance, though not in terms, a 'default' provision relating to the raising of equity capital by 31 December 2002. Mr Mueller told Mr Hogan that BankWest's consent to the proposed Glencore financing would be required. 41 On 5 September 2002, Mr Mueller sent an inter-office memo to other Glencore officers stating 'US$8 million is for working capital only; capital raising still being contemplated'. The memo also noted that BankWest's loan was secured 'via fixed and floating charge over basically all the assets', and was to be repaid within three years, and did not involve a 'default linked to operating figures/profit achievement, but to ore reserves'.

42 Attached to Mr Mueller's memo were spreadsheets prepared by Mr Mueller setting out what he described in his memo as 'the base case information and the sensitivity tables'. The spreadsheets are detailed. They show: · predicted monthly cash flow from July 2002 to December 2005; · for December 2002, a raising of equity of $9,700,000 (the gross figure was to be $10 million), and payments of $4,400,000 to BankWest and $2,077,000 to 'other'; · payments to BankWest of $2 million in March 2003 and $1 million each quarter thereafter; and · that if Selwyn did not raise the equity capital of $10 million by December 2002, it would have a negative closing cash balance by March 2003.

Mr Mueller's memo further stated: ' l Based on the above base case assumptions, Selwyn would be able to repay our debt as contemplated without additional funding requirement. · Considering a trading benefit of USD0.3 million per shipment, we should have a "return" by July 2004. · There is not a big buffer for a down case: only a slight worsening of the copper price or the throughput will bring Selwyn into a cash deficit situation! However, the model contemplates the repayment of the BankWest debt. · Uncertainty is also coming from the equity raising planned for December (AUD10 million). It must be considered that it might fail. · The annual concentrate supply will rather be around 80,000 tonnes rather than 90,000.' 43 Mr Mueller's memo and accompanying spreadsheets are relied on by Glencore as showing the marginal nature of Selwyn's financial position, Mr Mueller's careful consideration of it, and the importance of the proposed Glencore loan going to working capital. 44 On 6 September 2002, Glencore wrote to Selwyn Mines stating that Glencore would provide Selwyn with the US$8 million prepayment.

45 By 25 September 2002, two agreements were drawn up: · a Concentrates Sale Agreement (in substance, a renewal of the existing Offtake Agreement) between Glencore and Selwyn Operations for three years commencing 1 January 2003; and · the Glencore Finance Agreement by which Glencore would advance to Selwyn Operations US$8 million unsecured, repayable progressively on delivery of concentrates. 46 On 25 September 2002, Selwyn Mines (Mr Hogan) wrote to BankWest (Andrew Richards) confirming that terms had been agreed with Glencore, and enclosing copies of the then proposed agreements. Mr Hogan's letter continued: 'We refer to our discussions of the terms under which Bank of Western Australia Ltd (BankWest) would agree to SOPL [Selwyn Operations] and Selwyn Mines entering into these agreements and wish to confirm those terms. The Selwyn Mines Board and the SOPL Board have resolved to enter into these agreements, subject to first receiving from BankWest written confirmation that BankWest agrees in principle to the following terms: 1. The Glencore Advance will be deposited into the USD Proceeds Account and then transferred into the AUD Proceeds Account by BankWest converting it to Australian Dollars at the spot exchange rate. 2. An amount of A$6.9 million (Escrow Monies) of the Glencore Advance will be withdrawn from the AUD Proceeds Account and then deposited into the Debt Service Reserve Account with BankWest. 3. The balance of the Glencore Advance after deducting the amount of the Escrow Monies will remain in the AUD Proceeds Account and will be applied in accordance with clause 12.4 of the Facility Agreement. 4. The Escrow Monies will be held by BankWest on the following terms: a. that the Escrow Monies will be deposited into the AUD Proceeds Account upon the date that Selwyn Queensland Pty Ltd (SQPL) raises equity in an amount of not less than A$10,000,000 in accordance with clause 10.6 of the facility agreement dated 7 June 2000 (Facility Agreement) between SQPL, Selwyn Mines and SOPL and BankWest (as amended, supplemented and restated from time to time); b. if SQPL does not raise equity in an amount of not less than A$10,000,000 on or before 31 December 2002 in accordance with clause 10.6(a) of the Facility Agreement, then the Escrow Monies will be applied by BankWest on 1 January 2003 as follows: i. repayment of all Principal Outstanding under the Standby Facility; ii. satisfaction of the obligation to maintain a minimum balance of A$2,000,000 in the Debt Service Reserve Account; and iii. the balance to repayment of Principal Outstanding under the Cash Facility; c. if the Escrow Monies have been applied by BankWest in the manner referred to in paragraph 4(b) above, then the obligation of SQPL under clause 10.6(b) of the Facility Agreement will be deemed satisfied; and d. interest on the Escrow Monies will be paid by BankWest into the AUD Proceeds Account on a monthly basis. …………………………………………………………………………………… Can you please confirm that you are satisfied with the above terms by signing and returning copy of this letter.' (my emphasis) Although this letter was written by Selwyn to BankWest, it seems clear that it was setting out BankWest's conditions of consent, which, no doubt, had originated with BankWest. 47 Clause 12.4 of the BankWest Facility Agreement referred to in this letter was headed 'Proceeds Accounts - Priority of application', and gave BankWest a great degree of control over expenditures from such accounts. The top priority payment allowed was 'any amounts which [BankWest] is satisfied are Operating Costs properly incurred.' The expression 'Operating Costs' was defined in the BankWest Facility Agreement to mean 'all expenses incurred and paid by [Selwyn Operations] in the ordinary course of business in connection with the day-to-day activities of the Project [as defined]'. As I understand it, however, Glencore's complaint relates to the 'escrow monies' of A$6.9 million, and not the remaining part of the US$8 million advanced by Glencore. 48 On the same day, 25 September 2002, BankWest endorsed Mr Hogan's letter with its consent, which it returned to Selwyn Mines. Accordingly, it was agreed between BankWest and Selwyn that once Glencore made its advance of US$8 million to Selwyn, a sum of A$6.9 million of it would be immediately appropriated to Selwyn's Debt Service Reserve Account at BankWest, and so cease to be available for working capital. 49 Also on 25 September 2002, Selwyn Mines (Mr Hogan) wrote to Glencore (Mr Mueller) enclosing the form of Concentrates Sale Agreement signed by Mr Hogan on behalf of Selwyn Operations and the form of the Glencore Finance Agreement signed by Mr Hogan on behalf of both Selwyn Operations as borrower and Selwyn Mines as guarantor, for execution by Glencore. 50 The form of Concentrates Sale Agreement provided for the sale by Selwyn Operations to Glencore of all of Selwyn Operations's production of copper concentrate at the Selwyn Project/Mine in Queensland, over the three year period from January 2003 to December 2005. 51 The form of Glencore Finance Agreement recited the Concentrates Sale Agreement and the fact that Glencore was prepared to provide Selwyn with a pre-export finance loan facility for a maximum amount of US$8 million to be repaid by Selwyn Operations against future deliveries. Glencore, Selwyn Operations and Selwyn Mines agreed upon such a facility up to a maximum amount of US$8 million, provided all terms and conditions of the Glencore Finance Agreement were duly met. Clause 2 stated simply: 'Purpose of the Pre-export Finance Facility Working Capital Requirements for Selwyn [Selwyn Operations].' 52 The Glencore Finance Agreement provided that Selwyn Operations should be entitled to make a drawdown under it and that the disbursement of the facility should be made 'on one amount' [sic - 'in one amount']. The whole amount of US$8 million was in fact drawn down virtually immediately 'in one amount'. By cl 11(e), Selwyn Operations undertook within 30 days (of 25 September 2002) to deliver to Glencore evidence from Selwyn Operations's main bankers of their awareness of the Glencore Finance Agreement and of the Concentrates Sale Agreement. 53 Mr Hogan's covering letter drew down the whole of the US$8 million. The letter informed Glencore that BankWest's letter of acknowledgement of the existence of the two agreements would be provided within a few days. Mr Mueller states that he understood this statement to mean that BankWest had approved of the two agreements and agreed to provide an acknowledgement of that approval. He says that if it had been suggested that BankWest had not yet approved of them, Glencore would not have proceeded. Apparently both forms of agreement were executed immediately on behalf of Glencore. They are both dated 25 September 2002. 54 On 25 September 2005, Glencore advanced to Selwyn Operations US$8 million. The whole of this amount was paid into a Selwyn account with BankWest in New York and apparently dealt with in conformity with the conditions on which BankWest had given its consent, set out in [46]. 55 On 16 October 2002, Matthew Cleary of Glencore Australia wrote to Mr Mueller reporting that Selwyn Mines intended to raise A$10 million in the market, of which A$4.9 million was to be used to retire debt due at the end of 2002; that A$2 million was to be deposited in a debt servicing account with BankWest; and that the balance was to be used as operating and working capital. Mr Cleary said of the advance of US$8 million which Glencore had made on 25 September 2002: '(Of the US$8 million pre-export finance agreement payment AU$6.9 million deposited in a BankWest escrow account, (a condition of BankWest agreeing to the payment pending Selwyn's intended capital raising), AU$5 million has been committed to plant and operating improvements with AU$2 million set as a buffer.)' In a conversation between Mr Mueller and Mr Hogan, also on 16 October 2002, Mr Hogan stated: 'BankWest has a trigger in their agreement to review the terms if the capital raising does not occur.' Mr Mueller explored this matter further with Mr Hogan the following day, 17 October 2002. He asked Mr Hogan about BankWest's letter of acknowledgement and was assured by Mr Hogan, 'It's coming'. 56 On 28 October 2002, Mr Mueller visited Selwyn Mines' mines. Mr Hogan showed him a copy of a deed that BankWest wanted Glencore to execute, as a condition of its consenting to the Glencore Finance Agreement. Mr Mueller protested that Mr Hogan had led him to believe that BankWest had already consented. 57 On 4 November 2002, the directors of Selwyn Mines announced to the Australian Stock Exchange ('ASX') that agreement had been reached for a fully underwritten non-renounceable rights issue to raise approximately A$10.6 million, to be used 'to retire debt and supplement working capital'. 58 Evidence admitted subject to my ruling on an objection by BankWest, shows that on 11 November 2002 Mr Hogan faxed to Mr Mueller a copy of a letter dated 7 November 2002 from BankWest, addressed to Glencore, which read as follows: 'Bank of Western Australia Ltd ("BankWest"), as secured financier of Selwyn Mines Limited ("SML") and Selwyn Operations Pty Ltd ("SOPL") hereby confirms that it is aware that those parties propose entering into agreements with Glencore International AG ("Glencore") in the form of the following agreements: · a draft dated 10 September 2002 of a contract (contract No 101-03-10026.P) between SOPL and Glencore; and · a draft dated 23 September 2002 of a pre-export finance facility between Glencore, SOPL and SML under which Glencore will advance a sum of US$8 million to SOPL. BankWest has been provided with copies of those agreements and confirms that it has no objection to SML and SOPL entering into those agreements provided that Glencore, SML, SOPL and Selwyn Queensland Pty Ltd ("SQPL") execute the supplemental deed to offtake agreement - side deed between SOPL, SQPL, SML, Glencore and BankWest.' (my emphasis) 59 In his covering letter to Mr Mueller of 11 November 2002,Mr Hogan explained the reference to 'draft' in this letter. He stated that at the time of BankWest's writing (7 November 2002), BankWest had not been in possession of copies of the two agreements bearing Glencore's signatures, and that it had since been provided with them. Mr Hogan concluded by requesting Glencore to execute a supplemental deed to the Offtake Agreement - Side Deed dated 3 July 2000, as requested by BankWest. 60 It will be appreciated that the Concentrates Sale Agreement and the Glencore Finance Agreement had been entered into back on 25 September 2002, the advance of US$8 million had been made by Glencore on that date, and A$6.9 million of that sum had, at that time, been paid into the Selwyn 'Debt Service Reserve Account' with BankWest, the proceeds of which were available to be appropriated by BankWest in reduction of Selwyn's indebtedness to it. 61 Evidence admitted subject to my ruling on BankWest's objection to it further showed that following receipt of the fax dated 11 November 2002 from Mr Hogan, Mr Mueller telephoned him questioning BankWest's reference to 'draft', but Mr Hogan assured him that BankWest was informed about the Glencore arrangement 'about three to four weeks before it was entered into'. Mr Hogan told Mr Mueller that the escrow condition had not been raised by BankWest at the time of the signing of the Glencore Finance Agreement (on 25 September 2002) and had been raised by BankWest only 'recently'. It is common ground that on the evidence, this was untrue: it was referred to in Mr Hogan's letter to BankWest dated 25 September 2002 (see [46] above). 62 On 11 November 2002, Mr Hogan faxed to Mr Mueller a further BankWest letter of variation (dated, curiously, 13 November 2002) intended to replace that of 16 October 2002. It included the escrow condition. 63 On 13 or 14 November 2002, in response to questions raised by Mr Mueller, Mr Hogan wrote to him: 'The AUD6.9m was to [be] paid from any equity raising originally which had to be not less than AUD10m. When we requested consent from BankWest to enter into the Glencore arrangements the Bank escrowed the AUD6.9m as the cost for granting their consent. Having escrowed the funds it [is] those funds they will use to apply to repay the Standby facility, establish the Debt Service Reserve Account and repay the AUD$1.5m from the Cash Facility while the equity proceeds will be made available for the opex, capex, etc. The net position is the same. The Bank for their convenience only wish to apply the escrowed funds rather than the equity funds as was originally proposed. For the Company it is the same net outcome. The event of review will not be removed by the Bank however, given the equity raising is fully underwritten we believe it to be an unlikely event.' (my emphasis) 64 The 'net position' may have been 'the same' and the present application for preliminary discovery may not have been made, if the equity capital of A$10 million had been raised as planned and A$6.9 million of it had gone to working capital, but, unfortunately, the 'unlikely event' referred to in Mr Hogan's letter was in fact to occur. 65 On 14 November 2002, BankWest, Glencore and Selwyn executed a supplemental deed to the 'Offtake Agreement - Side Deed' (which made Selwyn Mines party to the Offtake Agreement - Side Deed, as if it had been a party to it originally). 66 The Selwyn Mines rights issue was to be finalised on 23 December 2002. On 20 December 2002 Mr Hogan broke the news to Mr Mueller that the underwriter had terminated the underwriting agreement. 67 On 30 December 2002, BankWest appointed Messrs Geroff and Trevor as joint and several receivers and managers of all the assets and undertakings of each of the Selwyn companies. In the case of Selwyn Mines, the appointment was made under the fixed and floating charge dated 7 June 2000, and in the cases of Selwyn Operations and Selwyn Queensland, the appointment was made under the fixed and floating charge dated 3 July 2000. Messrs Geroff and Trevor prepared an inventory of documents in Selwyn's possession. They are housed in more than 140 boxes, all of which are now archived. 68 At about the same time, Glencore wrote to BankWest alleging that it had misled Glencore, and BankWest denied the allegation. 69 Mr Mueller states in pars 65 and 66 of his affidavit: '65. I believe that Glencore may have the basis for claims against Selwyn Mines, Selwyn Queensland, Selwyn Operations, the Directors of the Selwyn Companies and BankWest. 66. The information available to Glencore is not sufficient to allow it to determine if it should commence proceedings against any or all of the persons and companies identified in paragraph 65 above. Glencore would need to have access to the information identified in the schedule to the Application to be able to make such a decision.' 70 Subject to my ruling on an objection by BankWest to the evidence, Mr Mueller testified that on 14 March 2003, he met with Mr North and that they conversed as follows: '[Mr Mueller]: Glencore always expected the funds to go into the company as working capital as requested by Selwyn. [Mr North]: That was my understanding [Mr Mueller]: So how come that suddenly this escrow condition is raised? Hogan told us that BankWest had agreed to the facility before we paid the money; has he lied to us? [Mr North]: I can't believe that. If he told you he had consent, he must have obtained it. I rather think that the Bank's behaviour was questionable. I've got good notes of our meetings between 20 and 26 December 2002 and in particular the last meeting. I am convinced BankWest's actions put Selwyn in administration. I believe the company could have survived and the shareholders and creditors would have been happy.' 71 On 31 May 2004, Atanaskovic Hartnell (AH), solicitors for Glencore, wrote to the liquidators, the receivers and managers and the present respondents requesting copies of the documents of which Glencore now seeks preliminary discovery in this proceeding.

Evidence relating to whether Glencore intends to sue Selwyn 72 BankWest submits that Glencore has no intention of suing Selwyn. The significance of this submission is that, as noted at [11], O 15A r 6 does not permit an order for third party discovery: the rule permits the making of an order for preliminary discovery only against a person from whom there is reasonable cause to believe that the applicant has or may have the right to obtain relief. Accordingly, preliminary discovery cannot be ordered against Selwyn in order to assist Glencore to decide whether it has a right to obtain relief from BankWest. 73 The facts on which BankWest relies in support of its submission that Glencore has no intention of suing Selwyn, are as follows. 74 On 30 August 2004, McCullough Robertson ('MR'), the solicitors for Messrs Cronin and Hennessey, the liquidators of Selwyn Operations and Selwyn Queensland, wrote to AH, advising them that the reason why no action had been taken against the Selwyn directors in relation to 'insolvent trading' was 'an absence of funds in the administration'. MR's letter continued: 'The Liquidators intend to correspond with all creditors by 1 September 2004 to determine if any creditors are willing to fund the Liquidators' further investigations and any subsequent action. In addition to your client, another creditor has expressed an interest in pursuing an action against the Directors for insolvent trading. If it is the case that our client does not receive an adequate response, or approval is not given for litigation funding to be obtained, our client will at that point, consider your client's request. At this time it would be premature for our client to accede to your client's request.' 75 Also on 30 August 2004, Mr Cronin, one of the liquidators, sent out a 'circular to creditors' which included this statement: 'Due to an absence of funds in the liquidation, I have been unable to conduct a comprehensive investigation in relation to insolvent trading and the existence of potentially voidable transactions. My preliminary investigations to date indicate that there may be a potential recovery action available to the Liquidators against the Directors for failing to prevent the company from trading whilst insolvent (refer to section 2). In this regard, I provide creditors with an opportunity to fund the Liquidators to undertake a comprehensive investigation in relation to the potential claim for insolvent trading.' 76 Section 2 of Mr Cronin's circular set out certain figures taken from profit and loss statements contained in monthly management reports of Selwyn Operations. These show that from June 2002 onwards, to use the words of Mr Cronin, 'significant losses were incurred'. According to the figures, from January to May 2002, there were accumulated profits, although these fell to $208,854 in May 2002. But, commencing with an accumulated loss of $551,009 in June 2002, accumulated losses grew to $13,696,235 in December 2002.

77 Mr Nicol also demonstrated:

• that the ratio of Current Assets to Current Liabilities of Selwyn Operations was well below the generally acceptable ratio of 2, from September to December 2002; and
• that in the period July to December 2002, Selwyn Operations and Selwyn Queensland were reliant on cashflows from financing activities to offset negative cashflows from operating and investing activities. 78 Mr Nicol concluded that while preliminary investigations lent support to a claim that Selwyn Operations was insolvent prior to the appointment of the receivers and managers by BankWest on 30 December 2002, funding was required to enable a comprehensive investigation to be carried out and a determination to be made as to whether further action [against the directors] was warranted. Mr Nicol invited creditors to indicate if they were willing to fund the necessary further investigation, and, if warranted, the commencement of legal action. 79 Glencore submits that on Mr Nicol's figures, it may have the right to obtain relief in the Court from the directors under s 588M(3) of the Corporations Actfor 'insolvent trading'. It is convenient to indicate at once that I accept this submission. 80 On 1 November 2004, AH wrote to the liquidators advising that Glencore did not, at that stage, wish to consider funding further investigations by the liquidators. 81 Paragraph 64 of Mr Mueller's affidavit is as follows: '64. The amount outstanding under the Glencore Finance Agreement as at 31 December 2002 was $US8 million plus interest. That sum remains outstanding. As the Liquidators' circular to creditors dated August 2004 discloses, that there will be no surplus funds from the receivership available to unsecured creditors and no asset realisations in the liquidation itself.' 82 In cross-examination, Mr Mueller said that it was still his understanding that, in relation to all of the Selwyn companies, there would be no surplus funds from the receivership available to unsecured creditors, and that there would be no asset realisation in the liquidations of Selwyn Operations and Selwyn Queensland. Glencore has lodged proofs of debt in those liquidations. 83 Mr Mueller was cross-examined with a view to showing that Glencore's intention was to sue only BankWest and the four directors, because it would be fruitless for it to sue Selwyn. That cross-examination included the following exchanges: 'Having regard to your understanding as to the financial position of the three companies, you don't expect to satisfy Glencore in respect of any of its losses from the assets of those companies; that is right, isn't it? --- That is right, yes. And it is fair enough to say, isn't it, that it is your intention that if you can to sue the bank, and to sue the four individuals, to see if some of the losses suffered by Glencore can be recovered? --- Well, I would think the whole depends on whether our counsel can be satisfied that we have valid claims against these parties. On this basis, yes, that is the intention. By these parties, you mean BankWest and the four individuals? --- That's correct. But as you sit there, you see no real benefit in attempting to sue the three companies, do you? There is not much in that for Glencore? --- I'm not sure I agree to that. It depends on whether we can seriously expect to get further evidence to complete the picture we have. But you've given - you've indicated that your - I withdraw that. You have given some evidence about the assets held by these three companies, and the debts that it owes to its secured creditor, have you not? --- I did. And the likelihood is, isn't it, that there will be no money forthcoming from those three companies, that is correct? --- That's correct. And the purpose of your company making this application, is to see whether it has a claim that it should bring against BankWest and the four individuals? --- That's correct. And really, having lodged your proof of debts in relation to two of the companies, and knowing the financial position of all of the companies, there would be no point, would there, in suing the three companies? --- I'm not legally educated enough to say whether there would be no point. It would be no point for the intent to recover money, but if that action would allow us to get further evidence and get a better understanding of the situation, then it might be a course of action we might not take. I see. Well, would I be correct in understanding that your motivation for suing, or possibly suing the three companies, despite their financial position, is to obtain more information to see whether you have a good cause of action, or good causes of action against the bank and the four individuals; would that be fair? --- I would certainly rely in this matter on the advice of the counsel, and I can't really give you a definite answer to that.' ....................................................................................................................... 'May we take it that subject to whatever advice you may receive from your legal counsel your present reason that you wish to bring proceedings against the three companies is to obtain information that will enable you to determine whether you have good prospects of succeeding in subsequent proceedings against BankWest and the four individuals. That is correct isn't it? --- I'm not sure I understood you correctly because you referred to, may wish proceedings to the future. We are currently in a, as I understand, pre trial discovery process and at this stage we are trying to fill the gaps we have but what happens in the future I cannot really comment on as I don't know it. What I'm trying to ask you and it is not easy over the video link and the many miles is this, so far as your present intention is concerned the reason you have sought pre trial discovery against the companies is so that not that you want to sue the companies but rather to see whether you should be suing BankWest and the four other individuals? --- Well I think that's correct'. (my emphasis) I do not infer from Mr Mueller's cross-examination that if he were to be advised that, notwithstanding all present indications, funds were after all available to meet a judgment against Selwyn, he would nonetheless persist in not suing them.

Rulings on evidence 84 The evidence to which BankWest objected was set out at [58], [61] and [70] above. The ground of the objection was that the material was hearsay. Glencore submits that the evidence is relevant, and not in the nature of hearsay, in relation to the issue posed in para (a) of O 15A r 6, that is, whether there is reasonable cause to believe that Glencore has or may have the right to obtain relief in the Court from any one of the eight respondents. I accept Glencore's submission. Thus, for example, the fact that Mr Hogan told Mr Mueller that BankWest was informed about the proposed Glencore Finance Agreement about three to four weeks before it was entered into, is itself one fact relevant to the question whether there exists reasonable cause to believe that Glencore had or may have a right to obtain relief in the Court from BankWest. The information conveyed by Mr Hogan to Mr Mueller is also to be taken into account for the purposes of para (b) of O 15A r 6. 85 If the issues posed by paras (a) and (b) are borne steadily in mind, it will be found that less material is in the nature of hearsay on applications for preliminary discovery than may at first seem to be the case. 86 The evidence at [58] and [61] are also admissible against Mr Hogan as admissions and that at [70] against Mr North as an admission. 87 The passages objected to are allowed.

88 As noted earlier, Glencore contends that it has or may have the right to obtain relief in the Court from BankWest on the following three bases: (a) that BankWest was knowingly concerned in the allegedly misleading or deceptive conduct of one or more of the Selwyn companies; (b) that BankWest was a knowing recipient of trust property or was knowingly involved in a breach of trust; and (c) that BankWest induced Selwyn Operations to breach cl 2 of the Glencore Finance Agreement.

(a) Knowingly concerned in Selwyn's misleading or deceptive conduct 89 The aspect of s 75B of the TP Act (or s 79 of the Corporations Act) most favourable to Glencore's case against BankWest of accessorial liability, is the reference to a person who 'has been in any way, directly or indirectly, knowingly concerned in, or party to (relevantly) the misleading or deceptive conduct. 90 The Glencore Particulars refer (in para 5) to seven alleged representations: '(a) One was that the sole purpose of the moneys to be advanced by Glencore was for the Selwyn Group's working capital, as opposed to debt reduction. The representation was made in, among other places, telephone conversations between Glencore's Mr Müller and the Selwyn Group's Messrs Hogan and Howe (the fifth and sixth respondents) on 5 September, 2002. The representation was embodied in clause 2 of the Glencore Finance Agreement.

(b) Another was that the Selwyn Group's immediate financing requirements were much less than the whole amount available under the Glencore Finance Agreement (US$8m). This representation was made in Mr Müller's 5 September conversations with Messrs Howe and Hogan.

(c) Another was that the only event of default under the Selwyn Group's facilities with BankWest related to the reserve life of the mines. This representation was made in Mr Müller's 5 September conversation with Mr Hogan.

(d) Another was that, apart from a total of A$6.9m to be applied to the Selwyn Group's debts to BankWest on 31 December, 2002, the only sums payable to BankWest were A$2m due in March, 2003 and quarterly payments thereafter in accordance with a formula based on cash flow. This representation was made in Mr Müller's 5 September conversation with Mr Hogan.

(e) Another was that the Selwyn Group's actual throughput rates had increased from 160-170 tons per hour to 220 tph, against a budget of 250 tph. This representation was made in Mr Müller's 5 September conversation with Mr Hogan and in a revised budget model which Mr Müller received from Mr Hogan after or about 5 September, 2002.

(f) Another was as to the Selwyn Group's true financial position, in particular, the Group's ability to meet its obligations (including its obligations to BankWest) as and when they fell due. These representations were conveyed in the revised budget provided by Mr Hogan after or about 5 September.

(g) Another was that BankWest had consented to the Glencore Finance Agreement. If so, BankWest would have known that the funds drawn down under the Glencore Finance Agreement would be used for working capital: that is, to pay trade creditors and support operating shortfalls. This representation was made by letter from Mr Hogan to Glencore dated 25 September, 2002 and was received prior to Glencore's releasing any funds under the Glencore Finance Agreement. Glencore lacks sufficient information to know whether this representation was true or false at the time it was made. 91 In my opinion, however, with the exception of representation (a), there is no tangible evidence giving reasonable cause to believe that BankWest was or may have been knowingly concerned in the making of the alleged misrepresentations. Representations (a) (partly), (b), (c), (d) and (e) (partly), are particularised as arising from things said by Mr Howe or Mr Hogan. Representation (e) (partly) and representations (f) and (g) are said to arise from documents which passed from Mr Hogan to Mr Mueller. The evidence does not suggest that BankWest may have been knowingly involved in the making of misleading representations by either means. 92 Glencore submits that BankWest was put on enquiry by the willingness of Glencore, an unsecured creditor, to advance to Selwyn US$8 million, of which Selwyn was at liberty, in effect, to pay A$6.9 million immediately to its secured creditor, BankWest. However, BankWest may have thought this arrangement attributable to a strong desire by Glencore to secure for itself a three-year supply of Selwyn's copper concentrates output. 93 I think it would be mere suspicion, as distinct from 'reasonable cause', to think that Glencore has or may have the right to obtain relief from BankWest as a party involved in these alleged representations by Selwyn. 94 I turn now to representation (a) in so far as it relies on the draft of the Glencore Finance Agreement. On 25 September 2002, BankWest received from Selwyn the draft of the Glencore Finance Agreement. There is no substance in Glencore's complaint that the whole of the advance of A$8 million was drawn down in one amount, since cl 3 provided that this was to occur. But Glencore also points to cl 2 (set out at [51] above). It should be noted, however, that the purpose of the funding by Glencore was not always referred to as 'working capital'. In the memo of 14 June 2002 from Selwyn Mines to Glencore described in [31] above, Selwyn stated that the funds were to be used for 'principal debt reduction'. Notwithstanding this, there is strong evidence that at least Mr Mueller always understood that the whole of the advance would be used for working capital. 95 Clause 2 of the Glencore Finance Agreement is the high point of Glencore's argument that BankWest may be liable to Glencore as an accessory in the present respect. BankWest submits that Selwyn Operations was not undertaking in cl 2 that the A$8 million would be used only for its working capital requirements. I refrain from deciding finally what is the proper construction and effect of cl 2. The clause is not expressed as an undertaking. Perhaps it is a representation by Selwyn Operations to Glencore that Selwyn Operations intended to use the US$8 million for its working capital requirements. In fact, as at 25 September 2002, Selwyn and BankWest had agreed, as a condition of BankWest's giving its consent, that A$6.9 million was to be 'quarantined' as 'escrow monies' to remain available to retire Selwyn indebtedness to BankWest if the equity capital raising did not succeed. If an appropriate person at BankWest read cl 2 before the sum of A$6.9 million was paid into the Debt Service Reserve Account on 25 September 2002, there would be reasonable cause to believe that BankWest knew that Selwyn was misrepresenting its intention to Glencore. Perhaps no-one at BankWest did read cl 2 in the short time between BankWest's receipt of the draft on 25 September and the payments of US$8 million and A$6.9 million on the same day. There is also a question whether knowledge by BankWest of cl 2 of what was, after all, a draft, followed by the appropriation of the sum of A$6.9 million as 'escrow monies', signifies that BankWest was knowingly concerned in misleading or deceptive conduct by Selwyn. 96 However, I think there is reasonable cause to believe that Selwyn may have a right to obtain relief from BankWest in the present respect. I accept, however, BankWest's submission that preliminary discovery by BankWest should be limited to documents which record or evidence, or from which can be inferred, the state of knowledge of BankWest on or about 25 September 2002 of the letter of that date from Selwyn to Glencore, of the Glencore Finance Agreement, and of their effect. It is to be hoped that Glencore and BankWest can agree on an appropriate description of the documents to be discovered by BankWest.

(b) Knowing receipt of trust property or knowing involvement in breach of trust 97 I can be brief in dealing with the suggested claim against BankWest based on a Quistclose trust in relation to the fund of US$8 million. In my opinion, there is no evidence giving reasonable cause to believe that the monies may have been subject to a Quistclose trust. The Glencore Finance Agreement did not provide for the monies to be paid into a separate account or to be returned to Glencore if the 'purpose' of use of the funds for 'working capital requirements for Selwyn [Operations]' failed. At most, cl 2 constituted a contractual promise or gave rise to a misrepresentation, generating a liability in personam in Selwyn Operations. 98 Clause 12 of the Glencore Finance Agreement identified each 'Event of Default', the first of which was default in the performance of any term, covenant or obligation contained in that Agreement. Let it be assumed that cl 2 fell within cl 12(a) or (c). Nonetheless, the consequence of an Event of Default is only that monies become 'immediately due and payable'. Nothing in the Glencore Finance Agreement suggests a common intention that the Glencore advance of US$8 million was to be treated in such a way by the parties as to give rise to a Quistclose trust. 99 In addition, on 14 November 2002, BankWest, Glencore and Selwyn entered into the supplemental deed to the 'Offtake Agreement - Side Deed' (see [66]). By that time, Glencore knew that A$6.9 million of its advance of US$8 million had been 'deposited in a WestBank escrow account' (see [55]). By cl 2.4 of the supplemental deed, Selwyn Operations irrevocably authorised and directed Glencore to make all payments due by Glencore to it into the account entitled 'Selwyn Queensland Pty Ltd USD Proceeds Account' maintained by Selwyn Queensland with BankWest, and Glencore undertook to use its best endeavours to make any payments due to Selwyn Operations under, relevantly, the Concentrates Sale Agreement and the Glencore Finance Agreement, in accordance with that irrevocable authority and direction. This provision lends further support to BankWest's submission that the advance of US$8 million was not subject to a Quistclose trust, or, if it was, that payment of A$6.9 million of it to BankWest was not a breach of it. 100 There is no evidence that BankWest may have known that there existed a fiduciary duty on the part of Selwyn in favour of Glencore or that Selwyn was breaching such a duty, or that BankWest knowingly participated in or assisted a breach of trust or of other fiduciary obligation owed by Selwyn to Glencore.

(c) Inducing a breach of contract 101 Is there a reasonable cause to believe that Glencore may have a right to obtain relief from BankWest for inducing a breach by Selwyn Operations of the Glencore Finance Agreement? Again, the reference is to cl 2 of that Agreement. 102 What Selwyn sent to BankWest on 25 September 2002 consisted of 'copies of each of the proposed contracts'. By endorsing its agreement on Selwyn's letter, BankWest was consenting to Selwyn Mines and Selwyn Operations entering into those 'proposed' agreements. In fact, Selwyn and Glencore entered into the agreements and Glencore advanced the US$8 million on the same day. There is no evidence suggesting that BankWest knew that Selwyn had failed to inform Glencore, prior to the making of the advance, of the conditions of BankWest's consent set out in Selwyn's letter of 25 September 2002, on which BankWest's acknowledgement and agreement was endorsed. Moreover, Glencore subsequently consented to the use of the funds advanced by it by payment of them into the BankWest account in New York. 103 It may be, however, that Glencore has a right to obtain relief from BankWest in the present respect. It may be that the proper inference to draw will be that at the moment when the sum of A$6.9 million was paid out of the advance of US$8 million into the 'BankWest escrow account', BankWest knew that Glencore and Selwyn had entered into the Glencore Finance Agreement and that the payment would constitute a breach of cl 2 of it. Glencore's argument would be that BankWest's condition of consent was a continuing inducement operating on Selwyn, and that it became incumbent on BankWest to revoke either its consent or that condition of it. 104 I think that there is reasonable cause to believe that Glencore may have a right to obtain relief from BankWest for inducing a breach of contract by Selwyn. 105 Again, however, the discovery should be limited to documents relating to the imposition of the condition of consent, BankWest's knowledge of cl 2 of the Glencore Finance Agreement and the payment of the sum of US$8 million by Glencore and the transfer of A$6.9 million as between the bank accounts. Again, it is to be hoped that the parties can agree on the precise description of the documents to be discovered by BankWest.

Selwyn Mining, Selwyn Operations and Selwyn Queensland 106 In the last part of the passage from the cross‑examination of Mr Mueller set out at [83] above, Mr Mueller accepted that the purpose of seeking preliminary discovery from Selwyn was not to enable Selwyn to be sued, but rather to see whether Glencore should be suing BankWest and the four directors. Counsel for Glencore seeks to minimise the effect of this evidence, by referring to earlier statements by Mr Mueller in his cross-examination in which he sought to take a more qualified position. 107 It seems to me right to say, however, that on the evidence, Glencore has no intention of suing Selwyn for the purpose of recovery against Selwyn, unless either there is a change of circumstances according to which Selwyn is likely to come into money, or Glencore receives legal advice that it should sue Selwyn in aid of its suing Bank West or the directors or both. The most obvious change to suggest itself is that an action is brought by the liquidators against the directors for insolvent trading. However, although invited by the liquidators to fund further investigations, and, if appropriate, the launching of a proceeding against the directors, Glencore has declined that invitation. Glencore is at liberty itself to launch a proceeding against the directors under s 588M(3) of the Corporations Act. 108 Although there is reasonable cause to believe that Glencore has or may have a right to obtain relief in the Court from the Selwyn companies in respect of misleading or deceptive conduct (it is also entitled to relief from Selwyn Operations in debt under the Glencore Finance Agreement and has proved as an unsecured creditor in the liquidation of that company), I decline to order preliminary discovery against them because Glencore would be using the preliminary discovery by Selwyn, not to enable it to decide whether it has a right to obtain relief against Selwyn, but to decide whether it has a right to obtain relief from BankWest or the directors.

Messrs Howe, Hogan, North and Daneel 109 There is reasonable cause to believe that Glencore may have a right to obtain relief against Mr Howe and Mr Hogan in respect of misleading or deceptive conduct by themselves, or being knowingly concerned in misleading or deceptive conduct by Selwyn. I do not accept BankWest's submission that it is clear that Glencore does not need any further documents from Mr Howe or Mr Hogan in order to determine whether it may have a right to obtain relief from them. 110 There is not reasonable cause, however, to think that Glencore has or may have a right to obtain relief against Mr North or Mr Daneel in respect of misleading or deceptive conduct, either by themselves or by Selwyn. 111 As noted at [79], there is reasonable cause to believe, however, that Glencore may have a right to obtain relief from all four directors under s 188M(3) of the Corporations Act.

Conclusion 112 I will publish these reasons with a view to the parties agreeing on the form of order to be made for preliminary discovery as against BankWest and Messrs Howe, Hogan, North and Daneel, and the proceeding will be listed for the purpose of the making of orders. 113 Although Glencore has obtained preliminary discovery against BankWest, it is much more limited in scope than what was sought. In addition, BankWest has succeeded on its argument that there should not be discovery against Selwyn. At first blush, it may appear that this is irrelevant to the question of costs as between Glencore and BankWest, but the arguments advanced by BankWest in relation to Selwyn were relevant to the dispute between BankWest and Glencore. My present view is that there should be no order as to the costs of the proceeding, but I will give the parties an opportunity to make written submissions in that respect. I certify that the preceding one hundred and thirteen (113) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate: Dated: 16 June 2005 Counsel for the Applicant: Mr R G McHugh

Solicitor for the Applicant: Atanaskovic Hartnell

Counsel for the Fourth Respondent: Mr R G Forster SC and Mr T M Thawley

Solicitor for the Fourth Respondent: Henry Davis York

Date of Hearing: 6,7 April 2005