Gujarat NRE India Pty Ltd v Wollongong Coal Limited

DEBT - Money had and received - whether the plaintiff is entitled in debt to the return of money as money had and received - money paid by the plaintiff to the defendant without consideration and in the absence of any objective intention that the defendant would be entitled to retain the money - whether a payment made by the plaintiff to the defendant under a sub-underwriting agreement should be repaid because of a failure of consideration - whether a payment made by the plaintiff to the defendant was a loan and that the plaintiff is entitled to repayment of the balance outstanding

GUARANTEE AND INDEMNITY - Contract of guarantee - Set-off EQUITY - General principles and maxims - Set-off - whether the defendant is entitled to set-off debts it owes to the plaintiff - the defendant is not entitled to set-off debts it owes to the plaintiff

RESTITUTION - Nature of restitutionary liability - Unjust enrichment Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71 Israel v Foreshore Properties Pty Ltd (1980) 54 ALJR 421; 30 ALR 631 Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 Re A & K Holdings Pty Ltd [1964] VR 257 Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 Victoria v Tatts Group Ltd [2016] HCA 5; (2016) 328 ALR 564 Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 343 ALR 58 Ruthol Pty Ltd v Tricon (Australia) Pty Ltd [2005] NSWCA 443; (2005) 12 BPR 23,923 Hong Kong Bank of Australia Ltd v Larobi Pty Ltd (1991) 23 NSWLR 593 Felton v Mulligan (1971) 124 CLR 367; [1971] HCA 39 Cochrane v Cochrane (1985) 3 NSWLR 403 Bofinger v Kingsway Group Limited (2009) 239 CLR 269; [2009] HCA 44 Barber v De Prima [2018] NSWSC 601 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 Erratt v Grills [2015] NSWSC 594; (2015) 18 BPR 35,345 Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 Burger King Corporation v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558; [2001] NSWCA 187 Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184; (2013) 29 BCL 329 Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32 Paciocco v Australian and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50 Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170; [1992] HCA 66 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Payne v Parker [1976] 1 NSWLR 191 Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560; [2014] HCA 14 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; [1992] HCA 48 Hawes v Dean [2014] NSWCA 380 Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 Texts Cited: Cheshire & Fifoot, Law of Contract 11th Australian Edition O'Donovan and Phillips, The Modern Contract of Guarantee (3rd English edition) Category: Principal judgment Parties: Gujarat NRE India Pty Ltd (plaintiff) Wollongong Coal Limited (defendant) Representation: Counsel: D Pritchard SC/A Macauley (plaintiff) DL Williams SC/CD Wood/ND Riordan (defendant)

Solicitors: Gillard Consulting Lawyers (plaintiff) Thomson Geer (defendant) File Number(s): 2014/211688

Judgment

1. The plaintiff in these proceedings is Gujarat NRE India Pty Ltd (GNI). GNI is an Australian company.
2. The defendant is Wollongong Coal Limited, which was formerly known as Gujarat NRE Coking Coal Ltd, and which at all material times has been listed on the Australian Stock Exchange. As have the parties, I will refer to this company as "WLC", to conform to the manner in which it is identified by the ASX.
3. GNI is one of a number of companies that comprise the Gujarat Group, which are companies incorporated in Australia and India involved in the production of metallurgical coal.
4. The parent company of the group is Gujarat NRE Coke Ltd (Gujarat India), which at material times was listed on both the Bombay Stock Exchange and the National Stock Exchange of India.
5. In the period between 7 April 2017 and 11 January 2018, Gujarat India was in external administration pursuant to the provisions of the Insolvency and Bankruptcy Code 2016 (India) (the Code), called a "corporate insolvency resolution process". The objective of the process was to put into effect a resolution plan that would preserve the company's corporate existence, but the plan was not approved by sufficient creditors. Gujarat India was ordered to be wound up pursuant to s 33(1) of the Code on 11 January 2018.
6. As at March 2013, which is the time primarily relevant to the commencement of the events the subject of the present dispute, Gujarat India owned 100% of the shares in an Australian company called Gujarat NRE Ltd (GNL), which in turn owned 100% of the shares in GNI.
7. GNL also owned 100% of the shares in an Australian company called Wonga Coal Pty Ltd (Wonga).
8. Companies in the Gujarat Group owned shares in WLC as follows: Gujarat India (6.26%), GNL (25.21%), GNI (13.39%) and Wonga (17.35%), giving a total of 62.21%.
9. In the period that followed up to about November 2013, the Gujarat Group lost majority control over WLC. By 18 November 2013, companies in the Jindal Group, being another group based in India, said to be involved in steel manufacturing and power generation, held 53.63% of the shares in WLC, and the Gujarat Group held 43.31%. Subsequently, the Gujarat Group's ownership of shares in WLC has diminished to less than 2%.
10. Mr Arun Kumar Jagatramka has at all material times been the managing director and chairman of Gujarat India. He has also been the managing director of GNI, and also until 26 October 2013 the chairman and chief executive officer of WLC. Mr Jagatramka was then replaced as an office holder of WLC by Mr Jasbir Singh, who was a representative of the Jindal Group. According to the ASIC record, Mr Jagatramka finally ceased to be a director of WLC on 14 February 2014.
11. The evidence did not deal in detail with the nature of WLC's business, but it has at relevant times operated a number of coal mines in the southern coalfields of New South Wales.
12. At all material times the chief commercial officer and company secretary of WLC has been Mr Sanjay Sharma.

Claims made by GNI

1. The claims made by GNI at the hearing are as formulated in its third further amended statement of claim filed on 13 September 2017 (SOC).
2. GNI makes two separate claims against WLC. As pleaded, GNI claims as a guarantor and third-party chargee to be indemnified by WLC in the amount of $12,000,000 in respect of the liability of WLC to a company called UIL (Singapore) Pte Ltd (UIL). GNI granted a charge in favour of UIL over 150,000,000 shares owned by it in WLC. On 15 May 2014, UIL and WLC entered into a settlement deed. One consequence of the settlement was that UIL sold the shares charged to it by GNI in part repayment of the outstanding debt owed to it by WLC. WLC did not use whatever financial resources may have been available to it to repay that part of the debt itself.
3. GNI has formulated a number of alternative grounds to support its claim for an indemnity from WLC, or alternatively an award of damages in the same amount as that for which it claims indemnity. Those different grounds will best be understood after the essential facts relevant to the dispute have been set out.
4. The second claim made by GNI concerns a payment made by GNI to WLC on 24 June 2013 of $7,962,974.88. Of that amount, $2,088,126.00 has been repaid, leaving a balance of $6,565,398.06. GNI claims an entitlement to be paid that amount by WLC, on the basis that the original payment was made under a sub-underwriting agreement, in return for the issue of shares in WLC to GNI, for which the consideration has totally failed, because the rights issue to which the sub-underwriting agreement related was cancelled and no shares were issued to GNI. Alternatively, GNI claims that the payment was a loan to WLC and GNI is now entitled to the repayment of the balance outstanding.

WLC's financial circumstances

1. The financial circumstances of WLC, over the period during which the events that have given rise to GNI's claims have occurred, are generally relevant to a background understanding of the conduct of the parties, and in some cases important to the determination of grounds relied upon by GNI to support its claims.
2. The evidence shows that, over the whole of the period, WLC was in a parlous, if not desperate, financial position, and there is every appearance that it was not able to pay all of its debts as and when they fell due from its own resources, because it frequently did not do so. It is not strictly necessary for the Court to make a finding about whether or not WLC was insolvent, but if, to an experienced lawyer, the fact that a company is constantly engaged in managing and farming its creditors, who are demanding repayment of overdue debts and making threats to institute recovery action, is highly suggestive of insolvency, the present case gives every appearance that WLC was insolvent.
3. The reasons for WLC's financial difficulties were not explored in any detail in the evidence. It is not necessary for the Court to make any definitive findings on that issue. There are suggestions that there were periods when one or both of WLC's coal mines were not operating, or operating effectively. There may have been marketing difficulties with the coal mined by WLC. WLC shipped coal to Gujarat India or other companies in the Gujarat Group, and was not paid promptly. As will be seen, WLC ultimately obtained a judgment from this Court in the sum of US$59,718,101.53 in respect of this accumulated debt. WLC was unsuccessful in a substantial rights issue that it made to its shareholders.
4. The evidence of WLC's dealings with its creditors focused on the period 22 to 28 March 2013. The reason, as I understand it, is that the Coal Purchase Agreement (CPA), which was the original source of WLC's debt to UIL, was entered into on 25 March 2013. That period represented the start of the events that have been the subject of the present proceedings. As I understand it, the evidence of WLC's dealings with its creditors was not exhaustive, and the evidence concerning the period 22 to 28 March 2013 is likely to be reasonably representative of subsequent periods. The evidence also included isolated events that reflected WLC's continuing financial difficulties.
5. On 23 October 2013, an originating process was filed in this Court seeking an order for the winding up of WLC. WLC defended the proceedings, which included at one stage UIL becoming substituted as the plaintiff in the proceedings. That led to the making of a compromise between UIL and WLC that will be seen to be relevant to one of the claims now made by GNI.
6. Ultimately, WLC survived. It does not go too far to describe that result as something of a marvel. It seems, as a general matter, that while the Gujarat Group had majority control of WLC, it was not capable of injecting into the company sufficient capital to allow it to escape from its financial woes. However, in conjunction with the Jindal Group wresting control of WLC from the Gujarat Group, various capital raisings and borrowings occurred which the Court can infer ultimately financed WLC's survival. As will be seen, the availability to WLC of that additional capital is also material to the resolution of the claims made by GNI.
7. It is not really necessary for the Court to analyse and make findings concerning the intensity of WLC's financial difficulties over the period. The issue is, however, relevant, because in my view the efforts made by Mr Jagatramka and Mr Sharma, and others on behalf of WLC, to manage WLC's creditors and to raise funds, must for much of the period have been intense and extremely distracting. That matter will be seen to be relevant when I come to deal with a claim made by WLC concerning the honesty of certain conduct on the part of Mr Jagatramka that is relevant to GNI's second claim.
8. It is not easy to distil from the evidence concerning WLC's dealings with its creditors in the period from 22 to 28 March 2013 the circumstances and effect of each dealing, because it is necessary to interpret a number of incomplete and unexplained documents, including chains of emails. I will set out the following in outline, principally to give a flavour of the events that were occurring. The outline is not complete. I will identify page references from the Court Book, to allow a more elaborate understanding of the events if that becomes necessary: 1. 21 March 2013 (409). WLC received a demand for an overdue $38,955.45 on behalf of a creditor, to be paid on 28 March 2013. 2. 25 and 26 March 2013 (412-414). WLC's debt to Komatsu had not been paid for September, October or November 2012. An internal email to Mr Sharma stated: "we need to sort Komatsu - $13.5 approx. we will not be able to load/unload any supplies without Forklift". 3. 26 March 2013 (416). Internal emails show that WLC could not obtain electrical consumables ordered in December 2012, because it was on "stop credit". The following comment was made by a WLC purchase manager: "We have run out of all options for electrical consumables". 4. 26 March 2013 (419). Internal emails indicate that WLC had to pay outstanding debts of $21,542.40 in order "to get more particulate filters". 5. 27 March 2013 (420). A creditor who claimed to be owed $175,000 stated in an email that it expected confirmation of at least half payment of the $175,000 due by the next day. 6. 25 March 2013 (425). WLC received an email on behalf of a lender concerning payment of interest and an instalment due on 18 December 2012 that had not been paid. It appears to state that the "irregularity" was US$18,120,000. 7. 22 March 2013 (426). A creditor stated in an email that legal action would be put on hold on the basis that full payment of $24,181.44 was made by 27 March 2013. 8. 27 March 2018 (429). Mr Sharma offered to a creditor "a payment of $100,000 tomorrow as a token money to reiterate our intention to clear your outstanding". 9. 20 March 2013 (453). Mr Sharma offered to a creditor payment of $200,000-$400,000 by 28 March 2013, and the remaining balance by 19 April 2013. 10. 26 March 2013 (454). A creditor threatened to seek judgment for $250,000 against WLC. 11. 26 March 2013 (455). An internal email refers to Dunn & Bradstreet seeking to recover $89,680.80 for a client. Payment of $10,000 the same day needed to be confirmed "else they will be going legal". 12. 28 March 2013 (457). An email to a creditor offered $25,000 on 28 March 2013, $50,000 on 15 April 2013 and $70,760.54 on 30 April 2013. 13. 28 March 2013 (462). A creditor observed by email that it understood that an overdue balance of $28,667.20 and a further amount of $112,512.45 due on 30 March 2013 would be paid by mid-April. 14. 28 March 2013 (465). Internal emails show that WLC was contemplating requiring staff to take annual or long service leave. 15. 28 March 2013 (468). A creditor stated: "the suggested payment of $100k as a token is not satisfactory given the $3.6m that has been overdue for several months".
9. Some only of the subsequent events that demonstrate WLC's continuing financial difficulties include: 1. On 21 May 2013, the ATO offered to WLC to accept a late payment of tax of $4,428,050.84 on 30 June 2013 (430). 2. On 3 June 2013, WLC assured Environmental Resources Management Australia that it would receive payment of outstanding invoices to the value of $201,119.32 before 21 June 2013, in return for which ERM would withdraw its current legal action (410). 3. On 21 June 2013, a creditor required WLC to pay it interest of $105,629.54 on an overdue debt (912). 4. On 25 June 2013, WLC's auditor notified ASIC: "… We are aware that [WLC] and its controlled entities… have not paid invoices within normal trading terms and have received various statutory demands from creditors, including the ATO. We therefore have reasonable grounds to suspect that the Company and Group could possibly be trading insolvently, and therefore could be in contravention of Section 588G of the Corporations Act" (917). 5. On 5 September 2013, a lawyer for WLC wrote to the ATO seeking to commence negotiations concerning a statutory demand dated 12 August 2013 requiring payment of $4,113,014.66 (1034). 6. A legal notices spreadsheet as at 17 September 2013 in respect of claims made against both WLC and Wonga (Tab 63) listed a substantial number of claims, and explained the status of those claims. The list included (1069) a reference to 8 statutory demands issued against WLC, in the respective amounts of $3,384,089.76, $941,100.94, $311,532.27, $4,113,014.66, $3,803,198.79, $124,943.37, $2,131,891.87 and $68,887.35. The first three of those amounts were said to be in dispute. The statutory demand for $311,532.27 was the one upon which the winding up claim was based. 7. On 2 October 2013, WLC received 14 garnishee notices issued by the ATO (1120-1179). 8. Tab 73 of the Court Book contains statutory demands received by WLC between October 2013 and October 2015. Between 10 October 2013 and 11 November 2013, WLC received five statutory demands for a total of $3,016,974.08 plus US$548,420.93. WLC received a further statutory demand on 29 April 2014 for $600,000.98.

Coal Purchase Agreement

1. GNI's first claim arises out of the fact that WLC and UIL entered into an agreement called the "Coal Purchase Agreement" on 25 March 2013. It will be clearly apparent from the following analysis of the terms of this agreement that it was entered into by WLC to raise immediate cash to keep its many creditors at bay.
2. Under cl 1 of the CPA, WLC agreed to sell and UIL agreed to purchase "225,000 metric tons (+/-10%) of [WLC] A unwashed coking coal subject to shipping tolerance".
3. Under cl 2.2, delivery of the coal was to be made during the period from the date of the agreement to 30 June 2013.
4. Clause 10 provided for payment terms as follows: The Buyer to remit US $20.00 million as advance payment latest by 27th March, 2013 to the Seller's Bank account at Sydney. The Buyer will submit to Seller a copy of bank advice for having effected the transfer of funds to the designated account of Seller towards advance payment by 27th March, 2013. The advance payment shall be proportionately adjusted from the sales invoice(s) commencing from the first shipment against submission of the following documents…
5. Clause 10 had the effect of requiring UIL to pay to WLC US$20 million as an advance payment for all of the coal to be delivered.
6. Security was to be provided to UIL for the advance payment and the other obligations of WLC under the agreement, as required by clause 13, which was in the following terms: The Seller agrees to provide charge, by way of pledge, over 150,000,000 fully paid ordinary share (sic) in the capital of the Seller (Security) held by [GNI] (Grantor) for the due payment by the Ultimate Buyer for all the cargo shipped equivalent to an amount of USD 20 million based on the shipment made from time to time. The same would be formalised by way of Specific Security Deed to be granted by the Grantor on or about the date of this agreement.
7. Aspects of this provision may be explained by the fact that UIL was a trader in coal and other minerals. It did not acquire coal for its own use. The term "Ultimate Buyer" is not defined in the CPA. It is referred to in clause 2 in the following terms: Buyer and Seller intend to cooperate in establishing dates for actual loading in maximum 6 shipments on mutually agreed laycans to an Ultimate Buyer to be nominated by the Seller".
8. This term contemplated that WLC, the Seller, rather than UIL, would identify and nominate the ultimate buyer for each shipment of coal.
9. The way that the security required by clause 13 was intended to work was that UIL would receive payment for shipments of coal to Ultimate Buyers from those buyers, and in that manner the payment made to WLC in accordance with clause 10 would be repaid. The pledge over the 150 million ordinary shares in WLC was to be limited to securing payment by Ultimate Buyers to UIL of an amount equivalent to USD 20 million.
10. Clause 14 provided for damages for non-performance in the following terms: If the Seller fails to physically deliver the cargo by way of actual shipment of the same to the Ultimate Buyer under this Agreement for any reason whatsoever including Force Majeure, OR the due payment by the Ultimate Buyer ("Event of Default") the Seller shall return to the Buyer within 15 days upon expiry of the Delivery Period, the entire amount of the advance payment or the unadjusted amount of advance payment, as the case may be. In addition he shall at the same time pay and transfer to Buyer's bank account, liquidated damages in the sum calculated at 3 months US$ LIBOR plus 6% pa. calculated for the period from the date of advance payment till the date of refund by the Seller to the Buyer's designated bank account, which the Seller agrees and accepts is a genuine estimate of the Buyer's reasonably anticipated losses in case the Seller fails to perform this agreement. In case the Seller is unable to return to the Buyer within 15 days upon expiry of the Delivery Period, the Buyer shall invoke the Security provided under clause 13 above and from the sale proceeds thereof adjust the entire amount of advance payment or the unadjusted amount of advance payment, (Refund Amount). Further any amount of the Refund Amount remaining unadjusted from the sale proceeds of the Security, the same will be adjusted by issuing such number of fully paid ordinary share in the capital of the Seller, to a nominee of the Buyer, each at the Issue Price as defined below such that the value of shares so issued is equal to the unadjusted Refund Amount. Issue Price: Is defined as the 30 days volume weighted average price (VWAP) of the shares on the ASX as on the date of expiry of the Delivery Period.
11. Therefore, if an Event of Default occurred, it was contemplated that the shares the subject of the Security would be sold and the proceeds deducted from the adjusted amount of the advance payment. In the case of a shortfall, WLC would be required to issue additional shares in WLC to UIL, with an issue price equal in total to the amount of the shortfall.
12. By an addendum to the CPA made on 15 August 2013, the Delivery Period was extended up to 31 August 2013.

Specific Security Deed

1. In compliance with the requirements of clause 13 of the CPA, on 26 March 2013 GNI and UIL entered into an agreement called the "Specific Security Deed (Shares)" (Security Deed).
2. Paragraph A of the Background states: "The Grantor enters into this deed in connection with the Coal Purchase Agreement".
3. By par B of the Background, it is recited that: "The Grantor has agreed to grant a Security Interest over the Secured Property to secure the payment of the Secured Money".
4. The following definitions in clause 1.1 of the Security Deed are material: Event of Default has the same meaning as in the Coal Purchase Agreement. PPS Act means the Personal Property Securities Act 2009 (Cth). PPSA Security Interest means a "security interest" as defined in the PPS Act. Present Security means each of the shares held by the Grantor in [WLC] comprising not less than 150,000,000 fully (sic) ordinary shares in the [WLC]. Secured Money means all present and future debts and monetary liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity) of each obligor to the Secured Party for any reason under or in connection with a Transaction Document and irrespective of whether those documents or liabilities are…
5. Although the term "each Obligor" is used in the definition of Secured Money, the term is not defined in the Security Deed.
6. Although "Secured Money" is defined by reference to obligations "under or in connection with a Transaction Document", there is no definition of the term "Transaction Document". The only candidates for inclusion within that term by this time were the CPA and the Security Deed itself.
7. The security is created by clause 2.1, which provided: The Grantor grants a PPSA Security Interest over the Secured Property to the Secured Party as security for the due and punctual payment of all of the Secured Money. The Grantor does this as legal and beneficial owner of the Secured Property.
8. Clause 4.1 contains a general undertaking by GNI in the following terms: "The Grantor must promptly pay the Secured Money in accordance with this Document and must ensure that no Event of Default occurs".
9. Thus, GNI covenanted to pay the amount owed by WLC to UIL personally and to ensure that no Event of Default occurred.
10. As the property the subject of the security was shares in a publicly listed company, the Security Deed contained various provisions that were designed to enable UIL to control the receipt and exercise of rights and benefits from GNI's ownership of the shares in WLC.
11. Clause 4.5 provides for the event that UIL became holder of the shares in WLC in the following terms: At any time after an Event of Default occurs and while it subsists, the Secured Party may procure itself or its nominee to be registered as the holder of any or all of the Secured Property. To facilitate this, the Grantor irrevocably and unconditionally authorises the Secured Party to [do what was necessary to effect the transfer].
12. Clause 5.1 provides that if an Event of Default occurred, the Security was "immediately enforceable without further notice to any Party", and "the Secured Money is immediately due and payable". By cl 5.2, after the Security has become enforceable "the Secured Party may in its absolute discretion enforce all or any part of this deed in any manner it sees fit". Clause 7.2 empowered UIL to exercise the powers of the receiver itself.
13. Clause 7.6 excludes each of the provisions of the PPS Act referred to in ss 115(1) and 115(7) of the PPS Act.
14. Clause 13.6 is entitled "No competition" and provides: (a) Until the Secured Money has been fully paid, the Grantor will not, for any reason: (i) be subrogated to any rights, security or moneys held, received or receivable by the Secured Party (or any trustee or agent on its behalf); (ii) be entitled to any right of contribution or indemnity in respect of any payment made or moneys received on account of the Grantor's liability under this Clause 13.6; (iii) claim, rank, prove or vote as a creditor of any Obligor or its estate in competition with the Secured Party (or any trustee or agent on its behalf); (iv) receive, claim or have the benefit of any payment, distribution or security from or on account of, or exercise any right of set-off as against, any Obligor; or (v) raise any defence or counterclaim in reduction of its obligation under this document. (b) The Grantor must hold in trust for and immediately pay or transfer to the Secured Party any payment or distribution or benefit of security received by it contrary to this Clause 13.6.
15. It is relevant to note that this clause has the effect of postponing GNI's right to act in the manner described in the sub-paragraphs of par (a) until the Secured Money has been fully paid to UIL. Provisions in guarantees containing restrictions of the nature of those contained in cl 13.6 were described by Ward JA (as her Honour then was) in O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71 at [26] as "suspension" and "preservation" or "pay now, litigate later" clauses.
16. If cl 13.6 were the only impediment to GNI seeking indemnity from WLC in respect of the value of the shares that were charged to UIL and ultimately sold in part repayment of WLC's debt, it would not prevent GNI from claiming indemnity because, as the whole of UIL's claim had been fully paid (by reason of the accord and satisfaction constituted by the settlement) the restriction on GNI claiming the indemnity will have lapsed. (That is the reason why GNI has put a submission that the suspension provision in cl 13.6 continues to apply separately to any right of indemnity that arises in respect of GNI's obligations under the Security Deed).

CHESS Tripartite Deed

1. Apparently because the subject of the Security Deed was shares in a publicly listed company, GNI, UIL and Argonaut Securities Pty Ltd (Argonaut) entered into a deed on 26 March 2013 called the "CHESS Tripartite Deed" (Tripartite Deed). The deed contains relatively technical provisions by which, in simple terms, Argonaut acted as stakeholder in respect of GNI's CHESS Holding concerning its 150 million shares in WLC. In effect, Argonaut warranted to UIL that it had been appointed by GNI "as Controlling Participant in respect of the CHESS Holding on the terms of the Sponsorship Agreement" (cl 3.1(a)(i)). The Sponsorship Agreement was not in evidence, but it apparently was required to comply with the "Settlement Rules" which was defined to mean "the ASX Settlement Operating Rules in respect of the settlement facility provided by ASX Settlement".

Demand by UIL

1. WLC was unable to deliver to UIL any of the coal required to be delivered under the CPA, and by email communications on 16 and 17 July 2013, apparently between representatives of GNI and UIL, UIL demanded that the contracted coal be delivered or that the money be refunded within 24 hours. Mr Jagatramka responded to UIL in the following terms: I confirm our phone discyssions just now (1020 am) india time that we shall refund uil singapore full amount if 20m within 31 july 2013. You have accepted this and promise not to take any action and in particular not to transfer 150 m shares in any manner…

Override Deed

1. GNI, WLC, UIL and Argonaut entered into a deed called the "Override Deed" on 25 July 2013.
2. It is important to note that there were four separate parties to the Override Deed, although, as will be seen, the deed varied and affirmed the earlier agreements to which some only of the parties to the Override Deed were parties.
3. The reason this is important is that the question at the heart of this aspect of the dispute is whether WLC is entitled to enforce one of the terms of the Override Deed against GNI, in circumstances where the clause is expressed in general terms, without identifying which of the parties to the Override Deed is entitled to enforce it. The question that arises is whether every party to a deed is entitled to enforce every term in it that may benefit that party, simply because of the privity that arises from the fact of being a party.
4. The Background in the Override Deed recites the essential matters concerning the CPA, the Security Deed and the Tripartite Deed, and in particular recited: A. On 25 March 2013, [WLC] and UIL entered into a coal purchase agreement (CPA). B. [WLC's] obligations under the CPA were secured by [GNI] granting a specific security deed dated 26 March 2013 (Original Security Deed)… The CPA is a Transaction Document and [WLC] and [GNI] are Obligors for the purposes of the Original Security Deed. C. The Original Security Deed was perfected by UIL taking control of the Security Shares through entering into a tripartite deed between [GNI], UIL and Argonaut dated 26 March 2013 (Tripartite Deed). D. The Tripartite Deed restricts the exercise of rights by [GNI] and Argonaut under a CHESS sponsorship agreement between [GNI] and Argonaut… E. Argonaut has entered into a clearing and settlement agreement with Pershing Securities Australia Pty Ltd… F. On 27 March 2013 UIL advanced [WLC] US$20 million as advance payment of its obligations under the CPA (Advance Payment). G. As at the date of this agreement, [WLC] has not shipped any Coal to UIL as required in accordance with the CPA. H. On 16 July 2013, UIL notified Argonaut that an event of default under clause 14 of the CPA had occurred and had requested the transfer of the Security Shares to its own account (Tripartite Notice). I. On the terms set out in this deed, UIL has agreed to withdraw the Tripartite Notice and [WLC] has agreed not to sell or deliver any Coal to UIL under the CPA on the basis that UIL is paid the Repayment Instalment on or prior to 3pm on the relevant Repayment Date, which the Securities Shares will be transferred to UIL in accordance with the Existing Security Deed.
5. As appears from Recital I, at the centre of the commercial arrangement intended to be effected by the Override Deed was the withdrawal of the Tripartite Notice and the cancellation of the agreement by WLC to sell coal to UIL under the CPA. That was to occur on the basis of the payment of the Repayment Instalment by specified times and the transfer to UIL of the Security Shares. This was all to be: "On the terms set out in this deed…"
6. Clause 2.1 provides for Repayment Dates of 31 July 2013 and 15 August 2013, on which dates Repayment Instalments of $4,500,000 were to be made. Clause 1.1 defines the Final Repayment Date as meaning 31 August 2013, and on that day, in effect, the balance due was required to be repaid.
7. Clause 1.1 defines "Obligors" as meaning WLC and GNI. This is consistent with the fact that both of those companies covenanted to pay the amount owed to UIL under the CPA and the Security Deed respectively.
8. Clause 2.1(c) releases WLC and UIL from the obligation to sell and buy coal created by the CPA. However, cl 2.2 contemplates that WLC may nonetheless by separate agreement with UIL perform its obligations to make payments under the Override Deed by delivering coal. As consideration for the release of the obligations in the CPA to buy and sell coal, WLC promised to pay the Repayment Amount by paying the Repayment Instalment on each Repayment Date as set out in the table. Effectively, the principal commercial object of the CPA was extinguished in return for WLC paying the Repayment Amount.
9. In the various components of cl 2, which is headed "CPA", the parties to the Override Deed attended to the issue of which parties were making covenants, and which parties would be bound. Clause 2.1 provides: "[WLC] and UIL agree that for the purposes of the CPA and all other purposes…" Clause 2.3 contains an acknowledgement by UIL, GNI and WLC as to the amount of the Repayment Amount on 23 July 2013. Clause 2.4 contains an agreement by "the parties" "for the purposes of the CPA and all other purposes" that any failure by WLC to pay any Repayment Instalment will be an Event of Default under the CPA, the Existing Security Deed and the Tripartite Deed. The reference to "the parties" is sensible because the agreement relates to all of the prior agreements to which several of the parties to the Override Deed were parties.
10. Thus, to reflect the fact that the Override Deed had four parties, but varied earlier agreements to which some only of the parties were party, to some degree the Override Deed explicitly identified the parties that were to be affected by particular terms. This circumstance will be relevant to the consideration of whether, on its proper construction, cl 5.3 of the Override Deed gives WLC standing to insist that GNI has waived its entitlement to be indemnified by WLC.
11. Clause 3.1 of the Override Deed makes a number of amendments to the Security Deed. It commences by stating: "The parties agree that for the purposes of the Existing Security Deed and all other purposes". Although all of the parties made this agreement, to the extent that the sub-clause made amendments to the Security Deed, it would remain the case that only the parties to that deed would be bound by it. Nothing in the Override Deed gave WLC or Argonaut any standing to enforce the Security Deed
12. Clause 3.1(a) amends cl 1.1 of the Security Deed by inserting a definition of "Obligor" as meaning WLC and GNI.
13. Clause 3.1(a) also has the effect of inserting into the Security Deed a definition of "Transaction Document", which as has been observed above, was omitted from that deed. The definition inserted is: "Transaction Document" means: (a) this deed; (b) the tripartite deed…; (c) the Override Deed; (d) any other document [GNI] and [UIL] agree is to be a Transaction Document.
14. The CPA is not included in the definition of Transaction Document, presumably because it had effectively been extinguished. The only document included in the definition to which WLC was a party is the Override Deed itself.
15. The Override Deed does not contain a separate definition of "Secured Moneys". Instead, cl 3.1(b) provides: "The Secured Moneys include the Repayment Amount".
16. It is implicit in the making of amendments to the Security Deed that, after the making of the Override Deed, the Security Deed continued to be in force as amended.
17. This is a significant result, as it means that not only did the charge created by the Security Deed continue in effect, but so did the 'suspension provision' in cl 13.6.
18. The effect of the Override Deed, in retrospectively inserting a definition of "Transaction Document" into the Security Deed, was that, whatever the effect of the definition of "Secured Money" may originally have been (perhaps necessarily being limited to obligations of WLC arising under the CPA), the effect changed in that the definition in practical terms extended only to all obligations of WLC arising under the Override Deed. That is because the Secured Money now meant, with respect to WLC's liability to UIL, "all present and future debts and monetary liabilities" of WLC "under or in connection with" the Override Deed (being the only Transaction Document to which WLC was a party).
19. Consequently, while cl 13.6 of the Security Deed continued in effect, the Secured Money to which it now applied consisted of WLC's debts and liabilities arising under the Override Deed.
20. Under cl 4.1, UIL withdrew the Tripartite Notice, but reserved the right to give a further notice under the Tripartite Deed.
21. As was the case for the Security Deed, cl 4.2 provided: "The parties agree that for the purposes of the Tripartite Deed and all other purposes", certain listed amendments to the Tripartite Deed were made. Clause 4.2(i) contained the following provision: Each of Argonaut and [GNI] agree that to the extent within its control it will not take any action or terminate or waive any rights or obligations under the Sponsorship Agreement, the Tripartite Deed or the Settlement Agreement (insofar as it relates to the Security Shares) without the prior written consent of UIL.
22. The only significance of this term for present purposes is that it is a specific agreement by Argonaut and GNI that confines the exercise of rights available to them under the identified agreements.
23. Otherwise, the amended Tripartite Deed remained in effect, and the only parties who could enforce it were the parties to that deed.
24. Clause 5 of the Override Deed provides: 5. GUARANTEE 5.1 Guarantee and Indemnity [GNI] unconditionally and irrevocably: (a) guarantees to UIL the payment when due of all amounts payable by [WLC] under or pursuant to this deed and the other Transaction Document; (b) undertakes to ensure that [WLC] will perform when due all its obligations under or pursuant to this deed and the other Transaction Document; (c) agrees that if and each time [WLC] fails to make any payment when it is due under or pursuant to this deed or any other Transaction Document, [GNI] must on demand (without requiring UIL to first to take steps against [WLC] or any other person) pay that amount to UIL as if it were the principal obligor in respect of that amount; and (d) agrees as principal debtor and primary obligor to indemnify UIL against, and to pay to UIL on demand an amount equal to, all Losses… directly or indirectly incurred or suffered by UIL arising out of or in connection with any non-payment or default of any kind by [WLC] under or pursuant to this deed or any other Transaction Document. 5.2 Obligations not affected by certain matters The obligations of [GNI] under this deed are not affected by any matter or thing which but for this deed might operate to affect or prejudice those obligations, including… 5.3 Waiver of rights [GNI] irrevocably waives and must not exercise any right of indemnity or subrogation which it otherwise might be entitled to claim and enforce against or in respect of [WLC]. 5.4 [WLC's] actions to bind [GNI] Any agreement, waiver, consent or release given by [WLC] binds [GNI] including under the terms of this deed.
25. Clause 5.1(a) is the primary aspect of clause 5, in so far as it creates a general guarantee by GNI in favour of UIL in respect of all amounts payable by WLC "under or pursuant to this deed and the other Transaction Document". It is clearly provided that this promise made by GNI is made solely to UIL, through the use of the words: "[GNI] unconditionally and revocably guarantees to UIL…" In the subsequent paragraphs of cl 5.1, GNI "undertakes" or "agrees", but following cl 5.1(a) as they do, it is implicit that these undertakings and agreements are to UIL, and not any other party to the Override Deed.
26. Clause 5.2 stipulates matters of a conventional nature that might otherwise affect or prejudice GNI's obligations under the Override Deed.
27. Clause 5.3 is the crucial provision for the purposes of this aspect of the case. WLC raises a defence that GNI is disentitled by the provision from seeking indemnity from it for the value of the shares in WLC that were charged to UIL under the Security Deed and, as will be seen, ultimately sold by UIL in reduction of WLC's debt arising under the Override Deed. WLC says that GNI has waived and undertaken not to exercise any right of indemnity against it.
28. WLC's defence must succeed if cl 5.3 is given its literal meaning, and WLC is entitled to enforce the term simply by reason of its being a party to the Override Deed.
29. Clause 5.3 differs from the effect of cl 13.6 of the Security Deed (which, as is observed above, continued to operate along with the balance of the amended Security Deed) in that cl 5.3 is not limited to suspending GNI's entitlement to exercise the rights referred to until UIL has been paid in full. The clause is not drafted as a suspension of rights, but is literally a permanent prohibition on their exercise, even after UIL has been repaid in full.
30. Clause 5.3 takes the form of a permanent and irrevocable waiver and prohibition against the exercise of any right of indemnity or subrogation which GNI might otherwise have been entitled to. It does not otherwise purport to extinguish such rights. It does not create them and if given its literal meaning applies to any that might happen to arise.
31. Clause 6.1(a) provides in relation to the transfer of the 150 million shares in WLC that were the subject of the Security Deed: The parties agree that for the purposes of the Tripartite Agreement, the Existing Security Deed and all other purposes if [WLC] fails to pay to UIL (or procure the payment to UIL of) any Repayment Instalment as UIL directs by 3pm on the applicable Repayment Date Argonaut will transfer the Security Shares held on the Holder Identification Number 0062441437 to the UIL trading account set up with Argonaut (with account number G1098846) on the immediately following Business Day…
32. It will be convenient to collect the various ways that the Override Deed deals with the rights and obligations of the four parties, given the significance of this issue to the proper construction of cl 5.3. The Override Deed deals with many subjects and three prior agreements, which appears to be reflected in the choice of the word "Override" as part of the name of the deed. Relevantly, in the Override Deed: 1. Clause 2 is an agreement between WLC and UIL concerning the effect of the CPA, although cl 2.3(b) contains an acknowledgement by UIL, GNI and WLC, and cl 2.4 is an agreement by all of the parties concerning any failure of WLC to pay a Repayment Instalment. 2. Clause 3 is an agreement between all of the parties as to amendments to the Security Deed, but the amended deed will only bind GNI and UIL, as the parties to it. 3. Clause 4 is primarily an agreement between all of the parties as to amendments to the Tripartite Deed, but the amended deed will only bind GNI, Argonaut and UIL, as the parties to it. 4. Clause 5 commences in cl 5.1(a) as being a guarantee by GNI in favour of UIL. The balance of the provisions in cl 5.1 and 5.2 appear to be for the benefit of UIL, although they are silent in specific terms as to the parties bound and benefited. Clause 5.3 is silent as well on that issue. 5. Clause 6 is an agreement between all of the parties "for the purposes of the Tripartite Agreement, the Existing Security Deed and all other purposes", to the effect that if WLC fails to pay any Repayment Instalment, Argonaut will transfer the Security Shares to the UIL trading account. Clause 6.2 contains a release, discharge and indemnity by WLC, GNI and UIL in favour of Argonaut. 6. Clause 7 deals with the manner of payments, and is silent as to the parties bound and benefited, although cl 7.3 requires payments made by WLC and GNI to be clear of all deductions and withholdings, and cl 7.4 is a waiver by WLC and GNI of rights of set-off. 7. The balance of the provisions deal with administrative type matters, and where references are made to the parties it is generally in terms of "all of the parties", "each party" or "any party". The exception is that cl 9.5 requires GNI to pay all stamp duty on or relating to the deed. 8. It should be noticed that cl 9.1(b) provides: "Each party is bound by [the CPA], Existing Security Deed and Tripartite Deed as amended by this deed", but it is very doubtful that this provision would have any effect in relation to parties who did not have rights and obligations as parties under the several agreements. For example, as WLC was not a party to the Security Deed, and had no obligations under it cl 9.1(b) did not impose any obligations on WLC. Although the parties all became bound by the earlier agreements, they were not given any additional rights to enforce those agreements if they were not already parties.

Subsequent events

1. On 23 September 2013, Argonaut sent an email to Mr Sharma WLC which said: Argonaut has been served with a notice under the Override Deed between Argonaut, [GNI] & UIL. That notice specifies that an event of default has occurred, and that as such, Argonaut is directed to transfer the 150,000,000 [WLC] shares held in [GNI's] account into that specified by UIL, without further enquiry. UIL has accordingly instructed Argonaut to make this transfer and as the notice is valid, Argonaut must now transfer the securities into the designated account which UIL has created with Argonaut.
2. On 27 September 2013, UIL wrote a letter to WLC in which, after referring to the Override Deed, the Security Deed and the Tripartite Deed said: On 23 September 2013, UIL took possession of property of [GNI] under the Specific Security Deed and Tripartite Deed as amended by the Override Deed, being 150 million shares in [WLC] owned by [GNI]. Under section 429 of the Corporations Act, UIL notifies [GNI] that it is a controller of property of [GNI]. We draw your attention to the requirements of section 429(2)(b) of the Corporations Act.

Deed of Settlement and Release

1. On 15 May 2014, UIL and WLC entered into a deed called the "Deed of Settlement and Release".
2. In the Background, the deed recites the CPA, the Security Deed, the Tripartite Deed, the making of the US$20 million payment by UIL, and the Override Deed, and then recites: G. On 31 July 2013, WLC delivered to UIL bills of lading in respect of 50,000 metric tonnes of coal, to be delivered to New Mangalore, with a value of USD $4.6 million. This coal was on-supplied by UIL to Gujarat NRE Coke Limited (GNCL) in India. UIL accepted the amount recovered under those bills of lading in reduction of the amount owing under the Override Deed. H. UIL has exercised its rights to the Security Property and it now holds the Security Property in its own right. I. The parties have agreed that on the Effective Date, Settlement Amount will remain owing by WLC to UIL under the Override Deed. J. UIL and WLC wish to agree under the terms of this deed on the full and final satisfaction of any Claims UIL may have against WLC under the UIL Agreements.
3. It should be noted that recital H was drafted on the basis that UIL by that stage held the 150 million shares previously owned by GNI in WLC in its own right.
4. In substance, the Deed of Settlement and Release provides that, upon payment by WLC to UIL of the Settlement Amount, following delivery of the bills of lading in respect of the coal with a value of USD 4,600,000, there would be a full and final settlement of all claims between the two parties: see cl 2.1(a).
5. "Settlement Amount" is defined in cl 1.2 as meaning: (a) the balance due and owing under the Override Deed which the parties agree is US$2,240,000 as calculated in the connection to this deed; and (b) the legal costs of UIL in the amount of US$400,000.
6. The Settlement Amount was calculated by deducting from the original advance payment of US$20 million, the US$4,600,000 value of the coal shipment, and two amounts paid to UIL by WLC of USD 1 million on 7 and 19 August 2013, leaving a balance of US$13,400,000.
7. From this amount the following was also deducted: Amount ($USD) Less adjustment for value of Secured Property being 150 million WLC shares at an agreed value per WLC share of AUD 8 cents at the agreed conversion rate of AUD/USD of 0.93 11,160,000

1. On 4 June 2014, UIL wrote a letter to GNI. The letter said: We refer to our letter dated 18 September 2013, in which we notified you that Argonaut was directed to transfer to UIL the 150 million shares in WLC provided by [GNI] as security in relation to amounts owing under the Override Deed (Shares). We write to notify you that on 29 May 2014 the Shares were disposed of for a consideration of 0.08 AUD per share… As a result, the sum of US $11,139,600 has been applied in reduction of the amount owing under the Override Deed. In the circumstances, UIL is satisfied that the price of 0.08 AUD is the best price it could obtain for the shares at this time …

Basis of GNI's claim for indemnity or damages

1. It will now be appropriate to consider the claims as they are pleaded by GNI in the SOC to be entitled to be indemnified by WLC for the value of the shares sold by UIL for the purpose of the partial repayment of the debt owed by WLC to UIL, or alternatively to damages or other relief equal to the value of the shares.
2. GNI has pleaded an array of claims involving breaches of express and implied terms of the Security Deed and the Override Deed, in some cases raising questions of construction, obligations of good faith, entitlement to contribution, entitlement to restitution on the basis of unjust enrichment, and estoppel by convention. May I say, with respect, that I have not found the structure in which these various claims have been set out in the SOC conducive to the efficient determination of the issues. I propose to deal with the claims in a different order than that in which they are raised in the SOC.
3. As I read GNI's detailed final written submissions, they do not appear to deal with all of the claims that have been pleaded, and sometimes appear to put the claims in a slightly different way than they have been pleaded and with different emphasis. I do not consider these changes to have exceeded the boundaries of the pleaded claims, and the contrary was not suggested by WLC.
4. In its closing submissions, GNI expressly abandoned a pleaded claim based upon the principles of conventional estoppel (SOC pars 114 to 119) and a claim for rectification of cl 5.3 of the Override Deed (SOC pars 78 to 80). There are other pleaded claims that I apprehend have not been supported, or supported in any detail, in GNI's final submissions. As they have not been abandoned, I will treat them as remaining alive.
5. In SOC pars 36, 59, 64, 105 and 109, GNI pleads reliance upon implied terms that it alleged arose out of the Security Deed, or both the Security Deed and the Override Deed. As WLC is not a party to the former deed, it could not be bound by any terms to be implied in that deed. As I understand GNI's final submissions, it accepted this necessary conclusion.
6. I have found it convenient to deal with GNI's pleaded claims in the following order: generally proceeding from claims based upon the express terms of the relevant deeds, as properly construed, to alleged implied terms, and then alternative bases for relief. The claims are: 1. GNI is entitled to damages for breach by WLC of the express terms in the Override Deed that required WLC to pay the Repayment Amount to UIL (SOC pars 72 to 77). 2. GNI's equitable right to be indemnified by WLC is not extinguished by cl 5.3 of the Override Deed on its proper construction (SOC pars 123 to 129). (In SOC par 128 GNI simply pleads that its right of indemnity has not been waived on the proper construction of the Override Deed, and refers to cl 5.3 in the particulars. This allegation is not confined to any particular reason for the alleged construction to be adopted. It may be noted that, in its closing submissions par 119, GNI put the submission on the basis that WLC is prevented from relying upon the waiver contained in cl 5.3 "at all times when it is in breach of the Override Deed". I have proceeded on the basis that the specific argument put in par 119 does not prevent GNI from relying upon any basis for the construction of cl 5.3 as alleged in SOC par 128. GNI confirmed in its reply submissions in the bullet point response to WLC's par 28 "that cl 5.3 cannot be enforced or relied upon by WLC - it was for the benefit of UIL"). 3. GNI's equitable right to be indemnified by WLC has survived because the right of indemnity arises under both the Security Deed and the Override Deed, which continued to operate coincidently, and cl 13.6 of the Security Deed no longer prevents the indemnity being enforced, because UIL has been fully repaid, so that it does not matter even if cl 5.3 of the Override Deed has extinguished GNI's right of indemnity in so far as it arises under that deed (SOC pars 129A to 129K). See also closing submissions pars 114 to 117. 4. GNI's equitable right to be indemnified by WLC is not extinguished by cl 5.3 of the Override Deed because, on the proper construction of that term, it is to be read down so that it does not operate after UIL has been fully repaid (SOC par 118). 5. Even if GNI's equitable right to be indemnified by WLC is extinguished by cl 5.3 of the Override Deed, that term only applies to GNI's right to be indemnified or to be subrogated to the rights of UIL, and not to GNI's right of contribution, so GNI is entitled to contribution from WLC in respect of half of the difference between the value of the shares that were sold in order to repay WLC's debt to UIL and the amounts repaid to UIL by WLC (SOC pars 90 to 104). 6. GNI is entitled to damages from WLC for breach of an implied term in the Override Deed, that is implied by law, to the effect that WLC would indemnify the plaintiff in respect of the value of the shares that were sold in order to repay WLC's debt to UIL (SOC pars 120, 121). 7. GNI is entitled to damages from WLC for breach of an implied term in the Override Deed, that is implied in fact and by law, to the effect that WLC would pay the Repayment Amount to UIL whether or not UIL resorted to the guarantee and indemnity granted by GNI (SOC par 71). 8. GNI's equitable right to be indemnified by WLC is not extinguished by cl 5.3 of the Override Deed because the Override Deed contains an implied term, that is implied in fact and by law, to the effect that cl 5.3 will not apply where the Repayment Amount is paid by accord and satisfaction (SOC pars 69, 70). 9. GNI is entitled to damages from WLC for breach of an implied term in the Override Deed, that is implied in fact and by law, to the effect that WLC would do all acts and things necessary to enable the Repayment Instalments to be made on time to UIL, and if not on time whenever it became possible, so as to ensure that GNI's shares in WLC were not sacrificed or prejudiced by WLC (SOC pars 59 to 61). 10. GNI is entitled to damages from WLC for breach of the duty to act in good faith (and reasonably) and also a duty to that effect implied in the Override Deed, that is implied in fact and by law (SOC pars 62 to 68, and separately pars 109 to 113). 11. Even if GNI is not entitled to be indemnified by WLC or damages for breach of any duty or an implied term, GNI is entitled to restitution from WLC for the value of the shares that were sold in order to pay WLC's debt to UIL on the ground that WLC was unjustly enriched (SOC par 122).

Is WLC liable for breaching an express term to pay UIL? Claim (1)?

1. GNI claims that it is entitled to damages for breach by WLC of that company's express obligation in cl 2.1(c) of the Override Deed to pay the Repayment Amount in accordance with the timetable set out in that provision. I note that this claim does not appear to have been supported by GNI in its closing submissions.
2. This claim fails because cl 2.1 of the Override Deed was expressly an agreement between WLC and UIL, and as a matter of contract the covenant by WLC was not made in favour of GNI and is not enforceable by that company.
3. In any event, GNI also agreed with UIL, in cl 4.1 of the Security Deed and cl 5.1(d) of the Override Deed as principal debtor and primary obligor, to pay to UIL the same amount as GNI complains WLC failed to pay UIL. As a matter of contract, both GNI and WLC were in breach of obligations to pay the same amount to UIL. Putting aside the issue of who could enforce those covenants, neither could succeed in recovering damages from the other because each was in breach for the same amount. In part, because of the inability of the law of contract to deal adequately with this situation, equity has developed rules for determining whether the obligations of co-obligors are coordinate or whether in reality, notwithstanding the contractual position, one is a primary and the other is a secondary obligation. Subject to what is said below concerning GNI's multiple implied term claims, success by GNI in establishing a right to indemnity or contribution must depend upon the application of equitable principles, provided that the terms of the Override Deed do not extinguish GNI's equitable rights.

Does cl 5.3 on its proper construction extinguish the right of indemnity: Claim (2)?

1. Even though both the Security Deed and the Override Deed collectively had the effect that both GNI and WLC were personally liable to pay all amounts due to UIL, as between the two obligors, WLC was the party primarily liable, and GNI's role was that of guarantor of WLC's liability to GNI. Equity looks to the substance of the transaction to determine whether the two obligors were co-ordinately liable to pay the debt, or whether one was in substance the guarantor of the other's liability: See Israel v Foreshore Properties Pty Ltd (1980) 54 ALJR 421 at 423-424; 30 ALR 631 per Aickin J (with whom the other members of the High Court agreed); and Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 at 118-120 per Bryson J (as his Honour then was). Indeed, in its closing submissions at par 58, in support of its argument that GNI is not entitled to contribution, WLC submitted: "There can be no doubt that GNI's obligations were, in substance, those of guarantor".
2. The PPSA Security granted by GNI to UIL under the Security Deed was therefore in substance a charge to secure GNI's liability to UIL to guarantee performance by WLC of its obligations to GNI.
3. It is also clear that, in the absence of an effective limitation on GNI's right to do so, GNI became entitled to be indemnified by WLC in respect of the loss suffered by GNI when UIL sold GNI's 150,000,000 shares in WLC on 29 May 2013: see Israel v Foreshore Properties Pty Ltd (above). The value of those shares was apparently US$11,160,000.
4. As already stated, the only impediment to GNI being entitled to be indemnified by WLC is WLC's reliance on cl 5.3 of the Override Deed, which for convenience I will repeat: 5.3 Waiver of rights [GNI] irrevocably waives and must not exercise any right of indemnity or subrogation which it otherwise might be entitled to claim and enforce against or in respect of [WLC].
5. Clause 5.3 is framed in terms of an irrevocable waiver of any right of indemnity and a covenant not to exercise any such right. GNI accepted that, if WLC is entitled to enforce cl 5.3, then that will provide a complete defence to GNI's claim to be indemnified (subject to GNI's alternative claims that WLC's reliance upon the clause was a breach of duty to it, and involved unjust enrichment, which will be subjects considered below).
6. I will first consider the general claim made by GNI in the SOC that, on the proper construction of the Override Deed as a whole, cl 5.3 is no bar to GNI enforcing its right of indemnity against WLC. I will then deal with the separate proposition raised by GNI in its closing submissions, to the effect that the reason cl 5.3 does not bar the right of indemnity is that the provision does not operate when WLC is in breach of its obligations under the Override Deed.
7. As GNI accepts that cl 5.3, on the ordinary meaning of its words, would prohibit GNI from enforcing its indemnity against WLC, the issue distills into a simple proposition: Is WLC entitled to enforce cl 5.3 by reason of the fact that WLC is a party to the Override Deed?
8. WLC's argument proceeded, as I perceived it, on the basis that: (a) WLC is a party to the Override Deed; (b) cl 5.3 by its terms clearly bars GNI enforcing any right of indemnity; (c) the bar is absolute and unrestricted; and (d) the bar is not explicitly made for the benefit of any party; so (e) WLC is entitled to enforce the bar notwithstanding that it is the primary debtor. This argument was put on the basis that it is self-evident, and submissions were not put as to why cl 5.3 may be enforced by the principal debtor, when the creditor has been wholly repaid, and the creditor does not seek to enforce the bar. WLC said in its closing submissions at par 51: "In this case, clause 5.3 was part of the bargain". That is the essence of WLC's case on this issue.
9. In my view, WLC's argument begs the question of why it is that WLC, as the principal debtor, has a right to enforce cl 5.3 against its guarantor, GNI, when the creditor, UIL, no longer has any interest to do so, and does not seek to enforce the provision.
10. WLC's argument raises the question whether or not it is the case that, when a deed contains a covenant by one party that is not explicitly made in favour of a limited number of the other parties, but is simply expressed in unqualified terms, all of the other parties to the deed are entitled to enforce the covenant.
11. There is, according to my researches and the assistance I have received from the parties, surprisingly little authority on the principles that govern how the Court should determine which parties to a multi-party deed are entitled to enforce covenants made by one party that are not explicitly made for the benefit of some only of the other parties to the deed.
12. I have reached the conclusion that this issue depends simply on the proper construction of the deed as a whole, and it may be that it is the simplicity of the solution that is the cause of the apparent absence of significant authority on the issue.
13. The basic principle, as stated by the learned editors of O'Donovan and Phillips, The Modern Contract of Guarantee (3rd English edition), at [12-015], is: "A guarantor's right of reimbursement or indemnity can be limited or excluded expressly by agreement or impliedly by the nature of the transaction secured by the guarantee" (footnotes omitted). That being so, the effect of any supposed agreement by the guarantor to exclude its right of indemnity from the principal debtor should be a matter governed by the proper construction of the agreement.
14. In Israel v Foreshore Properties Pty Ltd (above), the High Court resolved a similar question by construing the relevant contract. Referring to the report of the decision in (1980) 30 ALR 631 for convenience, Aickin J set out the operative provisions in the deed in question at 632-633: The operative provisions of the deed were as follows: - 1. The parties of the second, third and fourth parts shall repay the said amount of SIXTY-FIVE THOUSAND DOLLARS on or before the Twelfth day of November 1975 together with interest thereon at the rate of fourteen (14) per centum per annum calculated from the First day of May 1974 on a system of monthly rests, such interest to be paid at the time of repayment of the principal. 2. To secure payment of the said principal and interest the said Foreshore at the request of Mitta, Israel and the Carpenters DOES HEREBY AGREE to grant unto the McLaughlins a second mortgage in respect of … [the particulars of the land charged are then set out]. 3. IT IS ACKNOWLEDGED between the parties of the third and fourth parts that Israel is equally liable for the said debt with the Carpenters and Israel HEREBY GUARANTEES to the Carpenters that should Foreshore or the Carpenters pay the moneys owing hereunder he will forthwith be liable to pay one half of such moneys to them. 4. The McLaughlins shall not be entitled to claim any rents owing by them to Mitta by way of set off against the debt hereinbefore referred to.
15. Clause 1 was a covenant by the principal debtor and the guarantors to repay the debt to the creditor. Clause 2 involved the respondent to the appeal, Foreshore, granting a mortgage to the creditor over its property to secure the payment required by cl 1 at the request of the principal debtor and the guarantors. Clause 3 was an agreement between three of the guarantors that Israel would pay one half of the amount of the debt to the other guarantors, if those guarantors or Foreshore were required to pay it. It is to be noted that cl 3 only required Israel to pay half of the amount paid to the other guarantors, and did not require payment of any money to Foreshore itself, even if it had made the payment.
16. Foreshore paid the debt to the creditor to protect the property the subject of the mortgage that it had given to the creditor to secure repayment of the debt. Foreshore claimed that it was entitled under cl 3 of the deed to be paid by Israel half of the amount that it had paid to the creditor. By an alternative claim, Foreshore claimed that, on the true construction of the deed, it was entitled to an indemnity in respect of the amount paid to the creditor.
17. Israel admitted that cl 3 of the deed made him liable to pay one half of the amount paid to the creditor by Foreshore to the other guarantors, but claimed that, by reason of the existence of cl 3 in the deed, he was not liable to pay any money directly to Foreshore.
18. Aickin J said at 634: "Whether Foreshore is entitled to an indemnity from Israel, to contribution from Israel or to nothing at all depends primarily on the proper construction of the deed in the light of the general principles of equity and the common law". His Honour then said: "It is not disputed that if cl 2 stood alone each of [the principal debtor], Israel and the [other guarantors] would have been under an obligation to indemnify Foreshore and would amongst themselves have been entitled to contribution". Aickin J found that, by reason of the relationship between the parties, and the fact that Foreshore granted the mortgage at the request of the other parties and without any interest in the transaction itself, it was in the position of a guarantor entitled to be indemnified by all of the other parties (including the primary guarantors).
19. Aickin J then said at 634-635: Whether a right to indemnity in circumstances in which one party makes a payment or incurs an obligation at the request of another party without consideration depends upon the common law, general equitable principles or upon an implied contract, or an implied term in a contract, will depend upon all the circumstances… It was argued for the appellant that when regard is had to cl 3 of the deed no sure basis for implication or for application of equitable principles remains. There is, however, a major obstacle to this argument in that cl 3 is expressed to be an acknowledgement between Israel and the [other guarantors] that Israel is equally liable for the "said debt" with the [other guarantors]. The expression "said debt" refers to the obligation in cl 1 to repay to the [creditor] the $65,000 referred to in the fourth recital, that obligation resting on [the principal debtor and the guarantors]. Clause 3 then provides that Israel guarantees to the [other guarantors] that, if Foreshore or the [other guarantors] pay "the moneys owing hereunder" (ie the said debt), he will forthwith be liable to pay one-half of such moneys to them. It is by no means clear what the object of this provision was but it was suggested in argument that the draftsman had not distinguished between the individual parties and the companies and treated the agreements as being between Israel on the one hand and the [other guarantors] and Foreshore on the other. This theory fails to account for the fact that cl 3 records an agreement between Israel and the [other guarantors], to which Foreshore is not a party... Clause 3 dealt exclusively with the rights between Israel and the [other guarantors] and is expressed to be an agreement between them and no one else. There is nothing in the deed to indicate any intention that Foreshore should be bound by that provision or to warrant any implication which would be contrary to the implication from, or the consequence of, cl 2 itself, which does bind Foreshore as well as [the principal debtor], Israel and the [other guarantors]. It appears likely that the purpose of cl 3 was to define expressly the position as to contribution as between Israel and the [other guarantors], and perhaps also to exonerate [the principal debtor] from contribution. So regarded it leaves Foreshore's right to indemnity unaffected. (emphasis added)
20. Aickin J held that cl 2 of the deed required Foreshore to grant a mortgage in favour of the creditor that gave rise to a right of indemnity from the other parties, who were the principal debtor and guarantors who had a commercial interest in the loan being made. Clause 3 was construed as only being intended to be an agreement between the guarantors as to how Israel would contribute to the debt if Foreshore or the other guarantors were required to pay it. The agreement between the guarantors concerning contribution between them had no effect on the right of indemnity to which Foreshore was entitled.
21. It is true that his Honour's reasoning was assisted by the fact that cl 3 of the deed was expressed to be an agreement between the three guarantors. However, in my view the same result will arise if the proper construction of the deed requires the same conclusion, even in the absence of an express term to that effect.
22. The decision of Sholl J in Re A & K Holdings Pty Ltd [1964] VR 257 is another case where the court ascertained which parties were entitled to take the benefit of the provisions of a deed and who were entitled to enforce it on the basis that these questions "turn upon the interpretation of the document" (p 259).
23. There was no issue between the parties concerning the general principles that the Court is required to apply in order to properly construe the Override Deed.
24. It is not in the circumstances necessary to analyse all of the recent authorities that consider the manner in which the Court is required to construe commercial contracts. It will be sufficient to set out the following extract from the judgment of French CJ and Hayne, Crennan and Kiefel JJ in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 (footnotes omitted): [35] … [T]his court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience".
25. Later, in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, French CJ, Nettle and Gordon JJ said at [48] (footnotes omitted): Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
26. This statement has been approved in Victoria v Tatts Group Ltd [2016] HCA 5; (2016) 328 ALR 564 at [51]; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 at [78]; and Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 343 ALR 58 at [73]. See also for an elaboration of these principles Cheshire & Fifoot, Law of Contract 11th Australian Edition at [10.12].
27. It is clear that, where multiple parties enter into a deed, the parties may expressly provide for some covenants to be made by and in favour of some parties and not others. As a matter of principle, it cannot be right, without more, that all parties to a deed can always enforce all covenants that are expressed in general terms.
28. I have analysed the terms of the Override Deed above at par 87. Clearly some of the covenants were made by and for the benefit of all parties, but other covenants expressly had a restricted application as between some only of the parties, sometimes by amending earlier deeds that only operated between some of the parties. The question is: what was intended in relation to how cl 5.3 of the Override Deed was to operate?
29. The significance of this question is illustrated by the proposition that, if any party to the deed is entitled to enforce cl 5.3 of the Override Deed, Argonaut is a party, and it would be entitled to enforce the provision as much as would WLC. Argonaut has no interest whatsoever in whether or not GNI should be entitled to enforce an indemnity against WLC. Yet counsel for WLC was forced in submissions, when the question was put to him by the Court whether Argonaut would be entitled to enforce cl 5.3, to answer affirmatively. It seems absurd that the parties could have intended that Argonaut could prevent GNI from exercising a right of indemnity against WLC that arises in equity out of the terms of the Override Deed, or the earlier Security Deed.
30. It is true that there is a difference in practical terms between the position of Argonaut and WLC, in that the former has no interest in enforcing cl 5.3, while the latter has an obvious interest in doing so. Clause 5.3 creates on its face a substantial benefit for WLC, whereas it is no benefit to Argonaut. However, while the fact that a covenant in a deed expressed in unqualified terms may benefit a particular party may be relevant to the question of whether the deed should be construed with the effect that the covenant is made in favour of that party, and so enforceable by it, the existence of the benefit is not determinative of the question. The question must depend upon the proper construction of the deed as a whole.
31. I have come to the conclusion that, on the proper construction of the Override Deed, the whole of cl 5 was a covenant made by GNI in favour of UIL alone, and it was not made in favour of WLC or Argonaut, or intended to be enforceable by those parties.
32. I consider this construction to arise primarily out of the terms of cl 5 alone, although the construction is supported by the whole of the terms of the Override Deed, and the history of the agreements and the other events that occurred and were objectively known by all of the parties when they entered into the Override Deed.
33. I have set out the terms of cl 5 of the Override Deed above at par 79. The primary function of the provision clearly is to create a guarantee and indemnity by GNI in favour of UIL. That function appears from the wording of the provision (I have ignored the headings: see cl 1.3(n) and Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [348]).
34. Clause 5.1 begins: "[GNI] unconditionally and irrevocably: (a) guarantees to UIL the payment when due of all amounts payable by [WLC]…" That is the primary covenant in cl 5 and is expressly and exclusively made in favour of UIL.
35. The obligations in cl 5.1 (c) and (d) are also expressly made in favour of UIL alone, and the obligation in cl 5.1(b) is implicitly so.
36. The context in which cl 5.3 has been included in the Override Deed is as part of cl 5, and not as a separate restraint set out elsewhere as a stand-alone provision. I do not think that the fact that cl 5.3 has been inserted within cl 5 as a separate sub-clause with its own heading diminishes the force of this conclusion.
37. When cl 5.3 is read simply according to its ordinary words, in the context of cl 5 as a whole, in my view the absence of an express statement that the waiver is made only in favour of UIL becomes immaterial, in that it is obvious that the waiver is part of the collection of rights and protections intended to be granted to UIL as the creditor.
38. There is nothing in cl 5 of the Override Deed, or any other part of the deed, that supports the faintest appearance that the waiver was made for the benefit of WLC, or that it was intended to be enforceable by that party.
39. The history of the dealings between the parties to the Override Deed that is set out above may be taken to have been objectively known to all of the parties to the Deed when they entered into it. WLC undertook obligations to UIL under the CPA, which were almost immediately breached. GNI's liability to UIL under the Security Deed became immediately enforceable. UIL was entitled to be repaid US$20,000,000 almost immediately after it had advanced the money. The Override Deed represented a commercial attempt by UIL to retrieve its position. UIL plainly had the superior bargaining power. Argonaut was disinterested. In various ways, the provisions in the Override Deed can be seen to enhance the level of protection that was available to UIL, given the difficulty of its position. In these circumstances, there is no basis for concluding that any term in the Override Deed was intended by UIL, or the parties generally, to give WLC some new benefit that it did not receive under the earlier agreements, except to the extent that such a benefit was consequential on some term inserted for the benefit of UIL, and enforced by that party.
40. As the Override Deed amended but otherwise affirmed the operation of the Security Deed (which remained the only transaction document that created the charge granted by GNI in favour of UIL) both deeds operated concurrently from the date of the Override Deed. Clause 13.6 of the Security Deed plainly did not give WLC any right to prevent GNI from seeking indemnity from WLC, if UIL chose not to exercise its right to do so while any part of the amount owing to UIL was outstanding. Although the Override Deed made amendments to the Security Deed, the fact that they were to operate concurrently suggests that the parties to the Override Deed had the intention that they would operate consistently. That consideration highlights the question whether any circumstances can be identified that would support a finding of an objective intention on the part of UIL and GNI to create a bar to GNI being entitled to enforce its right of indemnity against WLC that was shared between UIL and WLC and did not exist before the Override Deed was made, and did not exist under the concurrently operating Security Deed. No such circumstances can be identified.
41. In support of its argument, WLC did not proffer any reason at all as to why the parties to the Override Deed would have intended to confer a new benefit on WLC, in the form of a complete and permanent waiver of any obligation on its part to indemnify its guarantor, GNI, in any circumstance where that benefit was not enforced by UIL at UIL's election.
42. WLC's argument necessarily takes the operation of cl 5.3 to the extremity of its possible, express effect, and that must include WLC being entitled to enforce the waiver before all amounts payable to UIL had been paid, even if UIL itself had a commercial reason for not doing so. Thus, the construction of cl 5.3 for which WLC contends puts it, the primary debtor, on a par with UIL, the creditor, in deciding whether or not to prevent GNI enforcing its right of indemnity against WLC. That is an improbable intention to attribute to the parties to the Override Deed, as although the issue is necessarily speculative, it is most likely that a creditor who found itself in the position of UIL would want to maintain freedom to control how and when it could recover the debt from each of the principal debtor and the guarantor, and it could well wish to be able to manipulate the balance between the two obligors by permitting the guarantor to indemnify itself from the debtor.
43. I accordingly find that GNI is entitled to maintain its claim for an indemnity against WLC, notwithstanding the existence of cl 5.3 in the Override Deed.
44. As I have noted above, in its closing submissions at par 119, GNI appears to have put its submission concerning the proper construction of cl 5.3 of the Override Deed on the more limited basis that WLC may not in the proper construction of cl 5.3 enforce the waiver at all times when it is in breach of the Override Deed. Although the submission is put as a matter of the proper construction of the clause, it is justified by reliance upon the principle "that a party may be precluded from relying upon a contractual entitlement arising from its own breach". That submission is put in reliance upon Ruthol Pty Ltd v Tricon (Australia) Pty Ltd [2005] NSWCA 443; (2005) 12 BPR 23,923 at [19]-[25] per Giles JA (Santow JA and Hunt AJA agreeing).
45. The general principle relied upon may be accepted, but the issue is how the general principle may be relevant to the proper construction of cl 5.3 in this case. The need for this submission only arises if I am wrong in my conclusion that, on the proper construction of the Override Deed, WLC has no standing to enforce cl 5.3. If it does have that standing, then it will follow that cl 5.3 contemplates that WLC may prevent GNI from enforcing its right to be indemnified by WLC. That right of indemnity will only ever arise when GNI pays out UIL after WLC has breached its contractual obligation to do so (or the same result occurs because UIL has enforced the charge granted to it by GNI). WLC's breach of contract is an essential condition of the creation of the right of indemnity the enforcement of which is barred by cl 5.3. I do not accept that, as a matter of construction, cl 5.3 was not intended to be enforceable by WLC (if it was generally intended to be enforceable by WLC) whenever the need for enforcement was caused by WLC's breach. That conclusion would destroy the premise upon which cl 5.3 was included in the Override Deed for the benefit of WLC. The assumed intention to benefit WLC is inconsistent with the construction that would prevent WLC enforcing the benefit whenever the need to do so has arisen from WLC's own breach, because that need will always arise from WLC's breach.

Is there a separate right of indemnity under the Security Deed: Claim (3)?

1. GNI argued that it does not matter whether or not WLC is entitled to enforce cl 5.3, because the Override Deed and the Security Deed operate concurrently, and even if cl 5.3 has the effect of prohibiting GNI from seeking indemnity from WLC in respect of any right of indemnity that would otherwise arise out of the Override Deed, GNI has an alternative and equally efficacious right of indemnity arising out of the Security Deed, and the only impediment to GNI asserting the right to indemnity under that deed is contained in cl 13.6(a). Unlike cl 5.3, whose operation is indefinite, the prohibitions in cl 13.6(a) only apply until the Secured Money has been fully paid to UIL. As the Secured Money has now been fully repaid to UIL, cl 13.6 no longer operates as a prohibition against GNI seeking indemnity from GNI.
2. I have explained above why I accept that the Security Deed and the Override Deed continued to operate concurrently. The latter deed contained amendments to the former deed, and clearly contemplated that the Security Deed would continue to operate.
3. However, it does not follow from the fact that both deeds were intended to continue to operate that the later deed in time has not altered the effect of the earlier deed. Indeed, that was the specific intention of the provisions of the Override Deed that amended the Security Deed. Other provisions of the Override Deed may have practically altered the way the Security Deed could continue to operate, without formally amending any provisions in that deed.
4. It is not correct in my view to analyse the operation of the two deeds as if cl 4.1 of the Security Deed imposed an obligation upon GNI to guarantee WLC's liability to UIL under that deed, subject to the restricted "no competition" limitation in cl 13.6, while cl 5.1(a) of the Override Deed created a new and different guarantee obligation that was subject to the unrestricted waiver in cl 5.3.
5. I have analysed the manner in which the Override Deed changed WLC's obligations towards UIL, and the definition of the "Secured Money" at pars 68 to 74 above. WLC's obligation to repay the price paid by UIL under the CPA, upon the failure of WLC to deliver the promised coal, which is found in cl 14 of that agreement, was replaced by the obligation in cl 2.1(c) of the Override Deed to pay the Repayment Amount to UIL. The effect of cl 3.1(a)(i) of the Override Deed inserting a definition of "Transaction Document" into the Security Deed was, given the definition of "Secured Money" in that deed, that the charge granted by GNI to UIL in the Security Deed secured WLC's liability to UIL under the Override Deed, which was the only agreement to which WLC was a party that was included in the definition of "Transaction Document".
6. Consequently, in strict terms, GNI's guarantee obligations under cl 4.1 of the Security Deed, and its guarantee under cl 5.1(a) and primary liability under cl 5.1(d) of the Override Deed, related to the same, single obligation of WLC that arose under cl 2.1(c) of the Override Deed. The only right exercised by UIL was to enforce the one charge granted by GNI in cl 2.1 of the Security Deed, which was to secure the one obligation of WLC to UIL created by cl 2.1(c) of the Override Deed.
7. The reality is that there was one charge created by the Security Deed and one debt created by the Override Deed. That being so, it is not correct to consider each of the deeds as giving rise to separate rights of indemnity, one being subject to cl 3.6 of the Security Deed, and the other being subject to cl 5.3 of the Override Deed. Both restrictions should apply, in accordance with their terms, to the one right of indemnity.
8. Clause 5.3 of the Override Deed is the provision that was created later in time, and it must be construed in accordance with its terms. The irrevocable waiver and covenant not to exercise any right clearly applies to "any right of indemnity" (emphasis added) which GNI otherwise might be entitled to claim and enforce against WLC. That restriction does not apply only to a right of indemnity that arises out of the Override Deed, but would apply equally to any separate right of indemnity that arose as a result of any earlier transaction. If, as in the present case, there are two provisions that bar generally all rights of indemnity, one of which has creased to operate, but the other has not, the one that has not will be effective to bar the indemnity.
9. Accordingly, I do not accept the argument that GNI remains entitled to enforce against WLC an indemnity that arises out of the Security Deed, which is no longer barred by cl 13.6(a) of that deed.

Should cl 5.3 of the Override Deed be read down: Claim (4)?

1. It is not necessary for the Court to deal with the third of the construction arguments put by GNI in support of its claim that it is entitled to an indemnity notwithstanding cl 5.3. That argument was that cl 5.3 should, as a matter of its proper construction, be read down so that it only operates so long as UIL has not fully been paid the entire amount of WLC's liability to UIL.
2. As it is not necessary to do so, I will not attempt to resolve this construction issue. It raises difficult questions, and the party with the most interest in contesting GNI's argument, the creditor UIL, is not before the Court to advance arguments on the issue.
3. GNI's submission was put at a high level of generality, and without any authority to support the argument: see closing submissions par 118. As I understand the submission, it was put solely on the basis of the proper construction of the Override Deed.
4. I am not aware of any authority to the effect that equity imposes a limitation on creditors, designed to protect the right of indemnity in favour of guarantors created by equity, that restricts the operation of "no competition" provisions to periods before the creditor has fully been repaid its debt. In Hong Kong Bank of Australia Ltd v Larobi Pty Ltd (1991) 23 NSWLR 593, Rogers CJ Comm D asked himself the question at 597: "Does the law permit an agreement between a lender and a guarantor which excludes the guarantor's right to contribution from a co-guarantor?" His Honour concluded, after a brief consideration of a number of authorities: … There is nothing in the law of principal and surety to prevent the guarantors, or any one of them, suspending its or his own right to contribution. What is precluded is a contract whereby the entitlement of other guarantors to contribution is sought to be excluded…
5. If it be accepted that the law recognises the effectiveness of what Ward JA (as her Honour then was) described in O'Brien v Bank of Western Australia Ltd (above) as "suspension" and "preservation" or "pay now, litigate later" clauses, there may still be a question of whether, and if so, to what extent, the law will permit creditors to impose on guarantors restrictions on their rights of indemnity or contribution that continue after the creditor has fully been repaid.
6. In the Larobi case at 597 to 599, his Honour explored the question of whether a term in a contract prohibiting a guarantor from pursuing a claim for contribution against co-guarantors could be void and unenforceable as being contrary to public policy on the basis that it excluded the jurisdiction of the courts to enforce a private right. In considering this issue, in a manner that is not directly relevant to the present case, his Honour observed at 598: "Further, as Windeyer J observed in Felton v Mulligan (1971) 124 CLR 367; [1971] HCA 39 at 385 'the grandiloquent phrases of the eighteenth century condemning ousting of the jurisdiction of courts cannot be accepted in this second half of the twentieth century as pronouncements of a universal rule'". This observation underscores the difficulties that may arise in any attempt to deal with this issue. There may be grounds to consider whether a term in a contract that purports perpetually to prohibit a guarantor from enforcing a right of indemnity, even after the creditor has been fully repaid, is valid in respect of the period after the repayment occurred. If the term were invalid in respect of the period after repayment, that may be a reason for reading down a perpetual prohibition to apply only until repayment. GNI did not put its submission on this basis, which was not explored.
7. The present is not a suitable case for the Court to embark upon an unnecessary consideration of whether it would be proper to read down cl 5.3 in the manner suggested by GNI, given the absence of UIL. My practical reason for this conclusion arises primarily out of the course of events that led up to the making of the Override Deed. Without putting the point too elaborately, it is relatively obvious that UIL responded to the almost immediate and total abrogation of their obligations by WLC and GNI, by seeking to impose greater and higher level obligations upon GNI. Although cl 4.1 of the Security Deed imposed a personal liability on GNI to pay the Secured Money to UIL, GNI was broadly treated as a third-party chargor with a personal covenant to pay, and not an indemnifying party. Clause 5.1(d) of the Override Deed made GNI, as between itself and UIL, a "principal debtor and primary obligor", with a liability to indemnify UIL in respect of all losses that it suffered.
8. In these circumstances, it would be problematic for the Court to be too readily open to reading down cl 5.3. The more UIL required GNI to adopt the position of a primary obligor, the less easy it is to countenance the reading down of the provision in the manner contended for by GNI. Accordingly, in the absence of a necessity to do so, I will not seek to resolve that question.

Is GNI separately entitled to contribution from WLC: Claim (5)?

1. GNI's claim to contribution is founded on the fact that cl 5.3 of the Override Deed expressly only constitutes a waiver of, and the prohibition of the exercise of, "any right of indemnity or subrogation". It does not in terms affect any right of contribution. GNI asserts a right of contribution, and says that there is no impediment to the Court giving effect to that right.
2. GNI claims a right to be paid US$949,800 by way of contribution. There was no issue about the correctness of that amount, which is explained in its closing submissions at pars 58 to 60. The amount was determined as one half of the difference between the value of GNI's shares in WLC, when sold by UIL, and the total amount of repayments made by WLC itself.
3. The basis of GNI's claim for contribution is set out in its closing submissions at pars 163 to 176. WLC responded at pars 56 to 73 of its closing submissions.
4. As I have found that GNI is entitled to be indemnified by WLC, the determination of its alternative contribution claim is not strictly necessary. While it may be desirable for the Court nonetheless to determine the contribution claim, against the possibility that it will be found that the Court has wrongly construed cl 5.3 of the Override Deed in favour of GNI, an impediment to that course is that, at its heart, the contribution claim raises significant questions of law, and it is doubtful that it could be warranted for the Court to devote the effort to the issue necessary for its full and proper resolution. The determination of the contribution claim does not require the Court to determine any contested issues of fact. If it becomes necessary to decide the contribution claim, that can be done.
5. I offer the following in explanation of why I have decided to take this course.
6. GNI has put its claim for contribution on the basis that the right arises by reason of "GNI and WLC being co-obligors/joint primary obligors in respect of the monies to be paid to UIL under the Override Deed and the Security Deed": closing submissions par 169. GNI relies upon the fact that cl 3.1(a)(i) of the Override Deed inserted a definition of "Obligor" into the Security Deed to mean each of WLC and GNI. Consequently, the definition of "Secured Money" in cl 1.1, in so far as it encompassed "all present and future debts and monetary liabilities… of each Obligor to [UIL]" put the obligations of the two Obligors on the same footing. It also relied upon the fact that cl 5.1(c) and (d) of the Override Deed "speak of GNI now being a primary obligor and liable to UIL as primary obligor".
7. As GNI's primary case was that it was a guarantor of WLC's liability to UIL, to support its claim to be entitled to be indemnified by WLC, this submission must in reality be that, at the one time GNI owed an obligation to UIL that was secondary to the obligation owed by WLC (so entitling it to an indemnity) and an obligation that was co-ordinate (so entitling it to contribution), and if the former right is contractually barred, GNI can elect to enforce the lesser right of contribution.
8. In my view, the position adopted by GNI raises issues of (a) the meaning and effect of the Override Deed in this context; (b) whether in reality GNI owed separate obligations to UIL that were in the one case secondary and in the other case co-ordinate; (c) whether the law recognises a right of contribution where a right of indemnity would exist, but for some contractual bar; and (d) whether the law allows a party who owes a secondary liability to the primary liability owed by another party, to choose to treat the first party's obligation as primary and co-ordinate for the purpose of obtaining contribution from the second party.
9. The significance of the issue outlined in sub-par (a) above is that, in my view, GNI's claim for contribution assumes that cl 5.3 of the Override Deed accepts that GNI would have a claim for contribution as an alternative to the indemnity claim, and intended to bar the latter but not affect the former. Apart from the undoubted absence of any reference to "contribution" in cl 5.3, there has been no suggestion as to why the parties commercially had any intention to bar an indemnity claim but leave a coincident entitlement to contribution alive. It is much more likely that contribution was not mentioned because it was understood that no such right would exist.
10. A distinction should be made here between cases where a party owes multiple obligations to a creditor, some of which are in reality secondary and others primary and co-ordinate with the obligations of some other primary obligor, and cases where the multiple obligations would be regarded by equity as being all secondary obligations to the obligations of some primary obligor. In the first case the party has genuine secondary and primary obligations, which may give rise to particular questions as to whether the law will allow the party to choose to proceed on the basis of one or the other type of obligation. It may be an entirely different matter for the law to allow a party who only owes secondary obligations to treat one or more of those obligations as if they had been primary.
11. To bring the issue back to the practical circumstances of the present case, the fact that both GNI and WLC are described as "Obligors" is not sufficient to characterise the relationship between their obligations. The nature of the obligations depends upon the actual terms that create them. Clause 4.1 of the Security Deed and cl 5.1(a) of the Override Deed impose guarantee obligations on GNI (in the former case, that is a matter of substance, and is so notwithstanding that the form of the obligation that is created is simply an obligation to pay the Secured Money). The question is, what is the effect of cl 5.1(c) and (d), which GNI submits are the sources of the primary obligations owed by it to UIL?
12. It will be convenient to set those provisions out again, as follows: [GNI] unconditionally and irrevocably: … (c) agrees that if and each time [WLC] fails to make any payment when it is due under or pursuant to this deed or any other Transaction Document, [GNI] must on demand (without requiring UIL to first to take steps against [WLC] or any other person) pay that amount to UIL as if it were the principal obligor in respect of that amount; and (d) agrees as principal debtor and primary obligor to indemnify UIL against, and to pay to UIL on demand an amount equal to, all Losses… directly or indirectly incurred or suffered by UIL arising out of or in connection with any non-payment or default of any kind by [WLC] under or pursuant to this deed or any other Transaction Document.
13. It is clear from the wording of par (c) that the obligation upon GNI only arises on demand being made by UIL "if and each time [WLC] fails to make payment when it is due". GNI is then required to make payment "as if it were the principal obligor", not as principal obligor. Whatever other effect this provision may have, if the question is whether GNI's obligation is primary and co-ordinate to the obligation of WLC, GNI's obligation is clearly secondary as a matter of the express wording used. GNI's obligation in par (d) is somewhat more directly described in terms as being that of a "principal debtor and primary obligor", but it is not simply an absolute obligation to pay particular amounts to UIL. It is an obligation to "indemnify UIL against, and to pay to UIL on demand an amount equal to, all Losses… suffered by UIL arising out of… any non-payment or default of any kind by [WLC]". That is also, in my view, clearly a secondary liability to the liability owed to UIL by WLC. Unless and until WLC defaults, and demand is made by UIL, no obligation of GNI will crystallise. Both liabilities of GNI are secondary in substance and in form.
14. If that is the right way of describing all of GNI's liabilities under the Security Deed and the Override Deed, all of those liabilities were secondary to the obligations of WLC to UIL, and depended on WLC breaching its obligations. It would follow that the parties to the Override Deed proceeded upon the basis that the deeds imposed secondary obligations on GNI which, in the absence of a contractual bar, would give GNI a right to be indemnified by WLC, if called upon by UIL or if UIL exercised its rights as chargee. That would explain in a simple way why cl 5.3 of the Override Deed only bars, relevantly, the right of indemnity and not any right of contribution.
15. This is not therefore, a case where the relevant agreement imposes in reality as a matter of law a primary and a secondary obligation upon a party, so that the question is whether there is any impediment to the party choosing to recover from some other party on the basis that the first party's obligation is primary or secondary. This is a case where all of the party's obligations are secondary, so the question is whether the party is entitled arbitrarily to treat a secondary obligation as if it were a primary one, for the purpose of avoiding a term of the agreement intended by the parties (on the present assumption that WLC can enforce cl 5.3) to bar the right of recovery based upon the real nature of the party's obligation, by treating it as having a nature that it does not in law have.
16. If I were required to decide whether GNI is entitled to contribution from WLC, on the assumption that my view of the proper construction of cl 5.3 is wrong, I would decide that, on the proper construction of the Override Deed, all of the obligations of GNI within the contemplation of cl 5.3 were secondary obligations to the obligations imposed upon WLC, which only gave GNI a right of indemnity from WLC, and the right of indemnity was intended to be barred. Whether as a matter of the proper construction of that term, or by implication, I would hold that cl 5.3 was also intended to bar GNI from treating a secondary obligation as a primary one and seeking contribution from WLC.
17. If it were necessary to go beyond the effect of cl 5.3 in the context of the Override Deed as a whole, as a matter of construction, and to decide whether the law permits a right of contribution in the present context, that is the point where the exercise would become contentious and difficult.
18. WLC put the submission in its closing submissions at par 73: "More fundamentally, if [GNI's] submission is correct, it turns the traditional law of guarantee on its head. It would mean that every time a principal debtor pays a guaranteed debt, they can seek contribution from the guarantor". I understand the basis of this submission to be that if (a) equity considers the obligation of one party to be secondary to the primary obligation of another party; but (b) equity allows the first party to treat the two obligations as being co-ordinate for some purpose connected with the making of a recovery from the second party; then (c) equity should also allow the second party to treat the obligation as being co-ordinate, for the purpose of seeking recovery from the first party. I do not accept that the submission made by WLC is necessarily correct, as it may go too far. However, equity often treats the rights of parties as being mutual, and there is at least a question as to whether equity should allow the first party a choice without giving the second party the same choice.
19. That is not a question that the Court should now attempt to resolve on the basis of the submissions that are before it, in the absence of any real need to do so.
20. Furthermore, there are authorities that suggest that equity only provides a remedy where there is a need to do so, and where one remedy is available (even if for some reason it is barred in the circumstances) equity will not offer an alternative remedy. This is also an area that should not be resolved in the absence of necessity.
21. WLC referred in its opening to the decision of Bryson J (as his Honour then was) in Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 at 118-119. I accept GNI's response that this decision is not helpful in resolving the present dispute. Putting aside irrelevant detail, the plaintiffs claimed contribution from the relevant defendants in respect of the repayment by the plaintiffs of a debt that was owed to a secured creditor by both the plaintiffs and the defendants, where both sets of parties had granted a mortgage over their homes to secure the borrowing. However, the loan was actually made by the creditor to the plaintiffs' company, and was used for their benefit. The defendants had promised to repay the loan and mortgaged their home at the request of the plaintiffs and without any consideration. On the face of the transaction documents alone it appeared that the plaintiffs and the defendants were obliged to the creditor in equal degree.
22. However, Bryson J first applied the principle stated by Aikin J in Israel v Foreshore Properties Pty Ltd (1980) 54 ALJR 421; 30 ALR 631 at 423-424, with the concurrence of the other members of the Court, that: "A person who acts on such a request to pay, or who accepts the role of surety in that manner and who pays the debt, is entitled to an indemnity from those who made the request to pay or to act as surety". His Honour also applied at 119-120 the principle that is well established in equity that the Court must look to the substance of the matter, and not the form of the transaction, to determine whether the liability of the parties is co-ordinate, or whether "one has primary liability and another has a liability to be resorted to only if resort to the first is insufficient".
23. The essence of Bryson J's decision was that the plaintiffs could not be entitled to contribution from the defendants, if in substance the plaintiffs were primarily liable to repay the creditor, so that if the defendants had been called upon to do so, they would have been entitled to be indemnified by the plaintiffs. A right to contribution could not arise against parties who would, if called upon to pay, be entitled to an indemnity from the parties claiming contribution. The truth of that proposition is, I would respectfully suggest, self-evident.
24. In that case, the plaintiffs were in the position of WLC, and the defendants were in the position of GNI. Bryson J did not make a finding equivalent to GNI not having a right of contribution against WLC, but made a finding that WLC would not have a right of contribution against GNI.
25. There is, however, other authority that may bear upon the question of whether a party who would have a right of indemnity against another party, but for the existence of a contractual bar enforceable by that other party against the right of indemnity being exercised, has a right to elect to pursue a claim for contribution against the other party where that claim is not barred.
26. In Cochrane v Cochrane (1985) 3 NSWLR 403, Kearney J dealt with an interlocutory application for the extension of an injunction. The plaintiff and the defendant, who had been husband and wife, had borrowed money from the defendant's mother. They had given a mortgage to the mother over their property. The mother died and the plaintiff's share in her estate was applied by the trustees to repay the mortgage. The trustees gave a discharge of mortgage to the defendant, and the plaintiff applied for an interlocutory injunction to prevent the defendant registering the discharge. The plaintiff claimed not only to be entitled to contribution from the defendant, but also to be subrogated to the mother's mortgage over the property. The question was whether the plaintiff had a sufficiently arguable case that he was entitled to be subrogated to the mother's mortgage.
27. Kearney J came to the following conclusion at page 405: As a corollary to this basis for the principle, there is no occasion for equity to intervene by way of subrogation where there is available to the third party a remedy at law or in equity sufficient to avoid an unconscionable result. In the light of these notions I am unable to accept that the doctrine of subrogation applies to the case of repayment of a mortgage debt by a co-mortgagor in the absence of a very clear reservation expressly or impliedly of such right. Each co-mortgagor being primarily liable for the whole debt, adequate justice is done between them if one has to pay the whole debt, by his entitlement to contribution…
28. It should be noted that in Cochrane v Cochrane both parties were debtors who were jointly primarily liable to the creditor to repay the amount of the debt, and each party mortgaged his or her interest in the property to secure repayment of the joint debt. Neither party executed the mortgage as a surety for the repayment of the debt, in circumstances where the other party was the principal debtor.
29. The point for which Cochrane v Cochrane is direct authority is that, in the absence of a very clear reservation of the right to enforce the mortgage, one co-debtor, who is also a co-mortgagor, will not be subrogated upon payment of the debt to the rights of the mortgagee under the mortgage against the other debtor, but will be left to its remedy in contribution. However, his Honour did state a more general proposition that equity would not intervene by way of subrogation when there was already available a remedy at law or in equity that was sufficient to avoid an unconscionable result.
30. In Bofinger v Kingsway Group Limited (2009) 239 CLR 269; [2009] HCA 44, in the judgment of the Court, the members of the High Court said (footnotes omitted): [83] Sackville AJA referred to the judgment of Kearney J in Cochrane v Cochrane. This is often, and correctly, cited as containing an orthodox statement and application of principles respecting the interrelation between the doctrines of subrogation and contribution. The remedy of one co-mortgagor who pays off the mortgage in full is not of subrogation to the rights of the mortgagee against the other mortgagor, but to contribution from that mortgagor.
31. I have had occasion to consider the effect of these authorities in a different context in Barber v De Prima [2018] NSWSC 601, which concerned the issue of whether a guarantor whose right to contribution from a co-guarantor had become statute barred could nonetheless recover the equivalent of the contribution amount by being subrogated to the rights of the creditor against the co-guarantor under a deed which were not statute barred. The point of my referring to these cases is that they illustrate that the proposition that the remedies of indemnity, contribution and subrogation are simply available to parties who are secondarily liable for the obligations of others at their choice is not straightforward, and may be highly contentious.
32. The submissions of the parties in this case have not dealt in any significant way with these questions, and as it is not strictly necessary to finally resolve GNI's alternative claim for contribution, I do not consider this to be an appropriate case for the Court to delve into this difficult area.

Can GNI recover under implied terms: Claims 6, 7 8 and 9?

1. In three of GNI's implied term claims it claims damages for breach of those terms. The other claim based upon an implied term (Claim 8) is that the Override Deed contains an implied term that cl 5.3 will not apply where the Repayment Amount is paid by accord and satisfaction. I will deal with the damages claims first.
2. These claims only arise if cl 5.3 of the Override Deed, on its proper construction, is enforceable by WLC to prevent GNI from maintaining a claim for indemnity against WLC.
3. The alleged implied terms are that WLC would nonetheless indemnify GNI in respect of the value of the shares that were sold (Claim 6), WLC would pay the Repayment Amount to UIL whether or not UIL resorted to the guarantee and indemnity granted by GNI (Claim 7), and that WLC would do what was necessary to enable the Repayment Instalments to be made "so as to ensure that GNI's shares in WLC were not sacrificed or prejudiced by WLC" (Claim 9).
4. The following propositions stated by the Judicial Committee in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 have been accepted by numerous authoritative decisions: "…for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."
5. Unsurprisingly, GNI restated these principles itself in closing submissions par 137.
6. GNI did not in its closing submissions seek to support each of the three claims for damages for breach of implied terms as made in Claims 6, 7 and 9 as pleaded in its SOC.
7. In closing submissions par 132(a), GNI relied upon an implied term that is materially the same as that pleaded in Claim 9. This is the claim that it was implied that WLC would do what was necessary to enable the Replacement Instalments to be paid to ensure that GNI's shares in WLC were not sacrificed or prejudiced by WLC. GNI submitted: … It is contended that WLC breached this term by wantonly/recklessly sacrificing the interests of GNI by failing to pay the amounts it was liable to pay to UIL under the CPA and the Override Deed when it was able to do so in light of the capital raising effected, and debt facilities secured, by WLC between July 2013 and June 2014.
8. The other implied term specifically asserted by GNI in its submissions (par 132(b)) was materially the same as that which I have treated as being the foundation of GNI's breach of good faith claim (Claim 10), which I will consider below.
9. As noted, GNI did not support the implied terms that were pleaded in the SOC as the basis for Claims 6 and 7. I infer that GNI has taken that course because it is plain that the alleged terms could not be implied into the Override Deed because to do so would be inconsistent, at the least, with condition (5) established by the Judicial Committee. If cl 5.3 of the Override Deed gave WLC an enforceable right to prevent GNI seeking indemnity from it, an implied term that WLC was nonetheless required to pay to GNI the value of the shares that were sold, and an implied term that WLC would pay the Repayment Amount to UIL whether or not UIL resorted to the guarantee and indemnity granted by GNI, would contradict the operation of cl 5.3. In my view, terms to the effect alleged by GNI should not be implied into the Override Deed. Without entering upon what was in the circumstances reasonable and equitable, in my view it has also not been established that conditions (2) and (3) have been satisfied.
10. The thrust of GNI's remaining Claim 9 appears to be to accept that, all other things being equal, cl 5.3 of the Override Deed may entitle WLC to prevent GNI seeking indemnity from it, but the restriction was only intended to operate when WLC was prevented in the ordinary course of events by its financial circumstances from being able to pay the Repayment Amount. On the assumption that the evidence establishes that WLC was able had it chosen to do so to pay the Repayment Amount from its capital raisings and debt facilities, GNI's claim is that it was implied in the Override Deed that WLC would not avail itself of its right to throw the Repayment Amount obligation on GNI by denying GNI's right of indemnity, if its decision to do so was so unnecessary as to fall within the description of a wanton or reckless sacrifice of GNI's interests.
11. Expressed in this way, it is with respect difficult to discern a difference between Claim 9 and Claim 10, the latter of which has at least the attraction that it squarely puts the claim on the basis of an implied obligation to act in good faith, reasonably and honestly, and not capriciously or for an extraneous purpose: see closing submissions par 132(b).
12. It will be more convenient to deal with the factual basis of this remaining implied term claim when dealing with the breach of good faith allegation in Claim 10, which I will do below.
13. I would not find that there was to be implied into the Override Deed a separate term that required WLC to do all things necessary to enable the Repayment Instalments to be made on time to ensure that GNI's shares in WLC were not lost to it (whether that involved any sacrifice of GNI's interests or not). The issue of whether or not there was an implied duty to act in good faith is another matter.
14. The Override Deed plainly contains an express term in cl 2.1(c) that required WLC to pay the Repayment Instalments in accordance with the table set out in that provision. I have explained above in relation to Claim 1 why I am of the view that breach of that express term by WLC does not give GNI a right to claim damages in lieu of its being entitled to enforce a right of indemnity against WLC. It cannot be necessary to imply the term asserted by GNI to give business efficacy to the Override Deed (the Judicial Committee's condition (2)) if it already contains an express term to the same effect that does not give GNI the right to the damages that it claims. The implication of the term alleged is not so obvious that 'it goes without saying' (condition (3)). I also do not accept that the implied term that is alleged is sufficiently clearly expressed so as to satisfy condition (4).
15. In the context of the Override Deed containing an express term requiring WLC to pay the Repayment Instalments by their due dates, GNI asserts the need to imply another term requiring WLC to do so where that is necessary to ensure that GNI's shares in WLC are not sacrificed or prejudiced. What is meant by "sacrificed" or "prejudiced" in this context? In any case where UIL exercises its rights against GNI under the charge, GNI's shares will be lost. That is as much a prejudice as GNI could suffer, and it could suffer it in the ordinary course. The essential reason why I reject the claim that this term is to be implied is because it assumes that objectively a line can be drawn between a failure by WLC to make Repayment Instalments that will involve the sacrifice of GNI's shares, and a failure that will not. It may be a different thing to consider whether WLC was under an implied duty of good faith, because that squarely focuses on the justification for WLC's conduct in a particular case, rather than simply distinguishing between conduct that involves a sacrifice (whatever that means) of GNI's property, and conduct that does not.

Is GNI entitled to recover for a breach of a duty of good faith: Claim 10?

1. Both GNI and WLC put detailed submissions on the issue of whether, and in what circumstances, a term that obliges the parties to a contract to act in good faith will be implied into the contract.
2. As with GNI's other claims based upon the suggested existence of implied terms in the Override Deed, it is not strictly necessary for the Court to deal with this basis of GNI's claim.
3. I propose nonetheless to consider the claim, as I have with other claims made by GNI, but I will focus my attention on those aspects of the claim that require the Court to make factual findings and decide whether the claim is made out on the basis of those findings.
4. Consequently, I will not deal comprehensively with GNI's submissions to the effect that a duty of WLC to act in good faith towards GNI should be implied into the contract, or the content of that duty in this case, if it exists. Rather, I will assume that a duty of good faith is to be implied, and that it has the content claimed by GNI. The reason that I will do this is that I have decided that, even if WLC came under an implied duty to act in good faith, and that duty had the content alleged by GNI, the evidence falls far short of proving that WLC breached that duty.
5. I will limit my treatment of the issue of whether a duty to act in good faith should be implied into the Override Deed to the following observations. GNI made the following submission at closing submissions par 155: "As revealed above, whether a duty to act in good faith is implied into a contract is an inquiry to be undertaken in light of the facts and circumstances of each case. The law has not presently progressed such that it is a recognised legal incident of all commercial contracts that each party is to act in good faith…" GNI's submissions support those observations in admirable detail. It is the complexity of the issue that persuades me that it is not warranted that it be comprehensively considered in this case.
6. There is, with respect, much to be said for the observation made by Lindsay J in Erratt v Grills [2015] NSWSC 594; (2015) 18 BPR 35,345 at 119: Where…parties have engaged in a detailed exposition of their respective rights and obligations in a formal document, there may be less call, or scope, for a generic implied term of any description.
7. As appears from the history of the dealings between the parties that is considered above, the Override Deed was a formal and structured rearrangement of the legal rights and obligations of the parties imposed by UIL to specify in relatively precise terms what those legal rights and obligations would be going into the future.
8. No implied contractual duty upon WLC to act in good faith towards GNI could have existed before the making of the Override Deed, as GNI and WLC were not both parties to any of the agreements that had been brought into existence before the Override Deed. The question is whether the terms of the Override Deed and the circumstances in which it was brought into existence gave rise to a duty of good faith on WLC's part.
9. At the time the Override Deed was made, the Gujarat Group controlled WLC. The obligations imposed upon WLC by the Override Deed were created in the circumstances that existed at the time the Override Deed was made, and the fact that the Gujarat Group subsequently lost control of WLC could not have led to a new duty springing into existence to reflect the fact that WLC had come to be in an arm's length relationship with GNI.
10. The question may be asked: in circumstances where the Override Deed obliged GNI to cause WLC to comply with its obligations to UIL under that deed, and GNI in association with the other Gujarat Group companies was able to control WLC's actions, why would an obligation be implied into the Override Deed that obliged WLC to act in good faith towards GNI? WLC had no choice but to act in the manner required by the Gujarat Group.
11. However, let me assume the correctness of the statement by Sheller JA (Powell and Beazley JJA agreeing) in Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 at 369: "The decisions in Renard Constructions and Hughes Bros mean that in New South Wales a duty of good faith, both in performing obligations and exercising rights, may by implication be imposed upon parties as part of a contract". See also Burger King Corporation v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558; [2001] NSWCA 187 at [186].
12. I respectfully follow the following observations made by Bathurst CJ (with whom Macfarlan and Meagher JJA agreed) in Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184; (2013) 29 BCL 329 at [144]: [144] Lesdor did not dispute that it was appropriate to imply into the Agreement an obligation that the parties would act in good faith towards each other. That is consistent with the approach adopted in a number of decisions of this Court: Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558 at [186]; Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 at 369; United Group Rail Services Ltd v Rail Corporation (NSW) [2009] NSWCA 177; (2009) 74 NSWLR 618 at [58]-[61]; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 at [11]-[12], [146]-[147]. However, these decisions have emphasised that the obligation does not require a party to act in the interests of the other party or subordinate its own legitimate interests to those of the other party, although it does require it to have due regard to the rights and interests of the other party. The necessity for the implication of such terms in commercial contracts has not been universally accepted: Service Station Assn Pty Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84 at 91-98; Royal Botanic Gardens & Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45 at [88], [155]. However, it is not necessary to discuss the matter further in the present case.
13. I do not ignore the proposition that: "The question whether a standard of good faith should be implied generally to contracts has not been resolved in Australia": per Kiefel J (as her Honour then was) in Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32 at [107].
14. It is easy to say that a duty that requires the parties to a contract to act in good faith is to be implied into a contract. The difficulty is always likely to be to determine what the performance of that duty will require in the particular case. Good faith is an inherently nebulous concept.
15. In addition to the observations made by Bathurst CJ in Cordon Investments concerning the content of the duty of good faith, I will have regard to the summary given by Allsop CJ (with whom Besanko and Middleton JJ agreed) in Paciocco v Australian and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50 at [288]: [288] The usual content of the obligation of good faith that can be extracted from cases such as Renard Constructions, Hughes Bros Pty Ltd v Trustees of Roman Catholic Church (Archdiocese of Sydney) (1993) 31 NSWLR 91, Burger King Corporation v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558, Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349, and United Group Rail Services Ltd is an obligation to act honestly and with a fidelity to the bargain; an obligation not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for; and an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and to the provisions, aims and purposes of the contract, objectively ascertained.
16. It is difficult to try to separate the question of the content of any implied obligation to act in good faith from the manner in which it is alleged that the duty has been breached.
17. It is not a straightforward matter to analyse the SOC to identify precisely what the alleged breach was. It is alleged in par 65 that WLC did not act in good faith by reason of the matters pleaded in pars 81 to 86, and it is then said that the breach arose from WLC "not paying out the debt where the security shares had not yet been sold and funds became available to [WLC]". It then alleges that WLC was "under an ongoing obligation to both UIL as the creditor and [GNI] to…not prejudice the security shares prior to their sale by UIL and…not to rest on the guarantee and indemnity and the security provided by [WLC]". An almost identical allegation is made in par 67.
18. GNI pleads in pars 81 to 86, in substance, that after UIL became a substituted creditor in the winding up of WLC, WLC settled UIL's claim by preferring its own interests over the interests of GNI by not remedying the default under the Override Deed so as to prevent the transfer of the Security Shares from Argonaut to "the Defendant" (which must be intended to refer to UIL). GNI pleads that between November 2013 and June 2014, WLC conducted a number of capital raisings that raised $135.92 million.
19. In essence, GNI pleads that WLC acted in breach of the duty of good faith when, in order to avoid an order for its winding up, it settled UIL's claim on terms that UIL would sell GNI's shares in WLC in partial repayment of WLC's debt, in circumstances where WLC had available sufficient funds to repay the whole amount the subject of the settlement from the substantial additional capital that it had raised. Using its own words, GNI's claim is that WLC "consciously and wantonly sacrificed GNI's interests when it was capable of repaying UIL in full and was motivated by the extraneous matter of the money purportedly owed by Gujarat India to WLC": closing submissions par 162.
20. The following matters are relevant to the determination of whether WLC failed to act with good faith towards GNI in the manner claimed by GNI.
21. First, the question whether WLC has breached an implied duty of good faith that it owed to GNI only arises in the context where it is found that, on the proper construction of the Override Deed, WLC had a contractual entitlement to prevent GNI claiming a right of indemnity from it following UIL's sale of GNI's shares in WLC, and the application of the proceeds to the reduction of the debt owed by WLC to GNI.
22. In that context, it is difficult to see why (to use Bathurst CJ's terminology) WLC would not have been required to "subordinate its own legitimate interests to those of" GNI, if it had not enforced the contractual right that it had under cl 5.3 of the Override Deed. Further, in the terms used by Allsop CJ, how could WLC have undermined the bargain made by GNI, if GNI had agreed that WLC could prevent it from obtaining indemnity from WLC? WLC's insisting on the application of cl 5.3 would, on the assumption being made as to the effect of that provision, involve the implementation of a benefit for which WLC had bargained, and far from the exercise undermining any benefit bargained for by GNI, it would involve the application of a detriment that GNI had accepted.
23. As WLC put it in its closing submissions at par 51: "Honesty and fidelity mandates giving effect to [cl 5.3], not sidestepping it".
24. In my view this argument is sufficient by itself to justify a finding that, on the assumption that a duty to act in good faith bound WLC, it did not contravene that duty as alleged.
25. I am also of the view, however, that the evidence does not substantiate the claim that WLC breached the duty of good faith, even upon a consideration of the circumstances in which WLC acted.
26. WLC must, of course, be treated as a corporate entity separate from the company groups who controlled it from time to time. However, provided appropriate care is taken, it may be proper to have regard to the facts that demonstrate which parties had control of WLC at relevant times.
27. At the heart of GNI's case is the proposition that, as a result of the substantial amounts of share and loan capital raised through the efforts of the Jindal Group, in conjunction with the circumstances in which the Jindal Group obtained majority control over WLC from the Gujarat Group, WLC acquired funds that were sufficient to enable it to repay the whole of its debt to UIL from its own resources, and furthermore that it was a conscious and wanton sacrifice of GNI's interests that it did not do so.
28. The reality is that during the period when the Gujarat Group controlled WLC, it caused WLC in broad terms to act in the interests of that group. The Gujarat Group caused WLC to enter into the CPA and the Override Deed. The business of WLC was to mine coal, much of which was sold to Gujarat India or other companies within the Gujarat Group. Gujarat India accumulated a very substantial debt to WLC in respect of coal that it did not pay for. Whatever the significance of the creditor management and farming that I have described above that took place while the Gujarat Group was in control of WLC, the fact is that the Gujarat Group was not able to adequately capitalise WLC so that it could pay its creditors generally, and UIL in particular.
29. By the time, in about November 2013, when the Jindal Group acquired majority control of WLC, the status quo then was that WLC was indebted to UIL under the Override Deed, and it did not have the financial resources to repay that debt. That circumstance was caused by the manner in which WLC was controlled by the Gujarat Group.
30. At the heart of GNI's claim that WLC acted in bad faith, and into the bargain did so in a wanton and sacrificial manner, is the proposition that the Jindal Group ought to have provided sufficient capital to WLC to enable it to repay UIL in order to spare GNI's discomfort from UIL's enforcement of the charge created by the Security Deed.
31. It must be remembered that, by the time the Jindal Group acquired majority control of WLC, the following events had occurred in relation to the treatment of GNI's shares in WLC that had been charged to UIL. Clause 14 of the CPA expressly provided that, if WLC was unable to repay the money it owed to UIL, UIL would invoke the security provided under cl 13, and use the proceeds of sale to reduce the debt. Recital I to the Override Deed recited that the Security Shares would be transferred to UIL in accordance with the Security Deed, if WLC did not pay the Repayment Instalments on time. Clause 6.1(a) of the Override Deed contained an agreement that, if WLC failed to pay any Repayment Instalment, Argonaut would transfer the Security Shares to UIL's trading account. On 22 September 2013, after default was made by WLC, Argonaut advised WLC that UIL had instructed it to transfer the shares into the designated account of UIL. On 27 September 2013, UIL advised WLC that it had taken possession of the shares.
32. Although UIL's interest in GNI's shares in WLC never lost the character of being a charge over those shares until they were sold, from a commercial perspective, a series of events had occurred where by reason of the Gujarat Group, in breach of its own obligations to UIL under the Override Deed, not being able to fund WLC's obligation to repay UIL, in practical terms a sequence of steps occurred whereby UIL obtained 'possession' of those shares.
33. From the perspective of WLC under the control of the Jindal Group, and continuing to battle for its corporate existence by using capital supplied or organised by the Jindal Group, it would be difficult to conclude that it was an act of bad faith by WLC to not raise even more additional capital in order to fund the payment to UIL to release GNI's shares from UIL's 'possession', which was a state of affairs for which the Gujarat Group was entirely and solely responsible.
34. GNI's claim that WLC acted in bad faith, in not paying the whole of the settlement amount payable to UIL under the Deed of Settlement and Release, is based upon evidence that WLC was able to raise a substantial amount of equity and debt capital in the period June 2013 to June 2014. GNI summarised the evidence concerning the transactions relevant to the capital raising in a table in its closing submissions (also marked as MFI 13). The following tables are edited versions of the table prepared by GNI.
35. WLC raised additional equity of $204.8 million. I will only include the closure dates stated in the table, and not the announcement dates. Issuance Closure Date Amount Placement to Jindal Group ($.20 per share) 12 November 2013 AUD 65.7 M Rights issue ($.08 per share) 10 January 2014 AUD 58.3 M Rights issue ($.08 per share) 6 February 2014 AUD 26.4 M Placement to Axis Bank ($.08 per share) 31 March 2014 AUD 3.2 M Rights issue ($.075 per share) 16 May 2014 AUD 29.4 M Rights issue ($.06 per share) 17 June 2014 AUD 21.8 M TOTAL AUD 204.8 M

1. The table prepared by GNI also contained a list of the debt facilities entered into by WLC. There was no evidence of the terms upon which those facilities were made available to WLC. Given WLC's parlous financial position, the Court would infer that by some means the Jindal Group supported WLC in respect of the loans.
2. The first debt facility listed by GNI is described as an "Axis Bank led consortium of lenders (refinance of existing facility)". The amount of the facility is listed as USD 118.6 M with an option to increase the facility to US$140 M. I do not accept that it is appropriate to take into account the part of this facility that refinanced an existing facility. It may be inferred that the existing facility was committed to financing matters other than the repayment of UIL. Accordingly, I will only include in the table of debt facilities the additional borrowing capacity of USD 21.4. Facility Date Facility Size Axis Bank Late 2013 USD 21.4 M option Axis Bank Late 2013 USD 10 M plus 50 M option JSPM 26 November 2013 USD 50 M TOTAL USD 60 M plus 71.4 M option

(The totals in the table above are not consistent with those set out in GNI's table, but it is not necessary to dwell upon that issue).

1. GNI's claim assumes that some of the equity raised or the money borrowed by WLC with the support of Jindal, was available to pay UIL in full.
2. WLC tendered evidence concerning how it spent the proceeds of the rights issue that closed on 10 January 2014 and raised $58.3 million. It did not explain how it expended the other equity raised or the additional money that it borrowed. Given the likely circulation of capital within a business such as that operated by WLC, it would have been a substantial exercise for WLC to have attempted to prove all of the transactions relevant to the question of whether it had spare funds to pay UIL in full from its own resources.
3. In conjunction with GNI's table that I have reproduced above showing the amounts that WLC was able to borrow, it introduced the quaint concept of "headroom", which I broadly understand to refer to financial resources that were available to WLC, from which it could have paid UIL itself had it chosen to do so. GNI's point was that if WLC had unused borrowing capacity, it could have drawn down the full amount needed to repay UIL. The "headroom" would at least extend to the unused borrowing facilities of US $71.4 million that WLC had the option to call upon.
4. GNI's claim that it was a breach of WLC's duty to act in good faith for it not to have used the "headroom" to repay UIL involves the proposition that the directors of WLC, an apparently insolvent company, ought to have made a new borrowing from its bankers in order to repay an existing borrowing, in order to relieve GNI from the burden of the Security Deed that was entered into before the Jindal Group acquired majority control of WLC, in the circumstances where cl 5.3 of the Override Deed is assumed to prevent GNI recovering the value of the charged shares from WLC.
5. The evidence includes WLC's Half-Year Report for the period ended 30 September 2013, and WLC's Annual Report for the year ended 31 March 2015, which includes corresponding financial information for the year ended 31 March 2014. These dates approximate respectively the time when majority control of WLC passed from the Gujarat Group to the Jindal Group, and the date of the Deed of Settlement and Release.
6. The financial statements show that, as at 30 September 2013, WLC had total current assets of $113,454,000 and total current liabilities of $578,787,000, a current account deficiency of $465,333,000. As at 31 March 2014, the equivalent figures were current assets of $23,086,000 and current liabilities of $680,153,000. The deficiency was $657,067,000.
7. In Note 6 to the 30 September 2013 Half-Year Report, concerning the trade and other receivables entry in the list of current assets, there is the statement: "Trade and other receivables above includes $63,036,000 from [Gujarat India] and associates".
8. The equivalent note (Note 12) records as at 31 March 2014 an impairment of receivables of $68,751,000 and states: "The impairment loss during the year ended 31 March 2014 was recognised on the basis that the amounts outstanding from [Gujarat India] and its group may not be recoverable. However, management are actively pursuing collection of the outstanding amounts".
9. As noted above, on 27 March 2017, this Court entered judgment in favour of WLC against Gujarat India for USD 59,718,101.53, of which the principal sum was USD 47,440,609.97 and interest up to judgment of USD 12,277,491.56. Gujarat India has not paid any amount of the judgment.
10. It is also relevant to take into account what was happening at the time in the winding up proceedings against WLC.
11. UIL, as substituted creditor, withdrew from the winding up action in this Court, founded on the debt due under the Override Deed, on 15 May 2014. According to par 75 of Mr Jagatramka's first affidavit, on the same date a further creditor was substituted as plaintiff in the application to wind up WLC.
12. The evidence does not explain how WLC survived the winding up application, as it plainly did. The evidence justifies the inference that WLC's survival did not simply involve finding the money to pay out UIL. There was at least one further creditor in the queue who was prepared to be substituted for UIL to continue to pursue the winding up application. WLC had more pressing financial needs to deal with than to risk further insolvency by borrowing additional money to repay UIL from its own resources.
13. As noted, the Deed of Settlement and Release was made on 15 May 2014. Statutory demands that were included in Tab 73 of the Court Book include a statutory demand served on 24 April 2014 for $600,000.98. Any thought that WLC's financial situation recovered to something approaching normality tends to be undermined by the receipt on 2 and 22 October 2014 of statutory demands for $2,816,543.61 and $2,964,369.49 respectively. Between 25 February 2015 and 20 July 2015, WLC received 17 statutory demands for a total of $5,963,280.29. The largest amounts claimed were $2,350,555.47 on 25 February 2015 and $1,173,253 on 1 July 2015.
14. Finally, the service by GNI of its own statutory demand on WLC is material to the issue of whether WLC acted in bad faith in failing to find the money to pay the whole of its debt to UIL, in a way that did not involve UIL selling GNI's shares in WLC to apply against the debt. GNI served a statutory demand on WLC dated 20 March 2014 claiming a debt of $6,570,394.06 (Exhibit 4). GNI cannot have it both ways. It has claimed that it had a right to serve that statutory demand based upon the debt that it now seeks to recover in these proceedings. If GNI was acting responsibly when it served the statutory demand, it must have believed that WLC was insolvent, as the only proper purpose for GNI to serve the statutory demand was to gain the benefit of the presumption of insolvency that would arise on WLC's failure to comply with the demand, in subsequent proceedings by GNI to wind up WLC. As it was GNI's own position that WLC was insolvent, GNI cannot properly argue that it was a breach of the duty of good faith for WLC to fail to borrow additional money to pay out UIL for GNI's benefit.
15. Accordingly, if it be correct to assume that the Override Deed imposed upon WLC some implied duty to act in good faith towards GNI, as a matter of fact GNI has not established on the evidence that WLC breached that duty.

Is GNI entitled to restitution: Claim (11)?

1. GNI alleges in par 122 of the SOC an alternative claim to be entitled to reimbursement or recoupment of the value of the 150,000,000 shares in WLC that were sold by UIL, on the basis that WLC has been unjustly enriched. The basis of the unjust enrichment alleged is that: (a) the debt that it owed to UIL was partly satisfied by UIL's "recourse to the guarantee and security when in fact funds became available to pay" UIL; (b) WLC knowingly continued to accept the benefit of the guarantee, indemnity and security provided by "the Defendant" (which must be a mistake for "the Plaintiff"); (c) WLC could have paid out the debt and was under an ongoing obligation to do so; and (d) this was unjust in the circumstances
2. I have emphasised aspects of GNI's claim that WLC has been unjustly enriched to highlight how that claim depends upon a finding that WLC had the financial capacity to repay the whole of its debt to UIL from its own resources, and that it was unjust for it to fail to do so. Purely at the level of fact, I consider the allegation that WLC's conduct was unjust as being equivalent to the allegation considered above that WLC failed to act in good faith towards GNI. For the reasons that I have given above in my consideration of Claim (10), I find that WLC's reliance upon cl 5.3 of the Override Deed (which, for the purposes of GNI's Claim (11) must be assumed to be enforceable by WLC) would not in fact have been unjust.
3. However, a more serious flaw in Claim (11) is the underlying assumption that, as a matter of legal principle, an action for restitution based upon the principle of unjust enrichment is available to GNI in circumstances where (as already found) it is assumed that WLC had a contractual entitlement to enforce cl 5.3 of the Override Deed; and its conduct in doing so does not involve any breach of any implied duty owed to GNI, whether arising out of the Override Deed or otherwise. It is a fatal impediment to this claim that the judgment of Mason CJ and Deane, Toohey, Gaudron and McHugh JJ in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; [1992] HCA 48 at 378, 379, (following Deane J in Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 256, 257) authoritatively establishes that unjust enrichment is not "a definitive legal principle according to its own terms and not just a concept", with the result that "it is not legitimate to determine whether an enrichment is unjust by reference to some subjective evaluation of what is fair or unconscionable". As their Honours say: "…recovery depends upon the existence of a qualifying or vitiating factor such as mistake, duress or illegality". In the context of the present case, that means that, assuming that WLC is entitled to enforce cl 5.3 of the Override Deed, after GNI has failed on the conventionally recognised grounds for seeking reimbursement from WLC, there is no catchall ground for recovery that depends upon the Court's notion of what is fair and just.

GNI's second claim for repayment of $6,565,398.06

1. GNI's second claim against WLC is for a debt of $6,565,398.06, plus interest. GNI pleaded an alternative claim for $5,874,848.88 in its statement of claim. I will deal with this alternative claim below.
2. WLC accepted that, on 24 June 2013, the sum of US $7,962,974.88 (equivalent to $8,653,524.06) was paid from an account of GNI with Axis Bank into an account held by WLC in the same bank. A further $690,549.18 was paid by GNI to WLC on the same date. The amount of GNI's claim equals the total of the two payments, after allowing for repayments by WLC that total $2,088,126.
3. GNI makes its claim on two alternative bases. The first arises out of the circumstances in which WLC made a rights issue to its shareholders on 22 May 2013, by which it hoped to raise $68,806,934. On a date in May 2013, WLC entered into an underwriting agreement with Wonga, under which Wonga agreed to underwrite an amount of $44,023,758. Clause 1.2 entitled Wonga to appoint sub-underwriters to sub-underwrite the offer. GNI claims that, on 22 June 2013, it entered into a sub-underwriting agreement with Wonga, under which it committed to sub-underwrite up to 30% of any shortfall in the take-up of the rights issue. The rights issue substantially failed, and only $35,134.80 was raised. GNI claims that it paid the US $7,962,974.88 to WLC on 24 June 2013 in anticipation of being called upon by Wonga to honour its obligation under the sub-underwriting agreement (as it was permitted to do by cl 8(c)). The payment was made in anticipation of being issued by WLC with the appropriate number of shares in WLC. On 3 July 2013, the underwriting agreement was cancelled by WLC and Wonga. Consequently, under cl 6 of the sub-underwriting agreement, that agreement also terminated. The relevant shares were not issued by WLC to GNI. GNI says that the consideration for the payment totally failed. GNI sues in debt for the return of the money as money had and received to GNI's use, and on a number of other grounds.
4. The second basis for GNI's claim is simply one for money had and received on the basis that the money was paid by GNI to WLC without consideration and in the absence of any objective intention that WLC would be entitled to retain the money.

Payment by GNI to WLC

1. The circumstances in which the payment was made from GNI's account to the account of WLC were relevantly as follows.
2. WLC was in the generally parlous financial position that has been outlined above at the beginning of this judgment.
3. By 19 June 2018, which was the closing date for the rights issue, it had become clear that the rights issue had substantially failed. The Gujarat Group companies had not been able to finance the exercise of the rights in respect of their shares in WLC. Jindal had chosen not to do so in respect of its rights.
4. WLC was, among other loan facilities, liable under loan facilities issued to it by Axis Bank, on its own behalf or as the leader of a consortium, for US $175,000,000, US $50,000,000, US $100,000,000 and US $10,000,000 (the loan facilities are listed in the particulars to par 99 of WLC's defence to the SOC).
5. By June 2013, WLC had received notices that it was required to pay substantial amounts to Axis Bank as instalments and interest payments to lenders in the Axis consortium, that included the following payments US $824,687.50, US $2,421,560.50, US $1,507,250, US $1,507,250, US $750,750, US $753,750, US $753,750 and US $203,086.94
6. WLC has claimed in the proceedings that all of these loan facilities were guaranteed by Gujarat India. The evidence does not strictly prove that claim, although given WLC's financial position, it is highly probable that companies in the Gujarat Group were required by the lenders to guarantee the loan facilities issued to WLC. In any event, the companies in the Gujarat Group that held shares in WLC had a financial interest in its survival.
7. On 13 June 2013, GNL, which was GNI's parent company, obtained the agreement of Axis Bank to lend to it US $10,000,000 "for investment by way of loans & advances to [WLC] for capital expenditure and development of" WLC's coal mines, as stated in the term sheet.
8. The parties accepted that the original intention was, after Axis Bank had advanced the net amount of the US $10,000,000 to GNL, GNL would have paid the money directly to Wonga for on-payment to WLC. Notwithstanding the restriction on the use of the borrowing in the Axis Bank term sheet, the money was going to be used by Wonga to acquire shares in WLC under the rights issue. There was, however, what WLC described in its closing submissions as a "glitch" in implementing this intention, because for reasons that were not specified an account with Axis Bank in the name of Wonga could not be established in a timely way. The parties accepted this position, although the evidence for it was indirect, by means of a paragraph in an affidavit of Mr Jagatramka referring to a general comment on the subject by Mr Sharma in an affidavit made by him in the proceedings to set aside GNI's statutory demand.
9. WLC had a paramount need to pay the instalments and interest payments to its lenders. I infer that failure to make the payments would have triggered defaults under many of its loan facilities. WLC, in par 81 of its closing submission, deployed the observation made by Mr Jagatramka (T 79.14-30) that the payments had to be made to "prevent [WLC] collapsing that very day".
10. As it happened, GNI either had an account with Axis Bank or there was no impediment to an account being established quickly.
11. The bank statements issued by Axis Bank establish that on 24 June 2013 the proceeds of the loan, in the amount of US $9,506,000 were paid into GNL's account. On the same day US $7,962,974.88 was transferred out of the account into the account of GNI, and from that account the sum was transferred into the account of WLC.
12. Axis Bank's statement for WLC's account shows that on 24 June 2013 payments were made out of the account (which were more fully described in par 104 to WLC's defence to the SOC), as follows: On 24 June 2013, [WLC] transferred the sums of: a. US $5,275,019.89 to Axis Bank Dubai branch b. US $1,466,945.90 to various banks, namely: i. Exim $611,227.46; ii. UCO $244,490.98; ii. DBS $488,981.97; and iv. Afra Asia $122,245.49. c. US $1,170,846.44 to Axis Bank Hong Kong branch; d. US $20,000 to Axis Bank Dubai branch; e. US $30 to Axis Bank Hong Kong branch; f. US $18,000 to Axis Bank Singapore branch; and g. US $30 to Axis Bank Hong Kong branch.
13. The money that GNL borrowed from Axis Bank was thus paid to GNI and then transferred to WLC, to permit WLC to meet urgent obligations to pay instalments and interest to Axis Bank, for on-payment in some cases to members of the consortium led by Axis Bank.
14. It should be noted at this point that one of the claims made by WLC in defence of GNI's claim was that, in the circumstances outlined above, GNI's bank account was merely a "conduit" for a payment made by GNL to WLC.
15. At the end of the hearing, WLC accepted that the payments that were made out of its account on 24 June 2013 were made for its own benefit, because the payments were made in respect of WLC's own obligations to its bankers. As will be seen, WLC had maintained the argument that the payments were in reality made for the benefit of Gujarat India, and had discharged obligations of the parent company.
16. The principal defences pleaded by WLC were based upon change of position and set off. I will return to these defences in detail below.
17. As will be seen, the defences pleaded by WLC were relatively complicated factually. It will be convenient to anticipate a number of issues by dealing with the following matters.
18. The first, and primary consideration, is that the evidence establishes that WLC has treated the payment to it by GNI in WLC's own accounts as giving rise to a debt payable by WLC to GNI.
19. On 21 February 2014, after majority control of WLC had passed from members of the Gujarat Group to the Jindal Group, Mr Jasbir Singh, the chairman of the board of WLC, wrote a letter to Mr Kannan of the Gujarat Group, in which he listed various obligations that he claimed existed as between WLC and members of the Gujarat Group: see the final two pages of exhibit 4. That list was as follows: As on 30.09.2013 As on 31.12.13 PARTICULARS AUD AUD GNM & GNW to Receive from Gujarat Sales & Dr Note (after adjustment) 34,887,827 30,936,999 Bill Discounting facility 21,480,287 5,089,543 Loan to Gujarat 8,873,713 29,075,383 Loan to NRE RESOURCES PTY LTD 3,649,058 3,649,058 Loan to Gujarat NRE Limited 230,000 230,000 Loan to Wonga Coal Pty Ltd 541,993 541,993 Dr note to Gujarat NRE Coke Ltd 4,350 4,350 69,667,227 69,527,326 GNM & GNW to Pay GNCL Loan from Gujarat NRE India Pty Ltd 6,570,400 6,570,400 Loan from NRE Coal (NSW) Pty Ltd 6,500 6,500 Loan from Wonga Coal Pty Ltd 4,000 4,000 6,580,900 6,580,900 O/S AS ON 63,086,327 62,946,456

1. It will be seen from the entry in this list described as "Loan from Gujarat NRE India Pty Ltd" that WLC acknowledged that it was liable for a debt to GNI for the amount of $6,570,400. The letter is an admission of the existence of the debt now claimed by GNI.
2. WLC's ledgers were not put in evidence, so there was no business record to establish directly how WLC accounted in its books for the receipt of the USD 7,962,974.88 on 24 June 2013. However, Mr Sharma conceded in cross-examination that WLC would have accounted for the receipt as a debt payable to GNI.
3. It is not surprising that WLC, a company listed on the ASX, accurately recorded payments and receipts as between it and companies in the Gujarat Group as giving rise to debts (unless, of course, they could legally be characterised in some other way, such as a payment of share capital). In so far as WLC's financial statements and annual reports were in evidence, they were entirely consistent with WLC having carefully accounted for debts owed to it by, and owed by it to, companies in the Gujarat Group.
4. For example, at par 259 above, in connection with my consideration of GNI's breach of good faith claim, I set out that in Note 6 to WLC's 30 September 2013 Half-Year Report, it was recorded that Gujarat India and associates owed WLC $63,036,000.
5. Given that WLC was a publicly listed company, and was apparently managed having regard to the need to apply proper accounting standards, the Court is entitled to proceed upon the basis of the prima facie correctness of how transactions have been entered in WLC's books.
6. As stated, WLC has argued that GNI was merely a "conduit" for the payment of the US$7,962,974.88 to it. It is not clear what the concept of a conduit is said to mean in this context. It may be that A could pay $X to B for the purpose of B paying the money to C, where B acts as the agent for A, and the debt is created between A and C. However, for it to be concluded that C is indebted to A rather than to B, evidence of the agency arrangement would be necessary.
7. Where, however, all that is known is that A has paid the $X to B, who has paid it to C, the prima facie position is that C is indebted to B, in the absence of evidence that would require categorising the payment as being a transaction other than a loan, and the legal relationship being between A and C rather than B and C. Absent any other evidence, B will have an action for money had and received against C.
8. It is in this context that WLC has recorded in its own accounts that it was indebted to GNI for $6,570,400. Furthermore, by its 21 February 2014 letter (referred to above at par 294), it acknowledged that indebtedness.
9. Those matters may not have any other legal effect than admissions, and if so it would be available to WLC to prove that the transaction had some other legal character, than of creating a debt owed by WLC to GNI. However, the Court is entitled to give weight to the appearance that the relevant accounting officers of WLC gave due consideration to the proper accounting treatment of the transaction, and decided that it should be accounted for as a loan. The Court is entitled to infer that the treatment of the payment as a loan from GNI was ultimately reflected as such by WLC in the financial statements accepted by its directors, and published to shareholders and the market.
10. The practical source of the problem is Gujarat India's insolvency and winding up, in circumstances where the judgment of this Court referred to in par 265 establishes that as at 27 March 2017, Gujarat India was indebted to WLC for US $59,718,101.53. WLC faces the prospect of being ordered to pay a substantial amount to a subsidiary of Gujarat India, being GNI, in circumstances where the dividend it may receive in a winding up of Gujarat India is doubtful.
11. A theme that features strongly in WLC's submissions is the proposition that Mr Jagatramka was the controlling mind of WLC, and caused WLC to act frequently in the interests of the Gujarat Group, or individual companies in the group, and not in WLC's own interests.
12. The evidence does support a finding that Mr Jagatramka had a commanding personality, and frequently made significant management decisions on behalf of WLC, so to speak, on the run.
13. That is to a considerable extent unsurprising, given the desperate measures that were necessary, and being taken, to keep WLC afloat financially. I have recorded some of those events above.
14. A vignette from Mr Sharma's evidence is telling. At par 27 of his 6 July 2016 affidavit he related a conversation that he had with Mr Jagatramka in early March 2013 to the following effect: In or about early March 2013, I had a conversation with Mr Jagatramka to the following effect: Mr Jagatramka: The way we are operating cannot continue for long. My life is hell and your life is hell at the moment, and the directors are at risk too. I have decided to sell our Australian operations, at least one mine, if not both. I am going to talk to Jindal about this. Me: I agree that we cannot continue like this. Selling the Australian operations will help you to focus and save the Indian operations. Otherwise, both are at risk. Mr Jagatramka: I've thought about it. I will start talking to Jindal.
15. WLC was a publicly listed company, with directors other than Mr Jagatramka, and responsible executives such as Mr Sharma. While Mr Jagatramka is likely to have had a paramount influence on many of the decisions made on behalf of WLC, a finding would not be warranted in relation to the events relevant to these proceedings that WLC acted solely at the direction of Mr Jagatramka, and in the interests of Gujarat India and other companies in the Gujarat Group, rather than in what was perceived to be its own interests. WLC did not attempt to establish a case to the contrary of this proposition in the cross-examination of Mr Jagatramka. Mr Sharma and Mr Firek (another director of WLC) did not give evidence that they were accustomed to act at the direction of Mr Jagatramka.
16. The crucial point is that the propriety of Mr Jagatramka's conduct is not on the pleadings an issue in this case. There is no claim that Mr Jagatramka breached his fiduciary duties to WLC in some manner for which GNI is responsible. WLC has based its change of position and set-off defences in part on the control exercised by Mr Jagatramka of WLC and other companies that were in the Gujarat Group, but it has not alleged that GNI is responsible for any wrongdoing on Mr Jagatramka's part.
17. WLC also put submissions to the effect that the payments made by WLC to Axis Bank and the members of the consortium led by it were made for the benefit of Gujarat India, because Gujarat India was a guarantor of WLC's indebtedness to the lenders.
18. Even if that were true (and it has not strictly been proved), WLC was the principal debtor. While a guarantor may receive a commercial benefit from lending money to the principal debtor to fund a payment by the debtor to the creditor, by avoiding being called upon under the guarantee, the law does not recognise the transaction as conferring a benefit on the guarantor rather than the debtor.

The sub-underwriting agreement

1. As it has happened, the fact that GNI has based its claim for repayment of the $6,565,398.06 upon a failure of consideration following the termination of the sub-underwriting agreement has led to substantial complications in the resolution of the dispute between the parties.
2. Mr Sharma gave evidence that he and the directors of WLC other than Mr Jagatramka did not become aware of the existence of the sub-underwriting agreement in June 2013 at or about the time it was allegedly made.
3. Mr Sharma said that he only learned of the supposed agreement as a result of evidence given by Mr Jagatramka in his affidavit dated 12 March 2016, in defence of WLC's application in the Federal Court for an order setting aside the statutory demand served by GNI. In that affidavit, Mr Jagatramka said: 115. On 22 June 2013, GNI and Wonga Coal entered into a Sub-Underwriting Agreement pursuant to which GNI agreed to sub-underwrite up to 30% of the shortfall under the Offer (being the shares not subscribed for under the Offer)(the "Shortfall") up to the sum of $13,207,127.00 (the "Sub-Underwriting Agreement"). 116. Exhibited hereto and marked "AKJ 29" is the Sub-Underwriting Agreement dated 22 June 2013 between Wonga Coal Pty Ltd and Gujarat NRE India Pty Ltd. 117. On 24 June 2013 and pursuant to the terms of the Sub-Underwriting Agreement, GNI advanced to WLC the sum of $7,962,974.88 to partially meet its sub-underwriting commitment in respect of the rights issue (the "Commitment Amount"). 118. Exhibited hereto and marked "AKJ 30" is record of transfer from GNI […] to WLC […] in the sum of USD 8,653,524.06 on 24 June 2013. 119. On 24 June 2013, WLC converted the above amount of USD 8,653,524.06 to AUD 7,962,974.88 by adjusting the exchange rate difference of AUD 690,549.18.
4. In its defence to the SOC, WLC denied that GNI and Wonga entered into the sub-underwriting agreement on or about 22 June 2013, or at all. At par 84, in addition to the general denial, WLC denied that the document purporting to be a sub-underwriting agreement was signed on about 22 June 2013, or that it was intended to give rise to legally enforceable obligations. It pleaded that the sub-underwriting agreement was not referred to in any contemporaneous business record. It was not known to the directors of Wonga, other than Mr and Mrs Jagatramka, until Mr Jagatramka's affidavit in the Federal Court proceedings was received. WLC alleged that there was no notice of any directors meeting of Wonga called to consider or approve the entry into of the sub-underwriting agreement. The sub-underwriting agreement was signed by Mr Jagatramka on behalf of Wonga and Mr Jagatramka and his wife on behalf of WLC. WLC pleaded that there was no legitimate commercial purpose in the parties entering into the alleged sub-underwriting agreement, and finally that "the document purporting to be a Sub-Underwriting agreement was a sham and fabricated document drafted and executed well after 22 June 2013".
5. WLC's defence to the SOC does not, however, on my reading, contain any allegation to support the claim that, if the sub-underwriting agreement was fabricated, GNI has no legal basis for recovering the amount claimed to have been paid under it from WLC.
6. In my view the resolution of the dispute as to the genuineness of the sub-underwriting agreement does not matter.
7. When WLC did not know of the alleged existence of the sub-underwriting agreement, it characterised the payment of the US $7,962,974.88 as giving rise to a debt owed to GNI, which has partially been repaid. It did that correctly. If WLC proves that the sub-underwriting agreement was a fabrication, the basis upon which WLC originally accepted that the payment gave rise to a debt to GNI will continue.
8. An acceptance of the validity of the sub-underwriting agreement will only change the legal basis of the existence of what will be in essence the same debt. The basis would become the total failure of the consideration for which the payment was made, being the failure of WLC to issue shares to GNI following the cancellation of the underwriting agreement between WLC and Wonga.
9. I have not found any submission made by WLC as to why this conclusion is wrong.
10. In its closing submissions at par 83, WLC said: "[GNI] nails its colours to the mast in relying on the Sub-Underwriting agreement as the basis for recovery".
11. That submission ignores the reality that GNI has pleaded an alternative claim based simply on the fact that it paid the money to WLC for no consideration in circumstances where ordinarily it would be entitled to recover the money as money had and received.
12. Nonetheless, the dispute acquired a life of its own and was the most intensely fought single issue in the case.
13. I have come to the view that it is necessary for the Court to resolve the issue, but that it is neither necessary nor warranted that the Court explore the issues contested by the parties in the detail engaged in by them.
14. I will therefore confine my attention to what I consider to be the principal issues.
15. The question is whether Mr Jagatramka fabricated the sub-underwriting agreement for the purpose of defeating WLC's application to set aside GNI's statutory demand, and whether he has thereafter in his affidavits and evidence to the Court maintained a bald-faced lie as to the authenticity of the document.
16. I accept GNI's submission that the Court should not make what is in effect a finding of fraud against Mr Jagatramka or GNI except on the basis of clear and cogent evidence: see Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 at 361-362 and Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170; [1992] HCA 66 at 171.
17. While I acknowledge that there are reasons to question the authenticity of the sub-underwriting agreement, I have not found WLC's claim proved to the requisite standard.
18. There are, no doubt, many questionable aspects of the whole transaction that led to the sub-underwriting agreement being made. There is no evidence that the companies in the Gujarat Group who held shares in WLC had real prospects of taking up their rights in the rights issue. There is no evidence that Wonga had the assets or borrowing capacity to honour its obligations under the underwriting agreement. There is a real possibility that the rights issue was initiated on a 'hope for the best' basis to keep WLC's creditors at bay. It was known by 19 June 2013, when the rights issue closed, that it had failed. GNI entered into the sub-underwriting agreement at a time when it was clear that, if the underwriting agreement remained in effect, GNI could be called upon to take up 30% of the shortfall, which was known to be about $13,207,127. There was originally no intention that GNI would participate in the rights issue in any other capacity than a shareholder in WLC taking up its rights, if funding became available. The only trigger for GNI entering into the sub-underwriting agreement could have been the realisation that the money borrowed by GNL from Access Bank would have to be channelled through GNI, because it would not pass through an Access Bank account in the name of Wonga. There is no explanation of why GNL did not pay the money borrowed directly to WLC. If the total amount of the available funds was limited to the net borrowing of the US $10,000,000 from Access Bank, there is no explanation for why the sub-underwriting agreement provides for GNI to sub-underwrite up to 30% of the shortfall. At the date of the sub-underwriting agreement, 22 June 2013, GNI did not have the funds to pay to WLC any more than the US $7,962,974.88 that it in fact paid.
19. I do not, however, consider that the strange and unexplained aspects of the transaction warrant a finding that the sub-underwriting agreement was fabricated at a later time.
20. A primary reason why I am not prepared to accept that the sub-underwriting agreement was fabricated is because I have not been able to see any purpose in Mr Jagatramka taking that course, and cannot see how it aided GNI's defence of WLC's application to set aside the statutory demand. Given that WLC had already admitted that it was indebted to GNI for $6,565,398.06, there was no rational purpose in Mr Jagatramka fabricating an exotic transaction simply in order to create a foundation for a complex claim by GNI for money had and received, when it already had a simple claim. Indeed, the fabrication of the sub-underwriting agreement could only have been a gift to WLC, which would naturally claim that it was a fabrication once WLC's directors and executives realised that they were entirely unaware of the existence of the sub-underwriting agreement at the time that it was alleged to have been made.
21. The fact that the existence of the sub-underwriting agreement has bedevilled GNI's attempt to recover the debt that it claims is owed to it by WLC simply reflects the extravagance of inventing the sub-underwriting agreement as the basis for the claim, if it was not genuine.
22. In my view it is necessary to judge the genuineness of the sub-underwriting agreement in its full and proper context.
23. WLC was in the desperate financial position that I have outlined above. It was desperate to borrow money to be able to pay its creditors and to capitalise its business. WLC's executives were engaged in a maelstrom of financial dealings, many of which involved fending off a substantial number of creditors on a day-to-day basis. The rights issue, that had been trumpeted to many creditors as being the source of funds to pay the debts owed to them, had effectively failed entirely. WLC was in imminent risk of a major default under its loan facility from the Axis Bank led consortium. On my calculation (looking at the list of loan facilities provided by WLC in the particulars to par 99 (i) of its defence to the SOC) at the time WLC had outstanding loan facilities of US $491.5 million plus a further $35,000,000 (the particulars did not specify the currency for this amount) and AUD $11,000,000. There must have been a prospect that a major default under the Access Bank consortium loan facility would lead to all of WLC's loan facilities being called up. Mr Jagatramka had flown to Europe in order to try to raise further loan funds on behalf of WLC. At the time GNI and Wonga are said to have agreed to enter into the sub-underwriting agreement, Mr Jagatramka was in transit between London, Mumbai and Kolkata. The only definite source of funds was the US $10,000,000 offered by Axis Bank. Those funds needed to be used to allow WLC to make payments due to the Axis Bank led consortium, contrary to the terms upon which the loan was made. It became known that the money could not be paid to WLC through an account of Wonga at Axis Bank. An account in the name of GNI either could be established or was already available.
24. There has been no suggestion that the underwriting agreement was anything other than genuine. It contained a term that permitted Wonga to lay off part of its risk by entering into sub-underwriting agreements. The evidence does not establish why the companies in the Gujarat Group had decided to capitalise WLC by increasing their equity in the company, but the fact that the rights issue was initiated shows that that was the hope, if not quite the intention. It is likely to be true that the rights issue was a desperate last measure to fend off Jindal, and retain majority control of WLC in the Gujarat Group. Had loan funds become available, it is likely that Wonga would have been held to its obligations under the underwriting agreement. In these circumstances, when it was realised by Mr Jagatramka that the money borrowed from Axis Bank would have to be channelled through GNI rather than Wonga, it is not an unnatural extrapolation of the arrangement that led Wonga to enter into the underwriting agreement to create, at the last minute, a sub-underwriting agreement that would effectively put GNI on the same footing as Wonga would have occupied had it been able to pay the money to WLC.
25. I recognise that the underlying flaw in this line of reasoning is that in reality the Gujarat Group's aspiration to retain control of WLC had almost surely already become hopeless, as the US $10,000,000 that GNL had been able to borrow from Axis Bank was plainly insufficient to save WLC, and the Gujarat Group appears to have exhausted its capacity to borrow substantial additional amounts. As is now known, negotiations between the Gujarat Group and Jindal that became manifest in the arrangements put in place at the 3 July 2013 meeting of the board of directors of WLC showed that the Gujarat Group had finally recognised that Jindal was the only source of salvation for WLC.
26. Although, in hindsight, it may now appear that the Gujarat Group's attempts to maintain control over WLC were futile, it still remained necessary for the Gujarat Group to ensure that WLC was able to make the payments due to the Axis Bank led consortium, and the Gujarat Group could not rely upon the intervention of Jindal until final agreement was reached.
27. The point of these observations is that, in my view, it would be a mistake to approach the issue of the genuineness of the sub-underwriting agreement by judging circumstances on the assumption that Mr Jagatramka and the other people involved were acting coolly and rationally and with adequate time to make sound judgments about the course that they were following.
28. It will now be appropriate to consider the evidence concerning the making of the sub-underwriting agreement in more detail.
29. The sub-underwriting agreement was prepared on the letterhead of Wonga, and is dated 22 June 2013. It was substantially modelled on a sub-underwriting agreement between Wonga and NRE Resources Pty Ltd that had been prepared in relation to an earlier rights issue made by WLC in November 2012.
30. The letter commenced by recording the basic integers of the underwriting agreement and the detail of WLC's non-renounceable entitlement issue of fully paid ordinary shares in WLC of 1 share for every 4 shares held at an issue price of $.20 per Entitlement Share to raise up to approximately $68,806,934. Numbered clause 1 provided: "You irrevocably commit to sub-underwrite up to 30% of the Shortfall". The Subscription Amount for which GNI could be liable was stated to be $13,207,127.
31. By clause 2 GNI agreed that in addition to its obligations in respect of the sub-underwriting commitment, it irrevocably agreed to apply for 100% of the shares in the rights issue that were offered to it.
32. Clause 6 provided that GNI's obligation in respect of the sub-underwriting agreement would terminate only if the obligations of Wonga under the underwriting agreement ceased or were terminated.
33. Clause 8(c) seems to contemplate the events that actually happened, in that it provided: Any funds paid by you to the company, before it become due, for meeting any urgent cash requirement of the company would be considered as payment under your sub-underwriting commitment vide this letter.
34. GNI tendered minutes of meetings of the boards of directors of GNI and Wonga on 22 June 2013 in which the directors resolved that the respective companies would enter into the sub-underwriting agreement.
35. The minutes of the board meetings were originally presented to the Court as annexures to the affidavit of Mona Jagatramka made on 20 December 2017. In circumstances that will be considered below, Mrs Jagatramka was not called to give evidence and her affidavit was not read. The board minutes were nonetheless admitted into evidence as Tabs 121 and 122 of the Court Book.
36. The minutes of the meetings of the directors of both GNI and Wonga were not produced as part of minute books kept for each company. There was no evidence that the minutes that were produced were copied from original minute books. The issue of the provenance of the minutes was not explored by WLC.
37. In s 251A of the Corporations Act 2001 (Cth), rules are prescribed for the keeping by companies of various types of proceedings and resolutions of companies. Section 251A(1)(b) imposed upon both GNI and Wonga, as Australian companies, an obligation to keep minute books in which they recorded within 1 month resolutions of directors' meetings. The companies were required by s 251A(5) to keep their minute books in their registered offices, their principal places of business in Australia, or another place in Australia approved by ASIC.
38. Section 1306(1) of the Corporations Act permits the minute books of companies to be kept in a bound or looseleaf book, or by some electronic device. Sub-section (3) prescribes that corporations must take all reasonable precautions for guarding against damage to, destruction of or falsification of, and for the discovery of falsification of, any book required by the Corporations Act to be kept by the corporation.
39. The objective of these provisions is obviously to facilitate proof of the genuineness of resolutions made by the directors of companies (as well as other matters dealt with by the provisions) and to reduce the risk of the falsification of the matters recorded in the relevant books. The fact that neither of the parties to these proceedings attended to the significance of the statutory requirements that apply to the resolutions of the directors of the two companies has deprived the Court of a very powerful basis for judging the genuineness of the minutes. As it has happened, the Court has been obliged to take the evidence concerning the preparation of the minutes at face value for the purpose of judging, in the context of the whole of the evidence, whether or not it should accept that the minutes are genuine.
40. As it was not proved that the minutes of the directors meetings of the two companies complied with the requirements of s 251A of the Corporations Act, I have not acted upon the basis, which would otherwise have been required by sub-s (6), that a minute that is recorded and signed in accordance with the section is evidence of the resolution to which it relates, unless the contrary is proved.
41. On their face, the minutes appear to be authentic; they contain information of a type that would be expected; and they record resolutions of the boards of the two companies to authorise the execution of the sub-underwriting agreement.
42. The minutes in each case record Mr and Mrs Jagatramka as being the only directors present. In Wonga's case, apologies are recorded for Mr Sharma and Mr Dave. Mr Sharma is recorded as having given his apologies in the case of the meeting of the board of directors of GNI.
43. Significantly, the minute of the meeting of the board of directors of Wonga states that the meeting was held at 2:50 AM (AEST) through a teleconference. The directors of GNI are recorded as having met on 22 June 2013 at 9:50 PM (AEST).
44. As will be seen, a significant forensic dispute occurred at the hearing as to whether these meetings could, as a practical matter, have been held at the times stated in the minutes.
45. The advent of the minutes of the meetings of the boards of the directors of the two companies has introduced the issue of the genuineness of the minutes, which is to be added to the issue of the genuineness of the sub-underwriting agreement.
46. At a meeting of the board of directors of WLC held on 3 July 2013, the directors resolved to agree with Wonga to terminate the underwriting agreement.
47. The minutes record that Mr and Mrs Jagatramka left the meeting, and the remaining directors, Mr Angie and Mr Firek, made the resolution.
48. The minutes record: It is unlikely that seeking to enforce the rights under the underwriting agreement would result in any positive outcome for the Company, and would unlikely see the Company receive any funds.
49. The minutes record the following resolution: IT WAS RESOLVED that on the basis that the new funding proposal is agreeable to Jindal, and it being considered that there is no benefit for shareholders in the Company pursuing its rights under the underwriting agreement with Wonga Coal Pty Ltd, the Company agree with Wonga Coal Pty Limited to terminate the underwriting agreement between the Company and Wonga Coal Pty Ltd with immediate effect.
50. The directors also resolved in effect to cancel the rights issue.
51. Mr and Mrs Jagatramka then re-joined the meeting, and the minutes record the results of discussions that had been had with Jindal regarding the funding of WLC. The minutes record that Jindal had agreed to provide immediate funding of $15,000,000 by subscribing to a convertible note issued by WLC.
52. The minutes also record that Jindal had agreed to underwrite a new rights issue on the basis of one new share for every two shares held by shareholders at a price of $.10 per share, which would raise WLC up to $68,815,717.60.
53. Finally, there was a resolution that the board of directors of WLC be restructured. Mrs Jagatramka was to resign from the board to be effective from the date of execution of the convertible note by Jindal.
54. Mr Jasbir Singh was appointed as a director effective from the execution of the convertible note.
55. Finally, it was agreed that a new chief financial officer of WLC would be appointed.

Mr Jagatramka's credibility

1. I accept Mr Jagatramka as being a truthful witness in respect of the substantial issues of fact in dispute in this case. I reject the submission made by WLC that Mr Jagatramka should not be accepted as a witness of credit. In particular, I find there is no basis for disbelieving Mr Jagatramka's evidence concerning the fact of the sub-underwriting agreement having been prepared in the circumstances alleged by GNI, and that the board minutes of the two parties to that agreement were genuine.
2. In coming to this conclusion, I have given due consideration to the arguments to the contrary made by WLC in pars 3 to 7 and 83 to 99 of its closing submissions.
3. Mr Jagatramka presented as an imposing personality, and it is easy to see how he may have dominated the affairs of the companies of which he was a director or chief executive officer. I am satisfied that Mr Jagatramka gave his evidence forthrightly and without any attempt at evasion or prevarication. His natural strength of character led him to put his views firmly, but he was prepared to make concessions against interest, particularly in relation to the detail of the circumstances in which the meetings of the boards of directors of Wonga and GNI occurred that resolved to execute the sub-underwriting agreement.
4. It is necessary to judge the credibility of Mr Jagatramka's evidence by placing the circumstances in which the sub-underwriting agreement was made in their proper perspective. At numerous places in these reasons for judgment I have explained the events relevant to the efforts by Mr Jagatramka, the Gujarat Group companies and WLC to rescue the Gujarat Group's investment in WLC, and to prevent WLC from collapsing financially. A great many matters must have appeared much more important to Mr Jagatramka than the manner in which the payment of the US $7,962,974.88 by GNI to WLC on 24 June 2013 was documented. Mr Jagatramka had been in Europe for some weeks making last-ditch efforts to raise funds to secure the Gujarat Group's continuing majority control of WLC. As I have already noted, Mr Jagatramka was en route from London via Mumbai to Kolkata, when the sub-underwriting agreement was prepared and the meetings of the boards of directors of the two companies occurred. The first of those meetings occurred by teleconference. It would be most surprising if this punishing itinerary did not have the effect of diminishing Mr Jagatramka's energy.
5. Furthermore, whatever may initially have been thought to be the necessity for the sub-underwriting agreement, it almost immediately was superseded as a result of the board of directors of WLC on 3 July 2013 terminating the underwriting agreement with Wonga.
6. Thereafter, the sub-underwriting was of no significance at all until about May 2014, when Mr Jagatramka was required to make an affidavit in support of GNI's defence of WLC's application to set aside the statutory demand that GNI served on WLC on 19 March 2014.
7. In that context, it is justifiable for the Court to accept Mr Jagatramka as generally being a witness of truth, while not being surprised that Mr Jagatramka's grasp of the detail of the making of the sub-underwriting agreement and its authorisation by the boards of directors of the two parties is fallible.
8. WLC submitted that Mr Jagatramka's flight times make it almost impossible for the board meetings to have occurred in accordance with Mr Jagatramka's final version of the circumstances in which the meetings occurred, because he claims to have held one meeting by telephone 10 minutes before his plane took off: see par 89(h) of WLC's closing submissions.
9. Initially, in Mr Jagatramka's affidavit made on 20 December 2017, he said in par 14 that on 22 June 2013, at 9:50 PM (AEST), being 5:20 PM in Mumbai, he attended a board meeting for GNI via teleconference from Mumbai with his wife who was present in Kolkata. Following the teleconference, he boarded a flight to Kolkata. He said in par 15 that at 2:50 AM (AEST), being 10:20 PM on 22 June 2013 in Kolkata, he attended a board meeting for Wonga with Mrs Jagatramka.
10. It was brought to Mr Jagatramka's attention in cross-examination that the minutes recorded that the Wonga board meeting had occurred prior to the GNI meeting, and had also occurred by telephone. Furthermore, the meeting of the board of Wonga occurred when Mr Jagatramka was in London and not while he was in transit in Mumbai. Mr Jagatramka conceded these points.
11. The following table is found in par 73(c) of GNI's closing submissions. It contains in convenient form the information in MFI 14 prepared by WLC. It sets out the relationship between the timing of the two board meetings and Mr Jagatramka's various departures and arrivals, in accordance with the scheduled flight times of Mr Jagatramka's aircraft. Event Time in London Time in Mumbai/Kolkata AEST Wonga Board Meeting 5:50pm on 21 June 2013 10:20pm on 21 June 2013 2:50am on 22 June 2013 Depart London 9:25pm on 21 June 2013 1:55am on 22 June 2013 6:25am on 22 June 2013 Arrive Mumbai 6:30am on 22 June 2013 11:00am on 22 June 2013 3:30pm on 22 June 2013 GNI Board Meeting 12:50pm on 22 June 2013 5:20pm on 22 June 2013 9:50pm on 22 June 2013 Depart Mumbai 1:00pm on 22 June 2013 5:30pm on 22 June 2013 10:00pm on 22 June 2013 Arrive Kolkata 3:45pm on 22 June 2013 8:15pm on 22 June 2013 12:45am on 23 June 2013

1. As I understand the argument made by WLC, it is that it is so improbable that Mr Jagatramka could have participated in a board meeting of GNI with Mrs Jagatramka by telephone at 5:20 PM on 22 June 2013 while in Mumbai, when his aircraft left Mumbai at 5:30 PM on that day, that the Court should reject Mr Jagatramka's evidence concerning the occurrence of the board meetings and the making of the sub-underwriting agreement.
2. While the discovery of the information that underpins this argument, as set out in the table, reflects admirably on the diligence of WLC's lawyers, I do not accept that the Court would be justified in making a damning finding concerning Mr Jagatramka's honesty based, as it would be, on the acceptance of the proposition that Mr Jagatramka's aircraft left Mumbai precisely at the scheduled time of departure, without there being any independent evidence of that fact.
3. Mr Jagatramka gave evidence that he and Mrs Jagatramka executed the sub-underwriting agreement upon Mr Jagatramka's return to Kolkata, and that a folder of papers had been delivered prior to him arriving, together with draft minutes for the meetings of the boards of directors of Wonga and GNI.
4. There is evidence that the original of the executed sub-underwriting agreement has been lost. I infer that it was in existence on 26 May 2014, when Mr Jagatramka made his affidavit in the statutory demand proceedings. The copy of the sub-underwriting agreement that is in evidence bears the certifications of authenticity applied by two persons, one a public notary in India, Mr Tapan Das, and the other Mr Jana (an advocate).
5. GNI called evidence from an employee of Gujarat India, Mr Chakraborty, who was responsible for maintaining files, who stated that he was involved in sending the original of the sub-underwriting agreement to Mr Das in May 2014, for the purpose of the certification of Mr Jagatramka's affidavit. Mr Chakraborty also gave evidence that would support an inference that the original of the document has been lost as a result of a change in Gujarat India's file storage arrangements.

Failure to call Mrs Jagatramka

1. I should not leave the issue of GNI's evidence in support of the authenticity of the sub-underwriting agreement without mentioning the failure of Mrs Mona Jagatramka to come to Court to give evidence, which had the result that her affidavit made on 20 December 2017, was not read.
2. My understanding is that Mrs Jagatramka was expected to travel to Australia to give evidence during the final period of the hearing, but that she decided that she was unable to do so for the following reason related to the Court by Mr Jagatramka (T 29/05/18 100.16 - 35): Q. So where is your wife, Mona Jagatramka? A. Currently, she is in Ahmedabad. Q. And where is Ahmedabad? A. It is north of Mumbai, about 500 kilometres north of Mumbai, in Gujarat. Q. Why is she not here? A. She was supposed to come with us, but two, three weeks back, my son, who had a pancreatic attack last year, suddenly had a relapse, and he had to be hospitalised, and she is the only carer for his regard and 24 hour care, so she could not leave him. He went last week, last Friday, before coming here, we had annual pilgrimage where we are going for last 20 years. Q. Annual? A. Annual pilgrimage, to a town called Diliputi, which is a holy town in India, the richest temple in the country where we go every fourth Friday of May every year for last 20 years, and drink, but she did not accompany me this time, for the first time in 20 years, because of my son. Even for a day, she was not prepared to leave, even though it is very important for her to go to that pilgrimage.
3. In an affidavit made on 31 May 2018, Ms Andrea Wykoff, a solicitor acting for GNI, gave evidence of being told on 18 May 2018 that, although a ticket had been booked for Mrs Jagatramka to travel to Australia, she would not be able to come. Ms Wykoff annexed a copy of a medical certificate dated 19 May 2018, which although not entirely legible - including as to the name of the doctor - certifies that Mrs Jagatramka's son has been suffering from acute pancreatitis since 13 May 2018, and that he would require full attention and personal care for some 2 to 3 weeks. Ms Wykoff said that on 28 May 2018 Mrs Jagatramka had made the following statement to her by telephone from India: My son Ayush is currently very sick for the second time. His doctor has advised to bed rest. He is on a very strict diet. I am Ayush's primary caregiver and currently the only one looking after him. I cannot leave Ayush. I must be with him 24/7. I need to monitor him all the time.
4. WLC submitted (closing submissions pars 92 to 95) that the Court should draw an inference that the evidence of Mrs Jagatramka would not have assisted GNI's case on the principle in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8, as expounded in Payne v Parker [1976] 1 NSWLR 191 at 201.
5. As Mrs Jagatramka was the only person, other than Mr Jagatramka, to participate in the board meetings of GNI and Wonga that resolved to enter into the sub-underwriting agreement, and as she signed the sub-underwriting agreement with Mr Jagatramka, the potential importance of her evidence on the issue of the authenticity of the sub-underwriting agreement is self-evident.
6. WLC accepted that Ayush Jagatramka's condition of acute pancreatitis is a serious one, but submitted that the explanation advanced by GNI to explain Mrs Jagatramka's failure to give evidence was unsatisfactory in various respects set out in par 94(c) of its closing submissions.
7. I consider that Mrs Jagatramka's absence has not adequately been explained, and even if it be accepted that it is reasonable that a mother would be unwilling to leave her son, given the condition of Ayush's health, it does not appear to me that GNI gave WLC the warning that it could have given, or presented to WLC the best alternative possible to Mrs Jagatramka travelling to Australia to give evidence. WLC has not been offered even the possibility of being able to cross-examine Mrs Jagatramka by video link (which is a possibility that it likely would have considered to be unattractive, but perhaps preferable to Mrs Jagatramka's absence as a witness).
8. Additionally, in my view the Court and WLC were entitled to more specific evidence from appropriate medical professionals to prove that it was essential for Mrs Jagatramka to remain in India, and that there was no reasonably suitable alternative way for Ayush to receive care in a manner that would permit Mrs Jagatramka to travel to Australia for the brief time necessary to permit her to give evidence. The Court would, of course, have made special arrangements to accommodate the problem that Mrs Jagatramka faced.
9. There are in the circumstances real grounds for suspicion that GNI and Mrs Jagatramka have not made the best attempt possible to allow Mrs Jagatramka to give direct evidence to the Court, and to subject her evidence to testing by WLC, as WLC had a right to expect.
10. Plainly, it is GNI that was expected to call Mrs Jagatramka to give evidence in support of its case.
11. It is therefore necessary for the Court to address the question of the significance of the absence of Mrs Jagatramka as a witness. The judgments in the Court of Appeal in Payne v Parker are of significance, as they address the question of the process of reasoning that is permissible in this context (in that case in respect of the directions that a trial judge may give to a jury charged with the responsibility for making findings of fact).
12. Hutley JA, who formed part of the majority with Mahoney JA, said at 194 (footnotes omitted): The basis of the rule is "plain commonsense", as Windeyer J. said in Jones v. Dunkel, after quoting from Wigmore on Evidence, 3rd ed. (1940) vol. 2, s. 285, p. 162, as follows: "The failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so, and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavourable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanation by circumstances which made some other hypothesis a more natural one than the party's fear of exposure. But the propriety of such an inference in general is not doubted."
13. Glass JA (although in dissent in the result) set out at 200-202 a number of propositions that his Honour thought could be distilled from the authorities, starting with proposition (1) that the so-called rule in Jones v Dunkel "is a principle of the law of evidence whereby a particular form of reasoning is authorized". His Honour then formulated the process of reasoning in proposition (2) in the following terms (footnotes omitted): (2) The reasoning which is permissible involves the treatment of a failure to adduce evidence as a reason for increasing the weight of the proofs of the opposite party or reducing the weight of the proofs of the party in default: O'Donnell v. Reichard. The principle may be invoked for a deficiency in the evidence either of a party bearing the legal onus of proving an issue, or of a party bearing the evidentiary burden only: Ibid; Steele v. Mirror Newspapers Ltd. If the failure is of the latter kind, the direct evidence of the party with the onus of proof can be more readily accepted, and inferences in his favour may be more confidently drawn: Jones v. Dunkel. If the failure is of the former kind, a consonant formulation would be that the direct evidence of the party carrying the onus may be more readily rejected, and the inferences for which he contends may be treated with greater reserve. The default "brings a great slur on his cause": Ward v. Apprice.
14. Mahoney JA made similar brief observations at 207.
15. GNI's failure to call Mrs Jagatramka may therefore have the effect of diminishing the weight to be given to the evidence of Mr Jagatramka of events in which his wife participated. As I have recorded above, there are in any event many strange aspects of the circumstances in which the sub-underwriting agreement is said to have been brought into existence. The point I have reached is that I am not satisfied that it has been established that the sub-underwriting agreement was a fabrication that was produced on the instructions of Mr Jagatramka and retrospectively dated. While the absence of Mrs Jagatramka as a witness diminishes the Court's confidence in the strength of its conclusions, it has not persuaded me that on the whole of the evidence the extreme step of finding that Mr Jagatramka has been guilty of rank dishonesty in his evidence to the Court is warranted.

Mr Sharma's credibility

1. Mr Sharma, in his 6 July 2016 affidavit, responded to Mr Jagatramka's claim that the US $7,962,974.88 was paid by GNI to WLC on 24 June 2013 in accordance with GNI's obligations under the sub-underwriting agreement in the following way: I refer to the Sub-Underwriting Agreement dated 22 June 2013 at Exhibit AJK-29 to the Jagatramka Affidavit. I was not party to any discussions about this transaction. I was a director of both [Wonga] and [GNI] at the time and I was responsible for retaining records on behalf of both companies. I did not receive any notice of any meeting of directors to discuss or approve this transaction and I did not receive a copy of the Sub-Underwriting Agreement until it became an issue in court proceedings in 2015 (Wollongong Coal Limited v Gujarat NRE India Pty Ltd [2015] FCA 221; (2015) 230 FCR 28). I did not receive any correspondence or notification from either [Wonga] or [GNI] that there had been a subscription for shares. … I refer to the Commitment Amount, defined at paragraph 117 of the Jagatramka Affidavit, and to paragraphs 131 and 132 of the Jagatramka Affidavit, in which Mr Jagatramka asserts that WCL voluntarily accepted the benefit of the Commitment Amount. I deny that the alleged Commitment Amount was advanced pursuant to the terms of the alleged Sub-Underwriting Agreement.
2. Mr Jagatramka responded to this evidence in his 31 August 2016 affidavit by asserting in par 10 that Mr Sharma "was extensively involved in this transaction". However, the only involvement that Mr Jagatramka specified was that Mr Sharma received emails written by Mr Jagatramka to various creditors of WLC "in which the subscription to the rights issued by GNI was specifically discussed". Mr Jagatramka also asserted that Mr Sharma signed the facility agreement between GNL and Axis Bank, and signed and sent to Axis Bank the letter requesting drawdown of the funds that were borrowed by GNL. These assertions fall far short of a claim (and provide no evidence) that Mr Sharma was involved in any way with the making of the sub-underwriting agreement.
3. Mr Jagatramka expanded upon Mr Sharma's involvement in the making of the sub-underwriting agreement in his 20 December 2017 affidavit. He said that he believed that the sub-underwriting agreement "was prepared in the Kolkata office under the supervision and guidance of Mr Sanjay Sharma". He said that he was informed on 22 June 2013, to the best of his recollection, by Mr Arpit Agarwal of the requirement of a sub-underwriting agreement as an internal compliance document, and thought this to be a routine requirement. Mr Argawal was part of the secretarial team in the Kolkata office, who according to Mr Jagatramka acted under the direction of Mr Sharma. Mr Argawal left the employment of the Gujarat Group around April 2015.
4. On analysis, Mr Jagatramka did not give any evidence that Mr Sharma knew about or was involved in the preparation of the sub-underwriting agreement.
5. GNI submitted that the Court should hold serious reservations in relation to the truthfulness and reliability of Mr Sharma. It submitted that, contrary to Mr Sharma's denials, he was involved in and aware of the sub-underwriting agreement.
6. I reject this submission, in so far as it calls upon the Court to reject Mr Sharma as a witness of truth and find that he was involved in and aware of the sub-underwriting agreement. I was entirely satisfied from the manner in which Mr Sharma gave his evidence that he did his best to respond to questions put to him in cross examination truthfully from his genuine memory.
7. It does not follow that I would accept that the evidence given by Mr Sharma was reliable in all matters of detail. For example, Mr Sharma maintained that he did not realise that the US $10,000,000 that was borrowed from Axis Bank by GNL was to be used for subscribing for shares in WLC, when it is clearly stated in a number of emails that he received between 19 and 26 June 2013 that the purpose of the borrowing was to fund the subscription for shares.
8. GNI submitted that Mr Sharma's denials that he was aware of the sub-underwriting agreement were not credible in the light of certain facts (closing submissions par 20(c)). Those facts were (a) that Mr Sharma was aware of WLC's rights issue; (b) he was aware that Wonga was the underwriter with power to appoint a sub-underwriter; (c) he was aware that Wonga had appointed a sub-underwriter in respect of the November 2012 rights issue; (d) he was aware that the rights issue was under-subscribed when it closed on 19 June 2013; (e) he was aware of GNL's borrowing of US $10,000,000; (f) he was aware that money could not be advanced to Wonga as originally intended, but was paid to WLC by GNI because of the technical difficulties; (g) he knew that documentation needed to be executed to reflect the new structure; and (h) notwithstanding his denial, he was aware that the money was to be used for the purpose of subscribing for shares in WLC.
9. I do not accept that these facts taken collectively justify a finding that Mr Sharma was aware of the sub-underwriting agreement in June 2013 notwithstanding his denials. An admission made in cross examination that he understood that some documentation needed to be executed to reflect the last-minute change, whereby WLC received the money from GNI rather than Wonga, goes nowhere near establishing that Mr Sharma was involved in and knew about the sub-underwriting agreement.
10. There is force in WLC's submissions (detailed in closing submissions par 90) that the existence of the sub-underwriting agreement was not reflected in any contemporaneous documents. There is no document in evidence that is known to have come to Mr Sharma's attention that would have informed him of the existence of the sub-underwriting agreement.

Finding on making of sub-underwriting agreement

1. Although there are many anomalies on the evidence concerning the circumstances in which the sub-underwriting agreement was brought into existence, they are not sufficient to justify the Court in finding that it was fabricated long after the date that it bears, in order to mislead the Federal Court as to the basis of GNI's claim that WLC was indebted to it in the amount of $6,565,398.06.
2. The most likely situation is that the sub-underwriting agreement was prepared on the initiative of officers of the Gujarat Group in Kolkata in response to the last-minute change, whereby the money borrowed from Axis Bank was paid to WLC through GNI instead of Wonga, and sight was lost of the document when almost immediately afterwards the rights issue was cancelled on 3 July 2013, in circumstances where the principal objectives of the Gujarat Group and WLC became the negotiations with Jindal.
3. Given the intensity of the activity required of both Mr Jagatramka and Mr Sharma that has been described in these reasons for judgment, both men may be forgiven for inaccuracies of recollection concerning the circumstances relevant to the making of the sub-underwriting agreement.

Pleaded grounds for repayment of $6,565,398.06

1. As I have now dealt with the parties' contentions on matters of fact concerning GNI's claim based upon the assertion that the US $7,962,974.88 was paid by GNI to WLC pursuant to the sub-underwriting agreement, which was terminated in circumstances where no shares in WLC were issued to GNI, it is necessary to consider the legal bases upon which GNI puts its claim.
2. GNI pleaded the basic facts relevant to this claim in pars 135 to 148 of the SOC, and then, in par 148A pleaded that the net amount of $6,565,398.06 is money had and received by WLC for GNI's use and WLC is indebted to GNI for that amount.
3. Then, GNI pleads in pars 149 to 157 a claim under the heading "Restitutionary liability for unjust enrichment", and the subheading "Benefit received in circumstances where [WLC] knew it had to repay or issue shares".
4. The specific allegations of fact appear to be intended to support an alternative claim to the money had and received claim designed to establish that WLC knew that the two amounts paid to it on 24 June 2013 would be repayable on a termination of either the underwriting agreement or the sub-underwriting agreement (par 152), or alternatively a reasonable person in the position of WLC would have had that understanding (par 153). That lead to the allegation in par 154 that "it would be unjust and unconscientious to allow [WLC] to retain the benefit" of the two payments without making restitution to WLC.
5. GNI then alleges "further and in the alternative" in par 155, that the two amounts paid on 24 June 2013 were paid on the basis that GNI would receive consideration by way of the issue of shares, and by reason that WLC has retained the benefit of the payments without issuing the shares (par 157) "it would be unjust and unconscientious to allow [WLC] to retain the benefit of the" payments without making restitution to GNI.
6. GNI then pleads a further alternative under the heading "Voluntary Acceptance" in pars 158 to 164. This claim is based upon the allegation that WLC "has knowingly continued to accept the benefit of" the two payments and "has benefited from and was enriched by" the payments. It is then alleged that WLC knew from July 2013 onwards that it had to repay GNI. Alternatively, it is alleged that a reasonable person in the position of WLC would have understood and realised that it was required to repay GNI. GNI alleges that WLC "failed to avail itself of the opportunity to reject the benefit" of the two payments, and then alleges in par 164 that: "it would be unjust and unconscientious to allow [WLC] to retain the benefit of the payments".
7. I do not think that it is necessary for the Court to engage with all of the alternatives in the way they have been pleaded by GNI, or with the particular grounds upon which the various forms of obligation to repay GNI are said to arise; such as whether WLC "knew" various matters or whether a "reasonable person in the position of WLC" would have had a particular understanding. In my view the basis of GNI's claim does not involve these complications.
8. The High Court in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560; [2014] HCA 14 (AFSL v Hills Industries) was concerned with a claim for restitution for money paid under a mistake. This aspect of GNI's case is in substance a claim for restitution based upon a total failure of consideration. The High Court's consideration of the basis of a claim for restitution of money paid under a mistake is nonetheless instructive for present purposes. At [109], Gageler J explained the relationship between the 18th century action of indebitatus assumpsit for "money had and received [by the defendant] to [or for] the use of the plaintiff'". A reading of the judgments of the High Court justifies the conclusion that there are not separate actions for money had and received, or for restitution. The plurality, at [67], by reference to David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, spoke in terms of the "prima facie obligation on the part of the recipient to make restitution", but then in [68] spoke of "the equitable roots of the principle by which a claim for restitution of money had and received to the use of the payer is to be determined". As Gageler J said (footnotes omitted): [105] The nature of the action for restitution of money paid under a mistake was explained in David Securities Pty Ltd v Commonwealth Bank of Australia… Within that explanation, "unjust enrichment" is rejected as "a definitive legal principle" but is embraced as a "unifying legal concept". [106] The explanation comes to this. The fact that a payment is caused by a mistake is sufficient to give rise to a prima facie obligation on the part of the recipient to make restitution. That is because causative mistake is a circumstance which the law recognises to be prima facie sufficient to make the recipient's receipt, and retention, of the payment unjust. To displace that prima facie obligation, the recipient must establish some other circumstance which the law recognises would make an order for restitution unjust…
9. Gageler J then referred to the defence of "change of position" which was the issue that required the attention of the High Court. In my view, where, as alleged in this aspect of GNI's case, the claim is that GNI paid US $7,962,974.88 to WLC in performance of the sub-underwriting agreement, in circumstances where the ultimate implementation of the underwriting agreement would involve WLC issuing the requisite number of shares in itself to GNI, but the consideration for the payment totally failed because of the cancellation of the underwriting and sub-underwriting agreements and the failure to issue the shares to GNI, the basis of the first step in determining whether GNI is entitled to restitution of the payment is as simple as that explained by Gageler J in the case of a payment made by mistake.
10. I have made these observations merely to justify why I have not found it necessary to engage with the specific allegations of fact made by GNI as to why WLC came under a prima facie obligation to repay the amount paid to it. On the assumption that the amount was paid in performance of agreements that were subsequently terminated, and the expected consideration for the payment was not received, then GNI will be entitled to restitution, unless WLC establishes some ground for displacing GNI's prima facie right. GNI has one claim, and it is not necessary to plead separately and in the alternative a claim for money had and received, a claim for restitution, and a claim based upon a total failure of consideration. Those descriptions all describe the one claim.

WLC's pleaded response to GNI's claim

1. I have set out this analysis of the basis pleaded by GNI for its first claim that WLC is indebted to it for $6,565,398.06 to assist in developing an understanding of WLC's pleading in response to the claim in its defence. The response is pleaded in pars 83 to 97 of WLC's defence. Not unreasonably, WLC has responded by dealing seriatim with the paragraphs in the SOC. The difficulties that I have had in understanding the effect of the SOC have therefore been repeated but magnified in the defence.
2. I have found it to be convenient to deal with some of the matters raised by WLC in its defence immediately after I have set out the allegation, but in other cases I have deferred considering the issue, so that I may deal with it more fully without unduly interrupting the analysis of the pleaded defence.
3. WLC has responded to the introductory allegations of fact in pars 135 to 148 of the SOC in pars 83 to 89 of the defence, and in par 84 WLC sets out the detail of its claim that the sub-underwriting agreement was fabricated. In par 89A, WLC denies GNI's claim to recover the debt on the basis of money had and received.
4. WLC then responds to the first additional basis of GNI's claim (the restitution for unjust enrichment claim) in pars 90 to 92. It responds to the failure of consideration claim in par 93, and the voluntary acceptance claim in pars 94 to 96.
5. I will not refer to all of these responses by WLC in detail, as I am of the view that that would compound the unnecessary complexity in which the factual issues have come before the Court.
6. It is an appropriate practical response to take this course, because, to my understanding, WLC has pleaded the real substance of its response to the money had and received and the unjust enrichment claims in par 97 of its defence, which is stated to be in further answer to pars 135 to 164 of the SOC.
7. The only way that the effect of WLC's defence can be understood is to set out par 97 of the defence verbatim. It is as follows: In further answer to paragraphs 135 to 164 of the Statement of Claim, [WLC] says: a. the parent company of [GNI], [Gujarat India], owed [WLC] in excess of US $60,000,000; Particulars [WLC] repeats the particulars to paragraph 45h) above [which alleges this Court's judgment of 27 March 2017 in favour of WLC against Gujarat India for US $59,718,101.53]. b. there is a close connection between [Gujarat India] and [GNI]; Particulars [GNI] is wholly owned by GNL which in turn is wholly owned by [Gujarat India], which was the parent company of the Gujarat Group of companies. c. Arun Jagatramka was a director of each of [GNI], [WLC] and [Gujarat India]; d. Sanjay Sharma was the secretary of each of [GNI] and [WLC]; e. it was the intention of [GNI], [WLC] and [Gujarat India] whereby: i. [GNI's] related company, GNL, borrowed $10,000,000 from Axis Bank in Hong Kong; ii. GNL paid that amount to [GNI]; iii. [GNI] paid a large proportion of that sum to [WLC]; and iv. [WLC] was to pay that amount, or a large portion of it, to Axis Bank in Hong Kong; f. [WLC] was a mere conduit for the funds which were being diverted through various members of the Gujarat Group at the direction of Mr Jagatramka; g. in the circumstances, [WLC] has received no benefit from the transaction; h. as part of the arrangements between the group of companies, [WLC] was entitled to treat a payment from any member of the Gujarat Group as a payment on behalf of [Gujarat India]; i. [WLC] changed its position by making payments to Axis bank at the direction of Mr Jagatramka shortly after receipt of the said sums; j. [WLC] is entitled to set off any amount payable to [GNI] in these proceedings against amounts owed to it by [Gujarat India] (which it claims in proceedings 2014/347246 in this Honourable Court) and in respect of which it now has a judgment of US $59,718,101.53; k. [WLC] refers to and repeats the allegations contained in paragraphs 99 to 112 below; l. In the premises it is unconscionable for [GNI] to demand payment for the amounts payable to it when [GNI's] parent company owes [WLC] the sum of $59,718,101.53 and owed it substantially more than the amount claimed in these proceedings as at June 2013. Particulars [WLC] repeats the particulars to paragraph 45h) above. m. In the premises it is unconscionable for [GNI] to demand payment for the amounts payable to it when Arun Jagatramka caused the payments referred to in paragraph 109 below to be made by [WLC] to [Gujarat India] and/or its wholly owned subsidiary, [GNI].
8. The first positive defence that WLC appears to raise is that, as a result of the manner in which the US $10,000,000 was borrowed from Axis Bank, and immediately a substantial part of the money borrowed was transferred back to that bank (par 97(e)), WLC was a mere conduit (par 97(f)), and WLC has received no benefit from the transaction (par 97(g)).
9. As I understand the position that WLC finally took in submissions, it effectively abandoned this claim, and accepted that the payments that WLC made to Axis Bank and the other lenders on 24 June 2013 were made to extinguish WLC's own liabilities, and were made for its benefit. There was no basis for the claim that WLC was a mere conduit. Although, at that stage, the Gujarat Group was the majority shareholder in WLC, it was plainly a separate publicly listed company in which many other parties held shares. WLC was the principal debtor who was primarily liable in respect of the various loan facilities. Although companies in the Gujarat Group borrowed the US $10,000,000 from Axis Bank and secured that borrowing, they were at most liable in the second degree in respect of the debts owed by WLC.
10. Secondly, WLC alleged in par 97(h) that part of the arrangements between itself and the Gujarat Group was that WLC was entitled to treat a payment from any member of the group as a payment on behalf of Gujarat India. There was no evidence of any such arrangement, and such evidence as there was established that it was in fact the practice as between WLC and the Gujarat Group to account for all payments and receipts separately, treating the individual companies as separate entities. That was the orthodox way for such transactions to be treated.
11. Thirdly, WLC alleged that it changed its position by making payments to Axis Bank at the direction of Mr Jagatramka shortly after it received the money from GNI (par 97(i)). As I understand it, in submissions WLC abandoned this change of position defence, consequently upon its acceptance that the payments to its creditors extinguished its own debts and were for its benefit. I shall have something more to say about the change of position defence below.
12. Fourthly, I will also consider WLC's set-off defence in par 97(j) separately below. I will deal with the fifth matter raised by WLC (par 97(l)), being that it is unconscionable for GNI to demand payment when GNI's parent owes WLC US $59,718,101.53, at the same time.
13. The manner in which par 97 has been pleaded epitomises the difficulties that can arise when paragraphs in a pleading incorporate cross-references to allegations set out in the pleading both before and after the relevant paragraph.
14. Before an attempt can be made to distil what the true nature of WLC's defence is, it will be necessary to refer to the allegations in pars 99 to 112, which will also pick up the cross reference in par 97(m) to the allegation made in par 109 of the SOC.
15. The need to do this will have an unfortunate effect on the structure of these reasons for judgment, as pars 98 to 112 of WLC's defence respond to pars 165 to 167 of the SOC, in which GNI pleads the basis of its alternative claim that WLC is indebted to it in the amount of $5,874,848.88.
16. Consequently, it will be necessary to deal with that alternative basis now and not later and separately after the defence to the first basis has been dealt with, as logic would normally require. That is necessary because WLC has pleaded its defences in a way that mixes up its factual responses to the two bases of GNI's claim.
17. In order to make the meaning of this part of the SOC clear, it is necessary to understand that in par 143, GNI defined the amount of US $7,962,974.88 that it paid to WLC on 24 June 2013 as the "First Commitment Amount". In par 144, it defined the further $690,549.18 that it paid to WLC on 24 June 2013 as being the "Second Commitment Amount".
18. In par 165 of the SOC, GNI alleges that the First Commitment Amount "was not advanced to [WLC] by [GNI] as a gift or gratuitously" and "was advanced as an inter-company loan, and in consequence WLC is indebted to GNI in the amount of $5,874,848.88. That amount is equal to the $6,565,398.06 less the second payment of $690,549.18.
19. It is mystifying why GNI has omitted the $690,549.18 from its alternative debt claim.
20. GNI alleged, as an alternative to its claim that the money was paid as an intercompany loan, that it was advanced for the purposes of subscribing to shares under the rights offer, which shares were not issued by WLC.
21. It is to be noted that the fact that GNI has only pleaded an entitlement to $5,874,848.88 in this alternative claim has not inhibited it from submitting in pars 249 and 250 of its closing submissions that it is entitled to be paid $6,565,398.06.
22. Because of the structure of the defence to the SOC, it is now necessary to analyse the facts pleaded by WLC in defence of GNI's alternative debt claim.
23. In par 99 of the defence, WLC alleges (correctly) the shareholdings of the Gujarat Group companies in WLC at 24 June 2013, and then alleges that WLC had entered into various banking facilities "which were the subject of guarantees and indemnities given by, amongst others, [Gujarat India] in favour of the lenders". WLC then gives particulars of the various loans.
24. GNI did not accept that the evidence establishes that Gujarat India guaranteed all of WLC's loan facilities, as is alleged. It is true that the evidence falls short of strict proof of that fact in the form of the tender of the guarantees. Given WLC's parlous financial position, however, it seems certain that either Gujarat India, and if not the parent company, other companies in the Gujarat Group, must have guaranteed WLC's indebtedness. For what it matters, Gujarat India clearly had an interest in preserving its investment in WLC, and probably other companies in the group, most likely including itself.
25. WLC also alleged in par 99 that it and Gujarat India entered into a coal purchase agreement dated 11 May 2017, and that Gujarat India owed WLC approximately $47,000,000. WLC's income was from coal it produced and sold to Gujarat India. WLC had substantial indebtedness to various creditors including Axis Bank, which was guaranteed by Gujarat India. WLC did not have assets sufficient to pay its liabilities to Axis Bank, and WLC's ability to pay those liabilities was dependent upon Gujarat India paying to it the monies that it owed, or companies in the Gujarat Group borrowing money to meet WLC's liabilities to Axis Bank.
26. The evidence justifies the Court inferring, as I do, that these allegations made by WLC are substantially true. However, the debt that Gujarat India owed to WLC (as now established by this Court's judgment) while substantial, was significantly less than the liability of WLC to its creditors. As a logical matter, it is clear that the failure of Gujarat India to pay its debt to WLC in a timely manner would have significantly impeded WLC's ability to pay its own creditors in due course. It goes too far to say that WLC's ability to pay its own creditors was dependent on Gujarat India paying its debt to WLC.
27. WLC alleges in par 100, correctly, that on 22 May 2013, Gujarat India provided a letter of support to WLC to the effect that (a) Gujarat India would not call on any loan or advances made which placed WLC in a position where it could not pay its debts as and when they fell due; and (b) Gujarat India would provide any cash assistance as and when required by WLC to meet its debts in the next 12 months from the date of the letter.
28. Then, in pars 101 to 104, WLC pleads the facts relevant to GNL's borrowing of US $10,000,000 from Axis Bank in June 2013, that ultimately led to WLC transferring the amounts to Axis Bank and other lenders that I have set out above.
29. Significantly, in par 103, WLC alleges: "On 24 June 2013, GNL transferred to the Axis Bank Hong Kong branch account of [WLC] the sum of $7,962,974.88". The particulars given for that allegation are that the payment by GNL to WLC involved a transfer through GNI's Axis Bank account.
30. This aspect of the defence seems to be another version of WLC's reliance on the argument that a transaction should not be analysed in accordance with the individual steps in it because one of the intermediate parties is only acting as a "conduit". I have explained above why I do not accept this argument in principle, in the absence of evidence that establishes in an orthodox way that the intermediary was only acting as an agent for or on behalf of another party in the transaction chain. In the present case, as has been explained above, WLC treated the receipt from GNI in its accounts as having given rise to a debt to GNI, rather than GNL, and nothing in the evidence has displaced the effect of that accounting treatment.
31. WLC then alleges, in par 105, that the effect of WLC's payments to the various lenders was the following: The said payments discharged [Gujarat India's] liability: a. as guarantor and indemnifier for the amounts owing under the facilities referred to in paragraph 99 i) above to the lenders referred to in paragraph 104 above; and b. pursuant to the [letter of support] referred to in paragraph 100 above.
32. Putting aside the issue of the extent to which the letter of support created obligations that bound Gujarat India, it is not in my view sound to regard the transaction whereby GNL borrowed US $10,000,000 from Axis Bank to fund WLC's obligations to repay its lenders as being a discharge of Gujarat India's liability. It may be true that, in various ways that have not been strictly proved, the effect of WLC having discharged its own liabilities may have reduced the risk that Gujarat India or other companies in the Gujarat Group would have been called upon to meet liabilities undertaken by them, as guarantors of WLC's obligations. However, it is clear that WLC was the party with the primary liability.
33. WLC pleads in par 106 that by 27 March 2017, Gujarat India's liability to WLC had been crystallised by the judgment of this Court at US $59,718,101.53.
34. In par 107, WLC alleges that on 31 March 2017, Gujarat India applied for initiating corporate insolvency.
35. Then, in par 108, WLC repeats the matters alleged in par 97. I have set out par 97 above. One thing that par 97 does (in sub-par k), is to repeat the allegations in par 108, which creates a circularity.
36. WC then alleges in par 109 that, in the period 4 July 2013 to 26 October 2013, Mr Jagatramka caused the following payments to be made by WLC to Gujarat India or GNI: Date Amount Destination 4/7/2013 $1,158,526 [GNI] 5/7/2013 $79,600 [GNI] 15/8/2013 $850,000 [GNI] 22/7/2013 $1,414,986 [Gujarat India] 13/9/2013 $7,550,000 [Gujarat India] 19/9/2013 $145,000 [Gujarat India] 23/9/2013 $1,382,910 [Gujarat India] TOTAL: $12,581,022

1. It should be noted that the three payments made to GNI add up to $2,088,126. GNI has given WLC credit for those payments in calculating the debt claimed of $6,565,398.06.
2. The total amount of the payments alleged to be made to Gujarat India is $10,492,896. As I understand it, GNI has not contested WLC's claim that it made the payments alleged to Gujarat India. Mr Sharma gave evidence in his 6 July 2016 affidavit in pars 50 to 52 that these payments were made. He said that he did not believe that board approval was sought or obtained for these transactions. He said that, when he asked Mr Jagatramka why these payments were being made, Mr Jagatramka replied: "I gave WLC funds when it needed them most, now I am taking them back because [Gujarat India] needs them". Mr Jagatramka does not appear to have responded to this evidence in his affidavits.
3. Then, in par 110, WLC alleges that the payments set out in par 104 (being the payments made by WLC to the various lenders on 24 June 2013) had the effect of preventing the various loan facilities of [WLC] being called up or classified as non--performing, and benefited [Gujarat India] in that the payments "preserved the value of the shares owned by Gujarat India in WLC, and allowed WLC to continue providing coal to Gujarat India".
4. Finally, the consequences of these various allegations are set out by WLC in pars 111 and 112, in the following terms: 111. In the premises, it would be unconscionable for [Gujarat India's] indirect wholly-owned subsidiary, [GNI], to claim the amounts referred to in paragraph 167 of the Statement of Claim without giving credit for: a. the amount of US $59,718,101.53; and b. the amounts of $12,581,022 (set out in paragraph 109 above). 112. In the premises, [WLC] is entitled to set off the said amounts as against the claims made in paragraph 167 of the Statement of Claim.
5. The issues that remain for consideration are WLC's change of position defence, what appears to be a general unconscionability defence (distilled in par 111), and the set-off defence.

Availability of change of position defence

1. WLC extended its change of position defence to being a response to GNI's claim to be indemnified for the cost of its 150,000,000 shares in WLC that were sold by UIL: SOC par 78e. I do not understand WLC to have put submissions directed to establishing a case that it in some way is protected from the need to indemnify GNI because it changed its position. Logically, a change of position defence is not available because WLC received the US $20,000,000 payment under the CPA from UIL as a debt, and did not receive any money at all from GNI.
2. As I have recorded above, WLC did not press the change of position defence in relation to the payments made on 24 June 2013 to Axis Bank and the other lenders to WLC (T 06/06/18 331.20).
3. In oral submissions, there was an exploration of whether WLC had pleaded a change of position defence based upon the payments that it made between July and September 2013 to Gujarat India. Counsel for WLC ultimately accepted that WLC had only pleaded a change of position defence in respect of the June 2013 payments to Axis Bank and others, and that it had abandoned that defence (T 07/06/18 344.47).
4. Upon a careful analysis of WLC's defence, it is not entirely clear that it was necessary for WLC to abandon this defence as a matter of pleading. As I have observed above, the structure of WLC's defence appears to have suffered from the need to respond to GNI having pleaded its restitution claim for $6,565,398.06 (or $5,874,848.88) in a number of separate but overlapping ways. It is true that WLC only specifically referred to having changed its position in par 78e (in response to GNI's indemnity claim), and in par 97i in relation to the June payments (in response to GNI's "voluntary acceptance" formulation of its debt claim). However, in par 97m WLC pleaded that it was unconscionable for GNI to demand payment of the debt when WLC had made the July to September payments to Gujarat India referred to in par 109, and in par 108 in its defence to GNI's restitution claim, WLC repeated the allegations in par 97. It is true that the words "change of position" were not used, but after the merry-go-round of the pleading has been negotiated, there was arguably a factual basis pleaded for maintaining the change of position defence in relation to the September payments.
5. I am satisfied in any event that WLC could not maintain a change of position defence in relation to the payments to Gujarat India. As I have observed above, the High Court in AFSL v Hills Industries was concerned with the availability of a change of position defence in the context of a payment made by mistake, rather than a payment for which the consideration has failed. All of the Justices observed that the change of position defence may be available where the defendant had acted "in reliance on the payment" or "on the faith of the receipt": see French CJ at [16], [18] and the plurality at [81]. Gageler J expressed the concept in terms of the defendant acting "in good faith on the assumption that the defendant was entitled to deal with the payment which the defendant received" (at [157]). It will often be the case that, where A pays money to B under some mistake of A's, the circumstances of the payment will cause B to believe that it is entitled to retain the money as its own. The possibility that B will be able to form a good faith belief that B is entitled to treat money received from A as B's own, when B has failed to provide the consideration that A expected to receive is less obvious. But if the change of position defence is to be available for an action for money had and received, or for restitution, in respect of money paid for which there has been a total failure of consideration, it must still be necessary for B to establish that B in good faith believed it was entitled to deal with the money as its own.
6. The evidence clearly shows in the present case that WLC treated the money received as having given rise to a debt to GNI. It is true, as WLC submitted, that it was available to WLC to lead evidence to counter its admission that it was indebted to GNI. In that enterprise, WLC has failed. The application of a change of position defence must be approached upon the basis that WLC did not assume in good faith, or at all, that the money paid to it by GNI was WLC's own money. When the payments to Gujarat India were made in July to September 2013, they were not in any way made upon the assumption that WLC was not required to repay GNI. It is possible that the September payments involved some breach of duty owed to WLC, but WLC has not pursued a claim to that effect.

Availability of unconscionable conduct defence

1. The next issue is whether WLC has any defence to GNI's claim on the basis that GNI's claim is "unconscionable" in the circumstances pleaded in par 97 and pars 99 to 110 of the defence (see pars 97l and m and 111). It appears to me that these claims are in reality based upon a general principle of unconscionability being a legitimate defence to a restitution claim. I do not understand WLC to have supported a general defence of unconscionability (in the absence of a change of position) in its written or oral submissions (although perhaps the contrary may be said of closing submissions par 122). In oral submissions, counsel for WLC acknowledged that it only had "two answers to the debt case, one is the debt is owed to a different entity and the other is the set off." (T 06/06/18 317.1).
2. As Gageler J observed in AFSL v Hills Industries at [136], the joint reasons in David Securities "continued by explaining that the concept of unjust enrichment informed both: the circumstances in which, if proved by a plaintiff, enrichment of the defendant at the expense of the plaintiff will be prima facie unjust and in which the law will therefore recognise a prima facie obligation to make restitution of a payment; and the circumstances in which, if proved by the defendant, will "[show] that his or her receipt (or retention) of the payment is not unjust" and in which the law will therefore recognise a defence". But as his Honour said at [135], "unjust enrichment is not a definitive principle in Australian law".

Availability of set-off to WLC

1. The remaining issue is the question whether WLC is entitled to set off the amounts that it owes to GNI against Gujarat India's obligation to pay to it the amount of this Court's judgment for US $59,718,101.53, plus the debt created by the payments by WLC of the total of $10,492,896 in July to September 2013.
2. Paragraph 127 of WLC's closing submissions shows that WLC relies upon equitable set-off in respect of GNI's claim for repayment of the debt of $6,565,398.06 following the termination of the sub-underwriting agreement. That appears to be consistent with WLC's defence, which only pleads a set off in pars 97i and 112.
3. WLC referred to the decision of the Court of Appeal in Hawes v Dean [2014] NSWCA 380, and properly accepted that the decision is binding on this Court. In that case Barrett JA, with whom Bathurst CJ and McColl JA agreed, set out the applicable legal principles as follows: [60] The words just quoted [i.e. "impeach the title"] are those used by Lord Cottenham LC in Rawson v Samuel (1841) Cr & Ph 161; 41 ER 451 at 458 in a passage approved by the High Court in Hill v Ziymack [1908] HCA 13; 7 CLR 352 at 361. The Lord Chancellor observed that, in every relevant case to that point (except one), equitable set-off had been allowed only where "the equity of the bill impeached the title to the legal demand". In England, the Court of Appeal decided in 2010 (in Geldof Metaalconstructie NV v Simon Carves Ltd [2010] EWCA Civ 667; [2010] 4 All ER 847) that the "impeachment of title" test "should no longer be used", noting disapproval of it in Bank of Boston Connecticut v European Grain and Shipping Ltd [1989] AC 1056 by Lord Brandon of Oakbrook who regarded the concept as "not a familiar one today"; while in Bim Kemi v Blackburn Chemicals Ltd [2001] 2 Lloyd's Rep 93, it was described by Potter LJ as "difficult to define and apply". [61] The "impeachment of title" test remains applicable in Australia. In Norman; Re Forest Enterprises Ltd v FEA Plantation Ltd [2011] FCAFC 99; 195 FCR 97, the Full Federal Court noted several cases in which the test had been adopted and applied by Australian appellate courts in recent times, including Walker v Department of Social Security (1995) 56 FCR 354, J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 41 ALR 539 and Forsyth v Gibbs [2008] QCA 103; [2009] 1 Qd R 403 (to these must now be added HP Mercantile Pty Ltd v Dierickx [2013] NSWCA 479, a case to be referred to in greater detail presently, and Ozden v Commonwealth Bank of Australia [2014] VSCA 127). The Full Federal Court noted that, in Forsyth v Gibbs, Keane JA (with whom McMurdo P and Fraser JA agreed) said at [10] that equitable set-off does not depend upon an unfettered discretionary assessment of what is fair. Rather, it is essential that there be such a connection between the claim and cross-claim that the cross-claim can be said to impeach the claim. [62] In Lord v Direct Acceptance Corporation Ltd (1993) 32 NSWLR 362, this Court accepted the impeachment test as explained at [3709(h)] of R P Meagher, W M C Gummow and J R F Lehane, Equity Doctrines & Remedies (3rd ed 1992, Butterworths), namely, that it is an indispensable requirement of equitable set-off "that the set-off actually go to the root of, be essentially bound up with, impeach the title of the plaintiff". The same test is stated in the 4th edition of that work at [37-045(h)]: R P Meagher, J D Heydon and M J Leeming, Meagher, Gummow and Lehane's Equity Doctrines and Remedies, (4th ed 2002, Butterworths LexisNexis). The court said that the concept was "better stated" in Meagher, Gummow and Lehane than in Bank of Boston Connecticut v European Grain and Shipping Ltd (above). [63] A more recent statement of the principle in this Court is found in the judgment of Emmett JA (Beazley P and Meagher JA concurring) in HP Mercantile Pty Ltd v Dierickx (above). His Honour said (at [136]), referring to the decision of Gummow J in James v Commonwealth Bank of Australia (1992) 37 FCR 445: For there to be an equitable set-off, the set-off must essentially be bound up with and go to the root of, challenge, call in question, or impeach the title of the claimant. Equitable set-off is available where the party seeking it can show a recognised equitable ground for being, to the relevant extent, protected from its adversary's demand. The mere existence of a cross-claim is not sufficient. There must be some ground for equitable intervention beyond the mere existence of a cross-claim, such that it can be said that the equity of the defendant impeaches the claimant's title to the legal demand being enforced. [64] Emmett JA gave three examples of situations in which relevant impeachment will exist. The first is where a mortgage is granted to a solicitor as security for costs and the mortgagor client has a cross-claim against the solicitor for faulty work (the lien of a solicitor was referred to as "well known" in this connection in Simpson v Lamb (1857) 7 E & B 84 ; 139 ER 1179 at 1181). The second is where a builder has a claim for money due under a building contract and there is an unliquidated claim against the builder for damages for breach of that contract. The third case is where a lender fails to provide promised further advances for a development project and the borrower is unable to complete the development project and repay the advances actually made. [65] In all the hypothetical cases to which Emmett JA referred, two wrongs or defaults are so closely connected that a net position or result ought in equity to prevail between the parties because it would be unconscionable to allow one of them to insist on its legal right without first accommodating the other's countervailing legal right. It is the existence of that unconscionability that causes the first party's claim to be "impeached" (that is, undermined and defeated) by the second party's claim.
4. It is telling that, in [66], Barrett JA noted that "two obvious factors immediately call into question the closeness of the connection between the two relevant claims". The first factor was that: "Mutuality is entirely lacking", because different persons owed the debts the subject of the set-off claim. Secondly, the liabilities arose out of different transactions entered into at different times.
5. After analysing the relationship between the circumstances in which the two debts arose, Barrett JA found at [81]: …The separateness of the transactions from which the rights arose, both in time and as to subject matter, the lack of any overarching agreement and the lack of correspondence between parties entitled and parties liable were so pronounced as to preclude a positive answer. Keane JA reminded us in Forsyth v Gibbs (above) that equitable set-off does not depend upon an unfettered discretionary assessment of what is fair and that it is essential that there be such a connection between the claim and cross-claim that the cross-claim can be said to impeach the claim. That connection is lacking here and any sanctioning of equitable set-off can only be the product of impermissible resort to the kind of discretionary assessment against which Keane JA cautioned.
6. For the purposes of the present case, I take his Honour's observation "that equitable set-off does not depend upon an unfettered discretionary assessment of what is fair and that it is essential that there be such a connection between the claim and cross-claim that the cross-claim can be said to impeach the claim" to express the heart of the issue.
7. WLC argued that the necessary close connection between the two claims in the present case arose in respect of the parties because GNI was a wholly owned subsidiary of Gujarat India, and Mr Jagatramka exercised effective control over each of Gujarat India, GNI and WLC.
8. In Hawes v Dean, Barrett JA emphasised the importance of respecting the corporate veil in cases where particular corporate structures had been set up for real commercial purposes. The Court should not be too ready to allow set-offs where the debtors are different companies within corporate structures, as to do so would ignore the genuine individuality of the companies.
9. Although GNI was a wholly owned subsidiary of Gujarat India, the latter was publicly listed in India, and both were likely to have different sets of creditors.
10. As to the claim that Mr Jagatramka exercised effective control over all three companies, all that is alleged in the defence was that Mr Jagatramka directed or caused WLC to take certain actions (par 97i and 109). There is no allegation that Mr Jagatramka exercised effective control over all three companies. The issue was not explored in cross-examination of Mr Jagatramka, and Mr Sharma did not attempt to prove that he was controlled by Mr Jagatramka. WLC had independent directors. The evidence may support a finding that, by reason of his forceful personality, Mr Jagatramka may often have had his way, but it does not establish that Mr Jagatramka "controlled" all three companies.
11. WLC sought to demonstrate the closeness of the transactions by submitting that, by reason of Mr Jagatramka's exerting his control, he created a situation where WLC was financially and commercially dependent on Gujarat India. In outline, WLC submitted that this state of affairs came about because Mr Jagatramka ensured that Gujarat India was its major buyer of coal; he made WLC liable to a bill discounting facility under which WLC became liable to lenders who financed Gujarat India's purchases of coal from WLC, when Gujarat India did not pay for the coal; he caused Gujarat India to accrue debts to WLC of US $46,000,000 as at March 2013; he caused Gujarat India not to repay this debt; and he caused WLC not to take any action against Gujarat India. WLC's parlous financial state led Mr Jagatramka to cause GNL to borrow funds from Axis Bank for WLC, and it is the amount paid to WLC that is the subject of GNI's claim.
12. In essence, WLC seeks to link the circumstances in which Gujarat India became indebted to WLC for the unpaid price of coal delivered, to the circumstances in which money was borrowed by GNL and transferred to GNI to be advanced to WLC.
13. In a loose sense there is some broad truth in these assertions of fact, but the evidence does not make out the claim that Mr Jagatramka "created" the situation by his "control". Mr Jagatramka was the chief executive officer of the companies, and it is likely that decisions that he took were the principal causes of the circumstances as they ultimately came to be. However, the evidence was insufficient to justify a finding that, by reason of the common involvement of Mr Jagatramka, the ultimate circumstances had the common link or association asserted by WLC. For example, there was no evidence at all about Gujarat India's business activities, or the reasons why it did not pay its debt to WLC, or became the subject of an order for its winding up. The outcomes relied upon by WLC may not have had any real connection, and in any event it has not been established that circumstances that may not otherwise have come to pass did so because Mr Jagatramka exercised his control over the companies to cause those circumstances to occur.
14. In my view, the reality is that WLC's submissions demonstrate how greatly disconnected the debts owed by Gujarat India and WLC to the other really were. Gujarat India became indebted to WLC because it did not pay the price for coal delivered by WLC to Gujarat India. WLC entered into loan facilities with various lenders, in particular loan facilities led by Axis Bank. WLC borrowed money from GNI in order to meet urgent instalment and interest obligations to Axis Bank. The transactions had no real connection. In no real way does WLC's claim that Gujarat India owes it a debt for unpaid deliveries of coal impeach GNI's claim for repayment of the debt owed to it. WLC's claim against Gujarat India does not go to the root of or be essentially bound up with GNI's claim against WLC. WLC's claim that if Gujarat India had paid its debt to WLC, WLC would not have borrowed the money that it did from GNI (even if true in fact) is not sufficient to cause the debt claimed by GNI to be impeached.
15. In any event, I am not satisfied that the timely payment of Gujarat India's debt to WLC would necessarily have avoided the need for WLC to borrow the money from GNI (although it obviously would have helped significantly). The evidence does not permit a positive finding on this issue one way or the other. WLC had many other debts to third parties, and it owed a very substantial amount to its lenders.
16. WLC submitted that it is not a requirement of equitable set-off that there exists a strict mutuality of parties, relying primarily on Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439 at 464-465 per Giles J (as his Honour then was). It submitted that the presence or absence of mutuality of parties will be one of several factors to be weighed in determining the sufficiency of the closeness of the connection between the completing claims or the extent to which one can be said to impeach the other.
17. Relevantly, Giles J said: Mutuality in relation to set-off means that the claims must be between the same parties and in the same capacities (or rights, or interests). The claim by B against A in A's personal capacity can not be set-off against a claim by A against B in A's capacity as trustee. It may be that generally there is not mutuality even in the case of a claim by B against A in A's capacity as trustee and a claim by A against B in A's capacity as trustee because beneficial ownership is the criterion rather than right to sue, although I would prefer to leave that open: see Derham, Set-off (1987) at 136-137; Wood, English and International Set-off (1989) at 1051, 1054-1055. But equitable principles admit of set-off even in the absence of mutuality, if the circumstances are otherwise such as to attract the intervention of a court of equity: see Ex parte Stephens (1805) 11 Ves Jun 24; 32 ER 996; Hamp v Jones (1840) 9 LJ Ch 258; West Street Properties Pty Ltd v Jamison [1974] 2 NSWLR 435; Bank of New Zealand v Harry Miller & Co Ltd (1992) 26 NSWLR 48; Derham (at 319); Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 3rd ed, 1992 par 2867 at 720-721. In the words of the last-mentioned authors, "lack of mutuality may, in some circumstances, furnish grounds for refusing to recognise that a claim amounts to an equitable set-off, but, since many equitable set-offs lack mutuality, its absence is not necessarily fatal". Equitable set-off is available where the defendant establishes an equitable ground for being protected from the plaintiff's claim. That has been expressed in language to the effect that the defendant's set-off goes to the root of or impeaches the title of the plaintiff's claim, but also in language to the effect that the counter-claim is so directly connected with the claim that it would be unjust to allow the plaintiff to recover without taking into account the defendant's counter-claim. It is sufficient to refer to AWA Ltd v Exicom Australia Pty Ltd, James v Commonwealth Bank of Australia (1992) 37 FCR 445; sub nom Re Just Juice Corporation Pty Ltd; James v Commonwealth Bank of Australia (1992) 109 ALR 334 and the discussion in Meagher, Gummow and Lehane, pars 3709-3710 at 817-823, without going into whether the latter approach is an illicit departure from principle and authority. Accordingly, if a court of equity will restrain A in his capacity as trustee from recovering his claim against B without allowing for B's counter- claim against A in A's capacity as trustee there will be set-off in equity. That B could not have levied execution against the trust property may be relevant to whether the court will intervene, but why should it necessarily prevent set-off? Depending on the circumstances, it may not be right for the beneficiaries to have the fruits of A's activity as their trustee without bearing the burden of A's conduct in so acting. (Emphasis added)
18. It appears that WLC has attempted to supply an equitable ground for being protected against GNI's claim by submitting that Mr Jagatramka preferred the interests of Gujarat India and GNI over those of WLC (closing submissions pars 142 and 143). The specific instances relied upon were the allegation that Mr Jagatramka pursued funding options for WLC that did not involve the dilution of the Gujarat Group's 63% shareholding in WLC; he caused WLC to terminate the underwriting agreement with Wonga; he allowed WLC to apply debit notes retrospectively to its accounts to achieve a reduction in Gujarat India's indebtedness to WLC in the amount of about $45,000,000; and notwithstanding the letter of support, he caused WLC to pay Gujarat India $10,492,896 and GNI $2,088,126.
19. WLC's defence does not contain any allegations that Mr Jagatramka avoided funding options that would involve the dilution of the Gujarat Group's shareholding in WLC, or that options that would have had that effect were available earlier than the arrangement made with Jindal. There is no allegation concerning the retrospective application of debit notes. More importantly, there is no allegation that Mr Jagatramka breached any duty that he owed to WLC to avoid conflicts of interest as between Gujarat India, GNI and WLC. There is no allegation that each of those companies was bound to the consequences of any breach of duty by Mr Jagatramka in relation to the other companies.
20. As a specific example, WLC alleges in par 109 of its defence that Mr Jagatramka caused the payments to be made to Gujarat India and GNI between July and October 2013. There is no allegation at all as to the circumstances or consequences of those payments. There is no allegation that the payments involved any breach of duty by Mr Jagatramka. All that is alleged, in par 112, that "in the premises" WLC is entitled to the set-off claimed.
21. The argument now put by WLC as the basis for the intervention of equity to allow a set-off between debts owed by different parties was not in any real way fought at the hearing. The attempt by WLC to support the argument is based upon disconnected pieces of the evidence. In particular, Mr Jagatramka was not in any adequate way cross-examined on the conflict of interest issue, and evidence was not lead from Mr Sharma or the only other director of WLC who was called, Mr Firek, to establish that Mr Jagatramka breached any duty to avoid conflicts of interest as it is now alleged.
22. I find that WLC has not made out its claim that it is entitled to set-off the debts that I have found it owes to GNI against any obligation of Gujarat India to WLC.

Conclusion

1. I find that GNI is entitled to be indemnified by WLC as sought in Prayer 2 of the SOC. Strangely, the prayers in the SOC do not specifically claim the sum of $6,565,398.06, being its second claim in these proceedings, although it is clear that the claim is made in par 148A of the SOC. I find that WLC is indebted to GNI in that amount.
2. It will be necessary for the parties to consider what entitlement to interest GNI has as a result of my findings. I invite the parties to address the interest issue and provide draft short minutes of order to my chambers, or arrange to relist the matter if agreement cannot be reached.
3. I note that in its submissions, GNI seeks the opportunity to make submissions as to the appropriate costs order to be made in these proceedings, including why any special cost order should be made. I will give the parties the opportunity to submit written submissions on this issue.

Amendments 31 December 2018 - Formatting correction at par 151 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 December 2018