Hill End Gold Ltd v First Tiffany Resource Corp

LEGISLATION CITED : (NSW) Uniform Civil Procedure Rules, rr 14.9, 14.10, 14.14

Chapple v Electrical Trades Union [1961] 3 All ER 612 Dwyer v National Trustees Executors and Agency Co of Australasia Ltd [1939] VLR 96 Fox v H Wood (Harrow) Ltd [1963] 2 QB 601 CASES CITED : Hill End Gold Ltd v First Tiffany Resource Corporation [2008] NSWSC 866 Howard v Borneman [1972] 2 All ER 867 TCS ACES Pty Ltd v Mikohn Gaming Australasia Pty Ltd [2007] NSWSC 1139 Pinson v Lloyds & National Provincial Foreign Bank Ltd [1941] 2 KB 72 Weinberger v Inglis [1918] 1 Ch 133

TEXTS CITED : A V Ritchie et al, Ritchie's Uniform Civil Procedure NSW (2005) LexisNexis

PARTIES : Hill End Gold Limited (plaintiff) First Tiffany Resource Corporation (defendant)

COUNSEL : Mr B J Weber SC w Mr C N Bova (plaintiff/respondent) Dr K A Stern (defendant/applicant)

SOLICITORS : Ian Congdon (plaintiff/respondent) Watson Mangioni (defendant/applicant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EXPEDITION LIST

5655/05 Hill End Gold Ltd v First Tiffany Resource Corporation JUDGMENT (ex tempore) 1 HIS HONOUR: The commercial and procedural history which underlies the present application for an order striking out Tiffany's defence is set out in my judgment of 22 August 2008 [Hill End Gold Ltd v First Tiffany Resource Corporation [2008] NSWSC 866], in which I granted leave to Tiffany to withdraw admissions it had made in its amended defence, granted leave to Hill End Gold to file a further amended statement of claim, and made directions for the filing of a defence to any such further amended statement of claim.

2 Pursuant to those directions, Hill End Gold Ltd ("HEGL"), on 26 September 2008, filed a further amended statement of claim, which worked a substantial repleading of its case. The fundamental elements of that pleading involve, first, in paragraphs 1 through to 20, a pleading of how HEGL has derived its interest in the mining tenements in question; for present purposes, that part of the pleading is uncontroversial. The pleading then, secondly, turns to the basis on which it is said that Tiffany has or no longer has any interest in the tenements. By paragraph 22 it is pleaded that, pursuant to the 1983 Joint Venture Agreement, Tiffany acquired a 20 per cent interest in the two joint ventures referred to in it. Paragraph 30 pleads that, some time prior to 19 March 1990, the 1983 Joint Venture Agreement was terminated, and paragraph 31 pleads that upon termination of the 1983 Joint Venture Agreement, HEGL's predecessor, Silver Orchid Pty Ltd ("Silver Orchid"), held a 100 per cent interest and Tiffany ceased to hold an interest in the tenements. 3 Paragraphs 34 to 38 plead, in the alternative, that HEGL provided Tiffany with a feasibility study as defined in the Joint Venture Agreement (on the hypothesis that it remained on foot), that Tiffany has refused to contribute 15 per cent of the requisite funding and as a result repudiated the 1983 Joint Venture Agreement, which HEGL claims to have terminated.

4 The only potential interest of Tiffany in the tenements which the statement of claim directly addresses is one acquired under the 1983 Joint Venture Agreement. As Dr Stern for Tiffany submits, it is implicit in paragraph 22 of the statement of claim - which alleges that, pursuant to the 1983 Joint Venture Agreement, Tiffany acquired a 20 per cent interest in the two joint ventures - that it was then that Tiffany first and only acquired an interest. That follows also from paragraph 31(b) which alleges that, upon termination of the 1983 Joint Venture Agreement, Tiffany ceased to have an interest in the tenements

5 Tiffany filed a defence to the further amended statement of claim on 24 October 2008. In answer to paragraph 21 of the statement of claim, Tiffany admits that a document entitled Joint Venture Agreement was executed on or about 23 August 1983, says that it "relies on the terms of the Joint Venture Agreement for their force and effect", and otherwise does not admit the paragraph. Tiffany denies paragraph 22 (that is the allegation that it acquired a 20 per cent interest in the joint ventures pursuant to the 1983 agreement). Tiffany also denies paragraph 31 (that it ceased to have an interest in the tenements upon termination of the 1983 Joint Venture Agreement) and paragraph 40 (that by reason of the foregoing matters, HEGL has a 100 per cent interest and Tiffany has no interest in the holdings).

6 The fundamental issue on this present application is whether the defence complies with the requirements of (NSW) Uniform Civil Procedure Rules ("UCPR"), r 14.14(2), which provides that a defence must plead specifically any matter that, if not pleaded specifically, may take the opposite party by surprise, or that raises matters of fact not arising out of the preceding pleading. 7 In the earlier judgment to which I referred, I summarised, in paragraph 44, an aspect of what I understood to be the case that Tiffany wished to advance: [44] The amended 1982 Agreement does not contain a Feasibility Study Term, although it does contemplate execution of a joint venture agreement "upon closing" to permit Tiffany to participate in development. The 1983 Memorandum introduced a Feasibility Study Term. Although, on one view, the 1983 Joint Venture Agreement superseded the 1983 Memorandum, its termination by the 1987 Termination Agreement at least arguably resurrected the preceding 1983 Memorandum, or alternatively was on terms that preserved a Feasibility Study Term (as indeed Tiffany had pleaded in its first proposed amended defence and cross claim). [45] However, as Dr Stern points out, insofar as HEGL's rights are derivative, the 1993 documentation contains no reference to the circumstances in which Tiffany's interest might become contributory. The 25 June 1993 agreement between BNP and Silver Orchid provides for the acquisition by BNP of an interest in all Silver Orchid's mining holdings in Hill End, and the 4 August 1993 agreement between BNP and Tiffany provides for the acquisition by BNP of 25% of Tiffany's undivided 20% free carried interest. The deed of transfer between Silver Orchid and Nugget Resources (HEGL) dated 16 March 1999 recited that Silver Orchid had held 80% of the legal and equitable interest in the relevant tenements, and transferred all Silver Orchid's legal and equitable interest in the tenements to HEGL. It is not by any means manifestly plain, though it is not unarguable, that these dealings caught, or had the effect of conveying to HEGL, any right or interest in respect of Tiffany's remaining 15% undivided free carried interest. [46] Thus, while there is undoubtedly an available argument that Tiffany's interest is subject to a Feasibility Study Term, it is not manifestly clear that that is so, and in any event it would arise in a manner different from that pleaded. Similarly, while it is not unarguable, it is not manifestly clear that HEGL has succeeded to any rights in respect of Tiffany's residual 15% carried interest. There is at least a seriously arguable case to the contrary. [47] Accordingly:

· In terms of the present pleadings, the admissions were wrongly made; · Although there may be alternative bases for contending that Tiffany's interest is subject to a Feasibility Study Term, it is not manifestly plain that it must be so. 8 In the course of argument, I asked counsel for the defendant whether Tiffany intended to put into evidence the amended 1982 agreement and the 1983 memorandum, and I understood the answer to be affirmative in effect. In any event, to make out the type of case which I anticipated in the previous judgment, those agreements would be necessary evidence. Those agreements, as it seems to me, are matters of fact that do not arise out of the previous pleading - that is, the further amended statement of claim - and, accordingly, are required to be pleaded by UCPR, r 14.14(2)(c). That is so even though once pleaded, the burden of disproving them may fall on the plaintiff, as it seems to me that the specificity of r 14.14 prevails over the more general r 14.10, which provides that a party need not plead a fact if the burden of disproving it lies on the opposite party. 9 Were I not of the view that, by reason of UCPR, r 14.14(2), it were necessary to plead these additional facts which do not arise out of the original pleading, then it would in any event have been appropriate to order particulars of them, as particulars of a pregnant negative in the defence. Where a defendant is simply putting the plaintiff to proof and not mounting any affirmative defence, then particulars would not be ordered of a pleading which merely put the plaintiff to proof [Fox v H Wood (Harrow) Ltd [1963] 2 QB 601, 605 (Diplock LJ); Weinberger v Inglis [1918] 1 Ch 133]; but where, as here, it is apparent that, despite the negative form in which it is couched, the defence will involve the defendant seeking to establish an affirmative allegation - even if it is an allegation the burden of disproving which will ultimately fall on the plaintiff - so that there is a "pregnant negative", particulars of the denial may be ordered [Pinson v Lloyds & National Provincial Foreign Bank Ltd [1941] 2 KB 72, 79 (Scott LJ); Chapple v Electrical Trades Union [1961] 3 All ER 612, 615; (Pennycuick J); Howard v Borneman [1972] 2 All ER 867 (Goff J); Dwyer v National Trustees Executors and Agency Co of Australasia Ltd [1939] VLR 96, 101-2 (Martin J)]. 10 However, any need to resolve that tension is overcome by the other, and I think it is fair to say admitted, defects in the defence. UCPR, r 14.9, provides that if any documents are referred to in a pleading, the effect of the document must, so far as material, be stated. In TCS ACES Pty Ltd v Mikohn Gaming Australasia Pty Ltd [2007] NSWSC 1139, I pointed out (at [7]) that a pleading which merely refers to a document and "relies on it for its full force and effect" does not comply with that rule. That decision and the reasons why that is so, are summarised in Ritchie's Uniform Civil Procedure Rules at [14.9.5], together with other authorities to the same effect. One reason of particular application in the present case is that, whereas the further amended statement of claim pleads the relevant effect for which the plaintiff will contend of each relevant document, the defence, by stating only that it "relies on the terms of that document for its full force and effect", leaves entirely open whether the defendant accepts that the document has the effect pleaded by the plaintiff, or attributes some and if so which other relevant effect to it.

11 As so much of the pleading - for example, paragraphs 3, 5, 7, 8, 15, 17, 18, 20, 21, 22, and 26 - is defective in that way, the appropriate course would be to strike out the defence, with leave to replead, in any event. That course will also enable the defence to be amended to comply with UCPR, r 14.14(2)(c), by pleading the material facts, not arising out of the statement of claim, on which the defendant will rely. 12 I order that the defence be struck out, with leave to replead.

13 I direct that any amended defence be served by 11 December 2008.

14 I order that the defendant pay the plaintiff's costs of the motion. 15 I extend time for the service of the defendant's expert evidence to 21 January 2009.

16 I adjourn the proceedings to 6 February 2009 at 11.15am for further pre-trial directions.

17 I do not propose at this stage to make a directions about evidence in reply.

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