In the matter of Idoport Pty Ltd ACN 075 318 106; In the matter of Idoport Pty Ltd (In Liq) (Receivers Appointed) [2012] NSWSC 524

Judgment 1The question in these proceedings is whether Idoport Pty Ltd (In Liq) (Receivers Appointed) has validly created charges in favour of Fulham Partners LLC and Portsmouth Partners LLC (the Chargees) over its rights under a Consulting Agreement dated 13 September 1996 between it and National Australia Bank Limited (NAB) and two of NAB's subsidiaries, National Markets Group Limited (NMG) and Australian Market Automated Quotation (AUSMAQ) System Limited (AUSMAQ) (together, the NAB Parties). The answer to that question turns on whether the NAB Parties were entitled to withhold their consent to the creation of those charges and, if so, the consequences of their doing so.

Factual background 2Idoport was, until its liquidation, a company controlled by Mr Maconochie. Prior to November 1996, Mr Maconochie and companies associated with him owned various intellectual property and associated rights in relation to an automated securities trading system known as the AUSMAQ service. Under agreements entered at or at about the same time as the Consulting Agreement, NMG, then a shelf company incorporated by NAB, acquired the shares in Ausmaq Limited, the holding company of AUSMAQ, and the intellectual property rights relating to the AUSMAQ service. At about the same time, Idoport was incorporated by Mr Maconochie for the purpose of entering into the Consulting Agreement. 3By cl 3.1 of the Consulting Agreement, Idoport agreed upon request to supply certain consultancy services in connection with the AUSMAQ service. The obligation to provide those services continued for a period of 5 years from the completion date of the agreement: cl 8.1. NMG had a right to extend that period under cl 8.2 for up to a further 5 years. That right, however, was not exercised. 4Under cl 6.1 of the Consulting Agreement, NMG was required to pay a service fee, regardless of whether the services were actually required by the NAB Group. By cl 5.1, Idoport was obliged to use its best endeavours to ensure that it could procure the services of certain named consultants (including Mr Maconochie) and, under cl 6.2, the service fee payable by NMG was reduced by specified percentages if one or more of those consultants were not available. 5Under cl 7 of the Consulting Agreement, NMG was to pay or to procure the payment of certain bonuses calculated by reference to the performance of specified companies in the NAB Group which used the AUSMAQ service. By cl 2 of the Consulting Agreement, the agreement continues in force until the intellectual property rights in relation to the AUSMAQ service permanently cease to be used by all related companies of NAB. The parties agree that the Consulting Agreement remains in force in accordance with that clause. The NAB Parties maintain, and Idoport disputes, that no bonuses have become payable under cl 7. 6Clause 20.1 of the Consulting Agreement provides: The rights and obligations of each party under this Agreement are personal. They cannot be assigned, encumbered or otherwise dealt with and no party will attempt, or purport, to do so without the prior consent of the other parties (not to be unreasonably withheld). 7On 24 September 1998, Idoport and a related company, Market Holdings Pty Limited, commenced proceedings in this court against a number of companies in the NAB Group as well as several NAB executives. On 1 March 1999, Idoport and Market Holdings commenced further proceedings against NAB's former managing director, Mr Donald Argus. The plaintiffs in the two proceedings (together, the Idoport Proceedings) claimed damages totalling in excess of US$29 billion arising from alleged breaches of the Consulting Agreement, misleading or deceptive conduct and breach of fiduciary duty. The claims included a claim that the NAB Parties had delayed the commercialisation of the AUSMAQ service and, in doing so, had deprived Idoport of its performance bonus. 8The final hearing of the Idoport Proceedings commenced before Einstein J on 24 July 2000. On 19 September 2000, Idoport commenced further proceedings against, among others, certain NAB entities, MLC Limited and Mr Frank Cicutto (the then Chief Executive Officer of NAB) (the MLC Proceedings) which also made claims based on the Consulting Agreement. The MLC Proceedings were consolidated and heard together with the Idoport Proceedings. 9On 29 January 2002, following 223 sitting days, Einstein J dismissed the Idoport and MLC Proceedings because of Idoport's failure to provide security for costs. Idoport was ordered to pay the defendants' costs of the proceedings. In addition, Einstein J ordered (the Barring Order) that Idoport and a number of associated entities, including Mr Maconochie: ... be barred from bringing fresh proceedings concerning any cause of action or the whole or any part of any claim for relief by any of them in these proceedings, until costs in these proceedings have been paid in full. 10On 1 July 2002, NAB received a letter from a law firm based in California which raised the possibility of the Californian firm commencing proceedings involving issues that were the subject of the Idoport Proceedings. In response to that letter, NAB and the other defendants in the Idoport and MLC Proceedings obtained interim anti-suit injunctions from Barrett J against Idoport, Mr Maconochie and associated companies. Barrett J also made a declaration making it clear that the Barring Order prevented the institution of fresh proceedings until all costs were paid. The anti-suit injunctions were subsequently continued in the form of undertakings by the defendants not to initiate proceedings in another country (the Undertakings). 11Idoport's appeal to the Court of Appeal from Einstein J's orders was dismissed with costs on 15 August 2002. An application for special leave to appeal from that decision was refused with costs on 20 June 2003. 12On 30 March 2005, Idoport entered into a number of agreements with the Chargees, including a loan agreement with Fulham and a share subscription agreement with Portsmouth, to provide litigation funding to Idoport. Under the terms of the loan agreement, Fulham agreed to lend up to $10 million to Idoport for purposes which included the payment of the outstanding costs order in the MLC Proceedings and the payment of costs incurred by Idoport in the existing proceedings (meaning the proceedings before Einstein J) or new proceedings. Under the share subscription agreement, Portsmouth agreed to subscribe for 116 A class ordinary shares and 1,000 redeemable preference shares of $1,000 each for an initial subscription amount of $1,000,116. The share subscription agreement contemplated that further shares could be issued at a subscription amount of $1,000 per share. 13Also on 30 March 2005, Idoport granted two fixed and floating equitable charges to Fulham and Portsmouth respectively (the Charges). The Charges secured the repayment of amounts drawn by Idoport under the loan agreement as well as other amounts payable under the transaction documents signed on 30 March 2005. 14The Charges are in substantially the same terms. Clause 3.1 provides: The Chargor charges, as beneficial owner, all of its right, title and interest in, to, and under the Secured Property to the Chargee as security for payment of the Secured Money. 15In cl 1.1 of the Charges, "Secured Property" is defined as: ... subject to clauses 3.2, 3.3 and 3.4, all the present and future rights, property and undertaking of the Chargor of whatever kind and wherever situated and includes Capital but does not include the Excluded Property unless and until the circumstances specified in clauses 3.2 or clause 3.3 occur. A reference to Secured Property includes any part of it. "Excluded Property" is defined in cl 1.1 as meaning "the rights and obligations of the Chargor under the Consulting Agreement". 16Clause 3 of the Charges relevantly provides: 3.1 Charge The Chargor charges, as beneficial owner, all of its right, title and interest in, to and under the Secured Property to the Chargee as security for payment of the Secured Money. 3.2 Consent of NAB to charge over Excluded Property If required by the Chargee, the Chargor must seek the written consent of NAB to the granting of a fixed charge in favour of the Chargee over the Excluded Property on the terms and conditions set out in this charge. If NAB consents to the granting of such a charge, then immediately upon the granting of such consent, the Secured Property shall be taken to include the Excluded Property and the Chargor shall be taken to have charged, as beneficial owner, all of its right, title and interest in the Excluded Property to the Chargee as security for payment of the Secured Money. 3.3 Notice extending charge over Excluded Property Notwithstanding clause 3.2, whether or not NAB consents to the granting of such a charge, the Chargee may at any time by notice to the Chargor declare that the charge in 3.1 will extend to, and operate as a fixed charge over, the Chargor's right, title and interest in the Excluded Property. Immediately upon the giving of such notice, the Secured Property shall be taken to include the Excluded Property and the Chargor shall be taken to have charged, as beneficial owner, all of its right, title and interest in the Excluded Property to the Chargee as security for payment of the Secured Money. 3.4 No charge over Excluded Property until consent or notice given For the avoidance of doubt, the Secured Property will not include the Excluded Property and nothing in this charge will operate as an Encumbrance over, or Security Interest in, the Excluded Property unless and until consent from NAB is received under clause 3.2 or the Chargee gives a notice to the Chargor under clause 3.3. ... 17Under cl 12.1 of the Charges, a Chargee may appoint a person as receiver or receiver and manager of the Secured Property at any time after an Event of Default. An Event of Default includes the appointment of a liquidator. Clause 13 confers broad powers on the receiver. 18NAB's costs in the MLC Proceedings were assessed. As at 1 April 2005, those costs plus interest stood at $333,147.30. Idoport paid those costs on that day and, on the same date, commenced proceedings against NAB and NMG seeking orders that they pay to Idoport the performance bonuses (the Master Key Proceedings). 19On 28 July 2005, Bergin J dismissed the Master Key Proceedings on the ground that they were brought in breach of the Barring Order. An appeal from that decision was dismissed with costs by the Court of Appeal on 24 July 2006 and, on 8 December 2006, an application for special leave to appeal against that decision was refused. 20On or about 1 March 2006, the Chargees, in exercise of their rights under cl 3.2 of the Charges, requested Idoport to seek NAB's consent to the granting of a fixed charge over Idoport's rights under the Consulting Agreement. By letter dated 16 March 2006, Idoport sought that consent, although the letter stated that Idoport did not concede that it was necessary to do so. 21NAB responded to that request on 27 April 2006 seeking the following: (a) detail the reasons why Idoport entered into the Charges and bound itself in the manner set out in clauses 3.2 and 3.3; (b) detail the reasons why Idoport is now seeking written consent. In particular, is consent being sought because of a request by the Chargees or either of them under clause 3.2 of the respective Charges? If so, please provide a copy of any correspondence in relation to this request; and (c) detail the extent of the indebtedness secured by the Charges. 22A copy of NAB's letter was passed on to the Chargees. However, for reasons which remain unexplained, Idoport did not respond to NAB's request until 22 November 2006. In that response, Idoport provided NAB with a set of confidential documents (which had been provided previously in connection with the proceedings before Einstein J). Idoport stated in the letter that "the detail requested in subparagraphs (a) and (c) of your final paragraph can be fully answered by a perusal of these Confidential Documents". The letter went on to say: As regards the detailed requested in sub-paragraph (b) of your final sub-paragraph, Idoport can confirm that consent is being sought because of a request by the Chargees under clause 3.2 of the respective Charges. We are not, however, in a position to provide you with copies of correspondence in this regard and cannot, in any event, see the relevance of same to the consent question. The letter concluded by repeating the request made on 16 March 2006 for the NAB Parties' consent to the granting of a fixed charge over the Consulting Agreement (without conceding that that consent was necessary). 23By a letter dated 29 December 2006, which was apparently received by NAB on 17 January 2007, Idoport repeated its request for a response to its letter dated 16 March 2006. 24In the meantime, on 9 January 2007, the Chargees purportedly exercised their rights under cl 3.3 of their respective charges and declared that the Charges extended to a fixed charge over "Idoport's right, title and interest in the Excluded Property". Although the Chargees submitted that this charge was only a charge over the "fruits" of the contractual entitlement to be paid bonus fees, it is clear from the terms of the Charges that it extends to the contractual rights themselves. 25On 19 January 2007, Idoport wrote to the Chargees complaining about the purported exercise of those rights. 26On 6 February 2007, Mr Lawson (the Deputy Chief General Counsel of NAB between 29 May 2006 and 14 February 2007 and Special Counsel Corporate Centre for the Bank from 15 January 2007 onwards) sent emails to Mr Nolan (the Company Secretary of NMG and AUSMAQ) and Ms Healey (the Company Secretary of NAB) enclosing draft letters addressed to Idoport refusing the NAB Parties' consent. 27A letter substantially in the terms of that draft was sent to Idoport on 7 February 2007 on AUSMAQ's letterhead. The letter relevantly said: NMG and AUSMAQ have considered Idoport's request. In particular they have taken into account the following matters: + the terms of the Consulting Agreement; + that Idoport has purported to charge its property in favour of third parties resident outside the jurisdiction and with no prior notice to NMG and AUSMAQ or the other party to the Consulting Agreement; + that there has been a long-running dispute between the parties as to the proper construction of the Consulting Agreement and as to the respective parties' entitlements in relation to the Consulting Agreement; + that NMG and AUSMAQ are major unsecured creditors of Idoport; + that the amount of funds that Idoport can access under the Loan Agreement and the Share Subscription Agreement are not sufficient to discharge the likely quantum of Idoport's total indebtedness to NMG and AUSMAQ; + that there has been an Event of Default under the Loan Agreement between Idoport and Fulham as a result of NSW Supreme Court Equity Division proceedings 50046 of 2005 having been dismissed and Idoport has given no details of what moneys have been drawn down under the Loan Agreement or whether that Event of Default has been waived, or whether a demand has been made for repayment or whether Fulham has given notice to Idoport that Fulham's obligations under the Loan Agreement have been terminated; + that there has been an Event of Default under the Share Subscription Agreement between Idoport and Portsmouth as a result of NSW Supreme Court Equity Division proceedings 50046 of 2005 having been dismissed and Idoport has given no details of whether that Event of Default has been waived or whether Portsmouth has given notice to Idoport that Portsmouth's obligations under the Share Subscription Agreement have been terminated; + that the circumstances surrounding, and the reasons for, Fulham and Portsmouth requesting Idoport to seek NMG's and AUSMAQ's consent to the extension of the Charges have not been explained. Having considered these matters NMG and AUSMAQ each decline to give their consent to the granting of a fixed charge over the rights and obligations of Idoport under the Consulting Agreement in favour of each of Fulham and Portsmouth. NAB sent a letter in the same terms to Idoport on 12 February 2007. 28Idoport objects to the tender of the emails dated 6 February 2007 and letters dated 7 and 12 February 2007 on the ground that they are hearsay. I return to that issue below. 29On 14 February 2007, Einstein J determined an application by the NAB Parties that had been made by them on 1 September 2003 for a gross sum costs order by ordering that Idoport pay NAB's costs in the amount of $42,050,000 plus interest. The amount due under that order is now approximately $85,000,000. 30On 3 September 2008, White J ordered that Idoport be wound up in insolvency. Idoport's only asset of any substance is its rights under the Consulting Agreement. 31On 20 November 2008, the Chargees purported to appoint Mr Michael Smith as receiver over Idoport's assets including its rights under the Consulting Agreement. On 19 December 2008, Freehills, acting for NAB, wrote to Atanaskovic Hartnell, acting for the Chargees, disputing their right to do so. 32On 9 October 2009, Mr Smith placed an advertisement in the Australian Financial Review calling for expressions of interest for the acquisition of rights under the Consulting Agreement. On 15 October 2009, Freehills wrote to Mr Smith disputing his right to do so. 33On 16 December 2009, Mr Smith wrote to NAB repeating the request made by Idoport on 16 March 2006 for written consent to the granting of a fixed charge over the Consulting Agreement in favour of the Chargees. The letter relevantly said: It is acknowledged that: + by operation of the orders of Justice Einstein made on 30 January 2002; and + having regard to the judgment of Justice Bergin on 28 July 2005, upheld on appeal to the Court of Appeal on 24 July 2006, and following dismissal of the application for special leave to appeal to the High Court on 8 December 2006, Idoport (and any assignee of its rights under the Consulting Agreement) must first pay the gross sum costs order before it is able to pursue the claims made in the 2005 Proceedings, or any other claims which concern a cause of action or part of relief in the original proceedings brought by Idoport which were the subject of Justice Einstein's orders. 34The letter went on to give the following explanation for the circumstances surrounding, and the reasons for, the request to extend the Charges: At the time the Charges were entered into, Fulham and Portsmouth intended to fund the 2005 Proceedings, and obtain a return on that investment from part of the proceeds of that litigation, or any settlement thereof. As a result of the 2005 Proceedings, Fulham and Portsmouth wish to extend the Charges over the Excluded Property to enable those rights to be sold by the Receiver to a third party, in order to enable the Idoport debt to be repaid. Idoport is unable to meet the gross sum costs order itself. The Receiver therefore wishes to place Idoport in a position where its rights under the Consulting Agreement are able to be sold to a third party in order to obtain, through that process, as much satisfaction of its contractual entitlements under the Consulting Agreement as it is thereby able to obtain. 35Freehills responded to that letter on 5 February 2010. In that response, they asserted that Mr Smith had not been validly appointed and that NAB did not propose to deal with him in relation to the Consulting Agreement. The Chargees also object to the tender of that letter. 36On 18 May 2010, Mr Smith circulated an information memorandum concerning Idoport's rights under the Consulting Agreement. Clause 2.2.7 of that document stated: The consequence of the above is that neither Idoport nor any assignee will be able to bring fresh proceedings in respect of the Claim unless either the relief claimed in any fresh proceedings falls outside the scope of the Barring Order, or the Gross Sum Costs Order is satisfied in full before commencement of the fresh proceedings. Given the breadth of the Barring Order and the comments by Bergin J and the Court of Appeal in the Second MLC Proceedings as to its scope, only the latter option is considered to be realistic. In addition, cl 5.2.8 stated: As discussed in paragraph 2.2.7 above, any prospective purchaser should be aware that the enforcement of the Claim would most likely require the complete discharge of the Gross Sum Costs Order, and the responsibility to do so lies solely with the purchaser who wishes to obtain the benefit of successful enforcement of the Claim. 37On 2 August 2010, Mr Smith was replaced as receiver by Messrs Sheahan and Lock, the first and second defendants. 38On 27 April 2011, the Chargees issued a further notice under cl 3.3 of the Charges declaring that the Charges extended to and operated as a fixed charge over Idoport's right, title and interest in the Consulting Agreement and confirming Messrs Sheahan and Lock's appointment as receivers of that property. 39On 18 November 2010 and 4 February 2011, Messrs Sheahan and Lock sought to issue examination summonses against 15 senior NAB executives for the purpose of exploring the basis for the NAB Parties' refusal of consent to the extension of the Charges to the Consulting Agreement. On 15 February 2011, the examinees filed a second further amended interlocutory process seeking to have those examination summonses discharged. The examinees also sought a declaration that Messrs Sheahan and Lock's appointment as receivers insofar as it related to Idoport's rights under the Consulting Agreement was invalid. Objection was taken to that relief on the ground, among others, that the NAB Parties were necessary parties to that relief. The application to set aside the examination summonses was heard by Ward J. In light of the objection to the declaratory relief sought by the examinees, her Honour granted the NAB Parties leave to file an originating process seeking declaratory relief in the same terms. 40On 8 April 2011, Ward J set aside the examination summonses, leaving the question whether the declarations sought by the examinees and the NAB Parties should be granted. Her Honour ordered that that issue continue on pleadings and, on 17 March 2011, the NAB Parties filed a statement of claim. 41The following relief is claimed by the NAP Parties in the originating process: 1 A declaration that the rights of the Fifth Defendant [Idoport] under the Consulting Agreement between the Fifth Defendant and the Plaintiffs dated 13 September 1996 do not, by reason of any notice issued by the Third Defendant and/or the Fourth Defendant on 9 January 2007, or otherwise, constitute "Secured Property" pursuant to: (a) the Fixed and Floating Equitable Charge between the Fifth Defendant and the Third Defendant dated 30 March 2005; and/or (b) the Fixed and Floating Equitable Charge between the Fifth Defendant and the Fourth Defendant dated 30 March 2005, as that expression is defined in those Charges. 2 A declaration that the appointment of the First Defendant and the Second Defendant as Receivers of the Fifth Defendant, insofar as that appointment relates to the rights of the Fifth Defendant under the Consulting Agreement entered into with the Plaintiffs dated 13 September 1996, is invalid. 42On 6 February 2012, the Chargees filed an amended defence. In the meantime, on 3 May 2011, the Chargees also filed interlocutory processes in both the winding up proceedings and the proceedings commenced by the NAB Parties seeking declarations that Idoport was not required to obtain the consent of the NAB Parties to charge its rights under the Consulting Agreement or alternatively that the NAB Parties had unreasonably withheld their consent to Idoport's request to charge its rights under that agreement together with a number of alternative or ancillary declarations. 43Paragraph 21 of the statement of claim pleads that the NAB Parties' refusal of consent was not unreasonable. The following particulars are given of that allegation: (a) clause 20.1 of the Consulting Agreement provided that the rights of the parties were personal; (b) Idoport had, with no prior notice to the NAB Parties, purported to charge its property in favour of the Funders who were parties resident outside the jurisdiction and who may reasonably have been apprehended to contest their amenability to the jurisdiction; (c) there was a long running dispute between Idoport and the NAB Parties as to the proper construction of, and the respective parties' rights under, the Consulting Agreement; (d) the NAB Parties were the largest unsecured creditors of Idoport and the effect of granting the consent sought would be to grant the Funders priority to Idoport's only asset of any significance to the direct detriment of the NAB Parties as unsecured creditors; (e) the amount of funds that Idoport could access under its agreements with the Funders was not sufficient to discharge Idoport's indebtedness to the NAB Parties; (f) Idoport had given no details of what amounts had been drawn down under its agreements with the Funders, whether the event of default under those agreements resulting from the dismissal of the MasterKey Proceedings had been waived, or whether the Funders had given notice to Idoport terminating those agreements; (g) Idoport had not explained the circumstances surrounding, nor the reasons for, the Funders' request that Idoport seek the NAB Parties' consent to the extension of the Charges; (h) Idoport had provided no evidence that there was any party ready, willing and able to pay the outstanding costs owing to the NAB Parties as a pre-condition to further prosecution of Idoport's rights under the Consulting Agreement; (i) the NAB Parties had been exposed to very significant cost and inconvenience of defending claims brought by Idoport over a period of almost 10 years, which results in the NAB Parties obtaining a costs order now in excess of $70 million which (at the time of the refusal) remained wholly unpaid; (j) the Funders are litigation funders who funded the MasterKey Proceedings which Idoport sought to prosecute notwithstanding the Barring Order and in a manner held to be an abuse of process. 44In response to that paragraph, the Chargees plead that the NAB Parties refusal of consent was unreasonable and that it was an implied term of the Consulting Agreement that "the parties to the agreement would do all things necessary on their part to enable the other party to have the benefit of the agreement". The Chargees then allege that the effect of refusal was to deprive Idoport of the benefits of the agreement. They give the following particulars of that allegation: The effect of withholding the consent would be to: i. preclude or hinder or impede Idoport from entering into any agreement which would result in payment of the Gross Sum Costs Order to the NAB Parties; ii. deprive Idoport or hinder or impede Idoport of the means of asserting its rights to payment from the NAB Parties under the Consulting Agreement; and iii. ensure that the NAB Parties would not be required to perform their obligations under the Consulting Agreement to make substantial payments to Idoport. The Chargees also allege that the NAB Parties actual reasons for refusing consent in February 2007 "were to deprive Idoport of the benefit of payment under the Consulting Agreement by preventing it from obtaining the means of asserting its rights to payment from the NAB Parties" (para 12(d)) and allege that the particulars to paragraph 21 of the statement of claim "are an ex post facto statement of reasons and were not the actual reasons for the NAB Parties' decision in February 2007 to withhold consent to the extension of the Charges" (para 12(e)).

45The proceedings raise a number of issues. The first is whether the letters setting out the NAB Parties' reasons for refusing consent and the emails enclosing drafts of those letters are admissible. The second is whether the NAB Parties' consent was necessary for the Charges to be effective. The third is, if it was, who bears the onus of proof in relation to the question whether the NAB Parties unreasonably withheld their consent. The fourth is, having regard to the onus, did the NAB Parties unreasonably withhold their consent. 46Before dealing with those questions specifically, it is necessary to say something about the legal principles that are relevant to the construction and operation of clauses prohibiting assignment in the absence of consent that is not to be withheld unreasonably.

47Generally speaking, a purported assignment of a contractual right in breach of a provision of the contract prohibiting assignment is ineffective. That was the conclusion reached by the House of Lords in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85. In that case, Lord Browne-Wilkinson (with whom the other members of the House of Lords agreed) accepted that the question was one of construction of the relevant contract and that there may be cases where, properly construed, the term does not invalidate a purported assignment but only gives rise to a right to damages, although his Lordship expressed the view that cases of that type "are very unlikely to occur": at 104. Exceptional cases of that type aside, his Lordship said (at 108): [T]he existing authorities establish that an attempted assignment of contractual rights in breach of a contractual prohibition is ineffective to transfer such contractual rights. I regard the law as being satisfactorily settled in that sense. If the law were otherwise, it would defeat the legitimate commercial reason for inserting the contractual prohibition, viz., to ensure that the original parties to the contract are not brought into direct contractual relations with third parties. Lord Browne-Wilkinson also rejected the proposition that a prohibition on the assignment of contractual rights was void as being contrary to the public policy in favour of the alienability of property. As his Lordship pointed out that proposition was contrary to a long line of cases in which courts have given effect to prohibitions in leases on assignments without the consent of the landlord: at 107. 48Linden Gardens has been referred to with apparent approval by the High Court in Broadcast Australia Pty Ltd v Minister Assisting the Minister for Natural Resources (Lands) [2004] HCA 4; 221 CLR 178 at 183 n 10; and has also been followed by a number of other Australian cases including Minister for Land & Water Conservation v NTL Australia Pty Ltd [2002] NSWCA 149 at [8] per Mason P, [19]-[22] per Sheller JA (reversed on another point in Broadcast Australia Pty Ltd v Minister Assisting the Minister for Natural Resources (Lands) [2004] HCA 4; 221 CLR 178); Australian Olympic Committee Inc v The Big Fights Inc [1999] FCA 1042 at [119]-[120] and Westgold Resources NL v St George Bank Ltd (1998) 29 ACSR 396 at 415. For further discussion, see G Tolhurst, The Assignment of Contractual Rights, Hart Publishing, 2006 at [6.84]. There is no reason why a different approach should be taken where the prohibition relates to the creation of a charge over the relevant rights rather than simply an assignment of those rights. 49Where the effectiveness of an assignment (or charge) depends on the consent of the obligor and that consent is not to be withheld unreasonably, the question of what matters the court should take into account in determining whether consent has been withheld unreasonably also depends on the particular terms of the contract in question. As Nettle J said in Cathedral Place Pty Ltd v Hyatt of Australia Ltd [2003] VSC 385 at [25], "the terms of the contract are paramount". See also EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78 at [113]. Nonetheless, many clauses prohibiting the assignment or encumbering of contractual rights are so similar that it is possible to state a number of principles that should be applied absent a peculiar feature of the particular clause in question. 50First, the question whether a party acts reasonably in withholding consent is a question of fact. In this context, the expression "reasonable" should be given a broad and common sense meaning: Ashworth Frazer Ltd v Gloucester City Council [2001] UKHL 59; [2001] 1 WLR 2180 at [4]-[5] per Lord Bingham. Consent is unreasonably withheld if it is withheld "on grounds which have nothing whatever to do with the relationship [of the contracting parties] in regard to the subject matter of the [contract]": Ashworth at [61] per Lord Rodger (with whom Lords Bingham and Scott agreed). Or as Walsh J said in Colvin v Bowen (1958) 75 WN (NSW) 262 at 264 in a passage cited with approval by Mason J (with whom Gibbs, Stephen and Aickin JJ agreed) in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 610: [T]he reason for refusal must be something affecting the subject matter of the contract which forms the relationship between [the parties], and not something extraneous and dissociated from the subject matter of the contract. 51Second, the question whether a refusal of consent was unreasonable is to be determined objectively having regard to all the circumstances of the case. In Secured Income Mason J, after observing that there was authority for the proposition that "the question whether consent has been unreasonably withheld to an assignment of a lease is a subjective, not an objective, question in the sense that the court must confine itself to the points raised by the landlord at or about the time of that refusal" (at 610-11) said (at 611): I am inclined to the view that the landlord is entitled to rely on a ground not taken at or about the time of refusal. It would be most unjust if the landlord could not take advantage of an important ground justifying refusal merely because it was not known to him at the time, e.g. the impending bankruptcy of the proposed assignee. 52The Chargees submitted that this passage was not inconsistent with decisions which focus on the reasons actually given by the obligor for refusing consent. In their submission, if the evidence reveals that the reasons given were not the real reasons for the refusal, the court will determine that consent has been unreasonably withheld. In addition, they submitted that, if the obligor fails to give reasons, that may lead more readily to the conclusion that the refusal was capricious. In support of these propositions, the Chargees referred to cases such as Tamsco Ltd v Franklins Ltd [2001] NSWSC 1205; Provident Capital Ltd v Zone Developments Pty Ltd [2001] NSWSC 843; Eddadock Pty Ltd v Denning Properties Pty Ltd [2002] NSWSC 208 and JA McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd [1992] 2 Qd R 121. In Tamsco Young CJ in Eq, after referring to Secured Income, said (at [56]): [A]s the task of the court is to find the real reason for refusal, if no reason is given at the time of refusal, or if only some reasons are given, which are not the reasons relied on at the trial, then the court may have little difficulty in finding that the additional reasons were not the real reasons. Provident Capital, Eddadock and McBeath were also all cases where the court stressed the need to examine the real reasons the obligor refused consent in order to determine whether consent was unreasonably withheld. 53These cases, however, are not inconsistent with the proposition that the court must consider all the facts in order to determine objectively whether the obligor has acted unreasonably in withholding consent. If the obligor has withheld consent in order to achieve an objective which is "a collateral advantage outside the terms of the [contract]" (to use the words of Kelly SPJ at 133 in McBeath), then it follows that consent was withheld unreasonably. That is true even if there were reasons for refusing the consent that were reasonable which the obligor did not rely on. It is objectively unreasonable for an obligor to withhold consent in order to achieve a collateral object if the obligor is unconcerned about particular matters concerning the proposed assignee, even if some other obligor could reasonably attach significance to those matters. It is for that reason that Young CJ in Eq said in Tamsco that the task of the court was to find the true reason for refusal. Similarly, it may be unreasonable for an obligor to refuse to give reasons for withholding consent, particularly if requested to do so. As Young CJ in Eq pointed out it may be inferred from the refusal to give reasons that the obligor was seeking to obtain some collateral benefit. See also Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 609 per Mason J. In addition, in my opinion, the refusal to give reasons itself may be relevant to the reasonableness of the obligor's conduct in withholding consent. 54The NAB Parties take issue with the proposition that an obligor's actual reasons will always be relevant to the question of reasonableness. In doing so, they rely on the general principle stated by Dixon J in Williams v Frayne (1937) 58 CLR 710 at 733 in these terms: ... as a general rule, it is enough that upon the true facts a party is entitled to act as he has done and his justification is independent of his own knowledge of the facts ... A particular application of that principle is that a party who terminates a contract may, at trial, rely upon any ground for termination whether or not taken at the time: see Shepherd v Felt & Textiles (1931) 45 CLR 359. However, in my opinion, the analogy is not an accurate one. Normally, the right to terminate a contract depends on the existence of objective facts, not on the reasonableness of the conduct of the parties. The effect of the principle is that a party who exercises a right to terminate a contract is entitled to rely on the objective facts, even if those facts were not relied on at the time. But where the issue is whether a party acted reasonably in deciding whether or not to give consent, it is necessary to consider that party's own conduct in determining the question of reasonableness. The result is that the obligor's reasons, and the reasons the obligor gives (or does not give), are part of the objective facts against which the question of reasonableness must be answered. But that does not mean that the question is not an objective one and that other facts, even facts not known to the obligor, are not relevant in answering that objective question. It simply means that the court must consider all the facts, including the obligor's own conduct, in considering the question of reasonableness. 55The third general principle that needs to be borne in mind is that, in considering whether consent has been unreasonably withheld, it is necessary to consider the position as at the date consent is refused: EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78 at [116]; JA McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd [1992] 2 Qd R 121 at 132-3 per Kelly SPJ. So, for example, in Hendry v Chartsearch Ltd [1998] CLC 1382, a company called Interface, which was owned by the plaintiff and his wife, had entered into an agreement with the defendants to provide data processing and computer services. The agreement contained a clause prohibiting assignment without the defendants' consent which was not to be withheld unreasonably. Interface purported to assign its rights under the contract to the plaintiff at a time when the parties were in dispute and the trading relationship between them had ceased. One question in the case was whether the defendants had unreasonably withheld their consent to the assignment. In answering that question Evans LJ (with whom Henry LJ and Millett LJ agreed on the point) said (at [37]) in relation to the clause prohibiting assignment without consent: [I]t seem to me that the clause can and does continue to operate, notwithstanding that the parties are no longer trading with each other and their relationship continues only for the purpose of resolving disputes governed by the terms of the agreement. But the change in the nature of their relationship means that the circumstances which are relevant to the reasonableness or otherwise of refusing consent have changed also. In principle, the party who is entitled to refuse consent may have a legitimate interest in the identity of the other party in litigation or arbitration ... 56The NAB Parties submitted that, in considering the question of reasonableness, the court should also have regard to events that occurred after consent was sought and refused for the purpose of deciding whether it was withheld unreasonably. In making that submission, they relied on Nikolaou v Papasavas, Phillips & Co (1989) 166 CLR 394 in support of the proposition that, in assessing damages for future loss, the court can have regard to events that occurred after the date of assessment for the purpose of determining what was likely at that time. They submitted that a similar principle should apply in the determining whether they acted reasonably. In some cases, courts will have regard to subsequent events in determining what was likely at a particular time. So, for example, courts will have regard to subsequent events in fixing value as at a particular date insofar as those subsequent events shed light on value as at that date: Kizbeau Pty Ltd v WG & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281. In the case of the assessment of damages, courts are also willing to depart from the general principle that damages should be assessed at the time of breach where the departure is necessary for the purpose of determining the true loss the plaintiff has suffered: Willis v The Commonwealth [1946] HCA 22; 73 CLR 105; Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] UKHL 12; [2007] 2 AC 353; Janos v Chama Motors Pty Ltd [2011] NSWCA 238. However, in my opinion, neither of those principles applies in this case. The question in this case is whether Idoport breached a term of the Consulting Agreement. That question depends on whether the obligor acted reasonably and must be capable of being answered on the date the breach is alleged to have occurred. Consequently, it seems to me that the answer must be given by reference to the facts that existed at that time. 57Fourth, one matter which is relevant to the question whether consent has been withheld unreasonably is whether the obligor has delayed unreasonably in responding to a request for consent. It is often said that in that case there has been a constructive refusal to give consent: see, for example, Provident Capital Ltd v Zone Developments Pty Ltd [2001] NSWSC 843 at [41] per Young CJ in Eq; Lewis & Allenby (1909) Ltd v Pegge [1914] 1 Ch 782 and Omar Parks Ltd v Elkington (1993) 65 P & CR 26. Put like that, the delay amounts to a refusal to give consent without reasons. An obligor is not bound to give reasons: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 609 per Mason J. However, as I have said, it may be more readily inferred from a failure to give reasons that the refusal was unreasonable. 58Against this background, it is now possible to turn to the particular issues that arise in this case.

Are the emails of 6 February 2007, the letters dated 7 and 12 February 2007 and Freehills' letter dated 5 February 2010 admissible?

59The NAB Parties submitted that the emails and letters were admissible on various bases. It is not necessary to deal with them all. One basis is s 60 of the Evidence Act 1995. That section provides: (1) The hearsay rule does not apply to evidence of a previous representation that is admitted because it is relevant for a purpose other than proof of an asserted fact. (2) This section applies whether or not the person who made the representation had personal knowledge of the asserted fact (within the meaning of subsection 62(2). Mr Jucovic QC, who appeared for the Chargees, made two submissions in relation to this section. First, he submitted that the emails and letters could only be relevant for the purpose of proving the asserted facts - that is, the reasons for the NAB Parties' refusal to give their consent - and for that reason s 60 did not apply. Secondly, he submitted that, even if the documents were admissible under s 60, they should be excluded under s 135 or a limitation should be placed on their use under s 136. Section 135 relevantly provides: The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might: (a) be unfairly prejudicial to a party, ... Section 136 relevantly gives the court power to limit the use of evidence rather than exclude it if there is a danger that a particular use of the evidence might be unfairly prejudicial to a party. 60I do not accept either of Mr Jucovic's submissions. In my opinion, the emails and letters are part of the objective facts by reference to which the question of reasonableness is to be judged. They are not relevant solely to the question of the reasons the NAB Parties had for refusing consent. The fact that they were written and sent is itself relevant to the question whether the NAB Parties acted unreasonably in withholding consent. For example, it is relevant that the NAB Parties gave consideration to the request for consent and responded to that request. Consequently, they are admissible under s 60. Once admitted, they are admitted for all purposes unless excluded under s 135 or a limitation is placed on their use under s 136. 61Mr Jucovic submitted that the Chargees are prejudiced by the admission of the documents because, as a result, he is not able to cross-examine the decision-makers on their real reasons for withholding consent, since the NAB Parties can simply rely on the documents as evidence of those reasons. However, the question is whether they have been "unfairly" prejudiced; and the prejudice caused by the admission of a document is not "unfair" merely because a party may be unable to cross-examine a witness on the document: see Ordukaya v Hicks [2000] NSWCA 180 at [33]-[41] per Sheller JA. Here, the documents simply record the objective facts the NAB Parties say they relied on in refusing consent. Many of those objective facts are not seriously in dispute and, to the extent that they are, it was open to the Chargees to lead evidence concerning those facts. The documents are evidence that the NAB Parties took those objective facts into account in deciding to decline consent. The NAB Parties have given discovery in this matter. NAB is a large institution and the likelihood is that any consideration of the question whether consent should be given is likely to have been reduced to writing. However, the Chargees do not point to any documents or any other evidence which suggest that the matters referred to in the emails and letters were not matters that the NAB Parties took into account: cf Longhurst v Hunt [2004] NSWCA 91 at [47]-[49] per Stein AJA (with whom Sheller and Santow JJA agreed on the point). Moreover, as I will explain, the matters which the NAB Parties say in the documents that they took into account appear to be relevant to the decision whether consent should be withheld. In those circumstances, I do not think that the Chargees have been unfairly prejudiced by the admission of the documents.

62In my opinion, this question is answered by the decision in Linden Gardens. There is no reason not to apply that decision in this case. The statement by the parties in cl 20.1 of the Consulting Agreement that "the rights and obligations of each party under this Agreement are personal" and the statement that "[the rights] cannot be assigned, encumbered or otherwise dealt with" are clear statements by the parties that they do not intend the rights under the agreement to be assignable without prior written consent. They cannot be taken by cl 20.1 merely to have agreed that it was a breach of the agreement for one party or the other to assign the rights. In accordance with the decision in Linden Gardens the court should give effect to that agreement. 63 The Chargees also rely on the following statement by Mason P in Minister for Land and Water Conservation v NTL Australia Pty Limited [2002] NSWCA 149 at [8]: If a contract prohibits assignment of certain rights arising under it, a purported assignment of those rights will be ineffective as an assignment, in the sense that it does not give the assignee any rights against the party bound even though it may be enforceable as a contract between assignor and assignee (Linden Gardens Trust Ltd v Lenesta Sludge Disposals [1994] 1 AC 85, Re Turner Corp Ltd (in liq) (1995) 17 ACSR 761). Applying that principle, they say that the NAB Parties are not entitled to the declarations they seek because those declarations make no distinction between how the Charges may operate as between the NAB Parties and the Chargees and Idoport and the Chargees. I do not accept that submission. The two declarations sought by the NAB Parties concern the operation of the Charges. The first says in effect that a valid charge was not created over the Idoport's rights under the Consulting Agreement. The second declaration is to the effect that the appointment of the receivers is invalid insofar as the appointment relates to the rights of Idoport under the Consulting Agreement. The existence of a valid charge and the right to appoint a receiver are not simply rights as between the Chargees and Idoport. They depend on the creation of proprietary rights which are enforceable against the NAB Parties. Those proprietary rights cannot be created without the NAB Parties' consent. 64It is also clear, for the reasons set out in Linden Gardens, that cl 20.1 is not contrary to the public policy in favour of the alienability of property.

65The principles applicable to the determination of the onus of proof where the plaintiff seeks declaratory relief were set out by McLelland CJ in Eq in Massoud v NRMA Insurance Ltd (1995) 62 NSWLR 657 at 660 in these terms: (1) a party who seeks relief has the burden of satisfying the Court of facts which (in the absence of proof of other facts) would justify the grant of that relief; (2) what those facts are depends principally upon: (a) the nature of the relief sought; and (b) the operation of any relevant presumptions; (3) in the case of relief by way of declaratory order, the precise terms of the declaration assume particular significance in that (subject to any relevant presumption) the party seeking the declaration has the burden of proof of any matter which is a necessary element of the declaration sought (even if in proceedings by that party for relief of another kind, or in proceedings by the other party, that matter would not arise unless raised (and the burden of proof consequently assumed) by the other party). See also Sanpine v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365 at [170]ff per Campbell J. 66In the present case, the NAB Parties seek declarations to the effect that Idoport and the Chargees have not, by the Charges, validly created charges over Idoport's rights under the Consulting Agreement. The NAB Parties do not, for example, seek a declaration to the effect that they acted reasonably in withholding their consent, although they do plead that their refusal to give consent was not unreasonable and give particulars of that allegation. The question, then, is whether a necessary element of the claim that the Charges were not valid is that the NAB Parties did not act unreasonably in withholding their consent. In my opinion it is not. The NAB Parties will establish that the Charges were not valid if they establish that they did not give their consent. If Idoport or the Chargees claim that the Charges are valid even absent consent, it is for them to prove that consent was withheld unreasonably: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 609; JA McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd [1992] 2 Qd R 121 at 129 per Kelly SPJ; Tamsco Ltd v Franklins Ltd [2001] NSWSC 1205 at [49]; Australian Maintenance and Cleaning Pty Ltd v AMC Commercial Cleaning (NSW) Pty Ltd [2011] NSWCA 103 at [64] per Macfarlan JA (with whom Hodgson and Young JJA agreed); see also Glebe Island Terminals Pty Ltd v Continental Seagram Pty Ltd (1993) 40 NSWLR 206 at 227, where Sheller JA held that the onus of proof in relation to an exception to an exception lay on the person seeking to rely on the second exception. 67The Chargees seek to answer this point by referring to cases which have held that where a party seeks a negative declaration - such as a declaration that the defendant was not entitled to terminate a contract - the plaintiff "must exhaust the possibilities and show that the claim cannot possibly be supported": see Hume v Monro (No 2) (1943) 67 CLR 461 at 474 per Latham CJ. See also Sanpine v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365 at [182] per Campbell J. But those cases are not analogous. There is a difference between an allegation that there are no grounds for terminating a contract and an allegation that an assignment has not occurred. The first depends on proof that none of the possible grounds exists. The second depends on proof that consent was not given. 68Nor is the position altered by the fact that the NAB Parties have pleaded that the consent was not unreasonably withheld. That pleading is superfluous; and a superfluous pleading cannot alter the onus of proof. As Campbell J said in Sanpine v Koompahtoo Local Aboriginal Land Council [2005] NSWSC 365 at [182]: I do not see how the plaintiff having made the unnecessary allegation makes any real difference. Of course, having made it, if at the end of the case the plaintiff is still urging the Court to make a declaration, or a positive finding, that there was no justification for the termination of the contract, the plaintiff would bear the onus of establishing it. But if it fails to discharge that onus, or if, as happened here, the plaintiff was asserting from the time of its opening submission at the hearing that it was the defendant who had the onus of proving there was a justification for termination of the contract, so far as obtaining a declaration that the contract is on foot, an injunction to restrain a breach of it, or damages for its breach, the plaintiff is back in the same situation it would have been in if it had never made the allegation in the first place. Here, the NAB Parties assert that the Chargees bear the onus of proving that consent was withheld unreasonably. The Chargees in their own pleadings assert that consent was withheld unreasonably. In those circumstances, they bear the onus of proof on that matter.

Did the NAB Parties unreasonably withhold their consent?

69The Chargees put their case that the NAB Parties unreasonably withheld their consent in a number of ways. 70First, their primary pleaded case has two steps. The first is that it was an implied term of the Consulting Agreement that the parties would do all things necessary on their part to enable the other party to have the benefit of the agreement. The second is that the effect of the refusal to give consent is to deprive Idoport of the benefits of the bonus payments said to be payable under the agreement because the only way that Idoport could raise sufficient funds to satisfy the gross sum costs order and to pursue further proceedings against the NAB Parties was to charge the one valuable asset it has - that is, its rights under the Consulting Agreement. 71Second, the Chargees submit that the NAB Parties delayed unreasonably in giving their consent. 72Third, the Chargees submit that the matters that the NAB Parties took into account were irrelevant to the relationship between the parties in regard to the subject matter of the Consulting Agreement. 73Fourth, the Chargees submit that the NAB Parties' purpose in refusing consent was to stultify any further proceedings seeking to recover the bonus payments due to Idoport under the Consulting Agreement and that that purpose was an unreasonable one. 74None of these reasons apart from the first was pleaded by the Chargees. However, it was not suggested that the Chargees were not entitled to raise those matters for that reason; and their failure to plead those matters can be explained by the fact that the NAB Parties chose to plead positively why it was reasonable for them to withhold consent. In those circumstances, it is appropriate to consider each of the reasons raised by the Chargees for why the withholding of consent was unreasonable, bearing in mind that the onus of proof rests with the Chargees in relation to each of those matters.

Did the refusal to give consent have the effect of depriving Idoport of the benefit of the contract? 75Two preliminary points need to be made before seeking to answer this question. First, as I have said, the first step in the argument advanced by the Chargees is that there was an implied obligation that each party to the Consulting Agreement will do all things necessary on its part to be done to enable the other parties to have the benefit of the agreement. There is no doubt that a term to that effect is to be implied in the contract: Mackay v Dick (1881) 6 App Cas 251; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 per Mason J. Whether, however, that obligation is essential to the argument is doubtful. It is clearly an express obligation of the Consulting Agreement that NMG would pay or procure the payment of the bonuses. If the effect (or purpose) of the withholding of consent was to prevent Idoport from recovering those bonuses, then it seems to me that that is a matter which is relevant, and possibly decisive, in relation to the question whether consent was withheld unreasonably. The implied term is not essential to this conclusion. The important question is whether the effect of the refusal was to deprive Idoport of the benefit of the bonuses. 76Second, the pleaded case appears to be that it was unreasonable for the NAB Parties to withhold their consent because the effect of doing so was to prevent Idoport from pursuing claims to recover the bonus. However, the Chargees submissions were directed at establishing that that was the NAB Parties' purpose in withholding consent. The Chargees were forced into that position by their submission that it was necessary for the court to determine the real purpose consent was withheld and their submission that, if the real purpose was an improper one, that was determinative of the case in their favour. Even so, having regard to the conclusions that I have reached on the correct approach to be applied in determining whether consent has been withheld unreasonably and the way the case is actually pleaded, it is appropriate to consider the effect of the refusal to give consent as well as its purpose. The effect itself is relevant. Moreover, in this case, the Chargees rely on the effect to infer purpose. 77The Chargees do not explain how the NAB Parties' refusal to give consent would stultify any further claim by Idoport under the Consulting Agreement. The Chargees accept that, as a consequence of the Barring Order, no further proceedings can properly be brought until the gross sum costs order is paid in full - that is, until the NAB Parties are paid the sum of $42,500,000 plus interest, making a total of approximately $85,000,000. The position of the Chargees is that they do not have the funds to pay that amount and fund a new case against the NAB Parties. The purpose of the Charges was to provide funding for the Master Key Proceedings. But those proceedings have been dismissed. Underlying the submission that future proceedings will be stultified by the NAB Parties' refusal to give consent is the suggestion that the receivers appointed by the Chargees may be able to sell the rights under the Consulting Agreement to another funder who is prepared to fund a future claim. Several points, however, may be made about that suggestion. 78First, I am not satisfied that there is a realistic possibility that it would be possible to find a person who would be prepared to pay the outstanding gross sum costs order of approximately $85,000,000 and then fund what is likely to be an expensive claim without any guarantee of success and with the risk of a further adverse costs order. Mr Lock gave evidence that he has formed the view that there were persons who might be interested in acquiring or funding a claim to recover bonuses under the Consulting Agreement, such as "overseas hedge funds with significant assets and an appetite for risk". He says that he formed that view after reviewing the Information Memorandum. However, the Information Memorandum is unclear about whether any potential claimant would have to satisfy the gross sum costs order before bringing proceedings. Clause 2.2.7 suggests that the claimant would. But cl 5.2.8 is less definitive. It says that the claimant would "most likely" have to pay the gross sum costs order in full before bringing proceedings. It is unclear from Mr Lock's evidence whether he is assuming that that is one of the risks that a potential claimant would be willing to run or whether he is assuming that a potential claimant would be willing to pay the $85,000,000. Although Mr Lock was not cross-examined, in my opinion, little weight can be put on his evidence for that reason. 79It might be argued that an assignee of the rights under the Consulting Agreement may not be bound by the Barring Order or the Undertakings and that consequently there may be someone who is willing to take that risk. Indeed, one of the reasons the NAB Parties object to the assignment of the rights to the Chargees is the fear that that may happen. I will say more about that later. It is sufficient to observe in the present context that Mr Jucovic submitted that that possibility was not a real one on the basis that the assignee would take the rights under the Consulting Agreement subject to all the equities that the NAB Parties have against the Idoport at the time of the assignment: Redman v The Permanent Trustee Company of New South Wales Limited (1916) 22 CLR 84 at 91 per Griffith CJ and Barton J. Moreover, if the Chargees could dispose of Idoport's rights under the Consulting Agreement in a way which meant that the assignee did not take those rights subject to the Barring Order or Undertakings, that it seems to me is relevant to the question whether it was reasonable to withhold consent. Again, I return to that point below. However, in my opinion, the result of these points in the present context is that the question whether there is a realistic possibility of the Chargees disposing of the rights under the Consulting Agreement to a person who would be willing to fund proceedings under the Consulting Agreement must be answered on the basis that that person would also have to pay the gross sum costs order. For the reasons I have given, I am not satisfied that there is a realistic possibility that such a person could be found. 80Second, even assuming that such a person could be found, it is not clear how the extension of the Charges to the Consulting Agreement with the result that the Chargees are able to sell those rights benefits Idoport. The benefit that Idoport sought to obtain from the agreements with the Chargees of which the Charges form part was the ability to fund the Master Key Proceedings. But those proceedings had been dismissed before a request was made for the extension of the Charges to the Consulting Agreement, and it was not until after the appeal against the decision in the Master Key proceedings was dismissed that consent was refused (for the first time). It is quite clear from these facts alone that the request for consent to the extension of the Charges was not to enable Idoport to fund a claim under the Consulting Agreement but to enable the Chargees to recover amounts owing to them by Idoport in circumstances where the action that they intended to fund has failed. Assuming that the rights under the Consulting Agreement could be sold, the sale of those rights may discharge Idoport's obligations to the Chargees. But at the same time it would deprive Idoport of the one asset it had from which it could satisfy the claims of other creditors - in particular, the NAB Parties. Why it should be in Idoport's interests to give priority to the Chargees over its unsecured creditors is not clear. Nor is it clear why the interests of the Chargees rather than those of Idoport are relevant to the question whether consent was withheld unreasonably. 81It might be thought that the true vice in the NAB Parties withholding consent is that proceedings to recover the bonuses will be stultified; and that it does not matter whether those proceedings are brought for the benefit of Idoport or someone else. But why that should be so is unclear. Under the terms of the Consulting Agreement, NMG agreed to pay or to procure the payment of the bonuses to Idoport. The parties agreed under cl 20.1 that that was a personal obligation. Why, it might be asked, would it be unreasonable in those circumstances for the NAB Parties to deprive some other person of the benefits of the bonuses? 82Third, and connected to the second point, if the true position is that there may be a person who would be willing to fund the costs associated with a further claim under the Consulting Agreement, it is not clear why the liquidator of Idoport could not enter into an agreement with that person either to obtain funding for the proceedings on particular terms or to assign the rights under the Consulting Agreement on terms that may benefit Idoport. An agreement of that type may and an assignment of that type would require the consent of the NAB Parties. But that would simply raise the question whether the NAB Parties had any reasonable grounds for withholding their consent to that proposed transaction. The Chargees submitted that the liquidator has no funds to pursue a possibility of that type since the only valuable asset Idoport has is its rights under the Consulting Agreement. But there is no evidence to suggest that the position of the liquidator is that, assuming the rights under the Consulting Agreement are not the subject of the Charges and assuming that there may be someone willing to acquire those rights, he is not in a position to pursue such a proposal because of a lack of funds. There is evidence that the liquidator is not actively investigating Idoport's claims against the NAB Parties and that he is considering options in relation to a possible acceleration of the finalisation of the liquidation. But that is equally consistent with the liquidator having formed a conclusion that there is no realistic prospect of finding someone willing to acquire the rights on the basis that would require them to pay the gross sum costs order. 83It follows from what I have said that the Chargees have not established that the effect of the NAB Parties refusal to give consent to the assignment is to stultify a claim by Idoport that it may otherwise be able to bring to recover bonus payments said to be due under the Consulting Agreement.

Did the NAB Parties delay unreasonably in giving consent? 84The Chargees submit that the NAB Parties delayed unreasonably in refusing consent because they had all the information they had requested in their letters dated 27 April 2006 by 22 November 2006 yet they did not refuse their consent until February 2007. In those circumstances, the Chargees say that they were entitled to exercise their rights under cl 3.3 of the Charges on 9 January 2007. I do not accept that submission. Idoport had delayed for over 6 months in giving the information requested by the NAB Parties. There may be a question of how important the information sought in that letter was. However, Idoport did not respond to the request at all until 22 November 2006. The NAB Parties might well have been entitled to think that the issue had gone away. Certainly, they were entitled to believe that the matter was not urgent. Idoport followed up the letter dated 22 November on 29 December 2006. The Chargees say that, in the absence of evidence from a witness, it should be inferred that that letter was received on or about the date it bears. I do not accept that submission. The letter bears a received stamp showing that it was received or at least opened on 17 January 2007. That stamp is admissible as a business record under s 69 of the Evidence Act. Having regard to the Christmas break, it is entirely plausible that the letter was not opened until then. Moreover, the letter does not explain why the issue had become urgent. In those circumstances, I do not think that the NAB Parties acted unreasonably in failing to respond to the request for consent by 9 January 2007.

Did the NAB Parties take into account irrelevant considerations? 85In my opinion, it was reasonable for the NAB Parties to consider their rights under the Consulting Agreement, the benefits to Idoport of the proposed assignment and the disadvantages to the NAB Parties of an assignment to the extent that those disadvantages were connected with the NAB Parties' rights under the Consulting Agreement. I have already concluded that the letters dated 7 and 12 February 2007 are admissible as evidence of what the NAB Parties took into account in deciding to refuse consent. In my opinion, it was reasonable for them to take into account those matters. The terms of the Consulting Agreement were clearly relevant to the NAB Parties' rights under it. The amount that Idoport could access under the Loan Agreement and Share Subscription Agreement, the question whether there had been defaults under those agreements and the failure of Idoport to explain the reasons behind the request for an extension of the Charges were all relevant to the benefits that Idoport could expect to receive from the assignment if consent were given. For the reasons I have given, there were good reasons for concluding that those benefits were illusory having regard to those matters. 86In my opinion, it was also reasonable for the NAB Parties in considering the effect of the assignment to take into account the fact that Idoport had charged its rights under the Consulting Agreement, the long running dispute between the parties, that NMG and AUSMAQ were major unsecured creditors of Idoport and the fact that Idoport was in default of its obligations under the Loan Agreement and Share Subscription Agreement. The identity of the contracting party remained important to the NAB Parties. Although services were no longer required to be performed under the Consulting Agreement, the NAB Parties had been engaged in a long running dispute with Idoport. As a result of that dispute, it had the benefit of the Barring Order. That order and the Undertakings were rights which were connected to Idoport's obligations under the Consulting Agreement. The NAB Parties were entitled to consider whether, as a result of the extension of the Charges to the Consulting Agreement, it was likely that Idoport's rights would be assigned and, if so, the likely potential assignee and, in particular, whether that assignee would be bound by the Barring Order and the Undertakings. Relevant to those matters were the fact that Idoport was in default and the fact that the Chargees were resident outside the jurisdiction. The fact that Idoport was in default meant that there was a risk that the Chargees would exercise their rights under the Charges and dispose of the rights under the Consulting Agreement. The fact that the Chargees are resident outside the jurisdiction is relevant to who the potential acquirers of those rights might be. 87Mr Jucovic, as I have said, sought to answer these points by saying that the NAB Parties' rights were equities which ran with Idoport's rights under the Consulting Agreement. However, whether that is so is doubtful. "Equities" in this context is interpreted broadly. As Mason J explained in Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1 at 20: The word "equities" is not used in its technical sense as meaning an equitable interest or something in the nature of an equitable interest. It is a general expression calculated to comprehend defences which would have been available to the debtor in an action brought against him by the assignor as well as set-off and counter-claims. Similarly, Lush J said in Provident Finance Corporation Pty Ltd v Hammond [1978] VR 312 at 319: The essential concept of an equity in this context is that it is a transaction or event or circumstance which entitles the debtor to say that it is unjust that the debt should be enforced against him without bringing into account his cross-claim arising from the transaction, event or circumstance. It is possible that the concept of an "equity" extends to an undertaking given by a party to the court, since that undertaking may also give rise to rights between the parties. For example, the undertaking may be given as a result of an agreement between the parties or may result in an estoppel; and that agreement or estoppel may well run with the rights in relation to which the agreement was reached or the estoppel operates. But it is less clear the concept of an "equity" would extend to a court order, particularly one which is designed to protect the processes of the court, such as the Barring Order. As Molesworth J said in Attorney-General v Rogers (1870) 1 VR (E) 132 at 139: [w]here an injunction is granted against one person and his servants, and that person's interest passes to another, the liability to attachment for breach of the injunction does not pass to the other until he is made a party to the bill, and a new injunction is issued against him. 88But even if that is wrong, in my opinion, there must be a real risk that if someone outside the jurisdiction acquired Idoport's rights under the Consulting Agreement that person would seek to bring proceedings in another the jurisdiction and would seek to argue that they were not bound by the Barring Order or the Undertakings under the law of that jurisdiction. That is relevant to the question whether it was reasonable of the NAB Parties to refuse their consent. 89The Chargees sought to answer this last point by pointing to cl 26 of the Consulting Agreement which provides: This Agreement is governed by the laws of Victoria. Each party submits to the non-exclusive jurisdiction of courts exercising jurisdiction there in connection with matters concerning this Agreement. But it is clear from the terms of that agreement that the submission to Victorian law is non-exclusive. Clause 26 does not prevent proceedings from being brought in another jurisdiction, as the Idoport Proceedings themselves demonstrate. 90It is true, of course, that the NAB Parties did not give reasons for their refusal in the terms that I have described. But I do not think that that is decisive. The question whether the NAB Parties acted reasonably is an objective question. The NAB Parties were not bound to give reasons. They explained the matters that they took into account. Those matters were relevant in the way that I have explained. The NAB Parties were not asked to explain why those matters were relevant. In those circumstances, I do not think that they acted unreasonably in doing what they did. 91The remaining matter that the NAB Parties took into account was the fact that NMG and AUSMAQ are major unsecured creditors of Idoport. Put simply in those terms, that is not a proper matter for the NAB Parties to take into account. It would not be proper to refuse the creation of a charge simply to avoid giving priority to another creditor where the unsecured debt that was owed was unconnected to the rights to be assigned or encumbered. But in this case, it is necessary to look at the context in which the unsecured debt arose. It arose from a claim in respect of the rights which were sought to be made the subject of the Charges. The Barring Order was made to ensure that those rights could not be pursued until the debt in question was paid. In those circumstances, the NAB Parties were entitled to consider the existence and the amount of that debt and the extent to which the Barring Order would ensure that that debt would be paid before the rights were pursued in deciding whether or not to grant consent.

Did the NAB Parties have a collateral purpose? 92The Chargees submit that it can be inferred that the NAB Parties had a collateral purpose in refusing consent from the fact that they did not give reasons for their decision, they took into account irrelevant matters and they sought in their statement of claim to rely on matters that had not been referred to previously. That purpose, they submit, was to stultify any action to recover bonuses payable under the Consulting Agreement. Moreover, they submitted that, to the extent that the NAB Parties now seek to rely on a case that their purpose was to avoid the possibility that the rights under the Consulting Agreement would be assigned to a person who will seek to enforce those rights outside the jurisdiction and who will claim that they are not bound by the Barring Order, that claim falls outside the case pleaded by the NAB Parties. 93I do not accept those submissions. I have already explained why, in my opinion, any stultification of Idoport's ability to seek to recover the bonuses payable under the Consulting Agreement does not arise from the refusal of the NAB Parties to give consent to the extension of the Charges. If that was not the effect, it is more difficult to infer that it was the purpose. Moreover, although the NAB Parties did not give reasons for their decision, they referred to facts which suggested that their real concern was that they would face future litigation in which they would not have the benefit of the Barring Order or Undertakings. In my opinion, that is a plausible explanation for the conclusion the NAB Parties reached having regard to those facts; and if an inference is to be drawn about the NAB Parties purpose from the facts they say that they took into account in refusing consent, that is the inference that ought to be drawn. That conclusion does not fall outside the pleadings. The onus of proof was on the Chargees. They pleaded in their amended defence what they alleged were the NAB Parties actual reasons for refusing consent. There was a joinder of issue on that claim. It was open in those circumstances for the NAB Parties to make a submission that the court should infer from the facts that they had a different purpose from the one pleaded.

The second refusal 94In my opinion, the second refusal does not raise substantially different issues. Mr Lock, the receiver, gave an acknowledgement that the gross sum costs order would have to be paid before further proceedings could be brought and gave some additional reasons for why Idoport was seeking consent. Those reasons confirmed that the Chargees wished to sell the rights under the Consulting Agreement and suggested that that was a means by which Idoport could obtain as much satisfaction of its contractual entitlements as possible. The NAB Parties refused to deal with that request because they did not accept that Mr Lock had been validly appointed as a receiver of Idoport's rights under the Consulting Agreement. 95The Chargees do not plead that the NAB Parties refusal to give consent was unreasonable because it prevented Idoport from receiving any proceeds from the sale of the rights under the Consulting Agreement after the Chargees had been repaid the amount owed to them. However, if that is the way the case is put, Idoport never gave the NAB Parties details of the actual amount secured by the Charges, which was clearly relevant to an assessment of the likelihood that there would be anything left for Idoport from the proceeds of sale. Moreover, for the reasons already given, it was reasonable for the NAB Parties to refuse their consent having regard to the risks to them of a sale of the rights. None of the additional information supplied by the receiver altered that fact. In particular, the acknowledgment given by the receiver that the gross sum costs order would first have to be paid could not be relevant since that acknowledgement would not be binding on any assignee. In those circumstances, it was reasonable of the NAB Parties to refuse to give further consideration to the request for consent, even if the receiver was acting as the agent of the Chargees in requesting that consent.

96It follows from the conclusions that I have reached that the NAB Parties are entitled to declarations in terms of paragraphs 1 and 2 of the originating process filed in proceedings 2011/85023. The interlocutory processes filed by the Chargees in proceedings 254047/2007 and 2011/85023 on 3 May 2011 should be dismissed. The Chargees should pay the NAB Parties' costs of the originating process and the interlocutory processes.

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