John Frederick Hillam v Ivan Peter Lewis

Background Facts 8The plaintiff is a geologist having graduated with honours from the University of Adelaide in 1975. He worked for a number of mining companies over the years in Western Australia and overseas, and in 2008 the possible opportunities for trading in iron ore for export excited his attention. 9The first defendant is the sole director of the second, third and fourth corporate defendants and at various times has been a shareholder in each of those entities. He was for many years a member of Parliament in the South Australian House of Assembly and Speaker of the Parliament during 2002 to 2005. Since leaving the Parliament he has been engaged in entrepreneurial activity in connection with the mining industry. 10Each of the defendant corporate entities hold various mining assets. The second defendant at the time of events surrounding the dispute in these proceedings: Mintech Resources Pty Limited (Mintech), held the following tenements: EL 4267 (formerly EL3143 to June 2009), ELA 138/05, ELA 101/107 (which was converted to EL 4773 on 13 September 2011, but set aside on 22 December 2011) 11The third defendant, Goldus Pty Limited (Goldus) holds EL3927, EL3997, ML5337, ML5471, ML5485, ML5486, ML5546, ML5550, ML5759, ML5886, ELA116/07 and MPL28. 12The fourth defendant Mawson Gold NL (Mawson Gold) holds ELA 2225/09 and ELA 99/07. 13EL 3143, EL 3927 and EL 3997 were exploration licences to explore for all base metals in an area known as Razorback Ridge, in South Australia. Razorback Ridge contains very substantial iron ore deposits. 14In or about May 2008 the plaintiff was introduced to representatives of a Japanese trading company, Sojitz Australia. Having busied himself to make certain searches at ASIC and the Primary Industry and Resources South Australia (PIRSA) he discovered not only the existence of the first defendant but of Mintech. 15Mintech was entitled to explore for all base metals including iron at Razorback Ridge and Iron Peak for a period of 5 years. 16Both the plaintiff and the first defendant agree that they commenced dealing with each other in or around July 2008. The plaintiff made contact with the first defendant indicating to him that he was a geologist and that he acted for a Japanese company Sojitz Australia and informed the defendant that there were funds available to be used by way of investment in a joint venture in relation to Razorback Ridge. 17In early August 2008 the plaintiff attended at PIRSA and purchased a number of reports concerning Razorback Ridge and also maps of the area. Having considered the material he formed the view that there was potential for the development of a mine at Razorback Ridge and that it may be commercially viable. 18Again in early August the plaintiff and the first defendant together with a representative of Sojitz made a site visit to the Razorback Ridge area. 19At or about the same time the first defendant emailed a proposed Memorandum of Understanding to the plaintiff in relation to a potential joint venture with Mintech. That Memorandum of Understanding was never executed. However one of the essential features of the agreement was that the plaintiff (described in the MOU as the third party) was to acquire a 10% interest in a successful joint venture were it to occur. In that event he was also to have a right to appoint a director to the board of the joint venture entity. 20The plaintiff asserts that in late August and/or early September 2008 he and the defendant agreed in a conversation that if he was able to procure a joint venturer to replace Sojitz then the terms of the Sojitz proposal would apply to a joint venture with any other party and in particular the plaintiff and the parties associated with him would acquire 10% interest in the joint venture. 21Also the plaintiff asserts that in late August and/or early September 2008 the first defendant requested the plaintiff to provide geological and consulting services. The plaintiff further asserts that from late August until early November the plaintiff assisted the first defendant in negotiations with potential funders and/or joint venturers in respect of the Razorback Ridge project. The plaintiff also asserts that he expressly raised with the first defendant the question of being paid for his work and he asserts the first defendant agreed with such a proposition. The plaintiff also asserts however that he and the first defendant made an arrangement whereby the plaintiff would not be paid consulting fees until either the second or third defendant had obtained sufficient funding in connection with the Razorback Ridge project. 22The first defendant disputes that any agreement of the sort asserted by the plaintiff was in existence as at November 2008. 23On 6 November 2008 the plaintiff sent an email to the first defendant enclosing what he described as a guide for possible quotation for the provision of geological and consulting services and expenses for "internal discussion only". The document purports to be a quotation for expenses to be incurred for 2009 for the provision of a number of services including laser mapping field work and the like, and clearly is intended to cover a number of employees including the plaintiff himself. The total estimated expenditure excluding GST was said to be in the order of $1.245 million. 24On 16 November 2008, the first defendant sent an email to the plaintiff informing him that he had entered an agreement with a company called New Rise Properties (New Rise) to act as a broker in an attempt to arrange funding. A Mr Manthorp was the principal of that company. 25Further in the same email the defendant stated (my emphasis): Also, forgive me for saying it, but I fear I have not got my head around my ethical obligations of payment to you somehow. Your frank précis of that responsibility to prompt my memory will be welcome and appreciated. 26On 17 November the formal agreement was executed with New Rise and the plaintiff witnessed the first defendant's and Mr Manthorp's signature on the document. Mintech and the first defendant were relevantly the parties along with Mr Manthorp and others. The agreement contained a number of salient terms and conditions. In particular that New Rise/TQM Enterprises (an entity associated with Mr Manthorp) were to receive a shareholding of 3% of the equity in Mintech effectively upon the raising of capital. 27On 23 November 2008 (at 12.17pm) the plaintiff sent an email to the first defendant. That email is in the following terms (my emphasis): I have to got out for two more meeting today for your project and rather than talking on the phone I will give our my thought so that you can think about it what you would like. Originally we talked about 10% if I brought a major company into the project but I think we have moved way beyond that now. Parr A 3% A. In th case of the first $1.1 million work that I quoted for a years work 1 This could contained up to $200,000 for Maptech for the program training and laser mapping. WE may wish to do a second fill in of laser mapping. 2. $250000-$350000 airborne study 3. Equipment hire vehicle caravan, food running costs, field assistant, staff %150,000 4. My fee 5. $120,000 to special staff member Mr. P. Originally you said if we put up $650,000 then we could have 3%. Out of the first $2,000,000 can you pay me $450,000 up front first and I will internally fund the rest ie $650,000 therefore you can be assured that this work will be complete. I also wish to remain the geologist on the project and play a long term active role. If we decide we want to hire other people apart from Mark Davies they work under me. I will not stand in the ay of somebody more experience because I wish to play other roles in helping you get this project started. Part B raising $6-$12 million and all amount in the future that you may wish top raise in near future ask can for 4%. Part C 3% to bring Mitsubishi, Sojitz or another party into the last part of the deal can I ask for another 3%. This part can be anyone but we will need to work as a team in order to successful in this last parts and it may also mean that we have to fly overseas to meet with these companies. If it is Mitsubishi or any body else that Mikio is involve with come of board I have a gentleman's agreement with him to share this part I will not break this agreement with Mikio. 28The defendant responded by email a few minutes later (12.21pm): I forgot to say at all time I will try to get the best deal for you that involve the least equity. I think you already know that from our conversations. 29The first defendant asserts that a conversation took place between himself and the plaintiff on 28 December 2008 which involved the entry of the plaintiff and the first to fourth defendants into an agreement. 30In particular on 28 December 2008 the first defendant was in Bougainville. He says that he rang the plaintiff for the purposes of checking on the status of negotiations with New Rise. During the conversation he discussed the provision of geological services. He says that he told the plaintiff he could not pay him there and then for geological services but he was prepared to pay at the rate of $20,000 per month for full time work. He also says that he stated that he had no geologist on PIRSA's files for the company's licenses and he would like to tell PIRSA that the plaintiff was the relevant geologist. He then says that he told the plaintiff that he would be paid as soon as "you or someone else" comes up with a successful deal and the companies receives funds. The first defendant says that the plaintiff agreed to that proposal. 31The first defendant says it was agreed the plaintiff was to provide all geological services that may have been required by PIRSA in relation to the exploration and exploitation licenses EL3143, EL3927 and EL3997. The first defendant further asserts that in the course of the same telephone conversation he stated explicitly that if the plaintiff was able to secure a potential investor that puts "me" in funds then he was prepared to give a 10% shareholding in the company or companies which entered into an agreement with a potential investor, and actually receives funds as a result of the agreement. He said in the course of the conversation he told the plaintiff that he estimated that he needed $250,000 as an upfront payment on the signing of the Memorandum of Understanding or similar document and at least $5 million on signing an agreement. He insists that he told the plaintiff that if he could get that arrangement the plaintiff would in return receive 10% shareholding in the company or companies that benefited from such a deal. He asserts he explicitly asked the plaintiff whether he was satisfied with that arrangement, to which he said the plaintiff said he was. 32The plaintiff denies that such a conversation ever took place, or that such an agreement was ever made. 33Attempts to raise finance had up to that point been unsuccessful. For example there had been negotiations with a Mr Bevitt and an entity called Coffey Resources. That eventually came to an end in about late January 2009. 34The first defendant sent a long email on 19 January 2009 to a Ms Susan Watson, the exploration coordinator at PIRSA. In the course of that email which dealt with a series of matters not immediately relevant to this litigation the first defendant said: This missive will serve to reassure you that John Hillam of Sydney is a geologist who has contracted with me as sole director of Mintech Resources, Goldus and Mawson to do/manage an exploration program on our ground this year worth over $1.2 million. Getting him to quote and accept and then keeping him has not been easy with all the bastardry that has been undertaken by people beating up phurphys in the media and trying to steal the company (s) from us. But he has signed and has already done considerable work since the middle of last year when he stopped work on the ground as the result of the earlier September fraud attempt by Birdseye and his associates. He is back on file since just before I left and now needs access to recent (last 3 years) reports we have filed. Please let him have access to that material. 35On 23 February 2009 the plaintiff sent an email to the first defendant. It contained the following (my emphasis): I am increasing becoming very disillusioned with this task and having to listen to all these crap people time and time again. I must have meet more than 30 different lots by now and one by one they are all pretenders who have nothing. I too have wasted a lot of my time for no results during all this time. I am also becoming worried about the fact that I have no agreement with you at all. 36On 23 February the first defendant responded by making suggestions as to how he might deal with questions of calculations and expenditure. 37On 24 February the first defendant sent an email to the plaintiff which contained the following: John You have said "The more I look into this project I feel that I have more to hide. "WHY? For god's sake man, you KNOW THE F>>>>>Reasons!! Swanson, Birdseye, Stephens Russel-Taylor all trying to con me or blatantly steal it!!! What am I supposed to try and do? I've hidden nothing from you. EVER! What's more I've spelt out tyhe procedure you'd be advised to follow to save time talking to F>>>>>TYRE KICKERS! If they can't prove funds they are a F...waste of your good time, eh? They're jackals working out how to get a bone for nothing. PISS THEM OFF!! YOU DO HAVE AN AGREEMENT WITH ME. Stick to your knitting and stop fussing, wherein you are putting blinkers on your vision of what is there. Thank you for what you're doing. PETER. 38The plaintiff responded on 24 February 2009 by email but the content of that email is directed entirely to technical matters. 39During this period the plaintiff was attempting to complete the 2007 and 2008 annual reports for EL3143 and the six monthly expenditure reports. These were required under the Mining Act and Regulations. The plaintiff communicated with Ms Watson of PIRSA from time to time to inform her that the various required materials were being completed. He collaborated with the first defendant for the purposes of preparing these reports. 40Also during this period in late 2008 and early 2009 there is little doubt both the plaintiff and the first defendant were in straightened financial circumstances. 41On 1 March 2009 a proposed work program and budget in support of the application for the renewal of EL3143 was lodged with PIRSA. The application was granted on 22 June 2009 and the new exploration licence was issued on that day. 42By the end of March 2009 the plaintiff asserts that he had prepared a number of reports for Goldus of a similar nature to that which he had prepared for Mintech covering the year 2008. 43The first defendant however was overseas until around about 15 March 2009 when he travelled to Sydney from Port Moresby via Cairns. He stayed at the plaintiff's home until 18 March when he returned to Adelaide. 44On 16 March 2009 when the first defendant was staying with the plaintiff the plaintiff asserts that he had conversations with the first defendant not only about the daily rate he should be charging but he also asserts that the discussion centred around a person called James Chu. In particular the plaintiff asserts the following conversation took place: Plaintiff: "If they are becoming involved we need to clarify our agreement. We need to make a formal agreement about my 10%". First Defendant: "That is fine however if James is to be involved in the company I will have to give him the same amount of equity as you. James has 3% in Mintech. I will have to give him another 7%" 45The first defendant denies having a discussion with the plaintiff along these lines. 46On 18 March the plaintiff prepared a long discussion paper which included a detailed proposal and sent it to the first defendant. Amongst other things the plaintiff stated as follows (my emphasis): At this time no formal agreement is yet recorded between the parties apart from the PIRSA record that John Hillam is now the geologist on file. This arrangement could easily change by either party's disagreement or departure. ... Summary of Mintech Resources offers to investors and brokers. Ian Manthorpe and Tina 3% equity in Mintech if they raised $6 million from other parties. 10% equity in Mintech and 5% in Goldus for $6 million capital from Bevitt and others. Mikio was offered 3% equity for an investment of $650,000 JH offered to spend $650,000 part of $1.1M spend if $450,000 was paid first for a 3% equity in Mintech and Goldus Iris group ask for a 10% success fee (reduce to 5%) for raising $2-6 million WA drilling group were offered 20% equity for $6 million including contra drilling work. Pre sell $4m gold at 20% discount 2.5% success fee to JH for gold sale (no success fee for seller is being offered at this time). Tina and Ian offered 1% success fee and 2% equity for a $300 million investment in JV (also 50% of the JV for the investor) I would like to discuss at this time a workable and long term agreement. In such an agreement I would seek a 5 year contract to Mintech and Goldus whereby this would be a long term work and incentive package based on fees paid for my time and work and an equity package based on achievements made. ... You may wish to start by listing what you would feel comfortable for certain achievements or benchmarks and a JV agreement with a major party is obviously be a major achievement that we would all be working towards. ... Note I accept your offer for a 2.5% success fee for hopefully raising $4 m by pre-selling gold from the Teetulpa alluvial fields as part of this wider package. Further to the agreement 1.5 year agreement 2.3% equity in Mintech and Goldus upon signing and subject to success of capital raising by pre-selling $4,000,000 worth of gold 3.additional 2% equity in Mintech and Goldus if contract remains in forces at 1st November 2010 within that time a JORC standard being obtained at either Iron peak and or Razor back ridge 4.Additional 2.5% equity in Mintech and Goldus upon successfully completing a joint venture agreement or other eventuality (such as public float, bank loans) for the provision of the mine development. 5.Free carriage of Mintech's equity into the JV 6.Contract fee of $100 per hour. Daily field rate of $1000 per day and office rate of $800 per day to be re-evaluated after the end of each 12 months. 7.All external cost at the company's expense. 8.Payment of $80,000 for prior work and $100,000 payment to the end of March 2009 subject to completion of outstanding reports at EL 3997 and EL 3927. 9.Success fee of $100,000 for raising $4,000,000 by pre-selling gold contracts 10.6 months termination payment based on full contract for early termination by the principal. Termination payment of 24 months full contract fees after 1 November 2010. 11.After 1 November 2010 all incentive that has been agreed remain in force independent of termination, death or disability assignable in the case of death to JH airs (sic) and successors. 47On the same day a few minutes later the plaintiff sent an email to a Mr Christopher Fisher (of Envisage, another finance broker) amongst other things an email that states: I have made a draft contract with Peter Lewis in Sydney with regard to my continuing involvement as he is staying with me. 48On 1 April 2009 the first defendant wrote to the plaintiff by email. This email concerned another entirely different arrangement concerning business opportunities in gold trading in Bougainville. Amongst other things he stated: I will continue to trade with the profits as I must make A$20 m to cover off all my existing debts and obligations and current and impending obligations during the forth-coming six months before the end of June. I really appreciate your work and support as well as the loyal forbearance you have demonstrated to date..... Please don't think too badly of me for telling you that half of my share in the deal is a fair thing for your part in baiting the hook to get a taker of the deal in providing finance for it. I had to conceive the scheme and see to it that it can work for win: win outcomes for all of us. I do not want you to conclude that I think I have offered you too much. I have not. I don't resent sharing equally with you, the profit of the trading, during the term of the trading contract. Lets see if we can make an uncomplicated deal for the six week term , eh? Peter 49On 25 April 2009 the first defendant travelled to Sydney and again stayed with the plaintiff until around 2 May. 50During his stay with the plaintiff on this occasion the first defendant and the plaintiff had a number of discussions concerning their joint activities. The first defendant asserts for example that during one of these discussions he said to the plaintiff that if the plaintiff could find a third party to sign his gold trading deal on completion of the deal he would give the plaintiff a commission of 50% of the total profits of the deal. He says the plaintiff accepted that offer. 51The plaintiff asserts during this time he was having discussions with the first defendant concerning what he describes as his equity participation in the companies. He asserts that during one of the discussions the first defendant said to him: We have an agreement. You have 10% in all my companies. As soon as we get a deal we can document it properly 52The first defendant on the other hand denies such a conversation as the above took place, but he does accept the plaintiff said to him that he had done a lot of work for the companies and that he wanted a percentage equity in the companies "around 20, 40 or 50 percent for all my hard work". The first defendant asserts that he said to the plaintiff: As it stands we have agreed that you will be entitled to 10% equity upon a successful deal. If I were to increase your equity share to 20% or 30% then to be fair and not to dilute the equity held by James Chu which is currently 3% I would need to increase James' equity and others like him to match your equity. There is no way that that will happen. 53The first defendant also asserts during the course of this conversation he said to the plaintiff: We have already agreed that you will receive $20,000 per month for your geological services and if you are able to bring in cash from a successful deal then you will be entitled to a "success fee" of 10% equity in the company or companies that benefit. I cannot pay you anything at the moment as there is no cash. I need a successful deal before I can pay you anything. I need no less than $5 million and around $20 million to $25 million would be more desirable. I need to pay other creditors too. 54The first defendant asserts that the plaintiff said: That is settled. I can get somewhere with that. 55The plaintiff denies such an agreement was ever made and that the first defendant made those statements. 56Both the plaintiff and the first defendant appear to agree that the plaintiff continued to press the first defendant for something in writing by way of a comfort letter. 57On 1 May 2009 the first defendant prepared and handed a copy of a letter of the same date to the plaintiff whilst he was again staying at the plaintiff's home. That letter reads as follows: Dear John Re: Professional Services Since you first contacted me in August last year on behalf of a group of prospective investors, the development of our relationship and in particular, through your professional services provided to both Mintech Resources and Goldus and undertaken without rancour or reservation for the last seven months have been very much appreciated. Thank you for your patience in allowing these companies to continue to receive the benefit of those services for the contractual arrangement whereby we have the benefit of these services without having to make cash payments they would otherwise have had to meet from scarce resources, which would have proved embarrassing if redirected to you. I therefore write to confirm our conversation(s) that We acknowledge our debt to you and will pay you a gratuity for your professional services [to cover all your costs] of $20,000 per month as soon as we have success in our cash raising programme [whether through sale of equity, or sale of assets or both]. We will put a new agreement in place with you for your services following the completion/settlement of whatever deal we get so that it is relevant in that [as yet unknown] context. You have agreed to accept an equal share of my part in the gold trading programme I am undertaking in the 'Programme for Peace' I initiated on behalf of the World Peace Council in my work in Bougainville. That work [in quest of peace] is aimed at getting a rapid cash flow into the community at the grass roots level [of the communities which have the traditional land ownership] in those areas which have gold-bearing gravels in the streams. That should result in the sale of -1 tonne of gold and yield us a net income before tax of at least - $1.2m over the next six months or so if we can kick it off quickly [before the beginning of June]. I trust that we have rapid success for the sake of all concerned. Yours Sincerely 58Towards the end of May 2009 the first defendant again returned to Sydney and stayed with the plaintiff until around mid July. 59At or about this time there were discussions ongoing with a company known as Geneva Manor Pty Ltd (of which a Mr Christopher Fisher was the principal). On 12 June a Memorandum of Understanding was signed between the first defendant and each of his corporate entities (Mintech, Mawson Gold and Goldus). The Memorandum of Understanding recorded the proposed sale by those corporate entities of the first defendant to the proposed purchaser, Geneva, for the sum of $40 million. That sale did not in turn proceed. 60For reasons that are unexplained on 4 June 2009 the plaintiff asked the first defendant to print yet another copy of the 1 May letter he had given him earlier on that date. On 4 June the first defendant forwarded an additional copy of the document to the plaintiff. 61On 13 June the first defendant asserts he sent an email to the plaintiff (which the plaintiff accepts he got for the first time on only 9 July). The communication allegedly sent on 13 June is in the following terms (my emphasis): Saturday 13th June 2009 Dear John As a corollary to the foregoing comments and undertakings on my part of 6 weeks ago [above] I am compelled to remark that I am disappointed that we haven't found a taker [for any kind of structure] in the deal we seek. We both know that must turn around now. Notwithstanding the disappointment and anxiety, I set down here for your protection in the event that I suffer some mis-adventure before I can get the following beneficial interests in our ground (or more particularly, the Companies which control it) to you. If we can get a deposit in excess of $250k by COB Tuesday in a deal which delivers us $5m in cash on any terms acceptable to the mining industry companies controlled by me by the end of June, AND if we can then secure some franchise or rights to act as sole agent for the Ukraine ground-penetrating passive electro-magnetic mineral exploration technology (PMRSE), which you can then make compatible with Vulcan survey IT I will happily provide you with 10% of my beneficial interest as at this time in Goldus, Mawson Gold and an equal percentage of shares to my interests in the newco exploration company we then establish to undertake that work. I also agree and believe that you should pursue the option of doing a PhD on the process of establishing the software to make Vulcan & PMRSE compatible with one another and accordingly, be the CEO of that newco. I think we should name that newco XMIN/CyberTECH or XPCybertech or XPMINTECH or X-P-$Minus to encompass the ideas that it is a "cybernetic systems mining and exploration technology" business. All of the foregoing will be subject to the usual performance arrangements. In the event that you want to sell some or all of your equity, or either of us wants to dissolve our relationships, we each tell the other, In consequence, that triggers a process in which we then both have 28 days to prepare a detailed bid for the other person's interests. The bids shall be put in a sealed envelope and lodged with the Solicitors [currently Kelly & Co] of Mintech or Goldus [as the case may be] by 4pm 28 days after notice was given. The solicitor on the file will open the envelope[s] containing the bid[s]. The unit prices for the respective interests are compared in silence by the solicitor without disclosing them to either party [whether present or not] or their representative witnessing the procedure. If the bids differ in unit value more than 10%, the higher bid is announced and the successful bidder has seven days to pay the other party. If he fails to do so the other party has seven days to pay his bid [lower] price. If perchance the two prices are within 10% of each other [per unit] then the prices are not disclosed and the two parties have a further seven days to review and resubmit their bid in sealed envelopes. The highest bidder of that bid wins & pays within 7 days. In the event the winning party fails to make the payment the other party has 7 days to pay the lowest of any of the four bids. If that fails the process is at an end for at least 6 months. As soon as I have funds in hand sufficient to enable me to do so, I will discuss this with you and form the company as well as have Kelly & Co put this arrangement into a formal Contract document. 62On 14 June whilst staying at his home the plaintiff alleges that he said to the first defendant: I want my interest documented. He asserts that the first defendant responded: You have 10% interest in all my companies. The Geneva Manor deal is for $45 million and this will give you $4.5 million. If we go with Howard Renshaw you will get more. I will ask Nina to issue 10% shares in all my companies including Mintech, Goldus and Mawson Gold NL if that makes you feel more comfortable. 63The first defendant denies this conversation and asserts that the only relevance of the Geneva Manor deal to the plaintiff was that if this particular deal came off, the plaintiff would be paid for his consulting fees. 64In the meantime the parties had been negotiating with a company called Bligh Street Capital Partners (Bligh Street). That was a company associated with the Honourable Mr Neville Wran and Mr Albert Wong. The plaintiff and first defendant with others attended a meeting at Bligh Street on or about 16 June 2009. At that meeting it is asserted by the plaintiff Mr Wong said to the first defendant: Who are the shareholders in Mintech? The plaintiff asserts that the first defendant said: I control the majority of the shares and as sole director I can execute a contract on behalf of Mintech without getting approval from other shareholders. The other shareholders are James Chu who has 3%. I hold 3.1% in trust for another person. John Hillam has a substantial beneficial interest in all my companies including Mintech and there are a few other small beneficial interests. 65The first defendant denies that the above was said at this meeting. He remembers attending such a meeting but that the meeting was preliminary only and there was no discussion about shareholders. The first defendant does assert however that at one meeting with Messrs Wran and Wong at some point prompted by the plaintiff he did say: A great of good work has been done by Hillam and Hillam will receive a substantial benefit from the success of this deal 66On 25 June Mintech and Bligh Street executed what is described as a term sheet agreement. The agreement was signed by both the plaintiff and the first defendant. Relevantly the term sheet included the following statements: It is proposed to incorporate a new entity Mawson Metals Group (MMG) and to list it on the ASX. BSCP has been mandated to assist and co-ordinate the capital raising and listing process for MMG on behalf of Peter Lewis and Mintech. Mintech is desirous to vend in its mining tenement EL4267 and designated additional areas into MMG and to raise new working capital of approximately $10M for exploration and drilling to establish a JORC compliant iron ore resource over a period of 18 - 24 months and to have its securities listed on the ASX. It is agreed that Mintech or interests associated with Peter Lewis will own 70% equity in MMG and BSCP (Messrs Albert Wong and Neville Wran) will have 20% with the investing public holding 10% on completion in the Company. Mintech and Peter Lewis will also be entitled to nominate directors to the board of MMG (including Peter Lewis and John Hillam) given their controlling shareholder interests in the Company. MMG will issue a prospectus to raise approximately $10M in working capital. New share equating to approximately 10% of MMG will be issued to the new investors. 67The plaintiff asserts that on 8 July he received a series of emails which contained an email from the first defendant to Mr Wong which indicated amongst other things "James is the only other registered shareholder of Mintech". As a result the plaintiff says he spoke to the first defendant and asked him when he (the first defendant) was proposing to transfer the shares as agreed. He asked the first defendant had it been done yet and the first defendant said: No it has not been done yet because I am here and I have not been back to Adelaide The plaintiff asserts he said: Well can you confirm in writing that you will do it He asserts the first defendant said: Yes I will send you an email 68The first defendant denies the plaintiff's version of events but asserts the plaintiff requested something in writing so he could show his creditors. 69On 9 July the first defendant sent an email to the plaintiff with the subject "your comfort". The email contained the text of the 1 May 2009 letter and the letter dated Saturday 13 June 2009. Further at the bottom of the second page of the communication is the date "Thursday 9 July 2009" and then the following text (with my emphasis): Just now quite by accident when looking for the, I discovered what I have previously composed but thought lost under the title $Mintech_Goldus Letterhead in a scrambled alpha-numb file on C: Drive. As nothing of consequence has materialised and in response to your request for something to comfort and to protect your interests over and above what is contained in the letter of 1 May [above], I will see Andrew Corletto as soon as possible on my return to Adelaide and proceed with the transfer of equity to you in the Mintech structure as outlined above, with further performance- based transfers in Goldus and Mawson, "if as and when" we get them into commercial production. Lets hope that Bob Ells is more honourable that these other types like Rory McDee..., Vince Keller. Cawwood, David's dudes, Frank & William, all of whom deceived you about having cash in hand to invest and/or who have some kindergarten ideas of what venture capital is all about, as well as Boris who said he has money but turns out his pockets to reveal nothing but a few hopeful connections down the track. Sincerely peter 70On 9 July the first defendant was again staying at the plaintiff's house. The plaintiff says as a result of receiving the email he had a conversation with the first defendant. He says he told the first defendant that the email was "not what we have agreed". He told the first defendant he alleges that there was an agreement that he would have 10% in each of the defendant's companies and that they were to set up an exploration company where each were to have 50%. The plaintiff insists the first defendant agreed that he would instruct Andrew Corletto (the defendant's solicitor) to issue the 10% shares when he (the defendant) got back to Adelaide. The plaintiff again asserts that the first defendant also agreed to get "Nina" (the first defendant's accountant) to issue the shares in Mawson Gold and Goldus "to you". The plaintiff also asserts that the first defendant said he would defer setting up any exploration company (as had been discussed) and indicated that there was no money for it at the moment but that it would be done when it was required. 71The plaintiff made what he asserts is a contemporaneous note of the alleged conversation of 9 July in a diary. He said in his evidence that the diary had been given to him by his wife and she had suggested that he make contemporaneous notes of important things. I will return to this diary entry later in this judgment. 72The first defendant stayed it seems with the plaintiff until 11 July when he returned to Adelaide. He denies the conversation asserted by the plaintiff, on 9 July 2009. 73On 12 July the plaintiff sent an email to the first defendant in the following terms: (Ex D2). Thanks for this information. Later week everything was in such a rush that I did not have much time to read this letter in full. Some comment that you may wish to consider. I have spoken with Ritchie today and ask him to organize a meeting with Albert and Neville about BOB Ells for Monday this week. This will crystallize Bob Ells into doing something whatever that maybe is still unknown at this time. Therefore while our needs involve raising a significant amount of money very quickly in order to remove those irritation that we have at this time the process that Neville and Albert have agreed to will resulted in $10 million being raised $8 million for the project and $2 million to you off the table within the next 90 days. We both have to address how we can survive during this time. In relation to the Gold trading this opportunity will still be available for years to come even if it were not on an exclusive basis. Give the inability of the King to organize his affair better than he has over the last 6 months it is more than likely that He will achieved nothing much in the next 6 months either leaving this opportunity still in your hands. Therefore perhaps you don't need to be so impatient in having to deliver on your Bouganville promises as soon as you may wish or like to. The gold trading will still be there in the future after you get the $2 million and this can wait a bit longer if it was necessary. Disappointing to you perhaps but another 3 months is not too long to wait when you consider that 3 - 4 months has already gone by already. Regards John Hillam 74On or about 20 July the plaintiff and the first defendant were staying at the Peterborough Hotel in South Australia. There was allegedly a discussion between the plaintiff, the first defendant and a Mr McDonald (another broker) who had been involved with MMG and a possible IPO. The plaintiff asserts some negotiations were taking place between Mr McDonald and the first defendant. In a private conversation between the plaintiff and the first defendant the plaintiff asserts that the first defendant again confirmed that he (the plaintiff) had 10% in the companies. The first defendant denies such a conversation although he accepts conversations did take place at or about the relevant time between himself, the plaintiff and Mr McDonald. 75During the balance of July the plaintiff and the first defendant were from time to time concerned in attempting to do all they could do to assist Bligh Street in the raising of capital. The parties were also working on obtaining a valuation of EL4267. The first defendant continued to negotiate with other parties interested in investing in the Razorback Ridge project, one such entity was Ausmon. The first defendant had offered to sell Mintech for $60 million to the principal of Ausmon, Mr Boris Patkin. Again that transaction in turn did not go ahead. 76On 28 or 29 July the plaintiff asserts he had a conversation with the first defendant in which he said: Peter I have not received any document regarding my shares yet. What is happening? The plaintiff in his affidavit does not record what if any reply the first defendant said. 77At about this time the plaintiff was communicating with Mr Robert Pyper (a valuer at a company called Minnelex) with respect to a valuation that was being prepared in relation to EL 4267. From an email from the plaintiff to Mr Pyper dated 29 July it is clear that at that time discussions were being undertaken on the basis that a value of approximately $160 million was a possible outcome in relation to that tenement. 78On 30 July 2009 the first defendant sent an email to the plaintiff and a copy to Nina. The subject of the email is stated as "Mintech and Goldus shares". The email states as follows: Please send Nina the name and address of the person/entity into which we must now place your beneficial interest of 10% in Mintech. I have not been well this afternoon. Giddy as hell in fact. I became ill during my composition of that letter to Boris. I tried to be polite in keeping him in the swim but did not want him to think that it is all hunky dory. It is not. Had another bloke lurking outside too. Peter 79In early August 2009 the plaintiff had discussions with Mr Wong of Bligh Street concerning an advance to Mintech Resources of some funds. Bligh Street advanced the sum of $250,000 in August 2009. 80The plaintiff acknowledges that on 14 August 2009 he was paid $65,000 by Mintech having previously received another $5,000. 81On 3 August 2009 the first defendant sent a long email to the plaintiff (along with others). The email in part states as follows (with my emphasis): If this deal with AUSMON succeeds by completing through the payment of the deposit of cleared funds before 4pm tomorrow, I confirm my commitment to you that, after settlement you will get 2% of the proceeds net of all costs to our side for your work in getting it done. That extra reward is in addition to the beneficial interests of 10% I promised you in Mintech for other efforts to help me/us hold it all together during these last 10 months. As you know it always follows that your 10% dividend will be calculated simultaneously with that to be paid to all other shareholders but comes after all creditors costs, reimbursements and outlays in Mintech have been met and provisions for taxes and contingencies have been determined. Such payments include your outstanding Consultancy Fees as well as your 2% 'success fee', both of which will have already been determined in that sequence and paid 82On 5 August and in the course of communicating with the plaintiff and other potential investors the first defendant stated the following in an email: John H is the geologist on file with PIRSA and he has a significant beneficial interest in the project as well as my full support in the good work he has been doing on many aspects of the commercialisation process to date. He has been working at it with increasing commitment through thick and thin for the last 10 months. He has all the background data and documentation relevant to it. He is no less trustworthy. You will first need to speak to him if you want information about the technical detail and data background of the project. 83On 29 July 2009 Mr Pyper prepared a draft valuation report valuing the magnetite project at between $130 million and $190 million with a preferred value of $160 million. 84By late August early September 2009 the plaintiff asserts that he was again concerned about moneys due to him for consultancy fees and also the lack of documentation in relation to his shares. 85By 23 August 2009 relations between the plaintiff and the first defendant were breaking down. On that day the plaintiff sent an email to the first defendant requesting as a matter of urgency that a number of things be done including documentation including his 10% interest in Mintech and the 10% "beneficial interest agreed" to be granted in Goldus and Mawson Gold with a new exploration company to be formed on a 50/50 basis. In the same email the plaintiff asked when the first defendant would address the $130,000 alleged to be unpaid as at the date of the email "for the last 12 months work for Mintech and other companies". The first defendant responded on the same day accusing the plaintiff of displaying "continual paranoia and ill founded accusations". 86On 31 August 2009 the plaintiff sent an email to the first defendant, Mr Andrew Corletto and Mr Albert Wong. In that email the plaintiff stated as follows (my emphasis): I note despite my earlier request more than a week ago none of these matters have been addressed or completed. Gentleman before I continue to do unpaid work for Mintech, MMG or any other company controlled by the Honourable Peter Lewis it is essential that my personal situation is satisfied and that the matters addressed below be undertaken, confirmed and or ratified. While I understand that in the case of shares in MMG this cannot be completed at this time until the final share structure has been decided and this will probably have to be completed at a later time but this should not prevent a written undertaking WRT the same and confirmation that under the Macquarie's proposal I would personal received 10% of Mintech's allocation with the same later rights as Mintech and similarly for any other proposal which could be finally accepted by all the parties. I am also aware that Ritchie Vereker who was given a 3% interest in Mintech for his part in bring Wran and Partners into the MMG IPO also wishes to have this interests transferred on a pro-rata basis to MMG. In the matters of Goldus Pty Ltd and Mawson Gold NL and my 10% shareholding, nothing should prevent this from happening right away. In the matter of the new exploration company a 50:50 share between Hon Peter Lewis and myself, this can be formally acknowledged prior to its formation. In the matter of $130,000 still to be paid to me acknowledgement of this debt can be undertaken, I assume it would be paid in full upon Peter receiving part or all of the balance of $2,000,000 payment that is to be made under the Wran and partner IPO agreement signed in June 2009. Nothing short of this would be acceptable. In the matter of my appointment as Executive director to MMG, nothing is preventing this from happening at this time. I trust that these matters can be completed ASAP as it will be essential that all these matters be addressed before I embark on any further work in SA from this Friday onwards. 87Through his broker, Mr McDonald, the first defendant had become acquainted with the CEO of Royal Resources Limited (Royal) (Royal was previously the sixth defendant in the proceedings) a Mr Marcus Flis, and had commenced discussions for the purposes of selling shares in Mintech, Goldus and Mawson Gold to Royal and entering an exclusive option agreement with the sixth defendant. This was all undertaken, the plaintiff asserts, without his knowledge on 11 September 2009. 88On 16 September 2009 Royal issued an announcement to the Australian Stock Exchange concerning the agreement to acquire the shares in Mintech. 89On 17 September 2009 the plaintiff sent an email to the first defendant. In that email amongst other things the plaintiff said as follows (my emphasis): I should not need to remind you that you have an existing and outstanding payment obligation to me for the balance of $130,000. This is for work completed up to May 2009. Notwithstanding the above I need to have ALL of the $130,000 paid in full and at this time. I note that a prior undertaking to pay $130,000 out of the outstanding amount of $200,000 several months ago was not paid as agreed. Only $70,000 was ever paid on that occasion 90In or around mid September 2009 the plaintiff ceased performing geological services. 91Proceedings were commenced in February 2010.

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Judgment (8 paragraphs)

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Cases Cited (18)

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