Moreton Resources Ltd (in liq) & Ors v First Samuel Ltd & Ors [2020] QSC 339

MORTGAGES - JUDICIAL SALE - where the first and second applicants held certain property and resource tenements associated with a silver mine in Southern Queensland - where a secured debenture deed granted the first respondent, as trustee for the debenture holders including the second respondent, a security interest over that property - where the third applicants were appointed as administrators of the first and second applicants and commenced a marketing and sale campaign for the property - where the second respondent made various offers to purchase the property which were not accepted - where the second respondent repeatedly asserted his security interest, including by causing the lodgement of caveats and appointment of receivers - where the liquidators entered into a sale agreement with a third party - whether the Court should direct, under s 99(2) of the Property Law Act 1974 (Qld), that the property be sold pursuant to the sale agreement

MORTGAGES - RECEIVERS - APPOINTMENT - GENERALLY - where the first respondent, as security trustee, did not appoint receivers pursuant to instructions given by beneficiaries including the second respondent - where the security trust deed provided that if the security trustee failed to exercise a power as instructed within a reasonable time, a beneficiary could exercise the power - where the second respondent purported to appoint the fifth respondents as receivers - whether the appointment of the fifth respondents as receivers was valid

Property Law Act 1974 (Qld), s 99

Asset Core Pty Ltd v Jarrett 1 Enterprises Pty Ltd [2016] 1 Qd R 379, cited

CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601, cited

Cheltenham and Gloucester Plc v Krausz [1996] EWCA Civ 780; [1997] 1 WLR 1558, cited

Hanson Construction Materials Pty Ltd v Davey [2010] QCA 246, cited

Jiwira Pty Ltd v Primary Industry Bank of Australia [2000] NSWSC 1094, cited

Toor v State Bank of India [2010] EWHC 1097, cited

Palk v Mortgage Services Funding Plc [1993] Ch 330, cited

Phillips v Hogg [2001] QSC 390, cited

Re Himstedt (1989) Q Conv R 54-311, cited

Worrell v Issitch [2000] QSC 146; [2001] 1 Qd R 570, cited

Yarrangah Pty Ltd v National Australia Bank Ltd [1999] NSWSC 97; (1999) 9 BPR 17,061, cited

K E Downes QC with A J Schriiffer for the applicants

G A Thompson QC SG with A G Psaltis for the second, third and fifth respondents

Colin Biggers & Paisley for the second, third and fifth respondents

• [1] The first applicant, Moreton Resources, is an ASX listed company which has the second applicant (MRV Metals) as one of its four subsidiaries.[1]
• [2] MRV Metals has acquired several mining tenements located near the township of Texas in Southern Queensland, and has been granted a mining lease and environmental authority for a silver mine called the "Granite Belt Project", namely:

(a) exploration permits with identifiers EPM26275, EPM18950, EPM12858, EPM11455 and EPM8854; and

granted under the Mineral Resources Act 1989 (Qld).[2]

• [3] MRV Metals is the registered owner of freehold properties described as:

(a) Lot 222 on CP S5181 contained within Title Reference 18217119;

(b) Lots 28 and 29 on CP MPH14454 contained within Title References 18830068 and 18271100 respectively; and

(c) Lot 2 on SP 140743 contained within Title Reference 50349574.[3]

• [4] On 24 May 2017, Moreton Resources entered into a Secured Debenture Deed with the first respondent (First Samuel), MRV Metals as guarantor, and the debenture holders of the debentures issued by Moreton Resources in accordance with that deed.[4]
• [5] Under the Secured Debenture Deed:

(a) Moreton Resources and MRV Metals are each Security Providers;

(c) First Samuel, the second respondent (Mr Feitelson), the third respondent (A & J Consultancy) and Mr Alexander Jason Elks are debenture holders;

(d) by cl 2.7, each debenture holder agreed to observe, perform and be bound by the Security Trust Deed in its capacity as a beneficiary;

(e) "Secured Property" is defined as meaning, in respect of each Security Provider, all of that Security Provider's present and after-acquired property and includes anything in respect of which the Security Provider has at any time sufficient right, interest or power to grant a Security Interest (also a defined term);

(f) by cl 10.2, there was a grant of a Security Interest in the Secured Property to First Samuel as security for the payment of all outstanding monies to the debenture holders (amongst other things) (First Samuel Security Interest);

(g) by cl 10.5, in the event of default, First Samuel may at its absolute discretion exercise any powers pursuant to cl 10.6; and

(h) cl 10.6 includes the power to appoint a receiver (10.6(g)).[5]

• [6] The First Samuel Security Interest was registered on the Personal Property Security Register (PPSR) as registration number 201910100053966 on 10 October 2019 (PPSR registration).[6]
• [7] A mortgage was also lodged over the exploration permits and the mining lease by First Samuel (First Samuel mortgage).[7]
• [8] On 24 May 2017, Moreton Resources also entered into the Security Trust Deed with First Samuel as Security Trustee and MRV Metals as guarantor.[8]
• [9] The Security Trust Deed sets out terms on which First Samuel holds the First Samuel Security Interest on trust for the named beneficiaries.[9]
• [10] Mr Feitelson is the Major Beneficiary within the meaning of cl 1.1 of the Security Trust Deed.[10] On 10 June 2020, the third applicants were appointed administrators of Moreton Resources and the subsidiaries pursuant to s 436A of the Corporations Act 2001 (Cth).[11] On that date, the third applicants entered into the Administration Funding Deed with First Samuel. Under that deed, First Samuel in its own right (not as Security Trustee under the Security Trust Deed) agreed to provide $500,000 as funding to the administrators.[12]
• [11] On 15 July 2020, the third applicants were appointed joint and several liquidators of Moreton Resources and the subsidiaries.
• [12] The third applicants, initially as administrators and then as liquidators, conducted a marketing and sale campaign for the assets of Moreton Resources and the subsidiaries. A chronology of the relevant events is set out below. In short, the liquidators received offers from a number of parties, including Mr Feitelson. On 27 July 2020, the liquidators received an offer to purchase the MRV Metals assets from Jadar Resources Limited (Jadar). The Jadar offer was reduced to a term sheet on 29 July 2020. On 3 August 2020, Jadar issued an ASX release in relation to the term sheet and the proposed acquisition of the MRV Metals assets. Subsequently, on 13 August 2020, Mr Feitelson and A & J Consultancy caused caveats to be lodged over the exploration permits and the mining lease (mining tenement caveats).

(a) the PPSR registration in relation to Moreton Resources and MRV Metals;[14]

(d) a caveat lodged by the fourth respondent over the properties pursuant to security granted under an alleged supply agreement and in relation to which the fourth respondent has claimed a debt of approximately $27,000.[15]

• [15] The fourth respondent did not seek to be heard on the amended originating application and will abide by any order of the Court.[16]
• [16] On 25 September 2020, a Deed of Appointment of Receivers dated 25 September 2020 was entered between Mr Feitelson and A & J Consultancy on behalf of First Samuel (as appointor) and the fifth respondents, Messrs Kirk and Joiner (as receivers).[17]

• [17] The primary relief sought by the applicants in the amended originating application is for a direction pursuant to s 99(2) of the Property Law Act 1974 (Qld) (PLA) that the Sale Interests (as defined in the Jadar Sale Agreement) be sold pursuant to that agreement. The applicants also seek a declaration pursuant to s 418A of the Corporations Act 2001 (Cth) that the appointment of the fifth respondents as receivers of the property of MRV Metals is invalid.
• [18] The applicants also seek ancillary relief to facilitate the sale in accordance with the Jadar Sale Agreement. Paragraph 2 of the amended originating application seeks an order pursuant to s 99(7) of the PLA that the first and second applicants be appointed to convey the Sale Interests pursuant to the terms of the Jadar Sale Agreement upon its completion, "free of any security interests held by the first to fourth respondents or any of them". To similar effect, paragraph 3(b) seeks an order that the sale of the Sale Interests proceed upon additional terms that require First Samuel to deliver to the liquidators various executed documents to ensure that the Sale Interests are conveyed pursuant to the Jadar Sale Agreement free of any security interests held by the first to fourth respondents. The relevant documents are identified in paragraph 3(b)(ii) to (iv) of the amended originating application:

"(ii) the first respondent shall forthwith deliver to the third applicants:

(A) a written and duly executed request to the Queensland Government Department of Natural Resources, Mines and Energy in accordance with section 28 of the Mineral and Energy Resources (Common Provisions) Act 2014 (Qld) to remove the caveat with reference number 323740 over the Tenements (as defined in the Jadar Sale Agreement) (Tenements); and

(B) a duly executed Form MMOL-06 under the Mineral and Energy Resources (Common Provisions) Act 2014 (Qld) in registrable form to release the mortgage with reference number 236156 over the Tenements;

(iii) the second and third respondents shall forthwith deliver to the third applicants a written and duly executed request to the Queensland Government Department of Natural Resources, Mines and Energy in accordance with section 28 of the Mineral and Energy Resources (Common Provisions) Act 2014 (Qld) to remove the caveat with reference number 323384 over the Tenements; and

(iv) the fourth respondent shall forthwith deliver to the third applicants a Form 14 - General Request to Withdraw Caveat under the Land Title Act 1994 (Qld) in registrable form to withdraw the caveat with dealing number 719888514 over Lot 29 on CP MPH14454, Title Reference 18271100, Lot 222 on CP S5181, Title Reference 18217119, Lot 28 on CP MPH14454, Title Reference 18830068 and Lot 2 on SP 140743, Title Reference 50349574."

• [19] The relief sought in paragraph 3(b)(ii) is, by paragraph 4 of the amended originating application, limited to the provision of executed documents to permit the sale to take place, rather than discharging or releasing the security interests of the first to fourth respondents:

(a) this Order shall not discharge or release the security interests granted by the first and second applicants in favour of the first respondent pursuant to the secured debenture deed dated on or about 24 May 2017, being exhibit 'GDS-2218' to the first affidavit of Grant Dene Sparks affirmed 18 September 2020 filed 21 September 2020 (First Respondent's Security);

(b) there shall be no discharge, release or other prejudice to any rights of the first, second and third respondents pursuant to the First Respondent's Security or otherwise;

(c) this Order shall not discharge or release any security interest granted by the second applicant in favour of the fourth respondent (Fourth Respondent's Security); and

(d) there shall be no discharge, release or other prejudice to any rights of the fourth respondent pursuant to the Fourth Respondent's Security or otherwise."

• [20] The proceedings raise two primary issues. First, were the fifth respondents validly appointed as receivers of MRV Metals? Secondly, in the circumstances of the present case, should the Court exercise its discretion under s 99(2) of the PLA to direct a sale in terms of the Jadar Sale Agreement and the additional terms identified in paragraph 3(b) of the amended originating application?
• [21] The validity of the fifth respondents' appointment as receivers should be considered first as it is relevant to the exercise of the discretion under s 99(2).
• [22] The position of First Samuel is that it does not oppose the relief sought by the applicants in the amended originating application.

• [23] The parties, in the course of the hearing, were able to agree a chronology.[18] The oral evidence was limited to brief cross-examination of one of the liquidators (Mr Sparks), one of the receivers (Mr Kirk) and Mr Feitelson. Where relevant, I refer to their evidence in the course of outlining the chronology.
• [24] The third applicants were appointed as the administrators of Moreton Resources and the subsidiaries on 10 June 2020.
• [25] By letter dated the same day, Mr Feitelson and A & J Consultancy wrote to First Samuel stating that:

(a) by paragraph 1, the appointment of an administrator would be an Event of Default under the Secured Debenture Deed and Security Trust Deed (Transaction Documents);

(b) by paragraph 2, if the Event of Default occurred, they instructed First Samuel to notify Moreton Resources that an Event of Default had occurred and that all Outstanding Moneys under the Secured Debenture Deed had become due and payable;

(c) by paragraph 3 (as hand amended), other than as set out in paragraph 2 above, or if a further Event of Default occurred or if the Event of Default created by the appointment of the administrator was not rectified by 10 September 2020, they did not instruct First Samuel to, and did not authorise First Samuel to, appoint a Receiver or Receiver and Manager to one or more of Moreton Resources or the subsidiaries or exercise any other powers in relation to that Event of Default.

• [26] As part of the marketing and sale process for the assets of Moreton Resources and the subsidiaries, the third applicants established a confidential data room and provided 34 individuals representing interested parties with access to that data room to conduct further due diligence. Advertisements were placed in national newspapers for expressions of interest. On 25 June 2020, the third applicants obtained a valuation of the plant and equipment owned by MRV Metals. The plant and equipment was valued at $1,888,090 (market value for existing use) and $786,970 (forced liquidation sale). The liquidators did not seek a valuation of the mineral resources or the tenements.[19] The second, third and fifth respondents tendered a valuation report of Brett Plant dated 20 October 2020, which valued the mineral resources tenements.[20] The letter of engagement identifies the purpose of Mr Plant's valuation report:

"The purpose of our Report is to assist the secured creditor of Moreton Resources Limited to determine if the transaction with Jadar Resources Ltd was at a fair market valuation."

• [27] Mr Plant has assessed the fair market value of the tenements to fall within the range of $9.2 million to $11.5 million. There are, however, a number of qualifications to this report. Under the heading "Scope of valuation" Mr Plant identifies that "[o]ur Report is a limited scope valuation report". Further, he states that "[o]ur Report should not be relied upon as being comprehensive" and that "[b]y its very nature, the formulation of a valuation assessment necessarily contains significant uncertainties and the conclusions arrived at in many cases will be subjective and dependent on the exercising of individual judgement".
• [28] The liquidators (as administrators) involved Mr Feitelson in the sale process. On 23 June 2020, they sent a letter to Mr Feitelson which included an indicative timetable for the potential acquisition of the assets or recapitalisation of the group, stating that they would expect him to be in a position to submit a non-binding indicative offer in writing by 29 June 2020. The letter informed Mr Feitelson that "[a]ny offer submitted after this time may not be considered". The indicative timetable showed that binding offers were due by 3 July 2020 with a targeted completion date of 27 July 2020.
• [29] On 26 June 2020, the liquidators (as administrators) issued an ASX announcement requesting non-binding indicative offers by 5.00 pm on 29 June 2020. By that date, six expressions of interest by way of non-binding indicative offers were received which included one from Mr Feitelson.
• [30] On 1 July 2020, the liquidators (as administrators) issued another ASX announcement which included a timetable of key milestones for a sales process. By 3 July 2020, four binding offers were received by the liquidators which included two proposals to buy some of the Moreton Resources assets and two proposals for a Deed of Company Arrangement (DOCA), including a DOCA proposal from Mr Feitelson.
• [31] In their report to creditors, the liquidators (as administrators) recommended the acceptance of Mr Feitelson's DOCA proposal. On 9 July 2020, Mr Feitelson's solicitors sent an email to the liquidators' solicitors expressing Mr Feitelson's interest in acquiring the additional assets of Moreton Resources and its subsidiaries.
• [32] At the second meeting of creditors on 15 July 2020, Mr Feitelson's DOCA proposal was rejected by creditors and as observed above, the third applicants were appointed as joint and several liquidators of Moreton Resources and its subsidiaries. Mr Feitelson's DOCA proposal was that he would provide $150,000 to the DOCA fund.

"Mr Orr: How much would the DOCA fund be if you were to propose a DOCA?

Mr Feitelson: $100,000 for the DOCA fund and $15,000 payable to you and Mr Sparks for two weeks' worth of care and maintenance costs."

• [36] Subsequent to his conversation with Mr Feitelson, Mr Orr sent an email to Mr Cash at First Samuel outlining the offer received from Mr Feitelson and advising that the liquidators would now proceed to disclaim the land and tenements associated with the MRV Metals silver mine. On the same day, Mr Haley (a director of Moreton Resources, on behalf of Mr Feitelson) sent an email to Mr Orr which stated:

"I've texted you couple thoughts as my email was down.

If a relatively minor top up to Tony 'offer' makes a difference let's have a quick chat - will be out of my pocket and given tony offer as I understand it. It may not make a difference but I don't like to leave stones unturned

I think I can see a workable doca providing a fee compromises are made and whether that's possible requires maybe 24 hours to sort out."

• [37] After an exchange of further emails between Mr Haley and Mr Orr, on 24 July 2020, Mr Orr emailed Mr Haley as follows: "Just confirm that the offer made is not commercial to pursue as it will not result in any dividends to creditors". Earlier on the same day, Mr Cash had emailed Mr Orr stating, "Agree. It would appear that we have exhausted all avenues".
• [38] On 27 July 2020 at 8.32 am, Mr Haley sent an email to the liquidators copied to Mr Feitelson which stated:

Are you able to advise/clarify what is a minimum commercial offer' and also clarify pls why the Tony Feitelson verbal non binding offer (which for clarity is subject to two weeks of DD and DOCA drafting) does not 'offer any return to creditors' when it clearly proposes that $70,000-$100,000 will be put in the 'creditors fund'?

Would you be able to advise/clarify please so that the Tony Feitelson group can consider today pls."

• [39] On the same day at 1.10 pm, Harry Spindler (apparently on behalf of Jadar) sent an email to the liquidators attaching a term sheet and stated (among other things) "as discussed".
• [40] At 3.22 pm, Mr Orr sent an email to Mr Haley copied to Mr Feitelson which stated:

"I am not able to advise what your offer needs to be but will say it needs to be substantially more than is currently contemplated.

As advised on our call last week the costs associated with the C & M of the silver mine at Texas including our time are in the order of $30k per week. Therefore, the offer contemplated is insufficient to put forward to creditors as after those and other costs the deed fund contemplated is insufficient to make any significant distribution to First Samuel and as the priority funding amount owed to them of $500,000 will not be covered no other creditor will receive a distribution. As such, we are not able to proceed with that offer as currently contemplated."

In oral evidence, Mr Feitelson stated that at the time, he did not understand that his offer should be at least $500,000.[22]

• [41] On 27 July 2020 at 4.23 pm, Harry Spindler (apparently on behalf of Jadar) submitted an updated term sheet to the liquidators to purchase the Sale Interests which included the exploration permits, the mining lease, the properties and other plant and equipment, for $500,000 (including a non-refundable deposit of $120,000 to cover care and maintenance costs).
• [42] On 27 July 2020 at 5.48 pm, Mr Feitelson, by his solicitors, sent a letter to the liquidators which stated:

(a) our client, Mr Tony Feitelson, made an informal, in principle offer last week to acquire specified assets of Moreton Resources Limited ... for circa $100,000, pursuant to a proposed new DOCA; and

(b) your client, Mr Orr, advised our client on Friday that this offer was 'not commercial to pursue', as it would not 'result in any dividend to creditors'.

1. You are aware that First Samuel Limited ... holds certain security as trustee for the benefit of our client and Mr Jason Elks in relation to debentures issued by MRL ... including over the assets and undertaking of MRL and of its subsidiary MRV Metals Pty Ltd ...
2. We are instructed to convey the following offer terms of your client:

(a) our client (or an entity nominated by him), offers $100,000 (Purchase Price) for all the assets of MRV, including its mineral tenements, associated licences and permits, ore stockpiles and its [claim] against the Department of Environment and Science ... (MRV Assets);

(b) completion of the acquisition will be subject to a 14-day due diligence period for the benefit of our client, allowing him time to discuss permitting issues with DES;

(c) our client will pay, upon execution of a formal sale contract or binding term sheet, a non-refundable deposit of $30,000 (being part of the Purchase Price) in consideration of the due diligence period and for exclusivity during that period;

(d) should this offer be accepted and the sale completed, our client undertakes to direct the Security Trustee not to apply any of the Purchase Price received by your client (from our client) towards settlement of amounts owing by MRL to our client in relation to the Debentures;

(e) our client will prepare draft transaction documents encompassing the above terms, should your client indicate that it is willing to accept this offer; and

(f) our client's offer is open for acceptance in principle by your client (subject to contract) until 17:00 on 28 July 2020, after which it lapses and is not capable of acceptance.

1. We are further instructed to advise your client as follows:

(a) accept as stated above in paragraph 3(d) our client asserts (and will direct the Security Trustee to assert) rights of security over the assets and undertakings of MRL and MRV and to that end, our client does not intend to direct the Security Trustee to relinquish its security in relation to any other sale of the MRV Assets or any assets of MRL; and

(b) should our client's offer not be accepted in principle (subject to contract) by the time stated in paragraph 3(f) and given our client's understanding that your client is considering relinquishing the mineral tenements and associated permits/authorities ... held by MRV, our client requests that you give at least 3 business days' prior notice of any proposed transfer or relinquishment of the Tenements (or parts of them) so that our client can further consider his position."

• [43] In oral evidence, Mr Sparks accepted that it was likely that someone from his office read this letter from Mr Feitelson's solicitors.[23] Mr Sparks also accepted that even though the letter from Mr Feitelson's solicitors requested at least three business days' prior notice of any proposed transfer or relinquishment of the tenements, neither he nor Mr Orr gave Mr Feitelson three days' notice of such a proposal.[24]
• [44] On 28 July 2020, Mr Sparks had a telephone conversation with Mr Cash from First Samuel in which he advised Mr Cash about the terms of the Jadar offer and noted that, without further funding, the liquidators would have no alternative but to disclaim the mining tenements.
• [45] There is an amended Jadar term sheet dated 28 July 2020 which included (among other things) a new condition precedent 5(g) which stated: "there being no challenge by any creditor, shareholder or other stakeholder of MRL or MRV to set aside the Transaction Documents".[25] On 29 July 2020 at 1.01 pm, Mr Holmes, on behalf of the liquidators, sent an email to Mr Spindler (on behalf of Jadar) which stated:[26]

"Please find attached an updated term sheet reflecting our discussion in relation to section 5 - para (g).

In short, we have tightened the wording around 'challenge' such that a creditor needs to make an application to the court to frustrate any sale process (and set aside the Transaction Documents). The date for withdrawal or dismissal of any action is 30 September (to coincide with the End Date of the other CPs) - however, this timeframe can be extended by the parties through mutual agreement subject to funding."

• [46] In oral evidence, Mr Sparks accepted that this amendment to paragraph 5(g) of the Jadar term sheet was for the purpose of requiring a security holder such as Mr Feitelson to bring proceedings to challenge the transactions documents if he asserted a claim.[27] Mr Sparks gave the following evidence:

"[MR THOMPSON:] Yes. So the position was that Mr Spindler and the liquidators were prepared to take a chance that Mr Feitelson would not pursue the claim - or if he did, he would have to go to court to establish it. That's a fair assessment too, isn't it?--- Well, the assessment we were making was that the security had to be released to effect any transaction in any event, and we were dealing directly with the security trustee through that process. And some of the advice we'd been receiving through that process was that the advance that we received to fund the administration and subsequent liquidation was by the security trustee in his own right. It would have priority and the history of the file was such that we'd been challenged on a lot of things through the course of the administration. We expected that that would continue to be the case.

[MR THOMPSON:] That hasn't answered my question, Mr Sparks, so I'll put it to you a slightly different way. What this evidences is that you were aware and Mr Spindler was aware also of the prospect of a challenge being made by Mr Feitelson and you were changing the terms of this document essentially to provide that that would have to be a challenge pursued in court to be established. Isn't that effectively what you were doing by these three documents or the two documents we're looking at?--- We were making sure that, if we entered into a contract, that we could complete where conditions that we could satisfy."[28]

• [47] When one reads the letter from Mr Feitelson's solicitors dated 27 July 2020 together with the timing and nature of the amendment made to condition precedent 5(g) of the Jadar term sheet it is, in my view, apparent that the liquidators must have known that, if Mr Feitelson was not successful in purchasing the MRV Metals assets, he would instruct First Samuel as Security Trustee not to relinquish its security in relation to any other sale of the assets and undertaking of Moreton Resources and MRV Metals.
• [48] On 29 July 2020, the liquidators executed the term sheet with Jadar to acquire either the issued capital of MRV Metals or the Sale Interests (as defined) for a total consideration of $500,000 on certain terms including a deposit of $120,000 (which was stated to be non-refundable) which the liquidators could use to pay care and maintenance expenses during the proposed due diligence period. The term sheet provided that completion was conditional upon Moreton Resources and MRV Metals executing all necessary agreements and/or obtaining all necessary consents prior to entering into the transaction documents. The Jadar term sheet also contained condition precedent 5(g) which stated:

"There being no application to a court by any creditor, shareholder or other stakeholder of MRL or MRV to set aside the transaction Documents which is not withdrawn or dismissed by the earlier of completion or 30 September 2020."

• [49] The Jadar term sheet also provided that the applicants could not directly or indirectly negotiate or enter into any transaction which may conflict with or be inconsistent with the transaction, or otherwise prejudice the rights of Jadar under the term sheet. The Jadar term sheet also contained a non-disclosure clause.
• [50] On 30 July 2020, Mr Feitelson rang Mr Orr and left a voice message regarding a potential amendment to his first offer. Mr Feitelson never received a call back from Mr Orr. On the same day, Jadar paid the non-refundable deposit of $120,000 which has been used by the liquidators to pay ongoing care and maintenance expenses. Jadar has since paid a further amount of $74,715 towards care and maintenance expenses.
• [51] On 3 August 2020, Jadar issued an ASX release announcing that it had acquired Moreton Resources' metals portfolio comprising five exploration tenements, one mining lease, in-situ crushing, screening, stacking, treatment and refining facilities "located in the highly prospective Silver Spur Basin of Southern Queensland". The announcement referred to the total consideration of $500,000.
• [52] On 13 August 2020, Mr Feitelson, by his solicitors, sent a letter to the liquidators' solicitors advising, among other things, that:

"4. Mr Feitelson as the 'Major Beneficiary' under the Security Trust Deed and in that capacity, has directed First Samuel Limited, as Security Trustee, to immediately lodge caveats under the Mineral Resources Act 1989 (Qld) and Mineral and Energy (Common Provisions) Act 2014, over the [MRV Tenements], and to take all other steps that are reasonably necessary to protect and preserve the Security Interest created under the Transaction Documents over the Secured Property for the benefit of the holders of Debentures under them, including our clients.

1. Our clients are aware of an ASX announcement (ASX announcement) released by MRL on 3 August 2020, in relation to which our clients have noted, with concern, that no mention is made of our clients' security over the 'Granite Belt' assets.
2. Mr Feitelson has directed the Security Trustee that under no circumstances does he consent to any release of the security over the MRV assets (as Secured Property) or their transfer to the proposed purchaser or any other person unless the full secured debt is tendered in consideration for their release. We presume this is not proposed, but if it is, please advise us immediately. To this end, Mr Feitelson has directed the Security Trustee to assert the Security Interests to prevent the sale of the assets foreshadowed in the [Jadar] ASX Announcement for a price that does not discharge the Secured Debt.
3. Our clients (and the other Debenture holders) are currently owed far more than the value of the MRV assets reflected in the ASX Announcement. To this end, our clients propose that the MRV assets that are the subject of the security be transferred to them by way in satisfaction of amounts owing to our clients and other Debenture holder and release of security Any such agreement is conditional upon final documentation being agreed and exchanged.
4. ... our client is prepared to discuss issues pertaining to sums due under the Administration Funding Deed and also, any claims that the Liquidators may wish to assert in relation to their cost, insofar as relevant to the transfer of MRV assets pursuant to our clients' security."

• [53] In oral evidence, Mr Feitelson confirmed that had he received notice of the Jadar offer prior to seeing the ASX release, he would have made an offer that matched or exceeded the purchase price offered by Jadar.[29] I accept this evidence as it is supported by the subsequent offers made by Mr Feitelson, which either matched or exceeded the purchase price offered by Jadar.
• [54] On 13 August 2020, Mr Feitelson, by his solicitors, also sent a letter to Jadar informing it of the debenture holders' security arrangements and the fact that caveats over the MRV Metals asset tenements had been lodged.
• [55] On the same day, Mr Feitelson, by his solicitors, wrote to First Samuel in the following terms:

"4. Mr Feitelson as the 'Majority Beneficiary' under the Security Trust Deed and in that capacity, has instructed us to direct you, as Security Trustee, as we hereby do, to immediately lodge caveats under the Mineral Resources Act 1989 (Qld) and Mineral and Energy (Common Provisions) Act 2014, over the [MRV tenements], prohibiting all dealings with the tenements and take all other steps that are reasonably necessary to protect and preserve the Security Interest created under the Transaction Documents over the Secured Property for the benefit of the holders of Debentures.

1. At this stage, Mr Feitelson does not direct you to appoint a receiver [on] behalf of the Debenture holders, but he reserves his right to do so.

1. Mr Feitelson directs that under no circumstances does he consent to any release of security over the MRV assets (as Secured Property) or their transfer to the proposed purchaser or any other person unless the full secured debt is tendered in consideration for their release. To this end, Mr Feitelson directs that you exercise all Powers under the Transaction Documents necessary to preserve the security and to prevent the sale of the assets foreshadowed in the [Jadar] ASX Announcement, unless the full secured debt is tendered in consideration for their release. ..."

• [56] The amounts that remained owing to Mr Feitelson and the debenture holders under the Secured Debenture Deed as at 28 September 2020 totalled $2,395,807.14 (including interest) broken down as follows:

(c) $210,340.50 owed to A & J Consultancy.[30]

• [57] On 13 August 2020, Mr Feitelson and A & J Consultancy, in their own right, lodged caveats over the mining tenement assets of MRV Metals.
• [58] On 17 August 2020 at 2.21 pm, First Samuel sent an email to Mr Feitelson's solicitors confirming receipt of the instructions contained in the letter of 13 August 2020 and explaining that they had been performing their role as Security Trustee without reimbursement and that they saw no reason or rationale for First Samuel to continue acting as Security Trustee, especially without being reimbursed for out of pocket expenses. The email requested (among other things) that:

"Your client agrees to accept First Samuel Limited resigning the role as security trustee under which circumstance you are free to arrange the lodging of caveats and coordination of dealings with the other beneficiaries.

Should your client continue to decline our request to resign, we do require that the beneficiaries lodge monies in the amount of $50,000 to place the surety trustee in funds pursuant to clause 4.2(b) of the Security trust deed to meet the reasonable expenses associated with actions requested of it by the Majority Beneficiary. We will action your client's request once the funds have been lodged to meet the costs of the request.

Our clear preference is that you accept the resignation (effective immediately). If not we shall wait being put in funds before progressing the latest request."

• [59] Mr Feitelson's solicitors replied to First Samuel on the same day agreeing to place it in funds to cover disbursements for registration of the caveats and did not agree to First Samuel resigning as Security Trustee. The following day, 18 August 2020, First Samuel lodged caveats over the mining tenement assets of MRV Metals. Prior to 19 August 2020, First Samuel also provided the liquidators with a copy of the letter from Mr Feitelson's lawyers to First Samuel dated 13 August 2020. On 19 August 2020, the liquidators sent an email to First Samuel enquiring whether First Samuel had or intended to lodge caveats over the tenements of MRV Metals.
• [60] On 19 August 2020, Mr Feitelson submitted a revised offer to the liquidators to purchase the MRV Assets for $500,000 (including a non-refundable deposit of $120,000) with a $30,000 per week reduction for due diligence waiver and a 30 day due diligence period (the Second Feitelson Offer).
• [61] On 20 August 2020, Mr Feitelson submitted a revised offer to the liquidators to purchase the MRV Assets for $500,000 (including a non-refundable deposit of $120,000) without a $30,000 per week reduction for due diligence waiver (the Third Feitelson Offer).
• [62] On 21 August 2020, the liquidators (by Mr Sparks) sent an email to First Samuel providing a copy of the letter of 13 August 2020 from Mr Feitelson's lawyers to the liquidators' lawyers and seeking confirmation that, as a result of having received instructions from Mr Feitelson, First Samuel would not (as the Security Trustee) release any security held to allow the proposed sale to Jadar to be completed.
• [63] First Samuel, by Mr Cash, replied to this correspondence on 21 August 2020. The email relevantly stated:

• We are obliged to act on instructions from the majority beneficiary and have registered caveats on the mining leases earlier this week (as also instructed by Mr Feitelson)
• We were aware (by your updated to First Samuel Limited on 22 July) that:
  • there were no offers (at the time) for the Texas Silver Mine capable of acceptance, and
  • you were to disclaim the Groups interest in the tenements
• We understand that an offer from [Jadar] was subsequently made (and accepted) and this remained the only offer you had received for the asset that you were capable of accepting
• It is my understanding that you accepted that offer from [Jadar] after having exhausted all other options and there were no counter offers made prior to you entering into the binding term sheet

• Clearly the offer from [Jadar] was the best (and only qualifying) offer for the asset
• Absent that offer, the mining lease was to be disclaimed
• Financial close of the deal with Jadar Resources Limited is the only realistic recovery for the asset
• We have lodged caveats upon instruction from the Majority Beneficiary however,
  • the consent from the Majority Beneficiary grants First Samuel Limited priority over all other outstanding monies
  • this grants First Samuel the right to lift the caveats and discharge its security and to allow settlement of the Jadar Resources Limited transaction
• I am comfortable doing this commercially given the offer from Jadar is the best offer you have received and the alternative is to disclaim the assets

I would ask that you convey this position to Norton Rose. I request that you ask Norton Rose to engage John Mollard to discuss:

• The legal merit in holding this commercial position
• The steps required to execute and facilitate financial close should they feel comfortable of our rights to do so."

• [64] On 25 August 2020, Mr Feitelson revised the Third Feitelson Offer to include a provision that he would also forgive $500,000 of the secured debt owed to him.
• [65] On 27 August 2020, Mr Feitelson submitted a further offer to the liquidators to purchase the MRV Assets for $600,000 (including a non-refundable deposit of $120,000) together with forgiveness of $500,000 of his secured debt which offer was open for acceptance until 4 September 2020 (Fourth Feitelson Offer).
• [66] On 4 September 2020, Mr Feitelson extended the period for which the Fourth Feitelson Offer was open for acceptance until withdrawn.
• [67] On 7 September 2020, Mr Feitelson sent an email to Mr Orr drawing attention to the due diligence period for the Jadar sale, as disclosed in the Jadar ASX release, having elapsed. The email relevantly stated:

"As your intentions regarding the Jadar transaction are of critical importance to me as a creditor with an interest in security over the relevant assets, I require an urgent update on the status of the Jadar transaction and my superior offer to acquire the MRV Metals Pty Ltd entity or assets, so that I can give instructions to my lawyers and the security trustee.

As my lawyers have advised, all my rights are reserved."

• [68] On 8 September 2020, Mr Orr sent an email to Mr Feitelson apologising for missing his call, confirming receipt of Mr Feitelson's email and advising that the liquidators would respond in due course.
• [69] On 14 September 2020, the liquidators, Moreton Resources and MRV Metals executed the Jadar Sale Agreement.
• [70] On 18 September 2020, Mr Feitelson (as Majority Beneficiary) and A & J Consultancy (by their solicitors) sent a letter to First Samuel advising (amongst other things) that Mr Feitelson was directing it to:

(b) appoint the Receivers "as joint and several receivers over the secured assets of MRV on behalf of Debenture Holders".

• [71] On the same day, Mr Cash of First Samuel emailed Mr Feitelson's solicitors confirming receipt of the letter of direction and requesting Mr Feitelson to consider First Samuel's request to resign as trustee and that he appoint an alternate trustee.
• [72] On 22 September 2020, First Samuel sent Mr Feitelson's lawyers an email which sought an amount of $10,000 to $15,000 to cover its lawyers' expenses and out of pocket costs in relation to the engagement, and relevantly requested that:

"Your client agrees to accept First Samuel Limited resigning the role as security trustee under which circumstance you are free to arrange appointment of the Receiver and Manager directly and coordination of dealings with the other beneficiaries.

Should your client continue to decline our request to resign, we do require that the beneficiaries lodge monies in the amount of $10,000 to place the surety trustee in funds pursuant to clause 4.2(b) of the Security trust deed to meet the reasonable expenses associated with actions requested of it by the Majority beneficiary. We do have some surplus funds from the last instruction and will advice (sic) if further amounts are required ..."

• [73] On 24 September 2020, Mr Feitelson's lawyers notified First Samuel that Mr Feitelson considered that a reasonable time to comply with his instruction had elapsed and gave First Samuel until 4.00 pm that day to comply. Later on the same day, First Samuel repeated its request for funding to comply with the request. A further email was sent on 24 September 2020 from Mr Cash asking for an update on the issue of funding. Mr Feitelson's solicitors replied as follows:

"We refer to your emails received at 10.41 am and 1.42pm today.

These emails are inconsistent with your email of 22 September 2020 in which you sought an 'amount of $10-$15,000' to cover legal expenses.

Our clients do not agree to place you in funds and require the Security Trustee to comply with the instructions given in our letter of 18 September 2020 by 4:00pm today as previously advised."

• [74] On 24 September 2020 at 4.50 pm, First Samuel's solicitors, HWL Ebsworth Lawyers, sent a letter to Mr Feitelson's solicitors. The letter relevantly stated:

"6. We hereby call upon Your Clients to withdraw the Caveat Direction in writing and without reservation, by 9:00am on Monday, 28 September 2020.

1. As to the Receiver Appointment Direction, we say as follows:

(a) We consider that clause 10.5 of the Debenture Deed, to which Your Clients are a party, makes it clear that the direction to appoint a receiver is one which the Security Trustee may determine to do at its absolute discretion.

(b) We consider that the Debenture Deed and the Trust Deed are intended to be read together. Accordingly the provisions of the Trust Deed which require the Security Trustee to abide by directions, such as clauses 3.3(a) and 13.2 should be read as subject to clause 10.5 of the Debenture Deed.

(c) It follows that the Appointment Direction given by Your Clients and the Instructing Group is not a direction that binds out client, as to do so would fetter the absolute discretion given to First Samuel in clause 10.5 of the Debenture Deed.

(d) Accordingly First Samuel is not bound by and nor does it intend to take any steps to appoint joint and several receivers over the secured assets of MRV on behalf of the Debenture Holders.

1. We hereby call upon Your Clients to withdraw the Appointment Direction in writing and without reservation, by 9:00am on Monday, 28 September 2020

(a) gives 30 days' notice of its resignation as Security Trustee for the Moreton Security Trust pursuant to clause 9.1 of the Trust Deed or (or such shorter period as the issuer and the Majority Beneficiary may agree). (Notice of Resignation): and

(b) calls upon Mr Feitelson, as the Majority Beneficiary, to appoint a successor Security Trustee (Replacement Security Trustee) pursuant to clause 9.6 of the Trust Deed ...

1. Whilst the resignation of First Samuel as Security Trustee takes effect from 30 days from the date of this letter, there is nothing preventing a Replacement Security Trustee being appointed before that date, or such shorter period as the issuer and the Majority Beneficiary may agree. In that regard we draw your attention to clause 9.6 of the Trust Deed which imposes on Mr Feitelson, as Majority Beneficiary, an obligation to act reasonably and without delay."

• [75] As noted above, on 25 September 2020, a Deed of Appointment of Receivers was entered between Mr Feitelson and A & J Consultancy on behalf of First Samuel (as appointor) and Messrs Kirk and Joiner (as receivers). Clause 2 of the Deed of Appointment states:

"(a) The Appointors, being entitled under the power conferred by the [Secured Debenture Deed and Security Trust Deed] to appoint a Receiver of the Secured Property on behalf of the Security Trustee, in the exercise of such power, hereby appoint the Receivers to be the receivers of the Secured Property with all the powers conferred upon the Receivers by the [Secured Debenture Deed and the Security Trust Deed] (including those powers in clause 10.6 thereof) and by law.

(b) In the event that the appointment on behalf of the Security Trustee is ineffective (but not otherwise) this appointment shall take effect from the date hereof as an appointment of the Receivers by Philip Anthony Feitelson and A & J Consultancy Pty Ltd personally."

• [76] On 28 September 2020, First Samuel (by its solicitors) gave 30 days' notice of its resignation as Security Trustee to Mr Elks and the liquidators. First Samuel also made a request for funding from Mr Elks, Mr Feitelson and A & J Consultancy to comply with the direction from Mr Feitelson and A & J Consultancy. On the same day, Mr Feitelson's solicitors sent a letter to the liquidators' solicitors confirming that Mr Feitelson acknowledged the liquidators' entitlement to be paid their costs and expenses properly incurred in the liquidation.
• [77] On 16 October 2020, Mr Feitelson appointed Melgear Pty Ltd as the successor Security Trustee to First Samuel.

Were the Fifth Respondents validly appointed as receivers of MRV Metals?

• [78] The resolution of this issue requires a consideration of the relevant clauses of the Secured Debenture Deed and the Security Trust Deed.
• [79] Both these agreements constitute commercial contracts and the Court should give a meaning to the relevant clauses which a reasonable businessperson would have understood those terms to mean and requires consideration of the language used by the parties, the surrounding circumstances and the commercial purposes or objects to be secured by the contract.[31]

• [80] I have already referred at [5] above to some of the clauses of the Secured Debenture Deed. The Secured Debenture Deed and the Security Trust Deed ought to be construed together. The Secured Debenture Deed contains a definition of Security Trust Deed to mean "the security trust deed entered into on or about the date of this document by the Security Trustee". Clause 2.7 which is headed "Security Trust Deed" provides that each debenture holder, by executing the Secured Debenture Deed, agrees to observe, perform and be bound by the Security Trust Deed as a party to the Security Trust Deed in its capacity as a beneficiary. Clause 11.1(a) states that "[t]he Security Trustee enters into this document as security trustee for the debenture holders appointed as such pursuant to the Security Trust Deed and in no other capacity." Clause 11.1(b) states that the Security Trustee is not responsible if it acts upon any instruction purported to have been given by a debenture holder, even though it may subsequently be found that there was some defect in the instruction or for any other reason the instruction was not valid or binding upon any debenture holder who it purports to bind or upon the Security Trustee. Clause 11.1 of the Secured Debenture Deed contemplates the debenture holders being able to instruct the Security Trustee.
• [81] Clause 1.1 defines "Event of Default" to mean any event specified in cl 8.1. An Event of Default includes, in cl 8.1(g), the appointment of a "Controller" which has the meaning given to that term by s 9 of the Corporations Act 2001 (Cth).
• [82] Clause 1.1 also defines "a Permitted Disposal" as, relevantly, a sale of, assignment of, transfer of, disposal of, parting with possession of, creation of interest in or other dealing with by the Security Providers, any asset which it acquired or held for the purpose of disposal in the ordinary course of business, stock in trade (or inventory as defined under the Personal Property Securities Act (Cth)) in the ordinary course of its business or with the prior written consent of the Security Trustee.

(a) appointing a Receiver of the whole or part of any Secured Property; and

(b) delegating any of the powers and authorities conferred on it under cl 10.6 to any person it approved.

• [85] The applicants do not rely on cll 10.5 or 10.6 of the Secured Debenture Deed to challenge the validity of the appointment of the fifth respondents as receivers. That is, the applicants have not sought to advance the proposition in First Samuel's solicitor's letter dated 24 September 2020 to the effect that, as cl 10.5 of the Secured Debenture Deed gave the Security Trustee an "absolute discretion" to appoint receivers, it did not have to comply with any instructions given by the Majority Beneficiary pursuant to the Security Trust Deed. Although the discretion granted by cl 10.5 is stated to be "absolute", pursuant to cl 11.1, the Security Trustee only entered into the Secured Debenture Deed in the capacity as Security Trustee for the debenture holders appointed as such pursuant to the Security Trust Deed. Further, as I have already observed, cl 11.1(b) of the Secured Debenture Deed contemplates the Security Trustee acting upon instructions given by the debenture holders.

• [86] By cl 1.1, the Security Trust Deed defined:

(ii) Debenture as a debenture issued under the Secured Debenture Deed;

(iii) Debentureholder as any person holding one or more debentures issued under the Secured Debenture Deed;

(iv) Instructing Group as all beneficiaries (in respect of cl 3.2) and the Majority Beneficiary (in respect of cl 3.3);

(v) Majority Beneficiary as the Beneficiary who at any time held the greatest number of outstanding Debentures;

(vi) Security Trust Fund, relevantly, as the Security Trustee's right, title and interest under the Securities and each other Transaction Document; and

(vii) Transaction Document as the Security Trust Deed and the Secured Debenture Deed.

• [87] By cl 3.1, where a Transaction Document required the approval, consent or instructions of the Security Trustee or the Security Trustee's exercise of a power, the Security Trustee was required to seek instructions from the Instructing Group before giving that approval, consent or instruction or exercising that power. Clause 3.1(b) provided:

"Unless expressly provided otherwise in a Transaction Document, the Security Trustee must act, and need only act, if and only if it receives clear instructions to do so from the Instructing Group."

• [88] Clause 3.1(c) provides that only a beneficiary who was a member of the Instructing Group with respect to a matter may instruct the Security Trustee in relation to that matter.
• [89] By cl 3.3, the exercise of First Samuel's powers in its capacity as Security Trustee in connection with an Event of Default (as defined in the Secured Debenture Deed) including the taking of any enforcement action, required instructions from the Majority Beneficiary, namely Mr Feitelson.
• [90] Clause 4 of the Security Trust Deed is headed "Duties and Responsibilities of Security Trustee". Clause 4.1 is headed "Duties and Responsibilities Limited". I note that cl 1.2 which deals with interpretation provides, in cl 1.2(l), that headings are for reference only and do not affect interpretation. Clause 4.1(b) states that the Security Trustee's obligations, duties and responsibilities under or in connection with the Security Trust Deed and Secured Debenture Deed are limited to those expressly set out in those documents and the Security Trustee is not responsible or liable if it acts in good faith on any instruction purportedly given by the Instructing Group that is later found to be defective, invalid or not binding on the Security Trustee or any beneficiary purportedly bound by the instruction.
• [91] The two clauses central to the parties' dispute as to the validity of the appointment of the receivers are cls 4.2 and 5.3 which I will set out in full:

Despite any other provision of any Transaction Document and regardless of whether it has received instructions from the Instructing Group, the Security Trustee is not obliged to act or exercise any Power:

(a) unless its liability is limited in the manner set out in clause 6;

(b) until it is first indemnified to its reasonable satisfaction in accordance with clause 6.1 or otherwise or the Beneficiaries place the Security Trustee in funds equivalent to the amount which the Security Trustee reasonably determines may become payable in respect of any liabilities, costs or expenses which will or may arise from the Security Trustee taking that action;

(c) where in the Security Trustee's reasonable opinion to do so would or may result in the Security Trustee breaching the terms of a Transaction Document or any law; or

(d) if it is impossible for the Security Trustee to act or to act lawfully due to any cause beyond its control (including but not limited to act of God, war, riot, terrorism, fire, natural disaster, labour dispute or chance in or introduction of law taking effect after the date of this document).

No Beneficiary may have recourse to the Security Trustee where the Security Trustee does not act on the Beneficiary's instructions (on behalf of the Instructing Group) as contemplated by this clause 4.2

(a) Subject to paragraph (b), no Beneficiary may exercise any Power comprised in the Security Trust Fund except through the Security Trustee on the terms of this document.

(b) If, in accordance with this document, the Instructing Group properly instructs the Security Trustee to exercise a Power comprised in the Security Trust Fund and the Security Trustee fails to do so within a reasonable time, subject to paragraph (c), a Beneficiary who is a member of the Instructing Group may exercise the Power.

(c) If the Security Trustee notifies the Beneficiaries that it has not exercised a Power within 5 Business Days because:

(i) the Security Trustee owes a duty to another person under any Transaction Document which would be contravened by the exercise of that Power; or

(ii) the Security Trustee (acting reasonably) is unable to ascertain whether the persons giving the relevant instructions constitute the Instructing Group,

• [92] Clause 6.1 is also relevant and provides:

"The Security Trustee is not responsible if its acts upon any instruction purported to have been given by a Beneficiary even though it may subsequently be found that there was some defect in the instruction or for any other reason the instruction was not valid or binding upon any of the Beneficiaries whom it purports to bind or upon the Security Trustee."

• [93] Clause 6.1 is referred to in cl 4.2(b) in the context of the Security Trustee being "first indemnified to its reasonable satisfaction in accordance with clause 6.1". The parties accept that the reference to cl 6.1 in cl 4.2(b) appears to be an error and that the reference should either be to cl 6.3 or cl 7.1. Clause 6.3 provides that each Security Provider indemnifies the Security Trustee against the amount of loss or damage suffered or incurred by the Security Trustee in connection with the Security Trustee carrying out their obligations under the Transaction Documents, except in the case of fraud, gross negligence or wilful misconduct by the Security Trustee. The more likely reference is to cl 7.1, which provides that the Security Trustee "is and will be indemnified out of any money from time to time received or recovered by the Security Trustee under each Security in respect of all Losses" incurred by it "in the exercise, protection or defence of any Powers or in performing any of its obligations, duties or responsibilities" or "otherwise in relation to a Security or other Transaction Document".

• [94] From the chronology set out above, it is evident that First Samuel, having been requested by Mr Feitelson through his solicitors to lodge caveats, requested to be placed into funds for this purpose pursuant to cl 4.2(b). This was agreed to on 17 August 2020 and First Samuel lodged caveats over the mining tenement assets of MRV Metals.[32] This is to be contrasted with Mr Feitelson's refusal to place First Samuel in funds for the purpose of appointing receivers.[33]
• [95] The applicants submit that as First Samuel (despite its request pursuant to cl 4.2(b)) had not been placed in funds, it was not obliged to act on Mr Feitelson's instruction to appoint receivers. Initially, the applicants submitted that as First Samuel had not been placed in funds, it could not be said that the Instructing Group, for the purposes of cl 5.3(b), had properly instructed the Security Trustee to exercise the power to appoint receivers.[34] This submission was not pressed.[35] The only clause of the Security Trust Deed that deals with instructions from the Instructing Group is cl 3 and the term "properly instructs" in cl 5.3(b) should be understood as referring to an instruction given under cl 3. Mr Feitelson is the Majority Beneficiary. By cl 3.3(a), he is expressly empowered to instruct the Security Trustee to exercise its powers under cll 10.5 and 10.6 of the Secured Debenture Deed which includes, by cl 10.6(g), the power to appoint a receiver. That direction was given by Mr Feitelson to First Samuel on 18 September 2020. There is no suggestion that the instruction to appoint receivers was anything other than a "clear instruction" for the purposes of cl 3.1(b) and was properly given in accordance with cl 3.3(a). The subject matter of cl 4.2(b) is distinct from the subject matter of cl 3. Clause 4.2 prescribes circumstances in which the Security Trustee is not obliged to act or exercise any power. The Security Trustee not being placed in funds by the Instructing Group does not mean, for the purposes of cl 5.3(b), that it has not been properly instructed. Rather, having received the instruction and not been placed in funds, cl 4.2(b) provides that the Security Trustee is not obliged to exercise the power.
• [96] The applicants accept that the construction issue is whether it can be said that the Security Trustee, having received a proper instruction from the Instructing Group, "fails" to exercise a power where it is not otherwise obliged to exercise the power.

"If the proper construction of the expression 'fails' in cl 5.3(b) was that a beneficiary could only step in and exercise a power of the Security Trustee if the Security Trustee was 'obliged to act' but failed to do so, then when the matter which relieved the Security Trustee from acting was an event where cl 4.2(d) is engaged, a beneficiary would never be able to step in. That would be an extraordinary and absurd consequence.

The Liquidator's construction of 'fails' would require reading qualifications into clause 5.3(b) that are not there."[38]

• [99] The second, third and fifth respondents submit that while cl 4.2(b) might give the Security Trustee an excuse in terms of an action brought against it by the debenture holders for why it did not act, it cannot change the fact that a Security Trustee has failed to act in circumstances where it otherwise should have acted. For the purposes of cl 5.3(b), why the Security Trustee has failed to act is irrelevant.[39]
• [100] The second, third and fifth respondents refer to the decision of the New South Wales Court of Appeal in CBS Productions Pty Ltd v O'Neill.[40] The contractual clause under consideration in that case was as follows:

16.01 If at any time the artist fails, except solely for CBS' refusal without cause to allow the artist to perform, to fulfil his Minimum Recording Commitment or the Increased Minimum Recording Commitment within the times set forth herein then without limiting CBS' rights, the expiration date of the then current contract period of the term hereof shall be deemed extended for the period of default and CBS' obligation to make payment to the artist hereunder shall be suspended ..."

• [101] Mahoney JA with whom Priestly JA agreed, Kirby P dissenting observed:

"The problem which the words pose is a simple one: it depends, in the end, upon the meaning to be given to 'fails'. 'Fail' may denote mere non-fulfilment (in this case, of the artist's Minimum Recording Commitment). If it has that meaning, then there is a failure whatever be the cause of non-fulfilment.

Alternatively, 'fail' may denote, not every non-fulfilment of the commitment, but only those cases where non-fulfilment arises from certain kinds of causes ...

What is to be determined in this case is which of these meanings 'fails' has in cl 16.01.

If the clause be considered purely as a matter of language, the construction of it is clear. The relevant words are: 'If ... the artist fails, except solely for CBS' refusal without cause to allow the artist to perform, to fulfil ...'. The fact that 'except solely for CBS' refusal without cause to allow the artist to perform' is specifically provided for indicates that, were it not provided for, a non-fulfilment because of CBS' refusal to allow the artist to perform would constitute a failure within the clause: if 'fails ... to fulfil' did not include a case where non-fulfilment resulted from CBS' refusal, there would be no need to provide specially for its exception."[41]

• [102] Similarly in the present case, cl 5.3(c) prescribes circumstances in which the Security Trustee fails to exercise the power and no beneficiary may exercise that power:

"(c) If the Security Trustee notifies the Beneficiaries that it has not exercised a Power within 5 Business Days because:

(i) the Security Trustee owes a duty to another person under any Transaction Document which would be contravened by the exercise of the Power; or

(ii) the Security Trustee (acting reasonably) is unable to ascertain whether the persons giving the relevant instructions constitute the Instructing Group,

• [103] The wording of cl 5.3(c) supports a construction that apart from the specific circumstances identified in cl 5.3(c), a beneficiary would otherwise be able to exercise a power which it has instructed the Security Trustee to exercise but which the Security Trustee has failed to exercise.
• [104] The correct construction of cl 5.3 is that the Security Trustee, having been properly instructed by the Instructing Group to exercise a power, fails to do so where that power is not exercised within a reasonable time. This is so irrespective of whether cl 4.2 absolves the Security Trustee from the obligation to exercise the power.
• [105] The applicants identify that the Deed of Appointment of Receivers names both Mr Feitelson and A & J Consultancy as the Appointors on behalf of First Samuel. Clauses 2(a) and (b) of the Deed of Appointment states:

"(a) The Appointors, being entitled under the power conferred by the Security to appoint a Receiver of the Secured Property on behalf of the Security Trustee, in the exercise of such power, hereby appoint the Receivers to be the receivers of the Secured Property with all the powers conferred upon the Receivers by the Security ...

(b) In the event that the appointment on behalf of the Security Trustee is ineffective (but not otherwise) this appointment shall take effect from the date hereof as an appointment of the Receivers by Philip Anthony Feitelson and A & J Consultancy Pty Ltd personally."

• [106] The applicants correctly submit that A & J Consultancy is not a Majority Beneficiary and did not have the authority to issue an instruction to First Samuel to appoint a receiver.[42] A & J Consultancy is not a member of the Instructing Group in respect of an instruction given under cl 3.3. It is not apparent whether the applicants rely on A & J Consultancy not being a Majority Beneficiary and yet being an Appointor under the Deed of Appointment of Receivers as constituting a ground of invalidity. It is apparent on the material, however, that Mr Feitelson as the Majority Beneficiary did, in that role, instruct First Samuel as Security Trustee to appoint receivers. Further, accepting that the Security Trustee failed to exercise the power to appoint receivers within a reasonable time, there is no issue that Mr Feitelson as the Majority Beneficiary was entitled to give an instruction to appoint receivers under cl 3.3(a) and was entitled to exercise that power pursuant to cl 5.3(b).
• [107] For the above reasons, the declaratory relief sought in paragraph 8 of the amended originating application is refused.

Should the Court exercise its discretion under s 99(2) of the PLA?

(a) Section 99 of the PLA

• [108] Section 99 falls within Part 7 of the PLA which deals with mortgages and provides:

"99 Sale of mortgaged property in action for redemption or foreclosure

(1) Any person entitled to redeem mortgaged property may have a judgment or order for sale instead of for redemption in an action brought by the person either for redemption alone, or for sale alone, or for sale or redemption in the alternative.

(2) In any action, whether for foreclosure, or for redemption, or for sale, or for the raising and payment in any manner of mortgage money, the court, on the request of the mortgagee, or of any person interested either in the mortgage money or in the right of redemption, and, even though -

(b) the mortgagee or any person so interested does not appear in the action;

and without allowing any time for redemption or for payment of any mortgaged money, may direct a sale of the mortgaged property, on such terms, subject to subsection (3), as it thinks fit, including the deposit in court of a reasonable sum fixed by the court to meet the expenses of sale and to secure performance of the terms.

(3) In an action brought by a person interested in the right of redemption and seeking a sale, the court may, on the application of any defendant, direct the plaintiff to give such security for costs as the court thinks fit, and may give the conduct of the sale to any defendant, and may give such directions as it thinks fit respecting the costs of the defendants or any of them.

(4) In any case within this section the court may, if it thinks fit, direct a sale without previously determining the priorities of encumbrancees.

(5) This section applies to actions brought whether before or after the commencement of this Act.

mortgaged property includes the estate or interest which a mortgagee would have had power to convey if the statutory power of sale were applicable.

(7) For the purposes of this section the court may, in favour of a purchaser, make an order vesting the mortgaged property, or appoint a person to convey the property, subject or not to any encumbrance, as the court may think fit or, in the case of an equitable mortgage, may create and vest a legal estate in the mortgagee to enable the mortgagee to carry out the sale as if the mortgage had been made by deed or instrument by way of legal mortgage."

• [109] Section 99(2) or its equivalent has been considered in a number of jurisdictions including Queensland. In Re Himstedt,[43] G N Williams J (as his Honour then was) observed:

"Sub-section (2) confers a wide jurisdiction on the court, and its language is so general that it would appear to cover all cases which might strictly arise under sub-s (1). The provisions are based on s 91 of the Law of Property Act 1925 (England) which in turn is derived from s 48 of the Court of Chancery Procedure Act 1852 and s 25 of the Conveyancing Act 1881; the provisions are much wider than s 74 of the Queensland Equity Act of 1867 which governed the position in this State until 1974. Section 25 of the 1881 Act was more extensive than s 48 of the 1852 Act, and the former was described by Jessel MR and Brett LJ as 'remedial' in Union Bank of London v Ingram [1882] UKLawRpCh 24; (1882) 20 Ch D 463.

That, in my view, is an accurate description of s 99 of the Property Law Act and in consequence it should be given a construction and an application befitting a remedial statute."

• [110] His Honour considered that the term "action" in s 99(2) was sufficiently wide to include proceedings by originating summons. Here, the proceedings were commenced by originating application and constitute "any action" within the meaning of s 99(2). The applicants are, for the purposes of s 99(2), persons "interested either in the mortgage money or in the right of redemption".[44] The "Sale Interests" as that term is defined in the Jadar Sale Agreement constitutes "mortgaged property" for the purposes of s 99(2) because s 99 applies both to real property and to property generally. This is evident from s 77A(1)(c) which deals with the application of Part 7 of the PLA and provides that subject to any other Act, Part 7 applies to any other mortgage whether of land or any other property. Under the Jadar Sale Agreement, the assets to be sold are real property, mining licences, exploration permits and plant and equipment, all of which fall within the meaning of "property" at law.[45] The Sale Interests are subject to a mortgage in favour of First Samuel within the meaning of s 99(2). The PLA in Schedule 6 gives the word "mortgage" a meaning which includes a charge on any property for securing money or monies' worth. The applicants therefore bring themselves within the operation of s 99(2) which permits the Court to exercise the discretion to direct a sale of the mortgaged property.

"It was, however, entitled to orders 2 and 3. It had proved the existence of an equitable charge in its favour to secure the payment of the debt guaranteed by the appellants and it had a right to have the court order the sale of the land to satisfy the debt. The power of the court to make such an order is found in equity and in s 99(2) of the Property Law Act. The latter power has been accepted in a number of decisions in this court..." (Citations omitted)

• [112] Two of the decisions referred to by Chesterman JA include Worrell v Issitch[48] and Phillips v Hogg.[49] In Worrell, Holmes J (as her Honour then was) held that s 99(2) empowered the Court to order the sale of land subject to an equitable charge. Dowsett J in the Federal Court had previously made a declaration in favour of Worrell that he was entitled to a charge on the respondent's property to secure payment of an amount of $90,167. Holmes J observed:[50]

"I am satisfied that the terms of s 99(2) are sufficiently wide to empower sale of property subject to a charge such as that created by the order of Dowsett J. In reaching that conclusion I note the comments of Williams J in Re Himstedt ... as to the width of the jurisdiction conferred by s 99(2). I have had regard also to the commentary in Duncan v Vann at paragraph 7.4740 to the effect that the power of sale in s 99 extends to charges; and that in any event the power to order sale exists under the general law."

• [113] In Phillips v Hogg, Mullins J (as her Honour then was) was also dealing with an application brought under s 99(2) by an equitable chargee. Her Honour recognised that a provision such as s 99(2) provides the remedy of a judicial sale for an equitable chargee.[51] In exercising the discretion under s 99(2), her Honour took the following matters into account:[52]

"The applicant has already satisfied this Court of the existence of the charge. The title of the property is clear. The property has a sufficient value to pay out the amount that has been determined as secured by the charge. The respondent's bank has not sought to register any mortgage over the property. The fact that the respondent has been unsuccessful in persuading the applicant to defer seeking payment of what is owed by the respondent is not a sufficient reason to deprive the applicant of the remedy which is sought."

• [114] From the above discussion, it is evident that in Hanson, Worrell and Phillips the Court's exercise of discretion under s 99(2) was in circumstances where an applicant was seeking to enforce an equitable charge. None of these cases were concerned with a mortgagor seeking a direction for the sale of mortgaged property which is opposed by a secured party.
• [115] The second, third and fifth respondents submit that where a secured party resists an application for judicial sale by a mortgagor, exceptional circumstances are required for the Court to intervene. This is because, otherwise, the value of the mortgagee's entitlements would be undermined.[53] They further submit that the discretion to direct a sale under s 99(2) ought ordinarily not be exercised:

(a) where the sale proceeds would be insufficient to fully discharge the mortgagee; and

(b) where the mortgagee is taking active steps to obtain possession and enforce its security by sale.[54]

• [116] In support of these propositions, the second, third and fifth respondents rely on this Court's decision in Asset Core Pty Ltd v Jarrett 1 Enterprises Pty Ltd[55] and the decision of the English Court of Appeal in Cheltenham and Gloucester Plc v Krausz.[56] In Cheltenham, Phillips LJ referred to the earlier decision of Sir Donald Nicholls VC in Palk v Mortgage Services Funding Plc[57] and observed:

"Until Palk it was the practice of the Chancery Court only to entertain an application for sale by the Mortgagor if the proceeds of sale were expected to be sufficient to discharge the entirety of the mortgage debt. In such circumstances the mortgagor might initiate proceedings by bringing an action for sale under s 91(1)[58], or, if the mortgagee sought to foreclose, the mortgagor could apply for an order for sale in place of foreclosure. The practice thus reflected the heading to s 91: Sale of mortgaged property in action for redemption for foreclosure.

Palk established, for the first time, that the Court has power under Section 91(2) to make an order for sale on the application of a Mortgagor, notwithstanding that the proceeds of sale will be insufficient to discharge the mortgage debt. In Palk the mortgagees had obtained an Order for possession with the intention, not of proceeding to sell the property but of waiting in the hope that the market might improve. The mortgagor was anxious that the property should be sold so that the proceeds would reduce the mortgage debt, on which interest was accruing at an alarming rate. The Court of Appeal held that, as the mortgagees could buy the property themselves if they wished to speculate on an increase in its value, in the interests of fairness the property should be sold."

• [117] It is evident from this passage that the facts in Palk's case were unusual.
• [118] Having referred to Palk's case, Phillips LJ continued:

"I recognise the principle of the inherent jurisdiction of the Court, as explained by Lord Morris in Connelly v Director of Public Prosecutions [1964] A.C. 1254, but I question whether that principle can justify the Court in exercising its power to order a sale of the mortgage property under Section 91 in circumstances where the mortgagee is seeking to enter into possession in order to sell property in which there is negative equity and where the sole object with which the mortgagor seeks that order is to prevent the mortgagee exercising his right to possession so that the mortgagor can negotiate his own sale while in possession.

Even if one assumes that the Chancery Court has power to order sale of mortgage property on terms that displace the mortgagee's right to possession, I do not consider that it follows from this that the County Court, as part of its inherent jurisdiction, can properly suspend an order or warrant for possession in order to enable a mortgagor to apply to the High Court for an Order under Section 91. It seems to be incumbent on the mortgagor to seek from the High Court any relief which that Court is empowered to give before the possession warrant takes effect."[59]

• [119] Millett LJ, in agreeing with Phillips LJ, stated:

"Palk... was a case in which the mortgagee had no wish to realise its security in the foreseeable future, whether by sale or foreclosure. It established that in such a case the mortgagor might obtain an order for sale even though the proceeds of sale would be insufficient to discharge the mortgage debt. It does not support the making of such an order where the mortgagee is taking active steps to obtain possession and enforce its security by sale. Still less does it support the giving of the conduct of the sale to the mortgagor in a case where there is negative equity, so that it is the mortgagee who is likely to have the greater incentive to obtain the best price and the quickest sale."[60]

• [120] The authors of Butt's Land Law,[61] in referring to Palk and Cheltenham, observe:

"The English equivalent of this provision has been held to empower the court to order a sale at the mortgagor's request and against the mortgagee's wishes, even where the sale will not bring enough to discharge the mortgage debt. However, it is clear that the jurisdiction to order a sale against the mortgagee's wishes will be exercised only in exceptional circumstances; an example is where the property is falling in value, the mortgagor having only a 'negative equity' and facing serious financial detriment if the mortgage is allowed to run on. The jurisdiction can be exercised against the wishes of the mortgagee(s), but in practice is unlikely to be exercised when the mortgagee is actively proceeding to exercise its power of sale."

• [121] To similar effect is the case of Toor v State Bank of India,[62] where the Court stated:

"For all those authorities, it seems to me that the legal position is this. Prima facie it is the right of the mortgagee to determine how and when to exercise its security. The court does have the power to interfere with that exercise of judgment under s 91. It is a power which is accepted by both counsel to be an unfettered discretion, to be exercised judicially. It is the case, in my view, that the authorities indicate that it would be exceptional to exercise that power to compel the mortgagee to make a sale at a time when it does not wish to do so where there would be a shortfall in the mortgage debt resulting. Nevertheless, the court can do so if the alternative would be to cause unfair prejudice or other unfairness, ... to the mortgagor. In my judgment, it is for the mortgagor to make an application and to demonstrate by evidence that the requisite degree of prejudice or unfairness will result."[63]

• [122] In Yarrangah Pty Ltd v National Australia Bank Ltd, Young J stated:[64]

"That line authority shows that when the section applies the court has a very wide jurisdiction and that where appropriate it will order a judicial sale of the property and it will usually commit that sale to the mortgagor.

However, there is flavour in the cases, especially in the Cheltenham case, and in a decision of Kekewich J in Brewer v Square [1892] UKLawRpCh 39; [1892] 2 Ch 111, 115, that where the mortgagee is actively pursuing its statutory or contractual power of sale then the court usually does not exercise its discretion to order judicial sale. However, the matter, generally speaking, is in the wide discretion of the court.

Assuming that the jurisdiction exists, it is one to be exercised in this special case. It is not to go against the normal procedures of permitting the mortgagee under its statutory or contractual power wide liberty to conduct the sale and, indeed, on analogy with s 103 of the Conveyancing Act, it would seem to me that where the mortgagee's sale is actively proceeding the equitable power should not ordinarily be exercised."

• [123] As noted in Asset Core,[65] a sale under s 99(2) is discretionary. The discretion must, however, be exercised judicially and having due regard to the interests of all concerned. Those interests would include those of a secured party, such as a mortgagee, which is taking active steps to obtain possession and enforce its security by sale. These are important interests to be considered by the Court when one has regard to the prerogatives of a mortgagee. The relevant principles are summarised by Austin J in Jiwira Pty Ltd v Primary Industry Bank of Australia:[66]

"(a) the power of sale is given to the mortgagee for its own benefit, to enable it to realise its debt ...

(b) the mortgagee is not a trustee of the power of the mortgagor ...

(c) the mortgagee may consult its own convenience as regards the time of sale subject to its duty to act bona fide in the conduct of the sale ...

(d) the mortgagee is not bound to postpone the sale in the hope of obtaining a better price later ...

(e) while the mortgagee may look to its own interests, it must pay some regard to the interests of the mortgagor. Where their interests conflict, it is not entitled to act in a manner which sacrifices the interests of the mortgagor ...

(f) it is part of the duty to act in good faith, to take reasonable precautions to obtain a proper price ...

(g) the burden of proof is on the mortgagor seeking to impugn the sale to prove breach of duty by the mortgagee ...

(h) a selling mortgagee need not consult the mortgagor, and if it elects to keep the mortgagor informed of the progress of negotiations for the sale, it does not thereby limit its freedom of action ...

(i) a mortgagee may sell when it considers appropriate ..." (citations omitted)

• [124] The applicants submit that the circumstances of the present case are readily distinguishable from Cheltenham. The primary point of distinction is the position adopted by First Samuel which, as the Security Trustee, holds the securities. In the context of this role, the applicants highlight the following matters:

(a) the third applicants, initially as administrators and then as liquidators, conducted a marketing and sale campaign for the assets of Moreton Resources and the subsidiaries;[67]

(b) First Samuel, as Security Trustee, was kept informed of the steps being taken during the sale campaign including by way of written reports, and no complaint was made;[68]

(c) no steps were taken to enforce the Security Interests under the Secured Debenture Deed during the sale campaign or at any time prior to the binding term sheet being entered into with Jadar;[69]

(d) prior to accepting the Jadar Offer, the liquidators had informed Mr Cash from First Samuel that if the assets could not be sold, they intended to disclaim;[70]

(e) the liquidators considered the completion of the Jadar Sale Agreement to be in the best interests of creditors of Moreton Resources and its subsidiaries;[71] and

(f) First Samuel (as Security Trustee) does not oppose completion of the Jadar Sale Agreement and it is First Samuel's position that "the completion of the Jadar Sale is in the commercial best interests of all beneficiaries;"[72]

• [125] Ms Downes QC for the applicants submits:

"In none of the cases has there been this scenario, where a secured creditor has indicated to the controller assent to entering into the sale - a contract with the proposed purchaser, and then, after that contract has been entered into, turned around and tried to resile from it.

So in this case, we have effectively the secured creditor seeking to resile from what it told the liquidators, and then the liquidators then told the proposed purchaser, and they all went ahead with the transaction believing that the secured creditor was in favour of it."[73]

• [126] There are, in my view, four difficulties with this submission. First, even though Mr Cash was not cross-examined, his affidavit evidence does not make it apparent that First Samuel "assented" to the liquidators entering into the Jadar Sale Agreement on 14 September 2020. Mr Cash's evidence was that on 3 September 2020, he received correspondence from Hopgood Ganim, solicitors for Jadar:

(a) advising they acted for Jadar, the purchaser in the Jadar Transaction;

(b) putting First Samuel on notice that Jadar would be significantly prejudiced by any attempt to delay, frustrate or in any way interfere with the Jadar Transaction; and

(c) reserving Jadar's rights to seek damages in respect of any loss or damage suffered by Jadar or its shareholders by reason of any action taken to delay, prevent, frustrate or in any way interfere with the Jadar Transaction.[74]

• [127] Subsequently, Mr Cash had a discussion with one of the liquidators, Mr Sparks. Mr Cash states:

"This was a high level discussion regarding the details of the sale of the Texas mine to Jadar. I was not privy to any of the transaction documents but Mr Sparks outlined a summary of the heads of agreement...

Mr Sparks explained to me that the offer from Jadar had come at the last minute and Mr Sparks had, prior to receiving the Jadar offer, resolved to disclaim the land and tenements associated with the Texas mine whilst negotiating a sale of the essential pumping infrastructure to the DES."[75]

• [128] According to Mr Cash, following that discussion with Mr Sparks, he formed the opinion that in the absence of the Jadar Sale there was no other viable option for the Texas mine and once the tenements had been disclaimed by the liquidator, there was likely to be no recovery for the creditors of Moreton Resources. He states:

"For these reasons, I was clearly supportive of the Jadar Sale as, in my opinion, it represented the only viable option for a distribution to creditors."[76]

• [129] This evidence suggests that Mr Cash formed his opinion after speaking to Mr Sparks on or about 3 September 2020. The evidence does not support a finding that Mr Cash communicated this opinion to Mr Sparks on or about 3 September 2020. Further, Mr Cash's evidence in his first affidavit is prima facie inconsistent with Mr Sparks' evidence.[77] According to Mr Sparks, he had a telephone conversation with Mr Cash on 28 July 2020. In the course of this conversation, he advised Mr Cash about the terms of the Jadar Offer and noted that without further funding, the liquidators would have no alternative but to disclaim the mining tenements held by Moreton Resources and its subsidiaries. According to Mr Sparks, in the course of this conversation, Mr Cash advised him that:

(a) First Samuel agreed that disclaiming the mining tenements was the only appropriate option open to the liquidators if further funding for care and maintenance expenses could not be arranged; and

(b) the Jadar Offer appeared to be the only viable option to potentially recover any of the funding provided by First Samuel under the Administration Funding Deed and to cover ongoing care and maintenance expenses.

• [130] In his second affidavit, Mr Cash sought to clarify the apparent discrepancy between paragraphs 23 and 24 of his first affidavit and paragraphs 72 and 73 of Mr Sparks' first affidavit.[78] Mr Cash's explanation is as follows:

"4. To the best of my recollection, the conversation referred to in paragraphs 72 and 73 of Grant Spark's First Affidavit relate to the Third Applicant and Jadar entering into the Heads of Agreement. By that conversation, Mr Sparks confirmed with me that:

(a) he had received an offer from Jadar and he gave me a few high level details of the offer;

(b) in the absence of the Jadar Offer, the Liquidator was going to disclaim the tenements by the end of July; and

(c) The Liquidator intended entering into the Heads of Agreement with Jadar and in response I proffered the view that the I thought the offer was reasonable and that I supported the Liquidator selling to Jadar.

1. The conversation referred to in paragraphs 23 and 24 of my first affidavit was a subsequent conversation to that referred to in paragraph 4. At the time of the 3 September 2020 conversation, I had received correspondence from the solicitors for Jadar indicating that they would be taking action to enforce the sale. As a consequence of receiving that correspondence, I telephoned Grant Sparks, discussed the correspondence from Jadar's solicitors and enquired about the status of the sale to Jadar."

• [131] I accept the submission of Mr Thompson QC for the second, third and fifth respondents that Mr Cash's recollection of his conversations with Mr Sparks constitutes an unsatisfactory evidentiary basis for the Court to find that First Samuel actually "assented" to the sale by the liquidators to Jadar.[79] A further difficulty with accepting that proposition is that Mr Feitelson, by his solicitors (as set out in [42] above), sent a letter dated 27 July 2020 to the liquidators which asserted that First Samuel held certain security as trustee for the benefit of Mr Feitelson and Mr Elks and that they asserted (and would direct the Security Trustee to assert) rights of security over the assets and did not intend to direct the Security Trustee to relinquish its security in relation to any other sale.
• [132] Secondly, the applicants' submission that the liquidators informed representatives of Jadar that First Samuel was assenting to the sale relies on evidence which is inadmissible. The applicants rely on two affidavits from persons representing the Jadar interest. The first is an affidavit of Harry Michael Spindler. Mr Spindler is a chartered accountant and employed as a Corporate Manager with the Indian Ocean Consulting Group Pty Ltd. In that role, he undertakes corporate consultancy services for Jadar and Jadar Silver. In carrying out this work, he often takes instructions from Mr Adrian Paul, who is the Executive Director of Jadar. Mr Spindler had a number of telephone conversations on or about 23 and 24 July 2020 with Mr Sean Holmes, who is employed as a director by Deloitte, concerning the Jadar Sale. On 24 July 2020, Mr Spindler had a conversation with Mr Paul in which Mr Paul stated that he wanted to make sure that the liquidators and any relevant secured creditors would consent to the proposed transaction. Mr Spindler thereafter rang Mr Holmes who stated: "There is one relevant secured creditor called First Samuel Pty Ltd. It is a trustee. We have spoken with it a few times. Yes, it is supportive of the transaction." According to Mr Spindler, he informed Mr Paul of his conversation with Mr Holmes to this effect. Mr Paul has also sworn an affidavit on 20 October 2020 where (at paragraph 19) he affirms this conversation with Mr Spindler.
• [133] Mr Thompson QC objects to the affidavits of Mr Spindler and Mr Paul on two bases, namely relevance and hearsay. Neither Jadar nor Jadar Silver are parties to the present application. Neither the points of claim nor points of defence raise any priority issue as between Jadar and any secured creditor. As Jadar and Jadar Silver are not parties to the present application, the evidence of any conversations between Mr Spindler and Mr Holmes constitutes inadmissible hearsay.

"... not only have liquidators relied upon the secured creditor, not only has the first and second applicants relied on the creditor, but also, so has the prospective purchaser ... "[81]

• [135] If the evidence is relied on for the purpose identified by Ms Downes QC, it follows that it is being relied on as to the truth of its contents. I uphold the objection of the second, third and fifth respondents both on the basis of relevance and hearsay.
• [136] Even if the evidence was admissible and representatives of Jadar had been informed that First Samuel assented to the Jadar Sale, such a belief being held by the liquidators and Jadar is prima facie inconsistent with the evidence set out in [42] to [47] and in [52] to [63] above.
• [137] Thirdly, in exercising the discretion under s 99(2), the Court must have regard to the interests of all concerned including the interest of the debenture holders and in particular Mr Feitelson, the Majority Beneficiary. Although the Secured Debenture Deed created the Debenture Security in favour of First Samuel (as Security Trustee),[82] that Deed is made subject to the Security Trust Deed.[83] By cl 2.1 of the Security Trust Deed, it is declared that the Security Trustee, as at the time of execution of the document, holds the sum of $10 and after execution of the document, will hold the rest of the Security Trust Fund on trust for the beneficiaries on the terms of the deed. Security Trust Fund is defined to mean the amount held by the Security Trustee under cl 2.1 as well as the Security Trustee's right, title and interest under the securities and each other Transaction Document. I accept the submissions of the second, third and fifth respondents that the Security Trust Deed creates a fixed trust by which the debenture holders are entitled to receive rateable distributions of money in accordance with their proportion of debentures.[84] Accordingly, as submitted by Mr Thompson QC, as a beneficiary under the Security Trust Deed, Mr Feitelson has a beneficial proprietary interest in the Debenture Security which renders him, at least in equity, a secured creditor.[85] Further, as the Majority Beneficiary, Mr Feitelson has validly, in my view, appointed the fifth respondents as receivers of MRV Metals.
• [138] Mr Feitelson and A & J Consultancy are the holders of 66% of the value of the debentures under the Secured Debenture Deed. First Samuel has given notice of its resignation as the Security Trustee which takes effect on either 28 or 29 October 2020. Under the Security Trust Deed, Mr Feitelson as the Majority Beneficiary has the right to appoint a new Security Trustee. On 16 October 2020, he exercised that power and appointed Melgear as successor Security Trustee. Mr Feitelson as the Majority Beneficiary has, as submitted by Mr Thompson QC, exhibited the requisite intention to enforce the security by the directions he has given to First Samuel as Security Trustee. He has instructed First Samuel to lodge caveats and to appoint receivers and has lodged caveats himself. First Samuel lodged caveats over MRV Metals' tenements on 18 August 2020, well before the Jadar Sale Agreement was executed. These steps taken by Mr Feitelson in the context of the degree of control he enjoys over the Security Trustee, together with his position as a beneficial owner of the Debenture Security, justifies this Court placing weight upon his intention as a secured creditor when exercising the discretion under s 99(2).

1. The amended originating application filed 21 October 2020 is dismissed.

[1] Points of Claim para 1; Points of Defence para 1.

[2] Points of Claim para 2; Points of Defence para 1.

[3] Points of Claim para 3; Points of Defence para 1.

[4] Points of Claim para 4; Points of Defence para 2.

[5] Points of Claim para 5; Points of Defence para 3(a).

[6] Points of Claim para 6; Points of Defence para 4(a).

[7] Points of Claim para 7; Points of Defence para 5(a).

[8] Points of Claim para 8; Points of Defence para 6.

[9] Points of Claim para 9; Points of Defence para 7(a).

[10] Points of Claim para 10; Points of Defence para 7(a).

[11] Section 436A of the Corporations Act 2001 (Cth) gives company directors the power to appoint an administrator under certain circumstances.

[12] Points of Claim paras 11, 12 and 13; Points of Defence paras 8 and 9(a).

[13] Points of Claim para 49; Points of Defence para 54.

[15] Points of Claim para 50; Points of Defence para 54.

[17] Points of Claim para 51; Points of Defence para 66.

[20] Affidavit of Brett Andrew Plant filed by leave on 21 October 2020.

[28] T 1-17, lines 38-46; T 1-18, lines 4-11.

[30] Affidavit of Philip Anthony Feitelson sworn 29 September 2020, para 62.

[31] Australian Special Opportunity Fund LP v Equity Trustees Wealth Services Ltd [2015] NSWCA 225; (2015) 323 ALR 570, [67] (Bathurst CJ, Macfarlan and Emmett JJA agreeing); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, [47] (French CJ, Nettle and Gordon JJ).

[33] See [70], [72] and [73] above.

[34] Applicants' Outline of Submissions, para 43.

[37] Security Trust Deed, cl 4.2(c) and (d).

[39] Second, Third and Fifth Respondents' Submissions, para 67.

[40] (1985) 1 NSWLR 601.

[41] CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601 per Mahoney JA at [615]-[616].

[42] Clause 3.3 of the Security Trust Deed.

[43] (1989) Q Conv R 54-311.

[44] Sandgate Corporation Pty Ltd (in liq) v Ionnou Nominees Pty Ltd [2000] WASC 91; (2000) 22 WAR 172 at 182-185.

[45] Acts Interpretation Act 1954 (Qld) s 36, sch 1.

[46] [2010] QCA 246.

[47] Hanson Construction Materials Pty Ltd v Davey [2010] QCA 246, [56].

[48] [2000] QSC 146; [2001] 1 Qd R 570.

[49] [2001] QSC 390.

[50] Worrell v Issitch [2000] QSC 146; [2001] 1 Qd R 570, [9].

[51] Phillips v Hogg [2001] QSC 390, [13].

[52] Phillips v Hogg [2001] QSC 390, [15].

[53] Second, Third and Fifth Respondents' Submissions, para 37.

[54] Second, Third and Fifth Respondents' Submissions, para 38.

[55] [2016] 1 Qd R 379.

[56] [1996] EWCA Civ 780; [1997] 1 WLR 1558.

[57] [1993] Ch 330.

[58] The equivalent to s 99(2) of the PLA.

[59] Cheltenham and Gloucester Plc v Krausz [1996] EWCA Civ 780; [1997] 1 WLR 1558, 1567.

[60] Cheltenham and Gloucester Plc v Krausz [1996] EWCA Civ 780; [1997] 1 WLR 1558, 1567-1568.

[61] 7th Edition, Thomson Reuters, 2017, [11.1340].

[62] [2010] EWHC 1097, [24].

[63] See also Sandgate Corporation Pty Ltd (in liq) v Ionnou Nominees Pty Ltd [2000] WASC 91; (2000) 22 WAR 172, [76], [81] and [83].

[64] [1999] NSWSC 97; (1999) 9 BPR 17,061, [5]-[6] and [37].

[65] Asset Core Pty Ltd v Jarrett 1 Enterprises Pty Ltd [2016] 1 Qd R 379, [19].

[66] [2000] NSWSC 1094, [229].

[68] Applicant's Outline of Submissions, para 74(g).

[69] Applicant's Outline of Submissions, para 74(h).

[70] Applicant's Outline of Submissions, paras 32, 74(m).

[71] Applicant's Outline of Submissions, para 74(u).

[72] Applicant's Outline of Submissions, para 74(v) and 74(y); Affidavit of Sean Cash filed 1 October 2020, para 43.

[74] Affidavit of Sean Cash filed 1 October 2020, para 23.

[75] Affidavit of Sean Cash filed 1 October 2020, paras 24 and 26.

[76] Affidavit of Sean Cash filed 1 October 2020, para 27.

[77] Affidavit of Grant Dene Sparks filed 21 September 2020, paras 72 and 73.

[78] Affidavit of Sean Cash sworn 20 October 2020.

[80] T1-12, lines 14-25 and T1-13, lines 5-6.

[82] Secured Debenture Deed, cl 10.2(a).

[83] Clause 11.1(a) of the Secured Debenture Deed.

[84] Clause 8.3(d) of the Security Trust Deed.

[86] Affidavit of Philip Anthony Feitelson sworn 20 October 2020, para 5.

[92] Applicant's Outline of Submissions, para 74(r).

[94] Second, Third and Fifth Respondents' Submissions, para 41(e).

[95] Section 99(2) and (4) of the PLA, Asset Core at [24], Palk at [335]-336] and [342] and Brewer v Square [1892] UKLawRpCh 39; [1892] 2 Ch 111 at 115; Second, Third and Fifth Respondents' Submissions, para 42.