Sudojo Consulting Pty Ltd v Africa Pacific Capital Pty Ltd

Supreme Court of NSW|2008-04-24|Before: Einstein J

CITATION : Sudojo Consulting Pty Ltd v Africa Pacific Capital Pty Ltd [2008] NSWSC 353

HEARING DATE(S) : 7/04/08, 8/04/08, 9/04/08, 10/04/08

JURISDICTION : Equity Division Commercial List

CATCHWORDS : Contract - Plaintiff and defendant agreed that they were parties to a consultancy agreement but disagree as to the precise terms - Letter/email later sent by plaintiff purporting to summarise terms agreed upon and seeking signature but never signed on behalf of defendant - Proceedings exemplify difficulties of pressing too far, the classical theory of contract formation based upon offer and acceptance in certain circumstances - Proceedings represent an example of a case where it is necessary to look at the whole of the relationship and not only at what was said and done when the relationship was first formed, it being the case that in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled.

Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343 CASES CITED : Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14,551 Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Australia) Pty Ltd (1988) 5 BPR 11,110 Masters v Cameron (1954) 91 CLR 353 Pobije Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105 Raguz v Sullivan (2000) 50 NSWLR 236 Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 Ryan (Receiver & Manager of Homfray Carpets Australia Pty Ltd) v Textile Clothing & Footwear Union of Australia [1996] 2 VR 235 Sinclair Scott and Co Ltd v Naughton (1929) 43 CLR 310

TEXTS CITED : S Williston, WHE Jaeger, Williston on Contracts, 3rd Ed, (1957) Baker, Voorhuis

PARTIES : Sudojo Consulting Pty Ltd (Plaintiff) Africa Pacific Capital Pty Ltd (Defendant)

COUNSEL : Mr M Elliott (Plaintiff) Mr D Studdy (Defendant)

SOLICITORS : Horton Rhodes (Plaintiff) Stanford Lawyers (Defendant)

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

50022/07 Sudojo Consulting Pty Ltd v Africa Pacific Capital Pty Ltd JUDGMENT The proceedings 1 The proceedings concern the terms of a retainer by the defendant ("APC") of the investment banking services of the plaintiff ("Sudojo"). 2 Sudojo and APC were parties to a consultancy agreement pursuant to which Sudojo provided consultancy services to APC. 3 The consultancy agreement terminated with effect from 1 November 2006. 4 Sudojo claims that under its terms (recorded in a letter misdated 1 December 2006 [Ex PX 74]), Sudojo on termination became entitled to receive certain payments and/or shares.

5 Sudojo claims orders for the specific performance by APC of its obligations under the consultancy agreement, or alternatively for damages for APC's breach of those obligations. 6 It has been agreed between the parties that if Sudojo satisfies the Court that there existed a contract between the parties giving it an entitlement to the shares the subject of its claim, APC will transfer or cause to be transferred those shares to Sudojo.

7 In that eventuality, in respect of Sudojo's claim for relief, there will remain only its claim for payment of a sum equal to 20% of the net profits of APC's business in the relevant period. The essential issues 8 The issues are:

i. What was the nature of the plaintiff's engagement by the defendant?

ii. What were the terms of the plaintiff's engagement by the defendant?

iii. What was the remuneration the plaintiff was to receive for providing services to the defendant?

iv. Was it a term of the plaintiff's engagement that it would receive Profit Share Remuneration, as alleged? Background 9 Afro Pacific Capital Ltd (formerly called Doyle Capital Ltd), was a company in respect of which Mr Doyle and Mr Turner were at all relevant times shareholders and controllers. Mr Doyle and Mr Turner were also directors and shareholders of APC. 10 APC provides management services to mining companies in which it (or by virtue of matters of history, Afro Pacific Capital Ltd) holds shares. 11 While APC receives relatively modest income in the form of fees for services provided, its primary asset and source of profit are the shares it holds in the mining companies it provides services to. The primary revenue generated by it from its affairs takes the form of the receipt by it of funds following the sale by it of those shares. The primary issue to be determined 12 The primary issue in dispute is whether Sudojo and APC were parties to a consulting agreement on the terms alleged by Sudojo. 13 Sudojo contends that the parties reached an agreement under which it would receive a base remuneration of $160,000 per annum, plus 20% of the net profits of the business (which would include, in the event of termination of the agreement, an entitlement to 20% of the shares held by APC or its related entities in the mining companies to whom APC provided services). 14 APC, on the other hand, contends that no such agreement was reached, and instead the parties agreed that Sudojo would be paid $160,000 and may be entitled to a discretionary bonus. Overview of Sudojo's case 15 Sudojo's case is broadly as follows:

i. Sudojo is Mr Jowell's company, and is the company through which Mr Jowell's services were provided to APC.

ii. In 2004 and 2005 Mr Jowell was employed by International Ferro Metals Ltd ("IFM"). IFM was a mining company and an investment of Afro Pacific Capital Ltd: hence Mr Doyle and Mr Turner were intimately involved in its affairs. Mr Jowell was employed by IFM as a corporate manager to assist with the promotion of IFM, which it was anticipated would culminate in a listing of IFM's shares on an exchange in the United Kingdom.

iii. It was expressly agreed between Mr Jowell, Mr Doyle and Mr Turner that Mr Jowell would not be employed by IFM on a mere salaried basis. During the contract negotiations Mr Jowell made it clear that he was someone who was only prepared to work on what he described as an " entrepreneurial basis ". Mr Turner and Mr Doyle made it clear this was what they wanted too, and that there was the potential for more work for Mr Jowell within the Doyle group after IFM listed.

iv. Following the listing of IFM in September 2005, Mr Jowell was invited to work for APC. The terms upon which that invitation came forward comprise a critical issue in the proceedings. The terms of the alleged agreement 16 The letter purportedly recording the terms of the agreement between the parties expressly provided that:

i. APC would pay Sudojo 20% of the net profits of APC;

ii. net profits would be calculated by only including reasonable costs and expenses in running the business;

iii. profits would include the final turning to account of shares and other securities acquired by APC without consideration, including the shares held in Impact and Afro Pacific Capital Limited's shares in American Southwest;

iv. should the agreement be terminated prior to the securities being turned to account, APC would either pay the value of the profit share based on its fair as at the date of termination, or have securities to that value transferred to Sudojo. Sudojo's essential contention 17 Sudojo's essential contention is that what the parties agreed through their communications of late 2005 and early 2006, and what emerges on the proper construction of the letter, was that in the event of termination of the agreement:

i. APC would pay a dollar sum in respect of 20% of the actual net profits earned by it during the period up to termination; and

ii. to the extent the Impact and American Southwest shares (and possibly other shares) had not been turned to account, APC would either transfer 20% of each share parcel to Sudojo (or in the case of American Southwest shares, cause Africa Pacific Capital Ltd to transfer those shares), or pay an amount equal to the fair value of those shares as at the date of termination. Relief sought 18 Sudojo claims that APC breached the claimed agreement. Its case is that:

i. As at the date of termination APC held 24 million shares in Impact and Africa Pacific Capital Ltd held 15 million shares in American Southwest. Impact has been renamed Platinum Mining Ventures and is referred to hereafter as " Platinum ".

ii. APC breached the agreement by failing to pay any sum or ensuring any of those shares were transferred to Sudojo following termination of the agreement on 1 November 2006. APC's case 19 APC's case is that the terms of the retainer and basis upon which the plaintiff would be remunerated were the basis of an oral agreement said to have been concluded by Mr Doyle on behalf of the defendant and Mr Jowell on behalf of the plaintiff. [Mr Doyle's evidence placed the agreement at 17 January 2006: Exhibit D5 paragraph 54] The principles 20 Plainly each of the parties accepts that a binding contractual arrangement was entered into in or about mid January 2006: that which divides the parties being what were the precise terms of that contractual arrangement. Hence insofar as the well-known principles expounded in Masters v Cameron (1954) 91 CLR 353 in part deal with the determination of whether or not the terms of agreement were intended to have, and therefore did or did not have, any binding effect of their own, the class of case presently before the court only raises the question of what were the terms of that agreement. Nonetheless, even in determining the terms of such agreement as was reached, it is appropriate to recall the classes for which Masters v Cameron is now accepted as authority and to note some of the observations made in the general authorities on matters germane to the issues raised in the instant proceedings:

i. It is useful to recall the three classes for which the decision of the High Court is authority. The passage in question at 360 is in the following terms: "Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.

In the each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution...

Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own..."… ii. In Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 McClelland J by reference to Sinclair Scott and Co Ltd v Naughton (1929) 43 CLR 310 referred to a fourth class in terms of Masters v Cameron, namely the situation where the parties were content to be bound immediately and exclusively by the terms which they had agreed upon, whilst expecting to make a further contract in substitution for the first contract containing, by consent, additional terms…

iii. In Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Mahoney J A (at 326) identified three questions which it is often useful to consider in such a context as the present, namely "....did the parties arrive at a consensus?; (if they did) was it such a consensus as was capable of forming a binding contract?; and (if it was) did the parties intend that the consensus at which they arrived should constitute a binding contract?"… Admissibility

iv. In Brambles Holdings Ltd v Bathurst City Council (Unreported, 2001, NSWCA, Mason P, Heydon JA and Ipp AJA) case, Heydon JA set out succinctly the conventional and accepted principles of the law of contract: "The first relevant principle of law is that pre-contractual conduct is only admissible on questions of construction if the contract is ambiguous and if the pre-contractual conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347-352.

The second relevant principle is that post-contractual conduct is admissible on the question of whether a contract was formed: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 77; Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 668, 669 and 672; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 [97011] at 9149 and 9154-9156; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 [97023] at 9255.

The third relevant principle is that post-contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed. As explained by Priestley JA (Meagher JA agreeing) in Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 326-330, the status of the relevant High Court authorities is unclear: hence unless it is demonstrated that the later decisions of the Victorian Full Court and Court of Appeal against admissibility, Ryan v Textile Clothing & Footwear Union of Australia [1996] 2 VR 235 and FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343, are clearly wrong or they are overruled, they should be followed in New South Wales. No attempt was made to demonstrate that they are clearly wrong.

The fourth relevant principle is that the construction of a contract is an objective question for the court, and the subjective beliefs of the parties are generally irrelevant in the absence of any argument that a decree of rectification should be ordered or an estoppel by convention found."

Objective intent v. Hence in determining the circumstances surrounding the formation of the agreement, the matrix of facts, it is the objective intent that is paramount. Whether any relevant individual representative thought that an agreement existed or that it did not exist, is irrelevant to the exercise unless there exists an argument concerning estoppel. As Lord Wilberforce has said: "When one speaks of the intention of the parties to the contract one speaks objectively - the parties cannot themselves give direct evidence of what their intention was - and what must be ascertained is what is to be taken as the intention which reasonable people would have had if placed in the situation of the parties." [ Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989]

vi. Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1907) 5 CLR 647; Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-549; Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) and Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 are also authorities supporting the proposition that in ascertaining the relevant intention, that is the intention to contract, relevant circumstances may include prior negotiation and subsequent conduct.

vii. A fundamental question falling for consideration is whether the conduct of the parties viewed in the light of surrounding circumstances shows or is indicative of an agreement having come into existence. "In an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at any particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal; rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed." [Per McHugh JA in Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Australia) Pty Ltd (unreported, NSWCA, McHugh, Mahoney and Hope JJA, 23 December 1988); see also Raguz v Sullivan (2000) 50 NSWLR 236 at 251] viii. To similar effect the Court in Brambles Holdings (supra) adverted to the "difficulties" of pressing too far the classical theory of contract formation based upon offer and acceptance (see also Pobije Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105 per Mason P at para1). Heydon JA said in that case, whilst considering the principles of the law of contract that: "Offer and acceptance analysis does not work well in various circumstances." [at para71]

ix. Questions of the relevance and probative value of evidence in circumstances in which the issue concerned whether or not an enforceable contract had been entered into were also before the court in Film Bars Pty Ltd v Pacific Film Laboratories (1979) BPR 9251 [97023]. As McClelland J put it, such questions cannot properly be considered independently of a consideration of the relevant issue namely what it is, in point of fact, that constitutes the making of a contract in circumstances such as here obtained. As his Honour points out, such a contract is made "by the mutual communication between the parties of their respective assents to being bound by identifiable terms otherwise capable of having contractual force, the mutual communication typically taking the form of offer and acceptance". As his Honour (citing Williston on Contracts, 3rd ed, Vol 1 para 21) points out, one is not concerned with the subjective thing known as meeting of the minds, but the objective thing, the manifestation of mutual assents which is essential to the making of a contract. [At p9254]…

x. I have approached evidentiary issues during the hearing in precisely the way in which McClelland J approached the issues in Film Bars . In short subsequent communications may have probative value depending upon the light they throw on the proper interpretation of earlier communications alleged to constitute the contract. Post contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed.

xi. Subsequent communications can also legitimately be used against a party as an admission by conduct, of the existence or non-existence, as the case may be, of a subsisting contract. The evidence concerning the terms of Mr Jowell's retainer with IMF 21 There is significance in following the circumstances in which Mr Jowell was interviewed in June 2004 for the position at IFM.

i. His first interview was with Mr Doyle and the finding is that their conversation was to the following effect: Mr Jowell: Although I am interested in the project and the role you are offering, I am not particularly interested in joining a business purely as a salaried employee. Any role I accept would have to allow me to participate in the entrepreneurial rewards of the business.

Mr Doyle: DCL is an entrepreneurial business; we look forward to having you join us on an entrepreneurial basis. Stephen Turner will discuss your pay with you as he is a Director of IFM and I am not. You should understand that although your contract will be with IFM, you will also be working on projects controlled by DCL. As such, you will be able to participate in the growth of the group. (emphasis added)

ii. Shortly after that initial meeting, Mr Jowell met with Mr Turner. Their conversation was in the following terms [Ex P1 para 7]: Mr Turner: If you were to accept the job, what salary would you expect?

Mr Jowell: As I explained to Alan, although I am interested in the project and the role you are offering, I am not particularly interested in joining a business as a purely salaried employee. I am looking to participate in the equity growth of the business. Any role I accept would have to allow me to participate in the entrepreneurial rewards of the business.

Mr Turner: I understand that, and that entrepreneurial spirit is exactly what we are looking for particularly when it comes to the Doyle Capital projects; but you have to appreciate that the IFM project, which will be your main focus initially, is fairly advanced and the equity opportunities are limited. What we can discuss is a salary sacrifice in return for a larger bonus. What do you think about that? Mr Jowell: That could work, it all depends on the numbers.

Mr Turner: What salary would you expect without a salary sacrifice?

Mr Jowell: Well, I have friends working in financial businesses, private equity, and their base salary is $240,000 per year, and bonuses have been anything from 75% plus.

Mr Turner: That's a lot of money. What I propose is that we pay you $120,000 but we will guarantee that, if the project is successful your minimum bonus will be 100% of salary. We will then pay you an additional bonus on top of that which will take into account the risk you took with the salary sacrifice. We need to be careful though, in order to keep your contract in line with the contracts of other employees, we will need to record the bonus as discretionary. How does that sound?

Mr Jowell: I would rather the bonus was defined; however I do understand the difficulties it could present internally.

Mr Turner: Thank you. Alan and I hope you will join us. Aside from IFM we have a number of other exciting projects that we are working on and look forward to your involvement on them. As they are in earlier stages we will be able to include you in the equity upside more directly.

Mr Jowell: It sounds exciting, and a real opportunity. (emphasis added)

iii. In more specific terms the circumstances in which Mr Jowell was retained and the variations in that respect are as follows:

a) He was employed by IFM in July 2004 as "Manager - Corporate" on terms which gave him a base salary of $120,000 per annum and, in the event IFM listed by 31 March 2005, a bonus of 100% of salary paid to date [PX p26].

b) About a year later his package was reviewed. The IFM listing had not yet occurred. By that time both Mr Doyle and Mr Turner had had the opportunity to see Mr Jowell at work.

c) In particular, in early June 2005 Mr Jowell met with Mr Turner and Mr Doyle in Mr Turner's office to discuss his package with IFM. He told them that if they were not prepared to guarantee him a bonus he needed to be paid a market related wage. He asked for $240,000 and produced a survey of wages from the Australian Financial Review to support his claim. As Sudojo contended, Mr Turner could not deny that such a wage survey was shown to him at this meeting [T141.33]. Mr Doyle, who was standing in one corner of the room, said to Mr Turner " he has a point" . [Ex P1 para 38]

d) Following this meeting, and by letter of 8 June 2005, Mr Jowell's package was varied so that he received a salary of $240,000 per annum and confirmation that his performance bonus of $100,000 would be paid immediately following the IFM listing [PX 42]. iv. Mr Jowell remained on this package until the IFM listing was completed and he began talking to Mr Doyle and Mr Turner about providing his services to another Doyle/Turner creation, namely the defendant APC. [I note that there is a reasonably extensive section of the reasons below which examines the evidence given on behalf of APC as to the IFM period. That evidence together with a number of other items of evidence later discussed in the reasons becomes very important in terms of the assessment of the reliability of the evidence given on behalf of APC.] 22 The significance of the contextual material concerning the approaches made to Mr Jowell in relation to IFM inheres in the fact that it was acknowledged and understood between Mr Doyle, Mr Turner and Mr Jowell, from the very inception of their relationship, that:

a) Mr Jowell had no interest in working as a salaried employee;

b) Mr Jowell would only work on the basis that he received a share of the entrepreneurial rewards of the business he provided services to;

c) Mr Turner and Mr Doyle were prepared to employ him on such a basis, both in respect of IFM in the immediate future and other Doyle Capital projects after that;

d) those future projects would not be as advanced as the IFM project was when the parties met, and as such Mr Jowell would be included in the equity upside of those projects. The evidence concerning the terms of Sudojo's consultancy 23 The particular evidence concerning the sundry discussions and the documents which led to Sudojo's consultancy lies at the core of the case. There were a number of disparate stages which require to be considered.

i. After IFM's listing in about September 2005, Mr Jowell, Mr Doyle and Mr Turner began to discuss with each other how Mr Jowell's services could be applied within the Doyle/Turner empire post-IFM.

ii. Both Mr Turner and Mr Doyle wanted to continue to use Mr Jowell's services on other matters in the Doyle group [T148.21] [T215.5].

iii. Up to September 2005 Doyle Capital had been providing services to mining enterprises, including American Southwest (and its operating subsidiaries, Metal Sands) and Impact [T148.35-44]. Mr Jowell had already been involved in the provision of services in respect of American Southwest [eg Ex P8].

iv. In return for those services Doyle Capital received management fees in some cases, and also took shares in the companies they were providing services to, including Impact and American Southwest.

v. By October 2005 Mr Turner and Mr Doyle were taking steps to establish APC to provide the services previously provided by Doyle Capital, and they wanted to retain Mr Jowell to work on those matters [T152.6].

vi. However it was recognised by all concerned that the day to day cash flows generated by that line of business to be conducted by APC would mean that APC could not afford to pay Mr Jowell the salary of $240,000 he had received from IFM [T151.39-49] [T216.10].

vii. The position was, therefore, that APC wanted Mr Jowell's services but could not afford to pay $240,000 per annum for them.

viii. Mr Doyle himself recognised in the witness box the difficulty of the position [T216.20]: Q: The position as at October 2005 was that you wanted to retain Mr Jowell's services for APC but APC could not afford to pay Mr Jowell what he had been paid by IFM, correct?

A: That's correct ix. This position was recognised by Mr Turner in the following exchange during cross-examination [T152.15]: Q: So you had a problem, didn't you?

x. The finding is that against this background, Mr Turner approached Mr Jowell about the possibility of working for APC [T153.51]. xi. Mr Jowell's evidence of that conversation which is accepted as reliable, was in the following terms [P1 para 20]: Mr Turner: Because of its successful listing on the stock exchange, IFM doesn't need your services. It will pay you a redundancy and then Alan and I would like to bring you into APC so you can continue to work on Impact, ASW and other mining deals. We will still contract you out to IFM on an ad-hoc basis when necessary.

Mr Jowell: I understand I'm not needed anymore at IFM. However, if I'm going to come across to APC, we would need to work out the details. I'm concerned that APC will have a monthly cashflow problem. It takes a long time to turn the free carry investments into cash. If I'm going to come to APC, I would be looking for an equity position in APC.

Mr Turner: I agree, this is the only way it could work. xii. In his statement Mr Turner denied inviting Mr Jowell to joint APC [D1 para 48], and said instead that he said to Mr Jowell "Now that IFM is listed, the project has come to an end and there is no ongoing role for you. You need to talk to Alan Doyle about working for Afro Pacific" [D1 para 47].

xiii. He gave inconsistent evidence in the witness box. Mr Turner's evidence in the witness box bore close resemblance to that given by Mr Jowell. Remarkably having regard to the terms of his witness statement, Mr Turner was not able to deny any of what Mr Jowell said. xiv. Again, adopting Mr Jowell's account, the following underlined portions were agreed by Mr Turner, and the parts in italics were parts of the conversation he did not deny [T154.1-54]: Mr Turner: Because of its successful listing on the stock exchange, IFM doesn't need your services. It will pay you a redundancy and then Alan and I would like to bring you into APC so you can continue to work on Impact, ASW and other mining deals. We will still contract you out to IFM on an ad-hoc basis when necessary.

Mr Turner: I agree, this is the only way it could work.

xv. The fact that Mr Turner was not able to deny that he said to Mr Jowell that Mr Jowell taking an equity position was the only way it could work is I accept, a powerful indicator that, in fact, this is the basis upon which the parties continued to deal with each other. As Sudojo has contended, if taking an equity position was so untenable, as Mr Turner and Mr Doyle later claimed, Mr Turner would surely have denied having said such a thing. xvi. As Sudojo contended, it is not surprising that Mr Turner was so easily prised from the version of the conversation set out in his witness statement. In his statement, he attempted to create the impression that Mr Jowell's retainer was really a matter just for Mr Doyle and so he did no more than refer Mr Jowell to Mr Doyle. Mr Turner's proposition that being a minority shareholder such matters were left out of his hands is rejected as unreliable. Mr Doyle and Mr Turner had been long standing business partners with a close personal relationship who had worked hand in glove at Doyle Capital for many years, and their equity split in APC was 51-49 [T147.20-38].

xvii. In his statement Mr Turner then said that after he had an initial discussion with Mr Jowell about the possibility of working for APC, Mr Jowell came back to him and said " I still haven't been able to talk to Alan about my remuneration. We have agreed a salary, but Alan is insisting that any bonus would be at his sole discretion" [D1 para 53]. As Sudojo contended, in the context of its placement in Mr Turner's affidavit, the reader was left with the clear impression that this further conversation took place after the October 2005 meeting and before the 21 December 2005 meeting.

xviii. The finding is that in fact there was no such conversation at the time, a fact Mr Turner ultimately conceded without being able to offer any satisfactory explanation for the placement of this paragraph of his statement [T161.34-24]. Mr Turner's witness statement on this topic was inconsistent with both Mr Doyle and Mr Jowell's version of what was happening at the time.

21 December 2005 meeting xix. By December 2005 the parties were trying to solve the common problem that existed between them. Mr Doyle and Mr Turner wanted Mr Jowell's services for APC, but APC's finances did not permit payment of the $240,000 salary that Mr Jowell had received from IFM. The solution, if there was to be one, lay in the provision of a satisfactory profit share or bonus for Mr Jowell.

xx. The parties met to discuss this matter on 21 December 2007. Mr Jowell's evidence about the 21 December 2005 meeting xxi. Mr Jowell's evidence of that meeting is as follows [P1 para 24]. Mr Doyle: APC is going to be our investment vehicle going forward.

Mr Turner: Yes, we have taken advice that because Afro Pacific has the financial services licence we really shouldn't be holding investments in that company.

Mr Jowell: What does that mean for investments subsidiaries like Impact and holdings like American Southwest?

Mr Turner: Basically we will be moving everything across. Alan and I are the majority shareholders so unless it creates a tax problem, there really shouldn't be an issue.

Mr Jowell: Except for that shares in ASW are restricted and may not be transferred for the time being.

Mr Turner: Of course. We will probably bring them across in due course. And IFM is excluded as well.

Mr Jowell: Ok, that's the existing projects. What about the future?

Mr Doyle: For a start, the plan is to develop Impact with GAU, and ASW which you already are working. We will also be looking for more projects in South Africa. I really want to build the assets in APC into something significant.

Mr Turner: We should be able to do really well. IFM was a landmark transaction and we should be able to leverage off its success both with the South African banks and with the London equity markets.

Mr Turner: We haven't worked that out yet. What do you suggest?

Mr Jowell: You know I want to be involved in the upside.

Mr Jowell: The issue is that APC is going to have a very lumpy cashflow - other than management fees and occasional cash raising fees, there isn't income or positive cash flow unless we sell off or list a project. That could take years - like IFM. So the important thing is that I have some protection. I can't take the risk that I work for "x" years and you fire me or my circumstances change just before a liquidity event.

At this meeting there was a high level discussion where some figures were tossed around. A salary range of $150,000 to $190,000 was mentioned, as was a profit share figure of 20%, although nobody has ever suggested that an agreement was reached on this occasion [T70.35].

Mr Turner's evidence about the 21 December 2005 meeting

xxii In Mr Turner's evidence in chief he explicitly denied Mr Jowell's version of events, and said instead that the conversation was to the following effect [D1 para 54]: Mr Jowell: "I need a salary of between $150,000.00 and $190,000.00 per annum as sufficient funds to live on. I understand you are not going to pay as high a salary as I need, so what do you think my bonus will be?"

Mr Doyle: "We pay a bonus if the funds are available. In this industry, as you know Alan, the majority of deals don't work and you have to off-set the losses of deals that don't work, against the deals that do, from which if there is a gain, a profit bonus could be paid. Alan, because of the nature of the business and the need to pay people and distribute shareholdings in project companies along the way, there is no set formula that can apply to a deal and the only way it can work is if, at the end of the transaction, or series of transactions, we review the overall outcome and any bonus that will be paid is then determined. Such determination will be solely by me."

Mr Jowell: "I think I should be entitled to 15% of the gross profit of the new transactions, or 20% of the profit, after salaries have been deducted".

Mr Doyle: "It just won't work. We don't know if we will ever be paid or how much we will be paid."

Mr Jowell: "We could do it on a cash receipts basis rather than an accrual basis that will include money owed".

Mr Turner: "It just won't work. You are asking for 15 or 20% of the profits and in any deal, there is not only Alan and I, but the rest of the team that need to share in the upside. At the moment, we have Alan and myself, Tony Grey, yourself, Dion Cohen, Trevor Jones, Steve Lui and people like Anthony Latimer who through introducing a deal, may be entitled to shares or payments.

Mr Jowell: "Let's think about it and we will discuss it again".

xxiii. Tellingly, Mr Turner's file note of this meeting [PX 60] makes no reference at all to an offer of a discretionary bonus. He did, however, record a discussion about a percentage profit share. This contemporaneous record is a useful indicator of the true "bottom line" of the parties' discussion to that point and the direction in which their negotiations were heading. I accept that if the notion of a profit share was so absurd, as Mr Doyle and Mr Turner pretend, Mr Turner would not have bothered recording it.

xxiv. Mr Turner's account of the 21 December 2005 conversation also has the difficulty that none of the people he identified as participants in any APC bonus pool were, at that time, employees of APC. One was a lawyer at Corrs Chambers Westgarth, and others had been involved in IFM. Mr Turner explained that they were all people who had been retained by Doyle Capital at some unidentified point in time [T162.33-163.16]. It is not disputed that Doyle Capital may have retained the services of solicitors and the like. But Mr Turner's suggestion that he would have said such people would need to be accommodated within an APC bonus pool is fanciful.

xxv. As Sudojo has contended, in cross-examination Mr Turner was not quite as dismissive of Mr Jowell's account of the 21 December 2005 meeting as he had been in his witness statement. Again adopting the part of Mr Jowell's account that was put to Mr Turner, the following underlined portions of that account was agreed to by Mr Turner in cross-examination [T155.1-27]: Mr Jowell: You know I want to be involved in the upside.

Mr Jowell: I would like to receive a profit share calculated on the top line profit based on revenue. I think this is the simplest form of remuneration as you both use the company for your personal expenses, spouse trips etc and I don't wish to become involved in that, as it is your affair. If my profit share was based on the bottom line, we would have to reverse all non-essential expenses relating to you out of the business. xxvi. Having regard to the above matters relating specifically to this conversation, to the differences between Mr Turner and Mr Doyle's evidence on the matter, and to the numerous matters identified throughout this affidavit with respect to Mr Turner's credit, Mr Turner's evidence in relation to the 21 December 2005 meeting is not regarded as reliable.

Mr Doyle's evidence about the 21 December 2005 meeting xxvii. According to Mr Doyle, when Mr Jowell asked for a profit share Mr Doyle said " any future ex gratia payment could be by a bonus scheme that would be at my discretion" , and Mr Jowell responded by stating " that's not satisfactory " [Ex D5 para 42]. xxviii. Even on Mr Doyle's version then, by 21 December 2005 he had no doubt that Mr Jowell would not agree to being remunerated by way of a smaller salary and a wholly discretionary bonus scheme. I accept that this is not surprising in circumstances where Mr Doyle and Mr Turner had then been paying him, through IFM, $240,000 plus a defined bonus.

xxix. Under cross-examination, and like Mr Turner had done, Mr Doyle either openly accepted or could not deny substantial portions of the conversation in the terms Mr Jowell had set out in his witness statement [T217-221]. As Sudojo has contended, there was no explanation as to why Mr Doyle did not indicate his assent to those portions of the conversation in his own witness statement.

xxx. I reject Mr Doyle's evidence that the parties had not discussed, in positive terms on 21 December 2005, a remuneration package for Mr Jowell that involved a salary sacrifice in return for a share of net profits.

xxxi. This is confirmed by the fact that Mr Doyle, on 28 December 2005, recorded in his diary note "S.L. … - share profit: APC AJ 20%...- Three way split after AJ 30%/70%" [Ex P6]. "S.L." was a reference to Steven Liu, a potential consultant for APC at the time. This note confirms that as at the end of December 2005 Mr Doyle was proceeding on the basis that Mr Jowell was going to get a 20% profit share.

xxxii. I reject the evidence given by Mr Doyle in re-examination in an attempt to explain this file note. He said it recorded what he was going to do with a deal called Transcol [T281.18]. As described later, that deal did not arise until mid 2006, and certainly the idea that Mr Jowell would take 20% of the options issued to APC in relation to that transaction was not raised by Mr Jowell or agreed to by Mr Doyle until mid 2006. Indeed, according to Mr Doyle, as at 28 December 2005 he and Mr Jowell were poles apart in terms of whether Mr Jowell would be retained by APC at all - let alone have some share in one particular deal.

xxxiii. The Court accepts as reliable Mr Jowell's evidence in relation to the meeting of 21 December 2005. The finding is that by the end of the meeting the parties had identified a profit share as a likely basis for compensating Mr Jowell for the proposed salary sacrifice and accommodating his essential requirement for a share in the upside of the business. 22 December 2005 email xxxiv. The very day after this meeting - 22 December 2005 - Mr Jowell sent Mr Doyle and Mr Turner an email attaching a document. The email stated " Attached hopefully summarises what we discussed yesterday" [PX 61].

xxxv. The attachment was headed " AJ's Profit Share Scheme" [PX 62].

xxxvi. The document began by noting that there were two alternatives - Mr Jowell receiving either a higher percentage of the net profits, or a lower percentage of the gross revenue. He suggested the latter was the better option, on the basis that it allowed Mr Doyle and Mr Turner to put whatever costs they saw fit through the business. I accept that this notation is entirely consistent with Mr Jowell's version of the 21 December 2005 meeting.

xxxvii. The document then proceeded to identify that profit share would be on fees, retainers and other income, and on profit from securities. In relation to securities, the document noted that Mr Jowell's profit share on those would be "payable on earlier of realisation…of securities or termination of AJ's employment for any reason" .

xxxviii. On the balance of probabilities it is extremely unlikely that on the very day after the parties met to discuss profit share, had Mr Doyle and Mr Turner dismissed it out of hand, Mr Jowell would send a profit share proposal document in these terms, under cover of an email stating that the document summarised what was discussed at that meeting.

xxxix. The finding is that the parties' discussion on 21 December 2005 was as Mr Jowell described and that the parties were beginning to move towards detailing a remuneration package that included a profit share.

xl. As Sudojo has contended, this is confirmed by the fact that, upon receipt of the profit share proposal document, neither Mr Doyle nor Mr Turner responded negatively to Mr Jowell. There is no email or conversation in which Mr Doyle or Mr Turner said to Mr Jowell " why did you send us this - this is the exact opposite to what we discussed!" . On the balance of probabilities the reason why there was no such communication was because the document came as no surprise to them having regard to what had been said on 21 December.

17 January 2006 meeting xli. Mr Jowell, Mr Doyle and Mr Turner met again on 17 January 2006.

xlii. The finding is that at this meeting it was again recognised by the parties that APC would not be able to pay Mr Jowell the $240,000 salary he had received for his services to IFM. $160,000 was the most that could be agreed by way of salary. The question was what could be done to address the problem. Mr Jowell's evidence about the critical 17 January 2006 meeting xliii. At this meeting Mr Jowell gave Mr Doyle and Mr Turner a revised version of a profit share document he had prepared following the 21 December 2005 meeting [PX 10]. Although it was put to Mr Jowell that he did not do this, Mr Turner accepted in cross-examination that he received this document at this meeting.

xliv. Mr Jowell's evidence in relation to the profit share discussion was as follows [P 1 para 31-32]: Mr Jowell said that he would like to receive 20% of the top line, net of what he was paid.

Mr Turner said that this would not work because he and Mr Doyle did not know what the margins and costs of the business would be. He said that the arrangement had to be 'on the bottom line'.

Mr Jowell said that left him with the problem that all sorts of personal expenses could be run through the business, which would lower the profits and his share of them. If the arrangement was to be the bottom line, then Mr Doyle/Mr Turner had to agree to normalise the calculation removing any personal expenses.

Mr Jowell then observed that because it was a bottom line, after costs Mr Doyle/Mr Turner should be prepared to give him a larger percentage - say 30%.

Mr Doyle said that Mr Jowell needed to be realistic. He and Mr Turner would be investing their money in 'this business' and there were other people they would have to pay.

Mr Jowell asked what was proposed. Mr Doyle indicated 15%.

Mr Jowell said that was not good enough: "I know you are investing your money, but really so am I through the salary sacrifice. You have to agree to 20%."

Mr Turner said 20% seemed ok to him and Mr Doyle said that he agreed.

Mr Jowell, referring to what had been discussed at their last meeting, said he needed to be protected so that if he worked for a period, developing projects and increasing their values, he would not lose that simply because it was not yet realised. He said that his salary sacrifice was an investment in the business and that the arrangement had to be structured so that that investment was safe.

Mr Doyle said that structuring was what Mr Jowell did for APC and asked what Mr Jowell suggested.

Mr Jowell said that the simplest thing to do was give him 20% of APC shares.

Mr Doyle disagreed referring to APC having had problems with that before and observing: "Stephen and I need to control all the shares."

Mr Jowell said that they could control them, but he would get the economic benefit, explaining that he would own the shares but could give them voting control.

Mr Jowell said: "Well then the only way is to draft an agreement that gives me the same financial benefit as owning the APC shares would; because in essence that's what the deal is. Do you agree?"

Mr Doyle said: "Yes, but keep the agreement simple. There is no point in writing a long contract."

Mr Jowell said: "Fine, but it is complicated because there are different companies, different situations. This really is an arrangement with a group rather than a company. Take for example APC, it doesn't own ASW; that makes it more complicated."

Mr Turner said: "Yes, but the group will be under APC and Alan and I will be the controlling shareholders. We told you last time we met, we would be bringing the ASW shares across from Afro."

Mr Jowell said: "So what we are saying today is that I would have 20% of the ASW shares in Afro."

Mr Doyle said: "Well just the ones that APC got in lieu of Management Fees."

Mr Turner said: "Well, nothing has really happened on Impact so it's an open field and a great project; perfect for you to get your teeth into." Mr Jowell said: "So I will have a 20% interest in that going forward?"

Mr Jowell said: "Good, because its important that I know what my share is and that when you say I have 20%, I know that I have 20% interest in the projects on the books at the moment, like Impact, and that I have 20% interest in the ASW shares, which Afro got for what was largely my work."

Each of Mr Turner and Mr Doyle said that they agreed. xlv. Mr Jowell made a note during the meeting [PX 11] which read "20% of Africa incl Impact. Salary = 160" . This note is consistent with Mr Jowell's evidence of the conversation and is one of the reasons why his evidence on this subject is preferred to that of Mr Doyle and Mr Turner. Mr Doyle's evidence about the 17 January 2006 meeting

xlvi. According to Mr Doyle, Mr Jowell did not mention profit share at this meeting, and there was no discussion at all regarding any payment of profit share [Ex D5 para 54]. His evidence was that Mr Jowell said " I can't live on $140,00 per annum. I've just bought a unit" , to which Mr Doyle said "Okay. We can only increase it to $160,000, and if we make a profit, we will pay a bonus but that would be discretionary on any deal concluding" , and Mr Jowell simply said " okay ". xlvii. I accept as correct the submission by Sudojo that throughout his evidence Mr Doyle showed himself to be a most unreliable witness. Amongst other things: a) his evidence that there was no discussion about profit share in the context of finalising Mr Jowell's package is inconsistent with the circumstance that the last communication between the parties had been Mr Jowell's document setting out a profit share proposal [PX 62];

b) his evidence that there was no discussion about profit share is rejected. In cross-examination he accepted that Mr Jowell would have proposed a profit share [T233.33-39][T234.40-45]. When the discrepancy between that evidence and what he had said in paragraph 54 of his first statement [Ex D5] was made plain to him, he was not able to offer any satisfactory explanation and sought to resile from the concession he made during the cross-examination and to revert to the position that there was no discussion at all about profit share [T234.46-235.21];

c) Mr Doyle's behaviour in this respect was all the more peculiar having regard to the fact that his own diary note of the day records "AJ/ST re AJ $160/pa. 20% net profit - APCL" [PX 72]. There was as Mr Doyle well knew, a discussion about profit share on 17 January 2006. Notably Mr Doyle did not reveal this file note in his witness statements, and unsuccessfully applied for an order setting aside a subpoena issued to him for production of his diaries and other documents [Watt affidavit];

d) The finding is that the true purpose of Mr Doyle's note, being a short entry in a diary, was to briefly summarise the bottom line of what had been agreed between the parties. His suggestion that he recorded what had not been agreed, but made no record of what had been agreed, is not accepted;

e) As Sudojo has submitted, the balance of probabilities strongly suggests rejecting the proposition that Mr Jowell, who had been paid $240,000 per annum plus a set substantial bonus at IFM, and who had argued for a profit share in December 2005 and had sent a profit share document to Mr Doyle on 22 December 2005, would suddenly arrive at the meeting on 17 January and so meekly and unreservedly say " okay " to an offer of $160,000 plus a discretionary bonus. xlviii. There are, in addition, the many other matters raised in these reasons which have a bearing on Mr Doyle's credit generally.

xlix. In a result Mr Doyle's evidence of the 17 January 2006 is rejected Mr Turner's evidence about the 17 January 2006 meeting l. As Sudojo has contended, Mr Turner was not quite as 'blasé' as Mr Doyle in the presentation of his evidence with respect to the 17 January meeting. He was at least prepared to accept that Mr Jowell said he wanted 20% of APC's net profit. li. In this respect the evidence of the defendant's witnesses was diametrically opposed.

lii. According to Mr Turner's witness statement [D 1 para 60], the 17 January 2006 conversation was to the following effect: Mr Jowell: "Where have you got to in determining my remuneration? I stopped being paid by IFM in November."

Mr Doyle: "The most we can pay you is $150,000.00 per annum and a bonus would be discretionary".

Mr Jowell: "Look, I really want 20% of Africa Pacific's net profit. I can't live on $150,000.00 per annum.

Mr Doyle: "Let's make it $160,000.00 and any bonus, as we have said before, will be determined on a deal by deal basis. You can be assured that Steve Turner and I will get the bulk of any bonus pool and after that, it will be distributed to the people that worked on the deal and made it happen".

Mr Jowell: "Okay. I'm happy with $160,000.00 but I need to borrow some money and it would be easy for me if the bonus scheme was more defined. I will instruct Frank to draw up an employment contract."

Mr Turner: "No please just draft a letter and we can review that."

liii. The finding is that Mr Turner's version of events cannot be accepted as reliable. It seems divorced from the realities of the context and the parties' contemporaneous communications. This is because: a) as already noted, it is highly improbable that there would have been such a meek and sudden about face by Mr Jowell, and that Mr Jowell would have decided to work for APC on terms that were below what Mr Jowell understood to be available in the market;

b) Mr Turner's own diary note of the day records "20% of bottom line of Africa Pacific net [profit]. Salary of $160K pa" [Ex PX 71]. On the balance of probabilities the true purpose of the note, being a short entry in a diary, was to briefly summarise the bottom line of what had been agreed. I reject the proposition whereunder Mr Turner's version suggests that he made a note of a passing claim by Mr Jowell that he had no interest at all in discussing and, at the same time, did not make a record of what he claims was actually agreed on that occasion (namely $160,000 plus discretionary bonus). liv. Also relevant to an assessment of the evidence in Mr Turner's witness statement are the concessions he made during cross-examination in relation to Mr Jowell's evidence as to this meeting. Again adopting the part of Mr Jowell's account that was put to Mr Turner, the following underlined portions of that account was agreed to by Mr Turner in cross-examination [T163.50-169.30]:

Mr Jowell: I would like to receive 20% of the top line, net of what you pay me .

Mr Turner: That won't work because we don't know what the margins and costs of the business will be. The arrangement has to be on the bottom line.

Mr Jowell: That leaves me with the problem that you can run all sorts of personal expenses through the business, which would lower the profits and my share of them. If the arrangement is the bottom line, then you have to agree to normalise the calculation removing any personal expenses ….

Mr Jowell: The simplest thing to do is give me 20% of APC shares .

Mr Doyle: No, we have had problems with that before. Stephen and I need to control all the shares .

Mr Jowell: You can control them, but I get the economic benefit .

Mr Jowell: Simple; I own the shares but I give you voting control .

Mr Doyle: No, I don't think I am comfortable with that .

Mr Jowell: Well then the only way is to draft an agreement that gives me the same financial benefit as owning the APC shares would; because in essence that's what the deal is. Do you agree?…

Mr Jowell: So what we are saying today is that I would have 20% of the ASW shares in Afro .

Mr Doyle: Well just the ones that APC got in lieu of Management Fees.

Mr Turner: Well, nothing has really happened on Impact so it's an open field and a great project; perfect for you to get your teeth into . lv. As Sudojo has pointed out, a number of observations may be made with respect to Mr Turner's evidence in cross-examination with respect to this conversation of 17 January 2006: a) the concessions he made as to what was said during this meeting were not made by him in his witness statement;

b) the parts of the conversation that Mr Turner accepted did take place would be most unlikely to have taken place unless the whole of the parties' conversation was as Mr Jowell described;

c) for example Mr Jowell would not have said (as Mr Turner accepted he did) " So what we are saying today is that I would have 20% of the ASW shares in Afro" unless there had been some prior acceptance by Mr Doyle and Mr Turner to the notion of a 20% share;

d) to take another example, the parties would not have debated the pros and cons of Mr Jowell holding APC shares if the notion of a 20% share of the business had been dismissed out of hand;

e) to take another example, Mr Turner would not have felt it necessary to debate the merits of applying a percentage to the top line or revenue line of APC's business if the notion of a profit share was to be rejected out of hand. It would not have mattered which line was taken. The fact that Mr Turner responded in this fashion is an indicator that the parties were debating what percentage should be applied, and to what "line". I accept that Mr Turner was unimpressive when challenged about this [see T164.18-36];

f) under cross-examination Mr Turner suggested that Mr Jowell had asked, in this conversation, for either " 20% of one calculation or 15% of another calculation " [T165.46]. This was not consistent with what Mr Turner said in his witness statement;

g) as Mr Turner would have it, when Mr Jowell put forward his proposal and it was rejected, Mr Jowell did not ask what APC proposed instead [T166.23]. This is inherently improbable.

h) For the above reasons, and the various matters relating to Mr Turner's credit identified throughout these reasons, Mr Turner's version of the 17 January 2006 meeting is not Concluded agreement as at 17 January 2006 24 Mr Jowell's evidence with respect to the meeting of 17 January 2006 is accepted as reliable. It is consistent with each of the notes of that meeting. It is consistent with the contextual realities. 25 The finding is that by 17 January 2006, having regard to what was said on that day in the context of the parties' prior discussions, the parties reached a binding agreement in terms later reflected in paragraphs 1, 2 and 3 of the 22 February email/letter.

26 In this respect, and having regard to the conversation that in fact took place on 17 January 2006, it was wholly unsurprising that Mr Jowell gave evidence that as he understood it, agreement had been reached on that occasion [T97.51]. 27 Whilst Mr Jowell conceded that he could not recall whether or not clauses 4 and 5 had been discussed [and could recall discussions taking place about terminating the agreement, believing that he put in the 30 day period for consideration by APT] this does not negate the probability that the parties had reached agreement with respect the fundamental commercial terms that would govern their relationship going forward: particularly as both parties accept that a binding agreement of some type was entered into at the 17 January 2006 meeting.

28 Notably it was approximately 6 days after 17 January 2006 that Sudojo submitted its first invoice which was consistent with the $160,000 per annum salary. During the hearing both counsel accepted that Sudojo by Mr Jowell actually started providing services for APC on 1 December 2005. Sudojo's case was that those services were provided prior to the concluded agreement being reached on 17 January 2006, following which the first invoice [dated back to 1 December 2005] was issued and paid. In other words, the work began prior to a concluded agreement being reached and the invoice submitted on 23 January 2006 was consistent with the agreement ultimately reached. The letter bearing date 1 December 2006 29 Following the parties' meeting of 17 January 2006, and by email dated 22 February 2006 [PX 73], Mr Jowell sent Mr Doyle and Mr Turner a letter on Sudojo letterhead setting out the terms of its retainer with APC [PX 74]. The letter was misdated 1 December 2006. 30 The letter began with the statement "This letter serves to confirm our recent discussions", and then proceeded to set out, in substance, the commercial terms that had already been agreed between the parties, together with some additional formal matters. 31 It was in the following terms:

This letter serves to confirm our recent discussions:

Sudojo Consulting Pty Limited (Sudojo) will be retained by Africa Pacific Capital Pty Ltd (APC) to perform a variety of investment banking tasks.

For its services, APC will pay Sudojo a retainer of $160,000 + GST p.a. The retainer will be paid monthly, pro-rata in arrears.

In addition APC will pay Sudojo, or its nominee, to 20% of Net Profits of APC. This will be calculated as follows:

a. Profits will be normalised, taking into account only reasonable costs and expenses of running the business including reasonable directors remuneration each not being more that 150% of Sudojo's retainer.

b. Profits will include profits on the final turning to account of securities or rights to securities (securities) acquired by APC either without further consideration (e.g. as fees, or in lieu of fees such as free carried interests) or acquired early or by virtue of preferential rights of acquisition (e.g. as founders shares or by way of private or preferential placement) in projects in which Sudojo played a role. i. APC sometimes uses other entities to acquire or hold securities. For the purposes of calculating Sudojo's profit share, any securities referred to above or rights to acquire such securities acquired or held in entities other than APC directly or indirectly in connection with the activities of APC, its directors or its shareholders, or of Sudojo, will be deemed to be securities acquired by APC.

ii. Unless agreed in writing, all transactions in which Sudojo is involved, will form part of the Profit Share arrangement.

iii. For the avoidance of any doubt, securities under this arrangement expressly exclude International Ferrometals, but includes shares in the Impact/Morokweng project as well as 15m of APC's American Southwest shares.

iv. While this arrangement is in force, payment will be made as and when the securities are turned to account. Should this arrangement be terminated, payment will be due at the date of termination and APC will, within 30 days of termination, either pay value of the Profit Share based on its fair value (without discount for acceleration or lack of marketability) at the date of termination, or have securities to that value transferred to Sudojo or its nominee.

All reasonable expenses incurred by Sudojo on behalf of APC in the course of its work will be promptly be (sic) reimbursed following submission of an account to APC. These will principally involve telephone, facsimile, entertainment, travel, accommodation and other sundry direct costs. No individual costs exceeding AUD$20,000 will be incurred by Sudojo without the express permission of APC.

APC and its associates agree to indemnify Sudojo, its associates, directors, agents, officers and employees from all costs associated with preparing, attending and/or defending any legal action arising out of this appointment, either as a result of Sudojo's engagement or activities in connection with the appointment. APC waives any rights which it may now or in the future have against Sudojo, its associates, directors, officers and employees but for this provision.

Either party can terminate this agreement on 30 days written notice.

This letter shall be governed and construed in accordance with the laws of New South Wales.

Yours sincerely Accepted by Afro Pacific Capital Pty Ltd Sudojo Consulting Pty Ltd

Alan Doyle Alan Jowell Chairman Director"

32 It is highly improbable that Mr Jowell would have sent such a letter, and in terms which expressly stated that the letter confirmed recent discussions, if the parties had not spoken to each other in late 2005 and early 2006 in the way described in Mr Jowell's evidence. 33 Pausing here, two matters seem significant:

i. In relation to at least paragraphs 1 to 3 of the letter, the letter can be taken as confirmation of the agreement that had already been reached. In this sense, its significance to these proceedings is that it constitutes evidence of the fact of the agreement that was reached on 17 January 2006.

ii. To the extent the letter contained something further to what had already been agreed by that point, it was a matter for the parties on and after 22 February 2006 as to whether they would agree to add those terms to their existing agreement. As the reasons below make plain, the finding is that they did so agree. Indeed Mr Satterthwaite conceded in cross-examination that he had said to Mr Jowell that the letter looked fine. Acceptance of the letter 34 Shortly after sending this letter Mr Jowell spoke with Mr Doyle about it. Mr Doyle said that the letter "looked fine to him". The finding is that he did not say anything to indicate he disagreed with any of the terms of the letter [T49.15-28]. 35 It is true that Mr Doyle has denied this. According to him, he said: "I've told you that we won't agree to a profit share", to which Mr Jowell said "I'll go back and re-jig it". This evidence is rejected as unreliable. 36 Aside from the unreliability of much of Mr Doyle's evidence generally, there are particular reasons why this piece of his evidence should not be preferred to that of Mr Jowell. As Sudojo has submitted, these reasons are:

i. having regard to the vigour with which Mr Jowell had pursued an agreement on profit share/bonus, if there had been a conversation of the kind Mr Doyle describes, it is highly improbable that Mr Jowell would not have gone back and re-jigged the letter. There was no re-jigged letter of any kind.

ii. if the parties had not had discussions of the kind described by Mr Doyle in his statement, one would expect that Mr Doyle and Mr Turner would have responded to the letter dated 1 December 2006 with outrage. On their version of events, it did not reflect anything like what had been discussed and agreed - indeed it promoted something that they say had been expressly and unequivocally rejected on several occasions. 37 Mr Jowell also spoke with Mr Satterthwaite at this time. He had been a director of Afro Pacific Capital Ltd since August 2003 and a director of APC since 15 December 2005. Mr Jowell asked Mr Satterthwaite whether he had any objections to the letter, and Mr Satterthwaite said he did not [T49.30-43]. In his witness statement Mr Satterthwaite said he did not recall discussing the letter with Mr Jowell. He denied saying to Mr Jowell words to the effect of "the letter looks fine" [Ex D7 para 11-12]. However under cross-examination he gave the opposite evidence, and accepted he had said these words [T285.9]. Bonus pool discussions in mid 2006 38 APC sought to rely, as part of the suggested subsequent conduct, on discussions between the parties in mid 2006 about the creation of a bonus pool. 39 Mr Jowell's evidence which is accepted on this matter is that Mr Doyle proposed the creation of a bonus pool at this time. There were discussions between Mr Doyle, Mr Jowell, Mr Satterthwaite, Mr Turner and Mr Giese. 40 Mr Jowell's evidence which is accepted was that he saw this as an attempt by Mr Doyle to vary the agreement that had been reached by changing (to APC's advantage) the structure of Sudojo's bonus entitlements. Mr Jowell refused to agree to any variation, and Mr Doyle subsequently confirmed that the position between APC and Sudojo remained as set out in the letter. [Ex P1 paras 43, 44, 47] 41 APC has contended that during the course of these "bonus pool" discussions, Mr Jowell stated that he had not been able to agree to terms with APC in relation to his bonus. This evidence is rejected as unreliable. Each of APC's four witnesses give different evidence on the topic. 42 Neither Mr Doyle nor Mr Turner gave evidence that Mr Jowell said anything of the sort now alleged by APC. 43 Mr Satterthwaite gave evidence that Mr Jowell did say these things, although he was not able to put any of it in admissible form (presumably because his memory was so poor) [Ex D7 para 17]. His evidence on the topic was also shown to be unreliable having regard to his about-face in relation to the conversation he said he had with Mr Jowell in February 2006. Further his evidence on the subject was diametrically opposed by that of Mr Turner, who said it was Mr Satterthwaite who did all the talking at the relevant meeting [Ex D2 para 75]. 44 Mr Giese, who had also been a director of APC from May 2006, gave evidence that Mr Jowell had said that he was battling to structure a bonus scheme with APC. This departs from Mr Satterthwaite's evidence as to what had happened. Nor is it consistent with Mr Jowell's evidence. 45 Mr Giese's evidence is not accepted for the following reasons: i. in his first statement he suggested he had a discussion with Mr Jowell and others over dinner [Ex D8 para 14]. He resiled from this in his second statement [Ex D9 para 3]. His recollection was obviously poor;

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