Vermillion Resources Pty Ltd v Gibbins Investments Pty Ltd

Counsel for the First Respondent: Mr AJ Kelly SC with Mr DG Guidolin

Solicitor for the First Respondent: Wisewould Mahony Lawyers

Counsel for the Second, Third and Fourth Respondents: The second, third and fourth respondents submitted to any order that the Court might make except as to costs.

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 639 of 2011

BETWEEN: VERMILLION RESOURCES PTY LTD (ACN 145 983 508)

AND: GIBBINS INVESTMENTS PTY LTD (ACN 122 828 369)

SAMUEL SAVAGE (AS EXECUTOR OF THE ESTATE OF JOHN THOMAS SAVAGE (DEC'D))

TERESA CLEGG (AS EXECUTOR OF THE ESTATE OF JOHN THOMAS SAVAGE (DEC'D))

MARYELLEN QUIGLEY (AS EXECUTOR OF THE ESTATE OF JOHN THOMAS SAVAGE (DEC'D))

JUDGES: RARES, GILMOUR & DODDS-STREETON JJ DATE OF ORDER: 10 NOVEMBER 2011 WHERE MADE: MELBOURNE

1. The appeal be dismissed.
2. The cross appeal be allowed, in part.
3. The appellant pay the respondent's costs of the appeal and cross appeal. THE COURT DIRECTS THAT:
4. The parties bring in short minutes to give effect to an order providing for specific relief in respect of the pre-emptive provision. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 639 of 2011

BETWEEN: VERMILLION RESOURCES PTY LTD (ACN 145 983 508)

AND: GIBBINS INVESTMENTS PTY LTD (ACN 122 828 369)

SAMUEL SAVAGE (AS EXECUTOR OF THE ESTATE OF JOHN THOMAS SAVAGE (DEC'D))

TERESA CLEGG (AS EXECUTOR OF THE ESTATE OF JOHN THOMAS SAVAGE (DEC'D))

MARYELLEN QUIGLEY (AS EXECUTOR OF THE ESTATE OF JOHN THOMAS SAVAGE (DEC'D))

JUDGES: RARES, GILMOUR & DODDS-STREETON JJ DATE: 10 NOVEMBER 2011 PLACE: MELBOURNE

REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) THE COURT: 1 On 29 April 2010, Minquip Pty Ltd entered into a contract to purchase 45 of the 100 issued shares in Sitzler Savage Pty Ltd, from the late Jack Savage. On 8 October 2010, Minquip assigned its rights under that contract to Vermillion Resources Pty Ltd. Sitzler Savage's constitution contained article 37 that gave its shareholders pre-emptive rights when one of them sought to transfer shares in the company. The other shareholder in Sitzler Savage, Gibbins Investments Pty Ltd owned the remaining 55 shares, and wished to exercise its right to pre-emption so as to acquire the 45 shares that now form part of Jack Savage's estate. 2 The primary judge upheld Gibbins Investments' right to insist on the executors of the estate following the pre-emptive rights procedure in article 37 if the estate sought to transfer the 45 shares. Her Honour granted a final injunction restraining the executors from selling or, relevantly, transferring any of the 45 shares otherwise than in accordance with Sitzler Savage's constitution. Her Honour rejected all the defences put by the executors and Vermillion. The executors, who took an active role at the trial, filed a submitting appearance in the appeal. Vermillion has raised three substantive arguments in support of its appeal.

Issues in the Appeal 3 The first two arguments put by Vermillion were based on an email exchange on 9 and 10 July 2009 between William (Bill) Gibbins, who controlled Gibbins Investments, and Jack Savage's son, Vincent (Vin) Savage. Her Honour found that this exchange did not entitle the executors or Vermillion to avoid the application of article 37 to their contract. First, Vermillion argued that the email exchange created a contract between the shareholders in Sitzler Savage that entitled each of them to sell their shares free of the constraints imposed by article 37. Secondly, Vermillion contended that the email exchange created a promissory estoppel that precluded Gibbins Investments from later insisting on its rights under article 37 so as to prevent Vermillion from purchasing 45 shares from the estate. The third argument put by Vermillion in support of its appeal was that her Honour should have refused to grant the injunction because Gibbins Investments had been guilty of laches. 4 Gibbins Investments cross-appealed, seeking to have the injunction her Honour granted supplemented by an order for specific performance so as to compel compliance with the requirements of article 37 in the circumstances. Vermillion indicated that if its appeal failed, it did not oppose such an order being made.

Background 5 The facts that follow have been taken largely from her Honour's careful judgment. Sitzler Savage was involved with other companies, including Peko Rehabilitation Project Pty Ltd and Australian Magnetite Pty Ltd, in a project to exploit minerals, including magnetite, from mining tenements close to Tennant Creek in the Northern Territory. Jack Savage invited Mr Gibbins to invest in their project in March 2006. Mr Gibbins did so, ultimately investing many millions of dollars through Gibbins Investments, and Mr Savage and he, through his company, each came to hold 50 shares in Sitzler Savage. Both of the investors held similar proportions of shares in the other companies involved in the project. The Full Court was informed that each of the other companies also had pre-emption rights in their articles or constitutions, but nothing in the trial or the appeal turns on this fact. 6 Importantly, in late 2010, Mr Gibbins was not aware of the pre-emptive rights and the provisions of the constitutions of Sitzler Savage, or the other entities concerned in the project. In particular, he did not know of article 37. Mr Gibbins had sought access to the project company's books and records from Jack Savage but Mr Savage had failed to provide him with, among others, its constitution. Article 37 relevantly provided: "37.1 No member shall transfer any share except in accordance with the procedures set out in the following sub-clauses of this clause 37. 37.2 A member proposing to transfer a share ("proposing transferor") must give written notice to the Company ("transfer notice") that he desires to transfer the share specified in the transfer notice and must specify the price of the share which he fixes as the fair value. … 37.3 …. 37.4 The delivery of a transfer notice shall be taken to constitute the Company the agent of the proposing transferor for the sale of the shares specified in the transfer notice to a purchaser to be nominated by the Company as provided in this clause at a price equal to the fair value of the shares as specified by the proposing transferor or as fixed by valuation in the manner provided in subclause 37.10, as the case may be. 37.5 Shares comprised in a transfer notice must in the first instance be offered by the Company by written notice to all the members (except the proposing transferor) as nearly as may be in proportion to their respective holdings of shares of the same class. … 37.6 The offer to members must state that if the same is not accepted in whole or in part within 21 days from its receipt it shall be taken to be declined and such offer must also require any member who desires to purchase shares in excess of his proportion to state how may additional shares he desires to purchase at the fair value specified or fixed by valuation. The offer must also request the members to state whether they desire the fair price of the shares to be fixed by valuation as provided in subclause 37.10. 37.7 …. 37.8 Any share comprised in the transfer notice which has not been accepted for sale in accordance with the preceding provisions of this clause 37 may be offered by the Company to any member or other person selected by the Directors as one whom it is desirable in the interests of the Company to admit as a member and who is willing to purchase the share at the fair value specified or fixed by valuation in the manner provided by clause 37.10. 37.9 … 37.10 The Directors must if so required by the purchasers of a majority of the shares to be purchased by the same notice as referred to in subclause 37.9 require the fair value of the shares to be fixed by an accountant of not less than 10 years standing appointed by a State Director for the time being of the Institute of Chartered Accountants in Australia or the Australian Society of Certified Public Accountants (or their respective successor bodies) instead of the fair value specified in the transfer notice. However, if the fair value so fixed by such accountant exceeds the fair value fixed in the transfer notice, the Company must immediately give written notice of that fact to the purchasers and all or any such purchasers may by written notice to the proposing transferor not later than 7 days after the determination elect not to continue with the purchase. 37.11 If the proposing transferor has become bound to transfer any shares and defaults in so doing the Company may receive the purchase money and shall cause the names of the purchasers to be entered in the Register as the holders of the relevant shares and must hold the purchase money in trust for the proposing transferor. The receipt of the Company for the purchase money shall be a good discharge to the purchasers and the entry of their names in the Register in purported exercise of this power will be conclusive evidence of the validity of transfer. 37.12 If at the expiration of 42 days after receipt of the transfer notice the Company has not found a member or person selected in accordance with the requirements of the preceding provisions of this clause 37 willing to purchase immediately for cash any shares mentioned in the transfer notice, the proposing transferor shall be entitled at any time within one month after the expiration of that period of 42 days to sell and transfer those shares to any person at a price not less than the price specified in the transfer notice. 37.13 All the members may by written agreement waive compliance with the provisions of subclause 37.2 to 37.12 inclusive in respect of a proposed transfer of shares by a member." (emphasis added) 7 Early in 2008, the relationship between Mr Gibbins and Jack Savage deteriorated. Mr Gibbins was frustrated by what he saw as an unjustified decision of Mr Savage to reject an offer by a substantial purchaser to acquire the project for about $50 million. Mr Gibbins insisted that he be given control of further negotiations to sell all of the parties' shares and that Jack Savage be replaced by his son, Vincent, on various boards. This was effected by a deed that the parties entered on 16 June 2008, appointing Mr Gibbins as Jack Savage's non-exclusive attorney to negotiate a sale of all or part of the project. However, this deed left each of the parties free to sell his or its own shares. 8 At a board meeting on 8 July 2008, attended by Mr Gibbins and both Jack and Vincent Savage, the parties agreed to vary the shareholdings. Mr Gibbins said that he would only invest needed funds of $1 million if his holding were increased to 55% of the shares, and the parties recorded that they would proceed on this basis so as to enable the project to continue as a going concern. Mr Gibbins' attempts to find a purchaser did not succeed. In August 2008, he had sought to interest Dean Clayson, a director and 50% shareholder in Minquip Pty Ltd, in purchasing all or part of the project, but Mr Clayson did not then have the funds. 9 On 9 July 2009, at 6.15 pm, Mr Clayson emailed to Vincent Savage a broad brush draft of an offer to purchase shares in the project. That draft suggested that Jack Savage would receive a greater share of the proceeds than his percentage interest justified. After Vincent Savage pointed this out to him, Mr Clayson sent a revised further email to both Mr Gibbins and Vincent Savage in the following terms: "Dear Bill & Vin, I am meeting in Hong Kong on Sunday & Monday 12-13th July with a group of investors and the China Commercial Bank. In principle and subject to conditions that will be stated in the contract they are intending to submit an offer through MQS or another entity for acquisition of Peko along the following lines: 1. Bill Gibbins on execution of his contract of sale will transfer all his shares in Peko and Sitzler Savage into the new entity and Jack Savage will transfer all of his Australian Magnetite shares to Bill Gibbins. Bill Gibbins is to receive 2 equal payments of $2.0m over the next 2 to 4 years. 2. Jack Savage is to be paid $1.0m at execution of the above agreements and receive same payments as Bill Gibbins over the next 2 to 4 years and will transfer his shares in Sitzler Savage and Peko to the new entity. 3. Necessary securities will be supplied to both Gibbins and Savage until the transactions are completed. 4. The payments that will become the responsibility of the new entity are as follows; a. Payment of all trade creditors of Peko totalling approximately $1.8m in a manner acceptable to them. b. Michael Sitzler's debt of $3.0m (Payment terms to be negotiated). c. Commonwealth of Australia $1.4m (Payment terms to be negotiated). d. Payment of Comprehensive Drainage $1.5m (Payment terms to be negotiated). Could you kindly advise whether "in principle" the basis of such an offer would be acceptable? Kind regards Dale Clayson" 10 The next day, 10 July at 10.53 am, Vincent Savage also emailed the offer to Mr Gibbins, saying that he had emailed Mr Clayson's offer to him but noting that Mr Gibbins' solicitor was not communicating with the solicitor for the Savage interest. Mr Gibbins replied to Mr Clayson at 12.47 pm saying: "You have never had, nor ever will have, authority to act on my behalf in the sale of my share in Peko or anything else for that matter." 11 The critical communication was the next email, when Mr Gibbins replied to Vincent Savage at 1.01 pm on 10 July 2008 as follows: "Happy for you to sell Jack's share to whoever you like and I'll sell my share to whoever I like, if and when I decide to. You have no authority to act on my behalf in any shape or form." Vincent Savage subsequently had a telephone conversation in which he said that Mr Gibbins had told him that he could sell his father's shares in both Sitzler Savage and Peko, but he had no authority to sell Mr Gibbins' holdings. 12 The email of 10 July from Mr Gibbins to Mr Savage provided the foundation of Vermillion's argument that an agreement or an estoppel existed that prevented Gibbins Investments from relying on article 37. Vincent Savage quickly acknowledged, in a further email later that day, that he had no authority to sell Gibbins Investments' shares and clarified that he did not intend to do so. No sale occurred in consequence of the trip to Hong Kong. 13 The next relevant event occurred on 20 April 2010 when Mr Clayson emailed Mr Gibbins, informing him that an agreement was being signed for a sale of Jack Savage's shares for $3.5 million. On 29 April 2010, Samuel Savage, another son of Jack, executed a share sale agreement under his father's power of attorney. Under that agreement, Minquip was the purchaser of the 45 shares held by Jack Savage. It was conditional on Minquip or its assignee obtaining the benefit of a contract for sale of Gibbins Investments' 55 shares in Sitzler Savage. That condition expressly inured for the benefit of both parties. The contract contained: an acknowledgement by Minquip that, in relevant respects, it would have no interest or rights in relation to shares until completion (cl 6.3); a conventional clause providing for a board meeting at which Vincent Savage would be replaced by Mr Clayson and for the approval of the share transfer to take place (cl 7.2); payment of a $40,000 deposit; and warranties by the vendor that: (1) the constitution of Sitzler Savage had been disclosed to Minquip (par 1.2); (2) the vendor was the absolute legal and beneficial owner of the shares and had full right and power to sell and transfer them (par 3.3(a)); and (3) the vendor had not entered into any agreement to vary rights attached to the shares and Sitzler Savage had not entered into any agreement either to vary rights attached to the shares or in respect of the shares (par 3.4). 14 Later, on 29 April 2010, Mr Clayson emailed the receivers of Peko, who had assumed control of it under a security in September 2009, informing them of the "finalisation" and an agreement for the sale of Jack Savage's shares. The receivers were the people through whom, by then, the Savages and Mr Gibbins were apparently communicating offers. Mr Clayson sent to Mr Gibbins an offer by Minquip to purchase Gibbins Investments' 55 shares on that day, and advised him that Minquip had reached agreement with the Savages to purchase Jack Savage's 45 shares. However, Minquip did not provide Mr Gibbins with a copy of its executed agreement with Jack Savage or confirm, at that time, the purchase price in that agreement. 15 Jack Savage died on 1 May 2010. On 17 May 2010, Mr Clayson sent the receivers an offer to buy Jack Savage's shares for $3.5 million and Gibbins Investments' shares for $4 million. In the months that followed, Mr Gibbins had discussions with Minquip about the possibility of a sale of Gibbins Investments' shares. In the meantime, Mr Gibbins also discussed the sale of his shares with others.

Was an agreement made on 10 July 2009? 16 Vermillion argued that the emails of 9 and 10 July 2009 created an agreement between the shareholders of Sitzler Savage that each was free to sell his or its shares without restraint. It contended that a shareholder is deemed to know of all the provisions in the contract with the company under which he or it held shares, including provisions such as article 37 of its constitution: see s 140(1) of the Corporations Act 2001 (Cth). Vermillion said that it followed that the parties had agreed that neither would be bound by the provisions of the articles. 17 We agree with the primary judge, for the reasons her Honour gave at [66] to [78] of her reasons for judgment, that the agreement alleged by Vermillion was not capable of being established. It is difficult to discern how an agreement could have been made, in effect, to dispense with compliance with article 37 when its very subject was not known to Gibbins Investments as at 10 July 2009. A similar principle was adverted to by Meagher JA, with whom Samuels AP and Priestley JA agreed, in the Court of Appeal of the Supreme Court of New South Wales in Herrman v Simon (1990) 4 ACSR 81 at 83. In that case his Honour distinguished the principle known as the Duomatic principle, based on Re Duomatic Ltd [1969] 2 Ch 365. There, Buckley J had held that the shareholders of a corporation could all agree, with full knowledge, effectively to depart from a company's articles or constitution so as to allow the company to proceed in a matter that could have been authorised by a resolution passed in a general meeting of the company. We agree with what Meagher JA said in Herrman 4 ACSR at 83: "… it seems to me a doctrine which goes to formalities and not to substance. If all shareholders want the same substantial result and say so, acting unanimously, that doctrine no doubt applies in order to dispense with any failure to observe formalities but it is not a doctrine which says that substantial rights may be varied. ... the Duomatic principle, however formulated, is really only a principle of waiver and it would be a very odd result if one could waive the destruction of rights of whose destruction one was ignorant. ... being a doctrine of waiver and a doctrine going to formalities, Buckley J was perfectly correct in stating that it can only operate where the persons attending a meeting have full knowledge and consent." (emphasis added) 18 There are other reasons why the argument that there was an agreement fails. First, Mr Gibbins rejected the proposal that Mr Clayson or Vincent Savage had any right to sell his company's shares. Secondly, Mr Gibbins' email simply expressed the true position that was consistent with article 37. The article prevented a transfer of shares that was not made in accordance with its provisions. Its efficacy was premised on a shareholder proposing to sell. Ordinarily, such articles contemplate, and often prudent vendors will protect their positions by obtaining, a binding contract to sell the shares subject to the articles. There was no inconsistency in Mr Gibbins' asserting that both he and the Savages were free to sell to whomever they chose, and the operation, at the same time, of article 37 on any contract for sale that then occurred. 19 At the time a contract for sale was made, a purchaser would be deemed to be aware of the constitution of the company, as indeed, was expressly provided in Minquip's contract with Jack Savage. The sale had to occur with the constraints that applied to the congeries of rights in a company represented by the shares to be acquired, including the pre-emptive process that had to be followed before a purchaser could obtain a registration of a transfer of the shares to it: cf Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) (1948) 77 CLR 143 at 154 per Dixon J. It matters not to a vendor in such a situation that he or she receives the price fixed under the contract for sale, or the price fixed under the pre-emptive article with a purchaser that the vendor has found, or one the company has found. 20 Thirdly, the primary judge correctly found that the parties never changed the constitution of Sitzler Savage. Her Honour correctly rejected Vermillion's assertion that the parties made a contract to do so in the emails of 9 and 10 July 2009. As her Honour noted, these emails unsurprisingly made no reference to article 37. They did not refer to a specific transaction. Mr Gibbins did not give an informed consent, since he was unaware of the provisions in the constitution, and of article 37 in particular, despite requesting Jack Savage to provide him with company records. 21 In essence, the email sent by Mr Gibbins to Vincent Savage on 10 July 2009 was an emphatic rejection of the assertion in Mr Clayson's earlier email that other persons could deal with Mr Gibbins' company's property. The email did not deal with the circumstances in which Gibbins Investments' rights would be affected in respect of any sale that may have been made. Nor can it be said that this exchange amounted to a voluntary assumption of legally enforceable obligations between the shareholders of Sitzler Savage. As Gaudron, McHugh, Hayne and Callinan JJ said in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 105-106 [24]-[25]: '"It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty." (Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 at 457 per Dixon CJ, Williams, Webb, Fullagar and Kitto JJ) To be a legally enforceable duty there must, of course, be identifiable parties to the arrangement, the terms of the arrangement must be certain, and, unless recorded as a deed, there must generally be real consideration for the agreement. Yet "[t]he circumstances may show that [the parties] did not intend, or cannot be regarded as having intended, to subject their agreement to the adjudication of the courts" (South Australia v The Commonwealth (1962) 108 CLR 130 at 154 per Windeyer J). Because the inquiry about this last aspect may take account of the subject matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances (South Australia v The Commonwealth (1962) 108 CLR 130 at 154; Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 367 per Windeyer J), not only is there obvious difficulty in formulating rules intended to prescribe the kinds of cases in which an intention to create contractual relations should, or should not, be found to exist, it would be wrong to do so. Because the search for the "intention to create contractual relations" requires an objective assessment of the state of affairs between the parties (Masters v Cameron (1954) 91 CLR 353 at 362 per Dixon CJ, McTiernan and Kitto JJ; ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-549 per Gleeson CJ) (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word "intention" is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened (Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 348-353 per Mason J; Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 76 ALJR 436; 186 ALR 289). It is not a search for the uncommunicated subjective motives or intentions of the parties.' 22 The email did not amount to a document evincing an intention to create contractual relations. Nor was there any consideration passing between the shareholders. Nor did Vincent Savage's reply on the same day agree with Mr Gibbins' assertion that Mr Gibbins could sell to whomever he wanted. The parties to this exchange could not be understood objectively to have intended to create a new legal relationship between them.

Did the emails of 9 and 10 July 2009 create a Promissory Estoppel? 23 Self-evidently, the critical email sent by Mr Gibbins to Vincent Savage on 10 July 2009, was not in terms directed expressly to the pre-emptive provisions contained in article 37. Nor did it expressly provide that Gibbins Investments would not insist on compliance with those terms, unsurprisingly, because Mr Gibbins was not aware of them. Vermillion submitted that by reference to the pre-existing context, as well as the subsequent conduct of Gibbins Investments, the email was to be understood as containing a promissory representation to the effect that Gibbins Investments would not require compliance by Mr Savage with article 37 in respect of any sale of his shares. It was necessary for Vermillion to make out, first, the representation it alleged, secondly, reliance on it, and thirdly, detriment, in order to succeed on its estoppel case. 24 We have concluded that at each stage, Vermillion has failed to do so. As her Honour explained in her reasons, the 10 July email needs to be understood in the context of the earlier emails to which it responded, and in the context of Mr Gibbins' response to Mr Clayson on the same day, which have been set out above. Mr Gibbins' email to Vincent Savage was, without his knowledge, sent by Vincent Savage to Mr Clayson. That was not a representation by Gibbins Investments to the interests that Mr Clayson represented. Even against the background that Gibbins Investments wanted to exit its investment in the project because Mr Gibbins was at odds with Jack Savage, the content of the email he sent to Vincent Savage on 10 July is not inconsistent with the continuing operation of the pre-emptive provisions. We have noted above that it stated no more than the legal position of shareholders in a company with pre-emptive rights. As senior counsel for Vermillion correctly conceded, Jack Savage was not restrained from selling his shares in Sitzler Savage by reason of the pre-emptive provisions. Commonly, from a commercial perspective, such an agreement for sale of shares will be the subject of conditions requiring compliance with pre-emptive provisions when they are known to the contracting parties. But it is the agreement for sale of shares itself which is the platform for the application of the pre-emptive provisions. A shareholder "desires to transfer" its shares, as we have noted above, because it has entered into arrangements, usually firm ones, with a prospective purchaser of its shares, before giving notice to the company under a pre-emptive rights article. 25 It is no answer for Vermillion to say that the 10 July email ought to be construed as representing that Gibbins Investments did not in the future intend to rely on article 37 because Mr Gibbins was not interested in buying Jack Savage's shares but rather wanted to exit his investment in the project. This construction seems to be a bridge too far. If the context is to be taken into account, including the evidence as to Gibbins Investments' intentions, then it must be relevant to consider the unchallenged evidence that at this time, Mr Gibbins, as the controlling mind of his company, had no actual knowledge of the pre-emptive provisions. 26 Moreover, the 10 July email might also be construed as an acknowledgment by Mr Gibbins that the 2008 agreement to which we have referred, by which he was constituted Jack Savage's attorney in order to secure a purchaser of the entire share capital involved in the project, was not exclusive. Gibbins Investments and Jack Savage remained free to sell their respective shareholdings, subject to Sitzler Savage's constitution. The evidence fell well short of establishing an unambiguous representation to the effect relied on by Vermillion. 27 Vermillion also contended in the appeal that Jack Savage had given the warranty in the sale agreement to Minquip and that he was the absolute legal and beneficial owner of the shares with the full right and power to sell and transfer them, in reliance upon the representation. That argument is without substance. First, her Honour, who had the advantage of seeing and hearing the witnesses, did not accept that the email itself contained a representation that was clear and unambiguous. Secondly, the primary judge made no finding of such a reliance, and there was no evidence to suggest that the 10 July email formed the basis of the warranty in the Minquip share sale agreement that had been executed on Jack Savage's behalf. 28 No witness gave evidence that he relied on the email exchange or Mr Gibbins' email to Vincent Savage in the decision making process by which Sam Savage came to execute on behalf of his father, and Minquip came to enter into, the contract of 29 April 2010, or any variation of it. Sam Savage was available to give evidence, and her Honour had been told he had prepared an affidavit, but neither the executors nor Vermillion called him to give evidence at the trial. Neither Mr Clayson nor Vincent Savage gave evidence in chief that he had relied on Mr Gibbins' statements in his email of 10 July 2009 to Vincent Savage for any purpose whatsoever. We were asked to infer in the appeal that one or both of Vincent Savage or Mr Clayson had. We reject those submissions. 29 In a well known passage in Commercial Union Assurance Company of Australia Limited v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418E-419F, Handley JA said that the principle in Jones v Dunkel (1959) 101 CLR 298, could be extended in a case where a party led evidence from a witness on some topics, but did not elicit evidence from the witness on the particular point that the party later sought to rely on. The relevant principle is that when a party fails to elicit direct evidence in chief on an identified issue from a witness it calls, the most natural inference is that the party fears to do so. That fear is that some of the witness' evidence in chief would have been, or would have exposed facts, unfavourable to the party: Ferrcom 22 NSWLR at 418E-G; Zaccardi v Caunt (2008) 15 BPR [28,403] at 20,408 per Campbell JA, with whom Allsop P and Barr J agreed; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 at 525-526 [230] per Weinberg, Bennett and Rares JJ. 30 Thirdly, we are not satisfied that the executors or Vermillion established any detriment suffered in relation to the alleged reliance on any representation.

Can Vermillion rely on any laches of Gibbins Investments? 31 The third argument advanced by Vermillion was that, in some way, Gibbins Investments was guilty of laches. Vermillion conceded that this submission had not been pleaded or argued below. It depended on asserting that Mr Gibbins had been inactive in failing to insist on compliance on the articles during the period after the executors had entered into the agreement with Minquip. 32 In Coulton v Holcombe (1986) 162 CLR 1 at 7-8 Gibbs CJ, Wilson, Brennan and Dawson JJ said in a much cited passage: "It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish. The powers of an appellate court with respect to amendment are ordinarily to be exercised within the general framework of the issues so determined and not otherwise. In a case where, had the issue been raised in the court below, evidence could have been given which by any possibility could have prevented the point from succeeding, this Court has firmly maintained the principle that the point cannot be taken afterwards: see Suttor v. Gundowda Pty. Ltd. (1950) 81 CLR 418 at p 438; Bloemen v. The Commonwealth (1975) 49 ALJR 219." 33 Here, the question of laches was one which, clearly, could have been met by evidence. Ordinarily, statutory provisions conferring appellate powers, even in the case of an appeal by way of rehearing, are construed on the basis that unless there is something to indicate otherwise, the power is to be exercised for the correction of error: Coal and Allied Operations Pty Limited v Australian Industrial Relations Commission (2000) 203 CLR 194 at 203-204 [14] per Gleeson CJ, Gaudron and Hayne JJ. In our opinion, the argument concerning laches should not be entertained because it was not raised at trial and could have been the subject of evidence. It is not appropriate to entertain it for the first time on appeal.

Conclusion 34 A number of other points were taken by Vermillion, but the substantive issues on which it could succeed had to be whether or not either the agreement or representation upon which it relied, arising out of the email exchange of 9 and 10 July 2009, could be established. It has failed to do so. For these reasons, its appeal must fail. 35 Gibbins Investments' cross appeal, not being opposed by either the executors or Vermillion, ought succeed, so that an order providing for the executors to comply with article 37 should be made. 36 In our opinion, orders should be made providing that the appeal be dismissed; the cross appeal be allowed, in part; the appellant pay the first respondent's costs of the appeal and cross appeal; and the parties should be directed to bring in short minutes to give effect to an order providing for specific relief in respect of the pre-emptive provision. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Rares, Gilmour & Dodds-Streeton.