FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Cascade Coal Pty Ltd (No 3) [2018] FCA 1019

(Revised on 15 August 2018)

ORDERS

THE COURT ORDERS THAT:

1.    The Application be dismissed.

2.    The applicant pay the first, second and fourth to eleventh respondents’ costs of and incidental to the Application.

THE COURT ORDERS THAT:

1.    Pursuant to r 39.04 of the Federal Court Rules 2011 (FCR) or, alternatively, pursuant to r 39.05(e) and (h) FCR, the Orders made by Foster J on 6 July 2018 be varied by deleting from Order 2 made on that day the word “second” so that Order 2 now reads:

2.    The applicant pay the first and fourth to eleventh respondents’ costs of and incidental to the Application.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

TABLE OF CONTENTS

REASONS FOR JUDGMENT

FOSTER J:

1    In the period from the late 1980s until about 2011, Edward Moses Obeid (Eddie Obeid) was a prominent politician in NSW. He was a member of the Legislative Council throughout the period from 1991 to 2011. He was a power broker in the Australian Labor Party who exercised significant influence in that Party at all times during those years.

2    Eddie Obeid has nine children—five sons and four daughters. Four of Eddie Obeid’s sons feature in the events which are the subject of this proceeding. Two of those sons, Moses Edward Obeid and Paul Edward Obeid, played a significant part in those events. Two other sons, Damien Edward Obeid and Gerard Edward Obeid, were also involved.

3    Members of the Obeid family conducted numerous business transactions together. Frequently, they deployed the following structure:

(a)    A company would be used as the entity that would enter into the particular transaction. The directors and shareholders of that company would be associates of the Obeid family such as a family friend, an accountant, a lawyer or business adviser;

(b)    The shareholders of the transacting company would hold the shares in that company on trust for one or more members of the Obeid family or their relatives, or on trust for other companies or trusts, the ultimate controllers and beneficiaries of which were one or more members of the Obeid family, their spouses or their relatives; and

(c)    The directors of the transacting company would act on the instructions of one or more members of the Obeid family and for their benefit.

4    Business structures with the features which I have described at [3] above were used by the Obeid family in and in connection with the transactions which are under scrutiny in the present case.

5    An important object sought to be achieved by the Obeid family by the use of such structures was to conceal the involvement of the Obeid family in those transactions from all except those who necessarily needed to know of that involvement.

6    The conduct of Moses Obeid and Paul Obeid in 2008 and 2009 is at the heart of the present case.

7    In this proceeding, the applicant, the Australian Competition and Consumer Commission (ACCC), claims relief against eleven respondents. The first six named respondents are corporate entities and the remaining five respondents are individuals. The ACCC claims declarations against all respondents, civil penalties against all respondents, disqualification orders against the individual respondents and costs in respect of alleged contraventions of ss 45(2)(a)(i), 45(2)(b)(i) and 44ZZRK (in respect of cartel provisions where the purpose conditions in s 44ZZRD(3)(a)(iii) and in s 44ZZRD(3)(c) are satisfied) of the Competition and Consumer Act 2010 (Cth) (CCA) by the corporate respondents. The individual respondents are all alleged to be liable as accessories to the alleged contraventions by the corporate contraveners.

8    The alleged contravening conduct took place in early June 2009. For this reason, the Court must apply s 4D and s 45 of the CCA in the form in which those sections then stood. Since 2009, s 45 has been substantially amended and s 4D has been repealed (as to which, see Act No 114 of 2017). In addition, the Court must apply s 44ZZRD and s 44ZZRK in the form in which those sections stood in 2009. Those sections have been renumbered by Act No 114 of 2017. Finally, I note that the joint venture defence provided for in relation to certain contraventions of the CCA has been reformulated by Act No 114 of 2017. The applicable sections in 2009 were ss 4J, 76C and 44ZZRP.

9    The references to sections of the CCA in these Reasons for Judgment are to the applicable sections in the form in which they stood in June 2009.

10    These Reasons for Judgment address questions of liability only. That is, by these Reasons for Judgment, I determine whether any declaratory relief should be granted to the ACCC and, if so, the form of that relief. In the event that it is necessary to address the ACCC’s claims for civil penalties and disqualification orders, those claims will be dealt with at a later date.

11    The corporate respondents are:

1.    Cascade Coal Pty Ltd (ACN 119 180 620) (Cascade);

2.    Mincorp Investments Pty Limited (ACN 132 441 868) formerly called Voope Pty Limited (Voope);

3.    Loyal Coal Pty Ltd (ACN 132 497 913) (Loyal Coal) formerly called Monaro Coal Pty Ltd (ACN 132 497 913) (Monaro Coal);

4.    Locaway Pty. Limited (ACN 066 616 484) (Locaway);

5.    Coal & Minerals Group Pty Ltd (ACN 144 641 092) (CMG); and

6.    Southeast Investment Group Pty Limited (ACN 143 535 620) (Southeast).

The individual respondents are:

7.    Moses Edward Obeid;

8.    Paul Edward Obeid;

9.    Richard Jonathan Poole;

10.    John Vern McGuigan; and

11.    James William McGuigan.

12    Relevantly, the alleged contraventions of s 45 of the CCA are based upon the proposition that certain provisions contained in two letter agreements signed on 5 June 2009 (one of which was varied on 6 June 2009) were exclusionary provisions (as to which, see ss 4D, 45(2)(a)(i) and 45(2)(b)(i) of the CCA). The s 44ZZRK contraventions are founded upon the proposition that the same two letter agreements contain cartel provisions (as to which see ss 44ZZRD(1)(a)(ii), 44ZZRD(3)(a)(iii) and 44ZZRD(3)(c)). In particular, the ACCC relies upon s 44ZZRD(3)(a)(iii) which relevantly provided that a provision of a contract, arrangement or understanding is a cartel provision if the provision has the purpose of directly or indirectly preventing, restricting or limiting the supply, or likely supply, of goods or services to persons or classes of persons by any or all of the parties to the contract, arrangement or understanding and if at least two of the parties to the contract, arrangement or understanding are or are likely to be, or, but for any contract, arrangement or understanding, would be or would be likely to be, in competition with each other in relation to the supply of those goods or services. The ACCC also relies upon s 44ZZRD(3)(c) which relevantly provided that the purpose condition in s 44ZZRD(1)(a)(ii) would be satisfied if the alleged cartel provision had the purpose of directly or indirectly ensuring that one of the statutorily stipulated outcomes in the nature of bid rigging was achieved in relation to requests for bids for the supply or acquisition of services. The ACCC alleges that certain of the corporate respondents were parties to the contract, arrangement or understanding which contained the alleged exclusionary provisions and cartel provisions and that all of the corporate respondents gave effect to those provisions. The ACCC alleges that the corporate respondents contravened s 44ZZRK of the CCA by giving effect to the cartel provisions contained in the arrangements made on 5 and 6 June 2009.

13    One letter agreement (the Buffalo Agreement) concerned the establishment of a coal mining venture in the Mt Penny coal exploration area in NSW. The entities expressly identified in that agreement as parties to the arrangements reflected therein were Cascade and Buffalo Resources Pty Limited (ACN 137 486 385) (Buffalo). The obligations of Buffalo under the arrangement recorded in the letter were expressed, at least in part, as obligations of Buffalo and “… its associates and related parties including Gardner Brook and Loyal Coal Pty Ltd”.

14    The other letter agreement (the Landowners Agreement) concerned the acquisition by Cascade of three rural properties located more or less above the likely mine site near Mt Penny (Cherrydale Park (Cherrydale), Donola and Coggan Creek). The entities expressly identified in that agreement as parties to the arrangements reflected therein were Cascade, United Pastoral Group Pty Limited (ACN 127 743 453) (UPG), Geble Pty Ltd (ACN 132 441 877) (Geble) and Justin Kennedy Lewis Pty Ltd (ACN 133 940 388) (JKL). As at 5 June 2009, Geble was already the registered proprietor of Donola and JKL was the purchaser under a Contract for the Sale of Coggan Creek which had not yet been completed. As at that date, Locaway, in its capacity as the trustee of the Moona Plains Family Trust, was still the registered proprietor of Cherrydale although steps were under way to replace it on the title to that property with UPG who was, by June 2009, the trustee of that Trust. UPG had changed its name to Rothshire Group Pty Limited on 27 September 2007 but that fact appears to have gone unnoticed by the Obeids when they began to involve UPG in the present matters in 2008.

15    The two letter agreements were interdependent.

16    The Buffalo Agreement was amended by a further letter agreement between Cascade and Buffalo on 6 June 2009 (the Buffalo Agreement Variation).

17    The respondents conveniently fall into four groups. At the commencement of the hearing before me, each of those groups was separately represented. The groups were:

    Cascade, John McGuigan and James McGuigan (the Cascade respondents);

    Locaway, Southeast, Moses Obeid and Paul Obeid (the Obeid respondents);

    Loyal Coal; and

    CMG and Poole (the CMG respondents).

18    James McGuigan is the son of John McGuigan. At all relevant times, John McGuigan was a director of Cascade.

19    At all material times, Poole was a director of Cascade and of CMG.

20    When the hearing commenced, Voope (the second respondent) was unrepresented. It had not filed an Address for Service nor had it ever been represented at any pre-trial directions hearing or case management hearing. It has never filed a Defence. For these reasons, on Day 2 of the hearing, Senior Counsel for the ACCC applied for an order pursuant to r 30.21(1)(b)(i) of the Federal Court Rules 2011 (FCR) that the hearing proceed generally against Voope notwithstanding its absence when this proceeding was called on for trial. I made that order on 5 April 2016. Thereafter, the ACCC’s case against Voope proceeded notwithstanding its absence.

21    On 29 March 2017, well after the trial had concluded, Deutsch Partners filed a Notice of Acting – Change of Lawyer in respect of Voope and the other Obeid respondents.

22    In these Reasons, I will generally refer to particular individuals by their surname alone. I mean no disrespect by taking that approach. The exceptions to this general approach are the Obeids and the McGuigans. For obvious reasons, it is necessary to refer to those persons by their Christian name as well as their surname.

Loyal Coal

23    At the commencement of Day 2 of the hearing, Counsel for Loyal Coal informed the Court that, upon the basis of an agreed statement of facts and admissions, Loyal Coal would consent to a declaration that it contravened s 45(2)(a)(i) of the CCA (read with s 4D) by arriving at what is described at pars 108 and 180 of the Further Amended Statement of Claim filed on 24 March 2016 (FASOC) as “the EOI Withdrawal Understanding”. Counsel also said that the ACCC and Loyal Coal intended to make a joint submission to the Court as to penalty and costs. Until the Court was informed of these matters, Loyal Coal had actively defended the proceeding. It had filed its Second Further Amended Defence as recently as 31 March 2016.

24    Loyal Coal requested to be excused from further attendance at the hearing and also requested that I defer further consideration of the ACCC’s claims against Loyal Coal until after judgment has been delivered in the ACCC’s cases against the other respondents. I acceded to both of these requests and Loyal Coal took no further part in the hearing.

25    At some future date, it will be necessary to conduct a hearing in order to determine whether the Court should approve and give effect to the settlement reached between the ACCC and Loyal Coal.

A Brief Overview of the Relevant Facts

26    In November 2007, Locaway, a company controlled by the Obeid family, completed the purchase of Cherrydale which is located at Bylong. Subsequently, over the next two years, the Obeid family, through companies and trusts controlled by the family, and, on occasion, in conjunction with associates of the family, also purchased two additional rural properties in the same area, Donola and Coggan Creek. These additional properties adjoined Cherrydale. The total sum outlaid on the three acquisitions was $7.75 million.

27    In early July 2008, Moses Obeid, who is the eldest son of Eddie Obeid, met with Paul Gardner Brook (Brook), who was, at that time, Senior Vice President, Asia Special Situations Group, of Lehman Brothers (Lehman) in Sydney, in order to gauge Lehman’s interest in being involved in a coal mining venture in the Mt Penny coal exploration area. Bylong is a few kilometres from Mt Penny. Cherrydale, Donola and Coggan Creek are centrally located in the Mt Penny coal exploration area which was one of the areas released by the NSW Government in September 2008 for the purposes of allowing exploration for coal to be undertaken there.

28    When he met with Brook in early July 2008, Moses Obeid provided to Brook a list of those small to medium mining companies which he (Obeid) believed would be invited to lodge an Expression of Interest (EOI) for an Exploration Licence (EL). ELs are granted under the Mining Act 1992 (NSW) (Mining Act). One company on that list was Monaro Mining NL (MMNL), a company which, up to that time, had not been involved in mining coal. It had focussed on mining uranium.

29    In August 2008, the NSW Department of Primary Industries (DPI), which was responsible for allocating and regulating ELs under the Mining Act, prepared an EOI Information Package (initial EOI information package) in respect of the NSW Government’s plan to release eleven areas of the State for the purpose of allowing exploration for coal in those areas and ultimately allowing mining for coal in those areas. After that package was prepared, the DPI sought and obtained the approval of the relevant Minister (at the time, Mr Ian Macdonald) to send the initial EOI information package to a number of specific mining companies together with an invitation to the recipients of that package to lodge EOIs in respect of ELs for one or more of the eleven coal release areas. This was the first external step taken in the process which, in substance, was a closed tender process.

30    On 19 September 2008, an invitation to lodge an EOI in respect of all eleven coal release areas was sent to MMNL. At the same time, invitations were also sent to other companies. An initial EOI information package was sent with each EOI invitation. Cascade did not receive an initial invitation to lodge an EOI for any of those coal release areas.

31    Soon after Brook’s first meeting with Moses Obeid, Brook contacted Mr Warwick Grigor, who was then the Chairman of MMNL. Over the next few weeks, Brook negotiated an arrangement between Voope, a company beneficially owned and controlled by the Obeid family, and MMNL, whereby MMNL granted to Voope or its nominee an option to acquire 80% of the issued capital of a special purpose vehicle (SPV) which was initially to be a wholly-owned subsidiary of MMNL, Monaro Coal Pty Ltd. Ultimately, Monaro Coal was registered with the intention of being that SPV. The option granted to Voope by MMNL was designed to place Voope in control of any EOIs lodged by MMNL pursuant to the DPI invitations of 19 September 2008. This arrangement was ultimately recorded in an Option Deed over Shares dated 20 August 2008 between MMNL and Voope (Voope Option Deed). Monaro Coal Pty Ltd later changed its name to Loyal Coal Pty Ltd.

32    On 15 September 2008, Lehman collapsed. As a result, Brook began to act on his own and for himself in connection with his ongoing dealings with the Obeid family and MMNL. At the same time, his nominee company, Oregon Standard Pty Limited (Oregon), signed a consultancy agreement with MMNL. Subsequently, Brook also intruded himself into the dealings between the Obeid family and Cascade and its directors.

33    On 21 November 2008, MMNL lodged EOIs for nine of the eleven coal release areas referred to in the initial EOI information package. Included within those nine areas were the Mt Penny and Glendon Brook coal release areas.

34    In January 2009, the DPI re-opened the EOI process. As a result, additional companies were invited by the DPI to lodge EOIs. A revised EOI Information Package (revised EOI information package) was prepared and sent to all invitees. Cascade was included within the group of invitees to whom revised EOI information packages were sent in January 2009.

35    On 16 February 2009, Cascade lodged an EOI for the Mt Penny coal exploration area. On the same day, it also lodged an EOI for the Glendon Brook coal exploration area. Glendon Brook is located in the Hunter Valley, approximately 12 km east of Singleton and approximately 170 km east of Mt Penny.

36    In its EOI for Mt Penny, MMNL had promised to pay not only the requisite financial contributions spelt out in the initial EOI information package (a total of $1,071,000) but had also offered an additional voluntary financial contribution of $25 million. In similar vein, it also offered an additional voluntary financial contribution of $5 million in its EOI for Glendon Brook.

37    In the period between August 2008 and May 2009, Brook claims to have tried to find an investor or financial partner for MMNL in order to enable it to meet the financial commitments which it had made in its EOIs but had been unsuccessful in finding such a partner. In May 2009, Brook told the directors of MMNL that he did not expect to be able to secure the necessary investment funds to support the promises made by MMNL in its EOIs.

38    In light of Brook’s communications at this time, and for reasons associated with its own financial position and business goals, on 22 May 2009, MMNL decided to withdraw all of its EOIs, subject to certain conditions being met. But, as a result of Brook’s entreaties, it did not do so immediately after 22 May 2009.

39    On 23 May 2009, Brook, Moses Obeid, John McGuigan and James McGuigan met in order to discuss a potential deal with Cascade.

40    Between 23 May 2009 and 31 May 2009, Brook and Moses Obeid took steps by which they intended that Voope would gain complete ownership and control of Monaro Coal and control of the EOIs lodged by MMNL in respect of a number of coal exploration areas, including the Mt Penny and Glendon Brook coal exploration areas.

41    On 31 May 2009, a second meeting took place. Those in attendance were Brook, Moses Obeid, Paul Obeid, John McGuigan and James McGuigan. An in-principle agreement was struck at this meeting. The substance of that agreement was: For a consideration equivalent to four times the value of Cherrydale, Donola and Coggan Creek, the owners of those properties would transfer those properties to Cascade or its nominee. In addition, Cascade and a nominee entity of the Obeids would enter into a coal mining venture in order to exploit the coal reserves in the Mt Penny coal exploration area. The Obeid entity would have 25% equity in that venture subject to certain detailed terms. The Obeids and Brook would ensure that the EOIs lodged by MMNL for Mt Penny and Glendon Brook would be withdrawn.

42    Further negotiations took place between representatives of Cascade, Brook and the Obeids in the period between 1 June 2009 and 5 June 2009.

43    The two letter agreements documenting the final arrangements were signed on 5 June 2009.

44    On 9 June 2009, Loyal Coal sent letters to the DPI by which it purported to withdraw the EOIs lodged by MMNL in respect of the Mt Penny, Glendon Brook and Spur Hill coal exploration areas. Those letters were signed by Brook.

45    On 19 June 2009, the DPI informed Cascade that it had been selected as the successful EOI applicant in respect of both the Mt Penny and Glendon Brook coal exploration areas.

46    On or about 27 October 2009, the DPI granted ELs over both the Mt Penny and Glendon Brook coal exploration areas to Cascade.

47    In late 2010, CMG agreed to buy out the Obeid interests from the coal mining venture. By then, Cherrydale, Donola and Coggan Creek had come under the control of Mt Penny Properties Pty Limited (Mt Penny Properties), a wholly-owned subsidiary of Cascade.

The ACCC’s Case and the Respondents’ Defences

48    The ACCC’s claims for relief are set out in detail in the Amended Originating Application filed by it on 24 March 2016 (Amended OA). Its pleaded case is found in the FASOC.

49    I shall now endeavour to explain the ACCC’s case as pleaded in the FASOC.

50    At pars 1 to 61, the ACCC describes the respondents as well as a number of other corporate entities and individuals who featured in the events which are the subject of the present proceeding. These paragraphs of the FASOC collect in one place a useful dramatis personae for this case. With one or two exceptions, which I shall identify, the Obeid respondents and Loyal Coal admitted the matters pleaded in pars 1 to 61 of the FASOC. The Cascade respondents and the CMG respondents did not admit most of those matters but, at the trial, did not seriously dispute most of them. Subject to the matters in dispute which I shall shortly identify, I will proceed in these Reasons upon the basis that the facts and matters pleaded at pars 1 to 61 of the FASOC are true. I make findings to that effect.

51    Paragraphs 1 to 61 of the FASOC are in the following terms:

Parties

Applicant

1.    The applicant is a body corporate established pursuant to section 6A of the Competition and Consumer Act 2010 (Cth), formerly the Trade Practices Act 1974 (Cth) (the CCA), and is entitled to sue in its corporate name.

Corporate Respondents

Cascade

2.    The first respondent, Cascade Coal Pty Ltd (Cascade) is and at all material times was a corporation duly incorporated according to law and a trading corporation within the meaning of s 4 of the CCA.

3.    At all material times from 21 August 2009, Cascade held 100% of the issued share capital in Mt Penny Coal Pty Ltd (Mt Penny Coal).

4.    At all material times from 4 September 2009, Cascade held 100% of the issued share capital in Mt Penny Properties Pty Ltd (Mt Penny Properties).

Voope

5.    The second respondent, Mincorp Investments Pty Limited, previously known as Voope Pty Ltd (Voope), is and at all material times was a corporation duly incorporated according to law and a trading corporation within the meaning of s 4 of the CCA.

6.    At all material times from on or about 28 July 2008 to 10 December 2009, Gregory Allen Skehan (Greg Skehan) held 100% of the issued share capital in Voope on bare trust for the Obeid Family Trust No. 2, or alternatively, for members of the Obeid Family (as defined below) including, at least, the sixth respondent, Moses Edward Obeid (Moses Obeid), and the seventh respondent, Paul Edward Obeid (Paul Obeid).

7.    At all material times from 2 June 2009, Voope owned 100% of the issued share capital in the third respondent Loyal Coal Pty Ltd, formerly Monaro Coal Pty Ltd (Loyal), and was a related body corporate of Loyal for purposes of s 4A(5) of the CCA.

Loyal

8.    The third respondent, Loyal, is and at all material times was a corporation duly incorporated according to law and a trading corporation within the meaning of s 4 of the CCA.

9.    At all material times prior to 2 June 2009, Loyal was a wholly owned subsidiary of Monaro Mining NL (Monaro Mining).

10.    At all material times from 2 June 2009, Loyal was a wholly owned subsidiary of Voope and a related body corporate of Voope for purposes of s 4A(5) of the CCA.

Locaway

11.    The fourth respondent, Locaway Pty. Limited (Locaway), is and at all material times was a corporation duly incorporated according to law and a trading corporation within the meaning of s 4 of the CCA.

12.    At all material times, the directors of Locaway included Moses Obeid and Paul Obeid.

13.    At all material times, Locaway was trustee for the Moona Plains Family Trust.

14.    At all material times, the beneficiaries of the Moona Plains Family Trust included Moses Obeid and Paul Obeid.

15.    At all material times, Locaway held the property known as “Cherrydale Park” Bylong (being Lot 1 in Deposited Plan 421103 and Lot 31 in Deposited Plan 598162), on trust for the beneficiaries of the Moona Plains Family Trust.

Coal & Minerals

16.    The fifth respondent, Coal & Minerals Group Pty Ltd (Coal & Minerals):

16.1.    is and at all material times from on or about 16 June 2010 was a corporation duly incorporated according to law and a trading corporation within the meaning of s 4 of the CCA; and

16.2.    at all material times until 27 September 2010 had the ninth respondent, Richard Jonathan Poole (Richard Poole) as its sole director and shareholder;

16.3.    at all material times after 27 September 2010 had Arthur Phillip Pty Ltd (Arthur Phillip) as its sole shareholder and Richard Poole as its sole director.

Southeast Investments

17.    The sixth respondent, Southeast Investment Group Pty Limited (Southeast Investments):

17.1.    is and at all material times was a corporation duly incorporated according to law and a trading corporation within the meaning of s 4 of the CCA; and

17.2.    at all material times had Sevag Chalabian as its sole director and shareholder.

Individual Respondents

Moses Obeid

18.    The seventh respondent, Moses Obeid, was at all material times:

18.1.    a director of Locaway;

18.2.    a director of Obeid Corporation Pty Ltd (Obeid Corporation);

18.3.    a beneficiary of the Obeid Family Trust No. 1;

18.4.    a beneficiary of the Obeid Family Trust No. 2; and

18.5.    a beneficiary of the Moona Plains Family Trust.

Paul Obeid

19.    The eighth respondent, Paul Obeid, was at all material times:

19.1.    a director and secretary of Locaway;

19.2.    a director of Obeid Corporation;

19.3.    a beneficiary of the Obeid Family Trust No. 1;

19.4.    a beneficiary of the Obeid Family Trust No. 2; and

19.5.    a beneficiary of the Moona Plains Family Trust.

Obeid Family

20.    Moses Obeid and Paul Obeid are brothers, together with Gerard Edward Obeid, Damian Edward Obeid and Edward Joseph Obeid (the Obeid Family).

21.    Members of the Obeid Family conducted numerous business transactions together. In conducting their business transactions, members of the Obeid Family often utilised the following structure:

21.1.    a company would be used to enter into the transaction, the directors and shareholders of which would be associates of the Obeid Family such as a family friend or an accounting, business or legal adviser;

21.2.    the shareholder or shareholders of the company would hold the shares on trust for one or more members of the Obeid Family or their relatives, or on trust for further companies or trusts the ultimate beneficiaries of which were one or more members of the Obeid Family, their spouses or their relatives; and

21.3.    the director or directors of the company would act on the instructions of one or more members of the Obeid Family and for their benefit.

22.    Each of Voope, Loyal (from 2 June 2009), Southeast Investments, Calvin Holdings Pty Ltd (Calvin Holdings), Equitexx Pty Limited (Equitexx), Buffalo Resources Pty Limited (Buffalo) and Rothshire Group Pty Limited, previously known as United Pastoral Group Pty Limited, (UPG) were entities that adopted, or operated in accordance with, the structure referred to in the previous paragraph.

23.    By reason of the matters pleaded in paragraphs 20 to 22:

23.1.    members of the Obeid Family, including Moses Obeid and Paul Obeid, had authority to negotiate transactions on behalf of each of Voope, Loyal (from 2 June 2009), Southeast Investments, Calvin Holdings, Equitexx, Buffalo and UPG; and

23.2.    Moses Obeid and Paul Obeid were agents for each of Voope, Loyal (from 2 June 2009), Southeast Investments, Calvin Holdings, Equitexx, Buffalo and UPG, and their conduct was conduct within their actual or apparent authority, for the purposes of section 84 of the CCA.

23A.    Further or in the alternative, the conduct of Moses Obeid and Paul Obeid alleged herein with respect to each of Voope, Loyal, Southeast Investments, Calvin Holdings, Equitexx, Buffalo and UPG was conduct engaged in with the express or implied consent or agreement of the directors of each of those companies for the purposes of s 84(2)(b) of the CCA, in circumstances where the giving of such consent or agreement was within the actual or apparent authority of those directors in each case.

24.    Further or in the alternative to the allegation in paragraph 23.2 above:

24.1.    Moses Obeid and Paul Obeid were at all material times directors of Voope and (from 2 June 2009) Loyal within the meaning of the CCA, and their conduct was conduct within their actual or apparent authority as directors of Voope and/or Loyal, for the purposes of section 84 of the CCA;

24.2.    Moses Obeid, Paul Obeid and Paul Gardner Brook (Gardner Brook) were at all material times officers of Voope and (from 2 June 2009) Loyal;

24.3.    Moses Obeid and Paul Obeid were (either together or individually) the directing mind and will of each of Voope and (from 2 June 2009) Loyal; and, or alternatively,

24.4.    Moses Obeid, Paul Obeid and Gardner Brook were each persons able to make contracts or arrangements with third parties, or to reach understandings with third parties, on behalf of Voope and (from 2 June 2009) Loyal.

Richard Poole

25.    The ninth respondent, Richard Poole:

25.1.    was a director of Cascade at all material times since its incorporation on or about 7 April 2006;

25.2.    was a director of Mt Penny Coal since its incorporation on or about 21 August 2009;

25.3.    was a director of Mt Penny Properties since its incorporation on or about 4 September 2009;

25.4.    was a director of Coal & Minerals since its incorporation on or about 16 June 2010; and

25.5.    held 100% of the issued share capital in Coal & Minerals from on or about 16 June 2010 to on or about 27 September 2010.

26.    Richard Poole had actual or apparent authority for the purposes of section 84 of the CCA to act on behalf of Cascade in relation to the conduct pleaded in paragraphs 77 to 148 below.

27.    Richard Poole had actual or apparent authority for the purposes of section 84 of the CCA to act on behalf of Coal & Minerals in relation to the conduct pleaded in paragraphs 142 to 163 below.

John McGuigan

28.    The tenth respondent, John Vern McGuigan (John McGuigan) was:

28.1.    a director of Cascade from on or about 19 February 2009;

28.2.    a director of Mt Penny Coal since its incorporation on or about 21 August 2009; and

28.3.    a director of Mt Penny Properties since its incorporation on or about 4 September 2009.

29.    John McGuigan had actual or apparent authority for the purposes of section 84 of the CCA to act on behalf of Cascade in relation to the conduct pleaded at paragraphs 77 to 148 below.

James McGuigan

30.    The eleventh respondent, James William McGuigan (James McGuigan) was at all material times an employee of Arthur Phillip.

31.    James McGuigan:

31.1.     had actual or apparent authority for the purposes of section 84 of the CCA to act on behalf of Cascade in relation to the conduct pleaded in in [sic] paragraphs 77 to 128 below; or, alternatively,

31.2.     engaged in such conduct at the direction of, or with the express or implied consent or agreement of, one or more directors of Cascade for the purposes of s 84(2)(b) of the CCA, and in circumstances where the giving of such direction, consent or agreement was within the actual or apparent authority of those directors.

Other Relevant Corporations

Arthur Philip [sic]

32.    Arthur Phillip is and at all material times was a corporation duly incorporated according to law.

33.    At all material times Arthur Phillip:

33.1.    employed Richard Poole and James McGuigan; and

33.2.    provided advisory and investment banking services to Cascade.

Buffalo

34.    Buffalo was a corporation duly incorporated according to law at all material times from about 3 June 2009 until its deregistration on or about 9 September 2010.

Calvin Holdings

35.    Calvin Holdings is and at all material times from 28 April 2011 was a corporation duly incorporated according to law.

36.    At all material times from about 29 April 2011, Calvin Holdings was trustee for the Obeid Family Trust No. 2.

Equitexx

37.    Equitexx is and at all material times was a corporation duly incorporated according to law.

38.    At all material times until about 28 April 2011, Equitexx was trustee for the Obeid Family Trust No. 2.

39.    At all material times from 3 June 2009 to 9 September 2010, Equitexx held 88% of the issued share capital in Buffalo.

Geble

40.    Geble Pty Ltd (Geble) is and at all material times was a corporation duly incorporated according to law.

41.    At all material times, Geble held the property known as “Donola” at Bylong (as in 77/DP755419, 78/DP755419, 90/DP755419, 177/DP755419, 178/DP755419, 192/DP755419, 210/DP755419, 211/DP755419 and 212/DP755419), on trust for the beneficiaries of the Elbeg Unit Trust.

42.    At all material times:

42.1.    50% of the units in the Elbeg Unit Trust were held by UPG on trust for the beneficiaries of the Moona Plains Family Trust; and

42.2.    50% of the units in the Elbeg Unit Trust were held by Challenge Property Investments Group Pty Limited as trustee for the Triulco Family Trust.

JKL

43.    Justin Kennedy Lewis Pty Ltd, formerly Coopers World Pty Ltd, (JKL) is and at all material times was a corporation duly incorporated according to law.

44.    At all material times, Justin Kennedy Lewis (Justin Lewis) held 100% of the issued share capital in JKL.

45.    At all material times, JKL held the property known as “Coggan Creek” at Bylong (as in 203/DP755419), on trust for the beneficiaries of the Justin Kennedy Lewis Family Trust.

Monaro Mining

46.    Monaro Mining is and was at all material times a corporation duly incorporated according to law.

47.    At all material times prior to 2 June 2009, Monaro Mining owned 100% of the issued share capital in Loyal.

Mt Penny Coal

48.    Mt Penny Coal is and at all material times from on or about 21 August 2009 was:

48.1.    a corporation duly incorporated according to law; and

48.2.    a wholly owned subsidiary of Cascade.

Mt Penny Properties

49.    Mt Penny Properties is and at all material times from on or about 4 September 2009 was:

49.1.    a corporation duly incorporated according to law; and

49.2.    a wholly owned subsidiary of Cascade.

Warbie

50.    Warbie Pty Limited (Warbie) is and at all material times was a corporation duly incorporated according to law.

51.    At all material times, 100% of the issued share capital in Warbie was held by Gardner Brook.

52.    At all material times from 3 June 2009 to 9 September 2010, Warbie held 12% of the issued share capital in Buffalo.

UPG

53.    UPG is and at all material times was a corporation duly incorporated according to law.

54.    At all material times, Andrew Ausama Kaidbay (Andrew Kaidbay) was the sole director and shareholder of UPG.

Other relevant individuals

Gardner Brook

55.    Gardner Brook:

55.1.    was a director of Buffalo from on or about 3 June 2009 to on or about 9 September 2010;

55.2.    was a director of Warbie from on or about 3 June 2009 to on or about 18 December 2011;

55.3.    held 100% of the capital issued shares in Warbie at all material times from on or about 3 June 2009;

55.4.    was a director of Loyal from on or about 16 September 2009 to on or about 16 August 2011;

55.5.    at all material times, in relation to the matters pleaded in this statement of claim, was acting as an adviser to the Obeid Family, or alternatively, to Moses Obeid and/or Paul Obeid, and entered into transactions on their behalf, or alternatively primarily on their behalf; and

55.6.    at all material times, engaged in the conduct pleaded in this statement of claim, at the direction of, or with the express or implied consent or agreement of, Moses Obeid and/or Paul Obeid for the purposes of s 84(2)(b) of the CCA, and in circumstances where the giving of such direction, consent or agreement was within the actual or apparent authority of Moses Obeid and Paul Obeid as directors or agents of Voope; and, or alternatively,

55.7.    at all material times from 2 June 2009, engaged in the conduct pleaded in this statement of claim, with the express or implied consent or agreement of Andrew Kaidbay for the purposes of s 84(2)(b) of the CCA, and in circumstances where the giving of such direction or consent was within the actual or apparent authority of Andrew Kaidbay as a director of Loyal; and, or alternatively,

55.8    at all material times from 2 June 2009, engaged in the conduct pleaded in this statement of claim, at the direction of, or with the express or implied consent or agreement of, Moses Obeid and/or Paul Obeid for the purposes of s 84(2)(b) of the CCA, and in circumstances where the giving of such direction, consent or agreement was within the actual or apparent authority of Moses Obeid and Paul Obeid as directors or agents of Loyal.

Sevag Chalabian

56.    At all material times from at least 9 November 2009 to at least 31 December 2010, Sevag Chalabian was a director of Lands Legal Pty Limited (Lands Legal).

57.    At all material times from at least 7 May 2010 to at least 31 December 2010, Sevag Chalabian was sole director, secretary and shareholder of Southeast Investments.

58.    At all material times from at least 9 November 2009, Sevag Chalabian acted as a solicitor for Locaway, Geble and JKL in connection with the transactions and agreements pleaded at paragraphs 128 to 132 below.

Andrew Kaidbay

59.    Andrew Kaidbay was:

59.1.    a director of Loyal from on or about 4 June 2009 to on or about 15 September 2009;

59.2.    the sole director and secretary of UPG from on or about 15 February 2008; and

59.3.    a director of Buffalo between 3 June 2009 and 9 September 2010.

60.    At all material times, in respect of the matters pleaded in this statement of claim, Andrew Kaidbay acted on the instructions, and for the benefit, of members of the Obeid Family, or alternatively, on the instructions, and for the benefit, of Moses Obeid and/or Paul Obeid.

Greg Skehan

61.    Greg Skehan:

61.1.    was at all material times a partner in the firm Colin Biggers & Paisley (now known as CBP Lawyers);

61.2.    was a director of Voope in the period 28 July 2008 to 10 December 2009, and as pleaded in paragraph 6 above, held 100% of the issued share capital in Voope on bare trust for the Obeid Family Trust No. 2, or alternatively, for members of the Obeid Family including, at least, Moses Obeid and Paul Obeid, at all material times from on or about 28 July 2008 to 10 December 2009;

61.3.    was a Dubai resident during the period August 2008 to October 2009, and had no day-to-day involvement in the affairs of Voope during that period;

61.4.    acted on, and followed, the requests, instructions and directions of members of the Obeid Family (including at least Moses Obeid and Paul Obeid) in conducting the affairs of Voope;

61.5.    executed documents on behalf of Voope at the request, instruction or direction of members of the Obeid Family (including Moses at least [sic] Obeid and Paul Obeid);

61.6.    was acting within the scope of his actual or apparent authority for the purposes of s 84 of the CCA when executing documents on behalf of Voope; and

61.7.    resigned as a director of Voope on or about 10 December 2009 at the request, instruction or direction of members of the Obeid Family (including at least Moses Obeid and Paul Obeid).

52    The matters in pars 1 to 61 which were in dispute were whether:

(a)    Poole ceased to be the sole shareholder of CMG on 21 September 2010 or on 27 September 2010 (par 16.2 and par 16.3);

(b)    Each of Voope, Loyal Coal (from 2 June 2009) and Buffalo were entities that adopted, or operated in accordance with, the structure referred to in par 21 of the FASOC. The Obeid respondents admitted that Calvin Holdings, Equitexx Pty Limited (Equitexx) and UPG did so operate (par 21 and par 22);

(c)    Paul Obeid had the pleaded authority in respect of Voope, Loyal Coal and Buffalo or was relevantly an agent of any of those companies. The pleaded authority and agency were both admitted insofar as Moses Obeid was concerned and also admitted in respect of Southeast, Calvin Holdings, Equitexx and UPG insofar as Paul Obeid was concerned (pars 23 and 23A);

(d)    Paul Obeid was ever a director of Voope or Loyal Coal; Paul Obeid was ever an officer of Voope or Loyal Coal; Paul Obeid was, either individually or together with Moses Obeid, the directing mind and will of Voope or Loyal Coal; and Paul Obeid was ever a person who could make contracts or arrive at arrangements or understandings on behalf of Voope or Loyal Coal (par 24). These matters are all denied by the Obeid respondents. Paragraph 24 is admitted in respect of Moses Obeid and separately asserted by those respondents as also being correct in respect of Brook;

(e)    Poole had actual or apparent authority for the purposes of s 84 of the CCA to act on behalf of Cascade in relation to the conduct pleaded at pars 77 to 148 of the FASOC or on behalf of CMG in relation to the conduct pleaded at pars 142 to 163 of the FASOC (par 26 and par 27);

(f)    John McGuigan had actual or apparent authority for the purposes of s 84 of the CCA to act on behalf of Cascade in relation to the conduct pleaded at pars 77 to 148 of the FASOC (par 29);

(g)    James McGuigan had actual or apparent authority for the purposes of s 84 of the CCA to act on behalf of Cascade in relation to the conduct pleaded in pars 77 to 128 of the FASOC or engaged in conduct at the direction of, or with the express or implied consent or agreement of, one or more of the directors of Cascade for the purposes of s 84(2)(b) of the CCA, acting within their authority (par 31);

(h)    Brook acted as an adviser to the Obeid family or, alternatively, Moses Obeid and/or Paul Obeid (par 55.5);

(i)    Brook acted at the direction of Moses Obeid and/or Paul Obeid in their capacity as directors of Voope (par 55.6);

(j)    Brook acted at the direction of Andrew Kaidbay and/or Moses Obeid and/or Paul Obeid in their capacity as directors of Loyal Coal (par 55.7); and

(k)    Brook, acting in his own interests, also gave directions to Skehan in relation to the affairs of Voope.

53    At pars 62 to 93 of the FASOC, the ACCC pleads a number of contextual facts and matters concerning Voope’s dealings with MMNL, the EOI process and MMNL’s involvement in that process. Most of the matters pleaded in this section of the FASOC were either admitted or not seriously disputed. However, some matters were in contest. These were:

(a)    Whether, from on or around 28 July 2008, Moses Obeid and Paul Obeid engaged Brook to act for Voope in negotiating a possible transaction with MMNL (par 62). The Obeid respondents deny that allegation;

(b)    Whether Brook also gave instructions to Christopher Rumore, a solicitor and partner in the law firm, Colin Biggers & Paisley (CBP), who was, in 2008 and 2009, acting for members of the Obeid family, in relation to negotiations with MMNL and whether he did so acting on his own behalf or, for a time, acting on behalf of Lehman;

(c)    Whether, in the period from around 15 May 2009 until 1 June 2009, Brook was acting at the direction of Moses Obeid and on behalf of Voope when he negotiated with the directors of MMNL for the acquisition by Voope of all of the shares in Monaro Coal and the nomination of Monaro Coal as the entity to take up any ELs offered by the DPI (par 82). The Obeid respondents deny that Brook was acting at the direction of Moses Obeid in the respects alleged, deny that Brook was acting on behalf of Voope in the negotiations with MMNL and contend that he was acting on his own behalf and using his own authority as a director of Voope; and

(d)    Whether MMNL’s decision to withdraw the EOIs which it had lodged with the DPI in respect of the Mt Penny and Glendon Brook coal exploration areas reflected in the resolution of the Board of Directors of MMNL passed on 22 May 2009 was contingent upon Voope agreeing new terms with MMNL which would include an outline of a satisfactory mechanism for transferring from MMNL to Voope or its nominee any ELs that may be initially awarded to MMNL, a promise to hold MMNL harmless in all respects and an agreement to reimburse MMNL all of the expenses incurred by it in relation to its EOI in respect of Mt Penny (par 83).

54    At pars 94 to 97 of the FASOC, the following is pleaded:

Competition

94.    At all material times, it was in the interests of Voope that Loyal was successful in obtaining Exploration Licences in respect of the Mount Penny and Glendon Brook Coal Release Areas.

95.    The effect of the request by Monaro Mining pleaded in paragraph 88.1 above was that:

95.1.    on and from 1 June 2009, or alternatively, 2 June 2009, Loyal was deemed to be the applicant for any Exploration Licence issued pursuant to the Monaro Mining EOI; and

95.2.    the DPI was required to grant any Exploration Licence issued pursuant to the Monaro Mining EOI to Loyal.

Particulars:

Mining Act 1992 (NSW), s 133

96.    Further, and in the alternative, at all material times, it was the practice of the DPI to:

96.1.    assign an Exploration Licence or an application for an Exploration Licence to a company nominated by the successful applicant for an Exploration Licence, upon the request of that applicant; or

96.2.    permit the holder of an Exploration Licence to transfer or assign the Exploration Licence to another corporation;

96.3.    permit a party participating in an expressions of interest process to nominate another entity to be the person to whom ministerial consent to apply for an Exploration Licence is given in the event that the party’s expression of interest was successful; or

96.4.    issue an Exploration Licence to another entity nominated by an applicant for an Exploration Licence, where the applicant was the successful participant in an expressions of interest process and/or had received consent to apply for an Exploration Licence;

provided in each case that the person to whom the Exploration Licence or application was to be issued, transferred or assigned complied with the formal requirements to hold an Exploration Licence, including under s 129 of the Mining Act 1992 (NSW) and provided that the decision maker was not satisfied that the application ought to be refused pursuant to s 22 of that Act.

97.    By reason of the matters pleaded in paragraphs 64 to 89 and 94 to 96, at all material times from at least 1 June 2009, or alternatively, 2 June 2009:

97.1.    Loyal was competitive with, or likely to be competitive with, Cascade within the meaning of s 4D and in competition with, or likely to be in competition with Cascade within the meaning of s 44ZZRD(4) of the CCA in relation to:

97.1.1.    the acquisition of services from the Crown; and/or

97.1.2.    the supply of services to the Crown; and

97.2.    further or in the alternative, by reason of its ownership and control of Loyal, Voope was competitive with, or likely to be competitive with, Cascade within the meaning of s 4D and in competition with, or likely to be in competition with Cascade within the meaning of s 44ZZRD(4) of the CCA in relation to:

97.2.1.    the acquisition of services from the Crown; and/or

97.2.2.    the supply of services to the Crown.

Particulars

The September 2008 EOI process contemplated both the acquisition of services from the Crown and/or the supply of services to the Crown by the successful bidder

The services which Cascade and Loyal, and/or Cascade and Voope, competed to acquire or were likely to compete to acquire, included:

i.    the right to participate in the EOI process;

ii.    the opportunity to apply for, or obtain, an Exploration Licence for coal in respect of mining activities in the Mount Penny and Glendon Brook Coal Release Areas;

iii.    the right to apply for, or obtain, the necessary approvals for mining activities in the Mount Penny and Glendon Brook Coal Release Areas;

iv.    the contractual right to the grant of an Exploration Licence; and

v.    the rights conferred by the grant of an Exploration Licence, including but not limited to the right to apply for a Mining Lease under s 51(4)(a) of the Mining Act 1992 and thereafter conduct mining activities pursuant to any Exploration Licence granted by the Minister.

The services which Cascade and Loyal, and/or Cascade and Voope, competed to supply or were likely to compete to supply included:

vi.    giving the Crown the valuable opportunity to grant an Exploration Licence in respect of the Mount Penny and Glendon Brook Coal Release Areas under the Mining Act 1992 (NSW), with conditions, undertakings and requirements to be performed by the licensee;

vii.    the performance of the conditions, undertakings and requirements attached to an Exploration Licence in respect of the Mount Penny and Glendon Brook Coal Release Areas, including paying or negotiating for the payment of additional financial contributions referred to at p 10 of the document titled Expression of Interest Information for the Mount Penny and Glendon Brook Coal Release Areas published by the Crown, dated January 2009;

viii.    the exploration of each of the Mount Penny and Glendon Brook Coal Release Areas;

ix.    the development and operation of a mine and related infrastructure in each of the Mount Penny and Glendon Brook Coal Release Areas; and

x.    the payment of royalties to the Crown.

55    Thus, the parties alleged to be in competition from at least 1 June 2009 or, alternatively, 2 June 2009, were Loyal Coal and Cascade (par 97.1) and Voope and Cascade (par 97.2). The services which those companies competed to acquire or were likely to compete to acquire were the various rights set out at subpars i., iii., iv. and v. of the Particulars provided in par 97 and the opportunity described in subpar ii. of those Particulars. The services which those companies competed to supply or were likely to compete to supply were those described at subpars vi. to x. of those Particulars.

56    A critical element in the ACCC’s case is the proposition pleaded at par 88.1 of the FASOC that, in accordance with the Deed of Release dated 2 June 2009 between MMNL and Voope, MMNL wrote to the DPI on 1 June 2009 and again on 2 June 2009 requesting that any EL issued pursuant to any EOI submitted by MMNL be issued to Loyal Coal. This request is said to have the consequences that Loyal Coal was deemed to be the EOI applicant in respect of such bids from that point on and that the DPI was obliged to grant any ELs that flowed from such bids to Loyal Coal (par 95). The fact that letters were sent to the DPI as alleged in par 88 was admitted by all parties. The alleged consequences were not admitted.

57    The allegations made at pars 94 to 97 of the FASOC are all either denied or not admitted.

58    At par 98 of the FASOC, the ACCC alleges that, between about 23 May 2009 and 5 June 2009, Brook, Moses Obeid and Paul Obeid negotiated with representatives of Cascade and sought to reach agreement on, the terms of a contract, arrangement or understanding in respect of the Mt Penny and Glendon Brook coal exploration areas. Those allegations are essentially admitted by the respondents although the Cascade respondents and the CMG respondents quibble about the capacity in which Poole and James McGuigan participated in the discussions referred to in that paragraph.

59    At par 99 of the FASOC, the ACCC makes the following allegations:

99.    In the course of the negotiations referred to in the previous paragraph:

99.1.    one or more of Gardner Brook, Moses Obeid and Paul Obeid indicated they had an ability to gain control of the Monaro Mining bid for the Mount Penny and Glendon Brook Coal Release Areas and could pursue that bid if necessary;

99.2.    one or more of Gardner Brook, Moses Obeid and Paul Obeid indicated that members of the Obeid Family had formed an alliance of owners of land the subject of the Mount Penny Coal Release Area, being Cherrydale Park, Donola and Coggan Creek, and were in a position to negotiate for the sale of that land to Cascade;

99.3.    there were negotiations for the withdrawal of the Monaro Mining bid for the Mount Penny and Glendon Brook Coal Release Areas;

99.4.    there were negotiations as to the grant by Cascade to members of the Obeid Family or to Gardner Brook (or their nominees) of an interest in any resulting mining venture, and negotiations as to the size of that interest (ultimately agreed at 25%) and its terms; and

99.5.    there were negotiations as to the purchase by Cascade of Cherrydale Park, Donola and Coggan Creek, including the purchase price (ultimately agreed at four times land value).

60    The respondents admit the matters pleaded at pars 99.2 to 99.5 but some of them dispute the matters pleaded at par 99.1. In particular, the Cascade respondents contend that one or more of Brook, Moses Obeid and Paul Obeid indicated during the relevant negotiations that MMNL had formally resolved to withdraw its bids for the Mt Penny and Glendon Brook coal exploration areas because MMNL was unable to meet the financial obligations assumed by it in its EOI and because there was a determination by MMNL to focus on uranium exploration following a Board dispute. The CMG respondents do not admit the matters alleged at par 99.

61    At pars 100 to 107 of the FASOC, the ACCC alleges that, at a meeting held on or about 5 June 2009 attended by Moses Obeid, Brook, Poole, John McGuigan and James McGuigan, the Buffalo Agreement and the Landowners Agreement were signed.

62    At par 102 of the FASOC, the ACCC alleges that the Buffalo Agreement was executed in circumstances where Moses Obeid, Paul Obeid and Brook had effective control over Loyal Coal and had actual or apparent authority to act on behalf of Loyal Coal as they saw fit and with the knowledge, consent and agreement of Voope, Loyal Coal, Moses Obeid, Paul Obeid and Brook. The Obeid respondents admitted these matters. The remaining respondents did not contest these matters at the trial.

63    At par 105 of the FASOC, the ACCC alleges that the Landowners Agreement was negotiated and finalised by Moses Obeid and Paul Obeid, who were directors of Locaway, and who had authority to enter into an agreement on behalf of Locaway for the sale of Cherrydale. Accordingly, as alleged at par 106 of the FASOC, the ACCC alleges that Locaway was a party to the Landowners Agreement. The Obeid respondents also admitted these matters. The other respondents did not contest these matters at the trial.

64    It is then alleged that the Landowners Agreement was executed in circumstances where Moses Obeid, Paul Obeid and Brook had effective control over Loyal Coal and had actual or apparent authority to act on behalf of Loyal Coal as they saw fit and with the knowledge, consent and agreement of Voope, Loyal Coal, Moses Obeid, Paul Obeid, Brook and Locaway. The Obeid respondents admitted these matters in respect of Moses Obeid and Brook but denied them in respect of Paul Obeid. The other respondents did not contest these matters at the trial.

65    At pars 108 to 111 of the FASOC, the ACCC pleads the following:

The EOI Withdrawal Understanding

108.    By reason of the matters pleaded in paragraphs 98 to 102 above, on or about 5 June 2009, Cascade made a contract or arrangement or arrived at an understanding (the EOI Withdrawal Understanding), with:

108.1.    Loyal;

108.2.    Gardner Brook;

108.3.    Buffalo; and

108.4.    further or alternatively, Voope

containing a provision that Loyal, Gardner Brook and any other “associates or related parties” of Buffalo including any companies controlled by the Obeid Family or by Gardner Brook (including Voope) would:

108.5.    withdraw any existing application for an Exploration Licence in relation to the Mount Penny and Glendon Brook Coal Release Areas (including the Monaro Mining EOI); and/or

108.6.    not pursue the grant of any mining rights, including the grant of an Exploration Licence, in the Mount Penny Coal Release Area or any contiguous area or the Glendon Brook Coal Release Area

and in consideration of these matters, Cascade would:

108.7.    vest its interest in an Exploration Licence for the Mount Penny Coal Release Area in a separate company or unincorporated venture; and

108.8.    grant Buffalo a 25% interest in the separate company or unincorporated venture (together the 25% Interest).

Particulars

In addition to the matters pleaded in paragraphs 98 to 102 above, the existence of the EOI Withdrawal Understanding is to be inferred from:

i.    Loyal’s conduct in withdrawing the Monaro Mining EOI as pleaded at paragraphs 118 and 119, below;

ii.    the email from Gardner Brook to James McGuigan pleaded at paragraph 119 below; and

iii.    the conduct of Cascade, Coal & Minerals and Southeast Investments in relation to the finalisation of the 25% Interest pleaded at paragraphs 142 to 163 below.

108A     In circumstances where Loyal was a party to a contract, arrangement or understanding as alleged in paragraphs 108, Voope is taken to be a party to that contract, arrangement or understanding pursuant to s 44ZZRC of the CCA.

109.    The provision pleaded in paragraph 108 above constituted:

109.1.    an exclusionary provision within the meaning of s 4D of the CCA; and, or alternatively,

109.2.    a cartel provision for the purposes of s 44ZZRD(3)(c) of the CCA, as that section applied from 24 July 2009; and

109.3.    a cartel provision for the purposes of s 44ZZRD(3)(a)(iii) of the CCA, as that section applied from 24 July 2009, in that it had a substantial purpose of preventing, restricting or limiting the supply, or likely supply, of services to the Crown by Loyal, Gardner Brook and any other “associates or related parties” of Buffalo, including Voope.

Particulars

The applicant refers to and repeats the particulars to paragraph 97.2

110.    Alternatively, by reason of the matters pleaded in paragraphs 98 to 107 above, on or about 5 June 2009, Cascade made a contract or arrangement or arrived at an understanding (the EOI Withdrawal and Land Sale Understanding), with at least:

110.1.    Loyal;

110.2.    [Not used];

110.3.    Gardner Brook;

110.4.    Locaway;

110.5.    Buffalo; and

110.6    further or alternatively, Voope

containing a provision that Loyal, Gardner Brook and any other “associates or related parties” of Buffalo including any companies controlled by the Obeid Family or by Gardner Brook (including Voope) would:

110.7    withdraw any existing application for an Exploration Licence in relation to the Mount Penny and Glendon Brook Coal Release Areas (including the Monaro Mining EOI); and/or

110.8    pursue the grant of any mining rights, including the grant of an Exploration Licence, in the Mount Penny Coal Release Area or any contiguous area or the Glendon Brook Coal Release Area

and in consideration of these matters, Cascade would:

110.9    grant Buffalo the 25% Interest;

110.10.    purchase the properties known as Cherrydale Park, Coggan Creek and Donola at a multiple of four times the unencumbered value of those properties; and

110.11.    refinance the mortgages over those properties with a facility at a zero per cent (0%) coupon rate or alternatively pay all interest attached to the existing mortgages.

Particulars

In addition to the matters pleaded at paragraphs 98 to 107 above, the existence of the EOI Withdrawal and Land Sale Understanding is to be inferred from:

i.    Loyal’s conduct in withdrawing the Monaro Mining EOI as pleaded at paragraphs 118 and 119, below;

ii.    the email from Gardner Brook to James McGuigan pleaded at paragraph 119 below;

iii.    the conduct of Cascade, Locaway, Geble and JKL pleaded at paragraphs 128 to 131 below; and

iv.    the conduct of Cascade, Coal & Minerals and Southeast Investments in relation to the 25% Interest pleaded at paragraphs 142 to 163 below.

110A.    In circumstances where Loyal was a party to a contract, arrangement or understanding as alleged in paragraphs 110, Voope is taken to be a party to that contract, arrangement or understanding pursuant to s 44ZZRC of the CCA.

111.    The provision pleaded in paragraph 110 above constituted:

111.1.    an exclusionary provision within the meaning of s 4D of the CCA; and, or alternatively

111.2.    a cartel provision for the purposes of s 44ZZRD(3)(c) of the CCA, as that section applied from 24 July 2009; and

111.3.    a cartel provision for the purposes of s 44ZZRD(3)(a)(iii) of the CCA, as that section applied from 24 July 2009, in that it had a substantial purpose of preventing, restricting or limiting the supply, or likely supply, of services to the Crown by Loyal, Gardner Brook and any other “associates or related parties” of Buffalo, including Voope.

Particulars

The applicant refers to and repeats the particulars to paragraph 97.2

66    The matters pleaded in these paragraphs are essentially disputed by all respondents.

67    In light of the above matters, the two cases sought to be put against the primary contraveners may be summarised as follows:

(a)    On or about 5 June 2009, Cascade, Loyal Coal, Brook, Buffalo and Voope, made a contract or arrangement or arrived at an understanding (called the “EOI Withdrawal Understanding” in the FASOC) which understanding was not necessarily confined to the Buffalo Agreement and which understanding contained a provision whereby Loyal Coal, Brook and all associates or related parties of Buffalo (including any companies controlled by the Obeid family or by Brook including Voope), agreed to withdraw any existing EOIs in relation to the Mt Penny and Glendon Brook coal exploration areas lodged by them with the DPI or over which they had control (including the EOIs lodged in respect of those two areas by MMNL) and not pursue any exploration or mining rights over those areas in return for which Cascade would vest its interest in any EL granted to it in respect of the Mt Penny coal exploration area in a separate company or unincorporated joint venture and grant to Buffalo or its nominee a 25% equity interest in that separate company or unincorporated venture (pars 98 to 102, 108 and 108A of the FASOC);

(b)    Alternatively, on or about 5 June 2009, Cascade, Loyal Coal, Brook, Buffalo, Locaway and Voope made a contract or arrangement or arrived at an understanding (called the “EOI Withdrawal and Land Sale Understanding” in the FASOC) which understanding was not necessarily confined to the contents of the Buffalo Agreement and the Landowners Agreement and which understanding contained a provision whereby Loyal Coal, Brook and all associates or related parties of Buffalo (including any companies controlled by the Obeid family or by Brook including Voope) agreed to withdraw any existing EOIs in relation to the Mt Penny and Glendon Brook coal exploration areas lodged by them with the DPI or over which they had control (including the EOIs lodged in respect of those two areas by MMNL) and not pursue any exploration or mining rights over those areas in return for which Cascade would vest its interest in any EL granted to it in respect of the Mt Penny coal exploration area in a separate company or unincorporated joint venture, grant to Buffalo or its nominee a 25% equity interest in that separate company or unincorporated venture, purchase the properties known as Cherrydale, Donola and Coggan Creek at a multiple of four times the unencumbered value of those properties and refinance the mortgages over those properties with a facility at a zero percent (0%) coupon rate or alternatively pay all interest attached to the existing mortgages (pars 98 to 107, 110 and 110A of the FASOC);

(c)    Loyal Coal was competitive with, or likely to be competitive with, Cascade within the meaning of s 4D and in competition with, or likely to be in competition with, Cascade within the meaning of s 44ZZRD(4) of the CCA as alleged at par 97.1 of the FASOC;

(d)    By reason of its ownership and control of Loyal Coal, Voope was competitive with, or likely to be competitive with, Cascade within the meaning of s 4D and in competition with, or likely to be in competition with, Cascade within the meaning of s 44ZZRD(4) of the CCA as alleged in par 97.2 of the FASOC;

(e)    The impugned provisions contained in the EOI Withdrawal Understanding and in the EOI Withdrawal and Land Sale Understanding were made for purposes, or substantial purposes, which were proscribed purposes within the meaning of s 4D and s 44ZZRD(3)(a)(iii) and s 44ZZRD(3)(c) of the CCA;

(f)    The impugned provisions contained in the said Understandings constituted exclusionary provisions within the meaning of ss 4D, 45(2)(a)(i) and 45(2)(b)(i) of the CCA and cartel provisions within the meaning of s 44ZZRD(1) of the CCA; and

(g)    By making or arriving at the said Understandings containing such provisions, the parties to those Understandings contravened s 45(2)(a)(i) of the CCA and, by giving effect to those provisions, most of the parties to the said Understandings together with CMG and Southeast contravened s 45(2)(b)(i) and s 44ZZRK(1)(b) of the CCA. The case against Voope is confined to alleged contraventions of s 45(2)(a)(i) constituted by its conduct in making or arriving at the two Understandings in question and the case against Loyal Coal is confined to contraventions of s 45 by making or arriving at the two Understandings in question and also by giving effect to the impugned provisions contained in those Understandings. The case against Southeast and CMG is confined to their conduct in giving effect to the impugned provisions.

68    At pars 178 to 183 of the FASOC, the ACCC specifies the particular contraventions alleged against each of the primary contraveners (Cascade, Voope, Loyal Coal, Locaway, CMG and Southeast). Those paragraphs are in the following terms:

Contraventions

Cascade

178.    The first respondent, Cascade:

178.1.    contravened s 45(2)(a)(i) of the CCA by making or arriving at that the EOI Withdrawal Understanding as pleaded at paragraph 108 above;

178.2.    alternatively, contravened s 45(2)(a)(i) of the CCA by making or arriving at the EOI Withdrawal and Land Sale Understanding as pleaded at paragraph 110 above;

178.3.    contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by causing Mt Penny Properties to enter into the Deed of Put and Call Option with Locaway, Geble and JKL;

178.4.    contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by causing Mt Penny Coal to enter into the Access Agreements with Locaway, Geble and JKL as pleaded at paragraphs 128 to 132 above;

178.5.    contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by causing and funding Mt Penny Coal to make the payments to Locaway, Geble and JKL pleaded at paragraph 133 above; and

178.6.    contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of the EOI Withdrawal Understanding pleaded at paragraph 108 above or alternatively the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by its conduct in relation to the finalisation of the 25% Interest pleaded at paragraphs 144.2, 147 to 150 above.

Voope

179.    The second respondent, Voope:

179.1.    contravened s 45(2)(a)(i) of the CCA by making or arriving at the EOI Withdrawal Understanding as pleaded at paragraph 108 above;

179.2.    alternatively, contravened s 45(2)(a)(i) of the CCA by making or arriving at the EOI Withdrawal and Land Sale Understanding as pleaded at paragraph 110 above.

Loyal

180.    The third respondent, Loyal:

180.1.    contravened s 45(2)(a)(i) of the CCA by making or arriving at that the EOI Withdrawal Understanding as pleaded at paragraph 108 above;

180.2.    alternatively, contravened s 45(2)(a)(i) of the CCA by making or arriving at the EOI Withdrawal and Land Sale Understanding as pleaded at paragraph 110 above; and

180.3.    contravened s 45(2)(b)(i) of the CCA by giving effect to the provision of the EOI Withdrawal Understanding pleaded at paragraph 108 above or alternatively the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by withdrawing or purporting to withdraw the Monaro Mining EOI as pleaded at paragraph 118 above.

Locaway

181.    The fourth respondent, Locaway:

181.1.    contravened s 45(2)(a)(i) of the CCA by making or arriving at the EOI Withdrawal and Land Sale Understanding as pleaded at paragraph 110 above;

181.2.    contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by entering into the Deed of Put and Call Option with Mt Penny Properties;

181.3.    contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by entering into the Locaway Access Agreement with Mt Penny Coal as pleaded at paragraphs 128 to 131 above; and

181.4.    contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by requiring Mt Penny Coal to make the payments pleaded at paragraph 133 above.

Coal & Minerals

182.    The fifth respondent, Coal & Minerals contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of EOI Withdrawal Understanding pleaded at paragraph 108 above or alternatively the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by its conduct in relation to the finalisation of the 25% Interest pleaded at paragraphs 142 to 163 above.

Southeast Investments

183.    The sixth respondent, Southeast Investments contravened s 45(2)(b)(i) and s 44ZZRK of the CCA by giving effect to the provision of EOI Withdrawal Understanding pleaded at paragraph 108 above or alternatively the provision of the EOI Withdrawal and Land Sale Understanding pleaded at paragraph 110 above by its conduct in relation to the finalisation of the 25% Interest pleaded at paragraphs 142 to 162 above.

69    At pars 113 to 116 of the FASOC, the ACCC refers to the 6 June 2009 Agreement which is alleged to have operated as a variation of the Buffalo Agreement.

70    At par 117 of the FASOC, the ACCC pleads the following:

117.    In the balance of this pleading:

117.1.    a reference to the EOI Withdrawal Understanding includes a reference to the varied EOI Withdrawal Understanding;

117.2.    a reference to the EOI Withdrawal and Land Sale Understanding includes a reference to the varied EOI Withdrawal and Land Sale Understanding; and

117.3.    a reference to the 25% Interest includes a reference to that interest modified as pleaded in paragraph 115.2 above.

71    At pars 118 to 122 of the FASOC, the ACCC pleads that, on or about 9 June 2009, Loyal Coal withdrew, or purported to withdraw, the EOI lodged by MMNL in respect of the Mt Penny coal exploration area, in accordance with the arrangements made between Loyal Coal and Cascade. These matters were not disputed by any of the respondents.

72    At pars 128 to 135 of the FASOC, the ACCC pleads the facts concerning the Deed of Put and Call Option entered into between the owners of Cherrydale, Donola and Coggan Creek and Cascade dated 24 November 2009 pursuant to which Cascade agreed to purchase those properties at four times their unencumbered value and to refinance the mortgages over those properties or, alternatively, pay the interest due on those mortgages. At around the same time, Cascade entered into access agreements with the owners of those properties pursuant to which Cascade was given access to those properties upon payment of certain access fees. These matters were also not disputed.

73    At pars 136 to 171 of the FASOC, the ACCC recounts the facts and matters concerning the replacement of Buffalo by Southeast and then ultimately the buyout of the Obeid family’s interests in the proposed mining venture. The facts and matters pleaded in these paragraphs were not seriously in dispute.

74    At par 150 of the FASOC, the ACCC alleges that, between 20 October 2010 and 3 May 2012, CMG made five payments totalling $30 million to Southeast. At par 153, the ACCC alleges that, between 21 October 2010 and 4 May 2012, Southeast distributed $29,461,665 out of the $30 million received by it from CMG to entities owned and controlled by the Obeid family. Those allegations are admitted by the Obeid respondents and were not disputed by the other respondents.

75    At pars 172 to 178 of the FASOC, the ACCC pleads the facts, matters and circumstances which it contends demonstrate that each of CMG, Moses Obeid, Paul Obeid, Poole, John McGuigan and James McGuigan had knowledge which justifies each of those parties being made liable as accessories to the contraventions by Cascade, Voope, Loyal Coal, Locaway, CMG and Southeast.

76    At pars 184 to 205 of the FASOC, the ACCC pleads the particular contraventions relied upon against each of the individual respondents. I will discuss these allegations more fully later in these Reasons.

77    The respondents also rely upon several positive defences.

78    First, in answer to the contraventions of s 45(2)(a)(i) pleaded against Voope, Loyal Coal, Locaway and Southeast, the Obeid respondents plead that the EOI Withdrawal Understanding and the EOI Withdrawal and Land Sale Understanding were for the purposes of a joint venture within the meaning of s 4J of the CCA and did not have the purpose of substantially lessening competition, and did not have, and were not likely to have the effect of, substantially lessening competition and that, for those reasons, they have a defence to the ACCC’s claims based upon s 45(2)(a)(i) by reason of the provisions of s 76C of the CCA.

79    Second, for similar reasons, those respondents argue that s 44ZZRK of the CCA did not apply to any conduct giving effect to the impugned contracts or arrangements made or understandings arrived at in the present case because the alleged cartel provisions were for the purposes of a joint venture and the other exculpatory conditions specified in s 44ZZRP were satisfied.

80    Third, the Obeid respondents also contend that the ACCC cannot rely upon s 44ZZRC of the CCA because that provision did not come into force until 24 July 2009 and does not apply to conduct engaged in prior to that date.

81    The Cascade respondents and the CMG respondents also rely upon joint venture defences.

82    In its Amended Replies filed on 23 March 2016, the ACCC joined issue with the respondents’ Defences and pleaded that the respondents’ joint venture defences were not maintainable because they had not been adequately pleaded. However, the ACCC did not make any application to strike out those defences.

The Relevant Facts

The Witnesses

83    The ACCC called two witnesses, Brook and Bradley William Mullard. Brook swore two affidavits—the first on 5 November 2015 and the second on 24 March 2016. He was cross-examined at some length. Mullard affirmed three affidavits—the first on 21 August 2015, the second on 18 March 2016 and the third on 7 April 2016. He was also cross-examined. In 2009, Mullard was initially the Acting Executive Director of Mineral Resources at the DPI. He was subsequently appointed to that position. Mullard’s position at the DPI was a senior position.

84    The Cascade respondents called three witnesses: John McGuigan, James McGuigan and David Agnew. John McGuigan affirmed one affidavit (on 11 February 2016). James McGuigan affirmed two affidavits—the first on 11 February 2016 and the second on 1 April 2016. Agnew affirmed two affidavits—the first on 12 February 2016 and the second on 22 March 2016. All of these witnesses were cross-examined.

85    The CMG respondents called Poole as their only witness. He swore one affidavit (on 25 February 2016). He was also cross-examined.

86    The Obeid respondents did not call any witnesses. In particular, they did not call any of Moses Obeid, Paul Obeid, Gerard Obeid, Damien Obeid, Christopher Rumore, Greg Skehan, Andrew Kaidbay, Sevag Chalabian, Sid Sassine or Mario Sindone.

The Primary Facts

Introduction

87    In this section, I set out the relevant primary facts. This account is taken mostly from documents tendered in evidence before me. From time to time, the material gleaned from the documents is supplemented or explained by evidence from the witnesses.

88    Most of the facts recorded in this section of these Reasons were either admitted or not seriously in dispute. Where there is some controversy about a particular fact or particular facts, I have endeavoured to explain the controversy and to make appropriate findings resolving the controversy.

89    There was a significant dispute in the evidence between Brook and John McGuigan as to the content of the discussions which took place at a meeting which was held on Saturday 23 May 2009. The persons who attended that meeting were Brook, John McGuigan, Moses Obeid and James McGuigan. I have dealt with that meeting in a separate section of these Reasons. That dispute led to other less significant disputes between Brook and Poole as to the substance of conversations which took place in later meetings, particularly those in early June 2009.

The Obeids’ Interest in Coal Ventures in the Bylong Valley – June and July 2008

90    On 27 September 2007, Locaway, as trustee of the Moona Plains Family Trust, entered as purchaser into a contract for the sale of Cherrydale. The purchase price was $3,650,000. Part of that purchase price was to be financed by the vendors and a related superannuation fund. Completion of the purchase was to take place on 15 November 2007. Damian Obeid and Paul Obeid executed the Contract for Sale as directors of Locaway and those persons, together with Edward Joseph Obeid and Moses Obeid, were guarantors of Locaway’s obligations under the Contract for Sale. The Moona Plains Family Trust was a trust of which Damian Obeid, Paul Obeid, Moses Obeid, Gerard Obeid and Edward Joseph Obeid were the primary beneficiaries. It was established on 25 October 1994 at the behest of Eddie Obeid.

91    There is some evidence in the materials tendered before me which supports the proposition that Locaway was replaced by UPG as the trustee of the Moona Plains Family Trust on or about 15 February 2008. There is a letter from the solicitor who had acted for the Obeid family in relation to Locaway’s acquisition of Cherrydale (Anthony Cordato of Cordato Partners) dated 14 February 2008 under cover of which a draft Deed of Appointment of New Trustee replacing Locaway with UPG was forwarded to Eddie Obeid for execution by him. There is an unsigned Deed of Appointment of New Trustee dated 15 February 2008. There is an undated and unsigned Real Property Act 1900 (NSW) Form (Form 04RP) entitled “Application to Record New Registered Proprietor” by which Locaway and UPG sought to have Locaway replaced on the title to Cherrydale by UPG upon the basis that UPG had replaced Locaway as the trustee of the Moona Plains Family Trust. There is the circumstance that, when the Elbeg Unit Trust was apparently created on 6 August 2008, 150 units in that Trust were issued to UPG as the trustee of the Moona Plains Family Trust. There is an email dated 2 October 2008 from Sid Sassine, who was the Obeid family’s accountant at that time, to Cordato informing him that UPG had been the trustee of the Moona Plains Family Trust since February 2008. Finally, there were two further letters dated 9 February 2009 and 16 February 2009 respectively from Cordato to the vendors/mortgagees of Cherrydale in which Cordato stated that UPG had been the trustee of the Moona Plains Family Trust since early 2008. In the second of these two letters, Cordato said that the reason for the change of trustee was “to protect the clients’ privacy”.

92    In light of the circumstances which I have recounted at [91] above, and given that no member of the Obeid family gave evidence at the trial, I think that it is more likely than not that UPG did, in fact, replace Locaway as the trustee of the Moona Plains Family Trust in February 2008 and I so find.

93    The purchase of Cherrydale was completed in mid-November 2007.

94    By 23 June 2008, Moses and Paul Obeid had begun negotiating with members of the Boyd family in connection with the creation of a proposed joint venture for the acquisition of two properties which adjoined Cherrydale, as well as a management agreement which would nominate Equitexx (an Obeid company) to act on behalf of the proposed joint venturers to achieve an “Improvement Event” (which was to be “broadly defined to cover anything that adds value to the properties”). The proposed arrangement contemplated that royalties would be generated in the future. A SPV was to be set up to act as the trustee of a unit trust which was intended to become the owner of the two additional properties to be acquired. By this time, Moses and Paul Obeid had briefed Mr Christopher Rumore, a partner with CBP, to act for them in the transaction. Rumore opened a file in Paul Obeid’s name on that day (23 June 2008).

95    The interests in the proposed joint venture were to be divided two-thirds in favour of the Obeids and one-third in favour of the Boyds. Contemporaneous notes disclose that the joint venture was directed towards an anticipated issue by the NSW Government of EOIs for ELs which was expected to increase the land value of the properties many times.

96    By 30 June 2008, the negotiations between the Obeids and the Boyds had broken down and a new prospective joint venture partner had been introduced, being the Tianda Group, which was associated with Mr Alan Fang. The negotiations with Fang envisaged that the Obeid interests would obtain an option to acquire a 30% interest in a company, Great Western Coal Pty Limited (GWC), which would only be exercisable if GWC secured the right to mine coal on the site of Cherrydale and the two adjoining properties.

97    By 2 July 2008, draft options for the purchase of Coggan Creek at Bylong, one of the two properties of interest adjoining Cherrydale, had been provided to Moses Obeid. On 2 July 2008, Rumore received a proposed contract for the sale of the other property adjoining Cherrydale, known as Donola.

98    In the evening of 2 July 2008, Moses and Gerard Obeid met with Rumore and Fang to discuss the proposed transaction. By this time, it was envisaged that the transaction would involve the acquisition of the adjoining properties by a “Hong Kong BVI company” (in which the Obeids would have a 40% interest) and the sale of those adjoining properties, together with Cherrydale, to GWC once it had obtained the right to mine coal on the site of those properties. Rumore provided further comments on the transaction to Moses, Paul and Gerard Obeid in the morning of 3 July 2008.

Brook and his Introduction to the Obeids

99    From August 2007 until mid-September 2008, Brook was a Senior Vice President of Lehman based in Sydney.

100    In the afternoon of 3 July 2008, Brook met Moses Obeid at the Wentworth Hotel in the Sydney CBD. He was introduced to Moses Obeid by Arlo Selby at Selby’s instigation. On this occasion, Moses Obeid informed Brook of the Obeid family’s ownership of Cherrydale. He went on to tell Brook of his belief that there were substantial coal deposits under Cherrydale and that a tender for ELs would soon take place. Moses Obeid expressed the Obeid family’s desire to participate in a coal mining venture and informed Brook that the Obeids had formed a landholders’ alliance with the owners of adjoining properties. He said that timing was tight as tenders would soon be called for and that a bidder with an alliance with the landholders would stand a much better chance of getting an EL. Moses Obeid inquired as to Brook’s experience and contacts in the resources sector and whether Lehman had any coal mining companies as clients. Moses Obeid was sounding out Lehman as to whether it would be interested in investing in the Obeids’ hoped for coal mining venture or in being involved in procuring finance for that venture.

101    By 4 July 2008, the Obeids had not finalised the deal with Fang and there was no certainty that a deal with him would actually come to fruition.

102    On 4 July 2008, Brook made inquiries, both within and outside Lehman, by which he was attempting to identify a company that might be a possible partner in the coal mining venture which he had discussed with Moses Obeid.

103    On 7 July 2008, Brook met with Moses Obeid, Paul Obeid and Gerard Obeid at the Wentworth Hotel in Sydney. This meeting was also arranged by Selby. At that meeting, Brook was shown two or three maps which disclosed the location of Cherrydale and the adjoining properties in an area referred to as Mt Penny. The Obeids told Brook of their belief that there were potentially 100 million tonnes of thermal coal in the Mt Penny area and possibly as much as 700 million to 1 billion tonnes of thermal coal in that area and that they believed that a government tender process for an EL for the area was about to open. They also informed Brook that the Obeids’ property would be critical to any proposed mine. They said that a miner would need access to Cherrydale in order to get water and in order to gain access to road and rail infrastructure. They also told him of their desire to participate commercially in a coal mining venture as silent, passive participants. One of the Obeids who attended this meeting said that the Obeid family’s involvement in the deal must remain confidential because their father (referring to Eddie Obeid) was a prominent political figure. One of the Obeids said:

With the government tenders coming up, they’re likely to involve junior companies because the State government doesn’t want larger mining companies to land bank mining assets.

104    Following that meeting, Brook made further inquiries within Lehman as to whether there were any Lehman clients interested in acquiring a small stake in a new coal mining venture in Australia for which a Government tender was coming up.

Arrangements between Brook, Monaro and the Obeids

105    On or about 10 July 2008, Moses Obeid provided Brook with a list of the names of 15 companies that were likely to be invited by the NSW Government to participate in a closed tender process for an EL for Mt Penny. Brook copied that list of those names and emailed it to himself. One of those companies was MMNL. Another was Tianda Resources (Australia) Pty Ltd. Cascade was not on that list. Moses Obeid told Brook that he had been asking around and had come up with the names on the list.

106    Brook’s evidence was that MMNL was one of several leads he was following and that he was not particularly focussing on MMNL in priority to other companies on Moses Obeid’s list, although he did give evidence to the effect that he thought that MMNL might be interested in securing the backing of Lehman as he thought that MMNL might be “financially weak”. According to Brook, Moses Obeid did not steer him towards MMNL. Brook testified that he asked Moses Obeid to pay him a success fee if he could broker a deal with MMNL. Moses Obeid agreed to this at the level of principle although no particular terms were agreed at this time.

107    On 15 July 2008, Brook met with the Managing Director of MMNL, Mr Mart Rampe. Brook told Rampe that he was working with a landholders’ alliance of owners of properties at Bylong who believed that a coal tender process was coming up and that those landholders wanted to do a joint venture deal with a mining company so that they could profit from the mining resource and not just make money from owning the land. Brook said that the landholders wanted to keep their identity confidential but that they were prominent Sydney business people. Rampe suggested that Brook meet with Mr Warwick Grigor who was, at that time, the Chairman of MMNL.

108    On 16 July 2008, Brook met with Grigor at Lehman’s offices. At that meeting, Grigor informed Brook that not all of the directors of MMNL were in favour of pursuing coal mining projects in NSW. He said that it was his own view that MMNL should diversify its business into coal and that, for the last couple of years, he had caused the company to lobby the DPI in order to be invited to tender for coal projects in the Lithgow area. Brook informed Grigor that the proposed venture concerned the Mt Penny area. Grigor said that he was not familiar with that area. Brook then said that Lehman had the landowners in the area on board and that they were proposing a joint venture with a mining company which involved some equity for them. Grigor indicated that MMNL would be keen to explore a relationship with Lehman with respect to any coal licences that might come up.

109    Shortly after that meeting, Brook informed Moses Obeid of the substance of his discussions with Grigor and of the potential for Lehman to provide capital for a coal mine, either from its own balance sheet or from its clients.

110    On or about 17 July 2008, Brook again met with Moses Obeid and Paul Obeid. At this meeting, Brook reported on his discussions with Grigor and recommended that the Obeids and Lehman pursue a coal deal with MMNL. For some time thereafter, Brook had very regular contact with Moses Obeid, which at times rose to the level of daily contact.

111    On 18 July 2008, Moses and Gerard Obeid met with Rumore. Rumore’s handwritten notes of that conference record that:

(a)    The “deal with Tianda” [Mr Fang] was “off”;

(b)    The Obeids provided to Rumore contact details for Brook in connection with a possible transaction involving MMNL and Lehman;

(c)    In respect of a “first bid”, the structure of that transaction was that Lehman would have an option to acquire 60% of a new company, referred to as Monaro Coal, exercisable “once MC wins right to mine pursuant to EOI”;

(d)    Monaro Coal would “buy 3 Obeid properties @ multiple” of three or four times valuation;

(e)    At the time of exercising its option, Lehman would direct Monaro Coal to issue 15% of its shares to Lehman and 45% to the Obeids;

(f)    The “two [arrangements]” were to be “interdependent”;

(g)    Both Lehman and Monaro Coal would use Clayton Utz as their solicitors in connection with the proposed transactions; and

(h)    In respect of a “second bid”, there was to be a similar agreement but this second bid would involve no land component and the lessor’s share would go to the Obeids.

112    A typed note on CBP’s Bylong file accords with Rumore’s handwritten notes of the conference. That typed note included additional matters which addressed a proposed agreement between Lehman and the landholders and Monaro Coal’s bids for rights to mine other properties.

113    Moses Obeid and Brook met again, on this occasion on 21 July 2008. There was no evidence as to what occurred at that meeting.

114    On 22 July 2008, Grigor sent Brook a letter on MMNL’s letterhead seeking Lehman’s support for MMNL to tender for certain coal tenements which were expected to be promoted through a closed tender process within 30 days. In his evidence, Brook said that it was Moses Obeid who had told him about the upcoming closed tender process. In return for that support, MMNL proposed in its letter to Brook to grant to Lehman an option for 60% of the issued shares in a special purpose vehicle which would bid in the tender process, such option to be exercisable upon the bid being successful. In the letter, Grigor also proposed that Lehman be granted the first right of refusal to provide or arrange capital for the development of a mine. That letter was submitted to Brook by Grigor as a draft. It was then discussed between them before they finalised the form of the letter on 22 July 2008.

115    On 23 July 2008, Brook attended a meeting at the offices of CBP at 42 Park Street, Sydney, with Rumore and Moses, Gerard and Paul Obeid. Rumore’s handwritten note of this meeting records the following: According to the note, there was to be a SPV between Lehman and the landholders. 45% equity in that SPV was to be held by an independent corporation as a bare trustee for the Obeids. The letter from MMNL to Lehman dated 22 July 2008 was referred to. Clayton Utz were to be retained to act for MMNL. CBP was to vet the proposed option agreement between MMNL and Lehman to ensure that the Obeids’ interests were protected. Clayton Utz were to act in respect of the option and Lehman was to retain Freehills or Mallesons to act in respect of its deal with the Obeids. It was expected that the MMNL option would be finalised by 29 July 2008 which was the date for the opening of the Government’s EOI campaign. Lehman was likely to accept MMNL’s offer contained in its letter of 22 July 2008.

116    It appears that Lehman entertained Messrs Costa, Macdonald, Tripodi and Eddie Obeid for lunch on the same day. With the exception of Eddie Obeid, all of the other men were Ministers in the NSW Government at the time. There was no evidence before me as to what was discussed at this lunch.

117    A typed note on CBP’s file dated 23 July 2008 records the important integers of the arrangement then proposed involving Monaro Coal. There was to be an option between MMNL and Lehman whereby 60% of the shares in Monaro Coal would be allocated to Lehman upon certain conditions being satisfied. Those conditions were: The option could only be exercised once Monaro Coal had won the right to mine on the three Bylong Valley properties in question (Cherrydale, Donola and Coggan Creek); there had to be an agreement in place for Monaro Coal to purchase those three Bylong properties at a multiple of the valuation of those properties at the time of the grant of the mining lease to Monaro Coal which multiple was yet to be agreed; and, at the time of the exercise of the option, Lehman was to direct MMNL to issue 15% of the shares in Monaro Coal to Lehman or its nominee and 45% of the shares to a special purpose vehicle which was intended to hold the interest of the Obeids in the venture. The note records that there were separate put and call arrangements between Lehman and each of the landholders who owned the three Bylong Valley properties in question which allowed Lehman to acquire those properties if Monaro Coal was successful in obtaining a right to mine over those properties. It was contemplated that a separate special purpose Monaro entity would bid for other rights to mine in NSW. Lehman was to grant an option for 45% of the shares in Monaro Coal in favour of the SPV for $1. The SPV was to act as a bare trustee holding 40% of the shares in Monaro Coal on behalf of interests nominated by the landowners with the other 5% being held on behalf of a nominated third party.

118    On the same day, CBP prepared a list of issues to be discussed with Sid Sassine, the Obeids’ accountant. The matters sought to be discussed included:

(a)    Details of the SPV to hold the shares in Monaro Coal as bare trustee;

(b)    The identity of the trust on behalf of whom the 40% of the shares in Monaro Coal were to be held;

(c)    The identity of the company to act as bare trustee to acquire the two farms (Donola and Coggan Creek); and

(d)    The identity of the trust which was to be the beneficiary with respect to those two farms.

119    At approximately 5.30 pm on 23 July 2008, Brook sent an email to Edwin Wong who was a Lehman employee located in Hong Kong and Brook’s immediate superior. Included within that email was a brief description of the proposal which Brook wished to discuss with Wong at that time. The important elements of that proposal as explained to Wong were as follows:

(a)    MMNL had become aware of certain tenements that were expected to come up for closed government tender in the next few days and was seeking financial support from Lehman as per its letter dated 22 July 2008;

(b)    MMNL had also identified a party who was currently the holder of land parcels which were anticipated to be crucial to the successful development of the coal tenements;

(c)    The land related party was seeking to participate in the ownership of any mine that followed from the grant of mining licences; and

(d)    To this end, it was proposed that Lehman would receive a 20% option over the shares in a successful joint venture SPV bidder with MMNL and that a further option for 40% of the SPV’s issued capital would be issued to the land related party.

120    The essence of the proposal was depicted diagrammatically as follows:

121    The explanation of the proposal continued: Brook said that in return for Lehman’s participation with MMNL through the tender process, Lehman would be issued an option for 20% of the issued capital in the SPV bidder company. This option would be issued to Lehman for $1 and would only be exercisable upon a bid being successful. An option on similar terms would be issued to the land related entity. Brook also foreshadowed the possibility that Lehman would have the option to fund exploration and feasibility study expenditure in order to increase its ownership in Monaro Coal.

122    On 23 July 2008, Barry Irwin, a partner at Clayton Utz, sent a letter to Grigor in which he set out his understanding of the proposed transaction and Clayton Utz’s willingness to act for MMNL in respect of the transaction.

123    On 25 July 2008, Clayton Utz forwarded a draft option agreement to Grigor. Grigor provided the draft to Brook who, in turn, forwarded it to Rumore.

124    At around this time, the proposed transaction the subject of Monaro’s letter of 22 July 2008 was revised to increase Lehman’s interest in the SPV, obtainable by exercise of the option, from 60% to 80%. This revision to the proposed transaction was reflected in Rumore’s notes of a further conference he had with Moses and Gerard Obeid on 25 July 2008.

125    By 25 July 2008, Rumore had received a draft Contract for Sale from the solicitors acting for the vendors of Donola. On that day, Rumore sought instructions from Paul, Gerard and Moses Obeid in respect of a draft letter which he advised should be sent to those solicitors on behalf of the purchasing entity. On the same day, Rumore sought instructions in respect of the proposed purchase of Coggan Creek. The purchaser in that transaction was also to be an Obeid entity.

126    Rumore met with Moses and Gerard Obeid on 25 July 2008 in order to discuss the instructions to be provided in respect of the acquisition of Donola and Coggan Creek. At that conference, one or other of the Obeids informed Rumore that the option proposal in favour of Lehman in respect of shares in the SPV (Monaro Coal) had been increased to 80% of the shares to be issued in that company. The Obeids informed Rumore that the manner in which the SPV would deal with this 80% would be addressed later during the six weeks EOI period. The Obeids asked Rumore to review the draft option agreement with MMNL which had been prepared by Clayton Utz. They also instructed Rumore that the agreement between the Obeid entities and the other two landowners could be done later during the EOI period. They also instructed Rumore that Greg Skehan, a partner in CBP, was to be the sole director and shareholder of the SPV (which later became Voope) and that Rumore was to be the sole director and shareholder of the second (landowner) vehicle (which later became Geble).

127    On 25 July 2008, Rumore placed an order for a new (shelf) company with Patricia Holdings Pty Limited, a shelf company supplier. The company order form records Skehan as the sole director and shareholder of the company, with the one share in the company to be held by Skehan on trust for Equitexx as trustee for the Obeid Family Trust No 2.

128    In the morning of 28 July 2008, Rumore sent an email to Gerard and Moses Obeid. This email was copied to Paul Obeid and to Skehan. In that email, Rumore reported on the progress which had been made in respect of the matters discussed with the Obeids in conference on 25 July 2008. In that email, he noted that he had ordered the two companies and brought the Obeids up to date with progress in respect of the land transactions. In respect of the companies, he said:

We have ordered the two companies, in respect of one of which companies Greg Skehan will be the sole director and shareholder (which company will enter into the option for the shares in Monaro Coal (Aust)), and the other in respect of which the writer will be the sole director and shareholder and which entity will acquire the properties as trustee for Equitexx Pty Ltd as trustee for the Obeid Family Trust No 2.

129    In the morning of 28 July 2008, Christine Gibara of CBP sent an email to Rumore with a message that Emily from Patricia Holdings had called to indicate that the company order form sent to Patricia Holdings on 25 July 2008 did not identify the company name to be used for the new shelf company or its intended principal place of business. Rumore’s handwritten note on the email recorded the following: “we don’t care [about] co[mpany] names. Whatever she has is fine. Principal place of business is our address. 2 companies will be done this afternoon”. On the same day, (28 July 2008) Voope (ACN 132 441 868) was registered with ASIC with Skehan as its sole director and shareholder. Geble (ACN 132 441 877) was also registered with ASIC on 28 July 2008 with Rumore as its sole director and shareholder.

130    On or about 28 July 2008, Brook again met with Rumore, Moses Obeid and Gerard Obeid. Prior to that meeting, Moses Obeid had told Rumore, and also Brook, that he required the entity which was to enter into the option agreement with MMNL to be an entity owned and controlled by the Obeid family. Rumore’s notes of this meeting appear to be addressing an email dated 28 July 2008 by reference to specific paragraphs in that email. The relevant email was not in evidence before me. Someone at the meeting informed Rumore that the option for 80% of the shares in Monaro Coal was to be in favour of the company in which Skehan was the sole director and shareholder (Voope) and that that company would then introduce a joint venture partner and give part of its shares to this joint venture partner. Rumore was also instructed that MMNL must bid only through Monaro Coal. Rumore’s notes go on to record that a shareholder’s agreement would be needed and that MMNL was to accept the Obeids’ direction in respect of the lodgment of the mining tenement application. Notes made during that meeting by Brook demonstrate that the transaction then under discussion involved a wholly owned subsidiary of Monaro (referred to as “Monaro Coal” and “Bidco”) tendering for the EL for Mt Penny and an “SPV” (Voope) having an “80% option” in relation to Monaro Coal meaning an option to secure 80% of the issued capital of Monaro Coal. Brook’s evidence was that he understood that the “SPV” referred to in his notes was to be an Obeid entity in which Lehman would have an interest.

131    On 28 July 2008, Rumore sent a letter to Gerard and Moses Obeid titled “Purchase two farms (three vendors) at Bylong Valley”. That letter enclosed a copy of the draft option deed prepared by Clayton Utz on 25 July 2008 which had been provided to Rumore by Brook who had obtained it from Grigor.

132    Rumore provided the following commentary on the structure of the transaction:

In view of the changed arrangement as discussed with writer on Friday afternoon, we understand that Lehman Brothers is not taking an option but that an option in respect of 80% of the shares in Monaro Coal (Aust) is to vest in a new SPV (in respect of which Greg Skehan will be the sole director and shareholder). [This was a reference to Voope]

Our principal concern is that you have now advised us that Monaro Coal (Aust) will not be able to bid for the coal leases on its own and would need to bring in a further party to support its application for the coal licence in Bylong Valley.

Our concern is that Monaro Coal may become a minor participant in the mining lease operations and by having an option to acquire, for nominal consideration, a significant part of the share capital in Monaro Coal (Aust), you will not achieve a significant interest in the overall coal operations that you intended.

You need to further think this through to see how your position will be protected as it may well be that even having an option over 80% of the shares in Monaro Coal (Aust) may not yield the end participants with an equity anything like the equity stake that they originally thought, as this company could very well become the “junior player” in the “consortium” which ultimately wins the coal mining lease concessions.

133    In the morning of 30 July 2008, Sally Parker of CBP sent an email to Rumore to advise that the certificates of registration for the “Obeid companies” were expected to be provided to CBP that morning. Later that morning, Emily Sheldon of Patricia Holdings sent an email to Rumore attaching the certificates of registration of the companies which he had ordered – being Voope and Geble.

134    Later that same day (30 July 2008), Rumore informed Moses, Gerard and Paul Obeid of (inter alia) the incorporation of Voope which he described as “[t]he company to take the option in respect of the shares”. Skehan was described as the sole director and shareholder of Voope. Rumore informed the Obeids that, as instructed, Skehan held the one issued share in Voope as a bare trustee for Obeid entities (Equitexx as trustee for the Obeid Family Trust No 2).

135    In an email of 31 July 2008, Rumore passed on to the Obeids the invoice for the costs of the incorporation of (inter alia) Voope. Rumore also told Moses, Gerard and Paul Obeid at this time that the company which was to acquire the properties at Bylong (Geble) had also been incorporated.

136    On 31 July 2008, Monaro Coal was registered with ASIC. On the same day, Brook informed Rumore of the registration of Monaro Coal and, on 1 August 2008, Rumore passed on that fact by email to Gerard, Moses and Paul Obeid. In the same email, Rumore sought comments “in relation to the option deed which we note you collected from our office yesterday”.

137    Upon registration, Grigor was appointed as the sole director of Monaro Coal. No secretary was appointed. All shares issued at that time were held by MMNL and the registered office of the company was the same address as the registered office of MMNL.

138    On 4 August 2008, Rumore sent a further email to Gerard, Moses and Paul Obeid reporting on progress in relation to the acquisition of Donola and Coggan Creek. It is apparent from that email that the acquisition transactions were expected to be consummated soon after 4 August 2008.

139    On 5 August 2008, Rumore sent to Clayton Utz, in their role as the solicitors for MMNL, a re-drafted “Option deed re shares” between MMNL and Voope. The draft option deed granted to Voope an option to acquire 80% of the issued shares in Monaro Coal in consideration for Voope’s assisting it in relation to an application in respect of various mining tenements. The option was exercisable within two years from the date upon which MMNL was granted a tenement or an interest in a tenement. Rumore also sent a copy of this email and the attachment thereto to Brook. In his evidence, Brook denied having any significant input into the drafting of this deed.

140    Later in the day on 5 August 2008, Rumore sent an email to Gerard, Moses and Paul Obeid in which he reported on the progress being made with the acquisition of Donola and Coggan Creek. Rumore reminded the Obeids that they were to come back to him to sign whatever documents were necessary to set up the bank accounts for Geble. He then said:

With respect to the option, we have prepared this with the changes referred to by Moses and have sent it through to Mr Irving at Clayton Utz.

With regard to the queries which Moses had in respect of the various obligations under that option, we refer you to clause 8 and, in particular, clauses 8(a)-8(e).

141    On 6 August 2008, the two option agreements between the vendors of Coggan Creek and Geble were exchanged. Those agreements gave Geble the option to purchase Coggan Creek for the total sum of $3,500,000. On the same day, the Contract for Sale between the vendor of Donola and Geble was also exchanged. On the same day, Geble apparently established the Elbeg Unit Trust in which 300 units were then issued. The initial unitholders were Challenge Property Investments Group Pty Limited (ACN 113 359 505) (Challenge) as trustee for the Triulcio Family Trust as to 150 units and UPG as trustee for the Moona Plains Family Trust as to 150 units. The purchase price of Donola was $600,000. UPG was an Obeid entity as was the Moona Plains Trust. The evidence did not go so far as to establish that Challenge was a front for the Obeids. At the very least, members of the Triulcio family were associates of one or more of the Obeids. In addition, there was some evidence which suggested that the Elbeg Unit Trust was not established on 6 August 2008 but was, in fact, created in September 2008. Whether or not this is so is not important for present purposes. I do not intend to make any findings about that matter.

142    On 7 August 2008, in a further email to Gerard, Moses and Paul Obeid of that date, Rumore suggested that, as Skehan was regularly absent from the office on business, it would be a good idea if Voope provided a power of attorney to one of Rumore’s partners in CBP’s property group. Rumore had prepared a power of attorney and enclosed it with the email. Rumore sought specific instructions from the Obeids that Skehan should provide such a power of attorney. Skehan ultimately executed the Power of Attorney on 15 August 2008. Rumore also suggested that he and the Obeids meet in order to discuss all outstanding issues and to obtain instructions from the Obeids in relation to those issues.

143    Late in the evening of 7 August 2008, Clayton Utz sent a revised version of the option deed to CBP.

144    On 8 August 2008, Rumore sent an email to Gerard, Moses and Paul Obeid. After referring to some specific issues relating to the acquisition of the properties at Bylong, Rumore noted that there was a significant number of matters that needed to be dealt with at that time and that, in light of the fact that some of the Obeids would be going on leave shortly, he felt that they should come and meet with him … “to run through all of the issues relating to these three matters (and associated matters) so we can take instructions in relation to the outstanding issues”. He added:

Of course, one of the things that needs to be resolved is the issue of the further option document which we have prepared and have sent through to Clayton Utz.

145    Later on 8 August 2008, Rumore sought instructions from Paul, Gerard and Moses Obeid in respect of that document generally but, in particular, in respect of the changes to Rumore’s re-drafted document which had been suggested by Clayton Utz.

146    Clayton Utz chased up Rumore about the MMNL option deed on Saturday 9 August 2008. The next day, Rumore told Ms Cuthbertson of Clayton Utz that he was awaiting instructions from his clients.

147    Rumore met with Moses and Gerard Obeid on Monday 11 August 2008. At that conference, Rumore discussed the changes to the draft of the MMNL option agreement which had been sent to Rumore on 7 August 2008.

148    On 12 August 2008, Rumore sent an email to Clayton Utz to which was attached a further draft of that agreement. In the covering email, Rumore highlighted a number of matters by way of explanation of the drafting changes. On the same day, he sent a copy to Moses and Gerard Obeid of his email to Clayton Utz with the attached redrafted option agreement.

149    On 16 August 2008, Clayton Utz advised Rumore that MMNL accepted the draft option deed in the form sent to Clayton Utz on 12 August 2008. Rumore then forwarded that email to Gerard, Moses and Paul Obeid and asked whether those gentlemen were content for the option deeds to be exchanged on 20 August 2008. On the same day, Moses Obeid replied that exchange on 20 August 2008 was great and that he would speak to Rumore on the following Monday, 18 August 2008.

150    In a further email sent on 18 August 2008 to Moses, Gerard and Paul Obeid, Rumore confirmed his instructions to the effect that the option deed was to be exchanged on 20 August 2008.

151    On 20 August 2008, as anticipated, the option deed between MMNL and Voope (Voope Option Deed) was exchanged. Skehan executed that document on behalf of Voope. The important provisions of the Voope Option Deed were as follows:

(a)    MMNL granted an option in favour of Voope or its nominee or assignee to acquire 80% of the issued shares in Monaro Coal (cl 2);

(b)    The consideration for the grant of that option was expressed to be “… the provision of consultancy, general assistance and advisory services by or on behalf of Voope or at the direction of Voope for the benefit of [MMNL] and [Monaro Coal]”;

(c)    The option was exercisable by Voope in the two years following the grant of a “Tenement” or an interest in a “Tenement” to Monaro Coal, but lapsed if that grant had not occurred within three years of the date of the document (cl 3 and cl 4);

(d)    “Tenement” was defined to mean “… the mining lease, exploration licence or any other mining interest applied for pursuant to the Invitation to Tender issued by the Department of Primary Industries (NSW) at any time after the date of the [Voope Option Deed] but prior to 1 January 2009 and granted pursuant to the Act in the State of NSW for the exploration or mining of coal”;

(e)    MMNL was obliged to ensure that all applications for Tenements (as defined in the Voope Option Deed) were made through Monaro Coal and not by MMNL itself or by any other related body corporate (cl 8(a));

(f)    MMNL was obliged to cause Monaro Coal to lodge applications for Tenements within the applicable time frames, to diligently pursue them and to supply the necessary information, documentation and material to the DPI (cl 8(b));

(g)    Prior to lodging any application for a Tenement or responding to any request for information from or correspondence from the DPI, MMNL was obliged to cause Monaro Coal to consult and confer with Voope and to act in accordance with the directions and suggestions of Voope (cl 8(e));

(h)    MMNL was obliged to ensure that Monaro Coal did not withdraw any application for a Tenement without the prior written consent of Voope (cl 8(f));

(i)    MMNL was obliged to ensure that Monaro Coal did all actions, matters and things as it was reasonably able to do in order to be successful in procuring a grant to it of any Tenement or Tenements (cl 8(g)); and

(j)    MMNL warranted that no party other than Monaro Coal had or would have any interest in any Tenement which might be granted to Monaro Coal without the written consent of Voope which should not be unreasonably withheld. The condition precedent to the exercise of the option was the granting of the Tenement or an interest in the Tenement to Monaro Coal.

152    In the afternoon of 20 August 2008, Rumore advised Moses, Gerard and Paul Obeid that the Voope Option Deed had been exchanged that day.

153    By Deed of Variation of Option over Shares dated 22 December 2008 between MMNL and Voope, the parties agreed to remove the words “but prior to 1 January 2009” from the definition of Tenement in the Voope Option Deed. The effect of this amendment was to remove the temporal restriction from that definition. It appears that this variation document was actually executed on or about 10 March 2009 and backdated.

Obeid Interests and Associates Acquire Coggan Creek and Donola

154    On 24 or 25 July 2008, the Obeid sons instructed Rumore that the Obeids wished to proceed with the purchase of Coggan Creek and Donola. The proposed transaction for the purchase of Coggan Creek took the form of two call options granted by the owners of the property, TE O’Brien and TE O’Brien (Merriwa) Pty Limited. In the case of Donola, the transaction took the form of a Contract for Sale with the owner, being the Estate of the Late KJ Stanmore.

155    As noted at [141] above, on 6 August 2008, Geble, as purchaser, entered into a Contract for the Sale of Donola for the price of $600,000 and the two call option agreements in respect of Coggan Creek were also exchanged. The purchase of Donola was completed on 22 October 2008. Geble acquired that property as trustee of the Elbeg Unit Trust.

156    Geble was obliged to exercise the options to purchase Coggan Creek by 6 October 2008. In early October 2008, Gerard Obeid instructed Rumore to ascertain whether the vendors of Coggan Creek would be prepared to grant an extension of the option period. The vendors did not grant the requested extension and the options lapsed on 7 October 2008. In an email dated 8 October 2008 from Rumore to Gerard Obeid (copied to Moses and Paul Obeid), Rumore recorded his instructions from the Obeids to the effect that Geble was not in a position to exercise the options by the due date (6 October 2008) and that they intended to let the options lapse.

157    Subsequently, on 24 October 2008, the vendors of Coggan Creek entered into two Deeds of Variation of Option in respect of the options previously granted in favour of Geble by which the option period was extended to 31 October 2008. These transactions were entered into notwithstanding the fact that the options had already lapsed on 7 October 2008.

158    On 6 November 2008, Geble nominated Coopers World Pty Limited (ACN 133 940 388) as trustee of the Justin Kennedy Lewis Family Trust as its nominee to exercise the call options in relation to Coggan Creek. Contracts for the Sale of Coggan Creek between TE O’Brien and TE O’Brien (Merriwa) Pty Limited, as vendors, and Coopers World Pty Limited, as purchaser, were entered into on 7 November 2008. As already mentioned, the total consideration paid under those contracts was $3,500,000.

159    On 10 November 2008, Coopers World Pty Limited changed its name to Justin Kennedy Lewis Pty Limited (JKL).

160    Completion of the purchase of Coggan Creek by JKL took place on 2 November 2009, almost a year later.

161    On 7 November 2008, Rumore met with Gerard Obeid and Justin Lewis, who is the principal of JKL. The following matters were recorded by Rumore in his note of that meeting:

(a)    The three landowners (UPG, Geble and JKL) would sell the three properties in one line to a mining company that “gets the coal lease”. [This is probably a reference to Monaro Coal. The reference in the note is “MC”];

(b)    The sale price would be at a multiple of not less than four times the valuation of the property as at the date of sale with all other terms to be agreed (acting reasonably);

(c)    One representative would negotiate the sale and the mining interests with full power to negotiate as per laid down criteria;

(d)    There was to be an option to Monaro Coal for an EOI and, in the event that Monaro Coal did not get the lease, the option would lapse;

(e)    If Monaro Coal got the mining interest, that interest was to be distributed pro rata to the land value paid for the owners’ respective parcels;

(f)    There was to be a separate agreement between the Obeids and Lewis as per paragraph 1 of Rumore’s memo of 7 November 2008. Interests associated with Lewis were to obtain 70% of the profit after all costs were deducted and the Obeids were to obtain 30% of that profit;

(g)    UPG was to be given the first right of refusal to acquire JKL’s land before the sale to Monaro Coal. The price at which that first right of refusal was to be exercised was the purchase price paid by JKL plus all costs subsequently incurred in relation to that acquisition;

(h)    If JKL could not settle within three months, it was to give notice to the Obeid interests of at least one month and they would take over the contract for sale; and

(i)    If anything was to happen to Lewis personally, there was to be a Power of Attorney to the owners’ representative to conclude negotiations as per agreed parameters.

162    By 11 November 2008, Rumore had drafted a Landowners’ Deed, the parties to which were Locaway, Geble and JKL. He had also drafted a Profit Sharing Deed, the parties to which were UPG and JKL. However, at the time when these documents were prepared, Rumore had a number of questions concerning the identity of the parties who were to enter into these arrangements and the correct names of those parties. These draft documents were provided to Moses Obeid on 12 November 2008 but do not appear to have been finalised. Nonetheless, on the evidence, it is more likely than not that the Obeids had entered into a profit-sharing arrangement with Coopers World Pty Limited which required that company to sell Coggan Creek to Monaro Coal, after taking out its reasonable costs of acquisition, and then to split the profits 70% to Coopers World Pty Limited and 30% to the Obeid interests.

163    Other transactions apparently took place at this time concerning Geble and UPG. Those transactions are somewhat confusing and may have proceeded upon incorrect assumptions. As they are not presently relevant, I do not propose to refer to them here.

164    In late November 2008, John Campo, the solicitor for the Triulcio family, became the sole director of Geble. He also became the sole shareholder at that time. However, it appears that he held those shares as to 50% on behalf of the Triulcio family and as to 50% on behalf of the Obeid family.

165    Also, it appears that a Landowners Deed, the parties to which were UPG, Geble and JKL, was executed on or about 18 November 2008. Under that Deed, those three companies appointed a representative to negotiate the sale of Cherrydale, Donola and Coggan Creek at a multiple of at least four times the current value of those properties. They also agreed to act together and to appoint a single representative to represent the three of them in negotiations for the sale of those properties.

The EOI Process for Mt Penny Commences

166    In 2008, the whole of NSW was declared to be a “Minerals Allocation Area” in respect of coal for the purposes of the Mining Act with the consequence that applications for ELs for coal could only be made with the prior consent of the Minister. The DPI established guidelines for the future allocation of ELs for coal exploration areas in relation to major stand-alone areas (that is, areas containing sufficient coal to develop a large new mine) by a tender or EOI process involving minimum and/or open-ended financial contributions.

167    In 2008 and 2009, the practice of the DPI in relation to applications for ELs for coal exploration areas was that certain parties would be invited by the DPI to lodge EOIs, the EOIs would be evaluated by a departmental committee and a recommendation made to the Minister or the Minister’s delegate as to who was considered to be the best candidate to be invited to apply for an EL. The members of the particular Evaluation Committee in the present case were: William Hughes, the Acting Director Development Coordination at the DPI, A Zanella, Project Manager, Project Management Coordination at the DPI; and J Moloney, Principal Adviser Minerals at the DPI. Usually, the recommendation of such an Evaluation Committee would be accepted and the successful party (or its nominee) would be invited to apply for an EL for the relevant coal exploration area.

168    Consistent with that practice, on 9 September 2008, the DPI sent to certain companies invitations for EOIs for coal ELs for eleven coal exploration areas in the Gunnedah, Hunter and Western Coalfields, including the Mt Penny, Glendon Brook and Yarrawa coal allocation areas. MMNL was one of the companies invited to lodge EOIs. Responses to the DPI letter of 9 September 2008 were required by 24 November 2008. Accompanying that invitation was a document entitled “Expression of Interest Information” dated August 2008. This was the initial EOI information package.

169    Shortly after 9 September 2008, Rampe informed Brook that MMNL had received invitations to submit EOIs for all eleven coal exploration areas being released at that time.

170    In section 1 of the initial EOI information package, after the identification of the relevant coal exploration areas, the following text appeared:

A number of companies have approached the Department of Primary Industries, seeking access to potential coal resources in these areas. The eleven (11) coal exploration areas may contain open cut and/or underground coal resources of domestic and possible export quality thermal coal.

In accordance with the Department’s Guidelines for Allocation of Future Coal Exploration Areas, with respect to “small areas unrelated to existing mines”, a limited form of expression of interest will be undertaken for these eleven (11) areas.

Only companies invited to submit an Expression of Interest may apply.

Expressions of Interest for more than one area may be submitted. An individual application must be made for each area of interest.

The Department of Primary Industries will establish an evaluation team from experts on its staff and elsewhere in government. The team will evaluate the Expressions of Interest using a consistent process approved by an independent probity auditor.

The successful applicant/s will be awarded a coal exploration licence over the area(s) for an initial period of up to 5 years, pursuant to the Mining Act 1992.

Interested parties are required to submit an Expression of Interest/s to the Department of Primary Industries with details of an exploration and development program. Closing time and date for Expressions of Interest is 12 noon on Monday 24 November 2008.

The Expressions of Interest (EOIs) are open to individual company or companies or a consortium by invitation only. Any proposed foreign investment in Australian resource projects is subject to the Australian Government’s Foreign Investment Review Board guidelines and approval.

Exploration rights over these areas will be awarded by part transfer of the existing titles held by the Crown where applicable or the grant of a new exploration title. The continued tenure of the Exploration Licence during the initial period and any subsequent renewal period will be subject to compliance with agreed commitments and title conditions. The Department of Primary Industries is not bound to accept any of the proposals.

171    The initial EOI information package went on to specify a timeframe for resource evaluation and development approvals and the prerequisites to future mine development (section 2 and section 3).

172    Section 6 of that package spelled out in some detail the evaluation process and evaluation criteria.

173    In section 6.2.1(e) (p 8 of the initial EOI information package), the following was said:

(e)    Financial Contributions

The successful EOI applicant/s will be required to meet the financial obligations for an exploration licence listed in Section 7.

Expression of Interest applicants may nominate additional financial contributions to those listed in Section 7 to be considered as part of the evaluation process.

Financial contributions in Section 8 will be payable if the release area proceeds to, and is granted development approval under, the Environmental Planning and Assessment Act 1979 (NSW).

174    Section 7 of the initial EOI information package specified three types of financial contribution. First, there was an assessment fee of $10,000. The second type of fee was described in the following way:

(b)    A one off payment by the successful applicant/s for the allocation of each area listed below as a contribution towards the Department’s Coal Development Fund for continued coal exploration as follows:

…

175    The third element was expressed in the following terms:

(c)    Additional financial contributions may be included as part of an applicant’s Expression of Interest.

176    The compulsory financial contributions and any voluntary contributions to which I have referred at [174] and [175] above were payable within 30 days of the Minister’s granting consent to apply for an EL for the relevant coal exploration area. Successful applicants were also required to pay standard fees for applications for an EL and an environmental security deposit. The directors of MMNL and Brook all misunderstood the 30 day requirement referred to above. They appear to have formed the (erroneous) view that the voluntary contributions would be paid later—when the EL was issued. This misunderstanding, when revealed, was a terrible shock to Brook and the others and caused a major problem for MMNL in the third week of May 2009.

177    The procedure documented in the initial EOI information package was not governed by specific provisions in the Mining Act. However, the granting of consent by the Minister or his delegate to a person to apply for an EL and the subsequent steps leading to the grant of an EL were subject to the provisions of the Mining Act. In particular, relevantly for present purposes, under s 13(4) of the Mining Act, any person wishing to apply for the grant of a new EL for coal had first to obtain the consent of the Minister or his delegate to do so. In 2009, the Minister’s power to grant such consent had been delegated to Richard Sheldrake, the Director-General of the DPI at that time, pursuant to s 363(1) of the Mining Act. The relevant instrument of delegation was signed by the Minister on 23 December 2008. Once consent had been granted, an application for a new EL for coal had to be made by lodging a Form 3.

MMNL’s EOI for Mt Penny and Glendon Brook

178    On 19 September 2008, Rampe sent a memorandum to Grigor and to the other directors of MMNL seeking (inter alia) approval to participate in, and incur expenditures in connection with, certain of the EOIs the subject of the DPI’s invitations made on 9 September 2008. He then explained the current position with Brook. He said that Brook had now revealed that he (Brook) represented a group of Chinese coal companies who wanted to establish a presence in the NSW coal industry. He said that Mt Penny was the “plum” area of interest. He said that Brook had also told him that some Indian parties were also interested.

179    On 15 September 2008, Lehman collapsed.

180    Notwithstanding the collapse of Lehman, Brook agreed with Moses Obeid and Paul Obeid that he would continue to pursue a possible deal with MMNL in relation to Mt Penny in return for a percentage of the Obeid family’s share in the proposed coal mining venture. He saw an opportunity for himself to replace Lehman as the intermediary between MMNL and the Obeids. As at late September 2008, Brook had still not revealed to MMNL that it was the Obeids who controlled Voope and the landowners.

181    On 23 September 2008, Brook, through his company Oregon, entered into an agreement with MMNL to provide consultancy services to MMNL in connection with its proposed tender for coal tenements in NSW. Under this agreement, Brook’s company was to receive approximately $25,000 per month by way of consultancy fees plus expenses. Oregon was to act exclusively for Monaro in relation to the NSW coal tenements covered by the agreement. It also undertook to make full and frank disclosure to MMNL in relation to such tenements and opportunities to acquire same.

182    In the period from September 2008 to December 2008, Brook endeavoured to generate interest amongst potential Chinese investors or financiers to finance MMNL’s tender for ELs and, if successful, its exploration activities at Mt Penny. At this time, Brook travelled to China. He canvassed a number of prospects but, initially, none was prepared to put up funds until the necessary ELs had been acquired. Brook kept Moses Obeid apprised of his discussions in China and of his dealings with MMNL, including those which concerned the introduction of a Chinese partner into the venture. He also looked for potential investors in India. He regarded himself at the time as acting for MMNL, the Obeids and himself. He thought that all of the relevant interests were aligned and that there were no conflicts of interest about which he should be concerned.

183    Just before 21 November 2008, MMNL entered into a MOU with Shenyang Tianci Yutong Industrial Inc (Shenyang Tianci) which constituted a conditional non-binding commitment to fund the Mt Penny financial contributions in return for equity in the project.

184    On 21 November 2008, MMNL lodged EOIs for ELs for the Mt Penny and Glendon Brook coal allocation areas. At the same time, MMNL lodged EOIs for ELs for seven other coal allocation areas. Brook had earlier sent a draft of MMNL’s Mt Penny EOI to Moses Obeid for his information.

185    In addition to the mandatory financial contributions specified in section 7 of the initial EOI information package, MMNL’s EOI in respect of the Mt Penny coal allocation area contained an offer to make an additional financial contribution of $25 million. In its covering letter in respect of that EOI, MMNL mentioned its partnership with Shenyang Tianci pointing out that its arrangements with Shenyang Tianci involved an off-take agreement and financial assistance to MMNL. The fourth dot point in the letter was in the following terms:

•    Aside from the statutory costs associated with the EOI, the Company, supported by Tianci, believes that an extra contribution of $25 million to the [DPI] is warranted. It is considered that this contribution should be paid to the [DPI] after certain milestones are achieved with the final payment being made upon the Approval of Mine Development being declared by the State Government.

186    In its accompanying EOI, MMNL went on to note that, if successful, it would request that the EL to be awarded pursuant to its EOI be granted in favour of a wholly-owned subsidiary and, in connection with funding, a copy of the MOU with Shenyang Tianci was attached.

187    At a Board Meeting of MMNL held on 26 November 2008, Brook expressed confidence that MMNL would be invited to apply for an EL for the Mt Penny coal release area.

188    In relation to the Glendon Brook coal release area, MMNL’s EOI offered an additional financial contribution of $5 million. As was the case with the EOI for the Mt Penny coal exploration area, MMNL sought to pay the additional financial contribution progressively.

189    The identity of those companies which had lodged an EOI in respect of each of the eleven coal areas the subject of the EOI process was made public on 24 November 2008. Rampe and Brook immediately ascertained which companies had lodged EOIs in respect of areas for which MMNL had lodged an EOI. Brook passed on that information to Moses Obeid. The EOI applicants for Mt Penny were MMNL and the Jain Group. The EOI applicants for Glendon Brook were MMNL and Hydromining Coal Australia Pty Limited.

The DPI Reopens the EOI Process

190    On 9 January 2009, the DPI announced that the EOI process for the eleven coal release areas in the Gunnedah, Hunter and Western Coalfields areas (including Mt Penny and Glendon Brook) was to be reopened to allow additional small to medium companies to lodge EOIs. Those parties who had already lodged EOIs could retain, revise and relodge or withdraw their EOIs. At the same time, the DPI issued a revised document entitled “Expressions of Interest Information” (revised package) which stated:

The successful applicant/s will be awarded a coal exploration licence over the area(s) for an initial period of up to 5 years, pursuant to the Mining Act 1992 … Exploration rights over these areas will be awarded by part transfer of the existing titles held by the Crown where applicable or the grant of a new exploration title. The continued tenure of the exploration licence during the initial period and any subsequent renewal period will be subject to compliance with agreed commitments and title conditions. The [DPI] is not bound to accept any of the proposals.

191    New and revised EOIs were required to be submitted by 16 February 2009.

192    Section 6 of the revised package described the evaluation process. Section 6.1 was in the following terms:

6.1    Evaluation Process

The Director-General of the Department of Primary Industries will make recommendations to the Minister in relation to the awarding of exploration licences following completion of the evaluation process for the eleven (11) release areas.

The Department of Primary Industries will establish an evaluation team from experts on its staff and elsewhere in government. The team will evaluate the Expressions of Interest using a consistent process approved by an independent probity auditor. The auditor will review compliance of the evaluation process by the evaluation team prior to the submission of recommendations to the Director-General. This process will ensure the highest levels of consistency, fairness and probity are achieved.

The evaluation team’s assessment will be based on the Evaluation Criteria outlined in Section 6.2.

193    Section 6.2 of the revised package repeated the evaluation criteria in the same terms as the initial EOI information package. Similarly, section 7 identified the relevant financial contributions in substantially the same terms as the initial EOI information package. All financial contributions were required to be made “… within 30 days of the Minister granting consent to apply for a new exploration licence”.

194    At the time when the DPI reopened the EOI process, Brook was in India meeting with the Jain Group, an Indian power generation company which had also lodged an EOI in relation to the Mt Penny coal release area, with a view to negotiating a joint venture between the Jain Group and MMNL in relation to Mt Penny. At around this time, Brook was told by Moses Obeid that the EOI process had been reopened “to allow the White Group to put in a bid”. Brook passed on that information to Rampe.

195    The Jain Group informed Brook that they did not wish to do a deal with MMNL before the DPI had announced the results of the EOI process.

196    By 2 January 2009, Brook and the Obeids were looking to funnel any investment proposal for Mt Penny through an Obeid entity. On that day, Brook sent an email to Rampe in which he said that he expected to receive an investment proposal from Kaidbay “next week”. That proposal appeared to relate only to the first payment of $1,000,000 in respect of Mt Penny.

197    On 5 January 2009, Locaway and UPG executed a Call Option Deed. That document was signed by Moses Obeid and Damian Obeid on behalf of Locaway and by Kaidbay on behalf of UPG. By clause 1.1 of that Deed, Locaway purported to grant to UPG or its nominee an option to purchase Cherrydale at the price of $5 million “… plus 50% of any amount over $5 million which UPG is able to sell [Cherrydale] for within a period of 10 years after the date it exercises the Call Option”. Under that Deed, UPG had the power to appoint a nominee to exercise the option instead of UPG itself. The Call Option granted by that Deed had to be exercised within six months after 5 January 2009.

198    The transaction embodied in the Call Option Deed to which I have referred at [197] above is a curious transaction. Locaway had purchased Cherrydale in 2007 in its capacity as the trustee of the Moona Plains Family Trust. UPG appears to have replaced Locaway as the trustee of that Trust on 15 February 2008. In order to reflect that change of trustee on the title to Cherrydale, all that was required was for UPG to be substituted for Locaway on the relevant title document upon the basis that it was the new trustee of the Moona Plains Family Trust. Indeed, as I have noted at [91] above, an undated document purporting to do just that was tendered in evidence before me. The transaction reflected in the Call Option Deed dated 5 January 2009 presupposed an arm’s length relationship between Locaway and UPG and a proposed transaction of sale and purchase in respect of Cherrydale. One may ask rhetorically: Why was this done? It seems to me that one plausible explanation for the transaction is that the Obeids were desirous of resetting the benchmark which was to be the subject of the four times multiple that they would ultimately seek when transferring the property (Cherrydale) into the anticipated coal mining venture. Kaidbay was an associate of Moses Obeid at the time. UPG was an Obeid company at the time. I think it unlikely that the Obeids had forgotten that they had replaced Locaway with UPG as the trustee of the Moona Plains Trust only a year before. In fact, in his letter to the solicitors for the vendors/mortgagees of Cherrydale dated 9 February 2009, Cordato made very clear that the Obeids were well aware of the fact that UPG had replaced Locaway as trustee of the Moona Plains Family Trust because, in that letter, Cordato said:

Our client desires to proceed without delay to record the appointment of [UPG] as the new trustee of the Moona Plains Family Trust on the title to the property.

199    It seems to me that, by February 2009, the Obeids wished to establish a value for Cherrydale which was at least $5 million (and hopefully more) so that the return on their ownership of Cherrydale would be far greater than it would otherwise have been had the original purchase price of $3,650,000 been used as the relevant benchmark.

200    On 13 January 2009, Cascade received the revised package from the DPI. Several of the directors of Cascade were also directors of White Energy Company Limited and the evidence suggests that, in the last quarter of 2008, those persons had been in contact with the DPI with a view to advancing Cascade’s coal mining ambitions in NSW.

201    James McGuigan sent the revised package by email to John McGuigan, Atkinson and Poole the next day (14 January 2009). In that email, James McGuigan said:

Yesterday we received the Expression of Interest Information Pack from the NSW Department of Primary Industry. It is attached, but the key points are:

–    The 4 medium and 7 small allocations from our previous meeting are on the table.

–    This includes the Mt Penny and Spur Hill areas that we were previously of the view that there had been a deal done for them.

–    This does not include the other major coal allocation (Bennalbri) in the Gunnedah Coalfield

–    The expression of interests are to be submitted by 16 February

As discussed before the Director General (Dr Richard Sheldrake) will make his recommendation to the Minister (Ian McDonald) in relation to rewarding the licence. The evaluation criteria is quite detailed, and we will most likely have to engage the services of a mine / exploration consultancy firm to assist us with the exploration program, mine development proposal, infrastructure plan etc... I have arranged a meeting with Behre Dolbear for early next week, however if you guys have other consultants that you think may assist please let me know.

Each submission will cost approx $11,000 to submit, further if are awarded the licence a one off payment for the area is required to the DPI’s Coal Development Fund:

–    Spur Hill $1.5

–    Mt Penny $1m

–    Glendenbrook $300k

Additional financial contributions may be included as part of an applicant’s Expression of Interest.

Moving forward, John M is arranging a meeting with Greg Jones for this Saturday to figure out if the Mt Penny and Spur Hill areas have effectively already been allocated. If this is the case, from our meeting in November we were thinking:

–    Glendenbrook for Redman Mining

–    Spur Hill for Cascade Coal

Both of those are Hunter Coalfield areas. We may want to revisit the WEC / Cessnock leverage point here. Further, both areas are close to Coal and Allied mines.

I have attached the Information package (Atko I sent one to North Sydney attention to John M). Below is also the article from December 30 referring to Ian McDonald’s allegations of buying personnel items on ministerial credit cards.

I propose we arrange a meeting on Monday, after Saturday’s meeting to set a plan for the following 3 weeks.

Please give me a call if there is anything else.

James McGuigan

Arthur Phillip Pty Ltd·

Level 33 Colonial Centre

52 Martin Place

Sydney NSW 2000

P: +612 92278914

E: jmcguigan@aphillip.com.au

Accused minister Ian Macdonald likely to be cleared by inquiry

NSW Primary Industry Minister Ian Macdonald is set to be cleared of an accusation that be bought a $1299 LCD television for himself using taxpayers’ money.

The Australian learned last night an internal inquiry by the Department of NSW Premier Nathan Rees had determined that key aspects of the allegations -- first aired in a Sunday newspaper earlier this month -- were unsubstantiated.

The newspaper reported that Mr Macdonald used a departmental credit card in 2005 to pay for the TV with built-in DVD player, despite ministerial use of corporate cards having been banned in 1995. It said the TV had been in Mr Macdonald’s home but was subsequently moved to his office.

Mr Macdonald’s name and private mobile number were included on a purchase order from Bing Lee, Burwood, that was leaked to The Sunday Telegraph. However, a spokeswoman for Mr Rees said that, while the inquiry was yet to be finalised, “so far it’s found that the statement he bought the TV on a credit card is false”.

The spokeswoman also said the TV was never in Mr Macdonald’s home. She said the inquiry would be concluded soon but that the findings so far were “pretty conclusive”.

The finding marks a reprieve for Mr Rees, who has had to sack two ministers for misbehaviour.

Former police minister Matt Brown was dismissed in September after it was revealed he had danced at a party in Parliament House in his underpants. Former medical research minister Tony Stewart was sacked last month for verbally intimidating a female staff member at a public function.

202    Greg Jones was an associate of several of the directors of Cascade. He also had a close association with Ian Macdonald and connections in the NSW Government.

203    On 4 February 2009, James McGuigan sent an email to John McGuigan, Atkinson and Poole in which he informed those gentlemen that he was preparing two submissions: One for Glendon Brook and one for Vickery South. He then said:

I won’t begin work on Mt Penny, until after the discussion with Greg Jones.

204    The day before (3 February 2009), Michael Johnstone informed Travers Duncan that he had had a telephone conversation that afternoon with John McGuigan, James McGuigan and Poole in which he had discussed various of the coal release areas the subject of the revised EOI process. In that email, Johnstone outlined the likely extent of coal deposits in some of the areas of interest.

205    At 5.23 pm on 4 February 2009, James McGuigan sent to Johnstone a report on the Mt Penny coal release area prepared by MMNL. That report was dated 10 October 2008. There was no direct evidence as to how James McGuigan had obtained that report.

206    By mid-February 2009, one or two of the directors of MMNL were becoming concerned about MMNL’s capacity to meet the financial promises which it had made in the EOIs which it had lodged with the DPI.

207    On 13 February 2009, MMNL confirmed to the DPI that it maintained its original EOI applications in respect of the Mt Penny, Spur Hill and Glendon Brook coal release areas. At the same time, it indicated to the DPI that, in due course, it would submit variations to the other EOIs which it had lodged.

208    On 16 February 2009, Cascade lodged its EOI with the DPI for the Mt Penny coal exploration area. In its covering letter, Cascade said:

The shareholders of Cascade are committed to developing a coal project and have committed to inject sufficient capital to meet the upfront fees and initial Program of Works as required in the event that Cascade is successful with its application. In this regard the shareholders have secured an underwriting from the investment bank Arthur Phillip Pty Ltd to underpin their commitment.

209    Unlike MMNL, Cascade did not offer any additional financial commitment. It did undertake to meet the minimum financial obligations and also committed to negotiate with the DPI in relation to an additional contribution at a later date.

210    On the same day, Cascade also lodged an EOI for the Glendon Brook coal exploration area.

211    The identity of the companies bidding for the areas covered by the DPI’s program became publicly available on 16 February 2009. The bidders for the Mt Penny coal exploration area were Cascade, MMNL, Jain Group and Breakspheare Coal Mines Pty Ltd. For Glendon Brook, the EOI applicants were Cascade, MMNL and Hydro Mining Coal Australia Pty Limited.

212    On 17 February 2009, James McGuigan informed the directors of Cascade of the identity of the various bidders for the Mt Penny, Glendon Brook and Spur Hill coal areas. On 18 February 2009, he also passed that information on to Jones.

213    In early March 2009, Brook was seeking a firm commitment from Moses Obeid that Brook would be given a percentage of the Obeids’ equity in the proposed mining venture at Mt Penny in compensation for his efforts on behalf of the Obeid family. He was seeking 5% of the shares issued in Monaro Coal. Moses Obeid subsequently raised this matter with Rumore and seemed willing to accommodate Brook’s request. However, nothing concrete was done at this time.

214    On 17 March 2009, MMNL sent a letter to Voope in the following terms:

17/3/2009

The Directors

Voope Pty Limited

c/- Colin Biggers & Paisley

Level 42, 2 Park Street,

Sydney NSW 2000

Dear Sir,

Re: Mt Penny Coal Release Area

This is to advise you that in its submission of an Expression of Interest to the NSW Department of Primary Industries for the Mt Penny Coal Release Area, Monaro has specifically requested that should it be successful in being awarded the Mt Penny area, that it be awarded to a wholly owned subsidiary of Monaro Mining NL. It is our intention that this subsidiary be Monaro Coal Pty Ltd.

Yours Faithfully,

Mart Rampe

Executive Director

215    A few days before, Brook had requested that a letter in those terms be sent to Voope. He settled the text of the letter with Rampe. Brook sent a copy of this letter to Moses Obeid soon after it was received by him.

216    In late March 2009, Rampe asked Brook if it would be possible to meet any of the landowners at Mt Penny while he and others were visiting the area. Brook told him “No”.

217    In April 2009, disputes arose amongst the directors of MMNL in respect of that company’s bids for ELs as part of the revised coal EOI process and its financial position generally. As a result, the Chairman, Grigor, was removed as a director of MMNL at a directors’ meeting of MMNL held on 29 April 2009. On the same day, Grigor also resigned as a director of Monaro Coal. After Grigor’s resignation as a director of Monaro Coal, the directors of Monaro Coal were James Malone, Rampe and Anne Adaley. All of the shares in Monaro Coal were still owned by MMNL.

218    By 6 May 2009, the officers of the DPI who were responsible for evaluating the EOI applications had substantially completed their analysis and had also finalised their recommendations. Those officers prepared an evaluation report of that date in which they recorded the results of their analysis. In that report, MMNL was identified as the preferred applicant for five of the EOI coal exploration areas, including Mt Penny, Yarrawa and Glendon Brook. MMNL’s stated financial contributions had a decisive effect in the deliberations of the evaluation committee. The report did not disclose the identity of the second placed applicant for any of the coal exploration areas under consideration.

219    In early May 2009, MMNL was advised by a lawyer retained by it that Voope had no obligation to finance any of MMNL’s coal bids.

220    On 6 May 2009, Hughes prepared a Ministerial Submission containing recommendations with respect to the EOIs for the eleven coal release areas covered by the revised EOI information package. In that submission, the author recommended that the Minister award ELs to the successful EOIs (as determined by the Evaluation Committee) for the eleven coal release areas covered by the submission. He also recommended that the Minister write to each company which either lodged a successful or an unsuccessful EOI in the terms of certain draft letters which were attached to the brief. Included within the bundle of draft letters attached to that brief was a letter to MMNL informing it that it was the successful EOI applicant for the awarding of an EL over the Mt Penny, Glendon Brook, Spur Hill, Yarrawa, Long Mountain and Ben Bullen coal release areas.

221    On 14 May 2009, MMNL informed Hughes by email that its commitment to pay $25 million as an additional financial contribution would be paid over a negotiated timeframe.

222    On 15 May 2009, Hughes responded to MMNL’s 14 May 2009 email in the following terms:

Thank you for clarifying with me the words ‘Upon Granting of Consent’ in Monaro’s various Expressions of Interest (EOI) for the Coal Release Areas. All EOI’s will be assessed by an Evaluation Team in accordance with the Evaluation Criteria outlined in the EOI Information Package for the Coal Release Areas. Each EOI will be assessed based on submissions made at the date of closing at 12 pm noon on Monday 16 February 2009.

223    The revised package required payment of the $25 million financial contribution offered by MMNL within 30 days of the Minister’s consent to the EL application being made.

224    On 15 May 2009, Rampe was contacted by an officer of the DPI who requested that he meet with officers of the DPI about MMNL’s coal bids. A meeting was arranged for 21 May 2009.

225    On 16 May 2009, MMNL proposed amendments to the Voope Option Deed. By the amendments, MMNL sought to impose upon Voope the obligation to fund the $25 million financial contribution required in respect of MMNL’s bid for the Mt Penny coal exploration area, whether required upfront, or paid over a negotiated period. Brook resisted any variation. In an email sent to Rampe on 16 May 2009, Brook said:

Incremental earn in by Voope is not acceptable and at this late hour will seriously put the outcome at risk. It was never the intention that Voope would have performance criteria.

You have had many months to address these issues.

226    On 17 May 2009, Rampe replied that the amendments which he had sought were “just a suggestion”. Rampe then proposed other ways of dealing with the issue.

227    In a memorandum dated 18 May 2009 forwarded by Rampe to the directors of MMNL, Rampe set out a timeline of relevant events. It seems likely that this memorandum was prepared for the directors of MMNL in order to bring them up to date immediately before the proposed meeting with officers of the DPI on Thursday 21 May 2009. Sections 3 and 4 of Rampe’s memorandum were in the following terms:

3 Agreements and Potential Investors

The only agreement in place regarding this project (together with a subsequent amendment) is an option deed over 80% of shares in Monaro Coal Pty Ltd held by Voope Pty Ltd (see Section 1 above). Please note that the purpose of incorporating Monaro Coal was to “house” the Mt Penny exploration licence, should it be granted by the DPI.

The basis for this agreement was established by Gardner Brook, who had previously established a connection with Voope. Voope represents a majority of the landowners located within the Mt Penny coal release area who have agreed to make the land available to Monaro Coal for exploration and mining. In addition, Voope has agreed to facilitate the raising of the bulk of the funds to finance the necessary payments to the Government (approximately $25M) as well as the exploration program (approximately $8.2M). Because of the large sums required to secure the Mt Penny area, a 20% “free carry” to a bankable feasibility study for Monaro was considered fair and reasonable to all parties. However, it was further agreed in general terms that Monaro would pay the 1st $1.0M of the DPI commitment. It was assumed that this commitment would be paid from a larger capital raising (ie perhaps $2-$3M) off the back of a successful announcement.

It was always understood that Voope would reduce its own interest in Monaro Coal, upon a principle investor being identified. To that end, Gardner Brook has been engaged on a retainer basis to canvass potential investors for Monaro Coal. This has involved meetings and discussions with a number of interested parties in Beijing, India, UK, USA as well as with local based companies. Finalization of the candidates will depend upon the Government confirming that Monaro has indeed secured the exploration licence.

The above agreement is being amended to incorporate practical commercial terms and it is anticipated that the amended version will be completed in the following days.

4 Next

Directors will be meeting with Gardner Brook and Voope this week ahead of a meeting with the head of the tender selection panel as well as the acting Director General of the DPI. The purpose of the meeting is to discuss the details of the Company’s submissions. It appears that the selection process is now coming to an end. However, the timing of any announcement regarding the success or otherwise for Monaro, is still unknown. The results of this meeting will be circulated as soon as possible.

228    On 19 May 2009, MMNL provided Brook with a draft deed varying the Voope Option Deed. Brook promptly provided a copy of that draft to Moses Obeid. At this time, a number of drafts seeking to vary that Deed were prepared. Some for the Obeids and several for MMNL. Most of those drafts were not passed on to the respective counter-party.

229    On 20 May 2009, Brook met with representatives of MMNL and Messrs Capo and Sindoni representing Voope. A note of the meeting records discussion about MMNL engaging a party to identify “funding partners” with MMNL having an opportunity to provide funds if the Voope arrangements did not proceed. Brook requested, and the MMNL representatives agreed, to bring Brook to the DPI meeting scheduled for the next day (21 May 2009).

230    On 20 May 2009, Rampe confirmed with Hughes the details of the meeting to be held on 21 May 2009 and also sought permission to “bring along our partner if that’s OK”. The reference to “our partner” in the relevant email was a reference to Brook.

231    On 20 May 2009, Moses Obeid sent an email to John McGuigan (copied to Jones) concerning Georadar. On 21 May 2009, John McGuigan sent that email and his response on to his son, James. Georadar was a piece of technology that enabled a miner to delineate an ore body of interest without having to drill. This email exchange suggests that Moses Obeid had talked to or met John McGuigan before 20 May 2009.

232    The meeting with Mullard and others took place at 10.30 am on 21 May 2009 at the Sydney offices of the DPI. Present at that meeting were Mullard, Hughes, Brook and Rampe. At that meeting, the DPI officers in attendance informed Brook and Rampe that all financial contributions were required to be paid in a lump sum, upfront. That is, within 30 days of the Minister giving consent to an applicant to apply for an EL. Those officers told Brook and Rampe that MMNL had to decide by the following Monday (25 May 2009) with which EOIs it wished to proceed. Brook passed on the substance of this discussion to Moses Obeid on the same day (21 May 2009).

233    In the afternoon of 21 May 2009, Rampe sent an email to Brook which was in the following terms:

Gardner

This is my understanding of the process that Brad outlined to us this morning:

1 We need to nominate which projects we want to run with on the basis that all fees are paid in one lump sum.

2 We need to advise him by Monday COB which projects we intend to run with.

3 We nominate the project(s) and if we are successful in our bid (or bids), the Department will advise us within the next 1-2 weeks – probably informally. At that point of time, they will want to be convinced that we are serious contenders.

4 If we say yes, we will get an official letter shortly thereafter inviting us to apply for a licence over the relevant area. The letter will advise us that we have 30 days to put up the cash.

Can you confirm that this is correct.

Mart

Mullard denied that he indicated to Brook and to Rampe at the meeting held on 21 May 2009 that MMNL was the favoured applicant for any of the coal release areas covered by the EOI process.

234    Later that same day, Brook forwarded to Moses Obeid Rampe’s email to him (Brook).

235    On 21 May 2009, Rampe provided Brook with a summary of MMNL’s financial commitments in respect of each of its EOI bids. Those commitments totalled approximately $60 million. Rampe also provided Brook with a copy of MMNL’s original EOI application for Mt Penny dated 21 November 2008. These documents were immediately passed on to Moses Obeid.

236    In early May 2009, Brook agreed with Moses Obeid to attempt to gain control of MMNL’s EOI for the Mt Penny coal release area. Later in May, but shortly before 22 May 2009, Brook met with Rampe at the Swissotel in Sydney. Rampe informed Brook that MMNL wished to withdraw from the EOI process to which Brook responded that Voope wanted to take control of the EOIs, if it could, subject to DPI approval. Rampe indicated that MMNL wanted some compensation for its costs of the EOI process.

237    On 22 May 2009, Brook met with several of the directors of MMNL (Messrs Malone, Barns and Rampe). The only director who did not attend this meeting was Mr Michael Duncan. At this meeting, Brook was endeavouring to ensure that Voope did not lose its interest in the Mt Penny project. Brook told the MMNL representatives that Voope was keen to preserve its position, that those who stood behind Voope had deep pockets and that they would want to take their chances. Immediately after this meeting, the Board of Directors of MMNL met.

238    At the meeting of its directors held on 22 May 2009, MMNL decided to abandon its “NSW Coal Project”. The meeting was attended by Messrs Malone, Rampe and Barns. The Minutes recorded the following matters:

Opening address

The Chairman referred to the discussion between the Directors and Gardner Brook held immediately prior to the Board Meeting in reference to the NSW Coal Project and the Expressions of Interest submitted by the Company. In summary, the Chairman indicated that the NSW Government’s requirement to have all fees and contributions paid within 30 days of offer placed the Company at too great a risk, should the Company fail to source the funds required. It was considered that the possibility of raising the funds nominated in the Expressions of Interest within the time frame suggested would be extremely difficult if not impossible. Given this very significant change to the anticipated strategy, the Chairman suggested that the Coal project was no longer viable.

The Chairman noted the request from Gardner Brook representing Voope Ltd, who had expressed the desire to attempt a salvage of the coal project (in particular Mt Penny), given their significant exposure to the project.

A discussion was then held between the directors during which time, various views were expressed.

Resolution

Resolved: to abandon the project, contingent upon the following:

Voope to provide a new agreement outling [sic] a satisfactory mechanism for transferring any licences that may be awarded away from Monaro Mining and holding Monaro Mining harmless in all aspects;

Voope to reimburse Monaro expenses, should it be successful in securing a coal licence

The Chairman advised that he would report the result of the meeting to Mr M Duncan. The Chairman felt that Mr Duncan would be sympathetic to the above resolution. A circular resolution would be distributed to all directors giving effect to the above resolution.

Next meeting

To be advised

Closure

There being no further business the Chairman declared the meeting closed at 10.45 am.

239    Notwithstanding the terms of this resolution, MMNL did not withdraw its EOIs for Yarrawa, Long Mountain and Ben Bullen. The EL for Yarrawa was ultimately issued to Loyal Coal after ownership of Loyal Coal had passed to Coalworks Limited and the EOIs for Long Mountain and Ben Bullen were allowed to lapse.

240    By late May 2009, MMNL had retained Mark Edwards, a solicitor based in Perth, to advise it in relation to a number of matters concerning its dealings with Voope. On 28 May 2009, Edwards sent an email to Rampe in which he provided advice on the liabilities of directors for insolvent trading. At par 4 of that email, Edwards said that the directors would have:

… reasonable grounds to believe that they will be able to meet liabilities arising from the tender if, prior to the time the liabilities were incurred, Monaro Coal enters into an unconditional legally binding agreement with a financially capable reputable company under which that company committed to provide the necessary capital to Monaro Coal to perform its obligations arising from the tender.

241    At this time, MMNL had two main concerns about the EOI process: First, the directors did not wish to commit MMNL, being a public company, to transactions which involved the payment of significant sums of money unless they were satisfied that MMNL had the necessary financial resources and/or backing to make those payments. Second, the directors of MMNL were concerned to preserve the company’s good name in its dealings with government and not to damage that good name by behaving erratically and inconsistently in relation to the EOI process which was then coming to a head.

Negotiations between Cascade and the Obeids, Related Matters and Subsequent Events (20 May 2009 to May 2012)

242    The evidence disclosed that there were four meetings of significance involving the McGuigans, the Obeids and Brook in late May and early June 2009. These meetings were held on 23 May, 31 May, 3 June and 5 June 2009. There is very little in dispute between the parties as to what occurred and what was said at the meetings held on 31 May 2009, 3 June 2009 and 5 June 2009. There is a difference between Brook and John McGuigan as to the substance of the discussions which took place on 23 May 2009. For this reason, I will address the meeting of 23 May 2009 in a separate section of these Reasons. There is also a difference between Brook and Poole as to the substance of what was discussed at meetings held on 1 (or 2) June 2009, on 3 June 2009 and on 5 June 2009.

243    On 25 May 2009, Rampe sent an email to Malone and Barns. It was copied to Brook. That email was in the following terms:

From:    Mart Rampe

Sent:    Monday, 25 May 2009 7:58 AM

To:    ‘jim.malone@xxxxx; ‘Greg Barns’

Cc:    ‘gbrook@oregonstandard.com.au’

Subject:    NSW Coal

Importance:    High

Gents

Having though [sic] about events from last week, I believe that the following matters need to be addressed, viz:

The NSW DPI has requested that we respond to their query regarding the payment of the Contribution by COB today.

I believe that we should advise them that we agree with their understanding of the upfront payment and let the them [sic] process our applications accordingly. My understanding of the process is that should the DPI deem one or more of our applications to be successful, we will then be invited to apply for a licence for the relevant area(s). It is at this point that Monaro either takes up the invitation or rejects it. This “invitation” from the DPI would appear to be a week or so from being forwarded to us (on the assumption that one or more of our applications are in the running). I would of course put this to them in writing. I would also imagine that they would give us a few days in which to make a decision.

In the meantime, commencing from today, we would (via Gardner) approach a number of parties who had previously expressed an interest, on the basis that a written commitment to come up with the funds needs to be lodged with the Company prior to the DPI’s “drop-dead” day. This is no question a tall order, but nevertheless, I believe that we are honour bound to at least give these interested parties an opportunity to respond. If the responses are unsatisfactory, then we can advise the DPI of our withdrawal. Parties that should be approached include The Jain Group, various Chinese Groups and Minsarco (who did the mine planning for us).

Should we proceed on the above course of action, another matter that needs clarification from the DPI is the “awarding” of a licence. Our submission indicated that we would wish to have any awarded licence be granted to a “wholly owned” subsidiary of Monaro. However, under the current agreement with Voope and based on advice from Grant Thornton, this is not a good idea because of stamp-duty implications for the purchaser of the shares in the subsidiary. Hence we need to ask the DPI, whether we can vary that to a “partly owned” Company (or even consider getting it issued directly into Monaro).

Does anybody have an issue with the above? We need to discuss as soon as possible this morning.

Regards

Mart

244    By late May 2009, Johnstone began to wonder whether there were links or associations between Cascade and MMNL. At 5.04 pm on 25 May 2009, Johnstone sent an email to James McGuigan in which he said:

I met with a few DPI geologists, from one corner I was told a possible positive outcome, on other, same mantra as previously conveyed – “We do not have a timetable for release of who gets what”. This implies a decision has been taken, but some sensitive issues and background dealing is going on.

At 5.06 pm on the same day, James McGuigan sent an email to Johnstone in which he said:

My mail is that we should be fine for Glendon Brook, and that we are in a good position with Mt Penny. Monaro have put substantial payments on every EOI area, however their ability to pay is what they are looking at.

Anyway – hopefully it will be resolved this week.

At 6.45 pm on the same day, Johnstone replied in the following terms:

I’m getting some form with Monaro on Mt Penny. Are there any links or associations between Cascade and Monaro?

245    At 6.49 pm, James McGuigan responded in the following terms:

Not at all.

There was the proposal of a deal to be brokered last week, where we would take 90% of Mt Penny and a Monaro associate would take 10%.

What’s going on behind the scenes is that we are trying to raise the question on Monaro’s ability to raise finances, especially after they have committed on each EOI.

That’s just between you and me.

I think our stance is that we’re not going to negotiate any more.

Let’s see how it plays out.

Johnstone replied by saying:

This clarifies some of the mixed spiel I have been getting.

246    The email exchange to which I have referred at [244]–[245] above took place on a Monday (25 May 2009). It took place shortly after the first meeting between Moses Obeid, Brook, John McGuigan and James McGuigan which had taken place on the preceding Saturday (23 May 2009).

247    It is a reasonable inference that James McGuigan had learned of the “substantial payments on every EOI area” placed by MMNL at the meeting held on 23 May 2009. He accepted as much in cross-examination.

248    On 27 May 2009, Paul Maroon, an employee of Streetscape, a company controlled by Moses Obeid, sent to Moses Obeid a draft of Heads of Agreement between Cascade and the landowners and a further draft Heads of Agreement between Cascade and Voope. The landowners Heads of Agreement provided that Cascade would purchase Cherrydale, Donola and Coggan Creek for an amount equivalent to four times the improved value of those properties. Recital E in the Voope draft Heads of Agreement recorded that, on 22 May 2009, the DPI had informed Monaro Coal that it was the leading tenderer in relation to a number of the coal exploration areas listed in the EOIs lodged by MMNL, including Mt Penny. The document went on to record an agreement to the effect that, if Monaro Coal was successful in being awarded the EL for Mt Penny, Voope would cause Monaro Coal to transfer that EL to Cascade. In return, Cascade would transfer 32.5% of its shares to Voope and lend moneys to Voope to enable it to pay out the existing mortgages over Cherrydale.

249    The next day (28 May 2009), further drafts of those two Heads of Agreement were sent to Moses Obeid, on this occasion by Mario Sindoni. Sindoni was acting for the Obeids.

250    On 29 May 2009, Moses Obeid attempted to email to John McGuigan a draft Deed of Release between Voope and MMNL. In the covering email, Moses said: “draft deed as discussed”. The email did not reach John McGuigan because the email address to which it was being sent was not the correct address for him. The draft Deed of Release was also sent to Rampe who then passed it on to Malone and Barns.

251    I think that it is likely that Moses Obeid attempted to send the draft Deed of Release between Voope and MMNL in order to satisfy him that Brook and the Obeids would, in due course, gain control over the MMNL EOIs. The draft Deed of Release did not mention the withdrawal of any EOIs. The substance of the transactions contemplated by that draft was the transfer from MMNL to Voope of ownership and control of Monaro Coal and the locking in of Monaro Coal as the official bidder for the eleven coal release areas for which MMNL had previously lodged EOIs. This tends to suggest that, at the meeting of 23 May 2009, the question of the Obeids gaining control of the MMNL EOIs was discussed and the fact that they would gain that control through Monaro Coal may also have been discussed.

The 31 May 2009 Meeting

252    Brook’s evidence was that, shortly before the meeting held on 31 May 2009 with the McGuigans, he and Moses Obeid, Paul Obeid and Gerard Obeid had met at Moses Obeid’s office at Birkenhead Point. He said that, at that meeting, Moses Obeid had said words to the following effect:

We want to incorporate Buffalo Resources, Buffalo Coal and Buffalo Energy. We want to use Buffalo Resources for the Cascade deal.

253    On 31 May 2009, immediately before the meeting with the McGuigans, Brook met Moses Obeid, Paul Obeid and Gerard Obeid outside Cascade’s office. A conversation then took place in which Moses Obeid said words to the following effect:

I’ve been talking to Brian [Flannery] and he’s been talking to Travers Duncan. Both the land and equity deals will have to be vetted by Duncan.

254    Brook and the Obeids were then shown into Cascade’s offices.

255    Present at the 31 May 2009 meeting were Brook, Moses Obeid, Paul Obeid, Gerard Obeid, Greg Jones, John McGuigan and James McGuigan.

256    At par 168 of his first affidavit, Brook gave a summary of the discussions which took place at this meeting. That paragraph is in the following terms:

During the course of the meeting, we worked through the points that would form the basis of the first draft of the agreements between the Obeids and Cascade. The multiple that would apply to the land purchases (which had not previously been finalised) was mentioned. I was not responsible for negotiating the multiple, and we did not agree on the precise amount at this meeting. We also discussed the fact that the proposed venture would extend to any contiguous areas over which Cascade later acquired mining rights and talked about how the Obeids’ 25% interest would work, in particular whether the shares would be ‘contributing shares’ (which would require the Obeids to make capital contributions) and whether the Obeids would be represented on the Board. I was sensitive to Cascade diluting the Obeids’ 25% interest by spending them out through high capital expenditure which the Obeids could not match, so we negotiated a clause relating to the exploration spend or the establishment of a 100 million tonne resource.

257    Brook said that this second meeting did not last long. According to him, the following conversation occurred at this meeting:

Brook:    “We have agreed with Monaro Mining that we will take control of their EOI submission. Monaro will contact the DPI and inform them that we now control the Monaro Mining bids. Also, the shares in the special purpose vehicle being used by Monaro Mining will be transferred to our control.”

John McGuigan:    “I want to see evidence that you control the Monaro bid.”

Brook:    “I will provide you with the letters to the DPI and proof of the share transfers when I have them.”

John McGuigan:    “Alright, well I’ll draft an agreement for you to review.

Also during the second meeting, there was a conversation to the following effect:

Moses Obeid:    “The Obeids’ interest will be held by a separate company.”

258    According to Brook’s evidence-in-chief, immediately after the meeting on 31 May 2009, he had a conversation with Moses Obeid in which Moses Obeid told him that the Obeids would use Buffalo as the company to hold the mining interests with Cascade and that he (Brook) could take his success fee in the form of 12% stake in Buffalo. Brook said that he agreed to this. Brook also testified that Moses Obeid requested on this occasion that he be a director of Buffalo and Loyal Coal with Kaidbay.

259    According to John McGuigan, the discussion on 31 May 2009 commenced with reference to the landowners’ alliance. John McGuigan said that he asked to see evidence of the landowners’ alliance. He then said that Cascade would agree to acquire the land from the landowners at a premium to its agricultural value. He said that Cascade would have to do some research before it would agree on any multiple. He then said that, if Cascade were the successful EOI applicant, then contracts to purchase the land would be entered into within 90 days of the award of an EL for Mt Penny. He said that those contracts would be completed within 90 days of the grant to Cascade of a mining lease.

260    John McGuigan then testified that the discussion moved to the proposed JV interest. At par 22 of his affidavit, John McGuigan said the following:

There was then discussion about the JV interest:

Brook said:    ‘As I said at our last meeting I am acquiring Monaro Coal from Monaro Mining. Part of the deal with Monaro Mining is that I will acquire or have access to work that has been done by Monaro Mining in relation to and in preparation of its Expression of Interest document. Quite a lot of work was done by Monaro Mining in relation to environmental matters, road access and the like. If we can do a deal I will provide that intellectual property to you. In consideration for us delivering the land and providing the intellectual property, we want a 30% interest in the joint venture’.

I said:    ‘I think a lower percentage would be more appropriate, something like 20%.

Brook said:    ‘Can we split the difference and make it 25%?’

After some deliberation, I said:

    ‘OK. I think we can work with that. So that means you will be contributing 25% of the costs associated with exploration?’

Brook said:    ‘Look. If we’re reducing the equity interest from 30% to 25% we don’t want to be contributing to the exploration costs.’

I said:    ‘Well, if a mining lease is granted UPG or its nominee will be required to make its proportionate contribution to all costs of the development of the Mt Penny mine or be diluted in accordance with provisions which we will insert into the agreement.’

Brook said:    ‘What about contiguous areas?’

I said:    ‘If Cascade receives an exploration licence and other rights over areas contiguous to Mt Penny become available, then to the extent that either Cascade or the joint venturer acquire rights over those contiguous areas UPG or its nominee will be entitled to a 25% interest.’

Brook said:    ‘We would like Board representation on the joint venture company equal to our joint venture interest.’

I said:    ‘That would be appropriate in the circumstances. We will have a go at documenting the deal. Because I am going to Indonesia I will leave this to Richard Poole and James.’

261    John McGuigan said that, after the meeting, he prepared the Key Principles document which he regarded as an accurate contemporaneous note of the main points discussed at that meeting.

262    I do not consider there to be any difference of substance between Brook’s evidence of what occurred at the meeting of 31 May 2009 and the evidence given by John McGuigan on that topic. The latter’s evidence is more detailed but the substance of that evidence is more or less the same as that given by Brook. Further, the Key Principles document dated 31 May 2009 which John McGuigan sent to his son on 31 May 2009, after the meeting, is a reliable record of the discussions which took place at the meeting earlier that day and of the agreements made as a result. In light of the material to which I have referred, I find that, subject to being satisfied of the matters set out in the Key Principles document, Cascade was willing to proceed to consummate a deal with Brook and the Obeids which incorporated the matters recorded in that document.

263    At 5.42 pm on 31 May 2009, John McGuigan sent an email to his son James McGuigan to which was attached a document headed “Key Principles – 31-05-2009”. That document was in the following terms:

Key Principles

l.    Acquire land from landowners at a consideration equal to the assessed value of the land for agricultural purpose together with a premium that reflects the marketplace assessment for a sale of agricultural land to the holder of Mining Rights.

2.    The contract to purchase and the determination of the consideration to be formally entered into within 90 days of the award of the Exploration License for Mount Penny to Cascade Coal Pty Ltd (“Cascade”).

3.    Title and ownership in the properties owned by the landowners will remain with the land owners until completion.

4.    Completion will take place within 90 days of the grant to Cascade of its application for a mining lease over Mount Penny and any additional contiguous areas.

5.    The landowners and in particular UPG Pty Ltd (“UPG”) will fully cooperate with Cascade in its pursuit of the grant of a Mining Lease.

6.    In recognition of UPG’s position as the key land holder Cascade will grant UPG or its Nominee a 25% interest in the Joint Venture Company formed to hold the Exploration License over Mount Penny and to pursue the grant of a mining lease and subsequent mining operations.

7.    UPG or its Nominee will not be required to make any contribution to the costs of the Joint Venture up to the time of the grant of a Mining Lease. For the avoidance of doubt the costs will include the exploration costs, the costs associated with the development application for the Mining Lease and the costs in purchasing the land.

8.    Once the Mining Lease is granted, UPG or its Nominee will be required to make its proportionate contribution to all costs of the development of Mount Penny or be diluted in accordance with the provisions of the Joint Venture governing the development of Mount Penny.

9.    Cascade agrees to seek the grant of an Exploration License or other rights over areas contiguous to Mount Penny should they become available. To the extent that either Cascade or the Joint Venture Company acquires the rights over the contiguous areas, UPG or its nominee will be entered to a 25% interest.

10.    In the principles outlined in paragraphs 7 and 8 with respect to Mount Penny will apply equally to any contiguous areas.

11.    UPG or its nominee will be entitled to participation on the board of the Joint Venture Company to an extent to commensurate with its equity interest.

264    That email was re-sent to James McGuigan at 10.18 am on 1 June 2009.

265    The essence of the deal embodied in this email was:

(a)    Cascade or its nominee would acquire all of the Bylong land owned by the Obeid nominee companies;

(b)    The Obeid interests would be awarded a 25% interest in a joint venture company to be formed in order to hold the EL over the Mt Penny coal exploration area and to pursue the grant of a mining lease and subsequent mining operations; and

(c)    The Obeid interests would not be required to contribute to the initial costs being the exploration costs, the costs associated with the development application for the mining lease and the costs of purchasing the land. Once the mining lease is granted, the Obeid interests would have to pay 25% of the costs of development incurred thereafter.

266    The reference to “UPG” in the email is a reference to United Pastoral Group Pty Limited.

267    After the meeting held on 31 May 2009, Brook, Moses Obeid and Paul Obeid agreed a split between the Obeid interests and Brook of the 25% equity interest in the venture. That split was 12% to Brook and 88% to the Obeids.

268    Poole met with Brook in the morning of 1 June 2009. Brook said that he did meet with Poole in a one-on-one meeting but that he thought that it was either on 2 June 2009 or on 3 June 2009. Poole’s evidence was that the meeting took place at around 10.00 am on 1 June 2009. Poole testified that, at this meeting, Brook told him that he had been unable to raise funding for the EOI lodged by a public company in respect of the Mt Penny coal release area. He said that the public company with whom he had been working had “… got cold feet and has decided that it did not want to proceed with any of the EOIs”. He said that he had been trying to raise funds for the deal everywhere but he had been unable to do so. He then mentioned recent discussions with John McGuigan and the fact that he had discussed a deal which involved the interests that he represented bringing over the land in return for a 25% interest in the coal mining joint venture.

269    In his second affidavit, Brook denied saying some of the things attributed to him by Poole in Poole’s affidavit. He accepted that he may have told Poole that he had been working with a public company on an EOI and had tried to raise funding for that purpose. He said that it was likely he told Poole that he had spoken to Indian and Chinese investors. He also accepted that he may have said that some of the members of the Board of MMNL had “got cold feet”. However, he denied telling Poole that MMNL’s EOIs were not proceeding. He also said that he did not tell Poole that he had been unable to raise funds and that his fundraising efforts were at an end. He denied telling Poole that MMNL’s EOI would be withdrawn in any event. The burden of Brook’s song was that he was at great pains not to tell the Cascade directors that MMNL had decided to withdraw its EOIs in respect of the Mt Penny and Glendon Brook coal release areas because that would have been contrary to his instructions from Moses Obeid and contrary to his own and the Obeid family’s interests in using the asserted capacity to control MMNL’s EOIs for those coal release areas as a bargaining chip in the negotiations with Cascade. Brook said that it would have made no sense for him to suggest that those EOIs would be withdrawn until he had ultimately concluded a deal with Cascade.

270    In his affidavit, Poole said that, after he had met with Brook on 1 June 2009, he had the clear understanding that the public company with which Brook had been working was not proceeding any further with its EOIs. He also said that he thought that a deal in principle had been done with John McGuigan the day before and that his role was now to document the terms of that deal.

271    At 12.26 pm on 1 June 2009, Poole sent to James McGuigan a draft of the letter agreement concerning the sale of Cherrydale, Donola and Coggan Creek to Cascade.

272    At 4.35 pm on 1 June 2009, MMNL sent a letter to Hughes at the DPI under cover of an email. Omitting address details and the heading, that letter was in the following terms:

I refer to my email sent to you on 14 May 2009 regarding Monaro mining NL’s (Monaro) meaning of the term “Upon Granting of Consent” within its various Expressions of Interest (EOI) submitted for the Coal Release Areas as invited by your Department in writing on 9 September 2009.

We wish to advise the following:

1.    We withdraw our meaning of the term “Upon Granting of Consent” as advised on 14 May 2009 via email.

2.    We will adhere to the Evaluation Criteria outlined in the EOI Information Package for the Coal Release Areas;

3.    We understand that if we are successful with any or all of our Expressions of Interest, that the Assessment Fee, EL Application Fee, Security Bond, the DPI Development Fund contribution and nominated additional financial contributions would be payable within 30 days from the date of a registration of part transfer of the current exploration licence or within 30 days of the Minister granting consent to apply for a new exploration licence.

4.    In order to adhere to and thereby comply with the Evaluation Criteria outlined in the EOI Information Package for the Coal Release Areas, Monaro requests that all Exploration Licences for which are granted pursuant to the Expressions of Interest currently lodged with your Department, that they be issued to our nominee company called Royal Coal Pty Ltd.

5.    In order to adhere to and thereby comply with the Evaluation Criteria outlined in the EOI Information Package for the coal Release Ares, the ownership of Royal Coal Pty Ltd will be transferred to Voope Pty Ltd who is the financial partner of Monaro’s consortium.

6.    It is intended that Monaro will provide Royal Coal with consultancy services via a management agreement should Royal Coal be awarded any Exploration Licences.

Should you have any questions regarding the above, please direct them to Mr Gardner Brook who represents both Royal coal and Voope, telephone 0488 080 101.

Yours faithfully

Mart Rampe

Executive Director

273    A later version of that letter was tendered in evidence. That version is dated 2 June 2009. It appears to be in the same terms as the earlier letter dated 1 June 2009 with the exception that the references to “Royal Coal Pty Ltd” were altered to “Loyal Coal Pty Ltd” (Loyal Coal).

274    By an email sent from Brook to James McGuigan at 5.18 pm on 1 June 2009, Brook passed on to James McGuigan his email address for him to send “the first draft”. He did not identify the subject matter of that draft. He then said:

Monaro completed all that I indicated today, and the share transfer will occur tomorrow.

I’ll send the relevant letters and agreement showing that we now have control of the bids.

275    At 5.23 pm on 1 June 2009, Poole sent to James McGuigan a further draft of the proposed letter agreement between Cascade and the landowners.

276    At 5.55 pm on the same day, Poole sent to James McGuigan a draft of the “equity letter” in respect of the proposed mining venture.

277    At 5.58 pm on 1 June 2009, James McGuigan sent the following email to Brook:

Gardner

That’s good news that it ran smoothly.

I spoke with Moses before, and informed him, that we are completing the agreements with the intention of getting them close to completion tomorrow. They will have to be reviewed by John who is in Indonesia, but I think we should be fine.

Well done again,

Speak soon

Cheers

278    In light of the contents of the emails sent on 1 June 2009 and the actions taken by MMNL, Brook and the Obeids during the course of the day on 1 June 2009, it is likely that, at the latest, on 31 May 2009, Brook informed the McGuigans that he and the Obeids would soon have control of the MMNL EOIs through Monaro Coal to whom the DPI would be asked to issue any ELs if its EOIs were successful and that MMNL would write to the DPI to both inform it of the transfer of ownership in Monaro Coal and request that any EL be issued in the name of Monaro Coal.

279    The “it” referred to in that email was a reference back to the email which Brook had sent to James McGuigan at 5.18 pm on 1 June 2009 to which I have made reference at [274] above. The “John” referred to in James McGuigan’s email is his father, John McGuigan.

280    At 6.43 pm on 1 June 2009, James McGuigan sent an email to Jones, John McGuigan and Poole. Attached to that email were documents described in the following terms: “Cascade Coal Letter – Land Owners.docx (31.54 kB); Cascade Coal Letter – Equity.docx (32.48 kB)”. The email was in the following terms:

Greg, John and Richard

Please find attached two Letters of agreement:

1)    Letter of Agreement between Cascade Coal Pty Ltd (“Cascade”) and United Pastoral Group Pty Ltd, Geble Pty Ltd, Coopers World Pty Ltd [collectively “the Landowners”].

2)    Letter of Agreement between Cascade Coal Pty Ltd (“Cascade”) and the (“Nominee”), collectively (“the Parties).

I have had a discussion with Mo, but am yet to receive what Nominee company they want to do it with, as well as any of the Land Agreements as promised from Paul.

Key changes made to these agreements include:

1)    We have agreed to form a Joint Venture instead of a Joint Venture Company with the Mount Penny asset to sit in Cascade

2)    With regards to Gardner’s comment about whether money in – will be treated as debt or equity, the following was inserted

“The Nominee acknowledges it has received consideration for the relevant land and that any contributions up to the grant of the Mining Lease shall be treated as shareholder loans and repaid out of profits in due course.”

Of immediate importance is the issue regarding as to what the multiplier which will be applied to the agricultural land – let’s discuss this.

Greg, we will discuss this tomorrow @ 11:30 at Arthur Phillip’s offices which are: Level 33, 52 Martin Place (Colonial Centre)

John, although documents are attached here I will resend as emails so that you can read on Blackberry. Please call me when you can.

In other news, Monaro completed all that they indicated yesterday – today, and the share transfer will occur tomorrow.

It will be a 100% entity owned by Gardner known as Royal Coal.

Cheers

281    One of the draft letter agreements attached to this email was an agreement whereby Cascade agreed to acquire the three properties referred to in the letters. These were the properties owned by UPG, Geble and Coopers World Pty Limited (Cherrydale, Donola and Coggan Creek). The other draft letter agreement attached to James McGuigan’s email dealt with a proposed joint venture between Cascade and a corporation to be nominated by Moses and Paul Obeid. This joint venture letter was in the following terms:

Dear Sir    DRAFT

Re: Letter of Agreement between Cascade Coal Pty Ltd (“Cascade”) and the [“Nominee”], collectively (“the Parties”)

I refer to our recent discussions in relation to Cascade’s intention to acquire a land interest in the Bylong region and to be granted an exploration licence (“the Exploration Licence”) and mining lease (“the Mining Lease”) over the Mount Penny area, and the letter of agreement between Cascade and the Landowners, dated 2 June 2009. Cascade has submitted an expression of interest requesting to be granted an Exploration Licence over the Mount Penny area.

Subject to the grant of the Exploration Licence, the Parties have agreed to form a Joint Venture (“JV”) to explore and develop the Exploration Licence and pursue the granting of the Mining Lease, in addition the JV will pursue the grant and issue of all relevant exploration licences and mining leases for any additional contiguous areas to Mount Penny.

Obligations of the Party’s

In recognition of the Nominee’s position as the key owner of land in the Mount Penny area and in consideration of the Nominee:

•    and its associates or related parties undertaking not to pursue the grant of any mining rights to the area or any contiguous area;

•    agreeing to assist Cascade to explore and develop the Exploration Licence and Mining Lease;

•    agreeing to make available and provide their expert knowledge of the area to assist with further exploration and review of the contiguous areas:

Cascade will agree to grant to the Nominee a 25% interest in the JV on the basis that the Nominee does not have to make any contribution to costs up to the grant of the Mining Lease.

Obligations of the Nominee

For the avoidance of doubt, prior to the granting of the Mining Lease the Nominee will not be liable to contribute to the exploration costs, the costs associated with the development application for the Mining Lease and the costs in purchasing the relevant land situated at Mount Penny. The Nominee acknowledges it has received consideration for the relevant land and that any contributions up to the grant of the Mining Lease shall be treated as shareholder loans and repaid out of profits in due course.

Once the Mining Lease is granted, the Nominee will be required to make a contribution to all costs of the development of the commercial mining operations in Mount Penny proportionate to the Nominee’s equity interest in the JV. Failure to contribute costs proportionate to the Nominee’s equity percentage will result in the Nominee’s interest in the JV being diluted pro rata in accordance with the provisions of the JV agreement governing the development of commercial mining operations in Mount Penny.

Contiguous Areas

If from time to time, the NSW Department of Primary Industries seeks expressions of interest from parties for the granting of a [sic] exploration licence, mining lease or any other mining interest for land that is contiguous to or adjoining or relevant to the future development of Mount Penny (“Contiguous Area”), Cascade on behalf of JV must use its best endeavors to become the successful applicant in any such exploration licence, mining lease or mining interest. To the extent that Cascade acquires the rights to pursue a mining interest over the contiguous areas, such areas shall be added to the JV.

The principles outlined above under the section “Obligations of the Nominee” with respect to contribution of costs relating to the development of a commercial mine at Mount Penny, will apply equally to the Contiguous Area.

Management of the Joint Venture

The Nominee will be entitled to participate on the board of JV to the extent to commensurate with the Nominee’s equity interest in JV.

The Nominee will be entitled to participate in the management of JV to an extent to [sic] commensurate with the Nominee’s equity interest in JV

Confidentiality

Except as expressly permitted by this Letter of Agreement, Cascade and the Nominee undertake and agree to hold each of the terms in this Letter of Agreement in strict confidence and not to disclose or discuss any Confidential Information to or with any person except, in accordance with this Letter of Agreement or as otherwise permitted by Cascade or the Nominee.

Cascade and the Nominee will ensure that no Confidential Information is photocopied, reproduced or recorded in any manner except to the extent that is necessary to provide such number of copies as are reasonably required by either Cascade or the Nominee.

Cascade and the Nominee will not use or disclose the Confidential Information or any part of it to gain any commercial, financial or other advantage for itself or any other person or to the competitive disadvantage or otherwise to the detriment of either Cascade or the Nominee.

Executed as an Agreement

Signed for and on behalf of

Cascade Coal Pty Ltd

ACN 119 180 620

Director        Director

Name of Director    Name of Director

(BLOCK LETTERS)    (BLOCK LETTERS)

Signed for and on behalf of

[“Landowners”]

ACN [ ]

Director    Director

Name of Director    Name of Director

(BLOCK LETTERS)    (BLOCK LETTERS)

282    On 1 June 2009, the change of name of Monaro Coal Pty Ltd to “Loyal Coal Pty Ltd” was registered by ASIC.

283    At 9.34 am on 2 June 2009, James McGuigan sent an email to Brook and to Moses Obeid in which he said:

Gardner, Moses

Just to touch base,

1)    Can you guys please send over or email the Land Owners Agreements, Paul was referring to on Sunday.

2)    Are you guys any clearer on the Nominee company that the agreement regarding the equity split with Cascade will be?

Just to keep you in the loop, I am meeting with Greg at 11:30 to discuss a few things, then I will get back in touch with you where we are and any changes to the agreements.

Regards

James

284    At 10.07 am on 2 June 2009, James McGuigan sent an email to his father which was in the following terms:

Dad,

I made the changes that we spoke about this morning.

-    Just to clarify the money in will be treated as shareholders loans (i.e equity)

-    With regards to the “subject to” with regards to the Landowners I have written:

“Completion of the SPA will occur within 90 days of Cascade being granted a mining lease for the Mount Penny area and for any additional contiguous areas (“Mining Lease”).

Completion is subject to Cascade

.    completing a Feasibility study that concludes in Cascades absolute discretion that it can develop a profitable mining operation including consideration of transport and all mine development factors and that Cascade should proceed to develop a coal mine;

.    concluding that the reserves are sufficient to justify the proposed Property Acquisition.

In the event Cascade does not receive the Mining Lease or conclude that a mine should be developed, the Facility will be repaid within 30 days.”

-    Should I insert a clause regarding the subject to directors approvals?

On a coincidental matter, there was a small article in the CBD section saying that land in the Bylong Area is going for $3,000 per ha (albeit it had a polo field). Could be a pure coincidence, but then again our letter mentions Bylong…. Could Greg have passed on to the boys, who planted the article??

Greg’s in at 11:30–I will write you an email to update after wards, and we will chat later in the arvo

285    At 10.41 am on 2 June 2009, John McGuigan replied to his son by email in the following terms:

James

Call me on mobile or blackbeery [sic] I can not get you.

On points

Shareholder loans are not equity. Basis of discussion on Sunday was that it would be equity namely npot [sic] repayable to Cascade. Will be hard to reopen.

On time for repayment suggest 90 days.

If pressure is to sign today will need 0to [sic] have subject to.

I would prefer to agree terms and have greg talk to Kingy and I will talk to Trav and John.

Less formal and reduces risk of ropening [sic] issues. Discuss with Greg.

John

286    At 1.18 pm on 2 June 2009, an employee of Moses Obeid’s business, Streetscape, sent to him a signed Landowners’ Deed, the parties to which were UPG, Geble and Coopers World Pty Ltd. That document had already been executed by Giovanni Campo, on behalf of Geble, but had not, at that time, been executed by either of the other parties.

287    At 2.37 pm on 2 June 2009, Moses Obeid sent an email to James McGuigan which was in the following terms:

James

As discussed I have included a copy of the Landowners agreement.

The multiple falls under 1.1 definitions clause ‘Criteria’.

The name of the entity being used by Gardner for the JV is BUFFALO RESOURCES PTY LTD.

I await you [sic] draft agreement.

Cheers

288    By an email sent at 3.09 pm on 2 June 2009 by James McGuigan to Moses Obeid and Brook (copied to John McGuigan and Poole), James McGuigan sent the final form of the two Cascade letters which had been the subject of consideration as drafts the day before. It would appear that Moses Obeid had received a revised draft of the landowners’ letter earlier that day.

289    Later in the day on 2 June 2009, a meeting was arranged at the offices of Arthur Phillip for 10.00 am on 3 June 2009. It was expected that that meeting would be attended by Brook, Moses Obeid, Poole and James McGuigan.

290    On 2 June 2009, Voope entered into a deed with MMNL styled “Deed of Release”. The recitals to that deed recorded the fact that Voope and MMNL had entered into an option deed in respect of certain shares in Monaro Coal (as controlled by MMNL) and that the parties agreed to release each other from their obligations under that option agreement. The deed recorded that Monaro Coal was to be renamed Loyal Coal Pty Ltd and that MMNL was to ensure that any ELs referable to EOIs lodged by it were granted in the name of Loyal Coal Pty Ltd. The commercial deal recorded in the document seemed to be that, in consideration for MMNL transferring all of its shares in Loyal Coal to Voope, Voope would pay MMNL the sum of $1 and keep MMNL indemnified against all claims, liabilities or causes of action arising from Loyal Coal becoming the successful bidder in respect of the relevant ELs. Voope also promised to pay $300,000 to MMNL within 60 days of Loyal Coal being awarded any EL for any of the eleven coal release areas. This deed formalised the transfer of control and ownership of Loyal Coal from MMNL and possibly others to Voope alone. On 1 June 2009, Monaro Coal had changed its name to “Loyal Coal Pty Ltd”. On 2 June 2009, MMNL transferred all of the issued capital in Loyal Coal to Voope. On the same day, Loyal Coal issued a share certificate in the name of Voope in respect of the shares so transferred. Thereafter, on 4 June 2009, Rampe, Malone and Ms Adaley resigned as directors of Loyal Coal and Kaidbay was appointed the sole director of that company.

291    After the registration of the transfer of all of the shares issued in Monaro Coal from MMNL to Voope, Loyal Coal was no longer a subsidiary of MMNL, let alone a wholly owned subsidiary of MMNL. It was, from that point on, a wholly-owned subsidiary of Voope. Kaidbay was its only director.

292    By an email sent by John McGuigan to James McGuigan at a time when John McGuigan was overseas at a resort called Tabang in Indonesia which email was apparently sent at 8.46 pm on 2 June 2009 and headed “CC – update”, John McGuigan said to his son:

Call me after your meeting.

I had a detailed discussion with Travers and we are on the same page.

Once you have the land owners agreement we need to verify title etc.

It is important we don’t give up on clause we inserted today re trigger of land purchase.

I am around now if you pick this up.

Tabang unbelievable.

The reference to “Travers” in this email was a reference to Travers Duncan, who was, at that time, a director of Cascade.

293    That email from John McGuigan was sent in response to an email from James McGuigan sent an hour or so earlier in which James McGuigan reported that there was to be a meeting at 10.00 am on 3 June 2009 in Sydney. James McGuigan made reference to “they” in his email to his father. It is perfectly plain that the “they” to which reference is made in that email are Moses and Paul Obeid. This much was made clear in an email sent by James McGuigan to Jones at 4.52 pm on 2 June 2009 where he said that he had sent the Letters of Agreement “to the boys”. In that email, he said to Jones:

Not sure if you want to come to the meeting – just letting you know so you are up to date with the events.

The Meeting of 3 June 2009

294    On 3 June 2009, Brook, Moses Obeid, James McGuigan and Poole met at the offices of Arthur Phillip at Level 33, 52 Martin Place, Sydney, in order to discuss the then current draft of the two letter agreements.

295    Poole testified that he went through each draft. He directed his discussion concerning the joint venture to Brook because he understood that he was representing Buffalo at the meeting. He directed a discussion concerning the Landowners Agreement to Moses Obeid because he understood that he was representing the landowners at the meeting. At pars 81 to 87 of his affidavit, Poole said the following in relation to the discussions which took place at this meeting:

I recall that the main issues discussed at the meeting were:

(a)    the final multiples of the land value to be paid to the landowners for acquisition of the land in the event of the grant of a mining lease;

(b)    the treatment of exploration funds to be spent by Cascade Coal in the joint venture; and

(c)    in particular, if the funds were not to be treated as a loan(s), I insisted there needed to be some protection for Cascade Coal and suggested that a cap or maximum expenditure number should be set after which Buffalo Resources had to start contributing cash to the joint venture.

In relation to the negotiation of the final multiples of the land value to be paid to the landowners, words to the following effect were said:

Moses:     “Look, there’s been sales of 10 times and higher.”

Me:     “That’s ridiculous. It’s got to be a reasonable amount or Cascade will never get any investors (when we need them), it should be two times.”

Moses:     “Well, it’s got to be four times, because that’s been agreed with the other landholders, it’s in the Landholders (Alliance) Agreement.”

Me:     “Well, look, I’ve got to get instructions from John and Travers.”

In relation to the negotiation of how to treat the exploration funds to be met by Cascade Coal, Gardner said words to the effect:

“It was agreed that the JV partner was not required to contribute any of the exploration funds. These contributions cannot be treated as a loan.”

I formed the view that Gardner was not going to agree with the amendment. Therefore, rather than abandon the position entirely, I fell back to the proposition of installing a cap or maximum limit on expenditure that Cascade Coal had to meet before the joint venture partner had to start contributing pro rata. My best recollection is that, during the meeting, I said words to the effect:

“I suggest an $8m cap or mine approval for a 75 million tonne resource.”

While going through the draft joint venture agreement at the meeting I read the “won’t pursue mining rights” clause and said words to the effect “Because this is a JV, the parties have to work together”. I do not recall this being controversial at all. My understanding, based on our discussion at the meeting, was that the clause was accepted as obvious. As previously stated in paragraph 62 above, I considered at the time that, if Arthur Phillip had not added this clause in the joint venture agreement, Arthur Phillip would have been negligent as I regarded the clause as being fairly standard in any joint venture agreement. I had the view, which I maintain, that it is in the interests of the joint venture that the parties will work together and not against each other or the joint venture interests.

During this meeting, in the context of working together, words to the effect were said:

Someone at the meeting (I cannot recall who) asked: “What about Glendon Brook?”

Gardner responded: “I am not interested in Glendon Brook.”

After the meeting, at around 12.29pm, I received an email from Gardner asking James to alter the revised joint venture agreement to reflect that the “non-dilution periods ends upon mine approval for 100m tonnes or $15m in capex”. A copy of this email, document STR.001.007.0031, is exhibited at Tab 37 of Exhibit RJP1. In the final document it was agreed that: “mining approval for a 100 million tonne resource; or Minimum exploration expenditure of $A10m. Contributions up to this milestone by Cascade will be treated as equity.”

296    Brook’s account of this meeting given in-chief was very brief and did not give rise to any contest of substance between his version and that given by Poole.

297    Poole has a recollection of raising the question of consideration being provided by Buffalo in support of the commitments it had extracted from Cascade in the Buffalo Agreement. This led to the insertion of the reference to Buffalo bringing intellectual property into the transaction.

298    I have no reason to doubt Poole’s version of what occurred at this meeting and I accept it.

299    After the meeting held on 3 June 2009, Brook met with Moses Obeid and, immediately after that meeting, requested an alteration to the joint venture letter agreement. The amendment was intended to protect the Obeid interests against early dilution of their interest. A copy of that email was sent to Moses Obeid.

300    By email sent at 2.04 pm on 3 June 2009 to Brook and Moses Obeid, James McGuigan asked whether they had received the ACN for Buffalo Resources.

301    At 3.17 pm on 3 June 2009, James McGuigan sent an email to John McGuigan. That email was in the following terms:

Dad,

This is the first email I will out line the changes in which we have made, the second two will be the agreements as they stand. Richard has still not returned, so·we haven’t discussed – hence these may change.

LANDOWNERS

•    We agreed on four times multiple for all their land.

•    Moses assured us this would be done in a way that would stand up if ever looked at. This still needs to be clarified, as 32m for a 100m resource may seem excessive

•    Changed timing of entering into contract to purchase properties to 30 days from 90 days

•    Changed timing from 90 days to 60 days with regards to organising the facility

•    Changed terminology from Mine Lease to Mine Approval

•    Inserted Cascade undertakes to complete any necessary rehabilitation works to reasonably restore the property to its 1 June 2009 condition.

We have left in the following clause as per our discussion yesterday morning:

Completion of the SPA will occur within 90 days of Cascade being granted a Mining Approval for the Mount Penny area and for any additional contiguous areas (“Mining Approval”).

Completion is subject to Cascade

•    completing a Feasibility study that concludes in Cascade’s absolute discretion that it can develop a profitable mining operation including consideration of transport and all mine development factors and that Cascade should proceed to develop a coal mine;

•    concluding that the reserves are sufficient to justify the proposed Property Acquisition.

In the event Cascade does not receive the Mining Approval or conclude that a mine should be developed, the Facility will be repaid within 180 days. Cascade undertakes to complete any necessary rehabilitation works to reasonably restore the property to its 1 June 2009 condition.

Equity

•    Cascade will agree to grant to Buffalo a 25% interest in the JV on the basis that Buffalo does not have to make any contribution to costs up to the grant of the Mining Approval. The 25% carried interest ends upon the earlier between:

•    Mine Approval for a 100 million tonne resource; or

•    Minimum exploration expenditure of A$12m.

•    Contributions up to this milestone by Cascade to the JV shall be treated as equity

•    Once the Mining Approval is granted, Buffalo will be required to contribute additional equity to fund costs should third party debt finance be unavailable or insufficient to fund such costs, including proportionate costs of any land acquisition

•    Inserted line that “To the extent that Cascade and its associates and related parties acquire the rights to pursue a mining interest over the contiguous areas, such areas shall be added to the JV.”

I will now send the 2 documents as is.

Call me when you can

James McGuigan …

302    A few minutes later, James McGuigan sent revised drafts of the letter agreements to his father.

303    At 5.57 pm on 3 June 2009, James McGuigan sent updated Letters of Agreement to Moses Obeid and to Brook with copies to his father, Jones and Poole. In that email, James McGuigan said:

… Let’s aim to sign at Kent St on Friday at 12:00.

The “Friday” referred to in that email was Friday, 5 June 2009.

304    In the email, he continued as follows:

Before that happens we are going to need to gain comfort on the following issues:

-    the formal definitions of the land parcels that are referred to in the opening paragraph of the Landowners Agreement (highlighted in the attachment)

-    the addresses of the land holdings of the three Landowners properties, so that I can conduct a Title Search;