FEDERAL COURT OF AUSTRALIA

Strang Aniokaka Limited v Lihir Gold Limited (No 2)
[2010] FCA 1065

THE COURT ORDERS THAT:

1.                  The application be dismissed.

2.                  The applicants pay the respondent’s costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                     This is an application for preliminary discovery under O 15A r 6 of the Federal Court Rules.  For the 12 years before 2008, Lihir Gold Limited (the respondent), and its predecessors, had engaged Strang Aniokaka Limited (the first applicant) under a contract to perform stevedoring and materials handling services for its gold mine operations in the Lihir Islands in the Independent State of Papua New Guinea.  Strang Aniokaka had been incorporated in Papua New Guinea in 1995 as a joint venture vehicle for Aniokaka Limited (a company owned by three companies each associated with a separate local clan in the Lihir Islands, namely LakakaLimited, TinetalgoInvestments Limited and Unawos Investments Limited) and Strang International Pty Ltd (a member company of an Australian stevedoring group) (the second applicant).

Issues

2                     The critical issues arising on this application are whether there is reasonable cause to believe that one or both of the applicants has or may have the right to obtain relief in this Court on one or more of three identified bases from Lihir Gold for the purposes of O 15A r 6(a). 

3                     Strang Aniokaka and Strang International believe that Lakaka and some local clan members on the Lihir Islands may have been involved in bringing about Lihir Gold’s decisions in August 2008, first, to terminate its contract with Strang Aniokaka and, secondly, to engage in allegedly sham exercises of calling for expressions of interest and tenders to provide stevedoring and materials handling services at the Lihir Islands.  They want an order for preliminary discovery of documents to ascertain whether what lay behind those decisions by Lihir Gold might enable them to bring proceedings in the Court against it.  The applicants rely on one or more of the following causes of action for which they assert there is reason to believe that Lihir Gold:

·               contravened s 52 of the Trade Practices Act 1974 (Cth) and the applicants suffered loss or damage by that contravention for the purposes of s 82 of the Act;

·               knowingly participated in a dishonest and fraudulent design by Lakaka, a joint venture partner who owed the applicants fiduciary duties, in respect of Lihir Gold’s termination of its contract with Strang Aniokaka or that Lihir Gold procured or assisted a breach of fiduciary obligations by Lakaka or its associates causing loss to the applicants;

·               tortiously interfered with the applicants’ contractual relations with Lakaka.

4                     Lihir Gold contended that there was no reasonable cause for the applicants to have the belief required by O 15A r 6(a) because:

·               there was insufficient material in evidence to establish any contravention of s 52 or sham in relation to the termination of Strang Aniokaka’s contract or Lihir Gold’s later conduct in calling for expressions of interest and tenders;

·               the conduct alleged against it did not occur “in trade or commerce” as defined in s 4(1) of the Act since all the relevant conduct in trade or commerce occurred in Papua New Guinea and did not concern “trade or commerce within Australia or between Australia and places outside Australia”;

·               there was no arguable basis that Lihir Gold had knowingly participated in a dishonest or fraudulent design or procured or assisted in a breach of fiduciary obligations;

·               there was no arguable basis that Lihir Gold had committed any tortious interference with contractual relations.

Order 15A r 6

5                     The application for preliminary discovery was made under O 15A r 6 which provided as follows:

“6         Discovery from prospective respondent

            Where:

(a)        there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description has been ascertained;

(b)        after making all reasonable inquiries, the applicant has not sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief; and

(c)        there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had possession of any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist in making the decision;

the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c).”  (emphasis added)

Principles applicable under O 15A r 6

6                     Principles applicable to determining an application under O 15A r 6 were discussed by Hely J in St George Bank Ltd v Rebo Australia Ltd (2004) 211 ALR 147 at 153-154 [26].  His enunciation of those principles has been accepted as correct by Full Courts more than once:  see  Apache Northwest Pty Ltd v Newcrest Mining Ltd (2009) 182 FCR 124 at 126 [2] per Moore and Gilmour JJ, 131-132 [26] per Flick J and the authorities there cited.  In St George 211 ALR at 153-154 [26] Hely J said (references omitted):

“[26]    The following propositions emerge from the authorities in which the proper application of O 15A r 6 has been considered by judges of this Court:

(a)        the Rule is to be beneficially construed, given the fullest scope that its language will reasonably allow, with the proper brake on any excesses lying in the discretion of the Court, exercised in the particular circumstances of each case ...

(b)        each of the elements prescribed in sub-paragraphs (a), (b) and (c) of the rule must be established ... Preliminary discovery cannot itself be used to remedy deficiencies in the satisfaction of the conditions themselves ...

(c)        the test for determining whether the applicant has "reasonable cause to believe", as required by sub-paragraph (a), is an objective one ... Further, the words "or may have" cannot be ignored. The applicant does not have to make out a prima facie case ...

(d)        belief requires more than mere assertion and more than suspicion or conjecture. Belief is an inclination of the mind towards assenting to, rather than rejecting a proposition. Thus it is not sufficient to point to a mere possibility. The evidence must incline the mind towards the matter or fact in question. If there is no reasonable cause to believe that one of the necessary elements of a potential cause of action exists, that would dispose of the application insofar as it is based on that cause of action ...

(e)        whilst uncertainty as to only one element of a cause of action might be compatible with the "reasonable cause to believe" required by subparagraph (a), uncertainty as to a number of such elements may be sufficient to undermine the reasonableness of the cause to believe...

(f)        the question posed by sub-paragraph (b) of the rule is not whether the applicant has sufficient information to decide if a cause of action is available against the prospective respondent. The question is whether the applicant has sufficient information to make a decision whether to commence proceedings in the Court ... Accordingly, an applicant for preliminary discovery may be entitled to discovery in order to determine what defences are available to the respondent and the possible strength of those defences, or to determine the extent of the respondent's breach and the likely quantum of any damages award ...

(g)        whether an applicant has "sufficient information" for the purposes of sub-paragraph (b) also requires an objective assessment to be made ... The sub-paragraph contemplates that the applicant is lacking a piece (or pieces) of information reasonably necessary to decide whether to commence proceedings;

(h)        it is no answer to an application under the rule to say that the proceeding is in the nature of a "fishing expedition" ... Indeed Order 15A r 6 "expressly contemplates" what once might have been castigated as "fishing" ... As Burchett J commented in Paxus Services [Ltd v People Bank Pty Ltd (1990) 99 ALR 728], the rule is (at 733):

... designed to enable an applicant, in a situation where his proof can rise no higher than the level the rule describes, to ascertain whether he has a case against the prospective respondent ...”

7                     In Optiver Australia Ltd v Tibra Trading Pty Ltd (2008) 169 FCR 435 at 444-445 [43]-[44], Heerey, Gyles and Middleton JJ emphasised that the discretion conferred under O 15A r 6 should be exercised having regard to its purpose of enabling the applicant to ascertain whether he, she or it has a case against the proposed respondent.  Although the making of an order for preliminary discovery will affect the respondent, they pointed out that one result could be that the applicant does not subsequently commence actual proceedings against that person.  They explained that an applicant, who has satisfied the requirement of establishing that there is reasonable cause to believe that he, she or it has or may have a right to obtain relief in the Court, may decide not to commence proceedings after reviewing the documents produced in answer to an order under O 15A r 6.  This decision could be made because the documents have dispelled the belief on which the order was founded, or simply left the applicant in the position where he, she or it can make a better informed decision not to sue.  Thus, an order for preliminary discovery can, in fact, benefit a respondent because the documents it produces forestall it having to contest litigation.  The preliminary discovery may enable the applicant to conclude that its proposed litigation is either hopeless or not sufficiently likely to succeed so as to justify its being commenced:  Optiver 169 FCR at 443 [36], 445 [44].

The early history of Strang Aniokaka at the Lihir Islands

8                     Robert Green, the managing director of Strang Aniokaka, swore an affidavit that set out the history of the applicants’ relationship with Lihir Gold and its predecessors.  Lihir Gold was incorporated in Papua New Guinea and was also registered in Australia as a foreign company.  In October 2005 Lihir Gold’s shares were listed on the Australian Securities Exchange.  Aniokaka was incorporated in January 1994.  Its issued capital consisted of 100,000 shares, 50,000 held by Lakaka, and Tinetalgo and Unawos each held 25,000 shares.

9                     In about 1995, Strang International formed the Pagini Strang Lihir joint venture with a Papua New Guinean company, Pagini Transport Limited, for the purposes of tendering for a contract with Lihir Management Company Pty Limited in relation to stevedoring and materials handling associated with the operations of the Lihir goldmine.  The mine was located on Niolam Island, in the Lihir Group of islands in Papua New Guinea.  Mr Green was associated with this joint venture from its inception.  A director of Lakaka, Marc Soipang, was also the chairman of the Lihir Mining Area Landholders Association, an organisation of local landholders affected by the goldmine’s activities.

10                   In about September 1995, Mr Green met with John McIndoe, then general manager of Lakaka.  Mr Green told Mr McIndoe that the joint venture between Pagini and Strang needed a joint venture partner who could represent the interests of local landholders.  Mr McIndoe replied that Lakaka was prepared to be a joint venture partner.  He said that Pagini and Strang should enter into an arrangement with Aniokaka, because it would be the best vehicle for Lakaka to use in the joint venture.  Mr McIndoe also said that Lakaka intended to use Aniokaka for logistics contracts.

11                  Following that discussion, a joint venture agreement was entered into between Pagini Transport, Tradex Logistics Pty Limited (a subsidiary of Strang International) and Aniokaka to create the Pagini Strang Aniokaka Lihir joint venture.  Under this joint venture agreement Aniokaka held 50% of the beneficial interest, with Pagini and Tradex holding 25% each.  The scope of the joint venture was limited to the operations, activities and transactions relating to the “business”, being the performance of a contract LMC-T-08 for materials, handling and stevedoring for the Lihir project (cl 5).  I will refer to that contract as the T-08 contract.  The joint venture participants were required to guarantee jointly and severally the payment of all costs associated with the acquisition of plant and equipment for the conduct of that business.  The joint venture was to continue during the term in which the T-08 contract remained on foot (cl 20.1).  Each of the participants agreed to be just and faithful in its activities and dealings with the other participants, and to perform its obligations and commitments under the joint venture agreement.  They agreed that nothing in the joint venture agreement would be construed to create a general partnership between the participants or to authorise any of them to act as agent for the joint venture.  They promised that each should not engage, either alone or in association with any other person, in any activity in respect of the real and personal property acquired and held for on behalf of the joint venture for use in connection with its operations except as authorised or provided in the joint venture agreement itself (cl 16).

12                  On 5 September 1995, Lihir Management entered into the T-08 contract with the Pagini Strang Lihir joint venture and Lakaka who were described together as “the contractor”.  This contractual description appears to have been intended to refer to the Pagini Strang Aniokaka Lihir joint venture that would be the vehicle through which Lakaka was to participate as Mr McIndoe had earlier discussed with Mr Green.  The contractor was to perform materials handling and stevedoring services in accordance with the detailed provisions of the contract.  The T-08 contract consisted of well over 100 pages.  Under one of the general conditions of the T-08 contract (cl 49 in section 6) Lihir Management, as principal, had the right, in its absolute discretion, to cancel the contract on seven days written notice regardless of whether the contractor was in default.

13                  Strang Aniokaka was incorporated in August 1996 under the then name of the three joint venturers, as Pagini Strang Aniokaka Pty Limited.  In about October 1997 Strang Aniokaka became the vehicle for conducting the joint venture and took over the obligations of the contractor under the T-08 contract.  In about November 1999 Pagini notified Tradex and Aniokaka that it wished to sell its interest in Strang Aniokaka.  Aniokaka was not in a financial position to exercise any pre-emptive rights to acquire any part of the Pagini shares, so the Strang interests, through Tradex, purchased them.  From this time Tradex and Aniokaka each held 50% of the shares in Strang Aniokaka.

14                  Mr Green produced a monthly report on Strang Aniokaka’s financial and operational affairs from the time it became the contractor under T-08 contract.  He distributed copies of this report each month to the group financial controllers of Strang International and Lakaka, because those were the primary parties in effective control of the joint venture.  He understood that Lakaka was responsible for administering the affairs for Aniokaka on behalf of itself and its associates Tinetalgo and Unawos.  Strang Aniokaka’s letterhead carries its name in large type and underneath in smaller type is the statement “(A Strang International P/L & Lakaka Ltd enterprise)”.

15                  In April 2002, Tradex and Aniokaka entered into a shareholders agreement.  The 2002 shareholders agreement commenced on its execution and was expressed to continue either as long as the parties, or their respective associates, were shareholders in Strang Aniokaka or it was terminated in accordance with its provisions.  The intention of the parties recorded in cl 4 was that Strang Aniokaka “… will operate but not [be] limited to carrying out the work required by [the T-08 contract]”.  The parties had to agree unanimously about any material change in the nature of the business of Strang Aniokaka, any alteration in its authorised or issued capital, and the acquisition or disposition of any property with a value greater than K25,000.  Each of the parties was entitled to appoint an equal number of directors and was required to bear its proportionate share for the funding and financial support of Strang Aniokaka (cll 5 and 6).  Profits were to be shared equally (cl 11).  The transfer of shares was the subject of a detailed pre-emptive rights regime provided in cl 13.  This regime contrasted with the simple proscription in cl 15.3 of the Pagini Strang Aniokaka joint venture agreement that no sale or transfer of a participant’s interest in the joint venture could occur without the consent of the remaining joint venturers.  Significantly, cl 25 provided that the 2002 shareholders agreement contained the entire understanding and agreement between the parties as to its subject matter.

16                  In October 2005, Lihir Gold became the operator of the mine, replacing Lihir Management and its associates.  Mr Green gave undisputed evidence that Lihir Gold knew that Strang Aniokaka was a joint venture company with Lakaka.  No doubt this knowledge was informed by the original description of the “contractor” in the T-08 contract.

17                  It was common ground in the proceedings that although the nature of the work to be performed under the T-08 contract, and indeed the identity of the contracting parties changed over the years between 1995 and late 2007, the document itself was the only relevant written record of the terms on which the materials handling and stevedoring services were performed.  The works described in the written T-08 contract related to the construction phase of the gold mine that was completed in 1997.  Nonetheless, Strang Aniokaka continued to provide materials handling, stevedoring and equipment maintenance services to each operator of the mine, including Lihir Gold, under what all of the parties considered to be a continuation of the T-08 contract.  No other written agreement was entered into between any operator of the mine and Strang Aniokaka, and all proceeded on a conventional basis that the T-08 contract provided a contractual framework for the conduct of their relationship, notwithstanding that it had expanded into different areas and involved different parties.

Lakaka comes under new management

18                  In April 2007, Mr Green had a meeting with Colin Vale at Lihir Gold’s office on Niolam Island.  Mr Vale told him that Mr Soipang “… wants you out and Strangs out”.  Mr Green responded that he had told Mr Soipang before that if he wanted to buy Strang’s shares he could make a commercial offer and it would be considered.  Mr Vale responded that Mr Soipang was alleging that the “Strangs” had cheated him out of taking up Pagini’s shares in 1997.  (That was presumably a reference to the events of November 1999.)  Mr Green retorted that that was not correct and that the “Strangs” had done everything properly.

19                  Soon after, in about July 2007, Mr Green became aware that Mr Vale had been appointed general manager of the Lakaka group of companies, including Lakaka.  John Kapska is the chairman of Lakaka’s board.  He has also been, and continues to be, a board member of Strang Aniokaka.  Mr Kapska sent a memorandum to all the managers of Lakaka’s subsidiaries and to Lihir Gold announcing Mr Vale’s appointment.  The memorandum said that Mr Vale would work closely with Lakaka’s board in reinventing the Lakaka group consistent with the aspirations of the Lihir sustainable development plan.

20                  On 5 August 2007, Mr Vale sent all the managers in the Lakaka group a memorandum.  He told them that the board had appointed him because the time was right to implement change and to structure the group to consolidate, rationalise and grow its business.  He said that he had appointed Dave Kelso as part of his management team because he wanted a works manager who understood machinery and could:

 “… work with us to make LCC [Lakaka Civil and Construction] the only company on the island that our customers want to deal with.  I want to build this company to become the ‘Best Imaginable’ civil and construction service provider.”  (emphasis added)

Lihir Gold seeks to negotiate a new contract

21                  In December 2007, Lihir Gold began negotiating with Strang Aniokaka, through Mr Green, a new draft contract to formalise the ongoing provision of services.  Lihir Gold’s draft had the proposed contract’s term as for only 12 months.  In March 2008, Mr Green had a conversation with David Pugh of Lihir Gold about the draft contract.  He complained to Mr Pugh that Strang Aniokaka had been on site for 12 years and that a 12 month contract was inadequate because of the capital investment they had made.  Mr Green told Mr Pugh that Strang Aniokaka had just bought new gear in the previous 12-18 months and could not recover its costs in a contract with a 12 month term.  Mr Pugh told him that this was just a standard term that Lihir Gold included in all its contracts but he understood that it may not be suitable for Strang Aniokaka.  He invited Mr Green to suggest the length of a term that would be suitable.  Mr Green responded with three to five years.  Mr Pugh suggested that a three year term with an option of two further years might be something Lihir Gold would consider.

22                  The negotiations progressed thereafter.  Mr Green considered they were conducted in a friendly and professional manner.  He said that Lihir Gold had not expressed any dissatisfaction with the services being provided by Strang Aniokaka, nor had they done so over the preceding years.  Mr Green asserted that it did not seem to him that the negotiations had reached an impasse or had broken down.

23                  In early May 2008, Mr Kelso ceased to be employed by Lakaka.  On 2 May 2008, Mr Vale sent an email to Mr Kelso in which, among other things, he said:

“My road ahead will be difficult and you haven’t made it any easier with the emails to Bob Green and others.  I can’t believe you advised him that we were coming for him and he’s better prepare for it!”  [sic]

Mr Green did not explain what this referred to and he gave no evidence about any emails or other statements made to him by Mr Kelso to which this email may have referred.  In particular, Mr Green did not give any evidence whether Mr Kelso had spoken to him about the subject of Mr Vale’s remonstrance in the email from which I have quoted.  The applicants did not explain the omission from Mr Green’s affidavit of any information he had.

24                  On 18 June 2008, Castlebar Limited, another wholly owned subsidiary of Strang International, acquired Tradex’s 50% shareholding in Strang Aniokaka and entered into a new shareholders agreement with Aniokaka.  That shareholders agreement also provided that Strang Aniokaka would operate but not be limited to carrying out the work required by the T-08 contract (cl 3).  It had a similar clause to the 2002 shareholders agreement concerning the need for unanimous decision-making.  The 2008 agreement provided that each of the shareholders would bear in proportion to its shareholding the ultimate responsibility for the management, funding and financial support of the company with a view to it carrying out the T-08 contract (cl 5).  Significantly, the parties agreed that they would not transfer their shareholdings without unanimous agreement in writing (cl 12).  This replaced the 2002 agreement’s detailed pre-emption provisions.  The 2008 agreement also provided in cl 23 that it recorded the entire agreement and understanding between the parties as to its subject matter.

25                  On 14 July 2008, Lakaka registered a business name, Anitua Freight and Port Services, under the Papua New Guinea Business Names Act.  The Register recorded the business description of this name as being to provide freight and port services and that it was currently associated with Strang Aniokaka.  However, Strang Aniokaka was unaware of this name or its purposes.

The meeting of 22 August 2008

26                  On 22 August 2008, Mr Green had a meeting with Mr Pugh and Bruce Covell of Lihir Gold.  Mr Pugh said that Lihir Gold’s management was considering its position and that the contract for the provision of materials handling and stevedoring services was going to go to tender.  When Mr Green asked why, Mr Pugh said:

“We want to make major changes to the scope of work and we have to take into account political considerations.”

They then discussed the timeframe for the process.  Mr Pugh said that expressions of interest would be called for by 15 September and would close by 10 October.  He said that Lihir Gold hoped that the successful tenderer would be signed up by 1 January 2009.  He told Mr Green that Lihir Gold would be sending a letter the next Monday making an offer regarding operations in the meantime.  Mr Green asked whether there were any pre-qualified tenderers.  Mr Pugh replied that these would be Strang Aniokaka and “Strang in its own right, Lakaka in its own right and any other company who we think is capable of doing the work”.  Mr Covell said that the contract being offered through the tender would allow Lihir Gold to offer a longer term.  Mr Green said that they should not take it for granted that Strang Aniokaka would go along with what was being proposed.  Mr Pugh said that Lihir Gold would offer a 6% increase in rates backdated to 1 May, but Mr Green responded that that would not be acceptable.

27                  Mr Green deposed that the above conversation had come to him like a “bolt from the blue”.  He said that at no time prior to this had anyone from Lihir Gold suggested that it wished to make major changes to the scope of work.  In addition, he had not seen anything since then suggesting that Lihir Gold wished to make major changes to the scope of work.  At no time had any such changes ever been identified to him.  Mr Green said that Mr Pugh did not identify what were the political considerations to which he referred.  However, in the preceding 13 years of his work, he had developed personal knowledge of the main clans and subclans in the Lihir Islands group.  Mr Soipang was the head of the Tinetalgo subclan and had maintained for some time that this clan of the Lihirian landowners generally should be carrying out the stevedoring work on Lihir Island (sic) exclusively.  Mr Green understood Mr Pugh to be referring to these matters as the “political considerations”.  He said he was not aware of any other “political considerations” to which Mr Pugh could have been referring.  There was no actual evidence of what Mr Pugh meant by his ambiguous reference to “political considerations”.

28                  On 3 September 2008, John Strang as chairman of Strang Aniokaka wrote to Noel Foley, the executive general manager of operations of Lihir Gold setting out the terms of the conversation between Messrs Green, Pugh and Cowell.  The letter noted that Strang Aniokaka would be most concerned if Lihir Gold’s position proved to be as had been stated to Mr Green in that conversation.  He noted that no letter from Lihir Gold had been received by Strang Aniokaka and asked to be informed what the position was by 5 September.

29                  Mr Foley responded on 12 September.  He asserted that the history of the T-08 contract from September 1995 was that it had been subject to several extensions with written and verbal amendments.  He referred to the November 2007 draft contracts proposing the split of the stevedoring and workshop services components.  He noted that negotiations had continued on the drafts without any firm agreement on a number of operational issues and they were still not agreed on the contract price.  Mr Foley asserted that Mr Green had been informed that the proposed course offered Lihir Gold an opportunity to rewrite the scope of work and offered Strang Aniokaka, its current business partners and other Papua New Guinean companies an opportunity to bid afresh.  He said:

“At no time did [Lihir Gold] expressly state or infer any other motivation.”

30                  He asserted that calling for expressions of interest and tenders would be a sensible and normal business practice having regard to the length of, and largely undocumented, existing arrangement.  The letter also offered to increase Strang Aniokaka’s contract rates by 5% from 1 May 2008 on a short term contract until a new one was made.

31                  Mr Strang responded on 17 September 2008.  He accepted that the parties had made ad hoc adjustments to the original contract.  He noted that Strang Aniokaka had been instructed to take account of the rights of local clans and landowners, to optimise co-operation and minimise the potential for industrial disputation and service interruption.  Mr Strang asserted that Strang Aniokaka had been led to believe that it would have security of tenure and had a legitimate expectation based on the above considerations when it made its capital investments.  The letter said that Strang Aniokaka had been induced by Lihir Gold to make substantial investments in plant and equipment for the business and should not be deprived of a sufficient time in which to recoup that expenditure.

32                  Mr Foley responded on 25 September.  He explained that Lihir Gold did not believe that Strang Aniokaka could support its claim of having made its investment decisions based on a legitimate expectation induced by Lihir Gold that the contract would remain on foot for any particular time.  Mr Foley referred to the history of negotiations that had not reached finality, as he had detailed in his letter of 12 September.  He reiterated that among the unresolved issues were the term of the proposed contract, prices, the schedule of rates, the composition of the work force, productivity improvements, work scheduling, training, localisation plans, fuel arrangements, relocation of the workshop and its timing and the provision of stevedoring services to third parties together with invoicing for that service.  Mr Foley noted that the existence of such a long and unresolved list of material issues for over 10 months indicated that the parties were a long way from actually forming a mutually acceptable contract.  In light of the history, he did not accept that Strang Aniokaka had made investment decisions in reliance on any representations that Lihir Gold made.  He said that, however, Strang Aniokaka would not necessarily be unsuccessful or disadvantaged in the bidding process proposed.  He noted that, in fact, it held a competitive advantage by virtue of its long term presence on the mine site and intimate knowledge of Lihir Gold’s stevedoring requirements.  He said Mr Green had acknowledged the opportunity to re-price Strang Aniokaka’s services to current market rates.  The letter confirmed that Strang International, Strang Aniokaka, Lakaka and other Papua New Guinean based specialists in the provision of stevedoring services would form the tender list.  Mr Foley said that he looked forward to receiving Strang Aniokaka’s bid once the tender documents were circulated.

33                  Mr Strang responded on 6 October acknowledging that they had been negotiating for a new contract.  He asserted that this did not compromise the existence of the current contract.  He said that Mr Foley’s assertion of 10 months of negotiations was an understatement and that in reality there had been 11 years of negotiations for a contract.  That had served to define the position as the parties progressed with their relationship.  He noted that no dissatisfaction with the services provided by Strang Aniokaka had been previously expressed.  Mr Strang again asserted that a substantial period of notice was necessary to enable Strang Aniokaka to earn a sufficient amount to reimburse it for its capital investment.

Termination of the T-08 contract, and the invitations for expressions of interest and tenders

34                  On 20 October 2008, Mr Foley wrote to Mr Green advising that Lihir Gold was seeking expressions of interest from providers for stevedoring and materials handling services presently undertaken by Strang Aniokaka and that it would be among the potential bidders contacted.  The letter said that the commencement date of the new contract was scheduled for 1 April 2009.  It gave formal notice that the T-08 contract would be finalised as at close of business on 31 March 2009.

35                  An invitation to Strang Aniokaka to express interest dated 17 October 2008 was attached to that letter and a similar invitation was sent to others in respect of stevedoring services, materials handling services and other services.  The invitation required parties registering an interest to demonstrate capacity and capability in the supply of all personnel, fuel and equipment necessary to provide the services, to provide them 7 days a week and at short notice for the purposes of loading and unloading cargo and to have an expert knowledge of stevedoring in Papua New Guinea ports.  It noted that the wharf was presently operated on day shift but it was intended to progress to a 24-hour a day operation.

36                  Mr Strang responded on 23 October 2008 enquiring about the basis on which only five months notice of termination had been given.  He asked whether the shareholding of Strang Aniokaka complied with the requirement of a joint venture with the local landowner company in the notice for expressions of interest.  The letter said that Strang Aniokaka did not accept that Lihir Gold was entitled to give notice either terminating the T-08 contract or seeking expressions of interest.

37                  On 3 November 2008, Strang Aniokaka submitted an expression of interest to Lihir Gold, noting that it did so under protest, without prejudice and without admissions.  The expression of interest referred to Aniokaka being a joint venture company between the Lakaka, Unawos and Tinetalgo clans and that they were a partner of Strang in Strang Aniokaka.  The expression of interest referred to the considerable number of Strang Aniokaka’s vehicles, plant and equipment that were dedicated to servicing Lihir Gold’s operations at that time.

38                  On the same day, but then unknown to Strang Aniokaka, Lakaka, which had been renamed Anitua, submitted an expression of interest to Lihir Gold.  In the overview of Lakaka’s expression of interest it noted that it:

“… currently had a 25% interest in [Strang Aniokaka], the current providers of materials, handling and stevedoring services.  Unfortunately our joint venture partner, Strang Pty Limited, does not share the same vision as the landowners and irreconcilable differences now force us to tender on work we currently have an interest in.”  (emphasis added)

39                  The document asserted that under the existing structure Lakaka had not seen growth from the operations in 13 years and that had not been an unexpected result because Strang Aniokaka was “controlled by an overseas partner whose vision and interests are not aligned with the wishes of the landowners”.  Lakaka’s expression of interest envisaged that it would pay management fees to a proposed manager and would provide “a far better model than current practice whereby 50% of the company’s bottom line goes offshore for essentially providing the same services!”.  The document proposed that most, if not all, of the current local citizens performing stevedoring and materials handling services would become employees of the new entity.  The expression of interest was signed by Mr Vale who said that he saw no reason why Lakaka would not be in a position to provide services from 1 April 2009.

40                  Mr Green’s evidence was that, apart from those associated with conducting the operations of Strang Aniokaka, he did not know of any local Lihirians who had knowledge of the stevedoring business in a Papua New Guinea port.  In November 2008, Mr Green received a copy of Issue 2 of the Anitua News announcing the rebranding of the Lakaka group.  The newsletter referred to Strang Aniokaka and another company called Zenex as being:

“two businesses that the Lakaka corporate team had little to do with.   Up until very recently, and only with Zenex, we have had no representation at board level.  Both companies want very little to do with us which is unfortunate and something we need to work at.  We are trying to change that mindset as we will all need to be rowing in the same direction and working towards our vision.”

The passage asserted that Strang Aniokaka was not operating in line with the long term vision of building sustainable value for the Lihirian shareholders before the mine closed.  The newsletter was signed by Mr Vale.

41                  On 7 November 2008, Mr Foley responded to Mr Strang’s and Mr Green’s earlier correspondence that had contested Lihir Gold’s right to terminate the existing contract and he defended its action.  Mr Foley challenged a number of assertions that Strang Aniokaka had made, including that Lihir Gold was not entitled to give the notice of termination.  He referred to the minutes of a number of meetings held during 2008 that identified new equipment that Strang Aniokaka had bought in the speculative hope that it would be used for an anticipated plant expansion.  He asserted that Strang Aniokaka had acted at its own risk.  He confirmed that Lihir Gold would proceed to evaluate the responses to its request for expressions of interest and thanked Strang Aniokaka for submitting its expression of interest.

42                  On 20 November 2008, Mr Strang wrote to Mr Foley seeking information as to the process of evaluating the expressions of interest and who the other persons on the short list were.  Mr Foley responded on 28 November saying that the tender submissions were still to be evaluated and that once a short listing had been completed Strang Aniokaka would be advised.  On 2 December 2008, Mr Strang responded to Mr Foley’s detailed letter of 7 November 2008.  By then the parties were at issue.

43                  On 10 December 2008, Mr Vale spoke to Mr Green saying that if the Strang companies wanted to resolve the situation they now found themselves in, they should talk.  He said:

“If you continue this recalcitrant attitude then I cannot see Strang remaining on Lihir for too much longer.”

44                  Later that day Mr Green wrote to Mr Vale saying that he had been instructed by his board that they could only meet if Mr Vale allowed Mr Green to record all the conversations and discussions that might take place.  Mr Vale responded asserting that he was acting on behalf of the Lakaka board, Unawos and Tinetalgo.  Mr Vale asserted that Lakaka wanted Strang Aniokaka to be aligned with the Lakaka group of companies rather than pursuing its own vision and mission.  Mr Vale wrote that if that were not possible then Lakaka, Unawos and Tinetalgo wanted a fair price from Strang to buy its shareholding in Strang Aniokaka so that it could be managed harmoniously with the rest of the Lakaka group, as he had asked 6-8 months before.  Mr Vale said that Lakaka wanted Strang Aniokaka to pursue growth opportunities actively.  He complained that the Strang companies were not proactive in supporting the landowners’ long term aspirations.  Mr Vale said that Strang Aniokaka was not then aligned with his vision of creating sustainable business opportunities for Lihir before the mine closed and that this needed to change if there was to be any ongoing relationship.  He noted that Zenex were then “on board” and still had their joint venture intact.  He continued in his email:

“I won’t lie to you Bob.  In light of your non response to point 2 above and the fact that your contract has gone out to tender I have been instructed to seriously consider tendering on the contractor work ourselves.  I have checked our legal position on this and there is nothing to stop us doing so.  Is that what you want?”  (emphasis added)

45                  On 17 December Mr Green responded in an email asking what authority Mr Vale had to say that he was acting on behalf of the Lakaka board, Unawos and Tinetalgo.  Mr Green said that if Mr Vale was representing all of them, he would have no choice but to meet with Mr Vale because he would be representing the shareholders in Aniokaka.  Mr Green asked what Mr Vale had meant by his statement that Lakaka was considering tendering for the work itself.  Mr Green said that he assumed that Mr Vale had meant Lakaka, Unawos and Tinetalgo but noted that, even if he were correct, it was too late because the expressions of interest closed on 3 November.  He said he assumed that Mr Vale would not have lodged an expression of interest with Lihir Gold without clearing it with the Strang Aniokaka board first.  Mr Vale responded shortly afterwards on 17 December saying that he did not intend responding to all the assertions and questions in Mr Green’s email or engaging in an email war.

46                  On 17 December 2008, Lihir Gold wrote separately to each of the three entities that had expressed interest, namely, Strang Aniokaka, Lakaka and JVG Stevedoring.  The letter thanked each for submitting its expression of interest, informed it that it had been shortlisted as a potential provider of the services and invited the submission by 16 January 2009 of a detailed, costed proposal to provide the services from 1 April 2009.  Lihir Gold reserved the right, at its absolute discretion at any time, to change any terms, discontinue the tender process, accept or reject or discontinue evaluation of any proposal and it was not obliged to enter into negotiations with the highest ranked, lowest priced or any supplier.

47                  On 24 December 2008, Mr Strang wrote to Mr Vale protesting about the possibility that Lakaka, Unawos, Tinetalgo or their associates might express interest or tender against Strang Aniokaka.  Mr Vale replied on 26 December referring to the lack of progress that had been made in supporting members of the indigenous community.  He said that he had been looking for an amicable way out of the problem but out of frustration and lack of communication had “ploughed on under the direction of others”.

48                  On 8 January 2009 the board of Strang Aniokaka met in Northgate, Queensland.  Mr Kapska told the board that Lakaka, Mr Vale and Mr Soipang had lodged an expression of interest with Lihir Gold, but that they had acted without the authority of the Lakaka board.  Mr Kapska was the chairman of Lakaka and the leader of the Unawos clan.  The Strang Aniokaka board resolved that it should continue to take all steps to ensure that the existing T-08 contract remained in place and was honoured by Lihir Gold.  It also ratified the decision to put in an expression of interest.  The board, by then, had become aware of Lakaka’s attempt to change Strang Aniokaka’s name to include the name Anitua and to publish adverse material about Strang Aniokaka.  The board also resolved to repudiate or reject any right or authority of Aniokaka, Strang International, Lakaka, Unawos, Tinetalgo or any associated or related persons or entity to act in competition with Strang Aniokaka either alone or in concert.

49                  On 14 January the Strang companies’ solicitor, Stewart Levitt, of Levitt Robinson, wrote to Anitua Limited, as Lakaka was now called, Mr Vale and Mr Soipang.  Mr Levitt stated that Strang Aniokaka had received information indicating that persons purporting to act on behalf of Lakaka had participated in the tender process with Lihir Gold by lodging an expression of interest.  The solicitors asserted that any participation in the tender process by Lakaka, Aniokaka or any associated entity or person in competition with Strang Aniokaka would involve that person being in breach of fiduciary duties owed by those parties to the Strang parties, including Castlebar.  The letter sought confirmation that nothing further would be done to progress any such plans.

50                  On 16 January 2009, Strang Aniokaka, Strang International and Castlebar commenced proceedings as plaintiffs against Lakaka, Mr Vale, Mr Soipang, Aniokaka, Unawos and Tinetalgo in the National Court of Justice at Waigani in Papua New Guinea.  That court made ex parte orders prohibiting the defendants from directly or indirectly entering, or taking steps to enter, on their own account or jointly with anyone else a contract with Lihir Gold to provide the whole or any part of the services presently the subject of a tender for the provision of materials handling and stevedoring services or to enter into any contract with Lihir Gold.

51                  On 16 January 2009, Strang Aniokaka lodged its tender with Lihir Gold.  The tender set out detailed proposals for pricing and the other matters required by Lihir Gold.

52                  On 22 January 2009, the National Court varied the injunction to restrain the defendants from entering directly or indirectly or taking any steps to enter directly or indirectly any contract the subject of the tender process.  Also on 22 January 2009 Richard Woods, the general manager - legal and commercial of Lihir Services Australia Pty Ltd, responded by email from its Brisbane offices to Levitt Robinson’s letter of 14 January 2009.  Mr Woods wrote that he was responding on behalf of Mr Foley of Lihir Gold.  Mr Woods’ letter asserted the validity of the termination of the T-08 contract and the expression of interest process.

53                  On 3 February 2009, Lihir Gold issued a notice to all shortlisted bidders including Strang Aniokaka, amending the timetable for completion of the expression of interest process to close of business on 30 June.  It also extended the time for final submission of tender proposals to 27 February 2009.  Lihir Gold asked Strang Aniokaka if it was prepared to continue providing its services until 30 June 2009.

54                  Strang Aniokaka’s board met in Brisbane on 12 February 2009.  Mr Vale attended as Lakaka’s representative.  After the conclusion of the meeting, when the other board members representing Aniokaka’s interests had farewelled Mr Vale, Mr Vale asked Mr Strang to meet him outside the boardroom.  Mr Vale told Mr Strang that the Strang companies had no chance of staying in business with Lihir Gold unless they got Mr Soipang’s support.  He said that Mr Soipang had authorised him to say that if the Strang parties were prepared to pay Mr Soipang back rent for its occupation of Strang Aniokaka’s site office and the land used to carry out the T-08 contract, Mr Soipang would use his influence with Lihir Gold to make sure that it awarded the contract at the end of the tender process to Strang Aniokaka.  He told Mr Strang to think about this.  Mr Vale said that if Strang Aniokaka was prepared to pay Mr Soipang back rent for the past 13 years, he would persuade Mr Foley and Lihir Gold to keep Strang Aniokaka as the party contracted to providing stevedoring services.  Mr Strang asked how much money was involved and Mr Vale responded that if he was told that the Strang parties were interested he would speak with Mr Soipang and something would be arranged.

55                  On 16 March 2009, Lihir Gold wrote to Strang Aniokaka informing it that it considered that the contract had been validly terminated and, in exercise of its rights under the tender process, gave notice that that process was also terminated.  The letter said that as from 1 July 2009 Lihir Gold itself would be undertaking the services currently provided by Strang Aniokaka.  Mr Foley’s letter noted that Strang Aniokaka had commenced proceedings in respect of the tender process.  It stated that Lihir Gold had been at the periphery of those disputes and did not know the full details.  Mr Foley concluded:

“However, as the tender process has now been terminated we assume that the injunctions and underlying dispute will now fall away.  If that is not the case, could you please explain to us why the injunctions would remain in place and the issues in dispute in those proceedings.”  (emphasis added)

56                  Mr Green responded on 1 April enquiring as to what interest Lihir Gold had in the injunctions “falling away”.  Mr Foley wrote back on 8 April saying that Lihir Gold had assumed, possibly incorrectly, that because the tender process had been terminated and it was going to provide the services itself, the proceedings in the National Court might fall away.  He explained that was because the injunctions were understood to relate to the tender process, but if that were not correct Lihir Gold was interested to know an explanation of the dispute in case those matters in dispute related to it.

57                  The dispute did not resolve.  But on 27 May 2009 Strang Aniokaka and Lihir Gold entered into an equipment sale contract for over USD 3 million for some of the equipment used by Strang Aniokaka.

58                  Mr Green gave evidence that since July 2009 he had observed workers who were providing labour under subcontract to Lihir Gold, performing stevedoring work and materials handling that had been previously carried out by Strang Aniokaka.  Those persons appeared to be engaged by Noram Limited and were wearing clothing bearing that name.  Noram was “Maron” spelt backwards.  Mr Green understood that Maron was the subclan of Tinetalgo clan of which Mr Soipang was the head.  Tinetalgo was the major indigenous clan on Niolam Island.

The Nature of the Applicants’ Case

59                  In essence, the applicants contended that they had reasonable cause to believe that the conduct of Lakaka, particularly through Mr Vale and Mr Soipang, from April 2007 had led to the position in which Lihir Gold had ultimately ceased to engage Strang Aniokaka to perform stevedoring and material handling services for it at Niolam Island.  They asserted that this had led to an entity that could be inferred to be controlled by Mr Soipang and his clan, Noram, replacing Strang Aniokaka and that the only reason that Lakaka was not now performing the work was the operation of the injunction granted by the National Court.  The applicants seek preliminary discovery because they assert that the above circumstances suggest that there is reasonable cause to believe that:

·               when Lihir Gold called for expressions of interest and later for tenders, it represented to the applicants that each of those processes would be genuine, when, in fact, Lihir Gold intended to cease the engagement of  Strang Aniokaka in any event and that this conduct contravened s 52 of the Trade Practices Act causing them to  suffer loss or damage.  This would then give the applicants a cause of action in this Court to recover that loss under s 82 of the Act;

·               Lihir Gold knowingly participated in a dishonest and fraudulent design of Lakaka and or the associates of Mr Soipang or Mr Vale each of whom owed the applicants a fiduciary duty not to seek to bring about the termination of the T-08 contract or to seek to replace Strang Aniokaka as the provider of those services;

·               Lihir Gold tortiously interfered in the contractual relations between the applicants and Lakaka by procuring Lakaka to act in breach of its implied obligation as a party to the T-08 contract, the 2008 shareholders agreement and or 1995 joint venture to do all things reasonably necessary on Lakaka’s part to give Castlebar, Strang International and Strang Aniokaka the benefit of those contracts.

A Threshold Question

60                  The applicants’ possible claim for relief under s 82 of the Act was the only right to obtain relief in this Court that they identified as the source of the Court’s jurisdiction under O 15A r 6.  In Apache (2009) 182 FCR at 127 [7], 128 [10] Moore and Gilmour JJ observed that where an applicant under O 15A r 6 had failed to make out its case in respect of a right to obtain relief in the Court (i.e. on a claim for which jurisdiction has been conferred on the Court under a law made by the Parliament in respect of a matter within the meaning of Ch III of the Constitution) there was a compelling discretionary reason for refusing to consider other wholly non-federal (or Ch III) claims.

61                  Lihir Gold argued that the applicants had not established any entitlement to preliminary discovery in respect of the claim under the Act.  It contended that if this were so, either, I should reject the balance of the application because I had no power to grant relief or I should exercise my discretion not to grant such relief by following Apache 182 FCR 127 [7].  It is not necessary for me to decide that issue.

The Trade Practices Act Claim – The Parties’ Submissions

62                  The applicants’ contended that there was reasonable cause to believe that the tender process that Lihir Gold initiated, as foreshadowed in the meeting of 22 August 2008, was a sham.  They contended that this was because of the reasons Lihir Gold gave for the initiation of the process.  First, they argued, there were no subsequent major changes to the scope of the works, as Mr Green’s observations showed.   Secondly, they contended the “political considerations” namely, the need for Lihir Gold to appease Mr Soipang could be inferred to be the real agenda behind that process and the termination of the T-08 contract.  The latter followed, so the applicants argued, from, first, Mr Vale’s statements from April 2007 that Mr Soipang wanted to remove the Strang interests from the scene, secondly, Mr Pugh’s statement in the 22 August 2008 meeting that Lakaka, in its own right, would be invited to participate in the process, thirdly, from the subsequent involvement in the process of Lakaka, Mr Soipang and Mr Vale and last, by the termination of the process after the National Court injunctions were made and use of the Noram workers who were apparently associated with Mr Soipang’s clan.  The applicants then posited that Lihir Gold had used a sham process in order to cloak its ultimate objective of awarding the new contract for provision of stevedoring and material handling services to Lakaka or Mr Soipang’s nominee.

63                  Lihir Gold contended that much of the applicants’ argument was no more than unfounded suspicions elevated to a conspiracy theory.  It argued that the invitation to tender itself foreshadowed a significant change to the current scope of works.  This was because of the intended change from operating the wharf on only a day shift to 24 hours a day.  Lihir Gold argued that the mention of “political considerations” did not necessarily refer to Mr Soipang’s agenda and could have referred instead to general requirements of Papua New Guinean politics.  Even if this phrase did refer to Mr Soipang’s desire to increase landowner involvement, Lihir Gold argued that nothing sinister need be implied, particularly since in the same conversation it revealed that Lakaka would be an invitee to express interest in its own right.  It contended that there was no evidence linking Lihir Gold to being aware of Mr Soipang’s agenda of displacing the Strang interests before the 22 August 2008 meeting.

64                  Lihir Gold argued that, most importantly, there was no credible reason why it would have engaged in a sham or fraudulent tender process, rather than a genuine one.  By August 2008, it had been negotiating, in good faith, on the provisions of a new contract with Strang Aniokaka for 10 months but not only had the parties not yet reached agreement, significant issues, such as the term and price of services, were unresolved.  It contended that self-evidently, a tender process of the kind proposed was a commercial and realistic means of Lihir Gold eliciting offers, including from Strang Aniokaka, that it was capable of accepting so as to form a contract.

65                  Lihir Gold also argued that a stated condition of the tender process was that it could be terminated by it, as had happened.  The applicants had obtained the injunction against Lakaka, Mr Soipang and their associates prevailing them from putting in a tender.  That resulted, on the evidence, in Strang Aniokaka being the only tenderer.  While the injunction and the tender process remained in place, if Lihir Gold had had a legitimate purpose of obtaining and considering competitive bids, including a purpose of assessing whether Lakaka could provide a credible bid, it could no longer exercise a choice.  Lihir Gold argued that it did not follow that the earlier tender process was a sham simply because it had decided, in this new context, to terminate the process and to conduct the stevedoring and material handling services itself, or to use Noram as supplier of labour.

The Trade Practices Act Claim - COnsideration

66                  On balance, I am satisfied that there was reasonable cause to believe that one reason for Lihir Gold’s decision to seek expressions of interest and pursue the tender process was because of the “political considerations” that Mr Green said had been mentioned in the meeting of 22 August 2008.  There was reasonable cause to believe that those considerations involved a response to pressure that Mr Soipang and his associates had brought to bear on Lihir Gold to allow them, possibly through Lakaka, to supplant Strang Aniokaka as provider of stevedoring and materials handling services.

67                  However, I am not satisfied that there was reasonable cause to believe that the presence of this motivation in Lihir Gold’s decision-making process or the other factors on which the applicants relied supported their assertion that the tender process was a sham.  First, there was no credible reason why Lihir Gold needed to engage in such a sham.  It was free to terminate the T-08 contract on reasonable notice:  Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd (1988) 14 NSWLR 438.  Once that contract were terminated, Lihir Gold could do as it liked in dealing with the consequences.  Indeed, the T-08 contract gave either party a right to terminate it without cause on 7 days notice.  Both the applicants and Lihir Gold were prepared to accept for the purposes of this argument that this express written term had evolved to a requirement for reasonable notice of termination.  Even so, it is difficult to conceive how Lihir Gold’s right to avail itself of the right to terminate on reasonable notice could be further constrained by the operation of s 52 of the Trade Practices Act.  There was no basis on which a term could be implied to this overriding effect, since it would be inconsistent with an express term of the T-08 contract:  BP Refinery (Westernport) Pty  Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-283 per Lord Simon of Glaisdale for himself, Viscount Dilhorne and Lord Keith of Kinkel.

68                  Secondly, Lihir Gold made clear to Strang Aniokaka on, and after, 22 August 2008 that Lakaka was being invited to participate in the tender process, as Mr Green noted on that day, “in its own right”.  Thirdly, no credible reason was given why Lihir Gold, if it had determined to engage Lakaka already, would have bothered waiting for the tender process to proceed.  Lakaka’s expression of interest lodged over two months after 22 August 2008, showed that it was not then ready to undertake the task, not least because it had not then identified, or at least was not prepared to name, its proposed manager.  Moreover, Lakaka had not put its tender in by the time that the applicants obtained the injunctions on 16 January 2009, which was the last day for tenders to be lodged.

69                  If the whole process were a sham engaged in by Lihir Gold only in order that it could award the tender to Lakaka, the latter did not appear to be very well prepared to play its role in this sinister activity.  People in our society ordinarily do not engage in fraudulent conduct as Mason CJ, Brennan, Dean and Gaudron JJ observed in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 450;  see too Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission  (2007) 162 FCR 466 at 481-482 [36] per Weinberg, Bennett JJ and myself.

70                  Another possible benefit to Lihir Gold from employing the expression of interest and tender process was that it could assess any proposal put by Lakaka or Mr Soipang’s nominee in the context of other bids, including by Strang Aniokaka.  That process could enable Lihir Gold to justify a decision not to bow to pressure from Lakaka and its associates by awarding the contract to them on the grounds that their tender was not as good as the winner’s.  The applicants no doubt saw commercial advantage in having Lihir Gold left with little choice but to deal with Strang Aniokaka.  However, it is understandable that Lihir Gold may not have seen its long term interest served by being tied to a supplier of important services with whom, over a period of 10 months, it had not been able to negotiate a new agreement for a three to five year term.

71                  I do not accept the applicants’ argument that the failure of Lihir Gold to call evidence on what Mr Pugh’s reference to “political considerations” meant leads to an inference that the process was a sham:  cf  Optiver 169 FCR at 447 [50].  There is reasonable cause to believe that Lihir Gold could have responded to pressure by Lakaka and its associates by terminating the T-08 contract and calling for expressions of interest.  However, this would have opened up competition for the provision of stevedoring and materials handling services.  In the circumstances, that did not give rise to reasonable cause to believe that the process Lihir Gold initiated was a sham or that it had decided to award the new contract to Lakaka or its nominee.

72                  A finding of the existence of reasonable cause to believe something requires less by way of proof than being satisfied of the existence of the fact believed:  George v Rockett (1990) 170 CLR 104 at 116 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ.  In explaining the distinction between statutory requirements that a person have reasonable grounds to, first, suspect or, secondly, believe something, their Honours said (George 170 CLR at 116):

“The objective circumstances sufficient to show a reason to believe something need to point more clearly to the subject matter of the belief, but that is not to say that the objective circumstances must establish on the balance of probabilities that the subject matter in fact occurred or exists: the assent of belief is given on more slender evidence than proof.  Belief is an inclination of the mind towards assenting to, rather than rejecting, a proposition and the grounds which can reasonably induce that inclination of the mind may, depending on the circumstances, leave something to surmise or conjecture.

It is necessary to identify the subject matter of suspicion and the subject matter of belief.”  (emphasis added)

73                  Here, assessment of the quality of the evidence for belief in the existence of the posited sham tender process is critical.  If this were established, then, the applicants also would need to establish that there was reasonable cause to believe that there was, or may have been, conduct engaged in by Lihir Gold “in trade or commerce”.   If both these matters were proved to the low threshold required by O 15A r 6, then there would be enough of a foundation to consider whether they could obtain relief in the Court for the contravention of s 52 of the Act on which the applicants rely as the foundation of a right to obtain damages under s 82.  They also seek a declaration under s 163A or s 22 of the Federal Court of Australia Act 1976.  So, there must be here reasonable cause to believe that they have or may have the right to obtain that relief under s 82.

74                  Of course, the applicants need only to establish that there is reasonable cause to believe that they may have (as opposed to do have) the right to obtain relief in the Court.  But, I am not satisfied that even on this lower threshold that the tender process may have been a sham.  On the evidence this possibility is just far-fetched.  If the tender process were a sham, it would have the appearance of a legally effective process when, in fact, Lihir Gold did not intend it to have that apparent, or any, legal consequence:  cp  Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 at 486 [46] per Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ.  However, in reality, Lihir Gold was entitled first, to terminate the T-08 contract on reasonable notice without grounds and, secondly, to deal with whomever it wished thereafter for provision of the services Strang Aniokaka had been providing.  There was no need for Lihir Gold to create a sham or fictitious tender process to do so.

75                  The applicants also relied on the ultimate result of Lihir Gold’s conduct;  namely that Noram appeared to have been awarded the work, or much of it, which Strang Aniokaka previously had performed.  I have considered whether this fact coupled with the whole of the antecedent circumstances on which the applicants relied, creates reasonable cause to believe that the termination of the T-08 contract, the process of calling for expressions of interest and then tenders were a sham.

76                  I have considered all of the events in evidence as a whole but I am not persuaded that there is reasonable cause to believe that Lihir Gold engaged or may have engaged in the conduct of subjecting the applicants to a sham process.  The applicants’ argument presupposes the Lihir Gold had an obligation to continue the T-08 contract or to award Strang Aniokaka a new contract and eschewed that obligation by employing a sham to achieve the substitution of Lakaka or its nominee.  That presupposition makes no commercial sense.  Lihir Gold was not obliged to continue, or contract anew, with Strang Aniokaka. 

77                  Fundamentally, Lihir Gold had the right to terminate the T-08 contract without cause, at least on reasonable notice.  It may not have wanted to deal with Strang Aniokaka, after the National Court injunctions had prevented Lihir Gold from even considering a tender from the only potential competitor, Lakaka.  If “political considerations” had been a motive for opening up the work to tenderers, then the applicants had frustrated that by obtaining the injunction against Lakaka.  By August 2008 Lihir Gold had not found common ground on a new contract with Strang Aniokaka.  It may have also had to deal with the “political considerations”, being the pressure from Lakaka.

78                  If the applicants’ theory underlying its sham argument provided reasonable cause to believe anything at all, the one thing Lihir Gold could have done, but did not do, was immediately to appoint Lakaka in place of Strang Aniokaka.  That theory suggested that Lihir Gold engaged in an elaborate, lengthy and ultimately pointless exercise rather than it doing directly what it had every right to do, namely to award a new contract to Lakaka.

79                  It is implausible that if Lihir Gold wanted to deal with Lakaka, and take whatever risk there were in respect of its possible fiduciary relationship with the applicants, it would act as it did.  The interposition of a tender process in which Lakaka was a known participant, could not relieve it of any fiduciary duty not to deal with Lihir Gold in opposition to the applicants, any more than if Lihir Gold simply terminated the T-08 contract and dealt directly with Lakaka.  That is, there was no point, and no benefit, in Lihir Gold going through the motions of a tender process;  either Lakaka was free to deal with it directly, or in that process, or it was not – the tender process could not have had any effect on Lihir Gold’s freedom to deal with Lakaka.  Moreover, the applicants’ argument ignored commercial reality.  Despite Lihir Gold trying to finalise a new agreement for a limited term during the months of bona fide negotiations preceding August 2008, both sides had failed to reach agreement.  That situation made it likely that Lihir Gold would seek to achieve a better outcome or one acceptable to it, by engaging in the processes of calling for expressions of interest and then tenders.  After all, there is no evidence to suggest that Lihir Gold had somehow lost its rights to freedom of contract to choose who worked for it and on what terms.

80                  Accordingly, I am not satisfied that there is reasonable cause to believe that Lihir Gold may have engaged in a tender process which was a sham or which, somehow, was a smokescreen to enable it, at the end, to engage Lakaka without it considering and deciding on whether to accept any tender the applicants, or anyone else, submitted.

“Trade or Commerce”

81                  Lihir Gold also argued that there was no reasonable cause to believe that the applicants have or may have the right to obtain relief under the Act because the conduct complained of did not occur in trade or commerce within the meaning of s 4(1) of the Act.  That section defined “trade or commerce”, relevantly as being between Australia and places outside Australia.  Lihir Gold contended that all the relevant conduct and representations complained of took place in Papua New Guinea between two companies incorporated there, namely itself and Strang Aniokaka.  The applicants asserted that some of Lihir Gold’s conduct and representations concerning the genuineness of the tender process were made in emails or letters sent or posted to or from Australia.

82                  In order to consider this argument, I will assume that, contrary to my finding above, there was reasonable cause to believe that the tender process was or may have been a sham at all times on and after 22 August 2008.  I will also assume that in preparing its expression of interest and tender Strang Aniokaka incurred expenses that, had it not been misled by the sham, it would not have incurred so as to sustain damage by that conduct within the meaning of s 82.

83                  The applicants relied on the fact that after 22 August 2008 Lihir Gold emailed copies of some letters concerning the tender process to their chairman, John Strang, at his Australian email address.  These letters included a copy of the letter sent on 20 October 2008 inviting each applicant to submit a tender, and the letter dated 7 November 2008 that was addressed directly to Mr Strang as chairman of Strang Aniokaka at its postal address on Lihir Island as well as to his Australian email address.  The applicants placed particular reliance on the response to Levitt Robinson emailed from Lihir Gold’s Brisbane office on 22 January 2009 as conduct occurring wholly within Australia.  The applicants argued that s 6(3) of the Act brought Lihir Gold’s conduct into s 52, consisting relevantly of the representations that the tender process was genuine.  Section 6(3) relevantly provided:

“In addition to the effect that this Act … has as provided by another subsection of this section, the provisions of … Division [1] of Part V – have, by force of this section the effect they would have if:

(a)        those provisions … were, by express provisions confined in their operation to engaging in conduct to the extent to which the conduct involves the use of postal, telegraph or telephonic services …;  and

(b)        a reference in those provisions to a corporation included a reference to a person not being a corporation.”

84                  For the following reasons, I am of opinion that the examples of email communications in and to Australia do not amount to trade and commerce for the purposes of s 52 of the Act.  Those examples do not otherwise assist in establishing reasonable cause to believe that the applicants have, or may be able to obtain, relief in the Court from any conduct of Lihir Gold in respect of them.

85                  First, any adverse consequence or loss or damage caused by a representation made, or other conduct engaged in, by Lihir Gold would have been suffered only by Strang Aniokaka.  Strang International was a shareholder in that company.  If Strang Aniokaka did not suffer loss or damage or was not entitled to relief, the applicants did not explain how its parent would or may have some other right to obtain relief for a contravention of the Act:  cf  Gould v Vaggelas (1984) 157 CLR 215 at 219-220 per Gibbs CJ, 253 per Brennan J, see too at 232 per Murphy J, 245-246 per Wilson J.

86                  A cause of action for damages for a contravention of Pt V of the Act created by s 82 is complete when damage is sustained.  But, as French J pointed out, ordinarily, the making of a representation by postal, telegraphic or telephone means is complete where the message is received:  Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (No 2) 44 FCR 485 at 493;  see too:  Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1 at 45-46 [145]-[148] per Merkel J.

87                  As a matter of practical reality the emails and other correspondence to and from Australian addresses were tangential to trading and commercial activities wholly within Papua New Guinea between the two Papua New Guinean trading entities, Strang Aniokaka and Lihir Gold.  In Australian Competition and Consumer Commission v Maritime Union of Australia (2001) 114 FCR 472 at 489 [76]-[77] Hill J considered that the concept of trade or commerce was a wide one.  He said that it ought not be broken up into individual components each of which, on its own and without reference to the others, may be seen as a separate activity, when each of the components actually formed an indispensable part of an integrated activity.  Correspondence and communication by electronic means, including telephone and email, is very often an integral component of the conduct of trade or commerce.  But, the mere fact that correspondence occurs within, to or from Australia does not, of itself, determine whether the correspondence or the activities to which it relates is “in trade or commerce” within the meaning of that expression in s 4(1) of the Act.

88                  If a publication of defamatory matter is made to more than one person, each defamatory publication to a person is a separate tort.  The proper law of the tort of defamation is the law of the place of publication even though the publisher was outside that jurisdiction:  Dow Jones & Co Inc v Gutnick (2004) 210 CLR 575 at 605-607 [40]-[44].  Here, the emails were written by Lihir Gold to Strang Aniokaka which acted on them.  The latter entity was a company whose business was in Papua New Guinea, although its chairman and some of its officers were in Australia and had email addresses here.  More importantly, the emails were addressed to Strang Aniokaka for the purpose of, and relating wholly to, its trade or commerce in Papua New Guinea.  (I have put to one side the invitation to express interest to Strang International because it was not acted on.)  Such communications were capable of being characterised as conduct in Australia, as Merkel J observed in Bray 118 FCR at 45-46 [147].  Obviously, however, the proper characterisation of such conduct depends on the circumstances:  see too Australian Competition and Consumer Commission v Chen (2003) 132 FCR 309 at 318 [32] per Sackville J. 

89                  It would be an odd result for a letter or email concerning trade or commerce that has no connection to Australia, addressed to an officer of a foreign company at a foreign email address, to be treated as capable of contravening s 52 merely because the addressee happened to receive it on his or her or a computer or “smart phone” (i.e. a telephone capable of receiving email) while he or she was present in Australia on holiday.  Such a letter or email would relate to trade or commerce, but I do not think that it would be conduct engaged in by its sender in trade or commerce between Australia and places outside Australia.  This consequence reinforces that all of the circumstances of the conduct in making the communication are important in considering the character of the conduct:  cf  Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 604-605 [37]-[40] per Gleeson CJ, Hayne and Heydon JJ;  Miller v Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31 at [91] per Heydon, Crennan and Bell JJ.  Additionally, it is a feature of email communications that a sender often will send copies to many people in organisations even though only one person is intended to spend any effort considering the particular communication.

90                  Indeed, as Mason CJ, Deane, Dawson and Gaudron JJ had explained in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 603-604, s 52 was not intended to extend to all conduct, regardless of its nature, in which a corporation might engage in the course of, or for the purposes of, its overall trading or commercial business.  They said (Concrete Constructions 169 CLR at 604):

“Put differently, the section was not intended to impose, by a side-wind, an overlay of Commonwealth law upon every field of legislative control into which a corporation might stray for the purposes of, or in connection with, carrying on its trading or commercial activities. What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character. Such conduct includes, of course, promotional activities in relation to, or for the purposes of, the supply of goods or services to actual or potential consumers, be they identified persons or merely an unidentifiable section of the public. In some areas, the dividing line between what is and what is not conduct "in trade or commerce" may be less clear and may require the identification of what imports a trading or commercial character to an activity which is not, without more, of that character.”  (emphasis added)

91                  There is no question that the scope of the concept trade and commerce with places outside Australia is capable of applying to many situations.  The concept is sourced in s 51(i) of the Constitution:  cf  Seaman’s Union of Australia v Utah Development Co (1978) 144 CLR 120 at 138 per Gibbs J, 154 per Mason J with both of whom Barwick CJ and Aickin J agreed.  Thus, s 52 of the Act controls and sets a norm of behaviour for the conduct of corporations when they engage in trade or commerce.  And s 6(3) of the Act gives s 52 two aspects of additional operation;  first, it confines the conduct s 52 regulates to that engaged in in trade or commerce using postal, telegraphic or telephonic services;  and, secondly, for that particular conduct, the reach of s 52 is expanded to include individuals:  see The Queen v Australian Industrial Court;  Ex parte CLM Holdings Pty Ltd (1977) 136 CLR 235 at 244-245 per Mason J with whom Barwick CJ, Gibbs, Stephen, Jacobs and Murphy JJ agreed.  Moreover, s 6(3) does not relate to the geographical reach of the Act but rather it was designed only to give the Act wider constitutional support:  Zhu v Treasurer of NSW (2004) 218 CLR 530 at 563-564 [96] per Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ.

92                  The real issue here is whether s 52 extends to regulate Lihir Gold’s conduct in respect of the emails and letters sent to or from Australia.  The effect of s 6(3) here is simply to confirm that the sending or receipt of the emails and letters amount to conduct for the purposes of the Act.  But, s 6(3) does not relieve the applicants of the need to establish that that conduct actually, or may have, contravened s 52, so as to satisfy the requirements of O 15A r 6(a).  Therefore it is still necessary to consider whether the sending or receipt of the emails and letters amounted to, or may have been conduct in, “trade or commerce” as defined in s 4(1).  In Fasold v Roberts (1997) 70 FCR 489 at 530B-531E Sackville J discussed the authorities identifying the distinction between conduct in trade or commerce and conduct in relation to trade or commerce.  The line is between conduct that is or is not an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character:  Fasold 70 FCR at 530B-C.

93                  Here the line between the two aspects of conduct can only be appreciated by considering whether the conduct was or may have been in trade or commerce between Australia and places outside Australia, namely Papua New Guinea.  Relevantly, only Strang Aniokaka and Lihir Gold were engaged in trade or commerce in relation to the tender process and the acquisition and supply of stevedoring and material handling services.  That activity occurred wholly within Papua New Guinea because Lihir Gold required, and Strang Aniokaka supplied, stevedoring and materials handling services there.  There is no evidence Strang Aniokaka incurred any expense, or suffered any detriment or loss or damage in Australia or anywhere outside Papua New Guinea.

94                  It may be arguable that by sending emails to Mr Strang or other email addressees in Australia for the purposes of communicating with Strang Aniokaka in relation to the tender process, Lihir Gold engaged in trade or commerce.  However, I am of opinion that these communications were not arguably trade or commerce between Australia and places outside Australia.  This includes Mr Woods’ letter of 22 January 2009 which he sent from Brisbane on behalf of Lihir Gold in reply to Levitt Robinson’s letter of 14 January 2009.  The only trading or commercial activity or transaction the subject of those communications, was located wholly in Papua New Guinea.  No trade or commerce between Australia and Papua New Guinea was contemplated.  The emails copied or addressed to Australian officers of Strang Aniokaka did not concern Australian trade or commerce at all.  Nor did internal board meetings of Strang Aniokaka that occurred here involve Lihir Gold engaging in conduct in trade or commerce within the meaning of s 52.

95                  The applicants also argued that they may be entitled to relief by way of a declaration that Lihir Gold had engaged in conduct in contravention of s 52.  In particular, while Strang International suffered no loss or damage, it contended that it had treated the tender process as valid, and so may be entitled to declaratory relief to vindicate its rights.  This argument was also put for Strang Aniokaka as an alternative.  Thus, if the letter dated 22 January 2009 sent by Lihir Gold from Brisbane and the emails sent to Australian addressees were conduct in trade or commerce within the meaning of s 52, the applicants may have the right to obtain at least declaratory relief.

96                  No declaration could be made about the conduct under s 163A(1) of the Act.  That is because s 163A(1) is concerned with the Act itself, its provisions, their interpretation and effect, and with the validity of things done and proposed to be done under the Act.  However, s 163A(1) is not concerned with whether particular conduct in trade or commerce is conduct that has breached a provision of the Act:  Westpac Banking Corp v  Northern Metals Pty Ltd (1989) 14 IPR 499 at 511 per Davies and Spender JJ.  However, the Court could grant declaratory relief under s 21 of the Federal Court of Australia Act 1976 in respect of such breaches:  cf  Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-582 per Mason CJ, Dawson, Toohey and Gaudron JJ.

97                  The power to grant relief under O 15A r 6 is discretionary.  The conduct of Lihir Gold of which the applicants complain, had at most a very slight connection with trade or commerce in Australia.  The basis of the applicants’ claim to relief before me, in respect of s 52 is so tenuous that I would not have exercised my discretion to grant preliminary discovery had I been satisfied that there was sufficient in the claim under s 52 to satisfy the jurisdictional requirements of O 15A r 6(a).

98                  A requirement enforced by a court order that a person discover documents that may enable another person to make a decision whether to commence proceedings is a substantive inference in the first person’s ordinary freedoms.  Such a requirement may be imposed legitimately because the Court considers that, on balance, the interests of justice will best be served by ordering preliminary discovery under O 15A r 6.  Of course, that rule should be beneficially construed:  St George 211 ALR at 153 [26].  But, the order should not be made lightly.  In a free society, governed by the rule of law, any interference with personal freedoms, even for corporate entities, should be sufficiently justified.  Here, the breadth of the power under O 15A r 6 is significant in at least two respects.  First, it is a recognition that preliminary discovery may be warranted not merely if there is reasonable cause to believe that the applicant actually has the right to obtain relief in the Court, but extends to situations where the belief is arrived at on a more speculative basis;  namely that the applicant may have such a right.

99                  Secondly, because it is a broad discretion that permits orders to be made against individuals as well as corporations, the Court must be satisfied that the order is necessary in the interests of justice:  cf  John Fairfax & Sons Ltd v Cojuangco (1988) 165 CLR 346 at 357 per Mason CJ, Wilson, Deane, Toohey and Gaudron JJ discussing the narrower power in Pt 3 r 1 of the Supreme Court Rules 1970 (NSW).  The interests of justice for the purposes of O 15A r 6 are served by giving effect to the beneficial purposes that it is intended to promote.  These include, where there is sufficient material before the Court to establish the necessary factual premise in O 15A r 6, allowing an applicant to “fish” in the documents of the person he, she or it has reasonable cause to believe may be liable to relief that the Court can grant.  The benefits of this include that, as a result of that “fishing”, the applicant’s belief in whether he, she or it has, or may have, a remedy that the Court could grant may either be disabused or fortified by the material discovered under O 15A r 6.  Where there is sufficient in the anterior material, namely that on which the order under O 15A r 6 is sought, often it will be necessary in the interests of justice to give the applicant the capacity to make a more informed choice.  Nonetheless, the power is discretionary and its exercise in favour of an applicant requires the Court, applying the relevant principles, to be satisfied that the order should be made:  i.e. that it is necessary so to order.

100               In Apache 182 FCR at 127 [8] Moore and Gilmour JJ said that the power under O 15A r 6 exists in aid of the exercise of the jurisdiction of the Court.  Of course, the interests of justice are shaped by the beneficial construction that should be given to the power to make an order under O 15A r 6.  This requires consideration of the discretion once the applicant has passed through the gateway of establishing that there is reasonable cause to believe that there is, or may be, relief available to that applicant in the Court:  cf  Optiver 169 FCR at 443 [36], 445 [44].

101               I am not satisfied that I should exercise my discretion to grant an order for preliminary discovery by Lihir Gold in favour of the applicants in respect of the only cause of action identified by them that owes its existence to or is sought in respect of a law made by the Parliament.  The other causes of action for which the Court could grant relief may be part of that putative matter.  However, since I have not been persuaded that there is reasonable cause to believe that the applicants have or may have the right to obtain relief in a matter within the judicial power of the Commonwealth, it is not appropriate to grant preliminary discovery in respect of the other claims that arise, if at all, under the law of Papua New Guinea.  The application should be dismissed.

102               I will explain why my preliminary view is that the other bases put by the applicants also do not appear to support a conclusion that there is reasonable cause to belief that, if they were part of a matter within the jurisdiction of the Court, the applicants have or may have a right to obtain relief in it.

The Breach of Fiduciary Duty Claim - Submissions

103               Lihir Gold accepted that it was arguable that there was reasonable cause to believe that each applicant was, or may have been, owed some fiduciary duty by Lakaka and its associates, including Mr Soipang and Mr Vale.   However, it contended that first, the applicants had not identified any such duty or its extent sufficiently and, secondly, they had to accommodate such duties as may have arisen when the 1995 joint venture was in place to the contractual relationship that had developed in the 2002, and later the 2008, shareholders’ agreements.  In addition, Lihir Gold accepted that it had, or may have had, a contractual obligation to take all steps necessary on its part to be done to give Strang Aniokaka the benefit of the T-08 contract while it was in force.

104               The only written articulation of the applicants’ postulated claim was made in their written submissions in chief.  These asserted that there was reasonable ground to believe that Lihir Gold was either a participant in a dishonest and fraudulent design of Lakaka or its associates, as persons owing the applicants a fiduciary duty, or Lihir Gold had procured or assisted in the breach of such a duty.  The applicants contended that the T-08 contract was terminated by Lihir Gold as a result of conduct engaged in by Lakaka or its associates in breach of their fiduciary duties.  This was based on a number of steps.

105               First, the applicants pointed to the cogent evidence that Mr Soipang and Mr Vale had expressed their intention to seek removal of the Strang interests from their role of providing stevedoring and materials handling services for Lihir Gold.  Lakaka and its associates regarded Strang Aniokaka as having been their “partner” in that endeavour.  Lakaka’s expression of interest acknowledged to Lihir Gold that it was tendering against its “partner” on “work we currently have an interest in”.  Importantly, the written explanation of the applicants’ claim was that the breach of fiduciary duty consisted of Lakaka procuring the termination of the T-08 contract that occurred, at latest by Lihir Gold’s 20 October 2008 letter but had been foreshadowed in the 22 August 2008 meeting between Messrs Green, Page and Covell.  Mr Pugh had given the explanation of changed scope of works and political considerations, neither of which, on the applicants’ argument, justified or entitled Lihir Gold to terminate the T-08 contract.  As I have explained above, the applicants contended that the termination of the T-08 contract came about because of those political considerations and Lihir Gold was acting on Lakaka’s request or requirement.

106               Secondly, the applicants argued that because of the conversation in 1995 when Mr McIndoe told Mr Green that Lakaka, through Aniokaka, was prepared to be Strang International’s joint venture partner, a fiduciary relationship had arisen that subsisted until 2009.  The applicants argued orally that there was reasonable cause to believe that before 22 August 2008 Lakaka, as a joint venture partner, had brought pressure to bear on Lihir Gold to terminate the T-08 contract.  And, the applicants contended that at least from the time Lihir Gold received Lakaka’s expression of interest, it knew that Lakaka was acting in breach of its fiduciary duty as a partner of Strang International or both applicants.

107               Thirdly, the applicants argued that Lakaka had a duty not to undercut or undermine the undertaking of providing, with its partner, stevedoring and materials handling services on the Lihir Islands in whatever contractual arrangement the partners had with Lihir Gold.  The written T-08 contract referred to the original 1995 joint venture in which Lakaka was a named partner.  In addition, Lihir Gold’s letter of 12 September 2008 referred to Strang Aniokaka and “its current business partners”.

108               Fourthly, the applicants argued that there was reasonable cause to believe that Lihir Gold was knowingly concerned in a breach of fiduciary duty (in Lakaka seeing to procure their removal from the scene) because of the impugned reasons Mr Pugh gave on 22 August 2008 for termination of the T-08 contract.  The applicants relied on the facts that subsequently, to Mr Green’s observation, the scope of work did not change;  and that Strang Aniokaka had given no cause, nor was there any other justification, for Lihir Gold to terminate the contract.  They referred to the criticisms in evidence of the Strang interests by Lakaka and its associates.  They argued that an inference may be open that Lakaka and its associates expressed those criticisms to Lihir Gold before 22 August 2008 in terms such as those in Lakaka’s expression of interest.  The applicants asserted that Lihir Gold had no valid basis to terminate the T-08 contract.

Breach of Fiduciary Duty - Consideration

109               I reject this argument.  Lihir Gold was entitled to act in its own interests in relation to the T-08 contract.  It is not enough that the termination of that contract may have coincided with Lakaka’s desire for that result.  Lihir Gold had a sound commercial reason to force the issue of the definition of its future contractual relationship with Strang Aniokaka after 10 months of ultimately unsuccessful negotiations.  Lihir Gold had no duty or obligation to keep the T-08 contract on foot.  That had evolved well past its written form of almost 13 years before and on terms with which Lihir Gold was no longer content.  I am of opinion that the applicants’ argument that Lihir Gold did not have a “valid” reason for terminating the T-08 contract, is without substance.   That contract, by its written terms, was terminable on seven days notice without cause and, on any view, was terminable on reasonable notice without cause.  That finding does not, however, exclude the possibility that Lihir Gold was participating in Lakaka’s design to reach the same objective.  But, that finding highlights the artificiality of the applicants’ reliance on the contention that Lihir Gold was, or may  have been, a participant in a fraudulent and dishonest design by Lakaka or its associates in breach of their fiduciary duties or had procured or assisted in such a breach.

110               There is reasonable cause to believe that before 22 August 2008, Mr Soipang and Mr Vale had, or may have, told Lihir Gold that they were unhappy with the Strang interests and would like to have Lakaka or its nominee do the work in Strang Aniokaka’s place.  But that expression of the Lakaka parties’ desires is far from the applicants’ claim that there is reasonable cause to believe that Lihir Gold had or may have had, not just an awareness of that disloyalty, but acted as it did to assist Lakaka and its associates in achieving their ends.

111               The applicants did not put a case that the dishonest and fraudulent design was to install Lakaka or its associates in their stead.  They confined their argument to that design being to terminate the T-08 contract and Lihir Gold not having any valid reason for doing so.  I am not satisfied that there is reasonable cause to believe that such a scenario may have occurred;  it is implausible, as I have explained in relation to the allegation of the tender process being a sham.

112               The applicants argued that Lihir Gold had or may have had knowledge of the dishonest and fraudulent design of Lakaka and its associates for the purposes of satisfying the test applicable in the second limb of Barnes v Addy (1874) LR 9 Ch App 244 at 251-252 per Lord Selborne LC.  They contended that for this purpose Lihir Gold had or may have had one of the following four states of mind, each of was sufficient to support the applicants’ claim as explained in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 163 [174], [177], namely that Lihir Gold had actual knowledge, or it had wilfully shut its eyes to the obvious, or it wilfully and recklessly had failed to make such enquiries as an honest and reasonable would have made, or it had knowledge of circumstances which would indicate the facts to an honest and reasonable person.  As I have explained above, there is reasonable cause to believe that Lihir Gold knew or was aware of the Lakaka parties’ desire to bring about both the termination of the T-08 contract and the Strang parties’ involvement in future provision of stevedoring and materials handling services for the goldmine.

113               However, the applicants’ argument did not have any regard to Lihir Gold’s interest in obtaining contractual certainty and contractual arrangements that it had negotiated to its own satisfaction.  Lihir Gold could not be treated as knowingly participating in the Lakaka parties’ breach of their fiduciary duties merely because it knew, or was aware, or may have known, or been aware, of their desire that the T-08 contract be terminated.  If that were the case, a person could never terminate a contractual relationship with a joint venture or a partnership if he or she were aware that one of the joint venturers or partners wanted the contract to be terminated.  In the end, having considered the evidence and arguments, I am not satisfied that the objective circumstances are sufficient to establish reasonable cause to believe that Lihir Gold acted as it did other than for its own purposes, uninfluenced by Lakaka or its associates’ purposes:  George 170 CLR at 116-117.

114               The applicants’ argument glossed over identifying a factual basis for there to be reasonable cause to believe that Lihir Gold had participated or may have participated in the dishonest and fraudulent design;  that is, the reason why it may have terminated the T-08 contract was to advance that design.  It is not sufficient that the design may or will be advanced by the objective fact of the termination.  Lihir Gold could not be constrained, as if it were a fiduciary, from terminating a contract in respect of which it had no fiduciary duties unless in doing so it was, or may have been, participating or assisting in a breach of fiduciary duty by someone else that was both dishonest and fraudulent:  Farah Constructions 230 CLR at 164 [179].  The applicants had to identify a basis for reasonable cause to believe that scenario.  But, what was it that had, or may have, made Lihir Gold’s decision to terminate amount to, first, its being a participant in the Lakaka parties’ design and, secondly, that design being dishonest and fraudulent?

115               An allegation that a person was or may have been a knowing participant in another’s dishonest and fraudulent design is a serious one.  In litigation, it requires proper pleading and particularisation:   Farah Constructions 230 CLR at 162 [170].  Of course, the strictures applicable to advancing such a claim in proceedings under O 15A r 6 are more relaxed than in litigation in which the allegation is made as a fact to be proved.  But, these considerations do not wholly dispense with the need to propound and prove an allegation to the requisite standard necessary to found relief under O 15A r 6.  Such an allegation requires a court to consider whether it is, or would be, established having regard to its serious nature and the matters referred to in s 140(2) of the Evidence Act 1995;  Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-363 per Dixon J; CEPU 162 FCR at 479-482 [29]-[38];  Farah Constructions 230 CLR at 162 [170].

116               In essence, the applicants asserted that more than mere coincidence explained, or may have explained, why in August 2008 Lihir Gold had sought to terminate the T-08 contract.   They gave two reasons for doing so (changes in the scope of works and “political considerations”) that they contended gave reasonable cause to believe the basis of their assertions concerning Lihir Gold and Lakaka on this issue.

117               Of course, O 15A r 6 does not require an applicant to establish that any claim he, she or it may bring after obtaining preliminary discovery is well founded.  There must be an element of speculation, conjecture or surmise – if the applicant’s case is too well established, the order will not be made because the applicant already has sufficient information to justify commencing proceedings.  So, the quality of the objective circumstances must be examined to ascertain whether they give reasonable cause for the Court to believe that the applicant may, not must, obtain relief if, at a later trial, the speculative, conjectured or surmised case can be proved.

118               Often in life events occur that could be explained differently depending on the perception of the observer and what he or she knows.  The cause of a car accident can be perceived differently by witnesses who have different vantage points and roles in the events, even though each of them gives an honest and accurate account of what he or she saw, heard or did.  In such a case, the person who gives his or her account will relate it to objective facts of the actual events together with his or her perceived interpretation, supported by the coincidences in the objectively ascertainable facts known to him or her.

119               The task of the fact finder goes beyond an uncritical acceptance of one account, even though in the end, that account, after examination, will be accepted as accurate.  The task of a person who must form a belief is less onerous but by no means uncritical.  In George 170 CLR at 117-118, the Court explained the importance of the description of the object of the search warrant in ascertaining whether the objective circumstances relied on for its issue gave reasonable grounds for believing that the object so described, if found, would afford evidence of an offence.  They, cautioned that, in general, the wider the description of the designated object, the more difficult it would be to persuade the justice of the peace that there were reasonable grounds for believing it would afford evidence of the offence if it were found in the search.  The issues raised by the requirement in O 15A r 6(a) are similar, but not identical to those discussed by the High Court there.  In George 170 CLR at 118 the Court said:

“… the description of the object of the search is a reference point for delimiting the scope of the warrant. The wider and less specific the description of the object, the wider will be the powers of seizure which the warrant confers. On the other hand, as has been seen, the wider and less specific the description of the designated object, the more difficult will be the task of persuading the justice that there are reasonable grounds for belief that the object so described will, if found, afford evidence of the commission of the particular offence. Thus, the requirement of “reasonable grounds for believing” in par (b) performs the important function of preventing the authority to search and seize which a warrant confers from being worded in unjustifiably wide terms.”  (emphasis added)

120               An applicant’s description of the basis asserted that he, she or it has, or may have, the right to obtain relief in the Court against a respondent, is a reference point for an order under O 15A r 6.  It focuses the scope of the enquiry about whether there is reasonable cause to believe that that actual or possible entitlement to relief exists.  And so, generally, the less specific the formulation of the basis for such relief, the harder it will be to establish that there are reasonable grounds for believing that the relief will or may be obtained.

121               The formulations in the applicants’ written and oral submissions of their claim involving Lihir Gold and the breaches of fiduciary duty by Lakaka and its associates depended too much on speculation, conjecture and surmise.  They were imprecise and formulaic, merely rephrasing what Lord Selborne LC had said in Barnes LR 9 Ch App at 251-252.  In essence, the applicants asserted no more than that Mr Vale and Mr Soipang or Lakaka spoke or communicated with Lihir Gold before 22 August 2008 telling it that they wanted to replace Strang Aniokaka with themselves or their nominee.  As I have found, it is likely, on the material in evidence, that such a conversation or communication occurred.  But, in itself, that fact does not give reasonable cause to believe that Lihir Gold, in effect, joined forces with the Lakaka parties to help them achieve their ends.  The preponderance of the objective evidence points to Lihir Gold being aware of the Lakaka parties’ agenda, but pursuing its own independent commercial ends.  The applicants did not make any case out that Lihir Gold had, or may have had, any need to bow, or have regard, to the Lakaka parties’ objectives.  Nor did they make out a basis why Lihir Gold would be, or may have been, prepared to deal with Lakaka and its associates in preference to other indigenous landowners who, apparently, were content with their involvement in Strang Aniokaka.  The reference to “political considerations” in the conversation of 22 August 2008 was pregnant with ambiguity;  i.e. it gave such a scope to what Lihir Gold was referring to that there was no reasonable cause to believe that it went, or may go, to make out the possible claim based on breaches of fiduciary duty by the Lakaka parties.

122               In the above assessment, I have not had regard to the possible consequences of any development of the relationship between Strang International and Lakaka reflected in the 2002 and 2008 shareholders agreements.  By the time of the latter, 18 June 2008, the shareholders in Strang Aniokaka were Castlebar and Aniokaka.  Its subject matter included, but was said not to be limited to, the performance of the work under the T-08 contract by Strang Aniokaka and the management of that company.  The 2008 shareholders agreement had an “entire agreement” clause (cl 23).

123               In addition, the 1995 Pagini Strang Aniokaka joint venture provided in cl 20.1 that it would continue during the term in which the T-08 contract remained on foot.  This express term suggests that there is a very limited scope for a fiduciary obligation that would affect the parties’ freedom to act in their own interests on termination of the T-08 contract or in respect of their position thereafter.  The applicants’ case did not come to grips with the effect that the very recent, June 2008, new contractual definition of the relationship between the shareholders of Strang Aniokaka had on either the supervening and continuing, or alternatively new and consequential, fiduciary relationship on which the applicants relied.

124               The contractual formulation of the parties’ relationship not only informs, but may be determinative of, the existence and scope of any fiduciary obligation that may exist between them.  The following principle identified by Mason J in Hospital Products Pty Ltd v United States Surgical Corp (1984) 156 CLR 41 at 97 was applied by French CJ, Gummow, Hayne, Heydon and Kiefel JJ in John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 266 ALR 462 at 484 [91]-[92] as follows:

“His Honour said of cases where contract provides the foundation for a fiduciary relationship:

In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.

The terms of the contract include not only those expressed, but those implied, particularly those implied pursuant to the principles in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352-355.”  (footnotes omitted)

125               Their Honours went on to quote with approval what Learned Hand J had said for the Court of Appeals in James Baird Co v Gimbel Bros Inc 64 F (2d) 344 at 346 (CA 2;  1933), namely, “… in commercial transactions it does not in the end promote justice to seek strained interpretations in aid of those who do not protect themselves”.  Their Honours continued (John Alexander’s 266 ALR at 487 [101]):

 "And where interpretations, strained or otherwise, will not help, assistance to those persons by a strained application of equitable ideas does not promote justice either."

126               It may have been possible that an extant or new fiduciary relationship co-existed with the 2008 shareholders agreement, but such a fiduciary relationship could not alter the operation of that agreement on its true construction.  Lakaka was not, itself a party to that agreement, although it was a 50% owner of Aniokaka.  The applicants’ submissions did not develop any detailed analysis of what the fiduciary duties were having regard to the 2008 shareholders agreement.  The shareholders in Castlebar and Aniokaka and Strang Aniokaka itself were not parties to the 2008 shareholders agreement, yet the fiduciary duties asserted by the applicants were alleged to have bound those shareholders in relation to the T-08 contract.  That was part of the subject matter of Castlebar and Aniokaka’s 2008 shareholders agreement as to how they would operate Strang Aniokaka as the contracting party with Lihir Gold.  One obvious question, that the applicants never answered, was why the parties chose to replace the 2002 shareholders agreement, including the pre-emptive rights clause in it, with a new agreement in 2008 when the identity of the investment vehicle used by Strang International changed with Castlebar replacing Tradex as its shareholder in Strang Aniokaka.

127               When understood in the context of many months of negotiations that Lihir Gold did not perceive as meeting or nearing its commercials goals, I am not persuaded that there is reasonable cause to believe that either applicant has or may have a right to obtain relief in the Court from Lihir Gold based on this claim concerning alleged fiduciary duties.

Claim for Tortious Interference – Submissions

128               The applicants argued that each party to the 2008 shareholders agreement and joint venture agreement was bound by an implied term to the effect of one or both of the following formulations:

·               each party agreed to do all such things as are necessary on its part to be done to enable the other party to have the benefit of the contract:  Mackay v Dick (1881) 6 App Cas 251 at 263 per Lord Blackburn applied by Griffith CJ in Butt v M’Donald (1896) 7 QLJ 68 at 70-71;  and Mason J (with whom Barwick CJ, Gibbs, Stephen and Aickin JJ agreed) in Secured Income Real Estate (Australia) Pty Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607;

·               each party shall not, by its own motion, act to put an end to the continuance of the existing state of affairs under which the contract operates or to bring about the impossibility of performance:  Stirling v Maitland (1864) 5 B & S 840 at 852 per Cockburn CJ (with whom Mellor and Shee JJ agreed as did Crompton J in separate reasons) applied by Barton J in Eastern Extension Australasia and China Telegraph Co Ltd v Commonwealth (1908) 6 CLR 647 at 672 and Isaacs J in O’Keefe v Williams (1907) 5 CLR 217 at 230;  Southern Foundries (1926) Ltd v Shirlaw [1940] AC 701 at 717 per Lord Atkin applied by Stephen J (Gibbs J and Mason J agreeing) in Commissioner for Main Roads v Reed & Stuart Pty Ltd (1974) 131 CLR 278 at 384-385.

129               Next, the applicants contended that Lakaka and or Aniokaka acted to encourage Lihir Gold to terminate the T-08 contract.  Lakaka was seeking itself or through a nominee to supplant Strang Aniokaka in providing stevedoring and materials handling services to Lihir Gold.  The applicants argued that when Lihir Gold terminated the T-08 contract, to which Lakaka had been a party, Lihir Gold “…tortiously interfered with the contractual relations between the applicants and Lakaka’s said breach of contract knowingly or recklessly indifferent as to whether it was a breach or not”.  I have quoted from the applicants’ written submission in reply which was the first written articulation of this argument.

130               I reject this argument.  There is no evidence to suggest that Lihir Gold did anything to procure Lakaka’s breach of either term implied by law.  A mere invitation to express interest or to tender for a new contract following the giving of a notice of termination of an existing one is not, by itself, capable of amounting to a procurement to the invitee to breach the existing, but terminated, contract.  The applicants did not identify any express contractual term prohibiting Lakaka or its associates from seeking to perform work previously done by Strang Aniokaka under the T-08 contract after its termination.  Once the contract was terminated or notice of termination given, neither party could be in breach of a term of that contract by looking to its interests in the future once the termination had taken effect.  The evident intention of Lihir Gold in issuing its invitations to express interest and tender, was to obtain a proposal from the invitees that would operate after its existing contractual relationship with Strang Aniokaka had terminated in accordance with the existing notice of termination. 

131               It is not possible to discern from the evidence or the applicants’ submissions where there was reasonable cause to believe that Lihir Gold, first, intended to interfere with an existing contract (and this could not be the 2008 shareholders agreement because neither applicant was a party to it) and, secondly, procured by Lihir Gold and Lakaka to breach it (whatever the contract was).  Lakaka did not need to be procured on the evidence relied on by the applicants – it had independently set about seeking to supplant Strang Aniokaka.

132               I am prepared to assume that Lihir Gold was sufficiently aware that there was a contractual relationship between the applicants and Lakaka in relation to the performance of T-08 contract.  However, no tort is committed if an alleged tortfeasor knows of a particular provision (in the sense of having a fairly good idea that the contract benefits another in a relevant respect) that is in fact breached but does not know (or intend) that the contract into which he enters with the contract breaker constitutes a breach of the former contract:  Allstate Life Insurance Co v Australia and New Zealand Baking Group Ltd (1995) 58 FCR 26 at 43C-D, 44-45A per Lindgren J, with whom Lockhart J and Tamberlin J agreed.

133               The tortfeasor must act without lawful justification for inducing or interfering in the contractual relationship of the injured party:  Zhu 218 CLR at 570 [115]-[116] per Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ.  What amounts to procurement or inducement for the purpose of the tort is, as Dixon J explained in James v Commonwealth (1939) 62 CLR 339 at 371 a “matter of some obscurity”.  But his Honour held that it is necessary to establish “… an element of impropriety, or of reliance upon some power or influence independent of lawful authority”:  James 62 CLR at 373, applied in Zhu 218 CLR at 584-585 [151].  The person who has interfered in the contractual relations of others must prove any justification for his conduct:  Building Workers’ Industrial Union of Australia v Odco Pty Ltd (1991) 29 FCR 104 at 143 per Wilcox, Burchett and Ryan JJ.

134               In James 62 CLR at 371 Dixon J discussed the distinction between procuring or inducing a breach and advising a breach, the former being actionable, the latter not.  Procuring or inducing involves the creation of a reason for the other party to the contract to break it;  while advising a breach consists of pointing out the reasons that already exist.

135               The applicants contended that Lihir Gold somehow facilitated a breach by Aniokaka or Lakaka of the 2008 shareholders agreement or the 1995 joint venture.  The lack of articulation or precision of this nebulous claim, itself suggests real difficulty in arriving at a finding that there is reasonable cause to believe that the applicants have or may have any right to relief based on it:  George 170 CLR at 117-118.  I am not satisfied that there is any such cause to believe.

Conclusion

136               The application should be dismissed.

Associate:

Dated:         1 October 2010