Les & Zelda Investments Pty Ltd (as trustee for Les & Zelda Family Trust) v Whitehaven Coal Limited (No 4)

These are representative proceedings under Part 10 of the Civil Procedure Act 2005 (NSW) brought by the lead plaintiff, Les & Zelda Investments Pty Ltd as trustee for the Les & Zelda Family Trust, against the defendant, Whitehaven Coal Ltd.

Les & Zelda is a family company associated with Nathan Tinkler, who is the principal figure for Les & Zelda as the plaintiff in these proceedings.

Whitehaven is a company listed on the Australian Stock Exchange (ASX) engaged in coal exploration and mining.

The claims by Les & Zelda relate to events which mainly took place over 14 years ago. The parties conducted the proceedings for close to six years before they were ready for hearing. The three weeks of hearing before me saw many thousands of pages of affidavits, expert reports and documents admitted into evidence. I received in excess of 500 pages of closely reasoned and densely referenced written submissions on every conceivable aspect of the multitudinous issues in dispute to assist me in determining them.

As a result, this judgment is extraordinarily lengthy to enable me to consider fully the sheer weight and detail of the material and arguments relevant to the issues I have been required to deal with and express my reasons for the determination of them.

The claims in the proceedings centre on two acquisitions by Whitehaven: the acquisition of Boardwalk Resources Ltd by and Aston Resources Ltd.

Boardwalk is an unlisted company that holds exploration rights and interests in four separate undeveloped coal tenements located in New South Wales (NSW) and Queensland (QLD), being the Ferndale, Dingo, Sienna and Monto tenements (together, the Boardwalk Projects). Boardwalk’s other significant asset is ownership of approximately 19.9% of the shares in another ASX listed company engaged in coal exploration and mining called Coalworks Ltd.

Aston was also an ASX listed company engaged in coal exploration and mining.

The acquisition of Boardwalk and Aston centre on the following linked transactions that were entered into by Whitehaven on 11 and 12 December 2011:

The acquisition of the Boardwalk shares and warrants by Whitehaven was conditional on the scheme of arrangement between Whitehaven and Aston being completed. The scheme of arrangement was ultimately approved and took effect from 2 May 2012.

Mr Tinkler, acting with his professional financial and legal advisers, negotiated the sale of the Boardwalk shares and warrants to Whitehaven and executed the SPA under power of attorney on behalf of the Boardwalk Shareholders who held over 85% of the shares and warrants issued by Boardwalk.

A particular feature of the sale of the Boardwalk shares and warrants to Whitehaven was that the consideration payable to the Boardwalk Shareholders, the Farallon/Noonday Lenders and the Minority Lenders for the Boardwalk shares and warrants was entirely comprised of shares in Whitehaven, with each of them receiving approximately 1.8595 ordinary shares in Whitehaven for each share they held in Boardwalk. As part of the transaction, Whitehaven issued 119,905,183 shares comprising:

Annexed to each of the SPA, the WPA and the Minority Lenders SPA was a draft Restriction Deed, which set out the restrictions on the Milestone Shares (together the Restriction Deeds). Each Restriction Deed was executed on 1 May 2012.

The restrictions on the Milestone Shares contained in the Restriction Deed continue to apply until the occurrence of certain events, which are defined as Trigger Events. The Trigger Events on which the restrictions can be lifted include the grant of a mining lease and associated environmental approvals over any one or more of the Boardwalk Projects and another tenement called Oaklands North, the latter being owned by Coalworks (the Boardwalk Projects and Oaklands North collectively being the Milestone Projects). The restrictions on 50% of the Milestone Shares (17,010,000) are to be released upon one of the Milestone Projects being the subject of a Trigger Event and the restrictions on the remaining 50% of the Milestone Shares are to be released upon a second of the Milestone Projects being the subject of a Trigger Event.

An important feature of the transactions – the essence of which was a scrip takeover of Boardwalk by Whitehaven – is that, immediately before they were entered into, the largest shareholder of Boardwalk (Boardwalk Resources Investments Pty Ltd (BRI)) was required to make a capital injection of $150 million to Boardwalk ($150 million Capital Injection). Approximately US$50 million of the $150 million Capital Injection was earmarked to repay debt owed by Boardwalk and $15 million was for deferred payments relating to Sienna, with the remaining amount being described in contemporaneous documents applying the expression: “will be used for the ongoing development of [Boardwalk’s] assets”.

Les & Zelda allege, consistent with that description, that there was an understanding, expectation and commitment made by Whitehaven during the course of negotiating the transactions that it would expend what remained of the $150 million Capital Injection after the payment of specified debts to develop the Boardwalk Projects. Les & Zelda assert that the evidence of this exists in the contemporaneous documents. Such an understanding, expectation and commitment found no expression in the extensively negotiated and complex commercial contractual documents agreed between the parties.

These representative proceedings are brought on behalf of 27 group members, being the former shareholders of Boardwalk who each hold Milestone Shares (Group Members). None of the Group Members elected to opt out within the opt out period in response to the court approved opt out notice.

For the reasons set out below, I have concluded that all of Les & Zelda’s claims should be dismissed. At the conclusion of the judgment, I have also answered all of the common questions that have been raised in these representative proceedings.

On 21 January 2011, Les & Zelda was incorporated. Les & Zelda is the trustee of the Les & Zelda Family Trust, established by a trust deed dated 21 January 2011.

Before 1 May 2012, Les & Zelda held two million ordinary shares in Boardwalk. On the acquisition of Boardwalk by Whitehaven, Les & Zelda exchanged the two million ordinary shares it held in Boardwalk for 1,075,554 ordinary shares in Whitehaven, holding 770,393 Unrestricted Shares and 305,161 Milestone Shares in Whitehaven. Les & Zelda still holds those Milestone Shares.

At the time of incorporation, the sole director and shareholder of Les & Zelda was Leslie Tinkler, the father of Nathan Tinkler. When I refer to Mr Tinkler, I am referring to Nathan Tinkler because Leslie Tinkler does not feature again in any of the relevant events I have dealt with below.

On 2 February 2024, Mr Tinkler was appointed as a director of Les & Zelda, with Leslie Tinkler remaining as the other director. Accordingly, Mr Tinkler was not a director of Les & Zelda at the time of the relevant events in 2011 and 2012.

On 15 March 2007, Whitehaven was incorporated. As stated above, Whitehaven is a company listed on the ASX which operates open-cut mines and an underground mine producing thermal and metallurgical coal in NSW and QLD.

Whitehaven has been listed on the ASX for about the past 16 years.

In 2011, prior to the acquisition of Aston and Boardwalk, the principal asset of Whitehaven was a 70% interest in an underground mine near Narrabri. Whitehaven operated four open-cut producing mines (Rocglen, Sunnyside, Tarrawonga and Werris Creek) and was progressing the development of another open-cut mine (Vickery Project, which Whitehaven purchased from Coal & Allied Industries Ltd in February 2010).

Between October 2008 and 25 March 2013, Anthony (Tony) Haggarty was the managing director and chief executive officer (CEO) of Whitehaven. From 25 March 2013 until 25 October 2018, Mr Haggarty remained as a non-executive director of Whitehaven.

Other relevant directors of Whitehaven include Mark Vaile (the chair), Paul Flynn (the CEO since 27 March 2013), Philip Christensen (from 3 May 2012 to 14 July 2014) and George Raymond Zage.

Since 13 December 2013, Kevin Ball has been the chief financial officer (CFO) of Whitehaven.

Since 29 July 2009, the company secretary of Whitehaven has been Timothy Burt.

On 2 April 2008, Boardwalk was incorporated.

Prior to its acquisition by Whitehaven in 2012, 69.2% of Boardwalk’s shares were owned by BRI as trustee of the Boardwalk Resources Trust (BR Trust). From 9 September 2010 to 9 February 2016, Rebecca Tinkler (the former wife of Mr Tinkler) was the sole shareholder of BRI.

Mr Tinkler is the appointor of the trustee of the BR Trust. On 17 June 2019, Mr Tinkler removed BRI as trustee of the BR Trust and replaced it with Cayenne Coal Pty Ltd, which remains the current trustee of the BR Trust. Mr Tinkler is the sole shareholder of Cayenne Coal.

The primary business of Boardwalk was to identify and acquire early exploration coal projects. Boardwalk was the ultimate holding company of separate entities that were incorporated to hold the interest of each early coal exploration project identified by Boardwalk. The separate entities were named after the particular project for which they were incorporated.

The details of each of the Boardwalk Projects and the subsidiaries of Boardwalk which held interests in the Boardwalk Projects are set out below:

In addition to the Boardwalk Projects, Boardwalk had a 19.9% shareholding in Coalworks which it obtained by a placement on 1 February 2011. Through that investment, Boardwalk had an economic interest in the following projects of Coalworks:

Les & Zelda does not press any claim in relation to the opportunity of Sienna, Monto or Oaklands North to achieve Trigger Events, and has instead placed its reliance on the opportunity to achieve Trigger Events through Ferndale and Dingo in the manner set out in greater detail below.

From 2 April 2008 to 1 May 2012, Mr Tinkler was a director of Boardwalk.

From 9 September 2010 to 9 February 2016, Mr Tinkler was a director of BRI.

From 12 April 2012 to 9 February 2016 and since 9 March 2021, Mr Tinkler has been a director of Cayenne Coal.

From 30 March 2010 to 1 May 2012, Mr Christensen was a director of Boardwalk. Mr Christensen was also an employee of the Tinkler Group, acting as inhouse counsel to Mr Tinkler (T263–264).

From 17 June 2011 to 1 May 2012, Mr Flynn was a director of Boardwalk. Mr Flynn was also the CEO and managing director of the Tinkler Group at relevant times leading up to May 2012.

From 15 January 2011 to 1 May 2012, Ian Craig was a director of Boardwalk.

During the relevant period in 2011 and 2012, Peter Kane was the CEO of Boardwalk.

On 23 January 2008, Aston was incorporated. Before Aston was acquired by Whitehaven in 2012, it was the main trading entity within the Tinkler Group of companies, which were either directly or indirectly controlled by Mr Tinkler and predominantly operating within the resources sector.

Aston was listed on the ASX from 17 August 2010 until 1 May 2012 when it merged with Whitehaven under the scheme of arrangement and became wholly owned by Whitehaven.

In about November 2009, Aston purchased the Maules Creek coal mine project from Rio Tinto Ltd after a competitive tender. Whitehaven was the unsuccessful tender party.

From about late 2010 to mid-2011, Aston worked towards obtaining a mining lease and approval for the Maules Creek coal mine project and developing it as a working coal mine.

From 23 January 2008 to 6 August 2010 and from 17 November 2011 to 3 May 2012, Mr Tinkler was a director of Aston. In the latter period, Mr Tinkler was also the chair of Aston.

From 16 November 2009 to 3 May 2012, Mr Vaile was a director of Aston.

From 1 May 2010 to 3 May 2012, Mr Christensen was a director of Aston.

In 2011–2012, Mr Kane was the interim CEO of Aston.

As articulated in the Second Further Amended Statement of Claim filed 2 August 2024 (SFASOC), Les & Zelda makes four principal claims against Whitehaven, which are summarised below and will be dealt with in detail later.

By the Implied Terms Claim, in summary it is alleged that Whitehaven breached implied terms in each of the SPA, the WPA, the Minority Lenders SPA and the Restriction Deeds that (SFASOC [99(a)], [99(b)], [100], [102], [150]–[157], [164]–[181]):

Les & Zelda seek damages for breach of these implied terms, including for the value of the Milestone Shares which, it says, would have vested by now had Whitehaven complied with its contractual duties, or the loss of that valuable commercial opportunity (SFASOC [153], [157] and [182]).

In summary, the Promissory Estoppel Claim has the following principal elements (SFASOC [111]–[117]):

Les & Zelda alleges that it is entitled to equitable compensation or other relief for the Promissory Estoppel claim although it has not pleaded any such entitlement in the SFASOC.

In summary, the Conventional Estoppel Claim has the following principal elements (SFASOC [79]–[82], [103]–[110]):

Les & Zelda alleges that it is entitled to damages as relief for the Conventional Estoppel Claim although it has not pleaded any such entitlement in the SFASOC.

The Oppression Claim is that Whitehaven’s decisions to:

The particulars to the Conventional Estoppel Claim, the Promissory Estoppel Claim and the Oppression Claim all refer to an alleged representation made by Whitehaven to Mr Tinkler in around November and December 2011, the form of which Les & Zelda has pleaded in [79] of the SFASOC and defined as the Use of Funds Representation throughout the SFASOC as follows:

The particulars provided in respect of the Use of Funds Representation are that it was express, it was made orally by Mr Haggarty to Mr Tinkler in meetings in the Sydney CBD in around November 2011, it was also made in writing in a draft announcement to the ASX on 9 December 2011 (defined below as the 9 December Draft ASX Announcement), and it was also made and/or confirmed:

It is further pleaded that Mr Haggarty was authorised to make the Use of Funds Representation (SFASOC [80]) and that by reason of Mr Tinkler being appointed agent and attorney of each of the Group Members, the Use of Funds Representation was made to each of the Group Members (SFASOC [81]).

The Use of Funds Representation is alleged to have been repeated to Mr Tinkler, Les & Zelda and the Group Members on 12 December 2011 in two announcements made by Whitehaven to the ASX and on 3 March 2012 in an announcement made by Whitehaven to the ASX (SFASOC [82]).

As is apparent from the manner in which the Use of Funds Representation is pleaded, it is not limited to just having been made orally by Mr Haggarty to Mr Tinkler. To the extent that the Use of Funds Representation is alleged to have been made orally by Mr Haggarty to Mr Tinkler, it is not limited to having been made on a particular day but in two meetings “in or around November 2011”. As a result, the pleaded case has some breadth in relation to when it is alleged that the Use of Funds Representation was made orally.

Whitehaven’s case in response is outlined in the Defence to the SFASOC filed 4 September 2024.

The general essence of the challenges to the claims made in the SFASOC, which are outlined in the Defence, is that Whitehaven:

The only witness called by Les & Zelda at the trial was Mr Tinkler, who was extensively cross examined by Whitehaven.

Whitehaven called three lay witnesses at the trial, being:

Whitehaven also relied on the expert report dated 30 November 2023 of Robert Yeates and an addendum to it dated 31 August 2024 (together the Yeates Report, concerning the economic justification of Ferndale and Dingo) and the expert report dated 1 December 2023 of Stephen O’Connor (O’Connor Report, concerning NSW planning and mining approval processes and regulation and the likelihood of development consent and a mining lease being approved for Ferndale).

Expert accounting evidence was tendered in the form of a statement of agreed facts, which obviated the need to call the accounting experts or tender their respective reports.

There were two principal lay witnesses who gave evidence at the trial and were cross-examined: Mr Tinkler for Les & Zelda and Mr Haggarty for Whitehaven. The credibility of each of them came under attack during the trial.

In every instance, I have endeavoured to evaluate each witness’ evidence, not only in the light of their responses during cross-examination, but also in light of the contemporaneous documents, the objectively established facts, the apparent logic of events, the probabilities of human behaviour, the existence and nature of corroborative evidence, and the effect and impression given by the evidence as a whole.

This is in line with the appropriate approach to be taken by a trial judge in assessing the reliability of evidence given by witnesses in the course of trial proceedings. Among the salient principles that guide this undertaking are the following:

Where necessary, I have made specific comments about the credibility and reliability of the evidence of particular witnesses in my findings about identified events and opinions below.

In terms of the credibility of each of Mr Tinkler and Mr Haggarty as witnesses, bearing in mind the foregoing principles, I am inclined to make the following general remarks:

The rule in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8, being the principle articulated by Kitto J at 308, Menzies J at 312 and Windeyer J at 320–321, has been distilled, summarised, expanded and explained in a number of authorities in the High Court of Australia, the Federal Court of Australia and the Court of Appeal of this court, principally including (in chronological order): Payne v Parker [1976] 1 NSWLR 191, Glass JA at 201–202; Flack v Chairperson, National Crime Authority (1997) 80 FCR 137, Hill J at 148–149; Adler v Australian Securities and Investments Commission (2003) 179 FLR 1; [2003] NSWCA 131, Giles JA (with whom Mason P and Beazley JA agreed) at [649]; Manly Council v Byrne [2004] NSWCA 123, Campbell J (with whom Beazley JA and Pearlman AJA agreed) at [44]–[61]; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11, Heydon, Crennan and Bell JJ at [63]–[64]; Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53, Besanko, Perram and Katzmann JJ at [79]; Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17, French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ at [167]–[169] and Heydon J at [259], [263]–[264]; Jagatramka v Wollongong Coal Ltd [2021] NSWCA 61, Bathurst CJ, Bell P and White JA at [49]; Ling v Pang [2023] NSWCA 112, Kirk JA (with whom Leeming and Mitchelmore JJA agreed) at [20]–[28]; SSABR Pty Ltd v AMA Group Ltd [2024] NSWCA 175 (SSABR appeal decision), Stern JA (with whom Ward P and Price AJA agreed) at [158]–[161]. These authorities support the following legal principles:

In the present case, Les & Zelda submit that a Jones v Dunkel inference should be drawn against Whitehaven by reason of fact that it did not call Mr Flynn or Mr Christensen.

Mr Flynn was a director of Boardwalk from 17 June 2011 until 1 May 2012. Since March 2013, Mr Flynn has been the CEO of Whitehaven. Les & Zelda says that given that Mr Flynn was on the Aston/Boardwalk side of the transaction in 2011 he would be in a position to explain, clarify or even deny critical features of this case, including the mutual understanding and expectation asserted by Les & Zelda. Les & Zelda says that Mr Flynn has chosen not to do so, which allows the court to draw more confidently the inferences that Les & Zelda contends arise from the documentary evidence and the evidence of Mr Tinkler and Mr Haggarty.

Les & Zelda also rely on Mr Flynn’s absence as bearing on the assessment of the character of Whitehaven’s conduct, being its departure from the expectation and understanding that it says was engendered under the helm of Mr Haggarty and Mr Flynn, who were personally acquainted with the facts and circumstances giving rise to it. Les & Zelda says that the failure of Whitehaven to spend any substantial money, in particular the balance of the $150 million Capital Injection, is not due to any concern as to the directors’ obligations or any extenuating circumstances, rather simply a refusal to do so despite the mutual understanding, the representation and the negative impact on the Group Members.

Whitehaven submits that Les & Zelda has failed to identify the evidence which it says should be accepted or rejected or the inferences it says should be made or not made as a result of Mr Flynn not giving evidence. Whitehaven submits that a generalised assertion that Mr Flynn could have “clarified” matters is precisely how a Jones v Dunkel inference cannot be used. Whitehaven argues that the failure of Les & Zelda to identify the relevant matter that Mr Flynn’s evidence is supposedly required to explain means that the court is unable to assess whether this condition has been fulfilled and therefore the inferences sought would have no utility.

Whitehaven also relies on the fact that Mr Flynn is not identified at all in the SFASOC and therefore it is readily understandable why Mr Flynn would not be called as a witness when there is no allegation made to which he would be expected to respond.

Les & Zelda accepts that Mr Flynn is not mentioned in the SFASOC and accepts that Mr Flynn is not “verballed” or said to be present at any conversation that Mr Tinkler says he can recall but relies on the rule in Jones v Dunkel arising from the “course of the evidence”.

Les & Zelda points to the following two specific matters supporting its argument that an inference pursuant to the rule in Jones v Dunkel should be drawn by reason of Whitehaven’s failure to call Mr Flynn as a witness:

As will be plain in the relevant parts of the judgment below, it has not been necessary for me to use the absence of Mr Flynn for the purpose of drawing any inference against Whitehaven pursuant to the rule in Jones v Dunkel. I have made findings in relation to the evidence without any reference to Mr Flynn’s absence from the witness box.

Each side seeks a Jones v Dunkel inference be drawn against the other in respect of the failure to call Mr Christensen as a witness.

As stated above, Mr Christensen was a director of Boardwalk from 30 March 2010 to 1 May 2012, as well as an employee of the Tinkler Group. Mr Christensen was then a director of Whitehaven from 3 May 2012 to 14 July 2014.

Les & Zelda argues that Mr Christensen was within Whitehaven’s “camp” and the Jones v Dunkel inference does not arise against Les & Zelda when the relationship with its “camp” has ceased and the relationship with Whitehaven has begun. Les & Zelda contends that after Mr Christensen’s departure from Whitehaven he was subject to confidentiality obligations which, through his solicitor, were used as a basis on which he has refused to speak to Les & Zelda.

As in the case of Mr Flynn, Whitehaven points to the fact that Les & Zelda has failed to identify the evidence which it says should be accepted or rejected or the inferences it says should be drawn or not drawn as a result of Mr Christensen not giving evidence, along with the failure of Les & Zelda to identify the relevant matter which Mr Christensen’s evidence is supposedly required to explain so that any inference would have no utility.

Whitehaven also says that Mr Christensen ceased to be involved with Whitehaven a decade ago, he is effectively a Group Member in these proceedings because his corporate vehicle holds Milestone Shares and so it could hardly be suggested he is in Whitehaven’s “camp”. Whitehaven contends that, if anything, Mr Christensen is in Les & Zelda’s “camp”.

I do not think that it is appropriate to draw any inference pursuant to the rule in Jones v Dunkel against either party in relation to a failure to call Mr Christensen. Mr Christensen was in Les & Zelda’s “camp” by reason of his positions at Boardwalk and the Tinkler Group and then moved into Whitehaven’s “camp” when he joined it as a director in May 2012. Now Mr Christensen has an association with a Group Member by reason of it holding Milestone Shares and yet has refused to speak to Les & Zelda because of the confidentiality obligations he says he owes to Whitehaven. Simply as a matter of common sense, I would not expect either Les & Zelda or Whitehaven to call Mr Christensen as a witness in their cause as a result of these competing considerations pulling in both directions.

The background events relevant to the two principal transactions which are the subject of Les & Zelda’s claims – the acquisitions of Boardwalk and Aston by Whitehaven on 11 and 12 December 2011 – have their genesis in mid-2011. It was during the negotiation of those acquisitions in November and December 2011 that the Use of Funds Representation is alleged to have been made orally to Mr Tinkler and then confirmed in documents.

The work undertaken on those acquisitions became known as “Project Trifecta”.

Set out below is a detailed chronology of those events.

In about July 2011, Mr Tinkler decided that Boardwalk should take steps to raise about $150 million in capital by way of a proposed initial public offering (Proposed IPO) of shares and the listing of those shares on the ASX.

On 21 July 2011, Mr Tinkler sent an email to his fellow directors of Boardwalk, Mr Flynn and Mr Christensen, setting out his views about the Proposed IPO, his future plans for Boardwalk and its valuation. In the email, Mr Tinkler said that Macarthur Coal will be taken over, Whitehaven is for sale and Aston is “going nowhere” because of its management. He also expressed a desire to build Boardwalk as a mining company that is “aggressive and growth orientated” to appeal to the Asian market. Mr Tinkler saw Boardwalk as having a $750 million valuation and by raising $250 million it would increase to $1 billion on listing. He said that by adding further assets it would have a $1.5 billion asset valuation and on raising $500 million it would be increased to $2 billion on listing. Mr Tinkler expressed this as part of a plan for him to join the board of Aston and for Boardwalk to lodge a bid for Aston.

To work on the Proposed IPO, Boardwalk engaged Queen Street Capital (beneficially owned by Mr Tinkler via a trust) as its corporate and financial adviser, Morgan Stanley to act as lead manager and broker for the sale of the shares, Ernst & Young to undertake the due diligence review of the financial information of Boardwalk for inclusion in the anticipated prospectus and Gilbert + Tobin to act as its solicitors.

On 18 August 2011, in the context of the Proposed IPO, Julian Peck of Morgan Stanley sent an email to Mr Christensen and Mr Kane (amongst others) saying that there had been a series of key developments over the previous 24 to 48 hours that they needed to discuss which were “negatives on executing the [proposed] IPO for value in the short term”, amongst which were:

The reference to a “JORC resource” was to the Australasian Code for Reporting of Mineral Resources and Ore Reserves (December 2004) published by the Joint Ore Reserves Committee (JORC) of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and the Minerals Council of Australia (JORC Code). In short, the JORC Code provides the mining industry recognised means by which mineral resources and ore reserves are measured, classified and reported.

Mr Peck said that in light of these matters, the options were to:

Mr Peck said that, in light of the issues identified and the generally weak state of equity markets, the right advice was to either delay the Proposed IPO and look to obtain better value from an IPO in early 2012 or consider another form of transaction.

On 23 August 2011, Mr Christensen prepared a draft memorandum for Mr Peck and Mr Kane to review, which was intended to be copied to Mr Tinkler (amongst others), stating that they had decided to delay the Proposed IPO until the first quarter of FY2012, positing the reason to be:

Mr Christensen said that the good news was that the delay would allow them to do further things, including to complete the expenditure at Dingo, acquire an underground JORC at Ferndale, acquire an open-cut JORC at Ferndale and commence drilling at Monto.

There is no evidence that the draft memorandum was ever finalised and sent.

Also on 23 August 2011, in an email to Mr Christensen (amongst others), Mr Tinkler expressed his clear and forceful disagreement to the idea of any delay to the Proposed IPO. Mr Tinkler said:

Mr Tinkler concluded the email by saying:

In September 2011, a management presentation for Boardwalk was prepared. The presentation included detail on the assets of Boardwalk, which were listed as Sienna, Dingo, Monto, Ferndale, Vickery South, Oaklands North, QLD Port and Rail infrastructure and NSW Port and Rail infrastructure. In addition, the presentation referred to “raising $150 million from both Cornerstone & other investors” to be utilised for exploration, repayment of debt and completion of Sienna. The uses included “Exploration & Development Expenditure” of $44.6 million and around $56 million for the repayment of debt.

On 14 October 2011, Gary Lawler of Gilbert + Tobin sent an email to Mr Kane and Mr Christensen (amongst others) setting out what appears to be the form of an email to be sent by Mr Kane to advise that the Proposed IPO had been delayed for a short period until early 2012. The email stated:

The evidence does not reveal to whom the proposed email from Mr Kane was to be sent and nor does it indicate whether it ever was sent to anyone. In the circumstances of the Proposed IPO being delayed at or about this time, I infer that the delay was due to the volatility and uncertainty in the financial markets, not something specific to what was proposed to be offered by Boardwalk.

Although the Proposed IPO appears to have been halted at around mid-October 2011, the lead manager of the Proposed IPO, Morgan Stanley, did prepare a draft prospectus for the Proposed IPO as at 31 October 2011 (Draft Boardwalk Prospectus). The Draft Boardwalk Prospectus was described as a “PROSPECTUS FOR THE ISSUE OF 100 MILLION FULLY PAID ORDINARY SHARES AT AN ISSUE PRICE OF $1.50 PER SHARE TO RAISE $150 MILLION”. The draft chairman’s letter in the Draft Boardwalk Prospectus was intended to be signed by Mr Tinkler. It refers to Boardwalk’s interests in four coal exploration projects (being Ferndale, Dingo, Sienna and Monto) and Boardwalk’s 19.9% interest in Coalworks. The draft letter states:

Further detail relating to the use of the proposed $150 million was contained in Table 3 “Sources and Uses” in section 1.7 of the Draft Boardwalk Prospectus entitled “PURPOSE OF THE OFFER” (which was also repeated in section 3.7 under the heading “PURPOSE OF THE OFFER AND USE OF PROCEEDS”), which included the following details:

The $47.9 million from Table 3 for the Exploration Expenditure to the end of FY2013 was broken down into more detail in Table 4 headed “Breakdown of Projected Project Exploration Expenditure – Up to the Period ending June 2013” in section 1.7 of the Draft Boardwalk Prospectus. The $47.9 million from Table 3 was detailed between each of the Ferndale, Dingo, Sienna and Monto projects as follows:

The Draft Boardwalk Prospectus also contained various statements regarding the uncertainties involved in whether the Boardwalk Projects would or would not proceed and the risks associated with them. The relevant sections of the Draft Boardwalk Prospectus included the following statements:

All of these risks and uncertainties were inherent in the nature of the Boardwalk Projects as early stage coal exploration projects and would have been understood by all of those at Boardwalk, including Mr Tinkler. There was nothing in the Draft Boardwalk Prospectus to indicate that the expenditure of the amounts in the table of “Projected Project Exploration Expenditure” on each of the Boardwalk Projects would result in the obtaining of a mining lease on any of them. To the contrary, as stated in the “Additional Funding Requirements” above, there was a specific indication that those amounts would not be sufficient to develop them beyond their immediate funding requirements.

The Draft Boardwalk Prospectus also specified the expected dates for obtaining statutory approvals for each of the Boardwalk Projects, setting them out in indicative timelines as follows: Ferndale (third quarter of FY2014 – section 4.2.5), Dingo (first quarter of FY2015 – section 4.3.5), Sienna (first quarter of FY2015 – section 4.4.5) and Monto (second quarter of FY2018 – section 4.5.5). There was, however, no reasoning contained in the Draft Boardwalk Prospectus to indicate how each of those dates had been determined.

In late October 2011, Mr Tinkler (through advisers acting on behalf of Aston and Boardwalk) approached Whitehaven in relation to a proposed three-way merger/acquisition involving Whitehaven, Aston and Boardwalk which became known as “Project Trifecta”.

The suite of advisers involved in the transaction were as follows:

The two principal advisers involved in the ensuing events were David Di Pilla from UBS for Aston and Doug Bartlett from Grant Samuel for Whitehaven. Despite their central involvement, neither Mr Di Pilla nor Mr Bartlett gave evidence at the trial.

For Whitehaven, Grant Samuel representatives tended to be with Mr Haggarty in face-to-face meetings and Goldman Sachs were involved in internal meetings and also assisting in doing calculations and valuations (T355).

I will refer to the Tinkler Group and its advisers as the Tinkler representatives or the Tinkler interests. I will refer to Aston and its advisers as the Aston representatives. Where there is no relevant delineation between the Aston representatives and the Tinkler representatives, I will refer to them as the Aston/Tinkler representatives or the Aston/Tinkler interests.

In about mid to late 2011, Mr Tinkler developed the concept of Aston merging with Whitehaven. He did so as one way to resolve the development problems that had been faced by Aston in working towards obtaining a mining lease and approval for the Maules Creek coal mine project and developing it into a working coal mine. Aston encountered difficulties in obtaining approval for the Maules Creek coal mine because all of the space to transport and ship the coal extracted from the Maules Creek coal mine had already been allocated by railway companies (Pacific National and Aurizon) and coal terminal providers (Newcastle Coal Infrastructure Group and Port Waratah Coal Services) to other mining companies. Aston found itself in a situation where the railway companies and coal terminal providers would not negotiate with Aston unless it had a mining lease in respect of the Maules Creek coal mine and the NSW Government would not grant a mining lease or approval for the Maules Creek coal mine unless Aston had transport arrangements in place with the railway companies and coal terminal providers. In cross-examination, Mr Tinkler said that this had been a continuing problem for several years by mid-2011 (T232–233).

Mr Tinkler knew that Whitehaven had been operating for about 10 years; had allocated space with the railway companies and coal terminal providers; and was interested in acquiring the Maules Creek coal mine project because it had been the unsuccessful tender party in acquiring it from Rio Tinto Ltd (with Aston the successful tender party). Mr Tinkler also thought that a merger of Aston and Whitehaven would mean that the Maules Creek coal mine project would obtain access to infrastructure directly rather than by relying on other mining companies to sell their allocated space to Aston if Aston decided to develop the project alone.

Mr Tinkler thought that the merger of Whitehaven and Aston would be advantageous to both companies and would build a very strong company (T233).

Mr Di Pilla on behalf of Aston approached Whitehaven to raise the possibility of a merger.

On 27 October 2011, UBS prepared a document titled “Project Trifecta – Indicative Term Sheet” dated 28 October 2011 (First Term Sheet). The First Term Sheet was expressed as containing “Indicative terms for proposed merger of Aston, Whitehaven and Boardwalk” and emphasised that the terms were “indicative only and not binding on either party”.

The First Term Sheet was based on instructions that Mr Tinkler, on behalf of the Aston board, gave to Mr Di Pilla (T234).

The First Term Sheet was divided between an “Aston / Whitehaven transaction” and an “Aston / Boardwalk transaction”.

The salient parts of the First Term Sheet in relation to the Aston/Whitehaven transaction included the following:

Mr Haggarty gave evidence in cross-examination that the fixed cash component of $1.8 billion required significant borrowing to be undertaken to enable it to be paid (T395).

The salient parts of the First Term Sheet in relation to the Aston/Boardwalk transaction included the following:

At this stage in the development of the proposals for the transactions, there was no mention in the First Term Sheet of the existing Boardwalk Shareholders contributing $150 million in capital to Boardwalk as a condition of the proposed acquisition of Boardwalk by Aston. The proposal in the First Term Sheet could not be seen as meeting any additional capital needs that Boardwalk might have had at that time, which Mr Tinkler had sought to address by the Proposed IPO.

At a price of $11.06 per share, the value of the 18 million Milestone Shares was therefore $199.08 million, in addition to the approximately $340 million in upfront Aston shares.

At about this time, UBS prepared a presentation titled “Project Trifecta – Preliminary valuation and transaction rationale” dated October 2011. The presentation used the Whitehaven share price of $7.25 per share, an exchange ratio of 0.56 Aston shares for every Whitehaven share, 50/50 cash/scrip consideration and 46.5 million Aston shares issued to Boardwalk Shareholders (including milestone payments) (slightly less than the 48.6 million in the First Term Sheet) to give the Tinkler Group a 25% post transaction shareholding in Whitehaven.

As suggested in the First Term Sheet, with the Tinkler Group and Whitehaven proposed to have five directors between them out of the nine directors on the Whitehaven board, they would have a majority of the directors in the post-transactions merged entity of Whitehaven. Each subsequent term sheet included this proposed board composition.

The First Term Sheet also included an indicative process and timeline, with four weeks of due diligence scheduled to begin in the week commencing 31 October 2011; the concurrent negotiation of key terms of the scheme implementation agreement; and a target to announce both the transactions in early December 2011 subject to Aston finalising satisfactory debt funding arrangements. The proposed timeline would lead to the scheme implementation occurring in mid-March 2012.

On around 27 October 2011, Matthew Keen of Queen Street Capital (financial advisers to Boardwalk) sent an email to Mr Haggarty, which attached the First Term Sheet. The email stated:

When Mr Haggarty received the First Term Sheet, he recognised that it involved Aston acquiring Whitehaven and, as mentioned above, that it involved a fixed cash component of $1.8 billion, which required a significant borrowing (T395).

On 27 October 2011, Mr Haggarty forwarded the email from Mr Keen with the attached First Term Sheet to Whitehaven personnel, referring to discussions which had occurred the previous day about the contents of the First Term Sheet.

On 28 October 2011 at 7:54pm, Mr Bartlett of Grant Samuel (financial advisers to Whitehaven) sent an email to Mr Haggarty and others, which refers to a conversation Mr Bartlett had with Mr Di Pilla, the relevant parts of which included the following:

The reference to First Reserve and AMCI in the email were to major shareholders of Whitehaven (T122 and T396).

At the conclusion of the email, the concept of Whitehaven buying Aston (the reverse of the proposed transaction in the First Term Sheet) was raised. In cross-examination, Mr Haggarty accepted that this concept was already under consideration and being discussed at this stage by Whitehaven and its advisers (T397).

The conversation between Mr Bartlett and Mr Di Pilla was also reported in an email of 28 October 2011 at 8:13pm from Mr Di Pilla to Mr Tinkler, Mr Flynn, Mr Keen and Mr Christensen in the following terms:

Mr Tinkler gave affidavit evidence that following entry into the negotiations with Whitehaven, he caused Boardwalk to stop taking any steps to pursue the Proposed IPO and focus its resources on Project Trifecta.

On 2 November 2011, Whitehaven and Aston entered into a confidentiality agreement and Boardwalk and Whitehaven entered into a confidentiality agreement. Both agreements concerned the information to be provided in the course of negotiating the proposed transactions. This led to the creation of a “dataroom” of documents to which Whitehaven was then provided access.

On 9 November 2011, Mr Keen sent an email to Mr Haggarty, Mr Bartlett and Ross King (the chairman of Goldman Sachs), which attached the latest version of the Draft Boardwalk Prospectus for the Proposed IPO. In cross-examination, Mr Haggarty agreed that he probably read the Draft Boardwalk Prospectus when he received it and that he would have understood at that time that Boardwalk had planned the Proposed IPO to raise $150 million to assist, in part, in developing the Boardwalk Projects (T369).

Mr Haggarty also agreed in cross-examination that part of the background information he had at that time was that he understood that Mr Tinkler had plans while he was still in control of Boardwalk to raise $150 million for the purpose of developing the Boardwalk Projects and Mr Tinkler was very keen on the Boardwalk Projects, a position Mr Haggarty respected (T369–370). Mr Haggarty said that he understood, although he could not recall when, that Mr Tinkler wanted to see the Boardwalk Projects developed but he did not recall discussing that with Mr Tinkler (T370).

In my view, in all likelihood it was the reference to the raising of $150 million from the Proposed IPO in the Draft Boardwalk Prospectus that was the genesis of the later proposal for Boardwalk to be capitalised with the $150 million Capital Injection to be used to develop its assets and repay debt.

I also infer that by reading the Draft Boardwalk Prospectus, Mr Haggarty would have understood the Boardwalk Projects to be early stage coal exploration projects and the $150 million proposed to be spent on the Boardwalk Projects as outlined in the Draft Boardwalk Prospectus would not be sufficient to develop them beyond their immediate funding requirements.

On 19 November 2011, Mr Di Pilla sent an email to Mr Tinkler, Mr Flynn, Mr Keen and Mr Christensen inviting them to confirm their attendance at a meeting at 8am on 21 November 2011 at the offices of UBS in Sydney.

On 20 November 2011 at 2:16pm Mr Bartlett sent an email to Mr Di Pilla in which he stated that representatives of Whitehaven (including Mr Haggarty) would be attending the meeting the following day.

On 20 November 2011 at 2:21pm, Mr Di Pilla sent an email to Mr Bartlett in which he proposed that the meeting be attended by more than 20 people comprising representatives of Aston (including Mr Tinkler and Mr Christensen), the Tinkler Group (including Mr Flynn) and their respective advisers, being UBS (including Mr Di Pilla), Ernst & Young, Freehills and Gilbert + Tobin.

On 20 November 2011 at 2:43pm, Mr Bartlett forwarded this list of proposed attendees to Mr Haggarty who responded sharply by email that day at 4:58pm to Mr Bartlett and others regarding the number of proposed attendees as “total overkill” in light of the purpose of the meeting being “high level stuff, not detailed [due diligence]”. Mr Haggarty suggested in his email that they needed to have Boardwalk execute a confidentiality agreement before Whitehaven made disclosures at the meeting and only those people nominated in the confidentiality agreement should attend the meeting. Mr Haggarty also proposed that they should “keep them out of the nitty gritty or we won’t make very good use of the time”. Mr Haggarty concluded the email by stating that “plan A [the concept of Aston acquiring both Whitehaven and Boardwalk] doesn’t look do-able for Hans”. “Hans” was a reference to Hans Mende of AMCI, a major shareholder of Whitehaven.

Mr Haggarty’s email elicited email responses from a number of the Whitehaven representatives, being:

In response to this last email, on 20 November 2011 at 6:03pm, Mr Plummer wrote:

It is clear from these communications that those within Whitehaven had an idea of pursuing either “Plan A” (by which Aston acquired both Boardwalk and Whitehaven) or “Plan B” (by which Whitehaven acquired Aston). That was the meaning of the reference in Mr Bartlett’s email on 28 October 2011 to not having raised with Mr Di Pilla the idea of Whitehaven buying Aston.

Mr Haggarty was extensively cross-examined on Plan B (T397–399), agreeing to the following propositions:

On 21 November 2011, Whitehaven, Boardwalk and the Tinkler Group entered into a confidentiality agreement in relation to the disclosures that were to be made as part of the discussions that would take place between them regarding the proposed transactions.

It is accepted on the evidence of Mr Tinkler (as corrected in his second affidavit and conceded in his cross-examination (T255–256 and T258)) and Mr Haggarty that there were three meetings that occurred on 21 November 2011, being:

The findings that I have been able to make about the critical discussions at the UBS Meeting, the Café Meeting and the Later Meeting involve consideration of the evidence in chief about those events given by each of Mr Tinkler and Mr Haggarty, the cross-examination of each of them, events as recorded in the contemporaneous documents, the inferences that I have be able to draw from those documents and the likelihoods arising from those events. I have set out the evidence and those findings below.

Before doing so, it is important to state that the Use of Funds Representation as pleaded in the SFASOC is particularised in a manner that makes it clear that to the extent that it is alleged to have been made orally by Mr Haggarty to Mr Tinkler, it was at two meetings in the Sydney CBD “in or around November 2011” (SFASOC at [79], Particulars (ii)). The pleading does not restrict the Use of Funds Representation made orally to any particular date in November 2011, although the evidence in chief of Mr Tinkler does do so by stating that the two meetings were on 21 November 2011, in the manner that is set out below.

In Whitehaven’s closing submissions, it stated its understanding of the case of Les & Zelda to be that Mr Haggarty made an oral representation to Mr Tinkler at a meeting prior to 25 November 2011 (at [35(a)]) and it rejected the proposition that the oral representation was made by Mr Haggarty to Mr Tinkler at any of the meetings prior to 25 November 2011 (at [39]).

In light of the pleading of the Use of Funds Representation as orally made at meetings “in or around November 2011” and the response of Whitehaven which addresses that broad case, I have not limited my consideration to whether the Use of Funds Representation was orally made at meetings on 21 November 2011 alone but I have also considered whether it was made at any of the other meetings prior to 25 November 2011.

In particular, much of the cross-examination of Mr Haggarty concerning what took place at meetings with Mr Tinkler between 21 and 25 November 2011 was not tied to a particular meeting but was by reference to a discussion between them in that period. Some of that cross-examination was directed towards an event long after that period, inviting Mr Haggarty to agree on the matters which must have been discussed by Mr Tinkler and Mr Haggarty at meetings between 21 and 25 November 2011.

In the cross-examination of Mr Haggarty, he said that between 21 November 2011 and the signing of the Final Term Sheet on 25 November 2011 (dealt with in detail below) there were conversations between the advisers and he was unable to recall the precise number of discussions in which he participated with Mr Tinkler, other than two of them occurring on 21 November 2011 (T371–372).

Mr Tinkler’s version of the UBS Meeting in his evidence in chief is that words to the following effect were said:

According to Mr Haggarty’s evidence in chief in response to the version provided by Mr Tinkler, he could not remember the exact words spoken at the UBS Meeting. Mr Haggarty gave the following responses to Mr Tinkler’s version of the UBS Meeting as follows:

In Mr Tinkler’s evidence in reply to Mr Haggarty’s evidence about the UBS Meeting, Mr Tinkler:

There is a contemporaneous record of the UBS Meeting that is independent of the respective recollections of Mr Tinkler and Mr Haggarty.

On 21 November 2011 at 4:57pm, Nikolas Pojezny (executive director of Goldman Sachs) sent an email to other members of the Goldman Sachs team reporting on a meeting held that day between Whitehaven representatives and Aston representatives. I infer that this was a report of the UBS Meeting as representatives from Goldman Sachs were not present at the Café Meeting or the Later Meeting (as demonstrated in the email of 21 November 2011 at 8:52pm from Mr Bartlett to Mr Haggarty, which is referred to below). The email from Mr Pojezny stated:

In the cross-examination of Mr Tinkler about the UBS Meeting, he agreed that at the UBS Meeting (T236, T256–257, T259–260 and T289–291):

Those matters all generally accord with the record of the UBS Meeting as set out in the email of 21 November 2011 at 4:57pm from Mr Pojezny.

There is no mention in Mr Pojezny’s record of the UBS Meeting of $150 million being required from Mr Tinkler for a share subscription in Boardwalk or of the concept of Milestone Shares. In cross-examination, Mr Tinkler refused to concede that there no discussion at all during the conversations on 21 November 2011 about the injection of $150 million into Boardwalk (T262–263).

When Mr Tinkler was confronted in cross-examination with the email of 21 November 2011 at 4:57pm from Mr Pojezny, it was put to him that there was no discussion at the UBS Meeting about Mr Tinkler investing an additional $150 million into Boardwalk (T291). As set out below, Mr Tinkler’s initial response in the exchange was telling in that he seemed to open up the possibility that the discussion may have occurred the following day (22 November 2011), but then again denied that it was not discussed at all on 21 November 2011 (T291):

Mr Tinkler was directly challenged in cross-examination on whether he had an actual recollection of what was said at the UBS Meeting as recounted in his affidavit made in April 2023 (some 11.5 years after the UBS Meeting) and he maintained that he did (T258). It was put to Mr Tinkler that there was no discussion at all at the UBS Meeting of the Tinkler Group investing an additional $150 million, which Mr Tinkler refuted by saying that the meeting became about Whitehaven’s alternative proposal and discussions around that (T258–259). It was suggested to Mr Tinkler that this evidence was also untrue, which he again refuted (T259–260).

Mr Haggarty was also cross-examined about the UBS Meeting, from which his evidence about the UBS Meeting can be summarised as follows (T399–400):

In my assessment, the best contemporaneous record of what occurred at the UBS Meeting is that contained in the email of 21 November 2011 at 4:57pm from Mr Pojezny. I consider that documentary record to be more reliable than the evidence of Mr Tinkler and Mr Haggarty about the UBS Meeting in light of the fact that they were each seeking to recollect matters from a meeting held about 11–12 years before they recorded their respective recollections of it in their affidavits (6 April 2023 and 5 April 2024 for Mr Tinkler and 23 November 2023 for Mr Haggarty) and nearly 13 years before they were cross-examined about it at the hearing (September 2024).

My findings in this regard does not reflect any adverse view on the credibility or honesty of Mr Tinkler or Mr Haggarty. I am not surprised that Mr Haggarty could not recall many matters about the UBS Meeting, but I am surprised that Mr Tinkler said that he could do so with such accuracy. I consider that each of them sought to give their evidence as honestly and as best as they could recollect. I just do not accept Mr Tinkler’s recounting of the UBS Meeting to be reliable and correct unless it is supported by the contents of Mr Pojezny’s email of 21 November 2011 at 4:57pm.

In Mr Pojezny’s email there is no mention of anything to do with the $150 million Capital Injection into Boardwalk, no mention of Milestone Shares and nor is there any mention of a discussion occurring in relation to Plan B of Whitehaven acquiring Aston. While I accept that Whitehaven was clearly working with its advisers on such a Plan B, there is no reliable evidence that it had been raised with the Aston/Tinkler interests during the UBS Meeting. This is important because, as I have outlined in more detail below, the contemporaneous documents demonstrate that the $150 million Capital Injection only arose at the point when Plan B came under active discussion between Whitehaven and the Aston/Tinkler interests, which was not until 23 November 2023.

A further indication of the unreliability of Mr Tinkler’s recollection is that, tellingly, Mr Pojezny’s email records that “AZT wants WHC directors to praise Boardwalk assets and express a view on valuation at time of announcement (i.e. before any IER on these assets) to support the transaction”, which was quite different to Mr Tinkler’s recollection that Mr Haggarty wanted Mr Tinkler to pay “an additional $150 million to support the development of these assets [and] allow all shareholders to support the transaction”.

Accordingly, I am not satisfied that Mr Haggarty made any suggestion at the UBS Meeting that the Tinkler interests invest an additional $150 million to support the development of Boardwalk’s assets. I am also not satisfied that Mr Tinkler said anything at the UBS Meeting about the timely triggering of Milestone Shares and that he “get the rewards for doing so” if he was going to make an injection of $150 million into Boardwalk. I do not accept Mr Tinkler’s evidence to the contrary.

To be clear, this finding does not mean that the essential matters which Mr Tinkler recollected as having been said at the UBS Meeting were not said at some other time. As set out below, I have considered whether that was the case.

Mr Tinkler’s evidence in chief about the Café Meeting attended by Mr Haggarty and Mr Tinkler alone is as follows:

Mr Haggarty’s evidence in chief about Mr Tinkler’s version of the Café Meeting is as follows:

Based on this evidence, the discussion at the Café Meeting about Mr Tinkler being the chair of the merged entity appears to be relevantly agreed on the evidence of Mr Tinkler and Mr Haggarty. That issue was then resolved in the Later Meeting, as outlined below. The real point of difference between their respective recollections is whether there was any discussion at the Café Meeting about Mr Tinkler injecting $150 million into Boardwalk and that the money would need to be spent on the Boardwalk assets, with Mr Tinkler asserting that there was and Mr Haggarty not recalling any such discussion.

Mr Tinkler was cross-examined about the Café Meeting. It was put to Mr Tinkler that:

Despite these direct challenges, Mr Tinkler stood by his evidence (T261–262).

In further cross-examination, Mr Tinkler agreed that at the Café Meeting he indicated that he would consider not being chairman of the merged entity (T290–291).

In the cross-examination of Mr Haggarty about the Café Meeting, Whitehaven’s questions did not challenge Mr Haggarty’ evidence in chief that he could not recall any discussion of the payment of $150 million and the Milestone Shares at the Café Meeting. Mr Haggarty’s cross-examination proceeded as follows (T387–388):

The cross-examination of Mr Haggarty then continued with the suggestion that the version of the conversation as deposed by Mr Tinkler as having occurred on 21 November 2011 may have taken place at some other time in the days after 21 November 2011 but before 25 November 2011. This questioning formed the basis for a direct attack on Mr Haggarty’s credit, with the cross-examination progressing in the following way (T388–390):

Given that the premise behind these questions was that the discussion which Mr Tinkler asserted had occurred on 21 November 2011 about the $150 million may have taken place on another day prior to 25 November 2011, I will return to this passage of cross-examination and what continued after it below.

In my view, there was no discussion at the Café Meeting of the $150 million Capital Injection into Boardwalk and how it would be spent, and there was no discussion at the Café Meeting about the special dividend to be paid by Whitehaven. I accept Mr Haggarty’s evidence that any discussion of those matters had not happened at that stage. As outlined below, on the contemporaneous documentary records, those matters did not arise until 23 November 2011.

As a result, I reject the evidence of Mr Tinkler that those matters were raised at the Café Meeting. I also reject the attack on Mr Haggarty’s credit. I consider that Mr Haggarty was doing the best he could in the preparation of his affidavit and also in his cross-examination to recall honestly conversations from over a decade ago and that it was reliable for him to say that he did not recall those conversations in circumstances where he genuinely did not.

As in the case of the UBS Meeting, my rejection of Mr Tinkler’s recollection that there was discussion at the Café Meeting of the $150 million Capital Injection into Boardwalk and how it would be spent, as well as the special dividend to be paid by Whitehaven, does not mean that those matters were not said at some other time. I have considered whether that was the case below.

The Later Meeting is recorded in an exchange of emails on 21 November 2011 between Mr Bartlett and Mr Haggarty.

The first email, at 8:52pm, was from Mr Bartlett to Mr Haggarty and others, which refers to a further meeting between Mr Haggarty and Mr Tinkler in the following terms:

In Mr Tinkler’s evidence in reply, he said that his presence at the Later Meeting came about after he decided to go to see Mr Di Pilla to tell him that the deal with Whitehaven would not have to live or die on him being chairman of the merged entity. Mr Tinkler said that when he arrived at the UBS office, Mr Haggarty and Mr Di Pilla were already in a meeting with others in attendance, including Mr Bartlett. Mr Tinkler said that he could not recall what was said by each of those who attended the Later Meeting. In any event, the issue of Mr Tinkler becoming the chair of the merged entity, which had been raised at the Café Meeting, was clearly resolved at the Later Meeting by Mr Tinkler no longer insisting that he would be the chair.

In the cross-examination of Mr Tinkler, he said that the key purpose of the proposed $1.3 billion of debt contained in the First Term Sheet was to maximise the Tinkler Group’s shareholding in the merged entity because the more Whitehaven shareholders who could be paid in cash rather than shares, the greater the Tinkler Group’s shareholding in the merged entity would be (T237). Mr Tinkler agreed that, as at 21 November 2011, his position was that he was targeting a minimum 20% shareholding in the merged entity and that was something that he told Mr Di Pilla either on or prior to 21 November 2011 (T237). Mr Tinkler also confirmed in cross-examination that he would not accept anything less than a 20% shareholding in the merged entity and it was an important matter he had discussed with Mr Di Pilla (T237–238). Mr Tinkler accepted that Mr Di Pilla spoke to Mr Bartlett and reported that Mr Tinkler’s target holding was a 20% minimum (T243).

In further cross-examination in relation to the Later Meeting, Mr Tinkler accepted that the Later Meeting ended on the basis that the numbers were going to be re-run to see what debt level the merged entity could comfortably hold (T238 and T291). As the cross-examination continued, Mr Tinkler initially refused to concede that the 20% shareholding was a consideration in that (T238–239), but later agreed that the discussions at the Later Meeting ended on the basis that UBS would run some numbers to reduce the debt while maintaining a Tinkler Group minimum interest of 20% in the merged entity (T239). Mr Tinkler understood that trying to maintain the Tinkler Group shareholding of 20% in the merged entity was what was sought to be achieved by the revised structures for which purpose UBS would run the numbers (T239).

The second email, at 9:33pm, was from Mr Haggarty to Mr Bartlett, amongst others, which states:

These emails are the best contemporaneous record of what took place at the Later Meeting. In neither of these emails on 21 November 2011 at 8:52pm or 9:33pm is there any mention of either $150 million being required from Mr Tinkler for a share subscription in Boardwalk nor is there any mention of Milestone Shares.

Mr Haggarty was not specifically cross-examined about his recollection of the Later Meeting. As mentioned above, Mr Haggarty had no recollection of there being any discussion of $150 million being put into the Boardwalk business by Mr Tinkler via a share issue as a means of achieving a possible conceptual Plan B as early as 21 November 2011 (T399–400), which would encompass the Later Meeting.

I do not accept that there was any mention of the $150 million Capital Injection into Boardwalk at the Later Meeting.

Mr Tinkler also said in his evidence in chief that after each of the conversations at the UBS Meeting, the Café Meeting and the Later Meeting, he believed that if he injected $150 million into Boardwalk by way of equity after the merger was complete, then Whitehaven would use the $150 million to repay creditors of Boardwalk the amount of about $50 million and use the balance to develop the Boardwalk Projects to a point where Milestone Shares would be issued by Whitehaven to the Boardwalk shareholders. In the cross-examination of Mr Tinkler, the truthfulness of this evidence was directly attacked and Mr Tinkler stood by his evidence (T262).

I do not accept this evidence from Mr Tinkler. For the reasons I have set out above, I am not satisfied that there was any mention of the $150 million being injected into Boardwalk at any of the UBS Meeting, the Café Meeting or the Later Meeting. As a result, nothing that occurred at any of those meetings could have resulted in the belief that Mr Tinkler expresses in his affidavit.

In saying this, I am not concluding that Mr Tinkler’s evidence was dishonest. My finding is that Mr Tinkler’s evidence of what took place at the meetings on 21 November 2011 concerning an alleged mention of $150 million being injected into Boardwalk is unreliable and incorrect and I do not accept it.

But my findings about the UBS Meeting, the Café Meeting and the Later Meeting do not mean that there were no other occasions in the days after 21 November 2011 which give rise to the inference that such statements were made by Mr Haggarty to Mr Tinkler. The way in which Les & Zelda has pleaded the Use of Funds Representation in the 2FASOC is that it was made orally by Mr Haggarty to Mr Tinkler in meetings in the Sydney CBD in “around November 2011”, it was also made in writing in the 9 December Draft ASX Announcement (defined below), and it was also made and/or confirmed in and by various documents in December 2011 and March 2012.

As I have mentioned above and have considered in more detail below, Mr Haggarty was also cross-examined on the basis that the conversations between Mr Tinkler and Mr Haggarty, which are pleaded as underpinning the Use of Funds Representation, took place sometime between 21 and 24 November 2011.

I will now turn to the relevant events running from 22 November 2011 onwards.

On 22 November 2011 at “08:28:59”, Victoria Hardie of UBS sent an email to Mr Tinkler, copied to Mr Di Pilla, which stated:

Although the time stamp of the email might indicate that it was sent in the morning at “8:28”, the fact that it refers to documents “tabled today” and discussions “this afternoon” leads me to infer that the email was sent in the evening at “8:28”. In my view it was most probably sent at 8:28pm.

The “original Trifecta term sheet” refers to the First Term Sheet.

The “revised structure tabled today based on a 0.56x exchange ratio” (the same ratio used in the First Term Sheet) and the “revised structure tabled today based on 0.525x exchange ratio” (a more favourable ratio to Aston shareholders, including Mr Tinkler, than the ratio used in the First Term Sheet) are both documents headed “Boardwalk acquired at A$250m, WHC cash price of A$7.25 per share”. The revised structure in each document still involves Aston acquiring Whitehaven. They both contain a cash component of $800 million (reduced from $1.8 billion in the First Term Sheet) to purchase Whitehaven shares at $7.25 per share, the valuation of Boardwalk is reduced to $250 million with the Boardwalk shareholders to receive 25 million shares in Aston (reduced from 30.6 million in the First Term Sheet), Aston would carry out a $300 million rights issue for Aston shareholders prior to the transaction and the number of Milestone Shares to be issued to Boardwalk shareholders had been input at “0”.

The documents respectively record a 19.3% shareholding for the Tinkler Group and a 19.8% shareholding for the Tinkler Group, which remains the same “pre-milestone payments” and “post-milestone payments” in light of the fact that there were no Milestone Shares in both of the scenarios outlined.

The exchange ratio document with “0.56x” records that of the 19.3% shareholding, 15.6% of the Tinkler Group shareholding is attributable to its stake in Aston and 3.6% is attributable to its stake in Boardwalk. In the transactions recorded in the documents, the Whitehaven shareholders were to end up with 45.3% of the merged entity and Aston and Boardwalk shareholders were to end up with 54.7% of the merged entity.

The exchange ratio document with “0.525x” (the document actually states “0.53x”) records that of the 19.8% shareholding, 16.1% of the Tinkler Group shareholding is attributable to its stake in Aston and 3.8% is attributable to its stake in Boardwalk. Whitehaven shareholders were to end up with 43.7% of the merged entity and Aston and Boardwalk shareholders were to end up with 56.3% of the merged entity.

Since the Tinkler Group had about a 32% shareholding in Aston, the $300 million rights issue by Aston stated in each document would have involved the Tinkler Group subscribing about $100 million.

In cross-examination, Mr Tinkler agreed that what he was being told by UBS on 22 November 2011 was that he had to put in $100 million in cash as a necessary element under the revised structure of Aston acquiring Whitehaven for the Tinkler Group to end up with an approximately 20% shareholding in the merged entity to make the revised structure work (T240–241).

The reference to the two documents having been “tabled today” does not enable me to determine whether they had been provided beyond Mr Tinkler to those at Whitehaven or had remained internally with Mr Tinkler and his advisers. They could have been “tabled” at an internal meeting, an external meeting or both. The position is not clear. It is, however, clear from an internal Goldman Sachs email on 22 November 2011 at 10:11pm and an email on 22 November 2011 at 10:37pm sent by UBS to Mr Plummer and copied to Mr Haggarty and others at Whitehaven (which are referred to below) that the revised transaction structure contained within the documents was provided to Whitehaven and was discussed with Whitehaven representatives.

The fourth document attached to the email of 22 November 2011 at 8:28pm is described as a set of “funding overview slides”, which are two slides headed “Funding Overview – Tax optimised” and “Funding Overview – Non tax optimised”. In the description of the slides in the covering email it specifically refers to those slides being “discussed this afternoon”. Given that they appear as an attachment to the email at 10:11pm that day from Mr Pojezny, they were clearly handed over by the Aston representatives to the Whitehaven representatives earlier on 22 November 2011.

Both slides contain tables headed “Sources” (including “AZT equity” of $2.8 billion, “AZT rights issue” of $300 million and “HY bond” of $1 billion) and “Uses” (including “WHC equity - scrip” of $2.8 billion and “WHC equity - cash” of $800 million). Amongst the matters described as “Key assumptions” on the first slide is “Other: Ex. Boardwalk exploration spend. Tax optimisation assumes $50m benefit p.a” and on the second slide “Other: Ex. Boardwalk exploration spend”.

On 22 November 2011 at 10:11pm, Mr Pojezny sent an email to others at Goldman Sachs, which referred to a “[s]eries of meetings today” and then listed “a few key points” as follows:

This email is consistent with the two scenarios setting out the “revised structure” that are attached to the email of 22 November 2011 at 8:28pm, which both involved Aston acquiring Whitehaven with $800 million in cash to be paid and a $300 million Aston rights issue. Clearly, that revised structure was the subject of discussion between the respective sides and their advisers during the course of 22 November 2011 and Whitehaven was given documents relating to it in the form of “attached scan of pages received”. Those pages comprise the “funding overview slides”, which were attached to the email of 22 November 2011 at 8:28pm. I will come to those slides shortly.

The significant reduction in the amount of debt in the revised structure is consistent with the addressing of Whitehaven’s concerns about the size of the debt expressed in the email of 21 November 2011 at 4:57pm from Mr Pojezny.

That email also describes Plan A/Structure A (Aston acquiring Whitehaven) as having capital gains tax problems for large Whitehaven shareholders, this time referring to Hans Mende as the shareholder not in support of it without rollover relief. As reflected in the email, the result mentioned in the email is Whitehaven’s desire to raise Plan B/Structure B (Whitehaven acquiring Aston) to the Aston representatives anticipated to be in “further principal to principal incl advisors meeting in the afternoon where W will probably suggest to A Structure B”.

In cross-examination, although Mr Haggarty punctuated his evidence by saying said that he could not recall whether he was involved in meetings on 22 November 2011, he said that he could have been and he agreed that it was probably the case that, at least at the 22 November 2011 meetings between Mr Haggarty, Mr Tinkler and their respective advisers, the possibility of Plan B was discussed at a conceptual level (T400–403).

Based on this evidence, I have concluded that while the respective parties were still in the midst of discussing the revised Plan A/Structure A of Aston acquiring Whitehaven, the Whitehaven representatives planned to and did mention the possibility of Plan B/Structure B to the Aston/Tinkler representatives in conceptual terms in meetings before the end of 22 November 2011. This is because the analysis attached to the email of 22 November 2011 at 8:28pm from Ms Hardie concentrates on Plan A/Structure A and the contents of the email of 22 November 2011 at 10:11pm from Mr Pojezny refers to Plan A/Structure A and that Plan B/Structure B would probably be raised that afternoon.

This finding undercuts Mr Tinkler’s insistence in cross-examination that the UBS Meeting on 21 November 2011 became about Whitehaven’s alternative proposal and discussions around that (T258–259). I am satisfied that his evidence to that effect is not reliable and should not be accepted.

For the reasons set out below, however, I do not have any basis on which to find that there was any discussion of the detail of Plan B/Structure B during the meetings on 22 November 2011.

Importantly, the email of 22 November 2011 at 10:11pm from Mr Pojezny raises the “[k]ey rationale” for raising Structure B is that it could deliver the “key outcome sought after by Tinkler (which is to own at least 20% in MergeCo)”, which is consistent with Mr Tinkler’s consideration of the minimum 20% shareholding as an important matter (T237–238), while not leading to negative tax consequences for Mr Mende.

It is also significant that Mr Pojezny states in the same email that Goldman Sachs were “working through certain mechanisms to increase Tinkler’s stake if it comes out below 20% (e.g. Tinkler contributing cash into Boardwalk; WHC paying a special dividend prior to merger)”. This was the forerunner to what would occur over the next day, with Plan B/Structure B being proposed, together with mechanisms to meet Mr Tinkler’s objective of a minimum 20% in the merged entity, one of which involved Mr Tinkler contributing cash into Boardwalk.

I also find that beyond this limited mention of Boardwalk, as reflected in the email of 22 November 2011 at 10:11pm from Mr Pojezny, there were “[n]o further discussions on Boardwalk” on 22 November 2011.

The “attached scan of pages received” referred to in Mr Pojezny’s email of 22 November 2011 at 10:11pm are in the form of the “funding overview slides” with handwriting across each of them. The handwritten comments on the “Funding Overview – Non tax optimised” slide state:

The last handwritten comment appears to be related to the handwritten comment on the “Funding Overview – Tax optimised” slide, which is “250m fully franked div” followed by one arrow sign above another arrow sign to indicate that it leads to “share price down WHC” and “SER” (which means “share exchange ratio”) leading to a double underlined “NT stake” with an up arrow. In other words, the special dividend could ultimately increase Mr Tinkler’s stake in the merged entity.

There are no means by which I could discern whose handwriting it is or when it was placed on those documents. In cross-examination, Mr Haggarty did not recall seeing these slides, did not know if they were provided during the course of meetings on 22 November 2011 and was unable to identify the handwriting, confirming that it was not his (T403).

Mr Haggarty said in cross-examination that he did not recall participating in meetings on 22 November 2011 and he had no recollection of a meeting on 22 November 2011 attended by him, Mr Tinkler and their respective advisers (T404). However, Mr Haggarty accepted that there must have been a discussion on 22 November 2011 where someone raised the possibility of cash going into Boardwalk and that the figure of $150 million was mentioned on either 22 of 23 November 2011 (T404). Mr Haggarty confirmed that he did not have a specific recollection of any of the other matters which are referred to in the handwritten comments as being raised in a meeting on 22 November 2011, including the payment of a fully franked special dividend (T405–406). His evidence under cross-examination was that the advisers were “sent away” on 21 November 2011 “to see if they could come up with something and that’s what they came up with” (T406).

In light of this evidence, any acceptance by Mr Haggarty that there “must have been discussion” on 22 November 2011 of cash going into Boardwalk is of limited assistance because he did not give any evidence that he was at such a meeting and does not know who wrote on the slides. The handwritten comments are just as likely to reflect someone’s uncommunicated thoughts as they are a record of matters forming part of a discussion. The handwritten comments may have been placed there on some other day than 22 November 2011. I would be speculating about all those matters. I do not consider that there is any firm basis on which I could make a finding that the detail of any idea of Mr Tinkler putting money into Boardwalk was raised or was the subject of discussion on 22 November 2011 as opposed to some other day.

The fact that the covering email of 22 November 2011 at 10:11pm said there were “[n]o further discussions on Boardwalk today” supports my conclusion above that I do not have a firm basis for finding that the detail of the concept of funds being injected into Boardwalk was discussed on 22 November 2011. Instead, I find that only the concept of Plan B/Structure B was discussed on 22 November 2011, including the possibility of cash being injected into Boardwalk.

On 22 November 2011 at 10:37pm, Victoria Hardie of UBS sent an email to Mr Plummer, which was copied to Mr Haggarty, Mr Bartlett, Mr Pojezny and Mr Di Pilla. The email referred to a discussion that afternoon and attached the “indicative shareholding breakdown based on the revised proposed structure”. The attachment is headed “Trifecta indicative shareholding outcomes” and contains a pie chart with the different percentages for the shareholding of the merged entity under the revised structure. It lists as key assumptions:

All of those assumptions underpin the two “revised structure” documents attached to the email of 22 November 2011 at 8:28pm. There is no mention of the $150 million Capital Injection to Boardwalk or Milestone Shares in the assumptions on which the shareholdings depicted in the pie chart are based. This document does not support a finding that by the end of 22 November 2011 the revised structure being actively discussed in detail was anything other than a revised form of Plan A/Structure A involving Aston acquiring Whitehaven.

On 23 November 2011 at 1:02am, Bo Jing of Grant Samuel sent an email to Mr Barlett, which was copied to Mr Pojezny and others from Grant Samuel and Goldman Sachs, which attached a document described in the email as “draft pages on pro-forma shareholdings under the alternative ‘Plan B’ transaction structure”.

The attached document is headed “Share exchange ratio and ownership analysis” and dated November 2011.

The first page of the attachment contains an “Executive summary” in the following form:

While the document is only shared between Whitehaven and its advisers, the introductory part of this summary refers to “the two transactions currently under discussion with AZT and its advisers”, which is a statement being made just after 1:00am on 23 November 2011. This supports the proposition that both Structure A and Structure B were under discussion with the Tinkler interests and their advisers at some time during the late hours of 22 November 2011 or the early hours of 23 November 2011. The statement is, however, inconsistent with the matters contained in the two emails of 22 November 2011 at 10:11pm and 10:37pm (referred to above), both of which were focused on the revised Structure A and made no mention of Structure B.

The summary is replete with matters which were familiar by this stage of the discussions. Amongst those matters were the expressed desire of Mr Tinkler to maintain a minimum of 20% in the merged entity (which is mentioned multiple times in the summary, is referred to as one of the “factors influencing” the choice of structure and which the cross-examination of Mr Tinkler referred to above revealed to be an important matter to him), the tax problem of Structure A for particular Whitehaven shareholders and the undesirability of the high gearing created by Structure A.

New to the analysis though is the mention of a cash injection of $150 million by Mr Tinkler into Boardwalk prior to Aston acquiring it, which is explicitly explained as the means by which Mr Tinkler is able to achieve the desired shareholding in the merged entity, together with the payment of a $0.50 per share special dividend by Whitehaven prior to the merger with Aston, which was aimed at having the effect of decreasing the value of Whitehaven by reducing its share price and thereby increasing the shares in the merged entity obtained by Mr Tinkler.

The second page of the attachment is headed “Share exchange ratio (SER): number of Aston shares per 1 Whitehaven share Since Aston IPO”. This document plots the share exchange ratio for exchanging Aston shares to one Whitehaven share and Whitehaven shares to one Aston share in the period from August 2010 to 21 November 2011.

The third page of the attachment is headed “Alternative ‘Plan B’ Pro-forma shareholdings in MergeCo under the alternative transaction structure”. It lists a series of four steps with accompanying events for each step set out as follows:

Beneath the description of these four steps is a list of the top shareholdings in Aston and Whitehaven before the transaction, a list of the top shareholdings in Aston and Whitehaven after Step 2 is completed, and a list of the top shareholdings in MergeCo after Step 4 is completed. In these lists:

These steps and the accompanying shareholdings demonstrate the proposition stated on the summary page of the document that the means by which Mr Tinkler was to achieve his desired 20% shareholding in the merged entity was by way of the $150 million Capital Injection into Boardwalk, together with the special dividend issued by Whitehaven. No other explanation for the $150 million Capital Injection appears in the document.

The principal feature of the two structures described in the document are that they are a reversal of each other: Structure A involves Aston acquiring Whitehaven and Structure B involves Whitehaven acquiring Aston, after Aston has acquired Boardwalk. In the document, the $150 million Capital Injection and the special dividend are so explicitly linked to Structure B as a means by which Mr Tinkler can achieve his desired shareholding in the merged entity that I do not consider them to be raised or discussed without necessarily pursuing a reversal of Structure A as submitted by Les & Zelda. I agree with Whitehaven that those elements as described in the document are firmly grounded as reasons for the pursuit of Structure B.

“Step 2” also indicates that Aston is to acquire Boardwalk not only for 46.9m Aston shares but that this amount “excludes future contingent payments”. There is no evidence about what that contingent consideration was intended to be at that stage of the discussions.

On 23 November 2011 at 1:27pm, Ms Hardie of UBS sent an email to a number of the Aston advisers at Freehills and Ernst & Young, copied to Mr Di Pilla. The email referred to a call in the morning that day (the email below it suggests it was at 11:00am) and stated that it attached “an outline of the contemplated transaction structure”. The email went on to say:

This indicates that sometime between 22 November 2011 at 10:37pm (when Ms Hardie’s email at that time makes no mention of an alternative structure of Whitehaven acquiring Aston) and 23 November 2011 at 1:27pm (when Ms Hardie’s email at that time does refer to that alternative structure), Structure B, and a cash injection into Boardwalk with a dividend to Whitehaven shareholders as two key features of it, had been raised in a detailed way in discussions with the Aston/Tinkler interests and their advisers.

A proposed $100 million cash injection into Boardwalk is raised in the email as an alternative to the $100 million that would be required from the Tinkler Group in the $300 million Aston rights issue under the revised Structure A, and as an explicitly linked means by which the Tinkler Group could achieve a greater shareholding in Aston before it is acquired by Whitehaven under Structure B.

In cross-examination, Mr Tinkler did not recall any discussions around UBS having indicated on the afternoon of 23 November 2011 that under an alternative structure proposed by Whitehaven approximately $100 million in a cash injection by the Tinkler Group would not be sufficient to achieve the required 20% shareholding in the merged entity (T252–254).

On 23 November 2011 at 1:48pm, Mr Haggarty sent an email to the members of the board of Whitehaven (together with the in-house counsel of Whitehaven, Mr Burt (T372)), which attached a new proposed term sheet with document identifier “Plan B Term Sheet (draft 23 Nov 2011)” which is headed “Project Trifecta – Indicative Term Sheet” (Second Term Sheet) along with a document identifier “Plan B shareholding analysis (22Nov11) – final single page.doc”. The email said:

This email appears to be a contemporaneous record of what happened, in general terms, during the course of 22 and 23 November 2011 given that it refers to the “significant progress with this in the last 24 hours”. The document identifier of the attached document suggests it was created on 22 November 2011, with the Second Term Sheet document identifier indicating that it was created on 23 November 2011. The principal events recorded in the email include:

In cross-examination about a discussion with Mr Tinkler in the “last 24 hours” which is referred to in the email of 23 November 2011 at 1:48pm, Mr Haggarty said that he did not have any specific recollection of meetings with Mr Tinkler on 22 November 2011 but those discussions would have been a group discussion probably involving Mr Haggarty, Mr Tinkler and their respective advisers, normally being quite long meetings, commonly with breakouts to discuss their individual positions (T372–373). Mr Haggarty also said in cross-examination that in this email he was anticipating a further discussion that afternoon with the Tinkler interests about Plan B (T375–376).

Mr Haggarty’s evidence in cross-examination accords with Structure B, the $150 million Capital Injection into Boardwalk and the special dividend all being more likely to have been mentioned in detail on 23 November 2011 rather than 22 November 2011, albeit with no specific recollection of any of those meetings (T404).

The Second Term Sheet that was attached to Mr Haggarty’s email of 23 November 2011 at 1:48pm was prominently marked “DRAFT FOR DISCUSSION”. The Second Term Sheet included the following content (with square brackets around amounts not then finalised):

The Second Term Sheet concluded with a section concerning the process and timetable, referencing the due diligence period, concurrent negotiation of the key terms of the scheme implementation agreement and the Boardwalk share purchase agreement, then the signing of the scheme implementation agreement and the Boardwalk share purchase agreement together with the announcement of the transactions scheduled for 12 December 2011.

The Second Term Sheet does not refer to any Milestone Shares as part of the consideration or as being linked in any way to the proposal for the Tinkler Group to inject $150 million into Boardwalk. There is no mention of the development of the Milestone Projects using any part of the $150 million.

The Second Term Sheet is consistent with the matters contained in the email, which is the form of Structure B of Whitehaven acquiring Aston, requiring no new debt funding and the $150 million Capital Injection to Boardwalk together with the special dividend of $0.50 per shares to be paid by Whitehaven were the means by which the Tinkler Group could achieve the minimum 20% shareholding in the merged entity. As explained by Mr Tinkler in cross-examination, he understood the reference to the “shareholding objectives achieved” as a benefit of the proposal contained in the Second Term Sheet to be to the Tinkler Group’s minimum 20% shareholding, the avoidance of the potential capital gains tax issues for the Whitehaven shareholders (which had been the subject of comment in the emails relating to the revised Structure A) and the overall ratio of shares to split between the companies (T244).

In cross-examination, Mr Haggarty accepted that it may well have been the case that he and his advisers went to a meeting with Mr Tinkler and his advisers where they discussed the Second Term Sheet (T380–381).

On 23 November 2011 at 3:02pm, Atagun Bensan of Grant Samuel sent an email to Mr Di Pilla, copied to Ms Hardie, Mr Pojezny, Mr Bartlett and Mr Jing amongst others, which stated:

Mr Tinkler agreed in cross-examination that Mr Di Pilla would have forwarded this email and its attachments to Mr Tinkler at about 3pm that day (T241 and T244). Mr Tinkler also agreed in cross-examination that this was when Whitehaven formally proposed an alternative structure which included for the first time the proposal that there be the $150 million Capital Injection (T257). Mr Tinkler maintained that they had discussed it beforehand and was directly challenged on the truthfulness of this evidence (T257–258).

In further cross-examination, Mr Tinkler rejected the suggestion that, to his understanding, the purpose of the special dividend proposed in the Second Term Sheet on the afternoon of 23 November 2011 was to assist the Tinkler Group in achieving its 20% shareholding objective, maintaining that it was raised on 21 November 2011 because it affected the merger ratio and the valuation in the transaction then being discussed (T262). As I have stated above, I reject Mr Tinkler’s evidence that the special dividend was discussed on 21 November 2011. I also reject his evidence denying that his understanding of the purpose of the special dividend was to assist the Tinkler Group achieving its 20% shareholding objective when the Second Term Sheet makes it very clear that this was one of the benefits of the proposal that included the special dividend and mathematically it would have that effect.

Attached to Mr Bensan’s email of 23 November 2011 at 3:02pm was a term sheet in near identical form to the Second Term Sheet other than relatively minor changes, including the post transaction board composition of Whitehaven to be three directors from the Tinkler Group rather than from Aston, and the insertion of the Whitehaven acquisition of Boardwalk as part of the structure of the Aston/Whitehaven transaction.

As explained by Mr Tinkler in cross-examination, he understood the reference to the “shareholding objectives achieved” as a benefit of the proposal contained in this revision of the Second Term Sheet to be the Tinkler Group’s minimum 20% shareholding, the avoidance of the potential capital gains tax issues for two major Whitehaven shareholders (which had been the subject of discussion in the meetings on 21 and 22 November 2011 and comment in the emails relating to the revised Structure A) and the overall ratio of shares to split between the companies (T244).

Also attached to Mr Bensan’s email of 23 November 2011 at 3:02pm was a further document titled “MergeCo ownership under revised proposal” dated November 2011. This document took the form of an iteration of the document headed “Alternative ‘Plan B’ Pro-forma shareholdings in MergeCo under the alternative transaction structure”, which was the third page attached to the email of 23 November 2011 at 1:02am from Mr Jing.

The second page of this further document is headed “Revised Proposal Whitehaven Acquisition of Aston and Boardwalk Resources - Pro-forma MergeCo Ownership” and contains the following significantly revised four steps:

Beneath the description of these four steps is a list of the top shareholdings in Aston and Whitehaven before the transaction, a list of the top shareholdings in Aston and Whitehaven after Step 3 is completed, and a list of the top shareholdings in MergeCo after Step 4 is completed. In these lists:

It was clear from the terms of the email that the circulation of the term sheet and the indicative shareholding breakdown were natural progressions from the discussions that had already taken place between the Whitehaven and Aston/Tinkler interests in relation to the proposed Structure B.

In cross-examination, Mr Tinkler agreed that it was his understanding that the effect of the $150 million Capital Injection was to increase the value of Boardwalk by $150 million, which would have the effect of increasing Mr Tinkler’s Boardwalk shareholding from 69.2% to 79.9%, which would in turn increase the number of Whitehaven shares that the Tinkler Group would receive when Whitehaven acquired Boardwalk (T245–246). Mr Tinkler’s understanding of the document was that the transaction structure proposed would give effect to his objective of holding approximately 20% of the shareholding in the merged entity and there was no longer a requirement for the Tinkler Group to inject $100 million into Aston pursuant to the $300 million rights issued proposed by UBS on 22 November 2011 (T245).

Taking all of these matters into account, with particular weight given to the contemporaneous documents, while the $150 million Capital Injection into Boardwalk was clearly mentioned in discussions on 23 November 2011, there is no basis on which I could find that there was any discussion involving Milestone Shares on 23 November 2011 between Mr Tinkler and Mr Haggarty.

On 24 November 2011 at 1:41am, Ms Hardie sent an email to Mr Pojezny, copied to Mr Di Pilla and another, which attached:

The attachment is titled “Project Trifecta Indicative Boardwalk valuation”. The valuation was summarised as follows:

The table contained in the document sets out a valuation of each of Sienna, Dingo, Monto, Ferndale, Vickery South and Oaklands North. For each of the projects, the table states the JORC resource, the resource target, the valuation approach, a current project value, a current net value and a potential net value. The current net value is stated as $318 million and the potential net value is stated as $508 million.

On 24 November 2011 at 8:09am, Mr Pojezny sent an email to Mr Haggarty and others, which forwarded the email of that day at 1:41am from Ms Hardie with its attachment. Mr Pojezny’s email summarised how the Boardwalk valuation amounts had been arrived at, saying that they will go through the numbers in detail to see if there was anything with which they materially disagreed and to continue to push for getting the “Boardwalk model”.

On 24 November 2011 at 2:30pm, Mr Keen sent an email to Mr Haggarty and Mr Bartlett, copied to Mr Tinkler, Mr Flynn, Mr Christensen, Mr Di Pilla and Ms Hardie, which attached the Boardwalk model for the Dingo, Sienna and Ferndale assets. This model had been mentioned in the email of 21 November 2011 at 4:57pm from Mr Pojezny as expected to be received on 21 or 22 November 2011 and in the email of 21 November 2011 at 8:52pm from Mr Bartlett who complained “[w]e still do not have their model”.

On 24 November 2011 at 2:34pm, Mr Bartlett sent an email to Mr Gerber which forwarded the Boardwalk model for the Dingo, Sienna and Ferndale assets.

On 24 November 2011 at 8:04pm, Dan Gerber of Grant Samuel sent an email to Mr Di Pilla, copied to Ms Hardie, Mr Pojezny, Mr Bartlett, Mr Jing and Mr Bensan amongst others, which stated:

The proposed final term sheet that is referred to in this email is not in evidence.

On 24 November 2011 at 9:40pm, Mr Di Pilla responded to Mr Gerber’s email stating:

This appears to be the introduction of what became the Milestone Shares as part of the proposed transaction for Structure B of Whitehaven acquiring Aston and Boardwalk, which had not featured in the Second Term Sheet (circulated within Whitehaven in the email of 23 November 2011 at 1:48pm by Mr Haggarty) or the revision of the Second Term Sheet (sent with the email of 23 November 2011 at 3:02pm by Mr Bensan to Mr Di Pilla).

On 24 November 2011 at 9:51pm, Mr King of Goldman Sachs sent an email to Mr Gerber, which was copied to Mr Pojezny, Mr Bartlett, Mr Jing and Mr Bensan amongst others, responding to the proposed final term sheet with the introduction of the Milestone Shares. His email stated as follows:

Mr King’s email suggested that Whitehaven exercise some caution about issuing Milestone Shares. His note of caution was too late though.

On 24 November 2011 at 9:58pm (7 minutes after Mr King’s email), Mr Bartlett sent an email to Mr King and Mr Gerber, copied to Mr Pojezny, Mr Jing and Mr Bensan, in which he stated that the introduction of Milestone Shares was agreed. He stated:

It is clear from this exchange that Mr Bartlett was aware that Mr Haggarty and Mr Plummer had agreed to Milestone Shares forming part of the transaction.

On 24 November 2011 at 10:03pm, Mr King sent an email to Mr Bartlett and Mr Gerber, copied to Mr Pojezny, Mr Jing and Mr Bensan amongst others, in which he queried what had been agreed, saying:

The two emails of 24 November 2011 from Mr King indicate that he was not directly involved in any of the discussions that must have taken place to lead to the agreement of Mr Haggarty and Mr Plummer on the introduction of the Milestone Shares as an aspect of the proposed transaction.

On 24 November 2011 at 10:08pm, in response to the email at 9:40pm from Mr Di Pilla, Mr Bartlett sent an email to Mr Di Pilla, which was also copied to Mr Gerber, Ms Hardie, Mr King, Mr Pojezny, Mr Jing, Mr Bensan, Mr Keen and Mr Christensen amongst others, saying that he was unable to contact Mr Haggarty or Mr Plummer that night to discuss the email, noting that it was a departure from what was agreed and he would respond the next morning.

On 24 November 2011 at 10:43pm, Mr Bartlett sent a further email to Mr Di Pilla, copied to Mr Gerber, Ms Hardie, Mr King, Mr Pojezny, Mr Jing, Mr Bensan, Mr Keen and Mr Christensen amongst others, in which he said that he had spoken to Mr Plummer and that they would need to extract Vickery South from the list but would add Monto and Oaklands North. Mr Bartlett asked that Mr Di Pilla confirm that this was okay and that they were now agreed.

On 24 November 2011 at 10:45pm, Mr Pojezny sent an email to Mr King, Mr Bartlett and Mr Gerber, copied to Mr Jing and Mr Bensan amongst others, in which he provided an analysis of the proposed terms for the Milestone Shares and how they compared to those which had originally appeared in the First Term Sheet. Mr Pojezny mentioned the early timing of the payment if Vickery South was included as an eligible project. The email stated (italics in original):

It is clear that what had been agreed in relation to the Milestone Shares was a different regime than that which was provided in the First Term Sheet. That difference is implicit in having “milestones that are harder to hit and the assets more de-risked by the time the approvals are received” than under the First Term Sheet. As expressly stated in the email, the dates for the expected times of the approvals for the Boardwalk Projects (Ferndale, Dingo, Sienna and Monto) were taken from the indicative timetables contained in the Draft Boardwalk Prospectus, which were referred to above. As stated above, no reasoning underpinning those “expected times for receipt of all approvals” appears in the Draft Boardwalk Prospectus and nor did it appear in this email from Mr Pojezny.

It is also implicit in having the milestones triggered by the approvals that significant funds would need to be expended to achieve them.

On 24 November 2011 at 11:07pm, Mr Bartlett sent an email to Mr Haggarty and Mr Plummer amongst others, copied to Mr King, Mr Pojezny and Mr Bensan and others, which attached a document titled “Project Trifecta – Term Sheet” (Third Term Sheet) and a further document titled “Term Sheet - Pro-forma MergeCo Ownership Excluding milestone payments for Boardwalk Resources”.

As revealed in the further email on 24 November 2011 at 11:30pm from Mr Bartlett to the same recipients, Mr Bartlett was asked by Mr Haggarty to send the email at 11:07pm on Mr Haggarty’s behalf as Mr Haggarty was on a plane.

The email at 11:07pm stated:

The Third Term Sheet included the following content:

The Third Term Sheet included a section concerning the process and timetable, referencing the due diligence period, concurrent negotiation of the key terms of the scheme implementation agreement and the Boardwalk share purchase agreement. The Third Term Sheet concluded by stating that the signing of the scheme implementation agreement and the Boardwalk share purchase agreement, together with the announcement of the transactions, was scheduled for 6 December 2011.

The further document attached to the email of 24 November 2011 at 11:07pm titled “Term Sheet - Pro-forma MergeCo Ownership excluding milestone payments for Boardwalk Resources” contained the following four steps:

Beneath the description of these four steps is a list of the top shareholdings in Aston and Whitehaven before the transaction, a list of the top shareholdings in Aston and Whitehaven after Step 3 is completed, and a list of the top shareholdings in MergeCo after Step 4 is completed. In these lists:

It is important to understand the manner in which the pre-cash injection valuation of Boardwalk at $286 million and the post-cash injection valuation of Boardwalk at $436 million were calculated, which is as follows:

The number of Unrestricted Shares in Whitehaven to be issued to the Boardwalk shareholders (85.88 million) is calculated by dividing the post-cash injection valuation of $436 million by Whitehaven’s share price ($5.58) less the special dividend of $0.50 per share (equals $5.08).

These calculations show how the $150 million Capital Injection directly related to the number of the Unrestricted Shares which the Boardwalk Shareholders would receive from Whitehaven before any consideration of the milestone payments came into reckoning. In mathematical terms, the $150 million Capital Injection amount was therefore part of the calculation in ensuring that the Tinkler interests ended up close to Mr Tinkler’s desired minimum 20% shareholding in the merged entity. As the further document indicates, the “Shareholding post step 4” for MergeCo lists Mr Tinkler at 19.5%.

The $150 million Capital Injection had no mathematical relationship to the number of Whitehaven shares to be issued as part of the milestone payments, being 34.02 million shares in two tranches of 17.01 million shares. Those amounts were based on the total number of Aston shares to be issued as milestone payments in the First Term Sheet (18 million in two tranches of 9 million) multiplied by the agreed share exchange ratio between Aston and Whitehaven shares of 1.89.

It is abundantly clear that the changes between the Second Term Sheet and the Third Term Sheet were the product of negotiations between the Aston/Tinkler interests and the Whitehaven interests held on 23 and 24 November 2011. When Mr Haggarty sent the Second Term Sheet by email on 23 November 2011 at 1:48pm, he referred to the Second Term Sheet as a document to be “discussed with them this afternoon”. From early 24 November 2011, the focus of the communications from the Aston/Tinkler interests and between the Whitehaven interests became the valuation of Boardwalk and the Boardwalk Projects. Further revisions to the Second Term Sheet were then made and were the subject of comment in communications by the Whitehaven interests during the evening of 24 November 2011. When Mr Bartlett sent the Third Term Sheet by email on 24 November 2011 at 11:07pm, he referred to “[l]ate today, agreement was reached”. Self-evidently, the parties were negotiating throughout 24 November 2011.

The Second Term Sheet saw the emergence of the $150 million Capital Injection into Boardwalk from the Tinkler Group before it was to be acquired by Whitehaven. The Third Term Sheet saw the Milestone Shares in Whitehaven added to form part of the consideration to be paid by Whitehaven to the Boardwalk Shareholders for their Boardwalk shares.

The email of 24 November 2011 at 11:07pm from Mr Bartlett on Mr Haggarty’s behalf and the Third Term Sheet gave rise to several very important passages of cross-examination of Mr Haggarty about the negotiations in which he participated immediately before 25 November 2011. The cross-examination often also occurred by reference to other documents which post-dated those negotiations.

By reference to the Q&A document for investor meetings which took place from December 2011 to March 2012 (dealt with in detail below), Mr Haggarty accepted in cross-examination that the $150 million Capital Injection was agreed between Whitehaven and the Tinkler Group as part of the negotiations to acquire Boardwalk in which Mr Haggarty was a part and probably involved Mr Bartlett, Mr Tinkler and Mr Di Pilla, although Mr Haggarty could not remember the precise conversations, how many there were or the precise date of them (T360–362). Mr Haggarty also agreed that at some point, part of the discussion when the $150 million Capital Injection was negotiated included that it would be used to help fund the exploration and development of the Boardwalk assets, although Mr Haggarty could not specifically recall it (T362).

Having been reminded of his earlier evidence as outlined above and the email of 24 November 2011 at 11:07pm, the following cross-examination of Mr Haggarty took place (T382–383):

In my assessment, these answers from Mr Haggarty are similar to the essence of the evidence in chief given by Mr Tinkler as to what took place across the UBS Meeting and the Café Meeting on 21 November 2011, which is that the $150 million Capital Injection was raised by Whitehaven as part of Plan B, either Mr Tinkler or his advisers said that if they were going to pay $150 million then they wanted Milestone Shares, the detail of the Milestone Shares was left to the advisers to work out and Mr Tinkler said that if he was going to put in $150 million he wanted some of that money to be spent on the Boardwalk Projects. I emphasise that I have focused on the essence of Mr Tinkler’s evidence about these matters because I do not consider that I can rely on Mr Tinkler’s evidence on the detail.

As I indicated above when dealing with the cross-examination of Mr Haggarty in relation to the Café Meeting on 21 November 2011, the premise of the questions put to Mr Haggarty was that what Mr Tinkler said had occurred on 21 November 2011 in relation to the $150 million may have taken place on another day prior to 25 November 2011. Mr Haggarty’s answers to those questions were to the effect that he could not recall any such discussion (T388–390). The cross-examination of Mr Haggarty then continued with Mr Haggarty giving the following evidence (T390–394):

Although Mr Haggarty’s answers in this passage of the cross-examination are peppered with his expressed lack of recollection of certain matters, there are core elements of it which are consistent with the essence of Mr Tinkler’s evidence in chief in relation to the UBS Meeting and the Café Meeting on 21 November 2011. These elements include the proposed transaction having problems with Whitehaven’s shareholders, Grant Samuel having done work to show that an additional $150 million from Mr Tinkler’s interests would allow Whitehaven’s shareholders to support the transaction and Mr Haggarty probably conveyed to Mr Tinkler that it would be a strong statement of belief in the Boardwalk assets.

When the answers in the passages of the cross-examination of Mr Haggarty at T360–362, T382–383 and T390–394 are considered in combination, most of the essence of the critical items of what Mr Tinkler alleges were said in the UBS Meeting and the Café Meeting on 21 November 2011 were accepted by Mr Haggarty as having been the subject of discussion in the period from 21 to 24 November 2011.

On 25 November 2011 at 4:17pm, Mr Di Pilla sent an email to Mr Bartlett and Mr Gerber, copied to Ms Hardie, Mr King, Mr Pojezny, Mr Keen and Mr Christensen amongst others, which referred to a conversation between them and stated that they agreed to remove Vickery South from the milestone payments.

On 25 November 2011 at 4:31pm, Mr Gerber sent an email to Mr Di Pilla, copied to Ms Hardie, Mr King, Mr Pojezny, Mr Bartlett and Mr Bensan, to which he attached “the final term sheet reflecting the agreed amendment for signing by Aston and Boardwalk”.

On 25 November 2011 at 3:58pm (although time stamped earlier than the email at 4:31pm, it is in reply to it), Mr Di Pilla sent an email to Mr Christensen, copied to Mr Tinkler, Mr Flynn, Mr Keen, Ms Hardie and Anthony Sweetman of UBS, asking that Mr Christensen arrange execution of the term sheet.

On 25 November 2011, the final version of the “Project Trifecta – Term Sheet” (Final Term Sheet) was signed by Mr Tinkler on behalf of Aston, Mr Christensen on behalf of Boardwalk and Mr Plummer on behalf of Whitehaven.

Underneath the title of the Final Term Sheet it stated:

The Final Term Sheet was largely the same as the Third Term Sheet but it was not identical. The issue which had been identified in the email of 24 November 2011 at 11:07pm from Mr Bartlett (the Tinkler Group interests requested amendment to increase the number of eligible projects for which the milestone payments could apply) had been resolved before the execution of the Final Term Sheet.

The key provisions concerning the Aston/Whitehaven transaction in the Final Term Sheet were as follows:

The key provisions concerning the Whitehaven/Boardwalk transaction in the Final Term Sheet were as follows:

The Final Term Sheet concluded with a section concerning the process and timetable, referencing the due diligence period, concurrent negotiation of the key terms of the scheme implementation agreement and the Boardwalk share purchase agreement. The Final Term Sheet then states that the signing of the scheme implementation agreement and the Boardwalk share purchase agreement together with the announcement of the transactions are scheduled for 6 December 2011.

The calculations set out above, which underpin the Third Term Sheet in relation to the pre-cash injection valuation of Boardwalk at $286 million, the post-cash injection valuation of Boardwalk at $436 million, the 85.88 million unrestricted shares in Whitehaven to be issued to the Boardwalk shareholders and the 34.02 million Whitehaven shares to be issued as part of the milestone payments, remained applicable to the Final Term Sheet. So too did the lack of mathematical relationship between the $150 million Capital Injection and the number of Whitehaven shares to be issued as part of the milestone payments.

The principal change to the consideration in the Whitehaven/Boardwalk transaction between the Third Term Sheet and the Final Term Sheet was that the milestone payments were now extended so that the mining and environmental approvals on Monto and Oaklands North were included as Trigger Events.

There was no mention in the Final Term Sheet of there being any restriction on the use which could be made of the $150 million Capital Injection from the Tinkler Group. There is no express purpose linking the $150 million to any of the Milestone Projects. The $150 million is simply identified in the Final Term Sheet as one of the integers by which the 85.88 million Whitehaven shares to the Boardwalk shareholders was calculated.

There is also no mention in the Final Term Sheet of Whitehaven having any obligation to develop the Milestone Projects within a time period, or to develop them at all.

In cross-examination, Mr Tinkler agreed that the Final Term Sheet did not contain any statement as to how the Tinkler Group’s $150 million Capital Injection would be spent or that the Boardwalk Projects would be developed in any particular timeframe or at all (T266). This is significant because it is reflective of a position in Mr Tinkler’s mind where any statement regarding the intended use of the $150 million Capital Injection was not anticipated to form part of what were to become commitments with contractual operation and enforcement.

The Final Term Sheet does expressly anticipate the negotiation of a Boardwalk share purchase agreement.

In the cross-examination of Mr Haggarty, he was questioned about his understanding of certain matters as at the date of the Final Term Sheet, variously by reference to the Q&A document for investor meetings that took place from December 2011 to March 2012, the 12 December ASX Announcement and the Scheme Booklet of 9 March 2012 (each defined and dealt with in more detail below). Mr Haggarty gave the following evidence:

Despite Mr Haggarty’s reluctance to agree that the source of what appeared in the 12 December ASX Announcement (which is defined and described below) regarding how the $150 million Capital Injection would be used were the discussions between Mr Haggarty and Mr Tinkler and their advisers before the signing of the Final Term Sheet, in my finding those discussions were clearly the source of what appeared in the 12 December ASX Announcement. I do not accept Mr Haggarty’s answers to the contrary. There is no other explanation as to how the statement on the use of the $150 million in the 12 December ASX Announcement came to be made.

The essence of Mr Haggarty’s evidence accepting that there had been discussions between him and Mr Tinkler concerning the expenditure of the $150 million is caught in the following passage of Mr Haggarty’s cross-examination (T322–323):

In my view, all of the unequivocal statements made in the Q&A document for investor meetings that took place from December 2011 to March 2012, the 12 December ASX Announcement and the Scheme Booklet regarding the use of the $150 million (which are outlined in detail below) arose from discussions between Mr Haggarty, Mr Tinkler and their respective advisers during the negotiations leading up to the Final Term Sheet. That finding arises as much from the objective factual surrounding material when the chronology of the relevant events is closely analysed against the inherent commercial probabilities as it does from the evidence given by Mr Haggarty as outlined above. In my opinion, there is no other plausible explanation for how those statements came to be made.

Considering all of the evidence, in my opinion during these discussions as part of the negotiations leading to the Final Term Sheet, Mr Haggarty said words to the effect that the balance of the $150 million Capital Injection was intended be used by Whitehaven to support the development of the Boardwalk assets. Given the unreliable recollections of both Mr Haggarty and Mr Tinkler about the detail of their discussions due to the passage of time since they occurred, the most reliable record of the effect of what was said lies in the subsequent contemporaneous documents. The consequence of this statement of intention must also be considered together with the manner in which it was subsequently recorded in the contemporaneous documents, how the statement was asserted to be understood by Mr Tinkler and whether any reasonable reliance could be placed on the statement in the circumstances.

On 25 November 2011, a document titled “Project Trifecta Board update” (November 2011 Board Update) was provided to the board of Aston, including Mr Tinkler as he accepted in cross-examination (T235). The document contains an executive summary, which includes a section headed “Update on transaction status” as follows:

The above section of the November 2011 Board Update contains a summary of the essential features of the transaction proposed in the First Term Sheet (based on Plan A/Structure A of Aston acquiring Whitehaven) and the transaction proposed in the Final Term Sheet (based on Plan B/Structure B of Whitehaven acquiring Boardwalk and Aston).

The November 2011 Board Update also sets out a summary of the Final Term Sheet, the transaction steps and shareholding outcomes, the strategic rationale for it, the indicative synergies and transaction benefits, valuations of Aston and Whitehaven, the proposed board structure of the merged entity and the transaction workplan and timetable.

The November 2011 Update does not contain any reference to Milestone Shares or the $150 million Capital Injection, which I infer was because it was a description of the proposed transaction from the perspective of Aston, and it was Whitehaven who was acquiring Boardwalk.

On 26 November 2011, Mr Pojezny sent an email to Mr Haggarty, Mr Plummer, Mr Conde and others on the board of Whitehaven, copied to Mr Bartlett, Mr King, Mr Gerber, Mr Bensan and another, to which he attached a slide presentation as a basis for discussion at the Whitehaven board meeting that day.

The slide presentation is titled “Project Guernsey – Preliminary Valuation Considerations” and dated November 2011. Included in the slide presentation is a slide setting out the valuation of Boardwalk based on Sienna, Dingo, Monto, Ferndale, Vickery South and Oaklands, which indicated:

The parties moved swiftly to finalise the terms of the SPA, which was ultimately executed on 11 December 2011. There is no evidence about the detail of the discussions which occurred during the negotiations over the SPA except for emails passing between the respective lawyers involved in the drafting of the SPA. Mr Tinkler was not personally involved in the negotiations between Boardwalk and Whitehaven as he was the chairman of Aston working on the Aston part of the merger with Whitehaven and there was a “Chinese wall” put in place, which prevented him from being involved in anything to do with the acquisition of Boardwalk by Whitehaven (T263).

Mr Christensen, who at that time was a director and the employed inhouse counsel of the Tinkler Group and a director of Boardwalk, together with other directors of Boardwalk and with the assistance of Gilbert + Tobin, was the person who negotiated the SPA on behalf of the Boardwalk shareholders (T263–264).

On 29 November 2011, Corrs sent an email to various Whitehaven representatives providing a Draft SPA, which had just been received from Gilbert + Tobin acting for Boardwalk.

This was the first draft of the SPA. In the Draft SPA, the consideration payable to each Vendor was divided into “Initial Consideration” and the “Milestone Shares” (cl 2.2). The Milestone Shares were not to be issued and allotted on completion of the SPA but were only to be issued and allotted on the satisfaction of the grant of a “Mining Lease” in respect of the Milestone Projects (cl 2.4). It was also proposed to be an obligation of BRI, as the major shareholder in Boardwalk, to subscribe or to procure the other Vendors to subscribe $150 million for 77,140,000 shares in Boardwalk (cl 4.9(a)), which was to be a condition precedent to completion (cl 3.2(i)). Further, the Draft SPA was not expressed to be conditional on the completion of the merger of Aston and Whitehaven.

There was no provision in the Draft SPA that restricted the use of the $150 million subscription funds by Whitehaven after completion. The Draft SPA contained best endeavours obligations to achieve a number of the conditions precedent to completion (cl 3.3). However, there was no such obligation in the Draft SPA in relation to the satisfaction of the granting of a “Mining Lease” for the Milestone Projects that would trigger the issuing and allotment of the Milestone Shares.

On 30 November 2011, KPMG Australia Pty Ltd provided the directors of Whitehaven with a draft due diligence report (Draft KPMG Due Diligence Report) in relation to the proposed acquisition of Boardwalk. In the Draft KPMG Due Diligence Report, the section of the executive summary headed “Key findings – financial due diligence” contained a table. In this table, as an issue of high importance, KPMG stated:

To the right of this row, in the column headed “Summary Observations”, KPMG stated:

Immediately beneath this statement was a further table headed “Indicative analysis on future funding requirements”. This table stated that when taking into account the $150 million Capital Injection, Boardwalk would have a net cash balance of $89.9 million and that there were identified capex requirements in FY2012 and FY2013 for “exploration costs (per prospectus)” of $47.9 million and “[p]lanned land purchase” of $7.2 million.

The Draft KPMG Due Diligence Report also gave a breakdown of the “forecast exploration costs for FY12 and FY13” totalling $47.9 million as between Ferndale, Dingo, Sienna and Monto for drilling, project management, concept/feasibility, cost type, environmental studies and approvals and geological modelling. These amounts were all expressly stated to be sourced from the Draft Boardwalk Prospectus dated 31 October 2011.

On 1 December 2011, Aimee Hyde, the corporate counsel for the Tinkler Group, sent an email to Mr Lawler requesting that Gilbert + Tobin prepare powers of attorney for “Nathan–related” shareholders of Boardwalk appointing any of Mr Tinkler, Mr Christensen, Mr Flynn or Ms Hyde as attorneys.

On 2 December 2011, Amy Knox of Gilbert + Tobin sent an email to Ms Hyde attaching a draft power of attorney in the form requested.

On 3 December 2011, Mr Pojezny sent an email to Mr Haggarty, Mr Plummer and others, copied to Mr Bartlett, Mr King, Mr Gerber, Mr Bensan and Mr Jing amongst others, to which he attached a “high-level valuation of Boardwalk”.

In the email, Mr Pojezny stated that their analysis had indicated a very wide potential valuation range for the assets, that the assets are difficult to value given their early-stage nature, the multiple-based valuation was between $198 million and $372 million (compared to the UBS valuation of $252 million to $442 million) and a 50% discounted cash flow valuation of $601 million.

Mr Pojezny also stated in the email:

The email concluded by observing that:

The email therefore appeared to confirm that the consideration for the acquisition of Boardwalk to be paid by Whitehaven was within the range of its valuation.

On 3 December 2011, Mr Burt sent an email to Mr Haggarty, Mr Conde, Mr Plummer and other members of the Whitehaven board. The email attached a “set of papers which provide an update on Project Trifecta”, one of which has a document identifier of “Project Trifecta (draft announcement 2 Dec 2011) clean.pdf”. That document is not in evidence but it would seem that it was the first draft of what later became further drafts and the final version of the ASX announcement of the merger between Aston and Whitehaven. The form of those draft ASX announcements and the final version of it are dealt with in more detail below.

On 3 December 2011 at 12:57pm, Mr Bartlett sent an email to Whitehaven representatives which indicated that Boardwalk was “not prepared to give interconditionality”, being the notion that the acquisition of Boardwalk by Whitehaven would only proceed if the merger of Aston and Whitehaven was to proceed.

On 3 December 2011 at 5:48pm, Mr Bartlett sent an email to Mr Di Pilla in which he stated that Whitehaven would concede on “interconditionality” to provide the certainty that they were seeking for the Boardwalk transaction on the basis that if the scheme of arrangement failed, the $150 million would not go into Boardwalk and Whitehaven would have the right to elect to pay a fixed sum of cash, in lieu of scrip, based on the values used to determine the share exchange ratio.

This demonstrated that a purpose of the $150 million Capital Injection was to increase the shareholding of the Tinkler interests in the merged entity because if the merger was not going to proceed, Whitehaven would only be required to acquire Boardwalk if there was no $150 million Capital Injection.

On 5 December 2011, KPMG prepared a further draft due diligence report (Further Draft KPMG Due Diligence Report) for Whitehaven in relation to Aston and Boardwalk.

As part of the Further Draft KPMG Due Diligence Report, in the section headed “Boardwalk executive summary Key findings – financial due diligence”, KPMG analysed the assets of Boardwalk and identified as an issue of high importance that “Boardwalk is currently cash constrained ($1.5 million at 30 November 2011) and will need capital to fund committed cash flows”. The “summary observations” next to that issue are:

In Appendix 9 to the Further Draft KPMG Due Diligence Report, detail on the “Boardwalk: Overview of capex requirements”, all of which was sourced from the Draft Boardwalk Prospectus, was set out as follows:

The variance in the table is noted to be immaterial.

On 5 December 2011, Gilbert + Tobin sent an email to Corrs which attached a revised draft of the SPA (Second Draft SPA), stated to reflect the discussions held the previous week as well as Boardwalk’s position on the outstanding issues. A Draft Restriction Deed was also attached to the email, which was stated in the email “to set out the restrictions that apply to the Milestone Shares whilst the Milestones remain unsatisfied” and “the arrangements for using the Milestone Shares [as] a fund for warranty claims”. The email further stated that:

In the Second Draft SPA, the Milestone Shares were expressed to be subject to the Restriction Deed.

On 6 December 2011, the Boardwalk Shareholders, including Les & Zelda, each executed the Power of Attorney in favour of Mr Christensen, Mr Flynn, Mr Tinkler and Aimee Hyde, appointing each of them to be its attorney jointly and individually on and from that date (cl 1).

Amongst other things, the Power of Attorney empowered any two attorneys acting jointly to execute and deliver the SPA as well as all documents ancillary or related to or referred to in the SPA (cl 2(a) and Schedule 3).

Accordingly, Mr Tinkler was not empowered by the Power of Attorney to act by himself alone.

On 6 December 2011, a “preliminary draft” of a joint ASX announcement of the merger of Aston and Whitehaven was prepared (6 December Draft ASX Announcement). The 6 December Draft ASX Announcement is headed “Creation of a Leading Independent Australian Coal Company” and appears to be in skeleton form, with headings including “Highlights”, “Aston/Whitehaven Merger”, “Merged Entity Board and Management”, “Transaction Rationale”, “Merger Implementation”, “Boardwalk Resources Acquisition” and “Timetable and Next Steps”.

The section of the 6 December Draft ASX Announcement headed “Boardwalk Resources Acquisition” refers to the “cash of A$150 million” but does not refer to any proposed use of those funds.

On 7 December 2011 at 6:35pm, Mr Di Pilla sent an email to Mr Bartlett, copied to others, which attached “a summary of the points agreed between Nathan & Tony this evening”. The attached document is titled “Project Trifecta Key outstanding commercial issues”. One scenario dealt with in this document is the “Aston scheme [failing] to reach implementation”. The response of Aston indicates that it was prepared to have interconditionality between the scheme of arrangement and the acquisition of Boardwalk by Whitehaven.

On 7 December 2011 at 7:36pm, Corrs sent an email to Gilbert + Tobin, which attached a further draft of the SPA (Third Draft SPA). A principal change of note in the Third Draft SPA was the introduction of a condition precedent to completion of the SPA that the Whitehaven and Aston scheme of arrangement be approved by the court (cl 3.2(c)). This reflected the agreement to allow interconditionality between them.

The Third Draft SPA also introduced a change to allow Boardwalk to incur debt of $5 million a month between the date of the SPA and completion under it (cl 4.9) and to enable BRI to fund the subscription amount by capitalising loans (cl 4.10).

On 8 December 2011, KPMG provided the final version of their due diligence report to Whitehaven in relation to Aston and Boardwalk (KPMG Due Diligence Report).

The KPMG Due Diligence Report contains exactly the same content regarding Boardwalk as the equivalent sections of the Further Draft KPMG Report on 5 December 2011, which are set out in detail above.

On 8 December 2011 at 7:07pm, Gilbert + Tobin sent an email to Corrs, copied to others, which attached their comments on the Third Draft SPA from the previous day (Fourth Draft SPA).

A substantive amendment in the Fourth Draft SPA was that Whitehaven consented to Boardwalk borrowing funds from BRI to fund the operations of Boardwalk in the period from the date of the SPA until 31 March 2012 to the maximum amount of $5 million a month (cl 4.9), and that BRI must subscribe for Boardwalk shares for the $150 million Capital Injection, which “shall include the capitalisation of loans” that it made in that period (cl 4.10).

On 8 December 2011 at 1pm and 7:21pm, Gilbert + Tobin sent emails to Corrs, copied to others, which attached their comments on the Draft Restriction Deed (Second Draft Restriction Deed). The change of note in the Second Draft Restriction Deed was a notation for Boardwalk to confirm the list of Trigger Events (cl 3.2).

On 9 December 2011 at 3:48pm, Alexandra Taylor (from Goldman Sachs (T354)) sent an email to Mr Haggarty, Mr Bartlett and other Whitehaven representatives. The email attached a “revised version of the investor presentation” together with a draft ASX announcement (9 December Draft ASX Announcement). Notably, this was a communication amongst Whitehaven representatives alone.

The 9 December Draft ASX Announcement contains the logo of each of Aston and Whitehaven at the top of the first page, is marked “Preliminary draft” and is headed “Creating a Leading Independent Australian Coal Company”.

The salient parts of the 9 December Draft ASX Announcement which describe the merger of Aston and Whitehaven and the acquisition of Boardwalk are in the following terms (emphasis added in underline):

The 9 December Draft ASX Announcement concludes with the heading “Forward Looking Statements” but there is no content under that heading other than an indication that the legal advisers were to provide it.

In cross-examination, Mr Haggarty agreed that the words underlined in the above extract of the 9 December Draft ASX Announcement were the same words as appeared in the 12 December ASX Announcement (defined and dealt with below), which was the final version (T354). The available inference is that the form of the 9 December Draft ASX Announcement reflected the intention of Whitehaven stated during the discussions and negotiations leading to the Final Term Sheet in relation to the use that would be made of the $150 million Capital Injection following the acquisition of Boardwalk by Whitehaven (part of which “will be used for the ongoing development of [Boardwalk’s] assets”).

In my view, the reference to the “ongoing development of its assets” in the 9 December Draft ASX Announcement (and all subsequent drafts as well as the final version in the form of the 12 December ASX Announcement (defined and described below)) only then “currently” included the development of “Boardwalk’s assets” referred to in the paragraph immediately above, which were the tenements described – Sienna, Dingo, Monto and Ferndale – being the Boardwalk Projects. Those were the only “currently include[d]” assets of Boardwalk on which money could be expended for their “ongoing development” by the use of the $150 million Capital Injection. I also consider that the “ongoing development of [Boardwalk’s] assets” did not include Boardwalk acquiring further assets such as a greater shareholding interest in Coalworks. Further, the Vickery South project held by Coalworks is not mentioned amongst the “currently include[d]” assets of Boardwalk in the 9 December Draft ASX Announcement so it could not be considered to be amongst the assets of Boardwalk which would be the subject of “ongoing development”.

I agree with Les & Zelda that the 9 December Draft ASX Announcement is a contemporaneous documentary record of an intention by Whitehaven that the $150 million Capital Injection would be used for the “ongoing development of [Boardwalk’s] assets” and the repayment of existing debt. My finding is that this intention had been stated during the discussions between Mr Haggarty and Mr Tinkler in November 2011 leading up to the signing of the Final Term Sheet in which it was agreed that $150 million would be injected into Boardwalk. In my assessment, the statement of intention about the use of the $150 million Capital Injection in the 9 December Draft ASX Announcement could only have been made during those discussions as part of the negotiations in which the parties agreed that $150 million would be injected into Boardwalk as part of the transaction recorded in the Final Term Sheet.

On 9 December 2011 at 3:48pm, Ms Taylor also sent an email to Mr Di Pilla and Ms Hardie, copied to Mr Bartlett, Mr Bensan, Mr Gerber, Mr Jing, Mr King, Mr Pojezny and others, which attached the 9 December Draft ASX Announcement along with a draft of the December 2011 Investor Presentation (defined and dealt with below). This is significant because it demonstrates that what had been circulated to the Whitehaven representatives was simultaneously being circulated to the advisers to the Aston/Tinkler interests for their review. In my view, this supports the inference that within Whitehaven it was considered that the Aston/Tinkler interests had the same understanding as Whitehaven did about the intention that had been discussed during the negotiations leading up to the Final Term Sheet regarding the use of the $150 million Capital Injection as expressed in the 9 December Draft ASX Announcement.

The 9 December Draft ASX Announcement was then the subject of comment in separate emails from Melissa Swain (the general counsel and company secretary of Aston) and Ms Hardie of UBS before an amended version of it (9 December Further Draft ASX Announcement) was sent by email on 9 December 2011 at 7:27pm from Philippa Stone of Freehills to the Aston/Tinkler representatives, including Mr Tinkler, Mr Christensen, Mr Flynn, Mr Di Pilla and Ms Hardie.

There are marked changes made in the 9 December Further Draft ASX Announcement. A single marked change appears in the section of the 9 December Further Draft ASX Announcement dealing with the acquisition of Boardwalk as set out below (underline indicating marked change):

As is apparent, the relevant marked change from the 9 December Draft ASX Announcement to the 9 December Further Draft ASX Announcement was relatively minor.

For the reasons I have stated above in relation to the 9 December Draft ASX Announcement, I regard the reference in the 9 December Further Draft ASX Announcement to the “development of its assets” as the Boardwalk assets listed as “currently including” the tenements described – Sienna, Dingo, Monto and Ferndale – and not including Boardwalk acquiring further assets such as a greater shareholding interest in Coalworks.

The 9 December Further Draft ASX Announcement also contains the following section under the heading “Forward Looking Statements”, which was not previously included in the 9 December Draft ASX Announcement:

Whitehaven argues that this disclaimer (and similar ones contained in the 10 December Draft ASX Announcement, the 12 December ASX Announcement, the December 2011 Investor Presentation and the Scheme Booklet, which are all defined and described below) serves to make clear that while the parties might have had an intention to act in a particular way in the future, that intention was not unchangeable, and whether that intention was in fact acted on would depend on a great variety of factors, including the state of the relevant projects at any particular point in time. Whitehaven also says that all these matters are consistent with the fact that none of the contractual documents imposed any obligation on a party to use the $150 million Capital Injection in a particular way or to develop the Milestone Projects.

Les & Zelda says that this disclaimer had no work to do in respect of statements by Whitehaven of its present intention and commitment (the word “will” being used) to expend the $150 million being injected into Boardwalk for “the ongoing development of its assets”. It points to the word “will” as being conspicuously missing from those listed, or within the genus listed, as comprising a “forward-looking statement”.

In the context in which it is used, I consider that the word “will” is a statement of the type described in the disclaimer. While I agree with Les & Zelda that it is a statement of intention, it is not one of commitment, particularly as it appears in a draft ASX announcement which would not be regarded as a document having contractual force and did not appear in the Final Term Sheet, which itself was expressly stated not to be “binding on either party”. While the word “will” might ordinarily be regarded as one denoting some form of commitment, in the context of these sophisticated and experienced parties deeply involved in the drafting of complex contractual documents for a large scale transaction with the assistance of financial and legal experts, I do not consider that the use of the word “will” in draft ASX announcements could reasonably be regarded as the expression of unwavering commitment by Whitehaven.

I note that the word “intends” appears in the list of examples as part of the genus which is covered by the disclaimer. Given that I consider the statement that the $150 million Capital Injection “will be used for the ongoing development of [Boardwalk’s] assets” is a statement of intention by Whitehaven, I regard it to be one which falls within the terms of the disclaimer. For that reason, in my opinion that statement of intention is one which is subject to “risks and uncertainties”, is not a guarantee of future performance and was “subject to various risk factors”. It follows that any reasonable person reading each of the 9 December Further Draft ASX Announcement, the 10 December Draft ASX Announcement, the 12 December ASX Announcement, the December 2011 Investor Presentation and the Scheme Booklet (each defined below) must be taken to have read the disclaimer as part of each of them.

Les & Zelda rely on the 9 December Further Draft ASX Announcement as making and/or confirming the Use of Funds Representation. I have dealt below with the Use of Funds Representation and its role in Les & Zelda’s case in more detail when considering the Promissory Estoppel Claim.

This communication and the attached 9 December Further Draft ASX Announcement provide contemporaneous documentary evidence that those within the Aston/Tinkler interests (including Mr Tinkler) had the same understanding as Whitehaven about the intended use of the $150 million Capital Injection. Again, that understanding could only have come from discussions which took place as part of the negotiations in which it was agreed that the $150 million would be injected into Boardwalk as recorded in the Final Term Sheet. But that understanding must also be conditioned by the meaning of the disclaimer contained in the 9 December Further Draft ASX Announcement.

Mr Tinkler said in his affidavit evidence that he reviewed the 9 December Further Draft ASX Announcement when he received it attached to the email addressed to him. In cross-examination, Mr Tinkler said that he would have read this document ahead of the transaction being announced and agreed that he could not recall precisely when he read it (T267). Mr Tinkler was challenged that he had no memory of having read this document in 2011, which he refuted (T267). The attack on Mr Tinkler’s assertion that he read the 9 December Further Draft ASX Announcement was also made by reference to there being no mention of the document in the December 2018 SOC, which he again rejected (T267).

As I have already stated above, the lack of any mention of the 9 December Further Draft ASX Announcement in the December 2018 SOC has no significance to the issue of whether Mr Tinkler is to be believed that he read this document. The December 2018 SOC was not drafted by him, it was drafted by lawyers to state pleaded causes of action, he did not sign, attest or otherwise adopt it and there is no evidence that he even reviewed it before it was filed.

I accept Mr Tinkler’s evidence that he read the email and the attached 9 December Further Draft ASX Announcement in light of the fact that the email was addressed to him, he was the chairman of Aston, the announcement was a joint one on behalf of Whitehaven and Aston and it related to a significant transaction affecting his interests which was about to be made public. In light of those matters, Mr Tinkler had a real interest in ensuring that the 9 December Further Draft ASX Announcement accurately reflected his understanding of the transaction so that the Aston shareholders were properly advised about what was occurring. It would be a dereliction of his duties if he did not scrutinise it in full. To my mind it would strain credibility for me to find that he did not read the 9 December Further Draft ASX Announcement in those circumstances.

Accepting that Mr Tinkler read the 9 December Further Draft ASX Announcement means that he must also be taken to have read the disclaimer contained within it. As I have stated above, the disclaimer meant that the statement of Whitehaven’s intention concerning the use of the $150 million Capital Injection (“will be used for the ongoing development of [Boardwalk’s] assets”) could be subject to various risk factors and change.

Mr Tinkler rejected the notion that when he read the 9 December Further Draft ASX Announcement he understood that Vickery South was as much a Boardwalk asset as was Oaklands North on the basis that both projects were owned by Boardwalk indirectly via its 19.9% shareholding in Coalworks (T294–295). I accept his evidence on this point.

On 9 December 2011 at 4:28pm, Corrs sent an email to Gilbert + Tobin with attached further changes to the draft SPA (Fifth Draft SPA). None of the proposed changes contained in the Fifth Draft SPA have relevance to the issues in these proceedings.

On 10 December 2011 at 5:47pm, Gilbert + Tobin sent an email to Corrs, copied to others, which included attached revisions to the Fifth Draft SPA (Sixth Draft SPA) and the Second Restriction Deed (Third Draft Restriction Deed).

On 10 December 2011 at 6:59pm, Gilbert + Tobin sent an email to Corrs with attached changes to the Sixth Draft SPA and the Third Draft Restriction Deed, asking that the versions sent earlier at 5:47pm be disregarded.

Again, none of the proposed changes in the Sixth Draft SPA and Third Draft Restriction Deed have relevance to the issues in these proceedings.

On 10 December 2011 at 11:29pm, Ms Hardie sent an email to Mr Tinkler, Mr Vaile, Mr Christensen and others, copied to Mr Flynn, Mr Keen, Mr Di Pilla and other Aston/Tinkler representatives, which attached proposed final draft versions of the ASX announcement (10 December Draft ASX Announcement) and the proposed final Draft Investor Presentation, which had been received by email that day from Albert Bielinko of Goldman Sachs. In other words, what was being circulated amongst the Aston/Tinkler interests were documents that had emanated from Whitehaven’s advisor as proposed final versions.

The section of the 10 December Draft ASX Announcement concerning the acquisition of Boardwalk by Whitehaven was in similar form to that contained in the 9 December Further Draft ASX Announcement. That section of the 10 December Draft ASX Announcement reads as follows (emphasis added in underline):

For the reasons I have stated above in relation to the 9 December Draft ASX Announcement, I regard the reference in the 10 December Draft ASX Announcement to the “ongoing development of its assets” as only then “currently” including the development of “Boardwalk’s assets” referred to in the paragraph immediately above, which were the tenements described – Sienna, Dingo, Monto and Ferndale – being the Boardwalk Projects. Those were the only “currently include[d]” assets of Boardwalk on which money could be expended for their “ongoing development” by the use of the $150 million Capital Injection. I consider that the “ongoing development of Boardwalk’s assets” did not include Boardwalk acquiring further assets such as a greater shareholding interest in Coalworks.

The 10 December Draft ASX Announcement contains the same section headed “Forward Looking Statements” as was contained in the 9 December Further Draft ASX Announcement. For the same reasons as I have expressed above in relation to the 9 December Further Draft ASX Announcement, I consider that the statement “will be used for the ongoing development of its assets” in the 10 December Draft ASX Announcement is a statement of Whitehaven’s intention to which the disclaimer applies. I consider that it must also be read as subject to the disclaimer which makes it clear that the intention could change depending on a variety of factors. In particular, as I have stated above, I do not regard the statement as one of commitment.

I consider that the 10 December Draft ASX Announcement also stands as contemporaneous documentary evidence that there was an understanding amongst Whitehaven, the Aston/Tinkler interests (including Mr Tinkler) and their respective advisers about the intended use of the $150 million Capital Injection. In my view, that understanding could only have come from the discussions which took place as part of the negotiations in which it was agreed that the $150 million would be injected into Boardwalk as recorded in the Final Term Sheet.

The Draft Investor Presentation took the form of a series of slides each of which is marked with the respective logos of Aston and Whitehaven. The presenters are identified as Mr Vaile, Mr Conde, Mr Haggarty and Mr Kane.

One of the slides of the Draft Investor Presentation is headed “Transaction overview”, which includes the following section:

In a standalone box at the bottom of that page the following text appears in bold:

Mr Tinkler says in his affidavit evidence that he read the email of 10 December 2011 at 11:29pm and its attachments. In cross-examination, Mr Tinkler was challenged on this statement, again on the basis that he had no memory of when he first read them and that they were not mentioned in the December 2018 SOC (T268).

I again accept that Mr Tinkler read the email together with the attached 10 December Draft ASX Announcement and the Draft Investor Presentation for the same reasons as I have expressed above for accepting his evidence that he read the 9 December Further Draft ASX Announcement. I also reject the attack on his evidence based on the lack of any mention of these documents in the December 2018 SOC for the same reasons as I have expressed above in relation to the lack of any mention of the 9 December Further Draft ASX Announcement in the December 2018 SOC. In accepting that Mr Tinkler read the 10 December Draft ASX Announcement and the Draft Investor Presentation, he must also be taken to have read any disclaimer contained in them.

On 11 December 2011, Mr Haggarty and Mr Conde executed the SPA on behalf of Whitehaven and Mr Tinkler and Mr Christensen executed the SPA as attorneys pursuant to the Power of Attorney on behalf of the Boardwalk Shareholders.

The relevant provisions of the SPA are as follows:

In short, cl 4.9 of the SPA gave effect to the $150 million Capital Injection into Boardwalk. Apart from the Subscription Amount of $150 million being, in effect, applied to repay loans made by BRI or its nominee, there was no restriction contained in the SPA on the use to which the $150 million Capital Injection could be put.

None of the best endeavours obligations in the SPA concerned the use of the $150 million Capital Injection by Boardwalk or Whitehaven.

There is no express term in the SPA obliging Whitehaven to expend the $150 million Capital Injection on developing Boardwalk’s assets. As a matter of express contractual obligation, Boardwalk was free to use the $150 million Capital Injection in any manner it saw fit (recognising that Boardwalk was not a party to the SPA in any event). Les & Zelda did not suggest otherwise because it did not mount a case which depended on any such express term.

I have dealt with the provisions of the SPA in more detail in my consideration of the Implied Terms Claim below.

Mr Tinkler gave affidavit evidence that by reading the Final Term Sheet, the 9 December Further Draft ASX Announcement and the email of 10 December 2011 at 11:29pm from Ms Hardie which attached the 10 December Draft ASX Announcement and the Draft Investor Presentation, he believed that if he injected or he arranged for $150 million to be injected into Boardwalk by way of equity, after the merger was implemented, Whitehaven would use the $150 million Capital Injection to:

In cross-examination, Mr Tinkler rejected the notion that he believed, based upon the documents he referred to, the $150 million Capital Injection would be spent on the five Milestone Projects, which included Oaklands North, as well as Vickery South (T271 and T294–295).

In Mr Tinkler’s affidavit evidence, he also said that he executed the SPA based on what he understood and believed from the conversations he had in November 2011, the Final Term Sheet, the 9 December Further Draft ASX Announcement and the email of 10 December 2011 at 11:29pm with the attached 10 December Draft ASX Announcement and Draft Investor Presentation.

Mr Tinkler rejected the suggestion in cross-examination that this evidence was entirely false (T265). As stated above, Mr Tinkler agreed that the Final Term Sheet does not contain any statement as to how the $150 million would be spent or that the Boardwalk Projects would be developed within any timeframe or at all (T266).

In cross-examination, Mr Tinkler agreed that when he signed the SPA on 11 December 2011 that it was a document intended to create legally binding rights and obligations between the Boardwalk Shareholders and Whitehaven (T268). Critically, Mr Tinkler also conceded in cross-examination that when he signed the SPA on 11 December 2011, as an experienced businessman, he knew that draft ASX announcements were not documents intended to create binding legally binding rights and obligations between the Boardwalk Shareholders and Whitehaven (T268–269). This concession has force for the reasons I have explained in dealing with the Promissory Estoppel Claim below.

It was then put to Mr Tinkler in cross-examination that he did not rely on statements contained in draft ASX announcements but instead signed the SPA in the belief that it would meet his objective of the Tinkler Group receiving approximately 20% of the merged entity, as evidenced in the following exchange (T269):

I accept that Mr Tinkler had the understanding about how Whitehaven intended to use the $150 million Capital Injection into Boardwalk as he professed in his affidavit at the time he signed the SPA, subject to the concession he made that he knew that the draft ASX announcements were not documents intended to create binding legally binding rights and obligations between the Boardwalk Shareholders and Whitehaven. The natural meaning from his reading of the Final Term Sheet, the 9 December Further Draft ASX Announcement and the email of 10 December 2011 at 11:29pm with the attached 10 December Draft ASX Announcement and Draft Investor Presentation would have given rise to this understanding, including his concession.

I am also satisfied that Mr Tinkler’s understanding would have arisen from the discussions in November 2011 between Mr Haggarty, Mr Tinkler and their respective advisers during the negotiations leading up to the Final Term Sheet on 25 November 2011. Those discussions gave rise to the similar understanding on the part of Mr Haggarty as to how the $150 million Capital Injection was intended to be used, as I have found above. While it was not put to Mr Tinkler directly in cross-examination, I also find that Mr Tinkler as an experienced businessman must have understood that any oral representations made by Mr Haggarty during pre-contractual negotiations similarly do not create legally binding rights and obligations.

I am also satisfied that an important consideration for Mr Tinkler at the time that he signed the SPA was that the $150 million Capital Injection increased the number of shares which the Tinkler Group would receive towards Mr Tinkler’s objective of ending up with approximately 20% of the merged entity. So much was accepted by Mr Tinkler in the above extract of the cross-examination. But this acceptance does not in any way derogate from the importance of Mr Tinkler’s understanding as to how it would be used. In my finding, the two considerations existed simultaneously within Mr Tinkler’s state of mind, being matters of importance to him.

I accept the submission made by Les & Zelda that each of the 9 December Further Draft ASX Announcement, the 10 December Draft ASX Announcement and the Draft Investor Presentation serve the purpose of being contemporaneous documentary evidence of the parties’ mutual understanding regarding how the $150 million Capital Injection into Boardwalk was intended to be used. But importantly, as accepted by Mr Tinkler in cross-examination, that understanding was not one which had contractual force and nor was it a commitment that could not change depending on a variety of factors.

On 11 December 2011, Whitehaven entered into the WPA with the Farallon/Noonday Lenders and other financiers to Boardwalk under which Whitehaven acquired their warrants over unissued shares in Boardwalk as part of an acquisition by Whitehaven of all the shares and other equity interests in Boardwalk.

Also on 11 December 2011, Whitehaven entered into the Minority Lenders SPA with the Minority Lenders whereby Whitehaven agreed to purchase all their shares in Boardwalk as part of an acquisition by Whitehaven of all the shares and other equity interests in Boardwalk.

On 12 December 2011, Whitehaven and Aston entered into the SIA regarding the proposed scheme of arrangement between them under Part 5.1 of the Corporations Act. Pursuant to the SIA, Aston agreed on the Announcement Date (12 December 2011) to release the Announcement (Annexure C to the SIA): cl 12.1(a).

The SIA set out the terms on which Whitehaven and Aston agreed to implement their scheme of arrangement. The conditions precedent to the scheme becoming effective included PwC issuing its independent expert report concluding that the scheme was in the best interests of the Aston shareholders before the date on which the scheme booklet is registered by ASIC, the approval of Aston shareholders to the scheme and court approval of the scheme under s 411(4)(b) of the Corporations Act: cll 3.1(l)–(n).

On 12 December 2011, Whitehaven and Aston released a joint announcement of the merger to the ASX (12 December ASX Announcement). The 12 December ASX Announcement was in the form of the Announcement in Annexure C to the SIA.

In cross-examination, Mr Haggarty agreed that Aston and Boardwalk represented the Tinkler interests in the 12 December ASX Announcement (T344–345).

The 12 December ASX Announcement took a substantially similar form to the earlier drafts of it in the 9 December Draft ASX Announcement, the 9 December Further Draft ASX Announcement and the 10 December Draft ASX Announcement, although there are differences between them.

The 12 December ASX Announcement confirmed that Mr Vaile was to be the chairman of the merged entity, Mr Conde was to be the deputy chairman of the merged entity and Mr Haggarty was to be the managing director of the merged entity. Mr Haggarty was named as the point of contact for Whitehaven.

Relevantly, the section of the 12 December ASX Announcement dealing with the acquisition of Boardwalk by Whitehaven stated as follows (emphasis added in underline):

In cross-examination, Mr Haggarty agreed that this underlined statement reflected his understanding as part of the proposed Boardwalk transaction which was originally negotiated and formalised in the Final Term Sheet (T346–347). Mr Haggarty also agreed that the understanding he had that the $150 million Capital Injection “will be used for the ongoing development of its assets” was an understanding he had as at the date of the Final Term Sheet (T347) and that it was “obviously part of the deal” (T350). Mr Haggarty said that he could not recall any meeting or discussion with Mr Tinkler between the signing of the SPA on 11 December 2011 and the date of the 12 December ASX Announcement concerning how the $150 million Capital Injection was to be used (T346). In other words, the circumstances existing as at 12 December 2011 as set out in the 12 December ASX Announcement were also prevailing as at 11 December 2011 when the SPA was signed.

As I have indicated above in relation to the findings I have made concerning the Final Term Sheet, in cross-examination Mr Haggarty repeatedly confirmed that the understanding he had at the date of the Final Term Sheet (25 November 2011) that the $150 million Capital Injection “will be used for the ongoing development of [Boardwalk’s] assets” was based on the discussions he had with Mr Tinkler and their respective advisers (see for example T320–323, T337, T346–347 and T349–351). I have found that those discussions were clearly the source of what was stated in the 12 December ASX Announcement about the intended use of the $150 million Capital Injection.

Mr Tinkler refused to agree that he had no memory of receiving or reading the 12 December ASX Announcement in 2011 or 2012 (T297). I accept his evidence.

The 12 December ASX Announcement is clearly a solemn document intended by those under whose approval it was issued to be relied upon by existing and prospective investors in the shares of Aston and Whitehaven. It must have been the subject of close scrutiny of both companies and their respective advisers. As a result, the statements made in it should be taken seriously in accordance with their terms.

One of the differences between the 12 December ASX Announcement and its drafts is that it does not refer to “Boardwalk’s assets” in the paragraph describing the tenements at Dingo, Ferndale, Sienna, Monto and Oaklands North, but instead uses the word “projects”. I consider this to be a distinction without a difference so far as the mutual understanding of the Aston/Tinkler interests and Whitehaven which had already been formed by this time. For the reasons I have stated above in relation to the 9 December Draft ASX Announcement, I regard the reference in the 12 December ASX Announcement to the “development of its assets” as only including the development of Boardwalk’s “projects”, being the tenements described – Sienna, Dingo, Monto and Ferndale – and not including Boardwalk acquiring further assets such as a greater shareholding interest in Coalworks.

At the end of the 12 December ASX Announcement is a type of disclaimer regarding what are described as “Forward Looking Statements”, which is in the same form as the section headed “Forward Looking Statements” in the 9 December Further Draft ASX Announcement and the 10 December Draft ASX Announcement. For the same reasons as I have expressed above in relation to those drafts, I hold the opinion that the statement “will be used for the ongoing development of its assets” in the 12 December ASX Announcement is a statement of Whitehaven’s intention that must be read with the disclaimer.

As part of the content of the 12 December ASX Announcement, I consider that the disclaimer must also be considered to have been read and understood by Mr Tinkler. The disclaimer makes it clear that Whitehaven's statement of intention could be subject to change and did not amount to a commitment.

Les & Zelda relies on the 12 December ASX Announcement as making and/or confirming the Use of Funds Representation, particularly emphasising the twice used “will” in relation to the $150 million Capital Injection and the use of it in the final paragraph of this section. Les & Zelda says that "will" was used in the same sense on both occasions to describe the certainty and sense of obligation attached to what was described. I disagree. For the reasons I have given above, I consider that the use of the word "will" was indicative of Whitehaven's intention, which was subject to the disclaimer.

In my opinion, the 12 December ASX Announcement is a contemporaneous formal documentary record of the mutual understanding that was held by Mr Tinkler for the Aston/Tinkler interests and Mr Haggarty for Whitehaven arising from the negotiations between them leading up to the Final Term Sheet that Whitehaven had made a statement of intention regarding the use and expenditure of the $150 million Capital Injection – that it “will be used for the ongoing development of [Boardwalk’s] assets”, subject to the operation of the disclaimer.

On 12 December 2011, Mr Haggarty sent a memorandum to all employees of Whitehaven with a subject line “Employee update regarding proposed Whitehaven / Aston merger” (12 December Memorandum), to which was attached a copy of the 12 December ASX Announcement.

The 12 December Memorandum relevantly stated (footnote omitted):

Les & Zelda relies on the 12 December Memorandum as making and/or confirming the Use of Funds Representation. It draws attention to the fact that the 12 December Memorandum states that the 12 December ASX Announcement is a document “detailing all aspects of the merger”.

Although Mr Tinkler referred to the 12 December Memorandum in his affidavit evidence, he did not claim to have read it. In cross-examination, Mr Tinkler agreed that he was not an employee of Whitehaven in December 2011 (or at any other time) and he had no memory of when he first saw or read the 12 December Memorandum (T275).

In cross-examination, Mr Haggarty agreed that the view he held at the time of the 12 December Memorandum was that the 12 December ASX Announcement detailed all aspects of the merger (T342). I infer from this statement that one of the aspects of the merger detailed in the 12 December ASX Announcement was that the $150 million contributed to Boardwalk “will be used for the ongoing development of its assets”. This reinforces my view that the 12 December ASX Announcement recorded the mutual understanding that was held by Mr Tinkler for the Aston/Tinkler interests and Mr Haggarty for Whitehaven arising from the negotiations between them leading up to the Final Term Sheet that Whitehaven intended that the $150 million Capital Injection “will be used for the ongoing development of [Boardwalk’s] assets”, as well as for the repayment of US$50 million in debt and deferred payments of $15 million relating to Sienna.

On 12 December 2011, a document titled “Project Trifecta - Marketing Schedule” was prepared within Whitehaven. The Marketing Schedule listed a series of meetings at which presentations were to be made on the proposed Whitehaven/Aston merger to analysts, investors, institutions, stakeholders and the media to be held from 12 December 2011 until January 2012 in Sydney, Melbourne, Narrabri/Gunnedah, Brisbane, Singapore, Hong Kong, Tokyo and in the United States and Europe. In the Marketing Schedule, it was proposed that Whitehaven be principally represented by Mr Conde and Mr Haggarty and Aston be represented by Mr Vaile and Mr Kane.

Attached to the Marketing Schedule was a presentation document dated December 2011 (December 2011 Investor Presentation) with the respective logos of Aston and Whitehaven. The December 2011 Investor Presentation appears to be intended to be shown at the events set out in the Marketing Schedule. The December 2011 Investor Presentation is a further version of the Draft Investor Presentation that was sent to Mr Tinkler and others on 10 December 2011 at 11:29pm, as set out above.

One of the slides of the December 2011 Investor Presentation is headed “Transaction overview” (being an updated version of the “Transaction overview” slide in the Draft Investor Presentation), which includes the following section (emphasis added in underline):

In cross-examination, Mr Haggarty said that the December 2011 Investor Presentation was usually handed out and put up as slides in the meetings (T363–364). Mr Haggarty could not recall who spoke to the slide extracted above during each of the meetings (T364).

A further presentation document dated March 2012 (March 2012 Investor Presentation) contains a slide headed “Transaction overview” with the following section, which is very similar to that contained in the December 2011 Investor Presentation (emphasis added in underline):

In cross-examination, Mr Haggarty agreed that the same relevant text was contained in the March 2012 Investor Presentation and the December 2011 Investor Presentation, which is that the $150 million Capital Injection “will be used for the ongoing development of [Boardwalk’s] assets” (T365).

In my opinion, the December 2011 Investor Presentation and the March 2012 Investor Presentation contained further confirmation of the mutual understanding amongst Whitehaven, the Aston/Tinkler interests (including Mr Tinkler) and their respective advisers about the intended use of the $150 million Capital Injection for the ongoing development of Boardwalk’s assets after the repayment of debt and the deferred payments relating to Sienna.

I infer that for the purpose of answering potential questions that might arise during the meetings outlined in the Marketing Schedule, Credit Suisse, Goldman Sachs, Grant Samuel and UBS as financial advisers to Aston and Whitehaven, jointly prepared a document titled “Project Trifecta - potential investor questions” (Q&A Document). The logo of each of those advisers is contained on each page of the Q&A Document.

Section 2 of the Q&A Document is headed “Boardwalk acquisition”. In answer to question 2.1 “Did Whitehaven want to buy Boardwalk or was it something that Nathan Tinkler wanted?” (which is tasked to Mr Haggarty and Mr Conde to answer), the suggested response is as follows:

In answer to question 2.4 “Would Aston independent directors prefer the Boardwalk assets weren’t included in the transaction?” (which is tasked to Mr Vaile to answer), the suggested response is as follows:

Section 3 of the Q&A Document is headed “Structure”. In answer to question 3.12 “Why is Tinkler Group injecting $150m of cash into Boardwalk as part of the transaction?” (which is tasked to Mr Haggarty to answer), the suggested response is as follows:

Section 5 of the Q&A Document is headed “Governance”. In answer to question 5.12 “Was the Boardwalk transaction structured this way to avoid related party issues?”, the suggested Whitehaven response (which is tasked to Mr Haggarty to answer) is as follows:

Mr Tinkler said in his affidavit evidence that he was not involved in the preparation of the Q&A Document, he was not involved in the meetings at which the presentations were made and he refers to the Marketing Schedule. In cross-examination, Mr Tinkler agreed that he was not involved in the presentations and could not recall whether he received or read the Marketing Schedule (T276–277). In further cross-examination, Mr Tinkler agreed that he was not involved in the preparation of the Q&A Document and again confirmed that he was not involved in the marketing presentations to potential investors but maintained that he received and read the Q&A Document and discussed it with Mr Flynn and Mr Christensen (T273–274). Mr Tinkler was further challenged on having no memory of receiving or reading the Q&A Document in 2011 or 2012, but refuse to concede that matter (T297). I accept Mr Tinkler’s evidence on this point, particularly in light of the fact that the Q&A Document refers to the motivations of the Tinkler Group and Mr Tinkler in particular.

The fact that Mr Tinkler deposed in his affidavit that he was “not involved in the roadshows or presentations” became a particular topic at the outset of the cross-examination of him by reference to the December 2018 SOC and the letter dated 21 December 2018 to Whitehaven to which the December SOC was attached (T223–232). As stated above, these proceedings were first commenced in the Supreme Court of QLD with Mr Tinkler as the plaintiff. In cross-examination, Mr Tinkler agreed that he instructed AJ & Co Lawyers to act on his behalf in the proceedings and he gave them detailed instructions over several months before the proceedings were lodged (T223–224).

Paragraphs 21, 22 and 23 of the December 2018 SOC state (emphasis in original):

In a lengthy portion of the cross-examination of Mr Tinkler, it was repeatedly put to him that the true position was that he was not involved in the roadshows or presentations, which he readily accepted, and therefore the claims made in paragraphs 21, 22 and 23 of the December 2018 SOC were false (T224–230). Mr Tinkler repeatedly denied this assertion on the basis that he had attended the initial Sydney telephone conference in UBS’s office when they announced the deal but did not travel to attend the roadshows (T224–230). This concluded in an attack on Mr Tinkler’s credit on the basis that he is “a person willing to make untrue claims, including in documents filed in the Supreme Court of Queensland, if you believe those claims will assist in your case against Whitehaven” (T230).

I reject this attack on Mr Tinkler’s credit. As referred to above, the December 2018 SOC was not drafted by him – it was drafted by lawyers to state pleaded causes of action. Mr Tinkler did not sign, attest or otherwise adopt the December 2018 SOC and there is no evidence that he even reviewed it before it was filed. I do not consider that it demonstrates Mr Tinkler to be a person willing to make false claims.

In cross-examination, Mr Haggarty confirmed that he went on the “roadshow” to the places listed in the Marketing Schedule (T357). As part of the “roadshow”, Mr Haggarty was equipped with the Q&A Document, which was prepared with his assistance as well as the assistance of advisers (T357–358). During the cross-examination, Mr Haggarty confirmed in various forms that he held the views expressed in the statements made in answer to questions 2.1, 2.4, 3.12 and 5.12 of the Q&A Document, which he regarded as accurate (T358–361).

In regard to the answer to question 3.12 in the Q&A Document extracted above, the cross-examination of Mr Haggarty proceeded as follows (T360–361):

Later in the cross-examination of Mr Haggarty, he was also asked about the answer to question 3.12 of the Q&A Document. Mr Haggarty agreed that he was part of discussions in the form of negotiations preceding the Final Term Sheet with advisers on both sides in which the subject matter of the cash injection was agreed (T378–379).

These answers collectively provide further confirmation of Mr Haggarty’s consistent evidence that the use of the $150 million Capital Injection was a matter which formed part of the discussions during the negotiations between Mr Haggarty, Mr Tinkler and their respective advisers before the Final Term Sheet. As I have found above, clearly those discussions were the source of the statements made in the Q&A Document regarding the use of the $150 million Capital Injection.

On 13 December 2011, a draft letter to Whitehaven shareholders was prepared to be signed by Mr Conde as chairman of Whitehaven (13 December Draft Letter). The 13 December Draft Letter referred to the announcement of the merger between Whitehaven and Aston and proposed to attach the 12 December ASX Announcement, which it described as “detailing important aspects of the merger”. The word “important” replaced (in track change) the word “all”.

Within the 13 December Draft Letter there is a section headed “Acquisition of Boardwalk Resources & Whitehaven Shareholder Approval”, part of which states:

In his affidavit evidence, Mr Tinkler referred to the 13 December Draft Letter but laid no claim to having received or read it. In cross-examination, it was suggested to Mr Tinkler that he did not have any memory of receiving or reading the 13 December Draft Letter in about 2011 or 2012 (T275–276). Mr Tinkler rejected that proposition, saying that as chairman of Aston “we shared things like this” and “this was certainly something that all parties signed off on” (T276). When pressed further on his memory, Mr Tinkler said he did not have precise timing on any actual memory of reading the 13 December Draft Letter in 2011 or 2012 (T276). Mr Tinkler refused to agree that he had no memory of receiving or reading this 13 December Draft Letter in 2011 or 2012 (T297).

I am not able to make any finding that Mr Tinkler received or read the 13 December Draft Letter, but in any event it is consistent with documents prior to 11 December 2011 (when the SPA was signed by Mr Tinkler) which are to the same effect in the description of the $150 million Capital Injection and which he plainly read, such as the 9 December Further Draft ASX Announcement and the 10 December Draft ASX Announcement.

Some time after 31 December 2011, Whitehaven published a quarterly report of its financial performance for the quarter ending 31 December 2011 (December 2011 Quarterly Report). Amongst the matters contained in the December 2011 Quarterly Report was the recently announced merger with Aston and the acquisition of Boardwalk. The relevant portion of the December 2011 Quarterly Report dealing with the acquisition of Boardwalk stated (emphasis added in underline):

The December 2011 Quarterly Report was a further document consistent with the way in which the use of the $150 million Capital Injection had been described in other documents issued by Whitehaven – “will be used for the ongoing development of its assets”.

On 12 December 2011, Minarco Mine-Consult (MMC) prepared a draft report titled “Ferndale Coal Deposit: Conceptual Mine Planning” (Draft MMC Report). Pursuant to s 136 of the Evidence Act 1995 (NSW), the Draft MMC Report was admitted into evidence on a limited basis only, as evidence that a report in that form and content was prepared and provided to Whitehaven. As a result, it cannot be used to prove any opinion that Ferndale was or is objectively uneconomic to develop.

The Draft MMC Report states that it was prepared for Boardwalk to document conceptual mine planning undertaken for Ferndale in circumstances where no coal resources had yet been estimated for Ferndale.

The Draft MMC Report states that Boardwalk had conducted work on an exploration programme at Ferndale, noting at heading “1.1 Purpose of Report”:

I have dealt with the Draft MMC Report in more detail in my consideration of Ferndale and Dingo respectively below.

On 19 December 2011, senior executives within Whitehaven (Paul Verner, Clive Berry and Allan Davies) communicated with each other by email as a result of communications with banks regarding a short term financing facility. In his email of 12:07pm, Mr Verner (the treasurer for Whitehaven) stated “the banks are questioning the timing of when Mr T’s milestone shares will become unrestricted”. This led to an analysis being prepared of when the Trigger Events in respect of the Milestone Projects (being Dingo, Ferndale, Sienna, Monto and Oaklands North) as stated in cl 3 of the Restriction Deed were likely to occur.

On 19 December 2011 at 6:15pm, Mr Berry sent an email to Mr Davies and Mr Verner, attaching a table containing “our best conservative estimate of timing of the trigger events for each of the Boardwalk assets”. Mr Berry said the timeframes were based on a review of the operations for due diligence and their understanding of the approval requirements and relevant timeframes.

In the attached table, all of the Milestone Projects were estimated to have Trigger Events in the form of mining leases and environmental approvals in either FY2015 (Sienna, Monto and Dingo) or FY2016 (Ferndale and Oaklands North).

On 11 January 2012, the Acting CEO of Boardwalk, Simon Slesarewich, sent an email to Mr Tinkler, Mr Craig, Mr Christensen and Mr Flynn, copied to Mr Kane and Mr Keen. In the email, Mr Slesarewich provided an update on the recent commencement of a due diligence committee, implementation committee and work of the independent expert from PwC in relation to the scheme of arrangement.

On 19 January 2012, Palaris Mining Pty Ltd published a report titled “Boardwalk Resources Independent Technical Experts Report” (Palaris Report). It was provided to Mr Slesarewich on behalf of Boardwalk.

The Palaris Report states that Boardwalk initially requested that Palaris complete an independent technical review of its coal mining projects for the Proposed IPO in October 2011 and prepare an independent technical expert’s report to be included in the prospectus for the Proposed IPO. However, the Palaris Report now comprised the independent technical expert’s report and was finalised for the benefit of Boardwalk’s directors and due diligence committee in connection with the proposed sale of Boardwalk to Whitehaven. The Palaris Report states that it was prepared by Palaris at the request of Boardwalk in respect of the relevant geological, mining and infrastructure assets at Ferndale, Dingo, Sienna and Monto.

Critically, the Palaris Report contains no economic analysis and continually emphasised the preliminary nature of many of the assessments made.

I have dealt with the Palaris Report in more detail when considering Ferndale and Dingo respectively below.

On 20 January 2012, AME Consulting Pty Ltd issued a report to the directors of Aston on the coking and thermal coal markets to be included in PwC’s independent expert report in relation to the proposed merger of Aston and Whitehaven (AME Report).

The AME Report provides analysis of the global coking and thermal coal markets and discussion on forecast coal production from Aston, Whitehaven and Boardwalk.

The AME Report was subsequently attached as part of the Scheme Booklet and was relied on in PwC’s independent expert report, both of which are set out in further detail below.

On 25 January 2012 at 3:29pm, David Picton (group financial controller of Whitehaven) sent an email to Austin Perrin (CFO of Whitehaven), Mr Bensan, Mr Gerber, Mr Pojezny and David Seton of KPMG. The email referred to a meeting that morning and attached a “draft calculation for Boardwalk Contingent Consideration for your review”. One of the “[m]ain points to note” as stated in the email was that:

“Tony” is likely to refer to Mr Haggarty and “ML” means mining licence.

In cross-examination, Mr Haggarty said that his involvement in the question of the likelihood of mining leases being granted would have been for the audit for that year (T406), with Whitehaven’s accountants (Mr Picton being the audit accountant for Whitehaven) looking for support for the auditors for the half-year accounts (T408–409).

In the attached document, under the headings “Assumptions” and “Projects Likelihood of Obtaining Mining Licence” the following table appears:

These percentages were then translated into another part of the attached document with a further table that indicated that there was:

Using these probabilities, the spreadsheet stated that the fair value of the Milestone Shares was $115,275,929.

Mr Haggarty said in cross-examination that while he could not recall that he got involved in assisting on the likelihood of the relevant contingent asset mining lease falling in about January 2012, from reviewing Mr Picton’s email he obviously did get involved (T407–408).

Also in cross-examination, Mr Haggarty rejected that the analysis of the contingent consideration was being done for the purposes of material which would go into a presentation to speak to investors (T409). I accept this evidence.

On 25 January 2012 at 9:07pm, Mr Pojezny sent an email to Mr Picton, Mr Perrin and others in response in which he commented on Mr Picton’s email of 3:29pm that day by saying that it “looks good” and the “results appear intuitive”. Mr Pojezny made a number of specific suggestions on the calculations. Mr Pojezny also stated (emphasis in original):

At that time, Mr Haggarty was conducting meetings with analysts and investors to make the presentations referred to in the Marketing Schedule, so the emboldened text was a suggestion for him to include in those presentations.

On 27 January 2012 at 9:21am, Mr Picton responded to the email of 25 January 2012 from Mr Pojezny, stating that he had incorporated the changes advised by Mr Pojezny and had also undertaken some sensitivity analysis, which he then attached in an updated document. The updated document contained a revised table under the headings “Assumptions” and “Projects Likelihood of Obtaining Mining Lease”:

The updated document also contained a revised further table that indicated that:

Using these probabilities, the spreadsheet stated that the fair value of the Milestone Shares was $137,882,998.

On 31 January 2012, a meeting of the Audit and Risk Committee of Whitehaven was planned, the agenda for which included an item titled “Project Trifecta – 31 Dec 2011 Balance Sheets and Draft Pro Forma adjustments for Scheme Book”. The papers attached to the agenda for the meeting included a “31 December 2011 Summary Pro Forma Balance Sheet” and supporting papers explaining the various adjustments, which included:

As is evident, these probabilities were taken from the table contained in the attached document accompanying the email of 25 January 2012 at 3:29pm from Mr Picton.

These same probabilities were then used in the Scheme Booklet to calculate the fair value of the Milestone Shares, a topic dealt with in more detail below.

In the document containing the adjustments, using the probabilities stated, the fair value of the Milestone Shares was said to be $118,821,669.

On 5 February 2012 at 11:14am, Ms Hardie sent an email to Mr Pojezny, Tim Slattery of Goldman Sachs and others from Grant Samuel and Goldman Sachs asking whether they were happy for her to send through the Whitehaven accounting treatment of the contingent payments to PwC so that they could see how Whitehaven was treating them. Attached to the email was an excel file with spreadsheets, one of which is titled “Contingent Consideration” calculating the value of the Milestone Shares by reference to the likelihood of mining leases being issued, which were:

On 5 February 2012 at 1:01pm, Mr Slattery sent an email to Mr Perrin and Mr Picton, copied to Mr Pojezny, Mr Bensan, Mr Jing and others, in which he forwarded the email at 11:14am from Ms Hardie with the attached spreadsheet. Mr Slattery explained that PwC had asked to see the Whitehaven accounting treatment for the Milestone Shares/contingent consideration. Mr Slattery described the spreadsheet analysis as follows:

Mr Slattery said that the Goldman Sachs/Grant Samuel view was that it was “fine to send” the spreadsheet, adding “if anything it helps the BWK valuation case”.

On 7 February 2012 at 6:30pm, Mr Picton sent an email to Mr Perrin to which he attached “revised pro-forma workings”. Mr Picton also attached the “revised Boardwalk contingent consideration taking account of non-marketability of the shares issued”, noting that it reduces the consideration by approximately $20 million. Those calculations had been made by Ernst & Young in a spreadsheet which Mr Picton forwarded with his email.

The attached spreadsheet reflected the same analysis which had been in the spreadsheet attached to the email of 25 January 2012 at 3:29pm from Mr Picton, which was that there was:

These probabilities gave rise to a fair value of the Milestone Shares of $98,027,877 as expressed in the attached spreadsheet.

Subsequently, as stated in more detail below, the Scheme Booklet stated the fair value of the Milestone Shares as $98.028 million, confirming the probabilities on which it was based to have been accepted within Whitehaven.

Based on the emails of 25 January 2012 at 3:29pm, 25 January 2012 at 9:07pm, 27 January 2012 at 9:21am, 5 February 2012 at 1:01pm, 7 February 2012 at 6:30pm and the attachments to those emails as well as the papers for the Audit and Risk Committee meeting on 31 January 2012, I infer that as at 7 February 2012:

I also consider that the views expressed in these emails and their attachments provide contemporaneous documentary support of an intention within Whitehaven that the $150 million Capital Injection would be spent on developing Boardwalk’s assets of Ferndale, Dingo, Sienna and Monto, collectively being the Boardwalk Projects.

It is also abundantly clear that none of the reasoning for the views on the likelihood of the Trigger Events was exposed in the documents in which they are expressed.

On 6 February 2012 at 5:25pm, Mr Christensen sent an email to Mr Haggarty and Mr Burt, which was copied to Mr Flynn, with an attached “memo” raising two issues concerning the SPA. In the covering email, Mr Christensen referred to a discussion with Mr Haggarty and Mr Burt “last week” and said:

While Mr Christensen’s “memo” has three numbered points, there are in fact two issues in it, with the third point relating to both of the two issues. Mr Christensen wrote about the three points in the following way:

As stated above, Queen Street Capital was beneficially owned by Mr Tinkler via a trust.

As is apparent, Mr Christensen was asserting that cl 4.2 of the SPA entitled Boardwalk to make payments to satisfy obligations which had been entered into before the date of the SPA (11 December 2011) from the $150 million Capital Injection and that the obligations of Boardwalk to pay interest on the US$50 million loan from Noonday and to pay Queen Street Capital the 1% fee for the $150 million Capital Injection had both arisen before the SPA. As his third point, Mr Christensen repeated the statement that appeared in the slide of the December 2011 Investor Presentation and is headed “Transaction overview”, which I have found above records the understanding reached in discussions during the negotiations between Mr Haggarty, Mr Tinkler and their respective advisers before the Final Term Sheet.

Whitehaven argues that Mr Christensen’s “memo” is directly inconsistent with Les & Zelda’s case because it was an assertion by Mr Christensen that funds could be used otherwise than to develop the Milestone Projects or to pay debts, and as such it was an assertion which contradicts Les & Zelda’s case theory. Whitehaven also says that it is important to bear in mind that Mr Christensen was one of the attorneys who signed the SPA and is effectively a Group Member in these proceedings.

On 7 February 2012 at 8:28am, Mr Haggarty sent an email to Mr Christensen in response to his “memo” of the previous day. Mr Haggarty answered each of the points raised by Mr Christensen in the following way:

Clearly Mr Haggarty took issue with the way in which Mr Christensen was interpreting the provisions of the SPA as they operated in respect of the proposed payment of interest to Noonday in a number of ways. First, by saying that it was intended that the $150 million would only be injected into Boardwalk after the scheme was approved. Secondly, by saying that an amount of up to $25 million would be injected into Boardwalk to meet expected obligations up to 31 March 2012 in accordance with the Boardwalk Budget attached as Annexure B to the SPA. Thirdly, by saying that cl 4.2 of the SPA had no application as there was no obligation to make interest payments to Noonday until the end of the two year loan period, which was beyond March 2012.

In relation to the 1% fee to be paid the Queen Street Capital, Mr Haggarty’s response that the $150 million “isn’t equity in the traditional sense – it is a transaction structured to achieve an outcome requested by Nathan”. This is consistent with there being the mutual understanding amongst Whitehaven, the Aston/Tinkler interests (including Mr Tinkler) and their respective advisers about the intended use of the $150 million Capital Injection, which was that it would be used for the ongoing development of Boardwalk’s assets, as I have found above. An outcome requested by Mr Tinkler was not just that the $150 million Capital Injection achieve a nearly 20% shareholding in Whitehaven for the Tinkler interests but also that the $150 million Capital Injection would be used to develop the assets of Boardwalk.

In any event, Mr Haggarty indicated that Whitehaven would be prepared to consider agreeing that the 1% fee to Queen Street Capital could be paid from the $25 million that would be contributed in loans in the period to 31 March 2012 (which cll 4.2 and 4.8 of the SPA allowed).

The third point raised by Mr Haggarty was simply to indicate that in valuing Boardwalk, analysts had recognised that the payment of Boardwalk’s $50 million in debt would leave Boardwalk with net cash of $100 million. Presumably Mr Haggarty did not want Boardwalk to be in a position where it had less than $100 million in net cash after the $150 million Capital Injection was made and the debt repaid.

Whitehaven says that this response from Mr Haggarty is telling because it was not asserted that the funds could only be used to develop the Milestone Projects and repay debt, rather Mr Haggarty observed that the premise of the deal was that except for identified instances, Boardwalk’s costs would be met from its funds in the lead up to completion. Whitehaven says that Mr Haggarty also identified that there was to be left with Boardwalk a certain amount of cash at completion, which the proposal would cut across. Whitehaven argues:

On 7 February 2012 at 12:11pm, Mr Christensen sent an email to Mr Haggarty, copied to Mr Flynn, in which he replied to Mr Haggarty on each of the two issues, saying “[l]ooks like we have different views here - but we do need to resolve this”. In summary, the email contained the following remarks:

On 7 February 2012 at 2:57pm, Mr Haggarty sent an email to Mr Christensen, copied to Mr Flynn, Mr Burt, Mr Perrin and Mr Bartlett, in which he observed that Whitehaven and their advisers had very different views on the issues, and said that Mr Christensen’s proposal was not acceptable to Whitehaven as it would result in a substantial reduction in the value of Boardwalk of around $5 million, which they believed was neither in the spirit nor the letter of the SPA. Mr Haggarty said that he did not know how to resolve the issue, he would be travelling to Perth that afternoon and Mr Christensen should liaise with Mr Burt and Mr Perrin if he wished to discuss it further that day.

On 9 February 2012 at 1:24pm, Mr Flynn sent an email to Mr Tinkler in which he raised with him the outstanding commercial issues concerning interest on the Noonday loan and the 1% fee for Queen Street Capital. Mr Flynn said that both of these items were in the data room “from day one” and they can prove that they had accessed them. Mr Flynn said that he had told Whitehaven that the items were their responsibilities to cover as part of their due diligence and “we should not be responsible for their poor dd”. Mr Flynn also said:

Mr Flynn summarised Whitehaven’s position, and his view on it, by saying:

On 10 February 2012 at 7:29am, Mr Tinkler sent an email to Mr Flynn with his direct and coarse response on these issues as follows:

Whitehaven relies on Mr Tinkler’s email as not demurring from Mr Flynn’s description of the purpose of the $150 million share subscription being to “improve our equity position post deal” and there was no mention of any understanding that the remainder of the $150 million Capital Injection was to be used in a particular way. Whitehaven also says that Mr Tinkler’s assertion that it was open to use the $150 million Capital Injection to pay for professional advice fees used in the process of generating a benefit for him and BRI is also inconsistent with an understanding that the remainder of the $150 million Capital Injection was to be used only for the purposes of obtaining approval for the Milestone Projects.

On 10 February 2012 at 10:37am, Mr Perrin of Whitehaven sent an email to Mr Christensen, copied to Mr Haggarty and Mr Burt, in which he referred to a conversation on the telephone the previous day and confirmed that Whitehaven was disputing the 1% fee for Queen Street Capital and the interest on the Noonday loan as a liability of the merged entity. After setting out Whitehaven’s view on the proper construction of the relevant provisions of the SPA, Mr Perrin set out a proposed compromise in which Whitehaven would allow 50% of the capitalised interest up to $1.5 million on the Noonday loan and no recognition of the 1% finance fee for Queen Street Capital.

On 13 February 2012 at 12:33pm, Mr Perrin sent an email to Mr Christensen which referred to a telephone conversation between them that day and stated that Mr Christensen was going to send him an email detailing his acceptance of the Noonday interest and Queen Street Capital finance fee arrangement that was put forward in the email of 10 February 2012, with minor amendments. Mr Perrin asked Mr Christensen as a matter of priority to forward the email to him at his earliest convenience so that he could “accelerate the scheme process”.

On 13 February 2012 at 12:57pm, Mr Christensen sent an email to Mr Perrin, copied to Mr Flynn and Mr Lawler (by then of Blake Dawson and no longer of Gilbert + Tobin), in which he referred to Mr Perrin’s email of 10 February 2012 and confirmed their agreement that $1.5 million of the interest on the Noonday loan would be funded by the merged entity and Boardwalk would fund the remaining interest of $1,534,000 by Queen Street Capital waiving its fee of 1% on the $150 million Capital Injection.

Les & Zelda says that, contrary to Whitehaven’s contentions, this correspondence about the payment of interest on the Noonday loan and the 1% fee to Queen Street Capital is not directly inconsistent with its case. Les & Zelda argues that Whitehaven’s characterisation is an erroneous reading of what was truly in issue, which was a fight over who got to control what was expended out of the $150 million being injected into Boardwalk. Les & Zelda says that Whitehaven (understandably) wanted as much net cash as possible post-merger, including because the net cash figure of $100 million had been picked up by a number of analysts in their reports addressing the issue of the valuation of Boardwalk. Les & Zelda submits:

In my view, Whitehaven’s submissions about what I can take and make from this correspondence is misplaced. Les & Zelda is quite correct in describing the main thrust of the correspondence as a fight over who could control what was spent out of the $150 million Capital Injection. The parties were trying to thrust on each other the interest expense for the Noonday loan and the 1% fee to Queen Street Capital by employing different interpretations of provisions of the SPA. I do not consider that it is appropriate to rely on the respective negotiating positions adopted by the Tinkler interests and Whitehaven to provide any basis for determining what was or was not understood as at the date of the execution of the SPA and the central documents which followed it. I have a much safer basis for reaching conclusions about understandings by considering the contemporaneous documents in November and December 2011 rather than the posturing taken by employing “fighting words” that followed them in correspondence nearly two months later.

On 29 February 2012, MMC issued its report to the directors of Aston (MMC Report) to be included in PwC’s independent expert report in relation to the proposed merger of Aston and Whitehaven and the proposed acquisition of Boardwalk by Whitehaven.

The purpose of the MMC Report is stated to be:

The MMC Report states that MMC conducted its technical review in recognition of the requirements of:

The MMC Report explicitly refers to “Boardwalk’s assets” as including the exploration tenements of Ferndale, Sienna, Dingo and Monto (with no mention of the Coalworks project at Oaklands North), concluding from its review of Boardwalk that:

The map of the “Location of Boardwalk’s Exploration Assets” which is in figure 1.2 of the MMC Report only depicts the location of Ferndale, Sienna, Dingo and Monto, and also does not include the Coalworks project at Oaklands North.

Section 22 of the MMC Report is headed “Boardwalk Overview”. Part 22.1 headed “Introduction” makes it clear that the MMC Report only reviews the assets in which Boardwalk has or will have a direct holding and “therefore does not include the Oaklands and Vickery South assets”.

In cross-examination, Mr Haggarty agreed that the MMC Report identified work being done in relation to the Boardwalk assets, either historical or ongoing, which was limited to the four tenements of Ferndale, Sienna, Dingo and Monto (T326–331).

I have dealt with the MMC Report in more detail in my consideration of Ferndale and Dingo respectively below.

On 6 March 2012, PwC’s independent expert report on the proposed merger of Aston and Whitehaven (PwC Report) was completed and attached to a letter of that date addressed to the directors of Aston (PwC Letter).

Earlier drafts of the PwC Report were provided to ASIC for the purposes of regulatory approval.

Attached to the PwC Report as Appendix B was a list of the “major sources of information” to which PwC had access and relied upon for in preparing the PwC Report, which included:

In cross-examination, Mr Haggarty said that he probably did provide information to PwC, and it would have been normal for him to do so (T317–318). He also agreed that he regarded the management of Boardwalk as including Mr Tinkler, the management of Aston as including Mr Tinkler and that the Scheme Booklet (which included the PwC Report) was approved by the advisers to all parties (T318).

In the PwC Letter, the following paragraph appears in section 1 headed “Introduction” (emphasis added in underline):

In cross-examination, Mr Haggarty said that he regarded this paragraph as an accurate description of the proposed transaction and that he signed off on it, which I take to mean that he had the same view as set out in this paragraph (T319).

The “Proposed Boardwalk Transaction” which is referred to in this statement is one in which the $150 million Capital Injection was being made as part of the issuing of the Unrestricted Shares and Milestone Shares. In cross-examination, Mr Haggarty confirmed that this was his understanding of the transaction (T321).

Mr Haggarty was questioned about the statement quoted above and gave the following evidence (T320):

Summarising this evidence, Mr Haggarty confirmed that the position which had been reached based on the negotiations in which he had participated prior to the signing of the Final Term Sheet was that the $150 million Capital Injection “will be used for the ongoing development of [Boardwalk’s] assets”. This is entirely consistent with the evidence given by Mr Haggarty at other points in the cross-examination in respect of the mutual understanding of the Aston/Tinkler interests (including Mr Tinkler), Whitehaven (including Mr Haggarty) and their respective advisers as to the intended use of the $150 million Capital Injection, which I have found to be sourced in the discussions as part of the negotiations leading up to the Final Term Sheet. That mutual understanding is also recorded in the 9 December Further Draft ASX Announcement, the 10 December Draft ASX Announcement, the 12 December ASX Announcement, the December 2011 Investor Presentation, the 2012 Investor Presentation, the March 2012 Investor Presentation, the Q&A Document and (as I have found below) the Scheme Booklet.

Mr Haggarty gave further confirmatory evidence of this understanding in the following exchange (T321):

Section 3 of the PwC Letter is headed “Summary of our opinion and key conclusions”, which commences with the statement that PwC consider the scheme to be in the best interests of Aston shareholders. PwC state that in arriving at their valuation assessments they have relied on the MMC Report as a technical expert report and the AME Report for views on the near term outlook for coal prices, both of which were also attached to the Scheme Booklet. PwC state that the MMC Report and the AME Report in the Scheme Booklet should be read in conjunction with the full PwC Report.

In relation to the value of Boardwalk, PwC state the following in the PwC Letter:

In section 1.3 of the PwC Report headed “Proposed acquisition of Boardwalk Resources Limited by Whitehaven”, the familiar description of the Boardwalk transaction is set out in the following terms (emphasis added in underline):

As I have repeatedly stated, this underlined statement reflects the mutual understanding of the Aston/Tinkler interests, Whitehaven and their respective advisers as to the intended use of the $150 million Capital Injection which arose from the discussions during the negotiations occurring prior to the Final Term Sheet.

On 9 March 2012, Jacobson J of the Federal Court of Australia delivered judgment in Re Aston Resources [2012] FCA 229 and ordered, amongst other things, that:

On 9 March 2012, Whitehaven made an announcement to the ASX, which stated that the “Court approves distribution of scheme documentation” and referred to the Scheme Booklet, which had been registered with ASIC that day and was available on Whitehaven’s website (March 2012 ASX Announcement).

The Scheme Booklet included:

The Scheme Booklet was distributed to the Aston shareholders in accordance with the orders made on 9 March 2012.

The Scheme Booklet was reviewed by Mr Haggarty as a director of Whitehaven, together with the whole of the board of Whitehaven, and by Whitehaven’s advisers, including Mr Bartlett at Grant Samuel (T316–317). In cross-examination, Mr Haggarty agreed that the Scheme Booklet had been read thoroughly and been signed off by Whitehaven’s advisers (T339), and as indicated above, was approved by advisers to all parties (T318).

The Scheme Booklet contains a letter dated 9 March 2012 from Mr Tinkler (as chairman of Aston) to the Aston Shareholders, a letter dated 9 March 2012 from Mr Vaile, Rick Gazzard and David Ryan (as independent directors of Aston) to the Aston shareholders and a letter dated 9 March 2012 from Mr Conde (as chairman of Whitehaven) to the Aston shareholders, all expressing their unanimous support for the scheme of arrangement and their recommendation for a vote in favour of it. In the letter dated 9 March 2012 from Mr Tinkler to the Aston shareholders (which formed part of the Scheme Booklet), Mr Tinkler said that he, Mr Christensen, Farallon and their affiliates would not vote at the meeting of the Aston shareholders in relation to the scheme.

Section 5 of the Scheme Booklet is titled “Profile of Whitehaven”. The introductory paragraph states:

In cross-examination, Mr Haggarty confirmed the truth of this statement (T336).

Section 5.8 of the Scheme Booklet is titled “Boardwalk Transaction”. Section 5.8.1 is headed “Boardwalk Transaction summary” and states (emphasis added in underline, footnotes omitted):

Section 15 of the Scheme Booklet contains the following relevant definitions:

In my opinion, it is clear that Whitehaven was responsible for the whole of the contents of section 5 of the Scheme Booklet. I consider that by reading together the definitions of “Whitehaven Information” and “Boardwalk Information” means that both Whitehaven and Boardwalk had together provided the content of section 5.8. However, the statement made about the use of the $150 million Capital Injection “if the Scheme becomes Effective” was clearly one which could only come from Whitehaven who would have complete control of Boardwalk in that eventuality.

In cross-examination, Mr Haggarty said that he considered section 5.8.1 of the Scheme Booklet to be an accurate statement of the Boardwalk transaction as he understood it (T336–337). He also that the final paragraph of section 5.8.1 as set out above reflected his understanding as at the date of the signing of the Final Term Sheet as to how the $150 million Capital Injection would be used (T337–338). Mr Haggarty presumed that Mr Tinkler held the same understanding (T338).

In further cross-examination, Mr Haggarty also said that everything in the Scheme Booklet was important (T339), including agreeing that it was important for readers of the Scheme Booklet as a potential shareholder of Whitehaven to know that (T338–339):

Mr Haggarty said that what was contained in the description of the Boardwalk transaction in the Scheme Booklet was “where [they] landed” and the Scheme Booklet is “on the record, so it’s true” (T340).

In my view, this section of the Scheme Booklet records the mutual understanding which had been reached by the Aston/Tinkler interests (including Mr Tinkler), Whitehaven (including Mr Haggarty) and their respective advisers that the $150 million Capital Injection to Boardwalk “will be used for the ongoing development of its assets including repayment of existing debt”. In my opinion that understanding could only have come from the discussions between Mr Haggarty, Mr Tinkler and their respective advisers during the negotiations in which it was agreed that the $150 million would be injected into Boardwalk as recorded in the Final Term Sheet.

For the reasons I have stated above in relation to the 9 December Draft ASX Announcement, I regard the reference in the Scheme Booklet to the “development of its assets” as only including the development of “Boardwalk’s assets”, being the tenements described - Sienna, Dingo, Monto and Ferndale, collectively the Boardwalk Projects - and not including Boardwalk acquiring further assets such as a greater shareholding interest in Coalworks. The assets to be developed were those comprising the Boardwalk Projects and did not include Oaklands North, which was a project of Coalworks and in which Boardwalk had an indirect interest by its shareholding in Coalworks.

Whitehaven relies on the “Important Notices” section of the Scheme Booklet, which contains a heading “Disclaimer as to forward-looking statements”, including the following:

For the same reasons as I have expressed above in relation to the 9 December Further Draft ASX Announcement, I consider that the statement “will be used for the ongoing development of its assets” in the Scheme Booklet is a statement of Whitehaven’s intention which must be read with the disclaimer. As a result, the statement of intention has to be read as one which contained no representation of the likelihood of it occurring.

Section 5.8.2 of the Scheme Booklet is headed “Boardwalk Transaction benefits and risks”, part of which states:

In cross-examination, Mr Haggarty said that the whole of this part of section 5.8.2 reflected his view (T341–342).

Section 5.8.2 of the Scheme Booklet then continued as follows:

Les & Zelda say that what is not said to be a “key risk” in section 5.8.2 was Whitehaven not following through on its commitment to spend $150 million on the “ongoing development” of Boardwalk’s assets (as described in section 5.8.1), or that Whitehaven would not engage in any “future exploration on Boardwalk’s existing tenements” as opposed to those activities not leading to “economically viable resources being identified and developed” (as described in section 5.8.2). Given that the list of “key risks” is said to be non-exhaustive, I do not think that anything turns on this point, especially in light of the disclaimer.

Mr Tinkler gave affidavit evidence that he attended the meeting of Aston shareholders on 16 April 2012. In accordance with the letter dated 9 March 2012 from Mr Tinkler to Aston shareholders (which is contained in the Scheme Booklet), he did not vote at the meeting of Aston shareholders.

On 11 April 2012 at 10:56am, Mr Bienlinko of Goldman Sachs sent an email to Mr Burt and others, which attached a draft Whitehaven “EGM presentation”. On 11 April 2012 at 11:32pm, Mr Burt sent a reply email to Mr Bienlinko and others requesting that he email a copy of the pack that had been used by Mr Haggarty and Mr Vaile on the international roadshow because Mr Haggarty wanted to cross check against that pack for his EGM presentation.

On 12 April 2012 at 10:18am, Mr Bienlinko sent an email to Mr Burt attaching a copy of the “pack used for the roadshow”, which was a copy of the March 2012 Investor Presentation.

It is evident from this communication that Mr Haggarty was wanting to make sure that the “EGM presentation” was consistent with what had been said during the investor presentations in March 2012.

On 18 April 2012, Jacobson J of the Federal Court of Australia approved the scheme of arrangement: Re Aston Resources Ltd (No 2) [2012] FCA 401.

On 18 April 2012, Whitehaven made an ASX announcement that the Federal Court had approved the scheme, the last day of trading in Aston shares was 19 April 2012, the scheme consideration would be issued to the Aston shareholders on 2 May 2012 and the expected date for payment of the fully franked special dividend of $0.50 for each share to existing Whitehaven shareholders was 4 May 2012. The ASX announcement also confirmed that Aston and Boardwalk shareholders who received Whitehaven shares under the scheme and the acquisition of Boardwalk would not be eligible to receive the special dividend.

On 30 April 2012, Boardwalk, Whitehaven and others entered into a document titled “Boardwalk Transaction Payment Instruction Letter” (Payment Letter), which, despite its title, was actually executed as a deed. Mr Tinkler signed the Payment Letter on behalf of Boardwalk.

Clause 4 of the Payment Letter contains a set of acknowledgements, including that:

Clause 5(a)(ii) of the Payment Letter stated that notwithstanding cl 4.9 of the SPA, it was agreed that the Subscription Amount ($150 million) was to be paid the “Business Day after the date on which the WCL-Aston Scheme comes into effect” for the purposes of s 411(10) of the Corporations Act.

Clause 5(a)(iii) of the Payment Letter stated that the Subscription Amount ($150 million) was to be subscribed by:

On 1 May 2012, BRI as trustee for the BR Trust completed an application addressed to the directors of Boardwalk for 75,786,713 ordinary shares in Boardwalk for the total application price of $150 million payable in full on application (Application) as follows:

Mr Tinkler signed the Application on behalf of BRI under power of attorney.

As part of the board papers for the meeting of the Whitehaven board on 26 June 2012, it is recorded that on 1 May 2012, the cash position of Boardwalk was increased by the receipt of approximately $85 million from its shareholders to recapitalise Boardwalk. This is consistent with the terms of the Payment Letter and the Application.

On 1 May 2012, the Application was tabled at a meeting of the board of directors of Boardwalk at which it was resolved that the Application be approved and the Subscription Shares be issued to BRI.

Clause 2.4 of the SPA provided that the Milestone Shares were to be subject to the Restriction Deed, the form of which was Annexure A to the SPA. Pursuant to cll 5.4(f) and 5.5(f) of the SPA, the Restriction Deed was to be entered into on Completion (which occurred on 1 May 2012).

On 1 May 2012, Andrew Lumsden executed the Restriction Deed as attorney on behalf of Whitehaven and Mr Tinkler and Ms Hyde executed the Restriction Deed as attorneys pursuant to the Power of Attorney on behalf of the Boardwalk Shareholders, including Les & Zelda.

The Vendor(s) are defined in the Restriction Deed to be the parties named in item 2 of Schedule 2, who are the Boardwalk Shareholders, including Les & Zelda. The Purchaser is defined in the Restriction Deed to be Whitehaven.

In short, the Restriction Deed imposes restrictions on the Milestone Shares so that there can be no disposal of them, no exercise of any voting rights attached to them, no dividends received on them and no participation in any rights issue in connection with them, unless one or more Trigger Events occur.

The relevant provisions of the Restriction Deed are as follows:

I have dealt with the provisions of the Restriction Deed in more detail in my consideration of the Implied Terms Claim below.

Mr Tinkler gave affidavit evidence that he executed the Restriction Deed on behalf of the Boardwalk Shareholders under the Power of Attorney based on conversations he had in November 2011, including at the UBS Meeting and the Café Meeting, and various documents, including the Final Term Sheet, the 9 December Further Draft ASX Announcement, the Draft Investor Presentation, the 12 December ASX Announcement, the Q&A Document, the 12 December Memorandum, the 13 December Draft Letter, the Marketing Schedule and the Scheme Booklet.

In cross-examination, Mr Tinkler confirmed that he executed the Restriction Deed on behalf of the Boardwalk Shareholders (T297). Mr Tinkler refuted the propositions that the conversations at the UBS Meeting and the Café Meeting did not occur and that he has no memory of receiving or reading the documents listed above in 2011 or 2012 (T298). Mr Tinkler said that he knew that the Restriction Deed was required by the terms of the SPA to be signed and delivered on completion, and this was the basis on which Mr Tinkler executed the Restriction Deed (T298).

On 1 May 2012, Mr Tinkler and Ms Hyde, acting under the Power of Attorney, executed share transfer forms on behalf of each of the Boardwalk Shareholders for the transfer of shares in Boardwalk to Whitehaven with the consideration payable stated on each share transfer form to be the specified number of fully paid ordinary shares in Whitehaven, divided between Unrestricted Shares and Milestone Shares. The Milestone Shares were stated to be fully paid shares in Whitehaven subject to the terms of the Restriction Deed.

The number of shares each of the Boardwalk shareholders held in Boardwalk, which were comprised in the number of Unrestricted Shares and Milestone Shares they received (which are the same as those as set out in the SPA), are as follows:

Transfer forms were also executed by the Farallon/Noonday Lenders and the Minority Lenders who were selling warrants and shares in Boardwalk which were acquired by Whitehaven. The details of the number of warrants/shares they held in Boardwalk which were comprised in the number of Unrestricted Shares and Milestone Shares they received (which are the same as those set out in the WPA and the Minority Lenders SPA respectively) are as follows:

Across the Boardwalk Shareholders, the Farallon/Noonday Lenders and the Minority Lenders, they received a total of 85,885,183 Unrestricted Shares and 34,020,000 Milestone Shares, comprising a percentage split of 71.6% in Unrestricted Shares and 28.4% in Milestone Shares.

On 1 May 2012, Mr Tinkler, Mr Flynn, Mr Christensen and Mr Craig each resigned as a director of Boardwalk and its subsidiaries: Boardwalk Sienna, Boardwalk Ferndale, Boardwalk Monto, Boardwalk Dingo, Boardwalk Coal Management Pty Limited and Boardwalk Coal Marketing Pty Limited.

On 1 May 2012, Whitehaven issued a notice under s 708A(5)(e) of the Corporations Act stating that in consideration for the purchase of Boardwalk, Whitehaven had issued 120,305,238 fully paid ordinary shares and 974,035 options. The notice stated that:

On 2 May 2012, Whitehaven made an announcement to the ASX that the scheme of arrangement had been completed and that 388,901,169 shares in Whitehaven and 16,872,910 options in Whitehaven had been issued.

On 7 May 2012, Whitehaven made an announcement to the ASX of its proposed acquisition of Coalworks for $1.00 per share (Coalworks ASX Announcement). Under the heading “The benefits of Whitehaven’s Offer to Coalworks shareholders”, the Coalworks ASX Announcement stated:

Mr Haggarty gave affidavit evidence that Whitehaven started exploring an acquisition of all the shares in Coalworks (known internally as Project Cotton) prior to completion of the Boardwalk transaction, after which Whitehaven would acquire the 19.9% interest in Coalworks that was held by Boardwalk. Mr Tinkler gave affidavit evidence that prior to the Coalworks ASX Announcement he had no knowledge of the proposed acquisition of Coalworks by Whitehaven and was not aware of the proposed acquisition being mentioned in any of the material issued by Whitehaven as part of Project Trifecta.

On 25 May 2012, Whitehaven made an announcement to the ASX, attaching its bidder’s statement. The bidder’s statement disclosed that the maximum amount of cash that Whitehaven would be required to pay under the offer for the Coalworks shares if acceptances were received in respect of all of the Coalworks shares on issue (other than those Coalworks shares in which Whitehaven already had a relevant interest) would be approximately $142 million, with an additional $21.7 million of consideration if the holders of all options on issue at that time exercised them and accepted the Whitehaven offer.

On 4 July 2012, Whitehaven made an announcement to the ASX that it had obtained a relevant interest in more than 90% of the shares in Coalworks, it did not intend to extend the offer beyond the close at 7pm that day and it intended to seek compulsory acquisition of all the remaining ordinary shares of Coalworks it had not acquired under the offer.

On 19 July 2012, Whitehaven made an announcement to the ASX that it held 95.52% of all the ordinary shares in Coalworks and was entitled to proceed to compulsory acquisition of all of the other shares in Coalworks.

On 21 August 2012, Whitehaven completed the compulsory acquisition of all of the remaining shares in Coalworks, which it reported as a subsequent event in its financial statements as at 30 June 2012.

On 12 June 2012, the Tinkler Group made an indicative non-binding proposal to acquire all the shares in Whitehaven.

On 13 June 2012, Whitehaven made an ASX announcement stating that it had received the indicative non-binding proposal from the Tinkler Group regarding the privatisation of Whitehaven.

On 13 July 2012, Tinkler Group made a further indicative non-binding proposal to acquire all the shares in Whitehaven.

Also on 13 July 2012, Whitehaven made an ASX announcement regarding the receipt of the further proposal from the Tinkler Group in which it also stated that the Tinkler Group would conduct due diligence over a four-week period, concluding on 23 August 2012.

Between 21 July 2012 and 23 August 2012, the Tinkler Group conducted due diligence in relation to the proposed acquisition of Whitehaven.

On 23 August 2012, the Tinkler Group sent a letter to Whitehaven stating that it was not in a position to table a cash offer of $5.20 per share.

On 24 August 2012, Whitehaven made an ASX announcement that the due diligence period had expired and it had been advised by the Tinkler Group that a formal binding proposal of $5.20 per share would not be forthcoming.

On 21 August 2012, Ernst & Young provided a report to the audit committee of Whitehaven as part of their audit of Whitehaven for the year ended 30 June 2012 (2012 Audit Report). In the section of the 2012 Audit Report headed “1.3 Acquisition of Boardwalk Resources”, Ernst & Young set out the calculation of the contingent consideration at $50.6 million through the issue of 34.02 million Milestone Shares, stating that the calculation was based on the following:

On 30 August 2012, KPMG provided a report to Whitehaven containing an assessment of the fair value of the assets acquired and liabilities assumed and an allocation of the purchase price in relation to its takeover of Boardwalk as at 1 May 2012 (KPMG Valuation Report).

In Part 3 of the KPMG Valuation Report titled “Purchase price allocation”, section 3.2 is headed “Consideration”, a portion of which contains the “Measurement of fair value of Milestone Shares (contingent consideration)”, which relevantly includes:

Adopting this reasoning as part of KPMG’s assessment, along with Whitehaven’s share price of $5.18 per share at the end of trading on 1 May 2012, an estimated future dividend of 2.75% until a Trigger Event was reached and a discount of 20% for lack of marketability, KPMG concluded in the KPMG Valuation Report that:

These probabilities and the calculation of the contingent consideration were exactly the same as stated in the 2012 Audit Report prepared by Ernst & Young.

On 14 September 2012, Whitehaven released its 2012 Annual Report. In the notes to the financial statement contained in the 2012 Annual Report, note 39 states that the fair value of the contingent consideration in the acquisition of Boardwalk was $50.595 million, which is consistent with the calculation of that amount made in the 2012 Audit Report and the KPMG Valuation Report.

Following the completion of the merger, there were a series of events which impacted the development of the Boardwalk Projects.

Across the period from October 2011 (when the possibility of Project Trifecta arose) to July 2016 there was a general decline in thermal coal prices and hard coking coal prices in world markets quoted in US dollars as recorded in recognised databases. Those prices then rose before fluctuating between October 2016 to April 2021, when they commenced to rise significantly until around January 2022 (in the case of hard coking coal prices) and October 2022 (in the case of thermal coal prices). From that time until October 2023, the thermal coal prices and hard coking coal prices declined overall again.

Set out below is a graph prepared by Les & Zelda which depicts the movements in thermal coal prices and hard coking coal prices across the time period from October 2011 to October 2023.

Across the period from June to December 2022, Whitehaven began to respond to the decline in coal prices in the manner outlined below.

On 22 June 2012 at 4:41pm, Mr Kane (as recounted by Mr Haggarty, from 1 May 2012 the chief operations officer of the Maules Creek and Boardwalk Projects) sent an email to a number of Whitehaven executives, including Mr Perrin and Mr Haggarty. The email attached board papers titled “Material from Aston Resources Limited and Boardwalk Resources Limited” for the Whitehaven board meeting proposed to be held on 26 June 2012 (June 2012 Aston/Boardwalk Board Papers).

Attachment B to the June 2012 Aston/Boardwalk Board Papers under the heading “3.1 Cash position” recorded the cash available as at 31 May 2012 totalled $73.7 million. This figure was comprised of cash held by Boardwalk of $1.9 million and cash held by Whitehaven of $71.8 million, noting that the “cash position was refreshed on 1 May 12 when $85m was received (net of debt repayments) from shareholders to recapitalise the company” and “[c]ash outflows during May 12 totalled $11.4m”.

The June 2012 Aston/Boardwalk Board Papers also included a draft budget paper titled “FY2013 Budget & FY 2014 & 2015 Forecast” (2013 Draft Budget). The 2013 Draft Budget recorded that “[c]oal prices have come under pressure in recent months” and that the ‘[r]evised pricing has seen a net reduction of $86.5M for all sales”.

The 2013 Draft Budget contained a total capital expenditure forecast for 2013 to 2015 on the Boardwalk Projects of $56.473 million, $41.093 million of which was forecast to be spent in FY2013 and $15.380 million of which was forecast to be spent in FY2014, with no amount forecast to be spent in FY2015.

The 2013 Draft Budget demonstrates that Whitehaven was still planning to expend capital on exploration and development activities on the Boardwalk Projects in FY2013 and FY2014.

On 24 August 2012, Whitehaven released its annual results for FY2012, making a presentation which included:

It was clear at this time that Whitehaven was focussed on progressing identified projects as part of its “core growth plans” (which did not include the Boardwalk Projects) and that the Boardwalk Projects fell within those on which reduction in operating costs would be sought, including the deferment and cancellation of expenditure on them.

On 5 September 2012, Mr Haggarty sent a memorandum to “Executive General Managers, General Managers and Commercial Managers”, copied to the CFO, which had the subject line “Interim Capital Expenditure Process and Cost Review” (5 September 2012 Capex Memo) and stated:

On 5 September 2012, Emma Larkworthy (an executive assistant at Whitehaven) sent the 5 September 2012 Capex Memo by email to a number of Whitehaven executives, including Mr Haggarty and Mr Kane, and copied to Mr Perrin. It generated email responses from these executives seeking clarification as to how the capital expenditure limit applied to the existing exploration projects, particularly the Boardwalk Projects.

On 12 September 2012 at 9:32am, Craig Boyd (Whitehaven’s General Manager Finance) sent an email to Mr Perrin and Mr Kane, amongst others, in which he referred to a discussion that morning with Mr Perrin and concluded:

On 12 September 2012 at 9:55am, Mr Perrin sent an email to Mr King, copied to Mr Haggarty and Mr Kane amongst others, which recorded what had been agreed in a meeting the previous week with Mr Kane about the work to be undertaken on numerous exploration projects, including the Boardwalk Projects. The email stated:

As a result of the capital expenditure limit contained in the 5 September 2012 Capex Memo, it was clear that only the minimum amount of work would be undertaken on the Boardwalk Projects.

On 13 September 2012, Mr King sent an email to Mr Walker, Mr Kane and Alan Wigan (CFO of Boardwalk) in which he recorded a further discussion between them that day stating the “Good”, “Bad” and “Ugly” capital expenditure options in relation to each of the Boardwalk Projects.

On 16 September 2012 at 4:35pm, Mr Walker sent an email to Mr Kane, Mr Wigan and Mr King with the subject line “BWK Reforecasts – The Good: Part 1 of 3” stating that he had re-run the FY2013 budgets for three separate cost reduction options being:

The balance of the email set out the different expenditure changes which would have to occur on each of the Boardwalk Projects by applying The Good (“High Case”) option.

On 16 September 2012 at 4:55pm, Mr Walker sent an email to Mr Kane, Mr Wigan and Mr King with the subject line “BWK Reforecasts – The Bad: Part 2 of 3” setting out the different expenditure changes that would have to occur on each of the Boardwalk Projects by applying The Bad (“Mid Case”) option.

On 16 September 2012 at 5:15pm, Mr Walker sent an email to Mr Kane, Mr Wigan and Mr King with the subject line “BWK Reforecasts – The Ugly: Part 3 of 3” setting out the different expenditure changes that would have to occur on each of the Boardwalk Projects by applying The Ugly (“Low Case”) option.

On 18 September 2012, Mr Kane made a presentation at the Whitehaven office in Brisbane, which was attended by Mr Haggarty. The presentation was titled “Whitehaven Coal Limited: Projects Presentation: Update on status, budget and forecasts” (September 2012 Projects Presentation). Mr Haggarty attended the presentation.

In the September 2012 Projects Presentation, overviews are provided for all of the Whitehaven exploration projects, including the Boardwalk Projects. These overviews included:

In the September 2012 Projects Presentation, “The Good”, “The Bad” and “The Ugly” were also identified for each of the revised project options on these exploration projects, including the Boardwalk Projects. Each of those options involved delays in the continuation of development work on the Boardwalk Projects and a reduction in the expenditure on them.

On 19 September 2012, Mr Walker sent an email to Mr Wigan, Mr Kane and Mr King to which he attached “reforecast numbers for the options agreed yesterday with Tony” which reforecast all of the proposed expenditure on each of the Boardwalk Projects under the Good, the Bad and the Ugly scenarios and introduced a further “reduced case” scenario.

On 19 October 2012, Mr Kane sent an email to Mr Haggarty with the subject line “The Fugly Case”, which attached a draft discussion paper dated 18 October 2012 with the “The Fugly Case” as the subject and “Consideration of cessation of the Business Development unit” as the outcome sought (October 2012 Fugly Case Discussion Paper). The preamble to the Fugly Case Discussion Paper is as follows:

Under the heading “History”, the October 2012 Fugly Case Discussion Paper, after referring to the amalgamation of Aston and Boardwalk into Whitehaven and its absorption of Coalworks, stated (emphasis added in bold):

The October 2012 Fugly Case Discussion Paper then set out the “Fugly Case” as follows (emphasis added in bold):

The October 2012 Fugly Case Discussion Paper then set out a series of staff changes involving redundancies (including of Mr Kane) and transfers and office closures in Brisbane and Denman.

On 1 November 2012, the Whitehaven board had a meeting for which Mr Kane had prepared a report titled “Business Development Monthly Report”, which stated that:

On 16 November 2012, Whitehaven made an announcement to the ASX that Whitehaven had decided to “scale back the company’s Business Development Unit and Brisbane presence” (16 November 2012 ASX Announcement). The 16 November 2012 ASX Announcement continued as followed:

In effect, the 16 November 2012 ASX Announcement demonstrated that the “Fugly Case” outlined in the October 2012 Fugly Case Discussion Paper had been put into action based on the economic conditions facing Whitehaven due to the decline in global coal prices. In other words, the Boardwalk Projects had been “mothballed indefinitely”.

In the notes to the financial statements contained in Whitehaven’s 2012 Annual Report, note 7 records the impairment of goodwill from the acquisition of Boardwalk in the amount of $119.791 million. This amount reflected the difference between the consideration paid by Whitehaven for the Boardwalk shares and the fair value of the Boardwalk shares. The assets themselves were not impaired.

Note 7(6) in the 2012 Annual Report also contains the following statement:

In the statement of agreed facts dated 20 August 2024, Les & Zelda and Whitehaven agreed that in Whitehaven’s financial statements for FY2012, an impairment of approximately $120 million was recorded in respect of the goodwill for Whitehaven’s acquisition of Boardwalk.

In December 2012, Whitehaven prepared a draft discussion paper titled “Impairment testing considerations for non-financial assets” (December 2012 Impairment Discussion Paper). The stated purpose of the December 2012 Impairment Discussion Paper was to document reporting considerations and outcomes to determine whether there is any indication of impairment and if any such indication exists, the asset’s estimated recoverable amount. The December 2012 Impairment Discussion Paper stated the background facts as follows:

The December 2012 Impairment Discussion Paper stated under the heading “Investment in Boardwalk and Coalworks” as follows (emphasis added in bold):

The December 2012 Impairment Discussion Paper concluded as follows (emphasis added in bold):

It was therefore clear that the reduction in the expenditure on the exploration and development work at the Boardwalk Projects was due to the company wide capital expenditure reductions, not because there was any adverse exploration results at any of the Boardwalk Projects.

On 14 April 2013, Jonathan Vandervoort (the executive general manager – infrastructure at Whitehaven) sent an email to Mr Flynn which attached a draft business development strategy he had developed for the annual budget process following a discussion between them the previous week.

The draft business development strategy attached stated (emphasis added in bold):

There is no indication in the evidence that this draft strategy was ever finalised.

On 26 April 2013, Adam Pont (financial planning and analysis manager at Whitehaven) sent an email to Mr King, Mr Perrin, Mr Vandervoort, Mr Flynn and others at Whitehaven, which attached a presentation titled “Business Development Budget AFY14 – AFY16 including the “9+3” forecast for AFY13”. One of the slides of the presentation stated:

On 16 May 2013, Whitehaven prepared an internal paper titled “Exploration Tenements Review” (May 2013 Review Paper), the stated purpose of which was a “[s]trategic review of Whitehaven’s exploration tenements to determine options for maximising the return on those exploration tenements that might now be regarded as non-core assets”. The context of the May 2013 Review Paper was stated as follows:

The May 2013 Review Paper then considered whether exploration tenements were “non-core assets” and, if so, whether “the cost of holding the exploration tenement [was] in all probability…in excess of any potential future returns”, and accordingly, whether the tenement should be sold alongside more marketable tenements or relinquished to the government. The May 2023 Review Paper did not set out any proposal to sell any of the Boardwalk Projects and none of them were identified for possible sale.

The decision to restrict expenditure on coal exploration projects to the minimum was reported in Whitehaven’s annual report for FY2013 (2013 Annual Report), which was sent to shareholders in October 2013, as follows:

In December 2013, Whitehaven prepared a discussion paper titled “Impairment testing considerations for non-financial assets” (December 2013 Impairment Discussion Paper). In relation to the Boardwalk Projects, the December 2013 Impairment Discussion Paper stated (emphasis added in bold):

Accordingly, by the end of 2013 while it was clear that the Boardwalk Projects were all subject to the capital expenditure constraints on exploration and development work that Whitehaven had imposed, there was no suggestion that any of the Boardwalk Projects should be impaired on the basis that they were uneconomic.

On 10 September 2014, Mr Ball (CFO of Whitehaven) circulated to the Whitehaven board a presentation titled “Board Refinance Workshop” (September 2014 Board Presentation), which presented three different scenarios for Whitehaven’s financial position in FY2015, FY2016 and FY2017: a base case scenario; a scenario where coal prices remained at their current level but foreign exchange prices were as set out in Whitehaven’s budget; and a scenario where coal prices remained at their current level and foreign exchange prices remained at their current level.

In the September 2014 Board Presentation under the heading “EDITA Margin Analysis”, the base case scenario records negative free cash flow available to service debt of $36 million in FY2015 and positive free cash flow available to service debt of $192 million in FY2016 and $318 million in FY2017. It was therefore envisaged that there would be a significant improvement in the cashflow of Whitehaven in FY2016 and FY2017.

On 22 June 2015, Mr Ball tabled a paper titled “Operating Assets Impairment Assessment” at an Audit and Risk Management Committee meeting (June 2015 Impairment Assessment). The purpose of the June 2015 Impairment Assessment was stated to “set the scene for the 30 June 2015 impairment assessment” and set out “the results of management’s initial review for indicators of impairment”. Against the external indicator of impairment (being where the “carrying amount of the net assets of the entity is more than its market capitalisation”), the “management comment” includes the following:

On 3 August 2015, a meeting of Whitehaven’s Audit and Risk Management Committee was held at which a discussion paper titled “Exploration Assets Impairment” was tabled (August 2015 Impairment Paper).

The August 2015 Impairment Paper provided “an explanation of the approach that was adopted to comply with Australian Accounting Standards in respect of exploration and evaluation expenditures in the financial statements of Whitehaven Coal Limited for the financial year ended 30 June 2015”.

The August 2015 Impairment Paper set out the accounting policy adopted by Whitehaven in the following form:

The August 2015 Impairment Paper noted the balance sheet values of each of the Boardwalk Projects in FY2013, FY2014 and FY2015 as follows:

Under the heading “Findings”, the August 2015 Impairment Paper provided as follows (emphasis added in bold):

As the result of these proposed impairments, the August 2015 Impairment Paper stated that the proposed carrying value as at 30 June 2015 in the financial statements of each of the Boardwalk Projects be revised to the following amounts:

The August 2015 Impairment Paper recommended the recording of an impairment charge of $305.0m in respect of the exploration assets on the balance sheet of Whitehaven at 30 June 2015.

The meeting of the Whitehaven Audit and Risk Committee on 3 August 2015 considered the recommended course in the August 2015 Impairment Paper and determined that “in aggregate terms, therefore, an impairment charge be taken for Ferndale, the QLD exploration assets and the residual exploration projects of approximately $335m before tax”.

On 10 August 2015, another meeting of Whitehaven’s Audit and Risk Management Committee was held. Consistent with the recommendations in the August 2015 Impairment Paper, the meeting on 10 August 2015, again determined that Whitehaven recognise an aggregate impairment of $355 million across all of its exploration projects, including the Boardwalk Projects. In the minutes of the meeting, it was noted that:

The board of Whitehaven accepted the recommendation of the Audit and Risk Committee to impair the exploration assets.

In Whitehaven’s 2015 Annual Report, it records an impairment charge of approximately $335 million in relation to the early stage exploration assets. The following explanations of the impairment charge were provided in various parts of the 2015 Annual Report:

In the statement of agreed facts dated 20 August 2024, Les & Zelda and Whitehaven agreed that the impairment charge of approximately $355 million for Whitehaven’s early stage exploration assets resulted in the Boardwalk Projects being impaired by $349.6 million in Whitehaven’s financial statements for FY2015, divided between each of them as follows:

In Whitehaven’s 2016 Annual Report, Whitehaven did not recognise any further impairment in relation to its exploration assets, including the Boardwalk Projects.

In July 2017, Whitehaven prepared a paper titled “Exploration Assets Impairment” (July 2017 Impairment Paper), which considered whether there should be any change in the carrying values in Whitehaven’s balance sheet for its exploration assets, including the Boardwalk Projects. The July 2017 Impairment Paper recommended no change in the carrying values of the Boardwalk Projects for the following reasons:

In August 2017, Whitehaven prepared a paper titled “Exploration Assets Impairment” (August 2017 Impairment Paper), which was tabled at the meeting of Whitehaven’s Audit and Risk Management Committee on 4 August 2017. The August 2017 Impairment Paper also considered whether there should be any change in the carrying values in Whitehaven’s balance sheet for its exploration assets, including the Boardwalk Projects.

The August 2017 Impairment Paper set out the accounting policy adopted by Whitehaven (which was in the same form as stated in the August 2015 Impairment Paper set out above) and then recorded the following as part of its “Findings” (emphasis added in bold):

The August 2017 Impairment Paper recommended the recording of an impairment charge of $55.0m in respect of the exploration assets on the balance sheet of Whitehaven at 30 June 2017.

The meeting of the Whitehaven Audit and Risk Management Committee on 4 August 2017 considered the recommended course in the August 2017 Impairment Paper and “agreed to recommend to the Board that the Group impair the greenfield exploration assets”.

In Whitehaven’s 2017 Annual Report, it recognised a further impairment charge of $54.963 million in respect of its exploration assets. The 2017 Annual Report stated in various parts (emphasis added in bold):

In the statement of agreed facts dated 20 August 2024, Les & Zelda and Whitehaven agreed that the impairment charge of approximately $55 million for Whitehaven’s early stage exploration assets resulted in the Boardwalk Projects being impaired by $54.6 million in Whitehaven’s financial statements for FY2017, divided between each of them as follows:

In the statement of agreed facts dated 20 August 2024, Les & Zelda and Whitehaven agreed that Whitehaven has not reversed any of the impairments recognised against the Boardwalk Projects in FY2012, FY2015 or FY2017.

Les & Zelda says that this is despite the precipitous growth in coal prices since 2017.

Despite the impairment of the Boardwalk Projects as assets on the balance sheet of Whitehaven, there has been a continued expression by Whitehaven that it continues to hold them as assets and “keep them in good standing with the potential for further exploration at the appropriate time”.

I agree with Whitehaven’s submission that the allegation by Les & Zelda that Whitehaven has abandoned any intention to develop the Boardwalk Projects was not put to any Whitehaven witness, including Mr Ball. This is significant because Mr Ball was not subject to any cross-examination and gave unchallenged evidence in chief in his affidavit as follows:

It is important to understand that the impairment of the carrying value of an asset in the balance sheet of Whitehaven is an accounting exercise. The assets continue to be held by Whitehaven and may be the subject of future exploration and development work.

The fact that the Boardwalk Projects were described as being “mothballed indefinitely” as part of the October 2012 Fugly Case Discussion Paper, which was then enacted in the 16 November 2012 ASX Announcement, does not detract from the position that the Boardwalk Projects remain capable of being developed. The very nature of early stage coal exploration assets is that they may be held for a significant period of time before any amount is spent on their exploration, economic assessment and development. Whitehaven still retains the ability to decide to commence exploration, economic assessment and development work on any of the Boardwalk Projects at any time of its choosing.

I do not consider that the evidence indicates that the development of the Boardwalk Projects has been abandoned. I do not consider that I can make any finding that the Boardwalk Projects will never be developed.

As mentioned above, Les & Zelda does not press any claim in relation to Sienna, Monto or Oaklands North, and has instead placed its reliance on Ferndale and Dingo in relation to is claims. I will first deal with the development and approvals relating to Ferndale.

As stated above, Ferndale is located at Yarrawa, which is near Denman in the Hunter Valley in NSW. Ferndale is based on EL 7430 for a period of five years from 18 December 2009 to 18 December 2014 granted by the NSW Government to Loyal Coal, in which Coalworks held a 92.5% shareholding.

On 8 December 2010, the same day that Boardwalk acquired its 19.9% interest in Coalworks, Boardwalk Ferndale entered into a Farm-In Agreement with Loyal Coal and Boardwalk and a Joint Venture Agreement with Loyal Coal. In summary, under these agreements, Boardwalk Ferndale was entitled to earn up to a 50% interest in Ferndale by funding specified exploratory works on EL 7430.

The “Farm-In” under the Farm-In Agreement operated in two stages:

At the time the SPA was entered into on 11 December 2011:

On 19 April 2012, Boardwalk Ferndale informed Loyal Coal that it had achieved the expenditure of at least $10 million to complete the Stage 1 Farm-In. Following a review of the expenditure by Loyal Coal, on 22 May 2012 it confirmed acceptance of the achievement of the Stage 1 Farm-In.

On 21 August 2012, Whitehaven’s acquisition of Coalworks had been completed such that it became a 100% owned subsidiary of Whitehaven and thereby had also acquired Coalworks’ 92.5% interest in Loyal Coal.

On 18 October 2011, geologist James Familiar of Geos Mining Minerals Consultants published a report commissioned by Loyal Coal titled “Review of Environmental Factors: Ferndale Coal Projection Exploration Drilling Proposal Stage 3” (Environmental Factors Report). The Environmental Factors Report identified potential impacts from mining activities, alongside mitigation strategies, but none were identified as having an adverse effect on the life cycle of any threatened flora or fauna.

The Environmental Factors Report concluded by stating:

As stated above, the Draft MMC Report dated 12 December 2011 was prepared before any coal resources had been estimated for Ferndale and admitted into evidence only to show that a document of that form was prepared and given to Whitehaven, not to prove that Ferndale was or is uneconomic. The Draft MMC Report stated that its “major objective” was to “determine conceptually what coal, if any, could be economically mineable by either open cut or underground mining methods” using “high level” analysis to guide further exploration and planning.

The Draft MMC Report stated:

In relation to the Draft MMC Report, Les & Zelda submits that:

Les & Zelda also relies on the fact that Whitehaven was positive about Ferndale and the potential it offered, made most plain by the fact that Whitehaven in its business judgement elected to acquire Boardwalk and pay serious consideration for its assets, including in excess of the value of opined in the PwC Report.

On 30 March 2012, Graeme Rigg (a senior mining engineer at MMC) sent an email to Boardwalk regarding further testing and activities at Ferndale. Mr Rigg stated that “if it was my resource, I would be carrying out exploration along the following lines” and then set out a list of proposed activities in two key stages. Mr Rigg proposed activities such as geotechnical testing for near seam material, geotechnical assessment for potential for goaf period weighting or windblast, spontaneous combustion testing of target seams, testing of gas content, composition and adsorption isotherms and permeability testing of the working seams. Mr Rigg concludes the email by stating:

Whitehaven relies on the Draft MMC Report to demonstrate that it contained a negative economic assessment of Ferndale. In light of the limitation placed on receiving the Draft MMC Report into evidence and the matters raised by Les & Zelda concerning it, I do not think that the Draft MMC Report can be relied on by Whitehaven in the way it wishes. I do not consider that the Draft MMC Report can be used as a basis to justify any decision by Whitehaven not to develop Ferndale as I consider that the Draft MMC Report recommended that further investigation work was required on Ferndale. In addition, Whitehaven’s actions after becoming aware of the Draft MMC Report do not indicate that Ferndale was considered uneconomic to develop.

On 17 January 2012, Geos published an annual report for Ferndale for the year ending 17 December 2011 (2011 Geos Ferndale Annual Report). The “Executive Summary” of the 2011 Geos Ferndale Annual Report included the following:

Notably, at the time the 2011 Geos Ferndale Annual Report was prepared, there were 23 cored holes (of a total of 37 holes drilled in 2010 to 2011) still being analysed and there was no clean coal composite data available for review, which made the “product characterisation of the Ferndale resource only cursory”. Amongst the further conclusions in the 2011 Geos Ferndale Annual Report was the following:

Clearly the 2011 Geos Ferndale Annual Report was “cursory” but indicated that further exploration work was required.

As stated above, on 19 January 2012, Palaris issued the Palaris Report, being an independent technical expert’s report for Boardwalk originally prepared for the Proposed IPO but finalised for use in the context of the sale of Boardwalk to Whitehaven. It assessed geological, mining and infrastructure assets at several sites but included no economic analysis and repeatedly stressed the preliminary nature of its assessments.

In respect of Ferndale, the Palaris Report stated:

These sections of the Palaris Report are consistent with the position that significant further exploration work was required to be undertaken at Ferndale to determine the extent of the coal resource, its quality and the economic viability of mining it.

As stated above, the MMC Report dated 29 February 2012 was included in the Scheme Booklet as the technical expert’s report.

As already extracted above, section 5.8.2 of the Scheme Booklet is headed “Boardwalk Transaction benefits and risks”, part of which states:

In summary, Whitehaven regarded that it paid fair value for Boardwalk even though it was well in excess of the valuation of Boardwalk arrived at in the PwC Report.

In relation to Ferndale, the MMC Report included the following summary of “Key Outcomes”:

There was no reference in the MMC Report of Ferndale being uneconomic to develop or not worthy of further exploratory works being carried out on it. As was the case with other documents concerning Ferndale, much of the relevant data remained to be collected.

On 14 May 2012, Mr Perrin sent an email to Mr Kane, copied to Mr Davies and Mr Haggarty, regarding budgets on the capital expenditure for Maules Creek (an asset of Aston) and Boardwalk. In the email, Mr Perrin stated (emphasis in original):

On 14 May 2012, Greg Dunn of A&B Mylec Pty Ltd provided to Mr Walker of Boardwalk a memorandum titled “Ferndale Revenue Model Update”, being an “interactive Revenue Model” to “assist [Boardwalk] in their assessment of the Ferndale lease”. The Revenue Model allowed Whitehaven to assess revenue from coal at Ferndale, including revenue after blending coal from Ferndale with coal from other tenements in the Gunnedah Basin.

On 15 May 2012, JB Mining prepared a report for Boardwalk Ferndale titled “Coal Resources at Ferndale: An Estimate of the In Situ Coal Resources at Ferndale Within EL 7430, New South Wales” that provided an estimate of coal resources for Ferndale in accordance with the JORC Code (May 2012 JB Mining Report). The May 2012 JB Mining Report estimated 369 million tonnes of bituminous coal existed, comprising 7.8 million tonnes of indicated coal resources and 361 million tonnes of inferred coal resources, within Ferndale. In compliance with the JORC Code, JB Mining was required to form an opinion as to the likelihood of “reasonable prospects for eventual economic extraction” in relation to any coal deposit. In forming this opinion, JB Mining had regard to the Draft MMC Report and arrived at the following criteria to be used to identify potential opencut resources and underground coal at Ferndale:

On 15 May 2012, Mr Davies sent an email in reply to Mr Perrin’s email of 14 May 2012, making the following comments on Ferndale (emphasis added in bold):

On 16 May 2012, Mr Haggarty sent an email in reply to Mr Perrin’s email of 14 May 2012, copied to Mr Kane and Mr Davies, in which he stated:

On 17 May 2012, Parvin Walia sent an email to Alan Wigan, Mr Kane, Mr Perrin, Mr Davies and Mr Picton in which he stated “the Ferndale land acquisition spend in FY2013 is to reduce from the current 70 mil to 15 mil”. As stated above, the 2013 Draft Budget in relation to Ferndale indicated that land purchases totalling $15 million would commence in September 2012, noting that this amount “could increase to $73.4 M in FY2013, however $15.0M is included in the Budget and Forecast as the project would require certainty and infrstrature [sic] proven before such significant outflows were committed”.

On 22 May 2012, Whitehaven made an announcement to the ASX, which included stating that the 369 million tonnes of bituminous coal was estimated to comprise of 7.8 million tonnes of indicated coal resources and 361 million tonnes of inferred coal resources for Ferndale based on the May 2012 JB Mining Report (May 2012 ASX Announcement). The May 2012 ASX Announcement stated:

The May 2012 ASX Announcement also stated that Whitehaven, through its wholly owned subsidiary Boardwalk Ferndale, had satisfied the first stage of the farm-in requirements to receive a 25% interest in Ferndale. It also stated that the second stage of the farm-in requirement to receive a further 25% interest would involve a feasibility study and a pre-feasibility study for open cut and underground mines with further expenditure of at least $15 million on project development (whichever occurred first and provided the second stage works had been completed by 31 December 2013).

On 23 May 2012, Mr King of Whitehaven prepared a briefing note that provided an update on the planning, the process of the development application lodgement and options and purchase of land at Ferndale (King Briefing Note 1). Under the heading “Status of Drilling and resource evaluation”, the King Briefing Note 1 stated:

Under the heading “Status of Project Planning”, the King Briefing Note 1 stated:

Among other recommendations, the King Briefing Note 1 recommended that:

On 29 May 2012, the Whitehaven board of directors held a meeting, the minutes of which state as follows:

At this board meeting, a presentation titled “Whitehaven Coal Limited Boardwalk Projects Budget: Year Ending 30 June 2013” was delivered (June 2013 Budget Presentation). The June 2013 Budget Presentation stated that $33.65 million was budgeted for Ferndale during FY2013, of which $15 million was for land acquisitions. The following “key dates” were also provided in relation to Ferndale:

On 6 June 2012, a meeting of the Ferndale Coal Farm-In Management Committee was held in which the report by Whitehaven and Loyal Coal titled “Ferndale JV Report May 2012” was presented. This report noted that:

On 14 June 2012, Mr King prepared a briefing note on the “proposal to acquire land in Ferndale area” (King Briefing Note 2), which referred to “conceptual level studies” having been finalised, with “some significant challenges that need to be overcome in the Pre-Feasibility and Feasibility planning cycles which make the purchase of large amounts of land at inflated prices in the Ferndale area a significant financial risk”. The King Briefing Note 2 also stated:

Notwithstanding these potential issues, the King Briefing Note 2 recommended the acquisition of at least three properties within the Ferndale tenement with an existing use value of $6.24 million and total expenditure of up to $7.488 million in the following terms:

On 14 June 2012, Mr King sent the King Briefing Note 2 by email to Mr Kidd, Mr Burt and Mr Kane saying that “we need to commence negotiations quickly”. On 15 June 2012, Mr Burt forwarded Mr King’s email and the King Briefing Note 2 to Mr Haggarty and Mr Perrin in an email that stated:

On 22 June 2012, Mr Kane sent an email to Mr Haggarty, Mr Perrin and others attaching the June 2012 Aston/Boardwalk Board Papers for the Whitehaven board meeting proposed to be held on 26 June 2012, which stated that:

The June 2012 Aston/Boardwalk Board Papers included the 2013 Draft Budget (referred to generally above), which contains a page headed “Boardwalk – Project Ferndale” that states the key dates in respect of Ferndale to be as follows:

In the 2013 Draft Budget, the issue of a mining lease for Ferndale is depicted as forecast at the end of the second quarter of FY2015.

On 28 June 2012, Mr Slesarewich of Whitehaven sent an email to Mr Wigan, copied to Mr Picton, which stated:

In June 2012, Boardwalk prepared a presentation titled “Ferndale Project – Conceptual Overview” (June 2012 Ferndale Presentation), which included an overview of the Draft MMC Report and the proposal to blend Ferndale with low ash coal from Gunnedah. Under the heading “Financial Model – Findings”, the June 2012 Ferndale Presentation stated (emphasis in original):

The June 2012 Ferndale Presentation concluded that the “Ferndale/Gunnedah Blend” option provided “significant benefit to Ferndale project economics” that “warrant[ed] further investigation”.

On 20 July 2012, a meeting of the board of directors of Whitehaven was held. The agenda and board papers for that meeting (July 2012 Board Papers) included an updated draft budget and expenditure forecast for Whitehaven, which budgeted $31.093 million in capital expenditure for Boardwalk in FY2013, and a further $25.38 million in capital expenditure for Boardwalk in FY2014. The July 2012 Board Papers stated that:

On 9 August 2012, Cumberland Ecology issued a “Preliminary Ecological Assessment” for Ferndale for Hansen Bailey Environmental Consultants (CE Report). The CE Report stated that:

These findings cohered with the Environmental Factors Report which is referred to above.

On 21 August 2012, a meeting of the directors of Whitehaven was held. The board papers for this meeting stated the following in relation to Ferndale:

On 21 August 2012, as stated above, Whitehaven acquired Coalworks, meaning Coalworks became a 100% owned subsidiary of Whitehaven (who acquired Coalworks’ 92.5% interest in Loyal Coal).

By the time of this acquisition of Coalworks, it was clear from the events outlined above that while work had been undertaken to make an initial JORC Resource estimate at Ferndale in the May 2012 JB Mining Report, which were announced in the May 2012 ASX Announcement, considerable further work was required to determine whether Ferndale was economically feasible and even whether it would be an open cut or underground mine. While budgets indicate that capital expenditure for Boardwalk would be undertaken in FY2013 of $31.093 million and in FY2014 of $25.38 million, the expenditure planned for Ferndale for land purchases had been scaled back from $74.85 million to $15 million.

From September 2012, the further work required to be undertaken at Ferndale was impacted by the capital expenditure limit imposed by Whitehaven.

As stated above, on 5 September 2012, Mr Haggarty sent the 5 September 2012 Capex Memo to all executive general managers, general managers and commercial managers of Whitehaven stating that “any request for capital expenditure greater than $20,000 requires approval by both the Managing Director and Chief Financial Officer”. It was later confirmed in the email of 12 September 2012 at 9:32am by Mr Boyd that the “$20,000 limit [was] intended to apply against all capital expenditure, including costs incurred in exploration”.

As stated above, on 12 September 2012, Mr Perrin sent an email to Mr Haggarty, Mr Kane and others that recorded a recap of a meeting with Mr Kane concerning expenditure on Boardwalk Projects, confirming that only the minimum work was required to protect the tenement and place a project into care and maintenance, or progress it to JORC-compliant status, and noting Ferndale was under “care and maintenance”.

In September 2012, Whitehaven prepared a report for Loyal Coal regarding Ferndale, in which it stated:

On 24 September 2012, Mr Wigan sent an email to Mr Haggarty, Mr Perrin, Mr Kane and copied to others that attached a document titled “Reforecast: June 30 2013” (June 2013 Reforecast Budget), which was said in the email to reflect the “discussions and decisions made by Tony [Haggarty] and Peter [Kane] in Brisbane on Tuesday 18 September in relation to the ex Boardwalk projects”. The June 2013 Reforecast Budget recorded a reduction in the planned capital expenditure on Ferndale during FY2013 to $3.035 million following the actual capital expenditure on Ferndale in FY2012 of $11.056 million.

On 19 October 2012, an updating reforecast budget titled “Reforecast 3 + 9: October 19 2013” (Updated June 2013 Reforecast Budget) recorded that the planned capital expenditure on Ferndale during FY2013 had been further reduced to $2.326 million.

As stated above:

On 14 January 2013, Geos published a report for Boardwalk in relation to Ferndale titled “Annual Report 2012” (2012 Geos Ferndale Annual Report), in which the “Executive Summary” noted that:

The 2012 Geos Ferndale Annual Report also stated under the heading “Proposed Exploration” that “[d]esktop mining feasibility studies planned to be completed in the 2012-2013 reporting period is budgeted to cost approximately $20K”.

On 22 January 2013, JB Mining published a report for Boardwalk Ferndale titled “Coal Resources at Ferndale: An Estimate of the In situ Coal Resources at Ferndale within EL 7430, New South Wales” (January 2013 JB Mining Report), which under the heading “Summary” stated:

The estimated coal resources of 445 million tonnes in the January 2013 JB Mining Report reflected an increase from the estimated coal resources of 369 million tonnes stated in the May 2012 JB Mining Report.

On 26 February 2013, Whitehaven made an announcement to the ASX which included the following statements, based on the January 2013 JB Mining Report and the 2012 Geos Ferndale Annual Report:

These results were later included in the 2013 Annual Report, which was published on 2 October 2013.

On 6 February 2013, Jonathan Vandervoort, the executive general manager of infrastructure for Whitehaven, sent an email to Mr Haggarty in relation to the expenditure on the Boardwalk Projects, which stated:

On 22 February 2013, Mr King sent an email to Patrick Markey of Whitehaven with an update on Vickery South and Ferndale, which stated in relation to Ferndale (emphasis added in bold):

On 21 June 2013, Mr King sent another email to Mr Markey with a further update on Ferndale and Vickery South, stating in relation to Ferndale:

On 23 July 2013, Mr Tinkler, as CEO of Bentley Resources Pte Limited, sent a letter by email to Mr Vaile and Mr Flynn, copied to others, containing a proposal for the purchase of Ferndale, Dingo, Sienna and Oaklands North (amongst other assets). In the email, Mr Tinkler stated that the offer was supported by equity from Bentley Resources and Trafigura Pte Ltd and “senior debt” that was subject to “some standard due diligence”. In the letter, the indicative proposed purchase price for the suite of assets was US$520 million subject to due diligence, approvals and formal contracts.

On 26 July 2013, Grant Samuel gave a presentation to the board of Whitehaven titled “Wagyu II Proposal Preliminary Considerations” in relation to Mr Tinkler’s indicative proposal for the purchase of various assets. The presentation said that “there appears to be little, if any, strategic rationale for selling these assets at the current time”, one of the reasons for which was stated to be that the “exploratory tenements” (which included Ferndale) were described as “an important part of the company’s long term growth options beyond the development of Maules Creek and Vickery”.

In cross examination, Mr Haggarty said that by this time he was a non-executive director of Whitehaven but he could not recall any specific discussion about the indicative proposal by the Whitehaven board although he did recall that it came up and was declined (T409–411). The minutes of the meeting of the Whitehaven board on 29 July 2013 do not refer to any consideration of the indicative proposal by the Whitehaven board and Mr Haggarty could not recall if it was dealt with by way of circular resolution or by way of a management recommendation to the board (T411–413).

On 30 July 2013, Mr Vaile sent a letter to Mr Tinkler and Pierre Lorinet of Trafigura rejecting the indicative proposal of the purchase of various Whitehaven assets. The letter stated:

On 23 December 2013, the annual report for Ferndale (the year ending 18 December 2013) was prepared (2013 Ferndale Annual Report), which:

In the December 2013 Impairment Discussion Paper (referred to above), there was no suggestion that Ferndale should be impaired because it was “sub-economic” in the manner described in the Draft MMC Report and the 2013 Ferndale Annual Report.

On 2 December 2014, shortly before it was due to expire on 18 December 2014, Whitehaven submitted a renewal application for EL 7430 to the NSW Department of Trade & Investment (EL 7430 Renewal Application). Receipt of the application was acknowledged on 8 December 2014. The application included a report titled “Renewal Justification Statement”, which noted:

In relation to the Renewal Justification Statement, Les & Zelda submits that:

I agree with these observations that the contemporaneous documents do not coincide with the statements made in the Renewal Justification Statement.

Despite Whitehaven lodging the application on time, EL 7430 was not renewed until 22 November 2023, with the renewal period ending on 18 December 2026.

Whitehaven submits that this delay was related to investigations undertaken by the Australian Competition and Consumer Commission (ACCC) and the Independent Commission Against Corruption (ICAC). ICAC commenced an investigation in relation to the award of EL 7430 in late 2012 and other coal interests in the Upper Hunter Valley. The ACCC brought proceedings against Loyal Coal in relation to interests associated with the Obeid family. Whitehaven says that while neither the ACCC investigation or ICAC proceedings concerned the conduct of Whitehaven, the fact that they have concerned EL 7430 and its part owners “is sufficient to cast a cloud over that tenement”.

On 8 October 2018, David Humphris of the NSW Department of Planning and Environment sent a letter by mail to Loyal Coal in relation to the application for the renewal of EL 7430, which stated:

In the email, Mr Humphris then requested information about Mr Kaidbay’s involvement in Loyal Coal, which was provided by Whitehaven on 26 October 2018. Later in June and July 2019, the NSW Department of Planning and Environment requested additional information about Mr Kaidbay’s involvement in Loyal Coal, which was provided by Mr Burt of Loyal Coal in a letter (with the Whitehaven logo) dated 9 August 2019 that attached various documents.

Whitehaven says that the delay in the renewal of EL 7430 is relevant because, for almost the entire period in issue, its renewal remained uncertain. In that context, it is entirely unsurprising that substantial project development did not occur. Whitehaven argues that the effect of the delay was to stall the work performed on Ferndale, as recorded in the annual reports in the subsequent periods as set out below:

In relation to the delay of the approval of the renewal of EL 7430, Les & Zelda submits that:

I am not in a position to make any findings about why it took so long for the renewal of EL 7430 to occur. I am certainly not able to attribute fault to Whitehaven for the delay. It is clear that the investigations by the ACCC and the ICAC had a role to play in the delay in considering and determining the renewal. The fact is that EL 7430 was renewed and is not set to expire until December 2026.

As indicated above in the 2017 Ferndale Annual Report, pending the renewal of EL 7430, no substantive work was undertaken on Ferndale in this period.

On 7 January 2015, Mark Dawson (geology manager at Whitehaven) sent an email to Mark Edmonson (general manager – technical services at Whitehaven), which stated:

The attached document was the Draft MMC Report. Whitehaven says this statement was “justified sarcasm”. Les & Zelda contends that characterisation is beside the point and, even if it is accepted, it is inconsistent with the earlier positive assessment of Ferndale on which Whitehaven had been preparing by mid-2012 to undertake substantive land acquisitions before market-driven company-wide capital reductions ensued. I do not think that anything turns on this email and it certainly plays no role in my assessment of the evidence regarding Ferndale.

On 18 April 2017, Mr Edmonson sent an email to Mr Ball (CFO of Whitehaven) in relation to Ferndale, apparently prompted by Mr Ball seeking Mr Edmondson’s thoughts on a property coming onto the market, which stated (emphasis added in bold):

In relation to this email of 18 April 2017, Les & Zelda submits that:

Les & Zelda says that reliance on the Draft MMC Report to justify a minimal future expenditure on Ferndale was misplaced and at odds with Whitehaven’s considered attitude in mid-2012, in the context of having acquired Boardwalk and Coalworks (after substantial due diligence) and its budgetary plans in the immediate aftermath of the merger (before the implementation of a company-wide capital reduction programme).

Whatever the various bases for the statements made by Mr Edmondson (some of which are obviously drawn from the Draft MMC Report), it is clear that at this time the prevailing view within Whitehaven was that expenditure on Ferndale was to be kept to a minimum. I do not regard the email from Mr Edmondson as evidencing a reasoned basis on which it could be said that Whitehaven considered that Ferndale should not be developed because it was uneconomic. If that is the inference that Whitehaven asks me to draw based on this email, I reject it.

On 24 January 2018, Peter Cribb of Resource Strategies sent an email to Kirsten Gollogly (general manager of health, safety, environment & communities at Whitehaven), copied to others including Mr Edmondson, which attached “the draft environmental approvals insert for the Ferndale Project Pre-Feasibility Study” (which draft is not in evidence before me) for Whitehaven to review. The email stated (emphasis added in bold):

These conclusions were also reflected in a document titled “Draft Ferndale Environmental Approvals Report” that Mr Cribb sent by email on 14 March 2018 to Ms Gollogly. Mr Cribb’s email confirmed that the conclusions summarised in his email of 24 January 2018, which were based on an earlier version of the Draft Ferndale Environmental Approvals Report, had not changed in the Draft Ferndale Environmental Approvals Report. The Draft Ferndale Environmental Approvals Report stated:

Les & Zelda says that these opinions should be questioned because:

I can only treat these emails and the Draft Ferndale Environmental Approvals Report as an expression of Mr Cribb’s opinions at the time that they were provided. I am not in a position to attach any particular weight to these opinions as they were not the subject of any challenge before me and Mr Cribb did not give evidence about them.

On 4 April 2018, RPM Global prepared a report titled “Ferndale Mine Planning Update” (RPM Report) for Whitehaven, which states:

Whitehaven submits that the RPM Report indicates that Ferndale was not economically viable and, contrary to Les & Zelda’s submission, is not a “distraction” but instead goes to the heart of the issues in these proceedings. Whitehaven says that Les & Zelda suggests that Whitehaven should have expended time, money and resources in attempting to obtain approvals for a project that Whitehaven’s consultant was reporting was not economically viable.

Les & Zelda raises the following issues with the RPM Report:

In light of these issues, Les & Zelda says that any reliance on the RPM Report by Whitehaven in submitting that Ferndale was uneconomic is misplaced because:

Having admitted the Draft MMC Report into evidence on a limited basis only, being as evidence that a report in that form and content was prepared and provided to Whitehaven, meaning that it cannot be used to prove any opinion that Ferndale was or is objectively uneconomic to develop, I do not accept the RPM Report to prove that opinion either. In my view, for the reasons submitted by Les & Zelda, the RPM Report is not substantively different in any meaningful way to the Draft MMC Report, with no new economic analysis having been undertaken between December 2011 (when the Draft MMC Report was issued) and April 2018 (when the RPM Report was issued). As RPM is merely a trading name of MMC, it is unsurprising that the previous work contained in the Draft MMC Report was referenced but I would have expected that it would have been updated.

Accordingly, I reject Whitehaven’s submission that the RPM Report indicates that Ferndale was not economically viable.

Mr Ball gave affidavit evidence summarising the money expended on Ferndale from December 2012 onwards as set out below with each financial year ending in December:

Les & Zelda submits that Whitehaven’s initial assessment of Ferndale in 2011 to 2012 was positive, as shown by:

Les & Zelda submits that exploratory activities undertaken between 2011 – 2013 revealed sizeable coal resources, which warranted further investigation. The resources were estimated at 369Mt in May 2012 and 445Mt in January 2013, which indicated the need for continued exploratory work to assess Ferndale’s economic viability, such as the possibility of blending or underground mining. Les & Zelda says that Whitehaven’s acquisition of Boardwalk and later Coalworks demonstrates that further exploration and development were, at the time, seen as justified and warranted.

However, Les & Zelda says that those further investigatory works were never carried out, not because Ferndale lacked merit, but because:

In short, Les & Zelda submits that, notwithstanding being repeatedly advised that further works were necessary to assess Ferndale (being works that also would have progressed Ferndale towards a mining lease), Whitehaven refused to expend such money. Far from being a prudent and unimpeachable business judgement, Les & Zelda says that Whitehaven paid substantial money to acquire Ferndale (it was booked in value at $237 million prior to the end of FY2015), yet it perversely refused to spend the money needed to investigate properly the potentiality of Ferndale, thereby setting at naught the significant money expended to acquire that asset — expenditure that could only be justified if money was spent to realise Ferndale’s potential or, at the very least, determine after proper investigations that the asset was incapable of being turned into a financially productive one. Les & Zelda says that this was compounded by the fact that, as part of its takeover of Boardwalk, Whitehaven was capitalised with the money needed to develop Ferndale, with Whitehaven representing that it would expend such money on the “ongoing development” of Boardwalk’s assets.

Whitehaven submits that:

It is true that Ferndale was an early stage coal exploration project when it was acquired as part of Whitehaven’s acquisition of Boardwalk that was completed in May 2012. It is clear that Whitehaven regarded the Boardwalk Projects as showing promise in light of the significant consideration that Whitehaven was prepared to pay for them, being $393 million (excluding the Milestone Shares) and $491 million (including the Milestone Shares), which was recognised by Whitehaven in the Scheme Booklet as being a fair value despite the fact that it was considerably in excess of PwC’s view of the value of them (between $200 million and $330 million as stated in the PwC Report).

Upon the completion of the acquisition of Boardwalk on 1 May 2012, Whitehaven then considered that Ferndale would be investigated to determine what work would be undertaken in relation to it. Multiple contemporaneous documents indicated that work was being undertaken to assess Ferndale, including the May 2012 JB Mining Report which estimated 369 million tonnes of bituminous coal existing comprising 7.8 million tonnes of indicated coal resources and 361 million tonnes of inferred coal resources within Ferndale, which assessment was then made public in the May 2012 ASX Announcement by Whitehaven. The view then held within Whitehaven was epitomised by the email of 15 May 2012 from Mr Davies which stated:

Also in May 2012, Whitehaven was contemplating that $15 million would be spent on land purchases for Ferndale in FY2013, having been reduced from $73.4 million as recorded in the 2013 Draft Budget, with this expenditure noted by the Whitehaven board in its meeting on 29 May 2012. The June 2013 Budget Presentation which was made to the board at that meeting indicated that the $15 million was part of a budgeted expenditure of $33.65 million during FY2013 for Ferndale and that the planned timeline for Ferndale would be a pre-feasibility study in July 2012, a feasibility study in January 2013 and first coal in mid 2017.

From my assessment of the contemporaneous documents, none of the work contemplated in the email of 15 May 2012 and the June 2013 Budget Presentation has ever been done in relation to Ferndale for three reasons.

First, the capital expenditure limit imposed in the 5 September 2012 Capex Memo, which then led into the June 2013 Reforecast Budget on 24 September 2012 and the Updated June 2013 Reforecast Budget on 19 October 2012 led to the budgeted expenditure during FY2013 for Ferndale being reduced to $2.326 million. This led to the October 2012 Fugly Case Discussion Paper and the Boardwalk Projects being “mothballed indefinitely”, which became part of the 16 November 2012 ASX Announcement in which Whitehaven’s business development activities were stated to have terminated, although it was reiterated that Whitehaven “remain[ed] confident of the long-term value of our development assets”. Further, the December 2012 Impairment Discussion Paper indicated that the budgetary measures implemented had been in response to macro-economic factors and “not made in response to any material adverse exploration results or other outcomes”, without noting an impairment at that time.

Secondly, the renewal of EL 7430 at Ferndale took from December 2014 until November 2023 to be completed. As I have indicated above, I do not ascribe any fault to Whitehaven for the delay which was experienced in that renewal. It is entirely understandable that no further expenditure occurred on Ferndale while the renewal application was outstanding.

Thirdly, as the unchallenged evidence of Mr Ball makes clear, the reason the Milestone Projects have not been developed up until now is that they have not demonstrated sufficient merit to attract the capital necessary to advance them when compared to other competing priorities in allocating capital within Whitehaven. Instead, the expenditure on Ferndale has remained at nominal amounts since FY2013, which is at a level that Whitehaven has repeatedly said is to “keep them in good standing with the potential for further exploration at the appropriate time” (see, for example, the August 2017 Impairment Paper).

Having reached these conclusions, I reject Whitehaven’s submission that it had concluded that Ferndale is uneconomic to develop. For the reasons I have stated above, I do not consider that I have any reasoned basis on which to make such a finding based on any of the contemporaneous documents. In particular, none of the documents supporting the impairment of the Boardwalk Projects makes any such suggestion, I cannot use the Draft MMC Report or the RPM Report on which to base that conclusion and I do not put any weight in statements made by Mr Edmondson in his email of 18 April 2017, which were not reasoned opinions that could be challenged at the trial. I do not consider that any of the impairments of Ferndale in Whitehaven’s accounts (which went from $237.6 million in FY2015 to zero in FY2017) have the slightest relevance to whether or not Ferndale can be developed in an economic way.

In short, Whitehaven continues to hold Ferndale as an asset, has renewed EL 7430 to December 2026 and has kept it in good standing capable of development should it wish to do so.

In light of the importance of obtaining relevant mining and environmental approvals in order to establish the fulfilment of the Trigger Events under the Restriction Deed, it is necessary to have regard to the process to be followed in order to obtain such approvals. The process in NSW was described by Mr O’Connor in the second chapter of the O’Connor Report as comprising four stages, as summarised in the submissions of Whitehaven that are outlined below, none of which are in contest.

Before an applicant may seek State Significant Development (SSD) approval for land shown on the Strategic Agricultural Land Map, it must first obtain a Gateway Certificate. This requirement has been in place since 2013. It applies to Ferndale because a large proportion of the land on which that project is located is designated as critical industry cluster land for both the equine and viticulture industries. The Gateway Certificate process is focused on protecting strategic agricultural land within NSW.

The decision-maker is the NSW Mining and Petroleum Gateway Panel, a body of independent scientific experts. Under s 2.31 of the State Environmental Planning Policy (Resources and Energy) 2021 (NSW) (SEPP), the Gateway Panel must consider a range of specified matters when determining an application for a Gateway Certificate. These include matters relating to the impact on the land (for biophysical strategic agricultural land) and the effect on industry (for critical industry cluster land). As a result, the designation of land as strategic agricultural land is not merely relevant to enlivening the Gateway Certificate requirement; it forms a critical part of the substantive assessment that informs whether SSD approval should ultimately be granted. The Gateway Panel is expressly directed to consider the effect of any development on the relevant critical industry.

Additionally, under cl 2.30 of the SEPP, the Gateway Panel must refer the application to the IES Committee and the Minister for Regional Water for advice regarding the impact of the proposed development on water resources.

Section 65 of the Mining Act 1992 (NSW) provides that the Minister for Natural Resources must not grant a mining lease unless an appropriate development consent is already in force. Under s 63 of the Mining Act, the Minister for Natural Resources may grant a mining lease over all or part of the land for which the lease is sought. Development consent is granted under the EPA NSW Act.

The EPA NSW Act sets out the procedures for evaluating development applications (s 4.15), the power to grant development consent (s 4.16), the power to attach conditions (s 4.17) and the requirements regarding the preparation of environmental impact assessments. All coal mining proposals in NSW must be assessed under the SSD framework, which is an assessment and approval process under the EPA NSW Act. SSD approval is given by either the Minister or the Independent Planning Commission (IPC), with the IPC generally determining coal mining projects as that is the determining authority for contentious applications. The Department of Planning and Environment (DPE) coordinates the assessment in relation to SSD approval. SSD projects are determined having regard to, amongst other things, their economic, environmental and social impacts and the principles of ecologically sustainable development.

The SSD process comprises several defined stages:

Under s 67A of the EPBC Act, any project that has, or is likely to have, a significant impact on a matter of national environmental significance, known as a “controlled action”, requires approval from the Commonwealth Environment Minister. Accordingly, for any project it is first necessary to determine whether it constitutes a controlled action.

According to the ecological assessment of Ferndale prepared by Cumberland Ecology on 9 August 2012 in the CE Report, Whitehaven was informed that Ferndale was likely to be declared a controlled action under the EPBC Act.

A bilateral agreement between the Commonwealth of Australia and the State of NSW accredits the NSW SSD determination process under the EPA NSW Act to apply to an environmental assessment triggered by the EPBC Act. As a result, NSW authorities assess the proposed controlled action on behalf of the Commonwealth, and no separate assessment is required under Part 8 of the EPBC Act. However, the criteria under the EPBC Act remain relevant to determining whether approval is ultimately provided.

As noted above, s 65 of the Mining Act requires that a development consent under the EPA NSW Act must first be secured before a mining lease may be granted.

The initial step in applying for a mining lease is the submission of a mining lease application to the Secretary for the Department of Regional NSW. The application must be accompanied by a proposed work program, a description of the proposed mining area and all other elements required by reg 25 of the Mining Regulation 2016 (NSW) (s 51 of the Mining Act). These include an assessment of the mineral bearing capacity of land in the proposed mining area and the extent of any mineral deposits in the land, particulars of the financial resources and relevant technical advice available to the applicant and a statement in the approved form of the financial capability of the applicant.

Consistently with these requirements, information published by the NSW Resources Regulator states that applicants must demonstrate that there is an economically mineable mineral deposit within the area of the proposed lease in order to be granted a mining lease. The Department of Regional NSW, in a flowchart explaining the process for granting a mining lease, identifies as a necessary area of assessment the evaluation of economic and environmental viability. One of the questions posed is whether the operation is viable now. If the answer is “yes”, the matter may proceed to a Conceptual Development Plan. If the answer is “no”, but viability may be possible in the future, the process identifies an assessment lease, after which the matter later returns to the evaluation of economic and environmental viability.

After the publication requirements are satisfied, the Secretary must then consider the application and may grant it over some or all of the land covered by the application or refuse it.

Les & Zelda says Whitehaven was critical in its opening submissions of Les & Zelda for failing, it said, to meaningfully grapple with the extensive legislative and regulatory regimes governing the grant of mining leases and associated approvals in QLD and NSW. Les & Zelda submits that this criticism proceeds from a misconception as to proof because in circumstances where Whitehaven’s wrongful conduct involved not developing any project towards a Trigger Event, it is not for Les & Zelda to prove, on the balance of probabilities, that a mining lease and all associated approvals would have been granted. To require that would perversely increase Les & Zelda’s burden in proportion to the egregiousness of Whitehaven’s conduct, forcing Les & Zelda to prove future hypotheticals from a state of affairs not of its making, and to undertake work Whitehaven itself failed to do. That issue is returned to below in addressing relief for loss of a chance.

Les & Zelda submits that properly understood Whitehaven’s point is that economic viability is a prerequisite to the grant of a mining lease and, at least in respect of Ferndale, there was no realistic prospect of obtaining development consent, as opined by Mr O’Connor. In any event, Les & Zelda submits that the evidence does not establish that either Ferndale or Dingo was uneconomic so as to preclude the grant of a mining lease, irrespective of the legislative framework.

Whitehaven says that Les & Zelda’s case almost wholly ignores the complexity and significant costs involved in the approval process for a mining lease in NSW by contending that such a process would likely be successful. Whitehaven argues that the process for obtaining mining and environmental approvals for the Milestone Projects in NSW is complex, involved and arduous, and requires the expenditure of significant time and money.

Whitehaven submits that the process of obtaining a mining lease in NSW makes clear that there were broad-ranging matters that would be relevant to assessing an application for approval of a mining lease and relevant environment approvals, including an assessment of the financial prospectivity and social, environmental and other impacts of the proposed mine against any benefits that might be obtained. Whitehaven says that the economic viability of Ferndale would be a key matter to be satisfied in such application.

Whitehaven says that Les & Zelda’s case that Whitehaven could and should have applied for a mining lease, received that mining lease and then done nothing until economic circumstances warranted the development of a mine is contrary to the process of obtaining a mining lease in NSW. Whitehaven argues that this is because part of the application required proof of the economic viability of the mine. Whitehaven contends that on Les & Zelda’s case, the demonstration of economic viability would presumably be centred around the proposition that the mine would not be developed then but might at some point in the future. Whitehaven says this position is absurd because the guidance from the Department of Regional NSW is that if the operation is not presently economically viable, but may be in the future, the mining lease is not granted and instead a further assessment is made until the conclusion is reached that there is present viability.

Whitehaven also says that it was contemplated that both pre-feasibility and feasibility studies would need to be carried out before the issue of any mining lease for the project, which is a strong indication that Whitehaven was approaching the matter through the understandable lens that it was required to demonstrate the economic viability of any mine. Whitehaven says the same process is evident in the Draft Boardwalk Prospectus, which shows the indicative timeline for Ferndale, with pre-feasibility and feasibility studies being completed before a mining lease is obtained.

I consider that it is abundantly clear that obtaining a mining lease in NSW is a complex process which would involve the incurring of significant costs. I am also satisfied that an assessment of the economic viability of the proposed mine will be undertaken by the Department of Regional NSW and unless that economic viability can be satisfied by the provision of information by the applicant, the application to obtain a mining lease will not proceed until it has been provided.

I have no evidence on the costs which would be likely to be incurred by Whitehaven to obtain a mining lease for Ferndale. The only evidence with which I was provided regarding the likelihood of development consent being granted for a mining operation at Ferndale is contained in the O’Connor Report. I will now turn to assess that evidence.

Mr O’Connor is a professional town planner with qualifications in planning and environmental science and over 50 years of experience in planning studies and environmental assessments. Mr O’Connor is a Registered Planner, a Fellow of the Planning Institute of Australia (PIA) and was a director of PIA for seven years. He served as Vice President of PIA from 2014 to 2018 and President of PIA from 2018 to 2020.

Mr O’Connor has been the principal in charge of assessments for major infrastructure projects (including water pipelines, railway lines, electricity transmission lines, sewerage schemes, gas pipelines, airport upgrades and major arterial roads) and new developments in the fields of mining, extractive industries, chemical industries, construction, commercial, retail, tourism, industrial and residential estates, recreational infrastructure and waste management projects.

Since 2010, Mr O’Connor has been a member of the NSW Natural Resource Advisory Council, appointed by the NSW Minister for the Environment. In 2015, Mr O’Connor was appointed as a Commissioner of the IPC by the NSW Minister for Planning.

Mr O’Connor is currently the chair of the Parramatta Local Planning Panel and the alternative chair of the Ryde Local Planning Panel, in which capacity he oversees the determination of complex and controversial development applications. Mr O’Connor also serves as an alternative member on all of the Sydney and Regional Planning Panels and assists in providing strategic planning advice.

As summarised above, the second chapter of the O’Connor Report sets out the NSW and Commonwealth legislative framework for the approvals required to obtain a mining lease in NSW. None of those matters were the subject of serious challenge by Les & Zelda.

In the third chapter of the O’Connor Report, Mr O’Connor considers the usual timeframe between commencing the process of applying for an approval to obtain a mining lease in NSW and receiving the approval or refusal of that application. Mr O’Connor reviewed 15 coal mining projects which were either granted development consent or refused development consent, noting that it took just over a year for some of the projects to be determined following public exhibition of the EIS, while one project took over five years to be determined (O’Connor Report at [3.1.12]). In the O’Connor Report at [3.1.13], Mr O’Connor concludes:

Les & Zelda did not challenge this opinion.

In the fourth chapter of the O’Connor Report, Mr O’Connor considered the question of whether an open cut coal mining operation at Ferndale would have been likely to be granted development consent in the period from 2012 to 2023 and a mining lease granted. In the O’Connor Report at [4.1.9.29], Mr O’Connor concluded:

In arriving at this conclusion, Mr O’Connor considered the impact of the local and regional land plans, including the Upper Hunter Strategic Regional Land Use Plan (Upper Hunter Plan), the Muswellbrook Local Strategic Planning Statement 2020–2040, (Muswellbrook Planning Statement) and the Hunter Regional Plan 2041. Mr O’Connor concluded in the O’Connor Report at [5.1.5] as follows (emphasis added in bold):

Les & Zelda submits that Mr O’Connor’s conclusion at [5.1.5] of the O’Connor Report is wrong for several reasons and claims that Mr O’Connor has produced a misleading partisan report and cherry-picked from documents to arrive at an untenable conclusion. Les & Zelda submits that I should put no weight on the O’Connor Report in relation to matters of contest given the content and effect of plans and statements referred to in the O’Connor Report. The Upper Hunter Plan, the Muswellbrook Planning Statement and the Hunter Regional Plan and Les & Zelda’s arguments in relation to the reliance upon them in the O’Connor Report are considered in turn below.

In the O’Connor Report, Mr O’Connor relied on the Upper Hunter Plan, stating:

Figure 16 of the O’Connor Report is a reproduction of Map 6 from the Upper Hunter Plan. Figure 17 is titled “More Recent Mapping of Strategic Agricultural Land at the Ferndale Site (2023)”.

Les & Zelda submits that the evidence at [4.1.7.3], [4.1.7.6] and [4.1.9.24] of the O’Connor Report is misleading for the following four reasons.

Firstly, Mr O’Connor failed to explain the meaning of or the basis for land being categorised as Strategic Agricultural Land (SAL) or part of an Equine Critical Industry Cluster (CIC) or a Viticulture CIC. Under the heading “Policy Response”, the Upper Hunter Plan explained the process of how land becomes mapped as a CIC as follows (emphasis added in bold and underline):

Mr O’Connor did not disclose in the O’Connor Report that the mapping was done at a “regional scale”, “was not intended to be used for property-level interpretations” and only showed “areas that potentially have strategically significant agricultural value”. In cross-examination, Mr O’Connor said that he had not read these parts of the Upper Hunter Plan nor appreciated that mapping had been done on “a regional scale” and was “not intended to be used for property-level interpretations” (T529–530). Surprisingly, Mr O’Connor gave evidence that he never read the whole of the Upper Hunter Plan (T530) despite purporting to opine on its effect. Mr O’Connor did not retract or qualify his opinions upon learning about the matters outlined above.

The regional nature of the mapping is reinforced by the Appendix to the Upper Hunter Plan, which contains the mapping criteria for both Equine CIC and Viticulture CIC (emphasis added in bold):

Les & Zelda submits that while the Appendix notes the criteria for mapping and classifying land as Equine CIC or Viticulture CIC, it does not denote the existence of any actual industry and says nothing about whether there were any viticultural operators at or near Ferndale who might be affected by either open cut or underground mining activities.

In cross-examination, Mr O’Connor gave evidence that he had not read the Appendix to the Upper Hunter Plan prior to making the O’Connor Report (T529–532). Les & Zelda observes that Mr O’Connor did not assert the existence of any equine or viticultural operators or activities at or near Ferndale. Mr O’Connor gave evidence that the photos of Ferndale included in the O’Connor Report (O’Connor Report at [4.1.1.6]) contained no signs of any vineyards or equine facilities and he had prepared the O’Connor Report without a site visit (T520–521). Mr O’Connor said that he was not sure whether the criteria in the Appendix had changed (T532–533), which Les & Zelda says is unsurprising given he did not even know what the criteria was in the first place despite Mr O’Connor disputing this (T533).

Les & Zelda says that there is no evidence that Figure 17 of the O’Connor Report (said to be “More Recent Mapping of Strategic Agricultural Land at the Ferndale Site”) was not based on regional mapping criteria and observes that the Upper Hunter Plan stated that the “Government is undertaking a regional scale verification process for the mapped CIC areas”. Accordingly, Les & Zelda argues that any revised mapping was still predicated upon “a regional scale” was “not intended to be used for property-level interpretations”.

Secondly, Les & Zelda contends that Mr O’Connor worryingly reproduced Map 6 from the Upper Hunter Plan in the O’Connor Report as Figure 16, which shows part of Ferndale as Equine CIC or Viticulture CIC land and Mr O’Connor failed to allude to or reproduce Maps 2 and 3 from the Upper Hunter Plan. Map 2 showed that the entirety of Ferndale fell within an area described as “[c]oal resource exploration potential: open cut and/or underground” with the presence of an “[e]xisting exploration licence potential for new open cut and/or underground mine”. Map 3 showed that the entirety of Ferndale fell within an area described as containing “high coal seam gas potential”. Les & Zelda submits that Mr O’Connor did not mention any of these facts or explain why Maps 2 and 3 were rendered irrelevant when Ferndale fell within areas partially shaded as Equine CIC or Viticulture CIC, which is important in regard to approval processes.

In cross-examination, Mr O’Connor gave evidence that he did look at Maps 2 and 3 when reading the Upper Hunter Plan (T551). Mr O’Connor stated that he did not think it was necessary to include Map 2 of the Upper Hunter Plan in his report (T552–553).

Thirdly, Les & Zelda argues that the consequence of an area being mapped as either an Equine CIC or Viticulture CIC is to simply trigger the requirement to obtain a Gateway Certificate, relying on reg 30(2)(a) of the Environmental Planning and Assessment Regulation 2021 (NSW). Les & Zelda points to cll 2.29 and 2.31(2) of the SEPP, which indicate that an application for a Gateway Certificate is to be made to the Gateway Panel for the determination of whether the proposed development meets the “relevant criteria” as defined in cl 2.31(4)(b):

In cross-examination, Mr O’Connor said that he was aware of these criteria but did not address it when he prepared the O’Connor Report (T536–540). Les & Zelda contends that this means none of the above factors were considered by Mr O’Connor in arriving at the opinion he expressed as to the likelihood of Ferndale achieving development approval despite being site-specific considerations to Ferndale.

Les & Zelda also points to cl 2.31(5) of the SEPP, which states that the Gateway Panel must have regard to proposed avoidance, mitigation, offset or rehabilitation measures in forming an opinion as to whether a proposed development meets the “relevant” criteria outlined above. Mr O’Connor agreed that he did not address cl 2.31(5) despite agreeing that they would all be matters which would have to be considered in coming to a view as to whether or not a Gateway Certificate was likely to be issued and, if so, on what terms conditional or otherwise and, with what recommendations (T538–539). Les & Zelda asserts that Mr O’Connor instead based his conclusions on the fact that parts of Ferndale had been mapped as Equine CIC or Viticulture CIC without acknowledging that this fact alone, without site-specific consideration, was of no moment and only prompted the need to proceed through the Gateway Certificate process. Les & Zelda says that obviously there cannot be an impact on equine or viticulture activities if there is none in the immediate environment.

Les & Zelda submits that, contrary to Mr O’Connor’s belief, Ferndale falling within areas mapped as Equine CIC or Viticulture CIC could not seriously arise as a matter required to be considered pursuant to s 4.15(1) of the EPA NSW Act in determining a development application. Les & Zelda says this is because the Upper Hunter Plan is not an “environmental planning instrument” (s 4.15(1)(a)) and could not seriously arise under s 4.15(1)(c) in considering the suitability of the site for the development, which clearly directed attention to site-specific features and not whether it had been mapped at some regional scale as falling within a CIC.

Fourthly, Les & Zelda submits that if the NSW Government genuinely intended to curtail, discourage or prohibit coal mining in and around Ferndale, it would be expected that issue to have been dealt with at various points in time, including when:

Les & Zelda says that this latter map does not denote Ferndale or any adjacent land as excluded from future coal exploration and mining and no reference is made to that map in the O’Connor Report, a matter I will deal with in further detail below. Les & Zelda contends that none of this was referred to in the O’Connor Report when it was clearly relevant.

In relation to the Muswellbrook Planning Statement, the O’Connor Report stated:

Figure 15 of the O’Connor Report is a reproduction of a Structure Plan contained within the Muswellbrook Planning Statement. Despite immediately following the Structure Plan, Mr O’Connor did not include, refer to or reproduce the following paragraph under the heading “Themes, Planning Priorities and Actions” in the O’Connor Report:

The NSW Strategic Statement relevantly stated under the heading “The future of thermal coal in NSW”:

Les & Zelda submits that Mr O’Connor did not refer to these matters in the O’Connor Report or their impact on his assessment as to the likelihood of development approval for Ferndale. In cross-examination, Mr O’Connor said that the reason he did not refer to the NSW Strategic Statement was “just for brevity” (T564).

Les & Zelda also contends that Mr O’Connor did not refer to other parts of the Muswellbrook Planning Statement that accepted and supported mining activities, such as the following statement under the heading “Planning Priority 3: The mineral resources and power generation industry is productive, accountable and considerate of surrounding land uses”:

Les & Zelda submits that Mr O’Connor selectively reproduced material in a most partisan fashion.

Mr O’Connor examined the Hunter Regional Plan at [4.1.8.1]–[4.1.8.8] of the O’Connor Report and stated the following at [4.1.9.25] in regard to its impact of any development approval at Ferndale:

Les & Zelda contends that this conclusion does not accurately reflect the full import of the Hunter Regional Plan, stating that the Hunter Regional Plan does not preclude mining at Ferndale and recognises the economic reality, namely:

Les & Zelda submits that the Hunter Regional Plan simply advocates for a balanced or “measured” approach, which must be read alongside the NSW Strategic Statement, which indicates that coal mining in and around Ferndale is to be permitted. The NSW Strategic Statement states that its aim is to “provide greater certainty to explorers, investors, industry stakeholders and communities about the future of coal mining in the state”. Les & Zelda says that this is accomplished by signalling where coal mining can and cannot occur in the future.

To support its claim that the court should place no weight on the O’Connor Report in respect of any contested matter, Les & Zelda makes the following five additional observations regarding the O’Connor Report:

In light of the above, Les & Zelda says that I should place no weight on the O’Connor Report in respect of any contested matter as it is a selective reproduction of material targeted towards a partisan conclusion in favour of Whitehaven.

Whitehaven says that Les & Zelda’s attack on Mr O’Connor’s credit is unwarranted and unfair as Mr O’Connor presented as a careful and considered witness, appropriately recognised the limitations of his expertise, made concessions where appropriate and sought to directly answer the questions that were put to him.

Whitehaven says that the basis for the attack on Mr O’Connor appears to stem from Les & Zelda’s attempt to place an alternative interpretation on various documents relied upon in the O’Connor Report and to suggest that some different import or meaning should have been drawn from them. In effect, Whitehaven submits that Les & Zelda seeks to cast itself as an opposing expert whose opinions should be preferred to those of Mr O’Connor. Whitehaven argues that while there is always room for legitimate debate as to what particular documents might mean or what considerations might be taken into account, Mr O’Connor’s value as an expert lies in his ability to give evidence as to how the IPC (on which Mr O’Connor sat from time to time including in respect of decision for coal mines in the vicinity of Ferndale) would apply such documents and other relevant considerations in deciding whether to grant approval in respect of Ferndale. Whitehaven says that to suggest that he lacks independence because he identified the considerations and matters from documents he believed were relevant to the task he was asked to undertake is a most unfair approach and one without merit.

Whitehaven submits that seeking to undermine Mr O’Connor’s expertise merely by asserting that he should have attributed different weight to particular factors degrades his expertise, particularly given his personal involvement both in making applications and as a decision-maker in respect of the types of decisions under consideration. Whitehaven argues that other attacks are similarly unfounded, including the contention that he relied on regional rather than site-specific considerations, where his evidence demonstrates that he considered both original and updated mapping that had been subject to investigation and refinement (T534). Whitehaven says the use of published mapping designating SAL is an entirely appropriate consideration in assessing how the IPC may approach approval, and those designations were targeted and refined rather than broad state-wide criteria.

Whitehaven also submits that it was open to Mr O’Connor to take into account the Upper Hunter Plan in assessing site suitability under s 4.15(1) of the EPA NSW Act, recognising that the phrase “suitability of the site for the development” operates at a high level of generality and that many facts may be relevant, citing MCC Energy Pty Ltd v Wyong Shire Council [2006] NSWLEC 581, Jagot J at [86]. Whitehaven contends that mapping for the site is one such factor, and it cannot seriously be contended that the effects of a coal mine and its associated infrastructure are confined to the strict boundaries of the site. Nor should Mr O’Connor be criticised for not reproducing every matter that might conceivably be relevant, including broader NSW Government attitudes to coal mining, as the task of an expert is to isolate the matters they consider relevant to their opinion, not to catalogue every potential factor and explain its irrelevance.

As a result, Whitehaven submits that Mr O’Connor’s opinion is that of an expert with significant direct experience in the matters under consideration and should be accepted.

As indicated above, I accept the submissions of Whitehaven that based on the evidence provided by Mr O’Connor, the process for obtaining mining and environmental approvals in NSW is complex, involved and arduous, and involves the expenditure of significant time and money. This evidence was not challenged by Les & Zelda. I also accept the unchallenged opinion of Mr O’Connor that the time to obtain the relevant approvals required for a mining lease in NSW would be at least three years.

I do not doubt Mr O’Connor’s long held expertise and recognise that having served on the IPC he is well placed to provide opinions on the questions which were posed for him. I am, however, very troubled by the matters which Mr O’Connor failed to consider or placed unwarranted emphasis in arriving at his conclusion on the question of whether an open cut coal mining operation at Ferndale would have been likely to be granted development consent in the period from 2012 to 2023 and a mining lease granted.

I do not consider that I can place any significant weight on Mr O’Connor’s opinion that it was very unlikely that a development consent would have been granted for an open cut coal mining operation at Ferndale between 2012 and 2023, absent which a mining lease could not have been granted for Ferndale for the reasons detailed below.

I agree with Les & Zelda’s criticisms of Mr O’Connor’s failures to read and understand the Upper Hunter Plan in full and especially his failure to realise that the maps of the CIC areas in it were on a regional scale and not intended for property level interpretations. I consider that Mr O’Connor has used the CIC areas in the Upper Hunter Plan in the manner that the text of it cautioned against.

I consider that Mr O’Connor’s failure to deal with the site-specific factors in relation to Ferndale in arriving at his conclusion and his placement of significant weight on the regionally mapped CIC areas seriously undermine the reliability of his conclusion.

I am particularly concerned by Mr O’Connor’s admission that he did not refer to the “relevant criteria” as defined in cl 2.31(4)(b) of the SEPP in reaching his conclusions when those matters are required to be considered by the Gateway Panel in the determination of an application for a Gateway Certificate. In my view, Mr O’Connor should have referred to these matters in the O’Connor Report and his failure to do so affects the reliability of the conclusions reached in it.

I also agree that the failure of Mr O’Connor to refer to the matters from the Muswellbrook Planning Statement and the NSW Strategic Statement in the O’Connor Report, which contain statements recognising the important role of coal mining in the areas around Ferndale, undermines the reliability of the conclusion contained in it.

I do not think that anything turns on the criticism of Mr O’Connor that he failed to allude to or reproduce Maps 2 and 3 from the Upper Hunter Plan in the O’Connor Report. I am well aware that Ferndale falls within an area considered to have “[c]oal resource exploration potential: open cut and/or underground” and “high coal seam gas potential”. It was not necessary for Mr O’Connor to reproduce Maps 2 and 3 of the Upper Hunter Plan in the O’Connor Report for me to know those matters.

I agree with Les & Zelda that the O’Connor Report should have referred to the parts of the Hunter Regional Plan that make it clear that it does not preclude mining at Ferndale and recognises the economic reality of mining in the Hunter area. I consider that Mr O’Connor’s failure to do so affects the reliability of the conclusion contained in the O’Connor Report on that matter.

Mr O’Connor lack of balance is epitomised by his consideration of biodiversity impacts of an open cut mine. Mr O’Connor has relied on the CE Report by Cumberland Ecology to opine that those impacts would be significant without giving consideration to the whole of the CE Report, which also states matters which provide more balance on the extent of the biodiversity impacts of open cut undermining at Ferndale.

I recognise that Mr O’Connor’s opinion is evaluative and based on his impressive qualifications and experience. However, in light of the shortcomings in the O’Connor Report which I have accepted as being present, I am concerned about accepting Mr O’Connor’s opinion in relation to the likelihood of development consent being granted for a mining operation at Ferndale.

Accordingly, I do not consider that I can rely on Mr O’Connor’s conclusion that it was very unlikely that Ferndale would obtain development consent as an open cut mining operation in the period from 2012 to 2023. This does not mean that Les & Zelda has established that it was likely that Ferndale would receive such development consent and a mining lease granted. I am simply left in the position where it has not been proved whether it was likely that a development consent for Ferndale would or would not have been obtained between 2012 and 2023.

Mr Yeates is a mining engineer with 50 years of experience in the Australian mining industry. He holds a Bachelor of Engineering (Honours I) in Mining Engineering and a Doctor of Philosophy in Mining Engineering from the University of New South Wales, and a Master of Business Administration from University of Newcastle. He is a Fellow of the Australasian Institute of Mining and Metallurgy (Chartered Professional (Management)), a Member of the Australian Mine Managers Association, a Certified Mineral Valuer with the Australian Institute of Mineral Valuers and Appraisers and a Fellow of the Australian Institute of Company Directors.

Mr Yeates has the following extensive experience as a non-executive director of mining companies:

For approximately the last 25 years, Mr Yeates has also worked as a mining industry consultant, including on the development of new coal mines (such as Ashton open cut, Maxwell underground and Mount Pleasant open cut in the Hunter Valley and Olive Downs open cut in QLD), the assessment of operating coal mines and coal mine development projects for acquisition or funding, and the valuation of operating coal mines, coal mine development projects and coal exploration tenements.

In the Yeates Report under the heading “Executive Summary”, Mr Yeates gave the following opinions in relation to the Boardwalk Projects generally and Ferndale:

Les & Zelda submits that Mr Yeates:

Les & Zelda submits that Mr Yeates’ reasoning was virtually non-existent. He assumed the correctness of the Draft MMC Report and reasoned that because Ferndale was uneconomic in 2011 – 2012, it necessarily remained so thereafter due to either decreasing coal prices (as at 2015) or increasing costs (as at 2023). Les & Zelda submits that such reasoning carries no weight, as it proceeds from an unproved supposition. The paucity of reasoning is further exemplified by Mr Yeates’ attempt to rationalise the assertion that between 2018 and 2023 “cost increases for coal mining [have been] greater than the increase in CPI”, which was predicated on the propositions that:

Les & Zelda submits that those figures are meaningless because FOB costs may increase for a variety of reasons, including the nature and location of the mines operated and company-specific capital and operating structures, and says nothing about the costs of establishing a new mine at Ferndale over time. Les & Zelda submits that one cannot extrapolate a general trend from two sources and that such reasoning is anecdotal. For those reasons, Les & Zelda submits that no weight should be placed on the Yeates Report, which is devoid of reasoning and rests on the correctness of a preliminary and draft analysis in the Draft MMC Report made in December 2011 that Mr Yeates neither verified nor explained.

Les & Zelda further submits that JORC coal resources were declared by JB Mining in the May 2012 JB Mining Report and in the January 2013 JB Mining Report, the latter identifying over 100Mt of “measured” coal resources under the JORC Code. Les & Zelda submits that this concept is significant. Under the JORC Code, a “Mineral Resource” is defined as follows (emphasis added in bold):

The phrase “reasonable prospects for eventual economic extraction” is explained in the JORC Code as follows (emphasis added in bold):

Les & Zelda says that where a coal resource is classified as “measured”, it reflects a higher level of confidence than “indicated” or “inferred”, arising where (emphasis added in bold):

Whitehaven submits that Mr Yeates has expressed unchallenged opinions in relation to Ferndale that development of the Ferndale open cut and underground projects was not economically justified in late 2012 and 2013, in 2015 or in 2023. Whitehaven says that Mr Yeates based that opinion on the factors identified in various reports prepared in relation to Ferndale, the coal prices prevailing at the relevant times and his assessment of project risks. Les & Zelda says that those risks included the nature of the coal, the high strip ratio, low product yields and the proximity of the proposed mine to rivers and National Parks. In relation to an underground mine, Les & Zelda observes that Mr Yeates also noted that the relevant coal seam lies at depths of between 500m and 800m, that most Australian mines operate at depths shallower than 500m and that significant risks and difficulties arise at such depths.

Whitehaven further submits that economic viability is a matter assessed in determining whether a mining licence is to be granted and that Mr Yeates’ evidence demonstrates that Ferndale was not economically viable during the relevant period.

Whitehaven contends that Les & Zelda’s reliance on the concept of “reasonable prospects of eventual economic extraction” (RPEEE) obscures the central issue. The critical word in that phrase is “eventual”. As made clear by the JORC Code, “eventual” may extend to timeframes well in excess of 50 years. In that regard, the JORC Code provides:

Whitehaven asserts that this is a fundamentally different inquiry from whether a mining company can presently decide, and a regulator can presently be satisfied, that a project is economically viable. Whitehaven submits that taken to its extreme, Les & Zelda’s position would permit the development of the Milestone Projects more than 50 years into the future. For that reason, Whitehaven submits that this material does not assist in resolving the issues in these proceedings.

I place no weight on the opinions expressed by Mr Yeates in relation to Ferndale for the essential reasons identified by Les & Zelda. Critically, Mr Yeates has rested his reasoning on the Draft MMC Report which was admitted into evidence on a limited basis only, as evidence that a report in that form and content was prepared and provided to Whitehaven. As a result, it cannot be used to prove any opinion that Ferndale was or is objectively uneconomic to develop. Critically, Mr Yeates has not sought to establish any of the assumptions and material facts underlying the Draft MMC Report and he simply recites the findings and conclusions contained in it as a basis for his opinions across all of the time periods he was asked to address. He has taken the same approach in relation to the opinions expressed in the Scheme Booklet, the Palaris Report, the RPM Report, the Draft Ferndale Environmental Approvals Report and the June 2012 Ferndale Presentation.

It is an entirely inappropriate way for an expert to set out his or her opinions by accepting the opinions reached by others (who have not given evidence) without attempting to establish the assumptions on which those others have reached their conclusions and expose the reasoning on which those opinions have been reached.

I am simply not assisted by Mr Yeates’ approach to providing his opinions in relation to Ferndale no matter how qualified he may be to have given them in an appropriate way.

The result is that it has not been established on the evidence that it was likely that Ferndale was uneconomic to develop. But nor do I consider that it has been established that Ferndale was unlikely to be economic to develop. The declaration of JORC coal resources by JB Mining in the May 2012 JB Mining Report and in the January 2013 JB Mining Report were not sought to be proved in the trial before me and, in any event, such a declaration involves no analysis of the forecast revenues and costs specific to the development of a mine at Ferndale. I am left in the position where I have no evidence as to whether it was or was not likely to be economic to develop a mine at Ferndale.

As stated above, Dingo is located between Dingo and Duaringa in the Bowen Basin in QLD. Dingo is comprised of two major coal formations, being the Baralaba coal measure and the Burngrove coal measure. The exploratory permits cover areas also referred to as Giles Creek (in the north and largely within EPC 862), Pearl Creek (in the middle of EPC 862), Carinya (to the south and also within EPC 862) and Tryphinia (located within EPC 1063, which is the most northerly EPC). The exploration permits for Dingo were originally granted to Independent Coal, a subsidiary of Cockatoo Coal.

On 16 July 2009, Aston Dingo Pty Ltd (later renamed Boardwalk Dingo) and Independent Coal, a subsidiary of Cockatoo Coal (later renamed Baralaba Coal Company Pty Ltd), entered into a Farm-In and Joint Venture Agreement, which allowed Boardwalk Dingo to acquire an interest in the tenements if it completed its “Farm-In Obligations” under the Farm-In and Joint Venture Agreement.

The “Farm-In” operated in three stages:

During the “Farm-In Period” while these obligations were being completed, Boardwalk Dingo was required to fund all the costs of the exploration programme (cl 5.1) and had the exclusive right to direct and carry out exploration activities on the tenements (cl 5.3). The “Farm-In Period” would cease once Boardwalk Dingo had spent a total of $9 million or a “Feasibility Study” had been completed (cl 3.4).

At the time the SPA was entered into on 11 December 2011, Boardwalk Dingo had completed the Second Farm-In and Independent Coal had transferred 51% of its interest in the tenements to Boardwalk Dingo. The Third Farm-In was completed shortly after Boardwalk was acquired by Whitehaven. By February 2013, Boardwalk Dingo held a 70% interest in Dingo and Independent Coal held a 30% interest. The Farm-In and Joint Venture Agreement continues to govern the relationship between Boardwalk Dingo and Independent Coal, which is now owned by Baralaba Coal Company.

At the time of the SPA, no JORC resource had been declared for Dingo.

As stated above, on 19 January 2012, Palaris issued the Palaris Report, being an independent technical expert’s report for Boardwalk originally prepared for the Proposed IPO but finalised for use in the context of the sale of Boardwalk to Whitehaven. It assessed geological, mining and infrastructure assets at several sites but included no economic analysis and repeatedly stressed the preliminary nature of its assessments.

In respect of Dingo, the Palaris Report stated the following:

As stated above, the MMC Report dated 29 February 2012 was included in the Scheme Booklet as the technical expert’s report.

As already extracted above, section 5.8.2 of the Scheme Booklet set out that the value of the consideration payable by Whitehaven for Boardwalk was $393 million (excluding the Milestone Shares) and $491 million (including the Milestone Shares), which exceeded the $200 million and $330 million valuation of Boardwalk determined by PwC in the PwC Report, but was believed by the Whitehaven Directors to represent fair value.

In relation to the mining operation at Dingo, the Scheme Booklet stated under the heading “25.10 Mining” that:

In relation to Dingo, the MMC Report included the following summary of “Key Outcomes”:

The 2013 Draft Budget contained in the June 2012 Aston/Boardwalk Board Papers included a page headed “Boardwalk – Project Dingo”, which stated the key dates in respect of Dingo to be as follows:

In the 2013 Draft Budget, the issue of a mining lease for Dingo is depicted as forecast at the beginning of the third quarter of FY2015.

As noted in respect of Ferndale, Whitehaven budgeted significant expenditure on Dingo following the completion of Project Trifecta, as set out below:

On 29 May 2012, the Acting CEO of Boardwalk, Simon Slesarewich, sponsored a memorandum titled “Dingo Port Capacity – Fitzroy Coal Terminal” (Slesarewich Memorandum). The Slesarewich Memorandum stated that “[i]ntegral to the development of the Dingo project is securing port allocation”. The Slesarewich Memorandum recommended the following:

Les & Zelda says that such a recommendation is only consistent with a positive appraisal of Dingo, namely, that it was worthy of further exploration, with it prudent even at that stage to secure port capacity for any future development of the tenement into an operational mine.

In March 2011 and between June – September 2012, McCollum Environmental Management Services (MEMS) provided the following reports to Whitehaven regarding environmental management and assessments in relation to Dingo, which identified potential implications and set out various mitigation strategies:

In July 2012, JB Mining prepared a report for Boardwalk Dingo titled “Interim Raw Coal Resource Estimate for the Pearl Creek Coal Deposit within EPC862 at 30th June 2012” (July 2012 JB Mining Report). The July 2012 JB Mining Report stated that the Pearl Creek deposit had 0.0Mt of measured coal resources, 6.6Mt of indicated coal resources and 34Mt of inferred coal resources.

On 13 July 2012, Anthony Walker of Whitehaven sent an email to Mr Kane and Mr Wigan attaching the July 2012 JB Mining Report, describing it as a “draft JORC Resource statement for the Pearl Creek area”. Mr Kane (as the COO of the Maules Creek and Boardwalk projects) replied by email on 13 July 2012 stating “[n]ot bad for a ¼ of the pearl creek area !”. Les & Zelda says that this statement meant that the results were only for 25% of the Pearl Creek area, with Pearl Creek comprising only one of three areas with coal being explored (the other areas being Giles Creek and Carinya).

On 16 July 2012, A&B Mylec provided a report titled “Technical Report: Preliminary Coal Quality Evaluation for the Dingo Project for Whitehaven Coal” (July 2012 A&B Report) to Whitehaven. Under the heading “1.0 Executive Summary”, the July 2012 A&B Report stated the following:

On 17 July 2012, Mr Walker sent an email to Ross Brims attaching the July 2012 A&B Report and stating “[e]xec summary tells a reasonably encouraging story with the exception of the high phos level and the likely price discount associated with this”.

On 18 July 2012, Mr Walker sent an email to Barry Saunders, Mr Brims, Stuart England of A&B Mylec and others in which he stated:

In the email, Mr Walker then stated that more analysis was required, including to obtain greater certainty of the results and address concerns regarding their consistency.

From September 2012, the further work required to be undertaken at Dingo was impacted by the capital expenditure limit imposed by Whitehaven.

As stated above, on 5 September 2012, Mr Haggarty sent the 5 September 2012 Capex Memo to all executive general managers, general managers and commercial managers of Whitehaven stating that “any request for capital expenditure greater than $20,000 requires approval by both the Managing Director and Chief Financial Officer”. It was later confirmed in the email of 12 September 2012 at 9:32am by Mr Boyd that the “$20,000 limit [was] intended to apply against all capital expenditure, including costs incurred in exploration”.

As stated above, on 12 September 2012, Mr Perrin sent an email to Mr Haggarty, Mr Kane and others that recorded a recap of a meeting with Mr Kane concerning expenditure on Boardwalk Projects, confirming that only the minimum work was required to protect the tenement and place a project into care and maintenance, or progress it to JORC-compliant status, and noting Dingo as “go slow on the project and do enough to protect the tenement with absolute minimal spend if any”.

As set out above in relation to Ferndale, on 24 September 2012, Mr Wigan sent an email to Mr Haggarty, Mr Perrin, Mr Kane and copied to others that attached the June 2013 Reforecast Budget, which was said in the email to reflect the “discussions and decisions made by Tony [Haggarty] and Peter [Kane] in Brisbane on Tuesday 18 September in relation to the ex Boardwalk projects”. The June 2013 Reforecast Budget recorded the planned capital expenditure on Dingo during FY2013 as $9.328 million (a slight reduction from the $10 million stated in the 2013 Draft Budget) following the actual capital expenditure on Dingo in FY2012 of $6.958 million.

On 3 October 2012, Independent Coal and Boardwalk Dingo held a meeting, the minutes of which recorded “Stage 3 drilling completed”.

By 19 October 2012, as noted in a document titled “Capital Expenditure Proposal (CEP) for Dingo 3+9 Reforecast AFY13” submitted by Mr King, the planned expenditure on Dingo had been further reduced to $8.92 million.

As stated above, between October and November 2012, Whitehaven explored a number of budgetary measures, including a “Fugly Case” cost-cutting scenario, which would lead to the “Boardwalk projects [being] mothballed indefinitely”. These measures were ultimately adopted, leading to Whitehaven’s 16 November 2012 ASX Announcement of its intention to “scale back the company’s Business Development Unit”.

On 7 November 2012, Andrew Lawson (the managing director of Cockatoo Coal) sent an email to Mr Kane and Mr King, copied to others, which stated (emphasis added in bold):

On 8 November 2012, Mr Lawson sent an email to Mr King, copied to others, which stated (emphasis added in bold):

On 23 November 2012, Independent Coal and Boardwalk Dingo held a meeting, the minutes of which record:

As stated above, in December 2012, Whitehaven considered whether any impairment of the Boardwalk Projects was necessary in light of the declining coal prices and the budgetary measures implemented in response. The December 2012 Impairment Discussion Paper recorded that the budgetary measures implemented had been in response to macro-economic factors and “not made in response to any material adverse exploration results or other outcomes”. The December 2012 Impairment Discussion Paper did not note an impairment.

On 5 December 2012, A&B Mylec provided a memorandum to Whitehaven in relation to Dingo titled “Clean Coal Composite Analysis Recommendations” (A&B Memorandum). Under the heading “3. Discussion”, the A&B Memorandum stated as follows (emphasis added in bold):

On 6 December 2012, A&B Mylec prepared a report titled “Technical Report: Coal Quality Update Dec-2012 for the Dingo Project for Whitehaven Coal” (A&B Further Report). Under the heading “1.0 Executive Summary”, the A&B Further Report stated as follows:

On 22 January 2013, JB Mining prepared the January 2013 JB Mining Report, which stated that exploratory activities (544 drill holes) had revealed the existence of indicated and inferred coal resources within the Pearl Creek deposit (being within EPC 862) of 52.4Mt (14.4Mt indicated, 39Mt inferred) as at the end of November 2012, as set out below (with the table having a minor discrepancy of 0.4Mt due to rounding):

These results were included in the 2013 Annual Report published on 2 October 2013.

After Whitehaven received the January 2013 JB Mining Report, in an internal Whitehaven presentation titled “Proposed Strategy for QLD Tenements”, it was recorded that “recently published JORC report on the Dingo Project will allow the Joint Venture to lodge an application for an MDL (Mineral Development Licence) over a significant portion of the Project Area”. The presentation noted that the “intent of this licence is to allow economic evaluation of the resource”. As set out in more detail below, a mineral development licence can only be applied for in respect of land in QLD that is already the subject of an exploration permit pursuant to s 179 of the Mineral Resources Act 1989 (Qld) and is therefore a step in obtaining a mining lease.

In March 2013, Palaris published a further report titled “Exploration Target Statement Dingo Project” (Palaris Dingo Report), which set out possible coal resources to a depth of 300m for the entirety of Dingo (i.e. EPC 862, EPC 863 and EPC 1063), which was estimated to be between 19Mt and 145Mt. As noted in the Annual Exploration Report for EP 862 dated 9 May 2016, Cockatoo Coal has undertaken mining of the Baralaba formation at its “Baralaba Mine, which is situated approximately 30km south southeast of the Pearl Creek resource”.

On 22 April 2013, Will Kendall of the Jingella Group sent an email to Mr Flynn proposing to acquire Whitehaven’s interest in Dingo (Jingella Offer). The proposed option agreement for the acquisition included an initial option fee of $500,000 for a twelve-month option, an exercise price of $22.5 million and a term that Jingella would “[undertake] to complete a work program on the project including additional drilling at our cost during the term”.

On 26 April 2013, Mr Vandervoort sent an internal email to Mr Flynn in relation to Mr Kendall’s email, which attached a file note titled “Expression of Interest in Dingo Coal Project: Jingella Proposal”. Under the heading “Recommendation”, the file note stated:

No further action was taken in respect of the Jingella Offer. Les & Zelda says this is because Whitehaven wanted to retain Dingo given its views of its potentiality and value.

As stated above in relation to Ferndale, between 23 and 30 July 2013, Whitehaven refused Mr Tinkler’s indicative proposal for the purchase of various assets, including Dingo.

On 6 June 2013, Mr King sent an email to Mr Vandervoort and Mr Perrin amongst others that attached a presentation titled “Dingo Joint Venture Provisional AFY14 – AFY16 including the “9+3” forecast for AFY13” and was described to be “[f]or [c]onsideration and approval by the Joint Venture Committee in the Joint Venture Budget Meeting on 12 June 2013”. Under the heading “Dingo JV – AFY 14 – Continued”, the presentation provided the following summary of the ongoing strategy for Dingo:

In late 2013, Cockatoo Coal and Whitehaven prepared a report titled “Dingo Joint Venture Report - No. 13 [f]or the period August to October 2013 inclusive” (2013 Dingo Report) for a meeting of Independent Coal and Boardwalk Dingo to be held in November 2013. This report included a summary of the outcomes from a technical review of the geological modelling of Dingo conducted in the second half of 2013. The report referenced a “technical session” held on 19 September 2013 in relation to the geology of Dingo and then stated:

On 27 May 2014, the Annual Report for EPC 862 for 2013 – 2014 recorded that an application for a Mineral Development Licence (MDL) was lodged during the year.

After the lodgement of the application during 2014, approval was granted for MDL 512 on 12 December 2014 and required minimum expenditure of $150,000 in the first two years and $200,000 in the third year, totalling $500,000. The grant included a “work program requirement” that:

The work program requirement was not completed.

On 5 May 2015, Whitehaven published its Annual Exploration Report for the period of 4 May 2014 to 3 May 2015 in relation to EPC 862, which reported the following modelling being undertaken by Cockatoo Coal:

Whitehaven says the inaction in progressing Dingo from 2016 to 2018 was due to Cockatoo Coal being placed into administration for the first half of 2016 and then re-entering administration in mid-2017 and relies on the following annual reports for Dingo during this period:

In relation to Whitehaven’s reliance on Cockatoo Coal being placed into administration, Les & Zelda submits that:

It appears to me that the contemporaneous documents demonstrate that one of the reasons why Whitehaven did not spend any money on the development of Dingo for the period from 2016 to 2018 was that Cockatoo Coal was in administration.

Between 20 December 2017 and 24 April 2018, various emails between Carmen Pantlin of Whitehaven and Alex Bell of Baralaba Coal were exchanged in an attempt to organise a meeting which was eventually scheduled for 26 April 2018. The presentation titled “Dingo Update” prepared for this meeting included the following:

On 19 September 2018, MDL 512 was renewed for three years by the QLD Department of Natural Resources, Mines & Energy.

The Annual Exploration Report for MDL 512 for 1 January 2019 to 31 December 2019 stated the following in regard to the work program:

The Annual Exploration Report for MDL 512 for 1 January 2020 to 31 December 2020 stated that the work program had not been completed that year due to “[s]tate border closures, travel restrictions and internal company protocols responding to the COVID-19 pandemic”.

On 31 August 2020, Encompass Mining published a report titled “Whitehaven Coal Ltd Pearl Creek Deposit: Competent Persons Report for Resources” (Encompass Report). The Encompass Report documented the estimation of coal resources “within the Pearl Creek Area of MDL 512”.

The Encompass Report concluded that considering the existence of coal resources to a depth of 200m, there was 47.9Mt of indicated and inferred coal resources (14.7Mt indicated and 33.2Mt inferred). This amount of coal was 8.7Mt greater than what was stated in the January 2013 JB Mining Report, which determined there was a total of 39.2Mt of indicated and inferred coal resources (12.2Mt indicated and 27.0Mt inferred) to a depth of 300m.

Under the heading “Executive Summary”, the Encompass Report stated:

Under the heading “7.4 Economic Test of Resource Material”, the Encompass Report stated:

Under the heading “8. Recommendations”, the Encompass Report stated:

Whitehaven’s annual report for 2021 (2021 Annual Report) made reference to an August 2020 report in relation to the coal resources for the Pearl Creek Open Cut tenement for which it stated there was 15Mt of indicated coal resources and 33Mt of inferred coal resources, which is likely rounded from the figures contained in the Encompass Report.

In September 2022, Whitehaven prepared an internal memorandum in relation to Dingo titled “Environmental Considerations Memo” (Dingo Memorandum). Under the heading “Project Description”, the Dingo Memorandum stated that:

The Dingo Memorandum noted that:

The native title claim has subsequently been determined adversely to the First Nations applicants: Blucher (on behalf of the Gaangalu Nation People) v State of Queensland (No 3) [2023] FCA 600; Gaangalu Nation People v State of Queensland (No 4) [2024] FCA 425.

On 8 February 2023, the Minister for Environment and Water rejected the proposed Central Queensland Coal Mine Project under s 130(1) of the EPBC Act. Whitehaven says this decision indicates that the grant of an approval under the EPBC Act to construct and operate Dingo is far from a foregone conclusion.

The Dingo Memorandum did not note any barrier precluding the granting of a mining lease.

On 31 December 2023, MDL 512 expired and does not appear to have been renewed.

Mr Ball gave affidavit evidence summarising the money expended on Dingo from July 2013 onwards. The following amounts were expended at Dingo:

Les & Zelda relies on many of the same points that were made in relation to Ferndale, saying that they are equally applicable to Dingo often with even greater force. Les & Zelda submits that Whitehaven’s initial assessment of Dingo in 2011 – 2012 was positive, as shown by:

Les & Zelda submits that exploratory activities revealed sizeable coal resource estimated at over 50Mt, which together with the preliminary analyses undertaken warranted further investigation to ascertain the coal resources within Dingo, and determine, upon proper analysis, whether it could be feasibly and economically mined. Les & Zelda says that this was Whitehaven’s view in 2011 – mid-2012 hence why it paid substantial money to purchase the asset.

Les & Zelda submits that those further investigatory works and analyses were never performed as from late 2012 capital expenditure on the Boardwalk Projects was suspended and they were mothballed indefinitely pursuant to a company-wide capital expenditure reduction programme rather than on any individual assessment of Dingo’s merits. Les & Zelda contends that notwithstanding, in the years that followed, Whitehaven adopted the attitude that Dingo was not worthy of further expenditure, including to ascertain properly whether open cut or underground mining was feasible.

As with Ferndale, in short, Les & Zelda submits that, notwithstanding Whitehaven being repeatedly advised that further works were necessary to assess Dingo (being works that also would have progressed Dingo towards a mining lease), Whitehaven refused to expend such money. Les & Zelda says that far from being a prudent and unimpeachable business judgment, Whitehaven paid substantial money to acquire Dingo (it was booked in value at about $65 million prior to the end of FY2015), yet it perversely refused to spend the money needed to investigate properly the potentiality of Dingo. As a result, Les & Zelda submits that the significant money expended to acquire that asset was set at naught — expenditure that could only be justified if money was spent to realise Dingo’s potential or, at the very least, determine after proper investigations that the asset was incapable of being turned into a financially productive one. Les & Zelda contends that this was compounded by the fact that, as part of its takeover of Boardwalk, Whitehaven was capitalised with the money needed to develop Dingo, with Whitehaven representing that it would expend such money on the “ongoing development” of Boardwalk’s assets.

Whitehaven says that at all times there was a joint venture partner in respect of Dingo, which was Independent Coal, a subsidiary of Cockatoo Coal, and by November 2012, Cockatoo Coal had expressed its reticence to spend any money on Dingo due to the poor market conditions and no port and rail access. Whitehaven says that this demonstrates the reasonableness of the position that Whitehaven had taken through September 2012 to November 2012 to impose a capital expenditure limit and mothball the Boardwalk Projects indefinitely.

Whitehaven points to the technical review of Dingo that was undertaken in November 2013 as recorded in the 2013 Dingo Report which concluded that that there were no quick solutions to increase tonnes or obtain better quality resources for Dingo without significant expenditure. Whitehaven submits that significant work was then undertaken which led to the granting of MDL 512 in December 2014 and further geological modelling undertaken by Cockatoo Coal as reported in the Annual Exploration Report for the period of 4 May 2014 to 3 May 2015 in relation to EPC 862.

Whitehaven argues that because Cockatoo Coal (as the parent company of its joint venture partner, Independent Coal) was placed into administration in the first half of 2016 and then re-entered administration in mid 2017 there was an understandable unwillingness of Boardwalk Dingo to spend money on Dingo until 2018.

Whitehaven submits that once MDL 512 was renewed in September 2018, a drilling program was carried out on Dingo during 2019 and 2020, which was then interrupted by the state border closures, travel restrictions and company protocols responding to COVID-19, and in August 2020 the Encompass Report provided an estimate of 47.9Mt of indicated and inferred coal resources. Following this, Whitehaven says that the internal assessment of Dingo in September 2022 as recorded in the Dingo Memorandum revealed a number of potential environmental difficulties with Dingo.

As I have stated above in respect of Ferndale, Dingo was an early stage coal exploration project when Whitehaven acquired Boardwalk in May 2012. At that time it was clear that Whitehaven regarded the Boardwalk Projects favourably, having paid consideration of $393 million (excluding the Milestone Shares) and $491 million (including the Milestone Shares), which was recognised by Whitehaven in the Scheme Booklet as being a fair value even though it exceeded PwC’s value of between $200 million and $330 million.

The June 2013 Budget Presentation made to the meeting of the Whitehaven directors on 29 May 2012 stated that $25.854 million was budgeted for Dingo during FY2013. This amount was then considerably increased in the 2013 Draft Budget contained in the June 2012 Aston/Boardwalk Board Papers which stated that Whitehaven planned a timeline for Dingo of a pre-feasibility study by June 2013, a feasibility study in January 2014 and the issue of a mining lease forecast at the beginning of the third quarter of FY2015. The 2013 Draft Budget also stated that $10 million has been allowed for the purchase of surrounding tenements in October 2012 and $52 million allocated for strategic land acquisitions potentially commencing in January 2014.

The July 2012 Board Papers included an updated draft budget and expenditure forecast for Whitehaven, which budgeted $31.093 million in capital expenditure for Boardwalk in FY2013, and a further $25.38 million in capital expenditure for Boardwalk in FY2014.

Between June and September 2012, considerable work was undertaken in relation to Dingo with environmental management and assessments prepared by MEMS, the July 2012 JB Mining Report estimating the coal resources and the July 2012 A&B Report providing a preliminary assessment of the coal quality which suggested some promising but also problematic phosphorus levels. At that point, it was clear that further work needed to be undertaken to assess the quality of the coal which might be able to be obtained from Dingo.

In my assessment, the lack of further work done in relation to Dingo since September 2012 is explicable for two of the same reasons as expressed above in relation to Ferndale, being:

Further reasons for the lack of work conducted on Dingo is also explicable due to the circumstances of there being a joint venture partner in relation to Dingo, which has impacted the development of Dingo across two time periods. In November 2012, Cockatoo Coal as the parent company of Independent Coal indicated that it did not want any money being spent on Dingo due to the poor market conditions and there being no port or rail access for it, which led to Dingo being placed in care and maintenance. Then, between 2016 and 2018, Cockatoo Coal went into administration and re-entered administration which caused Boardwalk Dingo to decide not to commit any exploration funding to Dingo.

Finally, I accept as another reason for the lack of work undertaken in respect of Dingo was that the drilling program for Dingo scheduled to commence in July 2020 was not completed due to the COVID-19 pandemic. The only substantive work conducted since then has identified potential environmental issues with Dingo.

As a result of all of these matters, the expenditure on Dingo has remained at nominal amounts from 2012 to 2023, at a level that Whitehaven has repeatedly said is to “keep them in good standing with the potential for further exploration at the appropriate time” (see, for example, the August 2017 Impairment Paper).

Similar to the process for obtaining a mining lease in NSW described above, the process for obtaining a mining lease in QLD is described below, as summarised to similar effect in the submissions of Les & Zelda and in the submissions of Whitehaven that are outlined below, none of which are in serious contest.

Part 3 of Chapter 4 of the Mineral Resources Act sets out the process for the granting of exploration permits for coal. Following the Minister for Natural Resources and Mines, the Minister for Manufacturing and the Minister for Regional and Rural Development making a call for tenders (s 136C), an eligible person (including a company (see Schedule 2, definition for “eligible person”)) may tender for a proposed exploration permit (s 136D). Amongst other requirements, the tender must provide a statement detailing the tenderer’s financial and technical resources (s 136E(c)). The Minister then decides whether to grant an exploration permit (ss 136I – 136L).

Pursuant to s 179(a) of the Mineral Resources Act, an eligible person may apply for a mineral development licence in respect of a mineral occurrence for land which at the time the application for the grant is made is in the area of an exploration permit for the same mineral. Pursuant to s 183, the application must, amongst other requirements:

The Minister may grant a mineral development licence with or without conditions for all or part of the relevant land (s 186(1)(a)). During the term of a mineral development licence, the holder must carry out any activities specified by the Minister. Those activities are not limited and may include geological, geophysical and geochemical programs and other works reasonably necessary to evaluate the development potential of a mineral occurrence, mining feasibility studies, metallurgical testing, environmental studies, marketing studies, engineering and design studies and any other activities the Minister considers appropriate (ss 181(1)–(3)). The purpose of a mineral development licence is to evaluate the development potential of the defined resource.

Pursuant to s 426(1) of the EPA Qld Act, a person must hold an environmental authority for an “environmentally relevant activity”. An environmentally relevant activity includes a mining activity (ss 18(a) and 107(c)), being an authorised activity for a mining tenement under the Mineral Resources Act or another activity that is authorised under an approval under the Mineral Resources Act that grants rights over land (s 110).

The grant of an environmental authority is subject to a multi-stage statutory process. Where required, that process includes the completion of an EIS process, followed by the determination of an application for an environmental authority by the Chief Executive of the Department of Environment, Science and Innovation.

The purposes of an EIS and the EIS process are relevantly to assess the potential adverse and beneficial environmental, economic and social impacts of a project, including the adequacy of proposed management, monitoring and mitigation measures and to consider feasible alternative ways of carrying out the project (s 40(a)–(b)). It is designed to provide sufficient information to the proponent, Commonwealth and State authorities and the public, to assist the administering authority in deciding an application for an environmental authority and to support informed decision-making by other government authorities (s 40(a)–(e)).

The EIS process applies to a project, other than a coordinated project, where an EIS requirement is in force in relation to an application for an environmental authority for a mining activity that is, or forms part of, the project (s 37(1)(a)). In those circumstances, before an environmental authority can be granted, the proponent must undertake the EIS process, which involves the following steps:

An applicant must submit an application for an environmental authority to the Department of Environment, Science and Innovation (s 125(1)). Amongst other requirements, the application must describe all environmentally relevant activities and the relevant land (ss 125(1)(c)–(d)). There are three types of applications, being standard applications, variation applications and site-specific applications, and the type of application made determines the information required to be provided (ss 121–124).

The Chief Executive may require the applicant to give further information to assess the application (s 140(1)) and such an information request must be made for site-specific applications and variation applications within certain timeframes (s 144).

Once lodged, the application is assessed to determine whether it is a properly made application (s 127). If it is not properly made, the administering authority must give notice of the deficiencies and the steps required to remedy them, failing which the application will lapse (ss 128–129). The application stage ends when the administering authority is satisfied that the statutory requirements have been complied with (s 136).

A site-specific application for a mining activity relating to a mining lease must be accompanied by a proposed progressive rehabilitation and closure plan (PRC Plan) (s 125(1)(n)). The PRC Plan is directed to maximising progressive rehabilitation of land to a stable condition and specifying the condition required before surrender of the authority and must include a PRC Plan schedule identifying post-mining land uses or non-use management areas and associated rehabilitation or management milestones (ss 126B–126D).

Subject to limited exceptions, the notification stage applies to applications for mining activities relating to mining leases and certain site-specific resource applications (s 149) but does not apply where the relevant EIS (and, where applicable, proposed PRC Plan) has already been notified and there has been no material change (s 150). Where it applies, the applicant must give and publish an application notice, make the application documents publicly available, and allow submissions within the prescribed period, before giving a declaration of compliance (ss 151–158). The notification stage then ends in accordance with s 164.

Following the notification stage, the Chief Executive must consider and decide the application. The matters to be taken into account depend on the type of application (ss 175–176), but in all cases include the “standard criteria” set out in Schedule 4 of the EPA Qld Act. Those criteria include the precautionary principle, intergenerational equity, the conservation of biological diversity and ecological integrity, the character, resilience and value of the receiving environment, any submissions made and the public interest. The process also provides for objections to be heard and determined by the Land Court.

As with NSW, under s 67A of the EPBC Act, any project that has, or is likely to have, a significant impact on a matter of national environmental significance, known as a “controlled action”, requires approval from the Commonwealth Environment Minister. Accordingly, for any project it is first necessary to determine whether it constitutes a controlled action.

In September 2022, Whitehaven prepared a memorandum called “Dingo Tenement (Mineral Development Licence 512): Environmental Considerations Memo” This memorandum stated that “[a]ny application would likely be declared a “Controlled Action” under the EPBC Act.

As in NSW, there is a bilateral agreement between the Commonwealth of Australia and QLD in relation to the application of the EPBC Act. The agreement provides for the sharing of information between the Commonwealth and QLD and the division of decision-making responsibility for approvals to be provided under the EPCB Act. It follows that any “controlled action” would require application of the EPCB Act, through the lens of the bilateral agreement.

Section 234 of the Mineral Resources Act provides that the Minister may grant a mining lease to an eligible person or persons for the purpose of mining the minerals specified in the lease and for all purposes necessary to carry on that mining, as well as for other specified non-mining purposes that are associated with, arise from, or promote the activity of mining.

Pursuant to ss 232(1) and 233 of the Mineral Resources Act, an eligible person may apply for a mining lease for one or more minerals over an area of contiguous land. If the application is for a coal mining lease, the proposed lease area must be in the area of an existing resource authority, being a prospecting permit, an exploration permit for coal, or a mineral development licence and the applicant must either be the holder of that resource authority or have the holder’s consent to apply for the lease (s 232(2)).

The requirements for the application for grant of a mining lease are set out in s 245, including that the application states the purpose of the land use, defines various boundaries, gives reasons why the mining lease should be granted, identifies the relevant minerals, nominates the term of the proposed mining lease and the reasons for that term.

Pursuant to s 245(1)(n), the application must also include a statement acceptable to the Chief Executive of the QLD Department of Resources that outlines the proposed mining program and its method of operation, indicates when operations or any alternative proposed use of the lease area are expected to commence, sets out the infrastructure requirements necessary for the mining program or the activities proposed to determine those requirements, and states the estimated human, technical and financial resources to be committed to authorised activities during the term of the proposed mining lease. The application should also include a separate statement acceptable to the Chief Executive detailing the applicant’s financial and technical resources (s 245(1)(o)).

In February 2023, QLD’s Department of Resources published a “Mining lease application guide”, which provides a list of information that is “highly recommended” to be included in the application for a mining lease. This includes providing a report demonstrating compliance with the JORC Code, the relevant feasibility study undertaken to determine ore reserves, a mine plan with maps and a statement on the economic viability of the proposed mining activities.

Pursuant to s 318DQ of the Mineral Resources Act, each holder of a coal mining lease must ensure that there is a development plan. The development plan must be approved before the grant of any coal mining lease (s 271A(4)). Section 318DT requires that a proposed development plan provides:

Section 318EA of the Mineral Resources Act provides that the Minister may approve or refuse to approve a proposed development plan and, in doing so, must consider the potential of the proposed mining lease area for mining and any other purposes sought, the nature, extent, timing and location of the proposed activities, whether the mining of minerals to be specified in the lease under s 234 will be optimised in the best interests of the State having regard to the public interest, and the coal seam gas assessment criteria.

In July 2019, the QLD Department of Natural Resources, Mines and Energy published a guideline titled “Initial and later development plan guideline” for the preparation and lodgement of a proposed initial or later development plan for coal mining leases under the Mineral Resources Act. The guideline breaks down the requirements in s 318DT with more specificity, indicating that the proposed initial development plan should include, among other things:

Pursuant to s 252 of the Mineral Resources Act, the Chief Executive may grant a mining lease notice if they are satisfied that, amongst other things, that the requirements for the application have been met. The Chief Executive may reject the application (s 250). The applicant for a proposed mining lease must promptly give specified documents and information to affected persons and publish a notice in an approved newspaper within prescribed timeframes before objections close (s 252A). The applicant must provide the Chief Executive with a statutory declaration confirming compliance with s 252A (s 252B). An entity may lodge a written objection to a mining lease application stating its grounds and supporting facts (s 260). Where a properly made objection is lodged, the Chief Executive must refer the mining lease application and relevant objections (and any related environmental authority matters) to the Land Court after which the court fixes a hearing date and hears the mining lease application and objections (ss 265 and 268). After hearing the application, the Land Court must forward any objections and its recommendation to the Minister on whether the mining lease should be granted or rejected, with or without conditions, having regard to statutory compliance, land suitability, applicant capability, environmental impacts and the public interest, and must give reasons if recommending refusal (s 269). In deciding a mining lease application, the Minister must consider any Land Court recommendation and the matters specified in s 269(4) (s 271). After considering the statutory criteria, the Minister may grant, reject or refer a mining lease application to the Land Court, subject to consent and development plan requirements for certain land and minerals (s 271A).

Les & Zelda says that the statutory provisions for the granting of a mining lease in QLD do not establish any explicit requirement for economic viability or describe what that entails. Les & Zelda submits that the requirement for a mine plan appears to entail the disclosure of some economic factors such as the rate and amount of the proposed mining and the reasons why the plan is considered appropriate by reference to the resource being recovered in the most efficient and viable way.

Les & Zelda argues that the information to be provided in accordance with the Mining lease application guide, which is highly recommended, is not prescribed.

Whitehaven says that the process of obtaining a mining lease in QLD emphasises the importance of the economic viability of a project in the mining lease process because in assessing such an application, the QLD Government undertakes a balancing act between the effects of allowing mining activity and the benefits produced by it. Whitehaven argues that a key source of those benefits is the economic benefits generated by a viable mining project.

Whitehaven submits that, like with NSW, there are broad-ranging matters that are relevant to assessing any application for approval of a mining lease and obtaining relevant environmental approvals. Whitehaven says that importantly, the economic viability of the proposed mine would be assessed as part of the application process, meaning the economic viability of a project would be a key matter to be satisfied in respect of any such application. Whitehaven says that this is illustrated clearly when considering the manner in which Whitehaven approached some of the projects in QLD and that Whitehaven contemplated that both pre-feasibility and feasibility studies would need to be carried out before the issue of any mining lease for the project. Whitehaven says that the Draft Boardwalk Prospectus also contains a timeline for Dingo showing that both pre-feasibility and feasibility studies would need to be completed before the issue of any mining lease for the project.

As is the case in NSW, I consider that an application for a mining lease in QLD is a complex, lengthy and expensive process. I also consider that as part of that process a statement of the economic viability of the proposed mine must be provided to the QLD Department of Resources.

Similarly to Ferndale, I have no evidence on the costs which would likely be incurred by Whitehaven to obtain a mining lease for Dingo. I also have no evidence regarding the likelihood of a mining lease being granted for Dingo.

During the trial, I ruled that the opinions contained in the Yeates Report on the economic justification of the development of Dingo were inadmissible because he failed to expose his reasoning in arriving at them. The only evidence in relation to the opinions in the Yeates Report on the economic justification of the development of Dingo which was admitted was the following at [9.5.3]:

Les & Zelda submits that there is no evidence from Mr Yeates that development of Dingo was uneconomic. Les & Zelda says that the only evidence was the statement in [9.5.3] set out above, which it described as an “unexplained assertion”. Les & Zelda submits that this is an impenetrable opinion to which no weight can be given. It provides no explanation as to why, contrary to other authors, the cost of overburden at a strip ratio of 15:1 would exceed the value of the coal mined, and rests on latent and unarticulated assumptions as to both the cost of removing overburden and the value of the coal.

Les & Zelda further submits that the only other comment of moment by Mr Yeates is his critique of the Encompass Report at [11.1.2] of the Yeates Report which contains a comparison between the Pearl Creek area and the “Baralaba and Bluff mines”, in which he asserted that “both these mines have troubled economic histories”. Les & Zelda says that this assertion was supported only by references to the financial difficulties of the mine owners, rather than matters referable to the mines themselves, notwithstanding that Mr Yeates was a director of Cockatoo Coal from 2005 to 2015, which operated the Baralaba coal mine.

As with Ferndale, Les & Zelda contends that JORC Resources were declared in both the January 2013 JB Mining Report and the Encompass Report in respect of the Pearl Creek area, identifying quantities of “indicated” and “inferred” coal resources, the meaning of which is explained below by reference to the JORC Code:

Whitehaven submits that Mr Yeates expressed unchallenged opinions in respect of Dingo in the Yeates Report at [9.5.3] that based on his review of the January 2013 JB Mining Report (which noted that the JORC estimate was based on a strip ratio of 15:1 bcm/t) it was unlikely Dingo could be mined economically at such a strip ratio because the cost of removing the overburden would exceed the value of the coal mined. Whitehaven says that in circumstances where Mr Yeates is a mining engineer with 50 years’ experience in the Australian mining industry and this evidence was not challenged, it should be accepted.

Whitehaven submits that the Yeates Report at [9.5.5] identified a range of additional negative aspects of Dingo, including high strip ratios, deep weathered zones, complex geology and only moderate yields (each of which would contribute to higher costs) and high phosphorous and fluorine levels (which would reduce revenue), all of which were unchallenged.

Whitehaven says that Mr Yeates’ opinions are consistent with the following contemporaneous documents and events:

Whitehaven says that those two matters support the difficulties identified by Mr Yeates and cumulatively the evidence highlights a number of significant obstacles that would have needed to be overcome to satisfy the Trigger Events under the Restriction Deed. Whitehaven asserts that Les & Zelda’s evidence addresses none of those obstacles, which is fatal to its case.

I do not consider that I could give any weight to the Yeates Report as reliable evidence that it was likely that Dingo was uneconomic to develop. All that is left in the admissible portions of the Yeates Report in relation to Dingo is the bald assertion that it was uneconomic because of the cost of removing the overburden compared to the value of the coal to be mined, neither of which propositions are supported by any reasoning or calculations.

I also agree with Les & Zelda that the observation in the Yeates Report which states that the Baralaba and Bluff mines have “troubled economic histories” rests on the financial difficulties of the mine owners and tells me nothing about the likely financial performance of mining any area at Dingo.

My opinion is that the negative observations about Dingo in the Yeates Report are very specific and not expressed to be related to any calculations of the likely revenues and costs of mining at Dingo. I am not prepared to accept that the Yeates Report provides a reliable basis for any conclusions about the likely economic returns of mining Dingo no matter how many years of experience Mr Yeates may have in the mining industry.

The result is that in relation to Dingo I am in the same position as I am in relation to Ferndale that I have outlined above, which is that it has not been established on the evidence that it was likely that Dingo was uneconomic to develop. Similarly, I am left in the position where I have no evidence as to whether it was or was not likely to be economic to develop a mine at Dingo.

In light of the findings I have made above concerning the development and approval process for each of Ferndale and Dingo, it is necessary for me to determine the issue of the likelihood of one or more Trigger Events occurring.

Les & Zelda submits that it is incorrect to require it to prove, on the balance of probabilities, that had the $150 million Capital Injection been used as agreed or expected, one or both of Ferndale and Dingo would have satisfied a Trigger Event, as the court does not award relief for loss of a valuable chance or opportunity on that basis. Les & Zelda says that, consistently with such relief, the court should conclude that there was a real and substantial prospect of one or more Trigger Events occurring but for Whitehaven’s wrongful conduct. Les & Zelda also argues that in circumstances where Whitehaven’s failure to expend the $150 million Capital Injection on the Boardwalk Projects has made that assessment difficult, significant inferences should be drawn against Whitehaven. Les & Zelda contends that the best estimate of the likelihood of one or more Trigger Events occurring is Whitehaven’s own assessments in 2012 at the time it acquired Boardwalk.

Les & Zelda argues that the following two possible analyses can be used from 2012:

Les & Zelda says that the cumulative effect of those probabilities was that Whitehaven expected 39% of the Milestone Shares to have vested by now, being 61% of the first tranche and 17% of the second tranche ((61% of 50% = 30.5%) plus (17% of 50% = 8.5%)). Although more favourable to Whitehaven, that analysis in the KPMG Valuation Report appears to have been directed to addressing an accounting “gap” of $171 million that had arisen by August 2012 between Whitehaven’s position and the pro forma balance sheet in the Scheme Booklet, rather than reflecting any change based on new information. This is evidenced in the email dated 20 July 2012 from Mr Seton of KPMG to Mr Perrin and Mr Picton, amongst others.

Les & Zelda submits that the relevant likelihood of Trigger Events occurring lies between 30% and 100%, namely:

Les & Zelda says that Whitehaven objects to reliance on the implied probabilities at the time of the transaction on the basis that no reasoning was articulated. Les & Zelda submits that this submission rings hollow where Whitehaven itself was the source of those figures, which represented its unvarnished and contemporaneous assessment at the time, factoring in the uncertainties that may or may not have come to pass, and remains the best estimate of the likelihood of a Trigger Event occurring had Whitehaven expended the $150 million Capital Injection as represented and agreed.

Whitehaven submits that Les & Zelda’s contention that the court should adopt the probabilities stated in 2012 as the likelihood that the relevant projects would be developed should not be accepted.

Whitehaven submits that there is no reasoning explaining how those probabilities were adopted or what weight should be afforded to them. Whitehaven further says that the probabilities were expressed as at 2012 and as explained in the section dealing with the mining and environmental approval process in NSW and QLD set out above, whether approvals are granted depends on numerous economic, environmental and social factors. Whitehaven argues that an assessment made in 2012 cannot be treated as valid at a later point in time, using as an example that the SSD and Gateway Panel process was introduced in NSW in 2013, a matter that could not have been factored into any 2012 assessment with reliability. Whitehaven also says that similarly, where economic viability is relevant, market conditions inevitably change and affect any assessment. Whitehaven observes that in any event, even on the most optimistic timeframes, not even Mr Tinkler anticipated that approvals would be granted in 2012.

Whitehaven further submits that the unreliability of the assessments is demonstrated by the probabilities themselves, stating that Sienna was identified as having the highest probability of obtaining a mining lease (60%), with Monto at 50%, and a later document recorded an 80% probability for Sienna. Whitehaven submits that Les & Zelda has since abandoned any case in respect of those projects and must therefore be taken to accept that there is no prospect of them satisfying the Trigger Events. In addition, in respect of Sienna, it is known that government regulation would prohibit any relevant mining. This illustrates, Whitehaven submits, that the probabilities were entirely unreliable and should be given no weight.

Whitehaven contends that the same reasoning applies to Les & Zelda’s reliance on generalised estimates made in 2012 as to when mining approvals might be obtained. Those estimates were, at best, guesses about events up to five years in the future, unsupported by articulated reasoning. Whitehaven says that moreover, as repeatedly acknowledged in contemporaneous transaction documents, the Milestone Projects were early-stage exploration projects subject to significant uncertainty, such that forming any reliable view as to their future approval timelines was not possible. Whitehaven argues that this is emphasised by the fact that shortly after those estimates were made, coal prices collapsed and the outlook for project development changed materially.

Whitehaven submits that the contemporaneous budgets significantly undermine Les & Zelda’s case. Whitehaven points to a budget prepared for FY2013, before any scale-back in spending occurred, recorded that more than $94 million was to be spent on Dingo, Ferndale, Sienna and Monto and even with that expenditure, mining approvals for Dingo or Ferndale were not anticipated until the second quarter of FY2015. Whitehaven says that the budget shows that further proposed expenditure of approximately $55 million in FY2014 was also not expected to result in mining leases. Whitehaven reasons that this budget records that even if the remainder of the $150 million Capital Injection had been expended, it was not anticipated that mining leases would be granted, illustrating that such expenditure would not have resulted in the Milestone Share restrictions falling away.

In my opinion, I cannot rely on the analyses conducted by Whitehaven and KPMG in 2012 as a reliable basis on which to conclude that there would be a Trigger Event in respect of either or both Ferndale and Dingo for the following reasons.

First, those probabilities are entirely devoid of any reasoning but simply stand as conclusory statements. To enable me to assess the reliability of those probabilities and give any particular weight to them I would have to understand the facts on which they are based and any underlying assumptions. As I have found above, I regard the process for obtaining a mining lease in NSW and QLD to be complex and costly. Having given no weight to the O’Connor Report, I have no reliable evidence on the likelihood of a mining lease being granted for Ferndale. I also have no evidence on the likelihood of a mining lease being granted for Dingo. Without evidence for each of Ferndale and Dingo which addresses the complexity of the approval processes for a mining lease that are evident in NSW and QLD respectively, I cannot default to rely on baldly expressed percentages about those likelihoods, whether Mr Haggarty was involved in the process of assessing them or not.

Secondly, the probabilities in 2012 were used for the limited purpose of attributing the valuation to the Milestone Shares in the Scheme Booklet and the accounts of Whitehaven. They were not done with any particular rigour, as evidenced by the lack of reasoning in the documents which record them.

Thirdly, the probabilities were expressed in 2012 and pay no regard to any of the events which occurred subsequent to them such as any assessment of the quality of the coal that might be obtained and any economic assessment that may or may not have been undertaken. They are inherently unreliable given the passage of time, including the reason given by Whitehaven that the SSD and Gateway Panel process was introduced in NSW in 2013, making the process for obtaining a mining lease more complex than it was previously.

Fourthly, the probabilities are not accompanied by any evidence regarding the likely expenditure that would have been required to achieve the approval of a mining lease at either or both of Ferndale and Dingo. I am simply not in any position to consider whether the expenditure of the balance of the $150 million Capital Injection by Whitehaven would or would not have been sufficient to bring about the approval of a mining lease for either Ferndale or Dingo.

These findings have importance for the reasons I have stated in relation to causation and relief which are set out below.

Although Les & Zelda made claims in the SFASOC under ss 254T and 256B of the Corporations Act in relation to the payment of dividends and the making of capital reductions by Whitehaven respectively, neither of those claims were separately pressed in the opening submissions or the closing submissions of Les & Zelda as they are said to rise no higher than the Oppression Claim. As a result, I have considered the payment of dividends and the making of capital reductions by Whitehaven as part of the factual matrix relevant to the Oppression Claim.

Following completion of the merger between FY2013 and FY2024, Whitehaven expended a combined total of more than $3.5 billion on both dividends ($2.106 billion) and share buybacks ($1.450 billion). Overall, Whitehaven has experienced significant financial success since FY2012, mainly in the period from FY2017 onwards. In FY2023, Whitehaven generated $6.065 billion in revenue (growing from $618 million in FY2012), earned $2.668 billion in net profit after tax (NPAT) (growing from $57.8 million in FY2012), and held $2.775 billion in cash at 30 June 2023 (growing from $513.6 million at 30 June 2012), resulting in a net cash position (being cash less total debt) of $2.587 billion at 30 June 2023 (growing from $24.2 million at 30 June 2012).

Les & Zelda submits that in paying those dividends and undertaking the share buybacks from the end of FY2017 onwards, Whitehaven did not consider whether it should, or was obliged to, honour the representations made pre-completion concerning the $150 million Capital Injection into Boardwalk and its expenditure on the Boardwalk Projects. Les & Zelda complains that Whitehaven should have considered whether funds should instead have been expended on the Boardwalk Projects, rather than being returned to shareholders by way of dividends and buybacks, from which the Milestone Shareholders could not benefit.

Les & Zelda also submits that only perfunctory consideration was given to the position of the Milestone Shareholders when undertaking those large expenditures, with that consideration confined to the conclusion that Milestone Shareholders could not complain because they had bargained on the basis that they would not receive dividends or be able to sell their shares until a Trigger Event occurred and had thereby “waived” any such entitlement.

Whitehaven submits that Les & Zelda’s claim that the declaration of dividends and implementation of capital reductions were not fair and reasonable to Whitehaven’s shareholders must be rejected, for essentially the same reasons addressed below in relation to the Oppression Claim. Whitehaven says Les & Zelda seeks to interfere with fundamental corporate decisions as to whether to declare dividends and effect capital reductions and that there is no relevant unfairness of the kind alleged.

The position of Whitehaven’s revenue, NPAT, cash, net cash and dividends declared from FY2012 to FY2016 was as follows:

There were no share buybacks conducted by Whitehaven in the period from FY2012 to FY2017.

As part of the Oppression Claim, Les & Zelda appears to make no complaint about the failure of Whitehaven to pay any dividends to the Milestone Shareholders or to conduct any share buybacks for the period from FY2012 to FY2017.

The position of Whitehaven’s revenue, NPAT, cash, net cash and dividends declared from FY2018 to FY2024 was as follows:

On 21 March 2017, Mr Ball (the CFO of Whitehaven) delivered a presentation titled “Capital Management & Funding” to the board of Whitehaven, forecasting net cash increasing from negative $341 million in FY2017 to positive $1.935 billion by FY2023. As noted above, Whitehaven exceeded that forecast for FY2023 by more than $650 million, ending with a net cash position of $2.587 billion at 30 June 2023.

Under the heading “Whitehaven’s Dividend History” the presentation recorded that:

The presentation recommended a modest and stable dividend paid to shareholders through the commodity cycle and a dividend policy of a proposed payout ratio of 10% of operating cash flows with a minimum of $60 million per year.

Les & Zelda observes that the presentation did not recommend, or even propose, reconsidering expenditure on the Boardwalk Projects in light of Whitehaven’s improving financial position.

On 24 July 2017, a meeting of the board of Whitehaven was held at which two presentations were made: one titled “Capital Management Recommendation” and the other titled “Proposed Capital Return”.

The Capital Management Recommendation presentation stated:

The Proposed Capital Return presentation, under “Capital Strategy”, stated that:

Les & Zelda submits that neither presentation considered the impact on the Milestone Shareholders, nor whether funds should now be expended on the Boardwalk Projects rather than returned to shareholders. Les & Zelda says, to the contrary, as noted above, Whitehaven impaired the remaining value of the Boardwalk Projects in FY2017 on the basis of a lack of imminent development.

On 16 August 2017, the board of Whitehaven held a meeting at which it was resolved, amongst other things, as follows:

One of the explanatory papers for the meeting of 16 August 2017 was a draft “Notice of Annual General Meeting”, which answered the question “Is the Capital Reduction fair and reasonable to shareholders?” (being a criteria set out in s 256B(1)(a) of the Corporations Act) at [84]–[85] as follows:

On 17 August 2017, Whitehaven published the 2017 Annual Report which recorded that while no dividends had been paid or declared during the year, there was a “proposed distribution to shareholders which will be subject to approval by shareholders at the Company’s AGM on 25 October 2017”. That proposal was for a 20 cent per share distribution, comprising “a 14 cent capital return and a 6 cent unfranked dividend”.

On 25 October 2017, prior to the annual general meeting for Whitehaven on the same day, the board of Whitehaven held a meeting in relation to the proposed dividend of 6 cents per share and the capital return of 14 cents per share. A supporting paper dated 23 October 2017 titled “Declaration of Dividend” tabled at the meeting in respect of the proposed dividend and why it was fair and reasonable (addressing s 254T of the Corporations Act) stated:

Les & Zelda submits that this style of reasoning — namely, that the Milestone Shareholders had “waived their entitlement to receive any distributions” — became a recurring justification for further capital returns not extending to the Milestone Shareholders. Les & Zelda says it gave no consideration to the legitimate expectation induced by Whitehaven’s express representations that the $150 million Capital Injection would be expended on developing the Boardwalk Projects, an assumption from which Whitehaven materially departed after completion of the SPA. Les & Zelda says that this conduct was antithetical to what the Milestone Shareholders were entitled to expect.

On 25 October 2017, the annual general meeting for Whitehaven was held at which the following Resolution 5 was passed, with 99.99% of votes cast in favour, with obviously no votes cast on account of the Milestone Shares:

Les & Zelda submits that, directly or indirectly, that $140 million was contributed to by the portion of the $150 million Capital Injection which ought to have been spent on developing the Boardwalk Projects. Les & Zelda says that non-use for that purpose is now relied upon by Whitehaven to not only to deny the Milestone Shareholders any return (on the basis that the Trigger Events were not satisfied), but also to enrich the holders of unrestricted ordinary shares in Whitehaven.

On 15 February 2018, the board of Whitehaven held a meeting to consider the payment of a dividend of 10 cents per share. A supporting paper dated 12 February 2018 titled “Declaration of Dividend” tabled at the meeting in respect of the proposed dividend and why it was fair and reasonable (addressing s 254T of the Corporations Act):

On the next day, 16 February 2018, Whitehaven declared an unfranked dividend of 13 cents per share, totalling $128.9 million, which was paid on 2 March 2018.

Les & Zelda says that similar reasoning was relied upon by the Whitehaven board in declaring numerous subsequent dividends in the period from FY2019 to FY2024, being:

Each of those board resolutions declared a dividend and addressed the criteria in s 254T of the Corporations Act in a conclusory manner, asserting that the payment was “fair and reasonable to the Company’s shareholders as a whole”, while “noting that the milestone shareholders have contractually waived their rights to receive dividends in respect of the 34m milestone shares”.

Again, Les & Zelda submits that no consideration was given to the legitimate expectation induced by Whitehaven’s express representations that the $150 million Capital Injection into Boardwalk as part of the acquisition would be expended on developing the Boardwalk Projects, an assumption from which Whitehaven materially departed after completion.

Les & Zelda says that there was no reinstatement of capital expenditure on the Boardwalk Projects notwithstanding improved market conditions and Whitehaven’s financial position, which occurred in circumstances where Whitehaven undertook substantial acquisitions during this period, further demonstrating its free cash flow. Les & Zelda relies on the following acquisitions by Whitehaven:

Les & Zelda submits that the SFASOC alleges that, from FY2017 onwards, the declaration of dividends and implementation of capital reductions breached ss 254T and 256B of the Corporations Act on the basis that they were not “fair and reasonable” to all shareholders. Les & Zelda accepts that this allegation does not rise beyond the same factual foundation as the Oppression Claim and is no longer necessary or pursued separately from the Oppression Claim. Rather, the inquiry is one of commercial unfairness. Les & Zelda says that it is the declaration and payment of the dividends, the conduct of the share buybacks, and the circumstances in which they occurred — including the lack of consideration given to the Milestone Shareholders — that are relevant to the commercial unfairness of those matters. I have addressed these submissions in dealing with the Oppression Claim below.

I have considered these matters in determining the Oppression Claim below.

As summarised above, the Implied Terms Claim is that Whitehaven breached the following implied terms in each of the SPA, the WPA, the Minority Lenders SPA and the Restriction Deeds that (SFASOC [99(a)], [99(b)], [100(a)], [100(b)], [100(c)], [102], [150]–[157] and [164]–[181]):

Although the SFASOC refers to the SPA, the WPA, the Minority Lenders SPA and the Restriction Deeds (plural), I will confine my analysis to the SPA and the Restriction Deed (singular), which is the manner in which the parties dealt with the issues in their respective submissions.

Les & Zelda seeks damages for Whitehaven’s alleged breaches of these implied terms, including for the value of the Milestone Shares that would have vested had Whitehaven complied with its alleged implied contractual duties, or for the loss of that valuable commercial opportunity (SFASOC [153], [157] and [182]).

Terms can be implied into contracts by four methods (Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; [2014] HCA 32, French CJ, Bell and Keane JJ at [21]):

The legal principles concerning methods (1), (3) and (4) are considered below because Les & Zelda asserts that:

The implication of a term in fact is based on the presumed or imputed intentions of the parties to the contract: Byrne v Australian Airlines Ltd (1995) 185 CLR 410; [1995] HCA 24, Brennan CJ, Dawson and Toohey JJ at 422.

The onus on the party asserting the implied term is most difficult to discharge in detailed commercial contracts because the “more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue”: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24, Mason J at 346.

A term will be implied in fact into a formal written contract that is complete on its face if the overlapping conditions set out by the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, at 283, are satisfied: as cited in Barker by French CJ, Bell and Keane JJ at [21] fn 89; and Codelfa by Mason J at 347.

In BP Refinery at 283, Lord Simon established that to imply a term in fact:

The BP Refinery criteria is applied as at the time the contract was made: Realestate.com.au Pty Ltd v Hardingham (2022) 277 CLR 115; [2022] HCA 39, Edelman and Steward JJ at [114]. Each of the five criteria is briefly considered below:

Where a term is implied in law for particular classes of contract, the implication derives from the nature of the contract itself: see Codelfa, Mason J at 345–346; Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468, Hope JA (with whom Samuels and Priestley JJA agreed) at 487–489.

The implication of a term by law in particular classes of contract does not depend on the intentions of the parties, actual or presumed: University of Western Australia v Gray (2009) 179 FCR 346; [2009] FCAFC 116, Lindgren, Finn and Bennett JJ at [136]. This kind of implication is instead a “legal incident of a particular class of contract”: Codelfa, Mason J at 345–346. In Byrne, Brennan CJ, Dawson and Toohey JJ at 449 state that the rationale for this position is that:

Where a contract or the obligation it creates falls within an established class, the term is presumed to form part of the contract and the burden of proof rests on the party contending that the term should not be implied to show that the parties agreed or intended to exclude the term: Heimann, Jordan CJ at 695–696.

The classes of contract which may attract such implied terms are not closed: Castlemaine Tooheys, Hope JA at 486. Examples of established classes of such contracts were identified in Burger King Corporation v Hungry Jack’s Pty Ltd (2001) 69 NSWLR 558; [2001] NSWCA 187, where Sheller, Beazley and Stein JJA at [165] observed:

Terms will be implied by law in new categories of cases where it is “reasonable and necessary” to do so: Burger King at [167]; Barker, French CJ, Bell and Keane JJ at [28]–[29].

In Byrne, McHugh and Gummow JJ at 450 said that “necessity has been crucial in the modern cases in which the courts had implied for the first time a new term as a matter of law” and such “necessity” would arise where “unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined”. To a similar effect, “necessity” would also arise where a contract would be “deprived of its substance, seriously undermined or drastically devalued in an important respect”: Byrne, Brennan CJ, Dawson and Toohey JJ at 453; Barker, French CJ, Bell and Keane JJ at [29]. A term will not be the subject of legal implication if, in the circumstances of the case, it is unjust or unreasonable to imply it: Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, Priestley JA at 261–262.

Terms implied in law can be excluded by express provision of the parties and will not be implied where there is inconsistency with the express terms of the contract: Byrne, McHugh and Gummow JJ at 449, quoting Halsbury’s Laws of England (4th ed) vol 9 at [354].

There is a duty to cooperate in all classes of contract under Australian law, which is expressed in positive terms (what a party must do) and in negative terms (what a party must not do). The duty is conditioned by what is necessary in the circumstances and by the notion of reasonableness: Barker at [28]–[29]. The basis for its existence has progressed through several historical strands and been the cause of much debate.

There are three ancient cases to which the duty to cooperate can be traced, which are set out below in chronological order:

As a result, the seeds of the debate over whether these principles rest in rules of construction or implication were firmly sewn. The debate definitively commenced following the decision of the High Court in Secured Income. In that case, Mason J delivered the principal judgment with Gibbs, Stephen and Aickin JJ agreeing, and Barwick CJ briefly determining the appeal on a narrow basis without expressing any disagreement with the reasons of Mason J.

In Secured Income, Mason J at 607–608 said (citations omitted):

It is evident that the judgment of Mason J in Secured Income adopted the respective statements of principle from both Mackay v Dick and Butt v M’Donald. Having observed that Mackay v Dick rested on a rule of construction and Butt v M’Donald was based on the implication of a term, Mason J appears to then favour implying a “duty to cooperate” based on the intention of the parties as manifested by the contract itself. Notably, neither Mackay v Dick nor Butt v M’Donald used the expression of there being a “duty to cooperate” in a contract. That expression has, however, taken hold in the authorities since.

The duty to cooperate became the subject of analysis and application in Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104, with Mason P, Beazley and Stein JJA at 123, citing Secured Income, in the following terms:

As evident from Australis, the duty to cooperate was expressed as either being a “rule of law” or the implication of a term. Importantly, in Australis, the duty to cooperate is said to have a positive aspect (as described in Mackay v Dick as a duty to do all that is necessary to be done to carry out what the parties agreed should be done) and a negative aspect (as described in Stirling v Maitland as a duty to do nothing to put an end to an existing state of circumstances).

In Australis, at 124–125, Mason P, Beazley and Stein JJA held:

In Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126; [2001] HCA 45, Gleeson CJ, Gummow, Kirby and Hayne JJ at [36] cited Butt v M’Donald and Secured Income as the basis on which the law implies an obligation by a party to a contract to do all things necessary on their part to enable the other party to have the benefit of the contract and stated that it was not necessary to consider the basis of the implication. The majority in Peters at [36] also said that the law implies a negative covenant for a party not to hinder or prevent the fulfilment of the purpose of the express promises made in the contract, citing Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 21, Dixon J at 378.

In Barker, French CJ, Bell and Keane JJ at [24]–[25] observed that debates about characterising terms implied in law in all contracts as implications or rules of construction do not necessarily result in practical differences and used the statements of principle in Secured Income by Mason J at 607 as an example where:

As mentioned above, the criterion of “necessity” as supporting the implication of a term was identified in Barker by French CJ, Bell and Keane JJ at [28]–[29] as connecting implications in law and implications in fact.

The majority in Barker at [29] and [37] describe the duty to cooperate as applying to contracts generally by universal implication and that it directly relates to contractual performance, which is why it could be characterised as a rule of construction.

It has been emphasised that care must be exercised in identifying the content and operation of an implied duty to cooperate so that it is not at odds with the express terms agreed by the parties: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 (Campbell High Court decision), Gummow, Hayne, Heydon and Kiefel JJ at [168].

The duty to cooperate is informed by the express terms of the contract so as to afford the other party the benefit of what they contracted for; it is not an obligation to act generally in the other party’s best interests or to act as if contractual provisions exercisable to one party’s advantage and the disadvantage of another party had ceased to exist: Beerens v Bluescope Distribution Pty Ltd (2012) 39 VR 1; [2012] VSCA 209, Nettle JA at [54], citing Mackay v Dick; Butt v M’Donald; Secured Income and Australis. Another way of saying the same thing is that the duty of cooperation “does not extend to being nice”: Beerens, Nettle JA citing Council of the City of Sydney v Goldspar Australia Pty Ltd (2006) 230 ALR 437; [2006] FCA 472, Gyles J at [162].

In Wolfe v Permanent Custodians Ltd [2013] VSCA 331, Warren CJ, Neave and Whelan JJA at [28] said:

The Court of Appeal of Victoria had further occasion in Adaz Nominees to consider the principles to be drawn from Mackay v Dick, Butt v M’Donald, Secured Income, Byrne, Peters and Barker as the basis for a duty to cooperate imposed on parties to a contract. In Adaz Nominees, Whelan JA and Riordan AJA concluded at [117]–[118] (citations omitted):

Although in dissent as to the result, McLeish JA in Adaz Nominees at [265]–[277] principally surveyed the expressions of principle in Byrne, Barker, Butt v M’Donald, Secured Income, Australis, Wolfe and Beerens, then at [278]–[280] said (citations omitted):

The Court of Appeal of Victoria in Bensons Property Group Pty Ltd v Key Infrastructure Australia Pty Ltd [2021] VSCA 69 dealt with the negative implied term by first considering the wording used in Stirling v Maitland (do nothing to put an end to the state of circumstances), Peters (not hinder or prevent the fulfilment of the purpose of the express promises made in the contract) and Byrne (the necessity which will support the implication of a term absent which the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined). In rejecting “impossibility of performance” as the relevant test, in Bensons, Niall, Emerton and Sifris JJA at [127]–[128] said:

In summary, the duty to cooperate implied by law into contracts generally consists of two aspects: a positive aspect and a negative aspect, broadly formulated as follows:

In all of these variously expressed principles, it should not be forgotten that what is “necessary” to be done by the party under the implied duty to cooperate in contracts generally must depend on the circumstances (to adopt the words used in Mackay v Dick) and the intention of the parties as manifested by the contract itself (to adopt the words used in Secured Income).

As mentioned, the duty of a party to cooperate is informed by the express terms of the contract such that it only requires cooperation in providing the benefits promised by that party and does not extend to bringing about something which the contract does not require to happen: Australis at 123; Beerens at [54].

Unlike the implied duty of cooperation, an implied obligation of good faith is not recognised as a general legal incident of all commercial contracts: Vodafone Pacific Ltd v Mobile Innovations [2004] NSWCA 15, Giles JA (with whom Sheller and Ipp JJA agreed) at [191]; CGU Workers Compensation (NSW) Ltd v Garcia (2007) 69 NSWLR 680; [2007] NSWCA 193, Mason P (with whom Hodgson and Santow JJA agreed) at [131]–[132]; Specialist Diagnostic Services Pty Ltd (formerly Symbion Pathology Pty Ltd) v Healthscope Ltd (2012) 41 VR 1; [2012] VSCA 175, Buchanan, Mandie and Osborn JJA at [86]; Androvitsaneas v Members First Broker Network Pty Ltd [2013] VSCA 212, Redlich, Priest JJA and Macaulay AJA at [108]; QNI Resources Pty Ltd v North Queensland Pipeline No 1 Pty Ltd (2022) 11 QR 648; [2022] QCA 169, Kelly J (with whom Morrison JA and Ryan J agreed) at [120]–[132]; Heavy Plant Leasing Pty Ltd (In Liquidation) v McConnell Dowell Constructors (Aust) Pty Ltd (No 2) [2022] NSWSC 1775, Stevenson J at [75].

Instead, the term may be implied by law if it is “reasonable” and “necessary” (QNI Resources, Kelly J at [138]) or implied in fact if the BP Refinery criteria are satisfied (as detailed above): Renard Constructions, Priestley JA at 255–256; Androvitsaneas, Redlich, Priest JJA and Macaulay AJA at [108].

As noted in Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349, at 368 by Sheller JA (with whom Powell and Beazley JJA agreed), the good faith term may be implied:

Where an obligation of good faith is sought to be implied for a particular class of contract, the “central criterion” is one of necessity in each case, which involves the consideration of “whether the contract would be effective without it, and whether the enjoyment of the rights expressly conferred would or could be rendered nugatory, worthless or perhaps be seriously undermined”: CGU Workers Compensation, Mason P at [136].

The content of the duty of good faith is context dependent and “will not call for the same acts from all contracting parties in all cases”: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (2010) 383 ALR 577; [2010] NSWCA 268, Allsop P at [17].

In Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50, Allsop CJ, Besanko and Middleton JJ at [288] held that, relying on Renard Constructions, Burger King and Alcatel, the “usual content” of the obligation of good faith includes:

Additionally, a “term that requires a party to act in good faith and fairly, imposes an obligation upon that party not to act capriciously” or for purposes extraneous to the contract: Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41-703; [1999] FCA 903, Finkelstein J at [37]; Burger King, Sheller, Beazley and Stein JJA at [172] and [185]. In Macquarie International, Allsop P at [13] concluded that “[n]one of these obligations requires the interests of a party to be subordinated to those of the other” and what is required is “good faith or fair dealing between arm’s length commercial parties by reference to the bargain and its terms”.

As observed above, Les & Zelda asserts that Whitehaven came under a duty to use reasonable endeavours on the basis that such a term was implied in fact, thereby attracting the test established in BP Refinery.

If a term of this kind is implied, it does not impose an absolute or unconditional obligation: Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, French CJ, Hayne, Crennan and Kiefel JJ at [41], citing Hospital Products, Dawson J at 144. Electricity Generation Corporation concerned an express “reasonable endeavours” clause which provided that, if the buyer’s nominated quantity of gas for a day exceeded the maximum threshold, the sellers “must use reasonable endeavours” to make available a supplemental maximum daily quantity of gas. In considering that clause, the majority held that a party’s obligation to use reasonable endeavours to achieve a contractual object is “conditioned by what is reasonable in the circumstances”, including that party’s independent business interests: Electricity Generation Corporation, French CJ, Hayne, Crennan and Kiefel JJ at [41]. Similarly, in Hospital Products, Gibbs CJ at 64 noted that:

An obligation to use reasonable endeavours does not oblige a party to act against its own interests. In Electricity Generation Corporation, French CJ, Hayne, Crennan and Kiefel JJ observed at [42] that an “obligor’s freedom to act in its own business interests, in matters to which the agreement relates, is not necessarily foreclosed, or to be sacrificed, by an obligation to use reasonable endeavours to achieve a contractual object”. In Tyro Payments Ltd v Kounta Pty Ltd [2023] NSWSC 1384, Rees J at [138] summarised the position in the following terms:

The principles regarding the construction of written contracts generally, as well as those principles particularly applicable to the construction of written commercial contracts, are well established. There was no dispute about them in these proceedings.

As to the construction of written contracts generally, the meaning of the words used in the contract are to be determined objectively, applying the standard of what a reasonable person in the position of the parties would have understood them to mean. That, normally, requires consideration not only of the text, but also of the context in which they appear, as well as the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35, Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52, Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at [40].

The relevant principles of construction were also summarised by Bathurst CJ (with whom Macfarlan and Meagher JJA agreed) in Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 at [52]:

In Electricity Generation Corporation, French CJ, Hayne, Crennan and Kiefel JJ stated at [35] (citations omitted):

The task of construction to be undertaken in cases such as this was elucidated in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, with French CJ, Nettle and Gordon JJ stating at [47]–[50] (citations omitted):

This approach was more recently restated in one of the many litigious exploits involving members of the Rinehart family in Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514; [2019] HCA 13, with Kiefel CJ, Gageler, Nettle and Gordon JJ at [44] confirming that a commercial contract “should be construed by reference to the language used by the parties, the surrounding circumstances, and the purposes and objects to be secured by the contract”, citing Electricity Generation Corporation at [35].

In Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd (2023) 276 CLR 500; [2023] HCA 6, Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ at [27], quoted with approval Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12, Kiefel, Bell and Gordon JJ at [16], stating:

It is a principle of construction that where the same parties execute several instruments contemporaneously relating to different parts of the same transaction, the provisions of all the instruments must be considered together in order to understand and construe each of them, and to determine and give effect to the “governing intention of the parties”: Toohey v Gunther (1928) 41 CLR 181; [1928] HCA 19, Isaacs J at 196, quoting the decision of the Privy Council in Shaw v Jeffery (1860) 13 Moo PCC 432; [1860] 15 ER 162 at 456–457.

In such a case, the court can approach the construction on the basis that the parties have “chosen to record a single bargain in several documents contemporaneously, or so close in point of time that they are treated as being contemporaneously executed” so that “the whole of the documents are read together, and that the words of one may have to be modified by the words of another”: Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133; [1919] HCA 64, Isaacs J at 144.

In Zhang v BM Sydney Building Materials Pty Ltd [2016] NSWCA 166, McColl JA (with whom Ward JA and Sackville AJA agreed) at [45] stated (citations omitted):

Les & Zelda asserts that Whitehaven breached both the positive aspect and the negative aspect of the implied duty to cooperate in the SPA and the Restriction Deed.

Les & Zelda pleads the two aspects in the same way, with the SPA dealt with in the SFASOC at [99(a)] and the Restriction Deed dealt with in the SFASOC at [100(a)], expressed as follows:

Les & Zelda says that the implication of these terms and their content requires attention to the express terms of the contract and what was promised, relying on Secured Income for the proposition that the implication of a duty to cooperate depends upon determining the intention of the parties as manifested by the contract itself.

Les & Zelda submits that the construction of the express terms in the SPA and the Restriction Deed should occur in accordance with the principles expressed in Pacific Carriers, Toll v Alphapharm, Electricity Generation Corporation, Mount Bruce, Ecosse and Rinehart. Those principles require determining the meaning of such terms by reference to what a reasonable businessperson in the position of the parties would have understood them to mean, considering the text and the surrounding circumstances known to the parties at the time of entering into the contract, the purpose of the contract and the objectives which the contract sought to secure. Les & Zelda also relies on the interlocking nature of the SPA and the Restriction Deed so that they are interpreted together, given that they record a single bargain concerning the sale of the shares in Boardwalk, citing Hoyt’s.

Les & Zelda makes the following points in relation to the express terms of the SPA and the Restriction Deed:

Les & Zelda argues that this case is akin to those where an item is sold in exchange for contingent consideration, the receipt of which is predicated upon a state of circumstances under which alone that consideration can be realised. Les & Zelda argues that this provides the basis for the implication of both the positive and negative aspects of the duty to cooperate.

Les & Zelda argues that at a “global level” the content of the asserted implied duty to cooperate, in both its negative and positive aspects, is informed by the other express terms of the SPA and the Restriction Deed when properly construed in light of the surrounding circumstances known to the parties at the time, being:

Les & Zelda submits that these facts and features of the transaction give weight to the negative and positive aspects of the implied duty to cooperate and the nature and content of the obligations imposed.

Les & Zelda characterises negative aspect of Whitehaven’s implied duty to cooperate as follows:

Les & Zelda says that the relevant necessity which founds the implication arises because absent the implication the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined (citing Byrne) or the contract would be deprived of its substance, seriously undermined or drastically devalued (citing Barker).

Les & Zelda submits that it does not say that Whitehaven was compelled to cause the Trigger Events to occur. Nor does Les & Zelda say that Whitehaven would be in breach of any duty if it could not cause the Trigger Events to occur in respect of any of the Milestone Projects or there were external factors that prevented or precluded a Trigger Event from occurring.

Les & Zelda contends that Whitehaven breached the negative aspect of the duty to cooperate by engaging in conduct that hindered, prevented and frustrated the Trigger Events from occurring in a manner that “seriously undermined” and “drastically devalued” Les & Zelda’s enjoyment of the promise that the Milestone Shares would vest upon a Trigger Event occurring. To support this position, Les & Zelda relies on the following five bases:

Les & Zelda emphasises that the reason why no Trigger Events have occurred is not because none can be satisfied, arguing that Whitehaven has never formed that opinion and the evidence does not bear that out. Les & Zelda submits that no Trigger Events have occurred, and will never occur, because of the steps outlined above that Whitehaven has taken (on its own motion) that have hindered and prevented that occurrence and rendered it (for all intents and purposes) impossible.

Les & Zelda asserts that it is no defence to these allegations of breach to say that Whitehaven had a change of attitude, even if bona fide, regarding the development of any of the Milestone Projects, in particular Ferndale and Dingo.

Les & Zelda characterises the positive aspect of Whitehaven’s implied duty to cooperate in the following terms:

Les & Zelda contends that the positive aspect of the implied duty to cooperate “to do all such things as are necessary” as stated in Butt v M’Donald at 70–71 and Secured Income at 607 is not an obligation to “do whatever it takes”. Instead, the “duty is conditioned by the concept of reasonableness”, citing Wellington v Huaxin Energy (Aust) Pty Ltd (formerly Cuesta Coal Limited) [2020] QCA 114 (Wellington Appeal), Philippides JA (with whom Morrison JA and Ryan J agreed) at [78] (further submissions about which are set out in detail below).

Les & Zelda also says that the positive aspect of the implied duty to cooperate precluded Whitehaven from taking the same steps as described in the five bases outlined above in relation to the alleged hindering and preventing conduct of Whitehaven.

Les & Zelda relies heavily on five decisions — three from the United Kingdom and two from Queensland — in support of its arguments on the negative and positive aspects of the implied duty to cooperate. Each is addressed in turn below.

First, Les & Zelda relies on the decision of Telegraph Despatch and Intelligence Company v McLean (1873) LR 8 Ch App 658 as an illustration of the negative aspect of the implied duty to cooperate and its interaction with the positive aspect. In Telegraph Despatch, the defendant sold his newsagency business to the plaintiffs for £2,500, of which £1,000 was payable in any event and the remaining £1,500 was contingently payable in two instalments depending on future profits. The plaintiffs agreed with another company to discontinue the newsagency business, and the issue was whether the plaintiffs acted in breach of contract. Les & Zelda relies on the following reasoning in Telegraph Despatch of Sir William James LJ at 661–662:

Les & Zelda especially refers to the following statements in Telegraph Despatch of Sir George Mellish LJ at 662 (emphasis added in bold):

Les & Zelda says that this emphasised portion of Telegraph Despatch illustrates the often vanishing point between the negative and positive aspects of the duty to cooperate. It argues that the obligation imposed and recognised extends not just to refraining from doing something of their “own motion to put an end to the state of circumstances, under which alone the arrangement can be operative” (using the words of Stirling v Maitland) but that the obligation also comprises (on the facts of Telegraph Despatch) an obligation to “so conduct the business that the real amount of the purchase-money may be ascertained”.

The second decision that Les & Zelda relies upon as a further illustrative example of the negative aspect of the duty to cooperate is the decision of CEL Group Ltd v Nedlloyd Lines UK Ltd [2004] 1 All ER (Comm) 689. The issue in CEL Group was whether, having granted the claimants the exclusive right to supply them with transport services for a three-year period, it was a breach of contract for the defendants to voluntarily merge the business with another group in such a way that their transport requirements could no longer be separately identified. Hale LJ noted that the trial judge had found there to be an implied term in the contract, saying at [10]:

Hale LJ also noted at [11] that the trial judge had relied upon the principle stated in Stirling v Maitland to support this implied term.

Les & Zelda emphasises that Hale LJ at [15] said:

Les & Zelda also points to the finding of Hale LJ at [22] that “the judge was right to imply a term that NLL would do nothing of their own motion to bring to an end their own requirements for road haulage services”.

Using the language of Telegraph Despatch at 662, Les & Zelda argues that, having purchased Boardwalk on terms involving contingent consideration becoming payable if its projects progressed to relevant “Trigger Events”, there was an “an implied covenant on the part of the company that they will so conduct the business that the real amount of the purchase-money may be ascertained”.

Les & Zelda submits that the present case reflects a stronger claim than that in Telegraph Despatch because an express feature of the sale in this case is that Boardwalk was being capitalised with money which was available for use, and understood by all to be used, on the ongoing development of its assets, the very assets which were eligible to cause a Trigger Event to occur.

Les & Zelda submits that the positive aspect of the duty to cooperate, as implied into the SPA and Restriction Deed, required Whitehaven to continue conducting the affairs of Boardwalk so that the purchase price, and whether any Milestone Shares vested, could be ascertained. Les & Zelda says it follows that Whitehaven could not mothball the Boardwalk Projects without investigating and assessing the tenements to see if they could be further developed.

Les & Zelda submits that such a conclusion on the positive aspect to the duty to cooperate is also consistent with the outcome and reasoning in the third decision on which it relies, being Bournemouth and Boscombe Athletic Football Club v Manchester United Football Club Ltd [1980] CA Transcript 506 (unreported decision, Court of Appeal, 21 May 1980).

In that case, Bournemouth and Boscombe Athletic Football Club transferred a football player (Edward MacDougall) to Manchester United in exchange for £200,000 payable in instalments: £175,000 upfront and £25,000 upon Mr MacDougall scoring 20 goals for Manchester United’s premier team. However, after only two appearances, Mr MacDougall was transferred to West Ham United for £170,000 due to a change in management strategy. The issue was whether Bournemouth and Boscombe Athletic Football Club was entitled to receive the additional £25,000 notwithstanding Mr MacDougall had not scored 20 goals for Manchester United.

Les & Zelda emphasises the reasoning of the majority, comprising Denning MR and Donaldson LJ, who held that Bournemouth and Boscombe Athletic Football Club was entitled to the £25,000 payment. Denning MR at 6 explained the nature of the implied term as follows (citations omitted):

Les & Zelda submits that in Bournemouth, Donaldson LJ at 8–9 espoused the following useful rhetorical drafting technique to test Manchester United’s position (citations omitted):

Les & Zelda argues that the content of the positive aspect of the implied duty pleaded in this case (for Whitehaven to do all such things as were necessary on its part to enable Les & Zelda to have the benefit of Whitehaven’s promise that the Milestone Shares would vest upon a Trigger Event occurring) is one of the many ways of formulating the same implied term and duty as Denning MR found in Bournemouth as being the “reasonable opportunity”.

Les & Zelda notes that in CEL Group, Hale LJ at [20]–[21] used the same rhetorical drafting technique outlined by Donaldson LJ in Bournemouth to reach the conclusion that there was an implied term the defendants would do nothing of their own motion to bring an end to their own requirements for road haulage services in that case.

The fourth and fifth decisions that Les & Zelda relies upon in considering the positive aspect of the duty to cooperate is Wellington v Huaxin Energy (Aust) Pty Ltd (formerly Cuesta Coal Ltd) [2019] QSC 18 (Wellington First Instance), which was upheld on appeal in Wellington Appeal. Les & Zelda made lengthy submissions on the application of principles outlined in Wellington First Instance.

Wellington First Instance concerned the sale of an exploration permit for coal in Queensland, the consideration for which was a mixture of upfront cash payments and “milestone” payments, with the third milestone payment payable when a competent person measured the existence of between 40Mt and 100Mt of measured coal resources within the tenement. After the sale, a competent person estimated the existence of an inferred mineral resource of 364.1Mt, which triggered earlier milestone payments. After that occurred, no further exploratory work was carried out to further upgrade the mineral resource and no further payment was made.

In Wellington Appeal, Philippides JA (with whom Morrison JA and Ryan J agreed) at [25] framed the asserted implied duty to cooperate as follows:

Les & Zelda relies on the reasoning of Jackson J in Wellington First Instance (upheld in Wellington Appeal), where his Honour rejected a number of propositions as to the ambit of an implied duty to cooperate in the context of contingent consideration:

Les & Zelda argues that the propositions rejected by Jackson J at [82] are precisely one of the arguments which Whitehaven seeks to advance in these proceedings.

Les & Zelda also draws attention to the reasoning of Philippides JA (with whom Morrison JA and Ryan J agreed) in Wellington Appeal, which upheld Jackson J’s decision in Wellington First Instance, at [76]–[78]:

Les & Zelda says that the following points of distinction should be noted about the decisions in Wellington First Instance and Wellington Appeal:

Les & Zelda concludes by submitting that the nature of the positive obligation in this case is fortified having regard to the seven “global” facts and features, including the $150 million Capital Injection as part of the same transaction, which lends greater weight to the application of the remarks of Sir George Mellish LJ in Telegraph Despatch and the reasoning of the majority in Bournemouth.

Les & Zelda also makes clear that it does not suggest that money had to be spent on the Boardwalk Projects come what may but it is clear that Whitehaven has mothballed the projects indefinitely, including Ferndale and Dingo, without proper assessment as to their viability, a course of action which was not open to it in light of the implied terms in the SPA and the Restriction Deed.

Whitehaven raises six arguments for why Les & Zelda’s claim based on an asserted implied duty of cooperation must fail.

First, Whitehaven contends that Les & Zelda seeks to have the asserted positive and negative aspects of the implied duty to cooperate do work beyond what the express terms of the SPA and the Restriction Deed require in the following way:

Whitehaven says that cl 3.3 of the Restriction Deed created a regime for contingent consideration such that the Milestone Shares would become free of restrictions if the Trigger Events occurred and the very nature of the consideration made it clear that the Trigger Events may not occur. Whitehaven submits that Les & Zelda maintains that Whitehaven was required to take positive steps to ensure that the contingency was fulfilled, creating a new obligation not found in any of the agreements, which means that Les & Zelda seeks to have the implied duty of cooperation rise higher than the express promises made by the parties.

In this regard, Whitehaven claims that Les & Zelda’s claim is analogous to those dealt with in Marmax Investments Pty Ltd v RPR Maintenance Pty Ltd (2015) 237 FCR 534; [2015] FCAFC 127 and SSABR Pty Ltd v AMA Group Ltd [2023] NSWSC 1551.

Marmax Investments involved two franchisees with exclusive franchise rights in adjoining areas granted by a franchisor that were alleged to have been infringed. Whitehaven relies on the following statement by Middleton, Foster and Gleeson JJ at [139]:

SSABR concerned two smash repair businesses sold for an initial payment amount plus an element of contingent consideration calculated by reference to future earnings. Whitehaven relies on the following statements of Rees J at [130]–[131] in rejecting the vendors’ claim:

Whitehaven notes that while an appeal was allowed in the SSABR appeal decision, the appeal concerned the claim for rectification and the reasoning on the implied duty to cooperate was not the subject of challenge.

Whitehaven submits that Marmax Investments and SSABR each endorse the proposition that a contractual duty of cooperation can only be used to support a contractual benefit that is promised under the contract and the release of the restrictions under cl 3.3 of the Restriction Deed represents a benefit or outcome which may occur under the contract, but is not an outcome which was required to occur.

Whitehaven argues that the decision in Bournemouth does not assist Les & Zelda’s claim because that case involved implied terms which were distinguishable from Les & Zelda’s pleaded claim under the implied duty to cooperate. Whitehaven says the implied term put in Bournemouth was to provide a reasonable opportunity for an outcome to be achieved, or to not transfer the relevant player without just cause, or to not take a step to deprive the contractual counterparty of an amount under the contract. Whitehaven contends that no such term was pleaded in this case and Whitehaven does not acquiesce to any departure from the pleaded case. Whitehaven says that Bournemouth was a case concerned with the taking of a positive step to prevent the contractual outcome from being achieved, which is also not pleaded in this case. Furthermore, Whitehaven notes that, to the extent that Bournemouth represents the proposition that a party can be required under an implied duty to cooperate to take steps to achieve a particular outcome, such propositions are inconsistent with Australian authorities, such as Marmax Investments.

Whitehaven also says that the decision in Wellington First Instance does not assist Les & Zelda because it was a decision where (as recognised by Jackson J at [75] and [77]) the relevant implied obligation was framed by reference to the particular circumstances of the case, including that there was a finite time limit within which work would have to be carried out (at [88] and [92]). Whitehaven says that it was a case in which the shares would be worthless if the work was not performed within that time, but the opposite is true here because there is no time limit.

Whitehaven contends that the above seven “global” factors identified by Les & Zelda fail to grapple with the essential nature of the relationship in this case, which was one that was always understood to be contingent. Furthermore, Whitehaven disputes that the Milestone Shares have no commercial value absent the Trigger Events, as highlighted by the fact that value was attributed to them by an independent expert, PwC.

Whitehaven contends that Les & Zelda failed to properly plead its claim and recast its claim in closing submissions that Whitehaven had “hindered, prevented or frustrated” the fulfillment of the Trigger Events. Whitehaven says that this is inconsistent with its pleaded case. Whitehaven argues that the pleaded allegation in the SFASOC at [150]–[151] is that Whitehaven failed to take steps to achieve the desired outcome, and that no reference was made to Whitehaven having taken steps that hindered or prevented any matter. Whitehaven again says that it does not acquiesce to any departure from the pleaded case. Whitehaven also argues that when regard is had to the five matters said by Les & Zelda to be the conduct by Whitehaven that hindered, prevented and frustrated the Trigger Events, it is apparent that they are all steps that it is alleged should have been but were not taken and do not involve any act that prevents or hinders. Whitehaven concedes that the one exception to this is the allegation that dividends were paid but says that this is also a matter not pleaded as a particular of breach, and Whitehaven does not acquiesce to any departure from the pleaded case.

Whitehaven asserts that, based on these matters, the claim by Les & Zelda that Whitehaven breached the implied duty to cooperate “fails at the first hurdle”.

Secondly, Whitehaven submits that Les & Zelda has failed to establish (in circumstances where it had the onus) that it was unreasonable for Whitehaven to not take steps to apply for a mining lease in respect of the Milestone Projects. Whitehaven says the authorities recognise that an implied duty to cooperate cannot require a party to take steps that were unreasonable and still less could it require a party to take steps that were impossible. Whitehaven contends that, throughout the relevant period, Whitehaven’s decision to not yet develop the Milestone Projects has been reasonable with the evidence establishing that its development decisions in respect of Ferndale and Dingo took into account available information, market conditions and the interests of shareholders. In the absence of Les & Zelda leading evidence as to what reasonable steps were required, Whitehaven argues that even if the asserted duty to cooperate functioned as Les & Zelda contended, no breach of it can be established.

Thirdly, Whitehaven submits that the alleged implied duty to cooperate cannot have imposed an obligation of the kind which Les & Zelda contends because the Milestone Projects include Oaklands North and at the time of the transaction Oaklands North was entirely outside the control of Whitehaven and Boardwalk. In those circumstances, Whitehaven says that the parties could not have expected that Whitehaven would have acted in the manner which Les & Zelda now contends.

Fourthly, Whitehaven submits that an implied duty to cooperate could not function in the manner for which Les & Zelda contends in circumstances where, had Whitehaven’s directors acted in that manner, they would have breached their directors’ duties. Whitehaven says that it is a settled principle of contractual interpretation that where a contract is susceptible to more than one meaning, a lawful meaning will be preferred over one that is unlawful, citing Global Network Services Pty Ltd v Legion Telekom Call Pty Ltd [2001] NSWCA 279, Mason P at [102]. Whitehaven contends that in the case of a general implied term such as a duty to cooperate, the obligations created by those terms could not require a party to carry out an unlawful act, viewing the matter as one of general principle or as an example of the proposition that a contractual duty of this kind could not require a party to act unreasonably.

Whitehaven asserts that obliging it to take steps to develop the Milestone Projects, even where it was against the interests of its shareholders, would require its directors to breach their duties under s 181 of the Corporations Act. Whitehaven says that its directors had formed the view that the development of the Milestone Projects would not be in the interests of Whitehaven, based on the following evidence:

Whitehaven argues that requiring it to expend resources on the development of the Milestone Projects when it was not in the interests of its shareholders would likely result in a breach of duty by Whitehaven’s directors, which is a sure guide that the alleged implied duty to cooperate could not impose such obligation.

Fifthly, Whitehaven contends that there could not have been a breach of the alleged implied duty to cooperate because the time for performance of those obligations has not yet passed. Whitehaven says that the evidence clearly demonstrates that it has not abandoned any intention to develop the Milestone Projects and it remains possible that, depending on conditions that emerge in the future, Whitehaven may decide to develop those projects if the conditions warrant it.

Whitehaven also argues that the express agreement between the parties was that the restrictions on the Milestone Shares could fall away at any point in time and if, contrary to its submissions above, there is some obligation in Whitehaven to take steps to cause those restrictions to fall away, the time for performance has not yet arrived.

Whitehaven says that a contrary finding would require the court to determine that as a matter of corporate decision-making, Whitehaven should have allocated capital to the Milestone Projects in preference to the other uses to which the capital was put, and such a finding is not available on the evidence. Whitehaven highlights that Les & Zelda has led no evidence that allocating capital to the Milestone Projects, rather than other uses, would be even preferable, let alone be a decision that the Whitehaven board was required to make. Whitehaven also points to the unchallenged evidence of Mr Ball that capital has not yet been allocated to the Milestone Projects because, as a comparative matter, they did not demonstrate sufficient merit when compared to the other competing priorities for allocating capital.

Sixthly, Whitehaven asserts that even if it is established that there was a breach of an implied duty to cooperate, Les & Zelda has not established that any loss flows from that breach because, even assuming that Whitehaven took steps directed to securing mining leases and environmental approvals of the Milestone Projects, there is no evidence that would establish that Whitehaven would have been successful in that endeavour. Whitehaven asserts that Les & Zelda’s case is mere speculation that such leases and approvals would have been granted.

Les & Zelda makes the following arguments in reply to those of Whitehaven:

The first matter I wish to make plain is that I consider that Les & Zelda properly presented the case at trial for the implied duty to cooperate in the SPA and the Restriction Deed. I reject Whitehaven’s submissions that Les & Zelda’s case was not properly pleaded.

This is amply demonstrated by the form of the alleged implied duty to cooperate in its positive and negative aspects in the SFASOC at [99(a)] and [100(a)] as set out above. It bears repeating:

Les & Zelda then asserted that Whitehaven breached this term in the SFASOC at [150] and [151] because:

The particulars to the SFASOC at [91] make it clear that the Restricted Shares are as defined in the Restriction Deed to mean the Milestone Shares.

The particulars to the allegation of breach in the SFASOC at [150] and [151] are the particulars to the SFASOC at [144]. In essence, those particulars (all of which are expressed in the alternative) include:

In these above-mentioned particulars, “Approval(s)” is defined in the SFASOC at [92], which states:

As mentioned above, cl 3.2 of the Restriction Deed is where the definition of Trigger Event resides, detailing all of the requirements for the granting of a mining lease, planning approval and environmental approval.

I am satisfied that Les & Zelda’s shorthand description of the central case that it ran — that Whitehaven has abandoned the development of the Milestone Projects — is within the case that was pleaded in the SFASOC.

I also agree with Les & Zelda’s observation that Whitehaven did not assert that it would have conducted its case any differently, adduced different evidence, or cross-examined differently to meet the allegation that it has abandoned the development of the Milestone Projects.

I am satisfied that the SPA and the Restriction Deed each had the implied term in the positive and negative aspects, as pleaded by Les & Zelda, because it is implied in all classes of contracts as confirmed in numerous authorities, including Secured Income, Australis, Barker and Adaz Nominees.

The essential question which must be answered in determining the scope of Whitehaven’s implied duty to cooperate, in both its positive and negative aspects, is what benefits were expressly promised by Whitehaven in the SPA and the Restriction Deed to Les & Zelda.

Based on the principles explained in Secured Income and confirmed in Australis, Peters, Campbell, Beerens, Wolfe, Barker and Adaz Nominees as outlined above, the appropriate place to start in answering this essential question is discerning the intention of the parties as manifested by the express terms of the SPA and the Restriction Deed on their proper construction.

To identify that intention I will apply the orthodox canons of construction repeatedly confirmed in Pacific Carriers, Toll v Alphapharm, Electricity Generation Corporation, Mount Bruce, Rinehart and Laundy Hotels to objectively determine the meaning of the terms in the SPA and the Restriction Deed as commercial contracts based on what a reasonable businessperson would have understood those terms to mean by considering the text of the language used in the contracts, the context of the circumstances addressed by the contracts and the commercial purpose or objects to be secured by the contracts.

Applying the guidance in Mount Bruce, the only recourse to events, circumstances and things external to the SPA and Restriction Deed which may be had are those matters which are objectively known to the parties, and only where there is a constructional choice due to ambiguity in the text of the SPA and the Restriction Deed or where it assists in identifying the commercial purpose or object of the transaction.

Applying the principles stated in Toohey, Hoyt’s and Zhang set out above, given that both documents form part of the same transaction, because entry into the SPA committed the parties to enter into the Restriction Deed as demonstrated by cl 2.4 of the SPA and that the Restriction Deed was Annexure A to the SPA, the SPA and the Restriction Deed should be construed together.

The relevant provisions required to be construed to determine the benefit of the SPA to Les & Zelda as one of the Boardwalk Shareholders are as follows:

In essence, by the exchange of promises in the SPA, on completion of the SPA Whitehaven became the owner of shares in Boardwalk and each of the Boardwalk Shareholders became the owner of shares in Whitehaven, with their holding divided between the Initial Shares and the Milestone Shares, and the Milestone Shares held by the Boardwalk Shareholders on the terms contained in the Restriction Deed. The evident commercial purpose of the SPA was for Whitehaven to become the owner of shares in Boardwalk in exchange for the Boardwalk Shareholders becoming owners of shares in Whitehaven, divided between shares that had no restrictions (Initial Shares) and shares that were subject to restrictions (Milestone Shares). In numerical terms, the Boardwalk Shareholders received 102,420,709 shares in Whitehaven, with the 73,361,477 Initial Shares representing 71.63% of the consideration they received and the 29,059,232 Milestone Shares representing 28.37% of the consideration they received.

There was a further purpose served within the provisions of the SPA. Clause 4.9 of the SPA contained the obligation of BRI to make the $150 million Capital Injection to Boardwalk in exchange for shares in Boardwalk in advance of Completion, the relevant parts of which state (replacing “Vendors” with “Boardwalk Shareholders” and “the Company” with “Boardwalk”):

The Dictionary in Schedule 1 to the SPA provides the following definitions:

This meant that before the sale of the Boardwalk shares by the Boardwalk Shareholders to Whitehaven for the consideration of the Initial Shares and the Milestone Shares issued and allotted to the Boardwalk Shareholders at completion of the SPA, the $150 million Capital Injection took place, giving BRI more Boardwalk shares that it would then sell to Whitehaven and therefore increase the number of Initial Shares and Milestone Shares it would receive as consideration for that sale. Significantly, there is no contractual promise by Whitehaven contained in any of the express terms of the SPA as to exactly how the $150 million Capital Injection might be spent, when it might be spent and even whether it might be spent at all.

To understand the intended nature and duration of the restrictions on the Milestone Shares, the provisions of the Restriction Deed must be construed in light of the promises contained in the SPA. The terms of the “Background” expressed in the recitals to the Restriction Deed make clear the explicit link between the SPA and the Restriction Deed in relation to the Milestone Shares by stating (replacing “the Purchaser” with “Whitehaven” and “Vendors” with “Boardwalk Shareholders”):

The principal operative provisions of the Restriction Deed are contained in cll 2 and 3, which deal with the Restrictions to which the Restricted Shares (being the Milestone Shares as defined in the Dictionary in Schedule 1 to the Restriction Deed) are subject for the Restriction Period.

The relevant parts of cl 2 of the Restriction Deed state (replacing the “Purchaser” with “Whitehaven”, “Vendor” with “Boardwalk Shareholder” and “Restricted Share” with “Milestone Share”):

“Restrictions” is defined in the Dictionary in Schedule 1 to the Restriction Deed to mean the restrictions, limitations and conditions set out in cl 2.2 of the Restriction Deed.

It is clear the Restrictions are expressed in terms of what each of the Boardwalk Shareholders agreed they “must not do” in relation to the exercise of rights that attached to the Milestone Shares. In effect, cl 2 of the Restriction Deed meant that each of the Boardwalk Shareholders agreed they would not exercise the specified rights regarding disposal, transference, voting, dividends and distributions, rights issues and surplus assets and profits that they have as holders of the Milestone Shares for the duration of the Restriction Period. The restrictions are not, therefore, stated in terms of any right being exercised or denied by Whitehaven.

It then becomes necessary to determine the duration of the Restriction Period. That is a matter determined by the operation of cl 3 of the Restriction Deed. Clause 3 of the Restriction Deed states (replacing “Vendor” with “Boardwalk Shareholder” and “Restricted Share” with “Milestone Share”):

The commencement of the Restriction Period is therefore the date of issue of the Milestone Shares, which cl 2.3 states will occur on completion of the SPA, being on the Business Day after the scheme of arrangement between Whitehaven and Aston comes into effect.

The end of the Restriction Period depends on the occurrence of the event of Vesting, which is defined in the Dictionary in Schedule 1 to the Restriction Deed to have the meaning in cl 3.3 of the Restriction Deed. In essence, Vesting is when the Restrictions cease to apply to the Milestone Shares or are released in the following two tranches:

Projects is defined in the Dictionary in Schedule 1 of the Restriction Deed to be Dingo, Ferndale, Monto, Oaklands North and Sienna, and Project is defined to mean any one of them. In other words, the Projects in the Restrictions Deeds are the Milestone Projects.

It is abundantly clear that once Whitehaven became the owner of all the shares in Boardwalk, for so long as it had control of Boardwalk, it also had control over determining when, and even whether, any of the work would be undertaken in an effort to achieve any of the Trigger Events for each of the Milestone Projects. But the occurrence of a Trigger Event was not even linked to Whitehaven remaining in control of Boardwalk. There was no promise by Whitehaven to remain in control of Boardwalk or any of the Milestone Projects and no restriction of Whitehaven selling Boardwalk or any of the Milestone Projects to another party. On their terms, it would be possible for Whitehaven to sell Boardwalk to another party or even sell one or more (perhaps even all) of the Milestone Projects to another party to develop them. The contractual operation of the Trigger Events in cl 3 of the Restriction Deed would be unaffected by any such sale because the release of the Restrictions could still occur no matter who was in control of Boardwalk or in control of any one of more of the Milestone Projects. This is a very important matter in determining the scope of Whitehaven’s implied duty to cooperate under the SPA and the Restriction Deed.

Crucially for the purpose of discerning the parties’ intentions on the operation of these provisions, cl 3.3(c) of the Restriction Deed explicitly provides that there is no time limit within which the Vesting (i.e. the release of the Restrictions in cl 2.2) is to occur. In my consideration, as I will explain in more detail below, the fact that the parties contemplated that Trigger Events for any of the Milestone Projects may not occur for some considerable period of time, or even at all, is another very important factor in deciding the scope of Whitehaven’s implied duty to cooperate in each of the SPA and the Restriction Deed.

Taking all of these provisions together, I discern that the parties intended that in exchange for the sale of their shares in Boardwalk, the Boardwalk Shareholders would receive all their consideration from Whitehaven in the form of the Initial Shares (being the Unrestricted Shares) and the Milestone Shares the day after completion of the Whitehaven/Aston scheme when all of those shares were issued and allotted to the Boardwalk Shareholders. There was no contingency as to whether or not the Boardwalk Shareholders received any of those shares — Whitehaven was obliged to meet its promise to issue and allot them. There was, however, a contingency in relation to whether the full value, part of the value or none of the value of the Milestone Shares ever materialised for the benefit of the Boardwalk Shareholders because of the restrictions on the exercise of the rights of the Boardwalk Shareholders that accompanied their holding of those Milestone Shares.

The parties expressly turned their mind to whether there ought to be some express contractual time period within which the restrictions on the Milestone Shares must be lifted and determined that there should be none, with the Vesting under the Restriction Deed having no time limit. The parties also failed to impose any contractual promise by Whitehaven that it was required to spend any of the $150 million Capital Injection in any particular way or within any particular time period. There was also no contractual promise made by Whitehaven that it would undertake any of the work that would be required to ensure that a Trigger Event occurred on any particular Milestone Project and no contractual promise made by Whitehaven that it would do that work by any particular point in time. Further, there was no contractual promise by Whitehaven that it would even remain the owner of Boardwalk or any of the Milestone Projects, in circumstances where Trigger Events could still have contractual effect even if Boardwalk or any of the Milestone Projects were under the control of another party.

This proper interpretation of the operation of cl 3.3 of the Restriction Deed is confirmed in Les & Zelda’s own pleaded case in the SFASOC at [96], which states:

Although Whitehaven did not admit that allegation in the Defence at [96], my finding is that cl 3.3 of the Restriction Deed operated in the manner which Les & Zelda pleaded. A Trigger Event could occur in relation to a Milestone Project regardless of who was in control of it.

The fact that the parties to the SPA and the Restriction Deed were represented by highly experienced corporate and legal advisers on commercial transactions of significant complexity, size and value, makes the lack of promises by Whitehaven on exactly what it was required to do and when it was required to do it, all the more striking.

In all of the circumstances, I consider that by the combined operation of the relevant provisions of the SPA and the Restriction Deed, in relation to undertaking work to achieve a Trigger Event and spending money in doing that work on any of the Milestone Projects, Whitehaven was left with full unbounded discretion on what work it did and when it did that work, which included the discretion not to undertake any work at all. In exercising that discretion, I also consider that Whitehaven could take full account of its own business needs as to the amount of money it spent and how it was spent, if at all.

Having determined that there is no express promise by Whitehaven in either the SPA or the Restriction Deed to do anything to bring about a Trigger Event, it becomes abundantly clear that what Les & Zelda is attempting to do by using the implied duty to cooperate is to require Whitehaven to go beyond the promises it made in the SPA and the Restriction Deed and deliver something it did not promise. It has been repeatedly expressed in the authorities that the implied duty to cooperate cannot be used in that way because such a term cannot be at odds with the express terms agreed by the parties (Campbell), only affords Les & Zelda the benefit of what it contracted for (Beerens) and is not a general duty to ensure Les & Zelda obtains an anticipated benefit (Wolfe). To use the guidance in Australis, the SPA and the Restriction Deed may contemplate many benefits to Les & Zelda, but Les & Zelda can only call upon Whitehaven to provide or cooperate in the providing of the benefits promised by Whitehaven. Requiring Whitehaven to go beyond the exercise of its own discretion whether and when it undertook any work towards the achievement of a Trigger Event is not one of the benefits which was promised by the express terms of the SPA and the Restriction Deed.

In arriving at this conclusion, based on the principles for contractual construction which bind me (particularly those in Mount Bruce), I am not permitted to have recourse to the repeated statement made by Whitehaven before and after the SPA was executed that the $150 million Capital Injection “will be used for the ongoing development of [Boardwalk’s] assets”. That statement of Whitehaven’s intention does not form part of the express terms of either the SPA or the Restriction Deed and there is no ambiguity in the terms of either the SPA or the Restriction Deed which would permit me to use it as an objectively known “global level” fact in the way that Les & Zelda contends.

As a consequence, I accept completely Whitehaven’s argument that the release of the restrictions under cl 3.3 of the Restriction Deed represents a benefit or outcome which may occur under the contract, but is not an outcome which is required to occur.

As will be apparent from the analysis set out above, I reject the submission made by Les & Zelda that cl 3.3 of the Restriction Deed imposed an obligation on Whitehaven because “it was a promise by Whitehaven that upon a “Trigger Event” occurring, the “Restrictions” would “cease to apply”. The manner in which the parties structured the promises in the Restriction Deed was that if a Trigger Event occurred, the Restriction Period for the Restrictions agreed by the Boardwalk Shareholders would end. In other words, the Boardwalk Shareholders would no longer be bound by their promise not to exercise the rights which attached to the Milestone Shares and would be free to exercise all of the rights which attached to half the Milestone Shares (if one Trigger Event occurred) and the rights which attached to all of the Milestone Shares (if a second Trigger Event occurred). I cannot find a relevant obligation on Whitehaven or a promise by Whitehaven from those provisions.

Contrary to the submissions of both Les & Zelda and Whitehaven, I am not assisted by the various authorities they each put forward in their respective arguments, such as Telegraph Despatch, CEL Group, Bournemouth, Wellington First Instance, Wellington Appeal, Marmax Investments and SSABR. The exercise of determining the scope of the implied duty of cooperation is done by the application of the well-recognised legal principles I have outlined above. It is an inherently fact-specific exercise, depending on the express terms of the contract under consideration when they are properly construed in the recognised way. Taking entirely different parties, contracts, contexts, objects and purposes and seeking to extrapolate out from them any guidance for this case is an exercise which is fraught with difficulty and danger. It is not an exercise which assists me to arrive at the particular conclusions I have reached and outlined above.

The result is that the implied duty of cooperation in the SPA and the Restriction Deed does not have the operation as contended by Les & Zelda and therefore none of alleged acts of breach of such a term constituting the “abandonment of the Milestone Projects” (as described by Les & Zelda) are in breach of the implied term. According to the proper construction of the relevant provisions of the SPA and the Restriction Deed that I have undertaken above, it was open to Whitehaven to take whatever steps it wished (including none) and spend whatever money it wished (including none) on the development of the Milestone Projects. The implied duty of cooperation did not alter that position.

In my view, none of Whitehaven’s decisions to:

If I am wrong about my conclusion concerning the scope of the implied duty to cooperate because I should have had resort to Whitehaven’s statement of intention that the $150 million Capital Injection “will be used for the ongoing development of [Boardwalk’s] assets” as forming an express promise as part the proper construction of the SPA and the Restriction Deed, then I still would not have regarded any of the above matters as constituting a breach of the implied duty to cooperate. The time for the performance of the express promises has not yet passed, which is made clear by cl 3.3 of the Restriction Deed, which provides that there is no time limit within which Vesting may occur.

I also wish to make it clear that if there was an express promise to spend the $150 million Capital Injection on the development of the Milestone Projects, I would have rejected Whitehaven’s arguments that there could be no breach of it because it would be unreasonable to develop the Milestone Projects or that to do so would be in breach of the duties owed by the Whitehaven directors. I consider that it could not be unreasonable or a breach of any directors’ duties for Whitehaven to adhere to the contractual obligations to which it had committed in the SPA or the Restriction Deed if those contracts included such an express promise.

Les & Zelda accepts that an implied duty to act in good faith is not a recognised legal incident of all commercial contracts, citing Vodafone, Specialist Diagnostic, Androvitsaneas and QNI Resources. Les & Zelda also submits that whether a duty to act in good faith is implied (either at law or in fact) in a contract is an inquiry to be undertaken in light of the facts and circumstances of each case.

Les & Zelda argues that the same obligations that arose under the implied duty to cooperate in its positive and negative aspects also arose under the rubric of an implied duty to act in good faith in relation to Whitehaven’s promise that the Milestone Shares would vest upon a Trigger Event occurring. Les & Zelda contends that such obligations arose as either a term implied in law or in fact pursuant to the BP Refinery criteria.

In support of Les & Zelda’s claim that an obligation of good faith should be implied, it relies upon the seven “global level” factors set out above in relation to its arguments in respect of the implied duty to cooperate. Les & Zelda said in performing that obligation, Whitehaven had to act in good faith with fidelity to the bargain, including in light of the conventional estoppel established (if any).

Furthermore, Les & Zelda argues that Whitehaven breached the implied term to act in good faith by acting unreasonably and capriciously in circumstances where:

Les & Zelda seeks damages for breach of this implied term of good faith in the same manner as for the alleged breach of the implied duty to cooperate.

Whitehaven argues that Les & Zelda’s claim for breach of a contractual duty of good faith fails for six reasons.

First, Whitehaven submits that the implied duty to act in good faith would not be implied into all commercial contracts as a matter of law based on the relevant authorities. This appears to be accepted by Les & Zelda.

Whitehaven argues that, in respect of an implied term for particular contracts as a matter of law, Les & Zelda has failed to establish that its asserted good faith obligation is “necessary” in the sense that, without the implied term, “‘the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined’ or the contract would be ‘deprived of its substance, seriously undermined or drastically devalued’”, citing Barker at [29].

Whitehaven contends that the SPA is capable of functioning perfectly adequately without the implication of any obligation of good faith as it sets out the terms on which Whitehaven was to acquire shares in Boardwalk. Whitehaven argues that an implied term of good faith would not facilitate the operation of the SPA, let alone be necessary to do so and there is no reason to constrain or control the conduct of the parties in respect of their obligations under the SPA.

Whitehaven says that the Restriction Deed sets out the terms on which the Milestone Shares may be dealt with and is capable of functioning as intended without the implication of a term of good faith. Whitehaven contends that the relevant right and benefit under the Restriction Deed is the right to obtain a payment under certain conditions and obtaining that right and benefit does not require the implication of duty of good faith. Whitehaven asserts that it could not be said that such a right and benefit would be rendered nugatory, worthless or seriously undermined in the absence of a term of good faith and there is therefore no need for the implication of a term of good faith as a matter of law.

Secondly, Whitehaven contends that, in respect of a term to act in good faith implied in fact to the SPA and the Restriction Deed, the good faith obligation fails to satisfy most of the five criteria in BP Refinery.

Whitehaven says that the term is not necessary to give business efficacy to the SPA and the Restriction Deed, which requires that the term is “necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case”, citing Realestate.com.au at [19]. Whitehaven submits that each of the SPA and the Restriction Deed are capable of functioning, and has functioned, in accordance with their respective terms.

Whitehaven submits that the good faith duty cannot be said to be so obvious that it goes without saying, given that the SPA and Restriction Deed were highly negotiated and the parties were advised by pre-eminent firms of solicitors throughout the preparation of the agreements.

Whitehaven also suggests that the asserted good faith term is inconsistent with the express terms of the SPA and Restriction Deed because under those agreements, the purpose of the Milestone Shares was to provide for contingent consideration. Les & Zelda would share in the economic upside of the Milestone Projects, but only if they were developed. Whitehaven says that to require it to take steps to develop the Milestone Projects regardless of whether it considered any of them to be economically beneficial is inconsistent with the purpose as expressed in the agreements (particularly the Restriction Deed) and would be both unreasonable and inconsistent with the express terms in those agreements.

Thirdly, Whitehaven argues that, even if the duty of good faith term was implied in the SPA and the Restriction Deed, Les & Zelda cannot establish that it breached such a term, in particular because it seeks to cast the duty as a freestanding obligation to act reasonably imposed under each of the agreements when such an obligation attaches to the exercise of powers and the performance of obligations so that it is ancillary to them. Whitehaven submits that Les & Zelda did not plead that Whitehaven failed to exercise any power or perform any obligation under the contracts in a particular way, but rather what it sought to do is create a positive obligation on Whitehaven to act reasonably in taking steps that are not required by the contracts.

Fourthly, Whitehaven submits that the alleged implied duty of good faith cannot impose an obligation of the kind for which Les & Zelda contends because one of the Milestone Projects was Oaklands North, in which Boardwalk had an interest through its holding in Coalworks and decisions regarding Oaklands North would be made by Coalworks. As a result, Boardwalk did not have control over the projects owned by Coalworks at the time that the SPA and the Restriction Deed were executed so it cannot have been the parties’ intentions that Whitehaven would be obliged to take steps to ensure that Oaklands North was developed. As a result, there could have been no expectation that Whitehaven would have acted in the manner for which Les & Zelda now contends.

Fifthly, Whitehaven further contends that it has not breached the alleged duty of good faith because Les & Zelda does not allege that Whitehaven has conducted itself in bad faith, relying on Overlook v Foxtel [2002] NSWSC 17, where Barrett J observed at [68] that “[i]n many ways, the implied obligation of good faith is best regarded as an obligation to eschew bad faith”. Whitehaven criticises Les & Zelda’s attempts to cavil with the reasonableness of Whitehaven’s business decisions, and nonetheless states that it has not been established that the decision up to now to refrain from developing the Milestone Projects has been unreasonable, with no evidence from Les & Zelda as to what might have been reasonable.

Finally, Whitehaven submits that, even if it were established that the duty of good faith was implied in the SPA and the Restriction Deed and that there has been a breach of them, Les & Zelda has not established that any loss flows from the breach because its evidence does not establish the probability that any such approvals of the Milestone Projects would have in fact been granted had they been sought.

The alleged implied duty to act in good faith which has been pleaded by Les & Zelda is in the following form (SFASOC [99(b)] and [100(b)]):

Les & Zelda then asserted in the SFASOC at [154] and [155] that Whitehaven breached this term because:

The particulars to the allegation of breach in the SFASOC at [154] and [155] are the particulars to the SFASOC at [144], which are the same particulars for the breach of the implied duty to cooperate and accordingly have been set out above.

Les & Zelda accepts that the authorities (amongst which are Vodafone, CGU Workers Compensation, Specialist Diagnostic, Androvitsaneas and QNI Resources) do not support the implication of a duty to act in good faith to all commercial contracts. The other bases put forward by Les & Zelda for the implication of such a duty to act in good faith in law and in fact can be dealt with quite shortly.

Without repeating my detailed consideration of proper construction of the promises contained in the SPA and the Restriction Deed as set out above in determining the scope of the implied duty to cooperate, it is clear to me that the central promises of:

I accept Whitehaven’s submissions that the SPA and the Restriction Deed function perfectly adequately without the implication of such a term and any such implied term would not facilitate the operation of them. Applying the principles in Barker and CGU Workers Compensation, it is not necessary for there to be an implied duty to act in good faith in the SPA or the Restriction Deed as it cannot be said that without such a term the enjoyment of the rights conferred by each of those contracts would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined, or that those contracts would be deprived of their substance, seriously undermined or drastically devalued. None of those descriptors is true for the essential promises made and performed in the SPA and the Restriction Deed.

I also accept the following arguments raised by Whitehaven against the implication of a duty to act in good faith in fact in the SPA and the Restriction Deed based on the application of the BP Refinery criteria as required by Renard Constructions:

In any event, even if there was an implied duty of good faith in the SPA and the Restriction Deed, I would not find that it has been breached. There is no suggestion of bad faith in any of the matters which are relied upon by Les & Zelda in the particulars to the SFASOC at [144]. In fact, none of the matters which are fixed upon in Alcatel, such as exercising a power capriciously, arbitrarily or for an extraneous purpose, have been demonstrated by Les & Zelda on the evidence before me.

Les & Zelda argues that Whitehaven was under an implied duty to “use its reasonable endeavours to achieve Approval [Trigger Events] of two of the Milestone Projects”. The asserted duty of reasonable endeavours is said by Les & Zelda to be implied in fact according to the BP Refinery test, and “piggy-backs” off the asserted implied duties to cooperate and act in good faith.

Les & Zelda argues that its pleaded implied duty to use reasonable endeavours is clearly expressed and does not contradict any express term of the SPA or Restriction Deed.

Les & Zelda cites in support the reasoning in Grocon, Santamaria, Kyrou and McLeish JJA at [141]–[143] concerning the BP Refinery criteria that the implied term must be reasonable and equitable, necessary to give business efficacy to the contract and so obvious it goes without saying.

Les & Zelda suggests that in light of the objective circumstances, using Mr Haggarty’s words, it was “obviously” agreed that the $150 million Capital Injection into Boardwalk was to be used “for the ongoing development of its assets”. In this sense, Les & Zelda contends that an officious bystander would have answered a resounding “yes” to the question of whether Whitehaven was obliged to use reasonable endeavours to achieve Trigger Events of two of the Milestone Projects.

In addition, Les & Zelda argues that the proposed implied term is reasonable and equitable and gives business efficacy to the SPA and Restriction Deed given the circumstances surrounding the transaction, including that:

Les & Zelda asserts that the Milestone Shares were not intended to be meretricious trinkets, particularly given the $150 million Capital Injection as part of Boardwalk’s sale, and the implied duty to use reasonable endeavours gives effect to the objectively determined presumed or imputed intentions of the parties.

Les & Zelda argues that Whitehaven breached the implied duty to use reasonable endeavours to seek approvals for the Milestone Projects for the same reasons expressed in relation to the breaches of the implied duty to cooperate as outlined above.

Whitehaven contends that Les & Zelda’s claim based on the alleged implied duty to use reasonable endeavours must fail for the following reasons:

The alleged implied duty to use reasonable endeavours which has been pleaded by Les & Zelda is in the following form (SFASOC [100(c)] and [102]):

The manner of the pleading is that Les & Zelda says that the duty to use reasonable endeavours is implied in the Restriction Deed as stated above (SFASOC [100(c)]), and that, further or alternatively, it is an implied term of the SPA based on the same particulars (SFASOC [102]).

As mentioned above, the reference to “Approval” in the alleged implied duty to use reasonable endeavours is that defined in the SFASOC at [92] as set out above.

Les & Zelda asserts that Whitehaven breached the implied duty to use reasonable endeavours in relation to Ferndale and Dingo in the SFASOC at [164]–[169] respectively:

In my opinion, the alleged implied duty to use reasonable endeavours does not meet the BP Refinery criteria in several respects: