Bacchus Resources Pty Ltd v Talisman Mining Limited

HIS HONOUR: The plaintiff (Bacchus) and the first defendant (Talisman) have interests in the mining industry. They are in dispute as to whether the Court should declare that an instrument, entitled ‘Opportunity Notice Proposal’ (the Proposal) which they both executed on 27 September 2018, brought into existence a binding joint venture agreement between them.

Bacchus and Talisman each owned certain mining tenements. Bacchus agreed to grant the second defendant (Haverford), a wholly-owned subsidiary of Talisman, a right to earn up to an 80% interest in the tenements and Haverford agreed to transfer a 20% interest in certain other tenements to Bacchus on specified terms and conditions.

On 8 January 2018, the parties entered into a ‘Farm-in Agreement’. The Farm-in Agreement made provision for the parties to enter into a joint venture agreement on terms contained in a draft joint venture agreement attached (“Attachment A”) to the Farm-in Agreement.

At the same time, Bacchus and Talisman entered into an ‘Alliance Deed’ under which they agreed to consider other prospective projects in New South Wales. The Alliance Deed contained provisions for a party to identify an Opportunity that met certain criteria and for the giving to the other party of an Opportunity Notice offering to join in the exploitation of, or decline, the Opportunity. Clause 3.2(b) of the Alliance Deed provides:

On 14 August 2018, Talisman gave Bacchus an Opportunity Notice which Bacchus elected to accept on 22 August 2018. The Opportunity has been referred to as “Mt Nobby”, which is near the town of Condoblin. The parties negotiated the terms of the acquisition of the Opportunity and then executed the Proposal. It is appropriate to set out the Proposal in full.

On 27 September 2018, Bacchus paid Talisman the sum of $6,250 in accordance with clause 2(a) of the Proposal.

It is not in dispute that the specimen joint venture agreement, Attachment A, includes the following provision:

The dispute arose in the following way.

On 22 February 2019, solicitors for Bacchus, Bird & Bird, wrote to solicitors for Talisman, MinterEllison, claiming a failure on Talisman’s part to fulfil its obligation under clause 2(b)(v) of the Proposal to draft a formal JV agreement to give effect to the Proposal. They called, amongst others, for an acknowledgement by Talisman that there was a joint venture agreement on foot between Bacchus and Talisman.

On 13 March 2019, MinterEllison responded in a letter which included the following:

It is evident from this that Talisman was taking the position that there was no binding joint venture agreement. It is to be observed that the Proposal makes no provision for refund of the initial payment, nor does clause 15 of Attachment A.

Bird & Bird replied swiftly, on 14 March 2019, as follows:

MinterEllison replied, for its part equally swiftly (the less said about the tone of this letter, the better), as follows:

On 15 July 2019, MinterEllison, on behalf of Talisman, took up the position for the first time that the Proposal had been fully performed. They wrote to Bird & Bird, relevantly:

On 16 July 2019, Bird & Bird responded:

On 18 March 2019, Bacchus sued out of this Court a Summons supported by a Commercial List Statement claiming a series of declarations and orders, all resting on the proposition that execution of the Proposal brought into existence a binding joint venture between Bacchus and Talisman.

The only declaration (which differs slightly from one claimed in the Summons) for which Bacchus now moves is one that:

Section 90(1) of the Civil Procedure Act 2005 (NSW) provides that the Court is, at or after trial or otherwise as the nature of the case requires, to give such judgment or make such order as the nature of the case requires. It is thus open to the Court to make a declaration in these terms if the nature of the case requires it.

Bacchus, for which Mr J Hutton of counsel appeared, argues that the Proposal is a binding agreement under which, upon payment of the sum provided for in clause 2(a), brought into existence a binding joint venture between the parties. He argues that the failure of the parties to execute and exchange a formal JV Agreement simply means that their joint venture is on the terms for which the Proposal provides.

It is not really in dispute that the Proposal was intended to be legally binding, although Talisman did faintly argue the contrary.

Talisman’s true position is that the Proposal was binding, but only to the extent of obliging the parties to negotiate in good faith and then execute and exchange a further formal JV agreement. It is not in issue that the parties did negotiate in good faith, but failed to reach consensus on the terms of the further formal JV Agreement.

Talisman, for which Mr J Giles SC together with Ms C Hamilton-Jewell appeared, argues that the Proposal was exhausted when the parties had negotiated in good faith but the negotiations failed to produce an executed formal JV Agreement.

Talisman argues that any declaration that the parties had a binding JV Agreement on 27 September 2018 is inutile because ‘events external to the litigation have overtaken the relief sought’.

These events are the failure of the parties to execute a formal JV Agreement and MinterEllison’s correspondence of 13 March 2019 and 15 July 2019, one of which, says Talisman, brought whatever agreement there might have been to an end.

Talisman does not move the Court for a declaration that the agreement embodied in the Proposal is no longer on foot.

I uphold Bacchus’ contention, and I reject those of Talisman, for two reasons. First, in my view, upon payment of the amount referred to in clause 2(a) of the Proposal a binding joint venture agreement came into effect and stayed on foot, notwithstanding the failure of the parties to agree and execute the formal JV Agreement. Second, neither of MinterEllison’s letters brought that joint venture to an end.

As to the first reason, the case is a species of what is sometimes described as a “Masters and Cameron”. This is a reference to the well-known decision of the High Court of Australia in Masters v Cameron (1954) 91 CLR 353, which categorised cases where the question is whether an agreement between parties, which contemplates that the matter of their negotiation is to be dealt with by a formal contract, is intended to be immediately legally binding.

Parties may agree immediately to be bound even though they may wish to restate their terms in a fuller or more precise way in a formal document, or they may agree immediately to be bound even though there would be a more formal agreement subsequently which could contain other terms. That is this case.

Whether parties who reach agreement intend immediately to be bound depends on their intention as disclosed by the language they have employed. Where they contemplate the subsequent execution of a formal contract but do not express their agreement to be subject to or conditional upon the execution of a formal document, whether they intended immediately to be bound again depends upon their intention, disclosed by the language they have used: Masters v Cameron (1954) 91 CLR 353 at 360; G R Securities Pty Limited v Baulkham Hills Private Hospital Pty Limited (1986) 40 NSWLR 631; Helmos Enterprises Pty Limited v Jaylor Pty Limited (2005) 12 BPR 23,021 at [52], [55] and [56].

The question here is whether the language the parties employed discloses an intention to be bound to do nothing more than negotiate in good faith. I do not think that it does. Rather, it discloses an intention that there be a joint venture on specified terms together with an intention that they negotiate in good faith towards the execution of the fuller formal JV Agreement on the footing that if they do not agree they simply revert to the terms in and incorporated in the Proposal, which includes the terms of Attachment A as modified to reflect the structure of the joint venture.

The following are the factors which I consider are determinative in concluding that the parties so intended:

As to the second reason, it is clear that clause 15 of Attachment A is part of the parties’ agreement.

The MinterEllison correspondence was not effective to bring the joint venture created by the Proposal to an end. The 13 March 2019 letter denied existence of any agreement and did not purport to give the 30 day notice required by clause 15 of Attachment A. It expressly refrained from doing so.

The 15 July 2019 letter asserted discharge by performance whilst denying the existence of a joint venture. It asserted that the 13 March 2019 letter was to be properly understood as notice under clause 15. This is insupportable. The language used cannot sustain it.

Neither of the letters gave the required 30 days’ notice. Neither was an unequivocal election to exercise a right: see, Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 646; Donau Pty Ltf v ASC AWD Shipbuilder Pty Ltd [2019] NSWCA 185 at 86. It follows that neither was effective to bring the joint venture to an end.

The fact that there has been and is a joint venture on foot can plainly have commercial consequences, even if, as I apprehend, Talisman might now give notice to bring it to an end.

I reject Talisman’s contention that the declaration sought is inutile and I propose to make it.

The Court declares that, on 27 September 2018, upon payment by the plaintiff of the sum of $6,250 to the first defendant they entered into a binding joint venture agreement.

The Court heard submissions as to costs. Although Bacchus moved for only one declaration, in slightly different terms to one claimed in the Summons, the fulcrum of the dispute was whether a binding joint venture agreement came into effect and whether relief has been rendered inutile by subsequent events.

Bacchus has succeeded, and Talisman has failed, on both these issues. There is no reason why costs should not follow the event. I order that Talisman is to pay Bacchus’ costs of the proceedings.