FEDERAL COURT OF AUSTRALIA Addenbrooke Pty Limited v Duncan (No 6) [2015] FCA 793 Citation: Addenbrooke Pty Limited v Duncan (No 6) [2015] FCA 793 Parties: ADDENBROOKE PTY LIMITED (ACN 055 973 576) v TRAVERS WILLIAM DUNCAN, PETER GRAY and SOUTHERN CROSS EQUITIES PTY LTD (ACN 071 935 441); SOUTHERN CROSS EQUITIES PTY LTD (ACN 071 935 441) v CASCADE COAL PTY LTD (ACN 119 180 620), ARTHUR PHILLIP PTY LTD (ACN 100 908 101) and RICHARD JONATHON POOLE; PETER GRAY v CASCADE COAL PTY LTD (ACN 119 180 620) File number: NSD 2243 of 2012 Judge: FOSTER J Date of judgment: 5 August 2015 Catchwords: TRADE AND COMMERCE – whether a potential investor in a placement of shares made by a private company was misled as to the true purpose of the capital raising – whether material facts were concealed from the potential investor – whether the investor relied upon the positive statements made to it and whether it relied upon those with whom it dealt to disclose certain facts – whether those facts were material to the investor Legislation: Australian Securities and Investments Commission Act 2001 (Cth), ss 12DA, 12GF, 12GB and 12GM Corporations Act 2001 (Cth), s 1041E Date of hearing: 2–6, 10 and 16–18 June 2014 Date of last submissions: 6 May 2015 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 442 Counsel for the Plaintiff: Mr FM Douglas QC, Mr G O'Mahoney and Mr JG Simpkins Solicitor for the Plaintiff: Gye Associates Lawyers Counsel for the First Defendant: Mr CRC Newlinds SC and Mr GES Ng Solicitor for the First Defendant: Yeldham Price O'Brien Lusk Counsel for the Second and Third Defendants and the Cross-Claimants in the First and Second Cross-Claims: Mr AJ Payne SC and Mr JAC Potts Solicitor for the Second and Third Defendants and the Cross-Claimants in the First and Second Cross-Claims: Speed & Stracey Counsel for the First Cross-Defendant in the First Cross-Claim and the Cross-Defendant in the Second Cross-Claim: Mr J Williams and Mr T O'Brien Solicitor for the First Cross-Defendant in the First Cross-Claim and the Cross-Defendant in the Second Cross-Claim: TressCox Lawyers Counsel for the Second and Third Cross-Defendants in the First Cross-Claim: Mr K Andronos Solicitor for the Second and Third Cross-Defendants in the First Cross-Claim: Torq Murray Law IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 2243 of 2012 BETWEEN: ADDENBROOKE PTY LIMITED (ACN 055 973 576) Plaintiff AND: TRAVERS WILLIAM DUNCAN First Defendant PETER GRAY Second Defendant SOUTHERN CROSS EQUITIES PTY LTD (ACN 071 935 441) Third Defendant and between: SOUTHERN CROSS EQUITIES PTY LTD (ACN 071 935 441) Cross-Claimant on the First Cross-Claim AND: CASCADE COAL PTY LTD (ACN 119 180 620) First Cross-Defendant on the First Cross-Claim ARTHUR PHILLIP PTY LTD (ACN 100 908 101) Second Cross-Defendant on the First Cross-Claim RICHARD JONATHON POOLE Third Cross-Defendant on the First Cross-Claim AND BETWEEN: PETER GRAY Cross-Claimant on the Second Cross-Claim AND: CASCADE COAL PTY LTD (ACN 119 180 620) Cross-Defendant on the Second Cross-Claim JUDGE: FOSTER J DATE OF ORDER: 5 AUGUST 2015 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Leave to amend the Amended Originating Application and the Second Amended Statement of Claim in accordance with the amendments set out in MFI-11 be refused. 2. The whole of this proceeding be dismissed. 3. The First and Second Cross-Claims be dismissed. 4. The plaintiff pay the costs of the first defendant (Travers William Duncan), the second defendant (Peter Gray) and the third defendant (Southern Cross Equities Pty Ltd) of and incidental to this proceeding (including the costs which those parties are ordered to pay to the cross-defendants pursuant to Order 5 and Order 6 below). 5. The cross-claimant in the First Cross-Claim (Southern Cross Equities Pty Ltd) pay the cross-defendants' costs of and incidental to that Cross-Claim. 6. The cross-claimant in the Second Cross-Claim (Peter Gray) pay the cross-defendant's costs of and incidental to that Cross-Claim. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 2243 of 2012 BETWEEN: ADDENBROOKE PTY LIMITED (ACN 055 973 576) Plaintiff AND: TRAVERS WILLIAM DUNCAN First Defendant PETER GRAY Second Defendant SOUTHERN CROSS EQUITIES PTY LTD (ACN 071 935 441) Third Defendant and between: SOUTHERN CROSS EQUITIES PTY LTD (ACN 071 935 441) Cross-Claimant on the First Cross-Claim AND: CASCADE COAL PTY LTD (ACN 119 180 620) First Cross-Defendant on the First Cross-Claim ARTHUR PHILLIP PTY LTD (ACN 100 908 101) Second Cross-Defendant on the First Cross-Claim RICHARD JONATHON POOLE Third Cross-Defendant on the First Cross-Claim AND BETWEEN: PETER GRAY Cross-Claimant on the Second Cross-Claim AND: CASCADE COAL PTY LTD (ACN 119 180 620) Cross-Defendant on the Second Cross-Claim JUDGE: FOSTER J DATE: 5 AUGUST 2015 PLACE: SYDNEY REASONS FOR JUDGMENT 1 Addenbrooke Pty Limited (Addenbrooke), which is the plaintiff in this proceeding, is the family company of the well-known Sydney businessman and entrepreneur, Denis James O'Neil. Denis O'Neil is accustomed to making investments through Addenbrooke. Denis O'Neil has been a director of Addenbrooke since 1993. He is the Chairman of Directors. He owns all of the issued capital of Addenbrooke, and always has. 2 Denis O'Neil has a son, Ned Arthur O'Neil. In mid-2014, Ned O'Neil was 29 years of age. He finished school in 2002 and then attended the University of Sydney where he gained the degree of Bachelor of Commerce. Before commencing work in the family businesses, Ned O'Neil worked for a short time for Multiplex Constructions as a junior project manager. He has had no other external post-graduation work experience. Ned O'Neil became a director of Addenbrooke in 2009 or 2010 when he was 24 or 25. At all times thereafter, Denis O'Neil and Ned O'Neil have been the only directors of Addenbrooke. 3 Gregory Alexander Smith (Smith) has been the Company Secretary and Financial Controller of Addenbrooke since 2006. Before 2006, he was the Company Secretary of Addenbrooke and a financial accountant employed by it. He commenced employment with Addenbrooke on 23 August 1999. He is not and never has been a director of Addenbrooke. 4 In September or October 2010, Gregory Keith Jones (Jones) mentioned to Denis O'Neil that he (Jones) was involved in a coal deal and that the company involved (Cascade Coal Pty Ltd) (Cascade Coal) was about to undertake a capital raising with the assistance of Southern Cross Equities Pty Ltd (SCE). He told Denis O'Neil that the operative at SCE who would have the carriage of the raising was Peter Gray (Gray). At that time, Gray was SCE's Director Corporate. Gray was well known to Denis O'Neil. He had been Addenbrooke's stockbroker for some years. 5 On 17 November 2010, Gray sent an Information Memorandum to Denis O'Neil, Ned O'Neil and Smith. Gray called that memorandum a "deal sheet" and described it as "… a summary of what we will be discussing on Friday". 6 The essence of the transaction as described in the deal sheet was that Cascade Coal was going to place up to 601,307 new fully paid ordinary shares at $46.57 per share in order to raise a total of $28 million of new capital. In the deal sheet, the following appeared: Application of Funds Placement proceeds will be applied to reduce third party debt and creditors 7 The two projects which Cascade Coal then had in mind were the Mt Penny and Glendon Brook projects. In the deal sheet, the authors said: Cascade Coal Pty Ltd, incorporated in 2006, is focused on the identification and development of Australian coal mining projects. Cascade holds Exploration Licence 7406 ("EL7406" or "Mt Penny") through its subsidiary Mt Penny Coal Pty Ltd and Exploration Licence 7405 ("EL7405" or "Glendon Brook") through its subsidiary Glendon Brook Coal Pty Ltd, both located in NSW. 8 In these Reasons for Judgment, I shall refer to the two Exploration Licences mentioned in the deal sheet as "EL7405" and "EL7406" respectively. I shall refer to Mt Penny Coal Pty Ltd as "MPC" and to its sister subsidiary of Cascade Coal, Mt Penny Properties Pty Ltd as "MPP". 9 On p 1 of the deal sheet, next to a map of NSW and immediately after the text which I have extracted at [7] above, the following corporate chart appeared: 10 At 11.00 am on 19 November 2010, a meeting took place in the board room at the offices of SCE at Level 32, Aurora Place, 88 Phillip Street, Sydney, NSW. The following persons attended that meeting: Denis O'Neil (Addenbrooke) Ned O'Neil (Addenbrooke) Smith (Addenbrooke) Travers William Duncan (Duncan) Gray Rex William Adams (Adams) (SCE) John Atkinson (Atkinson) (or John Vern McGuigan) (John McGuigan ) (Cascade Coal) 11 There is no dispute that a meeting took place at the offices of SCE at 11.00 am on 19 November 2010 (the 19 November meeting). There is no dispute that the O'Neils, Smith, Duncan, Gray and Adams were present at that meeting. There is a dispute as to whether it was Atkinson or John McGuigan who also attended. Those attendees who gave evidence before me all agreed that the person who attended was either Atkinson or McGuigan. No-one suggested that both of those men attended. Gray and Adams said that the person who attended was John McGuigan while Ned O'Neil sand Smith said it was Atkinson. 12 The 19 November meeting is critical to Addenbrooke's case. Addenbrooke contends that it was misled at this meeting by Duncan and by Gray. 13 Addenbrooke argues that it was induced to invest in Cascade Coal by representations made at the 19 November meeting and by representations made in the deal sheet. Addenbrooke also complains that it was not told certain matters which, had they been communicated to it, would have caused it not to invest in Cascade Coal. The matters of which they were not told concerned the involvement of the Obeid family in the project. 14 In particular, it is Addenbrooke's case that, as at November 2010: (a) Family members of the Obeid family, of which the patriarch was Edward Moses Obeid MLC (Eddie Obeid) and/or corporate or individual nominees of family members of the Obeid family, owned or had a legal entitlement to acquire at their election three rural properties which comprised all or most of the land area over which EL7406 had been granted; (b) In mid-2009, a company which was the nominee of members of the Obeid family, Buffalo Resources Pty Ltd (Buffalo Resources), had entered into an unincorporated joint venture with Cascade Coal pursuant to which Buffalo Resources was to receive 25% of the proceeds of the development or sale of the Mt Penny coal reserves; (c) From about the middle of 2010, the directors of Cascade Coal had embarked upon a course of action designed to take out the Obeid family and its nominees as landowners in respect of EL7406 and as joint venturer with Cascade Coal in respect of the Mt Penny coal reserves; (d) The capital raising in which Addenbrooke was invited to participate was devised and implemented in order to raise sufficient funds for Cascade Coal to enable it to pay out the Obeid family and its nominees and to sever all ties with the Obeid family and its nominees; and (e) Both Duncan and Gray knew of the matters to which I have referred at subpars (a) to (d) above but did not disclose any of those matters to any of Denis O'Neil, Ned O'Neil or Smith at the 19 November meeting or at any other time. Addenbrooke argues that all of those matters should have been disclosed to it and that, if any one or more of them had been disclosed, it would not have invested in Cascade Coal. 15 I am comfortably satisfied that the evidence tendered before me established the facts and matters summarised in subpars (a) to (d) of [14] above. In truth, in the end, there was no serious contest as to whether those matters had been proven. 16 There was, however, a real and substantial dispute about the matters referred to in subpar (e) of [14]. In particular, the remaining defendants (Duncan, Gray and SCE) and all of the cross-defendants (Cascade Coal, Arthur Phillip Pty Ltd (Arthur Phillip) and Richard Jonathan Poole (Poole)) submitted that Addenbrooke's case has been heavily influenced by hindsight. Those parties argued that the Court should be wary of allowing its judgment to be influenced by matters which have, since 2010, become matters of considerable notoriety in the public domain in respect of Eddie Obeid and his family and should confine its attention to the facts proven in evidence in this proceeding and nothing else. These cautionary remarks are well made. I am very conscious that I must be careful to ensure that my judgment is based upon only those facts actually proven in evidence before me and not to allow myself to travel beyond those facts. Of course, there is nothing unusual or out of the ordinary about such an approach—it is always the correct approach in every case. But, in this particular case, extra care must be taken to avoid the pitfalls that may be created by the distorting effect of hindsight. 17 The defendants and cross-defendants argued that, despite the evidence to the contrary led by Addenbrooke, in 2010, Denis O'Neil was still the real decision-maker on behalf of Addenbrooke in relation to its investments and that he had been the real decision-maker in respect of Addenbrooke's investment in Cascade Coal. They then submitted that, even if the Court accepts that he was not told any of the matters referred to in subpars (a) to (d) of [14] above, had he been told all of those matters, he still would have caused Addenbrooke to proceed with its investment in Cascade Coal. This was so because, in 2010, the Obeid name did not carry the kind or level of negative connotations it had come to bear in subsequent years. Those parties submitted that, at the time, Eddie Obeid was known as a power-broker in the Australian Labor Party in NSW but was not then generally seen by the public in NSW as corrupt or dishonest. The defendants and cross-defendants said that, given the short-term nature of Addenbrooke's investment in Cascade Coal and the real potential for Cascade Coal to unlock the value of the Mt Penny coal reserves by onselling its interests at Mt Penny to a public company, Denis O'Neil and thus Addenbrooke would not have been phased or discouraged by the full disclosure of the Obeids' interests in the venture and may have even regarded the Obeids' involvement as a positive factor. After all, Addenbrooke stood to make $2 million on an investment of $8 million in a three to six month timeframe. It was submitted that greed and the love of money were very powerful drivers for Denis O'Neil in 2010 when he was considering this investment. It seemed to him to be a no-brainer. The defendants and cross-defendants also submitted that, in any event, Denis O'Neil had made up his mind to cause Addenbrooke to invest in Cascade Coal before he attended the 19 November meeting. He had done so, it was submitted, because of the influence of Jones with whom he had a close business relationship at the time and because he had made his own assessment of the deal. 18 In order to decide whether Addenbrooke would still have gone ahead had it known all there was to know about the Obeids' involvement in the venture and in order to explain my conclusion that Addenbrooke has established the facts and matters summarised in subpars (a) to (d) of [14] above, it will be necessary to traverse the facts in some detail. 19 Of the main players in this story, only Denis O'Neil, Ned O'Neil, Smith and Gray gave evidence at the hearing. Adams was also called. But Duncan, John Alan Kinghorn (Kinghorn), John McGuigan, James McGuigan (John McGuigan's son), Atkinson and Poole did not testify at all. In addition, many other potential witnesses were not called. Neither Eddie Obeid nor any member of his family was called to give evidence. In particular, none of Eddie Obeid's sons Paul Edward Obeid, Moses Edward Obeid, Edward Joseph Obeid, Damien Edward Obeid or Gerard Obeid testified before me. 20 The absence of so many witnesses has meant that, in many cases, the documents, email communications, correspondence, notes and memoranda tendered in the case fall to be interpreted as part of the documentary jigsaw puzzle placed before the Court by the parties without the assistance of the authors and without explanation from those who theoretically may have been able to explain or qualify them. For the most part, no great difficulty was caused by these circumstances as the documents generally spoke for themselves. 21 On 26 November 2010, Addenbrooke invested a few dollars less than $8 million in Cascade Coal. As matters presently stand, that investment is worthless. 22 Addenbrooke claims declaratory relief and damages equating to its lost $8 million plus interest against Duncan, Gray and SCE. It had originally sued others—Arthur Phillip, Arthur Phillip Nominees Pty Ltd (APN), Cascade Coal, Poole, John McGuigan, Atkinson, Kinghorn, Coal and Minerals Group Pty Ltd (CMG) and Amanda Poole, Poole's wife—but subsequently settled with all of those parties. It relies upon ss 12DA, 12GF, 12GB and 12GM of the Australian Securities and Investments Commission Act 2001 (Cth). It also relies upon a common law action in negligence as against SCE and Gray. 23 Gray and SCE have brought Cross-Claims against Cascade Coal, Arthur Phillip and Poole by which they seek to offload to those parties some or all of any liability which they are found to have to Addenbrooke. 24 Thus, at the end of the hearing, the active parties in this proceeding were: Addenbrooke (plaintiff); Duncan (first defendant); SCE (third defendant and cross-claimant in the First Cross-Claim); Gray (second defendant and cross-claimant in the Second Cross-Claim); Cascade Coal (the first cross-defendant in both Cross-Claims); Arthur Phillip and Poole (the second and third cross-defendants in the First Cross-Claim) The Obeids, Cascade Coal and Mt Penny—The Early Period (September 2007–September 2010) 25 The narrative set out in this section of these Reasons for Judgment and the findings made therein are based entirely upon the documents ultimately admitted into evidence as Exhibit E and inferences drawn from those documents. No witness who might have spoken to this period and addressed the relevant documents was called by any party. 26 By Contract for Sale of Land made on 27 September 2007, Locaway Pty Ltd (Locaway), as trustee for the Moona Plains Family Trust, agreed to purchase for $3,650,000 the rural property at Bylong known as "Cherrydale Park". Bylong is in the centre of the area over which EL7406 was granted. The vendor was John Howard Cherry. Under the contract, settlement was to take place on 15 November 2007. The vendor agreed to finance part of the purchase price. The contract contained a confidentiality clause. The two directors of Locaway who executed the contract on its behalf were Damian Obeid and Paul Obeid. The guarantors named in the contract were Paul Obeid, Edward Joseph Obeid, Damian Obeid and Moses Obeid—four of Eddie Obeid's sons. I infer that Locaway was a company owned and controlled by the four Obeid sons named in the contract or which acted as their nominee in the transactions. 27 On 22 July 2008, Warwick Grigor, in his capacity as Chairman of Monaro Mining NL (MMNL) wrote to Mr Gardner Brook (Brook), who was at the time a senior executive at Lehman Brothers, confirming that MMNL was seeking to bid for coal exploration licences in New South Wales. Grigor said that MMNL was seeking the support of Lehman Brothers to tender for certain thermal and coking coal tenements which were expected to be promoted via a closed tender process within 30 days after the date of the letter. He said that while Monaro RO (MRO) was a listed company with the ability to raise equity capital through the issue of shares, he believed that Lehman Brothers' participation as a principal with MRO in tendering would better distinguish the bid application. He said: In return for Lehman Brothers participation with MRO through the tender process, we propose that Lehman Brothers would be issued an option for 60% of the issued shares in the bid company Special Purpose Vehicle (SPV). The option would be issued to Lehman Brothers for $1 and would only be exercisable upon a bid being successful. Lehman Brothers would have the right to transfer all or part of its option or shares post conversion. The option could also be exercisable over a direct equity in the licence as opposed to shares in the subsidiary company, at your election. At all times, including once a bid is won, Lehman Brothers would maintain the right of first refusal to provide or arrange capital for the purpose of developing a mine asset. Lehman Brothers would be under no obligation or capital or advice at any time. 28 In an internal document prepared at Lehman Brothers on 23 July 2008 and sent by Pryor, an employee of Lehman Brothers, to Brook, Pryor recorded: Monaro has become aware of certain tenements that are expected to come up for closed government tender in the next few days, and is seeking our financial support as per their written offer (attached) to make bids for Exploration Licences. Monaro has also (unofficially) identified a party whom is currently the holder of land parcels which are anticipated to be crucial to the successful development of coal tenements. The "land related" party is seeking to participate in the ownership of a mine and accordingly provide favourable to terms to any land reclamation in the event a mining license [sic] is awarded. To this end, it is proposed that Lehman Brothers would receive a 20% option over the shares in a successful JV bid SPV with Monaro, and a further option for 40% of the SPV shares would be issued to the land related party. 29 In the document in question, Pryor depicted this scenario in a table following immediately after the paragraph which I have quoted. Obviously, the "'land-related' party" referred to by Pryor was Locaway. I infer from the contents of the document referred to at [28] above that both Pryor and Brook knew that members of the Obeid family were ultimately in control of the land referred to and that the Obeids wanted a stake (40%) in the mining venture. 30 Pryor continued: In return for Lehman Brothers participation with Monaro through the tender process, Lehman Brothers would be issued an option for 20% of the issued shares in the bid company Special Purpose Vehicle (SPV). The option would be issued to Lehman Brothers for $1 and would only be exercisable upon a bid being successful. An option on similar terms will be issued to the Land Related Entity. Should an exploration license [sic] be granted it is anticipated that Lehman have the option to fund exploration and feasibility study expenditure in order to increase its ownership in Monaro Coal. The terms of such an agreement are still to be negotiated. 31 In the document, Monaro Coal is identified as the bid SPV. 32 On 25 July 2008, Chris Rumore, a partner at Colin Biggers & Paisley, lawyers, met with Gerard Obeid and possibly Moses Obeid and Paul Obeid. 33 On Monday 28 July 2008, Rumore reported to Gerard Obeid, Moses Obeid and Paul Obeid informing them that: (a) Colin Biggers & Paisley had ordered two companies, in respect of one of which Greg Skehan would be the sole director and shareholder (which company will enter into the option for the shares in Monaro Coal (Aust) Pty Ltd) and the other in respect of which Rumore would be the sole director and shareholder and which entity would acquire the properties as trustee for Equitexx Pty Ltd as trustee for the Obeid Family Trust No 2. (b) Rumore had sent faxes that day to the solicitors for the "various vendors" requesting amendments to the contract and two options. (c) Rumore noted that the recipients of the email were to check the schedule of improvements and inclusions annexed to the largest contract being the contract for the purchase from TE O'Brien (Merriwa) Pty Ltd. Rumore requested any suggestions for amendments. (d) Rumore confirmed that the cheques for the option fees for the two O'Brien options and the deposit cheque for the purchase from the estate of Stanmore needed to be drawn on the bank account of the relevant company. He undertook to provide the necessary details. 34 On 30 July 2008, Rumore reported to Gerard Obeid, Moses Obeid and Paul Obeid that the company which would acquire the properties at Bylong (in respect of which Rumore would be the shareholder and director) was Geble Pty Ltd (ACN 132 441 877) (Geble) and that the company which was to take the option in respect of the shares in Monaro Coal (Aust) Pty Ltd (in respect of which Greg Skehan will be the director and shareholder) was Voope Pty Ltd (ACN 132 441 868) (Voope). As at 30 July 2008, there were three transactions in prospect: a purchase of a rural property from the estate of the late KJ Stanmore, an option to purchase a rural property from TE O'Brien and an option to purchase an additional rural property from TE O'Brien (Merriwa) Pty Ltd. 35 Each of Geble and Voope was registered on 28 July 2008. 36 In its monthly Exploration Status Report (Group Projects) of August 2008, MMNL recorded the following: 4. NSW Coal Activities A new company Monaro Coal Pty Ltd (MCP) was registered to deal with a potential coal opportunity in NSW. Monaro was recently approached by Middle East interests via Leahman [sic] Brothers Australia Pty Ltd with the view to acting as the public face of a consortium wishing to tender for large coal deposits in NSW. To facilitate this process, an option deed was executed between Monaro Mining NL and Voope Pty Ltd (VPL), which will enable the latter to exercise an option to purchase shares in MCP in the event that MCP secures coal mining rights in NSW. MCP would end up with a minority interest in one or more potentially large coal deposits. At the same time, advice from the Department of Primary Industries (DPI) regarding the Company's direct approach to them regarding coal areas in the Western Coal Fields of NSW, suggests that it will be another month or 2 before the Company is advised about its request to secure ground in this area. Schedule Awaiting futher [sic] developments regarding MCP and a response from the DPI. 37 By contract for sale of land dated 6 August 2008, Geble agreed to purchase from the estate of the late KJ Stanmore the property at Bylong known as "Donola" for $600,000. 38 On the same day (6 August 2008), Geble entered into a Call Option Agreement dated that day with Terence Edward O'Brien. By that Agreement, Geble was granted the right to call for the transfer of a rural property owned by O'Brien for the total consideration of $73,678 (including the call option fee). The Call Option Agreement contained a confidentiality clause. 39 By a second Call Option Agreement made on 6 August 2008, Geble required the right from TE O'Brien (Merriwa) Pty Ltd to secure the transfer of a second property at Bylong being "Coggan Creek". The acquisition price was $3,481,218.30 (including the call option fee). 40 By a Deed made on 20 August 2008 between MMNL and Voope, MMNL agreed to grant to Voope an option to acquire 80% of the fully paid ordinary shares in MCP upon the terms and conditions more fully set out in that Deed. The recitals in the agreement recorded that Voope was assisting MCP in relation to an application in respect of a tenement described as: … the mining lease, exploration licence or any other mining interest applied for pursuant to the invitation to tender issued by the Department [of Primary Industries] at any time after the date of this document but prior to 1 January 2009 and granted pursuant to the [Mining Act 1992 (NSW) and any regulations or ordinances made pursuant to it] in [NSW] for the exploration or mining of coal. 41 No money was to change hands for this benefit granted to Voope. The consideration was described as "the provision of consultancy, general assistance and advisory services by or on behalf of [Voope] or at the direction of [Voope] for the benefit of [MMNL] and [MCP]". The option granted by this document was to be kept open for a period of three years. 42 Thus, by the end of August 2008, companies controlled by members of the Obeid family had acquired or had the right to acquire Cherrydale Park at Bylong, Donola at Bylong and Coggan Creek at Bylong. The total cost to those companies of those acquisitions was a little over $7.8 million. In addition, Voope had placed itself in the position to control the mining venture then contemplated by MMNL. 43 By letter dated 9 September 2008, the Department of Primary Industries (DPI) invited MMNL "to participate in Expressions of Interest for coal Exploration Licences, in accordance with the Mining Act 1992, in one or more exploration areas, in the Sydney and Gunnedah Basins as follows". [There followed a list of 11 coalfields of which one was the Mt Penny coalfield.] 44 The letter from DPI went on to say that only companies who had been invited to lodge an expression of interest may respond to its letter. Invited parties who decided to respond were required to submit their expression of interest to the DPI with details of an exploration and development program. The closing time and date for expressions of interest was said to be 12 noon on 24 November 2008. 45 By notice dated 6 November 2008, Geble, through its nominee Coopers World Pty Limited (ACN 133 940 388), exercised the call option granted to it pursuant to the Call Option Agreement dated 6 August 2008 between it and TE O'Brien. On 7 November 2008, a contract for the sale of part of the property known as Coggan Creek at Bylong was entered into between TE O'Brien (Merriwa) Pty Limited and Coopers World Pty Limited for the purchase price of $3,427,359. 46 By a Deed of Variation of Option over Shares entered into between MMNL and Voope on 22 December 2008, MMNL and Voope agreed to vary the definition of "Tenement" in the principal deed dated 20 August 2008 by removing all reference to the date "1 January 2009" in that definition. 47 The effect of that change was to leave open the arrangements between the parties indefinitely. 48 On 14 January 2009, James McGuigan, who is the son of John McGuigan, sent an email to Poole, John McGuigan and Atkinson. The email said that attached to it was the "NSW Coal Allocation – 9 January.pdf". The email was in the following terms: John, John and Richard Yesterday we received the Expression of Interest Information Pack from the NSW Department of Primary Industry. It is attached, but the key points are: – The 4 medium and 7 small allocations from our previous meeting are on the table. – This includes the Mt Penny and Spur Hill areas that we were previously of the view that there had been a deal done for them. – This does not include the other major coal allocation (Bennalbri) in the Gunnedah Coalfield – The expression of interests are to be submitted by 16 February As discussed before the Director General (Dr Richard Sheldrake) will make his recommendation to the Minister (Ian McDonald) in relation to rewarding the licence. The evaluation criteria is quite detailed, and we will most likely have to engage the services of a mine/exploration consultancy firm to assist us with the exploration program, mine development proposal, infrastructure plan etc…I have arranged a meeting with Behre Dolbear for early next week, however if you guys have other consultants that you think may assist please let me know. Each submission will cost approx $11,000 to submit, further if are awarded the licence a one off payment for the area is required to the DPI's Coal Development Fund: – Spur Hill $1.5 – Mt Penny $1m – Glendenbrook $300k Additional financial contributions may be included as part of an applicant's Expression of Interest. Moving forward, John M is arranging a meeting with Greg Jones for this Saturday to figure out if the Mt Penny and Spur Hill areas have effectively already been allocated. If this is the case, from our meeting in November we were thinking: – Glendenbrook for Redman Mining – Spur Hill for Cascade Coal Both of those are Hunter Coalfield areas. We may want to revisit the WEC/Cessnock leverage point here. Further, both areas are close to Coal and Allied mines. I have attached the information package (Atko I sent one to North Sydney attention to John M). Below is also the article from December 30 referring to Ian McDonald's allegations of buying personnel items on ministerial credit cards. I propose we arrange a meeting on Monday, after Saturday's meeting to set a plan for the following 3 weeks. Please give me a call if there is anything else. James McGuigan Arthur Phillip Pty Ltd Level 33 Colonial Centre 52 Martin Place Sydney NSW 2000 Accused minister Ian Macdonald likely to be cleared by inquiry NSW Primary Industry Minister Ian Macdonald is set to be cleared of an accusation that he bought a $1299 LCD television for himself using taxpayers' money. The Australian learned last night an internal inquiry by the Department of NSW Premier Nathan Rees had determined that key aspects of the allegations – first aired in a Sunday newspaper earlier this month – were unsubstantiated. The newspaper reported that Mr Macdonald used a departmental credit card in 2005 to pay for the TV with built-in DVD player, despite ministerial use of corporate cards having been banned in 1995. It said the TV had been in Mr Macdonald's home but was subsequently moved to his office. Mr Macdonald's name and private mobile number were included on a purchase order from Bing Lee, Burwood, that was leaked to The Sunday Telegraph. However, a spokeswoman for Mr Rees said that, while the inquiry was yet to be finalised, "so far it's found that the statement he bought the TV on a credit card is false". The spokeswoman also said the TV was never in Mr Macdonald's home. She said the inquiry would be concluded soon but that the findings so far were "pretty conclusive". The finding marks a reprieve for Mr Rees, who has had to sack two ministers for misbehaviour. Former police minister Matt Brown was dismissed in September after it was revealed he had danced at a party in Parliament House in his underpants. Former medical research minister Tony Stewart was sacked last month for verbally intimidating a female staff member at a public function. 49 In the email, James McGuigan referred to a newspaper article involving the NSW Primary Industry Minister, Ian Macdonald. The allegations referred to in the newspaper article concern the misuse of a departmental credit card. It also appears that, from at least January 2009, James McGuigan was employed by Arthur Phillip. 50 On 3 February 2009, Michael Johnstone (Johnstone), a mining engineer with whom Duncan had had dealings from time to time, sent an email to Duncan with a copy to James McGuigan. The subject matter of that email was said to be "Coal area release". The email was in the following terms: Travers I had a telecon this afternoon with James, John and Richard. My preferences are Vickery South, Mount Penny and Glendon Brook. The latter is very tough but would like to keep it in at this stage. Vickery south presents a small OC <30mt inferred at grass, but coal quality is very good 5-9% ash raw. Whitehaven will be looking at this after they got access to Vickery ML consent late last year. Mount Penny, presents a larger resource say 50-150Mt of OC and UG coal. Ulan seam is target, with upper half of seam better quality 17-25% ash raw. Rail runs through northern part of EL Tenement bounds Anglo area, which DPI believe has not been tested and may have significant low ash resource in lower seam. Anglo will come under pressure to renew this EL. DPI advise that a property called "Cortina" owned by Bruce Reid, was the target for regional coal exploration program sponsored by Macgen in Mt Penny area. Ive asked James to check this property location. Glendon Brook is former HWE EL, on its own not much opportunity. Too much road to get to rail. However, Mitchells flat has resources next door, I think Xstrata have this now, and may bail out. If this is the case there may be opportunity for a mini power plant. Im thinking in terms of cost of rail contruction [sic] (12km), versus installed cost per MW of power generation, a 25 to 50 MW plant may stand up. Intention is to have broad outline for three areas by Monday and discuss PM. I suggested some financial "engineering" say a multiplier for 1, 2 or 3 properties with a Macgen incentive. You all should look at this, and CSIRO collaboration. John will [sic] to do some research on Spur Hill. From geological point there are mineable resources, though Arrowfield winery may be an issue!! Mining technology [sic], should include a heavy tilt at local content and job creation. Post discussion with Cascade I have arranged through A Wells, some words on local environment issues etc. I am aware that Alan was on Singleton Local government, when Peter Murray tried to get Mitchells Flat going. He has some documents which may be usefull [sic]. Alans time has been capped to four days, and Ive asked him to bill this. Would it be easier for him to invoice me or Cascade? Can you give me some direction in this regards? Mike 51 On 4 February 2009, James McGuigan passed on to Poole, John McGuigan and Atkinson the email which he had received the day before from Johnstone. In his covering email, after referring to Glendon Brook and Vickery South coalfields, James McGuigan said that he would not begin work on Mt Penny "until after the discussion with Greg Jones". 52 The reference to a discussion with Jones in that email appears to be a reference to the planned meeting between John McGuigan and Jones to which reference had been made in earlier emails. 53 On 16 February 2009, by letter dated that day, on the letterhead of Cascade Coal, John McGuigan wrote to the Executive Director, Mineral Resources of the DPI, submitting an expression of interest for the Mt Penny Exploration Area in response to the request published by the DPI on 9 January 2009. That letter was in the following terms, omitting formal parts: Re: Expression of Interest – Mt Penny Exploration Area Cascade Coal Pty Limited ("Cascade Coal") is pleased to submit an Expression of Interest for the Mt Penny Exploration Area in response to the request published by the Department of Primary Industries on 9 January 2009. Cascade Coal has been specifically established to engage in greenfields exploration and developments within the coal sector preferably in New South Wales. You will note from the materials attached that the shareholders of Cascade Coal have significant experience in the coal sector and have been associated with large scale developments of coal properties in Australia and overseas. Cascade also currently has an active exploration program and holds a number of highly speculative tenements in Victoria referable to Brown Coal deposits. The shareholders of Cascade are committed to developing a coal project and have committed to inject sufficient capital to meet the up front fees and initial Program of Works as required in the event that Cascade is successful with its application. In this regard the shareholders have secured an underwriting from the investment bank Arthur Phillip Pty Ltd to underpin their commitment. In addition having regard to both the experience and expertise of the shareholders in raising substantial development capital in the coal sector the shareholders are confident that the necessary capital to enable the development of the above areas will be raised on a timely basis. Our submission for the area addresses in some detail the relevant exploration program, the proposed mine development methodology, the relevant infrastructure, the required mitigation of greenhouse gasses, other environ-mental concerns and the benefits to local and regional communities. We look forward to the opportunity of discussing the attached expressions of interest with you. Our nominated contact person is Michael Johnstone who may be contacted on [phone numbers omitted]. 54 The Expression of Interest document is a document of 31 pages in which Cascade Coal set out its plans for the Mt Penny tenement as well as details of the shareholders of Cascade Coal. These shareholders were identified in the Expression of Interest document as Messrs Kinghorn, John McGuigan, Atkinson, Poole and Duncan. The document also contained details of Cascade Coal's work program and mining methods intended for the site. 55 Messrs Duncan, Kinghorn, John McGuigan and Atkinson were appointed directors of Cascade Coal on 19 February 2009. 56 In May 2009, the DPI prepared a confidential evaluation of the expressions of interest received in respect of a number of NSW coal areas. In that document, in respect of Mt Penny, the author of the document recorded that it (the DPI) had received expressions of interest from four entities including MMNL and Cascade Coal. The author said that the submission made by MMNL was considered to be far superior in terms of its proposed technical program and additional financial contributions of $25,000,000 upon the grant of an exploration licence. The author went on to make favourable comments about MMNL's program of exploration and conceptual mine development proposals. The evaluation team considered that the MMNL expression of interest was superior to other expressions of interest. 57 By email sent on 20 May 2009, Moses Obeid provided some preliminary information on Go Radar to John McGuigan and Jones. 58 At the meeting of its directors held on 22 May 2009, MMNL decided to abandon its "NSW Coal Project". The meeting was attended by Messrs Malone, Rampe and Barns. The Minutes recorded the following matters: Opening address The Chairman referred to the discussion between the Directors and Gardner Brook held immediately prior to the Board Meeting in reference to the NSW Coal Project and the Expressions of Interest submitted by the Company. In summary, the Chairman indicated that the NSW Government's requirement to have all fees and contributions paid within 30 days of offer placed the Company at too great a risk, should the Company fail to source the funds required. It was considered that the possibility of raising the funds nominated in the Expressions of Interest within the time frame suggested would be extremely difficult if not impossible. Given this very significant change to the anticipated strategy, the Chairman suggested that the Coal project was no longer viable. The Chairman noted the request from Gardner Brook representing Voope Ltd, who had expressed the desire to attempt a salvage of the coal project (in particular Mt Penny), given their significant exposure to the project. A discussion was then held between the directors during which time, various views were expressed. Resolution Resolved: to abandon the project, contingent upon the following: Voope to provide a new agreement outling [sic] a satisfactory mechanism for transferring any licences that may be awarded away from Monaro Mining and holding Monaro Mining harmless in all aspects; Voope to reimburse Monaro expenses, should it be successful in securing a coal licence The Chairman advised that he would report the result of the meeting to Mr M Duncan. The Chairman felt that Mr Duncan would be sympathetic to the above resolution. A circular resolution would be distributed to all directors giving effect to the above resolution. Next meeting To be advised Closure There being no further business the Chairman declared the meeting closed at 10.45 am. 59 It appears that Brook had attended at the offices of MMNL immediately prior to the directors' meeting in an endeavour to ensure that Voope did not lose its interest in the Mt Penny project. I infer that, by 22 May 2009 at the latest, Brook was acting as the agent of and in the interests of the Obeid family, in particular, the four sons who had been involved in the land acquisitions at Bylong. 60 It appears that, by late May 2009, Johnstone began to wonder whether there were links or associations between Cascade Coal and MMNL. He raised this with James McGuigan in an email sent at 6.47 pm on 25 May 2009. In response to that email, James McGuigan said that there were no links or associations between Cascade Coal and MMNL. He went on to say: There was the proposal of a deal to be brokered last week, where we would take 90% of Mt Penny and a Monaro associate would take 10%. What's going on behind the scenes is that we are trying to raise the question on Monaro's ability to raise finances, especially after they have committed on each EOI. That's just between you and me. I think our stance is that we're not going to negotiate anymore. Let's see how it plays out. 61 Johnstone reverted to James McGuigan by saying that his email had "clarified some of the mixed spiel that he had been getting". 62 At 10.18 am on 1 June 2009, John McGuigan sent an email to his son James McGuigan to which was attached a document headed "Key Principles – 31-05-2009". That document is in the following terms: Key Principles l. Acquire land from landowners at a consideration equal to the assessed value of the land for agricultural purpose together with a premium that reflects the marketplace assessment for a sale of agricultural land to the holder of Mining Rights. 2. The contract to purchase and the determination of the consideration to be formally entered into within 90 days of the award of the Exploration License for Mount Penny to Cascade Coal Pty Ltd ("Cascade"). 3. Title and ownership in the properties owned by the landowners will remain with the land owners until completion. 4. Completion will take place within 90 days of the grant to Cascade of its application for a mining lease over Mount Penny and any additional contiguous areas. 5. The landowners and in particular UPG Pty Ltd ("UPG") will fully cooperate with Cascade in its pursuit of the grant of a Mining Lease. 6. In recognition of UPG's position as the key land holder Cascade will grant UPG or its Nominee a 25% interest in the Joint Venture Company formed to hold the Exploration License over Mount Penny and to pursue the grant of a mining lease and subsequent mining operations. 7. UPG or its Nominee will not be required to make any contribution to the costs of the Joint Venture up to the time of the grant of a Mining Lease. For the avoidance of doubt the costs will include the exploration costs, the costs associated with the development application for the Mining Lease and the costs in purchasing the land. 8. Once the Mining Lease is granted, UPG or its Nominee will be required to make its proportionate contribution to all costs of the development of Mount Penny or be diluted in accordance with the provisions of the Joint Venture governing the development of Mount Penny. 9. Cascade agrees to seek the grant of an Exploration License or other rights over areas contiguous to Mount Penny should they become available. To the extent that either Cascade or the Joint Venture Company acquires the rights over the contiguous areas, UPG or its nominee will be entered to a 25% interest. 10. In the principles outlined in paragraphs 7 and 8 with respect to Mount Penny will apply equally to any contiguous areas. 11. UPG or its nominee will be entitled to participation on the board of the Joint Venture Company to an extent to commensurate with its equity interest. 63 The essence of the deal embodied in this email was: (a) Cascade Coal or its nominee would acquire all of the Bylong land owned by the Obeid nominee companies; (b) The Obeid interests would be awarded a 25% interest in a joint venture company to be formed to hold the exploration licence over Mt Penny and to pursue the grant of a mining lease and subsequent mining operations; (c) The Obeid interests would not be required to contribute to the initial costs being the exploration costs, the costs associated with the development application for the mining lease and the costs of purchasing the land. Once the mining lease is granted, the Obeid interests would have to pay 25% of the costs of development incurred thereafter. 64 The reference to "UPG" in the email is a reference to United Pastoral Group Pty Limited (UPG), an Obeid-controlled company. 65 By an email sent from Brook to James McGuigan at 5.18 pm on 1 June 2009, Brook passed on to James McGuigan his email address for him to send the first draft. He did not identify the subject matter of that draft. He then said: Monaro completed all that I indicated today, and the share transfer will occur tomorrow. I'll send the relevant letters and agreement showing that we now have control of the bids. 66 At 6.43 pm on 1 June 2009, James McGuigan sent an email to Jones, John McGuigan and Poole. Attached to that email were documents described in the following terms: "Cascade Coal Letter – Land Owners.docx (31.54 kB); Cascade Coal Letter – Equity.docx (32.48 kB)". The email was in the following terms: Greg, John and Richard Please find attached two Letters of agreement: 1) Letter of Agreement between Cascade Coal Pty Ltd ("Cascade") and United Pastoral Group Pty Ltd, Geble Pty Ltd, Coopers World Pty Ltd [collectively "the Landowners"]. 2) Letter of Agreement between Cascade Coal Pty Ltd ("Cascade") and the ("Nominee"], collectively ("the Parties). I have had a discussion with Mo, but am yet to receive what Nominee company they want to do it with, as well as any of the Land Agreements as promised from Paul. Key changes made to these agreements include: 1) We have agreed to form a Joint Venture instead of a Joint Venture Company with the Mount Penny asset to sit in Cascade 2) With regards to Gardner's comment about whether money in – will be treated as debt or equity, the following was inserted "The Nominee acknowledges it has received consideration for the relevant land and that any contributions up to the grant of the Mining Lease shall be treated as shareholder loans and repaid out of profits in due course." Of immediate importance is the issue regarding as to what the multiplier which will be applied to the agricultural land – let's discuss this. Greg, we will discuss this tomorrow @ 11:30 at Arthur Phillip's offices which are: Level 33, 52 Martin Place (Colonial Centre) John, although documents are attached here I will resend as emails so that you can read on Blackberry. Please call me when you can. In other news, Monaro completed all that they indicated yesterday – today, and the share transfer will occur tomorrow. It will be a 100% entity owned by Gardner known as Royal Coal. Cheers 67 The reference to "Mo" in that email is clearly a reference to Moses Obeid. I say this because earlier references to "Mo" in emails from Mr Rumore were sent to Streetscape, a business operated by Moses Obeid. In addition, in the same breath as referring to "Mo", James McGuigan also referred to "Paul". I infer that that reference was a reference to Paul Obeid. 68 The letter agreements attached to this email were agreements whereby Cascade Coal agreed to acquire the three properties referred to in the letters. These were the properties owned by UPG, Geble and Coopers World Pty Ltd which had previously been acquired from the estate of KJ Stanmore, TE O'Brien and TE O'Brien (Merriwa) Pty Ltd. The second draft attached to James McGuigan's email dealt with a proposed joint venture between Cascade Coal and a corporation to be nominated by Moses and Paul Obeid. This joint venture letter was in the following terms: Dear Sir DRAFT Re: Letter of Agreement between Cascade Coal Pty Ltd ("Cascade") and the ["Nominee"], collectively ("the Parties") I refer to our recent discussions in relation to Cascade's intention to acquire a land interest in the Bylong region and to be granted an exploration licence ("the Exploration Licence") and mining lease ("the Mining Lease") over the Mount Penny area, and the letter of agreement between Cascade and the Landowners, dated 2 June 2009. Cascade has submitted an expression of interest requesting to be granted an Exploration Licence over the Mount Penny area. Subject to the grant of the Exploration Licence, the Parties have agreed to form a Joint Venture ("JV") to explore and develop the Exploration Licence and pursue the granting of the Mining Lease, in addition the JV will pursue the grant and issue of all relevant exploration licences and mining leases for any additional contiguous areas to Mount Penny. Obligations of the Party's In recognition of the Nominee's position as the key owner of land in the Mount Penny area and in consideration of the Nominee: • and its associates or related parties undertaking not to pursue the grant of any mining rights to the area or any contiguous area; • agreeing to assist Cascade to explore and develop the Exploration Licence and Mining Lease; • agreeing to make available and provide their expert knowledge of the area to assist with further exploration and review of the contiguous areas: Cascade will agree to grant to the Nominee a 25% interest in the JV on the basis that the Nominee does not have to make any contribution to costs up to the grant of the Mining Lease. Obligations of the Nominee For the avoidance of doubt, prior to the granting of the Mining Lease the Nominee will not be liable to contribute to the exploration costs, the costs associated with the development application for the Mining Lease and the costs in purchasing the relevant land situated at Mount Penny. The Nominee acknowledges it has received consideration for the relevant land and that any contributions up to the grant of the Mining Lease shall be treated as shareholder loans and repaid out of profits in due course. Once the Mining Lease is granted, the Nominee will be required to make a contribution to all costs of the development of the commercial mining operations in Mount Penny proportionate to the Nominee's equity interest in the JV. Failure to contribute costs proportionate to the Nominee's equity percentage will result in the Nominee's interest in the JV being diluted pro rata in accordance with the provisions of the JV agreement governing the development of commercial mining operations in Mount Penny. Contiguous Areas If from time to time, the NSW Department of Primary Industries seeks expressions of interest from parties for the granting of a [sic] exploration licence, mining lease or any other mining interest for land that is contiguous to or adjoining or relevant to the future development of Mount Penny ("Contiguous Area"), Cascade on behalf of JV must use its best endeavors to become the successful applicant in any such exploration licence, mining lease or mining interest. To the extent that Cascade acquires the rights to pursue a mining interest over the contiguous areas, such areas shall be added to the JV. The principles outlined above under the section "Obligations of the Nominee" with respect to contribution of costs relating to the development of a commercial mine at Mount Penny, will apply equally to the Contiguous Area. Management of the Joint Venture The Nominee will be entitled to participate on the board of JV to the extent to commensurate with the Nominee's equity interest in JV. The Nominee will be entitled to participate in the management of JV to an extent to [sic] commensurate with the Nominee's equity interest in JV Confidentiality Except as expressly permitted by this Letter of Agreement, Cascade and the Nominee undertake and agree to hold each of the terms in this Letter of Agreement in strict confidence and not to disclose or discuss any Confidential Information to or with any person except, in accordance with this Letter of Agreement or as otherwise permitted by Cascade or the Nominee. Cascade and the Nominee will ensure that no Confidential Information is photocopied, reproduced or recorded in any manner except to the extent that is necessary to provide such number of copies as are reasonably required by either Cascade or the Nominee. Cascade and the Nominee will not use or disclose the Confidential Information or any part of it to gain any commercial, financial or other advantage for itself or any other person or to the competitive disadvantage or otherwise to the detriment of either Cascade or the Nominee. Executed as an Agreement Signed for and on behalf of Cascade Coal Pty Ltd ACN 119 180 620 Director Director Name of Director Name of Director (BLOCK LETTERS) (BLOCK LETTERS) Signed for and on behalf of ["Landowners"] ACN [ ] Director Director Name of Director Name of Director (BLOCK LETTERS) (BLOCK LETTERS) 69 By letter dated 1 June 2009 sent to the DPI, MMNL requested that all exploration licences which are granted to it pursuant to the expressions of interest currently lodged with the DPI be issued to its nominee company "Royal Coal Pty Ltd" (Royal Coal). MMNL then said that the ownership of Royal Coal would be transferred to Voope which was described as the financial partner in MMNL's consortium. The author of the letter went on to say that it was intended that MMNL would provide consultancy services to Royal Coal via a management agreement should Royal Coal be awarded any exploration licences. 70 A later version of that letter was tendered in evidence. That version is dated 2 June 2009. It appears to be in the same terms as the earlier letter dated 1 June 2009 with the exception that the reference to "Royal Coal Pty Ltd" was altered to "Loyal Coal Pty Ltd" (Loyal Coal). 71 At 2.37 pm on 2 June 2009, Moses Obeid sent an email to James McGuigan which was in the following terms: James As discussed I have included a copy of the Landowners agreement. The multiple falls under 1.1 definitions clause 'Criteria'. The name of the entity being used by Gardner for the JV is BUFFALO RESOURCES PTY LTD. I await you [sic] draft agreement. Cheers 72 By an email sent at 3.09 pm on 2 June 2009 by James McGuigan to Moses Obeid and Brook (copied to John McGuigan and Poole), James McGuigan sent the final form of the two Cascade Coal letters which had been the subject of consideration as drafts the day before. It would appear that Moses Obeid had received a revised draft of the landowners' letter earlier that day. 73 Later in the day on 2 June 2009, a meeting was arranged at the offices of James McGuigan for 10.00 am on 3 June 2009. It was expected that that meeting would be attended by Brook, Moses Obeid, Poole and James McGuigan. 74 On 2 June 2009, Voope entered into a deed with MMNL. The recitals to that deed recorded the fact that Voope and MMNL had entered into an option deed in respect of certain shares in MCP (as controlled by MMNL) and that the parties agreed to release each other from their obligations under that option agreement. The deed recorded that MCP was to be renamed Loyal Coal Pty Ltd and that MMNL was to ensure that any exploration licences were granted in the name of Loyal Coal Pty Ltd. The commercial deal recorded in the document seemed to be that, in consideration for MMNL transferring all of its shares in Loyal Coal Pty Ltd to Voope, Voope would pay MMNL the sum of $1 and keep MMNL indemnified against all claims, liabilities or causes of action arising from Loyal Coal becoming the successful bidder in respect of the relevant exploration licences. This deed formalised the transfer of control and ownership of Loyal Coal Pty Ltd from MMNL and possibly others to Voope alone. 75 By an email sent by John McGuigan to James McGuigan at a time when John McGuigan was overseas at a resort called Tabang in Indonesia apparently sent at 8.46 pm on 2 June 2009 and headed "CC – update", John McGuigan said to his son: Call me after your meeting. I had a detailed discussion with Travers and we are on the same page. Once you have the land owners agreement we need to verify title etc. It is important we don't give up on clause we inserted today re trigger of land purchase. I am around now if you pick this up. Tabang unbelievable. 76 I infer that John McGuigan brought Duncan up-to-date with Cascade Coal's dealings with the Obeids. No doubt they discussed the form of the two letters in play at that time and the commercial arrangements embodied therein. 77 That email from John McGuigan was sent in response to an email from James McGuigan sent an hour or so earlier in which James McGuigan reported that there was to be a meeting at 10.00 am on 3 June 2009 in Sydney. He makes reference to "they" in his email to his father. It is perfectly plain that the "they" to which reference is made in that email are Moses and Paul Obeid. This much was made clear in an email sent by James McGuigan to Jones at 4.52 pm on 2 June 2009 where he said that he had sent the Letters of Agreement "to the boys". In an email, he said to Mr Jones: Not sure if you want to come to the meeting – just letting you know so you are up to date with the events. 78 At 5.57 pm on 3 June 2009, James McGuigan sent updated Letters of Agreement to Moses Obeid and Brook with copies to his father, Jones and Poole. In that email, James McGuigan said: … Let's aim to sign at Kent St on Friday at 12:00. 79 In the email, he continued as follows: Before that happens we are going to need to gain comfort on the following issues: - the formal definitions of the land parcels that are referred to in the opening paragraph of the Landowners Agreement (highlighted in the attachment) - the addresses of the land holdings of the three Landowners properties, so that I can conduct a Title Search; - to confirm the existing mortgage agreements; - John McGuigan and Travers Duncan want to understand why we changed from "Mining Lease" to "Mine Approval"; - And to approve the withdrawal letters regarding Mount Penny and Glendon Brook Coal Release Areas from Loyal Coal Pty Ltd (formerly Monaro) - And the Buffalo Resource ACN Also please note I added in the equity letter under Obligations of the Parties the following comment regarding Glendon Brook • "and its associates or related parties undertaking not to pursue the grant of any mining rights to the Mount Penny area or any contiguous area, or the Glendon Brook EOI Coal Release Area;" Please call or email me if there are any other matters to discuss. Cheers 80 I infer from the reference to "Travers Duncan" in James McGuigan's email that Duncan had carefully reviewed the letters as at 3 June 2009. 81 As I have mentioned, attached to that email were updated drafts of the Letter Agreements which had been under discussion over the preceding few days. 82 After the meeting held on 3 June 2009, Brook met with Moses Obeid and requested an alteration to the joint venture letter agreement. The amendment was intended to protect the Obeid interests against early dilution of their interest. A copy of that email was sent to Moses Obeid. 83 By email sent at 2.04 pm on 3 June 2009 to Brook and Moses Obeid, James McGuigan asked whether they had received their ACN for Buffalo Resources. 84 On 4 June 2009, Brook sought legal advice from a solicitor in respect of the landowners' letter and the joint venture letter which had been under discussion and which was intended to be signed the next day (5 June 2009). In his covering email, Brook said that the land agreement was with a related party. 85 Later the same day, Moses Obeid provided the lot numbers for the relevant land to James McGuigan and to Brook. Brook passed on that information to the solicitor whom he was consulting at that time. 86 On 4 June 2009, MMNL submitted a share transfer in respect of all of its shares in Loyal Coal for stamping by the Chief Commissioner of State Revenue. As anticipated, a Joint Venture Letter Agreement was signed between Cascade Coal and Buffalo Resources on 5 June 2009. That agreement was in the following terms: 5 June 2009 Gardner Brook Buffalo Resources Pty Ltd GPO Box 1810, Sydney NSW 2001 Dear Sir, Re: Letter of Agreement between Cascade Coal Pty Ltd ("Cascade") and Buffalo Resources Pty Ltd ("Buffalo"), collectively ("the Parties"). Further to our recent discussions this agreement is intended to outline the commercial terms for which both Buffalo and Cascade intend to establish a joint venture with the specific purpose of exploring and developing the Mount Penny Coal Release Area ("The Area"). Subject to the grant of the Exploration Licence (for the purposes of this agreement ("Exploration Licence") means an exploration licence granted to Cascade (or an affiliate) as a result of the current tender process and includes any extension renewal or replacement of that licence), the Parties have agreed to form either a Joint Venture Company or an unincorporated Joint Venture ("JV") to explore and develop the Exploration Licence and pursue the grant of Mining Approval over the Area. For the purposes of this agreement ("Mining Approval") shall mean the obtaining of all necessary permits and approvals including without limitation the grant of an appropriate mining tenement or tenements and environmental and native title approvals necessary for the development of a 100 million tonne resource. In addition the JV will pursue the grant and issue of relevant Exploration Licences and Mining Approvals over the area contiguous to the Area and detailed on the attachment hereto currently known as EL 6676 or any portion thereof ("Contiguous Area"). Obligations of the Parties In recognition of Buffalo's intellectual property contribution and in consideration of Buffalo: • and its associates or related parties including Gardner Brook and Loyal Coal Pty Ltd withdrawing any existing applications in relation to the Mount Penny and Glendon Brook Coal Release Areas and undertaking not to pursue the grant of any mining rights to the Area or any Contiguous Area, or the Glendon Brook EOI Coal Release Area; • agreeing to assist Cascade to explore and develop the Exploration Licence and obtain the Mining Approvals; • agreeing to make available and provide their expert knowledge of the Area to assist with further exploration and review of the Contiguous Area. Cascade agrees to: • vest 100% of its interest in the Exploration Licence in the JV; and • grant to Buffalo a 25% interest in the JV. Buffalo does not have to make any contribution to costs of the JV until the earlier of either: • Mining Approval for a 100 million tonne resource; or • minimum exploration expenditure of A$10m. Contributions up to this milestone by Cascade to the JV shall be treated as equity. For the avoidance of doubt, prior to the earlier of the, granting of the Mining Approval or minimum exploration expenditure of A$10m, Buffalo will not be liable to contribute to the costs of the JV including exploration costs. Upon the earlier of the grant of the Mining Approval or minimum exploration expenditure of A$10m Buffalo will be required to contribute its proportionate share of equity to fund costs should third party debt finance be unavailable or insufficient to fund such costs, including proportionate costs of any land acquisition. Failure to meet required equity contributions proportionate to Buffalo's equity percentage will result in Buffalo's interest in the JV being diluted pro rata in accordance with the provisions of the JV agreement governing the development of the Area. Contiguous Area If from time to time, the NSW Department of Primary Industries seeks expressions of interest from parties for the granting of a Exploration Licence, Mining Approval or any other mining interest in relation to the Contiguous Area, Cascade on behalf of the JV must use its best endeavors to become the successful applicant in any such Exploration Licence, Mining Approval or mining interest. To the extent that Cascade and its associates and related parties acquire the rights to pursue a mining interest over the Contiguous Area, such areas and rights shall be assigned to the JV. Management of the Joint Venture Buffalo will be entitled to participate on the board and management of the JV to the extent commensurate with Buffalo's equity interest in the JV. Buffalo will be entitled to review the books and records of the JV to ensure Cascade has complied with its obligation under this agreement and to inspect and obtain copies of all exploration records and data. No transfer or encumbrance No party may transfer or encumber its interest in the EL, any underlying mining rights or the JV without obtaining the consent of the other party. Confidentiality Except as expressly permitted by this Letter of Agreement, Cascade and Buffalo undertake and agree to hold each of the terms in this Letter of Agreement in strict confidence and not to disclose or discuss any Confidential Information to or with any person except, in accordance with this Letter of Agreement or as otherwise permitted by Cascade or Buffalo. Cascade and Buffalo will ensure that no Confidential Information is photocopied, reproduced or recorded in any manner except to the extent that is necessary to provide such number of copies as are reasonably required by either Cascade or Buffalo. Cascade and Buffalo will not use or disclose the Confidential Information or any part of it to gain any commercial, financial or other advantage for itself or any other person or to the competitive disadvantage or otherwise to the detriment of either Cascade or Buffalo. 87 The Agreement was signed by John McGuigan on behalf of Cascade Coal and by Brook on behalf of Buffalo Resources. 88 On the same day (5 June 2009), Buffalo Resources executed a Deed Poll. That document was signed by Andrew Kaidbay and Mario Sindone as directors of Buffalo Resources. By that Deed Poll, Buffalo Resources declared that it held all of its interest in the joint venture documented in the letter between it and Cascade Coal dated 5 June 2009 on behalf of Warbie Pty Limited (ACN 137 486 018) (Warbie) and Equitexx Pty Limited (ACN 100 544 483) (Equitexx). The beneficial interest of Equitexx in those companies' share of the joint venture was stated as 88%. 89 On 6 June 2009, Cascade Coal and Buffalo Resources entered into a further letter agreement varying the agreement which they had entered into the day before. This later letter agreement was in the following terms: Dear Sirs Letter of Agreement between Cascade Coal Pty Limited and Buffalo Resources Pty Limited We refer to the letter agreement between Cascade Coal Pty Limited and Buffalo Resources Pty Limited dated 5 June 2009 (JV Agreement). We would like to clarify a few points in the JV Agreement (by way of variation to the JV Agreement) by: 1. deleting the words "or an unincorporated Joint Venture" in line 5 of paragraph 2 on page 1 of the JV Agreement; and 2. deleting the first two (2) paragraphs on page 2 of the JV Agreement and replacing them with the following: "In recognition of Buffalo's Intellectual property and for Buffalo and its associates or related parties including Gardner Brook and Loyal Coal Pty Limited withdrawing any existing applications in relation to the Mount Penny and Glendon Brook Coal Release Areas and undertaking not to pursue the grant of any mining rights to the Area or any Contiguous Area, or the Glendon Brook EOI Coal Release Area, Cascade agrees to: • vest 100% of its interest in the Exploration Licence in the JV; and • on and from the date of this agreement grant to Buffalo the right to acquire at anytime a 25% interest in the JV for $1.00. Buffalo's contribution to the JV will be to: • Assist cascade to explore and develop the Exploration Licence and assist Cascade to obtain the Mining Approvals • Make available and provide its expert knowledge of the Area to assist with further exploration and review of the Contiguous Area." Could you please confirm your acceptance of this variation and clarification by signing a copy of this letter. Dated: 6/6/09 90 On 9 June 2009, MMNL and Loyal Coal withdrew their interest in (amongst others) the Mt Penny coal release area. 91 On 10 June 2009, James McGuigan sent an email to his father and to Poole. In that email, James McGuigan said: The property Cherrydale Park is owned by Locaway Pty Ltd Directors of Locaway Pty Ltd - Paul Obeid - Edward Obeid - Damien Obeid - Moses Obeid Shareholding of Locaway Pty Ltd Paul Obeid 50% Obeid Corporation 50% So, there are some issues here. 92 On 11 June 2009, in response to an inquiry from Poole, James McGuigan sent an email in which he said: I spoke to Dad last night and set that we thought the logical progression was for Locaway to transfer the Cherrydale Park Asset to UPG. He's having a meeting with Moses today. Will let you know as soon as there is news Cheers 93 Poole followed up James McGuigan at 1.50 pm. James McGuigan reported to him that there was no news as at that time and said: Hopefully we will sit down with Moses by end of today and then I guess find out then. 94 By letter dated 19 June 2009 and signed by the Director General of the DPI, the DPI informed Cascade Coal that it had been selected as the successful EOI applicant for the exploration licence over the Mt Penny coal release area. The author of the letter invited Cascade Coal to apply for the exploration licence over that area. The letter went on to specify certain financial terms and conditions. 95 In June and July 2009, the shareholders of Cascade Coal actively considered how they would fund the exploration licences which they had been granted including over the Mt Penny coal release area. 96 By late August 2009, James McGuigan (and possibly Poole) had prepared a document entitled "Cascade Coal: Shareholder Update (August 2009)". 97 On 22 August 2009, James McGuigan sent a draft of that Shareholder Update document to Poole for his consideration. Poole made some suggestions for improvement. 98 In an email sent by him to Poole on 23 August 2009, James McGuigan said: Richard – I've put your changes through as well reformatted it. I won't resend until we discuss whether we go into more detail with the Mt Penny agreements. I understand the sensitivities of putting who the parties are – however I think we have to disclose who Buffalo is (i.e entities associated with the land owners) – and remove the Monaro comment – but allude to it. I am saying this because if we don't include the background information – the comments don't mean anything. Also – as I have been writing this email – Mike Johnstone has emailed the GB ELA. What are your thoughts on including it as an attachment or referring to it? Give me a call when you can to discuss – at the office Cheers 99 On Monday 24 August 2009, the updated version of that document was sent to John McGuigan, Atkinson, Kinghorn and Poole. In that email, James McGuigan said that the update outlined that Cascade was proceeding to achieve the grant of exploration licences over the Mt Penny and Glendon Brook coal release areas and that an initial capital call of $2.1 million would be made ie $300,000 for each shareholder group. He said that it was imperative that those funds be received before the end of that week (Friday 28 August 2009). This email and its attachment (the revised Cascade Coal Shareholder Update) was also sent to an email address used by Duncan. I infer that it reached Duncan. 100 The revised Shareholder Update document circulated on 24 August 2009 was in landscape format. On pages 10 and 11 of that document, the authors addressed the Mt Penny agreements involving the landowners and Buffalo Resources in the following terms: 3. MT PENNY AGREEMENTS In preparation for the development of Mt Penny Cascade has entered into two agreements with: - the Landowners of the Mt Penny Area as well as; - Buffalo Resources Pty Ltd ("Buffalo"). The key points are summarised below. The Landowners Agreement To ensure Cascade can secure the land necessary for the development of Mt Penny and to reduce the risk in the project (given recent land owner issues in NSW) Cascade has entered into a conditional agreement to acquire three rural interests in the Bylong region specifically Cherrydale Park, Donola and Coggon Creek ("the Properties") that are situated on the Mt Penny Area in the event that Cascade determines that it will proceed to mine This contract should ensure Cascade's access for exploration and potential mine development at Mt Penny over a substantial portion of the Exploration License. The key terms of the agreement are: - Cascade to acquire 100% of each property. The purchase price shall be an amount equal to four times the total sum of the Properties. The value of each property shall be agreed as the improved value as at 1 June 2009 of each property and agreed between the parties or in the event of a failure to agree as determined by an independent valuer. Cascade's obligation to acquire the properties is conditional upon Cascade being satisfied that it will undertake a mine development at Mt Penny and a Mining Lease be granted for that purpose. - Cascade will provide within 60 days if the grant of the Exploration License a facility enabling the Landowners to replace the existing mortgagee with Cascade, or its nominee, on standard commercial terms other than that Cascade will essentially assume responsibility for the interest payments or at its option Cascade shall commence paying all interest attached to the existing mortgages. Buffalo Resources Pty Ltd Agreement An arrangement has been entered into with Buffalo Resources Pty Ltd ("Buffalo") whereby: - Cascade to vest 100% of the Mt Penny EL into a special purpose entity and to subsequently grant Buffalo a 25% interest in the entity; - Buffalo agreeing to assist Cascade to explore and develop the Exploration License and obtain the Mining Approvals; - Buffalo agreeing to make available and provide their expert knowledge of the Area to assist with further exploration and review of the Contiguous Area. - Buffalo does not have to make any contribution to costs of the JV until the earlier of either: Mining Approval for a 100 million tonne resource; or minimum exploration expenditure of A$10m. This above arrangement was entered into in recognition of Buffalo undertaking not to pursue the grant of any mining rights to Mt Penny or any contiguous areas and agreeing to facilitate the provision of unimpeded access to the Area. 101 At pages 18 and 19 of that document, the authors addressed the corporate structure of Cascade Coal in the following way: 6. CORPORATE STRUCTURE OF CASCADE COAL Shares in Cascade Coal will be held equally by the seven shareholder groups. Please advise as a matter of priority. Relevant to the award of the exploration licence was the fact that it could be demonstrated that Cascade had an existing interest in the coal sector. In this regard we were able to point to the fact that Cascade had an existing exploration program and that it was engaged in the "coal business". This was relevant to the successful application. In this regard Cascade currently holds several highly speculative exploration licences in Victoria, Australia. Now that Cascade has been successful in the Mt Penny and Glendon Brook applications these will be transferred out with all related loans and expenses so Cascade has a clean balance sheet. It is envisaged that a Shareholders Agreement will be entered into covering the normal matters namely: - Appointment of Directors; - Management of the company and decision making; - Capital Raising; - Transfer of shares and Pre Emptive Provisions; - Tag along and Drag along rights. Two wholly owned subsidiaries have been established, Mt Penny Coal Pty Lt [sic] and Glendon Brook Coal Pty Ltd. The applications for the relevant Exploration Licences will be made in the names of the wholly owned subsidiaries. Additionally, two other wholly owned subsidiaries will be incorporated: - MP Landowners Pty Ltd; - GB Landowners Pty Ltd; The chart on the following page illustrates the intended corporate structure: 102 The evidence was that the email address "bsweeney@blest.com.au" was the email address of Bill Sweeney who generally acted as the accountant for Jones and was participating in this particular venture as the nominee or trustee of Jones' interests. 103 By letter dated 24 August 2009 on Arthur Phillip letterhead but signed by Poole, Arthur Phillip committed to underwriting a placement on commercial terms to provide Cascade Coal funding to meet the required expenditure under the work programs apparently proposed by Cascade Coal at that time in respect of the Mt Penny and Glendon Brook coal release areas totalling $20 million over the program. 104 On 8 September 2009, James McGuigan sent an email to Bill Sweeney and John McGuigan. In that email, he said: Bill, In preparation of your meetings with Rabo Bank and Macquarie regarding the refinancing of the Mt Penny mortgages. I have amended the Cascade Shareholder's update report to remove: - Any reference to the equity agreement with Buffalo Resources; - Any reference to the resource estimates of the Mt Penny Coal release area; - Removal of the NAB reference. I have sent it in word format as well as PDF. If there are any other pieces of information that might be sensitive to the bank, please amend. Any questions or anything else, please call. Cheers 105 On 30 September 2009, each of Poole, Kinghorn, John McGuigan and Atkinson signed a Circular Resolution as directors of Cascade Coal which involved the allotment of an additional twenty (20) shares in that company. The resolution was in the following terms: CASCADE COAL PTY LIMITED ACN 119 180 620 CIRCULAR RESOLUTION OF DIRECTORS By this circulating resolution, we, the undersigned, being all the Directors of Cascade Coal Pty Limited (the Company) hereby RESOLVE, in accordance with Section 248A of the Corporations Act 2001 (Cth) (the Corporations Act): 1. Business of the Circular Resolution The business of the circular resolution concerns: A. Approving the issue of twenty (20) additional shares. The shares are fully paid ordinary shares ($1.00) per share. B. Applications for the shares have been received from British & Colonial Finance Pty Limited ACN 003 366 863, for ten (10) shares and Gaffwick Pty Limited ACN 010 584 522, for ten (10) shares. C. Upon the issuing of the additional 20 shares, the share capital of the Company will be as follows: Shareholders Ordinary shares Amanda Poole 10 British & Colonial Finance Pty Limited 10 Gaffwick Pty Limited 20 JA Kinghorn & Co Pty Limited 10 Riverbend Investments Pty Limited 10 Sanjur Pty Limited 10 Total 70 2. Resolution It is resolved to approve the issuing of the additional 20 ordinary shares to British & Colonial Finance Pty Limited ACN 003 366 863, for ten (10) shares and Gaffwick Pty Limited ACN 010 584 522, for ten (10) shares. 106 By letter dated 8 October 2009 from the DPI to James McGuigan at MPC, the Director General of the DPI informed James McGuigan that the DPI had reached the stage where it intended to grant a title in satisfaction of the above exploration licence (Exploration Licence No 3771) subject to the receipt of the security of $20,000 as outlined in conditions attached to the letter. 107 On 13 October 2009, James McGuigan sent an email to Johnstone by which he sought Johnstone's advice in relation to the draft conditions attached to the DPI letter of 8 October 2009. The next day (14 October 2009), Johnstone responded in some detail. James McGuigan then sent Johnstone's response received by him on to Duncan and John McGuigan. 108 Duncan responded. His email address shown on that response was "Executive Offices", being the email address "executive.offices@whitemining.com.au". Duncan sent his response to James McGuigan, Johnstone, Atkinson and John McGuigan. Duncan's response was in the following terms: James, agree to proceed with signing and return of EL's to DPI. John occurs in your court re Mt Penny. Agree with MJ's approach use open 20 or open holes in OCI area to get Resource number. To get quality start with say 3 holes, open hole to top of coal and only core the coal scan. This should be enough to get a starting paper. Start reconnaissance program ASAP. Will need a cash call. MJ keep this shut till we discuss any special arrangements. Invoice expenses for immediate cash recovery. Regards Travers 109 James McGuigan responded later the same day. He sent his response to Duncan, Atkinson and John McGuigan. In his response, he said: Thanks Trav – will send back tomorrow. I will circulate a note to the shareholders soon updating costs to date and anticipated costs up to June 30 2010. Further I will be repaying shareholder loans tomorrow of: $7,500 to Travers $12,500 to Atko They relate to the submission process back in February. And I will pay the $20,00 [sic] cash as security to the DPI. Any other questions please call. Cheers 110 By email sent at 4.53 pm on 21 October 2009 to all relevant parties, James McGuigan informed the recipients that he had received verbal confirmation that afternoon from the DPI that Glendon Brook Coal Pty Ltd had been granted Exploration Licence 7405 over the Glendon Brook coal release area and that MPC had been granted Exploration Licence 7406 over the Mt Penny coal release area. He said that both licences were valid for five (5) years from 21 October 2009. He also said that he would receive the official letters either Friday or Monday and that he would circulate a copy of those letters along with an update for all shareholders. 111 On 22 October 2009, James McGuigan appears to have prepared a chronology or summary of the events which led to Cascade Coal acquiring the exploration licences over the Glendon Brook coal release area and the Mt Penny coal release area. That document is incomplete and is in the form of a file note. It is in the following terms: [No Subject] Date: Thu, 22 Oct 2009 13:19:09 + 1100 1) February 2009: Cascade Coal Pty Ltd submits expression of interest tenders for Glendon Brook and Mt Penny Coal Release Areas. 2) February 2009: Upon submission Cascade learns that Monaro Resources has submitted for both the Glendon Brook and Mt Penny Coal Release Areas 3) May 2009: Cascade approached by Gardner Brook representing Monaro, regarding the fact that Monaro has been informed by the DPI that they are the front runner in the tender process. Gardner expressed concerns that Monaro would be unable to honour the financial contribution commitments to the DPI. 4) May 2009: Gardner informs Cascade, that himself and Andrew Kaidbay had come to an arrangement with 3 land owners within the Mt Penny, that should Monaro be the successful applicant Monaro would agree to purchase these properties at a multiple in recognition of land access, and a quick exploration program. 5) June 2009: Gardner informs Cascade that Monaro would be withdrawing from the tender process, and introduces the concept of Cascade entering into a similar agreement with the land owners. Gardner informs Cascade that the three properties are: - Cherrydale Park - Coggans Creek - Donola Gardner informs Cascade introduces Moses, Paul and Gerard Obeid to Cascade. 6) 5 June 2009: Cascade enters into a letter of conditional agreement with UPG, Geble Pty Ltd, and Justin Kennedy Pty Ltd to acquire 112 That file note appears to have been prepared after Brook had made contact with James McGuigan earlier on 22 October 2009 seeking an update in the progress of the acquisition of the relevant exploration licences. Brook's communication caused James McGuigan to send an email to John McGuigan and Poole which was in the following terms: Guys, Just had a conversation with Gardner and informed of being granted the EL's. He was keen to let me know that he feels left out of the process, and wants to be kept in the loop more. I made him aware of the fact that he is in London and it's a bit difficult. However he wanted me to relay the message. He also raised concerns that he would like to be the point of contact going between the "boys", as he is worried about them. I am of the view that it's easier to keep him happy and inform him of minimal information, than to shut him out. Cheers 113 The reference in the above email to "the boys" was a reference to the sons of Eddie Obeid. 114 On 11 November 2009, White Energy Company Limited (White Energy) issued a press release announcing that SCE had now formalised its unconditional offer on behalf of its institutional client base to provide White Energy with $100 million of equity financing by way of a placement of 41.67 million shares at $2.40 per share. The release continued: The Directors of White Energy have reviewed the terms of the offer and have determined that its acceptance is in the best interests of the Company. The funds raised through the placement will be used to finance the rollout of the Company's business plan and for general working capital purposes. The placement is being completed in two tranches with 28.8 million shares to be issued immediately pursuant to ASX Listing Rule 7.1 and the balance of 12.87 million shares to be issued subject to shareholder approval following an Extraordinary General Meeting to be held in mid December 2009. 115 On 24 November 2009, Locaway, Geble and Justin Kennedy Lewis Pty Limited, as vendors, entered into a Deed of Put and Call Option with MPP as purchaser. By that document, the vendors agreed to grant and the purchaser agreed to accept a call option to purchase the properties which were located over the area covered by EL7406. In addition, MPP agreed to grant and the vendors agreed to accept a put option whereby the vendors had the entitlement to require the purchaser to purchase those properties. The total purchase price agreed in respect of the properties the subject of the Deed of Put and Call Option was $33.4 million. This was a little over four times the amount which the vendors had outlaid to acquire the properties. MPP had the right to terminate the Deed of Put and Call Option if it or MPC decided, acting reasonably, that it could not develop a profitable coal mining operation on the land or if it or MPC was not granted mining approval or if it or MPC concluded, acting reasonably, that the reserves of coal on the properties were not sufficient to justify the proposed property acquisition. In the Deed of Put and Call Option, the parties agreed to keep the terms thereof confidential and also to keep information furnished from one to the other confidential. 116 Under the Deed of Put and Call Option, the vendors agreed to allow MPC access to the properties. 117 John McGuigan signed the Deed of Put and Call Option on behalf of MPP. His signature was witnessed by Poole. Paul Edward Obeid and Damien Edward Obeid signed that document on behalf of Locaway. Mr Cambo signed on behalf of Geble and Justin Lewis signed on behalf of Justin Kennedy Lewis Pty Limited. 118 On 19 December 2009, the Australian Financial Review published an article "Look inside Santa's coal sack". In that article, the author mentioned the circumstance that the Obeids had acquired Cherrydale Park for $3.65 million in late 2007 and would likely benefit significantly from that circumstance if mining commenced on the land. The author also hinted that the Obeids may have an interest in the company, Voope, and also in Buffalo Resources, both of which were involved in the exploration licence over the Mt Penny coal release area. 119 On 21 December 2009, Voope executed a Bare Trust Deed. That Trust Deed bore the signature of Andrew Kaidbay and one other person whose signature was not identified. That document was in the following terms: Parties Voope Pty Limited ACN 132 441 868 of Unit 41, 400 Chapel Street, Bankstown NSW 2200 (Trustee) Operative provisions 1 Declaration of Trust and relationship 1.1 The Trustee declares that it will hold all and any interest in the Joint Venture (Trust Fund) on trust for the Beneficiaries (as noted in the Schedule) in the Agreed Proportion. The Joint Venture is constituted by the 100 shares held by the Trustee in Loyal Coal Pty Limited ACN 132 497 913 and the 100 Units held in the Yarrawa Coal Unit Trust and by the Shareholders and Unitholders Co-Operation Agreement between the Trustee, Loyal Coal Pty Limited ACN 132 497 913 and Yarrawa Coal Pty Limited ACN 139 483 739 dated 21 December 2009 (Joint Venture). 1.2 The Beneficiaries interest in the Joint Venture is in the following Agreed Proportion (Agreed Proportion): 1.2.1 Warble Pty Limited ACN 137 486 018 as to 12/100 interest 1.2.2 Andrew Kaidbay as to 88/100 interest 2 Period of Trust 2.1 The trust created by this document will commence on the date of this document and will continue until the date which is 80 years from the date of this deed (Vesting Day). 2.2 As soon as practicable after the Vesting Day, the Trustee will transfer to the Beneficiaries the Trust Fund. 3 No Claim 3.1 The Beneficiary or any party claiming through the Beneficiary may not make a claim or seek any recovery from the Trustee in relation to any matters arising from the Trust Fund. Schedule Beneficiaries Warbie Pty Limited ACN 137 486 018 of 422/50 Macleay Street, Potts Point NSW 2011 as to a 12/100 interest in the Joint Venture Andrew Kaidbay of 41/400 Chapel Street, Bankstown NSW 2200 as to a 88/100 interest in the Joint Venture 120 On the same day, Andrew Kaidbay executed a further Bare Trust Deed as a Deed Poll. This additional Bare Trust Deed was in the following terms: Parties Andrew Kaidbay of 41/400 Chapel Street, Bankstown NSW 2200 (Trustee) Operative provisions 1 Declaration of Trust and relationship 1.1 The Trustee declares that it will holds [sic] 88 shares in Voope Pty Limited ACN 132 441 868 (Company and Trust Fund) on trust for the Beneficiaries (as noted in the Schedule) in the Agreed Proportion. 1.2 The Beneficiaries interest in the Joint Venture is in the following Agreed Proportion (Agreed Proportion): 1.2.1 Sevag Chalablan 6 Remuera Street, Willoughby NSW 2068 as to 70 of the 88 shares 1.2.2 Andrew Kaidbay as to as to [sic] 18 of the 88 shares 2 Period of Trust 2.1 The trust created by this document will commence on the date of this document and will continue until the date which is 80 years from the date of this deed (Vesting Day). 2.2 As soon as practicable after the Vesting Day, the Trustee will transfer to the Beneficiaries the Trust Fund. 3 No Claim 3.1 The Beneficiary or any party claiming through the Beneficiary may not make a claim or seek any recovery from the Trustee in relation to any matters arising from the Trust Fund. Schedule Beneficiaries Sevag Chalablan of 6 Remuera Street, Willoughby NSW 2068 as to 70 of the 88 shares. Andrew Kaidbay of 41/400 Chapel Street, Bankstown NSW 2200 as to 18 of the 88 shares 121 On 13 January 2010, Messrs John McGuigan, Atkinson, Duncan, Johnstone, Alan Wells and James McGuigan met to discuss the Cascade Coal venture. This was a meeting at which all relevant commercial and mining topics were discussed. It was intended that drilling would start in early to mid-February 2010. It was the intention of those meeting on this occasion that there would be an accelerated program for drilling and subsequently mining. Minutes of this meeting were kept and circulated by James McGuigan to John McGuigan, Duncan, Atkinson, Alan Wells and Johnstone. 122 In late January 2010, the directors of Cascade had under consideration extracting that company from its interests in Victoria and concentrating exclusively on the New South Wales coal release areas. 123 At the same time, Johnstone had completed his recognisance open hole program with 20 holes and the results were encouraging. 124 As at late January 2010, Addenbrooke was in negotiations with NSW Maritime in relation to the Rose Bay and Point Piper Marina leases held by it. In a letter sent by Addenbrooke to NSW Maritime on 27 January 2010 signed by Denis O'Neil, Addenbrooke put a detailed financial proposal to NSW Maritime in respect of those marinas. A copy of that letter was forwarded to Jones on the same day. Jones was assisting Addenbrooke with its negotiations with NSW Maritime. 125 In February 2010, White Energy had requested Arthur Phillip to prepare a discussion paper on the regulatory requirements, timing and the market perception that may arise should White Energy choose to proceed with any one of three acquisition scenarios then under consideration. Each of the scenarios under consideration involved the acquisition by White Energy of 100% of South Australian Coal Company Ltd (an unlisted company) and 100% of Cascade Coal. In order to effect those acquisitions, White Energy had under consideration raising capital to the tune of AUD100 million and to do so in March 2010. 126 To that end, Arthur Phillip prepared a Draft Discussion Paper entitled "Project Phoenix". 127 On p 5 of that Draft Discussion Paper, the author of the paper set out the common shareholdings and directorships between the relevant entities in the following terms: Common Shareholdings & Directorships Overview The common shareholdings and directorships between the entities are summarised below.[ ] Common Directorships and Shareholding Relevant Interest Directorship WEC SACL Cascade Travers Duncan WEC – ED Shares: 13,810.448 Shares Shares: 10 SACL – EC % held 5.87 % held: 15.24 % held: 14.34 Brian Flannery SACL – ED Shares: 13,390,492 Shares: Shares: 10 % held: 5.70 % held: 14.99 % held: 14.34 John McGuigan WEC – EC Shares: 5,172,556 Shares: Shares: 10 Cascade – Director % held: 2.20 % held: % held: 14.34 John Atkinson WEC – ED Shares: 5,172,556 Shares: Shares: 10 Cascade – Director % held: 2.20 % held: % held: 14.34 John Kinghorn SACL – NED Shares: Shares: Shares: 10 Cascade – Director % held: % held: % held: 14.34 Richard Poole Cascade – Director Shares: 3,996,975 Shares: Shares: 10 % held: 1.70 % held: % held: 14.34 Others: Greg Jones, David Knappick, Joe Butta, Hans Mende 128 The Discussion Paper is a detailed analysis of the relevant requirements and contains a detailed timetable for the proposed capital raising. 129 The Draft Discussion Paper was sent by James McGuigan to Anthony Levi, another Arthur Phillip operative, on 9 February 2010. In his covering email, James McGuigan noted that, as discussed the day before, the Cascade acquisition "[was] not being considered". 130 Addenbrooke tendered in evidence an email from Ned O'Neil to Jones sent on 12 February 2010 in relation to Addenbrooke's ongoing negotiations with NSW Maritime. The text and tenor of the email suggests that the O'Neils regarded Jones as a lobbyist or go-between between them and NSW Maritime in relation to Addenbrooke's ongoing negotiations about the two marinas. In a commercial sense, Jones was acting as an agent for Addenbrooke with a mandate to endeavour to "sell" its proposals to NSW Maritime. Other emails sent in February 2010 confirm this view of Jones' role at that time on behalf of Addenbrooke. 131 On 26 February 2010, Levi sent an email to Atkinson and Ivan Maras (with a copy to Poole and Andrew Laurie). That email was headed "Cascade". Under cover of that email, Levi sent two discussion papers: First, a discussion paper entitled "Cascade Discussion Paper – Performance Shares.pdf" and second, a discussion paper entitled "Project Phoenix Discussion Paper …pdf". Levi's email was in the following terms: John/Ivan, Please find attached: 1. A draft report which discusses the process and issues involved in WEC launching an off market bid for SACL. We would like to arrange a time to meet and present this to you. 2. A draft discussion paper which describes an example performance share structure for an acquisition of Cascade by WEC. The performance share structure is based on that used by Felix Resources but the escalator is determined by reference to increases in the size of Cascade's resources rather than to a listed share price. Depending upon the current and expected future values attributed to Cascade, the performance structure may involve the issue of a significant number of performance shares. This could create an "overhang" on WEC's capital structure which may not be positively perceived by the market. In considering the above and alternatives thereto, we have encountered numerous market perception, ASX, Corporations Law and tax hurdles. Alternative escalator structures (or hybrids thereof), could be considered, for example: 1. WEC acquires 100% of Cascade at 50% of the current value attributed to Cascade by an independent valuer. The acquisition consideration would be 100% scrip. In five years time, Cascade shareholders would be topped up to reflect 50% of the increase in the value of Cascade over the five year period as determined by an independent valuer. The top up would be by cash or scrip. The scrip top up would require shareholder approval which would result in it being issued at the prevailing WEC share price in five years time. Cascade shareholders would, therefore, not be exposed to fluctuations in the WEC share price over the five year period in respect of their top up shares. WEC would be responsible for funding and management of Cascade. 2. WEC acquires 50% of Cascade today for scrip. WEC manages and funds Cascade. WEC has the right to buy out the remaining 50% of Cascade in five years time based on an independent value. The buy out could occur for cash or scrip at the share price prevailing at the time of issue. Cascade shareholders would, therefore, not be exposed to fluctuations in the WEC share price over the five year period in respect of the second tranche of shares I note that we do not consider any of the above to be optimal solutions. We would like to further consider these and additional options with the assistance of legal and tax experts. I suggest that we meet to further consider the above. Have a good weekend. Regards, Anthony 132 There is no doubt that, in early 2010, Arthur Phillip personnel and White Energy executives were actively considering the acquisition of Cascade Coal by White Energy. 133 Earlier that day, Levi had provided Cascade valuations to Poole propounded upon certain assumptions. Based upon the reserves in the Mt Penny licence area, Levi suggested that Cascade was worth $350 million after exploitation of those reserves. Upon the basis of valuing the resources, Levi estimated that Cascade was worth $360 million at the same point in time. 134 In the months that followed, various operatives within Arthur Phillip discussed the potential value of the Cascade interests at Mt Penny. Those persons were Levi, Poole and James McGuigan. 135 In March 2010, a further Shareholder Update for Cascade Coal was prepared. In that Update, it was said that the purpose of the paper was to provide the shareholders of Cascade Coal with an update on recent activity in relation to its two assets: EL7406 (Mt Penny) and EL7405 (Glendon Brook). In the paper, there was a detailed exposition of recent activity concerning Mt Penny. In particular, the recognisance drilling program was the subject of a detailed report. At p 9 of that paper, the author recorded that MPP had put and call options in respect of three properties – Coggans Creek, Donola and Cherrydale Park. The author of the paper said that, as a condition of the land access agreements and the put and call options over the properties, the mortgage repayments were being serviced by MPP. 136 At p 14 of this paper, it was noted that costs to date incurred by MPC came to $1,275,724. Costs incurred by MPP were $95,130. Miscellaneous costs incurred by Cascade were $93,079. 137 At p 15 of the paper, there was a detailed draft budget and future cash call summary in respect of MPC. That summary showed that, between January 2010 and December 2010, it was envisaged that $2,252,733 would be spent by MPC in pre-mining development costs. 138 At p 16 of that report, the following text appeared: Future Cash Calls for Mt Penny Coal Pty Ltd • Based on the program outlined in this report and summarised in the budget through to 31st December 2010 it is proposed that shareholders fund the outgoings to the point where a clearer picture of the value of Mt Penny is available. • The shareholder cash calls will be advanced by way of an interest free loan to Cascade. In this regard, a short form loan agreement covering the allowances and the previous shareholder funding will be forwarded to shareholders shortly. • It is proposed that the shareholder contributions be made on a quarterly basis with the first call being on 31 March. A separate cash call is included with this report with bank details and instructions. • The June and September estimated cash calls will be confirmed at a later date depending on the progress of the project including the costs incurred compared to the budget. • The shareholder contributions that will be required are: • March, April, May = $630,000 • Contribution per shareholder on 31 March = $90,000; • June, July, August = $700,000 • Contribution per shareholder on 30 June = $100,000; • September, October, November = $560,000 • Contribution per shareholder on 30 September = $80,000. 139 A draft of this paper was sent to Duncan and John McGuigan on 10 March 2010. A copy was also provided to an employee at White Energy. That person (Kristy Ostens) was Duncan's Personal Assistant at that time. 140 On 18 March 2010, James McGuigan sent a version of the Shareholder Update to all shareholders. He drew their attention to the fact that cash calls would be made over the next nine months or so. He specifically drew their attention to the cash call program set out on p 16 of the document. 141 On 19 April 2010, Sevag Chalabian of Lands Legal sent an email to James McGuigan in the following terms: Subject to Legal Professional Privilege James I refer to the letter from Cascade dated 5 June 2009. I suggest the following course of action: - A further letter from Cascade to Buffalo confirming that the agreement dated 5 June 2009 is between Cascade and Buffalo or its nominee. - Buffalo will then reply to Cascade confirming it has appointed a nominee and the details of that nominee. Can you please send me a letter for point 1 above. Thanks 142 James McGuigan immediately passed that email on to Poole and John McGuigan. He said in a covering email: John/Richard As per our discussions, today I have just received the following from Sevag. On the face of it, the concept seems reasonable, however I am suggesting we find out who the nominee is before we send our letter. Do you agree? Let me know how you want me to proceed, and any other potential issues that might arise down the track. Cheers 143 Later that day (19 April 2010), James McGuigan sent an email to Chalabian in the following terms: Sevag, I have just re-read the June 5 letter, and think there may be a simpler approach. I refer to the section headed "No transfer or encumbrance" Which reads: No party may transfer or encumber its interest in the EL, any underlying mining rights or the JV without obtaining the consent of the other party. Can I suggest the following course of action: - A letter from Buffalo to Cascade referring to the agreement dated 5 June 2009 stating "in accordance with the letter, Buffalo wishes to notify Cascade that its interests, and rights in the EL will be transferred to [Company X]" - Cascade then will request to see an agreement letter between Company X and Buffalo - Once Cascade has confirmed that the agreement between Buffalo and Company X is bona fide, it will then agree to the transfer of the interests from Buffalo to Company X I haven't had a chance to run this by Richard, or John, which I will. But in my opinion this seems to be a more logical sequence of events. Let me know what you think. Regards 144 Chalabian replied soon thereafter in the following terms: James The ultimate effect is the same. The only change to your sequence would be that Buffalo would first seek Cascade's consent to the "proposed" assignment, provide a copy of the draft letter of assignment and then once consented to, would assign. Please confirm if this is acceptable and we can action. Regards 145 In response to that email, James McGuigan said that his proposal was "acceptable". 146 On 4 May 2010, Levi sent a brief update on the current status of the WEC/SACL transaction to Atkinson, Duncan and John McGuigan with a copy to Ivan Maras, Andromeda Duncan and Poole. That email was in the following terms: All, A brief update on the current status of the WEC/SACL transaction: • Everything is running smoothly and materially to schedule at this stage. • The WEC due diligence committee will convene its first meeting tomorrow morning. • Independent Experts have been appointed by WEC (Deloitte and Behre Dolbear) and SACL (BDO and Minarco). • The first drafts of the Bidder's Statement (over 80 pages) and WEC's notice of meeting have been circulated to a narrow audience for preliminary comments. • The latest timetable which has been agreed with SACL is attached. The key dates (which are subject to change) are: Notice of Meeting to WEC shareholders to be dispatched on 28 May. Bidder's and Target Statements to be dispatched to SACL shareholders on or around 4 June. Offer period open from 7 June to 12 July. WEC shareholders meeting on 2 July. Consideration for SACL shares acquired under the bid issued 26 July. Thereafter, compulsory acquisition and WEC shares issued under subscription rights offer. $75m placement completes on 26 July. Regards, Anthony 147 Duncan replied to that email the next day (5 May 2010). He said: Anthony, Thanks for the update and projected timing of the WECL/SACL transaction. I would appreciate a draft of the Bidders statement and inclusion within the narrow audience category. Regards, Travers. 148 On 5 May 2010, Mr Berry of Wells Environmental Services provided a timeline for Cascade Coal to get to the mining lease stage. On 10 May 2010, James McGuigan passed on that timeline to Jones. In an email sent at 11.13 am on that day, James McGuigan said: Greg Please see attachment which outlines the necessary steps for us to get ML. Please also see the note below from the firm that is assisting us on the approval process. He has outlined that for a December 15 approval (care taker mode starts). We have to get the Environmental Assessment Report ready by September 5. Please give me a call before or after the meeting if you need clarification on any issues. Cheers 149 Shortly after sending that email to Jones, James McGuigan reported to his father about his brief contact with Jones on that day. 150 At 4.47 pm on 10 May 2010, James McGuigan sent an email to Poole headed "Property Valuations". That email was in the following terms: Richard, As per our discussion: Property Valuations Cherrydale: $4.24 Coggan Creek: $3.5 Donola: $0.6 Wording from the letter: Purchase of the Properties from the Landowners by Cascade Cascade will acquire a 100% interest in the unencumbered Properties and in all related water and other necessary licences to build a mine, and in consideration will pay to the Landowners the Purchase Price. The Purchase Price shall be an amount equal to four times the total sum of: • 100% of the value of the Justin Kennedy Lewis Pty Ltd property (Coggan Creek), plus • 100% of the value of the Geble Pty Ltd property (Donola) plus • 100% of the value of the United Pastoral Group Pty Ltd's property (Cherrydale Park). The Purchase Price will be apportioned between the Landowners based upon the respective improved value of each property as at 1 June 2009. The value of each property shall be agreed as the improved value as at 1 June 2009 of each property and agreed between the parties or in the event of a failure to agree as determined by an independent valuer. Conditional upon Cascade's successful application for the Exploration Licence and within 30 days of the award of the Exploration License, Cascade and the Landowners shall: • enter into a contract of Sale and Purchase for the Properties ("SPA") on the terms set out in this letter agreement; and • complete the determination of the Purchase Price for the Properties. 151 Poole forwarded on the valuation figures given to him by James McGuigan to Atkinson, Duncan and John McGuigan. James McGuigan's email makes clear that, by early May 2010, the Cascade Coal stakeholders were contemplating the ultimate acquisition of the landholdings held by the Obeid family's nominees for $33.36 million. 152 By a Deed between Buffalo Resources and South East Investments Group Pty Ltd (South East Investments) entered into on 11 May 2010 which was executed by Andrew Kaidbay on behalf of Buffalo Resources and by Sevag Chalabian on behalf of South East Investments, Buffalo Resources retired as trustee "… of the trust recorded in the Bare Trust Deed made on 5 June 2009" and was replaced as trustee of that trust by South East Investments. The particular Trust Deed was not annexed to the Deed dated 11 May 2010 tendered in evidence before me. I infer that this Deed had the effect of substituting South East Investments as the joint venturer with Cascade Coal in respect of Mt Penny as documented in the letters of 5 June 2009. 153 On the same day (11 May 2010), Buffalo Resources sent a letter dated that day to Cascade Coal. That letter was in the following terms: Dear Sirs Letter of Agreement between Cascade Coal Pty Limited ("Cascade") and Buffalo Resources Pty Limited ("Buffalo") We refer to the letter of agreement between Cascade and Buffalo dated 5 June 2009 ("The Agreement"). We understand that Exploration Licence 7406 is held by Mt Penny Coal Pty Limited (ACN 139 010 209) which is a wholly owned subsidiary of Cascade. By execution of the copy of the letter where indicated below please confirm this fact. We advise that in entering into the Agreement, Buffalo was acting in the capacity as a bare trustee. Pursuant to the terms of the relevant trust we advise that Buffalo will be replaced as the trustee of that trust and all its rights and obligations will be assumed by South East Investments Pty Ltd 143 535 620 ("the New Trustee"). By execution of the copy of this letter where indicated below please confirm your acknowledgement of this change and confirm that the key terms of the Agreement are now effective as between Cascade and the New Trustee. Yours sincerely 154 On 18 May 2010, an article appeared in the online version of The Sydney Morning Herald under the name of journalist Anne Davies. In the article, Ms Davies noted that the Obeid family owned Cherrydale Park, a property in the Bylong Valley. The focus of the article was the suggestion that Eddie Obeid had used his influence to obtain State road funding for the benefit of his local council at Bylong. 155 On 20 May 2010, a second article appeared in the online version of The Sydney Morning Herald under the name of the same journalist, Anne Davies. As far as the evidence goes before me, this was the third newspaper article in which the author drew attention to the Obeid family's interests in the Bylong Valley which, of course, is located within the Mt Penny coal release areas. The article is important for the present case. For that reason, I extract it in full: In late 2007 the family of the upper house MP and former minerals minister Eddie Obeid bought a large property for $3.65 million in the Bylong Valley, a beautiful valley to the east of Mudgee renowned for its good cattle pastures. Less than a year after the purchase of Cherrydale Park, the NSW Department of Primary Industry – the department responsible for managing the state's mineral deposits – called for expressions of interest to bid for a highly prospective coal exploration licence over the Bylong Valley. A few months after the Obeid family trust company Locaway purchased Cherrydale Park, other Sydney investors noticed the beauty of Bylong. In July, one purchaser bought a property adjoining Cherrydale Park for $600,000 and made an offer on another much larger property, Coggan Creek, putting down $50,000 to secure an option to buy it. When his option over Coggan Creek lapsed because he was unable to find investors, another Sydney investor emerged – a wealthy young man, Justin Kennedy Lewis, who knows the Obeid sons from childhood. Mr Lewis told the Herald he was not aware of the coal in the valley when he bought Coggan Creek for $2.42 million. "I have always wanted a proper working farm and – especially now I'm a new dad – was looking forward to getting rough and ready with my son." Moses Obeid, Mr Obeid's eldest son, said he was surprised to find that Mr Lewis, whom he had known since his childhood in Hunters Hill, had bought 10 kilometres away. He had bumped into Mr Lewis in January and Mr Lewis had told him: "I've just bought a country property, and I hear you guys have a farm up there too," he recounted to the Herald. But the Obeid's country idyll and those others who fell in love with Bylong is about to be disrupted. After a few hiccups in the tender process, in July 2009 an exploration licence for the Mount Penny region, the area that includes the Obeid and Lewis farms, was awarded to Cascade Coal – a company whose directors were familiar with the coal riches in the region. Armed with the funds they received after selling Felix Resources's Moolarben mine 40 kilometres away, Cascade Coal is now in the throes of test-drilling the valley to decide where the richest seam of coal lies. For landholders, this is both good and bad news. They are now facing the prospect of an open cut mine in the valley, with work starting as early as 2011. But they are also likely to see their land values increase, judging by the experience of landholders in the Liverpool Plains, whose land was similarly affected by coalmining. Mining companies are able to force the acquisition of land for mines, but often have to pay handsome premiums. Contacted by the Herald, Mr Obeid said that his family had bought Cherrydale Park not for its proximity to coal but because he had fallen in love with "the magnificent property". "The minute I walked in there I thought, this is where I want to retire. Not right away," Mr Obeid added hastily, as there has been speculation he is under pressure to leave Parliament before the next election. The property, as Mr Obeid says, is "truly remarkable". Developed over 10 years by John Cherry, a tax adviser to the late Kerry Packer, it has several hectares of gardens with more than 2000 roses, an artificial lake and a compound of houses and cottages. Asked whether he knew if there was coal under Cherrydale, Mr Obeid said: "I don't know if there is coal or there isn't. The whole valley has mining leases over it. Anglo has had one for years. When we bought we certainly weren't told of the mining lease, so I wasn't aware of it. "I personally wish it would never happen," he said of the mine. However Mr Obeid said that as a former minerals minister, he realised there was little a landholder could do to prevent a mine owner compulsorily acquiring land. At the time Mr Obeid bought, there was no exploration licence over the valley, although the general existence of coal in the valley was no secret. A spokeswoman for the department confirmed that the plan to grant 11 new exploration licences was not made public until September 9, 2008. However, she said a geologist or any person who understood the test drilling data would have been able to look at information on the department's website and make an informed guess on where there was likely to be coal deposits before that date. Mr Lewis bought just after tenders were called, although he did not settle on his land until late 2009 – after tenders were awarded – due to delays in finalising the sale of another property. Meanwhile there have been other acquaintances of the Obeids who have taken an interest in the valley, although for other reasons. Monaro Mining was one of the 60 companies which was invited by the Department of Primary Industry to tender for 11 areas, including Mount Penny, the exploration area in the Bylong Valley. Monaro was approached by a consultant and former Lehman Bros investment banker, Gardner Brook, and another consultant, Andrew Kaidbay, who offered to help with its bid. Moses Obeid told the Herald he knew both men – Mr Kaidbay had approached the Obeid sons on an earlier occasion about financing one of their projects and had introduced Gardner Brook to Moses and one of his brothers. But the Obeids had no part in their mining transaction. Mr Brook had been a specialist in putting mining deals together at Lehman, and Mr Kaidbay was a finance consultant, who currently works for Mark Bouris's Yellow Brick Road Securities. Together with the Monaro directors, they worked on the submissions and attempted to arrange a more substantial financial partner for Monaro's bids. According to the Monaro directors, Mr Brook was confident that Monaro would be successful, and when documents were later tabled in the upper house they revealed that Monaro's bid was highly rated by the tender assessment team. "We felt like we had been touched on the shoulder by a fairy," one director told the Herald. But soon after tenders were lodged, the Monaro bid began to unravel. There was a split on the board over the direction of the company, and the global financial crisis made finding partners with deep pockets difficult. A company, Voope, was brought in as the finance partner, with a lawyer, Greg Skehan, from Colin Biggers and Paisley, as its sole director. In the end though, Monaro was unable to raise the funds that were required as upfront payments. In the case of Mount Penny, that was $1 million upfront and four yearly payments. Mr Brook wrote to the department relinquishing the licence for Mount Penny and two others on June 9 but kept three smaller ones. Monaro decided to walk away from its foray into coal, and Mr Brook and Mr Kaidbay ended up with the three smaller exploration licences, which they have since sold. Mr Obeid made a personal explanation to Parliament last night accusing the Herald of having a vendetta against him because he had successfully sued the paper several years ago. He said he was simply doing his job as an MP representing the people who had contacted him over a dangerous bridge which he said was 65 kilometres from his family farm. "I make no apologies, that is what my job has been for 18 years." Mr Obeid also said the Herald had published incorrect information about his pecuniary interest register. He said he had sold his house in Concord "ages ago". The 2009 register, tabled in September last year, lists the Concord property and the house and land in Matrit, Lebanon. A supplementary filing for the current financial year, not yet tabled in Parliament, reveals he has sold the Concord property. Mr Obeid said he would have difficulty listing the holdings of all his relatives because he had so many. 156 The newspaper articles to which I have referred were not admitted into evidence in order to prove the truth of the contents of those articles. They were admitted only to prove the fact of publication and the date of publication. They were also admitted as evidence of assertions made at the time by the authors of the articles. 157 In June 2010, another Shareholder Update for Cascade Coal was prepared. 158 In early June 2010, Ned O'Neil showed some interest in investing in a CBD development site in Melbourne. At this time, Ned O'Neil was discussing that interest with Gray. 159 On 10 June 2010, James McGuigan circulated a Draft Shareholder Update for Cascade Coal to Duncan and John McGuigan. In the Shareholder Update, James McGuigan included a management salary accrual of $1.01 million in favour of John McGuigan, Duncan and Poole. 160 On 15 June 2010, Duncan responded to that email. He said that "we" should explain the management salary accrual to the other shareholders in order to ensure that they understood the purpose of it. In his email, Duncan referred to some mining difficulties which were now becoming apparent. He said that the mining at Mt Penny would be a massively complicated mining operation with 14 levels operating horizons. 161 On 16 June 2010, British & Colonial Finance Pty Ltd executed a Standard Transfer Form in favour of JA Kinghorn & Co Pty Ltd in respect of ten shares in Cascade Coal. Bill Sweeney signed on behalf of British & Colonial Finance Pty Ltd and Kinghorn signed on behalf of his corporation. The consideration paid for the transfer of those shares was $10. 162 An ASIC Form 484 was lodged informing ASIC of that transfer. In that Form 484, the author stated that the ten shares transferred were beneficially held by JA Kinghorn & Co Pty Ltd. Subsequently, in an ASIC Form 492 lodged on 28 October 2010 by Arthur Phillip, a correction was made to that form. The correction stated that the shares transferred were not beneficially held by JA Kinghorn &Co Pty Ltd. 163 On 16 June 2010, there was a further exchange of emails between Ned O'Neil and Gray concerning the prospect of Addenbrooke investing in a real estate development in Melbourne. 164 On 16 June 2010, the same day when the share transfer between British & Colonial Finance Pty Ltd and JA Kinghorn & Co Pty Ltd took place, Cascade Coal sent a letter to Mr Sweeney. That letter was signed by John McGuigan. That letter was in the following terms: Dear Bill, Investment in Cascade Coal Pty Limited I refer to your letter of 8 June 2010, outlining the position of British & Colonial Finance Pty Limited (BCF) with respect to its investment in Cascade Coal. I have discussed your desire to exit from this investment on the basis of a refund of BCF's existing investment (comprising the purchase of shares in Cascade Coal and the repayment of moneys advanced by way of loan) with the shareholders of Cascade Coal. One of the existing shareholders, J.A. Kinghorn & Co Pty Limited is prepared to acquire the shares and to arrange for repayment of BCF's loan. Once this transaction is completed BCF will have no further interest in or commitment to the equity or funding of Cascade Coal. A further cash call is to be made in the next few days and in anticipation of a speedy completion of this transaction, I will ensure the cash call is sent to J.A. Kinghorn & Co Pty Limited. The Cascade records disclose that the cost of the BCF shareholding was $10 and the outstanding balance of the BCF loan account is $390,000. I will arrange for relevant transfers and acknowledgments to be executed. Regards 165 A Shareholder Update in respect of Cascade Coal was circulated to the shareholders on 17 June 2010. On p 15 of that document, the details of the further cash call were set out. Further cash calls of $180,000 per shareholder were envisaged in respect of the period between June and November 2010. 166 Shortly before he went on holidays, James McGuigan sent an email to Poole at 4.34 pm on 7 July 2010. In that email, he said: … Cascade is all sorted for the next few weeks – but I am on email for everything. August is going to be a busy month. John and Trav are meeting with the JV guys tomorrow – however I hold little hope for their negotiation. Atko is also sniffing around Peabody to see if they might be interested in a deal. Like I said – I am on emails so please shoot me an email should anything interesting transpire. Cheers 167 The reference to the "JV guys" in James McGuigan's email was a reference to Moses Obeid, Paul Obeid and probably Edward Joseph Obeid. 168 On 14 July 2010, Duncan sent an email to Atkinson, John McGuigan, Poole and Kinghorn. That email was in the following terms: Dear Gents, First preliminary estimate of Capital for Mt Penny Development: $M Land Purchase: 40 EA and Approvals: 7 Government Costs: 3 Project Management: 16 Road Works: 6 Power Supply: 11 Water Supply: 6 Rail Loop: 13 Mine Infrastructure: 17 Coal Handling Plant: 110 Coal Preparation Plant: 91 Mining Equipment: 175 Ramp up/Start costs: 4 Total: 499 Contingency: 51M Say: $550M When you are thinking about future development, please be aware the extent of capital involved to achieve development and potential time before positive cash to distribution. Regards, Travers 169 Levi produced to the Court a Draft Discussion Paper dated 23 August 2010 concerning South East Investment's interest in the Mt Penny project. That Discussion Paper was in the following terms: Southeast Investment Group Pty Limited (South East) Draft Discussion Paper 23 August 2010 Commercial in Confidence Background EL7406 (Project) is owned by an unincorporated JV, 25% South East and 75% Mount Penny Coal Pty Limited (Mount Penny). Mount Penny is a wholly owned subsidiary of Cascade. Objectives At the request of Cascade, to elevate the unincorporated JV into an incorporated vehicle or to consider potential options to restructure ownership of the Project. Options South East is generally comfortable with the commercial arrangements as they stand. However, given the request from Cascade, has considered the following options: Option B – Full Sell Down South East will consider transferring its 25% interest in the Project (by way of termination of the unincorporated JV or transfer of that interest or other alternate to result in best outcome) on the following basis: - based on information that has been provided to South East from Cascade there is an inferred resource on part of the Project of 111.9mt. - Additionally, there is an estimate of a minimum of a further 87mt which we understand is 75% recoverable resulting in a further minimum of 50mt. - Thus, the current expected tonnage from the Project is a minimum of 160mt. - Based on the most recent comparable transaction for a similar project (being the adjoining project) the current value of the Project is $2.50/tonne net of all costs (including underlying real estate) - Additionally there is significant value in upside from discoveries over 160mt, value increase resulting from a potential expansion or merger of the Project with adjoining projects and other value increase. This renders the current value of the Project at $400m. South East's share is thus $100m. South East will sell its interest in the Project for $100m. Option B – Part Sell Down South East will consider elevating its interest from the unincorporated JV into shares into new SPV subject to: - New SPV to be incorporated to hold Mount Penny only. SPV will have same shareholders in same proportion as Cascade. - South East will sell 15% of its interest in the Project (resulting in South East holding 10% in the new SPV) for the proportionate amount based on the analysis above. That is 15/25 x $100m or $60m. This is payable upfront. - Satisfactory shareholders agreement for SPV including drag/tag rights and agreement between the shareholders on any further vend of the Project. 170 There was also tendered in evidence an undated two page document on Cascade Coal letterhead which was in the following terms: Aim: To eliminate the unincorporated joint venture so that Cascade Coal Pty Ltd ("Cascade") controls 100% with known parameters, so that Cascade can be presented in this manner to any investor or acquirer without the complication of disclosing any JV agreement. Desired Outcome: Cascade is seeking to: - Achieve a level of certainty over the ability to develop Mt Penny; - Remove the unincorporated joint venture; - Minimise the level of action that is required; - Remove any ongoing obligations for future payments or any future negotiations with the former JV partner; Preference: Cascade would prefer: - Any payments to be made at a later date; - Keep correspondence consistent with previous arrangement. How: Agree to acquire the unincorporated JV rights for a payment in the future. The payment is to be calculated on agreed criteria and preferably with a minimum and maximum parameters so that Cascade can create a certain obligation in its financial accounts. The accounting treatment of this will depend on the exact agreement, however it will either be a contingent liability (if no fixed term for payment i.e no obligation unless sold) or a sale and purchase with a corresponding entry for assets and liabilities. Cascade is a Pty Ltd company and is not expected to lodge accounts in the near future as it does not qualify for 2 out of the 3 following conditions: - Employ more than 50 FTE's: - Generates in excess of A$25m in revenues; - Or has $12.5m in assets. Who: It would be recommended to establish an intermediary vehicle (Arthur Phillip Intermediary Services Pty Ltd) between Cascade and the JV partners to assist the negotiations. This would result in the vehicle being always controlled by a known party regardless of what occurs in Cascade. It also allows Cascade to record in its financial accounts and agree to pay a fixed maximum price in a fixed term (or unless otherwise agreed) to the intermediary which can then agree to pay the relevant amount to the joint venture partner and the balance will be paid to the existing shareholders as required. It may also be preferable to establish a separate Cascade subsidiary to hold the right and the liability so the subsidiary can potentially be exercised in the event of a Cascade sale (however this needs further tax planning and consideration). Price Mechanism: This needs further discussion as there are a range of issues to work through Example: Cascade for example might agree the following: - To pay 10-25% of the value of Cascade received on sale less an amount equal to (funds contributed to Cascade in excess of $10m* 1.5-2) to the joint venture partner; - Agree a minimum amount of say $10-20 million and a maximum amount of say $x-y m; - Payment is contingent on sale; - If sale has not occurred within say 5 years – Cascade will issue stock equal to the % or arrange a transfer of that % from shareholders; Definitions: It will be important to ensure that all terms are property thought through and defined for this to work. For example: - The value of Cascade will need to be carefully defined on an agreed formula (such as 100% of value received by initial shareholders plus the amount of the liability in the Cascade accounts) End Position: This will result in: - Unincorporated joint venture being dissolved; - No new shareholders to appear on the register; - Cascade to own 100% of Mt Penny - Cascade will owe Arthur Phillip Intermediary Services Pty Ltd say $50m. Corresponding entry will be Acquisition and Development costs at Mt Penny - Arthur Phillip Intermediary Services Pty Ltd will have to pay the Joint Venture Partner eventually with the balance to the shareholder 171 The document is found in the Tender Bundle in the August 2010 period. However, there was no oral evidence from any witness explaining the provenance of the document or the circumstances in which it was created. In the Tender Bundle, the document is presented as being part of the Discussion Paper of 23 August 2010. These two documents from August 2010 demonstrate unequivocally that, by that time, the Cascade Coal shareholders had decided to buy out the Obeid interests from the joint venture. The reasons for this decision were not the subject of any direct evidence before me. 172 A further Cascade Shareholder Update was prepared and circulated on 24 August 2010. 173 On 26 August 2010, Levi sent to Poole a Powerpoint presentation dealing with the potential acquisition of Cascade Coal by White Energy. The presentation was of a very preliminary nature. However, the critical component of the proposal was the acquisition by White Energy of 100% of Cascade Coal. 174 Thus, by August 2010, two critical proposals were running in tandem. The first of these was the plan on the part of the Cascade Coal stakeholders other than the Obeids to take out the Obeids from the entire project including the mining joint venture. The second strand was the proposal to on-sell Cascade Coal to White Energy. The Obeids' Exit from the Venture 175 By early September 2010, Warbie had agreed to sell its interest in the Mt Penny joint venture to a nominee of Poole. That nominee was CMG. The price agreed for that sale was $1.8 million. The price was to be paid into an account in Singapore controlled by Brooke. AUD1.739 million was, in fact, paid into that account on 26 September 2010. 176 In late September 2010, it was also agreed in principle that the balance of the Obeid interests in the joint venture would be transferred by South East Investments to CMG for $62 million. CMG was then to on-sell its acquired joint venture interest or give up that interest in favour of MPC for $32.5 million. 177 On or about 10 October 2010, Gray met with Poole. Poole explained certain transactions to Gray and made notes as he spoke. Gray made some additional notes on Poole's notes. 178 On 13 October 2010, the Cascade Coal stakeholders agreed to split the shares in Cascade Coal by converting the 70 shares then on issue to 7 million shares. They then resolved to issue a further 717,748 shares in Cascade Coal to CMG at $0.00001 per share for a total consideration of $7.17. 179 The formal agreements for transfer of the remaining interests held by the Obeid family members in the venture were executed on 20 October 2010. By those agreements, South East Investments agreed to sell its interest in the venture to CMG for $60 million. CMG agreed to secure payment of that sum by granting a charge over its shares in Cascade Coal. Subsequently, the agreed payment was increased to $62 million. 180 In late October 2010 and early November 2010, Levi, Poole and others were involved in drafting a document which came to be called "the placement letter". In an early iteration of that letter, the use of the proceeds of the placement was said to be in order to retire debts incurred in relation to securing 100% of the mining rights at Mt Penny as well as other expenditure in the order of $32.5 million. It was said that any surplus funds would be used to secure a 100% interest in EL7406. Then this was said: The retirement of debt at this stage of the project is an important step in preparation for a trade sale into an existing publicly listed coal company, JV or initial public offer ("IPO"). The Directors are currently evaluating these options with preliminary discussions under way. 181 As the drafting process continued, this text was revised. Ultimately, most of the above text was removed from the placement letter. 182 By 28 October 2010, a pro-forma Balance Sheet had been prepared. The evidence does not make clear who prepared that document. However, the document showed the "adjustments" that would be made after the new equity was raised. First, an amount of $7 million cash would be shown as an additional asset of Cascade Coal. This cash was said to be directors' loans. The amount of these loans was to be carried forward into the White Energy acquisition phase and then presumably repaid. Second, CMG was to be added as a creditor of Cascade Coal for $32.5 million. CMG was to be repaid in two instalments of $7 million and $25.5 million. The bulk of the placement proceeds of $26.32 million was to be used to pay the $25.5 million to CMG. The shareholders' loans of $7 million would be used to pay the balance. Third, there would be an asset revaluation upwards by $380 million in order to reflect the commercial value of the Mt Penny coal reserves. 183 The effect of the placement on the existing shareholders was set out in a table in a letter to shareholders probably sent out in late October 2010 as follows: Before Placement After Placement Gaffwick 25.91% 24.04% JA Kinghorn & Co 25.91% 24.04% Sanjur 12.96% 12.02% Riverbend Investments 12.96% 12.02% AP 12.96% 12.02% Coal & Minerals Group 9.30% 8.63% New Investor(s) 7.23% Total 100.00% 100.00% 184 On 3 November 2010, Duncan, Atkinson and John McGuigan received an email from Levi to which was attached the Cascade pro-forma Balance Sheets. In that email, Levi specifically alluded to the $32 million payable to CMG and the $7 million shareholders' loans. 185 Atkinson replied to Levi's email indicating that he expected to discuss its contents with Duncan, John McGuigan and Poole in the morning. I infer that he did so. 186 At 2.30 pm on 10 November 2010, Levi sent an email to Gray to which were attached several draft documents in respect of the proposed Cascade Coal placement which he anticipated would be given to potential investors. The draft documents were: The deal sheet. The Cascade Coal placement letter including a number of appendices to that letter. A document described as an introduction to Cascade Coal. This was a presentation document which provided details of Cascade Coal's exploration licences. The Cascade Coal Subscription Agreement. A Confidentiality Agreement. 187 The draft placement letter had as Appendix 4 a set of pro-forma Balance Sheets. In the letter, the purpose of the issue was said to be to reduce third party debt and creditors. CMG was shown as a creditor in the amount of $25 million in Appendix 4. 188 On 10 November 2010, Arthur Phillip and SCE entered into a Mandate Agreement in respect of the placement. 189 On the same day, Gray met with Duncan, Atkinson and John McGuigan. The evidence as to what occurred at that meeting is scant. Findings in Respect of the Obeids' Involvement in the Mt Penny Venture 190 The above narrative supports the following findings which I now make: (a) In the period from about September 2007 to August 2008, members of the Obeid family (principally Eddie Obeid's sons) set about acquiring the rural properties at Bylong (Cherrydale Park, Danola and Coggan Creek) which controlled the surface area above the area to be covered by EL7406; (b) By August 2008, the Obeid family members had gained control of those three properties at a cost to them of $7.8 million (approximately); (c) During the period when MMNL was bidding for the exploration licences, the Obeid family had control of that bid through Voope; (d) By June 2009, Cascade Coal had agreed with the Obeid family members involved in the project that it would acquire the three rural properties over which they had control and allow to the Obeid interests a 25% joint venture interest in the mining venture itself. These arrangements were ultimately documented in the letters signed on 5 June 2009 involving Cascade Coal, Buffalo Resources and the landholding companies; (e) By about the middle of 2010, the Cascade Coal directors wished to bring about an orderly exit of the Obeid interests from the entire project and thereafter set about ensuring that this was done before any transaction with White Energy took place; (f) The exit price for the Obeid interests from the joint venture was ultimately agreed at $62 million. In addition to that sum, Cascade Coal was to pay the nominees of the Obeids who held the three properties at Bylong which were located in the area of EL7406 a further amount of $33 million (approximately). (g) The placement of shares in Cascade Coal which was promoted to Addenbrooke and others in October and November 2010 was devised and intended to provide some of the funds needed to bring about the final exit of the Obeid interests from the project. 191 The detailed interaction amongst the individuals concerned which is evidenced by the narrative which I have given above makes clear that Duncan was well aware of the full extent of the Obeids' involvement in the venture (both as landholders and as co-venturers in the mining part of the enterprise) and was closely involved in the Cascade Coal's directors' plans to negotiate a complete exit of the Obeid family members from the project. The Addenbrooke Investment in Cascade Coal 192 By early September 2010, the O'Neils had become very interested in investing in White Energy. In an email sent by Ned O'Neil to Gray on 7 September 2010, Ned O'Neil instructed Gray to take up $300,000 of White Energy shares including $100,000 of special preference shares. Ned O'Neil chased up this trade on 13 September 2010 and again on 15 September 2010 when he told Gray that his father was asking him what was going on with the shares. Gray responded that Computershare were constantly changing the final number of shares and rights which SCE would be permitted to allocate and that this was causing a delay in making available the shares which Ned O'Neil had tried to secure. 193 On 15 September 2010, Ned O'Neil sent a further email to Gray in which he said: As discussed we just want to end up with a holding equal to $1 million. If some of these can be the special shares that would be great. 194 By early October 2010, Denis O'Neil wanted to invest as much as $10 million in White Energy. Ned O'Neil was also very keen on investing in White Energy but he was thinking of limiting Addenbrooke's investment to about $2 million. At one point around about this time, Ned O'Neil tried to secure some shares in White Energy for himself. 195 The evidence of Denis O'Neil was that the potential investment that was later identified as Cascade Coal was first introduced to him by Jones in about September or October 2010. 196 On 30 October 2010, Gray told Smith in an email sent on that day: I spoke to Denis this morning before he headed offshore. The likely timing for the larger investment we have been talking about is not before mid month, likely 15th–16th. Therefore he suggests you can invest the cash for more than a few days at a time if the rates are better. 197 In September and October 2010, Denis O'Neil had organised with his long term financier, Jo Dwek, to have $5 million available for investment purposes. By late October or early November, Smith was telling Mr Dwek's representatives in Australia that Denis O'Neil had decided to proceed with the big investment and that the funds would be required shortly. 198 As I have already noted, each of Denis O'Neil, Ned O'Neil and Smith gave evidence at the trial. Each of those persons gave evidence in chief which addressed the circumstances in which Addenbrooke came to invest in Cascade Coal. I now turn to discuss that evidence. The Affidavit Evidence of Denis O'Neil 199 Denis O'Neil was the third and the last of Addenbrooke's witnesses to give evidence. In 2010 he was 74 years of age. 200 In his affidavit evidence, Denis O'Neil said that he had never met Eddie Obeid, Paul Obeid, Moses Obeid or Brook. 201 As I have already mentioned, he claimed to have been introduced to what he described as "the coal deal" by Jones in about September or October 2010. He said that he had known Jones since about 2005 and had been involved in investments with him. He said that, in 2010, he trusted Jones. 202 Denis O'Neil went on to say that, after his initial introduction to the coal deal by Jones, he was thereafter generally kept informed about that deal by both Jones and Gray. 203 At par 14 of his first affidavit, Denis O'Neil said that he was never informed by anyone that Addenbrooke's $8 million investment had been used by Cascade Coal to pay out members of the Obeid family. 204 In his second affidavit, Denis O'Neil was a little more forthcoming as to his dealings with Jones and Gray in September and October 2010. That affidavit was sworn in response to Gray's lengthy affidavit of 1 December 2013. 205 Denis O'Neil said that Jones had told him that there was a coal deal in which he (Jones) was involved which would be very profitable. He said that Jones told him that it was going to be handled by SCE and that the SCE operative who would be managing the deal was Gray. Denis O'Neil accepted that he was enthusiastic about the proposal which Jones had outlined to him because it would be very profitable and would give a quick return on his investment. 206 These remarks made by Denis O'Neil in his second affidavit were made in response to pars 31–33 of Gray's affidavit sworn on 1 December 2013. In those paragraphs of Gray's affidavit, Gray had recorded a number of conversations with Denis O'Neil in September and October 2010. According to Gray, those conversations were in the following terms: A New Coal Deal 31. In about September 2010, I received the first of what became a series of telephone calls from Denis in relation to an investment in a coal deal. We had a discussion in words to the following effect: Denis: "Your firm is going to be awarded a hot coal deal. I want to be a significant investor in it, and I want a firm allocation." Gray: "Do you know the name of the hot deal?" Denis: "I can't remember the name. It's something in coal." Gray: "Without the.name, I can't do anything, as we have a lot of prospective deals on." Denis: "I'll find out the name and come back to you." At that time, I did not know what deal Denis was referring to. I had no knowledge of Cascade Coal Pty Limited (Cascade Coal) other than what I might have read about it in the press, nor did I have knowledge of any proposed capital raising for Cascade Coal. 32. A few days later, Denis telephoned me again, and we had a discussion in words to the following effect: Denis: "Have you been contacted about the coal deal yet?" Gray: "No. Did you find out the name?" Denis: "Yes. I asked and I should have written it down because I've forgotten it again." Gray: "Well, when you find out, let me know." 33. Later in September 2010, and also in October 2010, I received several more telephone calls from Denis in relation to this so-called "hot coal deal". Denis enquired "has Southern Cross been awarded the deal yet", he reminded me several times that "I want to make a significant investment in this deal", and using words to the following effect he emphasised that "I'm prepared to commit for a large amount early, on a firm basis, so I don't want to be cut back on what I want to put in", and he foreshadowed that "I'll be getting other high net worth friends of mine to invest in the deal as well". 207 Denis O'Neil did not deny that he may have had conversations in or to the effect of Gray's account set out at pars 31–33 of his affidavit. 208 Denis O'Neil accepted that he was enthusiastic about the prospective coal deal right from the start. Although the evidence of what Jones told him about that deal is scant, two aspects apparently stuck firmly in Denis O'Neil's mind: First, that the deal involved a short term investment and, second, that it would be very profitable. Given that Denis O'Neil did not deny the terms of the conversations recounted by Gray at pars 31–33 of his affidavit, I find that he had conversations with Gray in September 2010 and in October 2010 the substance of which is set out in those paragraphs. That being so, I also find that Denis O'Neil had quickly formed the view that he might be interested in investing in the deal. He was keen to learn more about it. 209 According to Gray, Denis O'Neil telephoned him again in late October 2010. Gray's account of that conversation was responded to by Denis O'Neil in his second affidavit. He did not deny having a conversation in late October 2010 with Gray although he did quibble about some of the content of that conversation as recounted by Gray. Nonetheless, the essence of the conversation as recounted by Gray was not disputed. Denis O'Neil was chasing up the "hot coal deal" and enquired of Gray whether SCE had been approached. Gray confirmed that SCE had been approached to raise funds for a coal company although no mandate had yet been awarded. Denis O'Neil indicated that he would be prepared to make a substantial investment and that he would be enlisting other high net worth friends to invest in the deal as well. He urged Gray not to forget him. 210 Once again, I find that a conversation along the lines of that recounted by Gray took place between him and Denis O'Neil in late October 2010. 211 According to Gray, on or about 17 November 2010, he contacted Denis O'Neil in order to organise the meeting at SCE's offices in relation to the Cascade Coal capital raising. He gave an account of that conversation at par 75 of his affidavit. According to Gray, Denis O'Neil told him in this conversation that he did not really go to presentations any more and would be happy with the investment. He just wanted to send in a cheque and the paperwork to SCE. According to Gray, he explained to Denis O'Neil that it really would be necessary for him to attend the foreshadowed presentation. On 17 November 2010, Gray sent the Cascade Coal deal sheet to Denis O'Neil, Ned O'Neil and Smith. 212 In his affidavit in response, Denis O'Neil went to some lengths to explain why he would not have had a conversation in the terms recounted by Gray. His response was argumentative and unconvincing. He claimed to be very interested in what was going to be said at the upcoming presentation yet, when it came to giving an account of what occurred at that presentation, he was unable to do so. 213 I think that it is more likely than not that Gray urged Denis O'Neil and the other Addenbrooke representatives to attend the upcoming presentation so that the Addenbrooke representatives could hear the relevant details of the investment proposal directly from Duncan and the Cascade Coal representatives who might attend the meeting. 214 In his affidavit, Gray gave detailed evidence to the effect that there was a presentation pack brought by him to the 19 November meeting which was available on the boardroom table during the course of Duncan's presentation and which the Addenbrooke representatives took with them at the end of that meeting. That evidence is hotly disputed. 215 Denis O'Neil denied that he saw or was aware of the presentation pack described by Gray. He also denied that he received such a pack from Gray and removed it at the end of the meeting. Given his general lack of recollection about the meeting, it is difficult to understand how Denis O'Neil could be so firm about this denial. 216 There is also a dispute between Gray and the Addenbrooke representatives as to whether it was John McGuigan or Atkinson who attended the 19 November meeting on behalf of Cascade Coal. As I have already mentioned, Gray and Adams assert that it was John McGuigan while the Addenbrooke representatives say that it was Atkinson. On this point, Denis O'Neil had no recollection. 217 In his evidence, Gray asserted that he mentioned to those present that the Obeids had an involvement in the land holdings at Cherrydale during the course of the 19 November meeting. Denis O'Neil's response to that assertion by Gray is curious. At par 14 of his second affidavit, he said: … I recall at some stage becoming aware that the Obeids had farming interests in the area where the Cascade Coal mine was intended to be situated but I cannot now recall when, where and in what circumstances I became so aware. However, as I have previously said, I had no knowledge at the time when the investment was made on behalf of Addenbrooke that the Obeids had any interest in the proposed mine and did not have any such knowledge until revelations were made by ICAC. 218 In his affidavit, Gray gave an account of a conversation which took place at the Rose Bay Marina Kiosk on Saturday morning, 20 November 2010, the day after the 19 November meeting. Present at this discussion were Denis O'Neil, Ned O'Neil, Neville Crichton and Jones. Gray thinks that others may have also been present. Denis O'Neil asked Gray how much he could invest in Cascade Coal. Gray told him that he could invest anywhere between $5 million and perhaps up to $10 million. Denis O'Neil then asked whether Neville Crichton could invest in Cascade Coal and Gray said that he could. 219 According to Gray, Ned O'Neil asked at this breakfast meeting: Peter, can you confirm to us your understanding about why outside investors are being invited to invest? 220 Gray responded to that question in the following terms: It's our understanding that the existing shareholders don't want to dilute their respective ownership shares as between themselves, as they can't all afford their proportion of the $28 million in cash. 221 At par 95 of his affidavit, Gray denied that he had ever been asked by Denis O'Neil or any other Addenbrooke representative whether SCE had carried out any due diligence on the Cascade Coal capital raising. In response to that denial, Denis O'Neil said (at par 17 of his second affidavit): I do not recall asking Gray whether he had done his due diligence. It is not the sort of question, which I would ask, but I expected him to have thoroughly researched the proposed investment before he had made any recommendation to me to acquire it on behalf of Addenbrooke. This was based on my prior association with him and recommendations he had previously made to Addenbrooke. 222 Denis O'Neil accepted that, shortly before Addenbrooke made its investment in Cascade Coal, Gray told him that the offer had "got better" and gave him details as to why it had "got better". 223 In his affidavit, Gray gave an account of a conversation which he had with Denis O'Neil on 25 November 2010 in which he said that the directors of Cascade Coal had resolved to increase the lift from the investor's price to the imminent sale price from at least 10% to 25%. In addition, he said that he told Denis O'Neil that the implied price for conversion into the listed vehicle was being adjusted down from $4.00 to $3.60 as a result of the recent weakness in the stock market. He also told Denis O'Neil that there was scope for Addenbrooke to increase its investment in Cascade Coal to the $8 million parcel that Denis O'Neil was after. Denis O'Neil was pleased to hear this. Gray asked him to confirm Addenbrooke's request to increase its placement in Cascade Coal to $8 million. Denis O'Neil did not deny this conversation. I find that it took place as recounted by Gray. 224 Denis O'Neil testified that he attended the 19 November meeting. At pars 12 and 13 of his first affidavit, he said: 12. I attended that presentation at Southern Cross Equities Pty Ltd ("SCE"). I was introduced to Travers Duncan as "Mr Coal" and I sat next to him. We exchanged pleasantries as he is a contemporary of mine in age terms. I was also aware that Duncan had engineered the successful mining operation of Felix Resources and the outcome that he achieved. I listened to Duncan's presentation and was very impressed with his knowledge and grasp of what Cascade were going to do with their mining opportunity and more relevantly how confident he seemed to be about the potential sale of Cascade to one of the number of suitors that he outlined during the presentation. 13. I do not involve myself in the detail of the investment as I leave this to Ned and Greg. In the instance of Cascade, my view on the investment was persuaded by the involvement of my friend Jones my trusted advisor of 10 plus years Gray and the proposed investment by other successful and capable businessmen. Further, I was very influenced by the impressive presentation conducted by Mr Duncan at SCE's office. In terms of the financial aspect of the deal I left that to Ned and Greg to arrange. 225 At pars 19–20 of the same affidavit, Denis O'Neil said: 19. Had I been informed about the Obeid involvement in September, October or November 2010, I would immediately have informed my son Ned and Greg Smith. I would have also immediately informed Neville [referring to Neville Crichton]. 20. I rarely attend presentations. Had I known that the true purpose of the raising of the monies was to pay the Obeid family then I would not have bothered attending a presentation at SCE. I do not see why I would be presented with an hour and half with an explanation of how good the mine is and how the money is going to be spent on obtaining a development approval and associated expenses included machinery and the like if all along I knew the monies were being paid to the Obeid family. The Oral Evidence of Denis O'Neil 226 At the time of the hearing before me, Denis O'Neil was 78 years of age. At the time of the relevant events, he was 74 years of age. He has had a most interesting and varied career as a businessman, amassing significant wealth while starting from nothing. 227 He said that he had known Gray for approximately 10 years before the investment in Cascade Coal. 228 He said that he was not good about dates. 229 He said that he was out of Australia between 31 October 2010 and the morning of 14 November 2010. He had no recollection of meeting Gray on or about 14 November nor did he have any recollection of speaking with him between 14 November 2010 and 19 November 2010. 230 His evidence about the 19 November meeting was scant to say the least. Amongst other things, he placed Neville Crichton as being present at that meeting. No-one suggested that Neville Crichton had attended the meeting and undoubtedly, in this respect, Denis O'Neil's recollection is faulty. 231 He said that he did not remember what was said at the meeting. He did remember that Cascade Coal was seeking to raise $28 million and that Addenbrooke was looking to invest $5 million which ended up at $8 million. At transcript 300/18–31, the following exchange took place between Senior Counsel for Addenbrooke and Denis O'Neil: And do you recall why it ended up at eight?---We just went from five to eight because it looked good, what we were told by Gray and Mr Duncan, it all looked good. 25 per cent return and three or four months, that's all that interests me. And the rest I leave to Ned, Greg and my good friend, Neville Crichton, who is a very, very capable businessman. And I knew Sir Ron Brierley was in and three or four other gentlemen, but I forget their names. They were in. I mean, that sounded good enough for me. Do you know that Mr Gray was involved as well?---I think he was. Was that important to you?---Yes. Why was that important to you?---Well, if a bloke – a chap is selling something to me – or a proposition and he's in there, that's pretty impressive for me. 232 He said that he could not remember when he made a decision to invest. He said that he discussed the investment decision with both Ned O'Neil and Smith. 233 He said he could not remember any dates. He said that that was not his expertise. 234 He asserted that there was nothing said about the Obeids at the 19 November meeting. He was then asked what he knew about the Obeids at the end of 2010. He said: I think I knew the name in Parliament and – I wasn't keen on that, I don't think. But I knew it was in Parliament. That's all. 235 He denied that Jones had ever mentioned Eddie Obeid in relation to Cascade. 236 In cross-examination, Denis O'Neil agreed that the Cascade Coal transaction was very different from any share transaction he had ever done before with SCE or Gray. 237 He agreed that he was regularly on the phone chasing Gray and others about the coal deal that Jones had mentioned to him after that deal was first mentioned in September 2010 and even before SCE had a mandate. He also agreed that, by early November 2010, he was anxious not to miss out on the coal deal. He said that it was "sounding good". He then said that "the deal sounded very good". 238 Denis O'Neil said that, in 2010, he did not and still does not read documents like the deal sheet. He said that he would rely on the advice of Ned O'Neil and Smith rather than read such a document. When asked to look at the document, he said that it would be a waste of time. 239 When cross-examined by Senior Counsel for SCE and Gray, Denis O'Neil frequently said that he could not remember the exact words or could not remember the conversation that was being put to him and constantly said that words that were put to him may have been said. He just could not remember. 240 In cross-examination by Senior Counsel for Duncan, Denis O'Neil repeatedly said that, in recent times, he had never gone against his son Ned, who runs the Addenbrooke business with Smith. He said that he always consults with Ned O'Neil and Smith before making any decision. His repeated assertions to that effect took on an air of unreality and exaggeration. 241 Denis O'Neil also said more than once that, contrary to the substance of questions being put to him in cross-examination, he had other possible investments in October 2010 in the fire in respect of which the funds borrowed from Jo Dwek could have been used. I do not accept that evidence. 242 It was suggested to Denis O'Neil that he was gilding the lily when he repeatedly asserted that he would not make business decisions without consulting his young son, Ned. It was put to him that Ned was wet behind the ears in 2010. Denis O'Neil disagreed. At transcript 331/15–31, the following exchange took place between Senior Counsel for Duncan and Denis O'Neil: Right. The truth is – and I'm sorry to have to say this to you – you're not telling the truth when you insist that all decisions by Addenbrooke were made only with the agreement of Greg, Ned and yourself?---I'm telling the truth, your Honour. For many years, there's been no decisions – like, semi-major of any – I mean, I bought a hundred thousand dollars worth of shares but anything else major, the three of us agreed. I will stand by that on oath. What about the decision when you increased the amount of money to be invested in Cascade from $6 million to $8 million? Do you say that happened with the agreement of all three of you?---Abso-blessed-lutely. That's not true, sir. You didn't speak to Greg Smith about that at all, did you?---Yes. The only mention you made of that decision to Greg Smith was to tell him to implement it?---Ned was in agreement. Ned might have been in agreement. What I'm - - -?---And Greg was in agreement. 243 This evidence to the effect that Denis O'Neil deferred to his son is exaggerated and not credible. I reject it. 244 Denis O'Neil was then asked about his relationship in 2010 with Jones and Neville Crichton. He said that he trusted them both. It was suggested to him that, if the investment was good enough for Neville Crichton, it was good enough for him. He agreed with that but then qualified his answer by saying "together with my son and Greg". It was then put to him that he had determined that the Cascade Coal investment was a good deal all by himself. To that, he gave an incoherent answer as follows: Greg Smith, Neville did but my son, Ned, was happy with it. 245 It was then put to Denis O'Neil that the fact that Smith was never invited to the breakfast meetings at the Rose Bay Marina Kiosk was a strong indication the true state of affairs was that Denis O'Neil did not seek out his advice in relation to important decisions. To that, Denis O'Neil replied: He's an employee. He lives over the North Shore. I have my friends at Rose Bay from time to time on ..... There was no need. He was in all other discussions. 246 Denis O'Neil eventually agreed that Smith had never been to any of the business or social occasions which regularly took place at the Rose Bay Marina Kiosk over the years. 247 He then agreed that the way he and others with whom he dealt did business was to socialise with business acquaintances and friends and exchange information about what's going on in Sydney and what deals people might be interested in. In modern parlance, this would be called "networking". 248 When he was cross-examined about his conversations with Jones, Denis O'Neil's memory began to fail him. He did not accept the obvious—namely, that Jones had told him that there was a coal play on the horizon and that it was a hot deal. He became very cagey when questioned about his conversations with Jones. 249 Despite his caginess, Denis O'Neil did accept that Jones told him that the investment would be short term – three or four months. 250 Denis O'Neil was then asked about Addenbrooke's investment in White Energy shares in September and October 2010. He said he did not remember Addenbrooke doing that. When asked about that topic, he was quite assertive in his answers to the effect that he could not remember doing so. He became quite evasive in his answers when asked about White Energy. 251 He was then asked whether it was suggested at the 19 November meeting that a publicly listed company might buy out Cascade Coal in the two to three month or three to four month period after his investment was made. He said that that was a matter of detail and that he was not into detail. He said that he did not remember that detail. As is obvious, information about the likely buy-out was hardly just a detail. 252 The cross-examiner then challenged Denis O'Neil about this, suggesting that it was a point of great significance to him at the time and that it was fatuous to suggest it was a matter of mere detail. 253 He was then asked about his habits in respect of reading daily newspapers. He endeavoured to distract the cross-examiner by exercising some of his well-known charm. At transcript 337/12–24, the following exchange took place: And at the relevant time, did you read the daily newspapers in Sydney?---Yes. Yes. On a daily basis?---Yes. And you've done that all your business life, haven't you?---Well, yes. Didn't read them when I was in the Northern Territory. Fair enough?---Or if I was overseas with an ugly girl. Yes. Well, I've heard that has never happened, sir. Is that - - -?---Woops. Sorry. Never ugly?---They were cuddly. 254 Denis O'Neil was quite content to continue his exercise in charm, although it came to an abrupt halt soon after. 255 Denis O'Neil accepted that he used to see Jones weekly in the years leading up to the investment which Addenbrooke made in Cascade Coal. He accepted that he has now fallen out with Jones. He accepted that he had the impression that Jones had good political connections, especially with the ALP in NSW. 256 After some prodding, Denis O'Neil accepted that, during his overseas trip in October/November 2010, he had discussed the prospective coal deal with Neville Crichton. When he was pressed as to whether he truly did have such a discussion and, if so, what was mentioned, he again resorted to charm. He began to drift into the jocular. 257 This approach to distracting the cross-examiner occurred again when Denis O'Neil was asked whether he had visited Dwek when he was on his October/November 2010 trip. 258 Denis O'Neil was then questioned about the timing of the draw down of the funds being made available by Dwek. Once again, he resorted to "I can't remember". 259 It was then suggested to him that he was not really interested in what Duncan was saying at the 19 November meeting. He disagreed with that. He was then asked this: But you had already made up your mind before you went to the meeting that the money was going to be invested, hadn't you?---Don't put words in my mouth. I'm not sure. It's my job. You're not sure?---I don't know, and I don't know the exact date that Ned, Greg and I said yes. 260 These answers are very telling. I am of the view that Denis O'Neil had made up his mind before the 19 November meeting to invest in Cascade Coal. His failure to deny that proposition is significant. 261 I then suggested to Denis O'Neil that he had to do his best to answer Counsel's questions. The following exchange then took place at transcript 345/1–16. I asked him: Had you made up your mind prior to the meeting at Southern Cross Equities?---I don't – I can't say definitely. Probably we were – that's why we went along. We were pretty sure maybe. I'm sorry. I'm trying to be truthful. COUNSEL: But you had made up your mind?---No. Hadn't you?---No. Don't try and point at me only. We were talking, as we do, Greg and Ned, all the time. And you were the one who made the decision for this investment to go forward, weren't you?---No, we made it together. That's just not true when you keep saying that?---Well, you can say what you like. You did not make - - -?---I'm saying Ned – I hadn't made my mind up. I thought it was good, but Ned I relied on, and Greg, to agree. 262 Denis O'Neil then endeavoured to water down the impact of those questions by suggesting that the Addenbrooke personnel had not made up their mind prior to the 19 November meeting and that they were "see-sawing" for some time about the investment decision. 263 Senior Counsel for Duncan then challenged the whole substratum of Addenbrooke's case. Shortly after Denis O'Neil was, in effect, boasting about his business successes by saying that, if he could not make more than 10.5% on an investment in three years, his name was not Denis James Patrick O'Neil. At transcript 348/27–351/14, the following exchange took place: MR NEWLINDS: Well, I'm sorry, Denis James Patrick O'Neil, but in relation to this $5 million, you lost the lot, didn't you?---Yes. Thanks a lot. I wish you would have told me before. But you just told his Honour that if you can't make 10 per cent on money within three years, your name is not Denis O'Neil?---Some deals you lose, and some deals you win, and this didn't turn out like we thought it would. And you are disappointed about that?---Very disappointed. And you're looking for someone to blame, aren't you?---Well, we were misled. You don't want it to be your fault, do you?---Well, we were misled. Now, do you remember having a discussion with Mr Duncan concerning him buying your Palm Beach – I suppose it's your holiday house, is it?---Yes. I can remember asking is he interested in the house. We had slept there five times in three years or three times in five years, something – we had finished. Yes. This all happened in around September 2011. I'm not asking you to remember that. Will you accept it from me that it's September 2011 that you're discussing the beach house with Mr Duncan?---Yes, I will accept – whenever it was, I remember discussing with him. And there are some emails that went backwards and forwards, but they're written by Ned to Mr Duncan. They're copied in to you, but may we take it that you wouldn't have seen them?---Correct. But you would have approved of them in a general sense before Ned sent them?---I don't know. Yes, I suppose I – what, in selling the house? Yes?---Yes. We wanted to sell the house. And as at September 2011, you and Ned were both on the most cordial terms with Mr Duncan, weren't you?---Which period are we – I've only met him a couple of times in my life. Which period are we - - - September 2011, so it's almost a year after the investment?---At the – where we had the offices. We're talking about Palm Beach. I think you actually took him down there and showed him round?---No. Or someone did?---Someone. I don't know. He said he wasn't interested. And then you said to him – or at around the same time you said to him, "As one old quarryman to another, can I borrow some money from you?" Do you remember that?---I say that to a few people. Well, presumably you only say it to other old quarrymen. Is that fair?---I said it to Joe Dwek. Was he an old quarryman?---No. Well, anyway, don't worry about saying it to a lot of people. Didn't you say something to Mr Duncan some time in late 2011, "As one old quarryman to another, can I borrow some money"?---Can't recall that. Can't honestly recall that. And do you remember ever confronting Mr Duncan yourself and telling him that you thought that he had misled you?---Is that the end of the question? That is the end of the question?---No. 100 per cent no. Can't remember that and wouldn't have said it Why not? Because you're polite? Is that because you're polite?---I'm not polite necessarily. I wouldn't say that to him. I didn't say that to him. I wouldn't say that to him. Well, you're saying to him through this court case - - -?---Yes, there's a fair bit of time elapsed. And - - -?---You're talking to his face, you said, didn't you. Yes?---No. You're not scared of him. He's actually older than you?---Yes. I could handle him out in the street. The - - -?---I didn't say that to his face. Right. And the reason you didn't say it to his face is you didn't believe he had misled you, isn't that right?---Well, we're going back a few years. I've only met him twice. All right?---And one was at the offices. I don't know where the other one was. And when you read the newspapers on a regular basis, at least when you're in Australia, it had come to your attention by late 2011 that there were a lot of allegations being made about the way the Mt Penny Coal exploration licence had been issued, correct?---Yes. Now, I know allegations are made in the press, and they're not always true, but you knew those allegations were being made?---Yes. And no doubt you discussed those allegations with your good friend, Mr Crichton?---Probably did. Do you want me to remember everything I discussed with Neville? No, no. If you can't remember, say so?---No, I say so, I can't remember. But you probably would?---And can I say out of all these papers – I do read them –but I used to scan over them, you know. Yes. But you look for stuff that interests you?---Well, it didn't interest me after a while. Well, Cascade Coal would have interested you?---I'm talking about – you said every day of that – you know, that – you know, I will get that accurately from Ned or Greg. But you scan the newspapers to look for things that interest you?---Yes, worldly news, everything. And topics about Cascade Coal, Mount Penny would have interested you?---Yes. No, I read it. Because the three-month high return had not eventuated?---Yes. And you were disappointed?---Yes. And you would have discussed with Mr Crichton what went wrong, wouldn't you?---Maybe. And what about Mr Jones, did you ever say to him - - -?---No, I said nothing to him. Why not?---Well, it would be water of a duck's back anyway. But did you ask him what's all this about?---No. I can't remember, to be honest .....saying anything else. I can't remember what Jones said to me and I said to him. 264 Denis O'Neil was not re-examined. The Evidence of Ned O'Neil 265 Ned O'Neil is the son of Denis O'Neil. In 2010, Ned O'Neil was 24 or 25 years of age. Ned O'Neil and Denis O'Neil are the only two directors of Addenbrooke. 266 In this section of these Reasons, I will endeavour to summarise the evidence given by Ned O'Neil in the affidavits sworn by him (on 14 August 2013, 18 December 2013, 20 December 2013 and 31 January 2014) and the oral evidence-in-chief given by him at the hearing. 267 From about 2009, after Ned O'Neil had had an argument with his father about certain investments made in that year and in the year before, it was agreed amongst Denis O'Neil, Ned O'Neil and Smith that all investment decisions made by Addenbrooke were to be supported by two out of three of those persons. 268 Throughout the period from about 2003 to 2013, Addenbrooke conducted business with Gray through SCE. From time to time, Gray invited Addenbrooke to participate in share placements. He also forwarded investment proposals to Addenbrooke. Both Denis O'Neil and Ned O'Neil met with Gray from time to time in a social context. 269 Throughout 2009 and 2010, Ned O'Neil had regular contact with Jones. That contact spanned a number of matters including negotiations with NSW Maritime concerning the Rose Bay and Point Piper Marinas and the use of one of Denis O'Neil's vessels by Jones. There was also a transaction of a commercial nature pursuant to which Jones, his accountant Bill Sweeney and Addenbrooke sub-underwrote a capital raising for a company called Water Resources Group Ltd. In the period between December 2009 and December 2010, Ned O'Neil sent 41 emails to Jones. Further, between 9 September 2010 and 19 November 2010, he met with Jones on at least seven separate occasions. He often met with Jones when no other person was present. There were seven meetings recorded in his diary although Ned O'Neil testified that there were probably other meetings as well. Ned O'Neil asserted that he was "the main conduit for any business related discussions between Jones and Addenbrooke". Ned O'Neil accepted that Jones did speak with Denis O'Neil on occasion concerning business matters including Cascade Coal. He went on to say, however, that nothing of consequence was discussed unless he was present. 270 Ned O'Neil also said that he was in regular phone contact with Jones. 271 On Saturday mornings, Denis O'Neil would regularly invite friends and business associates to the Rose Bay Marina Kiosk. Those occasions were both social and business encounters. Ned O'Neil said that, whenever Gray or Jones attended such breakfast meetings, Denis O'Neil would ensure that he (Ned O'Neil) was in attendance. 272 The first contact which Ned O'Neil had with anyone concerning an investment in Cascade Coal occurred in September 2010 when Jones indicated to him that there would be the potential to invest in a new mining venture called Cascade Coal on a short term basis. Jones said that this would be done through Gray and SCE. 273 Before Gray had a mandate from Cascade Coal, which Ned O'Neil believed was granted on or about 2 November 2013, there was a conversation with Gray at the Rose Bay Marina Kiosk. In attendance were Gray, Denis O'Neil and Ned O'Neil. Denis O'Neil asked Gray what the current situation was with the Cascade Coal proposal. Gray said that he had not yet been formally engaged but that he believed his engagement was imminent. Prior to Gray securing the relevant mandate, there was no discussion of any significance about Cascade Coal with either Jones or Gray. 274 In par 10 of his affidavit sworn on 14 August 2013, which was his first affidavit, Ned O'Neil gave an account of an occasion when Gray informally briefed him and Denis O'Neil at the Rose Bay Marina Kiosk. He said that Jones was also in attendance at this meeting. In his affidavit, Ned O'Neil said that the meeting took place on 6 or 13 November 2010. In his oral evidence, he said that the meeting took place on 13 or 14 November 2010. His recollection was that Denis O'Neil was present at the meeting and that Denis O'Neil had been away for part of the week prior to the meeting. According to Ned O'Neil, Gray told those present at this meeting: There is an opportunity to invest in Cascade Coal because the company needs money to continue developing the asset. The current situation is that not all shareholders can make the equity call so there is a need to introduce new capital to continue developing the asset. There are several short-term exit strategies each that could materialise within 3–6 months. These include a possible purchase by a publicly listed company and a sale of the asset via an IPO. I believe that a sale could be conducted in three months to a public company for a value of approximately 500m and six months is the likely timeframe for an IPO but I believe that this avenue could yield a higher value for the asset of approximately 700m. The people involved with Cascade are the best in the coal industry and have made large fortunes through Felix Resources and other projects. They also currently run the publicly listed White Energy. The main person is Travers Duncan who is known in the industry as Mr Coal. I have worked with him before. John Kinghorn is also involved. 275 In his first affidavit, Ned O'Neil does not recount anything that was said by any other person at the meeting which he says took place on 13 or 14 November 2010. 276 Gray denied that this meeting took place. 277 In October 2010, Addenbrooke was interested in investing in White Energy. However, there was a difference of opinion within Addenbrooke as to the amount which it should invest in White Energy shares. Ned O'Neil wanted to invest "a couple of million" and Denis O'Neil wanted to "go all in" with an investment of around $10 million. Addenbrooke purchased shares in White Energy throughout the period from late August 2010 until 8 October 2010. The total amount of its investment as at 8 October 2010 was $1 million. 278 On 17 November 2010, Ned O'Neil received a copy of the Cascade Coal deal sheet. He printed off several copies of that deal sheet prior to attending the 19 November meeting. His recollection was that each of Denis O'Neil, Smith and he took a copy of the deal sheet to the 19 November meeting. Ned O'Neil said that he had received no other printed material prior to or at the 19 November meeting. 279 Ned O'Neil said that Gray, Adams, Duncan and Atkinson were also in attendance at the 19 November meeting. He said that most of the talking at the 19 November meeting was done by Duncan who sat at the head of the table and chaired the presentation. 280 I required that each witness who was to give evidence at the hearing who attended the 19 November meeting should give his evidence of what occurred at that meeting viva voce and not by affidavit. Each of those witnesses had included his evidence of that meeting in affidavits sworn by him prior to the hearing so that all parties were aware of the substance of the evidence that each witness would give as to the conversations which took place at that meeting in the event that that witness was called at the hearing. The only witnesses who testified at the hearing as to what occurred at the 19 November meeting were Denis O'Neil, Ned O'Neil, Smith, Gray and Adams. None of Duncan, Atkinson or John McGuigan gave evidence at the hearing. 281 Ned O'Neil said that the 19 November meeting took place in the boardroom in the offices of SCE. The boardroom had a capacity of about 15 to 20 persons but only six or seven people had actually attended the meeting. He said that Duncan sat at the head of the table and in effect conducted a presentation. He said that Atkinson sat opposite him and that he had never met either Duncan or Atkinson prior to the 19 November meeting. 282 Ned O'Neil gave his evidence of what was said at the meeting by adverting to various topics. His recollection of the conversation was not so detailed as to enable him to recount in direct speech what was said. According to Ned O'Neil, Duncan said the following: (a) The funds being raised by the placement of shares in Cascade Coal were required to continue to develop the asset. (b) The funds would be used for drilling expenses, investigation drilling, costs associated with the application for the mining licence, costs associated with optioning up the land parcels and also costs associated with securing machinery, plant and equipment required to develop the mine. (c) The site had access to the port. There was also rail access close by. Cascade Coal had secured water rights which would enable the coal which was extracted to be washed on site or nearby. Nearby there was a power station that might be interested in buying some of the coal. There was an opportunity to share costs with the adjacent mine operated by Anglo Mine which might lead to economies of scale. All of the matters adverted to in this context were mentioned in relation to the general topic of "infrastructure". (d) While he was speaking, Duncan had a leather-bound folder with a number of documents in it. During the meeting he produced a mine plan from that folder and talked to that mine plan. He also talked about some of the equipment which would be required. (e) The mine was to be an open cut mine which made it more economical to develop. (f) There was potential to extend the exploration licence area. 283 At the 19 November meeting, Gray said that the options that the company (referring to Cascade Coal) had ahead of it was either to sell to a publicly listed company (and that would take approximately three months) or to undertake an IPO as an alternative strategy, that is, float the company, but that would take longer (approximately six months) and be subject to Cascade Coal obtaining a mining licence. Gray said that the value of Cascade Coal would be higher if the alternative of undertaking an IPO was adopted, as high as $700 million. Gray also said that a purchase of Cascade Coal by a public company could happen in a shorter timeframe (three months) but would yield a lower price, namely, a price of around $500 million. Gray said that the value attributed to Cascade Coal as at the date of the meeting was $388 million. This meant that an investor taking up shares as at that date would be buying into the company at that value. 284 According to Ned O'Neil, one of the Addenbrooke representatives at the 19 November meeting told those present that Addenbrooke was only interested in investing in a short term investment so that the three to six month timeframe suited Addenbrooke's investment strategy. 285 Ned O'Neil said that Smith asked whether anyone on the Cascade Coal side of things had had discussions with the NSW Opposition. Presumably that question was asked because everyone knew that there was to be a State election in March 2011 and the general feeling at the time was that the Liberal National coalition would be voted into government. Duncan responded to Smith's enquiry. He said that there had been discussions with the Opposition and that they were supportive of mining in the Mt Penny area. He said that this indication was important because the approval of the mining licence had to be given by a Minister. 286 Duncan also mentioned that there were significant lead times involved in acquiring equipment and that that was why substantial costs would be incurred in the near future. He said that some of the money that would be raised would be used to place deposits on that plant and equipment. 287 Ned O'Neil remarked at one point that any approval process could be subject to delays so there was a degree of uncertainty that the timeline of three to six months could actually be achieved. 288 According to Ned O'Neil, Duncan said that the reason why Addenbrooke was being offered this opportunity to invest in Cascade Coal was because there was an equity call required from the existing shareholders to continue to develop the mine and that the amount of that call could not be met by all of the existing shareholders. He said that some of the existing shareholders who could not meet the equity call were very sensitive to dilution as between themselves. He said that, for that reason, it was agreed amongst the existing shareholders to raise new capital. 289 Ned O'Neil said that he could not recall any discussion at the 19 November meeting about the "farms" being owned by members of the Obeid family. He said that he could recall a discussion at some time about the farms. 290 He also said that Atkinson did not say much at the meeting. Apparently, Atkinson nodded or agreed with much of what Duncan was putting forward. 291 Ned O'Neil recalled that Duncan and Atkinson handed out business cards with White Energy logos on them at the meeting. There had also been some reference to White Energy in the deal sheet sent to Addenbrooke on 17 November 2010. 292 After the meeting, but before the Addenbrooke personnel left SCE's office, Gray approached Denis O'Neil, Ned O'Neil and Smith at the lift. He asked them what they had thought of the presentation. Ned O'Neil said that it had been very impressive. Gray asked whether or not they thought they would invest and Ned O'Neil responded by saying that they were very interested but that they needed to go away and talk about it. He said that if they did invest, they might invest up to $5 million. 293 According to Ned O'Neil, Gray went on to say that the Addenbrooke personnel might have a suspicion or be aware that the public company being spoken about at the meeting could be White Energy. He said that, "given you had that knowledge, you can no longer trade in White Energy shares until there is an announcement about the proposal". 294 After the 19 November meeting, Denis O'Neil, Ned O'Neil and Smith had a number of discussions as to whether Addenbrooke should invest in Cascade Coal. Each of them had come to the view that Addenbrooke should invest in Cascade Coal. There was a difference of opinion as to how much should be invested. I interpolate here that, initially, $5 million by way of investment was proposed. That was then increased to $6 million and ultimately to $8 million. 295 In his oral evidence, Ned O'Neil said that, in early 2011, at a meeting which took place at that time, he was told that the Obeids owned the farms. He said that, at this subsequent meeting, Duncan had said that the Obeids owned the land so that Cascade Coal could develop the mine without having to purchase the Obeid land. 296 Ned O'Neil specifically denied receiving or having made available to him or to the other Addenbrooke personnel who attended the 19 November meeting any documents other than the mine plan and survey A3 sized documents produced by Duncan from the folder which he had in front of him. In particular, he denied receiving or being made aware that there was available on the table a bundle of documents described by Gray in his affidavit material as a "Presentation Pack". He denied that any of the Addenbrooke representatives made notes on documents produced by Gray at the meeting. He also said that he did not see his father or Smith look at or pick up any documents. Ned O'Neil also denied that there was any discussion at the 19 November meeting concerning any existing or possible involvement of the Obeids in the mining joint venture. In his second affidavit, Ned O'Neil said that he had some recollection of there being mention of the Obeids holding land in the area of the exploration licence. In his second affidavit, Ned O'Neil said at some stage: "We can develop the majority of the mine without necessarily having to acquire the Obeid land." Ned O'Neil also denied that there was any mention of White Energy at the meeting although he accepted that White Energy was mentioned by Gray at the lift after the meeting. 297 Between 20 November 2010 and 25 November 2010, Ned O'Neil had further discussions with Gray. In those discussions, Gray informed him that he and several other SCE employees proposed to invest in the capital raising. He said that that gave him additional confidence in the investment. 298 On 25 November 2010, Ned O'Neil and Denis O'Neil executed the Subscription Agreement in respect of Addenbrooke's investment in Cascade Coal and dated the document that day. On 26 November 2010, he authorised payment of the Subscription Moneys described in the Subscription Agreement of approximately $8 million. That payment was made to the Berndale Securities Ltd Trust Account which operated as the clearing account for SCE. 299 Ned O'Neil said that, when he authorised the payment of the Subscription Moneys to Berndale, he was not aware, nor was he intending to authorise, the payment of the Subscription Moneys to a third party, namely, CMG. It was his understanding that the Subscription Moneys would be sent to Berndale and then directly on to Cascade Coal. 300 On 26 November 2010, Cascade Coal offered to sell 100% of its issued capital to White Energy for an enterprise value of $500 million. Payment was to be partly in cash and partly by shares in White Energy. On 30 November 2010, White Energy informed the ASX of the Cascade Coal offer. 301 On 1 December 2010, $25 million of the placement proceeds were paid to CMG at the direction of Poole. Gray was aware of this. 302 On 23 December 2010, White Energy announced to the ASX that it proposed to proceed with its acquisition of Cascade Coal for $486 million plus accrued liabilities of $14 million. 303 On or about 25 January 2011, SCE told Ned O'Neil that Addenbrooke now held 171,784 ordinary shares in Cascade Coal and that those shares were held on Addenbrooke's behalf by Lost Ark Nominees Pty Ltd, a nominee company of SCE. 304 On or about 4 February 2011, Gray contacted Ned O'Neil and informed him that White Energy had made a bid for Cascade Coal and that SCE would be sending paperwork to Addenbrooke which Addenbrooke needed to sign promptly and get back to SCE. He said it was the offer documents to ensure the sale of Addenbrooke's shares in Cascade and they needed to sign those documents promptly. 305 On 7 February 2011, Addenbrooke received two letters from SCE. One of the documents received was an irrevocable authority. On 7 February 2011, Ned O'Neil signed that irrevocable authority as did Smith. The original of that document was then returned to Gray on or about 7 February 2011. 306 When the ICAC Inquiry into the allocation of the exploration licence for Mt Penny commenced in late 2011, Ned O'Neil became concerned about Addenbrooke's investment in Cascade Coal. 307 The sale of Cascade Coal to White Energy fell over in April 2011. 308 At pars 31 and 32 of his second affidavit, Ned O'Neil emphasised that he had sought from Gray his recommendation in relation to the proposed investment in Cascade Coal and that at all relevant times Gray had recommended that investment to Addenbrooke. In particular, at par 32, Ned O'Neil said: I asked Mr Gray for his recommendation in this respect, and relied on this recommendation, because of: the commercial relationship we had developed over an extended period of time; the trust I had in him because of the advice he had provided to us on previous occasions; my understanding that he, or those who reported to him, had carried out due diligence on Cascade Coal in relation to the proposed capital raising, and his representation that he and others at Southern Cross were investing themselves. 309 At pars 4–8 of his third affidavit, Ned O'Neil made a number of assertions as to the relationship between Addenbrooke and Gray. In those paragraphs, Ned O'Neil said that most of the investments discussed between Gray and the O'Neils were brought to the O'Neils by Gray rather than the other way around. In addition, he endeavoured to suggest that Addenbrooke always followed Gray's advice. He went on to say that, because Addenbrooke's main business activities were centered on real estate and property investments and because Addenbrooke did not have any internal research capability or expertise in relation to investments in capital markets, Addenbrooke relied upon Gray as its trusted and long standing broker and adviser in relation to such investments. 310 As I have already mentioned, Ned O'Neil denied that the Presentation Pack spoken of by Gray was at the 19 November meeting. He went on to say that, if such a pack had been at that meeting, he would have expected Gray to draw attention to the presence of the documents and to have discussed those documents with the Addenbrooke representatives who attended the meeting. 311 At pars 29 and 30 of his first affidavit, Ned O'Neil said: 29. I would not have agreed to investing in Cascade Coal had I known that shares in Cascade has been issued to CMG for .00001/share as opposed to the $46.57/share that was the price the capital raising was conducted at approximately one month before Addenbrooke invested. If I had been aware of this fact, I would have wished to know the purpose for which they had been issued and the reasons for the share issue before I would have given any consideration to Addenbrooke's investing. 30. At no time on behalf of Cascade, or otherwise, did anyone inform us that the Obeid Family or interests associated with the Obeid family (as that expression is defined in the [Amended Statement of Claim]) were or had been involved in Cascade Coal. If we had been told this I would not have agreed to Addenbrooke investing in Cascade Coal. 312 At pars 62–69 of his first affidavit, Ned O'Neil set out his evidence as to what he would have done and recommended to the other directors of Addenbrooke had he known the matters to which he referred in those paragraphs. Those paragraphs are in the following terms: 62. Since the making of the initial investment on 26 November 2010, and since the discussions which I had in 2012 related above, I have had the benefit of reading a large number of the exhibits which have been tendered in the Independent Commission Against Corruption Operation Jasper Inquiry ("ICAC Jasper") paragraphs 51 to 126 of the ASOC herein and the ICAC report. 63. As a result of informing myself in that way, I now understand that since at least June 2009 the Obeid Family or interests associated with the Obeid family had a 25% Option Interest in the Exploration Licence filled by Mount Penny Coal Pty Ltd, ("Mount Penny Coal") a subsidiary of Cascade, pursuant to what is described in the Statement of Claim as the Amended Buffalo Letter of Agreement. 64. I also understand from reading the response of Mr Kinghorn to Marianne Wilkinson that since at least April-May 2010 Cascade and its directors had strong suspicions that the Obeid Family were entitled to that 25% Option Interest, or a substantial part thereof, and did not wish to be in business with them. In addition, I understand from reading the mentioned sentences in paragraph 64, that in October 2010 a series of transactions were entered into to enable CMG, a Company associated with Mr Richard Poole, the Ninth Defendant herein to purchase that Option Interest from Southeast Investments, a Company associated with the Obeid Family or interests associated with it, and also to enable Cascade to acquire from CMG those same rights for a total consideration of $62 million, as set out in paragraphs 51 to 126 of the ASOC. 65. I now also understand that the purpose of the capital Raising in which Addenbrooke participated was to enable Cascade to obtain funds to pay at least $28 million of what has been defined as the Termination Price, under what is defined as the Rights Termination Agreement in the ASOC. 66. It is also my understanding, that in order to enable the transaction to occur, the shares defined in the Statement of Claim as the CMG Cascade shares were issued to CMG at an amount of 0.00001 of a share to CMG, equivalent to 9.3% of its then capital for a total price of $7.17, as compared to the amount which was raised in the Capital Raising for a not dissimilar number of shares one month later. 67. I have carefully considered the nature of the transactions described in paragraphs 51 to 126 of the ASOC herein. In my opinion, those transactions, and the pleaded purpose of those transactions, if established, are completely inconsistent with what I considered the purpose and nature of the investment that Addenbrooke was making. If I had known all or any of those facts, and in particular, the purpose of paying $60 million to Southeast Investments, for the interests of the Obeid family or interest associated with it, I would have very serious objections to the investment, and would not have contemplated it in any circumstances. If either Greg or Denis had desired to pursue the investment, notwithstanding knowledge of those facts, I would have strenuously resisted it and under no circumstances would I have contemplated Addenbrooke entering into the investment. If Denis would not listen to reason I would have raised the matter with members of my immediate family, including my Mother to bring pressure to bear. There have been occasions on which I have had to do this in the past and it has always been successful. The reason why I have grave concerns about the transactions as described in paragraphs 51 to 126 is that its [sic] is apparent to me, that if that was the true nature of the transactions which took place, they were intended to disguise the involvement of the Obeid Family in the initial grant of the licence, and to extricate them from the investment without public disclosure of that fact. It would have not had mattered to me whether the Obeid Family had in fact been corrupt in procuring their interest in the investment. It is simply the fact that they were involved, and at the relevant times Mr Obeid was a well known politician, which in my opinion would have tainted the investment, regardless of how he obtained his initial stake. I would not have been prepared to take such risks. 68. Likewise, I cannot imagine any circumstance in which Mr Jones would have disclosed to Denis the involvement of Mr Eddie Obeid and the Obeid Family in the proposed investment, and not have told me, or Neville Crichton, his close friend or Greg. As described above, I have had a significant involvement with Mr Jones over the years, including in relation to this particular investment. Moreover, Denis, in my experience, is always very unguarded in his disclosures to me, and does not keep any secrets. I cannot imagine any circumstance in which he would have been told prior to making the investment that the Obeid Family was involved in the transaction, without him disclosing that fact to me. 69. It may be that some of the facts which are set out in paragraph 51 to 126 would not of themselves have put me on notice on the entirety of the transactions to which I take objection. However, having reviewed each of those paragraphs, I am of the firm belief that most of the facts and matters described therein would have caused me to pursue a further chain of inquiry, would have caused me to lose interest in this particular investment on behalf of Addenbrooke. 313 At par 20 of his second affidavit, Ned O'Neil said: These discussions which I had with Mr Gray [referring to the discussion which he had recounted at par 10 of his first affidavit and the discussions which he had with Gray at and immediately after the 19 November meeting at the lift and discussions between 20 and 25 November 2010 in which Gray said that he believed that the investment in Cascade Coal was a good investment and that he (and perhaps others) were investing in it themselves] (and the Representational Document forwarded on 17 November 2010), together with the presentation made by Mr Duncan, persuaded me to invest in Cascade Coal as a director of Addenbrooke. The presentation, which was made by Mr Duncan, is a matter which influenced me greatly. The discussions which I had with Mr Gray were influential because if, for example, he had told me he was not impressed with the investment, and did not or could not recommend it, I would not, as a director of Addenbrooke, have taken steps to ensure that Addenbrooke invested in the company. My discussions with Mr Jones introduced me to the opportunity but without the presentation from Mr Duncan and the recommendation of Mr Gray I would not have made a decision to invest in Cascade Coal as a director of Addenbrooke. 314 At pars 16–19 of his third affidavit, Ned O'Neil said: 16. Even if such a bundle of documents had been provided, I would have expected Mr Gray to draw my attention to the relevant material, noting the balance sheet of Cascade, and that he had reviewed the details of the transaction, the circumstances that led to Cascade Coal's supposed indebtedness to CMG or, alternatively, acknowledging the fact that the background to those so-called debts had not been ascertained. I would also have expected him to reveal that CMG was already a shareholder as well as the proposed recipient of the placement funds as this would have required explanation as to how this came about. I would have expected Mr Gray, acting for Southern Cross to have done an ASIC search on the entity that was to receive $25,000,000 from the Capital Raising and then based on this inform me that CMG was a related party to this transaction and had only been incorporated on the 16th June 2010 and in less than four months had accumulated a debt of $25,000,000 with Cascade Coal. In addition I would have expected Mr Gray, acting for Southern Cross to enquire as to why CMG also had a shareholding and a what price CMG had acquired shares given it was only incorporated less than 4 months prior. Without a reasonable explanation I would have advised Addenbrooke not to participate in the Capital Raising and taken steps to ensure that Addenbrooke did not take part in it. 17. The matters which were not brought to our attention by Southern Cross and Mr Gray which were set out in the Placement letter to which I have already referred were matters of which none of us was likely to have knowledge or the means of knowledge. I believed and I expected at the time of the Capital Raising that because of his and Southern Cross' association with us and because of his and Southern Cross' role and reputation as financial advisers he would, notwithstanding Southern Cross was acting on behalf of Cascade bring those matters to our attention. 18. It is clear to me that Southern Cross had been engaged to put the capital raising to potential investors like Addenbrooke, and to ensure that I would have placed before me and my father and Greg Smith, all the information that was material and known to Southern Cross, to enable a sound decision to be made on Addenbrooke's behalf regarding whether to invest or not in the capital raising. 19. Had enquiries been made into the circumstances surrounding the so-called debt to CMG, based on what I now understand, that would have revealed that CMG was a company with a sole director Richard Poole who was a related party, given his directorship and ownership of both Arthur Phillip and Cascade Coal and that the Obeid family had an interest, in respect of which it stood to receive most of the subscription monies raised in the Capital Raising. Had I known this at the time Addenbrooke was introduced to the Capital Raising, I would have strongly advised my father and Greg Smith not to engage in the transaction on behalf of Addenbrooke. I am confident Addenbrooke would not have entered into the capital raising transaction if we had been made aware of these circumstances. The Cross-Examination of Ned O'Neil 315 In cross-examination, Ned O'Neil steadfastly adhered to the account which he had given in chief of the circumstances in which Addenbrooke came to invest in Cascade Coal. In particular, he said that the first time he learned of the potential for White Energy to be involved was at the 19 November meeting. 316 He also agreed that the only things he did before Addenbrooke actually made its investment was to read the deal sheet, listen to what was said at the 19 November meeting and speak to Gray. 317 He said that it was only after the ICAC hearings commenced in mid-November 2012 that he understood that the Obeids had anything to do with the mining venture. 318 He was then questioned rather closely about the contents of par 26(e) of his second affidavit. 319 At the time Ned O'Neil swore that affidavit, he anticipated that Gray would give evidence that, at the 19 November meeting, he had said to Duncan words to the following effect: Can you confirm that the only involvement of the Obeids is in the land holdings at Cherrydale? 320 In answer to that evidence which he believed Gray would give, Ned O'Neil denied that there was any discussion concerning any existing or possible involvement of the Obeids in a mining joint venture at the 19 November meeting. He said that he had some recollection of discussion concerning the fact that the Obeids had land holdings in the immediate vicinity which would need to be acquired together with land holdings held by other land holders in the area. He said that whilst that was his best recollection, he did not discount the possibility that he became aware of the Obeid land holdings and their proximity to the proposed mine on some other occasion either before or after the 19 November meeting "because [he believed] that there had been some media coverage of the land holding earlier in 2010". He then said in par 26(e): To the best of my recollection Mr Duncan at some stage said words to the effect that: "We can develop the majority of the mine without necessarily having to acquire the Obeid land". He did not mention anything specific about options to acquire any of the relevant land, but to the best of my recollection Mr Duncan indicated that Cascade Coal was in a position to secure all of the relevant land which it needed for its proposed mining operations. 321 When cross-examined about that paragraph in his second affidavit, Ned O'Neil said that Duncan may have said that which he had attributed to him in par 26(e) at the 19 November meeting or at a subsequent meeting. 322 When dealing with questions about par 26(e), Ned O'Neil repeatedly said that the words may have been spoken by Duncan at a subsequent meeting but he was unable to identify when that meeting took place. 323 It was suggested to Ned O'Neil that, had he been aware that the Obeids owned land in the vicinity of the proposed mine, it would have been "no big deal". He disagreed with that. He said that he would have preferred that the Obeids had no involvement whatsoever. I think that, contrary to his assertions, revelation of the fact that the Obeids were the relevant landholders would indeed have been no big deal. 324 Ned O'Neil was taxed with questions designed to elicit just exactly what it was that he knew about Eddie Obeid and his family at the time that Addenbrooke made its investment in Cascade Coal. He said that, prior to investing, he knew that the Obeids had a somewhat questionable reputation. That Eddie Obeid and his family did not have "a great reputation". It was put to him that all that he really knew was that Eddie Obeid exercised a lot of power in NSW politics. That he was a factional warlord. It was suggested to Ned O'Neil that he was allowing his evidence to be heavily influenced by hindsight in light of the ICAC hearings which he had followed closely from 2012 onwards and the subsequent findings made by ICAC. 325 Ultimately, Ned O'Neil accepted that he may well have known that the Obeids were in some way involved with the land that was in proximity to the mine prior to Addenbrooke's investment in Cascade Coal. He then said that, had he known of the Obeids' involvement in the venture, he would have made further enquiries because of the Obeids' reputation. He was then asked what he would have done and the evidence tailed off after a suggestion that he would have asked Gray. 326 Eventually, Ned O'Neil accepted that Addenbrooke had a short term interest in the investment which it was being asked to make. At transcript 132/1–transcript 133/39, the following exchange took place between the cross-examiner and Ned O'Neil: Had you, in your own mind, determined that it was likely that White Energy would buy out Cascade in the short term, prior to 19 November meeting?---I was told by Mr Gray in my – just prior to the meeting, in my informal briefing, that one of the liquidity – sorry. One of the options for liquidity is sale to a publically listed company. I then – when I received the deal sheet, there were some bios there about the key personnel, and that included White Energy – references to White Energy. And then at the meeting, I think one of the business cards – I think Mr Duncan's business card that was given across had a White Energy logo on it. And then when the meeting had finished, we were about to leave and Mr Gray said to me, "You're probably" – he goes – he said to me that the company that is looking to acquire Cascade is White Energy. And I responded by saying, "Well, that made it a fair" – you know, I can understand that link, because of the business cards and the bios that were there. And you thought that was great, didn't you, because your family, or Addenbrooke, already held a large parcel of White Energy shares?---We had built up a shareholding in White Energy. We even considered making a larger investment in White Energy, prior to going into this investment. Yes. I know. You say that in your third affidavit?---Yes. Right. And Mr Gray, of course, pointed out to you, if you didn't need it pointed out, that it wouldn't be appropriate – you understanding that White Energy was interested in buying Cascade – to trade in your White Energy shares?---Correct. Right. And you didn't do that?---No. But you saw as a way to get into White Energy, a purchase of shares in Cascade, didn't you?---Yes. We already had an appetite for White Energy – hence why we built up our previous position – and then the fact that this was explained to us after the presentation meeting, we didn't have a problem with owning White shares, and also those shares would have liquidity. So that was one of the events they were working towards. This made it a great opportunity for you, because not only would you get into White Energy, which was one of your projects, correct?---Yes. Yes. You would also make a significant profit on the way through. Correct?---Yes. That was what attracted us to the investment. Yes. And that was what you were interested in. A short term investment in Cascade, which would eventuate in you owning more White Energy shares, and having made a profit along the way?---Yes. Great deal, if it comes off?---Yes. We were happy to make an investment on that basis. Expecting to make, I think, a minimum 25 per cent uplift on the way in?---It started at 10 per cent, and then was some email correspondence that the deal has gotten better, it is now 25 per cent. And ultimately, I think that was the increment they were looking at. So having – being a person who, by happenstance, was already very interested in White Energy shares at the time, this was a terrific deal, wasn't it?---Mr Gray was strongly recommending – strongly advising us that White Energy was an excellent company, had good - - - But you didn't need to be told that. You were already interested in White Energy?---Through that correspondence with Mr Gray, and – he was our broker. He's who we dealt with through that. And you've already bought up a shareholding?---Yes. Right. And so after 19 November – indeed, after you became aware of the Cascade opportunity, you saw this as a much better way of getting more shares in White than simply buying shares in White Energy, didn't you?---Yes. But there are risks involved investing in private - - - I understand that?---Yes. And those risks are covered by the very high short term profit that's made on the way in?---Yes. But, you know, a private placement in an unlisted company does come with a fair amount of risk. Well, I think we all know that?---Yes. Okay. And much more risk than whether or not the Obeids are involved or not. Correct? Lots of other risk?---There are – yes. There are risks. Yes. There's no liquidity. There's - - - The price of coal could collapse, and the whole thing would be off?---Yes. Correct. The government might change its policy, for whatever reason?---Yes. That's why we asked the question about the government. Yes. But there are no certainties in any of these things. Correct?---No. 327 Later in his cross-examination, Ned O'Neil said that, if he had been told the truth about CMG's involvement as at November 2010, it would have been a deal breaker. He was unable to offer a reason for that assertion other than that he did not wish to invest in the company that was, or is, associated with the Obeids because of their reputation. He even went so far as to say that, if he had been told that the Obeids had been involved in the mining venture but had been taken out and that the money being invested by Addenbrooke was to be used to pay them out, it would have concerned him greatly. Yet he was unable really to explain why. 328 Eventually, the cross-examiner extracted the following concession from Ned O'Neil: And what I'm putting to you is that the only explanation you've given as to why it was that you think, as I understand you say you think, that the mere mention of the Obeids being involved at all in Cascade would have meant you wouldn't have invested. We find that in the second half of paragraph 67, and the proposition is because he's a well-known politician. That's a fair summary of your affidavit evidence, isn't it?---Yes. 329 When cross-examined by Senior Counsel for SCE and Gray, Gray's version of the discussion at the 19 November meeting was put to Ned O'Neil. Most of that version was denied by him. The Evidence of Smith 330 As was the case with the other witnesses who attended the 19 November meeting, Smith gave his evidence about that meeting orally at the hearing. He said that the persons who attended the meeting were Duncan, Gray, Atkinson, Adams, Denis O'Neil, Ned O'Neil and himself. He said that he had received the deal sheet prior to the meeting but had not received any other documents. He also said that Duncan had some loose papers at the end of the table but that there was no folder of documents on the table. Smith then proceeded to give an account of what was said at the meeting. 331 He said that Gray introduced Duncan and then Duncan did most of the talking thereafter. He said that Duncan then explained various things about the coal resources at Mt Penny and Glendon Brook and the way in which the mining would be carried out. Smith said that he had read the deal sheet and had noted that the purpose of the placement was said to be in order to reduce third party debt and creditors. For that reason, he said that he asked Duncan what the money was to be used for. Smith recounted that Duncan's response was that Cascade Coal was progressing with the EIS that was required to be lodged and that there were numerous consulting fees that were required to be paid as part of that process. Some of those fees had been accrued and some had already been incurred. Duncan said that the placement funds would be used to repay those amounts. Smith said that Atkinson confirmed what Duncan was saying in this respect. Smith went on to say that Duncan then mentioned that the existing shareholders had a discrepancy in terms of their ability to raise the necessary funds and did not wish to be diluted as between themselves. For these reasons, they had decided that it was beneficial to raise money externally. 332 Smith also mentioned that Duncan specifically alluded to White Energy and other potential suitors. Duncan emphasised that the investment would become liquid when it was converted into shares in White Energy or some other publicly listed vehicle. Smith again asked Duncan about the relevant timeline. He said that Cascade Coal was confident of getting the mining licence by March 2011. Smith claimed that Duncan also said that Addenbrooke would be investing in Cascade Coal at around $400 million and that the discussion with White Energy and other suitors to date had been around $500 million. 333 Smith said that Gray stated at the 19 November meeting that, if the company went down the road of an IPO, the value that might be achieved was greater and might be of the order of $600 million or $700 million. 334 Smith said that he raised the question of whether Cascade Coal had approached the NSW Opposition given the looming State election in March 2011. Duncan reassured him that that would not be a problem as he was confident the bureaucrats were on side. 335 Smith said that the Obeids were not mentioned by anyone at this meeting nor was there any mention of their ownership of farms in the vicinity of the exploration licence. Smith also said that CMG was not mentioned. 336 In his affidavit evidence, Smith said that the decision to make the investment in Cascade Coal was made shortly after the 19 November meeting. In his affidavit evidence, Smith said that, had he known that the Obeid family had a 25% free carry interest in EL7406, he would have forcefully advised both Denis O'Neil and Ned O'Neil not to have anything to do with the proposed investment in Cascade Coal. Further, he said that if he had known that CMG was not only a substantial creditor but also a shareholder in Cascade Coal, he would have asked a lot of questions about CMG. He said that knowledge of CMG having both capacities would have placed great doubt on whether or not he would have recommended to Addenbrooke that it continue with the investment. The Cross-Examination of Smith 337 In cross-examination, Smith accepted that he knew that Addenbrooke was building a large shareholding in White Energy in the months leading up to the investment in Cascade Coal. 338 Smith also made fairly clear during cross-examination that, in his opinion, Denis O'Neil was still making the decisions which affected Addenbrooke in 2010. 339 Smith said that he regarded the 19 November meeting as the due diligence process in respect of the foreshadowed investment. 340 For Smith, the critical figures were that Addenbrooke was buying into Cascade Coal when it was valued at $400 million whereas, in the event of a sale to a publicly listed vehicle, something of the order of $500 million would be realised implying a 25% return on any investment which Addenbrooke would make. The investment seemed extremely attractive given that it was to be realised in two to three months. 341 Smith accepted that Denis O'Neil had told him that Jones had brought the "coal play" to Denis O'Neil and that he (Denis O'Neil) was very interested in it because it would be a short term investment which was very profitable. 342 Smith was cross-examined about Denis O'Neil's arrangements with Dwek. He accepted that there was an air of informality about those arrangements and that funds could be drawn down at short notice. Interest was not payable until and unless funds were actually drawn down. 343 Smith accepted that, on or about 3 November 2010, Denis O'Neil had informed Dwek that he proposed to draw down the full amount of $5 million on 16 November 2010. Smith endeavoured to explain that Denis O'Neil had wanted to have all of the money available by 16 November because he had a number of investment decisions that he was then considering. It was put to Smith that the reason that this was done was that a decision had already been made to go ahead with the investment in Cascade Coal by 3 November 2010 and that there was an expectation in the Addenbrooke camp that the investment funds would have to be paid on or about 16 November 2010. Smith accepted that, as matters developed through November, by 16 November 2010 the expectation was that the investment in Cascade Coal would be made on the following Friday (viz 19 November 2010). As at 16 November 2010, the Addenbrooke personnel did not know that there was to be a presentation at SCE's offices on 19 November 2010. 344 Smith accepted that the funds borrowed from Dwek were drawn down on 23 November 2010 and that, by that date, Denis O'Neil had decided to invest in Cascade Coal. 345 When it was put most directly to Smith that the money was drawn down from Dwek only because a decision had been made well before the 19 November meeting by Denis O'Neil to invest in Cascade Coal, Smith disagreed with that proposition. I do not think that Smith was being truthful when he gave that answer. 346 At one point in his cross-examination, Smith said the obvious: "If Mr O'Neil [referring to Denis O'Neil] made a decision to do something he usually went ahead and did it". 347 Smith was challenged in cross-examination by the proposition that his evidence as to what Duncan said about the use of the funds at the meeting was inconsistent with the deal sheet in that the deal sheet spoke of reducing third party debt and creditors whereas Duncan spoke of paying consultants' fees. Smith's only explanation for accepting this apparent inconsistency at the time was that he took Duncan at face value. 348 At transcript 269–272, Senior Counsel for SCE and Gray put Gray's version of the conversation at the 19 November meeting to Smith. In large part, Smith agreed with that version. However, Smith disagreed that Duncan mentioned $14 million worth of shareholder loans. He also disagreed that CMG was mentioned. He denied that a debt of $25 million to CMG was specifically mentioned by Duncan. He also denied that Duncan had said that the funds raised by the placement would be used to pay out CMG. Smith said that the Obeids were not mentioned at all at the 19 November meeting. The Evidence of Gray 349 In his affidavit evidence, Gray gave a very detailed and rather polished account of his dealings with the O'Neils and Smith in respect of Addenbrooke's investment in Cascade Coal. He also recounted various communications which he had had with Duncan, John McGuigan, Poole and other operatives at Arthur Phillip. 350 Gray accepted that he had been told about a "coal deal" in September 2010 but did not know at that time who the players were in the deal. He said that he found that out in the third week of October 2010 at a meeting with Poole. 351 At par 45 of his first affidavit, Gray said: I did not introduce or recommend the Cascade Coal investment opportunity to Denis. Denis was aware of it from other sources, before I was aware of it. He appeared to me to have made up his mind that Addenbrooke would make a significant investment in Cascade Coal without any guidance or recommendation from me, or Southern Cross. Had Denis not contacted me about it first, I would not have considered an unlisted coal exploration company like Cascade Coal for Addenbrooke. Addenbrooke had never previously asked me about large exposure to unlisted investment opportunities. Further, to my knowledge, Southern Cross had not introduced or recommended any private unlisted investments to Addenbrooke since the internet boom around 2000. 352 Gray said that he became aware from newspaper articles which he found on the internet in about late October 2010 that Eddie Obeid and his family had an interest in some of the land in the area of the Cascade Coal tenements. 353 Gray testified that, in late October 2010, he specifically asked both Poole and John McGuigan at a meeting with them whether the Obeids were involved in more than just the land. He said that John McGuigan told him that they were involved only in the land. At around the same time, Gray was told by Poole and John McGuigan that Cascade Coal had secured control of the land, in any event. 354 Gray gave evidence that he subsequently rechecked with Duncan and John McGuigan that the Obeid family had no interest in the venture itself and was told that they did not. 355 In his second affidavit, Gray testified that, on or about 8 October 2010, he had a conversation with Denis O'Neil in which Denis O'Neil said: I have spoken to Jones and the deal you're going to get will be a very good investment. The shares that are going to be offered as part of this new coal deal will convert into shares in White Energy at an attractive price. I want a large exposure and I will bring in some friends. 356 To that, Gray responded: OK, but if you've got any price sensitive information you can't buy any more White Energy shares on market. 357 Denis O'Neil did not deny this conversation. 358 In his oral evidence, Gray gave a detailed account of what was said and done at the 19 November meeting. In particular, he said that there was a presentation pack in a manilla folder on the table which was, as it were, pushed towards the Addenbrooke representatives at the meeting for them to look at. He also said that the presentation pack was taken away from the meeting by either Ned O'Neil or Smith. 359 Gray said that, after he introduced Duncan, Duncan talked about the prospects of the mine in which Cascade Coal had invested. After mentioning matters of detail under that general topic, Gray said that Duncan said that the purpose of the fundraising was to repay some external debt and to leave the company with some working capital for the short term. Gray went on to recount that Duncan said that the reason for going to external shareholders or potential shareholders was that the original group of investors in Cascade Coal had made a decision to keep their relative interests equal. Duncan said that, for the status quo to be maintained, in circumstances where not all of the group could put up their proportion of the current intended fundraising figure in cash, external investors needed to be brought in. Gray said that Duncan specifically mentioned CMG and that there was a debt to CMG of $25 million. According to Gray, CMG had been providing services to Cascade Coal to allow the exploration licence to move towards a mining lease. 360 Gray continued that either Duncan or John McGuigan (who Gray said had attended this meeting) confirmed that there were arrangements in place with the landholders. Cherrydale Park was mentioned. When Cherrydale Park was mentioned, the person who spoke said that that property was associated with the Obeid family. Gray thinks that Duncan was the one who said this. 361 Gray accepted that, as at the date of the 19 November meeting, he knew that Cherrydale Park was owned by the Obeids. He said that he had found that out by doing Google searches on the internet. He said he had done those searches in late October. 362 Gray's account of the meeting then continued: He said that there was some discussion about the valuation of Cascade Coal. A figure of $400 million was mentioned as the current valuation. Ned O'Neil then asked about the team that was running Cascade Coal and Duncan explained who the various shareholders and directors were. 363 A discussion then took place as to what might happen with Cascade Coal. The concept of a liquidity event was mentioned. Duncan said that there was a variety of options open to the Board of Cascade Coal including selling it to a publicly listed entity. Ned O'Neil apparently then said that it was obvious that it was White Energy that was going to take over Cascade Coal to which Duncan replied that that was one of the options available to them. 364 Gray was very certain that it was John McGuigan and not Atkinson who attended the meeting on behalf of Cascade Coal in addition to Duncan. The Cross-Examination of Gray 365 Gray was vigorously cross-examined by Senior Counsel for Addenbrooke. He was accused of fabricating his evidence on more than one occasion. One of the points of attack early in the cross-examination was Gray's assertion that he had had a conversation with Denis O'Neil on or about 8 October 2010 in which Denis O'Neil mentioned White Energy and the possibility of White Energy gaining control of Cascade Coal. I propose to treat Gray's evidence with caution. 366 Gray accepted that it was important for all of the prospective investors to be aware that the Obeids owned a piece of land that was associated with the transaction. He also accepted that, were the Obeids to be involved in the mining licence, that would give rise to very serious commercial and political concerns as to the grant of the licence itself. 367 At transcript 441/32–transcript 443/12, I asked a number of questions of Gray. The questions which I asked and the answers which he gave are set out below: Mr Gray, how many times before 19 November 2010 did you inquire of anyone from Cascade as to whether the Obeids were involved in some way in the corporation Cascade or the licence or the venture?---I would have inquired three or four times. Over what period?---It would have been the last few days of October, first couple of days in November. After you had done the Google search?---Yes. Who did you speak to?---I spoke to Mr Poole, Mr McGuigan, Mr Atkinson – those three – those three in detail at that time. And were you regularly and persistently told in answer to those inquiries that the Obeids had no such involvement?---Yes. What had caused you to ask about it?---These – these articles. So the articles actually led you to think that they might have such an interest?---Well, the articles suggested that is the case, and we needed to be clear in our own minds that that wasn't the case, that the company could absolutely assure us that was not the case before we were prepared to brand the transaction to proceed. And why was that?---Because it was a non-standard part of resource deals that we were looking at at the time, and we wanted to assure ourselves that it was not going to be a problem for the reasons Mr Douglas has suggested. When you mentioned this word "branding" before, it's, in effect, for whatever benefit it might have, putting Southern Cross Equities' good name behind the placement. Is what you mean by branding?---Yes, that whether people invest or not, if we take them propositions, we're expected to have compared those propositions with other similar ones and believe that this is an appropriate one to put before people. And if you had been told by any of the Cascade directors that the Obeids had a commercial interest either in the form of shares in Cascade, some interest in the venture or some indirect interest of commercial value in the licences, would you have put Southern Cross behind this placement?---No. Why not?---Because there was the danger that there would be – that what appeared to be a relatively automatic progression from an exploration licence to a mining licence wouldn't occur, and without the company obtaining a mining licence it would have had negligible value. Why did you think there was such a danger?---Because there was a state election coming up, and we didn't expect the mining licence to be granted until the middle of 2011, and so clearly it needed to be non-controversial from a political point of view so that the normal mining process, if you like, and approval process would occur. Why did you think it would be called or considered controversial from a political point of view if the Obeids were involved commercially in this licence?---Because that would raise the prospect of there being some potential difficulties with governments or approvals. It was just an – it's not an area of our expertise, but part of our process is not to be involved in anything that has unquantifiable controversy about it. You were told that they had this interest in Cherrydale?---Yes. You suspected, it is fair to say, that they had some commercial interest in the venture itself?---No. You thought that might be the case?---We asked the question several times. We were assured every single time that was not the case. After you ask a question three or four or five times and you get exactly the same answer three or four or five times, you have to make a decision. You either believe the people, in this case, the people we trusted implicitly, or you say, "I don't believe them. I don't want to do the project." Why did you ask three or four times and not only once?---Because I wanted to hear it from the variety of people. It didn't – the first time was with Mr Poole, and it was with, I think, Mr McGuigan and Mr Atkinson separately who I just happened to see. Our offices are all quite close to each other, and then the third time we actually had a proper meeting with all of them there. Who was there?---That was Mr Poole, Mr McGuigan and Mr Atkinson, myself, Mr Adams and Mr Thomas. 368 Gray accepted that, on 1 December 2010, he learned that Poole was associated with CMG when Poole was the person on behalf of CMG who instructed that a payment of $25 million be made to CMG. 369 Gray persistently denied knowing that the purpose of the capital raising was to provide funds to pay out an existing shareholder. I find that evidence hard to accept. 370 Gray testified that he and his fellow employees at SCE contributed between $4 million and $4.5 million to the placement made by Cascade Coal. 371 During his cross-examination, Gray was heavily taxed as to the meaning of certain notes made by Poole in Gray's workbook during the course of a meeting held on or about 10 November 2010. A number of interpretations were put by Senior Counsel for Addenbrooke on the notes. Gray did not agree with most of them. In the end, I have received very little assistance from the notes or the cross-examination in respect of them. However, there is mention of CMG in the notes. I infer that CMG was discussed at this meeting although I have no sound foundation for making any findings about what was said. The Evidence of Adams 372 Adams was called essentially to give evidence as to what was said at the 19 November meeting. At transcript 511/8–transcript 512/9, Adams recounted his best recollections of that meeting. 373 In cross-examination, Adams became emphatic that Atkinson was not at the meeting and that John McGuigan did attend the 19 November meeting. 374 Adams said that he remembered that there was a folder of presentation material on the table. He said that Duncan was the main presenter at the meeting. He said that Duncan was at the head of the table and had some maps in front of him. He said that the folder of presentation material was in the middle of the table. He said that he did not personally check what was in that folder but assumed that the contents of the folder were the presentation materials that had been assembled. 375 When asked whether he can recall anyone looking at the folder of presentation materials, he said that he could not recall exactly. He did say, however, that he had the impression that someone was looking at a document on the other side of the table. The persons to whom he was referring when he made that remark were Denis O'Neil, Ned O'Neil and Smith. 376 Adams said that he stayed at the 19 November meeting for 20–30 minutes but had to leave early. 377 He gave his account of the meeting at transcript 511/8–512/9 in the following terms: And doing the best you can, and, please, if you can tell me who was speaking and put it in direct speech, what do you remember being said during that meeting for the time you were there?---As I said, the main presenter was Travers Duncan. He was at the head of the table, and he said – or opened the presentation with words something like, "Cascade Coal has a licence over the Mount Penny coal deposit", which Duncan said we will work on, so it now has a resource of the order of 175 million tonnes of JORC-compliant resource. JORC mightn't mean much to you, but that's the standard for reporting in the mining industry. This deposit was suitable for open cutting. It had a railway line. He said a railway line was nearby. He said it could be quite quickly developed with its own rail loop, and there's an open-cut operation. He went into some detail about how it would be developed and that it was similar to other things that he had been involved in developing with his previous companies. He then went on to say that the company had incurred significant debt in getting to this point of development, and they were looking to raise $28 million from new investors. One of the reasons given was that the major shareholders who were all approximately equal shareholders, some had different means than others and didn't wish to put any money in, and they didn't want to dilute against each other, so they were looking for a new group of investors to raise the 28 million. As I remember, the price was $46 a share which valued the company around 380 million. There was a question from across the table, I recall. Just before we get to that, did he say anything about what the proceeds from the capital raising will be paid towards?---The proceeds were for working capital and pay down the debts and creditors of the company at that point. Yes. I cut you off. You said there was a question asked?---There was a question from across the table. Do you remember who asked it?---It might have been from Ned or Denis, but I guess it's a question I might have expected from the account, but I'm just not clear which one asked it. It was, "Was that pricing reasonable in the market?", and initially, I think, I responded, and I said that valued the company at around $400 million, and compared to what was happening in the market at the time – and this was a pretty hot coal market, particularly for coal stocks. Coal prices has been going up rapidly, so there was a lot of market interest in this sort of company. There had been a couple of large takeover bids, so I indicated that I thought 400 million was reasonable, and then there was a bit of a discussion about, you know, what was a market value for Cascade Coal. And what do you remember about that discussion?---I think the suggestion was that it could have a market value of up to about 700 million, but I was comfortable that, you know, 400 million was reasonable. And, doing the best you can, do you remember anything else being said during that meeting while you were there?---Once we got to the end of the discussion about how the Mount Penny project could be developed I was running out of time, so, yes, I left the meeting, so I'm not aware of, you know, the final part of the discussion after I left. 378 The only Counsel who cross-examined Adams was Addenbrooke's Senior Counsel. 379 He was challenged as to whether it was John McGuigan or Atkinson who attended on behalf of Cascade Coal. He said he had a firm recollection that it was John McGuigan. 380 He also accepted in cross-examination that he did not have a clear recollection of anyone on the Addenbrooke side of the board table looking at the presentation pack. 381 Adams said that he thought there was some mention of the landowners at the 19 November meeting but that the topic had not been raised by him. He accepted that, as a result of the October meeting which he had had with the Cascade Coal directors, he became aware that members of the Obeid family had property in the area which may need to be accessed for the purposes of mining in the area of EL7406. 382 Adams' expertise was in assessing mining projects and the value of mining ventures. He had put an approximate value on Cascade Coal as at November 2010 of $350 million. He accepted that about 90% of that value resided in the Mt Penny coal reserves. Findings in Respect of the Addenbrooke Investment in Cascade Coal 383 In this section of these Reasons for Judgment I set out my ultimate findings in respect of Addenbrooke's investment in Cascade Coal. I have based these findings upon my detailed consideration of the evidence at [192]–[382] above. 384 The potential "coal play" was brought to Denis O'Neil in September 2010 by Jones. It was presented to Denis O'Neil and understood by him to be an opportunity to make a short-term investment which would be very profitable. Jones told Denis O'Neil that SCE and Gray would be given a mandate to raise capital for the venture by way of a private placement. 385 Thereafter, throughout September and October 2010, Denis O'Neil badgered Gray and Jones about the progress of the coal play. He also arranged for his son, Ned O'Neil, to make persistent enquiries of both Jones and Gray along the same lines. 386 Meanwhile, in September and October 2010, Addenbrooke was pursuing the acquisition of shares in White Energy. Denis O'Neil had formed the view that investing in coal at that time was a smart move—the price of coal was high at the time. He may even have thought or suspected that White Energy was involved in the coal play but the evidence does not make this clear. 387 Denis O'Neil was kept at bay until about mid-November 2010. He was, by then, very keen to take up the coal play opportunity. He said more than once in conversations with Jones and Gray in October that he did not want to miss out on that opportunity and that they should not forget him. 388 By early November 2010, Gray had had a number of meetings with the directors of Cascade Coal. A Mandate Agreement for SCE had been prepared. That Agreement was eventually signed on 10 November 2010, although it is dated 2 November 2010. 389 In the period August to October 2010, Cascade Coal was busy trying to lock down an exit deal with the Obeids. The formal documents by which that deal was done were signed on or about 20 October 2010. At the same time, plans were being made to sell Cascade Coal to White Energy. 390 Given that Duncan, John McGuigan, Atkinson and Brian Flannery were all directors of both companies, given the value of the coal reserves at Mt Penny (which had been established with some certainty by late October 2010) and given the circumstance that Cascade Coal had by then secured control of the main land holdings where the mining at Mt Penny was to occur, the transaction with White Energy looked to be fairly much a sure thing. And so it turned out to be—at least at the beginning. Immediately after Cascade Coal had raised the funds which it had sought through the private placement (25 November 2010), Cascade Coal made its offer to White Energy which showed instantaneous positive interest. It committed to the deal in principle in late December 2010. 391 Denis O'Neil was out of Australia between 30 October 2010 and 14 November 2010. During that trip, he spent some time with Neville Crichton, another wealthy businessman who was interested in and who eventually took up shares in Cascade Coal. He was and is a close friend of Denis O'Neil. Denis O'Neil almost certainly discussed Addenbrooke's proposed investment with Neville Crichton at this time. Neville Crichton did not give evidence before me. 392 Ned O'Neil claimed that, in the morning of the day of Denis O'Neil's return from his trip (14 November 2010), Gray met with Denis O'Neil and him at the Rose Bay Marina Kiosk. Gray denied that this meeting took place. Denis O'Neil did not give evidence about it in either of his affidavits. When, during his oral evidence in chief, he was led to the possibility that such a meeting had taken place, he said that it was possible that he had attended such a meeting. He then said that he could not remember doing so. 393 In Addenbrooke's Statement of Claim, this meeting was specified as having taken place on 20 November 2010 (which was a Saturday). In his affidavit evidence, Ned O'Neil placed the meeting as having taken place on 6 November 2010 or on 13 November 2010, both of which days were also Saturdays. After he had sworn all of his affidavits but before he gave oral evidence, Ned O'Neil realised that his father was not in Australia on either of those days so he changed his evidence to accommodate that circumstance. He then said that the meeting must have taken place on 14 November 2010, which was a Sunday. 394 I find that, when giving his evidence, Ned O'Neil was acutely conscious of the fact that, without this meeting and the evidence which he gave about it in par 10 of his first affidavit, Addenbrooke would be left with no particular occasion when Gray told them things that were arguably false or misleading and no particular occasion before Addenbrooke made its investment where Gray made specific representations about the proposal. 395 Ned O'Neil's recollection of this meeting is confined to a detailed account of what Gray is alleged to have said. He did not put those remarks into any context and did not give an account of anything which he or his father said. Furthermore, there is an air of unreality about the statements which he has attributed to Gray. 396 For the reasons which I have explained at [391]–[395] above, I am not persuaded that this meeting took place on 14 November 2010 as alleged by Ned O'Neil nor am I satisfied that Gray made the statements attributed to him in par 10 of Ned O'Neil's first affidavit at any time before Addenbrooke invested in Cascade Coal. 397 On 16 November 2010, Gray and Ned O'Neil set up the 19 November meeting. 398 On 17 November 2010, Gray sent the deal sheet to Denis O'Neil, Ned O'Neil and Smith. 399 In the meantime, by no later than 3 November 2010, Denis O'Neil had organised a borrowing of $5 million from Dwek. He intended to deploy those funds in the Cascade Coal investment. There were no other investments seriously being considered at that time which would involve the use of those funds. As at early November 2010, Denis O'Neil expected to have to commit to Cascade Coal on 15 November or 16 November 2010 and intended to do so at that time. 400 The 19 November meeting took place at SCE's offices at about 11.00 am. Present at the meeting were Denis O'Neil, Ned O'Neil, Smith, Duncan, Gray, Adams and one other—either Atkinson or John McGuigan. 401 Both Gray and Adams testified that the second Cascade Coal representative at this meeting was John McGuigan. Ned O'Neil and Smith said that it was Atkinson. Denis O'Neil could not remember which of the two was present. 402 Both Gray and Adams knew John McGuigan. Gray, in particular, had met him on many occasions in the past. He had known him for almost 20 years. He also knew Atkinson. None of the Addenboooke witnesses had met either Atkinson or John McGuigan. In those circumstances, it is more likely that the recollections of Gray and Adams on this point are more reliable. 403 The dispute about whether John McGuigan or Atkinson attended this meeting seemed to me to be rather beside the point. Yet all witnesses gave firm evidence as to their recollections. 404 I find that the Addenbrooke witnesses are mistaken about this. 405 The evidence of Ned O'Neil and of Smith as to what was said at this meeting is broadly consistent. However, there are some important differences between the two accounts. These are: (a) Ned O'Neil claimed that Duncan said that the placement funds were required to develop the asset. He then gave details of what was involved in that. Smith, on the other hand, said that he knew that the funds were to be used to reduce debt and to pay creditors because he had read the deal sheet. He said that he asked what the money was to be used for and was told that it would be used to pay consultants' fees. (b) Ned O'Neil said that White Energy was not mentioned during the meeting but was mentioned afterwards—by Gray at the lift. Smith said that White Energy was mentioned during the meeting itself. (c) Ned O'Neil said that the Obeid family's ownership of the farms may have been mentioned at the meeting. Smith said that there was no mention of the Obeids at the meeting. 406 Denis O'Neil claimed to have no recollection of the substance of what was discussed at the 19 November meeting. 407 I have summarised Gray's account of the 19 November meeting at [358]–[364] above. It broadly fits with the evidence of Smith. There are also some features which are common to the accounts of that meeting given by Ned O'Neil and Smith (eg the desire of the existing shareholders to avoid dilution of their interests in the venture as between themselves). However, there are several important differences between Gray's evidence and that of Ned O'Neil and Smith. These are: (a) Ned O'Neil claimed that there was no discussion along the lines that the funds being raised by the placement would be used to reduce external debt. Smith accepted that the question of reducing debt was discussed. Gray said that Duncan specifically mentioned that the purpose of the fundraising was to reduce some external debt and to leave Cascade Coal with some working capital for the short term. Adams confirmed that the question of debt was mentioned. (b) According to Ned O'Neil and Smith, there was no mention of CMG. Gray claimed that CMG was mentioned. Adams was not asked and did not comment one way or the other as to whether CMG was mentioned. Gray also said that CMG was in effect a consultant and had been providing services to Cascade Coal to allow the exploration licence to move towards a mining lease. (c) Gray said that the question of landowners was mentioned at the meeting and that, in that context, the Obeid family was specifically referred to. Adams recalled that the landowners were mentioned at the meeting although he did not say one way or the other whether the Obeids had been specifically mentioned. Smith said that there was no mention of the Obeids at the meeting. Ned O'Neil testified that there may have been mention of the Obeids at this meeting. (d) Gray and Adams both asserted that there was a folder of documents on the boardroom table which was taken away from the meeting by one or other of the Addenbrooke representatives. No-one asserted with any great conviction that any of the Addenbrooke representatives had looked at this folder during the course of the meeting although Adams hinted that such a thing had occurred. The presentation pack, as described by Gray and assumed by Adams, contained pro-forma Balance Sheets as Appendix 4 to the placement letter. Ned O'Neil and Smith vehemently denied that there was a folder of documents on the boardroom table during this meeting and vehemently denied that they looked at any such file during the course of the meeting or took away such a file after the meeting. 408 There were, as I have said, some common features across all accounts of what occurred at the 19 November meeting. The existing shareholders' desire not to dilute their interests as between themselves was one such matter. The imputed value of Cascade Coal at around $400 million as at the date of the meeting was another. The question of whether a change of government in NSW would make a difference to the proposal was a third. And the idea that the enterprise would be sold to a publicly listed company or floated by means of an IPO was a fourth. The proximity of other mines, the railway and road connections were also discussed according to most of the witnesses. The likely nature of the mining operation was also referred to. 409 Each of the witnesses who gave evidence at the hearing gave me the impression that they were well versed as to the issues in the proceeding and as to the significance of the 19 November meeting to Addenbrooke's case and to the defences raised by the defendants, particularly those raised by SCE and Gray. Each witness had a significant incentive to push one or more particular points about the meeting. Gray and Adams had every reason to introduce into their account of what occurred mention of CMG and the Obeids. On the other side of things, Ned O'Neil and Smith had every reason to deny that they were told anything about CMG or the Obeids. I have treated all of the evidence about the 19 November meeting with considerable caution. 410 As at 19 November 2010, there was a significant degree of sensitivity amongst the existing stakeholders in Cascade Coal about the involvement of members of the Obeid family as landholders at Bylong and, in particular, as co-venturers in the mining joint venture which was in play insofar as the Mt Penny coal reserves area was concerned. Why this was so is truly a matter of speculation although I have no doubt that the existing Cascade Coal stakeholders preferred to offer Cascade Coal to White Energy as a clean entity which had complete control of the Mt Penny coal reserves area rather than as an entity involved in an unincorporated joint venture with members of the Obeid family. 411 This sensitivity had been demonstrated in the endeavours of the drafters of the placement letter to water down the detail of the arrangements that had hitherto been agreed with the nominees of the Obeid family involved in the joint venture and to avoid mentioning altogether the arrangements for organising an orderly exit of those nominees from that joint venture. 412 In those circumstances, I very much doubt that Duncan would have mentioned at the 19 November meeting CMG or that Gray would have made available to the Addenbrooke representatives a folder of documents which included the pro-forma Balance Sheets. By the time the meeting took place, the commercial deal with the Obeids had been done and the formal documents had been signed. Duncan and Gray had every reason to think that the deal with White Energy would be consummated in due course and that the Obeids would be contented and happy retirees from the venture. There was no reason to bring about a state of affairs whereby one of the external investors then being courted might ask awkward questions about the very complicated transactions which were then under way designed to implement an orderly exit of the Obeids from the venture. 413 For these reasons, I am not persuaded that anyone mentioned CMG at the 19 November meeting nor am I persuaded that a folder of documents was made available to the Addenbrooke representatives at that meeting, being a folder which included the placement letter and appendices which, in turn, included the pro-forma Balance Sheets. This was information which, on any view of things, was better kept away from the potential investors. For the same reasons, I doubt that the fact that the Obeids owned land in the area where the mine was to be developed was mentioned. I say this, notwithstanding that Ned O'Neil conceded that the Obeids might have been mentioned in this context. 414 On the other hand, I am not convinced that there was no discussion at all about the statement in the deal sheet to the effect that the purpose of the placement was to raise funds in order to reduce third party debt and creditors. I think that Smith may well have asked about this as he claimed. I also think that, when he did so, he was given the explanation which he recounted in his evidence (ie that the funds would be used to repay existing consultants and likely future expenditure on consultancy fees). The concepts of spending on consultants and of spending on infrastructure are not all that far apart. However, I had the distinct impression when Ned O'Neil gave his evidence about this meeting that he had organised a series of topics about which he would speak and that he intended to emphasise that the general thrust of what Duncan had said was directed to matters of infrastructure rather than the commercial deal. I think that Ned O'Neil exaggerated these points in order to "load up" Duncan with a series of statements which were demonstrably false. 415 In the end, if, as I have found, Duncan explained the purpose to which the funds would be used as paying consultants' fees, that was literally true in the sense that CMG was said to have provided consultancy services to the venture. However, I think that it is stretching credulity for anyone to accept that CMG or the Obeids for that matter provided $25.5 million worth of consultancy services to this venture. 416 A statement to the effect that the use to which the funds raised by the placement would be put was to reduce third party debt and creditors without further explanation would have been false and capable of being seriously misleading in November 2010. As I have found, such a statement was made on 19 November 2010. A similar statement was made in the deal sheet. 417 As the above narrative amply demonstrates, things moved very quickly after the 19 November meeting. Addenbrooke paid its $8 million to Berndale Securities on 25 November 2010 and was thereafter committed to the venture. 418 As is commonly the case with causes of action based upon misrepresentation, the mere fact that a person makes a false statement will generally not be sufficient to found an action for damages or other relief. Generally speaking, there will have to be a causal connection between the making of the statement and the loss claimed by the alleged victim. The present case is no exception to these general rules. 419 In the present case, Addenbrooke relies upon certain positive representations as being false and misleading. It also relies upon the failure on the part of Duncan and Gray to put the Addenbrooke representatives fully in the picture as at October/November 2010 insofar as the involvement of members of the Obeid family in the enterprise was concerned. 420 In order to make good that case, Addenbrooke must satisfy the Court that the decision-maker or decision-makers who made the relevant decisions on its behalf relied upon the positive misrepresentations that were made to its representatives and counted on being told of the involvement of the Obeids in the enterprise because knowledge of their involvement would have been a material factor in the decision which Addenbrooke ultimately made. 421 I now turn to deal with the question of whether Addenbrooke has made good the question of reliance as I have just explained it. 422 According to the evidence of Denis O'Neil, Ned O'Neil and Smith, up to a date in 2009, Denis O'Neil had run Addenbrooke. He was and is its sole shareholder. The O'Neils and Smith testified that, in about 2009, a change occurred in the management of Addenbrooke. Ned O'Neil, who was then 22 or 23 years of age and utterly inexperienced in matters of commerce or investment, was appointed as a director of Addenbrooke. At the same time, it was claimed that Denis O'Neil had agreed to consult with Ned O'Neil and Smith about all major investment decisions to be made by Addenbrooke and that decisions would be made on the vote of the majority. That is, if Ned O'Neil and Smith were against a particular investment and Denis O'Neil was in favour of that investment, according to the O'Neils and Smith, the investment would not be made. 423 Denis O'Neil is a charming man who some may consider is charismatic. He is a self-made man having worked extremely hard in his youth doing all manner of things including hard manual labour. He and his brother created a very successful business known as "Hymix Concrete". He has been involved in many very significant real estate developments over many years. He has a wide circle of friends and acquaintances and a deep and widespread network of business acquaintances. He is the consummate entrepreneur—not afraid to take risks where he considers the potential rewards to justify the taking of those risks. He has proven over very many years that he has a good nose for a good deal. 424 I do not accept that such a man agreed to subjugate his decision-making power to the views of his 22 year old son or his employed accountant whom he had never made a director of Addenbrooke and whom he did not regard as being part of his inner circle. I do not accept the evidence of the O'Neils and Smith that suggested he did agree to do just that. 425 I find that in 2009 and 2010, as had always been the case, Denis O'Neil was the sole decision-maker in respect of investment decisions to be made by Addenbrooke. In particular, I find that he was the sole or real decision-maker in respect of Addenbrooke's investment in Cascade Coal. This is not to say that he did not consult with others. He did talk to Ned O'Neil and to Smith about the proposal. He spoke to Jones on more than one occasion about the proposal. He spoke to Gray about the proposal. Undoubtedly, he spoke to Neville Crichton about the proposal. But, in my judgment, the decision to invest was his and his alone. 426 When Denis O'Neil gave his evidence, I had the distinct impression that he was either feigning or exaggerating his lack of recollection of the events surrounding Addenbrooke's investment in Cascade Coal. I also had the impression that he had determined upon such a course because he wanted to avoid or minimise cross-examination directed to his reasons for causing Addenbrooke to make that investment and to avoid or minimise cross-examination on the crucial topic of whether the presence of the Obeids in the enterprise was a material negative factor for him. The effect of Denis O'Neil's lack of recollection and the evidence of the O'Neils and Smith as to the significant role played by Ned O'Neil and Smith in the business and affairs of Addenbrooke was to bestow upon Ned O'Neil the sole responsibility of convincing the Court that Addenbrooke relied upon Duncan and Gray when deciding to invest in Cascade Coal, both in terms of what those men actually said to Ned O'Neil and in terms of what they did not tell him concerning the involvement of the Obeids in the Cascade Coal venture. I have to say that the evidence in chief given by Ned O'Neil as to reliance was artificial. It was broken down to its essentials during cross-examination and then demolished. 427 To my mind, Denis O'Neil generally made his investment decisions by looking at the people involved in the proposal and forming a view about the business acumen and trustworthiness of those people. Obviously, he would be interested in the essence of the proposal but would not devote much attention to the detail. 428 As far as Addenbrooke's investment in Cascade Coal was concerned, I have come to the conclusion that: (a) Throughout the period from August 2010 to late 2010, Denis O'Neil had a strong desire to invest in coal producing assets or companies involved in coal mining. This was because he was aware that the price of coal was high at the time and was likely to remain high for some time; (b) He regarded Jones, who brought the proposal to him, as a friend, as trustworthy and as someone who had good business and political connections. He considered Jones to be a very astute investor who had sound commercial acumen; (c) He knew Gray and thought that he too was well connected in investment circles; (d) His close friend and much admired businessman, Neville Crichton, was going to invest in the placement and that was good enough for him; and (e) He assessed the investment as short-term and likely to be very profitable. 429 In addition, I have come to the conclusion that Denis O'Neil had decided to go ahead with Addenbrooke's investment in Cascade Coal by no later than the end of October or early November 2010. He organised the Dwek loan funds to be available then. At the time that he took that step, he was not aware that there was to be a presentation on 19 November 2010. 430 It was Denis O'Neil's evidence that, had he been informed of any involvement of any member of the Obeid family in the Cascade Coal venture, he would immediately have informed Ned O'Neil and Smith. He also said that he would also have immediately informed Neville Crichton. He also gave the curious evidence set out in par 20 of his first affidavit. What Denis O'Neil did not say in his affidavit evidence was that he would not have gone ahead with the investment had he known that the Obeids had some involvement with Cascade Coal. 431 At [199]–[264] above, I have summarised Denis O'Neil's evidence. I formed the view that, from time to time, he was less than frank in the answers which he gave. As I have noted in those paragraphs, he tried to distract the cross-examiner by using his charm. In addition, he took refuge in his asserted lack of recollection when the questions became difficult. 432 The thrust of his evidence was that, had he known about the involvement of the Obeids in Cascade Coal and the foreshadowed mining venture, he would have consulted with his son and Smith to see what they would do next. While I accept he may have spoken to his son and Smith had he known about the Obeids' involvement in Cascade Coal, I do not accept that he would have vacated the decision-making ground in light of the disclosure of that involvement. In this regard, I also do not accept that Ned O'Neil and Smith would have counselled Denis O'Neil against the proposed investment in Cascade Coal had they known that the Obeids had some involvement with it. 433 When Ned O'Neil was pressed as to what it was about the involvement of the Obeids in the enterprise that would have been a deal-breaker, he was unable to say more than that Eddie Obeid had a questionable reputation. It is difficult to understand why the simple fact that Eddie Obeid had a questionable reputation would have been enough to discourage Denis O'Neil from causing Addenbrooke to invest in Cascade Coal. Ned O'Neil also said that he understood that Eddie Obeid was a factional warlord within the ALP. While, at the time, this may have been seen as a slightly negative factor should the Liberal National Coalition have won the March 2011 election, it is again difficult to understand why that circumstance would have been enough to cause Addenbrooke not to invest in Cascade Coal. None of the Addenbrooke witnesses gave evidence that they saw the 20 May 2010 article published by The Sydney Morning Herald on line. Of those witnesses, only Ned O'Neil testified that the Obeids may have been mentioned at the 19 November meeting. If the Obeids were mentioned, apparently he thought nothing of it. 434 Given Denis O'Neil's palpable enthusiasm for the proposal, I do not accept that, had the Addenbrooke representatives been told that the Obeids owned the farms where the mining was likely to take place and had also, for some time, had an interest in the joint venture which was to exploit the mining rights but had recently been taken out both of the ownership of the land and the joint venture by Cascade Coal, that information would have made any difference to Denis O'Neil when it came to making his decision whether or not to invest in Cascade Coal. To my mind, he would have gone ahead anyway, had he known those facts. He was enthusiastic about coal, he was aware of some of the connections between White Energy and Cascade Coal and his money would be at risk for only a short time. The rewards were great and the risks relatively contained. 435 I am of the view that Denis O'Neil did not pay close attention to what Duncan said at the 19 November meeting and did not make his decision to invest based upon the circumstance that the funds to be raised by the placement were to be spent on infrastructure or consultancy fees. Nor did he rely on anything said by Gray. Nor did he count on Gray carrying out a due diligence. Nor did he expect Gray to tell him all there was to know about the proposal. It did not matter to him whether others were skimming off substantial sums in the enterprise. What mattered to him was whether he was likely to make a substantial profit from the investment. He made a judgment about that based upon his knowledge of the people involved and the fact that Cascade Coal was likely to be sold to White Energy. In my judgment, had he been told the truth about the involvement of the Obeids at that time, it would have made no difference to the decision which he made. Conclusions 436 The findings which I have made in respect of Denis O'Neil are sufficient to dispose of this proceeding. 437 They are fatal to all of the statutory causes of action relied upon against Duncan and Gray for misleading and deceptive conduct and to the negligence action brought against SCE and Gray (see esp pars 175 ff of the Second Amended Statement of Claim). 438 In Closing Submissions, Senior Counsel for Addenbrooke sought to amend its Originating Application and the Second Amended Statement of Claim in order to raise a cause of action for contravention of s 1041E of the Corporations Act 2001 (Cth). Breach of that section constitutes a criminal offence. I was not disposed to allow that amendment because of the serious nature of the consequences of breach and because the application to amend had been raised so late. Further, the defendants may have conducted their case differently had s 1041E been in the ring earlier. I remain of the view that Addenbrooke's amendment application should be refused. 439 The two Cross-Claims only come into play if Addenbrooke is successful in its claims against SCE and Gray. It has failed against those parties. For this reason, both Cross-Claims must be dismissed. 440 As to costs, Addenbrooke must pay the costs of Duncan, SCE and Gray. SCE and Gray must pay the costs of the remaining cross-defendants of and incidental to the Cross-Claims. I think that I should make an order requiring Addenbrooke to reimburse the cross-claimants the amount of those costs. That is, the costs which Addenbrooke must pay to SCE and Gray should include the costs which those parties will be ordered to pay to the cross-defendants. 441 Before leaving the matter, I wish to note that, even if Addenbrooke had persuaded me that the defendants were liable, there remained very serious obstacles in the way of its claim, principally in the area of causation. Because of the findings which I have made, it is not necessary to discuss these questions. 442 There will be orders accordingly. I certify that the preceding four hundred and forty-two (442) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate: Dated: 5 August 2015