FEDERAL COURT OF AUSTRALIA Hislop v Paltar Petroleum Ltd (No 3) [2017] FCA 1253 File number: NSD 1383 of 2017 Judge: GLEESON J Date of judgment: 26 October 2017 Catchwords: CORPORATIONS – application for leave under s 237 of the Corporations Act 2001 (Cth) to bring proceedings on behalf of and in the name of a company – allegations of equitable fraud, breaches of fiduciary duty, misleading and deceptive conduct and unconscionable conduct against directors and another – whether proposed proceedings in the best interests of the company – whether serious question to be tried – whether application brought in good faith – whether appropriate to grant leave in the absence of 14 days' notice – leave granted Legislation: Corporations Act 2001 (Cth) Evidence Act 1995 (Cth) Petroleum Act 1984 (NT) Cases cited: Carpenter v Pioneer Park Pty Ltd (in liq) [2004] NSWSC 973; (2009) 51 ACSR 245 Chahwan v Euphoric Pty Ltd [2006] NSWSC 1002 Charlton v Baber [2003] NSWSC 745; (2003) 47 ACSR 31 Huang v Wang [2016] NSWCA 164; (2016) 114 ACSR 586 Cooper v Myrtace Consulting Pty Ltd [2014] FCA 480 Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492 Fiduciary Ltd v Morningstar Research Pty Ltd [2005] NSWSC 442; (2005) 53 ACSR 732 Keenan v Bundaberg Port Authority [2016] FCA 134 Maher v Honesett & Maher Electrical Contractors [2005] NSWSC 859 MG Corrosion Consultants Pty Ltd v Vinciguerra [2011] FCAFC 31; (2011) 82 ACSR 367 Neilson v Overseas Projects Corporation of Victoria Ltd [2005] HCA 54; (2005) 223 CLR 331 Rafferty v Time 2000 West Pty Ltd (No 6) [2011] FCA 402 Re Gladstone Pacific Nickel Ltd [2011] NSWSC 1235; (2011) 86 ACSR 432 Swansson v Pratt [2002] NSWSC 583; (2002) 42 ACSR 313 Syndicate Mortgage Solutions Pty Ltd v El-Sayed [2010] NSWSC 348 Vigliaroni v Concrete Precast Systems Pty Ltd [2009] VSC 253 Heydon JD, Leeming HJ and Turner PG, Meagher, Gummow & Lehane's Equity – Doctrines & Remedies (5th ed, LexisNexis Butterworths, 2015) Date of hearing: 18 and 20 September 2017 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 149 Counsel for the Plaintiff: Mr A Leopold SC with Ms E Holmes Solicitor for the Plaintiff: Johnson Winter & Slattery Counsel for the Defendants: Mr M Henry SC with Mr DE Baran Solicitor for the Defendants: Dentons ORDERS NSD 1383 of 2017 BETWEEN: JOHN HISLOP Plaintiff AND: PALTAR PETROLEUM LIMITED (ACN 149 987 459) First Defendant ROBERT MADZEJ Second Defendant MICHAEL CAETANO (and others named in the Schedule) Third Defendant JUDGE: GLEESON J DATE OF ORDER: 26 OCTOBER 2017 THE COURT ORDERS THAT: 1. Pursuant to s 237 of the Corporations Act 2001 (Cth), the plaintiff has leave to bring proceedings against the first to fourth defendants on behalf, and in the name, of the fifth defendant, in order to make the claim or claims set out in the "Draft Outline of Proposed Claim (Revised)" annexed to the amended originating process ("Proposed Claim") and any claim or claims arising out of the same or substantially the same facts as the claim or claims referred to in the Proposed Claim and claiming relief to the effect of, or to substantially similar effect as the relief referred to in the Proposed Claim against the first to fourth defendants. 2. The defendants pay the plaintiff's costs of the proceeding. 3. Within seven days of the date of this order, the parties submit proposed orders with a view to hearing the plaintiff's foreshadowed application for a lump sum costs order in accordance with the procedure set out in the Court's Costs Practice Note (GPN-COSTS). Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT GLEESON J: 1 The plaintiff ("Mr Hislop") seeks leave under s 237 of the Corporations Act 2001 (Cth) ("Act") to bring proceedings on behalf, and in the name, of the fifth defendant, Nation Energy (Australia) Pty Ltd ("Nation Australia"), against the first to fourth defendants who (with Nation Australia) opposed the application. 2 Mr Hislop has standing to bring the s 237 application as a member of a related body corporate, Nation Energy Inc ("Nation Wyoming"), and as a former director of Nation Australia from 19 June 2015 to 19 June 2017: s 236(1)(a) of the Act. Nation Australia is a wholly owned subsidiary of Nation Wyoming, a company incorporated in Wyoming in the United States of America. Nation Wyoming is or was involved in oil and gas exploration and development. 3 The first defendant ("Paltar") is also a member of Nation Wyoming. Paltar is an Australian company involved in oil and gas exploration. It holds six oil and gas exploration permits, being EP136, EP143, EP231, EP232, EP234 and EP237 issued by the Northern Territory ("NT") government (with Sweetpea Petroleum Pty Ltd having an interest in EP136 and EP143) ("six EPs"). The permits cover, in the aggregate, approximately 8,936,800 acres of potentially prospective land in the NT. 4 The second defendant ("Mr Madzej") and the third defendant ("Mr Caetano") were appointed as directors of Nation Australia on 19 June 2017. 5 The fourth defendant ("Mr Causbrook") has been a director of Nation Australia since 6 August 2015. Mr Causbrook is also a director of Paltar. 6 In short, Mr Hislop complains that valuable rights under certain earning agreements between Nation Australia and Paltar which relate to the six EPs have been stripped away from Nation Australia as a result of equitable fraud and breaches of directors' duties by the second to fourth defendants (from which Paltar knowingly benefited) and misleading and deceptive conduct and unconscionable conduct by Paltar. Mr Hislop alleges that the assertion that Nation Australia was in default of certain payment obligations to Paltar was used as a pretext for seeking to strip away assets from Nation Australia for the benefit of Paltar and, indirectly, the second to fourth defendants. 7 On Mr Hislop's case, Nation Australia was established to provide a vehicle for the acquisition of funding from third parties to facilitate the exploitation of permits including the six EPs. Underlying the arrangements was a $24.3 million promissory note from Nation Australia (and guaranteed by Nation Wyoming) in favour of Paltar which did not mature until 31 May 2019. On Mr Hislop's case, Nation Australia would not be responsible for "Work Program Expenses" as defined in the earning agreements until it had reaped the benefit of certain contingent rights to anticipated production licences. In the meantime, it was contractually liable to make payments to Paltar only when it had "funds conveniently available", which was not the case at any relevant time. Thus, Mr Hislop contends that Nation Australia did not default on its obligations to Paltar under the earning agreements. 8 The claims that Mr Hislop wishes to bring in the name of Nation Australia are the claims summarised in a document entitled "Draft Outline of Proposed Claim (Revised)" which is annexed to Mr Hislop's amended originating process ("Proposed Claim") or claims arising out of substantially the same facts as are set out in that document. 9 The defendants argued that the pre-conditions to the grant of leave to bring the proceedings have not been satisfied. To the contrary, on the defendants' case, Nation Australia was contractually obliged to surrender its interests in the earning agreements and has benefited substantially from the settlement agreement pursuant to which it surrendered those interests. Legal framework 10 Section 237 of the Act provides relevantly: (1) A person referred to in paragraph 236(l)(a) may apply to the Court for leave to bring, or to intervene in, proceedings. (2) The Court must grant the application if it is satisfied that: (a) it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and (b) the applicant is acting in good faith; and (c) it is in the best interests of the company that the applicant be granted leave; and (d) if the applicant is applying for leave to bring proceedings--there is a serious question to be tried; and (e) either: (i) at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or (ii) it is appropriate to grant leave even though subparagraph (i) is not satisfied. 11 As set out in Carpenter v Pioneer Park Pty Ltd (in liq) [2004] NSWSC 973; (2004) 51 ACSR 245 ("Carpenter (No 1)") at [16], the structure of ss 236 and 237 is that "anyone with a particular form of 'insider' status described in s 236(1)(a)" can – seek the court's assistance in taking over the role of the normal decision makers in relation to a particular proceeding. The court's function is essentially a screening function. It must assess against specified criteria the litigation proposal the applicant has in mind for the company. If that proposal is found by the court to meet the criteria, it must grant leave enabling the applicant to pursue it for the company.. Good faith 12 In Re Gladstone Pacific Nickel Ltd [2011] NSWSC 1235; (2011) 86 ACSR 432 ("Re Gladstone"), Ball J stated (at [58]): The requirement that the applicant be acting in good faith has at least two elements. One is that the applicant must honestly believe that the company has a good claim with reasonable prospects of success. The other is that the claim must not be brought for some collateral purpose as would amount to an abuse of process: Swansson [2002] NSWSC 583; (2002) 42 ACSR 313 at [36]. See also Maher [2005] NSWSC 859 at [29]; Gerard Cassegrain & Co Pty Ltd v Cassegrain [2010] NSWSC 91 at [110]-[111]; Fitzpatrick v Cheal [2010] NSWSC 717 at [40]. In my opinion, the applicant must also honestly believe that it is in the best interests of the company that the action be brought. Best interests of the company 13 In Swansson v Pratt [2002] NSWSC 583; (2002) 42 ACSR 313 ("Swansson"), Palmer J said (at [55]-[56]): [55] At the outset, it is important to note that s.237(2)(c) requires the Court to be satisfied, not that the proposed derivative action may be, appears to be, or is likely to be, in the best interests of the company but, rather, that it is in its best interests. In this respect, s.237(2) differs significantly from its counterpart in the Canadian legislation, which requires the Court to be satisfied that the proposed derivative action "appears to be" in the interests of the company, and from s.165(3) of the New Zealand Act which requires that the Court "have regard to ... the interests of the company". These provisions seem to have led the Courts of those countries to the view that the best interests of a company need be considered only in a prima facie way: see e.g. Re Bellman and Western Approaches Ltd (1981) 130 DLR (3d) 193, at 201; Vrij v Boyle (1995) 3 NZLR 763, at 765; Techflow (NZ) Ltd v Techflow Pty Ltd (1996) 7 NZCLC 261,138. [56] The requirement of s.237(2)(c) that the applicant satisfy the Court that the proposed action is in the best interests of the company is a far higher threshold for an applicant to cross. It requires the applicant to establish, on the balance of probabilities, a fact which can only be determined by taking into account all of the relevant circumstances. 14 At [60], Palmer J expressed the view that there should be evidence as to the ability of the prospective defendant to meet at least a substantial part of any judgment in favour of the company in the proposed derivative action so that the court may ascertain whether the action would be of any practical benefit to the company. 15 In Charlton v Baber [2003] NSWSC 745; (2003) 47 ACSR 31 ("Charlton") at [46], Barrett J said: The expression "best interests", taken literally, is apt to create a false impression that some absolute or superlative is in contemplation. Its true meaning emerges from a consideration of other contexts in which it is used. 16 At [52], Barrett J concluded : "Best interests" is thus an expression concerned with a person's separate and independent welfare. Where the concern to which the "best interests" assessment is relevant centres upon possibilities of undue influence and, perhaps, improper purpose, the task is to consider what the putative victim would have done in seeking to protect his or her own position and promote his or her own advantages with such a degree of selfishness as the circumstances will admit. 17 In Re Gladstone at [57], Ball J stated: The requirement that the court be satisfied that it is in the best interests of the company that the applicant be granted leave raises two questions. One is whether it is in the best interests of the company that the action be brought. The other is whether it is in the best interests of the company that it be brought by the applicant. The court must consider the interests of the company as a whole. As Brereton J said in Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 at [44]: The phrase "best interests" directs attention to the company's separate and independent welfare. [Charlton] [52]; Fiduciary Ltd v Morningstar Research Pty Ltd [2005] NSWSC 442, [46]. This imports the familiar concept of the interests of the company as a whole. ... Whether the "best interests" of the company as a whole reflect those of the shareholders taken together in light of the corporate objects, or those of the creditors which will prevail in the context of insolvency, will be influenced by the status of the company. Walker v Wimborne [1976] HCA 7; (1976) 137 CLR 1; 3 ACLR 529; Spies v R [2000] HCA 43; (2000) 201 CLR 603; 173 ALR 529; 35 ACSR 500; [Charlton] [53]. In considering what is in the best interests of the company, it is necessary to consider the prospects of success of the action, the likely costs and likely recovery if the action is successful and likely consequences if it is not. One relevant matter in considering these issues is the nature of any indemnity the applicant has offered to the company if the action is brought and the likelihood that the company will recover under that indemnity. It is also necessary to consider the resources the company will be required to devote to the action and the resources it has available, together with the effect that the action may have on other aspects of its business. Finally, it is necessary to consider whether some other remedy is available to the applicant so as to make the proposed action unnecessary from its point of view: see [Swansson] at [56] ff. 18 Ball J's identification of the matters necessary to consider was approved by Bathurst CJ in Huang v Wang [2016] NSWCA 164; (2016) 114 ACSR 586 ("Huang") at [38] and [67]). 19 In Huang, Bathurst CJ also said (at [57]-[59]): [57] … In Swansson, Palmer J at [24] stated that leave should not be given lightly. He stated that the requirement of best interests requires the applicant to establish on the balance of probabilities that the action is in the best interests of the company, a fact which can only be determined by taking into account all relevant circumstances. That approach has been followed consistently: Goozee at [72]; Morningstar at [46]; Carpenter v Pioneer Park Pty Ltd (in liq) [2004] NSWSC 1007; 51 ACSR 299 at [19]; Chahwan [[2008] NSWCA 52] at [85]. [58] It is correct that these cases were decided at a time when it was considered that proceedings under s 237 of the Act were final in nature, a view held to be incorrect in McEvoy at [4] per Macfarlan JA, Allsop P and Beazley JA agreeing. In my opinion, that does not alter the requirement that an applicant satisfy the court on the balance of probabilities that the proceedings are in the best interests of the company. That is consistent with the words of s 237(2)(c) and recognises the serious nature of an order requiring a company to bring proceedings which it is unwilling to take itself. [59] The appellants were correct in submitting that the best interests of the company means best interests in the sense of its separate and independent welfare: Chahwan at [88]. Best interests, at least assuming the company concerned is solvent, will predominantly reflect the interests of shareholders in that capacity: Charlton at [52] … 20 Generally, it is reasonable to expect that the pursuit of an action by or on behalf of a company against an officer for recovery of compensation for damage done to the company by the officer's breach of duty is in the best interests of the company: cf. MG Corrosion Consultants Pty Ltd v Vinciguerra [2011] FCAFC 31; (2011) 82 ACSR 367 at [60]; Cooper v Myrtace Consulting Pty Ltd [2014] FCA 480 ("Cooper") at [26]; Vigliaroni v Concrete Precast Systems Pty Ltd [2009] VSC 253 at [29]; Maher v Honesett & Maher Electrical Contractors [2005] NSWSC 859 at [52]. 21 In Fiduciary Ltd v Morningstar Research Pty Ltd [2005] NSWSC 442; (2005) 53 ACSR 732 at [47], Austin J said: It seems to me that, where the company in question is a joint-venture vehicle and one of the venturers alleges that the other has acted unlawfully causing the company loss, it will usually be appropriate to allow the complaining venturer to bring proceedings in the company's name against the other venturer and its representatives on the board, even though there are no other shareholding interests than those of the litigants and the effect of success of the litigation will be indirectly to benefit the complaining venturer proportionately to its shareholding. 22 At [51], Austin J observed that: [T]here is a balance to be struck between the prejudice that the company will suffer if claims are pressed unsuccessfully on its behalf and there is an adverse costs order, and the advantage that it will gain, indirectly for the benefit of its shareholders, if the claims are successful. Serious question to be tried 23 In Keenan v Bundaberg Port Authority [2016] FCA 134, Reeves J said (at [40]): This criterion has been held to set a "relatively low threshold to surmount" and it has been compared to the standard applicable to the grant of an interlocutory injunction: see Swansson at [25] and Gaertner at [46]. It has also been observed that this criterion "does not require the Court to enter into the merits of the proposed derivative action to any great degree": see Vinciguerra at [147]. Nonetheless, it is clear on the authorities that "the application must be supported by evidence. A mere 'indication of the evidence' without actual evidence is insufficient": see Vinciguerra at [141] and Gaertner at [47]. Proper parties to s 237 application 24 In Carpenter (No 1), Barrett J rejected an application by a prospective defendant to be joined to a s 237 application, saying (at [16] and [17]): [16] … Part 2F.1A is concerned with the domestic process by which a company makes decisions relevant to initiation and continuation of legal proceedings. The statutory provisions aim to counter the effects of inaction on the part of those who would normally decide such matters internally. In most cases, those persons will be directors whose inaction may be a product of self-interest. ... The provisions do not, in my opinion, have in view the welfare or interests of persons who are, from the company's perspective, "outsiders". They enable anyone with a particular form of "insider" status described in s.236(l )(a) to seek the court's assistance in taking over the role of the normal decision makers in relation to a particular proceeding. The court's function is essentially a screening function. It must assess against specified criteria the litigation proposal the applicant has in mind for the company. If that proposal is found by the court to meet the criteria, it must grant leave enabling the applicant to pursue it for the company. [17] The intended defendant in the proposed proceeding no doubt has an interest of a general kind in the question whether leave should be granted under Part 2F.1A. If leave is granted, that person will be sued (or is likely to be sued). If it is not granted, the person will not be sued, at least at the instigation of the person who has failed to obtain leave under Part 2F.1A. But this cannot, in my view, form a basis for intervention under Part 8 rule 8. ...The question whether leave should be granted under Part 2F.1A can be decided perfectly well in the absence of the intended defendant. No legal liability or other legal consequence will accrue to that person by any grant of leave. The presence and involvement of the person when the leave question is argued is in no sense "necessary" to an effectual and complete determination of the matters with which Part 2F.1A is concerned. 25 In Chahwan v Euphoric Pty Ltd [2006] NSWSC 1002 ("Chahwan"), Barrett J granted the defendant leave to be heard on a s 237 application brought following the commencement of proceedings. In that case, the s 237 application had been served on the defendant and it was only in the course of the application that the plaintiff submitted that the defendant should not be heard. At [9], Barrett J stated: Mr Kidd submitted, on the basis of the decisions in [Carpenter (No 1)], Roach v Winnote Pty Ltd [2006] NSWSC 231; (2006) 57 ACSR 138 and Peters v Coastace Pty Ltd [2006] NSWSC 289; (2006) 57 ACSR 241, that the question of a grant of leave under s.237 is a matter of domestic concern within the company concerned (here, Bycoon), involving a decision as to whether the company should, under the auspices of the applicant for leave (who must be a member or former member of either the company or a related body corporate, or a present or former officer of the company) be allowed to cause the company to bring proceedings that the normal decision makers within the company are unlikely to cause it to institute. In ordinary circumstances, the persons properly interested in such an application are those I have called "the normal decision makers" being, in addition to the applicant, those who are within the categories qualified to apply for leave under s.237. 26 In Syndicate Mortgage Solutions Pty Ltd v El-Sayed [2010] NSWSC 348, Brereton J granted leave to the prospective cross-defendants (who were not already parties to the proceeding) to be heard on a s 237 application, concluding (at [7]) that they had a legitimate interest in being heard on the application, in particular, because it may have significant costs implications for them in connection with the proceedings. 27 In Huang, Barrett AJA agreed with Bathurst CJ's reasons for dismissing the appeal but added some observations on the question whether an order granting leave under s 237 is final or interlocutory. At [85]-[87], his Honour said: [85] A person with standing under s 236(1) may file a s 237 leave application which merely names the company itself as respondent and identifies the case that the person wishes the company to pursue against some unrelated third party. A recent example of such a case is Cooper v Myrtace Consulting Pty Ltd [2014] FCA 480. Because the reason for the application is usually the unwillingness of the company to bring the proceeding in question, the likelihood is that the company will oppose the application. In such a case, the debate is solely on an issue of internal governance and domestic concern: whether the company should sue the third party and whether the applicant, who otherwise lacks the ability to put the company into motion, has established a statutory entitlement to act on the company's behalf in that respect. The only persons legitimately interested in that debate are the applicant and the company. [86] When a s 237 application is framed and advanced in the way just described, the only parties to the controversy before the court are the applicant and the company. It follows that an order granting leave under s 237 in such a case is an order that finally disposes of the rights of those parties regarding the relevant subject matter, being the question whether the applicant should be permitted to bring the particular action on the company's behalf. [87] Generally speaking, the unrelated third party that the s 237 applicant wishes to see the company sue is not a necessary party to the s 237 application …. But if, as in McEvoy v Caplan, the application for leave is brought in existing proceedings and the applicant actively involves the third party in the application, that issue is preempted or sidestepped by the applicant's own decision to proceed in that particular way: see, for example Chahwan v Euphoric Pty Ltd [2006] NSWSC 1002 at [9]-[15]. 28 The reference to Cooper is curious. In that case, the prospective defendant was not a party to the proceeding. However, it is not clear in what sense the prospective defendant might have been described as an "an unrelated third party" since he was the other shareholder and sole director of the defendant company. His Honour did not address the position of "normal decision makers", considered in Chahwan at [9]. In the absence of any such reference, and having regard to his Honour's references to the position of an "unrelated third party", I do not read these observations as detracting from the proposition that the "normal decision makers" are persons who are properly interested in a s 237 application. 29 I am satisfied that, while not necessary parties to the application, the first to fourth defendants are proper parties to the application as each of them is within the scope of the categories qualified to apply for leave under s 237: Paltar is a "member … of a related body corporate" of Nation Australia within the meaning of s 236(1)(a)(i) of the Act; the second to fourth defendants are "officers" of Nation Australia within the meaning of s 236(1)(a)(ii). Background facts 30 Mr Hislop has been a shareholder and director of Nation Wyoming since June 1999. During various times from 2003 to earlier in 2017, Mr Hislop served as the chief executive officer ("CEO"), president and chief financial officer ("CFO") of Nation Wyoming. 31 In about September 2013, Mr Hislop commenced discussions with Marc Bruner, the founder and then majority shareholder of Paltar. Mr Bruner has been a director of Paltar since its registration as a company in March 2011. Agreement to issue Nation Wyoming shares to Paltar 32 Following the discussions between Mr Hislop and Mr Bruner, in October 2013, Nation Wyoming and Paltar entered into a written agreement regarding the transfer and sale by Paltar of certain oil and gas permit and application assets, initially including EP231, EP232, EP234 and EP237 ("Paltar/Nation Wyoming share agreement"). Among other things, the agreement provided for the issue of 600 million shares in Nation Wyoming to Paltar. The agreement was amended and restated on numerous occasions, and in its most recent form provided for the issue of 900 million shares in Nation Wyoming to Paltar. 33 In early 2015, there were discussions between Mr Bruner, David Siegel and others concerning a capital raising of up to US$165 million to fund development costs in relation to Paltar's exploration permits. David Siegel was appointed as a director of Nation Wyoming on 15 September 2015. 34 By a document dated 30 August 2015, Nation Wyoming and Paltar agreed a "Third Amended and Restated Agreement regarding Paltar Petroleum Limited Australia Permits & Applications". The agreement provided for the issue of 600 million shares in Nation Wyoming, referred to as "Earning Agreement Shares" on certain terms, including cll 11 and 12 on which Mr Hislop now relies. 35 As subsequently amended, cl 11 provides: All of the Earning Agreement Shares or, in the event that an Exchange Transaction is consummated, all shares of the common stock of Nation issued to the Paltar shareholders pursuant to the terms of the Exchange Documentation (the "Exchange Shares"), shall be held in an escrow account subject to the terms of an escrow agreement. The escrow agreement shall provide, among other things, that (A) in the event an Exchange Transaction is consummated on or prior to December 16, 2015, the Exchange Shares issued in connection therewith shall be held in the escrow account for a period of at least 3 years, or (B) upon the issuance of the Earning Agreement Shares, all of the Earning Agreement Shares shall be held in the escrow account for a period of at least (1) with respect to a percentage of Earning Agreement Shares then beneficially held by Bruner, 5 years, and (2) with respect to a percentage of Earning Agreement Shares beneficially held by persons other than Bruner, 3 years, in each case subject to earlier release by the escrow agent. The escrow agreement shall provide that the escrow agent will be a newly formed Delaware limited liability company that shall be managed by a board of managers. The board of managers shall be composed of the following 4 members, each of whom shall have equal voting rights under the terms of the escrow agent's governing document: (a) 2 managers appointed by Bruner and David Siegel, an individual resident of Denver, Colorado ("Siegel"); so long as each of them continues to hold directly or indirectly at least 1/2% of the issued and outstanding shares of Nation's common stock, or, if one or both of them does not hold at least 1/2% of the issued and outstanding shares of Nation's common stock, 1 or 2 managers, as the case may be, appointed by the Nation Board (as defined below) that does not hold any equity securities of Paltar; (b) 1 manager appointed by Hislop, so long as he continues to hold directly or indirectly at least 1% of the issued and outstanding shares of Nation's common stock, or, if Hislop does not hold at least 1% of the issued and outstanding shares of Nation's common stock, 1 manager appointed by the Nation Board that does not hold any equity securities of Paltar; and (c) the Independent Director (as defined below). In the event of deadlock among the members of the board of managers of the escrow agent , the chairman of the board of managers shall possess an additional tie-breaking vote. The governing document of the escrow agent shall provide that the chairman of the board of managers of the escrow agent be Bruner or, if Bruner ceases to serve on the board of managers, then a person elected by the board of managers after the vacancy created by Bruner's departure has been filled. 36 Clause 12 provides: At the time of issuance of (A) the Earning Agreement Shares, Paltar and Hislop or (B) the Exchange Shares, Hislop, Bruner, Siegel, Darrel Causbrook and their affiliates, whichever of (A) and (B) occurs earlier, shall enter into a shareholder agreement (the "Shareholder Agreement") which shall include a covenant that Paltar and Hislop will each vote their Nation common shares to increase the number of Nation directors to 5 and, for 5 years thereafter, to elect Hislop (or his nominee), Darrel Causbrook, Siegel, and Bruner (or such other nominees as Paltar may nominate from time-to-time), so long as each of them directly or beneficially holds at least 1% of the issued and outstanding shares of Nation's common stock, and one independent person as members of the Board of Directors (the "Nation Board"), although there may be as many other directors of Nation as it shareholders may determine. Prior to any issuance of the Earning Agreement Shares or the consummation of an Exchange Transaction (but not thereafter), Hislop agrees to vote his shares of Nation common stock to elect Hislop, Darrel Causbrook, Siegel, Bruner and one independent person that is also not an equity holder of Paltar (the "Independent Director") as members of the Nation Board. 37 A document dated 31 May 2016, entitled "Fourth Amendment to Third Amended and Restated Agreement" provides relevantly: Item 3 of the Agreement is hereby amended in its entirety as follows: Within seven (7) days after delivery to Nation of Paltar's audited financials as set forth in Item 18(d) of this Agreement, Nation shall issue an aggregate of 900,000,000 Nation common shares (the "Earning Agreement Shares") to Paltar, with an agreed upon value of US$0.03 and one-third cent per share. 38 Mr Hislop's evidence was that Nation Wyoming issued 900 million shares to Paltar, which resulted in Mr Hislop's shareholding in Nation Wyoming being reduced from about 97% to about 14% and Paltar becoming the holder of approximately 85% of the shares in Nation Wyoming. 39 The arrangements in cll 11 and 12 were never formalised. Earning agreements 40 Nation Australia was registered as a company on 19 June 2015. 41 From about 30 August 2015, Nation Australia entered into six earning agreements with Paltar, with respect to each of the six EPs held by Paltar, and a seventh earning agreement with Officer Petroleum Pty Ltd ("Officer"), a subsidiary of Paltar, with respect to a seventh earning permit, earning permit EP468. 42 Between about 30 September 2015 and about 31 March 2016, Paltar issued Nation Australia with 18 invoices for "reimbursements of costs" for specified years, being "Year 3" and "Year 4" (and, in one case "Year 2"). In the later invoices, the invoices also specify particular quarterly periods. The invoices do not specify a due date. 43 None of these invoices was paid. Mr Siegel's undisputed evidence was that Nation Australia had no cash at bank nor access to funds at any point at least up until 19 June 2017 when he was removed as a director. 44 On about 31 May 2016, the six earning agreements were amended and restated by agreements dated 31 May 2016. These are the latest versions of the earning agreements. The May 2016 earning agreements contain substantially the same material terms for each permit. 45 Clause 2.1 of the earning agreements provides for the promissory note mentioned earlier. It provides that the principal amount of the promissory note reflects the "the total cash consideration due under" the six earning agreements (and the earning agreement with Officer). 46 Clauses 3.2(c)(vi) and 6.2 of the earning agreements confers valuable rights upon Nation Australia, in the form of Paltar's promises to pay to the NT government "all periodic payments, taxes, fees and other amounts pertaining to Operations" and a contingent right to a 75% overriding royalty revenue interest ("ORRI") with respect to petroleum produced following the grant of production licences. 47 Section 5 of the earning agreements is entitled "Work Programs and Budgets". Clause 5.1 of the earning agreements provides: The Work Program and Budget detailing the Operations to be performed in respect of the Permit for the fourth and fifth Permit Years is attached as Schedule 2. 48 Schedule 2 provides relevantly: Work to be performed on or for the benefit of the Paltar Blocks: Permit Year 4 (28 Aug 2015 to 27 Aug 2016) Begin drilling one horizontal exploration well $10,465,508 Geological and geophysical work 415,848 Engineering, Geological and Geophysical Services 1,395,447 $12,276,803 Permit Year 5 (28 Aug 2016 to 27 Aug 2017) Complete the horizontal exploration well begun in Permit Year 4 $19,406,240 Geological and geophysical work 4,019,864 Engineering, Geological and Geophysical Services 1,701,650 $25,127,754 49 Clause 5.3 of the earning agreements for EP136 and EP143 provides: Funding of Work Program Expenses (a) Nation agrees to contribute 100% of the actual Work Program Expenses. (b) Nation must pay all Work Program Expenses as follows: (i) As soon as practicable after Nation has such funds conveniently available, Nation will deliver to Paltar the full amount of the Work Program and Budget costs actually incurred for the third Permit Year, together with the Work Program and Budget costs estimated for the fourth Permit Year, as shown in Schedule 2; (ii) Estimated Work Program Expenses for subsequent years will be delivered to Paltar on or before the date which is the 150th day anniversary following the date on which the applicable Permit was granted; and (iii) Amounts in addition to the estimated amounts set forth in approved Work Programs and Budgets, whether incurred as a result of cost overruns, unforeseen events, or otherwise, will be delivered by Nation to Paltar in accordance with the cash call procedures set forth in clause 1.6 of the Accounting Procedure. 50 Clause 5.2 of the other earning agreements are relevantly similar to cl 5.3 above. 51 "Permit Year", "Work Program Expenses" and "Work Program and Budget" are defined in cl 18.1. 52 "Permit Year" is defined to mean a year beginning on a stated date and ending on a stated date in the following year. 53 "Work Program Expenses" means: [T]he costs and expenses incurred, paid or payable by the Operator in accordance with the provisions of this Agreement or otherwise authorized by the Operating Committee in connection with conducting Work Programs and Budgets. 54 "Work Program and Budget" means: [A]n annual work program prepared by Paltar setting out the Operations to be undertaken during that year under this Agreement in respect of the Permit, together with the estimated amounts required to perform such work program. 55 Annex 1 to the earning agreements is a document entitled "Accounting Procedure". Clause 1.6 is entitled "Payments and Advances". Clause 1.6.8 provides: If Paltar does not ask Nation to advance its share of estimated cash requirements, Nation shall pay its share of cash expenditures within 10 days following receipt of Paltar's billing. 56 Section 7 of the earning agreements is entitled "Default". Clause 7.1 of the earning agreements for EP136 and EP143 provides: Default and Notice Nation will be in default under this Agreement if it fails to contribute any portion of the Work Program Expenses when due under clause 5.3(b). Paltar shall promptly provide Nation written notice of such default. 57 Clause 7.1 of the other earning agreements is similar, except that it refers to cl 5.2(b). 58 Clause 7.3(a) provides: If the Nation default relates to a failure to pay the Work Program Expenses actually incurred for the third Permit Year or to contribute the Work Program Expenses for the further or fifth Permit Years, and if Nation fails to remedy such default within 30 days following Paltar's notice, then Nation, upon the written request of Paltar, shall surrender its entire interest in this Agreement to Paltar, free of all encumbrances arising by, through or under Nation, and shall execute a written surrender instrument in such form as reasonably may be requested by Paltar. As a result of such surrender, Nation shall have no right ever to receive any interest whatsoever in the Permit or Paltar Blocks and no right ever to recover any amounts it previously expended or contributed, whether under this Agreement, in quantum meruit, or under any other legal or equitable principle. 59 Clause 7.6 provides: No penalty The remedies in this clause 7 have been selected by the Parties in light of their recognition that Paltar is not anticipated to have the funds necessary to pay Work Program Expenses for the fourth and fifth Permit Years, so that the Permit likely will be lost in its entirety if Nation fails to make the contributions promised for those years. In the years thereafter, the parties recognize that Paltar may be able to go forward with others based upon prior work results, but only if it can obtain the interest previously held by Nation. Nation agrees that the remedies conferred by this clause 7 do not constitute a penalty or an unreasonable forfeiture and are necessary to ensure the maintenance of the Permit in good standing. Nation acknowledges that it is essential to the viability of the Permit that Nation comply with its financial obligations in a timely manner, and that assumption by Paltar of the obligations of Nation under this Agreement is good and valuable consideration for the exercise by Paltar of its rights to acquire Nation's interest in this Agreement under this clause 7. 60 There are a further six invoices from Paltar to Nation Australia dated 30 June 2016. Five seek reimbursement for costs "for Year 4 per earning agreement … for the period 1 April 2016 to 30 June 2016". One seeks reimbursements of costs "for Year 3 per earning agreement for EP232 for the period 1 April 2016 to 30 June 2016". Fracking moratorium 61 On 14 September 2016, the Chief Minister of the NT announced a moratorium on, and a scientific inquiry into, hydraulic fracturing of unconventional onshore reservoirs in the NT. The announcement stated that the moratorium will remain in place until the government has considered the findings of the inquiry. When asked what expenses, if any, does the moratorium not limit in the short to medium term, Mr Caetano answered "Zero at this time". 62 There are six invoices from Paltar to Nation Australia dated 30 September 2016. Five seek reimbursement for costs "for Year 4 per earning agreement … for the period 1 July 2016 to 30 September 2016". One seeks reimbursements of costs for Year 3 per earning agreement for EP232 for the period 1 July 2016 to 30 September 2016". 63 On 8 November 2016, the delegate of the NT Minister for Primary Industry and Resources extended the terms of permits EP136 and EP143 to 27 August 2018, stating that permit year 4 would end on 27 August 2017 and permit year 5 would end on 27 August 2018. There is evidence that similar extensions were granted for the other exploration permits except EP232. 64 There are six invoices from Paltar to Nation Australia dated 30 December 2016. Each seeks reimbursement for costs "for Year 4 per earning agreement … for the period 1 October 2016 to 30 December 2016". 65 A quarterly report for the period ended 31 December 2016, certified by Mr Hislop, and filed by Nation Wyoming with the Securities Exchange Commission ("SEC") records current liabilities for "Accounts payable and accrued expenses – related party" of US$6,705,845. Mr Carmen (Tony) Lotito's evidence was that this amount included US$4.8 million of unpaid invoices rendered by Paltar to Nation Australia. Mr Lotito is executive vice president of Paltar. 66 The quarterly report also states: Effective 30 December 2016, exploration permit 468 was cancelled by the Western Australia government. As a result, effective December 30, 2016 Nation Australia has terminated the related EP 468 Earning Agreement dated May 31, 2016 with Officer, and the Company has recognized an impairment expense of $5,565,664. The Company will continue to focus its resources on the development of the Northern Territory Exploration permits in the Beetaloo Basin and the Victoria River Basin. To implement any new business plan, significant financing will be required and the Company will need to be successful in its efforts to identify, acquire and develop a new business venture. … Future Financings As of December 31, 2016, we had cash of $393,434. We currently do not have sufficient funds to acquire and develop any opportunities, including the opportunity presented by the third amended and restated agreement with Paltar Petroleum. Paltar Nation was formed for the purpose of funding exploration expenditures required to be provided by the wholly-owned subsidiary of Nation Energy Inc., Nation Energy (Australia) Pty Ltd., which is expected to become a wholly-owned subsidiary of Paltar Nation, to explore and develop all or a portion of 775,292 acres of certain Australian exploration permits. We also anticipate continuing to rely on shareholder loans or equity sales of our common stock in order to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity or arrange for more debt or other financing to fund any future activities. Events of 2017 67 At the start of 2017: (1) Nation Wyoming's directors were Mr Hislop, Mr Siegel and Mr Causbrook. (2) Nation Australia's directors were Mr Hislop, Mr Siegel, Mr Causbrook and Andrew Logan. (3) Mr Logan was the CEO of Nation Australia. Dealings between Paltar and Fortem 68 Mr Caetano gave evidence that, in his positions as chairman and CEO of Fortem Resources Inc (previously known as Strongbow) ("Fortem"), he was approached by Mr Bruner on about 14 March 2017 concerning Paltar's exploration permits. Mr Caetano was told by Mr Bruner that Nation Australia was not going to meet its obligations to Paltar under the earning agreements. Mr Caetano's affidavit evidence was that, around this time, he and Mr Bruner discussed the possibility of a transaction between Paltar and Fortem through which Fortem would fund Paltar's obligations under the exploration permits. 69 According to Mr Caetano's affidavit evidence, also on about 14 March 2017, Mr Caetano attended a meeting with Mr Bruner and Mr Siegel at which Mr Bruner proposed to Mr Siegel consideration of a joint venture partnership between Nation Australia and Fortem. According to Mr Siegel, Mr Bruner said that he wanted to transfer Nation Australia's interest under the earning agreements to Fortem. In cross-examination, Mr Caetano agreed that Mr Bruner said words to the latter effect to Mr Siegel in his presence. Mr Siegel rejected the proposal. 70 Mr Bruner's evidence was that he asked Mr Siegel: "Would Nation Australia consider transferring some interests in the Earning Agreements to Strongbow as part of a possible transaction where Strongbow would provide the financing necessary to fund Paltar's obligations under the Exploration Permits?" Mr Bruner said that, following Mr Siegel's rejection of the proposal, Mr Siegel "refused to engage in further discussions and did not provide any alternative proposals to enable Nation Australia to meet its obligations under the Earning Agreements or otherwise raise working capital to preserve Nation Australia's and Paltar's interests in the Exploration Permits". That evidence was admitted subject to a limitation pursuant to s 136 of the Evidence Act 1995 (Cth) that it was not admitted as evidence of the fact of Nation Australia's obligations under the earning agreements, but rather only as evidence of Mr Bruner's subjective understanding of those obligations. 71 Mr Bruner said: Under these circumstances, I thought that action had to be taken to save the Exploration Permit assets from forfeit to the Northern Territory government. I believed that Nation Australia, Siegel and Hislop would not be able to raise the financing necessary to prevent the assets from being forfeited and had no plan to accomplish this any time in the future. 72 Based on his affidavit, the "action" that Mr Bruner consequently took or procured included the events, described below, which Mr Hislop characterises as the "Nation Wyoming board stacking" and the "Nation Australia board stacking". 73 From March to July 2017, Mr Caetano and Mr Bruner were discussing the possibility of a 50/50 joint venture between Paltar and Fortem through which Paltar would pursue the exploration interest. By mid-June 2017, there was on the table, in communications involving Mr Caetano, a proposal that Nation Australia give up its rights through a restructuring. 74 There are six invoices from Paltar to Nation Australia dated 31 March 2017. Each seeks reimbursement for costs "for Year 4 per earning agreement … for the period 1 January 2017 to 31 March 2017". 75 The total of the 42 invoices issued by Paltar to Nation Australia between 30 September 2015 and 31 March 2017 is $6,796,607.75 (or US$5,195,326.96). 27 April 2017 76 On 27 April 2017, Mr Bruner executed a "Majority Written Consent of Shareholder in Lieu of a Meeting" ("majority written consent") that had the effect of increasing the Nation Wyoming board from three directors to seven directors and appointing Mr Caetano, Mr Madzej, Mr Lotito and Robert Buljevic to the four newly created director positions. Mr Bruner gave evidence of these events under the heading "Paltar's Efforts to Save the Exploration Permits". Mr Madzej is or was the chief operating officer ("COO") of Fortem. Mr Buljevic is a friend of Mr Caetano. 77 When Mr Bruner signed the majority written consent, he purported to utilise the earning agreement shares (which were the only shares Paltar held in Nation Wyoming). 11 May 2017 78 On 11 May 2017, a meeting of the board of Nation Wyoming was held and the board voted to: (1) replace Mr Hislop with Mr Caetano as CEO and president of Nation Wyoming; (2) replace Mr Siegel with Mr Caetano as chairman of the board of directors; and (3) appoint Mr Lotito to the role of COO. 79 On 31 May 2017, Mr Hislop resigned as CFO of Nation Wyoming. 19 June 2017 80 On 17 June 2017, Mr Hislop and Mr Siegel were given notice of a meeting of Nation Wyoming to be held on 19 June 2017. 81 On 19 June 2017, a meeting of the board of Nation Wyoming was held and the board passed resolutions determining that Nation Wyoming would convene a special general meeting of Nation Australia to consider and, if thought fit, to pass certain ordinary resolutions, including that Messrs Causbrook, Logan, Siegel and Hislop be removed as directors of Nation Australia; that Messrs Causbrook, Madzej and Caetano be appointed as directors of Nation Australia; and that Mr Caetano be appointed as the chair of the board of directors and CEO of Nation Australia. Neither Mr Hislop nor Mr Siegel were present at the meeting. 82 Later on 19 June 2017, the special general meeting of Nation Australia was held, during which: (1) Mr Causbrook, Mr Logan, Mr Hislop and Mr Siegel were removed as directors of Nation Australia; (2) Mr Causbrook, Mr Madzej and Mr Caetano were appointed as directors of Nation Australia; and (3) Mr Caetano was appointed as CEO and chairman of the board of directors of Nation Australia. July 2017 83 On 3 July 2017, Mr Lotito sent an email to Mr Causbrook and Belinda Nisbet, copied to Mr Caetano and Mr Livesley, Paltar's lawyer, which stated relevantly: Nation Energy Inc, Nation Energy Australia, Paltar and Fortem need to finalize the: (1) Paltar Default Notice; (2) Settlement Agreement and (3) The Fortem/Paltar Private Placement … 84 On 7 July 2017, Fortem's lawyer, Mr McTavish, sent an email to Paltar's lawyer, Mr Livesley, concerning the documentation of the "Fortem/Paltar agreement". The email contains a summary of the proposed transaction which stipulated the following condition: Entry into a Joint Venture Agreement, whereby Fortem and Paltar agree to advance and develop Paltar's existing O&G assets on a 50/50 basis … The email went on to say: Can you advise if Paltar is subject to any outstanding litigation or demands and the particulars thereof? We understand that there is a gentleman by the name of John Hislop that has advanced significant funds to the company. We would like to know the status of those loans, whether they are in default, and the rights Mr. Hislop has with respect to the repayment thereof, including whether he could frustrate or delay the proposed transaction, petition Paltar into bankruptcy, etc. Alternatively, what his rights would be to stall a potential transaction, such as the Australian equivalent to an oppression remedy in Canada, or whether the transaction above would trigger dissent rights. Mr McTavish's email concluded: We apologize in advance for the length of this email, but I will be out of the office tomorrow (although reachable by phone and email) and I wanted the parties to get a jump on the transaction. … Our client wishes to bypass an LOI or term sheet and move straight to the definitive stage … Default notice issued to Nation Australia 85 On 10 July 2017, Paltar issued a notice of default to Nation Australia in respect of the earning agreements. The notice refers to the six earning agreements and states that the notice is issued: … under all of the Earning Agreements because Nation has failed to contribute a portion of the Work Program Expenses due under Clause 5.3(b) as follows: The Total Work Program Expenses related to EP136, EP143, EP231, EP232, EP234, EP237 of US$5,195,327 were due and payable to Paltar Petroleum Limited on or about April 15, 2017 … 86 According to Mr Lotito, the US$5,195,327 figure in the default notice represents the total amount owed by Nation Australia to Paltar as at 31 March 2017. It corresponds with the total of the 42 invoices issued by Paltar to Nation Australia, referred to above. 87 There is no evidence of unsatisfied demands being made of Nation Australia by Paltar prior to the default notice. 88 Mr Caetano agreed in cross-examination that he was involved in finalising the form of the default notice. There is a serious question as to whether this conduct involved a failure on Mr Caetano's part to avoid a conflict of his duties as a director of Nation Australia and his duties as an officer of Fortem or his interests as a member of Fortem. Mr Caetano agreed that, when the notice was served, he understood that it was a "done deal". Having participated in finalising the form of the default notice, Mr Caetano considered that there was no occasion for him to consider the notice any further after it was served, and he did not do so. Nor is there any evidence that any steps were taken by the other directors of Nation Australia, Mr Madzej or Mr Causbrook, to consider whether the default notice was valid or to remedy any default. 89 On 17 July 2017, Mr Bruner became a director and CEO of Fortem. Surrender and cancellation of earning agreements 90 By email dated 1 August 2017, Mr Siegel and Mr Hislop were provided with notice of a board meeting of Nation Wyoming to be held on 4 August 2017 together with minutes of the meeting of 19 June 2017 and the following draft agreements: (1) "Surrender and Cancellation of Earning Agreements" for the six earning agreements between Nation Australia and Paltar; (2) "Surrender and Cancellation of EP 468 Earning Agreement" between Nation Australia and Officer; and (3) "Settlement Agreement and Release of All Claims" between Nation Wyoming, Nation Australia, Paltar and Officer ("settlement agreement"). 91 On 4 August 2017, Mr Siegel and Mr Hislop attended the board meeting of Nation Wyoming by telephone. According to Mr Siegel and Mr Hislop, Mr Siegel attempted to state why he thought that the board should not proceed in the proposed manner, but he was shut down. According to Mr Caetano, the members of the board who were not directors, officers or shareholders of Paltar (namely himself, Mr Madzej and Mr Buljevic), voted to accept the settlement agreement. 92 On 5 August 2017, the board of directors of Nation Australia (excluding Mr Causbrook who abstained from voting) approved the settlement agreement. 93 Although he abstained, there is evidence that Mr Causbrook was involved in the process of determining the terms of the settlement agreement. That evidence raises a serious question as to whether, by this involvement, Mr Causbrook failed to avoid a conflict of his duties as a director of Nation Australia and his duties as a director of Paltar. 94 On 9 August 2017, Mr Caetano executed the settlement agreement on behalf of Nation Wyoming and Nation Australia. The settlement agreement provided for: (1) the immediate surrender by Nation Australia of all of its rights under the six earning agreements; (2) a debt for equity exchange, by which Paltar agreed to accept shares in Nation Wyoming in exchange for "the cancelation of certain debts owed to Paltar and/or Officer, and the settlement of certain damages incurred by Paltar and/or Officer", comprising: (i) the settlement of damages by conversion of the "EP 468 Impairment" (defined as a loss suffered by Officer in respect of the cancellation of EP486 by the NT Government, that loss being valued at US$5,797,476.00), at a conversion rate of US$0.05 per share, into 115,949,520 fully paid shares in Nation Wyoming issued to Paltar; (ii) the cancelation of debt by conversion of the "EP 468 Expenses" (defined as a debt owed by Nation Australia to Officer in respect of unpaid work permit expenses and other charges payable under the EP486 earning agreement totalling US$1,029,955.53), at a conversion rate of US$0.05 per share, into 20,599,110 fully paid shares in Nation Wyoming issued to Paltar; (iii) the cancelation of debt by conversion of the "Work Permit Expenses" (defined as a debt owed by Nation Australia to Paltar in respect of unpaid work permit expenses and other charges payable under the EP486 earning agreement totalling US$5,195,325.96), at a conversion rate of US$0.05 per share, into 103,906,540 fully paid shares in Nation Wyoming issued to Paltar; and (iv) the cancelation of debt by conversion of the amounts owed to Paltar by Nation Australia under the promissory note (being US$19,368,913.78), at a conversion rate of US$0.05 per share, into 387,378,275 fully paid shares in Nation Wyoming issued to Paltar. (3) the grant of a 5% ORRI to Nation Wyoming in consideration for which Nation Wyoming agreed to issue Paltar a further 500 million shares; and (4) a waiver and release in favour of Nation Wyoming and Nation Australia from any claims or obligations arising under the earning agreements. 95 On 8 August 2017, Mr Livesley sent an email to Mr McTavish, copied to Mr Caetano, Mr Lotito and Mr Causbrook referring to Mr McTavish's 7 July 2017 email, and saying: Just following up on your email below. I had anticipated further instructions, but understand the matter is in your court to prepare said term sheet. I have mentioned to Paltar the issues around the takeover code which will be relevant here. Perhaps we could have a discussion re the current status. Filing of s 237 application 96 The s 237 application was filed on 11 August 2017. 97 On 15 August 2017, Mr McTavish sent an email to Mr Liveseley, saying: "I'm told that the Paltar/Fortem transaction is on pause for the time being so we haven't pursued a term sheet at this time." Mr Caetano's evidence 98 Mr Caetano gave the following affidavit evidence: No agreement of any kind has ever been entered into between Fortem, on the one hand, and Nation, Nation Australia, Paltar or third parties on the other hand, regarding the provision of any financing relating to the Exploration Permits or meeting Nation Australia's obligations under the Earning Agreements. Fortem has never entered into an agreement pursuant to which it might or could be transferred, assigned or receive any rights under or in connection with the Earning Agreements. Fortem has not been transferred, assigned or received any rights under or in connection with the Earning Agreements. In my current position as chief executive officer of Fortem, I am aware that Fortem has no interest at this time in entering into any negotiations with Paltar in relation to any rights or interests under the Earnings Agreements. 99 Mr Caetano also gave evidence of his evaluation of the draft settlement agreement and of his conclusion that it was in the best interests of Nation Australia to accept the settlement agreement. Mr Caetano's considerations included his belief that there had been "a clear, and essentially inarguable default" of the payments terms found in cl 5.3(2)(b)(ii) (or cl 5.2(2)(b)(ii)) of the earning agreements. At the hearing, senior counsel for the defendants, Mr Henry SC, did not rely on this provision to argue that there had been default. 100 Mr Caetano also referred to a valuation of the ORRI for "EP136 contingent resources" prepared by Sigma Cubed, an oil and gas engineering firm. The valuation concluded that a 5% portion of the ORRI was worth US$17.8 million (risked) and US$342 million (unrisked). That evaluation was provided by letter dated 11 July 2017 to Mr Caetano as CEO of Nation Wyoming, apparently on the basis of a list of assumptions entitled "Paltar-Fortem Australia 50/50 Joint Venture as of 7/1/2017". Senior counsel for Mr Hislop, Mr Leopold SC, noted that this valuation appears to relate to only a fraction of the 75% ORRI contingent rights under the six earning agreements. 101 In his affidavit, Mr Caetano's stated considerations included: [T]he fact that under Settlement Agreement the ORRI would provide value to Nation Australia without requiring the expenditure of any working capital now or in the future. 102 In evidence in chief, Mr Caetano corrected this evidence to refer to Nation Wyoming. However, he did not seek to correct his statement that: Based upon my 20 years of business experience, including 10 years in the oil and gas industry, I concluded that Nation Australia was likely to receive significantly greater value if it (i) accepted the Settlement Proposal, and obtained the ORRI and (ii) allowed Paltar to raise funds necessary to meet its obligations under the Exploration Permits, thereby generating revenues that would accrue in part to Nation Australia (pursuant to the terms of the ORRI). 103 The conclusion in the latter passage is expressly based on the false proposition that Nation Australia would receive value from the settlement in the form of the ORRI. In cross-examination, Mr Caetano sought to maintain that the 5% ORRI granted to Nation Wyoming provided an "indirect benefit" to Nation Australia on the basis that Nation Australia is a wholly owned subsidiary of Nation Wyoming and suggested that the settlement agreement "would give Nations 5 per cent overriding royalty". I accept Mr Leopold SC's submission that Mr Caetano was dissembling at best when he gave that evidence. I do not accept that Mr Caetano ever considered that the ORRI "would provide value to Nation Australia" or that Nation Australia was likely to receive value under the settlement proposal if it accepted the proposal and "obtained the ORRI" because, despite Mr Caetano's affidavit evidence, there was never any proposal that the ORRI would be obtained by Nation Australia under the settlement agreement. On Mr Caetano's oral evidence: "It was clear that the 5 per cent royalty would go to Nation Wyoming which would reflect Nation Australia." I accept the former part of that evidence. The proposition that the grant of a royalty to Nation Wyoming "would reflect Nation Australia" is nonsense. 104 Consequently, and despite Mr Caetano's affidavit evidence, I do not accept that Mr Caetano ever determined that it was in the best interests of Nation Australia to accept the settlement agreement. Consideration 105 The defendants did not dispute that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them. Accordingly, I am satisfied as to s 237(2)(a). Is there a serious question to be tried? 106 It is not in dispute that Nation Australia had the opportunity to earn a significant revenue stream pursuant to the earning agreements. In cross-examination, Mr Caetano accepted that under the settlement agreement, Nation Australia gave up very valuable potential rights in relation to each of the six earning agreements. 107 Mr Leopold SC submitted that the Court should ask itself the following question: If the default notice was legitimate and defensible, then why did Paltar (through Mr Bruner) have to stack the Nation Wyoming board and the Nation Australia board with associates of Paltar, Mr Bruner and Fortem? Mr Henry SC did not offer an answer to this question. I accept Mr Leopold SC's submission that, at least at a "serious question to be tried" level, the answer is that the surrendering of all of Nation Australia's assets in the manner described above was the product of equitable fraud; statutory unconscionable conduct; breach of directors' duties (including fiduciary duties – a failure by Mr Caetano to avoid a conflict between his duties to Nation Australia and his duties to and interest in Fortem); knowing receipt by Paltar of benefits accruing from breaches of fiduciary duty; and misleading or deceptive conduct. These claims, and the appropriate corresponding relief, are articulated in the Proposed Claim. 108 On the facts set out above, Mr Hislop has established a serious question to be tried in relation to the Proposed Claim, including in relation to the following matters. To be clear, the findings in [109] to [122] below are not made on a final basis: my finding is that there is a serious question to be tried in relation to each of the matters set out in those paragraphs. The Paltar/Nation Wyoming share agreement 109 The Paltar/Nation Wyoming share agreement set out the rights and obligations of Paltar and Nation Wyoming in respect of the issuance to Paltar of 900 million earning agreement shares in Nation Wyoming. It contained terms relating to voting rights in the earning agreement shares as set out in the Proposed Claim. The voting restrictions 110 Pursuant to cl 11, there were voting restrictions on Paltar's earning agreement shares, having the effect that Paltar was not entitled to or could not conscionably vote the shares alone. The voting restrictions arose from the requirement to place the shares in an escrow account to be managed by a newly formed company, to be managed by a board of managers who would have voting rights in relation to the shares. Although the arrangements referred to in cll 11 and 12 of the Paltar/Nation Wyoming share agreement were never formalised, there is a serious question as to whether, by agreeing to cl 11, the parties intended to restrict the way in which Paltar could utilise the earning agreement shares. Mr Henry SC acknowledged that "there could be a dispute" about whether cll 11 and 12 of the Paltar/Nation Wyoming share agreement have the effect that Paltar was not entitled to vote in respect of its 900 million shares. The earning agreements 111 Under the six earning agreements, Nation Australia had valuable contingent rights to be issued with production licences. Those rights, in turn, gave Nation Australia contingent rights to a potentially valuable revenue stream equating to 75% of an ORRI in petroleum produced from certain blocks. Those rights were Nation Australia's only valuable assets. The asset stripping proposal 112 There was an "asset stripping proposal", initiated by Mr Bruner on behalf of Paltar, that Nation Australia's interest in the earning agreements would be transferred to Fortem. Furtherance of the asset stripping proposal 113 Resolutions were passed on 27 April 2017 by Paltar, in its capacity as a shareholder of Nation Wyoming, which resulted in the "Nation Wyoming board stacking". The "Nation Wyoming board stacking" was only achieved by Paltar violating the voting restrictions in the Paltar/Nation Wyoming share agreement. This was in furtherance of the "asset stripping proposal". 114 It is arguable that Paltar's actions constituted an egregious departure (contrary to law and equity) from the regime laid out in cl 11 of the Paltar/Nation Wyoming share agreement; that it was not open to Paltar to ignore the obligations to which Paltar had agreed by executing the Paltar/Nation Wyoming share agreement and to treat those obligations as if they were entirely inapplicable; that such deliberate defiance of the agreed contractual regime is plainly unconscionable in the eyes of equity; and an equitable obligation, reflecting the substance of the agreed regime, would be imposed by equity on Paltar's conscience, rendering such conduct unconscionable (see, for example, Heydon JD, Leeming HJ and Turner PG, Meagher, Gummow & Lehane's Equity – Doctrines & Remedies (5th ed, LexisNexis Butterworths, 2015) at [3-185] ff). 115 On 19 June 2017, by a meeting of directors of Nation Wyoming and a purported special general meeting of Nation Australia, the "Nation Australia board stacking" occurred. The "Nation Australia board stacking" was achieved as a result of, and could not have been achieved without, the "Nation Wyoming board stacking" and by Paltar violating the voting restrictions in the Paltar/Nation Wyoming share agreement. It was carried out in furtherance of the "asset stripping proposal". I accept Mr Leopold SC's submission that it should be inferred, at least on the "serious question to be tried" standard, that this was to ensure that Nation Australia dealt in a supine manner with the default notice which was shortly to be issued. Default notice 116 Paltar delivered a default notice pursuant to the earning agreements between Paltar and Nation Australia in furtherance of the "asset stripping proposal". 117 Mr Leopold SC argued that the default notice was so "riddled with invalidity" as to bespeak unconscionable behaviour. I accept that there is a serious question to be tried as to the validity of the default notice, at least by reason of the following arguable propositions: (1) Nation Australia was not obliged to make any payments otherwise required pursuant to cl 5.3(b)(i) because those payments were not due until "[a]s soon as practicable after Nation has such funds conveniently available" and Nation Australia has had no funds conveniently available. (2) Amounts included in the default notice which are amounts actually incurred for the third permit year (or the second year in the case of EP232) are only payable pursuant to cl 5.3(b)(i) and those amounts are therefore not yet due. (3) Similarly, amounts included in the default notice which are amounts actually incurred for the fourth permit year are only payable pursuant to cl 5.3(b)(i) and those amounts are therefore not yet due. This construction is consistent with Mr Bruner's evidence that the "conveniently available" condition precedent was "only applicable to payments related to the third and fourth Permit Years". In particular, it is arguable that cl 5.3(b)(iii) applies only to amounts which are "in addition to" the estimated amounts set forth in approved "Work Programs and Budgets" and therefore does not apply to the amounts included in the default notice, because they are not suggested to meet that description. (4) To the extent that the amounts included in the default notice relate to the period after 27 August 2016, those amounts are properly to be considered as costs "for the fourth Permit Year" within the meaning of cl 5.3(b)(i) by reason of the NT government's extensions of permit year 4. (5) Accordingly, Nation Australia was not obliged to pay any amount included in the default notice. (6) To the extent that cl 5.3(b)(i) does not apply to amounts included in the default notice, those amounts are not "in addition to the estimated amounts set forth in approved Work Programs and Budgets" within the meaning of cl 5.3(b)(iii), because there is no evidence that they meet that description. Accordingly, cl 1.6.8 of the "Accounting Procedure" has no relevant operation. (7) The default notice is not a "notice of such default" within the meaning of cl 7.1 of each earning agreement because it does not provide notice of the particular failure "to contribute any portion of the Work Program Expenses" under the relevant agreement. 118 There is also a serious question to be tried as to whether amounts included in the default notice are not "Work Program Expenses" within the meaning of cll 5.3 and 7.1 to the extent that they are consultancy fees rendered by Mr Lotito, Mr Causbrook and Mr Bruner. The relevant amounts total A$2.746 million of the US$5.2 million in the default notice. They do not appear to relate to work of the kind described in Sch 2 to the earning agreements, and it is arguable that they are neither expenses "incurred, paid or payable by [Paltar] in accordance with the provisions of" the earning agreements nor "otherwise authorized by the Operating Committee in connection with conducting Work Programs and Budgets". Mr Logan, Nation Australia's former CEO, gave evidence disputing that these amounts are "Work Program Expenses". 119 There is also a question about whether the amount in the default notice is overstated based on Mr Lotito's evidence that, as at 31 December 2016, US$4.8 million was owed by Nation Australia to Paltar. This figure appears to be lower than the total of the invoices issued as at 31 December 2016 and relied upon for the figure in the default notice. There is also evidence from Mr Logan that approximately A$30,000 of the invoices underpinning the default notice have been paid. 120 In the light of Mr Caetano's evidence that the default notice was a "done deal", there is a serious question to be tried as to whether none of the individual defendants, in their respective capacities as directors of Nation Australia, gave due or any consideration to the validity of the default notice and were accordingly recklessly indifferent to the validity or invalidity of the default notice. 121 This failure may be explained by the negotiations that were on foot between Fortem and Paltar for a joint venture agreement which, it may be inferred, would take effect after the "asset stripping proposal" was completed. There is a strong case that Mr Caetano (a director, officer and shareholder of Fortem) was involved in those negotiations on Fortem's behalf, despite the fact that he was a director of Nation Australia. There is a strong case that Mr Caetano failed to avoid a conflict between his duties to Fortem as a director of that company and his interest as a shareholder in Fortem, on the one hand, and his duties to Nation Australia, on the other hand, and therefore breached his fiduciary duties. Settlement agreements and surrender and cancellation of earning agreements 122 As a result of meetings of the boards of Nation Wyoming and Nation Australia on 4 and 5 August 2017 respectively, Nation Wyoming, Nation Australia, Paltar and Officer entered into the settlement agreement and Nation Australia and Paltar entered into six "Surrender and Cancellation of Earning Agreements" by which Nation Australia lost and surrendered to Paltar the benefit of all of its valuable rights. This was the asset stripping which was achieved as a result of the "Nation Wyoming board stacking" and the "Nation Australia board stacking; the violation by Paltar of the voting restrictions; and as a result of Paltar having issued an invalid default notice. The evidence strongly suggests that the acceptance and execution of the settlement agreement and the Surrender and Cancellation Agreements was in conformity with the wishes or instructions of Nation Wyoming and did not involve any independent consideration by the directors of Nation Australia of its best interests. Defendants' submissions 123 The defendants submitted that Mr Hislop assumed, but did not prove by evidence even to a prima facie level, that the conduct alleged in the Proposed Claim was unlawful. The defendants did not submit that the matters alleged in the Proposed Claim could not give rise to the various pleaded breaches of duty, claims in equitable fraud and statutory contraventions, or that they could not give rise to the relief claimed. 124 In oral submissions, the argument was developed with particular reference to the alleged voting restrictions. Mr Henry SC argued that the Paltar/Nation Wyoming share agreement is expressed to be governed by the laws of Wyoming and there is no evidence that cll 11 and 12 have the effect contended for by Mr Hislop. 125 Mr Henry SC argued that the following evidence indicates that the increase in Nation Wyoming's board membership from three to seven was in accordance with the laws of Wyoming: (1) Nation Wyoming's filing with the SEC signed by Mr Lotito and dated 15 May 2017. The filing states relevantly: On April 27, 2017, by means of a majority written consent of shareholder in lieu of meeting (the "Consent") executed by Paltar Petroleum Limited, the Board of Directors (the "Board") of Nation Energy Inc. ("Nation") was expanded from three (3) to seven (7) directors. At the time of the Consent, Paltar Petroleum Limited held a majority of the outstanding voting common stock of Nation. This action is permitted under the bylaws of Nation, the Articles of Incorporation of Nation, and the Wyoming Business Corporation Act. (2) The minutes of the meeting of Paltar held on 20 April 2017, which state relevantly: The Chairman advised that Nation Energy Inc. bylaws stated that there were up to seven (7) board positions that could be filled. That three (3) were currently occupied and that through a Majority Shareholder Written Consent issued by the Company to Nation Energy Inc. that the board could be increased to the maximum seven (7) directors and that the four (4) new appointed directors could be nominated by the Company. The Chairman was advised that given the circumstances that Mr Causbrook was also a current director of Nation Energy Inc., Mr Causbrook would abstain from voting. It was agreed by the remaining Director's being Mr Bruner and Mr Sutton that the Notice be issued to National Energy Inc.. and nominate four (4) directors to their board. It was resolved to issue to Nation Energy Inc. a Majority Shareholder Written Consent to increase the board of Nation Energy Inc. to seven (7) directors by appointing four (4) additional Directors to the board of Nation Energy Inc. in accordance with Nation Energy Inc.'s Bylaws. (3) The majority written consent dated 27 April 2017, which states relevantly: The undersigned, being the holder of a majority of the outstanding shares entitled to vote at meetings of the shareholders of Nation Energy Inc., a Wyoming corporation (the "Company"), by this instrument in lieu of a meeting of the Company, consents to the adoption of the following resolutions, all in accordance with Section 17-16-704(b) of the Wyoming Business Corporation Act. 126 The relevant allegations in the Proposed Claim are, in summary, that: (1) obligations imposed on Paltar to enter into an escrow agreement and a shareholders agreement, and to have an escrow agent and board members appointed on the terms of the Paltar/Nation Wyoming share agreement were "imposed on the conscience of Paltar" and, alternatively, as a matter of construction, that was the effect of the Paltar/Nation Wyoming share agreement; and (2) consequently, Paltar's shares in Nation Wyoming could not conscionably be voted by Paltar in a manner inconsistent with the proposed escrow agreement and proposed shareholders agreement and, alternatively, this was the case as a matter of construction of the Paltar/Nation Wyoming share agreement. 127 I do not accept that Mr Hislop was required to adduce evidence of the laws of Wyoming in order to demonstrate a serious question to be tried on these allegations. It may be that, on a final hearing, it would be necessary for Mr Hislop to prove at least aspects of those allegations by reference to the laws of Wyoming. However, as Mr Leopold SC contended, it is arguable that Mr Hislop is entitled to the benefit of the general evidentiary presumption that foreign and domestic law are the same. In Neilson v Overseas Projects Corporation of Victoria Ltd [2005] HCA 54; (2005) 223 CLR 331 ("Neilson") at [125], Gummow and Hayne JJ referred to the "presumption" that foreign law is the same as the law of the forum as a relevant consideration in the proper construction of an article of Chinese law. Mr Leopold SC also referred to Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492. In that case, at [119], Heydon JA referred to several cases as establishing the proposition that where foreign law is not proved it will be presumed to be the same as the lex fori, in relation to the construction of contracts. 128 I accept that there is at least a serious question to be tried that Mr Hislop is entitled to the benefit of the presumption and this is sufficient answer to Mr Henry SC's contention. In particular, I do not accept that the case propounded by Mr Hislop requires a conclusion that the 15 May 2017 statement to the SEC was necessarily false or misleading. Mr Leopold SC submitted that the statement could not have been more carefully worded. The statement does appear to have been carefully worded. 129 Mr Henry SC next argued that the evidentiary foundation for the asserted equitable fraud was "wanting in the extreme". He referred to evidence that the 11 May 2017 board meeting of Nation Wyoming did not occur behind Mr Hislop's back or to Mr Hislop's exclusion. Mr Hislop's evidence is that he received notice of the meeting on 9 May 2017 and, in the week following the meeting, expressed his objection to his replacement as CEO and President by Mr Caetano and the replacement of Mr Siegel by Mr Caetano as chairman. The minutes of the 11 May 2017 meeting record that Mr Hislop was not in attendance and was retained as CFO of the company. 130 Mr Henry SC also referred to the minutes of a board meeting of Nation Wyoming on 16 May 2017, about which Mr Hislop did not give evidence. The minutes record that Mr Hislop was elected to the audit committee of the company. 131 However, the equitable fraud case sought to be raised in the Proposed Claim does not rely on allegations of deception or exclusion of Mr Hislop. As I understood it, the case alleges unconscionable reliance on legal rights (particularly, the alleged violations of the voting restrictions and the alleged board stackings), breaches of conflicts of interest (particularly as between the duties of Mr Caetano to Nation Australia and Fortem, and as between the duties of Mr Causbrook to Nation Australia and Paltar) and failures of Mr Madzej, Mr Caetano and Mr Causbrook to act in the best interests of Nation Australia (notably by failing to dispute the validity of the default notice). There appears to be an evidentiary foundation for each of these aspects of the equitable fraud case. 132 Mr Henry SC also argued that, irrespective of whether the default notice is liable to be set aside, Nation Australia is in default of its obligations to pay "Work Program Expenses" under the earning agreements. He noted that there was no evidence that any of Paltar's invoices was disputed. Orally, Mr Henry SC pointed to Mr Hislop's certification of Nation Wyoming's quarterly report to the SEC for the period ended 31 December 2016, recording current liabilities of US$6,705,845 of which US$4.8 million is said to comprise liabilities owed by Nation Australia to Paltar. Mr Henry SC also referred to the affidavit evidence of Mr Logan which, he contended, did not dispute all of the invoices underlying the default notice. I accept that Mr Hislop's certification is some evidence that Nation Australia owed Paltar US$4.8 million as at 31 December 2016. However, that apparent admission does not necessarily defeat the case raised by Mr Hislop: its significance should be determined at a final hearing in the light of all the evidence. Nor does Mr Logan's evidence require a conclusion that the construction arguments advanced by Mr Leopold SC do not give rise to a serious question to be tried. 133 Accordingly, I am not satisfied that Nation Australia was contractually obliged to surrender its interests in the earning agreements as Mr Henry SC contended. Best interests of the company 134 I accept that it is in the best interests of Nation Australia that the Proposed Claim be pursued, at least against Paltar, so as to seek to recover the valuable assets that it has lost. There is strong evidence of breaches of duty by Nation Australia's directors, and of the other misconduct alleged in the Proposed Claim, and a serious question to be tried that Nation Australia has suffered very significant losses by reason of those breaches of duty. I do not accept the defendants' contention that the Proposed Claim has poor prospects of success, although they have identified various matters that may operate either to prevent Mr Hislop from making out his case at a final hearing or which may operate by way of defence. 135 In arguing that the grant of leave is not in the best interests of Nation Australia, the defendants referred to the following matters: (1) Nation Australia secured substantial benefits under the settlement agreement and will be worse off if the "Surrender and Cancellation of Earning Agreements" are set aside because Nation Australia is in default and is unable to remedy its defaults or is unable to pay "Work Program Expenses" under the earning agreements going forward. (2) The likely substantial costs of the proposed derivative action. Mr Hislop's undertaking to pay the costs of the proposed derivative action provides no comfort in the absence of disclosure of his asset position. (3) Although it is accepted that Paltar would be able to provide relief of the kind sought, by reinstatement of lost rights, the same has not been demonstrated in relation to the other defendants. 136 As to (1), I have accepted that there is a serious question to be tried that Nation Australia is not in default. I do not consider that it is reasonable to conclude that the company will be unable to comply with its payment obligations in the event that the "Surrender and Cancellation of Earning Agreements" are set aside. That will depend upon the proper construction of the earning agreements and when payment obligations have arisen or will arise. 137 As to (2), Mr Leopold SC conceded that the proposed action is relatively complex and can be expected to be costly to run, although he submitted that the estimate provided by Louise Massey, the defendants' solicitor, was necessarily more of a "guessitmate". I do not accept that Mr Hislop's undertaking provides no comfort. Mr Leopold SC referred to evidence which appears to show that Mr Hislop is a creditor of Paltar for an amount in excess of Nation Australia's estimated costs of prosecuting the proceeding to judgment. 138 As to (3), there is no dispute that, if successful, the proposed action as against Paltar would be of practical benefit to the company. The claims made against the individual defendants are based on the same series of events that give rise to the claims made against Paltar. The evidence of the individual defendants' ongoing participation in commercial activities (such as Mr Caetano and Mr Madzej's respective executive roles as CEO and COO of Fortem, and Mr Caetano and Mr Madzej's roles as directors, with Mr Bruner, in Green Matters Inc.), as well as Mr Caetano's ownership of shares in Fortem said to be valued in the order of $10 million and Mr Causbrook's profession as a chartered accountant and principal of the firm Causbrook & Associates provide, sufficient reason to think that the proposed claims are unlikely to be of little practical benefit to Mr Hislop. Good faith 139 Mr Hislop in his affidavit deposes that he seeks leave to bring the contemplated proceedings for the purpose of clawing back the assets of Nation Australia and remedying what he believes to be the wrongdoing of Paltar and the recently appointed directors of Nation Australia which has caused the alleged loss and damage to Nation Australia. 140 There is no suggestion that Mr Hislop does not honestly believe that a good cause of action exists and has reasonable prospects of success. Nor is there any suggestion that the contemplated proceedings would be brought for a collateral purpose that would amount to an abuse of process. 141 The defendants contended that the good faith criterion is not proved because no reasonable person in Mr Hislop's position could, in good faith, want Nation Australia to pursue the proposed proceeding. The submission was developed by reference to submissions made concerning the best interests of the company. Since I am satisfied that the best interests of Nation Australia that the Proposed Claim be pursued, this contention must fail. Whether appropriate to grant leave despite absence of notice 142 It is common ground that the 14 days written notice required by s 237(2)(e)(i) was not given. Accordingly, it is necessary to consider whether it is appropriate to grant leave under s 237(2)(e)(ii) even though s 237(2)(e)(i) was not satisfied. 143 In Rafferty v Time 2000 West Pty Ltd (No 6) [2011] FCA 402 at [16], Lander J expressed the view that urgency was a matter that justified the grant of leave despite failure to give the requisite 14 days' notice. 144 On behalf of Mr Hislop, it was submitted that the s 237 application was commenced urgently and ex parte relief was appropriately sought. Mr Hislop relied, in particular, on the fact that Paltar was in discussions with Fortem to enter into a fresh joint venture agreement even before the default notice was issued to justify Mr Hislop's apprehension that, absent ex parte injunctive relief, Paltar would deal with the rights that had been the subject of the earning agreements in a way which would put those rights beyond the reach of Nation Australia. As it turns out, Mr Hislop contended, Paltar was engaged in negotiations with Fortem to that very effect. 145 Although the defendants contend that Mr Hislop's apprehension was unsubstantiated and subjective, in my view, it was well-founded for the following reasons: (1) Mr Caetano's claim was that "Fortem has no interest at this time in entering into any negotiations with Paltar in relation to any rights or interests under the Earnings Agreements". Mr Caetano's choice of words was careful. The words "at this time" convey the possibility that Fortem may have had such an interest when the s 237 application was filed on 11 August 2017. Mr Livesley's 8 August 2017 email, to which Mr McTavish did not respond until 15 August 2017, tends to suggest the existence of such an interest as at 11 August 2017. (2) Mr Caetano's affidavit did not disclose negotiations with Paltar during June and July 2017, which ultimately led to Mr McTavish's understanding, as at 15 August 2017, that the "Paltar/Fortem transaction" was "on pause for the time being". In those circumstances, to the extent that Mr Caetano's evidence tended to suggest that Fortem had not already entered into negotiations with Paltar, that suggestion is wrong. The true position, which Mr Caetano chose not to disclose in his affidavit, was that there had been significant negotiations between Paltar and Fortem. (3) The previous negotiations between Paltar and Fortem appear to have concerned the rights or interests under the earning agreements because of Mr McTavish's concern, mentioned in his 7 July 2017 email, to understand whether the proposed transaction "would trigger dissent rights" or could otherwise be frustrated by Mr Hislop. Accordingly, there is a basis for thinking both that the "Paltar/Fortem transaction" (which may be "on pause" and therefore may cease to be "on pause"), was a transaction "in relation to any rights or interests under the Earnings Agreements". 146 On behalf of Mr Hislop, it was also argued that, had notice been given in accordance with s 237(2)(e)(i), it would have made no difference to Nation Australia's stance in respect of the proposed proceeding in the name of Nation Australia. Mr Henry SC did not contend to the contrary. 147 Mr Henry SC argued that the s 237 application was not explained by any asserted urgency, submitting that Paltar could not put the rights that are the subject of the earning agreements beyond the reach of Nation Australia without the consent of the relevant Minister of the Northern Territory Government by reason of s 93 of the Petroleum Act 1984 (NT). Section 93 provides for the transfer of interests or part interests in an exploration permit or licence. It is far from obvious that this is the kind of right surrendered by Nation Australia. 148 In those circumstances, I accept that Mr Hislop had a proper basis for filing the s 237 application on an urgent ex parte basis and that it would be appropriate to grant leave despite the failure to give 14 days' written notice of the application, if the other elements of s 237 are satisfied. Costs 149 The first to fourth defendants submitted that the proceeding against them should be dismissed with costs because they are not necessary parties to the proceeding. They contended that Nation Australia opposed Mr Hislop being granted leave and, accordingly, there was no need for any of the other defendants to contradict Mr Hislop's case. However, the fact is that the defendants collectively opposed Mr Hislop's application. Costs should follow the event in this case and the defendants should be ordered to pay Mr Hislop's costs. I certify that the preceding one hundred and forty-nine (149) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson. Associate: Dated: 26 October 2017 SCHEDULE OF PARTIES NSD 1383 of 2017 Defendants Fourth Defendant: DARREL CAUSBROOK Fifth Defendant: NATIONAL ENERGY (AUSTRALIA) PTY LTD (ACN 606 533 046)