Supreme Court New South Wales Medium Neutral Citation: Keybridge Capital Ltd v Bell Potter Securities Ltd [2022] NSWSC 1022 Hearing dates: 2 to 4 May 2022 Date of orders: 1 August 2022 Decision date: 01 August 2022 Jurisdiction: Equity - Commercial List Before: Rees J Decision: Verdict for the first defendant, with costs. Catchwords: STOCKBROKING – shares – plaintiff had 'cornerstone' shareholding in publicly-listed company – stockbroker made 'firm' bid on behalf of client to acquire plaintiff's shares for $10 million – plaintiff 'matches' with 'firm' offer – shares to be transacted by block trade – plaintiff and client yet to open accounts with broker – client yet to provide broker with cleared funds – plaintiff's offer expires – plaintiff and client continue to negotiate directly, to no avail – shares now worth nothing. AGENCY – breach of warranty of authority – principles at [3]-[10] – whether broker warranted authority of client to contract – broker acted within scope of authority – no contract entered into. WORDS AND PHRASES – meaning of 'firm' in stockbroking – whether word had a specific, technical meaning – 'firm' not a term of art. CONTRACTS – whether contract formed by acceptance of 'firm' bid – acceptance amounted to counter-offer – no intention to create legal relations – post-contractual conduct indicated no contract formed. Legislation Cited: ASX Listing Rules Corporations Act 2001 (Cth) Cases Cited: Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420; [2009] HCA 48 Allen v Carbone (1975) 132 CLR 528 Apand Pty Limited v The Kettle Chip Company Pty Ltd (1994) 52 FCR 474 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3) [2009] FCA 1087 BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 4) (2009) 263 ALR 63 Boulas v Angelopoulos (1991) 5 BPR 11,477 Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 Brownett v Newtown (1941) 64 CLR 439 C Czarnikow Ltd v Koufos (The Heron II) [1969] 1 AC 350 Cherry v Colonial Bank of Australasia (1869) LR3PC 24 Clarke v Macourt (2013) 253 CLR 1; [2013] HCA 56 Collen v Wright (1857) 27 LJQB 215 Cro Travel Pty Ltd v Australia Capital Financial Management Pty Ltd [2018] NSWCA 153 Farmer v Honan (1919) 26 CLR 183 Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 Firbank's Executors v Humphreys (1886) 18 QBD 54 Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 G R Securities v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 Habton Farms v Nimmo [2003] EWCA Civ 68 Hearse v Staunton [2010] NSWSC 954 Heskell v Continental Express Ltd [1950] 1 All ER 1033 In Re National Coffee Palace Company [1883] 24 Ch D 367 Jones v Dunkel (1959) 101 CLR 298 Leggo v Brown & Dureau Ltd (1923) 32 CLR 95 Max Cooper & Sons Pty Ltd v Sydney City Council (1980) 29 ALR 77 McIntosh v Linke Nominees Pty Ltd [2008] QCA 275 Molonglo Group (Australia) Pty Ltd v Cahill [2018] VSCA 147 Molopo Energy Limited 01 & 02 [2017] ATP 10 Molopo Energy Limited 03R, 04R & 05R [2017] ATP 12 Molopo Energy Ltd, Re; Molopo Energy Ltd v Keybridge Capital Ltd (2014) 104 ACSR 46; [2014] NSWSC 1864 Mr Rental Australia v IRD Services Pty Ltd [2016] NSWSC 118 O'Donnell v Reichard [1975] VR 916 Oliana Foods Pty Ltd v Culinary Co Pty Ltd (in liq) [2020] VSC 693 Payne v Parker [1976] 1 NSWLR 191 Permanent Custodians Ltd v Geagea [2014] NSWSC 562 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 Queensland Phosphate Pty Limited v Korda and Shepard (as joint and several liquidators of Legend International Holdings Inc (in liq)) [2017] VSCA 269 Ratcliffe v Evans [1892] 1 QB 524 Salter v Cormie (1993) 108 DLR (4th) 372 Schlieske v Overseas Construction Co Pty Ltd [1960] VR 195 Stevenson v Singh [2012] EWHC 2880 (QB) Taylor v Johnson (1983) 151 CLR 422 Toll (FGCT) Pty Limited v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 Trentelman v The Owners - Strata Plan 76700 [2021] NSWSC 155 Trentelman v The Owners – Strata Plan No 76700 (2021) 106 NSWLR 227; [2021] NSWCA 242 V/O Rasnoimport v Guthrie & Co Ltd [1966] 1 Lloyd's Rep 1 Vince Coles Pty Ltd v Skischufabrik Dynafit (Court of Appeal (NSW), McHugh JA, 28 October 1985, unrep) Watson v Foxman (1995) 49 NSWLR 315 Texts Cited: Dal Pont, GE, Law of Agency (4th ed, 2020, LexisNexis) Watts, Peter and Reynolds, FMB, Bowstead & Reynolds on Agency (22nd ed, 2020, Sweet & Maxwell) Category: Principal judgment Parties: Keybridge Capital Ltd (Plaintiff) Bell Potter Securities Ltd (First Defendant) Roy Mironi (Second Defendant) Representation: Counsel: Mr AT Broadfoot QC / Ms SCB Brenker (Plaintiff) Mr JAC Potts SC / Mr AR Langshaw (First Defendant) No appearance (Second Defendant) Solicitors: Gadens Lawyers (Melbourne) (Plaintiff) Speed & Stracey Lawyers (First Defendant) File Number(s): 2021/115364 Judgment 1. HER HONOUR: Keybridge Capital Ltd sues stockbroking firm, Bell Potter Securities Ltd, for damages for breach of warranty of authority. Bell Potter is said to have represented itself to be the agent of Roy Mironi and authorised as such to purchase all shares held by Keybridge in Molopo Energy Ltd, when it held no such authority. Bell Potter is said to have thereby induced Keybridge to sell its shares at 25 cents a share, causing loss of some $10 million. 2. More particularly, in a one minute telephone call on 27 April 2015, Bell Potter's senior equities advisor, Bradley Shallard is said to have told Keybridge's managing director, Nicholas Bolton, "I have a firm bid from our client at 25 cents for all your Molopo shares." Keybridge says that "firm" has a special trade meaning; a "firm bid" is a bid capable of becoming immediately binding upon acceptance. Half an hour later, Mr Bolton rang back and, in a four minute conversation, said he was "happy to match". Keybridge contends that a contract was thereby formed; Bell Potter induced Keybridge to contract with Bell Potter as the agent of Mr Mironi. The case turns on whether "firm" has the special trade meaning asserted and whether a contract came into existence. Before turning to these matters, it is timely to review the nature of the cause of action. Breach of warranty of authority 1. The cause of action for breach of warranty of authority was simply explained by Willes J in Collen v Wright (1857) 27 LJQB 215 at 217-18: … [A] person, who induces others to contract with him as the agent of a third party by an unqualified assertion of his being authorised to act as such agent, is answerable to the person who so contracts for any damages he sustains by means of the assertion of authority being untrue … The obligation arising in such a case is well-expressed by saying that the person professing to contract as agent for another impliedly undertakes with the person who enters into such a contract upon the faith of his being duly authorised, that the authority he professes to have does in point of fact exist. The fact of entering into the transaction with the professed agent as such is good consideration for the promise. 1. The cause of action has three elements, as described by Issacs J in Leggo v Brown & Dureau Ltd (1923) 32 CLR 95 at 106: (emphasis in original) The essentials are (1) assertion of authority; (2) inducement by asserting; (3) transaction which but for that assertion the other party would not have entered into. Where they coexist there is a warranty. There is no suggestion that there must be 'belief' in the truth of the assertion; there must, of course, be reliance on the assertion, for that is connoted by the 'inducement'. The other party might well say to the professing agent: 'I have no belief about it; as to the instructions you have I am ignorant and agnostic, but I am content to rest upon and trust to your assurance and to base my dealing upon that'. That is the only operative effect of the word 'warranty'. 1. As to the first element – assertion of authority – the plaintiff must establish that the defendant made "an unqualified assertion of his being authorised to act as the agent": Hearse v Staunton [2010] NSWSC 954 at [96]. The plaintiff need not prove that the professed agent warranted how they derived the authority but merely that they actually had that authority: Heskell v Continental Express Ltd [1950] 1 All ER 1033 at 1043 (per Lord Devlin). It matters not whether the professed agent knew that their authority was defective or believed that they actually possessed the authority asserted, nor whether they acted with any intention of fraud or malice, nor whether they were negligent in making the assertion: Cherry v Colonial Bank of Australasia (1869) LR3PC 24 at 31; BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3) [2009] FCA 1087 at [40]. In this respect, breach of warranty of authority "is a matter of strict liability imposed on agents": Salter v Cormie (1993) 108 DLR (4th) 372 at 377; see also Cherry at 31; GE Dal Pont, Law of Agency (4th ed, 2020, LexisNexis) at 621-622. 2. The second element – inducement by asserting – is "prima facie to be implied from the making of the representation and the subsequent entry by the plaintiff into the relevant transaction", this being a rebuttable presumption able to be overcome on the balance of probabilities: Schlieske v Overseas Construction Co Pty Ltd [1960] VR 195 at 198 (per Sholl J). 3. The third element – reliance – is proved by a 'but for' test: would the claimant have been induced to enter the contract in question but for the assertion made by the professed agent? No liability arises where the plaintiff did not, in fact, rely upon the assertion, for example, where they knew the truth or were privy to all of the material facts as to the extent of the agent's authority: Brownett v Newtown (1941) 64 CLR 439 at 445 (per Starke J). This is not to say that a claimant has a duty to inquire into the authority asserted by the agent but simply that the claimant must have genuinely relied on that assertion to their detriment: V/O Rasnoimport v Guthrie & Co Ltd [1966] 1 Lloyd's Rep 1 at 11 (per Mocatta J). Further, "[t]he fact that, in the absence of conduct by a defendant, damage would have been caused by another person acting unlawfully does not negate the proposition that the damage was caused by the defendant's conduct": Permanent Custodians Ltd v Geagea [2014] NSWSC 562 at [108], citing Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420; [2009] HCA 48. 4. As to remedies, the agent responsible for the breach of warranty of authority is "bound to make good to the other contracting party what that party has lost, or failed to obtain, by reason of the nonexistence of the authority": Leggo v Brown at 99 (per Knox CJ). Whilst there is some debate as to whether the "action is contractual, quasi-contractual or tortious" (Boulas v Angelopoulos (1991) 5 BPR 11,477 at 11,490), the remedy is damages for breach of contract: C Czarnikow Ltd v Koufos (The Heron II) [1969] 1 AC 350; Heskell at 1043 (per Devlin J); BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 3) [2009] FCA 1087 at [51]; BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 4) (2009) 263 ALR 63 at [6]; Oliana Foods Pty Ltd v Culinary Co Pty Ltd (in liq) [2020] VSC 693 at [903]; In Re National Coffee Palace Company [1883] 24 Ch D 367, 371-372, 373; Habton Farms v Nimmo [2003] EWCA Civ 68; [2004] QB 1 at [46] (per Clarke LJ); Peter Watts and FMB Reynolds, Bowstead & Reynolds on Agency (22nd ed, 2020, Sweet & Maxwell) at [9-077]. 5. As Lord Esher MR held in Firbank's Executors v Humphreys (1886) 18 QBD 54 at 60-61: "The damages, under the general rule, are arrived at by considering the difference in the position [the plaintiff] would have been in had the representation been true, and the position he is actually in, in consequence of its being untrue". More recently, in Cro Travel Pty Ltd v Australia Capital Financial Management Pty Ltd [2018] NSWCA 153, Ward JA (with whom Meagher JA and Barrett AJA agreed) explained at [162]: (citations omitted, emphasis added) There is no dispute that the appropriate question to be postulated in assessing damages for breach of warranty of authority is to ask what would have happened if the purported agent had the authority it held itself out to have. That is, one considers an hypothetical situation and asks what would the position have been had the authority in fact existed at the relevant time. 1. The plaintiff must establish, with "as much certainty and particularity … as is reasonable", the damage suffered as a result of the breach of warranty of authority: McIntosh v Linke Nominees Pty Ltd [2008] QCA 275 at [20]-[22] (per Muir JA, Cullinane and Douglas JJ agreeing), citing Ratcliffe v Evans [1892] 1 QB 524 at 532-533 (per Bowen LJ). Where an agent only warrants authority to negotiate a contract, the damages may be confined to the plaintiff's wasted expenditure: Bowstead & Reynolds on Agency at [9-078], citing Stevenson v Singh [2012] EWHC 2880 (QB) at [101]. As to the time at which damages are to be assessed, contractual damages are assessed at the time of breach: Clarke v Macourt (2013) 253 CLR 1; [2013] HCA 56 at [106]-[110] (per Keane J). Post-contractual conduct 1. In this case, post-contractual conduct gained some prominence in determining whether a contract came into existence on 27 April 2015. Post-contractual conduct is admissible on the question of whether a contract was formed: Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25]–[26] (per Heydon JA). It is relevant to consider subsequent conduct in ascertaining whether the parties intended to immediately enter into binding legal relations: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 547-550 (per Gleeson CJ, with whom Hope and Mahoney JJA agreed); Queensland Phosphate Pty Limited v Korda and Shepard (as joint and several liquidators of Legend International Holdings Inc (in liq)) [2017] VSCA 269 at [37]. 2. In particular, post-contractual conduct may shed light on the proper interpretation of earlier communications alleged to constitute a contract, for example, subsequent communications may show that, at the time of the allegedly contractual communications, there were other uncompleted negotiations between the parties such that the allegedly contractual dealings could not properly be interpreted as mutual assent to be bound: GC NSW v Galati at [93], citing Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 at 9255. Further, subsequent communications may be used by a party as an admission by conduct of the existence or non-existence of a subsisting contract: GC NSW at [95], citing Film Bars. Evidentiary matters 1. Keybridge's case is largely based on the precise terms of telephone calls which took place seven years' ago. Neither party to the conversations made a contemporaneous note, nor had reason to recall the conversations until these proceedings were commenced six years' later. This case was a good example of the general problem that recollections given in the course of legal proceedings may be distorted, albeit innocently, by a desire to succeed. As McLelland CJ in Eq described it in Watson v Foxman (1995) 49 NSWLR 315 at 319: … human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience. 1. Consequently, telephone records and contemporaneous records (emails and board papers) became particularly important in determining whose version of the conversations was more likely to be correct. 2. As to witnesses, Keybridge relied on the evidence of Mr Bolton, and expert witness, Michael Heffernan. Michael Heffernan was a fair and open witness; no issues of credit arose. 3. Mr Bolton was a careful witness who appeared intelligent and experienced in matters of share trading and investment. Perhaps unfortunately, while Mr Bolton set out his experience as a director in his first affidavit, he failed to mention that he had been disqualified from managing a corporation for three years, albeit his period of disqualification had since expired and the disqualification is the subject of an appeal. Mr Bolton said he did not consider it relevant to mention his disqualification, although agreed that, by the description of his experience in his affidavit, he wanted the Court to accept that he was an experienced company director. This matter became the source of some embarrassment and discomfort for Mr Bolton during cross examination. It would certainly have been better if Mr Bolton had disclosed this matter to the Court at the outset. 4. Whilst Mr Bolton agreed that he received and made hundreds of mobile calls and text messages each month, and notwithstanding that he made no contemporaneous note of any telephone conversation with Mr Shallard, Mr Bolton claimed to have an actual recollection "of the key points" of the conversations in question: "I don't recall verbatim every word that was spoken but certainly key words". I'm not sure that Mr Bolton's recollection was any better than anyone else trying to recall conversations years' earlier with limited contemporaneous records to refresh one's memory. Neither affidavit accorded with telephone records, to which I will defer. In particular, Mr Bolton referred to three conversations in his first affidavit, when there were at least nine telephone calls. 5. Mr Bolton described first receiving a call from Mr Shallard on 23 April 2015, then corrected this in chief to 22 April 2015, then agreed in cross-examination that his affidavit conflated his first and second conversations with Mr Shallard. The version of the conversation in his affidavit is also inconsistent with available contemporaneous records: according to Mr Bolton, Mr Shallard asked whether a price of 19 to 20 cents would "get it done", while the contemporaneous documents refer to a bid at 18 cents. Nonetheless, Mr Bolton said, "I stand by the substance. … In terms of the substantive points of the conversation this does reflect my recollection." I attach little weight to the expressed firmness of Mr Bolton's recollection. 6. With some exceptions, overall Mr Bolton gave fair answers and made reasonable concessions. Mr Bolton was initially evasive in respect of whether he had obtained approval from each of Keybridge's directors to accept Mr Mironi's offer, but then described conversations with each of the directors, albeit these conversations were not referred to in his affidavits. Whilst Mr Bolton said this was not a relevant concern at the time of preparing his affidavits, it was certainly a pleaded issue in Bell Potter's defence by the time Mr Bolton swore his second affidavit. In fact, Mr Bolton gave evidence on a number of matters which I would have expected to see articulated in his affidavits and were not. He also appeared to have produced – very late in the day – telephone records and an important email which should have been provided to Bell Potter during discovery. 7. No other directors or officers of Keybridge gave evidence. The then chairman, Andrew Moffat, was someone with whom Mr Bolton is in contact and lives in Perth. The former chief financial officer and company secretary, Adrian Martin, appeared to be alive and well and living in Sydney. Bell Potter submitted that a Jones v Dunkel (1959) 101 CLR 298 inference should be drawn by reason of Keybridge's failure to call these gentlemen, together with Keybridge directors Bill Brown and Craig Coleman, as well as John Corr of Keybridge's then subsidiary, Aurora Funds Management Ltd. Keybridge submitted that no such inference should be drawn where the critical conversations were with Mr Bolton and there was no point calling multiple witnesses who would say the same thing. 8. Before drawing a Jones v Dunkel inference, the missing witness must be a person who it would be natural for one party to call; the witness might be regarded as "in the camp" of one party or "a witness likely to be friendly to the interests of the party": Payne v Parker [1976] 1 NSWLR 191 at 201-202 (per Glass JA), citing O'Donnell v Reichard [1975] VR 916 at 920 (per Gillard J); Ghazal v Government Insurance of New South Wales (1992) 29 NSWLR 336 at 343 (per Kirby P with whom Mahoney and Clarke JJA agreed). That is certainly the case with the potential witnesses identified by the defendant. Further, there was no explanation as to why these witnesses were not called. But nor is it necessary for a party to call an unnecessary witness: Apand Pty Limited v The Kettle Chip Company Pty Ltd (1994) 52 FCR 474 at 490. As Parker J recently explained in Trentelman v The Owners - Strata Plan 76700 [2021] NSWSC 155, the Jones v Dunkel inference does not arise from a failure to call merely cumulative evidence; if the party has more than one witness of equal significance, then it is sufficient to call one of them: at [194]-[195]. In that case, Parker J considered that the failure to call a witness appeared "to have been nothing more than a commendable attempt to save time": at [196]. Parker J's decision was relevantly affirmed on appeal: Trentelman v The Owners – Strata Plan No 76700 (2021) 106 NSWLR 227; [2021] NSWCA 242 at [210]-[214] (per Leeming JA, Bell P agreeing at [170]). 9. Whilst it would have been open to Keybridge to submit with some force that, having called some of its directors and officers who dealt with this transaction, it was unnecessary to call all of them, this submission is hollow where Keybridge called none of these witnesses save for Mr Bolton. Whilst it is true that only Mr Bolton spoke to Mr Shallard, Mr Bolton then reported to each of these witnesses in respect of his dealings. Where the Keybridge board had to approve this deal, these witnesses would have been well placed to say what they knew about the deal at the relevant time. I infer that their evidence would not have assisted Keybridge. 10. Bell Potter relied on the evidence of Mr Shallard, who was a pleasant fellow and gave evidence in a fair and straightforward manner, making reasonable concessions. Unsurprisingly, Mr Shallard did not recall conversations "word for word". Rather, "I have vague recollections, but there was a theme throughout the month which is [a] well-worn path on what we do in business." Mr Shallard also had regard to his usual practice and contemporaneous records, including emails and telephone records. 11. In any contest between the evidence of Mr Shallard and Mr Bolton, I generally preferred the evidence of Mr Shallard, subject to what the contemporaneous records reveal. Mr Shallard's lack of a specific recollection is more likely to represent the reality of the position, where both witnesses were endeavouring to recall a conversation which occurred seven years earlier and where neither had need to recall the conversation nor prepare an affidavit until years after the event. Block trades 1. It was envisaged that any sale and purchase of Molopo shares would take place by a 'block trade' or 'special crossing'. It is useful to understand what this involves at the outset. 2. Ordinarily, shares in companies listed on the Australian Stock Exchange (ASX) are traded on-market. Trading is conducted with transparency. Market participants, including stockbroking firms, place either a buy order (bid) or sell order (offer) into the electronic trading platform maintained by the ASX on behalf of a client for a specified quantity of shares at a particular price. Stockbrokers are prohibited from pre-arranging bids or offers. If a corresponding buyer or seller is prepared to transact at that price and quantity and places a corresponding sell or buy order on the trading platform, it is a 'match' between the two parties and a contract is made for the sale of the specified shares at the specified price. The matching of the two orders is recorded on the order book of the ASX. A written confirmation is sent by the stockbroker to the client, referred to as "printing". Settlement of the transaction occurs automatically on settlement day which, in 2015, was three business days' later. 3. An exception to the prohibition on pre-arranged trading is permitted for 'block trades' or 'special crossings', where the transaction is of a specified minimum value being, in 2015, $1 million for "Tier 1" shares such as BHP, $500,000 for "Tier 2" shares such as the Bank of Queensland and $200,000 for "Tier 3" shares. Where the specific minimum value is exceeded, the buyer and seller are permitted to negotiate and pre-arrange a price per share, quantity of shares and the time of the transaction (regardless of the market) and any other desired terms. This may be particularly useful where the seller owns a strategic or 'cornerstone' shareholding such that the value of these particular shares exceeds the on-market share price. 4. A single stockbroker usually acts for both sides of a block trade. Once the parties have reached agreement on the terms of a sale, and before a block trade can take place, the stockbroker must confirm that the seller has ownership and possession of the shares. Both parties must have opened accounts with the stockbroker to become its clients. In order to open an account with a stockbroker, the Know Your Client (KYC) process must be followed to ensure compliance with anti-money laundering regulations; this involves verifying the client's identity. In the ordinary course, the buyer must place the broker in cleared funds. Once each of these matters has been completed to the stockbroker's satisfaction, instructions are given to the stockbroking firm's designated trading representative (DTR) to lodge the block trade on a crossing facility, such as that maintained by the ASX. When the DTR lodges the block trade on the crossing facility, the block trade takes place and the market is informed that the transaction has occurred. 5. The need for the stockbroker to confirm that they have received cleared funds from the buyer is fundamental as, once a block trade is entered into a crossing facility, the stockbroker becomes personally liable to complete the block trade at the specified time. This is a standard practice within the stockbroking industry as between stockbroking firms and individual stockbrokers. It is thus important for an individual stockbroker to be satisfied that the client purchasing the shares is able to complete the transaction at the specified time, in order to avoid significant personal liability. 6. Both Mr Shallard and Mr Bolton were familiar with block trades. Mr Bolton said he had 15 to 20 years' experience in share market related activities. Mr Bolton's expertise was dealing in strategic lines of shares, that is, owning more than 5% of a company or holding a 'cornerstone' position. Mr Bolton said that, as a result of these types of shareholdings, he had dealt with many stockbrokers across Australia. Mr Bolton agreed that, for a large block or line of shares which had been solicited by a particular party, the usual way to complete such a transaction would be a block trade, "I have engaged in that transaction on many, many occasions." 7. For his part, at the time of these events, Mr Shallard had worked as a stockbroker for 20 years. In addition to Bachelor of Business, Mr Shallard had completed the Chartered Practising Accountant qualification, a Graduate Diploma in Applied Investment and Finance from the Securities Institute Australia and a Graduate Diploma of Financial Planning. He is a fellow of the Financial Services Institution of Australasia (FINSIA). It was not suggested that Mr Shallard was anything other than experienced and competent. It was not suggested that Mr Shallard did not understand the proper processes for a block trade or that he failed to follow these processes. 8. Unsurprisingly for an experienced professional, Mr Shallard had some usual practices when going about his business. In particular, as both parties to a block trade must have an open account with the stockbroker in order to carry out the trade, Mr Shallard said it was and remains his usual practice to check early in the course of negotiations whether all parties have an open account with his firm and, if not, to expressly tell each party with whom he is negotiating that all parties must open accounts with Bell Potter before any block trade can occur. As a result of the potential for personal liability, it was also, and remains, Mr Shallard's usual practice to expressly raise with parties the need for cleared funds from the buyer before any block trade can be agreed. 9. It was and is Mr Shallard's practice never to give any instruction to the DTR until he has confirmation of the quantity of shares, price, timing, ownership, accounts opened, possession by the seller and cleared funds from the buyer. Mr Shallard considered ensuring that he was satisfied of each of these preconditions to the lodgment of a block trade on a crossing facility was an important aspect of his work, including to avoid exposing himself to personal liability in relation to the block trade. As such, each of these preconditions to the lodgment of a block trade were matters of which he was, and continues to be, particularly conscious throughout the course of negotiating a potential block trade. 10. It was not suggested that Mr Shallard did not have these practices or that these practices were not sensible. By and large, it was not suggested that Mr Shallard did not follow these practices on this occasion. It is reasonable to proceed on the basis that he did, absent contemporaneous evidence to the contrary. Keybridge and Molopo 1. Keybridge is an investment and financial services firm. At the time of these events, Keybridge's directors were Mr Moffat (chairman), Mr Bolton (managing director), Mr Brown, Mr Coleman and Antony Sormann. Mr Martin was the chief financial officer and company secretary. 2. Keybridge had acquired a strategic line of shares in Molopo. In April 2015, Keybridge had a 16.15% shareholding in Molopo, held either directly (14.76%) or indirectly (1.39%) by its subsidiary, Aurora. Mr Bolton described Molopo as a "$68m cash box", carrying significant cash and net cash assets. Initially, Keybridge's strategy for its Molopo shareholding was to release this cash. In November and December 2014, Keybridge requisitioned a general meeting of Molopo to pass a resolution that Molopo's issued share capital be reduced by paying $54 million to shareholders. This failed when Molopo commenced proceedings and the Court held that Molopo was not required to convene such a meeting: Molopo Energy Ltd, Re; Molopo Energy Ltd v Keybridge Capital Ltd (2014) 104 ACSR 46; [2014] NSWSC 1864. Notwithstanding this setback, Keybridge "rolled" the Molopo board (as Mr Bolton later put it); Mr Sormann became Keybridge's representative on Molopo's board. 3. After acquiring Aurora in March 2015, Keybridge developed a different strategy for its Molopo shares. Aurora was the responsible entity for a number of registered managed investment schemes, some of which were listed on the ASX. The total funds under management by Aurora had been in decline when Keybridge bought the business. Mr Bolton said, "There was a material fund outflow before we bought the business from 650 million down to 150 million … it was continuing." Keybridge was interested to obtain the Molopo funds for Aurora to manage. In addition, Mr Bolton said, "everything's for sale at the right price at any given time and [these strategies] can coexist together quite harmoniously." Mr Mironi 1. On 13 April 2015, Mr Shallard received a call from Mr Mironi, who said he was calling from overseas (likely, from Israel) and looking to buy a large volume of shares in Molopo. Mr Shallard had never dealt with nor heard of Mr Mironi before; he was not an existing client of Bell Potter. Mr Shallard did not know how Mr Mironi came to contact him, "I've thought a lot about this and I just don't know." Nor had Mr Shallard ever bought or sold Molopo shares. Mr Shallard did not have any specific knowledge about Molopo, which Mr Shallard described as "a relatively small and unknown listed entity". 2. Following his conversation with Mr Mironi, Mr Shallard conducted research through a market data software package to which Bell Potter subscribed, IRESS, to find out who the major shareholders in Molopo were: the largest shareholder was Bentley Capital Ltd (19.97%), followed by Keybridge. In accordance with his usual practice, Mr Shallard likely also reviewed a small selection of Molopo's recent major ASX announcements and followed current information on trading price and the volume of shares traded in Molopo. Molopo shares were then trading at 13 cents a share. 3. Mr Shallard recalled thinking there was a low probability of a transaction, "It was a cold call, offshore, wasn't a client but I thought I'd explore the opportunity." Bentley Capital was a client of Bell Potter. Mr Shallard knew Bentley Capital's chairman, Farook Khan. Mr Shallard left a message with Mr Khan, who promptly returned Mr Shallard's call and advised that Bentley Capital was not interested in selling its Molopo shares. 4. Mr Shallard was not familiar with Keybridge and made some inquiries to find out who he should contact from its senior management in order to discuss the potential sale of its Molopo shares. Mr Shallard ascertained that Keybridge's managing director was Mr Bolton. Mr Shallard called Keybridge's general telephone number and got the contact details for Mr Bolton. Mr Shallard left a message. 5. As Mr Bolton explained, the usual way to try to buy a large parcel of shares is by contacting a number of individual shareholders and bidding them for their line. The usual way to approach this is to have your broker call to see whether they were interested in selling their shares, "typically through the same sort of process that Mr Shallard engaged in." Mr Bolton was experienced in bidding lines of shares and also receiving offers for lines of shares. First call: a fishing expedition 1. Mr Bolton returned Mr Shallard's call later on 13 April 2015 and, according to telephone records, they spoke for five minutes. Mr Shallard said that he had a party who was looking to buy a substantial holding in Molopo and asked whether Keybridge had any interest in discussing a sale of its shares. Mr Bolton said Keybridge was open to receiving bids. Mr Bolton accepted Mr Shallard's recollection of this conversation, which Mr Shallard described as "a fishing expedition." 2. Mr Bolton's recollection of his early conversations with Mr Shallard was that he told Mr Shallard, "I'm not really interested in a fishing exercise and [the price] would have to be north of the NTA [net tangible assets per share]. Come to me with a firm bid capable of acceptance and I will take it to my board. Otherwise I cannot give you an indication as to the price which we will deal. In any case, I personally do not have authority to sell without reverting to my board, and I will not present the offer … unless you're firm." Mr Shallard said he would come back to Mr Bolton once he had spoken with his client. (Mr Shallard does not believe that he would have referred to Mr Mironi as a "client" as Mr Mironi had not opened an account with the firm and was not, to Mr Shallard's understanding, a client of the firm.) Mr Bolton said, "I presume we would transact through an on-market cross if you can present firm. Do we have an account with you?". Mr Shallard agreed that an on-market cross was appropriate and said he was not sure whether Keybridge had an account. Mr Bolton said he would check this "on our end". 3. Mr Shallard reported to Mr Mironi, advising that Bentley was not interested in selling while Keybridge was open to bids. Mr Mironi said that he was looking to buy more than the amount of shares that Keybridge held but was prepared to bid up to 18 cents a share for Keybridge's holding and asked Mr Shallard to find out if Keybridge was interested. Mr Shallard agreed but added, "We need accounts set up before we can proceed with any transaction." Second call: bid at 18 cents 1. On 16 April 2015, at 2.53 pm, Mr Shallard called Mr Bolton and they spoke for three minutes. Mr Shallard said he could not remember the exact words of their conversation; "There was a flavour". He told Mr Bolton, "My party who is interested in buying Keybridge's Molopo shares is calling from overseas, and he's not someone I have dealt with before." Mr Bolton agreed this was said. 2. Further, Mr Shallard said, "I think there is a low prospect that a transaction will go ahead." Mr Shallard said he told Mr Bolton this because he held, and holds, the view that, in the stockbroking business, every party you deal with is a potential future client and a party's trust in him is important. Mr Shallard wanted to be open and honest with Mr Bolton about his view that there was a low likelihood of the transaction coming to fruition. Mr Bolton did not recall this being said but agreed that it was possible, although more likely to have been said in their first call. 3. Mr Shallard continued, "In any event, no transaction will go ahead until Bell Potter gets client accounts open from both him and from Keybridge, and we get funds in account from him. … At this stage our potential buyer is not yet a client of Bell Potter." Mr Bolton denied this was said. 4. Mr Shallard said this accorded with his usual practice and was important to avoid exposing himself to personal liability on the transaction. This was a particularly significant concern where Mr Shallard did not have a pre-existing relationship with the prospective purchaser. Mr Shallard said, "Whenever I speak to any potential buyer or seller, it's standard practice that I say it's a potential buyer, it's a potential seller and [until] that account's open, I actually can't do the transaction, it's physically impossible. … One of the first conversations I had with Mr Bolton I stated that. That we need accounts open … I told him from the start this was a low probability because he wasn't a client at Bell Potter." 5. It was the fact that Mr Shallard had never dealt with Mr Mironi before. As he told Mr Bolton (and Mr Bolton agreed that he was told), Mr Mironi was "calling from overseas, and he's not someone I have dealt with before." It rather followed from this information that Mr Mironi did not have an account with Bell Potter and, as any transaction would take place by a block trade, such an account would need to be opened. Opening an account was not an instantaneous process, as Mr Bolton would likely have appreciated at the time. Where Mr Shallard had also never dealt with Keybridge before, it is likely that Mr Shallard made plain that the block trade could not take place until both parties had opened an account with his firm and he was in possession of cleared funds from the purchaser. I accept Mr Shallard likely adhered to his usual practice by making the position clear to Mr Bolton. In fact, Mr Shallard hardly needed to say this to Mr Bolton, who was familiar with block trades. 6. According to Mr Shallard, he concluded the conversation by saying, "He has indicated he is prepared to bid up to 18 cents for Keybridge's Molopo shares." (Mr Bolton agreed that this was said.) Mr Bolton said that he would get back to him. In addition, according to Mr Bolton, "There was conversation about it being firm. … Mr Shallard confirmed that the bid was firm at 18 cents. I said that I would take that back to my board and to Aurora and come back to him." 7. Following the telephone conversation, at 3.02 pm, Mr Bolton sent an email to Mr Moffat, Mr Sormann and John Corr of Aurora, advising: (emphasis added) We have a firm bid at 18c for our full line of [Molopo] expires tomorrow. Said they want to close before the AGM. [Molopo's annual general meeting was on 29 May 2015.] I think it's a pass for me, but over to you three for feedback. John [Corr], I note that you're probably a seller at this level, but I suspect it's for the full line only … so you … may only have a tag along right! My view is that we presently control the vehicle, notwithstanding Farooq [Khan]; and the likely cash value is closer to 23c per share. Probably room to show them a counter at say 20c; but for me I'm still a pass at that level. 1. According to Mr Bolton, Mr Corr was the chief investment officer at Aurora who had delegated authority to deal with all securities in Aurora's funds. Mr Corr later replied, "Understood. Would sell at 18 (4.09mill), but understand bigger corporate logic, and the probable "all or none" nature of the bid." 2. After his call with Mr Bolton, Mr Shallard provided his contact details to Mr Mironi and enquired, "By way of introduction, which firm are you representing?". Mr Mironi replied, "I will use a special purpose vehicle for the purchase. I am part of a group of private European investors looking at various investment ideas. Once we know we have a deal, we will go the full KYC and disclosures". Third call: bid rejected 1. In the evening of 20 April 2015, Mr Mironi sent an email to Mr Shallard, asking whether there was any update as he had a meeting with "a few of the people here" later that day; "Again, if we have a deal, I would like to close before the AGM." Clearly, Mr Bolton had yet to respond to Mr Mironi's bid to buy Keybridge's Molopo shares at 18 cents a share. 2. The next morning, at 8.20 am on 21 April 2015, Mr Shallard left a message for Mr Bolton. That afternoon, Mr Shallard reported to Mr Mironi, "Just waiting for the managing director to get back to me." Mr Mironi replied later that evening: Just a thought – the price will not be the same (i.e. it will go down or just expire) if Keybridge start buying more stock to make a quick profit on me. The offer is ok for 16.15% (which I understand is what they have now). Nothing more. That is, although the bid at 18 cents a share had been made for all of Keybridge's Molopo shares, a quantitative limit was now in view. 1. On 22 April 2015, at 7.58 am, Mr Shallard spoke to Mr Bolton (for one minute and 27 seconds). Mr Shallard immediately reported to Mr Mironi (at 8.02 am): I have spoken to the MD of Keybridge this morning and he has informed me their investment team will pass on your offer to buy their holding in Molopo Energy Ltd up to 18 cents. (As a later email from Mr Shallard makes clear, the email meant that Keybridge wished to "pass" on the offer to buy its Molopo shares, rather than that the investment team would "pass on" the offer.) Mr Shallard's email also displays a practice evident from his emails in this matter, being to repeat back to a client their instructions on which he has acted. Fourth call: no counter offer 1. Mr Mironi did not notice Mr Shallard's email. On the afternoon of 23 April 2015, Mr Mironi emailed Mr Shallard again, asking whether there was any news. Mr Shallard promptly replied, "I emailed you yesterday morning informing you the board of Keybridge have decline[d] your offer to buy the ~16% of Molopo up to 18 cents." Mr Mironi apologised for having not seen Mr Shallard's earlier email and added, "I want to be productive. We have a no at 18. At what level will they sell?". 2. On Friday, 24 April 2015, at 9.25 am, Mr Shallard spoke to Mr Bolton for five minutes. As Mr Shallard recalled it, he and Mr Bolton discussed that the potential buyer was still active and looking for a line in Molopo but Mr Bolton said Keybridge was not interested in making a counteroffer, nor interested in being party to a fishing expedition. Mr Bolton said, "Come back to me when you've got something firm that I can take to my board". Mr Shallard got the impression that Mr Bolton was not interested in selling. On conclusion of the call, Mr Shallard promptly reported to Mr Mironi by email, "Just spoke to the MD of Keybridge. At this stage they are not interested in a counter offer." Fifth call: bid at 25 cents 1. Mr Mironi emailed Mr Shallard later on the evening of 24 April 2015, "I don't want to give up so easily" and, later again, "Thinking again, please offer them a clear proposal for 24-25 cents. This is the only way to understand what they want to do. I expect them to give us a decent answer, not just a plain 'no' so we can make a final decision". 2. Mr Shallard considered Mr Mironi's email to propose a significant price increase for Molopo shares, which made it more likely that Keybridge would be interested in Mr Mironi's proposal. However, Mr Mironi's email referred to a range of 24 to 25 cents per share, which indicated to Mr Shallard that there was some fluidity in his proposal, despite his reference to wanting to offer a "clear proposal". Mr Shallard wanted to clarify Mr Mironi's position and, if possible, for Mr Mironi to indicate his willingness to transact at a specific price rather than just making proposals designed to find out Keybridge's position. 3. By now, it was Anzac Day and Mr Shallard was at his holiday home. On Monday morning, 27 April 2015, Mr Shallard and Mr Mironi exchanged emails. From Mr Shallard: Just being very clear you want me to bid for Keybridge's stake in Molopo Energy Ltd at AUD 25cents. So this is a FIRM bid?? Mr Mironi replied, "Yes. Firm. But timing is important. I need a quick reply." 1. Five minutes after receiving Mr Mironi's email, Mr Shallard spoke to Mr Bolton briefly at 11.33am (one minute and 18 seconds). Mr Bolton took the call while driving to the office. Mr Shallard promptly reported to Mr Mironi on the conversation by email at 11.37am: Just spoke to the MD of Keybridge. He said he will get back to me today with an answer. He is acutely aware that the timing is a key issue. 1. As to the terms of the conversation between Mr Shallard and Mr Bolton, Mr Shallard recalled that he said, "The buyer has indicated that he has interest in increasing his bid up to 25 cents per share. This is a bid for Keybridge's 16.15% of Molopo shares". Mr Shallard recalled that it was important for him to refer to 16.15% of Molopo shares – and he made sure that he expressly did so – because of Mr Mironi's email of 21 April 2015 indicating that he would not buy more than this volume and because the price now being offered was significantly above the trading price for Molopo shares, which was then 12.5 cents. Mr Bolton said he would come back to him with Keybridge's response. 2. Mr Bolton recalled that Mr Shallard said, "I have a firm bid from our client at 25 cents for all your Molopo shares." According to Mr Bolton, "I clarified that it was a firm bid, whether he was bidding firm, and he confirmed that he was bidding firm, and I said I will take that to my board and Aurora." Mr Bolton insisted that he was "very, very clear about this particular matter." 3. At 11.40am, Mr Bolton promptly reported on his conversation with fellow director, Mr Coleman, texting: "We've been bid 25c MPO. Let me know your thoughts." (Perhaps inconsistently with Mr Bolton's recollection, his text message referred to a 'bid' rather than a "firm" bid. Consistent with his recollection, however, Mr Bolton made no reference to 16.15%.) Further text messages ensued regarding the estimated profit on such a deal; Mr Bolton and Mr Coleman agreed that they should "take it". Mr Coleman also surmised that the bidder – described by Mr Bolton in the text as "an anonymous client presented through Bell Potter Perth" – was associated in some way with Mr Khan. As Mr Bolton explained, Mr Khan was trying to get control of Molopo, "so we thought that he may well be somehow behind the introduction of the party to Bell Potter who was buying our stake." 4. As to whether Mr Shallard used the words attributed to him by Mr Bolton – "I have a firm bid from our client at 25 cents …" – Mr Shallard had endeavoured to extract confirmation from Mr Mironi that this was "a FIRM bid??" and Mr Mironi had obliged, "Yes. Firm". It is reasonable to think that Mr Shallard faithfully conveyed Mr Mironi's instructions in the call to Mr Bolton. In cross examination, Mr Shallard agreed that he told Mr Bolton, "I've got a potential buyer who's firm at 25 cents for the 16.15%." I consider it likely that Mr Shallard said the words attributed to him by Mr Bolton, and I so find. 5. As to whether the bid was for 16.15% of Molopo shares, or all of Keybridge's Molopo shares, the former is more likely and I so find. Where Mr Mironi had specified that his offer was "ok for 16.15% … Nothing more", it is inherently likely that the stockbroker specified both the price and quantity of the bid when conveying its terms to Mr Bolton. Consistently with this, Mr Shallard confirmed by email later that day that the offer had been accepted and referred both to the price and quantity: see [71]; see also [105]-[106]. Sixth call: acceptance? 1. At 12.02 pm on 27 April 2015, Mr Bolton called Mr Shallard and they spoke at greater length (for four minutes and 16 seconds). Mr Shallard recalled that Mr Bolton rang him back and said he was happy to match. Mr Shallard assumed that Keybridge was happy with the price. Mr Shallard said that the next step was for both parties to open accounts with Bell Potter. 2. Mr Bolton recalled saying that he was prepared to match firm at 25 cents. Mr Bolton said he recalled saying this, "They were very important words about a very important deal." I place little weight of this professed clear recollection where Mr Bolton did not refer to this conversation at all in his first affidavit. 3. At 12.18 pm on 27 April 2015, Mr Shallard reported to Mr Mironi by email: (emphasis added) I have heard back from the managing director of Keybridge Capital and he stated they are willing to sell their circa 16.15% of Molopo Energy Ltd at AUD 25 cents. To proceed with this transaction my colleague Adam Hunter will email you forms to establish an account so we can facilitate the transaction. There was no suggestion that Mr Bolton's call had resulted in an immediately binding contract but rather that the first step in the process had been achieved, being agreement on the key terms of the block trade. 1. At 12.20 pm, Mr Shallard provided his contact details to Mr Bolton by email. Mr Bolton replied, "I understand our Aurora funds have an account with you, but we may not. Our CFO [Adrian Martin] is copied to sort that out." Mr Shallard replied, copying in Mr Hunter to "assist with the account opening etc". Bell Potter provided an account opening form. At 2.08pm, Mr Bolton forwarded the precise details of Keybridge and Aurora's shareholdings in Molopo to Mr Shallard. Keybridge then held 14.83% and Aurora held 1.75%, totalling 16.58%. Mr Bolton added, "Happy to match the firm bid at 25c." 2. Mr Shallard said this was the first time he became aware that Keybridge wished to sell more than 16.15% of Molopo's shares, and the first time he became aware that some of the shares were owned by Aurora. Mr Shallard realised that he now needed to seek Mr Mironi's agreement to purchase the additional Molopo shares above 16.15% and, in addition, Aurora also needed to have an account with Bell Potter. Mr Shallard responded, "Will email the group the exact quantity of shares." Mr Shallard forwarded the information to Mr Mironi. 3. Meanwhile, Mr Bolton was still in the process of speaking with all of Keybridge's directors to approve the deal. Board approval was required for divestments of capital greater than $5 million. Mr Bolton said he called Mr Corr shortly after his call with Mr Shallard, although did not refer to this conversation in his affidavits. He spoke to Mr Sormann, but he was conflicted given his directorship on the Molopo board. 4. At 2.19pm, Mr Bolton spoke to Mr Brown for nine minutes. Mr Bolton said he told Mr Brown that the bidder had gone firm at 25 cents and that everyone else was quite happy with the price. They had a long conversation about who the bidder might be and whether they were related to Mr Khan. Mr Brown agreed that he was happy to sell at that level. Mr Moffat was then in Scotland. Mr Bolton sent various text messages and left voice messages for Mr Moffat at 1.30 pm, 2.18 pm, 2.19 pm, 8.09 pm and 8.10 pm. Mr Moffat later called Mr Bolton back. Mr Bolton told Mr Moffat, "We'd got the price, they bid firm, and that he was happy with that price point, and he certainly was." Although no board meeting was held, Mr Bolton considered these conversations were sufficient to obtain the approval of the board. 5. Later that evening, Mr Martin provided Bell Potter with partially completed account opening forms. He proposed to send the completed documents in the morning "but given the urgency of this account to open I thought it would assist in sending the completed forms." 6. An account opening for Mr Mironi was also underway. Mr Mironi advised that he was checking internally as to what was the best option but thought, most likely, he would use a British Virgin Island special purpose vehicle. Mr Hunter advised Mr Mironi, "cleared funds are imperative for any transaction to occur". Mr Hunter offered to provide Bell Potter's banking details so that funds could be transferred in anticipation of the account opening. 7. Mr Bolton said he believed, as of 27 April 2015, that Keybridge had entered into a binding legal contract to sell its Molopo shares. Keybridge was obliged to comply with the continuous disclosure requirements of the ASX Listing Rules and the Corporations Act 2001 (Cth) by timely disclosure of any information concerning Keybridge that a reasonable person would expect to have a material effect on the price of Keybridge's shares. Mr Bolton and Mr Martin were responsible for communications with the ASX. No announcement was made in respect of the $10 million sale of Molopo shares, which Mr Bolton said was not a material disposal, even though it comprised some 25% of Keybridge's assets; "potentially profit from the transaction could have been material but not necessarily the disposal." Mr Bolton did not accept that he would have taken immediate steps to announce this to the market on 28 April 2015, "If it had printed, absolutely, but we were focused on making sure that Bell Potter completed their subsequent steps." Mr Bolton denied that the reason that he did not make a disclosure on 28 April 2015 was because he knew there was no binding legal contract. 8. There is insufficient evidence of market practice to enable me to conclude that the absence of an ASX announcement in respect of the sale of Keybridge's Molopo shares amounts to an admission that there was then no binding contract of sale. I have treated this as a neutral consideration. Seventh call: offer expiring 1. At 2.20 pm on 28 April 2015, Mr Shallard sent a follow-up email to Mr Mironi, asking him to call with regards to the purchase of Keybridge's Molopo shares. 2. On 29 April 2015, at 9.09 am, Mr Shallard sent a further email to Mr Mironi, "Have not heard from you. Can I assume you are no longer interested in [Molopo]? If I have not heard back from you by the close of trade today I will go back to the seller and inform them you are no longer interested." There is no suggestion in Mr Shallard's email that Mr Mironi was then in breach of a binding contract but rather that Mr Mironi could choose, if he so wished, not to proceed further. 3. Meanwhile, Keybridge sought confirmation that it's account opening forms had been received in the mailroom "and that everything is in order to open an account". (There were problems with how Keybridge's account opening forms were completed.) At 11.43 am on 29 April 2015, Mr Bolton also sent an email to Mr Shallard: (emphasis added) Just to say that we're firm until tomorrow. Please let me know if your counterpart is unlikely to meet that timeframe. Happy to print on a deferred settlement basis as needed for international wire, but it needs to print. 1. Mr Shallard interpreted the email as Keybridge being prepared to entertain a deferred settlement, which was somewhat unusual. On receipt of Mr Bolton's email, Mr Bolton and Mr Shallard had a telephone call at 11.44 am (four minutes and eight seconds). According to Mr Shallard, he told Mr Bolton that he was trying to set up the accounts but he had not heard back from the potential buyer. 2. According to Mr Bolton, Mr Shallard told him that his client had not actually opened an account with Bell Potter, did not have the funds to complete the share purchase and would not be purchasing the shares under their firm bid. Mr Shallard also apologised. Mr Bolton said he understood from this call that Bell Potter did not have authority to make the firm bid, despite what Mr Shallard had said in their telephone call on 27 April 2015. The accuracy of Mr Bolton's recollection is diminished by the fact that he referred to one conversation with Mr Shallard on this day when there were three conversations; Mr Bolton insisted that he was told that the purchaser was unable to complete in the timeframe and Mr Shallard was very embarrassed and very apologetic, saying repeatedly that it had never happened to him as a broker before. 3. Mr Shallard disputed Mr Bolton's version of their conversation. He did not say that Mr Mironi "would not be purchasing" the Molopo shares and had no specific recollection of apologising to Mr Bolton, although accepted he may have said he was "sorry for messing you around" as Mr Shallard was disappointed at the delay in obtaining a response from Mr Mironi. Further, Mr Shallard said he had already told Mr Bolton – probably twice – that both parties needed to open an account with Bell Potter and the buyer needed to transfer funds to Bell Potter before any transaction could proceed. 4. To some extent, Mr Bolton's account is corroborated by a board paper circulated by Mr Bolton later that evening: see [90]. That said, the board paper does not support Mr Bolton's evidence that he was told that Mr Mironi would not be purchasing the Molopo shares but rather that Keybridge's offer had expired before Mr Mironi was in a position to complete the block trade. As such, I prefer Mr Shallard's version of the conversation save that he may have apologised more fervently than he now recalls. 5. In any event, at 11.51 am, Mr Mironi replied to Mr Shallard, advising "I am still interested. I am putting together the structure on my side." Mr Mironi said he was in the process of establishing a company and had all the KYC documents ready and would send them later that day. On receipt of this email, Mr Shallard called Mr Bolton a second time and they spoke (four minutes and 19 seconds). Mr Shallard does not recall what was said in the conversation; it was his usual practice to keep parties to a potential transaction regularly updated and so it is likely he relayed to Mr Bolton the summary of his recent email from Mr Mironi. 6. Following their conversation, Mr Shallard emailed Mr Mironi at 12.02 pm: (emphasis added) I have been talking to Keybridge Capital and they stated their offer will expire 10.00am EAST tomorrow. I get the feeling they are becoming uneasy with the proposed transaction. If you wish to proceed I recommend you expedite the process from your end. The fact that Keybridge's offer "will expire … tomorrow" is inconsistent with there being a binding contract already in existence. Further, Mr Shallard referred to this as "the proposed transaction", where Mr Mironi was obliged to take steps "if you wish to proceed". 1. Two hours later, Mr Bolton and Mr Shallard spoke for a third time (for three minutes). 2. Later that evening at 8.45 pm, Mr Bolton circulated a report to the board of Keybridge in advance of the board meeting the next day. In respect of his dealings with Bell Potter, Mr Bolton reported: (emphasis added) • On Monday I received an approach from Bell Potter Perth for our [Molopo] line @ 25c. It was bid firm by the broker, and I responded with a firm offer @ 25c to match and print immediately. • This offer has since expired, as [Bell Potter] were not able to deliver their firm bid. In fact their bidder did not have an account, nor were they funded. • I have questioned the credibility of the offer in light of Bentley having received an approach at the same value back in June 2013 that did not close. • [Bell Potter] have agreed and are very apologetic. They have advised that they will continue to progress with the client, and will present a bid if they are in a position to be firm. I have stated that there is no agreement … to deal, and he knows where to find me if they're in a position to present firm and funded. … • For the moment, we consider the bid past and speculative. We do remain ready to be surprised. 1. As Mr Bolton circulated the board paper the evening before Keybridge's offer expired but proceeded on the basis that Bell Potter's client would not be able to complete the transaction before its expiry, it is likely that Mr Bolton's conversations with Mr Shallard were directed to ascertaining the expected position, so that Mr Bolton could report to the board. Noteworthy, Mr Bolton's description of his dealings with Bell Potter were not consistent with a presently enforceable contract having come into existence between Keybridge and Bell Potter's client. There was no suggestion that, by failing to "match and print", Mr Mironi was in breach of contract. Rather, the manner in which the proposed sale had unfolded was unfortunate – perhaps unprofessional – but a more serious offer may be forthcoming. 2. Consistently with putting the potential sale of its Molopo shares behind it, on 29 April 2015, Keybridge acquired an additional 250,000 Molopo shares. Mr Bolton said Keybridge's "primary play" in respect of its Molopo shares was then to get Molopo's funds into Aurora to increase the funds under management, but if Mr Mironi "turned up firm again we would take it back to the board and consider what the position was". 3. Mr Shallard said that he heard nothing further, by phone or email, from Mr Mironi before Keybridge's deadline for expiry of its offer at 10.00 am on 30 April 2015. At 10.46 am on 30 April 2015, Mr Bolton sent an email to Mr Shallard: (emphasis added) Just to clarify our conversation yesterday. Our firm offer has been withdrawn as your client was unable to deliver on their firm bid. We remain receptive to an approach on a firm and committed basis. 1. Similar to Mr Bolton's board paper, his email is not consistent with a perception that there was a binding contract in existence. Mr Bolton agreed that he did not then assert that Bell Potter had breached a warranty of authority for which Keybridge was holding it responsible, even though he said that Keybridge was "very unhappy at that point." 2. Mr Shallard promptly replied: (emphasis added) Noted Nick. I will not approach you until I have something FIRM. 1. On 30 April 2015, Keybridge acquired a further 530,000 Molopo shares. Mr Bolton agreed that, after 30 April 2015 and at all times since, Keybridge continued to pursue its own commercial strategies in relation to its holdings in Molopo, "while simultaneously progressing a sale." 2. An hour later, Mr Mironi emailed Mr Shallard, suggesting that he should propose a memorandum of understanding with Keybridge to "make them feel more comfortable". Mr Shallard replied: (emphasis added) I have been liaising with Keybridge this morning. They are receptive to FIRM and COMMITTED bids. So from your end all you need to do is establish the account and have cleared fund in our trust account. In essence the ball is in your court. 1. Later that evening, Mr Mironi confirmed that he had received the account opening forms, which would take a couple of days to complete as he was sorting out a company in the British Virgin Islands to use for the purchase. On 1 May 2015, Mr Hunter asked Mr Shallard whether he should suggest that Mr Mironi wire the funds whilst the account opening process was happening so that, once the account was opened, they were ready to go. Mr Shallard replied, "Spoke to him yesterday. I give it a 5% chance." Later that morning, Mr Mironi called Mr Shallard and asked him to enquire of Keybridge how Mr Mironi's nominated director could be appointed to Molopo's board. Mr Mironi advised he was still in the process of opening a company and working on the account opening form. Mr Shallard advised that he had left a message with Mr Bolton to "flesh out the directorship". Mr Bolton returned Mr Shallard's call and left a message. 2. On 1 May 2015, Keybridge acquired a further 250,000 Molopo shares. On 3 May 2015, Keybridge acquired a further 460,000 Molopo shares. 3. On 3 May 2015, Mr Mironi asked Mr Shallard to arrange for someone to assist him to complete the account opening forms and advised that he proposed to use a Cypriot special purpose vehicle. Mr Shallard arranged for his staff to help Mr Mironi complete the forms. This proved a laborious process. Mr Mironi was in Israel, where he needed to sign the forms before sending the forms onto Cyprus for further signature. On 5 May 2015, Mr Shallard's assistance advised, "I think we can keep [the] seller around for a week. … Once [account opening documents] are on the way maybe you could wire funds. … We can't do anything until cleared funds are received our end." 4. On 4 May 2015, Keybridge sold 85,000 Molopo shares at 13.5 cents a share. On 5 May 2015, Keybridge purchased a further 82,225 Molopo shares, for 14.5 cents a share. On 7 May 2015, Keybridge acquired a further 150,000 Molopo shares. On 8 May 2015, Keybridge bought and sold Molopo shares, overall acquiring 224,501 shares at some 15 cents a share. 5. Difficulties in proper completion of the account opening forms continued. Mr Mironi expressed, on 11 May 2015, "I am keen to close the deal. Timing is important." Mr Shallard's assistant advised that they were "getting very close to satisfying compliance" and again requested that funds be transferred, "We can not transact until funds are received into our trust account." Mr Mironi advised, "We usually we do not send funds until the deal is fully sorted. First we should confirm the forms are complete." On 12 May 2015, Mr Mironi emailed Mr Shallard, enquiring whether he had an update on the directorship issue and suggesting that his lawyers may draft a share purchase agreement to deal with the issue. Mr Shallard replied that he had spoken to Mr Bolton and set out a proposed order of events, the first of which was to "Trade the line". ("Trading the line" means trading a reasonably large holding of shares.") Problems continued with the forms as completed by Mr Mironi. The executed forms were finally sent by courier from Cyprus on 13 May 2015. 6. On 11 May 2015, Keybridge acquired 145,714 Molopo shares. On 12 May 2015, Keybridge acquired 54,571 Molopo shares. On 12 May 2015, a notice of change of interest of substantial holder was completed, advising that Keybridge now held 17.2% of the issued shares. On 13 May 2015, Keybridge acquired 100,000 Molopo shares. 7. On the afternoon of 13 May 2015, Mr Shallard telephoned Mr Bolton and they had a short conversation, following which Mr Bolton emailed: (emphasis added) Thanks for the update. Give me a call if your party can progress to a firm bid. 1. Later that afternoon, Mr Mironi emailed Mr Shallard, requesting a copy of the agenda for the annual general meeting of Molopo and adding: Also – just to confirm – as we agreed, I will buy 16.15% of Molopo. Keybridge keep buying more shares. I am not buying the rest. 1. Mr Shallard promptly provided Mr Mironi with the notice of the annual general meeting, adding "In regards to buying 16.5% that is all I have stated to the managing director of Keybridge." (Mr Shallard explained that the email contained a typographical error and he intended to refer to 16.15%, consistent with Mr Mironi's email to which he was responding.) 2. Mr Mironi asked what was the last date to change the agenda for the meeting in respect of directors, and Mr Shallard said he would check and get back to him. On 14 May 2015, Mr Shallard reported that 28 days' notice was needed, that is, it was now too late to change the agenda for Molopo's annual general meeting. Mr Shallard's assistant asked Mr Shallard whether he thought this would be a deal breaker for Mr Mironi and Mr Shallard advised, "No he is ok. Speak to him." Mr Hunter again provided Mr Mironi with Bell Potter's banking details. Mr Mironi suggested that he would send the money from his lawyer's trust account in Gibraltar. 3. On 15 May 2015, Mr Mironi's account opening forms arrived at Bell Potter. Mr Hunter advised Mr Mironi that the account was now ready to trade on, "I understand you have spoken with Brad [Shallard] around potential timing of transaction but you now have our banking instructions to wire funds in readiness." Mr Mironi replied that he was working on the transfer of funds. Mr Hunter provided a calculation of the amount required on an acquisition of 16.15% shareholding at 25 cents a share. With commission, the amount required was some $10.1 million. 4. At 12.11 pm on 15 May 2015, Mr Shallard spoke to Mr Bolton. Mr Hunter also followed up Mr Martin in respect of the proper completion of Keybridge's account opening forms, advising "We are very close to being ready for trade and I just want to get all ducks in line." Mr Hunter reported to Mr Shallard that he had spoken to Keybridge, "good thing I did … Nick [Bolton] hasn't kept Adrian [Martin] up to speed and Adrian thought it was all dead and buried and didn't bother returning the paperwork with the signature required." Mr Martin's perception that the deal was "all dead and buried" is inconsistent with any understanding that there was a binding contract in place which had not been performed. Mr Martin made arrangements to have the forms properly signed. 5. On Monday 18 May 2015, Keybridge delivered the completed account opening forms to Bell Potter. Later that evening, Mr Mironi called Mr Shallard and, as Mr Shallard reported by email to Mr Bolton the next morning, "The group interested in acquiring a stake [in Molopo] … have received legal advice to wait until the AGM and the resolutions have passed before the[y] act. The sag[a] continues." Mr Bolton forwarded this to Mr Moffat, who observed that there was nothing contentious in the resolutions before the annual general meeting, "Given we do not have an offer, just a lot of talk from [Mr Khan's] broker, one wonders if the noise emanates from the recent seller." 6. On 17 May 2015 Keybridge acquired 200,000 Molopo shares. On 18 May 2015, Keybridge acquired 1,383,086 Molopo shares. On 19 May 2015, Keybridge acquired 1,083,914 Molopo shares. On 20 May 2015, Keybridge completed a notice of change of interest of substantial shareholder form; its Molopo shareholding then stood at 18.46%. 7. On 20 May 2015, Mr Mironi emailed Mr Shallard and enquired whether there was any news in relation to the change of directorship, "Again, we are committed to the trade, but it would be a waste of time to go through the directorships twice." Mr Shallard replied, somewhat tersely, "I have spoken to Managing Director of Keybridge … the process would be to undertake the transaction and then Keybridge's representative would step down. … this is NOT a complex nor uncommon transaction. Keybridge would have no reason to stay on the board if they exited their position." Mr Mironi replied, "We should target the first week after the AGM for trade." 8. It appears that Mr Shallard informed Mr Bolton that the trade was now scheduled for after the annual general meeting. Mr Bolton prepared a report for a board meeting to take place on 28 May 2015, reporting that Keybridge and Aurora had continued to increase their shareholding in Molopo, with a strategy to get to 19.01% as soon as possible "to begin creep clock". Bentley had asked to meet to discuss plans for Molopo "and its cash". The annual general meeting was on Friday: (emphasis added) • The Bell Potter approach continues to lack credibility. They now say they have interest after the AGM, despite their prior approach being explicitly requiring a trade prior to the AGM. • The primary play remains to obtain the [Molopo] funds for Aurora to manage. Mr Bolton's description of the previous bids as a "prior approach" does not suggest that he understood a binding contract to have come into existence and not been performed. 1. On the day of Molopo's annual general meeting, Mr Mironi emailed Mr Shallard and requested that he ask Keybridge whether it would agree "to do the deal now and pay a 1m non-refundable deposit but close and exchange only on July 1st." Mr Shallard replied promptly, "[Keybridge is] just after a clean uncomplicated transaction." Direct negotiations 1. On 1 June 2015, Mr Mironi emailed Mr Shallard and asked to be connected directly to Keybridge, to "move this ahead." Mr Bolton's contact details were provided. Mr Mironi and Mr Bolton spoke and further emails ensued. Mr Bolton reported to Mr Moffat that Mr Mironi was "evasive". Mr Moffat noted "the strange manner in which it has unfolded … We have little appetite in giving up the future for $1m deposit. Best for them to simply approach when and if they have a firm offer and we will consider then." 2. On 10 June 2015, Mr Shallard enquired of Mr Bolton whether he had heard from Mr Mironi. There was no response. Mr Shallard heard nothing further from Mr Mironi or Keybridge about the transaction until he was provided with the statement of claim in these proceedings in May 2021. 3. On 11 June 2015, emails were exchanged between Mr Mironi and Mr Sormann, arranging to meet in Milan to discuss a potential deal. A meeting took place following which, on 17 June 2015, Mr Bolton emailed Mr Mironi advising Keybridge continued to have some interest in pursuing the transaction but no decision had been made by the board: (emphasis added) [Keybridge] Board has stated that it will only consider an offer once it is presented firm. Below we have listed the next steps … 1. You fully fund your account with Bell Potter. 2. Bell Potter confirms with [Keybridge] that it is in a position to execute the transaction on a T+3 basis subject to instruction. … 7. Upon confirmation from [Molopo] that it will appoint you as a Director – Your offer goes firm. 8. [Keybridge] accepts the offer (subject to Board approval). 9. Bell Potter completes the trade via On-Market cross. 1. Mr Bolton agreed that he did not assert to Mr Mironi that he had already entered into a binding contract with Keybridge, to which he would be held. Where Keybridge was trying to get Mr Mironi to complete a very similar deal, "we were playing it very tactfully. So … I don't thing we were threatening to Mr Mironi through those discussions." Failed takeover 1. Mr Bolton submitted a report in advance of a Keybridge board meeting on 25 June 2015, reporting that Keybridge and Aurora had now acquired just over 19% of Molopo shares and had started the 'creep clock'. Further, "Roy Mironi continues to pursue 40m shares from us at 25c. We have met him, and advised that he needs to come back with a firm bid. Whether or not we would accept is for discussion." Mr Bolton's report made plain that Keybridge was involved in a number of potential outcomes in relation to its Molopo shareholding, of which Mr Mironi was but one, and a lesser one at that. 2. Keybridge continued to buy Molopo shares from 20 May 2015 to 30 June 2015 and, on 1 July 2015, gave notice that its interests then stood at 19.68%. On 25 August 2015, Keybridge became a substantial holder, with 19.95%. The same day, Bentley Capital sold its shareholding in Molopo via a special crossing on the stock exchange for 26.5 cents per share. 3. On 31 August 2015, in his report in Keybridge's annual report for 2015, Mr Bolton highlighted Keybridge's achievements, including acquiring a strategic 19.67% stake in Molopo; "We are now considering the future of the vehicle." There was no suggestion that Keybridge had a failed-sale of its Molopo shares to Mr Mironi but, rather, an ongoing strategy in relation to its shareholding. Mr Bolton agreed that Keybridge continued to actively buy Molopo shares; Keybridge's strategy was to increase its holding in Molopo, unless someone offered an attractive price. Mr Bolton said, notwithstanding the strategies in respect of the Molopo shares set out in the annual report, the company's strong preference was to sell the shares. As to why this was not stated in the report to shareholders, "that would be imprudent to disclose such a thing." 4. On 6 October 2015, Mr Bolton was disqualified from managing a corporation for three years by the Australian Securities and Investments Commission (ASIC). Mr Bolton appealed to the Administrative Appeals Tribunal. He resigned as managing director of Keybridge but continued to work for the company as a consultant and, according to a later media release by the Takeovers Panel, also provided advice and assistance to Aurora. 5. There began a difficult chapter in Keybridge's corporate life. On 1 July 2016, Keybridge announced that it had sold Aurora. Mr Bolton was opposed to Keybridge selling the business and "ended up on the buy side". Mr Bolton then invested in Aurora, which bought more Molopo shares. According to a later media release by the Takeovers Panel, Aurora proceeded to increase its shareholding in Molopo to 17.92%. In April 2017, ASIC filed an application with the Takeovers Panel, suggesting that Keybridge and Aurora were associated with one another and their combined shareholding in Molopo was 37.33%, in contravention of section 606 of the Corporations Act. Molopo shares were suspended from trading on 29 May 2017. On 31 May 2017, the Takeovers Panel made a declaration of unacceptable circumstances, having regard to the effect these events may have on the control of Molopo: Molopo Energy Limited 01 & 02 [2017] ATP 10. On 30 June 2017, the Takeovers Panel made orders vesting Keybridge and Aurora's Molopo shares in ASIC to sell: Molopo Energy Limited 03R, 04R & 05R [2017] ATP 12. Trade in Molopo shares resumed on 4 July 2017 but was suspended again on 25 July 2017 with a closing price of $0.14. 6. On 27 July 2017, Aurora made a takeover bid for 100% of Molopo shares at $0.18 per share. The review panel of the Takeovers Panel confirmed the declaration of unacceptable circumstances and made further divestiture orders. On 2 August 2017, Molopo shares were suspended from quotation, which suspension was extended from time to time. On 11 September 2017, Keybridge commenced legal proceedings against Molopo in the Supreme Court of Western Australia, seeking orders under section 247A of the Corporations Act to inspect the company's documents and books. Keybridge also requisitioned a meeting of Molopo to appoint a Keybridge director to the board. Keybridge commenced an oppression suit against Molopo. On 18 September 2017, Keybridge commenced proceedings against Molopo in the Supreme Court of Victoria, seeking to restrain the company from paying US$4.5 million to fund a US oil and gas project; this application failed. 7. Further proceedings continued before the Takeovers Panel and in various courts concerning Keybridge, Aurora and Molopo in 2018. Over this period, the value of Molopo shares continued to fall. By February 2019, Aurora valued the shares at $0.026 per share. On 1 April 2021, Molopo was removed from the official list of the ASX, having been suspended from trading for a continuous period of more than two years. 8. On 26 April 2021, Keybridge commenced these proceedings. Keybridge continues to hold the 41,264,667 Molopo shares it held at the time of the "firm" bid, albeit the investment has been written down to nil. Mr Bolton said Keybridge did not sell the shares as it failed to receive any subsequent offers that were an improvement to the price offered by Bell Potter, nor was it able to sell on-market at a better price. Keybridge did, however, remain a seller of its shares at or around that price. WAS KEYBRIDGE INDUCED TO CONTRACT? 1. Keybridge submitted, following the sixth conversation between Mr Shallard and Mr Bolton on 27 April 2015, a contract was formed between Mr Mironi and Keybridge to buy and sell the 16.58% of Molopo's shares held or managed by Keybridge. The remaining steps described by Mr Shallard to effect a block trade – opening accounts and obtaining funds from the purchaser – constituted performance of that agreement or, alternatively, conditions subsequent stipulating that an already-binding contract will cease to have force after a specified event does or does not take place: Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 551-552 (per Mason J). Mr Shallard impliedly represented that he had authority to enter into a binding contract for the sale of shares on behalf of his principal. In fact, the scope of Bell Potter's authority was to invite Keybridge to treat, not to bind Mr Mironi to a contract. Mr Bolton was induced to accept Bell Potter's offer and enter into a contract. Bell Potter exceeded its authority by binding Mr Mironi to the contract. If Bell Potter had not represented that it had authority to enter into a binding contract on behalf of its principal, Mr Bolton would not have accepted Bell Potter's offer and revealed the price at which Keybridge was willing to sell. Keybridge submitted that it lost the benefit of the contract by reason of its reliance on Bell Potter's warranty of authority. 2. Keybridge's case, so framed, depends upon whether a contract was formed on 27 April 2015 to buy and sell the Molopo shares, being either all or 16.15% of the shares or at all. To use the words of Willes J in Collen v Wright, the question is whether Bell Potter induced Keybridge to contract with Bell Potter as the agent of Mr Mironi by an unqualified assertion that it was authorised to so act. The answer depends, in part, on the meaning of "firm". Meaning of "firm" 1. According to Mr Bolton, a "firm bid" is an offer by a bidder which contains no conditions which may prevent acceptance and which, by its terms, remains open and binding until accepted, rejected or expiry. Mr Bolton said that, in his experience, a broker took a discussion about the potential purchase of shares from a theoretical one to a binding one by the use of the word "firm". Further, "When the broker presents the bid as a firm bid, that is a binding offer that is a one way offer, and when it is accepted firm, it becomes a transaction. And so, that's the tipping point as I understand these transactions to progress." 2. Mr Shallard did not agree. In his experience, a bid or offer may be expressed as 'firm' in relation to price or volume or both but be subject to conditions before being binding. In his experience, the word 'firm' was used in block trades by stockbrokers with its ordinary meaning, being to convey a degree of certainty, usually in relation to the price per share or the volume of shares. As to what Mr Shallard meant by "a FIRM bid" in his email to Mr Mironi of 27 April 2015 (see [60]), Mr Shallard said, "I was at a point where … my confidence was low and I just wanted to get a price. Either are you going to give 24, 25, give me a firm price I can work with." He never thought that "firm" meant irrevocable, committed or non-negotiable. Rather, "I was getting frustrated with it, time was ticking on and he wasn't being clear, so I said give me something firm." 3. Mr Moffat, Mr Coleman, Mr Brown, Mr Martin and Mr Corr, or at least some of them, may have been well-placed to say what they understood was meant by a "firm" bid. In the absence of any explanation as to why these witnesses were not called, I infer that their evidence would not have assisted Keybridge. 4. The meaning of technical terms, or terms of art, is a question of fact to be decided upon expert evidence: Max Cooper & Sons Pty Ltd v Sydney City Council (1980) 29 ALR 77 at 85 (per Lord Diplock). As McHugh JA explained in Vince Coles Pty Ltd v Skischufabrik Dynafit (Court of Appeal (NSW), McHugh JA, 28 October 1985, unrep) at [5]: (citations omitted) When evidence is admitted to prove that words in an agreement have a special trade or locality meaning, it is because their use in an agreement made in that locality, or with reference to a matter in that trade, raises a presumption that the parties have contracted in accordance with that special meaning … The presumption arises from the parties' knowledge, or the notoriety, of that meaning in the locality or trade … The presumption is one of fact, not of law, and may be rebutted … The terms of the agreement may show that the parties did not intend to contract in accordance with the special meaning … Proof that one or both parties were ignorant of the special meaning of the words in the trade or locality will rebut the presumption … Moreover, unless the meaning is both certain and notorious, no presumption arises. 1. As McDougall J explained in Mr Rental Australia v IRD Services Pty Ltd [2016] NSWSC 118, while expert evidence might be admissible to explain some special meaning to be given to words and phrases to be derived from trade custom or usage, "the evidence would not be admissible to demonstrate how particular words, or a particular clause of a contract, should be expected to apply in the particular circumstances of a given case": at [9]-[10]. 2. Mr Heffernan was asked by Keybridge to opine on the language used in the conversation described by Mr Bolton on 27 April 2015, when Mr Shallard said, "I have a firm bid." Mr Heffernan is an economist. For many years, he worked at the ASX as the economist lawyer, where he was involved in the oversight of stockbrokers. In 1997, he started working for stockbroking firms, dealing with clients who wished to buy and sell shares, and did so for some 20 years. However, Mr Heffernan has never acted on a special crossing; he only effected trades for clients in on-market transactions. 3. Mr Heffernan said that the word "firm" was used in stockbroking in the context of equity capital raisings. For initial public offerings (IPOs), it was of critical importance to issuers that they would achieve the amount of funds that they sought. To that end, the issuer would advise selected stockbrokers that they would receive firm allocations of shares, which they in turn could provide to their clients. Here, "firm" meant that the stockbroker would in fact receive the shares promised and make them available to interested clients. In this context, the issuer used the term "firm" to provide certainty to stockbrokers, that is, a commitment. Mr Heffernan agreed that the word 'firm' is used to indicate that an allotment of shares is no longer subject to change. He equated the word 'firm' with 'irrevocable'. 4. When asked whether the word 'firm' was commonly used in stockbroking, Mr Heffernan said that the word was used generally in relation to equity capital raisings, "It's not all that common but there are times when some people use it I guess." Mr Heffernan considered that the word had a technical meaning "particularly in relation to equity capital raisings." Used outside of that context, "firm, if used by a client and specifically used by a client, would mean that is exactly what they want. Most clients probably wouldn't use that term but there are some clients who may well do so and because firm is a term not unknown to stockbrokers, if people use it I would say it does have a particular technical meaning, as I have indicated." 5. Mr Heffernan considered that if the client said that they wanted a 'firm price', "that I think underlines the importance the client attaches to what they are telling the advisor." To Mr Heffernan, he considered that this meant something that was non-negotiable and irrevocable. He also agreed that a client using the word 'firm' could do so to emphasise particular instructions, "I think they're underlining the importance of what it is that they want. I would definitely say so." Elsewhere, Mr Heffernan said, "A firm bid means someone wants to buy a particular stock at a particular price and that is what it means, that and no more." Mr Heffernan accepted that the precise meaning of the word 'firm' depended on the surrounding words and context. Where two parties were negotiating an off-market sale of shares, both as to volume and price, and one party said, "I am firm on price", Mr Heffernan agreed, "You would probably ask more questions" to understand the meaning of the word 'firm' in that context. "If it's used in [that] context … 'firm on price' … probably means they're pretty strong on that." 6. With no criticism of Mr Heffernan, he offered a range of meanings of the word 'firm', many of which had no particular grounding in the stockbroking industry as opposed to everyday life. As Bell Potter submitted, Mr Heffernan's evidence did not rise above the ordinary, natural meaning of the word. In the Macquarie Dictionary, 'firm' is defined inter alia as "not subject to change, for example, a firm offer". 7. I am not satisfied that the word 'firm' has a specific, technical meaning outside the context of an equity capital raising. Much depends on the context in which the term is used and by whom. Mr Heffernan was largely drawing a conclusion as to the meaning of the term in the context of which it was used in a conversation between Mr Shallard and Mr Bolton. Expert evidence of the special or technical meaning of a word may not be used to opine as to how that word was used in the particular circumstances of the case. That is the province of the Court. 8. As already described, the contemporaneous records are replete with the use of the word "firm". It was clearly a term that had some meaning to Mr Shallard, Mr Bolton and Mr Mironi. The question is whether it had the meaning suggested by Mr Bolton or Mr Heffernan. It is apparent from the communications between the parties that the word 'firm' was used in a variety of ways, frequently inconsistently with the meaning suggested by Mr Bolton. 9. In Mr Bolton's affidavit version of his first conversation with Mr Shallard, he recalled saying, "Come to me with a firm bid capable of acceptance and I will take it to my board." If 'firm' has the technical meaning suggested by the plaintiff, then it would not have been necessary for Mr Bolton to add the words "capable of acceptance" as it would have been inherent within the meaning of the term. 10. Mr Bolton's email of 29 April 2015 stating "we're firm until tomorrow" is inconsistent with the suggested meaning of the word: see [82]. As I read it, by "firm until tomorrow", Mr Bolton represented that Keybridge was prepared to sell its Molopo shares at 25 cents until then. If "firm" meant what Keybridge now asserts, Mr Bolton's statement "we're firm until tomorrow" makes no sense as Mr Mironi was already bound to complete the transaction. To this, Mr Bolton said he then expected that the trade should have crossed on-market the same day it was accepted "as a formality" and he was growing concerned that the on-market print had yet to occur. He considered that Keybridge was bound as a "firm seller" but wished to put a time frame for exchange so that Keybridge was not 'hanging in the wind', as he thought it likely that Bell Potter was in default or were going to default on their part of the transaction. Mr Bolton's explanation is not persuasive, particularly where Mr Bolton never complained that Bell Potter was in default, until commencement of these proceedings six years' later. 11. Nor did Mr Shallard appear to have a shared understanding of the meaning of 'firm' where Mr Shallard continued to refer to "a proposed transaction" after 27 April 2015: see [88]. 12. Mr Bolton appears to have used the word 'firm' in a variety of ways in his report to the Keybridge board circulated on 29 April 2015: see [90]. Specifically, Mr Bolton reported that Bell Potter had "bid firm", to which he responded with a "firm offer … to match and print immediately" but "This offer has since expired, as [Bell Potter] were not able to deliver their firm bid". If "firm" has the meaning suggested by Mr Bolton, then Keybridge's offer would not have "expired" but resulted in a binding contract. Rather Bell Potter was invited to present another bid when "firm and funded". The bid was said to be "past and speculative" where, if 'firm' means what Mr Bolton says, the bid would have been better described as accepted and binding. 13. Similarly, on 30 April 2015 Mr Bolton confirmed by email, "Our firm offer has been withdrawn as your client was unable to deliver on their firm bid." If 'firm' means what Mr Bolton asserts then Keybridge's offer could not have been withdrawn where the very making of that offer would have resulted in a binding contract. Instead, Mr Bolton invited a further bid "on a firm and committed basis". Mr Shallard repeated this information to Mr Mironi, "They are receptive to FIRM and COMMITTED bids." I do not consider that, by both Mr Bolton and Mr Shallard referring to "firm and committed bids" that 'firm' had a distinct meaning to 'committed'; more likely, both words were used for emphasis by the repetition of common concepts. 14. Also of interest is the differing use of 'firm' by Mr Bolton in his communications with Mr Mironi on 11 June 2015: see [117]. Any offer from Mr Mironi was to be "presented firm" but then would only "go firm" after a series of steps had been taken, including by the board of Molopo. The word 'firm' appears to have had a variety of meanings depending on the context in which it was used. 15. Overall, the word 'firm' was used to mean a serious and committed offer. As such, Mr Shallard saying "I have a firm bid at 25 cents" did not mean, without more, that Keybridge's agreement to that price led to a binding contract such that all subsequent steps, including opening accounts with Bell Potter and Mr Mironi providing the firm with cleared funds were merely conditions subsequent. Acceptance 1. There is the further problem that Mr Bolton's acceptance of any "firm bid" on 27 April 2015 was a "match" as to price but not as to quantity: see [67]. As such, Keybridge's acceptance of any offer was a counter-offer, where Mr Shallard had to seek further instructions from Mr Mironi as to whether he was prepared to buy more than 16.15% of Molopo shares. Intention to create legal relations 1. Whether Keybridge and Mr Mironi, represented by Bell Potter, intended to create a binding agreement by their communications is to be determined objectively: Taylor v Johnson (1983) 151 CLR 422 at 429 (per Mason ACJ, Murphy and Deane JJ); Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; Toll (FGCT) Pty Limited v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [40]; Molonglo Group (Australia) Pty Ltd v Cahill [2018] VSCA 147 at [131]-[132]. Three matters tell against such an intention here. 2. First, as Bell Potter submitted, the magnitude and subject matter of the transaction weighs against a conclusion that an agreement formed by way of informal communications between Mr Shallard and Mr Bolton was to have immediate legal effect: G R Securities v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634 (per McHugh JA, with whom Kirby P and Glass JA agreed). The proposed transaction involved an off-market block trade in listed securities for some $10 million. There were a number of preconditions that needed to be met by the parties before they were in a position to complete the transaction and inform the market. It was unlikely in these circumstances that the parties intended to be immediately bound by telephone calls between Mr Shallard and Mr Bolton on 27 April 2015. 3. Second, it would have been utter foolishness for Mr Shallard to have made any representation to Mr Bolton which might have been taken as an intention to create a binding agreement, where Mr Mironi was overseas, previously unknown to Mr Shallard, yet to open an account with the firm and, most importantly, yet to place Bell Potter in funds to complete the transaction. Where Mr Shallard would have been personally liable to fund the share purchase, where it was not suggested that Mr Shallard did not understand what he was doing and where the participants to the conversation were experienced in block trades, it cannot have been imagined by Mr Shallard or Mr Bolton that, by this conversation, Mr Shallard was taking the risk that he would have to fund a $10 million deal. 4. Third, the parties never reached a concluded agreement as to the number of shares to be sold, which weighs against the parties having intended to immediately enter into a binding contract: Farmer v Honan (1919) 26 CLR 183 at 192-193; Allen v Carbone (1975) 132 CLR 528 at [11]. Post-contractual conduct 1. Keybridge submitted that limited use could be made of the conduct of the parties after 27 April 2015 being, on its case, post-contractual contract. Rather, by Mr Bolton's email of 30 April 2015, it was said that Keybridge accepted the principal's repudiation of the contract and terminated the contract. Further communications were directed to negotiating a new contract and were said to be irrelevant. 2. I do not agree. Post-contractual contract in this case was very illuminating, as I have endeavoured to describe at [71], [81], [88], [91], [94], [109], [113], [121], [121]. I infer that the evidence of other directors and officers of Keybridge would not have assisted in explaining its post-contractual conduct. 3. As Bell Potter submitted, after the conversation on 27 April 2015, Mr Bolton emailed through the precise number of shares both Keybridge and Aurora held in Molopo, advising that Keybridge was "[h]appy to match the firm bid at 25c", speaking of a future intention rather than a statement of present fact. Mr Shallard's responded that he "[w]ill email the group the exact quantity of shares", that is, convey a key element of the proposed transaction to his principal. This did not suggest the parties had concluded an immediately binding contract. 4. Mr Bolton's report to the Keybridge board on 29 April 2015 contained admissions inconsistent with the contention that there was any pre-existing contract Keybridge and Bell Potter's principal for the sale of shares in Molopo. Mr Bolton's reported that the "offer has since expired", that he had stated that "there is no agreement … to deal" and that he considered "the bid past and speculative". On 29 April 2015, Mr Bolton sought to impose a deadline on the parties reaching a concluded and binding agreement (that is, to "print"), expressing that Keybridge's position would only remain "firm" until the following day. After that deadline had passed, Mr Bolton expressly advised that Keybridge's "firm offer has been withdrawn". This language is inconsistent with the notion that the parties had earlier concluded a binding contract. Keybridge and Mr Mironi continued negotiating the terms of the potential transaction and taking steps to facilitate entry into the anticipated transaction if those terms could be agreed by opening accounts with Bell Potter. These inquiries and proposals were not met with an assertion as to Keybridge's extant contractual rights to proceed with a sale on terms already agreed. 5. Keybridge did not 'skip a beat' after it became apparent that Bell Potter's client was not in a position to "deliver their firm bid" and, on 29 April 2015, began acquiring more Molopo shares. In not one of the subsequent emails or board papers did Mr Bolton protest that there was already a contract in place between Keybridge and Mr Mironi. While Mr Bolton noted in his report in Keybridge's annual report for 2015 that Keybridge "continued to aggressively pursue litigation on a number of matters where Keybridge has wrongfully suffered loss" – and Mr Bolton agreed that Keybridge was well and truly prepared to litigate, and litigate aggressively – a glaring omission from the litigious landscape earlier described (at [123]-[125]) was any suit brought by Keybridge against Mr Mironi for breach of contract. Mr Bolton agreed that he did nothing to pursue a claim against Bell Potter until the day before expiry of the limitation period. CONCLUSION 1. Bell Potter represented to Keybridge that it had authority to act for Mr Mironi in respect of the proposed transaction. Bell Potter took no specific act in excess of its authority. Mr Shallard had specific authority from Mr Mironi to use the word "firm" in conveying the bid on 27 April 2015, having obtained specific authority to do so. Mr Shallard acted within the scope of authority granted by Mr Mironi. Any representation made by Bell Potter as to its authority to act for Mr Mironi was accurate. 2. More importantly, Bell Potter did not induce Keybridge to contract with Bell Potter as the agent of Mr Mironi by an unqualified assertion that it was authorised to so act. Keybridge did not enter into a contract with Mr Mironi on 27 April 2015 or at any time. Mr Mironi's bid at 25 cents for Keybridge's 16.15% of Molopo shares was not accepted but met with a counter-offer of 25 cents for Keybridge's 16.58% of Molopo shares. There was no intention to create legal relations by the two brief telephone calls on 27 April 2015. The parties conducted themselves thereafter consistently with there having been no contract entered into on that date. It is thus not necessary to consider whether Mr Bolton had the requisite authority to accept Mr Mironi's bid where no contract came into existence in any event. As such, Keybridge's claim fails. 3. If I am wrong about this, then Keybridge has failed to establish that it suffered any loss. The measure of damages for breach of warranty of authority is contractual: Cro Travel at [168] (per Ward JA). That is, the measure of damages is to place Keybridge in the same position it would have been in had Bell Potter's warranty of authority been true: Habton Farms at [46]. Damages are to be assessed at the time of breach: Clarke v Macourt at [106]-[110] (per Keane J). 4. If Bell Potter held itself out to have authority to contract and had such authority, then Keybridge would have sold its shares to Mr Mironi at 25 cents a share. As it was, Keybridge continued to hold the shares and pursued a deliberate strategy of increasing its shareholding. The limited evidence before the Court suggests that the Molopo shares continued to be worth 25 cents a share, with ready buyers at that price, by reference to three matters. 5. First, Mr Mironi (who can be viewed as an arms-length purchaser) continued to try to buy the Molopo shares at that price after 27 April 2015. Second, Mr Bolton agreed that, at the time, he perceived that Keybridge's Molopo shares were in fact worth about 25 cents a share. Molopo was then engaged in litigation in Canada; "I think it was a live situation but … 25 cents was … a touch above litigation NTA and a touch below pre-litigation NTA". True it is that the ordinary measure for damages is the difference between the contract price and the market value of the asset at the time: Habton Farms at [56]. Molopo shares were then worth 12.5 cents on-market. But where Keybridge's shareholding was a 'cornerstone' position, the on-market trading prices for shares at the time is not the correct value. 6. Third, Mr Bolton's assessment of value was likely right as, on 25 August 2015, Bentley Capital sold its shareholding in Molopo via a special crossing on the stock exchange for 26.5 cents per share. As such, there was no loss. Nor can there be any serious suggestion that Keybridge waited patiently for another Mr Mironi to come along. Rather, Keybridge pursued a different strategy altogether, acquiring Molopo shares and endeavouring to takeover the company. ORDERS 1. For these reasons, I make the following orders: 1. Verdict for the first defendant. 2. Order the plaintiff to pay the first defendant's costs of the proceedings. 3. In the event that either party seeks to vary Order 2, direct: 1. the party seeking a variation to provide any affidavits and submissions (limited to three pages) within 28 days; 2. the other party to provide any affidavits and submissions in reply (limited to three pages) within 14 days of receipt of the material in Order 3(a); 3. such application to be determined on the papers. 1. Direct the parties to notify any errors or omissions within 14 days. 2. The exhibits are to be returned forthwith. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 August 2022