Supreme Court New South Wales Medium Neutral Citation: Bacchus Resources Pty Ltd v Talisman Mining Limited [2019] NSWSC 1044 Hearing dates: 8 August 2019 Decision date: 16 August 2019 Jurisdiction: Equity - Commercial List Before: Hammerschlag J Decision: The Court declares that, on 27 September 2018, upon payment by the plaintiff of the sum of $6,250 to the first defendant they entered into a binding joint venture agreement. Defendants to pay the plaintiff's costs. Catchwords: CONTRACT – construction – whether the parties entered into a binding joint venture agreement or bound themselves only to negotiate in good faith a further formal joint venture instrument – whether if they entered into a binding joint venture agreement the first defendant brought it to an end – whether declaration that a binding joint venture agreement entered into is of utility; HELD: the parties entered into a binding joint venture agreement – the first defendant did not bring it to an end – appropriate to order declaratory relief Legislation Cited: Civil Procedure Act 2005 (NSW) Cases Cited: Masters v Cameron (1954) 91 CLR 353 G R Securities Pty Limited v Baulkham Hills Private Hospital Pty Limited (1986) 40 NSWLR 631 Helmos Enterprises Pty Limited v Jaylor Pty Limited (2005) 12 BPR 23,021 Category: Principal judgment Parties: Bacchus Resources Pty Ltd - Plaintiff Talisman Mining Limited - First Defendant Haverford Holdings Pty Ltd - Second Defendant Representation: Counsel: J Hutton - Plaintiff J Giles SC with C A Hamilton-Jewell - First and Second Defendants Solicitors: Bird & Bird - Plaintiff MinterEllison - First and Second Defendants File Number(s): 2019/86148 Judgment 1. HIS HONOUR: The plaintiff (Bacchus) and the first defendant (Talisman) have interests in the mining industry. They are in dispute as to whether the Court should declare that an instrument, entitled 'Opportunity Notice Proposal' (the Proposal) which they both executed on 27 September 2018, brought into existence a binding joint venture agreement between them. Background 1. Bacchus and Talisman each owned certain mining tenements. Bacchus agreed to grant the second defendant (Haverford), a wholly-owned subsidiary of Talisman, a right to earn up to an 80% interest in the tenements and Haverford agreed to transfer a 20% interest in certain other tenements to Bacchus on specified terms and conditions. 2. On 8 January 2018, the parties entered into a 'Farm-in Agreement'. The Farm-in Agreement made provision for the parties to enter into a joint venture agreement on terms contained in a draft joint venture agreement attached ("Attachment A") to the Farm-in Agreement. 3. At the same time, Bacchus and Talisman entered into an 'Alliance Deed' under which they agreed to consider other prospective projects in New South Wales. The Alliance Deed contained provisions for a party to identify an Opportunity that met certain criteria and for the giving to the other party of an Opportunity Notice offering to join in the exploitation of, or decline, the Opportunity. Clause 3.2(b) of the Alliance Deed provides: If the Acquiring Party elects to accept the acquisition of the Opportunity in accordance with clause 3.2, the parties will negotiate in good faith the terms upon which the Opportunity will be acquired and enter into any necessary agreements to give effect to such acquisition. 1. On 14 August 2018, Talisman gave Bacchus an Opportunity Notice which Bacchus elected to accept on 22 August 2018. The Opportunity has been referred to as "Mt Nobby", which is near the town of Condoblin. The parties negotiated the terms of the acquisition of the Opportunity and then executed the Proposal. It is appropriate to set out the Proposal in full. Opportunity Notice Proposal Opportunity - ELA 5705 Alliance Deed ("Alliance Deed") dated 8 January 2018 between Talisman Mining Limited ("Talisman") and Bacchus Resources Pty Ltd ("Bacchus") Background A. Talisman and Bacchus entered into the Alliance Deed on 8 January 2018 and the Alliance Deed provides for, amongst other things, the identification of Opportunities. B. By an Opportunity Notice dated 14 August 2018 ("Notice"), Talisman identified the Opportunity being ELA 5705 ("Opportunity"). C. By letter dated 22 August 2018 ("Acceptance Notice"), Bacchus elected to accept the acquisition of the Opportunity, but disagreed with a term of the proposed acquisition contained in the 4th dot point of paragraph vii of the Notice. D. In accordance with clause 3.2(b) of the Alliance Deed, the Parties have negotiated the terms of the acquisition of the Opportunity in good faith and have agreed that they will deal with the Opportunity on the terms set out in this document. Opportunity Acquisition Terms 1. Talisman submitted the Application for the Opportunity ("Application") to the NSW Department of Energy and Resources ("DER") on 18 July 2018 and the Application is now in the statutory advertisement phase in accordance with Section 13A of the Mining Act 1992 and Clause 15 of the Mining Regulation 2016 and as such the grant of the Application is pending. 2. The Parties agree that they shall deal with the Opportunity on the following terms: (a) Bacchus shall pay the sum of $6,250 to Talisman ("Initial Payment") within 5 Business Days of this document being executed and exchanged by the Parties, with such payment being in recognition of, amongst other things, the costs of making the Application, the costs of identifying Opportunities and which ones to proceed with. (b) With effect from when the Initial Payment is made, the Parties shall form a separate joint venture for the Opportunity ("JV") and the structure of the JV ("JV Agreement") shall be as follows: (i) Initial Joint Venture Interest: Talisman 80%; Bacchus 20%; (ii) Talisman to be the joint venture manager (subject to the terms of the JV Agreement); (iii) No free carried interest or free carried period. Joint venture participants to participate in all expenditures on the basis of their respective Joint Venture Interest from JV formation (subject to the terms of the JV Agreement); (iv) JV terms and conditions to be based on Attachment A of the Farm-in Agreement between Haverford Holding Pty Ltd, Talisman and Bacchus dated 8 January 2018 ("Farm-in Agreement"), modified to reflect the structure of this JV and with such modifications as agreed by the Parties acting reasonably; and (v) Talisman shall draft a formal JV agreement to give effect to the above as soon as possible and the Parties shall negotiate in good faith the formal JV Agreement and then execute and exchange the JV Agreement. 3. Terms used in this document which are not defined but which are defined in the Alliance Deed or the Farm-in Agreement, as appropriate, shall have the meaning ascribed to them in the Alliance Deed or the Farm-in Agreement, as the case may be. Dated: 27 September 2018 Signed: ………... (sgd) …………… …………..(sgd)…………… Signed for and on behalf of Signed for and on behalf of Talisman Mining Limited Bacchus Resources Pty Ltd 1. On 27 September 2018, Bacchus paid Talisman the sum of $6,250 in accordance with clause 2(a) of the Proposal. 2. It is not in dispute that the specimen joint venture agreement, Attachment A, includes the following provision: 15 Withdrawal 15.1 Notice to Withdraw Any Participant may withdraw from the Joint Venture by giving 30 days notice in writing to the other Participant. 15.2 Effect of Withdrawal Upon a withdrawal from the Joint Venture, then, unless otherwise provided in this agreement, the withdrawing Participant shall thereupon absolutely forfeit and be deemed to have assigned to the other Participant all its Joint Venture Interest and the withdrawing Participant shall be released from all future obligations relating to the Joint Venture. 15.3 Reserve other rights Any withdrawal pursuant to this clause ‎15 shall be without prejudice to any rights or obligations of the Participants arising prior to the withdrawal. 1. The dispute arose in the following way. 2. On 22 February 2019, solicitors for Bacchus, Bird & Bird, wrote to solicitors for Talisman, MinterEllison, claiming a failure on Talisman's part to fulfil its obligation under clause 2(b)(v) of the Proposal to draft a formal JV agreement to give effect to the Proposal. They called, amongst others, for an acknowledgement by Talisman that there was a joint venture agreement on foot between Bacchus and Talisman. 3. On 13 March 2019, MinterEllison responded in a letter which included the following: For all of these reasons, and for others which have been canvassed on a 'without prejudice' basis, it is with some regret that our client considers its efforts to have been frustrated and now withdraws from the proposed Mt Nobby joint venture. Had there been an agreed procedure for so doing, our client would have given notice of its intention to withdraw from the Mt Nobby joint venture and notice of its intention to resign as Manager. What our client will now do is refund the Initial Payment of $6,250 to your client and, with your client's co-operation, take steps promptly to transfer all of its interest in the subject tenement to your client. 1. It is evident from this that Talisman was taking the position that there was no binding joint venture agreement. It is to be observed that the Proposal makes no provision for refund of the initial payment, nor does clause 15 of Attachment A. 2. Bird & Bird replied swiftly, on 14 March 2019, as follows: Bacchus Resources Pty Ltd, Talisman Mining Limited and Haverford Holdings Pty Ltd We refer to your letter of 13 March 2019, received at 11.28pm. Since that does not provide what was required, proceedings will, subject to what follows, be commenced seeking a declaration that the Mt Nobby Joint Venture is governed by the terms of an agreement in the form of the attachment to our letter of 22 February 2019 and remains on foot. The purported withdrawal in your letter does not comply with that agreement and is accompanied by language which disavows its existence of any such agreement. Accordingly, process will be served tomorrow morning unless by 9.30am: 1. One of the executed documents required by our letter of 8 March 2019 is delivered to us; or 2. We receive your client's undertaking to proceed with a withdrawal forthwith, precisely as though it were bound by clause 15 of Attachment A to the Farm-In Agreement, including the applicable defined terms. As to 2. above, we note that your letter, contrary to clause 15, does not give 30 days' notice, announces a refund of the Initial Payment which is not required by clause 15 and which our client will not accept, and only refers to the transfer to our client of your client's interest in the subject tenement, whereas clause 15 refers to an assignment of all the withdrawing Participant's Joint Venture Interest (the definition of which in turn refers to Joint Venture Property as defined which in turn imports the defined terms of Tenements, Information and Minerals). As to the description of the history of negotiations in your letter, suffice to say that much of it is strongly denied, both as a matter of fact and characterisation. We do not propose to add to the already weighty record by canvassing each point of disagreement. That can await the objective assessment to which you refer, if necessary. 1. MinterEllison replied, for its part equally swiftly (the less said about the tone of this letter, the better), as follows: Talisman Mining Limited and Bacchus Resources Pty Ltd - proposed Mt Nobby Joint Venture Agreement. We refer to your letter of 14 March 2019. We note the continuing threat to commence proceedings, this time a little better particularised to refer to declaratory relief your client might seek to the effect that an extant Mt Nobby joint venture is governed by the attachment to your letter of 22 February. Given all that has transpired we would have been interested to see how you would attempt to establish that the parties ever reached the point of being ad idem; the balance of your letter, respectfully, only underscores the complete futility of the foreshadowed proceedings. Further to its withdrawal from the Mt Nobby opportunity, our client instructs us that it will not proceed 'as though' bound by anything, but that it is prepared to (and does) give the following undertakings: 1) Without prejudice to its position that it withdrew from the Mt Nobby opportunity yesterday, our client will proceed with effecting that withdrawal forthwith. 2) Our client, with your client's cooperation, will promptly transfer or assign to your client all of our client's legal and beneficial interest in tenement ELA 5705 (recently granted and given tenement Identification EL 8814) the subject of the Mt Nobby opportunity; all information in relation to that tenement in our client's possession, and all minerals which a tenement-holder is entitled to extract from that tenement. 3) Our client will promptly respond to any reasonable request to do anything reasonably required to effect the transfers and/or assignments detailed at numbered paragraph (2). 4) Our client will keep, and not purport to return, the $6,250 paid by your client to ours in respect of the Mt Nobby opportunity. To this point, our client has been at pains to respond reasonably and in good faith to your client's increasingly shrill demands for responses and proposals. It doesn't consider that its reasonableness and good faith has been reciprocated and, although your client may protest otherwise, the stance articulated in your most recent correspondence is a cogent example on point. Should this dispute continue, our client will look to recover all of the costs associated with what it sees as your client's unwarranted intransigence over the last six months. On the question of costs: as practitioners we often see hasty, spurious or ill-considered claims that a party may pursue indemnity costs or even a special costs order should proceedings issue. We are not given to that kind of claim unless it is clearly warranted. In light of the history of this matter and these proffered undertakings, however, we have probably reached the point where such applications would be reasonably tenable and reasonably prospective. Please let us know, before 9:30am AEST tomorrow, whether our client's undertakings proffered in this letter are accepted. If not, please acquit the pre-litigation steps which the Court would expect of you. 1. On 15 July 2019, MinterEllison, on behalf of Talisman, took up the position for the first time that the Proposal had been fully performed. They wrote to Bird & Bird, relevantly: Our respective clients engaged in extensive negotiations in an attempt to conclude the "formal JV Agreement" referred to in the September Agreement. At least five drafts of a possible "formal JV Agreement" were proposed between the parties over the period from September 2018 to March 2019. Our clients have engaged in honest and genuine attempts to conclude a joint venture agreement with your client, and engaged in the negotiations in good faith. However, the parties have not been able to conclude the "formal JV Agreement", and it is our clients' position that there is no concluded "formal JV Agreement" between the parties in relation to the Mt Nobby Opportunity. So much is plain from the List Statement and List Response. In these circumstances, the September Agreement has been fully performed (by negotiations in good faith having been undertaken and completed) or is at an end by the effluxion of the negotiations between the parties. There are no remaining obligations under the September Agreement and the September Agreement is at an end. As your client is aware, your client alleges and our clients deny that the agreement, in precisely the form of which is described as Annexure A to the Summons filed by your client (Alleged Joint Venture Agreement), was entered into. Our clients continue to deny that the Alleged Joint Venture Agreement was entered into. Further, on 13 March 2019 we sent you a letter pursuant to which our clients formally withdrew from the Mt Nobby Opportunity and any joint venture contemplated by the September Agreement (13 March Letter). The 13 March Letter terminated any extant obligations under the September Agreement. If, which is denied, the Alleged Joint Venture Agreement had been entered into, the 13 March Letter is properly to be understood as a notice under clauses 15 and (to the extent necessary) 3.2(a) of the Alleged Joint Venture Agreement. 1. On 16 July 2019, Bird & Bird responded: Bacchus Resources Pty Ltd v Talisman Mining Limited and Haverford Holdings Pty Ltd – Supreme Court of NSW Proceeding No 2019/00086148 We refer to your two letters dated 15 July 2019 and received by email that day. For convenience and without admission, we adopt the defined terms used in your letter. We are instructed to reply as follows: 1. Our client will accept the purported notices of resignation and withdrawal as valid and effective pursuant to the Alleged Joint Venture Agreement provisions you refer to (namely clauses 3.2(a) and 15.1), provided that the other provisions in that document relevant to such resignation and withdrawal (that is to say, clauses 15.1 and 15.2) are also agreed to be applicable. 2. Our client will on that basis agree to the dismissal of the Proceeding, provided that there is a consent order that its costs are paid on an indemnity basis. 3. The attached proposed short consent orders: a) Effectively bring forward the termination of the first defendant's participation in the alleged joint venture, and of the second defendant's role as manager, thereby respectively abridging the 30 day and 60 day notice periods referred to in the notices received yesterday; b) Accommodate the proviso referred to in 2. above, but otherwise are substantially identical to the proposed consent orders submitted with our letter of 12 April 2019. Upon receipt of the consent orders executed on behalf of your clients, we will enquire of the Court whether the orders may be made in chambers and the forthcoming directions hearing vacated. The contest 1. On 18 March 2019, Bacchus sued out of this Court a Summons supported by a Commercial List Statement claiming a series of declarations and orders, all resting on the proposition that execution of the Proposal brought into existence a binding joint venture between Bacchus and Talisman. 2. The only declaration (which differs slightly from one claimed in the Summons) for which Bacchus now moves is one that: On 27 September 2018, upon payment by the plaintiff of the sum of $6,250 to the first defendant they entered into a binding joint venture agreement. 1. Section 90(1) of the Civil Procedure Act 2005 (NSW) provides that the Court is, at or after trial or otherwise as the nature of the case requires, to give such judgment or make such order as the nature of the case requires. It is thus open to the Court to make a declaration in these terms if the nature of the case requires it. 2. Bacchus, for which Mr J Hutton of counsel appeared, argues that the Proposal is a binding agreement under which, upon payment of the sum provided for in clause 2(a), brought into existence a binding joint venture between the parties. He argues that the failure of the parties to execute and exchange a formal JV Agreement simply means that their joint venture is on the terms for which the Proposal provides. 3. It is not really in dispute that the Proposal was intended to be legally binding, although Talisman did faintly argue the contrary. 4. Talisman's true position is that the Proposal was binding, but only to the extent of obliging the parties to negotiate in good faith and then execute and exchange a further formal JV agreement. It is not in issue that the parties did negotiate in good faith, but failed to reach consensus on the terms of the further formal JV Agreement. 5. Talisman, for which Mr J Giles SC together with Ms C Hamilton-Jewell appeared, argues that the Proposal was exhausted when the parties had negotiated in good faith but the negotiations failed to produce an executed formal JV Agreement. 6. Talisman argues that any declaration that the parties had a binding JV Agreement on 27 September 2018 is inutile because 'events external to the litigation have overtaken the relief sought'. 7. These events are the failure of the parties to execute a formal JV Agreement and MinterEllison's correspondence of 13 March 2019 and 15 July 2019, one of which, says Talisman, brought whatever agreement there might have been to an end. 8. Talisman does not move the Court for a declaration that the agreement embodied in the Proposal is no longer on foot. Consideration 1. I uphold Bacchus' contention, and I reject those of Talisman, for two reasons. First, in my view, upon payment of the amount referred to in clause 2(a) of the Proposal a binding joint venture agreement came into effect and stayed on foot, notwithstanding the failure of the parties to agree and execute the formal JV Agreement. Second, neither of MinterEllison's letters brought that joint venture to an end. 2. As to the first reason, the case is a species of what is sometimes described as a "Masters and Cameron". This is a reference to the well-known decision of the High Court of Australia in Masters v Cameron (1954) 91 CLR 353, which categorised cases where the question is whether an agreement between parties, which contemplates that the matter of their negotiation is to be dealt with by a formal contract, is intended to be immediately legally binding. 3. Parties may agree immediately to be bound even though they may wish to restate their terms in a fuller or more precise way in a formal document, or they may agree immediately to be bound even though there would be a more formal agreement subsequently which could contain other terms. That is this case. 4. Whether parties who reach agreement intend immediately to be bound depends on their intention as disclosed by the language they have employed. Where they contemplate the subsequent execution of a formal contract but do not express their agreement to be subject to or conditional upon the execution of a formal document, whether they intended immediately to be bound again depends upon their intention, disclosed by the language they have used: Masters v Cameron (1954) 91 CLR 353 at 360; G R Securities Pty Limited v Baulkham Hills Private Hospital Pty Limited (1986) 40 NSWLR 631; Helmos Enterprises Pty Limited v Jaylor Pty Limited (2005) 12 BPR 23,021 at [52], [55] and [56]. 5. The question here is whether the language the parties employed discloses an intention to be bound to do nothing more than negotiate in good faith. I do not think that it does. Rather, it discloses an intention that there be a joint venture on specified terms together with an intention that they negotiate in good faith towards the execution of the fuller formal JV Agreement on the footing that if they do not agree they simply revert to the terms in and incorporated in the Proposal, which includes the terms of Attachment A as modified to reflect the structure of the joint venture. 6. The following are the factors which I consider are determinative in concluding that the parties so intended: * Recital D records that, in accordance with clause 3.2(b) of the Alliance Deed, the parties have negotiated the terms of the Opportunity and that they will deal with it on the terms set out in the document. This discloses an intention that no further agreement is necessary to bring the agreement as to how to deal with the Opportunity into being. * Clause 3.2(a) of the Alliance Agreement (which is referred to in Recital D) contemplates the parties negotiating and reaching agreement and entering into any necessary agreements to give effect to the acquisition. The only agreement necessary to give effect to the acquisition is the Proposal. Talisman's contention is that the parties negotiated not an agreement to give effect to the acquisition, but an agreement providing that they would negotiate and agree to give effect to the acquisition. I do not consider that reasonable persons in the position of the parties would have intended this. * A non‑refundable payment is made, with effect from which the parties 'shall form a joint venture'. * The structure of the joint venture is provided for, and it was not suggested that more terms were needed to make the arrangement workable. 1. As to the second reason, it is clear that clause 15 of Attachment A is part of the parties' agreement. 2. The MinterEllison correspondence was not effective to bring the joint venture created by the Proposal to an end. The 13 March 2019 letter denied existence of any agreement and did not purport to give the 30 day notice required by clause 15 of Attachment A. It expressly refrained from doing so. 3. The 15 July 2019 letter asserted discharge by performance whilst denying the existence of a joint venture. It asserted that the 13 March 2019 letter was to be properly understood as notice under clause 15. This is insupportable. The language used cannot sustain it. 4. Neither of the letters gave the required 30 days' notice. Neither was an unequivocal election to exercise a right: see, Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 646; Donau Pty Ltf v ASC AWD Shipbuilder Pty Ltd [2019] NSWCA 185 at 86. It follows that neither was effective to bring the joint venture to an end. 5. The fact that there has been and is a joint venture on foot can plainly have commercial consequences, even if, as I apprehend, Talisman might now give notice to bring it to an end. 6. I reject Talisman's contention that the declaration sought is inutile and I propose to make it. 7. The Court declares that, on 27 September 2018, upon payment by the plaintiff of the sum of $6,250 to the first defendant they entered into a binding joint venture agreement. 8. The Court heard submissions as to costs. Although Bacchus moved for only one declaration, in slightly different terms to one claimed in the Summons, the fulcrum of the dispute was whether a binding joint venture agreement came into effect and whether relief has been rendered inutile by subsequent events. 9. Bacchus has succeeded, and Talisman has failed, on both these issues. There is no reason why costs should not follow the event. I order that Talisman is to pay Bacchus' costs of the proceedings. ********** 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: 16 August 2019