Aquila Steel P/L v AMCI (IO) Pty Ltd & Anor; BD Coal Pty Ltd & Anor v AMCI (BC) Pty Ltd and Ors [2007] QCA 456

SUPREME COURT OF QUEENSLAND CITATION: Aquila Steel P/L v AMCI (IO) P/L & Anor; BD Coal P/L & Anor v AMCI (BC) P/L and Ors [2007] QCA 456 PARTIES: AQUILA STEEL PTY LTD ACN 097 803 613 (defendant/appellant) v AMCI (IO) PTY LTD ACN 123 253 485 (first plaintiff/first respondent) WESTIRON PTY LTD ACN 112 157 427 (second plaintiff/second respondent) BD COAL PTY LTD ACN 113 623 439 (first defendant/first appellant) AQUILA RESOURCES LIMITED ACN 092 002 769 (second defendant/second appellant) v AMCI (BC) PTY LTD ACN 124 113 873 (first plaintiff/first respondent) BELCOAL PTY LTD ACN 112 863 180 (second plaintiff/second respondent) AMCI HOLDINGS AUSTRALIA PTY LTD ACN 075 176 386 (third plaintiff/third respondent) RIO DOCE AUSTRALIA LIMITED ACN 112 797 403 (fourth plaintiff/fourth respondent) CVRD INTERNATIONAL SA (fifth plaintiff/fifth respondent) FILE NO/S: Appeal No 8679 of 2007 Appeal No 8680 of 2007 SC No 3468 of 2007 SC No 3469 of 2007 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 21 December 2007 DELIVERED AT: Brisbane HEARING DATE: 26 November 2007 JUDGES: McMurdo P, Jerrard JA and Keane JA Separate reasons for judgment of each member of the Court, each concurring as to the orders made -- 1 of 22 -- 2 ORDER: 1. Appeals dismissed 2. Appellants pay the respondents’ costs, agreed or fixed, assessed on the standard basis CATCHWORDS: CONTRACTS – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – OTHER MATTERS – where a joint venture agreement made provisions in the case of a “change of control” of one of the companies – where there was a restructuring of companies within the group – whether such restructuring amounted to a “change of control” Toll (FGCT) PL v Alphapharm P/L (2004) 219 CLR 165, considered COUNSEL: A J Myers QC, with B Dharmanania, for the first appellant in Appeal No 8679 of 2007 and for the first and second appellant in Appeal No 8680 of 2007 W Sofronoff QC, with A M Pomerenke, for the first and second respondents in Appeal No 8679 of 2007 and Appeal No 8680 of 2007 C A Wilkins for the third, fourth and fifth respondents in Appeal No 8680 of 2007 SOLICITORS: Mallesons Stephen Jacques for the appellants Allens Arthur Robinson for the first and second respondents Baker McKenzie for the third, fourth and fifth respondents [1] McMURDO P: Each appeal should be dismissed with costs for the reasons given by Jerrard JA and Keane JA as to the construction of cl 14 of the joint venture agreement. [2] JERRARD JA: These appeals are from a judgment delivered in the Trial Division of this Court on 4 September 2007, in two proceedings (3468/2007 and 3469/2007), in which the learned judge made similar orders in both proceedings. In proceeding number 3468/07 the judge declared that upon the proper construction of Clause 14.2 of the Joint Venture Agreement entered into between Westiron Pty Ltd and Aquila Steel Pty Ltd on 14 February 2005, Westiron Pty Ltd was entitled to transfer and had transferred its joint venture interest to AMCI (IO) Pty Ltd. The judge further declared that there had been no change in control of a company AMCI (IO) Pty Ltd within meaning of clause 14.5 of the Joint Venture Agreement, and dismissed a counter-claim by Aquila Steel Pty Ltd, ordering that it pay the costs of AMCI (IO) Pty Ltd and Westiron Pty Ltd of and incidental to the proceedings. [3] AMCI (IO) Pty Ltd and Westiron Pty Ltd had claimed as plaintiffs in the proceeding 3468/07 for a declaration that on the proper construction of Clause 14.2 of their Joint Venture Agreement, Westiron was entitled to transfer and had transferred its joint venture interest to AMCI (IO) Pty Ltd; and a declaration that there had been no change in control of the first plaintiff AMCI (IO) Pty Ltd within meaning of Clause 14.5 of the Joint Venture Agreement. [4] Orders in similar terms were made in proceeding number 3469/07, in respect of the Joint Venture Agreement the subject of that claim. The appellant Aquila Steel Pty -- 2 of 22 -- 3 Ltd, in appeal number CA 8679/07 in the proceedings 3468/2007, essentially contends the judge erred in concluding that there had been no change of control of AMCI (IO) Pty Ltd within the meaning of clause 14.5 of the Joint Venture Agreement, and erred accordingly in making the other declaration. Similar grounds of appeal are pleaded in CA No 8680/07, in the appeal from proceedings 3469/2007. [5] The learned judge began the judgment under appeal by immediately identifying as the central question for determination whether in the circumstances, which were substantially undisputed, there had been any change in control of a Joint Venture participant, such that the other participant in the joint venture had acquired an option to purchase the interest of the first mentioned participant, by operation of clause 14.5 of the Joint Venture Agreement. The learned judge explained that proceedings 3468/2007 concerned a Joint Venture Agreement dated 14 February 2005, originally entered into between Aquila Steel Pty Ltd and Westiron Pty Ltd, for the purposes of exploring for minerals and known as the “Premium Iron Ore Joint Venture”. The agreement in action 3469/2007 dated 7 April 2005, was entered into between the first defendant in those proceedings, BD Cole Pty Ltd, and the second plaintiff in those proceedings, Belcoal Pty Ltd, and known as the “Belvedere Joint Venture”. [6] Both Joint Venture Agreements were relevantly identical, as were the transactions and events relied on by the plaintiffs and defendants to establish their respective cases in relation to the two joint ventures. [7] The learned judge recorded that Westiron and Belcoal, at the dates on which they entered into their respective Joint Venture Agreements, were companies in a group of which the ultimate holding company was a Swiss company AMCI International AG. All of the shares in Belcoal were held by AMCI (BP) Pty Ltd, and all of the shares in Westiron were held by WA Resources Pty Ltd. Both WA Resources Pty Ltd and AMCI (BP) Pty Ltd were wholly owned subsidiaries of AMCI Holdings Australia Pty Ltd, which in turn was a wholly owned subsidiary of AMCI Investments Pty Ltd. 99.9 per cent of the shares in that company were owned by AMCI International AG. [8] Each Joint Venture Agreement had provision for changes in control of a company which was a joint venture participant. The Premium Iron Ore Joint Venture is reproduced at AR 166. The relevant provisions read as follows: “'Change in Control' occurs for the purposes of clause 14.5 if a person who, as at the Commencement Date: (a) does not have the capacity to control the composition of the board of a Participant or of a holding company of a Participant; (b) is not in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of a Participant or of a holding company of a Participant; or (c) does not beneficially hold more than 50% of the issued share capital (excluding any part of that issued share capital that carries no right to -- 3 of 22 -- 4 participate beyond a specified amount in a distribution of either profits or capital) of a Participant or of a holding company, of a Participant, subsequently has the ability to do so except: (d) where the Change. in Control happens as a result of a change in control (as defined in paragraphs (a) to (c) above) with respect to a Participant, or of a holding company of a Participant, whose shares are quoted on Australian Stock Exchange Limited or any other recognised stock exchange; or (e) in the case of Westiron, where the Change in Control happens as a result of a change in control (as defined in paragraphs (a) to (c) above) with respect to AMCI Holdings Australia Pty Ltd ACN 075 176 386 or the entities which control AMCI Holdings Australia Pty Ltd ACN 075 176 386. 'Commencement Date' means the date of execution of this Agreement.” [9] Provision was also made for assignment and pre-emptive rights in clause 14, reproduced at AR 186-07. These provisions relevantly read: “14. ASSIGNMENT AND PRE-EMPTIVE RIGHTS 14.1 No Participant may assign or Transfer or purport to assign or Transfer this Agreement, its Venture Interest or any right under this Agreement other than in accordance with this clause 14. 14.2 Each Participant may Transfer all or any part of its Venture Interest as a matter of right to: (a) any Related Body Corporate if: (i) the Related Body Corporate: (A) enters into an appropriate deed of covenant and deed of charge in accordance with clause 14.4; (B) remains a Related Body Corporate of the Participant (otherwise the Related Body Corporate must reassign its Venture Interest to the relevant Participant); and (ii) the relevant Participant is not relieved of its obligations with respect to the Venture Interest if the Related Body Corporate fails to perform them; and -- 4 of 22 -- 5 (b) an Original Participant, where the transferring Participant is also an Original Participant. 14.3 Except as provided in clause 14.1 a Participant may not Transfer all or any part of its Venture Interest without the written consent of the other Participant, unless it has first observed and complied with the pre-emptive rights and provisions set out in this clause 14 or any other provisions contained in this Agreement which deal with the ability or obligation of a Participant to Transfer its Venture Interest whether as a consequence of the default provisions in clause 10 or otherwise. 14.4 No Transfer under this clause 14 is effective unless and until the Transferee has executed and delivered to each of the Participants and the Manager, as the case may require: (a) a deed of covenant, a form reasonably acceptable to each Participant, by which the Transferee covenants to observe, perform, comply with and be bound by the provisions of this Agreement, and any other Project Documents as if the Transferee had been expressly named in this Agreement and those other project Documents in the place of the Transferor; (b) executed transfers of the relevant proportion of the Participant's shares in the Manager; and (c) a deed of charge executed by the Transferee on the same terms and conditions as the Cross Charge save for the necessary amendments reflecting the Transferee's introduction as a Participant. 14.5 If a Change in Control of a Participant occurs then the following provisions apply: (a) the remaining Participants (and if more than one on a pro rata basis) have an option to purchase the venture Interest of the Participant that is subject to the Change in Control at a purchase price determined in accordance with clause 14.5(b) within the period in clause 14.5(e); (b) the purchase price for the Venture Interest of the Participant that is subject to the Change in Control will be determined as at the date of the Change in Control by an Independent Expert with the valuation to be requested by the remaining Participants within 60 days of the fact of the Change in Control first becoming known to the remaining Participants -- 5 of 22 -- 6 provided that the purchase price for any Development Area during the Development Period will be calculated in accordance with clause 6; (c) all parties must co-operate fully with the Independent Expert and acknowledge that: (i) the Independent Expert acts as an expert and not as an arbitrator; (ii) the determination of the Independent Expert is final and binding on the parties; and (iii) the cost of the Independent Expert is to be borne by the Participant subject to the Change in Control; (d) the Independent Expert must apply the standards prescribed by the Australasian Institute of Mining and Metallurgy when undertaking a valuation; (e) all or any of the remaining Participants may exercise their option pursuant to clause 14.5(a) by notice to that Participant within 14 days after determination of the purchase price, by notice in writing to that Participant and if more than one remaining Participant exercises the option those Participants are entitled to acquire the Venture Interest in the proportion that their respective Venture Interests bear to the aggregate of their Venture Interests; (f) the terms of the acquisition are to be negotiated in good faith as soon as practicable after exercise of the option and completion of any acquisition of a Venture Interest pursuant to this clause 14.5 is to take place within 90 days of determination of the purchase price and the parties will execute such documents and do all things necessary, to give effect to the sale and purchase. 14.6 A Participant ('Transferor') may at any time Transfer the whole or any part of its Venture Interest to any person ('Proposed Transferee') if the Transferor first offers the Venture Interest to the other Participant ('Continuing Participant') in accordance with the following. (a) The offer to the Continuing Participant must be made by notice to the Continuing Participant, containing: (i) the name and address of the Proposed Transferee together with sufficient details to -- 6 of 22 -- 7 enable an assessment of its financial standing and, where applicable, the financial standing of its ultimate holding company; (ii) all the terms and conditions of the proposed Transfer; (iii) an offer to sell such Venture Interest to the Continuing Participant on terms and conditions no less favourable to the Continuing Participant than those offered by the Proposed Transferee; (iv) a statement as to whether or not the Continuing Participant must accept the offer in respect of the whole (and not just a part only) of the Venture Interest on offer; (v) where the consideration to be paid by the Proposed Transferee is not to be paid in cash on the date of sale, then the cash equivalent of the consideration to be paid by the Proposed Transferee on the basis that the cash equivalent is paid on the date of sale with such statement being certified as being correct by the Independent Expert. (b) The Continuing Participant has the right to accept such offer by giving the Transferor notice to that effect at any time during a period of 60 days after being given such notice. Any purchase by the Continuing Participant of the whole or a part of a Transferor's Venture Interest will be subject to obtaining any necessary Approvals. The responsibility for obtaining such Approvals rests on the Continuing Participant or Transferor which requires such Approval. If the Continuing Participant fails to accept the offer of the transferor within the 60 day period and the only reason for such failure is the Continuing Participant's inability to obtain the necessary Approvals, then, provided that the Continuing Participant has notified the Transferor of the Approvals still to be obtained and has accepted the offer of the Transferor within such time period subject to the obtaining of such necessary Approvals, either unconditionally or on conditions acceptable to the Continuing Participant, the time period will be deemed not to have expired with respect to the Continuing Participant until the expiration of a further 30 days after the date upon which such period would otherwise have expired. -- 7 of 22 -- 8 (c) The Continuing Participant may accept such offer on the basis that, where it applies, the cash equivalent constitutes the consideration payable by the Continuing Participant accepting the offer. (d) Prior to any such Transfer, the Transferor must procure that: (i) the Proposed Transferee enters into a covenant reasonably satisfactory in form and substance to the Continuing Participant by which the Proposed Transferee must covenant and agree to be bound by all the provisions of this Agreement and the other Project Documents and to assume, observe and perform all of the obligations of the Transferor; (ii) where the Proposed Transferee is a subsidiary of another corporation, the Proposed Transferee must (if required by the Continuing Participant) provide to the Continuing Participant and the Manager a guarantee from its Parent in a form acceptable to the Continuing Participants, to secure to the Continuing Participant the due and punctual performance by the Proposed Transferee of its obligations under the Joint Venture Agreement and the other Project Documents; and (iii) the Proposed Transferee executes a deed of charge on the same terms and conditions as the Cross Charge save for the necessary amendments reflecting the Proposed Transferee's introduction as a Participant. 14.7 A Participant must not Transfer or Encumber the whole or any part of its Venture Interest except in accordance with this Agreement. Where the Transferor and the Proposed Transferee have complied with this clause 14, the Transferor and where applicable its Parent shall to the extent of the Venture Interest being transferred, be released by the other Participants from all liabilities arising under this Agreement and all other Project Documents on and from the date on which the Transferor and the Proposed Transferee have complied in full with this clause 14 and any other provisions contained in this Agreement which deal with the ability or obligation of a Participant to transfer its Venture Interest. The Participants will execute all documentation necessary to give effect to this release including a release of any -- 8 of 22 -- 9 guarantee given by the Parent of the Transferor with respect to that Transferor and a release of the Transferor's obligations and the other Participants' rights against the Transferor under the Cross Charge.” [10] The reasons for judgment record changes in the group structure, which are at the heart of these proceedings. On 27 July 2006 a company AMCI (WA) Pty Ltd was incorporated as a wholly owned subsidiary of AMCI Investments Pty Ltd. On 22 December 2006 a company AMCI (IO) Pty Ltd was incorporated as a wholly owned subsidiary of Westiron Pty Ltd. Westiron transferred its interest in the Premium Iron Ore Joint Venture to AMCI (IO) Pty Ltd, pursuant to an agreement made on 26 February 2007. That assignment made AMCO (IO) Pty Ltd a “Participant”, as defined in the Joint Venture Agreement. Immediately prior to this transfer Westiron transferred all the shares in AMCI (IO) Pty Ltd to AMCI (WA) Pty Ltd, which was still a wholly owned subsidiary of AMCI Investments Pty Ltd. On 29 March 2007 AMCI Holdings transferred all of the shares held by it in WA Resources Pty Ltd to AMCI (WA) Pty Ltd. The judgment under appeal record that those transactions, and other dealings in shares within the AMCI Group, are alleged to have trigged Aquila’s rights under Clause 14.5 of the Premium Iron Ore Venture. Similar dealings within the AMCI Group are alleged to have triggered the same rights under clause 14.5 of the Belvedere Joint Venture. [11] The learned judge found against those contentions, because of the judge’s construction of the provisions of clause 14 of the Joint Venture Agreement. The appellants Aquila Steel Pty Ltd in CA 8679/2007 (in the appeal in proceedings 3468/2007) argued that the judge fell into error in concluding that clause 14.2, which permitted a transfer of a participants joint venture interest to a related body corporate, operated to the exclusion of clause 14.5. The judge had concluded that because Westiron and AMCI (IO) Pty Ltd were related bodies corporate, clause 14.2 permitted the transfers and clause 14.5 did not operate. [12] Counsel for the appellant’s written argument explains that one purpose of the transactions described was to extricate a previous holding company of each of Westiron and Belcoal, namely AMCI Holdings Australia Pty Ltd, out of the company group. The written outline explains, by reference to the evidence and to diagrams, that the shares in that company AMCI Holdings Australia Pty Ltd were originally held by AMCI Investments Pty Ltd, and in February 2007 Investments had agreed to sell those shares to CVRD International SA. However, those shares in AMCI Holdings Australia Pty Ltd were sold after that company had been relieved of its previous subsidiaries, relevantly AMCI (IO) Pty Ltd, Westiron Pty Ltd, and WA Resources Pty Ltd. That was because new subsidiaries of AMCI Holdings Australia Pty Ltd had been created, namely (in the premium iron ore joint venture) AMCI (WA) Pty Ltd, to house AMCI Holdings Australia Pty Ltd’s previous subsidiaries, and the venture interests the subject of the Joint Venture Agreement. [13] Accepting that submission as accurate, it may mean there has not been a “change in control”, as defined by agreement in the Joint Venture Agreement. That definition excepted from its provisions a change in control of Westiron, where that happened as a result of a change in control with respect to AMCI Holdings Australia Pty Ltd, or the entities which controlled that company. On the description given in the careful submissions of the appellant’s counsel, that is precisely what happened. -- 9 of 22 -- 10 AMCI (WA) Pty Ltd now has the capacity to control the composition of the board of the holding Company (WA Resources Pty Ltd) of Westiron Pty Ltd and of AMCI (IO) Pty Ltd, now a participant in the joint venture. That change of control of Westiron Pty Ltd happened as a result of a change in control with respect to AMCI Holdings Australia Pty Ltd. That means that in appeal 8679/2007 the appellant Aquila Steel Pty Ltd, had agreed with the respondent Westiron Pty Ltd that what occurred would not constitute a change in control. [14] Similar provisions appear in the definition of “change in control” in the Belvedere Coal Joint Venture, in respect of a change in control of Belcoal, happening as a result of a change in control with respect to AMCI Holdings Australia Pty Ltd. It follows that in that appeal as well the appellant BD Coal Pty Ltd, and second respondent Belcoal Pty Ltd, had agreed that in those circumstances a change in control had not happened. Those provisions in each Joint Venture Agreement should be fatal to these appeals. [15] Senior Counsel for the appellant submitted that the excepting definition of “change in control” had no consequence in either appeal, because it relied on a different change of control. That was a change of control of AMCI (IO) Pty Ltd, when AMCI (WA) Pty Ltd became its holding company. At that stage AMCI (IO) Pty Ltd was a participant, namely on 26 February 2007. [16] That submission squarely raised the validity of the construction given by the learned trial judge, namely that Clause 14.5 did not apply to fetter or limit the rights given by Clauses 14.2, 14.3, or 14.6. The appellant’s senior counsel conceded that construction was correct with respect to Clauses 14.3 and 14.6, but contested it regarding Clause 14.2. The respondent contended, both on appeal and below, that Clause 14.2 was likewise unaffected by the provisions in Clause 14.5 regarding change of control. That was particularly because Clause 14.2(i)(b) made express provisions for what would occur if a related body corporate, to whom part of a Venture Interest had been transferred by a participant, ceased to be a related body corporate of the participant. That express provision requires that the transferring participant take a re-assignment of its Venture Interest, and Clause 14.2(a)(ii) provided that a Joint Venture Participant, who had transferred its venture interest to a related body corporate, was not relieved of its obligations if the related body corporate failed to perform them. Those express terms of Clause 14.2 relevantly made provision, as Mr Sofronoff QC submitted, for the position when there was a change in control of a related body corporate to which there had been a transfer by a Participant. I respectfully agree with what Keane JA has written on the construction of Clause 14. [17] Clause 14.5 is obviously applicable when changes in external control of a participant occur. The object of the clause is to protect joint venturers from being forced to continue in a joint venture with a party with whom they would not willingly venture their capital. I agree with the learned trial judge that on these facts there was no “change in control” which triggered the operation of Clause 14.5 of the Joint Venture Agreement. The ultimate holding company remained the same. I would dismiss the appeals, with orders that the appellants pay the respondent’s costs, agreed or fixed, assessed on the standard basis. [18] KEANE JA: In this Court the appellants, Aquila Steel Pty Ltd ("Aquila Steel") and BD Coal Pty Ltd ("BD Coal"), challenge the learned primary judge's declaration -- 10 of 22 -- 11 that they were not entitled to exercise rights of pre-emption under the Australian Premium Iron Ore Joint Venture Agreement ("the API JVA") and the Belvedere Coal Joint Venture Agreement ("the BC JVA") respectively. The appellants claimed that these rights had been triggered by transactions associated with the transfer of interests in each joint venture of Westiron Pty Ltd ("Westiron") to AMCI (IO) Pty Ltd ("IO") and by Belcoal Pty Ltd ("Belcoal") to AMCI (BC) Pty Ltd ("BC"). [19] The API JVA was an agreement between Westiron and Aquila Steel for the pursuit of mineral exploration and mining. It was made on 14 February 2005. The BC JVA was an agreement between Belcoal and BD Coal for purposes similar to the API JVA. It was made on 7 April 2005. The material terms of each joint venture agreement were identical. [20] The appeals turn largely on the proper interpretation of the joint venture agreements. Before I turn to a discussion of the proper interpretation of the joint venture agreements, I propose to summarise the relevant changes within the corporate structure of the group of companies to which Westiron, IO, Belcoal and BC belong, and the material terms of the joint venture agreements. I will then summarise the learned primary judge's reasons for rejecting the claims of Aquila Steel and BD Coal. The AMCI International Group of Companies [21] At the time when the joint venture agreements were made Westiron and Belcoal were members of a group of companies, the ultimate holding company of which was AMCI International AG ("International"). The group was relevantly structured in this way: • International held 99.9 per cent of the shares in AMCI Investments Pty Ltd ("Investments"); • Investments, in turn, held all of the shares in AMCI Holdings Pty Ltd ("Holdings"); • Holdings held all of the shares in each of WA Resources Pty Ltd and AMCI (BP) Pty Ltd ("BP"); • WA Resources Pty Ltd held all of the shares in Westiron; • BP held all of the shares in Belcoal. [22] On 27 July 2006 AMCI (WA) Pty Ltd ("WA") was incorporated as a wholly owned subsidiary of Investments. On 22 December 2006 IO had been incorporated as a wholly owned subsidiary of Westiron. Westiron transferred its interest in the API JVA to IO pursuant to an agreement made on 26 February 2007. Immediately prior to this transfer, Westiron transferred all its shares in IO to WA. [23] On 27 July 2006 AMCI (SEQ) Pty Ltd ("SEQ") was also incorporated as a wholly owned subsidiary of Investments. On 23 February 2007 BC was incorporated as a wholly owned subsidiary of Belcoal. On 26 February 2007 Belcoal transferred its interest in the BC JVA to BC. Immediately prior to this transfer, Belcoal transferred all its shares in BC to SEQ. -- 11 of 22 -- 12 [24] On 29 March 2007 Holdings transferred all of the shares held by it in WA Resources Pty Ltd to WA, and all the shares held by it in BP to SEQ. Pursuant to an agreement made on 26 February 2007 which was completed on 20 April 2007, the issued share capital in Holdings was transferred by Investments to VRD International SA ("VRD"), a company unrelated to any of the members of the AMCI group. IO and BC were then, and have remained, wholly owned subsidiaries of WA and SEQ respectively. Each of these two companies has remained a wholly owned subsidiary of Investments, which has continued to be owned as to 99.9 per cent by International. The joint venture agreements [25] Each of the joint venture agreements contained provisions regulating the transfer by a Participant in the joint venture of its interest in the joint venture to other persons. In each case, by cl 14.2 a Participant was permitted to transfer its interest in the joint venture directly to a related body corporate or a related corporation "as a matter of right". Each of the joint venture agreements also provided by cl 14.5 that if there was a change in control of a Participant in the joint venture, an option to purchase would become exercisable by the other Participant. [26] Aquila Steel claimed that, by virtue of the restructuring of the AMCI International group of companies, a change in control of IO had occurred. BD Coal claimed that a change in control of BC had also occurred. This was said to be because, after 26 February 2007, WA and SEQ were able for the first time since the commencement of the joint venture to exercise the kind of control of a Participant described in the Agreement. This was said to engage the right conferred on Aquila Steel and BD Coal to purchase the interests held by IO and BC respectively in the joint ventures by cl 14.5 of the joint venture agreements. [27] For present purposes, the relevant provision of each joint venture agreement is cl 14. It is sufficient to refer to the API JVA. It is in the following terms: "14. ASSIGNMENT AND PRE-EMPTIVE RIGHTS 14.1 No Participant may assign or Transfer or purport to assign or Transfer this Agreement, its Venture Interest or any right under this Agreement other than in accordance with this clause 14. 14.2 Each Participant may Transfer all or any part of its Venture Interest as a matter of right to: (a) any Related Body Corporate if: (i) the Related Body Corporate: (A) entered into an appropriate deed of covenant and deed of charge in accordance with clause 14.4; (B) remains a Related Body Corporate of the Participant (otherwise the Related Body Corporate must -- 12 of 22 -- 13 reassign its Venture Interest to the relevant Participant); and (ii) the relevant Participant is not relieved of its obligations with respect to the Venture Interest if the Related Body Corporate fails to perform them; and (b) an Original Participant, where the transferring Participant is also an Original Participant. 14.3 Except as provided in clause 14.1 a Participant may not Transfer all or any part of its Venture Interest without the written consent of the other Participant, unless it has first observed and complied with the pre-emptive rights and provisions set out in this clause 14 or any other provisions contained in this Agreement which deal with the ability or obligation of a Participant to Transfer its Venture Interest whether as a consequence of the default provisions in clause l0 or otherwise. 14.4 No Transfer under this clause 14 is effective unless and until the Transferee has executed and delivered to each of the Participants and the Manager, as the case may require: (a) a deed of covenant, in a form reasonably acceptable to each Participant, by which the Transferee covenants to observe, perform, comply with and be bound by the provisions of this Agreement, and any other Project Documents as if the Transferee had been expressly named in this Agreement and those other Project Documents in the place of the Transferor; (b) executed transfers of the relevant proportion of the Participant's shares in the Manager; and (c) a deed of charge executed by the Transferee on the same terms and conditions as the Cross Charge save for the necessary amendments reflecting the Transferee's introduction as a Participant. 14.5 If a Change in Control of a Participant occurs then the following provisions apply: (a) the remaining Participants (and if more than one on a pro rata basis) have an option to purchase the Venture Interest of the Participant that is subject to the Change in Control at a purchase price determined in accordance with clause 14.5(b) within the period in clause 14.5(e); -- 13 of 22 -- 14 (b) the purchase price for the Venture Interest of the Participant that is subject to the Change in Control will be determined as at the date of the Change in Control by an Independent Expert with the valuation to be requested by the remaining Participants within 60 days of the fact of the Change in Control first becoming known to the remaining Participants provided that the purchase price for any Development Area during the Development Period will be calculated in accordance with clause 6; (c) all parties must co-operate fully with the Independent Expert and acknowledge that: (i) the Independent Expert acts as an expert and not as an arbitrator; (ii) the determination of the Independent Expert is final and binding on the parties; and (iii) the cost of the Independent Expert is to be borne by the Participant subject to the Change in Control; (d) the Independent Expert must apply the standards prescribed by the Australasian Institute of Mining and Metallurgy when undertaking a valuation; (e) all or any of the remaining Participants may exercise their option pursuant to clause 14.5(a) by notice to that Participant within 14 days after determination of the purchase price, by notice in writing to that Participant and if more then one remaining Participant exercises the option those Participants are entitled to acquire the Venture Interest in the proportion that their respective Venture Interests bear to the aggregate of their Venture Interests; (f) the terms of the acquisition are to be negotiated in good faith as soon as practicable after exercise of the option and completion of any acquisition of a Venture Interest pursuant to this clause 14.5 is to take place within 90 days of determination of the purchase price and the parties will execute such documents and do all things necessary, to give effect to the sale and purchase. 14.6 A Participant ('Transferor') may at any time Transfer the whole or any part of its Venture Interest to any person ('Proposed Transferee') if the Transferor first offers the Venture Interest to the other Participant ('Continuing Participant') in accordance with the following. -- 14 of 22 -- 15 (a) The offer to the Continuing Participant must be made by notice to the Continuing Participant, containing: (i) the name and address of the Proposed Transferee together with sufficient details to enable an assessment of its financial standing and, where applicable, the financial standing of its ultimate holding company; (ii) all the terms and conditions of the proposed Transfer; (iii) an offer to sell such Venture Interest to the Continuing Participant on terms and conditions no less favourable to the Continuing Participant than those offered by the Proposed Transferee; (iv) a statement as to whether or not the Continuing Participant must accept the offer in respect of the whole (and not just a part only) of the Venture Interest on offer; (v) where the consideration to be paid by the Proposed Transferee is not to be paid in cash on the date of sale, then the cash equivalent of the consideration to be paid by the Proposed Transferee on the basis that the cash equivalent is paid on the date of sale with such statement being certified as being correct by the Independent Expert. (b) The Continuing Participant has the right to accept such offer by giving the Transferor notice to that effect at any time during a period of 60 days after being given such notice. Any purchase by the Continuing Participant of the whole or a part of a Translator's Venture Interest will be subject to obtaining any necessary Approvals. The responsibility for obtaining such Approvals rests on the Continuing Participant or Transferor which requires such Approval. If the Continuing Participant fails to accept the offer of the Transferor within the 60 day period and the only reason for such failure is the Continuing Participant's inability to obtain the necessary Approvals, then, provided that the Continuing Participant has notified the Transferor of the Approvals still to be obtained and has accepted the offer of the Transferor within such time period subject to the obtaining of such necessary Approvals, either unconditionally or on conditions acceptable to -- 15 of 22 -- 16 the Continuing Participant, the time period will be deemed not to have expired with respect to the Continuing Participant until the expiration of a further 30 days after the date upon which such period would otherwise have expired. (c) The Continuing Participant may accept such offer on the basis that, where it applies, the cash equivalent constitutes the consideration payable by the Continuing Participant accepting the offer. (d) Prior to any such Transfer, the Transferor must procure that: (i) the Proposed Transferee enters into a covenant reasonably satisfactory in form and substance to the Continuing Participant by which the Proposed Transferee must covenant and agree to be bound by all the provisions of this Agreement and the other Project Documents and to assume, observe and perform all of the obligations of the Transferor; (ii) where the Proposed Transferee is a subsidiary of another corporation, the Proposed Transferee must (if required by the Continuing Participant) provide to the Continuing Participant and the Manager a guarantee from its Parent in a form acceptable to the Continuing Participants, to secure to the Continuing Participant the due and punctual performance by the Proposed Transferee of its obligations under the Joint Venture Agreement and the other Project Documents; and (iii) the Proposed Transferee executes a deed of charge on the same terms and conditions as the Cross Charge save for the necessary amendments reflecting the Proposed Transferee's introduction as a Participant. 14.7 A Participant must not Transfer or Encumber the whole or any part of its Venture Interest except in accordance with this Agreement. 14.8 Where the Transferor and the Proposed Transferee have complied with this clause 14, the Transferor and where applicable its Parent shall to the extent of the Venture Interest being transferred, be released by the other Participants from all liabilities arising under this Agreement and all other Project Documents on and from the date on -- 16 of 22 -- 17 which the Transferor and the Proposed Transferee have complied in full with this clause 14 and any other provisions contained in this Agreement which deal with the ability or obligation of a Participant to transfer its Venture Interest. The Participants will execute all documentation necessary to give effect to this release including a release of any guarantee given by the Parent of the Transferor with respect to that Transferor and a release of the Transferor's obligations and the other Participants' rights against the Transferor under the Cross Charge." (emphasis added) [28] Terms defined by the joint venture agreements which are relevant to the interpretation of cl 14 are as follows: "'Commencement Date' means the date of execution of this Agreement. 'Change in Control' occurs for the purposes of clause 14.5 if a person who, as at the Commencement Date: (a) does not have the capacity to control the composition of the board of a Participant or of a holding company of a Participant; (b) is not in a position to cast, or control the casting of, more than 50% of the maximum number of votes that might be cast at a general meeting of a Participant or of a holding company of a Participant; or (c) does not beneficially hold more than 50% of the issued share capital (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital) of a Participant or of a holding company of a Participant, subsequently has the ability to do so except: (d) where the Change in Control happens as a result of a change in control (as defined in paragraphs (a) to (c) above) with respect to a Participant, or of a holding company of a Participant, whose shares are quoted on Australian Stock Exchange Limited or any other recognised stock exchange; or (e) in the case of Westiron, where the Change in Control happens as a result of a change in control (as defined in paragraphs (a) to (c) above) with respect to AMCI Holdings Australia Pty Ltd ACN 075 176 386 or the entities which control AMCI Holdings Australia Pty Ltd ACN 075 176 386. 'Original Participants' means Aquila and Westiron. -- 17 of 22 -- 18 'Parent' means the ultimate Australian incorporated holding company of an incoming Participant, or such other company acceptable to the existing Participants. 'Participant' means each of Aquila and Westiron and their respective successors and assigns in accordance with this Agreement. 'Related Body Corporate' has the meaning given in the Corporations Act. 'Transfer' means to sell, assign, transfer, convey, declare any trust or otherwise dispose of, and 'Transfer', 'Transferred' and 'Transferring' have corresponding meanings. 'Venture Interest' means, in relation to a Participant, the respective proportion, expressed as a percentage, by which that Participant, on a several basis, subject to this Agreement: (a) is the beneficial owner as a tenant in common of an undivided share of Venture Property; (b) and participates in all other rights and liabilities accruing to, or incurred by the Participants in, or arising out of this Agreement. 'Venture Property' means: (a) the Applications; (b) the Tenements; (c) the Mining Information; (d) all assets, property and rights acquired by or on behalf of the Joint Venture pursuant to the terms of this Agreement; (e) all fixtures, machinery, plant, equipment and supplies acquired for the purposes of the Joint Venture; (f) any other Mineral Rights and other property or rights of any description, whether real or personal, acquired for the purposes of the Joint Venture; (g) all Iron Ore and Extracted Iron Ore until such time as the entitlement of the Participants thereto arises in the terms described in clause 9.1; (h) subject to clause 7.13, the issued capital of the Manager; and, (i) any Feasibility Study, -- 18 of 22 -- 19 but specifically excludes where the Manager is a Participant, the rights and obligations as Manager as set out in this Agreement." (emphasis added) [29] The provisions of the BC JVA are materially the same, save that sub-paragraph (e) of the definition of "Change in Control" refers to Belcoal rather than Westiron. The decision of the learned primary judge [30] The central argument advanced by Aquila and BD Coal before the learned primary judge (and before this Court) was that cl 14.5 of each of the joint venture agreements means that, if a person who was not relevantly in control of a Participant at the date of the commencement of the joint venture subsequently obtains such control, that change in control engages the right to purchase conferred by cl 14.5. There was a change in control of IO and BC after 26 February 2007 within the meaning of cl 14.5 of each joint venture agreement because a person, namely WA and SEQ respectively, who was not in control of IO or BC or a holding company of either of them at the commencement of the joint venture subsequently obtained control. [31] The principal argument advanced by the respondents was that cl 14.2 provides a free-standing facility, operating independently of cl 14.5, for the transfer of a Participant's interest in the joint venture to a related company. [32] The learned primary judge accepted that the right conferred by cl 14.2 was not conditioned or limited by cl 14.5. His Honour explained the inter-relationship between cl 14.2 and cl 14.5 as follows: "… The parties intended by clause 14.2 to confer freedom to move from time to time the joint venture interest to a related company. The conditions attached to the right were that the assignee had to maintain its relationship and the assignor had to continue to be bound by the terms of the Joint Venture Agreement. Where an assignment of a joint venture interest is effected under clause 14.5 the assignor incurs no such obligation. The parties, by clause 14.2, thus intended to deal with transfers of joint venture interests to related corporations in a way which provided its own protections against changes in control of the assignee. That being so, it is unlikely that the contractual intention was that clause 14.5 would override the operation of clause 14.2. The test for whether one company remains related to another, by virtue of the definition 'related Body Corporate' is to be found in the Corporations Act 2001. (See in particular sections 46, 49, 50 and 50AA) That test does not correspond precisely with the test for 'Change in Control'. I consider it quite improbable however, that the contractual intention was that clause 14.5 operate in respect of an occurrence within 14.2(a)(i)(B) where the circumstances under which the assignee ceased to be a 'Related Body Corporate' of the -- 19 of 22 -- 20 Assignor contained a matter not relevant for the 'Related Body Corporate' test but which would constitute a 'Change in Control'."1 [33] In the upshot the learned primary judge concluded that: "… clause 14.5 operates only where there has been a 'Change in Control of a Participant' who holds a Joint Venture Interest. The holding of a Joint Venture Interest is necessary as, for reasons already discussed, clause 14.5 is based on the premise that the 'Change in Control' is that of the Participant with the Joint Venture Interest which is the subject of the option. … IO was not a 'Participant' until such time as a transfer to it was effected in compliance with clause 14.2. That, as subsequent discussion shows, took place after its shares were acquired by WA. As was pointed out in the submissions made on behalf of the plaintiffs, no sensible reason would be served by triggering the operation of clause 14.5 merely because a transferee of a Participant's interest, although a related company of the Participant at the time of the transfer, had not always enjoyed that status."2 [34] It is apparent that his Honour considered that both textual and commercial considerations favoured the respondents' interpretation of cl 14. Discussion [35] The argument for the appellants takes as its starting point the statement by the High Court in Toll (FGCT) PL v Alphapharm P/L:3 "The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction." [36] The appellants' argument in this Court emphasises the primary importance of the language which the parties have used to express the terms of their bargain, and the need to give effect to that language rather than attempting to rewrite the contract. The appellants criticise the learned primary judge for treating as significant the difficulty in identifying a sensible commercial reason why cl 14.5 should be triggered "merely because a transferee of a Participant's interest, although a related company at the time of the transfer, had not always enjoyed that status." The appellants say that it is not for a court to speculate upon the reasons which inform the terms in which commercial parties choose to frame their bargains. [37] The appellants also argue that the interpretation of cl 14 of the joint venture agreements favoured by the learned primary judge is inconsistent with the object of the joint venture agreements to be gleaned from the text of the agreements. They 1 AMCI (IO) P/L & Anor v Aquila Steel P/L and AMCI (BC) P/L v Belcoal P/L [2007] QSC 238 at [46] – [48]. 2 [2007] QSC 238 at [51] – [54]. 3 (2004) 219 CLR 165 at 179. -- 20 of 22 -- 21 submit that the learned primary judge erred in regarding cl 14.2 as operating "to the exclusion of cl 14.5". The appellants point out that cl 14.5 is not expressed to be "subject to cl 14.2", and that cl 14.5 is not in terms concerned with the assignment of an interest in a joint venture agreement. Clause 14.5 is not concerned to carve out an exemption from the general prohibition on the transfer of an interest; rather it entitles a Participant to acquire the joint venture interest of another Participant where there is a change in the control of that Participant. Insofar as cl 14.5 is a provision designed to avoid attempts to achieve indirectly changes in the control exercised over interests in the joint ventures, it should be construed widely.4 [38] One may accept that the object of the joint venture agreements was to establish a relationship between the original Participants, and that each Participant has an abiding interest in the identity of those whose decision-making may direct the conduct of other Participants in the joint venture and thereby affect the course of the joint venture. There is equal force, however, in the observation that it was open to the corporate entities, who were the original Participants in the joint ventures, to agree that the legitimate interest of each Participant in ensuring that control of Venture Interests held by others should not fall into unacceptable hands would not be unacceptably affected by a transfer of a Venture Interest to a corporation which was, and remained, related to the original Participant. The issue is whether that is indeed the effect of the parties' bargain. In reaching the conclusion that this is the effect of their bargain it is relevant, though not decisive, that there is no discernible commercial reason which justifies reading cl 14.2 so as to allow cl 14.5 to defeat a transfer to a related entity merely because that transferee is under the control of a related corporate entity which did not exist when the joint venture commenced. [39] There are powerful textual indications that cl 14.2 was intended by the parties to operate independently of cl 14.5. The first of these indications is that cl 14.2 is concerned to permit direct transfers of Venture Interests by Participants to related corporations, whereas cl 14.5 is concerned to allow a Participant to acquire an interest where an indirect transfer of the economic benefit of an interest still held by a Participant would otherwise occur. Clause 14.2 and cl 14.5 thus address different dealings in relation to Venture Interests: cl 14.2 is concerned to permit direct transfers of ownership of a Venture Interest by a Participant to other bodies corporate which exhibit, and maintain, the irreducible minimum of relatedness with the transferor contemplated by the Corporations Act 2001 (Cth), whereas cl 14.5 is concerned to entitle one Participant to prevent an indirect change in the effective control of an interest by reason of a change in the control of another Participant. [40] Secondly, cl 14.2 is not expressed to be subject to cl 14.5. In this respect it is like cl 14.3 and cl 14.6. The appellants accept that cl 14.3 and cl 14.6 cannot possibly be understood as if they were subject to cl 14.5. It is difficult to see why cl 14.2 should be understood as if it were, uniquely within the transfer-facilitating provisions of cl 14, subject to cl 14.5. [41] Thirdly, cl 14.2 is expressed to operate "as a matter of right". The appellant's argument fails to recognise that cl 14.5 must be understood in its context. That context includes cl 14.2 which manifests an intention that a Participant may transfer all or part of its Venture Interest as a matter of right to a Related Body Corporate. A body corporate may be related to another by reason of qualities which are not the 4 Cf Beaconsfield Gold NL v Allstate Prospecting Pty Ltd [2006] VSC 320 at [32] – [34]. -- 21 of 22 -- 22 equivalent of the indicia of control in cl 14.5. On its face cl 14.2 confers upon a Participant a right to transfer a Venture Interest to a related body corporate. On the appellants' argument it would be open to another Participant to invoke cl 14.5 to intercept a transfer by a Participant to a related body corporate merely because the transferee was not also historically subject to the control of the transferor at the time of the commencement of the joint venture. Acceptance of this argument involves a substantial derogation from the right conferred by cl 14.2 which depends only on the existence of relatedness between transferor and transferee. [42] The appellants sought to meet this objection with the contention that to speak of a transfer as a "matter of right" is merely to say that it is not necessary for the transferor to seek the consent of another Participant prior to its exercise. But a right is not properly described as a right if its exercise is apt to be rendered nugatory by the later act of another person. If it were the case that a transfer by a Participant to a Related Body Corporate could not be effective because cl 14.5 permits another Participant to claim the Venture Interest the subject of the transfer, the right conferred by cl 14.2 would be rendered illusory: it would be a travesty to speak of it as a "right" at all. [43] Fourthly, cl 14.2(a)(i)(B) expressly addresses the possibility that a related transferee of Venture Interest from a Participant might cease to be related to the transferor after the transfer. This provision is a strong indication that the right of transfer contained in cl 14.2 is a self-contained facility, and that the existence and maintenance of relatedness between transferring Participant and transferee marks the limit of protection for Participants against the participation of strangers in the joint venture. It is a compelling indication that the maintenance of related status, rather than all of the indicia of control, is the relevant condition of an effective transfer under cl 14.2. [44] For these reasons, I am respectfully of the opinion that, if one gives due attention to the language of cl 14 as a whole, it is clear that the exercise of the right conferred by cl 14.2 was not intended by the parties to be subject to the expansive concurrent operation of cl 14.5 for which the appellants contend. Conclusion and orders [45] The learned primary judge was right to reject the interpretation of the joint venture agreements advanced by Aquila Steel and BD Coal. [46] The appeals should be dismissed. [47] The appellants should pay all respondents' costs of the appeals assessed on the standard basis. -- 22 of 22 --