Supreme Court New South Wales

• Medium Neutral Citation: Poole v Chubb Insurance Company of Australia Ltd [2014] NSWSC 1832
• Hearing dates: 18 August - 2 September and 21 - 24 October 2014
• Decision date: 19 December 2014
• Jurisdiction: Equity Division - Commercial List
• Before: Stevenson J

Decision

Insured entitled to indemnity

• Catchwords: INSURANCE - indemnity - directors and officers cover - whether insured entitled to indemnity for legal costs incurred at an ICAC hearing - whether insured knew that submission made to Government Department false or misleading - whether insured knew that public inquiry into grant of mining exploration licence likely - whether insured fraudulently in breach of duty of disclosure - whether insured fraudulently misrepresented the position when answering questions in proposal; EVIDENCE - allegation of fraudulent misrepresentation and non-disclosure - onus - whether clear and cogent proof established - whether Jones v Dunkel inferences to be drawn where case of fraud sought to be established in part from documentary and circumstantial evidence
• Legislation Cited: Coal Mine Health and Safety Act 2002; Evidence Act 1995; Insurance Contracts Act 1984 (Cth); Mining Act 1992
• Cases Cited: Advance (NSW) Insurance Agencies Pty Ltd v Matthews (1987) 4 ANZ Ins Cas 60-813; Australian Securities and Investments Commissions v Hellicar [2012] HCA 17; 247 CLR 347; Blatch v Archer (1774) 1 Cowp 63; Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1; Briginshaw v Briginshaw (1938) 60 CLR 336; Chamberlain v R (No. 2) (1984) 153 CLR 521; CGU Insurance Ltd v Porthouse (2008) 235 CLR 103; Commercial Union Assurance Co of Australia Ltd v Beard (1999) 47 NSWLR 735 Derry v Peek (1889) 14 App Cas 337; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 88 ALJR 447; Jones v Dunkel (1959) 101 CLR 298; Maynard v Goode (1926) 37 CLR 529; Midaz Pty Ltd v Peters McCarthy Insurance Brokers Pty Ltd [1999] 1 Qd R 279; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449; Newey v Westpac Banking Corporation [2014] NSWCA 319; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451; Palmer v Dolman [2005] NSWCA 361; Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; Plasteel Windows Australia Pty Ltd v CE Heath Underwriting Agencies Pty Ltd (1990) 19 NSWLR 400; Prepaid Services Pty Ltd v Atradius Credit Insurance NV [2013] NSWCA 252; Rejfek v McElory [1965] HCA 46; 112 CLR 517; Schellenberg v Tunnel Holdings Pty Ltd [2000] HCA 18; 200 CLR 121; Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165; Vines v Australian Securities & Investments Commissions [2007] NSWCA 75; 73 NSWLR 451
• Texts Cited: K Sutton, Insurance Law in Australia, (3rd ed, 1999); N Seddon, R Bigwood and M Ellinghaus, Chesire & Fifoot Law of Contract, (10th Edition 2012, LexisNexis Butterworths); J D Heydon, Cross on Evidence
• Category: Principal judgment
• Parties: Andrew John Poole (Plaintiff); Chubb Insurance Company of Australia Ltd (Defendant)
• Representation: Counsel: A P Coleman SC with J E Curtin (Plaintiff); A Leopold SC with T M Mehigan (Defendant); Solicitors: Horton Rhodes (Plaintiff); Clyde & Co (Defendant)
• File Number(s): SC 2013/336778

TABLE of contents

Introduction	1
Decision	13
General background	16
Obtaining an exploration licence for coal	22
DCM resolved to seek direct allocation of an exploration licence	25
DCM sought and obtained a direct allocation of the Exploration Licence - overview	28
The proposals for insurance, policies issued and notification of circumstances likely to give rise to a claim	34
The proper construction of the question at cl 9(f) in the proposals	44
Waiver of the duty of disclosure with respect to the DCM policy?	53
Chubb's case - overview	62
The "Misleading Submission" case	64
The "EL Grant Controversy" case	66
The non-disclosure and misrepresentation alleged	67
Non-disclosure	67
Misrepresentation	72
Alleged relevance of the "Misleading Submission" and the "EL Grant Controversy"	74
"Fraudulent" non-disclosure and misrepresentation	76
Causation	77
Mr Poole's case	78
Non-disclosure	78
Misrepresentation	81
A case based on documents and cross-examination of Mr Poole	85
Mr Poole's credit	106
Mr Maitland's "relationship" with the Minister	119
Mr Poole's knowledge of the "relationship" between Mr Maitland and the Minister	126
Relevant statutory provisions and legal principles	133
The statutory test of relevance under the ICA	136
"Fraud"	143
Onus	154
The facts in detail - events leading to the Submission	156
Late 2006	159
15 January 2007 Meeting	168
The Palese Information Memorandum	171
Direct allocation or nothing	185
The training mine "angle"	191
Mr Maitland's meeting with the Minister	195
15 February 2007 request for consent to apply for an exploration licence	211
DCM board meeting 28 February 2007	217
Mr Maitland's meeting with the Minister's staff of 8 March 2007	222
Board meeting 3 April 2007	227
21 November 2007 meeting	238
30 November 2007 "Shareholder Briefing" note	264
Drafting the Submission	269
Mr Poole's review of the draft Submission	288
Board meeting 29 January 2008	294
Purchase of the land	299
"Without huge profits"	300
10 March 2008 Westpac note	304
18 March 2008 request for consent to apply for an exploration licence	310
The Submission	313
Departmental consideration of the Submission	332
21 August 2008 - Ministerial consent granted	341
The September 2008 Information Memorandum	355
NBN Nine News story	391
Mr Maitland's return from China	401
Mr Lewis's review of the Submission	403
Mr Ransley's email of 25 September 2008 - "promises made in the past" & "whole new level of public scrutiny"	410
Mr Maitland's email to Mr Tudehope of 25 September 2008	413
DCM 29 September 2008 application for the Exploration Licence	417
The Minister's 5 December 2008 offer of an exploration licence	425
23 December 2008 board meeting	430
The "Info Memo"	432
Revelation that access had been granted to all seams	436
January 2009 visit to China	451
Possible "back-door listing"	468
Further reports from Dr Palese	471
January 2009 - public controversy developing?	475
Falling out between Mr Ransley and Mr Maitland?	484
Mr Maitland removed as director of DCM	487
Press publicity - the "brewing controversy"	498
Jerrys Plains Community Q&A	503
Jerrys Plains' community meeting 25 August 2009	514
DCM proposal for insurance	534
NuCoal 23 November 2009 option to purchase shares in DCM	536
Prospectus	538
NuCoal proposal for insurance	545
The "Misleading Submission" case	547
(1) Statements about a "training mine"	555
What was said and was it false or misleading?	555
(2) Statement that the training facility was forecast to be "cost neutral"	576
What was said and was it false or misleading?	576
(3) Statements about the size of the coal resource	583
What was said and was it false or misleading?	583
Mr Poole's knowledge - saleable v mineable tonnes	603
The September IM	627
The Application	634
The events of 24 December 2008	638
(4) Statements about the size of the operation - a "small to medium" operation	644
What was said and was it false or misleading?	644
(5) Statements about the "Strategic Alliance"	656
What was said and was it misleading or deceptive?	656
Mr Poole's knowledge about the "Strategic Alliance"	666
(6) Statements about the rigour of the process of locating a site	676
What was said and was it false or misleading?	676
Mr Poole's knowledge	681
Conclusions as to Chubb's "Misleading Submission" case	684
The "EL Grant Controversy"	687
The 16 September 2008 NBN Nine News Story	698
Mr Ransley's 25 September 2008 email ("about to reach of whole new level of public scrutiny")	701
Mr Barns' note of 19 January 2009	711
Removal of Mr Maitland as director of DCM	715
The July 2009 press publicity	718
Jerrys Plains' Q&A and community meeting	725
Conclusion	731
Further matters for consideration	733
Which policy responds to Mr Poole's claim?	735
Extension 2H of the DCM policy	737
Exclusion 4A(i) of the NuCoal policy	740
Quantification of Mr Poole's claim	744

Judgment

Introduction

1 The plaintiff, Mr Poole, seeks indemnity under directors' and officers' liability policies issued by the defendant, Chubb Insurance Company of Australia Ltd, to Doyles Creek Mining Pty Ltd ("DCM") and NuCoal Resources NL.

2 Mr Poole is a former director of DCM and NuCoal and sues as an "Insured Person" under both policies.

3 Mr Poole seeks payment from Chubb of legal costs of $658,745.16 incurred by him in the course of an inquiry conducted by the Independent Commission Against Corruption ("ICAC") into the granting of Exploration Licence No. 7270 (the "Exploration Licence" or "EL") to DCM. Each of the policies provides cover for "Legal Representation Expenses" including reasonable "Defence Costs" incurred on account of attending a "Formal Investigation". Chubb does not dispute that the costs incurred by Mr Poole at ICAC fall within these definitions.

4 Chubb denies however that it is liable to indemnify Mr Poole by reason of Mr Poole's alleged fraudulent non-disclosure and misrepresentation of certain matters relating to the grant of the Exploration Licence to DCM, which I discuss in detail below. The misrepresentation is said to arise from the answer "no" given to certain questions in the relevant proposal forms. No alternative claim of innocent non-disclosure or misrepresentation is made; indeed, such a claim has, in terms, been eschewed.

5 Chubb advances no other basis upon which to deny Mr Poole's claim for indemnity.

6 Chubb contends that, if it is liable to indemnify Mr Poole that liability arises under the DCM policy, and not the NuCoal policy.

7 Chubb accepts that by reason of cl 6 in the DCM policy and cl 7 in the NuCoal policy it is not entitled to avoid the policies, even if it establishes fraudulent non-disclosure or misrepresentation. However, if Chubb does make out those allegations, its liability to indemnify Mr Poole is excluded under cl 6 of the DCM policy, and under the NuCoal policy it is entitled to seek a reduction of its liability to indemnify Mr Poole so as to place it in the same position it would have been had the fraudulent non-disclosure or fraudulent misrepresentation not been made: s 28(2) of the Insurance Contracts Act 1984 (Cth) ("the ICA").

8 In relation to each policy, Mr Poole accepts he is a party to each of the insurance contracts and an insured within the scope of s 21(1) of the ICA. He accepts he had a duty of disclosure but denies that he has acted in breach of that duty or that, so far as he was concerned, the answers given in the proposal forms were wrong.

9 I am aware that Mr Poole has appeared before ICAC; in these proceedings he seeks to recover from Chubb the legal costs he thereby incurred. I am also aware that the issues before ICAC concerned the same broad factual matters as those before me. I was informed from the bar table that many of the documents in the Court Book were sourced from the ICAC inquiry.

10 Such report as ICAC may have published is, however, not before me. That is because it is not admissible to prove any fact relevant to the issues I must determine. I am bound to apply the rules evidence; ICAC is not. Counsel, quite properly, were assiduous to avoid any reference to such findings as ICAC may have made about the events in question before me.

11 I must determine Mr Poole's case on the basis of the evidence before me and not on the basis of findings that may have been made by a tribunal not bound by the rules of evidence and which may have been able to consider material not in evidence in these proceedings.

12 I have been greatly assisted by the detailed and careful submissions made by Mr Coleman SC, who appeared with Ms Curtin, for Mr Poole and Mr Leopold SC, who appeared with Mr Mehigan, for Chubb. Much of what follows, especially as to background and other uncontroversial matters (including as to legal principles), is drawn, with gratitude, from those submissions.

Decision

13 Chubb has failed to satisfy me that Mr Poole has engaged in either fraudulent non-disclosure or fraudulent misrepresentation.

14 It follows that Mr Poole is entitled to indemnity. I accept Chubb's submission that such indemnity arises under the DCM policy, and not the NuCoal policy.

15 Mr Poole is entitled to judgment for the amount of his costs before ICAC, together with interest and costs.

General background

16 Mr Poole holds a Bachelor of Commerce and a Master of Business Administration. He is a fellow of the Australian Society of Certified Practising Accountants. Prior to his involvement with DCM, Mr Poole was, amongst other positions, Chief Financial Officer and Company Secretary of Bradken Ltd.

17 In late 2006, Mr Poole and Mr Craig Ransley agreed to establish a business which would consolidate a number of smaller companies servicing the mining sector. To that end, in November 2006, Mr Poole caused DCM (then known as ResCo Services Pty Ltd) to be incorporated. He also caused to be incorporated another company, then known as Rosa Holdings Pty Ltd. That company later changed its name to ResCo Services Pty Ltd. I shall refer to it simply as "ResCo".

18 Mr Poole was the sole director of DCM until 15 February 2007. On that date Mr Ransley and Mr John Maitland became his co-directors. Mr Maitland had until recently been the National Secretary of the Construction, Forestry, Mining and Energy Union ("CFMEU") and had recently been appointed Chairperson of the NSW Coal Competence Board. Mr Poole ceased to be a director of DCM on 9 August 2012.

19 Interests associated with Mr Poole's family were the largest shareholders in DCM from 2007 until the acquisition of DCM by NuCoal in the circumstances I describe below. In February 2008 interests associated with Mr Poole controlled some 23.22 per cent of the shares in DCM.

20 In late 2009 and early 2010, the shareholders of DCM implemented what the parties described as a "back door" ASX listing of DCM. That transaction involved the shareholders of DCM giving to a listed but suspended company, which came to be known as NuCoal, the option to acquire all of their shares in DCM upon re-quotation of the listed entity.

21 Mr Poole was a director of NuCoal from 5 February 2010 to 26 April 2012 and realised significant profits from the "back door listing".

Obtaining an exploration licence for coal

22 In New South Wales, in order to mine land within a "mineral allocation area" (which, in the case of coal, is the whole of the State) it is necessary to obtain a mining lease under the Mining Act 1992. Only the holder of an exploration licence is able to apply for a mining lease of land within a mineral allocation area (s 51(3) of the Mining Act).

23 Any person may apply for an exploration licence (s 13(1) of the Mining Act) but an application that relates to a "mineral allocation area" may only be made with the consent of the Minister of the Mineral Resources (s 13(3); at all relevant times Mr Ian Macdonald ("the Minister")).

24 The NSW Government's "Guidelines for Allocation of Future Coal Exploration Areas" stated at the relevant time that "normally" allocations for exploration licences are made on a competitive basis. However, the Minister has a discretion to make a direct allocation of an exploration licence without competitive tender (ss 22 and 23).

DCM resolved to seek direct allocation of an exploration licence

25 As I discuss below, on 15 January 2007, Mr Poole, Mr Maitland and Mr Ransley first met to discuss a possible coal mining project at Doyles Creek.

26 Mr Poole was clear in his evidence before me that he, and the other directors of DCM, were only prepared to proceed with the Doyles Creek project if DCM could obtain an exploration licence by direct allocation from the Minister. They were not prepared to cause DCM to participate in a competitive tender.

27 The "differentiating factor" (to adopt an expression used by Mr Coleman in his submissions) that the DCM board resolved to adopt in order to persuade the Minister to allocate directly an exploration licence to DCM (rather than require DCM to go through a tendering process) was to include in the proposed venture an underground "training mine".

DCM sought and obtained a direct allocation of the Exploration Licence - overview

28 On 15 February 2007, Mr Maitland, on behalf of DCM, wrote to the Minister seeking the Minister's consent under s 13(3) of the Mining Act for DCM to apply for an exploration licence at Doyles Creek and said that DCM's objectives included the development of a training mine.

29 Preparation of a formal submission seeking the Minister's consent to an application by DCM to apply for an exploration licence commenced in late 2007.

30 Ultimately, DCM lodged a detailed submission ("the Submission") with the Department of Primary Industry ("the Department") on 18 March 2008.

31 On 21 August 2008, the Minister invited DCM to apply for an exploration licence.

32 DCM made that application (addressed to The Mining Registrar (Coal)) on 29 September 2008.

33 On 5 December 2008, the Minister offered DCM the Exploration Licence. It was formally issued by the Department on 10 December 2008.

The proposals for insurance, policies issued and notification of circumstances likely to give rise to a claim

34 On 8 October 2009, DCM submitted a proposal for insurance to Chubb for directors' and officers' cover. The proposal form was completed by Mr Peter Logvyn, as the Chief Financial Officer of DCM.

35 The proposal posed the following question at cl 9(f):

"Is any person proposed for coverage cognisant of any facts or circumstances which:

(i) he or she has reason to suppose might afford valid grounds for any future claim(s) such as would fall within the scope of the proposed coverage?

(ii) indicate the probability of any such claim(s)?

It is agreed that if such facts or circumstances exist, any claim, action or proceeding arising therefrom is excluded from the proposed coverage.

If the answer to any one of the questions in 9, is yes, please attach details." (emphasis in original)

36 Adjacent to each of sub paragraphs 9(f)(i) and (ii) was a box marked "yes" and "no". Mr Logvyn answered each of these questions by ticking "no".

37 Mr Poole said that Mr Logvyn did not consult him about what answers should be given to these questions and, indeed, that he was unaware that DCM had proposed for insurance in October 2009 (see [535] below). Mr Poole accepted however that, had he been consulted by Mr Logvyn, he would have approved the answers given by Mr Logvyn.

38 The DCM policy incepted on 9 November 2009 and went into run-off from 30 June 2010. By an endorsement issued on 28 April 2010 Chubb granted a 12 month "extended reporting period" (to 30 June 2011). By a further endorsement issued on 13 July 2011, Chubb granted a further 72 month "extended reporting period" (effectively a period of run-off) effective retrospectively from 30 June 2010 to 30 June 2017.

39 On 4 February 2010, NuCoal submitted a proposal of insurance to Chubb for directors' and officers' cover. The proposal form was completed by Mr Glen Lewis, then a Director of DCM. The proposal form was in the same form and posed the same questions as set out at [35] above. Mr Lewis answered each of the questions by ticking the "no" boxes.

40 Mr Poole accepted that he was consulted about the NuCoal proposal and approved the answers given by Mr Lewis.

41 The NuCoal policy incepted on 16 February 2010, was extended to 30 June 2011 and then renewed to cover the period 1 July 2011 to 30 June 2012, renewed to 30 June 2012.

42 On 29 December 2011, both DCM and NuCoal gave Chubb notice of circumstances likely to give rise to a future claim, namely the decision by the NSW Government to refer to ICAC certain allegations concerning the Exploration Licence.

43 On 26 October 2012, Mr Poole gave Chubb notice that he had been summonsed to give evidence and produce documents to ICAC in relation to the inquiry.

The proper construction of the question at cl 9(f) in the proposals

44 Two questions concerning the proposals arose in the course of argument. In view of the overall conclusion to which I have come, it is not necessary that these questions be answered. However, I will deal with them, albeit briefly.

45 The first question concerns the proper construction of the question posed by cl 9(f) of the DCM and NuCoal proposals.

46 Clause 9(f) called for revelation of circumstances of which "any person proposed for coverage" was "cognisant". A person is only "cognisant" of something if that person knows or is aware of that thing. I would thus read "cognisant" as meaning "actually knows". I did not understand Chubb to submit to the contrary.

47 The debate between the parties was whether the question at cl 9(f) was directed to known facts or circumstances that might reasonably be supposed by the insured as affording "valid grounds for a future claim" against the insured, as opposed to known facts which might reasonably be supposed as affording "valid grounds for a future claim" by the insured for indemnity under the policy.

48 The matter is to be determined objectively by reference to what a reasonable person would have understood the terms to mean; see for example, most recently Newey v Westpac Banking Corporation [2014] NSWCA 319 at [84] per Gleeson JA (with whose conclusions Basten and Meagher JJA agreed) citing the familiar cases of Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40].

49 The most recent statement by the High Court on the question is in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 88 ALJR 447 where French CJ, Hayne, Crennan, Kiefel JJ said at [35]:

"...this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties ... intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'." (citations omitted)

50 The question in cl 9(f) refers to "future claim(s) such as would fall within the scope of the proposed coverage". That language suggests to me that the parties intended that what was to be disclosed were facts or circumstances such as would give rise to any such claim: that is a "valid" claim for indemnity by the insured under the proposed policy. And whether or not the insured thought that the claim being made against him or her was itself a "valid" claim.

51 If an insured's obligations, when answering the question in cl 9(f), was to disclose facts or circumstances relevant only to what the insured had reason to suppose might afford "valid" grounds for a future claim against him or her, the question would not call for disclosure of a claim which an insured knew was about to be made against him or her but which the person insured reasonably thought to be hopeless. The coverage under the policy was to include representative costs and defence costs. It would extraordinary if an insured, knowing of the certainty of a proposed claim, but believing it to be without merit, could successfully propose for insurance cover including defence costs in relation to such a claim, without disclosing the claim.

52 In those circumstances, in my opinion, reasonable business people in the position of the parties would understand the question in cl 9(f) to require an assessment by a prospective insured of whether facts and circumstances of which he or she was "cognisant" might reasonably give rise to a claim for indemnity under the policy (including, in this case, for defence costs) whether or not the claim being made against the proposed insured was thought by the insured, or was in fact, "valid".

Waiver of the duty of disclosure with respect to the DCM policy?

53 The second question arises from the identity of the person who signed the DCM proposal.

54 Chubb's proposal forms (including that for the DCM policy) concluded with the statement:

"DECLARATION AND SIGNATURE

The undersigned authorised officers of the Applicant declare that to the best of their knowledge and belief the statements set forth herein and all attachments and schedules hereto are true and immediate notice will be given should any of the above information alter between the date of this proposal and the proposed date of inception of the insurance. Although the signing of the proposal does not bind the undersigned, on behalf of the Applicant and its Directors and Officers, to effect insurance, the undersigned agree that this proposal and all attachments and schedules hereto and the said statements herein shall be the basis of and will be incorporated in the policy should one be issued.

The undersigned, on behalf of the Applicant and its Directors and Officers, acknowledge that the Statutory Notice contained herein has been read and understood.

This proposal must be signed by the Applicant's Chairman of the Board, Managing Director or Chief Executive Director."

55 Below his signature on the DCM proposal Mr Logvyn wrote "CFO Doyles Creek Mining" making clear that the proposal was not signed by DCM's Chairman of the Board, Managing Director or Chief Executive Director.

56 Mr Coleman submitted that:

"The failure by the insurer to insist on the proposal...being signed by one of the required and specified directors of DCM means that there has not been an answer to any of the questions asked nor a declaration as to the truth of them."

57 Mr Coleman drew attention to s 21(3) of the ICA which provides that:

"(3) Where a person:

(a) failed to answer; or

(b) gave an obviously incomplete or irrelevant answer to;

a question included in a proposal form about a matter, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter."

58 Mr Coleman submitted that:

"By reason of s 21(3) therefore, the insurer is deemed to have waived compliance with the duty of compliance in respect to the matter the subject of the questions."

59 I do not accept that submission.

60 The provision in the proposal that it "must be signed" by the nominated person was a provision for Chubb's benefit. Chubb was able to, and evidently did, waive its benefit (see generally N Seddon, R Bigwood and M Ellinghaus, Chesire & Fifoot Law of Contract, (10th ed 2012, LexisNexis Butterworths) at [20.13] citing Maynard v Goode (1926) 37 CLR 529; Suttor v Gundowda Pty Ltd (1950) 81 CLR 418).

61 In these circumstances, I do not accept that the consequence of Chubb issuing the DCM policy on the basis of the proposal signed by DCM's Chief Financial Officer (rather than the Chairman of the Board, Managing Director or Chief Executive Director) has the consequence that DCM either "failed to answer" the relevant question or "gave an obviously incomplete or irrelevant answer" for the purposes of s 21(3).

Chubb's case - overview

62 In substance, Chubb's case of fraudulent non-disclosure or misrepresentation is founded on two circumstances which, in its closing submissions, it described as the "Misleading Submission" and the "EL Grant Controversy".

63 The manner in which Chubb puts its case in closing submissions was as follows.

The "Misleading Submission" case

64 Chubb's "Misleading Submission" case is based on the Submission of 18 March 2008.

65 In its closing submissions, Chubb summarised its case concerning the Submission as follows:

(1) the Submission contained statements about the size of the coal resource at Doyles Creek and about DCM's business objectives and other matters which were misleading and/or false;

(2) the inclusion of those false and misleading statements in the Submission was intended to provide "apparent justification" for the exercise by the Minister of a discretion under s 13(3) of the Mining Act to invite DCM to make an application for the Exploration Licence rather than invite tenders for the Exploration Licence under s 14 of the Mining Act. Chubb alleges that this conduct was dishonest;

(3) Mr Poole knew of that dishonesty, and approved the Submission and its delivery to the Department. In particular, Mr Poole knew that the Submission understated the only independent appraisal DCM had (that of a geologist, Dr Guy Palese) as to the size of the coal resource at Doyles Creek, both as to estimated tonnage and as to the statement made in the Submission that Doyles Creek had the potential to support in a "small to medium" coal mining operation; and

(4) Mr Poole also knew that the Submission falsely stated that the primary focus of DCM's business objectives was the development of a training mine. Chubb claims that Mr Poole knew that the development of a training mine was incidental to DCM's primary objective of developing what could be presented to investors as a medium to large commercial coal mining operation yielding profits substantially in excess of those necessary to sustain a training mine. Chubb also alleges that Mr Poole also knew that the Submission misleadingly exaggerated the extent of a "Strategic Alliance" of local business interests said to be supportive of a training mine.

The "EL Grant Controversy" case

66 In its closing submissions, Chubb summarised its case concerning the "EL Grant Controversy" as follows:

(1) During the course of 2009 Mr Poole knew there was an "emerging public controversy" (including press reports and a meeting of a local action group known as "Jerrys Plains Minewatch") about the circumstances of the grant of the Exploration Licence to DCM which controversy, at that time, focused on two matters:

(a) first, the nature of the relationship between the Minister and Mr Maitland. Chubb contends that Mr Poole knew that Mr Maitland was appointed Chairman of DCM in order to utilise his personal and political connections (including with the Minister) in connection with the endeavours of DCM to procure the Exploration Licence;

(b) second, whether DCM's stated primary business objective of developing a training mine concealed its "real primary objective" of developing what could be presented to investors as a major commercial coal mine.

(2) Chubb alleges that Mr Poole knew that, arising from this "emerging public controversy" there was a possibility of an investigation by ICAC into the circumstances of the grant of the Exploration Licence and that in view of the "huge profits" the DCM shareholders (including Mr Poole) made from the "back door listing" referred to at [20] above, it was "obvious that those who had already expressed concerns about the circumstances in which the EL was granted to DCM may agitate for some form of investigation or inquiry".

The non-disclosure and misrepresentation alleged

Non-disclosure

67 Chubb alleges that Mr Poole acted in breach of his duty of disclosure (as set out in s 21 of the ICA; see [133] below) for two reasons.

68 First, Chubb claims, Mr Poole knew that the Submission contained false and misleading statements. Chubb contends that it follows that Mr Poole knew that fact to be relevant to Chubb's decision whether to accept the risk; alternatively that a reasonable person in Mr Poole's position could be expected to know it was relevant.

69 Second, Chubb alleges that Mr Poole knew the matters said to comprise the "EL Grant Controversy".

70 Chubb alleges that arising from those facts Mr Poole "knew there was a possibility of an investigation by ICAC into the circumstances of the grant of the EL" to DCM and knew that this was a matter relevant to Chubb's decision whether to accept the risk.

71 Alternatively, Chubb alleges that whether or not Mr Poole subjectively believed a formal investigation was likely, a reasonable person in his position could be expected to know that the facts constituting the "EL Grant Controversy" were relevant to Chubb's decision whether to accept the risk.

Misrepresentation

72 Chubb also alleges that Mr Poole approved the answer "no" given to question at cl 9(f) in the proposal forms and thus represented to Chubb that he was not "cognisant" of any facts or circumstances which he had reason to suppose might afford "valid grounds" for a future claim by him under the policies.

73 Chubb alleges that such representation was false because he was aware that the Submission contained false and misleading statements and was aware of the facts comprising the "EL Grant Controversy" and had "reason to suppose" either of those matters might give rise to a claim for indemnity.

Alleged relevance of the "Misleading Submission" and the "EL Grant Controversy"

74 Chubb contends that the "Misleading Submission" is relevant for two reasons, outlined in its closing submission as follows:

(1) First, the alleged fact that Mr Poole had approved an important business document containing statements he knew to be false and/or misleading, and that he was aware of DCM's dishonest purpose in respect of the Submission, demonstrated impropriety and a propensity for dishonesty which was itself relevant to a Directors and Officers insurer, as it went to the "moral hazard" associated with the risk.

(2) Second, the fact that the Submission was false and misleading (and inconsistent with the equivalent statements in the NuCoal Prospectus) meant that there was basis for a formal investigation into the circumstances of the grant of the Exploration Licence to DCM.

75 Chubb contends that the "EL Grant Controversy" was relevant because it "revealed the possibility of a formal investigation or inquiry into the circumstances of the grant of the Exploration Licence and/or a claim arising out of those circumstances".

"Fraudulent" non-disclosure and misrepresentation

76 Chubb contends that:

(1) Mr Poole knew the matters set out above;

(2) Mr Poole knew those matters were relevant to a Directors and Officers insurer and consequently any non-disclosure "must have involved knowing fraud"; or

(3) a reasonable person in the circumstances would have known those matters were relevant and Mr Poole recklessly failed to disclose the matters. Mr Poole was, Chubb contends, "consciously indifferent" to disclosure because he "closed his mind to, or did not care about" compliance with his duty of disclosure or the truth or falsity of the answers in the proposal forms.

Causation

77 Chubb contends that had Mr Poole complied with his duty of disclosure (or answered "yes" to the relevant questions in the proposals and provided details of the circumstances) Chubb would not have entered into either policy or would have excluded any claim arising out of the circumstances of the grant of the Exploration Licence to DCM.

Mr Poole's case

Non-disclosure

78 So far as concerns the Submission, Mr Poole's case was simple. His position is that, at all relevant times, he believed that every statement in the Submission was true.

79 His case was thus, in effect, that if the Submission was false or misleading, that was not a matter "known to" him for the purpose of the chapeau to s 21 of the ICA; and that accordingly no duty of disclosure was enlivened.

80 So far as concerns the "EL Grant Controversy", Mr Pool accepted that he knew the facts relied on by Chubb as constituting that "Controversy" but that he did not believe there was any prospect of those facts giving rise to any form of public inquiry; and that, as I understand his case, no reasonable person in his position would have come to a different conclusion or would have thought that the facts relied on by Chubb could be relevant to Chubb's decision to accept the risk.

Misrepresentation

81 As I have said, Mr Poole said he did not know of, or approve of Mr Logvyn's completion of the DCM proposal (but that he would have approved of Mr Logvyn's answers, had he been asked). Mr Poole accepted he approved of Mr Lewis's answers in the NuCoal proposal.

82 In any event, Mr Poole's case was that, so far as he was concerned, the question at cl 9(f) was correctly answered "no" in both cases.

83 In the case of the Submission that was because he believed every statement in the Submission to be true and was thus not "cognisant" of any facts or circumstances that he had reason to suppose might give rise to a claim.

84 So far as concerns the "EL Grant Controversy" that was because the facts of which he was "cognisant" did not cause him to suppose, and did not give him reason to suppose that there would be a public inquiry and thus did not give him reason to suppose he might need to make a claim under the policy.

A case based on documents and cross-examination of Mr Poole

85 The allegations Chubb makes are very serious. Chubb called no witnesses to prove these matters. Chubb has sought to make out these allegations based on documentary evidence, and cross-examination of Mr Poole. That cross-examination extended over six hearing day and was, to say the least, comprehensive. I heard no evidence on these questions from any of Messrs Macdonald, Maitland, or Ransley (or anyone else but Mr Poole).

86 As will become clear from what follows, there were many other people involved in preparation of the Submission and in subsequent events leading to the issue of the Exploration Licence. Some of those people were employed by DCM, but others were, and are, independent professionals. If, as Mr Leopold submitted, the Submission was a "deeply misleading" document, and that Mr Poole knew this was so, it is hard to escape the conclusion that other persons, more directly involved in the preparation of the Submission than Mr Poole, must also have known of the Submission's flawed nature.

87 As Mr Coleman submitted on behalf of Mr Poole:

"The gist of the allegations made by Chubb, although couched as a fraudulent non-disclosure and misrepresentation case against Mr Poole, effectively requires the Court to conclude that all of the abovementioned people were involved in a deliberate and lengthy conspiracy to mislead the New South Wales Government and Department of Primary Industries by submitting knowingly false information to them for the purposes of the direct allocation of the [Exploration Licence] with the intent of then selling their share of the venture (through a listing or otherwise) at great profit".

88 To a very significant extent, Chubb's case turns on inferences it contends should be drawn from documents. Mr Leopold's cross-examination of Mr Poole was focused on documents created between 2007 and 2009. Few of those documents were created by Mr Poole. There was in evidence one note taken by Mr Poole at a meeting and a number of emails sent by Mr Poole. However, most of the documents on which Mr Poole was cross-examined were created by others. These included emails copied to Mr Poole and diary notes of meetings which Mr Poole attended (including meetings characterised by Mr Leopold as being "seminal" or "critical").

89 I admitted those diary notes by making what became known as the "Diary Note Ruling". This was a ruling under s 136 of the Evidence Act 1995 in the following terms:

"Admitted only as evidence that a meeting took place on the date identified; that the people identified in the note were present at the meeting; and that at that meeting something was said or something happened that caused the author of the note to make the record that he or she made".

90 Mr Poole was also closely cross-examined on various drafts of the Submission, the Submission itself and information memoranda prepared after the Submission was created. Mr Poole was not the author of any of those documents (although he reviewed and commented on some of them).

91 It is a serious matter to allege fraud, especially in a case largely based on circumstantial evidence. It is true, as Chubb submitted, that in an appropriate case serious allegations can be proved by "circumstantial evidentiary facts" and "inference and circumstances" (per Ipp JA, with whom Spigelman CJ agreed in this respect, in Vines v Australian Securities & Investments Commissions [2007] NSWCA 75; 73 NSWLR 451 at [811] citing Dixon CJ in Briginshaw v Briginshaw (1938) 60 CLR 336 at 366). A case based on circumstantial evidence must, of course, be determined by assessing the weight of all the circumstances put together (Palmer v Dolman [2005] NSWCA 361 at [41]; Chamberlain v R (No. 2) (1984) 153 CLR 521 at 535-536). However, care must be exercised in coming to conclusions of fraud in such circumstances.

92 I accept Mr Leopold's submission that I should not view individual pieces of evidence in isolation and that I should draw conclusions as to what, overall, Mr Poole knew from the totality of the evidence. Nonetheless, as I set out below, I must make a decision about Mr Poole's knowledge of each of the matters that Chubb contends he knew. That decision will take into account the particular circumstances of each occasion but also my assessment of Mr Poole's credit generally.

93 From time to time, Chubb has sought to draw implications from documents (prepared by persons other than Mr Poole) in circumstances where, had the author of the document, or another person involved or named in the document given evidence, more light may have been shone on the actual course of events.

94 Thus Chubb submitted:

"Fraud can, and often will, be found by drawing inferences from circumstantial evidence (see, for instance, Palmer v Dolman [2005] NSWCA 361 at [39]; Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 at 5). A case based on circumstantial evidence must be determined by assessing the weight of all the circumstances put together (Palmer at [41], Chamberlain v R (No. 2) (1983) 153 CLR 521 at 535-536).

The rules in Jones v Dunkel (1959) 101 CLR 298 and Blatch v Archer (1774) 1 Cowp 63 at 65 will have some role to play in this case. With very few exceptions, the additional witnesses who might have been called to explain the events relating to the Submission and the proposals for insurance are in Mr Poole's 'camp' (in particular, Mr Ransley, Mr Stevenson [a solicitor, to whom I refer below], Mr Lewis, Mr Ireland [a mine manager, to whom I refer below] and Mr Logvyn)."

95 In Australian Securities and Investments Commissions v Hellicar [2012] HCA 17; 247 CLR 347 the matter for consideration by the High Court was ASIC's failure to call evidence from a witness that it was plainly in a position to call. The plurality (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ) said at [165]:

"Disputed questions of fact must be decided by a court according to the evidence that the parties adduce, not according to some speculation about what other evidence might possibly have been led. Principles governing the onus and standard of proof must faithfully be applied. And there are cases where demonstration that other evidence could have been, but was not, called may properly be taken to account in determining whether a party has proved its case to the requisite standard. But both the circumstances in which that may be done and the way in which the absence of evidence may be taken to account are confined by known and accepted principles...".(emphasis in original)

96 In Schellenberg v Tunnel Holdings Pty Ltd [2000] HCA 18; 200 CLR 121 Gaudron J at [51] cited with approval the following passage from Cross on Evidence at [1215]):

"[T]he rule [in Jones v Dunkel] only applies where a party is 'required to explain or contradict' something. What a party is required to explain or contradict depends on the issues in the case as thrown up in the pleadings and by the course of evidence in the case. No inference can be drawn unless evidence is given of facts 'requiring an answer'." (citations omitted)

97 Gaudron J went on to say at [53]:

"A Jones v Dunkel inference can only make certain evidence more probable. It 'cannot be used to make up any deficiency of evidence'." (citing Menzies J in Jones v Dunkel at 312)

98 Mr Poole was faced with a very lengthy and exacting document based cross-examination over six days. Very often, the particular implications sought to be drawn from documents could only have become apparent to Mr Poole when he heard the manner in which Mr Leopold opened the case or when he was confronted with the document in the witness box.

99 Chubb's Jones v Dunkel submission really amounts to the proposition that once Mr Poole was able to see just what Chubb sought to make of the documentary material, Mr Poole should have embarked in a case in reply by calling the persons who created the documents, or were mentioned in them (for instance Mr Maitland, Mr Ransley and Mr Stevenson) and that his failure to do so should lead to an inference that those witnesses were unable to give evidence supportive of his case. I do not accept that proposition. This is a fraud case, and although a fraud case can be proved from circumstantial evidence, it was for Chubb to make good the very serious allegations it made against Mr Poole by clear and cogent admissible evidence. It was not for Mr Poole to "explain" that he had not behaved as Chubb contends; it was for Chubb to prove he had. It was not for Mr Poole to "contradict" inferences that might be available from documents by calling their author, or others named in them.

100 If more than one inference is available from documents tendered by Chubb, or if some documents leave important questions unanswered, the result will be that Chubb has failed to discharge its burden of proof. Chubb cannot, in effect, throw the burden of clearing up ambiguities or unanswered questions on Mr Poole by use of a Jones v Dunkel submission.

101 Consideration of Chubb's contentions concerning the allegedly misleading nature of the Submission, and Mr Poole's knowledge of that matter, requires a detailed consideration of the events from late 2006 to 18 March 2008 (when the Submission was delivered). It also involves consideration of events thereafter as there are documents produced by DCM (information memoranda prepared to attract investment in the project) and by NuCoal (the relevant Prospectus) which, Chubb contends, cast light on the manner in which the project was depicted by DCM in the Submission.

102 Likewise, consideration of the matters surrounding the "EL Grant Controversy" requires a detailed consideration of events, particularly, in 2009, considered against the backdrop of earlier events.

103 Of course, what is critical about these matters is what Mr Poole made of them, and thus what was his actual state of knowledge concerning their nature at the time DCM and NuCoal proposed for insurance with Chubb.

104 For those reasons, it is necessary for me to review, in some detail, the course of events.

105 I should also make some preliminary observations about Mr Poole's credit.

Mr Poole's credit

106 As I have said, Chubb called no witnesses on this aspect of the case. Apart from giving evidence himself, nor did Mr Poole. Mr Poole was cross-examined over six days. The cross-examination was, as was submitted on Mr Poole's behalf, exhaustive and unrelenting. It was certainly thorough.

107 Chubb submitted that Mr Poole was an "intelligent and resilient witness keenly aware of the forensic task before Chubb" and that I should conclude that Mr Poole gave "in many important respects, unreliable and dishonest evidence".

108 In closing submissions, Chubb was particularly critical of Mr Poole's professed lack of recollection of the details of meetings and communications. Chubb described this evidence as being "often implausible".

109 Mr Poole was being cross-examined about very particular aspects of events, particularly meetings and communications which, for the most part, occurred in the two year period commencing January 2007.

110 What was being put to Mr Poole throughout that cross-examination was that he had behaved dishonestly. It is unsurprising that, in those circumstances, he often presented as being cautious in answering questions.

111 I observed Mr Poole carefully over the period of his cross-examination. Overall, and with only minor exceptions (see for example [480ff] below), I gained the impression that Mr Poole was doing his best to give as honest an account of matters as his recollection allowed. He did not appear to be a person who was, deliberately, giving false evidence. I found the manner in which he gave his evidence as being measured and thoughtful.

112 Mr Poole consistently and repeatedly said that he believed that every statement in the Submission was true (both at the time it was first provided to the Department on 18 March 2008, and when it was attached to DCM's formal application for the Exploration Licence on 29 September 2008) and that it did not occur to him that there might be a public inquiry about the circumstances in which the Exploration Licence was granted.

113 These are not matters about which Mr Poole could be mistaken. Accepting that many years have passed since the events in question, and that Mr Poole's recollection of much of the detail was, as he said, poor, Mr Poole was clear in his evidence about these matters.

114 For Chubb to succeed on its claims, I would have had to have an "actual persuasion of the mind" (see [154] below) that I should not accept this evidence and that I should find that, from the beginning to the end of his evidence, Mr Poole was deliberately giving a false account of his state of mind.

115 For the reasons I discuss in detail below, I do not have an "actual persuasion of the mind" that this was the case.

116 When considering Mr Poole's evidence about these two critical matters, I have borne in mind that although DCM's sole business activity during the relevant period was directed to obtaining the Exploration Licence, Mr Poole was principally involved in acquisitions for ResCo Services. As Mr Coleman submitted, although DCM's main activities during the two year period from January 2007 to December 2008 were the drafting of the Submission, and the obtaining of support from and commitment to the project from community members and organisations, Mr Poole was not directly involved in either of those activities. Mr Poole did attend various meetings, including DCM board meetings, arranged capital raisings for DCM and read draft versions of the Submission. Otherwise, his focus was on ResCo's business.

117 I have also borne in mind Mr Poole's evidence that, prior to January 2007, he had had no experience in the coal mining industry and no knowledge of the process required to apply for an exploration licence. That evidence was not challenged.

118 I will deal with particular challenges made by Chubb to the credibility of Mr Poole's evidence as to particular events in the course of my analysis of those events.

Mr Maitland's "relationship" with the Minister

119 In the proceedings, much was made by Chubb of the "nature of the relationship" between Mr Maitland and the Minister, the alleged "political connection" between the two and Mr Maitland's alleged "easy access" to the Minister and his staff. In its closing submissions, Chubb submitted that there was a "close personal and professional relationship" between Mr Maitland and the Minister, and that Mr Poole knew this.

120 Chubb's pleaded case is that DCM, with Mr Poole's knowledge and consent:

"Deployed the close personal and professional relationship between Maitland and the Minister for the purpose of seeking to procure the exercise of discretion by the Minister to grant the EL by direct allocation without the usual competitive tender process."

121 Before me there was no direct evidence of any such "relationship", "connection" or "access". The evidence upon which Chubb relies comprises inferences it contends should be drawn from documents.

122 Critically, what Chubb does not contend in these proceedings is that the Minister behaved improperly (let alone corruptly) in directly allocating the Exploration Licence to DCM. Chubb has, in terms, eschewed any such suggestion. Mr Leopold stated very clearly that this was no part of Chubb's case.

123 Indeed, it is central to Chubb's case that the Submission made to the Department in response to which the Minister invited DCM to apply for, and ultimately issued the Exploration Licence, was misleading and dishonest.

124 Thus, in closing oral submissions, Mr Leopold said:

"...we do say the submission was expressed in false or misleading terms in order to seek to persuade the Minister to exercise that discretion favourably to DCM, to justify departure by the Minister from what was known to be the usual competitive tender process...

We do say the Department was against direct allocation and in support of a competitive tender process...and that the Department affirmatively recommended that the competitive tender process be undertaken...

The Minister might have been duped by the submission or persuaded by the submission and accepted all the falsities in it, or he may have been; we just don't know, but it's perfectly possible that he was duped by it and persuaded by it, and we don't say otherwise. It's simply no part of our case as to whether he was duped or not duped, acted properly or improperly...".

125 As I set out below, the evidence reveals that after the Submission was received by the Department on 18 March 2008, officers of the Department recommended that the Minister consider a competitive allocation process rather than a direct allocation of an exploration licence. As I have set out above, the Minister nonetheless invited DCM to apply for an exploration licence and ultimately allocated one directly, and without a competitive tender. There is not any evidence before me as to why the Minister took this course. There is no evidence such as would justify me concluding that the Minister took this course because of any personal or professional relationship with Mr Maitland or as a result of any private or unrecorded communication from Mr Maitland.

Mr Poole's knowledge of the "relationship" between Mr Maitland and the Minister

126 Mr Poole denied knowing of any "relationship" between Mr Maitland and the Minister. At one point Mr Poole said:

"They virtually didn't know each other, as I understand it."

127 However, earlier Mr Poole agreed that he knew that Mr Maitland dined occasionally with the Minister during the course of DCM's endeavours to procure the Exploration Licence.

128 Mr Poole said that, prior to Mr Maitland becoming chairman of DCM, he had only heard his name "in passing".

129 Mr Poole said that it was Mr Ransley who suggested Mr Maitland be chairman and that:

"...when the training mine was introduced, the concept a little bit later, it became obvious, certainly in my mind, that Mr Maitland was the best qualified to take the running of that particular part of the business."

130 Mr Poole also said:

"He was well networked and I suspect he knew his way around the network and the politicking, yes...I had no direct experience of Mr Maitland...but I suspected then that after 40 years in the trade union movement he probably would know his way around, yes...I figured he would probably know his way around it - have a rather large connection, network connection".

131 The course of events described below makes it clear that Mr Poole became aware that Mr Maitland became the direct point of contact between DCM, the Department and, through it, the Minister.

132 However, the evidence before me does not establish any basis to conclude that Mr Poole knew of any connection between Mr Maitland and the Minister such as would cause him to give credence to suggestions in the press and otherwise (that I discuss below) that the Minister granted the Exploration Licence to DCM as a "favour" to Mr Maitland.

Relevant statutory provisions and legal principles

133 Section 21 of the ICA is in the following terms:

"The insured's duty of disclosure

(1) Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that:

(a) the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or

(b) a reasonable person in the circumstances could be expected to know to be a matter so relevant.

(2) The duty of disclosure does not require the disclosure of a matter:

(a) that diminishes the risk;

(b) that is of common knowledge;

(c) that the insurer knows or in the ordinary course of the insurer's business as an insurer ought to know; or

(d) as to which compliance with the duty of disclosure is waived by the insurer.

(3) Where a person:

(a) failed to answer; or

(b) gave an obviously incomplete or irrelevant answer to;

a question included in a proposal form about a matter, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter."

134 Section 26 of the ICA is, relevantly, in the following terms:

"Certain statements not misrepresentations

(1) Where a statement that was made by a person in connection with a proposed contract of insurance was in fact untrue but was made on the basis of a belief that the person held, being a belief that a reasonable person in the circumstances would have held, the statement shall not be taken to be a misrepresentation.

(2) A statement that was made by a person in connection with a proposed contract of insurance shall not be taken to be a misrepresentation unless the person who made the statement knew, or a reasonable person in the circumstances could be expected to have known, that the statement would have been relevant to the decision of the insurer whether to accept the risk and, if so, on what terms."

135 Section 28 of the ICA is in the following terms:

"General insurance

(1) This section applies where the person who became the insured under a contract of general insurance upon the contract being entered into:

(a) failed to comply with the duty of disclosure; or

(b) made a misrepresentation to the insurer before the contract was entered into;

but does not apply where the insurer would have entered into the contract, for the same premium and on the same terms and conditions, even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into.

(2) If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract.

(3) If the insurer is not entitled to avoid the contract or, being entitled to avoid the contract (whether under subsection (2) or otherwise) has not done so, the liability of the insurer in respect of a claim is reduced to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made."

The statutory test of relevance under the ICA

136 The following statements of principle are largely taken from counsels' submissions. In view of the overall conclusion to which I have come, not all are relevant, but I set them out in deference to the care with which counsels' submissions were prepared.

137 It is common ground that the knowledge referred to in the chapeau to s 21 ("every matter that is known to the insured") is actual knowledge (for example, Advance (NSW) Insurance Agencies Pty Ltd v Matthews (1987) 4 ANZ Ins Cas 60-813 at 74, 992 per Young J (as his Honour then was) and Midaz Pty Ltd v Peters McCarthy Insurance Brokers Pty Ltd [1999] 1 Qd R 279 per Pincus JA (with whom Moynihan and Byrne JJ agreed) at 281).

138 The statutory test of relevance requires that, in relation to matters actually known to Mr Poole that, either:

(1) Mr Poole knew such matters to be relevant to Chubb's decision whether to accept the risk (and if so on what terms) (s 21(1)(a)); or

(2) a reasonable person in Mr Poole's circumstances could be "expected to know" those matters to be so relevant (s 21(1)(b)).

139 The insured is not under a duty to disclose matters which the insurer "knows" (s 21(2)(c)). It was common ground that the word "knows" in this context also means actual knowledge held by the particular officer of the insurer handling the insurance (Commercial Union Assurance Co of Australia Ltd v Beard (1999) 47 NSWLR 735 at [62] - [63] per Davies AJA with whom Meagher JA and Foster AJA agreed).

140 Section 26(2) imports the same test of relevance in relation to misrepresentations by providing that a statement made by a person proposing for insurance will not be a misrepresentation "unless the person knew, or a reasonable person in the circumstances could be expected to have known, that the statement would have been relevant to the decision of the insurer whether to accept the risk and, if so, on what terms" (emphasis added).

141 Chubb accepted that the onus of establishing that the test of relevance under ss 21(1) or 26(2) rested on it.

142 In his Amended Reply, Mr Poole placed reliance on s 26(1) of the ICA and asserted that he in fact believed (and that such belief would have been held by a reasonable person in the circumstances) that the answers given in the proposal form were true. As I understand it, Mr Poole did not dispute that the onus was on him to satisfy the elements of s 26(1) if it was established that the representations were false (for example, Plasteel Windows Australia Pty Ltd v CE Heath Underwriting Agencies Pty Ltd (1990) 19 NSWLR 400 at 407- 408 per Samuels JA).

"Fraud"

143 Section 28(2) of the ICA limits the circumstances in which an insurer can avoid an insurance contract to cases of fraudulent non-disclosure or misrepresentation. The section does not, however, define what constitutes fraud.

144 Further, it is common ground that by cl 6 of the DCM policy, Chubb has waived any rights it may have had under the ICA to avoid the DCM policy for fraudulent non-disclosure or misrepresentation.

145 Clause 6 of the DCM policy is in the following terms:

"In issuing this Coverage Section the Company has relied upon the statements, representations and information in the Proposal.

No statement, representation or information provided in the Proposal by an Insured Person or knowledge possessed by such Insured Person shall be imputed to any other Insured Person for the purpose of determining if coverage is available under this Coverage Section.

The Company shall not avoid this coverage section or exercise any rights against any Insured for any misrepresentation (fraudulent or otherwise) in the Proposal or for any non-disclosure (fraudulent or otherwise). However, in the event of misrepresentation or non-disclosure which would otherwise entitle the Company to avoid this coverage section or exercise rights against an Insured:

A. no Insured Person who, at the time of the contract evidenced by this coverage section was entered into, knew the true position with regard to the facts or matters misrepresented to the Company or knew any of the non-disclosed facts, and no Organisation to the extent that it may indemnify any such Insured Person, shall have cover under this coverage section for any Loss of that Insured Person on account of a Claim based upon, arising from or in consequence of the true position of any misrepresented or non-disclosed facts...".

146 Chubb submitted that, properly construed, cl 6, particularly by the words "no cover", operates as an exclusion of claims arising out of circumstances known to Mr Poole when he entered into the DCM policy if he fraudulently failed to disclose those circumstances to Chubb or fraudulently misrepresented the true position.

147 Chubb accepts that it bears the onus to prove that Mr Poole's claim falls within the terms of cl 6 and is thus excluded.

148 Thus, Chubb's entitlement to deny cover to Mr Poole under the DCM policy depends on it establishing that:

(a) it would have been entitled under s 28(2) of the ICA, by reason of fraudulent misrepresentation or fraudulent non-disclosure, to avoid the DCM policy;

(b) Mr Poole knew the true position with regard to the facts or matters misrepresented to Chubb or knew of any non-disclosed facts;

(c) Mr Poole's claim was based upon, arose from, or was in consequence of the true position of the misrepresented or non-disclosed facts.

149 There was no dispute between the parties as to what must be shown to prove fraud in this sense.

150 For the purposes of s 28(2) of the ICA, and thus for the purposes of the exclusion constituted by cl 6 of the DCM policy, a non-disclosure or misrepresentation will be fraudulent if it is made with an absence of actual and honest belief in its truth, or recklessly, not caring whether it is true or false (Derry v Peek (1889) 14 App Cas 337 at 374; Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 at 680 per Griffith CJ).

151 The insurer must show either a deliberate decision by the insured to mislead or conceal something from the insurer or recklessness amounting to indifference about whether this occurred (K Sutton, Insurance Law in Australia, (3rd ed, 1999) at [3.138]). It is thus not necessary to establish knowledge on the part of the insured of a substantial prospect that the statements made by the proposed insured were not true (Prepaid Services Pty Ltd v Atradius Credit Insurance NV [2013] NSWCA 252 per Meagher JA (with whom Macfarlan and Emmett JJA agreed) at [41]). It is sufficient if the insured was "consciously indifferent" to the truth of answers given in a proposal form (Atradius at [51] and [55]).

152 An explanation as to what is meant by "conscious indifference" was given by Meagher JA in Atradius at [46]: it means more than "mere, or even gross, carelessness" and requires the insurer, in the context of a representation in a proposal form, to establish that the insured "did not care before and at the time that he signed the proposal, whether the answers in it were correct or not" (emphasis added).

153 Fraudulent misrepresentation will be made out where it can be established that the representor was consciously indifferent or reckless as to the truth of the representation as "someone who is indifferent to whether a representation is true or false can have no honest belief as to its truth" (Atradius at [40] per Meagher JA).

Onus

154 Obviously, the onus is on Chubb to show that Mr Poole has acted fraudulently in the sense described above. Where fraud is alleged the proof of fraud:

"...should be clear and cogent such as to induce, on the balance of probabilities, an actual persuasion of the mind as to the existence of the fraud." Rejfek v McElory [1965] HCA 46; 112 CLR 517 at [521] per Barwick CJ and Kitto, Taylor, Menzies and Windeyer JJ.

155 The High Court also stated in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; 67 ALJR 170 at 171 (per Mason CJ and Brennan, Deane and Gaudron JJ):

"...authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary 'where so serious a matter as fraud is to be found'. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct." (citations omitted)

The facts in detail - events leading to the Submission

156 As I have mentioned, Chubb's case was largely documentary. During the course of Mr Leopold's cross-examination of Mr Poole, he was taken to many documents (the Court Book comprised well over 4,000 pages) from 2007 to 2010. Mr Poole often professed a lack of recollection of particular documents and events.

157 However, Mr Poole agreed that it would have been his practice to read carefully documents sent to him and to pay attention when attending meetings as a director of DCM. On a number of occasions, Mr Poole made very precise observations about documents sent to him for his consideration.

158 Whilst it is understandable that Mr Poole would not, now, have a detailed recollection of all of the matters to which he was taken in cross-examination, I am satisfied that, at the time, Mr Poole was doing his best to pay attention to the detail of what was being put before him. As appropriate, I shall comment further on this aspect of the matter in the context of particular documents and events.

Late 2006

159 As I have said, in late 2006, Mr Poole and Mr Ransley agreed to set up a business with the objective of consolidating a number of smaller companies servicing the mining sector. To that end, DCM (then known as ResCo Services Pty Ltd) and ResCo (then known as Rosa Holdings Pty Ltd) were incorporated in November 2006.

160 ResCo was to be the investment vehicle for private equity and DCM was to be the parent trading entity under which the businesses would be acquired.

161 In late 2006, Mr Ransley approached Mr Maitland with a view to Mr Maitland becoming involved in DCM. As I have mentioned, Mr Maitland had recently retired as National Secretary of the CFMEU and been appointed as Chairperson of the Coal Competence Board. Mr Poole said he understood Mr Maitland to have had "a long and distinguished career in industrial relations in the mining sector".

162 In late 2006 Mr Poole had this conversation with Mr Ransley:

Mr Ransley: "I have been asking around if anyone knows a potential chairman for [DCM] with experience in workers capital.

Mr Poole: Ok.

Mr Ransley: I think I have the right guy. He is John Maitland the ex-Union Boss. I will arrange a meeting with him so we can see."

163 In December 2006, Mr Poole and Mr Ransley met with Mr Maitland and invited him to become chairman of DCM.

164 As I have mentioned (see [18] above), at this time Mr Poole was the sole director of DCM. Mr Ransley and Mr Maitland became his co-directors on 15 February 2007.

165 On 14 January 2007, Mr Ransley telephoned Mr Poole to say that he had arranged a meeting the next morning "to talk about a training mine" and invited Mr Poole to attend.

166 In his oral evidence in chief Mr Poole was asked about that conversation and said:

"Yes, I recall that quite clearly. I arrived home from holidays on the evening of 14 January and Mr Ransley rang me to tell me that he'd had a meeting organised the next morning out at Rathmines in Lake Macquarie to talk about a training mine and he asked me if I would be interested in coming to that meeting, to which I responded 'yes'."

167 Mr Poole gave the following evidence in his reply affidavit:

"I did not know what a 'training mine' was and believe that around this time John Maitland and Craig Ransley explained to me the safety benefits that could be obtained by practical training in an actual mine as opposed to theoretical or simulated training. Put simply, it was aimed at saving lives and helping to address the projected skills shortage in the mining industry.

Given the passage of time, I have no recollection of the actual conversations but do recall the passion both men had for training and safety in mining and the benefits that training within an operating mine would have.

I understood from Craig Ransley that Mr Vincent Martin, a director of Eastern Mining & Construction Company Pty Ltd (a company [DCM] was looking to acquire), had been asked if he knew of an area that a training mine could be developed and he had contacted Dr Guy Palese, a geologist."

15 January 2007 Meeting

168 On 15 January 2007 Mr Poole, Mr Ransley and Mr Maitland attended a meeting with, amongst others, the geologist, Dr Guy Palese of whom Mr Ransley had spoken. Dr Palese was from Comet Coal and Coke Pty Ltd.

169 Also present were Mr Martin, and Mr James Chisholm from an organisation called "Left Brain Strategy". Mr Chisholm made a note during the meeting which I admitted under the "Diary Note Ruling" (see [89] above)

170 Mr Poole recalled that "it was quite a lengthy meeting" and "went for a couple of hours".

The Palese Information Memorandum

171 In January 2007, Dr Palese prepared a document called "Information Memorandum Doyles Creek Exploration Area". I shall call this document the "Palese Information Memorandum".

172 Mr Poole said that he did not recall seeing the Palese Information Memorandum. However, it seems probable that he was given a copy of it at the meeting on 15 January 2007. He discovered a copy of the document with his note "AP 2" on the front page and a number of his manuscript annotations on Dr Palese's "ELA Area 1" table to which I refer below. Mr Poole said he was not able to recall whether he made those annotations during the 15 January 2007 meeting but I find that it is probable that he did. Ultimately, Mr Poole did not resist the suggestion that Dr Palese's document was produced at the meeting as he said that at the meeting Dr Palese "tabled some documents which I assume were the Information Memorandum".

173 In an answer to an interrogatory verified by an affidavit sworn on 29 July 2014 (some three weeks before the hearing commenced), Mr Poole denied having received a copy of the Palese Information Memorandum prior to March 2008. Mr Leopold submitted that I should find that:

"...Mr Poole either knew he had received the Palese IM before March 2008 or that he had no recollection as to when he received the Palese IM in which case the honest answer was to say precisely that. In either case, the answer to the interrogatory was dishonest. At the very least, the unqualified denial demonstrated a reckless disregard for the truth which is a telling blow against his credit."

174 I do not accept that submission. Mr Poole said, and I accept, that the answer he gave to the interrogatory was true to the best of his recollection at the time he swore the answer. After that time, there was an order for further discovery. During that process (undertaken by his legal representatives) further documents were uncovered which, Mr Poole accepted, showed he had received a copy of the Palese Information Memorandum prior to March 2008.

175 I do not see this circumstance as reflecting adversely on Mr Poole's credit. I accept that he made the error in his answer to the interrogatory innocently and believing that his answer was true.

176 Mr Poole gave this evidence as to the information Dr Palese presented at the meeting:

"[Dr] Palese, as I recall, tabled some documents which I assume were the information memorandum. He discussed that he had looked at this particular block of land. I do have a recollection of either a 60 or an 80 million number floating around, tonnes I would suspect that was. He said it was an unloved block of land; the big boys - the Xstratas in particular of the world that I was able to confirm later - had looked at it and didn't like it because it had igneous intrusions and faults and things in it. He believed that it was - it had some merit and he was quite passionate about that. I do recall that. It was quite a lengthy meeting. It went for a couple of hours, but they're the things I do recall and I remember coming out of that and having the discussion with John [Maitland] and Craig [Ransley] and, based on that, thought this thing's probably got enough legs for someone to take a risk on trying to get this block of dirt and spending the money to drill it to find out whether or not it did have any tonnes. Because at the end of the day we were - all we were after was an exploration licence that gave us the right to drill some holes to find out if in fact there was viable coal deposit there."

177 In the "Executive Summary" at the beginning of the Palese Information Memorandum, Dr Palese said:

"The area is situated in the Upper Hunter Valley Coalfields, some 35 km from a major rail coal loading facility. The surface area involved is approximately 27 square kilometres...

The principal economic target of this proposal is the Whybrow Coal Seam and part of the Redbank Creek Seam, with total inferred in situ mineable resources estimated at 125 million raw tonnes."

178 Dr Palese said that one of the "advantages of this project area" was that it was:

"One of the very few areas still with vacant title, with sufficient coal resources to enable a medium to large size mining operation."

179 Dr Palese continued:

"The complexity of the local geology has discouraged larger coal producers from carrying out coal exploration...

Notwithstanding the above, we believe that structurally undisturbed blocks, between faults, may exist within the area of interest. These blocks may contain sufficient coal resources to enable the establishment of at least a medium size mining operation...

The Whybrow Coal Seam is the topmost coal of the Wittingham Coal Measures within the Jerrys Plains Group...It lies some 100m to 300m below the surface...The Redbank Creek Seam, occurs some 10 to 30m below the Whybrow Seam."

180 Dr Palese said that the coal resources for "Main Area" being the "Exploration Licence Application Area proposed" were summarised in the following table:

 

 

181 The total area of "ELA Area 1" was 27.3km². Dr Palese's table revealed that what he described as a "principal economic target" of his proposal (the Whybrow and Redbank Creek seams) contained "total coal resources" of 306.8 million tonnes ("MT") with "estimated total in situ mineable" coal of 125.3 MT.

182 Dr Palese continued that "should it be appropriate to apply for a smaller area", "Coal resources for the reduced Exploration Licence Application Area" were summarised in the following table:

 

183 The area of the "ELA Area 2" was 16.5km². The evidence did not make clear whether "ELA Area 2" was a part of "ELA Area 1" or some different area. Dr Palese opined that this smaller area had "total coal resources" of 183.5 MT and "total in situ mineable" coal of 69.9 MT.

184 So far as the evidence reveals, the Palese Information Memorandum was the only independent geological report available to DCM prior to the delivery of the Submission on 18 March 2008.

Direct allocation or nothing

185 As I have mentioned the directors of DCM had no interest in participating in a competitive tender for an exploration licence (see [26] above).

186 Thus Mr Poole said in cross-examination:

A. "I have only recollection that we always said we would try to get a direct allocation of that. And I understood from the meeting with [Dr] Palese and others on 15 January that that was an option available to us. And I remember when that was floated by whomever, I recall [Dr] Palese saying, 'well, good luck with that'...

It was certainly always my understanding here that we had available to us a direct allocation by the Minister...that was always from the 15th January the approach we were going to take on this.

Q. When you say a direct allocation was available, you mean presumably at the Minister's discretion?

A. As I understood it, yes your Honour.

Q. As opposed to, what, a tender process?

A. The main point in my mind I'm sure then and certainly my recollection is to avoid the tender process because there had been extraordinary amounts of money paid for to large open cut resources, I think one's called Caroona and Watermark in the not too distant past...we certainly didn't want to get into a bidding match with the Xstratas and the BHP and the Chinese of the world is my recollection, your Honour.

Q. That's the big boys?

A. The big boys as I mentioned yesterday, yes."

187 The reference to the "big boys" arose from evidence Mr Poole had given the previous day that:

"We made a conscious decision at Board level we will not continue with the project if we have to compete with the big boys."

188 Mr Poole agreed that, from his point of view, it was a "direct allocation or nothing" and that:

"The Board of Doyles Creek made a conscious decision if this thing was to go to tender we would apply our energies elsewhere".

189 Several months later, on 3 April 2007, Mr Ransley wrote:

"My thoughts are that if we are able to bypass the tendering process and have the Minister grant us the ELA we should go for it, however if this lease was to go to tender I believe we should drop it and move on to something more beneficial."

190 Although Mr Ransley's note was written several months after the 15 January 2007 meeting, I think it probable that what he wrote on 3 April 2007 reflected the views of Mr Poole, Mr Maitland and Mr Ransley as at 15 January 2007, and that it was this that led to discussion of the training mine "angle".

The training mine "angle"

191 So far as concerns the topic of a training mine, Mr Poole gave this evidence:

Q. "You can't recall the meeting of 15 January 2007...of a single mention of a training, or developing of training mine, or a training mine proposal, can you?

A. Yes, I can.

HIS HONOUR:

Q. What is your recollection of what was said on that day about a training mine?

A. I recall John giving his vision, John Maitland giving his vision of his training mine to make an angle, if I recall, to avoid the open tender. One thing I do remember quite clearly [Dr] Palese saying words to the effect:

'Well, good luck with that.'

I think he meant probably that's a pretty good idea. That's the one thing that stuck in my mind, [Dr] Palese saying 'good luck with that', your Honour.

MR LEOPOLD:

Q. Mr Maitland used the word 'angle', did he?

A. I have no recollection of that, no.

Q. Did you not use the word 'angle' in what you just said?

A. I don't recall, I may have.

Q. You recall now thinking back somebody did use the word 'angle' at that meeting?

A. I don't recall it being used, no. But I won't deny it, Mr Leopold. I don't know.

Q. What, in fact, Palese said 'good luck' to was trying to get around the open competitive tender process?

A. Correct.

Q. Mr Maitland didn't say anything at that meeting, not one word about a training mine, did he?

A. Well, if it wasn't Mr Maitland, it may have been Mr Ransley. It certainly was discussed, which led to [Dr] Palese's comment. And I remember 'good luck with that'.

Q. It, that is, the concept of a training mine came up a little later, that is a bit after 15 January 2007, didn't it?

A. No. Mr Ransley, when he asked if I wanted to attend the meeting, that topic was the training mine.

HIS HONOUR:

Q. That is before the meeting?

A. The night before, your Honour, before the meeting.

MR LEOPOLD:

Q. That did not happen either, the phone call from Mr Ransley, he did not say anything about the training mine, did he?

A. I believe he did. That's my recollection.

Q. When you say I believe you did, you don't have any real recollection at all of it being said then rather than a week later or two weeks later or two months later, do you?

A. I absolutely recall it was said on the night of the 14th when I got home. It was an event in my mind. The night I got home from South Australia, Mr Ransley rang me about the training mine meeting the next morning. I remember Mr Leopold, it was quite an event in my life at the time.

Q. It was quite an event in your life at the time that somebody mentioned the training mine, was it?

A. The first time I ever heard of it, yes."

192 Although, in response to Mr Leopold's questions, Mr Poole had said he could not recall Mr Maitland using the word "angle" his response to my questions, asked immediately earlier, was as I have set out and is consistent with a note made by Mr Chisholm at the meeting:

"Need to approach from totally different angle."

193 It appears to me probable, from this evidence, and Mr Poole's recollection of the circumstances in which Dr Palese said "good luck with that", that Mr Maitland did suggest, at this meeting, that a means by which the Department and the Minister might be persuaded to grant an Exploration Licence by direct allocation (rather than through the "normal" tender process) was by including a training mine in the proposal to put to the Department and the Minister. This was to be the "differentiating factor" (see [27] above) that DCM was to put to the Department and the Minister as the reason the Minister should give favourable consideration to DCM's application for direct allocation of an exploration licence.

194 The fact that an "angle" was in this context discussed at the first meeting of what was to become the DCM board suggests that those present, including Mr Poole, were aware from the outset that, in the usual course, a party in the position of DCM would not be able to obtain an exploration licence for coal unless it participated in a competitive tender and that a special case would have to be made out to persuade the Department and the Minister to follow a different course.

Mr Maitland's meeting with the Minister

195 The following day, 16 January 2007, Mr Maitland sent a note to Mr Ransley:

"In my meeting with Minister Ian McDonald [sic] on Thursday the 18th January I will make a presentation in support of [DCM] being granted an exploration licence over ELA 1 and/or ELA 2 [the areas identified in Dr Palese's Information Memorandum] as the case may be. Arguments in support will include:

(a) Lack of skilled workers for the industry

(b) [DCM] wants to develop a training mine...

(g) [DCM] would start training at unused mine until new mine is established, possible 2-3 years with fast track.

...

By the way, the current Minister for Mines and Energy in Queensland, Jeff Wilson, is a personal friend and a former employee of CFMEU in Queensland. I am organising a meeting with him to discuss China and competencies for the week commencing the 5th February."

196 As I have mentioned, Mr Maitland had recently been appointed Chairman of the Coal Competence Board, and the meeting with the Minister to which Mr Maitland referred in his note had been arranged, several days before the 15 January 2007 meeting, to discuss "the establishment and operation" of the Board. Thus, a departmental "Diary Brief", evidently prepared in advance of that meeting, stated under the heading "Purpose/Agenda":

"John Maitland has been appointed as the Chairperson of the Coal Competence Board...and will meet with the Minister to discuss the establishment and operation of the Board to be constituted under the Coal Mine Health and Safety Act 2002."

197 Mr Maitland misspelt Mr Macdonald's name in his note to Mr Ransley and mentioned his personal friendship with the Queensland Minister for Mines and Energy (but made no like comment concerning Mr Macdonald).

198 The evidence does show that Mr Maitland took advantage of his 18 January 2007 meeting with the Minister to discuss the possibility of DCM obtaining an exploration licence. However, the proximity of Mr Maitland's 18 January 2007 meeting with the Minister and the 15 January 2007 meeting seems to have been fortuitous.

199 On 22 January 2007, Mr Maitland sent to the Minister's Chief of Staff a "Briefing Note" that included the following statements:

"Background

There is a severe shortage of semi-skilled and skilled workers across Australian industry.

This shortage is particularly acute in the underground coal mining industry...

For some time a proposal to develop an underground training mine in the Newcastle/Hunter Valley coal mining region has been discussed. However, the discussions have not lead [sic] to any concrete proposal primarily because of the lack of a suitable site and lack of adequate long-term financial support.

Proposal

A specific initiative has now been developed with the support of a number of Newcastle business people. The initiative includes the establishment of a company, with adequate financial resources, to undertake the development of an underground training mine as part of its business objectives...

What is needed is a suitable site for the development of the mine. Several mines that have been closed have been considered however, each has its own problems and they are unlikely to provide a readily accessible source of coal that would enable the training mine to be self-funding.

It is therefore considered that the ideal situation would be to establish a mine in an area not previously selected for development.

Almost all good quality, known-brand reserve areas, which are considered to economically viable, are under title. However, the proposed project only needs a coal resource that would allow the development of a small to medium sized mining operation.

Proposed project area

The proposed project area is situated in the Upper Hunter Valley coalfields overlaying mostly sediments of the Wollombi coal measurements. The surface area involved is approximately 27 square kilometres...

The complexity of the local geology has discouraged larger coal produces from carrying out coal exploration...

These blocks may contain sufficient coal resources to enable the establishment of at least a small to medium sized operation, specially designed to accommodate the training initiative...

The preferred area is outlined in the document entitled Doyle's Creek Area (E.L.A. 1) with attached coordinates.

The advantages for the project being granted in this area are:

1. The area is with vacant title with sufficient coal resources to enable a small to medium sized mining operation.

2. Good quality known-brand coal resources, not difficult to market.

3. Close to infrastructure and services...".

200 Much of the language in Mr Maitland's "Briefing Note" is taken from the Palese Information Memorandum. However, there were some changes. Mr Maitland described the area as being "approximately 27 square kilometres" (the area of Dr Palese's "ELA Area 1"), but described the proposed development as a "small to medium" mining operation whereas Dr Palese had described the proposal to mine "ELA Area 1" as a "medium to large" operation. The descriptor "small to medium" was thereafter used by DCM consistently in its communications with the Department and the Minister.

201 The "Briefing Note" also described the proposal as being one to develop "an underground training mine", albeit one with a "readily accessible source of coal" that would enable it to be self-funding. The description of the project as involving a "training mine" loomed large in the manner in which the proposal was ultimately put to the Minister in the Submission.

202 At around this time, DCM retained Mr James Stevenson, a solicitor from Sparke Helmore's Newcastle office.

203 On 2 February 2007, Mr Stevenson sent an email to Mr Maitland, Mr Ransley and Mr Poole:

"The process under the Mining Act to apply for an Exploration Licence ("EL") is pretty straightforward.

...Any person can apply, but because most of the Hunter Valley is a 'designated mineral allocation area' under the Act, an application for an EL can only be made with the consent of the Minister. There is a formal process for seeking that consent...

I understand you are preparing a further briefing note to the Minister...

Craig [Ransley] and Andrew [Poole] - any comments/thoughts at this stage?"

204 A few days earlier, on 30 January 2007, Mr Alan Coutts of the Department wrote to Mr Maitland, referring to Mr Maitland's Briefing Note of 22 January 2007:

"In order that the Minister can consider your proposal further he has asked that I seek from you more details of the proposal, in particular, how the proposed mine would operate on a commercial basis and what, if any support would be required from Government."

205 Accordingly, on 6 February 2007, Mr Maitland sent Mr Coutts a further note which included:

"My original briefing note gave a general overview of the proposal to develop a mining project with specifically designed underground and surface training facilities as part of the business plan...

To enable an application to be made, a proprietary limited company has been established by local business people with sufficient resources to meet the conditions set out on the [Department's] website.

Should the exploration drilling identify structurally undisturbed blocks that contain sufficient coal resources to enable the establishment of a small to medium sized mine, the company has access to sufficient private equity capital to develop the mine.

The coal measures that underlay [sic] the area that are outlined in the document titled Doyles Creek exploration area (ELA 1) contain good quality known brands of soft and semi-soft coking coals...

We will be seeking the Minister's consent to make the application for the exploration licences and we would hope to get public support from the Government in establishing the training facilities that will be an integral part of the coal mine operations".

206 On 14 February 2007, Mr Stevenson circulated to Mr Maitland, Mr Ransley and Mr Poole a draft letter to the Minister and invited comments.

207 On 15 February 2007, Mr Poole sent an email to Mr Stevenson:

"Looks good - I assume we will still have to have the formal changes to [DCM's] Directors (etc) lodged shortly with ASIC (I assume the Dep't will do a search)."

208 Mr Poole was referring to the fact that although Mr Maitland and Mr Ransley were acting as if they were directors of DCM they had not, by 15 February 2007, been appointed directors. As I have mentioned, that appointment occurred that day.

209 Also, on 15 February 2007, Mr Maitland sent an email to Mr Stevenson and Mr Ransley suggesting some changes to the draft letter and stating:

"If we mention just the Whybrow and Redbank seams can we still access the Woodlands Hill Creek seam at some later stage?"

210 That comment bespeaks a knowledge by Mr Maitland of the potential availability of seams below the Whybrow and Redbank Creek seams.

15 February 2007 request for consent to apply for an exploration licence

211 On 15 February 2007, DCM sent a letter to the Minister (signed by Mr Maitland as "Chairman"). This was DCM's first request for Ministerial approval for consent to apply for allocation of an exploration licence. The letter stated:

"Application for Exploration Licence - Part 3 Mining Act 1992

I refer to communications between myself and Allan Cootes [sic: Coutts] of the Department on Tuesday the 6th February 2007 and the briefing note that I provided to your office dated Monday the 22nd of January 2007.

[DCM] now seeks your consent under section 13(4) Mining Act 1992 for [DCM] or a related entity to apply for an exploration licence over the area of land referred to in paragraph 3 below.

We provide the following information in support of our request for the Minister's consent.

1. [DCM] is a recently formed company whose business objectives include the development of a new underground training mine in the Hunter Valley. [DCM] believes the establishment of a training mine will assist in addressing the severe shortage of semi skilled and skilled workers in the underground coal mining industry in New South Wales.

2. This initiative has been developed with the support of a number of prominent business people. As chairman of [DCM] I am well known to the coal industry and bring considerable national and international experience...

3. [DCM] intends to establish a mine in an area not previously developed, which has sufficient coal reserves to enable a training mine to be self funding.

4. The area over which [DCM] seeks an exploration licence is located in the Upper Hunter Valley coal fields overlaying sediments of the Wollombi coal measures. The service area is approximately 27 square kilometres...[t]he area is shown outlined in the attached document titled 'Doyles Creek area (ELA 1)'...

5. Initial geological reports have demonstrated the existence of structurally undisturbed blocks between faults in the area which may contain sufficient coal resources to enable the establishment of at least a small to medium sized mining operation which could accommodate a training initiative...

8. It is anticipated the project would produce sufficient coal to sell to the market and this would assist in funding a specifically designed training facility which include classrooms and accommodation...

9. [DCM] and its founding shareholders and directors have substantial experience in the mining industry and are well aware of the contentious nature of any new mining projects...

10. If granted the exploration licence sought, [DCM] either itself or through a related entity, intends to progress drilling to establish the extent of the resource and complete a feasibility study. The outcome of that feasibility study will then determine the further stages of the project but it is hoped that subject to securing appropriate approvals a feasible project could lead to coal production and commencement of the operation of a training mine within 3 to 5 years."

212 The letter thus described the project as a "new underground training mine", albeit one with "sufficient coal reserves to enable [the] training mine to be self funding", and stated that the "coal resources" would enable the establishment of "at least a small to medium sized mining operation".

213 On 22 February 2007, a Departmental Officer, Mr Brad Mullard, prepared a "Ministerial Briefing" for the Minister which included:

"Mr John Maitland provided a briefing note to the Minister's office on 22 January 2007 outlining a proposal to establish a training mine in the Hunter Valley and proposing an area for the project...

The area has been estimated to contain 62 million tonnes of underground coal reserves. As such, it would be classified as a major stand alone area under the current Guidelines for Allocation of Future Coal Exploration Areas (March 2006) and subject to allocation by competitive tender or expression of interest with a financial contribution...There would be major policy difficulties, potential probity issues and environmental sensitivities involved in considering a proposed direct resource allocation...".

214 Mr Mullard's note reveals that the Department thought there to be 62 MT of coal at Doyles Creek and that under the relevant guidelines this would constitute a "major stand alone area" and be subject to competitive tender. Mr Mullard also stated that the Mine Safety Council had considered a "similar proposal" in late 1999 and early 2000 but that the concept was not pursued. Mr Mullard then said that:

"There would be major policy difficulties, potential probity issues and environmental sensitivities involved in considering a proposed direct resource allocation for this purpose. In addition, without the support of major industry players, it is unlikely that the present proposal would be successful."

215 Mr Mullard stated that there were three options; rejection of the current proposal, agreement to seeking "competitive expressions of interest" or referral of the proposal to the Mine Safety Advisory Council. Mr Mullard recommended the third option. There is, however, no evidence that this was ever done.

216 The matter was pursued further in a meeting which Mr Maitland had with Departmental officers on 8 March 2007, to which I refer below.

DCM board meeting 28 February 2007

217 At a board meeting of DCM on 28 February 2007, Mr Poole, Mr Maitland and Mr Ransley resolved to confirm Mr Maitland's appointment as Chairman and Mr Ransley's appointment as Managing Director and resolved that Mr Poole would undertake the role of Acting Chief Financial Officer.

218 So far as concerns the Doyles Creek project, the minutes recorded that:

"[Mr Maitland] updated the directors on progress with the Doyles Creek project (being the potential to establish an underground mine in the Doyles Creek area of the Upper Hunter Valley). The Chairman tabled a package of documentation relating to the Doyles Creek project consisting of an update of his meetings with the Department, an information memorandum relating to the exploration area [Dr Palese's Information Memorandum] and associated correspondence...[i]n summary:

- The letter sent by [DCM] to the Department requesting the Minister's consent to apply for an exploration licence for the Doyles Creek area has been placed before the Minister. However [Mr Maitland] has been advised by Tony Hewson (Senior Advisor to the Minister) that no consideration will be given to the application until after the State election on 24 March 2007.

- [Mr Maitland] has been told by Alan Cootes [sic: Coutts] (Senior Officer in the Department) that the EL area contains some environmentally sensitive areas. Alan Cootes [sic: Coutts] also suggested that the Minister may decide that the EL should go to tender.

- [Mr Maitland] has spoken to Coal Services about possible arrangements with them for the establishment of a proposed training mine within the EL...

- [Mr Maitland] reported he had been in contact with Tianda Group (a large Chinese pharmaceutical and energy company) and they should be considered as a possible participant in the Doyles Creek project at a later date."

219 Mr Maitland's reference to the possibility that the "Minister may decide that the EL should go to tender" evidently provoked further discussion as to the desirability, from DCM's point of view, of avoiding this result and promoting the idea of a training mine as a means of persuading the Minister to exercise his discretion to allocate directly an exploration licence to DCM. As I have explained, the DCM board (certainly Mr Poole and Mr Ransley) were not prepared to commit DCM to the project if there was to be a competitive tender (see [26] above).

220 Thus Mr Poole made a note at the meeting:

"DEP'T - might go to open tender

Training concept our best argument".

221 By this note Mr Poole was, in my opinion, recording or confirming the agreement between the directors that the "argument" that DCM should advance to the Minister in an effort to persuade him to not "go to open tender" but, rather, directly allocate an exploration licence to DCM, was to advocate the "training concept".

Mr Maitland's meeting with the Minister's staff of 8 March 2007

222 Mr Maitland met with members of the Minister's staff on 8 March 2007 and recorded what happened in a briefing note (dated 26 March 2007):

"Following my letter of the 15 February to the Minister for Mineral Resources, Ian McDonald [sic] seeking consent to make application for an exploration licence at Doyles Creek, I met with members of his staff on Thursday 8th March. They told me that the Department had made the following observations regarding our application and the proposal for the training mine

1. A similar proposal was considered by the former Mine Safety Council (now Mine Safety Advisory Council) in late 1999 and early 2000. Following a study by consultant Bob Gibbons into the feasibility of a training mine, the Mine Safety Council agreed that the training mine concept no longer be pursued. ...

2. The Doyles Creek area has previously been the subject of interest by a number of companies but no formal proposal has been received before now. The area contains substantial tonnes of underground coal reserves and it would be classified as a major stand alone area under the 'guidelines for allocation of future coal mining areas' and subject too [sic] allocation by competitive tender or expressions of interest with a financial contribution. It would seem that a number of interested parties would seek access to the reserves if the area were to be tendered.

3. The area is considered to have environmental and publicly [sic] sensitivities. This is due to its proximity to the Jerrys Plains Township, the alluvial areas of the Hunter River and the proximity to the Wollombi national park.

4. The department says it is reasonable to expect that any new mining development would raise significant environmental and community concerns. ...

The above advice provides an outline of the challenges faced in getting approval for the exploration licence.

We need to be able to show that circumstances have changed since 2000 and that the development of a training mine would be in the public interest and beneficial to the State of New South Wales. We would also need to show that ResCo has significant support to develop the concept.

...

A major issue is the suggestion that there may be an open tender for the area, which could result in unrealistic bids for the resource.

My suggestion is that we conclude the MOU's with HVTC, CSPL and the CFMEU and then meet with the new Minister as soon as possible."

223 Mr Maitland's note informed the DCM board of some of the matters recorded in Mr Mullard's Ministerial Briefing of 22 February 2007, particularly that the Department regarded the Doyles Creek site as a "major stand alone area" under the prevailing Departmental "Guidelines for Allocation of Future Coal Exploration Areas" and thus was "subject to allocation by competitive tender".

224 Mr Maitland's note also appears to set out a template for the DCM directors as to the task ahead of them; namely to show that "circumstances have changed since 2000", that "development of a training mine would be in the public interest" and that DCM had "significant support to develop the concept".

225 Mr Maitland's concluding remarks reflected DCM's apprehension that there may be an "open tender" for an exploration licence for the area which might result in "unrealistic bids" (against which DCM was not prepared to compete).

226 A State election was held on 24 March 2007. Mr Maitland's suggestion of a meeting with "the new Minister" would suggest that he did not assume that Mr Macdonald would be the relevant Minister after the election. In fact, the Labor Government was returned and Mr Macdonald retained his portfolio.

Board meeting 3 April 2007

227 A further meeting of the DCM directors took place on 3 April 2007.

228 The minutes of the 3 April 2007 meeting record that:

"[Mr Maitland] reported that the Department were [sic] now suggesting that a tender process could be run for the Doyles Creek resource. It was therefore imperative that [Mr Maitland] continue discussions with the Department following the recent letter sent by [DCM] to the Department requesting [the] Minister's consent to apply for an exploration licence.

[Mr Maitland] reported that he was talking to a number of interested parties with a view to entering into memorandums [sic] of understanding in relation to the establishment of a training mine at Doyles Creek as follows...Hunter Valley Training...Coal Services - ...CFMEU".

229 Chubb relied upon the statement in the minutes that Mr Maitland had reported that the Department was now "suggesting that a tender process could be run" for the Doyles Creek site as showing that DCM, and thus Mr Poole, knew that the Department was "not supportive" of direct allocation of an exploration licence.

230 That this was Mr Poole's state of mind is confirmed by the following passage from his cross-examination:

Q. "You understood...from what Mr Maitland had written on the 26 March 2007 note...that it was the Department's view at the time that the application should go to open tender, correct?

A. I understand at the time that was one of the options the Department had. Yes, I believe I understand, I remember discussing that.

Q. [In] discussing it, you understood Mr Coutts, the Deputy Director General of the Department, was less supportive of the application than the Minister was?

A. Yes, I believe, I believe I recall [a] discussion to that effect back then.

Q. You had no personal knowledge yourself of any change in attitude by the Department since hearing those things, that is since hearing from Mr Maitland that they thought it should go to open tender and since coming to the understanding that the Department was less supportive?

A. I don't recall any personal discussion with the Department on this, no."

231 Chubb also relied on the statement in the passage in the 3 April 2007 minutes that it was "imperative" that Mr Maitland continue discussions with the Department as demonstrating a perception by those present, including Mr Poole, that "Mr Maitland had a special attribute making him the one who should steer the political processes towards Ministerial consent for a direct allocation", the "special attribute" being his "personal connection with the Minister".

232 I do not read that implication into the minutes. It is true that Mr Maitland was the person on behalf of DCM having discussions with the Department. But DCM was making no secret of the fact that it was seeking the Minister's consent to a direct allocation of an exploration licence. In light of the information received by Mr Maitland from the Minister's staff on 8 March 2007 that, because the Doyles Creek site was a "major stand alone area" it would normally be subject to "allocation by competitive tender or expressions of interest", it is unsurprising that the directors of DCM thought that it was "imperative" that Mr Maitland continue to liaise with the Department. The absence of any contention by Chubb that any connection between Mr Maitland and the Minister caused the Minister to exercise a discretion he would not otherwise have exercised deprives this reference in the minutes (and others upon which Chubb placed similar emphasis) of the sinister overtones attributed to it by Chubb.

233 The board minutes also included Mr Ransley's report with the statement, referred to at [189] above, that "if this lease was to go to tender I believe we should drop it and move on to something more beneficial".

234 At the 3 April 2007 meeting it was resolved that Mr Maitland:

"...continued to progress MOUs with the above parties and other parties which he may consider appropriate to assist in progressing the grant of an exploration licence for Doyles Creek."

235 There is however scant evidence of any communication between Mr Maitland and the Department in the months following the board meeting of 3 April 2007.

236 There is in evidence a document which suggests that the Minister may have arranged a "lunch meeting" with Mr Maitland, Mr Ransley and Mr Poole on 26 July 2007. However there is no evidence that that meeting took place, let alone as to what might have occurred had the meeting taken place.

237 There is also a document which suggests that on 5 or 6 November 2007 Mr Maitland met with the Minister, a member of his staff and Mr Coutts from the Department, and a representative of the University of Newcastle. If that meeting took place, what occurred is not revealed by the evidence.

21 November 2007 meeting

238 Otherwise, so far as the evidence suggests, nothing of significance occurred after the directors' meeting of 3 April 2007 until 21 November 2007 when a meeting took place between Mr Poole, Mr Ransley, Mr Maitland, Mr Martin (who also attended the 15 January 2007 meeting: see [169] above), Mr Stevenson, Mr Lawrie Ireland, and Mr Michael Chester.

239 Mr Ireland was an experienced mine manager who, at around this time, had been appointed as DCM's Operations Manager. Mr Chester was an investment banker from Opes Prime (later merged into a company called Paradigm) who was retained by DCM and given primary responsibility for drafting the Submission.

240 On 9 November 2007, shortly before the 21 November 2007 meeting, Mr Ireland had sent Mr Ransley a table which, according to its covering email, contained "[a]pproximate reserve numbers based on my scribble plan". The table was headed "Potential Doyles Creek Reserves based on 250 metre Long walls" and showed a range of "total tonnes" of between approximately 150 MT and 174 MT.

241 Mr Stevenson made a note at the meeting which was admitted under the "Diary Note Ruling" (see [89] above).

242 Mr Poole's evidence was that he did not recall attending this meeting. Chubb submitted that Mr Poole's "professed non-recollection about everything said at that meeting, and his claim that Mr Stevenson's contemporaneous note did not refresh his memory of anything said at the meeting, was calculated and dishonest". I did not get the impression that Mr Poole was giving dishonest evidence about his recollection of this meeting. It may well be that he now has little or no recollection of it. But, for the reasons I have outlined earlier, I think it probable that at the time he paid attention to what was said.

243 Mr Stevenson's note records Mr Ransley saying something to the effect that the Department required a "mine plan to determine if we go to tender", that DCM needed to prepare a "bankable document to present to Dept" and that Mr Chester would "pull it together/structure finance". That suggests that the preparation of the Submission was discussed and that Mr Chester was to play a role in its preparation (as he in fact did - see below at [269] to [287]). Mr Stevenson's note includes "When to make the submission - asap - if goes in over Xmas may help" suggesting the timing of the Submission was discussed.

244 Mr Stevenson's note also suggests that Mr Ransley said something to the effect "don't want to spend $1m" and "don't want to have to go to tender". This reflected the view expressed by Mr Ransley in his 3 April 2007 report (see [189] and [233] above), with which Mr Poole agreed, that DCM should only pursue the Doyles Creek proposal if it could obtain an exploration licence by direct allocation.

245 Mr Stevenson's note also attributes a number of comments to Mr Ransley about a "pre-feasibility" study which I take to be Mr Ransley's reference to the proposed Submission.

246 Mr Stevenson's note reads:

"5. So we can in 'prefeasibility' study with 'spin' for training mine

6. So we sell as benefit to state but can stand alone commercially ie. prefeasibility is that it can stand alone".

247 That part of the note suggests that Mr Ransley said something to the effect that the proposed submission to the Minister could include, as an argument in favour direct allocation to DCM of an exploration licence (the "spin") that there be a training mine, and that this would be a "benefit to the state" and that the mine could "stand alone commercially" (that is, would not require any Government assistance).

248 The word "spin" appears to connote much the same thing as the word "angle" referred to in Mr Chisholm's 15 January 2007 diary note (see [192] above); namely the argument to be put to the Minister to persuade him to exercise his discretion and allocate an exploration licence directly to DCM.

249 Mr Stevenson's note also contains the following under the heading "JM":

"(7) Minister - want him to exercise discretion → not tender or EOI.

(8) Need to show commercially sustainable mine with training facility

(9) Tonnage - 60M?? [but we think 140M]

[therefore] model on 60M".

250 Mr Stevenson's points (7) and (8) suggest that Mr Maitland said something to the effect that DCM wanted the Minister to exercise his discretion to allocate directly an exploration licence to DCM and that for that purpose it was necessary to show a "commercially sustainable mine with a training facility".

251 There was considerable controversy as to what can be drawn to the third aspect of Mr Stevenson's note, namely the reference to a tonnage of "60M??" and the parenthetical note "but we think 140M".

252 As to the "60M??" figure, Dr Palese's estimate for the "in situ mineable resource" at "ELA Area 2" was 69.9 MT. Mr Mullard's Ministerial Briefing Note of 22 February 2007 suggests that the Department estimated there be 62 MT of "underground coal reserves" at the Doyles Creek site. There is, however, no evidence that the Department shared this figure with Mr Maitland (whether at the meeting of 8 March 2007 or on any other occasion).

253 As I discuss below, several weeks later Mr Ireland produced some modelling which suggested a "life of mine tonnage" for the Whybrow seam (that is, not including the Redbank Creek seam) of 67 MT which was the figure adopted in the early drafts of the Submission (see [271] below). It may be that this is what was discussed at this meeting. However, I do not feel I am able to draw that conclusion. There is no evidence of any communication by Mr Ireland of the results of his modelling to anyone at DCM prior his email of 20 December 2007 (see [271] below).

254 Chubb submitted that:

"The most likely explanation of DCM's focus on the figure of 60MT for its modelling in the Submission to the Department is this: DCM (including Mr Poole) knew that Dr Palese used to work for the Department. Dr Palese probably said to those present at the earlier 15 January 2007 meeting (including Mr Poole) that his view when he was with Department was that the Tenement contained a resource of 60MT to 80MT. That in effect set a floor on the tonnage of the resource that could realistically be stated to the Department in the Submission."

255 There is no evidence before me that would justify me coming to these conclusions. Chubb's submission is, in my opinion, no more than speculation and I do not accept it.

256 Chubb submitted that the words "but we think 140M" revealed that Mr Maitland said something to the effect that those at DCM who were considering the size of the coal resource at Doyles Creek believed that, rather than it being in the order of 60 MT, it was actually something in the order of 140 MT; and that "therefore" the modelling in the Submission should be on the lower figure of 60 MT.

257 This is certainly an available reading of Mr Stevenson's note.

258 There is no earlier reference in the evidence to a "tonnage" of 140 MT. It does not match any figure in the Palese Information Memorandum or in Mr Ireland's "scribble plan" of 9 November 2007. There is nothing in the evidence to explain why Mr Maitland or anyone else at the meeting might say that "we think" the "tonnage" is 140 MT.

259 However, Mr Poole was adamant that he had "never" heard Mr Maitland say anything to the effect that "we think that the size of the coal reserve as a tenement is about 140 million tonnes".

260 This aspect of the evidence throws into sharp relief the difficulties associated with adjudicating a case presented as Chubb has advanced this case. On the one hand, there is a diary note prepared by one person (Mr Stevenson) recording what other people (Mr Maitland, Mr Ransley, perhaps others, but not Mr Poole) said at a meeting. On the other hand, there is Mr Poole's sworn testimony as to what he heard. It is for Chubb to persuade me that, on the probabilities, Mr Maitland said something to the effect for which it contends, that Mr Poole heard what was said, and that I should disbelieve Mr Poole's denial, on his oath, that he heard any reference to 140 MT.

261 I appreciate that, as I said earlier (see [92] above) Chubb's submission is that I should not view individual pieces of evidence in isolation and that I should draw conclusions as to what, overall, Mr Poole knew from the totality of the evidence. Nonetheless, I must make a decision about Mr Poole's knowledge of each of the matters that Chubb contends he knew. That decision will take into account the particular circumstances of each occasion but also my assessment of Mr Poole's credit generally.

262 The conclusion to which I have come is that I should accept Mr Poole's evidence that he did not hear Mr Maitland speak of 140 MT. Mr Poole appeared to me to be very confident of this aspect of his evidence. On many other occasions, he simply said he could not recall what happened. He often accepted that documents revealed a certain state of affairs, but that he could not remember them. However, on this occasion he gave firm evidence of never having heard the words spoken. He was either giving deliberately false evidence, or telling the truth. I am not satisfied he was giving knowingly false evidence.

263 Some confirmation of that is revealed by the matter I next consider.

30 November 2007 "Shareholder Briefing" note

264 On 30 November 2007, Mr Stevenson sent a "Shareholder Briefing" note and a "Capital Raising note" to DCM shareholders. The note was signed by Mr Maitland and stated that its purpose was to update shareholders on the status of DCM's "opportunity" and to:

"...raise sufficient funds to further our attempts to secure an exploration licence over an area of land in the Hunter Valley not previously selected for development."

265 The note stated:

"You will recall that in January 2007 your Directors had brought to our [sic] attention an area of land in the Hunter Valley that we understand contains approximately 65 million tonnes of good quality soft and semi-soft coking coal reserves that will be ideal for a medium sized underground mining operation with specifically designed underground and serviced training facilities...

The NSW Government has responded favourably, whilst MOU's have been exchanged with various parties including the University of Newcastle, Hunter Valley Training Company and the Newcastle Rescue Helicopter Service.

The Directors have written to the Minister for Resources seeking the Minister's consent to make application for an exploration licence over the area in question. The area is considered by the Government to be of significant economic value, and hence will need to go to some form of public tendering process (we expect this process to be along the lines of the Government seeking an [Expression of Interest] to develop a training mine in the area."

266 Mr Coleman was not able to point to any evidence explaining on what basis Mr Maitland said that "we understand" that Doyles Creek "contains approximately 65 million tonnes of...coal reserves". The figure of 65 MT is close to the figure (67 MT) that, several weeks later, Mr Ireland estimated as lying within the Whybrow seam (see [271] below). There is, however, no evidence that this was known to Mr Maitland on 30 November 2007.

267 Mr Coleman submitted that if those at DCM truly believed the reserves were 140 MT (as Chubb contends Mr Stevenson's note of what Mr Maitland said on 21 November 2007 reveals) "wouldn't they be telling their shareholders that, in order to excite them to raise capital?". There is force in that submission. The "Shareholder Briefing" note was a private document, circulated to shareholders. There was no reason for Mr Maitland, as Chairman of DCM, to seek to mislead DCM's own shareholders as to the size of the resource central to the company's aspirations.

268 Mr Poole, or interests associated with his family, was then a significant shareholder in DCM. If he then understood that the coal resource at Doyles Creek was more, indeed considerably more, than 65 MT it seems likely he would have questioned or expressed dissent from the statement in the "Shareholder Briefing" note. There is no evidence, or suggestion, that he did.

Drafting the Submission

269 Work on drafting the Submission commenced in about December 2007 when DCM engaged Price Waterhouse Cooper ("PWC") to prepare a first draft. Representatives of PWC met with Messrs Maitland, Ransley, Stevenson and Ireland on 19 December 2007. Mr Poole was not present at this meeting. Mr Stevenson's notes suggest that the purpose of the meeting was to brief PWC in relation to the Doyle's Creek project.

270 Mr Stevenson's note of that meeting includes a reference to "68 MT in Whybrow" which was a figure close to that calculated a week earlier by Mr Ireland as the estimated "total mine tonnes" in the Whybrow seam.

271 On 12 December 2007, Mr Ireland had prepared what he described in an email of 20 December 2007 to Mr Ransley, Mr Stevenson and the PWC representatives as a "10 year mine schedule" which included a table showing a calculation of a "life of mine tonnage of 67 m Tonnes in the Whybrow seam". Mr Ireland's exact estimate for the Whybrow seam was 66,974,595t. It will be recalled that the Palese Information Memorandum stated that the "principal economic target" of his proposal was the Whybrow seam and also part of the underlying Redbank Creek seam. Mr Ireland's calculations made no reference to the Redbank Creek seam.

272 On 11 January 2008, Mr Ireland produced a further calculation of the likely "total mine tonnes" in the Whybrow seam of 90,875,689t.

273 The change between Mr Ireland's 12 December 2007 calculations and those of 11 January 2008 resulted from his increase of a figure (which he called a "Factor") which he multiplied by the "Length" of various components of the "Longwall" to achieve an estimated "Tonnage". In his first calculation Mr Ireland used a "Factor" of 701.4, and in the second a "Factor" of 980.

274 On 25 January 2008, Mr Ireland produced, and I infer circulated to those preparing the Submission, a document called "Comments on Training Mine Facility Submission". One of his comments was:

"Page 25 - change 69 million tones [sic] over a 25 year period to 91 million tones [sic] over a 35 year period (reserves recalculated as per attached sheets)

Page 26 - change 66,900 tonnes to - 91,000...over 35 years".

275 The "attached sheets" to which Mr Ireland referred were, evidently, the 11 January 2008 calculations referred to at [273] above.

276 There is no direct evidence as to whom Mr Ireland distributed his 25 January 2008 "comments". However, at that time, other documents show that each of Messrs Maitland, Ransley and Chester were actively involved in preparation of the Submission. It must have been obvious to them that Mr Ireland's figures, which were incorporated into the Submission, related only to the Whybrow seam. There is, however, no evidence that Mr Poole saw Mr Ireland's calculations. There is no evidence that Mr Poole saw a draft of the Submission prior to 6 February 2008.

277 Between January 2008 and early March 2008 approximately six drafts of the Submission were prepared, in the first instance by PWC and later by Mr Chester.

278 As the drafts evolved, the detail included progressively increased.

279 However a number of matters stand out.

280 First, from the outset, the drafts stated, as did the final Submission, that the "target coal seams" were both the Whybrow and Redbank Creek seams and that there were "in situ mineable resources" 125 million raw tonnes (language obviously taken from Dr Palese's Information Memorandum).

281 Second, the figures included in the drafts for "the resource" or the "expected coal reserves" approximated Mr Ireland's calculation for the Whybrow seam alone (originally 67 MT, and following Mr Ireland's further calculation of 11 January 2008, 91 MT), and the figures included in the drafts for "production forecast" were exactly, to the last tonne, Mr Ireland's calculations for the Whybrow seam alone: originally 66,974,595t and thereafter 90,875,689t. In the first two substantial drafts (the first prepared by PWC and the second revised by Mr Chester) the former figure appears. In the third and following drafts the latter figure appears.

282 Third, from the outset (including the first draft produced by PWC) there was included as "Appendix C" what was described in the body of each draft (and in the final Submission) as "a description of the in-situ coal resources for the Exploration Licence Application Area". Appendix C, in every draft, and in the final Submission, is in the following form (albeit, early on, without the overlaid word "Draft"):

 

283 Appendix C is a redacted copy of the table in Dr Palese's Information Memorandum for "ELA Area 2" (see [182] above), which Dr Palese included "should it be appropriate to apply for a smaller area". The heading "ELA Area 2" and Dr Palese's borders have been removed, although what appears to be someone's manuscript mark adjacent to the figure "83.4 Million t" and circle around the figure "60%" on the copy of the Palese Information Memorandum in evidence remain.

284 Appendix C refers to a "resources Area" of 16.5km², whereas early drafts of the Submission itself referred to the project covering 27km², and later drafts (and the final Submission) referred to the project covering 31km².

285 The figure in Appendix C of 69.9 MT is described as being the "Estimated Total In Situ Mineable Amount" for the 16.5km². That figure is close to Mr Ireland's original estimate for the Whybrow seam (approximately 67 MT). But that appears to be a coincidence.

286 Appendix C is directly contradictory of the other figures in the Submission (and its drafts) for coal tonnage. Although none of the authors of the Submission was called, it seems most unlikely that any of them intended this result.

287 It appears to me likely, as Mr Coleman submitted on behalf of Mr Poole, than inclusion of Appendix C in all of the drafts (including that prepared by PWC), and in the final Submission, was a mistake, originally made by PWC and, extraordinarily, not noticed by any of the persons reviewing the drafts. I will return to this below.

Mr Poole's review of the draft Submission

288 The first draft of the Submission that Mr Poole saw was one circulated by Mr Chester on 6 February 2008 by which time Mr Ireland's revised Whybrow seam estimate of 91 MT had been incorporated into the drafts for "estimated resource" and "expected coal reserves".

289 Mr Poole gave evidence that his usual practice on receiving important documents was to read them carefully. He agreed that he read "later drafts" of the Submission with care. There is no evidence of Mr Poole making any comment on the draft he saw on 6 February 2008.

290 On 20 February 2008, Mr Chester circulated a further draft to, amongst others, Mr Poole.

291 Mr Poole responded in the following terms:

"A couple of 'spots on the wall' that at least show I read it:

pp4 2nd last para reads '....Long Term Injury Frequency Rate', sh read '....Lost Time Injury......'

pp28 Typo in 'Infrastructure' para, reads '.....be located FOR the....' - delete word 'for'

pp41 & pp41 Tables are set off the page slightly

Also, I notice the Director profiles at pp32 do not reference that Craig, John and myself are Directors of ResCo - is this deliberate or just that they are taken from the ResCo web Director Profiles where obviously it doesn't need to be mentioned. I think it should be mentioned as it is very easy to establish.

Good job on the submission."

292 That email shows that Mr Poole read this draft of the Submission with care. He noticed matters requiring correction on five different pages of the draft. However, he gave evidence that, so far as concerned the "mining and geology" aspects of the drafts, he had no relevant expertise and relied on those who he understood did have such expertise. He did, however, acknowledge that there were aspects of the "mining and geology" matters that were not hard for him to understand.

293 Thus, he gave this evidence:

Q. "There were things in that submission that did not match your understanding, do you agree?

A. No, I don't. I believed every word in the submission at the time was the truth.

Q. And you satisfied yourself of that by reading it fairly thoroughly, correct?

A. I read it thoroughly. The parts that I understood and had some expertise in, I even commented on.

Q. There is no part of that submission which is beyond somebody like you, a CPA, MBA and university graduate to understand without any area of special expertise, no part of that submission fell into that category, did it?

A. Absolutely incorrect, Mr Leopold.

Q. Which parts of that submission, Mr Poole, when you read when reading the document thoroughly, did not understand adequately, do you say?

A. I would suggest almost 100% of the mining and geology aspects of it I had no expertise in and was completely reliant on experts.

Q. Well, there is nothing hard to understand about the phrase 'small to medium', is there?

A. In the normal context of the world [sic: "word" ] I would say 'no'. In mining I'd say I can't answer your question, because I don't know.

Q. I will come back to that. There is nothing hard to understand about the size of the resource which was expected to be produced in production tonnes, being 91 million tonnes over the life of the mine, was there?

A. I understood that from the submission, yes.

Q. There is nothing hard to understand about a claim that binding commitments had been entered into with each of the strategic alliance members, is there?

A. No, I agree with you.

Q. Nothing hard to understand about the suggestion that the training mine was the primary focus of the proposed exploration licence?

A. I agree."

Board meeting 29 January 2008

294 Mr Poole and Mr Ransley attended a board meeting of DCM on 29 January 2008. The minutes included a note:

"It was noted that [Mr Maitland] had undertaken considerable work for the Company in his role as Chairman and the directors considered [Mr Maitland's] continuing involvement was crucial to the success of the operations of the Company."

295 Chubb submitted that the reference to Mr Maitland's continuing involvement being "crucial" to the success of DCM's operations suggested that "there was something personal to Mr Maitland which required his involvement as opposed to that of anybody else".

296 In his opening submissions Mr Leopold said:

"There could not be any clearer indication that Mr Poole recognised that the relationship, the special, easy, friendly relationship which Mr Maitland had with the Minister and his staff, and to some extent the Department. Easy access he had to the Minister and his staff and the ability to get, have the sort of communications with the Minister and staff and personal meetings with them the ordinary individual can't have. That was not necessarily proper and would be certainly the sort of thing which is likely to give rise to an administrative investigation of some sort, special inquiry, and ICAC investigation or the like."

297 In my opinion, this is drawing too much from this minute. It does seem that the DCM directors believed that Mr Maitland was well placed to be its point of contact with the Department and the Minister. But, as I have said in relation to the 3 April 2007 minutes (see [232] above), absent any evidence (or, indeed, any suggestion by Chubb) that the Minister behaved improperly because of his relationship with Mr Maitland (or at all) I am not prepared to read into this minute the sinister connotation suggested by Mr Leopold.

298 The minutes also recorded:

"The chairperson tabled negotiated terms of a contract for the purchase of land at Jerry's Plain...[i]t was noted that the purchaser under the draft contract is shown as Craig Ransley, who is to hold the land as trustee for the Company under a trust deed."

Purchase of the land

299 In or around 28 February 2008, Mr Ransley contracted to purchase the relevant property as trustee for DCM (having executed a Declaration of Trust on 20 February 2008). Initially, Mr Leopold submitted that the fact that Mr Ransley, rather than DCM itself, purchased the land bespoke some kind of furtiveness on DCM's part. The matter was not pursued in final submissions.

"Without huge profits"

300 On 20 February 2008 Mr Ransley sent an email to Mr Poole, Mr Maitland and others, in response to Mr Poole's email of 20 February 2008 (at [291] above):

"Andrew's point is a good one as we are trying to also establish that we have the financial and street cred to run the mine.

...the financials need to establish that the Mine shows a solid financial return without huge profits, but that it's [sic] operations are self sustaining and that we won't be putting out our hands for government grants".

301 Mr Leopold submitted that Mr Ransley's reference to what the financial information to be included in the Submission "needed to establish" (a "solid return without huge profits") reflected DCM's intention to understate the likely profitability of the project and thus, somehow, increase DCM's prospects of persuading the Minister to exercise his discretion and allocate directly the Exploration Licence to DCM.

302 That is one reading of the document. Another is that Mr Ransley was saying no more than that even if DCM could not demonstrate that it would make "huge profits" from the venture it was at least in a position to show sufficient "financial return" to persuade the Minister that the venture would be self-sustaining and that DCM would not be seeking any financial assistance from the Government (a matter Mr Coutts raised with Mr Maitland a year earlier in his letter of 30 January 2007: see [204] above).

303 Mr Ransley was not called to give evidence. For the reasons I have set out (see [99] above) I am not prepared to draw a Jones v Dunkel inference against Mr Poole because he did not call Mr Ransley to give evidence about this. For his part, Mr Poole said that "the [Submission] was going to show what it was going to show, based on the forecasts".

10 March 2008 Westpac note

304 On 10 March 2008, Mr John Baxter, an officer at Westpac Banking Corporation, made a note in respect of a proposal by DCM to borrow from Westpac $477,000 to purchase Doyles Creek.

305 Mr Baxter's note read:

"The principals of [DCM] have made application to the NSW Government for a mining exploration licence in respect of specific land at Jerrys Plains with a view to establish what they are loosely calling a 'training mine'.

The said mining exploration licence has some 140 million tonne of terminal coal and the said land provides the best site for pit-top etc. The mine could commence in approx 2 years. The principals of [DCM] have however no long term intention of operating a coal mine and it is likely the land and exploration licence and training status would be sold to a large Operator for significance [sic] financial gain...

The 'training mine' status is not significant and does not entitle the operators to any additional Government support. The status as a Registered Training Organisation will be achieved by [DCM] entering into a joint venture with the Newcastle University and Hunter Valley Training Company and the training status may mean some large Operators (Rio, Xstrata, etc) may support the wages costs whilst they send workers there for training. Otherwise, the mine will operate as a commercially viable mine."

306 The first sentence of the second paragraph of Mr Baxter's note suggests that someone mentioned to him the figure of 140 MT of coal in connection with the Doyles Creek venture. There is no indication in Mr Baxter's note as to the source of this information.

307 Mr Leopold submitted that it was probable that Mr Poole was the source of this information and that he was repeating the figure referred to in Mr Stevenson's note of the 21 November 2007 meeting ("Tonnage - 60M?? [but we think 140M]" see [249] above).

308 Mr Poole accepted that he had had some dealings with Mr Baxter but consistently denied that he mentioned the 140 MT figure and said that "I have no recollection of the 140 million tonne number".

309 As neither Mr Ransley nor Mr Baxter was called to give evidence, I can only speculate as to the provenance of Mr Baxter's note concerning the 140 MT. I am not prepared to conclude it was Mr Poole.

18 March 2008 request for consent to apply for an exploration licence

310 On 18 March 2008 DCM, under the hand of Mr Maitland, wrote to the Department seeking the Minister's consent under s 13(4) of the Mining Act for DCM to apply for an exploration licence.

311 Mr Maitland enclosed with that letter the Submission which, he said, "contains full details of the proposed training mine facility".

312 Mr Maitland's letter also said:

"Doyles Creek is a recently formed company whose business objectives include the development of a new underground training mine in the Hunter Valley. Doyles Creek believes the establishment of a training mine will assist in addressing the severe shortage of semi skilled and skilled workers in the underground coal mining industry in New South Wales...

Initial geological reports have demonstrated the existence of structurally undisturbed blocks between faults in the area which may contain sufficient coal resources to enable the establishment of at least a small to medium sized mining operation which could accommodate a training initiative. The target coal seams would principally be the Whybrow and the Redbank Creek coal seams of the Whittingham coal measure...

It is anticipated the project would produce sufficient coal to sell to the market and this would assist in funding a specifically designed training facility which would include classrooms and accommodation.

To assist with the establishment of the mine Doyles Creek has entered into alliances with Hunter Valley Training Company Limited, University of Newcastle, Hunter Region SLSA Helicopter Rescue Service and ResCo. Full details of these alliances are set out in the attached Submission."

The Submission

313 Mr Leopold described the Submission as a "deeply misleading document", containing false and misleading statements and which showed that its authors had a "propensity for dishonesty".

314 As developed in final submissions, Chubb contended for, in substance, categories of allegedly false or misleading statements in the Submission.

315 These were:

(1) statements about a "training mine" and, in particular, the statement that the development of an underground training mine was the "primary focus" of DCM's objectives;

(2) statements to the effect that the training mine facility had been forecast as being "cost neutral";

(3) statements about the size of the coal resources at Doyles Creek;

(4) statements that the mining operation at Doyles Creek would be "small to medium" (rather than "medium to large" as stated in the Palese Information Memorandum) and what Chubb contended to be related statements concerning the "complexity of the local geology" at Doyle's Creek;

(5) statements to the effect that a "Strategic Alliance" had been established with the University of Newcastle and other entities; and

(6) statements concerning the rigour of the process undertaken to locate the Doyles Creek site.

316 The question of whether the relevant statements were false and misleading on occasions requires consideration of events which occurred after the Submission was sent to the Department on 18 March 2008.

317 Accordingly, I will proceed with a description of subsequent events, and return to the "Misleading Submission" case below.

318 It is, however, necessary to set out at this stage of the judgment what was said in the Submission concerning the size of the coal resource at Doyles Creek.

319 Seven statements were made.

320 First, in the Executive Summary the Submission stated:

"Doyles Creek hosts a resource estimated at 91 million tonnes, capable of supporting coal mining operations over a life of 35 years."

321 Second, on p 28 under the heading "Coal Mineral Resources" the Submission stated:

"Total inferred in situ mineable resource at Whybrow and Redbank seam of Whittingham coal measure estimated at 125 million raw tonnes...the target coal seams would be principally the Whybrow and Redbank Creek coal measures of the Whittingham coal measures, with total inferred in situ resources estimated at 125 million raw tonnes."

322 Third, also on p 28, the Submission stated that:

"A description of the in-situ coal resources for the Exploration Licence Application Area are summarised in Appendix C."

323 As I have described above (see [282] to [287]) Appendix C replicated Dr Palese's "ELA Area 2" table and showed an "Estimated Total In-Situ Mineable" figure of 69.9 MT.

324 Fourth, on p 29 of the Submission, under the heading "Proposed Mining Operation" the Submission stated:

"The project will involve the mining of an estimated 91 million tonnes over a 35 year period by means of underground mining."

325 Fifth, on p 30 of the Submission, under the heading "Royalties and Taxes" the Submission stated:

"The expected coal reserves at Doyles Creek are 91,000,000 tonnes of coal. Assuming a value of A$100 per tonne, at the current royalty rate of six per cent of the value of the coal recovered, the mine is expected to produce $546 million in royalties over its 35 year life."

326 Sixth, on p 38, under the heading "Project Development Timetable" the Submission stated:

"The project comprises the mining of 91,000,000 tonnes of recoverable reserves that can be beneficiated very easily to produce soft and semi-soft marketable products. The mining of the coal deposit will be undertaken over a project mine life of 35 years."

327 Seventh, and finally, on p 42 of the Submission under the heading "Production Forecasts" the Submission stated that production forecasts for the mine are as follows:

"Figure 10.1	Production forecasts
Longwall	Tonnes
West	60,197,588
South West	15,127,154
East	15,550,946
Total Tonnages	90,875,688

The tonnages are expected to rise from 46,883 tonnes in 2011, to 303,722 tonnes in 2012, to 356,720 in 2013, to 1,400,240 in 2014 and then to the full design capacity of 3,356,720 from 2015 until the end of the life of the mining operation."

328 There followed a table setting out the estimated production of coal for the years 2011 to 2015. The table was in the following form:

FYE	Units	2011	2012	2013	2014	2015
PRODUCTION
ROM coal	t 000's	47	304	357	1,400	3,357
CPP plant yield	%	75.0%	75.0%	75.0%	75.0%	75.0%
Washed coal	t 000's	35	228	268	1,050	2,518
SALES VOLUME
Semi-Soft Coking Export (FOB)	t 000's	35	228	268	1,050	2,518
Total sales	t 000's	35	228	268	1,050	2,518
NSW STATE ROYALTY
Royalties	$m	1.4	1.6	6.2	14.9	14.9
UNIT CASH FLOW
Total revenue	AUD/t	113.8	101.3	101.4	98.6	98.6
Total cash costs	AUD/t	36.3	108.8	94.2	67.8	61.2
Operating Cash Margin (Loss)	AUD/t	77.6	(7.5)	7.2	30.8	37.4

329 "ROM coal" is "run of mine coal"; raw coal as extracted from the ground. The "CPP" is the coal preparation plant, or "washery". Mr Poole explained that raw, or "run of mine" coal is "washed" or "beneficiated" (the term used on p 38 of the Submission under the heading "Project Development Timetable" referred to at [326] above) to produce "washed" or "saleable" coal.

330 Mr Poole explained the process in answer to questions from me as follows:

Q. "Just so I understand, why do you wash coal?

A. You get, I think your Honour heard it earlier referred to as crap, you get the crap out of the coal, your Honour, shale or that sort of thing. If the coal's not pure block, as I understand it, if there are bits of rubbish...you wash it. I'm not sure how it works. It separates the coal from the rubbish. The coal over there and the rubbish comes out...

Q. You can lose some bulk of the material taken?

A. Yes, I remember I have no idea how much. It can be a large percentage.

Q. By washing you mean cleaning?

A. It is called clean coal as against raw coal."

331 The table thus forecast that "washed" or "beneficiated" coal would represent 75 per cent of ROM or raw coal and would constitute the annual "sales volume" yielded by the mine.

Departmental consideration of the Submission

332 The only evidence of consideration of the Submission by the Department is a note dated 13 May 2008 by Ms Patricia Madden, the Manager Operations Mineral Resources at the Department.

333 Ms Madden recorded that:

"The proposal suggests a total on 91Mt of coal would be removed from the mine, or 3.3 Mtpa, of which only 150,000 tonnes would be from the 'training panel' portion of the mine...

The training component represents only a relatively a small part of the overall proposal in that the proposal is actually for a major mining operation with a small training component included. This raises the possibility that once the mine has been established that the training component may be downgraded or considered not feasible in the longer term."

334 Thus, although the Submission promoted the project as a "training mine", Ms Madden, and thus the Department, had no difficulty seeing that the amount of coal to be "removed from the mine" dwarfed that which would be extracted from the "training panel" and that the proposal was "actually for a major mining operation".

335 Thus, if, as Chubb contends, it was the objective of the authors of the Submission to hoodwink the Department into believing that the proposal was little more than a "training mine", Ms Madden, and thus the Department were not fooled for a moment.

336 Ms Madden also expressed the view that the "area in question is quite attractive" and that a number of companies had "expressed interest in the area" and that accordingly:

"The current policy would suggest that where there is strong interest expressed by a number of companies in a coal area a competitive allocation process should be considered."

337 Ms Madden listed three options for the Minister's consideration:

(1) direct allocation of an exploration licence to DCM with "strong conditions on the title regarding the requirement to establish and maintain a training mine component";

(2) allocation of the area "on a competitive basis with a requirement to establish a training program as a part of any allocation of the area";

(3) allocation of the area on a "competitive basis" with a cash component in the order of $5 million per annum either as an "upfront payment or as an annual fee over the life of the mine".

338 Ms Madden concluded:

"Given the level of industry interest in the area, that the Minister considers a competitive allocation process with a requirement to either establish a training facility or establish a broader industry training fund."

339 Ms Madden's memorandum was copied to the Director, Coal and Petroleum Development, the "PMESO Sydney", the "DDG, Mineral Resources" and the Director General. She prepared a draft letter for the signature of Mr Coutts as "Deputy Director General". There is no evidence of what, if any, consideration these Departmental officers gave to Ms Madden's recommendation, or to the Submission generally.

340 There is no other evidence before me concerning the consideration given by either the Department or the Minister to the Submission.

21 August 2008 - Ministerial consent granted

341 As I have mentioned (see [31] above) on 21 August 2008, the Minister invited DCM to apply for the Exploration Licence.

342 The Minister's letter read:

"Thank you for your letter and submission of 18 March 2008 concerning the proposed Doyles Creek Training mine located near Jerrys Plains.

I am advised that the University of Newcastle, the Australian Council of Trade Unions, the Westpac Rescue Helicopter Service along with several mining companies have given their support to your proposal. I'm also advised that the NSW Minerals Council is currently considering the proposal and I expect their advice shortly.

I am aware that a number of their members have already indicated their support, and that the Minerals Council of Australia has recently renewed their call for safer work environments in the mining industry and has forecast a significant shortfall in skilled mining industry workers over the next 12 years at a time when Australia is experiencing strong growth in the mining sector.

Therefore a proposal such as yours provides a real opportunity to address any potential skill shortages in this area while continuing to strengthen and boost our important regional economies.

In order to progress your proposal I am pleased to invite Doyle's [sic] Creek Mining Pty Ltd to apply for an exploration license [sic] over the area outlined in the submission subject to the provision of a supplementary submission outlining in detail the industry and wider community support for such a proposal.

Any consent that is finally given will be made under the Government's Guidelines for Allocation of Future Coal Exploration Areas (copy attached) and any future mining development will be subject to a financial contribution as per the table in the Guidelines.

The New South Wales Government recognises the importance of the mining industry to our state, both in generating employment and in being the single largest export income contributor."

343 The evidence does not reveal whether the Minister saw Ms Madden's recommendation of 13 May 2008 that the matter go to competitive tender. Nor does the evidence reveal whether the Minister received any other, and if so what, advice from the other Departmental officers to whom Ms Madden (evidently) sent copies of her note.

344 I simply do not know on what basis the Minister took the decision he did, or what matters he took into consideration. I do not know, for example, whether he ever saw the Submission. If the Minister saw the Submission, I cannot draw any conclusions as to whether he was influenced by any misleading or false statement in it (for example as to the size of the coal resource or the status of the "Strategic Alliance").

345 I certainly could not infer, or find on the evidence before me, that the Minister made his decision on the basis of any inappropriate influence from, or friendship or association with Mr Maitland. Indeed, as I have sought to emphasise, Chubb does not urge me to make any such finding and, in terms, disavows any suggestion that the Minister behaved inappropriately. Chubb does contend that DCM "deployed" Mr Maitland to use his "close personal and professional relationship" with the Minister to procure a favourable exercise of discretion (see [120] above). But it does not allege, and certainly has not adduced evidence to prove, that it was that "relationship" that, as a matter of fact, caused the Minister to act as he did.

346 It does seem that Mr Maitland received some kind of advance notice that the Minister proposed to exercise his discretion favourably to DCM.

347 Thus, on 15 August 2008, Mr Stevenson sent an email to Mr Maitland, Mr Ransley and Mr Poole:

"Following my discussion with [Mr Maitland] this morning, I assume the letter from the Minister will be a formal invitation to apply for an [exploration licence] under s 13 Mining Act, which is in response to our request to him last year...

What this means is that he will not go to tender but will seek exclusively from us our formal application for the [exploration licence] which will involve a detailed submission (but which we have effectively already done in the previous 'informal' submission).

So the indications are that we will be the only party invited to apply and assuming we can tick all the procedural boxes which are required then we should get the [exploration licence].

Lets [sic] hope this is what transpires."

348 Shortly thereafter, Mr Ransley sent an email to Mr Stevenson, Mr Maitland and Mr Poole:

"This is for our ears only at this point. And thanks."

349 A minute later Mr Ransley sent a further email to Mr Stevenson, Mr Maitland and Mr Poole:

"And please bury this letter as there should be no trace that this is linked to ResCo".

350 Mr Ransley's second email suggests that he had some concern about further publication of the contents of Mr Stevenson's email and its revelation of the likelihood that the Minister "will not go to tender". That concern may have been because Mr Ransley did not want it known that ResCo (or DCM) had received advance notice of the Minister's decision. But, again, the matter could not be explored before me because Mr Ransley did not give evidence.

351 I am not prepared to infer that there was any impropriety, known to Mr Ransley or Mr Poole that Mr Ransley was by this email seeking to conceal.

352 There is no evidence at all to suggest that Mr Poole knew, or had any reason to believe, there was any such impropriety.

353 Mr Poole said that he regarded this invitation as being the "critical step" in relation to the obtaining by DCM of the Exploration Licence.

354 Mr Poole said:

"...in 2008 as it was explained to me by our legal people...once you got the...invitation from the Department you then needed to tick a number of boxes and formally fill out your application and should that application meet whatever the criteria are, you would generally be offered the exploration licence."

The September 2008 Information Memorandum

355 The Submission mentioned that DCM would seek to raise $125 million from equity investors to help fund initial project developments.

356 Mr Maitland travelled to China in September 2008 to meet potential investors.

357 In preparation for Mr Maitland's China visit, Mr Chester prepared a draft "Information Memeorandum [sic]" which he sent to Mr Maitland by email on 8 September 2008. Mr Chester's draft was based closely on the Submission and repeated the various statements made in the Submission as to the size of the coal resource (the figures of 69.9 MT, 91 MT and 125 MT referred to at [320] to [327] above). The only significant changes made by Mr Chester were the years in the production development timetable and the coal price assumptions. The evidence does not reveal on what basis Mr Chester made these changes. There is no evidence to suggest the changes were not appropriate, and in the case of the coal price assumptions that they did not reflect likely coal prices. Those changes had the effect of increasing the long range profit forecast from $54.8 million in 2015 (in the Submission) to $76.5 million in 2016.

358 Mr Chester sent a copy of his memorandum by email to Mr Maitland on 8 September 2008 stating:

"I wanted to get a document to you quickly so that we could discuss changes and you could review the general changes [and] items for update...

I can update the reserve numbers etc but wanted to check to see if they had changed owing to potential access to another seam".

359 Mr Chester's reference to updating the "reserve numbers" and the "potential access to another seam" suggests that he understood that the statements made in the Submission concerning the "reserve numbers" might be changed for the purpose of the information memorandum to be shown to the potential investors.

360 There is no evidence that Mr Poole saw the Mr Chester's draft information memorandum or his email.

361 On 10 September 2008, Mr Maitland circulated a further version of Mr Chester's document (now called "Doyles Creek Coal Project") which Mr Poole did see, and review. I will call this document "the September IM".

362 Mr Maitland sent the September IM to Mr Chester, with a copy to Mr Poole on 10 September 2008 and said:

"I have edited the document quite heavily. Including changing the reserves and proposed recovery total."

363 Mr Maitland certainly did edit Mr Chester's document "quite heavily".

364 Mr Maitland did not change Mr Chester's increased coal price assumption and thus adopted Mr Chester's increased estimate of profit ($76.5 million in 2016). Nor did Mr Maitland change Mr Chester's estimate as to the amount of coal to be extracted in the first full year of operation or Mr Chester's production forecasts.

365 However, Mr Maitland made substantial changes to the figures for coal "reserves" and "proposed recovery".

366 He increased the production forecasts by changing the table described in the Submission as "Figure 10.1" (which I set out above at [327]) by adding exactly 30 MT to the "West" longwall, exactly 10 MT to the "South West" longwall and exactly 10 MT to the "East" longwall. The effect was to add exactly 50 MT to the production forecast.

367 The new table for "Production Forecasts" thus read:

"Figure 12.1	Production forecasts
Longwall	Tonnes
West	90,197,588
South West	25,127,154
East	25,550,946
Total Tonnages	140,875,688

The tonnages are expected to rise from 46,883 tonnes in 2012, to 303,722 tonnes in 2012, to 356,720 in 2014, to 1,400,240 in 2015 and then to the full design capacity of 3,356,720 from 2016 until the end of the life of the mining operation."

368 Although Mr Maitland increased the figure for "Total Tonnages" he did not change the figures, below the table, as to expected annual tonnages (other than to put each annual forecast back one year). Of course, on Mr Maitland's revised "production forecasts" the "end of the life of the mining operation" would be extended.

369 Mr Maitland also made corresponding changes to the estimated mineable tonnage from 91 MT (in the Submission) to 140 MT. He repeated, word for word, four of the five references to 91 MT in the Submission but substituted 140 MT for 91 MT.

370 Mr Maitland also increased the figure for the "total inferred in situ mineable resource" from 125 MT (in the Submission) to 200 MT. Again, he adopted the language used in the Submission concerning in situ mineable resource and simply substituted 200 MT for 125 MT.

371 Mr Coleman submitted that "there is no evidence as to why or on what basis Mr Maitland decided to change the reserves [from 125 MT to 200 MT] and proposed recovery total [from 91 MT to 140 MT]".

372 There are two earlier references in the evidence to the figure "140". First, there is the "but we think 140M" note in Mr Stevenson's record of the 21 November 2007 meeting, referred to at [249] above. Second, there is the statement in Mr Baxter's note of 10 March 2008 that "the said mining exploration licence has some 140 million tonne of terminal coal" (see [305] above). I have made findings above as to Mr Poole's knowledge of those matters (see [262] and [309] above).

373 It is hard to see what connection might exist between whatever was said on 21 November 2007 and whatever was said to Mr Baxter about the coal resource being 140 MT and the adoption by Mr Maitland of that figure in the September IM. Mr Maitland seems simply to have added arbitrary round numbers (30 MT and 10 MT) to the corresponding figures in the Submission (see [366] above). Because Mr Maitland did not give evidence before me, the matter could not be explored.

374 Mr Maitland sent a copy of the September IM to Mr Poole later on 10 September 2008.

375 When first asked about the September IM, Mr Poole said he thought it was "a mere teaser rather than an investment document". Mr Poole said that what he meant by a "teaser" was "the initial thing you'd throw out to see if there's any interest" being a document "scant on details" that "tells a nice story that may or may not get some interest". A cursory reading of the September IM shows that it could not be so described. It is a very detailed document. When I drew this to Mr Poole's attention, he accepted that the September IM was not a "teaser". He then suggested that the "scant" document he had in mind was the information memorandum he and Mr Maitland took to China in January 2009. However, examination of that document (which I discuss below) shows that it was as detailed as the September IM.

376 Nonetheless, in final submissions, it was submitted on behalf of Mr Poole that I should regard the September IM as a "mere teaser in the sense that it was intended only to excite interest from prospective investors". I do not accept this submission. The September IM, though not purporting to be a prospectus, was a detailed and considered document. It was doubtless intended to "excite interest" but, as Mr Poole must have realised, was a serious and formal document that Mr Maitland intended to place before prospective investors as a truthful representation of the Doyles Creek project.

377 Several hours later, Mr Poole sent Mr Maitland an email drawing attention to what he described as a "small point" being the statement on a map forming part of the document which showed that the land had been purchased by ResCo rather than by DCM.

378 Mr Poole said he could not recall receiving the September IM but agreed that the fact that he picked up the "small point" suggested that he read the document with some care. Mr Poole agreed:

Q. "In order to pick up such fine print on page 15 you accept you read the document fairly closely?

A. I don't recall but it would certainly seem that way."

379 As Mr Leopold pointed out to Mr Poole, one of the references to 140 MT (written as "140,000,000 tonnes") was on the page immediately preceding the map on which Mr Poole noticed the "small point".

380 Mr Poole said that "I don't ever recall seeing the 140 million tonne number" and gave this evidence:

Q. "When you read through this document on 10 September 2008 you saw a reference to a production forecast of about 140 million tonnes, correct?

A. I don't recall it but it's certainly in the document.

Q. And I suggest you saw it and it conformed with your belief at that time as to the approximate production tonnage at the proposed mine?

A. I don't recall that."

381 However, later in his cross-examination, Mr Poole, accepted that he "may well have seen the 140 million tonne figure".

382 In my opinion, the probability is that Mr Poole did see the 140 MT figure in the September IM and I so find. Mr Poole's 10 September 2008 email picking up the "small point" demonstrates that he read the September IM with care. One reference to the 140 MT was on the page immediately preceding that the subject of the "small point". He could not have failed to see the figure, and, in the end he did not deny doing so.

383 I also think it likely, and find, that Mr Poole noticed the reference made by Mr Maitland to the "in situ minable resource" of 200 MT. Mr Maitland mentioned the 200 MT figure several weeks later in an email to a Mr Arch Tudehope of 25 September 2008 (see [414] below) which was copied to Mr Poole. Mr Poole, however, denied believing, as at September 2008, that 200 MT, rather than 125 MT, "was the appropriate figure for insertion" in the September IM.

384 There is no suggestion in the evidence of Mr Poole then expressing any surprise or making any enquiry about these figures. Whether that was because he did not appreciate their significance is a matter I consider further below.

385 Mr Coleman submitted that if I were to conclude that Mr Poole did notice "the reference to 140 million tonnes in Mr Maitland's document" (and, I assume, the reference to 200 MT) I should also infer:

"...that Mr Poole, who would have been mindful of the fact that all the figures regarding the resource were estimates only, regarded the increased reserves and recovery figures as having been included by Mr Maitland as a statement only of potential reserves which may be proved, after drilling."

386 In that regard, Mr Coleman referred to the reference in Mr Maitland's email to Mr Tudehope to the fact that "insufficient drilling has been done to verify the in situ reserves" (see [414] below).

387 But Mr Poole did not say that this is how he regarded Mr Maitland's figures. What he did say was that "I have no idea why he changed the forecast".

388 Mr Poole did not dispute knowing of the 91 MT referred to in the Submission. He agreed that, in September 2008, he had firmly in his mind that the "financials" in the Submission "were based on the 91 million tonnes". As I set out above, Mr Poole said that he understood the 91 MT was for "saleable" coal (that is "washed" or "beneficiated coal" rather than "mineable" or "producible" coal: see [329ff] above).

389 Mr Poole accepted that, so far as he knew, DCM had received no new information about the extent of the coal reserves at Doyles Creek between the date of the Submission and his receipt of the September IM.

390 Nonetheless, in his evidence Mr Poole repeatedly said, including when cross-examined about the September IM, that he believed "every word" in the Submission was true.

NBN Nine News story

391 In or around September 2008, DCM engaged Mr Michael Dries as a public relations or media consultant.

392 On or about 16 September 2008, Mr Dries was approached by a representative from NBN Nine at Newcastle. On that day he sent an email to Mr Poole, Mr Maitland and Mr Ransley headed "Doyles Creek Mining NBN story" as follows:

"I have just fielded some follow up questions from Jane Goldsmith from NBN in relation to the story they will be running.

The only question of any substance was how we answer the claims made on the 'Save Jerry's [sic] Plains website' that the training mine is being used as a diversion to assist with the obtaining of the licence and then will be dumped as a concept once the licence is granted."

393 Of course, the training mine could not be "dumped as a concept" as it became a term of the grant of the Exploration Licence that was granted "solely to allow determination of resource capacity to support a training mine" (see [426] below).

394 Mr Poole described that question as being "rubbish".

395 Mr Dries continued:

"Of course I said that that was not the case. I indicated that the training mine would be inextricably linked to the mine and that, whilst it is for the State Government and not us to determine the conditions of any licence, we would expect the conditions to reflect the need for the establishment and operation of the training mine."

396 Mr Poole responded to Mr Dries email saying that he thought Mr Dries' responses were "appropriate".

397 Mr Dries concluded that he understood from his discussion with the NBN Nine representative that the story would be a "positive one".

398 The next day, 17 September 2008, Mr Dries sent a further email to Mr Maitland, Mr Ransley and Mr Poole:

"[T]he NBN news story went to air last night and they represented the story as though there was real opposition to the mine and training facility on environmental grounds.

I have been speaking with [Mr Ransley] this morning in relation to preparing a strategic response."

399 The NBN Nine news story itself was not in evidence before me. Mr Dries' email of 17 September 2008 suggests it focused on environmental issues, rather than on the training mine.

400 Mr Poole disputed that this showed there was a "high chance of public controversy". He said he did not expect any more controversy than "any other project in the Hunter Valley", and that he did not believe this gave "rise to a real chance of public controversy". He said did not give the matter any thought "whatsoever".

Mr Maitland's return from China

401 Mr Maitland was in China for some time between 10 and 17 September 2008. Mr Maitland met the President of the "Shougang Group".

402 On 17 September 2008, after his return, Mr Maitland sent an email to Mr Poole:

"Andrew as I mentioned by phone I felt like a very small fish in a very large ocean. Shougang Group [is] a massive state owned company...they are interested in Doyles and want to know how we see them being involved had 2 and ½ hours with Mr Li the president. Their [sic] are also very interested in the training side...".

Mr Lewis's review of the Submission

403 Mr Lewis was appointed a director of DCM on 29 June 2009 and became Chief Operating Officer of ResCo Services in around August or September 2008.

404 Prior to joining DCM, Mr Lewis had had some 30 years' experience in the coal industry and had been General Manager of XStrata Coal.

405 On 25 September 2008, Mr Lewis circulated an email to Messrs Poole, Ransley, Stevenson, Maitland and Ireland stating:

"I have gone through the original submission document several times now and see no reason for any modifications.

Once we add the covering letter, application and letters of support, I think all will be fine"

406 As I set out below, four days later the Submission was attached, unchanged, to the formal application for the Exploration Licence "for information". I do not read Mr Lewis's statement that he saw "no reason for any modifications" to mean anything more than that, in his view, it remained an accurate statement of the position as at 18 March 2008. Mr Lewis was not called as a witness, so that matter could not be explored. There is no evidence that Mr Lewis knew the provenance of the coal resource figures in the Submission.

407 In his affidavit, Mr Poole set out that email and then said:

"In the circumstances, my assessment was the Submission remained in proper order to be put to the Minister".

408 On this subject Mr Poole gave the following further evidence in response to questions from me:

Q. "Mr Poole, did you appreciate that what was being attached to this 29 September application was, amongst other things, a copy of the March submission?

A. Yes your Honour.

Q. And you were satisfied I think you told me when the March submission went in, March -

A. Yes.

Q. ...that it contained nothing that was misleading or deceptive?

A. Yes, your Honour, correct.

Q. I assume you didn't have to spend very long looking again at that document in September, because you had already formed a view that it was fine to go?

A. Yes, your Honour. That was what I was meaning to say earlier that, once Mr Lewis reviewed it and sent that email to us, I was fully satisfied and I don't recall looking at the March submission again."

409 In final submissions, Mr Leopold described Mr Poole's evidence that he relied on Mr Lewis's review of the Submission as "dishonest". Mr Leopold's criticism of Mr Poole was evidently based on the suggestion that Mr Lewis had not been employed by DCM for sufficient time to come to any proper conclusion as to the Submission's suitability for delivery to the Department. I do not accept that submission. Mr Lewis had considerable experience in the coal industry and I see no reason to doubt Mr Poole's evidence, given in cross-examination that "Mr Lewis brought himself up to speed fairly quickly".

Mr Ransley's email of 25 September 2008 - "promises made in the past" & "whole new level of public scrutiny"

410 Also on 25 September 2008, Mr Ransley sent an email to Mr Poole, Mr Maitland and others which included:

"One other note, we are the owners of this project there is NO need to keep circulating everything for the partners to approve they are recipients of the trust not the owners or board members of Doyles and this is the relationship that needs to be managed into the future. Once these issues are fixed it's all good from my end.

...

This project is about to reach a whole new level of public scrutiny, there has been promises made in the past that we will not be fulfilling, this cannot continue into the future. I noticed that in our meeting the other day the rescue helicopter asked when we would confirm in writing (MOU) what they were getting, this will NOT be done until after we have completed the feasibility study. They all will be recipients, what they in fact receive at the end of the day will be decided by the board of Doyles [sic] and be based solely on commercial reality."

411 Chubb relies on Mr Ransley's reference to the project being "about to reach a whole new level of public scrutiny" as being relevant to its contentions as to Mr Poole's awareness of the "EL Grant Controversy". Chubb also relies on Mr Ransley's reference to "promises made in the past that we will not be fulfilling" and to "rescue helicopter" (the Hunter Region SLSA Helicopter Rescue Service) not getting confirmation in writing of "what they were getting" as showing that aspects of the Submission which referred to the "Strategic Alliance" were false or misleading. I will return to these matters below.

412 Mr Poole said he could not recall the email but accepted that, in the normal course, he would have read it.

Mr Maitland's email to Mr Tudehope of 25 September 2008

413 Also on 25 September 2008 Mr Maitland sent the email to Mr Tudehope to which I have referred (see [383] and [386] above). Mr Poole received a copy. Mr Poole described Mr Tudehope as "an old coal miner" who was living in China and who, by January 2009, was acting as an intermediary between DCM and prospective Chinese investors.

414 Mr Maitland's email read:

"I am very pleased about the interest in our project...

We are currently in the process of completing our application to the New South Wales Minister for Resources for the Exploration Licence over the area that we have identified in the Hunter Valley.

We expected [sic] to be granted the licence sometime in early December...Given that our coals are of the soft and semi soft coking variety we believe that our project has an EV [enterprise value] / resource level of approximately US$1.75 per tonne.

With our resource estimated [at] 200 million tonnes this puts a value of some US$350 on the project once we are granted the Exploration Licence. On these figures 20% equity would be worth approximately US$70 million.

It is recognised that insufficient drilling has been done to verify the insitu reserves so we envision a process where 20% equity can be secured with an upfront payment of US$17.5 and the remaining payment of plus or minus US$52.5 million made when the programme of exploration drilling has determined the total resource."

415 Mr Poole said he could not recall receiving this email but did not dispute reading and understanding it at the time. The reference to a "resource estimated at 200 million tonnes" and to "insufficient drilling" to which I have earlier referred appears in the third and fourth paragraphs I have set out.

416 Mr Maitland's reference to a resource of 200 MT was obviously a reference to the figure he had put into the September IM as the "total inferred in situ resources" at Doyles Creek. The corresponding figure in the Submission was 125 MT. Mr Poole must have noticed this reference and I find that he did.

DCM 29 September 2008 application for the Exploration Licence

417 On 29 September 2008, DCM lodged with the Mining Registrar (Coal) at the Department an application under Pt 3 of the Mining Act for an exploration licence ("the Application").

418 The Application stated, under the "Objectives":

"The submission by Doyles Creek Mining seeks approval to be granted an Exploration Licence at Jerrys Plains in order to construct a Training Mine Facility on site, concurrent with the development of a substantial underground coal mine to provide practical and theoretical mining and OH&S experience and expertise. The operating coal mine is projected to generate sufficient financial returns to support the training mine operation on a long term self-sustaining basis.

...By granting the exploration licence Doyles Creek Mining intends to progress an exploration drilling program to define the extent of the coal resources and complete a bankable feasibility study. Following this program and subject to securing appropriate approvals, a feasible project could lead to the operation of a training mine within 3 to 5 years.

Currently very scant data exists over the subject area...

Notwithstanding the above, it is believed that structurally undisturbed blocks between faults may exist in the area of interest. These blocks may contain sufficient coal resources to enable the establishment of a small to medium sized mining operation."

419 Under the heading "Exploration Methods" the Application continued:

"A well qualified and experienced geologist would be commissioned to lead the drilling program described above. With sparse current drill information over the Proposed Area a two Stage drilling program is planned to cover the application area targeting the Whybrow Seam and the underlying Redbank Creek Seam."

420 Chubb relied upon this statement as "damning" and "unanswerable" evidence that DCM at all times endeavoured to target both the Whybrow and Redbank Creek seams. However, as I have said earlier (see [321] above) the Submission did state that both the Whybrow and Redbank Creek seams were "targeted".

421 There was also attached to the Application a large number of "letters of support" from politicians, mining companies, trade unions and other interested parties in an effort to show "industry and wider community support for" the proposal. The Minister's letter of 21 August 2008 (see [342] above) had called for a "supplementary submission" outlining industry and community support for the project. Evidently, the "letters of support" were intended to be in lieu of such a submission.

422 The covering letter for the Application was signed by Mr Maitland as Chairman of DCM and copied to the Minister.

423 It enclosed a copy of the Submission stating:

"For information, copy of submission dated 18 March 2008 previously provided to the Minister to assist him in consenting to invite Doyles Creek Mining to apply for an exploration licence".

424 I do not see this statement, and the attachment of the Submission to the Application, as being anything more than a reaffirmation by DCM that the Submission remained an accurate statement of the position as at its date, 18 March 2008. So far as the evidence reveals, there was no need to attach the Submission to the 29 September 2008 Application. By now, DCM had achieved its object of obtaining the Minister's consent to an application for a direct allocation of the Exploration Licence and avoiding a competitive tender process. As Mr Poole said, obtaining the Ministerial consent of 21 August 2008 was the "critical step" (see [353] above). In substance, all that had remained was for DCM to show "industry and wider community support" (the language in the Minister's letter) which it sought to do with the "letters of support".

The Minister's 5 December 2008 offer of an exploration licence

425 On 5 December 2008, the Minister wrote to Mr Maitland at DCM:

"I refer to my previous letter dated 21 August 2008, concerning the proposed Doyles Creek Training Mine.

I am pleased to advise that I can now offer an Exploration Licence in satisfaction of your application. The proposed licence document, including special conditions relating to the training mine, are attached...

The grant of an exploration licence does not necessarily mean a mining lease will subsequently be granted...

This consent has been made under the Government's Guidelines for Allocation of Future Coal Exploration Areas."

426 One of the "special conditions" to the grant was:

"This licence is not transferable and is granted solely to allow determination of resource capacity to support a training mine. Should the licence holder not meet all commitments outlined in these conditions with respect to a training program and subsequent development of a training mine, the licence will be cancelled."

427 Another was the payment of $1.106 million "for the refund of public expenditure" by the Department, and an annual fee of $250,000 for the duration of the licence.

428 The Exploration Licence itself was executed by the Minister, and Mr Maitland and Mr Ransley for DCM, on 15 December 2008.

429 According to press statements made in the following July (see [499] and [500] below), the Minister announced the grant of the Exploration Licence on 24 December 2008. Chubb did not seek to make anything of that alleged fact, no doubt because the press statements were not admitted as evidence of the matters asserted in them.

23 December 2008 board meeting

430 On 23 December 2008, Mr Poole attended a board meeting at DCM with Mr Maitland, Mr Ransley and Mr Greg Barns (who was by then a director of DCM dealing with public relations).

431 Under a heading "Potential Investors" the minutes stated that Mr Maitland confirmed that discussions were continuing with "Chinese companies for equity stake" in DCM. The directors "discussed the matter and agreed" that DCM "needs a commitment from Chinese by end of January 2009".

The "Info Memo"

432 On 24 December 2008, Mr Ransley sent an email to Mr Chester:

"Thanks for the call re the word version of the Info Memo. I have spoken to Pooley and we are in total agreement, we need to maintain the integrity of the information. The IM is already in peoples [sic] possession, the document is not to be released in word version. We need to do the info up from here on as an addendum to the IM, in other words, thanks for your interest following on from what you have already received here is copy of the granted ELA and further geological results etc, showing a further two seams that have been identified. The integrity of our information is paramount and is to be treated as such by all parties, the easiest way to cockup the whole process is to have differing info as all of us that have actually been through this process understand. Thanks for your offer to do whatever is needed for China, I'm sure Pooley will be in touch."

433 The "Info Memo" and "IM" to which Mr Ransley referred was, evidently, the September IM that Mr Maitland took to China; hence Mr Ransley's reference to the IM already being in "peoples [sic] possession". Mr Ransley's reference to the need to "do the info up from here on" appears to be a reference to the need to update the September IM in light of the grant of the Exploration Licence.

434 The reference to "Pooley" is obviously a reference to Mr Poole, who was scheduled to travel to China with Mr Maitland the following month, January 2009, to speak further to potential Chinese investors.

435 Mr Ransley's reference to the need to "maintain the integrity of the information" and to "Pooley's" agreement with that proposition suggests that Mr Poole and Mr Ransley had discussed the contents of the September IM and were agreed on the need for it accurately to state the position.

Revelation that access had been granted to all seams

436 Also on 24 December 2008, and shortly after Mr Ransley sent Mr Chester the email referred to above, Mr Lewis sent an email to Mr Ransley stating:

"...I have reviewed the available data with Brian McCowan [who by then was General Manager, Technical at ResCo services] and based on 2 holes only plus regional geology we are aware of from United and the surrounding area, the following is provided

Our original tonnage estimate was based on 2 target seams and we were conservative on the overall tonnage as we only wanted to indicate we had sufficient resource to justify the training mine.

Since the granting of the [Exploration Licence], it appears we have not been provided [with] a stratified lease and therefore all available seems [sic] down to 900m can be considered. Mining in NSW is down to around 550m only so this update is based on using that as a floor for the project...

From the borehole data available and extrapolation from United and Wambo collieries there would appear to be at least 5 economic seams present in the Doyles Creek area with an estimate of 550 Mt of in situ coal resource."

437 Mr Ransley forwarded Mr Lewis's email to Messrs Poole, Maitland, Chester and Barns with a note:

"As requested the info you need for China is attached, when you read you will understand why I can't wipe the smile off my face, merry bloody christmas [sic]".

438 Mr Poole responded:

"I wasn't going to partake in a Chrissy drink but now I will.

Very good news, thanks."

439 The spontaneous tone of these emails suggests that Mr Ransley and Mr Poole were surprised, and delighted, to learn that as the Exploration Licence was not "stratified", DCM was able to access seams to a depth of 900m, including seams beyond the Whybrow and Redbank Creek seams (including the Woodland Hill, Glen Munro and Blakefield seams) and that this suggested in situ coal resources of some 500 MT. This was considerably more than mentioned in the Dr Palese's Information Memorandum and the Submission (125 MT) or even Mr Maitland's September IM (200 MT).

440 Mr Chisholm's note of the 15 January 2007 meeting suggests that the Woodland Hill, Glen Munro and Blakefield seams were mentioned that day, and Mr Maitland's 15 February 2007 email (see [209] above) shows that he was aware of the potential availability of (at least) the Woodland Hill Creek seam. Nonetheless, the language used in the Christmas Eve emails suggests that the full implications of the underlying seams were not appreciated by anyone at DCM until then.

441 That appears to be confirmed by an email that Mr Maitland sent the following day, 25 December 2008, to Mr Edwin Chan, a representative of potential Chinese investors. Mr Maitland forwarded to Mr Chan a copy of Mr Lewis's 24 December 2008 note and said:

"This is a report I have received from our geo people following the allocation of the Exploration Licence. It appears that the resource is much bigger than originally thought. We had only applied for two seams in the area however we have been granted access to all seams within the 28 sq klms. This is very good news and makes the project much more attractive although more drilling must be done to finally prove the resource...

I can confirm that we are ready to go to Beijing in mid January to negotiate sale of equity in project and are willing to discuss more than 30% if parties are interested."

442 Mr Maitland's note to Mr Chan suggests that he was genuinely surprised, and delighted, by the revelation in Mr Lewis's email.

443 Returning to Mr Lewis's 24 December 2008 email, Chubb attached great significance to the passage in the second paragraph where Mr Lewis spoke of "our original tonnage" (evidently a reference to DCM's statement in the Submission as to the size of the coal resource) which Mr Lewis described as "conservative" because "we only wanted to indicate we had sufficient resources to justify the training mine".

444 I read this part of Mr Lewis's email to convey that he understood that, prior to delivery of the Submission, DCM had considered what "tonnage" to include in the Submission and had opted for a "conservative" figure "sufficient" to "justify the training mine". The "conservative" figure was, obviously, the 91 MT referred to five times in the Submission which, as I have described, was based on Mr Ireland's estimates concerning the Whybrow seam. The reason DCM wished to "justify" a training mine was to persuade the Minister to exercise his discretion directly to allocate an exploration licence to DCM. This was the "angle" or "differentiating factor" to which I have referred above (see [27] and [192] - [193] above).

445 Mr Lewis was not working at DCM at the time the Submission was delivered to the Department on 18 March 2008 but, as I have mentioned, reviewed the Submission in late September prior to its redelivery to the Mining Registrar on 29 September 2008.

446 In Mr Poole's response to Mr Lewis's email he did not suggest any disagreement with what Mr Lewis said. Indeed, he said that, as a result of what was said in the email he might "partake in a Chrissy drink" (although that was probably a response to Mr Lewis's statement concerning the estimate of 500 MT in situ coal resource).

447 In cross-examination, Mr Poole said he recalled receiving Mr Lewis's email. He gave the following evidence about Mr Lewis's reference to "conservative" tonnage:

Q. "When you read that sentence, at the time that squared with your own belief as to what the submission lodged with the Government in March 2008 had done, correct?

A. Yes. We only put the two target seams in the submission, yes, as I recall.

Q. Not only that, the two target seams and the conservatism on the overall tonnage, because of a desire only to indicate you had sufficient resource to justify the training mine; that squared with your own belief as to the contents of the March 2008 submission?

A. Yes, we didn't - no one knew what the tonnages were, so there was no - there was just no reason to put in any more than was required.

...

Q. ...so far as you are concerned, you had a belief that it was appropriate only to indicate sufficient resource to justify the training mine, rather than what your true belief may have been as to the resource?

A. It was my understanding that every word in it was true. The experts put it in front of me and I relied on them.

...

Q. Mr Poole, you didn't have any substantial disagreement with the sentiment in the sentence commencing with the words "Our original tonnage", correct?

A. I didn't know how they calculated the tonnage, so how could I disagree with it, is that an answer?

Q. You knew that the figures for tonnage estimates in the submission of both March 2008 and September 2008 had been minimised from what you believed to be a more reliable estimate?

A. No, I didn't.

...

Q. You believed, Mr Poole that if the figure of 140 million tonnes had been included in that submission in March 2008, that would have substantially diminished the chances of getting a directed [sic] allocation?

A. The thought never crossed my mind.

Q. Likewise, you believed that if that figure had gone in the submission in September 2008, it would have substantially diminished the chances of getting the application granted?

A. The thought never crossed my mind."

448 I understood from this evidence that Mr Poole agreed that he understood that the coal tonnage figure in the Submission was, as Mr Lewis described it ("conservative"). The way Mr Poole put it was that "there was just no reason to put in [the Submission] any more [coal tonnage] than was required".

449 Mr Poole, however, denied that the "conservative" figure of 91 MT was different from his "true belief" about the size of the resource, or that he knew that the tonnage had been "minimised" for the purpose of the Submission, or that he believed that if the Submission had referred to 140 MT (the corresponding figure in the September IM) rather than 91 MT this would have "substantially diminished" DCM's prospects of persuading the Minister to grant a direct allocation of the exploration licence.`

450 Mr Poole said that he "didn't know how they calculated the tonnage" and "the experts put it in front of me and I relied on them".

January 2009 visit to China

451 Mr Poole, Mr Maitland and Mr Chester travelled to China between 14 and 19 January 2009 "with a view to furthering discussions for a possible equity input into Doyles Creek Mining from selected Chinese Corps" (to use the words from Mr Poole's 21 January 2009 "China Trip Report").

452 For that purpose, a further information memorandum was prepared called "Doyles Creek Coal Project Investment Opportunity" (the "January 2009 Information Memorandum").

453 Mr Poole was involved in the composition of that information memorandum and, on 5 January 2009 wrote to Mr Maitland and Mr Ransley and others (under the heading "China visit"):

"We will offer the Chinese up to 49% ownership of Doyles...; 50% of this amount payable up front, the balance at end drilling based on drilling tonnes...

Valuation is US$1/tonne

Tonnes for valuation (based on 550m in situ), initially 300m tonnes, ie valuation equals US$300m. (AP suggestion: go no lower than $250m)."

454 Evidently Mr Poole's reference to "550m in situ" was based on the information revealed in Mr Lewis's email of 24 December 2008.

455 The document also stated that "Production Forecasts" (which, in this document, were stated only to be in respect of the Whybrow seam) were as follows:

Figure 13.1	Production forecasts
Longwall	Tonnes
West	90,197,588
South West	25,127,154
Total Tonnages	115,324,742

456 That table replicated the figures for the West and South West longwalls from the table in Mr Maitland's September IM (see [367] above) which were exactly 30,000 and 10,000 higher than the corresponding figures in the Submission. For some reason, the table did not include any figure for the East longwall.

457 The January 2009 Information Memorandum stated that Doyles Creek had 550 MT "coal reserves" (also described as its "in-situ coal resource").

458 The document made a number of references to the proposed "training facilities" including:

"The training centre will have the capacity to provide well-trained qualified labour to the wider industry. The Hunter Valley Training Company will be responsible for occupational training programs for electrical and mechanical trains that run from the mine. These programs will be set up to meet the requirements and standards of the industry, and will be run as a separate commercially sustainable organisation domiciled at the Doyles Creek mine." (at p 8)

459 It appears that the China trip was not successful.

460 Messrs Poole, Maitland and Chester met with, amongst others, a Mr Lee (or Li) from an organisation called Capital Steel. In a report that Mr Poole circulated on his return he said:

"No commercial discussions were undertaken and Mr Lee said he needed more technical info and that he would make available his geologists at a later meet".

461 Messrs Poole, Maitland and Chester also met with Mr Chan who Mr Poole described as "our primary Chinese contact/agent".

462 Mr Poole reported:

"[Mr Chan] also indicates at this stage that a mine of 140 mt and 3 mt/pa was never going to fly however our 550 mt reserve at (say) 6 mt/pa may be attractive to Chinese".

463 The figure "140 mt" in Mr Poole's note appears to be the 140 MT figure referred to in the September IM that Mr Maitland took to China several months earlier. The figure "550 mt" is obviously a reference to the corresponding figure in the January 2009 Information Memorandum.

464 Mr Poole's report continued:

"AP expressed privately to JM my level of disappointment in what has transpired, no preparation, meetings not organised, EC [Mr Chen] not showing up etc".

465 In a note made after a second meeting with representatives of Capital Steel, Mr Poole reported:

"At this meeting we progressed the technical meeting as best we could, however it became obvious that we lack a thorough Geologists Report that pulls together all available info on our seams and their surrounds. AP promised this info by the end of the week...".

466 On 27 February 2009, Mr Poole reported to the DCM board that the "visit to China and subsequent activities involving potential Chinese investors were disappointing".

467 So far as the evidence reveals, that is where the attempt to obtain Chinese investment rested.

Possible "back-door listing"

468 At the 27 February 2009 DCM board meeting, Mr Ransley reported that he was "reviewing the possibility of a back-door listing" for DCM.

469 That led to the engagement on 3 April 2009 of Trident Capital to "undertake a reverse listing" aimed at forming a "vertically integrated coal mining company" incorporating DCM, ResCo and another entity, Springsure Mining Pty Ltd (which had interests in Queensland).

470 In due course, the transaction that in fact occurred was, relevantly, the acquisition by NuCoal of the shares in DCM which I discuss briefly below.

Further reports from Dr Palese

471 Between January and April 2009, Dr Palese produced further reports which comprised a more detailed analysis of the likely resources at the Whybrow and Redbank Creek seams and also addressed some of the underlying seams.

472 Unlike Dr Palese's 2007 Information Memorandum, the estimates given by Dr Palese in these documents complied with the standards laid down by the Joint Ore Reserves Committee (the "JORC") of the Australasian Institute of Mining and Metallurgy, the Australia Institute of Geoscientists and the Minerals Council of Australia (the "JORC Code").

473 The JORC Code sets out minimum standards, recommendations and guidelines for public reporting in Australasia of exploration results, mineral resources and ore reserves.

474 Ultimately, in April 2009, Dr Palese opined that there was a JORC Code compliant inferred coal resource at Doyles Creek of 247.1 MT comprised of 82.9 MT in the Whybrow seam, 114.7 MT in the Redbank Creek seam and 49.5 MT in the Whynot seam.

January 2009 - public controversy developing?

475 In the meantime, on 19 January 2009, Mr Barns sent an email to Mr Poole, Mr Ransley and Mr Maitland headed "update on community/political issues".

476 Mr Barns' note stated that the Minister had announced the grant of the Exploration Licence to DCM on 23 or 24 December 2008 and continued:

"It was picked [up] by the Newcastle Herald, the Singleton Argus, and the Hunter Valley News. I did a news grab for Newcastle Radio Station KOFM. The Singleton Argus quoted an opponent of the project Don Barry, but otherwise the stories were positive...

I spoke with the Minister's Chief of Staff last Friday who indicated that...the Minister is concerned to ensure that everything relating to this application is strictly in accordance with the relevant Acts and regulations, as it has been to date. I indicated that we too obviously want to ensure that everything we do is in accordance with relevant laws and protocols.

He also said that the Minister's office had been receiving letters and messages from individuals who think that the only reason the EL was granted was as a favor [sic] to John Maitland."

477 There are a number of matters arising from Mr Barns' note, all of which would be been apparent to Mr Poole. First, although one local newspaper had quoted an "opponent" of the Doyles Creek project, "most stories were positive". Second, Mr Barns quoted the Minister's Chief of Staff as saying that the Minister's position was that everything concerning the Exploration Licence had been, and was to be dealt with "strictly in accordance with the relevant Acts and regulations". Third, the Minister's office was receiving communications from persons "who think that the only reason the EL was granted was as a favor [sic] to John Maitland".

478 In relation to the third matter, Mr Poole gave this evidence in response to questions from me:

Q. "You can see what is being said is the Minister is getting complaints from people who read [sic] that this EL was granted because of a favour done to Mr Maitland?

A. Yes, your Honour, I can see that.

Q. You knew that?

A. Yes.

Q. Did you have a view about whether that had happened yourself?

A. Just absolute rubbish. They virtually didn't know each other, as I understand it.

Q. The point is you understood that some people were expressing --

A. Yes, your Honour.

Q. -- a contrary opinion to the Minister?

A Yes, your Honour.

Q. And that caused you some concern I suppose, did it?

A. Not at all. It - it was just no more than any other coal mine application or development in the Hunter Valley. No, it didn't concern me at all, your Honour."

479 I will return to this evidence when considering Chubb's contentions concerning what is describes as the "EL Grant Controversy". However, I make a number of comments at this stage.

480 First, I have mentioned earlier Mr Poole's statement that he understood Mr Maitland and the Minister "virtually didn't know each other" (see [126] above). It was in response to my questions, set out above, that Mr Poole gave that evidence. I do think Mr Poole was understating matters somewhat. As I have said, he knew Mr Maitland and the Minister occasionally dined together during the course of DCM's efforts to obtain the Exploration Licence and that Mr Maitland "knew his way around" the political network.

481 Second, I found Mr Poole's comment that "it was no more than any other coal mine application for development in the Hunter Valley" curious. Mr Poole seemed to be saying that he saw the concerns reportedly expressed to the Minister as being "usual" concerns arising from a Hunter Valley coal mining application. If the concerns being expressed to the Minister's office were about environmental issues (such as coal dust or noise, or destruction of natural amenity) I could see why Mr Poole might have this state of mind. However, the concerns being reportedly ventilated on this occasion were that the Minister may have behaved inappropriately, perhaps corruptly, in granting a "favour" to Mr Maitland. I find it hard to accept that Mr Poole thought such concerns were "no more than any other coal mining application".

482 However, as I have emphasised above (see for example [122]), there is no evidence before me that the Minister did behave inappropriately, let alone corruptly, in exercising his discretion to grant the Exploration Licence to DCM. There is no evidence, or suggestion, that the Minister did do Mr Maitland a "favour". Chubb has, in terms, disavowed making any such allegation.

483 It must follow that there is no basis to conclude that Mr Poole entertained any suspicions to the contrary.

Falling out between Mr Ransley and Mr Maitland?

484 On 22 January 2009, Mr Ransley sent an email to Mr Maitland, Mr Poole and Mr Barnes making a number of complaints about Mr Maitland including that he and Mr Chan (referred to above at [441] and [461]) were "setting up a mining consultancy in Australia" and Mr Maitland had offered Mr Chester "a position in the new entity".

485 That led Mr Ransley to state:

"Mate, politely I have had enough of ResCo and others being canned when we are the ONLY reason you are where you are, we are footing the bills and all we asked in return was that you do your job which was to steer the process politically, it wasn't your idea, you didn't find the coal and you didn't do all the work...

John you have done no more than what you were paid to do. You simply did your part and I was the one who vouched for you I am completely gutted, if this is the way we are going to run our business give me a number and I am out!! Please as I am completely livid could you leave me alone until I return from leave."

486 Chubb relies upon Mr Ransley's statement that Mr Maitland's job was to "steer the process politically" as evidence of what it contends to be Mr Maitland's relationship with the Minister. However, in the absence of any evidence or suggestion that some impropriety (or worse) was involved in Mr Maitland's dealings with the Minister, I am not prepared to draw from this comment anything more than that he thought that Mr Maitland's background in the industry meant he was well suited to give advice about the best way to approach the Department and the Minister; in effect to be a lobbyist. There is no evidence before me that Mr Maitland did any more than this.

Mr Maitland removed as director of DCM

487 At a DCM board meeting on 10 July 2009, Mr Ransley proposed that Mr Maitland be removed as a director of DCM. The minutes recorded that Mr Maitland "confirmed his agreement to resign as Director of the Company and will provide a written resignation shortly".

488 Mr Poole gave the following evidence as to why Mr Maitland ceased to be Chairman of DCM:

Q. "In any event the decision recorded in those minutes was taken to remove Mr Maitland as a director of the company, correct?

A. Yes.

Q. Now that from your point of view was done to keep him out of the public eye?

A. I don't even recall thinking that was my point of view at the time, no.

...

Q. There's no doubt at all that that decision was taken at that time to try and get him out of the public eye because of the perception of developing concerns out within the public?

A. That's not correct.

Q. What do you say was the reason, so far as you understood it, as to why he was removed as a director?

A. The training mine project had been moved on to a new level. It was now all about financing and the exploration aspects of it. Mr Maitland had done a great job over the two years in driving the application and the process. It was time for Mr Maitland to go where he wanted to be which was the safety and training aspects of it which at the time I understood would fit within the gambit of what we were calling the Centre of Excellence."

489 I am not persuaded that the evidence permits the conclusion that Mr Maitland's removal as chairman and director of DCM was, as Mr Leopold put to Mr Poole, to "get him out of the public eye because of the perception of developing concerns out within the public".

490 The only evidence before me of "concerns out within the public" as at 10 July 2009 is Mr Dries' note of 16 September 2008 referred to at [392] above concerning the NBN Nine News story and Mr Barns' report of 19 January 2009 referred to at [476] above concerning the press coverage of and communications received by the Minister's office about the grant of the Exploration Licence.

491 As to the NBN Nine News story, that evidently related to environmental concerns expressed eight months earlier by some members of the public about the Doyles Creek project. Mr Barns' report certainly concerned what appears to have been a perception amongst some people that the Minister had done a "favour" to Mr Maitland by granting DCM the Exploration Licence. But that was also four months earlier.

492 By the time of the ABC and Sydney Morning Herald press coverage of 20 and 23 July 2009 (see below), Mr Maitland had already ceased to be a director of DCM. There is no suggestion in the evidence that, at the date Mr Maitland ceased to be a director, anyone at DCM knew the 20 and 23 July 2009 press coverage was imminent.

493 On the other hand, Mr Poole's explanation (that "it was time for Mr Maitland to go where he wanted to be") does fit with objectively verifiable facts.

494 The 10 July 2009 board minutes noted:

"The Chairman [Mr Ransley] also noted that John Maitland's employment contract with the Company will be terminated as of 2 August 2009 and John would then be engaged as a consultant to Doyles Creek Centre of Excellence Pty Ltd. John acknowledged and agreed with this."

495 On the evidence, this appears to be what happened. Four days after the board meeting, on 14 July 2009, Mr Maitland through his company Jonca Investments Pty Ltd, executed a "Contract for the Performance of Services" which on its cover was stated to be between Jonca Investments and Doyles Creek Centre of Excellence. By that agreement Mr Maitland agreed to provide "the client" with various services concerning the "Centre of Excellence" for five years for a "fee" of $100,000 per annum. Mr Lewis executed the agreement on behalf of "Orion Mining Pty Limited" on 10 July 2009. There was no explanation in the evidence why that company executed the agreement. However, the fact is that four days after the 10 July 2009 board meeting, Mr Maitland, through Jonca Investments, committed himself to a five year consultancy with the Doyles Creek Centre of Excellence.

496 Further, on 24 June 2009, the Department recommended to the Minister that he reappoint Mr Maitland as chair of the Coal Competence Board for a further 18 month term commencing 1 July 2009. That suggests that, at least so far as the relevant officers of the Department were concerned, there were no political sensitivities associated with Mr Maitland.

497 In those circumstances, I am not prepared to draw the inference sought by Chubb.

Press publicity - the "brewing controversy"

498 In mid July 2009 there was press publicity concerning the grant of the Exploration Licence.

499 On 20 July 2009, the Sydney Morning Herald reported, under the heading "Minister in hot water again, over mining grant":

"The State Minister for Primary Industries, Ian Macdonald...has been accused of doing more favours for mates after he approved a coal mining exploration licence for a mine run by a former union boss, John Maitland...

But he has also annoyed locals in the Hunter by approving an exploration licence for Doyles Creek mine, which Mr Maitland, a former president of the Construction, Forestry, Mining and Energy Union, is involved with.

Mr Macdonald announced the mine by media release on Christmas Eve, and has been accused of not following Department of Primary Industry guidelines by approving an exploration licence without the company advertising its intention to apply for the licence...

Craig Chapman, a community representative at the site of the proposed mine, Jerrys Plains, said it was clear the mine had been treated differently to others and he was sceptical of Mr Macdonald and Mr Maitland's claims that the mine was simply for "training" mine workers.

'This is being promoted as a training mine...this is a mining mine' he said...

Mr Macdonald defended his association with Mr Maitland...

He said: 'I have met John Maitland several times in a professional capacity over the last few years and I can assure you he is an industry leader and expert in his field. His involvement is a minor factor, the key element is the strength of this proposal that was developed over a couple of years with the Department; a proposal that has gained considerable support from industry and educational sectors alike'...

A spokesman for Doyle's [sic] Creek Mining Company said: 'It's a training mine and established according to due process. Suggestions it's a special deal are wrong'."

500 On the same day, ABC News reported, under the heading "Minister Defends Hunter Mine Licence":

"The New South Wales Primary Industries Minister Ian Macdonald says no corners were cut in the granting of an exploration licence for a training mine in the Hunter Valley.

The project, at the Doyles Creek mine near Singleton, has been touted as an Australian first and involves an underground mine, training facilities, a workshop and recreation area.

The opposition claims that the first locals knew of the proposal was in a press release, released on Christmas Eve.

It believes the mine received special treatment because former mining union head John Maitland is among the proponents.

The opposition's industry spokesman Duncan Gay thinks the timing of the announcement is suspicious.

'Here was a mine that the locals didn't find out about until at least a fortnight after it happened when the Minister sneaked out a press release' he said.

But Mr Macdonald says all the proper processes were followed and the proponents held six public meetings ahead of the exploration licence being granted.

'This process has been extensive' he said."

501 Three days later, on 23 July 2009, ABC News published a further report headed "Doubt cast over training mine approval process" which quoted a local farmer as saying that:

"There's only been the one public meeting with applicants. Ian Macdonald was misinformed there."

And

"It wasn't granted fair and square, it was underhandedly done, no one was given the opportunity to object."

502 Mr Poole said he did not recall, but did not dispute that he saw or at least heard of this publicity. I find it probable that he did. The claims attributed to community representatives and to the State Parliamentary Opposition were carried in two major media outlets and were, plainly, serious.

Jerrys Plains Community Q&A

503 In or about July 2009 a Jerrys Plains' community group (called "Jerrys Plains Minewatch") circulated, and evidently sent to DCM, a questionnaire entitled "Questions the Community of Jerrys Plains would like answers for".

504 One of the questions was:

"5. Current Issues in the Press and effect on DCM in relation to the,

5.1.1 Minister?

5.1.2 ICAC?"

505 On 27 July 2009 Mr Ransley circulated to, amongst others, Mr Poole, his suggested responses to the Jerrys Plains Community's "[q]uestions".

506 Mr Ransley's proposed response to the question set out at [504] was:

"No issue from DCM point of view as our process was extremely rigorous and included several independent signs [sic] offs as we navigated the various bureaucracies".

507 His email circulating the proposed response was headed "PLEASE NOTE THAT THIS HAS NOT BEEN SENT TO JOHN M" and stated:

"Mine and Glen [Lewis's] thoughts, if you wish to add, do so and return to Glen, please watch who you CC. I have attempted to keep John [Maitland] right out of it for now so as to limit political attack, but also to keep him away from the flow of money, we do not want him on any funding/community committees."

508 Chubb submitted that it was implicit in Mr Ransley's statement that Mr Maitland should be kept "right out of it for now so as to limit political attack" was a "recognition of Mr Maitland's personal relationship with the Minister and his personal role in the process". Otherwise, Chubb asked rhetorically, why keep Mr Maitland "right out of it"?

509 Mr Poole gave this evidence in answers to questions from me:

Q. "But the political attack that Mr Ransley is speaking of here clearly relates, doesn't it, to the Jerrys Plains complaint?

A. I just honestly don't recall your Honour but now that I've read it I've tried to rack my brain about what it might relate to. My thoughts are it's probably more likely to do with the very nasty union situation going on in the Valley, very nasty and personal...I'm reading it now and I don't recall any situation of the political attack and it just happens to be exactly the same time, I've since established, that particularly Craig [Ransley] was having a very nasty with the CFMEU, the unions including the CFMEU."

510 In that regard, there is in evidence a letter Mr Ransley had written to the Minister several months earlier, on 27 May 2009, referring to a dispute between ResCo and the CFMEU and what Mr Ransley described as "an attempt by the CFMEU to place undue pressure on ResCo and associated companies in projects underway in New South Wales". Mr Ransley said that ResCo's employers were in the process of voting on a "collective agreement" and "several tactics have been used to undermine the employee's voting process".

511 It appears that this was the "very nasty union situation" to which Mr Poole referred. As Mr Maitland had a former connection with the CFMEU, it may be that those at DCM had some sensitivity about DCM or ResCo becoming embroiled in an industrial dispute with that union.

512 However, it seems more likely that Mr Ransley's reference to "political attack" was a reference to the recently reported press statements concerning the Parliamentary Opposition's "suspicions" as reported by the ABC a few days earlier.

513 So far as concerns Mr Ransley's reference to keeping Mr Maitland "away from the flow of money" Mr Poole gave this evidence, again in response to questions from me:

Q. "What was going on?

A. Mr Maitland had a propensity to spend our money, as one of my sayings, like a drunken sailor in a bar.

Q. Haven't I seen an email from Mr Ransley complaining about that matter? [I was referring to Mr Ransley's email of 22 January 2009 referred to at [485] above)

A. About John spending money?

Q. Yes.

A. Quite likely your Honour yes and I suggest it's probably what this relates to. I know I had a significant issue about it at one stage and took Mr Maitland to task. I think it's probably to do with that.

Q. Is that the real reason he was removed as chairman?

A. No. We had already pulled him into line on that money side of it before then, but he still tended to run amuck a little bit with our money."

Jerrys Plains' community meeting 25 August 2009

514 The meeting between members of the Jerrys Plains Minewatch organisation and DCM took place on 28 July 2009. Messrs Maitland, Poole and Lewis attended for DCM.

515 Thus, despite Mr Ransley's stated desire to keep Mr Maitland "right out of it for now so as to limit political attack", Mr Maitland attended the meeting and, according to minutes of the meeting, played an active role in answering questions from the floor. That suggests that DCM was not sensitive to exposing Mr Maitland's role in the process.

516 The minutes of the meeting repeated the answers given by DCM to the questionnaire and also recorded that the answer given by DCM to question five had been changed so that the word "processes" was substituted for the word "bureaucracies". The answer now read:

"No issue from DCM point of view as our process was extremely rigorous and included several independent signs [sic] offs as we navigated the various processes".

517 The minutes also incorporated questions asked of the DCM representatives and the answers given to those questions including this exchange between a participant at the meeting and Mr Maitland:

"Q Licence did not go to tender

JM - Licenses did not got tender - discretionary powers of the Minister to grant the licence. DCM paid $1.106 million to the Government for the licence. Other conditions were that DCM donate $250,000 to Centre to Geosciences University of Newcastle and build a Centre of Excellence in Jerrys Plains. It is too early to detail what the Centre of Excellence will be."

518 The minutes record questions being asked and answered concerning a wide range of other topics including when the training facility would commence, whether the training "school" would be integrated with the mine, whether there would be training for locals, where the mine site would be located, whether transport from the mine would be underground, whether there would be a rail spur to the mine, whether a washing area would be constructed, how local horse studs would be affected and various other matters. The minutes record that participants expressed concern that the Hunter Valley was "disproportionately dependant on coal" and that "coal mining sterilises the land". The minutes record that somebody complained that Mr Barns had not communicated with the Minewatch organisation and had "created speculation that the committee is hiding something from the community". Mr Lewis was recorded as saying, in response, that the first person he would employ was an "Environmental Community Officer" and stated that DCM would do "quarterly mail drops".

519 It seems clear from the minutes that the interrogation of the DCM representatives was wide ranging and extensive.

520 However, the minutes do not record that any question was asked of any of the DCM representatives concerning DCM's answer to question five in the Minewatch questionnaire (concerning "Current issues in the Press" in relation to the "Minister?" and "ICAC?" (see [504] above)).

521 The minutes appear otherwise comprehensive. The inference I draw is that there were no questions from the floor at the meeting concerning question five.

522 Mr Leopold submitted that Mr Poole can draw no comfort from that fact because DCM's answer to question five (that its "process" had been "extremely rigorous" and that it had received "several independent sign offs") was false, and deliberately so.

523 I do not accept that submission.

524 As was submitted on behalf of Mr Poole, whether the "process" that DCM had undertaken leading up to the grant of the Exploration Licence could be described as "extremely rigorous" is a matter about which opinion might differ. However the "process" by which the Submission was prepared (leaving aside the question of whether it was a misleading document) could certainly in my opinion be described as "rigorous".

525 Further, as was submitted on behalf of Mr Poole:

"...without the benefit of any expert evidence as to how applications for exploration licences are typically prepared, or any useful comparison, it is difficult to see how DCM or Mr Poole can be meaningfully criticised for the process they engaged in to obtain the EL, which took many months and involved many people including consultants, and it is certainly not possible to say that the description they chose to give to the process was false and deliberately so."

526 I accept that submission. Chubb did not adduce expert or other evidence that the "process" undertaken by DCM to seek direct allocation of the Exploration Licence was abbreviated or somehow less comprehensive or "rigorous" that that which would be undertaken in any circumstance where a land owner was seeking direct allocation of an exploration licence. DCM made a submission on 15 February 2007; was told more information was needed; spent months preparing the Submission; in August 2008 received a Ministerial invitation to apply for the Exploration Licence; garnered community and industry support for the Application itself and ultimately made that Application on 29 September 2008. Whatever else might be said about the process, it cannot in my opinion be said to be misleading or false to say it was "rigorous".

527 So far as concerns the question of "independent signs [sic] offs" Mr Poole gave this evidence:

Q. "But there were no sign offs by anybody independent of DCM, correct?

A. The Jerrys Plains people were talking about the application for the [Exploration Licence], and it went through and the Department signed it off - at every level, every hoop we jumped through the Department signed off on.

Q. Is that what was meant by sign offs to your recollection, is it?

A. And legal sign offs. We had an independent lawyer providing us with advice that we paid for. If I recall the statement, it was as we negotiated with the bureaucracy, so it was clearly relating to the Department."

528 So far as concerns "legal sign offs" Mr Poole was evidently referring to Mr Stevenson who, as Chubb submits, was hardly independent; he was DCM's solicitor and had shares in DCM.

529 However, the thrust of Mr Poole's evidence was that he regarded the "independent" sign offs as being the approvals that he saw as having been given by the Department (although, formally, by the Minister). I see nothing implausible about that evidence.

530 The Minewatch minutes, under the heading "Further Updates" state that a "DCM Community News Letter" was expected at the end of August 2009 and that a "DCM Community Information meeting" was scheduled for 27 September 2009. There is no evidence before me as to whether any such newsletter was circulated, or as to whether any such meeting took place.

531 My attention has not been drawn to any further mention in the press or by the Minewatch group to the issue of the grant of the Exploration Licence to DCM (let alone of any possible inquiry at ICAC or anywhere else) after the meeting of 28 July 2009 prior to 29 December 2011, when DCM and NuCoal gave Chubb notice of circumstances likely to give rise to a claim (see [42] above).

532 The other possibly relevant reference in the evidence to this subject is in the minutes of the DCM board meeting on 17 November 2009 which state that at a meeting of the "Community Consultative Committee" there were "no major issues".

533 Thus, on the evidence before me, the issue of the grant of the Exploration Licence to DCM was, so far as Mr Poole knew, raised twice during 2009. First, it was raised by Mr Barns' note of 19 January 2009 (see [476] above). Second it was raised by the press reports from 20 July 2009 and by the Minewatch group prior to and at the meeting of 28 July 2009. On the evidence, that controversy disappeared in just over one week.

DCM proposal for insurance

534 As I have mentioned, on 8 October 2009, Mr Peter Logvyn as "CFO" signed the proposal for the DCM policy and answered each of the questions in cl 9(f)(i) and (ii) "no" (see [36] above).

535 Mr Poole gave the following evidence about that proposal in his affidavit:

"Given the passage of time, I have no recollection of why the Directors and Officer Liability Insurance was not already initiated for DCM at this time [27 February 2009]. My recollection was that DCM had Directors and Officer Liability insurance at all times but I must have been mistaken in that belief given the evidence I refer to in the following paragraph.

...

I note Peter Logvyn has signed the proposal as 'CFO Doyles Creek Mining'. To the best of my recollection, Peter Logvyn never held the position of Chief Financial Officer of DCM.

To the best of my recollection, I did not have any discussions with Peter Logvyn as to Directors and Officer Liability Insurance or the proposal form.

I have no record of and to the best of my recollection did not receive the proposal form. I have no record of and to the best of recollection did not approve its form or authorise Peter Logvyn to sign the proposal form."

NuCoal 23 November 2009 option to purchase shares in DCM

536 On 23 November 2009 NuCoal (then known as Supersorb Environmental NL) entered into an Option to Purchase to which the shareholder in DCM gave it the "sole and exclusive option" to purchase all of the shares in DCM.

537 The Schedule to the Option revealed that interests associated with Mr Poole then held approximately 10 per cent of the shares in DCM.

Prospectus

538 On 2 December 2009, NuCoal lodged with the Australian Securities and Investments Commission (ASIC) a Prospectus offering the issue of 50 million shares at 20 cents to raise $10 million to be used to conduct further exploration and drilling programmes at Doyles Creek.

539 The Prospectus stated that NuCoal were being granted an option to acquire all of the issued capital of DCM and that DCM:

"...has a JORC Code compliant 247.1MT inferred coal resource...".

540 This was the figure referred to in Dr Palese's April 2009 report (see [474] above).

541 Under the heading "Training Mine" the Prospectus stated:

"An extension to the Doyles Creek project is the proposed establishment of a specialised coal centric training facility run in parallel with the proposed mine. The ultimate outcome is for a attendees, both new entrant and existing black coal workers, to qualify up to certificate level 4 under the accreditation of the Coal Training Package MNC04, endorsed by the National Training Quality Council of Australia. The on site training facility will broaden the educational experience by providing attendees with both theoretical and practical mining experience. The site will encompass best practice training rooms and workshop facilities in addition to accommodation and associated amenities. No other facility currently exists in Australia whereby the actual training facility is situated within an operating mine.

The ultimate value of the training mine is expected to be realised in both the additional revenue stream for [NuCoal] and in securing of skilled labour for use at the Doyles Creek Project."

542 This was the only mention, in the Prospectus, of a "training mine". Nonetheless, so far as the evidence reveals, it remained a condition of the Exploration Licence that a training mine be established.

543 An annexure to a "Solicitors' Report" prepared by Price Sierakowski, solicitors from Perth, referred to the condition of the Exploration Licence stating that it was not transferable and was granted solely to allow determination of the resource capacity to support a training mine.

544 On 5 February 2010, NuCoal acquired all of the issued shares in DCM. As I have mentioned, Mr Poole became a director of NuCoal that day and held that position until 26 April 2012.

NuCoal proposal for insurance

545 As I have mentioned, on 4 February 2010 Mr Lewis signed a proposal for insurance on behalf NuCoal. That proposal was in the same form as the DCM proposal. Mr Lewis completed the proposal by answering "no" to the two questions in cl 9(f) (see [39] above).

546 Mr Poole accepted that, in early January, he reviewed this proposal and completed those parts that were within his knowledge and that, on or about 19 January 2010, he had confirmed that the correct answers to the questions in cl 9(f) were, so far as he was concerned, "no".

The "Misleading Submission" case

547 As I have said, Chubb's case is that the Submission was a "deeply misleading document", containing false and misleading statements which showed its authors have a "propensity for dishonesty".

548 Mr Poole was one of the three directors of DCM. He was not involved in the drafting of the Submission but did review drafts of the Submission circulated from early February 2008 (see [288] above). On one occasion (20 February 2008) he made some minor commentary: "a couple of 'spots on the wall' that at least show I read it" (see [291] above).

549 Mr Poole was aware that the Doyles Creek project was DCM's only business and that the making of the Submission was a critical step to DCM's plan to persuade the Minister to exercise his discretion to allocate directly to DCM the exploration licence it sought. Mr Poole shared his fellow directors' view that if direct allocation could not be achieved, DCM should not proceed with the venture.

550 Mr Poole repeatedly and emphatically gave evidence that he believed every statement in the Submission was true. He said "the experts put it in front of me and I relied on them".

551 As I have said, this is not a matter about which Mr Poole could be mistaken. He was either telling the truth about this, or deliberately giving false evidence.

552 This is a critical aspect of the case. Unless Chubb can show that, contrary to his sworn position, Mr Poole did believe the Submission to contain false or misleading statements, it cannot establish that Mr Poole "knew" one of the two critical matters it claims he failed, fraudulently, to disclose. In order to accept Chubb's submission, I must have an actual "persuasion of the mind" (see [114] and [154] above) that that position is correct. What that means, as a practical matter, is that I must also have an "actual persuasion of the mind" that Mr Poole, deliberately and repeatedly, gave knowingly false evidence before me.

553 For the reasons that follow, I do not have that actual persuasion of the mind. Although I have found some aspects of Mr Poole's evidence troubling, overall, I am not satisfied that I should reject his evidence on this critical matter. It was not for Mr Poole to prove he believed the Submission to be true. It was for Chubb to prove that he did not. Chubb has failed to so persuade me.

554 I will now consider each of the respects in which Chubb contends the Submission was false or misleading. Where I conclude the Submission was false or misleading, I will then consider Mr Poole's knowledge of that matter.

(1) Statements about a "training mine"

What was said and was it false or misleading?

555 The Submission itself is entitled "Training Mine Facility Submission".

556 The opening sentence of the Submission stated that it sought approval to be granted an exploration licence:

"...in order to construct a Training Mine Facility in the Hunter Valley in New South Wales, concurrent with the development of a sustainable underground coal mine to provide practical and theoretical mining and OH&S experience and expertise."

557 Thus the opening words of the Submission stated that the "Training Mine" was to be constructed concurrently with a "sustainable" (which I would read to mean financially sustainable) underground coal mine.

558 It is true that great emphasis was placed in the Submission on the "training mine" component of the project.

559 Thus, Part 2 of the Submission was headed "Training Mine Proposal" and comprised 12 of the 76 pages of the Submission.

560 In Part 2 it was stated:

"Doyles Creek Mining Pty Ltd was incorporated in 2007 by a number of Newcastle business people as a vehicle with sufficient financial resources to undertake the development of an underground training mine as the primary focus of its objectives" ...

The Doyle's Creek Training Mine Facility can be differentiated from previous concepts as the coal mine is projected to generate sufficient financial returns to support the training mine operation on a long term self-sustaining basis".

561 This passage contains the statement on which Chubb's submissions concentrated: that the training mine was the "primary focus" of DCM's objectives.

562 Chubb contends that this statement was false and misleading because:

"...in truth, the primary focus of DCM's business objectives was to pursue the development of the Tenement as a medium to large commercial mining venture which it intended would yield huge profits (well in excess of the level of profitability necessary to demonstrate the commercial sustainability of a training mine), with a training mine being merely incidental to that primary commercial objective."

563 Chubb contends that DCM's "real business objectives, known to Mr Poole" were:

"...to develop the Tenement as a medium to large commercial mining venture capable of yielding huge profits well in excess of the level of profitability necessary to demonstrate the commercial sustainability of a training mine."

564 Chubb thus seeks to draw a contrast between DCM's stated "primary focus" (the development of an underground training mine) with what is said to be its "real" or "true" business objectives which were to conduct a profitable commercial mining venture.

565 But the passage in the Submission following shortly after that referring to DCM's "primary focus" stated that this project could be differentiated from "previous concepts" (which I read to mean previous training mine proposals) in that it was to "generate sufficient financial returns" to support a training mine on a "long term self-sustaining basis". This was evidently to dispel any suggestion that DCM would be seeking Government assistance in the future: see Mr Coutts communication to Mr Maitland of 30 January 2007 at [204] above.

566 DCM's statement in the Submission that the "primary focus" was on the development of an underground training mine must also be seen in the context of DCM's forecast, in the same document, of the profitability of the project.

567 The Submission made no secret of the fact that it was expected that the proposed mining venture would be profitable, indeed very profitable. Thus the "Net Profit/(Loss) After Tax" was forecast to be:

"2011 $0.8 m

2012 $3.6m

2013 $5.6m

2014 $13.6m

2015 $54.8m"

568 Chubb sought to draw a contrast between these forecast profitability figures with those produced in the September IM, where higher profits were forecast. However, as I have said (see [357] above), those later, higher profit forecasts were the product of a changed assumption (by Mr Chester) as to the prevalent coal price. There is no evidence before me to suggest that the coal price assumed for the purpose of the Submission was not reasonable, nor any evidence to suggest that the forecast profitability of the venture in 2015 of $54.8 million was not reasonable (assuming the forecast coal productivity).

569 Chubb also drew attention to the statement by Mr Ransley in his email of 20 February 2008 (see [300] above) that the "financials" needed to establish that the mine "shows a solid financial return without huge profits". The implication of Chubb's submission seemed to be that the financial statements attached to the Submission downplayed DCM's collective view as to the likely profitability of the project. If that is the submission, I do not accept it. I see nothing in the evidence to suggest that the financial statements in the Submission were otherwise than a genuine estimate by DCM of future profits. Further, as I have said at [302] above, I see Mr Ransley's email as being, in any event, equivocal.

570 In any event, in a real sense, at the time the Submission was lodged the idea of a training mine was a, if not the, primary focus of DCM's business objectives. DCM would not have pursued the venture unless it could obtain an exploration licence by direct allocation and the incorporation of a training mine into the project was the "differentiating factor" that DCM used to seek to persuade the Department and the Minister that the Minister should exercise his discretion and allow such a direct allocation. In circumstances where the DCM board had resolved not to proceed with the venture at all unless it could obtain a direct allocation of an exploration licence, I cannot see that, at the time the Submission was lodged, it was "false and misleading" for DCM to so characterise its "primary focus".

571 It is true that the September IM, the January 2009 Information Memorandum and the Prospectus placed less emphasis on the proposed training mine than the Submission.

572 However, each of the documents referred to the incorporation of a training mine into the project. That is hardly surprising, as it became a term of the Exploration Licence that a training mine would be established.

573 As Mr Poole emphasised several times during his cross-examination, the Submission, the September IM, the January 2009 Information Memorandum and the Prospectus were addressed to a "different audience". I did not understand Mr Poole to mean by this that he thought it was acceptable to mislead one or more of those "audiences". The point he was making, as I understood it, was that the Submission was seeking persuade its audience (the Department and the Minister) of a very different matter than was the object of the September IM, the January 2009 Information Memorandum and the Prospectus. In the case of the Submission, what was sought to be emphasised was a "differentiating factor" which could persuade the Minister to exercise his discretion and make a direct allocation of the Exploration Licence. In the case of the September IM, the January 2009 Information Memorandum and the Prospectus, the object was to attract investment.

574 As was submitted on behalf of Mr Poole:

"It is perfectly legitimate for more detail on the training facility to have been provided to the Minister and the [Department], who were being asked to grant the [Exploration Licence] by way of direct allocation on the basis of DCM building the training mine, and less detail to have been provided on this aspect to potential investors who presumably, for the most part, would be persuaded to invest not for altruistic reasons but in the expectation that they would see a return on their investment based on the proposal's commercial success."

575 In all of those circumstances, I am not satisfied that the statements in the Submission concerning the training mine were, seen in their proper context, false or misleading.

(2) Statement that the training facility was forecast to be "cost neutral"

What was said and was it false or misleading?

576 Under the heading "Financial Overview" the Submission stated:

"The Training Mine Facility has been forecast as cost neutral and has been incorporated into the financial model. Training Mine Facility costs have been included with training revenues offset as the Facility has been treated as a separate cost centre."

577 Chubb submitted that the financial analysis in the Submission concerning the forecast that the training mine facility was "cost neutral" was "rudimentary" "and prepared by Mr Chester within just three days". Chubb submitted that this "rudimentary analysis" was "stuck into the Submission as an afterthought" and that this is "most revealing of the fact that the training facility was of merely incidental importance to the larger commercial objectives of DCM".

578 I cannot see any basis for this submission. I cannot see what conclusion I can draw from the fact that Mr Chester spent "just three days" preparing this analysis. Nor do I see any basis for Chubb's submission that the analysis was simply "stuck into the Submission as an afterthought".

579 Mr Poole's evidence was that his understanding of this analysis was that it reflected only "direct costs" of the training facility whilst indirect costs of the facility were incorporated elsewhere. Mr Poole said he specifically asked Mr Chester about his analysis of the costs for the training facility and gave this evidence:

Q. "You didn't ever ask him what analysis he had done to come up with that?

A. I asked him what made up the numbers. I recall that conversation.

Q. Did you say you asked him what made up the numbers?

A. Yes, and if I recall he told me it was the direct miners in the training panel.

Q. When you say 'if I recall', do you recall or not?

A. I recall correctly. I don't recall his exact words, because the number looked low to me. I thought maybe - we went through this yesterday - the number looked low to me and I asked him and my recollection is what I have to this day remembered is that it was the direct - well, I don't remember the exact words, but I believe it's the direct employees in the training panel. That's my understanding from all that time ago."

580 I can see no reason why I should not accept this evidence. Mr Poole's background is in accounting and finance. He said that his "focus in reading the drafts of the submission was on the financials". It is probable in my opinion that his evidence as to his discussion with Mr Chester is correct.

581 In any event the Submission makes clear that the financial figures were models based on estimates (as they were bound to be: the venture had not started).

582 In these circumstances, I am not persuaded that this aspect of the Submission was false or misleading.

(3) Statements about the size of the coal resource

What was said and was it false or misleading?

583 As I have mentioned, the Submission made seven statements touching on the question on the size of the resources at Doyles Creek. I have set them out above, but it is convenient to repeat them here.

584 First, in the Executive Summary the Submission stated:

"Doyles Creek hosts a resource estimated at 91 million tonnes, capable of supporting coal mining operations over a life of 35 years."

585 Second, at p 28 under the heading "Coal Mineral Resources" the Submission stated:

"Total inferred in situ mineable resources at Whybrow and Redbank seam of Whittingham coal measure estimated at 125 million raw tonnes...

The target coal seams would be principally the Whybrow and Redbank Creek coal measures of the Whittingham coal measures, with total inferred in situ resources estimated at 125 million raw tonnes."

586 Third, also at p 28, the Submission stated that:

"A description of the in-situ coal resources for the Exploration Licence Application Area are summarised in Appendix C."

587 Appendix C replicated Dr Palese's "ELA Area 2" table and showed an "Estimated Total In-Situ Mineable" figure of 69.9 MT.

588 Fourth, at p 29 of the Submission, under the heading "Proposed Mining Operation" the Submission stated:

"The project will involve the mining of an estimated 91 million tonnes over a 35 year period by means of underground mining."

589 Fifth on p 30 of the Submission, under the heading "Royalties and Taxes" the Submission stated:

"The expected coal reserves at Doyles Creek are 91,000,000 tonnes of coal. Assuming a value of A$100 per tonne, at the current royalty rate of six per cent of the value of the coal recovered, the mine is expected to produce $546 million in royalties over its 35 year life."

590 Sixth on p 38, under the heading "Project Development Timetable" the Submission stated:

"The project comprises the mining of 91,000,000 tonnes of recoverable reserves that can be beneficiated very easily to produce soft and semi-soft marketable products. The mining of the coal deposit will be undertaken over a project mine life of 35 years."

591 Seventh, and finally, on p 42 of the Submission under the heading "Production Forecasts" the Submission stated that production forecasts for the mine were as follows:

"Figure 10.1	Production forecasts
Longwall	Tonnes
West	60,197,588
South West	15,127,154
East	15,550,946
Total Tonnages	90,875,688

The tonnages are expected to rise from 46,883 tonnes in 2011, to 303,722 tonnes in 2012, to 356,720 in 2013, to 1,400,240 in 2014 and then to the full design capacity of 3,356,720 from 2015 until the end of the life of the mining operation."

592 The Submission thus referred to three figures.

593 First, Appendix C referred to an "estimated total in-situ mineable" figure of 69.9 MT. That figure was plainly incorrect and was, in my opinion, inserted in the Submission by mistake (see [285] to [287] above). The figure is so glaringly inconsistent with the other figures in the Submission that I could not conclude that any reasonable reader of the Submission would be misled by it.

594 Second, it referred to "125 million raw tonnes" as being the "total inferred in situ mineable resource" of both the Whybrow and the Redbank Creek seams. Chubb does not suggest that this figure was misleading. It accurately repeats the corresponding figure in the Palese Information Memorandum.

595 Third, the figure of 91 MT is mentioned five times; as the size of the resource at Doyles Creek, the size of the expected coal reserves at Doyles Creek, the size of the recoverable reserves at Doyles Creek, the amount that would be mined at Doyles Creek, and the forecast production of Doyles Creek.

596 The repeated reference to 91 MT suggests that what is being referred to is something different from, and less than the "125 million raw tonnes" that is stated to be the "total inferred in situ mineable resource" of the two named seams.

597 Although the Submission stated that the "target coal seams" were both the Whybrow and the Redbank Creek seam, the figure of 91 MT was Mr Ireland's revised forecast of the likely amount of coal mineable from the Whybrow seam alone. As I have set out above, that fact must have been known to all those actively involved in the drafting of the Submission (see [276] above).

598 As Mr Leopold submitted, no one at DCM or advising DCM had estimated the "resource", or "expected coal reserve" or "recoverable reserves" or the forecast production for each of the "target seams" at Doyles Creek to be 91 MT. The figure of 91 MT was Mr Ireland's revised estimate of the coal available from the Whybrow seam; and that seam was only one of the two "target seams". Mr Ireland's estimates explain the provenance of the 91 MT figure, but not the context in which it was included in the Submission.

599 The clear impression conveyed by the repeated references in the Submission to 91 MT was that this was the amount that DCM actually anticipated recovering.

600 In my opinion, the true position was that at all relevant times, including at the date of the Submission, DCM proposed to exploit all of the coal resource at Doyles Creek being (at least) the "total inferred in situ mineable resource" of 125 MT.

601 That is revealed by that part of Mr Lewis's email to Mr Ransley of 24 December 2008 (forwarded by Mr Ransley to Messrs Poole, Maitland, Chester and Barns) to which I have referred at [436ff] above which read:

"Our original tonnage estimate was based on 2 target seams and we were conservative on the overall tonnage as we only wanted to indicate we had sufficient to resource to justify the training mine."

602 In those circumstances, my opinion is that the Submission was, to this extent, misleading and not a true reflection of DCM's assessment of the resources available at Doyles Creek.

Mr Poole's knowledge - saleable v mineable tonnes

603 There is no evidence to suggest that Mr Poole knew that the 91 MT figure in the Submission was based on the coal mineable from the Whybrow seam alone (see [276] above)

604 Mr Poole knew the Submission spoke of 91 MT but, as I have set out earlier (see [388] above), said that he understood that the reference to 91 MT in the Submission referred to "saleable tonnes" or to "91 million tonnes coal sold".

605 As I have explained (see [329ff] above), DCM contemplated that mined coal would be the "beneficiated" or "washed" producing "washed" or "saleable" coal representing 75 per cent of the "raw" or "run of mine" coal extracted from the ground.

606 If this was Mr Poole's state of mind, it would explain how he could reconcile the statement in the Submission that there was an in situ mineable resource of 125 MT with the various references to 91 MT (as 91 MT is very nearly 75 per cent of 125 MT). Mr Poole did not, in terms, say this was his process of reasoning but that is the necessary implication of his evidence.

607 Mr Leopold recognised that implication and did not seek to challenge the proposition inherent in it; namely that Mr Poole saw no tension between the references in the Submission to 91 MT and 125 MT because he understood the figure 91 MT to refer to "saleable" (or "washed" or "beneficiated") coal.

608 Rather, Mr Leopold suggested to Mr Poole and submitted that Mr Poole's evidence that he believed the references in the Submission to 91 MT were to saleable coal was knowingly dishonest.

609 Thus Mr Leopold submitted:

"Mr Poole dishonestly tried to explain away the inconvenient truth that the modelling in the Submission had been based on a gross understatement of what he in fact believed that coal resource of the Tenement to be...At some point Mr Poole invented the proposition that he did not appreciate the dishonesty of what had occurred in the Submission because he believed that the figure of 91 MT was the figure for 'saleable' tonnes (i.e. after washing or 'beneficiation') rather than mineable tonnes."

610 Chubb described Mr Poole's evidence in this regard "indefensible and dishonest".

611 Again, this is an occasion where Mr Poole could not been mistaken. Either the position is as Chubb contends, namely that Mr Poole has "invented" a basis by which he reconciled the figures in the Submission, or his evidence was the truth.

612 The basis for Chubb's submission was what it contended to be an internal contradiction in Mr Poole's evidence. Chubb drew attention to this evidence of Mr Poole:

Q. "There is nothing hard to understand about the size of the resource which was expected to be produced in production tonnes, being 91 million tonnes over the life of the mine, was there?

A. I understood that from that submission, yes."

613 Chubb submitted that "despite that quite unambiguous answer", very shortly afterwards Mr Poole "decided to depart from it, even repeating the phrase 'production tonnes' in his diametrically opposed answer" in the following passage:

Q. "The intention that you agree you had, which was to squeeze such profit as you could out of these rights, subject to the need to have a training mine, was something that was not disclosed to the Government at any time during 2008, correct?

A. Firstly, I didn't agree at any stage that I recall to squeezing profit out of the mine. The second part of your question is I believe we did disclose in the March submission the profitability of the mine. If I recall, Mr Leopold, in year 5 we put $50 million worth of net profit in that submission, on page 28 if I recall.

Q. Based on an assumed tonnage production, tonnage of life of the mine of 91 million tonnes?

A. No.

Q. Wasn't that modelled on 91 million tonnes?

A. Not production tonnes. It was 91 million saleable tonnes.

Q. The washed coal was 75 per cent of revenue. It assumed a profit of $54 million in the 2008 year, correct?

A. It's not put in a model. It's the 91 million tonnes coal sold.

Q. You could only sell washed coal, couldn't you?

A. You said, Mr Leopold, and maybe check 91 million tonnes as washed at 75 per cent. My recollection of the submission is we sold 91 million tonne of coal.

Q. We are talking about projections, Mr Poole, do you understand that?

A. Yes, saleable tonnes 91 million tonnes.

Q. I am talking about what was sold, not what was projected, correct?

A. Correct.

Q. The production of 91 million tonnes, and washed tonnes 75 per cent of that number is around about 69 or 70 million tonnes?

A. That's not my recollection. My recollection is 91 million tonnes saleable." (emphasis added)

614 This second passage of evidence was given only a minute or two after the first (only two pages of transcript separate the two passages).

615 The question and answer in the first passage occurred in the context of a series of questions involving the proposition, put by Mr Leopold to Mr Poole, that there was "nothing hard to understand" about various (different) parts of and expressions in the Submission.

616 When Mr Leopold then returned the subject of the 91 MT, and focused on the topic of "assumed tonnage production" Mr Poole proffered, spontaneously I thought, the response "[n]ot production tonnes. It was 91 million saleable tonnes".

617 I do not gain the impression that Mr Poole was "deciding to depart" from, or seeking to correct or change earlier evidence.

618 Mr Leopold returned to the topic two days later. Mr Poole repeatedly stated that he understood that the 91 MT referred to "saleable" coal.

619 Ultimately Mr Poole gave this evidence:

"HIS HONOUR:

Q. What is being put is that if you thought the 91 million was saleable, not mineable, that shows that you, when you were reading these documents, didn't care whether what was being said was true or false; what do you say about that?

A. No, that's not true, your Honour.

MR LEOPOLD:

Q. The suggestion that you didn't understand in February 2008 that the 91 million tonnes was mineable, is a dishonest suggestion you are making to his Honour?

A. No.

Q. And you are making it to pretend that the 91 million tonnes figure came from a percentage of a higher mineable figure provided by Dr Palese?

A. Never in my thought process, Mr Leopold. I accepted the 91 million tonnes as put in front of me as saleable coal and my full recollection of my understanding at the time was that was the intention.

Q. You knew from discussions with Mr Ireland in late 2007 and early 2008 that the figure of 91 million tonnes was mineable and Whybrow seam only?

A. No."

620 Mr Poole's attention was then directed to a passage in a draft of the Submission that, ultimately, was included in the Submission in which I have set out at [326] and [590] above. For convenience I will set that passage out here:

"The project comprises the mining of 91,000,000 tonnes of recoverable reserves that can be beneficiated very easily to produce soft and semi-soft marketable products."

621 That passage makes clear that 91 MT is not the amount of

622 "saleable" or "beneficiated" coal and that it is the 91 MT that is to be "beneficiated" to yield a lower amount of "saleable" coal (being some 75 per cent of the 91 MT: see [331] above).

623 In relation to that passage Mr Poole gave this evidence in response to questions from me:

Q. "Do you agree that the author of that paragraph seems to have regarded the 91 million tonnes as the mineable, not the saleable figure, because he or she speaks of that figure being beneficiated?

A. Yes, I take that reading that, your Honour, yes.

Q. So that whoever wrote that seems to have thought that 90 [sic] million tonnes was mineable, not saleable?

A. That's how it reads.

Q. Assuming that the same person's written this whole document, that person seems to have started his or her calculations...from that starting point, namely that there was a total mineable amount of coal of 91 million odd tonnes?

A. It does look that way, yes, your Honour.

Q. I think what Mr Leopold is asking you is in those circumstances does it look as if whoever wrote this document had made a mistake and had confused mineable with saleable?

A. Your Honour, certainly my understanding was it was 91 million of saleable coal. Again, my understanding would be you would need to mine more coal than that due to the washed loss or unless we assumed zero to get it. So the answer would be yes, it would seem to me, reading those paragraphs, the 91 million tonnes...should be higher.

...

Q. Can you recall by what process of reasoning you came to the conclusion it was saleable, is it because somebody said that to you?

A. Certainly. I'm sorry, your Honour. I accepted without question what was put in front of me by Mike [Chester] in that regard.

Q. But I think the proposition that's being put to you is that...this document which suggests that 91 million dollars [sic] is not the saleable figure but is the mineable figure?

MR LEOPOLD: Tonnes.

A. Certainly, your Honour, and clearly I didn't pick up the distinction between the two."

624 A short time later, in answer to a question from Mr Leopold Mr Poole gave this evidence:

Q. "The figure of 91 million tonnes as a production figure, do you now agree, had no proper basis in 2008?

A. Yes, I think I agree with that because it had to be higher than the 91 saleable, yes."

625 Later, I asked Mr Poole about the same passage, as reproduced in the Submission itself. Mr Poole gave this evidence in response to questions from me:

Q. "It makes it quite clear that's mineable not saleable?

A. 91 million tonnes?

Q. Yes.

A. It does, your Honour.

Q. Had you seen that, it would have been clear to you, would it not, that the 91 million was mineable (or recoverable) and not saleable (or marketable)?

A. It's not - I don't recall having picked up on that point, you Honour.

Q. Doesn't that suggest the author of the document was endeavouring to make the distinction even clearer on this page that had been made on the corresponding page in the second draft of the Submission, the words 'recoverable' and 'marketable' have been added?

A. Gee, I don't know, your Honour. I have no recollection of that...".

626 Mr Leopold submitted:

"The mineable versus saleable issue was critical and, as his demeanour showed when giving evidence on that topic, he knew it. His demeanour noticeably altered when your Honour exposed the lie. This was a crucial example of the dishonesty of Mr Poole's evidence".

627 I do not accept that submission. I observed Mr Poole carefully while he gave this evidence. The impression I gained was that, until his attention was drawn to the passage in the draft submission (and ultimately in the Submission itself) to which I have referred at [620] above, he believed that the reference to 91 MT was to "saleable" coal. I gained the strong impression that he was surprised to realise that the clear implication from that passage was that his previously stated belief could not be correct. I did not get the impression that Mr Poole was being disingenuous in giving this evidence. Once he recognised that the 91 MT could not be "saleable" coal (but was, rather, the quantity of coal to be "beneficiated" to yield "saleable" coal) Mr Poole readily accepted that there was no "proper basis" for inclusion of the figure 91 MT in the Submission. However, I accept his evidence that he "didn't pick up the distinction between the two" at the time, and did not, when he was reviewing the drafts of the Submission understand the implication of the passage to which I have referred.

The September IM

628 I have found that, although he said he could not recall this, Mr Poole must have seen the references to 140 MT and 200 MT in the September IM at the time he reviewed it in September 2008. His January 2009 report that "a mine of 140 mt...was never going to fly" with the Chinese investors (see [462] above) also suggests that he knew, by then at least, that Mr Maitland had put this figure to those investors as the size of the Doyles Creek resource.

629 Mr Poole said he had "no idea" why Mr Maitland "changed the forecast". The impression I gained when Mr Poole gave this evidence was that he was speaking of his current state of mind (he said "I have" no idea why Mr Maitland changed the forecast). I did not understand Mr Poole to mean that he noticed, at the time, that Mr Maitland had changed the forecast.

630 Mr Poole agreed that, if he had thought in September 2008 that the mineable reserves at Doyles Creek were 140 MT rather than 91 MT that "this should have been disclosed to the Government".

631 However, Mr Poole denied that he believed, in September 2008, that 140 MT was the "correct figure for insertion" in the Submission.

632 I have considered whether these matters should cause me to reject, as untrue, Mr Poole's clear evidence, given repeatedly and emphatically, that he always believed (and continued from September 2008 to believe) that every word of the Submission to be true both at the time it was forwarded to the Department on 18 March 2008 and when it was appended to the Application on 29 September 2008.

633 To reject Mr Poole's evidence, I must also conclude that: (1) he appreciated in September 2008 that the figures in the September IM were different to those in the Submission; and (2) that, for that reason, the figures in the Submission (as opposed to those in the September IM) could not be, and were not correct. Neither of these propositions was, in terms, put to Mr Poole in cross-examination (although Mr Leopold certainly put to Mr Poole, and Mr Poole denied, that the figure 91 MT was inserted in the Submission to suggest a "modest proposal which might justifiably avoid the open tender process").

634 This aspect of the evidence has troubled me. As I have said, this is a matter about which Mr Poole could not be mistaken. However, having given the matter careful consideration, and having seen the conviction with which Mr Poole, repeatedly, asserted his belief as to the truth of the statement in the Submission, I am not prepared to come to these conclusions; or reject Mr Poole's evidence.

The Application

635 Mr Lewis reviewed the Submission shortly before 29 September 2008 and said he saw "no reason for any modifications" (see [405ff] above). Mr Poole said that his own assessment was that the Submission "remained in proper order to be put to the Minister" (although he did not recall looking again at the Submission - see [407] and [408] above).

636 The Submission was attached to the 29 September 2008 Application "for information". It spoke as at its date (see [423] above).

637 Mr Poole said that he continued to believe the Submission to be a truthful document. He repeatedly made the point that he believed the Submission to be a truthful document at the time it was made and also at the time it was "appended" to the Application.

638 I am not prepared to reject that evidence.

The events of 24 December 2008

639 On 24 December 2008, Mr Lewis revealed that the analysis that he and Mr McCowan had conducted, after the Exploration Licence was issued, showed an estimated in situ coal resource of 550 MT (see [436ff] above).

640 Mr Poole received a copy of Mr Lewis's email stating that "we were conservative on the overall tonnage" in the Submission because "we only wanted to indicate we had sufficient resource to justify the training mine" (see [436] above). Mr Poole did not suggest in cross-examination that this statement came as a surprise to him; the way he put it was there was "no reason to put in any more than was required" (see [447] and [448]).

641 But Mr Poole, as I have set out earlier denied that the figure in the Submission for the coal resource was less than his "true belief", or that the tonnage had been "minimised" for the purpose of the Submission. He said he "didn't know how they calculated the tonnage" and that "the experts put it in front of me and relied on them" (see [447]).

642 I do draw from this evidence the conclusion that, at least by December 2008, Mr Poole knew that the coal tonnage figures in the Submission were "conservative". But it does not follow from this that Mr Poole knew they were false, or had been calculated so as to understate deliberately DCM's estimate of the available reserves. As I have said on a number of occasions, there is no basis in evidence to conclude that Mr Poole knew that the 91 MT figure was based only on the Whybrow seam.

643 As I have sought to emphasise, the task for Chubb in relation to this aspect of the matter was to persuade me that I should be affirmatively satisfied, and have an actual persuasion of the mind that, on the balance of probabilities Mr Poole knew the Submission was false; that is, knew that it understated the coal reserves; and thus that, from the beginning to the end of his cross-examination, Mr Poole was deliberately giving false evidence about this matter

644 I do not have that actual persuasion of the mind. I do not accept this aspect of Chubb's case.

(4) Statements about the size of the operation - a "small to medium" operation

What was said and was it false or misleading?

645 In the "Executive Summary" at the beginning of the Submission it was stated that:

"The proposed location has the potential to support a small to medium sized coal mining operation" (emphasis added).

646 The Submission also stated:

(i) "A rigorous assessment process was undertaken to locate a suitable site as the basis of this Submission, on the premise that only a small to medium sized mining operation would be required for the Submission to be economically viable";

(ii) "The complexity of local geology has historically discouraged large-scale coal exploration. However, further examination by consultant engineers suggests the potential for a small to medium sized mining operation";

(iii) "...independent geological advice suggests that structurally undisturbed blocks between faults may exist in the area of interest. These blocks are expected to contain sufficient coal resources to enable the establishment of at least a small to medium sized operation, specifically designed to accommodate the training initiative" (emphasis added).

647 Mr Leopold submitted that these statements were "plainly misleading" in circumstances where Dr Palese had described the tenement as having a sufficient coal resource to enable a "medium to large" sized mining operation. Mr Leopold submitted this was "one of the central misleading features of the Submission" and "was obviously intended to justify the granting of consent by the Minister to a direct allocation".

648 As I have mentioned (see [200] above) the descriptor "small to medium" was used by DCM consistently in its communications with the Department and the Minister from the date of Mr Maitland's first communication with the Minister's Chief of Staff on 22 January 2007. There is no explanation in the evidence as to why this expression (rather than Dr Palese's language: "medium to large") was used. It is, however, obvious that the choice of words (originally those of Mr Maitland) was deliberate.

649 However, whatever may have been the motivation of Mr Maitland or anyone else at DCM to adopt the wording "small to medium" or "at least" small to medium rather than "medium to large", the relevant question is whether the statement made by DCM in the Submission that the operation was "small to medium" or "at least" small to medium was itself false or misleading.

650 The Submission stated, amongst other things, that the production forecast for the mine was 91 MT and that the profit forecast for 2015 was $54.8 million. There is no evidence before me as to whether an operation of this size would be regarded, in mining circles, as "small to medium" or "medium to large". Chubb contends that it was misleading of DCM to describe the project as "small to medium". That submission however leaves unanswered the question, "small to medium compared to what?"

651 The Department considered Doyles Creek itself to be within a "major stand alone area" but that casts no light on whether the description adopted by DCM of the operation it proposed to conduct was misleading.

652 There is no evidence before me from which I could draw any conclusion about this, and for that reason, I am not able to conclude that DCM's description of the project as being "small to medium" was either false or misleading.

653 Further, I see the description "small to medium" as being little more than editorial commentary that any reasonable reader of the Submission would assess in context of the details of the proposal, as revealed elsewhere in the Submission; particularly the production tonnage and likely profit.

654 As a matter of fact, as I set out at [333] above, the Department concluded from the Submission that "the proposal is actually for a major mining operation with a small training component included".

655 Accordingly, not only can I not conclude that the Submission was false or misleading, the evidence makes clear that the Department was not misled.

656 Mr Leopold submitted that the reference in the Submission to the "complexity of local geology" which had "historically discouraged large-scale coal exploration" was itself misleading as it gave the impression that "large-scale" mining was not possible at Doyles Creek because of the complex local geology. I do not agree. The statement in the Submission about the "complexity of the geology" was evidently based on a statement by Dr Palese in the Palese Information Memorandum that "the complexity of the local geology has discouraged larger coal producers from carrying out coal explorations" (see [179] above). Chubb did not suggest that statement was wrong. I do not read this part of the Submission as conveying anything more than this.

(5) Statements about the "Strategic Alliance"

What was said and was it misleading or deceptive?

657 The Submission stated:

"An influential Strategic Alliance has been established with Memorandum [sic] of Understanding ("MOU") signed between mining services and occupational health and safety groups (ResCo Services Pty Ltd; Coal Services Pty Ltd), educational institutions (University of Newcastle; Hunter Valley Training Company) and rescue services (Hunter Region SLSA Helicopter Rescue Service Ltd) to undertake this venture.

All of the parties to the Strategic Alliance acknowledge the skills shortage in the minerals industry, particularly in the coal sector in Australia." (emphasis added)

658 Under the heading "Key Risks" the Submission stated:

"The risk of a possible dissolution of the Alliance between the ResCo Services, the training providers and the Hunter Helicopter Rescue Service has been considered.

This risk has already been minimised owing to the existing agreements in place to ensure commitment between all parties. All [parties] have signed MOU's [sic] to confirm their commitment to the Training Mine project." (emphasis added)

659 The Submission stated under the heading "Board and Management":

"The initial management team is proposed to consist of the current Doyles Creek Mining Board. Pending successful grant of the Doyles Creek Exploration License [sic], a new Doyles Creek Board will be constituted that includes representatives from the community, union, government, ResCo, HVTC, the University of Newcastle and the Hunter Helicopter Rescue Service."

660 The Submission thus stated that:

(1) a "Strategic Alliance" had been "established";

(2) relevant Memoranda of Understanding had been "signed" by each of the named members of the "Strategic Alliance" and agreements were "in place"; and

(3) representatives of the Strategic Alliance would be members of a "new Doyles Creek Board".

661 Mr Leopold submitted that the MOUs were "empty of any serious obligation" and that, in any event, it was false and misleading to say in the Submission that a strategic alliance had been "established" with "signed" MOUs or that there were agreements "in place" with the asserted members of the "Strategic Alliance".

662 So far as concerns the first point, it is common ground that the terms of the Memoranda of Understanding (presuming that they were executed) did not impose legally binding obligations on any of the parties named to be members of the "Strategic Alliance". I do not find that fact, alone, to render false or misleading what was stated in the Submission. After all, as was submitted on behalf of Mr Poole, at the date of the Submission the Minister had not even signified his consent to the making of an application by DCM for an exploration licence.

663 On the evidence, it appears likely that the University of Newcastle and the Hunter Valley Training Company had executed Memoranda of Understanding.

664 It is unclear on the evidence whether the Helicopter Rescue Service had executed a Memoranda of Understanding, and Mr Ransley's email of 25 September 2008 (referred to at [410] above) suggests that it had not.

665 It is common ground that DCM never intended that representatives of the "Strategic Alliance" would be appointed to the DCM board and that the statement to the contrary in the Submission was wrong.

666 To this extent, the Submission was misleading.

Mr Poole's knowledge about the "Strategic Alliance"

667 Mr Poole said, repeatedly, that he understood, at the date of the Submission, the Memoranda of Understanding had been executed.

668 Mr Poole said that he had a recollection of being told by Mr Stevenson or Mr Maitland that "all of the MOUs" had been signed.

669 I am not persuaded that I should reject this evidence.

670 Mr Poole appeared to me to be very clear about his recollection. It is consistent with the statement in the Shareholder Briefing note that Mr Stevenson circulated on 30 November 2007 that "MOU's [sic] have been exchanged with the various parties including the University of Newcastle, Hunter Valley Training Company and the Newcastle Rescue Helicopter Service" (see [265] above).

671 Mr Poole, however, accepted that the statement in the Submission that representatives of the "Strategic Alliance" would become members of the "new Doyles Creek board" was a mistake and that what was intended was that such representatives would be appointed to the board of Doyles Creek Centre of Excellence Pty Ltd. It will be recalled that Mr Maitland was appointed to that board after he resigned as chairman and director of DCM in July 2009 (see [494] above).

672 Mr Poole gave this evidence:

Q. "When you approved this document in February/March 2008 you had no genuine intention of including on the DCM Board, once the exploration licence was granted, representatives of the parties named there, did you?

A. No. It should be the Centre of Excellence Board. It should of read 'Centre of Excellence Board'."

673 Mr Poole explained that:

"We made a decision we would incorporate another company, Doyles Creek Centre of Excellence. That is to look after, in short, the training aspects of it...That is to be a Doyles Creek Centre of Excellence within the Doyles Creek company. That was the idea there. In fact the one John Maitland transferred to during 2009."

674 Mr Poole said:

"The submission was put together. We deliberately had competent qualified experienced professional people putting every part of this submission together. The Doyles Creek board, myself, relied on them to do it. I relied on their expertise, their professionalism, their experience. I would say it was rigorous."

675 Ultimately a company called Doyles Creek Centre of Excellence Pty Ltd was incorporated. Mr Poole readily accepted that no representatives of the "Strategic Alliance" were appointed to the board of that company.

676 Mr Leopold described Mr Poole's evidence about this aspect as being "just a fib on the run". I do not accept that submission. Mr Poole did not seem to me to be giving knowingly false evidence about this. I accept that, at least from his point of view, the statement in the Submission about appointing "Strategic Alliance" representatives to the DCM board was simply a mistake and not such as to render the Submission false or misleading.

(6) Statements about the rigour of the process of locating a site

What was said and was it false or misleading?

677 The Submission stated:

"Extensive due diligence and detailed assessments have been carried out to identify a location suitable for the construction of a Training Mine Facility. Doyles Creek has been identified as the ideal site for such a development."

678 As I have set out above when considering the statements in the Submission as to a "small to medium sized operation", the Submission stated:

"A rigorous assessment process was undertaken to locate a suitable site as the basis of this Submission, on the premise that only a small to medium sized mining operation would be required for the Submission to be economically viable".

679 I read this passage to convey that DCM itself had undertaken the "rigorous assessment process" referred to and that it was this process that led to the identification of the Doyles Creek site.

680 It is common ground that, in fact, DCM had not itself undertaken such a process.

681 It follows that, on my reading of this passage in the Submission, it misstated the position.

Mr Poole's knowledge

682 Mr Poole gave the following evidence about this aspect of the Submission:

Q. "...there was no rigorous assessment process undertaken to locate a suitable site as the basis for the submission, was there?

A. I understood it had been going on for ten years.

Q. Well, not by DCM?

A. No. I never had the view DCM had undertaken that."

683 Mr Poole then gave the following evidence in answer to questions from me:

Q. Who did you think had undertaken a rigorous assessment process?

A. Yes, your Honour. Mr Maitland had explained to me somewhere along the course that he had been looking at this. I believe I might have lost a decade or so in there, but I believe from the early to mid-2000s they had been looking at it. They had explored a number of sites, both existing mines and as I understand it, green fields such as the one that we finally got and for whatever reason it hadn't gone ahead.

Q. So who is the "they" in that sentence?

A. Well, Mr Maitland - I don't recall who the actual group were. He was involved with the CFMEU, so I don't know, to be honest with you.

Q. Do you think the union had been investigating a site?

A. No, no, it wouldn't have been a union thing and in fact in the end I don't think the union supported the training mine concept when it did come. So I couldn't tell you the actual group who done it. Mr Maitland explained to me that he'd been looking, so.

Q. Did Mr Maitland say Mr Ransley was involved?

A. Mr Ransley had also expressed to me that he'd been involved in that in the past, but I don't think to the extent Mr Maitland had.

Q. Did Mr Maitland tell you that while he was the president of the CFMEU --

A. I didn't think he was president --

MR COLEMAN: National secretary, I think your Honour.

HIS HONOUR

Q. While he was national secretary of the CFMEU, he had been engaging in some sort of rigorous assessment process of a training mine site?

A. I think it was more to do with his external - he was appointed, as I understand it, on some external training bodies at the time. I believe it was more to do with them than his actual role in the CFMEU, your Honour. But they were certainly all very related. They did actually mention to me a couple of mines they looked at over the years, Craig and John.

Q. What do you say about the suggestion that these words suggest that the vigorous assessment process being spoken of, had been undertaken by DCM?

A. Well your Honour, we had only been around a year and a bit. I know that we looked at the Oceanic venture was the one that I looked at and I know I understand - well, I know Mr Ransley had spoken to Xstrata and Centennial about any opportunities there during my time. So I didn't think the word "rigorous" was too out there, your Honour.

MR LEOPOLD:

Q. Thank you your Honour. It clearly does imply DCM, doesn't it, that DCM had undertaken that process?

A. That's not how I read it. It wasn't my recollection of what we were saying, Mr Leopold."

684 It is clear to me from this evidence that Mr Poole misread the Submission and understood it to refer to the "rigour" of the process undertaken by Mr Maitland and others (prior to their involvement with DCM) to locate a suitable site. I see no reason to doubt that this was Mr Poole's state of mind at the time. It follows that to the extent that the Submission was misleading in this respect, Mr Poole did not appreciate that this was so.

Conclusions as to Chubb's "Misleading Submission" case

685 For these reasons my conclusion is that the Submission was misleading insofar as it made the statements to which I have referred concerning the coal resource of 91 MT, the "Strategic Alliance" and the rigour of the process undertaken by DCM to locate the Doyles Creek site.

686 However, for the reasons I have set out, I am not persuaded that I should conclude that Mr Poole was aware that the Submission was misleading in these respects.

687 Accordingly, Chubb's "Misleading Submission" case fails.

The "EL Grant Controversy"

688 Chubb's case is that by July 2009, at the latest, Mr Poole knew that circumstances had developed giving rise to a genuine controversy about the grant of the Exploration Licence in December of the previous year. Chubb alleges that the matters known to Mr Poole were such that he was actually aware, or alternatively a reasonable person in his position could be expected to know, that there was a real possibility that there would be a formal investigation or inquiry, whether by ICAC or otherwise, into the fact that the Exploration Licence had been granted by the Minister by direct allocation, rather than by the usual competitive tender process.

689 Chubb relied upon six circumstances:

(1) the 16 September 2008 NBN Nine News story (see [391] to [400] above);

(2) Mr Ransley's 25 September 2008 note that the project was "about to reach a whole new level of public scrutiny" (see [410] to [412] above);

(3) Mr Barns' report of 19 January 2008 of complaints to the Minister's office (see [475] to [483] above);

(4) Mr Maitland's removal as director and chairman of DCM on 10 July 2009 (see [487] to [497] above);

(5) the 23 July 2009 Sydney Morning Herald and ABC publicity (see [498] to [502] above); and

(6) the 27 July 2009 Jerrys Plains Minewatch meeting (see [503] to [533] above).

690 I have outlined the circumstances of each of these incidents in my narrative of events and will not repeat here what I have said earlier.

691 Mr Poole was adamant that he did not think that these events, whether taken individually, or in combination gave rise in his mind to the slightest possibility that there would be a public inquiry into the circumstances in which the Exploration Licence was granted to DCM. I accept that evidence.

692 Nor do I think that a reasonable person in Mr Poole's position could be expected to know that there was a real possibility of there being a public inquiry. The critical element that is missing from Chubb's case is any evidence, or allegation, that the Minister acted improperly, whether because of a personal relationship with Mr Maitland or otherwise. The critical publicity arose around suggestions by members of the public that the Exploration Licence was granted by the Minister as a "favour" to Mr Maitland (see Mr Barns' report of what he had been told by the Minister's Chief of Staff in January 2009) or done as a "favour for mates" (as reported in the Sydney Morning Herald on 20 July 2009).

693 As I have sought to emphasise in these reasons, it was no part of Chubb's case that the Minister had granted the Exploration Licence to DCM as a "favour" to Mr Maitland or to any of his "mates".

694 Chubb did submit that DCM had "deployed" what it alleged to be a "close personal and professional relationship" between Mr Maitland and the Minister to "steer the process politically" (to use the words from Mr Ransley's email of 22 January 2009 referred to at [485] above). Chubb submitted that it should be inferred that Mr Maitland was "recruited specifically" for that task.

695 But Chubb did not, and on the evidence could not, take the further step of alleging that the relationship between Mr Maitland and the Minister was so "close" (personally or professionally) that the Minister had exercised his discretion to allocate directly the Exploration Licence as a "favour" to Mr Maitland or DCM.

696 Absent that allegation, or any evidence that could provide a basis for that allegation, I cannot see how it can be said that anyone in Mr Poole's position could reasonably have believed, following the last of the incidents upon which Chubb relies (the Jerrys Plains Minewatch meeting) that there was any sensible prospect of there being a public inquiry.

697 Whatever it was that led to the ICAC inquiry is not a part of the evidence before me.

698 I will turn briefly to each of the incidents on which Chubb relies.

The 16 September 2008 NBN Nine News Story

699 The inquiries received by Mr Dries from the NBN Nine representative prior to the story going to air evidently concerned a suggestion that the "training mine is used as a diversion to assist with the obtaining of the licence and will then be dumped as a concept once the licence is granted" (see [392] above).

700 As I have said, that suggestion was misconceived as the training mine could not be, and so far as the evidence reveals, has not been "dumped as a concept" as it was to become, and did become a term of the grant of the Exploration Licence.

701 The story that went to air concerned "environmental" matters. There is nothing in the evidence to suggest that "environmental" matters might have led to a public inquiry concerning the grant of the Exploration Licence.

Mr Ransley's 25 September 2008 email ("about to reach of whole new level of public scrutiny")

702 On 25 September 2008 Mr Ransley sent an email to Mr Maitland, Mr Poole and others which included the statement that "this project is about to reach a whole new level of public scrutiny".

703 Mr Ransley's email was primarily directed to DCM's relationship with members of the "Strategic Alliance".

704 It is not clear to me from the email why, or in what context, Mr Ransley thought a "new level of public scrutiny" would come about.

705 The matter could not be explored with Mr Ransley as he was not called as a witness.

706 Mr Poole said he could not recall seeing this email but accepted that, in the normal course, he would have read it.

707 Mr Ransley's observation must have conveyed to Mr Poole the obvious proposition that, with the grant of the Exploration Licence imminent, it was likely that there would be some "public scrutiny" of the fact that the Exploration Licence had been granted without competitive tender.

708 Mr Ransley's email also mentioned that promises had been made, seemingly to members of the "Strategic Alliance" "that we will not be fulfilling".

709 Chubb submitted that both these matters "might engender controversy and inquiry".

710 I have found that Mr Poole did not at this, or any time, believe that any false and misleading statement had been made in the Submission. And, of course, Chubb does not contend that the Minister behaved improperly by inviting DCM's application to apply directly for an exploration licence.

711 In those circumstances, I cannot accept that Mr Poole should have inferred from Mr Ransley's observation that a formal inquiry was on the horizon.

Mr Barns' note of 19 January 2009

712 I have set out my findings about this email above at [475] to [483].

713 The critical aspect of Mr Barns' note is the report that the Minister's office had been receiving messages from individuals who said they believed that the Exploration Licence was granted to DCM "as a favor [sic]" to Mr Maitland. As there is no evidence or suggestion before me that the Minister did exercise his discretion to grant to DCM the Exploration Licence "as a favour" to Mr Maitland it must follow that there is no basis to suppose that Mr Poole entertained any suspicions to the contrary.

714 Indeed Mr Barns' email contained a record of assurances conveyed by the Minister's Chief of Staff to Mr Barns that "everything relating to this application is strictly in accordance with the relevant Acts and Regulations".

715 I see nothing in Mr Barns' note, even if read together with Mr Ransley's 25 September 2008 forecast that the project was about to reach "a whole new level of public scrutiny" as giving Mr Poole any basis to suppose there might be a public inquiry.

Removal of Mr Maitland as director of DCM

716 I have dealt with this matter at [487] to [497] above.

717 For the reasons set forth in those paragraphs, I am not persuaded that the evidence permits the conclusion that Mr Maitland was removed as director of DCM "to get him out of the public eye". I accept Mr Poole's explanation for Mr Maitland's departure.

718 Accordingly, I see nothing in the circumstances to give Mr Poole any reason to suppose a public inquiry was likely.

The July 2009 press publicity

719 The publicity in the Sydney Morning Herald and on the ABC News on 20 and 23 July 2009 was more pointed.

720 The press reported accusations that the Minister had done "more favours for mates" by approving the direct allocation of the Exploration Licence to DCM and reported related complaints that the project was being falsely promoted as a training mine.

721 The opposition industry spokesman was quoted as suggesting that the timing of the announcement of the grant of the Exploration Licence (said to have been Christmas Eve in 2008) was "suspicious" and "sneaked out" in a press release.

722 These were doubtless serious allegations but any foundation for giving credence to them is not made out in the evidence before me.

723 It was not Chubb's case that the Minister had granted the Exploration Licence to DCM as a "favour" to DCM or to any "mate" (whether Mr Maitland or anyone else).

724 There is thus no room, on the evidence before me, for any conclusion that Mr Poole harboured any such suspicion. Quite properly, Mr Leopold did not put any such proposition to Mr Poole.

725 In those circumstances I cannot conclude that Mr Poole should have seen that there was any significant prospect of a public inquiry.

Jerrys Plains' Q&A and community meeting

726 I have dealt with this matter at [503] to [533] and, in particular, with Chubb's submissions concerning Mr Ransley's email of 27 July 2009 (in which he said he had attempted to keep Mr Maitland "right out of it for now so as to limit political attack"), the question asked by the Jerrys Plains Minewatch group concerning the "Minister?" and "ICAC?" and the answers given by DCM to the meeting of the Minewatch group to those questions.

727 Whatever may have been Mr Ransley's reasons for wanting to keep Mr Maitland "right out of it now so as to limit political attack", and assuming that those reasons were related to the publicity in the Sydney Morning Herald and on the ABC News on 20 and 23 July 2009, the fact is that Mr Maitland attended the Jerrys Plains Minewatch meeting and subjected himself to questions from the floor.

728 The question concerning "ICAC?" in the Minewatch Q&A, was not pursued at the meeting and, after the meeting, on the evidence before me, there was no further controversy, whether in the press, or by the Minewatch group concerning DCM or the grant of the Exploration Licence. As I have said, on the evidence, the controversy disappeared in just over a week.

729 In those circumstances I am not persuaded to reject Mr Poole's evidence that he did not, subjectively, believe that there was any prospect of there being a public inquiry about the circumstances in which the Exploration Licence was granted. Nor am I persuaded that any reasonable person in his position would, on this evidence, come to a different conclusion.

730 I do not consider that the "huge profits" (Chubb's expression: see [66(2)] above) that Mr Poole may have anticipated making, or in fact made from the "back door listing" of DCM takes the matter any further.

731 As I have said, whatever it was that in fact led to the ICAC inquiry is not in evidence before me.

Conclusion

732 In those circumstances, my conclusion is that Chubb has failed to make out both the "Misleading Submission" and the "EL Grant Controversy".

733 It follows that Chubb has failed to establish that Mr Poole acted in breach of his duty of disclosure and failed to establish that Mr Poole was "cognisant" of any facts or circumstances which he had reason to suppose might afford a valid claim for a future claim by him under either the DCM or NuCoal policies.

Further matters for consideration

734 It follows from these conclusions that there are a numbers of issues raised by the parties that it is not necessary for me to decide.

735 One further matter which must be considered, however, is whether Mr Poole's entitlement to an indemnity is under the DCM policy or the NuCoal policy.

Which policy responds to Mr Poole's claim?

736 I accept Chubb's submission that it is the DCM policy covering the period 9 November 2009 to 30 June 2010 (with an Extended Reporting Period to 30 June 2017) that is the policy which responds to Mr Poole's claim.

737 This conclusion is a consequence of the proper construction of Extension 2H of the DCM policy and by reason of Exclusion 4A(i) ("the Prior Notice" exclusion) in the NuCoal policy.

Extension 2H of the DCM policy

738 Extension 2H of the DCM policy provides for an "Extended Reporting Period" in respect of conduct occurring before 30 June 2010. A notification made in the Extended Reporting Period is deemed to be made in the policy period immediately preceding the commencement of the Extending Reporting Period; that is the period to 30 June 2010.

739 Documents produced by DCM's insurance broker suggest that DCM's request for run-off cover under the DCM policy was made at the same time as NuCoal proposed for the NuCoal policy; that is as part of a package.

740 In those circumstances I accept Chubb's submission that it must have been the intention of the parties that, if a notification were to be made under Extension 2H of the DCM policy, a notification in relation to the same event could not be made under the NuCoal policy. I accept Chubb's submissions that reasonable people in the position of the parties would not be taken to have intended that there could be notification under two policies. That would serve no sensible purpose.

Exclusion 4A(i) of the NuCoal policy

741 Exclusion 4A(i) of the NuCoal policy is in the following terms:

"[Chubb] shall not be liable for Loss in respect of any Claim...based upon, arising from, or in consequence of any fact or circumstance if notice of such fact or circumstance has been given under any policy or coverage section of which this Coverage Section is a renewal or replacement or which it may succeed in time...".

742 Documents produced by DCM's insurance broker make clear that the NuCoal policy was intended to provide Directors and Officers coverage from 30 June 2010 in respect of the activities of the new entity from that date and that the DCM policy was placed into run-off in relation to events prior to that date. That being so, I accept Chubb's submission that the NuCoal policy either "succeed[ed] [the DCM policy] in time" or was a "replacement" of it for the purpose of Exclusion 4A(i).

743 Mr Poole gave notice to Chubb of the ICAC inquiry on 29 December 2011, purportedly under both policies. Under Extension 2H of the DCM policy, that notification was deemed to have been given in the policy period expiring on 30 June 2010; that is prior to the inception of the NuCoal policy.

744 For those reasons, my conclusion is that Mr Poole's entitlement to indemnity is under the DCM policy. In view of the conclusions to which I have come, I do not find it necessary to decide whether Mr Poole's entitlement to indemnity is under what Mr Coleman described as being the "Initial Contracts of Insurance" as opposed to the "2011 Contracts".

Quantification of Mr Poole's claim

745 Mr Poole has incurred legal costs in the sum of $658,745.16 in the course of the ICAC inquiry.

746 Mr Poole's entitlement is for indemnity in respect of "Defence Costs" which is defined to include:

"...reasonable costs, charges, fees (including but not limited to legal counsels' fees and experts' fees) and expenses...".

747 In the course of argument Mr Leopold suggested that Chubb might seek to have an assessment made of the reasonableness of the fees that Mr Poole incurred at ICAC.

748 There has been no order for the separate determination of that issue. There has already been a 16 day hearing during the course of which Chubb could have adduced evidence on the topic.

749 Nonetheless, I will now hear submissions from the parties as to whether there should be a reference out (or some other assessment) of the reasonableness of the fees that Mr Poole has incurred.

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Decision last updated: 19 December 2014