Clive Palmer’s company Mineralogy ordered to pay more than $14.5m by Queensland Court of Appeal

The Queensland Court of Appeal today denied the appeal lodged by Mineralogy and found the guarantee issued by Clive Palmer, Director of Mineralogy had not been waived by amendments to the original contract nor by Mineralogy releasing BGP (the company to whom the guarantee was given and who sued for payment of outstanding debts) from alleged contractual breach.

In July 2010 Clive Palmer executed a two page guarantee on behalf of Mineralogy to BGP with an introductory paragraph requesting that BGP enter into a contract with a subsidiary company (which was later renamed Palmer Petroleum) and guaranteed that if the contract was entered into, Mineralogy guaranteed that Palmer Petroleum would duly perform it’s contractual obligations.

The dispute before the Court of Appeal revolved largely around whether or not BGP was owed amounts as per the original contract for services rendered. Mineralogy appealed on 11 grounds seeking primarily to persuade the Court that they were not liable to BGP for any amount.

In summary, the basis of Mineralogy’s arguments to the Court were:

  1. That it was not bound by the guarantee because its liability had been discharged or released and the Court should declare as such; and/or
  2. Deeds amending the original contract were so fundamental that they substituted the contract for a new contract to which the Guarantee did not apply; and/or
  3. The Guarantee was discharged by releasing BGP from alleged contractual breaches by operation of the law of guarantees; and/or
  4. That a key section of the contract should be interpreted to mean that once there had been unsatisfactory performance by BGP, Palmer Petroleum was no longer liable to pay for any work done by BGP after that point; and/or
  5. That the same matters claimed by Palmer Petroleum to have constituted unsatisfactory performance by BGP meant that BGP demanding payment for unpaid invoices amounted to unconscionable conduct; and/or
  6. That the guarantee should be void by virtue of BGP engaging in misleading or deceptive conduct in contravention of the Trade Practices Act 1974 (Cth) by misrepresenting its skill and competence to provide a report regarding the prospective existence of oil and related substances.

The Court rejected the above arguments finding the ordinary meaning of the word ‘Amendment’ (and it’s substitutes) applied and that general propositions relied upon by Mineralogy to ‘read down’ a particular section of the contract (point 4 above) were insufficient given that a contract of guarantee is construed ‘strictly’ by the Law. The Court noted that the doctrine of ‘Strictissimi Juri’ occupied a wider ambit than that construed by Mineralogy in their arguments.

With respect to Mineralogy’s argument relating to unsatisfactory performance by BGP, Justice McMurdo noted that much of Mineralogy’s argument was based on a misinterpretation of BGP’s pleading and once that was set aside, what remained was a challenge to the findings of the primary judge about the expert evidence rather than an error in making the original findings or interpretation of the relevant provisions of the Contract. Thus, there was no basis to disturb the primary judge’s rejection of the claim of unsatisfactory performance.

Eight years after the original guarantee was executed, it has been upheld by the Court of Appeal with Mineralogy now liable not just for the amounts covered by the guarantee but at least a portion of the legal costs incurred by BGP seeking redress for unpaid invoices.

Justice Doesn’t Just Happen.

Be Engaged. Be Informed. Be Curious.

 

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