Orion’s belt: purchaser held to automatically-terminating agreement

The Supreme Court of Western Australia considered whether termination of an asset sale agreement was valid including whether specific performance should be granted. In finding against the plaintiff, the Court held the parties to a strict interpretation of the relevant agreements.

Background

Orion Resources Pty Ltd was a party to an Asset Sale Agreement entered into on 18 October 2024. Pursuant to the Asset Sale Agreement, Orion was to purchase mining assets associated with the Cloncurry Gold Project in north-western Queensland. The sellers were various companies with receivers and managers, liquidators and / or administrators appointed. Some of the mining assets were the subject of encumbrances in favour of Chinova Resources Pty Ltd (Encumbrances).

Completion under the Asset Sale Agreement did not occur by the agreed date of 3 November 2025. On 8 November 2025, the parties entered into an extension, release and termination agreement (ERT Agreement), pursuant to which they agreed that initial completion under the Asset Sale Agreement was to occur by a final deadline of 14 November 2025, failing which the Asset Sale Agreement would automatically terminate at 5:01pm on the same day. The parties agreed the variations were to be ‘strictly complied with’. Initial completion did not occur by the final deadline and at 5:15pm, an email was sent to Orion confirming the Asset Sale Agreement had automatically terminated.

Orion’s ability to pay the purchase price at completion was contingent upon it obtaining loan funds which were required to be drawn on 3 November 2025 (being the initial completion deadline). The first defendants were required to obtain releases of the Encumbrances for completion to occur and notified Orion at 4:51pm on 3 November that the releases had not been obtained. Orion did not draw funds on 3 November and its funder withdrew funding.

Orion commenced proceedings against the seller parties seeking a declaration that the termination was invalid and an order for specific performance of the Asset Sale Agreement. The defendants applied for summary judgment or orders striking out Orion’ statement of claim.

Findings

Orion argued that the first defendant’s failure to obtain releases of the Encumbrances caused its financiers to withdraw funding, resulting in the termination of the Asset Sale Agreement.

Justice Hill found there were four primary difficulties with this argument and held the parties to a strict interpretation of the terms of the ERT Agreement. Orion had agreed to a variation of the Asset Sale Agreement which meant that the Asset Sale Agreement would automatically terminate if it failed to pay, and the liquidators were only required to use reasonable endeavours to obtain releases of the Encumbrances. Orion agreed to the variation after funding had been withdrawn. Accordingly, the Asset Sale Agreement had terminated due to Orion’s own breach.

Justice Hill found that there was not a prima facie case or serious question to be tried that the termination of the Asset Sale Agreement on 14 November 2025 was invalid and granted summary judgment in favour of the defendants.

Implications

This case illustrates the courts’ reluctance to permit parties to avoid contractual obligations expressed in clear terms. More often than not, parties will be held to their bargain. A party that agrees to a variation to accommodate a counterparty’s breach will likely lose the right to rely upon that breach. Parties to a contract should obtain proper legal advice to ensure the contract operates as intended and their rights and obligations are clear. This is particularly the case for receivers and managers, liquidators and administrators when entering contracts for the benefit of creditors, often in condensed timeframes.