AED Oil Ltd v Puffin FPSO Ltd (No. 6)
[2011] VSC 115
•7 April 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 8380 of 2009
| AED OIL LIMITED (ACN 110 393 292) | Plaintiff |
| V | |
| PUFFIN FPSO LIMITED (COMPANY REGISTRATION NO. C37772) (INCORPORATED IN MALTA) | Defendant |
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JUDGE: | JUDD J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 23 March 2011 | |
DATE OF JUDGMENT: | 7 April 2011 | |
CASE MAY BE CITED AS: | AED Oil Ltd v Puffin FPSO Ltd (No. 6) | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 115 | |
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Practice and procedure – Costs – Application to vary injunction - Injunction discharged – Proceeding stayed pending arbitration – Supervision of injunction
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| APPEARANCES: | Counsel | Solicitors |
| For AED Oil Limited | Mr J J Gleeson SC with Mr A J Woods | Corrs Chambers Westgarth |
| For Puffin FPSO Limited | Dr J P Moore | Freehills |
HIS HONOUR:
On 10 March 2011, I delivered judgment on cross applications made by the plaintiff, AED Oil Ltd (supported in its application by AED Services PTE Ltd) and Puffin FPSO Ltd, for variations to conditions imposed on the grant of an injunction restraining Puffin from exercising its rights under a charge granted by AED Oil in support of a guarantee. The injunction, granted on 27 August 2009 was discharged and orders made for the return of guarantees and funds paid into court.
While Puffin sought the discharge of the injunction, it was not discharged on any basis advanced by Puffin, but because of changed circumstances that made it inappropriate for this court to embark upon a reconsideration of the conditions for the injunction and whether they should be modified. In the reasons for judgment I said,[1]
In my opinion, the parties ignored the most important changes in circumstances since the injunction was granted in August 2009 – the continuing stay granted by the Court of Appeal, the fact that an arbitrator has been appointed, and the fact that the arbitral process had commenced. A hearing is very likely to take place around the middle of this year. In such circumstances it seems desirable that the arbitrator, who is to determine all issues in the proceeding, will assume responsibility for the protection of the related competing rights and interests including the moulding of any order for security; equally, it seems undesirable or inappropriate for this court to embark upon a reconsideration of the basis for the injunction or whether conditions should be modified. For so long as the stay remains in force, the event defining the outer limit of the injunction granted by this court, involving an adjudication of the tax dispute, is beyond the control and supervision of this court. On the other hand, the arbitrator has the power to bind the parties by an ‘interim measure’ under Chapter IVA of Schedule 2 of the International Arbitration Act 1974 (Cth). The arbitrator is uniquely well placed to consider whether to make orders to protect rights and to supervise such orders whereas this court is not.
Should an application be made to the arbitrator for relief, and to mould an order for security, the timing and duration of the arbitral hearing may be a very relevant consideration, as might the possibility of an early determination of an issue or issues to resolve the validity of Puffin’s claims.
In these circumstances, I am firmly of the opinion that it is not appropriate for this court to continue to supervise the injunction, conditions and undertakings. That being so, the only course is to discharge the injunction, although not on the basis advanced by Puffin. No injustice is done to either party if the injunction is discharged, provided the parties are given an opportunity to seek adequate protection before the tribunal they have chosen to finally determine the issues in dispute between them. I propose to discharge the injunction, direct a return of all security to AED Oil and discharge the parties from their undertakings. Should Puffin hereafter seek to rely upon its rights under the charge it remains open for AED Oil to seek relief from the arbitrator. I will refrain from giving effect to these orders for 14 days, or such other period as the parties may agree, to provide them with an opportunity to consider their respective positions.
[1]AED Oil Ltd v Puffin EPSO Ltd (No 5) [2011] VSC 60, paras 9, 10, 11.
AED Oil submitted that it should be awarded its costs of the applications because it was broadly successful in achieving its objective and resisting Puffin’s attempt to have a new condition imposed. It submitted that it had sought the return of all security and funds paid into court and to have all issues between the parties resolved by the arbitrator. AED Oil sought to distinguish between the outcome of these applications and other interlocutory applications in which orders might properly be made for costs in the cause or to reserve costs. It submitted that in the present case the outcome of the arbitration would not assist the court in deciding whether the application for the return of the ‘GST funds’ was properly made because, subject to Puffin’s attempt to convert the GST funds into a condition to protect its claims for income tax, it was inevitable that those funds should be returned.
AED Oil also submitted that a determination of its application for costs may assist in the resolution of issues between the parties in the arbitration. I do not understand this submission, which seems to presuppose a particular outcome.
AED Oil submitted that had the parties been offered, as a possibility, the discharge of the injunction on the grounds set out in the reasons for judgment, it would have embraced that alternative. That submission was inconsistent with the position AED Oil adopted at the hearing. It sought the return of the GST funds and the maintenance of the injunction. It did not submit that the injunction should be discharged so that the arbitrator could deal with the protection of its position against rights asserted by Puffin. AED Oil maintained that stance notwithstanding an opportunity, presented by the court, to consider whether it was appropriate for the court to hear and determine the applications in circumstances where the resolution of the dispute by the court had been stayed and the whole of the dispute referred to arbitration.
To support its claim, AED Oil prepared a schedule delineating issues addressed in the applications, the outcomes, a monetary value where applicable, an estimate of time spent on the issue at the hearing and the volume of material presented by each party in relation to each issue. With the aid of that document, AED Oil submitted that it was obviously successful in respect of the ‘big ticket’ items such as the return of the GST amount and Puffin’s failure to achieve a new condition to support its claim for indemnity in respect of income tax. Such an analysis may have assisted had the court not decided to discharge the injunction for reasons other than those advanced by Puffin and contrary to the case advanced by AED Oil.
Puffin submitted that the costs of the applications should be reserved. It submitted that the usual order when an injunction is granted is that costs are reserved or made costs in the cause.[2] It submitted that neither party was successful and that the basis for the decision of the court to discharge the injunction supported the proposition that one party should not be made to pay another party’s costs. Puffin submitted that the order for costs should not be dictated by dicta, but by the outcome and the reasons for that decision.
[2]Petar v Mascedonian Orthodox Community Church St Petka Inc (No 2) (2007) NSWCA 142 at para 21; Adamson v Ede (2009) NSWCA 379 at para 160; Dal Pont, Law of Costs, 2nd ed, pp 432-433.
AED Oil resisted such an approach. It submitted that there was no utility in reserving the costs of these applications until after the arbitration because the issues decided in the arbitration would be of no assistance in determining those costs. AED Oil also submitted that the elapse of time between the present and the completion of the arbitration may be such that a judge, confronted by an application for costs in this proceeding following the completion of the arbitration, may be at a disadvantage, having to trawl through recollections about the applications when the facts and circumstances are fresh in mind today.
While the passing of time may make it more difficult to recall events and circumstances not recorded in the reasons for judgment, the court may be confident in this case that any submissions on costs will be well researched and vigorously presented by competent counsel on both sides.
While it is true that the costs of a successful application for an injunction will ordinarily be made costs in the cause, or reserved pending the hearing and determination of the principal proceeding, applications to vary an injunction may fall into a different category. AED Oil sought the return of guarantees and funds paid into court as a condition of the injunction upon that condition having been satisfied. On the other hand, Puffin had successfully sought the introduction of that condition to protect its position. It might be argued that Puffin should not have resisted the application, having derived the benefit of the condition. On the other hand, Puffin was exposed to a depleting asset supporting the undertaking as to damages.
In my opinion it is not appropriate to order that one party pay the costs of the other party when both failed in its objective. Nor is it appropriate that each party bear its own costs when the respective merits of their competing positions will be resolved in the arbitration. Ultimately, an appropriate order for costs on these applications can only be made after consideration of the merits of the issues in the arbitration. The notices of demand may be declared invalid. Puffin may be vindicated in asserting its entitlement to an indemnity for the tax amount. Puffin may issue new and different demands. The position in relation to the unpaid invoices will become clear. Puffin may be found to be entitled to appoint a receiver.
With the exception of the order for costs made by the Court of Appeal in relation to the application for a stay and the appeal, costs have been reserved. AED Oil submitted that it was appropriate that liability for those costs be determined after the conclusion of the arbitration but that the costs in relation to the applications to vary the injunction were in a different category. In my opinion they are not. The positions adopted by the parties in these applications will be informed by the outcome of the arbitration. Accordingly, the resolution of the dispute over costs should be reserved until the conclusion of the arbitration.
I will reserve all parties’ costs of the applications.
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