Baraka Energy & Resources Ltd v Statoil Australia Theta BV - [2014] WASC 198

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: BARAKA ENERGY & RESOURCES LTD -v- STATOIL AUSTRALIA THETA BV [2014] WASC 198

CORAM: EDELMAN J

HEARD: 29 MAY 2014

DELIVERED : 30 MAY 2014

FILE NO/S: CIV 1386 of 2014

BETWEEN: BARAKA ENERGY & RESOURCES LTD
Plaintiff
AND
STATOIL AUSTRALIA THETA BV
First Defendant
PETROFRONTIER (AUSTRALIA) PTY LTD
Second Defendant

Catchwords:

Interlocutory injunction - Joint venture - Interlocutory injunction to prevent respondents from asserting rights to deny applicant's access to data or information - No submissions on the the applicant's primary pleaded case in circumstances in which it is doubtful whether that case would entitle the applicant to the data and information - Strength of applicant's alternative case - No sufficient evidence of any prejudice to the applicant

Legislation:

Corporations Act 2001(Cth)

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff:     Mr L A Warnick
First Defendant             :     Mr D J Jackson
Second Defendant         :     Mr J R Ludlow

Solicitors:

Plaintiff:     Mizen & Mizen
First Defendant             :     Clifford Chance
Second Defendant         :     HWL Ebsworth Lawyers

Case(s) referred to in judgment(s):

Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2013] FCAFC 29; (2013) 296 ALR 465
Aura Enterprises Pty Ltd v Frontline Retail Pty Ltd [2006] NSWSC 902; (2006) 202 FLR 435
Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Limited (No 4) [2007] FCA 963; (2007) 160 FCR 35
Breen v Williams [1996] HCA 57; (1996) 186 CLR 71
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 88 ALJR 447
Emeco International Pty Ltd v O'Shea [2012] WASC 282
Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49
Gloxinia Investments Ltd v Low [2013] NSWSC 1889
Hearne v Street [2008] HCA 36; (2008) 235 CLR 125
Hilton v Barker Booth & Eastwood [2005] UKHL 8; [2005] 1 WLR 567
Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303
John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1
JTA Le Roux Pty Ltd v Lawson [No 2] [2013] WASC 373
Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596
Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486
Todd v Novotny [2001] WASC 171
Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110
Whitegum Petroleum Pty Ltd v Bernadini Pty Ltd [2010] WASCA 229
EDELMAN J:

Introduction

The plaintiff, Baraka Energy, and the defendants, Statoil Australia and PetroFrontier, are involved in two oil and gas joint ventures in the Northern Territory. Both joint ventures are governed by a joint operating agreement. The Operating Committee of the joint ventures approved a 'Work Program and Budget' for 2014 on 4 December 2013, purportedly under the joint operating agreements. The Chairman of Baraka Energy, Mr C Vost, abstained from the vote. The minutes of the 4 December 2013 meeting of the Operating Committee disclose that Mr C Vost said that Baraka Energy was 'very pleased with the planning work' that had been completed by the operator (Statoil Australia) and 'noted the high quality of the work completed to date'.[1]
[1] Affidavit of Mr C Vost, 26 March 2014, attachment CV5, pages 264, 265.
Subsequently, on 1 January 2014, Baraka Energy disputed what it described as the 'validity' of the Work Program and Budget. Baraka Energy later declined to contribute to the financial cost of that Work Program and Budget. It says that by notices on 3 January 2014 it elected under the joint operating agreements, as it was entitled to do, to reduce its participating share in the joint ventures. But it also said that it would challenge the 'validity' of the Work Program and Budget.
Counsel for Baraka Energy characterised the 3 January 2014 notices as an unequivocal election, with immediate effect, not to contribute and to reduce its Participating Interest. He said that the notices given would reasonably have been understood as saying that an election was made immediately and that it would remain the contractual position 'if the Work Program and Budget is valid. But if [the] claim of invalidity succeeds [Baraka Energy] will be entitled to a [re]adjustment of [its] contractual rights'.[2]
[2] Submissions of Baraka Energy, 14 April 2014 [35].
The defendants say that Baraka Energy did not make the election required by the joint operating agreements. The defendants issued cash calls to Baraka Energy for contribution. The cash calls were not paid by Baraka Energy. The defendants say that this placed Baraka Energy in default.
This application for an interlocutory injunction was brought by Baraka Energy to restrain the defendants from acting upon their assertions of default. After a preliminary hearing, the defendants gave undertakings which reduced Baraka Energy's application to a short point. The point is whether, prior to trial, the defendants should be restrained from exercising any right to refuse access to Baraka Energy to 'any data or information relating to any operations under [the joint operating agreements]'.
Although the point is a short and confined one, the evidence and submissions on this application were substantial. The hearing took nearly a whole day because it was necessary to canvass much of Baraka Energy's case. My overall conclusion is that Baraka Energy has a prima facie case that would entitle it to the data and information in the limited categories it described at the hearing. But, at this preliminary stage, my assessment of Baraka Energy's case in relation to this asserted entitlement is that its case is not strong. There is also no sufficient evidence of any immediate prejudice to Baraka Energy if the injunction is refused. Further, it appears likely that Baraka Energy may receive the very data and information about which it is concerned in the discovery process. That discovery will begin within the next two weeks.
The application is refused.

The facts for the purposes of this application

Baraka Energy's pleaded claim, as well as the facts assumed for the purposes of this application, are combined in the discussion below.
Baraka Energy is involved in two oil and gas joint ventures in the Northern Territory. The other joint venturers are the defendants, Statoil Australia and PetroFrontier. Each of the two joint ventures is governed by a joint operating agreement. The two agreements are in substantially identical terms.
In each joint venture the interests of the parties were as follows: Statoil Australia 60%; Baraka Energy 25%; and Petrofrontier 15%. The operator is Statoil Australia.
The joint operating agreements are described in the statement of claim as 127 JOA and 128 JOA. This reflects the exploration permit numbers 127 and 128 to which each joint venture relates. The defendants also hold adjoining exploration permits, EP 103 and EP 104.
Baraka Energy pleads that on 4 December 2013, the Operating Committee of each joint venture purported to approve a Work Program and Budget for each joint venture. Mr C Vost, the chairman of Baraka Energy, attended the meeting of the Operating Committee but abstained from voting.[3]
[3] Amended statement of claim [20].
The primary allegation in Baraka Energy's statement of claim is that the Work Program and Budget is 'not valid', or is 'void'. It appears that this language is used to mean that the Work Program and Budget was not passed in compliance with the strict terms of the contract.
In very broad terms, Baraka Energy says that the Work Program and Budget is not 'valid' because[4]
(i) they do not comply with various requirements of each joint operating agreement,
(ii) they were submitted in breach of an implied obligation to act reasonably and in good faith,
(iii) they were prepared, presented and implemented in breach of fiduciary duty, and
(iv) they involved conduct that was unconscionable within the meaning of s 20 of the Australian Consumer Law.
[4] Amended statement of claim [21] - [22].
In its statement of claim, Baraka Energy seeks a final injunction to restrain the defendants from taking any further action to give effect to the Work Program and Budget.
Baraka Energy has an alternative claim. Its alternative claim is that if the Work Program and Budget is 'valid' then the defendants should be restrained from asserting or exercising any rights under the joint operating agreements which arise from cash calls and default notices issued to Baraka Energy.
Baraka Energy's alternative claim arises as follows.
It is common ground that, under cl 8.1(a) of the joint operating agreements, if the Budget were validly approved by the Operating Committee on 4 December 2013 then Baraka Energy had 30 days from that date to elect not to contribute to the budget and therefore to reduce its participating interest by dilution. A failure to make that election would mean that Baraka Energy was required to meet cash calls when they were issued. If Baraka Energy did not meet the cash calls then it would be exposed to the default consequences governed by cl 9 of the joint operating agreements.
Baraka Energy says that it was faced with a choice of two inconsistent rights:[5]
(i) to elect not to contribute and be diluted, or
(ii) to elect to contribute but face the risk of default.
[5] Submissions of Baraka Energy, 7 April 2014 [5]; Submissions of Baraka Energy, 14 April 2014 [6].
On 3 January 2014, Baraka Energy issued notices in relation to each joint operating agreement. In each notice, Baraka Energy disputed the 'validity' of the Work Program and Budget for 2014. It then said the following:[6]
That if, contrary to Baraka's claim of invalidity, the said Work Program and Budget is valid, Baraka hereby elects as at the date of this notice not to contribute to the said Work Program and Budget and elects to reduce its Participating Interest under the JOA with effect from the date of this notice [3 January 2014] in accordance with the provisions of Clause 8.1 of the JOA.
[6] Affidavit of Mr C Vost, 26 March 2014, attachment CV8, pages 277, 278.
On 5 February 2014, Statoil Australia wrote to Baraka Energy disputing that any proper election had been made in these notices.[7] Statoil Australia said that Baraka Energy's 3 January 2014 notices did not amount to an unequivocal election by Baraka Energy to reduce its Participating Interest.
[7] Affidavit of Mr C Vost, 26 March 2014, attachment CV11, page 284.
On 18 February 2014, Statoil Australia issued a cash call under each joint operating agreement.[8] The cash calls provided for 6 March 2014 as the due date for payment by Baraka Energy. Baraka Energy disputed the 'validity' of the cash calls, relying on its 3 January 2014 notices.[9]
[8] Affidavit of Mr C Vost, 26 March 2014, attachment CV12, pages 286, 287.
[9] Affidavit of Mr C Vost, 26 March 2014, attachment CV13, page 288.
The amount of the cash calls were, respectively, $283,296 and $288,242.[10]
[10] Affidavit of Mr C Vost, 26 March 2014, attachment CV12, pages 286, 287.
On 11 March 2014, Statoil Australia issued default notices to Baraka Energy. Statoil Australia relied on cl 9.1 of each joint operating agreement.[11] Statoil Australia also said that the Default Period would commence on 19 March 2014.[12]
[11] Affidavit of Mr C Vost, 26 March 2014, attachment CV14, page 290.
[12] Affidavit of Mr C Vost, 26 March 2014, attachment CV15, pages 292, 293.
Clause 9.2(a) provides as follows.
9.2     Operating Committee Meetings and Data
(a)Notwithstanding any other provision of this Agreement, the Defaulting Party shall have no right, during the Default Period, to:
(i) call or attend Operating Committee or subcommittee meetings;
(ii) vote on any matter coming before the Operating Committee or any subcommittee;
(iii) access any data or information relating to any operations under this Agreement;
(iv) consent to or reject data trades between the Parties and third parties, nor access any data received in such data trades;
(v) transfer all or part of its Participating Interest, except to non-defaulting Parties in accordance with this clause 9;
(vi) consent to or reject any Transfer or otherwise exercise any other rights in respect of Transfers under this clause 9 or under clause 13;
(vii)      receive its Entitlement in accordance with clause 9.4;
(viii) dilute its Participating Interest in accordance with clause 8;
(ix)       withdraw from this Agreement under clause 14; or
(x) take assignment of any portion of another Party’s Participating Interest in the event such other Party is either in default or withdrawing from this Agreement and the Permit.
Clause 9.2(b) also provides that during the Default Period:
(i) unless agreed otherwise by the non-defaulting Parties, the voting interest of each non-defaulting Party shall be equal to the ratio such non-defaulting Party’s Participating Interest bears to the total Participating Interests of the non-defaulting Parties;
(ii) any matters requiring a unanimous vote or approval of the Parties shall not require the vote or approval of the Defaulting Party;
(iii) the Defaulting Party shall be deemed to have elected not to participate in any operations that are voted upon during the Default Period, to the extent such an election would be permitted by clause 5.13 and clause 7; and
(iv) the Defaulting Party shall be deemed to have approved, and shall join with the non-defaulting Parties in taking, any other actions voted on during the Default Period.
At the same time as the Default Notices, Statoil Australia sent letters to Baraka Energy saying that unless Baraka Energy remedied its failure to pay the Cash Calls by 10 April 2014 then Statoil Australia and PetroFrontier 'may elect to require Baraka to completely withdraw from [the joint operating agreements] and the Permit'.[13] This consequence is provided in cl 9.4(d):
If a Defaulting Party fails to fully remedy all its defaults by the thirtieth (30^th) Day following the date of the Default Notice, then, without prejudice to any other rights available to each non-defaulting Party to recover its portion of the Total Amount in Default, each non-defaulting Party shall have the option, exercisable at any time thereafter during the Default Period, to require that the Defaulting Party completely withdraw from this Agreement and the Permit. Such option shall be exercised by notice to the Defaulting party and each non-defaulting Party. If such option is exercised, the Defaulting Party shall be deemed to have transferred, pursuant to clause 14.6, effective on the date of the non-defaulting Party’s or Parties’ notice, its Participating Interest to the non-defaulting Parties. Notwithstanding the terms of clause 14, in the absence of an agreement among the non-defaulting Parties to the contrary, any transfer to the non-defaulting Parties following a withdrawal pursuant to this clause 9.4(d) shall be in proportion to the Participating Interests of the non-defaulting Parties.
[13] Affidavit of Mr C Vost, 26 March 2014, attachment CV15, pages 292, 293.

The undertakings offered and the interlocutory injunction sought

The interlocutory injunction that was initially sought by Baraka Energy was far broader than the interlocutory injunction that is now pursued. Most of the orders sought in the interlocutory injunction were rendered unnecessary as a consequence of undertakings given by the defendants to the Court. The identical undertakings by each defendant are as follows.
Upon [Baraka Energy] giving the usual undertaking as to damages:
1.The [respective defendant] undertakes that it will not rely on any of its rights under clauses 9.2(a)(i), (ii) or (iv) to (x) (inclusive) and 9.2(b) of the 127 JOA and the 128 JOA (each as identified in the amended statement of claim dated 21 March 2014) (statement of claim) as a basis for denying to [Baraka Energy] any of the rights identified in those provisions.
2.This undertaking will remain in force until the earlier of:
a. the [respective defendant] giving 14 days' notice in writing to [Baraka Energy] that it intends to exercise its rights under any of clauses 9.4(a)(i), (ii) or (iv) to (x) (inclusive) and 9.2(b) of the 127 JOA and the 128 JOA (so that on expiry of the 14 days this undertaking will no longer apply in respect of the clauses identified in the notice); or
b. the disputes the subject of the statement of claim are resolved either by agreement with [Baraka Energy] or by determination by the court in these proceedings or otherwise.
3.This undertaking is given without prejudice to all of the [respective defendant's] other rights and remedies under the 127 JOA and the 128 JOA and the [respective defendant] expressly reserves all such other rights and remedies.
It is common ground that those undertakings protect Baraka Energy from the consequences of being classified as a Defaulting Party under the joint operating agreements, with one exception. The exception is the issue in this application.
The exception is that the defendants say that Baraka Energy's alleged default means that, under cl 9.2(a)(iii), Baraka Energy has no right to 'access any data or information relating to any operations under [the joint operating agreements]'.
This application by Baraka Energy's chamber summons dated 26 March 2014, and amended on 29 May 2014, is to restrain each defendant until after judgment in this action, or further order, 'from asserting or exercising any rights under cl 9.2(a)(iii) of either the 127 JOA or the 128 JOA arising from the [cash calls or default notices]'. During oral submissions, counsel for Baraka Energy confined the terms of the injunction further to seek only a restraint from relying upon cl 9.2(a)(iii) in relation to the following matters in cl 4.4(a):
... the following data and reports relating to Joint Operations upon request (with costs charged to the Joint Account):
(i) copies of all logs or surveys, including in digitally recorded format if such exists;
(ii)daily drilling reports;
(iii)copies of all Tests and core data and analysis reports;
(iv) final well recap report;
(v) copies of plugging reports;
(vi)copies of final geological and geophysical maps, seismic sections and shot point location maps;
...
(xiii) other reports as directed by the Operating Committee.
The 'data and reports' will be matters 'relating to Joint Operations', as defined in cl 1.1, if they relate to 'those operations and activities carried out by Operator pursuant to this Agreement, the costs of which are chargeable to all parties'. But, as I explain below, Baraka Energy's primary case is that the operations and activities carried out by the defendants are not 'pursuant to the [joint operating agreements]'.

The test for whether an interlocutory injunction should be granted

The test to be applied to whether an interlocutory injunction should be granted was not in dispute. Counsel for the parties relied on cases including the principles I set out in Emeco International Pty Ltd v O'Shea.[14] It was common ground that the two, inter-related, questions to be asked were whether Baraka Energy has a prima facie case, and where the balance of convenience lies.
[14] Emeco International Pty Ltd v O'Shea [2012] WASC 282 [16] - [24] including the discussion in Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 [7] - [11] (Beech J).
Counsel for PetroFrontier submitted that the Court should take into account the nature of the injunction sought which, by restraining the defendants from relying on cl 9.2(a)(iii), was said to be effectively a mandatory interlocutory injunction. No different principles apply to mandatory interlocutory injunctions, although the nature of the application and the nature of the relief sought are relevant for the context in which those principles are to be assessed.[15]
[15] JTA Le Roux Pty Ltd v Lawson [No 2] [2013] WASC 373 [15] - [23].

Does Baraka Energy have a prima facie case?

Baraka Energy's primary case at trial

The question of 'prima facie case' requires consideration of whether there is a prima facie case that Baraka Energy will be entitled at trial to the relief it seeks on an interlocutory basis. This requires consideration of the whole of Baraka Energy's case including both its primary and alternative pleaded cases. For instance, if Baraka Energy had an extremely strong primary case, but its primary case was very unlikely to entitle it to the relief it seeks on an interlocutory basis, then an assessment of its prima facie case to entitlement to the relief sought on an interlocutory basis would be likely to be that any prima facie case for that relief is weak. This would be so because, on this example, a likely success on the primary case would mean that there is only a weak claim to the relief sought.
The difficulty in this case is that counsel for Baraka Energy expressly declined to make any submissions about the strength of its primary claim. The matter was put in issue by written submissions on behalf of PetroFrontier.[16] Nothing was said in written submissions in response. Oral submissions were made by counsel for PetroFrontier. And counsel for Baraka Energy was invited to make submissions on the strength of its primary claim in reply. But he declined to do so.
[16] Submissions of PetroFrontier, 17 April 2014 [10] - [13].
The submissions on behalf of PetroFrontier suggest that Baraka Energy's primary claim might not rise to the level of a prima facie claim. I do not need to reach any final conclusion on this point and, in the absence of submissions on this point by Baraka Energy, I do not reach this conclusion. It is enough, for the purposes of this application, to say that on the very limited submissions and evidence before me, Baraka Energy's primary claim, if it is assumed to be a prima facie claim, is weak. This is so because of the significant difficulties identified by the defendants.
The first difficulty with Baraka Energy's primary claim that the defendants identify concerns obstacles to Baraka Energy's claims based upon (i) the failure to comply with various requirements of each joint operating agreement, (ii) the alleged breach of an implied obligation to act reasonably and in good faith, and (iii) the allegations of conduct that was unconscionable within the meaning of s 20 of the Australian Consumer Law. These matters are pleaded to result in the 'invalidity' of the 2014 Work Program and Budget.
One general obstacle for Baraka Energy in relation to these claims is cl 5.13 of the joint operating agreements. That clause provides that, subject to exceptions (none of which were said to be relevant) '[a]ll decisions taken by the Operating Committee pursuant to this clause 5 shall be conclusive and binding on all the Parties'. It is not immediately clear how it is unconscionable, unreasonable, or in bad faith for the defendants to rely upon decisions that the joint operating agreements provide to be binding decisions.
As to the plea that the Work Program and Budget was prepared, presented and implemented in breach of fiduciary duty, counsel for Baraka Energy submitted that a fiduciary relationship arose because the parties were involved in a joint venture. But no submission, nor authority, was identified for the proposition that fiduciary duties were owed between the parties due merely to the characterisation of the endeavour as a 'joint venture'.[17]
[17] Compare John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1, 21 [44] (the Court).
Another significant obstacle to the fiduciary duty argument at trial will be cl 15.1 which provides that '...[i]n their relations with each other under this Agreement, the parties shall not be considered fiduciaries except as expressly provided in this Agreement'.[18]
[18] See Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Limited (No 4) [2007] FCA 963; (2007) 160 FCR 35, 77 [281] (Jacobson J); Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2013] FCAFC 29; (2013) 296 ALR 465, 475 [61] (the Court).
Although I received no submissions from Baraka Energy concerning the strength of its primary claim, counsel for Baraka Energy did make submissions concerning its alleged entitlement, if that primary claim is successful, to any 'data and reports relating to Joint Operations [carried out by Operator pursuant to this Agreement] upon request' (see cl 4.4(a) and cl 1.1). It suffices to observe that there are also serious obstacles to such an entitlement.
One obstacle is that this entitlement is not relief which is sought.
Another obstacle is that any 'invalidity' or 'void' nature of the Work Program and Budget may mean that these are not activities 'carried out by [the] Operator pursuant to' the joint operating agreements.
Counsel for Baraka Energy asserted that if Statoil Australia is acting in breach of its 'contractual and/or fiduciary duties as a Joint Venturer and Joint Venture operator' it cannot carry on those operations 'with immunity from any requirement to provide information to fellow Joint Venturers about what it is doing'.[19] Putting aside the difficulties concerning whether the relationship could be characterised as fiduciary, there are difficulties concerning whether a positive obligation to disclose data and information could arise as an incident of fiduciary duties.[20] There are also difficulties concerning whether the requirements for implication of a term[21] have been met.[22]
[19] Submissions of Baraka Energy, 20 May 2014 [28].
[20] Compare Breen v Williams [1996] HCA 57; (1996) 186 CLR 71, 83 (Brennan CJ), 92 (Dawson & Toohey JJ), 108 – 110 (Gaudron & McHugh JJ), 137 - 138 (Gummow J).
[21] Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337, 347 (Mason J, Stephen & Wilson JJ agreeing); Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 605 - 606 (Mason J; Gibbs, Stephen & Aickin JJ agreeing).
[22] Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2013] FCAFC 29; (2013) 296 ALR 465, 477 - 478 [75] - [78] (the Court).
In summary, and acknowledging the limitations based on lack of submissions and absence of evidence directed to the primary claim, I consider that the obstacles faced by Baraka Energy's primary claim are sufficient that it is necessary to turn to its alternative claim in order to assess the strength of any prima facie claim that Baraka Energy has to restrain the defendants from asserting or exercising any rights under cl 9.2(a)(iii) to deny access to the relevant documents and data.

Baraka Energy's alternative case at trial

Clause 8.1 provides as follows.
8.       DILUTION
8.1     Election to not contribute
(a) On and from the Farmin Completion Date, each Party may, within 30 days after the Operating Committee has approved a Budget, notify the Operator that it elects not to contribute to that Budget and to reduce its Participating Interest as provided below.
(b)If a Party does not make an election to reduce its Participating Interest in accordance with this clause 8.1, it will be deemed to have elected to contribute to the relevant Budget.
(c)        For the avoidance of doubt:
(i) if a Party does not make an election to reduce its Participating Interest in accordance with this clause 8.1, a failure by that Party to contribute to Joint Account expenses shall be governed by the other terms of this Agreement, including the provisions relating to default in clause 9; and
(ii) this clause 8 shall not prevent the Parties from invoking the procedures relating to Exclusive Operations as set out in clause 7.
Clauses 8.2 and 8.3 are as follows.
8.2 Dilution of non-contributing parties interest
If a Party (Diluting Party) fails to duly make a contribution to the Joint Account expenses in proportion to its Participating Interest that it is obliged to make under this Agreement, then the Participating Interest of that party in the Joint Operations shall dilute in accordance with the following formula (and the Participating Interest of the other Party shall increase accordingly):
Where:

I

=

the Participating Interest of the Diluting Party

DPE

=

the total Joint Account expenses paid or deemed to have been paid by the Diluting Party as at the date of the calculation; and

TE

=

the total Joint Account expenses paid or deemed to have been paid by the Parties as at the date of calculation.

8.3Further dilution
It is further agreed by the Parties that if a Party pays the share of Joint Account expenses that should have been paid but was not paid by the other Party the dilution of the Participating Interest of the non-contributing party shall be diluted at a rate of 150% of the rate calculated in accordance with the above formula.

The question relevant to this application, arising from Baraka Energy's alternative claim, is whether Baraka Energy made an election 'to reduce its Participating Interest' (cl 8.1(b), cl 8.1(c)(i)) or, possibly, and which may amount to the same thing, whether Baraka Energy made an election 'to contribute to that Budget and to reduce its Participating Interest' (cl 8.1(a)).
The parties all made substantial submissions concerning the meaning of the concept of 'election' at common law. Those authorities are of limited assistance where the question is the meaning of the word in a particular contract. The meaning of the contractual word 'election' is found in the words of the joint operating agreement in context. It is not the common law meaning of election.[23]
[23] See also Whitegum Petroleum Pty Ltd v Bernadini Pty Ltd [2010] WASCA 229 [37] (Buss JA, Murphy JA agreeing).
Counsel for Statoil Australia relied on remarks of Lord Steyn in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd[24] that if
notices under contractual rights reserved contain errors they may be valid if they are 'sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt as to how and when they are intended to operate' ... That test postulates that the reasonable recipient is left in no doubt that the right reserved is being exercised. (citations omitted)
[24] Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, 768.
There was no dispute on this application that this is also an accurate representation of Australian law.[25] For the purposes of this application, I proceed on the basis of that assumption as well as several others:
(i) The election must be unequivocal. This was common ground on this application.[26]
(ii) The election must have immediate effect. This was also common ground on this application.[27]
(iii)The election must include an election by Baraka Energy to reduce its 'Participating Interest'.
(iv)The notification of the election was required to be given to Statoil Australia within 30 days of 4 December 2013.
(v)The effect of a failure by Baraka Energy to elect to reduce its Participating Interest is that it will be 'deemed to have elected to contribute to the relevant Budget' (cl 8.1(b)).
[25] See Whitegum Petroleum Pty Ltd v Bernadini Pty Ltd [2010] WASCA 229 [91] - [93] (Newnes JA); Aura Enterprises Pty Ltd v Frontline Retail Pty Ltd [2006] NSWSC 902; (2006) 202 FLR 435, 445 - 446 [40] (Brereton J); Hometeam Constructions Pty Ltd v McCauley[2005] NSWCA 303 [148] (McColl JA, Ipp & Tobias JJA agreeing).
[26] Submissions of Baraka Energy, 14 April 2014 [23(b)]; Submissions of Statoil Australia, 8 April 2014 [20]; Submissions of PetroFrontier, 17 April 2014 [17].
[27] Submissions of Baraka Energy, 14 April 2014 [32]; Submissions of Statoil Australia, 8 April 2014 [26] - [30].
Against this legal background, the 3 January 2014 Notices for each of EP 127 and EP 128 can be considered. They are as follows:[28]
Baraka Energy & Resources Ltd ('Baraka') hereby gives the following notices to each of Statoil and Petrofrontier under the Joint Operating Agreement for EP127 dated the 18^th September 2009 (JOA):
1. That Baraka disputes that the Work Program and Budget for the 2014 year considered by the Operating Committee at its meeting on the 4^th December 2013 is a valid Work Program and Budget capable of being approved by the Operating Committee under the JOA and claims that the said Work Program and Budget is invalid on the ground that it is harsh, excessive, unreasonable and unfair in its effect on Baraka (as more fully explained by Baraka in its letter dated 3^rd January 2014 to Statoil and Petrofrontier);
2. That Baraka gives notice that it submits that the said dispute for resolution by arbitration under Clause 19.2 of the JOA and seeks an early order that the said Work Program and Budget be set aside and replaced by a valid Work Program and Budget; and
3.That if, contrary to Baraka's claim of invalidity, the said Work Program and Budget is valid, Baraka hereby elects as at the date of this notice not to contribute to the said Work Program and Budget and elects to reduce its Participating Interest under the JOA with effect from the date of this notice [3 January 2014] in accordance with the provisions of Clause 8.1 of the JOA.
[28] Affidavit of Mr C Vost, 26 March 2014, Attachment CV8, pages 278, 279.
The submission by counsel for Baraka Energy is essentially that each Notice constituted an unequivocal election by Baraka Energy immediately to reduce its Participating Interest. Counsel submitted that the Notices should be construed as though they said that this unequivocal election would remain the case unless Baraka Energy's claim of invalidity succeeded, in which case Baraka Energy would be 'entitled to a [re]adjustment of [its] contractual rights'.[29]
[29] Submissions of Baraka Energy, 14 April 2014 [35].
Baraka Energy supported this submission by reference to the words of the Notice 'as at the date of this notice' and 'with effect from the date of this notice'. Those words suggest an immediacy of the election.
Baraka Energy also supported its submission by an assertion designed to suggest that its interpretation is a businesslike interpretation which has the effect of producing a commercial result.[30] The assertion was that it is not commercially feasible for one party to make a decision that affects funding, but to purport to postpone the operation of that decision to a future time.[31] It was common ground between the parties that a postponed election is commercially unfeasible.[32] Baraka Energy therefore said that the Notices should not readily be construed as meaning that the election is postponed.
[30] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 88 ALJR 447, 454 - 455 [35] (French CJ, Hayne, Crennan, Kiefel JJ).
[31] Submissions of Baraka Energy, 14 April 2014 [36].
[32] Submissions of Statoil Australia, 8 April 2014 [26] - [30]; Submissions of Baraka Energy, 14 April 2014 [36].
There is also a further point that may provide some support for Baraka Energy's construction. Clause 1.1 defines 'Work Program and Budget' to mean 'a work program for Joint Operations and budget as described and approved in accordance with clause 6'. If cl 8.1(b) is construed to mean that Baraka Energy is deemed to have elected to contribute to a Budget properly approved under the joint operating agreement then it may be that the opening words of par 3 of the Notices could be construed simply to set out the legal position that the deemed consequences of contribution do not apply, despite the election 'at the date of the notice', if there is no Budget properly passed under the joint operating agreement.
It may be, therefore, that this case is different from the circumstance that 'a notice that is given "without prejudice" does not constitute an unequivocal election'.[33] In other words, it may be that this circumstance would be distinguishable if the notices are construed as being an election to reduce a Participating Interest under 'a work program for Joint Operations and budget as described and approved in accordance with clause 6'.
[33] Gloxinia Investments Ltd v Low [2013] NSWSC 1889 [23] (Young AJ).
Against these submissions, the defendants alleged that the proper, commercial, construction of the 3 January 2014 Notices is that Baraka Energy was indicating that it was 'going to challenge the validity of the 2014 Budget and only if that challenge is unsuccessful will Baraka Energy agree to choose dilution (with retrospective effect)'.[34]
[34] Submissions of Statoil Australia, 8 April 2014, [25].
Counsel for Statoil Australia pointed to a number of matters of context in support of its interpretation.
First, counsel pointed to the dispute about the validity of the Work Program and Budget and refers to contemporaneous communications about that dispute.[35] Counsel for Statoil Australia, rightly, submitted that par 3 of each of the Notices needs to be construed in the context of the preceding paragraphs including the reference to the dispute about validity and arbitration of that dispute.
[35] Affidavit of Mr Moore, 8 April 2014, attachment XDM 12, pages 134, 137.
Secondly, counsel for Statoil Australia pointed to contemporaneous communications on 3 January 2014 to Statoil Australia and PetroFrontier where Baraka Energy says that[36]
should it be established (contrary to our opinion) that the programs are valid programs under the JOAs, we will not be contributing in accordance with Clause 8.1, and accept to be diluted in accordance with Clause 8.2 of the JOA agreement. We have attached hereto 2 separate notifications accordingly. (Emphasis added).
[36] Affidavit of Mr Moore, 8 April 2014, attachment XDM 12, pages 136, 139.
Thirdly, counsel for Statoil Australia pointed to a draft ASX announcement from Baraka Energy dated 6 January 2014, but apparently provided in draft as part of the package of communications on 3 January 2014. The draft ASX announcement describes the dilution of Baraka Energy's participating interest 'if the work programs are valid' (emphasis added).[37]
[37] Affidavit of Mr Moore, 8 April 2014, attachment XDM 12, page 140.
Statoil Australia also relies on a number of cases. Perhaps the most closely relevant is the decision of Ipp J in Tern Minerals NL v Kalbara Mining NL.[38]
[38] Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486.
In Tern Minerals, Tern and Kalbara were parties to a joint venture. A first right of refusal clause in their contract provided for a notice to be given by Kalbara and for Tern to have an option 'to elect to purchase ... the interest covered by such notice upon the same terms and conditions or equivalent as set forth in such notice'. Kalbara notified Tern of an offer Kalbara had received for a sale of its interest. Tern purported to accept Kalbara's offer but offered a completion date that was a month later. There was a dispute between the parties concerning whether the election by Tern was 'equivalent'. Tern's solicitors wrote a letter to Kalbara's solicitors saying '[s]hould the court declare that your construction ... is correct, our client will complete the acquisition of your client's interest in accordance with the declaration of the court'.
The trial judge, Ipp J, held that this letter was not an election to purchase because it was conditional upon the Court making an appropriate declaration.[39] Further, Kalbara would have to wait for a decision of the Court before knowing whether or not there had been a binding exercise of the option by Tern, and a final decision (including any appeal) would not have been delivered in time.[40]
[39] Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486, 498.
[40] Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486, 499.
The circumstances of Tern Minerals are different from the circumstances in this case. The analogy might be closer if the dispute had concerned the validity of the election clause, if the condition could have been completed, and if there had been reference in the letter to the election taking immediate effect. But the case does indicate the need for an unequivocal communication having immediate effect and it shows that a conditional election might not be an election at all.

My overall assessment is that Baraka Energy has a prima facie claim on this issue. Counsel for Statoil Australia properly accepted that this means that Baraka Energy has a prima facie claim to the documents described in cl 4.4(a).
Full argument will be needed to reach any concluded view, including full consideration of cl 8 and all of the related provisions of the joint operating agreements. Arguments might evolve. And it will also be necessary to consider all of the evidence of the surrounding context of the 3 January 2014 Notices, not merely the evidence provided on this application. But my preliminary, and very tentative, view of Baraka Energy's alternative claim, based upon limited evidence and argument, and only for the purposes of the assessment of the balance of convenience, is that it is not a strong claim that, to paraphrase the case put by Baraka Energy:
Baraka Energy immediately and unequivocally elected to immediately reduce its Participating Interest and that the election would apply unless, and until, its claim of 'invalidity' succeeded, in which case Baraka Energy would be 'entitled to a [re]adjustment of [its] contractual rights'.
In reaching the conclusion that Baraka Energy's claim is not strong, I have not mentioned the oral submission by counsel for PetroFrontier that even if Baraka Energy succeeded in showing that its construction should be accepted this would not be sufficient because any condition (even one concerned only with whether an election is required which operates subsequently upon an immediate election) imposed upon an election means that the election is equivocal. My preliminary view is that this submission faces the difficulty I have explained above, which is that the election described in cl 8 of the joint operating agreements might be construed as only being an election that is concerned with 'a work program for Joint Operations and budget as described and approved in accordance with clause 6'.

Where does the balance of convenience lie?

The question of the balance of convenience is not independent of the strength of any prima facie case. In particular, 'as the apparent strength of the applicant’s case diminishes, the balance of convenience moves against the making of an order'.[41] The balance of convenience falls to be considered in the context of my preliminary assessment that Baraka Energy's prima facie case is not strong.
[41] Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 [11] (Beech J) citing Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49 at 54 - 55 and Todd v Novotny [2001] WASC 171.
The defendants assertion of prejudice was entirely in general terms. They asserted only a general prejudice that they would suffer if restrained from relying upon cl 9.2(a)(iii) in relation to the particular data and reports relating to Joint Operations under cl 4.4(a). That general prejudice was said to be effectively that they would lose the benefit of their asserted contractual right to withhold the particular data and reports in relation to the 2014 Work Program and Budget in circumstances in which, if they are successful at trial, Baraka Energy will have failed to elect to reduce its Participating Interest and failed to meet cash calls in relation to the 2014 Work Program and Budget.
Against this general assertion of prejudice, counsel for Baraka Energy relied on a number of assertions of particular prejudice arising from deprivation of access to the data and information described in cl 4.4(a)(i) - (vi) and 4.4(a)(xiii) of the joint operating agreements. In oral submissions these assertions were confined to three matters.
(i) That it would be unable to make informed decisions on any issue involving the exercise of its Joint Venture rights without access to data and information.
(ii) That it will be unable to comply with its reporting obligations under the ASX Listing Rules and the Corporations Act 2001 (Cth).
(iii)That it will be unable to sell its Joint Venture interests because any potential purchaser will need up to date information about the Joint Venture operations.
Each of the three matters can be considered in turn.
As to (i), the decisions upon which Baraka Energy relied were[42]
(a) whether to exercise its election to contribute to the 2015 Budget,
(b)whether and how to exercise its voting rights at any Operating Committee Meeting, and
(c)whether to elect to participate in a Completion of each well the subject of the 2014 Work Program in accordance with cl 6.1(f) of each joint operating agreement, and consequential decisions.
[42] Submissions of Baraka Energy, 14 April 2014 [52].
An interlocutory injunction is not needed to protect decisions by Baraka Energy concerning the 2015 Budget. As counsel for Baraka Energy accepted, this matter should go to trial later this year and it is very unlikely that a decision in this case will be delayed until 2015.[43]
[43] ts 54 (29 May 2014).
In an affidavit filed on 28 May 2014, Mr J Vost, a director of Baraka Energy, annexes Operating Committee votes in relation to approving authorisation for expenditure for drilling of EP 127 and EP 128. The votes have notice dates of 19 May 2014 and 22 May 2014 and they say that Statoil Australia considers that the proposal requires 'urgent determination'. However, there is no evidence concerning any specific matter on which information provided would affect the manner in which voting rights at any Operating Committee meeting would be exercised by Baraka Energy. Perhaps more importantly there is no evidence that Baraka Energy's vote on any particular matter could affect the outcome, and thus cause any irreparable prejudice to Baraka Energy, in circumstances in which, on one view, Statoil Australia holds a 60% interest in each joint venture.
Finally, as to any election to participate in a Completion of a well, clause 1.1 of the joint operating agreements defines Completion as 'an operation intended to complete a well through the Christmas tree as a producer of hydrocarbons in one or more Zones ...' A 'Christmas tree', counsel for Statoil Australia submitted, is the equipment that sits on top of the well.[44] There was no dispute that, on the evidence before the Court, completion is not a matter that will arise in 2014 where the program is concerned with exploration.[45]
[44] ts 88 (29 May 2014).
[45] ts 88 - 89 (29 May 2014).
As to (ii), the basis for the assertion of non-compliance with ASX Listing Rules was put in extremely broad terms. Counsel for Baraka Energy submitted that the obligation to comply with ASX Listing Rules requiring continuous disclosure included an obligation to provide information that Baraka Energy did not have. No specific provision was identified which imposed such a strict reporting requirement.
Counsel for Baraka Energy referred to Listing Rule 5.45. That Rule provides as follows:
An entity must not, and must ensure that all its child entities do not, enter a joint venture agreement to investigate or explore a mining tenement or a petroleum tenement, unless the agreement provides that if the entity requires it, the operator of the joint venture will give the entity all the information the entity requires to comply with the Listing Rules; and that the information may be given to ASX for release to the market if necessary for the entity to comply with the Listing Rules.
There might be doubt about whether this rule has been infringed by the particular default provision, cl 9.2(a)(iii), of the joint operating agreements. But even if Listing Rule 5.45 has been infringed, this occurred upon entry into the joint operating agreements. It is not a matter that would be cured by an interlocutory injunction.
Mr C Vost's affidavit evidence in relation to the ASX Listing Rules was also in very general terms:[46]
[I]f the Plaintiff is denied access to all information relating to joint venture information it will be unable to meet its reporting obligations under the Listing Rules of the Australian Securities Exchange (ASX), particularly the obligations in Chapter 5.
…
If Baraka was placed in a position of inability to gain access to joint venture information, this would have to be disclosed to ASX under the continuous disclosure requirements in Chapter 3 of the Listing Rules. From my experience of dealings with ASX I believe that this would be likely to result in quotation of Baraka's shares being suspended until information access was restored. This would mean that Baraka shareholders would be unable to trade their shares on the market.
[46] Affidavit of Mr C Vost, 15 April 2014 [7] - [8].
Mr C Vost did not explain the basis upon which his dealings with the ASX led him to this conclusion. Nor did he explain whether he had ever seen this to be a practice of the ASX. His unsupported evidence of opinion, without any further basis, has little weight.
The same difficulty faces the submission by counsel for Baraka Energy that the deprivation of information to Baraka Energy about the 2014 drilling program will mean that the market will be uninformed and, therefore, that Baraka Energy's shares will be suspended from trading by the ASX. Again, there is no supporting evidence for this assertion.
There are further difficulties with this assertion of prejudice. It appears, and it was submitted, that the defendants are listed entities (although not listed in Australia). Particular information that is required for reporting purposes may be required to be disclosed to other markets by those defendants. There is no evidence that the defendants would refuse to provide Baraka Energy with any information that is disclosed by the defendants to other markets. Indeed, there is no evidence that any such information has even been requested by Baraka Energy.
There may be an interesting issue concerning whether the suspension of a company from trading for a period of time amounts to prejudice relevant to the balance of convenience, but that issue need not be resolved in this case because it is open to Baraka Energy to approach the Court again for an interlocutory injunction if there were any sufficient evidence of an immediate threat concerning suspension of its shares from trading or if that event did occur.
As to (iii), even if the defendants were restrained from relying on asserted rights under cl 9.2(a)(iii) the possibility that Baraka Energy might sell its interest in the Joint Venture, in the shadow of this litigation, might be thought to be remote. Baraka Energy's evidence does not identify any prospective buyer. Nor does Baraka Energy suggest that any buyer would engage in serious discussions if the relevant information were provided. At its highest, the evidence of Mr C Vost is as follows:[47]
I have made contact with third parties about seeking buyers of either all or a portion of Baraka's equity in the two joint ventures but it is almost impossible to advance any serious discussion while Baraka is denied access to joint venture information on the basis that it is a Defaulting Party.
[47] Affidavit of Mr C Vost, 15 April 2014 [5] (sic: [9]).
On the current evidence before the Court, any prejudice to Baraka Energy in relation to a sale of its interest is insubstantial.
For these reasons, in the consideration of the balance of convenience, there is no irreparable prejudice to Baraka Energy arising from a failure to grant the interlocutory injunction sought. And on the evidence currently before the Court, any prejudice to it is remote and insubstantial.
There are also two further matters that weigh in the balance of convenience.
The first emerged during oral submissions. The defendants strongly deny that Baraka Energy is entitled to take the benefit of all work done and expense incurred under the 2014 Work Program and Budget without any contribution or dilution of its interest in the joint ventures. Counsel for Statoil Australia foreshadowed a possible counterclaim, or perhaps more accurately a contribution notice, against Baraka Energy on the basis that if Baraka Energy's primary claim is successful then Baraka Energy would have been unjustly enriched by the work done and expense incurred by the defendants. The defendants' defences, and any counterclaims, are due in less than two weeks. If such a plea is made then this may mean that all the documents and data that are sought by Baraka Energy would be immediately discoverable. And if Baraka Energy could provide a concrete basis for an assertion of the risk of suspension of its shares from trading then it could apply to the Court for release from its obligation only to use the documents for the purpose of this litigation.[48]
[48] Hearne v Street [2008] HCA 36; (2008) 235 CLR 125, 157 - 160 [105] - [108] (Hayne, Heydon & Crennan JJ).
The second matter is that there is no evidence of any specific request by Baraka Energy for any data and information described in cl 4.4(a)(i) - (vi) and 4.4(a)(xiii) of the joint operating agreements. It may be that the manner in which this litigation has been fought, and the fact that this interlocutory injunction has been so heavily contested, suggests that such a particular request might be denied. But, as I explain in the conclusion to these reasons, this is a matter that is crying out for a commercial solution. Counsel and solicitors before me demonstrated a proper, objective, approach to the litigation and, it can be hoped that such a reasonable and commercial attitude will, at least, avoid further interlocutory disputes.

Conclusion

The application must be dismissed.
This interlocutory application was argued by all counsel with great skill and in considerable detail. But the expense that appears to have been incurred on this interlocutory application is disturbing. This is especially so in the context in which (i) the cash calls currently in issue are for amounts of $283,296 and $288,242, (ii) the exclusive focus of Baraka Energy was on its alternative case that it had elected to dilute its interest by the amount of these cash calls, and (iii) the evidence suggests that Baraka Energy's shares are very thinly traded[49] and that it might not have the assets to meet the cash calls.[50]
[49] Affidavit of Ms Godhard, 26 May 2014, attachment KEG 4, page 6.
[50] See Affidavit of Mr Moore, 8 April 2014 [19], attachment XDM2, page 53; attachment XDM5, pages 73, 75A; Affidavit of Ms Godhard, 17 April 2014, attachment KEG2, page 13.
This matter will be listed for directions in my usual list on Wednesday next week, 4 June 2014. The parties should confer on orders to program this matter to a trial by September or October. But the matter still cries out for a commercial solution, particularly in the context of the mounting legal costs being incurred by the parties. Concurrently with the programming orders that I will make next week, the parties should give consideration to further mediation for, as Lord Walker of Gestingthorpe said in a slightly different context, 'the good name of the solicitors' profession'.[51]
[51] Hilton v Barker Booth & Eastwood [2005] UKHL 8; [2005] 1 WLR 567, 580 [47].

I	=	the Participating Interest of the Diluting Party
DPE	=	the total Joint Account expenses paid or deemed to have been paid by the Diluting Party as at the date of the calculation; and
TE	=	the total Joint Account expenses paid or deemed to have been paid by the Parties as at the date of calculation.