Blue Sky Offshore Services Pte Ltd v Bredenkamp and Hughes - [2017] WASC 213

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: BLUE SKY OFFSHORE SERVICES PTE LTD -v- BREDENKAMP & HUGHES [2017] WASC 213

CORAM: MASTER SANDERSON

HEARD: 25 JULY 2017

DELIVERED : 3 AUGUST 2017

FILE NO/S: CIV 1455 of 2017

BETWEEN: BLUE SKY OFFSHORE SERVICES PTE LTD
Plaintiff
AND
DANIEL BREDENKAMP & BRYAN HUGHES in their capacities as the joint and several deed administrators of HYDRA ENERGY (WA) PTY LTD (Subject to a Deed of Company Arrangement)
Defendants

Catchwords:

Defendants' application for summary judgment - Turns on own facts

Legislation:

Nil

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff: Mr L A Warnick
Defendants: Mr J C Vaughan SC

Solicitors:

Plaintiff: Clifford Chance
Defendants: Clayton Utz

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

Henderson v Curtis [2008] WASC 283

MASTER SANDERSON: This was the defendants' application for summary judgment. Although the principles of summary judgment are well understood it is worth restating them in the context of a defendant's application. As Beech J said in Henderson v Curtis [2008] WASC 283 the principles which apply to summary judgment applications generally are:
(a)summary judgment will be granted only when there is no real question to be tried and no fairly arguable point to be brought forward;
(b)it is only in the clearest of cases, where there is a high degree of certainty about the ultimate outcome of the proceedings if it went to trial that summary judgment ought properly be granted;
(c)the power to order summary judgment is one that should be exercised with great care;
(d)the overall legal burden on persuasion lies on the applicant for summary judgment but the party showing cause assumes an evidentiary burden;
(e)while the court may determine any difficult question of law on such an application it will often be appropriate to leave the determination of such questions for trial.
In the case of summary judgment applications by the defendant, two further criteria are relevant. First it must be assumed the relevant facts supporting the plaintiff's claim are found in the statement of claim. There is no warrant for the assumption of material facts which are not found in the pleading. This stands in contrast to an application for summary judgment by a plaintiff. When the application is made the defendant should not have filed a defence. But even if a defence has been filed, it is open to a defendant to raise any point at all in answer to the plaintiff's claim. Essentially, the defendant is at large and is not constrained by any pleading limitation.
The second factor particular to applications for summary judgment by the defendant is that should the defendant's application fail they have a right of appeal. Should a plaintiff's summary judgment application fail they have no right of appeal. Generally speaking when a plaintiff's application fails only the briefest of reasons is necessary. Only in exceptional cases are written reasons provided. But, if a summary judgment application by a defendant fails the reasons why it failed need to be carefully articulated. This requires a delicate balance between explaining the reasoning leading to the dismissal of the application while not determining any of the issues which must be resolved at trial. The Court of Appeal is entitled to expect reasons which disclose the process that lead to the dismissal of the application. The parties are entitled to a decision which does not purport to determine any of the issues between them.
Turning then to the statement of claim. The defendants are the deed administrators of Hydra Energy (WA) Pty Ltd (Hydra) which is subject to a deed of company arrangement. In October 2016, Hydra and the administrators commenced negotiations of a transaction pursuant to which the plaintiff would acquire all or some of the assets of Hydra. On 21 November 2016, Blue Sky, Hydra and the administrators entered into an Exclusivity Deed. I will deal with the relevant terms of this deed below. For present purposes it is enough if I say that the deed required Hydra, the administrators and the administrators' staff not to procure or even discuss any possible third party approach to acquire the assets of Hydra. The plaintiff alleges that a Mr Paul Nimmo, the sole director of Hydra, did in fact procure a third party offer for the assets of Hydra. In the end the assets were sold to the third party. The plaintiff alleges the defendants were in breach of the exclusivity deed and are therefore liable to the plaintiff in damages.
As part of the defence, the defendants allege they had no control over Mr Nimmo and therefore if there was a breach of the Exclusivity Deed it was not they who were at fault. However, this is not the case which is being advanced on the summary judgment application. Whatever the merits of that defence, it can be put to one side for the purposes of this application. In this application, the defendants say that the terms of the exclusivity deed are such they cannot possibly be liable to the plaintiff as alleged or at all.
A copy of the exclusivity deed is found as attachment BKH‑7 to the affidavit of Bryan Kevin Hughes sworn 21 April 2017 and filed in support of the application. For present purposes cl 2.1, cl 2.2 and cl 3 are relevant. They read as follows:
2.1 Rights granted to the Proponent
(a)During the Exclusivity Period, Hydra WA grants to the Proponent, the exclusive right to conduct further due diligence in respect of the assets and determine if it wishes to make a proposal to proceed with a Transaction.
2.2 No dealings
(a)Subject to 2.2(b), during the Exclusivity Period, the Administrators must not, and must procure that Hydra WA and each of the Administrators' respective representatives and Administrator Staff do not, directly or indirectly do or procure any other person to do any of the following:
(i)solicit, or invite, directly or indirectly, discussions or proposals in relation to a Competing Proposal;
(ii)initiate or continue discussions or negotiations in relation to a transaction that would be a Competing Proposal, whether any such discussions or negotiations are solicited or encouraged by the Administrators or otherwise; and
(iii)enter into any transaction that would be a Competing Proposal.
(b)For the avoidance of doubt, Hydra WA may, before the expiry of the Exclusivity Period, receive an unsolicited bid from a third party and accept or enter into a transaction pursuant to such bid if that would be in the interests of creditors of Hydra WA (Superior Proposal), provided that before entering into such transaction:
(i)the Administrators provide the Proponent with written notice of the terms of such Superior Proposal (including the key terms of such transaction, including the consideration being offered, the Assets being acquired and the proposed timing of that transaction); and
(ii)the Proponent have not, within three (3) Business Days of receiving written notice of the terms of any unsolicited Superior Proposal presented to Hydra WA in accordance with clause 2.2(b)(i) (Matching Period), submitted a written proposal to the Administrators which the Administrator's, acting reasonably and in good faith, determine provides an equivalent or better outcome for creditors of Hydra WA than the Superior Proposal.
3 Administrators' liability
(a)The Proponent acknowledges that this deed is executed by the Administrators on behalf of Hydra WA in their capacity as agents of Hydra WA and that the Administrators are not liable in any capacity, under this deed.
(b)Notwithstanding any other provision of this deed or any applicable law, the Administrators make no representations or warranties:
(i)under or in respect of or in connection with this deed or any transaction contemplated under this deed; or
(ii)in respect of any party or transaction over which the Administrators have no control.
(c)The Proponent releases the Administrators and each Administrator Staff from all claims (howsoever arising, and whether arising in contract, tort, under statute or otherwise) it may have or claim to have or, but for this release might have had against the Administrators or Administrator Staff connected with or arising out of this deed.
Against that background, the defendants advanced two arguments. First, they say the deed makes it plain they are agents of a disclosed principle - that is, Hydra Energy. As such, they bear no personal liability for any breach of the agreement. In support of that proposition they rely on Halsbury's Laws of Australia [15] ‑ [320] which says:
Where an agent in making a contract discloses both the existence and the name of a principal on whose behalf the agent purports to make it, the agent is not, as a general rule, liable on the contract to the other contracting party, whether there was in fact authority to make it or not.
For its part the plaintiff does not disagree with that statement of principle, rather it is said that it is 'a general rule' which does not apply in all cases. If it can be shown that the agent was the real principal then the agent/principal will be liable. That the plaintiff says is this case.
To support that submission reference is made to cl 2.2(a). That clause is directed squarely at the administrators. It does include Hydra but the obligation falls squarely on the administrators and the fact they are to be regarded as agents of Hydra is neither here nor there. By the very wording of the clause they have undertaken personal liability as principles.
In my view, that proposition is arguable. Put in another way, I could not conclude the submission of the plaintiff's is so hopeless as to not require further examination. It would not be appropriate to enter judgment for the defendants on this point.
The defendants second argument relates to cl 3(a) which in the defendants' submission relieves the defendants of any liability in any circumstances whatsoever.
In response to this submission the plaintiff's rely on what is generally known as 'the main purpose rule'. Counsel referred to Contract Law in Australia (6^th ed) JW Carter, where at [14-13] the learned author explained the principles in the following terms:
The main purpose rule. What is usually described as the 'main purpose' rule has two aspects. One aspect was expressed by Lord Halsbury LC in Glynn v Margetson & Co. 'Looking at the whole of the instrument, and seeing what one must regard ... as its main purpose, one is must reject words, indeed whole provisions, if they are inconsistent with what one assumes to be the main purpose of the contract'. He explained the main purpose of the contract before the court as being the delivery of perishable goods pursuant to a contract for carriage by sea. Although there was a clause in the contract permitting the carrier to 'proceed to and stay' at a series of ports 'for the purpose of delivering coals, cargo, or passengers or for any other purpose whatsoever', this had to be construed in the light of the main purpose of the contract. The carriage provided for was between Malaga and Liverpool and the cargo was found to be damaged owing to the delay involved in the vessel travelling 350 miles from Malaga to Burriana on the east coast of Spain before retracing her course. Had the vessel not deviated the cargo would have arrived in good condition, and so the contract was construed as if there was no liberty to deviate except to call at a port (or ports) in the course of the agreed voyage. In the result, the carrier could not invoke the clause.
The second form of the main purpose rule is indistinguishable from the fundamental breach rule. If the breach by the promisor is so serious that application of the exclusion clause to the breach would defeat the main purpose of the contract, the court will presume that the parties did not intend the exclusion clause to apply.
The continued existence of the main purpose rule as a rule of construction has been acknowledged, and courts have not usually interpreted literally an exclusion which would destroy contractual intent. Thus, it might be considered illusory to say 'I promise to do X', if the agreement totally excludes any liability for a failure to do X. However, it is doubtful whether there is a rule of law even in this context. Moreover, it is now clear that even as a rule of construction it is not as wide as originally conceived. For example, in Photo Production Ltd v Securicor Transport Ltd Lord Diplock restricted the main purpose rule to clauses which would deprive the parties' agreement of the 'legal characteristics of a contract'. More recently, in Nissho Iwai Australia Ltd v Malaysian International Shipping Corp Berhad the High Court held that an exclusion clause may apply to an event defeating the main object of the contract. It was also said that if the happening of the event covered by the clause will always defeat the main object of the contract, the clause will apply.
Counsel then referred back to cl 2 of the exclusivity agreement. He pointed out that cl 2.1 is 'rather weak'. That is to say it lacks content. The operative part of the deed is actually found in cl 2.2(a). Clause 2.2(a)(i) is what might be termed 'a no solicit' provision. Clause 2.2(a)(ii) is a 'no discussion' clause. It is those two subclauses which give the Exclusivity Deed teeth. As counsel submitted, without those two provisions, the Exclusivity Deed really has no purpose. Yet cl 3(a) on the defendants case protects the defendants even if they choose to ignore those two restrictions completely. It was counsel's submission that it was at least arguable the reading of cl 3(a) as proposed by counsel for the defendants offended the main purpose rule.
It seems to me the position is arguable. Once again I could not reach the conclusion that the plaintiff's argument on this point is so hopeless as to warrant striking out the action. Once that point is reached the application for summary judgment must fail.
Accordingly, the application for summary judgment will be dismissed. The costs of the application including reserve costs will be costs in the cause.