Callide Energy Pty Ltd v Park

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FEDERAL COURT OF AUSTRALIA

Callide Energy Pty Ltd v Park [2025] FCA 37  

File number: QUD 701 of 2024
Judgment of: SHARIFF J
Date of judgment: 3 February 2025
Catchwords:

CONTRACTS – contractual construction and interpretation – joint venture agreement – pre-emptive rights clauses – where a pre-emptive right is exercisable upon a change in control – privity of contract – agency – where a clause purports to impose obligations on a non-party company in a corporate group – whether a subsidiary is obliged to use reasonable endeavours to procure its parent companies to perform contractual obligations – where a joint venture participant ceases to be a subsidiary of its ultimate holding company – whether a defined term must yield to the wider context of the agreement – whether a defined term results in absurdity or inconsistency – “woodenly literal” approach

COURTS AND JUDGES – judicial comity – whether Court bound to follow earlier decision involving construction of same contractual provisions unless persuaded earlier decision “plainly wrong” – where earlier decision involved making of judicial directions under s 90-15 of the Insolvency Practice Schedule (Corporations)
Legislation:

Corporations Act 2001 (Cth) Sch 2 (Insolvency Practice Schedule (Corporations)), s 90-15

Corporations Act 1989 (Cth) Part 13 (Corporations Law), s 82 (repealed)

Federal Court (Corporations) Rules 2000 (Cth) r 2.13
Cases cited:

Angas Securities Ltd v Small Business Consortium Lloyds Consortium No 9056 [2016] NSWCA 182

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99

Australian Securities Commission v Melbourne Asset Management Nominees Pty Ltd [1994] FCA 1031; (1994) 49 FCR 334

Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd [1999] 1 AC 266

BHP Petroleum (Australia) Pty Ltd v Sagasco South East Inc [2001] WASCA 159

Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWSC 1302

Bligh Consulting Pty Ltd v Ausgrid [2017] NSWCA 95

BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPC 13; (1977) 180 CLR 266

Byland Holdings Pty Ltd v Pineland Property Holdings Pty Ltd [2009] NSWSC 1159

Chartbrook v Persimmon Homes Ltd [2009] 1 AC 1101

Cirrus Real Time Processing Systems Pty Ltd v Hawker Pacific Pty Ltd [2024] FCA 763

Cirrus Real Time Processing Systems Pty Ltd v Jet Aviation Australia Pty Ltd [2023] NSWCA 280; (2023) 113 NSWLR 80

Clark v Johnson [1967] SASR 279

Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337

Colbran, in the matter of Balsub Pty Ltd (in liquidation) [2023] FCA 1635

Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520

Current Images Pty Ltd v Dupack Pty Ltd [2012] NSWCA 99

Dockside Holdings Pty Ltd v Rakio Pty Ltd [2001] SASC 78; (2001) 79 SASR 374

Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd [2019] NSWCA 185; (2019) 101 NSWLR 679

Elisha v Vision Australia Limited [2024] HCA 50

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Details
Case
[2025] FCA 37
Decision Date

CaseChat Overview and Summary

Callide Energy Pty Ltd (CEPL) sought an interlocutory injunction to restrain the sale of shares in IG Power (Callide) Ltd (IGPC) by IGPC's then parent company, International Gas Energy Holdings (IGEH) to Sev.en Pty Ltd (Sev.en). The injunction was granted, and the matter proceeded to final hearing before the Federal Court of Australia. The court had to determine whether IGPC was bound by certain clauses in a Joint Venture Agreement (JVA) and whether these clauses were triggered by the proposed transaction. The first issue was whether IGPC, acting as IGEH's agent, was bound to provide a "Sale Notice" to CEPL under cl 9A.2(b) of the JVA. This raised questions about agency and the obligation to use reasonable endeavours to procure IGEH to give a Sale Notice. The second issue was whether IGPC was bound to provide notice to CEPL that it would cease to be a subsidiary of its ultimate holding company, OzGen UK, under cl 9B.2 of the JVA. This raised questions about the construction of the term "Ultimate Holding Company" and whether an implied term should be added to the JVA.

The court found that IGEH was not bound by cl 9A.2(b) of the JVA and that IGPC was not acting as IGEH's agent with actual authority to bind IGEH. Furthermore, IGPC was not obliged to use its reasonable endeavours to procure IGEH to give a Sale Notice to CEPL. The court also found that the term "Ultimate Holding Company" in cl 9B.2 should be given its ordinary meaning and that the court should not imply a term into the JVA. The court was not bound to follow an earlier decision involving the construction of the same contractual provisions unless persuaded that the earlier decision was plainly wrong.

The court dismissed CEPL's Amended Originating Application and ordered that the parties provide by email to the Associate to Shariff J short minutes of order reflecting the orders that should be made to dispose of the Cross-Claim in line with these reasons by 4pm on 5 February 2025 and, if they cannot agree, the matter be listed at 9.30am on 6 February 2025. The Applicant was ordered to pay the Respondents' costs of the Amended Originating Application and the Cross-Claim as taxed or agreed.

Orders

Orders of the court

1. The Amended Originating Application be dismissed.

2. The parties provide by email to the Associate to Shariff J short minutes of order reflecting the orders that should be made to dispose of the Cross-Claim in line with these reasons by 4pm on 5 February 2025 and, if they cannot agree, the matter be listed at 9.30am on 6 February 2025.

3. The Applicant pay the Respondents’ costs of the Amended Originating Application and the Cross-Claim as taxed or agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons that follow, CEPL has not made out its case in relation to either the First Question or the Second Question. The result is that the Amended Originating Application should be dismissed with costs and orders should be made as sought in the Cross-Claim, but I will allow the parties a short time to confer to agree upon orders to dispose of the Cross-Claim in line with these reasons. 2. RELEVANT FACTS2.1 The Original JVA The JVA was executed in 1998 by CEPL, IGPC and CPM (Original JVA). At that time, IGPC was named “Shell Coal Power (Callide) Ltd” and was a member of the “Shell Group” of companies. The Original JVA did not address the issues that might arise if there was to be a change in the ownership or controlling interest of IGPC. It did address the circumstance where one party could acquire the other’s “Interest” in the event that the other party became a “Defaulting Participant”: cl 7 of the Original JVA. That process is not presently relevant, but in substance it provided that in certain circumstances a “Non-Defaulting Participant” had a “right” to acquire the “Interest” of a Defaulting Participant: see cl 7.8 of the Original JVA. The Original JVA defined the word “Interest” as follows (which remained unchanged):‘Interest’ means the undivided right, title and interest of a Participant, expressed as a percentage, in:(a)the Joint Venture Property;(b)rights arising under this Agreement and the Related Agreement; and(c)any benefits arising from the foregoing (other than the proceeds of Electricity sales); and(d)each Participant’s issued ordinary shares in the capital of the Manager, The Original JVA also contained a clause dealing with “assignment” by either “Participant”, which relevantly provided as follows:9. ASSIGNMENT9.1 AssignmentA Participant (‘Assignor’) must not assign or otherwise deal with or alienate this Agreement or the Related Agreements or any right under this Agreement or any Related Agreement except:(a)to any person (‘Assignee’) with the prior written consent of each other Participant which will not be unreasonably withheld or delayed if:(i)the Assignee has agreed to be bound by the terms of this Agreement and the Related Agreements by a Deed of Assumption in accordance with Clause 9.2(a);(ii)the Assignor has demonstrated that the Assignee is reputable and of good financial standing and has the capability to fulfil all the obligations of the Assignor under this Agreement and the Related Agreements, or(b)to a Related Body Corporate (‘Related Body Corporate Assignee’) if the proposed Related Body Corporate Assignee has agreed to be bound by the terms of this Agreement and the Related Agreements by a Deed of Assumption in accordance with Clause 9.2(a).Such an Assignment has no force or effect until the Assignor and Related Body Corporate Assignee have complied with Clause 9.2 and have entered into a deed of covenant with the other Participants, including a covenant by the Related Body Corporate Assignee to the effect that if, at any time, it ceases to be a Related Body Corporate of the Assignor for any reason, the Related Body Corporate Assignee will immediately reassign the Interest to the Assignor or, if the Assignor is then no longer a Related Body Corporate of the company which was, at the date of the original Assignment, its Ultimate Holding Company, then to a Related Body Corporate of that former Ultimate Holding Company.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

On 15 November 2024, Derrington J made the directions sought by the Administrators: Park, in the matter of IG Power (Callide) Ltd (Administrators Appointed) (No 4) [2024] FCA 1316 (15 November Judgment). The result was a vindication of the position taken by the Administrators and Sev.en, and a reciprocal loss for CEPL. There was no appeal instituted from the orders made by Derrington J. Irrespective of whether it had any right to seek leave to appeal or appeal from those orders, CEPL took a different course in seeking its preferred outcome. At the time at which Derrington J had listed the matter for pronouncement of the orders that his Honour ultimately made, representatives for CEPL informed his Honour that the present proceedings had been commenced and thereupon pressed an interlocutory injunction seeking to enjoin the IGEH Share Sale Agreement from proceeding pending the urgent determination of these proceedings. That interlocutory injunction was granted. The matter was thereafter allocated for final hearing before me on 19 December 2024 as the Commercial and Corporations List Duty Judge. The parties read a number of affidavits in support of their respective cases. It is not necessary to specify these affidavits, which were contained in the Court Book that was economically and efficiently prepared by the parties’ representatives. The parties also tendered a Statement of Agreed Facts and the Court Book contained the relevant documents in chronological order. The parties filed written submissions and have since also filed supplementary submissions on matters arising from the oral hearing. With the assistance of the Court’s staff, I extended the sitting hours of the Court on 19 December 2024 to ensure that the hearing of the matter completed within the day given the urgency of the dispute and the availability of the parties’ representatives at that time of year. At the oral hearing before me, the Administrators foreshadowed the filing of a cross-claim in the present proceedings (Cross-Claim). The purpose of that Cross-Claim was to ensure, if there was any doubt, that this Court was seized with jurisdiction of a federal matter. The Cross-Claim has since been filed. It seeks to invoke the Court’s jurisdiction under s 90-15(1) of the IPS to make orders in relation to the external administration of the companies that are presently under administration by way of declarations that are in substance the inverse of the relief sought by CEPL. As both CEPL’s claim and the Administrators’ Cross-Claim relate to companies under administration and matters that relate to their external administration, I am satisfied that this Court has jurisdiction to hear and determine the matters they raise, and the matters raised by the Cross-Claim put that beyond doubt. The efficient conduct of the matter by the parties’ representatives has enabled me to focus on the real issues in dispute. The relief claimed by CEPL depends on whether cll 9A and 9B of the JVA are engaged by the proposed transaction between IGEH and Sev.en. This raises questions as to whether:(a)IGEH is bound by cl 9A.2(b) to provide a “Sale Notice” to CEPL (First Question) which, in turn, raises the following issues: (i)whether IGPC was acting as IGEH’s agent and with its actual authority to bind IGEH to the obligations contained in cl 9A.2(b) (Agency Issue); (ii)alternatively, whether IGPC is obliged to use its reasonable endeavours to procure IGEH to give a Sale Notice to CEPL (Reasonable Endeavours Issue); (b)IGPC is bound by cl 9B.2 to provide notice to CEPL that, as a result of the proposed transaction, it will cease to be a subsidiary of its ultimate holding company, OzGen UK (Second Question) which, in turn, raises the following issues:(i)whether the words “Ultimate Holding Company” in cl 9B.2 are to be given the meaning that those words bear in the schedule of defined terms contained in the JVA or whether they are to be given their ordinary meaning (Constructional Issue); (ii)alternatively, whether the Court should imply a term into the JVA to the effect that, if the nominated Ultimate Holding Company ceases to be IGPC’s ultimate holding company, then, for the purpose of cl 9B.2, the Ultimate Holding Company is the entity that is IGPC’s ultimate holding company (as defined in the Corporations Act) from time to time (Implied Term Issue).

Ratio Decidendi

Legal Principle Established

The Administrators made an earlier application to this Court seeking directions under s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS), being Sch 2 to the Corporations Act 2001 (Cth) (Corporations Act). They sought directions that, amongst other things, the obligations contained in cll 9A and 9B of the JVA were not engaged by the proposed transaction. CEPL was not joined to that application but appeared, with leave, under r 2.13 of the Federal Court (Corporations) Rules 2000 (Cth), and made detailed written and oral submissions. On 15 November 2024, Derrington J made the directions sought by the Administrators: Park, in the matter of IG Power (Callide) Ltd (Administrators Appointed) (No 4) [2024] FCA 1316 (15 November Judgment). The result was a vindication of the position taken by the Administrators and Sev.en, and a reciprocal loss for CEPL. There was no appeal instituted from the orders made by Derrington J. Irrespective of whether it had any right to seek leave to appeal or appeal from those orders, CEPL took a different course in seeking its preferred outcome. At the time at which Derrington J had listed the matter for pronouncement of the orders that his Honour ultimately made, representatives for CEPL informed his Honour that the present proceedings had been commenced and thereupon pressed an interlocutory injunction seeking to enjoin the IGEH Share Sale Agreement from proceeding pending the urgent determination of these proceedings. That interlocutory injunction was granted. The matter was thereafter allocated for final hearing before me on 19 December 2024 as the Commercial and Corporations List Duty Judge. The parties read a number of affidavits in support of their respective cases. It is not necessary to specify these affidavits, which were contained in the Court Book that was economically and efficiently prepared by the parties’ representatives. The parties also tendered a Statement of Agreed Facts and the Court Book contained the relevant documents in chronological order. The parties filed written submissions and have since also filed supplementary submissions on matters arising from the oral hearing. With the assistance of the Court’s staff, I extended the sitting hours of the Court on 19 December 2024 to ensure that the hearing of the matter completed within the day given the urgency of the dispute and the availability of the parties’ representatives at that time of year. At the oral hearing before me, the Administrators foreshadowed the filing of a cross-claim in the present proceedings (Cross-Claim). The purpose of that Cross-Claim was to ensure, if there was any doubt, that this Court was seized with jurisdiction of a federal matter. The Cross-Claim has since been filed. It seeks to invoke the Court’s jurisdiction under s 90-15(1) of the IPS to make orders in relation to the external administration of the companies that are presently under administration by way of declarations that are in substance the inverse of the relief sought by CEPL. As both CEPL’s claim and the Administrators’ Cross-Claim relate to companies under administration and matters that relate to their external administration, I am satisfied that this Court has jurisdiction to hear and determine the matters they raise, and the matters raised by the Cross-Claim put that beyond doubt.