Esso Australia Resources Pty Ltd v Oil Basins Limited
[2024] VSCA 240
•17 October 2024
| SUPREME COURT OF VICTORIA COURT OF APPEAL |
| S EAPCI 2024 0070 |
| ESSO AUSTRALIA RESOURCES PTY LTD (ACN 091 829 819) & ORS (ACCORDING TO THE ATTACHED SCHEDULE) | Applicants |
| v | |
| OIL BASINS LIMITED & ANOR (ACCORDING TO THE ATTACHED SCHEDULE) | Respondents |
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| JUDGES: | McLEISH, NIALL and KENNY JJA |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 12 September 2024 |
| DATE OF JUDGMENT: | 17 October 2024 |
| MEDIUM NEUTRAL CITATION: | [2024] VSCA 240 |
| JUDGMENT APPEALED FROM: | Order of the Honourable Justice Croft of the Supreme Court of Victoria on 31 May 2024 |
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COMMERCIAL ARBITRATION – Practice and procedure – Proceeding instituted for declaration that dispute is incapable of arbitration – Application for stay of proceeding pursuant to s 7 of the International Arbitration Act 1974 (Cth) – Where trial judge made timetabling orders at a directions hearing listing the proceeding and stay application for the same dates – No error in trial judge’s orders – Stay application should be heard and determined before proceeding – No injustice to applicants – Opportunity to be heard on stay application prior to proceeding to arise on dates fixed by trial judge – Leave to appeal refused.
Civil Procedure Act 2010; International Arbitration Act 1974 (Cth); Judiciary Act 1903 (Cth); Supreme Court Act 1986.
Hancock Prospecting Pty Ltd v Rinehart (2017) 257 FCR 442, considered.
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| Counsel | |||
| Applicants: | Mr B Walker SC with Mr G Harris KC and Ms F Hudgson | ||
| Respondents: | Mr M P Costello KC with Mr M C Roberts | ||
Solicitors | |||
| Applicants: | K&L Gates | ||
| First Respondent: | Arnold Bloch Leibler | ||
| Second Respondent: | Herbert Smith Freehills | ||
MCLEISH JA
NIALL JA
KENNY JA:
Introduction
The applicants seek leave to appeal from orders made by a judge of the Trial Division on 14 June 2024, following a directions hearing on 31 May 2024.
These orders concerned a proceeding instituted by the first respondent (Oil Basins Limited (‘OBL’)) and the applicants’ interlocutory application for a stay of that proceeding. In substance, the orders fixed both OBL’s proceeding and the applicants’ stay application for hearing in November this year for an estimated five days and made directions to ensure that both matters were ready to proceed at that time.
Leave to appeal may be granted under s 14A of the Supreme Court Act 1986 only if the Court of Appeal is satisfied that the appeal has ‘a “real” as opposed to a “fanciful” chance of success’.[1] Relevantly in this case, leave may be refused where the question sought to be agitated is essentially one of practice and procedure involving the exercise of discretion.[2] The orders challenged in this case were interlocutory orders of this kind. They were in the nature of case management orders made under pt 4.2 of the Civil Procedure Act 2010 (‘CPA’). In such a case, the applicants must satisfy the Court that there was material error in the exercise of discretion and that they will suffer substantial injustice if the decision is permitted to stand.[3]
[1]Supreme Court Act 1986, s 14C; Kennedy v Shire of Campaspe [2015] VSCA 47, [12]–[13].
[2]Cargill Australia Ltd v Viterra Malt Pty Ltd [2018] VSCA 260, [113], adopting Bodycorp Repairers Pty Ltd v GDG Legal Pty Ltd [2018] VSCA 32, [19].
[3]Billington v Sussan Corporation Australia Pty Ltd [2020] VSCA 12, [24]; Austin v Dwyer [2023] VSCA 227, [61].
Background
The applicants and BHP Group Limited (‘the Producers’) are obliged to make royalty payments to OBL under a Royalty Agreement made over 60 years ago. Under the Royalty Agreement, OBL acquired the right to receive an overriding royalty of two and a half per cent of the gross value of all hydrocarbons produced and recovered within a designated area in Bass Strait. Related contractual arrangements changed over time with the result that today the royalty to which OBL is entitled is payable by the Producers.
From time to time, the Producers and OBL have been in dispute as to the proper amount of royalty payable to OBL under the Royalty Agreement. There have been numerous arbitral awards addressing the various disputes. Following a dispute about the calculation of royalty from 1 July 1990, OBL and the Producers entered into the 17 March 1994 Settlement Agreement. In due course this Settlement Agreement underwent numerous amendments. The Settlement Agreement provides for a methodology derived by a special referee to calculate royalties and, in several places, for the modification of that methodology. At the hearing of this matter, the Court was referred to a version of the Settlement Agreement, which consolidated the amendments (‘Amended Settlement Agreement’).
For present purposes, it suffices to say that, in September 2023, OBL served a notice of dispute on the first and second applicants stating that a dispute had arisen between them with respect to the treatment of GST in the calculation of the overriding royalty. The following month, the first and second applicants served notices of dispute on OBL stating that disputes had arisen with respect to the treatment of GST in the calculation of the overriding royalty and issues relating to depreciation and decommissioning (‘the D&D Issues’).
The parties executed an Arbitrator Appointment Agreement in March 2024 appointing arbitrators pursuant to the Amended Settlement Agreement. They agreed to refer the dispute concerning the treatment of GST in the calculation of royalty payable to OBL to them. Further, they agreed that the arbitrators should determine the D&D Issues ‘subject to the resolution of OBL’s objection to the competency of the Producers’ Notices of Dispute insofar as they related to [them]’. Relevantly, though, they disagreed as to whether the disputes about the proper treatment of the D&D Issues were arbitrable under the Amended Settlement Agreement.
On 22 April 2024, OBL commenced proceedings in the Trial Division of the Court seeking declarations, including that the D&D Issues were not capable of being arbitrated under the Amended Settlement Agreement, and injunctive relief restraining the Producers from taking steps to progress the arbitration of the D&D Issues (‘OBL Proceeding’). In substance, OBL maintained that the D&D Issues did not constitute an arbitrable dispute, because:
(a)by reason of clauses 5(b) and 6B(f) of the Amended Settlement Agreement, no modification may be made to the special referee’s modified methodology by arbitration under the Amended Settlement Agreement; and
(b)the Producers have failed to identify any item in relation to Depreciation and Decommissioning Costs which the special referee’s modified methodology does not accommodate, or to which it is not applicable, or for which it is not appropriate.
We interpolate here that, as amended, clauses 5(b) and (c) of the Amended Settlement Agreement provide as follows:
(b)No further modification may be made by arbitration under this Agreement to, or which is inconsistent with, the modifications to the Special Referee’s methodology referred to in any of clauses 6(a), 6(b)(i)(aa), 6(b)(i)(bb), 6(b)(ii), 6(b)(iii), 6(h), 6A(a), 6A(b)(i)(aa), 6A(b)(i)(bb), 6A(b)(ii), 6A(b)(iii), 6A(f), 6B(a), 6B(b)(i)(aa), 6B(b)(i)(bb), 6B(b)(ii), 6B(b)(iii), 6B(b)(iv) and 6B(f) and the application of any of clauses 7, 8 and 9 of this Agreement.
(c)In the event that the Special Referee’s modified methodology or any part thereof does not accommodate, is not applicable to or appropriate for any item which may affect the gross value of hydrocarbons for the purposes of clause 3 of the Royalty Agreement, then, subject to clause 5(b), the Special Referee’s modified methodology may be further modified by arbitration under this Agreement.
Clause 6B(f)(i) further provides:
The deduction for the cost of capital of eligible post LVO assets to which commitment to investment was made on or after 1 July 1990 shall be calculated in accordance with the Special Referee’s methodology applying the applicable cost of capital rate provided in sub-clause (f)(ii).
Relevantly too, clause 19(a) of the Amended Settlement Agreement provides that ‘[a]ny dispute … in any way arising out of or related to or connected with [the Amended Settlement] Agreement shall be determined by arbitration in Melbourne …’. Clause 19(b) defines ‘dispute’ for the purpose of clause 19(a) but subject to clause 5(b), as ‘a dispute, difference or question in any way arising out of or related to or connected with [the Amended Settlement] Agreement, including as to (i) its termination or breach; and (ii) any further modification to the Special Referee's modified methodology’.
On 20 May 2024, the applicants filed an application for a stay of the OBL Proceeding pursuant to s 7 of the International Arbitration Act 1974 (Cth) (‘IAA’) (‘Stay Application’). Section 7 of the IAA relevantly provides:
7 Enforcement of foreign arbitration agreements
(1)Where:
(a)the procedure in relation to arbitration under an arbitration agreement is governed, whether by virtue of the express terms of the agreement or otherwise, by the law of a Convention country;
(b)the procedure in relation to arbitration under an arbitration agreement is governed, whether by virtue of the express terms of the agreement or otherwise, by the law of a country not being Australia or a Convention country, and a party to the agreement is Australia or a State or a person who was, at the time when the agreement was made, domiciled or ordinarily resident in Australia;
(c)a party to an arbitration agreement is the Government of a Convention country or of part of a Convention country or the Government of a territory of a Convention country, being a territory to which the Convention extends; or
(d)a party to an arbitration agreement is a person who was, at the time when the agreement was made, domiciled or ordinarily resident in a country that is a Convention country;
this section applies to the agreement.
(2)Subject to this Part, where:
(a)proceedings instituted by a party to an arbitration agreement to which this section applies against another party to the agreement are pending in a court; and
(b)the proceedings involve the determination of a matter that, in pursuance of the agreement, is capable of settlement by arbitration;
on the application of a party to the agreement, the court shall, by order, upon such conditions (if any) as it thinks fit, stay the proceedings or so much of the proceedings as involves the determination of that matter, as the case may be, and refer the parties to arbitration in respect of that matter.
…
The May 2024 directions hearing
At a directions hearing on 31 May 2024, the trial judge had the benefit of the parties’ written and oral submissions concerning the Stay Application and the OBL Proceeding. OBL’s written submissions filed before the hearing acknowledged that ‘The issue for the directions hearing on 31 May 2024 is how the [OBL Proceeding], including the [Stay Application], should be timetabled’.
In these submissions, OBL contended that the Stay Application and the OBL Proceeding should be heard ‘at the same time’; and that, before addressing the Stay Application, the Court should first determine if, as OBL submitted, the D&D Issues were incapable of being arbitrated. In any event, so OBL contended, there was no power to grant a stay under s 7(2)(b) of the IAA, because that power only arose in respect of a matter that ‘is capable of settlement by arbitration’.
OBL’s position was developed further at the directions hearing. Its senior counsel (Mr Young KC) contended that the Stay Application ‘intersect[ed]’ with the principal issue raised in the OBL Proceeding, that is, whether there was an agreement to arbitrate the D&D Issues. He sought the resolution of the contractual dispute identified in the OBL Proceeding first, on the basis that this was ‘the most efficient and expeditious way of proceeding with least cost’. He submitted that OBL intended to rely on expert industry and accounting evidence to elucidate ‘quite complex issues of a contractual nature’. In his submission, sub-clauses 5(b) and (c) of the Amended Settlement Agreement prohibited any arbitration ‘which is inconsistent with the special referee’s methodology or the particular modifications to the special referee’s methodology’. Since, in his submission, there was no agreement to arbitrate the D&D Issues, neither the competence-competence principle nor s 7(2) of the IAA were engaged.
In written submissions, the applicants contended that OBL was seeking directions that would ‘in effect, usurp the Arbitral Panel’s statutory obligation to determine the arbitrability of the disputes with respect to [the D&D Issues]’. They submitted that the real issue was whether ‘the Court should hear the separate attack or permit the arbitral tribunal to hear it, by staying its own proceeding’, citing Hancock Prospecting Pty Ltd v Rinehart (2017) 257 FCR 442 (‘Hancock’) at [377] and [380]. They contended that the ‘correct approach’ was for the Court to hear the Stay Application first to determine if the elements of s 7 of the IAA were established to its satisfaction and, if so satisfied, to refer the matter to be resolved by arbitration.
Mr Harris KC, who appeared for the applicants at the directions hearing, maintained this position. He contended that this was a competence-competence case; that the matter was clearly ‘within the scope of the authority of the panel to determine at a jurisdictional level’; and that the Court’s jurisdiction was preserved in Articles 16, 34 and 36 of the UNCITRAL Model Law on International Commercial Arbitration (‘Model Law’), as stated in Hancock.[4] He submitted that the Stay Application had to be dealt with first, there being ‘no debate’ that there was an enforceable arbitration agreement and that the arbitral panel was properly constituted for the purpose of deciding the issues under it.
[4]Section 16 of the IAA provides that the Model Law has the force of law in Australia. Article 16(1) of the Model Law relevantly provides that the arbitral tribunal may rule on its own jurisdiction. Article 34(2) limits the bases upon which a court may set aside an arbitral award, including where the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration: art 34(2)(a)(iii). Article 36 limits the bases upon which recognition or enforcement of an arbitral award may be refused, in relevantly similar terms: art 36(1)(a)(iii).
In the course of the directions hearing, the trial judge observed that it was ‘hard to even form a view … without exploring issues in much greater depths’. Relatively early in the hearing, his Honour indicated that he was proposing to list the OBL Proceeding and the Stay Application at the same time in order that ‘the whole issue as to whether there’s a stay or not can be ventilated properly’. In conformity with this, the Stay Application and the OBL Proceeding were subsequently set down for hearing on the same dates. His Honour also made relatively detailed directions to ensure that all matters might be heard at that time.
The trial judge’s reasons for these orders were brief. His Honour stated:
Everything I’ve heard this morning reinforces my view that I should proceed as [OBL] is proposing for the reasons I’ve indicated in discussions with counsel and also particularly for the reasons advanced by Mr Young in written and oral submissions.
The parties’ submissions on the applicants’ leave to appeal application
The applicants’ case before us was that issues concerning the scope of a valid and enforceable arbitration agreement were to be determined in the first instance by the arbitrators according to the competence-competence principle recognised by Article 16 of the Model Law. Their primary submission was that the scheme established by the IAA expressly favoured the parties’ arbitration and chosen arbitrators as the avenue for dispute resolution. They submitted that this scheme permitted the arbitral panel to determine any question of jurisdiction; and that following the panel’s determination, the Court’s role was limited to what was contemplated by articles 16(3), 34(2)(a)(iii) and 36(1)(a)(iii) of the Model Law.
The applicants submitted that the dispute in this case was ‘a dispute, difference or question as to an entitlement to further modify the Special Referee’s modified methodology’. The issue was whether the applicants’ claim for adjustment was precluded by subsequent agreements and, if not, what further adjustment should be made. In the words of Mr Walker SC, senior counsel for the applicants, ‘there is a dispute between the parties as to whether or not the iterative agreements concerning the modifications which involved [the D&D Issues] … produced the position where [the applicants] can no longer get a benefit from arbitrations or whether … as [the applicants argue] we can by dint of a proper understanding of terms between the parties’. He submitted that these questions could and should be determined by the arbitrators.
Further, citing Hancock,[5] the applicants submitted that where s 7(2) of the IAA applied and was satisfied, then a stay under s 7 would be granted. The applicants noted that OBL’s submissions and the terms of the orders made by the trial judge indicated that OBL’s jurisdictional challenge was not confined to a question of law, but raised (at least) mixed questions of fact and law. Accordingly, the applicants submitted that OBL’s challenge afforded no basis upon which the Court could properly have exercised its discretion to set down a trial of OBL’s proceeding before hearing the Stay Application.[6]
[5]Hancock Prospecting Pty Ltd v Rinehart (2017) 257 FCR 442 (‘Hancock’), 480 [141], 481 [145] (Allsop CJ, Besanko and O’Callaghan JJ), citing Dell Computer Corporation v Union des consommateurs [2007] 2 SCR 801.
[6]Also in this context, the applicants submitted that Hancock at [393] was plainly wrong in proposing that where an issue of law might be dispositive, a court could refuse a stay. As will be seen, it is unnecessary to consider this submission further.
Citing Hancock,[7] the applicants submitted that the purpose of a s 7 stay application was to facilitate the process of arbitration, which could only be achieved by addressing the Stay Application first on an interlocutory basis. The applicants contended that, once a stay application under s 7 of the IAA was made, the Court was obliged to determine the application as soon as practicable and in a timely way. It was impermissible, so they contended, to postpone the determination of such an application until the proceeding sought to be stayed was ‘timetabled for a trial’. The applicants submitted that this was because the Court’s obligation to stay its proceeding was ‘an important power the purpose of which is to protect the practical legitimacy and authority of the arbitration process’.[8] It was impermissible, so the applicants submitted, to stand over the Stay Application to be listed with the very proceeding sought to be stayed. This, they submitted, was contrary to the evident intent of s 7 of the IAA.
[7]Hancock, 481–2[146], [147], 483 [149], 536 [378], 538 [390].
[8]Cf Hancock, 481–2 [146].
The applicants submitted that it was not open to the trial judge to rely on comparative efficiencies as a basis for exercising his discretion to fix both the Stay Application and the OBL Proceeding for hearing at the same time. They argued that his Honour was in error in so far as he relied on OBL’s contention that the arbitrators’ competence did not extend to the D&D Issues because of the terms of the previous awards and the Amended Settlement Agreement. They argued that this was because the relevant dispute was the entirety of the dispute, including as to an entitlement to further modify the Special Referee’s modified methodology on account of the D&D Issues, notwithstanding the terms of previous awards or the operation of clause 5(b) of the Amended Settlement Agreement.
Finally, the applicants submitted that, even if the trial judge heard and acceded to the applicants’ submission at the commencement of the November hearing to determine the Stay Application first, the loss of time and waste of resources could not be recovered. At the same time, they contended that it would be improper for his Honour to proceed to hear the OBL Proceeding ahead of the Stay Application.
OBL, on the other hand, sought to maintain the orders made by the trial judge following the May 2024 directions hearing. First, Mr Costello KC submitted that the orders in question were essentially timetabling orders, relating to practice and procedure. He submitted that the applicants did not demonstrate how his Honour’s exercise of discretion miscarried. In written submissions and at the hearing, OBL submitted that it was open to his Honour to take into account that it might be more efficient for the Stay Application to be heard at the trial of the proceeding, having regard to the overarching purpose of the CPA, which is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.[9]
[9]Civil Procedure Act 2010, ss 7(1) and 8(1).
In written submissions, OBL contended that the applicants’ submissions conflated the issue of how a stay application should be timetabled with how a stay application should be decided. Senior counsel for OBL contended that there had been no interference with the applicants’ rights, and that the trial judge had not yet made any decision as to how the Stay Application would be determined, although he conceded that ‘as a matter of practicality, the stay application [would] probably [be] first’.
OBL argued that the intersection between the Stay Application and the OBL Proceeding provided the context for the orders that his Honour made. Mr Costello KC submitted that ‘the real question’ was whether the OBL Proceeding ‘involve[s] the determination of a matter that, in pursuance of the [Amended Settlement Agreement], is capable of settlement by arbitration’, as s 7(2)(b) of the IAA required. He maintained that the alleged D&D Issues were not capable of being arbitrated, including because of clause 5(b) of the Amended Settlement Agreement.
In argument, OBL emphasised that the Stay Application was ‘a mirror image’ of the OBL Proceeding, with the consequence that any evidence it sought to rely on in its proceeding would also be relied on by it in opposition to the applicants’ stay application. Senior counsel submitted that the trial judge’s decision to hear the OBL Proceeding and the Stay Application concurrently reflected the fact that there was a high degree of overlap between the questions arising in the proceeding and the statutory question that arises on the stay sought under s 7 of the IAA.
In written submissions, OBL argued that the essential issue was one of contractual interpretation which could be determined ‘most efficiently and expeditiously by the Supreme Court’. Citing Hancock at [399], it contended that arbitral determinations on jurisdictional issues could not be resolved on a final basis and would be subject to challenge in the Court. In any event, in its submission, under the Amended Settlement Agreement and by virtue of clauses 5(b) and 19, it was not open to the arbitrators to decide whether they had authority to determine the D&D Issues. Accordingly, in its submission, the ‘real question’ with respect to s 7(2) of the IAA turned on whether there was ‘a matter’ capable of settlement by arbitration.
In written submissions, OBL cited Hancock at [145] in support of the proposition that the way a judge dealt with a stay application under s 7 of the IAA would depend ‘significantly upon the issues and the context’. It submitted that Hancock identified two different approaches that a court might adopt where a party alleges an arbitration agreement is inoperative or incapable of being performed. That is, there was a ‘prima facie’ approach, where a matter will be referred to arbitration if there appears to be a valid arbitration agreement which prima facie covers the matters in dispute;[10] and there was also a ‘merits’ approach, where a full merits hearing would be undertaken as to the existence and scope of the arbitration agreement and whether the dispute fell within it.[11] OBL argued that Hancock did not adopt a general rule to the effect that an interlocutory stay should be granted by applying the prima facie approach.
[10]Hancock, [141].
[11]Hancock, [142].
Consideration
As already noted, OBL commenced its proceeding first, in substance alleging that by reason of the Amended Settlement Agreement,[12] the D&D Issues were incapable of settlement by arbitration. By their subsequent Stay Application, the applicants invoked s 7(2) of the IAA.[13]
[12]Referring to clauses 5(b) and (c), 6B(f) and 19(a) of the Amended Settlement Agreement.
[13]See [12] above.
If s 7(2) were engaged, then the Court would be required to stay the OBL Proceeding and refer the matter (here, the D&D Issues) to the arbitrators appointed by the parties under the Arbitrator Appointment Agreement. In the present case, however, OBL contends, in effect, that the ‘matter’ to be referred is not ‘capable of settlement by arbitration’ as required by s 7(2)(b) of the IAA and that therefore the duty to stay its proceeding cannot arise.[14]
[14]There is no suggestion that the Amended Settlement Agreement is ‘null and void, inoperative or incapable of being performed’ within s 7(5).
For present purposes, it is fair to say that the IAA establishes a framework that preferences the process of arbitration agreed by the parties as the path to the resolution of their disputes. As a general rule, issues concerning the scope of an arbitration agreement fall to the arbitrators to determine in the first instance according to the competence-competence principle in Article 16 of the Model Law. Once the arbitrators have made their determination, the Court’s role is confined to that disclosed in articles 16(3), 34(2)(a)(iii) and 36(1)(a)(iii) of the Model Law.
Broadly speaking, in relation to the D&D Issues, the immediate issue that divides the parties is whether the applicants’ claim for adjustment is precluded by subsequent agreements and, if not, what further adjustment should be made. It is not, of course, for us to express an opinion on either question. It is also not for us to express an opinion as to whether the ‘matter’ to be referred is ‘capable of settlement by arbitration’ as required by s 7(2)(b). This is for the trial judge to determine when the Stay Application is heard. The applicants must satisfy his Honour that there is such a matter before any stay can be granted. Practically speaking, no other issues relating to the grant of the stay arise unless this issue is determined in the applicants’ favour.
For present purposes, we accept that, as OBL maintained at the directions hearing before the trial judge, the same or broadly the same issue arises in the OBL Proceeding, that is, whether the D&D Issues are capable of resolution by arbitration. Even if this turns out not to be entirely accurate, we accept that the approach taken by his Honour at the 31 May directions hearing needs to be understood in this context.
At the 31 May directions hearing, the trial judge was engaged in case management under pt 4.2 of the CPA.[15] The purpose of the case management was to ensure that the proceedings before him (that is, the OBL Proceeding and the Stay Proceeding) were conducted so as ‘to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’.[16] His Honour’s subsequent orders were the practical expression of this purpose. By fixing a timetable to ready the matters for hearing on the appointed dates, the orders ensured not only that the proceedings were listed for hearing, but also that the parties would have a fair opportunity to present their respective cases.
[15]See Judiciary Act 1903 (Cth), s 79.
[16]Civil Procedure Act 2010, ss 7 and 47.
Bearing in mind the statutorily-stated purposes of judicial case management, it was clearly open to his Honour to take into account that essentially the same issue fell for determination in the OBL Proceeding and on the Stay Application. Further, OBL’s statement that the evidence it relied on in its proceeding would be the same as the evidence it relied in opposition to the Stay Application was not evidently unreasonable; and was also relevant to his Honour’s case management. Bearing these matters in mind, we consider that it was open to his Honour to determine that, for the purposes of case-management, an efficient and cost-effective solution was to fix hearing dates when both the Stay Application and the OBL Proceeding could be heard. There was no error in case management terms in so doing, and none of the parties’ rights were adversely affected by his Honour’s case management orders.
The orders of the trial judge did not address specifically the question whether the Stay Application would be heard and determined before the OBL Proceeding. His Honour was silent on the precise order in which he proposed to hear and consider the applicants’ interlocutory application and the OBL Proceeding. It may be that, as senior counsel for OBL intimated at the hearing before us, his Honour assumed that the Stay Application would be heard first. By stating a preference for OBL’s approach and making directions much as OBL sought, however, his Honour could be understood to have rejected the applicants’ submission that the Stay Application be heard and determined before the hearing and determination of the OBL Proceeding.
Of course, whether his Honour intended his reasons to be understood in this way is open to doubt. The understanding is perhaps inconsistent with his Honour’s earlier statement at the hearing that it was ‘hard to form a view’ without exploring the issues ‘in more depth’ and his relatively early indication that he proposed to list the OBL Proceeding and the Stay Application for the same dates in order that ‘the whole issue as to whether there’s a stay or not can be ventilated properly’.
In all the circumstances, given the importance of the issue, we consider it desirable to clarify in these reasons the position concerning the priority the Court is required to give the Stay Application in relation to the OBL proceeding.
We accept that, once a stay application under s 7(2) of the IAA is made, the application must be heard and determined as soon as practicable and before the proceeding to which it relates. In Hancock the Full Federal Court described s 8 of the Commercial Arbitration Act 2010 (NSW), which is equivalent to s 7(2) of the IAA, as ‘an important power the purpose of which is to protect the practical legitimacy and authority of the arbitration process’.[17] In this context too, it must be borne in mind that ss 39(2)(a) and 39(2)(b)(i) of the IAA require the Court, in performing functions and powers under the IAA, to have regard to the objects of the IAA[18] and to the fact that ‘arbitration is an efficient, impartial, enforceable and timely method by which to resolve commercial disputes’.[19] To postpone the hearing and determination of a stay application until after the hearing of the proceeding to which it related would be to defeat the evident purpose of s 7(2) of the IAA. It would also be to disregard this statutory fact and the objects of the IAA.
[17]Hancock, [146].
[18]IAA, ss 39(2)(a) and 2D.
[19]IAA, s 39(2)(b)(i).
There were four proposed grounds of appeal. Three of these grounds essentially challenged the trial judge’s orders because his Honour set down the Stay Application and OBL Proceeding for the same dates. For the reasons stated, none of these three grounds have any real prospect of success. As we have stated, we do not find any error in his Honour’s orders; and even if there were, it would not be of a kind that occasioned the applicants any injustice. The applicants have not been denied the opportunity to be heard on their stay application. They will have this opportunity in November. Nor do we accept that his Honour’s orders led to any substantial waste of resources or time, bearing in mind that so far as OBL is concerned, its evidence in opposition to a stay of its proceeding is the same evidence that it would rely on in its own proceeding.
A fourth ground impugned the adequacy of his Honour’s reasons. We do not accept that this ground has any real prospect of success. Bearing in mind that his Honour was concerned with timetabling the OBL Proceeding and the Stay Proceeding for hearing, the brevity of these reasons is insufficient to attribute error. If there were any deficiency, it lay in the fact that his Honour’s reasons were silent about the order in which the Stay Application and the OBL Proceeding would be heard and determined. As we have explained, we are not persuaded that his Honour had formed the erroneous view that the OBL Proceeding should (or could) be heard ahead of, or at the same time as, the Stay Application. We consider it likely that his Honour was yet to form a view about the matter, and that any potential for error will be avoided by these reasons.
Lastly, we do no more than note that the applicants’ application for leave to appeal was also accompanied by an application for a stay of the OBL Proceeding including the judge’s orders of 14 June 2024. The applicants supported this application with a brief written submission, but did not press the application at the hearing. In the circumstances of the case, we consider the matter of the stay of the OBL Proceeding should be heard and determined by the trial judge in accordance with his Honour’s orders of 14 June 2024; and, of course, before the hearing and determination of the OBL Proceeding.
Conclusion
For the foregoing reasons, the application for leave to appeal should be refused. The application for a stay pursuant to rule 64.39(a) of the Supreme Court (General Civil Procedure) Rules 2015 should be dismissed. We will invite the parties to make submissions as to costs.
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SCHEDULE OF PARTIES
ESSO AUSTRALIA RESOURCES PTY LTD (ACN 091 829 819) First applicant WOODSIDE ENERGY (BASS STRAIT) PTY LTD (ACN 004 228 004) Second applicant WOODSIDE ENERGY (NORTH WEST SHELF) PTY LTD (ACN 004 514 489) Third applicant and OIL BASINS LIMITED First respondent BHP GROUP LIMITED (ACN 004 028 077) Second respondent
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