Mighty River International v Bryan Hughes and Daniel Bredenkamp as Deed Administrators of Mesa Minerals Ltd (Subject to Deed of Company Arrangement)

[2017] WASC 203

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   MIGHTY RIVER INTERNATIONAL -v- BRYAN HUGHES AND DANIEL BREDENKAMP AS DEED ADMINISTRATORS OF MESA MINERALS LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) [2017] WASC 203

CORAM:   LE MIERE J

HEARD:   11 JULY 2017

DELIVERED          :   31 JULY 2017

FILE NO/S:   COR 96 of 2017

MATTER                :Mesa Minerals Ltd (Subject to Deed of Company Arrangement)

BETWEEN:   MIGHTY RIVER INTERNATIONAL

Plaintiff

AND

BRYAN HUGHES AND DANIEL BREDENKAMP AS DEED ADMINISTRATORS OF MESA MINERALS LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
First Defendants

MESA MINERALS LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
Second Defendant

MINERAL RESOURCES LTD
Third Defendant

Catchwords:

Practice and procedure - Stay - Whether proceeding is an abuse of process - Whether same or similar issues raised before Court of Appeal - Where Court of Appeal has not yet made a decision that has the potential to affect the present proceeding - Turns on own facts

Practice and procedure - Whether proceedings should be expedited - Where pending decision of Court of Appeal may impact issues to be resolved in present proceeding - Whether practical - Whether in interests of justice - Turns on own facts

Practice and procedure - Joinder - Whether necessary party - Whether rights directly affected - Turns on own facts

Corporations Law - Administrator - Deed of company arrangement - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 445G(2), s 445G(3), s 445G(4), pt 5.3A, s 445D, s 445E(3)(a)
Rules of the Supreme Court 1971 (WA), O 18 r 6(2)

Result:

First and second defendants' application for a stay or for security for costs adjourned for directions after 3 August 2017
Plaintiff's originating process for leave to proceed against the second defendant adjourned for directions after 3 August 2017
Mineral Resources Limited added as third defendant
Mineral Resources Limited's application be adjourned to a directions hearing after 3 August 2017

Category:    B

Representation:

Counsel:

Plaintiff:     Mr D Sulan & Mr P J Hannan

First Defendants            :     Ms J Taylor

Second Defendant         :     Ms J Taylor

Third Defendant            :     Mr M L Bennett & Mr D Banda

Solicitors:

Plaintiff:     Nova Legal

First Defendants            :     Clayton Utz

Second Defendant         :     Clayton Utz

Third Defendant            :     Bennett + Co

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

John Alexander's Club Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1

Kermani v Westpac Banking Corporation (2012) 36 VR 130

Mighty River International Ltd v Hughes and Bredenkamp [2017] WASC 69

LE MIERE J: 

Summary

1. The plaintiff (Mighty River) brought proceedings seeking a declaration that the deed of company arrangement entered into by the first defendants (the Administrators) and the second defendant (Mesa) on 3 November 2016 (the DOCA) is of no force or effect, an order terminating the DOCA and an order that Mesa be wound up.  Mineral Resources Ltd (Mineral Resources), the biggest shareholder in, and a creditor of, Mesa brought proceedings claiming that if there are any defects in the DOCA they should be cured under Corporations Act 2001 (Cth) s 445G(2) and (3) or the DOCA should be varied to the extent necessary under s 445G(4). Master Sanderson heard both matters together and on 16 March 2017 ordered that Mighty River's action be dismissed and declared that the DOCA was not void. Mighty River appealed to the Court of Appeal. The appeals were heard on 19 and 20 April 2017.

2. On 3 May 2017 the Administrators issued a report in compliance, or purported compliance, with the DOCA and convened a further meeting of creditors which was held on 11 May.  At the meeting the creditors resolved to vary the DOCA to extend to 3 August 2017 the date by which the Administrators were to report to creditors on their investigations and recommendations (Resolution 4).  The effect of the variation to the DOCA is that the Administrators are to issue a further report to creditors by 3 August 2017 and convene a further creditors meeting in mid‑August 2017.

3. Mighty River applied to the Court of Appeal to adduce new evidence and make further submissions in the appeal about the Administrators report of 3 May 2017, which Mighty River asserted was a material contravention of the DOCA, and Resolution 4.  The Court of Appeal gave directions that the parties file submissions which would be received subject to the court subsequently determining whether they were relevant.  Mighty River, the Administrators and Mineral Resources filed submissions.  The Court of Appeal decision is still pending.

4. Meanwhile, on 10 May 2017 Mighty River commenced this proceeding. Mighty River claims that the Administrators have materially contravened the DOCA in that they have not prepared and distributed to creditors a report which complies with cl 15 of the DOCA and the court should make an order under s 445D of the Corporations Act terminating the DOCA and further that the Administrators wrongly admitted Mineral Resources to prove for $8,106,226 at the creditors meeting on 11 May 2017 and if Mineral Resources had not voted at the meeting Resolution 4 would not have been passed.

5. Mighty River seeks directions for an expedited trial so that the matter be resolved by judgment before the creditors meeting expected in mid‑August and an order that Mighty River have leave to proceed against Mesa.  The Administrators and Mineral Resources say that the proceeding should be stayed.  The Administrators alternatively seek an order for security for their costs.  Mineral Resources seeks an order that it be joined as a defendant and further directions.

6. For the reasons which follow:

   1.the proceeding will not be expedited;

   2.the Administrators' application to stay the proceedings or alternatively for security for costs and Mighty River's application for leave to proceed against Mesa will be adjourned for directions after 3 August 2017; and

   3.Mineral Resources will be added as a third defendant and its application for directions will otherwise be adjourned to a directions hearing after 3 August 2017.

Mighty River challenges DOCA

1. By originating process (COR 247 of 2016) Mighty River sought, amongst other relief:

   1.a declaration that the DOCA is of no force or effect;

   2.an order terminating, alternatively setting aside the DOCA;

   3.an order that Mesa be wound up.

   In COR 13 of 2017 Mineral Resources claimed that if there were any defects in the DOCA they should be cured under Corporations Act 2001 (Cth) s 445G(2) and (3) or the DOCA should be varied to the extent necessary under s 445G(4). Master Sanderson heard both matters together and on 16 March 2017 ordered that Mighty River's action be dismissed and declared that pursuant to s 445G(2) of the Corporations Act the DOCA is not void.  The relationship between the parties, the appointment of the Administrators and the making of and terms of the DOCA are set out in the reasons for judgment of Master Sanderson:  Mighty River International Ltd v Hughes and Bredenkamp [2017] WASC 69.

2. Mighty River appealed to the Court of Appeal. The principal ground of the appeals is that the DOCA is not a valid deed of company arrangement under pt 5.3A of the Corporations Act and that the Master ought to have declared that the DOCA is of no force and effect or is void under s 445G(2) or otherwise ordered that it be terminated under s 445D. As I have said, the appeals were expedited and heard on 19 and 20 April 2017.

Administrators deliver report and convene further creditors meeting

1. Clause 15 of the DOCA provides that by the Sunset Date, which was defined to be 3 May 2017, the Administrators will provide to creditors a report (Sunset Date Report) outlining the results of their investigations, a summary of any restructuring proposals received and if they consider a restructuring proposal (Recommended Proposal) to result in a better return to creditors than a liquidation or any other proposal details of the Recommended Proposal.  On 3 May 2017 the Administrators issued the Sunset Date Report or a report that purported to be the Sunset Date Report.  The Administrators convened a creditors' meeting which was held on 11 May (Creditors Meeting).  At the meeting the creditors resolved to vary the DOCA to extend the Sunset Date to 3 August 2017 (Resolution 4).

Mighty River commences this proceeding

1. On the day before the meeting, 10 May 2017, Mighty River commenced this proceeding by originating process against the Administrators and Mesa. The originating process has subsequently been amended. Counsel for Mighty River, Mr Sulan, says that there are two principal issues in this proceeding which arise from Mighty River's following claims. First, the Administrators have materially contravened the DOCA in that they have not prepared and distributed to creditors a Sunset Date Report which complies with cl 15(b) of the DOCA and the court should make an order under s 445D of the Corporations Act terminating the DOCA. Secondly, the Administrators wrongly admitted Mineral Resources to prove for $8,106,226 at the creditors meeting on 11 May. Mighty River says that if Mineral Resources had not voted at the meeting the resolution to amend the DOCA would not have been passed.

Further submissions to Court of Appeal

1. At a further hearing before the Court of Appeal on 19 May Mighty River sought leave to adduce new evidence and make further submissions arising out of the Sunset Date Report and the Creditors Meeting.  The Court of Appeal gave directions that the parties file submissions which would be received subject to the court subsequently determining whether they were relevant.  Mighty River, the Administrators and Mineral Resources filed submissions and Mighty River filed reply submissions.

The interlocutory applications

1. This originating process came before the Acting Master on 29 June 2017.  The Acting Master made directions that the defendants file and serve any application for a stay of proceeding, Mighty River file and serve an application for leave to proceed against Mesa and for the applications to be heard on 11 July 2017.

2. Three interlocutory applications came on for hearing before me on 11 July:

   1.Mighty River's interlocutory process of 5 July 2017 for an order that the plaintiff have leave to proceed against Mesa;

   2.the Administrators' chamber summons of 5 July 2017 for an order that the proceedings be stayed or alternatively Mighty River give security for the Administrators' costs; and

   3.Mineral Resources chamber summons of 7 July 2017 for an order that Mineral Resources be joined as the third defendant to this action and programming orders concerning Mighty River's claim that Mineral Resources proof of debt in the amount of $8,106,226.05 should not have been admitted for the purpose of the creditors meeting on 11 May 2017.

3. The applications were heard during the court recess.  Counsel for Mighty River, Mr Sulan, submitted that the matter was urgent and not only should the proceeding not be stayed but that it should be expedited so that the application was heard and judgment delivered before the expected creditors meeting in mid‑August.  It is convenient to consider first whether the proceeding should be stayed on the ground that it is an abuse of process.

Proceeding should not be stayed

1. The Administrators and Mineral Resources say that this proceeding is an abuse of process because it raises issues which are the same or similar to issues before the Court of Appeal.  The relevant principles applicable to the matter were summarised by Robson AJA, with whom Neave and Harper JJA agreed, in Kermani v Westpac Banking Corporation (2012) 36 VR 130 at [97]:

   (1)The court possesses an inherent jurisdiction to stay its proceedings as an abuse of process if the proceedings are unjustifiably oppressive and vexatious or manifestly unfair or otherwise bring the administration of justice into disrepute among right‑thinking people.

   (2)The jurisdiction should only be exercised in exceptional cases or sparingly with the utmost caution.

   …

   (5)In considering whether to grant a stay as an abuse of process, the court should undertake a weighing process involving a subjective balancing of a variety of factors and considerations.

   …

   (9)It is prima facie vexatious to bring two extant civil actions where one will lie.

   (10)This prima facie rule applies whether or not the two proceedings are in separate courts or one.

   (11)The prima facie rule applies where the issues overlap or significantly overlap or there is a similarity of subject matters of the proceedings.

   (12)The fact that the parties may not be identical, or the relief different, does not necessarily disentitle relief under this principle.

   …

   (14)The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice.  Regard may be had to:

   …

   (g)an overall balancing of justice to the alleged abuser against the matters supportive of abusive process.

   (Authorities omitted)      

2. The Administrators and Mineral Resources say that the main substance of the Amended Originating Process has already been argued before the Court of Appeal whose decision is pending.  They say that Mighty River's contention that Resolution 4 is invalid by reason of the alleged contravention of the DOCA has already been argued before the Court of Appeal and that in substance the only additional claim in this proceeding is that the decision of the Administrators to admit, for voting purposes, the proof submitted by Mineral Resources for $8,106,246.05 was wrong or invalid.  It is therefore necessary to give some consideration to the issues pending before the Court of Appeal.

3. On 19 May 2017 the Court of Appeal ordered that it will receive on a provisional basis additional evidence set out in the affidavits of Mr Di Renzo sworn 8 May and 18 May 2017 and will rule on the admissibility of the additional evidence in its reasons for judgment and gave directions for the parties to the appeals to serve written submissions as to how, if at all, the proper exercise of the court's discretion under Corporations Act s 445D, 445G(2) or (3) is affected by the additional evidence. The additional evidence concerns the report issued by the Administrators on 3 May and the resolution of the creditors meeting on 11 May to vary the DOCA to extend the Sunset Date to 3 August 2017 (Resolution 4).

4. On 26 May Mighty River filed submissions pursuant to the order of the Court of Appeal. The submissions include the following. The Administrators contravened provisions of the DOCA in that the Sunset Date Report contains no summary of any proposals received, does not set out the results of the investigations into possible recovery actions and contains no recommendation as to the acceptance of any proposal nor identify the likely return to creditors under a Recommended Proposal. Further, the Administrators did not convene the meeting contemplated by cl 15(c) of the DOCA because such a meeting must involve the consideration of a varied deed accommodating a Recommended Proposal. Further, at the creditors meeting on 11 May Mineral Resources was admitted to prove to vote in the amount of approximately $8,000,000 despite the fact that in the Sunset Date Report the Administrators said they were investigating the various components of the Mineral Resources claim. One ground of appeal is that the Master failed to give reasons in respect of Mighty River's application under s 445D. If and when this ground succeeds the Court of Appeal will either need to exercise its discretion afresh or remit the matter. The exercise of the discretion afresh by the Court of Appeal ought to be on the basis of the position as it now exists. Even if the Court finds that the DOCA is valid notwithstanding that it is a 'holding' deed of company arrangement the court ought to terminate the DOCA.

5. Thus, Mighty River's case in this proceeding that the Administrators have materially contravened the DOCA and that they have not prepared and distributed to creditors a Sunset Date Report which complies with cl 15(b) of the DOCA and the court should make an order under s 445D of the Corporations Act terminating the DOCA has been submitted by Mighty River to the Court of Appeal.

6. The Administrators and Mineral Resources each filed submissions to the effect that the new evidence is not relevant and should be rejected by the Court of Appeal. In addition, the Administrators and Mineral Resources asserted that the Administrators had not contravened the DOCA and further, even if a contravention of the DOCA was made out, the Court should exercise its discretion under s 445D whether to terminate the DOCA by not doing so because there is no evidence that the interest of creditors as a whole favours the termination of the DOCA.

7. The Court of Appeal has not decided whether it will admit the new evidence in the appeal and hence whether it will consider Mighty River's case that the Administrators have contravened the DOCA in the way in which it is alleged in this proceeding and on that ground should terminate the DOCA. Until the Court of Appeal delivers its decision it is premature to decide whether or not this proceeding should be stayed. If the Court of Appeal determines that the new evidence is not admissible and the Court of Appeal does not consider the new case put by Mighty River to the Court of Appeal based on that evidence then this proceeding should not be stayed. That is because the case put by Mighty River that the Administrators have materially contravened the DOCA in that they have not prepared and distributed to creditors a Sunset Date Report which complies with cl 15(b) of the DOCA and the court should make an order under s 445D of the Corporations Act terminating the DOCA will not have been determined by the Court of Appeal.  The Court of Appeal has not yet admitted the new evidence; that evidence and Mighty River's case based on that evidence is only provisionally before the Court of Appeal.

8. On the other hand, if the Court of Appeal admits the new evidence and adjudicates on Mighty River's assertion that the Administrators breached the DOCA in the manner asserted in this proceeding then it may be appropriate that this proceeding be stayed in whole or in part.  Thus, whether or not this proceeding should be stayed because the main substance of the Amended Originating Process has already been argued before the Court of Appeal cannot be properly resolved until the decision of the Court of Appeal is known.

9. The Administrators' application for a stay should be adjourned to a directions hearing to be held after the Administrators have delivered their report to creditors which is due on or before 3 August.  The Administrators' chamber summons alternatively seeks an order that Mighty River give security for its costs.  That matter should also be adjourned to a directions hearing to be held after the delivery of the Administrators' report due on or before 3 August.

Proceedings should not be expedited

1. The court should not expedite this proceeding so that the trial takes place and judgment is delivered before the expected creditors meeting in mid‑August. First, the decision of the Court of Appeal may have an impact on the issues to be resolved in this proceeding. If Mighty River's appeal is successful then this proceeding will be rendered otiose. Even if Mighty River's appeal is not successful the Court of Appeal may consider the new evidence and the s 445D argument advanced by Mighty River in this proceeding. Mighty River accepts that this court should not determine this proceeding whilst the Court of Appeal decision is pending. Indeed, if this court were to do so there is a prospect of this court and the Court of Appeal delivering inconsistent findings.

1. Secondly, the interests of justice do not require that this proceeding be determined before the expected creditors meeting in mid‑August.  If this proceeding or the Court of Appeal decision or both have not been resolved by the time of the creditors meeting then the creditors will have to determine their course of action.  They will do so in the knowledge that this proceeding or the Court of Appeal decision or both are pending.  If, after trial, this court is satisfied that there has been a material contravention of the DOCA by the Administrators the court will have to decide in the exercise of its discretion whether the DOCA should be terminated.  That discretion will be informed by the interests of the creditors as a whole.  The contents of the further Administrators report, any restructure proposal and the Administrators recommendation to the creditors would be relevant to the exercise of the court's discretion.

2. Thirdly, it would be difficult, if not impossible, to proceed to trial and judgment before mid‑August - a period of approximately four weeks. It would be desirable, if not necessary, that the parties file and serve points of claim and defence to define with clarity and precision the issues or questions of fact and law which are in dispute between the parties and that are to be decided by the court and to provide the opposite party fair and proper notice of the case that it has to meet. On the material presently before the court it will be necessary for Mighty River to articulate the grounds on which it says the Administrators wrongly admitted Mineral Resources proof of debt in the amount of $8,106,226.05 for the purpose of the creditors meeting held on 11 May 2017, the amount in which Mineral Resources' proof of debt should have been admitted and the grounds on which the court should make orders setting aside Resolution 4 because the Administrators wrongly admitted Mineral Resources proof of debt in the amount of $8,106,226.05. Mighty River says that it will require discovery of documents considered by the Administrators in admitting Mineral Resources' proof of debt for the purposes of voting at the meeting. Mineral Resources says that the Administrators had before them documents relating to more than 1,000 transactions in support of Mineral Resources proof of debt and even the limited discovery proposed by Mighty River would take some time to attend to. The parties would then have to put on evidence and then submissions. A trial would require at least one or two days. The court is likely to reserve its decision and require a reasonable time to deliver a judgment. Whilst it may be possible to proceed to a trial and judgment before mid‑August, to do so would place a great burden on the parties and the Court. Even if a judgment was delivered before mid‑August it may be subject to an appeal. Furthermore, if this proceeding is expedited for a trial to take place before mid‑August there is a risk that the Court of Appeal will deliver judgment before the hearing of this proceeding and a significant amount of preparatory work carried out in this proceeding would be wasted if the Court of Appeal allows the appeal or considers Mighty River's s 445D argument in a way that renders that part of this proceeding otiose.

3. Fourthly, Mighty River's claim that the Administrators wrongly admitted Mineral Resources to prove for $8,106,226 at the Creditors Meeting and Resolution 4 was invalid for that reason has not been developed.  On the material before the court it seems likely that even if it were established that the Administrators wrongly admitted the proof for the full amount claimed it would not have affected the passing of Resolution 4.  That is because if Mineral Resources proof had been admitted for an amount as little as $23,000 the resolution would have been passed.  On the material before the Court it is likely to be found that the Administrators should have admitted Mineral Resources to prove for at least $23,000 at the Creditors Meeting.

Case management

1. The Supreme Court Rules require that matters in the court will, to the extent that the resources of the Court permit, be managed and supervised in accordance with a system of positive case flow management. The objects of case management include disposing efficiently of the business of the court and maximising the efficient use of available judicial and administrative resources.

2. Mr Sulan proposed that the court should give directions for an expedited hearing and then if the Court of Appeal has not delivered its judgment at the time when the trial is due to commence the court may reconsider staying the proceeding until the Court of Appeal has delivered its decision.  That would require the parties to undertake preparatory work under significant time pressures which may be wasted in whole or in part.  It would also involve the court setting aside time for the trial of the action in the knowledge that it may not proceed.  That is not consistent with the proper approach to case management.

3. The appropriate course is to adjourn the proceedings until after the Administrators have delivered the report to creditors, which is due by 3 August 2017.  The parties and the court will then know what, if any, restructure proposals are to be put before the creditors, what recommendations are made by the Administrators and what, if any, prejudice may be caused to Mighty River if the Administrators recommendations are accepted by the creditors.  I will grant liberty to apply on short notice so that the parties may apply for further directions if the Court of Appeal delivers its judgment before the adjourned hearing or some other development requires the matter to be further considered.

Leave to proceed

1. Sections 444E(3)(a) of the Corporations Act provides that a person bound by a deed of company arrangement cannot begin or proceed with a proceeding against the company or in relation to any of its property.  In Mighty River International Ltd v Hughes and Bredenkamp at [27] Master Sanderson commented that Mighty River did not need an order granting it leave to proceed against Mesa in a proceeding to challenge the validity of a deed of company arrangement or to terminate it. However, Mighty River has applied for leave. The decision whether to grant leave to proceed is discretionary. It is not possible to exhaustively state what factors the court should take into account in the exercise of the discretion to grant leave to proceed. However, the matters the court will have regard to include the nature and apparent strength of the claim and the interests of the creditors. Those matters will be informed by the decision of the Court of Appeal and the Administrators' further report to creditors. It is appropriate to adjourn Mighty River's application for leave to proceed against the company to the further directions hearing to be held after 3 August.

Joinder of Mineral Resources

1. The court may order that any person be added as a party where their presence is necessary to ensure that all matters in dispute be effectually and completely determined and adjudicated upon:  Rules of the Supreme Court 1971 (WA) O 18 r 6(2). Where the court is invited to make orders directly affecting the rights of a non‑party, the non‑party is a necessary party and ought to be joined: John Alexander's Club Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 [131]. Orders that the decision of the Administrators to admit Mineral Resources to prove for $8,106,226.05 was wrong and invalid and as a result Resolution 4 was invalid directly affects the rights of Mineral Resources. Mineral Resources should be joined as a party.

2. Mighty River submitted that if the court orders that Mineral Resources should be joined as a party it should be on condition that Mineral Resources not be entitled to security for its costs of the proceeding.  I decline to make such a condition.  Whether or not Mighty River should give security for Mineral Resources costs of this proceeding is a matter that should be determined if and when Mineral Resources applies for security for its costs.

3. In its chamber summons Mineral Resources seeks orders that Mighty River file and serve the grounds upon which it objects to Mineral Resources' proof of debt being admitted in the amount of $8,106,226 for the purpose of the Creditors Meeting and Mineral Resources file any response.  Consideration of those matters should be adjourned to the directions hearing to be held after the Administrators have delivered their further report.

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION: MIGHTY RIVER INTERNATIONAL -v- BRYAN HUGHES AND DANIEL BREDENKAMP AS DEED ADMINISTRATORS OF MESA MINERALS LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) [2017] WASC 203 (S)

CORAM:   LE MIERE J

HEARD:   ON THE PAPERS

DELIVERED          :   4 DECEMBER 2017

FILE NO/S:   COR 96 of 2017

MATTER                :Mesa Minerals Ltd (Subject to Deed of Company Arrangement)

BETWEEN:   MIGHTY RIVER INTERNATIONAL

Plaintiff

AND

BRYAN HUGHES AND DANIEL BREDENKAMP AS DEED ADMINISTRATORS OF MESA MINERALS LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
First Defendants

MESA MINERALS LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT)
Second Defendant

MINERAL RESOURCES LTD
Third Defendant

Catchwords:

Costs - Joinder application - Costs follow event - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA), O 66 r 1(c)

Result:

Plaintiff to pay the third defendant's costs of its joinder application

Category:    B

Representation:

Counsel:

Plaintiff:     No appearance

First Defendants            :     No appearance

Second Defendant         :     No appearance

Third Defendant            :     No appearance

Solicitors:

Plaintiff:     Nova Legal

First Defendants            :     Clayton Utz

Second Defendant         :     Clayton Utz

Third Defendant            :     Bennett + Co

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

Mighty River International Limited v Hughes [2017] WASC 69

Mighty River International v Bryan Hughes and Daniel Bredenkamp as Deed Administrators of Mesa Minerals Ltd (Subject to Deed of Company Arrangement) [2017] WASC 203

LE MIERE J: 

Summary

1. The third defendant, Mineral Resources Limited (Mineral Resources) seeks an order that the plaintiff, Mighty River International (Mighty River) pay the costs it incurred in making an application for joinder, on the basis that it was unreasonable in the circumstances for Mighty River to oppose that application.  For the following reasons, Mineral Resources' application is allowed.

Background

1. I summarised the background to this action in Mighty River International v Bryan Hughes and Daniel Bredenkamp as Deed Administrators of Mesa Minerals Ltd (Subject to Deed of Company Arrangement) [2017] WASC 203 (the Primary Decision), but I provide a brief summary of relevant factual information below.

2. Mighty River commenced this action on 10 May 2017. On 20 June 2017, Acting Master Strk gave Mighty River leave to file and serve an amended originating process to include a claim challenging the admission of Mineral Resources' proof of debt in the amount of $8,106,226.05 for the purpose of voting at the creditors meeting of the second defendant, Mesa Minerals Limited (Mesa Minerals), held on 11 May 2017.  On 29 June 2017, pursuant to a direction given by Acting Master Strk, Nova Legal, solicitors for Mighty River, served Bennett + Co, solicitors for Mineral Resources, with a copy of the amended originating process filed 28 June 2017 and an accompanying affidavit.

3. In their memorandum of conferral, filed together with their joinder application, Mineral Resources state that the first defendants (the Administrators) and Mesa Minerals had confirmed that they did not oppose Mineral Resources being joined to the action.

4. On 4 July 2017, Bennett + Co wrote to Nova Legal, referring to a telephone conversation earlier that day, and asking whether Mighty River would consent to Mineral Resources being joined to the action.  On 5 July 2017, Nova Legal wrote to Bennett + Co, stating that Mighty River does not consent to Mineral Resources' joinder because '[w]e do not see how your client is a necessary party to these proceedings', but that that Mighty River consents to Mineral resources 'joining … as an interested party and making submissions on both procedural and substantive matters'.  On 7 July 2017, Mineral Resources filed a chamber summons for joinder, together with a memorandum of conferral and accompanying affidavit, and on 10 July 2017 filed a brief outline of submissions.  At a hearing before me on 11 July 2017, counsel for Mighty River, Mr Sulan, opposed the joinder application (ts 25), only consenting to Mineral Resources being heard as a non-party (ts 25).  Mr Sulan argued that Mineral Resources is not a necessary party (ts 75), but that if I was inclined to join Mineral Resources this should be conditional upon Mineral Resources being precluded from seeking security for costs from Mighty River (ts 76).

5. On 12 July 2017 I ordered that Mineral Resources be joined as the third defendant to this action.  My reasons for that decision are explained at [32] of the Primary Decision.

The costs orders sought

1. On 4 August 2017, Mineral Resources applied for an order that Mighty River pay its costs in respect of its joinder application dated 7 July 2017.  On 8 August 2017, I made a consent order that the parties file submissions and that this application be determined on the papers.

2. Mineral Resources' argument is that Mighty River's opposition to the joinder application was unreasonable because it was apparent, or should have been apparent, to Mighty River that Mineral Resources was a necessary party.  Mineral Resources argues that because of the position adopted by Mighty River they were required to file a joinder application, comprising a chamber summons, memorandum of conferral, accompanying affidavit, and an outline of submissions.  In response, Mighty River argues that the costs of the joinder application should be borne by Mineral Resources or, in the alternative, become costs in the cause.  

Determination

1. The general rule is that costs follow the event:  Rules of the Supreme Court 1971 (WA) O 66 r 1(c). The plaintiff has relied on three main reasons for its argument that this principle should be departed from in the present case.

2. The first of these reasons is that Mineral Resources delayed in making its application for joinder, because while the action was commenced on 10 May 2017, Mineral Resources did not 'formally advise' of a desire to be joined until 3 July 2017.  Given that the originating process was amended on 28 June 2017 to add complaints regarding the assessment and scope of Mineral Resources' proof of debt, and that a copy served on Mineral Resources on 29 June 2017, I do not accept Mighty River's assertion that Mineral Resources delayed in their joinder application, which was filed eight days after they were served with a copy of the amended originating process, and two days after Mighty River wrote to refuse Mineral Resources' request for consent to join.

3. Mighty River's second reason is that, despite its repeated attempts, Mighty River

   had not been provided with any detailed information about the status of discussions and information exchange between the deed administrators and Mineral Resources regarding the proof of debt or the precise bases for the decision to allow Mineral Resources to vote the full amount claimed in the proof of debt.

4. The third reason given by Mighty River is that Mineral Resources did not confer '[s]ubstantively' in a way that would allow Mighty River to understand why Mineral Resources is a necessary party.  Mighty River develops this argument in two ways.  First, that once the joinder application was filed, there was not adequate time to consider it before the hearing on 11 July 2017.  Second, that Mighty River did not have information about the precise basis upon which Mineral Resources said its interests were impacted by Mighty River's amended originating application until the hearing on 11 July 2017.  This is said to be because Mighty River did not receive Mineral Resources 'brief written submissions' until 4.59 pm the day before the 12 July 2017 hearing and because counsel for Mineral Resources provided 'much more detailed' oral submissions at that hearing, and that as a result it was only after the hearing that Mighty River could form any sensible view of whether Mineral Resources were a necessary party.

5. I will deal with the second and third arguments by Mighty River together, which are both effectively that Mighty River did not have enough information to know whether Mineral Resources was a necessary party. I reject this argument for the following reasons

6. First, it should have been clear to Mighty River that Mineral Resources has a direct interest in the subject matter of the orders proposed at 4A, 4(c) and 6 in its amended originating process filed 28 June 2017.  As I found in [32] of the Primary Decision, orders that the decision of the Administrators to admit Mineral Resources to prove for $8,106,226.05 was wrong and invalid, and as a result that Resolution 4 made at the 3 May 2017 creditors meeting was invalid, are orders that directly affect the rights of Mineral Resources.  I do not accept that Mighty River required further information or conferral to come to this conclusion.

7. Second, it should have been clear to Mighty River that Mineral Resources is a necessary party because Mineral Resources, Mighty River, Mesa Minerals and the Administrators are involved in related legal proceedings.  The deed of company arrangement (DOCA) was the subject of challenge by Mighty River in proceedings involving Mighty River, the Administrators and Mesa Minerals numbered COR 247 of 2016.  COR 247 of 2016 was heard together with COR 13 of 2017, an action commenced by Mineral Resources relating to the DOCA, and involving Mighty River, the Administrators and Mesa.  Master Sanderson delivered his reasons for decision in relation to both actions on 16 March 2017 in Mighty River International Limited v Hughes [2017] WASC 69. Mighty River appealed. CACV 30 of 2017 is the appeal from COR 247 of 2016. CACV 31 of 2017 is the appeal from COR 13 of 2017. The delivery of the Court of Appeal's reserved decision in CACV 30 and CACV 31 of 2017 was pending at the time of the 11 July 2017 hearing before me. In CACV 31 of 2017, Mighty River had been granted leave to and had in fact made submissions and filed evidence in respect an argument about a variation of the DOCA to extend the sunset date. The similarity of the argument made in CACV 31 of 2017, to which all of the parties in this current action are parties, and Mighty River's claim in this action should have indicated to Mighty River that Mineral Resources is a necessary party. The ultimate remedy sought by Mighty River in the related legal proceedings is that Mesa Minerals be wound up and a liquidator appointed to conduct its affairs. This is the same ultimate remedy that it was seeking in this action. Given the degree of commonality between this and related proceedings, and that Mineral Resources is a party to one of those related proceedings, it should have been apparent to Mighty River that Mineral Resources is a necessary party to this action.

8. Third, although Mineral Resources' submissions as to joinder were filed late on the afternoon on the day before the 12 July 2017 hearing, it should have been apparent to Mighty River from reviewing those submissions that Mineral Resources is a necessary party.  It was still open to Mighty River to revert from their opposition to the joinder application ahead of the 12 July 2017 hearing, but instead Mighty River maintained its opposition.

9. Finally, I find that, given that the parties were due to come to court, at Mighty River's instigation, on 11 July 2017, the conferral between Mighty River and Mineral Resources between 4 July 2017 and the 12 July 2017 hearing, as to whether Mighty River was a necessary party, was adequate in the context of the relevant timeframe.

Conclusion

1. The appropriate cost order in this case is that Mighty River pay Mineral Resources' costs of its joinder application.