Multinet Gas (DB No 1) Pty Ltd v Alinta Asset Management Pty Ltd (No 2)

[2009] VSC 80

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION  No. 4712 of 2007

MULTINET GAS (DB NO 1) PTY LTD (ABN 66 086 026 986)	First Plaintiff
and
MULTINET GAS (DB NO 2) PTY LTD (ABN 57 086 230 122)	Second Plaintiff
v
ALINTA ASSET MANAGEMENT PTY LTD (ACN 104 352 650)	First Defendant
and
ESSENTIAL SERVICES COMMISSION (ABN 71 165 498 668)	Second Defendant

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JUDGE:	Kyrou J
WHERE HELD:	Melbourne
DATE OF HEARING:	13 March 2009
DATE OF JUDGMENT:	13 March 2009
CASE MAY BE CITED AS:	Multinet Gas (DB No 1) Pty Ltd v Alinta Asset Management Pty Ltd (No 2)
MEDIUM NEUTRAL CITATION:	[2009] VSC 80

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Costs – Sanderson order – unsuccessful first defendant ordered to pay costs of successful plaintiff and successful second defendant.

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APPEARANCES:	Counsel	Solicitors
For the First and Second Plaintiffs	Mr P Bick QC with Mr D Farrands	Norton Gledhill
For the First Defendant	Mr J Delany SC with Mr A Weinstock	Blake Dawson
For the Second Defendant	Mr P Gray	Brand Partners as agents for Gilbert & Tobin

HIS HONOUR:

1. Following the delivery of my reasons for judgment dated 10 February 2009,[1] the parties reached substantial agreement on the declarations and orders I should make to reflect my reasons for judgment, save in relation to the costs of the second defendant (“ESC”). 

   [1]Multinet Gas (DB No 1) Pty Ltd v Alinta Asset Management Pty Ltd [2009] VSC 18.

1. The plaintiffs (“Multinet”) submitted that the first defendant (“AAM”) should pay the ESC’s costs.  The ESC submitted that either Multinet or AAM should pay its costs or those costs should be shared by Multinet and AAM in such proportion as the Court determines.  AAM submitted that Multinet should pay the ESC’s costs or, alternatively, that the ESC should bear its own costs or, alternatively, that Multinet and AAM should share the ESC’s costs. 

1. I have decided that AAM should pay the ESC’s costs for the following reasons:

(a)Multinet’s claims against the defendants are interdependent because AAM’s obligations to Multinet under the operating services agreement depended on Multinet’s obligations to the ESC under the Gas Industry Guideline No. 17, Regulatory Accounting Information Requirements, Issue No. 1, published by the ESC on 13 July 2005 (“Guideline”), and this in turn depended on the determination of the issues of the validity, scope and application of the Guideline that were raised by AAM.  Multinet was caught between the ESC’s demands that it comply with the Guideline and AAM’s refusal to provide the information required by the Guideline. 

(b)It was reasonable for Multinet to have joined both defendants and to have proceeded against both, particularly since the validity, scope and application of the Guideline were critical to the outcome of the proceeding.  It was necessary that both AAM and the ESC be bound by the Court’s determination on the validity of the Guideline, its scope and its application to Multinet.

(c)If AAM had agreed to provide the information required by the Guideline instead of challenging the validity of the Guideline and denying it was a related party for the purposes of the Guideline, the proceeding may not have been necessary.  Also, AAM did not merely defend the claim brought against it by Multinet.  It filed a counterclaim against both Multinet and the ESC.  That counterclaim sought a declaration that the Guideline was invalid.  The Guideline is an important part of the gas industry regulatory regime that in the relevant period was the responsibility of the ESC and a declaration of invalidity by this Court would have adversely affected that regime.  Although the counterclaim was filed at the close of the hearing, it reflected AAM’s opening and closing submissions.  Accordingly, the conduct of AAM was such as to make it just to require it to pay the costs of the ESC. 

(d)The ESC did not seek any substantive relief in the proceeding.  It did not call any witnesses and its cross-examination and submissions were broadly consistent with Multinet’s, save that initially Multinet contended that the Guideline was invalid. 

(e)Although the ESC, through its counsel, informed the Court during the hearing that it had no current intention to take action in relation to Multinet’s non-compliance with the Guideline, I have found that this did not render the proceeding hypothetical or futile.

(f)The fact that initially Multinet pleaded that the Guideline was invalid and subsequently withdrew this allegation had an insignificant impact on the costs of the proceeding, as Multinet did not make extensive submissions in support of the invalidity of the Guideline before it withdrew the allegation of invalidity.

(g)This proceeding was heard concurrently with another proceeding involving AAM and the ESC as defendants and United Energy Distribution Pty Ltd (“UED”) as plaintiff (“UED proceeding”)[2] which raised similar issues.  In that proceeding, UED and the ESC have been successful and AAM has been unsuccessful.  AAM has agreed to pay UED’s and the ESC’s costs in the UED proceeding.  This fact and the fact that it will be very difficult to apportion costs as between this proceeding and the UED proceeding because of the overlapping factual and legal issues are additional considerations favouring an order that AAM pay Multinet’s and the ESC’s costs.

(h)It has not been suggested that any party is insolvent or is incapable of meeting an order for costs.  There is therefore nothing to be gained by an alternative order requiring UED to pay the ESC’s costs and then seek reimbursement from AAM in respect of those costs.[3]

(i)In all the circumstances, it is reasonable and just for AAM to be required to pay the costs of not only Multinet but also the ESC.

[2]United Energy Distribution Pty Ltd v Alinta Asset Management Pty Ltd [2009] VSC 19.

[3]Compare Sanderson v Blyth Theatre Company [1903] 2 KB 533 and Bullock v London General Omnibus Company [1907] 1 KB 264.

1. My conclusion is consistent with the principles discussed by the Court of Appeal in Victoria v Horvath (No 2).[4]

   [4][2003] VSCA 24. Compare Nationwide News Pty Ltd v Naidu [2008] NSWCA 71.

1. Accordingly, I will make the following orders:

The Court declares that:

A.In each of the financial accounting years ended 31 December 2004 and 31 December 2005 (“Relevant Years”), the First Defendant was a related party of the Plaintiffs within the meaning of the Gas Industry Guideline No. 17, Regulatory Accounting Information Requirements, Issue No. 1, published by the Second Defendant on 13 July 2005 (“Guideline”).

B.Under the First Defendant’s agreement with the Plaintiffs entitled “Services Agreement – Multinet Distribution Network” and dated 14 July 2003, the First Defendant is obliged to prepare gas regulatory accounting statements for the Plaintiffs’ distribution business for each of the Relevant Years in accordance with the Guideline if the Second Defendant informs the Plaintiffs that the Second Defendant requires compliance with the Guideline.

The Court orders that:

1.      The First Defendant’s counterclaim is dismissed.

2.The First Defendant pay the Plaintiffs’ and Second Defendant’s costs of the proceeding, including reserved costs.

3.The parties have liberty to apply.