Perdaman Chemicals and Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [No 2] - [2011] WASCA 211

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: PERDAMAN CHEMICALS AND FERTILISERS PTY LTD -v- THE GRIFFIN COAL MINING COMPANY PTY LTD [No 2] [2011] WASCA 211

CORAM: PULLIN JA

HEARD: 2 SEPTEMBER 2011

DELIVERED : 2 SEPTEMBER 2011

FILE NO/S: CACV 94 of 2011

BETWEEN: PERDAMAN CHEMICALS AND FERTILISERS PTY LTD
Appellant
AND
THE GRIFFIN COAL MINING COMPANY PTY LTD
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :BEECH J
Citation  :PERDAMAN CHEMICALS & FERTILISERS PTY LTD -v- THE GRIFFIN COAL MINING COMPANY PTY LTD [2011] WASC 188
File No  :CIV 1925 of 2011

Catchwords:

Application to be released from undertaking - Whether material change in circumstances - Turns on own facts

Legislation:

Nil

Result:

Application dismissed

Category: B

Representation:

Counsel:

Appellant: Mr M L Bennett
Respondent: Mr B D Luscombe

Solicitors:

Appellant: Bennett & Co
Respondent: Clifford Chance

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

Adam P Brown Male Fashions Pty Ltd v Philip Morris [1981] HCA 39; (1981) 148 CLR 170

PULLIN JA: This is an application by the respondent seeking to be released from an undertaking it gave earlier this week or, alternatively, that there be an increase in the security given by the appellant in support of its undertaking as to damages.
I will relate some background to this. On 29 August 2011, I decided I was prepared to grant an injunction pending the appeal, if a suitable undertaking as to damages was given by the appellant. The parties negotiated and on 30 August 2011, the respondent expressed willingness to give undertakings in the same form as the proposed injunction if security for an undertaking of $100,000 was given by the appellant.
The appellant was prepared to provide that security. As a result, the appellant gave an undertaking as to damages and the appellant's solicitors gave an undertaking to hold $100,000 in trust as security for the undertaking. In return, the respondent then gave an undertaking in the same terms as the proposed injunction. Liberty was granted to apply on 48 hours' notice to discharge the undertaking which had been given by the respondent.
Now the respondent has terminated the coal supply agreement and has applied to be released from the undertakings or to be released unless security for the appellant's undertaking as to costs is increased to $1 million. It does not claim to be released by reason of the termination but by reason of information revealed in an affidavit, namely that the appellant has made a press release to which the respondent takes exception.
I will again briefly mention the points in issue in this appeal. The appellant's appeal is against the decision of Beech J, refusing to grant an injunction against the respondent to prevent it entering into transactions which might provide security to financiers over the respondent's entire assets. The background is that on 21 December 2010, the appellant and the respondent entered into a coal supply agreement. It contained terms which constituted the primary obligations imposed on the parties. If the obligations were not met, then at law a secondary obligation to pay damages would arise and this obligation also arose from the contract.
On 9 February 2011, Lanco Australia and Lanco Singapore (shareholders of the respondent) entered into a facility agreement with ICICI Bank and Bank of New York Mellon under which the banks were to provide funds to allow the two borrowers to acquire the shares in the respondent. The appellant alleges that in May 2011 there were breaches by the respondent of the coal supply agreement and Beech J has held that there is an arguable case of breach (at [168]), but of course they are provisional findings only and only at trial will it be known whether those breaches have occurred or not.
Subsequently, sometime between 12 and 21 June 2011, a negative pledge agreement was entered into by the respondent and ICICI Bank which contains a clause which the appellant contends has the effect that if any security is granted by the respondent, for any amount, no matter how small, then the respondent is bound to grant an equal‑ranking security for all amounts due under the facility agreement. The respondent's shares were purchased for about $800 million with funds provided under the facility agreement and according to the appellant, it may be assumed that if security were granted to secure repayment of that sum or any sum over $800 million, that all of the respondent's assets would be committed for that purpose and according to the appellant, ICICI Bank would then have priority over any claim by the appellant to recover damages which the appellant might be awarded if it succeeded in its claim that there was a breach of the coal supply agreement.
The contention of the appellant is that this will frustrate the court's process by denying the appellant its entitlement to damages because the facility agreement will have the effect of putting the respondent's assets out of the reach of the appellant as soon as it grants security to any financier for any amount.
Beech J said at [135] of his reasons that an intention to produce that result did not have to be shown in order to obtain a freezing order. Beech J, having found that there was an arguable case of breach, however, dismissed the application for the freezing order because of other considerations which are set out in his reasons and which I need not repeat.
The respondent has sought liberty to apply before me today because of a press report which contains a press release prepared by the appellant and obviously provided to the press. The article that is particularly referred to and which contains a copy of the press release appeared in Business News dated 31 August 2011.
The respondent says that this press release is damaging to its reputation. It does not contend that it is false save in one aspect; namely, the statement that the 'question of whether or not Griffin Coal had legal power under Australian law to terminate the coal supply agreement was debated on 27 July 2011 before Supreme Court Justice Andrew Beech, who expressed the view that Griffin could not exercise any power to terminate (ts 72)'. Whether that is strictly accurate or not is not for me to determine, but there was an exchange before Beech J where that topic was discussed. Apart from that aspect, the press release does reflect what has happened in the litigation, although it does not set out all of the relevant circumstances, nor does the respondent or its owners set out the full circumstances of the litigation in press releases that they have made or in advertisements that they have placed. This is not surprising, given that the litigation is complex and would require much more space than newspapers and other media outlets are likely to give for such a report. The respondent submits that there has been a material change in circumstances. If there has been such a change, the court does have power to release a party from an undertaking: see Adam P Brown Male Fashions Pty Ltd v Philip Morris [1981] HCA 39; (1981) 148 CLR 170, 178. The changed circumstance is said to be this press release by the appellant about the dispute. Alternatively, the respondent submits that the security provided by the appellant is now inadequate and finally the respondent contends that the appellant has been guilty of contempt by referring to an affidavit of Mr Amarendran which was not read. As to this latter aspect, the affidavit was relied on at the hearing and in accordance with usual practice in this court, it could be taken that that affidavit had been read.
In my opinion, there has been no material change of circumstance. I have read the affidavit of Mr Walewski dated 1 September 2011 which reveals that both parties are providing information to the press, sometimes as required by law and sometimes not, which is feeding further press reports about the dispute. The possibility of this continuing after the cross undertakings were given earlier this week must have been in the minds of the parties, who had used the press before that time. The respondent's application to be released from its undertaking or to have the appellant increase its security for its undertaking is dismissed.