Southern Pacific Petroleum NL (Receiver and Manager Appointed), (Administrator Appointed) v Esso Australia Resources Pty Ltd, in the matter of Southern Pacific Petroleum NL (Receiver and Manager Appointed),

[2004] FCA 1327

FEDERAL COURT OF AUSTRALIA

Southern Pacific Petroleum NL (Receiver and Manager Appointed), (Administrator Appointed) v Esso Australia Resources Pty Ltd, in the matter of Southern Pacific Petroleum NL (Receiver and Manager Appointed), (Administrator Appointed) [2004] FCA 1327

SOUTHERN PACIFIC PETROLEUM NL (RECEIVER AND MANAGER APPOINTED), (ADMINISTRATOR APPOINTED ACN 008 460 366 v ESSO AUSTRALIA RESOURCES PTY LIMITED ACN 091 829 819 & ORS

N1336 OF 2004

EMMETT J
14 OCTOBER 2004
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1336 OF 2004

IN THE MATTER OF SOUTHERN PACIFIC PETROLEUM NL (RECEIVER AND MANAGER APPOINTED), (ADMINISTRATOR APPOINTED)

BETWEEN:

SOUTHERN PACIFIC PETROLEUM NL (RECEIVER AND MANAGER APPOINTED), (ADMINISTRATOR APPOINTED) ACN 008 460 366
PLAINTIFF

AND:

ESSO AUSTRALIA RESOURCES PTY LIMITED
ACN 091 829 819
FIRST DEFENDANT

PETER IVAN FELIX GEROFF
SECOND DEFENDANT

WILLIAM MARTIN COLWELL
THIRD DEFENDANT

ANDREW JOHN LOVE
FOURTH DEFENDANT

JUDGE:

EMMETT J

DATE OF ORDER:

14 OCTOBER 2004

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.All claims as against the first defendant be dismissed on the ground that the Court has no jurisdiction to hear and determine those claims. 

2.The plaintiff pay the first defendant’s costs of the proceeding including the notice of motion filed on 5 October 2004. 

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1336 OF 2004

IN THE MATTER OF SOUTHERN PACIFIC PETROLEUM NL (RECEIVER AND MANAGER APPOINTED), (ADMINISTRATOR APPOINTED)

BETWEEN:

SOUTHERN PACIFIC PETROLEUM NL (RECEIVER AND MANAGER APPOINTED), (ADMINISTRATOR APPOINTED) ACN 008 460 366
PLAINTIFF

AND:

ESSO AUSTRALIA RESOURCES PTY LIMITED
ACN 091 829 819
FIRST DEFENDANT

PETER IVAN FELIX GEROFF
SECOND DEFENDANT

WILLIAM MARTIN COLWELL
THIRD DEFENDANT

ANDREW JOHN LOVE
FOURTH DEFENDANT

JUDGE:	EMMETT J
DATE:	14 OCTOBER 2004
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. The question before the Court is whether the Federal Court of Australia has jurisdiction to determine a dispute between the plaintiff, Southern Pacific Petroleum NL (‘Southern Pacific’), and the first defendant, Esso Australia Resources Pty Limited (‘Esso’) concerning the effect of a provision of a joint venture agreement dated 18 July 1985 (‘the Rundle Joint Venture Agreement’) entered into between Southern Pacific, Esso and Central Pacific Minerals NL (‘Central Pacific’).  The dispute arises in the context of a proposed deed of company arrangement between Southern Pacific and the second, third and fourth defendants (‘the Administrators’) who are administrators of Southern Pacific, appointed pursuant to the provisions of the Corporations Act 2001 (Cth) (‘the Corporations Act’).

   THE RUNDLE JOINT VENTURE

2. The Rundle Joint Venture Agreement was entered into to establish the Rundle Joint Venture between Southern Pacific and Central Pacific on the one hand and Esso on the other hand.  It refers to Southern Pacific and Central Pacific collectively as ‘SPP/CPM’ and recites that:

   • SPP/CPM had selected Esso to participate with it in developing the Rundle oil shale resource in Queensland;
   • SPP/CPM and Esso had reached agreement on the terms and conditions upon which they intend to develop that resource.

3. Clause 4.02 of the Rundle Joint Venture Agreement provides that the objectives of the parties include the development of mining in the relevant area by way of an unincorporated joint venture.  Under Clause 5.02 the interests of the participants in the Rundle Joint Venture were to be:

   • Southern Pacific/Central Pacific - 50 per cent;
   • Esso – 50 per cent.

   Under clause 6, Esso was to be the operator of the project under the terms of an operating agreement subject to the directions of an operating committee.

4. The dispute between Southern Pacific and Esso concerns the true construction of clause 24 of the Rundle Joint Venture Agreement, which deals with assignment.  Clause 24 relevantly provides as follows:

   ‘24.01  (a)       Each Participant shall have the right to assign all or part of its Interest to a Related Corporation without the consent of the other Participant…
              (b)       Subject to this article each Participant may with the prior written consent of the other, which shall not be unreasonably withheld, assign all or part of its Interest to a third party (‘Relevant Interest’).
              (c)       On assignment of a Relevant Interest, this agreement shall be modified so that the rights and obligations of the assignor are shared with the assignee in proportion to the Interest assigned.

   24.02   Subject to obtaining the prior written consent of the other Participant, where a Participant wishes to dispose of a Relevant Interest… wishes to sell the whole or part of a Participant’s Interest, it shall be entitled, at its election, either to auction the Relevant Interest pursuant to Clause 24.05, or to sell it pursuant to clause 24.06.’

5. Clauses 24.05 and 24.06 provide a procedure whereby a relevant interest can be sold by public auction or by private treaty.  Under clause 24.05, where a participant elects to auction a relevant interest, it must give at least 60 days notice to the other participant of the date, time and venue of the auction.  Under clause 24.06, where a participant elects to dispose of a relevant interest by way of sale other than by auction it must first notify the other participant of the minimum price at which it is prepared to sell and the other participant is to have the right within 90 days to purchase the relevant interest for that price.

6. Clause 1.01 of the Rundle Joint Venture Agreement provides that the term ‘Related Corporation’ is to have the same meaning as ascribed to that term by s 5(1) of the Companies Act 1981 (Cth) (repealed) and provides that a corporation is to be deemed to be a related corporation of Southern Pacific/Central Pacific if it is a related corporation of either Southern Pacific or Central Pacific. Section 5(1) of the Companies Act refers, in turn, to s 7(5) of that Act, which, in turn, picks up the operation of s 7(1) in relation to the deeming of one company to be a subsidiary of another. Under s 7(1)(a)(i) a corporation is to be deemed to be a subsidiary of another corporation if that other corporation controls the composition of the board of directors of the first-mentioned corporation.

   DEEDS OF COMPANY ADMINISTRATION

7. Part 5.3A of the Corporations Act deals with the administration of a company’s affairs with a view to executing a deed of company arrangement. The object of Part 5.3A stated in s 435A is to provide for the business, property and affairs of an insolvent company to be administered in a way that maximises the chances of the company continuing in existence or results in a better return for the company’s creditors and members than would result from an immediate winding up of the company.

8. Section 436A(1), which is within Part 5.3A, provides that a company may appoint an administrator of the company if its board has resolved that in the opinion of its directors the company is insolvent and an administrator should be appointed. Under s 439A(1) the administrator of a company must convene a meeting of the company’s creditors within the period fixed by that section. Under s 439C, at such a meeting, the creditors may resolve:

   • that the company execute a deed of company arrangement;
   • that the administration should end; or
   • that the company be wound up.

9. Section 444A applies where, at a meeting convened under s 439A, a company’s creditors resolve that the company execute a deed of company arrangement.  Under s 444A(2) the administrator of the company is to be administrator of the deed and under s 444A(3) the administrator of the deed must prepare an instrument setting out the terms of the deed.  Section 444A(4) provides what that instrument must specify.

10. Under s 444B(2), where an instrument is prepared under s 444A, the company must execute the instrument within 21 days after the end of the meeting of creditors, or such further period as the Court allows on an application made within that period of 21 days.  Under s 444B(5) the administrator of the deed must execute the instrument before, or as soon as practicable after the company executes it.  By the operation of s 444B(6) when executed by both the company and the deed’s administrator, the instrument becomes a deed of company arrangement. 

11. Division 12 of Part 5.3A of the Corporations Act provides for consequences of a company contravening s 444B(2). Under s 446A, if a company under administration contravenes s 444B(2) at a particular time, the company is to be taken to have passed, at that time, a special resolution under s 491 that the company be wound up voluntarily and to have done so without a declaration having been made and lodged under s 494. Under s 491(1), a company may be wound up voluntarily if the company so resolves by special resolution. Under s 494(1) where it is proposed to wind up a company voluntarily, the directors may make a written declaration to the effect that they have made an inquiry into the affairs of the company and have formed the opinion that the company will be able to pay its debts in full within a period not exceeding 12 months after the commencement of the winding up. Under s 494(2) there must be attached to such a declaration a statement of affairs of the company showing prescribed particulars.

12. Further, by the operation of s 1311(1)(b), a person who does not do an act that the person is required to do under a provision of the Corporations Act is guilty of an offence. That may have application in the context of s 444B(2).

    ADMINISTRATION OF SOUTHERN PACIFIC

13. On 13 February 2004, the Administrators were appointed administrators of Southern Pacific pursuant to a resolution of its board of directors under s 436A.  The meetings of creditors of Southern Pacific and Central Pacific that were convened pursuant to s 439A were adjourned to enable the Administrators to consider, inter alia, dealing with the interests of Southern Pacific and Central Pacific under the Rundle Joint Venture Agreement. 

14. On 17 August 2004, the Administrators forwarded a report to the creditors of Southern Pacific and Central Pacific (‘the Report’).  By the Report, the Administrators stated that they proposed to reconvene the meetings of creditors for 24 August 2004.  The Report stated that the Administrators had received offers from two parties for the interest of Southern Pacific and Central Pacific in the Rundle Joint Venture.  The Report stated that the Rundle Joint Venture Agreement conferred on Esso, in certain circumstances, pre-emptive rights on the potential sale of the interest.  The report pointed out that one of the offers received triggered Esso’s pre-emptive rights and that details of that offer had been forwarded to Esso for urgent consideration. 

15. The Report then described the two offers that had been received. One was from Queensland Energy Resources Limited, which would trigger the pre-emption provisions of clause 24.06. The other was from Mr John Allen Browning, as agent for a proposed new public company to be registered under the Corporations Act. The offer from Mr Browning involved inter-conditional deeds of company administration for each of Southern Pacific and Central Pacific.

16. The Administrators were unable to prefer one proposal over the other at the time of the Report.  They considered that each proposal had merit but were unable to conclude that one proposal had less completion risk than the other.  The Administrators indicated that they would discuss the proposals further with a view to formulating a recommendation prior to the reconvened meeting of creditors.

17. At the reconvened meeting of the creditors of Southern Pacific and Central Pacific held on 24 August 2004, the representatives of Mr Browning and Queensland Energy Resources Limited addressed the meeting on the merits of their respective proposals.  Mr Browning’s representative provided an amended proposal and outlined changes to the proposal that had originally been put forward.  The creditors of Southern Pacific then passed the following resolution:

    ‘That the company be required to execute a Deed of Company Arrangement under Part 5.3A of the Corporations Act 2001 in the same form as the amended proposal statement presented to the meeting.’

18. Following the meeting, Southern Pacific and the Administrators received correspondence from the solicitors for Esso questioning ‘the validity of the Browning Offer’ and seeking assurances there would be no dealing with the interest in the Rundle Joint Venture.  On 13 September 2004, Esso obtained an order from the Supreme Court of Victoria restraining Southern Pacific from:

    • selling, transferring, assigning or otherwise dealing with;

    ·entering into any agreement to sell, transfer, assign or otherwise deal with;

    its interest or any part of its interest in the Rundle Joint Venture except pursuant to Article 24.01(b) of the Rundle Joint Venture Agreement.

19. A proposed deed of company arrangement was prepared by the Administrators in performance of the obligation imposed by s 444A(3) and (4) of the Corporations Act. The parties to the proposed deed were to be Southern Pacific, the Administrators and Mr Browning as agent for a proposed new public company. With effect from the date of execution of the deed, all of the functions and powers of Southern Pacific were to be performed or exercised by Southern Pacific under the management, operation and control of its directors, to the exclusion of the Administrators. Clause 6 provided for a bar to creditors’ claims on the basis that they were to accept that their entitlements under the deed in full satisfaction and discharge of all claims that they might have against Southern Pacific. That entitlement was to consist of shares in the proposed new public company.

20. Clause 8 of the draft deed deals with Southern Pacific’s right, title and interest under the Rundle Joint Venture Agreement.  Under clause 8(a)(i), Southern Pacific and the proposed new public company are to enter into an assignment deed.  By the proposed assignment deed, Southern Pacific is to assign to the proposed new public company all of its right, title and interest in the Rundle Joint Venture Agreement and the proposed new public company is to assume all of Southern Pacific’s obligations under the Rundle Joint Venture Agreement. 

21. By clause 9.1(d) Mr Browning is to incorporate the proposed new public company and Southern Pacific agrees to appoint three named individuals as the three directors of the proposed new public company.  The proposed deed contains an acknowledgement by Southern Pacific and the proposed new public company that the proposed new public company will be a subsidiary of Southern Pacific by reason of its right to appoint those individuals as directors. 

22. The assignment deed, which is an attachment to the proposed deed of company administration contains an acknowledgement that Southern Pacific controls the composition and board of directors of the proposed new public company and that, accordingly, the proposed new public company will be a Related Corporation of Southern Pacific, within the meaning of the Rundle Joint Venture Agreement, at the time of the proposed assignment.

23. Thus, Southern Pacific contends that the proposal falls within clause 24.01(a) because any assignment will be to a Related Corporation.  Accordingly, there would be no contravention of clause 24.01 of the Rundle Joint Venture Agreement by reason only of Southern Pacific’s execution and performing the proposed deed of company arrangement. 

24. An alternative form of deed of company arrangement has been proposed.  It is substantially similar to the first form of proposed deed except that instead of an assignment deed, the alternative form provides for the execution of a trust deed.  Under the proposed trust deed, instead of Southern Pacific assigning its right, title and interest in the Rundle Joint Venture Agreement to the proposed new public company, it will declare that it holds its right, title and interest in the Rundle Joint Venture Agreement on trust for the benefit of the proposed new public company.  Southern Pacific proposes to contend that such a change would ensure the proposed deed of company arrangement and deed of trust would not constitute a contravention of clause 24.01 of the Rundle Joint Venture Agreement.

25. On 13 September 2004, the directors of Southern Pacific resolved that the form of the draft deed of company arrangement tabled at the meeting be executed once the issues raised by Esso in respect of the Rundle Joint Venture Agreement had been determined by a court and the directors had received a legal opinion confirming that such issues had been so determined.  The directors also resolved that Southern Pacific seek an extension of time under s 444B(2) within which it may execute the proposed deed of company arrangement. 

    THIS PROCEEDING

26. On 14 September 2004, Southern Pacific commenced this proceeding in the Court, claiming an order under s 44B(2)(b) of the Corporations Act extending the time within which Southern Pacific may execute a deed of company arrangement. On 14 September 2004, I made an order in the following terms:

    ‘…that the period within which the Plaintiff must, pursuant to s 444B(2) of the Corporations Act 2001, execute an instrument prepared by the administrator of the Plaintiff pursuant to s 444A(3) of the Corporation Act 2001 be the period ending after today on a day to be fixed by further order of the Court.’

27. However, on 1 October 2004, Southern Pacific filed an amended application and a statement of claim pursuant to which Esso and the Administrators were joined as defendants.  Southern Pacific now claims, inter alia:

    • a declaration that the execution and implementation of the deed of company arrangement provides for the assignment of Southern Pacific’s interest in the Rundle Joint Venture in accordance with clause 24.01(a) of the Rundle Joint Venture Agreement; and
    • a declaration that the execution and implementation of the alternative deed of company arrangement does not contravene the Rundle Joint Venture Agreement or the rights of Esso under the Rundle Joint Venture Agreement.

28. Following joinder of Esso, Esso filed a notice of motion claiming orders that:

    • Southern Pacific’s claims against Esso be dismissed on the ground that the Court has no jurisdiction to hear and determine those claims;
    • The proceeding, in so far as it concerns Esso, be stayed until the hearing and determination of the proceeding in the Supreme Court of Victoria pursuant to which injunctions were granted on 13 September 2004.

29. I have heard argument from both Southern Pacific and Esso on the question of jurisdiction.  However, assuming the Court has jurisdiction, I have deferred the question of a stay until the parties are able to inform the Court with some degree of certainty as to whether the Supreme Court of Victoria will be in a position to determine the essential dispute between Southern Pacific and Esso in the near future.  Even if the Court has jurisdiction, if the Supreme Court of Victoria is able to resolve that dispute in the near future, I would be disposed to stay the proceeding in so far as it relates to that dispute. 

30. It is against that background that I now consider the question of whether the Federal Court of Australia has jurisdiction to entertain Southern Pacific’s claim for declarations as to whether either of the proposed deeds of company arrangement would constitute a breach of clause 24.01 of the Rundle Joint Venture Agreement, if entered into, and completed by Southern Pacific without the prior written consent of Esso, which is not presently forthcoming. 

    JURISDICTION

31. Under s 1337B(1) of the Corporations Act, jurisdiction is conferred on the Federal Court of Australia with respect to civil matters arising under the Act. Further, under s 447A(1), the Federal Court may make such order as it thinks appropriate about how Part 5.3A is to operate in relation to a particular company. For example, under s 447A(2) if the Court is satisfied that the administration of a company should end because the company is solvent or because the provisions of Part 5.3A are being abused or for some other reason, the Court may order that the administration is to end.

1. In addition, if the jurisdiction of the Court is attracted in relation to a matter, that jurisdiction extends to the resolution of the whole of that matter.  That jurisdiction carries with it the authority to make such remedial orders as are necessary or convenient for or in consequence of that resolution of the whole matter in controversy between the parties:  see Fencott v Muller (1983) 152 CLR 570 at 603-4. The essential function of judicial power is the quelling of controversies between subjects, or between subject and state, by ascertainment of the facts, by application of the law and by exercise, where appropriate, of judicial discretion. What is and what is not part of one controversy depends on what the parties have done, the relationships between or among them and the laws that attach rights or liabilities to their conduct in relationships. The scope of a controversy that constitutes a matter is not ascertained merely by reference to the proceedings which a party may institute, but may be illuminated by the conduct of those proceedings and especially by the pleadings in which the issues in controversy are defined and the claims for relief are set out: Fencott v Muller (supra) at 608.

2. The power to determine the whole of a dispute judicially is inconsistent with a limitation that would restrict the Court to resolving only the federal claim and what is necessary for that purpose.  The judicial ascertainment of facts in a particular controversy should not be bedevilled by the possibility of divergent findings or by unseemly attempts to secure a first finding from one court rather than another:  Fencott v Muller (supra) at p 609. While there may be various claims, if there is one matter, the Court will have jurisdiction in respect of that matter, see ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at [51]-[52].

3. The identification of the justiciable controversy between parties is not determined only by the considerations of there being separate proceedings and different parties in the one court.  In some circumstances, a single matter can proceed through more than one court.  There is but a single matter if different claims arise out of common transactions and facts or a common substratum of facts, notwithstanding that the facts upon which the claims depend do not wholly coincide.  Also, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other.  One example is where there are alternative claims for the same damage and the determination of one will either render the other otiose or necessitate its determination.  On the other hand, claims that are completely disparate, completely separate and distinct or distinct and unrelated are not part of the same matter:  Re Wakim 198 CLR 511 at [138] and [140].

4. There can be no doubt that this Court had jurisdiction to entertain the application by Southern Pacific for an extension under s 444B(2)(b), of the time within which to execute the proposed deed of company arrangement. However, in the consideration of the exercise of the discretion to grant that extension, the question of whether the execution of the proposed deed of company arrangement would be a breach of clause 24.01 of the Rundle Joint Venture Agreement did not arise.

5. The justification for the extension was that Southern Pacific was caught between Scylla and Charybdis.  That is to say, if it did not execute the proposed deed within 21 days it would be taken by one of the many heads of s 446A(1)(b), 446A(2) or s 1311(1)(b).  On the other hand, if Southern Pacific executed the proposed deed in the face of the order made by the Supreme Court of Victoria, it would be sucked into the whirlpool of contempt of court. 

6. Clearly, prior to the orders of the Supreme Court of Victoria, Southern Pacific was proposing to execute the proposed deed in the expectation that there would be no contravention of clause 24.01, because any assignment would fall within clause 24.01(a) as being in favour of a Related Corporation.  Southern Pacific was apparently prepared to take the risk that entry into the proposed deed and completion by executing the assignment deed would not be a breach of the Rundle Joint Venture Agreement.  

7. The matter that was before this Court was the exercise of judicial discretion to avoid the consequence that Southern Pacific would either be wound up and possibly commit an offence or commit a contempt of the Supreme Court of Victoria. The existence of a dispute as to the proper construction of clause 24.01 may have been a relevant matter for consideration by the Court in the exercise of its discretion. However, the resolution of that dispute was not a part of the matter that arose under s 444B(2)(b) of the Corporations Act.

8. I consider, therefore, that the controversy between Esso and Southern Pacific is not one that arises under the Corporations Act nor one that is in any way incidental to the matter before the Court that arises under the Corporations Act. I do not consider that s 447A assists the position so far as Southern Pacific is concerned. That provision authorises the Court to make orders about how Part 5.3A is to operate in relation to a particular company. It does not authorise the Court to determine a dispute between the company and a third party that has nothing to do with the operation of Part 5.3A. The provision would authorise the Court to make an order as to how Part 5.3A might operate, according to how the dispute between Southern Pacific and Esso was determined. However, an order resolving that dispute would not be an order about how Part 5.3A is to operate in relation to Southern Pacific.

9. It may be that it would be convenient for the administrator of a deed of company arrangement to know what the answer might be to a question arising between their company and a third party. That, however, is not sufficient to give a court exercising jurisdiction under the Corporations Act to determine that question. It may be that such a court could give advice to administrators as to whether they would be justified in taking a particular course one way or the other. That is to say, it may be that circumstances could arise where it would be appropriate for this Court to advise the administrators that they would be justified in treating the proposed deed of company arrangement and the assignment deed as falling within clause 24.01(a) of the Rundle Joint Venture Agreement. However, that is a different matter from resolving the controversy as between Southern Pacific and Esso.

   CONCLUSION

10. I am not persuaded that the Federal Court has jurisdiction to entertain the question sought to be raised by Southern Pacific in its Statement of Claim.  It follows that its claims against Esso should be dismissed on the ground that the Federal Court has no jurisdiction to hear and determine those claims.  Southern Pacific should pay Esso’s costs of the proceeding including the application for dismissal. 

I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate:

Dated:             14 October 2004

Counsel for the Plaintiff:	Mr A Bannon SC, Ms K Morgan
Solicitor for the Plaintiff:	Gilbert + Tobin
Counsel for the First Defendant:	Mr R Strong
Solicitor for the First Defendant:	Middletons
Date of Hearing:	8 October 2004
Date of Judgment:	14 October 2004