Vikas Rambal as Trustee for the Vikas Rambal Family Trust v PANKAJ Oswal as Trustee for the Burrup Trust
[2006] WASC 312
VIKAS RAMBAL As Trustee For The Vikas Rambal Family Trust -v- PANKAJ OSWAL As Trustee For The Burrup Trust & ORS [2006] WASC 312
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASC 312 | |
| Case No: | COR:144/2006 | 14 DECEMBER 2006 | |
| Coram: | LE MIERE J | 21/12/06 | |
| 30 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | VIKAS RAMBAL As Trustee For The Vikas Rambal Family Trust PANKAJ OSWAL As Trustee For The Burrup Trust SIVAN JEYARAJAH ROGER CHRISTIAN STEINEPREIS BURRUP FERTILISERS PTY LTD (ACN 095 441 151) BURRUP HOLDINGS PTY LTD (ACN 097 138 353) |
Catchwords: | Corporations Receivers Jurisdiction Drastic nature of remedy Balance of convenience Not just and convenient to appoint a receiver Interlocutory injunction Balance of convenience Injunctions must be certain Injunctions refused |
Legislation: | Corporations Act 2001 (Cth), s 232, s 233, s, 1324 Rules of the Supreme Court 1971 (WA), O 51 Supreme Court Act 1935 (WA), s 25 |
Case References: | Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 Australian Broadcasting Corporation v O'Neill (2006) 80 ALJR 1672 Jenkins v Enterprise Gold Mines NL (1992) 6 ACSR 539 Mercator Property Consultants Pty Ltd v Christmas Island Resort Pty Ltd, [1998] 896 FCA National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271 National Australia Bank Ltd v Bond Brewing Holdings Ltd [1990] 1 VR 386 Parsons v Sovereign Bank of Canada [1913] AC 160 Vu v Luong (1996) 20 ACSR 493 Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1991) 146 CLR 249 Airpeak Pty Ltd v Jetstream Aircraft Ltd (1997) 73 FCR 161 Australian Securities & Investments Commission v Adler (2001) 19 ACLC 1221 Australian Securities & Investments Commission v Burke [2000] NSWSC 694 Australian Securities & Investments Commission v Ivey (1998) 29 ACSR 391 Australian Securities & Investments Commission v Mauer-Swisse Securities Ltd (2002) 42 ACSR 605 Australian Securities & Investments Commission v Triton Underwriting Insurance Agency (2003) 48 ACSR 249 Australian Securities & Investments Commission; In the matter of Richstar Enterprises Pty Ltd v Carey (No 3) (2006) 57 ACSR 307 Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504 Australian Securities Commission v United Tree Farmers Pty Ltd (1997) 24 ACSR 94 Baxter v West (1858) 28 LJ Ch 169 Beach Petroleum NL v Johnson (1993) 43 FCR 60 Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 1 ACSR 445 Broken Hill Proprietary Co v Bell Resources Ltd (1984) 2 ACLC 157 Cambridge Credit Corporation Ltd v Surfers Paradise Forests Ltd [1977] Qd R 261 Carlton & United Breweries (NSW) Pty Ltd v Bond Brewing (NSW) Pty Ltd (1987) 76 ALR 633 Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 Constantinidis v JGL Trading Pty Ltd (1995) 17 ACSR 625 Corporate Affairs Commission v ASC Timber Pty Ltd (No 2) (1989) 7 ACLC 599 Corporate Affairs Commission v Home Buyers Finance Ltd (1987) 5 ACLC 706 Corporate Affairs Commission v Lombard Nash International Pty Ltd (No 3) (1987) 12 ACLR 475 Corporate Affairs Commission v Lone Star Exploration NL (No 2) (1988) 50 SASR 24 Corporate Affairs Commission v Smithson [1984] 3 NSWLR 547 Cummins v Perkins [1989] 1 Ch 16 Emlen Pty Ltd v St Barbara Mines (1997) 15 ACLC 1107 Marshall v Charteris [1920] 1 Ch 520 McMillan v Toledo Enterprises International Pty Ltd (1995) 18 ACSR 603 Mesenberg v Cord Industrial Recruiters Pty Ltd (1996) 39 NSWLR 128 National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386 National Companies and Securities Commission v Greater Pacific Investments Ltd [1990] VR 558 Owen v Homan (1853) 4 HL Cas 997 Prytherch v Williams (1889) 42 Ch D 590 QIW Retailers Ltd v Davids Holdings Pty Ltd (No 2) (1992) 37 FCR 57 Re Bright Pine Mills [1969] VR 1002 Re Brighton Joint Venture Partner No 2 Scheme (2005) 54 ACSR 177 The Lakes Security Management Pty Ltd v Mico Security Services Pty Ltd (1987)12 ACLR 407 Westchester Financial Services Pty Ltd v Acclaim Exploration NL (1999) 32 ACSR 499 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
PANKAJ OSWAL As Trustee For The Burrup Trust
First Defendant
SIVAN JEYARAJAH
ROGER CHRISTIAN STEINEPREIS
Second Defendants
BURRUP FERTILISERS PTY LTD (ACN 095 441 151)
Third Defendant
BURRUP HOLDINGS PTY LTD (ACN 097 138 353)
Fourth Defendant
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Catchwords:
Corporations - Receivers - Jurisdiction - Drastic nature of remedy - Balance of convenience - Not just and convenient to appoint a receiver
Interlocutory injunction - Balance of convenience - Injunctions must be certain - Injunctions refused
Legislation:
Corporations Act 2001 (Cth), s 232, s 233, s, 1324
Rules of the Supreme Court 1971 (WA), O 51
Supreme Court Act 1935 (WA), s 25
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff : Mr M L Bennett & Mr T O Coyle
First Defendant : Mr M H Zilko SC & Mr S J Davis
Second Defendants : Mr M H Zilko SC & Mr S J Davis
Third Defendant : Mr G H Murphy SC & Mr A J Power
Fourth Defendant : Mr G H Murphy SC & Mr A J Power
Solicitors:
Plaintiff : Lavan Legal
First Defendant : Maxim Litigation Consultants
Second Defendants : Maxim Litigation Consultants
Third Defendant : Blake Dawson Waldron
Fourth Defendant : Blake Dawson Waldron
Case(s) referred to in judgment(s):
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199
Australian Broadcasting Corporation v O'Neill (2006) 80 ALJR 1672
Jenkins v Enterprise Gold Mines NL (1992) 6 ACSR 539
Mercator Property Consultants Pty Ltd v Christmas Island Resort Pty Ltd, [1998] 896 FCA
National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271
National Australia Bank Ltd v Bond Brewing Holdings Ltd [1990] 1 VR 386
Parsons v Sovereign Bank of Canada [1913] AC 160
Vu v Luong (1996) 20 ACSR 493
Case(s) also cited:
Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1991) 146 CLR 249
Airpeak Pty Ltd v Jetstream Aircraft Ltd (1997) 73 FCR 161
Australian Securities & Investments Commission v Adler (2001) 19 ACLC 1221
Australian Securities & Investments Commission v Burke [2000] NSWSC 694
Australian Securities & Investments Commission v Ivey (1998) 29 ACSR 391
Australian Securities & Investments Commission v Mauer-Swisse Securities Ltd (2002) 42 ACSR 605
Australian Securities & Investments Commission v Triton Underwriting Insurance Agency (2003) 48 ACSR 249
Australian Securities & Investments Commission; In the matter of Richstar Enterprises Pty Ltd v Carey (No 3) (2006) 57 ACSR 307
Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504
Australian Securities Commission v United Tree Farmers Pty Ltd (1997) 24 ACSR 94
Baxter v West (1858) 28 LJ Ch 169
Beach Petroleum NL v Johnson (1993) 43 FCR 60
Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 1 ACSR 445
Broken Hill Proprietary Co v Bell Resources Ltd (1984) 2 ACLC 157
Cambridge Credit Corporation Ltd v Surfers Paradise Forests Ltd [1977] Qd R 261
Carlton & United Breweries (NSW) Pty Ltd v Bond Brewing (NSW) Pty Ltd (1987) 76 ALR 633
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148
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Constantinidis v JGL Trading Pty Ltd (1995) 17 ACSR 625
Corporate Affairs Commission v ASC Timber Pty Ltd (No 2) (1989) 7 ACLC 599
Corporate Affairs Commission v Home Buyers Finance Ltd (1987) 5 ACLC 706
Corporate Affairs Commission v Lombard Nash International Pty Ltd (No 3) (1987) 12 ACLR 475
Corporate Affairs Commission v Lone Star Exploration NL (No 2) (1988) 50 SASR 24
Corporate Affairs Commission v Smithson [1984] 3 NSWLR 547
Cummins v Perkins [1989] 1 Ch 16
Emlen Pty Ltd v St Barbara Mines (1997) 15 ACLC 1107
Marshall v Charteris [1920] 1 Ch 520
McMillan v Toledo Enterprises International Pty Ltd (1995) 18 ACSR 603
Mesenberg v Cord Industrial Recruiters Pty Ltd (1996) 39 NSWLR 128
National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386
National Companies and Securities Commission v Greater Pacific Investments Ltd [1990] VR 558
Owen v Homan (1853) 4 HL Cas 997
Prytherch v Williams (1889) 42 Ch D 590
QIW Retailers Ltd v Davids Holdings Pty Ltd (No 2) (1992) 37 FCR 57
Re Bright Pine Mills [1969] VR 1002
Re Brighton Joint Venture Partner No 2 Scheme (2005) 54 ACSR 177
The Lakes Security Management Pty Ltd v Mico Security Services Pty Ltd (1987)12 ACLR 407
Westchester Financial Services Pty Ltd v Acclaim Exploration NL (1999) 32 ACSR 499
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1 LE MIERE J: The plaintiff applies for the appointment of a receiver and manager of the property of the third and fourth defendants. Alternatively, the plaintiff seeks injunctive orders to protect the property of the third and fourth defendants pending the trial of the plaintiff's action.
The Burrup Project
2 The Burrup Fertilisers ammonia plant on the Burrup Peninsular is one of the world's largest ammonia plants. The plant is owned and operated by the third defendant ("BFPL"). The fourth defendant ("Holdings") is the parent company of BFPL and holds 99.999 per cent of the issued shares in BFPL. The first defendant ("Oswal") in his capacity as trustee of the Burrup Trust holds one issued share in BFPL and is the only other shareholder. Oswal in his capacity as trustee of the Burrup Trusts holds 55 per cent of the shares in BFPL.
3 Vikas Rambal ("Rambal") is a chemical engineer. He has deposed that he has significant experience as an engineer and has supervised the construction and operation of various projects similar to the Burrup Fertilisers ammonia plant. He deposes that he was involved in designing the technical and other requirements of the plant. In his capacity as trustee of the Vikas Rambal Family Trust he holds 15 per cent of the shares in BFPL.
4 The remaining 30 per cent of the shares in Holdings is held by Yara Australia Pty Ltd ("Yara"). BFPL has made a long term uptake agreement with Yara Switzerland Ltd to sell all ammonia from the project's ammonia plant. Yara and Yara Switzerland Ltd are part of the Yara International group. Yara International is a Norwegian based group of companies and one of the world's leading suppliers of mineral fertilisers.
5 BFPL contracted with SNC Lavalin ("SNC") to build the plant as the head contractor pursuant to the engineering procurement and construction deed for the fixed cost of US$320 million (EPC Deed or EPC Contract). SNC subcontracted most of the work to Paramount (WA) Ltd ("Paramount") and Galaxy Projects FzCo ("Galaxy"). There is a dispute about who owns and controls Paramount. Rambal says that Oswal is the major beneficial owner of, and controls, Paramount. Oswal says that Rambal controls Paramount.
Board of directors of the Companies
6 Under a shareholders' deed made 31 March 2005 between Holdings, BFPL, the plaintiff and the first and second defendants ("the Shareholders'
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- Agreement") the board of directors of each of the Companies comprises a maximum of five directors. Presently the directors are:
• 1 non-executive director appointed by Yara, Mr Edward Cavazuti;
• 1 director appointed by Rambal, currently Rambal himself;
• 3 directors appointed by Oswal, currently Oswal himself and the second-named second defendants, Sivan Jeyarajah ("Jeyarajah") and Roger Christian Steinepreis ("Steinepreis").
Dispute between Rambal and Oswal
8 In April 2006 Rambal travelled to India to visit his father who was seriously ill. In the course of a telephone conversation there was conflict between Rambal and Oswal apparently arising from two matters. The first concerned Rambal telling Oswal to comply with the communication protocol in contacting company operations staff. The second was that Rambal said to Oswal that he needed to repay the funds to the Companies which he had instructed Rambal to use to pay some of Paramount's debts in the months of March and April 2006 by the end of April 2006.
9 Rambal returned to Perth on 26 April 2006. Rambal was excluded from the Companies' offices. On 12 May 2006 Rambal received a letter confirming termination of his employment by the Companies. These letters stated that Rambal's employment was terminated on 30 April 2006. Rambal's termination was ratified by the directors of the Companies at a meeting on 30 May 2006.
10 On 31 May 2006, the plaintiff (Vikas Rambal as Trustee of the Vikas Rambal Trust) commenced COR 95 of 2006. By that originating process the plaintiff applied under s 1324, s 140, s 180, s 181 and s 182 of the Corporations Act 2001 (Cth) and the inherent jurisdiction of the court. The plaintiff alleged that the conduct of Oswal and Yara as shareholders
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- of Holdings and the conduct of Oswal, Radhika Oswal, Cavazuti and Steinepreis as directors of Holdings and BFPL is contrary to the terms of the Shareholders Deed which provides in its express terms that it is to be read with and form part of the constitution of the Companies. The application further asserted that the conduct of the defendants caused the plaintiff to fear that the defendants intended to further breach the terms of the Shareholders Deed. The plaintiff sought orders by way of an injunction restraining the defendants from purporting to pass resolutions at meetings of the board of directors of Holdings and BFPL contrary to cl 4.5(b)(ii) of the Shareholders Deed and in particular entering into related party transactions between the Companies, or either of them, and Yara or its related corporations. The plaintiff also issued an interlocutory process which sought an injunction restraining the defendants from purporting to pass resolutions at meetings of the board of directors of Holdings and BFPL contrary to cl 4.5(b)(ii) of the Shareholders Deed.
11 I heard the plaintiff's application for interlocutory relief on 19 June 2006 and reserved my decision. After I had reserved my decision the plaintiff requested that I not deliver my decision because the plaintiff intended to seek leave to re-open and put forward further evidence. The application was overtaken by subsequent events including the commencement of these proceedings and the parties did not subsequently press me to deliver a decision on that application.
12 In April and May there was a dispute concerning Rambal being given access to the Companies' books and records. Rambal in his personal capacity commenced COR 96 of 2006 by originating process. The defendants to COR 96 of 2006 are Oswal, Steinepreis, Radhika Oswal and the Companies. In COR 96 of 2006 Rambal seeks orders that an injunction be granted requiring the defendants to make available various books and records of the Companies. By interlocutory process in COR 96 of 2006 Rambal sought an injunction requiring the defendants to make available for inspection various books and records of the Companies. On 9 June orders were made by consent providing for Rambal to have access to the Companies' books and records on the terms set out.
13 Rambal requested to inspect various documents or classes of documents. The Companies made some documents available to Rambal. Rambal maintained that the Companies had not given him access to all of the documents that he had requested. There were further applications to the Court and hearings concerning access to documents in July and August.
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14 Clause 6 of the Shareholders Deed provides that a shareholder, on not less than 10 business days notice, may have access to any premises occupied by the Companies for, among other purposes, any reasonable purpose. On 20 June 2006 Rambal's solicitors gave notice to the Companies of Rambal's wish to exercise his rights under cl 6 of the Shareholders Deed. There were then arguments about the accuracy of the notice and subsequently discussions concerning Rambal executing a confidentiality deed before being given access to documents.
15 On 4 August Rambal attended the premises of the Companies in Perth together with a solicitor for the purpose of auditing the Companies pursuant to a written notice given pursuant to cl 6 of the Shareholders Deed. The audit proceeded over the next five days. There were arguments about the adequacy of the access to documents, records and employees given to Rambal.
Originating process
16 The plaintiff commenced these proceedings by originating process on 7 September 2006. The application is made under the Corporations Act, s 232 and s 233. In the originating application the plaintiff seeks relief against the defendants on the basis that the conduct of the affairs of Holdings and BFPL and the actual and proposed acts or omissions of the defendants on behalf of Holdings and BFPL, are contrary to the interests of the members of Holdings and BFPL as a whole, or are oppressive to, unfairly prejudicial to, or unfairly discriminatory against, the plaintiff in his capacity as a shareholder and in other capacities. In his originating process the plaintiff seeks orders regulating the conduct of the affairs of Holdings and BFPL in the future and orders amending the constitutions of Holdings and BFPL to the effect that the first defendant and the second defendants are prohibited from acting in the capacity of directors. The plaintiff seeks alternatively an order that the plaintiff be entitled to purchase the second defendant's shares in Holdings and BFPL and alternatively orders restraining the defendants from taking any steps on behalf of or in the name of Holdings or BFPL or howsoever to release securities held by BFPL or Holdings in relation to the Burrup Ammonia Project including, without limitation, retentions from contractors, letters of credit securing obligations of contractors or otherwise. The plaintiff also seeks an order removing the first and third defendants as directors and officers of Holdings and BFPL.
17 The originating process has been expedited. The trial of the plaintiff's application is to commence on 5 February 2007.
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The present application
18 On 6 December 2006 the plaintiff filed an interlocutory process described as "interlocutory process application for protective orders in connection with the property of the third and fourth defendants", that is the Companies. It is that application which the Court is now dealing with. The interlocutory application is stated to be made pursuant to the Corporations Act and the Rules of the Supreme Court 1971 (WA) and pursuant to the inherent jurisdiction of the Court. On the facts stated in the supporting affidavit the plaintiff applies for the following interlocutory relief:
"Protective orders be made on such terms as to this Honourable Court may seem just and on such conditions as this Honourable Court may direct as to the conduct of the third and fourth defendants or in connection with the property of the third and fourth defendants, and to the extent that this Honourable Court may consider appropriate, orders set out in attachment A hereto."
19 The first order set out in attachment A is that a Mr Ryan and a Mr Francis be appointed interim receivers and managers of the assets, property and undertaking of the Companies. The attachment sets out the proposed powers of the receiver and managers. The proposed orders also include an order that the Companies be restrained from performing any transactions in respect of all bank accounts (and other accounts with financial institutions) relating to the affairs of the Companies without the prior written consent of the receivers and managers or by order of the Court.
20 Before addressing the plaintiff's application it is convenient to refer to some of the matters that provide the context to the plaintiff's application.
Construction contracts structure
21 The structure for the contracts to construct the plant is broadly as follows. BFPL entered into the EPC Contract with SNC. The EPC Contract is for a fixed price of US$320 million to construct the plant. The EPC Contract includes the usual provisions dealing with liquidated damages for delay in practical completion, among other things. SNC entered into two subcontracts to carry out the contract work. Paramount is responsible for construction of the plant and onshore procurement work ("Paramount subcontract"). Galaxy is responsible for engineering and
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- offshore procurement ("Galaxy subcontract"). The amounts payable under each of the subcontracts is US$152 million. The total payable under the two subcontracts is therefore US$304 million. The balance of US$16 million is SNC's fee.
22 The obligations of SNC to BFPL under the EPC Contract are secured by a parent company guarantee from SNC's parent company ("SNC Lavalin parent company guarantee") and a US$32 million letter of credit in favour of BFPL covering performance guarantee, liquidated damages and provision of spares ("Letter of Credit"). Oswal Chemical and Fertilisers Ltd, a public company listed on the Delhi Stock Exchange of which Oswal's father retains a controlling share, and Oswal personally each provided a guarantee in favour of SNC to secure the performance of Paramount's and Galaxy's obligations under their respective subcontracts with SNC. SNC is to withhold a total of US$42 million from payments due under the Paramount and Galaxy subcontracts by way of retention to be released upon practical completion and then expiry of the defects liability period. The release of the retentions to Paramount and Galaxy is to be contingent upon and equal to the release of or partial release of SNC 's letter of credit by BFPL.
23 Rambal has deposed that on a number of occasions prior to his dismissal as managing director Oswal said to him that he, Oswal, was the person controlling Paramount and Galaxy and that Billon Investments Ltd, a British Virgin Islands company that holds the shares in Paramount, was controlled by Mick Cahill on behalf of Oswal. It is the plaintiff's case that Oswal controls and has a beneficial or commercial interest in Paramount.
24 Rambal deposes that he was aware that Paramount had set up an account in Hong Kong into which payments from SNC were deposited. Monies from this account were then transferred into Paramount's Australian bank accounts which were used to make payments to Paramount's creditors. Rambal was a signatory to the Paramount account in Hong Kong. Rambal authorised transfer of some payments in and out of Paramount. Rambal deposes that after he returned from India in April 2006 he became aware that Oswal had used approximately US$15 million to US$20 million of BFPL's funds to pay Paramount's creditors.
Loan from Yara
25 On 10 April 2006 the Companies received a notice of termination dated 10 April 2006 that had been issued by Apache under the Gas Supply Agreement with respect to claims for non-payment of amounts owing by
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- BFPL. Rambal states that there were alternative provisions under an agreement described as the Tripartite Deed that provided a further period for payment before termination could occur. Rambal deposes that on 2 May 2005 Oswal requested that Yara provide funds to tide over the Companies over the next few months. Rambal alleges that Oswal made this request to Yara with the full knowledge that funding was not required in order for the Companies to meet their financial commitments, rather funding to the Companies was required to enable Oswal to use Company funds in order to meet the debts of Paramount, to discharge his personal obligations to Paramount's creditors that had arisen by virtue of the guarantee Oswal had provided, both in his personal capacity and in his capacity as trustee of the Burrup Trust.
26 Yara and the Companies entered into a loan agreement on 16 May 2006. Rambal says that the loan agreement was not approved by him or passed by a special resolution of the board of directors and therefore it breached the Shareholders Deed.
Budget and cash flow
27 Rambal alleges that there have been many problems with the various budgets and cash flows that the Companies have provided under the control of Oswal since Rambal was removed as managing director. Rambal says that the cash flow budget differs from profit and loss figures and both documents contain figures that represented substantial increases compared with the figures contained in the original bank base case model. For example, in relation to spares and maintenance, the cash flow assumed US$34,073,000, the profit and loss assumed US$17,250,000 and the bank base case model contained a cost for spares and maintenance of only US$7 million to US$8 million.
Paying Paramount invoices and proposed reversal of those payments
28 Rambal deposes that during the months of April and May 2006 Oswal caused the Companies to use in excess of US$20 million to make payments for and on behalf of Paramount. Rambal and Cavazuti queried some of these payments. Mr Tan, on behalf of the Companies, sent out a response on 12 July 2006. The Companies stated that the Burrup Trust transferred US$14.9 million into BFPL to cover the substantial payments made to Paramount and its subcontractors in April and May 2006. Mr Tan stated in the e-mail that the payments should more appropriately have been paid directly from the Burrup Trust to Paramount's subcontractors and accordingly reversing entries would be made to correct the transaction.
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29 The plaintiff alleges that BFPL employed Paramount's workforce, transferred its employees to Paramount's offices and that Ambalavaner and Jeyarajah are directors of Paramount and employed in senior positions with BFPL. Rambal says that these are matters of concern because Oswal had guaranteed the obligations of Paramount and Galaxy under the Paramount and Galaxy subcontracts and SNC held retentions that were withheld from Paramount and Galaxy pending expiry of the defects liability period under the EPC Contract. During the defects liability period BFPL would have to assess whether any claims existed against SNC relating to work performed by Paramount and Galaxy under their respective subcontracts. If any such claims existed this could result in the forfeiture of the retention funds held by SNC and of the Oswal guarantee (securing the performance of Paramount) being called on. Either event would be a disadvantage to Paramount and to Oswal personally under his guarantee. Rambal says that there is a conflict involving Paramount and BFPL as the Companies share directors and senior officers and insofar as Paramount has certain obligations to provide procurement and maintenance under the defects liability period of the EPC Contract but as a result of Oswal's actions, Paramount is also responsible for procurement and maintenance services that are not to be provided under the defects liability period of the EPC Contract. In other words, the people that decide whether a claim for procurement of spares or maintenance should be made under the defects liability provisions of the EPC Contract are the same people that have an interest in Paramount not being liable to provide the procurement or maintenance under the defects liability provisions of the EPC Contract.
Force majeure mechanical and practical completion
30 Under the EPC Contract the following milestones must be reached in order for the plant to achieve practical completion: mechanical completion, minimum performance guarantee, passing of all tests (excluding performance test relating to performance guarantees) and certificate of practical completion (which may be conditional). 28 days after practical completion US$16 million or part thereof may be released to the contractor, SNC, from the Letter of Credit. The remaining US$16 million should be released to the contractor from the Letter of Credit at the end of the 10 month defects liability period provided performance guarantees and obligations under the defects liability provisions have been met.
31 The Companies have released the first US$16 million to SNC. Rambal says that the Companies should not have issued the certificate of
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- practical completion or should have issued it subject to conditions and in any event should not have released the Letter of Credit. That is because the conditions for its release have not been properly met.
Backdating of force majeure approvals
32 The original date for practical completion to be achieved under the EPC Deed was 18 July 2005. The EPC Deed provided that if practical completion was not achieved by that date, without a justified reason provided for in the EPC Deed, SNC would have to pay BFPL liquidated damages in the amount of US$140,000 for each day practical completion was delayed. It is common ground that the project had some genuine force majeure events that were approved. The Project Superintendent, Mr Williams of Worley Parsons, approved extensions because of force majeure events. The plaintiff disputes the propriety of those extensions.
33 The plaintiff further alleges that the practical completion certificate completed by Mr Williams stating that practical completion was achieved on 9 June 2006 was backdated. I will refer to that matter again later in these reasons.
Release of the SNC bank guarantee
34 Rambal alleges that the documents provided by the Companies show that the date for Practical Completion was only validly extended until 12 February 2006. Due to the conduct of Oswal in granting approvals and approving claims for allegedly invalid force majeure events, the extended date for practical completion was 9 June 2006, being the date that practical completion has purportedly been certified as being achieved. The difference between 12 February 2006, being the date said by Rambal to be the valid date for practical completion, and 9 June 2006 is 117 days. 117 days multiplied by US$140,000 gives a total of US$16.83 million in liquidated damages to which BFPL is entitled and the amount for which BFPL should have pursued SNC.
35 Prior to 16 June 2006 Rambal and representatives of Yara requested that the Companies not release the SNC guarantee until the matter was approved by the board. Rambal says that, without board approval, Oswal caused BFPL to release the SNC bank guarantee on 16 June 2006. Rambal alleges that the decision of Oswal to extend the date for practical completion by arranging for invalid claims for extensions of time to be approved and the decision of Oswal and Jeyarajah to certify the practical completion have been achieved notwithstanding SNC had not provided the spares and further that the plant did not meet the performance
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- guarantees provided a benefit to Paramount because if BFPL claimed liquidated damages from SNC then SNC would in turn make a claim against Paramount and/or Galaxy. Further, if the retention monies were not sufficient to cover SNC's liability to BFPL then SNC would have a claim against Paramount and Oswal as a result of the Paramount and Galaxy subcontractor's guarantees provided to SNC. If Paramount was not able to pay its subcontractor debts the subcontractors would call on the Burrup Trust to pay the debts that Paramount owed to its subcontractors pursuant to the parent company guarantees the Burrup Trust provided to Paramount subcontractors. By releasing the US$16 million letter of credit to SNC, who in turn would then release the retention money to Paramount and Galaxy, Oswal had the benefit of a tax free lump sum US$16 million which should have been paid to BFPL and thereafter shared between the three shareholders.
Ammonia spill – 8 August 2006
36 Rambal deposes that he was informed that there had been an ammonia leak at that plant on 8 August 2006 that had caused the evacuation of neighbouring industries, personal injuries and death of wildlife. Rambal says that the Company did not inform him of this event and indeed did not disclose it to him. I will refer to that matter later in these reasons.
The relief sought
37 The interlocutory process states that the plaintiff applies for protective orders to be made on such terms as to the court may seem just and on such conditions as the court may direct as to the conduct of the third and fourth defendants or in connection with the property of the third and fourth defendants and to the extent that the court may consider appropriate orders set out in an attachment to the interlocutory process. The proposed orders in the attachment provide for the appointment of a receiver and manager and consequential orders. The defendants submit that the only relief sought by the plaintiff in his interlocutory process is the appointment of a receiver and manager and the plaintiff should not be permitted to submit in the alternative that injunctions should be made in relation to the conduct of the defendant companies.
38 If the plaintiff had given no notice of the relief he seeks other than in his interlocutory process I would have been inclined to accept the defendant's submissions. However, when the plaintiff's interlocutory application for protective orders came before me on 7 December for the making of directions counsel for the plaintiff stated, in effect, that the
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- plaintiff sought the appointment of a receiver or alternatively other orders such as the appointment of an investigating accountant or injunctive orders. Counsel stated that on the hearing of the plaintiff's application the plaintiff would canvass the variety of remedies that the court might grant including orders relating to the operation of the plant so that it did not run at excess capacity, orders in relation to audit safety matters and to financial matters. In those circumstances I considered that the defendants had had notice that the plaintiff sought injunctive relief in the alternative to the appointment of a receiver and manager and I permitted the plaintiff to argue for that alternative relief.
39 This application for interlocutory relief has been expedited. The trial of the substantive proceedings that is relief for oppression under Corporations Act, s 232, has also been expedited. The trial is to commence on 5 February 2007, that is approximately seven weeks from the hearing of the interlocutory application.
Jurisdiction to make orders for appointment of receivers
40 The plaintiff says that the court has jurisdiction to make orders for the appointment of receivers and managers under O 51 of the Rules of the Supreme Court and under Corporations Act, s 1324(5) or (9).
41 Corporations Act, s 1324 provides that where a person has engaged, is engaging or is proposing to engage in conduct that, amongst other things, constitutes a contravention of the Act then the court may grant an injunction restraining the first mentioned person from engaging in the conduct or requiring that person to do any act or thing. Subsection 1324(4) provides that the court may grant an interim injunction pending determination of an application under subsection (1). Section 1324(9) provides that in proceedings under s 1324 the court may make an order under s 1323 in respect of that person. The power to grant an interim injunction under s 1324(4) is not enlivened because there is no application under s 1324(1).
42 Section 25(9) of the Supreme Court Act 1935 (WA) empowers the Court to appoint a receiver by interlocutory order in cases where it appears to the court to be just or convenient to do so.
43 O'Donovan "Company Receivers & Administration" at [19.110] says that despite the apparent breadth of this jurisdiction it is governed by the principles which were applied by the Court of Chancery prior to the English Judicature Act of 1873. The Full Court of the Supreme Court of Victoria underscored this point in National Australia Bank Ltd v Bond
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- Brewing HoldingsLtd [1990] 1 VR 386 at 530 when it held that a syndicate of unsecured creditors was not entitled to an order appointing receivers and managers in ex parte proceedings which were hostile to the company. The court said that the appointment of a receiver is a drastic remedy and the court will only appoint a receiver where it is convinced of a need to do so. The court will be particularly reticent to appoint a receiver on an interlocutory application and will not do so where some lesser remedy is adequate.
44 The just or convenient jurisdiction can be invoked on a wide variety of situations. O'Donovan says that if the directors of a company become embroiled in disputes and the business is without effective management, the court will intervene by the appointment of a receiver and manager until proper management is restored.
45 O'Donovan, at [19.810], refers to a number of authorities in support of his conclusion that in an appropriate case the court may appoint a receiver to take over the management of the company from delinquent or supine directors. O'Donovan refers to Mercator Property Consultants Pty Ltd v Christmas Island Resort Pty Ltd, [1998] 896 FCA, where Nicholson J appointed a receiver and manager under s 57 of the Federal Court Act 1976 (Cth) because there was an arguable case that the affairs of the respondent company were being conducted for the benefit of its major shareholder rather than for the benefit of the company as a whole. It was just or convenient to make the appointment because the company's casino licence was in jeopardy and it allegedly had unpaid creditors in excess of $2,000,000.
46 In Vu v Luong (1996) 20 ACSR 493, McLelland CJ in Eq appointed a receiver of the property and business of a company on an interlocutory application by a shareholder. McLelland CJ in Eq found that there was a sufficient risk of jeopardy to the assets of the company to justify the appointment of a receiver and a manager.
47 Counsel for the plaintiff referred to Jenkins v Enterprise Gold Mines NL (1992) 6 ACSR 539, in which the Full Court upheld an appeal against the decision of the trial Judge refusing to appoint a receiver and manager. The proceedings were brought pursuant to s 320 of the Companies Code (WA) alleging that the affairs of the company in relation to certain transactions had been conducted in a manner which was oppressive or unjust. The Full Court held that the trial Judge had wrongly exercised his discretion in refusing to appoint a receiver. The Full Court held that it is not necessarily correct for a court to approach the issue of
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- the appropriate remedy pursuant to s 320 conservatively. Once the relevant oppression or unfairness is found for the purposes of s 320, it is the obligation of the court to grant whatever relief is best suited to deal with the conduct involved. However, the court was not there concerned with an application for interlocutory relief of the sort that is sought in this case.
Grounds for the application
48 There are broadly three parts to the plaintiff's case for interlocutory relief. First, the plaintiff alleges that the mismanagement of BHPL has resulted in safety incidents and a risk of further safety incidents and the plant being shut down and the company's licence being suspended. Secondly, BFPL has made improper payments to third parties including related entities, and in particular Paramount. The plaintiff says that there is a risk of BFPL becoming insolvent. Thirdly, the plaintiff alleges that he has been denied access to the books and records of the Companies and Oswal and senior managers of the Companies have deceived him and failed to disclose to him matters that should have been disclosed.
Position of Yara
49 Yara has not sought to be represented on the hearing of this application. However, Yara has stated in correspondence to the solicitors for the plaintiff and the defendants that it supports the plaintiff's application for the appointment of a receiver.
The safety matters
50 There have relevantly been eight safety incidents at the plant. The first three occurred when the plaintiff was managing director and he does not submit that they give rise to any relevant safety issues.
51 Hemant Deshmukh is a mechanical engineer with experience in the fertiliser industry. He is the general manager Karratha operations of BFPL and is responsible for ensuring that the plant is running safely and efficiently at its full capacity. In his affidavit sworn 11 December 2006 Mr Deshmukh refers to the safety incidents described by the plaintiff. I will not refer to all of the incidents but will briefly refer to the two incidents identified by counsel for the plaintiff as the most serious incidents.
52 On 26 May 2006 an incident took place where there was a temporary venting of aMDEA solution. The incident is the subject of an internal BFPL report described as "root cause analysis report form" completed
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- after an investigation by a team including Deshmukh. The report says that the sequence of events leading up to the spill indicates that the incident was caused by a combination of equipment failure and operator error. GHD Pty Ltd is a company that provides engineering and other professional services. GHD criticised the BFPL root cause analysis report statement that the incident was caused by a combination of equipment failure and operator error. GHD says that the tone of the report ascribes equipment failure ahead of failure of operations communication but says that the plant appears to have been operated for some time in the condition that led to the failure and on one view suggested that greater emphasis should be given to the failure of operations communication.
53 The incident was reported to the Western Australian Department of Consumer and Employment Protection ("DOCEP"). DOCEP is the government regulator with the responsibility and empowerment for ensuring BFPL complies with the requirements for demonstration of safe plant operations. DOCEP administers the requirements of and compliance with BFPL's dangerous goods licence that is essential to the operation of the plant. DOCEP representatives visited the plant on 17 August 2006 to conduct a quarterly performance review of the plant. During the course of the review the DOCEP and company representatives discussed four safety incidents, including the aMDEA venting incident on 26 May 2006. There is no evidence that DOCEP have any concerns about any continuing safety issue relating to or arising from the aMDEA venting.
54 The incident alleged by the plaintiff to be the most serious safety incident is the ammonia spill on 8 August 2006, that I have already referred to. A GHD report says that on 8 August between 4.3 to 7.2 tonnes of unburnt ammonia was released from the plant's flare stack. People working in the area reported several incidents of strong ammonia smell. The estimated location of people reporting the incident was two to four kilometres to the west and broadly down wind of the ammonia plant flare. GHD said that the incident occurred during abnormal operation after failure of the sea cooling waterline.
55 DOCEP issued a media statement on 30 August 2006 which stated that it had completed an investigation into the ammonia release by BFPL. DOCEP said that the investigation had identified the underlying cause of the release which the company had addressed to ensure that it does not reoccur.
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56 The plaintiff has raised another safety matter. In his affidavit of 29 November 2006 the plaintiff said that in reviewing documents discovered by GHD by way of non-party discovery, he found a number of documents which disclose a problem with the five kilometre pipeline used to convey ammonia from the plant to the jetty at the Dampier Port for ship loading. The plaintiff annexed to his affidavit two photographs showing the movement of the pipeline. It appears from the photographs that the pipeline has moved and the vertical line on the pipeline that should line up with the vertical line on the concrete support does not. In his affidavit the plaintiff said that it was not possible for him to reach a view as to the cause of the problem but said the possible consequences are that additional stress will be placed on the pipeline structure which could lead to the egress of ammonia product at vulnerable points of the pipeline and in particular at the point where the pipeline enters the jetty.
57 Rohit Akhaury Kumar is a chemical engineer. He is the engineering co-ordinator for BFPL. He was recruited to work for BFPL by Rambal. In his affidavit of 11 December 2006 Kumar refers to the movement of the pipeline described by Rambal. Kumar says that the movement of the pipeline is caused by expansion and contraction of the pipeline which in turn is caused by the variation in the temperature inside and outside the pipeline during its commissioning and operation. Kumar says that the pipelines have been designed for this expansion and contraction during varying temperatures. The expansions and contractions are partly accommodated for by the expansion loops positioned at various places along the pipelines. GHD were engaged on behalf of BFPL to consider whether the movements of the pipelines were within design parameters. Kumar says that he has been advised by Mr Kamper of GHD that the movement that has been observed in the pipelines is within the design parameters.
58 The plaintiff has raised a further safety matter relating to the capacity at which the plant has been operated. The plaintiff says that on occasions the plant has been run at up to 105 per cent of its design capacity. Some operating figures show that the plant has been operating at 106 per cent of its design capacity. The plaintiff submits that Oswal and his wife's family in India are in difficult financial circumstances and require funds. The plaintiff says that Oswal has caused the plant to operate in excess of its design capacity so as to maximise the sale of ammonia and hence the revenue derived from those sales.
59 Deshmukh deposes that the plant can be run safely and efficiently at 105 per cent of its design capacity. He says that all plants have inbuilt
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- design margins to enable designers to meet their guarantee as to the plant capacity. Apart from design, parameters like ambient temperature play a key role in plant performance. Deshmukh says that he is responsible for making the decisions about the level to which the plant is run and that he has done so without interference or direction from Oswal. He says that BFPL has been able to run the plant safely and efficiently at the capacity of 100 per cent to 105 per cent.
60 The plaintiff says that the plant has tripped on many occasions. Deshmukh says that the plant, or part of it, trips from time to time as he would expect in the first year of operations. He says that the plant is being run at safe levels.
61 The plaintiff also complains about the installation of an isolation valve at the base of the jetty. In short, BFPL's response is that the installation of the valve is a DOCEP requirement.
62 I have not set out exhaustively all of the matters which the plaintiff has referred to in relation to the proper and safe operation of the plant. It is sufficient to say that the plaintiff has raised a number of concerns and the Companies have responded that there are no serious concerns about the safety of the plant.
63 On 5 December 2006 BFPL wrote to DOCEP asking DOCEP to confirm a number of matters. The acting executive director – resources safety division of DOCEP responded by letter of 11 December 2006. The acting executive director said that DOCEP was aware of the incidents at the plant on 12 April, 26 May, 7 July and 8 August 2006. The acting executive director said that it is a condition of BFPL's dangerous goods licence that deferential flow between automatic isolation valves must be installed at the base of the jetty. The acting executive director said that there has been a significant improvement in communications between DOCEP and BFPL since dialogue directly with the general manager – Karratha operations was implemented. This takes the form of scheduled weekly telephone conference calls as well as other telephone calls and e-mail correspondence. DOCEP officers have also visited the site many times since the plant was commissioned. Performance reviews are held every quarter. The review is comprehensive and follows a standard format and content required of all major hazard facilities. BFPL's attendance, content of presentation and openness at the first review was excellent considering their lack of familiarity with this process. The acting executive director concluded his letter with the following statement:
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- "As you are aware DOCEP is the government regulator with the responsibility and empowerment for ensuring BFPL are compliant with the requirements for demonstration of safe plant operations. If DOCEP had serious concerns that the plant or part of the plant presented an unacceptable safety risk to the workforce or to the public then DOCEP would require that the plant or part thereof was rendered safe until corrective actions were undertaken. This course of action has not been required and, with due diligence by BFPL should, hopefully, never be required."
64 The evidence before the Court raises a number of concerns about the proper and safe operation of the plant. It is neither possible or appropriate that I should make any findings about those matters. At this interlocutory stage the Court can do no more than assess the risk of damage to the plant or injury to workers or neighbours if the plant continues to be operated under its current management rather than under managers answering to a receiver.
65 I am not satisfied that the evidence before the Court establishes an imminent risk to the safety of the plant or people in its vicinity. There is no expert opinion establishing such a risk. DOCEP is the government regulator with responsibility for ensuring that BFPL complies with requirements for safe operation of the plant. Its officers have regularly visited the plant and reviewed its operations. It has no serious concerns that the plant or any part of it presents an unacceptable safety risk to the workforce or to the public. There is no evidence that the plant is likely to be shut down or BFPL's licence revoked or suspended before the resolution of the plaintiff's originating process.
Plant modifications, defects liability, insurance
66 The plaintiff submits that the Companies have operated the plant contrary to specification and have modified or altered the plant, or may do so, in ways that are not approved under the EPC Deed. The Companies say that those actions give rise to a risk of prejudice to BFPL's rights under warranties set out in the EPC Deed and to coverage under relevant insurance policies.
67 The plaintiff says that he is concerned that BFPL may be in breach of its obligations under cl 3 of the contract of insurance. Annexure VR16 to the affidavit of Rambal affirmed 29 November 2006 consists of a number of documents including a document described as "cover note" issued by Alexander Forbes International Risk Services and addressed to Stratheran
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- Insurance Brokers, who appear to be the insurance brokers for BFPL. The cover note includes conditions including condition 3. Condition 3 provides that the insured shall take all reasonable precautions to prevent personal injury and property damage, to prevent the manufacture, sale or supply of defective products and to comply and ensure that the insured, workers, servants and agents comply with all statutory obligations, by-laws or regulations imposed by any public authority in respect thereof of the safety of persons and property. The clause also provides that the insured shall at the insured's own expense take reasonable action to trace, recall or modify any products containing any defect or deficiency which defect or deficiency the insured has knowledge of or has reason to suspect. That cover note states that it insures, amongst others, BFPL from 30 December 2005 to 30 December 2006.
68 As I have said, the plaintiff has expressed concern that BFPL may be in breach of its obligations under the contract of insurance. The plaintiff has pointed to evidence which gives rise to his concerns. However, the issue has not been explored by way of evidence or argument in anything more than a superficial way. I am not in a position to make any findings on the matter. The evidence does not at this stage give rise to a sufficient risk of the insurance policy being prejudiced so as to require that the affairs of the company be taken out of the hands of its directors and managers before the resolution of the plaintiff's originating process. The same observations apply to the plaintiff's concerns that BFPL has engaged in conduct prejudicial to its rights under the EPC Deed.
69 The plaintiff asserts that BFPL has made, or may make, modifications to the plant which might adversely affect BFPL's right to make claims against SNC for any defects to the plant during the defects liability period under the EPC Deed. The plaintiff has not identified all of the modifications which he refers to. The plaintiff has referred to the isolation soft safety valve at the jetty. As I have said, the Companies say that the installation of the valve is a condition of the licence required by DOCEP. The plaintiff says that the independent report of GHD reveals that the installation of the safety valve was to follow a HAZOP evaluation or study that has not been carried out. This is one of the matters that may be explored by evidence at the trial. However, I am not satisfied that the evidence presently before the Court establishes a sufficient risk of prejudice to BFPL's rights under the EPC Deed in relation to the defect liability period to necessitate the Court removing the management of the Companies from the directors and managers prior to the resolution of the plaintiff's application, the trial of which is to commence on 5 February 2007.
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Financial concerns
70 The plaintiff says that he is concerned about improper payments made by BFPL to third parties, including related entities, and in particular Paramount. The plaintiff is concerned that BFPL's acts or omissions have prejudiced BFPL's rights against the SNC under the EPC Deed. The plaintiff is concerned that these, and other matters, could further exacerbate what the plaintiff says is the already deteriorating financial position of BFPL and give rise to a genuine issue as to whether control of the company should properly be left with the first defendant.
71 There is evidence that amounts in excess of $20 million have been paid by BFPL to Paramount or to its subcontractors.
72 The alleged improper payments to or on behalf of Paramount, and the alleged improper release of the Letter of Credit in favour of SNC, and whether BFPL should be purchasing spare parts rather than claiming for them under the EPC Deed, are matters which have been in issue between the plaintiff and the first defendant for some time. These matters have not recently arisen. That is important in the current circumstances, that is where the action is to be tried in seven weeks time.
73 The defendants submit that the first payments made by BFPL to or on behalf of Paramount were by way of cheques signed by the plaintiff. The plaintiff says, in effect, that he was giving effect to a request from Oswal and at the time considered that the payments were related to the construction of the plant and did not cause any prejudice to BFPL. Those allegations and counter-allegations, together with the issue of who owns or controls Paramount, are matters that will be considered at the trial of this action. It is neither necessary nor appropriate to make any findings about these matters at this time.
74 The plaintiff says that there is a threat to the liquidity of BFPL. That has given rise to an exchange of expert reports. Andrew Edwards of PriceWaterhouseCoopers has provided a report of 27 November 2006 in accordance with instructions from the plaintiff's solicitors. Mr Edwards notes a number of anomalies in the reports and management accounts of BFPL.
75 The Companies have filed affidavits of Jeyarajah sworn 11 and 12 December 2006. Mr Jeyarajah puts forward an operating forecast and a projected cash flow position for BFPL to 30 June 2007 which shows that BFPL will be able to meet its cash flow requirements.
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76 Mr Edwards provided a further report of 12 December 2006 after reviewing the affidavits of Jeyarajah sworn 11 and 12 December 2006 and the affidavit of Oswal sworn 11 December 2006 and analysing in greater detail the differences between the actual fixed costs disclosed in BFPL's management reports and expected fixed costs as disclosed in BFPL's budget for the year to June 2007 and in the BFPL base case financial model dated December 2002.
77 Mr Edwards points out that BFPL's latest forecast as contained in Mr Jeyarajah's affidavit is materially different from BFPL's previous forecast. Mr Edwards says that BFPL's revised cash forecast is materially dependent on achieving a reduction in operating cash outflows before actual levels incurred from commencement of operations to October 2006. Mr Edwards notes the explanations for the high actual costs in Mr Jeyarajah's affidavit and says that without more detail on the specific cost impact of the stated reasons and the time period over which these have occurred (or will continue to occur) he is unable to comment on the reasonableness of the assumed reductions in future operating costs.
78 The evidence in relation to BFPL's cash flow position gives rise to issues that will be considered at the trial of this action. The evidence does not establish that BFPL is presently insolvent or that it is likely to be insolvent by February 2007 if a receiver is not appointed.
Falsehoods, deceptions and non-access
79 The plaintiff submits that the senior management of BFPL have engaged in falsehoods and deceptions and have failed to give to the plaintiff proper access to the books and records of BFPL. The plaintiff submits that these matters in combination show that the present management of BFPL, under the control of Oswal, cannot be trusted to manage the Companies consistently with their obligations under the Corporations Act and the Shareholders Deed. The plaintiff submits that such conduct militates in favour of the need for the business and the affairs of the Companies to be controlled by an external and independent party.
80 The defendants say, in effect, that the plaintiff has been making similar allegations for some time, that these allegations will be considered at the trial of this action and they are not so urgent as to require the appointment of a receiver before the trial of the action in seven weeks.
81 The plaintiff says that documents obtained in the course of third party discovery demonstrate the seriousness of the issue and the urgent
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- need for action to be taken. Counsel for the plaintiff drew particular attention to an alleged falsification of a record in relation to a request by SNC for an extension to the practical completion date. The Companies discovered a letter of 6 June 2006 from SNC to BFPL requesting an extension to the practical completion date of 21 days so that the revised practical completion date would be 12 June 2006. SNC did not discover a copy of that letter but discovered a copy of a letter in identical terms except that it is dated 21 June 2006 and requests a 30 day extension to the practical completion date so that the revised practical completion date would be 21 June 2006. The Companies did not discover a copy of that letter. Counsel for the plaintiff submitted that as at 21 June 2006 practical completion according to the Companies had already been achieved and certified by SNC. That was done on 12 June. There would be no reason for SNC to give a force majeure claim certificate out to 21 June if the date of 12 June was genuine.
82 The evidence referred to by counsel for the plaintiff in support of the submission that the record relating to the practical completion date was falsified raises a serious issue.
83 The plaintiff raises other incidences of alleged false or misleading statements made by senior managers of BFPL to the plaintiff or his solicitors. There is evidence to support those allegations.
84 The plaintiff alleges that the Companies have not given him access to the books and records of the Companies that he is entitled to, in his differing capacities, as shareholder and director. Again, there is evidence to support those allegations.
85 The allegations of deception, falsehood and denied access are serious allegations. The defendants will have an opportunity to answer them at the trial of this action. It is not possible, nor appropriate, that I should make any findings in relation to those allegations at this time.
The discretion to appoint a receiver
86 The plaintiff alleges that the first defendant has a conflict of interest. Through the Burrup Trust he is the major shareholder of Holdings and indirectly of BFPL. He has given a performance guarantee to Paramount. The plaintiff says, in effect, that the first defendant's interests are advanced by BFPL not making any claims upon SNC because SNC would in turn make claims on Paramount and the first defendant has given a performance guarantee for Paramount. The plaintiff says that interest is in conflict with the first defendant's duty to advance the interests of BFPL.
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87 The plaintiff says, in effect, that the affairs of BFPL are being conducted for the benefit of its major shareholder, the first defendant, rather than for the benefit of the company as a whole. There is evidence to support that allegation. However, it is not necessary or appropriate that I should make any finding in relation to that allegation.
88 The evidence does not establish that BFPL's licence is in immediate jeopardy, that is in jeopardy of being revoked or suspended prior to the trial of this action. The evidence does not establish that there is a likelihood of a safety mishap, damage to the plant or prejudice to the rights of BFPL under its insurance policy or the EDC Deed prior to the trial of this action.
89 The third and fourth defendants submit that the appointment of a receiver would cause the Companies to be in default under numerous operating and financing agreements.
90 The ANZ Bank provides finance facilities with an aggregate limit of US$360 million to BFPL under the terms of the Senior Bank Subscription Agreement ("SBSA"). It is common ground that the appointment of a receiver would be an event of default under the SBSA that would entitle the ANZ Bank, amongst other things, to appoint its own receiver or to require immediate repayment of the amounts owing to it under the SBSA. By letter of 8 December 2006 to the plaintiff's solicitors the solicitors for the ANZ Bank stated that their client objects to the plaintiff's application for the appointment of a receiver. The ANZ solicitors said:
"(b) having particular regard to the scheduled hearing date of the substantive claim brought by your client, our client is not persuaded that the alleged risk of imperilment to the assets of BFPL and Burrup Holdings Pty Ltd (collectively the Companies) outweighs the potential prejudice that would be caused to the Companies and our client by the appointment; and
(c) our client is concerned that the appointment may do irreparable harm to the Companies and (in turn) have an adverse impact on our client's position as secure financier to BFPL."
91 The position of the ANZ is that if the Court appoints a receiver then the ANZ may appoint its own receiver.
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92 The damage to be apprehended by the making of an order for the appointment of a receiver and manager is not so much that the receiver and manager may so exercise his powers as to occasion loss in the business to which he has been appointed. It consists of the consequences flowing from the fact of appointment and of the defendant's loss of his "title to control its assets and affairs" (the phrase of Viscount Haldane LC in Parsons v Sovereign Bank of Canada [1913] AC 160 at 167: National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271 at 277.
93 Having regard to the fact that the trial of this action is only seven weeks away and the potentially very substantial loss and damage to the Companies that may result from the appointment of a receiver, the balance of convenience does not favour the appointment of a receiver. It is not just and convenient to appoint a receiver and I decline to do so.
Injunctive relief
94 The plaintiff alternatively seeks orders for an injunction. The orders proposed by the plaintiff are that the defendant companies be restrained from:
1. operating the third defendant's plant at levels in excess of 100 per cent of its rated capacity;
2. conducting the business of the Companies otherwise than in the normal course; and
3. making any payments or transfers in excess of $50,000 without first giving notice in writing or by e-mail to:
(a) the plaintiff (by his solicitors),
(b) the solicitors for Yara Australia Pty Ltd,
such notice identifying the proposed payee or transferee and the purpose of such payment or transfer.
95 The plaintiff also proposes orders to the effect that the Companies make available to independent accountants books, records and information for the accountants to prepare a report to the Court in relation to assets and liabilities of the Companies, whether the Companies have maintained proper financial records and payments and transfers made by the Companies in excess of $50,000.
96 Where an interlocutory injunction is sought it is necessary to identify the legal (which may be statutory) or equitable rights which are to be
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- determined at the trial and in respect of which final relief is sought (which need not be injunctive in nature): Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199.
97 By his originating process the plaintiff claims relief under Corporations Act, s 233. The plaintiff claims, amongst other things, that the conduct of BFPL's affairs is contrary to the interests of the members as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, the plaintiff in his capacity as a shareholder. In support of that claim the plaintiff says that the affairs of BFPL are being conducted for the benefit of its major shareholder, the first defendant, rather than for the benefit of the company as a whole. The plaintiff says that the affairs of BFPL are being conducted so as to maximise short term revenue for the advantage of the first defendant and that rights of BFPL are being prejudiced for the benefit of the first defendant. There is evidence to support those allegations. If the plaintiff makes out his case at trial then the Court may make any of the orders specified in Corporations Act, s 233(1) that the Court considers appropriate. The plaintiff has a sufficient claim to final relief to found the Court's power to grant an interlocutory injunction.
98 The principles to be applied in determining whether to grant an interlocutory injunction were recently described by Gleeson CJ and Crennan J in Australian Broadcasting Corporation v O'Neill (2006) 80 ALJR 1672 at [19]:
" … in all applications for an interlocutory injunction, a court will ask whether the plaintiff has shown that there is a serious question to be tried as to the plaintiff's entitlement to relief, has shown that the plaintiff is likely to suffer injury for which damages will not be an adequate remedy, and has shown that the balance of convenience favours the granting of an injunction. These are the organising principles, to be applied having regard to the nature and circumstances of the case, under which issues of justice and convenience are addressed."
99 I find that there is a serious question to be tried as to the plaintiff's entitlement to relief under Corporations Act, s 232. I have already referred to some of the plaintiff's contentions and evidence which has been produced on the hearing of this interlocutory application. It is neither necessary nor appropriate to discuss those matters in further detail.
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100 Whether or not interlocutory injunctions should be granted require a consideration of the balance of convenience having regard to the nature and circumstances of the case.
101 There is evidence that BFPL have run the plant at 106 per cent of its specified capacity. However, there is also evidence that the plant may be safely run in excess of its specified capacity. There is no evidence that the plant has been operated at a level that is unsafe or is likely to be in the future. It is little more than speculation that running the plant in excess of its design capacity may prejudice BFPL's rights under the EPC Contract or its insurance contracts. In those circumstances, having regard to the fact that the trial of this action is only seven weeks away, it is not appropriate to restrain BFPL by injunction from operating the plant at levels in excess of 100 per cent of its rated capacity. The operation of the plant should be left to the engineers with the expertise to oversee its operation. There is no sufficient or sufficiently urgent reason for the Court to interfere in the running of the plant.
102 An injunction must be framed in sufficiently precise terms that the person to whom it is directed knows with a reasonable degree of certainty what is required of them. An injunction restraining the Companies from conducting their business otherwise than in the normal course is not sufficiently certain. The plaintiff indicated that the order was aimed at restraining the Companies from making payments or incurring debt otherwise than in the normal course of business. An order in the form proposed by the plaintiff would not establish whether certain payments were permitted or prohibited. For example, there may be argument whether a payment made by BFPL to Paramount, or its creditors, was made in the normal course of business. It may be arguable whether a loan obtained by BFPL from Yara to pay creditors to service debt is in the normal course of business. It is not appropriate to make an order of the sort proposed by the plaintiff.
103 Furthermore, it is not just or convenient to grant an order of the nature proposed. The injunction would involve an intrusion into the affairs and management of the Companies which is not justified, having regard to the imminence of the trial.
104 The plaintiff seeks, in effect, that the Companies give notice of any payments or transfers in excess of $50,000. I am not persuaded that such an order should be made. BFPL's business is a large scale operation. Payments of $50,000 or more cannot be regarded as extraordinary, or at least there is no evidence that they should be. Rambal and Yara, or its
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- representative, in their capacities as shareholders and directors, have rights of access to books and records and to information as directors and under the Shareholders Deed. They allege that they are not being provided with the access to which they are entitled. That is a matter that will be considered at the trial of this action. The trial of the action is only seven weeks away. There is no evidence that the assets of BFPL are in jeopardy such as to justify an order of the sort proposed pending the trial of this action.
105 I do not consider it is appropriate that the Court make orders for independent accountants to be provided with books, records and information by the company and to provide a report to the Court on the matters outlined earlier. The usual and proper trial process provides for the parties to put before the Court such evidence as they see fit at the trial of the action. It is not necessary or appropriate that the trial process should be supplemented by an investigation and report by independent accountants of the sort envisaged by the orders proposed.
Conclusion
106 For the reasons stated, the plaintiff's application is dismissed.
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