Wise Energy Group Company Ltd v Rocke [No 2]
[2015] WASC 22
•23 JANUARY 2015
WISE ENERGY GROUP COMPANY LTD -v- ROCKE [No 2] [2015] WASC 22
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 22 | |
| Case No: | CIV:2539/2014 | 5 DECEMBER 2014 | |
| Coram: | PRITCHARD J | 23/01/15 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Plaintiff's application for a separate trial of issues granted | ||
| B | |||
| PDF Version |
| Parties: | WISE ENERGY GROUP COMPANY LTD CLIFFORD STUART ROCKE JOHN ALLAN BUMBAK GENERAL NICE RECURSOS COMERCIAL OFFSHORE DE MACAU LIMITADA |
Catchwords: | Practice and procedure Order 32 r 4 Trial of separate issues Factors relevant to whether separate trial of liability issues should be held Turns on its own facts |
Legislation: | Rules of the Supreme Court (1971) (WA), O 32 r 4 |
Case References: | Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334 BCBC Singapore Pte Ltd v PT Bayan Resources TBK [No 2] [2012] WASC 321 City of Swan v Lehman Brothers Australia Ltd [2009] FCA 784 Landsdale Pty Ltd v Moore [2009] WASCA 176 Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
CLIFFORD STUART ROCKE
First Defendant
JOHN ALLAN BUMBAK
Second Defendant
GENERAL NICE RECURSOS COMERCIAL OFFSHORE DE MACAU LIMITADA
Third Defendant
- Plaintiff
AND
GENERAL NICE RECURSOS COMERCIAL OFFSHORE DE MACAU LIMITADA
Defendant
Catchwords:
Practice and procedure - Order 32 r 4 - Trial of separate issues - Factors relevant to whether separate trial of liability issues should be held - Turns on its own facts
Legislation:
Rules of the Supreme Court (1971) (WA), O 32 r 4
Result:
Plaintiff's application for a separate trial of issues granted
Category: B
Representation:
CIV 2539 of 2014
Counsel:
Plaintiff : Mr K J Mony De Kerloy
First Defendant : Mr G G Rakoczy
Second Defendant : Mr G G Rakoczy
Third Defendant : Mr G G Rakoczy
Solicitors:
Plaintiff : Herbert Smith Freehills
First Defendant : Lavan Legal
Second Defendant : Lavan Legal
Third Defendant : Lavan Legal (as agents for Kemp Strang)
CIV 2547 of 2014
Counsel:
Plaintiff : Mr K J Mony De Kerloy
Defendant : Mr G G Rakoczy
Solicitors:
Plaintiff : Herbert Smith Freehills
Defendant : Lavan Legal (as agents for Kemp Strang)
Cases referred to in judgment:
Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334
BCBC Singapore Pte Ltd v PT Bayan Resources TBK [No 2] [2012] WASC 321
City of Swan v Lehman Brothers Australia Ltd [2009] FCA 784
Landsdale Pty Ltd v Moore [2009] WASCA 176
Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1
- PRITCHARD J:
(This judgment was delivered extemporaneously on 5 December 2014 and has been edited from the transcript.)
1 This is the plaintiff's application for a separate trial of issues pursuant to O 32, r 4 of the Rules of the Supreme Court 1971 (WA). The application is supported by the affidavit of Mr Samuel James Dundas sworn 5 December 2014. The issues in respect of which a separate trial is sought are all issues in the amended statement of claim dated 28 November 2014 and the amended defences dated 3 December 2014, save for an assessment of the quantum of any damages claimed by the plaintiff (the liability issues).
Factual background and issues raised by the pleadings
2 The facts in dispute between the parties are for the most part not in dispute. In broad terms, the factual position is that Wise Energy Group Company Ltd (Wise) and Pluton Resources Limited (Receivers and Managers Appointed) (Pluton) entered into a Joint Venture Agreement in 2013 (Joint Venture Agreement) by which they became equal participants in an iron ore mine on Cockatoo Island off the Western Australia coast (Joint Venture).
3 Pluton was the manager of the Joint Venture. In April 2013, General Nice Recursos Commercial Offshore De Macau Limitada (GNR) agreed to a loan to Pluton of about $24 million on terms and conditions set out in an agreement. One of those terms provided that the loan would be repaid by the delivery of shipments of iron ore to General Nice (HK) Ltd.
4 Pluton granted a security interest in favour of GNR over certain of Pluton's assets as security in respect of that loan. Wise also entered into an agreement with GNR to provide GNR with a security interest over certain of Wise's assets, as security for the moneys payable to Pluton by GNR (Wise Security Deed). Wise's liability was subject to a liability cap (Wise Liability Cap) which would be reduced by shipments of iron ore made by Pluton to GNR and by the exercise by GNR of certain rights of conversion of Pluton's debt into equity. Under the Wise Security Deed, GNR had a right to enforce its security if 'an event of default' occurred, namely, by the appointment of receivers and managers.
5 Wise also says that it entered into a further agreement with Pluton in April 2014 (Side Deed) pursuant to which Pluton agreed that upon the occurrence of certain events it would resign as the manager of the Joint Venture within 30 days of a written notice from Wise. Wise says it issued a notice to Pluton requiring it to resign as the manager of the Joint Venture on 27 October 2014.
6 On 3 November 2014, GNR appointed the first and second defendants as receivers and managers of the assets of Pluton. On 4 November 2014, GNR appointed the first and second defendants as receivers and managers of Wise's interest in the Joint Venture and the Joint Venture Agreement (the Receivers).
The issues in dispute
7 There are two aspects to the dispute between Wise and the defendants. The first concerns the appointment of the Receivers as the receivers and managers of its interest in the Joint Venture and the Joint Venture Agreement. Wise's case is that their appointment of the Receivers was unlawful and invalid. Wise also contends that GNR acted in breach of the Wise Security Deed, because the Wise Liability Cap had, by 4 November 2014, been reduced to nil and because GNR failed to comply with certain of its obligations under the Wise Security Deed.
8 Wise also claims that the appointment of the Receivers constituted an interference with its contractual rights under the Joint Venture. Wise says that the defendants have trespassed on its interest in the Joint Venture and it has suffered loss and damage as a result. The defendants say that the appointment of the first and second defendants was valid, and deny any liability for trespass.
9 The second aspect of the dispute between Wise and the defendants arises from the Receivers' conduct after their appointment as receivers and managers of Wise's assets. Wise claims that on 5 November 2014 the Receivers purported to vary the Joint Venture Agreement by executing it on behalf of both Wise and Pluton.
10 Wise says that the effect of that variation was to reinstate Pluton as the manager of the Joint Venture, notwithstanding that Wise had previously issued a notice to Pluton requiring it to resign as manager of the Joint Venture. Wise alleges that by varying the Joint Venture Agreement, the Receivers acted whilst in a position of conflict with respect to the interests of Wise and Pluton and did not exercise their powers in good faith.
11 The Receivers deny any liability on this basis. They deny that any conflict of interest existed, because it was the overriding interest of both Wise and Pluton that the Joint Venture should continue to operate and that no conflict of interest would arise if the status quo was effectively maintained for the overall benefit of the Joint Venture.
12 The relief sought by the plaintiff is in the form of various declarations and injunctions, effectively to have the Receivers removed as the receivers and managers of the Wise's interest in the Joint Venture and the Joint Venture Agreement, declarations that the deed of variation entered into by the Receivers is void and of no effect, and various variations on that relief.
The procedural history
13 On 7 November 2014, Wise made an urgent application for an interlocutory injunction seeking to restrain the Receivers from acting as the receivers and managers of Wise's interest in the Joint Venture. It was immediately apparent that the determination of whether to grant an interlocutory injunction was very likely to involve a significant overlap with the same issues and evidence which would arise for consideration at the trial of Wise's action.
14 For that reason, I reserved some dates for the hearing of the action or of part of the action as contemplated by the parties, pending their attempts to mediate this dispute, together with an action brought by Rizhao Port Group Logistics Co Ltd against GNR and the receivers and managers it appointed in respect of Pluton's interests in the Joint Venture. The latter action has since been resolved, but the action between Wise and the defendants has not.
The plaintiff's application
15 Wise now makes an application for a separate trial of the liability issues. The parties are ready for the trial of the liability issues. The basis for the application for the separate trial was set out in the affidavit of Mr Dundas (sworn 5 December 2014). A separate trial of the liability issues is essentially sought for four reasons.
16 First, the liability issues are narrow and effectively pertain to the construction of various agreements. The proper construction of those agreements is necessary to determine the validity of the Receivers' appointment and to determine the legal question of the duties of the Receivers and whether there was a breach of those duties by the variation of the Joint Venture Agreement. The resolution of those issues does not require discovery, lay or expert evidence, and the parties are ready to proceed.
17 Secondly, the trial of all of the issues raised on the pleadings, that is, damages as well as liability, would require extensive discovery, lay and expert evidence, and would be likely to take between 5 and 10 days.
18 Thirdly, Mr Dundas' view is that a separate trial could save time and money by substantially narrowing the issues for determination at a later trial of damages and potentially by assisting the prospects of agreement between the parties.
19 Finally, Wise says that the matter should be urgently resolved for a number of reasons. They are that the Receivers are incurring liabilities in their role as receivers and those liabilities are significant. (However, I note that most of those liabilities appear to involve the ordinary operating expenses of the mine.) Wise is also concerned about whether the mine is operating at a loss, yet it has not received any substantive information from the Receivers about the operation of the mine.
20 Wise also says that the Receivers' continuing appointment constitutes a trespass and is inflicting damage to Wise's reputation and goodwill when the appointment may have been invalid. While the Receivers' appointment continues, Wise has no control over its interest in the Joint Venture, and no ability to participate in decisions regarding the future operation of the mine.
Consideration
21 The principles in relation to the determination of an application for a separate trial are well-known. I start with the observation of the Court of Appeal in Landsdale Pty Ltd v Moore1.
The respondents' application for separate trials of liability and damages was founded on the proposition that such a course would result in a more efficient and cost-effective resolution of the proceedings. There is no doubt that at a time when the time and cost involved in litigation is a matter of legitimate public concern, it behoves the court to approach each case which comes before it with the object of eliminating any unnecessary delay or cost, and ensuring the efficient and timely resolution of the case, consistent with doing justice to both sides. That is reflected in O 1 r 4A and 4B of the Rules of the Supreme Court 1971 (WA). But while that will often require a more flexible approach than might have been taken in the past, at the same time it is important that the lessons of the past are not forgotten, and that the court and the parties do not succumb to the immediate attraction of apparently more efficient but less conventional procedures without careful regard to past experience with such procedures.
In relation to the present case, experience has shown that the attraction of the separate trial of issues is often illusory; it is a course that often causes the very delay, additional expense and uncertainty of outcome it was intended to avoid. It is self-evident that generally a trial on liability alone will be shorter and less costly than a trial on both liability and damages. But it is equally self-evident that separate trials will not necessarily lead to the overall action being resolved sooner or at a lesser cost. If the plaintiff is successful on liability and it is necessary to have a further trial on the issue of damages, the contrary may well be the case. Separate trials also raise the prospect of separate appeals on the findings on liability and quantum, which, if it occurs, will increase the time and expense involved in the overall action. The vagaries of litigation are such that its course often does not run smoothly, or predictably. An application for the separation of issues is therefore to be approached with some caution. See generally Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1, 55.
22 The observations of the Court of Appeal in that case echoed observations made by the High Court in Tepko Pty Ltd v Water Board2 and in Bass v Permanent Trustee Co Ltd.3
23 A range of factors may be relevant to the question whether a separate trial should be ordered. Some of these were referred to by Rares J in City of Swan v Lehman Brothers Australia Ltd4, where his Honour said:
In AWB Ltd v Cole (No 2)(2006) 233 ALR 453 at 460 - 463 [26] - [40], Young J reviewed the authorities from which (without reciting the authorities to which his Honour referred) I have taken the following principles:
(1) As a general rule the starting point is that all issues of fact and law should be determined at the one time.
(2) A party seeking the determination of separate questions must satisfy the Court that it is “just and convenient” for the order to be made. The order must be made on concrete facts, either established or agreed, for the purpose of quelling a controversy between the parties so as to produce a conclusive or final judicial decision on the issue, which is of a real, not hypothetical, importance to the determination of the controversy.
(3) There are special problems where the separate issue involves a mixed question of fact and law, although it may still be able to be decided as a separate issue. However, care must be taken in precisely formulating the question and specifying the facts upon which it is to be decided.
(4) The Court must have all relevant matters before it as a precondition of it being asked to exercise its discretion if the separate question involves the grant or refusal of declaratory relief.
(5) It may still be appropriate to determine a separate question even if it will not resolve all the issues, provided that there is a strong prospect that the parties will agree upon the result when the core of the dispute has been decided or if the decision will obviate unnecessary and expensive hearings of other questions.
(6) Generally speaking an issue will not be appropriate for separate determination if it is simply one of two or more alternative ways in which an applicant or plaintiff frames its case and its determination would leave other significant issues unresolved.
(7) It is relevant to consider whether:
• the separate questions will contribute to the saving of time and cost by substantially narrowing the issues for trial or even lead to the disposal of the proceedings;
• they will contribute to the settlement of the proceedings;
• they will give rise to significant contested factual issues both at the time of the hearing of the preliminary question and at the time of the trial;
• there will be any significant overlap between the evidence adduced on the hearing of the separate question and a trial;
• the questions will prolong, rather than shorten, the proceedings.
25 One issue about which I remain very concerned in relation to the proceedings is the question of whether the real dispute between the parties can be resolved, at least in an immediate (albeit temporary) sense, so as to militate against any urgency in the final resolution of the matter. This appears to turn on the payment by Wise of such amount it is said to owe to GNR under the Wise Security Deed. I have raised this issue with the parties with no satisfactory resolution.
26 However, it now appears that, in fact, the primary issue in dispute is not so much the question of what might be required to be paid out by Wise in order for the Receivers to retire, but the consequences of actions taken by the Receivers in varying the Joint Venture Agreement. Those matters cannot be resolved by securing the retirement of the Receivers in respect of the Joint Venture interests. Accordingly, I must have regard to the other considerations relevant to the present application.
27 Ordinarily, I would be loathe to try questions of liability separate from questions of damages. However, I have formed the view that in this case and its particular circumstances, the application should be granted. The factors upon which I have particularly relied to reach that conclusion are as follows.
28 First, and most importantly, there is very likely to be an extensive overlap in the evidence and issues requiring resolution on any application pursued by Wise for urgent injunctive relief and the final trial of the liability issues. In this respect, I note that Wise's initial application for urgent injunctive relief effectively remains extant. The prosed separate trial would go beyond that issue to deal with the question of the Receivers' conduct after their appointment, but in a way which does not appear likely to involve any significant additional time, evidence or court resources.
29 Secondly, at a time when the Court's resources are under considerable stress and when case management principles are more important than ever, it would not be the most efficient use of the Court's resources to proceed to deal with an urgent interlocutory injunction application when the question of liability could be finally resolved in virtually the same amount of time. A separate trial of the liability issues would save the Court and the parties at least one day hearing time.
30 Thirdly, once questions of liability are resolved, there may well be a greater prospect of resolution of the damages claim by agreement. This is a consideration which warrants some weight in the context of the Court's case management principles.
31 Fourthly, the facts are largely not in dispute, but those facts which are in dispute will be resolved at the separate trial of liability issues. There is no prospect of the Court resolving questions which might prove hypothetical, as has been an issue in other cases.6
32 Fifthly, there will be no overlap between the evidence on the separate trial of liability issues and the evidence at a trial on damages.
33 Sixthly, if the Receivers' appointment was invalid, Wise is being denied control over its interests in the Joint Venture. That is not an insignificant consideration.
34 Finally, I do not overlook the fact that there is a risk that to proceed by a separate trial of the liability issues as is proposed may increase the risk of multiple appeals. However, because of the limited factual dispute in the matter and the fact that the trial is to proceed by way of documentary evidence, there appears to be little prospect that, if an appeal were brought and were successful, that there would be a need for a retrial. Having regard to the other factors to which I have referred, I am of the view that this final consideration should not be decisive in the resolution of Wise's application.
35 Accordingly, I will make the orders that are necessary to proceed to a separate trial of the liability issues. I will hear from counsel as to the form of the orders.
1Landsdale Pty Ltd v Moore [2009] WASCA 176 [19] - [20].
2Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1.
3Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334.
4City of Swan v Lehman Brothers Australia Ltd [2009] FCA 784 [27].
5BCBC Singapore Pte Ltd v PT Bayan Resources TBK [No 2] [2012] WASC 321 [27].
6Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 CLR 334.
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