Shell (Petroleum Mining) Co Ltd v Todd Petroleum Mining Co Ltd - [2007] NZCA 586

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IN THE COURT OF APPEAL OF NEW ZEALAND
CA144/06
[2007] NZCA 586
BETWEENSHELL (PETROLEUM MINING) COMPANY LIMITED

First Appellant
ANDENERGY PETROLEUM INVESTMENTS LIMITED

Second Appellant
ANDENERGY PETROLEUM HOLDINGS LIMITED

Third Appellant
ANDTARANAKI OFFSHORE PETROLEUM COMPANY OF NEW ZEALAND

Fourth Appellant
ANDENERGY PETROLEUM TARANAKI LIMITED

Fifth Appellant
ANDSHELL NEW ZEALAND HOLDING COMPANY LIMITED

Sixth Appellant

ANDTODD PETROLEUM MINING COMPANY LIMITED

First Respondent
ANDSHELL TODD OIL SERVICES LIMITED

Second Respondent
ANDMAUI DEVELOPMENT LIMITED

Third Respondent
ANDOMV NEW ZEALAND LIMITED

Fourth Respondent

Hearing:23 and 24 April 2007

Court:William Young P, Chambers and Ellen France JJ
Counsel:J E Hodder and N S Wood for Appellants

J B M Smith and M C Smith for First Respondent
T C Stephens for Fourth Respondent

Judgment:18 December 2007 at 4 pm

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BThe cross-appeal is allowed.
COrders 1, 2, and 4 made in the High Court on 19 June 2006 are confirmed.
DOrder 3 made in the High Court on 19 June 2006 is set aside.
EAn injunction is granted restraining the second respondent from resolving to effect the removal of the second respondent as operator of the Maui field and doing any act or thing to carry such a resolution into effect.
FLiberty to apply is reserved if any party considers further orders are required to formalise or perfect this court’s reasoning.
GThe appellants must pay to the first respondent costs of $20,000 plus usual disbursements. We certify for second counsel.

REASONS OF THE COURT
(Given by Chambers J)
Table of Contents
Para No

The future operation of the Maui gas field  [1]
Issues on the appeal  [7]
Do the contractual arrangements between Todd, Shell and STOS
mean that Shell is not entitled to encourage its directors
on the STOS board to vote in favour of a resolution to
remove STOS as operator of the Maui field?
The contractual background to the current dispute  [10]
           The pleadings  [20]
           What Wild J found  [24]
           Shell’s argument on this appeal  [34]
           Our interpretation of the contractual position  [40]
           Why we reject Shell’s argument as to the interpretation of core term 3 [59]
           Why we reject Shell’s argument on clause 9.1
of the HoA[74]

Why we reject Shell’s implied term argument  [77]
           Why we reject Shell’s “repudiation/acceptance” argument on the
           second cause of action  [81]
Why we reject the judge’s view that Todd could not sue on the
           STOS employment contract  [90]
           The consequences of our contractual interpretation  [98]
Was the judge right to grant Todd injunctive relief?
The form of the proposed injunctions  [101]
           Proper approach on an appeal against the grant of an injunction       [109]
Effectively an order of specific performance to carry on a business?   [118]
Relevant factors: group A[122]
Relevant factors: group B  [139]
Conclusion  [151]
Declaratory relief  [152]
Costs  [160]

The future operation of the Maui gas field
[1] Maui is New Zealand’s largest gas field, worth today, according to Shell, some $1.5 billion.…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] NZCA 586
Decision Date: 18 December 2007

CaseChat Overview and Summary

Shell (Petroleum Mining) Co Ltd v Todd Petroleum Mining Co Ltd was an appeal by Shell from a decision of Wild J in the High Court in Wellington. Todd cross-appealed on the second cause of action on which it failed before Wild J. The appeal was dismissed and the cross-appeal was allowed. Orders 1, 2, and 4 made in the High Court on 19 June 2006 were confirmed. Order 3 made in the High Court on 19 June 2006 was set aside. An injunction was granted restraining the second respondent from resolving to effect the removal of the second respondent as operator of the Maui field and doing any act or thing to carry such a resolution into effect. Liberty to apply was reserved if any party considered further orders were required to formalise or perfect this court’s reasoning. The appellants must pay to the first respondent costs of $20,000 plus usual disbursements. Shell and Todd were joint venturers in the operation of the Maui gas field. Day to day operation of the Maui field had always been the responsibility of Shell Todd Oil Services Limited (STOS). Shell and Todd each held 50% of its shares. Shell, supported by OMV, had for some time been keen to remove STOS as operator of Maui and to replace it with a Shell subsidiary. To this end, Shell sent to Todd and OMV a resolution that the joint venturers had no confidence in STOS’s operatorship and directing the appointment of a new operator in STOS’s place. Shell and OMV supported the resolution, but Todd did not. Todd further claimed that the proposed resolution was ultra vires the joint venture agreement and other agreements constituting the contractual framework under which Maui was owned and operated. Shell disagreed. Shell’s case, stripped to its bare essentials, was that core term 3.2 conferred on Shell’s STOS directors control of STOS, with the consequence that they could vote for STOS’s resignation from its various operatorships if requested by Shell to do so. The first issue on this appeal and cross-appeal was whether the contractual arrangements between Todd, Shell and STOS meant that Shell was not entitled to encourage its directors on the STOS board to vote in favour of a resolution to remove STOS as operator of the Maui field. The second issue was whether the judge was right to grant Todd injunctive relief. The court found that the contractual arrangements between Todd, Shell and STOS meant that Shell was not entitled to encourage its directors on the STOS board to vote in favour of a resolution to remove STOS as operator of the Maui field. The court also found that the judge was right to grant Todd injunctive relief.

Orders