Todd Petroleum Mining Company Limited v Vector Gas Trading Limited
[2017] NZHC 2394
•29 September 2017
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE WHANGANUI-Ā-TARA ROHE
CIV 2014-485-11563 [2017] NZHC 2394
BETWEEN TODD PETROLEUM MINING
COMPANY LIMITED First Plaintiff
AND
SHELL (PETROLEUM MINING) COMPANY LIMITED
Second Plaintiff
AND
VECTOR GAS TRADING LIMITED Defendant
Hearing: 22 September 2017 Appearances:
M Colson, J H Stevens and K H Dobbs for Plaintiff
B Scott and G Scott-Jones for DefendantJudgment:
29 September 2017
JUDGMENT OF DOBSON J [application for separate trial on some issues]
[1] This proceeding involves a claim and counterclaims about the terms on which the defendant (Vector) provides processing of raw gas from the Kapuni field for the operators of that field at Vector’s Kapuni Gas Treatment Plant (KGTP). A six week fixture to hear all aspects of the claims has been allocated to start on 30 April 2018. Recently, Vector applied for an order splitting some of the issues arising on the claims, for determination prior to the remaining issues. This judgment deals with that application.
[2] When the proceedings were commenced the operators of the Kapuni field comprised both plaintiffs who have been referred to as the Kapuni Mining
TODD PETROLEUM & SHELL PETROLEUM v VECTOR GAS [2017] NZHC 2394 [29 September 2017]
Companies or KMCs. Prior to argument of the present application, the foreshadowed end to Shell’s interest as a KMC ensued. A memorandum of counsel on its behalf dated 7 August 2017 confirmed that to be the position and requested that Shell’s counsel be excused from appearing at all subsequent hearings of the proceedings. That is appropriate, and I so order. Except in historical contexts where “KMCs” remains appropriate, I will henceforth refer to the plaintiffs simply as “Todd”.
[3] I summarised the background of the litigation in general terms in my judgment of 29 May 2017. To understand the present application, I repeat the following paragraphs: 1
Background to the litigation
[2] The [KMCs] are the vendors of gas from the Kapuni field in Taranaki. The output of that field was sold pursuant to a 1967 contract to Natural Gas Corporation, which was at that time a Crown corporation. Vector has subsequently taken over the position of the buyer under the 1967 contract.
[3] In early 1997, a High Court judgment upheld the KMCs’ complaint that the contractual commitment to sell all the gas from the Kapuni field to the buyer was in breach of s 27 of the Commerce Act 1986. That statute came into force after the contract, but applied retrospectively to its provisions. The judgment required the output of the Kapuni field to be split equally, one half to the KMCs and the other half to the buyer. The judgment also required the buyer to make available its Kapuni Gas treatment plant to enable the KMCs to process, at reasonable prices, any Kapuni gas not purchased by the buyer under the original contract (Order 27). In addition, the Court enforced an undertaking from the KMCs that, subject to being given access to the treatment plant, they would not compete with the buyer in selling Kapuni gas to electricity generators or petrochemical companies.
[4] In late 1997 the parties agreed that the original contract, as varied by the High Court orders, would also apply to additional quantities of gas from Kapuni being approximately a further 495 petajoules which is referred to as “Current Tranche Gas”.
[5] The High Court judgment contemplated a process of negotiation, mediation and if necessary arbitration to settle the fee that the buyer (now Vector) could charge the sellers for processing their gas at the Kapuni gas processing plant.
[6] In late 1998 and early 1999, arbitral hearings were convened before Sir Ian Barker on the price to be paid for the gas by the buyer for the Current Tranche Gas and on the processing fee to be paid by the sellers. The
1 Todd Petroleum Mining Co Ltd v Vector Gas Trading Ltd [2017] NZHC 1129.
arbitrator set the price for Current Tranche Gas, and also set the processing fee, which was to be adjusted for changes in the Producer Price Index (PPI) every two years.
[7] The parties have taken Kapuni gas in unequal measure and Vector exhausted its one half share of the Current Tranche Gas in mid-2013. In contrast, the KMCs predict that they will exhaust their share of the Current Tranche Gas in 2019 or 2020.
[8] In 2015, the parties embarked on a further arbitration to set the terms for the supply of an additional tranche of gas (Next Tranche Gas). The parties adopted different views as to whether the condition imposed by Order
27 of the 1997 judgment (ie requiring Vector to process the KMCs’ Kapuni
gas) would continue to apply to Next Tranche Gas after the KMCs took their full share of Current Tranche Gas. To clarify the contractual position, the
KMCs commenced the present proceedings seeking a declaration that Order
27 obliged Vector to process the KMCs’ share of Kapuni gas for so long as the KMCs required that to occur, subject to there being processing capacity physically available at the Kapuni gas treatment plant. They will argue that Order 27 cross refers to Order 21 from the 1997 judgment, and that Order stipulates that it is to apply “until such time as the field becomes uneconomic”.
[4] I will refer to the original 1967 Kapuni Gas Contract as KGC.
[5] At issue is the length of the period during which Vector must continue to process Kapuni gas for Todd, and the period during which the fee for that processing as determined in the 1999 arbitration (the Performance Fee Arbitration or PFA) is to apply.
[6] Vector opposes that declaration and also pleads five counterclaims. The first seeks an order discharging Order 27 once Todd has taken its share of Current Tranche Gas. That would free Vector of any obligation to process Todd’s Kapuni gas, from future tranches on any terms at all. Vector will argue that the order requiring Vector to process gas for the KMCs was only justified on a view of the state of competition in the gas market that no longer exists so that the requirement to process Todd’s gas is no longer warranted. For Todd, Mr Colson labelled that as Vector’s “nuclear option”.
[7] As an alternative to that, in second and third counterclaims Vector seeks modifications to the way the fee for processing Todd’s gas is to be set. Vector will argue that the price set in the PFA is no longer reasonable so that a modification should occur to allow for a new reasonable price to be set.
[8] The fourth counterclaim seeks a declaration, irrespective of whether Vector can require the processing fee to be reset, that nothing in Order 27 prevents Vector from making commercial decisions about the future operation or closure of the KGTP.
[9] A fifth counterclaim arises if Todd establishes that the terms of Order 27 have status as terms of the KGC. If so, Vector would pose the question whether it is a provision, like others, that is to be reset for each tranche of gas.
[10] Todd’s reply to Vector’s counterclaims disputes that the Court has jurisdiction to reopen Order 27 because it is a component of final orders made in determining a completed proceeding. Todd also disputes that the Court has jurisdiction to alter conditions that have the status of contractual terms. In this regard, the parties entered into a settlement agreement in November 1997 that committed them to not appeal the 1997 High Court judgment. Todd will argue that Vector is committed under the terms of that settlement agreement to a waiver of any right to appeal, undermine or seek to attack or alter the terms of the 1997 High Court judgment.
[11] Vector’s application for a separate trial distinguished components of a number of these different claims, which it characterises as raising interpretative issues that could arguably be resolved efficiently and with relatively confined evidence. The questions posed would produce answers for the parties that might obviate the need to deal with the remainder of the issues that are more factually complex and will require large amounts of contentious evidence.
[12] Vector’s application sought prior determination of causes of action and separate questions that it treats as four interpretative issues as follows:
(a) (Arising on Todd’s claim) whether Vector is obliged to process Todd’s share of Kapuni gas on the terms set out in the PFA for so long as Todd requires, subject only to processing capacity being physically available at the KGTP.
(b)(Arising on Todd’s defence to the counterclaims) whether the Court is prevented from making the declarations sought by Vector in its first to fourth counterclaims because either any entitlement to pursue amendment to the relevant obligations were waived by the terms of the 1997 settlement agreement, or because Order 27 is a variation to the KGC so that the Court does not have jurisdiction to alter what constitute contractual terms.
(c) (Arising on Vector’s fourth counterclaim) whether there is anything in Order 27 that prevents Vector from making commercial decisions about the operation and/or closure of the KGTP once it has completed its obligations to process Todd’s share of Current Tranche Gas.
(d)(Arising on Vector’s fifth counterclaim) if the Court finds Order 27 is a variation of the KGC (Todd’s contention) whether the requirement to set a reasonable fee is an applicable term within the contract as contemplated in the 1997 settlement agreement that must be reset for each new tranche of gas.
[13] The second set of issues would involve the complex question of whether the Court’s concerns in 1997 about the anticompetitive effect of the original contractual position under the KGC that justified the imposition under Order 27 (that is, for Vector to provide the processing facilities) are no longer present because of changes in the gas market. If so, Vector would ask the Court to remove the condition as no longer being justified. Vector’s second set of issues would also traverse the current reasonableness of the price for processing as set in 1999. Mr Scott distinguished these as the “competition and pricing issues”.
[14] Vector argues that separating the issues in this way would be efficient. If Vector was successful on the first issues, arguably it would obviate the need for argument on any of the second group of issues. Certainly, focussing only on the interpretative arguments in the first series of issues would obviate the need for a large amount of evidence so that up to four of the six weeks presently allocated for
the whole case would not be required. Mr Scott suggested the parties would save an estimated $2,000,000 in legal and associated expenses if that were the case.
[15] Todd opposed the application on a range of grounds. In essence, it needs clarity on all the issues affecting its entitlement to have Vector process Kapuni gas and the cost of doing so. Todd disputes the prospect of efficiently dividing the issues so as to avoid substantial duplication in the evidence, and overall takes the view that it is a case in which what appears to be the long way around will be the shortest way home.
[16] Vector’s application relied on both High Court Rules 2016, rr 10.4 and 10.15, which apply respectively to ordering separate trials of different causes of action and defining questions for separate determination.
[17] The parties were in substantial agreement as to the approach the Court is to adopt on such applications. Todd emphasised that there is a substantial onus on an applicant for such orders to displace the presumption that one trial would normally be the most expeditious and efficient manner for dealing with a proceeding.2
[18] In Turners & Growers Ltd v Zespri Group Ltd White J provided a checklist of
14 criteria, labelled (a)–(n), that had been taken into account in various cases.3
These have been considered in a number of subsequent applications. A somewhat shorter list of questions that can be considered was provided by Kos J in Haden v Attorney-General.4 Those questions are:
·Will there be difficult demarcation questions between those issues to be addressed at the first trial and those left to the second?
· Will the separate question bring the proceedings to an end?
· What potential time saving does the separate question offer?
2 Turners & Growers Ltd v Zespri Group Ltd HC Auckland CIV–2009–404–4392, 5 May 2010 at
[10]; and Clear Communications Ltd v Telecom Corp of NZ Ltd (1998) 12 PRNZ 333 (HC) at
335.
3 Turners & Growers, above n 2 at [11].
4 Haden v Attorney-General (2011) 22 PRNZ 1 (HC) at [50].
· How will appeals be dealt with?
· Are there any other practical considerations tending one way or the other?
It is convenient to analyse the parties’ competing positions on these questions, adding observations on the Turners & Growers criteria where they can assist in the analysis.
[19] I intend no disrespect to counsel in dealing with their competing arguments as to how the various issues might be argued at a somewhat more abstracted level than the analysis they provided for me. I am able to form a clear view on the merits of the application by considering the numerous criteria identified as relevant to it, without commenting on how any of the issues proposed for argument at either the first or second stage might play out. I would not wish to stray into comments that might inadvertently suggest how the substance of any aspects of the claim or counterclaims might be addressed.
[20] Mr Scott cited a suggestion I made during the contested discovery hearing in May to the effect that there may be scope for separate prior determination of some of the issues raised by Todd’s claim and Vector’s counterclaims. My comment was intended only to raise a possible issue. It did not suggest any reasoned view and cannot reduce the nature of the onus on Vector to justify split trials.
[21] Mr Scott annexed to his submissions a diagram of the sequence of outcomes, depending on the answers at a first stage trial dealing with the interpretative issues. It was intended to support his submissions that there is substantial efficiency in what he characterised as a division of issues that could be readily maintained. That efficiency arose mainly if Vector succeeded on the first set of issues.
[22] For his part, Mr Colson embellished the diagram as prepared for Vector with an additional set of issues that Todd argued would arise if Vector succeeded with an interpretative ruling that the pricing determined in the PFA did not apply beyond Current Tranche Gas. In that event Todd would argue that Vector would still need to establish that the price set in the PFA was unreasonable before any process of
resetting the price could be undertaken. Todd’s argument in that situation would be that Order 27 required the payment of a reasonable fee which, in the absence of agreement, was to be settled by arbitration (that is, the PFA). If the price as determined in the PFA did not apply beyond Current Tranche Gas, then continuation of the existing fee could only be disputed if Vector could establish that it was no longer a reasonable fee.
[23] I accept that there is arguably a rationale for addressing the issues in the sequence proposed for Vector. An important consideration is the deferral of the work involved in complex and extensive factual and expert evidence on the differences between the state of the gas market in the mid 1990s and as it will be when Todd is projected to finish taking its share of current tranche gas. Also, extensive evidentiary issues are raised by Vector’s complaint that the basis for its charging for processing gas for Todd is unreasonable. Turning then to the questions from Haden.
Difficult demarcation questions when separating the issues for first and second trials?
[24] It would be important in demarcating the issues to define and maintain the limits on the scope of relevant evidence on the interpretative issues. Mr Scott was confident that, with robust monitoring, an efficient division could be maintained to confine the contextual evidence. This would address relevant background to the terms of the KGC, the sealed orders following from the 1997 High Court judgment, the 1997 settlement agreement, and the context in which the PFA arbitral award was produced.
[25] Contextual evidence in contractual disputes is often not readily confined by any precise definition. Although the Court has often criticised parties for urging a wider assessment of context than is helpful, it is very difficult for the Court to prescribe accurate boundaries in advance. This is a case where the factual background is complex. Application of the Court Orders to the contract has 20 years of history. Evidence might credibly extend to the wider circumstances bearing on the interrelationship between the documents to be interpreted. Given the parties appear intent on contesting every aspect of every issue as thoroughly as possible, the
prospects of confining the evidence in a disciplined way are likely to be less than might otherwise be the case.
[26] There is likely to be substantial contextual evidence relevant to the interpretative issues that would also be relevant at any second trial. As Mr Colson submitted, an understanding of the interpretative issues will necessarily inform the competition and pricing issues.
[27] For example, Vector’s challenge to the continued application of the PFA fee implicitly relies on the criticism that a fee set in 1999 should not persist for years to come, where it obliges Vector to continue processing raw gas for Todd at a loss, and to an extent that the enforced commitment now amounts to an injustice. Mr Colson apprehended that Vector would continue to use this concern as an underlying theme on its arguments on the interpretative issues. However, Todd disputes that the fee set in the PFA has become unreasonable and also disputes Vector’s claim that it is providing the processing service at a loss. Although those issues ought only to arise directly if and when a second trial occurred, Vector’s propositions are so embedded in the justification for its stance that it seems unlikely that it would entirely omit these factual propositions from its case on the first set of issues.
[28] Three of the Turners & Growers criteria reflect the concerns that demarcation issues might produce in splitting trials. Those are (labelled consistently with that judgment):
(f) demarcation difficulties in defining issues to be addressed at the first trial;
(g) resulting difficulties of issue estoppel; and
(i)inadvertent findings at the first trial upon matters that are for full evidence and argument at the second hearing.5
[29] I consider that material concerns might well arise on each of these points if split trials were ordered along the lines sought by Vector.
[30] I am not persuaded that any clear dividing line could be maintained between contextual evidence that is admissible, and matters going beyond that but which would potentially have relevance to the second set of issues. The absence of a bright line test for relevance on the first set of issues risks findings in the course of the first hearing that inadvertently have implications for the second set of issues. The Court should avoid a division of issues on terms that might artificially constrain its reasoning on the first set of issues because of a prospect emerging during argument of influencing or even foreclosing findings on the second set of issues.
[31] In this case I see that difficulty in demarcating the scope of evidence as a substantial factor weighing against splitting of trials. It is not, as per Turners & Growers, a simple matter of separating pure questions of law from the factual context, as the following analysis makes clear.
[32] The parties take widely differing views as to what would be involved in arguing what Vector describes as an interpretative issue arising on its fourth counterclaim.6 Order 27 obliged Vector to process the KMC’s gas if requested by them to do so “subject to the capacity of the KGTP”. Todd treats that as a reference to the physical processing capacity of the KGTP. However Mr Colson anticipated that on this interpretative issue Vector would argue that the reservation entitles Vector to make commercial decisions about the operation and/or closure of the KGTP on a wider basis than the physical capacity of the plant, such as the
commercial capacity of the KGTP to carry out the processing economically.
[33] In a memorandum of counsel filed in support of the present application Mr Scott acknowledged for Vector that some limited economic evidence may be needed on the interpretation issue arising out of its fourth counterclaim. In Vector’s submissions that acknowledgement was withdrawn and its stance was that such evidence would not be required. Vector’s commentary on the point referred to cases
including Union Shipping NZ Ltd v Port Nelson Ltd.7 The apparent relevance of that decision is its consideration of the prospect of the essential facilities doctrine being applied in New Zealand competition law. In oral submissions Mr Scott confined the relevance of the analysis of the essential facilities doctrine in Port Nelson to a possible explanation for the approach adopted by Barker J when accepting the undertaking offered by Vector to process the KMC’s gas which led to the terms of Order 27. Whilst some of the language in the 1997 judgment might have suggested an approach akin to the essential facilities doctrine, Mr Scott would argue that the essential facilities doctrine should not apply in considering the interpretation of Order 27 so far as it might permit Vector to make decisions about the continued operation of the KGTP in its own commercial interests.
[34] Mr Colson was not committed to an argument that Order 27 had to be interpreted by applying the essential facilities doctrine. However he made the reasonable submission that the Court could not assess the scope of evidence that might be relevant to the interpretation issue raised by Vector’s fourth counterclaim without acknowledging the prospect of a substantial volume of economic evidence adduced to address whether something akin to the essential facilities doctrine that conformed with the provisions of s 36 of the Commerce Act 1986 would be required. Mr Colson indicated that Todd proposes to call expert evidence from economists with knowledge of how the essential facilities doctrine has been applied in the United States, as well as evidence on whether it would be economic or rational in the sense of being an ordinary commercial decision, for Vector to close KGTP.
[35] On the competing views as to how Vector’s fourth counterclaim might be argued, it is clear that at least substantial parts of the evidence foreshadowed by Mr Colson cannot be ruled out at this stage as irrelevant. That takes the likely evidence well beyond the confined scope Mr Scott was urging.
[36] In responding to Todd’s concern about the prospect of inadvertent issue estoppels arising, Mr Scott submitted that such concern arose from a misunderstanding of the correct approach to the issues. He submitted that, given the
potential for a second hearing, the Judge would be expected to be careful not to
7 Union Shipping NZ Ltd v Port Nelson Ltd [1990] 2 NZLR 662 (HC).
make unnecessary findings in the first hearing. If findings that were unnecessary were made, then he submitted that they would not in any event give rise to an issue estoppel. He cited the decision in Talyancich v Index Developments Ltd.8 That decision adopted a definition from Spencer Bower and Turner as follows: 9
Issue estoppel arises where an earlier decision is relied upon, not as determining the existence or non-existence of the cause of action, but as determining, as an essential and fundamental step in the logic of the judgment, without which it could not stand, some lesser issue which is necessary to establish (or demolish) the cause of action set up in the later proceedings.
[37] I do not accept Mr Scott’s assurance that the contextual evidence and findings in respect of it would avoid any risk of issue estoppel arising. The background to the longstanding dealings between the parties would give rise to a real risk of that occurring.
[38] The answers to the questions of demarcation firmly point away from splitting the trial.
Would the interpretative issues if determined separately, bring the proceedings to an end?
[39] This raises the same consideration as the Turners & Growers criterion in the following terms:
(c) whether a decision one way or the other on the separate questions would end the litigation.10
[40] The parties were at odds on this. Vector argued that answers in its favour on a number of its arguments on the interpretative issues would bring the proceedings to an end. That would be the case where the outcome was that the PFA did not apply to tranches beyond Current Tranche Gas. Todd did not accept that outcome on the basis that an onus would still arise for Vector to establish that the current pricing in
accordance with the PFA award was unreasonable.
8 Talyancich v Index Developments Ltd [1992] 3 NZLR 28 (CA).
9 At 37–38 citing George Spencer Bower and Alexander Turner, The Doctrine of Res Judicata
(2nd ed, London, Butterworths, 1969), at 191.
10 Turners & Growers, above n 3, at [11].
[41] Todd was also wary of qualifications to Vector’s assurances that alternative arguments raised by its counterclaims would be discontinued if Vector achieved an outcome that was satisfactory to it on the duration of the PFA award.11 Todd is concerned at the prospect that, notwithstanding Vector obtaining an interpretation that freed it from the current pricing regime for processing gas, Vector might nonetheless resurrect at a later time additional arguments to advance other aspects of its contractual position. This might occur, for example, if Vector prevails in getting the processing fee reset, but then does not like the new fee that is set.
[42] Todd also argued that the finding Vector sought as one of interpretation as to when the fees set under the PFA would come to an end could not, even if argued as Vector wants, resolve how the parties priced the processing fee to apply after the PFA award ceased to apply. The duration of any new fee, or process for setting new fees, would still be an open question that might not be determined on the questions as posed for Vector. For example, issues would arise as to whether it should be set for a period of time or until it becomes unreasonable, or for a minimum volume of throughput, or until the field is exhausted.
[43] Todd may not be on strong ground in arguing that a finding in Vector’s favour on the duration of the PFA would necessarily result in the reasonableness of the current fee and resetting process being litigated in this Court. It may well be that the resetting process to be followed is a current repeat of the process contemplated in the
1997 judgment, that is, negotiation and, if necessary, arbitration to settle the fee. However whilst Todd may not be correct in saying that these elements would necessarily need to be resolved later, there is at least the prospect that they are correct in asserting a wider scope for the issue that arises than Vector contends.
[44] There are a range of outcomes on the interpretive issues, only some of which will resolve all issues to bring an end to the proceedings. I am not persuaded that the likelihood of outcomes that would provide finality following the first trial is sufficiently high for this criterion to carry substantial weight in favour of splitting the
trial. There is, in my view, a higher likelihood that some issues would remain to be
11 Mr Colson cited recent correspondence in which Vector’s solicitors expressed its intentions about not pursuing counterclaims in certain circumstances as “Vector’s current thinking”, with a reservation of Vector’s position “if circumstances change at some point in the future”.
resolved. I am mindful, however, that lack of finality following the first trial cannot be decisive in favour of not splitting the trial because of the terms of r 10.15.
What potential timesaving do the separate questions offer?
[45] In this case it is appropriate to include in the assessment of potential timesaving the following Turners & Growers criteria:
(a) the likelihood of delay in finally resolving the proceeding; (b) the probable length of the hearings if there is a split trial; (d) the impact on the length of any subsequent hearing;
(j) the need to recall some witnesses at the second hearing;
(k) the duplication of time involved in the Court and counsel “coming up to speed” again for the second hearing; and
(m)a second round of discovery or other interlocutories and amended pleadings following the first trial.12
[46] Vector claims that the prospect of achieving finality on the interpretative issues would save the parties some $2,000,000 in legal costs. Mr Scott projects that it would reduce the first trial from six to two weeks. Parties to litigation ought always to be encouraged to confine the scope of what genuinely needs to be argued. Further, the Court resource is finite, and it should always be concerned to allocate that resource carefully.
[47] In this case the parties are extremely well resourced and have given every indication of pursuing all the issues very thoroughly. However in this case the parties cannot be criticised (at least thus far) for committing disproportionate
resources to the litigation. On any view, the continued extraction of gas from Kapuni
12 Turners & Growers, above n 3 above at [11].
is an enterprise of real significance to the parties, and can even claim some materiality in assessing matters of national interest.
[48] Mr Scott’s projection was that no additional hearing time would be required, so that if a two week hearing for the interpretative issues did not resolve the proceedings, then the remaining four weeks would be enough for the competition and pricing issues. With respect, I consider that unrealistic. A measure of overlap would be unavoidable and ultimately, if a second trial were required, then more time overall would be required. Certainly, given the inevitability of appeals, splitting the hearings is likely to substantially delay a final resolution in the High Court.
[49] Given the thoroughness with which the issues are being litigated, deferral of the competition and pricing issues would be likely to trigger continuing discovery obligations. Amendments to the pleadings in light of the outcome of the first trial and appeals from that decision would be likely. I consider it likely that some of the witnesses providing contextual evidence at the first trial would be required at the second. There is also the issue, as recognised in the Turners & Growers criteria, of the inefficiency of the Court and counsel having to come up to speed again for the second trial.
[50] In isolation, split trials, with the prospect that the second might be unnecessary can be attractive in both time and resources. As a matter of proportionality, I do not consider the extent of time and cost that would be saved if a second trial of any substantial scope was not required can outweigh the risks that would arise of compromising the overall efficiency and timeliness of the outcome where some part of the second trial would still be required.
[51] The differences between the parties have been smouldering for some time. These proceedings were commenced in 2014. My understanding is that Todd’s claim and Vector’s counterclaims have now put in issue the full range of arguments that could influence any change in the current contractual commitments between them. Those issues ought to be resolved efficiently. My overall assessment is that an efficient outcome is more likely to be achieved if they are all advanced together.
How will appeals be dealt with?
[52] Haden raises the same consideration as Turners & Growers criterion (l), namely the prospect of multiple appeals.
[53] Both counsel accepted that appeals will be inevitable, irrespective of whether the issues are dealt with in two trials or at one, and whichever side prevails on any of the issues. Mr Colson not unreasonably labelled both protagonists as “recidivist litigants”. The inevitability of appeals at each stage is a material consideration against splitting trials. It creates the risk of a substantially protracted final outcome.
[54] On present projections I consider an overall appellate outcome is more likely to be achieved sooner if there are not split trials. That supposition does not involve any preliminary judgment on the merits of any of the issues arising, but on the best projection I can make at this time of the various options likely to play out between these well-resourced and determined litigants.
[55] I would also be concerned in proceedings of this type that the way in which arguments get extrapolated and developed on appeal would place appellate courts in potentially invidious positions if part only of the overall dispute was before them. Appellate consideration would be tidier if the appeal courts are seized of all of the issues. An overall outcome is certainly likely to be achieved at appellate level more promptly if that is the case.
Other practical considerations?
[56] The remaining Turners & Growers criteria are illustrative of practical considerations that might apply here:
(e) a balancing of the advantages to the parties and the public interest in shortening litigation as against any disadvantages asserted by parties opposing a split trial;
(h)inadvertent disqualification of a Judge who has expressed views at the first trial on matters for decision at the second trial; and
(n)rostering difficulties in ensuring that the same Judge is available for the second hearing.13
[57] At issue in this dispute are the conditions on which Todd can obtain processing of its half of raw gas extracted from Kapuni, and the duration for which and terms on which Vector does that processing. It is a significant commercial issue and is one that, on more optimistic views of the economic life of the Kapuni field, may have a material impact for many years to come.
[58] The parties have been aware of the differences between them for some time. Vector disputes the importance of Todd’s need for a prompt overall answer by pointing to the extent of money that Todd has been prepared to commit to further assessments of the Kapuni resource whilst not knowing the outcome of these issues. Todd’s recent initiatives include buying Shell’s share in the venture. Mr Colson’s rejoinder is that the amount spent recently would pale into insignificance compared to the commitments that Todd would make if it can see a path for redevelopment of the field to extract substantially more Kapuni gas on terms acceptable to it. Todd has not sold any raw Kapuni gas for more than 10 years, and needs the KGTP to get any gas to market. I accept Todd’s concern that its long-term planning now requires finite answers as soon as reasonably possible.
[59] Todd (together with Shell) took the initiative in seeking declaratory relief to clarify its commercial position. In contesting their view, Vector has exercised its entitlement to broaden the range of issues arising about the future of the contract, and now seeks to bifurcate the path to a resolution of all the issues raised. Mr Colson was critical that Vector introduced its “nuclear option” in its first counterclaim to terminate the obligation to process Kapuni gas and now, having had discovery of the market data it had anticipated relying on to make out the unreasonableness of continued operation of Order 27, has sought to park that “nuclear option” for later reassessment.
[60] I have acknowledged the risk in this case of answers at the first trial intruding into matters for decision at the second trial, which raises the prospect of
13 Turners & Growers, above n 3, at [11].
disqualification of the Judge hearing the first trial. That is a relevant consideration against splitting the trials, as is the prospect of rostering difficulties if the second set of issues had to come back to the High Court. That could be a quite substantial period after the original decision, given the time required for appeals from it. These practical considerations reinforce the view I have taken about the undesirability of the split trials as sought.
[61] The possibility of achieving an overall determination by prior argument of a subset of the issues is not sufficient to outweigh the concerns that Todd have raised to progress all issues to a determination. On the Turners & Growers criterion (e), the prospect of advantages to the party seeking separate trials and to the public interest cannot outweigh the disadvantages foreshadowed for the opposing party.
Outcome
[62] I accordingly dismiss the application. The parties should proceed in accordance with the timetable for argument of all issues in the six week fixture scheduled to begin on 30 April 2018.
[63] Shell (Petroleum Mining) Company Ltd is excused from appearing at all subsequent hearings of the proceedings.
[64] The parties appear not to have responded to the Court’s request that they address the costs categorisation for the proceeding.14 Todd is entitled to costs on the present application on a 2B basis. That order does not mean that costs category is to apply generally to the proceeding, but is appropriate for this application. I certify for
second counsel at the half day hearing.
Solicitors:
Bell Gully for first plaintiff
Minter Ellison Rudd Watts for second plaintiff
Chapman Tripp for defendant
Dobson J
14 Todd Petroleum Mining Co Ltd v Vector Gas Trading Ltd HC Wellington CIV-204-485-11563, 8
December 2016 (Minute of Clifford J) at [5].
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