AUSTRALIAN OIL AND GAS CORPORATION LIMITED v BRIDGE OIL LIMITED [1989] NSWCA 239

AUSTRALIAN OIL AND GAS CORPORATION LIMITED v BRIDGE OIL LIMITED

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

GLEESON CJ, CLARKE JA AND KIRBY P 28, 29 November 1988, 12 April 1989

[1989] NSWCA 239

CONTRACT — petroleum lease — net profits interest reserved by appellant — payments made to appellant by respondents as successors to parties to original agreement — whether payments made in accordance with contractual obligations — whether payments made in accordance with fiduciary obligations — respondents to make two disputed deductions from the payments to appellant — deductions include allowance for processing of petroleum product and transport thereof — processing and transport charges include profit element — whether properly deducted from "net profits interest" payable to appellant

CONTRACT — joint venture — contractual relationship — whether also fiduciary relationship — relationship between contractual and fiduciary duties considered by the members of the Court Hospital Products Limited v United States Surgical Corporation and Ors (1984-85) 156 CLR 41, 70, 96 and Bromley London Borough Council vy Greater London Council [1983] 1 AC 768 considered.

PETROLEUM AND MINERALS — petroleum exploration licence agreement to farm out exploration — reservation of "net profits interest" — meaning of expression — proper approach to calculation of — whether profits of processing and transport may be included in deductions — whether fiduciary duty between joint venturers in the circumstances.

WORDS AND PHRASES — "net profits interest". Petroleum Act 1923-1983 (Qld) Property Law Act 1974-1978 (Qld) Petroleum Regulations (Land) 1966 (Qld)

(Reversing Brownie J) (1) "Net profits interest" is a phrase which does not have a precise meaning. It depends upon the construction of the particular agreement in question. Christy v Petroleum Resources Corp 691 P 2d 59; 102 NM 58 (1984) applies; (2) The method of calculating the net profits adopted by the respondents was incorrect; (3) The evidence before the Court of Appeal was insufficient to permit it to determine the correct figures; (4) The proceedings should be returned to the Commercial Division for a determination of the contractual duties of the respondents to the appellant to be reconsidered in the light of the reasons of the Court and the evidence including any further evidence called; (5) (per Gleeson CJ and Clarke JA) The appellants alternative argument that there was a fiduciary relationship between the parties which prevented the making of the deduction in question was incorrect Hospital Products Limited v United States Surgical Corporation and Ors (1984-85) 156 CLR 41 applies. (6) (per Kirby P) It was unnecessary and inappropriate to determine that issue at this stage.