New South Wales Supreme Court CITATION : Elgas Limited v Orica Australia Pty Limited & Anor [2004] NSWSC 506 HEARING DATE(S) : 7/06/04, 8/06/04 JUDGMENT DATE : 8 June 2004 JURISDICTION: Equity Division Commercial List JUDGMENT OF : Einstein J DECISION : Hearing date vacated. CATCHWORDS : Practice and procedure - Joinder of all joint venturers where claims made to a breach of joint venture agreement LEGISLATION CITED : Supreme Court Rules Lombard Australia Ltd v NRMA Insurance Ltd (1968) 72 SR (NSW) 45 CASES CITED : News Ltd v Australian Rugby League Ltd (1996) 64 FCR 410 Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52 Elgas Limited (ACN 002 749 260) (Plaintiff) PARTIES : Orica Australia Pty Limited (ACN 004 117 828) (First Defendant) Qenos Pty Limited (ACN 054 196 771) (Second Defendant) FILE NUMBER(S) : SC 50166/00 COUNSEL : Mr S Gageler SC, Mr D Studdy (Plaintiff) Mr C Scerri QC, Mr J Stoljar (Defendants) SOLICITORS : Gilbert & Tobin (Plaintiff) Mallesons Stephen Jaques (Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST Einstein J Tuesday 8 June 2004 ex tempore Revised 9 June 2004 50166/00 Elgas Limited v Orica Australia Pty Limited & Anor JUDGMENT 1 The final hearing of these proceedings was fixed to commence on 7 June 2004. 2 The proceedings had been very closely prepared. Both parties had raised significant issues in relation to a joint venture agreement entered into on 4 June 1982 which regulated the construction and on going operation of a LPG storage terminal at Botany Bay. 3 The issues are as pleaded in the current form of further amended summons and in the current form of further amended cross-claim. They were further carefully detailed in overview written submissions furnished to the court as part of the court's usual pre-trial directions. 4 The particular facts, matters and circumstances forming the background to the current dispute, as it was due to be heard in the final hearing, were also chronicled in a usefully prepared agreed statement of fact. 5 The original joint venture participants were the Commonwealth Industrial Gases Limited (CIG); the first defendant, Orica Australia Pty Limited, then known as ICI Australia Operations Pty Limited (Orica); Mobil Oil Australia Pty Limited (Mobil); The Shell Company of Australia Limited (Shell); and Hematite Petroleum Pty Limited (Hematite). 6 Following assignments by certain of the original joint venture participants of their joint venture interests to other entities, the present joint venture parties are Elgas, Mobil, Gogas Australia Pty Ltd [Gogas] and Orica. 7 Over time a number of agreements and arrangements were apparently put in place either by the original joint venture participants or by their successors. At the same time the agreed statement of facts suggests that there appear to have been significant changes in the use by particular joint venture participants, or in the use by parties associated with particular joint venture participants, of facilities in and around the HSF hydrocarbon storage facility at Port Botany. 8 At the commencement of the final hearing the court raised with both parties a question as to whether or not there may be attention required to the proper constitution of the record in terms of all necessary or appropriate parties being required to be joined or given notice of the proceedings. 9 That matter having been raised, following the parties being occupied during first morning in settlement discussions, the final hearing proceeded [those discussions apparently not bearing fruit] at 2 pm on the first day of the hearing. 10 On that occasion Mr Scerri QC, leading counsel for the defendant, contended that the proceedings were shown not to have been properly constituted by reason of the absence as necessary parties of Gogas and Mobil. Although submissions in relation to the question of joinder were very briefly commenced it seemed to me that the more convenient course was to permit the plaintiff's leading counsel, Mr Gageler SC, to open the case, standing over until this morning the taking of detailed submissions on the question of joinder. 11 That course was followed and Mr Gageler's opening from the bar table proceeded until shortly before 4 pm. He indicated that he had approximately one further hour in which time to complete those submissions. 12 At the court's request, the parties overnight, prepared outline submissions in respect of the joinder parameter. The defendants contended that the court should order, pursuant to part 8, rule 8(1)(a) or alternatively (1)(b) of the Supreme Court Rules, that the parties to the joint venture agreement, who were not presently parties to the proceedings, be added as defendants. 13 The defendants, in the alternative, contended that within the meaning of part 8 rule 3 of the Supreme Court Rules, the relief that the plaintiff is claiming is relief to which the absent parties are entitled, jointly with the plaintiff, and that consequently part 8 rule 3 required that Gogas and Mobil be joined as parties to the proceedings. 14 In its written submissions the plaintiff stated that consistently with the plaintiff's counsel's duty to the court, the plaintiff acknowledged a real difficulty with the constitution of the proceedings which it submitted, appeared to infect the summons and the cross-claim equally. The question of parties, it was said having been properly raised by the court, and having been belatedly [so it was said], taken up by the defendants/cross-claimants, there appeared to be no real alternative - adopting an appropriately conservative approach - but to vacate or adjourn the hearing and to joint the absent joint venture participants as defendants to the summons and as cross-defendants to the cross-claim. 15 The particular difficulties which were seen to arise were fleshed out in the plaintiff's written submissions: "3. The difficulty arises from two sources. One is the operation of Pt 8 r 3(1) which provides that where a plaintiff claims relief to which another person is jointly entitled all persons so entitled must ordinarily be parties to the action. The other is Pt 8 r 8 which provides for the joinder of a person whose joinder is "necessary to ensure that all matters in dispute in the proceedings may be effectually and completely determined and adjudicated upon". 4. Part 6 r 6(2) makes Pt 8 rr 3 and 8 applicable, mutatis mutandis, to a cross-claim. 5. The difficulty arising from Pt 8 r 3(1) is that both the Plaintiff and the Cross-Claimants seek relief in the form of declarations and injunctions based on allegations that promises contained in provisions (significantly Art 2.5 and Art 11) of the Joint Venture Agreement have been breached. Probably, or at least arguably, those promises are properly construed as being made by one party to the Joint Venture Agreement to all of the other parties to the Joint Venture Agreement who hold the promises jointly rather than severally: Lombard Australia Ltd v NRMA Insurance Ltd (1968) 72 SR (NSW) 45 at 51. 6. The difficulty arising from Pt 8 r 3(1) could be overcome by the Court granting leave under Pt 8 r 3(2). Part 8 r 4(2) allows that leave to be sought notwithstanding that the Summons and the Cross-Claim have been filed. 7. However, the additional difficulty arising from Pt 8 r 8 cannot so easily be overcome. That test for whether a person needs to be joined under that rule has been expressed as being: "will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?": News Ltd v Australian Rugby League Ltd (1996) 64 FCR 410 at 524 quoting Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52 at 56. As explained in News Ltd at 525: "The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected. … The requirement of a direct effect on rights or liabilities differentiates the case where a person ought to be joined, from other cases, where the effect of the order on non-parties can be characterised as only indirect or consequential." 8. Contrary to the oral submissions of the Defendants/Cross-Claimants and as further explained in News Ltd at 525: "It is the effect of the orders upon the third party that must be determined. The test is not whether the conduct of the third party is raised in the pleadings between the existing parties, or whether the third party is a party to a contract, the meaning or effect of which is pleaded as a matter relevant to the ascertainment of the rights between those parties." 9. Here the injunctive relief sought in the Summons with respect to the Orica Sale Offer would prohibit Orica from selling its individual interest in the Joint Venture Agreement. The individual interest of Orica includes, by definition, its rights against and obligations to, all of the other Joint Venturers. Indeed, in accordance with Art 11.3.1 of the Joint Venture Agreement the purchaser from Orica would "assume all of the liabilities and to perform all of the obligations of the Selling Joint Venture". Restraining the sale by Orica would therefore prevent the assumption by the purchaser from Orica of rights against and obligations to Gogas and Mobil as well as the Plaintiff. The rights and obligations of Gogas and Mobil would in that sense be affected, and probably "directly" affected, by the relief sought. There appears to be a similar problem with the injunctive relief sought in the Cross-Claim with respect to the Orica Sale Offer. 10. It appears that failure to join under Pt 8 r 8 a person whose rights are so affected cannot be cured by Pt 8 r 7: News at 524. Nor can such a failure to join be overlooked or excused because the person has been given notice of the proceedings and an opportunity to participate. As the Court in News went on to state at 526: "Absent an application for joinder by a defendant, or by a third party who claims to be directly affected by the proposed orders, it is for the party prosecuting the proceedings to choose who are the necessary parties to enable the Court to make the orders sought. Generally speaking, to permit that party to transfer to others who might be affected by the outcome of the proceedings the responsibility of deciding whether or not they should apply to be joined could be productive of uncertainty and inconvenience." 11. This is despite the fact that as between the parties to the Joint Venture, the underlying controversy appears to be limited to one between Elgas and Orica: neither Mobil nor Gogas have raised any opposition to either the First LPG Sale Agreement or the Orica Sale Offer. This is hardly surprising given that Mobil Australia Finance Company Limited is the ultimate owner of a 25% interest in Quenos and that, according to the paragraph 62 of the affidavit of Mr Keating sworn 26 August 2003, Gogas reached a "commercial resolution" with Orica in August 1999." 16 The position which then obtained when the matter was called this morning was that both parties joined in the application for the court to vacate the hearing dates and to make appropriate orders, which will be made in a moment and will succeed in the joinder of the absent joint venturers. Both parties are also content with the defendant's suggestion that costs of and occasioned by the vacated hearing date be reserved. 17 The purpose of this short judgment is simply against the event that another judge be allocated for the final hearing of the proceedings as they will be further constituted. It seemed useful for that judge to appreciate the precise events which had occurred. 18 It seems to me that I have hopefully reasonably correctly summarised the position which has obtained up to this point in time. Any arguments such as there may be as to whether or not the comment by the court led to the defendant, in effect, making a de facto application for joinder of the new parties or whether the matter was to be regarded as only one where the court, which itself has the discretion to order joinder of additional parties, had enlivened the issue need not be the subject of examination by me. A full transcript was taken of what occurred yesterday and is being taken presently. That transcript will disclose precisely what was said from the bar table and at what points in time. 19 For those reasons, by consent the court makes the following orders: I vacate the hearing dates for the final hearing. I grant leave to the plaintiff to join Gogas (Australia) Pty Limited and Mobil Oil Australia Pty Limited as additional defendants to the further amended summons. I grant leave to the cross-defendant/cross-claimant to join Gogas (Australia) Pty Limited and Mobil Oil Australia Pty Limited as further cross-defendants to the further amended cross-claim. I direct that on or before Tuesday 15 June 2004 the plaintiff file and serve on the new parties a re-engrossed form of the further amended summons which is to be made returnable before the list judge on 9 July 2004. I direct the defendant [as cross-claimant] on or before 15 June 2004, to file and serve upon the new cross-defendants a re-engrossed form of the further amended cross-claim. The re-engrossed form of cross-claim is to be returnable before the list judge on 9 July 2004. The proceedings are stood over for directions to the list judge on 9 July 2004. Costs of and occasioned by the vacated hearing date are reserved. 20 The parties are agreed that the further case management of the proceedings with the new parties will be a matter for the list judge and that the list judge should not be constrained by any notion that I am to be regarded as part heard in the proceedings. The parties, as part of and involved in the consent orders, have acceded to the proposition that it would not be inappropriate, if the list Judge is disposed so to do, when the case comes on for final hearing for the final hearing to be before myself or before any other judge of the commercial list, depending upon the list judge's diary and unfettered discretion. I certify that paragraphs 1 -20 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 8 June 2004ex tempore and revised 9 June May 2004 ___________________ Susan Piggott Associate 9 June 2004 Last Modified: 06/21/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.