BETWEEN : EDWF HOLDINGS 1 PTY LTD (ACN 114 267 748)

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : EDWF HOLDINGS 1 PTY LTD -v- EDWF HOLDINGS 2 PTY LTD [2008] WASC 275

Contract - Joint venture agreement - Change of control of a participant - Provision for change of control of a participant with the prior written consent of the other participant - Consent not to be unreasonably withheld - Proviso that the new party in control of the affected participant must have 'the financial and technical resources and experience to adequately support the affected participant' - Proper construction of the provision for change of control and the proviso - Whether the first respondent unreasonably withheld its consent to a change in control of the appellant - Whether the trial judge made errors in his findings of fact or took into account irrelevant considerations in construing and applying the provision for change of control and the proviso

Trial process - Function of pleadings - Case litigated at trial - Whether the trial judge relied on reasons or grounds that were not raised on the pleadings or litigated at trial to justify the first respondent's withholding of consent to the change of control of the appellant

First Respondent : Mr M J McCusker QC & Mr G J Carter

Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349

British Gas Trading Ltd v Eastern Electricity Plc [1996] EWCA 1239

Cathedral Place Pty Ltd v Hyatt of Australia Ltd [2003] VSC 385

Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89

Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215

Gibson Motor Sport Merchandise Pty Ltd v Forbes [2005] FCA 749

International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151

International Drilling Fields Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch 513

JA McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd [1992] 2 Qd R 121

Kids Campus Holdings Pty Ltd v Kelly [2007] VSC 282

Mackay v Dick (1881) 6 App Cas 251

Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181

Maitland Main Collieries Pty Ltd v Xstrata Mt Owen Pty Ltd [2006] NSWSC 1235

Mick Skorpos Petrol Discount King Pty Ltd v The Shell Company of Australia Ltd (1997) ATPR 41-556

Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1

Nullagine Investments Pty Ltd v Western Australian Club Inc [1993] HCA 45; (1993) 177 CLR 635

Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11

Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451

Park v Brothers [2005] HCA 73; (2005) 80 ALJR 317

Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126

Ray v Davies [1909] HCA 51; (1909) 9 CLR 160

Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596

Smith v Chadwick (1882) 20 Ch D 27

Tattersall's Hotel Penrith Pty Ltd v Permanent Trustee Co of NSW Ltd [1942] 42 SR (NSW) 104

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

United Dominions Corporation Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1

Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491

Williams v Australian Telecommunications Commission (1988) 52 SASR 215

Yedway Pty Ltd v Owners Corporation of Strata Plan 62871 [2009] NSWSC 8

2 BUSS JA: The appellant and the first respondent are participants in an unincorporated joint venture known as the Emu Downs Wind Farm Joint Venture (the Joint Venture). The second respondent is the manager of the Joint Venture.

3 The Joint Venture was established pursuant to an agreement dated 21 July 2005 (the JVA), made between the appellant and the first respondent as participants and the second respondent as manager.

4 The appellant is a subsidiary of Stanwell Corporation (Stanwell), a body incorporated under the Government Owned Corporations Act 1993 (Qld). At all material times, Stanwell's issued share capital has been held by ministers of the State of Queensland on behalf of the State.

5 The first respondent is a subsidiary of Griffin Energy Group Pty Ltd (Griffin Energy). In these reasons I will refer to the first respondent, Griffin Energy and their related corporations as the Griffin group.

6 The appellant and the first respondent jointly own the second respondent.

7 By cl 11.7 of the JVA, a 'Change in Control' (as defined in cl 1.1) of a participant (the affected participant) requires the prior written consent of the other participant. Clause 11.7 also provides:

(such consent not to be unreasonably withheld or delayed or given subject to unreasonable conditions provided that the new party in Control of the affected Participant must have the financial and technical resources and experience to adequately support the affected Participant)

8 On 30 November 2007, the appellant sought the first respondent's consent to a proposed change in control of the appellant from Stanwell to Transfield Services Infrastructure Ltd (TSIL). The change in control was intended to occur pursuant to an agreement dated 28 November 2007 and made between Stanwell, TSIL and others. In these reasons I will refer to TSIL and its related corporations as the Transfield group.

9 By letter dated 18 March 2008, the first respondent withheld its consent to the change in control.

10 The appellant contended that the consent was wrongly and unreasonably withheld. It commenced a Supreme Court action (as plaintiff) against the first respondent (as first defendant) and the second

respondent (as second defendant). In its prayer for relief, the appellant claimed, relevantly:

(a) a declaration that the first respondent had withheld its consent to the proposed change in control of the appellant unreasonably and in breach of the JVA; and

(b) a declaration that, in the events which had occurred, the appellant shall not be deemed by cl 11.7 of the JVA to have offered to assign the whole of its Joint Venture interest to the first respondent if the proposed change in control of the appellant to TSIL is effected.

11 The action was tried before Martin CJ. His Honour dismissed the appellant's claim and entered judgment for the respondents. In summary, his reasons were these:

(a) the appellant had failed to establish the factual conditions which, on the proper construction of cl 11.7 of the JVA, are a prerequisite to any claim that the first respondent had unreasonably withheld consent to the proposed change in control;

(b) further and in any event, the appellant had failed to make good the grounds upon which it asserted that the first respondent had unreasonably withheld consent; and

(c) further, even if a broader view of the question of reasonableness of consent was taken, unconstrained by the appellant's pleading, there were a number of reasons why a party in the position of the first respondent was and remained justified in refusing consent to the proposed change in control.

13 The proper construction of cl 11.7 of the JVA is central to the resolution of the issues in the appeal. It is therefore necessary to set out in some detail the relevant provisions of the JVA and other transaction documents.

14 The commercial context in which the JVA was made is recorded in its recitals. They provide, relevantly:

1. Stanwell and Griffin Energy ... have decided to proceed with the Project on the basis that the Participants will initially be wholly owned subsidiaries of Stanwell and the Participants will form an unincorporated joint venture for the purposes of the Project.

1. The Participants are entering into this Agreement to govern the relationship between them as an unincorporated joint venture to implement the Project.
2. The Manager is to be engaged by the Participants to manage the Joint Venture.

15 In cl 1.1, 'Joint Venture', 'Project', 'Wind Farm', 'Wind Farm Facilities' and 'WTG' are defined, as follows:

Joint Venture means the unincorporated joint venture established under cl 3.1.

...

Project means the Emu Downs Wind Farm Project involving the design, development, construction, commissioning, testing, operation, maintenance and modification by or on behalf of the Participants of the Wind Farm at the Site but excluding the utilisation or sale of JV Output produced by the Wind Farm.

...

Wind Farm means the development of two wind powered electricity generating plants at the Site of 40MW capacity each (or such other capacity as the Participants determine) and comprising the Wind Farm Facilities.

Wind Farm Facilities means all WTGs and other facilities including electricity transformation equipment, the electricity transmission and/or distribution lines used to convey the electricity for injection into an electricity transmission network and all associated plant and structures used for the sale and efficient operation of the WTGs, housing, control, support and production as may be required for the establishment and connection of the Wind Farm to the Western Power transmission network.

...

WTG means a wind turbine constructed for generating electricity that is driven by wind power and includes the structures and plant used to provide the energy derived from the wind.

16 The duration of the Joint Venture is specified in cl 2.1, which reads:

This Agreement commences operation on the Commencement Date and will continue in full force and effect until the earliest of:

(a) the JV Termination Date;

(b) the date on which one Participant acquires the whole of the JV Interests arising under this Agreement;

(c) the date agreed in writing by each of the Participants.

17 In cl 1.1, 'Commencement Date' is defined to mean the date of execution of the JVA and 'JV Termination Date' is defined, in essence, to mean the date of termination of the lease agreement by which the participants will gain access to, and have usage rights over, the land on which the Wind Farm is to be constructed.

18 The lease agreement in question is dated 21 July 2005. By the agreement, the appellant and the first respondent are granted a lease over the relevant land for a term of 22 years commencing on 23 July 2005 and expiring on 22 July 2027, together with an option of renewal for a further 10 years commencing on 23 July 2027.

19 'JV Output' is defined in cl 1.1 to mean, in essence, all energy production generated by the Joint Venture and any and all rights, benefits, credits or certificates of any kind which derive from the generation of that energy production.

20 Clause 1.1 defines the terms 'Joint Venture Property' and 'JV Interest'. 'Joint Venture Property' means, in essence, the JV Documents, the rights and entitlements of the participants under the JV Documents, all real and personal property (including plant, equipment, facilities and leases) held, acquired or created at any time for use by or on behalf of the participants or either of them for the JV Purpose. 'JV Interest' means the undivided right, title and interest (expressed as a percentage) of a participant in:

(a) the Joint Venture Property;

(b) rights arising under this Agreement and the JV Documents; and

(c) any benefits arising from the foregoing.

21 Clause 3.1 establishes the Joint Venture and specifies its purpose (the JV Purpose), as follows:

The Participants agree to associate as joint venturers in an unincorporated joint venture to implement and carry the Project into effect and to pursue the following objects subject to and in accordance with this Agreement:

(a) to:

(i) carry out the Construction Activities;

(ii) operate, maintain and, if required, modify the Wind Farm;

(iii) connect the Wind Farm to Western Power's transmission network; and

(iv) undertake and perform all such other acts, matters and things,

so as to generate the JV Output, to which each Participant will be severally entitled to a share in proportion to its JV Interest; and

(b) to undertake such other purposes as the Management Committee may approve in accordance with this Agreement.

22 In cl 1.1, 'Construction Activities' is defined to mean the design, construction, commissioning and testing of the Wind Farm.

23 Construction of the Wind Farm was completed in October 2006. The generation and sale of electricity from the Wind Farm commenced shortly afterwards.

24 Clause 3.5(a) states that the relationship of the participants is that of joint venturers in an unincorporated joint venture. Other provisions of cl 3.5 state, relevantly, that nothing in or contemplated by the JVA or the JV Documents shall be considered or interpreted as constituting the relationship between the participants as a partnership or quasi-partnership.

25 In cl 1.1, 'JV Document' is defined to mean each of the following:

(a) this Agreement;

(b) the Management Agreement;

(c) Shareholders Agreement (Manager);

(d) Lease Agreement;

(e) any Cross Charge, Deed of Priority, confidentiality agreement or Deed of Assumption entered into by the Participants for the purposes of this Agreement;

(f) the EPC Contract;

(g) any contract relating to the connection and access of the Wind Farm Facilities to Western Power's transmission network; and

(h) any other agreement designated by the Participants as a JV Document.

26 The Management Agreement is the agreement between the participants and the manager relating to the management of the Joint Venture, that was executed contemporaneously with the JVA. The Shareholders Agreement (Manager) is the agreement between the participants and the manager relating to the shareholding of the participants in the manager, that was executed contemporaneously with the JVA. The Cross Charges comprise the charges created in the deed that was executed contemporaneously with the JVA, under which each of the participants, as beneficial owner, created a charge in favour of the other participant and the manager severally. It is unnecessary to refer to the 'Deed of Priority' or the 'Deed of Assumption', as defined in cl 1.1. The EPC Contract is the contract between the participants and Vestas-Australian Wind Technology Pty Ltd for the construction of the Wind Farm at the agreed site. No other agreement has been designated by the participants as a JV Document.

27 Clause 3.8 is a typical provision in unincorporated joint ventures of the kind in question. It provides, relevantly, that each participant is entitled and obliged to receive and take in kind, as its own absolute property, its share of all JV Output equal to its JV Interest and separately dispose of its share of the JV Output equal to its JV Interest.

28 Clause 3.9 limits the joint venture to the JV Purpose (that is, the purpose specified in cl 3.1). It reads:

The Joint Venture is, unless the Participants otherwise agree, strictly limited to the JV Purpose and is not to be construed as extending further by implication or otherwise.

29 Clause 3.10 deals with the rights of the participants in relation to engaging in activities outside the scope of the JV Purpose, as follows:

Each Participant has an unrestricted right to engage in and receive the full benefit of any activity outside the JV Purpose (whether or not in competition with the JV Purpose or another Participant) without consulting the other Participants or permitting the other Participants to participate, and without any liability or accountability to the other Participants provided such activity does not unreasonably interfere with, impede or compromise the JV Purpose.

30 Clause 7.1 establishes the Management Committee. Each participant is entitled and obliged under cl 7.4(a) to appoint two representatives to the Management Committee. In general, each participant (other than a defaulting participant in the circumstances specified in cl 9.6) is entitled at meetings of the Management Committee to that number of votes which is equal to the number of percentage points comprised in its JV Interest at the commencement of the meeting. See cl 7.2. The chairperson of the Management Committee does not have a second or casting vote in addition to the vote he or she may have as a Management Committee representative. See cl 7.9(d). The chairperson must be appointed from the Management Committee representatives. See cl 7.9. By cl 7.11(a), subject to the provisions of any JV Document, all matters concerning the Joint Venture and the Joint Venture Property must be determined by the Management Committee. Clause 7.11(b)(v) provides that, without limitation to cl 7.11(a), the powers and responsibilities of the Management Committee include, relevantly, establishing appropriate insurance arrangements for the Joint Venture.

31 All decisions of the Management Committee, other than those with respect to 'Reserved Matters', require a resolution of the Management Committee approved by a 'Special Majority' of votes. See cl 7.13(a). In cl 1.1, 'Special Majority', with respect to decisions of the Management Committee, is defined to mean an affirmative vote of at least 75% of the votes cast by Management Committee representatives who represent participants entitled to vote at that meeting. The Reserved Matters are those listed in Annexure A to the JVA. By cl 7.12(d), the Management Committee may not make a decision on any Reserved Matter except with the unanimous consent of all Management Committee representatives of participants (other than a 'Disqualified Participant'). The term 'Disqualified Participant' is defined in cl 7.3.

32 By cl 9.6, relevantly, if an insolvency event occurs in respect of a participant or if a participant fails to remedy a specified default or fails to pay compensation in respect of an irremediable default then, in essence, the non-defaulting participant and the manager or either of them may exercise all rights under the Cross Charge granted by the defaulting participant.

33 Clause 11 is concerned with the disposal of JV Interests. Clause 11.4 provides for assignment to third parties. It reads:

A Participant (Assignor) may Dispose of the whole or any part of its JV Interest, (Available JV Interest) to any person (including any other Participant) other than a Related Body Corporate, (Assignee) subject to the following conditions:

(a) the Assignor must obtain the prior written consent of each other Participant (Non-Disposing Participants) which will not be unreasonably withheld or delayed if:

(i) the Assignee has agreed to be bound by the terms of this Agreement and the JV Documents by a Deed of Assumption in accordance with clause 11.6(a); and

(ii) the Assignor has demonstrated that the Assignee is reputable and of good financial standing and has the capability to fulfil all the obligations of the Assignor under this Agreement and the JV Documents; and

(b) the Assignor must have complied fully with the requirements of clause 11.5.

34 Clause 11.7 relates to 'Change in Control', as defined in cl 1.1. There will be a 'Change in Control' if, in essence, there is a change in the control of:

(a) the beneficial ownership of a participant or the ultimate holding company of a participant; or

(b) the composition of the board of directors of a participant or the ultimate holding company of a participant; or

(c) more than half of the voting power of the board of directors, or more than half of the voting power of any class of shares, of a participant or of the ultimate holding company of a participant.

35 It is common cause, in the present case, that there was a proposed change in control of the appellant from Stanwell to TSIL.

Subject to clause 11.8, if there is a Change in Control of a Participant, such Participant shall immediately give notice in writing thereof to the other Participants and, unless the other Participants have given their prior written consent to the Change in Control (such consent not to be unreasonably withheld or delayed or given subject to unreasonable conditions provided that the new party in Control of the affected Participant must have the financial and technical resources and experience to adequately support the affected Participant), the affected Participant shall be deemed, whether or not such notice has been given, to have offered to assign the whole of its JV Interest to the other Participants as required by clause 11.5(a) together with its Associated Interest such that for the purposes of the Disposal Notice:

(a) the consideration for the offer is the value of the Participant's JV Interest and Associated Interest at the date of such Change in Control being the Fair Value as determined in accordance with clause 9.14 less all Valuation Costs;

(b) the settlement date is the date which is 60 days after the other Participants reasonably became aware of the Change in Control,

and the provisions of clause 11.5 shall apply to such offer (modified as necessary).

37 For present purposes, the exceptions in cl 11.8 are not relevant.

38 Clause 15 is concerned with confidentiality. It is stipulated in cl 15.1 that each party must, relevantly, keep 'Confidential Information' confidential and not disclose it or allow it to be disclosed to any third party without the prior consent of the other participant. Clause 15.2 contains various exceptions to the prohibition in cl 15.1. The exceptions are, relevantly, these:

Notwithstanding clause 15.1, a party (Disclosing Party) may disclose Confidential Information:

...

(i) to any bona fide potential assignee of all or any part of the Disclosing Party's JV Interest (and to its professional advisers, including legal advisers, and prospective financiers) with whom the Disclosing Party is in good faith negotiations, provided that the potential assignee agrees with the Disclosing Party and for the benefit of the other Participants:

(i) to only use the Confidential Information disclosed by the Disclosing Party for the purposes of satisfying it of the value and commercial viability of the relevant JV Interest; and

(ii) to be bound by confidentiality undertakings substantially the same as those contained in this clause 15;

(j) to any bona fide potential transferee of all or part of a person's shareholding in the Disclosing Party with whom that shareholder of the Disclosing Party is in good faith negotiations, provided that the potential transferee agrees with the Disclosing Party and for the benefit of the other Participants:

(i) to only use the Confidential Information disclosed by the Disclosing Party for the purposes of satisfying it of the value and commercial viability of the relevant JV Interest held by the Disclosing Party; and

(ii) to be bound by confidentiality undertakings substantially the same as those contained in this clause 15.

The relevant provisions of the Management Agreement

39 On 21 July 2005, the appellant, the first respondent and the second respondent executed the Management Agreement.

40 Clause 3.1 provides that the first respondent (who is referred to in the agreement as 'the Manager') must manage the Joint Venture on behalf of the participants. The provision reads:

(a) The Manager must manage the Joint Venture, including all activities of the Joint Venture, as agent for the Participants subject to the terms of this Agreement and the Joint Venture Agreement, and to the control and direction of the Management Committee under the Joint Venture Agreement.

(b) While the Manager continues to manage the Joint Venture pursuant to this Agreement, it must not, without the prior written consent of the Management Committee, whether:

(i) on its own account;

(ii) jointly with or on behalf of any other person or corporation as a partner, joint venturer or agent; or

(iii) by means of an agent, independent contractor or any firm or corporation in which it may be interested,

carry on any other activities, undertakings, businesses or enterprises, whether of a similar nature to the JV Purpose or otherwise, except for the Other Functions.

41 By cl 3.2, subject to any resolution or direction of the Management Committee under the JVA, the first respondent, as manager, shall perform the following functions and duties on behalf of the participants, relevantly:

(a) do all things necessary or desirable for the efficient and economic conduct of the Joint Venture in accordance with Approved Annual Programs and Approved Capital Expenditure Programs;

...

(c) perform and attend to all things required of the Manager under this Agreement or the Joint Venture Agreement or pursuant to a resolution of the Management Committee under the Joint Venture Agreement;

...

(o) carry out or procure the design, construction, commissioning, testing, operation and maintenance of the Wind Farm Facilities;

(p) employ, engage, appoint or contract with competent experts, advisers, superintendents and engineers as employees or independent contractors of the Manager;

(q) procure specialised engineering, design, legal, accounting and other professional or non-professional services;

(r) supervise and control consultants, specialists or independent contractors engaged by the Manager;

(s) ensure the custody, maintenance, operation and protection of Joint Venture Property in the Manager's possession or control;

(t) manage and maintain all interests in land held by the Joint Venture, or the Manager on behalf of the Joint Venture, in accordance with the protocols and guidelines (if any) advised to the Manager from time to time by the Management Committee;

(u) acquire all property and services necessary for the Joint Venture;

...

(dd) without limiting its other functions and duties, carry out or procure to be carried out the activities specified in schedule 2;

...

(ff) any other functions or duties as resolved by the Management Committee in relation to the Joint Venture;

(gg) undertake any other functions stated in any JV Document to be conferred on the Manager in that capacity.

42 The functions and duties specified in sch 2, which the second respondent as manager is bound to carry out or procure to be carried out, include, subject to any resolution or direction of the Management Committee under the JVA, the following activities, amongst others:

• Start/stop Wind Farm
• Visual plant/site inspections
• Plant fault first up response
• Plant fault finding
• Maintain operations and maintenance records
• High Voltage system operation
• Scheduled maintenance
• Breakdown maintenance
• Outage/overhaul maintenance/refurbishment
• Procure services, spares and consumables
• Statutory inspections (fire, lifting, electrical, etc)
• Cleaning
• Storage and maintenance of plant manuals and drawings
• Site storage and management of spares and consumables

Supply plant technical support comprising the following obligations

• Management of plant modification, design, review and approval processes
• Maintenance of O&M manuals and drawings for all plant
• Manage plant certification
• Manage registration of plant
• Schedule and plan scope of plant maintenance/refurbishment outages
• Project management
• Analyse plant trips and events
• Review plant alarms
• Facilitate and document plant risk assessment activities as required
• Develop and manage risk control plans
• Coordinate and schedule capital works programs
• Procuring goods and services for capital works programs
• Liaison with Western Power on transmission interface issues
• Provide initial Wind Farm operations training

Manage Wind Farm performance and efficiency activities comprising the following obligations

• Monitor plant performance
• Recommend, design and implement plant performance improvement
• Measure plant efficiency

Liaise with, advise and report to the Management Committee on the following obligations

• Statutory compliance
• Plant performance
• Investigations
• Special projects
• Due diligence
• Plant improvement options
• Risk management
• Capital requirements

Planning, preparation and management of Wind Farm budgets including the following obligations

• Develop annual Operation and Maintenance Plan including plant improvement and compliance projects
• Assist with planning of annual OPEX and Capital budgets, and 5 year forecast

Ensure personnel are appropriately trained for site activities

• Implementation of training plan for site competencies
• Evaluate and maintain competencies
• Manage performance against the plan
• Identification of initial training requirements
• Provision of training as required.
• Ensure Participants' personnel are trained and competent to access site in accordance with O&M Sub-contractors requirements.
• Evaluate and maintain competencies.

43 Clause 9.1 provides that the second respondent as manager must maintain, relevantly, such insurances as may be directed by the Management Committee from time to time, with an insurer approved by the participants.

44 By cl 11.2, the second respondent as manager must not, without the prior approval of the participants, assign all or any part of its rights and obligations as manager, or delegate the whole or any part of its duties or obligations.

The relevant provisions of the Deed of Cross Charge

45 On 21 July 2005, the appellant, the first respondent and the second respondent executed a deed which created the Cross Charges (the Deed of Cross Charge).

46 By cl 2.1, for the purpose of securing the due and punctual payment of the 'Moneys Secured', each participant, as beneficial owner, charged in favour of the other participant and the manager severally:

(a) all of the Participant's JV Interest;

(b) all of the Participant's entitlement to the JV Output under the Joint Venture Agreement;

(c) the Participant's rights and interest in any Sales Contracts;

(d) the Participant's right to any proceeds, revenues or other amounts payable to the Participant (Sale Receipts) with respect to the sale (including under any Sales Contracts) of its share of the JV Output under the Joint Venture Agreement; and

(e) all of the Participant's shares in the Manager.

47 In cl 1.1, 'Moneys Secured', in respect of a participant, is defined to mean its share of the cash calls and all other moneys which may become due and payable by that participant to the manager or the other participant pursuant to the JVA or the Deed of Cross Charge. 'Cash calls' are amounts specified by the manager in accordance with the JVA as being required to be contributed by a participant for the expenses of the Joint Venture, being the proportion of those expenses the subject of the cash call at that time as is equal to that participant's JV Interest.

48 'Sales Contract' is defined in cl 1.1 to mean any present or future contract made by a participant for the sale of its right, title and interest in any JV Output.

49 The charge created under cl 2.1 was partly fixed and partly floating. Clause 2.2 provides that the charge is:

(i) JV Interest of each Participant in any freehold or leasehold property or any other interest in real property or fixtures forming part of the Joint Venture Property;

(ii) JV Interest of each Participant in any plant, machinery, equipment or any other interest in plant, machinery or equipment forming part of the Joint Venture Property;

(iii) right, title and interest of each Participant under any JV Document;

(iv) the Participant's shares in the Manager;

(v) securities, instruments, document of title, books of account, invoices, statements, ledger cards, computer software and all other documents and agreements of each Participant relating to the Joint Venture;

(vi) personal property (other than that described above) acquired by each Participant for purposes associated with the Joint Venture other than for disposal in the ordinary course of business; and

(b) a floating charge on all other Charged Property.

50 By cl 2.3, relevantly, the floating charge crystallises and becomes fixed if the security constituted by the Deed of Cross Charge becomes enforceable in respect of the participant in question, as provided in cl 5.1 of the Deed of Cross Charge.

51 By cl 2.5, the cross charges operate as first ranking securities.

52 Clause 5.1 provides, relevantly, that upon any participant becoming a defaulting participant and the rights under the Deed of Cross Charge becoming exercisable pursuant to cl 9.6 of the JVA, the charge created by the defaulting participant becomes enforceable and all powers under the Deed of Cross Charge not previously exercisable become exercisable.

The relevant provisions of the Technical Services Agreement

53 On 26 August 2005, the second respondent as manager entered into a technical services agreement with Stanwell. By that agreement, Stanwell agreed to provide engineering, operations, maintenance, environmental, health and safety, electricity marketing and trading and drafting services, and such other services as the second respondent may reasonably require in relation to the Wind Farm, for a fee to be determined in accordance with specified hourly rates. On 21 December 2005, this agreement was replaced by another agreement.

54 The agreement of 21 December 2005 was made between the second respondent as 'principal' and Stanwell and The Griffin Coal Mining Company Pty Ltd (Griffin) as 'service providers' (the Technical Services Agreement). The second respondent in its capacity as manager of the Joint Venture appointed Stanwell and Griffin to perform various services.

55 The first respondent and Griffin Energy are subsidiaries of Griffin.

56 Stanwell is obliged to perform the 'Stanwell Services' and Griffin is obliged to perform the 'Griffin Services', in each case, for valuable consideration.

(a) Stanwell shall only be responsible to the Principal for the performance of the Stanwell Services and all other obligations under this Agreement associated with and ancillary to the Performance of the Stanwell Services. Stanwell shall not be responsible to the Principal for the performance of the Griffin Services.

(b) Griffin shall only be responsible to the Principal for the performance of the Griffin Services and all other obligations under this Agreement associated with and ancillary to the Performance of the Griffin Services. Griffin shall not be responsible to the Principal for the performance of the Stanwell Services.

58 The Stanwell Services and the Griffin Services are set out in sch 2, and are identical. The services to be performed are:

Engineering, operations, maintenance, environmental, health and safety, electricity marketing and trading and drafting services and such other services as the Principal may reasonably require (in writing) [Stanwell/Griffin] to perform for the Project from time to time.

59 Although the Stanwell Services and the Griffin Services, as set out in sch 2, are identical, the evidence at the trial was to the effect that, in fact, Stanwell provided some technical services and Griffin provided some accounting (but not technical) services pursuant to the Technical Services Agreement.

60 The fees to be paid to each of Stanwell and Griffin for the provision of the services are set out in sch 3. The fees are to be calculated in accordance with the following hourly rates:

61 The term of the agreement is set out in cl 2.2, which reads:

Subject to clause 6, each of the Service Providers must perform in accordance with this Agreement those Services for which they are responsible commencing on the Start Date for the duration of the Project.

62 In cl 1.1, 'Start Date' is defined to mean, in essence, the date of the agreement, namely 21 December 2005.

63 Clause 6.2 provides for termination of the agreement by either Stanwell or Griffin. It states, relevantly:

Either of the Service Providers may terminate this Agreement if:

...

(d) if [sic] a Service Providers [sic] divests itself of its interest in the unincorporated joint venture which proposes to undertake the Project.

The relevant provisions of the Joint Development Agreement

64 On 26 April 2007, Stanwell and Griffin Windfarm 2 Pty Ltd (a subsidiary of Griffin) entered into an agreement called the 'Wind Farms-Joint Development Agreement' (the JDA). The recitals referred to the history of association between related corporations of the parties in relation to the Wind Farm, and the desire of the parties to investigate the feasibility of developing further wind farms at Emu Downs North (sometimes referred to as Badgingarra), Joanna Plains and such other sites as may be agreed. The JDA, in essence, obliged the parties to share joint responsibility for the preparation of a technical feasibility report, a comprehensive economic model of each prospective wind farm, a set of specifications and designs for each prospective wind farm, and various other reports and feasibility assessments for each project. The JDA provided for these obligations to be achieved by the appointment of a project manager under the control of a committee called the 'Project Control Group'. Each party was entitled to appoint two members to this committee.

The relevant provisions of the WP Sale and Purchase Agreement

65 On 28 November 2007, the State of Queensland, Stanwell, TSIL and TSI (Wind Farms) Pty Ltd (TSI (WF)) entered into an agreement called the 'WP Sale and Purchase Agreement' (the WP Sale and Purchase Agreement). TSI (WF) is a subsidiary of TSIL. Under the agreement, TSI (WF) agreed to purchase all of the issued shares in the appellant and Wind Portfolio Pty Ltd. The appellant is a subsidiary of Wind Portfolio Pty Ltd, which is a subsidiary of Stanwell. The sale was subject to numerous conditions including that the appellant obtain the first respondent's consent to the change in control, as required by cl 11.7 of the JVA. That condition was required to be satisfied by, at the latest, 19 December 2008. As I have mentioned, by the letter dated 18 March 2008, the first respondent refused to consent.

66 On 30 November 2007, the appellant sought the first respondent's consent to the proposed change of control. During January and February 2008, there was an exchange of correspondence between the appellant and its solicitors on the one hand and the first respondent and its solicitors on the other. This correspondence involved, primarily, the Griffin group seeking information about the Transfield group.

67 On 17 March 2008, a meeting was held of the board of directors of various companies in the Griffin group, including the first respondent. A paper was presented at the meeting which dealt with the request for consent to the proposed change of control (the Griffin Board Paper). The paper set out background details in relation to Stanwell, the Transfield group and the Griffin group. It raised three areas of concern about the proposed change of control. The concerns related to technical, competition and financial matters.

68 First, the Griffin Board Paper asserted that the Transfield group did not have wind farm development, operation or maintenance experience and lacked the personnel to provide necessary services to the Joint Venture. Secondly, the paper drew a distinction between Stanwell, which did not compete against Griffin in the Western Australian energy market, and the Transfield group, which did. The paper said that this competitive tension could inhibit the frank discussions between participants which are necessary for the successful operation of the Joint Venture. Thirdly, the paper expressed doubts about the Transfield group's ability to provide financial support for the Joint Venture. It said that the Transfield group had limited available capacity with its existing debt facilities, and would be vulnerable to changes in interest rates.

69 The Griffin Board Paper referred to Transfield Services (Renewables) Pty Ltd (TS Renewables), which is a subsidiary of Transfield Services Ltd (TSE). The paper noted that the proposed change in control would allow for the rights and assets held by Wind Portfolio Pty Ltd under JDA to be assigned to TS Renewables.

70 The Griffin Board Paper contained an 'overall summary' in these terms:

13.1 Griffin has been provided with insufficient information on its technical, competition and financial concerns, as detailed above. Stanwell's lawyers have stated that Griffin now has all the information necessary to enable it to make a decision on the Change in Control (and on the other consents set out below). There is no further opportunity for Griffin to ask questions of TSIL/TSE.

13.2 In relation to the technical concerns, notwithstanding that TSE either has or claims some wind farm development, operation and maintenance expertise, including in the form of Terry Johannesen and Jeff Ware, and non-wind farm specific development, operation and maintenance expertise in the energy sector:

(a) neither TSIL nor TSE have any wind farm systems or significant wind farm deve1opment, construction operations or maintenance experience;

(b) TSIL and TSE are on steep learning curves which cannot easily be scaled, which is likely to prejudice the operation of the EDJV, any expansion of the Emu Downs Wind Farm, and the Badgingarra Development, at least in the short to medium term;

(c) TSIL/TSE does not have sufficient contracted personnel with a sufficient depth of experience in wind farm development, construction, operation and maintenance;

(d) TSIL//TSE does not offer a similar level of in-house expertise (in terms of personnel and systems) as Stanwell, which will require TSE and/or the EDJV to contract out most of the technical services required to be performed in relation to the EDJV;

(e) TSIL/TSE is unlikely to be able to properly design or manage wind farm related contracts, where it has no relevant expertise to perform the work itself;

(f) TSIL's/TSE's proposed appointees to the Management Committee do not have any relevant wind farm expertise, which expertise the Manager relies on heavily for the daily performance of his functions;

(g) Stanwell is not required under the SPA to support TSIL beyond a period of 30 days after the completion of the SPA.

(a) TSIL/TSE is a competitor to Griffin in the WA energy generation market, and has confirmed that it will continue to compete against Griffin;

(b) TSIL/TSE is not prepared to indicate its future plans in the WA energy generation market;

(c) TSIL/TSE may not wish to support any future expansion of the Emu Downs Wind Farm, in view of TSIL's/TSE's other interests in the WA energy generation market;

(d) TSIL/TSE will, by virtue of their participation in the Emu Downs Joint Venture, be privy to information concerning Griffin's business know-how, business model and economic and financial parameters, relating to development projects and sales models, methods of financing, debt to equity ratios, financing costs, internal rates of return and the like. Thus giving TSIL/TSE a competitive advantage over Griffin outside the Emu Downs Joint Venture, potentially to Griffin's commercial detriment;

(e) in view of these factors, Griffin is unlikely to establish an open and transparent joint venture relationship with TSIL/TSE as it had with Stanwell. The relationship will necessarily need to be at arm's length in many respects. In short, the relationship will not have the ingredients for the establishment and maintenance of a lasting joint venture relationship;

(f) the EDJV has a 25 year existing asset life (which may be extended), and Griffin cannot afford to enter a 'marriage' with TSIL/TSE when considerable risk and uncertainty surrounds the proposed relationship, particularly as TSIL/TSE may obtain an advantage from the relationship to Griffin's commercial detriment.

(a) there is uncertainty as to how TSIL/TSE propose to fund the Badgingarra development, if a decision is made to proceed with it. Similar uncertainty exists as to how TSIL/TSE may fund any expansion of the Emu Downs Wind Farm and any other development, including Joanna Plains;

(b) there is a possibility that TSIL's financial position may deteriorate such that its participation in the EDJV (and any expansion of the Emu Downs Wind Farm) is adversely affected;

(c) TSIL does not currently have the financial capacity to fund any expansion of the EDJV, or to participate in the Badgingarra development or any other wind farm development including Joanna Plains;

(d) whilst TSE has a significant financial capacity, TSIL has not identified to what extent TSE would fund the Badgingarra development;

(e) upon a Change in Control, TSE would be the relevant parent company of Transfield Services (Renewables) Pty Ltd's interest in the Badgingarra project. However there is no certainty that TSE will provide a parent company guarantee, nor has TSIL been prepared to confirm that TSE will not transfer part or all of its interest in the Badgingarra project back to TSIL for the purposes of developing that project.

13.5 In summary, due to its technical, competition and financial concerns, and the lack of adequate information provided by TSIL/TSE, Griffin is exposed to an unacceptable level of risk and uncertainty, in relation to TSIL's/TSE's proposed participation in the EDJV, any expansion of the EDJV, the Badgingarra development and any other development including Joanna Plains.

71 The Griffin Board Paper concluded that it was not in Griffin's best interests for the proposed change of control to occur and it recommended that consent not be given.

72 This recommendation was accepted by the board of the first respondent.

The letter dated 18 March 2008 from the first respondent to the Queensland Treasury

73 In the letter dated 18 March 2008 from the first respondent to the Queensland Treasury on behalf of the appellant, the first respondent informed the Queensland Treasury that on 17 March 2008 its board of directors had met and passed a resolution that it did not consent to the proposed change in control. The letter elaborated upon the refusal of consent, as follows:

As you are aware, [the first respondent] has and continues to have a number of concerns with the Change in Control of [the appellant]. Those concerns relate to Transfield Services Infrastructure Limited's (TSIL's)/Transfield Services Limited's (TSE's):

1. technical expertise and capacity in the operation and maintenance of wind farms;
2. technical expertise and capacity in the development and construction of wind farms;
3. financial capacity and the inter-relationship between those entities;
4. role as a co-venturer in the Emu Downs Joint Venture and the potential commercial detriment to [the first respondent] and related Griffin entities arising from the above and the fact that the Transfield and Griffin entities are and will continue to be competitors.

These issues have been made clear to you in correspondence including our formal questions, and at the meeting on 6 March 2008 in Sydney. Despite [the first respondent's] best efforts to obtain adequate information and assurances from TSIL/TSE, its concerns remain largely unaddressed.

[The first respondent] considers that unacceptable risk and uncertainty surrounds the Change in Control, and that it is not in its best interests to consent to the Change in Control. In light of the above, [the first respondent] considers that the proposed relationship with TSIL/TSE would not work in practice, and would be to the detriment of the Emu Downs Joint Venture and its participants.

[The first respondent] has not consented to the Change in Control on the basis of the concerns expressed in this letter, individually and collectively.

74 In its statement of claim, the appellant pleaded facts about the various parties, the JVA and the development of the Wind Farm. Most of them were not disputed.

75 The appellant alleged that since about October 2006, the revenue received by the appellant from the sale of its share of JV Output has substantially exceeded its share of the costs of operating the Wind Farm [21]. The appellant also pleaded that as at November 2007, the purposes of the Joint Venture that remained to be pursued were the continuing operation, including the continuing maintenance, of the Wind Farm [22]. It then alleged that as from 30 November 2007, it was reasonable to expect that:

(a) the revenue to be received by the appellant from the sale of its share of JV Output would substantially exceed its share of the costs of operating the Wind Farm; and

(b) the technical resources and experience required to operate the Wind Farm would be able to be procured by the manager, in that:

(i) the manager has ongoing contracts with Griffin Services Pty Ltd to provide necessary business, marketing and trading services for the Wind Farm; and

(ii) the manager will be able to procure any necessary technical services from TSI (WF), as TSI (WF) has available to it the necessary technical resources and experience [23].

76 The appellant pleaded that at all material times on and from 30 November 2007, the appellant has had and will continue to have the necessary financial and technical resources and experience to operate the Wind Farm [29].

77 The appellant alleged that TSIL has the financial and technical resources and experience to support, reasonably adequately, the pursuit of the purposes of the Joint Venture which remain to be pursued, in that TSIL has available to it for the purposes of operating and maintaining the Wind Farm:

(a) the technical resources and experience of TSE, to be provided through its wholly owned subsidiary Transfield Services (Australia) Pty Ltd (TSAPL), which include the following:

(i) persons who were previously employed by Stanwell or another Queensland government owned corporation, with specific expertise in wind farms (Jeff Ware, Terry Johannesen);

(ii) experience in constructing, operating and maintaining wind farms in Australia and New Zealand;

(iii) 200-300 staff located in Western Australia capable of providing services to support the operation and maintenance of the Wind Farm's plant and equipment;

(iv) experience of operating power stations connected to the South West Interconnected System;

(b) its own financial resources, which presently include a net profit of $16.2 million in the six months to 31 December 2007 and net assets of $518 million [30].

78 The appellant then alleged that in the letter dated 18 March 2008, the first respondent withheld its consent to the proposed change in control of the appellant to TSI (WF) and TSIL for the stated reasons, in effect, that:

(a) the first respondent held concerns about TSIL's financial and technical resources and experience to reasonably adequately support the appellant; and

(b) there was and might be competition between companies associated with TSI (WF) and TSIL and companies associated with Griffin Energy [31].

79 Finally, the appellant pleaded that in the circumstances alleged in pars 29, 30 and 31 of the statement of claim, and on the proper construction of the JVA, the first respondent withheld its consent unreasonably and in breach of the JVA, in that:

(a) as to the first respondent's concerns about TSIL's financial and technical resources and experience, TSIL has the financial and technical resources and experience to reasonably adequately support the appellant; and

(b) as to the contention that there was and might be competition between companies associated with TSI (WF) and TSIL and companies associated with Griffin Energy, that reason was inconsistent with cl 3.10 of the JVA, read with cl 11.7 of the JVA, and such a prospect of competition (if any) as may exist was not capable of sustaining a reasonable withholding of consent having regard to the remaining purposes of the Joint Venture.

80 As I have mentioned, in its prayer for relief the appellant sought, relevantly, declaratory relief.

81 The first respondent admitted that as at November 2007, the purposes of the Joint Venture were the continuing operation and continuing maintenance of the Wind Farm. However, it said, further, that the objects and purposes of the Joint Venture include modification of the Wind Farm and such other purposes as may be agreed by the Management Committee from time to time [3].

(a) the appellant has had and will continue to have the necessary financial and technical resources and experience to operate the Wind Farm; and

(b) TSIL has the financial and technical resources and experience to support, reasonably adequately, the pursuit of the purposes of the Joint Venture which remain to be pursued [6].

(a) the financial resources which may be required to be contributed to the Joint Venture by the appellant in the future include those financial resources which might reasonably be expected to be required for any significant modification of the Wind Farm, including by way of expansion of the Wind Farm, and any other objects or purposes agreed by the Management Committee from time to time; and

(b) following any change in control, the appellant will not have available to it adequate technical resources and experience necessary to operate or maintain the Wind Farm, or design, develop, construct, commission or test the Wind Farm (as modified or proposed to be modified) [6].

84 The first respondent pleaded that the decision withholding consent was made having regard to all the relevant circumstances as at 17 March 2008, including the information provided to the first respondent by the appellant or otherwise available to the first respondent, and the inadequate nature of certain information provided to the first respondent by the appellant as at 17 March 2008 [13].

85 It was alleged that the decision withholding consent was not unreasonable and was made for five reasons. First, the first respondent's concerns about the adequacy of the technical expertise and capacity of TSIL and TSE in the design, development, construction, commissioning, testing, operation, maintenance and modification of wind farms. Secondly, the first respondent's concerns about the adequacy of the financial resources available to and the capacity of TSIL and TSE to adequately finance the design, development, construction, commissioning, testing, operation, maintenance and modification of any future wind farm arising out of or in connection with the JDA, and the operation, maintenance and any significant modification of the Wind Farm. Thirdly, the first respondent's concerns about the commercial detriment likely to be caused to the first respondent and its related bodies corporate (referred to collectively in the defence as 'Griffin') by the first respondent being in a joint venture in the Western Australian energy generation market with a competitor of Griffin in that market, unlike Stanwell (and its related bodies corporate) which were not in competition with Griffin in the Western Australian energy generation market. Fourthly, the failure by Stanwell and its related bodies corporate, including the appellant, to provide sufficient information to the first respondent, despite requests for such information from the first respondent and its related bodies corporate, relevant to the first respondent's decision to grant or withhold consent, or grant its consent subject to reasonable conditions, and sought by the first respondent for the specific purpose of a full and proper evaluation by the first respondent of all matters relevant to the first respondent's decision to grant or withhold its consent, or grant its consent subject to reasonable conditions, to the proposed change in control of the appellant. Fifthly, the consequence of the first respondent consenting to the change in control of the appellant would have been to convey the rights in the JDA to TS Renewables, a subsidiary of TSE, which was a consequence the first respondent did not consider to be in Griffin's best interests by reason of the concerns embodied in the first, second, third and fourth reasons [14].

86 The appellant filed and served a reply to the first respondent's defence. In the reply, the appellant, relevantly, joined issue with the first respondent on its defence, except insofar as the defence contained admissions.

87 The trial judge began by summarising the background facts, the agreements between the various parties and the evidence given by the appellant's and the respondents' witnesses.

88 His Honour then discussed various decided cases relating to evaluating the reasonableness of a refusal to consent to the assignment of an interest under a contract. Most of those cases were concerned with the relationship of lessor and lessee. He identified three areas of tension in the English and Australian authorities [202] - [204].

89 The first area of tension concerns the extent to which a particular factor or purpose may be considered extraneous and therefore irrelevant to the relationship between the contracting parties, with the result that it provides no basis for refusing consent. His Honour elaborated:

While the principle that a party cannot refuse consent for the purpose of obtaining a collateral benefit not provided by the contract is clear from the authorities (such as the early surrender of the lease in Bates (Bates v Donaldson [1896] 2 QB 241)), the authorities are not entirely consistent in the way in which they deal with allied commercial interests of the party whose consent is sought. So, while in Houlder (Houlder Bros & Co Ltd v Gibbs [1925] 1 Ch 575) it was held that the landlord's interest in maintaining a tenant in adjoining premises was irrelevant, in Premier Confectionery (Premier Confectionery (London) Co Ltd v London Commercial Sale Rooms Ltd [1933] Ch 904), the landlord's interest in adjoining premises being occupied by the same tenant was considered reasonable and relevant, as was the landlord's desire for a desirable tenancy mix in Tamsco (Tamsco Ltd v Franklins Ltd [2001] NSWSC 1205) and the landlord's desire that all tenants insure with the one insurer in Tredegar (Tredegar v Harwood [1929] AC 72) . On the other hand, in Cathedral Place (Cathedral Place Pty Ltd v Hyatt of Australia Ltd [2003] VSC 385) , the hotel manager's interest in a contract which was closely related commercially to the hotel management agreement was held to be irrelevant and extraneous [202].

90 The second area of tension concerns whether the party whose consent is sought may refuse consent even if the proposed assignee intends to do nothing more than exercise the rights lawfully conferred by the contract. His Honour said:

With one exception, the cases consistently establish that consent may be refused even though the basis for refusal involves the exercise of an express contractual right - such as the right to carry out a particular use of the premises. The exception is the decision in International Drilling Fluids (International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] 1 Ch 513), which appears to have turned upon the form of the covenant as to the use of the leased premises, and the court's view of the commercial detriment that would be suffered by the assignor if consent was refused [203].

91 The third area of tension concerns the matters investigated by the court when reviewing the reasonableness of a refusal. His Honour explained:

On the one hand, the cases emphasise that the task of the court is to review the subjective decision taken by the relevant party at the time it was taken, by reference to the actual reasons for refusal and the material before that party. On the other hand, the cases also establish that a party refusing consent may rely upon any ground available up to the time of hearing, even though the ground was not relied upon at the time consent was refused [204]

According to his Honour, this tension may be minimised if the court proceeds as follows:

First, the court should identify the reasons why the party refused consent at the time consent was refused. If, having identified those reasons, the court finds that they were objectively reasonable (in the sense that a reasonable person could refuse consent for those reasons), that they were relevant to the relationship between the parties to the agreement, and that it has not been established that the factual premises upon which the refusal was based were erroneous, that will be the end of the inquiry - the other party will have failed to discharge the onus of proving that consent was unreasonably withheld. However, if the court does not conclude that there were relevant reasons which provided a reasonable basis for the decision to refuse consent at the time the decision was made, or that the reasons depended upon a factual premise which was false, it will be open to the party who refused consent to sustain that conclusion by reference to other reasons, supported by objective facts which exist at the time of hearing [204].

92 Next, the trial judge examined the framework for assessing whether, in the present case, the first respondent had unreasonably withheld its consent. He said in relation to the 'proviso' in cl 11.7 of the JVA:

The parties have expressed a condition which must be satisfied before any obligation to consent to a Change in Control arises. That condition identifies a number of specified characteristics of the party taking control. It also specifies the standard which is to be applied to the assessment of those characteristics - namely, that they be adequate to support the affected Participant - in this case, [the appellant]. In that context, it would, I think, be perverse to attribute to the parties an intention that consent could reasonably be withheld by the application of some other or different standard to the assessment of those characteristics.

However, it is necessary to note the boundaries of this proposition. Because cl 11.7 is concerned with a Change in Control of a Participant, the characteristics which are identified by the proviso are those of the new controller. By contrast, cl 11.4, which is concerned with an assignment of the JV Interest of a Participant in the Joint Venture, focuses upon the characteristics of the assignee, who is to take on the role of Participant if the assignment proceeds. The proviso to cl 11.7 exhaustively defines the criterion or standard of assessment which is to be applied to the specified characteristics of the new controller - that is, its financial resources, technical resources and experience. The proviso requires that those characteristics be assessed by reference to the adequacy of support to be provided to the affected participant - in this case, [the appellant].

The proviso does not provide an exhaustive statement of all issues relating to financial or technical resources or experience. A Change in Control might have an impact upon the financial or technical resources and experience available to [the appellant], or to the Joint Venture generally, through some means other than the support to be provided to the Participant by its controller. That would be an effect which falls outside the terms of the proviso (because it does not relate to the controller's capacity to adequately support the Participant) which could therefore be taken into account by the party whose consent is sought, if it is sufficiently related to the Joint Venture to be properly taken into account. So, for example, the fact that the Change in Control will lead to Stanwell exercising an option to terminate the Service Agreement is a matter which falls outside the terms of the proviso, because it does not relate to the capacity of the new controller to support [the appellant], but rather to the technical services available to the Joint Venture through the Manager. Thus, the proposition that the proviso exhaustively defines the rights and obligations of the parties in respect of the matters it covers does not answer the question of whether or not Stanwell's termination of the Service Agreement in the event of a Change in Control, is a matter properly taken into account by [the first respondent] for the purpose of determining whether or not to give consent to the proposed Change in Control. That is a question which I will address below [212] - [214].

93 The trial judge then dealt with the question of the onus of proof. In its statement of claim, the appellant had alleged that the first respondent refused its consent for specified reasons. In its defence, the first respondent joined issue with those allegations and pleaded reasons why its consent was refused. In its reply, the appellant relevantly joined issue with the first respondent on its defence. According to his Honour, there was no common ground between the parties as to the reasons why consent was refused. The appellant bore the onus of proving the unreasonableness of the refusal to consent. The trial judge decided that the best evidence of the first respondent's reasons for refusing consent was contained in the Griffin Board Paper [217], [219]. According to his Honour, the framework of the issues to be determined was as follows:

First I must determine whether the evidence establishes, as an objective fact, that TSIL has the financial and technical resources and experience to adequately support [the appellant]. If that condition is not satisfied on the evidence, [the first respondent] is under no obligation to consent, and [the appellant's] claim must be dismissed. However, if the condition is satisfied on the evidence, I must then determine whether [the appellant] has established that [the first respondent] acted unreasonably at the time it withheld its consent for the reasons which I have found, being the reasons enunciated in the Griffin Board Paper presented to the board of [the first respondent]. That question is to be determined by reference to the assertions made in the statement of claim. If the evidence does not make good the assertions made in the statement of claim, by reference to the reasons for the decision made by [the first respondent], the claim must be dismissed. However, if it is concluded that the refusal of consent was unreasonable by reference to the actual reasons for that refusal, it would then be necessary to determine whether any additional reasons asserted in the defence justify the refusal of consent, and whether the facts sustaining those reasons have been established [221].

94 His Honour determined the considerations that were relevant to the assessment of whether to consent to the proposed change in control, and those that were irrelevant to such assessment. Two considerations, whose relevance was disputed between the parties, were the prospect of competition, and the fact that if the proposed change of control occurred then Stanwell would terminate the Technical Services Agreement.

95 As to the prospect of competition, the appellant argued that the JVA expressly permitted the co-venturers to compete against each other and against the Joint Venture. It contended that, on the basis of this express right to compete, the prospect of competition between the Transfield group and the Griffin group was not a consideration that could properly be taken into account. A refusal of consent based on this consideration would have the effect of depriving a party of its rights under the JVA. The trial judge rejected the appellant's argument. He said:

[I]t is significant that the principle upon which [the appellant] relies for this submission exists alongside a line of authority which also establishes that the manner in which a right conferred by the agreement might be exercised can be relevantly considered by the party whose consent is sought ... This is not a case like Bates where the party refusing consent has been motivated by a desire to deprive the other party of a right to which they were entitled - in that case the right to remain in occupation for the term of the lease. Nor is it a case in which it is alleged that consent has been refused in order to deprive [the appellant] of the right to assign its interest, or to undergo a Change in Control or deprive entities associated with the new controller of the right to compete with entities associated with [the first respondent]. This is a case which is analogous to those cases in which the change for which consent is sought would have an impact upon the manner in which rights conferred by the agreement are likely to be exercised - in this case, the right to compete. Put another way, there is no suggestion that the right of [the appellant] to compete with [the first respondent] or the Joint Venture itself is to be curtailed. However, the proposed Change in Control would make it much more likely, indeed almost inevitable, that associates of [the appellant] will exercise the right to compete with associates of [the first respondent]. Accordingly, in my opinion, the increased likelihood of competition between entities associated with [the appellant] and entities associated with [the first respondent] in the event of a Change in Control, is a matter properly taken into account in assessing the reasonableness of the refusal of consent by [the first respondent], to the extent that it is relevant to the relationship created by the Joint Venture as regards the Joint Venture [232].

96 As to the fact that, if the proposed change of control occurred, Stanwell would terminate the Technical Services Agreement, the appellant argued that the termination of this agreement, being a relationship between Stanwell and the second respondent as manager, was extraneous to the relationship between the co-venturers. The trial judge rejected this argument. He was of the opinion that the termination of the Technical Services Agreement was a relevant consideration:

[I]t is the very Change in Control for which consent is sought which triggers the capacity of Stanwell to terminate the Service Agreement pursuant to its terms. Thus, the termination of the Service Agreement would be the direct consequence of the Change in Control for which consent is sought. Further, the services provided under the Service Agreement, are provided to [the] Manager on behalf of the Participants and for the purposes of the Joint Venture. It follows that the effect of a Change in Control upon the provision of services by Stanwell under the Service Agreement is a matter directly related to the Joint Venture itself, and to the relationship between the Participants in the Joint Venture. The Service Agreement can be distinguished from the JDA which was a separate agreement, between separate entities (albeit related) and dealing with separate projects. Therefore, the termination of the Service Agreement is a matter permissibly taken into account in assessing the reasonableness of the refusal of consent [234].

97 Next, his Honour considered whether the 'proviso' in cl 11.7 of the JVA had been satisfied in relation to TSIL's financial and technical resources. He was of the opinion that TSIL did have sufficient technical resources to support the appellant, and hence that aspect of the proviso was satisfied [250]. The respondents do not challenge this finding in the appeal. The trial judge held, however, that the appellant had not established that TSIL had the financial resources to provide adequate support to the appellant. He said that there was '[v]ery little' direct evidence adduced as to TSIL's capacity to provide adequate financial support [241]. According to his Honour, the appellant's case was limited to the proposition that the appellant was debt free and cash-flow positive and, as a result, no financial support would be required from TSIL. His Honour said:

It seems to me that in order to demonstrate that TSIL had sufficient financial resources to adequately support [the appellant], the first matter that was required to be addressed by the evidence was the possible future financial needs of [the appellant] over the period of the Joint Venture, and across a range of potential contingencies, including such things as Cash Calls, to meet the expenses of operating and maintaining the Wind Farm, modifications to the Wind Farm, changes in market conditions including the price at which the products of the Joint Venture could be sold, and the possibility of calamitous loss of the turbines and plant. From this assessment, conclusions could be drawn as to the likely future financial needs of [the appellant], and in particular, whether it was capable of meeting those needs from its own resources. If it was not, the next matter that would require to be addressed is the capacity of TSIL to provide any support needed by [the appellant] in meeting those financial needs.

As I have mentioned, no attempt was made to lead evidence addressing these issues, even though [the first respondent] has denied the express plea of [the appellant] that TSIL has the financial resources to adequately support it. The various gaps in the evidence to which I have referred make it impossible for me to conclude that [the appellant] has established this contested assertion on the balance of probabilities [246] - [247].

98 The appellant's failure to establish that TSIL had adequate financial resources to support the appellant meant that the 'proviso' in cl 11.7 was not satisfied and, as a result, the appellant's claim failed, irrespective of whether or not the first respondent's refusal to consent was unreasonable [247]. Nevertheless, his Honour set out his findings in relation to the other matters in contest at trial.

99 The trial judge dealt with the first respondent's concerns about the adequacy of TSIL's financial and technical resources. As to financial resources, he was of the view, as I have mentioned, that it was not unreasonable to refuse consent on the basis of financial resources. As to technical resources, his Honour was of the view, as I have mentioned, that TSIL had the technical resources and experience to adequately support the appellant, and it was not open to the first respondent to apply some other criterion of assessment to TSIL's capacity to support the appellant in this area. However, his Honour was also of the view that this did not mean that the first respondent was precluded from taking account of the effect which a change in control would have upon the technical resources and experience available to the co-venturers, if that impact occurred through some means sufficiently connected to the relationship between the parties to the JVA, other than the extent of the support provided by the new controller to the appellant. His Honour said:

The evidence establishes that personnel employed or associated with Stanwell have provided significant technical resources and experience to the Manager of the Joint Venture. Those resources and experience have been supplied both formally, pursuant to the [Technical Services] Agreement, and informally, as a result of informal requests made by Mr Roberts, on behalf of the Manager. This is not support provided to [the appellant]. Accordingly, it is not support of a kind covered by the proviso to cl 11.7 of the JVA. The provision of those technical resources and experience is, on the evidence, of substantial benefit to the Joint Venture, and therefore to [the first respondent] as a Participant in the Joint Venture. Although the day to day operation and maintenance of the Wind Farm is carried out by the contractor who constructed the Wind Farm (Vestas), this has been described in evidence, which I accept, as an 'arms and legs' operation. On that analogy, the intellectual input has to be provided from other sources, and in the past, Stanwell has made a significant contribution in this respect. It was reasonable for [the first respondent] to conclude that those benefits would be lost in the event of a Change in Control. [The appellant] does not challenge that conclusion, which is in any event established by the evidence.

The loss of the benefit of the technical resources and experience supplied both formally under contract and informally by personnel related to Stanwell is a matter which directly affects the relationship between the parties which was created by the Joint Venture as regards the Joint Venture. The loss of those benefits could not be said to be a matter extraneous to their relationship as Joint venturers - rather, it bears directly upon that relationship and the Joint Venture itself, and would be the direct consequence of the proposed Change in Control. Although the new controller of [the appellant] will be in a position to direct some personnel who have particular experience in wind farm energy projects to assist the Joint Venture, notably Mr Neil, Mr Johannesen and Mr Ware, the technical resources and experience available from that quarter would be a significant reduction in the technical resources and experience presently available, both informally and formally, through Stanwell and its associates. The evidence also establishes that while it may not be impossible for the Manager to augment the technical resources and experience available to support the maintenance and operation of the wind farm, such expertise is not readily available, and might only be sourced with some difficulty [257] - [258].

His Honour therefore concluded that it was not unreasonable to refuse consent on the basis of concerns about the technical resources available to the Joint Venture. In so concluding, his Honour excluded from consideration any technical resources or experience that might be required by the parties to the JDA [259].

100 The trial judge then considered the prospect of competition between the Transfield group and the Griffin group. His Honour found that there was a real prospect of competition between them in the Western Australian energy market. Also, his Honour found that the evidence established, consistently with the views expressed in the Griffin Board Paper, that there is a real prospect that issues might arise in the future operation of the Wind Farm which will require negotiations between the parties to the JVA. His Honour gave, as examples, a modification to the Wind Farm to add an additional six turbines, the financing or 'securitisation' of a party's JV Interest, and the joint negotiation of agreements for the sale of the JVA Output [261]. He continued:

The evidence also establishes, and I find, that negotiations on subjects of this kind would be likely to be enhanced if the parties to those negotiations were free to communicate with each other without concern that commercially confidential aspects of their business or plans for the future might give the other party, or associates of the other party, a competitive advantage in relation to other projects. For example, disclosure of a party's attitude in respect of the internal rate of return required to justify capital investment; its expectations as to future demand in the Western Australian energy market; as to future revenue likely to be derived from the sale of energy into the Western Australian market; or as to its perceptions of the risks which attend energy generation and the sale of energy into the Western Australian market might all be matters which would be regarded as commercially sensitive in the context of prospective competition. In such a circumstance, the parties to the Joint Venture would either have to take the risk of commercial damage arising from disclosure to the other party of commercially sensitive information, or restrict the nature and content of their communications in relation to potentially significant issues arising under the Joint Venture. The dilemma faced by each party in that circumstance is an aspect of their relationship under the Joint Venture as regards the Joint Venture, and can therefore be taken into account in assessing whether or not to refuse consent. In my view, it would be reasonable for a party in the position of [the first respondent] to form the view that the prospect of such a dilemma having an adverse impact upon the Joint Venture was sufficiently undesirable to reasonably conclude that consent to the Change in Control should be refused [262].

101 His Honour concluded that the appellant had not established that the first respondent had unreasonably withheld consent. The non-satisfaction of the 'proviso' to cl 11.7 meant that the question of whether the refusal was unreasonable did not arise. In any event, it was open for the first respondent to refuse consent on any of the grounds of concern about financial resources, technical resources and the prospect of competition. His Honour dealt with the issue of reasonableness by reference to the five reasons asserted in par 14 of the first respondent's defence. He said:

The first reason concerns the adequacy of technical expertise. Although I would not couch my conclusions in quite the same terms as the allegations made in the defence, for the reasons I have given I have concluded that the diminution in the Joint Venture's access to technical resources and experience in the event of a Change in Control provides a reasonable basis for refusing consent.

The second reason concerns the adequacy of the financial resources available. Again, while I would not couch my conclusions in the terms of the defence, and in particular reject any assertion that the potential obligations arising under the JDA are relevant, for the reasons I have given I have concluded that the lack of demonstrated financial capacity to adequately support [the appellant] provides a reasonable basis for refusing consent to the proposed Change in Control.

The third reason pleaded in the defence relates to the likelihood of increased competition. While I would again express my conclusions in rather different terms to those pleaded, for the reasons I have given, I have concluded that the likelihood of increased competition between entities associated with [the appellant] and entities associated with [the first respondent] provides a reasonable basis for refusing consent.

The fourth reason pleaded in the defence relates to the inadequacy of the information provided in support of the request for consent to a Change in Control. To the extent that the information provided was inadequate to establish the financial capacity of TSIL to adequately support [the appellant], this reason overlaps with the reason given related to lack of demonstrated financial capacity. To that extent, it provides a reasonable basis for the refusal of consent. However, in relation to matters other than those concerning financial capacity, the information provided to [the first respondent] appears to me to have been adequate for proper assessment and evaluation of the proposal for a Change in Control.

The fifth reason pleaded in the defence relates to the contemporaneous proposal to assign an interest in the JDA. For the reasons I have given, this reason is extraneous to the matters properly considered by a party in the position of [the first respondent], and therefore provides no reasonable basis for a refusal to consent to the proposed Change in Control [264] - [268].

102 The appellant relies on six grounds of appeal. They read:

1. The trial judge erred in law by holding, in effect, that in order to prove that the first respondent's withholding of consent to the proposed Change in Control was unreasonable, the appellant was required:

(a) to negate reasons which the first respondent considered when determining whether to withhold consent, but which the first respondent did not plead or litigate at trial as justifying the reasonableness of its withholding of consent to the proposed Change in Control;

(b) further and alternatively, to negate reasons which the first respondent did not plead or litigate at trial as justifying the reasonableness of its withholding of consent to the proposed Change in Control.

Particulars as to ground 1(b)

The reasons which the first respondent did not plead or litigate at trial were the following:

(a) the financial risks to which the appellant and its participants might be exposed, such as an uninsured calamitous event;

(b) the financial capacity of the joint venture to bear its share of the likely costs of modifying the Wind Farm, by adding six new turbines, and the possible effect of such a modification upon the sharing of confidential information;

(c) the prospect of the appellant obtaining capital by offering its joint venture interest as security to prospective lenders;

(d) the effect of Stanwell terminating the Technical Services Agreement.

1. The trial judge erred in fact by holding that TSIL did not have the financial resources to adequately support the appellant if the proposed Change in Control occurred. The trial judge should have held that TSIL did have such financial resources.
2. The trial judge erred in law by holding that the first respondent was entitled to consider, and to objectively justify the reasonableness of withholding consent to the proposed Change in Control by reference to, the increased likelihood of competition between entities associated with the appellant and entities associated with the first respondent in the event of the proposed Change in Control. The trial judge should have held that the first respondent was not so entitled.
3. The trial judge erred in fact by holding that there was a real prospect that if the proposed Change in Control occurred, entities associated with the first respondent would have to disclose confidential information to entities associated with the appellant. The trial judge should have held that there was no such real prospect.
4. The trial judge erred in law by holding that the first respondent was entitled to consider, and to objectively justify the reasonableness of withholding consent to the proposed Change in Control by reference to, the likely consequential termination of the Technical Services Agreement between [the second respondent], Stanwell Corporation Ltd and Griffin Coal Mining Company Pty Ltd. The trial judge should have held that the first respondent was not so entitled.
5. The trial judge erred in law and in fact by holding that the first respondent had properly and reasonably withheld its consent to the proposed Change in Control. The trial judge should have held that the first respondent had improperly and unreasonably withheld such consent.

The grounds of appeal generally: the proper approach to contractual construction

103 The construction of a written contract involves ascertaining what a reasonable person would have understood the parties to mean. Consideration should ordinarily be given not only to the language of the document, but also to the surrounding circumstances known to the parties, and the apparent purpose and object of the transaction. See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, where Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ said:

This Court, in Pacific Carriers Ltd v BNP Paribas ((2004) [2004] HCA 35; 218 CLR 451), has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction (Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at 461 - 462 [22]) [40].

See also Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 [11]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22]; International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 [8], [53].

104 Where a commercial transaction is implemented by several contracts or documents, all of the contracts or documents may be read together for the purpose of ascertaining their proper construction and legal effect, at least where the contracts or documents are executed contemporaneously or within a short period. See Smith v Chadwick (1882) 20 Ch D 27, 62 (Jessel MR) and, on appeal, (1884) 9 App Cas 187. See also the discussion in Lewison, The Interpretation of Contracts, 4th ed, par 3.03.

105 The parties to a contract may be under an implied duty to cooperate in the performance of contractual obligations.

106 In Mackay v Dick (1881) 6 App Cas 251, Lord Blackburn stated the applicable principle, as follows:

I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. What is the part of each must depend on circumstances (263).

Lord Blackburn's statement was cited with approval by Isaacs J in Ray v Davies [1909] HCA 51; (1909) 9 CLR 160, 170.

107 In Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, the parties were agreed that the contract between them imposed an implied duty on each party to do all that was reasonably necessary to secure performance of the contract. Mason J (Barwick CJ, Gibbs, Stephen and Aickin JJ agreeing), after referring to the statement of Lord Blackburn in Mackay, said:

It is not to be thought that this rule of construction is confined to the imposition of an obligation on one contracting party to co-operate in doing all that is necessary to be done for the performance by the other party of his obligations under the contract (607).

Mason J then referred (607), with approval, to this observation of Griffiths CJ in Butt v M'Donald (1896) 7 QLJ 68:

It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract (70 - 71).

It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself (607 - 608).

108 The general principle of construction, according to which parties are taken to agree to do all that is reasonably necessary to secure performance of their contract, was reiterated in Park v Brothers [2005] HCA 73; (2005) 80 ALJR 317 [38] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ). See also Nullagine Investments Pty Ltd v Western Australian Club Inc [1993] HCA 45; (1993) [1993] HCA 45; 177 CLR 635, 659 (Deane, Dawson & Gaudron JJ); Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17; (1997) [1997] HCA 17; 189 CLR 215, 219 (Dawson & Toohey JJ), 226 (McHugh & Gummow JJ); Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126 [36] (Gleeson CJ, Gummow, Kirby & Hayne JJ).

109 The duty to cooperate does not, however, rise above the promises made by the parties to the contract. In other words, the duty 'cannot over-ride the express provisions of the contract': Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349, 368 (Sheller JA, Powell & Beazley JJA agreeing). See also Maitland Main Collieries Pty Ltd v Xstrata Mt Owen Pty Ltd [2006] NSWSC 1235 [49] (Bergin J).

The grounds of appeal generally: the proper construction of cl 11.7

110 The term 'joint venture' is not a technical term. Its meaning at common law is unsettled. See United Dominions Corporation Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1, where Mason, Brennan and Deane JJ said:

As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots' law, 'adventure') will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership (10).

See also Gibson Motor Sport Merchandise Pty Ltd v Forbes [2005] FCA 749 [75] - [81] (Crennan J).

111 The ordinary contractual rules apply to the construction of cl 11.7 of the JVA. But on the facts and in the circumstances of the present case, the focus is on the language of the transaction documents and the apparent purpose and object of the original participants when they entered upon the agreed joint enterprise. So, the proper construction of cl 11.7 is to be determined by construing the language of the provision in the context of the JVA as a whole and the other JV Documents that were entered into contemporaneously with the JVA. This context includes the apparent purpose and object of the agreed joint enterprise, as revealed by the transaction documents, when the JVA was executed.

112 Clause 11.7 contains, relevantly, three components. First, if there is a change in control of a participant, the affected participant shall be deemed to have offered to assign the whole of its JV Interest to the other participant unless the other participant has given its prior written consent to the change in control. Secondly, if a participant seeks the consent of the other participant to a proposed change in control of the affected participant, the proposed new party in control of the affected participant must have 'the financial and technical resources and experience to adequately support the affected Participant'. Thirdly, if a participant seeks the consent of the other participant to a proposed change in control of the affected participant and the proposed new party in control of the affected participant has the financial and technical resources to adequately support the affected participant, the other participant must not unreasonably withhold or delay its written consent to the change in control or give its written consent subject to unreasonable conditions.

113 The content and ambit of the second and third components of cl 11.7, including the permissible grounds on which the other participant may withhold its consent to a proposed change of control, depend on the proper construction of the JVA and the other JV Documents. These documents record the creation of, and the terms and conditions applicable to, the joint enterprise between the participants. The nature of the transaction is materially different from a grant by a grantor to a grantee of a proprietary or contractual right. Also, its nature is materially different from a lessor and lessee relationship. Each of these other relationships does not involve the common pursuit of a venture, and the fundamental rights and interests of the parties in respect of the subject matter of the transaction will usually be opposed. It is therefore essential to exercise caution in reviewing authorities decided in different contractual settings. See, generally, the contractual provisions in issue and the discussion in International Drilling Fields Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch 513, 520 (Balcombe LJ, Fox & Mustill LJJ agreeing); British Gas Trading Ltd v Eastern Electricity Plc [1996] EWCA 1239 (Leggatt LJ, Henry & Hutchison LJJ agreeing); Tattersall's Hotel Penrith Pty Ltd v Permanent Trustee Co of NSW Ltd [1942] 42 SR (NSW) 104, 114 - 115 (Roper J); Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1, 20 - 23 (Bryson J); Cathedral Place Pty Ltd v Hyatt of Australia Ltd [2003] VSC 385 [28] - [29] (Nettle J); Yedway Pty Ltd v Owners Corporation of Strata Plan 62871 [2009] NSWSC 8 [101] - [103] (Barrett J). Each decided case necessarily turns on its own contractual provisions and individual facts and circumstances. This point was, with respect, rightly made by Nettle J in Cathedral Place. After referring to the reasons of Mason J in Secured Income, 607 - 608, his Honour said that 'the terms of the contract are paramount' [25].

114 These observations may be made about the second component of cl 11.7:

(a) The second component does not require that the proposed new party in control promise or undertake to provide any financial or technical resources or experience to the affected participant. It merely requires that the proposed new controller have these resources and experience and that the resources and experience be available to the affected participant. This is consistent with the JVA and the other JV Documents as a whole which do not impose on a participant's controller any obligation to provide financial or technical resources or experience to the participant it controls.

(b) The financial and technical resources and experience of the proposed new party in control must enable the proposed new controller to 'adequately' support the affected participant.

(c) The term 'adequate' connotes that the proposed new controller will have sufficient or suitable financial and technical resources and experience on which the affected participant may draw to facilitate the discharge of its obligations under the JVA in relation to financial and technical matters until the JV Termination Date.

(d) It may be necessary for an affected participant to draw on the proposed new controller's financial resources and experience in order to discharge its monetary liabilities under the JVA and to draw on the proposed new controller's technical resources and experience in order to ensure that its representatives on the Management Committee are able properly to carry out their powers and responsibilities, including deciding whether to give any (and, if so, what) directions to the manager in connection with its functions and duties under the Management Agreement.

115 The following observations may be made about the third component of cl 11.7:

(a) The primary purpose of the requirement that the affected participant obtain the consent of the other participant to the proposed change in control appears to be to enable the other participant to scrutinise the proposed new controller and decide whether, if the proposed change of control proceeds, the affected participant will (continue to) be willing and able:

(i) to perform its obligations under the JVA and the other JV Documents; and

(ii) in association with the other participant, to implement and carry the Project into effect and to pursue the objects of the Joint Venture (subject to and in accordance with the JVA), as contemplated by cl 3.1 of the JVA,

for the balance of the duration of the Joint Venture.

(b) The qualification to the requirement that the affected participant obtain the consent of the other participant, namely, that the other participant must not unreasonably withhold or delay its consent or give its consent subject to unreasonable conditions, reflects the degree of importance that the parties have attached to the right of a participant, with valuable proprietary and contractual rights under the JVA, to assign those rights.

(c) In general, the other participant will not be acting unreasonably in withholding its consent if:

(i) the grounds for withholding consent are held honestly;

(ii) the grounds relate to the objects of the Joint Venture or to rights, benefits or obligations of the affected participant or the other participant under the JVA or the other JV Documents;

(iii) the grounds are permissible under the JVA or the other JV Documents, properly construed, and are not materially inconsistent with their provisions, properly construed; and

(iv) on the basis of the facts and circumstances, objectively ascertained, as at the date on which consent is refused, the grounds for withholding of consent are not unreasonable.

(d) In general, the other participant will be acting unreasonably in withholding its consent if:

(i) the grounds for withholding consent are not held honestly;

(ii) the grounds are extraneous or unrelated to the objects of the Joint Venture or to rights, benefits or obligations of the affected participant or the other participant under the JVA or the other JV Documents;

(iii) the grounds are not permissible under the JVA or the other JV Documents, properly construed, or are materially inconsistent with their provisions, properly construed; or

(iv) on the basis of the facts and circumstances, objectively ascertained, as at the date on which consent is refused, the grounds for withholding of consent are unreasonable.

(e) Although the other participant is entitled to take into account, in determining whether it will consent to the proposed change in control, how the change will affect the pursuit or fulfilment of the objects of the Joint Venture and how the change will affect its rights, benefits or obligations under the JVA or the other JV Documents, it is not entitled to take into account broader commercial factors which are extraneous or unrelated to the objects of the JVA or to rights, benefits or obligations of the affected participant or the other participant under the JVA or the other JV Documents.

116 As to the second and third components, the onus of proving that the proposed new controller has the financial and technical resources and experience to adequately support the affected participant, and that the other participant has unreasonably withheld or delayed its written consent or given its written consent subject to unreasonable conditions, is on the affected participant. See International Drilling, 520; Kids Campus Holdings Pty Ltd v Kelly [2007] VSC 282 [12] (Smith J). Further, whether consent has been unreasonably withheld etcetera is to be determined as at the date on which consent is refused. See JA McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd [1992] 2 Qd R 121, 132 - 133 (Kelly SPJ); Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11 [81] (McLure J, Murray & Parker JJ agreeing).

117 I will elaborate upon the observations I have made concerning the second and third components of cl 11.7 in the course of analysing the individual grounds of appeal.

118 Ground 1 asserts, in essence, that the trial judge erred in law by holding, in effect, that in order to prove that the first respondent's withholding of consent was unreasonable, the appellant was required to negate reasons for the withholding of consent or which justified the withholding of consent that were not pleaded or litigated at trial.

119 As I have mentioned, after reviewing the pleadings, the trial judge held that there was no common ground between the parties as to the reasons why the first respondent had refused to consent. His Honour noted that at no point in the pleading process had the appellant 'embraced or adopted the assertions made in the defence as to the reasons for refusal' [216]. He then said that if the issues were to be addressed strictly from the perspective of the pleadings, 'the success of [the appellant's case] must depend upon it making out the propositions upon which it relies for its cause of action, being the propositions asserted in the statement of claim' [216].

120 Also, as I have mentioned, the trial judge decided that the 'best evidence' of the first respondent's reasons for refusing consent was contained in the Griffin Board Paper [217], [219]. His Honour held:

To the extent that the defence of [the first respondent] relies upon grounds which go beyond the reasons enunciated in the Griffin Board Paper, it is entitled to rely upon those grounds at trial, pursuant to the line of authority to which I have referred [217].

121 The relevant authorities were those which establish that a person who refuses consent to an assignment of contractual rights and obligations is not confined to the grounds of refusal relied upon at the time of refusal. At trial, the person may rely upon other grounds. See, for example, Secured Income, where Mason J said, in the context of examining cases concerned with whether consent had been unreasonably withheld to an assignment of a lease:

I am inclined to the view that the landlord is entitled to rely on a ground not taken at or about the time of refusal. It would be most unjust if the landlord could not take advantage of an important ground justifying refusal merely because it was not known to him at the time, eg the impending bankruptcy of the proposed assignee. In the context of this case, the reasons for allowing the respondent to advance a ground not communicated at the time of refusal are rather stronger. There is here no question of informing a lessee so that he can decide whether he should assign or not. And the general rule in contract is that a party can justify his termination or rescission of a contract by reference to grounds not taken at the relevant time (S_hepherd v Felt and Textiles of Australia Ltd_ ((1931) [1931] HCA 21; 45 CLR 359)) (611).

122 The basis on which the trial judge proceeded in relation to the Griffin Board Paper, was this:

If [the appellant] wishes to establish the unreasonableness of that refusal of consent because, for example, the facts asserted in the Griffin Board Paper are false, it carries the burden of establishing the falsity of those facts. Accordingly, the limited basis of the tender of the evidence of the witnesses to which I have referred, namely, as not establishing the truth of the facts asserted, is only material if there is a pleading and evidence which establishes the falsity of those facts. However, [the appellant] did not allege in the statement of claim, nor lead any evidence to establish the falsity of the facts asserted in the Griffin Board Paper. Rather, its attack upon the process of reasoning revealed by the Griffin Board Paper was upon the relevance of some of the matters asserted, and the ultimate conclusions drawn on issues such as technical resources, financial capacity and the like [219].

123 The witnesses referred to by the trial judge included Mr Wayne Trumble. At all material times, Mr Trumble was the executive general manager, power generation, of Griffin Energy. He was responsible for the management of Griffin's existing energy generation projects and the development of future projects. Mr Trumble was the author of substantial parts of the Griffin Board Paper. His witness statement described in general terms the matters upon which he relied for the assertions made in the paper. Mr Trumble's evidence in this respect was not tendered as evidence of the truth of these assertions [142].

124 Pleadings have two functions. First, to ensure a fair trial by putting the other party on notice of the case to be met. Secondly, to define the issues for decision so that the court can control the preparation of the case and the conduct of the trial. See Williams v Australian Telecommunications Commission (1988) 52 SASR 215, where King CJ said:

The fundamental purpose of pleadings is to provide a structure or framework for the litigation designed to promote a just outcome. Pleadings achieve this purpose by performing two basic functions. The first is to define the issues between the parties thereby providing the basis for the determination of questions as to discovery before trial and admissibility of evidence at trial and of questions as to what the litigation has decided for the purpose of the Rules as to res judicata and issue estoppel. The second function is to give to the parties fair notice of the case to be made against them at trial thereby minimising the risk of injustice resulting from surprise (216).

See also Mick Skorpos Petrol Discount King Pty Ltd v The Shell Company of Australia Ltd (1997) ATPR 41-556, 43,693 - 43,694 (Mansfield J).

125 It is, of course, well-established that a case may be litigated at trial in a manner that is materially different from the issues as defined by the pleadings. Where this is alleged to have occurred, the actual conduct of the proceedings must be examined to ascertain whether a point was or was not taken at trial. For this purpose, no narrow or technical view should be adopted. See Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491, 497 (Mason CJ, Wilson, Brennan & Dawson JJ).

126 Ground 1 of the appeal relates to the second and third components of cl 11.7. If the appellant had made out the second component (that is, established that TSIL had the financial and technical resources and experience to adequately support the appellant) then, in terms of the third component, the first respondent would have been bound to not unreasonably withhold or delay its written consent to the change in control from Stanwell to TSIL or give its written consent subject to unreasonable conditions.

127 The appellant, in pars 29 and 30 of its statement of claim, pleaded compliance with the second component of cl 11.7.

128 The appellant then pleaded, in pars 31 and 32 of its statement of claim, that the first respondent, in breach of the third component of cl 11.7, had unreasonably withheld its consent to the proposed change in control for the reasons stated in its letter dated 18 March 2008. These reasons were to the effect that the first respondent held concerns about TSIL's financial and technical resources and experience to reasonably adequately support the appellant, and about the existence or possibility of competition between companies associated with TSIL and TSI (WF) on the one hand and companies associated with Griffin Energy on the other. See [78] above.

129 The first respondent, in par 6 of its defence, denied each and every allegation in pars 29 and 30 of the statement of claim and alleged, further, that:

(a) the financial resources which may be required to be contributed to the Joint Venture by the appellant in the future include those financial resources which might reasonably be expected to be required for any significant modification of the Wind Farm, including by way of expansion of the Wind Farm, and any other objects or purposes agreed by the Management Committee from time to time; and

(b) following any change in control, the appellant will not have available to it adequate technical resources and experience necessary to operate or maintain the Wind Farm, or design, develop, construct, commission or test the Wind Farm (as modified or proposed to be modified).

The first respondent then referred, by way of particulars, to the matters pleaded in par 14 of its defence.

130 The first respondent did not, in its defence, merely refer to or reproduce the reasons in its letter dated 18 March 2008. Rather, the first respondent sought to defend that part of the appellant's pleaded case which alleged that, in breach of the third component of cl 11.7, the first respondent had unreasonably withheld its consent, by pleading, in par 13 of its defence, that the decision to withhold consent was made having regard to all relevant circumstances as at 17 March 2008 including information specified in par 13 and by pleading, in par 14 of its defence, detailed reasons for its refusal. See [85] above.

131 The appellant, in its reply, joined issued with the first respondent on pars 6, 13 and 14 of its defence.

132 At trial, the parties litigated the alleged compliance with the second component and the alleged breach of the third component of cl 11.7 on the basis that the first respondent's reasons for refusal were those pleaded in pars 6 and 14 of its defence. This is apparent from the following:

(a) The appellant, in its written opening submissions dated 18 September 2008, asserted that by the letter dated 18 March 2008 the first respondent withheld consent to the change of control, and that the grounds relied upon by the first respondent for withholding consent were pleaded in pars 13 and 14 of its defence. See pars 8 - 9 of the submissions at BAB 112. Later in its written opening submissions, the appellant addressed pars 13 and 14 of the first respondent's defence. See pars 99 - 141 of the submissions at BAB 124 - 131.

(b) Although the appellant, in its written opening submissions, asserted that the grounds relied upon by the first respondent for withholding consent were pleaded in pars 13 and 14 of its defence, par 13 in fact pleaded that the decision withholding consent was made having regard to all relevant circumstances as at 17 March 2008 including information specified in par 13, and par 14 in fact pleaded that the decision withholding consent was not unreasonable and was made for the reasons specified in par 14. That is, the first respondent's grounds for withholding consent to the change of control were set out in par 14.

(c) As I have mentioned, the first respondent, in the particulars to par 6 of its defence in relation to the alleged compliance with the second component of cl 11.7, referred to and relied upon the matters pleaded in par 14 of its defence.

(d) The first respondent, in its written opening submissions dated 19 September 2008, reproduced in substance pars 6, 13 and 14 of its defence as the basis on which it withheld its consent to the change of control. See pars 16 and 17 of the submissions at BAB 137 - 140.

(e) Counsel for the appellant, in his oral opening submissions, addressed the reasons for refusal pleaded in par 14 of the defence. See ts 100 - 103.

(f) Counsel for the first respondent, in his oral opening submissions, said:

McCUSKER, MR: You see, your Honour, the question of whether it was unreasonable to refuse consent doesn't depend, in our submission, entirely upon on what the agreement says. It depends on all the circumstances but I accept what your Honour says that the question of unreasonableness can be tested by reference to what considerations were taken into account by the first defendant's board and in particular whether there were considerations which were irrelevant, but irrelevant to what? A decision as to whether reasonably viewed and commercially viewed this incoming partner or proposed controller would be a suitable party to the joint venture.

Now, there are a number of factors and my learned friend has taken you to the reasons put forward by the first defendant and indeed taken you through the defence so I won't do that again but although competition was one element it certainly wasn't the only element that concerned the first defendant.

There was the question of the degree of expertise that it expected and was getting from its existing joint venture partner without which it would not be able to proceed in the way that it had been proceeding so it's not a simple case of a landlord and tenant where the issues that arise really are not entirely but the major one is: can the tenant pay the rent?

There is no commercial relationship other than that between the landlord and the tenant. Occupation of course of the premises and whether the premises are going to be properly cared for is another one but here it's more than that. It's a commercial business venture, so different considerations apply (ts 128 - 129).

(g) The appellant's counsel accepted that the first respondent's pleaded reasons for its refusal of consent were actually held by it (ts 135).

(h) The appellant, in its written outline of closing submissions dated 24 September 2008, said in relation to the scope of the first respondent's reasons for refusing consent:

The [first respondent] has not confined its refusal to the reasons originally stated in March 2008. It has embellished and expanded those reasons in its amended defence.

Thus, what must be determined is whether the reasons pleaded in the amended defence are proper reasons for refusal, having regard to the proper construction of the JVA and the requirement of reasonableness.

For reasons outlined above as regards reasonableness of process, the [appellant] is entitled to an opportunity to present evidence concerning the reasons ultimately relied upon by the [first respondent].

However, even if that is not so, the [first respondent's] refusal of consent did not accord with the proper construction of the contract and was unreasonable, having regard to the material available to the [first respondent] by the time it made its decision in March 2008.

See pars 34 - 37 of the submissions at BAB 157 - 158.

(i) The appellant then addressed each of the first respondent's reasons or grounds of refusal as pleaded in par 14 of its defence. See pars 38 - 67 of the written outline of closing submissions at BAB 158 - 165.

(j) The first respondent, in its undated written outline of closing submissions, said that the decision of the board of the first respondent to refuse consent 'was made for each of the reasons notified to [the appellant] ... and subsequently expanded upon; and made on the basis that each of them was a sufficient reason in itself for the board to decide not to consent'. It was then said that unless the appellant can establish that none of those grounds was reasonable, it cannot establish unreasonableness. See par 19 of the submissions at BAB 170 - 171.

(k) Counsel for the first respondent, in his oral closing submissions, did not elaborate on (or, indeed, even refer to) par 19 of the first respondent's written outline of closing submissions.

(l) The onus of proof, and the reasons for the first respondent's refusal of consent which the appellant had to negate, were debated between the trial judge and counsel for the appellant in the course of counsel's oral closing submissions. Counsel argued:

ZELESTIS, MR: ... the facts [are] narrowed by their pleading, which is [that] the decision withholding consent was not unreasonable and 'was made for the following reasons'. They are not making it for other reasons. They don't attempt to defend other reasons that might or might not have been available. We get to a trial and they have put forward their reasons. That's all that we are now in dispute about.

We don't have to try to disprove other things which are in the [Griffin Board Paper] or in people's minds, and so paragraph 14 is the repository of the reasons that they want to rely upon to defend the decision which we challenge, and 14(b) speaks about the capacity of TSIL and TSE, TSE not being relevant because it's not the ultimate proposed controller, to adequately finance - putting aside the JDA, it's the operation, maintenance and any significant modification of the Emu Downs wind farm. That's all that is put against us as regards the wind farm (ts 263).

133 I am satisfied that the first respondent's grounds for refusing consent to the proposed change of control which the appellant was required to negate were those pleaded in par 14 of the first respondent's defence. This was the basis on which the parties litigated at trial the alleged compliance with the second component and the alleged breach of the third component of cl 11.7. My review of the relevant parts of the trial record does not indicate that the issues between the parties, as defined by the pleadings (in particular, pars 6 and 14 of the defence read with the reply), were varied or supplemented by the conduct of the parties in the course of the trial.

134 The appellant did not, at any stage of the proceedings, seek to attribute to the first respondent any improper purpose. Rather, the appellant accepted, and the trial was conducted on the basis, that the first respondent's reasons for refusing consent, as pleaded in par 14 of its defence, were actually held in good faith. The appellant's challenge to the first respondent's grounds for refusing consent was based, in part, on whether those grounds were open or available on the proper construction of cl 11.7 in the context of the JVA as a whole and the other JV Documents and, in part, on whether as a matter of fact the grounds were unreasonable. There was a proper joinder of issues between the parties at the trial.

135 I respectfully disagree with the trial judge's decision, in effect, that the appellant was required to negate reasons for the withholding of consent or which justified the withholding of consent that were not pleaded or litigated at trial. In particular, the appellant's onus of proof did not extend to all matters referred to in the Griffin Board Paper which raised matters other than those pleaded in pars 6 and 14 of the defence [219]. The appellant's onus was confined to the first respondent's pleaded reasons for refusal.

136 The first respondent tendered the Griffin Board Paper to prove the procedure which had been adopted and the information which had been considered by its board in deciding to refuse consent. The paper was not tendered to prove the truth of its contents. See ts 133 - 138. This proposition was accepted before this court by counsel for the first respondent (appeal ts 72). The Griffin Board Paper could not outflank the pleadings.

137 In the circumstances, it was not open to the trial judge to rely upon reasons or grounds that were not pleaded or went beyond the issues joined between the parties at trial. See Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [132] - [133] (Gleeson CJ, Gummow, Callinan, Heydon & Crennan JJ).

138 In my respectful opinion, the trial judge relied on reasons or grounds that were not raised on the pleadings or litigated at the trial in, relevantly, these respects:

(a) the financial risks to which the Joint Venture and its participants might be exposed, such as an uninsured calamitous event [243]; and

(b) the prospect of the appellant obtaining capital by offering its JV Interest as security to prospective lenders [245].

139 I will refer in greater detail to these reasons or grounds in the course of considering the other grounds of appeal.

140 Counsel for the appellant submitted that the trial judge relied on two other reasons or grounds that were not raised on the pleadings or litigated at the trial, namely:

(a) the financial capacity of the appellant's proposed new controller to fund its share of the costs of a proposed modification of the Wind Farm, by adding six new turbines, and the possible effect of this proposed modification upon the sharing of confidential information [244], [261] - [262]; and

(b) the effect of Stanwell terminating the Technical Services Agreement [233] - [234], [258].

141 I turn, first, to deal with the appellant's submission in relation to the financial capacity of the appellant's proposed new controller to fund its share of the costs of the proposed modification of the Wind Farm.

142 The Griffin Board Paper referred to a proposed expansion of the Wind Farm in the context of the Griffin group's concern about TSIL's financial resources. The paper said that Griffin was considering a potential expansion of the Wind Farm to take advantage of expected higher renewable energy prices: par 7.2(d) at GAB 411. It also said that uncertainty existed as to how TSIL/TSE may fund any expansion of the Wind Farm and any other development, including Joanna Plains: pars 11.54, 13.4(a) at GAB 429, 433. It added that there was a possibility that TSIL's financial position may deteriorate so that its participation in the Joint Venture would be adversely affected (par 13.4(b) at GAB 433) and that TSIL did not currently have the financial capacity to fund any expansion of the Joint Venture (par 13.4(c) at GAB 433).

143 The first respondent pleaded in par 6(a) of its defence that the financial resources which may be required to be contributed to the Joint Venture by the appellant in the future include those financial resources which might reasonably be expected to be required for any significant modification of the Wind Farm (including by way of expansion of the Wind Farm).

144 Also, the first respondent pleaded in par 14(b) of its defence that its decision to withhold consent was not unreasonable and was made because of, relevantly, the first respondent's concerns about the adequacy of the financial resources available to, and the capacity of, TSIL and TSE adequately to finance any significant modification of the Wind Farm. Particulars of this allegation were provided, relevantly, as follows. The first respondent was not reasonably satisfied, and none of Stanwell or any of its related bodies corporate including the appellant had adequately demonstrated to the reasonable satisfaction of the first respondent, that:

(a) TSIL had the financial capacity directly and adequately to fund;

(b) TSIL had adequate borrowing capacity for additional funding to fund;

(c) TSIL did not have a high level of borrowings which might adversely affect its capacity to borrow further, and result in an inadequate borrowing capacity to fund;

(d) TSE had sufficient financial capacity or willingness to be able to share the development risk of and fund,

any significant modification of the Wind Farm (particularly, in the case of TSIL and its borrowing capacity, in the event that it was unable to repay its borrowings).

145 As I have mentioned, the appellant, in its reply, joined issue with the first respondent on the allegations in pars 6(a) and 14(b) of the defence.

146 It appears that the appellant presented its case at trial in the belief that par 14(b) of the defence, in referring to 'any significant modification of the Wind Farm', was contemplating an expansion of the maximum generating capacity of the plant beyond 80 megawatts. As the trial judge noted, an expansion of that kind would be beyond the range of considerations properly to be taken into account in assessing whether to grant or refuse consent, in that the JVA is confined to the development of the Wind Farm and this, in turn, is defined by reference to the development of two generating plants each having a capacity of 40 megawatts [229].

147 The specific proposal relied on by the first respondent, namely, the addition of six turbines at a total cost of about $15 million, was not disclosed by the first respondent to the appellant before the appellant sought the first respondent's consent to the proposed change of control. Further, it was not disclosed in the course of communications between the parties relating to the request for consent (ts 146). In addition, details as to the nature and extent of the specific proposal were not put to any of the appellant's witnesses in cross-examination.

148 However, the nature, extent and cost of the modifications under consideration by the first respondent emerged in the cross-examination of the first respondent's witness, Mr Trumble. Counsel for the appellant questioned Mr Trumble, as follows:

In the course of making your recommendations I think you gave some thought to modification of the existing Emu Downs wind farm?---Yes.

What sort of modification did you have in mind?---The potential expansion of the wind farm by the addition of additional wind turbine generators.

Did you have in mind the addition of extra generating capacity?---We had that in mind, yes.

And by that I mean adding to the substations?---No.

Well, is it not the case that the substations out there can only handle 80 megawatts?---Yes.

In order to put more electricity into the grid you have to increase the capacity of the substations?---At the peak load. The wind farm does not operate at its peak capacity only but irregularly, when the wind is blowing

I understand that. You can add some more turbines to try to generate more electricity when the wind is blowing?---Yes.

But I want to understand whether the modification that you had in mind included increasing the capacity of the substations?---No, it did not.

Did you have in mind any particular extent of possible addition of turbines?---At that time we had asked consideration of the existing noise limitations for the wind farm what our expansion capability might be. We had at that time not yet received confirmation as to what the expansion might be within those limitations.

So did you have in mind at all a potential number of additional turbines that might be installed?---My own view was that we were potentially looking at up to six further turbines.

So you didn't think you had in mind any more than six?---Not given the limitations that were

Did you participate in the process of verbal questions and answers with Transfield and Stanwell people?---A number of times, yes.

That's in relation to the consent question?---Specifically, on March 6 I participated in that meeting.

Did you say or did you hear anyone else from Griffin say that you had in mind the possible addition of up to six turbines?---Yes. We had I believe discussed an expansion of the Emu Downs project. I am not - my recollection with regard to the number six being used I can't confirm for you.

So you don't know whether you ever put to Transfield that what was in your mind at least was up to six additional turbines?---I don't believe that's the case.

You don't think you did tell them?---I believe that we discussed expansion of the wind farm but I don't believe we discussed six.

When you discussed expansion did you make clear what you had in mind, that is, adding turbines, not adding generating capacity?---I don't believe the conversation went to that depth.

Right. The turbines come at about $2 million each on their poles and installed, don't they?---I would suggest that that perhaps is a bit light given current increases.

You mean light not late?---Light. Yes.

You think it's a bit more than two million?---I believe it would be.

But it's of that order, isn't it? Say two and a half million?---Fair enough.

We're not talking $10 million a?---No, we wouldn't be talking

No, so around two and a half million dollars to design, install and get another turbine going and hooked up to the system. Correct?---Correct.

Is it the case that at the moment there are some - there are 48 turbines on poles?---That's correct.

And they are connected to two 40 megawatt substations?---That's correct (ts 145 - 147).

149 A little later in Mr Trumble's cross-examination, counsel for the appellant returned to this issue:

So the substations can't exceed an output of 80 megawatts?---That is our physical and contractual limitation.

So the addition of the extra turbines would simply increase the proportionate time at which you're generating more electricity below the 80 megawatt - - - ?---That's correct.

Good. Thank you for that.

ZELESTIS, MR: Now, to come back to the proposed modification, you have said in your mind it was up to six new turbines and pylons?---Yes.

We have had a discussion about the rough cost of that. There are two participants in the joint venture, aren't there?---Yes.

So each participant would have to contribute the capital cost of three?---Yes.

Say, seven and a half, eight million dollars?---Yes.

Can I suggest to you that in the course of considering whether to recommend consent to Griffin, you never paid any attention to TSIL's capacity to fund a limited expenditure of that kind, did you?---No.

Because you didn't doubt that it could?---I would not have a very good understanding of whether they could or couldn't. [It] just didn't get a consideration.

So you didn't pay any attention to that?---No (ts 150).

150 The trial judge noted in his reasons the evidence of Mr Trumble about this proposed expansion. His Honour said:

In relation to that portion of the Griffin Board Paper dealing with the expansion of the Wind Farm, Mr Trumble advised that Griffin has had under consideration the addition of up to six further turbines. The addition of those turbines would not take the Wind Farm beyond a capacity of 80 mw, but would increase the power generated up to 80 mw during the many times at which the Wind Farm operated below maximal output because of reduced winds. He estimated that the capital cost of each of those six turbines would be approximately $2.5 million - producing a total capital cost of about $15 million [146].

151 The appellant did not at any material time request further and better particulars from the first respondent in relation to the 'significant modification' of the Wind Farm referred to in pars 6 and 14 of the defence.

152 In my opinion, the nature, extent and cost of the potential expansion of the Wind Farm under consideration by Griffin was adequately raised on the pleadings by the general allegation in par 14(b) of the defence (in respect of which the appellant was content not to seek further and better particulars), and litigated at the trial.

153 I turn now to deal with the appellant's submission in relation to the effect of Stanwell terminating the Technical Services Agreement.

154 The first respondent pleaded in par 6(b) of its defence that following the proposed change in control, the appellant would not have available to it adequate technical resources and experience necessary to operate or maintain the Wind Farm, or design, develop, construct, commission or test the Wind Farm (as modified or proposed to be modified).

155 Also, the first respondent pleaded in par 14(a) of its defence that the decision to withhold consent was not unreasonable and was made because of, relevantly, the first respondent's concerns about the adequacy of the technical expertise and capacity of TSIL and TSE in the design, development, construction, commissioning, testing, operation, maintenance and modification of wind farms. The particulars of this allegation asserted, relevantly, that the first respondent was not reasonably satisfied that either or both of TSIL and TSE had:

(a) sufficient numbers of employees with adequate technical expertise in the design, development, construction, commissioning, testing, operation, maintenance and modification of wind farms or in the procurement, or management of the performance, of any such work by an independent contractor; or

(b) access to sufficient wind farm specific systems, procedures and processes necessary for the proper and efficient design, development, construction, commissioning, testing, operation, maintenance and modification of wind farms,

when compared to Stanwell and its related bodies corporate including the appellant, which had sufficient numbers of such employees and such systems, procedures and processes.

156 As I have mentioned, the appellant, in its reply, joined issue with the first respondent on the allegations in pars 6(b) and 14(a) of the defence.

157 In my opinion, the effect of Stanwell terminating the Technical Services Agreement was raised adequately on the pleadings by the assertion in the particulars to par 14(a) of the defence in relation to the technical expertise and capacity of TSIL and TSE compared to Stanwell and its related bodies corporate, and litigated at the trial. The assertion in the particulars to par 14(a) included, notably, the absence of reasonable satisfaction on the first respondent's part as to the adequacy of either or both of TSIL's and TSE's technical expertise in the procurement, or management of the performance, of any of the work in question by an independent contractor, when compared to Stanwell and its related bodies corporate.

158 Ground 1 of the appeal has been made out in part. As I have mentioned, I will refer in greater detail to the reasons or grounds that were relied on by the trial judge, but not raised on the pleadings or litigated at the trial, in the course of considering the other grounds of appeal.

159 Ground 2 asserts, in essence, that the trial judge erred in fact by holding that TSIL did not have the financial resources to adequately support the appellant if the proposed change in control proceeded. According to the appellant, his Honour should have held that TSIL did have the requisite financial resources.

160 The trial judge held that the appellant had failed to demonstrate that TSIL had sufficient financial resources to adequately support the appellant in that no evidence was adduced at trial as to:

(a) the current financial position of TSIL, or as to what was proposed in relation to the revenue stream to be derived by the appellant from its participation in the Joint Venture [241] - [242];

(b) the terms of the contracts which had been entered into by the parties for the sale of the products of Joint Venture operations [91], [243];

(c) the maintenance cycle of the turbines, from which an assessment could be made of the likelihood of significant expenditure on maintenance or replacement of the turbines in the future [243];

(d) the financial risks to which the Joint Venture and its participants were exposed or whether there was insurance against these events [243]; and

(e) the appellant's capacity to raise capital by borrowing [245].

161 I will deal with each of these findings in turn.

162 First, as to the current financial position of TSIL, and as to what was proposed in relation to the revenue stream to be derived by the appellant from its participation in the Joint Venture, Mr Charles Mott, TSIL's chief financial officer, gave evidence. His witness statement was tendered as his evidence-in-chief.

163 Mr Mott said that he was responsible for the financial and commercial functions of the Transfield Services Infrastructure Fund (the Fund) including financial and management reporting, treasury, funding and investor relations.

164 He gave evidence that TSE is the holding company of TSAPL. TSE is a publicly listed company. It is included in the S&P/ASX 200 and had a turnover of $2.4 billion during the year ended 30 June 2007. TSE wholly owns TSAPL. TSE also owns 49% of the Fund. The Fund is publicly listed and the balance of the Fund (not owned by TSE) is owned by members of the public.

165 The Fund is a triple stapled entity comprising TSIL, TSI International Ltd (TSIIL) and Transfield Services Infrastructure Trust (the Trust). Infrastructure Fund Management Ltd (RE) is the responsible entity for the Trust.

166 TSIL is the holding company of the whole of the Fund's investment portfolio.

167 TSI (WF) is a wholly-owned subsidiary of TSIL. It was incorporated in late November 2007 for the sole purpose of acquiring and operating wind farms that were being divested by the Government of Queensland.

168 TS Renewables is a wholly-owned subsidiary of TSAPL. TS Renewables was incorporated in late November 2007 for the purpose of holding the portfolio of potential wind farm development sites being acquired by TSIL from the Government of Queensland.

169 Mr Mott gave evidence that, as publicly listed entities, both the Fund and TSE are required to report their financial performance at the half-year to 31 December and the full year to 30 June each year. He annexed to his witness statement the accounts of the Fund for the year ended 30 June 2007 (which were dated 27 August 2007) and the accounts of the Fund for the year ended 31 December 2007 (which were dated 20 February 2008). Mr Mott gave evidence that the accounts for the six-month period ended 31 December 2007 were the most recent publicly available accounts.

170 The accounts for the year ended 30 June 2007 revealed a profit before income tax of $10,285,000, an income tax expense of $8,751,000 and a net profit attributable to stapled security holders of the Fund of $1,534,000. The accounts for the six-month period ended 31 December 2007 revealed a profit before income tax of $23,344,000, an income tax expense of $7,124,000 and a net profit of $16,220,000.

171 As to the accounts for the year ended 30 June 2007, there was evidence that the results for the 12-month period ended 30 June 2007 were not based upon a full year's income from all of the assets that the Fund owned by 30 June 2007. See note 29 to the accounts where it is said:

In August and September 2006, the Company purchased the power stations of Transfield Services Ltd for $174,259,000 and in February 2007 interests in the water filtration assets for $27,243,000 (net of loans transferred) from Transfield Services Ltd.

172 Mr Mott said in his 'chief financial officer's report', which was included in the Fund's annual report for 2007, relevantly:

The consolidated accounts included in this Annual Report relate to the operations of the TSI Fund for the 12 months to 30 June 2007. The consolidated Net Profit After Tax of $1.5 million recorded for the year on revenues of $147.1 million was slightly ahead of the forecasted statutory result of a $3.4 million loss presented in the Product Disclosure Statement (PDS) and Prospectus dated 4th May 2007, which was issued for the IPO.

173 As to the accounts for the six-month period ended 31 December 2007, the only significant event which occurred after the balance date (31 December 2007) and before the signing of the financial statements on 25 February 2008, was that on 25 February 2008 the directors resolved to pay a fully-franked dividend of 18 cents per share. See note 9 to the accounts.

174 It must be emphasised that it was the financial position of TSIL at or about the time when consent to the proposed change of control was sought and refused that was relevant, and not its position as at the date of trial.

175 Counsel for the first respondent cross-examined Mr Mott, but not on any issue relating to the current financial position of TSIL.

176 Mr Mott said in par 50 of his witness statement:

The Fund expects that the operating costs of the wind farm will be met from the wind farm's operating revenue.

177 Further, the first respondent did not raise at trial any issue concerning the application of the appellant's revenue stream if the change of control occurred.

178 In any event, as I have mentioned, on 21 July 2005, the appellant, the first respondent and the second respondent executed the Deed of Cross Charge. Relevantly, for present purposes, the appellant charged in favour of the first respondent and the second respondent, amongst other things, all of its JV Interest, all of its entitlement to the JV Output, its rights and interests in any sales contracts and its right to any proceeds, revenues or other amounts payable to it with respect to the sale of its share of the JV Output to secure, amongst other amounts, its share of the cash calls and all other moneys which may become due and payable by the appellant to the first respondent or the second respondent pursuant to the JVA or the Deed of Cross Charge. Although the charge operated as a floating charge over the appellant's entitlement to the JV Output, its rights and interests in any sales contracts and its rights to any proceeds, revenues or other amounts payable to it with respect to the sale of its share of the JV Output, the floating charge crystallises and becomes fixed if the security constituted by the Deed of Cross Charge becomes enforceable in respect of the appellant. Relevantly for present purposes, the security will become enforceable upon the appellant becoming a defaulting participant and the rights under the Deed of Cross Charge becoming enforceable pursuant to cl 9.6 of the JVA. By cl 2.5 of the Deed of Cross Charge, the cross charges operate as first ranking securities.

179 I am satisfied that, contrary to the finding of the trial judge, evidence was adduced at trial as to the financial position of TSIL at material times, and as to the likely future use of the Wind Farm's revenue stream.

180 Secondly, as to the terms of the contracts which had been entered into by the parties for the sale of the products of Joint Venture operations, these contracts were referred to in the witness statement of the appellant's witness, Mr Alan Sutcliffe.

181 Mr Sutcliffe's witness statement was tendered at the trial as his evidence-in-chief. He was not cross-examined.

182 Mr Sutcliffe is the finance manager of Stanwell. He gave evidence concerning the contracts relating to the sale of product, which he described as 'long-term, fixed price contracts with mechanisms for the future calculation of price'. Paragraphs 20, 21 and 22 of his witness statement read:

1. A number of power purchase agreements (PPAs) are in place for the purchase of electricity, renewable energy certificates (RECs) and other green benefits produced by the Wind Farm. These are:

(1) 55MW Energy Purchase Agreement with Synergy (formerly known as Western Power Corporation) (both EDWF 1 and EDWF 2) which is document 7, pages 279 - 390 in the trial bundle;

(2) 25MW RECs and Energy Purchase Agreement with Synergy (formerly known as Western Power Corporation) (both EDWF 1 and EDWF 2) which is document 6, pages 170 - 278 in the trial bundle;

(3) 28MW RECs Purchase Agreement with Synergy (formerly known as Western Power Corporation) (both EDWF 1 and EDWF 2) which is document 8, pages 391 - 476 in the trial bundle;

(4) Green Benefits Purchase Deed (13.5 MW) with Origin (formerly with Energex) (EDWF 1) which is document 5, pages 162 - 169 in the trial bundle.

1. The PPA's are all long term, fixed price contracts with mechanisms for the future calculation of price. Accordingly, none of the electricity of RECs produced by the Wind Farm is traded on the spot market. This means that, while there is an agreement in place for trading services to be provided to the JV by Griffin, no trading of the electricity and RECs produced by the Wind Farm is in fact required.
2. Griffin prepares and issues the invoices for the sale of both Participants' shares of the electricity and RECs produced by the Wind Farm.

The reference in Mr Sutcliffe's witness statement to EDWF 1 is to the appellant and the reference to EDWF 2 is to the first respondent.

183 The likely future expenditure obligations of the Joint Venture were set out in particulars to par 23 of the statement of claim. In par 23(a), the appellant pleaded that the revenue to be received by the appellant from the sale of its share of JV Output would substantially exceed its share of the costs of operating the Wind Farm. The particulars to par 23(a) read:

Budget income and expenditure for the whole Wind Farm for the financial years ending 30 June 2010 to 2017, prepared by the Manager, are as follows:

*2009 budget figures not finalised at date of claim

Plaintiff's share of income and expenses is 50%

184 In par 4(a) of its defence, the first respondent admitted par 23(a) of the statement of claim.

185 I am satisfied that, contrary to the finding of the trial judge, evidence was adduced at trial as to the terms of the contracts which had been entered into by the parties for the sale of the products of Joint Venture operations, even though the contracts themselves were not tendered.

186 Thirdly, the first respondent did not raise at trial any issue concerning the maintenance cycle of the turbines. Accordingly, it was unnecessary for the appellant to adduce evidence as to the likely average annual costs of maintaining and replacing the turbines and related equipment. In any event, however, this evidence was in fact tendered. See the document entitled 'Operation & Maintenance Strategy - Emu Downs Wind Farm Joint Venture' dated 24 June 2005, where it is stated at pages 4 - 6 (GAB 94- 96):

FINANCIAL

Years 1 & 2

Operational and Maintenance costs are planned to be low in years 1 and 2 due to the EPC Contractor (Vestas) providing defects liability, warranty and scheduled maintenance for this period. The main costs in years 1 and 2 will be associated with management of the wind farm and environmental monitoring and general facility and plant maintenance and compliance.

Years 3 - 5

In years 3 - 5 Vestas will provide all site operations and maintenance services for a price of $26 500/turbine (effective at date of PC - Oct 2006) or a total cost of $1 272 000 (or $1 232 640 in 2005 dollars). Wind farm management costs will be similar to years 1 & 2.

Unscheduled Maintenance of the wind farm will become a major cost item as the plant ages. It is expected that years 3 - 5 will have a relatively low level of unscheduled maintenance.

Vestas will engage third parties as required to assist with the maintenance of the wind farm. These may include fire systems maintenance, lifting equipment inspection and certification and switchyard maintenance and testing.

A spare parts inventory will be determined after experience has been gained with the plant. Prior to the expiry of the defects liability period an analysis will be made of the best option for holding spare parts, ie JV owned inventory, Vestas owned inventory. An amount of $550 000 has been allowed in the EPC Budget for provision of spare parts.

Years 6 - 20

It has been assumed that scheduled maintenance costs and wind farm management costs will be comparable to the first 5 years of operation. Unscheduled maintenance is expected to increase over the life of the project. Unscheduled maintenance costs include labour and spare parts.

A number of electronic based systems will require replacement during the life of the project. It is expected that the Wind Turbine Control Systems and Switchyard Protection relays will require replacement in year 12 due to lack of supportability at an estimated cost of $1 388 000. The site SCADA system will require software and hardware upgrades every 5 years at an estimated cost of $21 000.

The average cost of operation and maintenance of the wind farm over the 20 year life of the projects is $2 107 000 per year or $43 900 per turbine. See the graph below for the cost components and time effect of costs.

187 I am satisfied that, contrary to the finding of the trial judge, evidence was adduced at trial as to the maintenance cycle of the turbines, from which an assessment could be made of the likelihood of significant expenditure on maintenance or replacement of the turbines in the future.

188 Fourthly, the first respondent did not raise at trial any issue concerning the financial risks to which the Joint Venture and its participants were exposed or whether there was insurance against these events. The first occasion on which the issue of calamitous risk was mentioned was by the trial judge during the appellant's oral closing submissions. This exchange occurred between his Honour and counsel for the appellant:

MARTIN CJ: Quitem [sic] but the point is you have $30 million available to service eight or nine major projects. Isn't it reasonable for the party whose consent is sought to say, 'That gives me a reasonable basis for concern about the availability of capital to meet whatever exigencies might lie in the future, which I know not'? Isn't that a reasonable position.

ZELESTIS, MR: With respect, not at all. It's not a reasonable foundation at all because one needs to have some idea of the order of magnitude of the exigencies because

MARTIN CJ: The exigencies include a calamitous event, obviously.

ZELESTIS, MR: There are provisions for insurance and I mean, the calamitous event has to be reasonably based on experience: has one happened? Has one happened in other wind farms around the country? Do these things have any foundation? It's just speculation otherwise (ts 268 - 269).

189 As I have mentioned, by cl 7.11(a) of the JVA, relevantly, all matters concerning the Joint Venture and the Joint Venture Property must be determined by the Management Committee. Clause 7.11(b)(v) provides that, without limitation to cl 7.11(a), the powers and responsibilities of the Management Committee include, relevantly, establishing appropriate insurance arrangements for the Joint Venture.

190 Also, by cl 9.1 of the Management Agreement, relevantly, the second respondent as manager is bound to maintain such insurances as may be directed by the Management Committee from time to time, with an insurer approved by the participants.

191 The appellant and the first respondent were joint venturers. Each of them (relevantly, the first respondent) was fully informed as to the Joint Venture operations. If the first respondent had any concern about the ability of the proposed new controller of the appellant to deal with a calamitous event in respect of which there was no insurance policy that would respond, it is reasonably to be expected that this point would have been raised at the trial.

192 Further, in the course of communications between the parties after consent to the proposed change in control was sought and before it was refused, Griffin asked TSIL numerous questions. One of the questions related to insurance. TSIL said in its written response dated 15 January 2008:

Transfield intends to maintain the current insurance arrangements that are in place for the Emu Downs wind farm until they are required to be changed or modified, in which case, Transfield will agree any future insurance arrangements with Griffin as its Joint Venture partner.

TSIL's written response was tendered in evidence. Mr Mott said in evidence that the answers in the written response were true. He was not cross-examined on the point.

193 I am satisfied that although, as the trial judge said, no evidence was adduced at trial as to the financial risks to which the Joint Venture and its participants were exposed, that issue was not raised on the pleadings or otherwise by the parties in the course of the trial. This observation may also be made in relation to the absence of evidence as to whether there was insurance against these events. However, in any event, the Management Committee was bound to establish appropriate insurance arrangements for the Joint Venture and there was no suggestion at the trial that this had not been or would not be done.

194 In my respectful opinion, his Honour should not have taken into account the absence of evidence as to financial risks or as to insurance arrangements in relation to them.

195 Fifthly, as to the appellant's capacity to raise capital by borrowing, the appellant's JV Interest was not encumbered except under the Deed of Cross Charge.

196 The first respondent, in par 11.55 of the Griffin Board Paper, assessed that TSIL would have $30 million of available credit after it settled with Stanwell on the purchase of the appellant's issued share capital. See par 11.55 of the paper where it is said that, based on an analysis of publicly available information, TSIL will have 'unborrowed debt of around $30 million' if 'the Emu Downs acquisition proceeds'. Although, as I have mentioned, the Griffin Board Paper was not tendered as evidence of the truth of its contents, par 11.55 is evidence of the basis on which the first respondent formed its view in relation to the appellant's capacity to raise capital by borrowing.

(a) the accounts of the Fund for the six-month period ended 31 December 2007 reveal a net profit after tax for that period of $16,220,000;

(b) the parties were agreed, on the pleadings, that the revenue to be received by the appellant from the sale of its share of JV Output would substantially exceed its share of the costs of operating the Wind Farm; and

(c) the charges created by the appellant under the Deed of Cross Charge secure, amongst other amounts, its share of the cash calls and all other moneys which may become due and payable by the appellant to the first respondent or the second respondent pursuant to the JVA or the Deed of Cross Charge, and the cross charges operate as first ranking securities.

198 At trial, the first respondent did not raise any issue (on the pleadings or otherwise) as to whether it would be necessary for the appellant to obtain capital by offering its JV Interest as security or as to the prospect of the appellant obtaining capital by offering its JV Interest as security to prospective lenders or as to whether the charges created by the appellant under the Deed of Cross Charge would impact on its capacity to borrow funds against the security of its JV Interest.

199 In my respectful opinion, his Honour should not have taken into account the absence of evidence as to the prospect of the appellant obtaining capital by offering its JV Interest as security to prospective lenders.

200 The trial judge should not have held that TSIL did not have the financial resources to adequately support the appellant if the proposed change in control proceeded. On the evidence, his Honour should have held that TSIL did have the requisite financial resources. My conclusions on these matters are based on the following:

(a) The question whether TSIL had the financial resources to 'adequately' support the appellant depends, in part, on the nature and extent of the appellant's likely receipts and outgoings on income and capital account from Joint Venture operations.

(b) The unchallenged evidence of TSIL's chief financial officer, Mr Mott, at the trial was that the Fund expected that the operating costs of the Wind Farm would be met from the Wind Farm's operating revenue.

(c) The unchallenged evidence of Stanwell's finance manager, Mr Sutcliffe, at the trial was that the appellant's share of JV Output had been sold under long-term, fixed price contracts with mechanisms for the future calculation of price.

(d) It was agreed on the pleadings that the revenue to be received by the appellant from the sale of its share of JV Output would substantially exceed its share of the costs of operating the Wind Farm.

(e) The first respondent and the second respondent hold first ranking charges over the appellant's entitlement to the JV Output, its rights and interests in any sales contracts and its right to any proceeds, revenues or other amounts payable to it with respect to the sale of its share of the JV Output. The charges secure, relevantly, the appellant's share of cash calls and all other moneys which may become due and payable by the appellant to the first respondent or the second respondent pursuant to the JVA or the Deed of Cross Charge.

(f) The unchallenged evidence at the trial was that for the six-month period ended 31 December 2007, the Fund had a net profit of $16,220,000.

(g) The accounts for the six-month period ended 30 December 2007 were dated 25 February 2008 and it was not suggested at the trial that there had been any material adverse change in the appellant's financial condition between 31 December 2007 and 25 February 2008. The accounts were reasonably proximate to the date on which the first respondent refused its consent, namely 18 March 2008.

(h) The total cost of adding the six turbines under the specific proposal relied on by the first respondent was about $15 million, and it is apparent, on the basis of the facts and circumstances set out at [162] - [199] above, that the appellant in combination with TSIL had the capacity readily to contribute the appellant's share of the total cost.

202 Ground 3 asserts, in essence, that the trial judge erred in law by holding that the first respondent was entitled to consider, and objectively to justify the reasonableness of withholding consent to the proposed change in control by reference to, the increased likelihood of competition between entities associated with the appellant and entities associated with the first respondent if the proposed change in control proceeded. According to the appellant, his Honour should have held that the first respondent was not so entitled.

203 The trial judge held that the increased prospect of competition between entities associated with TSIL on the one hand and the first respondent on the other was relevant to the issue of the reasonableness of the first respondent's refusal of consent [231] - [232], [260] - [262]. The basis for this conclusion was that, although cl 3.10 of the JVA permits competition, the first respondent was entitled to take into account the manner in which the right of competition was likely to be exercised [232].

204 Clause 3.9 of the JVA confined the Joint Venture to the JV Purpose, being the purpose specified in cl 3.1. By cl 3.1, the participants agreed to associate as joint venturers to implement and carry the Project into effect and to pursue the following objects 'subject to and in accordance with this Agreement':

(ii) operate, maintain and, if required, modify the Wind Farm;

(iii) connect the Wind Farm to Western Power's transmission network; and

(iv) undertake and perform all such other acts, matters and things,

so as to generate the JV Output, to which each participant will be severally entitled to a share in proportion to its JV Interest; and

(b) to undertake such other purposes as the Management Committee may approve 'in accordance with this Agreement'.

205 Clause 3.10 specified the rights of the participants to engage in activities outside the scope of the JV Purpose. By cl 3.10, each participant has an unrestricted right to engage in and receive the full benefit of any activity outside the JV Purpose (whether or not in competition with the JV Purpose or the other participant) without consulting the other participant or permitting the other participant to participate, and without any liability or accountability to the other participant, provided such activity does not unreasonably interfere with, impede or compromise the JV Purpose.

206 The question whether increased competition was a consideration which the first respondent was entitled to take into account in deciding to withhold its consent to the proposed change in control depends on the proper construction of the JVA (in particular, the proper construction of cl 3.1, cl 3.9 and cl 3.10 in the context of cl 11.7).

207 It is apparent from cl 3.10 that, when the JVA was executed, the participants contemplated that each of them may, and would be entitled to, engage in other commercial activities (including owning and operating wind farms and other forms of energy generation) in Western Australia or elsewhere that would create or involve competition between those other commercial activities and the Joint Venture.

208 Clause 3.10, read with cl 3.9, therefore conferred on the appellant the right to engage in other commercial activities, whether or not those activities would create or involve competition with the first respondent or its related entities, subject to the other commercial activities not unreasonably interfering with, impeding or compromising the JV Purpose.

209 I note, as regards the JV Purpose, that when the appellant sought the first respondent's consent to the proposed change in control, the Construction Activities had been completed and the Wind Farm had been connected to Western Power's transmission network. The Wind Farm had been generating and selling electricity since in or about October 2006.

210 I also note, as regards the JV Purpose, that the participants confined the agreed objects of the Joint Venture to, relevantly, the construction, operation, maintenance and, if required, modification of a wind farm with two generating plants of 40 megawatts capacity each. The words 'and, if required, modify the Wind Farm' in cl 3.1(a)(ii) refer to modifications which may be necessary in order for the Wind Farm to operate in the manner provided for in the JVA. The generating capacity of the Wind Farm cannot be increased or expanded without the consent of both participants. Although the JV Purpose includes undertaking such other purposes as the Management Committee may approve, in accordance with the JVA, the adoption of any other purpose would require the unanimous consent of the representatives of the Management Committee; that is, the adoption of any other purpose would, in substance, require the consent of both participants. See the provisions of the JVA which I have summarised at [30] - [31] above. A participant may refuse, for any reason (or, indeed, no reason), to consent to the adoption of another purpose. A participant, in deciding whether to consent to the adoption of another purpose, is not constrained by reasonableness. A new agreement is required without any obligation on either participant to agree.

211 It is apparent from cl 3.10, read with cl 11.7 (and, also, cl 11.4) that when the JVA was executed the participants contemplated that one or other of them might undergo a change in control or assign its rights and interests under the JVA and that the new controller or the assignee might, and would be entitled to, engage in other commercial activities (including owning and operating wind farms and other forms of energy generation) in Western Australia or elsewhere that would create or involve competition between those other commercial activities and the Joint Venture.

212 It is likely that any new controller or assignee will be involved in energy generation. The clear implication from cl 3.10, read with cl 11.7 (and, also, cl 11.4) is that a new controller or an assignee might well be engaged in commercial activities, before and after the change in control or the assignment, that have been and will be in competition with the Joint Venture.

213 Although the 'proviso' to cl 3.10 protects the integrity of the JV Purpose, cl 3.10 otherwise confers, in very broad terms, freedom for each participant to engage in other commercial activities, whether in competition with the Joint Venture or not. So, one participant may establish a wind farm or some other electricity-generating project in the vicinity of the Joint Venture operations or anywhere else in Western Australia.

214 The 'proviso' in cl 3.10 applies only to the participants. It has no application to the controller or any related entity of a participant. Accordingly, the controller or a related entity of a participant may engage in commercial activities (including owning and operating wind farms and other forms of energy generation) in Western Australia or elsewhere that create or involve competition with the Joint Venture.

215 The only contractual restraint on competition by a participant of the kind I have described is that the other commercial activities giving rise to the competition not unreasonably interfere with, impede or compromise the JV Purpose. The word 'unreasonably' is important. It connotes that the competition generated by the other commercial activities must not threaten the pursuit, implementation or carrying on, on a commercial basis, of any of the objects specified in cl 3.1. As at 18 March 2008, when the first respondent refused its consent to the proposed change of control, all agreed construction activities had been completed, and the Wind Farm had been generating and selling electricity into the Western Power transmission network, for about 18 months. In these circumstances, if any such competition were to interfere with, impede or compromise the JV Purpose it would, probably, relate to the price at which each of the participants was able to sell its share of the JV Output. As to this point, the restraint against unreasonably interfering with, impeding or compromising the JV Purpose would require that the competition in question should not, of itself, diminish the ability of each participant to sell its share of the JV Output on terms that would enable the participant to derive a reasonable commercial rate of return on its investment in the Project.

216 In my opinion, on the proper construction of cl 3.1, cl 3.9 and cl 3.10 of the JVA, in the context of cl 11.7, a participant who is considering whether to consent to a proposed change in control is not entitled to take into account any aspect of competition which extends beyond protecting the integrity of the JV Purpose. Consent can only be refused on the ground of the competitive effect of the proposed change in control if the change in control would, in terms of cl 3.10, unreasonably interfere with, impede or compromise the JV Purpose. This must necessarily involve an assessment of the extent to which the JV Purpose has already been implemented, and the commercial circumstances of the Joint Venture, as at the date on which consent is refused.

217 I respectfully disagree with the trial judge's decision, in effect, that the first respondent, in deciding whether to consent to the proposed change in control, was entitled to take into account the increased likelihood of competition between entities associated with the appellant and entities associated with the first respondent. On the proper construction of cl 3.1, cl 3.9 and cl 3.10 of the JVA, in the context of cl 11.7, the first respondent was not entitled to consider, and objectively to justify the reasonableness of withholding consent to the proposed change in control by reference to, the increased likelihood of competition between entities associated with the appellant and entities associated with the first respondent if the proposed change in control proceeded. The first respondent was not entitled to take into account the manner in which the appellant, when under the control of TSIL, might exercise its express right of competition under cl 3.10 or the manner in which TSIL or any of its related bodies corporate might compete with the first respondent or any other companies within the Griffin group.

219 Ground 4 asserts, in essence, that the trial judge erred in fact by holding, in essence, that there was a real prospect that if the proposed change in control occurred, entities associated with the first respondent would have to disclose confidential information to entities associated with the appellant. According to the appellant, his Honour should have held that there was no such real prospect.

220 The trial judge held that the commercial detriment flowing from the competition concern, which could properly be considered in refusing consent, was the commercial detriment that would flow from disclosing confidential information to a competitor in relation to financing the capital cost of adding six turbines, the financing or securitisation of a participant's JV Interest or the collective sale of JV Output [261] - [262]. His Honour found that negotiations on subjects of this kind would be likely to be enhanced if the parties to the negotiations were free to communicate with each other without concern that commercially confidential aspects of their business or plans for the future might give the other party or its associates a competitive advantage in relation to other projects [262].

221 As to the disclosure of confidential information as regards financing the capital cost of adding six turbines, this issue had not been raised by the first respondent with TSIL, and the cost involved was, in the context of the Project as a whole, modest. Mr Trumble gave this evidence:

So you don't know whether you ever put to Transfield that what was in your mind at least was up to six additional turbines?---I don't believe that's the case.

You don't think you did tell them?---I believe that we discussed expansion of the wind farm but I don't believe we discussed six.

When you discussed expansion did you make clear what you had in mind, that is, adding turbines, not adding generating capacity?---I don't believe the conversation went to that depth.

...

ZELESTIS, MR: Now, to come back to the proposed modification, you have said in your mind it was up to six new turbines and pylons?---Yes.

We have had a discussion about the rough cost of that. There are two participants in the joint venture, aren't there?---Yes.

So each participant would have to contribute the capital cost of three?---Yes.

Say, seven and a half, eight million dollars?---Yes.

Can I suggest to you that in the course of considering whether to recommend consent to Griffin, you never paid any attention to TSIL's capacity to fund a limited expenditure of that kind, did you?---No.

Because you didn't doubt that it could?---I would not have a very good understanding of whether they could or couldn't. [It] just didn't get a consideration.

So you didn't pay any attention to that?---No.

And the wind farm is operating financially profitably now, isn't it?---It is (ts 146, 150).

222 As to the disclosure of confidential information as regards the financing or securitisation of a participant's JV Interest, TSIL had informed Griffin that it was not proposing to offer any Wind Farm asset as security for long-term financing. TSIL said in its written response dated 15 January 2008 to questions from Griffin:

TSIL's current financial arrangements do not provide for any security over any wind farm assets and thus it is not proposed to offer any wind farm asset as security to [sic] any long term financing. This policy extends to TSIL's interest in the Emu Downs wind farm, which is financed on an unsecured basis. However, TSIL will consider secured project finance as an option if appropriate, as was the case for Stanwell.

As I have mentioned, Mr Mott gave evidence that the answers in TSIL's written response were true, and he was not cross-examined on the point.

223 As to the disclosure of confidential information relating to the collective sale of JV Output, it is not apparent why information confidential solely to Griffin would be likely to be disclosed to TSIL.

224 The JVA does not provide that access to confidential information or intellectual property of the Joint Venture or a participant is a ground for restricting competition between the participants. Clause 15 of the JVA controls and regulates access to and use of 'Confidential Information'. This term is defined in cl 1.1 to mean, in essence, information and data 'of a commercially sensitive nature relating to the Project' which is regarded by one or more of the participants as being confidential to it. By cl 15.1, relevantly, each participant must not disclose Confidential Information or allow it to be disclosed to any third party without the prior consent of the other participant. Clause 15.2 provides, relevantly, that notwithstanding cl 15.1, a participant may disclose Confidential Information to any related body corporate of the disclosing party, provided such related body corporate agrees with the disclosing party to comply with cl 15.

225 The right of competition under cl 3.10, read with cl 3.9, was very broadly expressed in circumstances where the participants must have known, when it was executed, that confidential information would be likely to be acquired in the course of pursuing, implementing or carrying on the objects of the Joint Venture. Indeed, it is apparent from recital A to the JVA, which records that, before executing the JVA, Stanwell and Griffin Energy 'undertook certain activities in order to determine whether to proceed with the Project' that confidential information was generated in the course of planning for and ascertaining the commercial feasibility of the Project.

226 Mr Trumble said in cross-examination that when the feasibility of the Project was under examination by the participants, each of them separately prepared a draft cash flow model on the basis of its own financing, tax and other interests. When each of these draft cash flow models had been prepared, they were given to an independent contractor, Corpac Pty Ltd, who was engaged by the participants to develop a more sophisticated cash flow model for the purposes of raising finance (ts 168 - 170). The settled model developed by Corpac Pty Ltd reflected an 'agreed common view' between the participants (ts 170 - 171). There appears to be no reason why a similar process could not be adopted in relation to the feasibility of any proposed expansion of the Project which the participants might, in future, wish to investigate. Any financial models prepared by an independent contractor engaged by the participants could readily be applied separately by each participant through its own scenarios and rates of return for the purpose of ascertaining whether it would be prepared to agree to the expansion.

227 In my opinion, it is materially inconsistent with the provisions of the JVA which permit competition between participants, even if they share confidential information, and with the provisions of the JVA which control and regulate access to and use of such information, to hold that the requirement for consent under cl 11.7 enables a participant to withhold consent because competition may occur when confidential information is held.

228 In any event, I respectfully disagree with the trial judge's decision, in effect, that there was a real prospect that if the proposed change in control occurred, then entities associated with the first respondent would have to disclose confidential information to entities associated with the appellant. My reasons for this conclusion are these:

(a) As I have mentioned, when the first respondent refused its consent to the proposed change in control, all agreed construction activities had been completed, and the Wind Farm had been generating and selling electricity into the Western Power transmission network, for about 18 months.

(b) The potential for the disclosure of confidential information in connection with any financing of the capital cost of adding six turbines, any financing or securitisation of a participant's JV Interest or the collective sale of JV Output was not of any particular significance when evaluated against:

(ii) the degree of importance of a participant's right to assign its valuable proprietary and contractual rights under the JVA;

(iii) the extent to which the JV Purpose had already been implemented;

(v) the very broad right of competition conferred by the JVA.

(c) The mechanisms adopted by the original participants to protect their individual interests when preparing draft cash flow models relating to the feasibility of the Project and the absence of any compelling reason why similar mechanisms could not readily be adopted in the future.

230 Ground 5 asserts, in essence, that the trial judge erred in law by holding that the first respondent was entitled to consider, and objectively to justify the reasonableness of withholding consent to the proposed change in control by reference to, the likely consequential termination of the Technical Services Agreement. According to the appellant, his Honour should have held that the first respondent was not so entitled.

231 The trial judge rejected the appellant's submission that the likely exercise by Stanwell of its right to terminate the Technical Services Agreement in the event of a change in control was extraneous to the relationship between the parties to the JVA and, therefore, not a matter that could properly be taken into account in assessing the reasonableness of the first respondent's refusal of consent. His Honour held that the likely exercise by Stanwell of this right was a relevant consideration:

[I]t is the very Change in Control for which consent is sought which triggers the capacity of Stanwell to terminate the Service Agreement pursuant to its terms. Thus, the termination of the Service Agreement would be the direct consequence of the Change in Control for which consent is sought. Further, the services provided under the Service Agreement, are provided to [the] Manager on behalf of the Participants and for the purposes of the Joint Venture. It follows that the effect of a Change in Control upon the provision of services by Stanwell under the Service Agreement is a matter directly related to the Joint Venture itself, and to the relationship between the Participants in the Joint Venture. The Service Agreement can be distinguished from the JDA which was a separate agreement, between separate entities (albeit related) and dealing with separate projects. Therefore, the termination of the Service Agreement is a matter permissibly taken into account in assessing the reasonableness of the refusal of consent [234].

232 A feature of the JVA and the Management Agreement is that the design, construction, commissioning, testing, operation and maintenance of the Wind Farm and its facilities are to be implemented or carried on by the second respondent as manager, either by itself or by the engagement of independent contractors. The functions and duties of the second respondent as manager are, of course, to be performed subject to any resolution or direction of the Management Committee under the JVA. But the activities in question are not to be implemented or carried on by the participants working together as joint venturers.

233 The JVA and the other JV Documents, consistently with this feature, do not make any provision for the participants to provide technical or other services in connection with obtaining or pursuing the objects of the Joint Venture, either directly or through the second respondent as manager. Similarly, no such provision is made in relation to the ultimate holding company or any other related body corporate of each participant. The participants were content to engage the second respondent as manager to provide or arrange for the provision of services. The participants made no promise to each other to provide any services for the advancement of the JV Purpose.

234 By cl 5.1(a) and (b) of the JVA, the participants engaged the second respondent to manage the Joint Venture, including the Construction Activities, in accordance with the JVA and the Management Agreement. By cl 5.1(d) of the JVA, subject to direction by the Management Committee and the terms of the Management Agreement, the participants agreed that the second respondent as manager had the authority, discretions and powers of an independent contractor in its management, supervision and conduct of the Joint Venture.

235 Clause 3.2 of the Management Agreement provides that, subject to any resolution or direction of the Management Committee under the JVA, the second respondent as manager shall perform the functions and duties specified in cl 3.2. See [41] - [42] above. These duties and functions include carrying out or procuring the design, construction, commissioning, testing, operation and maintenance of the Wind Farm Facilities and the supervision and control of consultants, specialists or independent contractors engaged by the second respondent as manager.

236 Pursuant to the powers conferred on it by the Management Agreement, the second respondent as manager executed the Technical Services Agreement with Stanwell and Griffin. As I have mentioned, the Technical Services Agreement superseded a similar agreement entered into by the second respondent as manager with Stanwell on 26 August 2005.

237 The second component of cl 11.7 requires that the new controller have the financial and technical resources and experience to adequately support the affected participant. As I have mentioned, the term 'adequate' connotes, relevantly, that the proposed new controller will have sufficient or suitable technical resources and experience on which the affected participant may draw to facilitate the discharge of its obligations under the JVA in relation to technical matters until the JV Termination Date. The proposed new controller is not required to promise or undertake to provide technical resources or experience to the affected participant. The requisite resources and experience merely have to be available to the affected participant.

238 In addition to the technical services provided by Stanwell under the Technical Services Agreement, Stanwell supplied to the second respondent as manager, on an informal basis and without cost, significant technical expertise for the purposes of the Joint Venture. These informal services were provided without any obligation. Stanwell could have ceased to provide the informal services at any time, and for any reason or no reason.

239 In my opinion, the better construction of cl 11.7 is that the second component deals comprehensively with the capacity of a proposed new controller to provide technical resources and experience to the affected participant upon a change of control. The third component of cl 11.7, construed in the context of the scheme of the JVA and the other JV Documents (in particular, the Management Agreement) with respect to the manner of implementing and carrying on the JV Purpose, does not permit the other participant to withhold its consent to a proposed change of control on the ground that an agreement for the provision of technical services entered into by the second respondent as manager with the ultimate holding company of the affected participant may be terminated upon the change in control occurring.

240 In my opinion, it would be unreasonable for the other participant to withhold its consent to a proposed change of control on the ground that the ultimate holding company of the affected participant may cease to provide informal technical expertise to the Joint Venture which the ultimate holding company is not obliged to provide and which it may cease providing at any time, for any reason or no reason. My reasons for this conclusion are:

(a) The second component of cl 11.7 deals comprehensively with the capacity of a proposed new controller to provide technical resources and experience.

(b) It would be incongruous if the affected participant's right to assign its valuable proprietary and contractual rights under the JVA were to be prejudiced by the affected participant or a related body corporate having voluntarily, gratuitously and without obligation agreed to provide informal technical expertise for the benefit of the Joint Venture, especially in the context of the scheme of the JVA and the other JV Documents (in particular, the Management Agreement) concerning the method of implementing and carrying on the JV Purpose.

242 Ground 6 asserts, in essence, that the trial judge erred in law and in fact by holding that the first respondent had properly and reasonably withheld its consent to the proposed change in control. According to the appellant, his Honour should have held that the first respondent had improperly and unreasonably withheld such consent.

243 The trial judge held that if it was necessary to consider the reasons pleaded in the first respondent's defence, its refusal of consent was not shown to have been wrongful or unreasonable having regard to its concerns in respect of:

(b) a diminution in the range and quality of technical resources and experience that would be available to the Joint Venture through the manager [256] - [259]; and

(c) an increased likelihood of competition between related entities of TSIL on the one hand and related entities of the first respondent on the other [261] - [262].

244 For the reasons I have given in the course of considering the other grounds of appeal, it was not open to the first respondent to withhold its consent on the basis of its concerns in respect of these matters. I respectfully disagree with the trial judge's finding that the first respondent's refusal of consent was not shown to have been wrongful or unreasonable.

246 The proposed change in control from Stanwell to TSIL was conditional upon the consent of the first respondent being obtained by 19 December 2008. The condition was not fulfilled.

247 By letter dated 13 January 2009, the appellant's solicitors informed the first respondent's solicitors that the agreement under which the proposed change in control was to be effected, had been terminated.

248 Initially, the first respondent contended that, in the circumstances, the appeal was moot. This contention was, however, abandoned before the hearing of the appeal. In my opinion, the first respondent properly abandoned the point. The trial judge's decision continues to affect legal rights and may affect future requests for similar consents, having regard to the proper construction of the JVA and the other JV Documents. Also, questions relating to costs in the primary proceedings turn upon the correctness of his Honour's decision.

249 The amended orders wanted by the appellant include declaratory relief, as follows:

(aa) it be declared that, on a proper construction of the Emu Downs Wind Farm Joint Venture Agreement dated 21 July 2005, as regards a request for consent to a proposed Change in Control, it is not relevant to consider, and it is not open to justify objectively the reasonableness of withholding consent to a proposed Change in Control on the ground of, an increased likelihood of competition between entities associated with the appellant and entities associated with the first respondent in the event of [a] proposed Change in Control;

(ab) it be declared that, on a proper construction of the Emu Downs Wind Farm Joint Venture Agreement, that it is not relevant for the first respondent to consider, and it is not open for the first respondent to justify objectively the reasonableness of withholding consent to a proposed Change in Control on the ground of, the

likely consequential termination of the Technical Services Agreement between EDWF Manager Pty Ltd, Stanwell Corporation Ltd and Griffin Coal Mining Company Pty Ltd;

(a) it be declared that the first respondent withheld its consent to the proposed Change in Control of the appellant unreasonably and in breach of the terms of the Emu Downs Wind Farm Joint Venture Agreement executed on 21 July 2005;

(b) it be declared that, in the events which have occurred, the appellant shall not be deemed to have offered to assign the whole of its joint venture interest in the Emu Downs Wind Farm Joint Venture to the first respondent.

250 I would allow the appeal. Counsel should be heard as to the precise form of the orders.