Energy Resources of Australia Ltd v Minister for Resources and Minister for Northern Australia

The interlocutory application 8 By an interlocutory application filed on 4 October 2024, Zentree Investments Limited (Zentree) and Packer & Co Pty Ltd (Packer) applied for leave to intervene in the proceedings pursuant to ss 236 and 237(1) of the Corporations Act 2001 (the Corporations Act). An alternative application to intervene pursuant to r 9.12(1) of the Federal Court Rules 2011 (Cth) was included in the interlocutory application but not pressed. 9 After hearing argument from Zentree and Packer and from the parties to the proceeding, I dismissed the interlocutory application on 22 October 2024. These are my reasons for doing so. 10 Zentree and Packer are both shareholders in ERA. The application for leave to intervene under ss 236 and 237 of the Corporations Act is expressed to be: … for the purpose of taking the following steps in the proceedings on behalf of the applicant: (a) pursuing and seeking relief in respect of a cause of action that [the Commonwealth Minister and the Territory Minister] permitted and/or engaged in conduct that wrongfully derogated from the grant of interests conferred by [the lease]; (b) submitting that [Ms Margarula] is estopped, whether by reason of res judicata (including the principle arising from Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589), issue estoppel or estoppel by deed from defending the proceedings on the basis of her contention that clause 2 of [the lease] is invalid; and (c) submitting that, to the extent that any respondent seeks relief to the effect that clause 2 of [the lease] is invalid, the Court should, in the exercise of its discretion, refuse that relief on the grounds of delay. 11 The third of these proposed arguments was not advanced before me and can be put to one side. It is useful to outline the first and second proposed arguments at this point. 12 Argument 1, as developed orally, focused on the express terms of cl 2 of the lease. The reference in the interlocutory application and written submissions to wrongful derogation from the grant of interests (a doctrine of property law that ordinarily concerns itself with acts of a lessor which are inconsistent with the quiet enjoyment of the property by the lessee) is likely an inapt label for the argument as it eventually emerged. In common with the argument advanced by ERA pursuant to ground 6, the argument would rely on s 203(1) of the MT Act in order to contend that the obligation of the Territory Minister under cl 2 of the lease is not displaced by the conferral of a discretion under s 43 of the MT Act. However, Argument 1 would then rely on what is said to be the contractual force of the lease in order to argue that ERA is entitled to injunctive relief or specific performance requiring the lease to be renewed. It would thus go further than ground 6, by directly requiring renewal of the lease rather than requiring reconsideration of the renewal application by the Minister. 13 The gravamen of Argument 1, therefore, is that ERA is entitled to additional or alternative relief to that sought in its Amended Originating Application. In effect, therefore, Zentree and Packer seek by their proposed intervention to bring about a further amendment to the originating application so as to add further or alternative prayers for relief. 14 Argument 2 would seek to meet an argument, advanced by Ms Margarula in the main proceeding, that cl 2 of the lease does not have the effect contended for by ERA (or, by extension, the effect contended for by Argument 1). In short, Ms Margarula submits that: (a) clause 2 was beyond power when the lease was executed, because the Mining Act as then in force made no provision authorising the grant of further terms or the conferral of a right of renewal of a mining lease; and (b) clause 2 is in any event invalid - and therefore not binding on the Territory or the Territory Minister - to the extent that it purports to fetter future exercises of statutory power or discretion. 15 Argument 2 is that it is not open to Ms Margarula to make these submissions, as a result of one or both of the decisions in the 1998 Margarula proceedings or the terms of a deed (the Long Term Care and Maintenance Agreement (LTCMA)) that she executed on behalf of traditional owners on 25 February 2005. (a) In the 1998 Margarula proceedings, Ms Margarula contended that the grant of the lease was unauthorised because all interests in uranium ore remained vested in the Commonwealth pursuant to the Atomic Energy Act 1953 (Cth) and neither the Territory Minister nor the Territory itself had any valid authority under a law of the Commonwealth to grant a lease to mine that ore. These arguments were unsuccessful before Sackville J and in the Full Court. Argument 2 seeks to contend that the validity of the entire lease (including cl 2) is therefore res judicata as between ERA and Ms Margarula, or that an issue estoppel or Anshun estoppel prevents her from putting in issue the legal efficacy of cl 2. (b) Clause 5.1(d) of the LTCMA provided (relevantly) as follows. In consideration of ERA entering into this Agreement, the NLC and the traditional owners each: (d) acknowledge that ERA holds and is entitled to continue to hold [the lease], and that they will not initiate, fund or allow to be brought in their names any action which seeks the result that [the lease] is forfeited, cancelled or otherwise prejudicially affected, otherwise than for breach by ERA of this Agreement. 16 Argument 2 would not call for any particular orders to be made. If accepted, it would limit the submissions available to Ms Margarula in answer to ground 6 (and in answer to Argument 1). Zentree and Packer accept that Argument 2 would not prevent any of the other respondents from advancing submissions along the lines currently put by Ms Margarula.

The Corporations Act provisions 17 Sections 236 and 237 relevantly provide as follows. 236 Bringing, or intervening in, proceedings on behalf of a company (1) A person may bring proceedings on behalf of a company, or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings (for example, compromising or settling them), if: (a) the person is: (i) a member, former member, or person entitled to be registered as a member, of the company or of a related body corporate; or (ii) an officer or former officer of the company; and (b) the person is acting with leave granted under section 237. (2) Proceedings brought on behalf of a company must be brought in the company's name. (3) The right of a person at general law to bring, or intervene in, proceedings on behalf of a company is abolished. ... 237 Applying for and granting leave (1) A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings. (2) The Court must grant the application if it is satisfied that: (a) it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and (b) the applicant is acting in good faith; and (c) it is in the best interests of the company that the applicant be granted leave; and (d) if the applicant is applying for leave to bring proceedings - there is a serious question to be tried; and (e) either: (i) at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or (ii) it is appropriate to grant leave even though subparagraph (i) is not satisfied. (3) A rebuttable presumption that granting leave is not in the best interests of the company arises if it is established that: (a) the proceedings are: (i) by the company against a third party; or (ii) by a third party against the company; and (b) the company has decided: (i) not to bring the proceedings; or (ii) not to defend the proceedings; or (iii) to discontinue, settle or compromise the proceedings; and (c) all of the directors who participated in that decision: (i) acted in good faith for a proper purpose; and (ii) did not have a material personal interest in the decision; and (iii) informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and (iv) rationally believed that the decision was in the best interests of the company. The director's belief that the decision was in the best interests of the company is a rational one unless the belief is one that no reasonable person in their position would hold. ... 18 The interlocutory application was framed, for the purposes of s 236(1), as an application for leave to "intervene" in an existing proceeding rather than to "bring" proceedings. Just as a proceeding that is "brought" pursuant to s 236(1) must be brought in the company's name (s 236(2)), "intervention" under s 236(1) is necessarily undertaken "for the purpose of taking responsibility on behalf of the company" for the proceedings or for "a particular step" in the proceedings. The Court is therefore not concerned with a circumstance in which a person with an interest in the subject matter of a proceeding intervenes in order to advance that interest. Rather, s 236 contemplates a person other than the board or an officer of a company (acting in their capacity as people responsible for the management of the company) bringing or conducting proceedings on behalf of the company and acting in its name. Obviously, this is an exception to the normal rule that the day to day decision making of a company (including as to the conduct of litigation) are made by its directors and are not the province of individual shareholders (see s 198A of the Corporations Act). 19 In the present case it was common ground that Zentree and Packer were members of ERA and thus satisfied s 236(1)(a). The barrier to their intervention was the requirement, erected by s 236(1)(b), for a grant of leave under s 237. 20 The criteria for the grant of leave are contained in s 237(2)(a) to (e). It was common ground (and is clear from the statutory language) that the Court must be satisfied as to the matters in all of paragraphs (a) to (e) in order for leave to be granted. This understanding is also supported by authority: eg Swansson v R A Pratt Properties Pty Ltd [2002] NSWSC 583; 42 ACSR 313 at [26] (Palmer J) (Swansson). Palmer J observed in Swansson that the applicant for leave bears the onus of satisfying the court that, on the balance of probabilities, these requirements are met. 21 It was also common ground that, if the court is satisfied as to all of the matters in s 237(2)(a) to (e), leave must be granted. There is no residual discretion as to the grant of leave, although there is authority that conditions may be imposed: eg Ao Qing Investment Pty Ltd v 52 Lord St East Perth Pty Ltd [2022] FCA 743 at [47] (Jackson J).

Section 237(2)(a): the company properly taking responsibility for the proceedings 22 The evidence presented on the interlocutory application did not establish a probability that ERA would not "properly take responsibility" for the proceedings within the meaning of s 237(2)(a). This in itself was fatal to the application for leave. 23 The evidence showed a course of correspondence between the solicitors for Zentree and Packer and the solicitors for ERA between 17 September and 4 October 2024 and recorded that a videoconference took place on 20 September 2024 involving both firms of solicitors and their respective counsel. The merits and the utility of Arguments 1 and 2 were discussed and were apparently given serious consideration by the lawyers conducting the proceeding on behalf of ERA. They declined to adopt the arguments. 24 Senior counsel for Zentree and Packer made very clear that he was not suggesting any form of bad faith and accepted that ERA was very competently represented in the proceeding. Nothing in the conduct of the proceeding so far suggests that the approach of ERA's lawyers is anything less than assiduous. 25 Counsel nevertheless submitted that, if a claim or an argument is identified which has substance and would advance the company's position in a proceeding, the failure to adopt that argument is sufficient to satisfy s 237(2)(a). For the following reasons, I reject this construction. 26 First, the terms of the paragraph do not focus on an individual "step" or the reasons why that step has or has not been taken. The paragraph calls for a judgment as to probability, which is necessarily forward-looking, and a judgment about whether the company will properly take responsibility for the proceedings or for "the steps" - not a particular step - in the proceedings. This language does not on its face call for second-guessing by the court, on the application of a member or former member of the company, of individual forensic decisions made by the lawyers who have been retained to represent the company. It calls for an overall judgment about the likely future conduct of the case. Further, the expression "properly take responsibility for" indicates that the paragraph is concerned not with the wisdom of particular forensic decisions but with whether the company, through its staff and legal representatives, is devoting and will devote an appropriate degree of energy and attention to the protection of its interests. 27 Secondly, the statutory context supports this understanding. (a) The assessments for the purpose of s 237(2) must be made by a court, which will normally if not inevitably be the court that is hearing (or will hear) the relevant proceeding. In an adversarial system, courts are very slow to interfere in the decisions made by parties and their legal representatives as to how to conduct their cases. There could scarcely be a more extreme form of interference, in a proceeding that is already on foot, than to give a non-party responsibility for the conduct of the case (or part of it) on a party's behalf. Parliament should not be taken to have intended this to happen, other than in rare cases where the party (being a company) has effectively abdicated responsibility for protecting its (and to the extent relevant its shareholders') interests. (b) Sections 236 and 237 constitute a carefully delineated exception from the general principle that companies are separate legal persons which act according to their responsible officers' judgment as to their best interests. In litigation as in corporate life more generally, and leaving aside circumstances of insolvency, decisions are ordinarily made for the company by its directors and officers, not by individual shareholders (or by courts). A construction of s 237(2)(a) which leaves decisions about litigation in the hands of the company and its advisers, while allowing intervention by other persons when those decisions are not being made conscientiously and for proper purposes, is consistent with that principle and with the balance that the legislature was evidently seeking to strike. (c) Consistently with these understandings, s 237(2)(c), which calls for consideration of whether the grant of leave is in the interests of the company, is qualified by a rebuttable presumption pursuant to s 237(3). The presumption is (in short) that the grant of leave to another person to bring or defend proceedings in the name of a company is not in the company's interests if the company's directors, possessed of the relevant information, have decided in good faith not to bring or defend the proceedings (or to discontinue or compromise the proceedings). Subsection (3) was not said to be in play in the relevant case. However, it provides a further indication that the regime of ss 236 - 237 was not intended to facilitate the calling into question of forensic decisions made carefully and in good faith by or on behalf of a company.

Section 237(2)(c): the best interests of the company 28 Section 237(2)(c) requires the applicant for leave to satisfy the court that the grant of leave is in the best interests of the company. Here, leave is sought in order to raise two additional arguments in the main proceeding, and the question is therefore whether allowing Zentree and Packer to raise those arguments on behalf of ERA is in ERA's best interests. 29 If raised, the arguments might succeed or they might fail. In the event that they failed, there would be costs consequences; however, I have proceeded on the basis that Zentree and Packer could be ordered to pay any additional costs occasioned by the arguments. 30 Despite this, I was not satisfied that the grant of leave would be in the best interests of ERA. 31 The benefits to ERA of Arguments 1 and 2 being raised and accepted appear to be fairly marginal. (a) Argument 1, as noted above, would travel with the existing ground 6 until the stage of formulating appropriate relief is reached. Argument 1, if completely successful, would lead to relief of an injunctive nature requiring the Territory Minister to renew the lease. Meanwhile ground 6, if successful, would lead to the non-renewal decision being set aside, together with the publication of reasons by the Court explaining that as a matter of law the Minister must renew the lease. There is no reason to suppose that the Territory Minister would then refuse to act in accordance with the law as expounded by the Court. (b) Argument 2, as noted above, would only bite against Ms Margarula. Any of the other respondents is free to take up her submissions on the efficacy of cl 2 if those submissions are considered to have merit. ERA has notice of the submissions and could not claim to be prejudiced by another party adopting them. 32 Meanwhile, there is at least a serious possibility that a grant of leave to raise Arguments 1 and 2 would result in the trial not being able to be completed next week. New and moderately complicated issues of law would need to be dealt with by the parties. Preparation for the trial would be interrupted by discussions and case management hearings concerning the appropriate procedural orders under s 241 of the Corporations Act. It is not certain that ERA's compliance with relevant conditions for the purposes of cl 2 would be uncontested, and further evidence may therefore be needed on that topic. Additionally, the primary remedies that Zentree and Packer would wish to seek are equitable remedies and therefore discretionary. A range of factors might conceivably be raised going to whether specific performance or injunctive relief was appropriate. This might involve evidence; and the respondents should in fairness be given more than a few days in order to consider and make inquiries about these issues. 33 Since the commencement of the proceedings, ERA has sought an early hearing date. Senior counsel for ERA informed the Court that the company is firmly of the view that a delayed hearing is not in its interests. The basis for that view was not explored and no evidence was led on the topic. However, it can be inferred that the prolongation of uncertainty as to the status of the lease has adverse consequences for ERA. I was not in a position to be satisfied that the potential benefit of Argument 1 or 2 succeeding outweighs the potential detriment to ERA of a delayed hearing.

Section 236(1): a step in the proceeding 34 As noted earlier, the interlocutory application was put on the basis that leave was sought to "intervene" in the proceeding for the purpose of taking responsibility, on behalf of ERA, for "a particular step" in the proceeding. Some attention was directed in submissions to whether the raising of Arguments 1 and 2 constituted a "particular step" in this sense. However, I was not directed to any authority that assisted in resolving the question. 35 Section 236(1) itself includes two examples of "particular steps": compromising or settling a proceeding. "Step", meanwhile, is an ordinary English word that usually connotes a distinct action which is completed within a relatively short time. While it is not difficult to envision a party such as a shareholder being given leave to take responsibility for the conduct of a proceeding, or for a distinct and definitive action such as discontinuing or settling the proceeding, there is clearly potential for some complexity and confusion in the notion that such a party might take over part of the argument in a case while the company itself remains involved. This makes it doubtful that the role that Zentree and Packer propose to adopt in the present case is within the scope of what s 236(1) authorises. 36 Some light is shed on the issue by s 237(2)(d). That paragraph requires the court to be satisfied as a precondition for leave that there is a serious question to be tried; however, it is expressed to apply only when leave is being sought to "bring" proceedings. No such requirement is imposed on an applicant for leave who wants to raise an additional argument in a proceeding already on foot. It is clearly very unlikely that Parliament intended to prevent "actions proceeding which have little likelihood of success" (to quote the relevant Explanatory Memorandum, extracted in South Johnstone Mill Ltd v Dennis [2007] FCA 1448; 163 FCR 343 at [34] (Middleton J)) while allowing additional points to be run in existing proceedings without any regard to their merit. This indicates that s 236 was not intended to permit "intervention" for the purpose of running an additional argument on behalf of a company in an existing proceeding, and that participation of that kind is not a "particular step" within the meaning of s 236(1). If necessary, I would hold that the provision should be construed in that way. 37 This conclusion is clearly an additional reason why the interlocutory application must fail at least in regard to Argument 2. 38 Argument 1 presents a little more complexity because, as noted earlier, it involves (in substance if not form) amending the Originating Application in order to seek additional relief. The raising of Argument 1 thus has some of the features of the commencement of a proceeding, an act which is clearly capable of being undertaken under s 236(1) with leave. However, in the context of a legislative scheme concerned with the management of companies and the rights of members, the expression "bring proceedings" should be understood in a practical rather than an esoteric way. "Proceedings" in this context means a case that is in train in a court. Correspondingly, to "bring" proceedings is to invoke the jurisdiction of a court by filing an appropriate originating document. The raising of Argument 1 therefore cannot be brought within s 236(1) on the basis that it constitutes the bringing of proceedings. Nor, for reasons indicated above, should it be regarded as a "particular step" in the proceeding.

Conclusions 39 For these reasons, I concluded that: (a) the prerequisites for a grant of leave in s 237(2)(a) and (c) were not made out; and (b) in any event, the form of intervention proposed by Zentree and Packer was not one contemplated by s 236(1). 40 I was therefore able to determine the interlocutory application without reaching any view on the substantive merit of Arguments 1 and 2. Because they overlap significantly with issues that will or may be the subject of fuller argument in the trial, it is preferable that I should not express any opinion as to their merits in an interlocutory judgment. 41 The parties to the proceeding sought orders that Zentree and Packer pay their costs. Senior counsel for Zentree and Packer did not seek to be heard against such orders. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Kennett.

SCHEDULE OF PARTIES NSD 1056 of 2024 Respondents Fourth Respondent NORTHERN TERRITORY Fifth Respondent JABILUKA ABORIGINAL LAND TRUST Sixth Respondent NORTHERN LAND COUNCIL Seventh Respondent YVONNE MARGARULA

Proposed interveners ZENTREE INVESTMENTS LIMITED PACKER & CO PTY LTD