Highlands Pacific Limited v Orogen Minerals Limited

(a) Nord entered into a sale and purchase agreement by which it sold its 31.5% interest in the venture to the second respondent;

(b) the applicants released Nord from claims they had on foot against Nord;

(c) the applicants and the respondents entered into the Put Option agreement under which the first applicant granted the second respondent an option to require the first applicant to purchase from the second respondent the 31.5% interest in the Ramu joint venture purchased by the second respondent under the sale and purchase agreement it entered into with Nord, less any part of the interest sold by the second respondent to the State of Papua New Guinea or to any third party;

(d) the applicants and the respondents agreed that the first respondent would exercise its rights under a statutory option that arose from the Mining Act 1992 (PNG) and the arrangements the respondents had entered into with the Papua New Guinea authorities to increase the second respondent's interest in the venture under its purchase from Nord.

6 It is said that the respondents made representations to the same effect as in par (d) above that induced the applicants to enter into the Put Option agreement. By failing in July 2001 to exercise the statutory option and by exercising the Put Option in March 2002, of which they gave notice of intention in January 2002, the respondents left the applicants, so they contend, with a greater interest in the venture than they had anticipated when they entered into the Put Option agreement and with substantially smaller net cash receipts than if the statutory option and the Put Option had both been exercised. 7 How worse off the applicants say they are than they would have been but for the conduct complained of is the subject of the allegations in pars 42, 44(c) and (e), 45, 46, 48, 49, 50, 51, 52 and 53 of the proposed amended statement of claim. However, the applicants' application is to have the hearing of all these issues postponed, with the other issues in the action being the ones for early determination. 8 Unless the applicants can show that they are worse off by entering into the Put Option agreement than they would have been if they had remained involved in the project with Nord and had kept their rights of action against Nord, they will fail to show that they have any entitlement to the relief central to their case, ie, voidance of the Put Option agreement and damages under the Trade Practices Act. 9 They do have a claim for damages for breach of contract against the first respondent only, but little will be served by a hearing that would resolve liability only with respect to that one subsidiary issue against one respondent. The applicants did not, for understandable reasons, seek to justify the order claimed on the motion on this limited foundation. To return to the relief based on ss 82 and 87 the Trade Practices Act, the applicants may be able to show, after litigating the issues they wish to defer and which I have identified, that they are worse off in the events which have happened. But it is not so plain on the material before me that that is the position that I think I should conduct the trial in the two phases sought by the applicants. 10 There is a reluctance by courts, born of long experience, to separate issues for determination. Most recently, the High Court in Tepko Pty Ltd v Water Board (2001) 178 ALR 634 has dealt with this question. In the joint judgment of Kirby and Callinan JJ, their Honours say at [168]: "The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real". And at [170], they observed: "Single-issue trials should, in our opinion, only be embarked upon when their utility, economy, and fairness to the parties are beyond question." 11 Caution in separating issues is especially called for in cases like this, based on s 52 and ss 82 and 87 the Trade Practices Act where little finality will generally be achieved by litigating issues that do not include whether the applicant has in fact suffered loss by reason of the contravening conduct complained of. See Energy Australia v Australian Energy Ltd [2001] FCA 1049 where Stone J, in dealing with an application for the determination of separate issues under O 29 r 2 the Federal Court Rules, said at [7]:

"I am not convinced that this is a case where separation would have such a benefit. I have a number of concerns but chief among them is that, where there are claims of misleading and deceptive conduct and relief is sought under ss 82 and 87 of the Trade Practices Act 1974 (Cth), it is not possible to separate liability and damage completely; see Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718 at [12].

12 The latter is a decision of Branson J to the same effect in which her Honour sets out in some detail, the principles to be applied generally and in the context of misleading and deceptive conduct cases under the Trade Practices Act for determining whether separate issues should be ordered to be tried. Yet the kind of exercise criticised as generally inappropriate for separate determination of issues by Stone and Branson JJ is just what the applicants seek to persuade the Court to undertake here. 13 In Tepko, another consideration telling against the trial of a case in parts is the likely lack of utility of such an approach due to the opportunity created for proliferation of appeals. I regard this as a significant consideration here. The applicants say that the prompt determination by this Court of the limited range of issues they have identified may well lead to a resolution of the entire dispute. 14 But if the respondents were to lose on the determination of the separate issues proposed, there is no reason to think they will not seek to appeal that determination. If the applicants lose, an appeal is also likely. The applicants and respondents are public companies which are engaged in a dispute arising out of their commercial relationship. The dispute may have significance in the market so far as their share value and financial standings are respectively concerned. Positions have been adopted. The respondents have given public notice of their having exercised the Put Option and the applicants have issued a public statement asserting that they are not bound to accept the exercise of that Option and say that that is backed up by legal advice that they have. Further, attempts, all unsuccessful to date, have been made to settle the dispute. 15 If liability is not finally determined - and it cannot be if the applicants' proposal is adopted - there is no reason, on the material before me, to think that the litigation will not continue, very likely after an interlocutory appeal by one side or the other against the preliminary determination. Though an order disposing of those issues will be interlocutory in form, it finally disposes of those issues and leave to appeal is likely to be granted. 16 The applicants seek to avoid the possibility of an interlocutory appeal by seeking the order in the terms framed in the notice of motion. In Landsal, the Full Court held that an appeal was incompetent since it was apparent that the trial judge had not proceeded to determine separate issues under O 29. If he had done that, even if he had not made an order determining those issues, he would have been bound to have made an order and an appeal would have lain. But, instead, he had determined to conduct the trial in two phases. At the end of the first phase, he published his findings and reasons, but deliberately made no order reflecting those findings. The Full Court accepted that the Court's inherent power over its process permitted a trial judge to conduct litigation in that way without making any appealable order at the end of the first phase. But it is significant, as appears from p 428, that his Honour followed that rather unusual course in the case before him at the request of the parties. It was thought by the parties that such a procedure might be of advantage in resolving the entire litigation. 17 I do not think that if this case were one in which separate issues should be determined, it would, in the absence of consent by all the parties, be proper to make the orders sought on the motion. If the determination were to go against the respondents, they would be deprived of the right to apply for leave to appeal, a right of some substance as I have explained. In the absence of consent, such a procedure carries with it the possible implication that the Court, in circumstances like the present, is putting pressure on one side at the request of the other. This is a special concern here: the applicants seek to justify the order sought on grounds, among others, that the respondents are deliberately delaying the action. 18 As to this issue of delay, I am not persuaded that the respondents have been shown to be guilty of engaging in delay as a tactic to advantage themselves. The cause of action on which the applicants sue arose in July 2001; the proceedings were not brought until March 2002. The applicants say that what provoked their bringing the proceedings in March 2002 was the exercise by the respondents of the Put Option. But they gave notice that they intended to do that in January 2002. It is true that three months' delay occurred in delivery of the defence, the statement of claim having been served with the originating application. But, on the limited information available to me, that is explained by the consent order which was entered into in circumstances where the parties then decided that discussions were worth entering into. 19 The motion will therefore be dismissed. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Drummond.

Solicitor for the Respondents: Allens Arthur Robinson