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[2025] QCA 114
respondent. Appeal dismissed with costs. The Court also concluded that the respondents’ notice of contention failed on its two grounds, concerning the Sale and Purchase Deeds and privity.
The Court of Appeal held that the purchasers’ deeds made them responsible for their agreed percentages of the royalty the sellers had to pay Tri-Star. The amount payable was fixed by an arbitration under the sellers’ agreement with Tri-Star. The purchasers were not parties to that arbitration, but the Court considered that their own deeds independently required them to contribute their shares of the royalty amount determined through the contractual process. The Court rejected the sellers’ alternative arguments that the same liability arose under the Sale and Purchase Deeds or that the purchasers were legally bound to the arbitration as privies. The appeal was dismissed with costs.
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2,118 words · generated 07/10/2026
The dispute arose from the upstream component of the GLNG Project, which involved extracting, processing and selling coal seam gas from Queensland tenements, including the Fairview and Arcadia Tenements ([1]–[8]). The appellants acquired interests in those tenements from the respondents. The parties recorded their arrangements in three linked sets of instruments: Sale and Purchase Deeds, Royalty Assumption Deeds and Deeds of Assumption ([9]–[13]).
No linked legislation citations have been extracted yet.
Before the sales, the respondents had agreed with Tri-Star Petroleum Company to pay an ongoing royalty on petroleum produced and sold from the tenements. That obligation came from the Settlement Agreement, which incorporated Exhibit C, setting out the royalty calculation provisions ([14]–[16], [45]–[57]). The Settlement Agreement also required disputes to be resolved by binding arbitration in Texas if they could not be settled amicably ([17], [61]–[63]).
The appellants were not parties to the Settlement Agreement. However, the primary judge accepted that, when they entered the deeds, they knew a dispute about the amount of the royalty could be arbitrated under the Settlement Agreement ([18], [123]). The dispute eventually concerned calculations for September 2015 to September 2020. The arbitrator made an Award requiring the respondents to pay Tri-Star an additional $57,582,308, plus interest. The parties in the Queensland proceeding agreed that the Award’s calculation was erroneous ([19]–[22]).
The Award was confirmed by the District Court of Harris County, Texas. The respondents paid the amount to Tri-Star and invoiced the appellants for their stated percentages. The appellants did not pay those invoices, and the respondents sued in Queensland ([23]–[31]).
At first instance, the primary judge construed the Royalty Assumption Deeds and Deeds of Assumption as requiring the appellants to bear their respective shares of the amount the respondents were legally obliged to pay. The Court of Appeal dismissed the appeal, holding that the primary judge had not erred in those constructions ([32]–[34], [159], [172]–[173]). The Court also considered, but rejected, the respondents’ alternative arguments under the Sale and Purchase Deeds and privity of interest ([174]–[209]).
The Court began from the parties’ common position that the primary judge identified the correct principles of construction. The deeds had to be read as a whole, objectively, in light of text, context and purpose, from the perspective of a reasonable businessperson in the parties’ position ([35]–[37]). The Court assessed the Royalty Assumption Deeds and the Deeds of Assumption as connected parts of the transaction, rather than treating a single phrase as detached from the contractual setting.
The Royalty Assumption Deeds defined “Tri-Star Royalty” as “the total amount of royalty payable by the [respondents] to Tri-Star on petroleum produced and sold from the Permits as calculated under Exhibit C” ([74]). Clause 2.3(a) required each appellant to pay its “Buyer’s Percentage” of that royalty to Santos TOGA ([75]–[76]). The Court considered that the words “payable by the [respondents]” mattered: they pointed to the respondents’ actual payment obligation under the Settlement Agreement, not to a separate amount that might be produced by a second calculation undertaken for the appellants ([113]–[115]).
The Award did not bind the appellants as parties to the arbitration. Rather, the Court reasoned that the appellants were bound by the promises they had themselves made in the Royalty Assumption Deeds. The respondents remained obliged to pay Tri-Star under the Settlement Agreement, whether the amount was reached through an invoice, an amicable resolution or arbitration ([111], [135]–[138]). The arbitrator had attempted to calculate the royalty under Exhibit C, and the Court regarded the Award as fixing the amount the respondents had to pay for the relevant period ([105]–[110], [132]).
The appellants argued that Exhibit C was a valuation provision distinct from the arbitration clause. The Court accepted that an arbitration agreement and a valuation provision are different instruments, but held that this distinction did not resolve the construction question. The arbitration clause remained part of the Settlement Agreement when that agreement was read as a whole. The principle of separability did not require the Court to ignore the arbitration clause when construing the related contractual arrangements ([116]–[127], [130]–[133]).
The Court also rejected the argument that there needed to be express words binding the appellants to an arbitral award, by analogy with cases about guarantees. The Court considered that the analogy was not apt: Tri-Star was not suing the appellants on a guarantee or seeking to enforce the Award directly against them. The relevant question was what payment obligation the appellants had promised the respondents ([148]–[158]).
The Deeds of Assumption reinforced this reading. They required the appellants to assume and discharge the respondents’ “Santos Group Covenants”, defined as obligations contained in Exhibit C “to the extent of the Assigned Interests” ([83]–[86]). The Court held that Exhibit C operated as part of the Settlement Agreement, and that the deeds were not to be read as referring to a hypothetical version of Exhibit C stripped of that context ([164]–[167]). “To the extent of the Assigned Interests” referred to the interests actually assigned to the appellants ([169]–[171]).
The judgment applies established principles rather than announcing a new general test for construing commercial contracts. It reiterates that contractual meaning is determined objectively from text, context and purpose, with the instrument read as a whole. It follows the approach in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd ([35]–[36], [130], [157]–[158]).
The decision’s application of those principles is specific to the wording and structure of the deeds before the Court. The definition of Tri-Star Royalty referred both to a calculation under Exhibit C and to the amount “payable by the [respondents] to Tri-Star”. The Court read those elements together and treated the latter words as identifying the relevant obligation. It did not hold that every contractual promise to pay an amount calculated under a separate agreement automatically incorporates a later arbitral award. The decision rests on the particular text and contractual context before it ([74]–[76], [113]–[115], [132]–[138]).
On privity, the Court applied the Australian approach expressed in Ramsay v Pigram and affirmed in Tomlinson v Ramsey Food Processing Pty Ltd. A person said to be a privy in interest must claim under or through the person said to be the privy. A financial interest in the result is not enough, nor does influence over the earlier proceeding by itself establish privity ([186]–[188]).
The Court also explained that the broad “sufficient degree of identification” formulation associated with Gleeson v J Wippell & Co Ltd did not reflect the Australian approach as described in Tomlinson. Instead, the analysis looks for a shared legal interest or a relationship sufficiently analogous to established forms of representation, such as agency or trusteeship ([199]–[200]). The judgment applies those principles to reject the respondents’ alternative estoppel case, not to change the legal test.
At [137], the Court said: “Irrespective of which process is followed, it produces a result, namely the Tri-Star Royalty payable by the respondents to Tri-Star. It is this royalty which the appellants have promised, by cl 2.3(a) of the Royalty Assumption Deeds, to pay their share.” In plain English, the Court treated the appellants’ promise as a promise to share the royalty the respondents actually had to pay, even though the amount was established in a process to which the appellants were not parties.
At [156], the Court explained: “The principle has no application where a party has otherwise agreed to be bound by the outcome of a process to which they are not a party.” The distinction was between being legally bound to an arbitration as a participant or privy, and having separately promised to pay a sum whose amount is fixed through another party’s contractual process. The Court’s conclusion rested on the second kind of obligation.
At [186], Barwick CJ’s statement in Ramsay v Pigram was quoted: “The basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy.” The Court applied that requirement when considering the respondents’ notice of contention. The appellants’ commercial interest in the outcome did not show that they claimed under or through the respondents in the arbitration ([188]–[197]).
At [191], the Court described the appellants’ position as, at most, an economic interest, because the Award would affect the amount they might have to pay under their own deeds. That distinction mattered: financial exposure did not itself amount to the shared legal interest required for privity.
At [165]–[166], the Court rejected a reading of Exhibit C “shorn of its context” in the Settlement Agreement. In plain English, the Deeds of Assumption did not refer to an isolated formula detached from the agreement that gave the royalty its meaning and operation. The Court read the relevant instruments together.
The decision is most relevant where commercial parties enter related agreements that allocate between them a share of an obligation owed by one party to an outsider, and the amount of that obligation is determined under a separate contract. The central features here were that the Royalty Assumption Deeds expressly tied the appellants’ shares to the royalty payable by the respondents, and that the underlying Settlement Agreement and Exhibit C were part of the disclosed contractual context ([74]–[76], [120]–[123]).
It is also relevant where a party argues that its payment obligation should be calculated independently from the amount another party is legally obliged to pay. The Court rejected that argument on these facts because the language referred to the amount “payable by the [respondents]” and the arbitrator had attempted to calculate the royalty under Exhibit C ([105]–[115], [135]–[138]). A case involving materially different wording, or an amount agreed for reasons unrelated to the contractual calculation, may raise a different construction question. The Court identified that possibility in discussing a hypothetical compromise involving extraneous matters, but did not decide it ([141]–[143]).
For privity, the decision is relevant where a party that was not named in earlier litigation or arbitration is said to be bound by its result. The judgment indicates that evidence of economic alignment, procedural updates, or a contingent possibility of future contractual obligations will not alone establish the required shared legal interest or representation ([191]–[197], [202]–[208]). The respondents accepted that the appellants were not parties to the arbitration, had not authorised or controlled it, and were not owed fiduciary duties in its conduct ([184]).
The supplied judgment gives no information about how later courts have treated KGLNG E&P Pty Ltd v Santos Toga Pty Ltd. Because it was delivered on 24 June 2025, this judgment itself cannot establish later judicial treatment, and no later decisions should be inferred from the text provided.
The Court does identify the authorities it applied or discussed. It followed Mount Bruce Mining on contractual construction ([130], [157]–[158]), applied the privity principles in Ramsay v Pigram ([186]) and followed Tomlinson on the Australian approach to privity and identification ([187], [199]–[200]). It applied Effem Foods in explaining that merely promoting another person’s claim, where success might bring an advantage, does not establish privity ([196]). It did not apply the broader formulation attributed to Gleeson ([199]–[201]). The judgment’s treatment of those cases describes the Court’s reasoning as at the date of decision, not subsequent developments.
The Court left open whether the Royalty Assumption Deeds would require the appellants to contribute to a settlement between the respondents and Tri-Star if that settlement included matters unrelated to calculating the royalty under Exhibit C. The Court noted that the respondents accepted that a reasonable compromise could fall within their construction, but the appellants raised the possibility of a compromise producing an amount not calculated in accordance with Exhibit C. Because the Award before the Court resulted from an attempt to calculate the royalty under Exhibit C, the Court did not resolve the hypothetical ([141]–[143]).
The judgment also does not establish a general rule about how every clause referring to an amount “calculated under” another instrument interacts with arbitration provisions in that instrument. Its reasoning depends on the particular definition, the express reference to the amount payable by the respondents, the related deeds, and the Settlement Agreement context ([74]–[76], [113]–[138]).
Finally, the Court did not need to decide the notice of contention to dispose of the appeal, although it addressed the parties’ submissions. Its conclusions that the royalty was not an Assumed Liability and that privity was not established concern those alternative grounds and the wording and facts in this case ([173]–[174], [179]–[182], [209]).
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Source: Queensland Judgments (Supreme Court Library Queensland) (www.queenslandjudgments.com.au). Converted to plain text by ZoeLaw. Not the official version.
SUPREME COURT OF QUEENSLAND
CITATION: KGLNG E&P Pty Ltd v Santos Toga Pty Ltd [2025] QCA 114
PARTIES: KGLNG E&P PTY LTD / ACN 146 143 339 / (first appellant) / TOTAL E&P AUSTRALIA / ARBN 112 603 880 (second appellant) / TOTAL E&P AUSTRALIA II / ARBN 149 617 167 / (third appellant) / PAPL (UPSTREAM) PTY LTD / ACN 131 318 888 / (fourth appellant) / v / SANTOS TOGA PTY LTD / ACN 077 536 871 / (first respondent) / SANTOS TPY, LCC / ARBN 102 958 707 / (second respondent) / SANTOS TPY CSG, LLC / ARBN 84 108 566 052 / (third respondent) / SANTOS QUEENSLAND, LLC / ARBN 111 733 969 / (fourth respondent) / SANTOS TOG, LLC / ARBN 102 958 734 / (fifth respondent) / BRONCO ENERGY PTY LIMITED / ACN 121 979 664 / (sixth respondent) / VAMGAS PTY LTD / ACN 006 245 110 / (seventh respondent) / SANTOS QNT PTY LTD / ACN 083 077 196 / (eighth respondent)
FILE NO/S: Appeal No 11657 of 2024 / SC No 15114 of 2021
DIVISION: Court of Appeal
PROCEEDING: General Civil Appeal
ORIGINATING COURT: Supreme Court at Brisbane – [2024] QSC 169 (Bradley J)
DELIVERED ON: 24 June 2025
DELIVERED AT: Brisbane
HEARING DATE: 14 April 2025
JUDGES: Flanagan JA and Burns and Ryan JJ
ORDER: The appeal be dismissed with costs.
CATCHWORDS: CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where the parties are associated in an unincorporated joint venture concerning the upstream component of the GLNG Project – where the respondents agreed to pay the Tri-Star Royalty to Tri-Star on petroleum produced and sold by the upstream component from the Fairview and Arcadia Tenements – where such an obligation arose from the Settlement Agreement between the respondents and Tri-Star – where the appellants obtained interests in the upstream component by entry into three categories of deeds with the respondents, namely the Sale and Purchase Deeds, the Royalty Assumption Deeds and the Deeds of Assumption – where, by the Sale and Purchase Deeds, the appellants acquired 70 per cent of the undivided legal interest in and to the Fairview and Arcadia Tenements from the respondents – where the deeds did not alter the respondents’ obligations under the Settlement Agreement to pay to Tri-Star the Tri-Star Royalty – where, by the Royalty Assumption Deeds, the appellants agreed to pay a “Buyer’s Percentage” of the Tri-Star Royalty payable by the respondents to Tri-Star – where a dispute arose between the respondents and Tri-Star as to the calculation of the Tri-Star Royalty for the period September 2015 to September 2020 – where the Settlement Agreement provided for the resolution of disputes by way of arbitration in the State of Texas – where Tri-Star submitted the dispute to arbitration pursuant to that arbitration clause – where an arbitrator attempted to apply Exhibit C of the Settlement Agreement to calculate the Tri-Star Royalty – where the Award was confirmed in the District Court of Harris County, Texas – where the parties agree that the Award is erroneous – where the respondents have paid the additional payments for the Tri-Star Royalty as determined by the Award to Tri-Star – where the respondents issued new invoices to the appellants for the additional amount according to their respective “Buyer’s Percentage” – where the appellants did not pay these invoices – where the respondents brought proceedings against the appellants for the amounts the subject of the new invoices – where the learned primary judge found that on a proper construction of the Royalty Assumption Deeds, the Buyer’s Percentage that the appellants were bound to pay the respondents pursuant to Exhibit C of the Settlement Agreement necessarily included the additional amount determined by the Award – where the appellants challenge this finding – whether the learned primary judge erred in construing the Royalty Assumption Deeds – whether the learned primary judge failed to give proper effect to the term “payable”; failed to distinguish between a separate arbitration agreement and a valuation provision; failed to correctly assess commercial risk; dismissed points of principle; and erred in finding that the appellants’ construction required a theoretical determination of the Tri-Star Royalty / CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where, by the Deeds of Assumption, the appellants agreed to discharge the respondents’ obligation to pay the Tri-Star Royalty to Tri-Star in proportion to their acquired interest in the upstream component – where the learned primary judge found that on the proper construction of the Deeds of Assumption, the appellants promised to discharge in proportion to their joint venture interest the amount which the respondents were legally obliged to pay to Tri-Star – where the appellants challenge this finding – whether the learned primary judge erred in construing the Deeds of Assumption – whether the learned primary judge failed to give proper effect to the words “contained in Exhibit C” and “to the extent of the Assigned Interest” in construing the definition of “Santos Group Covenants” / CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where, by the Sale and Purchase Deeds, the appellants agreed to be liable for and assume the Assumed Liabilities – where Assumed Liabilities is defined to included liabilities in relation to or in connection with the Fairview Interests – where the learned primary judge found that the liabilities of the respondents to pay the Tri-Star Royalty were not Assumed Liabilities – where the respondents seek to maintain the decision at first instance on the alternative ground that on the proper construction of the Sale and Purchase Deeds, the appellants were liable to pay to the respondents a proportionate amount of the Tri-Star Royalty which the respondents were obliged to pay Tri-Star as a result of the Award – where the respondents contend that their obligation to pay the Tri-Star Royalty was an Assumed Liability such that the appellants had a corresponding obligation to pay their proportion of the Tri-Star Royalty to the respondents – where the respondents submit that there is a direct relation between the Fairview Interests and the Tri-Star Royalty – whether the Tri-Star Royalty was an Assumed Liability for the purposes of the Sale and Purchase Deeds / CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – PARTIES – GENERAL PRINCIPLES – where the appellants were not parties to the Settlement Agreement – where the appellants were also not parties to the arbitration between the respondents and Tri-Star – where the respondents provided procedural updates to the appellants throughout the arbitration – where the respondents submitted at first instance that the appellants were bound by the Award as privies of the respondents – where the learned primary judge found that the appellants were not so bound – where the respondents, by their notice of contention, submit that the learned primary judge erred in concluding that the appellants were not estopped from denying that they were liable to pay the respondents their proportionate share of the Tri-Star Royalty in the amounts determined by the Award – where the respondents contend that there existed between the parties a shared legal interest and a sufficient degree of identification in the outcome of the arbitration – whether there is a privity of interest so as to bind the appellants to the outcome of the Award / Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (in liq) (1993) 43 FCR 510; [1993] FCA 342, applied / Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510; [1977] 3 All ER 54, not applied / IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466, cited / Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, followed / Ramsay v Pigram (1968) 118 CLR 271; [1968] HCA 34, applied / Timbercorp Finance Pty Ltd (in liq) v Collins (2016) 259 CLR 212; [2016] HCA 44, cited / Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28, followed
COUNSEL: B W Walker SC, with M F Johnston KC, for the appellants / S L Doyle KC, with S J Webster KC, for the respondents
SOLICITORS: White & Case for the appellants / Allens for the respondents
FLANAGAN JA: The appellants and the respondents are associated in an unincorporated joint venture concerning the upstream component of the GLNG Project.
The GLNG Project is a coal seam gas (“CSG”) to liquified natural gas (“LNG”) project in Queensland involving an upstream component and a downstream component.
The upstream component of the GLNG Project involves the extraction of CSG from wells, and the production, processing and sale of CSG prior to entry into gas transmission pipelines.
The upstream component consists of a number of tenements comprised by various petroleum leases derived from authorities to prospect (“ATP”).
These tenements include the Fairview and Arcadia Tenements.
The downstream component concerns the activities after the sale of the CSG which is produced from the Fairview and Arcadia Tenements. It involves the transportation of the CSG through a 420 kilometre long gas transmission pipeline to liquefaction facilities near Gladstone, where the CSG is liquified to change it from a gaseous state to a liquid state to become LNG, and then the storage and loading of the LNG onto ships for overseas export and sale.1
The point of sale for the CSG is where the CSG is metered prior to entry into the gas transmission pipeline.
Neither the appellants nor the respondents are participants in the downstream component of the GLNG Project.
In obtaining their interests in the upstream component of the GLNG Project, namely interests in the Fairview and Arcadia Tenements and the CSG produced therefrom, the appellants entered into various deeds with the respondents.
These deeds fall within three categories:2Gladstone LNG Upstream Sale and Purchase Deeds (“Sale and Purchase Deeds”);3Royalty Assumption Deeds – Amerind, NationsBank and Tri-Star Royalty;4 (“Royalty Assumption Deeds”); andTri-Star Deeds of Assumption – Settlement Agreement and Mutual Release (“Deeds of Assumption”).5
Principles of construction
There is no dispute that in construing the Sale and Purchase Deeds, the Royalty Assumption Deeds and the Deeds of Assumption, the primary judge correctly identified the applicable principles of construction.
As observed by his Honour:24
“Each [Sale and Purchase Deed, Deed of Assumption, and Royalty Assumption Deed] is a deed recording the relevant parties’ commercial agreement. It is common ground that each deed is to be construed as a whole. Its meaning is to be determined objectively by reference to its text, context, and purpose. The meaning is what a reasonable businessperson in the position of the parties to the deed would have understood it to mean.25 It must be construed to avoid making commercial nonsense or working commercial inconvenience. It is construed practically, to give better effect to its purpose. It is inappropriate to adopt a narrow or pedantic approach to its construction.”26
The relevant factual context
“These reasons proceed on the basis that the tendered documents are relevant as evidence of the instruments to be construed, the context in which those instruments were executed, the factual matrix known to the parties by that time, or other factual matters that explain how the parties came to be in dispute and the course of their disputes.”
His Honour set out the relevant factual context at Reasons, [12] to [43]. Some of this factual context is set out above. The following additional facts should also be noted.
The original ATPs in relation to the Fairview and Arcadia Tenements were respectively granted to Tri-Star on 1 November 1992 and 30 September 2002.28
The work authorised by these tenements was conducted in accordance with two joint operating agreements which his Honour referred to as the 1992 JOA and the 2002 JOA.29 The 1992 JOA is in respect of rights that came to include the Fairview Tenement and the 2002 JOA is in respect of the Arcadia Tenement.30
At the commencement of the 1992 JOA, Tri-Star was the operator, and the participants included a joint venture linked to Tri-Star, Santos TOGC,31 Amerind Oil Company Limited (Amerind), NationsBank of Texas NA (NationsBank), other corporations, and some individuals.32
Until about 23 February 2005, Tri-Star was the sole holder of the Fairview Tenement. On 1 January 1997, by separate written agreements, one with Amerind and the other with NationsBank, Santos TOGC acquired their rights, title and interests arising under or created by the 1992 JOA, including their interests, through the 1992 JOA in the Fairview Tenement. As observed by his Honour, as a term of each acquisition agreement, Amerind and NationsBank retained a contractual right to be paid a certain percentage of the gross proceeds of oil and gas produced and sold (less certain costs and taxes) under the Fairview Tenement attributable to their interest under the 1992 JOA. In the Royalty Assumption Deeds, these payments are referred to as the Amerind Royalty and the NationsBank Royalty. By these agreements, Santos TOGC is obliged to make these payments.33
Prior to October 2004, Tri-Star had acquired working interests under the 1992 JOA by assignments from participants who are not parties to the present proceeding. His Honour referred to this working interest as the 2.25 per cent Working Interest.
The relevant clauses of the Settlement Agreement
“The Settlement Agreement is comprised of two recitals and 25 numbered clauses, some operative, and some explanatory. These are followed by the witnessed execution of the document by each party. Then, there are nine ‘Exhibits’, including Exhibit C. Some exhibits are the forms of applications or notices the parties have agreed to sign by operative clauses of the agreement. Others are separate agreements the parties have similarly agreed to execute, complete with separate execution clauses. Some are short sets of clauses specific to a particular topic. Exhibit C deals with the Tri-Star Royalty. Although it includes eight definitions, it also uses terms defined in the Settlement Agreement. It does not include any separate execution clause. It takes effect only as part of the Settlement Agreement.”
His Honour dealt with the relevant terms of the Settlement Agreement at Reasons, [31] to [34].
The parties to the Settlement Agreement are Tri-Star and various Tipperary entities, which for present purposes may be treated as the respondents.
The Settlement Agreement, by way of recital, refers to litigation in the District Court of Midland, Texas, and the parties’ desire to settle their legal dispute.
As observed by the primary judge four relevant things happened pursuant to the Settlement Agreement:36
“(a) Tri-Star unconditionally resigned as operator under the 1992 JOA and was replaced by Santos TOGA.
Tri-Star sold the 2.25 per cent Working Interest to Santos Qld.
Tri-Star, as the sole holder of the Tenements, prepared and lodged an application for the minister to approve the vesting of the then existing Fairview and Arcadia tenements in the [respondents], Craig Ltd, and Ms Kennedy, each in their respective percentage interest under the 1992 JOA.
With the minister’s approval, the then existing Tenements vested in the [respondents], Craig Ltd, and Ms Kennedy.” (citations omitted).
At Reasons [40], his Honour noted that having acquired the 2.25 per cent Working Interest from Tri-Star, Santos Qld did not subsequently sell, transfer, or assign any of its interest in the upstream component, including the 2.25 per cent Working Interest, to any of the appellants. This fact, as discussed below, is relevant to a submission of the appellants concerning his Honour’s construction of the Deeds of Assumption. (Ground 2 of the notice of appeal).
Clause 7 of the Settlement Agreement provides for the ongoing obligations of the respondents and Tri-Star. By cl 7(d) the respondents are required to ensure payment of the “Retained Overriding Royalty” to Tri-Star on due dates in accordance with the Settlement Agreement.
“Retained Overriding Royalty” is a defined term and means “the right of Tri-Star, reserved from the 2.25 per cent Working Interest, to receive a royalty calculated and paid on the terms set out in Exhibit C attached hereto and incorporated herein, … In this Agreement, references to the Retained Overriding Royalty are references to an overriding royalty on and subject to the terms set out in Exhibit C”.37
While the definition refers to the right of Tri-Star to receive a royalty calculated and paid on terms set out in Exhibit C “reserved from the 2.25 per cent Working Interest”, it may be accepted that the calculation of the Tri-Star Royalty and the obligation to pay it is not limited by reference to the 2.25 per cent Working Interest, but is calculable by reference to the whole of the respondents’ interests.38
Clause 1.2 of Exhibit C is headed “Terms of Retained Overriding Royalty Payments”.
Clause 1.2(c) of Exhibit C defines a number of terms, including “Sale Proceeds”, “Revenue” and “Delivery Point” which are relevant to calculating the Tri-Star Royalty.
By cl 1.2(e) of Exhibit C Tri-Star is to provide a tax invoice in respect of the Tri-Star Royalty and applicable GST on or before the 25th of the month in which a report is given.
Clause 1.2(f) of Exhibit C provides that the respondents will pay to Tri-Star the Tri-Star Royalty payable on petroleum sold during the previous month on or before the end of the month.
Clause 1.2(g) states that if an error is discovered in the Tri-Star Royalty calculation or payment and if the parties are in agreement as to the amount of the error, then such error shall be adjusted, within 30 days of the determination of the error.
Clauses 1.2(h), (i) and (l) of Exhibit C provide:
“(h) If Tri-Star disputes the [Tri-Star Royalty] Payment or the figures on which the [Tri-Star Royalty] is based in any month, it shall notify the [respondents]. Tri-Star may also state what Tri-Star believes the [Tri-Star Royalty] should have been for the particular month. Within 7 days of receiving a notice from Tri-Star pursuant to this clause the [respondents] shall notify Tri-Star whether they agree with Tri-Star’s calculation of the [Tri-Star Royalty] for the particular month (if provided by Tri-Star).
During the pendency of any dispute between the parties, the [respondents] shall pay Tri-Star on a monthly and timely basis, the greater of the following:
the amount [the respondents] [do] not dispute is owed to Tri-Star;
the amount of the last undisputed monthly payment; or
an amount equal to the average of the last six months monthly payments.
Tri-Star may accept these payments without prejudice to or waiver of its right to receive additional amounts for the months or production covered by the payments and may enforce this obligation by mandatory injunctive relief.
…
(l) The [respondents] shall pay interest on any Arbitrator’s or judicial monetary award at the Interest Rate until paid in full.”
Clause 1.3(b) of Exhibit C states that the respondents must not deal with all or any part of a tenement or other part of the respondents’ interest in favour of any third party unless the respondents first obtain from the third party a written agreement to assume and discharge the obligations of the respondents under Exhibit C to the extent of the interest acquired by the third party and provide corresponding security. The relevance of cl 1.3(b) is that the respondents, pursuant to this clause, in disposing of their interest to the appellants under the Sale and Purchase Deeds, required the appellants to enter into the Royalty Assumption Deeds and Deeds of Assumption.
As already observed, by cl 16 of the Settlement Agreement, the respondents and Tri-Star agreed to settle disputes arising out of or related to the Settlement Agreement, including Exhibit C, by binding arbitration. Clause 16 provides:
“Any controversy, claim or dispute among the Parties hereto arising out of or related to this Agreement or exhibits hereto that cannot be settled amicably by the Parties shall be settled by binding arbitration in accordance with the Texas General Arbitration Act upon the written request of one Party after the service of that request on the other Party. Such demand for arbitration shall be made within thirty (30) days after the controversy, claim or dispute arises and in no event shall such demand be made after the date when institution of legal or equitable proceedings based on such controversy, claim or dispute would be barred by the applicable [statute(s)] of limitation. The Parties hereto shall appoint a mutually acceptable single impartial arbitrator to hear and determine the dispute; provided, however if the Parties are unable to mutually agree upon an arbitrator within thirty (30) days after a demand for arbitration, the arbitrator shall be selected by Senior State District Court Judge sitting in Harris County, Texas, from qualified arbitrators with at least 10 years experience in the subject of the primary controversy. Such arbitrator must be someone who is subject to the personal jurisdiction of the Texas State District Court. The arbitrator will conduct the arbitration process and make a written arbitration award within ninety (90) days after the date of his or her selection as arbitrator. If the original arbitration award is not delivered to the Parties by the arbitrator within such ninety (90) days, the Parties shall agree on another arbitrator and if that arbitrator does not deliver an arbitration award within ninety (90) days of appointment, then the Parties are excused from any further duty to arbitrate the claims raised in the arbitration process and may resort to legal process for enforcement of their respective rights and remedies. Each Party to the arbitration shall bear its equal proportionate share of the costs of the arbitration, including the arbitrator's fees and expenses and any court reporter’s fees and expenses or expenses associated with the facility in which the arbitration is to be held. Each Party will bear its own attorneys’ fees and expenses and any fees or expenses incurred by a witness called by that Party to testify either in person or by deposition. All provisions of the Texas General Arbitration Act not in conflict with this arbitration agreement are applicable to the arbitration conducted under this clause. This provision does not prevent any party from seeking urgent extraordinary, interlocutory, injunctive, (prohibitive or mandatory, see, eg. Paragraph 1.2 (i) of Exhibit C) or declaratory relief or an order for specific performance from a court of competent jurisdiction to compel performance of this agreement, including the payment of money, where, in that party’s reasonable opinion, that action is necessary to protect that party’s rights.”
According to its terms, cl 16 applies to a dispute in relation to the Tri-Star Royalty in circumstances where the respondents and Tri-Star cannot settle such dispute “amicably”. Clause 16 also makes reference, by way of example, to cl 1.2(i) of Exhibit C which is set out above.
By cl 17 of the Settlement Agreement, the parties agreed that the agreement had been made under the laws of Texas, and that the courts of Texas have exclusive jurisdiction in relation to its subject matter, save for duties and obligations performable in Queensland.
The relevant clauses of the Sale and Purchase Deeds
By the first ground of the notice of contention, the respondents seek to challenge his Honour’s construction of the Sale and Purchase Deeds.
By the Sale and Purchase Deeds, the respondents transferred interests in the upstream component to the appellants.39 Entry into the Royalty Assumption Deeds and the Deeds of Assumption was a condition precedent to the completion of each Sale and Purchase Deed.40
Clauses 4.1 and 4.2 of the Sale and Purchase Deeds deal with “Assumed Liabilities” and provide:41
“4.1 Assumed Liabilities
Subject to Completion occurring, and subject to the provisions of clause 8 regarding the Completion Adjustment, the Buyer is liable for and must assume the Assumed Liabilities and on and after Completion must pay, perform, honour and discharge the Assumed Liabilities when and how due and payable or performable.
4.2 Indemnity relating to Assumed Liabilities and the Assigned Interests
“Despite any other provision of this deed, other than the provisions of clause 8 regarding the Completion Adjustment, the Buyer indemnifies and holds harmless and must keep indemnified the Sellers and each Seller Group Member against any Loss suffered or incurred by a Seller Group Member in relation to or in connection with:
the Assumed Liabilities; and
the Buyer’s ownership or use of the assets and interests in the Assigned Interests on and from the Effective Date,
and the Buyer must pay to the Sellers in Immediately Available Funds an amount equal to, any Loss suffered or incurred by the Sellers or the relevant Seller Group Member in relation to these matters within 5 Business Days after the Buyer receives written notice of the relevant Loss from the Sellers from time to time.”
“all Liabilities in relation to or in connection with the Fairview Interests regardless of whether or not such Liabilities have arisen from events and circumstances before, on or after the Effective Date, other than Liabilities:
relating to events or circumstances before the Effective Date where those Liabilities have been actually paid by a Seller as at the Effective Date (such that the Seller is not reimbursed for any past actual expenditures in relation to the Fairview Interests); or
which arise and are the subject of a written claim which has been made to the Sellers prior to the Effective Date outlining the precise nature and quantum of the Liability.”
The term “Fairview Interests” is also defined in cl 1.2 to mean “the interests and assets referred to as being sold to the [appellants] in section 1 of Schedule 8”.
Schedule 8 which is headed “Assigned Interests” under item 1 deals with the “Fairview Interests”. These interests include the respondents’ legal interests in the Fairview Permits and the working interests of Santos TOGA under the 1992 JOA.
Clause 1.2 also defines the word “Liabilities” to mean:
“any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, known or unknown, matured or unmatured, or determined or determinable, including all Environmental Liabilities and all obligations in respect of principal, accrued interest, penalties, fees and premiums, but excluding Tax Liabilities.”
The relevant clauses of the Royalty Assumption Deeds
The Recitals to the Royalty Assumption Deeds record that by the Sale and Purchase Deeds, the [appellants] acquired the Assigned Interests from [the respondents] and that pursuant to the Sale and Purchase Deeds, the appellants have agreed to assume a pro-rata share of the liabilities relating to the Assumed Royalties.
Clause 1.1 contains the definition of “Assumed Royalties” which includes the Tri-Star Royalty.
The term “Tri-Star Royalty” is defined in cl 1.1 as follows:
“the total amount of royalty payable by the [respondents] to Tri-Star on petroleum produced and sold from the Permits as calculated under Exhibit C to the Tri-Star Settlement Agreement.”
“(a) Subject to Completion occurring, the [appellant] Buyer shall pay Santos TOGA on and from the Effective Date the Buyer’s Percentage of the Tri-Star Royalty on the terms set out in Section 3 of Schedule 2. For the avoidance of doubt, the Buyer will not be liable to pay any royalty in respect of petroleum produced and sold from ATP 745P. Santos TOGA or a member of the [respondents] will pay all of the Tri-Star Royalty under the Tri-Star Settlement Agreement.”
“(a) The Buyer’s Percentage of the Tri-Star Royalty payable by the Buyer to Santos TOGA shall be calculated on a monthly basis and paid monthly in arrears on and from the Effective Date.
… Santos TOGA will provide the Buyer with a tax invoice in respect of the Buyer’s Percentage of the Tri-Star Royalty on the 20th day of each month....
…
The Buyer will pay to Santos TOGA in Immediately Available Funds the Buyer’s Percentage of the Tri-Star Royalty as stated in the invoice issued pursuant to section 3(b) of this Schedule 2 on or before the 25th day of the month.”
“(a) On the date of execution of this deed, the Buyer shall execute the Tri-Star Deed of Assumption.
The execution by the Buyer of the Tri-Star Deed of Assumption in order to meet the obligations of Santos TOGA under clause 1.3(b) of Exhibit C to the Tri-Star Settlement Agreement may expose the Buyer to liability with respect to the payment of the Tri-Star Royalty. Accordingly, subject to the Buyer having satisfied its obligation under clause 2.3(a) of this deed, Santos TOGA indemnifies the Buyer in respect of any Loss that the Buyer pays, suffers, incurs or is liable for at any time as a result of the failure by Santos TOGA or the [respondents] to pay the Tri-Star Royalty to Tri-Star in accordance with the terms of the Tri-Star Settlement Agreement.”
“The Buyer must, if requested by Santos TOGA after the Effective Date:
enter into a written agreement directly with Tri-Star agreeing to assume and discharge Buyer’s Percentage of the obligations of the [respondents] under Exhibit C to the Tri-Star Settlement Agreement, and to that extent shall thereupon be released from its obligations to the [respondents] under this deed; and
provide such security in favour of Tri-Star and/or Santos TOGA as may be required in accordance with clause 1.3(b) of Exhibit C to the Tri-Star Settlement Agreement.”
“The Buyer must not directly or indirectly contact or approach NationsBank, Amerind or Tri-Star or any representative of those parties to discuss any matter in connection with the Assumed Royalties without the prior written consent of Santos TOGA (in the case of Tri-Star) and Santos TOGC (in the case of Amerind and NationsBank).”
“(a) Nothing in this deed gives a party authority to bind any other party in any way.
Nothing in this deed imposes any fiduciary duties on a party in relation to any other party.”
The primary judge found that on a proper construction of each Royalty Assumption Deed, the appellants are bound to pay Santos TOGA each appellant’s Buyer’s Percentage of the Tri-Star Royalty which the respondents must pay to Tri-Star pursuant to Exhibit C.43
As already observed, the appellants, by Ground 1 of the notice of appeal, seek to challenge his Honour’s construction of the Royalty Assumption Deeds.
The relevant clauses of the Deeds of Assumption
The Recitals to the Deeds of Assumption record that Santos TOGA has assigned the Assigned Interests to the Buyer. Further, that in order to comply with cl 1.3(b) of Exhibit C to the Settlement Agreement, the Buyer has agreed to enter into the deed pursuant to which it agrees to assume and discharge the obligations of the [respondents] under Exhibit C to the Settlement Agreement to the extent of the Assigned Interests acquired by the Buyer.
“Assigned Interests” is defined in cl 1.1 of the Deeds of Assumption as the Buyer’s Percentage legal interest in the Permits and the Buyer’s Percentage working interest in the 1992 JOA.
Clause 2.1(a) states:
“2.1 Buyer to assume from Completion
Subject to Completion occurring, Buyer shall assume and discharge the Santos Group Covenants on and from the Effective Date.”
“the covenants, agreements and obligations contained in Exhibit C to the Tri-Star Settlement Agreement to be observed and performed by [the respondents] to the extent of the Assigned Interests.”
Clause 6.11(a) of the Deeds of Assumption provides that nothing in the deed gives a party authority to bind any other party in any way.
Before the primary judge, the respondents contended that cl 2.1(a) of each Deed of Assumption rendered the appellants liable to reimburse them for the Tri-Star Royalty amount as determined under the Award.44
In accepting the respondents’ submission, his Honour considered that on the proper construction of the Deeds of Assumption, the appellants agreed to assume and discharge the respondents’ obligation under Exhibit C to pay (to the extent of its percentage interests in the Tenements or the JOA) the Tri-Star Royalty to Tri-Star. For the period September 2015 to September 2020, that obligation was to pay the amount determined by the Award.45
As already observed, ground 2 of the appellants’ notice of appeal seeks to challenge his Honour’s construction of the Deeds of Assumption.
Ground 1 of the Notice of Appeal: error in construing the Royalty Assumption Deeds
The parties identified the primary issue raised by Ground 1 in slightly different terms. The issue, according to the appellants, is whether they are liable to pay their percentage of the Tri-Star Royalty as determined by a calculation pursuant to a “valuation provision”, namely Exhibit C to the Settlement Agreement or as determined pursuant to the Award.46
The issue, according to the respondents, is whether the appellants are liable to pay the royalty which the respondents are actually legally obliged to pay to Tri-Star as determined by the Award or some different (lesser) amount.47
The respondents further clarified the issue in their oral submissions as follows:48
“The way in which our learned friends have put the issue, really, is that the court is to decide whether the [appellants] are obliged to pay an amount in excess of the amount properly payable under [E]xhibit C. …And that begs the ultimate question … whether the [appellants] are obliged to pay a proportion of the amount payable by [the respondents] to Tri-Star as calculated in accordance with [Exhibit] C. And if, you put it that way … there’s only one answer… Because… there is only one such amount”.
As outlined at [75] above, pursuant to cl 2.3(a) of the Royalty Assumption Deeds, the appellants agreed to pay the respondents their “Buyer’s Percentage” of the Tri-Star Royalty, as defined in cl 1.1.49
The primary judge, in construing cl 2.3(a) of the Royalty Assumption Deeds, together with the definition of Tri-Star Royalty in cl 1.1, determined that the Buyer’s Percentage that the appellants were bound to pay the respondents pursuant to Exhibit C necessarily included the additional amount determined by the Award.
His Honour reasoned as follows:
“[67] The purpose of the covenant in cl 2.3(a) of the [Royalty Assumption Deeds] was to allocate to each of the [appellants] an obligation to reimburse Santos TOGA a share of the Tri-Star Royalty payable by the [respondents]. Each [appellant’s] share was the same as its Buyer’s Percentage, i.e. its interest in the Upstream JV. The covenant should be construed practically, to better give effect to its purpose.
…
[70] By calling the defined term the ‘Tri-Star Royalty’ and by defining it as ‘the total amount of royalty payable … as calculated under Exhibit C to the Tri-Star Settlement Agreement’, Santos TOGA, Santos TOGC and each [appellant] adopted a label readily identifiable as the royalty the [respondents] were bound to pay to Tri-Star under the Settlement Agreement. There is no ambiguity. If there were any, it would be resolved by the label adopted by the parties.
[71] At any point in time, ‘the royalty payable by the [respondents] to Tri-Star on petroleum produced and sold from the Permits as calculated under Exhibit C’ could only be a specific amount. When each [Royalty Assumption Deed] was executed, the parties, including the [appellants] giving the covenant in cl 2.3(a), knew any dispute between the [respondents] and Tri-Star about that specific amount, including about ‘the total amount of royalty payable’, would be determined by an arbitration in accordance with the Settlement Agreement. The [respondents] could not be obliged to pay any other amount. The ‘royalty payable by the [respondents] to Tri-Star’ could not be any other amount.
…
[73] On the [appellants’] interpretation, each of the [appellants] would be obliged to pay their respective Buyer’s Percentage of an amount that might be less or more than the amount the [respondents are] bound to pay to Tri-Star. The [respondents] would not have a residual, unreimbursed liability for 30% of the royalty that must be paid to Tri-Star. Rather, the [respondents’] liability might be greater or lesser than 30%.
[74] When each [Royalty Assumption Deed] was made, a reasonable businessperson in the position of the relevant parties would not have understood it to have introduced a risk of under-recovery or over-recovery by the [respondents] and consequential underpayment or overpayment by the [appellants].
[75] … The amount each [appellant] is liable to pay to Santos TOGA is an agreed fixed percentage of a sum payable under an instrument to which they are not a party. The bargain the [appellants] made with Santos TOGA and Santos TOGC does not permit the [appellants] to vary or avoid its contractual liability by contending that the sum payable to Tri-Star for the Tri-Star Royalty would be different if it were to be determined by a different decision maker or process.
[76] The [appellants’] interpretation of cl 2.3(a) serves no logical or commercial purpose. It would require a second, separate and theoretical determination of the Tri-Star Royalty. It would introduce risk and uncertainty.
…
[80] On the proper construction of each [Royalty Assumption Deed], the [appellants are] bound to pay Santos TOGA its Buyer’s Percentage of the Tri-Star Royalty the [respondents] must pay to Tri-Star pursuant to Exhibit C. For the period September 2015 to September 2020, the amount the [respondents] must pay includes the additional amount determined by the Award.”
The appellants challenge this reasoning and assert that his Honour made four errors in construing cll 2.3(a) and 1.1 of the Royalty Assumption Deeds. These are as follows:a failure to give proper effect to what was expressly described as “payable” in the definition of Tri-Star Royalty and a failure to distinguish between a separate arbitration agreement and a valuation provision;failing to correctly assess commercial risk;dismissing points of principle in binding liability of a third party to an arbitration award; andfinding that the appellants’ construction required a second, separate and theoretical determination of the Tri-Star Royalty.
There is considerable overlap in the submissions made by the appellants in relation to these four asserted errors. Rather than consider each error separately, it is convenient to deal with them collectively in construing the Royalty Assumption Deeds.
At first instance, the appellants contended that that the phrase “as calculated under Exhibit C” must mean “as correctly calculated under Exhibit C” such that they could not be bound by the result of the Award where the arbitrator adopted an “erroneous approach”.50 This construction imports a standard of correctness.
His Honour rejected this submission on the basis that a reasonable businessperson in the position of the parties would have understood cl 2.3(a) in each Royalty Assumption Deed to refer to the sum actually payable by the respondents to Tri-Star. That amount could “only be a specific amount” which, in the circumstances of the case, had to be that which was determined by the Award.
The fact that the parties did not use the use the term ‘actually’ does not alter the intended meaning of the cl 1.1. As noted by his Honour:
“[61] … A reasonable businessperson in the position of the parties would not have understood the phrase to have a different meaning without the word ‘actually’. In the absence of any objective indication in the text or the context, it is inappropriate to assume that the omission of an unnecessary word bears any significance in the interpretation of the covenant.”
The appellants contend on appeal that his Honour’s construction is “contrary to the language” of the Royalty Assumption Deeds in that it fails to grapple with the substance of other terms in the definition.51 They submit that cl 1.1 “does not stop at the end of the words ‘total amount of royalty payable by the [respondents] to Tri-Star’”.52 If this were so, the terms “on petroleum produced and sold from the Permits” and “as calculated under Exhibit C” would have no work to do.
There are a number of relevant agreed facts. As to the term “on petroleum produced and sold from the Permits”, it is agreed that the relevant petroleum for these purposes is CSG and not LNG. Accordingly, a royalty calculated in accordance with Exhibit C is by reference to the arms length value of CSG and not LNG. At all times prior to the Award, Santos TOGA issued invoices to the appellants based on a CSG price.53
The appellants go further however, and assert that the Award did not purport to calculate the royalty payable “on petroleum produced and sold from the Permits”. An examination of the reasoning of the arbitrator does not support this assertion.
The arbitrator, in determining the Award, did seek to calculate the royalty payable in accordance with Exhibit C.
At paragraph 3 of the Award,54 the arbitrator set out the definitions of “Sale Proceeds”, “Revenue” and “Delivery Point” contained in Exhibit C. At paragraph 7, the arbitrator noted that the dispute between Tri-Star and the respondents arose from a significant change in CSG production and transportation operations that affected the value of CSG produced from the Fairview Tenements. At paragraph 13 the arbitrator referred to the fact that CSG sales from the Fairview Tenements to the GLNG Downstream Entities had been made pursuant to two gas sale agreements and noted that the CSG volumes sold under these agreements were subject to Tri-Star’s Overriding Royalty Interest. At paragraph 31 of the Award the arbitrator specifically noted that the resolution of the dispute turned on the meaning of the three defined terms in Exhibit C.
By reference to the definition of “Revenue”, which is that amount that would be determined as an arms length value that would be determined by the royalty section of the Queensland Department of Natural Resources, Mines and Energy under the Petroleum Act 1923 (Qld), relevantly the Office of State Revenue for the State of Queensland (OSR), the arbitrator reasoned that the definition requires only a determination of what the OSR would find is the “arms length value” of the CSG when sold. Such a determination does not take into account the location of the sale or deductions, or related set offs or adjustments.
“On [the appellants’] construction, the Tri-Star Royalty is the ‘total amount’ of royalty … on petroleum produced and sold from the permits as calculated by [the respondents and the appellants or a Queensland Court] under Exhibit C to the Tri-Star Settlement Agreement regardless of whether it is in fact ‘payable by [the respondents] to Tri-Star’ or not.”58
His Honour’s conclusion that the parties adopted a “label” sits well with reading the definition as a whole so that the words “on petroleum produced and sold from the Permits as calculated under Exhibit C to the Tri-Star Settlement Agreement” are simply descriptive of the royalty which the respondents were already bound to pay to Tri-Star pursuant to the Settlement Agreement.59
As to the term “as calculated under Exhibit C”, the appellants’ construction proceeds on the basis that Exhibit C constitutes a valuation provision which is fundamentally different in nature from an arbitration agreement. The appellants submit that the primary judge failed to give effect to this distinction.
It is not disputed that cl 16 constitutes a binding arbitration agreement between the respondents and Tri-Star. The appellants describe Exhibit C as a valuation provision. They submit that there are sound commercial reasons why the parties would agree to an objective valuation provision. A valuation provision is said to “provide objective predictability and commercial certainty of the liability” through calculation formulae and methods.60 By contrast, cl 16 “is concerned with the mechanism of resolution and not with defining the nature and extent of the principal liability”.61 Such mechanisms include an amicable settlement between the respondents and Tri-Star, compromise by a consent award, or an arbitration governed by the laws of Texas.
The respondents contend that “the notion, implicit in the Appellants’ submissions, that the parties are to be taken to have deliberately used the words ‘contained in Exhibit C’ because they were conscious of and intended to draw a distinction between a ‘valuation provision’ and a separate arbitration agreement is commercially unreal”.62
An arbitration agreement and a valuation provision are, of course, distinct instruments. While his Honour did not expressly address this distinction, the asserted failure of his Honour to recognise and apply the critical differences between an arbitration agreement and a valuation provision does not, in itself, establish any error.
As noted by his Honour, in each Sale and Purchase Deed, the parties noted that the respondents disclosed to the appellants the instruments relating to the Tri-Star Royalty in the due diligence process for each appellant.63 A commercial party in the position of each appellant, would have appreciated from the terms of Exhibit C itself and from the terms of the Settlement Agreement, that minds may differ as to the calculation of the Tri-Star Royalty under Exhibit C and that such a calculation could potentially be disputed.
“[71] … When each [Royalty Assumption Deed] was executed, the parties, including the [appellants] giving the covenant in cl 2.3(a), knew any dispute between the [respondents] and Tri-Star about the specific amount, including about ‘the total amount of royalty payable’, would be determined by an arbitration in accordance with the Settlement Agreement. The [respondents] could not be obliged to pay any other amount. The ‘royalty payable by the [respondents] to Tri-Star’ could not be any other amount.”
To the extent that it is necessary to characterise Exhibit C as a valuation provision by reason of its inclusion of formulae and criteria for calculating the Tri-Star Royalty, it does so by reference to the possibility of a dispute. In other words, and as the respondents submit, Exhibit C sets out a process “for determining an amount which is inherently capable of dispute, challenge and determination by arbitration”.64
The appellants submit that an agreement to pay a royalty “payable by the [respondents] … calculated under” a valuation provision, is not “an agreement to bind liability by the determination of a stranger (an arbitrator) pursuant to a separate arbitration agreement”.65 In this respect the appellants refer to the principle of separability in relation to arbitration agreements.
The applicability of the principle, in this case, goes no further than an acceptance that cl 16 may function as a separate agreement. As the respondents correctly submit, the principle says “nothing about the proper construction of the main contract”.66
It does not follow from a consideration of the principle that cl 16 is not part of the Settlement Agreement. Yet the appellants submit that it is unnecessary to have any regard to cl 16 to understand the calculation under or operation of Exhibit C.67
On the appellants’ argument:68
“… one starts and… should finish with the proposition that there is nothing reasonable whatever in supposing that in the event that a dispute about the royalty payable by [the respondents] to Tri-Star gets determined in a dispute resolution process between them… that the sum provides one of the integers of the second of the algorithms, namely the fraction which [the appellants] have agreed to pay for that which is calculated and payable under exhibit C… because the determination of what is owing by [the respondents] to Tri-Star is by proceedings in relation to which [the appellants] have no role.”
In this regard, the appellants urge that there is a difference between the total amount payable by the respondents to Tri-Star and the total amount payable as calculated in accordance with Exhibit C.69
These submissions cannot be accepted. One must construe the deeds as a whole in accordance with the principles in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd.70
As the respondents correctly observe:
“… the language does not permit an isolation of the amount calculated in accordance with [E]xhibit C from the whole of the agreement in critical respects because it internally requires reference to definitions used in the agreement; it cross-refers to an arbitral award; and it has to be construed as part of the contract as a whole.”71
“There is no principle that says, in constructing the main contract… [that] you ignore the arbitration clause. It is part of the main contract, even if it can have an existence separately for different reasons… the principle of separability, as it’s called operates to ensure that a dispute can be arbitrated, even if there’s a dispute about the validity of the main contract, but it does not say when you turn to construe the main contract, you need to put the arbitration clause out as if it’s not part of it…”.72
When cl 16 is read in context, by reference to the entire Settlement Agreement, the amount determined by the Award constitutes the Tri-Star Royalty as it is that royalty which the respondents must pay to Tri-Star.
Further, Exhibit C is only operative by reference to the respondents’ obligations under cl 7(d) of the Settlement Agreement.73
The appellants further submit that, contrary to his Honour’s findings as to the construction of the Royalty Assumption Deeds, there is no provision in these deeds which binds or determines the appellants’ liability to pay a royalty pursuant to an arbitral award arising from the respondents’ separate obligations as to how to resolve its disputes with Tri-Star.74 This submission also cannot be accepted.
His Honour’s construction is based on cl 2.3(a) of the Royalty Assumption Deeds and the definition of “Tri-Star Royalty” in cl 1.1. The obligation of the appellants under cl 2.3 is to pay their Buyer’s Percentage of the Tri-Star Royalty. There are a number of ways this royalty may be arrived at. An invoice may be sent by Tri-Star to the respondents, which is simply paid. An invoice may be sent by Tri-Star to the respondents, which is disputed, but paid once the dispute is resolved.
A dispute as to the royalty payable may go beyond a mere dispute in relation to a particular invoice. Such a dispute may be settled amicably. If not it may be referred to arbitration.
Irrespective of which process is followed, it produces a result, namely the Tri-Star Royalty payable by the respondents to Tri-Star. It is this royalty which the appellants have promised, by cl 2.3(a) of the Royalty Assumption Deeds, to pay their share.
His Honour was therefore correct to conclude75 that for the period September 2015 to September 2020, the amount the respondents must pay includes the additional amount determined by the Award. As submitted by the respondents:76
“… it involves no strain on the language of the Royalty Assumption Deeds to say … that the amount determined by the Award is ‘the total amount of royalty payable by the [respondents] to Tri-Star on petroleum produced and sold from the Permits as calculated under Exhibit C to the Tri-Star Settlement Agreement’ for the [relevant] period.”
The appellants also submit that the primary judge’s construction, when applied to other dispute resolution mechanisms contemplated under cl 16, such as an amicable settlement, “give[s] rise to absurd outcomes”.77
The appellants submit:
“There is no obligation in the [Royalty Assumption Deeds] by which the [appellants] agreed to blindly attach their liability to a separate dispute resolution mechanism as between Tri-Star and the [respondents] or as to whatever amount the [respondents] in fact [decide] or [agree] to pay to Tri-Star. The definition ‘Tri-Star Royalty’ makes clear that the [appellants’] liability is on CSG produced ‘as calculated under Exhibit C’. No more; no less.”78
The respondents accept that the definition of “Tri-Star Royalty”, being the total amount payable by the respondents to Tri-Star calculated in accordance with Exhibit C, would extend not only to an arbitral award or a money judgment but also to a reasonable compromise.79
While the present case only concerns an arbitral award, a consideration of a compromise or settlement as between Tri-Star and the respondents is relevant in construing the Royal Assumption Deeds. The difficulty, according to the appellants, in accepting his Honour’s construction is that in relation to a compromise or settlement, Tri-Star and the respondents, for their own commercial reasons as part of a broader compromise, could agree as to how Exhibit C operates and how to perform the calculation. Such a compromise as between the respondents and Tri-Star may result in an amount which is not calculated in accordance with Exhibit C.
As already observed, there is no suggestion in the present case that the Award was not the product of an attempt by the arbitrator to calculate the royalty in accordance with Exhibit C. The issue of the appellants’ liability under the Royalty Assumption Deeds in relation to a compromise in which extraneous matters were taken into account and the royalty was not calculated in accordance with Exhibit C, may be different. However, any anomaly arising from such a potential scenario does not greatly assist in resolving the proper construction of the Royalty Assumption Deeds.
The appellants further submit that in construing the Royalty Assumption Deeds his Honour erred both in assessing risk and finding that the appellants’ construction requires a “second, separate and theoretical determination”.80 These two asserted errors may be dealt with briefly.
At Reasons, [74] his Honour found that in relation to each Royalty Assumption Deed, a reasonable businessperson would not have understood it to have introduced a risk of under-recovery or over-recovery by the respondents and consequential underpayment or overpayment by the appellants. The appellants submit that the approach of the primary judge was to allocate the entire risk of an arbitrator’s “manifest error” to the appellants to the extent of their respective percentages, which is not the effect of the Royalty Assumption Deeds. The appellants assert that the primary judge applied a “one-sided assessment of risk, focussing only on the perspective of the [respondents] in wanting to avoid the adverse outcome in its arbitration”.81
No error has been established. First, the submission does not take into account the fact that the respondents remain liable to pay 30 per cent of any arbitral award with the appellants being responsible for the remaining 70 per cent. There is no suggestion that the Award resulted from any default, neglect or failure by the respondents to properly contest the arbitral proceedings. As correctly submitted by the respondents, the Royal Assumption Deeds reflect a transaction where the Joint Venture Partners agreed to pay their share of the total sum which the other Joint Venture Partner is determined to be liable to pay.
“[79] In this proceeding, Tri-Star is not seeking to enforce the Award against any [appellant]. By the cl 2.3(a) covenant, the [appellants] did not guarantee to Tri-Star that the [respondents] would pay the Tri-Star Royalty or that the [respondents] would duly perform their obligations under Exhibit C (or that Santos TOGA would do so). Tri-Star is not a party to any [Royalty Assumption Deed] (or [Sale and Purchase Deed] or [Deed of Assumption]) and the covenant does not make any [appellant] responsible to Tri-Star for the payment of the Tri-Star Royalty, by way of security. By the covenant, the [appellants] did not indemnify Tri-Star for any loss caused by the failure of the [respondents] to pay the Tri-Star Royalty. These important differences mean that the analogy the [appellants] draw with the decision in the Vasso, and in Ex parte Young; In re Kitchen, and Begley v Attorney-General (NSW), and is not apt.” (citations omitted).
Contrary to this finding, the appellants contend, by analogy to the guarantee cases, that they cannot be bound to the outcome of the arbitration. They submit that in order to be bound, one would objectively expect clear words to appear in the Royalty Assumption Deeds binding their liability to the result of an arbitral award.86
The appellants acknowledge that the case is not one where Tri-Star is seeking to enforce the Award against them as a guarantor. The appellants also accept that they are not bound as a party to the arbitration to the Award itself.87 Nonetheless, the appellants submit that, instead of stipulating that they were to be bound to the result of an arbitration in Texas, the parties agreed that nothing in the Royalty Assumption Deeds “gives a party authority to bind any other party in any way” and that the parties agreed to submit to the “exclusive jurisdiction of the courts of Queensland”.88
The appellants assert that they ought not be bound to the result given that they had no reasonable opportunity to participate or be heard in the arbitration. They point to the “principle at the core of our legal system that a party claiming or denying the existence of a legal right or obligation should have an opportunity to present evidence and arguments to establish the facts and law on which the claim or denial is founded”.89
The primary judge’s construction, it is said, operates such that the appellants “have no right to defend their position by reference to a correct calculation of the royalty”.90 The appellants’ submission ultimately requires a finding, by reference to the guarantee cases, that the appellants cannot be bound to the result of the arbitration in the absence of express words in the Royalty Assumption Deeds. The respondents recognise that as a consequence of their construction, the appellants have agreed to and are liable to pay their proportionate share of an amount ultimately determined in an arbitration to which they were not parties.91 This does not mean, however, that the appellants are bound to either the arbitration agreement or the Award itself. As the respondents emphasise, the appellants are “not being invited to be bound by the Award” but rather “to be bound by their promise” to pay their percentage of the Tri-Star Royalty. Accordingly, the guarantee cases are said to be of no assistance to the construction of the Royalty Assumption Deeds.
Ground 2 of the Notice of Appeal: error as to the construction of the Deeds of Assumption
“[119] There is much overlap between the parties’ submissions on this instrument and their submissions on the [Royalty Assumption Deeds]. A reasonable businessperson in the position of the parties to each [Deed of Assumption] would understand the references in the [Deed of Assumption] to ‘covenants, agreements and obligations contained in Exhibit C’ as references to those covenants, agreements and obligations with the meaning and effect each has as part of the Settlement Agreement. I reject the contrary submission for the [appellants] that the parties to each [Deed of Assumption] intended to refer to Exhibit C shorn of its context in, and the effect given to it by, the Settlement Agreement.
…
[121] On the proper construction of the [Deeds of Assumption], each of the [appellants] agreed to assume and discharge the [respondents’] obligation under Exhibit C to pay (to the extent of its percentage interest in the Tenements or the JOA) the Tri-Star Royalty to Tri-Star. For the period September 2015 to September 2020, that obligation is to pay the amount determined by the Award.”
As noted by his Honour, there is considerable overlap between the appellants’ submissions as to the proper construction of the Royalty Assumption Deeds and the Deeds of Assumption. For the reasons already given in relation to the construction of the Royalty Assumption Deeds, the appellants’ submissions concerning the asserted errors as to the primary judge’s assessment of commercial risk and the points of principle in binding liability of a third party to an arbitral award cannot be accepted.
In relation to Ground 2 the appellants further submit that the primary judge erred in construing the defined term in cl 1.1 “Santos Group Covenants”.100 The appellants submit that his Honour failed to give proper effect to the words “contained in Exhibit C” and “to the extent of the Assigned Interest” within this definition.
At Reasons, [119] outlined above, the primary judge noted that the reference to obligations “contained in Exhibit C” should be understood as a reference to the obligations “with the meaning and effect each has as part of the Settlement Agreement”. The appellants submit that there is no part of the arbitration agreement in cl 16 which gives any “meaning or effect” to Exhibit C. His Honour therefore erred in conflating and merging different obligations in cl 16 and implicitly finding that they are “contained in Exhibit C”. His Honour’s construction, according to the appellants, extends to obligations of the respondents not merely contained in Exhibit C, but those contained in the Settlement Agreement.
These submissions cannot be accepted.
His Honour, in identifying the structure of the Settlement Agreement, noted that Exhibit C takes effect only as part of the Settlement Agreement. As correctly submitted by the respondents, the use of the words in the definition “contained in Exhibit C” should not be read as setting up some technical distinction between the assumption of notional obligations to pay the royalty under Exhibit C “shorn of its context” and the actual obligations which the respondents had and have to pay the royalty provided for in Exhibit C, read and applied in the context of the Settlement Agreement as a whole.101
In addition, and as already observed, the Recital to the Deeds of Assumption records that the relevant appellant had agreed to enter into the deed pursuant to which it agrees to assume and discharge the obligations of the respondents under Exhibit C to the Tri-Star Settlement Agreement, in order to comply with cl 1.3(b) of Exhibit C. As correctly submitted by the respondents, if the appellants’ construction is to be accepted so that the Deeds of Assumption do not operate so that the appellants assume and discharge their share of the royalty payment obligations of the respondents to Tri-Star in a “back to back” manner, the Deeds of Assumption do not achieve their purpose of ensuring compliance with cl 1.3(b) of the Settlement Agreement.
Ground 1 of the Notice of Contention: error in construing the Sale and Purchase Deeds
The respondents submit that the primary judge erred in concluding that the liabilities of the respondents to pay the Tri-Star Royalty were not “Liabilities in relation to or in connection with the Fairview Interests” under cl 1.2 of the Sale and Purchase Deeds.
His Honour accepted that the phrase “in relation to or in connection with” as used in cl 4.2 of the Sale and Purchase Deeds is very broad.108 His Honour was not however, persuaded that the Tri-Star Royalty is a liability related to or connected with the interest under the Fairview Tenements and the 1992 JOA. It therefore did not constitute, for the purposes of the Sale and Purchase Deeds, an “Assumed Liability”.109 His Honour reasoned as follows:
“[101]The relationship or connection between the Tenements and the obligation to pay the Tri-Star Royalty is rather attenuated. The obligation to pay the royalty has a direct connection with Tri-Star disposing of its remaining interest under the JOA (including in the Fairview tenements and its role as operator) and with Santos TOGA becoming the operator under the 1992 JOA.
[102]Each of the [Sale and Purchase Deed] transactions was a sale of an interest free of encumbrance. Had the [respondents] borrowed to acquire the Fairview tenements, it seems doubtful that their obligation to repay the principal borrowed and pay interest would be among the Assumed Liabilities within the meaning of cll 4.1 and 4.2. The position would be the same had the [respondents] secured such borrowing in the same way they secured their obligation to pay the Tri-Star Royalty, by a charge over Santos Qld’s interest.
[103]When the [Sale and Purchase Deeds] were executed, as the operator under the JOAs, Santos TOGA was likely to have debts, liabilities, and obligations incurred in the operation of the Upstream JV. By the definition of “Fairview Assumed Liabilities” in cl 1.2, the parties made clear that the [respondents] were not to be “reimbursed for any past actual expenditures in relation to the Fairview Interest”. Nor were the [respondents] able to recover any liabilities “the subject of a written claim which has been made” prior to the Effective Date outlining the precise nature and quantum of such a claim. This left liabilities for sums not yet paid by the [respondents] and not yet the subject of a precise claim.
[104]The Tri-Star Royalty was known; as were the Amerind Royalty and the NationsBank Royalty. The parties specifically agreed on the reimbursement of the Buyer’s Percentage of each royalty in the [Royalty Assumption Deeds]. These royalty obligations were different in nature to other obligations incurred by Santos TOGA in operating the Upstream JV.” (citations omitted).
The respondents submit that the phrase “in relation to or in connection with” is “of the widest import and should not, in the absence of compelling reasons to the contrary, be read down”.110 The respondents submit that there is a direct relation between the Fairview Interests and the Tri-Star Royalty such that those interests have a relationship or connection with the royalties. These relations include that:the liability to pay the Tri-Star Royalty, contained in cl 7(d) of the Settlement Agreement, is visited upon each of the respondents; the liability to pay the Tri-Star Royalty is calculated on revenues earned from gas produced from the Fairview Interests; andthe set of transactions between the parties contemplate that each of the appellants would assume obligations to pay their proportionate share of the Tri-Star Royalty as part of the consideration for being assigned the Fairview Interests.111
In such circumstances, according to the respondents, there is no “attenuated” relationship between the tenements and the obligation to pay the Tri-Star Royalty. It follows, according to the respondents, that as the Tri-Star Royalty was a liability “in relation to or in connection with” the Fairview Interests, then it constituted an “Assumed Liability” which fell within the scope of cll 4.1 and 4.2 of the Sale and Purchase Deeds.
No error has been established.
By reference to the definition of “Fairview Assumed Liabilities” in cl 1.2 of the Sale and Purchase Deeds, his Honour drew a distinction between those liabilities which were known and those which were not. Pursuant to cl 1.2, the appellants were not, for example, responsible for liabilities relating to events or circumstances before the Effective Date where those liabilities had been paid by the respondents as at the Effective Date. This ensured that the respondents were not reimbursed for any past actual expenditures in relation to the Fairview Interests. Similarly, the appellants would not be responsible for liabilities which arose and were the subject of a written claim (which outlined the precise nature and quantum of the liability) made to the respondents prior to the Effective Date.
His Honour correctly reasoned, that similar to these known liabilities captured by the definition of “Fairview Assumed Liabilities”, the liability of the respondents to pay the Tri-Star Royalty to Tri-Star was also known, as was the Amerind Royalty and the NationsBank Royalty.
It follows therefore, that the Tri-Star Royalty is not an Assumed Liability for the purposes of the Sale and Purchase Deeds.
Ground 2 of the Notice of Contention: Privity
The respondents contend that the primary judge erred in concluding that the appellants are not estopped from denying that they are liable to pay the respondents their proportionate shares of the Tri-Star Royalty in the amounts determined by the Award because:the appellants did not share the same legal interest and were not privies to the arbitration so as to be bound by the Award; orthere was no sufficient degree of identification to make it just to hold that the appellants should be bound to the decision of the arbitrator.
The respondents accept that the appellants were not named parties to the arbitration, did not directly authorise or control the conduct of the arbitration and that the respondents did not owe the appellants any fiduciary duties in conducting the arbitration.112
Notwithstanding, the respondents maintain that it is just for the appellants to be bound by the Award because there existed between the parties a shared legal interest and a sufficient degree of identification in the outcome of the arbitration.113
The principle governing privity of interest is drawn from the oft-cited passage of Barwick CJ in Ramsay v Pigram.114 In identifying three classes of privies, his Honour observed:115
“Of the three classes of privies of blood, of title and of interest, the only one which is submitted and indeed could be submitted to be relevant is that of a privy in interest … The basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy.”
“It is common ground between Mr Tomlinson and Ramsey that the question of whether Mr Tomlinson was privy in interest with the Fair Work Ombudsman for the purpose of issue estoppel is to be determined by reference to the principle governing privity of interest stated and applied in this Court in Ramsay v Pigram. That principle, in the language of Barwick CJ, is that the ‘basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy’. It is not argued that some wider principle, along the lines of that which has since come to be adopted in the United Kingdom or New Zealand or Canada, should now be adopted in Australia.
…
Subsequent applications of the principle in Ramsay v Pigram have for the most part correctly emphasised that the interest of the privy must in each case be a legal interest: an economic or other interest on the part of A in the outcome of the earlier proceeding is insufficient. Those applications have also correctly emphasised that, absent a legal interest, such influence as A might have had over the conduct of the earlier proceeding is irrelevant even if that influence amounted to control.”
The appellants correctly identify that there is a threshold problem for the respondents in seeking to establish a privity in interest.118 In accordance with Ramsay v Pigram it is a “basic requirement” that to be a privy, the appellants must claim under or through the respondents. The respondents have not made any submissions on appeal nor pleaded at first instance, that the appellants claim “under or through” the respondents. In such circumstances, the appellants submit that in no sense was the arbitration conducted or undertaken on behalf of the appellants.
The respondents seek to address this “basic requirement” by submitting that there is a shared legal interest. In this respect, the question they pose is to what extent did the parties’ contractual relations give rise to a shared legal interest in the outcome of the arbitration.119
The respondents put forward three bases for concluding that the appellants had a shared legal interest.
First, the respondents emphasise that the appellants were participants in the upstream joint venture meaning they are entitled to a share in the extraction of CSG from tenements which is the subject of the obligation to pay the Tri-Star Royalty. This background fact, by itself, cannot and does not create a shared legal interest in the outcome of the arbitration so as to establish a privity of interest. At best, the appellants had an economic interest in the outcome of the arbitration as the Award would ultimately determine the amount which they were obliged to pay the respondents under cl 2.3(a) of the Royalty Assumption Deeds.
Secondly, the respondents assert that the appellants, pursuant to cl 4 of the Royalty Assumption Deeds,120 are under a present liability to be required to enter into an agreement with Tri-Star that would “assume and discharge” the obligations of the respondents to Tri-Star under Exhibit C of the Settlement Agreement.
There is an apparent oddity in the language of this submission. A “present liability” is not one which carries obligations that may eventually fall “to be required”. Any requirement for the appellants to enter into such written agreements with Tri-Star is contingent on a request by Santos TOGA. No such request has been made.
Clause 4 therefore creates only a contingent legal interest. It is not a present legal interest. Counsel for the respondents acknowledged this in oral submissions but maintained that it is “a legal interest nonetheless because whatever those obligations are, [the appellants] may at any time become contractually required to assume them and to discharge them”. The difficulty with this submission is that unless and until the respondents request that the appellants enter into a written agreement with Tri-Star agreeing to assume and discharge the respondents’ obligations under Exhibit C, the obligation simply does not exist. The possibility that the appellants may in the future enter into a contract with Tri-Star does not evince the existence of a present legal interest.
“In England, it has also been said that it is enough that there be ‘a sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in proceedings to which the other is party’. But in contrast, in this country, that formulation has been judicially criticised for its evident circularity – it is what Lord Wright might perhaps have denigrated as ‘idem per idem’ – and, in any event, it is subject to the limitations of any category of indeterminate reference.
The approach in this country, therefore, remains one of identifying characteristics of a relationship between party and privy which, although not amounting to a shared same interest or established legal or equitable relationship like agency or trusteeship, are sufficiently analogous to the established categories of sufficient connection to warrant inclusion in the concept. And, for present purposes, the important characteristics of the established forms of representation which emerge from the decided cases appear to be that a principal is generally able to control the conduct of an agent, and that the imposition of fiduciary duties on certain kinds of representatives has the effect of guiding the representative’s conduct and providing remedies to the principal on default.”128
Even if the obiter dicta of Megarry V-C were to be applied, the respondents, both at first instance and on appeal, have failed to establish a sufficient degree of identification between the parties.
The respondents rely on three primary features in seeking to demonstrate the respondents’ representation of the appellants’ shared interests in the arbitration.129
First, the appellants’ legal interest pursuant to cl 4 of the Royalty Assumption Deeds fundamentally aligned with the interests which the respondents sought to defend in the arbitration. As already observed, this submission cannot be accepted as there is no shared legal interest between the parties.
Secondly, the appellants were kept informed about the existence, progress, and outcome of the arbitration. While the respondents provided various procedural updates on the progress of the arbitration, they did not seek any substantive input from the appellants. As found by his Honour, the appellants did not exercise control over the respondents’ conduct in the arbitration or in the subsequent Texas Court proceedings. Nor was there any evidence of consultation between the respondents and the appellants concerning the evidence to be adduced or the submissions to be made in either forum.130
Further, a letter dated 2 July 2021 undermines any basis for concluding that the appellants participated in the arbitration in a real or significant way. To the contrary, the respondents conveyed in writing that “[n]either the [Royalty Assumption Deeds] nor the [Deeds of Assumption] contain any requirements for consultation or input with [the appellants]”.131
The evidence before his Honour was therefore insufficient to demonstrate any active involvement by the appellants in the arbitration.
Thirdly, the appellants’ non-participation in the arbitration reflected a contractual reality that they had agreed, as part of the suite of promises associated with joining the upstream joint venture, that the respondents would deal with Tri-Star in respect of the Tri-Star Royalty. According to the respondents, this conclusion is supported by cl 5 of Royalty Assumption Deeds which prevents the appellants from approaching Tri-Star to discuss any matter relating to the Tri-Star Royalty without the respondents’ prior written consent. They say that the appellants would not have agreed to cl 5 unless they appreciated that the respondents were representing their interest concerning the Tri-Star Royalty. The corollary of cl 5 was that the respondents would represent the overall interests of all parties in dealings with Tri-Star.
Disposition
The appeal should be dismissed with costs.
**BURNS J:**I agree that the appeal should be dismissed with costs, for the reasons expressed by Flanagan JA.
**RYAN J:**I agree with Flanagan JA.
Exhibit 2, RB, vol 2, page 274 – 275, paragraph 9. ↩
The parties agree that nothing turns on the (slight) differences between the various deeds: Appellants’ Amended Outline of Argument, paragraph 10; Santos TOGA Pty Ltd v KGLNG E&P Pty Ltd [2024] QSC 169 (“Reasons”), [48]. ↩
Record Book, vol 3, page 798. ↩
Record Book, vol 5, page 2056. ↩
Record Book, vol 5, page 1998. ↩
Reasons, [48]. ↩
The first to fifth respondents will, for convenience, be referred to as the respondents. ↩
Reasons, [2]. ↩
Exhibit 2, RB, vol 2, page 678. At the time of entering into the Settlement Agreement the respondents were described as the Tipperary Parties. ↩
In the Settlement Agreement, this royalty is referred to as the “Retained Overriding Royalty”. ↩
See [86] below. ↩
Reasons, [34] (b). ↩
Reasons, [71].
KGLNG E&P Pty Ltd
Santos Toga Pty Ltd [2025] QCA 114
(1993) 43 FCR 510
(1991) 22 NSWLR 466
(2015) 256 CLR 104
(1968) 118 CLR 271
(2016) 259 CLR 212
(2015) 256 CLR 507
(1910) 11 CLR 432
(2008) 100 SASR 560
(1999) 47 NSWLR 716
(2000) 50 NSWLR 222
Appeal dismissed with costs. The Court also concluded that the respondents’ notice of contention failed on its two grounds, concerning the Sale and Purchase Deeds and privity.
As noted by the learned primary judge,6 at the hearing (as was the case on appeal) the parties made submissions by reference to the deeds concerning the fourth appellant.
By the Sale and Purchase Deeds the appellants acquired 70 per cent of the undivided legal interest in and to the Fairview and Arcadia Tenements from the respondents. This resulted in the respondents and each of the appellants holding the following interest:respondents – 30 per cent;first appellant – 15 per cent;second appellant – 20 per cent;third appellant – 7.5 per cent; andfourth appellant – 27.5 per cent.
The three deeds are related. Pursuant to each Sale and Purchase Deed, the appellants agreed to execute a Royalty Assumption Deed and a Deed of Assumption on or before completion. Each Sale and Purchase Agreement includes an unexecuted Royalty Assumption Deed and Deed of Assumption in a schedule.
Prior to the appellants acquiring their interests in the upstream component of the GLNG Project, the first to fifth respondents7 agreed to pay a royalty (“the Tri-Star Royalty”) to Tri-Star Petroleum Company (“Tri-Star”) on petroleum produced and sold by the upstream component from the Fairview and Arcadia Tenements.8
The obligation on the part of the respondents to pay the Tri-Star Royalty arose from an agreement between the respondents and Tri-Star entitled “Settlement Agreement and Mutual Release” (“Settlement Agreement”).9 Relevantly, the Settlement Agreement obliges the respondents to pay to Tri-Star the Tri-Star Royalty10 which is an ongoing royalty derived from gas produced from the Fairview and Arcadia Tenements in which Tri-Star, until 2004, had certain interests. The way in which the royalty is to be calculated is set out in Exhibit C to the Settlement Agreement.
None of the three deeds altered the respondents’ obligations under the Settlement Agreement to pay to Tri-Star the Tri-Star Royalty. By cl 2.3(a) of each Royalty Assumption Deed, each appellant agreed to pay their “Buyer’s Percentage” set out at [12] above, of the Tri-Star Royalty payable by the respondents to Tri-Star. The term “Tri-Star Royalty” is defined in cl 1.1 of each Royalty Assumption Deed, set out at [74] below. Further, by cl 2.1(a) of the Deeds of Assumption, the appellants agreed to assume the “Santos Group Covenants” which was defined in cl 1.1 of the Deeds of Assumption to include the respondents’ obligations under Exhibit C of the Settlement Agreement.11
By cl 16 of the Settlement Agreement, Tri-Star and the respondents agreed to settle disputes arising out of or related to the Settlement Agreement (or the exhibits to it) by binding arbitration in accordance with the Texan General Arbitration Act.12
The appellants are not parties to the Settlement Agreement. The primary judge accepted however, that at the time of entry into the deeds, the appellants knew that any dispute between the respondents and Tri-Star concerning the amount constituting the Tri-Star Royalty would be determined by an arbitration in accordance with the Settlement Agreement.13
After the appellants had acquired their interests in the upstream component, Tri-Star and the respondents came to be in dispute concerning the calculation of the Tri-Star Royalty for the period September 2015 to September 2020.14
Tri-Star submitted the dispute to arbitration pursuant to cl 16 of the Settlement Agreement. In May 2021 the arbitrator issued a final award (“Award”).15
It was an agreed fact that the amount of the Tri-Star Royalty for the period September 2015 to September 2020 determined by the Award was based on a construction and application of Exhibit C by the arbitrator which was erroneous.16
The Award determined that the respondents were liable to pay Tri-Star $57,582,308.00 in additional payments for the Tri-Star Royalty, and simple interest (at five per cent per annum) on that amount from 11 September 2019.17
On or about 21 June 2021, Tri-Star filed a motion to confirm the Award in Texas.
On or about 16 July 2021, the respondents filed a motion to vacate the Award.
On 27 August 2021, the District Court of Harris County, Texas, confirmed the Award.
The respondents have paid Tri-Star the additional payments for the Tri-Star Royalty as determined by the Award.18
On 30 November 2021, the first respondent (Santos TOGA) issued new invoices to each of the appellants for its share of the additional payments made pursuant to the Award.
Prior to issuing these new invoices, Santos TOGA had already periodically issued previous invoices to the appellants for the royalty period September 2015 to September 2020 for amounts calculated by applying their respective percentage interest in the upstream component to the royalty amount the respondents had paid to Tri-Star prior to the Award.19
The previous invoices were based on a CSG price and not an LNG price and were paid by the appellants.20
The appellants did not pay the new invoices.21
The respondents sued the appellants in the Supreme Court of Queensland for the amounts the subject of the new invoices based on the Award.
The primary judge determined that:on the proper construction of clause 2.3 of the Royalty Assumption Deeds, the appellants promised to pay a proportion of the royalty actually payable by the respondents to Tri-Star, not some different sum notionally, but not actually, payable by the respondents to Tri-Star;22 andon the proper construction of clause 2.1(a) of the Deeds of Assumption, the appellants promised to discharge (in proportion to their joint venture interest) the obligation of the respondents to pay to Tri-Star the royalty which they were legally obliged to pay (not a notional obligation that the respondents did not actually have to discharge).23
By their notice of appeal, the appellants seek to challenge both these findings. Ground 1 of the notice of appeal asserts errors made by his Honour in construing the Royalty Assumption Deeds and Ground 2 asserts errors in his Honour’s construction of the Deeds of Assumption.
By their notice of contention, the respondents seek to maintain the decision at first instance on the alternative grounds that:on the proper construction of clauses 4.1 and 4.2 of the Sale and Purchase Deeds, the appellants were liable to pay to the respondents a proportionate amount of the Tri-Star Royalty which the respondents were obliged to pay Tri-Star as a result of the Award; oralternatively, there was a privity of interest between the appellants and the respondents in respect of the arbitration such that the appellants are estopped from denying that they are liable to pay the respondents a proportionate share of the Tri-Star Royalty because:the appellants shared a legal interest in the outcome of the arbitration;the appellants identified themselves with the respondents and sought to be informed and updated on the conduct of the arbitration; andthe Deeds of Assumption evince an intention that the respondents would represent the appellants in interactions with Tri-Star.
At the commencement of the 2002 JOA, Santos TOGA was the operator.
At paragraph 45 of the Award, the arbitrator held that the OSR would conclude that the “arms length value” of the volumes sold under the Fairview and Arcadia gas sale agreements, is the price at which those volumes are transferred to an LNG transport. The arbitrator therefore used the price at which LNG is sold as the method for valuing CSG from the tenements.
In short, while the parties accept that the amount of the Tri-Star Royalty for the period September 2015 to September 2020 determined by the Award was based on a construction and application of Exhibit C which was erroneous,55 the arbitrator did attempt to calculate the royalty by reference to CSG not LNG in accordance with Exhibit C.
The reasoning of the arbitrator in determining the Award cannot assist in the proper construction of the Royalty Assumption Deeds. There are however, a number of aspects of the Award which are relevant. First, as already observed, it must be accepted that the arbitrator attempted to calculate the royalty in accordance with Exhibit C by reference to its defined terms including, “Sale Proceeds”, “Revenue” and “Delivery Point”. As recorded in the Award itself,56 the arbitration arose from Tri-Star’s claim that the respondents had “for several years incorrectly calculated and underpaid Tri-Star the amounts due under Tri-Star’s Overriding Royalty Interest in production from coal seam gas fields in the State of Queensland, Australia”. The arbitrator, in arriving at the royalty payable, attempted to calculate the royalty in accordance with Exhibit C.
Secondly, it must also be accepted that the respondents, pursuant to the Settlement Agreement, having acquired Tri-Star’s interests in the Fairview and Arcadia Tenements under cl 7(d) of the Settlement Agreement, became bound to ensure payment of the Tri-Star Royalty to Tri-Star. The respondents are bound to pay the Tri-Star Royalty irrespective of whether it is the subject of an award arising from an arbitration under cl 16, court proceedings or otherwise “amicably” agreed between Tri-Star and the respondents.
Thirdly, the reasoning of the arbitrator assists in understanding how minds may differ in calculating the Tri-Star Royalty in accordance with Exhibit C. It is unnecessary to go beyond the definition of “Revenue” to demonstrate this point. The definition of “Revenue” requires the person calculating the Tri-Star Royalty to identify the amount that would be determined as an arms length value “that would be determined by the royalty section” of the OSR. That is, the person or entity undertaking the calculation under Exhibit C is required to determine an amount which a third party, namely the OSR, would itself determine. A calculation under Exhibit C, whether one describes it as a valuation provision or otherwise, is not one which is capable of a precise mathematical result.
The appellants’ submission that his Honour failed to have regard to all of the words of the definition of “Tri-Star Royalty” in cl 1.1 cannot be accepted. First, at Reasons, [54] his Honour set out the full text of the definition. His Honour concluded that by reference to the defined term “Tri-Star Royalty”, the parties adopted a label readily identifiable as the royalty that the respondents were bound to pay to Tri-Star under the Settlement Agreement.57
The difficulty with the appellants’ construction of the definition of “Tri-Star Royalty” is that by emphasising the terms “on petroleum produced and sold from the Permits” and “as calculated under Exhibit C” it leaves no work to do for the words “payable by the [respondents]”. As correctly submitted by the respondents:
The relevant clauses of Exhibit C in this respect are set out at [56] to [59] above. The process commences by Tri-Star providing a tax invoice in respect of the Tri-Royalty and applicable GST to the respondents on or before the 25th of the month in which a report is given. Clause 1.2(g) provides that if an error is discovered in the Tri-Star Royalty calculation or payment, and if the parties are in agreement as to the amount of the error, then such error is to be adjusted within 30 days of the determination of the error. Under cl 1.2(h), if Tri-Star disputes the Tri-Star Royalty payment or the figures on which it was based in any month, it is required to notify the respondents stating what the calculation should have been for the particular month.
As already observed, if the parties could not amicably settle a dispute arising from Exhibit C, cl 16 provided for the steps to be followed to arrive at a binding arbitration.
The appellants, having had the Settlement Agreement disclosed to them, should be taken to have understood that when agreeing to pay the Buyer’s Percentage of the Tri-Star Royalty, in the event the calculation of the Tri-Star Royalty was disputed, an arbitration may take place between the respondents and Tri-Star to determine the Tri-Star Royalty. As his Honour observed:
As to his Honour’s finding that the appellants’ construction requires a “theoretical amount”, again no error has been established. The point made by his Honour is that if the appellants’ construction of cl 2.3(a) of the Royalty Assumption Deeds is accepted, it would require a second, separate and theoretical determination of the Tri-Star Royalty.83 Both in his Honour’s analysis of risk assessment and the requirement for a theoretical amount, his Honour recognised that the obligation to pay the Tri-Star Royalty to Tri-Star remained with the respondents. While Santos TOGA could, pursuant to cl 4 of the Royalty Assumption Deeds, request the relevant appellant to enter into a written agreement directly with Tri-Star agreeing to assume and discharge the Buyer’s Percentage of the obligations of the respondents under Exhibit C, this never occurred. Under the Settlement Agreement, the respondents were bound to pay the whole amount of the Award to Tri-Star as the Tri-Star Royalty. If the appellants’ construction was accepted, then the promise under cl 2.3(a) of the Royalty Assumption Deeds, would not cover what was actually payable as the Tri-Star Royalty by the respondents to Tri-Star. Rather the appellants’ promise to pay the Buyer’s Percentage would be limited to a calculation of the Tri-Star Royalty in accordance with Exhibit C which was “correct”. Such a construction would result in the appellants, having obtained their interest in the upstream component from the respondents pursuant to the Sale and Purchase Deeds, only being responsible to pay their Buyer’s Percentage of the Tri-Star Royalty, not actually payable by the respondents to Tri-Star, but a different (lesser) amount.
A further asserted error concerns his Honour dismissing a point of principle by analogy to cases involving guarantees.84
The relevant principle, stemming from a line of authorities in the context of guarantees, is that an arbitral award will not be binding against a guarantor who is not a party to the arbitration in the “absence of a special agreement” unless “explicit words” are used to that effect.85
In refusing to apply this principle “by analogy and force of reasoning”, his Honour reasoned as follows:
Conversely, the respondents, drawing on cases on contractual indemnities,94 insurance for liability95 and payment of outgoings,96 posit that “general words can be construed as imposing an obligation to pay for, or referring to, the actual liability of a party fixed by a process outside the control of a party obligated to make payment (including judgment or award)”.97
It is unnecessary to place any material reliance on either the appellants’ or the respondents’ proposed analogies in order to properly construe the Royalty Assumption Deeds. The principle identified from Tomlinson at [153] above, as acknowledged by the appellants, ordinarily arises in the context of an issue estoppel which is discussed below in relation to Ground 2 of the notice of contention. The principle has no application where a party has otherwise agreed to be bound by the outcome of a process to which they are not a party.
As the respondents noted in oral submissions “[t]he correct approach to the construction of these [deeds] is that identified in Mount Bruce v Wright Prospecting”.98
This is precisely the approach his Honour took in construing the Royalty Assumption Deeds. His Honour was correct in finding, applying Mount Bruce, that the definition of the Tri-Star Royalty covers the royalty which is payable by the respondents to Tri-Star, resulting from the Award.
No error has been established.
The appellants’ reliance on cl 6.11(a) of the Deeds of Assumption is also misplaced.102 This clause does not support the appellants’ construction that there is no objective intention to extend the obligations contained in Exhibit C to separate obligations in cl 16, as to do so would permit the respondents to bind the appellants by its actions and conduct in an arbitration or a settlement with Tri-Star.103 Rather, what the appellants are bound by is the obligation in the Deeds of Assumption.104
As to the words “to extent of the Assigned Interests” in the definition of “Santos Group Covenants”, the appellants submit that the obligation of the respondents to pay the Retained Overriding Royalty in Exhibit C to the Settlement Agreement is not an obligation to the “extent of the Assigned Interests” because it is in no way reserved in connection with or solely from the interests which the appellants purchased. According to the appellants it is only the Royalty Assumption Deeds which impose an obligation on the appellants concerning payment of a royalty as calculated under Exhibit C.105 The appellants’ construction cannot be accepted.
First, the appellants’ construction ignores that the “Assigned Interests” under the Deeds of Assumption are distinct from those interests assigned under the Settlement Agreement. By definition, the “Assigned Interests” under the Deeds of Assumption are each appellant’s percentage legal interest in the relevant Permits and each appellant’s working interests in the 1992 JOA.106 Properly construed, the words “to the extent of the Assigned Interests” can only be understood as a reference to what interests were actually assigned to the appellants rather than what interests were not assigned to the appellants.107
Secondly, as noted above at [53], while the definition of “Retained Overriding Royalty” in the Settlement Agreement refers to the right of Tri-Star to receive a royalty calculated and paid on terms set out in Exhibit C “reserved from the 2.25 per cent Working Interest” it must be accepted that the calculation of the Tri-Star Royalty and the obligation to pay it is not limited by reference to the 2.25 per cent Working Interest, but is calculable by reference to the whole of the respondents’ interest. This is because the Retained Overriding Royalty is payable from an undivided interest on all revenues from the sale of gas from the tenements.
This is evident from the definitions used in Exhibit C, including the definition of “Sale Proceeds”, which means the revenue to the respondents from petroleum produced from the respondents’ interests and permits measured at the delivery point or, in the event sale occurs downstream from the delivery point, at the point of sale. The royalty is therefore calculated by reference to the revenue generated from the respondents’ whole interest.
No error has been established.
As the appellants have failed to establish that his Honour erred in construing the Royalty Assumption Deeds and the Deeds of Assumption, it follows that the appeal should be dismissed with costs.
It is therefore unnecessary to deal with the notice of contention. As the parties made submissions in relation to both grounds, it is however, appropriate to address the substance of these submissions.
Thirdly, the respondents submit that the obligations so assumed would be identical to those owed by the respondents to Tri-Star which were the subject of the arbitration. While this may be accepted, it does little to establish a present legal interest in circumstances where those obligations have not actually been assumed.
The respondents postulate that the appellants “would have enjoyed the benefits of the Award were the [respondents] to have succeeded”.122 The proposition that the appellants stood to benefit from the arbitration does not substantiate the existence of a legal interest. As Burchett J emphasised in Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (in liq),123 “the mere promotion of someone else's claim, in circumstances where some advantage might accrue from its success, is not enough to constitute a party a privy”.
It follows that the parties do not share a legal interest in the arbitration and his Honour’s conclusion in this respect was correct.124
The primary judge was otherwise correct in concluding that there was no sufficient degree of identification between the parties.125
Before addressing the substance of the respondents’ submission, a preliminary observation should be made. The concept of a “sufficient degree of identification” that the respondents rely upon emanates from the English authority of Gleeson v J Wippell & Co Ltd.126 As the appellants point out, the obiter dicta of Megarry V-C in that case do not reflect the law in Australia and have been the subject of judicial criticism.
As Nettle J observed in Tomlinson:127
It is difficult to reconcile the respondents’ arguments with respect to the obligations under cl 4 with the reliance they place on cl 5. Pursuant to cl 4, the appellants have contingent obligations to Tri-Star which may crystalise, yet simultaneously, cannot, pursuant to cl 5, approach Tri-Star without the respondents’ consent. The idea that the appellants could on the one hand be privies on the basis of potential future contractual relations with Tri-Star and on the other hand privies because of their obligations not to approach Tri-Star is untenable. As correctly submitted by the appellants, “there is an instability and… incoherence in these being the main contractual provisions which are called in aid so as to give substance to an argument for an estoppel…”.133
Ground 2 of the Notice of Contention fails.
Reasons, [3]. ↩
Reasons, [3]. ↩
RB, vol 2, page 283, paragraph 2(b). ↩
Reasons, [3]. ↩
Reasons, [4]. ↩
Exhibit 2, RB, vol 2, page 277, paragraph 38. ↩
Exhibit 2, RB, vol 2, page 277, paragraph 39. ↩
Exhibit 2, RB, vol 2, page 277, paragraph 39 and page 278, paragraph 40. ↩
Reasons, [80]. ↩
Reasons, [121]. ↩
Reasons, [46]. ↩
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, [46]–[52] (French CJ, Nettle and Gordon JJ), [109] (Kiefel and Keane JJ), [112] (Bell and Gageler JJ). ↩
This summary is drawn from that in Freedom Willetton Pty Ltd v Commissioner of State Revenue (WA) [2021] WASCA 38, [84] (Buss P, Murphy and Vaughan JJA). ↩
Reasons, [11]. ↩
Reasons, [21]–[22]. ↩
Reasons, [23]. ↩
Reasons, [23]. ↩
Santos TOGC was then called Tipperary Oil and Gas Corporation. ↩
Reasons, [27]. ↩
Reasons, [29]. ↩
Reasons, [30]. ↩
Reasons, [120]. ↩
Reasons, [33]. ↩
Clause 1(k) of the Settlement Agreement; RB, vol 2, page 678. ↩
Transcript of Proceedings, 14 April 2025, page 1-29, lines 1 – 10. ↩
See [12] above. ↩
Reasons, [82]. ↩
RB, vol 3, page 815. ↩
Clause 4.2 of the Sale and Purchase Deeds. ↩
Reasons, [80]. ↩
Reasons, [111]. ↩
Reasons, [121]. ↩
Appellants’ Amended Outline of Argument, paragraph 1. ↩
Respondents’ Amended Outline of Argument, paragraph 1. ↩
Transcript of Proceedings, 14 April 2025, page 1-26, lines 17 – 24. ↩
Clause 1.1 is set out at [74] above. ↩
Reasons, [56]-[57]. ↩
Appellants’ Amended Outline of Argument, paragraph 23. ↩
Appellants’ Amended Outline of Argument, paragraph 16. ↩
Appellants’ Amended Outline of Argument, paragraph 6. ↩
RB, vol 6, page 2294. ↩
Exhibit 2, Schedule 3, paragraph 2(b); RB, vol 2, page 283. ↩
RB, vol 6, page 2293. ↩
Reasons, [70]. ↩
Respondents’ Amended Outline of Argument, paragraph 19. ↩
Respondents’ Amended Outline of Argument, paragraph 20. ↩
Appellants’ Amended Outline of Argument, paragraph 20. ↩
Appellants’ Amended Outline of Argument, paragraph 22. ↩
Respondents’ Amended Outline of Argument, paragraph 44. ↩
Reasons, [64]. ↩
Respondents’ Amended Outline of Argument, paragraph 22(b). ↩
Appellants’ Amended Outline of Argument, paragraph 23. ↩
Transcript of Proceedings, 14 April 2025, page 1-44, lines 14–15. ↩
Appellants’ Amended Outline of Argument, paragraph 22. ↩
Transcript of Proceedings, 14 April 2025, page 1-8, lines 18–25. ↩
Transcript of Proceedings, 14 April 2025, page 1-32, lines 21–24. ↩
(2015) 256 CLR 104. ↩
Transcript of Proceedings, 14 April 2025, page 1-32, lines 17–21. ↩
Transcript of Proceedings, 14 April 2025, page 1-44, lines 18–27. ↩
Respondents’ Amended Outline of Argument, paragraph 22(a). ↩
Appellants’ Amended Outline of Argument, paragraph 2. ↩
Reasons, [80]. ↩
Respondents’ Amended Outline of Argument, paragraph 24. ↩
Appellants’ Amended Outline of Argument, paragraph 24. ↩
Appellants’ Amended Outline of Submissions, paragraph 24. ↩
Transcript of Proceedings, 14 April 2025, page 1-44, line 39. ↩
Reasons, [62], [63], [74] and [76]. ↩
Appellants’ Amended Outline of Argument, paragraph 26. ↩
Respondents’ Amended Outline of Argument, paragraph 28(c). ↩
Reasons, [76]. ↩
Reasons, [79]. ↩
Re Kitchin, ex parte: Young (1881) 17 Ch D 668; Begley v Attorney-General (NSW) (1910) 11 CLR 432, 439-440 (Griffith CJ, 448 (Barton J), 460 (Isaacs J); Bruns v Colocotronis (The Vasso) [1979] 2 Lloyds Rep 412, 418. ↩
Appellants’ Amended Outline of Argument, paragraph 32. ↩
Appellants’ Amended Outline of Argument, paragraph 30. ↩
Appellants’ Amended Outline of Argument, paragraph 25. ↩
Appellants’ Amended Outline of Argument, paragraph 31 citing Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507, [38] (French CJ, Bell, Gageler and Keane JJ). ↩
Appellants’ Amended Outline of Argument, paragraph 32. ↩
Respondents’ Amended Outline of Argument, paragraph 28 paragraph. ↩
Transcript of Proceedings, 14 April 2025, page 1-34, lines 44 – 45 to page 1-35, line 1. ↩
Respondents’ Amended Outline of Argument, paragraph 29. ↩
Parker v Lewis (1873) LR 8 Ch App 1035, 1059 (Mellish LJ in obiter), cited with approval in White Industries QLD Ply Ltd v Hennessey Glass & Aluminium Systems Pty Ltd [1999] 1 Qd R 210, 225 (Derrington J). ↩
QBE Insurance v Nguyen (2008) 100 SASR 560, [134]-[136]; Lumberman’s Mutual Casualty v Boris Lend Lease Ltd [2005] 1 Lloyds Rep 494, [43]; Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88, 94; White Industries Qld Ply Ltd v Hennessy Glass & Aluminium Systems [1999] 1 Qd R 210, 225-227; CE Heath Casualty & General Insurance Ltd v Pyramid Budding Society (in liq) [1997] 2 VR 256, [273]; VACC Insurance Ltd v BP Australia Ltd (1999) 47 NSWLR 716, [26]; Insurance Exchange v Dooley (2000) 50 NSWLR 222, [83]. ↩
Bonafair Holdings v Hungry Jacks [2016] NSWCA 276. ↩
Respondents’ Amended Outline of Argument, paragraph 30. ↩
Transcript of Proceedings, 14 April 2025, page 1-35, lines 22–23. ↩
Reasons, [119]–[121]. ↩
This definition is set out at paragraph [86] above. ↩
Respondents’ Amended Outline of Argument, paragraph 43; Reasons, [118]–[ 119]. ↩
Clause 6.11(a) is set out at [87] above. ↩
Appellants’ Amended Outline of Argument, paragraph 42. ↩
Respondents’ Amended Outline of Argument, paragraph 46. ↩
Appellants’ Amended Outline of Argument, paragraph 47. ↩
See [84] above. ↩
Transcript of Proceedings, 14 April 2025, page 1-46 lines 35–37. ↩
Reasons, [94]. ↩
Reasons, [105]. ↩
IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466, 483 and 487. ↩
Respondents’ Amended Outline of Argument, paragraph 55. ↩
Transcript of Proceedings, 14 April 2025, page 1-50, lines 19–23. ↩
Reasons, [128]. ↩
(1968) 118 CLR 271. ↩
Ramsay v Pigram (1968) 118 CLR 271, 279. ↩
(2015) 256 CLR 507. See also Timbercorp Finance Pty Ltd (in liq) v Collins (2016) 259 CLR 212, [45], [49] (French CJ, Kiefel, Keane, Nettle JJ). ↩
Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507, 515 [17], 522 [35]. ↩
Appellants’ Amended Outline in Reply, paragraph 33. ↩
Transcript of Proceedings, 14 April 2025, page 1-50, lines 25–27. ↩
Clause 4 of the Royalty Assumption Deeds is set out at [76]. ↩
Transcript of Proceedings, 14 April 2025, page 1-52, lines 7–9. ↩
Respondents’ Amended Outline of Argument, paragraph 65. ↩
(1993) 43 FCR 510, 542. ↩
Reasons, [137]–[138]. ↩
Reasons, [141]–[143]. ↩
[1977] 1 WLR 510. ↩
Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507, 539 [97]-[98]. ↩
The decision of this Court in Thomas v Balanced Securities Ltd [2012] Qd R 482 where Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510 is referred to does not constitute any authority in support of the proposition that the obiter dicta of Megarry V-C has been adopted in Queensland. ↩
Transcript of Proceedings, 14 April 2025, page 1-56, lines 18–46 – page 1–57, lines 1–35. ↩
Reasons, [143]. ↩
RB, vol 6, page 2362. ↩
Respondents’ Amended Outline of Argument, paragraph 66. ↩
Transcript of Proceedings, 14 April 2025, page 1-59, lines 3–7. ↩