Nation Energy (Australia) Pty Ltd v Paltar Petroleum Ltd

The history 3 On 26 October 2017, Gleeson J granted leave to John Hislop to commence derivative proceedings in the name of Nation Energy against the respondents, being Paltar and certain directors and officers of Nation Energy. That leave was granted under s 237 of the Act: Hislop v Paltar Petroleum Ltd (No 3) [2017] FCA 1253. The discontinuance, compromise or settlement of the proceeding would thus require leave under s 240. 4 On 22 November 2017, Nation Energy filed a statement of claim in the proceeding. On 21 January 2019, the respondents filed a defence. No further substantive steps have taken place. 5 On 17 April 2019, Ryan Eagle and Peter James Gothard were appointed joint and several voluntary administrators of Paltar by resolution of the board of directors pursuant to s 436A(1) of the Act. 6 As a consequence of the statutory moratorium imposed by s 440D of the Act, as from the commencement of the voluntary administration of Paltar no proceedings could be commenced or continued against Paltar without the written consent of the voluntary administrators or the leave of the court. 7 On 3 May 2019, in separate a proceeding, I ordered that Paltar be wound up pursuant to s 459A of the Act and that Messrs Eagle and Gothard be appointed joint and several liquidators of Paltar: T-S Capital Partners LLC v Paltar Petroleum Ltd (adms appt), in the matter of Paltar Petroleum Ltd (No 2) [2019] FCA 636. 8 As a consequence of the statutory moratorium imposed by s 471B of the Act, no proceeding can be commenced or proceeded with against Paltar without the leave of a court. That includes the present interlocutory application. 9 The current position is therefore that the proceeding as against the first respondent, Paltar, cannot be proceeded with, and the orderly progress of the proceeding against the remaining respondents is hamstrung, or at least complicated, by the continued presence of Paltar as a party. Also, Nation Energy requires leave under s 471B of the Act to bring this interlocutory application for leave to have the proceeding against Paltar dismissed. Unsurprisingly, the liquidators of Paltar have expressly consented to leave in both respects. 10 On or around 30 May 2019, the liquidators of Paltar published a circular to creditors in which they advised that Paltar had ceased to trade and that in respect of possible return to creditors "it is uncertain what dividend, if any, might be paid". 11 On or around 2 August 2019, the liquidators published a further circular to creditors which provided updated information. That included that certain assets, being exploration permits, that are the subject of earning agreements between Nation Energy and Paltar are in the process of being attempted to be sold to third parties or in the alternative surrendered to the Northern Territory Government. The liquidators stated that at this stage they are not in a position to advise the likelihood of a dividend being payable to unsecured creditors and that their investigations are continuing with respect to the realisation of Paltar's assets and the availability of any further recoveries.

The law 12 As indicated, the proceeding against Paltar was brought with leave under s 237 of the Act. Section 240 provides that proceedings brought with leave "must not be discontinued, compromised or settled without the leave of the court". Section 240 does not mention dismissal of the proceeding. 13 Nation Energy seeks the dismissal on the basis that it is by agreement of the parties, with the result that the proceeding against Paltar is to be treated as having been "settled", and that that settlement provides for, or justifies, the dismissal. On that basis, Nation Energy seeks leave under s 240 for the proceeding against Paltar to be dismissed. 14 With respect to the order that it seeks actually dismissing the proceeding against Paltar, Nation Energy relies on s 241 of the Act which gives to the court a broad supervisory power to make any orders, and give any directions, that it considers appropriate in relation to proceedings brought or intervened in with leave: Fiduciary Ltd v Morningstar Research Pty Ltd [2005] NSWSC 442; 53 ACSR 732 at [15] per Austin J. None of the particular types of orders listed in paragraphs (a) to (d) of s 241 specifically covers the dismissal order that is presently sought, but that list - which is prefaced by the word "including" - is clearly not exhaustive and the wording of the section is wide enough to enable the court to make such a dismissal order: Isak Constructions v Faress [2005] NSWSC 679 at [11] per Campbell J; Magafas v Carantinos [2008] NSWSC 691 at [15]-[23] per Einstein J. 15 Given that the power under s 241 is supervisory of proceedings commenced with leave under s 237, and the interests of the company are central to the granting of such leave, the interests of the company must be central to the exercise of the power under s 241. In considering what is in the best interests of the company, it is necessary to consider the prospects of success of the action, the likely costs and likely recovery if the action is successful and likely consequences if it is not: Robash Pty Ltd v Gladstone Pacific Nickel Pty Ltd [2011] NSWSC 1235; 86 ACSR 432 at [57] per Ball J.

Decision 16 I raised with the parties whether a discontinuance of the proceeding, which unlike dismissal is specifically provided for by s 240 of the Act, would not be a more appropriate course. It would have the consequence that the present proceeding could continue without the difficulties presently experienced by the continued presence of Paltar as a party, and the question whether a new proceeding against Paltar should ever be allowed in the future will be able to be dealt with under the rubric of leave to proceed against the company in liquidation under s 471B of the Act. 17 The liquidators of Paltar replied with a submission which was supported by Nation Energy that that form of discontinuance would leave the liquidators in continuing uncertainty with regard to whether or not Nation Energy's claims would ever be brought again in the future. That is because of r 26.14 of the Federal Court Rules 2011 (Cth) which provides that discontinuance cannot be pleaded as a defence to a proceeding in relation to the same, or substantially the same, cause of action. The liquidators explained how any ongoing uncertainty with regard to whether the claims might be brought again has, or at least reasonably may have, an impact on the saleability, or at least the sale price to be realised, of Paltar's principal assets which they are seeking to dispose of. 18 In those circumstances, I am satisfied that the parties have "settled" the case as between Nation Energy and Paltar on the basis that it should be dismissed, that there is appreciably good reason why the proceeding should be dismissed, and that I have the power under s 241 of the Act to dismiss the proceeding. 19 The remaining consideration is the best interests of Nation Energy as a whole, as distinct from the interests of Mr Hislop who has brought the proceeding in the name of Nation Energy. In that regard, the reports of the liquidators reveal that there is likely to be little in the matter for Nation Energy as an unsecured creditor, and it is a complicated and costly claim to bring. On the evidence, there does not appear to be any practical utility in Nation Energy proceeding against Paltar. 20 In the circumstances, I am satisfied that it is in the best interests of Nation Energy for the proceeding to be dismissed against the first respondent. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stewart.

SCHEDULE OF PARTIES NSD 2078 of 2017 Respondents Fourth Respondent: DARREL CAUSBROOK