New Hope Corporation Ltd v Northern Energy Corporation Ltd

Judgment

1. I gave judgment in this matter on 12 July 2019: New Hope Corporation Ltd v Northern Energy Corporation Ltd (administrators appointed) [2019] NSWSC 879.
2. These reasons deal with the form of the declarations that should be made to give effect to my reasons and the question of costs.
3. I shall use the same abbreviations here as in the 12 July 2019 judgment.
4. I held that, on the proper construction of the Deed, the plaintiffs do not guarantee the obligations of the first to eighteenth defendants.
5. Having come to that conclusion, it was not necessary for me to determine the plaintiffs' case that the Deed should be rectified by deleting the Part 1(3) Entities. However I concluded that, had I been called upon to reach a conclusion about that matter, I would have refused rectification.

Declaratory relief

1. It is desirable that declarations indicate "the gist of the findings" I have made: Rural Press Limited v Australian Competition and Consumer Commission (2003) 216 CLR 53; [2003] HCA 75 at [89] (Gummow, Hayne and Heydon JJ).
2. With that in mind, the plaintiffs and Wiggins each proposed a detailed series of declarations to give effect to my reasons of 12 July 2019.
3. I have given careful consideration to the parties' contentions and have concluded that the appropriate declarations are those that I have set out at [31] below.

Costs

1. It is common ground that Wiggins must pay the plaintiffs' costs of the construction argument.
2. The dispute is as to whether Wiggins should also pay the plaintiffs' costs of the plaintiffs' claim for rectification of the Deed.
3. There is also a dispute as to what order for costs should be made in respect of NEC which was appointed to represent the interests of creditors of any of the Part 1(2) and Part 1(3) Entities on 19 February 2019.

The costs of the plaintiffs' claim for rectification

1. The plaintiffs contend that, although they would not have been successful in relation to their claim for rectification, they should have their costs of that issue because "[p]roperly characterised, the plaintiffs' application to this Court for declaratory relief, and if necessary for rectification, was defensive", because "the proceedings originated out of [Wiggins'] prosecution of its constructions arguments in the Federal Court".
2. The plaintiffs were referring to proceedings commenced in the Federal Court of Australia by the administrators of NEC and Colton Coal seeking an order extending time for the convening of the second meeting of creditors pursuant to s 447A(1) of the Corporations Act 2001 (Cth).
3. Wiggins was joined as an "Interested Party" to those proceedings doubtless because, as I recorded at [14] of the 12 July 2019 judgment, it claims to be a substantial creditor of both NEC and Colton Coal.
4. Before Farrell J, Wiggins opposed the extension of time sought by the administrators and submitted that NEC and Colton Coal should be immediately placed into liquidation.
5. According to Farrell J's judgment, one argument advanced by Wiggins was that New Hope and the Part 1(2) Entities guaranteed the debts of NEC and Colton Coal by the Deed: see Jahani, in the matter of Northern Energy Corporation Ltd (Administrators Appointed) [2018] FCA 1983 at [5], [23]-[27].
6. The plaintiffs contend that it was necessary for them to bring these proceedings to meet that contention.
7. It may be, in those circumstances, that the plaintiffs' application in these proceedings for declaratory relief as to the proper construction of the Deed can be seen as being defensive to the position that Wiggins evidently adopted in the Federal Court proceedings.
8. However I do not see that the same can be said for the plaintiffs' claim, brought in the alternative, that the Deed should be rectified. That claim was brought against the possibility that Wiggins' contentions as to the proper construction of the Deed were correct. The claim for rectification cannot in those circumstances be seen as being defensive to Wiggins' contentions as to the construction of the Deed. Rather, the claim for rectification is better characterised as an affirmative step taken by the plaintiffs lest Wiggins' contentions as to the proper construction of the Deed be accepted.
9. In this case, as Wiggins' submitted, there were two clear events in respect of which the plaintiffs sought different orders; namely, the proper construction of the Deed and whether the Deed should be rectified.
10. The proceedings occupied four hearing days. The plaintiffs' case for rectification occupied two and a half of those days. The plaintiffs served some 15 affidavits from 10 witnesses, of whom 9 were cross-examined. The Court Book comprised eight volumes of material, six of which related to the rectification issue. The construction issue required the tender of the Deed and some extrinsic materials and legal argument, admittedly of some complexity, about the meaning of the Deed.
11. In these circumstances, I think this is a case where the issues that were agitated before me were sufficiently discrete to warrant a costs order being made reflecting the success the plaintiffs' have achieved in relation to those issues: Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [13]; Network Ten Pty Ltd v TX Australia Pty Ltd (No 2) [2019] NSWCA 51 at [13].
12. The plaintiffs should have their costs of the construction argument and Wiggins should have its costs of the rectification argument.
13. As Wiggins has pointed out, there is no reason to think that the assessment of costs so ordered would be impracticable.

The costs of the representative defendant

1. The order made on 19 February 2019 that NEC be appointed to represent the creditors of the Part 1(2) and the Part 1(3) Entities was made on condition that New Hope agreed to indemnify NEC for those costs.
2. I have been informed that the plaintiffs sought an order that Wiggins be appointed as representative defendant, that Wiggins opposed being so joined and that NEC was appointed as representative defendant over its opposition.
3. The effect of the making of the representative order was that, were the plaintiffs to be successful in obtaining declaratory relief as to the proper construction of the Deed (as has turned out to be the case), such declaration or declarations would bind all creditors of the Part 1(3) Entities, and not merely Wiggins.
4. NEC participated in the hearing by joining with Wiggins in arguing that, on the proper construction of the Deed, the plaintiffs guaranteed the debts of the Part 1(3) Entities and that rectification should be denied.
5. In those circumstances my conclusion is that the fair order to make is that Wiggins pay the costs incurred by NEC in responding to the plaintiffs' arguments as to the proper construction of the Deed.
6. As I understand it, the making of this order will result in the plaintiffs remaining liable to indemnify NEC for the costs it incurred in responding to the plaintiffs' claim for rectification.

Declarations and orders

1. I make the following declarations: 1. That, on the proper construction of the Deed of Cross Guarantee dated 31 July 2012 ("Deed"), to be "listed in Part 1 of the Schedule" to the Deed, an entity there named must have executed the Deed. 2. That each of the first to eighteenth defendants: 1. did not execute the Deed; 2. is not "listed in Part 1 of the Schedule" to the Deed for purposes of the opening words of the Deed nor the definition of "Group Entity" in cl 1.1; 3. is not a "Group Entity" for the purpose of the Deed; 4. is not "covered by" the Deed for the purposes of cl 2.1 nor the definition of "Certificate" in cl 1.1; and 5. does not have the benefit of the Cross Guarantee in cl 3.1 nor the Deed Poll in cl 6.1. 1. That on the proper construction of the Deed the plaintiffs have not guaranteed the payment of any debt or claim which is now, or at any future time may be, admissible to proof in the winding up of the first to eighteenth defendants.
2. I make the following orders: 1. That the nineteenth defendant pay the plaintiffs' costs of the claim for declaratory relief in respect of the proper construction of the Deed. 2. That the plaintiffs pay the costs of the nineteenth defendant of the claim for rectification of the Deed. 3. That the nineteenth defendant pay the costs incurred by the first defendant responding to the plaintiffs' claim for declaratory relief in respect of the proper construction of the Deed. 4. That the proceedings otherwise be dismissed. 5. That the parties have liberty to apply on short notice as to the form of these orders and declarations, such liberty to be exercised by 5.00pm on 29 July 2019.

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