Oceltip Pty Ltd v Noble Resources Pte Ltd & Ors [2016] QSC 246

(a) Oceltip had two directors, Mr Tinkler and Mr Higgins, and at no time had a sole director;

(b) Oceltip did not conduct any trading or business activities;

(c) Oceltip did not have any day-to-day activities;

(f) Oceltip did not hold any assets other than its contractual rights under the Oceltip Royalty Deed and Noble Royalty Deed;

(g) Oceltip did not receive any income, other than income received under the Oceltip Royalty Deed;

(h) The only activity conducted by Oceltip was receiving amounts it was entitled to receive under the Oceltip Royalty Deed and distributing those funds to its members;

(i) Oceltip did not execute any powers of attorney in favour of Mr Tinkler or Mr Higgins; and

(j) Oceltip did not have any custom or practice of permitting, or acquiescing in, Mr Tinkler exercising or purporting to exercise any authority on behalf of Oceltip when dealing with third parties.

[9] I observe that the allegation in [12](j) is an important part of Oceltip's case.

[10] Third, Oceltip contends, in paragraph 17 of its statement of claim, that the Waiver Deed was not binding on it. Paragraph 17 provides:

1. The Waiver Deed signed by Mr Tinkler was not binding on Oceltip and was not, on the proper construction of clause 12.6 of the Restated Noble Royalty Deed "writing signed by" Oceltip, as:

(a) Mr Higgins never signed the Waiver Deed or any counterpart of it;

(b) the Oceltip Constitution did not authorise Mr Tinkler to execute the Draft Waiver Deed on behalf of Oceltip;

(c) Oceltip's directors had not authorised Mr Tinkler to execute the Draft Waiver Deed;

(d) Oceltip's members had not authorised Mr Tinkler to execute the Draft Waiver Deed;

(e) the directors of Oceltip had not resolved to permit or authorise Mr Tinkler to execute the Draft Waiver Deed for Oceltip;

(f) the Draft Waiver Deed was not executed using the common seal of Oceltip;

(g) for the purposes [of] section 127 of the Corporations Act 2001 (Cth), two directors did not sign the Draft Waiver Deed, and Oceltip was not a proprietary company with a sole director;

(h) Oceltip had not granted any power of attorney to Mr Tinkler authorising Mr Tinkler to execute the Draft Waiver Deed as Oceltip's attorney;

(i) clause 102 of the Oceltip Constitution did not authorise the execution of the Draft Waiver Deed by Mr Tinkler; and

(j) Mr Tinkler had no implied or apparent authority to execute the Draft Waiver Deed for Oceltip;

[11] On 4 October 2010, Noble and Gloucester entered into a Share Purchase Agreement. Oceltip characterises that agreement as set out in paragraph 19C of the pleading. It suffices to say that Oceltip contends the conduct was a dealing with the Marketing Royalty, contrary to the constraints set out in the Restated Noble Royalty Deed.

[12] On 22 December 2011, Noble and Gloucester entered into a Deed of Assignment in which Noble assigned the Marketing Royalty to Gloucester. Gloucester did not do the things which it would have had to do had it sought to comply with cl 9 of the Restated Noble Royalty Deed. Oceltip contends that on 22 June 2012, Gloucester ceased to be a related body corporate and that would have triggered the pre-emptive right in Oceltip if cl 9 had not been waived.

[13] Oceltip says that it did not give consent to the foregoing conduct which apparently led to Oceltip losing a contractual pre-emptive right in relation to the Marketing Royalty.

[14] Oceltip advances three fundamental contentions. -

• (a) First, it should succeed in avoiding the Waiver Deed.
• (b) Second, if it does, then it should be able to attack the validity of Noble's purported assignment of the Marketing Royalty. In this regard it says that the purported assignment contravened binding contractual restraints and accordingly was ineffective, and that it, and not Gloucester, remains entitled to the Marketing Royalty.
• (c) Third, if the assignment is ineffective, then it should be able to recover damages from Noble.

[15] On the first two contentions, Oceltip seeks declaratory relief vindicating its position.

[16] On the third contention, it seeks damages from Noble for breach of the clauses in the Restated Noble Royalty Deed which constrained Noble from dealing with the Marketing Royalty. The relevant case is pleaded at paragraphs 31 to 35 of the statement of claim as follows:

1. Had the said breach not occurred, Oceltip would have retained its pre-emptive right granted by clause 9 of the Restated Noble Royalty Deed.
2. In the premises pleaded at paragraphs 30 and 31 above, by reason of Noble Marketing's assignment of the Marketing Royalty to Gloucester SPV, Oceltip has been deprived of its pre-emptive right granted by clause 9 of the Restated Noble Royalty Deed and the opportunity to exploit that right.
3. As at the date of each Purported Assignment to Gloucester SPV, Oceltip's pre-emptive right had a value in an amount to be assessed by the Court.
4. Gloucester SPV did not, by notice in writing (or by any other means), offer to sell the whole of the Marketing Royalty to Oceltip when it ceased to be a related body corporate of Noble Marketing.
5. In the premises pleaded at paragraphs 30 to 34 above, Oceltip has suffered loss and damage in the amount of the value of the pre-emptive right referred to at paragraph 33 above.

[17] Against that background, Oceltip now seeks orders pursuant to r 483 of the Uniform Civil Procedure Rules 1999 (Qld) which would effectively split the trial as between liability on the one hand and damages on the other. It asks me to order that the Court determine separately from all other questions in the proceeding (and after those other questions have been determined) the issue of Oceltip's loss and damage, being the matters raised by:

• (a) paragraphs 32, 33 and 35 of its pleading filed 16 November 2015 and subparagraph 7(c) of the prayer for relief (being the damages claim); and
• (b) paragraphs 32, 33 and 35 of Noble's defence filed 9 March 2016 responding to Oceltip's statement of claim.

[18] The essence of Oceltip's argument is that -

• (a) If it loses on the first contention concerning waiver, then it will lose completely, because the Waiver Deed will have authorised the other conduct of which it complains.
• (b) If it wins on both the first contention and on the second contention, namely, that the assignment was ineffective, then, again, it will win completely, and there will be no need for the damages case.
• (c) It is only if it wins the first contention and loses the second contention that there is any need for the resolution of its contractual damages case.

[19] Thus, Oceltip contends it is worth making the orders it seeks because of the potential avoidance of the need ever to embark upon a contractual damages case, thereby saving -

• (a) considerable time and money in interlocutory steps necessary to advance such a case; and
• (b) time and money at the trial, because a trial which did not enquire into the contractual damages case would be shorter and cheaper than a trial which enquired into all issues.

[20] And even if there does have to be a second trial, Oceltip points out that if the orders it seeks are made, Gloucester would not have to be part of the second trial, because that trial would only be necessary if Oceltip had lost its case concerning the efficacy of the assignment to Gloucester.

[21] There was no dispute between the parties as to the principles which informed the way in which I should approach this application.

[22] The judgment of Branson J in Reading Australia Pty Ltd v Australian Mutual Provident Society [1999] FCA 718; (1999) 217 ALR 495 is often cited and was relied upon by Oceltip, Noble and Gloucester before me. I will apply her Honour's reasoning. The last three of her Honour's list of principles at [8] bear restatement (citations omitted):

(e) care must be taken in utilising the procedure provided for ... to avoid the determination of issues not "ripe" for separate and preliminary determination. An issue may not be "ripe" for separate and preliminary determination in this sense where it is simply one of two or more alternative ways in which an applicant frames its case and determination of the issue would leave significant other issues unresolved [(In CBS Productions Pty Ltd v O'Neill, Kirby P said that "[a] matter is 'ripe' for separate and preliminary determination where it is a central issue in contention between the parties, the resolution of which will either obviate the necessity of litigation altogether or substantially narrow the field of controversy")];

(f) factors which tend to support the making of an order ... include that the separate determination of the question may:

(i) contribute to the saving of time and cost by substantially narrowing the issues for trial, or even lead to disposal of the action; or

(ii) contribute to the settlement of the litigation;

(g) factors which tell against the making of an order ... include that the separate determination of the question may:

(i) give rise to significant contested factual issues both at the time of the hearing of the preliminary question and at the time of trial;

(ii) result in significant overlap between the evidence adduced on the hearing of the separate question and at trial - possibly involving the calling of the same witnesses at both stages of the hearing; or

[23] It is also material to note the judgment of Flanagan J in Callide Power Management Pty Ltd v Callide Coalfields (Sales) Pty Ltd (No 3) [2015] QSC 295 at [44] to [46], not because it articulates any different principles, but because it emphasises the need for an applicant to persuade the Court and some of the obstacles which an applicant faces. His Honour made the following observations at [44] to [46] (citations omitted):

[44] The court has a wide discretion to order separate questions. That discretion must however be exercised consistent with the overriding obligations of parties and the court stated in rule 5 of the UCPR. Rule 5(1) identifies that the purposes of the rules is to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense. Rule 5(2) states that the rules are to be applied by the courts with the objective of avoiding undue delay, expense and technicality and facilitating the purposes of these rules. In Landsdale Pty Ltd v Moore, Newnes JA, with whom Buss JA agreed, noted that the court should "approach each case with the object of eliminating any unnecessary delay or cost, and ensuring the efficient and timely resolution of the case, consistent with doing justice to both sides."

[45] The principles in relation to whether an order should be made for separate questions to be heard were summarised by Rares J in City of Swan v Lehman Brothers Australia Ltd:

"(1) As a general rule the starting point is that all issues of fact and law should be determined at the one time.

(2) A party seeking the determination of separate questions must satisfy the court that it is 'just and convenient' for the order to be made. The order must be made on concrete facts, either established or agreed, for the purpose of quelling a controversy between the parties so as to produce a conclusive or final judicial decision on the issue, which is of a real, not hypothetical, importance to the determination of the controversy.

(3) There are special problems where the separate issue involves a mixed question of fact and law, although it may still be able to be decided as a separate issue. However, care must be taken in precisely formulating the question and specifying the facts upon which it is to be decided.

(4) The court must have all relevant matters before it as a precondition of it being asked to exercise its discretion if the separate question involves the grant or refusal of declaratory relief.

(5) It may still be appropriate to determine a separate question even if it will not resolve all the issues, provided that there is a strong prospect that the parties will agree upon the result when the core of the dispute has been decided or if the decision will obviate unnecessary and expensive hearings of other questions.

(6) Generally speaking an issue will not be appropriate for separate determination if it is simply one of two or more alternative ways in which an applicant or plaintiff frames its case and its determination would leave other significant issues unresolved.

• the separate questions will contribute to the saving of time and cost by substantially narrowing the issues for trial or even lead to the disposal of the proceedings;
• they will contribute to the settlement of the proceedings;
• they will give rise to significant contested factual issues both at the time of the hearing of the preliminary question and at the time of the trial;
• there will be any significant overlap between the evidence adduced on the hearing of the separate question and a trial;
• the questions will prolong, rather than shorten, the proceedings."

[46] Whilst the court is exercising a wide discretion in determining whether it is appropriate to order separate questions, a cautious approach should be adopted. As identified by Lehane J in POS Media Online Ltd v Queensland Investment Corp, one of the main considerations requiring a cautious approach is that the court is called upon to make a discretionary judgment at an early stage in proceedings.

[24] Noble and Gloucester say that the risk involved in acceding to Oceltip's application is not a risk worth running.

[25] First, they contend that the inadequate development of the damages case on the face of the pleading means that the present pleading architecture is not in a state which enables me to have sufficient confidence in making the requisite evaluation.

[26] Second, they contend that insofar as one can evaluate the considerations, one is driven to the conclusion that there will be an overlap of witnesses between the hypothesised two trials and that the overlap is likely to involve a trial judge having to evaluate the credit of such witnesses. In particular, they contend that it is likely that both Oceltip's directors would be involved at both stages of the trial.

[27] Third, they contest the extent of the time and cost savings which might be involved in not having to embark upon the contractual damages case.

[28] I will deal with the last point first. The evidence revealed three different evaluations by the solicitors for each party. Oceltip's evidence suggested a very significant saving in interlocutory time and costs and a significant saving in the time involved in a comparison between the hypothesised first hearing and a complete hearing of all issues in the case. The evidence of Noble and Gloucester suggested the savings would be more modest. To my mind, this issue is not determinative. I think that on any view there would likely be significant savings if the dispute between these parties could be resolved without having to go through the interlocutory processes and trial processes involved in a consideration of Oceltip's damages case.

[29] Ultimately, the question before me is a case management decision as to whether it is "just and convenient" to manage the dispute between the parties by adopting the course proposed by Oceltip. The decision involves evaluating -

• (a) the potential of obtaining the cost and time savings associated with making the order if the first trial results in Oceltip either completely winning or completely losing; and
• (b) the downside risk that the case might be determined in such a way as necessitated the damages inquiry in which case:
  • (i) the trial could settle at mediation at some time after Oceltip had pleaded the damages case properly, disclosure had occurred and expert reports obtained; or
  • (ii) the damages case could be heard at trial to a conclusion, which would mean that all that would have happened is that there would be two trials rather than one; or
  • (iii) the worst case scenario could occur and the trial judge at the first trial might have had to make credit findings in relation to witnesses who become witnesses at the second trial and have to recuse himself or herself from hearing the second trial.

[30] As to that evaluation task, Oceltip contended, I think rightly, that the most important consideration for the determination of its application was whether there was a real risk that the application might give rise to a significant overlap between the evidence adduced on the first hearing and the second hearing involving the calling of the same witnesses at both stages.

[31] I make the following observations.

[32] First, the damages pleading presently does not make clear how the damages case is to be presented. The value of the alleged lost opportunity probably involves considerations of how it might have been that Oceltip could have obtained money from its alleged pre-emptive rights in relation to the Marketing Royalty. It might be that Oceltip's case requires an evaluation of whether it could and would have acquired the Marketing Royalty. It might be that its case requires an evaluation of whether it could and would have sold its pre-emptive rights to someone else. It would necessarily involve considerable expert opinion addressing the evaluation of the Marketing Royalty, but it might be necessary for both Oceltip's directors to give evidence addressing decisions which might have been made on various scenarios. Oceltip concedes Mr Tinkler would likely be required. I cannot be certain that Mr Higgins also would not be required at the second hearing.

[33] Second, although Oceltip contended I should form the view that it would not call Mr Tinkler, and if Mr Higgins was called at the first hearing, his credit could not seriously be an issue, I find it difficult to see how I can confidently reach that view. I have explained the breadth of Oceltip's case in seeking to demonstrate that Mr Tinkler was not authorised to execute the Waiver Deed. I have explained that it forms part of Oceltip's case to prove that Oceltip did not have any custom or practice of permitting or acquiescing in Mr Tinkler exercising or purporting to exercise any authority on behalf of Oceltip when dealing with third parties. That allegation is denied by Noble. Whilst it is true that some of Noble's positive case in relation to the denials seems unlikely to involve the credit of Mr Higgins, that is not the end of it. Oceltip must still prove its pleaded case. Presently, it seems likely to me that Oceltip would call Mr Higgins, and it would be insufficient for him simply to respond to the matters pleaded by Noble. If his evidence sought to support Oceltip's pleaded case, then I think that Noble would be entitled to test his credit.

[34] Third, Oceltip contended that Mr Tinkler would not be called by it as part of the first trial, but I do not see why that means that I can be confident that he would not be called or the subject of subpoena by some other party at the hypothetical first trial.

[35] The result is that I have not been persuaded by Oceltip that acceding to its application would not result in a real risk of the calling of the same witnesses at both stages of the hearing, where the witnesses' credit would be an issue at both hearings.

[36] In favour of Oceltip's application is the consideration that, if the putative first hearing was determined one way, there might a considerable savings of time and money, but against it are these considerations:

• (a) the fact that the outcome of the first trial would not necessarily be dispositive of the case;
• (b) in light of the absence yet of any detailed articulation of a damages case, it does not seem to me that if the outcome of the hypothetical first hearing was not dispositive that it necessarily promoted the likelihood of a negotiated settlement;
• (c) making a proposed order would give rise to significant contested factual issues at both hearings; and
• (d) the overlap in evidence to which I have earlier referred.

[37] Bearing in mind the cautious approach which case law suggests I should bring to this question, ultimately my evaluation of the relevant considerations leads me to reject Oceltip's application.

[38] My order is that the amended application filed by leave today is dismissed.

[39] In those circumstances, I make an order that Oceltip pay the costs of Noble and Gloucester of the application filed 6 May 2016 and the amended application filed by leave today.